I call this meeting to order. This is meeting number 82 of the Standing Committee on Finance.
Our orders of the day are pursuant to the order of reference of May 25, we are studying Bill . This is our first session.
We have with us here this morning a number of individuals to present. I want to welcome all of you and to thank you for appearing here this morning.
We have Professor Maureen Donnelly from Brock University.
We also have Professor Allister Young, from Brock University as well, I understand.
We have from the Canadian Federation of Agriculture, Mr. Ron Bonnett, president.
From the Canadian Labour Congress, we have their senior economist, Ms. Angella MacEwen.
From the Canadian Manufacturing Council, we have the vice-president, Mr. David Podruzny.
From Imagine Canada, we have the president and CEO, Mr. Bruce MacDonald.
Welcome to everyone.
From the Library of Parliament, we have Monsieur Jean-Denis Fréchette.
Welcome once again, Mr. Fréchette.
You will each have five minutes for your opening statements, and then we'll have questions from members.
We'll begin with Ms. Donnelly, please.
I am here today to address provisions of Bill dealing with changes to the tax-free savings account, specifically the proposed increase of the TFSA annual contribution limit from the current $5,500 to $10,000.
I speak against this very large increase of more than 80% on the basis that the existing TFSA, with its $5,500 limit, is already failing to serve its stated purpose. To almost double the limit will exacerbate the inequity that research has already identified.
I will refer you specifically to our article published in the Canadian Tax Journal entitled “Tax-Free Savings Accounts–A Cautionary Tale from the UK Experience”.
The purpose of that research project was to predict how Canadians would use the TFSA and specifically whether the government's promise would be borne out, i.e., that the introduction of the TFSA would benefit all Canadians at all income levels in all walks of life.
We used data from the British experience with their tax-free savings plan, the ISA, or individual savings account, a tax measure very similar to the Canadian TFSA. There was every reason to believe that the Canadian experience would be similar to the effects that the British savings plan had already shown, as follows:
One, as income rises, so does plan participation.
Two, the introduction of such a plan does little to break down the barriers to savings faced by low-income individuals.
Three, the plan take-up rate in terms of new savings by low-income individuals could be less than 5%.
Four, the proportion of accounts held by low-income individuals falls consistently over time, as the proportion held by high-income individuals continues to rise.
Five, these plans provide a significant opportunity for income splitting in single-income households.
Six, the typical account holder is a man, belongs to the highest-income cohort, and is approaching retirement.
These were our predictions for the tax-free savings account, and on that basis it belied the promise of universal benefit. As Canadian data emerges on the TFSA experience to date, research recently published by our Canadian tax academic colleagues, in particular Professor Kevin Milligan of UBC and Professor Jonathan Kesselman of Simon Fraser, suggests that our predictions were more accurate than we would have liked.
Yes, it is true that millions of Canadians in all walks of life have opened and made contributions to TFSAs; however, that does not answer the question as to which Canadians at which income levels will the largest benefits accrue and at what cost to the Canadian tax system.
One of the features of the TFSA that most unsettles tax policy scholars is the ability for interspousal contributions. Canada's benchmark tax has always identified the individual as the appropriate tax unit. Measures that allow transfer of wealth between spouses undermine that principle and represent significant disincentives for Canadian women to enter or re-enter the workforce by disproportionately benefiting single-income households.
In conclusion, this is an extremely expensive tax expenditure. Although early-year estimates may not shock, the long-term estimates of revenue to be forgone by future governments are enormous and will serve an increasingly narrow population of Canadians over time.
The budget speech refers to four reasons Canadians might use their TFSA to save: one, buy a home; two, start a business; three, pay for post-secondary education; and four, make retirement more comfortable.
Reducing the public treasury through increasing tax-free savings is a very blunt instrument to use in the pursuit of helping Canadians make these key aspects of their lives more affordable. More equitable and more finely tuned measures already exist for those specific purposes, and any additional expenditures through the tax system should be directly targeted. To simply expand the TFSA does not serve that purpose and is not worth the high cost to the citizenry as a whole.
Those are our remarks.
Thank you, and thanks for the invitation to attend.
As mentioned, I'm the president of the Canadian Federation of Agriculture, and we represent about 200,000 farm families across the country.
I'd like to make a few comments on some of the provisions in the 2015 federal budget and Bill .
The first concerns the decrease in the small business income tax rate from 11% to 9%, applying to the first $500,000 of income.
This measure will provide broad tax relief for Canadian producers, providing them an additional flexibility to manage risk, to reinvest in their operations, and to improve productivity. Any such relief directly contributes to Canadians' agricultural competitiveness in global markets.
As well, the extension of the tax deferral regime that applies to patronage dividends paid to members of agricultural cooperatives through eligible shares is welcomed. Agricultural cooperatives provide valuable support to small and medium-sized agricultural producers as a resilient business model that provides improved risk management capacity, improved market access, and a variety of other benefits to their members.
These businesses play an important role in the economies of rural communities across Canada, and such a tax deferral enhances cooperatives' capitalization capacity and frees up important investment funds that would otherwise be directed towards addressing members' associated tax liabilities.
As well, I would briefly like to comment on the provision for accelerated capital cost allowance for investments in machinery and equipment. While the benefits of such a measure do not directly relate to the majority of agriculture operations, a vibrant food processing industry is essential to the ongoing success of the Canadian agricultural industry.
I would like to dedicate the rest of my time to discussing the increase to the lifetime capital gains exemption and the important role that tax policy plays in what is soon to be a significant transfer of farm businesses to the next generation.
The continued success of Canadian agriculture as an economic driver for Canada requires a tax policy environment conducive to continued viability and competitiveness for Canadian farm businesses. One of the most pressing issues facing Canadian agriculture is the rising age of Canadian farmers. Over the next 10 to 15 years we expect at least 120,000 farms to transfer ownership, with total assets well over $50 billion. As such, CFA would like to express its support for the bill's immediate increase to the lifetime capital gains exemption for owners of farm and fishing businesses from approximately $813,000 to $1 million.
The additional exemption of nearly $200,000 in capital gains offers producers important tax relief, allowing them to maintain more of their capital for retirement and also providing additional flexibility to develop a succession plan that meets the needs of both parties.
There are other things that can be done to improve the issue of succession planning. Capital gains exemption is just one aspect of the tax policy environment that influences the succession process and operational arrangements involved.
We have several outstanding recommendations.
The first concerns barriers facing farms transferred to the next generation under joint sibling ownership. Subsection 55(2), often regarded as the most complex section of the Income Tax Act, adds significant barriers to splitting up a farm corporation that is jointly owned by two siblings. This is because section 55 considers siblings to be unrelated or at arm's length.
Joint sibling ownership will be a common result of many intergenerational transfers over the next decade. Parents can transfer to their children on a tax-deferred basis, but unexpected issues can arise following the transfer that even the most comprehensive succession plan cannot account for. If the siblings then need to split up the operation, it can no longer be done on a tax-deferred basis. CFA has recommended that the Income Tax Act deem siblings to be non-arm's length, specifically for farm corporations.
Second, section 84.1 of the Income Tax Act currently limits the access to the capital gains exemption when a transaction occurs between family members. In the sale of a company's shares to a non-related purchasing corporation, a holding company is generally used as the purchasing vehicle. This allows the purchaser to access the acquired company's income stream and allows the vendor to access their enhanced capital gain exemption on the sale.
However, when dealing with family, the benefits of this structure are effectively denied. Most family farms now operate as corporations, and as such the intergenerational family farm transfer rules are not facilitating the transfer.
We recommend that amendments be made to section 84.1 of the Income Tax Act so that it no longer contains those constraints.
This is a brief overview. We have provided the members with a full pre-budget submission, and it goes into more detail.
In conclusion, I would like to thank the committee for allowing me to speak to this bill and once again reiterate our support for the four amendments I previously touched on.
On behalf of the 3.3 million members of the Canadian Labour Congress, we want to thank you for the opportunity to present our views today. The CLC brings together workers from virtually all sectors of the Canadian economy, in all occupations, and in all parts of Canada.
Part 1 of Bill , which we're speaking to today, would implement a wide variety of income tax and related measures. Today our comments will be limited to three provisions: reducing the required minimum amount for withdrawal annually from the RRIF; increasing the annual contribution limit for the tax-free savings accounts; and renewing the accelerated capital cost allowance for investment in machinery and equipment.
First of all, in terms of retirement security, the changes to the RRIF withdrawals and the increases to the tax-free savings accounts are measures that are both related to retirement security, but it will be no surprise to members of this committee that the Canadian Labour Congress feels that expanding the Canada pension plan is a much better solution to the looming retirement security crisis in Canada. Changes to RRIF withdrawals benefit older workers who already have RRSP savings, but they do little for workers without the means to save through RRSPs. This is significant because only a third of Canadians today contribute to RRSPs, and the unused RRSP contribution room reached $790 billion in 2013. Eleven million workers in Canada have no pension plan other than the CPP. At the same time, the annual contribution limit for the tax-free savings account would increase to $10,000, as has already been discussed, and this measure would have an estimated cost to federal revenues of $1.1 billion by 2019.
Even at the maximum annual contribution of $5,500, the TFSA is projected to cost the federal government up to $15 billion annually, and cost the provinces another $8 billion when the program is fully mature. Doubling would further increase this cost almost exclusively to the benefit of higher income earners. In contrast, expanding the CPP would benefit all workers, follow workers who change employers or who have multiple employers, and be simple for employers to administer.
In terms of supporting manufacturing, we recognize that as a result of globalization, unfavourable trade deals, a high dollar, and the most recent recession, manufacturing in Ontario and across Canada has experienced devastating losses over the past decade. In recognition of this reality, we have long supported renewing the accelerated capital cost allowance for investment in machinery and equipment. This measure was first introduced in 2007, renewed in 2011 and 2013, and would now be renewed until 2026. While we support this measure, we want to note that corporate tax cuts have failed to spur business investment. In the same vein, we feel that continuing this accelerated capital cost allowance would be insufficient to support a struggling manufacturing sector in Canada.
Coming out of the recession, business investments in manufacturing have been very slow to rebound, despite the continuation of the accelerated capital cost allowance. In October 2014, the monetary policy report released by the Bank of Canada suggested that this is in part because of a semi-permanent loss of capacity in several manufacturing export sectors. Low interest rates and low taxes have not been sufficient drivers of growth. Weak and uncertain demand have played a significant role in subdued investment. All signs point to the need for the federal government investment in infrastructure to spur growth and therefore boost business confidence and private investment.
A singular focus on tax cuts has significant drawbacks. We note that while the budget 2015 documentation mentions the importance of investment in skilled labour in the same sentence as it mentions investment in machinery, government action on this front has been noticeably absent.
Let me remind the committee of some of the recommendations the Canadian Labour Congress has made in the past that would make a difference to investment in skilled workers.
One, establish a national skills council that brings key stakeholders together to identify skills gaps and develop strategies, policies, and programs to address them.
Two, establish a mandatory national workplace training fund. Employers with a payroll of more than $1 million who fail to invest 1% of their payroll in training should pay the shortfall into a public fund that is used to finance work-related training initiatives.
Three, increase funding for the labour market agreements, the LMAs, with the provinces and territories to help vulnerable unemployed workers, including immigrants, aboriginal peoples, persons with disabilities, women, older workers, younger workers, and less skilled individuals.
Four, mandate employers to hire and train apprentices. The federal budget should ensure that those projects receiving federal dollars through the new building Canada fund and the investment in affordable housing program mandate employers to hire and train apprentices.
This budget further erodes the fiscal capacity of the Canadian state and rejects the opportunity to take advantage of exceptionally low borrowing costs and invest in the current and future needs of working people in Canada.
Thank you for this opportunity to meet with you.
The Canadian Manufacturing Coalition represents 50 trade associations representing over 100,000 companies and is represented in all 21 subsectors of manufacturing. Sales in 2014 were $621 billion, and that was a 5% increase from the year before. Exports were $525 billion. That's also a new record. We've had a weak start to 2015 because there's been some short-term weakness in manufacturing.
I'm here today to speak in support of the accelerated capital cost allowance 10-year extension at a 50% declining balance rate as it was introduced in budget 2015. In summary, analysis shows that the competition had a better system. We believe budget 2015 will level that playing field in this area.
I personally represent the Chemistry Industry Association of Canada, so some of the examples that I'm going to be using will come from there.
Let me start by saying that we commissioned an independent study in early 2014 and we shared that with the standing committee during the pre-budget hearings in the fall. The study shows that the measure adopted matches what already exists as a permanent feature in the United States.
The second point I'd like to make is that there is an opportunity to invest in North America. The accelerated capital cost allowance, which is levelling the playing field, puts us back in the game. For over a decade there has been very little investment in North America; a lot of it has been going to developing economies. Shale gas and generally lower energy prices are changing and putting us back in the game.
The third point I want to make is, why 10 years. Why extend it for so long? This takes account of business cycles and planning processes. Investors can look with certainty on this aspect of planning in the future. I have an example, which I've supplied to you, of a timeframe for a large capital-intensive investment. Think of an investor considering a billion-dollar investment and looking at perhaps five years before there is any prospect of income. The ACCA will provide some front-end cash flow. Having a 10-year time horizon, or roughly two business cycles, will also allow everyone to measure if this is resulting in incremental investments. That's the last point I'd like to make.
There are budget pressures, and it's important to demonstrate that a measure is providing incremental net benefits and not costs. Our sector plans to measure incremental investments over the first five years of this ACCA. We want to demonstrate that it should be a permanent feature in the future.
ln summary, we strongly support the federal government adopting a 10-year accelerated capital cast allowance.
I would be pleased to take questions later.
Thank you, Mr. Chair. I would like to thank you for your invitation and for giving me the floor today.
As an umbrella organization for the charitable and non-profit sector, Imagine Canada is pleased to share its thoughts with you regarding the provisions in Bill and the federal budget for our sector.
I do not have to remind the committee about the contribution of charitable and non-profit organizations in Canada and around the world, whether in terms of social services, arts and culture, amateur sport, the protection of the environment, education, health care and health research, international development or religious practices.
We keep saying that the charitable and non-profit sector is a major economic asset for Canada. It accounts for 8% of the GDP and employs over 2 million people from coast to coast.
In 2012, this same committee held extensive hearings on the issue of tax incentives for charitable donations in Canada. You heard the testimony of organizations from across the country, you learned about our challenges and possibilities, and you made recommendations to improve our financial health.
Every federal budget since 2012, including this one, has responded to your recommendations.
With regard to Bill , it clarifies eligibility for qualified donee status for foreign charitable foundations. We see this mainly as a housekeeping measure, ensuring that the letter of the law is brought into line with the intent of a previous budget measure.
While we would have liked to see other measures from the 2015 budget included in this bill rather than waiting for subsequent legislation that may or may not come prior to the upcoming election, we appreciate that the department wants to take the time to get the particulars right.
We are pleased that the budget expanded the Mitacs internship program, in which charities and non-profits are now able to participate. Access to specialized research will help many organizations improve the work they do.
We look forward to two budget measures in particular that arose from this committee's hearings in 2012, and which we strongly support.
The first one of these will see a capital gains exemption when the proceeds of selling real estate or private company shares are donated to charity. Members of the committee will know that in terms of encouraging donations from the broadest array of citizens this was not Imagine Canada's top priority. That being said, those of you with whom we have spoken aIso know that we have strongly supported this measure and we were pleased to see it in this year's budget.
We are particularly pleased that the provision will apply to cash donations made from the proceeds of the sale of such assets. While addressing potential valuation issues, this will make it easier for donors to split their donations among a greater number of charities, if they so wish. lt will also make it easier for recipient charities, particularly small charities, to manage the receipt of such donations as they will be dealing with cash donations and will not have to manage assets that may be transferred to them. We are hopeful this measure will translate into hundreds of millions of dollars' worth of new donations over the next several years.
The budget also announced that charities will be allowed to invest their assets in limited partnerships. This will benefit the sector in two ways. First of all, foundations will be able to make investments, which they previously could not do, to diversify their portfolios. Second, operating charities and non-profits may themselves be involved in limited partnerships. The ability of foundations to invest in these ventures could free up significant amounts of capital. While we are waiting for specific details on how this will work, our initial estimate is that tens or even hundreds of millions of dollars could be available annually for partnerships involving charities and non-profits.
These two issues were among those about which this committee heard testimony and made recommendations. By our count, the only significant outstanding recommendation is the stretch tax credit for charitable giving, which we recognize would come at the highest cost to the treasury, as we believe it would have the greatest impact.
I hope that next year I'll be invited back to testify about the adoption of the stretch tax credit. ln the meantime, I want to recognize the significant progress that has been made in budget 2015.
I'm the only witness who got some chocolate. I suspect it's a perk because I'm the last one to speak.
Mr. Chair, vice-chairs, and members of the committee, thank you for inviting me to assist with your study of Bill , Part 1.
My comments are focused on the increase in the annual contribution limit for Tax-Free Savings Accounts (TFSAs), a measure the Office of the Parliamentary Budget Officer has studied in detail.
Before the changes proposed in Bill , the fiscal impact of the TFSA program was expected to grow from $1.3 billion in 2015 to $54 billion in 2060. This is equal to a roughly eightfold increase as a share of the economy. The changes to the contribution limit proposed in Bill C-59 would increase the impact in 2060 by a further 20%, to $63.6 billion.
The proposed TFSA limit of $10,000 will not be indexed to inflation. This policy decision reduces total long-run fiscal costs by 15% in 2060.
The implications of the changes in Bill to the long-run sustainability of debt as a share of GDP will be assessed by the PBO in a future report, our fiscal sustainability report.
Over the long run, the TFSA program will become increasingly regressive, by income and especially by wealth, as you can see in Figures 2 and 3 of our presentation. By 2060, households in the top half of the income distribution will benefit by 20% more than households in the lower half. The wealthiest 50% of households are projected to benefit by 1.2 times more than the lower half.
Finally, Mr. Chair, as per your question the other day about the amount of new money or existing savings invested in TFSAs that involve the purchase of equity or bonds in Canadian companies, I can report that TFSA administrative data and other data sources that we have obtained so far cannot currently be used to determine whether investments in Canadian equities or bonds have increased due to TFSAs.
However, TFSA contributions are expected to originate mostly from the reallocation of existing savings and taxable accounts. External estimates of the responsiveness of savings through tax-preferred programs like the TFSA are mixed, but typically small. The PBO therefore expects that a comparatively small proportion of TFSA contributions will be the result of new savings. The TFSA is relatively new and the PBO has not yet independently assessed the savings behaviour of Canadians in response to the TFSA program, but this work could be pursued in a future study.
Thank you, Mr. Chair.
Thank you to all of our witnesses this morning.
Mr. Fréchette, I particularly liked your comment about the need to have more studies on the TFSA program and its impacts.
I have to start with the two academics in the room, if I may, because I don't actually understand how you're approaching things.
First of all, as academics, I'm certain you've studied the British case. Ms. Donnelly, your intention, I expect.... We have data from 2009 when the Conservative government introduced tax-free savings accounts. Then we augmented the tax-free savings account in 2013, and we're about to do that again. Are you planning on studying the Canadian data as well as the British data?
Okay, that's good.
The other thing I don't understand.... I actually went to business school. I went to Western and I did take tax policy. Actually, part of our study told us that, when capital is accumulated, that's a benefit to the economy. That's part of the study of tax policy. Has your study, Ms. Donnelly, in terms of the impacts of the tax-free savings account, done any analysis regarding the pool of capital that will be available to invest in the economy and in small businesses and in productivity and in growth in our economy, or is that still to come along with the Canadian analysis?
Good morning, everyone, and thank you for joining us today.
If I'm not mistaken, an OECD study was published last week about the increasing inequality in our societies and the impact of this increase. I am talking about the Gini coefficient. I'm guessing that most of you are familiar with this concept. The study says that this increase in inequality has a major impact on GDP growth. We see that the budget proposes two measures: the TFSA program and income splitting, which will lead to increasing wealth and income inequalities.
My question is for Mr. Fréchette. Have you calculated the impact of those two measures on GDP growth?
That is certainly the case.
I would like to come back to the impact of this measure on the provinces.
You said that, in 2080, there would be a loss of tax revenue of $77 billion at the federal level and of $39 billion at the provincial level. I'm not sure whether that is before or after doubling the TFSA. Perhaps you can clarify that. For Quebec, my province of residence, this means several billion dollars that it will not be able to invest in education and health.
Would it not have been a good idea to bring the provinces together to reflect on this measure? I know that it is a political question, but before initiating a measure that takes $39 billion from the revenue of the provinces, it seems to me that they should have been consulted.
Thank you, Mr. Fréchette.
Thank you, Mr. Chair.
I'll move on to Mr. Bonnett.
Agriculture is a big component of my riding of Kelowna—Lake Country, and I appreciate the work that you do as far as your representative is concerned.
On page 202 of the budget, with under the lead, we're expanding the agri-marketing program. I'm just wondering if you wanted to comment from your perspective in the industry on the proposal to provide $12 million over two years starting in 2016-17 to the agri-marketing program to promote Canadian agriculture and agrifood products around the world.
Is that something your association supports?
Yes, we support that initiative. As I mentioned, in the brief we highlighted the top four things that we support.
On the agricultural marketing initiative, I think it's becoming even more critically important now with all of the discussions on opening up new markets around the world that getting a trade agreement in place is just the first step.
If you really want access to markets you have to go out and fight for those markets and be competitive. I think putting some emphasis on market development is critical.
The other thing I think that's not widely recognized is the economic impact that agriculture has on the overall economy. If you talk to people in western Canada, they're now starting to recognize that there are two pillars to the economy out there. There is the oil sector, but the agricultural sector is also getting more and more recognition and it's core to keeping the economic activity of Canada going, and this marketing will enhance that.
My thanks to all the witnesses for being here with us today.
Ms. Donnelly and Mr. Young, in your very interesting article on the issue, you pointed out something that I already knew but that I'm certain will benefit everyone. Over 30 years ago, in 1982, Canadians' personal savings were at about 20%. Since 2000, this rate has systematically gone under 5%.
Clearly, one of the arguments for the TFSA is to encourage people to save. However, just like Mr. Fréchette, you showed that, unfortunately, it is mostly a shift in savings. Clearly, the tax-free approach solves nothing at all. The problem seems to be elsewhere. Can you give us some idea of what we should do to promote savings?
I would agree with that.
In the information we looked at from the British experience, that was one of the conclusions of the ISA study. What happened in the U.K., as I said, was the ISAs were introduced in 1999, and they had a sunset clause that they were going to be under review in the year 2007. They did an extensive study on the ISA holders at that time and exactly what types of new savings they were trying to generate, because when the ISAs were introduced by the then Labour government of Tony Blair, they said the goal of the ISA was in fact to encourage low-income and middle-income earners to save and participate.
The study that was concluded in 2007 indicated that there was a take-up rate by that cohort; however, the largest take-up rate was in the upper income levels. There was definitely a reshuffling of assets or money out of taxed accounts.
Mr. Bonnett, in the brief that you submitted for the prebudget consultations, we see a very important and interesting recommendation. The federation recommends deeming siblings to be non-arm's length, specifically for farm corporations.
My colleague Francine Raynault introduced Bill to address this recommendation and help brothers and sisters be properly recognized. Unfortunately, the Conservative government is against this measure.
Could you comment on the government's position in that sense?
Yes. First of all I would like to say that Bill does attempt to address that issue. We have actually consulted with some accounting firms, and I think the proposal looks like a simple way to fix the issue.
Maybe I should explain a little further. Quite often farmers will develop a succession plan. When you're passing an operation on to siblings, you get the capital gains exemption on the transfer. However, if they split that operation soon after the transfer, that money has to be paid back.
I don't think it recognizes that now we have some very, very large farms that are transferring, and there may be siblings, and even with the best laid plans you may need to change the operation, and there shouldn't be a disincentive. I think what we're trying to suggest is that there's a flaw in the system in that it treats siblings differently than it would treat other people. I think the idea is to clean up the language within the tax policy. I think we were talking earlier with some of the professors about tax policy becoming very detailed. I think one of the things that we noticed in Bill is it tried to simplify dealing with the issue, so we would support that legislation going ahead.
Thank you all for being here.
I'm tempted to go to our two academics.
I'm puzzled; I really am. I'm a businessman and maybe I've just done everything wrong my whole life. Maybe I should have gone to business school. I would suspect that there are other schools that would disagree with different academics. As a matter of fact, I'm quite sure of that.
I can tell you from my own experience.... It's no secret; I think everybody around here is in that bracket that is somewhat privileged. I don't use the tax-free savings account. I suspect part of the reason is that I have a decent pension now. I make enough money that I can save; I can invest in other places. My wife, on the other hand, who has been a stay-at-home mom her whole life—now, mind you, we're still together, so she'll have that benefit of my experience in life—but she uses that, and her income is substantially less.
I don't know if I want you to comment. I know it's not fair, possibly, but I just think this has to be said. I think you really need to get out of the British model and really study the Canadian model, because there are so many dissimilarities, starting with a tax system where they just tax the living daylights out of people and there is no money left to save.
I would direct this to Ms. MacEwen, too, that if I were a worker who was making $40,000 or $60,000 a year, and if all I was getting was CPP, you know, that's a whole different discussion. We can have that discussion. There are probably reasons for why that happens, and part of it is because we have inequity in our pension system in this country. Then I would be really enticed to start saving. I suspect that when you do your study, you will find that in actuality that is what is going to happen.
The last thing I'd like to say is that—and this is why I find this discussion so bizarre—the money is mine. If it's $40,000, $60,000, or $150,000, once I've paid the taxes, it's mine. If I want to stick it in a tin can and bury it in the backyard, that's my business. I just, for the life of me.... But to put it into a bank or put it into a savings account where it can be reinvested by people, that's where I'm going next.
Thank you all for being here.
I want to begin my questioning, first of all, with Mr. MacDonald.
As you know, the existing capital gains tax exemption for the donation of publicly listed securities is going to be extended to include donations resulting from the sale of private shares and real estate, which will.... On your website, it claims an extra $265 million over the next four years.
Could you comment on that and on how positive it would be for your sector?
Thanks very much. I appreciate that.
Mr. Podruzny, the ACCA measure I think is a sign of committees doing effective work. I think, going back, if we recall, and we're dating ourselves, this came out of a 2007 industry committee report, which was a unanimous report at the time. It called for ACCA for five years. Then as you know, it was put in place for two years and it kept being extended. Now I think the minister has very wisely put it in place for ten years, to judge how it will be for a five-year period initially and then for a second period.
Over the years you've argued for it to be longer than two years. Explain to the committee why it needs to be longer than the two-year renewal period.
I call this meeting back to order. We are resuming our study of , an act to implement certain provisions of the budget tabled in Parliament on April 21, 2015, and other measures.
I want to welcome all of our officials here this morning. Thank you so much for being with us.
Colleagues, I've received some feedback in terms of priorities, so this is how I will proceed as chair. We will do part 1 first, then we will proceed to part 2, and then we will proceed to part 3. In part 3 we will do divisions 1, 6, 7, 10, 18, and 20. If we have time, and that's a big if, we will do part 3 divisions 8 and 19. Those are the sections that committee members have indicated are priorities for them.
I want to welcome our officials for part 1. I ask you to make an extremely brief opening statement. Members have all had extensive briefings on the bill itself, so we'll just do a brief introduction of part 1 and then we'll go to members' questions.
Mr. McGowan, I think you'll be doing the statement.
Let me give you a little background on that.
In 2012, we changed the approach used by the government to designate foreign organizations as charitable organizations by adding some conditions. Yes, a state donation is needed. In addition, the charitable organization must carry out certain activities.
If you don't mind, I will continue in English.
That's just for disaster relief or humanitarian aid, or if it's in the national interest of Canada.
What this provision does in this budget is it extends these rules not only to what we refer to as charitable organizations but also charitable foundations. This is to add flexibility, because in an international context, for instance, it may be a bit more difficult to determine the nuance, the distinction. It gives more flexibility and it allows what would be considered a foundation under our rules here to still qualify if all the other conditions are met. That's basically the purpose of this provision.
The costs would have been higher.
The government recognizes the impact on the federal treasury to de-index the TFSA, thereby trying to minimize the impact on the treasury.... It seems strange then that there's some recognition that the impact on the treasury is significant and therefore it changes the policy of the TFSA—not indexing it anymore—but it refuses to acknowledge that the costs into the future are so significant as to limit the government's ability to do anything in terms of contributions to health care, infrastructure, and the like. It seems to be, in part, a recognition that the costs would spiral out of control, yet it is not addressing the main and concerning question.
In the budget document itself around this bill, who is it that puts together the construct of the typical family? There's a typical family that is used to give some sense of the taxation policies. The government has been using it for how many years. It's usually a family of four: a husband, a wife, and two kids. Is that correct?
There are a couple of minutes left. I want to follow up on this and then on a RRIF question.
The budget itself says, “As of the end of 2013, nearly 11 million individuals had opened a TFSA and the total value of assets held...was nearly $120 billion.” It also says that it's “a popular means of saving for Canadians at all income levels”. As well, it says, “Individuals with annual incomes of less than $80,000 accounted for more than 80 per cent of all TFSA holders and about 75 per cent of TFSA assets as of the end of 2013.”
I'm a little puzzled at the responses to the questions, because this and the other evidence that the department presented in the budget itself is evidence that the TFSA is in fact encouraging Canadians to save more for their retirement or other issues. The budget itself talks about the link between the TFSA and seniors.
Maybe I'll give you an opportunity to respond again, Mr. Jovanovic.
My final question, then, is on RRIFs.
The budget changes the amount in terms of what is to be withdrawn. This was asked for by many seniors groups, by CARP and others, who said that Canadians are living longer. This is just a reality. My understanding is that those numbers have not changed since 1992. This is reflecting the fact that people are living longer, and also what Mr. Saxton said earlier about how the benefits from their investments have been lower with the lower interest rates. This is obviously dealing with that.
Did the department do a costing in terms of actually completely eliminating any type of mandatory withdrawal from RRIFs?
I am going to go back to income splitting.
Earlier, we talked about what was in the Conservatives' platform. I would like to know how many assessments you have done on income splitting. Was there one two years ago, for example, in order to inform the government about how much it might cost, or is that just done as the budget is being prepared? As we know, the way in which income splitting was introduced has changed.
How many assessments has the Department of Finance conducted in support of this measure?
Okay, then I will thank our officials for part 2. Thank you very much for being here.
Colleagues, we'll bring forward the officials for part 3.
The way we're going to do this, I recommend, is we have about 40 minutes, so we'll do division 1, division 6, and division 7 at the same time. Then the second panel, if you want to call it that, will be on division 18 and division 20.
We'll do part 3, division 1, division 6, and division 7.
I want to welcome all of you to the committee. Thank you so much for being with us.
We have division 1, the federal balanced budget act. We have division 6 regarding the Export Development Act. We have division 7 regarding the Canada Labour Code.
I would ask one official to address each division, and I would ask you to be very brief to allow time for members' questions.
We'll start with division 1.
Mr. Recker, I believe you'll be addressing that, please.
Division 7 of part 3 would amend part II and part III of the Canada Labour Code in order to protect interns in the federal jurisdiction.
Currently there are no specific provisions in the Canada Labour Code related to interns. The policy intent of the amendments is to ensure all interns in the federal jurisdiction receive full occupational health and safety protections under part II of the code as well as appropriate labour standard protections under part III.
Under the proposed amendments, an intern is considered to be a person who is not an employee, but who performs activities for an employer, the primary purpose of which is to enable the person to acquire knowledge and experience.
The proposed amendments would do three things.
First, they would amend part II of the code to ensure all interns in the federal jurisdiction are entitled to full occupational safety and health protections, including the right to refuse dangerous work.
Second, the amendments would clarify that part III of the code applies to interns, subject to specific exceptions. The amendments would specify two exceptions when part III protections, such as minimum wage, do not apply to interns. In practice, this would establish when an intern can be unpaid. The first exception would be if the internship is formally part of an educational program. The second exception would be if the internship meets all of six specific criteria.
Last, the amendments would permit regulations to be made to apply and adapt part III labour standard protections to interns who could be unpaid because their internship meets one of the two exceptions I've noted. It's expected that labour standard protections related to maximum hours of work and sexual harassment at a minimum would be provided to unpaid interns through these regulations. The regulations would be put in place as quickly as possible following consultations with stakeholders as part of a normal regulatory process.
Thank you for that question.
It's fair to say that while official development assistance has done a tremendous amount of positive work, or has worked positively internationally for the past four years, there is a growing recognition, a consensus internationally, that post-2015 objectives, the objectives the international community is trying to negotiate at this time, will need more resources than official development assistance. Within that context, countries, including developing countries, have increased the focus on foreign direct investment as a source of funding for growth and development. Within that context, a number of donors have already acted to optimize their contribution to this space.
Canada doesn't have a DFI, development finance institution. Other G-7 countries have DFIs, and what the DFIs ostensibly do is they operate in the space where the private sector currently isn't. What I mean by that is they occupy a space where the perceived risks might be too great for the private sector. Therefore, from that perspective, the DFIs will entertain initiatives as long as there is a development outcome as well as a viable project on the table.
Within that context, this initiative will occupy specific space that is complementary and additional to official development assistance. Official development assistance will continue to work on establishing a good governance context, promoting sustainable economic growth in areas where there are market failures or an inability for the private sector to play; whereas this will present an opportunity for the government to partner with the private sector on ventures that yield a development outcome but are also viable enterprises or projects unto themselves.
Thank you for your question.
One of the difficulties with part III is the fact that it sets a number of labour standards relating to a person who receives a salary, whether it involves vacation pay, compensation for stat holidays, overtime and so on.
Because of how part III is structured, it would have been difficult to simply extend all the protections, for example to unpaid interns, because some of these protections would not make sense at that time. It would be impossible for employers to respect these provisions.
The decision was made to adopt a bit of a different approach. It aims mainly to improve protection for everyone, but it recognizes that there are very different circumstances for interns. That is how we improved protections while avoiding more confusion.
Colleagues, we have 15 minutes. If members want to continue with this group of officials, it's fine, but if you want to question the next group, then we're going to have to move on.
An hon. member: Go to the next group.
The Chair: I'm sensing there's consensus for the next group, so we'll thank this group of officials. Thank you so much for being with us today.
We'll bring forward the officials for part 3, divisions 18 and 20. Division 18 deals with the Ending the Long-gun Registry Act, and division 20 is sick leave and disability programs.
We have officials from Public Safety and from Treasury Board. Welcome to the committee.
Perhaps I'd ask one official from Public Safety and one official from Treasury Board to give a brief overview of these two divisions.
We'll start with Public Safety. Mr. Potter, would you be doing that?
Many of you will recall that in October 2011, the ending the long-gun registry bill was introduced in the House. In April 2012, the Ending the Long-gun Registry Act came into force. That act had two primary objectives. The first was to end the registration of long guns in Canada. The second was to destroy the long-gun registry data. The second objective of destroying the data is primarily to respect the privacy rights of Canadians who had registered their long guns.
The amendments in the budget implementation act are intended to comprehensively address that second objective by ensuring that no other act of Parliament, including the Access to Information Act, would compromise that key objective of destroying the data. Put simply, the amendments to the budget implementation act address a gap in the original Ending the Long-gun Registry Act.
Thank you and good morning, Mr. Chair and committee.
As stated in budget 2015, the government will make every effort to reach agreement with bargaining agents within a reasonable timeframe on necessary reforms to disability and sick leave management.
A new round of collective bargaining between the Government of Canada and the federal public service bargaining agents began in 2014 to renew the government's collective agreements. The government's overarching goal in these negotiations is to reach agreements that are fair and reasonable for both employees and taxpayers. The negotiations held today reflect the government's commitment to good faith collective bargaining.
The government's priority in these negotiations continues to be to provide for a disability and sick leave management system that is modern, comprehensive, and responsive to employees needs. The government's outdated existing system of bankable sick days is failing both employees and taxpayers. For example, over 60% of employees in the core public administration do not have enough banked sick leave to cover a full period of short-term disability.
Twenty-five per cent of our employees have fewer than 10 days of banked sick leave. Many employees, especially new and younger employees, have no banked sick leave at all. In contrast, long-tenured individuals, including many executives, have far more banked sick days than they will ever reasonably need.
The government will continue to make every effort to negotiate and to reach agreement with bargaining agents within a reasonable timeframe on necessary reforms to disability and sick leave management. The government continues to negotiate with bargaining agents to identify mutually acceptable design parameters for the new system and is prepared to consider reasonable improvements to its tabled proposals.
In the event that agreement cannot be reached, the government will take steps required to implement a modernized disability and sick leave management system within a reasonable timeframe.
Under the Financial Administration Act, the Treasury Board may establish terms and conditions of employment for public service employees, including those respecting sick leave, and may modify any group insurance or other benefit program for employees.
In accordance with requirements under the Public Service Labour Relations Act, the government is bargaining in good faith and is proposing changes to the terms and conditions of employee sick leave as well as the introduction of a new short-term disability plan.
The government believes in the bargaining process and is committed to making every effort to reach a negotiated settlement.
Under the proposed legislation, the government—
Right now, if an employee without a sufficient amount of sick leave for a longer-term illness found themselves ill, they would be out of income. They would be on leave without pay. They would look to apply for EI sickness benefits, which have a lengthy waiting period. If they get the EI sickness benefits, they're at 55% of pay. Longer term, they would look at accessing the long-term disability program, at 70% of pay.
All our new proposal would have, from the depletion of sick leaves...a short-term plan for several weeks at 100% pay and active case management, a third party service provider working with the employee, the employer, and the medical practitioner to determine what the needs are, how long they need to be away, and what the accommodations would be to come back.
That tells us that a lot of people will not be out of income and likely will also not go towards a long-term disability plan, but will get the support they need from the employer.
Mr. Chair, I would like to ask a brief question about the long-gun registry.
Mr. Potter, this is a topic we've heard a lot about. Much has been written about it. My question is perhaps more of a moral one. You may say that I am on the wrong track, but in your position, don't you sometimes advise the government or provide your personal opinion on a given situation? In this case, did you consider making a recommendation to the government about destroying data, even though my colleague, Mr. Saxton, said that measures in this regard had been passed in the House?
Generally speaking, our role is to advise the government.
That advice is confidential. It is a typical part of our role to provide that frank and honest advice to the minister, and we do that in confidence. In terms of this bill, I would say, as I stated earlier, there is, in my view, a clear, logical consistency between the original intention of the Ending the Long-gun Registry Act and these amendments.