Chair and honourable members, good afternoon.
First, on behalf of the three million members of the Canadian Labour Congress, I want to thank the committee for the opportunity to present our views on Bill .
We want to commend the government for two recent improvements to the working income tax benefit, WITB, now renamed the Canada workers benefit, CWB. The first of these improvements expanded WITB as part of the Canada pension plan enhancement. The second improvement is proposed in Bill . In total, there will be nearly $1 billion of annual investment coming into effect in 2019 that will increase the maximum benefit and expand the number of workers who will receive these benefits. The government estimated that these enhancements will lift about 70,000 people out of poverty, and will encourage a greater labour market participation.
We're also pleased that the Canada Revenue Agency will automatically enrol low-income tax filers who are eligible for the benefit. This will improve access for low-paid workers. The government estimates that an additional 300,000 low-income workers will receive the CWB in the 2019 tax year.
We also have several recommendations to further improve the benefits.
First, receiving EI benefits should not cause the CWB to be reduced. Currently, the CWB is gradually phased out based on net income instead of on earnings. This means that EI beneficiaries can be eligible for the Canada workers benefit. Workers have earned these benefits by paying EI premiums, and their EI benefits should not reduce their CWB.
Second, low-income workers should be able to get the CWB more frequently through the year. Low-paid workers need the CWB in periods of low or no earnings. However, only half of the anticipated benefit can be paid in advance. In our view, the CWB should be changed so that 100% of the expected benefit can be paid quarterly, instead of having to wait for tax time. This would be similar to other transfers like the GST tax credit.
Third, it is important to keep in mind that this is still a very modest benefit. In 2015, 1.2 million working-age Canadians received the WITB, with an average annual benefit of only $807 per household. Many recipients of the benefit will continue to fall below the poverty line. More money should, therefore, be allocated to the Canada workers benefit to provide higher benefits and to phase it out more slowly. We believe that no worker in Canada should live in poverty. In particular—shamefully—full-time, full-year workers earning minimum wage in Canada could be earning at or near the poverty line. This leads to my final point.
The CWB alone is simply not enough. It must be part of a broader tool kit to eliminate working poverty in Canada.
As the 2018 budget noted, over the past four years, lower and middle-income workers have had their wage prospects stall while the CWB remains essential. Therefore, we must strike new wage and workplace standards and combat precarious work. This should take a three-prong approach.
First, we need to strengthen the labour standards of the Canada Labour Code, which we hope we will do this year. This will include the creation of a new federal minimum wage. A $15 federal minimum wage is long overdue. The federal government also should enact measures to ensure equal pay protection for part-time, temporary, and contract workers within the federal jurisdiction.
Second, there is still a gap between the number of Canadians who want to join a union and the number of Canadians who are actually represented by a union. The best and the most effective way to raise wages and fight precarity is by giving these workers a voice in the workplace. This means strengthening the labour laws to enable workers to join a union.
The third prong is simple. Attack the joblessness and unemployment by creating decent jobs. The CLC urges the government to invest in the bold economic transition to a low-carbon economy. We have an historic opportunity to respond to the climate crisis and generate decent jobs—green jobs—through the ambitious program of energy investment, public transit, and home and building retrofits. There are many job options here waiting to be tapped. If we reduce the labour market slack and address underemployment, wages will begin to rise.
Finally, I want to say something about the improvement to the Canada pension plan in part 6 of this bill. The CLC welcomes these enhancements to the survivors pension and other benefits. With respect to the child rearing and disability dropout, we believe the government hasn't properly researched the impact on women and workers with a disability. We therefore recommend the committee ask the Department of Finance to provide detailed modelling of the drop-in provision that's in the bill in regard to the CPP enhancement, for the committee members.
I want to thank the committee members for the opportunity to be here today. I will answer on behalf of the congress any questions the committee wishes to pose.
Thank you so much.
My name is Bob Blakely. It's my privilege to represent the half million unionized construction workers in Canada.
Construction is 14% of Canada's GDP and 8% of all direct employment. We maintain a building stock worth about $1 trillion.
One of the principal features of organized construction is that we're the largest private sector trainer in Canada. We maintain 175 training centres across the country, with a bricks and sticks value of around $1 billion. We train our members there. We expend somewhere between $300 million and $350 million a year on pre-apprenticeship training, safety training, apprenticeship, graduate level training, upgrading, and new technologies. Virtually every cent of that money is from investments made by our members and our employer partners through collective bargaining. The investment makes our construction workforce in Canada the best in the world.
I would like to endorse the remarks of the leader of the labour movement. I'm not going to repeat his comments, but I'll try to complement the greater labour movement position with those that matter to construction.
The title of this year's budget, “Equality Growth: A Strong Middle Class”, resonates with most building trades members. It is a rational and reasonable goal to which people aspire. Government can create the climate and develop an impetus toward those goals. In 1968, the Woods task force reported its findings to Parliament. Those findings created the underpinnings for the Canada Labour Code. The report is succinct and elegant. I will, in an inelegant way, try to paraphrase a couple of those findings.
The first is that everyone, employers included, acknowledged the contribution of collective bargaining in raising the standard of living in Canada. The committee reported an interesting, counterintuitive finding that unionization is a great thing as long as it's in somebody else's business—people said they didn't need one in theirs.
Not much has changed since the Woods task force. Government needs to be value-based in how we deal with these sorts of things, and to express support for collective bargaining. The Canada Labour Code contains a preamble that stresses promotion of common well-being through encouraging collective bargaining, recognizing collective bargaining as the basis for effective labour relations. The preamble colours the legislation and encourages bargaining. It is not neutral in nature or in effect.
Last year, the Government of Canada ratified ILO convention 98, the right to organize and collective bargaining. There now is only one industrialized country in the world that doesn't subscribe. Somehow I doubt that Donald Trump is going to be seized by an attack of conscience and fix this.
Shortly put, collective bargaining creates better wages, better conditions, and a better organized workplace. The net effect of collective bargaining is a rising tide that floats all boats. In the construction business, the union rate is the benchmark. When the union rate goes up or down, non-union workers get a raise or a cut. When the union gets a health plan, so does the non-union worker. When the union gets a pension plan, the non-union worker gets some form of retirement security.
The Canada Labour Code, since the passage of Bill , has returned to being the only non-politicized labour code in the country. It has remained true to the Woods task force principles. There haven't been federal swings, but rather there has been stability over a significant amount of time.
Let me point something out: virtually every construction collective agreement in Canada is provincially bargained. We're not under the Canada Labour Code, but the Canada Labour Code stands alone as a model enactment.
If you want to lift people into the middle class and maintain them, encourage collective bargaining and not the demonization of unions.
The Government of Canada doesn't necessarily create jobs. Even if it did, it couldn't create enough for every Canadian who wants a career. Canada does spend an enormous amount of money on infrastructure and procurement. Could this money do double duty?
A number of sophisticated owners—major purchasers of construction—recognize that it is in their interest to ensure that the stock of trained and skilled construction workers remains appropriate. They build commercial terms into construction contracts that require the contractor to employ skilled people and to do a level of training on the site. It doesn't mean union only. We can negotiate our own deals. However, it means using tax dollars to achieve other important social, fiscal, and occupational goals.
The Government of Canada has been talking about community benefit agreements to provide for things like training and apprenticeship within local communities. If you look at the survey done by Build Force Canada, we are going to replace a quarter of a million people in the construction industry in the next five years. That means recruiting more than half a million people, because we only graduate about 49%.
Much can be gained in the area of health and safety, quality, and the reduction of construction-related claims, by having some sort of community benefits in an agreement and doing a value construction matrix to evaluate tenders.
The lowest bid does not equal the lowest cost. Taking the lowest bid doesn't create value. Contractors aren't in business to lose money. If they submit a price that's too low, they'll try to make it up on the claim. Evaluate the bids going in. Community benefit agreements provide support for communities and government by getting people apprenticeship ready. The little understood fact is that success in the construction trades isn't easy; it takes the same level of intellect to complete a skilled trade's apprenticeship as it does to get a university degree.
As for supports for groups like women, the budget has done a good job on the apprenticeship incentive grant for women and the women in construction fund. There were also positive changes in this budget for veterans and indigenous people, with the the lnnu-IBEW legacy project for the latter. These initiatives are getting our kids out of the basement, where they're playing video games, and into real careers are laudable goals. Some of our programs, like Build Together, which will double the number of women in organized construction, and Helmets to Hardhats will create careers.
We build Canada's infrastructure, and what we do builds the middle class. We lift people into that middle class with a hand up. We provide them with an opportunity for a meaningful career. The Canadian worker benefit does that, but we need to do more. The building trades have prepared to partner with you in this regard because you need to get a return on investment for what you've made—some real investments—in the construction workforce, the supports to women in the trades, pre-apprenticeships, and the union training and innovation program.
Let me close by asking you to support lifting people into the middle class and maintaining them there. It takes conscious thought to ensure that the climate to build better careers and to provide vehicles, like community benefit agreements, will ensure better results. I would be most pleased to respond to any questions you may have.
Canadians for Tax Fairness, which many of you are already familiar with, advocates for fair and progressive tax policies aimed at building a strong, sustainable economy, reducing inequality, and ensuring that there is adequate funding for the quality public services that Canadians both need and want.
In Budget 2018, there are many steps forward, which some of our best speakers have already spoken to, such as the working income tax benefit and the action to tackle the gender gap. We at Canadians for Tax Fairness have particularly applauded the Liberal government's efforts to close unfair tax loopholes related to private corporations as a step forward on tax fairness, but it's important to note that we consider this a small step.
We urge the government to follow this up by closing other loopholes such as the stock option deduction, the capital gains exemption, the business entertainment tax deduction, and others. Further, in the budget, we again applaud action taken on trusts and banks in terms of loopholes, but real action is needed on tax havens where corporations and the wealthy are able to avoid paying their fair share. Examples include an economic substance rule.
There are four really important reasons why Canadians for Tax Fairness is pushing for the government to go further in closing loopholes and other measures for tax fairness. The first is that Canadians want action. Poll after poll for years have shown that Canadians are deeply concerned about inequality and bias in the tax system, and want action on tax fairness. This includes polls by Angus Reid, EKOS, Mainstreet, Environics, and others. Even after the pointed campaign against the private corporation tax reforms in last fall's consultations, more Canadians still supported the proposals than opposed them. Some of the support for change has been very high. Last fall an Environics poll found that 87% of Canadians want to see the law changed to make it illegal for corporations to use tax havens to avoid paying their fair share. Ninety per cent said it was immoral, although legal.
The second major reason that we want to see more ambitious change in terms of tax fairness is that Canada is in the bottom third of OECD countries for what we collect in taxes as a percentage of GDP. The same is true for social spending: we lag well behind other developed countries. The government has been seeing criticism of the gender and anti-poverty measures in this budget as tepid, from child care to pharmacare, from pension security to safe drinking water. Infrastructure and programs that Canadians need and want are being underfunded due to inadequate revenues. We are already running a deficit in our current programs. As the resource transition on climate change and new technological change impact our economy with automation, we will need more, not less, social spending.
The third major reason we're advocating a more ambitious agenda on closing loopholes in tax reform is that inequality is dragging down our economic growth and impacting the well-being of everyone. Research shows that not just the low-income people but also the wealthy suffer, in outcomes from education to health, even in less equal societies. On the economy side, the International Monetary Fund, the OECD, and others have determined that the current level of inequality in countries like Canada is negatively impacting economic growth.
Surveys have found that the main factor inhibiting the ability of small businesses to increase their sales and production is insufficient domestic demand—not tax rates but lack of purchasing power by Canadians.
Investing in social programs is an important way to boost consumer demand. I have a great example with regard to Norway. They save their own gas revenues and put it into a fund that they convert to a pension fund. When the financial crisis hit, Norway had the shallowest dip and exited the soonest with the highest consumer confidence in the OECD. So what we see is that pension security and broader programs for coverage of pharmacare, child care, and other social programs stabilized their economy and built back consumer confidence. Of course, they also have a higher tax to GDP ratio than Canada.
The fourth reason we need a more ambitious plan on loopholes is that they're very unfair. The government did proceed with closing some of those loopholes in the 2018 budget, but even as modified, the tax structure still disproportionately benefits the wealthy. For example, the threshold for the small business deduction for passive investment starts at $50,000, which is an estimated $1 million in assets at a 5% return, and fades out at $3 million.
By comparison, Canadian families held $259,000 in net assets in 2016. A third of that is housing, much of which is in overheated markets, which potentially means that the number is inflated. Also by comparison, median individual income was just $27,000, and the maximum for RRSPs was in the $26,000 range.
Those loopholes as restructured in budget 2018 are out of reach for most Canadians. Some would argue that these boutique tax preferences are compensation for the risks that business owners take—they don't have pensions, sick leave, maternity leave—but it's not just business owners who lack these benefits. Increasingly, work is precarious for most workers. Most private sector workers lack a pension, and increasingly are being forced into precarious work arrangements where they have no benefits, no sick leave, no maternity leave, no EI, no CPP, no paid vacations. And they're not getting more compensation for this shift of risk; they're getting less. Automation is predicted to make this situation much worse, and inequality, economic security and precariousness are driving the rise of extremism and authoritarianism.
The solution to what is fast becoming the overarching crisis of our time is not to provide boutique tax treatment for a small portion of privileged Canadians, but to provide universal child care, sick leave, and pension programs that will be available to all workers as well as low-income business owners who are falling through the cracks. For this, the polling shows that Canadians want to see much more aggressive action on closing unfair loopholes, shutting down tax haven use, and having a much more progressive tax system.
Thank you. I'll answer any questions the committee may have.
Thank you, Mr. Chair, and members of the committee. As mentioned, my name is Bruce Ball. I'm vice-president of tax for the Chartered Professional Accountants of Canada, known as CPA Canada.
CPA Canada is one of the largest national accounting organizations in the world, representing more than 210,000 members. Created through unification of the three legacy designations, CPA Canada is celebrating five years of serving the profession, advocating in the public interest, and supporting the setting of accounting, auditing and assurance standards.
I'll focus my comments today on the amendments to the Income Tax Act in part 1 of Bill . In particular, I wanted to address three important points, the first being the outstanding issues that remain with the private company tax measures; the impact of the recent U.S. tax changes on Canada's competitiveness; and the need to review Canada's tax system to address these matters and other matters related to competitiveness, simplicity, fairness, and efficiency.
Starting with the private company measures, as you're well aware, the 's initial proposals to change the tax provisions for Canadian-controlled private corporations were met with considerable criticism. The minister and his department have listened and acted. The provisions laid out in budget 2018 and the bill are much improved. However, there are still aspects in need of further improvement. In particular, the new legislation around the tax on split income is still complex, difficult to read and interpret, and challenging for business owners and practitioners to apply.
A general exemption for spouses would go a long way to simplifying the measures, and is highly recommended. The joint committee on taxation of the Canadian Bar Association and CPA Canada also made some suggestions to further clarify the rules, which we think should be considered. The joint committee's suggestions are rather technical, so I won't go into the details here, but if there are particular questions, I'd be happy to address them.
Though not yet legislated, the changes to the tax on split income are set to take effect on January 1, 2018. We're still suggesting that the government consider deferring the changes to January 2019 to allow more time for consultation and further refinements, because we still think the rules can be improved.
On competitiveness and the matter of the U.S. tax reforms, no matter what we think about them, they are a game-changer for Canada. Budget 2018 announced that Finance Canada would conduct a detailed analysis of the U.S. federal tax reforms. This is good news, but this process must have a sense of urgency to it. Canada's competitiveness depends on it.
In the most recent CPA “Canada Business Monitor” survey, two-thirds of Canadian business leaders report that Canada is now a less competitive place to invest and do business versus the United States, compared to one year ago. The says he does not believe that the corporate tax rate is the problem, and we agree. The issue is competitiveness, and competitiveness can be affected by a number of different factors. The tax system as a whole, not just tax rates, is a fundamental part of creating a competitive business environment.
This brings me to my third point, a comprehensive tax review. To ensure that Canada has the most competitive, fair, simple, and efficient tax system possible, it's time for a review of the tax system. You've heard me make this argument before, but each time I appear before this committee the rationale becomes stronger and more urgent. Tax reform will involve broad consultation, and it will involve looking at the tax system more holistically, not just from the perspective of business competitiveness. The process will be worth it. It will lead to a better, more long-term approach to fixing Canada's tax problems.
While the U.S. tax changes demonstrate the need to address Canada's tax system, the controversy around the proposed CCPC tax changes also illustrates why a holistic approach is preferable to incremental changes. The Advisory Council on Economic Growth also recommended addressing the competitiveness challenges in Canada's tax system.
It we want a tax system that fosters our long-term competitiveness, that supports inclusive growth, and that benefits all Canadians, then a review of the entire tax system is the first crucial step.
Thank you very much for the opportunity to appear before the committee, and I'll be happy to answer questions.
Thank you, Mr. Chairman.
Welcome to all the witnesses.
Everyone, with my first question, I'll try to spread the wealth around.
To the Canadian Labour Congress, to Hassan or Emily, we haven't had a substantial or meaningful update to the Canada Labour Code in many, many years. I think it's long overdue. You referenced two or three changes that you'd like to see or suggest. I know that a lot of the stakeholders will be interested in that.
With reference to the industries that the Canada Labour Code applies to, the ones that are governed under federal legislation, where could we go that would both ensure the competitiveness of the industries we're looking at, whether transportation, telecommunications, or the banks, and improve the benefits and rights of middle-class workers?
To Mr. Ball and the CPA, I've dealt extensively with your organization and many other organizations that focus on tax. Our government has put in place some measures where we landed on passive investments. It's a win for tax fairness, but it's also a win to allow private corporations to grow and compete, whether domestically, across the border, or globally.
One of the factors that you've mentioned is the U.S. tax reform. You are correct: it's not just about what the tax rate is, unless there is a huge discrepancy, but for now, there's not a huge discrepancy. On marginal investment dollars, I want to get your opinion of the landscape on that front.
Today we had Amazon announcing there would be 3,000 new jobs in downtown Vancouver. I think it's a great win for Canada and for those workers who will be employed. These are good high-tech jobs. Obviously, Canada is an attractive place to invest.
I want to get your thoughts on the direction, where we should be going, and so forth.
That is really a $64,000 question.
When you look at the construction industry, at the skilled trades essentially, not necessarily just construction, for years if a bright, young woman who was captain of the debate team, captain of the volleyball team, and won the school spirit award told her guidance counsellor that she wanted to be a millwright, the shock treatments would start before her parents were contacted There is a bias against people who work with their hands. The theory is that if you can't cut it in university, then you go into the trades.
We don't need those people. We need bright, young people. The money that you're going to give to female apprentices to help them get through is a start. We need to have programs that will allow indigenous young people who are going along the path of a utility.... Go pipelines! We need to have a way to get them apprenticeship-ready and get them into lifelong careers.
If you want to lift people out of poverty, give them a job that leads to a career, which leads to employment almost anywhere in the country. Our apprenticeship system can do that. There are a number of people you can partner with to do it.
Mr. Ball, in going through your PowerPoint presentation, on page 9 under “Detailed Assessment of U.S. Federal Tax Reforms Urgently Required”, it shows that 84% totally agree. I guess these are your members, but in the budget, you briefly mention it. In the whole budget, I think there's one line that actually says anything about what the review might be like. It seems to me this requires more than just one line.
What would CPA Canada like to see in terms of a review—how fulsome, how in depth, how much transparency?
Next you have “Findings of Detailed Analysis Should be Made Public Soon After Completion”, and 93% of your membership seems to agree. So, how much information should be made public? What should it look like? What is the ideal situation for you?
That would be one way to do it. As you know, this issue arose after the finance ministers had met in 2016 and agreed to the enhancement.
Over time, when the government finally tabled the legislation for the enhancement, we were able to determine that the drop-out period, both for women's child-rearing years and disability, had not been included in the provisions. Once the finance department was alerted, the government did work with the provinces, because you needed to have their agreement on how to deal with this anomaly.
They came up with a new proposal called drop-in, and not drop-out, but we are still slightly skeptical that it will provide the same benefit of the drop-out provision under the current CPP provision. We don't know that, and I don't want to say definitively that they didn't get it right, but there is a need to do modelling to determine whether it will have the same impact as the drop-out provision has had in the current CPP.
The worry, of course, is that you don't want women who are rearing children to be disadvantaged by no fault of their own. We did end the discrimination of the previous CPP, and it was a good thing for us to do. We also did it for disability.
Going forward, it is very important to do modelling to show how the new provisions would impact this particular drop-in provision, because there is an expectation on the part women and those who may be affected by disability that they're not going to be disadvantaged.
If the modelling were to show there's a problem, we would have to figure out how we can discuss this with the provinces to get it addressed. Had we agreed to keep the old model, it would have been much easier in the end, but as you know, this is a benefit that will take effect starting next year.
They're hoping, based on the increase in the rate that the worker and employer would be paying, that there's enough flexibility to cover the drop-in period. We're not certain of that at the CLC, and that's why we've raised this issue.
Thank you for your question.
The numbers are quite small. My understanding is that 3% of businesses, about 750,000, are impacted, so it's relatively small. Because the threshold is quite high, it is quite out of reach for most small businesses. The broader issue is that the bulk of businesses are only earning $73,000 and under. That's the median: half are earning less than that, and half more. If you have a median income at that rate, and this passive investment is only for past investment—it doesn't apply to active income—you need a business with that income for that passive investment threshold to be meeting this criterion
So it's relatively small number of the businesses that are accessing the passive investment threshold. Canadians for Tax Fairness feels that the threshold could better serve Canadians if it were lower, at around $25,000, more on par with RRSP deductions. We would like to see that tightened up, because the data shows very clearly among small business owners, the bulk of it is in the hands of 10% of the top 1% of earners. This needs to be closed up to make it fairer.
You know, you really make a good point. We had successes with things like the Alliance pipeline. We got a crew of people. We got them up to speed. They were working. Everything was great. Then the job ended. We had another job down the road, and people didn't want to go . We hadn't thought it through.
Look at something like the proposed energy east pipeline, with 165 pumping stations along the way. It's a megaproject in and of itself, with a pumping station every 50 miles. We could have developed, in communities along the right of way, a couple of electricians, a couple of steamfitters, a millwright or two, a carpenter, a labourer, a painter—people who would be required, for the life of that facility, to service it. They could have been home every night, because it's 50 miles to one station and 50 miles to the other. We missed the boat when energy east failed. There are a number of projects like that.
Look at the Nalcor facility at Muskrat Falls. We have a workforce building it there. We've been bringing in a fair number of indigenous people, but we haven't gotten enough of them into apprenticeable trades yet. That job will go live in two and a half years. When it does, they're going to need a workforce there. Who better to be the workforce than the people who live there?
We have to look differently at how we try to engage indigenous people. It needs to be on their terms and on their ground. I mentioned the lnnu-IBEW legacy project, which is going on in Newfoundland and Labrador now and which is trying to make certain that when the construction is done at Muskrat Falls, and the construction hopefully goes on at Gull Island, the people who live there will be front and centre in doing the work and having careers.
I want to thank all of our witnesses who are here today for the work they do for their organizations and for helping Canadians through helping this committee.
I'll start with you, Mr. Ball. Most of the presentation I saw here today was based more on the competitiveness. If there's time, I'd like to address that.
You wrote, or perhaps it was a group effort, in regard to some concerns over the overly broad provisions in relation to TOSI—for example, how there may be cases where someone inadvertently.... You do the raise the point, I think, in the letter I'm speaking to, that unless someone has access to sophisticated advice, these rules may or may not apply. People who maybe have traditionally used the tax on split income rules may be ineligible because of the overly broad provisions. But there might be cases like the example in here, the hairdresser for whom 10.1% of her business is retail, selling shampoo and supplies and whatnot. She may be considered an excluded business versus someone who isn't. Again, if you have two hairdressers competing side by side or across from each other, that gives one an advantage that the other one doesn't have.
Could you maybe speak a little bit in regard to the differences and how the some of the lack of definitions in these amendments may lead to some unforeseen consequences?
Thank you all for coming. Mr. Yussuff and Mr. Blakely, I want to ask about some comments. Either of you can jump in, or both, if you like.
In terms of the need to have...and you specifically mentioned women in trades, but I think the idea, in terms of this budget, is also to have, as my colleague Mr. McLeod pointed out, indigenous peoples entering the workforce in ways that haven't been done in the past.
I'll just read from a tweet that was sent out by the Conservative critic for Innovation, Science, and Economic Development. It's very concerning to me, given that's the mandate. In talking about Canada's competitiveness, he said, “...this government is more interested in pandering to the radical left with more taxpayers money thrown at gender, race and other 'intersectional identity' issues, than in ensuring our economy remains competitive.” My colleague Ms. Khera rightfully responded that leaving people behind is not the way to grow the economy.
I'm just curious, in and around—
The reality is that if we're not going to address some of the systemic issues that have always plagued women's participation in the economy, we're not going to change the economy. Addressing systemic issues does take time. We're changing attitudes, changing approach as to how we do things. It's critical that you stay focused, because if you're simply going to play at the edges, then stop pretending that you're going to transform this country to give women a real opportunity.
Women's underperformance has nothing to do with their capacity to perform at the same level. The fact of the matter is that they work in similar occupations as men, yet they make that much less than men. Without proactive pay equity legislation, they will never achieve economic equality.
It also goes to the point that Bob is making in regard to getting them into non-traditional jobs. We have to say, of course, first of all, that you belong here, and secondly, we're going to support whatever is necessary for you to succeed. Simply opening the door for them to come in is not going to get them there. We have to change the culture, the attitudes, and the behaviour of the people they are working beside, and say, if you want to work here, we are going to assist you in succeeding. That takes time.
It's simply wrong to suggest that half the working population in this country does not deserve their government paying attention and spending resources on them. It's fundamental that we get this right, because if we do want to succeed, we're going to have to take the time and the effort. All Canadians, whether in business or the labour movement, all of us, have to labour at this much longer, otherwise we will not get the desired outcome we're hoping to have here.
Thanks to all the witnesses for coming here.
I guess my question is going to be focused a little bit more on Ms. Norgang, and continuing your conversation about the workers income tax benefit.
I'm so pleased to see that we're dealing with this. I think this is an approach that's long overdue, and one that is similar to the initial idea of about 20 years ago when there was the launch of the national child benefit. If you have people of similar income but one is working and one is receiving benefits, you want to make sure that the advantages to choosing to work remain the same, that there is no rational avenue for people to choose social assistance because they can get more benefits that way. We want to level that playing field, because fundamentally, I just believe that people love the dignity of work, the ennobling act of being at work.
You suggest making the payments happen more often. Like my colleague opposite, I'm just trying to figure out what necessarily would be the advantage to that. Could you walk us through this, why you think there are clear advantages to it working that way? That would be very helpful to the committee.
Take your time in doing this, because whatever testimony we hear, that's what we can pull off in the final report.
Yes, and we have seen those major changes as having been helpful, but the change to the workers income tax benefit is still a modest change to a modest benefit.
Just to frame it in the context of what we're talking about, when we're talking about the working poor, 7% of all economic families are part of the working poor. This goes up to 19% for single females, 16% of single parent females, and 15% of single working males. Fully one third of the working poor held full-time, full-year jobs. These are people who are working full time, full year, and still living in poverty.
The challenge, certainly, is there. To get to your question, the idea is that, by providing it quarterly throughout the year, it would enable people to have these benefits when they needed them. They could continue to then feel able to take up part-time work or temporary work if they needed to do that, but they would still have the supplement to pay for the things that they need most, whether it's rent, medicine, or food.
That's a great question, because it applies to a lot of our tax expenditures. You know, as structured, a lot of them are fairly blunt instruments. That one, for example, is not specifically targeted at struggling start-ups in the tech industry. It's widely available to those who have the right thresholds. That's why I said earlier that if we're going to talk about tax expenditures, we need to tie it to a clear public goal and to have metrics and accountability for if whether or not it's meeting the goal.
We don't have any metrics that tell us whether or not those stock options are building tech companies or if they are being reinvested, whether those are highly successful companies or start-ups, or whether those are multimillion-dollar CEOs or low-income tech workers.
First off, we need to ensure that all of our tax expenditures are structured in a way that we're clear on what the goal is and is tied to a real public good. There are metrics for measuring its effectiveness and transparency and reporting to the public on how that money is being spent.
The other thing is that, to some extent, it's risky. If we have struggling tech companies whose workers aren't being compensated adequately and they're relying on stock options, that can exacerbate the precariousness in a sector where a lot of workers are already highly precarious. I know lots of tech workers who are really struggling. It's not necessarily the best way to support struggling tech companies if it's being on done on the backs of precarious workers.
I would say that the small income tax break is another measure that, ostensibly, is aimed at creating jobs, but half of the small businesses have zero employees. How targeted is that? It's not.
Generally, we need to look at those instruments much more carefully.
Thank you, honourable Chair.
Honourable parliamentarians, ladies and gentlemen, let me start by thanking you for the opportunity to speak to you today about the section of Bill concerning the medical expense tax credit for service dogs. I'm sure there are parliamentarians of various parties who are glad we are addressing the METC, because I don't have to contact them anymore.
Some hon. members: Oh, oh!
Mr. Medric Cousineau: The media contacted me after budget day and asked what this meant in financial terms. My response was that it would be approximately $37.50 a month. Their incredulous response was, “You fought a five-and-a-half year war over a $1.23 a day?” No, I fought a war for equality and human rights. The $1.23 is just a consequence or byproduct.
What started the war that I've waged for years for efficacy studies and tax credits? Three-plus decades ago I was injured doing my job in the military. The mental health injuries have been and will always be an ongoing battle, 24-7 365 days a year. When I was paired up with Thai, almost six years ago, I applied to VAC for their service dog allowance. If I was blind and Thai was a guide dog, I would be receiving an allowance for her care and upkeep. Buried deep within VAC's own benefit grids you're going to find benefit 625995, which provides $1,200 for 12 calendar months for the care and upkeep of a guide dog. Trying to differentiate between a guide dog and a service dog is a moot point. In each case a highly specialized dog is task trained to mitigate their handler's disability. Yet I was denied. When I asked why, they said that Thai does not meet the standard. When I asked what standard she did not meet, I was informed they did not have one. Yes, you have heard that right. I was denied a benefit for a standard I could not meet that they could not define.
I then checked the Income Tax Act, and found out that all service dogs were covered under the medical expense tax credit, with one singular, notable exception. When I repeatedly queried this, I was told there were no studies proving the efficacy of the use of service dogs for PTSD, this despite the fact that other service dogs were never subjected to efficacy studies. It's interesting to note that in 2012, six years ago, diabetic alert dogs were not subjected to the requirement of an efficacy study when they were included in the METC.
The difference between that and how I was treated was discriminatory by definition, treated differently on the basis of my disability. Yes, you heard that one right. I was being discriminated against based on the nature of my disability, in direct contravention of the Canadian Human Rights Act.
Ladies and gentlemen, this war was fought for human rights and equality, and any attempt to justify or rationalize human rights based on dollars and cents is so distasteful I cannot quantify it. It actually makes me physically ill. I should probably be testifying at the Standing Committee on Veterans Affairs to discuss the implications of VAC's complacency and apathy surrounding the demise of the national service dog standard. This failure by VAC will only further delay financial assistance to disabled veterans with service dogs.
All Canadians who were severely disabled by the debilitating injuries surrounding PTSD need help. The horrific impact 24/7 and 365 days a year on their lives and the lives of their families should not be minimized in any way. The latest is that CRA is denying those with severe mental health injuries their disability tax credit certificate because of a bureaucratic policy, and that, too, is unconscionable. At every turn we've had to fight hammer and tongs for every inch.
You see $1.23 a day, or $37.50 a month, may not sound like much, but the $450-a-year medical expense tax credit, based on $3,000-per year care and upkeep for your service dog, does make a difference to those living with serious mental health injuries. The lash of discrimination only further traumatizes and stigmatizes. A huge step is taken when equality is finally ratified. It should never have come to this.
Why I waged a war for equality and had to have it go on for so long escapes me. However, this is only the first step on a very long journey that those battling the ugly stigma of mental health injuries face. I strongly encourage all parliamentarians to take the next step in helping our disabled veterans by ensuring that VAC end their clearly discriminatory policy, and ensure that I and other disabled veterans receive their allowances under benefit code 625995.
VAC's policy is that they will not provide a benefit further back than when you applied for it. VAC is steadfast in this rule. In my personal case, I'm entitled to almost six years of this benefit back to the date of my application.
In the other matter I was asked to address, the new pension for life, I was extremely hesitant to talk about that because I realized there are others who may have greater expertise. However, I feel, upon considered reflection, I must comment.
The government is about to create a problem of epic proportions for itself. Having just waged human rights battles based on disability, it is about to create another equally loathsome, yet avoidable, human rights battle, based on gender discrimination. Let me explain.
Two soldiers deploy, trained to do the same job and are in the same vehicle, and they sustain exactly the same injuries. They are both covered under the new pension for life, as presented to our veterans, yet astonishingly, the two soldiers receive different monthly payouts. The people who elected you will not stand for that. Imagine what happens when folks comprehend that the difference in payouts is based on gender, and that this government wilfully and knowingly implemented a human rights violation.
There is no other pension at the federal and provincial levels that has gender-based payout differentials, so why the one, solitary exception? The answer is gender-based actuarial assumptions. Should our two veterans choose a lump sum, their benefits are exactly the same. Should they choose a monthly payout, they receive different payouts based on gender. That is not a pension; that is an annuity.
This may seem similar, but there are key differences. Hearken back to my comments earlier that attempt to justify human rights violations based on financial considerations is wrong on all levels. You cannot do that. To knowingly adopt such a plan is unfathomable.
This is not yet law, and the government has the chance to rectify it and save itself immense problems in the future. With the passage of Bill , a critical step forward in helping all Canadians who live with disabilities will transpire with the inclusion of the medical expense tax credit for the use of service dogs by those with mental health injuries. But do not violate Canadians' human rights. To adopt the new pension for life with embedded gender-based discrimination would be unconscionable.
I spent the last five and a half years embroiled in a battle for equality, no more, no less. Equal is equal. How the, who wants to be seen as the champion of gender equality, can participate in enacting legislation embedding gender disparity escapes me. We fought for freedom, and we fought for equality. We should never have to fight our government for human rights and benefits. That was what my fight was for. It was for equality. It was never about $1.23.
Thank you, Mr. Chair.
Mr. Chair and distinguished members of the committee, I am pleased to be here today. My name is Pierre Cléroux, and I am the chief economist of the Business Development Bank of Canada. With me today is Karen Kastner, vice-president of Government Relations.
In the context of your study of Bill , I would like to talk to you briefly about who we are, and then give you an overview of the current environment in which Canadian SMEs operate and what the BDC does.
BDC is the only bank dedicated exclusively to entrepreneurs. We are a financially sustainable crown corporation that does not rely on Canadian taxpayers.
We work with nearly 50,000 entrepreneurs in all parts of the country and all sectors of the economy. We provide support in the form of loans, investments, and advice to help them grow their business. We do not provide grants or subsidies. Rather, we operate on commercial terms as a complimentary lender, and support creditworthy businesses with viable projects.
With our network of clients across the country, we can really put our finger on the pulse of Canadian entrepreneurs and the challenges they face.
From an economic perspective, global growth brings good news for Canadian entrepreneurs. Last year's expansion was broad-based, with all sectors of the economy contributing. In 2018, all sectors are expected to continue to grow, though there were contractions in real estate and oil and gas during January.
In terms of general sentiment among Canadian SMEs, the mood is optimistic. At the same time, SMEs are facing some challenges, including the changing and increasing digital economy, aging entrepreneurs and workforce, difficulty attracting and retaining talent, the direction of the U.S. administration, etc.
For SMEs, there's general liquidity in the market. Access to capital is easy for well-established businesses and traditional business models. However, when it comes to asset-light companies and innovative business models, they have more difficulty accessing capital. Financial institutions have not fully adapted to the reality of financing or investing in technology companies. However, we are seeing consistent improvements in this area.
At BDC, these trends are hugely important for us. We are continually innovating to meet the needs of entrepreneurs by expanding our offerings, changing the ways in which we interact with entrepreneurs and improving our delivery model.
Despite the uncertainty in their landscape, we are constantly encouraging SMEs to invest in their business. By doing so, they can improve their resilience. Simply put, businesses that invest more, experience stronger growth. That, in turn, means a stronger Canadian economy. We want to see more business investment across the board.
That's where BDC can play a role, by both investing and providing advice to help SMEs grow. At the end of this fiscal year 2018—and please note that these numbers are unaudited and might change slightly—our total financing commitments to Canadian SMEs hit $28.8 billion. On the venture capital side, our investments in high potential innovative companies and funds reached a total commitment of $1.26 billion.
We are also investing in key areas of the economy to help unleash the potential of women entrepreneurs, for example. As indicated in the budget, building on the success of our previous women entrepreneur initiative, we have set a new bold and ambitious target to lend $1.4 billion to women entrepreneurs over the next three years. That's double our previous target.
The budget also announced the expansion of our women in technology venture capital fund, from $70 million to $200 million. This is now the largest VC fund dedicated to supporting and scaling women-led technology businesses in the world.
We are also investing in a number of other key areas, such as clean tech and later stage venture capital, through the new venture capital catalyst initiative. Given the time constraints, Karen and I would be delighted to receive your questions on any of these issues, or the state of small and medium-sized businesses in Canada more broadly.
Thank you, Mr. Chair, and thank you to the committee for having the Canadian Union of Public Employees here today. We're the largest trade union in Canada, with 650,000 members across the country in virtually all sectors of public work.
Obviously, Bill is a very large bill. We're not going to comment on every section of this bill, but focus on a few gendered aspects of the bill that we find particularly concerning.
The first one would be the lack of pay equity legislation. I know you talked about this in the earlier session today. This is something that we've been advocating for a long time. This government has been making very public commitments to a goal of gender wage equality. This is the simplest way for the government to take a step in the right direction. Your budget committed to doing this. It's been now two years since the Liberal-led committee studied this and recommended moving forward. The report was called “It's Time to Act”. They said we'd go forward within 18 months. We're now 24 months past that point. Your budget said this was going to be in the budget implementation legislation. It's not there. We hope that it will be there very soon.
I'd like to focus the rest of my time on the Canada pension plan drop-out issue. I know this was also mentioned at an earlier session. I was before this committee about a year and a half ago talking about Bill , the legislation that implemented the federal-provincial deal reached in the summer of 2016 for a modest expansion of the Canada pension plan.
When we looked at this legislation, we were shocked to find that there were no drop-out provisions in the new CPP benefits for periods of child-rearing or disability. These have long existed in the CPP that we all know. Essentially, these CPP benefits are a function of how much you've earned through your working career, so if you have a period of zero or low earnings, that's going to pull your CPP benefits down.
Governments over the decades have recognized that it's appropriate to put in place what they call “drop-out provisions” for periods of child-rearing or disability in order to exclude those periods from the calculation of CPP benefits, so that you don't see a pension penalty for raising a child or for being disabled and unable to work. That's worked well for the 50 years of the CPP's existence, so we were shocked to find that it wasn't going to be part of the new tier of CPP benefits.
CUPE and the labour movement brought this to the attention of the government. The bill was passed as written, which we were quite opposed to. We thought the government should have done something at that point. We were happy to see in December of this past year, 2017, that the finance ministers of the federal and provincial governments said they were going to do something about this. They said they were going to add what's called a “drop-in provision” to the new level of CPP to deal with this child-rearing and disability issue.
The problem with the drop-in provisions is that they're clearly structured to deliver a significantly lower benefit than the traditional drop-out replacement would have done. When the government brought in these drop-in provisions, it said they were an improvement that would strengthen benefits. In our view, however, a large inappropriate cut was instituted that, to a certain degree, walks the benefits back. We don't see that as an improvement. We still see that as an unjustified cut.
We've asked the government for numbers on this. We wanted to find out what this was going to mean for individuals down the line, and what it would mean for the plan. We haven't seen any of those numbers, but these drop-in provisions are included in Bill .
To me, to CUPE, this is an issue of major importance. Our position is that workers taking time out of the workforce to raise a child at home or because of a disability should not face any CPP penalty. I know that at earlier meetings finance officials were asked to get those data to you, and I certainly hope that you see those numbers and reflect upon them before passing this legislation.
Thank you, and I'll be here for questions afterwards.
Thank you very much, Mr. Easter.
My name is Kevin Milligan. I am a professor of economics at the Vancouver School of Economics. I've been asked to speak specifically about the new Canada workers benefit.
I've been studying the impact of tax benefits for modest-income workers for about 15 years, and the evidence from around the world is unusually strong and consistent. Benefits that are focused on providing incentives for modest-income workers to join the workforce have been successful in the United States, the United Kingdom, and also here in Canada.
However, the existing working income tax benefit, WITB, suffers from two shortcomings. The first is that it is too small. The maximum benefit for a single worker under the 2017 configuration is only about $1,000. That means that the benefit is all gone by the time someone reaches about $18,000 of income. If you're a full-time, full-year minimum wage worker in most provinces, you see absolutely no benefit from the existing WITB. I think that misses the mark.
The second shortcoming is that the existing WITB lacks salience. It's hidden away on the tax form, requiring the filing of a special supplemental schedule, so people are often not even aware of it. This has resulted in a substantial number of people who are eligible for the WITB but don't end up getting the benefit.
The proposed transition to the new Canada workers benefit makes some substantial and important improvements in ameliorating both of these shortcomings. The new Canada workers benefit is larger. The maximum benefit is 30% larger for singles, and 24% bigger for couples and those with kids. As importantly, the income range that is now covered by the new Canada workers benefit is much larger. It extends up to about $24,000 for singles, and up to $36,000 for couples and those with kids. This means that a much larger proportion of modest-income working Canadians will see some benefit under this new Canada workers benefit than was the case under the old WITB.
The new Canada workers benefit will also be easier to access. In a new and very important initiative, the Canada Revenue Agency will check everyone's tax filing to make sure that the tax filer has applied for the Canada workers benefit if the person is eligible. If they haven't applied, they will automatically be enrolled for this benefit. This starts in 2019. Moreover, the government has indicated that it will explore ways to make the Canada workers benefit payable on a monthly basis rather than lumped in with the other aspects of the tax filing done annually.
Both of these measures, higher benefits and making benefits easier to access, are important advances. However, there is still some more work to do, and I have three brief ideas.
First, I think benefits still need to be larger. If you think about someone who is a full-time, full-year worker—that means about 2,000 hours a year of work—and the minimum wage in some provinces approaching $15 an hour, if you multiply those together, you get about $30,000 of income for a full-time, full-year worker. I think that ought to be a target for the income range for the WITB. It's currently at $24,000 for singles. I think we ought to try to get that up to $30,000.
Second, I think the government should continue its efforts to make the benefit more salient. Economists like me spend a lot of time trying to design these kinds of programs that provide incentives for rewarding work and for promoting good behaviour, but if the incentives are buried in complexity, we're not going to see the full realization of the benefit that we want to see. We want to make sure that the benefit is salient, easy to access, and people can get the benefits that they've earned.
Finally, the government should undertake a study of the feasibility of individualizing the Canada workers benefit. This has been advocated by Professor Tammy Schirle at Wilfrid Laurier University.
Individualizing means that the benefit is phased out based on one's own income rather than on a couple's income. This would have an important impact on married people, and specifically on married women as that would give married women a boost both within the economy and within our society. I think it's worthy of some more study.
I'm looking forward to your questions, and I pass it back to the chair.
Thank you all for your presentations.
I'm going to turn to Mr. Cousineau.
Thank you for your testimony.
Mr. Chair, I'd suggest that since a portion of the testimony was not part of this specific study, maybe we should send it to the to draw his attention to some of the items you've outlined, because we're not dealing with all of it right here today.
I want to ask you a question with regard to the service dog allowance specifically. One of the changes we made was to allow for this through our medical expenses. I'm not sure if this addresses all of your issues, then, if the service dog qualification policies—although I think you used a different word—still haven't been established by Veterans Affairs. Would you be able to access the psychiatric tax credit, or does this now take care of that issue? I'm just trying to clarify this from your testimony.
Mr. Janson, I just want to quickly ask about the drop-in provisions versus the drop-out provisions, because this was an issue I was very concerned about too and was happy to see the changes made. If the problem is that the details aren't out, then that's fine. We can have that information further on.
However, the way I understand it, the drop-in provisions are specifically to drop in the parents' average earnings during the years prior to birth or adoption, and that for persons with disabilities it is the same. It's dropping in for the years when they received the CPP disability pension, and the drop-in amount would be 70% of their average earning for the six years to the onset of the disability.
Where do you see the difference in the drop-in versus the drop-out if, from my understanding, it's somewhat functioning like the drop-out?
Thank you for your presence here.
Obviously, we've had a few discussions over the years. Your work specifically targeting how government policy can help assist people, especially those with modest incomes, is to be applauded. I certainly appreciate your presence here today, Professor.
I just wanted to focus on two areas. First of all, you have said that raising the amount would be important and would also make it more salient.
Would you agree that changing the benefit from the current designation, the working income tax benefit, to the Canada workers benefit may alienate people who already know the benefit and identify it as being a tax measure? Do you think that that is a helpful thing for the government to do, or should we try to build upon the current name rather than creating a new one?
I'll just give the example where many members of Parliament still refer to the Minister of Innovation, Science and Economic Development as the Minister of Industry, just out of force of habit. Are we reinventing just for reinvention's sake?
Again, I agree that if we can make it so that people who need this service and need the benefit can access it more quickly.... I would just say that if you talk to the member for Brampton, whom we have here, he would probably say that the change from “Coke” to “New Coke” wasn't a great change in branding.
Anyway, that said, I think we should try to build upon what can be improved but maintain it at the same time, and again, clearly identifying this as a tax measure, particularly because I have so many people who come into my office and often ask about provincial benefits, because there's not always a clear distinction as to what is a federal benefit and what's a provincial one.
Second, you did mention you could build upon a greater pickup, for example, if people were treated as individuals. Let's put it this way. If you have a situation where you have a breadwinner and a spouse, common law or married, and you allowed them both to be individuals, to have a higher benefit you might see someone consider going back to work, versus getting the current benefit.
Do you think, then, that the government should have a default where you have both but that information should be presented to them to encourage someone to join the workforce?
The program is up and running. One of the things I want to do over the course of the year.... You may have noticed in the budget that there was also an announcement about the boot camps that we're going to be running.
What we'd like to do with those boot camps is, obviously, to have them across the country, and use them as an opportunity to bring together the partners we work with, whether the WEOC, Startup Canada, Futurpreneur, or some of the other partners, EDC, and others, to really catalyze our support around women entrepreneurs, and to try to get the word out through them.
We're creating some other online tools to be more visible. One of the things we learned about ourselves is that while we do a fairly good job in terms of the treatment of the loan, once the loan application is made, our loan applications by women are lower than by men. We want to solve that problem.
I think this program is great. It will take a few years to start showing a lot of dividends in terms of how these entities are performing, and we also need to track that.
Turning to Mr. Milligan at UBC, one of the things you may have commented on the Canada workers benefit, or WITB. One of the big things we aim to do with our budget, and with the BIA, is to increase labour force participation rates, especially when we face the headwind of many people withdrawing from the labour force. Our population may be getting bigger, but there are many people actually withdrawing from the labour force—many baby boomers, and the like. Recently, I've had many people tell me, “I'm retiring, I'm 58” or “I have a pension. I'm 65, and I'm out”.
The Canada workers benefit—and I don't know if you've done statistical modelling of this—should not only lift people out of poverty via the the auto-enrollment, but also encourage people to enter the labour force.
It may not be at the level, numerically, where you want it to be, in terms of where the threshold is, because you have the upward trajectory, the threshold, and then the clawback, but I want to hear your take on the labour force participation angle, because that's very important.