Thank you very much for allowing my voice to be heard in this committee. I am truly honoured and humbled to be here with you all today.
My name is Clayton Achen. I'm a founding partner at Achen Henderson CPAs in Calgary. Given my practice area, my primary interest with respect to Bill is tax—specifically the taxation of private companies and small businesses and their owners. I'm primarily interested in what's missing from Bill C-97.
My firm's day-to-day work as a chartered professional accounting firm is to work directly with middle-class small business families. This has given us better perspective than most to see how hard it is for entrepreneurs to earn a living. We also see how easy it has become for our government to take those hard-earned dollars away, sometimes under the guise of fairness, which is a clever word that does nothing to consider the risks and ultimate hardships that an entrepreneur endures.
I'll spend a few minutes talking about some of their more recent challenges, including economic challenges, increases to tax, increased compliance burdens and uncertainty, and challenges in dealing with the CRA and navigating our tax system. I'll then make some brief comments on Canada's desperate need for a modern tax system and close with my thoughts on a few business-related items that are contained in Bill .
It cannot be understated how complicated our tax system has become in the last 50 years, which was the last time that a comprehensive review was undertaken. Our last three budgets have heaped more and more layers of complication and burdens of compliance onto Canadian small businesses. While I am grateful that the attack on private corporations and their shareholders appears to have subsided in 2019, I am disappointed that the bill contains nearly nothing to help them.
What we've seen, particularly in my home province of Alberta, is that entrepreneurs have faced tremendous adversity in the last five years and particularly in the last three and a half.
In Alberta, some small businesses have managed to survive a long and sustained economic downturn with very little help from our governments. A lot have simply closed their doors and are out of work.
For all Canadian small businesses, the cost of compliance has increased dramatically as a result of changes to the inter-corporate dividend rules, tax on split income, the specified corporate income and association rules, changes to family trust reporting and new penalties for saving too much in your business regardless of the reason.
Many wealthier clients have increased their risk tolerance with regard to tax planning strategies and reduced their tolerance for economic risks. Many wealthier clients are shifting their wealth out of Canada.
Most of this is a direct side effect of the offensive and ill-conceived attempt at tax reform for private corporations and their shareholders that was announced on July 18, 2017. Moreover, all companies, including small businesses, are now shouldering significant CPP increases for the next seven years.
According to research conducted by the CFIB, Canadian small businesses are now being asked to shoulder nearly half of the federal carbon tax take, which increases the cost of everything—and I mean everything—while receiving disproportionately small rebates.
In many cases, small businesses have tried to pass these costs on to consumers in order to remain viable. In many cases, they simply can't. This results in corporate inequity, meaning smaller companies are simply unable to compete with larger corporations and multinationals who are better positioned or better equipped to shoulder these additional tax and compliance burdens.
I share these insights with you today not to complain, but rather to highlight that there have been real, rapid and sustained challenges for middle-class small businesses owners across Canada and Bill offers very little in the way of assistance or stimulus.
The next issue is the CRA's service levels. I can confirm the substance of the 2017 Auditor General's report, which says it is very difficult to reach the CRA by phone and even more difficult to get a complete and correct answer. We still deal with this daily. At Achen Henderson, we have been forced to add this to our service levels and have elected to do so at no additional cost to our clients.
While I'm thankful for my newfound love of chamber music and encouraged that the government recognizes the problem, we must ask ourselves if the measures in Bill are the correct approach. While advances have been made by the CRA to be more accessible and user-friendly online, it confuses us that the CRA requires five times the staff per capita to administer our tax system than the IRS does, with more hiring announced in the 2019 federal budget.
Based on our extensive experience in dealing with the CRA and helping many organizations who have experienced similar challenges, we've come to believe that the CRA's issues are cultural in nature. Defective cultures always result in operational bottlenecks. These bottlenecks are magnified by a tax system that is far too complicated for the average CRA agent or taxpayer to navigate, which is further magnified by a lack of or inadequate professional training, in our opinion.
Next, instead of taking steps toward modernizing our tax system to make it more transparent, competitive and easy to comply with and administer, Bill is a continuation by our government of using taxation to pick winners with tax breaks in various economic areas and industries. Furthermore, does nearly nothing to address tax competitiveness with the United States. Instead, the bill stretches the fabric of our tax act even further, mending holes where the fabric breaks with more patches, resulting in legislation that is impossible to comply with and administer.
lt's not all bad. There are some welcome patches in the bill, such as the improvements to the RDSP rules and the specified corporate income rules, but I can't help but wonder how many more holes will need to be patched until we consider modernizing our tax system.
The patch to the SR and ED program is a step in the right direction. lt undoubtedly makes the program more accessible to certain CCPCs. For them, this should help to tip the balance between compliance costs versus benefits and increased support. Unfortunately, these changes do not address the administration issues in the SR and ED program, and they only impact a very small portion of private companies in Canada.
While the accelerated investment incentive will be helpful to some private companies—namely those who are doing well and/or those who are able to expand or upgrade—the full expensing of M and P equipment, clean energy equipment and electric vehicles seems like boutique benefits that will only help certain private companies. We are disappointed that the accelerated CCA measures are temporary in nature.
ln closing, entrepreneurs have endured a lot these last few years. Many continue to struggle with uncertainty and excessive tax complexity, and have received very little from their government in return. While doesn't ask them to shoulder much more, it doesn't offer much in the way of assistance or stimulus.
We've seen improvements in the CRA's online offerings, but we have experienced very little improvement in hold times or service levels, and we question if Bill 's approach to resolving these problems is the correct one. Bill C-97 is a missed opportunity to initiate a comprehensive review of our tax system with the goals of modernization and simplification at its core.
Lastly, the accelerated CCA measures in are targeted at specific industries and temporary in nature, and we think they miss the mark on tax competitiveness with the United States.
Thank you very much for inviting me to speak today. I'd be happy to take your questions.
Good morning, Mr. Chair and members of Parliament. It's a pleasure to be here today to provide our proposal for your consideration and to include in the clause-by-clause consideration of Bill .
My name is Shannon Coombs and I'm the President of the Canadian Consumer Speciality Products Association. For 21 years, I have proudly represented the many accomplishments of this responsible and proactive industry. Today, I provided a one-pager, “Imagine Life Without Us?”, which illustrates the types of products CCSPA represents. I'm sure you have used many of them today.
CCSPA is a national trade association that represents 35 member companies across Canada, collectively a $20-billion industry employing 12,000 people across 87 facilities. Our companies manufacture, process, package and distribute consumer, industrial and institutional speciality products such as soaps and detergents, domestic pest control products, aerosols, hard surface disinfectants, deodorizers and automotive chemicals, or as I call it, everything under the kitchen sink.
I would also like to thank those MPs around the table who are assisting CCSPA with our social media campaigns on Lyme awareness, tick prevention and hand washing.
Why are we here today? Bill makes amendments to various pieces legislation. Part 4, division 9 of Bill C-97 includes provisions to support regulatory modernization in Canada. Four of the acts included within the regulatory modernization section impact our members. These pieces of legislation are the Pest Control Products Act, the Weights and Measures Act, the Food and Drugs Act, and the Hazardous Materials Information Review Act.
I would be pleased to answer any questions you may have regarding those acts. However, our primary focus today is not these but the Hazardous Products Act.
First and foremost, CCSPA applauds the government's commitment to support regulatory modernization in Canada. 's fall economic statement underscored the need for regulatory reform to make it easier for Canadian businesses to grow and remain competitive while still protecting the health and safety of Canadians. Given this commitment, we are here today to request the removal of a costly and unique-to-Canada provision in the Hazardous Products Act via Bill .
The requirement found in paragraph 14.3(1)(a) of the Hazardous Products Act requires suppliers to keep a “true copy” of labels for workplace chemicals housed on a server in Canada for six years. This unique-to-Canada provision was included in the omnibus bill of 2014, when amendments were made to the Hazardous Products Act to allow for the modernization of the hazardous products regulations. As the provision for the “true copy” was included in the legislation, it did not have to go through any costing for companies. In the development of the regulations, it also avoided regulatory costing oversight as it was considered “compliance” and outside the scope of the regulations and the one-for-one rule. To date, no clear policy intent or objectives have been provided to us related to the true copy provision.
The cost for our member companies to comply with the true copy requirement is prohibitive and is realized throughout the entirety of the Canadian supply chain. On average, CCSPA members will have an initial investment for the first year of $4.2 million, $17 million in ongoing investment for each year for human resources, and up to $10 million associated with the Canadian server. If we were to break it down and look at the impact on an individual company, annual costs for one member with four manufacturing sites are estimated at $400,000 to inspect, photograph and catalogue 23,000 receipts of their raw materials annually. The costly process has been captured on the left-hand side of the the document that I provided to the clerk for your reference.
As members can see from the diagram on the right-hand side, costs are not just borne by the manufacturer but upstream by the supplier and downstream by the distributors. Everyone will have to collect and retain the label information already captured on the safety data sheet. The redundancy of collecting this information at multiple points in the supply chain is an unnecessary burden and one without a clearly defined benefit.
As mentioned earlier in my remarks, regulatory modernization must work together for the “health and safety of Canadians” policy objective. The removal of the true copy provision within the HPA does not diminish the protection of Canadian workers. Industry is obligated to provide safety data sheets for all hazardous materials and chemicals used in the workplace. Under the Hazardous Products Act, suppliers are required to retain a copy of all safety data sheets for six years. This requirement is aligned with the United States and the EU requirement for safety data sheet retention. We are the outlier with respect to this unique label data collection.
The role of a safety data sheet is such that employers are obligated to train workers on hazardous chemicals that they work with and to ensure that workers read and understand the safety data sheets before they begin handling the products. This helps to ensure that their workers are protected when they use those products. The safety data sheet, which contains all of the important information on how to use that product, is the most comprehensive document that can be used to train workers on the hazards and precautions specific to that product. As members can see from the copy of the SDS that the clerk has shared with you, it is the most comprehensive piece of information. The label is a limited restatement of those hazards and precautions that already appear on the SDS.
CCSPA has been and remains committed to working with this government to support an efficient and effective regulatory climate for businesses so that we can be competitive at home and abroad. We believe that the issues, as outlined, support our collective goal of meaningful regulatory change as per the government's regulatory reform agenda.
For companies who wish to be competitive in North America, this unusual paper burden, unique to Canada, is a disincentive to innovation and keeping businesses here. We respectfully request that the finance committee help us to remove this unique legislative burden and deliver against the government's regulatory reform agenda.
Thank you, Mr. Chair.
Thank you, Mr. Chair and committee members.
As Mr. Easter said, I'm Dennis Prouse, vice-president of government affairs for CropLife Canada.
CropLife Canada represents the Canadian manufacturers, developers and distributors of pest control and modern plant-breeding products. Our organization's primary focus is on providing tools to help farmers be more productive and more sustainable. We also develop products for use in urban green spaces, public health settings and transportation corridors.
We are here to speak in support of Bill due to the fact that it makes an important start down the road of regulatory modernization. As we know from both the advisory council on economic growth report—often known as the Barton report—and the agri-food economic strategy table, Canada must overcome internal regulatory barriers that hinder innovation and competitiveness if it is going to meet the government's target of $75 billion in agri-food exports by 2025.
Bill takes significant actions to address regulatory modernization. In particular, it makes key amendments to the Pest Control Products Act—PCPA for short—to help alleviate resource pressure on Health Canada's pest management regulatory agency to allow it to focus on work that meaningfully contributes to the agency's mandate.
The current requirement in section 17 of the PCPA requires the Minister of Health to initiate a special review of any pesticide where an OECD country bans all uses of an active ingredient. The language gives no discretion to the minister to determine whether or not a special review is necessary. An active ingredient that is currently under re-evaluation or has just been reviewed in Canada can still be subject to a new special review.
Certain interest groups have learned to exploit the current system, and the onerous special reviews, coupled with the challenges with the current re-evaluation process, are contributing to the PMRA's unsustainable workload. These duplicative efforts only serve to bog down the system and to prevent farmers from having access to the tools that they need to protect their crops and help drive Canada's economy.
Under Bill , the Pest Control Products Act would be amended to give the Minister of Health discretion to move forward with a special review only when it stands to serve the best interests of Canadians. It also allows the minister to consolidate related special reviews, which would fix the tsunami effect that might otherwise result.
We applaud the efforts of Bill to address regulatory modernization, but it is only one part of a much broader set of improvements that are needed. For instance, we continue to press for critical improvements that can and need to be made to PMRA's re-evaluation process under existing authorities, as these have not yet been addressed.
Similarly, we are seeking formal cabinet-level acknowledgement of the economic role that both PMRA and the Canadian Food Inspection Agency play in facilitating agriculture and agri-food's economic growth. On the CFIA side for instance, the agency has still not yet clarified its regulatory oversight for products of gene editing. Gene editing is poised to transform agriculture around the globe. Despite this, Canada is falling behind some of its global competitors who are acting decisively on creating timely, predictable approaches to regulatory oversight for products of gene editing.
Examples like this are why the government needs to act quickly on the concept articulated in budget 2019 of placing a competitiveness lens on regulatory agencies. Competitiveness does not come at the expense of health and safety, which must always remain at the forefront. What it does mean is that regulators acknowledge and embrace their role in helping to facilitate innovation and competitiveness for Canadian companies, all while maintaining their focus on science-based regulation.
Action is also required for the annual regulatory modernization bill as outlined in budget 2019. The new external advisory committee on regulatory competitiveness will no doubt have some strong content for that bill.
It is encouraging to see momentum building around regulatory modernization that will serve to drive growth in Canadian agriculture and the economy writ large. However, regulatory modernization must be a whole-of-government exercise and must be led by key economic players, namely the Department of Finance and Treasury Board. Regulatory agencies do not reform themselves. They respond only to strong direction and leadership from above. Absent of that, regulatory modernization will slowly lose momentum and collapse. Given the promise held by economic growth in Canadian agriculture and agri-food, that would be a tragic development.
Thank you, Mr. Chair. I look forward to the questions that the committee might have.
I want to thank the committee members for giving me the opportunity to speak this morning.
My name is Michael Hatch, as the chairman mentioned, and I am the Associate Vice-President for Financial Sector Policy with the Canadian Credit Union Association. Try saying that five times fast.
We represent 248 credit unions and caisses populaires outside of Quebec. Collectively, our sector contributes $6.5 billion to the Canadian economy. We have 5.8 million members. We employ almost 30,000 Canadians and we manage over $225 billion in assets. In 2018 we donated $62.5 million back to community initiatives and projects across the country, which is a much higher share of our after-tax income than the large banks.
Credit unions are owned by the people who bank with them, as many of you will know and appreciate, and that's what sets us apart. We're the only banking services provider with a physical branch in 395 communities across Canada, many of which are represented around this table today.
Despite our smaller size, we have market share comparable to the big five banks in agricultural and small business lending. We lend to small businesses because we are small business. In the western provinces, for example, credit unions often have between 30% and 50% of the market. In Manitoba, one out of every two consumers banks with a credit union.
The important work we do in our communities is why credit unions have been asking the government to modernize some outdated provisions within the Bank Act, which are obsolete and a barrier to innovation and competition in financial services. We were pleased to see two of our pre-budget recommendations included in budget 2019, back on March 22. These were changes to federal credit union member voting for AGMs, and an elimination of the outdated requirement for federal credit unions to send paper statements to all members each year.
We thank the government for hearing our concerns and for working to address some of our recommendations in budget 2019. However, we were disappointed that only one of these two recommendations was included in Bill . This means that federal credit unions will have to continue sending out inefficient, costly and environmentally unfriendly paper statements to all of their members, including children, preventing the credit unions from returning the savings that electronic notices would provide back to their communities, until at least 2020 and perhaps beyond.
One of our federal credit unions has estimated that this costs it nearly $1 million every year. This money would be much better spent on reinvestment in the credit union or on the community programs that our members support so generously.
While the Bank Act does apply directly to only federal credit unions, it is important to note that modernization of outdated provisions eliminates barriers to entry for credit unions considering going federal, as well as sending an important message to provincial regulators, encouraging them to re-examine their own outdated provisions in their own legislation. Several provinces still have similarly outdated provisions. These recommendations will have an impact not only in the federal sphere but across Canada in increasing competitiveness and innovation within the sector.
With the support of the all-party credit union caucus—of which many members are here this morning—and all parties, credit unions remain hopeful that the Parliament elected in October will follow through with the budget measure on the elimination of the requirement to send paper statements, and our other recommendations to support innovation and competition within the financial services sector.
Ultimately, policy should encourage competition in financial services in Canada. Our financial sector is not noted for its high levels of consumer choice. Credit unions represent the only real alternative to the large banks in Canada. Further, policy-driven concentration in financial services in this country is not in the interests of the consumer or the economy.
Credit unions will continue to advocate for the changes that the government committed to in its budget this year but that did not make it into this bill, regardless of the outcome of the election later this year. The sector appreciates the support of the all-party credit union caucus and asks this committee for its support in ensuring that these changes are implemented at the earliest legislative opportunity.
Thank you very much.
I will focus on two aspects of Bill touching on immigration.
The first, starting at clause 305 of Bill is the diversion of a subset of refugee claimants from the Immigration and Refugee Board's refugee determination process to a pre-removal risk assessment. This applies to those who have made a refugee claim in one of the Five Eyes countries before coming to Canada, and that country is by and large the United States.
Why is this happening and with what effect? It's important to know that the pre-removal risk assessment is designed to be a supplement to, not a substitute for, a proper refugee determination. A proper refugee determination provides an oral hearing before an independent expert decision-maker. The pre-removal risk assessment is conducted by an employee of Immigration, Refugees and Citizenship Canada—someone who is not independent, someone who is not an expert in refugee determination and does not routinely provide oral hearings.
Why would one make this change from a process designed for refugee determination to one that is intended only as a supplement—one that is, for purposes of refugee determination, clearly inferior? Two reasons have been proffered. One is to address the delays, backlog and inefficiencies arising from the growth in the flow of incoming refugee claimants entering the system.
With respect to this problem, legal scholars—me included—and lawmakers, when confronted with a policy challenge, often reach first to law as the solution. The problem of a law is it's a bad law, and if it's a bad law, we'll make a better law. But that's often not the case and it's not the case here. The problem for the Immigration and Refugee Board was the inadequacy of the resources it had to manage an increasing flow of refugee claimants and, candidly, a lack of nimbleness in responding to the challenges of doing its job. These were amply documented in a recent audit report about the refugee determination process.
Having said that, since the data was gathered for that report, the Immigration and Refugee Board has received increased resources from the federal government, to the government's credit, and the IRB itself has developed new and better techniques for managing its workload, so that at present, they have exceeded their performance target for fiscal year 2019. In other words, there was a policy challenge, it was operational and administrative and they're meeting it.
For the government to switch horses in the middle and start to divert claims to another process, I think, is operationally unwise. More importantly, or in addition to that, this new process, or PRRA—pre-removal risk assessment process—is not able at the moment to manage refugee determination. It doesn't do oral hearings. It doesn't have expert decision-makers. There has been no calculation of the additional resources, delays and costs that will be imposed by switching to a different process for that subset of claims. In short, I think it is an inappropriate policy response to an operational or administrative challenge, and one that, indeed, on the evidence, is being addressed under the existing system.
I will move on to another concern about this, or another reason this process has been suggested, which is to somehow respond to the increased movement of so-called irregular border crossers who are coming to make asylum claims in Canada. I have a couple of responses to that.
First, the evidence suggests that very few of those people who are crossing irregularly into Canada have made asylum claims in the United States. So if the goal is to somehow address that population, it isn't going to be addressed by this move.
Second, for this allocation of refugee claimants who have made a claim in the United States the pre-removal risk assessment applies not only to irregular border crossers but to people who cross the border in any way—people who fly into Canada or people who enter to make a refugee claim under one of the exceptional categories of the safe third country agreement, for example, if they already have a relative in Canada. In other words, it doesn't just apply to irregular border crossers.
Finally, there seems to be a misconception that people who are diverted to the pre-removal risk assessment process because they have made a refugee claim in the United States will, if they fail before the PRRA, be removed to the United States. That's not right.
Let me give you an example. Let's say there is somebody from Iran in the United States who entered before the Muslim ban—a student, for example. The situation has become dangerous for her to return to Iran, and she decides, perhaps not unreasonably, that the United States is not a safe place for her to make a refugee claim. Maybe she makes a refugee claim in the United States and changes her mind, or maybe she doesn't make one at all. She comes to Canada. She gets this pre-removal risk assessment, which is an inferior process to a refugee determination process and one that will have a higher risk of false negatives, false refusals. If she is refused under this process, she isn't returned to the United States to complete her refugee claim there. She's returned to Iran.
This process exposes people to a very real risk of refoulement—a return to face persecution—and indeed through an unfair, incomplete, inadequate process.
Why, then, is this being done to people who have made refugee claims elsewhere? If it's under the assumption that they should complete their refugee claim in the place they started, as I pointed out, they aren't going to be returned to the place where they started their refugee claim. They're going to be returned to a place where they may fear persecution. If there is a view that somehow people ought not to make a refugee claim in one of the Five Eyes countries and then come to Canada, I will only refer you to the written submission of Professor Karen Musalo, an expert in U.S. immigration and refugee law.
She testified before the citizenship and immigration parliamentary committee on the question of what kind of asylum process now exists in the United States. She provides ample evidence about the extent to which it is unfair in its process, through things like, for example, the detention of children and the separation of families, and how it is unfair in its content and substance, by, for example, denying protection to women who flee domestic violence from other countries and cannot obtain refugee protection.
There has also been some claim that people who undertake this or who are subjected to this pre-removal risk assessment will in fact get a robust oral hearing and full access to appeal. I would refer you to the actual provisions in this legislation, in this bill, clause 305 and onwards. Nowhere in there does it say that anybody will get an oral hearing. Nowhere does it say that they will get an appeal. These are mere promises that are held out as something that may be done in regulation if this legislation is passed. I would encourage you not to sign a blank cheque on this. There is no oral hearing provided in this legislation. There's no provision for appeal under the present pre-removal risk assessment. There is very rarely occasion for oral hearings. They are generally not given.
In the moment that remains, I will just highlight for you something I will not pursue here, which is another provision in the bill regarding visas. There is a provision here to systematically deny visitor visas and other kinds of visas from countries that Canada considers unwilling to furnish adequate travel documents for purposes of removal of those already in Canada.
Let me cut to the chase on that. What this proposes, for example, is that if a country like China, which often does not issue travel documents readily to people being removed from Canada to China.... Canada decides it's not going to give any more travel documents to Chinese visitors to Canada. You as MPs are going to have an office full of angry constituents who say, “My mother can't visit for a wedding because she's from China, and China isn't delivering travel documents for returning Chinese visitors fast enough.” I'm not sure if you want to confront that situation in your constituency offices, but that's what this legislation will permit and authorize.
With that, I welcome your questions. Thank you very much.
Actually, I want to touch on this issue of regulatory burdens and barriers as well.
Ms. Coombs, if you have anything you want to add, you can certainly do that.
Mr. Prouse, I also noticed that you had mentioned in your opening remarks about some regulatory concerns. This is something that I certainly hear. In fact, it's probably the number one issue that I hear when I meet with chambers of commerce or business owners across the country. I hear about the regulatory burden, the regulatory compliance and how much time is taken away from the important things that a business owner should be doing, like serving customers, mentoring employees and growing their business, in order to comply with government red tape.
Mr. Prouse, I'll give you an opportunity and Ms. Coombs, too, if you have anything you want to add.
Mr. Achen, I don't know if you had anything you'd like to say on this as well. In terms of the regulatory burden in this country and how it's stifling innovation and reducing our ability to be competitive globally, I want to hear thoughts on that.
I'll start with you, Mr. Prouse.
Thank you. Unfortunately, I hear those types of examples all too often. Those are the types of things that we obviously need to be looking at to try to address with regulatory compliance.
Mr. Achen, regarding the CRA, you raised an issue that is also one I hear so frequently. You mentioned, and I actually hadn't heard this statistic before, that we have five times the number of agents per capita in the CRA than does the IRS. I've heard that expressed in different ways before, about the thousands and thousands of agents that we have at CRA, yet when you make a phone call, you can never get any one of them on the phone. People always wonder how the heck it is possible, with all those people there, that you can't even get someone on the phone. Then they say, if you ever do get someone on the phone, you might talk to four different agents and get six or eight different opinions, so that's obviously a source of frustration.
I wonder if you might speak to the opportunity that's lost for our businesses, particularly our small businesses, when they're dealing with these types of compliance burdens with the CRA. Obviously the complicated nature of the tax code and the fact that even the CRA agents can't really give you a proper interpretation of it, what do those effects mean for our small businesses in terms of lost opportunity to be able to be competitive and to be able to grow their businesses, mentor employees and so on?
It certainly creates classes of refugee claimants: those who are deemed worthy of a proper, full and fair refugee hearing, and those who are not.
As I explained, those who are not and who are relegated to the PRRA process, are not mainly, or even probably, those who have entered irregularly. Relatively few of those who have entered irregularly, it appears, have in fact claimed refugee status in the United States. What it does do is set up a distinction between those who deserve a proper hearing and those who, apparently, for reasons that are never fully explained or justified, don't warrant a full hearing.
Let me add to that. The pre-removal risk assessment was designed to be a supplement to the refugee determination system. Somebody who went through the system and had been refused, but for whom a long time had passed before they were about to be removed, had the chance to say, “Here is new evidence. Something has changed since I was refused refugee status. Please look at it before you make the final removal.”
The idea is that they had already had one fair and full decision made, and this is a supplement to that. In the present circumstances, the bill will take people who don't have any decision made about them in the United States, Australia, England or anywhere else. They are simply people who have claimed refugee protection, yet for that reason, they are denied a full and fair hearing and confined only to this inferior process.
It's interesting. I listened to your testimony, and you've done very important work over the years at the University of Toronto. You've been an outspoken advocate on the need for Canada to remain a welcoming country.
I want to read for you what the representative of the UNHCR to Canada, Mr. Jean-Nicolas Beuze, says about the proposed change. He says, “The measure...still upholds a welcoming approach”. He calls it reasonable, and he says, most importantly, that what has been proposed here in the BIA is “in line with international law” because asylum seekers are still entitled to a process that considers whether they will face persecution in their home country if deported from Canada.
I think it's very important for the record to reflect what the UNHCR has to say on this issue. The UNHCR, arguably, is the global body tasked with advocating for refugees and respected for that very reason. We can agree or disagree, obviously.
You said, Professor, that you disagree with some of their positions on certain issues but the UNHCR's work speaks for itself. It's done an outstanding job in making sure that refugees are protected.
You gave a hypothetical example of an Iranian student who may feel justifiably, as you put it, that the U.S. is not a safe country for them. I wonder, though, what you would tell the 50,000 people who applied to be refugees in 2018, who were refugee claimants, who sought refuge in the United States. That is to ask you a very specific question. I understand your concerns about the United States, but I would ask you this. Is it not the case that the United States is much more than simply the presidency, that there is in fact a rule of law system in place in the United States, that there are avenues for individuals to seek due process under the law, fairly and equitably?
When we raise these hypotheticals, with all due respect, it needlessly creates questions and fears among Canadians who want our country to remain welcoming. When we have the UNHCR on side with this proposed change, when we take into account that the United States is not simply President Trump, that it's a much more complicated.... There are nuances here. There's a real democracy still in place in the United States—
If it's 3% and it's a matter of life or death for them, I'm not sure why the government insists on proceeding with this. The whole point here is that there is no due process as it is understood under the existing PRRA. The United Nations high commissioner's representative's remarks were based on his belief that what is in the proposed legislation includes a so-called enhanced PRRA, with a robust oral hearing and a full appeal. As I have pointed out to you, these are absent in the legislation. At most, they are a proposal of what may be in regulation, but of course with no obligation to do that.
Second, and candidly, the United Nations High Commissioner for Refugees does admirable, wonderful work in delivering humanitarian protection all over the world. It is less robust in its defences of the legal protections, and particularly in those countries that happen to be [Technical difficulty—Editor] of the United Nations High Commissioner for Refugees. The UNHCR [Technical difficulty—Editor] costs money.
Turning to the United States, I've heard this before—the idea of how do we really know what's happening in the United States and that President Trump doesn't control the whole system. I rely, for my information, on what people who are experts in the U.S. immigration and refugee system are saying about what is happening now. They're talking about the way people are being treated by customs and border police, detention practices, what's happening before immigration judges and what's happening all over the system.
If you are interested in knowing what's happening on the ground, not merely what President Trump is pronouncing, then I urge you to seek recourse to those experts. It is not satisfactory to not seek that recourse, not ask the questions, and then say you don't really know what's happening there. If you want to know—
Good morning and thank you for the opportunity to address this committee. My name is Michèle Biss and I am the Policy Director and Human Rights Lawyer at Canada Without Poverty.
For those who are not aware of our organization, CWP is a non-partisan, not-for-profit and charitable organization dedicated to ending poverty in Canada. For nearly 50 years, CWP has been championing the human rights of individuals experiencing poverty, and for our entire existence, our board of directors has been composed entirely of people with a lived experience of poverty.
I will begin at the outset by stating that CWP has read the comments of my colleague Leilani Farha, the UN special rapporteur on the right to housing, and we wholeheartedly support her comments. The national housing strategy act, if inclusive of amendments proposed by civil society last week, presents a historic opportunity to make an incredible impact on some of the most marginalized in this country.
However, this afternoon I will focus my comments on the poverty reduction act, within division 20 of part 4 of the budget implementation act. This legislation comes at a critical moment in Canada's history. It is the legislation that will guide all laws, policies and programs for millions of people in this country who make daily decisions about whether to pay their hydro bill or put food on the table. We must get this right.
While CWP supports that Canada's first poverty reduction strategy will in fact be secured in legislation, we have serious concerns about whether this section truly adheres to and implements Canada's international human rights obligations.
As this committee is no doubt aware, after decades of advocacy, the poverty reduction act was tabled originally in November 2018 by the . ln response to the legislation, along with our partners at Citizens for Public Justice and Campaign 2000, we organized an open letter with recommendations for the legislation. I believe it is important for this committee to know that despite the fact that this open letter was signed by over 500 organizations and individuals—including the Canadian Council of Churches, ACORN Canada, Oxfam Canada and the Canadian Women's Foundation—none of these recommendations were reflected when the bill was lifted word for word into the budget implementation act.
I urge members of this committee to consider recommendations brought forward on this critical legislation by CWP and hundreds of other stakeholders. In particular, we recommend that the legislation be amended to place Canada as a leading country in the implementation of the sustainable development goals by committing to the spirit of SDG 1, which is to end poverty. ln its current form, the goal of the legislation is to reduce poverty by 50% by 2030. The reality is that when we commit to only reducing poverty, we create opportunity for some, but not all, especially those who are the most marginalized.
Two, the legislation and accompanying regulations must recognize the limitations of the methodology behind Canada's new official poverty line, the market basket measure. This poverty line will be used to establish eligibility for programs, meaning that it carries significant weight. Statistics Canada must be mandated to understand that it too has a role in implementing our human rights obligations to ensure that we have an accurate methodology that truly leaves no one behind.
Three, the legislation and accompanying regulations must ensure that the national advisory council on poverty can adequately implement the progressive realization of economic and social rights. Concretely, the council must be mandated as independent, given authority to make recommendations and to require remedial action for compliance with the rights of people living in poverty, and a sufficient budget to fulfill its mandate.
Four, we recommend that the committee recommend to amend proposed section 11, which arbitrarily authorizes the dissolution of the council once poverty has been reduced by 50% of 2015 levels. As has been noted many times by civil society, this is highly problematic and it, in fact, demonstrates a complete disregard for the other 50% of people living in poverty. It is, in fact, an excellent example of why Canada cannot merely strive to reduce poverty. We must endeavour within our goals to end it.
Last, the government must commit to working in partnership with indigenous governments to co-develop initiatives to ensure accountability and implementation of remedies for the distinctive barriers that are faced by first nations, Métis and Inuit persons living in poverty.
I look forward to answering questions in this regard.
I was both honoured and humbled to be part of the deputy minister's staff during 2017, supporting ' consultations and efforts in developing the poverty reduction strategy. This is a historic piece of legislation because it establishes an official poverty line, because it articulates a vision for lowering poverty by setting ambitious yet attainable targets, and because it offers a set of meaningful and measurable indicators that can be used to monitor progress through a national advisory council.
The decision to adopt what Statistics Canada calls the market basket measure as the official income poverty indicator came about through extensive discussion with provinces and municipalities and reviews of their many poverty reduction strategies, through consultations with stakeholders and social policy experts but, most important, through a series of round tables and in-depth interviews with people who have a lived experience of poverty in communities spanning the country.
The market basket measure is the most appropriate indicator to use as an official poverty line because it most accurately captures regional variations and affordability of clothing and footwear, of transportation, of nutritious food, of shelter and clothing, and of other goods and services essential to a basic standard of living. This is meaningful to Canadians in a way that the other available measures are not, and it is appropriate for the purposes at hand—for judging the progress a current government has made by the standards and values of the citizens it represents.
However, it is a statistic that nonetheless has shortcomings, and that is why it is particularly important that the legislation include proposed subsection 7(2), insisting that the official poverty line be regularly reviewed in a non-partisan way by Statistics Canada. This review should be understood to afford the opportunity not only to update the contents of the basket but also to address a host of other limitations building upon the precedent set in the last review of the MBM in 2010.
The official poverty line should be understood only as a headline indicator of monetary poverty and, therefore, an incomplete indicator of the many related concerns of Canadians, whether poor or not. This is why the bill puts forward three sets of four complementary indicators, each covering an important concern.
The first set, referred to as the dignity pillar, supports the official poverty line by putting a focus on the poorest of the poor. It includes an indicator of deep income poverty, of food insecurity, of core housing needs and homelessness, and of unmet health needs. These are most closely tied to the fundamental human rights we all hold. We can judge progress in the official poverty rate only when the lot of the least advantaged, those prone to experiencing long-term poverty, also progresses.
The second suite, called the opportunity pillar, is a suite of indicators of social inclusion and upward movement out of poverty. Similarly, the resilience pillar is a set intended to measure the risk of falling into poverty. In my view, there is still currently some incoherence in some of the statistics proposed in this last pillar, but it is encouraging that the legislation offers the flexibility for revision in proposed subsection 7(2).
The bill proposes two targets: an intermediate target, with poverty being 20% lower in 2020 than it was in 2015, and a longer-term target with it being 50% lower in 2030. The bill states that progress in poverty reduction will contribute to Canada meeting the UN sustainable development goals. SDG 1 is no poverty, and the first two specific targets associated with this goal are to eradicate extreme poverty by 2030 and, by 2030, “reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions”.
If the electoral mandate of a government is roughly five years, then if each successive government committed to lowering the poverty rate prevailing at the onset of its mandate by 20% over the course of its term, the official poverty rate would fall from 12% in 2015 to 9.7% in 2020, 7.7% in 2025 and 6.1% by 2030, roughly half of the 2015 rate.
The successive repetition of this intermediate goal is the implicit contract this bill offers future governments. In proposing the set of targets in proposed section 6 of the bill, the government is making good on its international commitments, offering a national definition of poverty and seeking to cut it in half.
My regret is that the bill does not speak as clearly about extreme poverty. The indicator of deep poverty in the dignity pillar can be used as a national definition of what extreme poverty would mean in the Canadian context. Targeting it would ensure that progress in reducing the official poverty rate can only be celebrated if it is accompanied by progress in extreme poverty.
The deep poverty indicator is an important complement to the official targets because it prevents governments from seeking to lower poverty by simply supporting those households just below the poverty line. After all, the official poverty rate could be lowered by transferring resources from the very poor to the near poor, a perverse sense of progress.
Accordingly, impartial and independent advice on how to continually improve measurement, set priorities and monitor and interpret progress is an important part of this bill and generally this way of thinking about public policy.
The proposed national advisory council is an essential mechanism in promoting a transparent conversation with Canadians about the progress that is made and about the gaps that remain to be filled. It is necessary, but not sufficient. I hope that the council interprets its functions, particularly in proposed paragraph 10(b), as supporting citizen engagement, not simply advising a minister.
Ultimately, the staying power of this legislation will reflect an implicit contract between successive governments, one ultimately enforced through a transparent and ongoing conversation between Canadians, their representatives and their advocates in a way that makes poverty indicators as closely watched as the other social and economic goals this country has set for itself.
This bill is a historic step forward in Canadian social policy. As an academic who has spent the better part of three decades studying and writing about the measurement of poverty both in Canada and in other rich countries, as a former consultant with UNICEF who has reviewed and monitored progress towards achieving past UN poverty reduction targets, but most importantly, as an engaged citizen whose family has experienced the needless indignities of poverty, I give this legislation my unreserved support.
Good afternoon and thank you.
I am Leilani Farha, the United Nations Special Rapporteur on the Right to Housing. I was appointed to this position by the UN Human Rights Council in 2014. In this capacity, my role is to monitor and assess the enjoyment and implementation of the right to housing in countries around the world. I often provide technical assistance to governments with respect to the drafting and implementation of law and policy related to the right to housing. I have done so in Egypt, France, Chile, India, Spain and Ireland, among many other countries and cities.
I thank the committee for providing me with an opportunity to appear before you. My comments today will be brief and will focus on the proposed national housing strategy act. I have been in conversation with ' office, with , as well as with CMHC to some degree as this legislation has taken shape.
Let me tell you a little about my history with this legislation.
In May 2017, I issued a formal communication, called an “allegation letter”, to the Government of Canada expressing my concerns regarding the alarming rates of homelessness in this country, which I note persist today, as well as the lack of a national housing strategy based in human rights. Subsequently, in November 2017, the government responded by introducing its rights-based national housing strategy.
In July 2018, I was compelled to write a follow-up letter to the Government of Canada expressing my concern regarding two matters: first, that while a rights-based national housing strategy had been adopted, the government appeared to be reluctant to recognize the right to housing in legislation; and second, the government appeared to be reluctant to ensure access to effective remedies through which rights holders could hold the government accountable to the obligation to progressively realize the right to housing. I indicated at that time that this would put the Government of Canada at odds with its international human rights obligations.
In April of this year, the government wrote to assure me that my concerns were being addressed through Bill .
Unfortunately, in its current form, Bill does not fully address my concerns. In my opinion, amendments are required.
The proposed national housing strategy act would make a policy commitment to the progressive realization of the right to housing consistent with the International Covenant on Economic, Social and Cultural Rights. It would create an independent housing advocate supported by the Canadian Human Rights Commission. It would establish a national housing council with the explicit inclusion of people with lived experience of homelessness and inadequate housing, and it would commit to ensuring participation of affected communities. These developments are very positive and I commend their inclusion in the NHSA, but more needs to be done if Canada wants to comply with its international human rights obligations and become a model for other governments.
I understand that last week representatives from civil society provided you with an overview of amendments to the act that would be required to bring Canada in compliance with its international human rights obligations. I concur with those submissions and I reiterate them as follows.
First, the NHSA must include a clear articulation that housing is a fundamental human right.
Second, the government's implementation of the progressive realization of the right to housing must be monitored. The housing council could play a role in that regard.
Third, the housing advocate must be able to receive and investigate petitions that identify systemic housing rights issues and make specific recommendations to which the minister, in this instance, and the future minister, must respond.
Fourth, the legislation must establish a procedure for the housing advocate to refer important systemic housing rights issues to public hearings before a panel, ensuring affected groups have a voice. The panel's recommendations must be considered by the minister.
These proposed amendments are by no means the high-water mark of the right to housing. Other jurisdictions offer more protections and accountability. However, these amendments are creative and responsive to the Canadian context and consistent with Canada's human rights obligations.
There is no reason to be fearful of legislation that embraces Canada's human rights obligations. It is now well understood internationally that alongside climate change, housing is the key issue of our times. The world is experiencing a housing crisis, and Canada is in the thick of it. One need only walk down the streets of Toronto, Vancouver or even Ottawa to know it. It is now well-established that only an approach based in human rights will achieve the housing outcomes I know this government is keen to reach.
I hope that amendments such as those proposed in my submissions and those of others last week will be tabled and adopted by this committee and that I might be able to share Canada's achievement on the world stage.
Thank you, and I'm happy to take any questions.
Thank you very much, Mr. Chairman. This is a real smorgasbord of different topics, but I guess that's what you'd expect with an omnibus bill like Bill .
Thank you very much for your invitation to speak about Bill , an act to implement certain provisions related to the budget. I will specifically comment on the tax provisions.
To begin, a number of measures introduced in the budget are appropriate from the point of view of addressing some specific problem areas of the tax structure, and I won't go into those. Some are initiatives that I want to applaud, particularly the tax credit to assist Canadians with training costs.
In this day and age, with rapidly evolving technologies, some of them disruptive to specific sectors of the labour market, a focus on training is helpful to address. The good thing about a tax credit such as this, or at least some help in some form, which could be a grant instead of a tax credit, is that it nudges people to think about saving for training costs. Of course, it's going to have to be carefully monitored and carefully put into place because there could be a lot of wastage involved with that if one's not careful.
However, what I wish to discuss is the plethora of new credits, accelerated cost reductions and other forms of targeted assistance in this and previous budgets. I have seen that more harm than good is done with a tax system increasingly looking like Swiss cheese. In particular, tax preferences for investments in manufacturing, clean technologies, mineral exploration and the purchase of housing and electric vehicles in this budget, added to past preferences, raise several well-known issues about the effectiveness of these various policies.
First, governments trying to pick winners often end up supporting losers. By favouring some activities over others, the allocation of resources in the economy is distorted, resulting in lower incomes and productivity.
Second, targeted incentives might generate some additional activity, but they also reward activities that were already planned. This undermines the cost effectiveness of the incentive, and in many cases leads to little new activity.
Third, incentives can only be used if the household or business is paying taxes. If taxpayers cannot use the credit, it is often of little value unless the credit is made refundable, enabling the taxpayer to effectively receive a grant. An important question, though, is whether it is better to provide subsidies as grants or refundable tax credits. There's a long discussion about the advantages and disadvantages of grants versus credits.
Fourth, tax credits, accelerated depreciation and other tax preferences push some companies and higher-income individuals into positions whereby they are no longer paying taxes. Taxpayers look to shift their deductions or credits to others through complicated planning procedures. Governments then try to stop so-called loopholes that are caused by their own policies. The tax systems become increasingly unstable with new limitations and minimum taxes introduced to claw back the incentives.
Fifth, targeted incentives to producers also cause great demand for tax-assisted goods and services, blunting the incentives as prices or input costs rise. In other words, the tax incentives might look politically good but basically make the suppliers of the products richer without encouraging the activity they were intended to support.
My favourite example of that was the Quebec tax holiday for a few buildings in Montreal that effectively just led to higher rents in the buildings as opposed to really helping startup businesses. In fact, it led to a lot of angry landlords in other buildings that didn't get the same incentive.
Sixth, someone has to pay for the tax incentives, today's taxpayers or future taxpayers, as a result of higher deficits.
In my careers, I participated in two business tax reforms—the Honourable Michael Wilson's budget in May 1985 and the Right Honourable Paul Martin's business tax reform panel in 1996 and 1997. Both reforms had to deal with a non-competitive tax system in which tax rates became too high, discouraging successful activities. Past policies that led to the introduction of numerous tax incentives undermined the tax system, which eventually led to the only sensible reform of reducing tax rates and removing incentives.
Did the reforms help the economy? I would suggest that has been the case based on various economic studies.
Many of you might have read my critical comments on the adoption of accelerated depreciation in November 2018 and contained in Bill . I believe it was a policy error for the reasons given above. As Philip and I have shown in a recent Canadian Tax Journal article—which I sent to you for members to look at if they wish—the introduction of temporary accelerated depreciation was biased toward machinery investments in certain industries, thereby almost tripling economic distortions.
Bonus depreciation in the U.S., or accelerated depreciation of machinery, has been placed in the United States since 2001 without significant consequence to Canada. A recent study has shown that the policy undermined U.S. growth and, interestingly, increased economic inequality by favouring skilled workers, who benefited most. The same will be true with this budget policy.
Even worse, the accelerated depreciation provisions fail to address the effect of U.S. tax reform that will erode certain business activities and public revenues in Canada. The business tax reform with competitive corporate income tax rates in the United States will attract not just more tangible investment to the United States from Canada but also intangible income and profits. Canada needs a corporate tax reform to protect our tax base and encourage companies to keep profits in Canada. A reduction in corporate income tax rates would also help counter the competitiveness effects of U.S. reform without mucking up our own tax system.
In other words, we should have approached this with a mini-type of corporate tax reform, which by the way, is being pursued by 12 other countries in the world at this point. In fact, Canada sticks out as the only country that responded to U.S. reform with accelerated depreciation. Congratulations, you are unique, at least.
The key point is that we need to get back to the basics of running a good tax system that is efficient, simple and fair. We are straying away from these principles in recent years, which we will regret in the future.
Thank you very much. It's an honour to be asked to appear before the House of Commons committee to speak on the amendments to the Immigration and Refugee Protection Act, which, strangely, are contained in this budget bill.
As I have been asked to speak before the finance committee, I will not comment at length on the serious problems I have from a human rights perspective with the amendments. I will only reiterate that these amendments will replace a fair hearing and appeal before an independent tribunal, the refugee protection division of the Immigration and Refugee Board, with something that is much less fair: a right to apply to an officer, who is not independent, for a risk assessment.
I note, as have my colleagues who appeared before the immigration committee, that the provisions in the legislation as currently drafted do not require an oral hearing, and notwithstanding the assurances by the minister that such a hearing will be provided for by regulations, we have not seen the regulations that will shape the so-called enhanced PRRA.
As this bill is a budget bill, it's important to consider the fiscal implications of the proposal. I for one will certainly admit that the Immigration and Refugee Board has in the past not been the most efficient tribunal. However, with the arrival of the new chairperson, Richard Wex, we have seen a remarkable improvement in productivity at the IRB in its processing of refugee claims.
During fiscal year 2018-19, the IRB finalized 35,000 claims, 10% above its performance target. The board also eliminated the 35,000 so-called legacy claims, those claims that were left hanging when the previous Conservative government did not provide the Immigration and Refugee Board funding to deal with the backlog when it amended the legislation in 2012. More importantly, a new task force has begun triaging less complex cases so that 5,000 cases will have been decided without a hearing before the end of May 2019. These are significant achievements that demonstrate that the Immigration and Refugee Board has the ability to deal with the claims in an efficient manner provided it has the funding to do so.
This budget bill is indeed providing $200 million to the Immigration and Refugee Board to process cases. If this is the case, why is the same budget removing 5% of the claims from the Immigration and Refugee Board to be processed through a separate, parallel process?
We are told that the new PRRA will be an enhanced PRRA, one that will be as fair as the Immigration and Refugee Board hearings and guarantee an oral hearing. We are told that the government plans to hire 80 to 100 new PRRA officers.
It should be noted that, up and until now, PRRA officers have, for the most part, been rendering paper decisions. Oral hearings have been extremely rare. If PRRA officers are going to hold oral hearings in almost every case, they'll have to hold thousands of hearings. New facilities will have to be organized. PRRA interviews, which had not been recorded, will now have to be recorded. There is no registry to schedule hearings. PRRA officers do not have the sophisticated support and infrastructure that exists at the Immigration and Refugee Board.
We know that the new PRRA will have to comply with the principles of fundamental justice if it's going to be the main decision-making process for refugees, so there will be a right to counsel, a right to disclosure and a right to know and meet the case. This will all result in new needs for new infrastructure for a new process. As a result, we have to ask: Why is the government creating a parallel hearing process just when the Immigration and Refugee Board has finally proven its ability to operate efficiently and when it has finally been provided the funding to ensure that it can handle the projected caseload?
I should also warn members of the committee that having dealt with hundreds of PRRA applications over many years, I can recall that prior to 2013 when all persons were entitled to a PRRA prior to deportation, the PRRA process became extremely backlogged so that there were often cases that were delayed for years as a result of people waiting for a pre-removal risk assessment.
There is no doubt that replacing the refugee protection division with the PRRA will be a significant waste of taxpayers' money. If PRRA officers are going to become a parallel tribunal, replacing the refugee protection division in a large number of cases, the government is going to have to spend a great deal of money to create a new infrastructure, with a new registry and new hearing rooms.
I want to comment briefly on something that was mentioned in the previous session about the support of the UNHCR. I had a lengthy conversation with the esteemed representative of the UNHCR in Canada about his support. All I can suggest to you is that, unfortunately, it's my view that the esteemed delegate really doesn't fully appreciate how the PRRA works. I can say that having represented through my office, where we have 10 lawyers, hundreds of PRRA applicants and having judicially reviewed dozens of PRRA decisions, I'm pretty well aware of how the PRRA operates and I can assure you that it is not as fair a process as the refugee protection division. My assumption is that the esteemed delegate of the UNHCR, unfortunately, really doesn't fully appreciate how the PRRA process has worked in the past.
Obviously, the promises that have been made in terms of what will be in the regulations are not promises that we can hold anyone to, because we haven't yet seen the regulations.
In terms of the suggestion that the U.S. is a country that respects the rule of law, I can only say that having seen the evidence of how refugee claimants are treated in the U.S., how they are subject to arbitrary detention over lengthy periods of time, and having seen some of the reforms brought in by the Trump administration that undermine the rights of many people to claim refugee status, I really sincerely doubt that the U.S. is a safe place for refugees at the present time. Even if it's true that ultimately the rule of law will be respected, people will end up spending months or years in detention while their cases go through the courts.
In conclusion, members of the committee, this ill-conceived amendment will deprive refugees of rights without any practical benefit. I predict the PRRA process will prove less efficient than the Immigration and Refugee Board and will cost millions of dollars of taxpayers' money to implement. As members of the finance committee, you should ask the minister why he's proposing to spend taxpayers' dollars so recklessly in the budget bill to proceed with an amendment that will deprive refugees of all the rights that they get at the Immigration and Refugee Board and replace them with a less-fair alternative that will cost millions of dollars to implement.
I have a couple of questions, first of all to the United Nations rapporteur.
I really appreciated hearing that you have identified that one of the key issues facing our times is climate change. I represent the Northwest Territories. The north is seeing the changes happen in that part of the world like nowhere else. Normally, we would see 20 forest fires a year. Two weeks since the snow melted, we're at seven already. We expect a very strong season for fires.
Housing is a big issue for us. It's probably higher there than anywhere else. We have the second-highest core need in housing in the country. It leads to other social issues. We have a growing suicide rate, the second highest in the country. We have the highest murder rate in the country. We know the studies show that, if we can solve our housing issues, we would solve at least 50% of our social issues. It's something that we really need to address.
I had to smile when you said that, in order to comply, you had to include monitoring. That's what we say as indigenous people on the issue of reconciliation: We need agencies, organizations, independent watchdogs to monitor. I guess some of us don't trust governments to do what they claim they are going to do. Oversight is something we certainly advocate for.
I didn't hear you say anything about the need in our strategies to have a special focus on indigenous housing. Do you think it's important that we have an indigenous housing strategy attached as part of what we're doing here on the issue of housing and the right to housing?
I look forward to your report. I think it's an issue that we really have to get our minds wrapped around. We have to certainly have indigenous governments be in charge of programs such as indigenous housing, and not have other governments doing it for them.
My next question is to Michèle Biss on the poverty issue, the poverty reduction act.
As I said, I'm from the north. We have a very high cost of living and the issue of poverty is huge for us. It's really amazing that we, in the north, live in a land that's so rich in resources yet we're facing such extreme poverty.
There are certainly a lot of things that I could point to, but I find the act doesn't talk about the economic side of it. For us, in the north, especially in our small aboriginal communities, we talk about the ability to have a good education and get a good job as our way forward. In our indigenous communities we need economic reconciliation. We can't move forward unless we have that.
Would it be fair to say that there should be a specific focus, I wanted to say for the north, but maybe towards indigenous people? Why do we have 150,000 unemployed indigenous people in western Canada and the north, while there are opportunities, especially for us in the north, for mines and things of that nature? You said it's a distinctive barrier. I think that's the term you used.
Would you maybe just respond to that question? Should there be a focus on certain parts of the country, or on populations even?
I think the biggest issue facing Canada when talking about competitiveness—and I don't want to overplay it too much—is that we have a number of disadvantages as a country that are natural. Our relatively small population base is spread over a big geography along the U.S. border, so we don't have depth of markets, except for maybe the GTA being the most deep. We have a cold climate. Historically, cold climates don't attract a lot of people and that's still true today.
As a result, what we have to do is to try to have an uneven playing field, where we try to draw businesses here, and I think we have had a very successful set of strategies over the past several decades, including free trade agreements, even recent ones that have been completed. Especially now that we've established—or are trying to have—access to the U.S. market and are trying to maintain that access, we still need to do something to make it appealing for businesses to come to Canada to serve the North American market if we're going to be successful. This is a view that I've had for many years, and going back decades, actually.
What happened over the years since 2000...and I have to admit that the report we did for Paul Martin back in 1996-97 on business tax reform really led to a lot of the changes that happened after 2000. However, what happened after 2000, where we created this very significant business tax advantage for Canada, I think was very important, because it helped offset some of the negatives that Canada has. Of course, we have other negatives, such as regulation—it's well known that it's hard to get things built in this country—and a number of other things, so the business tax advantage was really important.
Along came U.S. tax reform. U.S. tax reform not only eliminated the business tax advantage we had for tangible investment, but it brought in a number of major changes to the U.S. tax system, which included tightening up on interest deductions and loss deductions, and brought in a new base erosion anti-avoidance tax that effectively hit foreign companies, such as Canadian companies investing in the U.S. They could only avoid this tax by making sure they had more taxable income in the United States. There were also a number of other provisions, including—most important—a concessionary rate for intangible income, which includes intellectual property, marketing, etc.
What's happening now is that Canadian businesses are restructuring. They are putting more intangible income activities into the United States, such as sales forces. At one time, because we had a 27% corporate income tax rate and the U.S. rate was 39%, it was much better to put the sales forces in Canada. Now, it's going the other way. That's just one example. There are a number of functions that are moving into the United States from Canada, and I can tell you this because of the connection I have with EY as a national policy adviser. I get to hear a lot of things that are happening in the private sector right now.
More a concern that I have is the potential base erosion in Canada. The IMF estimated that U.S. companies operating in Canada will probably shift general administrative expenses and interest expenses into Canada, resulting in about a 10% loss in the corporate tax base of those companies. Many of the Canadian companies that I have talked to are already looking to shift more income into the United States and putting expenses into Canada, so governments are going to be finding that their corporate tax base is going to be eroded. We want to pay for poverty reduction and a number of other important things, but we need the revenues to support that.
Other countries have been feeling that, too, and in fact, 12 countries.... There's a paper that I wrote with Phil Bazel in Australia, where we put together what's been happening around the world over just the past two years with corporate tax changes. Every one of these 12 countries has been lowering corporate rates and tightening up deductions.
I think that should be our response. It doesn't mean a loss in corporate revenues. In fact, it could mean the opposite. It could mean actually a gain in corporate revenues, but it's really a way of responding to this U.S. reform. We're the country closest to the U.S., heavily integrated with the U.S., and instead, we picked probably one of the worst items in the U.S. tax reform, which was expensing on a temporary basis.
We picked that as our way of responding to U.S. reform. It was a complete failure of policy on the part of Canada. I know that before an election it's tough to do mini tax reforms of this type, so maybe we can do it after an election, but whoever comes to power after the next election really needs to look at these issues because we're going to get side-swiped by this U.S. reform unless we respond.
We're trying to reassure the public by saying that we'll copy the existing process, when we could simply keep the status quo.
Ms. Biss, I have one question about poverty reduction and another about housing.
Two new pieces of legislation are expected, of course. However, unfortunately, they're totally unambitious. They're a mistake on the part of the minister, especially since, as you said, there was a substantial response to the first poverty reduction bill introduced. Over 500 organizations had written letters recommending improvements, but these letters were totally ignored by the parliamentary secretary. Bill proposes a copy and paste of the legislation, when we could have responded to the recommendations and improved it.
One recommendation provided by some groups, including the Collectif pour un Québec sans pauvreté last week, was to change the proposed poverty line measure, which is currently the market basket measure. Is that your position as well? If so, for what other measure would you change the market basket measure? If not, would the idea simply be to improve transparency with respect to Statistics Canada's publication of the poverty line, the market basket measure and its composition, and give the agency all the independence needed to establish this measure?
Thank you for that question.
I'll start with the market basket measure. I will say that we've been working with many of our colleagues in Quebec. We share some of those concerns about the market basket measure, in particular with the way that it's being proposed as a panacea to measure poverty. The reality is that any measurement you pick is going to be messy. It's not an easy process, but what's so important is that we have multiple different indicators and that we're aware that our narrative with those indicators is always that they need to complement one another.
I will say, having been part of many consultations around the market basket measure, that I have serious concerns that we have not yet seen a “what we heard” report on that market basket measure consultation. What I am hearing publicly is very different from the concerns that I heard raised in those rooms, concerns that this is in fact going to be misused, but used nonetheless, by a number of organizations that are providing direct services. If we don't include specific people, we're going to see those who might not follow a very particular form of poverty—for example, single mothers, other marginalized groups—not qualifying for programs.
This market basket measure might seem like some minutia, but the reality is that how we measure poverty is going to matter so much for the way that we are able to strive to reach these programs.
On your point about the ambitiousness of the target, to be honest, I think there's been some misunderstanding with this government about how to set targets for a poverty strategy. I heard a lot of discourse around the need to set forward realistic targets, but I would argue that if you look at this internationally that's not the way to do it from a human rights perspective. In fact, that's not the way that a number of successful countries have done it.
The way you build in your targets is that you build the human rights goal—to end poverty—in line with the sustainable development goals, and then you work in your short-term goals, your sub-targets. You work through progressive realization to meet your larger goals. That's why I have some concerns about this conversation about realistic targets, because we should be setting our sights on no poverty. There's no question there. It's “end poverty”.
I will just add in one quick point. I will say—
Thank you very much. I appreciate it.
Ms. Farha, to follow up on your remarks, one of the things that I think we need to be aware of—and my colleague Michael McLeod talked about the north and the unique situation there—is that when you gave your examples, you used three major cities. Poverty and housing issues are alive and well, unfortunately, in rural Canada as well. When we hear the narrative about this, we continually hear about large cities. As you said, you just have to walk down the street.
In my community, walking down the street, you indeed may not see it, but if you look behind the curtains, as they say, or if you talk to those folks who are helping with providing meals and shelter.... Our police station lobby is now open in the winter for people because we have no shelter and no housing.
This is not a question, so much as a request, that as you're going through these processes, you provide a more broad view and a broader conversation around those situations that are outside the large city centres.
Let me tell you, Ms. Farha, that at least on this side of the table—and I'll even speak for my colleague on the other side, Mr. Dusseault, with his permission, of course, and he has nodded his head—we genuinely respect the work you do. We recognize that you have an international focus. Your advice to us here at the committee today, and indeed to the government, is to be valued and appreciated.
I've tried to sift or distill from your presentation what I believe are the key points. Because time is limited, I'll phrase my questions very succinctly. If you could, just reply with yes or no.
For the housing advocate that's been proposed, should the housing advocate be independent of CMHC and the minister, and therefore, the government?
Mr. Poilievre, you should have done your homework. Special rapporteurs are unremunerated, in fact.
We were momentarily on the same page. Like you, I am worried about the fact that people who work in cities, whether they be teachers or baristas in coffee shops or nurses, are often unable to live in the cities where they actually work. They're commuting long distances at some cost and at some fragmentation to family life, etc. That is a real concern of mine.
I'm not sure I would agree that it's zoning laws only that are creating this phenomenon. What I'm seeing worldwide is something else. I actually see here in this country and elsewhere quite a bit of supply being built. Actually, if you go to Toronto, they're now calling it the vertical city, for example. When you look up, what do you see? You see tons of high-rise towers and tons of cranes.
The issue isn't that there isn't stuff being built. The issue is what's being built, and for whom. What's not being built is affordable housing. At the same time, I'm seeing a phenomenon whereby private equity firms and multi-billion dollar, multinational asset management firms are scooping up affordable units across our cities and turning those into less affordable units for higher-income people. They're even going so far as to buy single-resident occupancy homes—that's for the lowest-income folks—and convert those to fancy bachelorettes for students and also higher-income people.
I think there's a plethora of issues to be dealt with in this country and elsewhere, and I think that [Technical difficulty—Editor] in actual fact, Mr. Poilievre, you and I could have a very constructive conversation about zoning and other issues confronting cities.
First of all, when the stakeholders were told, “You're not going to get a corporate rate reduction”, they were all quite happy to have at least something, so I'm not sure that tells you very much.
Again, I don't think that is the criterion for a good tax system. The criterion for a good tax system is one where we want to make sure that we don't get in the way of successful investments, don't push more companies into tax loss positions and don't do all sorts of other things.
We've had accelerated depreciation for manufacturing and processing equipment since 1972. It was disbanded, finally, by 1987. It was brought back by the Conservatives in 2006 or 2007, if I recall, as temporary accelerated depreciation, and it stayed on for the next 10 or 11 years, if I recall the exact dates.
Then you ask this question: What has that done for our manufacturing industry in Canada? Well, manufacturing today has far fewer jobs as a share of total jobs in Canada compared with what it was in 1972, 1987 or 2000. In other words, it has been a failed policy, but we keep doing it and it's rather too bad that we keep doing it.
In fact, if you look around—we do this analysis across 92 countries around the world—Canada, Lesotho and maybe a couple of other countries have a significant bias in our effective tax rates towards manufacturing industries, and towards mining as well, by the way. However, if you look at our taxation of services, which is actually 70% of the job force in Canada, we whack them with a lot of taxes. In fact, our competitiveness problems are even bigger in the service sector than they are in the others.
What we have done is create a very biased system. Sure, companies are going to say, “Give me something; give me accelerated depreciation”, but I don't think that is really the criterion for how we want to run a good tax system.