That, given the proposed changes to the taxation of private corporations as outlined in the Minister of Finance's paper “Tax Planning Using Private Corporations” will have a drastic negative impact on small and medium sized local businesses, the House call on the government to continue, until January 31, 2018, its consultations on these measures.
He said: Mr. Speaker, I will be splitting my time with the hon. .
The government says it wants to avoid unintended consequences from its proposed tax changes. Here is one. What if these proposals simultaneously raise taxes and reduce government revenue?
Let us consider the government's new tax on so-called passive income. Under the present system, when all is said and done, small business earnings are taxed at the same rate as wages. The only difference is timing. Assuming a 50% personal income tax rate, a wage earner pays 50¢ on the dollar in the year it is earned. A business, by contrast, pays 15¢ in the year it is earned and the remaining 35¢ when she takes the money out of the company. The government claims that this is allowing the business owner to invest that 35¢ inside her company, growing a bigger nest egg than she would if she had paid all the tax up front. This, according to the , is unfair.
To prove it, the 's so-called consultation document has a table showing how much better off this small business woman is from investing the after-tax proceeds of $100,000 of business earnings versus investing the after-tax proceeds of $100,000 in wages. In the first instance, the business owner has starting capital of $85,000, with the small business tax rate being roughly 15%, in most provinces. As an employee, she would have only $50,000 as starting capital.
The result is that if both she and her employee had the same money and invested the after-tax proceeds, she, as a small business owner, would have $62,000 at the end of a 10-year investment, and the employee would have about $58,000, using the round numbers the government provides in table 7 of its consultation paper. It is $62,000 at the end of the day at the end of the 10-year period for the small business woman, and $58,000 for the employee. It is not fair, right? However, there is one key detail the finance department excluded from this table. In fact, the only detail that matters is excluded, and that is who actually paid more tax, the small business woman or the employee, after the 10-year period, assuming a 3% rate of return, as the department's table does. The government omitted that calculation altogether. It did not want people to know who paid more taxes at the end of the day.
I had a respected tax modelling firm, headed by Jay Goodis, the chartered professional accountant and CEO of Tax Templates, do the math the government left out of the consultation paper. Let us break it down. It is true that the employee paid more tax up front: $50,367, to be exact. He then paid another $8,023 on the interest earned in the subsequent 10 years, for a total tax bill of $58,390.
The business woman, on the other hand, paid admittedly less money up front: $14,400. She then paid another $5,412 on her interest. So far it is true that the business person paid a little bit less. However, at the end of the 10-year period of investment, when she took the money out, she actually paid a whopping $45,238, because that tax was not avoided; it was merely deferred. She paid a total of $65,050, or about $6,700 more than the employee.
How is it possible that the small business person actually paid more tax and had more money at the end of the 10-year cycle? The answer is that the money on the deferred tax grew to a larger total, so when she pulled it out, there was more money to tax. In other words, both the business owner and the government are actually better off. This, again, is under the scenario the government put in its consultation paper, lest my friends across the way try to accuse me of contriving the right circumstance to get the right result.
To be fair, we need to take account of inflation. The business owner did pay the $35,000 in tax at the end of the 10 years, as opposed to the beginning, and during that time the value of money declined. The Bank of Canada has a target rate of inflation of 2%, which reduces the value of that $35,000 by $6,403, but still, even if we subtract that $6,403, the small business woman paid $250 more in tax than the employee did in this scenario.
The scenario of course was perfectly contrived by the government to produce the best possible result to make its case. Now I am using it to make mine, but if that business person and that employee had earned, say, 6%, which is still a very reasonable return, then the business woman would have paid almost $8,000 more in tax after inflation was factored in than the employee in the exact same circumstance.
Also, the calculation is extremely conservative. I am excluding the benefits of having the entrepreneur invest the money up-front and to pay the taxes later. For example, the companies she is lending to or investing in are paying her 3% for a reason. They are using her capital to hire people and buy profit generating assets, which also generate tax revenue for the government. I am excluding all of that revenue from my calculation.
The suggests that these types of passive investments inside a company constitute dead money. He is dead wrong. In fact, this bizarre claim contradicts his own consultation paper, which calculated that these very investments generate $27 billion in income every year. The only way these investments could possibly generate these returns is if the companies receiving the investments use them to fund their own growth.
How much of that growth would be lost if the government deleted the initial investment by forcing the business owner to pay that extra 35% up front on the principal, or a new double tax of 73% on the resulting income? The $27 billion in growth is a lot of money and it cannot be the result of dead money because we know that dead things do not grow.
The calculation I put forward also excludes other behavioural responses that would inevitably result from the government's proposed tax increase. With the punitive 73% tax rates the government is threatening to impose on passive income, how many of the investments I just described would simply not happen in the first place? How many young people would look at the diminished reward and simply say, why should I bother taking the risk, or why should I not just invest in another country? Even if none of these behavioural changes happen, if we believe the contrived scenarios the has developed to make his case, the government will still be getting less lifetime revenue, according to the calculations provided by Jay Goodis at Tax Templates.
When I asked the Finance officials these questions, they said it was true that the government would get less revenue, but that it would be fairer because it would be more neutral. That is the kind of negative, adverse thinking that the government has toward our entrepreneurs. This is not a policy of wealth distribution, it is a policy of wealth destruction. The only reason the government wants a policy that will reduce its revenue is that it will increase the revenue in the very short term as money floods out and into the coffers, because the wants to spend the money now and so he wants to tax it now. Our view is that he should consult more, fix these problems, scrap this tax increase, and focus on growing the wealth of the nation so that the rising tide will lift all ships.
Madam Speaker, I want to start by thanking my colleague, the shadow minister of finance, for sharing his time with me today.
Today, our Conservative opposition is demanding that the government give Canada's local business owners a little respect.
For the past couple of months, our Conservative opposition has heard from Canadians across the country. They come from all walks of life and live in cities and rural areas. They own small local businesses and have people working for them. They are the mechanics and their employees who maintain our cars. They are the coffee shop owners who provide us with a place to meet our friends. They are the farmers who provide us with fresh, healthy food, who want to hand over the family farm to the next generation. They are unanimous when it comes to the Prime Minister's tax increases. The proposed tax increases are a serious threat to their jobs, their livelihood, and their community.
Small businesses are the backbone of Canada. They are the heart of our economy in communities large and small. That is where we get our first jobs or where people get a fresh start.
That is why we simply cannot stand by and allow the Liberal government to attack those people. We have been hearing for months of the very real threat these tax hikes pose to local business. The government needs to listen to those voices. That is why we are calling for the consultation period to be extended. There is simply too much on the line for so many hard-working Canadians for the government to get this wrong.
We are not talking about big multinational corporations, but about our neighbours and people like Bowen Lew, a first generation Canadian I met last week in the market. Bowen owns a company that sells hardwood flooring. He employs five workers. He came to Canada from China because he believed that this was the right place to build his business and raise his family. Bowen wants to expand. He wants to open another location. He wants to hire more workers. That is job creation in action. It is a small business hiring a few more people. However, the Liberal government's new taxes on passive investments and income are putting his expansion plans in jeopardy. It will make it much costlier for him to save within his company.
The government likes to talk about fairness. It says that it is raising taxes on business operators like Bowen in the name of making things fair for the middle class. That makes no sense.
That is not fair. Those business owners are honest, hard-working people. They do not have paid vacation or employment insurance benefits to help them. They do not keep track of their overtime hours. Instead, they put everything they have into their business to get people working and to make their community stronger.
The government demeans people like Bowen and millions like him by calling them “tax cheats”. The has said that “a large percentage of small businesses are actually just ways for wealthy Canadians to save on their taxes”. That is astonishing. I have no doubt that the and the run in the kinds of circles where many people do set up these types of corporations to avoid paying their fair share of taxes. However, the millions of Canadians across this country like Bowen are doing it to create something for their family, an opportunity. The Liberals are targeting local business owners with a political campaign that plays up the politics of envy and resentment, pitting one group of Canadians against another, dividing us instead of uniting us.
The decision to raise taxes is being made by a government with a major spending problem. The Liberals broke their promise to run a deficit of only $10 billion, and they will not balance the budget by 2019. According to the government's own estimates, Canadians will be paying off its debt for the next 35 years. The government chose local businesses to pay back its out-of-control spending. Rather than taking responsibility for its own mistakes, the government is punishing small businesses.
Higher taxes help no one, but the Liberal government is determined to impose a massive tax hike with no care for the cost to jobs or the impact on local communities.
The Liberal government is hurting the very people it claims to help. The Liberals campaigned on a promise to help the middle class. However, according to a recent study, 80% of middle-class families are now paying $800 more a year in taxes as a result of a series of tax hikes, which include an increase in payroll taxes and Canada pension plan premiums, the cancellation of many tax credits that families needed, and a lower TFSA contribution limit.
That is not all. The Liberals also imposed a national carbon tax. These tax hikes are just another major blow to Canada's small businesses.
What is so frustrating is listening to the rhetoric that comes from the government. We are asked to believe that this is about fairness. We have already established that what the Liberals are doing is not fair, but let us explore that a bit deeper.
The Liberals are causing a whole bunch of people to lose out with these proposals, such as anyone who has ever used a passive investment account to save during good times to get through the bad times, female entrepreneurs who decide to self-fund their own maternity leave, and successful business owners who want to save money to open a second location. Perhaps for some years that money was not invested directly into the business. Instead, it was put to work elsewhere in the economy. It was invested in any number of productive enterprises that helped others grow and expand. After those funds were out there for some time, helping with that growth, earning interest and compounding, the owner used that money to open a second location. Anyone who did that is going to lose out under these new proposals.
It is not dead money, as the would have us believe. I do not know how he is going to show his face around serious economists after having said that. Does the minister actually believe the money that is saved in investments does not do any good? Is he going to tell all of his millionaire friends, who got exceedingly rich by taking money from Canadians and investing it for themselves, that they have somehow damaged the economy by doing that? His solution for that dead money is to take these defibrillators full of tax hikes and revive that dead money back to life with a 73% tax rate. That will get the job done.
As so many people will lose under these proposals, we have to ask ourselves who the winners are. Who will be better off? The big answer is nobody.
The government admits that the current rules on passive income do not cost the government in the long run. At the end of the day, the tax is not avoided; it is deferred. In other words, nobody else has to pay higher taxes because of that tool. Nobody will benefit from tearing people down.
The answer must be that the Liberals just cannot wait. They need the money now. There will be a temporary spike in government revenue in the year these changes are made, as the deferral is essentially eliminated. That is why the is doing it. The Liberals are desperate for cash after raiding the savings that the previous Conservative government left them.
Just as the Liberal government is indifferent to the needs of hard-working Canadians, our Conservative opposition is here to give them a voice. We will not stand by and let the government cripple local businesses and threaten jobs with these tax hikes. That is why we are fighting these increases every step of the way.
Today, the Liberal government has the chance to start repairing the damage it has already done. It has a chance to demonstrate some good faith toward Canada and local business owners. It can extend the consultation period on these tax proposals until January 31, 2018, and why not? What is the downside and what could possibly be wrong with listening to Canadians for a few more months and getting that feedback?
Extending the consultations would allow local businesses and farmers to really make their voices heard. It is about respect for the people who work hard to create jobs and contribute to their communities. It is high time the government started treating local businesses with the respect they deserve. Canadians expect nothing less. We, the Conservative opposition, will always be there to stand up for them. We are the voice of prosperity and opportunity for all Canadians.
Madam Speaker, I am very pleased to rise today to speak about our government's plan to address the problem of tax planning using private corporations and about what we are doing to help the middle class and reduce inequality.
As many of us in the House already know, yesterday the government concluded consultations on its tax fairness proposals. As part of the consultations, we heard from Canadians from coast to coast to coast. I myself had the chance to meet with a great many Canadians to talk about these proposals. Just last week, I was in Regina, Saskatchewan, where I met with owners of small and medium-sized businesses, farmers, and representatives from the agricultural industry.
On behalf of the , I would like to thank the many stakeholders who participated in this discussion, because the issues we are to consider today are very important ones. What is the best approach to achieving strong economic growth that benefits the middle class? How do we level the playing field when it comes to tax fairness?
The government wants to get a wide range of views on these issues, and that is why we launched consultations that enabled us to hear from Canadians across the country.
However, it is clear that there is now a lot of false information out there about our government's intentions and the impact of the tax fairness proposals. That is quite evident from the comments made here as well as the content and tone of the motion tabled today.
First and foremost, I would like to assure you all that our government is committed to guaranteeing a healthy, business-friendly economic environment, as well as protecting the ability of Canadian businesses to invest, grow, and create jobs.
Our government wants to ensure all Canadians are set up for success in our fast-changing economy. From the beginning, one of our government's main priorities has been to level the playing field so that every Canadian has a chance to succeed.
Allow me to underline and outline key achievements of our government to bring about this increased fairness and to help support middle-class Canadians.
When our government came into office two years ago, it made a commitment to invest in Canada's middle class. We started by lowering personal income taxes for the middle class and raising them for the top 1% of income earners. In so doing, we reduced taxes for nine million Canadians, a measure the opposition voted against.
We introduced the Canada child benefit, which puts more money in the pockets of nine out of 10 families. The CCB is better targeted to the families who need it most, low- and middle-income Canadians. With payments delivered to eligible families every month, the CCB is helping lift approximately 300,000 children out of poverty in Canada. That represents a reduction of approximately in 40% in child poverty in 2017 from what it was just back in 2013. The introduction of the Canada child benefit represents the most significant social policy innovation in a generation.
The Canada child benefit is complemented by other initiatives to support children and families, such as the multilateral early learning and child care framework signed with the provinces and territories on June 12, 2017.
The government has also prioritized the movement of people and goods by investing in infrastructure. The government invested for the long term in our infrastructure because we saw infrastructure investment as critically important to the future of our country and our economy. Recognizing the important role infrastructure plays in building strong communities, creating jobs, and growing the economy, budget 2016 provided $14.4 billion for public transit, green infrastructure, social infrastructure, infrastructure at post-secondary institutions, and for rural broadband.
In addition, budget 2017 laid out our long-term plan with an additional $81.2 billion over 11 years. This money is going to support public transit, green infrastructure, social infrastructure, transportation that supports trade, Canada's rural and northern communities, and smart cities, improving the way Canadians live, move, and work. Transit investments will allow Canadians to benefit from shorter commute times, reduced air pollution, access to more good, well-paying jobs, and stronger economic growth.
I would like to spend a few minutes talking about Canada's economic performance, and more specifically our impressive economic performance over the past two years.
Ours is currently the fastest-growing economy by far in the G7. Our economy is growing at an impressive 4.5%, the highest growth rate since the beginning of 2006. In the two years since we came into office, 400,000 jobs have been created, most of them full-time. Thanks in part to strong economic growth and our government's prudent investments, our fiscal position is better than forecast in March. For the fiscal year that ended on March 31, we had a budget deficit of $17.8 billion, which is $11.6 billion less than was forecast in 2015.
We are the first to recognize that small businesses are the cornerstone of our economy, and it is thanks to them that our economy is thriving today. Our goal is to encourage businesses to grow and create jobs. That is why we have the lowest combined federal-provincial-territorial average tax rate for small businesses in the G7. Canada has a combined general corporate tax rate that is 12 percentage points lower than that of our largest trading partner, the United States, and those rates are going to remain low.
We also have a lifetime capital gains exemption of more than $835,000 for capital gains realized by individuals on the disposition of qualified small business shares. The exemption is $1 million for qualified farm and fishing properties.
All of these things add up to Canada being a great place to do business, which is all good news, yet business investment in Canada is not as strong as we would like. Canada's business sector labour productivity growth has generally lagged that of the U.S., on average, over the last 25 years. Part of the reason is that American businesses invest more than double, on average, on things like information and communications technology. These investments lead to higher productivity and create more growth and jobs.
In Canada, we have a system that encourages wealthy individuals to incorporate just to get tax advantages not accessible to the vast majority of middle-class Canadians. We do not think it is fair and we will take action to level the playing field. We understand that setting up a private corporation offers hard-working middle-class business owners the ability to sell shares, raise capital, and limit liability. As I mentioned earlier, it also gives them access to the lowest small business tax rate in the G7.
However, we know that for some, incorporation offers something different. That is what we want to address. In some cases, it can allow a high-income incorporated professional to be taxed at a lower rate on his or her personal income than a salaried Canadian.
During our consultations on tax planning using private corporations, we wanted to hear from business owners on how we can encourage them to invest in their active businesses to help create more growth and even more jobs. After all, that is what Canada's low and competitive tax rates are meant to do: they are meant to support and encourage active business investment to spur productivity, growth, and job creation.
Creating growth is one thing, but we also want to work to ensure that growth and prosperity in this country is inclusive. We need an economy in which all Canadians, not just the wealthiest, can participate and take advantage of economic opportunities.
There is work to do to ensure fairness for middle-class Canadians. That is what we are talking about when we talk about improving our tax system: ensuring that everyone benefits from economic growth, not just the wealthy few.
From the very beginning, we have been perfectly clear about our goal. We want to create an economy that works for the middle class and all of those working hard to join it. At the heart of that goal is a very simple premise: every Canadian needs to pay his or her fair share.
Before I wrap up, I also want to correct some of the false information that is out there. First of all, we did not raise the small business tax rate. SMEs in Canada will continue to benefit from one of the lowest small business income tax rates in the G7.
The government wants to make sure that these proposals do not impact the ability of SMEs to save for business purposes. The tax fairness proposals will not impact the ability of individuals to incorporate. They will also not prevent business owners from hiring family members. The proposed changes do not in any way target middle-class Canadians.
For example, in order for passive investment income to be more beneficial than the savings plans offered to all Canadians through RRSPs and tax-free savings accounts, or TFSAs, a company must make over $150,000. According to the Coalition for Small Business Tax Fairness, two-thirds of businesses in Canada earn less than $73,000 a year. We are also aware that business owners and professionals have saved and planned for their retirement under the existing regulations.
I want to be very clear on this point and reassure everyone that the changes we are proposing with regard to taxing passive income will apply only on a go-forward basis. Our intention is to ensure that neither existing savings nor investment income from those savings will be affected. Lastly, we have heard from many women entrepreneurs and professionals who face unique challenges. We want to thank them for bringing their concerns forward, and we are particularly interested in better understanding how these changes could affect women differently than men.
We can assure the House that the measures we are taking will help, not hinder, women's success. We also commend small business owners for reminding us of the undeniable fact that what they do takes guts, and that the risks they take are very real. The changes that the government proposed to make to the tax regime during the consultations on tax planning using private corporations will in no way detract from businesses' ability to invest, compete, and grow.
Our proposals focus on the tax treatment of passive investment income, not money that is invested in the business. They target money that is taken out of the business to make sure that it is taxed fairly. We heard from thousands of Canadians across the country who took part in this important discussion during our consultation process. They shared their thoughts during open discussions, round tables, live online events, and meetings held from Vancouver to St. John's.
The also met with parliamentarians, specifically members of the House of Commons Standing Committee on Finance. A fair tax system helps all Canadians. It allows hard-working small business owners to be compensated for their work. It helps small and large businesses develop and create jobs. However, when it benefits certain individuals at the expense of the vast majority, it needs to be changed. The government asked Canadians for their help in order to get this right. We have listened.
Again, the government will not raise tax rates on businesses or make it more difficult for them to incorporate. Business owners can continue to have family members actively involved in and appropriately compensated by their business. As I have already mentioned, changes to passive income taxation would only apply on a go-forward basis; the changes would not affect existing savings or investment income from those savings. The government will take no actions that would impair a business owner's ability to invest, to compete, and to grow his or her business.
Canadians have made it clear that they want a fairer tax system, and that is what we are going to deliver. As the economy grows, Canadians need to know and deserve to know that their tax system is fair. Right now, such is not always the case, and we can do better.
Madame Speaker, I would first inform you that I will be sharing my time with my illustrious colleague from , whom I commend on her excellent work. She has been an excellent addition to our team since her election.
I would like to begin by taking a moment to go over the Liberal platform and all of the Liberal promises that have been broken in the first two years of this government's term. They said they wanted to help the middle class and support middle-class families, but one of the first things they did was to adjust the tax rates in such a way as to completely leave out those earning less than $45,000 a year. That is the Liberal Party of Canada’s definition of middle class. They are completely out of touch; they rub shoulders with the rich and powerful, with Canada's most elite familes, and with folks from Bay Street, who do not consider people earning $30,000, $35,000 or $40,00 per year to be part of the middle class. These people will get absolutely nothing. It is not rocket science. Those earning over $180,000 per year, however, benefitted the most from the Liberal Party's tax changes. That is the difference between what the Liberal Party says and what it does. I would love it if the Liberals actually went out there and told people earning $20 or $21 per hour that they are not part of the middle class and that they do not need any help. I think those people would tell them, to their faces, that their position makes no sense.
They also told us that small and medium-sized businesses are very important and that they would drop their tax rate from 11% to 9% to help them out. Surprise! Nothing was done. This government has been in office for two years, and it has yet to take any action to help small entrepreneurs, families who set up small companies to earn living and support their families.
I know the situation small and medium-sized businesses are in. In a riding of 11 square kilometres, there is no room for big businesses. There are only small businesses, all crowded together.
I will try to stick to tax issues, because that is what we are talking about today, but in terms of broken promises, we could also mention electoral reform, the fight against climate change with the same plan and same targets as the previous government, and the sale of arms to Saudi Arabia.
Back to business, and no, that was not a bad pun. Back to the fact that the Liberal Party had also promised to launch a broad review of all tax measures that make tax avoidance or tax evasion possible. It was part of their program. That is what the Liberals told us in the last election. Surprise! They are doing something else entirely. Their review only addresses one aspect of the situation and the problem, the one that involves small and medium-sized businesses and health care professionals.
New Democrats are not saying that we should not look closely at those aspects of the problem, but we do believe there are others we need to look at.
Curiously, a whole bunch of people, companies, multinationals and banks will remain unaffected, even though they represent considerably more lost revenue than the people targeted in the Department of Finance's discussion paper following this summer’s consultations.
New Democrats recognize the contribution of small and medium-sized businesses. We find it unfortunate that, in its statements claiming to attack major tax cheats, the government paints all SMEs as cheats who abuse the system, even though the vast majority of them are not, as I will explain later. Most SMEs make little money, their profit margins are slim, they do not make enough to use the tax measures the Liberal government is currently targeting.
It is like using a bazooka to kill a fly. There may be collateral damage. SMEs create jobs in our communities. They are therefore important and must be nurtured. Currently, several aspects of the proposed reform, or “pre-reform”, raise concerns. I will come back to that.
In the NDP, we support the principle of tax fairness, which is at the heart of our entire political agenda and our social-democratic vision. It is a matter of not allowing the rich and large companies to avoid paying their fair share, which would normally enable us to take care of each other.
Let me explain. A certain Mr. Holmes, not Sherlock, said something important that I very much like. He said that taxes are what we pay for a civilized society. What he meant is that we give ourselves the means, all of us together, through our social programs, to build a better society where no one is left out. In other words, when everyone pays their share, the middle class, salaried workers, SMEs, health care professionals, banks, and millionaires, we can have useful things, like a free and accessible universal health care system. It is an integral part of our identity as Canadians and Quebecers to ensure that we have access to a doctor so we can be cared for within a reasonable time. Such things can be achieved through tax fairness and wealth redistribution. Taking the money from where the money is enables us to pay for programs that are absolutely essential. We can talk about, for example, health or post-secondary education. Why is tuition so much cheaper here in Quebec and Canada compared to the United States? Because everyone pays their share.
Therefore, as a political party on the left, as New Democrats, we support this principle of tax fairness and we will always want to pursue that goal, because we know that it is part of the solution to have sufficient revenues, the programs we need, affordable social housing and health care for indigenous children in the communities and reserves that need it. We also need those funds to invest in a green shift, to be less and less dependent on carbon as a source of energy, particularly coal and oil. Therefore, there can be good reasons to address inequities.
According to a recent study, tax avoidance through the use of private corporations, the government’s current target, is practised by people among the richest 0.01% in the country, or individuals earning more than $2.3 million per year. If that is the problem, why are the Liberals not targeting just those people rather than scaring everyone? Not everyone will be affected.
According to Statistics Canada, two thirds of SMEs earn less than $73,000 annually. The majority of SMEs would therefore not be affected by the proposed changes. However, the government is unable to assure them that this will not be the case and there is a pile of conflicting information and a lot of confusion on the ground, which is why we are in this mess. We get the impression that the government and the were incapable of being crystal clear and addressing the real problem, namely tax avoidance by the wealthiest 0.01% of individuals who use private corporations to lower their tax rate.
However, perhaps there is a reason that the government is unable to explain its position properly and that it seems to believe that all SMEs are potential cheats. Let us not forget that the himself has used no less than four numbered companies to lower his tax rate over the years. That is part of the problem.
What we are saying is that there needs to be more consultation and we must address the real cheats who engage in tax avoidance and tax evasion. I am talking about the banks, millionaires, CEOs, and friends of the Liberal Party.
Madam Speaker, I rise today to talk about tax fairness for the farmers and small business owners in my riding.
My riding of Essex is a rural riding with five municipalities, where towns are filled with small businesses, and the space between them is filled with gorgeous farm fields. We have some of the richest soil in Canada and the largest amount of acreage under glass in our greenhouse sector.
The hard-working people in Essex are very angry and confused by this consultation by the Liberal government, which is now officially closed. These are hard-working people who have now been told that they did something wrong, that they are tax cheats, or that they were intentionally not paying their fair share.
Paying our fair share is something that is deeply important to New Democrats. Fighting for fairness is the foundation of all of our work. Fair share is a phrase that we use with pride about our contribution to our communities. We pay taxes to our government so that we can collectively take care of each other.
Canadians place trust in the government to fairly distribute the wealth of our society so that we all benefit from services that keep our communities healthy and thriving. This is a basic tenet here in Canada. It is one of the things that I love about Canada. I ran to become an MP to protect and fight for our social services and for their equal delivery.
This is why so many people in my riding are also very proud to pay their taxes, to pay their fair share. They work hard for their families, their communities, their family traditions, and their family businesses and farms. They pay their fair share and they work to pay for the health of their community as well.
This summer when the consultations started, there was a lot of rhetoric being thrown around by the Liberal government about tax fairness. People in my riding were being told that they were cheating the system, that they were taking away from the community they love and helped to build, where they were raised and where they raised their children, instead of adding to it. Not only did they feel targeted by this language, but they were using a system that was in fact perfectly legal and one that they had been encouraged to use to grow.
They understand and support tax fairness, but the main question I get is why the Liberals brought in only these proposals in which they they are only looking at small businesses. Where was the consultation on CEO stock option loopholes, or the consultations on how we end offshoring and snow washing? The Panama papers came up quite a bit.
I understand why farmers and small business owners are angry. What I cannot understand is the Liberal government limiting the scope and the time of this debate in Canada. The government has many opportunities to bring forward real and tangible tax fairness.
I believe in tax fairness, but real tax fairness, not this limited version being proposed by the government.
Real tax fairness could have come when New Democrats stood in the House in March and introduced a motion to eliminate tax havens and the CEO stock option loophole. Why should CEOs be able to hide their salaries and stock options to keep from paying their fair share? The NDP proposed the elimination of the tax break on stock options used by rich CEOs, a loophole that costs the government and communities $800 million per year.
The government voted in favour of our motion but has done nothing to address the issue. I heard Liberals talking about the provisions in the budget that they brought forward, but they do not eliminate the loophole, and these are very different things.
Real tax fairness could have been accomplished by the Liberals if they had passed my colleague's private member's bill, Bill . This legislation would have helped small business owners, like farm and fishing businesses, transfer between family members. We have a system in Canada where farmers pay less tax if they sell their family farm to a stranger than if they sell it to a family member. How on earth is that fair? Again, the government, which says on a constant basis how much it cares about farmers, voted against the bill, which would have made it fairer to succession plan, something that Canadian farm families are struggling with across the country.
I recently spoke with a farmer in my riding who told me that he and his wife had taken on payments to be able to buy the farm from his parents. They have a 16-year commitment to do this, and now they are very worried that they have made the wrong decision and will pay the price for the government's complete lack of understanding about farm management. This is not a multi-million dollar farmer. This is a family that is teaching its children how to farm and keeping our community in fresh local food.
Now, instead of using viable options to make our tax system fairer to tackle the real and serious problem of inequality, the government has put forward consultations, which are now over.
Income inequality in Canada is a real and serious issue for all. Recently, the census revealed that Canada's level of income inequality has worsened over the past 12 years. Due to past government inaction, the richest one per cent of our population has seen a 14% rise in median income. According to the census data, the richest one per cent now earns 6.8 times more than a worker earning Canada's median wage of $34,204 in 2015. The changes that the government is consulting on would do nothing to alleviate this gap. In the Windsor Essex area, the United Way says that about one-quarter of our youth live in poverty, which means that in 2013, 19,900 children under the age of 17 lived in families where the income was less than $17,000 per year.
We need to address this gap and work hard to close it with a serious effort. That is why this consultation must include all avenues to do that, not just the narrow scope of the measures the government is proposing. In fact, the Liberals promised to address these inequalities in their platform, but these measures are so limited in scope that people are learning once again that the Liberals say one thing during an election and never follow through.
If the Liberals are serious about helping small businesses, then where is the small business tax reduction, something that all parties in this House committed to during the campaign? We are two years into the government's mandate and have still not seen that proposal come forward, despite the fact it would be so incredibly important to the 98% of businesses in this country that are small- and medium-sized businesses. If the Liberals are serious about helping small business, then when is this helpful proposal coming forward? Where is the legislation to ensure that business owners can see the tax reduction they were promised and, quite honestly, they were moving forward on and basing their future on? Therefore, it is another broken promise to our most important job creators. No one in Canada thinks that the Liberals are standing up for small businesses.
I want to talk about the consultations for a minute. These consultations released a tidal wave of misinformation that has only scared and worried people across the country. The government caught Canadians off-guard, leaving many small business owners in Essex wondering about the vague language and implications of the proposals, and many others are confused by the complexities of the reforms. I heard some Liberals today in the House talking about whether the NDP would vote on this. To my knowledge, there is nothing to vote on at this point. We do not know what will be proposed. We have a vague understanding, but again small business owners and farmers are confused by these proposals.
The Liberals launched the consultations in mid-July and, as of yesterday, the consultations are over. How could the Liberals not have realized that this time of year would be problematic for farmers? This is harvest season, and many farmers will not be able to get to their accountants or tax planners in time to get detailed advice on how the potential changes to the tax system could affect them. When I travel in my riding, I see all the tractors running at full speed. It has been very tough for those farmers to connect because they simply have had to be on their farms during this critical time.
I also do not understand why the government has decided to rush the consultation process. Surely, it makes sense for the Liberals to post their proposals and wait for honest, well-thought-out feedback. Why do they not give everyone the time to study the changes? If the Liberals are serious about tax fairness, then they will expand the scope, extend the deadline, and have a true comprehensive review.
That is why I move, seconded by the member for , that the motion be amended, (a) by deleting the words, “will have a drastic negative impact on small and medium sized local businesses,” and replacing them with the following, unfairly target small businesses while ignoring the largest abuses of Canada's tax system; and (b) by adding after the word “measures” the following, and to expand the consultations to include measures targeting large corporations, loopholes for CEOs, and tax havens.
Madam Speaker, it is always nice to have enough Liberal members in the House so that we have true consultation and consideration.
To go back to the letter written to the local newspaper by a neighbouring Liberal MP, the letter said:
So far, I have heard from constituents including small business owners and incorporated professionals, hearing their concerns and proposals for moving forward. We had two townhalls with participation by 60 persons,
—so approximately 30 at each of these town hall meetings—
and have received emails, letters, phone calls, and held individual meetings.
Key themes have emerged through these consultations. The first thing that residents...indicated to me is that they believe this consultation period is too short for such broad reforms.
He went on:
Continuing these consultations for a longer period could exacerbate the current air of uncertainty for small business owners. The current due date allows our Government to deliver a framework for the new system to allow business owners time to plan for any changes ahead.
In other words, it is going ahead. There is confusion, and they do not want to exacerbate that. Well, where did the confusion come from? It came from the ill-advised, poorly created policy of taxing unfairly against one part of our economy, the hard-working Canadians in small businesses. That is where the uncertainty comes from.
I am going to tell a little story of some of the constituents I have heard from.
One of them is Tamara Jansen. She is a small business owner, together with her husband. They have had the business for over 30 years. When they started off, it was very small. It is today one of the biggest greenhouse companies in my riding of Langley—Aldergrove. Tamara Jansen and her family expected they would be able to roll over the company to the next generation, to their children.
For the first five years, she got no salary. The salary for her husband, Byron, was just enough to live on. They kept reinvesting everything back into the company. They now have a very successful company that hires a lot of people and provides a very good agricultural products to the community.
At some time in the future they would like to be able to retire and pass the business on to their children. It is always nice, a dream, to be able to pass a business on. With what is being proposed by the government, they would not be able to do that. The tax structure for them to pass it on to one of their children means that they are talking about a tax rate of up to 93%. It sounds impossible. It is impossible to grasp how the government would do that. However, taxation would be far lower if a foreign entity bought them out. This kind of taxation discourages families from passing on a company they have built up over decades to the next generation. It stops that.
Tamara Jansen and I did an interview. It is available on markwarawa.com and on YouTube. I encourage people to watch it.
Another interview I did was with Scott Johnston, who is the past president of the chamber of commerce. He is a corporate lawyer and represents a lot of small businesses. We are hearing from across Canada and in my constituency that people want more consultation.
I think back to 2004, when I was first elected here. It was not my party leader, Stephen Harper, who voted for me. He was running in his own riding. It was the constituents who voted for me and got me here. In 2006, 2008, 2011, and 2015, it has always been the people of Langley—Aldergrove who have elected me and sent me here to represent them and be their voice in Parliament. I believe that is fundamentally our responsibility. I know how the constituents of Langley—Aldergrove want me to vote and the voice and message they want me to bring, and it is to say here, today, now, to extend the consultation period.
How long should it be extended? The proposal of the official opposition is to extend it to January 31 and to start true, genuine consultation. To every member in this House, I can pretty much guarantee that it is the same message that they are hearing: extend the consultation.
I have a question for my Liberal friends. I respect them, and they are in a very tough position. Their leader, the , is telling them how to vote and providing the script and talking points on what they are to say to the media and to their constituents, which is “We are looking out for you. We are looking out for your best interests. We want to build the middle class.”
In reality, the Liberals are hurting the middle class. I encourage my Liberal friends to ignore what the is saying, represent their constituents, and vote to extend the consultation.
Madam Speaker, I thank my colleague from Langley—Aldergrove for his intervention on this issue as well, and for all the hard work that he has done to raise awareness about these unfair tax changes.
One of the things that concerns me most with this entire debate and what has transpired over the last four months is whether the Liberal government meant to try to depict small business owners, farmers, ranchers, and professionals across Canada as tax cheats, people who live in gated communities who are somehow circumnavigating the system and have secret bank accounts in the Cayman Islands and are not paying their fair share.
It is obviously clear that the Liberal members have not met my constituents: the rural doctor who takes that midnight call, the small business owners who work endlessly hour after hour to ensure their businesses are successful, the farmer who works the 16-hour workday during the harvest to try to get his harvest in the bin, the cattle rancher who braves the bitter cold at night during calving season. These are the small and medium-sized enterprises that these tax changes will hurt.
It just goes to show how out of touch the Liberal government is with actual hard-working Canadians, our small business owners, our entrepreneurs, our risk-takers, and our job creators, who it is always proposing to help. However, they are the ones that these tax changes will absolutely hurt.
Today I rise to speak on behalf of my thousands of constituents who have voiced their concerns about these unfair tax changes. Their first questions have to do with why the government is trying to do this so quickly, why it is trying to devastate small businesses, and why it is trying to take away the family farm.
Our motion today is quite genuine. Will the government extend the consultation period to January 31, 2018? To try to make these substantial changes in just four months is simply impossible. How can it say that it is listening to Canadians when a vast majority of our farmers and ranchers are in the fields during harvest? Many of our professionals and small business owners simply are not paying attention to these things during their busy summer season.
I know we are not asking for too much with the motion we have put forward to the Liberal government. If the government is confident that these changes are not going to hurt small business, if it is confident that the changes being put forward are not going to end the family farm, if it is confident that these changes are not going to hurt our professionals and impact access to health care in rural communities, then it will not oppose extending this consultation period to truly hear from Canadians.
That is not what the Liberals have done so far, nor is it what I think they will do. I think that later on this afternoon they are going to vote against our motion, despite massive opposition from Canadians across the country. The and the have been quite vocal and quite open. They fully intend to move ahead with these tax changes, regardless of what comes out of the consultations over the last 72 days.
The government gave us two days at committee and four months to consult with respect to these massive tax changes. The last time it happened, 40 years ago, it took four years to make similar changes to our tax code. Why the rush? Why is the government in such a hurry to get these things done?
My constituents have asked me that every single day. Why the panic? Why the extreme rapidity to try and get these things done? The only answer I can come up with is it needs the money now. It is that simple. It sees an opportunity to try to make its balance sheet look a little better. It is certainly not balanced, but it may be a little better. To do that, it is going to rob our small businesses, our farmers, our ranchers, and our professionals. That is just not right, and it is disappointing that this is the answer that I have to give to my constituents.
We have heard over and over again from the that he is out there listening. Well, I have had phone calls and emails from small business owners and professionals across the country. I will give members a great example. Two business owners in Nova Scotia, one who has a sporting goods store and the other who is a rural doctor, went to see their Liberal member of Parliament to discuss these tax changes. Do members know what the response was when they went to his office? It was a closed door. They were told that the member of Parliament was not taking meetings on this issue.
A chamber of commerce in Nova Scotia invited two Liberal members of Parliament to a town hall to talk about these tax changes. It was a great opportunity for those Liberal members of Parliament to stand up in front of their constituents, their small business owners, the ones they profess these tax changes will not hurt, and explain how this would not impact them, but they did not show up.
The Liberals talk about how much they have been listening to Canadians for the last four months. I am not sure what their definition of listening is when their constituents cannot even get in the front door or have a meeting with their member to talk about their concerns, or at least have an opportunity for that Liberal member of Parliament to explain these tax changes to them and maybe address some of their concerns. Therefore, for the Liberals to say that they are listening is false.
Who is listening is the Conservative Party, the official opposition. We have held town halls, community meetings, and round tables in every single province in this country. I have held several in my riding. It is unanimous. People are concerned. They are worried that they will lose their small businesses and their ability to sell those businesses to the next generation. Our farmers and ranchers are worried about how they will be able to maintain the legacy of their family farms. Those are the things we are hearing.
Our Liberal friends across the way have said over and over today that the people they are hearing from have no concerns about these changes. I do not know who they are hearing that from. The Canadian Chamber of Commerce, the Western Canadian Wheat Growers Association, the Canadian Cattlemen's Association, the National Cattle Feeders' Association, and the Canadian Medical Association have all spoken out in opposition to these tax changes. That is a fraction of the ones we have heard from. I am sure if members asked all of us on the Conservative side, we could give them lists of groups and professional associations, agriculture associations, small business groups, and chambers of commerce across the country that have spoken openly in opposition to these changes. The first thing they are asking for is more time to understand these changes.
I have heard from several accountants and tax lawyers that 70 days is simply not enough time for them to possibly understand every scenario, every situation, and every ramification that could come from these tax changes. These are the people who will have to talk to their clients and explain the implications for their livelihoods. If the professionals who deal with these changes to our tax code every single day do not understand them, how can we possibly expect the average Canadian to try to live with these changes?
More than 80% of the small business owners we have heard from are in opposition to these tax changes. However, I would also like to talk about my farmers and my agricultural community. They are looking at this as another blow in losing their family farms. They talk about the carbon tax, eliminating the deferral on cash grain tickets, and now these tax changes. It will be almost impossible for them. We on the Conservative side do not think the government should be punishing those who are working hard to be successful, to grow a business, and to create jobs. We should be celebrating them, thanking them, and ensuring that they have every tool possible to be successful.
As Conservatives, we will not support these tax changes. We are asking our colleagues to extend the consultation period to at least January 31, 2018.
Madam Speaker, I am giving some of my time to my colleague from .
I will preface my remarks with some personal history. I grew up on a small family farm in Saint-Philippe, where I worked the land and ran a dairy operation with my mother and father. I never finished high school because the farm income could no longer support our family. There were four of us kids, and I had to drop out at 15 to help my mother with the cows and the crops while my father worked off the farm.
In 1976, my mother got sick. She had brain cancer. She died two years later. I knew then that I would one day take over the farm.
I went back to school to learn what I needed to know to gradually take over the farm during the 1980s.
I can assure you that I know a thing or two about being a farmer. Running the farm on my own, I had to deal with all kinds of challenges familiar to many Canadian farms: crops destroyed by fickle weather events; accidents; contagious diseases that swept through the herd; and all the financial stress farm families deal with.
That is why I am pleased to rise to speak to tax fairness for all Canadians.
This gives me the opportunity to say how important it is to our government to maintain the vitality of Canada's agriculture and agrifood industry. I have spoken with the personally, and he has said many times, as we all have, that the tax benefits designed to help family businesses grow, create jobs, and innovate will not be affected. I would also like to clarify a few things.
First, our proposed tax changes will not increase the tax rate for farms.
Second, they will have no impact on the ability of farmers to incorporate, invest, and pay family members salaries to work on their farm.
Third, farm owners will continue to benefit from a lifetime capital gains exemption of up to $1 million for their farm properties. When they sell their farm assets, they pay capital gains on the proceeds of the sale up to a maximum of $1 million.
Fourth, the proposed changes will have no impact on the ability of farmers to pay family members a salary for working on the farm.
Let us be clear. The and the know that farmers play an essential role in the country's economy, and that is why we want to be sure that the measures we take are the right ones. We are listening to farmers' perspectives, and we have repeatedly met with industry representatives. We listened to farmers' views to determine if and how it will be possible to transfer farm businesses to the next generation. I can guarantee that we will be considering the agricultural sector's perspectives as we move forward.
The changes we are proposing would eliminate the tax advantages that only the richest Canadians can benefit from. To make things clear, these changes are not aimed at middle-class Canadians and small business owners. They will only affect a small number of particularly well off corporations.
We support small businesses, we support family farms, and we support the contributions that they are making to our communities and our economy.
We are going to make sure we do not create more red tape for hard-working, middle-class small businesses. Our priority is to ensure tax fairness, while avoiding any unforeseen consequences for our tireless farmers.
I would like to assure my colleagues that the government will not be changing the tax measures meant to help family farms grow, create jobs, and innovate. We are well aware that farmers face unique risks and issues as businesspeople. That is why we are working together with them to make sure our programs provide the tools they need to explore new opportunities.
Beginning on April 1, 2018, the Canadian Agricultural Partnership will target federal, provincial, and territorial investments of more than $3 billion over five years to help the sector innovate, grow, and prosper. The partnership will focus on priorities that are critical to unleashing the sector's growth potential, including research, innovation, domestic competitiveness, and international trade. Under the partnership, producers will continue to have access to business risk management programs that are comprehensive, responsive, and accessible.
The Canadian agriculture and agrifood industry is one of Canada's most important economic drivers. We are talking about a sector that, from farm to table, accounts for over $100 billion of our GDP and over $62 billion of our exports. Trade is an important priority. It is estimated that almost half of the value of Canada's agricultural production is exported. We are the world's largest exporter of canola, flax, pulse crops, and wild blueberries, and the third largest exporter of wheat and pork. Canadian agrifood exports are increasing by about 10% every year, and our goal is to expand exports to $75 billion by 2025. We are working tirelessly to reach that goal.
We are proud to have signed the Comprehensive Economic and Trade Agreement with Europe. The industry estimates that this agreement will help increase Canadian agrifood exports by $1.5 billon a year, which is good for farming enterprises, job creation, and economic growth in Canada.
Asia is another important market for our industry. Its middle class is expected to increase by three billion people over the next two decades. Exploratory discussions to examine the potential of a free trade agreement with China have set a goal of doubling trade between our two countries by 2025.
We are also looking at entering into an agreement with the Association of Southeast Asian Nations, one of the world's fastest-growing economies. In addition, we are working with the United States and Mexico on an ongoing basis to strengthen the North American Free Trade Agreement, which quadrupled North American agricultural trade over the past two decades.
To get our products to our international buyers reliably and efficiently, we have brought in provisions to support rail transportation. Research and development are key to Canada's agricultural success on a global level. Continued public and private investment in research is critical if Canada is to help feed the world.
Canada has the best farmers and food processors in the world. We will keep working with all farmers, with family farm businesses, and with all of our food processors on tax and all other issues to ensure that our agricultural sector remains a global leader and the Canadian economy's top job creator.
Madam Speaker, I am pleased to rise today to speak to the issue of tax fairness and our government's efforts to bring greater fairness to Canada's tax system.
At its core, this is about a key commitment our government made during the election campaign, and has worked every day to deliver; that is to build a stronger middle class and help those working hard to join it.
Simply put, our government has always said that when we have an economy that works for the middle class, we have a country that works for everyone. That is why one of our government's first actions was to raise taxes on the wealthiest 1% of Canadians while cutting taxes for the middle class.
Our current proposals have the same objective, which is to make our system fairer for all Canadians and ensure everyone pays their fair share.
In our platform, we had a specific commitment to address the use of corporations to reduce personal income tax obligations for high income earners. Currently, an incorporated professional earning $300,000 can use the private corporation to get tax savings that amount roughly to the average Canadian's earnings for a year.
We understand these tax-planning strategies are legal. However, when we consider that these strategies are not available to all Canadians. it is clear they are not fair.
At present, a single woman with two children aged 12 and 14 and an incorporated business pays a tax rate that is higher than a married woman with two children aged 19 and 20 and an incorporated business bringing in the same revenue. That is not fair.
The changes we are proposing are aimed at eliminating the legal but unfair advantages that allow the wealthy to incorporate to avoid paying taxes on some of their income and to have a lower tax rate than individual taxpayers.
We do not believe that is fair, and most Canadians agree with this.
There is a lot of misinformation out there about these proposals and I would like to take a few minutes to address some of the more notable misstatements I have heard.
To begin, some have said that these proposals are an attack on middle-class small business. That could not be further from the truth. As the has said, as the has said, and as so many others in this place have said before today, this is absolutely not true.
We know very well just how important small businesses are to our economy. Small businesses employ approximately 8.2 million Canadians, and this represents 70% of the private sector workforce and approximately 30% of GDP.
We are deeply committed to supporting middle-class small businesses so they do thrive and create good, well-paying jobs. We know just how hard these business owners work to provide for their families.
It is worth remembering that two-thirds of businesses in Canada earn less than $73,000 a year. These hard-working, middle-class small businesses are not our focus. We are supporting these businesses in many ways, as they invest, create jobs, and drive growth throughout our economy. For example, Canada's average tax rate for small businesses is the lowest in the G7 and the fourth lowest among the OECD. This allows small businesses to retain more of their earnings to reinvest, supporting growth and job creation.
Other commentators have expressed concern that our proposals are an attack on the family business. This is also not accurate.
Famliy is often crucial to the success of small businesses. I understand that, and so does the government. If a family member is paid for their work in a small business, the changes we are proposing will not affect them. Family members can continue working for the business without any repercussions.
However, we believe that high-income earners should not be allowed to pay dividends to adult family members through the corporation if those family members do not make significant contributions to the business, simply in order to avoid paying their fair share of personal income tax.
This type of tax planning is unfair because it is not available to all Canadians.
Our government understands that many small business owners save money in their businesses for the future, whether for a rainy day, future investments, or eventual retirement. When it comes to the actions that have already been taken, we have no intention of going back in time. Our proposals would only be applied on a go-forward basis. Our intent is that neither existing savings nor investment income from those savings would be affected. We are not going after the nest eggs. What is more, we encourage small business owners to continue using all available tax-sheltered savings plans, such as pension plans, RRSPs, and TFSAs.
Less than 3% of Canadians max out their RRSP, TFSA, or pension plan contributions. We are proposing to eliminate the legal but unfair advantages that allow some individuals to use unlimited tax-sheltered accounts that are beyond the means of most Canadians.
However, someone who saves money in their business with the intention of reinvesting it in the business or in a rainy day fund will be free to keep doing so. The proposed changes will not affect them.
Finally, I want to address the concerns of some doctors, who have raised concerns about their ability to take parental leave. Our proposals are about making the tax system fairer for everyone. All Canadians, employees, and small businesses can continue to benefit from pensions, employment income, and maternity leave, if they choose. However, our government has been clear since our election that we strongly support women entrepreneurs. The has made it one of her priorities as minister.
We know that of small businesses in Canada, just under 17% are majority owned by women, and that is simply not good enough. That is why we have taken steps to create specific programs that support women entrepreneurs, and when it comes to these proposals, we are committed to ensuring that these changes do not affect women differently from men. Our government is committed to gender equality, and we will work to ensure that these changes support women's ongoing success.
It is worth reminding the House that our proposed changes will continue to protect businesses' ability to incorporate, make investments, save for downturns, and pay family members who work in the business.
They will protect and maintain small businesses' ability to succeed and create jobs, while ensuring that the wealthiest Canadians pay their fair share.
Our government is committed to building a fair tax system in Canada, and we want to get it right. Over the coming weeks, we will continue to listen to Canadians, including small business owners, professionals, and experts, on how to build such a system while avoiding any unintended consequences.
Although consultations have concluded, the work of the government continues, and we will continue to work with small business owners and professionals, like everyone else, to address their concerns.
Over the summer, a lot of misinformation has been spread, and I want to assure members of the House that our and the government are committed to listening to Canadians and getting this right. As the Prime Minister has said, better is always possible, and nowhere is that more needed than in creating a fairer tax tax system for Canadians.
When we have an economy that works for the middle class, we have a country that works for everyone.
Mr. Speaker, I will be sharing my time with the member for .
As the member of Parliament for the riding of Renfrew—Nipissing—Pembroke, I appreciate the opportunity to voice the objections of my constituents, who are opposed to paying for the bad spending of the Liberal Party.
As a 17-year veteran of Parliament, I can confirm for the newly elected MPs that substantive changes in tax policy are typically the subject of a federal budget. They are well publicized in advance, released while the House is in session, and delivered by the in a speech to all parliamentarians and Canadians. Our Conservative government gave opposition parties the opportunity to comment on proposals and offer their assessment to their constituents. In short, a better-informed public and an opportunity for dialogue and debate results from this time-honoured approach.
I can confidently say that the proposals of July 18 are some of the most sweeping and dramatic I have ever seen. The manner in which the Department of Finance released these proposals was not fair, and the comment period was not adequate. Media outlets and the public should have been advised well in advance of the speech, to provide an opportunity to assemble experts to review and comment on the proposals. Changes of this magnitude should have been announced when the House was in session. The delivery of sweeping tax changes, which contain very controversial provisions, while Parliament was in recess thwarts rebuttal and effectively reduces exposure of the measures, and it is not right or reasonable. It is an affront to democracy, which leads to the substance of the Conservative motion before the House today.
A 75-day consultation period is unreasonably short, given the timing and manner of the announcement. Legislation continues to be built providing the Canada Revenue Agency with an increasing level of interpretative powers. The predominance of phrases such as “reasonably being considered” and “reasonable to conclude” throughout the draft legislation increases uncertainty for taxpayers. It opens the door to abuse by government authorities. The should ask this. If he were still at his Toronto Bay Street corporation, would he or his employees conclude, as tax shelter advisers, that the method of announcement could be considered reasonable or reasonably fair? The answer is definitely not, and in a democratic society as we have in Canada, future announcements of this magnitude must only be made when the House of Commons is in session where the full scrutiny of all Canadians can be brought to bear on whatever is being proposed.
I know how my constituents feel about the Liberal Party's tax proposals, because I spent the summer talking with them. I am pleased to thank the many constituents who attended a packed meeting at the agricultural hall in Cobden last week to voice their opposition to the plan by the federal government to raise taxes on farmers, small business, and a variety of professionals such as engineers, doctors, building contractors, plumbers, and electricians, to name a few trades. In addition to Mayor Hal Johnson and Reeve Terry Millar of Whitewater Region Township, which hosted our tax town hall, and councillor Stan Pecoskie and John Jeffrey of Killaloe, Hagarty and Richards Township, we welcomed a mayor from a neighbouring municipality in Quebec, Jim Gibson. He was looking for information that he obviously was not receiving from his Liberal MP, and there was no charge to constituents to attend the information session that I hosted.
Since the and members of his party claim that Canadians should not have had the opportunity to be consulted about their sweeping tax-change proposals unless they paid $1,500 for the privilege to do so, I am pleased to share excerpts of a letter from a constituent who just happens to disagree with the government. For the record, I did not ask for $1,500 to read excerpts from this constituent's letter:
“Good morning. I've sponsored events to raise funds toward the local hospital for years. I've personally donated and raised well over $100,000 for the hospital and well over $1 million for our community, from junior hockey programs, minor hockey, figure skating, girls hockey, soccer, to minor softball, to name a few of the causes.
“Under these new tax laws, I would have to re think the programs I sponsor. I am now more than a little embarrassed to admit that I voted Liberal in the last election. I truly believed they supported small businesses and understood that we were the back bone of our economy.
“If I thought small business and the economy would continue to purchase our product at the higher rate I would not say anything. However, I do not believe that. My savings and my retirement funds, at one time, which was considered good and responsible business practice, was just attacked by the liberal Government.
“Accounting firms from either side of our country agree that the Liberals are deceiving business people. They are trying to sneak in a major tax sweep and hoping no one would notice. They point out the fairness of these new proposed tax laws, not only how they will effectively attack business, but also the underhanded way in were introduced. One cannot even begin to argue that.
“When you own your own business you starve as you pay your suppliers and tradesmen in the beginning and that's after you work your normal hundred hour week, and find there's no money left for yourself, all in the hopes that in the (end) eventually it will pay off.
“Income sprinkling. Did the Liberals miss the part about hundred hour work weeks with NO pay cause there was no money left? Whose house was used to finance the start-up, just mine or was I putting my wife and children's lively hood in grave danger also? Who shared the responsibility of working in the store or business office because we couldn't afford to hire anymore help? How many husbands and wives to to go out and work to help support their struggling spouse?
“Attacking doctors, something every small community is screaming for, small communities organizing fund raisers in order to try and entice any new young doctors to come to our communities.
“Does (the Prime Minister) really believe there is this doctor shortage because the business is so lucrative, or perhaps fewer people want to go into that kind of school debt for such a long term return?
“I believe he is attacking our doctors as a smoke screen to hide his direct attack on small business.
“I've dealt with Canada Revenue Agency on a number of occasions. I filed an HST rebate for about $155,000.00. They declined my request for rebate, said I put it on the wrong form. We informed them that in 2011 we had this same issue and CRA ruled I had deposited on the wrong form then and insisted I resubmit on the same form submitted, contradicting themselves.
“They then started charging me 5% compounded daily until I pad the $155,000.00 and my file was sent to appeals. It was two years later when they agreed we had submitted correctly and my money was finally returned. I think it bore 1/2% interest.
“Do you really think as a small business owner I want, as these new laws indicate, to give CRA any more Interpretive Powers? They can't make their minds up when it is in black and white.
“If I had no passive investments where would the $155,000.00 come from? Attacking passive income, as a business owner I have to have passive income, I need funds to pay for future purchases, future development costs and letters of security in order to develop.
“This summer I had to come up with 6.3 Million dollars. The banks do not simply lend you 6 million on past performance in the hope you can or will pay them back.
“Does the (liberal) government really believe they can tax the passive investments, which finance the small business owner's future growth, or pay their employees when business is slow? The banks want security for every dollar they lend you, and if you are offering real-estate as security they may give you 50% of the appraised value.
“How can we make it even harder for small business to survive?
“I've been in business 30 years, in the last 12 years of that time we have been able to start accumulating wealth. 30 years in the business, with all my past track records of making sure everyone was paid, yet I still had to put my house up as collateral to get the funds I needed to proceed with the 2 new jobs this year, and now the liberal government wants to start attacking my passive investments.
“The funniest part of all of this is, the Prime Minister wants to start attacking dividends. I guess now that he has a pension he can take the silver spoon out of his mouth and stop depending on all the dividends, or perhaps income sprinkling that his father set up for those boys and that he took advantage of for years.
“Please do not forget, the majority of small business owners do not know or understand the magnitude of these changes They were all hard at work all summer trying to make money through this soggy year as the government employees were on their paid holidays.
“Please, understand that it is hard to camouflage my bitterness, and I do not only mean government employees. I missed your meeting in Cobden last night (federal member of Parliament), but I can only imagine the eye opening that small business owners got from that meeting.
“I know you are going to fight this, and I hope, for my company and retirement and my employees' future you are successful in defeating it.”
It is time for the finance minister to go back to the drawing board. Canadians are tired of being asked to pay for this government's bad spending.
Mr. Speaker, I thank my colleague for sharing her speaking time with me.
I am always happy to rise in the House, but quite frankly, I have to say that I would rather be talking about something else today, but the government decided to specifically target Canadian entrepreneurs, the people who create jobs and wealth and who are the backbone of the Canadian economy. As evidenced by the 's infamous reform proposal, they have fallen out of favour with the Liberal government.
Two aspects of the Liberal government's approach are a complete disgrace. The first is obviously the direct attack on our entrepreneurs, but there is also the fact that Canadians had so little time to debate these major issues. That is why, today, we have moved a motion stating that this Liberal reform is no good, as it is an attack on our entrepreneurs, and asking the government to extend until January 31 the consultations it claims to have held.
In 1962, the Diefenbaker government created the Carter Commission to evaluate proactive tax measures that could be presented by the federal government to stimulate entrepreneurship, investment and job creation. How long did it take for that government and the ones that followed to develop a positive policy? It took 10 years because, in the 1960s, governments listened to citizens, business people and those who make the economy work.
It took 10 years, until 1972, to achieve the tax measures that we know today. Since then, various adjustments, changes and proposals are made every year, which is perfectly normal. Our job here is to look carefully at each proposal. The scandalous part is that the launched a supposed 75-day consultation of Canadians in the middle of the summer, on July 18. I was a journalist for 20 years and I have been in politics for nine, so I know the game well enough to know that a government that provides a 75-day consultation period starting in the middle of the summer has already made up its mind; it does not care what people have to say. That is the reality under the Liberal government.
I would like to share just a little story about how I was on vacation when I saw the 's announcement. I checked in with my colleagues, released a statement, and headed to the Radio-Canada studio in Quebec City. I was on vacation. My hair was long, I had a beard, I was wearing bermuda shorts and sandals, but we did the interview anyway because it was important to us. I hope nobody digs out the pictures because that could be embarrassing. I can see that my colleague from Montreal's south shore is having quite a chuckle picturing that. Taxpayers paid for those pictures because we did it at Radio-Canada.
Jokes aside, the fact is that when a government launches consultations in the middle of the summer, that is a sure sign it does not really want to hear what people have to say, and for good reason. How do the Liberals really feel about entrepreneurs? Why did the Liberal government launch this so-called consultation about taxing them more heavily? Because it does not like them. It despises them. People across the aisle are getting all up in arms. They say I am exaggerating, but I am not.
Almost exactly two years ago, on September 8, the CBC's Peter Mansbridge interviewed the Liberal party leader, who said, “a large percentage of small businesses are actually just ways for wealthier Canadians to save on their taxes". Not only is that not true, it is also derogatory, arrogant, and so very Liberal. On the basis of that fallacy, the Liberal government started thinking about ways to help itself to even more of our entrepreneurs' money.
The government settled on a three-pronged approach to making life difficult for our entrepreneurs and getting its hands on even more of their money: business transfers, passive income, and income sprinkling.
Is there anything better than walking into a second-, third-, or fourth-generation business, where the pictures of the grandfather and great grandfather are hanging? How wonderful to see people managing to transfer their knowledge from generation to generation, people motivated by family pride to make their business thrive.
What does the ’s reform propose?
It proposes further taxing those who would like to sell their business to their children. Too bad for them, but the reality is that, if an entrepreneur wants to sell the family farm or business to their children, they will pay more taxes than if they sold it to a stranger.
How unfortunate. As the member for notes every time he asks a question on the topic, the risk, particularly in the case of family farms, is that farmers will very likely end up selling to a large company, like McCain, rather than to a family member if it means paying less tax. That is outrageous.
As Canadians, we must respect and promote family entrepreneurship. That is what the provincial government is currently doing, with the support and co-operation of the opposition parties in a spirit that allows family businesses to be sold within the family without any tax penalty.
The first pillar of the Liberal government’s attack is the transfer of businesses, which is taxed more when it happens within a family. What a bad idea.
The second is passive income. The Liberal government wants to further tax people who put money aside in businesses. That is outrageous; absolute heresy. Anyone in business will tell you the facts, which are that, in business, there are good years, and there are bad years. You have to save money when you want to buy something, invest in your company, modernize equipment, give bonuses to employees, hire people or raise salaries.
That is the fair, responsible and realistic way Canadian entrepreneurs operate. That is not the Liberal way, who prefer to live on credit, run deficits and rack up debt without a care in the world.
No! A true entrepreneur is a visionary man or woman who is responsible and puts money aside. Unfortunately, the Liberal government wants to further tax entrepreneurs. That is a sign of the contempt in which it holds them, in typical Liberal fashion.
The third is income distribution. We have been hearing a lot about how it is not right for people to split their income and to hire family members, and what not.
No! In real life, when you know how family businesses work, how often do you hear entrepreneurs say that they had to mortgage their house to stay afloat? Others say they have not paid themselves a salary, and that their children and spouse are pitching in, that everyone is making an effort, everyone is rolling up their sleeves, all trying to make the business grow.
Anyone who visits a local business owner, whether it be the owner of a modest pizzeria on the corner or your local electrician or plumber, knows that the family is engaged and involved in the business's success. Sometimes family members are paid salaries or dividends, but this is not some mortal sin; on the contrary, that is how you run a business.
That is what you are supposed to do. Of those three factors, this is an attack on entrepreneurs because entrepreneurs are not salaried employees. That is what is so vicious about the Liberals' attitude. They are pitting salaried employees and entrepreneurs against one another, when everyone should be working together.
The Liberal government says it is going to tax the wealthiest 1% more. It seems to have forgotten that the Department of Finance found in a report released last week that the infamous 1% paid less in taxes this year than it did two years ago. Will you look at that!
That is the Liberal Party's policy, but I digress. I cannot conclude my remarks without mentioning the fact that, last Friday, we, the five Conservative members for Quebec, spoke out on behalf of Quebec business owners. We held a meeting, and it was very moving to hear from real Canadians, real business owners, and real job creators who are completely disgusted by the Liberal government's attitude.
Thirty-six-year-old Steeve Marin started his company 15 years ago with the support and backing of some of his colleagues. Today, he says that, after all of the sacrifices he has made, what the Liberal government is doing is like using a bazooka to kill a fly. Not only is this approach inadequate, it is disrespectful.
Ms. Lapierre and her husband started a company three years ago. They went without a salary for 10 months so that they could pay their employees. That is what life is really like for business owners, the very people the Liberals intend to go after. It is unacceptable.
Gaétan Boudreau owns a construction company. He said, and I quote, “if this keeps up, I'm walking away.
That is the reality. It is not the Conservatives who are saying this. We were pleased to hear from tax expert Louis Julien from Choquette Corriveau, who said that, if these measures are passed as they now stand, business owners will have to pay more taxes. They will have less money for future projects and a lower standard of living. These measures will curb entrepreneurship, cause an economic downturn, negatively affect job creation, and cause hundreds of entrepreneurs to leave Canada. That is what the Liberals' bad policy would do.
The least the government can do is to continue to listen to what Canadians have to say about this, at least until January 31, 2018.
Mr. Speaker, I will be sharing my time with the hon. member for .
I want to begin by saying that I fully support the business owners and farmers of Glengarry—Prescott—Russell. I grew up with a father who sacrificed hours and hours working on his business when I was young. He had two restaurants and was involved in municipal politics. Spending time with him meant going to the restaurant early in the morning or going to the office. I personally experienced the family sacrifices a father or mother must make for their business. That is why I wanted to speak to the motion we are debating today.
Today, I will explain what we are trying to accomplish and why I will not support the motion.
We know farmers are key to our economy, which is why we want to make sure we get this right, particularly when it comes to the new generation of farmers and agricultural entrepreneurs.
The government will not change benefits in the tax system that are intended to help family businesses grow, create jobs, and innovate. Farmers do so much for Canada. They deliver high-quality food to Canadians and our international customers, provide jobs in rural communities, and boost Canada's economy, while working to safeguard our natural resources.
As I am sure my honourable colleagues know, farming is a 24-hour, 7-day a week business. It is a physically demanding, time-consuming job. It is commendable.
Supporting farmers is a priority for the government and for me, personally. We know that one of the greatest returns on investments we can make is helping the next generation enter agriculture as their career of choice.
As the industry grows, so does the need for additional talented, energetic and well-educated young people. The government is committed to helping this new generation obtain the skills and support it needs to help young people move into good-paying jobs, including many opportunities in Canada's agriculture sector.
A recent informal survey by Farm Credit Canada of 33 post-secondary institutions offering agriculture and ag-related programs confirms agriculture has become a popular career option, especially over the past five years as the industry has grown.
According to Statistics Canada, in 2014, over 12,000 students across Canada were studying in agriculture or an ag-related program. This is great news. A University of Guelph study found that there are 4 job openings for every graduate of the Ontario Agricultural College. The gap has risen from 3 jobs for every graduate in 2012, despite a 30% increase in enrolment over the same period.
Sixty-seven per cent of agriculture companies and 51% of food processors or retailers said they had trouble finding qualified employees, according to the study. The University of Manitoba's School of Agriculture just graduated its largest class in more than 30 years. Similarly, the University of Guelph’s Alfred campus offers a wide range of courses aimed at training the next generation of farmers.
According to Statistics Canada’s Census of agriculture, for the first time since 1991, the number of farmers under the age of 35 increased. Agriculture has shaped our nation and contributes to the health of both Canadians and Canada's economy.
We are talking about a powerful engine of jobs, growth and trade in this country. Today, it is a $100-billion industry, employing more Canadians than any other industry in Canada.
Thanks to our innovative farmers and their commitment to delivering the highest standards of safety and quality, Canadian foods and beverages can be found on store shelves around the globe. Customers in the world’s fastest-growing market, China, can now order Canadian food products with the click of a mouse.
As we celebrate the 150th anniversary of Confederation, it is exciting to reflect on how far our agricultural industry has come. Farmers can now link their tractors to satellites in the sky, and we now have robots to milk cows. This would have seemed like science fiction in 1867.
The future is bright for this dynamic industry, with a growing global middle class looking for products our world-class farmers and food processors can deliver. To continue to succeed, however, the sector depends on continuing to attract young farmers. There are financial hurdles to overcome for many young people to take over the family farm or start their own farm business from scratch.
That is why the government, through Farm Credit Canada, has increased its support for young farmers by doubling the amount of credit available to $1 million from $500,000. As well, FCC has lowered the possible minimum down payment to 20% of the value of the loan which supports the purchase or improvement of farmland and buildings. These are key measures which will help beginning farmers overcome the considerable capital outlay required to start out in the business.
Young farmers also play a key role in the Canadian Agricultural Partnership, a federal-provincial-territorial agreement to invest $3 billion to advance our great industry over the next five years. The partnership will focus on priorities that are critical to unleashing the sector’s growth potential, including research, innovation, domestic competitiveness and trade.
The partnership will be a solid foundation for the future of our great agricultural sector. To grow our agrifood trade even further, the budget targets $75 billion a year in agricultural exports by 2025.
As the House can see, the government fully understands that it is in Canada’s best interest to encourage young people to choose a future in agriculture. The tax changes we are proposing will not raise tax rates on farm businesses. They will not affect farmers’ ability to incorporate, make investments or pay family members who work in the farm business.
Our priority is to ensure tax fairness, while avoiding unintended consequences for our hard-working farmers. This is the purpose of the consultation. I realize that there may need to amend the bill once it is introduced, but that is what consultations are for. We provide information, knowing that comments and suggestions will follow. It is not a done deal, as some people claim.
The indicated that the our government’s goal was not to make it more difficult to transfer family farms. On the contrary, we want to make it easier.
I had the opportunity to speak to many accountants and tax lawyers since the beginning of the consultations. I want to thank each and every one of them who reached out to me. They agree with the government that while legal, converting dividends into capital gains is an aggressive tax strategy. Most of them do not advise their clients to do so. They also agreed that a child who was two days old should not be able to use the lifetime capital gain exemption. Again, the vast majority of entrepreneurs do not do this.
I believe the last point is important for a young generation. Under the current rules, children could use the lifetime capital exemption, which is up to $850,000, without their consent. Let us say they start a business and grow it into a success. By the time they want to retire and sell the business, if the amount of the lifetime capital exemption was all used when they were two days old, they will have to pay the full taxes on capital gains when they retire. That is wrong, and ut is not fair for a young generation.
Some accountants and tax specialists have also raised concerns, and I recognize that the proposal contains certain unwelcome measures. I also know that the has been listening to and will continue to listen to people’s concerns.
What farmers and entrepreneurs need is certainty in the marketplace. Extending the consultation period would cause more delays and more uncertainty in the market. Realistically, if the Conservatives are going to blast us for launching these consultations during the summer, I do not see how extending them during the Christmas period is going to help.
Lastly, the government’s goal is to make sure the next generation of farmers has the tools, resources and support it needs to succeed.
Mr. Speaker, I am pleased to rise in this chamber to speak to the recently concluded consultations of our government on the proposal on tax planning used by private corporations.
The Liberals' plan is to make our tax system fair. It has been part of our commitment. We are also trying to do that by growing the economy and putting more money into the pockets of ordinary Canadians.
Since we formed government, we have been focused on the priorities of strengthening and growing the middle class. How have we done that? We have done it by reducing taxes for middle-income earners, which has benefited nine million Canadians. The Canada child benefit is helping lift hundreds of thousands of children out of poverty. We have also expanded the Canada pension plan to ensure that Canadians will be better off financially in their later years. We continue to invest in our communities and people, which has resulted in a positive change to the economy.
The Canadian economy is in a resurgence. Economic indicators tell us that since the fall of 2015, the Canadian economy has created over 400,000 jobs. The results of the second quarter indicate that there is growth of 4.5% in the GDP. Our economy is now growing faster than any of the other G7 countries. It is through strategic planning and a forward-looking agenda that we have been able to achieve these results.
As our economy grows, we are committed to ensuring that the benefits of economic growth are shared by every Canadian. How do we that? Investing in people and the economy should result in a benefit for all Canadians, but all Canadians are not sharing in this wealth. This is where tax fairness comes in.
Individuals who take advantage of the tax system are able to pay less tax than those who earn the same amount and do not, for example, create a private Canadian corporation. Hence, we need to review the system and see how we can make it fairer.
Consultations have taken place, and we have heard from many individuals by mail and email. From the correspondence I have received, I have realized that there is much misunderstanding as to who would be impacted by the proposal. As such, I held a town hall in my riding to listen to concerns and clarify misperceptions and took that input back to the minister.
What is the proposal really trying to do? Contrary to the Conservatives' spin, this proposal would not impact the carpenter, the plumber, the local shopkeeper, or the restaurant. The premise of the Conservatives' argument is disingenuous, because they are misrepresenting who the tax system is really going to go after.
For example, someone earning $500,000 could take advantage of the maximum RRSP and TFSA and be left with an income of $250,000. If that individual wished to reduce his or her tax, he or she could create a PCC, float the money to his or her spouse, and sprinkle the income. Through this strategy, which is legal, the individual would be able to reduce the amount of tax paid. On the other hand, an individual who did not incorporate and who earned the same amount of money would pay a higher tax rate.
Canadians have told us that they want a fair system in which everyone pays their fair share of taxes. The tax system has not been overhauled since the 1960s. It is time to review the system and ensure that it is fair.
As an accountant, when I posed the question for the asking him which specific section he was talking about that would impact the carpenter or the plumber, I realized that he had not really read the legislation. The proposed legislation would only target the 1% who take advantage to reduce their personal taxes, and the contractor, the plumber, and others would not be impacted by these changes.
I can say from experience, having done many corporate tax returns, that the majority of small and medium-sized enterprises, before they even submit their tax returns, have taken advantage of things that are legally available to them. They have taken advantage of expense deductions, like mortgages, hydro, and car. They have taken advantage of capital gains, which is capped at $800,000.
We understand that small and medium-sized enterprises take risks and work hard. We continue to work with them. That is why our government has invested, and continues to invest, in innovation and technology. Small and medium-sized enterprises have taken advantage of these investment programs.
In my riding, I have many SMEs that have taken advantage of innovation funds. We have recognized creative businesses through our career focus by giving them funds to hire university graduates. This is a win-win for both the employees and the employers. We have increased funding for the Canada summer jobs program so that SMEs can hire students at no, or minimum, cost. These are the benefits that small and medium-sized enterprises can take advantage of.
We have the lowest corporate tax rate for small and medium-sized enterprises in the G7. These are advantages that all of them can take. Small and medium-sized enterprises can also take advantage of deferred taxes. We are not going after those.
If anyone reads the legislation, they will know that only the 1% that probably make $250,000-plus will be impacted once they start sprinkling income. That is what the government is trying to do: make the system fairer. This is about individuals who take out the money.
It is important that we have a robust and respectful discussion and that our conversations are not based on misinformation, speculation, or hyperbole, because it does not benefit anyone. The proposal is not going to affect legitimate corporations or restrict an individual's ability to incorporate.
The Government of Canada continues to work to create a healthy and growing economy in which businesses can generate well-paying jobs and where people can have confidence that they can succeed. We are committed to supporting hard-working entrepreneurs as they invest in their businesses, create good, well-paying jobs, buy new equipment, and re-invest in the economy.
We want to ensure that Canada's tax system continues to help businesses, small and large, expand and create jobs. Our actions are to improve the tax rules to ensure that they benefit individuals as well as a competitive corporate tax system.
We do not want any unintended consequences. That is why all this debate and all these conversations are taking place.
Mr. Speaker, today I love hearing the word “fair” from the Liberals.
I am going to be sharing my time with the member for , and I am honoured to speak today on behalf of my constituents of Elgin—Middlesex—London regarding the proposed tax changes put forward and the request to extend the consultations on these proposed changes.
I would like to thank the Liberal government for creating chaos in my community. It was created by the Liberal government and not by anyone else but the Liberal government.
Members of the community, including renovators and home builders, farmers, physicians, family-run businesses, restaurants, and accountants made sure they took time away to come to speak to me about these changes and how they will be negatively impacted.
Today I want to start with some of the highlights from my constituents. I have only brought in about eight of the letters from the hundreds and hundreds of letters have come in. I have had lots of meetings. We have been doing these consultations, and I continue to have consultations.
I would like to begin with a letter from Mike from London, who wrote:
Three years ago I established a new business in London investing significant resources in addition to working the 60+ hour weeks required to make it successful. In March we doubled our warehouse space and employee count double to 4, with us considering adding a 5th person this fall. I question why I am doing this based on the new tax path the federal Government is planning to implement. The returns available to small businesses are just not balanced with the risks faced every day.
Jim, from St. Thomas, is also a well-respected accountant who immediately started reviewing these changes. It wasn't us, but someone who has worked in this field for 35 years who then wrote to me the following:
We continue to feel that the income sprinkling issue in particular is way out of line and potentially just plain wrong in every sense of the word if you can't share your family business income and future gains with a child rearing/non participating or only partially participating spouse. For example is the doctors spouse who runs the office and may or may not be a nurse eligible for equal compensation to the doctor in the future? I'd like to be there when the CRA field auditor says they're not just to see what happens. Or the farmers spouse?
We are also hearing that the new “reasonableness rules” in the Act will override the old administrative policy of the CRA that “any” owner-manager salary/bonus is reasonable. So if dividends paid have to represent a reasonable return, then we are unclear of how to distribute income from a company whether it be by way of a wage or a dividend.
It is funny that we are talking about how the Conservatives have spun on this, but I did not write anything to these people. They are actually writing us, and we have tax specialists writing to us. I have not asked for their insight. As we continue with this, I want to be sure that members of the government know we are listening to the people.
I would like to share three paragraphs.
Hetty is another small business owner. She works in the community. She is widowed and happily just remarried, and we are very proud of her. She works seven days a week at her landscaping business. She wrote me a very lengthy letter, but I just want to read a little excerpt:
Please find attached a couple of letters from me regarding Taxation of Private Corporations. From what I have been hearing, it is really starting to worry me. I've worked my whole life as an entrepreneur and if I can't use capital gains exemptions or realize a profit from the sale of my business then my retirement is looking very dim. I do not have CPP or a pension to fall back on. Small business owners need support in order to realize a decent retirement. I hope that the government is able to stop what they are doing and have some conversations with the business community so they don't unfairly target private small business.
As I continue with this, the letters and emails have been pouring in from Canadian families, but I specifically looked at only the people from Elgin—Middlesex—London, which includes the city of London, the city of St. Thomas, and eight other municipalities, mostly farming communities.
I have Jason and Shelby from Thorndale, who wrote to me:
According to the Coalition for Small Business Tax Fairness, these proposals will restrict small-business owners, like family farm owners, from sharing income with family members. Changes to capital gains rules will make it more difficult for owners to transfer their farms within the family to the next generation.
This in particular is a concern for multi-generational farm businesses that have incorporated for the purposes of farm succession....
That is something we on this side have heard many times from our advocates. We are here to listen to the farmers. We want to know what is going on.
I can continue, and that is exactly what I am going to do. Members are going to have to listen to me for five more minutes. Farmers in my area are very vocal. If members ever want to hear vocal, come to Elgin—Middlesex—London. They will let the members know what is really happening.
Peter and Sarah from West Elgin shared with me a very familiar story. I too was raised on a farm and I understand the challenges and risks. I was a farmer's daughter. We raised 18,000 turkeys and 2,000 pigs. My dad worked seven days a week, 365 days a year, and that is what he did until he sold his farm in 1996.
However, this is what they have written. He gave me an entire page before it, but it states:
Fast forward 30 years and we have survived almost complete bankruptcy, droughts, crop loss, pig deaths and many other trials and tribulations to create successful cash crop and livestock operations. However, all of this was at a cost. We received no funding to pay for our university educations, no help to open our new businesses. We risked it all. On paper we might look like a successful business but there is no retirement for our parents other than the family farm. As an employer I have no access to EI, I have to pay for my own benefit plan and I have no access to OSAP for my children to attend University. I have no help other than my own blood, sweat and tears poured in 365 days a year and multiple hours a day because that what it takes to raise livestock. I risked marrying a city girl only to have her discover that pigs get shipped out on Christmas Day, that chores need to be done on the weekends and going away for more than 4 or 5 days at a time is hardly possible.
To continue with this, now I have Linda's letter. Linda is a great lady from the city of London. She wrote:
I thought it might be helpful to provide a more personal response to the proposed tax amendments. The amendments are premised on the idea that small business owners are wealthy. To the contrary, many business owners are middle class – the same group of people that this government seems to want to prioritize.
I think that speaks for itself. It is the middle class saying, “Hey, you're not helping us, government.”
I would like to move on to Dan. Dan is a very well-respected financial planner within our own community. He also does insurance. He has studied this. He has not been told about it by me or any other member of the Conservative Party. We are talking about an academic studying this information and breaking it down, so before members say that this is a Conservative spin, this is what Dan, a well-respected person in my community, has written. These are the first top six issues he has:
Federal proposals represent significant tax reform for family businesses in Canada.
Family business owners are the middle class. Family-owned enterprise is the engine of our economy.
I hope everyone realizes that.
It is misleading to equate business owners with salaried employees. I am not sure how many members have been small business owners in this room. However, I have been. I have worked many times for zero dollars. I can tell members that at the end of the day I made sure the employees went home with a paycheque, while I sat there trying to figure out what to do. That is just the life of a small business owner.
Imposing new rule introduces more complexity and uncertainty.
We have heard that time and time again.
Integrating generational businesses makes succession even more difficult.
Those are some of Dan's tactics and issues.
I want to finish with Jonathan. When I looked at Jonathan's letter, I thought, “This guy gets it. This guy really gets it and does care.” He wrote:
I am deeply concerned with the tax proposals released by the Department of Finance on July 18th. These proposed changes, as currently worded, will be extremely damaging for my farm and the farm businesses across Ontario and Canada. These proposed changes, will add uncertainty and complexity to farmers and small business owners across the country. I am particularly concerned with the impact these changes would have on succession planning. It is unacceptable that the government of Canada would make it easier and more beneficial from a tax perspective for a farmer to sell their farm business to a stranger, rather than their own child or grandchild. This type of policy threatens the tradition of the Canadian family farm.
The conduct of this consultation is completely unacceptable. Providing a 75-day consultation period on such complex, and ill-conceived legislation makes a mockery of the democratic process and good governance.
As currently worded, these proposed changes cannot be allowed to move forward. If tax reform is a priority, it must be done in a meaningful consultation with Canadian farm businesses and other small businesses.
I ask that you do not support this process or these proposed tax changes.
As a young farmer, and someone that is now completely self-employed, these changes will de-incentivise entrepreneurial ventures and business owner ship in general.
He carries on about how in Ontario we do not have just the Liberal government to deal with but also the Ontario Liberal government to deal with, so these farmers will now be paying minimum wage increases and paying more for hydro. I really do not know how they are doing it.
All we are asking for today is more time for consultations. The government can say the process is over, but if it is over, why do I continue to get loads of calls from many people still wanting to meet with us? It is because people just found out on July 18 that the government is proposing this change. In the dead of summer, people are busy doing things. Maybe they were doing Canada 150 celebrations, as I was, but we have not given Canadians the proper opportunities to speak.
What the government has done here is totally demobilize the faith of good Canadians. I urge members to vote yes to allow the consultations to proceed for the next couple of months so that all Canadians can have their voices heard.
Mr. Speaker, I too am very glad to have the opportunity to have this motion put forward today and to have this very important conversation. The Liberals have indicated that we would have a lot of time to discuss this through legislation, but that is totally inaccurate. This might be the only opportunity in the House to talk about something that would impact so many small businesses across my riding.
There has been nothing since I was elected in 2008 that has created more of a reaction in my community than these particular proposed changes. There have been emails, people coming to the offices, and people phoning. They are angry, upset, and very concerned, and so this has really mobilized them. I do not think anyone should underestimate how important these changes are.
I will talk first about the process, and then I will talk about the implications. I think at the very end, members will understand that having an extension is a very reasonable request, and we are only asking to extend this until the end of January 2018.
On the implications of the process, this paper was released on July 18 during the period of summer that is called the dog days for a reason. It tends to be when people are focused on their opportunities for vacation and to enjoy time with family. They do not tend to be engaged in the political process during the dog days of summer. However, of particular importance for the riding I represent, on July 7 in B.C. one of the first wildfires broke out and the province of British Columbia was in a state of emergency. We had thousands of people evacuated over the coming months, and there were many issues. Therefore, I can assure the Liberals that there was no sort of review of this particular proposal during that time.
Indeed, one of my ranchers had been evacuated, her fences were burnt, and her cattle were missing. She stopped by the post office to get a letter from her accountant, which told her what the implication of these changes would be. Can members imagine being devastated, with their fences burnt and cows missing, and then getting something from their accountant saying that the Liberals were going to make significant changes?
However, members do not have to take my word for this, because we are not the tax experts. There are tax experts out there, and they are not the Liberal talking points on this issue. I have three tax experts, and one is a representative from the business community, the chamber of commerce. It prides itself on being a non-partisan organization, and this is what it had to say:
...it is very unfortunate that the federal government has chosen to position this in terms of “fairness” and “loopholes.” The tax strategies being followed date back to the 1960s and have been refined and tested over many decades. The federal government has engaged in rhetoric that divides the country, directly stating that small business owners do not “contribute” to the wellbeing of the country....
My time is up, but I will get back to this important quote from this very important organization.