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Results: 91 - 105 of 656
View Pat Kelly Profile
CPC (AB)
There's one other point I also want to make or get into the record through witnesses.
There have been criticisms of the whole idea of a corporate entity. We know what's been said in the past and the accusations of tax cheating and that kind of thing. I'll leave this for whichever witness might be best able to answer this, but is it not correct that often the decision for a business to operate through a corporation is driven by pressures that are not really their choice? It could be their bank, for example. In any kind of commercial lending scenario, a bank will normally insist that the land or the building be held in a corporate entity, and often maybe even one separate from the operating entity, but they want both to be corporate structures.
This whole idea of small businesses, family businesses, forming corporations is often not the choice of the business owners themselves.
Andre Harpe
View Andre Harpe Profile
Andre Harpe
2021-03-09 16:35
I'll speak quickly and maybe somebody else can add to it, but I do know that if you look at the business world right now and especially banks, they're very used to the corporate culture. They get very uncomfortable...or they operate a lot more easily when they're dealing with a corporation, whether it's a farmer—
Marcel Groleau
View Marcel Groleau Profile
Marcel Groleau
2021-03-09 16:36
I would like to answer Mr. Kelly's question.
First, the situation is a bit different in the agricultural sector because of the assets' value compared with the return on assets. In agriculture, the rule is that $6 to $7 must be invested to generate $1 of income, while in commerce in general, it is $1 of investment for $1 of income. That is why there are special tax rules for the agricultural sector, including bigger capital gains exemptions for people selling businesses when they transfer their agricultural assets.
Second, banks do not require us to be incorporated. Legislation favours that type of legal structure because tax costs are lower for corporations than for individuals. This leads us to become incorporated or to create companies to run our businesses. Banks don't require this. It is a matter of good management.
View Michael McLeod Profile
Lib. (NT)
Thank you, Mr. Chair.
Thank you to all our witnesses for a very interesting discussion on a very concerning issue.
I'm in the same boat as Pat Kelly; I don't have a whole lot of farms in my riding. We do have some hobby farms and some community gardens and things of that nature.
I have a number of questions. I think I'll start with Mr. Harpe. He made a very good presentation, but I'm not clear on some things he said, maybe because of my lack of exposure to farming. He mentioned that his farm was a corporate farm, but it's not a real corporate farm. I can understand the difference between an unincorporated farm and an incorporated farm, but maybe he could explain to me what he meant. I think his farm is considered a corporate farm, but it's not the same as a real corporate farm. I didn't follow that.
Andre Harpe
View Andre Harpe Profile
Andre Harpe
2021-03-09 16:39
Sorry, I apologize.
Yes, our farm was incorporated in 1972, when my father took over from my grandfather. We feel that the public perception is that when we talk about a corporate farm, we're talking about a corporation with shareholders, like IBM and businesses like that, that type of corporation. When we say “corporate farm”, we mean.... In Canada, it's usually a family farm that has made a business decision to become a corporation.
So yes, we are incorporated, but we consider ourselves a family farm.
Brian Janzen
View Brian Janzen Profile
Brian Janzen
2021-03-09 17:09
Thank you.
Section 84.1 has been a thorn in my side for 25 to 30 years. I was pleased when I saw the Liberal bill in 2015—which did not get passed—and I'm just ecstatic to see what's transpiring so far. There was a brief example given in the earlier session, but I want to quickly highlight what would happen in Manitoba with and without section 84.1 on a sale to your kids versus a sale to arm's-length parties.
Right now, if you have a $1-million business and you sell your shares—in a restaurant, let's say—to your neighbour, you will walk away with after-tax proceeds from a $1-million sale of about $971,000. That's only $29,000 of leakage.
If you turn around and.... There are various ways to sell your shares to your kids under the current regime of section 84.1, but I'll just use the worst-case scenario. The worst-case scenario is that your kid sets up a holding company, or holdco, and buys your shares from you. In Manitoba, that will cost you $466,000 because of the deemed dividend. That's a difference, between the two scenarios, of $437,000. That's just crazy.
There are various other ways to reduce that difference, but there is always a difference when you sell the shares of a small business corporation. I'll just concentrate on the small business corporation during my discussion, because we've talked a lot about farms.
I understand why section 84.1 was introduced. It was introduced to stop internal surplus stripping when there wasn't a real third party sale or any kind of sale. That's totally understandable, but section 84.1 went too far, and Bill C-208 really goes a way to correcting that.
There are a couple of other things. As I said, it really encourages you to sell to a third party and not your kids. I've seen so many cases of that. I have current clients now, and even family members, who are looking at sales. They're pursuing the third party because it's too expensive to sell to their kids. An American company or a multinational is more attractive than their kids. As we've heard from CALU and from everybody, that is not the way to build a great economy.
On the first example I mentioned, where the person retains $970,000 on a $1-million sale, there's been a lot of commentary that it's a loophole and that it shouldn't be: Why should they pay that little? Well, small business people and farmers should be treated differently, because this person who sold their business for $1 million probably had little or no RRSP. First of all, they probably took little salary out. That's their retirement. If they lose half of it to the government.... I don't lose half of my pension when I retire. This is their RRSP. This is why it's so important to retain as much as they can.
I have a couple of other quick comments. In the earlier session, there was commentary that corporations and holding companies are loopholes. Those are not loopholes. A corporation, as somebody was saying, is mostly required by the bank. Even in Manitoba, if you're a small business manufacturer, you need a corporation to take advantage of Manitoba's investment tax credits. A corporation is not a loophole.
The other thing I want to reiterate is that after the sale—let's say a dad sells to his kid and they paid more tax because of section 84.1—that kid is also left in a worse position on an ongoing basis. Depending on how they structured it, he now has to use his after-tax corporate profits to pay personal tax, or pay his dad off, as opposed to reinvesting. The third party who bought from your neighbour gets to reinvest his 90¢ on the dollar. The guy who bought from his dad does not. That puts him at a disadvantage on an ongoing basis as well.
This bill is a great start. It has some caps on value, which is great. This bill is helping the lower end of the small business community. It is not helping the huge, rich companies, even if they're family owned. The impact of section 84.1on them is a drop in the bucket. This is helping the smaller families.
I didn't think I needed to get technical, because Dustin did a great job on that. These are my comments. As I said, I've worked with small businesses for 34 years, so this is a great help.
Thank you.
Jesse Whattam
View Jesse Whattam Profile
Jesse Whattam
2021-03-08 11:25
To name some of our members, they include the Canadian Labour Congress, Unifor, Canadian Union of Public Employees, United Steelworkers, and the Climate Action Network, just to name a few.
The World Trade Organization has failed to serve Canada or create a better, fairer world for all, and the Trade Justice Network welcomes the calls for fundamental reform. For three decades, the regime of hyperglobalized trade investment and supply chains via the World Trade Organization has empowered pharmaceutical, agribusiness, financial and other corporate interests in high-income countries to dominate economies to the detriment of national and local economies, workers, farmers, indigenous peoples, our health and the environment.
In the past three decades, despite increased global economic integration, the numbers of the world poor have increased absolutely and relatively. Without a labour protection floor, we've seen repressed wage growth and increased precarious work. The climate and economic crises have been ignored or needed solutions have been constrained by trade rules. There has been a rise in inequality within and between nations as governments have been stripped of essential tools to pursue the well-being of their peoples.
This is why the WTO is facing an existential crisis. The COVID-19 pandemic has only further exposed the inequality and instability of the current WTO regime. It's time for change.
I'm going to focus my comments on the inequity of power at the WTO, regulatory practices and the dispute settlement mechanisms.
The reality is that while the WTO is supposed to be governed by its 164 members, it's actually managed by its most powerful members. The EU and the U.S., along with most western OECD countries, have remained dominant and set the global rules of importance to multinational capital that have never been mutually beneficial for developing countries. This especially played out when rich countries sidelined the Doha development round priorities while pursuing an explosion of bilateral agreements and plurilateralism at the WTO, which was then foisted on developing countries. The interests of developing countries and the poorest communities and low-wage workers everywhere have been marginalized in many of these new negotiations.
In the realm of domestic regulation, corporate interests have lobbied successfully for deregulation through the current trade regime. Further, dispute settlement mechanisms and other explicit constraints in the WTO and free trade agreements prohibit high standards of public and environmental protection. While claiming that domestic regulation maintains the ability of member countries to regulate in the public interest and facilitate increased trade, in reality there's an inherent tension between the domestic regulatory space and trade liberalization.
While the language in the General Agreement on Trade in Services recognizes the sovereign right to regulate, it does not preclude a challenge against a state on the grounds that it administered a regulation that did not fulfill its standards and the criteria set under international instruments, such as the WTO law. In effect, such questioning of domestic regulations via the WTO dispute settlement mechanisms and based on international disciplines and standards challenges the boundaries of the state's regulatory space and the role of its regulatory authorities.
Since the founding of the WTO, regulatory barriers to trade have been at the top of the priority list for multinational corporations. Developed countries, on behalf of their largest industries and exporters, began to complain more loudly that the food and product safety standards, public health measures and environmental protections were creating market inefficiency. Under this pretense of market inefficiency, it has facilitated a deregulation affecting labour rights, consumer products and environmental protections.
Further, international business lobbies have increased their advocacy of so-called regulatory coherence and co-operation, including a right to intervene in the regulatory process as early and as often as possible, hoping to derail or weaken pro-consumer or pro-environment policies and regulations before they're even implemented, avoiding the need to later challenge them.
Right through the pandemic, this has been clear. Negotiations have continued on limiting domestic regulation of the service sector, even as the concentration of service firms is posing a major impediment to timely and cost-effective procurement and distribution of essential goods. Negotiations to limit regulation and vetting of foreign investors continue, despite a clear need for the production of personal protective equipment and medicines to be diversified.
A fundamental transformation should mean that no country should seek or be required to incorporate the so-called good regulatory practice into binding international treaties, as they've been designed to benefit corporate interests and multinational capital while putting democratic decision-making in a stranglehold.
My next point is on the dispute settlement mechanism within the current form of the WTO and trade regime. One of the biggest shifts of the WTO is that countries that try to restrict foreign trade can be more easily sanctioned, most notoriously by giving foreign investors the ability to sue states under the opaque arbitration process. Previous witnesses have spoken about how this current dispute mechanism has hurt Canadian industries.
Just last week, pharmaceutical companies were asking that countries such as Colombia, Chile and others be punished for seeking to ramp up their production of COVID-19 vaccines and therapeutics without express permission from pharmaceutical companies. Sanctions are being urged by the drug industries, citing alleged threats posed by any effort to challenge basic intellectual property rights. Canada and other high-income nations have refused to sign on to the proposal of the WTO or have delayed approving it. Even in the middle of a global pandemic, the rules of the WTO are prioritizing the profit of multinational corporations over people, especially in the global south.
When it comes to the climate, it is paramount that the WTO and trade rules protect climate policy. WTO trade rules that conflict with climate action should be eliminated to allow communities and governments to advance bold climate protections without the fear of being challenged in trade tribunals. We should not be beholden to agreements, such as the government procurement agreement, that can prohibit, say, renewable power purchasing. A fundamental transformation would align trade policies with climate objectives and enforce commitments to implement international climate accords and to make climate-protecting policy changes.
In conclusion, the WTO has functioned to establish rules for the world economy that mainly benefit large transnational corporations at the expense of national and local economies, workers, farmers, indigenous peoples, our health and the environment. Recently the Trade Justice Network signed on to a global call for WTO reform, which was signed by hundreds of civil society organizations across the world. This call cited the Geneva principles for the global green new deal, where economists, policy-makers, experts and civil society organizations aimed to lay down the foundations of a new multilateralism that builds the rules of the economy towards goals of coordinated stability, shared prosperity, and environmental sustainability while respecting national policy sovereignty.
It's these goals that should shape the WTO reform: people and the planet before profit.
Thank you for having me.
Daniel Kelly
View Daniel Kelly Profile
Daniel Kelly
2021-02-25 15:45
Thank you very much, Chair and members of the committee. It's great to be with you again.
I want to share with you some new data from CFIB—we just put some out this morning. Of course we also have a few recommendations for you.
A deck was sent around in English and French. You should have that, members of the committee. I wanted to walk you through that.
Businesses in Canada remain really shut down. On average across Canada, only 51% of businesses are fully open at this stage. The number is lowest in Ontario, while some provinces, particularly Atlantic Canada and some of the prairie provinces, are doing better than that.
On the staffing side, only about 40% of businesses are at normal levels of staffing, meaning 60% of them have fewer staff than is normal for them at this time of the year. Most concerning of all, only 25% of business have normal or better revenues than they usually do at this stage in the game.
Small businesses are deeply concerned about the economic repercussions of COVID. Of course, this started out as a health care emergency and quickly morphed into an economic emergency, but there are a great many worries on the part of small business owners, such as economic repercussions, consumer spending concerns even following COVID, the sluggish vaccine rollout, their business cash flow, debt and stress. These are some of the things small business owners are telling us.
I want to flag some brand new data that I mentioned we just put out today. One thing the committee should be very concerned about is the amount of COVID-related debt small businesses have incurred since the start of the pandemic. Right now, across Canada, it is $170,000 on average for a small firm in new COVID-related debt directly attributable to the pandemic. Bankers will tell you it's not that businesses have been rushing out and borrowing a whole bunch more money. It's typically unpaid bills that are the largest chunk of the debt. A lot of that is due to landlords, in part due to some of the failures of earlier rent relief programs. I agree with the previous speaker that the new rent support program is a much better version, but it's still not delivering in sufficient quantity to businesses that are being affected. That's $170,000 in debt, on average, across Canada.
Our estimate at CFIB, based on our member data, is that one in six businesses across Canada is at significant risk of closing. That means there could be 181,000 fewer small, independently owned and operated businesses across the country that go bankrupt or wind down permanently, directly as a result of COVID and the damage they sustained over the course of the emergency. That would represent 2.4 million Canadian private sector jobs being taken out at the same time.
Data from StatsCan will tell you that in fact business bankruptcies to date are actually lower than is normal. They too have been affected by the COVID emergency. Many firms are existing right now on government subsidies, and as those subsidies start to be taken out of the economy—and we all hope one day we can replace subsidies with sales—many business owners are worried they're not going to make it, especially, as I shared previously, due to the amount of debt they've gained over the course of the pandemic. That's one in six businesses, or 181,000, on top of the 60,000 Canadian businesses that have already gone bankrupt over the last little while. That means there could be a full wipeout of 20% of Canada's small and medium-sized businesses.
The government has created a number of very helpful programs, and I credit the finance committee and the government itself—with opposition parties, of course, contributing to this as well—for the creation of many of these programs. It was slow. It was incomplete. There remain hundreds and hundreds of different exemptions and rules that have made tens of thousands of business owners slip through the cracks of the program, but many have been helped. Sixty-five per cent of our members have used the CEBA bank account, which has now been topped up to $60,000 loans. Fifty-nine per cent of our members have used the wage subsidy—the CEWS program.
The Canada emergency response benefit—CERB—or the new one under EI has been used by entrepreneurs themselves. Twenty-eight per cent of business owners have used those programs. However, even now only 26% of small businesses are able to use the rent support program, because there remain a number of significant gaps.
We've put forward six major recommendations. We've presented these to Finance. Let me just run through them quickly.
We're asking the government to extend and expand COVID support until the entire economy can recover, including reopening Canada's borders. Really, the sign that government can start to scale back subsidies is when federal and provincial governments can stop telling Canadians to stay at home. Until we're at that point, we would not advise ratcheting back the subsidies that are provided to businesses to keep them alive, because so many businesses need that face-to-face interaction with a customer in order to make a living.
We're asking you—we're pleading with you—to put a moratorium on any new taxes and costs to small businesses. We just can't handle them. We're unhappy that CPP premiums went up at the beginning of this year, in the middle of this terrible time. We're asking you to delay further increases in CPP and the increases planned for the carbon tax—or at least to provide a full rebate to the businesses that are affected by it—and to freeze the liquor tax escalation.
We really think that forgiving more small business debt is a chunk of the solution here, and there are pathways in existing programs. One-third of CEBA is now forgivable if you repay the balance. Something similar to that could be adopted with the new HASCAP program, which we think has some potential.
A hiring incentive would be a good idea as we transition from a shut-down economy to a reopened one. Cutting red tape should be made a priority, as should holding off on any consumer stimulus. I'm really worried that the government may embark upon a big consumer stimulus measure. While that might be helpful to some, if we do that too early, businesses that rely on face-to-face transactions, which have been the ones that have been hardest hit, will not benefit from it, because of course that money will be going to the parts of the economy that have remained open.
As I close, I also just want to commend the finance committee on the great recommendations in its recent report. Many of the all-party recommendations, as well as some that were put forward by the parties, make a lot of sense.
One of the ones I want to highlight, which we love, is making good on the Liberal party promise to small business owners to eliminate credit card processing fees on sales taxes. That, we believe, would save small businesses $500,000 a year. It was a promise in the 2019 Liberal party platform, but we've seen no signs of that proceeding and we urge the committee to keep the pressure up.
We strongly support Bill C-208, which the Conservatives have put forward. That would allow for the same tax benefits for parents selling their farm or small business to a child or family member. That's a great move and would be welcomed by farmers and business people across the country. We have listed a few others there as well, but I know we're tight on time.
Thank you, again, committee. A lot of good work has been done, and I'm happy to take any questions at the appropriate time.
View Sean Fraser Profile
Lib. (NS)
View Sean Fraser Profile
2021-02-25 16:26
Thank you.
Mr. Kelly, thank you for the work you've done through this pandemic. Despite certain criticisms, which I appreciate and have jotted down, I really appreciate the advice that CFIB has provided from the outside of this pandemic. You focused heavily on solutions to small and medium-sized business debt.
Obviously government subsidies can't carry on in perpetuity. The private sector is going to play an important role at a certain point in time.
I'm curious whether you have any thoughts on the role that could be played by an equity tax credit of limited duration to help with the economic recovery—to help some of these businesses that may not otherwise survive not just get back on their feet but grow in a healthy way once it's safe to do so.
Daniel Kelly
View Daniel Kelly Profile
Daniel Kelly
2021-02-25 16:27
I'm not sure that I understand what you mean by an equity tax credit, but the idea of some support as we move from lockdowns to ending of stay-at-home orders and advice and then into an open economy.... That transition is going to be a really delicate one and different for every sector of the economy. As was noted by my friend from Restaurants Canada, we are going to need a variety of measures.
The one I would advocate most strongly—to move us towards recovery with the pool that the Deputy Prime Minister has already suggested she's allocated for this purpose—would be to try to find some ways to relieve small business debt. The CEBA model, with the current one-third that is forgiven, could be ratcheted up. We've suggested that be expanded to a $80,000 loan that is 50% forgivable. The other is to move a forgivable component into the HASCAP loan for the highly affected sector.
If you did that, we think businesses would be helped. If equity implies perhaps government partial ownership of the business, I'm not sure that would be something we would support, but—
View Sean Fraser Profile
Lib. (NS)
View Sean Fraser Profile
2021-02-25 16:28
To be clear, that's not what I'm interested in. I'm wondering if we can make it easier for investors within communities to help invest in businesses within their communities as they transition to reopening.
I expect I'm out of time, so if you have thoughts on that, perhaps we could have a follow-up conversation.
View Ed Fast Profile
CPC (BC)
View Ed Fast Profile
2021-02-25 17:23
You also mentioned that new businesses were promised they were going to get access to more support programs, and that was in fact never delivered. How many new businesses have been left behind because of lack of access to these support programs? Which specific programs, if you can do it very quickly, do you believe they need immediate access to?
Daniel Kelly
View Daniel Kelly Profile
Daniel Kelly
2021-02-25 17:24
We've been begging governments to look at the plight of new business owners. I know they're sensitive to it and they're thinking about it, but, for goodness' sake, we're a year into the pandemic and these businesses have had no support at all. I don't have an exact number. There are thousands who reach out to the CFIB asking for help—people who have spent their entire life savings of half a million dollars to open a restaurant that has had no income and been shut down all of last year because of technicalities regarding their environment. This needs to change. It is desperate.
First, the program they need the greatest access to is CEBA—getting them a loan quickly. That $40,000 to $60,000 loan would help a great deal.
Second, we need to fix the wage and rent subsidy to allow them access to those two programs, because they have been real lifesavers for a whole bunch of businesses.
View Peter Fragiskatos Profile
Lib. (ON)
Thank you, Chair.
Thank you to the witnesses.
My apologies. I had to disappear for an hour on a previous commitment, so if my question has already been answered, then I especially apologize.
I have a question for Mr. Kelly.
Mr. Kelly, in your introduction, you talked about the number of businesses that continue to be affected by debt taken on during the pandemic. If I'm not mistaken, the average small business has taken on 170,000 dollars' worth of debt. Is that right?
Daniel Kelly
View Daniel Kelly Profile
Daniel Kelly
2021-02-25 17:25
You got it. Seventy-three per cent of businesses have taken on new debt at an average of $170,000.
Results: 91 - 105 of 656 | Page: 7 of 44

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