Finance Committee on Oct. 21st, 2014

[Dr. Frances Woolley]

Basically, if you have a single parent who's earning $30,000 a year, and they have a relationship and they fall in love with somebody else who's also earning $30,000 a year, when they form a family, when they go from being a single parent with a net income of $30,000 to a two-parent family with a net income of $60,000, the loss of the Canada child tax benefit is actually close to $500 a month. It's quite a lot, and that's something that concerns me. I think if there's an opportunity to preserve the strength of the CCTB while addressing that. That would be something to think about.

[Murray Rankin, NDP, Victoria, BC]

I wanted to thank you for referencing grandparents in your very powerful critique of the regressive income splitting policy that seems to be the flavour of the month for the government. In a riding full of grandparents, I know exactly what you're talking about. I thought that was a very reasonable thing to say.

I'll go back to Professor Robson, if I may, for the very small amount of time that I have remaining. You said that we could tax on the basis of families versus, the way we currently do, on the basis of individuals. I think if I understood you correctly, you were positing that as a theoretical possibility. Is there such a program in other parts of the world where families are taxed as units as opposed to individuals?

[Prof. Jennifer Robson]

There are jurisdictions. I think one of the other witnesses named a few. I'll speak very briefly about two very short examples.

[The Chair, Conservative, James Rajotte]

Very briefly.

[Prof. Jennifer Robson]

France has had family taxation; however, they also have a very different approach to taxation. They tax capital, they tax wealth, they pay families to have a parent stay at home for five years. They have female labour force participation that is 10% lower than here in Canada.

In the U.S., they give people the option. Do they want to opt to be taxed as families or taxed as individuals?

What you see, at least in the most recent tax data, is a pretty clear relationship that higher-income individuals choose to file jointly. Why? Because they get more bang for their buck out of it.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Rankin.

Mr. Adler, please, for your round.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

Thank you, all, for being here this afternoon.

We never really have enough time to explore in full detail all the topics that we would like here, but I would like to begin. I know everybody around the table would certainly agree with the fact that our government has a strong record of combatting international tax evasion, and getting tough on tax cheats. In fact, from 2006 to March 31 of this year, the CRA has audited over 8,600 international tax cases, identifying over $5.6 billion in additional taxes that are now being collected. Moreover, the economic action plan of 2013 introduced a number of new measures dedicated to offshore compliance activities, and an investment of $30 million over five years in support of their implementation. Economic action plan 2014 has introduced even more. In fact, since 2006, our government has introduced over 85 measures to improve the integrity of our tax system. It's to the NDP and Liberal discredit that they voted against every single one of these measures.

My question for Ms. Alepin, would you not agree that that is a step in the right direction?

[Brigitte Alepin]

Yes, it is a step in the right direction. However, I would like to make two comments about this issue, although I made one of them earlier.

I find that the tax system is sending a mixed message. On the one hand, the investigative measures are extremely tough and restrictive for taxpayers who use tax havens. On the other hand, we have a tax system in place that allows multinationals to use tax havens legally. That is my first comment.

I also have trouble understanding something. Right now, multinationals are in fact able to do business in tax havens without paying taxes anywhere. They pay no taxes in tax havens or in Canada. In this case, how is the government handling the fact that the system has become unfair for the country's small and medium-sized businesses? I cannot figure that out. We hear that this is a step in the right direction, but setting up a tax system for multinationals is no such step. Multinationals actually pay less tax than small and medium-sized businesses.

When I started my career in taxation, that was not the case. Small and medium-sized businesses used to pay much less tax than multinationals.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

Ms. Robson, I'm just curious, earlier you had indicated that the child tax benefit pays individuals money and you mentioned that wives of bank presidents don't need that. That's a little disparaging, because not everyone in this country is the wife of a bank president.

When we introduced that program, one of the senior Liberals said that people were just going to take that money to buy more beer and popcorn. Is that a comment that you would agree with, or you would say that's just a silly thing to say?

[The Chair, Conservative, James Rajotte]

One minute.

[Prof. Jennifer Robson]

So if I just sit here in silence....

To be clear, I think the reference to the wealthy bankers' wives is kind of a historical one in terms of the policy debate around how we support families in this country. It's one that goes back to the mid-1990s, talking about how we had a system of universal child allowances and there were criticisms about that. So it's really more of a historical reference.

With regards to the comments made by one particular individual, I don't think we actually know how families are using the UCCB. I can't comment on how families use it.

[Mark Adler, Conservative, York Centre, ON]

Okay, thank you, fair enough.

Ms. Woolley, just quickly, you wrote a paper in 2000 called Control over Money in Marriage. Would the debate today in terms of income splitting have changed your conclusions in that paper at all?

[The Chair, Conservative, James Rajotte]

Okay, just very briefly, Professor Woolley.

[Dr. Frances Woolley]

No.

[The Chair, Conservative, James Rajotte]

Okay, thank you for that brief response.

Mr. Harris, there's one more five-minute round. I understand you have a question or two?

[Dick Harris, Conservative, Cariboo—Prince George, BC]

All right.

Thank you, panel.

I just want to be clear. In my mind there's a clear difference between what we would call tax evasion or tax avoidance and tax benefits and tax allowances. One is bad; the other is good.

I always believed that, if Canadians were to do all of the things that they should do to try to earn a good living such as get an education, work hard, and handle their money in a prudent fashion, and if they make a good life for themselves, to the extent that the chances were very slim that they would ever be dependent on the government, maybe they should have some sort of a reward, a small reward, to do that. That's what we call tax breaks, tax breaks for Canadians.

Now over the last eight years our government has lowered the average tax to Canadian families by, I think, about $3,600 a year. I would suggest that the average Canadian middle-class family does not put that $3,600 a year into a sock somewhere every year and just let it sit there. They put it back into the economy because they buy things. That's good for the economy. As a matter of fact, just at the bottom line, for every dollar in tax breaks that the federal government gives to a Canadian family, they reap 5¢ just at the basic level on every dollar that's put back into the economy. It only has to turn over 20 times in the economy, which could happen in a day, and the government has that dollar back. That's good for the economy.

If some panellists here today think that tax breaks for Canadian families or for working Canadians are not necessarily a good thing, I would like to argue that they are a very good thing and that we should do whatever we can to support them. It doesn't stay in a sock; it gets put back into the economy.

I just have one question.

Mr. Gillespie, you talked about individual long-term care insurance. I think that's a great idea. I think that anyone who is willing to put money into a program like that so that they relieve the government of supporting them when they're in their senior years should maybe get some sort of reward, such as a tax allowance, on the premiums that they pay because, at the end of the day, the government is going to come out far better than if they didn't do that.

Is that a good suggestion?

[Clay Gillespie]

That would be our opinion also.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Okay.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thanks for that.

Thank you very much, Mr. Harris.

I only have a couple of minutes unfortunately, so I don't think I'll have any chance for a question. Perhaps I can make a couple of comments and have people respond.

First of all, I appreciate CALU's recommendations. I think they've very healthy in terms of the policy debate.

Second, Professor Woolley, I know you had more in your opening presentation. Your third concern was about the CCTB system in terms of when the government should look at addressing. I've got about a minute here if you want to expand on what your third concern is and how we should address it. The first concern is the clawback, the second is marginal rate. Do you want to expand on the third concern? I was going to get into the income splitting debate, but I don't think I'll have time to do that.

Professor Woolley.

[Dr. Frances Woolley]

The marriage penalty?

[The Chair, Conservative, James Rajotte]

Yes. Your third concern is it's based on net family income. Can you just expand on that?

[Dr. Frances Woolley]

If somebody who's a single parent is in a new relationship, unless they're in a new relationship with somebody who has no income, they're going to lose. If they move in together or get married, they will lose quite substantial amounts of CCTB. The numbers are large for low-income people because, if you're talking about a single parent with an income of $20,000 or $30,000, around that range, the marginal tax-back rates on CCTB are really quite high. Marrying somebody who has an income of $30,000 also would cause quite a big loss in benefits.

[The Chair, Conservative, James Rajotte]

The income calculation is the same for two-parent and one-parent families, so you're saying to change that aspect, right?

[Dr. Frances Woolley]

Yes.

With the WITB, it's not like that. If the CCTB looked liked more like the WITB, the problem wouldn't be so big.

[The Chair, Conservative, James Rajotte]

Okay, I appreciate that.

I want to thank you all for being with us here this afternoon and early evening. Thank you for contributing to our pre-budget consultation debate.

Merci beaucoup.

This meeting is adjourned.