Finance Committee on Nov. 20th, 2013

[Cecelia McGuire]

Yes, I do.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Okay.

How much time do I have left?

[The Chair, Conservative, James Rajotte]

You've got 30 seconds.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That's all I want to have confirmed. I appreciate your telling this committee that.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Rankin, it’s your round.

[Murray Rankin, NDP, Victoria, BC]

Thank you, Chair.

Thank you, and welcome to all of the witnesses for attending today.

I direct this question to Mr. Thomas and to Ms. Moreau. It has to do with tax havens and the perspective that your organization has on the use of tax havens.

I must start by commending the Canadians for Tax Fairness, and Mr. Howlett, for the enormous work you've done on raising consciousness on this issue. However, the government has made such significant cuts to the Canada Revenue Agency that it is difficult to see how they can address this issue seriously. Rather than making the investments to do the job that's required, they've cut over $250 million from the CRA and over 2,500 FTEs. A SWAT team of 10 to 12 people who pursue tax cheats was announced with great fanfare. But if the enormity of the problem you've identified were understood, I think people would be much more involved and the government would take it much more seriously.

Anyway, the organizations—the Canadian Federation of Independent Business and the Canadian Taxpayers Federation, your members, for example—Starbucks is able to use these fancy schemes to pay very little tax, we've learned, yet the person in the corner store with the coffee shop isn't able to take advantage of those same things.

Have you spoken out? Do you intend to speak out?

I ask each of you for your response to that.

[Monique Moreau]

I'll start.

We would have to go to our members on this issue specifically. We operate by survey research, so for this particular issue, we would need to get their views on it. We generally find that on tax issues, our members want competitiveness and fairness, and to be able to administer their taxes as simply and efficiently as possible. I can speak to those broad issues. On this particular issue, we'll have to go our membership and get their vote on it.

[Murray Rankin, NDP, Victoria, BC]

Is that something you intend to do?

[Monique Moreau]

We are in the midst of planning our lobbying and legislative affairs for 2014. So I'm not sure where it is on the list, but...

[Murray Rankin, NDP, Victoria, BC]

Okay.

Mr. Thomas, have you taken a position on this?

[Gregory Thomas]

Yes. We obviously denounce all illegal use of tax havens and we strongly encourage every Canadian corporation and person to pay every penny of tax that's owing under the law in Canada. To the extent that there are people who think it's cute to take advantage of being able to move money out of the country or use techniques that are outside the law, we denounce that.

[Murray Rankin, NDP, Victoria, BC]

But some of these techniques are not outside the law. These are perfectly legal but morally reprehensible activities. That's what we're talking about, and I wondered if you have taken a position on those.

[Gregory Thomas]

Well, I think you're talking about both, aren't you? You acknowledge that there is a tremendous amount of illegal exportation of revenue—

[Murray Rankin, NDP, Victoria, BC]

Absolutely.

[Gregory Thomas]

—and concealment of revenue that is legally taxable in Canada. That's a huge problem, and that's something that Canadians for Tax Fairness have talked about. They—

[Murray Rankin, NDP, Victoria, BC]

I only have a limited amount of time.

I would like to go, if I could, to Mr. Howlett. You spoke about a couple of examples in your new tax loophole campaign. You talked about stock options. You talked about the business entertainment deduction. I'd like to invite you to speak about other examples that your campaign is addressing.

[Dennis Howlett]

We're also concerned about the high maximum contribution levels that are allowed for RRSP and the tax-free savings account. The RRSP level is way beyond the max. At $23,000 a year, it's way beyond what most ordinary people could contribute. So effectively, that kind of a high max acts as a subsidy to the retirement incomes of the richest people.

Similarly, on the tax-free savings account, which is broadly utilized—and we're not suggesting eliminating the program, but if you look at the estimates from the finance department of tax expenditures, the cost to revenue is almost doubling every year. Even though currently it sits at about $305 million in 2012, it could go up to $6 billion a year. We raise that because we've heard that's one of the things the government is thinking of increasing, the benefit, which would be disastrous in terms of the cost to revenue. So we're not saying get rid of it, but we are saying there should be a cap set on it. That would not hurt the vast majority of Canadians. They would not be negatively affected by that at all. It would just make the system fairer.

There are also a number of boutique tax cuts and fossil fuel subsidies that we think should be examined because many of them are ineffective, and they are not fair, and they don't serve the public good.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Rankin.

I'm going to take the next round as the chair, and I don't know if I'll get to all of my questions but I'll do my best.

First I want to start with the Retail Council of Canada. Mr. Littler, you talked about Canada's custom tariff, and I think generally the measures that were introduced in the budget have proceeded fairly well, but as you mentioned it's a $4 billion item there. So if you look at phasing these out over a longer period of time, does your organization have a ballpark in terms of the numbers?

If you look at the input tariffs from the manufacturing sector, I think that was a five-year phase-out. Do you have a timeline in mind for this?

[Karl Littler]

Over the long haul for phasing it out? No, I think what we've chosen to do instead is recommend areas that are priorities, whether areas that have counterintuitive public policy....

A case in point is the government did a good thing in promotion of its healthier lifestyles on sporting goods, but it did not include bicycles. In the intervening period the CITT has ruled that there is no domestic bicycling industry, so logically it would seem that an environmentally responsible form of transportation and healthy activity might be a reasonable priority where there's no domestic manufacturing industry.

[The Chair, Conservative, James Rajotte]

So maybe not a timeline, but have you done a full prioritization in terms of which ones should be looked at first?

[Karl Littler]

We have. We are particularly interested in children's clothing and footwear. We are interested in completing the work on bicycles. We have a list, and we would be happy to make that available to all members of the committee.

[The Chair, Conservative, James Rajotte]

I would appreciate that very much. We will make that available to all members.

I'd like to then move to CFIB. We had a discussion about the two rates, the 15% federal tax rate and then the 11% for small businesses. One of the other things we did by moving the rate from 12% to 11% was we also moved it from $300,000 to $500,000 in terms of business income.

Ms. Moreau, do you have a sense, a ballpark guess, as to what percent of your members would pay the higher rate and what percent would pay the lower rate?

[Monique Moreau]

I believe we have that figure, but I don't have that information with me at this time.

I can attempt to get that information for the committee.

[The Chair, Conservative, James Rajotte]

If you could provide that, I'd appreciate it very much.

I want to turn to slide 3 of your presentation.

I have to say I'm a little surprised as an Alberta MP, especially in my area, that the shortage of qualified labour is at 48%. I thought it would have been much higher. That's certainly the number one issue that I hear.

Do you find that labour is perhaps a greater concern on the prairies than it is elsewhere in Canada?

[Monique Moreau]

It certainly will be. We can get this breakdown for you by region, where you'll see it does move up.

However, members across the board are telling us that they're having difficulty finding labour. While the issue may be lower on this list, it's not substantially lower. It's certainly not down there with availability of financing, for example.

The total tax burden, as long as I've been with CFIB, has been the number one issue. But the shortage of qualified labour remains an important concern for many of our members.