Thank you very much.
Mr. Chairman, honourable members, on behalf of the 47 member companies of the Direct Sellers Association and 1.3 million independent sales contractors, we want to thank you for the opportunity to participate in this consultation.
The direct selling companies and the independent sales contractors market a wide variety of products and services directly to the consumer, usually in the consumer's home rather than in traditional retail establishments. The industry's combined labour force earned an estimated $966 million in income, of which $772 million was paid in bonuses and commissions to independent sales contractors, based on retail sales of $1.96 billion.
The DSA applauds the federal government's reduction of the GST as an important step in getting money back into the pockets of Canadians. We also believe that personal income tax reductions are necessary to promote economic growth, job creation, and international competitiveness. While the DSA recognizes that such cuts must be balanced by the government's spending commitments, we believe that such tax reductions should remain an important priority.
The direct selling industry is a vital part of the small business sector in Canada, investing in entrepreneurial and human capital. The direct selling industry has a tremendous capacity to create jobs, promote entrepreneurial activity among Canadians, and in the process reduce dependence on social assistance programs.
The direct selling industry provides accessible business opportunities with little or no investment, usually less than $500. It is open to all Canadians, without any restrictions with respect to gender, age, education, knowledge, or previous experience. This business opportunity is accessible to all men and women everywhere in Canada, whether they live in urban or rural communities.
Accessibility of these earnings opportunities is highlighted by the fact that close to 24% of all independent sales contractors have no more than a high school education, 49% have some post-secondary education, and 27% percent have either a graduate degree or undergraduate degree.
With 88% of the direct sellers being women operating their own small businesses on flexible hours in their homes, there is a lesser burden on the already strained child care system than there would be if these women were working in more conventional jobs with fixed hours.
The direct selling industry also offers a viable business opportunity that has an unlimited capacity to transform individuals who are dependent on social programs such as employment insurance into successful small business operators. Accordingly, the DSA recommends a partnership between itself and the government to educate and promote the direct selling business opportunity to individuals currently receiving social assistance and employment insurance.
For this partnership to work, existing EI rules must be amended, as there are currently barriers for those who are receiving such benefits. As an example, while there is now a provision that allows for a certain level of additional income to be earned from employment before social benefits are reduced, there is currently only uncertain and limited transitional relief for earnings from self-employment.
In the DSA's view, the current rules discriminate against the direct selling industry and inhibit the transition from dependency to independence, by discriminating amongst those who are serious from the outset in establishing their own direct selling businesses. While the DSA applauds the government for its reduction in the GST rate, there are a number of GST-related issues that we believe need to be addressed, namely the GST treatment of dietary supplements and natural health products—and I direct you to page 9 of our submission—and the expansion of the GST direct sellers mechanism that is set out in detail on page 8.
While the GST direct sellers mechanism is operating in a positive fashion and has been beneficial to consumers, government, and the direct selling industry since the inception of GST, it currently discriminates against the independent sales contractors of the approximately 20% to 25% of the industry that operates through independent sales agents, a group that is excluded. DSA therefore recommends that the government introduce straightforward technical amendments so that the direct sellers mechanism applies throughout the industry without discrimination.
Mr. Chairman, I have a letter that outlines specifically how this could be done and I will give it to you after.
Now I want to turn to the subject of dietary supplements and natural health products, which increasingly Canadians are using on a daily basis as part of their daily diet and health routine. The Excise Tax Act provides complete GST relief to, or makes zero-rated, food or beverages for human consumption, with the exception of snack foods and carbonated beverages. The Canada Revenue Agency, however, changed its administrative interpretation of what constitutes zero-rated foods or beverages and has indicated that most if not all dietary supplements and natural health products are to be treated as taxable.
DSA seriously disputes the CRA's rationale and believes that most consumers consider such products as essential parts of their daily intake of food and beverages.
Mr. Chairman, the Direct Sellers Association and its members appreciate this opportunity to participate in the budget consultation process. As always, we are prepared to provide our support to the government to help achieve its goals.
Thank you.