Thank you, Mr. Chairman.
Mr. Chairman, honourable members, on behalf of the fifty member companies of the Direct Sellers Association and 600,000 independent sales contractors or direct sellers across Canada, I want to thank you for the opportunity to participate in this consultation.
Direct selling companies and the independent sales contractors market a wide variety of products and services directly to the consumer, usually in the consumers' homes rather than in traditional retail establishments. The industry's combined labour force earns an estimated $966 million in income, of which $772 million was paid for in bonuses and commissions to these independent direct sellers, based on retail sales of $1.96 billion.
The DSA applauds the federal government for the further reduction of the GST as an important step in getting money back into the pockets of Canadians. We also applaud the personal and business income tax reductions announced in the finance minister's October economic statement. These reductions are necessary to promote economic growth, job creation, and international competitiveness.
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 and to promote entrepreneurial activity amongst Canadians. We also provide accessible business opportunities with little or no investment, usually less than about $500, that is open to all Canadians, without restriction 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, suburban, or rural communities.
While the DSA applauds the government for its reduction in the GST rate, there is one GST-related issue that we believe needs to be addressed--namely, the discrimination that currently exists with the goods and services direct sellers mechanism.
The direct sellers mechanism is based on pre-collection by the direct selling companies of GST or HST on the suggested retail price. It removes a considerable burden from both the independent sales contractors and the Canadian Revenue Agency. Without the direct selling mechanism, independent sales contractors would have to be GST-registered and collect and remit the tax to CRA. The direct sellers mechanism eliminates that step, resulting in administrative efficiencies and a cashflow advantage to the government, with no underground economy with respect to the goods and services tax in the direct selling industry.
While the GST direct sellers mechanism is operating in a positive fashion, it discriminates against the 20% to 25% of the industry operating as independent sales agents, who are currently excluded from the mechanism.
I want to emphasize to the committee that this amendment would be revenue-neutral. The government would continue to receive “tax at the max” with no risk, and there would be no cost to the federal government.
The DSA has had positive discussions with the Department of Finance and the Minister of Finance's office in order to find a straightforward technical amendment so that the direct sellers mechanism applies throughout the industry without discrimination. We believe all parties are in agreement on how to correct this shortcoming, and of course, Mr. Chairman, we would greatly welcome an endorsement by this committee that the government should proceed with this amendment.
Mr. Chairman, the Direct Sellers Association and its member companies appreciate the opportunity to participate in the pre-budget consultation process. As always, we are prepared to provide our support to the government to help it achieve its goals.
Thank you.