Thank you, Mr. Chairman.
My name is Richard Fahey and I am the Senior Vice-President of Strategic Development at the CFIB. My organization represents 105,000 SMEs across Canada, of which 24,000 are in Quebec. Out of this number, we have approximately 11,000 self-employed members in Canada of whom 3,000 are in Quebec, making this the largest national association of self-employed workers.
Today's presentation will focus on the definition of the term "personal services business", subsection 125(7) of the Income Tax Act, and its impact on the tax deductions that a self-employed worker, particularly in the informatics sector, can claim.
When this provision was created, in the 1990s, we had two prominent cases, two reasons or fundamental objectives in mind. The Metro grocery store chain had made changes that affected delivery drivers, the people who distributed the groceries. These employees had been laid off, then rehired immediately after as independent workers in the transportation sector. There was also another problem, and that was that some professional athletes were incorporating themselves in order to be able to deduct expenses when in fact their only employer was the sports team with which they had a contract. These two cases led to subsection 125(7) of the Income Tax Act.
Let us now examine the issue from the self-employed workers' viewpoint. I will provide you with data taken from surveys commissioned by the CFIB. First of all, in early 2000, we commissioned two surveys to better understand what motivates people to become self-employed. It turned out that their top reason was to be their own boss, to have some flexibility, to create their own job and to improve, to some extent, their financial situation.
The same questions were asked in 2007 as part of a joint Hewlett-Packard and Ipsos Reid survey. We can see that a very large percentage of people want to be their own boss. Indeed, when we asked these self-employed workers whether they consider themselves to be self-employed workers, workers or entrepreneurs, 82% of them responded very clearly that they view themselves as entrepreneurs. Essentially, they view their business as one that would eventually expand over the years. This decision to go into business is an important one.
In Quebec, we have discussed how we should view dependent self-employed workers, namely, those who have a small number of clients. It should be pointed out that "dependent" does not mean "exclusive". However, 86% of these dependent self-employed workers also view themselves as entrepreneurs. In early 2000, Quebec tried to treat dependent self-employed workers as salaried employees, but the self-employed workers refused to agree to this status, as shown by the survey results at the bottom of page 3.
More recently, in 2005, the government proposed to include self-employed workers in part III of the Canada Labour Code. We surveyed our members at that time, and 52% replied that they were not interested.
If you look at a breakdown of the undecided—you know how surveys work—you realize that 62% of entrepreneurs do not support the proposal whereas 38% of entrepreneurs would accept self-employment being included in part III of the Canada Labour Code. Thus, CFIB concluded in 2005 that there were no compelling reasons to change the status of self-employed individuals in Canada.
Let's now briefly discuss—and this will be the final point of my presentation— the evolution of self-employment in Canada. It is a myth to believe that the self-employed are forced into starting their own businesses. They do by choice, independently of economic cycles.
According to the latest labour force survey from Statistics Canada, there were close to 2.8 million self-employed Canadians, which represents about 16% of the current workforce. Despite a dynamic job market since the 90s, the self-employed sector grew by 4% per year on average.
An interesting fact that you will see on the graph at the bottom of page 4 is that the ranks of the self-employed are growing. There was an 8.5% increase in employees, whereas there was an 18% increase in the incorporated self-employed during the same period.
If we look at the numbers of the self-employed, we realize that today, there are more women in the labour force and hence a greater proportion of female self-employed workers, but there are also more older self-employed workers who decide to build a bridge to their retirement.
Currently, according to the 2006 Census data, about two thirds of independent workers are men and one third are women. The greatest growth has been noticed in the case of self-employed individuals in the 45-to-64 age group, as you see in the graph on page 5. This is therefore a bridging mechanism towards their retirement.
With the aging of the Canadian population, these highly-skilled workers decide to continue working from home and remain a part of the labour force which is essential for Canada. Treating self-employed individuals as salaried employees is showing them a lack of respect, and could discourage these people from launching new businesses becoming self-employed or setting up a small business, an SME. This would only aggravate Canada's severe labour shortage.
We need to facilitate self-employment and contribute to the overall competitiveness of the Canadian economy. On that note, you will see that Canada's macroeconomic reality applies quite relevantly to the status of independent workers in the computer industry.
And now, I will hand over to Jean-Pierre Mathieu.
Thank you, Mr. Chairman.