Finance Committee on Nov. 2nd, 2010

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is the 43rd meeting of the Standing Committee on Finance.

Welcome to all of our guests here this morning. We have two panels of seven organizations each this morning. We are continuing our pre-budget consultations for 2010-11. I want to welcome you all here.

We have with us here in the first panel the Canadian Institute of Chartered Accountants, the Canadian Home Builders' Association, Cardus, the Canadian Chamber of Commerce, the Alberta Chambers of Commerce, the Canadian Association for Community Living, and the Canadian Diabetes Association. You will each have five minutes for an opening statement, and we'll proceed in that order.

I just want to point out that the austerity measures have begun early, because we don't have that many lights in the room. That is on orders from Minister Flaherty to start saving some money. We're trying to rectify that matter as quickly as possible.

[A voice]

It's Treasury Board.

[The Chair, Conservative, James Rajotte]

It's Treasury Board, yes.

We'll begin with the Canadian Institute of Chartered Accountants, please.

[Bruce Flexman, Chair, Tax Policy Committee, Canadian Institute of Chartered Accountants]

Good morning. I am Bruce Flexman, chair of the CICA Tax Policy Committee and president of the International Financial Centre of British Columbia, which looks to attract international business to Canada and British Columbia. On behalf Canada's 77,000 chartered accountants, I thank you, Chairman, for the opportunity to appear before the committee.

In my remarks today I will highlight our views on how Canada's competitiveness can be enhanced through measures that follow two tracks: making the country's tax system more competitive, simpler, more effective, and more efficient, and at the same time ensuring prudent fiscal management of the country's finances.

We applaud the government's commitment to reducing the general corporate income tax rate to 15% by 2012. Finance Canada's own analysis shows that for every 10% reduction in taxes on business investment, expenditure on machinery and equipment increases by 10%. Research also shows that most corporate taxes are borne by workers in the form of lower wages and that lower investment in machinery, equipment, and software hurts job creation and wages. Indeed, the U.K., in its most recent budget, and at a time of financial crisis, reduced its corporate income taxes.

In deciding whether to invest, businesses are driven by the need for certainty. In the current economic climate, it is crucial that the government remain visibly committed to reducing corporate tax rates. This is essential for attracting investment, enhancing Canada's competitiveness, and creating prosperity.

The complexity of our tax regime plays an equally important role in attracting investment. Every year, the World Economic Forum measures the global competitiveness of 133 countries around the world. The forum's most recent report shows that concerns over Canada's tax rates and tax regulations are among the top five most problematic factors cited by business executives in doing business in Canada. The report deems both the extent and effect of taxation and the total tax rate to be competitive disadvantages for Canada. Canada's tax system must be simplified to lessen this burden of compliance and to reduce complexity.

Our submission makes a number of points in this regard. Allow me to highlight two that were endorsed by the Advisory Panel on Canada's System of International Taxation.

Consolidated tax returns or loss transfers for groups of related companies are not permitted in Canada, despite the fact that more than two-thirds of OECD member countries now offer group taxation. The ability to transfer losses to other corporations within a group would reduce administrative and compliance burdens, improve cashflow within a group, and increase the harmonization of federal and provincial tax systems.

We acknowledge that in its December 2009 report, this committee recommended that the government review the implications of allowing consolidated tax reporting, and accordingly, the 2010 budget included a commitment by the federal government to explore the possibility of implementing a formal system of loss transfer or consolidated reporting for corporate groups. We urge the federal government to work with the provinces to facilitate the use of tax losses and credits within a group of companies.

There is also a significant cost associated with complying with Regulation 105, which imposes a 15% withholding tax on fees paid to non-residents for services rendered in Canada. Canadian businesses are frustrated by having to bear administrative responsibility for another person's tax liability. We urge the government to adopt a certification system, as the U.S. does, to shift the compliance burden at the withholding stage from the payer to the non-resident.

I would also add that we continue to believe that additional progress in harmonizing sales taxes is needed.

On the issue of retirement income, the CICA has raised concerns regarding the adequacy of Canada's retirement income system and urges the government to put in place further incentives for retirement savings.

We support the recent announcement by the government that an independent expert panel will examine federal programs that contribute to innovation, with a view to recommending how to maximize them, such as the scientific research and experimental development program. Under the SR and ED program, investment tax credits are fully refundable only for smaller companies.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Bruce Flexman]

As part of this review, we urge the government to make credits refundable for all claimants, regardless of size, or consider allowing an offset through which they are creditable against an employer's portion of EI premiums.

If we are to stay competitive and attract the best and the brightest, we need to stay attuned to the personal income tax burden placed on Canadians. Roughly half of Canada's tax revenue comes from personal taxation. This is high by international standards. Our top marginal rates are high and apply at lower-income thresholds than is the case with many of our competitors.

Let me say at the outset that we do not believe the way to address this is through the introduction of additional targeted tax benefits. While such targeted measures initially seem attractive, in the end they simply introduce more complexity and inefficiencies in the tax system.

Acknowledging the need for fiscal responsibility, we believe that broadly based reductions to personal income tax are preferable to targeted tax benefits. Over time, and as finances permit, we urge the government to consider an increase in the top two thresholds and the rate of tax applied to them.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm sorry, but we're well over five minutes here. Thank you for your presentation.

We'll now hear from the Canadian Home Builders' Association.

[Victor Fiume, President, Canadian Home Builders' Association]

Thank you, Mr. Chairman, for inviting us to be here today.

I am Victor Fiume, president of the Canadian Home Builders' Association, and I have with me here today Mr. Vince Laberge, first vice-president. Both Vince and I are new home builders and renovators. My company operates in Oshawa, Ontario, while Vince is based in Edmonton, Alberta.

Let me begin my remarks with a short summary of CHBA's views on market conditions going forward. The last year has certainly shown that our industry contributes significantly to Canada's economic well-being. Looking ahead, we are entering a very uncertain period for our industry. This certainly is reflected in the wide range of new home starts forecast by Canada Mortgage and Housing Corporation of between 146,900 and 210,500 in 2011, with a point forecast of 176,900 starts. At a recent meeting of CHBA's economic research committee, builders estimated there would be 165,000 starts next year, which serves to underline the concerns we have going forward.

While we expected a slowing of the housing activity and view CMHC's point forecast for 2011 as a healthy housing market, we are very concerned about the uncertainty surrounding this forecast. As the Governor of the Bank of Canada has observed, there is the potential for a more pronounced correction.

We cannot be complacent about our industry's performance going forward and its ability to continue to contribute to the economic recovery. A marked downturn in housing activity will have serious ramifications for the economy. It should be noted that our industry's working capital and reserves were seriously depleted last year, and we remain in a weakened state.

On the employment front, while employment levels have increased dramatically and the number of jobs now exceeds pre-recession levels, the jobs recovery has been uneven. Specifically, we are not seeing a recovery in employment for younger workers in the 15-year to 24-year cohort. These are tomorrow's first-time homebuyers, and they continue to face very challenging job prospects, which will impact our industry.

With respect to house prices, a major element in the price increases is the costs imposed by governments through taxes, fees, levies, and other development-related charges. Over time, reduced housing affordability will inevitably lead to lower housing activity and reduced job creation.

Now let me turn to the recommendations contained in the CHBA's pre-budget submission. The CHBA has called upon the federal government to introduce a single threshold, full rebate treatment of GST on new home purchases. In 1991 the full rebate threshold was set at $350,000, with an upper cut-off point of $450,000. At that time the government made a commitment to review these limits over time so they would reflect changes in economic conditions and housing markets. To date this has not been done. As a result, in most urban markets, few new homebuyers are eligible for a full or even partial GST rebate on their new home purchase. Lack of action by the government on this issue continues to undermine housing affordability.

In addition to the need for action on how the GST is applied to new homes, the CHBA has also called upon the federal government to introduce a permanent 2.5% home renovation GST rebate. This measure would return the effective rate of GST on home renovation expenditures to the pre-GST level, restoring fairness to how home renovations are taxed by the federal government.

We saw that Canadians reacted with enthusiasm to the home renovations tax credit. As a result, they demanded proper paperwork from their renovation contractors, seriously hampering the activities of cash operators who rely on undocumented transactions. Properly configured, a permanent 2.5% home renovation GST rebate would build on this experience by supporting the legitimate taxpaying contractor and increasing the government's tax revenues.

The federal government must take firmer and more effective action to combat the underground cash economy. The current contract payment reporting system simply doesn't address this problem--something even the CRA has noted. The CHBA has called on the government to develop more effective measures that directly target cash operators. For example, all businesses, regardless of their annual sales, should be required to register for a business number. The continued growth of the underground cash economy is a threat to legitimate businesses, consumers, and the integrity of our tax system.

I'll talk, in closing, on the next generation of the federal ecoENERGY program. This program was a great success. Over 600,000 homeowners received home energy evaluations, and the majority of them have followed up by carrying out energy-efficient improvements. That amounts to one in twenty households in Canada. We believe it is important to build on this momentum to both improve the performance of Canada's existing housing stock and to address the government's broader environmental goals. The CHBA hopes the next federal budget will contain the next generation of this important initiative.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from Cardus, please.

[Michael Van Pelt, President, Cardus]

Thank you, ladies and gentlemen.

My name is Michael Van Pelt, and I'm president of Cardus. I'm with my colleague, Ray Pennings, who is a Cardus senior fellow and director of our research. I appreciate the opportunity to appear in front of you today.

Cardus is a Canadian think tank, a research institution based out of Hamilton, Ontario. Our mission is to strengthen Canada's social architecture.

Regarding the purpose of our meeting here today, it has been our observation for some time that Canada and Canadians increasingly default to fewer and fewer institutions to solve the problems we meet day to day. This has come largely at the expense of many mediating institutions that make Canada a vibrant and flourishing society.

Today my colleague Ray Pennings will outline and analyze this challenge that we face in Canada and make the kinds of tax recommendations we would like this committee to consider.

[Ray Pennings, Director of Research, Cardus]

Thank you, Michael.

At the heart of our research is a focus on the fact that a civic core of Canadians--approximately 29% of them--provide over 80% of the charitable giving, volunteering, and participating in the various organizations that make up society. This is based on StatsCan data. We have been actively working on this data, and in January or February we will be coming out with a follow-up report that looks at incidences of giving.

There we will see that we've moved from about $1.4 billion in 2000 to over $3 billion today, which is coming from just 15% of donors. Perhaps to put the numbers a little more starkly, in 2007 the average donation those 15% made was $961, compared to $227 for donors who are not part of this core group. It's very clear that a small group of Canadians are providing the bulk of the support that our charitable sector needs to continue.

It's estimated that due to various factors--I've outlined some of them in the brief, and there is some other research--that group is declining by about 1% to 2% per year. Project that forward over a decade and it's quite clear that if we lose 10% to 20% of the capacity of our civic core, it will pose significant challenges to the way of life we have been taking for granted.

The charitable sector needs to be sustained. In 2008 charitable receipts declined by 5.3%. This comes at a time when demographics, immigration, and urbanization combined are putting upward pressure on the demands of the charitable sector.

Our suggestion is that the most immediate way to address this problem in the short term is through direct incentives to those who are already giving. Research has shown that the small proportion of donors whose giving is planned, recurring, and in significant amounts are most likely to respond to incentives.

Our proposal before you this morning is a straightforward one, that we add a category to the charitable tax credit to provide for donations over $450 receiving a 42% tax credit. We believe this is the most effective way to provide relief to charities, as the benefits will go to those who are already giving, those who research shows are most likely to give some more. The proposal is easy to understand and easy to communicate, given the current structure for charitable giving.

The estimated costs are $300 million to $400 million. Last year, you may recall, we proposed replacing the 29% with 42%. We received a lot of support from various quarters. The objection was the costs. By proposing the $450 threshold, we more than halve the costs, and I would remind you that the costs are directly focused on those who give.

That's the essence of it. We look forward to your questions.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Chamber of Commerce, please.

[Perrin Beatty, President and Chief Executive Officer, Canadian Chamber of Commerce]

Thank you very much, Mr. Chairman.

I'm Perrin Beatty. I'm president and CEO of the Canadian Chamber of Commerce.

It's a pleasure for me to present the views of the Canadian Chamber of Commerce and its 200,000 members who are active in all sectors of the economy and are present in all regions of Canada and employ millions of Canadians.

As you know, the Canadian chamber network is the most broadly based business association in Canada, representing close to 200,000 businesses of all sizes and sectors of the economy and in all regions of the country. Our members create the jobs, pay the taxes, power the growth, and contribute the leadership that provides the quality of life that we enjoy in our country.

We led the call for our political leaders to work together on a clear strategy to stimulate the economy, to ensure access to affordable credit, and to lay the foundations for long-term economic growth and competitiveness, and we saw results. Canada's economy weathered the financial and economic crisis better than most industrialized countries and staged an impressive turnaround. In only four quarters, the economy recovered all of the output and jobs lost during the recession. No other G-7 country can make that claim.

However, after the dramatic bounce-back, second-quarter GDP results provided telltale signs of a slowing recovery, and recent data give further confirmation. The near-term global economic outlook remains uncertain, and our economy faces strong headwinds from weak U.S. demand and overstretched Canadian households.

Continued vigilance and leadership are required to secure the recovery in jobs. In our submission we urged the federal government to follow through on delivering existing stimulus plans. The steady fiscal course is essential to reinforce consumer and investor confidence. We also stressed the importance of returning to budget balance over the medium term. Left unchecked, high and growing government debt will drive up interest rates, drain national savings, and threaten our future economic prosperity.

The October economic and fiscal update reiterated the government's pledge to balance its books by fiscal 2015-16. This outcome cannot be taken for granted. The government will have to follow through with its commitments to allow temporary stimulus measures to expire come March 31, 2011, and constrain growth and program spending to an average of about 2% per year, starting in fiscal 2011-12.

The opportunity to bring indebtedness down is rapidly ending as an aging population and slower growth in the labour force will exert significant pressures on the public purse. To meet the challenges we must address the longstanding structural impediments to growth. Now more than ever, leadership and courage are needed to dismantle the internal barriers to trade and mobility, foreign investment restrictions, overlapping regulations, and work disincentives in the income support system.

Additionally, a better designed and more efficient tax system would lift the economy's long-term growth potential. High marginal personal income tax rates discourage people from working, saving, and investing, and entrepreneurs from taking on risk. With growth in Canada's labour force slowing, our personal income tax system must be competitive so we can maintain, attract, and develop one of the most skilled and productive workforces in the world. That's why it's crucial that we maintain a strong focus on expenditure restraint to recapture our fiscal flexibility, to deliver meaningful personal income tax cuts.

Mr. Chairman, increasing business income taxes or reneging on promised corporate tax reductions to raise additional revenue is economically destructive. Businesses have a critical role to play in sustaining economic growth by initiating new investments and hiring to expand productive capacity. Loose talk about cancelling the reductions may cause companies to pull back. Businesses require certainty and predictability from their government to operate and to invest with confidence. Parliamentarians must keep their word.

Mr. Chairman, it has been estimated that giving up the planned three-point reduction in federal general corporate income tax rate would result in the long-term loss of $47 billion in capital investment and 233,000 jobs. We also need to ensure that Canada's tax system is fair, simple, and efficient.

Mr. Chairman, it costs businesses tens of billions of dollars each year to comply with their tax obligations, the lion's share of the burden carried by small and medium-sized enterprises. These costs are the result of excessive paperwork due to the complexity of the tax system, frequent changes in tax legislation, different rules across jurisdictions, and dealing with multiple audits by different jurisdictions.

Mr. Chairman, I recognize the time is short. I'll perhaps stop here, and I'll be pleased to respond to questions from any of the members of the committee.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Alberta Chambers of Commerce.

[Ken Kobly, President and Chief Executive Officer, Alberta Chambers of Commerce]

Mr. Chair, my name is Ken Kobly, and I'm the president and CEO of the Alberta Chambers of Commerce. With me today is Don Oszli, our past chair.

Thank you to you, Mr. Chair, and to members of the committee for this opportunity to present to you our policy advocating the reintroduction of the accelerated capital cost allowance for oil sands and extending it to include resource processing investment.

By way of introduction, the Alberta Chambers of Commerce is a voluntary federation of 124 community chambers in the province of Alberta who in turn represent in excess of 22,000 businesses. As well, all chambers in Alberta are proud members of the Canadian Chamber of Commerce. The Alberta Chambers of Commerce is the largest business organization in Alberta. We count among our members small, medium, and large businesses. Our policy process is at the grassroots, being developed, submitted, and approved by our community chambers; therefore, it reflects the opinions of our member businesses. Every business in Alberta, and I would dare say Canada, is affected by the health of the oil patch. Whether it's labour sourced from Newfoundland or manufactured materials coming from Ontario, the oil sector has a dramatic positive impact on the economy of Canada as a whole.

Specifically, today we wish to encourage you to reintroduce the accelerated capital cost allowance for oil sands investment and further extend it to merchant upgraders in the petrochemical industry. The ACCA was first introduced in 1996 to encourage investments in the oil sands. It proved to be a great stimulus to the industry. However, it was removed in Budget 2007. This, coupled with the major economic downturn we've seen since 2008, has resulted in almost all major industry construction shelved. Indeed, there was over $150 billion in planned spending on the books before oil prices collapsed. There is now, however, some cautious optimism in the sector, and government has within its power to add an additional piece of encouragement to the optimism by reinstating the ACCA.

By the numbers, the construction of one upgrader has the following economic impacts.

The capital cost of an upgrader is approximately $5 billion. The construction period, which comes after an 18-month engineering and planning phase, is approximately four years. So you can see the outlay of capital dollars takes at least five and a half years until the first dollar of production revenue is seen. During the construction phase, 3,500 jobs are created for the full four-year construction period. The average wage during this period is $75,000 per year. This would generate in excess of $263 million in employment income per year, as well as $42 million in personal federal tax per year on that income. There is also a benefit to all provinces in addition to the federal taxes collected, as approximately 44% of the jobs created by oil sands investment are generated outside of Alberta. It would also produce an estimated $195 million in corporate tax from the construction companies working on the project. These numbers indicate that for the first five and a half years after approval of an upgraded project, the big winner would be the federal treasury in terms of personal and corporate taxes collected. We have not included any multiplier in these numbers for the spin-off effect of the additional spending in the economy.

Capital cost allowance is a deductible expense under the tax act, which is available to every business in Canada to help them recoup a portion of the cost of acquiring capital assets. Capital cost allowance allows a business to write off a portion of their investment in capital assets against income every year, thereby reducing their tax bill by a percentage of the capital cost.

The ACCA is much the same. The difference between the two is the length of time to recover the portion of the capital cost. As the name indicates, under accelerated capital cost allowance, the recovery rate is somewhat faster.

However, at the end of the day, the cost to the federal treasury is the same, as noted in a Finance department study, written in 2001, by Ketchum, Lavigne, and Plumber. To reinforce an earlier point, it is at least five and half years until any revenue is generated by the project and the first penny of capital cost allowance is claimed. Further, the ACCA may only be claimed to the extent that the particular project is profitable. This is not a subsidy. As the quoted authors pointed out very correctly in their paper, this is a timing difference.

[The Chair, Conservative, James Rajotte]

One minute.

[Ken Kobly]

In addition, we've tabled letters of support for our policy from the Canadian Chamber of Commerce, and Building Trades of Alberta, the organization that represents the unions that construct these projects. We also know you've heard from the Edmonton Chamber of Commerce. As well, we understand you'll be hearing from the Building and Construction Trades Department on this same issue.

In summation, we encourage you to reinstate the ACCA, which was removed in Budget 2007.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now hear from the Canadian Association for Community Living.

[Anna MacQuarrie, Director, Policy and Programs, Canadian Association for Community Living]

Good morning.

My name is Anna MacQuarrie. I'm with the Canadian Association for Community Living, the national federation that advocates for people with intellectual disabilities and their families.

It's exciting to be here today. I get to start by thanking all of you for Canada's ratification of the UN Convention on the Rights of Persons with Disabilities on March 11 of this year. It was a proud moment, and certainly it was a turning moment for the rights of people with disabilities in Canada. If meaningfully implemented, the CRPD has the potential to make a real difference in the lives of Canadians with disabilities.

Our focus in our budget submissions for this year is to tackle the staggering and persistent rates of poverty facing Canadians with disabilities. When we look across the country today, we know that working-age adults with intellectual disabilities are almost three times more likely to live in poverty than working-age Canadians without disabilities. About 45.5% of working-age people with intellectual disabilities indicate they receive provincial or territorial social assistance. The employment rate is abysmal. We know that the employment rate for working-age adults is only one-third of the employment rate for people without disabilities and that the average income for people who are working is less than half of that of those without a disability.

The truth is that in Canada we have created poverty as the most likely outcome of life with a disability.

We know there has been building momentum to address these issues. In late 2009, we saw both the Senate standing committee, in their report “In from the Margins”, as well as the report from the finance committee, suggest that we have a refundable disability tax credit. The finance committee went on to recognize the need to address the registered disability savings plan in regard to concerns around the legal capacity of people with intellectual disabilities. We thank you for those recommendations, and we urge the committee and the Government of Canada to implement them and take some action.

We are suggesting that a refundable disability tax credit for low-income Canadians be a first step in a broader income reform strategy. To guide the broader income reform strategy, we suggest establishing an advisory committee that reports both to the Minister of Finance and the Minister of Human Resources and Skills Development to explore options for addressing poverty, income reform, and the federal role in income support for people with disabilities.

Additionally, we are encouraging the Government of Canada to take concrete steps to meaningfully implement the Convention on the Rights of Persons with Disabilities. Ratification was step one; we need to move on to probably the more difficult job of making it real and meaningful in our communities.

Lastly, in order to do any of the above, we need a robust and comprehensive disability data collection strategy. The current survey, which has been used in the past--the participation and activity limitation survey, more often known as PALS--has been cancelled.

We are working with the government. We know that a new data strategy is being developed. Any such strategy is going to need significant resourcing and time invested in ensuring we are not losing data. We do not want to find that four or five years from now we do not know what's happening with people with disabilities in this country because we don't have the data to understand it.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Canadian Diabetes Association.

[Glen Doucet, Executive Director, Office of Public Policy and Government Relations, Canadian Diabetes Association]

Good morning.

I appreciate the opportunity to participate in the committee's pre-budget consultations. I wish I were here to report better news about the fight against diabetes. However, that is not the case.

Today, three million Canadians are living with diabetes. Diabetes rates in Canada have doubled over the past decade and are forecast to nearly double again by 2020.

Over the next decade we expect to see a 67% increase in diabetes rates in Alberta and a 62% increase in British Columbia. If these statistics are not troublesome enough, a recent report by the Centers for Disease Control estimates that one in three people in the United States will be living with diabetes by 2050.

While these numbers are staggering, the economic impact of diabetes on our health care system and our economy is equally sobering. The cost of diabetes in Canada currently stands at $12.2 billion annually, and it is estimated that this cost will grow to $17 billion by the end of the decade. By 2020, the economic impact of diabetes in Canada will have increased by over 130% from year 2000 levels.

If, as projected by the CDC in the United States, Canada were to reach the one-in-three level by 2050, the costs associated with diabetes in Canada would be $54 billion annually. So it's clear: we have a diabetes epidemic in Canada and it's getting worse. It is also clear that this epidemic poses not only a significant threat to the health of millions of Canadians, but it also threatens the sustainability of our health care system and our future economic prosperity.

Our recommendations today are aimed at improving not just the health of Canadians but the health of our economy. Eighty percent of diabetes-related costs are for treating the complications associated with diabetes and not the treatment and management of diabetes itself. These serious, potentially life-threatening complications include kidney failure, heart attack, stroke, and limb amputation. Therefore, if we are to address the economic impact and the burden of diabetes, we need to focus on keeping those living with diabetes healthy to avoid or at least delay these serious complications.

Our brief to the committee contains three recommendations. However, today I will focus my remarks on our first recommendation, which is to extend the federal disability tax credit to those living with chronic diseases such as diabetes.

The greatest challenge for people living with diabetes is the affordability of the medicines and devices they need to effectively self-manage their disease. People with chronic disease face three times higher out-of-pocket health expenses than the average Canadian. The average out-of-pocket cost for someone living with type 2 diabetes in Canada is $2,400 a year. In New Brunswick it's $3,500 a year.

People living with diabetes are among those who can least afford these costs. In fact, 57% of people living with diabetes cannot afford to comply with their prescribed diabetes management therapy. As a result, many of these people end up developing serious complications that lead to poor health and premature death.

Over 6,000 Canadians die each month due to their diabetes. To put that in perspective, Mr. Chair, that is equivalent to the population of the town of Devon, Alberta, dying each month due to diabetes.

The disability tax credit would offset some of these out-of-pocket costs and would allow an increased number of Canadians living with diabetes the means to prevent these secondary complications. When originally introduced, the disability tax credit was limited to people who met very specific eligibility criteria based on severe physical disability. However, since its introduction, the criteria for this tax credit has been expanded to recognize the changing health status and needs of Canadians, including those with mental illness and those requiring life-sustaining therapy. However, only a very small number of Canadians living with diabetes are eligible for this credit.

So my question to the committee is this: why must people living with diabetes have to wait until they lose a limb or go on dialysis to be eligible for this tax credit? Would it not make more sense to provide this tax credit beforehand so that they can afford to effectively self-manage their disease and thereby prevent the need for amputation or other acute interventions? Such an enhancement to this tax credit would not only assist in preventing needless human suffering but would also save much needed health care dollars.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll start members' questions.

We'll go to Ms. Coady for seven minutes, please.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much. I'll be sharing my time with Mr. Brison.

I appreciate you all coming here today and giving your perspective on the pre-budget submissions. I know how much work goes into preparing them. By way of disclosure, I sat for 11 years on the board of the Canadian Chamber of Commerce and was the chair of the Canadian Chamber of Commerce in 2003-04. So I've been in your position, where you had to come and try to convince government to do certain things.

My first question goes to Mr. Beatty of the Canadian Chamber of Commerce. In your discourse this morning you talk about returning to balanced budgets. I remember during the 11 years that I sat on the Canadian Chamber of Commerce how diligent we were in working to ensure that government did just that.

We have a very serious deficit right now. I guess this is the biggest spending and biggest borrowing government in the history of Canada, and we have concerns about its fiscal strength and the economic strength of our country.

I note in your discourse that you talk about continuing along the lines of decreasing corporate taxes. I can remember when I was on the board in 2000 that the effective tax rate was about 28%. It is now down to 18%, and you're asking this government to borrow money--borrow money--to drive up our deficit and our debt to ensure that tax rates continue. I find it a little ironic that you would ask this government to continue in the way of debt and deficit, borrowing, to fund these lower taxes.

I note on your website today that you have this: “Do you believe that the recent Fiscal Update is pointing Canada in the right direction?” Over half have voted no, they don't think it's going in the right direction.

So you're asking this government to continue on this course of lowering corporate taxes. Could you comment on why at this particular time your board and your 175,000 businesses are following in that direction when in fact you've been very strong in advocating for, and I'll quote your own words, “vigilance and leadership” in making sure we have a strong economy?

[Perrin Beatty]

Thank you very much, Ms. Coady, and let me go one step beyond you. Not only were you a former chair of the Canadian Chamber, but you were also a revered former chair of the Canadian Chamber and somebody who still has many friends within the chamber movement across the country. So thank you very much for the question.

Canada has made progress, you are absolutely right about that, starting with the Liberal government, which started to bring down corporate tax rates because it understood a fundamental principle, and that is, to attract investment to Canada, to create jobs, to get businesses in a position where they're able to be competitive, we have to have a competitive tax system.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

We did it at a time when there was a surplus, right?