My name is Gabe Hayos, vice-president of taxation for the Canadian Institute of Chartered Accountants. On behalf of Canada's 82,000 chartered accountants, thank you for the opportunity to appear before this committee. I would also like to acknowledge the committee's 2011 report, which included a number of the recommendations made by the CICA.
At the outset, I want to underscore the crucial role that strong management of government finances plays in achieving a sustained economic recovery and enhancing economic growth and applaud the government for balancing the budget over time through expenditure controls.
Easing the personal income tax burden will enhance economic growth by helping to attract and retain talent. However, rather than personal income tax credits that add complexity, we believe broad-based tax reductions represent a more meaningful approach and should be examined.
There is also a need to consider the appropriate mix of personal income and consumption taxes. Compared to other OECD countries, Canada obtains a significantly higher proportion of revenues from personal income tax than from consumption tax. We recommend that the government consider changing the revenue mix to bring it closer to OECD averages.
In order to stay competitive and create employment opportunities, the scientific research and experimental development tax incentive program should be improved. Although many of the modifications to the program are focused on encouraging small business, large business also contributes to SR and ED. The program should be focused on encouraging those companies, whether small or large, that increase their investment in SR and ED.
An amendment to reduce the general tax credit rate and exclude capital expenditures should be repealed or deferred, and the investment tax credit should be made partially refundable for all business in order to encourage foreign investment. An angel tax credit for innovative start-up companies would be an important addition to this program.
Simplifying Canada's complex tax system will increase productivity and improve competitiveness. We recommend a two-staged approach.
First, the government should establish an independent office that would provide advice on reducing both legislative and administrative complexity of our current tax system. The U.K. Office of Tax Simplification could serve as a model for a similar office in Canada. This independent office would investigate and provide recommendations on matters such as general federal and provincial tax harmonization and a formal loss transfer system for taxation of corporate groups, and continue to adopt policies recommended by the advisory panel on Canada’s system of international taxation.
We also believe that an expert panel should be established to examine major structural changes to simplify and improve the long-term efficiency and effectiveness of the tax system, looking at a wide range of areas such as the language, the costs and benefits of various provisions, and the use of anti-avoidance rules, with a view to permanently simplifying the system.
We recommend that standard business reporting, and specifically XBRL, be adopted for use by business for all government filings to reduce compliance costs and enhance the government's data collection.
We recommend that the capital cost allowance rates on all classes of equipment be continuously adjusted to correspond to the true economic life of the asset in order to encourage investment in productivity-enhancing equipment.
In promoting job creation, we support the government's focus on enhancing trade by reaching a trade agreement between Canada and the European Union and its entry into the trans-Pacific partnership negotiations. Both hold opportunities for expanding trade in the professional service sector.
Maintaining low corporate tax rates in Canada plays an important role in attracting new investment and creating jobs. We applaud the government for having fulfilled this commitment to lowering corporate tax rates to 15%.
Ensuring the adequacy of retirement savings is fundamental to addressing the challenges associated with an aging population. Individuals must have the skills and knowledge to save for their retirement. We are an active participant in improving financial literacy, offering home- and workplace-based educational tools and community workshops by volunteer CAs and conducting awareness campaigns. We urge the government to continue its commitment to financial literacy in the 2013 budget.
We also believe the government should provide further incentives to save for retirement by reducing or eliminating the income tax on personal savings. Increasing limits on TFSA contributions and reviewing the limits for RRSP contributions would further this objective.
We welcome the government's efforts to help internationally trained professionals, as they are vital to Canada's future. We are pleased to have the federal government support initiatives to create online assessment tools that validate foreign education and workplace experience and customized bridging programs to help internationally trained accountants become CAs in Canada. We recommend that such funding be continued.
Mr. Chairman, thanks for the opportunity to appear before the committee. I would be pleased to respond to any questions.