Finance Committee on Nov. 5th, 2012

[The Chair, Conservative, James Rajotte]

I call this meeting to order.

This is meeting number 88 of the Standing Committee on Finance. Pursuant to the order of reference of Tuesday, October 30, 2012, we are studying Bill C-45, A second Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.

We have with us officials from the Department of Finance as well as other departments today to discuss division 15 of part 4. We have officials from CRA, Human Resources and Skills Development Canada, and the Department of Finance.

We want to welcome you all to the committee.

Colleagues, just for your information, in part 4 we have divisions 15, 17, 22, 23, and 24.

We have to be out of this meeting at 6:30 p.m. sharp because there are other meetings here tonight. I encourage us to get through all of this today.

We will start with division 15. I will ask members to state their questions as they did last week.

Could we have one of the officials give us a brief synopsis of these changes?

[Ray Cuthbert, Director, CPP/EI Rulings Division, Canada Revenue Agency]

My name is Ray Cuthbert. I am the director of the Canada Pension Plan and employment insurance rulings division in the Canada Revenue Agency.

We are here to talk about part 4, division 15, the hiring credit for small business for 2012. Essentially, it is the same as the hiring credit for 2011, except for the reference to the years involved.

Small businesses that had employer EI premiums for 2011 of $10,000 or less and whose employer EI premiums in 2012 have increased are eligible for a credit. The credit is equal to the difference between the employer EI premiums in 2012 and 2011. It must be greater than two dollars and it cannot exceed $1,000. The credit is calculated automatically by the Canada Revenue Agency upon processing of the employers' 2012 T4 information return.

We would be pleased answer any questions.

[The Chair, Conservative, James Rajotte]

Thank you very much for that briefing.

Mr. Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

Unlike in 2011, employers did not necessarily know that there would be a tax credit in 2012.

The tax credit was introduced in the second omnibus bill, not the first. Is there an impact on the businesses that could benefit from this?

[Mireille Laroche, Director General, Employment Insurance Policy, Department of Human Resources and Skills Development]

First, as Mr. Cuthbert mentioned, the tax credit is automatic. So, even if the business doesn't know about it, it will still benefit from it.

Then, since it's in the second bill, rather than the first, the tax credit will be applied when businesses complete their tax returns next year.

Therefore, the question about the fact that the tax credit appeared in the first or second bill is irrelevant.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

The tax credit has been available to businesses for a year already. Are there any statistics indicating the percentage of retention, after one year, of employees hired by businesses that requested the tax credit?

Do you know if the employees are still there after one year? What is the normal duration of a job offered by businesses that received the tax credit?

[Mireille Laroche]

Given that the measure is included in Canada Revenue Agency income tax returns, we do not have that information. The tax credit is really allocated based on the increase in contributions from one year to another.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Is there any way of knowing whether the tax credit met its intended goal?

[Tamara Miller, Chief, Labour Markets, Employment and Learning, Department of Finance]

Are you asking if there is a way of knowing whether the employees were retained for the year?

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

That is what I want to know, or if the job was a permanent one or a temporary one, for example.

[Tamara Miller]

I don't think we have that information.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have a question about something else.

The expected costs are $205 million. Is that amount taken from the general government revenue or is it taken from the employment insurance account?

[Mireille Laroche]

It is taken from the employment insurance account.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

That's it for now.

[The Chair, Conservative, James Rajotte]

Go ahead, Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair, and thank you very much to the witnesses for joining us today.

Is the calculation of the 2012 EI credit based on the 2011 EI premiums before or after the 2011 EI credit is applied?

[Tamara Miller]

The calculation is based on approximation. I'm not sure of the exact calculation with respect to the numbers or whether the calculation is applied before or after.

Do you have any idea?

[Mireille Laroche]

The calculation is exactly as it was last year, and it was based on the employers' 2011....

It's going to be on the 2012 premiums, minus those paid in 2011. I would think that it would be based on what they paid as opposed to what the credit.... It would be based on what they paid.

[Scott Brison, Liberal, Kings—Hants, NS]

Is it possible to check on that and to get back to me with the methodology?

If the 2012 calculation doesn't include the 2011 EI credit, then we'd need some clarification, because under Bill C-45, small businesses will be hit for the full EI increase in 2012.

How much revenue from EI premiums would the government have expected to collect in 2012 if the government had not raised the EI rates by 5¢ but had instead kept it at $1.78?

[Mireille Laroche]

I'm not sure. The only calculations we have are with respect to the actuals. In terms of the revenue, they would be on page 239 of the budget document itself.

[Scott Brison, Liberal, Kings—Hants, NS]

The logic behind this tax credit is that lower EI premiums incentivize hiring.

[Tamara Miller]

That's the way it was presented in the budget. It's to make it a little bit easier for small businesses to hire new employees.

[Scott Brison, Liberal, Kings—Hants, NS]

Would it be logical to assume, then, that higher EI premiums have a negative effect?

[Tamara Miller]

I'm afraid I can't answer that question. It's an assumption that I can't make.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.