Finance Committee on Nov. 21st, 2012

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

I'd like a recorded vote.

[The Chair, Conservative, James Rajotte]

It's a recorded vote.

(Clause 11 agreed to: yeas 7, nays 4 [See Minutes of Proceedings])

(On clause 12)

I shall, therefore, move to clause 12. I have no amendments for clause 12. Is there anyone who wishes to speak to it?

Go ahead, Mr. Brison.

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

Mr. Chair, further on PRPPs, there's been extensive work done by Canadian think tanks. The C.D. Howe Institute produced one of the most substantive reports in this area. Again, the conclusion of the C.D. Howe Institute report is that while the PRPPs may improve pension coverage, it will continue to leave a significant gap in the options available to and likely to be capitalized on by Canadians. Further, Mr. Chair, and I'll quote directly from the report:

When the federal government first announced the basic PRPP framework in 2010, it indicated that it would develop tax rules to put PRPPs “within the basic system of rules and limits” for Registered Retirement Savings Plans (RRSPs) and pension plans.

Proposed tax rules for PRPPs were released, as you know, Mr. Chair, on December 14, 2011. The main elements of those were that PRPP contributions will be limited to an individual's available RRSP contribution room. I want to touch on that for a moment.

The reality is that most Canadians, the overwhelming majority of Canadians, are not even coming close to maxing out their RRSP contributions. In fact, most Canadians will not be able to max out their PRPP contributions.

You can say that this is a reflection that maybe a mandatory option forcing Canadians to put away more would be helpful, but again the challenge to that is that you'd actually be increasing payroll deductions at a time when there's quite stubbornly high unemployment, particularly in non-resource-rich provinces. As well, you'd be cutting the take-home pay of Canadians at a time when personal debt is extremely high, in some cases because Canadians are trying to replace full-time work with part-time jobs. It is a real challenge. While I posit that in the long run moving towards more mandatory approaches may be the best approach, in the short run, I understand the government's rationale in putting something forward.

The challenge we have to consider is that these changes can disproportionately benefit those who have an opportunity to save. In this place we should always consider the progressivity of our measures.

We've heard from Governor Carney and we've heard from Dean Roger Martin of the school of business—I was going to say Dean Martin, but Conservatives may think I was thinking of the guy who used to sing in the Rat Pack or something. Roger Martin, Governor Carney, the Conference Board of Canada and others have indicated the growing issue of income inequality in Canada. We have to be careful in this place that we consider unintended consequences that may actually contribute to income inequality.

If, in fact, the measures we are offering to Canadians—even with our hearts in the right place of helping Canadians have better options for saving for retirement—are designed in such a way that they only advantage those with the means to pay into them, it could actually contribute to a growing income inequality. Governor Carney spoke to the journalists in Nova Scotia this summer and said that those who say income inequality is not an issue are wrong, but those who want to create a sense of class warfare around it are wrong, too, in that we should be focusing on equality of opportunity.

The reality is that the opportunity to contribute to plans like PRPPs and RRSPs belongs to a very small number of Canadians who actually have the means to do it. I posit that, Mr. Chair, because I think that all of us in this committee, regardless of party affiliation, want to help all Canadians achieve retirement incomes that are sustainable and can provide a decent retirement income for themselves and for their families, particularly with the demographic shift that is upon us, which will only become more pronounced in the future.

I think it's important that members consider that as we're considering this measure.

[The Chair, Conservative, James Rajotte]

Thank you very much for your comments, Mr. Brison.

Shall clause 12 carry?

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

I would like a recorded vote, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Okay.

(Clause 12 agreed to: yeas 7; nays 4 [See Minutes of Proceedings])

(On Clause 13)

We'll go to Mr. Brison on clause 13.

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

Clause 13 is on the rollover to a registered disability savings plan after the death of a registered retirement savings plan or registered retirement income fund annuitant or a member of a registered pension plan. I think, in fact, members of the NDP, even though they may disagree with pooled registered pensions plans, may agree with the merits of this individual clause in terms of its effect on people with respect to fairness to survivors.

It also gives us an opportunity, Mr. Chair, to consider further this whole issue of whether we are helping Canadians adequately prepare for retirement. This demographic shift is going to impose on governments federally, provincially, and even municipally, and on Canadian households, tremendous burdens in the future.

I'll say frankly that the impact of the demographic shift on the well-being of Canadian citizens is going to be quite different depending on the province you're in. In a province like Nova Scotia and in the Maritimes, where we are teetering on a declining population and an aging population concurrently, there is going to be a very different burden than there will be in a province like Alberta or Saskatchewan, where there is a younger population.

The challenge when we're designing these types of plans is to ask whether they're actually going to help families across the board. That is an important question. It not only has an impact in terms of the consideration of how progressive the measure is; it has an impact on the regions if, in fact, in some regions there are a larger number of low-income seniors. Specifically in the Maritimes, we have a lot of senior citizens. We are seeing a lot of our younger citizens moving to other parts of the country.

I was in Fort McMurray, in fact, in Mr. Jean's riding, over the weekend, and I saw a lot of fine Atlantic Canadians. He and his mother gave me a drive, in fact, to my Liberal event, which was very fine of him, and to the McMurray Newfoundlanders Club.

I want to say that while I congratulate Fort McMurray and I congratulate Alberta for its success, it's important to recognize that before people had the vision, foresight, and wisdom to put oil and gas under the ground, there were some challenges out there too, so it's important that we, as legislators, consider all regions of the country in the design of these kinds of measures.

The reality from a demographic shift perspective is that in the Maritimes—and Quebec is facing some similar challenges—where you have an aging population and a population teetering on decline, retirement savings vehicles are critically important. My concern is that PRPPs are being oversold, and a lot of organizations and groups think they're going to solve every problem. I really don't think they will. In the same way, RRSPs—and for the record, I support RRSPs and the PRPP options—are not addressing this aspect.

What we really have to consider in terms of retirement security for Canadians is not always simply focusing on what is there for those who can afford to retire. As legislators, we have to be considering what is going to be there for those who can't afford to pay into plans right now. The burden of responsibility on us in this place, regardless of partisan affiliation, is to think of those most vulnerable. What I'm concerned about is the lack of discussion about those people who are not making enough to contribute to either RRSPs or pooled registered pension plans.

I would hope that the Conservatives and all members of this committee would endeavour to address what continues to be, according to the Canadian Association of Retired Persons, and even the CFIB and other national organizations, a supplemental—

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Brison. I appreciate your intervention and informing us of your adventures with Brian Jean in Fort McMurray. Thank you.

Are there any further interventions?

Shall clause 13 carry?

[An hon. member]

I'd like a recorded vote.

[The Chair, Conservative, James Rajotte]

There's been a call for a recorded vote.

(Clause 13 agreed to: yeas 7; nays 4 [See Minutes of Proceedings])

(On clause 14)

[The Chair, Conservative, James Rajotte]

I do not have any amendments for clause 14.

Do I have anyone who wishes to speak clause 14?

Mr. Brison, you have five minutes, please.

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

Thank you, Mr. Chair.

This speaks as well to the issue of fairness and the issue of growing income inequality and the importance that we as legislators consider the challenges and the plight faced by low-income Canadians, the people we ought to be most concerned about.

Theoretically, pension income splitting is something that sounds pretty innocuous, except when we consider there is a significant tax expenditure through pension income splitting and when we really consider who benefits from pension income splitting. We have been informed by witnesses, numerous studies, and experts in the area of retirement income and pension policy that the disproportionate benefit for income splitting in general goes to people with higher income.

I think it's important. We all represent people from all walks of life, and in the House of Commons we bring our own experiences as well as those of a lot of the people we meet with on Saturdays in our constituency offices across Canada and during break weeks. The people coming to see us on issues are people who are struggling, people who face real challenges.

We're struggling with budget deficits. The minister recently announced that he was going to miss another target and that the budget wouldn't be balanced until 2016-17, but now the Prime Minister has subsequently announced that the minister was wrong and we would be balanced before the next election. In any case, my point is that we do live in a period....

I have heard Mr. Van Kesteren sometimes say there are no free lunches, usually after members of Parliament have just had one here, but the reality is that tax revenues and the fiscal situation today are such that any decision that involves a tax expenditure has to be taken very seriously.

While I understand on the surface why pension income splitting would be supported overwhelmingly by tax planners, you have to ask yourself why. Who do tax planners work for? Typically the people hiring tax planners are people who make a fair bit of money, so it's not surprising that tax planners ought to support pension income splitting. What we should be looking out for at this committee are the people who can't afford to hire tax planners, the people who can't necessarily afford to hire professional accountants, the people who shuffle down to H and R Block and do their best to get their tax returns in but don't really have the resources to hire the sophisticated financial and tax advisory services that are hired by the well-paid people who tell us that pension income splitting is good. Pension income splitting is good for their clients.

The problem with this, Mr. Chair, is that it does involve reallocation of money from other areas. We heard from Ms. Glover, Ms. McLeod, Mr. Adler, and witnesses who called for tax reform. We have not had significant study of our personal tax system in Canada since the Carter commission changes of 1971.

Some people advocating tax reform were advocating it for building a fairer tax system and addressing some of the inequities and closing some of the loopholes and addressing those issues. Some others approached it from the perspective of competitiveness, but the reality is, Mr. Chair, at a time when we face significant budget deficits and significant challenges in balancing the books and also at time of rising poverty and rising income inequality, I question the judgment of the government and the decision of the government to go forward with pension income splitting. I just think there are better ways we can help low-income seniors.

Ironically, this government wants to take people on old age security and—

I'm sorry, I was just getting started, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

Shall clause 14 carry?

[An hon. member]

I would like a recorded vote.

[The Chair, Conservative, James Rajotte]

(Clause 14 agreed to: yeas 6; nays 5 [See Minutes of Proceedings])

(On clause 15)

I do not have any amendments for clause 15.

Does anyone wish to speak to clause 15?

Mr. Brison, you have five minutes.

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

Mr. Chair, I'd like to speak to clause 15, which deals with exception from attribution rules.

This issue, Mr. Chair, is important. Subsection 75(3) of the act exempts a number of trusts from the attribution rule in subsection 75(2) under which any income or loss from trust property held by certain reversionary trusts can be attributed for tax purposes to the persons from whom the property was received.

Mr. Chair, paragraph 75(3)(a) exempts certain trusts governed by plans such as registered pension plans, registered retirement savings plans, and employee benefit plans. This amendment will come into force with the Pooled Registered Pension Plans Act, and again, Mr. Chair, the C.D. Howe Institute's report referred to this in saying that that pooled registered pension plans do not really address some of the challenges.

For instance, the C.D. Howe Institute said that “While the federal government presents PRPPs as a way to ‘bridge existing gaps’ in Canada’s retirement-saving system, they have received a tepid response from many pension experts and commentators.”

Now again, these are pension experts who are looking at it from the perspective of all Canadians and the future of their retirement security. It's important that we differentiate advice we get from tax planners, who are very important professionals and do good work in Canada, from people who are experts in the public policy of pension design. We've listened to people who, directly or indirectly, actually benefit from these new plans and assume that what they said applies to all Canadians. The truth is, it doesn't. As the C.D. Howe Institute says, the PRPPs cannot require mandatory participation and therefore will have very little advantage compared to a group RRSP.

Again, the C.D. Howe Institute has compared the PRPPs to a group RRSP and said that there is very little advantage in a PRPP as compared to a group RRSP. Secondly, the C.D. Howe Institute has identified that unlike employer-sponsored defined benefit pension plans and the Canada and Quebec pension plans, a PRPP represents another savings vehicle that “will not guarantee any particular pension”.

That brings us to the whole issue of defined benefit pension plans, such as the CPP, for example. I acknowledge that there has been a movement away from defined benefit plans, and there have been significant challenges around the prudential strength of many defined benefit plans, but there's a real advantage to defined benefit plans, particularly as people near their retirement and the global capital markets face a downturn. Even though the returns garnered on someone's investment into a defined benefit plan potentially may be lower, the risk is lower as well.

For Canadians, one of the advantages of the CPP as it is now, and as it could be with a voluntary supplemental CPP option, is another option—a defined benefit plan, one that would insulate Canadians against the vagaries of market fluctuations, particularly as Canadians get close to their retirement.

Mr. Chair, we can't expect, even with your initiative and that of others on financial literacy, to turn all Canadian workers and future retirees into Warren Buffetts overnight. In the interim, I have great faith in the Canada Pension Plan and a defined benefit option.

MPs are one of the groups in society with defined benefit options. I can't for the life of me understand why we wouldn't do more to help more Canadians have access to a greater level of participation and investment in individual voluntary supplemental CPP defined benefit options.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Brison.

Is there discussion on this clause?

Shall clause 15 carry?

[An hon. member]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

(Clause 15 agreed to: yeas 7; nays 4 [See Minutes of Proceedings])

(On clause 16)

We are on clause 16.

I have one amendment there, LIB-30.

Go ahead, Mr. Brison.

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

Mr. Chair, I'd like to speak to this again. I ask the Conservatives to think about this, because the reality is that although we are hearing from people in the capital markets in Toronto, we're also hearing from the extractive sectors.

I remind the committee that 80% of the mining deals in the world over the last five years were transacted in Toronto. Toronto has emerged as a global leader in the financing of extractive sector opportunities. That has created wealth across the country. The reality is that our mining industry, our extractive sectors, our oil and gas and natural resource sectors have broadly generated and are generating significant wealth to Canadians. The TMX and the Toronto Stock Exchange, where 80% of the mining deals in the world are transacted, are telling us very clearly that these changes will have a deleterious effect on the investment environment in Canada. I would hope that the Conservatives would consider that.

Again, the estimate from the TMX is that over 700 publicly traded companies with operations in foreign jurisdiction would be inappropriately and inadvertently negatively impacted by the proposed rules.

There has been a lot of talk, Mr. Chair, about the CSR of Canadian mining companies in the world. We can all do more in terms of strengthening the corporation social responsibility of any Canadian company doing business anywhere in the world, but I've got to say that by and large, Canadian companies globally are actually punching above their weight in terms of corporate social responsibility in labour and environment. I would like to see us strengthen corporate social responsibility in areas of labour standards and social investment and the environment, but one of the first steps is to make sure there are Canadian companies actually operating in those places.

Now my fear, if we listen to the TMX and the Canadian financial community, is that there is a real risk that a lot of these financings will not be taking place in Canada; they may be in London or somewhere else, and essentially there will be a diminution in the influence that Canada has on CSR of the extractive sector globally. I'm a guy in the centre, so I have the NDP to the left and the Conservatives to the right. I'm trying to bring everyone together because we've seen what polarization does in the U.S. system.

For the guys on the right, I can say this is going to cost the financial sector and the business sector in Canada jobs and opportunities. It's going to cost Canadian investors a lot of money and it's going to hurt them. For the folks on the left—and I share with them an interest in strong corporate social responsibility—Canada is going to lose influence in the world as we see a reduction in the influence of our extractive sectors, as we lose head office jobs from Canada in these sectors, and as we see fewer financings in Canada.

I will also bring the committee's attention to the representation from the Prospectors and Developers Association of Canada. PDAC has been very clear on this. PDAC is saying that effectively these changes are going to cost jobs and that we are going to see a reduction in the financings and the extractive sector head office jobs. It's important that we also consider all the spinoffs of this.

For young Canadians graduating from university today—whether in finance, geology, or engineering—these mining and extractive sector jobs are good jobs. We have the benefit, and I've heard the Conservatives say that we have a stable economy. We do, and it's a good thing the Conservatives had the vision, wisdom, and foresight to put that oil and gas under the ground and off the coast of Newfoundland as well. How smart. I thought that was Danny Williams.

The reality is, Mr. Chair, that we have a responsibility to continue growing those jobs, and I do not want to see the Conservatives imposing this job-killing kind of measure.

[The Chair, Conservative, James Rajotte]

Thank you very much for that.

Seeing no further interventions, I will therefore call the vote on LIB-30.

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

I'd ask for a recorded vote.

[The Chair, Conservative, James Rajotte]

We'll have a recorded vote on LIB-30.

(Amendment negatived: nays 10; yeas 1 [See Minutes of Proceedings])

Now we will vote on clause 16.

[An hon. member]

I ask for a recorded vote.

[The Chair, Conservative, James Rajotte]

We'll have a recorded vote.

(Clause 16 agreed to: yeas 6; nays 5 [See Minutes of Proceedings])

(On clause 17)

I'll move to clause 17. I have one amendment, Liberal amendment 31.

Go ahead, Mr. Brison, on that amendment.