Finance Committee on Nov. 25th, 2013

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chair.

I have one specific question for Ms. Yalnizyan. A mistake was made on fishermen's EI in the last budget, quite frankly, when fishing hours and non-fishing hours became separated. When someone applied for EI they weren't able to get their fishing hours and their non-fishing hours lumped together, and lost EI benefits because of that. We correct that in this budget. The minister has recognized that was a mistake. It will be retroactive to April 1, 2013. Do you support that change?

[Armine Yalnizyan]

I support any government that recognizes its mistakes and corrects them. I think there is room for this budget to do what every budget has done because you wouldn't be the first government that had made a mistake in drafting that was discovered, often through the process of scrutiny in clause-by-clause, sometimes through the chamber of sober second thought, and sometimes not until things were implemented. So there is always room for technical changes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you. I'm going to take that as a yes on that one issue at least.

Ms. Moreau, you talk about government support for small business. I realize all our witnesses have time limits here, but one of the things you didn't get a chance to discuss was the reduction of the small business tax rates from 12% to 11%, and increasing the amount of income a small business can make and still be eligible for the small business tax rate. There's a tremendous benefit to any small business in being able to increase the amount eligible from $300,000 to $500,000. That's another $200,000 worth of income. Have you done any in-depth studies through your group to see how big a benefit that would be for small business?

[Monique Moreau]

I don't have those figures with me on that particular segment. I believe I promised them to the chair last week as well, so we are certainly looking into whether we can provide that. The reduction of the small business tax rate is an important component of reducing the overall tax burden for small businesses, and we are asking the government to consider reducing that tax even further in its next budget .

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Dr. Gauthier, have you had a chance to do any in-depth studies and take a look at that as well?

[Dr. Michelle Gauthier]

This is with regard...could you clarify?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

...to lowering the small business tax rate and increasing the amount of money a small business can make and still qualify as a small business.

[Dr. Michelle Gauthier]

Certainly, given the different status of charities through the CRA, the applicability of that particular provision may be different from that of other small businesses in their being tax exempt, but I'm happy to take that question to our chief economist and to provide you any additional information we have.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

One of the other questions that came up, and again it's related to small business, is the lifetime capital gains exemption. In my part of the world in rural Nova Scotia there's a big agricultural community, a huge fishery, and certainly a big forestry community. Without that, quite frankly, there would be very little intergenerational transfer of those businesses between family members. It just wouldn't occur because the owner of the business would have to sell most of the assets to pay the capital gains. Could you remark on that and the benefit of that to small business?

[The Chair, Conservative, James Rajotte]

Make a brief comment, please.

[Monique Moreau]

The extension of the lifetime capital gains threshold has been an important component of succession planning for our small business members and especially the indexation to inflation, which keeps it current.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Keddy.

We'll go to Mr. Brison, please, for your round.

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

Thank you, Mr. Chair.

Welcome to each of you and thank you for your presentations today.

My first question is to Madam Moreau, from the CFIB.

Towards the end of your presentation, you said that you would support the reduction of EI premiums once the account is in balance. The recent economic statement or fiscal update from the minister has said that the account will be in balance in 2015. The minister's projections up until 2017 show that, by freezing the EI rate at $1.88 for every $100 of insurable earnings, there will be an additional $5.6 billion collected until the end of 2016.

Just to be clear, are you calling for the EI premiums to be reduced after the account is in balance in 2015, as opposed to the government collecting an additional $5.6 billion on workers and employers?

[Monique Moreau]

We are certainly in favour of ensuring that the account doesn't accumulate too much of a surplus. These projections are projections for right now, so we'll see what happens in 2015, 2016, and 2017, but we're not in favour of the accounts generating enormous surpluses. The way it's structured now, with the seven-year break-even rate, as I understand it, should be that there's no need for the account to generate surpluses.

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

So when you're saying that you support the freeze, you do not mean freezing it at unnecessarily high rates. You don't want it to go higher, but you would support it going down to reflect the fact that it had gone into a balance.

[Monique Moreau]

We always like to go to our members, as you know, on issues like this, but I can say that, for what we know to date, the stability of the rate is a critical component. Knowing from year to year and for seven years at a time what the rate will be is an important measure for our members.

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

Sure.

Okay, thank you very much.

Ms. Yalnizyan, it's nice to see you again. It's always nice to see you at committee.

[Armine Yalnizyan]

Yes, thank you.

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

You and your organization have been active on the whole issue of income inequality, but also growing inequality of opportunity. A budget and budget implementation acts provide us with the opportunity to consider measures that would address inequality. One of the measures that has been presented to this committee on numerous occasions by organizations has been the conversion of the currently non-refundable tax credits introduced in recent budgets to refundable tax credits.

Would you like to comment on that and what the effect would be on low- and middle-income Canadians?

[Armine Yalnizyan]

Any time you take a non-refundable tax credit and turn it into something refundable, it means you extend the reach of the benefit of whatever the government envisioned to offer people. Clearly, by offering more cash to people further down the income spectrum, you have an opportunity to close that gap.

But may I say that, simply proliferating tax credits has occurred in a number of the past few budgets. Converting some of those tax credits, extending them to people who might be able to take advantage of them.... The lower your income is.... A lot of these tax credits are dependent on having enough surplus income to be able to put your child into sports, arts, fitness, or do a lot of the things that are very difficult, very challenging for families to do. The refundability of the tax credit isn't the critical thing, it's finding ways of actually helping all children get opportunities every day of their lives.

[The Chair, Conservative, James Rajotte]

Thirty seconds.

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

With the same public policy objective of addressing inequality, would a significant increase to the working income tax benefit achieve a great deal for low-income families?

[Armine Yalnizyan]

It's all in the design. The working income tax benefit is not unlike a wage supplement. For a government and for many analysts who wish to see the labour market functioning without supports from the government, it would be actually better to make sure that you are not actively intervening in market forces, for example, actually pouring hundreds of thousands of temporary foreign workers into the bottom end of the wage pool, therefore actually suppressing wage growth at the bottom end. All these great things we can do—through an enhanced WITB and actively working against the way the market itself would raise wages—seem to be kind of working at cross purposes. It's over-intervention, from a governmental point of view.

[The Chair, Conservative, James Rajotte]

Thank you.

We're going to go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

Thank you to all of the witnesses for being here today.

Ms. Moreau, could you please comment on the importance of having predictability and stability of EI premiums for small business?