Good morning.
I'm Peter Effer, chair of the policy forum of Financial Executives International Canada, and we are honoured to be here today.
FEI Canada is a voluntary professional membership association comprised of 1,700 of Canada's chief financial officers and other senior financial executives who work in all industries and sectors across the country. The recommendations that we are presenting to you today were prepared by some of these volunteer members and are generally representative of the views of all our members.
As senior financial executives, we control costs in our organizations as much as possible while growing our businesses. We lead our organizations to do more with less. It should come as no surprise that Canada's financial executives agree that fiscal restraint should remain a top priority for the federal government.
FEI Canada recommends that the federal government retain its objective of balancing the budget in the near term, while Canada's economy is relatively stable, and then use any budgetary surplus to grow the economy and pay down some debt. Fiscal prudence will enable Canada to maintain social programs at the current levels as the population ages, to withstand future international economic headwinds, and to support high levels of employment during the slower periods of the economic cycle.
We encourage the government to balance the budget without raising corporate or personal income taxes so that Canada remains globally competitive and accessible to domestic and global investment capital. If additional tax revenue is required to balance the budget, the GST rate should be increased, as value-added taxes are viewed by most economists as an efficient and progressive form of taxation.
In our submission, FEI Canada offers suggestions that will save costs. One method involves simplifying the federal Income Tax Act by removing certain complexities and administration embedded in this act. This would save administrative costs for both the government and taxpayers, particularly small and medium-sized enterprises, which are key drivers of the economy.
For instance, the government should immediately allow a company to elect to include capital losses in its eligible capital expenditure pool. In the near term, a company should be allowed to transfer non-capital losses and net capital losses at least to another related company operating within the same provincial tax jurisdiction, and, when feasible, to any related company within the same corporate group, rather than, for those who can afford to, undertaking costly corporate reorganizations to achieve the same result.
For GST purposes, companies should be allowed to elect to claim input tax credits in a related company, similar to the election currently available that allows another taxpayer to remit GST. The election would simplify both taxpayer reporting and government audits of the GST by reducing the number of relevant GST returns that would be filed and then audited, with no change in net tax collected by the government.
Lastly, introducing legislation that requires a mandatory settlement process at the field audit and/or objection level for both income tax and GST would reduce tax audit dispute costs for both government and taxpayers.
Economic growth, driven by job creation, is enhanced when innovation is fostered and allowed to flourish. Innovation creates new products and services for use and sale by Canadian companies, which leads to increased productivity and employment. FEI Canada suggests that the federal government allow companies in all industries engaged in innovation to issue flow-through shares to access capital through the monetization of development and related commercialization expenses. This would be similar to the program that exists in the resource and mining industries. Companies issuing innovation flow-through shares would renounce qualifying SR and ED expenses and tax credits to shareholders, who would claim these amounts on their tax returns. This program simply transfers tax deductions and tax credits from one taxpayer to another.
We believe expenditures incurred up to product commercialization should also be eligible for this flow-through to encourage the private sector to fund costs associated with converting ideas into marketable products. This program would be beneficial for start-up firms that are not yet earning taxable revenue in excess of innovation expenses—