Evidence of meeting #50 for Finance in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was unions.
A video is available from Parliament.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I want to go to Imagine Canada first. I want you to give me a quick explanation of your third recommendation. Can you give me a better explanation of that?
President and Chief Executive Officer, Imagine Canada
As we look at the evolving nature of charities in this country and how they are going to earn or raise money, it's important that many of those might actually come from earned income streams. Charities will need access to some of the supports that small business in this country have as they evolve and change their business models. There will be donation models. There will be earned income models. In those supports that are in place for small business—there's IRAP, BDC—there are opportunities to assist that evolution as we become differently structured and funded in this country. We're looking to see if there's an opportunity to have access to those similar kinds of services.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Mr. Cockfield, do you agree? This one puzzles me a bit.
Has anybody from academia looked at that and seen the feasibility of that?
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
The third recommendation, is that something that's workable? Are we starting to cross over into areas that...?
Prof. Arthur Cockfield
I'd hesitate to answer that, sir. I'm not entirely clear on this particular area. I'd perhaps pass that to one of my other colleagues, if I could.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
That's very fair. I'm confused on it, too.
Mr. Moffat.
Assistant Professor, Ivey Business School, As an Individual
I wish you had asked me first, because I'm going to pass it along as well. I've not looked at that particular item and could not comment on it intelligently.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Okay. That makes me feel a little better.
I'll ask Nathan next.
I want the Credit Union to explain to me something which I think I understand. I'm going to say it, and you can say yes or no, because we need that for the record.
Banks in general need 9% of savings in order to lend against that. Am I right on that?
Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
It's not yes or no; it's that I don't know what the banks' credential capital requirements are.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Okay.
However, if they have access to the Bank of Canada, they could borrow from the Bank of Canada at whatever the going rate is if they need money. Is that correct? Are you able to do that?
Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
We do not have an emergency lending agreement set up with the Bank of Canada. Liquidity is managed for the credit union systems provincially, as they are regulated....
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I understand that banks can borrow one from another as well. If they need a capital increase, they can borrow from a bank, and if they get $100, they can lend out another $1,000. Am I correct on this?
Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
I think you may be commingling the issues of liquidity, which is money in and out, versus capital equity in the institutions.
October 21st, 2014 / 4:30 p.m.
Conservative
Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
For liquidity purposes, yes.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
But the credit unions are not able to do that same thing.
Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
We do have liquidity structures between credit unions. What I would argue is that it doesn't solve our capital challenge, which is that we need to have sufficient level of earnings to grow capital to continue the sustainable business model we've enjoyed for 75 years, which is different from solving for short-term liquidity movement between two credit unions.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Are you at somewhat of a disadvantage in regard to the major banks?
Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
We are absolutely at a disadvantage. Our proposal argues to understand the unique structure of credit unions and to have tax policy that supports us building a robust, sustainable capital framework for credit unions.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Thank you.
Professor Cockfield, you mentioned the United States, and Britain is prepared to do this but they haven't.
Are there any jurisdictions—I'm thinking possibly in emerging economies or possibly eastern European countries that haven't been entangled in the web of tax fiddling that the western cultures have—that we can point to and say that they're doing it and it's working?
Prof. Arthur Cockfield
Sometimes one hears about the Norwegian system where it's a complicated corporate tax system. It has effectively abolished the corporate tax and just focuses on what we call consumption taxation. That is touted by Robin Boadway, whom I mentioned earlier, and others as the most efficient system. It is significantly simpler than our own system.
Again, this Mowat Centre report similarly recommended what's called a rent-based corporate tax that would allow corporations to currently deduct all inputs like equipment and salaries. It would convert it effectively into a consumption tax. That's the way most economists and many tax law professors would like to see our system evolve.
There are some examples out there. As for other countries, China, for instance has been modernizing its income tax system over the last decade and it has become increasingly complex, increasingly like our own. I don't think that's necessarily a great example, but there are at least a few examples out there. There are other fundamental tax reform examples in Sri Lanka, in smaller countries, that would likely not be appropriate for Canada.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Is it realistic to expect that to happen in today's society? We see governments so involved in the marketplace. We're doing things now that we wouldn't have dreamed of doing even back in the 1980s, as far as governance is concerned. Is that perhaps something that we've evolved to? I'm thinking in terms of government interference with the market. Increasingly we pick winners; we pick losers. We try not to but we encourage areas. We encourage areas like green energy. Those have tax ramifications. Is it realistic to really try to go back to those days when we've already opened Pandora's box?
Prof. Arthur Cockfield
Yes, I don't think it's realistic to go back to the War Measures Act of 1917, which a couple of the honourable members here have mentioned, but I do think that the late 1980s reform, broadening the base, even maybe bringing rates down, is feasible in my opinion, but it would really take a bipartisan government effort to pull it off, likely. It's not going to be easy.
