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.

On the agenda

MPs speaking

Also speaking

Arthur Cockfield  Professor, Faculty of Law, Queen's University, As an Individual
Mike Moffat  Assistant Professor, Ivey Business School, As an Individual
Eric Dillon  Chief Executive Officer, Conexus Credit Union, Credit Union Central of Canada
Bruce MacDonald  President and Chief Executive Officer, Imagine Canada
Jon Cockerline  Director, Policy and Research, Investment Funds Institute of Canada
Brigitte Alepin  Tax Expert, Agora Fiscalité, As an Individual
Jennifer Robson  Assistant Professor, Kroeger College, Carleton University, As an Individual
Frances Woolley  Professor, Associate Dean, Carleton University, As an Individual
Clay Gillespie  Member, Board of Directors, Conference for Advanced Life Underwriting
Andrea Mrozek  Executive Director, Institute of Marriage and Family Canada

4:35 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. Van Kesteren.

Mr. Rankin, you should have seven minutes.

October 21st, 2014 / 4:35 p.m.

NDP

Murray Rankin NDP Victoria, BC

I want to build on what Mr. Van Kesteren has been talking about.

In particular, Professor Cockfield, you've written about corporate tax reform. Just now you talked about consumption tax. Initially you suggested that maybe if we had a British approach, an independent panel, we might finally get on with tax simplification, and fixing what Professor Moffat called gobbledygook and tax loopholes, citing Ronald Reagan.

Even the accountants have told us the same thing every year, and nothing gets done. I'm very skeptical about it. The government likes boutique tax credits because it gets to buy votes with that. I don't think it's a partisan thing; it has been around for years. Now it's on the corporate side, which, let's face it, is where a lot of the complexity of the Tax Act comes from. Drafters need to put these complicated rules down in black and white. That's the system we have, and it makes a lot of lawyers and accountants rich in doing so, which isn't necessarily a bad thing.

My point is, how can we possibly reform the corporate tax system?

To get to the question, Professor Cockfield, you've written that Canada's current corporate tax system is failing on a number of fronts. It discourages investment, hampers innovation and productivity by taxing the normal rate of capital, and increases the rate of bankruptcy, etc. etc.; it's very inefficient.

What is the alternative for the corporate side to simplify the Tax Act?

4:35 p.m.

Prof. Arthur Cockfield

Well, I think you may be quoting from the Mowat report, actually authored by professors Tremblay and Boadway, but I was on the same panel and I agree with what they wrote. I came to believe in this fundamental reform, what's called a rent-based tax, but I'm not necessarily advocating any particular approach here today. I'm suggesting that this is an important thing the government needs to look very carefully at in an independent fashion. This would be more of a medium-term reform, whether it ends up as a rent-based tax, or some other base-broadening effort like the Tax Reform Act of 1986 in the U.S., or the 1987 approach here in Canada. I think we can bring the level of complexity down.

One of the problems, even if one moves away from corporate tax—and I think we've at least referenced this host of credits, for instance, for low-income Canadians; I can't recall them all: child tax credit, universal child tax credit benefit, the working income tax benefit, and there are at least a few others. Most people who toil in this area as researchers would say that's not necessarily helpful to low-income Canadians. It's extremely complex how it works in our province, with Ontario Works and so on. That could be simplified, and again, to help—

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

I appreciate that. I would obviously love to talk to you later, because right now time doesn't permit it, about the corporate side of that, because I think the corporate tax part is a much harder thing.

I just want to thank you, by the way, for all of your work, Professor Cockfield, on the international tax havens. Your scholarship and your actions have really been very helpful.

Today you said again that we're losing millions of dollars to the offshore. Do you have any fresh ideas about how we might invest those dollars to get those great returns?

4:40 p.m.

Prof. Arthur Cockfield

I think the government's whistleblower program was a good idea. In the past, I've recommended measures like a dedicated office at the CRA that works with the justice department on an ongoing basis. Just as one example, the Auditor General, in chapter nine of his most recent report, looked at the Liechtenstein bank scandal where 182 Canadian families were identified as holding undisclosed offshore accounts. The CRA recommended two for prosecution and the justice department decided not to prosecute any. I'm on the record suggesting we've had zero tax prosecutions in this year. If you're a roofer and you cheat on your GST by $100, the government's going to come down on you with a hammer, if I may, but if you steal $100 million and put it in your offshore account, you can almost do that with impunity in our country.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

It's absolutely scandalous.

Mr. MacDonald of Imagine Canada, time doesn't give me the opportunity to ask as many questions as I'd like to. Mr. Van Kesteren asked about your third recommendation. I'd like to ask about the second: the merchant fees on credit cards and how that affects, or should affect, charities.

Could you elaborate on that recommendation?

4:40 p.m.

President and Chief Executive Officer, Imagine Canada

Bruce MacDonald

The bottom line is we'd like to have the ability for charities to realize more of the dollars that are donated when the transaction goes through a credit card. They're paying merchant fees, and if there's an opportunity to mirror what's happening in other jurisdictions where we're seeing a reduction in those fees for charities, ultimately the donor's dollars are now going to the mission and cause they would like to see them going to.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

Okay.

Budget 2013, as you referenced, has a super credit. Is it too early to tell how well that's working?

4:40 p.m.

President and Chief Executive Officer, Imagine Canada

Bruce MacDonald

With numbers, yes. I'm fairly new to Imagine. I was with an organization on the ground. We were promoting it. We were hearing good things from our local organizations in the field and there was a good awareness, so they're targeting young donors to be able to come into the sector.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

On the stretch tax credit you rightly said we've heard a lot of from constituents. I've heard from the Victoria Foundation and I'm sure my colleagues have had similar entreaties from the sector. The idea is this stretch tax credit would change your behaviour because it only triggers the government's investment when you've changed over the preceding year.

Has there been any costing to see what the fiscal implications would be?

4:40 p.m.

President and Chief Executive Officer, Imagine Canada

Bruce MacDonald

Yes. We estimate about a $234-million incentive and then another $170 million in that natural growth that's taking place. Overall, using the same formula that the finance department did on the super credit, it would be about $40 million a year.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

Is that on top of the super credit?

4:40 p.m.

President and Chief Executive Officer, Imagine Canada

Bruce MacDonald

No. I think that's just as per the stretch. I'd have to check on that and get back to you.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

I see. Right.

How is the idea of a stretch credit going so far? How has that been perceived by your members? Does it seem to have legs?

4:40 p.m.

President and Chief Executive Officer, Imagine Canada

Bruce MacDonald

Certainly the individuals we talked to are interested. Understand that one of the great things about the stretch tax credit is that it affects every community in the country, because there are charitable groups and organizations everywhere. Also, there's no barrier in terms of wealth, so any donor would get a benefit if they increased their gift. It truly is a national program.

4:40 p.m.

NDP

Murray Rankin NDP Victoria, BC

Those who say it only helps the more affluent Canadians should understand that it would help anyone at any income level, as long as they have increases against which this would be relevant to write off. They have to have that level of income. Is that right?

4:45 p.m.

President and Chief Executive Officer, Imagine Canada

Bruce MacDonald

It's for anybody who increases their gift over the previous year.

4:45 p.m.

NDP

Murray Rankin NDP Victoria, BC

Right, thank you.

4:45 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much, Mr. Rankin.

Mr. Adler, you should have seven minutes, please.

4:45 p.m.

Conservative

Mark Adler Conservative York Centre, ON

Thank you all for being here today. This is quite a fulsome discussion, and I have a number of questions for a number of you.

Mr. Moffat, earlier you had an exchange with Mr. Brison about EI. In your opinion, who owns the EI fund?

4:45 p.m.

Assistant Professor, Ivey Business School, As an Individual

Mike Moffat

Who owns it?

4:45 p.m.

Conservative

Mark Adler Conservative York Centre, ON

Yes, whose money is it?

4:45 p.m.

Assistant Professor, Ivey Business School, As an Individual

Mike Moffat

As a business owner, I'm a little biased on that, but I think it should be run like an insurance fund, that it should be owned by all Canadians.

4:45 p.m.

Conservative

Mark Adler Conservative York Centre, ON

It's owned by the people who pay into it.

4:45 p.m.

Assistant Professor, Ivey Business School, As an Individual

Mike Moffat

Yes, exactly.