Thank you very much.
Evidence of meeting #83 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was benefit.
A recording is available from Parliament.
Evidence of meeting #83 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was benefit.
A recording is available from Parliament.
9:25 a.m.
Conservative
9:25 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Mr. Zive, the potential for more investment in long-term care insurance is an important one, and that's driven, as you said, by the demographic shift that is going on. In our family, my father is 91 and lives at home. My mother passed away a couple of years ago after a long bout with Alzheimer's. She was able to pass away at home because they had savings and were able to do that.
Are there ways, from a public policy perspective, to enable more people to save for the future? For instance, if there's a tax benefit for investments in long-term insurance, how can we make that progressive, such that not just wealthier people who have the money to invest but all Canadians can actually benefit from that? Have you considered how to make that more progressive?
9:25 a.m.
Chair, Government Relations, Conference for Advanced Life Underwriting
Thank you for the question, Mr. Brison.
First of all, there has to be a recognition that between 60% to 70% of Canadians feel that long-term care is covered under the Canada Health Act. We determined that in the research we did, so clearly we have a significant misconception among Canadians in terms of the fact that they think they are covered for long-term care. That obviously is not the case.
The first challenge is obviously to communicate to Canadians in a positive fashion the benefits of long-term care and why they should be interested in taking care of themselves. Second, there needs to be a significant dialogue with the provinces, because clearly the different formulae that are available in each of the provinces are not consistent across the country.
9:25 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you very much.
It's...[Technical Difficulty—Editor] Given that demographic shift, it's also important that we help the provinces to protect their fiscal capacity in the future.
Professor Woolley, you've spoken of the impact of TFSAs or of expanding TFSAs on the fiscal capacity of government to invest in health care in the future. It also has a significant impact, according to the analyses of the PBO and others, on provincial governments. Consistent with Mr. Zive's important assertion that we need to help Canadians protect themselves and save for the future, do we also need to protect the fiscal capacity of future provincial governments to invest in health care? Is the TFSA increase going in the wrong direction in that sense?
9:25 a.m.
Professor, Carleton University, As an Individual
I'm very worried about the long-term fiscal situation of the provinces. Right now, even though the first baby boomers have already hit retirement age, we're still in a sweet spot demographically.
The provincial budget situation over the medium and long terms is not good. The federal government is much better at raising taxes than provincial governments are. I think it's essential that the federal government retain its tax base and prevent the erosion of its tax base. TFSAs have a serious potential to erode the tax base for both levels of government, and I think that's a very serious problem going forward.
9:25 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
You've echoed what other economic analysts, including the IMF, have said about how progressive tax systems are better for growth. Also in terms of inequality, we've had TD Economics and others discuss the importance of leaning against inequality.
Would you say that our tax system has become more progressive or less progressive in terms of many of the measures introduced over the last 10 years in Canada in terms of our tax system?
9:25 a.m.
Professor, Carleton University, As an Individual
That's a tough question.
9:25 a.m.
Professor, Carleton University, As an Individual
Yes. I think the big changes are with investment income. Going outside of what we're talking about today, I think one of the big changes in this act that's not regressive is the move from.... The introduction of the family tax cut.... One of the best things this government did when it was first elected was the introduction of the child tax credit amount. I'm very disappointed to see that being replaced by income splitting. It's a very regressive move.
It's a complicated question, but yes, there are important initiatives that have made the tax system less progressive than it was.
9:30 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
If we were to cut taxes on low- and middle-income Canadians, would that be more stimulative than cutting taxes on the wealthier?
9:30 a.m.
Professor, Carleton University, As an Individual
If you cut my taxes, do you know what I'll do? I'll put the money in the bank. It's not going to do anything for the Canadian economy. If you give money to lower- and middle-income Canadians, they spend that money in local businesses, and that is much better for economic growth.
9:30 a.m.
Conservative
9:30 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Have you done any analysis of the GIS loophole that is created by the TFSAs and potentially worsened by increasing them, in that you can delay your CPP and RRSP income until the age of 70 and as such get the maximum GIS for three years while living off your TFSAs? Is that creating a significant problem for the future, in terms of higher-income people benefiting from the GIS?
9:30 a.m.
Professor, Carleton University, As an Individual
I would rely here on the PBO's analysis, which suggests that yes, this is a very serious issue.
9:30 a.m.
Conservative
9:30 a.m.
Conservative
Joyce Bateman Conservative Winnipeg South Centre, MB
Thank you to all of our witnesses this morning. I very much appreciate the commentary.
I want to ask the same question to a few of you at the start. Perhaps I could start with Mr. Lavoie.
The effective tax rate by 2016 for small business people for new investment will be 9.1% in Canada. That compares with 31.7% in the United States at the same point in time and with 26.4% in Germany. Those are considered strong economic players in our global economy. How is that rate structure going to impact and perhaps help Canadian business?
9:30 a.m.
Director, Policy, Innovation and Business Taxation, Canadian Manufacturers and Exporters
You're right. I think Canada's is now the lowest in the G-7 by far.
As I said, I think the structure of our economy is also more dependent upon small businesses than may be the case in some other countries. We haven't seen a huge shift in our sector, but definitely the large companies that had plants in the past may have fewer plants in Canada than they used to.
To us, this measure is a no-brainer. We agree with CFIB on this. It's a stimulus. As a small business owner myself, I can tell.... Tax is tax is tax. It's the first thing you pay. This is a measure not only to help SMEs grow, but also to have more people starting their own businesses.
9:30 a.m.
Conservative
Joyce Bateman Conservative Winnipeg South Centre, MB
Great.
Ms. Pohlmann, could you comment on the rate structure and how it's going to impact your membership?
9:30 a.m.
Senior Vice-President, National Affairs, Canadian Federation of Independent Business
Certainly, it makes them much more competitive. One thing we certainly want to encourage is more growth in the Canadian economy through getting businesses to start their businesses. One thing we've discovered is that the cost of doing business is still pricey. Anything that helps reduce that cost is going to be important in encouraging more people to potentially go into business and in encouraging more businesses to potentially look at exporting or trading into other countries. Having a lower tax base here may potentially allow them to do so much more easily. I think there are many advantages to having a lower tax rate for small businesses.
9:30 a.m.
Conservative
Joyce Bateman Conservative Winnipeg South Centre, MB
Great.
Will it help us stay at the top of the pack in the G-7?
9:30 a.m.
Senior Vice-President, National Affairs, Canadian Federation of Independent Business
Hopefully it will. I think it's important.
Again, I want to give kudos to Canada for recognizing that there are higher costs for small businesses. This is one way to help alleviate some of those costs. I think it's important and a measure that needs to be kept, because it's something that really does give us an advantage and is one of the reasons we have so many start-ups in Canada that at least get going on the ground.
9:30 a.m.
Conservative
Joyce Bateman Conservative Winnipeg South Centre, MB
How does Canada perform in start-ups? You've just said that our low-tax culture is the reason we have start-ups. How are we performing globally on our start-ups?
