Finance Committee on Sept. 20th, 2017

[Daniel-Robert Gooch]

When large organizations are considering communities to locate themselves in, access to efficient airports with a lot of air service is one of the criteria they will often look at.

We've made recommendations today in terms of CBSA and CATSA. If executives can't get through the airport and have a reasonable experience along the way, they're not happy about that. Certainly, CBSA is not only supporting travellers going through airports, it also handles goods coming through Canada as well.

As I said, the agency is doing a very good job dealing with the strong demand which is, in part, related to the strong demand in our economy, the strong growth in our economy. We need to make sure that it continues to be armed with the tools to manage that growth, look ahead and innovate, and be at the forefront of what countries around the world are doing with similar rates of growth.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

Can I turn it over to Mr. McKenna quickly, please?

[John McKenna]

I support what Mr. Gooch has said.

Obviously the proximity of an airport is key today, with just-in-time management. The cost of doing business there is crucial also; that's an element that people will look at. They'll go somewhere else if flying out of there or doing business there is just too expensive. They will look at it for services but also for costs of services.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

For Dan from the Vintners Association, as you well know, I have a major winery with headquarters in my riding. They're great employers. They employ a lot of people, both in my riding and down in Niagara.

On WIIP, the program that you and your organization have spoken about, I believe that it does have some merit and some multiplier effects. If you could reiterate, how quickly could the vintners or wineries—at whatever level of integration you want to speak about within the process—benefit from this program? What would be the economic impact, or the lag, or the forward dating on that? How quickly could they respond?

[Dan Paszkowski]

I would say that we would be able to respond immediately. This is the type of program that would benefit every single winery in this country to whatever level they want to invest in.

We have put a cap on the amount of investment based upon the size of winery, but 77% of all the benefits would go to small and medium-sized wineries. They could turn it over extremely quickly, especially in light of CETA coming into play. The competition today is fierce, and it's going to get fiercer. The opportunities are there to become more innovative and to produce a better quality of product and take advantage of those opportunities in Canada and abroad.

I would say that it would be implemented immediately if the government were to provide that 30% share of every dollar of investment.

[The Chair, Liberal, Wayne Easter]

Thanks to all of you.

Mr. Kelly, you have five minutes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

First, quickly, I would like to ask Mr. McKenna about the effect of the carbon tax on the price of flights and what will be passed on to consumers. You mentioned estimates of what you thought it would do to the price of a litre of jet fuel. Can you put that in perspective for the ticket price increases that you suspect would result?

[John McKenna]

Well, by 2022, for a typical round trip between two cities in Canada—from here to Winnipeg, say—we're talking about a $3,000 increase in the cost of fuel for a typical 737, based on the consumption. Clearly, that will trickle down to the passengers.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I'd like to move now to you, Mr. Brakel. I heard loud and clear that your only ask around the small business tax increases that are coming is to reconsider or to at least hear the concerns. For your members, either in total or just by anecdote, how many of them have said that they would either shut down or move their operations if that goes through?

[Hendrik Brakel]

We haven't surveyed members on the responses to it. The challenge is that the consultation period is so short, so business owners are just finding out. They're going to see their accountants, so they're finding out what this actually means for their business now. That's why I'm still getting emails. It's been in the media for weeks, but business owners don't have time to understand what it means for their business. They're just finding out now.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I ask the question because at the round tables I've attended that was a common theme that was brought up. They said they will shut down their business, or fail to expand their business, or abandon plans to expand, or seek another jurisdiction—particularly medical professionals.

You've mentioned the consultation period. What do you have to say about the adequacy of the 75-day consultation period on the largest change in income tax in 40 plus years?

[Hendrik Brakel]

I think that's what troubles our members most. I think that maybe some would agree that there might be some abuses that could be addressed, but there are ways to get at them and to make sure that we're not impacting a whole wide swath of businesses.

Really, 70 days is not enough to understand what the impacts are. That's why we've urged the government to shelve these proposals and have a broader discussion. We'd love to come up with ideas about how to address some of the inadequacies of tax fairness in Canada, but this is not the way to do it—just jamming it through.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Indeed.

Have any of your members whom you've spoken to challenged the notion, as stated by the minister, that those who earn less than $150,000 a year won't be affected?

[Hendrik Brakel]

I think what the minister might be getting at is that once you get to $150,000 your RRSPs max out. Lots of businesses that earn $60,000 or $50,000 are paying themselves $50,000 but they're keeping the money in the business. It impacts business owners at all income levels. We think it's not limited to $150,000.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

So your members have pointed that out—

[Hendrik Brakel]

Very clearly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

—that these changes will affect business owners at all income levels?

[Hendrik Brakel]

Yes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Especially perhaps those who have been in business for quite some time and had planned their family's overall financial plan for retirement and the eventual career cycle of themselves as workers and of their business and that the investment of passive income is—

[Hendrik Brakel]

Mr. Kelly, let me give you an example of a couple who have owned a bakery and they've been working there for 30 years. They pay themselves dividends of $50,000 a year, each one. One of them starts slowing down the work that she does because they're aging and they've just reduced their number of hours. Suddenly, that could trigger a higher tax rate because the labour contribution has declined. If the family had invested in a registered retirement income fund, a RRIF, that wouldn't have happened. We understand that's not the intention of these proposals but there are real impacts for businesses.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I can't imagine that your members care one way or another what the intention is. The effect of what is going to happen is what would matter most.

Is there anything else with the few moments we have before my time is up?

[Hendrik Brakel]

No.

We would encourage a broader consultation. Our CEO, Perrin Beatty, was in Atlantic Canada talking with the coalition for tax fairness, the unions, and the Centre for Policy Alternatives. The gentlemen said they would welcome a broader discussion on tax fairness in Canada and how to make the system really fair. Perrin asked if they would join him in calling for a broader consultation. I said I guessed so, it made sense. Even the coalition for tax fairness and the unions agree with us that we should have a broader consultation on this. We're pleased to report it's unanimous.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Why don't I pick up right where we left off?

Mr. Brakel, you've been here before. You've been to the pre-budget consultation process. You know how this works: we receive the briefs, we hear testimony, we ask questions based on that testimony, and we can make recommendations to the Minister of Finance for the next budget. You mentioned that your members would be interested in going after some of the abuses.

What specifically should we be going after that your members support?

[Hendrik Brakel]

You could take an example of dividends. You could have a stock issued for one dollar, it's redeemable, and it's a discretionary dividend. You can redeem that one dollar dividend and you could with discretion send out limitless amounts to a family member or something like that. That's a little extreme and CRA has challenged that in the courts and said this was a bit preposterous. There are extremes.

The thing is, we agree that maybe some of those extremes should be addressed but it's just the way it's written.