Thank you very much, Mr. Chair, and as always, thank you very much to the committee for the invitation.
I have some good news for the committee. I did not provide a pre-budget submission this year. That is because the government did not see fit to adopt any of our recommendations from last year, so you've saved me the time. However, hope springs eternal, and I direct you to last year's submission for some ideas.
Ladies and gentlemen, I would be remiss if I did not use the few minutes I have to talk about the issue—and I'm sure we all know what that is—that has been dominating the news over the last few months, since it is the single largest issue that our organization has been hearing about.
I should point out to the committee it is rather unique, in that, as an advocacy group, we take it upon ourselves to draw our supporters' attention to issues. This issue is not like that. Our supporters brought this issue to us. I think that signifies how big of an issue this is. I'm certain the members around the table have heard likewise from their constituents and will know I'm not exaggerating when I say this is not a small issue.
I want to make clear up front, though, that our organization agrees with the government's broad objective of tax reform. The problem is not with the government's goal, it is that the specific proposals on the table will not achieve these goals and could actually make things worse by having many negative unintended consequences.
First of all, our view is that these proposals further complicate the tax code rather than simplifying it. The fundamental driver of incorporation among Canadian-controlled private corporations has been the gap between personal and business tax rates. Unless and until this gap is addressed, any attempts to close so-called loopholes will simply incentivize the search for newer and more complex loopholes. Whac-a-mole may be a very fun game at the county fair, but it does not make for an efficient tax system.
Second, the government's failure to guarantee that any new revenues received through these changes will be returned to Canadians through cuts to general tax rates feeds the suspicion that these measures are not actually about fairness but instead about a government that is short of money and looking to find new revenue.
Third, on the issue of fairness, the government's credibility on this matter labours under the handicap of the rest of its record, and of other tax measures that have gone untouched. Is it fair for small business owners to pay taxes only to see the proceeds go into the pockets of corporate welfare recipients like Bombardier or Ford? Is it fair for the government to trumpet its litany of subsidies to selected industries while insisting that it wants a level playing field for all?
Even if we focus on tax measures alone, is it not reasonable for Canadians to ask why, for example, the tax treatment of unions has been left out of this discussion, including the labour-sponsored venture capital tax credit which costs taxpayers $115 million a year, or the tax deductibility of union dues and professional fees which cost taxpayers nearly $1 billion a year.
I would be remiss if I did not point out the federal political donation tax credit that provides a 75% taxpayer subsidy on the first $400. A cynic might say—and I try very hard not to be a cynic—that such a generous tax measure serves as a testament to the ability of politicians to safeguard their own interests.
In any event, addressing these issues would go a long way to giving the government greater credibility in arguing that it is truly interested in a fair tax system.
As a final point, I want to reiterate that I do not think the government should abandon tax reform altogether, but if it is serious, it needs to slow down. There are two concrete steps that could help to achieve this. The first is to launch a royal commission on tax reform. In fact, the last time that similar changes of this nature were implemented, it was following a royal commission under Kenneth Carter, with three years of study rather than 75 days in the middle of the summer. Second, the government should release the results of the tax expenditure review that it conducted following the 2016 budget. This would give a more complete picture of the costs associated with the various complexities of the tax code.
I'll leave it there, and I'm happy to take questions.