Finance Committee on Sept. 26th, 2017

[The Chair, Liberal, Wayne Easter]

Sorry, Dan. You have one more quick one. Jennifer went over by three, so we'll let you over by one.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay.

Obviously in Canada we have a lot of great big companies, but people sometimes feel that this hogs out competition. Are you worried that these kinds of incentives may change it so that larger companies have an inherent advantage?

[Brian Kingston]

I haven't seen that as a concern. I don't want to create a situation through the tax system, though, where small and medium-sized enterprises are not encouraged to grow into large companies. The objective of any small business should be to become a large business eventually, so if the tax system is disincentivizing that behaviour, I think we have a real problem on our hands.

[The Chair, Liberal, Wayne Easter]

Thank you both. The last questioner to this panel is Ms. Dabrusin.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

Thank you.

Ms. Watts-Rynard from the Canadian Apprenticeship Forum, you talked about government infrastructure spending and all the construction-type projects you can see.

Have you thought about the value of community benefits programs being linked? A private member's bill was before us at one point talking about putting it to the minister of infrastructure that, when we have infrastructure projects, we take into account community benefits such as training and apprenticeship opportunities.

[Sarah Watts-Rynard]

Absolutely. All kinds of things are already happening in the provinces and territories that certainly go in that direction. They are linking some of the money they're putting out in maintenance and construction contracts. They understand that training, understand the requirement to hire indigenous people, for example, within an area, and those things are working.

There's no reason why the people who are the owner community, who have the money to spend, can't decide what they expect from their contractors.

I think we see this in the oil and gas sector, for example. Big companies that use contractors to build and maintain their infrastructure will say the expectation is that they're going to hire the local community, they're going to be doing training, and it works for them. That encourages small businesses to think about their impact on the local labour market. I think it's a matter of taking that example and starting to think about how that could be applied to federal spending.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

Thank you.

You mentioned different programs in different provinces and territories across the country. Have you seen any particularly good models that you would like to see if the federal government was considering community benefits-type programs?

[Sarah Watts-Rynard]

One example is in Manitoba. One of the ways they do this is that when they're putting out any kind of contract to bid that requires skilled trades labour, they need to have a letter from Apprenticeship Manitoba indicating that they are involved with the system in some way, that they have at least one apprentice, that they are somehow involved with the apprenticeship board, for example, project or program advisory committees with their local colleges. They have to be able to show that they are engaged with training. It's not a matter of ratios. It's not a matter of that for every dollar they're going to give to them, they have to show us this much in benefits, but there is a requirement to show that there's involvement.

Again, this is a very soft on-ramp to the idea that governments do have a choice about how their money is being spent and the impact on the community as a result. British Columbia does something similar based on value, so the higher the value of the contract, the more the requirement to show a connection with training, for example.

These are the kinds of conversations that when we're having them with apprenticeship authorities and with provincial governments, they're saying it's important to them to make sure that their local population has the work, has the opportunities to train, and that means that if they've decided that the local indigenous population should be part of those agreements, then those are parts of agreements being put in place through procurement contracts.

[The Chair, Liberal, Wayne Easter]

We have time for one more quick one, and then the two Pierres want one question each. Then we'll come back. The government wants one more question.

Go ahead, Ms. Dabrusin.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

I'll make it a quick question.

Ms. Mentzelopoulos for the credit unions, in your submission you mentioned section 983 of the Bank Act, and that you'd had discussions about other solutions with the Department of Finance. What would be your preferred solutions that you would be putting forward as to how to change the terminology?

[Athana Mentzelopoulos]

I would preface this by saying that this is an issue that feels a bit like a solution in search of a problem. The policy intent, as we understand it, is to avoid consumer confusion, but we've seen no evidence of consumer confusion. I've been a member of a credit union in the past and I recently joined another credit union. My personal experience is that they have a very extensive on-boarding process, and it really leaves no room for doubt in terms of what kind of financial institution you're joining.

We respect, though, that the Department of Finance is seeking to avoid consumer confusion. What we are going to be proposing—it's a consultation process that ends at the end of this week—is a fairly light-touch change to that section of the Bank Act that would allow for a “reasonable person” test. Recognizing that the original intent was that there would be avoidance of any deliberate misleading, we think that it is possible to achieve with some changes a principle-based approach that will assist in avoiding that confusion. But fundamentally, we will still allow for the usage of what we believe are the very common terms of “bank” and “banking”.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you. That's very good information.

Mr. Dusseault, you have one question.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I have a quick question for Mr. Kingston.

I have often heard—we often hear this in this committee—that tax rates are too high and that they should be lowered. That is a recurrent theme as regards competitiveness.

Are you not afraid, as others are, that this is a race to the bottom that is happening all over the world? Are you not afraid that the tax rates for companies and enterprises, which are almost nil in certain jurisdictions, are driving that race to the bottom?

The result is that employees have to pay even more tax.

Are you not afraid of this race to the bottom, which is spurred on by repeated comments about tax rates being too high and companies wanting to pay less and less? In any case, they will always say that they pay too much tax or income tax.

Are you not afraid of this global race to the bottom?

[Brian Kingston]

We're by no means advocating for the elimination of the corporate tax, and I do appreciate that there are jurisdictions that have gone to that extreme. But I think that Canada should compare itself to its OECD competitors. I think that's a fair comparison, and it's one that we need to make consistently because our OECD competitors are constantly changing their tax systems, not necessarily lowering rates but streamlining and eliminating complexity. The fact is that we sit above the OECD average, and I think that is worrying. When we compare with our peers and the other jurisdictions where people consider investments, we are lagging, so I think there's work to be done.

I'll also note that part of tax reform isn't just lowering rates. The other element is cleaning up the tax system. We survey our members every year. We collect data on 68 different taxes that they pay. They spend over $3 million just complying with Canadian tax legislation. That alone would be a huge benefit—if you could just simplify the system and make it easy for taxpayers to file and comply with the tax legislation.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Poilievre, you have one question.

[Pierre Poilievre, Conservative, Carleton, ON]

When businesses want to acquire assets or other companies, they have to outbid their competitors. They make those bids out of liquid assets inside the company, and typically those liquid assets are classified under the Income Tax Act as passive investments.

Do you worry that there will be distortions in those competitive bidding processes as a result of the fact that one group of companies, the privately owned, will pay a significantly higher rate of taxation on its passive investments than will another group, public corporations? For example, for a farmer saving up to buy a quarter section, he has to be taxed at a rate as high as 72% on passive income, whereas a publicly traded land aggregator will not face those taxations and therefore could outbid the farmer. Myriad other analogous examples could be given.

Do you worry that such distortion and imbalance could result from the proposed tax changes?

[Brian Kingston]

Yes. That is something that we worry about. We want to see neutrality in the system, particularly when you're comparing large, private corporations...if this does apply to them, because it's unclear in the proposal.

If you have a situation where a large, private corporation is not on equal footing with a public corporation as a result of these rules, because they're disincentivized from holding investments, that could be very problematic.

[The Chair, Liberal, Wayne Easter]

With that, we're at our adjournment time.

I think we had a very good discussion on quite a number of points related to pre-budget consultations and the current proposal that's on deck coming out of Finance.

I thank members and all the witnesses again for their appearances today.

We'll see the committee tomorrow at 3:30. The meeting is adjourned.