Evidence of meeting #108 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site.) The winning word was data.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kate Edwards  Executive Director, Association of Canadian Publishers
Glenn Rollans  President, Association of Canadian Publishers
Dany Richard  President, Association of Canadian Financial Officers
Don Giesbrecht  Chief Executive Officer, Canadian Child Care Federation
Larry Levin  President, Canadian Dental Association
Noah Shack  Director of Policy, Centre for Israel and Jewish Affairs
Massimo Bergamini  President and Chief Executive Officer, National Airlines Council of Canada
Karl Littler  Vice-President, Public Affairs, Retail Council of Canada
Scott Chamberlain  Director of Labour Relations, General Counsel, Association of Canadian Financial Officers
Kevin Desjardins  Director, Public Affairs, Canadian Dental Association
Greg Pollock  President and Chief Executive Officer, Advocis, The Financial Advisors Association of Canada
Andrew Casey  President and Chief Executive Officer, BIOTECanada
Fred Phelps  Member of the Management Committee, Canadian Alliance on Mental Illness and Mental Health
Karen R. Cohen  Member of the Management Committee, Canadian Alliance on Mental Illness and Mental Health
Catherine Kells  President, Canadian Cardiovascular Society
Lisa Votta-Bleeker  Chair, Canadian Consortium for Research
Bruce Ball  Vice-President, Taxation, Chartered Professional Accountants of Canada

3:35 p.m.

Liberal

The Chair Liberal Wayne Easter

I call the meeting to order. This meeting is held pursuant to Standing Order 83.1, pre-budget consultations in advance of the 2018 budget.

Welcome. I want to thank all the witnesses for appearing today, and also to thank those who were able to provide us with more substantive submissions prior to the August deadline. They are on our iPads. They've all been gone through, so you will see members from time to time looking at their iPads to see if you're saying the same thing today as you said then. However, I am aware that there are some issues that have emerged since August that are of concern to some people.

We will try to hold the witnesses to five-minute comments. We do have to suspend this session at 4:45 p.m., so that we can get the second panel done prior to votes tonight.

Again, I welcome all. We'll start with the Association of Canadian Publishers. We have Mr. Rollans who is the president, and Ms. Edwards who is the executive director.

Welcome, the floor is yours.

3:35 p.m.

Kate Edwards Executive Director, Association of Canadian Publishers

Thank you, Mr. Chair, and members of the committee. My name is Kate Edwards, and I serve as executive director of the Association of Canadian Publishers. I'm joined by Glenn Rollans, ACP president and co-owner of Brush Education, an independent publishing firm based in Edmonton. Together, we acknowledge that we're meeting today on the unceded traditional lands of the Algonquin Anishinabe people.

ACP represents 115 Canadian-owned, English-language book publishers active in trade, children's, literary, scholarly, and educational publishing. Our members are independent businesses, and operate in communities from coast to coast. We publish books that serve local and regional interests, and also those with broad appeal that reach audiences across Canada and around the world. Although our market has changed rapidly over the past decade, our members continue to adapt to technological change, and now produce books in a full range of digital formats in addition to print and audio. Canadian-owned publishing firms are responsible for roughly 80% of the new books published by Canadian authors each year.

Our industry's success has been made possible in part by strategic investment on the part of the Government of Canada, for which we are grateful. The support of the Canada book fund, a program of the Department of Canadian Heritage, remains essential to the health of a competitive domestic book publishing industry. The fund has been instrumental in stimulating independent publishers' successful transition to digital, and their continued pursuit of export markets. Its programs are well-administered and results-oriented, providing strong economic returns and high cultural value. The fund's annual budget has remained at $39.1 million since 2001.

This committee recognized the need for new investment during last year's pre-budget consultation, when it recommended to Parliament that the fund be increased. However, budget 2017 did not include an increase, so ACP maintains its recommendation that the annual budget of the Canada book fund be increased by $15 million per year, to a total of $54 million.

3:35 p.m.

Glenn Rollans President, Association of Canadian Publishers

Thank you, Mr. Chair, and members of the committee. Thank you, in particular, for arranging for us to meet here, under the spirit of the printed word, which rises behind you there, Mr. Chair.

Books have an important role among other media. They are authoritative, prestigious, long form, and intended to last. Because of those things, they have a unique role in our culture and our communities, and among our cultural exports, whether in print or digital form.

Books matter in ways that are unique to books. Canadian priorities matter to Canadian-owned publishers in ways they will never matter to foreign-owned publishers. Independent Canadian-owned publishers cope with structural challenges, in particular a marketplace defined by foreign-owned, multinational companies that enjoy huge economies of scale. We've also had to cope with serious losses to our industry caused directly, although inadvertently, by the Copyright Modernization Act of 2012.

The Canada book fund functions as an amplifier of our success in that intensely competitive, difficult environment. The fund is essential to the capacity of businesses such as mine to take risks and make investments in this arena, where we, for example, are the only independent Canadian book publisher specializing in medicine and health professions.

The Canada book fund has been supported by successive governments over a period of decades. That's because all those governments have understood and supported the role of Canadian-published books in building our communities, in understanding ourselves and our times, in education, and in our economy. They have also understood and supported the role played by Canadian-published books in bringing Canada to the world. Broadly speaking, our goals for our sector are your goals for our sector.

During a period of huge challenges and change for our sector, the Canada book fund has remained stuck. Its value has declined by more than 30% since 2001. Your investment in your goals for our sector has declined by more than 30% over that period. Our proposed increase in the Canada book fund from $39.1 million to $54 million is long overdue. It would pay off in strengthening Canadian artists' presence in digital media, in increased export earnings, and in employment and tax revenues. It would strengthen Canadian communities and Canadian education. It would enable our members, including my company and me, to do a better job for Canada.

Thank you. I look forward to any questions you might have.

3:35 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

Next is the Association of Canadian Financial Officers, with Mr. Richard, president, and Mr. Chamberlain, director of labour relations. The floor is yours.

3:35 p.m.

Dany Richard President, Association of Canadian Financial Officers

Good afternoon. Thank you for this opportunity to present on behalf of ACFO. We are North America's largest union exclusively representing accountants, comptrollers, auditors, and financial professionals. We're speaking today on behalf of more than 4,600 dedicated federal public servants.

This committee has been tasked with finding ways to make Canadians and Canadian businesses more productive and competitive. As you prepare recommendations for the federal budget, I urge you to remember that our productive, world-class public service represents a tremendous competitive advantage for Canada. A recent study out of the U.K. confirmed this fact. Canada's public service generally and our financial management professionals specifically are among the world's best.

Maintaining our place among the world's best will require work. Canadians and Canadian businesses rely on quality and professional public services to be productive and competitive. The services we deliver and the resources we provide serve as a critical foundation upon which the economy is built. The renewal of the institutions that deliver those services has to be done right.

Too often that important renewal work is taken out of the hands of the people best placed to do it. Too often governments rely on consultants rather than listening to the people who know the system best. In the particular case of financial management and accountability, this too often means hiring multinational firms that spend the bulk of their time actually advising clients on how to invest less in public services through aggressive tax planning and the abuse of costly loopholes.

This outsourcing also comes at incredible cost. In 2011, during the height of the previous government's strategic and operational review, the government was paying one such consulting firm $90,000 per day.

This government pledged in budget 2017 to undertake top-to-bottom reviews of three departments this year, with more reviews to follow. Last week, the President of the Treasury Board announced that this year's reviews will be done at Health Canada, Canada Border Services Agency, and the Canada School of Public Service. We are calling on the government to rely on its own in-house expertise for these reviews. With world-class capabilities in public service financial management and accountability at its fingertips, there's no reason to look outside.

That's why our recommendation is that the government rely on its own financial management professionals to develop the framework for these departmental reviews and to carry out the reviews. After all, the goal is to ensure that spending is aligned with priorities and programs that deliver results for Canadians. We understand public finance. We understand value for money. We understand the unique challenges and opportunities of working in the public sector. It's not a conflict to engage my community in departmental reviews; in fact, it's what we exist to do. My job as an accountant in the public service is to give non-partisan, unbiased advice to the minister on how to best execute the mandate.

These reviews could be coordinated by the office of the comptroller general and carried out by the auditors and financial officers in each department. Their reports would then go to the minister's office or even to the operations and estimates committee for greater transparency and accountability. This model could be subject to impartial review by the Auditor General for additional accountability.

Why outsource to consultants and contractors whose job is to make sure they win their next contract? Why hand over the keys to profit-driven companies not bound by the same integrity and accountability rules as public servants? Why pay $90,000 per day for advice that is better provided by people you're already paying? Instead, turn to experts in public finance and accountability. Turn to the people who have committed to serving the Canadian public and will have signed an oath to do just that.

Acting on this simple recommendation will also have a bigger benefit. The legacy of downsizing and outsourcing has led to an over-reliance on expensive consultants, contract employees, and a part-time workforce. In this era of precarious work, the public service should be a model employer setting an example for others, not a participant in the race to the bottom.

This government has promised to restore respect for the public service. The repeal of anti-labour legislation and the respect shown for basic bargaining rights have been an important first step. Now it's time to reinvest in our capacity to serve Canadians. This recommendation will do that.

Our reputation around the world is good, but unless we invest in our own capacity, that reputation is at risk. Using public servants to carry out departmental reviews will send a strong message to the public service and to Canadians about the value of the institutions we all rely on. Invest in this competitive advantage and ensure that all Canadians can rely on quality public services as they make their own contributions to our economy.

As you can see from our written brief, we've made additional recommendations around financial reporting and ways to extend this government's commitment to tax fairness. I'm happy to answer any questions about any of our recommendations.

Merci.

3:40 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

We will turn now to the Canadian Child Care Federation.

Mr. Giesbrecht.

3:45 p.m.

Don Giesbrecht Chief Executive Officer, Canadian Child Care Federation

Good afternoon to everyone. Mr. Chair and committee members, I thank you on behalf of the Canadian Child Care Federation, Canada's child care and early learning sector, for the opportunity to present to all of you today on how increased federal child care investment measures would help Canadians and Canadian businesses be more productive and competitive, and more specifically help women in their employment, productivity, economic security, and equality.

The reality for today's Canadian families requires that they have access to high-quality, affordable, inclusive, and accessible child care. It is a key economic element for the majority of Canadian families, including the middle class, and for our economy overall. Importantly, however, the economic benefit of child care is not just for the families of today but for the well-being of children in the future and of the contributions that Canada's early childhood workforce makes in the present.

For Canada's workforce and talent to thrive, the federal government must significantly increase its already allocated spending on child care, as outlined in our submitted brief, and accompany that increase with an expanded and more detailed evidence-based policy framework, with the goal of making high-quality child care fully accessible to all families and inclusive of all children in every part of Canada over the next decade. This will significantly support Canadians, but even more specifically women, in their employment, productivity, economic security, and equality.

Adding to our previously submitted brief outlining the work of the IMF on the economic impact and value of women's ability to enter into and stay in the workforce when child care is available, I draw your attention to data gathered and analyzed from Canada's own Pierre Fortin, using real-time data from the province of Quebec's child care system. Women's workforce participation increased significantly in Quebec in conjunction with the child care system in that province. Between 1997 and 2015, the labour force participation rate of women in Quebec increased from approximately 77% to 85%. This resulted in a net economic gain of 75¢ per dollar on top of each public dollar invested into the Quebec child care system.

Public opinion support for child care and its value for families, children, and the economy are further supported in the Manitoba Child Care Association's and Probe Research's public polling of Manitoba's opinions on the issue of child care. While of course Manitoba-specific, it closely mirrors the report's first-hand experiences and the continued systemic issues that are commonly discussed in the media and most certainly reported from our members across Canada. This research, done in the fall of 2016, found that a significant percentage of Manitobans have turned down jobs, delayed returning to work, or declined an educational opportunity because of the lack of available child care spaces.

Specifically, the lack of available child care has impacted upon Manitoba's families as follows: 30% report turning down a job; 41% have delayed returning to work; and 24% have declined an educational opportunity. As for businesses, a majority of Manitoba business leaders, 76%, in fact, say that the lack of child care in Manitoba is a serious issue, with 49% reporting that they have experienced difficulty finding skilled employees for reasons related to child care issues.

The child care sector is of course an employer as well as a service provider for families and children. A well thought-out workforce strategy specific to the child care sector will put people to work, supporting those who are also working and going to school. This fact should not be lost, as the child care workforce is the key to quality, and to be clear, child care and early learning must be of the highest quality, built on evidence and best practice.

This is not about creating child care that goes to the lowest bidder or is left to chance; it must be purposely planned. Canada's child care sector has long been known for its low wages and for recruitment and retention issues. Contributing to the economy in this primarily female-dominated profession contributes not only to the economic security of the families it serves, but also of those who work in it. If we are to value children and their well-being, the women and men who provide early years education and care for Canada's youngest citizens are integral to its purposeful planning and to contributing to a robust economy.

As an organization we are committed to working with the federal government to make early learning and child care a priority in this country. Our organization, along with its 13 provincial and territorial affiliates and national partners, brings invaluable expertise, commitment, and connections to the grassroots of child care services, children, families, and the sector.

We are pleased to put forward ideas for consideration on a number of ways the federal government can support and expand its existing commitments to quality child care, a key component of a productive and prosperous future for our country.

3:50 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

Turning to the Canadian Dental Association, we have Mr. Levin, president, and Mr. Desjardins, director of public affairs.

Welcome.

3:50 p.m.

Larry Levin President, Canadian Dental Association

Thank you, Mr. Chair and members of the committee. Good afternoon, everyone. It's my pleasure to present to you, as you continue your pre-budget consultations.

The Canadian Dental Association is the national voice of dentistry, representing the profession and the 18,000 practising dentists in Canada, most of whom operate as small businesses, employing approximately 100,000 people and investing in their communities all across Canada.

Obviously, the discussion around the proposed changes to the Income Tax Act with regard to the Canadian-controlled private corporations provides added context in which these hearings occur. Our preference in appearing before you would have been to begin a discussion on federal leadership in funding targeted oral health programs for vulnerable populations, or to discuss increased long-term investment in programs such as the children's oral health initiative, which provides preventative oral health care for indigenous children. However, given the importance of the tax issue, I would like to spend some time discussing it.

In the CDA's pre-budget submission, we raised our concerns about the process and timeline to examine small business tax changes. At that time, we had only begun our internal discussions on that matter. Given the short timeline, with the October 2 deadline for submissions on the tax process only a few days away, we continue to consult with our members and other small business organizations to better understand the implications and the unintended consequences.

We know that these changes to tax policy will be far reaching, but the implications remain unclear and require more study. The government's discussion paper, released in July of this year, is a highly technical document. It is multi-faceted with multiple proposals. To effectively understand it's implications, more time is required on such a complex matter.

One of the biggest problems it creates is uncertainty, which is not helpful in a small business environment. Dental practices are like other small businesses. They provide middle-class jobs for tens of thousands of Canadians. They purchase supplies and equipment from Canadian suppliers. They're strong contributors to the economy, both locally and nationally. Most importantly, dental practices are like mini hospitals, requiring significant expenditures on capital equipment. Thus, like many other small businesses, the proposed tax changes could have a fundamental impact on how dental offices are established, how they're managed, and how they're staffed.

It is our view that the government's proposal takes too narrow a view of the impacts, without examining the deeper social or economic effects of such changes on small businesses and their employees. A 75-day consultation period is simply not sufficient time to properly analyze, consider the implications, and engage meaningfully with the government on these changes.

Moreover, we are concerned that some of the measures put forward in the proposal earlier this summer may make their way into the budget legislation. Including profound tax policy changes within a budget implementation bill will not allow the Standing Committee on Finance to adequately perform its duties to review the legislation, nor will it allow stakeholders to be properly consulted. We know that the committee is holding separate hearings to study these measures, and we hope those discussions will lead the government to re-evaluate its approach.

We know that the questions involved are complex and deserve an appropriate amount of study. The Canadian Dental Association would strongly recommend that the government establish a new process to allow for a more fulsome consideration of the implications of these wide-ranging proposals.

Thank you very much for your attention.

3:55 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Levin. I expect that you may get some questions in that area later.

From the Centre for Israel and Jewish Affairs, we have Mr. Shack.

3:55 p.m.

Noah Shack Director of Policy, Centre for Israel and Jewish Affairs

Thank you, Chair. I'm grateful for the opportunity to speak to the members of this committee on behalf of the Centre for Israel and Jewish Affairs, the advocacy agent of the Jewish Federations of Canada. We're a national, non-partisan, non-profit organization representing more than 150,000 Jewish Canadians affiliated through local federations across Canada.

I'd like to quickly highlight six items for your consideration.

The first is security infrastructure. The federal security infrastructure program, or SIP, assists communities at risk of hate-motivated crime to improve their security infrastructure, sending a clear signal that victims need not shoulder the burden alone.

We welcomed the increase in funding for the SIP in the 2017 budget. Increased funding, combined with support for internal security measures and access controls, should make a valuable contribution to the security and well-being of vulnerable groups; however, additional funding is required to further modernize the program and maximize its effectiveness. I'd be happy to provide concrete examples in the Q and A.

The second item I'd like to highlight is affordable housing. We welcomed the commitment to support affordable housing in the 2017 budget; however, the housing needs of Canadians with disabilities are still often overlooked as governments tackle the broader challenges of poverty.

This is particularly acute for Canadians with developmental disabilities. Statistics Canada reports that the employment rate is 49% for Canadians with disabilities and 22.3% for those with developmental disabilities, compared with 79% for the rest of the population. Of adults with developmental disabilities, 90% live in poverty, and 18% to 30% of homeless individuals have a developmental disability.

There's a 40-year wait-list in Ontario right now for affordable housing with supports for those with developmental disabilities. We recommend that the 2018 budget include a set allocation of affordable housing funds for people with disabilities. This should include 5% of total affordable housing spending being directed to specifically support people with developmental disabilities, which will be a game-changer.

The third item I'd like to highlight is palliative care. High-quality palliative care services are currently accessible to fewer than 30% of Canadians. Even where appropriate palliative care policies and procedures are in place, there's often a lack of resources, training, and access that limits the provision of care. We hope the 2018 federal budget will address this shortfall.

The fourth item is charitable giving. Deductions for charitable gifts were previously tied to the lowest and highest personal income tax rates, for donations below and above $200 respectively. We welcome the increase in charitable tax credits for those with income exceeding $200,000 to the level of the new top personal tax rate of 33%; however, we believe the tax credit for charitable gifts should be raised to the new top tax rate, 33%, for all Canadians, regardless of their income, even if this new rate is applied to donations of another benchmark: higher than $200. This would ensure that all Canadians enjoy the same benefits from giving charitably, helping to grow the important charitable sector of Canada's economy and society.

The fifth item I'd like to highlight is combatting hatred. The June 2017 Statistics Canada hate crime report confirmed that Jews remain the most targeted religious minority in Canada. To combat hate targeting a wide array of identifiable groups, the 2018 budget should provide support for the development of dedicated police hate crime units. Additionally, the budget should include funding for a national education campaign for police, prosecutors, and the public about the dangers of hate speech so that it's taken seriously in every instance.

The last item I'd like to raise is green infrastructure for community institutions. The Jewish community, like many other communities across Canada, recognizes the imperative of ensuring a sustainable future. Government can help encourage a significant reduction in our collective ecological footprint by providing support for green communal infrastructure, such as incentives for green renovation or building of community centres and houses of worship. These institutions, often housing charitable organizations of limited means, in many cases lack the financial capacity to choose a more expensive green option. Incentives of this kind would help to tip the scales and encourage a more environmentally conscious approach.

Thank you all for your time. I'm happy to answer any questions you might have.

3:55 p.m.

Liberal

The Chair Liberal Wayne Easter

You have our appreciation, Mr. Shack.

Next is the National Airlines Council of Canada, Mr. Bergamini.

3:55 p.m.

Massimo Bergamini President and Chief Executive Officer, National Airlines Council of Canada

Good afternoon, Mr. Chair and members of the committee.

My name is Massimo Bergamini, and I am president and CEO of the National Airlines Council of Canada.

I want to thank you for the opportunity to appear today to provide my organization's perspective on the upcoming federal budget.

The National Airlines Council of Canada was created in 2008 by Canada's four largest airlines—Air Canada, Air Transat, WestJet and Jazz.

Our members carry more than 92% of Canada’s domestic air traffic and 65% of its international air traffic, and they employ over 50,000 Canadians directly and contribute to an additional 400,000 jobs in related sectors, such as aerospace and tourism. Those are significant statistics, which reflect the role that a strong, competitive aviation industry plays in ensuring Canada’s economic prosperity. Today in Canada, commercial aviation has become the only practical way for millions to travel, to be with family, for work, or simply to explore our vast country. And travel they do.

According to Statistics Canada, the total number of passengers emplaned and deplaned in Canada increased by some 30% between 2008 and 2016. The era of elite jetsetters is long past. For Canadians, flying is now part of daily life and the lifeblood of an open, diverse, and geographically dispersed society. The 2016 Canada Transportation Act review, also known as the Emerson report, recognized this in its detailed aviation chapter.

Beyond the numbers, we cannot lose sight of the fact that air transportation is first and foremost about people. As people now book flights as readily as they drive cars, air travel has become the domain of the middle class, not the one per cent. Commercial air travel is not a luxury in Canada, yet Canada’s current policy framework treats it that way.

Our current system fails to recognize that air transportation serves both individual air travellers and the country’s larger social and economic interests. Adding costs to air travel in the form of airport rents, fuel taxes, security fees, and now likely a carbon tax, stifles our global competitiveness and penalizes the people whom air transportation is meant to serve. Given the demographics of air travel today, let’s call it what it is, another set of taxes on the middle class.

The Emerson report recognized how mounting fees and charges, as well as delays in security screening, affect travellers and the efficiency of the industry. It recommended phasing out airport rents, reforming the user-pay policy for air transport, and putting in place regulated performance standards for security screening. We urge your committee to recommend that the Government of Canada support the key competitiveness proposals of the Emerson report and put in place multi-year financial commitments starting in next year’s federal fiscal framework.

I would now like to add a few words about for-profit airport privatization.

First of all, to be clear, we are not opposed to for-profit airport privatization on ideological grounds. Our concerns stem from our understanding of the international experience.

Australia, a country with a similar geography and population density, has tried airport privatization, and their experience is instructive.

As the Australian consumer protection agency reported this spring, privatization resulted in massive increases in costs for airlines and travellers alike. Since their transfer to not-for-profit airport authorities in the 1990s, Canadian airports have successfully leveraged billions of dollars in user-generated revenues to grow into successful global transportation hubs recognized as the most efficient in the world. Adopting a business model that puts profit first risks damaging these hubs, hurting travellers, communities, and regions.

Under this model, protecting travellers would require strict regulatory controls on the ability of the privatized airports to set rates and fees, as well as the mandating of strong service standards. This, of course, creates a catch-22 for government, as strict regulatory consumer protection would reduce the value of these assets in the marketplace.

This is why our organization has urged Finance Canada to make public the market surveys that it has on this matter as well as the economic models it is using to arrive at an optimal regulatory framework. The discussion around airport privatization should be done in public and with all of the relevant data available for scrutiny. The stakes are too high for travellers, for airlines, for communities, and for Canada to follow any other course.

Thank you.

4 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

Next is the Retail Council of Canada. Mr. Littler, welcome.

4 p.m.

Karl Littler Vice-President, Public Affairs, Retail Council of Canada

Thank you, Mr. Chairman, for the opportunity to provide a retail industry perspective in your pre-budget deliberations.

The Retail Council of Canada is engaged on several key files before the government and before Parliament, among them the NAFTA renegotiations and the Canadian payments system. I have had the opportunity to speak to this committee previously about de minimis and interchange rates and would be happy to answer any questions on those, but will focus my remarks today on another matter of concern to our industry.

This being the season of hotly debated tax issues, I want to address a matter arising under the Income Tax Act. That is not the taxation of Canadian-controlled private corporations, but another proposed change that would negatively affect a very different demographic, namely our industry's two million employees.

Since time immemorial the retail industry has provided discounts to its employees, as have restaurants, travel and hospitality, and many other businesses. I can't speak for the other sectors, but these discounts are nearly ubiquitous in retail, whether in general merchandise, grocery, pharmacy, or fashion. For almost as long, the Income Tax Act has not treated these discounts as taxable benefits unless they provide merchandise below wholesale cost or involve reciprocal discounts beyond the employee's own employer. Not only is this rule well understood, but it forms a part of the Canada Revenue Agency's own employers' guide, of which I have attached the relevant sections to the written remarks that you have before you.

More recently, however, CRA has developed what is called a “folio”, which is one way that CRA raises pending changes to its approach. That folio section, which you also have in front of you on the same page, contains a very different interpretation of the Income Tax Act, which would begin to treat employee discounts as taxable benefits come January 1. Initially we thought this might be a typo, and we flagged the inconsistency for CRA. But no, it turns out the CRA does intend to change its long-standing practice in just over three months' time.

How the Income Tax Act, which remains unchanged, can support two opposite interpretations is hard for us to comprehend. What we do know is that the law doesn't simply invert itself without legislative change. Either the long-standing interpretation was correct at the outset but has now drifted to the point of being unrecognizable or a decision has been made that the law was wrongly interpreted from the get-go, which surely requires more consultation, discussion, and debate than simply repurposing the rule in a CRA folio. What is also certain is the negative impact this will have on almost two million retail industry employees and, one imagines, hundreds of thousands if not more employees in other sectors.

For workers of typically modest incomes, these discounts are indeed small perks of the job. Of course, most industries offer some non-taxable perks, be they language training, education, public transit passes, social events, workplace refreshments, and the list goes on. All of these have some notional value, but the government has not seen fit to include them in income.

Why, then, would the government want to abandon its long-standing practice and start to tax a store employee for a 20% discount on a pair of jeans, or a restaurant worker coming off shift for a meal at the end of the night? If these benefits were truly substantial additions to income, that could perhaps be understood, but they are typically of small value in each instance and even over the course of the year. To be taxed on these will reduce income for front-line workers, or they will be forgone altogether to avoid the tax consequences.

The second problem will be an administrative nightmare for retail and other employers. Once the benefit becomes taxable, its value will have to be tracked over an entire workforce and over a large number of low-value transactions. Then there's the question of fair market value. Is it this week's sale price, last week's regular price, or a competitor's price? Does it matter whether a coupon or loyalty points could have been used? And so on. The system works effectively now because employers know to keep the discount at a level above the employer's own cost, so that tracking is not required. You add, then, another complex and in our view needless compliance burden.

However, mainly our concern is with our employee impact. In an industry with low margins but high turnover, these employee discounts are one way to provide a small reward to employees and to engender staff loyalty and attachment to the workplace. We can't help but think that there are other issues of far greater concern than capturing employee discounts in the income tax system.

If the government does not step in to correct this problem, then that is exactly what is going to happen several months before the next budget on which you are deliberating.

Thank you.

4:05 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Littler.

I can't help but shake my head at this one, to be honest with you. In any event, we'll get to it.

We'll start with questions. We have to be tight. We'll go to five-minute rounds.

Mr. Sorbara.

4:10 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, Mr. Chair, and welcome to everyone.

I'll start with the Association of Canadian Publishers.

My question concerns our commitment to the Canada Council for the Arts for funding to the $360-million level by a certain year. I want your feedback on how transformative that is for the Canadian arts community, please.

4:10 p.m.

President, Association of Canadian Publishers

Glenn Rollans

Briefly, we're tremendously grateful for that increased investment in the arts. I think the Canada Council for the Arts plays an irreplaceable role in the arts generally. Many of our members benefit from the support for publishing and writing that comes through the council.

The quick description that I would give of the difference between what we're talking about today in the Canada book fund and the Canada Council for the Arts is that the CCA is a support for creation and the CBF is a support for dissemination. Canadian book publishers are equivalent to film producers. We build creative teams and create products, bring them to their audiences, and hopefully bring back enough money to do the same process again over and over. Those two pieces work in very complementary ways, and they're both really important to our members.

4:10 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you.

I'll go to the Association of Canadian Financial Officers on the recommendation on modernizing stock option deductions and the way we treat them.

Has your organization looked at the differential between a public company having a stock option and a private company that is not generating a lot of cash flow but gives its employees equity stakes, or as you would call them, options, from which they may benefit later on?

In my background I have read about that. I wonder whether you folks have looked at this at all.

4:10 p.m.

President, Association of Canadian Financial Officers

Dany Richard

We haven't looked at it, no.

4:10 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

My next question is for the National Airlines Council of Canada. Could you quickly comment on—you alluded to it—the Australian experience for the consumer with respect to the airport privatizations that have occurred in Australia?

4:10 p.m.

President and Chief Executive Officer, National Airlines Council of Canada

Massimo Bergamini

Yes. Thank you very much.

One reason we speak about Australia is due to the striking similarities with Canada in terms of territory and population density. Our understanding is that in their system they are operating under what they call literally a “soft touch” regulation regime that over the last 10 years has, according to the Australian consumer protection agency, resulted in increases in fees for both passengers and airlines of $1.6 billion Australian.

We've had the opportunity to discuss this with some of our counterparts in Australia, and they suggest to us that Canada should not jump headfirst into this process without meaningful and open evaluation of all the options.

4:10 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, sir.

Mr. Littler, thank you for coming. It's great to see you again.

You provided a comment today on the potential discounts for somebody working in retail or at a restaurant—getting 10% or 5% off an item—and having it declared a taxable benefit. To be blunt, this is the first I've heard of this. I'm surprised and maybe, if I can use the word, at first glance and without reading all the information a little disappointed. I'd like to get some more information from you on that, if we could take it off to the next part. Thank you for raising that issue with us.

Thank you, Chair. I'm done.

4:10 p.m.

Liberal

The Chair Liberal Wayne Easter

We're doing well.

Mr. Albas, you have five minutes.

4:10 p.m.

Conservative

Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC

I want to thank all our witnesses for coming here today and helping to educate us on where you think Canada needs to go in the next budget.

I'll start with the Retail Council. Sir, thank you very much for your briefing note.

It's usually small retailers, I'd say, the smaller operations, that are hit the hardest when it comes to compliance. Is that the case?