Thank you, Mr. Chair.
Good morning. I want to thank the committee for the invitation to appear today and participate in the discussion as part of the consultation on the government's current review of tax planning using private corporations.
While I am the senior vice-president of the Canadian Federation of Independent Grocers, I am speaking today in my capacity as chair of the Small Business Matters coalition, a group of trade associations covering a wide variety of sectors. The cumulative number of businesses we represent is about 180,000. In terms of a coalition size, we are now the largest in Canada.
Over the last few weeks, there's been a lot of sound and fury coming forth from various quarters on the proposal about the issue we are discussing today and how the current system may not be working for the purposes intended.
Our coalition was aware that, in the last federal election, the Liberal Party had declared in its policy platform that, if elected, they would move to reduce the current small business tax rate to 9% but wanted to “ensure that Canadian-Controlled Private Corporation (CCPC) status is not used to reduce personal income tax obligations for high-income earners rather than supporting small businesses.”
During the course of the last election campaign, our coalition supported that plank. I believe that was reiterated in the Minister of Small Business's mandate letter that was publicly released.
I went through the media clippings before I came here today, and I can't recall seeing any outrage or anything like the sound and fury that we're seeing today. But as we said to the minister, we reiterated our support for the principle behind that review, a review aimed, as we understand, at exploring ways to ensure there was fairness and more transparency in the current system, and that it is being utilized by genuine small businesses for the purposes intended.
We also said to this minister, to this committee, and to previous ministers, as did others in the business community, that we need more fairness and transparency in the payment system in this country that is currently allowing small businesses to be put at a competitive disadvantage by unacceptably high credit card interchange fees amounting in the billions of dollars. The concept that you could push forward support for these principles in one area but not in another leaves me personally perplexed.
I'm not saying, and our coalition is not saying, that some changes cannot be made to proposals that were outlined in the consultation document. I expect changes will be made by the government based on the input they've received. The government has made clear to us that they are listening during the consultation period, and we have yet to see any legislation on the most contentious piece, passive income, nor any definitive statements of finality by the government as to how they intend to proceed.
When this occurs, we will make our views known, but in the context of this review, let's apply that principle of fairness and transparency to income sprinkling as an example. This is an extremely important measure that exists to compensate family members making a reasonable contribution to the business, and we look forward to working with the government on defining that term. But income sprinkling should not be used as a means by which self-employed, high-income professionals avoid tax by sprinkling income among family members with no reasonable connection to the business.
I know people who take advantage of this tax planning strategy, but with all respect, as I have said to them, the money that is going to them, our coalition believes, should instead be used to help further reduce the small business tax rate. Notwithstanding that Canada has the lowest small business tax rate in the G7, our small businesses have unique cost challenges. While investing in the bricks and mortar of their businesses, hiring local, buying local, and being the backbone of communities across this country, our members cope with skyrocketing energy costs, higher credit card fees for small businesses as opposed to large corporate chains, the growth of online shopping, and in some provinces, whopping minimum wage increases and a myriad of various and increasing fees, charges, and premiums.
All of these costs and more have a disproportionately deeper impact on small business. All too often this context is forgotten when governments examine the small business tax rate. All three levels of government must do more to be cognizant of the cumulative impact of these costs, no matter what level of government is responsible.
At the same time, the business community must be consistent when it pushes government for more fairness and transparency in other areas. We must ensure that the tax system is one that continues to support small businesses' ability to invest, hire more people, source Canadian products, and to expand. If the review that has been undertaken allows Canada to build on that, this is something, again, our coalition supports.
If there is one message I would leave with this committee today, it is to convey to them that, no, the entire small business community is not lighting their hair on fire over this consultation. Our members understand the principles that are being discussed in this review. We feel we are being listened to, and thanks to the openness that we have personally encountered with Minister Chagger and Minister Morneau and others, and how they've dealt with us—and that's all I can speak to—we're confident that the government will take action to ensure there are no unintended consequences to these proposals.
And yes, I want to repeat that we want to see a further reduction in the small business tax rate.
Thank you.