Finance Committee on Oct. 20th, 2017

[Jay Goodis]

What our company does is build software to solve some of the hardest compliance in the country. I look at the effect this would have in all the different pools that have to be tracked. You'd have pools from before legislation, or before the day they implement the legislation. Then you'd have pools from potentially small business income. Then you'd have high-rate income. I could share some of them, but there is just not enough time. There are too many.

If you want one very simple example, let's just take a company, such as mine, that's building up IP. That's an active asset I have, but one day, if that gets sold, it would be considered a passive asset. One day, when I have that capital gain, if I decide to sell the asset inside my company, would the first $50,000 be subject to the current rules, and then, for everything above that, could I be looking at those really high rates of 60% or 70%?

There are a lot of concerns, and there are a lot of transition issues that I don't think have been thought through. I do agree with CPA Canada about a comprehensive study and an economic study to see the impacts, because this passive income proposal is more about business than about tax.

[The Chair, Liberal, Wayne Easter]

We'll have to leave it there.

We will have time for one question from each of the parties following Ms. O'Connell. Go ahead, Jen.

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

Thank you, Mr. Chair.

Thank you all for coming.

I'm going to also start with No Fly List Kids. A lot of the questions have been answered, and I also agree with Mr. Boulerice's comments. But I am somewhat glad you're here in the sense that if funding is an issue, then it's important for this committee to know as part of our pre-budget deliberations, because if we don't know and we don't hear it, frankly, then we can't actually make a recommendation. So I am glad you're here, despite the fact that it sounds like an awful situation to be in, and I am sorry that has happened.

In response to my colleague Mr. Fergus's question about Bill C-59, my understanding is that if the request to come off the list is made and the minister doesn't respond, then they can default off. I think, Mr. Ahmed, you said something to the effect that the name would be on the list and you are just told that it is not on the list. I'm sorry if I misheard, but could you explain why you think that the change in Bill C-59 in terms of the minister's non-response would be a default removal and why that wouldn't actually change anything?

[Khadija Cajee]

The reason for that is that our children's names are not actually on the list. Our children are name matched to somebody on the list. So whoever it is whose name is on the list has a legal recourse for redress. Our children are not the actual people whose names are on the list, so these kids are caught in a grey zone where, because they're not the names on the list, they don't have access to that recourse.

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

I totally get it. Thank you for that clarification. That was confusing on the answer, but I completely understand now.

So to your presentation in terms of that additional information to confirm identity, whatever that may be....

[Sulemaan Ahmed]

MP O'Connell, when our son was born in 2009, a gentleman in the United States was convicted of terrorism. That person is still in jail, and our son's name matches part of his name.

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

I get it, the clarification.... Thank you. I appreciate that.

Mr. Goodis, I just want to clarify some of the things you said in terms of that $50,000 investment limit. I'm not sure if you're aware, but it's not a $50,000 limit of your investment. That's the limit on the income from your passive investment, which would mean you'd have to have $1 million per year at a 5% rate of return to reach that $50,000 income limit. When you make statements to this committee saying that you can only invest $50,000, no, you would have up to $1 million a year if you're getting a 5% rate of return.

In your testimony, you talked about RRSPs and TFSAs being dead money, but even you can acknowledge that those have limits on them before they're taxed at a different rate. In your scenario, you say you have no passive investment now. You have to reach approximately $1 million to get to that $50,000 limit. You don't think that's fair in terms of everybody else has limits on RRSPs and TFSAs, and yours would be up to $1 million. As you said, you don't have passive investment right now, so you don't think that will give you a lot of room to grow over time?

[Jay Goodis]

I think you're looking at this more as a strictly retirement issue as opposed to a business issue. Let's take a tech company as an example. A tech company starts small, and it looks to grow very big. As the owners are looking to grow, a lot of times they're looking at an acquisition strategy. To acquire other tech companies is expensive. If we limit the capital available for these growing companies to what you say is $1 million, then what are they going to do? They want to have more money. They need to get sometimes $2 million, $3 million, $4 million, $5 million, $10 million in order to buy others.

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

Sorry, just to clarify, these changes only impact when the money is pulled out for personal use. If it's about acquisition and growing the company, then there actually are no changes, so there are no limits. It is a question of retirement essentially because that's the consultations we heard, that it's putting the money aside and taking it out at a lower rate for personal use, not for business or investing in the business or investing in acquisition or establishing more capital.

I'll move on to my next question because I know I'm going to get cut off. I think you said that two or three doctors already left your firm. I'm just curious. Where did they go, and when did they leave?

[Jay Goodis]

That was provided to me by experts within my network. I asked people what had happened to the doctors.

If I can respond to your point about them keeping the money and reinvesting, you just have to compare it to, say, a public corporation, which is not subject to those same rules, and the shareholders of those public corporations aren't facing the same rules. I think it's important, and this is where I go back to—

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

Sorry, but I have to ask. Where did the doctors go? You stated that in your opening testimony.

[Jay Goodis]

I don't know. I asked the experts, and they said they've already had two or three doctors leave.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

We will have to cut it there.

Before I go to Mr. Kmiec, Ms. Ballantyne, I don't believe you have had a question. Do you have anything you want to add to bolster the arguments in your paper?

[Morna Ballantyne]

Let's wait for the round, and then I can make a final comment.

[The Chair, Liberal, Wayne Easter]

Okay, that's what we'll go with.

Mr. Kmiec, you can have one question.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Chair, I think I'm going to hand my time—

[The Chair, Liberal, Wayne Easter]

Oh, sorry. It's Mr. Albas now.

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

I just want to make sure Mr. Goodis's point is counted there.

You are saying that if a business purchases and acquires a competitor and then continues to run that as a parent company, when it looks to draw dividends in from that, because it's a passive business, those profits or retained earnings into the parent corporation would be taxed differently. Is that correct? Is that what you're trying to say?

[Jay Goodis]

That gets very challenging, but yes. In short, if we have a company that acquires another company, it's going to be using its assets, and that could be deemed to be a passive investment. So now, if one company buys another company and it now owns it, how is that going to be treated?

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

I'm worried, because you will have someone who, let's say, creates a master franchise, a management system, and then basically has people buy franchises whereby they are paying into it. Again, it's a passive investment because it's intellectual property, so it will be taxed at a much higher level than if it had been an international company coming in with the same strategy. This is where I think the differences are, and I don't think the government is giving a lot of clarity on that.

[Jay Goodis]

People think of passive assets as just investments in the stock market, but that's not true. There are a lot of passive assets that create jobs that really add a lot of value to the economy. Again, I think we really need to think this through and do a comprehensive study to make sure that we're achieving the goals of the government and we're not impacting what's happening to the business world.

[The Chair, Liberal, Wayne Easter]

Mr. Boulerice.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

I have a question for you, Ms. Ballantyne. Obviously, you can imagine that I really liked your presentation and your proposals.

In Quebec, we have experienced the arrival of early childhood centres, low-cost public day care centres. According to a study by economist Pierre Fortin, this has enabled 70,000 women to return to the workforce. So it's a very significant increase in collective productivity.

Conversely, not having affordable public day care can prevent women from entering the workforce or remove them from the workforce. This morning, when we heard the audience's comments, a grandpa spoke. He was very happy that his daughter had twins. However, it has also caused some difficulties. They realized that the only day care centre that could offer a place for the twins was a 45-minute drive from home and that the cost of day care for these two babies was the same as their mother's income. She wondered if she would be better off leaving work to stay home, because it was too complicated and too expensive to send her children to day care.

Isn't this a good example of the risks to our economy that this lack of programs poses?

[Morna Ballantyne]

Yes, exactly. The International Monetary Fund's new research speaks exactly to these risks.

I apologize, Mr. Boulerice, but I'm going to switch to English.

You asked for comments. I started advocating for child care when I was pregnant with my first son. He and his partner just had a child, who is now seven months old, and the only real change.... In fact, the situation is much worse, but the only good thing is that between my son and his partner they have 12 months of parental leave and, fortunately, they have access to parental EI benefits. Unfortunately, that's true for only a minority of parents who have access to that. They have been on a waiting list for a child care space in Ottawa. Again, his partner did exactly what I did: I got my name on a waiting list as soon as I was pregnant. They are now number 8,212, I think, on the waiting list.

There's not enough space. It's unaffordable. It's particularly unavailable for infant children. I was really glad to hear the presentation from the March of Dimes. Children with disabilities are almost completely excluded. Parents who have disabilities have trouble affording and accessing it. It's so frustrating. You talk about being on the backbenches and not being listened to by government. Well, we have been advocating for this for decades.

Fifty years ago the Royal Commission on the Status of Women said that you have to build a child care system that's affordable and accessible if you want women in the workforce and you want women to enjoy economic security. We have a Liberal government that has put the issue on the agenda, but not enough. I'm really afraid that what they've done is to say they've checked the box, because they gave essentially $500 million in funding for 13 jurisdictions for one year, and that's not going to increase very much for 11 more years.

Let me remind you that in 2005, the last time we had a Liberal government, they promised $1 billion in current dollars in 2005, annually, so we're really moving backward, not forward. It's a detriment to women's participation in the workforce, and it's a real detriment to the economy.

If the IMF researchers, the IMF of all institutions, are saying that if Canada wants to grow its economy, get women to participate in the labour force in equal numbers, provide the child care and other support.... What's interesting in the IMF report.... We hear a lot about the investment in the child tax benefit, and we congratulate the government for that investment. It's hugely important in addressing poverty among families and children. But what's happening is that because the cost of child care has increased, the child care benefit is even becoming a disincentive. What parents have to calculate is exactly what you said. What am I going to earn? What's the cost of child care? One of the things that gets taken away, if you have access to child care tax benefits, is potentially your access to a subsidy.

You have to do the whole thing. If you want increased participation, you have to do it. We've asked for this. Listen to us, please. You haven't done enough. You're on the right track. Engage the child care sector in the consultations. We have been completely excluded in the development of a multilateral framework agreement. We think that's one of the reasons that it's not meeting the objectives it should.