Finance Committee on Nov. 9th, 2017

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

Thank you, Mr. Chair.

Thank you, witnesses, for your testimony today. I'm going to start with the Canadian Federation of Independent Business.

Ms. Pohlmann, thank you for being here and for raising the issue of indirect interests. Obviously, governments need to be up front and clear with the business community, because businesses require not only opportunity to grow but also certainty. So when suddenly the government introduces rules that are vague or that do not necessarily allow them to understand how they need to comply, it can trigger all sorts of unintended consequences. People stop doing things just because they're not sure. It's a grey zone, and oftentimes accountants are some of the most conservative in a business sense, Mr. Chair.

First of all, has the government been able to convey what problem it is trying to fix by introducing these indirect ownership restrictions?

[Corinne Pohlmann]

My understanding, based on budget 2016, was that it was to provide rules that would prevent what we understood to be organizations, mostly professionals, from accessing the small business deduction more than once. There was the example of the law firms in which each partner had their own incorporation, plus the law firm itself was incorporated, and each would get access to the small business deduction. That was my understanding.

However, what we're seeing after the fact is that it goes well beyond that and it's having an impact on what I would consider middle-class small businesses that are simply trying to make the best of it. It's bringing complications into the system that they had not foreseen. Not only is it not allowing them to access the small business deduction on certain parts of their corporate earnings but it's also adding a lot more administrative burden, which again is an extra cost to those businesses. By not getting good clarity on whether what they're doing is the right or wrong approach, you're right that they are then taking that conservative approach their accountants are telling them to take, because it's not clear right now until we start seeing people challenge the government on it.

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

One of the biggest challenges I've heard since July 18 was around the tax planning for the private corporations' document. Beyond the rhetoric, many people didn't like being described as utilizing loopholes. One of the things we heard was that there are challenges around family ownership and owners wanting to have intergenerational transfer of their farms or businesses. Why is the government so concerned about businesses doing business with each another? They're going to get their share of tax regardless. To me, with this indirect method, it sounds as though they are basically creating a situation in which they want to charge almost by the shareholder and not by company. Is that correct?

[Corinne Pohlmann]

Now you're getting beyond my expertise. This is where it becomes very complicated in how it works.

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

Yes. Yesterday we were trying to get the Minister of Finance to build some certainty in the business community, because the government has said that they want to tax passive investments, but it's not being clear about whether or not the thresholds at which someone goes to a much higher rate on passive income are by shareholder—so that no matter how many businesses you own, you get that exemption for $50,000—or by company.

[Corinne Pohlmann]

With regard to the current tax changes the table, there were amendments made, some of which were very good, but there were other amendments that.... There are certain elements of those tax changes that are still moving forward and there are lots of details we still don't know. I think that's creating a lot of uncertainty and we need those details quickly, and we need to understand what those impacts are going to be. I would use the changes to the multiplication of the small business deduction as an example of what could happen if we do not look at this closely and understand what those unintended consequences are. It's not just impacting a few, but many. That's our fear about those changes that are still on the table.

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

Some might say that tax cuts are a wonderful thing. I usually think they can be good, but again, private campgrounds that are apparently not small enough, because they only have five employees, are being ruled out for that deduction; doctors such as radiologists who are working in a shared practice have been disallowed; and until this bill, co-operatives of farmers and fishers would have been disallowed.

How does the government fix the indirect cost? Would you say it should just repeal that legislation and be agnostic when it comes to the interactions within families?

[Corinne Pohlmann]

Absolutely. What's needed is some clarity, such as the farmers and fishers' thoughts around co-operatives, as to what it means when family members do business with each other but don't own shares in each other's companies. They're still separate companies. That's the issue that needs to be—

[The Chair, Liberal, Wayne Easter]

We'll have to end it there.

I believe the minister said yesterday, in response to those questions on passive income, that they're still working that through and will make an announcement in the not-too-distant future.

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair, and thank you to the presenters today.

I have a few questions. The first one is for the Canadian Centre for Policy Alternatives. I listened with real interest when you talked about the issue of housing and how it affected employers. You pointed to domestic abuse as something that has resulted from poor housing.

I just sat on a committee that reviewed the issue of suicide in aboriginal communities across the country, and the numbers that we found and the despair that people are exposed to are horrific. There are many issues that are causing the despair among our youth, but housing was pointed to as one that was fixable.

It was mentioned many times that if we could fix the issue of housing, which has worsened over the years, we'd solve 50% of the social issues that are challenging us. Housing is a factor in domestic abuse, but in our aboriginal communities it's also a real factor in sexual abuse. It's also a factor when it comes to suicide. It limits our people being able to hang onto gainful employment. Students have a hard time studying, and it causes lower grades.

I'm assuming you have some research you could share with us.

Mr. Chair, maybe she could provide that to us.

My next question is for the Canadian Federation of Independent Business. I represent the Northwest Territories. Almost all our communities are aboriginal. We really have a challenge, because the way we live has changed. Many things are causing that, and our culture is being diluted. A lot of our elders say that our youth have to live in two cultures now: they have to have a foot in both worlds. Some of the elders of the Tlicho Nation say that you have to be strong like two people, because you have to be able to know how to hunt, fish, berry pick, trap, and all these traditional pursuits that we've done historically, but at the same time you have to have a full-time job to look after your family.

We were quite happy to see the flexibility in the labour code changes. We know there was a lot of work done with indigenous governments and people in terms of consultation. I wonder why you're making a recommendation not to go ahead. Have you talked to indigenous people? Have you gone out and consulted with indigenous governments, first nations, Métis, and Inuit? There was a lot of work done on this, and I'm not sure where you're getting your direction from. I'm assuming....

I'll let you answer that.

[Corinne Pohlmann]

It's from our membership. Our membership are 109,000 owners of small and medium-sized businesses across Canada, including in the Northwest Territories. We have over 250 members in the Northwest Territories.

[Michael McLeod, Liberal, Northwest Territories, NT]

Yes.

[Corinne Pohlmann]

It came from them. It's the direction we get from them.

The reason we prefer not to make prescriptive changes to flexible work arrangements is that we worry that when you get too prescriptive around some of these labour code changes, it almost takes away a lot of the flexibility that already exists. Small companies know their employees very well and tend to know what's going on with them, because the owner works beside the employee. We know they already provide a lot of flexibility.

We have recently done public opinion polling of employees and found that, for those who work at the smallest companies, the thing they like the most about working at a small company is the flexibility it provides. What we worry about is that when we start implementing requirements, it can sometimes restrict the flexibility that already exists.

[Michael McLeod, Liberal, Northwest Territories, NT]

Could you go to the question I just asked you?

[Corinne Pohlmann]

What was that?

[Michael McLeod, Liberal, Northwest Territories, NT]

Have you talked to any indigenous people on this?

[Corinne Pohlmann]

Well, we talk to our membership.

[Michael McLeod, Liberal, Northwest Territories, NT]

That's not what I asked you.

[Corinne Pohlmann]

That's where we get our direction from. We get our direction from our membership.

[Michael McLeod, Liberal, Northwest Territories, NT]

I'm asking you if you've talked to any indigenous governments about this.

[Corinne Pohlmann]

No, I have not talked to indigenous governments.

[Michael McLeod, Liberal, Northwest Territories, NT]

Okay, thank you.

My next question is for the nurse practitioners.

I really appreciate the work you've done to allow the nurse practitioners to enhance their role. We depend a lot on nurse practitioners in all three territories in the north. A lot of times it's difficult to see a doctor, and if you do, you're probably not going see him or her again. I want you to maybe discuss with us your organization's work in the remote areas of the province that you're in, and maybe the rest of Canada, and how that's being received by your members and the people they assist.

[Theresa Agnew]

There are now close to 5,000 nurse practitioners across Canada. Many of those nurse practitioners work in rural and remote and northern areas across every jurisdiction. I, myself, had the pleasure of working for a year in the Moose Factory zone and providing primary care services to the communities of the James Bay coast. I would say nurse practitioners are somewhat disproportionately represented in under serviced northern and remote areas, yes.

[The Chair, Liberal, Wayne Easter]

We will have to leave it there. Thank you all.

Mr. Kmiec, you have about four minutes.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

Just to go back to the Canadian Federation of Independent Business and to talk about the flexible work arrangements specifically, a lot of the rules proposed in Bill C-63 are for federally regulated employees. My question for you is, first—because you had said you're kind of worried about it—what kind of impact will it have on your members? You do represent small and medium-sized businesses, so which of your members would specifically be most impacted by this? Second, what would be your suggestions for amendments or modifications to the proposal put forward in Bill C-63?