Finance Committee on April 24th, 2018

[Trevor McGowan]

Pierre can discuss the classes of information, and thanks for giving me an opportunity to clarify my earlier comments if they weren't adequately clear. Prior to the introduction of the Canada child benefit, a number of provinces referenced the national child benefit supplement in providing their social services, as Pierre discussed. The introduction of the Canada child benefit replaced the old NCBS, but a number of the provinces still referenced the NCBS, which is a variable in the computation of the old child benefit regime. That variable, I think it might have been (b) or (c), was retained—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Before you continue, just so I understand, is this part of the change supposed to help some provinces where the administration of the child benefit, and some of the administration of provincial programs, was being done by the federal government? Is that part of it, or is it not?

[Trevor McGowan]

It has more to do with provinces that require the amount determined in paragraph 122.61(c) of the Income Tax Act. If they refer to needing that information specifically, then with the change in the rules, (c) wouldn't have been there anymore. It was kept on the books for a couple of years to give provinces an opportunity to transition their information requirements to the new Canada child benefit system.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you.

[The Vice-Chair, Conservative, Pierre Poilievre]

Madam Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Mr. Chair, and thanks to everyone today for being here, for all your work, and for your patience with all our questions.

The first thing I wanted to talk about is the Canada workers benefit. My riding of Davenport is in downtown west Toronto. It sounds like a wealthy place, but it's not. I have a lot of working-class residents, so often our Liberal government talks about putting in place a lot of measures that will help support the middle class and those working hard to join it. I would say a good chunk of my residents are working hard to join the middle class, and I'm delighted with the introduction of the Canada workers benefit.

I would love it if you could just, for my own purposes, make sure I'm clear on how the new Canada workers benefit will be an advantage for low-income workers.

[Pierre Leblanc]

When the Canada workers benefit, building on the current working income tax benefit, is introduced in 2019, you can think of two main enrichments or improvements. One is the generosity of the benefit. It will become more generous in a couple of ways. First, the maximum benefit will be increased by about $170 for both singles and families; that's both single parents and couples.

[Julie Dzerowicz, Liberal, Davenport, ON]

That would be for a month, a week, a year?

[Pierre Leblanc]

That's a year. These are annual amounts.

[Julie Dzerowicz, Liberal, Davenport, ON]

Okay.

[Pierre Leblanc]

Also, the Canada workers benefit, to use the new name, phases in with earnings, it's flat for a while, and then it phases out with your net income. The proposal is to start phasing it out a little later so people can earn a bit more income before it starts to phase out and then phasing it out at a more gradual rate, at 12% instead of the current 15%. I talked about the increase of $170 in the maximum benefit but the increase can be significantly more than $170 for several types because they're benefiting from the two elements, both from the increase in the maximum benefit but also because it's phasing out more gradually as income increases.

As an example given in the budget, for a single worker, someone earning around $15,000 it would be about a $500 increase from the proposal included in budget 2018. There's that enrichment. The second is that we know, and in 2016 we published in our tax expenditure report, that everyone who is eligible currently for the working income tax benefit isn't claiming it. We estimated a take-up rate of about 85%. That means some low-income workers who are filing a tax return currently have to fill out schedule 6. Basically, the changes that are being proposed will be in the second budget implementation bill. To briefly set the stage, if someone doesn't claim it, the CRA will calculate it for them and pay it out.

[Julie Dzerowicz, Liberal, Davenport, ON]

Do we know how many people we expect that 15% to help?

[Pierre Leblanc]

That's about 300,000 eligible low-income workers.

[Julie Dzerowicz, Liberal, Davenport, ON]

Wow, that's wonderful.

How is this new tax credit going to encourage more people to enter the workforce?

[Pierre Leblanc]

Just the idea of the supplementing it requires. It's phased in with earnings. That could be employment income or it could be self-employment income. The idea is to support low-income families in a way that's connected to work. That requires you to have a job. That's the encouragement. As I mentioned, phasing it out more gradually means people who are in the income range where it's being phased out will lose a little less of their benefit as their income goes up.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

With regard to the small business tax rate and its reduction, I held a round table discussion with small businesses in my riding. When I spoke to them about the reduction from 11% to 9%, they were unequivocally very happy about it.

Could you talk to me about the impact of the reduced small business tax rate on eligible Canadian businesses' productivity and investment?

[Maude Lavoie]

The objective of the small business deduction is to leave more after-tax income within businesses so more money is available for businesses to reinvest in their business. Overall, about 750,000 businesses each year claim the small business deduction.

[Julie Dzerowicz, Liberal, Davenport, ON]

Okay. That's great.

My last question is around the expansion of the medical expense tax credit for service animal expenses. I'm a chronic insomniac, and lately I've been listening to podcasts about trauma and PTSD.

How do service dogs help individuals who suffer from PTSD?

[Pierre Leblanc]

Trevor talked about the expansion, that psychiatric service dogs will be included as an eligible expense. If you think of psychiatric service dogs in general, they can be tasked with, if people have severe anxiety, searching their homes before they enter. If someone is experiencing night terrors, applying compression can help improve the situation. For someone with post-traumatic stress disorder, if that person is having a disassociative episode, the dog could lick their hand to try to take them out of it. If someone has, partly related to that post-traumatic stress disorder, agoraphobia—not wanting to leave their home—the dog can be trained to try to coax them to get out and engage more, to leave their home. Those would be some examples of the tasks that would be in mind.

[Julie Dzerowicz, Liberal, Davenport, ON]

How will this tax credit help cover the cost of the service dog?

[Pierre Leblanc]

The medical expense tax credit is a non-refundable credit. It's for above-average medical expenses. It's the portion of eligible expenses that are about 3% of your net income for most people. Basically, it will be 15% of whatever those eligible expenses could be. It could be obtaining the animal. It could be the upkeep of the animal: food and things like that. It could be vet bills. If you are required to travel to undergo special training to learn how to best use the animal to help you, that would be another type of eligible expense.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

[The Vice-Chair, Conservative, Pierre Poilievre]

I have a few questions.

With regard to the Canada workers benefit, does it start to phase out before someone becomes taxable? In other words, we all have the personal exemption. Many of us have additional credits that raise the level of income we earn before any tax rate begins to apply. Does the Canada workers benefit start to phase out before that point or after it?

[Pierre Leblanc]

I'm thinking of an unattached individual because it's going to phase out around $13,000. That's roughly around the same level because you have—

[The Vice-Chair, Conservative, Pierre Poilievre]

As the personal exemption.