Thank you, Mr. Chair, and members of the committee. As mentioned, my name is Bruce Ball. I'm vice-president of tax for the Chartered Professional Accountants of Canada, known as CPA Canada.
CPA Canada is one of the largest national accounting organizations in the world, representing more than 210,000 members. Created through unification of the three legacy designations, CPA Canada is celebrating five years of serving the profession, advocating in the public interest, and supporting the setting of accounting, auditing and assurance standards.
I'll focus my comments today on the amendments to the Income Tax Act in part 1 of Bill C-74. In particular, I wanted to address three important points, the first being the outstanding issues that remain with the private company tax measures; the impact of the recent U.S. tax changes on Canada's competitiveness; and the need to review Canada's tax system to address these matters and other matters related to competitiveness, simplicity, fairness, and efficiency.
Starting with the private company measures, as you're well aware, the finance minister's initial proposals to change the tax provisions for Canadian-controlled private corporations were met with considerable criticism. The minister and his department have listened and acted. The provisions laid out in budget 2018 and the bill are much improved. However, there are still aspects in need of further improvement. In particular, the new legislation around the tax on split income is still complex, difficult to read and interpret, and challenging for business owners and practitioners to apply.
A general exemption for spouses would go a long way to simplifying the measures, and is highly recommended. The joint committee on taxation of the Canadian Bar Association and CPA Canada also made some suggestions to further clarify the rules, which we think should be considered. The joint committee's suggestions are rather technical, so I won't go into the details here, but if there are particular questions, I'd be happy to address them.
Though not yet legislated, the changes to the tax on split income are set to take effect on January 1, 2018. We're still suggesting that the government consider deferring the changes to January 2019 to allow more time for consultation and further refinements, because we still think the rules can be improved.
On competitiveness and the matter of the U.S. tax reforms, no matter what we think about them, they are a game-changer for Canada. Budget 2018 announced that Finance Canada would conduct a detailed analysis of the U.S. federal tax reforms. This is good news, but this process must have a sense of urgency to it. Canada's competitiveness depends on it.
In the most recent CPA “Canada Business Monitor” survey, two-thirds of Canadian business leaders report that Canada is now a less competitive place to invest and do business versus the United States, compared to one year ago. The minister says he does not believe that the corporate tax rate is the problem, and we agree. The issue is competitiveness, and competitiveness can be affected by a number of different factors. The tax system as a whole, not just tax rates, is a fundamental part of creating a competitive business environment.
This brings me to my third point, a comprehensive tax review. To ensure that Canada has the most competitive, fair, simple, and efficient tax system possible, it's time for a review of the tax system. You've heard me make this argument before, but each time I appear before this committee the rationale becomes stronger and more urgent. Tax reform will involve broad consultation, and it will involve looking at the tax system more holistically, not just from the perspective of business competitiveness. The process will be worth it. It will lead to a better, more long-term approach to fixing Canada's tax problems.
While the U.S. tax changes demonstrate the need to address Canada's tax system, the controversy around the proposed CCPC tax changes also illustrates why a holistic approach is preferable to incremental changes. The Advisory Council on Economic Growth also recommended addressing the competitiveness challenges in Canada's tax system.
It we want a tax system that fosters our long-term competitiveness, that supports inclusive growth, and that benefits all Canadians, then a review of the entire tax system is the first crucial step.
Thank you very much for the opportunity to appear before the committee, and I'll be happy to answer questions.