Finance Committee on April 30th, 2018

[Emily Norgang]

In terms of encouraging people to join the workforce, it would be helpful if the benefits from the Canada workers benefit weren't reduced based on the receipt of EI. These benefits have been earned by payment through a premium.

Also, we should allow advance and more frequent payments of the Canada workers benefit, so that applicants can apply for about 50% of it to be provided in advance. It would be good if it were reformed, so that 100% of the expanded benefits could be paid quarterly in advance. This would be similar to the GST tax credit, and would benefit workers during periods of low or interrupted earnings in the year.

[Pierre Poilievre, Conservative, Carleton, ON]

Can I ask a quick question?

[The Chair, Liberal, Wayne Easter]

Yes, go ahead, then we'll come to Ms. Gibson.

[Pierre Poilievre, Conservative, Carleton, ON]

I just want to follow up on that point.

I've been thinking a lot about that, because you're right. If the benefit only applies at year end, it's hard for the worker to make the link between the benefit and their daily work.

My only concern is that if someone's income is disproportionately low in one part of the year, and therefore they received the benefit, and then it was higher in the later part of the year, is there a risk they might have an unexpected obligation to repay the government, if they had received the benefit on a quarterly basis?

[Emily Norgang]

I was just going to say that clarity in general around this would be helpful, and I think it's a challenge to promote this benefit and what it means.

So again, it's only applicable to those who file their taxes, and we have to remember that some low-income earners don't even file their taxes to begin with. So there's a wide range of awareness that needs to go along with it.

[Pierre Poilievre, Conservative, Carleton, ON]

I agree with your point. It would be good if we could make them more frequent. I'm just trying to ascertain how one could do that practically without, for example, providing a benefit early in a year when the income is low for the person, and then because they do a lot better in the last five months of their tax year, say, they all of a sudden have an obligation to pay it back.

I haven't sorted out in my mind how that would work, and I welcome your suggestions.

I think some other witnesses would like to comment.

[The Chair, Liberal, Wayne Easter]

Yes, Ms. Gibson wanted to come in on the original question.

Go ahead, Ms. Gibson.

[Diana Gibson]

Yes, one of the big problems we have with our system, not just with the working income supplements, but in general with our income benefits programs is that there's a concept of deserving and undeserving poor. If we could move away from that back to a place where there's a right to a dignified income when in need and we move to a living income for those folks, we would bypass a bunch of these problems. When you start means testing every little piece, and you start forcing people to jump through a whole bunch of hoops to get a benefit, like selling off all their assets, we've put them into a place where they end up being further behind.

Addressing this by moving to a non-stigmatized, rights-based income would be a really important place for us to go, more generally.

I also wanted to speak to the tax expenditures issue that was raised more generally. Each of our tax expenditures should be looked at in terms of the goals that are set for it, evaluated against a clear social public good and outcome with a clear metric for measuring, with accountability and outcomes. So, for example—

[Pierre Poilievre, Conservative, Carleton, ON]

Sorry, we're getting a little bit off the subject.

[The Chair, Liberal, Wayne Easter]

We're over time too. I'll just let Ms. Gibson finish and then we'll go to Mr. Fergus.

[Diana Gibson]

In this case, making sure that there is clear tracking and evaluation of implications for those who are on the income would be a really critical part of the puzzle.

[The Chair, Liberal, Wayne Easter]

Just before I turn to Mr. Fergus, Mr. Ball, on your tax review, this is something that comes up a lot. In fact, this committee recommended a comprehensive tax review in our report to Parliament two years ago. We looked at it last year, and it just kind of carried over.

How would you see that taking place? Do you see a royal commission? Do you see a committee of experts? Do you see a parliamentary committee? How would you think that review should take place?

[Bruce Ball]

There are a number of ways of doing it. I don't think it needs to be a royal commission. I do think it needs to be independent, though. That could involve input from both inside and outside government, but it should be independent.

We've started a bit of a process in terms of trying to determine that ourselves. We got people together to do a sort of SWOT analysis of the tax system—its strengths, weaknesses, what's working, what's not—and then look at the key areas that need to be focused on. We'd like to see it done as one review, but that said, it could be done maybe in stages as well. I think we're happy to just have a discussion around how to advance it and find a method that works for the government, because we're pretty flexible in terms of how we'd like to help.

As I say, a review of the whole system at the same time would be great, and we would like to have independent people involved, but the format doesn't have to be a royal commission.

[The Chair, Liberal, Wayne Easter]

Thank you. That's helpful. There will be pre-budget consultations this fall. It might be a recommendation you want to make.

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Chair.

Thanks to all the witnesses for coming here.

I guess my question is going to be focused a little bit more on Ms. Norgang, and continuing your conversation about the workers income tax benefit.

I'm so pleased to see that we're dealing with this. I think this is an approach that's long overdue, and one that is similar to the initial idea of about 20 years ago when there was the launch of the national child benefit. If you have people of similar income but one is working and one is receiving benefits, you want to make sure that the advantages to choosing to work remain the same, that there is no rational avenue for people to choose social assistance because they can get more benefits that way. We want to level that playing field, because fundamentally, I just believe that people love the dignity of work, the ennobling act of being at work.

You suggest making the payments happen more often. Like my colleague opposite, I'm just trying to figure out what necessarily would be the advantage to that. Could you walk us through this, why you think there are clear advantages to it working that way? That would be very helpful to the committee.

Take your time in doing this, because whatever testimony we hear, that's what we can pull off in the final report.

[Emily Norgang]

I just want to start by giving the members a sense of how big or small this benefit is. It is actually very meagre, very modest, compared to other social transfers.

Just to frame this, in 2015, 1.2 million working-age Canadians received the benefit. It was an annual average of only $807. This compares to child benefits, providing 3.9 million working age people with an average of over $5,000; EI benefits, providing 2.4 million people with an average of over $7,000; and social assistance, providing 1.2 million people with an average of over $8,000.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

This is the first real change and increase that we've had. Also, bringing forward the future increases and making them indexible is a major change.

[Emily Norgang]

Yes, and we have seen those major changes as having been helpful, but the change to the workers income tax benefit is still a modest change to a modest benefit.

Just to frame it in the context of what we're talking about, when we're talking about the working poor, 7% of all economic families are part of the working poor. This goes up to 19% for single females, 16% of single parent females, and 15% of single working males. Fully one third of the working poor held full-time, full-year jobs. These are people who are working full time, full year, and still living in poverty.

The challenge, certainly, is there. To get to your question, the idea is that, by providing it quarterly throughout the year, it would enable people to have these benefits when they needed them. They could continue to then feel able to take up part-time work or temporary work if they needed to do that, but they would still have the supplement to pay for the things that they need most, whether it's rent, medicine, or food.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Ms. Gibson, do you want to have in on this issue?

[Diana Gibson]

No, I'll leave it there.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Okay, perfect.

Ms. Gibson, in your opening comments, you talked about the importance of removing stock options as one way of creating more tax fairness. I think that a lot of Canadians would probably agree with you.

However, across the river from my riding are a lot of people who work in the high-tech industry, and they use a lot of stock options for compensation in start-up companies as a way of buying into the promise of what a company or enterprise represents.

Do you think there are ways it could be useful without being abused?

[Diana Gibson]

That's a great question, because it applies to a lot of our tax expenditures. You know, as structured, a lot of them are fairly blunt instruments. That one, for example, is not specifically targeted at struggling start-ups in the tech industry. It's widely available to those who have the right thresholds. That's why I said earlier that if we're going to talk about tax expenditures, we need to tie it to a clear public goal and to have metrics and accountability for if whether or not it's meeting the goal.

We don't have any metrics that tell us whether or not those stock options are building tech companies or if they are being reinvested, whether those are highly successful companies or start-ups, or whether those are multimillion-dollar CEOs or low-income tech workers.

First off, we need to ensure that all of our tax expenditures are structured in a way that we're clear on what the goal is and is tied to a real public good. There are metrics for measuring its effectiveness and transparency and reporting to the public on how that money is being spent.

The other thing is that, to some extent, it's risky. If we have struggling tech companies whose workers aren't being compensated adequately and they're relying on stock options, that can exacerbate the precariousness in a sector where a lot of workers are already highly precarious. I know lots of tech workers who are really struggling. It's not necessarily the best way to support struggling tech companies if it's being on done on the backs of precarious workers.

I would say that the small income tax break is another measure that, ostensibly, is aimed at creating jobs, but half of the small businesses have zero employees. How targeted is that? It's not.

Generally, we need to look at those instruments much more carefully.

[The Chair, Liberal, Wayne Easter]

You seemed to have a quick supplemental question, did you, Greg?

We're running into our next panellist's time, but there are only four witnesses there.

Go ahead.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I'll be very, very quick then.

Am I hearing that you could see some use for this, but that it would depend on what the goals of the public policy options were? You wouldn't want to just throw the baby out with the bath water; you would like to see this more focused.

[Diana Gibson]

I would suggest that for any tax expenditure like this, we should look at the public goal first. If the public goal is to support struggling tech companies to get out of the gates in Canada, we should look at the whole toolbox we have and ask if tax expenditure is the best and most cost-effective way for Canadians to support that.

If that is a public goal, maybe there's a different way. Maybe those companies are struggling to get highly skilled workers. Maybe their barriers are different than simply the compensation issue of those workers. We need to identify the goal and those barriers, and then the toolbox we have that's going to be the most targeted way to effectively achieve that goal.

It may or may not be stock options. I doubt it would be, to be honest. We need to look at the actual challenges that those businesses are facing, figure out what they are, and then track what works and what doesn't.