Evidence of meeting #147 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was workers.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
We will call the meeting to order to hear from witnesses on the budget implementation act, Bill C-74.
In this round between 3:30 and 5:00, we have four witnesses here, and one from Vancouver by video.
We'll start with Mr. Robert Blakely from Canada's Building Trade Unions.
The floor is yours.
Robert Blakely Canadian Operating Officer, Canada's Building Trades Unions
Mr. Chairman, I think it would only be appropriate that the senior member of the labour movement, the president of our body, speaks first, and I will follow up.
Liberal
Canadian Operating Officer, Canada's Building Trades Unions
I mean by rank, not necessarily age.
Liberal
The Chair Liberal Wayne Easter
—but Mr. Yussuff would probably have a very good comeback, so I'd better just settle with where I am.
Hassan Yussuff President, Canadian Labour Congress
Mr. Chair, you are supposed to be neutral and not express your views on these matters.
Liberal
President, Canadian Labour Congress
Thank you, sir.
Chair and honourable members, good afternoon.
First, on behalf of the three million members of the Canadian Labour Congress, I want to thank the committee for the opportunity to present our views on Bill C-74.
We want to commend the government for two recent improvements to the working income tax benefit, WITB, now renamed the Canada workers benefit, CWB. The first of these improvements expanded WITB as part of the Canada pension plan enhancement. The second improvement is proposed in Bill C-74. In total, there will be nearly $1 billion of annual investment coming into effect in 2019 that will increase the maximum benefit and expand the number of workers who will receive these benefits. The government estimated that these enhancements will lift about 70,000 people out of poverty, and will encourage a greater labour market participation.
We're also pleased that the Canada Revenue Agency will automatically enrol low-income tax filers who are eligible for the benefit. This will improve access for low-paid workers. The government estimates that an additional 300,000 low-income workers will receive the CWB in the 2019 tax year.
We also have several recommendations to further improve the benefits.
First, receiving EI benefits should not cause the CWB to be reduced. Currently, the CWB is gradually phased out based on net income instead of on earnings. This means that EI beneficiaries can be eligible for the Canada workers benefit. Workers have earned these benefits by paying EI premiums, and their EI benefits should not reduce their CWB.
Second, low-income workers should be able to get the CWB more frequently through the year. Low-paid workers need the CWB in periods of low or no earnings. However, only half of the anticipated benefit can be paid in advance. In our view, the CWB should be changed so that 100% of the expected benefit can be paid quarterly, instead of having to wait for tax time. This would be similar to other transfers like the GST tax credit.
Third, it is important to keep in mind that this is still a very modest benefit. In 2015, 1.2 million working-age Canadians received the WITB, with an average annual benefit of only $807 per household. Many recipients of the benefit will continue to fall below the poverty line. More money should, therefore, be allocated to the Canada workers benefit to provide higher benefits and to phase it out more slowly. We believe that no worker in Canada should live in poverty. In particular—shamefully—full-time, full-year workers earning minimum wage in Canada could be earning at or near the poverty line. This leads to my final point.
The CWB alone is simply not enough. It must be part of a broader tool kit to eliminate working poverty in Canada.
As the 2018 budget noted, over the past four years, lower and middle-income workers have had their wage prospects stall while the CWB remains essential. Therefore, we must strike new wage and workplace standards and combat precarious work. This should take a three-prong approach.
First, we need to strengthen the labour standards of the Canada Labour Code, which we hope we will do this year. This will include the creation of a new federal minimum wage. A $15 federal minimum wage is long overdue. The federal government also should enact measures to ensure equal pay protection for part-time, temporary, and contract workers within the federal jurisdiction.
Second, there is still a gap between the number of Canadians who want to join a union and the number of Canadians who are actually represented by a union. The best and the most effective way to raise wages and fight precarity is by giving these workers a voice in the workplace. This means strengthening the labour laws to enable workers to join a union.
The third prong is simple. Attack the joblessness and unemployment by creating decent jobs. The CLC urges the government to invest in the bold economic transition to a low-carbon economy. We have an historic opportunity to respond to the climate crisis and generate decent jobs—green jobs—through the ambitious program of energy investment, public transit, and home and building retrofits. There are many job options here waiting to be tapped. If we reduce the labour market slack and address underemployment, wages will begin to rise.
Finally, I want to say something about the improvement to the Canada pension plan in part 6 of this bill. The CLC welcomes these enhancements to the survivors pension and other benefits. With respect to the child rearing and disability dropout, we believe the government hasn't properly researched the impact on women and workers with a disability. We therefore recommend the committee ask the Department of Finance to provide detailed modelling of the drop-in provision that's in the bill in regard to the CPP enhancement, for the committee members.
I want to thank the committee members for the opportunity to be here today. I will answer on behalf of the congress any questions the committee wishes to pose.
Thank you so much.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Yussuff. With you is Emily Norgang, senior researcher.
Did you have anything to add, Mr. Blakely?
Canadian Operating Officer, Canada's Building Trades Unions
My name is Bob Blakely. It's my privilege to represent the half million unionized construction workers in Canada.
Construction is 14% of Canada's GDP and 8% of all direct employment. We maintain a building stock worth about $1 trillion.
One of the principal features of organized construction is that we're the largest private sector trainer in Canada. We maintain 175 training centres across the country, with a bricks and sticks value of around $1 billion. We train our members there. We expend somewhere between $300 million and $350 million a year on pre-apprenticeship training, safety training, apprenticeship, graduate level training, upgrading, and new technologies. Virtually every cent of that money is from investments made by our members and our employer partners through collective bargaining. The investment makes our construction workforce in Canada the best in the world.
I would like to endorse the remarks of the leader of the labour movement. I'm not going to repeat his comments, but I'll try to complement the greater labour movement position with those that matter to construction.
The title of this year's budget, “Equality Growth: A Strong Middle Class”, resonates with most building trades members. It is a rational and reasonable goal to which people aspire. Government can create the climate and develop an impetus toward those goals. In 1968, the Woods task force reported its findings to Parliament. Those findings created the underpinnings for the Canada Labour Code. The report is succinct and elegant. I will, in an inelegant way, try to paraphrase a couple of those findings.
The first is that everyone, employers included, acknowledged the contribution of collective bargaining in raising the standard of living in Canada. The committee reported an interesting, counterintuitive finding that unionization is a great thing as long as it's in somebody else's business—people said they didn't need one in theirs.
Not much has changed since the Woods task force. Government needs to be value-based in how we deal with these sorts of things, and to express support for collective bargaining. The Canada Labour Code contains a preamble that stresses promotion of common well-being through encouraging collective bargaining, recognizing collective bargaining as the basis for effective labour relations. The preamble colours the legislation and encourages bargaining. It is not neutral in nature or in effect.
Last year, the Government of Canada ratified ILO convention 98, the right to organize and collective bargaining. There now is only one industrialized country in the world that doesn't subscribe. Somehow I doubt that Donald Trump is going to be seized by an attack of conscience and fix this.
Shortly put, collective bargaining creates better wages, better conditions, and a better organized workplace. The net effect of collective bargaining is a rising tide that floats all boats. In the construction business, the union rate is the benchmark. When the union rate goes up or down, non-union workers get a raise or a cut. When the union gets a health plan, so does the non-union worker. When the union gets a pension plan, the non-union worker gets some form of retirement security.
The Canada Labour Code, since the passage of Bill C-4, has returned to being the only non-politicized labour code in the country. It has remained true to the Woods task force principles. There haven't been federal swings, but rather there has been stability over a significant amount of time.
Let me point something out: virtually every construction collective agreement in Canada is provincially bargained. We're not under the Canada Labour Code, but the Canada Labour Code stands alone as a model enactment.
If you want to lift people into the middle class and maintain them, encourage collective bargaining and not the demonization of unions.
The Government of Canada doesn't necessarily create jobs. Even if it did, it couldn't create enough for every Canadian who wants a career. Canada does spend an enormous amount of money on infrastructure and procurement. Could this money do double duty?
A number of sophisticated owners—major purchasers of construction—recognize that it is in their interest to ensure that the stock of trained and skilled construction workers remains appropriate. They build commercial terms into construction contracts that require the contractor to employ skilled people and to do a level of training on the site. It doesn't mean union only. We can negotiate our own deals. However, it means using tax dollars to achieve other important social, fiscal, and occupational goals.
The Government of Canada has been talking about community benefit agreements to provide for things like training and apprenticeship within local communities. If you look at the survey done by Build Force Canada, we are going to replace a quarter of a million people in the construction industry in the next five years. That means recruiting more than half a million people, because we only graduate about 49%.
Much can be gained in the area of health and safety, quality, and the reduction of construction-related claims, by having some sort of community benefits in an agreement and doing a value construction matrix to evaluate tenders.
The lowest bid does not equal the lowest cost. Taking the lowest bid doesn't create value. Contractors aren't in business to lose money. If they submit a price that's too low, they'll try to make it up on the claim. Evaluate the bids going in. Community benefit agreements provide support for communities and government by getting people apprenticeship ready. The little understood fact is that success in the construction trades isn't easy; it takes the same level of intellect to complete a skilled trade's apprenticeship as it does to get a university degree.
As for supports for groups like women, the budget has done a good job on the apprenticeship incentive grant for women and the women in construction fund. There were also positive changes in this budget for veterans and indigenous people, with the the lnnu-IBEW legacy project for the latter. These initiatives are getting our kids out of the basement, where they're playing video games, and into real careers are laudable goals. Some of our programs, like Build Together, which will double the number of women in organized construction, and Helmets to Hardhats will create careers.
We build Canada's infrastructure, and what we do builds the middle class. We lift people into that middle class with a hand up. We provide them with an opportunity for a meaningful career. The Canadian worker benefit does that, but we need to do more. The building trades have prepared to partner with you in this regard because you need to get a return on investment for what you've made—some real investments—in the construction workforce, the supports to women in the trades, pre-apprenticeships, and the union training and innovation program.
Let me close by asking you to support lifting people into the middle class and maintaining them there. It takes conscious thought to ensure that the climate to build better careers and to provide vehicles, like community benefit agreements, will ensure better results. I would be most pleased to respond to any questions you may have.
Merci beaucoup.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Blakely.
Now, turning to the video conference from Vancouver, we have Diana Gibson, from Canadians for Tax Fairness. Welcome, Diana, the floor is yours.
Diana Gibson Director, Communications and Research, Canadians for Tax Fairness
Thank you very much.
Canadians for Tax Fairness, which many of you are already familiar with, advocates for fair and progressive tax policies aimed at building a strong, sustainable economy, reducing inequality, and ensuring that there is adequate funding for the quality public services that Canadians both need and want.
In Budget 2018, there are many steps forward, which some of our best speakers have already spoken to, such as the working income tax benefit and the action to tackle the gender gap. We at Canadians for Tax Fairness have particularly applauded the Liberal government's efforts to close unfair tax loopholes related to private corporations as a step forward on tax fairness, but it's important to note that we consider this a small step.
We urge the government to follow this up by closing other loopholes such as the stock option deduction, the capital gains exemption, the business entertainment tax deduction, and others. Further, in the budget, we again applaud action taken on trusts and banks in terms of loopholes, but real action is needed on tax havens where corporations and the wealthy are able to avoid paying their fair share. Examples include an economic substance rule.
There are four really important reasons why Canadians for Tax Fairness is pushing for the government to go further in closing loopholes and other measures for tax fairness. The first is that Canadians want action. Poll after poll for years have shown that Canadians are deeply concerned about inequality and bias in the tax system, and want action on tax fairness. This includes polls by Angus Reid, EKOS, Mainstreet, Environics, and others. Even after the pointed campaign against the private corporation tax reforms in last fall's consultations, more Canadians still supported the proposals than opposed them. Some of the support for change has been very high. Last fall an Environics poll found that 87% of Canadians want to see the law changed to make it illegal for corporations to use tax havens to avoid paying their fair share. Ninety per cent said it was immoral, although legal.
The second major reason that we want to see more ambitious change in terms of tax fairness is that Canada is in the bottom third of OECD countries for what we collect in taxes as a percentage of GDP. The same is true for social spending: we lag well behind other developed countries. The government has been seeing criticism of the gender and anti-poverty measures in this budget as tepid, from child care to pharmacare, from pension security to safe drinking water. Infrastructure and programs that Canadians need and want are being underfunded due to inadequate revenues. We are already running a deficit in our current programs. As the resource transition on climate change and new technological change impact our economy with automation, we will need more, not less, social spending.
The third major reason we're advocating a more ambitious agenda on closing loopholes in tax reform is that inequality is dragging down our economic growth and impacting the well-being of everyone. Research shows that not just the low-income people but also the wealthy suffer, in outcomes from education to health, even in less equal societies. On the economy side, the International Monetary Fund, the OECD, and others have determined that the current level of inequality in countries like Canada is negatively impacting economic growth.
Surveys have found that the main factor inhibiting the ability of small businesses to increase their sales and production is insufficient domestic demand—not tax rates but lack of purchasing power by Canadians.
Investing in social programs is an important way to boost consumer demand. I have a great example with regard to Norway. They save their own gas revenues and put it into a fund that they convert to a pension fund. When the financial crisis hit, Norway had the shallowest dip and exited the soonest with the highest consumer confidence in the OECD. So what we see is that pension security and broader programs for coverage of pharmacare, child care, and other social programs stabilized their economy and built back consumer confidence. Of course, they also have a higher tax to GDP ratio than Canada.
The fourth reason we need a more ambitious plan on loopholes is that they're very unfair. The government did proceed with closing some of those loopholes in the 2018 budget, but even as modified, the tax structure still disproportionately benefits the wealthy. For example, the threshold for the small business deduction for passive investment starts at $50,000, which is an estimated $1 million in assets at a 5% return, and fades out at $3 million.
By comparison, Canadian families held $259,000 in net assets in 2016. A third of that is housing, much of which is in overheated markets, which potentially means that the number is inflated. Also by comparison, median individual income was just $27,000, and the maximum for RRSPs was in the $26,000 range.
Those loopholes as restructured in budget 2018 are out of reach for most Canadians. Some would argue that these boutique tax preferences are compensation for the risks that business owners take—they don't have pensions, sick leave, maternity leave—but it's not just business owners who lack these benefits. Increasingly, work is precarious for most workers. Most private sector workers lack a pension, and increasingly are being forced into precarious work arrangements where they have no benefits, no sick leave, no maternity leave, no EI, no CPP, no paid vacations. And they're not getting more compensation for this shift of risk; they're getting less. Automation is predicted to make this situation much worse, and inequality, economic security and precariousness are driving the rise of extremism and authoritarianism.
The solution to what is fast becoming the overarching crisis of our time is not to provide boutique tax treatment for a small portion of privileged Canadians, but to provide universal child care, sick leave, and pension programs that will be available to all workers as well as low-income business owners who are falling through the cracks. For this, the polling shows that Canadians want to see much more aggressive action on closing unfair loopholes, shutting down tax haven use, and having a much more progressive tax system.
Thank you. I'll answer any questions the committee may have.
Liberal
The Chair Liberal Wayne Easter
Thank you, Ms. Gibson. We'll go to questions after we hear from Mr. Ball.
With the Chartered Professional Accountants of Canada, Bruce Ball, vice-president, taxation.
Welcome, Mr. Ball.
Bruce Ball Vice-President, Taxation, Chartered Professional Accountants of Canada
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.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Ball.
We'll turn to questions and just say to the witnesses that, if you want to add something, just raise your hand, although the question may be directed to another individual.
It's especially important for you, Ms. Gibson, that you don't get overlooked because you're appearing by video conference, and not here.
We'll turn to Mr. Sorbara first.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Mr. Chairman.
Welcome to all the witnesses.
Everyone, with my first question, I'll try to spread the wealth around.
To the Canadian Labour Congress, to Hassan or Emily, we haven't had a substantial or meaningful update to the Canada Labour Code in many, many years. I think it's long overdue. You referenced two or three changes that you'd like to see or suggest. I know that a lot of the stakeholders will be interested in that.
With reference to the industries that the Canada Labour Code applies to, the ones that are governed under federal legislation, where could we go that would both ensure the competitiveness of the industries we're looking at, whether transportation, telecommunications, or the banks, and improve the benefits and rights of middle-class workers?
President, Canadian Labour Congress
Almost 13 years ago, Professor Harry Arthurs conducted a very extensive review of the Canada Labour Code, part 3, and provided the government at that time with a very detailed recommendation in which both the Canadian Labour Congress and FETCO, my counterparts in the employers organization, participated in. Of course, Professor Arthurs' recommendations were not acted upon. The current government is to take a look at those recommendations and is in the process of proposing some changes to the Canada Labour Code, part 3. This is essential in the context of employment standards, hours of work, vacation pay, and how we deal with precarious employment, and the list goes on.
Our view would be, of course, it cover banks, railways, and all the major federal sector employers, both in the private sector, but also would apply to the public sector as it applies to the federal jurisdiction. We're hoping the government would outline very shortly their recommendations, but they've certainly been talking to the CLC, just as they have been discussing this with FETCO, the federal employees' council, to ensure, in regard to those recommendations, which are more than 13 years old, what provisions we would see as complementary to the improvements the government would like to make going forward.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you.
To Mr. Ball and the CPA, I've dealt extensively with your organization and many other organizations that focus on tax. Our government has put in place some measures where we landed on passive investments. It's a win for tax fairness, but it's also a win to allow private corporations to grow and compete, whether domestically, across the border, or globally.
One of the factors that you've mentioned is the U.S. tax reform. You are correct: it's not just about what the tax rate is, unless there is a huge discrepancy, but for now, there's not a huge discrepancy. On marginal investment dollars, I want to get your opinion of the landscape on that front.
Today we had Amazon announcing there would be 3,000 new jobs in downtown Vancouver. I think it's a great win for Canada and for those workers who will be employed. These are good high-tech jobs. Obviously, Canada is an attractive place to invest.
I want to get your thoughts on the direction, where we should be going, and so forth.
Vice-President, Taxation, Chartered Professional Accountants of Canada
I guess there are two things I'd address. The first is, as I mentioned, that we're in favour of doing a review, part of which would compare Canada and the U.S. and other countries. If you're taking about the U.S. in particular, the one other thing they've done that's fairly major is a new rule that allows companies, businesses, to deduct capital expenditures faster. That is one of the concerns as well. Is there an issue there? Is the U.S. more favourable for companies expanding versus Canada, or is there something that we should be doing here?
The other thing that's a little bit of a concern with the mobility of businesses across the border is personal tax as well. It does depend on where you are. Some U.S. rates are a bit lower than Canada's, and the higher rate tends to kick in at a higher level compared with Canada.
I think those are just two examples of what you'd look at as part of a tax review to make sure that Canada is competitive.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
The review that needs to take place of the Canada Labour Code, which hasn't been done for many years—decades really—is probably the same review that would need to be done of the tax code. If you're going to do one, you need to extend and look at that. That's my personal view.
From the Building Trades Unions, welcome, Mr. Blakely.
There were some reports issued earlier this year—I forget the exact name of the report—ranking shortages of labour on a scale of 1 to 5, reflecting Ontario specifically.
Canadian Operating Officer, Canada's Building Trades Unions
You're talking about BuildForce Canada.