Finance Committee on April 30th, 2018

[The Chair, Liberal, Wayne Easter]

We'll have to leave it there.

Thank you very much, Ms. Gibson, Mr. Blakely, Mr. Yussuff, Ms. Norgang, and Mr. Ball.

We will suspend for about four minutes to bring up the next panel.

[The Chair, Liberal, Wayne Easter]

We'll begin our next panel with Mr. Cousineau from Paws Fur Thought, please. The floor is yours.

[Medric Cousineau, Co-Founder, Paws Fur Thought]

Thank you, honourable Chair.

Honourable parliamentarians, ladies and gentlemen, let me start by thanking you for the opportunity to speak to you today about the section of Bill C-74 concerning the medical expense tax credit for service dogs. I'm sure there are parliamentarians of various parties who are glad we are addressing the METC, because I don't have to contact them anymore.

[Some hon. members]

Oh, oh!

[Medric Cousineau]

The media contacted me after budget day and asked what this meant in financial terms. My response was that it would be approximately $37.50 a month. Their incredulous response was, “You fought a five-and-a-half year war over a $1.23 a day?” No, I fought a war for equality and human rights. The $1.23 is just a consequence or byproduct.

What started the war that I've waged for years for efficacy studies and tax credits? Three-plus decades ago I was injured doing my job in the military. The mental health injuries have been and will always be an ongoing battle, 24-7 365 days a year. When I was paired up with Thai, almost six years ago, I applied to VAC for their service dog allowance. If I was blind and Thai was a guide dog, I would be receiving an allowance for her care and upkeep. Buried deep within VAC's own benefit grids you're going to find benefit 625995, which provides $1,200 for 12 calendar months for the care and upkeep of a guide dog. Trying to differentiate between a guide dog and a service dog is a moot point. In each case a highly specialized dog is task trained to mitigate their handler's disability. Yet I was denied. When I asked why, they said that Thai does not meet the standard. When I asked what standard she did not meet, I was informed they did not have one. Yes, you have heard that right. I was denied a benefit for a standard I could not meet that they could not define.

I then checked the Income Tax Act, and found out that all service dogs were covered under the medical expense tax credit, with one singular, notable exception. When I repeatedly queried this, I was told there were no studies proving the efficacy of the use of service dogs for PTSD, this despite the fact that other service dogs were never subjected to efficacy studies. It's interesting to note that in 2012, six years ago, diabetic alert dogs were not subjected to the requirement of an efficacy study when they were included in the METC.

The difference between that and how I was treated was discriminatory by definition, treated differently on the basis of my disability. Yes, you heard that one right. I was being discriminated against based on the nature of my disability, in direct contravention of the Canadian Human Rights Act.

Ladies and gentlemen, this war was fought for human rights and equality, and any attempt to justify or rationalize human rights based on dollars and cents is so distasteful I cannot quantify it. It actually makes me physically ill. I should probably be testifying at the Standing Committee on Veterans Affairs to discuss the implications of VAC's complacency and apathy surrounding the demise of the national service dog standard. This failure by VAC will only further delay financial assistance to disabled veterans with service dogs.

All Canadians who were severely disabled by the debilitating injuries surrounding PTSD need help. The horrific impact 24/7 and 365 days a year on their lives and the lives of their families should not be minimized in any way. The latest is that CRA is denying those with severe mental health injuries their disability tax credit certificate because of a bureaucratic policy, and that, too, is unconscionable. At every turn we've had to fight hammer and tongs for every inch.

You see $1.23 a day, or $37.50 a month, may not sound like much, but the $450-a-year medical expense tax credit, based on $3,000-per year care and upkeep for your service dog, does make a difference to those living with serious mental health injuries. The lash of discrimination only further traumatizes and stigmatizes. A huge step is taken when equality is finally ratified. It should never have come to this.

Why I waged a war for equality and had to have it go on for so long escapes me. However, this is only the first step on a very long journey that those battling the ugly stigma of mental health injuries face. I strongly encourage all parliamentarians to take the next step in helping our disabled veterans by ensuring that VAC end their clearly discriminatory policy, and ensure that I and other disabled veterans receive their allowances under benefit code 625995.

VAC's policy is that they will not provide a benefit further back than when you applied for it. VAC is steadfast in this rule. In my personal case, I'm entitled to almost six years of this benefit back to the date of my application.

In the other matter I was asked to address, the new pension for life, I was extremely hesitant to talk about that because I realized there are others who may have greater expertise. However, I feel, upon considered reflection, I must comment.

The government is about to create a problem of epic proportions for itself. Having just waged human rights battles based on disability, it is about to create another equally loathsome, yet avoidable, human rights battle, based on gender discrimination. Let me explain.

Two soldiers deploy, trained to do the same job and are in the same vehicle, and they sustain exactly the same injuries. They are both covered under the new pension for life, as presented to our veterans, yet astonishingly, the two soldiers receive different monthly payouts. The people who elected you will not stand for that. Imagine what happens when folks comprehend that the difference in payouts is based on gender, and that this government wilfully and knowingly implemented a human rights violation.

There is no other pension at the federal and provincial levels that has gender-based payout differentials, so why the one, solitary exception? The answer is gender-based actuarial assumptions. Should our two veterans choose a lump sum, their benefits are exactly the same. Should they choose a monthly payout, they receive different payouts based on gender. That is not a pension; that is an annuity.

This may seem similar, but there are key differences. Hearken back to my comments earlier that attempt to justify human rights violations based on financial considerations is wrong on all levels. You cannot do that. To knowingly adopt such a plan is unfathomable.

This is not yet law, and the government has the chance to rectify it and save itself immense problems in the future. With the passage of Bill C-74, a critical step forward in helping all Canadians who live with disabilities will transpire with the inclusion of the medical expense tax credit for the use of service dogs by those with mental health injuries. But do not violate Canadians' human rights. To adopt the new pension for life with embedded gender-based discrimination would be unconscionable.

I spent the last five and a half years embroiled in a battle for equality, no more, no less. Equal is equal. How the Prime Minister, who wants to be seen as the champion of gender equality, can participate in enacting legislation embedding gender disparity escapes me. We fought for freedom, and we fought for equality. We should never have to fight our government for human rights and benefits. That was what my fight was for. It was for equality. It was never about $1.23.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cousineau.

We'll go to questions following all of the witnesses' presentations.

We will turn to the Business Development Bank of Canada, Mr. Cléroux, vice-president and chief economist; and Ms. Kastner, vice-president, partnerships and government relations. Welcome. The floor is yours.

[Pierre Cléroux, Vice-President and Chief Economist, Research, Business Development Bank of Canada]

Thank you, Mr. Chair.

Mr. Chair and distinguished members of the committee, I am pleased to be here today. My name is Pierre Cléroux, and I am the chief economist of the Business Development Bank of Canada. With me today is Karen Kastner, vice-president of Government Relations.

In the context of your study of Bill C-74, I would like to talk to you briefly about who we are, and then give you an overview of the current environment in which Canadian SMEs operate and what the BDC does.

BDC is the only bank dedicated exclusively to entrepreneurs. We are a financially sustainable crown corporation that does not rely on Canadian taxpayers.

We work with nearly 50,000 entrepreneurs in all parts of the country and all sectors of the economy. We provide support in the form of loans, investments, and advice to help them grow their business. We do not provide grants or subsidies. Rather, we operate on commercial terms as a complimentary lender, and support creditworthy businesses with viable projects.

With our network of clients across the country, we can really put our finger on the pulse of Canadian entrepreneurs and the challenges they face.

From an economic perspective, global growth brings good news for Canadian entrepreneurs. Last year's expansion was broad-based, with all sectors of the economy contributing. In 2018, all sectors are expected to continue to grow, though there were contractions in real estate and oil and gas during January.

In terms of general sentiment among Canadian SMEs, the mood is optimistic. At the same time, SMEs are facing some challenges, including the changing and increasing digital economy, aging entrepreneurs and workforce, difficulty attracting and retaining talent, the direction of the U.S. administration, etc.

For SMEs, there's general liquidity in the market. Access to capital is easy for well-established businesses and traditional business models. However, when it comes to asset-light companies and innovative business models, they have more difficulty accessing capital. Financial institutions have not fully adapted to the reality of financing or investing in technology companies. However, we are seeing consistent improvements in this area.

At BDC, these trends are hugely important for us. We are continually innovating to meet the needs of entrepreneurs by expanding our offerings, changing the ways in which we interact with entrepreneurs and improving our delivery model.

Despite the uncertainty in their landscape, we are constantly encouraging SMEs to invest in their business. By doing so, they can improve their resilience. Simply put, businesses that invest more, experience stronger growth. That, in turn, means a stronger Canadian economy. We want to see more business investment across the board.

That's where BDC can play a role, by both investing and providing advice to help SMEs grow. At the end of this fiscal year 2018—and please note that these numbers are unaudited and might change slightly—our total financing commitments to Canadian SMEs hit $28.8 billion. On the venture capital side, our investments in high potential innovative companies and funds reached a total commitment of $1.26 billion.

We are also investing in key areas of the economy to help unleash the potential of women entrepreneurs, for example. As indicated in the budget, building on the success of our previous women entrepreneur initiative, we have set a new bold and ambitious target to lend $1.4 billion to women entrepreneurs over the next three years. That's double our previous target.

The budget also announced the expansion of our women in technology venture capital fund, from $70 million to $200 million. This is now the largest VC fund dedicated to supporting and scaling women-led technology businesses in the world.

We are also investing in a number of other key areas, such as clean tech and later stage venture capital, through the new venture capital catalyst initiative. Given the time constraints, Karen and I would be delighted to receive your questions on any of these issues, or the state of small and medium-sized businesses in Canada more broadly.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cléroux.

We'll turn now to the Canadian Union of Public Employees, Mr. Janson, and then to Vancouver after that.

Mr. Janson.

[Mark Janson, Research, Canadian Union of Public Employees]

Thank you, Mr. Chair, and thank you to the committee for having the Canadian Union of Public Employees here today. We're the largest trade union in Canada, with 650,000 members across the country in virtually all sectors of public work.

Obviously, Bill C-74 is a very large bill. We're not going to comment on every section of this bill, but focus on a few gendered aspects of the bill that we find particularly concerning.

The first one would be the lack of pay equity legislation. I know you talked about this in the earlier session today. This is something that we've been advocating for a long time. This government has been making very public commitments to a goal of gender wage equality. This is the simplest way for the government to take a step in the right direction. Your budget committed to doing this. It's been now two years since the Liberal-led committee studied this and recommended moving forward. The report was called “It's Time to Act”. They said we'd go forward within 18 months. We're now 24 months past that point. Your budget said this was going to be in the budget implementation legislation. It's not there. We hope that it will be there very soon.

I'd like to focus the rest of my time on the Canada pension plan drop-out issue. I know this was also mentioned at an earlier session. I was before this committee about a year and a half ago talking about Bill C-26, the legislation that implemented the federal-provincial deal reached in the summer of 2016 for a modest expansion of the Canada pension plan.

When we looked at this legislation, we were shocked to find that there were no drop-out provisions in the new CPP benefits for periods of child-rearing or disability. These have long existed in the CPP that we all know. Essentially, these CPP benefits are a function of how much you've earned through your working career, so if you have a period of zero or low earnings, that's going to pull your CPP benefits down.

Governments over the decades have recognized that it's appropriate to put in place what they call “drop-out provisions” for periods of child-rearing or disability in order to exclude those periods from the calculation of CPP benefits, so that you don't see a pension penalty for raising a child or for being disabled and unable to work. That's worked well for the 50 years of the CPP's existence, so we were shocked to find that it wasn't going to be part of the new tier of CPP benefits.

CUPE and the labour movement brought this to the attention of the government. The bill was passed as written, which we were quite opposed to. We thought the government should have done something at that point. We were happy to see in December of this past year, 2017, that the finance ministers of the federal and provincial governments said they were going to do something about this. They said they were going to add what's called a “drop-in provision” to the new level of CPP to deal with this child-rearing and disability issue.

The problem with the drop-in provisions is that they're clearly structured to deliver a significantly lower benefit than the traditional drop-out replacement would have done. When the government brought in these drop-in provisions, it said they were an improvement that would strengthen benefits. In our view, however, a large inappropriate cut was instituted that, to a certain degree, walks the benefits back. We don't see that as an improvement. We still see that as an unjustified cut.

We've asked the government for numbers on this. We wanted to find out what this was going to mean for individuals down the line, and what it would mean for the plan. We haven't seen any of those numbers, but these drop-in provisions are included in Bill C-74.

To me, to CUPE, this is an issue of major importance. Our position is that workers taking time out of the workforce to raise a child at home or because of a disability should not face any CPP penalty. I know that at earlier meetings finance officials were asked to get those data to you, and I certainly hope that you see those numbers and reflect upon them before passing this legislation.

Thank you, and I'll be here for questions afterwards.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Janson.

Going back to Vancouver, we have a second witness from Vancouver today, Mr. Milligan, who's a professor at the Vancouver School of Economics, University of B.C.

Welcome. The floor is yours.

[Professor Kevin Milligan, Professor, Vancouver School of Economics, University of British Columbia, As an Individual]

Thank you very much, Mr. Easter.

My name is Kevin Milligan. I am a professor of economics at the Vancouver School of Economics. I've been asked to speak specifically about the new Canada workers benefit.

I've been studying the impact of tax benefits for modest-income workers for about 15 years, and the evidence from around the world is unusually strong and consistent. Benefits that are focused on providing incentives for modest-income workers to join the workforce have been successful in the United States, the United Kingdom, and also here in Canada.

However, the existing working income tax benefit, WITB, suffers from two shortcomings. The first is that it is too small. The maximum benefit for a single worker under the 2017 configuration is only about $1,000. That means that the benefit is all gone by the time someone reaches about $18,000 of income. If you're a full-time, full-year minimum wage worker in most provinces, you see absolutely no benefit from the existing WITB. I think that misses the mark.

The second shortcoming is that the existing WITB lacks salience. It's hidden away on the tax form, requiring the filing of a special supplemental schedule, so people are often not even aware of it. This has resulted in a substantial number of people who are eligible for the WITB but don't end up getting the benefit.

The proposed transition to the new Canada workers benefit makes some substantial and important improvements in ameliorating both of these shortcomings. The new Canada workers benefit is larger. The maximum benefit is 30% larger for singles, and 24% bigger for couples and those with kids. As importantly, the income range that is now covered by the new Canada workers benefit is much larger. It extends up to about $24,000 for singles, and up to $36,000 for couples and those with kids. This means that a much larger proportion of modest-income working Canadians will see some benefit under this new Canada workers benefit than was the case under the old WITB.

The new Canada workers benefit will also be easier to access. In a new and very important initiative, the Canada Revenue Agency will check everyone's tax filing to make sure that the tax filer has applied for the Canada workers benefit if the person is eligible. If they haven't applied, they will automatically be enrolled for this benefit. This starts in 2019. Moreover, the government has indicated that it will explore ways to make the Canada workers benefit payable on a monthly basis rather than lumped in with the other aspects of the tax filing done annually.

Both of these measures, higher benefits and making benefits easier to access, are important advances. However, there is still some more work to do, and I have three brief ideas.

First, I think benefits still need to be larger. If you think about someone who is a full-time, full-year worker—that means about 2,000 hours a year of work—and the minimum wage in some provinces approaching $15 an hour, if you multiply those together, you get about $30,000 of income for a full-time, full-year worker. I think that ought to be a target for the income range for the WITB. It's currently at $24,000 for singles. I think we ought to try to get that up to $30,000.

Second, I think the government should continue its efforts to make the benefit more salient. Economists like me spend a lot of time trying to design these kinds of programs that provide incentives for rewarding work and for promoting good behaviour, but if the incentives are buried in complexity, we're not going to see the full realization of the benefit that we want to see. We want to make sure that the benefit is salient, easy to access, and people can get the benefits that they've earned.

Finally, the government should undertake a study of the feasibility of individualizing the Canada workers benefit. This has been advocated by Professor Tammy Schirle at Wilfrid Laurier University.

Individualizing means that the benefit is phased out based on one's own income rather than on a couple's income. This would have an important impact on married people, and specifically on married women as that would give married women a boost both within the economy and within our society. I think it's worthy of some more study.

I'm looking forward to your questions, and I pass it back to the chair.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Milligan. Sometimes there are the “howevers” in those presentations. Thank you very much for that information.

We'll turn to Ms. O'Connell for seven minutes.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair.

Thank you all for your presentations.

I'm going to turn to Mr. Cousineau.

Thank you for your testimony.

Mr. Chair, I'd suggest that since a portion of the testimony was not part of this specific study, maybe we should send it to the Minister of Veterans Affairs to draw his attention to some of the items you've outlined, because we're not dealing with all of it right here today.

I want to ask you a question with regard to the service dog allowance specifically. One of the changes we made was to allow for this through our medical expenses. I'm not sure if this addresses all of your issues, then, if the service dog qualification policies—although I think you used a different word—still haven't been established by Veterans Affairs. Would you be able to access the psychiatric tax credit, or does this now take care of that issue? I'm just trying to clarify this from your testimony.

[Medric Cousineau]

The medical expense tax credit should be embedded inside the Income Tax Act and provide equality for a psychiatric service dog—and here I would suggest to the committee that we look toward dispensing with the use of the stigmatizing word “psychiatric”. “Veteran-assist service dog” or “first-responder-assist service dog” are certainly much more palatable options, from my chair. That needs to be embedded inside the Income Tax Act. It's also related to the legislation and policies that VAC is continuing to struggle to implement. There's almost a commingling of benefits, and there is no clearly defined policy. However, any attempt by the government to say that we have no standards for these dogs.... Unfortunately, there are no standards for the dogs that are already there. It has to be an equal playing field.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

If I'm understanding correctly, despite these changes, we still need to deal with making sure that on the VAC side, the policies are going to be consistent so that if CRA needs some type of credentials or verification or something, the policies match up and they will be able to provide that.

[Medric Cousineau]

The CRA doesn't have to go to VAC for those, because they're not going to any other department.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Right.

[Medric Cousineau]

For example, they're not going to the health department to provide the credentialing for diabetic-alert dogs or seizure-alert dogs, and they're not going there for the Canadian National Institute for the Blind. In some cases, the Veterans Affairs issue is a little bit of a red herring.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Fair enough. Thank you for providing that clarification.

I have more questions, but I won't be able to get to them all. That's why I'm suggesting that your testimony be forwarded to Veterans Affairs as well.

Mr. Cléroux, you are an economist and you spoke about investments in terms of women entrepreneurs and essentially increasing the types of entrepreneurs, start-ups, and small businesses. As an economist, have you looked at the type of growth potential of some of the investments you spoke about specifically?

[Pierre Cléroux]

Do you mean in terms of the BDC investments?

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Yes, and specifically whether it's women or other groups that haven't traditionally been specifically invested in, and what that growth potential is.

[Pierre Cléroux]

What we have looked for before is the impact of BDC on its clients. We worked with Statistics Canada to evaluate whether our clients are growing faster than similar businesses in the economy. The analysis was done by Statistics Canada with a third party, and we found out that when BDC invests, our clients are actually growing faster than very similar companies, very similar SMEs, and that if they use our advisory group, the impact is even greater. The biggest impact we can have is through having some lending tools, and, on top of that, having some services to help them better manage their business. That's how we have the biggest impact on SMEs.

[Karen Kastner, Vice-President, Partnerships and Government Relations, Business Development Bank of Canada]

Thank you, and good evening.

I'll just add that with respect to women entrepreneurs specifically, we've looked at some data and found that the majority of women-owned businesses tend to be smaller. They grow more slowly and there are fewer of them. When you look at the majority of women-owned businesses in the economy in general, you will see that they make up about 16% of all businesses. We feel there is tremendous potential there. As Pierre said, we are allocating $1.4 billion over three years to lending. Then, specifically for women in technology, we have a $200-million fund, which we think is the biggest in North America dedicated to women, as well as some other resources.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Have you done any projections on what those types of investments could mean in terms of growth?

[Pierre Cléroux]

No, we haven't.