Evidence of meeting #166 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was poverty.
A video is available from Parliament.
Northumberland—Peterborough South, Lib.
You're not suggesting...as you know, various equipment, various things have.... I remember the days when computers used to be written off over 10 years, and now it's an expense.
Have you given any thought to what that would look like? You mentioned that it may be reviewed and time limited, as you're suggesting it is in the States, but they didn't just jump to 100% either. Did they not go from $500,000 to $1 million?
Northumberland—Peterborough South, Lib.
That's okay. We'll come back to that.
What opportunities do you see within the trade agreements for your clients and for small businesses generally across Canada?
Regional Tax Leader, MNP LLP
That's a good question.
I think that whenever we have any kind of trade agreement that encourages Canadian businesses to be able to export abroad, that's always a great thing. It helps a lot of the export businesses. We see a lot of our clients in oil field services, agriculture and those kinds of industries. Some of them are having trouble getting their products to market abroad, so when we have a product that we have one buyer for, we tend to have problems. We also have problems with some of our farmers having their grain tied up in the elevators for a long period of time because they can't get it transported on rail.
Liberal
The Chair Liberal Wayne Easter
Thank you.
We're going to leave it there. We are turning to Mr. McColeman. We'll have to go to four minutes to get the next four questions in.
We were a little too liberal on the first round.
September 20th, 2018 / 9:55 a.m.
Conservative
Conservative
Conservative
Phil McColeman Conservative Brantford—Brant, ON
Thank you, Mr. Chair.
For some context and full disclosure, I spent the summer meeting with many businesses in my riding. I come from a proud, heavily industrial community called Brantford, Ontario. There are six major businesses that would employ somewhere around 2,000 people in total. Two of them have gone on the national news saying they're on the precipice of either going bankrupt or moving to the United States. I'll give you the names of the companies, because they are on public record. Patriot Forge in Brantford is the largest forging company of specialty forging. They employ approximately 400 people. JEM Manufacturing does metal strapping. They have a workforce of just under 100. Both of those owners have been at committee over the summer here in Ottawa, or have been profiled on national media.
It is real. I'll give you an example from the industry I was in. I had my own business for just under 30 years in the construction and development business. I was on your side, as president of the Ontario Home Builders' Association in 1992-93. When the keys are handed over by the builder to the new owner of her home, 35% to 45% of the price of the home is government taxation, or red tape or approval process fees.
People talk about the affordability of a new home. The governments at all three levels are taking, in some jurisdictions, up to 45% of the price of that home. I want to talk to the mortgage people about this because everyone cries about affordability. You mentioned entry-level buyers, and the effects of the price of the home and the affordability of the home being distorted by two major markets in this country. Hence, we get the rules that affect communities like mine, of 100,000 people, and put small builders, like those with 20 employees, out of business.
Has your association ever dealt with the fact of the makeup of the price of a home? Let's say 35%, 40% or 45% are government-imposed costs that end up being paid by the consumer at the end of the day. Remember, all the other costs—the land, the materials, the labour, and everything else—makes up the other 55% to 65%. What are your thoughts on that?
President and Chief Executive Officer, Mortgage Professionals Canada
Thank you very much indeed for the question.
The recommendation we're making regarding providing interest-free loans to municipalities actually ties into this, to a degree. I think a lot of measures have been implemented that are essentially trying to tamp down demand when the answer to the problem, in terms of Vancouver, is probably adding supply. The only way to make sure that you mitigate prices in just those two regions is to ensure that there are enough places to live for the number coming into the cities.
I understand that the cost is very high to put pipe in the ground to make some of the property that is earmarked as residential land through the city of Toronto. I think the city is probably trying to get some money to allow them to even begin that development. If there is a mechanism to help funding, that might offset that. Certainly those costs needs to be examined, though.
We spend a lot of time in discussion with the Canadian Home Builders' Association when we're considering our strategies around these things. Those costs are very high.
Conservative
Phil McColeman Conservative Brantford—Brant, ON
Can I also refer to 2008 to 2012, when we were dealing with the subprime mortgage situation in the United States, which was the impetus of a global recession that this country went through relatively unscathed?
I worked very closely with the finance minister, Mr. Flaherty, during those years. Mr. Flaherty came out with policies, watched housing, watched mortgage levels, and in fact restricted mortgage levels during that period of time. This government has seemed to take them further for the protection of a subprime mortgage collapse in Canada. Is that something you have ever seen on the horizon for Canada, or would see in the future?
President and Chief Executive Officer, Mortgage Professionals Canada
Do you want to take that one?
Past Chair, Board of Directors, Mortgage Professionals Canada
We see the markets as two completely separate markets. We believe that prudent measures taken 10 years ago and those taken recently are important to ensure the sustainability of and confidence in the Canadian housing markets. When you were able to refinance a home at 95% of the value and take 100% financing out on a Beacon score of 640, there were steps taken to bring prudent lending practices to Canada.
Our recommendations here are to tweak the most recent recommendations to ensure that Canadians have the opportunity to afford to get into the housing market. We think some of the changes here are keeping too many Canadians, who would otherwise be very prudent choices for lenders, out of the housing market. The arrears rates are very low. Portfolios are performing well. Credit scores for homeowners have gone up and up, each and every year.
We don't see the correlation between what's happened in the Canadian market and what happened in the U.S. market 10 years ago. The lending atmosphere is completely different. The arrears rates there were 8%, 9%, and 10%. As Mr. Taylor mentioned here, we're under a quarter of a per cent at 90 days arrears right now.
What we're advocating for is the opportunity to get more Canadians into the housing market, prudently, which we also believe will help with affordability. Right now, we have a lot of those Canadians staying either in mom and dad's basement or renting, which further takes stock out of the rental pools, tightens up the vacancy rate in rentals, and has an impact on affordable housing there as well.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you, Mr. Chair.
I would like to thank all the witnesses for being here today. It is very kind of you to come here to take part in our pre-budget consultations.
My first question is for Mr. Bleyer, from the Canadian Centre for Policy Alternatives.
First, I would like to congratulate the CCPA. For years, I have followed your analysis of the federal budget. Most of the time, in the Harper years, you were right on the mark in predicting deficits.
Your third recommendation is that we should use carbon tax revenues to reduce carbon emissions generated by our activities.
I have two questions.
The first is a general one. Why does the CCPA advocate putting a price on pollution? Can you explain how taxing pollution can help the economy become more efficient and even greener?
Executive Director, Canadian Centre for Policy Alternatives
Thank you for your support all these years. I hope our projections will be as clear, definite and accurate during the years of this Liberal government. I think they have been so far.
Taxing pollution is not the only tool available, but it is an important tool given the major, existential crisis that our country, our generation and the whole world are facing right now. It is important to use all the tools that are necessary and available to address this crisis.
With respect to economic competition, taxing pollution is an important tool that can guide us in the right direction towards a sustainable economy that can withstand future challenges. It can lead us to a livable society and livable communities. It can provide jobs for future generations. It can lead us to a society that can limit inequality. In a climate crisis, this can only be achieved by adapting policies and developing an economy that recognizes that pollution has to be reduced.
So carbon pricing is an important tool in this strategy.
Liberal
The Chair Liberal Wayne Easter
Pierre Poilievre is next, and then Mr. McLeod will have the last question for this panel.
Mr. Poilievre.
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you.
My questions are for the witnesses from MNP.
Do you have anecdotal evidence of money leaving the country as a result of the relatively high taxes in Canada?
Regional Tax Leader, MNP LLP
We do. We have anecdotal evidence from clients of money leaving the country. We also have anecdotal evidence of foreign investment not coming in.
We've had clients who have left. I've had clients in my office who've said every option is on the table: “Are we going to stay in Canada or not? Where in the world are we going to set up business?” We've had people looking at emigrating. There are people who have emigrated. We have doctors looking at.... The options are such that it may make more sense for them to go and practice down in the United States or somewhere else.
It's happening all the time. We've had clients who were at the 19th hour of selling their business to an American company, when the Americans walked away because they didn't want their capital in our country. That's happened, where it's almost sold and then they've pulled away.
Can I just mention one...? Ms. Rudd, you'd asked us about the American...about the capital. It's a full writeoff until 2022, and then it gets phased out between 2023 to 2026.
Conservative
Pierre Poilievre Conservative Carleton, ON
There's no question that there's data now to support your claim that money is leaving the country. Canadian investment in the United States is up two-thirds. U.S. investment in Canada is down by half. President Trump's made it clear his goal is to take our money and our businesses. Clearly the policies of this government are helping him do both.
My next question is about the revenues to the government from higher taxes. Data from CRA showed that the wealthiest 1% of Canadians paid $4.5 billion less in the first full year after the government's tax changes came into effect. They were supposed to pay $3 billion more according to the Liberal platform. There's a gap of almost $7 billion.
Recently, the government tried to bring in some very aggressive tax increases on small businesses that are incorporated. Did you see evidence that people reacted to the threat of those changes by withdrawing cash from their businesses or making the decision to leave and pay an exit tax in the 2017 year?
Regional Tax Leader, MNP LLP
That's a two-part question.
The first was about the reduction, or was it that less tax was collected although the rates went up?
Regional Tax Leader, MNP LLP
It's probably too early to tell what the long-term ramifications were, but one thing that did happen.... I live in Alberta and we had a compounding effect. We had a 5% increase provincially, and we had a 4% increase federally, but our dividend rates also went up 11%. What we did in 2015, in anticipation, was extract significant amounts of money from corporations wherever possible, so that we wouldn't have clients paying high personal tax rates going forward.
There were also timing differences, so we probably spiked in 2015. We had a significant reduction in 2016. We also had clients who did leave in 2017, paying exit taxes.