Evidence of meeting #20 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was budget.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
You are over time by a little bit.
We will go to Mr. Johns for three minutes, and then we will deal with this motion before the witnesses leave. Before I go there, it is a standing order of the committee that we can't distribute documentation or motions unless they are in both official languages. We can suspend that rule if there is unanimous consent to do so. Is there agreement to suspend?
Liberal
The Chair Liberal Wayne Easter
I will read out the motion, then, when we get to it.
Mr. Johns, you have three minutes.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thank you, Mr. Chair.
When I was a small-business person, and when I was talking to business people throughout the country as the spokesperson for the NDP and as a former Chamber of Commerce executive director, people felt held hostage by credit card fees. We look around the world. I know that in Europe and Australia they provided relief to their members by reducing those fees, and government intervention has been key.
I want to thank Mr. Scholten for bringing this forward. Do you think the current private member's bill on merchant fees goes far enough? I know that, while it further enables regulation, it doesn't actually require any legislation. Wouldn't you like to see something with a few more teeth?
President, Canadian Convenience Stores Association
We would like to see something with more teeth. However, one of the reasons we are supportive of this bill is that we would like to see a lot more study on what is necessary or appropriate for credit card rates, to ensure that retailers aren't paying too much, but also to ensure that there is a vibrant credit card system in Canada. From our position, we want consumers to have credit cards. We believe it gives them easy access to funds they might not otherwise have, so it allows them to purchase goods and services when they are in our stores.
When we looked at what was in that private member's bill, and it didn't identify specific rates, we thought that as long as it goes further in terms of studying what those appropriate rates should be, we are in support of it.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thank you.
All the parties agreed on the reduction of tax for small business. We knocked on doors; we talked to chambers of commerce and the business community. I know the chair talked about perhaps being able, in future budgets, to see this reduction. The best part is that this table can actually make it happen in this budget and make recommendation to members. I hope they'll consider that.
We talk about trust. We've seen corporate taxes drop from 28% to 15% over the last 25 years. Small business hasn't seen that kind of fair tax distribution. How is this, in terms of building trust with small business? They're the front end, and they're the most intimate relationship government should have.
Mr. Kelly, do you want to talk a little bit about trust?
President and Chief Executive Officer, Canadian Federation of Independent Business
This is a tricky issue for us.
We are very keen as an organization to work cooperatively with the new government on a variety of fronts, and that stands today. There were two measures in the Liberal party platform that we celebrated and were cheerleaders for during the election campaign, and they were the Liberal party promise to reduce the small business rate to 9%, and the LIberal party promise to give small firms an entire EI holiday for hiring young people for 2016, 2017, and 2018.
The sad part is that both of those promises that we loved in the Liberal platform were cancelled in the 2016 budget. I would love it if the committee.... If there's any way possible to bring back the tax reductions, you will have no bigger cheerleader than Dan Kelly and CFIB should you be reinstating the tax reductions that were promised by the new government in this budget.
Thank you very much for that.
Liberal
The Chair Liberal Wayne Easter
Turning to the motion, I will will read it out.
I might say, Mr. Scholten, there is a dispute on the issue, and there is also a dispute on what you said at committee. Were you operating from a written text?
Liberal
The Chair Liberal Wayne Easter
We might need that in this discussion.
The motion is in order. I can go to the rules to explain why it is in order. The committee has this authority.
The motion is:
That the Standing Committee on Finance compel officials at the Department of Finance, as well as the Finance Minister and his exempt staff, to provide documents indicating any plans to reduce the small business tax rate during the course of the government’s present mandate, including any correspondence with the Canadian Convenience Store Association or other industry associations indicating a plan to proceed with a small business tax rate reduction. And that the Finance Department also provide the names of any officials who have met with the Canadian Convenience Store Association since the 2015 election.
It is in order. You're moving it, I assume. You already did move it. It's on the table.
Is there any discussion?
Mr. MacKinnon.
Liberal
Steven MacKinnon Liberal Gatineau, QC
Mr. Chair, I first of all want to thank the witnesses for coming here today.
You've come in a spirit of constructiveness and have done a very good job of advancing your point of view. I regret that we've been tied up in procedural knots.
I suspect the Liberals on the committee will be voting against the motion. I certainly will be. The budget I have in front of me on the small business income tax rate says, “Budget 2016 proposes that further reductions in the small business income tax rate be deferred.”
If I look up the definition of “deferral”, it says it is the act of postponing to another time or place. I can only conclude, then, that having been postponed, it will be revisited at a certain point, and that the government will be considering that on a more or less ongoing basis. As such, I don't know if Mr. McColeman thinks he's found who shot J.R. or has solved one of the other great mysteries of life, but I regret this kind of procedural wrangling and hope we can move to the question.
Conservative
Lisa Raitt Conservative Milton, ON
Thank you very much, Mr. Chair.
Mr. Scholten, hope you realize this isn't about you. It's about a statement you made today that indicated our concern of whether or not you had been told something that MPs haven't been told. The budget document is silent on when the deferral is over, and indeed the parliamentary budget officer had to ask for more data from Finance Canada to get a better picture of what was in the budget.
It's very concerning to hear that something may be coming in 2017 that didn't appear in here, or in the PBO. I think it's a valid use of the committee's time to determine whether or not there's any correspondence out there that may put us in the direction of understanding whether or not there is a plan to put it in because it is material to the analysis of the projections for income, and to the costing of the deficits and the debt to this country. It's a material fact that we should have, and if indeed it is the plan of the government then they should inform MPs as they seem to be informing stakeholders.
If you have written documentation...my understanding was that you had said a year. If you had said it was deferred then we wouldn't have perked up our ears. You said 2017 and that's what got our attention, so I think it's a valid use of our time. The Liberal members are going to try to say we're being mean. We're not being mean, sir. We just want to get some information for Canadians and we're doing it in great spirits.
You don't get to respond, but I want to let you know to come in and see us on a non-partisan, non-political basis any time you want to talk about Canadian convenience stores because we're here to listen and to help. On this matter we want to understand whether or not the Minister of Finance's office is providing insight into other stakeholders as to what's happening in the future.
Thank you for your time. Thank you for your presentation, everybody else's as well.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Mr. Easter, the government ran on a platform of openness, transparency, trust. When we hear testimony from witnesses...and again I want to thank Mr. Scholten for coming. I think we all support the Canadian convenience stores; they're important to each one of our communities in our ridings. I think this is fair to the public, and certainly to members of Parliament, when there might be information we're not aware of, and I think in the spirit of transparency it's essential that we follow through with this motion. I hope that members across the floor honour their platform and their promises for transparency and building trust with Canadians.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Johns.
(Motion negatived)
With that I would like thank all the witnesses for making their presentations this morning. It was indeed a lively discussion at times. No doubt we'll be calling on you again. We'll suspend for five minutes until the next witnesses come to the table.
Liberal
The Chair Liberal Wayne Easter
We'll reconvene. I'd like to welcome the witnesses for the next session. We're scheduled until two o'clock, but I think about 20 to two we're going to have to go to committee business to decide on witnesses.
With us at this session on an act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures we have as an individual Ian Lee, an associate professor; from Analytica Advisors Incorporated, Céline Bak; from the Caledon Institute of Social Policy, Ken Battle; and from Fondaction, le Fonds de développement de la CSN pour la coopération et l'emploi, Julien Lampron.
We'll start with you, Mr. Lee; you have five minutes.
Ian Lee Associate Professor, As an Individual
Thank you for inviting me, Chairman Easter.
I'm a tenured associate professor at Carleton University's Sprott School of Business. In the past 24 months, I've authored two peer-reviewed publications on Canada's retirement system, one in Carleton University's How Ottawa Spends, and one in an American pension journal with my colleague, Chancellor Professor Vijay Jog. I've also co-authored two monographs this year on the pension system in Canada, at the Macdonald-Laurier Institute think tank.
Before I go into my comments, I have a shout-out to your support staff, who have been extremely helpful. I didn't get the documents to them until yesterday, and yet they managed to pull it off and get them translated and printed. I give them my very gracious thanks.
First my disclosures, and then I'll get right into it. I don't consult to anyone or anything anywhere in the world. I'm not a paid or unpaid or registered or unregistered lobbyist. I don't belong to or donate monies to any political party or NGO anywhere. Finally, I only source empirical data in my research from OECD countries' government departments and IGOs such as the OECD, the IMF, and other international bodies. I do not source data from political parties or elected officials, or from NGOs or unions, because they're political or social activists with an agenda.
I'm going to focus on pension reform for both OAS and CPP in my short five minutes.
One of the great urban legends in Canada today is the story of large numbers of impoverished senior citizens possibly reduced to eating cat food due to mean-spirited social policies.
Never let it be said that we baby boomers are terrible marketers. We have managed to convince large numbers of Canadians, in concert with some NGOs, such as CARP, of this false urban legend, yet Stats Canada shows that the wealthiest of cohorts in all of Canadian society are our seniors—and I will disclose that in 18 months from now, I become one of them—while the cohort with the least amount of assets and income is our young people, who we refer to as the “millennials”.
In a book published in 2012, which every member of Parliament and senator should read, the following was said. This is a direct quote: “Crisis? What crisis? There exist persistent myths about the Canadian retirement situation. We think of our seniors as living in near poverty when the elder poverty rate is half that of working Canadians.”
The book was called The Real Retirement. The author was Bill Morneau, the current finance minister, and the 2012 data in that book was and is correct. Demography changes very slowly. A country's demography does not change in 48 months. I say that for anyone who argues that circumstances are different today than in 2012.
In fact, since OAS, GIS, and CPP were introduced in the fifties, elder poverty in Canada has crashed and collapsed in Canada, not skyrocketed, as some have alleged. Per OECD Pensions at a Glance, Canada has one of the lowest rates of elder poverty, with 7.2% of elders below the poverty line. Remember, the OECD countries are the richest countries in the world. This means that we have one of the lowest rates of elder poverty on the planet earth—11th lowest.
Can we do more to address the 7.2% of elders below the poverty line? Absolutely, by targeting them through an increase in the GIS, which your government did in this budget and which should be strongly supported—and indeed I do—and by providing 100% survivor benefits on CPP to those seniors, who are, typically, the “elder” elder females, and who lack their own CPP. When their husband dies, the benefits drop.
Let's turn to those not yet retired. The McKinsey study on retirement readiness of Canadians showed that approximately 85% of Canadians not yet retired are pension ready, meaning 15% are not. Also, do note, because some may dismiss this as as a consulting firm, that this research largely duplicated and confirmed the peer-reviewed research of Professor Kevin Milligan at UBC, Professor Jack Mintz at Calgary, and Mr. Baldwin, formerly with the Canadian Labour Congress.
To summarize these researchers, first, the bottom quintile of Canadians experiences a significant increase in retirement of some 25%, because they were previously low-income workers and the OAS, GIS, and CPP lift them up.
Second, most Canadians are pension ready, while a minority of 15% are not. This suggests three startling conclusions: one, the lack of pension readiness lies amongst some in the middle and upper middle class, not the bottom quintile; second, pension reform should focus on targeted policies, not universal policies such as universal CPP reform, to address the 15% who are not pension ready in the middle and upper middle classes; and finally, this suggests very strongly that universal CPP reform is completely unnecessary, because 85% of Canadians are pension ready.
I have a final issue, and then I'll wrap up, and that's the reduction of OAS eligibility back to 65.
Several analysts argued in op-eds in The Globe and Mail that this was a terrible decision because it was not evidence-based. For those who read OECD regularly—and I certainly do—it has for several years urged OECD countries to increase the age of pensionability as we're living much longer. To deal with the canard that's been alleged that critics such as myself are suggesting that the pension system will bankrupt Canada, this is absolute nonsense. Canada is one of the wealthiest countries in the world, with one of the highest GDPs per capita in the world. I think this was a straw man concocted to obscure the real issue: all resources are scarce and finite, not unlimited, and this means that decision-makers such as you, as parliamentarians, must economize scarce resources by not squandering those scarce resources on less critical wants instead of more urgent needs. Indeed, I'll go further.
Associate Professor, As an Individual
I've got one sentence left.
Instead of 65 or 67, we should debate rolling OAS into GIS and making it completely targeted to those who need it. There's no empirical or moral justification in providing OAS to the upper quintiles in Canada, such as financially comfortable university professors, NGO and union leaders, or senior corporate types.
Thank you.
Céline Bak President, Analytica Advisors Inc.
Thank you, Mr. Chair.
Hello ladies and gentlemen, members of the committee.
Madam Clerk, thank you for this invitation and for your team's support.
I'm a fellow at the Centre for International Governance Innovation, and I've published this year two peer-reviewed policy briefs on the global clean technology industry, as well as on matters to do with innovation. I'd like to ask that the two synopses, which we submitted in advance of today's hearings, be read into the record. They have been submitted in both English and French in advance of this meeting.
On April 19, I reported the findings and recommendations of Analytica Advisors' 2016 report on the global and Canadian clean technology industry, our fifth annual report. The global market for clean technology goods reached $1.1 trillion in 2005, up from $555 billion in 2004, representing a 7.5% annual growth rate. The industry is now globally worth two-thirds that of the automotive industry.
From 2005 to 2014, the market for clean technology goods nearly doubled.
Canada is losing global market share. In that same period Canada's ranking as a clean technology goods exporter fell from 14th to 19th place in the table of the top 25 global exporters.
During that period, our market share shrank by 35%, placing us third from last among exporters. For the first time in six years, we have noted a decline in revenues for the industry as a whole.
Up until two years ago we reported growth of four times that of the overall Canadian economy, but that growth has now stopped.
Let me just briefly say that the clean technology industry added another 5,000 jobs last year, and it now directly employs 55,000 people, in almost 800 firms. Many of these people are young people working at the start of their careers in positions that range from finance to engineering to manufacturing and global sales. People in this industry are working in companies that are creating and scaling up technologies that protect our environment.
By 2030, clean technology enterprises will enable Canada to reduce emissions by 30% in relation to 2005 levels, which Canada committed to doing in the Paris Accord.
We'd like to make some specific recommendations in regard to Bill C-15.
We support the addition of $50 million, over four years, allocated to Sustainable Development Technology Canada for the SD tech fund and $82.5 million, over two years, to Natural Resources Canada to support research, development, and demonstration of clean energy technologies. However, we strong urge this government to implement programs for financing clean technologies where support is lacking for the rollout of the first commercial facilities. Addressing this financing gap is essential to stimulate the investments and create significant job opportunities, directly contributing to meeting the government's goal of generating economic growth through expanded green infrastructure while reducing greenhouse gas emissions.
We also support the expansion of eligibility criteria for accelerated capital cost allowances to include electric vehicles' charging stations and electric energy storage, but recommend that other sectors, including the advanced biofuels equipment and other carbon-reducing equipment, be included so that there is a level playing field.
We also support the fact that regional development agencies will double their annual aggregate support for clean technology to $100 million per year from existing resources starting in 2016-17 and urge that this government increase the overall funding allocated to these agencies to support clean technology. We'd like to note that the OECD has assessed Canada's subsidies to fossil fuel industries at about $3 billion per year, making quite a significant support to an industry that contributes 27% of Canada's greenhouse gas emissions. We note also that this budget does not establish a date for the phase-out of those subsidies to the fossil fuel industries.
With that, I'd like to conclude my remarks.
Ken Battle President, Caledon Institute of Social Policy
Thank you.
One of the most important and thorny policy issues I have had to face in my long career is indexation, whether full or partial.
In 1998 I wrote a report called “No Taxation Without Indexation”. It explored the impact of partial de-indexation of the personal income tax system, the refundable GST credit, and the federal child benefits.
Introduced into the tax transfer system in 1986 by the Mulroney Conservatives, partial de-indexation is instrumental to what I call social policy by stealth. It's the use of arcane and poorly understood technical changes to public policy, which were imposed on Canadians without their knowledge, consent, or understanding.
Partial de-indexation steadily and surreptitiously lowered the federal tax bank threshold, imposed an annual inflation-induced hidden income tax hike on taxpayers at all income levels, weakened the GST credit, and eroded the value of child benefits, especially for low- and modest-income families.
The following year, I did another piece that looked in more detail at what I called credit creep and explained how partial de-indexation has affected all aspects of the tax transfer system.
At that point, I had declared that we'd never get rid of partial de-indexation, but thank God I turned out to be wrong. In the 2000 budget, Ottawa re-indexed the tax transfer system. So far so good. De-indexation faded from view. Even the Harper government didn't try it, with the notable exception of its pet social program, the universal child care benefit, which was not indexed, although nobody seems to understand that.
Next, indexation popped up again from an unusual source: the new Canada child benefit. This is the last place I would expect to see stealth in operation. What happened was that, in launching the program, there was no indication that it will be indexed until it will be finally indexed in the year 2020.
Why did the federal government decide to do defer indexation until 2020, especially since it's a policy that goes against its whole view of transparency in public policy?
Cost is the only plausible explanation we can come up with. The Canada child benefit likely ended up being more expensive than originally estimated, and therefore the de-indexation of it over the five years it will be implemented will save a lot of money.
There are some remedies to this problem. The best is to index the program the way it should be, and another would be look at the leakage of revenues through boutique tax credits that favour the wealthy, and get money out of that.
To make up for lost ground, we've recommended the federal government super-index the Canada child benefit starting in 2020. The maximum benefit would be fully indexed, and another amount layered on, so the total value of the program would be more than inflation. Ottawa did this, by the way, back in the 1990s when it grew the Canada child tax benefit.
Caledon strongly supports the Canada child benefit, a program we have advocated and worked on for many years. Its overt architecture is strong, but deferring indexation, although not the end of the world, makes it sad the program has to start its life with this Achilles heel.
Thank you.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Battle.
Turning to Mr. Lampron. The floor is yours.