Good morning, Chairman, and members of the finance committee.
The fall economic statement and budget introduces measures to address competitiveness and affordability and signals that the government has taken first steps to addressing taxpayer concerns. We believe, however, that Canada must do more.
For over 60 years, MNP has been dedicated to our clients' success. Today we proudly serve more than 180,000 businesses and 19,000 farms throughout Canada. We are the third-largest tax filer in the country.
Our clients are concerned with how their businesses can stay competitive. In addition, they struggle to cope with the increasing complexity and administrative burden of the tax system. They're worried about how affordable Canada will be, especially for the next generation.
In terms of competitiveness, we note that the budget and Bill C-97 contain several improvements to capital cost allowance, scientific research and experimental development, legislative changes to section 143 that promote tax fairness, and small business deduction relief for farming and fishing businesses. These are important changes and initiatives on competitiveness. Of note, however, is the fact that the new accelerated capital cost allowance lacks parity with the recent tax reform in the United States. It does not go far enough to provide Canadian businesses with a competitive advantage.
Further, we continue to recommend lowering the combined corporate tax rate to a more modest 20%, and a combined personal tax rate below 50%. With a top marginal tax rate of 53.5%, Canada's is the fourth highest among OECD countries, which hurts our competitiveness.
In terms of the small business deduction, we are pleased that the government corrected the unintended consequences to the agriculture and fishing industries related to the 2016 legislative changes. However, there are other industry groups that were also inadvertently affected. We urge the government to ensure that Canadian start-ups and private enterprises are not subject to the proposed employee stock option cap. These businesses rely on stock options to attract and retain talent in their formative years, and removing access to stock options would severely impact their ability to compete in the global marketplace.
Affordability is clearly a growing concern for Canadians. It's an issue that dominates the daily headlines. MNP has a quarterly national study on affordability that shows that just under half of Canadian families are within $200 of financial insolvency every month. To try to address this issue, the budget and Bill C-97 include the following: targeted support for first-time homebuyers, a Canada training credit and an incentive to make zero-emission vehicles more affordable.
We commend the government for focusing on these areas and believe measures could be further enhanced. We find that many first-time homebuyers rely on their parents to help them with their down payments. Parents often take a tax hit in order to do so. We suggest that further incentives be contemplated to provide relief for parents, such as using their RRSPs for their children's homebuyers' plan. Alternatively, the government could consider simplifying related party loans specifically tied to the purchase of a home.
Governments are striving to make education affordable. The Canada training credit helps build our future workforce and ensures workers get the training they need. However, education costs remain a burden to many families. We recommend full tuition credit transfers, rather than the current $5,000 annual cap.
Regarding zero-emission vehicles, the incentive helps businesses but could inadvertently impact their employees. These vehicles are generally more expensive, and the standby charge for employees who drive them could become an affordability issue.
We are pleased with the government's commitment to consult on intergenerational transfers of businesses while protecting the integrity and fairness of the tax system. In our practice many families struggle with how to transition their business. In our brief we've shared Tracy and Marc's dilemma of selling their bakery to their daughter versus a third party. The tax system unfairly penalizes them if they sell their business to their daughter.
In summary, we ask that the government commit to introducing policies and tax measures to make Canadian businesses more competitive and improve affordability for Canadians. At the same time, we need to ensure that these measures are simple and do not increase the cost of doing business in Canada.
Tax policy should be fair, certain and predictable.
Together, we have much work to do and we look forward to working with you to ensure Canadian competitiveness and affordability.
Thank you.