Evidence of meeting #209 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was mining.
A recording is available from Parliament.
Liberal
Michael McLeod Liberal Northwest Territories, NT
On a point of order just quickly, based on Mr. Poilievre's comment about being televised, I want to get clarity on it. I don't believe, at least it wasn't my understanding, that we are televised today.
Can we get clarity on that for our witnesses, so they know?
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
I'm going to shift gears, although the discussion is interesting.
First of all, I would like to thank Mr. Roberts and all the other witnesses who are testifying before us.
Mr. Roberts, my first question is related to what you mentioned. I would have liked you to have provided some clarification on the issue of the proposed amendments to the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act.
You said that the proposed amendments would not have changed the way Sears' bankruptcy was settled. We know that many pensioners of this company have been penalized. This includes pensioners from Canada, and even from my region in Sherbrooke.
Can you clarify this statement that the new provisions of the act wouldn't have changed anything at all? That's sort of the argument of the government, which is saying that these amendments are being proposed in response to what happened at Sears.
National Director, Social and Economic Policy Department, Canadian Labour Congress
The relatively modest amendments in Bill C-97 with respect to the CCAA and the Bankruptcy and Insolvency Act would have had little impact in the case of Sears.
The problem in the Sears Canada fiasco was that despite the pension plan having a funding deficit since 2007, the directors of that company authorized a series of very significant dividend payments. While the company was within the requirements of solvency funding rules with respect to its pension plan deficit, there were no other restrictions, and indeed, no requirement on supervisors, that is, pension regulatory and superintendent bodies, to track what was occurring and intervene, despite the fact that the company was clearly being put at risk and the ability of the sponsor to make good on the pension deficit was being placed in question.
That's a long answer, but the short answer is no, I don't think any of the very modest amendments being proposed in this bill would have addressed that situation.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
What would have really changed the situation in a significant way would have been a change in the order of priority of creditors.
A large majority of the people and experts consulted, including those from the union movement, like you, supported this measure. Are you disappointed that it isn't part of the provisions of Bill C-97 that amend the Companies' Creditors Arrangement Act?
National Director, Social and Economic Policy Department, Canadian Labour Congress
That's certainly the position of the CLC and many unions, that this was a missed opportunity. Even if the government had been unwilling to grant straight-out superpriority status for the pension deficit claim, there are many ways in which the government could have entertained an evidence-based discussion about what changes to the order of priorities, the hierarchy of claims in bankruptcy and insolvency, might have been sufficient in future cases to have a meaningful impact on pensioners and plan members.
Given that there are private members' bills on this, namely Bill C-384 and Bill C-372, and a bill from the Senate as well, there's an opportunity to get the evidence on the table to really understand what opportunities exist within the existing statute, even short of superpriority, but we haven't seen that debate occurring.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Indeed. I'm disappointed, too.
In its last budget implementation bill before the next election, the government did not address intergenerational business transfers, a problem it has had for the past four years. It dedicated only one paragraph in its budget speech to this to say that it would study the issue further.
I commend the accounting firm MNP for clearly explaining in its brief the tax penalties faced by Canadian business owners when they transfer the business to a family member. The Liberal government has been saying for four years that it wants to address this tax unfairness, but it has not, which is another big disappointment.
Ms. Lidder and Ms. Drever, what do you think about this other missed opportunity? Why would it be important to address this issue without further delay, given all the demographic concerns and the number of companies that come to you for consultation regarding a transfer to the next generation?
Jennifer Kim Drever Regional Tax Leader, MNP LLP
Thank you for the question.
The transition of a business from one generation to the next is something that's very near and dear to our hearts at MNP, because we deal with owner-managed businesses quite frequently. This is one of the things they struggle with all the time. How do they transfer the business to the next generation?
In our brief, we have given the example of Marc and Tracy and their bakery. They're trying to transfer this business, which is worth $2.7 million, to their daughter. A lot of unwary people in this situation are going to walk into a tax bill for mom and dad and another tax bill for the daughter. There's going to be double tax on that transition. On a business worth $2.7 million, they could be paying $1.8 million in tax, at Ontario rates, which is very punitive. If they sell to a large consolidator, they are going to have a tax bill of under 10%, because they can get their capital gains exemption, and it could be funded with corporate dollars.
We have been advocating and asking for quite some time for the ability to put intergenerational transfers on an even footing with arm's-length, third party transfers. It is not fair that within a business, we cannot transfer to the next generation without a very punitive tax rate. The very best we can do, with proper planning, is get it to about a 27% tax rate, but that still leaves a lot less money in mom's and dad's hands for retirement than if they had sold to the arm's-length party.
We do know that the government is looking at this, and we applaud that. We think this is very important. It's important to get it right. We don't want to see a situation where we have such stringent, severe requirements that we can't get any businesses to meet the requirements.
We want to make sure that this is flexible enough that businesses can transition to the next generation in an effective manner. It helps keep businesses private, grow the middle class and make jobs for working-class Canadians.
Do you have anything to add to that?
Senior Vice-President, Taxation Services, MNP LLP
No. I would agree that we need to spend some time making sure that we come up with a solution that allows most transactions to fit within the criteria, and has hallmarks for a bona fide transition of family business. Also, when there might not be a full and complete transition, but a plan is in place, it should at least be treated as a capital gain, and be taxed not at a punitive rate, but the same as it would be for a sale to a third party.
Liberal
The Chair Liberal Wayne Easter
Thank you.
In the budget, you've noted that the government is continuing to look at that. It says, “continue its outreach”.
Has MNP been contacted on any of these consultations?
Regional Tax Leader, MNP LLP
Yes. I attended a round table last summer with the Department of Finance. They did four round tables across Canada, and we attended them. We would love to be more involved in the developing of the framework and hallmarks, because it is very important to get it right for Canadian business. We need it for our competitiveness.
Liberal
The Chair Liberal Wayne Easter
We will pass that on.
Am I right on these numbers? You're saying that if they sold that bakery, they could pay $1.8 million in taxes, out of a $2.7-million sale to family. If they sold at arm's-length, with my calculations, it would be $270,000.
Regional Tax Leader, MNP LLP
Yes. That's correct.
I would like to point out that on the very right, where it says “2007 draft legislation”, this is what was originally proposed, and then got rolled back. These were the changes proposed to section 84(1) that the tax community was very concerned with. We said it was—for lack of a better word—killing the ability to transfer a business within a family.
We applaud the government for stepping back from that, and taking the time to do it right.
Liberal
The Chair Liberal Wayne Easter
Thank you. We'll pass that on to whoever we should pass it on to. We'll figure that out too.
Thank you, all three.
Mr. Fragiskatos.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thank you, Mr. Chair.
Thank you to the witnesses for today's testimony.
Mr. Roberts, you mentioned pharmacare. I'll be very to the point. Where does pharmacare rank for your workers—for the people you represent—in terms of priorities and hopes for the future?
National Director, Social and Economic Policy Department, Canadian Labour Congress
I think it ranks very high. Although many of our members have workplace drug coverage plans, many of those plans are under pressure, as you know, from high drug costs, and employers not wanting to offer them to retired employees, constantly restricting the availability of drugs under those plans and introducing co-pays, deductibles and limits of all sorts.
Even among our members, as well as many non-unionized workers who don't have workplace drug plans, this is a major concern. I would say it is close to the top, if not the top concern.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Okay.
It echoes testimony we've heard from others as well, whether here in Ottawa or in the consultations that I participated in with colleagues in eastern Canada. I know other colleagues participated in western Canada. It's a universal view, I believe. The devil is in the details, though, in how we get there. I'm very happy to see that budget 2019 advances the conversation in important ways, as you've made clear this morning.
Does the CLC have in mind a specific example of a country that has done it well and done it right which Canada could learn from? I hate to put you on the spot. That's a big question, I know. We can talk about pharmacare but we also need to talk about models and examples and what Canada can learn from those.
Do you have any thoughts on that?
National Director, Social and Economic Policy Department, Canadian Labour Congress
I think that the comparative context for understanding the deficiencies in Canada's model is vitally important, because when one looks at the rich countries in the OECD zone, one finds that for most countries that have universal health insurance, they also have a universal drug insurance plan as part of that. Canada is a bit of an outlier in that regard, and because of that Canada has some of the highest drug prices in the rich industrialized world.
While there may not be a single country's model that one would simply adopt wholesale in reforming the Canadian model, there are very many components in many countries that are comparators for Canada that are worth looking at closely. There's New Zealand among small countries but also larger, wealthier countries as well.
I think what we know is that the principles involved, which involve universality, a single buyer, a national comprehensive formulary and the like, are the tenets, the principles, that one wants to adopt from different models rather than simply hunting for a single country that has the perfect drug insurance plan.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
That's a fair point.
I'll move on to the Canada training benefit, which I know the CLC has a favourable view of. Of your workers, are there particular workers you envision will be very interested in taking advantage of the benefit? I'm thinking of workers in sectors that are perhaps jeopardized by automation, either currently or in the future. Do you see those workers in particular demanding it more than others, so to speak?
National Director, Social and Economic Policy Department, Canadian Labour Congress
Absolutely. Certainly, technological change and automation are not restricted to a single industry or sector. They're increasingly transforming work in occupations across a whole range of different sectors and industries. I would say there are very many unions, private sector but also public sector unions, that are intending to take advantage of this lifelong learning opportunity. In particular, the construction trades that operate union training centres, I think, will want to look closely at making this available to members.
What we find in other countries is that when there's an intermediary, a union in particular, that can make working people aware of the benefit, the opportunity, and help assist in taking advantage of that opportunity, the take-up rates go up and there's more efficient utilization of those credits and those opportunities. So we think unions have a critical role to play in expanding digital skills, in expanding new capacities to deal with automation across a whole range of occupations and industries.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Mr. Roberts, I'm going to assume that many, if not all, of your workers are supported by the Canada child benefit. You will have seen just yesterday it was announced that the Canada child benefit is going up $30 a month, or $360 a year. As you know, the CCB is tax-free. Would you support that it continue to be tax-free?
National Director, Social and Economic Policy Department, Canadian Labour Congress
Yes, I think it's a very important social policy innovation, absolutely.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
I only put that on the record because we've seen in the past that the CCB is not the first child benefit we've had in Canada. We've had previous approaches to the policy, but there's been a tax applied, so I worry sometimes that we might get back into that. Putting that on the record is important.
MNP, on that, since you have a tax focus—although I know child benefits are not your prime focus—would you support that the CCB remain tax-free?
Senior Vice-President, Taxation Services, MNP LLP
Yes, that's a great initiative.
I understand it is going to be indexed and adjusted annually. When you look at that, there are other items in the Income Tax Act that aren't indexed, and we would suggest that be looked at by the government. An example would be the tuition credit transfer we referred to in our presentation and submission. Families struggle to fund education. Parents usually help the children pay for the tuition, yet they're only allowed to receive $5,000 of a tuition transfer from the child and the rest remains with the child. Once the children start working and they're earning income, they could use it at that point. We feel it would help affordability.