Evidence of meeting #212 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was process.
A recording is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
I will call the meeting to order. For the record, we're dealing with the order of reference of Tuesday, April 30 on Bill C-97, an act to implement certain provisions of the budget tabled in Parliament on March 19, 2019, and other measures.
We have five groups in the first panel and we have Ms. Macklin joining us by video conference.
We will start with Mr. Achen, with Achen Henderson LLP. The floor is yours.
Clayton Achen Managing Partner, Achen Henderson LLP
Thank you, Mr. Chair.
Thank you very much for allowing my voice to be heard in this committee. I am truly honoured and humbled to be here with you all today.
My name is Clayton Achen. I'm a founding partner at Achen Henderson CPAs in Calgary. Given my practice area, my primary interest with respect to Bill C-97 is tax—specifically the taxation of private companies and small businesses and their owners. I'm primarily interested in what's missing from Bill C-97.
My firm's day-to-day work as a chartered professional accounting firm is to work directly with middle-class small business families. This has given us better perspective than most to see how hard it is for entrepreneurs to earn a living. We also see how easy it has become for our government to take those hard-earned dollars away, sometimes under the guise of fairness, which is a clever word that does nothing to consider the risks and ultimate hardships that an entrepreneur endures.
I'll spend a few minutes talking about some of their more recent challenges, including economic challenges, increases to tax, increased compliance burdens and uncertainty, and challenges in dealing with the CRA and navigating our tax system. I'll then make some brief comments on Canada's desperate need for a modern tax system and close with my thoughts on a few business-related items that are contained in Bill C-97.
It cannot be understated how complicated our tax system has become in the last 50 years, which was the last time that a comprehensive review was undertaken. Our last three budgets have heaped more and more layers of complication and burdens of compliance onto Canadian small businesses. While I am grateful that the attack on private corporations and their shareholders appears to have subsided in 2019, I am disappointed that the bill contains nearly nothing to help them.
What we've seen, particularly in my home province of Alberta, is that entrepreneurs have faced tremendous adversity in the last five years and particularly in the last three and a half.
In Alberta, some small businesses have managed to survive a long and sustained economic downturn with very little help from our governments. A lot have simply closed their doors and are out of work.
For all Canadian small businesses, the cost of compliance has increased dramatically as a result of changes to the inter-corporate dividend rules, tax on split income, the specified corporate income and association rules, changes to family trust reporting and new penalties for saving too much in your business regardless of the reason.
Many wealthier clients have increased their risk tolerance with regard to tax planning strategies and reduced their tolerance for economic risks. Many wealthier clients are shifting their wealth out of Canada.
Most of this is a direct side effect of the offensive and ill-conceived attempt at tax reform for private corporations and their shareholders that was announced on July 18, 2017. Moreover, all companies, including small businesses, are now shouldering significant CPP increases for the next seven years.
According to research conducted by the CFIB, Canadian small businesses are now being asked to shoulder nearly half of the federal carbon tax take, which increases the cost of everything—and I mean everything—while receiving disproportionately small rebates.
In many cases, small businesses have tried to pass these costs on to consumers in order to remain viable. In many cases, they simply can't. This results in corporate inequity, meaning smaller companies are simply unable to compete with larger corporations and multinationals who are better positioned or better equipped to shoulder these additional tax and compliance burdens.
I share these insights with you today not to complain, but rather to highlight that there have been real, rapid and sustained challenges for middle-class small businesses owners across Canada and Bill C-97 offers very little in the way of assistance or stimulus.
The next issue is the CRA's service levels. I can confirm the substance of the 2017 Auditor General's report, which says it is very difficult to reach the CRA by phone and even more difficult to get a complete and correct answer. We still deal with this daily. At Achen Henderson, we have been forced to add this to our service levels and have elected to do so at no additional cost to our clients.
While I'm thankful for my newfound love of chamber music and encouraged that the government recognizes the problem, we must ask ourselves if the measures in Bill C-97 are the correct approach. While advances have been made by the CRA to be more accessible and user-friendly online, it confuses us that the CRA requires five times the staff per capita to administer our tax system than the IRS does, with more hiring announced in the 2019 federal budget.
Based on our extensive experience in dealing with the CRA and helping many organizations who have experienced similar challenges, we've come to believe that the CRA's issues are cultural in nature. Defective cultures always result in operational bottlenecks. These bottlenecks are magnified by a tax system that is far too complicated for the average CRA agent or taxpayer to navigate, which is further magnified by a lack of or inadequate professional training, in our opinion.
Next, instead of taking steps toward modernizing our tax system to make it more transparent, competitive and easy to comply with and administer, Bill C-97 is a continuation by our government of using taxation to pick winners with tax breaks in various economic areas and industries. Furthermore, C-97 does nearly nothing to address tax competitiveness with the United States. Instead, the bill stretches the fabric of our tax act even further, mending holes where the fabric breaks with more patches, resulting in legislation that is impossible to comply with and administer.
lt's not all bad. There are some welcome patches in the bill, such as the improvements to the RDSP rules and the specified corporate income rules, but I can't help but wonder how many more holes will need to be patched until we consider modernizing our tax system.
The patch to the SR and ED program is a step in the right direction. lt undoubtedly makes the program more accessible to certain CCPCs. For them, this should help to tip the balance between compliance costs versus benefits and increased support. Unfortunately, these changes do not address the administration issues in the SR and ED program, and they only impact a very small portion of private companies in Canada.
While the accelerated investment incentive will be helpful to some private companies—namely those who are doing well and/or those who are able to expand or upgrade—the full expensing of M and P equipment, clean energy equipment and electric vehicles seems like boutique benefits that will only help certain private companies. We are disappointed that the accelerated CCA measures are temporary in nature.
ln closing, entrepreneurs have endured a lot these last few years. Many continue to struggle with uncertainty and excessive tax complexity, and have received very little from their government in return. While C-97 doesn't ask them to shoulder much more, it doesn't offer much in the way of assistance or stimulus.
We've seen improvements in the CRA's online offerings, but we have experienced very little improvement in hold times or service levels, and we question if Bill C-97's approach to resolving these problems is the correct one. Bill C-97 is a missed opportunity to initiate a comprehensive review of our tax system with the goals of modernization and simplification at its core.
Lastly, the accelerated CCA measures in C-97 are targeted at specific industries and temporary in nature, and we think they miss the mark on tax competitiveness with the United States.
Thank you very much for inviting me to speak today. I'd be happy to take your questions.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Achen.
Next is the Canadian Consumer Specialty Products Association, with Ms. Coombs, president.
Shannon Coombs President, Canadian Consumer Specialty Products Association
Good morning, Mr. Chair and members of Parliament. It's a pleasure to be here today to provide our proposal for your consideration and to include in the clause-by-clause consideration of Bill C-97.
My name is Shannon Coombs and I'm the President of the Canadian Consumer Speciality Products Association. For 21 years, I have proudly represented the many accomplishments of this responsible and proactive industry. Today, I provided a one-pager, “Imagine Life Without Us?”, which illustrates the types of products CCSPA represents. I'm sure you have used many of them today.
CCSPA is a national trade association that represents 35 member companies across Canada, collectively a $20-billion industry employing 12,000 people across 87 facilities. Our companies manufacture, process, package and distribute consumer, industrial and institutional speciality products such as soaps and detergents, domestic pest control products, aerosols, hard surface disinfectants, deodorizers and automotive chemicals, or as I call it, everything under the kitchen sink.
I would also like to thank those MPs around the table who are assisting CCSPA with our social media campaigns on Lyme awareness, tick prevention and hand washing.
Why are we here today? Bill C-97 makes amendments to various pieces legislation. Part 4, division 9 of Bill C-97 includes provisions to support regulatory modernization in Canada. Four of the acts included within the regulatory modernization section impact our members. These pieces of legislation are the Pest Control Products Act, the Weights and Measures Act, the Food and Drugs Act, and the Hazardous Materials Information Review Act.
I would be pleased to answer any questions you may have regarding those acts. However, our primary focus today is not these but the Hazardous Products Act.
First and foremost, CCSPA applauds the government's commitment to support regulatory modernization in Canada. Minister Morneau's fall economic statement underscored the need for regulatory reform to make it easier for Canadian businesses to grow and remain competitive while still protecting the health and safety of Canadians. Given this commitment, we are here today to request the removal of a costly and unique-to-Canada provision in the Hazardous Products Act via Bill C-97.
The requirement found in paragraph 14.3(1)(a) of the Hazardous Products Act requires suppliers to keep a “true copy” of labels for workplace chemicals housed on a server in Canada for six years. This unique-to-Canada provision was included in the omnibus bill of 2014, when amendments were made to the Hazardous Products Act to allow for the modernization of the hazardous products regulations. As the provision for the “true copy” was included in the legislation, it did not have to go through any costing for companies. In the development of the regulations, it also avoided regulatory costing oversight as it was considered “compliance” and outside the scope of the regulations and the one-for-one rule. To date, no clear policy intent or objectives have been provided to us related to the true copy provision.
The cost for our member companies to comply with the true copy requirement is prohibitive and is realized throughout the entirety of the Canadian supply chain. On average, CCSPA members will have an initial investment for the first year of $4.2 million, $17 million in ongoing investment for each year for human resources, and up to $10 million associated with the Canadian server. If we were to break it down and look at the impact on an individual company, annual costs for one member with four manufacturing sites are estimated at $400,000 to inspect, photograph and catalogue 23,000 receipts of their raw materials annually. The costly process has been captured on the left-hand side of the the document that I provided to the clerk for your reference.
As members can see from the diagram on the right-hand side, costs are not just borne by the manufacturer but upstream by the supplier and downstream by the distributors. Everyone will have to collect and retain the label information already captured on the safety data sheet. The redundancy of collecting this information at multiple points in the supply chain is an unnecessary burden and one without a clearly defined benefit.
As mentioned earlier in my remarks, regulatory modernization must work together for the “health and safety of Canadians” policy objective. The removal of the true copy provision within the HPA does not diminish the protection of Canadian workers. Industry is obligated to provide safety data sheets for all hazardous materials and chemicals used in the workplace. Under the Hazardous Products Act, suppliers are required to retain a copy of all safety data sheets for six years. This requirement is aligned with the United States and the EU requirement for safety data sheet retention. We are the outlier with respect to this unique label data collection.
The role of a safety data sheet is such that employers are obligated to train workers on hazardous chemicals that they work with and to ensure that workers read and understand the safety data sheets before they begin handling the products. This helps to ensure that their workers are protected when they use those products. The safety data sheet, which contains all of the important information on how to use that product, is the most comprehensive document that can be used to train workers on the hazards and precautions specific to that product. As members can see from the copy of the SDS that the clerk has shared with you, it is the most comprehensive piece of information. The label is a limited restatement of those hazards and precautions that already appear on the SDS.
CCSPA has been and remains committed to working with this government to support an efficient and effective regulatory climate for businesses so that we can be competitive at home and abroad. We believe that the issues, as outlined, support our collective goal of meaningful regulatory change as per the government's regulatory reform agenda.
For companies who wish to be competitive in North America, this unusual paper burden, unique to Canada, is a disincentive to innovation and keeping businesses here. We respectfully request that the finance committee help us to remove this unique legislative burden and deliver against the government's regulatory reform agenda.
Thank you, Mr. Chair.
Liberal
The Chair Liberal Wayne Easter
Thank you, Shannon.
Next we have, from CropLife Canada, Mr. Prouse, Vice-President, Government Affairs.
Go ahead, Dennis.
Dennis Prouse Vice-President, Government Affairs, CropLife Canada
Thank you, Mr. Chair and committee members.
As Mr. Easter said, I'm Dennis Prouse, vice-president of government affairs for CropLife Canada.
CropLife Canada represents the Canadian manufacturers, developers and distributors of pest control and modern plant-breeding products. Our organization's primary focus is on providing tools to help farmers be more productive and more sustainable. We also develop products for use in urban green spaces, public health settings and transportation corridors.
We are here to speak in support of Bill C-97 due to the fact that it makes an important start down the road of regulatory modernization. As we know from both the advisory council on economic growth report—often known as the Barton report—and the agri-food economic strategy table, Canada must overcome internal regulatory barriers that hinder innovation and competitiveness if it is going to meet the government's target of $75 billion in agri-food exports by 2025.
Bill C-97 takes significant actions to address regulatory modernization. In particular, it makes key amendments to the Pest Control Products Act—PCPA for short—to help alleviate resource pressure on Health Canada's pest management regulatory agency to allow it to focus on work that meaningfully contributes to the agency's mandate.
The current requirement in section 17 of the PCPA requires the Minister of Health to initiate a special review of any pesticide where an OECD country bans all uses of an active ingredient. The language gives no discretion to the minister to determine whether or not a special review is necessary. An active ingredient that is currently under re-evaluation or has just been reviewed in Canada can still be subject to a new special review.
Certain interest groups have learned to exploit the current system, and the onerous special reviews, coupled with the challenges with the current re-evaluation process, are contributing to the PMRA's unsustainable workload. These duplicative efforts only serve to bog down the system and to prevent farmers from having access to the tools that they need to protect their crops and help drive Canada's economy.
Under Bill C-97, the Pest Control Products Act would be amended to give the Minister of Health discretion to move forward with a special review only when it stands to serve the best interests of Canadians. It also allows the minister to consolidate related special reviews, which would fix the tsunami effect that might otherwise result.
We applaud the efforts of Bill C-97 to address regulatory modernization, but it is only one part of a much broader set of improvements that are needed. For instance, we continue to press for critical improvements that can and need to be made to PMRA's re-evaluation process under existing authorities, as these have not yet been addressed.
Similarly, we are seeking formal cabinet-level acknowledgement of the economic role that both PMRA and the Canadian Food Inspection Agency play in facilitating agriculture and agri-food's economic growth. On the CFIA side for instance, the agency has still not yet clarified its regulatory oversight for products of gene editing. Gene editing is poised to transform agriculture around the globe. Despite this, Canada is falling behind some of its global competitors who are acting decisively on creating timely, predictable approaches to regulatory oversight for products of gene editing.
Examples like this are why the government needs to act quickly on the concept articulated in budget 2019 of placing a competitiveness lens on regulatory agencies. Competitiveness does not come at the expense of health and safety, which must always remain at the forefront. What it does mean is that regulators acknowledge and embrace their role in helping to facilitate innovation and competitiveness for Canadian companies, all while maintaining their focus on science-based regulation.
Action is also required for the annual regulatory modernization bill as outlined in budget 2019. The new external advisory committee on regulatory competitiveness will no doubt have some strong content for that bill.
It is encouraging to see momentum building around regulatory modernization that will serve to drive growth in Canadian agriculture and the economy writ large. However, regulatory modernization must be a whole-of-government exercise and must be led by key economic players, namely the Department of Finance and Treasury Board. Regulatory agencies do not reform themselves. They respond only to strong direction and leadership from above. Absent of that, regulatory modernization will slowly lose momentum and collapse. Given the promise held by economic growth in Canadian agriculture and agri-food, that would be a tragic development.
Thank you, Mr. Chair. I look forward to the questions that the committee might have.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Dennis.
We'll turn, then, to the Canadian Credit Union Association and Mr. Hatch, Associate Vice-President.
Welcome.
Michael Hatch Associate Vice-President, Financial Sector Policy, Canadian Credit Union Association
Thank you, Mr. Chair.
I want to thank the committee members for giving me the opportunity to speak this morning.
My name is Michael Hatch, as the chairman mentioned, and I am the Associate Vice-President for Financial Sector Policy with the Canadian Credit Union Association. Try saying that five times fast.
We represent 248 credit unions and caisses populaires outside of Quebec. Collectively, our sector contributes $6.5 billion to the Canadian economy. We have 5.8 million members. We employ almost 30,000 Canadians and we manage over $225 billion in assets. In 2018 we donated $62.5 million back to community initiatives and projects across the country, which is a much higher share of our after-tax income than the large banks.
Credit unions are owned by the people who bank with them, as many of you will know and appreciate, and that's what sets us apart. We're the only banking services provider with a physical branch in 395 communities across Canada, many of which are represented around this table today.
Despite our smaller size, we have market share comparable to the big five banks in agricultural and small business lending. We lend to small businesses because we are small business. In the western provinces, for example, credit unions often have between 30% and 50% of the market. In Manitoba, one out of every two consumers banks with a credit union.
The important work we do in our communities is why credit unions have been asking the government to modernize some outdated provisions within the Bank Act, which are obsolete and a barrier to innovation and competition in financial services. We were pleased to see two of our pre-budget recommendations included in budget 2019, back on March 22. These were changes to federal credit union member voting for AGMs, and an elimination of the outdated requirement for federal credit unions to send paper statements to all members each year.
We thank the government for hearing our concerns and for working to address some of our recommendations in budget 2019. However, we were disappointed that only one of these two recommendations was included in Bill C-97. This means that federal credit unions will have to continue sending out inefficient, costly and environmentally unfriendly paper statements to all of their members, including children, preventing the credit unions from returning the savings that electronic notices would provide back to their communities, until at least 2020 and perhaps beyond.
One of our federal credit unions has estimated that this costs it nearly $1 million every year. This money would be much better spent on reinvestment in the credit union or on the community programs that our members support so generously.
While the Bank Act does apply directly to only federal credit unions, it is important to note that modernization of outdated provisions eliminates barriers to entry for credit unions considering going federal, as well as sending an important message to provincial regulators, encouraging them to re-examine their own outdated provisions in their own legislation. Several provinces still have similarly outdated provisions. These recommendations will have an impact not only in the federal sphere but across Canada in increasing competitiveness and innovation within the sector.
With the support of the all-party credit union caucus—of which many members are here this morning—and all parties, credit unions remain hopeful that the Parliament elected in October will follow through with the budget measure on the elimination of the requirement to send paper statements, and our other recommendations to support innovation and competition within the financial services sector.
Ultimately, policy should encourage competition in financial services in Canada. Our financial sector is not noted for its high levels of consumer choice. Credit unions represent the only real alternative to the large banks in Canada. Further, policy-driven concentration in financial services in this country is not in the interests of the consumer or the economy.
Credit unions will continue to advocate for the changes that the government committed to in its budget this year but that did not make it into this bill, regardless of the outcome of the election later this year. The sector appreciates the support of the all-party credit union caucus and asks this committee for its support in ensuring that these changes are implemented at the earliest legislative opportunity.
Thank you very much.
Liberal
The Chair Liberal Wayne Easter
Thank you, Michael.
We'll turn, via video conference, to the University of Toronto and Ms. Macklin, Director of the Centre for Criminology and Sociolegal Studies.
Welcome.
Professor Audrey Macklin Director, Centre for Criminology and Sociolegal Studies, University of Toronto, As an Individual
Thank you.
Thank you for giving me the opportunity to speak to the committee. This is my first appearance, and I hope that I [Technical difficulty—Editor].
Can you hear me?
Liberal
The Chair Liberal Wayne Easter
Could you go maybe go a little more slowly, Ms. Macklin, and we'll see how that works?
Prof. Audrey Macklin
I will focus on two aspects of Bill C-97 touching on immigration.
The first, starting at clause 305 of Bill C-97 is the diversion of a subset of refugee claimants from the Immigration and Refugee Board's refugee determination process to a pre-removal risk assessment. This applies to those who have made a refugee claim in one of the Five Eyes countries before coming to Canada, and that country is by and large the United States.
Why is this happening and with what effect? It's important to know that the pre-removal risk assessment is designed to be a supplement to, not a substitute for, a proper refugee determination. A proper refugee determination provides an oral hearing before an independent expert decision-maker. The pre-removal risk assessment is conducted by an employee of Immigration, Refugees and Citizenship Canada—someone who is not independent, someone who is not an expert in refugee determination and does not routinely provide oral hearings.
Why would one make this change from a process designed for refugee determination to one that is intended only as a supplement—one that is, for purposes of refugee determination, clearly inferior? Two reasons have been proffered. One is to address the delays, backlog and inefficiencies arising from the growth in the flow of incoming refugee claimants entering the system.
With respect to this problem, legal scholars—me included—and lawmakers, when confronted with a policy challenge, often reach first to law as the solution. The problem of a law is it's a bad law, and if it's a bad law, we'll make a better law. But that's often not the case and it's not the case here. The problem for the Immigration and Refugee Board was the inadequacy of the resources it had to manage an increasing flow of refugee claimants and, candidly, a lack of nimbleness in responding to the challenges of doing its job. These were amply documented in a recent audit report about the refugee determination process.
Having said that, since the data was gathered for that report, the Immigration and Refugee Board has received increased resources from the federal government, to the government's credit, and the IRB itself has developed new and better techniques for managing its workload, so that at present, they have exceeded their performance target for fiscal year 2019. In other words, there was a policy challenge, it was operational and administrative and they're meeting it.
For the government to switch horses in the middle and start to divert claims to another process, I think, is operationally unwise. More importantly, or in addition to that, this new process, or PRRA—pre-removal risk assessment process—is not able at the moment to manage refugee determination. It doesn't do oral hearings. It doesn't have expert decision-makers. There has been no calculation of the additional resources, delays and costs that will be imposed by switching to a different process for that subset of claims. In short, I think it is an inappropriate policy response to an operational or administrative challenge, and one that, indeed, on the evidence, is being addressed under the existing system.
I will move on to another concern about this, or another reason this process has been suggested, which is to somehow respond to the increased movement of so-called irregular border crossers who are coming to make asylum claims in Canada. I have a couple of responses to that.
First, the evidence suggests that very few of those people who are crossing irregularly into Canada have made asylum claims in the United States. So if the goal is to somehow address that population, it isn't going to be addressed by this move.
Second, for this allocation of refugee claimants who have made a claim in the United States the pre-removal risk assessment applies not only to irregular border crossers but to people who cross the border in any way—people who fly into Canada or people who enter to make a refugee claim under one of the exceptional categories of the safe third country agreement, for example, if they already have a relative in Canada. In other words, it doesn't just apply to irregular border crossers.
Finally, there seems to be a misconception that people who are diverted to the pre-removal risk assessment process because they have made a refugee claim in the United States will, if they fail before the PRRA, be removed to the United States. That's not right.
Let me give you an example. Let's say there is somebody from Iran in the United States who entered before the Muslim ban—a student, for example. The situation has become dangerous for her to return to Iran, and she decides, perhaps not unreasonably, that the United States is not a safe place for her to make a refugee claim. Maybe she makes a refugee claim in the United States and changes her mind, or maybe she doesn't make one at all. She comes to Canada. She gets this pre-removal risk assessment, which is an inferior process to a refugee determination process and one that will have a higher risk of false negatives, false refusals. If she is refused under this process, she isn't returned to the United States to complete her refugee claim there. She's returned to Iran.
This process exposes people to a very real risk of refoulement—a return to face persecution—and indeed through an unfair, incomplete, inadequate process.
Why, then, is this being done to people who have made refugee claims elsewhere? If it's under the assumption that they should complete their refugee claim in the place they started, as I pointed out, they aren't going to be returned to the place where they started their refugee claim. They're going to be returned to a place where they may fear persecution. If there is a view that somehow people ought not to make a refugee claim in one of the Five Eyes countries and then come to Canada, I will only refer you to the written submission of Professor Karen Musalo, an expert in U.S. immigration and refugee law.
She testified before the citizenship and immigration parliamentary committee on the question of what kind of asylum process now exists in the United States. She provides ample evidence about the extent to which it is unfair in its process, through things like, for example, the detention of children and the separation of families, and how it is unfair in its content and substance, by, for example, denying protection to women who flee domestic violence from other countries and cannot obtain refugee protection.
There has also been some claim that people who undertake this or who are subjected to this pre-removal risk assessment will in fact get a robust oral hearing and full access to appeal. I would refer you to the actual provisions in this legislation, in this bill, clause 305 and onwards. Nowhere in there does it say that anybody will get an oral hearing. Nowhere does it say that they will get an appeal. These are mere promises that are held out as something that may be done in regulation if this legislation is passed. I would encourage you not to sign a blank cheque on this. There is no oral hearing provided in this legislation. There's no provision for appeal under the present pre-removal risk assessment. There is very rarely occasion for oral hearings. They are generally not given.
In the moment that remains, I will just highlight for you something I will not pursue here, which is another provision in the bill regarding visas. There is a provision here to systematically deny visitor visas and other kinds of visas from countries that Canada considers unwilling to furnish adequate travel documents for purposes of removal of those already in Canada.
Let me cut to the chase on that. What this proposes, for example, is that if a country like China, which often does not issue travel documents readily to people being removed from Canada to China.... Canada decides it's not going to give any more travel documents to Chinese visitors to Canada. You as MPs are going to have an office full of angry constituents who say, “My mother can't visit for a wedding because she's from China, and China isn't delivering travel documents for returning Chinese visitors fast enough.” I'm not sure if you want to confront that situation in your constituency offices, but that's what this legislation will permit and authorize.
With that, I welcome your questions. Thank you very much.
Liberal
The Chair Liberal Wayne Easter
Thank you, Ms. Macklin. Thank you all for your presentations.
We'll start with seven-minute rounds. First up is Mr. Sorbara.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Mr. Chair.
Good morning everyone and thank you for your testimony. I'll try to do a couple of questions here so we can go across the board.
First off is Clayton. I listened to your comments. My first question is this. In Canada right now our debt-to-GDP ratio is declining. We're running a deficit-to-GDP ratio around 0.7%. In the United States, the equivalent deficit-to-GDP ratio is around 5%. Would you argue for stimulus—whether it's a tax expenditure, a tax cut or increased spending—to increase our deficit?
A lot of your comments were aligned with the party across. Would you argue for a higher deficit? How would you pay for it? What services would you cut?
I'd like a brief response, in 20 seconds, please.
Managing Partner, Achen Henderson LLP
I think that cherry-picking economic indicators is probably not the right approach to looking at the challenges that small business owners face in Canada. I think there needs to be a bit more compassion and empathy towards the plight that real people face, in particular with these new legislative challenges, so I'd argue for a comprehensive tax reform to analyze the things that you've just discussed, which are very critical points.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
You're not answering the question.
My second comment is this. We cut the small business tax rate from 11% to 9%, a $7,500 saving for every business across Canada. Over a million jobs have been created by Canadian businesses here in Canada. A.T. Kearney ranked us the number two place to invest in the world last year in their annual rankings, and I'm sure we're going to be up near the top again this year. We introduced the accelerated investment incentive and, for some reason you forgot to mention, the marginal effective tax rate on new investments in Canada is five points lower than in the United States.
I'm going to stop there and I'm going to move over to Mr. Hatch.
Managing Partner, Achen Henderson LLP
Do I get a chance to respond to that?
Managing Partner, Achen Henderson LLP
Thank you very much, Mr. Chair.
You know, I completely agree, and shortly after the uproar that resulted from the July 18, 2017, attack on private companies, the government brought back the 2015 plan to lower the small business rate. Whether or not that was a good idea is a question for economists. The jury is out on whether or not that encourages small business rewards and risks. A recent CPA report cited the need to review the tax system in order to determine if there's a net positive effect.
The small business deduction only helps those who are fortunate enough to be earning enough to leave some behind after they've paid themselves and their employees. This seems a bit contrary to the government's objective of helping the middle class, or maybe there isn't enough to be left behind.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Chair, I'm going to move on. He is effectively arguing for higher tax rates on small businesses. I thank him for his comments.
Managing Partner, Achen Henderson LLP
I'd appreciate it if you didn't put words in my mouth. That's not what I said, sir.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Michael, good morning to you. It's great to have the chair of the credit union caucus here this morning. We have worked together, I believe, very co-operatively with all parties in ensuring consumers have greater choice and that there's competition in the marketplace.
I understand the two budget measures are the budget measures that were introduced in budget 2019, one of which just made it to the BIA. I would argue that the actual governance structure that is being put in place is a longer term work in progress amongst yourselves, the government and the finance officials, but it has generally been very co-operative.
Just to clarify, the rules that have been put in place under the BIA would only impact those credit unions that are federally regulated.
Associate Vice-President, Financial Sector Policy, Canadian Credit Union Association
That's right. Thank you for the question and thank you for your leadership on the all-party credit union caucus. It's been a really instrumental piece of the puzzle, along with Mr. Albas from the Conservatives and Mr. Julian co-chairing that group.
Yes, to answer your question, these provisions directly apply to only federal credit unions. There are only two of them, and two more soon to be going through that process, but if I may add, there's an important downstream effect at the provincial level. I can tell you that in B.C., for example, they are currently undergoing a review of their FIA, their Financial Institutions Act, and this same provision exists for provincial credit unions in B.C.
But partially as a result of the progress that we've made on this requirement to send paper statements at the federal level, B.C. is now strongly considering eliminating that for provincial credit unions in that province, which would obviously be a huge win.