Evidence of meeting #40 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was alberta.
10:55 a.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Rabik.
Ms. O'Brien-Moran and Mr. Tait with MNP.
Go ahead.
10:55 a.m.
Michelle O'Brien-Moran Hutterite Tax Expert, MNP LLP
Chair, vice-chairs, and committee members, thank you very much for inviting us to appear before your committee today to provide evidence and answer any questions you have on the taxation of Hutterite colonies in Canada.
Hutterites live very private lives in the rural prairie provinces, and as such, there are a lot of misconceptions concerning them. If you look at the cover of the brief that we have provided, that's what a colony looks like. Hutterites live on these colonies. There are approximately 40,000 Hutterites in Canada on 375 colonies, with 15 to 20 families and 75 to 150 members. These colonies are each separate economic entities.
Hutterites are deeply religious people who follow the life and teachings of Jesus Christ and live together and share all things in common. Hutterites are a wonderful example of successful family farms. They have large diversified businesses; however, on a per capita or per family basis, they are, in fact, very small.
Hutterites are successful financially because the individuals work very hard, and they live very simple, humble lives. Everyone, including the children, contributes to the common well-being, and in return, the colonies provide for their every need from cradle to grave.
Colonies are very innovative. They have solar power, wind power, robotics, and geothermal energy. They're leading in manufacturing and agriculture.
In the 1960s it was determined that Hutterites should be taxed in Canada. The third session of the 30th Parliament of the Senate of Canada, on November 30, 1977, said that Hutterites should be taxed in the same manner as their non-Hutterian neighbours; that is, favourably, but not more favourably than all other taxpayers.
The taxation challenge arises from the fact that the income from a colony does not belong to any individual member; it belongs to all members, so a method needed to be developed in order to reach this fairness. As such, the act creates a fictional or a deemed trust in order to accomplish this.
The 1977 notice of ways and means motion in acting section 143 of the act, which is the part of the act that taxed Hutterite colonies, specifically said that a communal organization should be given the option of calculating its tax payable as the aggregate of the total taxes that would have been calculated had the income from its organization been taxed in all of the families' hands.
It's very clear. Everyone wanted Hutterites to be taxed the same way as every other taxpayer. Hutterites are clearly business people and farmers. There is no doubt about this. In fact, in order to fall into section 143 of the act, they must have income from a business. The confusion arises because of these deemed or fictional trusts that are created as well as the lack of clarity of the wording in section 143 over income retaining its source.
The working income tax benefit is a refundable tax that was created in 2007 in our Income Tax Act. It has very clear criteria on who an eligible person is and what they need to have in order to receive it.
Mr. Chair, if I could ask you to pretend to be a rural farmer for a minute, I could provide an example. Are you 19 years of age or older? Do you have income from farming? Does it fall within the range of $3,000 to $27,000?
10:55 a.m.
Hutterite Tax Expert, MNP LLP
Say yes, for the sake of our example.
10:55 a.m.
Hutterite Tax Expert, MNP LLP
You are entitled to the working income tax benefit. Wait. Are you a member of a communal organization?
10:55 a.m.
Hutterite Tax Expert, MNP LLP
Sorry, you don't get to receive it.
We all know that the intention was never to treat Hutterite colonies differently; however, it is, in fact, a result of what has happened.
Our recommendations result from the fact that the government worked together with Hutterites in a collaborative, respectful manner almost 60 years ago. This resulted in a fair and equitable tax system. We are asking to do the same thing today. Our recommendations impact the wording in section 143. Only Hutterites are taxed in this section of the act, so only they will be impacted by our recommendations.
First, we are recommending that the income in section 143 retain its source for purposes of the act.
Second, we are recommending that a congregation be given the option of deducting amounts deemed payable to individuals beginning at the age of 10.
Third, we are recommending that the definition of “congregation” in paragraph 143(4)(c) be revised to respect Hutterites' religious beliefs.
In conclusion, any of the credits or refunds that are created from these recommendations will go directly towards our government's stated objectives of stimulating the economy, investing in innovation and research and development, and creating green energy. This is all going to be done in Canada. As a result, it will allow Canada to maintain its ability to be a worldwide-known agricultural leader and keep its reputation of providing the opportunity for all of its citizens to be successful and prosper. We know that this is the right thing to do.
Thank you.
11:05 a.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Ms. O'Brien-Moran.
We are now turning to Ms. Vipond with the Alberta Federation of Labour.
11:05 a.m.
Siobhan Vipond Secretary Treasurer, Alberta Federation of Labour
Thank you for this opportunity to speak with you today.
My comments today will touch on four key areas: employment insurance, infrastructure investment, health care, and early childhood education and care.
The recent economic downturn in Alberta succinctly showcases a major problem with the employment insurance system—the regional variation. Regional variation disadvantages certain provinces and urban areas, and by extension, those workers, their communities, and their families.
The regional variation is unnecessary and divisive, and treats Canadians differently based on where they live. Where you live has little impact on your personal experience of losing a job. The EI system already has rules and time limits for individuals accessing those benefits. In recent months, in Alberta, we have also seen that the regional variation cannot respond fast enough to keep up with market economy changes. The government should eliminate the regional variation and create a uniform entry requirement of 360 hours for all EI benefits, with a qualifying period.
We applaud this government for recognizing the positive impact that infrastructure investment can have on the broader economy. We ask the government to make the rules around procurement of these investments advantageous to Canadian businesses and workers. Responsible investment in infrastructure can be an important tool for supporting and strengthening our economy. Not only do these projects improve lives for future generations, they also provide valuable jobs to the workers now.
Still, infrastructure spending and procurement must be done right in order for these benefits to be realized. Across North America, we are seeing more sustainable and ethical procurement practices that focus not just on the bid price, but also on the quality of employment offered to workers, opportunities for training and apprenticeship for future workers, and how the projects fit into a just transition strategy for workers moving to more green jobs.
We ask that this government follow through on its promise of infrastructure investment to create quality jobs and stimulate the economy, but we also want to stress the importance of the rules within the procurement agreements to ensure that Canadians benefit not only from jobs of the installation process, but also those in manufacturing and maintenance.
Well-resourced and fully integrated early childhood education programming benefits society by reducing inequality and poverty, and providing children with the foundation and skills to succeed in productive and participatory lives. A national child care program makes good economic sense for workers, families, and communities. Now is the time for the federal government to spearhead a national, public, centre-based, regulated child care program, and ensure that child care jobs are good quality jobs with secure retirement options to retain the workforce.
The Canada health accord is an agreement outlining the Canada health transfer. Funds from the Canada health transfer must be used according to the criteria in the Canada Health Act. In order to deliver quality health care, the provinces require predictable and stable funding. Therefore, we ask the federal government to commit to funding at least 25% of health care costs through the health care transfers under a new Canada health accord.
Pharmaceuticals are a growing cost to the Canadian health care system, to employers through extended benefit costs, and to Canadians who require care. Canada is the only developed country to have a universal health care system without including pharmaceuticals outside of those being used in the hospital settings. Currently, prescription drugs are financed through a patchwork of private and public funding. There's no debate that pharmaceuticals are medically necessary, and pharmaceuticals administered outside the hospital are just as medically necessary as those administered inside the hospital. A publicly funded drug plan is the only reasonable way of controlling drug costs and promoting universal access across Canada.
We are living through unprecedented times in terms of globalization and economic issues. We cannot respond to these issues as we have in the past, with deep cuts and tightening our belts. Rather, we should focus on investing in the future, investing in social goods, such as public infrastructure, pharmacare, child care, and quality safety nets for people going through tough times.
Although these investments may seem like an array of different issues, they are united by a simple fact. Good investments in these areas create quality jobs and quality programs that help people through their lives. These investments are good for workers, families, and Canadian communities across the country.
Thank you.
11:10 a.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much.
We turn to the Recreation Vehicle Dealers Association of Canada, Mr. Merkowsky.
11:10 a.m.
Dan Merkowsky Member, Recreational Dealers Association of Alberta, Recreation Vehicle Dealers Association of Canada
Mr. Chairman and committee members, I'd like to thank you for giving us an opportunity to talk to you this morning as part of your pre-budget consultations.
My name is Dan Merkowsky and I'm the executive vice-president of the RDA of Alberta, and I am appearing on behalf of the Recreation Vehicle Dealers Association of Canada.
The RVDA of Canada is a national volunteer federation of provincial and regional RVD associations, and the members have united to form a professional trade association for all businesses involved in the recreation vehicle industry.
For the upcoming 2017 budget the RVDA of Canada is asking the federal government to help protect our tourism industry and prevent unnecessary obstacles to further growth in this important sector. By implementing the following recommendations we can help to provide economic growth, business expansion, and innovation to all communities, particularly rural and remote communities across Canada.
We ask you today to consider investment in RVing and camping infrastructure in Canada's national parks, and protection of Canadian businesses by not raising the de minimis level up to $200.
RVing and camping are already components of the Canadian economy. In 2011 the total economic activity associated with the Canadian RV industry reached $14.5 billion. Direct spending associated with recreational vehicles reached $11.5 billion and these expenditures generated $8 billion in net activity and 98,000 jobs.
By making a dedicated investment in camping and RVing infrastructure in Canada's national parks we can help to bring further growth to rural and remote communities. By nature, RVing and camping are found in these communities that are outside of our urban centres.
Canada is home to vast natural beauty, which is not being fully explored by our own population or external visitors. There are over 4,231 campgrounds operated across Canada, each offering a unique experience for Canadians and international visitors.
We require critical upgrades in electrical outlets and an increase in campsite size requirements to accommodate larger RVs. Many campsites do not have lower amp services of 30 or 50 amps that are required to accommodate the more amenities in RVs today. Additionally, as units can now reach up to 45 feet, compared to 25 feet, these upgrades are essential for continued use of existing sites.
RVing in Canada has a considerable economic impact. The manufacturing, purchasing, servicing, and use of recreation vehicles contributes billions to the Canadian economy each year. In total the retail sales and service associated with Canada's more than 400 recreation vehicle dealers generates about $1.5 billion in net economic activity throughout Canada, and supports nearly 19,300 jobs.
In order to protect this valuable industry, along with many other Canadian businesses, we ask that the de minimis level not be raised to $200.
The changes in the 2012 federal budget to increase the value of goods travellers can bring back into Canada free of taxes and duties has seriously worsened the ability of Canadian RV dealers to compete with U.S. dealers, who already have the advantage of lower costs. Popular after-market parts, now falling within the new exemption level, give customers a powerful reason to take their business to the U.S. Dramatically raising the limit when the Canada Border Services Agency is not actively enforcing the current threshold sends a contradictory message on behalf of the Canadian government and fails to support our businesses and the Canadian economy as a whole.
While American online merchants and couriers will argue that the raised de minimis level in Canada is only a fraction of that of the United States' current threshold of $800, the U.S. taxation process differs from that practised in Canada. Furthermore, the United States does not collect federal, local, or state taxes on interstate shipments. The tax advantage the U.S. would experience if the Canadian de minimis were raised to $200 would be huge, while tax benefits on inbound goods would be greatly reduced for Canada.
Many groups representing Canadian businesses support the position that raising de minimis levels would only result in Canadians shopping less often in Canada and as a result fewer goods would be sold nationally, leading to a significant decrease in government revenue.
The United States already holds a predominant position in the online retail space and indeed the global online space with only 22% of U.S. customers reporting having made a purchase from a non-U.S. seller. By contrast, 67% of Canadians report having made online cross-border purchases.
Implementation of RVDA of Canada's recommendations for the 2017 budget would help to protect Canadian businesses; grow our economy, particularly in rural and remote communities; and promote Canada as a tourism destination for both internal and external visitors.
Thank you for your time.
11:15 a.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Merkowsky.
We will turn to Mr. Gorman, with the Canadian Solar Industries Association.
To the last two witnesses, thank you as well for switching from Ottawa to here, due to the pressure of the number of witnesses we have in Ottawa.
Go ahead, Mr. Gorman.
October 4th, 2016 / 11:15 a.m.
John Gorman President and Chief Executive Officer, Canadian Solar Industries Association
Thank you, Mr. Chair. It was actually quite fortuitous, because the solar industry is having its major conference and trade show in Edmonton this week.
I thank you for the opportunity to be presenting on behalf of the Canadian wind and solar industries.
Hello Mr. Chair, ladies and gentlemen of the committee.
First of all, thank you for inviting me to testify here today. I would also like to thank the clerk for her fine work.
My name is John Gorman and I am the president and CEO of Canadian Solar Industries Association, or CanSIA.
Today I will talk to you about the joint recommendations of the solar and wind energy associations, thanks to our cooperation with the Canadian Wind Energy Association, or CanWEA.
The federal government has stated that Canada will work to reduce its GHG emissions by a minimum of 30% from 2005 levels by 2030, and by 80% from baseline levels by 2050. This is an ambitious target, but it is consistent with the level of initial effort required to meet the Paris agreement commitment to hold the increase in average global temperatures to no more than 2°C from pre-industrial levels.
Numerous analyses have demonstrated that GHG emission reductions of this scale can only be achieved through the decarbonization of the electricity system, and the subsequent use of that electricity to replace fossil fuels across a wide variety of end uses, including transportation, buildings, and industrial processes. In other words, deep decarbonization in the Canadian context requires deep electrification with clean sources.
Solar heating and cooling technologies can also play an important role in reducing emissions from buildings and industrial processes. Accordingly, we believe a focus on zero carbon electricity production, increased electrification, and fuel switching to renewable resources must be at the core of Canada's climate change strategy. The federal government has a great opportunity, through its spending and fiscal measures, to transition Canada towards a low-carbon economy while ensuring that Canadians benefit from new jobs, economic development, and a cleaner environment.
This transition to a low-carbon economy will require significant investment in renewable energy projects. Global investments in renewable energy are in the order of $250 billion per year. Incidentally, that is twice as large as the amount of money that is invested in fossil fuel electricity generation globally per year.
As investment globally has soared, prices have plunged. For example, the cost of solar power has fallen 82% in the last six years. Similarly, the cost of wind has declined 61% over this same period. The amount of investment needed in Canada to meet its GHG reduction targets outweighs the available public funds. For that reason, successful public policy seeks to attract and leverage private sector investment to its maximum potential. To this end, CanSIA and CanWEA have detailed several mechanisms to attract the investment of private capital in renewable energy projects in Canada.
We have made a detailed submission to this committee, but as our time here is limited today, I would like to focus on just one of these measures, tax credits. They are the one measure, if introduced in combination with the existing measures, that have the potential to attract the private sector investment that Canada needs.
The United States has used tax credits for renewable energy since 2006, namely the investment tax credit and the production tax credit. The ITC, or investment tax credit, has been a tax credit in the U.S. that has attracted most investment in solar energy for households, businesses, communities, and industry. It is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay to the federal government. The ITC is equal to 30% of the investment in the solar property.
The ITC steps down after 2023—this is in the U.S.—and the residential credit will drop to zero while the commercial and utility credit will drop to a permanent 10%.
The ITC reduces the cost of solar electricity by approximately 20% to 25%. Since its implementation, the ITC has helped annual solar installations grow in the United States by over 1,600%.
The production tax credit, or PTC, has been the tax credit most valuable to the wind energy industry in the United States.
The PTC is a production-based tax credit provided for every kilowatt hour of electricity generated to the power grid. The PTC alone has helped to more than quadruple wind power in the U.S. since 2008, and it has also helped them drive down the cost of wind energy by 66%.
Canada has the opportunity to benefit from these types of measures while learning from the United States' experience. CanSIA and CanWEA are working with staff in the departments of Minister Carr and Minister McKenna to provide detailed costings and design guidance to optimize these mechanisms for Canada.
Once again, thank you for this opportunity to testify before the committee.
11:20 a.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Gorman, and thank you all for your presentations and also the ones that came in prior to August 5.
We're starting then with Mr. Grewal for five minutes.
11:20 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair, and thank you to all our witnesses for being here with us today.
I want to start off with MNP LLP. Thank you for your brief and your presentation. You asked for a change to the Income Tax Act. What would be the revenue impact on Treasury if the change was made?
11:20 a.m.
Hutterite Tax Expert, MNP LLP
The changes we're asking for are only to provide clarity that Hutterites be taxed in the same manner as their non-Hutterian neighbours. I'm not sure if we would consider it to be a change or clarity in the way it should be taxed. For example, if you were to look at something like the working income tax benefit that we provide an example for, a Hutterite's farming neighbour, if they met all the same criteria, would receive the working income tax benefit. Hutterites are asking for the exact same treatment. The impact it would have would probably be about $5 million a year, and that money would be reinvested into the Canadian economy.
11:20 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
It seems like a drop in the bucket from a large perspective. Have you made this suggestion in previous budgets as testimony? I just want to get the context of the history and the advocacy on the changes to the Income Tax Act.
11:20 a.m.
Hutterite Tax Expert, MNP LLP
As I had said, the working income tax benefit came into the act in 2007, and from 2007 until about 2013, Hutterites claimed the working income tax benefit and received it. They filed the returns as they've always filed them. The CRA has always required that they report their income as farming income, or if they have manufacturing income, it gets reported as manufacturing income. They claimed and received the working income tax benefit from 2007 to 2013. This has just become a recent issue because we feel there's been an error in the way that the Canada Revenue Agency interprets the act. They are taking a literal interpretation of the act instead of the proper modern-day statutory interpretation that has been determined by the Supreme Court of Canada again and again. The CRA is just taking a literal reading of it instead of the three-pronged approach, and it's clear Hutterites could be nothing other than farmers. That's what they do. They farm. If you're a farmer and you're not a Hutterite, then you're going to receive this working income tax benefit.
This has come up recently because it's been raised recently.
11:25 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
On a case-by-case basis, does the CRA rule in your favour, or is it a blanket rule to follow the strict interpretation of the legislation?
11:25 a.m.
Hutterite Tax Expert, MNP LLP
They have put out their own interpretation that's taken a strict literal reading of the act. What they did on our 2014 filing...MNP represents about 350 of the 375 colonies in Canada. Before the Hutterites filed their 2014 returns, they had put out an interpretation that said “communal organizations do not quality”, so it's a blanket. None of them qualify.
11:25 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Interesting, thank you. Thank you for the full understanding of that issue.
The Alberta Federation of Labour, you are advocating for a publicly funded drug plan. I just don't see how, in this day and age, we can get to universal pharmacare in Canada, given all the economic challenges we face. We just had another decrease of our growth outlook by the IMF. My conversation with the average Canadian has always been this, that there is only so much money that comes in revenue—and the only way the government gets revenue is through taxes—and there is always extra expenditure. Now, what we are advocating here, on your position, is to increase our expenditure, in my humble opinion quite significantly, without having the revenue model to fund it.
We can have this debate for a very long time, but when government is stimulating economic growth, the best dollar-for-dollar funding formula is through infrastructure funding, which you also support. Can you please just give an economic argument for universal pharmacare?
11:25 a.m.
Secretary Treasurer, Alberta Federation of Labour
Absolutely. I think when you first look at it, any expenditure in health care looks like more of an expenditure. But when we look at the lack of a pharmacare system, it's actually very expensive on our system. You don't have to go very far to find out that the use of emergent care is significantly higher because patients are unable to pay for their medication, so they use an expensive part of our system, which is emergent care, and not what they should be using, which is the treatment.
I won't deny that it would take an influx of cash to get it going, but overall it will actually save our health care system significant money, because you won't be dealing with patients who are not taking their medication or ending up in emergent care, which is so expensive. It also disproportionately affects seniors and low-income people, who are not getting the care they need and end up in our health care system in a more permanent way, or they're not treating long-term or chronic illnesses, which are extremely expensive for our health care system.
11:25 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
What percentage of the Canadian population doesn't have private drug plans through an employer? Do you have the statistics?
11:25 a.m.
Secretary Treasurer, Alberta Federation of Labour
I apologize. I don't have that number on me, but there is a very good paper that was put out that CFNU had instructed, and I can forward that to your office. It goes in detail about where the money comes from, and the estimate was that it would save our system between $6 billion and $8 billion.