Finance Committee on Oct. 18th, 2016

[Josie Baker]

Prince Edward Island has a critical worker stream in our provincial nominee program that has allowed workers who don't necessarily have really high fields—though many of them do, but they're just not working in high field positions—and they don't have a great deal of money to invest in a business in Prince Edward Island as immigrants. That's been really positive in terms of allowing some of the temporary foreign workers in Prince Edward Island to settle here. Those families who have children thrive.

They're really committed to staying and working in this province. However, one of the barriers federally is that workers who are in seasonal industries have a difficult time qualifying for that program, even if they are working 14-hour days eight months of the year, which, if you even it out, would be equal to a full-time position. Workers would have to transition out of some of the high-demand industries, such as agriculture and fisheries, and into any other full-time job in order to qualify for that program. I would say that P.E.I. has had some success in that and that provincially there has been work done to give the seasonal industries access to it.

I also would like to highlight that the changes of 2014 were devastating for industry and devastating for workers. The more difficult it is to hire a migrant worker, the more we are funding the under-the-table recruitment industry. Prince Edward Island, unlike other provinces, doesn't have regulations specifically governing that, so I think that loosening up those things to allow employers to hire workers a little more easily, but also allowing workers to leave dangerous or abusive situations, is important.

Personally, in the company of migrant workers, I have assisted in communicating their ask to the federal government surrounding the 2014 changes, surrounding the HUMA committee's review, and also surrounding the lack of follow-up from the 180-day exemptions that were issued for the seasonal industry right now, which has left these workers with nowhere to go.

There are various issues, but I encourage the committee and everyone here on this panel, when they're talking about the temporary foreign worker program, to not only consider the needs of industry but also to consider the needs of the workers.

[The Chair, Liberal, Wayne Easter]

Thanks to all of you.

Ziad, before I turn to you, I want to throw out one question to the Canadian Camping and RV Council.

You have a recommendation here, Shane, but it's based on the changes. The CRA changed their interpretation without notification earlier this year. This hearing is all about how to achieve growth. Listening to your brief, this is going to drive people out of business, which is not exactly achieving growth. Why did the CRA change the interpretation? Did they give you any reason why? Also, is what you've proposed here the only fix?

[Shane Devenish]

We've tried to uncover the motivation of CRA. We had a meeting with a liaison in their office. We weren't given any reason why suddenly they started to crack down on campgrounds, even though nothing changed in terms of the campgrounds' classification or their business model.. Nothing ever changed, but all of a sudden they started to act on what their interpretation was, I guess. Four campgrounds—three in Ontario and one in Quebec—started this forest fire, for lack of a better term, when CRA did some audits and reassessed these campgrounds, one going back three years at $250,000. We've yet to uncover why.

It's important to say that our industry is really unique in that it's very seasonal. There's been some correspondence and communication, some in an earlier committee meeting that I saw, in which campgrounds and storage facilities were used in the same sentence. We think they're completely different. We want to point out that campgrounds are very seasonal and that their workforce is made up of probably three or four times as many seasonal workers as full-time workers. This will have an economic impact.

[The Chair, Liberal, Wayne Easter]

Just so I'm clear, as far as CRA's interpretation goes, do they consider seasonal campgrounds and RV sites in the same way they consider a hotel or a motel or an inn?

[Shane Devenish]

No, they're considered in the same vein as an apartment building or a modular home complex.

[The Chair, Liberal, Wayne Easter]

Okay.

Mr. Aboultaif.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you.

Thanks to the minister for the warm welcome. This is a great place to be. It's my first time in P.E.I.

As a final note regarding the campgrounds, as the CRA critic, I received letters a few months ago. I can understand the concerns. With regard to the CRA position, I can see that if we're going to lose businesses, if a business is going to shut down, nobody's going to benefit, so we're going to hurt everybody more or less.

The motive for CRA has to be a financial one. They somehow feel that some money has not been shown there, and maybe some taxes can be collected, whatever the case. By the way, I've sent the letters to the minister from my office just to show him the concerns of the business owners, and I haven't received anything back yet.

Have they shown you any figures? Have they given you any fundamental reasons why this move is on? Usually, it has to be money. Have you heard anything in that regard?

[Shane Devenish]

We haven't heard anything directly about that. We can surmise that's the motivation. Since our meeting, we haven't heard anything from CRA or anybody else in the Ministry of Revenue office. They're basically pointing the finger at the Ministry of Finance and saying that it's up to them to change the laws in the Income Tax Act or the budget. They're just looking at the cards they've been dealt, for lack of a better term.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

If I look at it as a business owner, I think this is a move towards taking those businesses from being small businesses to being bigger business. I hope that's not the case here, and I hope we don't end up with this, because small businesses are very vital for our economy and our society.

[Shane Devenish]

Yes, and thank you for that. It is a good point that these campgrounds cannot afford the triple increase in tax. Undoubtedly, We will see campground closings in the worst-case scenario. The next-to-worst is that they just stop improving their services and eventually have to go out of business because they won't be competitive with other places anymore.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Okay.

My next question is for Mr. Pearson.

Congratulations on the business you've built. I'm very grateful to hear your story. I've read it already. It's a very successful Canadian story of growing a business.

I'm also very interested, being a CRA critic, in your proposal regarding taxation for increasing the threshold from $500,000 to $750,000. You didn't seem to be very excited about lowering business taxes, let's say, from 10.5% to 9%. The final part of my question, and then you're free to answer, is, what do you think, as a business owner, of the expansion of CPP and the increase of EI premiums for businesses? How are these things going to impact you as a business owner with 150 employees?

[Michael Pearson]

For the record, I'm not against lower taxes. Tax decreases are always a good thing. However, if I had a choice between adjusting the tax rate on the existing threshold or increasing the threshold, the economic impact of increasing the threshold will be so much greater, because, again, the key is to keep the money in the business. The money in the business will be used to continue to grow the business.

Once you take the money out of the business, which a lot of business owners like me are forced to do, it's no longer available to fund innovation and research, to buy equipment, or to hire new staff. That's why I want to focus on increasing the threshold, which hasn't been adjusted for probably a decade at the federal level, as far as I'm aware.

That would be my preference, but I wouldn't refuse a tax decrease if one was offered.

Could you remind me of the second part of your question, please?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

It concerned CPP expansion and EI increase.

[Michael Pearson]

Any additional—and I'll avoid the words “tax” or “payroll tax”—employer-funded cost of employment has to be considered very carefully. Again, a lot of employers are like me. We're going to look at what it costs to hire somebody in this province versus Ontario, versus the U.S., and versus Europe or Australia. Any additional cost of employment will factor in our decisions in terms of where we want to hire, invest, and create new jobs.

I understand the need for a federally mandated expanded CPP program. Given the alternatives in some of the provinces, this is the far better option. We want to see a federal program rather than each province going it alone, so we support that. We also support the gradual implementation of the changes that are being proposed. As a business owner, the worst thing that we can be exposed to is sudden unpredictable shifts in policy and taxation that we can't predict or that we have a very hard time reacting to.

To answer your question about CPP and the policy that's being proposed, we would not be in favour of an additional cost of employment, but if it has to be done, this is a somewhat responsible way to do it.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Am I done?

[The Chair, Liberal, Wayne Easter]

We'll give you a little more time.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you.

Due to the nature of your business, which is software development, if I understand correctly, how competitive are you on the world stage compared to other businesses if you're not in a niche business? If you're in a common-ground business, compared to Australia, let's say, or the United States, how competitive are you?

[Michael Pearson]

Your question is how competitive are we in Canada versus other jurisdictions around the world?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Yes, specifically within your industry.

[Michael Pearson]

There are many facets to that question, but we are very competitive in Canada. Part of that, obviously, is related to the foreign currency exchange. The current environment makes Canada very competitive in the labour market. We are a net exporter of services, which means we do work for companies and organizations all around the world based out of Canada. Part of that decision is based on the currency, obviously, because it affects our costs significantly.

To answer your question in summary, we find that our operations in Canada are very cost competitive, especially compared to some of the States to the south. We also choose to do business here, not just because we happen to be here.

[The Chair, Liberal, Wayne Easter]

Thank you, Ziad.

Mr. Grewal, you have five minutes.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for coming and testifying today. We really appreciate it.

Like my colleague here, this is my first time in P.E.I., and hopefully not my last.

My first question is for the Canadian Camping and RV Council. I'd like some clarification. You're advocating for a change to assess the income as business income, as opposed to investment income. What has the CRA said on the matter?

[Shane Devenish]

They said that we weren't eligible as a specified business. They said that if the employee level was fewer than five, we weren't eligible for the small business tax deduction. They don't consider us an active business.

[Raj Grewal, Liberal, Brampton East, ON]

Is the matter before the courts for interpretation?

[Shane Devenish]

Not yet. The reassessments have been pushed back to the campgrounds and then back to CRA, but we have not gone—and we certainly don't want to have to go—to the courts.