Finance Committee on Oct. 26th, 2016

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

Ladies and gentlemen, welcome to your House of Commons.

I will first address Mr. Laurin, from the C.D. Howe Institute, who is joining us by videoconference.

Good afternoon, Mr. Laurin.

[Alexandre Laurin]

Good afternoon.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Laurin, you warned us earlier that we would never be safe from negative growth and that we had to be very careful in the new year that is about to start. In fact, a little earlier this week, the Governor of the Bank of Canada revised Canada’s economic growth downwards. So did the Parliamentary Budget Officer. However, in response to a question from us two days ago, the latter made it clear that the previous government had left a surplus of $2.9 billion.

My question deals with the impact on small and medium-sized businesses of the measures proposed by the current administration. Three weeks ago, a new carbon tax was announced. For some investors and entrepreneurs, that tax will be coming into effect much too quickly.

In the House at the moment, we are debating Bill C-26, which proposes to increase the Canada Pension Plan. I say “increase” because the contribution from workers will go up by approximately $1,000. For businesses, it will be $1,000 per employee. The proposal is for the tax rate for SMEs to stay at 10.5%, whereas some people had committed to reduce it to 9%.

In your opinion, what will be the effect on economic growth of the combination of those three factors: the carbon tax, the increase in the Canada Pension Plan, and the SME tax rate remaining the same?

How will that affect those who create jobs and the small and medium-sized businesses that form the backbone of our economic strength?

[Alexandre Laurin]

That is a complex question, so it will be difficult to deal with it in its entirety in a few minutes.

You mentioned a lower tax rate for small businesses. But SMEs form a very varied group that include some businesses that are showing strong growth, young businesses, businesses that are investing heavily, other businesses that one might call “mom-and-pop” operations like convenience stores, which have no growth objectives, and incorporated professionals. In short, businesses come in all shapes and sizes and they react to incentives differently.

A lower tax rate would be very helpful for innovating and young businesses, those that want to grow. For incorporated professionals, it is mostly about tax planning, which is not necessarily the right way to grow the economy. For family businesses too, it is not going to contribute to economic growth. So you have to be careful there.

The C.D. Howe Institute proposal is that a lower tax rate be more targeted to young businesses that are making investments and that wish to grow. With a better target, that tax option could bring about growth.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

There is talk of additional charges to the Canada Pension Plan and of a tax on carbon. Do you believe that those new measures could help young, innovating businesses?

[Alexandre Laurin]

Absolutely not.

Pension plan premiums are a tax that does not take profits into account. Even if a company makes no profit, it still pays the premiums. In terms of investments, that has a more adverse effect than taxes on profits. Actually, economists who study social premiums often say that they have a harmful effect on the economy. A number of empirical studies also confirm that.

As for the carbon tax, everything depends on what is done with the tax dividend, on whether it is reinvested or not.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

As I have very little time, I am going to quickly choose the people I want to talk to.

This question goes to the Canadian Convenience Stores Association.

Last year, one of the issues we spent a lot of time on was credit cards. You alluded to Linda Lapointe’s Bill C-236. It is very short. I can even read it. It has these two short paragraphs:

5.1 (1) The credit card acceptance fees that a payment card network operator may charge a merchant must not exceed the limit prescribed by regulation for each category of users. Regulations (2) The Governor in Council may, by regulation: (a) define “credit card acceptance fees”; (b) establish categories of users; and (c) set limits on credit card acceptance fees.

This comes down to saying that the government can do anything it likes. I don’t think that really solves the problem. With a situation that is extremely harmful to retailers, you would like a solution that goes a little further.

[Alex Scholten, Past-President, Canadian Convenience Stores Association]

The main question or main concern we had about Madame Lapointe's bill was that it didn't set the rates. We wondered as well, similar to your question, what that would mean in the future when those rates would be established. What we like that we're hearing from the finance ministry now is that they're going to study this. Madame Lapointe's bill did not suggest that either.

As an industry, we recognize the need for a vibrant credit card system in Canada. Our retailers want to see customers having access to debit. Ensuring that everyone is treated fairly in a resolution is very important. We think that having Finance look at this now and study it in greater detail will be a much better way to approach this issue.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I look forward to seeing that, but I feel that there will be another consultation about it.

Thank you.

Ms. Lanthier, let me give you a little history. In 1991, I was a workshop leader when the Fédération des communautés francophones et acadienne was formed to replace the former Fédération des francophones hors Québec.

You mentioned cellphones and the Internet in small, more remote francophone communities. I can guarantee you that the problem is not limited to remote francophone communities. In Témiscouata, eight out of the 19 municipalities still do not have a cellphone connection.

You have probably looked at federal investments in Internet or cellular technologies. Generally, when the current and former federal governments invested in the area, they invested in high-speed Internet. They always forgot the cellphone issue.

Does the federal government need to commit to improve cellular access as it is doing for the Internet? How could that be done?

[Sylviane Lanthier]

As I am no expert in cellular and Internet access, I am not sure that I could give a very intelligent answer to the second part of your question. However, to the first part, I can tell you that, in the communities we represent in the Yukon, the Northwest Territories and some remote parts of Ontario and the Maritimes, people have problems accessing high-speed Internet. In addition, the cost of accessing those services is prohibitive in some places.

There are inequities at that level, and they have an effect, for example, on the ability of schools to do distance education, on the potential for economic development in those communities, and so on. All that is a reality.

As cellphones are in tremendous use these days, we cannot talk about the Internet without also talking about cellphone access.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

I will finish my time with you, Mr. Laurin. I have so many questions to ask you.

You have probably studied public policy history a little, specifically in terms of the Canada Pension Plan.

The arguments that we hear at the moment, including from my colleague, are the same as we heard when the program was improved in the 1990s in order to deal with the long-term situation. Actually, they are the same arguments that we heard in 1965 when the Canada Pension Plan was created.

Each time that we talk about a program like this, we always have to deal with the same concerns. In 1965, people said that it was going to be disastrous for business. They said the same thing in 1996 or 1997 when it changed.

[Alexandre Laurin]

I can comment on that.

The new CPP will certainly have negative effects on the economy, but that does not mean that I am saying that it will destroy the economy.

There are other aspects of the new CPP that have to be examined to find out whether it meets the needs. In my view, the needs have been studied a lot. There are several studies on the matter, but most of them focus on the needs of a very specific category of workers, those with a higher income on average, and on a sub-category of those workers. But the CPP is a universal and mandatory plan.

If you are asking me for my personal opinion, as I wrote, the CPP does not do enough for those who really need it. Basically, overall, it is not enough, but at the same time, it is much too much. In fact, it is not focused at all for the majority of Canadians, who really do not need it. In my opinion, there was an opportunity to do much better.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone, and thank you for your presentations.

Obviously, time is truncated today so I'll try to be quick.

To the Canadian Mental Health Association, in your brief I think you mentioned directed funding for dollars that need to be invested in mental health. In another presentation we heard about ring-fencing those dollars. What is your view on that? I think it's very important. I've been to Mens Sana. I've been to about three or four events on mental health issues in the last two weeks, and it's just amazing. It's troubling, but it's amazing.

[Patrick Smith]

It's because of the years of deferred maintenance. This isn't pointing fingers. Many countries have found themselves in the same position over the years. The gap between what we know we need and what we have is so significant that the transformation fund that we're talking about needs to be held centrally to specifically invest in the building blocks that we need in the country.

Second, since every province has been working on their own mental health plans, the transfer of monies should be earmarked and ring-fenced so that it's dedicated to spending on mental health. At the health round table there was a concern that sometimes the Canadian health transfer doesn't even get spent on health. If it doesn't get spent on health, and even if it does, the evidence suggests that it doesn't get spent on mental health.

This fix is significant, and it's also going to be economically important for our country to do that.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

To the Canadian Medical Association on dealing with the small business deduction, could you elaborate for 30 seconds on the implications of that legislation, please?

[Dr. Granger Avery]

I have a couple of observations. First, the Canadian Medical Association does not negotiate and does not represent doctors financially. We are presenting this issue as a risk to Canada's health system. We are very pleased to see responsible tax policy, and we're pleased that the budget recognized physicians as a strong economy within Canada.

The issue has some complexity, and it is around the group medical structures. These structures are put together by provinces and imposed upon physicians in universities and in teaching hospitals so that specialized services, research, and teaching can be supported. The doctors don't actually have an option; they have to join a structure like this.

What the proposed legislation does is make the small business deduction applicable to the group as a whole, so one deduction, rather than each individual physician within that group. That means that the 6% or so of money from the dedicated funding that the provinces supply goes into a pot so that we can support that research and teaching, which is not otherwise paid, or at least not significantly paid.

If these structures are dissolved, surveys of our physicians who are affected in that way indicate that at least 60% of those doctors will eventually leave those structures, and that will significantly impair teaching, research, and specialized services.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, sir.

I have one question for FCM about the $12.66 billion ask. With TCHC, the Toronto Community Housing Corporation, you get a backlog of repairs. Is that $12 billion ask for a completely new build, or does that include the operating costs on a year-by-year basis so we don't get into a situation where a housing authority has a huge backlog of expenses and repairs two or three years out?

[Sylvie Goneau]

The $12.66 billion dollars is spent over 10 initiatives. That encompasses keeping the agreements that are coming to an end to be able to keep our buildings in good, livable conditions. It's also for building rental units, being able to afford, also, sustainable and affordable housing. There is $5 billion in repairs and maintenance on existing social housing, $3 billion to keep housing affordable, $4 billion for new affordable housing, and $700 million for portable housing allowance. That's just an idea of the breakdown of the $12.6 billion.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you, Mr. Chair.

Mr. Sauvé, I don't have a question for you, but my colleague Mr. Aboultaif and I are members of Parliament from Alberta, and I think I speak on behalf of probably all of my colleagues here in thanking the Red Cross for all the great work that was done during the Fort McMurray time frame. You just didn't hear anybody complaining about how the Red Cross handled it, so congratulations to your organization for a tremendous job well done.

I am going to ask a question to the Canadian Convenience Stores Association and the Chicken Farmers of Canada. I'm not going to repeat the question my colleague Mr. Deltell asked the C.D. Howe Institute, but I would be interested in getting your responses. I presume you heard the question that Mr. Deltell asked, but in a nutshell, how does the sort of piling on of all of these taxes, whether it's increases in CPP contributions, carbon tax, the failure to reduce the small business tax as promised, or in Alberta's case, increases to minimum wage, impact your organizations, and how does that contribute to growing the economy in the country?

[Alex Scholten]

That's a very good question.

Any cost increase for small business retailers creates a difficult situation for them to remain competitive and to succeed. We certainly are concerned about all of the areas you're discussing. We do recognize there is need for some of these things, as well, and we're hoping that our industry will be consulted when they come about, so that we have an opportunity to express those concerns and to understand how it may impact us. Yes, it certainly has us concerned.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you.

Mr. Janzen, could you give us your thoughts?