Finance Committee on Feb. 22nd, 2017

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Do any other countries do something similar? Maybe it's not first aid, but are there other types of tax credits, for instance in Israel, Sweden, Estonia, or sub-Saharan Africa? Could we use that as a basis point to perhaps analyze this and its impact?

[Pierre LeBlanc]

Are you thinking specifically of first aid or are you thinking of something—

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

It could be anything. We're talking about an average of a $200 tax credit, probably $100.

[Pierre LeBlanc]

It's often context-specific, and if we were to look at a different measure in a different context, what you could infer from that could be pretty limited, or you'd have to make some pretty strong assumptions to take findings from a tax credit for a different activity in Estonia. Estonia has a flat tax system, so they don't have many tax incentives.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

That would be a good experiment. If they introduced a tax credit, in the western world we could then analyze what they do and see if it works, like a sugar tax or—

[Pierre LeBlanc]

Yes, it would be quite good in Estonia. It's a pretty small population, so we'll see what Estonia is doing.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Albas is next.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair, and thank you to our witnesses for the work you do for Canadians.

I have a couple of different questions. One of the arguments that's been presented here is, I think, a good argument. Obviously there are different schools of thought as to whether we should have tax credits as a way of lowering taxes or whether we should simply remove them and then lower taxes accordingly for everyone, so I'm glad we're able to ask the questions.

To start with, if a sole proprietor or a corporation were to give their employees first aid training, they would then be able to deduct that. That's sometimes referred to as a tax shield. Is that correct?

[Trevor McGowan, Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance]

I don't know about—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It's because they're paying with pre-tax dollars that ultimately they're not taxed on.

[Trevor McGowan]

Right. If an employer provided it as part of their business, you would expect the employer to be able to deduct it, and yes, the business would deduct it out of pre-tax dollars.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Given that the average individual would have to pay for their own first aid training, in this case there is an inequity between what is available for businesses and sole proprietors or corporations versus what the average Canadian does, because they do pay with after-tax dollars.

[Pierre LeBlanc]

I think that's fair, but it's much broader than that. When you think businesses can deduct all reasonable expenses in arriving at their net and ultimately at their taxable income....

I mean, as individuals, let's say all of us here are—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

There is inequity.

[Pierre LeBlanc]

It's a different treatment. All of us here are working. We have certain employment expenses. The treatment of employment expenses in most cases is quite general. There is general recognition through the Canada employment credit, but it's capped and it's fairly limited. In that way, businesses and individuals are treated differently in a very general way.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

But again, there is inequity between individuals, because the Income Tax Act doesn't distinguish between individuals. Whether it be a citizen or a business, it's based on what they're doing to derive that income.

[Pierre LeBlanc]

Yes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Therefore there is an inequity, because certain types of individuals are treated differently under the Income Tax Act when it comes to first aid. Is that correct?

[Pierre LeBlanc]

Different types of income are treated differently, so whether you're an individual who is incorporated or not incorporated, just as you explained, the expense is deductible in both cases. It's more—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Yes, but if I am going to take a first aid course to protect my family, to offer community service, but income is not generated from that activity, I cannot deduct it. Therefore, I am treated differently under the Income Tax Act, which is a form of inequity.

[Trevor McGowan]

That's absolutely correct. The tax system tends to draw a distinction between personal expenses and business or income-generating expenses, and unless there is some specific provision in the act that allows for a deduction—the tax credits are an example—to offset purely personal expenses, the tax system does not, as a general rule, recognize that. Likewise, we're taxed on our income from a business or employment or property, so expenses incurred to earn that income are deductible against that source of income.

When you have mixed activities as you do here, where you have a first aid course that could be taken for the purpose of enhancing an employer's business, obviously you don't forget that training the second you walk out the door. You have that knowledge and you have that course and you can apply it.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

There is a social good that's associated with this, which goes beyond just that individual and that business. Is that not correct?

[Trevor McGowan]

Is knowing first aid a social good?

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Yes, of course, because it's transferable. Someone can apply it in not just a business sense but in a private sense in the community, correct?

[Pierre LeBlanc]

Oh, sure.