Finance Committee on Feb. 4th, 2020

[The Chair, Liberal, Wayne Easter]

I'll call the meeting to order.

We're here to further our study of the pre-budget consultations for 2020. It will be an intense week of hearing witnesses.

I want to welcome the witnesses who are here. Thank you for coming on very short notice. I also want to thank all those who made submissions prior to the mid-August deadline for the pre-budget consultations. Those submissions will also be considered as part of the pre-budget consultations.

Before I start with the Canadian Association of Fire Chiefs, I believe Mr. Julian has a point he wants to raise.

The floor is yours, Peter.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

As you pointed out, we have witnesses coming here on short notice to provide very important testimony to us for the pre-budget study.

Last night at the end of the session there was an unfortunate comment by a member of this committee, which I thought was insulting to one of the witnesses. I just want to remind all members of the committee, through you, Mr. Chair, that the committee should be respectful to all witnesses at all times.

[The Chair, Liberal, Wayne Easter]

Okay, point noted. The two who had the little bit of an intense discussion at the table had a wonderful discussion out in the corridor afterwards, so I think all was well at the end of the day, but your point is noted and valid.

I'll start with the Canadian Association of Fire Chiefs, Mr. Perron, board member; and Tina Saryeddine.

Whoever is up, go ahead.

[Daniel Perron, Board Member, Canadian Association of Fire Chiefs]

Thank you, Mr. Chair and members of the finance committee.

My name is Daniel Perron. I am a member of the board of the Canadian Association of Fire Chiefs, division fire prevention chief for the regional municipality of Marguerite-D'Youville and retired chief of the Ville de Sainte-Julie in the suburbs of Montreal. I am joined here today by Dr. Tina Saryeddine, the CAFC's executive director.

My colleagues and I appreciate this opportunity.

In our August pre-budget brief, we offered four recommendations. I will touch on each of these, but first let me tell you about the people and organizations that make up the CAFC.

There are about 3,500 fire departments in our country—metro, large, small, medium, urban and rural, career and volunteer—and within them are about 155,000 firefighters. About 85% of both departments and firefighters are volunteer or paid on call.

When we talk about fire departments, flames might come to mind, but fire departments are “all-hazard”. Many have responsibility accorded from their municipality for emergency management, whether it's by formal mandate or informally, because of the expertise held within the fire department.

About 20% to 30% of a typical fire department's caseload is fire suppression, 30% to 50% is emergency medical response and 20% to 30% is all-hazard response. Why is this?

With roots in fire suppression, we've worked as a country to reduce the number of fires through public education and prevention. The skills needed for fire suppression and the culture of training within fire departments are transferable to all hazards, and the numbers and complexity of and demand for all-hazard responses are increasing. Remember, an effective response to fire, flood, dangerous goods or other adverse events mitigates further environmental and economic damages.

I recall my own department's experience during the 1988 Saguenay earthquake, the largest earthquake registered in Canada. It registered 6.0 on the Richter scale, the largest earthquake in Canada in the last 50 years.

Here is where I'd like to illustrate one of our asks. Today, the country's heavy urban search and rescue teams would most likely be called upon to assist in earthquakes. They are a source of national pride, consisting of multiple professions from fire to police, search and rescue, paramedics and medicine, nursing, IT and others, able to operate 10 days autonomously off the grid.

Four of Canada's six HUSAR teams are housed in fire departments. The federal and provincial governments provide significant funding to them. However, unlike in the United States, where all HUSAR teams are coordinated through the federal emergency management administration, FEMA, our coordination nationally still has gaps.

While Canada has agreements and has experts who, as one HUSAR leader said, operate easily on a “call us and we'll come” basis, we have no centralized emergency management agency to coordinate at the interfaces between policy and operations and between different levels of government, the fire departments and the public.

Our model, which consists of various acts, agreements and experts, has many virtues. It ensures that those closest to the emergency are responding unencumbered. However, consider FEMA's stated mission of helping people before, during and after disasters, making the linkage between mitigation, response and future planning.

The U.S. Fire Administration, under FEMA, also performs five functions: public safety information, including official messaging to the media; data; operations support; research; and, grant administration. These are intimately coordinated with the fire departments.

We need all of these in Canada. Through various initiatives at all levels of government, we have them. However, we don't yet have a whole-of-government approach. It could begin with a small investment. Consider that more than 14 federal departments have policy functions relevant to fire departments and are doing commendable work.

A national fire adviser secretariat linking all fire departments, the municipalities, and different levels and parts of government would further improve mitigation, response and resilience.

CAFC members can assist in scoping this out with a large cross-section of the country's fire chiefs and all of the provincial, territorial and national affiliate fire organizations at its national advisory council. Aside from this, we are also asking the federal government to consider a modified and improved form of the joint emergency preparedness program that was intended to provide aid to emergency response capacity in small and rural departments. The program had difficulties because of its execution, which can be improved. Remember, micro investments matter.

In addition, as a nation interested in innovation, we need to ensure capacity for emergency response involving innovations. Examples are electric cars and tall wood buildings. This is why we ask for a fire-driven research and innovation fund. It would allow us to match innovations with training on the emergency response side. It would also allow us to call the research priorities that will bring the evidence to bear on our experiential knowledge. Remember, federally funded research is driven mainly by researchers. Finally, we commend you and ask you to continue your regular efforts on mental health for first responders.

Thank you for hearing us today, and we look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Chief Perron.

With the Chartered Professional Accountants of Canada, we have Mr. Ball, vice-president, taxation; and Ms. McGuire, director, external reporting and capital markets.

Welcome.

[Bruce Ball, Vice-President, Taxation, Chartered Professional Accountants of Canada]

Thank you and good morning. I'll be making our remarks, and then we'll both be fielding questions.

Thank you, Mr. Chair and members. I am Bruce Ball, vice-president of tax at Chartered Professional Accountants of Canada, known as CPA Canada. As mentioned, Rosemary McGuire is with me. She is director of external reporting and capital markets at CPA Canada. While the focus of my work is mainly with respect to tax and fiscal policy, Rosemary's portfolio includes some of CPA Canada's work related to sustainability.

CPA Canada is one of the largest and most respected national accounting organizations in the world. Our membership includes more than 217,000 Canadian professional chartered accountants who work in diverse roles, in all kinds of organizations, in all sectors of the economy.

I believe you have all received a copy of our pre-budget submission. We thank the finance committee for agreeing to accept our written submission in your consultations.

Your colleagues in the last Parliament chose the theme of climate emergency and the required transition to a low-carbon economy. This theme is timely and important, and yet climate change is one of the global forces that may make the next decade or two a period of unprecedented change. Those other global forces—economic, technological, societal and geopolitical—are just as powerful, and often work in interconnected and complex ways. For that reason, our submission brings a broad perspective to the theme of transitioning to a low-carbon economy.

My comments today will focus briefly on our pre-budget recommendations.

First, we encourage the government to carefully consider the recommendations of the expert panel on sustainable finance. The government has set ambitious climate targets for 2030 and 2050. Canadians are wondering how we will achieve those targets. The expert panel's report does not contain all the answers, but it offers a clear direction forward and good ideas for addressing some of the specific problems. It does so while recognizing the challenges and opportunities this presents for the country's economy.

Second, digital technologies and the rise of big data are outpacing our ability to properly govern and regulate them. Canada's digital charter, introduced last May, is a welcome start to addressing this challenge. Building trust in the digital economy should remain a priority of this government. That includes creating the right environment for businesses to embrace digital technologies and capitalize on the opportunities of a data-driven economy.

Third, tax policy cuts across all topics. It's one of the most important policy levers of the government. The tax system itself is being buffeted by global drivers of change. For example, the rise of digital commerce presents monumental challenges for a tax system that was designed for a bricks and mortar world. Our pre-budget brief makes a couple of specific recommendations for taxation of the digital economy. More fundamentally, though, the digital economy is just one more example of why it's time to undertake a comprehensive review of Canada's tax system. It's not equipped to meet some of these new challenges and needs of the 21st century.

As the government turns its attention to a tax expenditure review, CPA Canada welcomes the commitment to transparent reporting. In addition, and as our research has shown, for the best results, the process should be independently led, with public consultations; should consider the complexity and effectiveness of tax expenditures; and should produce a set of achievable recommendations for the government to act on.

Finally, we urge the government to work with the provinces and territories to strengthen Canada's anti-money laundering regime. Money laundering hurts all Canadians. Addressing it is a multi-jurisdictional challenge, though. We recommend that the federal government encourage collaboration with the provinces and territories in building consistent beneficial ownership requirements and also a new national framework around whistle-blowing. The challenge for budget 2020 will be to empower Canadians and Canadian businesses to confront the global drivers of change head-on. This includes the need to transition to a low-carbon economy.

Thank you again. Rosemary and I look forward to answering your questions.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Ball.

From the Federation of Canadian Municipalities, we have Ms. Saab, executive director, and Mr. Rubinstein, director.

Welcome. The floor is yours.

[Carole Saab, Executive Director, Policy and Public Affairs, Federation of Canadian Municipalities]

Thank you.

I am Carole Saab, executive director of policy and public affairs at FCM.

FCM is the national voice of local governments, with 2,000 members representing 90% of Canadians from coast to coast to coast.

Joining me today is Daniel Rubinstein, the manager of policy and research at the FCM.

We are grateful for every opportunity to discuss how our two levels of government can work together to improve citizens’ quality of life.

Budget 2020 is key. It's where this minority government needs to show it can get things done for Canadians. FCM is preparing a formal short list of recommendations, and I'll offer today a preview in three priority areas.

The first is climate action. With the federal government’s support, municipalities are ready to fight climate change by adopting measures that build better lives for Canadians.

With your support, municipalities are ready to deliver climate action that builds better lives for Canadians. Budget 2019 recognized this by investing nearly $1 billion in FCM's world-renowned green municipal fund towards lower-emission community buildings, affordable housing and other family homes across Canada.

Budget 2016 enabled the FCM's municipalities for climate innovation program, empowering local leaders to conduct climate risk assessments, work with neighbouring communities and build GHG reduction plans. It's worth noting that, three years into this program, municipal demand for the program's tools far exceeds the funds remaining.

In budget 2020, the opportunity for transformational climate action starts with implementing a bold election commitment: to launch a permanent funding mechanism for public transit. Removing the 2027 sunset date from the federal transit plan will empower cities to continue designing system expansions, cutting commutes and emissions.

Expanding on a second election commitment to support zero-emission transit vehicles will cut GHGs faster. In fact, FCM's proposal on this front will cut 10 million tonnes in a decade, which is equivalent to 13% of Canada's climate targets.

Also, this budget can help communities protect Canadians from climate extremes by topping up the effective but depleted disaster mitigation and adaptation fund.

Finally in this area, we're proposing ways to incent landlords to repair and retrofit lower-cost market-rental homes, to keep them not just available but also more energy efficient.

That brings us to FCM's second focus area for this budget: housing affordability.

You've heard mayors call the national housing strategy a breakthrough on the housing crisis. It's not the end but a major federal re-entry into the social and affordable housing space. Truly claiming this space means delivering on the NHS while also continuing to grow it to meet the challenge.

We have identified key opportunities to bolster the NHS in budget 2020, namely, in the areas of affordable housing for indigenous households in our communities and supportive housing for those living with mental illness and substance use.

Finally, we're recommending additional measures to strengthen communities of all sizes. Topping the list is building on the success of the direct and reliable gas tax fund transfer. Every year it empowers municipalities, big and small, to deliver thousands of infrastructure projects.

That's why budget 2019 funded a one-time doubling of the GTF transfer to get more done, and it has, like in Prince Albert, Saskatchewan, where those funds have enabled vital upgrades to the water treatment plan, and in London, Ontario, where a new system transforming heat from waste-water treatment into electricity will cut emissions and generate $600,000 in annual savings.

Right across the country, those gas tax dollars are building better roads, bridges, water systems and more. To build on this proven model, we're proposing a basic step for this upcoming budget: to boost the GTF's annual escalator from 2% to 3.5%, in essence to keep pace with real construction costs on a go-forward basis.

We'll have more proposals in our formal pre-budget submission: for instance, on railway safety and ideas flowing from FCM's western economic solutions task force, where municipal leaders are uniting to tackle economic challenges head-on in the region, because whether it's tackling economic uncertainty or fighting climate change, local leaders are problem-solvers.

These are the governments closest to daily life. Rural and urban, east and west, we are united in our resolve to get things done and to bring Canadians together.

That is what budget 2020 needs to be about. From coast to coast to coast, local leaders are ready to continue working together with our federal partners to build better lives for Canadians.

Thank you very much.

We would be pleased to answer any questions you have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Carole.

With Tax Templates Inc., we have Mr. Goodis, CEO.

[Jay Goodis, Chief Executive Officer and Co-founder, Tax Templates Inc.]

Thank you, Mr. Chair and members of the committee, for time to speak about opportunities in Canadian taxation in advance of the 2020 budget.

I'd also like to congratulate new members of the committee. I'm excited and hopeful for all the things you can do for Canada.

My expertise is Canadian income tax. For nearly a decade my software company has been building advanced algorithms for tax planning and tax compliance, specializing in the integration between individuals and corporations. In that time, I have computed countless tax outcomes for taxpayers in all jurisdictions and at all income levels. As Mr. Ball recommended, I suggest that the Government of Canada undertake a detailed review of the tax system with the intention of introducing thoughtful tax reform. There are many elements within the tax system that warrant discussion, but I'd like to share two of those for your attention today.

The first is that the effective tax rate on income earned by individuals is often drastically higher than the intended tax rate. The second is the complexity of the current TOSI legislation, which presents ongoing challenges to all concerned parties.

The behavioural response of taxpayers to varying marginal tax rates is an often-discussed topic. In Canada the top personal income tax rate on ordinary income ranges between 44.5% and 54%. We intuitively expect that these are the maximum rates that will be paid on income. We also expect that they will be paid by those earning relatively high amounts of income.

For a comprehensive view, we must also include the impact of income-tested government policies. Taxpayers with average incomes can face higher effective tax rates through a combination of progressive tax rates and things often overlooked in basic calculations, such as material differences in various benefits and payroll amounts. After all, a dollar lost to taxes and a dollar of benefits lost are directly equal.

The example I'm using today is a spousal couple living in Ontario with two young children. The parents have identical employment income and they deduct allowable child care. This is a completely ordinary scenario, not some exotic fabrication.

I tested the net cash outcome of their earning an additional $1,000 of employment income, starting at $25,000 of employment income for each parent. The lowest effective marginal tax rate was 44.19% in taxes, payroll costs and reduced benefits, and the worst result was 93.09% in taxes, payroll costs and reduced benefits. This 93% tax rate arose at $37,000 of average income. Many would be surprised to learn of a rate so high but would be more surprised at the income level to which it applies.

Considering effective rate peaks and valleys stemming from overlapping tax rates, credits and payments, testing $1,000 additions might yield some unusual figures. To confirm the general results, I repeated the exercise testing the effective marginal rates of earning an additional $5,000 of income. While normalizing the extremes, a family is subject to a 73.44% marginal rate at only $35,000 of average income. If they earn a bonus or work some extra shifts, would this really be the intended outcome?

Continuing with this $35,000 of income per parent, the effective tax rate on $1,000 and $5,000 was approximately 42% to 53% across all provinces and territories. These take-home amounts are relatively aligned with the top federal and provincial tax rates of each province. This is to say that on a cash basis, someone earning $35,000 will experience approximately the same effective tax rate as someone earning $300,000.

Changing details such as self-employed income versus employment income, or increasing the income of one parent at the expense of the other normally leads to higher overall tax rates even when the overall income earned remains the same.

Let's look at another example, considering a CCPC in Nova Scotia with one shareholder who earns interest income. This interest is taxed in the corporation, then paid out as dividends to the shareholder where it is taxed again. Once all corporate and personal taxes are paid, the total tax paid at 2020 top rates is 61.98%. That's compared to the highest marginal rate of 54%. Other provinces also near 60% integrated tax rates in this scenario.

These types of incomes are not limited to individuals. An example would be a CCPC facing the clawback of the small business deduction, which will face temporary cash impacts ranging from 117% to 144% of income, depending on the province.

There are more examples, but these here may justify a closer look at Canada's tax system to ensure that legislation achieves the intended results. There are rational behavioural responses to effective marginal rates: whether to invest, enter the workforce, take an extra shift, or look at which country to start a business or seek employment in. The government could take steps to review clawback rates or legislate maximum clawbacks. The government could also review integrated tax rates to ensure reasonable corporate and personal tax integration. The government could also take a look at tax rates of other countries, specifically the United States, to ensure that our tax system is competitive for businesses and taxpayers.

I'd now like to discuss the tax on split income rules, commonly known as TOSI.

The TOSI rules continue to represent a challenge for businesses, shareholders and their advisers. The topic since their introduction has become a staple at Canadian tax conferences across the country due to its complexity and scope. It impacts every CCPC and their shareholders. Advising on TOSI should only be done by advisers who specialize in this area, but due to its wide impact on small businesses and the cost of hiring specialists, it's common for more direct approaches to be taken while decisions are made.

I'll share with you a common scenario that advisers are facing. I hope this will help the committee understand the results of the legislation.

Let's assume that spouse A and spouse B operate a trucking business that each is actively involved in. They are not subject to TOSI due to their active involvement. Due to a medical emergency of spouse A, they sell the trucking business, spouse A retires, and spouse B actively manages the investments inside the same corporation. Since spouse A is not actively managing the investment business, which was funded by spouse A's and spouse B's direct efforts in the trucking business, spouse A could be subject to TOSI at the highest personal tax rate on subsequent investment returns. This is one of many unintended consequences that the tax community has seen. There have been many submissions to CRA and Finance identifying a multitude of other scenarios.

I'll also share that in a recent article by Stan Shadrin, Manu Kakkar and Alex Ghani, it was shown how the TOSI rules can create double taxation scenarios, subjecting individual taxpayers in Ontario to a tax rate of 107%. Again, as I said earlier, we find presumably unintended tax consequences that lead to these exorbitant rates.

If there is a willingness to reopen the discussion about TOSI, I would recommend an alternative approach to complex guidance. To achieve the perceived key outcomes as outlined by Finance, many of Canada's top tax experts have suggested raising the kiddie tax from 18 to 24 in lieu of the current legislation. This change would significantly simplify the tax system and reduce the administrative cost, legal challenges, and burden on the CRA and taxpayers.

If there is an appetite by the committee and others in Parliament to explore comprehensive tax reform to address these issues along with several others, such as Canada's SR and ED program, stock option deductions, the small businesses deduction, and a few things that I heard Mr. Ball speak to, I would be happy to provide relevant information and viewpoints to explore these opportunities for improvement.

Thank you for listening to my ideas. I would be happy to answer your questions afterwards.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Goodis.

Turning to TMX Group Limited, we have Mr. Fletcher.

[Braden Fletcher, Head, TSX Venture Exchange, TMX Group Limited]

Thank you, Mr. Chair and your committee colleagues, for having me here today. My name is Brady Fletcher, and I am the managing director and head of the TSX Venture Exchange.

The Toronto Stock Exchange, or TSX, and the TSX Venture Exchange together represent the world’s premier two-tiered capital formation platform, with over 3,200 public companies listed between the two markets, representing $3 trillion in aggregate market cap. Our markets support companies early in their life cycle by providing access to public venture capital through TSX Venture and then graduating the companies directly onto the TSX. In the last 15 years, we've had some 670 companies graduate off the venture exchange up to the TSX.

This two-tiered structure enables the average Canadian investor to participate in the early phases of growth of Canada’s next global leaders. Companies that have included the likes of Canopy Growth Corp., Wheaton Precious Metals, and Boardwalk REIT have provided the average Canadian with opportunities for life-changing wealth creation by supporting the growth of Canadian-built businesses—businesses that have gone on to employ thousands, all supported by private sector investment.

I am pleased to be here today to share some of our organization’s advice and recommendations as they pertain to the Government of Canada’s upcoming 2020 budget.

In order to continue fostering the Canadian capital markets, the democratization of growth capital and Canada’s competitiveness, we have broken our recommendations into three broad objectives, the first being the need to support Canada’s public markets in an increasingly competitive global landscape while facing increasingly growing pools of private equity supported by a low interest rate environment.

When companies remain private for extended periods of time, it means that the average Canadian investor is precluded from participating in the greatest phases of growth, which are often the best opportunities for wealth creation. In order to support Canada’s markets, we advise adopting a policy of “fairness for growth”, whereby the federal incentive programs afforded to Canadian private companies, or CCPCs, are equally offered to companies that elect to fund their growth through public venture capital and the private investment sector.

Currently, there are a number of different programs that disadvantage the public markets, including scientific research and experimental development credits, support for the private equity and venture capital community and continued delineation between the stage of company based on CCPC status.

In Canada, according to Statistics Canada tests, two-thirds of all public companies are classified as small to medium-sized enterprises of fewer than 500 employees and less than $50 million in revenue. By electing to finance their businesses' growth through public venture capital, these companies are providing the average Canadian with an ability to participate in the growth of Canada’s emerging leaders.

These are firms that in the past have included BlackBerry, first financed by GMP Securities, or Canopy Growth Corp, which went public five years ago and now employs over 2,000 people and is doing $250 million in revenue and boasting a market capitalization of $8 billion. If you had been an early investor in Canopy Growth Corp at one point you could have returned over 3,000%. This is life-changing wealth creation for the average individual.

It's imperative that our government seek opportunities to support these companies that list early in their life cycle, create new jobs, grow Canada’s economy and democratize the wealth creation of a company’s earliest phases. Again, a specific recommendation in this regard is a full exemption of publicly traded SMEs from the new employee stock option taxation regime.

Second, we call on our federal government to seek opportunities to encourage private sector investment into Canadian companies. While initiatives including reducing capital gains inclusion rates would incent Canadian investors to support the growth of Canadian companies, we believe that Canada must maintain a competitive capital gains tax regime in order to foster investment into our Canadian companies by the private sector. We also believe that the evaluating of expanding the flow-through tax credit program to include other capital intensive sectors with long paths to commercialization would be an elegant way to leverage existing federal structures to encourage private sector investment.

We propose the expansion of the flow-through tax regime for the following reasons. Flow-through shares allow Canadians to invest their money in clean technology companies that are driving job creation while accelerating climate and energy solutions. Flow-through shares will help clean technology entrepreneurs focus on developing innovative solutions that grow their companies while helping them achieve Canada’s climate goals, and they will do this by simplified market-led access to capital. This new capital will complement existing grant and funding programs without creating additional transaction costs, reporting burdens, missed timing cycles or other frictions sometimes associated with government-led programs.

Finally, section 11.3b) of the “Final Report of the Expert Panel on Sustainable Finance—Mobilizing Finance for Sustainable Growth” called on ISED to develop “tailored structures” that help capital providers invest in projects that are capital intensive, or don’t necessarily meet provider timelines for returns. Flow-through shares are a proven Canadian financial tool that accomplish this goal, having had lots of success in establishing Canada as a leader in the resource sector.

During the election the Liberal Party promised to have the corporate tax rate for clean-tech companies as a means of growing Canada's clean-tech sector. While laudable, this incentive does not help clean-tech companies in the critical pre-revenue development phases, as they are not yet in a taxable position.

For over 60 years flow-through shares have helped Canada's mining and energy sectors become global leaders by offering access to private capital at an early, often exploratory, stage of development. This innovative financial structure has helped to defray risks and establish Canada as a leader in these industries. The same mechanisms that have built the economy of today can be improved and leveraged to accelerate Canada's energy transition and establish Canadian companies as leaders in the low-carbon economy of tomorrow.

Like Mr. Ball and Mr. Goodis, we appreciate the committee's time, and our final recommendation would be for a wholesome review of Canada's tax act with a view to global competitiveness.

Canada is already very attractive in the global market for entrepreneurship. As global pools of capital have only become more mobile, we must continue to reinforce our reputation. Technology entrepreneurs have ever more choices as to where they incorporate and where they build their businesses. Top talent will tend to pursue the best opportunities available.

Stock options are a critical tool for attracting and retaining talent at the earliest stages of a company's development. Many entrepreneurs rely on options to get the best out of their employees, and even for their own retirement savings. Policy leaders should look toward having a holistic review that develops a detailed understanding of how options can be framed to protect and incentivize both entrepreneurs and investors.

Simply increasing taxation on options could have unintended consequences, including increasing costs to public shareholders, as companies would need to gross up to compensate top-tier management at competitive levels on a net, post-tax basis.

We must seek opportunities to recognize and reward private individuals who fund and support Canada's economic growth and leadership in new industries, ranging from clean technology in battery metals to blockchain to cannabis.

I hope this committee will carefully consider the important issues and recommendations I have raised today. I wish you the best of luck with your ongoing deliberations, and we welcome any questions you might have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Fletcher.

We'll begin with a six-minute round, starting with Mr. Cumming and then going over to Mr. McLeod.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

Thank you to all of you for taking the time to be here on incredibly short notice. We very much appreciate hearing from you.

Mr. Goodis, I'd like you to expand a little on tax competitiveness. What have you heard, and what have you gathered from people using your services, regarding the complexity of the tax code, particularly the tax changes that were made. I've heard a lot about the TOSI rules and how discriminatory they are and how difficult it is for small businesses particularly, and for those in a variety of different businesses where it could be just a husband and wife practice. Can you elaborate a little more on that?

[Jay Goodis]

I'll speak to the TOSI rules first. Ultimately it's just a very complex set of legislation. Whenever we have to decide whether to aim for fairness, horizontal equity, vertical equity or simplicity, sometimes the best answer can include all of those things. We have to choose, and although I agree with some of the things the Department of Finance was looking to do with the TOSI rules, the manner in which they have gone about it has just created too much complexity in the marketplace.

We want our businesses and advisers not to be spending a lot of time trying to figure out who can be paid a dividend: my wife or not my wife? We want to focus their time on growing their businesses. We want the advisers helping them to grow their businesses.

I was looking through some of my documentation and found 30 CRA reviews or notices about the new TOSI rules already. That is a lot considering these are only two years old, and there are still more coming. I don't believe they've responded to all the submissions. When it comes to TOSI, it's a very complex piece of legislation. With the right team I think we could meet Finance's goals, but also simplify the system

[James Cumming, Conservative, Edmonton Centre, AB]

Mr. Fletcher, can you comment? What we hear a lot about is access to capital and access to financial markets. Particularly with the venture exchange, it's certainly a vehicle that more people can look at.

Is there a regulatory issue, or is there too much of a burden for those businesses to try to use the TMX as a venture? Is there anything from a federal legislation standpoint that you would like to see changed in that area?

[Braden Fletcher]

It is very much that the TSX Venture is the original form of crowdfunding. Indeed today, with over 1,670 listed companies, our average market cap is roughly $25 million and the average financing size is between $3 million and $4 million. This is predominantly driven by retail Canadian investors, and the companies that are listed with us are not the big multi-billion dollar organizations that have a lot of access to an internal general counsel's office to manage public filings.

When we look at what would be helpful for venture companies, the idea of optional semi-annual reporting, being able to streamline their public company disclosure obligations and even just reducing some of the duplicative nature of MD and A in financial statements and your annual information forms would reduce the burden on our existing public companies.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

I'll yield.

[The Chair, Liberal, Wayne Easter]

Mr. Cooper, do you want to go?

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Sure.

Mr. Fletcher, in your submission you noted, for the purposes of launching a task force to review the Canadian tax act, reducing complexity by 50%. Can you speak to the complexity of our tax code and the fact that we haven't had a review since the early 1960s, going back to Carter? Where does that place us in terms of competitiveness, especially having regard for the fact that most of our largest trading partners have undertaken, since 2015, major tax reforms?

[Braden Fletcher]

I do not hold myself out to be a CPA or to have the depth of expertise that Mr. Goodis has. I do look at, though, our ability to attract top-tier management teams to the Canadian listed issuers and to the companies that are growing with us on either the TSX or the TSX Venture. When we look at the Canadian tax code and the discussion of increasing taxation on stock options, that is of serious detriment to our markets. It's a disadvantage to Canadian companies. It persuades top-tier management to not come to this country and not support building our listed issuers.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Mr. Goodis, would you care to comment?

[Jay Goodis]

If I were to speak to the Canadian tax code for individuals, I have mostly, personally, built a big chunk of the personal tax return and the corporate return myself. A lot of our clients use our software when they're trying to determine what is the best strategy for their clients to work in Canada or potentially invest elsewhere. They use us for the Canadian side, and view the American side or another jurisdiction in another way. We know our software is being used as a comparison to other countries. I'm aware of some of the results of those from a competitive point of view.

In terms of complexity, if we think about changes to the small business deduction in the last few years, we see the changes that could be coming to stock options. If we look at changes to subsection 55(2) and safe income, there's a lot of burden on our Canadian corporations. I believe if we explore comprehensive tax reform, I know that CPA Canada has some great papers about what could be done there. Mr. Ball is probably a great person to ask those questions of. If we were able to get the right people in the room and have the discussion, we could put together a fantastic tax code for the 21st century and be up there with all our biggest trading partners.

[The Chair, Liberal, Wayne Easter]

Thank you to all.

Often at committee a question will go to one witness, but if another witness has a supplementary point they want to add, they can just raise their hand and I'll let them in.

I'm thinking of you, Mr. Ball, in this case. Go ahead, and then we'll move over to Mr. McLeod.

[Bruce Ball]

Thank you, Mr. Chair.

I agree with just about all that's been said. One thing I would point out, too, is that there are considerable issues around lower-income individuals getting access to credits and other benefits that are coming to them. That's been highlighted a lot as well. I think that's another issue that should be addressed through a tax review. We've talked about complexity and competitiveness. We agree with that sort of thing, but we also have concerns about complexities that affect more vulnerable people and whether they're getting the benefits that are coming to them as well.

All of those reasons are why we favour doing a comprehensive tax review.