Evidence of meeting #5 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Peter Weissman  Chartered Accountant, Trust and Estate Practitioner, As an Individual
Daniel Wilson  Special Advisor, Research and Policy Coordination, Assembly of First Nations
Timothy Ross  Executive Director, Co-operative Housing Federation of Canada
Courtney Lockhart  Program Manager, Policy and Government Relations, Co-operative Housing Federation of Canada
Kim Moody  Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Gartner Tax Law LLP
Brian Sauvé  President, National Police Federation
Peter Merrifield  Vice-President, National Police Federation
Brian Kingston  Vice-President, Policy, International and Fiscal, Business Council of Canada
Francis Bradley  President and Chief Executive Officer, Canadian Electricity Association
Pierre Céré  Spokesperson, Conseil national des chômeurs et chômeuses
Bilal Khan  Managing Partner and Head of Deloitte Data, Deloitte
Paul Taylor  President and Chief Executive Officer, Head Office, Mortgage Professionals Canada
Elaine Taylor  Chair of the Board of Directors, Head Office, Mortgage Professionals Canada
Nora Spinks  President and Chief Executive Officer, Vanier Institute of the Family
Kevin Lee  Chief Executive Officer, Canadian Home Builders' Association
Catherine Abreu  Executive Director, Climate Action Network Canada
Pierre Patry  Treasurer, Confédération des syndicats nationaux
Rebecca Alty  Vice-President, Northwest Territories Association of Communities
Sara Brown  Chief Executive Officer, Northwest Territories Association of Communities
Lisa McDonald  Executive Director, Prospectors and Developers Association of Canada
Charlotte Bell  President and Chief Executive Officer, Tourism Industry Association of Canada
François Bélanger  Union Advisor, Labour Relations Services, Confédération des syndicats nationaux
Paul Rochon  Deputy Minister, Department of Finance

February 5th, 2020 / 3:40 p.m.

Liberal

The Chair Liberal Wayne Easter

I call this meeting to order. As all the witnesses know, we are dealing with pre-budget consultations for budget 2020.

3:40 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

I have a point of order, Mr. Chair, and I'll try to be quick because I know the witnesses came here to testify.

We had a discussion at committee the other day about an invitation to have Minister Morneau appear, in addition to the planned appearance of Minister Fortier tonight. Obviously, I flagged the scheduling conflict, but Minister Morneau will be able to make himself available to the committee on February 19. I just wanted to let the committee know of his intended presence here, though it will be after the upcoming constituency week.

3:40 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you for that information, and thanks to Mr. Morneau for agreeing to appear.

I want to begin by thanking the witnesses for coming on such short notice. We have a very tight time frame to do this. I also want to thank those who made submissions prior to the mid-August deadline. Those submissions will be considered as part of the pre-budget consultations.

With that, we'll begin with Mr. Weissman, as an individual, from Toronto by video conference.

Welcome.

3:40 p.m.

Peter Weissman Chartered Accountant, Trust and Estate Practitioner, As an Individual

Thank you. I want to thank you for having me here to share my thoughts with you about the upcoming budget.

I've been a witness at this committee on other issues before, but just by way of background, I've been an income tax practitioner for over 30 years. While my comments today will be some of my income tax observations, they are informed by years as a student, as an employee, as an accounting student, and for the last 20 years, as a business owner running an accounting practice.

I'll be honest with you. We're all still licking our wounds from the battle that was waged over the government's private company tax changes. You'll be relieved to know I don't plan on rehashing all of that today. I know what this is about. We have what we have.

The only thing I'd like to say about it is that, during the process, I don't think the objectives of that process were flawed. Some of the ways of going about achieving the objectives were much too complicated, but they are what they are. We have complicated rules to work with instead of simple ones. In 10 years or so we might find we have some judicially determined answers to what are seemingly unanswerable questions right now, to be quite honest, with respect to the TOSI rules, the income-splitting rules.

I'm hopeful that the upcoming budget won't include similarly complicated proposals, and as a Canadian, to be very honest, I hope that they also won't include a lot of the divisive rhetoric we've seen in recent years. I personally found it very disturbing and really not productive to achieving what we as Canadians want.

I also just want to state that contrary to what I think many Canadians believe, business owners are not any more nefarious in their tax matters than employees are or, to use the government's term, the middle class and those working hard to join it. There are a number of employees who are very aggressive in their tax planning. I don't deal with aggressive tax planners. I don't want anything to do with them. I pay my fair share of tax and I think everyone else should. I don't really want to subsidize people who are cheating our tax system. I don't think anyone should have to pay more than their fair share but I don't think they should pay less. It's not really morally acceptable, in my opinion, to pay less than your fair share.

We live in a great country. We have a high standard of living. We should maintain that. We have great social safety nets. Some of them could be improved, but we look after our citizens and we look after our people and vulnerable Canadians. That, to me, is what I think our tax system should be doing. I'm happy to give suggestions to help keep funding that and using the funds efficiently to meet those objectives.

With that in mind, I'll just give you a few of my suggestions that will, hopefully, be considered in the budget or post-budget in further dealings. Hopefully, the 2020 budget will stray away from partisan positions and rhetoric and just take a more conciliatory approach to be more productive and to work with people who can help be part of the solution, instead of part of the problem.

In that spirit I'd like to suggest that the government commit to three actions. First, we've invested in hiring more auditors, but I think the money needs to be spent now on training those auditors. What we're experiencing in the field, particularly at the audit level, is that a lot of people who are new to the audit world as auditors have not necessarily been trained in income tax provisions. They follow audit manuals. Honestly, they're not well trained. Decisions are being made at the audit level that trickle all the way through to appeals and to the tax courts. When something's not handled well at the audit level, the trickle-up effect happens.

I could give you a lot of examples. I have a situation right now that should be a simple matter. Something was purchased before a certain date, and the auditor thinks the act says it had to be purchased after a certain date. It's clearly not correct. It's really simple when you read the act. It's a mistake. The proposal right now is to assess my client as having $6 million of capital gains because they sold a smaller property they were working out of and moved into a newer one. The act allows you to defer the tax when you do that. Because of this misreading of the act and saying that the new place had to be purchased after a certain date, my client now has to deal with appeals to try to get that reversed.

What concerns me is not just that the auditor misunderstood something relatively simple in the act but the fact that the supervisor signed off on that audit as well. I think that's a function of workload. I'm not judging anyone, but the training of auditors, to me, is much more important now than hiring more auditors.

I gave you that example. I think that hiring people without training them defeats or undermines the objective of why we are hiring them. I'm all in favour of enforcing more compliance for people who aren't in compliance with our tax rules, so don't get me wrong on that front. I think that using the auditors better, training them, would get us a better result, recovery-wise and cost efficiency-wise, than just hiring more people.

Second, I'm hopeful that the government will continue on its path to making the system easier to navigate and manage for people with disabilities—physical disabilities and mental infirmities. I was appointed inaugural co-chair of the first disability advisory committee back in 2005. That was a committee that reported to the minister of revenue, just as the current disability advisory committee does. At that time John McCallum was the minister of revenue. That committee was created in a budget. I remember reading the budget, as a tax practitioner, and it said it proposed to create this committee to advise the minister on ways to better administer the disability tax credit. I applied based on that and got the position. It was a very productive year, before the committee was cancelled when the government changed.

We have had luck in having the committee reinstated recently. My concern, though, is why. We shouldn't need the committee to exist anymore. I was appointed in 2005, so that's 15 years ago, and we still have the need for a committee to help advise the government on how to administer the disability tax credit.

I think it's time to consider a new role for the disability tax credit or perhaps a new model. It's very complicated, the way it's worded. It's a very old system, and so are some of the medical expenses. I'll give you some examples. I think a look at the overall treatment of disability tax measures and medical expenses in general is really overdue.

We have, for example, in the medical expense section, limits on how much you can claim in certain circumstances for full-time attendants. The limit was set in 1997, $10,000. We're now in 2020 and that limit hasn't changed. In over two decades that $10,000 number that was set back in 1997 dollars hasn't changed, and people looking after or paying for full-time attendants to look after their loved ones have a very restrictive amount they can claim in certain circumstances. It's time to relook at that. That's just one example.

Another one is that a number of years ago people with celiac disease lobbied—I'll use the term—the government because the cost of gluten-free food was much more expensive than the cost of regular food. The act was amended to include a provision that said for people with celiac disease the incremental cost to purchase gluten-free food is a medical expense. I think that was great at the time. More people are affected now by gluten problems than just people with celiac disease, but that provision hasn't been amended.

I don't deal specifically in disability-related matters, but I do tax planning with people. I had a client whose father couldn't swallow food properly. He had been rendered quadriplegic in a car accident. All of his food had to be pureed, but not in a blender at home. It had to go out, actually, to a food processing facility. It was very expensive. There's nothing in the act that allows something like that. They're quite common now, swallowing disorders. For people with Alzheimer's disease, dementia, that's a common symptom. There's nothing in the act that addresses that.

I'm just trying to give you a flavour. There's a whole area in our act that really needs to be revamped and brought up to date, and maybe even relooked at in a different context. That's what my third comment is.

I think—no, I know—it's time for the government to commit to convening a multidisciplinary, comprehensive, bipartisan panel to look at a comprehensive review of our tax system. I know there's not an appetite for it. It's something that has been falling on deaf ears. It's really important.

I'll give you two analogies here. I think of our tax act over the years; it's like a pair of socks. Holes have popped up here and there, and we've darned them, sewn them, closed them shut, but now we have this tattered pair of socks that we really can't walk around in.

To give you a better example, in 1972 Canada had the best hockey team in the world. We all remember the Canada-Russia series in 1972. That was also when our tax act was last overhauled.

3:50 p.m.

Liberal

The Chair Liberal Wayne Easter

I don't want to interrupt, but we are considerably over time. I'd ask you to close pretty quickly.

3:50 p.m.

Chartered Accountant, Trust and Estate Practitioner, As an Individual

Peter Weissman

Thank you. I'll end in 10 seconds.

That team was the best in the world in 1972. That's when the tax act was amended. That team wouldn't stand a chance on the ice today. That's the version of the tax act we're working with.

Thank you for your time. I'm sorry I went over.

3:50 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much for those suggestions. This committee in the past has also recommended a comprehensive review.

Turning to the Assembly of First Nations, we welcome Mr. Wilson, special adviser.

3:50 p.m.

Daniel Wilson Special Advisor, Research and Policy Coordination, Assembly of First Nations

Thank you, Mr. Chair, for the invitation to speak with the committee today as we meet on the unceded territory of the Algonquin nation.

The Assembly of First Nations has developed a submission reflecting a broad range of investments that would support the participation of first nations in the economy. I believe it has been distributed to members. My thanks to the clerk.

As we have noted with this committee in the past, closure of just the education and employment outcome gaps between first nations and other Canadians would provide an additional 1.5% to Canada's gross domestic product. Among the investments set out in the document we have provided, I'd like to highlight four priorities that I believe could provide the greatest return on investment, with each of these moves forward a shared priority of first nations and the Government of Canada, building on important work already done and being done.

The first is the implementation of the Indigenous Languages Act, passed by the previous Parliament. The revitalization of first nations languages is a key step in reversing one effect of Canada's former residential school policy—the erasure of our languages. Knowledge of one's language also leads to better educational attainment and supports better employment prospects, part of that GDP growth to which I alluded earlier. The investments detailed in our handout were calculated by former associate deputy minister of finance Don Drummond, and take into account the investment made in budget 2019.

The second priority I'd highlight is similarly about implementing legislation passed in the previous Parliament, An Act respecting First Nations, Inuit and Métis children, youth and families. Again, the roots of that legislation lay in our colonial history and the failure to provide adequate care to first nations children. The important step of recognizing the jurisdiction of first nation governments through legislation is most welcome, but that jurisdiction needs financial support. The investment called for in our submission will support implementing first nations' jurisdiction. It would result in fewer children in the system and reduce the social costs of the damage being done to them currently. Those reduced social costs will be joined, once again, by better outcomes for first nation citizens and concomitant benefits to Canada's economy.

The third area I would like to highlight is housing. Regional Chief Picard of the Assembly of First Nations Quebec-Labrador spoke to this in this committee yesterday, so I will use this time solely to augment his remarks. I would point out that the investment called for in our submission would also give effect to one of the simplest and most concrete recommendations from the inquiry into missing and murdered indigenous women and girls that this government conducted over the previous Parliament. As that inquiry reported, lacking suitable housing alternatives, young women move out of their communities and find themselves in environments that are not secure and that expose them to harm. This investment can prevent that vulnerability and save lives.

In addition, it is well established that the ability to function at both school and work is dependent on the quality of housing. Committee members can easily imagine how difficult it is to function at school or work the next morning when upwards of 20 people are sharing a three-bedroom house, as is too often the case in first nation communities. Addressing this need will reduce social costs and provide benefits to the greater Canadian economy through enhanced productivity.

The final priority I'd like to bring to the committee's attention is governance funding. The Assembly of First Nations welcomes the unprecedented investments made by the current government over the past four budgets. The investment in governance detailed in our submission will increase the return on investments made to date and any that may come in the future. Every government requires strong governance systems in order to make efficient and effective use of the resources at their disposal. First nation governments are no exception.

Funding for first nations governance has not risen by more than 2% in any year since 1997, thus failing to keep up with inflation, let alone other cost drivers. As a result, current funding for first nation governance amounts to just over 3% of spending, whereas most governmental organizations operate in the 10% to 15% range of expenditures. This is simply unsustainable for our governments. The investment outlined in our submission would provide for institutional development; the creation and functioning of shared service organizations; recruitment and retention of qualified staff; and the strengthening of financial management, human resource, and IT systems, and all other essential governance structures required to run an effective and efficient government. By investing in good governance, first nations are able to make better use of the resources available to them.

Canada and first nations share a desire to increase self-determination for first nations, as we agree that this, above all else, will improve the quality of life of first nations' citizens. However, jurisdiction, without the fiscal capacity to exercise that jurisdiction, is hollow. This investment in governance funding could be the most important step that Canada can take to support the important work that first nations and Canada are engaged in together.

First nations' priorities are Canada's priorities. The return on investment is clear and benefits us all.

I look forward to your questions.

Thank you. Wela'lioq.

3:55 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Daniel.

From the Co-operative Housing Federation of Canada, we have Mr. Ross, who is the executive director; and Ms. Lockhart, program manager.

Welcome.

3:55 p.m.

Timothy Ross Executive Director, Co-operative Housing Federation of Canada

Thank you to the committee for the invitation to be here today.

I represent the Co-operative Housing Federation of Canada. We represent over 250,000 Canadians living in housing co-operatives from coast to coast to coast, in every province and in every territory. I'm joined here today by my colleague Courtney Lockhart. Our mission is to inspire, represent and serve our members across the country.

I'm not here to talk about, necessarily, the interests of our members here today. I'm talking about an issue that is affecting so many Canadians, and that's the housing crisis. Everyone needs and deserves a place to call home that is affordable, attainable and sustainable. I'm sure that all of you around this table have heard from your constituents about the housing crisis and the lack of affordability and supply in your communities. We are far from providing safe and affordable housing for all Canadians.

Today, among renters across the country, nearly one in five is spending over half of their income on rent, putting families and individuals at risk of homelessness and reducing their capacity to afford basic necessities. The problem is getting worse and more robust federal action is needed.

When it comes to housing options, people know that they can buy and they can rent, but there's another choice that has been underutilized, and that's co-operative housing. Housing co-operatives are owned by their members. They provide security of tenure and they're affordable forever. For example, here in Ottawa, a two-bedroom apartment now costs, on average, $1,400 per month, whereas a two-bedroom apartment in a co-operative costs approximately $1,000 per month.

Here we are at the pre-budget consultation for 2020 and we have three actions that we'd like to propose to the federal government that will augment and accelerate the good work that is already under way with the national housing strategy.

First, CHF Canada is calling on the federal government to invest in non-profit and co-operative housing. This is not a new or radical idea. During the 1970s and 1980s, Canada developed many programs that successfully started most of the co-ops that exist in Canada today, sprouting up in every province and territory. These federal programs were cut in the 1990s or devolved to provinces, creating a serious shortage of affordable housing in communities across the country. Had these programs continued, we would have half a million more affordable, community-owned homes across our country.

To get back in the game, we are proposing that the federal government establish a $300-million quick-start co-operative housing development fund.

Second, CHF Canada recommends that the federal government enhance the federal lands initiative under the national housing strategy that is already in place today. The cost of land is one of the biggest obstacles to developing new co-operative homes. The federal government should transfer $15 million in surplus land to the co-operative housing sector to develop new co-op housing. This would spark the creation of permanent affordable housing for generations to come.

In B.C., for example, the co-op sector has leveraged government surplus lands to develop community land trusts and hundreds of new co-op homes that will be permanently affordable in one of Canada's most expensive markets. With an enhanced lands initiative, we can replicate this model and build more co-op and non-profit housing across the country.

I'll turn things over to my colleague Courtney.

4 p.m.

Courtney Lockhart Program Manager, Policy and Government Relations, Co-operative Housing Federation of Canada

Our third point is that the government needs to commit to protect long-term rental assistance programs. Rental assistance is a tried and tested method to help low-income households offset the cost of rent. This ensures that low-income households pay no more than 30% of their income on rent. This also creates mixed-income communities, where people paying market rent and people using assistance live alongside one another. We have 50 years of evidence that this model works and creates a strong sense of community among neighbours.

The national housing strategy includes a new rental assistance program that is set to begin in April 2020, but the scope is quite limited. In the past the federal government assisted almost half of all households and co-ops across the country. Now it has dropped below 20% because the rental assistance programs have become unpredictable, or do not even exist in some provinces. You may say that this is because there is less need and people are finding the right housing in the market, but we know that this is not the case. The need for affordable housing continues to grow, with 1.7 million Canadian households currently in core housing need, meaning their housing is not affordable or not adequate.

Co-op homes are already built, paid for and situated in strong communities. By maintaining these rental assistance programs, we can continue to help more low-income families live in co-ops across the country.

Solving these housing problems no longer requires discussion; it requires action. We know what will work, so we encourage the federal government to leverage our expertise and our communities. A housing system that works for all Canadians must include more co-operative housing.

Thank you for your invitation today. We look forward to your questions.

4 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you both for those presentations.

Now we're turning to video conference from Calgary—we had a witness yesterday from Calgary as well—Moodys Gartner Tax Law LLP, with Mr. Moody, CEO.

Welcome.

4 p.m.

Kim Moody Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Gartner Tax Law LLP

Thank you, Mr. Chair, and good afternoon, committee members.

Thank you for the opportunity to appear to discuss the 2020 budget. My name is Kim Moody. I'm a chartered professional accountant and the CEO of Canadian tax advisory services for Moodys Gartner Tax Law and Moodys Private Client in Calgary.

I have a long history of serving the Canadian tax profession in a variety of leadership positions, including as chair of the Canadian Tax Foundation, co-chair of the joint committee of the Canadian Bar Association and CPA Canada on taxation, and chair of the Society of Trusts and Estate Practitioners for Canada, to name a few.

Before commenting on the 2020 budget, I want to start by sharing the significant tax changes we've seen in the last few years, for two reasons: first, to outline the significant challenges that are still outstanding to emphasize that we need to get it right; and, second, to highlight the divisive rhetoric that we all experienced to emphasize that this needs to end so that we can move forward with sound economic tax policy.

The last four years' budgets have been plagued with disturbing and divisive rhetoric, pithy branding messages and, ultimately, poor taxation policies. Some examples are, one, qualifying most budget contents with the phrase “middle class and those working hard to join it” when no credible definition of “middle class” exists; two, attacking the so-called wealthy with a 4% increase in personal tax rates at a time when our neighbour to the south was decreasing personal tax rates, which has put our country's competitiveness at risk; and, three, introducing the private corporation tax proposals of July 18, 2017, with the government effectively calling private corporation business owners tax cheats.

Such proposals, while scaled back, resulted in the introduction of the tax on split income regime and the new passive investment rules—more on this later—and the introduction of the journalism tax incentives, which frankly are an assault on our country's free speech.

Woodrow Wilson, the 28th President of the United States, who served from 1913 to 1921 and was widely regarded as one of the better presidents of the U.S., once said the following about a nation: “a nation is a living thing and not a machine”. I find that very wise and sage. With that in mind, I'll put recent history aside and move on to try to make a positive contribution to our living thing, Canada, but frankly, I believe all of us have an obligation to positively contribute to building a great Canada. We should be working together to develop positive policy and not simply revert to partisan politics. Such working together should be in a co-operative manner, with a conciliatory tone.

Given such, here are some tax priorities that I believe should or should not be part of budget 2020.

Number one, take a permanent pause on the implementation of the stock option proposals. Overly simplified, I believe the government and the Department of Finance have not provided a compelling case to change the status quo, as I have written about extensively in June 2019. Such proposals are very complex, with minimal tax revenues predicted to be raised, and the joint committee on taxation has pointed out some of the technical problems and the complexity of the current proposals. The proposals could have a detrimental impact on growing businesses' ability to attract skilled labour if they are not exempt from the new regime. Again, in my view, these proposals should be permanently abandoned.

Number two, do not increase personal tax rates. While I note that the Liberal election policy platform did not contain an explicit proposal to increase personal tax rates, it—and the Minister of Finance's mandate letter—did contain a proposal that the minister “Undertake a review of tax expenditures to ensure that wealthy Canadians do not benefit from unfair tax breaks.” With respect, such a review was done during the previous government's mandate, so another review in three years is, simply stated, code for tax increases aimed at the wealthy. Such indirect tax increases would cause even more capital to flee Canada and discourage the best and brightest from staying in Canada. This needs to be avoided.

Number three, decrease corporate tax rates. U.S. tax reform has had a significant impact on the competitiveness of our Canadian businesses. In my home province of Alberta, now going into its sixth year of recession, the impacts of U.S. tax reform have been felt greatly. While our provincial government has responded with corporate tax rate reductions, the federal government has not responded in a meaningful way to competitiveness issues caused by U.S. tax reform. One way that could occur is with modest corporate tax rate reductions.

Number four, do not increase the capital gains inclusion rate. Again, the Liberal Party election platform did not contain explicit comments regarding the capital gains inclusion rate, but it did contain the aforementioned tax expenditure “review” to ensure that wealthy Canadians do not benefit from tax breaks. With the 50% inclusion rate being one of the largest tax expenditures, many are concerned that the inclusion rate could increase in the 2020 budget. Such an increase would be devastating to the investment community and to the ability of our country to attract capital. Don't do it.

Number five, do not introduce the interest deduction limitation rule proposed in the Liberal election policy platform. Such election policy platform proposed a new rule to limit interest deductions to 30% of EBITDA. This appears to be a copycat proposal from the U.S. tax reform. However, the U.S. rule was introduced concurrently with a series of other anti-stripping rules and a 14% corporate tax rate reduction. In the domestic context I am unaware of the need for broad-based change, and would suggest careful and comprehensive review before such a rule is proposed. A sloppily introduced rule could have a devastating impact on the business community, especially capital-intensive businesses that hire hundreds of thousands of Canadians and form the backbone of the Canadian economy.

Number six, amend the TOSI regime. As many have likely already told you, the TOSI regime is extremely complex and broad-sweeping, resulting in massive tax increases for so-called middle-class business owners and their families. While there may be a compelling policy case for some sort of anti-income splitting regime, the current regime is untenable and, frankly, unfair. These rules need a complete rethink.

Number seven, repeal the journalism tax incentives. These rules are an attack on free speech in Canada. Some, including me, believe that the regime could lead to biased media reporting in an era where the average person believes that our media is already biased, which is not good. While these incentives may be well intentioned, the tax system is certainly not the right policy lever to deal with the foundational challenges that the print media around the world are facing.

As Woodrow Wilson said during World War I in 1917:

I can imagine no greater disservice to the country than to establish a system of censorship that would deny to the people of a free Republic like our own their indisputable right to criticize their own public officials. While exercising the great powers of the office I hold, I would regret, in a crisis like the one through which we are now passing, to lose the benefit of patriotic and intelligent criticism.

In my view, the journalism tax incentives will indeed lead to a form of indirect censorship, and ultimately, this slippery slope needs to be avoided.

Number eight, introduce meaningful changes to enable a fair succession of the family business and farm to the next generation.

Finally, as many presenters have told you before, this country needs comprehensive tax review and reform. Yes, I know many of you are tired of hearing this. I've had a chance to listen briefly to yesterday's panel, and three of the speakers said the same thing, and so did Peter Weissman.

Perhaps there is something to all the smart people who have appeared before you. Perhaps certain academics, bureaucrats and parliamentarians, who think that comprehensive tax review and reform are not necessary or that Canadians are not ready for such a review, are simply wrong. In my view, Canadians are ready. They're ready for real and refreshing change for the better, ready for positive change to assist our living thing to get ready for the next generation.

I realize that this committee has recommended it before, but the government does need to take action.

Thank you. I'd be happy to take questions.

4:10 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much.

Turning to the Multiple Sclerosis Society of Canada, we have Mr. Davis, senior VP.

4:10 p.m.

Benjamin Davis

Good afternoon.

I'm pleased to present to your committee key priorities for Canadians affected by MS. Canada has one of the highest rates of MS in the world. An estimated one in every 385 Canadians live with the disease. It's a chronic, episodic, progressive and often disabling disease of the central nervous system. Since that includes the brain, spinal cord and optic nerve, MS can affect vision, memory, balance and mobility. On average, 11 Canadians are diagnosed with MS every day.

The MS Society has heard the personal and profound stories of life with MS from Canadians, the struggles in the workplace, the financial difficulties families are facing to make ends meet, the frustrating barriers in accessing Health Canada-approved therapies, appropriate care, housing and social supports, and of course, the hope that research gives to the tens of thousands of Canadians living with this disease.

To address these realities, I'll present our recommendations on employment and income security, access and accelerating research.

First is employment security. People with MS want to work but struggle to continue to work. We need to update the definition of disability to include episodic. A staggering 60% are unemployed and that needs to change. Often the problem is one of flexibility and accommodation, and an understanding of episodic disability.

Last year, the HUMA committee studied Motion No. 192, episodic disabilities. Its report, “Taking Action: Improving the Lives of Canadians with Episodic Disabilities”, made 11 important recommendations that now need to be implemented, including extending the duration of the EI sickness benefit from 15 to 26 weeks.

The second area of priority is income security. The costs of paying for medication, services, equipment and treatment are a significant burden for people with MS and their families. Intertwined with this burden are complicated application processes, requirements for numerous verified medical forms and strict eligibility criteria for programs. When MS stops people from working, they should be able to access adequate income and disability support. This situation is amplified for women. In Canada, MS affects women three times as often as men.

We recommend the following. First, make the disability tax credit refundable. Second, implement the 11 recommendations in the HUMA committee's Motion No. 192 report. Third, change the eligibility criteria for the Canada pension plan and disability tax credit to include those with episodic disabilities, using the new Accessible Canada Act's definition of disability.

The third area of priority is access. Access to comprehensive treatment, care and appropriate housing is a must. We recommend the following to make access a reality for Canadians. First, implement the Accessible Canada Act to ensure a barrier-free Canada, with a specific focus on programs and service delivery, employment, built environment and transportation. Second, we recommend, through intergovernmental health agreements, investing in comprehensive home care, and for those unable to remain at home, funding the development of appropriate housing through the national housing strategy. Third, we recommend increasing access to Health Canada-approved treatments, as early intervention is vital to avoid many of the long-term economic and personal costs that result from unnecessary, irreversible disability. The needs of people with MS and their families should be at the centre of health and drug policy decisions.

The fourth and final priority area is accelerating research. Research is key to new treatments, better quality of life, and ultimately, a cure. Canada remains at the forefront of MS research around the world. Through generous contributions from donors, corporate sponsors and fervent fundraisers, the MS Society has invested over $175 million in research since its inception in 1948.

The MS Society continues to fund fundamental research, as we still don't know what causes MS or how we could prevent it in the future. First, we recommend the federal government continue to invest in basic scientific research. Second, we recommend that the federal government connect with health charities to ensure the patient voice is part of setting research priorities. We believe that federal research funding programs should be informed by the perspectives of patients, their caregivers and health care providers. Finally, our third recommendation is to partner with health charities to turn innovative research into real-life treatments.

There are a number of partnership opportunities within the impact goals of our own new strategic plan: advance treatment and care, enhance well-being, understand and halt disease progression and prevent MS. For example, the Canadian prospective cohort study to understand progression in MS, otherwise known as CanProCo, is an innovative public, private and philanthropic partnership that will allow researchers and clinicians to observe a large group of people living with MS from across Canada over a period of time, and collect data from them. Analyzing this data will answer fundamental questions as to why and how progression occurs, which is key to improving diagnosis, treatment, health services and health outcomes.

Thank you for this opportunity to speak and share with you the priorities that Canadians affected by MS want you to take action on: employment, income, access and research.

4:15 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Davis.

Our final witnesses are from the National Police Federation: Mr. Sauvé, president, and Mr. Merrifield, vice-president.

Welcome.

4:15 p.m.

Brian Sauvé President, National Police Federation

Thank you, Mr. Chair.

Good afternoon to the committee. I want to thank you for the invitation to present today. My name is Brian Sauvé. I was recently elected and confirmed as the president of the National Police Federation, representing almost 20,000 members of the RCMP across the country. With me today is vice-president Peter Merrifield, as well as two other vice-presidents sitting in the gallery, Michelle Boutin and Dennis Miller.

I provided copies of the speaking notes to the clerk, as well as a short presentation that I'll refer to. First, I want to give you a bit of history on the RCMP, and then we'll get into what the NPF is all about.

This past weekend we celebrated our 100th anniversary as the Royal Canadian Mounted Police. For those who don't know, in 1920 the Royal North West Mounted Police merged and assimilated the Dominion Police, forming what you have today, which is the Royal Canadian Mounted Police. Effectively we've had this name for 100 years. We're approaching our 150th anniversary in 2023 because the North West Mounted Police was founded in 1873.

Many Canadians will know the RCMP from their presence here on Parliament Hill or the storied musical ride. Our responsibility is to enforce all federal statutes in Canada including national security and organized and commercial crime. However, in addition to those high-priority mandates the RCMP also provides contract police services in over 150 communities across Canada. We have over 929 work sites, both domestic and international.

Many of those communities are remote and isolated. For example, from Grise Fiord, Nunavut, all the way to Surrey, British Columbia, to Gander, Newfoundland, to Red Deer, Alberta. When all those residents dial 911, we show up. We are the police jurisdiction and they expect someone to treat them with courtesy and respect, as well as to investigate their crimes and solve their issues.

Here's a little about the National Police Federation. For those of you who don't know, that coming up on its150-year history, the RCMP membership was unable to organize and certify a bargaining agent. We are the first one ever. We made history in 2017 by filing the first application for certification. The Federal Public Sector Labour Relations and Employment Board certified the NPF in July last year as the first-ever bargaining agent for all 19,000 police officers across the country. Overnight the NPF became the largest voice of organized police labour in Canada, the second-largest voice of organized police labour in North America, and most probably, close to the fifth- or the sixth-largest one in the world.

We're a fairly large body now and we're still learning as we go. We're keeping our voices respectful and professional. We're solutions-based. For now the membership of the RCMP has a voice to speak out about all the trials and tribulations, successes and pitfalls, we have encountered through our 147-year history. The primary focus of the NPF is to ensure RCMP members are properly compensated, resourced, supported and trained to maximize public and police officer safety.

We are entering into collective bargaining on contract issues with Treasury Board later this winter. However, that's not the reason I'm here today. It's an introduction to who we are, but I do want to cut to one case that is specific to the budget and this committee. The RCMP is drastically underfunded and under-resourced. The deck I provided on page 3 shows a cross-section of British Columbia. I could do every province but it would be a very long presentation. That data is from 2016. It shows you that the RCMP, in every community we police in British Columbia, offers fewer police officers per population than comparative municipalities.

Our Mounties are extremely efficient, and I would put a Mountie up against a munie any day. However, I would suggest to you that a reasonable person would assume that we are stretching them beyond their capabilities. If we're going to talk about priorities of happy, healthy work-life balance, mental resilience, mental health in the workplace for our first responders, they cannot be as overworked as our membership. They are continually at risk of burnout. You will see provinces across this country making legislation for post-traumatic stress related to our first responders' jobs that is directly linked to that exposure. We can train them to be resilient, but we also need them to have time off to decompress.

In order to improve that resiliency and to provide a healthier work-life balance, which can only lead to improved service delivery and a safer Canadian public, the RCMP needs more police officers. I can't bargain that with the employer. This committee can recommend to the minister to improve the funding for the RCMP and increase that funding for the number of cadets who go through Depot in Regina.

Although dated, a 2010 white paper was written by the Senate entitled “Toward a Red Serge Revival”. It speaks specifically to the human resource crisis the RCMP was facing in 2010, and one of the recommendations was that we hire an additional 5,000 to 7,000 police officers to address that crisis with our increasing mandate and the demands placed on us in 2010. We are now 10 years further down the road, and I would suggest to you that if that report were written today, similar conclusions and recommendations would be made.

Respectfully, we need to act. The RCMP is in need of additional funding to increase its ability to recruit and train more police officers to provide those members working day in and day out the ability to enjoy a healthy work-life balance, remain healthy and maintain public safety in the communities they police. I know it's a little odd to have a labour group come and ask for funding for its employer, but that's where we're at.

I thank you for your time. I appreciate the invitation, and we're open to questions.

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Brian. We thank you and all the police forces in the country for what they do.

We'll turn to questions, and if we can go to five-minute rounds for the first four and then drop it to probably three and a half for the next four, we'll get everybody in.

We'll start with Mr. Poilievre and then go to Mr. Fragiskatos.

4:20 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

My question is for Mr. Kim Moody, Canada's most colourful accountant. I hope you won't mind me saying that.

He's also one of Canada's best accountants and has been a very intelligent and knowledgeable commentator on matters related to the Income Tax Act.

Mr. Moody, when the government brought in the new tax on split income rules for spouses and adult children, a current and also a former chief justice of the Tax Court said that the complexity would lead to “battle” in the the court system between CRA and taxpayers, and that the judiciary was not sure how it would even interpret these rules. At the time I commented that the government probably spent more money on enforcement and administration than it would collect in new revenues.

Now that these changes have been implemented, what has been your experience with your clientele?

4:25 p.m.

Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Gartner Tax Law LLP

Kim Moody

Thank you, Pierre, for the kind comments.

My experience has been that the average accountants and their clients just cannot comprehend these rules nor apply them. At the end of the day, we're dealing with a situation where these rules apply to such a broad-based group of people. Pretty much every single private shareholder of a private corporation will have to deal with these rules and has dealt with these rules, whether correctly or not. That's the problem with these rules: When you foist complexity on such a broad group of people who do not have means to access people like Peter Weissman, me and others, foundationally in my view, that is just unfair.

I agree with your proposition, and I agree with the former justice proposition that the courts will be littered and the CRA will be littered with disputes on these matters, which is very unfortunate. Now having said that, is there a compelling policy need to do something to cleanup some mischief? Absolutely, but not with this set of rules.

4:25 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

On the same subject, I'll go over to Mr. Weissman, whom I know to be a very wise man. I wonder if he has any wisdom to impart to us regarding the application of the new TOSI rules or the passive income grind-down that were part of the final tax changes coming out of July 2017.

4:25 p.m.

Chartered Accountant, Trust and Estate Practitioner, As an Individual

Peter Weissman

Thanks, Pierre. Yes, I'd be happy to give my observations.

We've now had experience in the trenches with the TOSI rules. What we predicted is what's happening. We have a lot of difficulty interpreting the rules. They're not just tweaks. If you look at the record, if you look at how many interpretations and positions the CRA has released in trying to help auditors, Canadians and taxpayers interpret the TOSI rules, you get a good idea of the number of resources that are being spent just on learning the rules, not even on enforcement.

When I have a client who calls me about the rules, I have to pull out the act. I will not give an answer over the phone. I have to get back to client and I am a tax practitioner.

The income-splitting objective, I think, was a notable one. As I said in a Senate standing committee comment, I think we could probably collect about 75% of the anticipated revenues from the TOSI rules by changing them to a simple income-splitting curtailing method of extending our kiddie tax age to 24. That would have taken no additional work, with no additional costs of recovery for that.

In the trenches, to answer your question, both the passive income rules and the TOSI rules are problematic, and we're still learning.

I think it was Justice Rip who made the comments that you were talking about. I was at the presentation when he talked about the Tax Court issues, and we're seeing them. I alluded in my opening remarks to the workflow that's moving up to appeals and to the Tax Court.

4:25 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

It seems to me that a tax system that forces people to spend time guessing whether or not they can pay a contributing spouse dividends, rather than letting the two spouses just work on building the business, serving the customers and paying the employees, is a twisted outcome indeed.

We have family members now who don't know whether or not they can qualify and are spending more time filling out logbooks to prove that they're actually contributing members of businesses than they are contributing to the business itself.

Would you agree that this is an area of unnecessary and new complexity that could easily have been avoided with simple changes like the one you just suggested?

4:25 p.m.

Chartered Accountant, Trust and Estate Practitioner, As an Individual

Peter Weissman

Yes, and I am on record saying that.

4:25 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Good. Thank you.