Finance Committee on Oct. 24th, 2022

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

That's fair enough.

Mr. Kelly, I'll come back to you.

You have a number of interesting recommendations in your submission that I want to canvass with you. I'll just go over them. You suggested changing the sixty-forty split on EI premiums to fifty-fifty. You talked about increasing the small business tax reduction from $500,000 to $600,000. You also talked about stopping the phase-out of the accelerated CCA.

I wonder if you can comment on that suite of recommendations and what impact you're hoping to achieve if they were all to be implemented.

[Daniel Kelly]

Sure.

I think at this point we really need to put some incentives on the table for businesses to grow and expand once again. The small business threshold of $500,000 has been in place now for many years. Of course, it's not indexed to inflation. Raising that would be of some help.

We've also recommended lowering the small business corporate tax rate to allow businesses that are earning some form of corporate income to plow that back into their business for growth, which is what our members tell us they would do, particularly to deal with some of the gaps they're experiencing on a labour front, like to shore up wages or enhance benefits.

The one that I will pause on just for a second, though, is with respect to equalizing the EI treatment. That's been a long-standing recommendation of CFIB.

Right now, an employer pays 1.4 times the rate of employees. Of course, we are on the eve of another series of potential expansions regarding the purposes of the EI fund and the things that qualify for EI benefits. If that's the case, more and more of the EI-related funding will not be given as a result of insurance for job losses, and will basically be for achieving other social policy objectives. They are meaningful ones, of course, like compassionate care leave and the enhanced maternity or parental leave benefits, but if we're moving EI closer to being a social program and away from being job-loss insurance, then it doesn't seem to make much sense that we would have this primarily loaded on the backs of employers, especially small employers. We have suggested that the premium be changed to essentially effect a fifty-fifty split in premiums.

It surprises some MPs to know that years ago EI was essentially 40% employer, 40% employee and 20% government, through general revenues. That's no longer the case. The 20% that the government used to kick in is now on the backs of employers. One way to address that would be to have a lower rate of EI, perhaps on the first $500,000 or $1 million in payroll. That would lower it to a fifty-fifty split for, perhaps, those who are small employers or not-for-profit associations.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Morantz. That's your five minutes.

We're going to the Liberals now, with MP Dzerowicz for five minutes. That's so we will have a full third round.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank everyone for being here. I will not have time to ask you all questions, but I want to say that your testimony is important and it's important for us to hear you.

I am going to start off with Ms. Choo. I'll ask you a couple of questions, although I won't have as much time to hear all of your answers as I'd like. If we don't get through all the answers, please make sure that you respond by following up by email.

First, thank you for your extraordinary work. You do an amazing job in Vancouver in helping settle newcomers to Canada. You're absolutely right that immigration is a key economic advantage for Canada. We are in competition for the best and brightest in the world. We need to make sure we have the right things in place to support them.

I have two questions for you.

Firstly, you talked about how we need more settlement dollars. I wouldn't mind you talking a bit more about that. We're already providing quite a bit of money right now for settlement. Is it just a matter of more or is it different? Could you respond to that?

Secondly, when I was last in Vancouver, a number of innovative housing models were being looked at by organizations such as yours. Is there something more the federal government can do to step up on that front to help with affordable housing for newcomers? I'd be grateful to hear about it.

I have about 30 to 45 seconds for you and then I have to move to the next group.

[Queenie Choo]

Thank you so much for the questions.

It's amazing that we are able to serve the vulnerable people who come to Canada. Certainly, many of them come with not one but multiple issues for which we need to provide wraparound services. Whether they are Syrian refugees, Afghan refugees or newcomers from Ukraine, we want to make sure there are enough resources to provide settlement and resettlement services for them so they can get on their feet, have employment and feel welcome in Canada.

To your second question about some of the innovative programs, I mentioned in my presentation that we have a pilot project, operation welcome home, for Ukrainian arrivals. As you know, housing is expensive in the Lower Mainland, Vancouver, Toronto and even Montreal, so we need to ensure that these folks have a place to stay to—

[Julie Dzerowicz, Liberal, Davenport, ON]

I'm so sorry to interrupt, but I will have to ask you to make that submission to our committee. We will absolutely look at those recommendations, because it's important for us to do so.

My next two questions are for the Canadian Chamber of Commerce on another very big issue that I'm very worried about.

A new report came out from the C.D. Howe Institute that says business investment in Canada is about half of what it is in the United States and lower than in other OECD nations. It says, “Business investment...is so weak that capital per member of the labour force is falling, and the implications for incomes and competitiveness are ominous.”

What recommendations do you have to improve business investment for companies in Canada?

[Alex Gray]

Increasing the capital cost allowance is one of the recommendations I made earlier. It essentially allows companies to invest in capital assets and, for reporting purposes on their taxable income, to claim the amortization more readily. It's a clear incentive to get capital assets or make additions to existing capital assets more quickly, especially in comparison with recent federal tax changes in the U.S. with the Tax Cuts and Jobs Act, which increases the similar amortization to 100%.

[Julie Dzerowicz, Liberal, Davenport, ON]

That will not close the gap, though. Do you have any other recommendations? We are at 50%, half of what the United States is at. You might not have them here today, but if you have any other recommendations, I'd be grateful.

[Alla Drigola Birk]

Absolutely. One of those areas is aimed at reducing emissions and making sure that we are competitive internationally, not just domestically.

We did release a report earlier this month that goes in depth into what Canada could do to increase competitiveness. It goes beyond just carbon pricing. I would be happy to share that with you, because I know we have limited time today.

[Julie Dzerowicz, Liberal, Davenport, ON]

That would be great.

I have one more quick question. One of the key things that have been recommended by a number of economists who have come before us is to eliminate the trade barriers and regulations across our provinces and territories. They said it would increase our GDP by four points.

Do you agree with that, and do you think that should be a top priority for our government?

[The Chair, Liberal, Peter Fonseca]

That is a great question, but I do need a short answer.

[Alla Drigola Birk]

Absolutely. It has been something we've been pushing for a very long time. We are a very large country and there is a lot on the table. Our most recent data report shows that provinces primarily trade with just Ontario. There's lots of opportunity with all the other provinces and territories that we can look at.

We can share that with you as well.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much.

[The Chair, Liberal, Peter Fonseca]

Thank you for being very concise on that. I know it was difficult.

Members, we have 26 minutes. A full round takes 25 minutes if we're strict to the time. We will now start the third round, and we will stay strict to the time.

The Conservatives are up first.

MP Hallan, you have five minutes.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Mr. Chair, I'm going to defer to MP Lawrence.

[The Chair, Liberal, Peter Fonseca]

MP Lawrence, you have five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much. My apologies for not updating the chair.

I want to talk a bit about the payroll tax increase.

Mr. Kelly, your testimony was quite compelling. You said that someone earning $65,000 will pay $750 extra. The employer, of course, kicks in $750 as well. Perhaps you could take 30 seconds to describe the impact that will have on your members.

[Daniel Kelly]

Pardon me. I should note that the $750 is a cumulative increase over the rounds of the CPP enhancements, the CPP premium increases, that we've seen over the last number of years. Taking that amount of money is an annual withdrawal from someone's take-home income and now is fully implemented. We have one more round of increases for all employees before the maximum pensionable earnings go up. Then we have two more years when maximum pensionable earnings limits will rise. That means that middle-income Canadians—those earning around $75,000—will see giant increases in their CPP premiums, now over a seven-year time frame.

Payroll taxes are profit-insensitive. We all know the impact as an employee, but from an employer perspective, that is money that they now have to ante up in their half of the premiums for every employee, making it more costly for them to create jobs or enhance wages.

Of course, for the self-employed—business owners being self-employed—you have to pay double that rate, because you pay both the employer and the employee share. In some cases we're seeing $1,500 increases for owners of businesses or self-employed Canadians. That's a very big bite out of your take-home income at a time when we're struggling to make ends meet in many instances, for employers after the course of the pandemic and for employees under the inflation they're experiencing.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you. I couldn't agree with you more, Mr. Kelly.

We are seeing input prices increasing dramatically, of course, and for our workers, we're seeing food costs go up by $1,000, so we're losing $750 here and $1,000 there, and already we're heavily taxed as Canadians.

Maybe the Canadian Chamber of Commerce would also like to comment on the impact it would have on your members who are employers.

[Alex Gray]

As you mentioned before, it is an issue of significance to employers, absolutely. I think all sorts of.... I know there's been debate on whether it's a tax or not. It's a cost on business at the end of the day, and that needs to be balanced with the need for economic growth and the need for revenue.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

I'll go to the Federation of Agriculture as well.

Of course you know, Mr. Currie, as you're in my riding, that I have a large agriculture community there. In talking to my friends there, I know that the margins are very thin, and labour costs often are a big portion of that for them.

When you increase payroll costs and increase the carbon tax in an industry where people are already working 15, 16 and 18 hours a day, which is not unusual during harvest time, and they already have very thin margins, I have to think that this would be an additional challenge for your members, who are already working very hard.

[Keith Currie]

Absolutely, and like any increase in costs, what becomes problematic for the farmers and ranchers I represent is that we are price-takers, so we cannot pass those costs on. We have to absorb them. That makes it even more problematic as costs continue to mount.

We certainly aren't opposed to employees making what they need to make, but we need to find a way to balance that with the fact that we can't add on that cost and add a nickel on every product going out the door. We have to absorb it, so it is concerning.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

I obviously agree with all the comments. I mean, there are literally hundreds of thousands of Canadians, if not millions, represented by these institutions, and they're all saying clearly that on the payroll tax, perhaps—in Mr. Kelly's words, not mine—a “pause” would be warranted in a time when Canadians are facing incredible pressures. Canadian businesses have just recovered from the pandemic, and now we're facing inflation at 6.9% and food inflation at 11.4%. I'm hoping the government is listening.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

We are now moving to the Liberals and MP Baker for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

Thank you to all the witnesses. I wish I could ask all of you questions, but I won't have time for that.

Mr. Kelly, I'd like to clarify something that I think I heard you say, but I don't want to put words in your mouth.

You were talking about EI premiums earlier, and I think I heard you say that you were suggesting that the share of the EI premium covered by the employee increase and that the employer portion decrease. Did I understand you correctly?