Finance Committee on May 17th, 2023

[Neil Hetherington]

The guaranteed seniors income benefit had a major correlated reduction in poverty among seniors. That should be applauded.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Chatel.

I think I speak for all committee members, the clerk, the analysts, the staff here, the interpreters and everybody who is watching. We thank you for your tremendous knowledge and the amazing advocacy that all of you have brought to our committee, and for answering many questions. We're so grateful that you accepted our invitation in such short order.

Thank you very much for coming before us and for being part of this study. We really appreciate it.

Members, we're going to suspend for a transition to our second panel, this time for five minutes.

Thank you.

[The Chair, Liberal, Peter Fonseca]

We are back with our second panel of witnesses.

In this second panel we have, from the Canadian Federation of Independent Business, the CEO, Dan Kelly. Also with us from Campaign 2000 is the national director, Leila Sarangi. We have the chair of the Coalition of Rail Shippers, John Corey, with us. From H&R Block Canada Inc., we have the associate vice-president, Peter Davis. From Option consommateurs, we have Sylvie De Bellefeuille and Alexandre Plourde. From Pulse Canada, we have the vice-president, Greg Northey, with us.

We are going to start with opening remarks from the Canadian Federation of Independent Business and Mr. Dan Kelly, please.

[Daniel Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business]

Thank you so much for the opportunity to be here. I apologize in advance to the committee, last weekend I had a bout of laryngitis—I'm sure many parliamentarians would be happy to hear as I was quieter than normal—so I'm about 50%. I'm happy to be doing this from home.

I wanted to share a few thoughts about the budget and the budget implementation bill. I thought I would start with a bit of an overview of where small businesses are at right now in Canada in their economic recovery, and then go to the specifics of this piece of legislation and perhaps make a couple of broader comments about the budget.

As you know, we have 97,000 small and medium-sized companies as members of the Canadian Federation of Independent Business. When I look at the state of affairs for small businesses, we are still deeply worried about what is happening with the situation facing SMEs across the country. If you can believe it, still, three years in, only half of small businesses in Canada are back to normal levels of sales, prepandemic levels of sales—only half.

On top of the fact that only half of them are back to regular sales, two-thirds of them are facing a mountain of pandemic-related debt. This isn't new debt they took on for a plant or equipment or expansion, this is debt they took on to keep their lights on over the course of the past three years. That legacy of debt is significant, an average of $105,000 per business. About $60,000 of that typically is in the form of a CEBA loan. A lot of businesses are very worried about how they're going to possibly repay the debt they've taken on.

Of course, there are a whole host of issues. Even those businesses that have sales back to normal or are doing better than normal, they are facing a litany of cost increases. Some of them are natural cost increases due to inflationary pressures from private sector suppliers. Sadly, many cost increases are as a result of government policy. This includes rising EI premiums at the beginning of this year, rising CPP premiums at the beginning of this year, minimum wage increases from provincial governments, and of course the most recent increase in the carbon tax and the smaller but still an increase in the excise tax on alcohol products.

That's the situation facing small and medium-sized firms at the moment.

On the actual bill itself, there are a few pieces that we quite like. The measure that we were very pleased about in this legislation is the doubling of the tradeperson's tool deduction from $500 to $1,000. That's really good news. That is super helpful to a whole bunch of tradespeople, an issue that CFIB put forward decades ago. It's really wise on the part of government to look at that threshold and raise it by $500, doubling it essentially to $1,000. That's something we're happy with.

Secondly, I'm also pleased to see there's going to be a single complaint-handling body for the banks. This has been a recommendation of CFIB for several years. There are lots of small business issues related to Canada's financial services sector. This is progress in that respect.

I mentioned a second ago the change on the excise tax, capping that at 2% rather than the full inflationary increase, which I think was going to be between 6% and 7%. This was a huge relief and we were pleased. We would have been further pleased had the budget capped it altogether. However, it is good news that the full hit did not happen to Canadian consumers and all the industries that are affected by that as well, both for producers and restauranteurs and bar owners, who would be forced to pass that on to their customers at a challenging time.

Those are a few of the measures in the specific legislation before you that we like. One that was a smaller one that does worry us is the exclusion from the definition of “financial services” of certain payment card clearing services, now exposing them to GST or HST. I reference this because in the budget there was a big win for small businesses on credit card processing fees. This was the central positive move in the budget for SMEs. We're hoping to learn some more details of what that's going to look like in the days ahead, but I can tell you that adding taxes to certain payment processing fees while you're trying to reduce payment processing fees is not really helping to the degree that it possibly could. We've had some estimates that it could cost as much as two basis points more by this policy change. We're still investigating that one. It's something that we wish to have a further study and a review of.

A couple of other smaller items include the requirement to make electronic remittances or payments to CRA and other departments for any amounts over $10,000. That is something we have heard from a few small businesses on. When I look at it, on employment insurance—

[The Chair, Liberal, Peter Fonseca]

Mr. Kelly, if you could just wrap up. You will have a lot of opportunity during questions.

[Daniel Kelly]

In the budget as a whole, I'll just reference that the credit card processing fee reduction was the big win and the thing that we're most pleased about. There is progress on internal trade reduction. That's a huge file for small businesses, so there's some good news there. There's some progress on employee ownership trust, but I will say that we're a little worried about the specific measures. Finally, I'll raise the CEBA loan situation. That hasn't been extended.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Kelly.

Now we'll hear from Campaign 2000.

Ms. Sarangi, go ahead, please.

[Leila Sarangi, National Director, Campaign 2000]

Thank you, honourable chair and committee members.

Campaign 2000 is a pan-Canadian coalition of organizations working to end child and family poverty. I want to start by thanking you for inviting me to appear again today. I spoke about our priorities for budget 2023 back in February of this year, which I know resonated with the committee because we saw many of them in your report from March. It was really unfortunate that those recommendations didn't make their way into the federal budget.

Earlier this year, Campaign 2000 released its annual report card looking at the situation of poverty in Canada using 2020 data—so the first year of the pandemic, when large swaths of the economy were shutting down. We saw a historic drop in the rates of poverty and child poverty. Our analysis showed that this was almost all attributed to the $102 billion in new federal transfers that went directly to individuals and families in the form of emergency programs like the CERB and the one-time top-ups to existing programs like the Canada child benefit.

Using the low-income measure, more than 314,000 children were lifted out of poverty that year. Without any of those pandemic transfers, the child poverty rate would have ballooned to nearly 21%. Without any government transfers at all, more than one-third of children would have been in poverty in 2020. We know that income transfers to families and individuals work.

Those temporary measures have all ended. Inflation has raised in ways we didn't anticipate. We have a housing crisis. There are barriers to accessing the new system of child care. Data released last week from Statistics Canada showed, unsurprisingly, that poverty rates have risen and are projected to reach prepandemic levels.

Unfortunately, we're going backwards, and budget 2023 doesn't do much to mitigate this. We have the temporary grocery rebate, which will provide some minimal but temporary relief. There is an expansion of a small automatic tax filing project for vulnerable people, but that's going to take another three years to achieve. There's a commitment to do consultations about vulnerable non-tax filers, but there are no clear timelines around that project. We're really worried that the budget allocates over 53 million new dollars to double down on pandemic benefit repayments. I've been in front of this committee several times talking about the challenges around CERB repayments and low-income individuals and families.

In budget 2023, it says that “ESDC and the CRA have adopted an empathetic, people-first approach to support...people facing issues with repayment. They also have the discretion to negotiate a suitable resolution depending on the factors and conditions of a case to reduce any undue burden.” I have not heard any experience that would be characterized like this, and I'm going to share three quick stories that I've heard just this week.

A gentleman out west who had back surgery was bedridden, and he had repayment letters sent to him that he didn't understand. He called the CRA and was told multiple times to go in for an appointment, which he physically was unable to do. He ended up having his medical EI garnished and his tax rebate held back. He calculates that the federal government has now taken $800 more than what they said he owed.

There is a mother with two adult sons with disabilities. One was asked to verify his self-employment income. His receipts and invoices were not being accepted by the CRA. His accountant doesn't know why. They can't get any information from the CRA, and his mom is really worried. His mental health has deteriorated so much that he's on a suicide watch. Through our legal clinic partners, we have been hearing this week that they're no longer able to establish repayment plans of five dollars a month for clients who are on social assistance and who clearly can't afford anything more.

We know that there are scores of these cases going through the federal courts, which is a further waste of resources. When you look at those cases, you can see that the judges want to do something to help people, but they're legally tied. There's no wiggle room. They say that they're unable to help. We know that there's a statute of limitations on debt recovery—that was discussed in the AG's report last year—but these efforts are causing a lot of pain and a lot of hardship. They are not only using up federal resources but using up precious community and personal resources. We really think it's time to retire the CERB debt, as any business would, and implement a CERB amnesty.

We need, dare I say, a sustained elimination of poverty through robust income security measures: supplementing the child benefit with a low-income supplement for families, the implementation of the federal disability benefit, the enhancement of the disability benefit for children and a benefit for working-age individuals regardless of their earned income.

Our pre-budget submission to you has many recommendations on our planks of income security, making work decent and a pathway out of poverty around child care, housing and public health. I won't go through those because you have them, but I do look forward to—

[The Chair, Liberal, Peter Fonseca]

Ms. Sarangi, could you wrap up really quickly? You'll have an opportunity during questions to elaborate on all of them.

[Leila Sarangi]

Yes.

That's it. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you very much, Ms. Sarangi.

Now we'll hear from the Coalition of Rail Shippers.

We have the chair, John Corey, with us.

[John Corey, Chair, Coalition of Rail Shippers]

Good evening, ladies and gentlemen.

Thank you to the committee for allowing me to come here tonight to speak to you.

My name is John Corey. I'm the president of the Freight Management Association of Canada, as well as the chair of the Coalition of Rail Shippers. The Freight Management Association advocates on behalf of freight purchasers: rail, marine, air and trucking. The FMA has been in business since 1916.

The Coalition of Rail Shippers represents various shipping associations that, combined, constitute about 75% of the Canadian revenue of CN and CPKC, with more than 100 member companies from all major industries in Canada, including agriculture, agribusiness, forest products, mining, fertilizer, chemicals, manufacturing and retailing.

As we are all aware, we've just come through a very tough three years, and shippers were very pleased to see that, in January of 2022, Minister Alghabra struck a national supply chain task force. The task force produced a final report in October of 2022. Some of the recommendations in that report actually made it into the recent budget.

There were five main ones, including one to establish a supply chain office to oversee the supply chain and to have better co-operation between Transport Canada and Stats Canada in developing transportation supply chain data. Also, the minister is being provided the authority to compel data sharing by shippers accessing federally regulated transportation services. As well, there's a temporary extension of interswitching on a pilot basis, and there's a review of the Shipping Conferences Exemption Act.

Of the items above, three are of main concern to shippers.

First, the ability of the minister to compel shippers to provide confidential data without any stated parameters is worrisome to shippers. Second, a review of SCEA, the Shipping Conferences Exemption Act, is long overdue, since Canadian shippers currently have no ability to complain about poor service and high rates charged by ocean carriers. Third, the extended interswitching to increase competition in the rail sector is good, but the limited time frame and the restriction to only part of the country are problematic.

I'll say just a few more words about extended interswitching. This is a mechanism that shippers can use to level the playing field when dealing with the monopoly railroads. The railways obviously have a power imbalance, and they use it extensively to control shippers' choices of transportation. We think that needs to be addressed. Hopefully, the budget will do that when regulations are brought out.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Corey.

Now we'll hear from H&R Block Canada and Mr. Peter Davis, please.

[Peter Davis, Associate Vice-President, Government and Stakeholder Relations, H&R Block Canada Inc.]

Thank you, Mr. Chair and other committee members, for the opportunity to appear before you this evening on behalf of H&R Block Canada and our broader industry.

I also serve as co-chair of the board of directors for Tax-Filer Empowerment Canada, the national industry association for Canada's tax preparation and software industry, so I am pleased to also provide their perspective along with my company's this evening.

I'll give you a little background on H&R Block Canada. We are the largest assistant tax preparation firm in Canada. During tax season we have nearly 1,000 service locations across the country, with nearly 10,000 associates operating coast to coast to assist Canadians with their filing obligations year-round.

I am going to provide some brief commentary on Bill C-47 specifically and then finish up with some more general remarks on budget 2023.

Bill C-47 contains some very important legislative provisions that will enable our industry to better serve Canadians with their taxes. Specifically, these provisions include amendments to the Income Tax Act and the Tax Rebate Discounting Act. These will permit approximately 60% of tax filers who do work with tax preparers and accountants to use electronic signatures on certain key tax forms. If these changes pass, that will open the door for Canadians to file their taxes virtually with their preparers and also to potentially receive refund advances in a timely manner, all without having to leave their homes.

We believe the innovations through this legislation could incent more Canadians to file their taxes as we make the process easier for them and could also ensure that they are able to receive their benefits as soon as possible. H&R Block Canada and our industry have long advocated for electronic signatures, and we fully support the timely passage of these amendments in their current form within Bill C-47.

I would like to switch gears a little bit and talk about budget 2023 and take this opportunity to raise some significant concerns with the budget's proposals to expand the role of the CRA to include filing taxes on behalf of millions of Canadians.

I'd like to first touch on how taxpayers would be negatively impacted by the prospect of government directly preparing and filing their taxes. In Canada, we have what's called a voluntary tax compliance system. This system ensures a clear separation of roles between the tax collector and the tax preparer, for the benefit of Canadians. This gives Canadians the right to independently prepare their taxes in order to maximize their benefits and reduce their tax liability to government.

How would this work if the CRA were to start filing taxes for some Canadians? For starters, the CRA would find itself in a major conflict of interest on two fronts. How can the CRA successfully balance maximizing government revenue while also ensuring Canadians get the most back from government coffers?

H&R Block Canada's independence from government tax collection allows us to remain impartial and to fully dedicate our efforts to maximizing refunds and benefits for Canadians, even in the many instances when the CRA feels that they are entitled to less. In fact, our tax professionals frequently advocate for our clients by opposing CRA rulings that seek to reduce the benefits claimed on their tax returns. If the CRA were to file our taxes, would any of us feel confident that the agency would ever advocate against itself with determination equal to that of an independent third party to ensure that we receive all of our benefits and deductions?

Second, how can the CRA function as an effective impartial regulator when it introduces government products and services to market that are in direct competition with the industry it regulates?

The Government of Canada's policy decision to directly file Canadians' taxes runs counter to the successful partnership between our industry and the CRA, which has served Canadians well for decades. While we don't believe that government tax filing can best assist Canadians, we are very supportive of ensuring that low-income Canadians file their taxes in order to get their benefits. This is why our industry offers several low- and no-cost options to Canadians who need them most.

One quick example is that at H&R Block Canada we have our annual Returning Hope program, which supports Canadians who live below the poverty line and who may be experiencing homelessness. These individuals tend to miss out on government benefits or tax refunds because they're unable to file and often do not have a fixed address or bank account. We have been able to partner with 15 non-profit organizations across Canada to prepare tax returns for over 800 Canadians in need and found over $715,000 in missed refunds and credits.

In-depth tax interviews with Canadians in need, conducted by tax professionals at H&R Block Canada, help determine whether these individuals could qualify for the significant disability tax credit and other applicable related benefits. This is something that automated and telephone government tax filing will not be able to achieve and, therefore, a loss of economic benefits to Canadians who need them most would result.

With that, we would conclude by saying that, instead of embarking on more large-scale government IT projects to create automated tax filing and to expand government telephone tax filing, Canadians' needs would be far better served by the CRA meaningfully working with industry to create the conditions needed to support and expand initiatives like H&R Block Canada's Returning Hope program.

Thank you very much. On behalf of H&R Block Canada and our product industry, we're looking forward to questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Davis.

We're right on time.

Now we're going to Option consommateurs with Ms. De Bellefeuille and Mr. Plourde.

[Sylvie De Bellefeuille, Lawyer, Budget and Legal Advisor, Option consommateurs]

Good evening, Mr. Chair.

Good evening, committee members.

We thank you for the opportunity to present to you today.

My name is Sylvie De Bellefeuille. I have been a lawyer with Option consommateurs for 13 years. I'm accompanied by my colleague Alexandre Plourde, who is also a lawyer.

Established in 1983, Option consommateurs is a non-profit association whose mission is to help consumers defend their rights. As such, we receive thousands of legal information requests every year from people experiencing difficulties with merchants, including financial services and travel. We also provide budget consultations to people who are struggling with debt and credit.

In our view, Bill C‑47 introduces a number of measures that will benefit Canadian consumers. Our remarks today will focus on three themes addressed in this bill: air transportation, the complaint process in the banking sector and usurious credit.

In recent years, there have been countless delays and cancelled flights by airlines, which have led to tens of thousands of consumer complaints. While changes have been made to the air transport regulatory framework to strengthen consumer protection, efforts still need to be made to provide adequate protection for Canadian travellers. We think Bill C‑47 responds to several of the requests we have made over the past few years.

First, the bill removes the three categories of flight disturbances so that only exceptional circumstances can justify a lack of compensation for passengers. This will then allow us to amend the air passenger bill of rights so that passengers can benefit from better protection.

Second, it closes certain loopholes in Canadian regulations that benefited airlines. This will put the onus on the carrier to prove that the delay or cancellation of a flight is not attributable to the carrier, rather than putting the burden of proof on the consumer. In addition, the bill requires airlines to compensate consumers for late luggage, not just lost luggage.

Finally, this bill makes it easier for air passengers to have recourse by requiring airlines to provide a decision to the consumer within 30 days and by creating a more effective complaints regime for the Canadian Transportation Agency, as well as requiring airlines to cover the cost of handling complaints filed with the Canadian Transportation Agency.

In short, we believe that the proposed amendments to the Canada Transportation Act are positive for consumers and should be adopted.

In the banking sector, we are pleased to see that Bill C‑47 finally puts an end to the ability of banks to choose the external body that will deal with complaints made against them by their clients. This is something that consumer associations have been waiting for for a long time.

In the current version of the act, a bank can choose between two external complaints bodies that are currently approved by the government. Needless to say, this situation raises serious questions about the independence of the handling of consumer complaints and, more importantly, about the appearance of bias in the process.

While we welcome the amendment in the bill to create a single external complaints body, we regret that the body's decisions remain non-binding on the banks, which could choose not to abide by them. To ensure full consumer protection, we believe that this bill should make the body's decisions binding on the banks.

Finally, Option consommateurs welcomes the initiative to lower the usury rate set out in the Criminal Code. The current rate, set at 60%, was introduced in the early 1980s, when the economic situation was significantly different and the Bank of Canada rate was around 20%.

That said, we have a number of reservations about the bill.

First, rather than the fixed rate proposed in the bill, we believe that a variable interest rate would make it possible to adapt to the economic situation. In a number of countries, the limit fluctuates based on the rates set by the central bank or the average market rate.

Second, contrary to what the bill proposes, we believe that no regulatory exceptions should be allowed for consumer loans. We therefore believe that exceptions such as the one concerning payday loans should be abolished.

Without this appropriate usury rate framework, lenders can easily take advantage of consumers and make them even more vulnerable.

Thank you.

I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. De Bellefeuille.

Now we'll go to Pulse Canada and Mr. Greg Northey.

[Greg Northey, Vice-President, Corporate Affairs, Pulse Canada]

Thank you, Mr. Chair.

I want to thank the committee for the invitation tonight to speak to you.

My name is Greg Northey, and I'm the vice-president of corporate affairs with Pulse Canada.

Pulse Canada is a national association representing over 25,000 pulse growers, as well as the processors and exporters of Canadian pulse crops, including peas, lentils, chickpeas, dry beans and fava beans. Canadian pulses are among the most sustainable sources of protein in the world. In 2021 alone, Canadian pulses, thanks to their nitrogen-fixing capabilities and the modern agricultural practices of pulse growers, removed 3.6 million tonnes of carbon dioxide from the environment. This is the equivalent of taking 1.1 million cars off the road in a single year.

In addition to our environmental contributions, the pulse industry is a significant economic driver, accounting for roughly 26,000 Canadian jobs and delivering $6.3 billion in annual economic activity. This is in part thanks to the fact that Canada is the world's largest exporter of pulse crops. We send billions of dollars' worth of pulses to over 120 markets around the world.

To do this economically, Canada's pulse industry and the entirety of Canadian agriculture rely on timely and predictable rail service.

In its final report, the national supply chain task force identified the key persistent issue that consistently threatens the competitiveness, productivity and growth of Canadian agriculture exporters. It says, “Railways are the only source of transport for many shippers, giving rail companies pricing and service discretion that is not balanced by normal market forces.” Simply put, railways are monopolies, and the lack of competition between them results in unreliable and unpredictable service for shippers.

That is why Pulse Canada was pleased to see important transportation measures that explicitly focus on incenting and improving a competitive dynamic within the rail sector included in Bill C-47. Key among these measures is the proposal to implement a pilot on extended, regulated interswitching. It is extremely positive that the government has recognized the pro-competitive value of extended interswitching and the positive economic benefits that competition delivers.

Competition unlocks the full potential of Canadian shippers, improves innovation and collaboration among Canada's class 1 railways and supports Canada's overall economic growth. When extended interswitching was in place from 2014 to 2017, it was the first time that competitive forces were introduced to a monopoly rail market ever. Even in this limited sample, the results were positive as shippers adjusted to the new market dynamic.

How could they not be? It is well known that competitive forces improve economic outcomes and productivity.

The previous extended interswitching period was also beneficial for the overall rail system. Railway operating ratios remained low, system average train speeds, car velocity and yard productivity increased in that time, and dwell times decreased. Importantly, movement of Canadian grain on both CN and CP also increased.

Extended interswitching has proven to be a vital tool for Canadian shippers, and Pulse Canada and our allies urge this committee and all members of Parliament to look to the successes of the last pilot as the foundation on which to build a more permanent extended interswitching program that will benefit Canada for decades to come.

In fact, to further strengthen this pro-competitive policy, the Government of Canada can improve it by setting the extended interswitching distance to 500 kilometres to ensure competitive market forces are available to a large group of captive shippers, which is only fair; ensuring that extended interswitching is available to all North American railways with operations subject to the Canada Transportation Act to further integrate our North American market and shorten the distance goods need to travel; promoting investment in rural rail infrastructure so that interchanges can accommodate larger trains and further unlock productivity and efficiency gains; and assuring that the pilot lasts a minimum of five years to unlock the full potential of competition.

This five-year extension is key, as presently shipments can be booked for up to 12 months in advance, meaning two-thirds of the pilot may expire with the 18-month pilot that's proposed now before a shipper can make use of the new competitive regulations.

To close, extending the interswitching is a policy that works for Canadian shippers, railways and consumers. We urge this committee to move this proposal through to completion and consider improvements in needed competition for Canadian rail shippers.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Northey.

Thank you to all of the witnesses.

Before we go to the members' questions, on behalf of our committee, thank you for graciously accepting our invitation to come and appear before the finance committee. You had to be able to do it with short notice.

Now we're going to the members' questions. We're starting with the first round. Each of the parties will have up to six minutes to ask questions. We're starting with the Conservatives.

We have MP Lawrence for six minutes.

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

Thank you, Mr. Chair.

I'll begin my questions with Mr. Kelly.

Thank you for all of the excellent work that you and your organization do.

I'm going to spend some time talking a little bit about the carbon tax. We've heard from the PBO that Canadian individuals and families in general pay more in carbon tax than they receive in rebates. This problem is particularly acute for farmers and, first of all, business owners. They will receive individual rebates, for sure, but they often don't receive any type of rebate for their business use of carbon and the carbon tax it attracts.

Mr. Kelly, would you mind just explaining a little bit about how the carbon tax affects your members?

[Daniel Kelly]

It's a really important question. Carbon taxation has mixed views among Canadians, as we all know. That's equally true for Canadian small business owners.

For small firms, it is a really bad deal. The only reason why anyone could suggest that some Canadians are getting more in rebates than they're paying in the carbon tax levy—if that's true for anyone—is that other Canadians are paying but not getting anything back.

When the carbon tax was first created, the plan was that small businesses would be lumped into it. Large emitters, of course, have their own system. Small and medium-sized firms pay the carbon tax. Our estimate is that somewhere between 40% and 50% of the carbon tax revenue comes from small businesses and a few other taxpayers. Originally, only 7% of the rebate programs were targeted to go back to small businesses. It gets worse. Of that 7% that was targeted to go back to small businesses, less than 1% did go back to small firms.

The theory of the carbon tax is that you put a price on the use of carbon, and then you give it back to consumers so that they can use it for lower-carbon options. That's not true if you just pay the tax and you don't get any of the money back. For small businesses and many in the agricultural community, they pay the tax and get none of the benefits of the rebate scheme whatsoever. You can imagine that it leads to hostility towards the whole concept. Even our members who like the concept of the carbon tax really don't like the way that the federal carbon backstop is administered.

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

I'm sure, like all of the members in our party, that many if not all of your members see the urgent nature of fighting climate change. Even those who may support carbon pricing of some sort.... To put all of that responsibility on small business owners is, I believe, unfair and inequitable.

I'll go on and ask you another question with respect to the carbon tax. It's also a double-edged sword. Tiff Macklem has written to our committee and told us that, at today's rates, nearly 10% of inflation is a direct result of it. You have both the carbon tax hit and then you have inflation.

Now the Liberal government is looking to triple the cost of the carbon tax and even add a new carbon tax called the clean fuel standard. If we see tripling and then another carbon tax—we'll hear from the PBO exactly what it's going to cost, or an estimate anyways—without any additional rebate, Mr. Kelly, for your members, then it's inequitable and unfair. Would you care to comment on that?

[Daniel Kelly]

This becomes even more worrisome as we look ahead to the further rounds of carbon tax increases that we're facing.

Our main piece of advice to governments when businesses—or any Canadian, for that matter—is struggling is not to make the problem worse. Sadly, we've seen it right throughout the pandemic. Canadian pension plan premiums have continued to increase. EI premiums just went up at the beginning of this year. Carbon taxes went up. The liquor tax was, fortunately, kept in a more reasonable fashion.

With these large increases that are coming and none of it coming back in the form of rebates, it's deeply worrisome where small businesses are going to find the money to continue to kick into this. It's essentially a wealth transfer from independent businesses, who have been among the groups hardest hit by pandemic-related restrictions. It's a wealth transfer from them to consumers all through the system of government.

About half of our members oppose the carbon tax, full stop. Even the almost one-third of our members who support carbon taxation do not like the way that the federal carbon backstop is designed. If we're going to keep it, then we have to find a mechanism that's fair to all Canadians who are paying into it.

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

Thank you very much.

Thank you to all your members. The small business community and its business owners are the backbone of our communities and a major driver to our economy, so thank you for your advocacy and, more importantly, thank you to your workers.

I have a question for Mr. Davis. I'll make it brief so that he has a little bit of time. The chair's flexible with time, so I'm sure he'll be fine.

Mr. Davis, my constituency staff has done some amazing work in reaching out to people who haven't filed their taxes. One individual who was unhomed got over $20,000 back. It changed his life, and it looks like he's back in the game, as it were, and doing well. We make it a practice to try to reach out to folks like him. The problem, though, is never that they had trouble filing or even the cost of the filing. It's people who have lost their way. Maybe they've dealt with significant traumas in their lives or they've had mental health crises, so it's more about the communication.

Wouldn't it be more beneficial to have the CRA reach out to some of these people to encourage them to file their taxes as opposed to having an automated filing system, which will no doubt work as well as Phoenix and some of the other government snafus?