Evidence of meeting #129 for Government Operations and Estimates in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was different.
A video is available from Parliament.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
Again, I think the reality is that you can't look at just one single tax measure.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
You are looking at it when you're responding to the question about the rise in capital gains tax. Thirty-three per cent of capital gains is tax-free in Canada or will continue to be so; fifty per cent of that will still be tax-free for revenues up to $250,000 or more annually, not just on a one-time basis.
Entrepreneurs are going to get a $1.25-million lifetime exemption for the sale of their business. We are trying to be competitive, especially with the United States, because they're increasing their capital gains tax rate to 45%. Canada will not even be close to that.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
Having said that though, Mr. Sousa, with the one example I mentioned about SMEs, there are a number of small businesses that are captured by the capital gains tax that had a plan to invest and are now scrambling to look at different succession plans and different tax structures.
These SMEs are not wealthy. They are not the richest of Canadians. They're trying to make ends meet.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
We need to support....
I'm sorry. I'm not sure how much time I have, Mr. Chair.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
We need to support them. We need to support SMEs. We need to support entrepreneurs. We need to support start-ups in Canada. We need to enable them to succeed, and in so doing, we need to provide.... We are offering a number of other opportunities to support that. Partly, in doing so, we have had exemptions, and we have had some tax reductions well beyond those in the United States for SMEs.
To your point about the escalation from SME to corporate, and that tax differentiation you were referencing earlier, those are things that we need to support as we go forward.
I'm just trying to remind you that Canada needs to be competitive on all fronts, and those issues are being taken into consideration as we proceed. The inclusionary rate provides for a huge benefit at the $250,000 mark—$500,000 if they're husband and wife entrepreneurs—but the beneficial ownership that is not applied to trusts and small businesses will still be at a 33.3% tax-free benefit, which will be competitive—
Conservative
Liberal
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you, Mr. Chair.
Mr. Greco, my economics classes, both the ones I took and the ones I taught, are far in the past. However, as I recall, the gross domestic product is the revenue generated for each hour of work. I seem to remember that if more people are unemployed or in precarious or low-income jobs, it can have an impact on the GDP. The number of people without degrees or who have unskilled jobs can also affect it. Naturally, regulations can also have an impact on the GDP, because the hour someone spends filling out paperwork does not generate much revenue. It can potentially lead to revenue, but that can take a very long time.
Do we look only at capital gains at the time of a sale, or do we look at all aspects to determine what has a major impact on Canada's GDP?
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
Thank you for the question. It's a good one.
I think you have to look at everything. It's not just one simple GDP measure. You have to look at everything from productivity to capital investment to growth and business investment in order to say where we are in terms of our competitive position.
I will give you a couple of other numbers. When we look at trading across borders, according to the World Bank, we're 51st. We're 64th on construction permits as a whole in part of that overall ease of doing business.
It has to be everything, and this is where I think we have to look not only at broad-based tax reform, but at broad-based regulatory reforms, and really look at them. I think the external advisory committee and the work the Treasury Board is doing are starting to do that, but they have to look at really focusing on how we're tracking, how we're reporting and how we're monitoring our progress. Otherwise, we're going to have a measure there and a measure here, and we're not going to keep moving things forward.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you.
Right now, Canada is experiencing one of the largest population increases in the last 30 years. Does the population boom have an impact on the GDP?
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
Yes, to a degree, but it's also having more of an impact on some of our productivity numbers and how we will be able to maximize workers coming into the workforce to be more efficient and get the most out of what we do.
If you do a comparison between Canada and the United States, there's around a 20% to 25% difference in what we get out of our productivity. That has been due, yes, to our population, but it also requires additional training and resources to get those numbers up.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
Thank you, Mr. Chair.
I found Mr. Sousa's line of questioning interesting.
Mr. Greco, you mentioned the anticipated impact of capital gains changes on the GDP. Are you familiar with the research into the impact of capital gains on the GDP?
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
Yes, I am.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
There is pretty mixed research in terms of the conclusions.
I'm looking at a study out of the American University, posted earlier this month. It looked specifically at the proposed increase to capital gains taxes in the United States. It found that there would be a positive impact on GDP by increasing the capital gains tax on the wealthiest Americans—something President Biden has proposed.
How is it possible that increasing the capital gains tax could increase GDP in the United States?
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
What you have to look at is Canada being in a different position from that of the United States, so far, in terms of our GDP growth numbers, productivity and investment climate. Yes, it's important to pay attention to the United States, but we're in a different position in terms of our wealth and prosperity.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
However, this study tried to pull out and isolate that one factor and quantify the impact of that one factor on GDP. It found a positive correlation, which, frankly, I find a bit surprising, but it calls into question this assumption that, if you raise capital gains taxes, it's going to negatively impact the gross domestic product.
I can read you the summary of the study and what they're actually finding.
It says:
This brief provides a new analysis of the macroeconomic effects of raising taxes on dividend income and capital gains. Increasing dividend income and capital gains taxes from 20% to 39.6% for households earning over $1 million would raise government revenue by about 5% and GDP by about 1% in the long term.
It goes on to say at the end:
Because dividend income and capital gains are enjoyed largely by the wealthiest members of society, increasing taxes on income from these sources can play a crucial role in mitigating income and wealth inequality.
Here's a question: Is “mitigating income and wealth inequality” one of the goals of your organization?
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
No, it absolutely is not.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
We want the prosperity of all Canadians, but we—
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
We're not talking about prosperity, though.
We're talking specifically about income inequality and wealth inequality, both of which are known to be corrosive to society. How can your organization not care about widening wealth equality?
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
We do care about it. We care about wealth. We want wealth.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
No, it's not about wealth. It's about wealth inequality.
