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.
5:30 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Okay.
Can you give us a history of where the inclusion rate has been...let's say since the 1980s, through two or four different governments?
5:30 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
When you say “inclusion rate”, are you talking about specifically the capital gain—
5:30 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
The capital gain inclusion rate, yes: for example, during Mulroney's time, during the Chrétien time, during the Harper time and during Trudeau's time.
5:30 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
I would have to get back to you on that. I don't have the specifics on that at this point.
5:30 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Okay.
Look, I'd like to submit that under Prime Minister Mulroney, who I admire a lot, the capital gain inclusion rate was actually at 75%. Then it was brought down to about 50%, and that continued until now, until the proposed increase. Do you have any idea how that inclusion rate increased from 50% to 75% during Prime Minister Mulroney's time? How did it impact productivity?
5:30 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
I don't have the specifics on that. I would have to work on that with our senior director tax person at the Canadian Chamber, and I can get back to you on that.
5:30 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
I'm happy to let you know that the highest productivity rate in recent history occurred during the tech boom of the 1990s. That's when the inclusion rate was actually at the highest. Can you explain to me how an increase of 16% in the inclusion rate for a high-tech company that is in the growth stage—with that many allowances to be able to exclude it from taxes—is going to impact productivity?
How does it reduce the productivity? You just said that productivity is basically the output of individuals who are working in that economy. How is that going to impact this?
5:30 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
I think you can't just.... You have to also look at just the overall environment to be able to invest in people and processes and technologies. That all ties into productivity as well. Simply put, if it's more expensive to do business and there are higher business costs, it impacts the ability to be an investor and to do investments in productivity. It can make it more expensive to do so.
5:30 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
The capital gains inclusion rate comes only at the time that you're actually divesting. During that time, there's nothing stopping any organization from investing and growing the company, because at the end of the day what they want to do is to grow the company, and they realize that $3.5 million of free tax....
I'm at a loss. Perhaps Ms. Jones might be able to intervene on that one to help clarify some....
5:30 p.m.
Chair, External Advisory Committee on Regulatory Competitiveness, Business Council of British Columbia
I apologize, but my audio failed temporarily. I know that you were asking about productivity, but perhaps you had a more specific question.
5:30 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
I'm trying to understand this adverse relationship, as claimed—that productivity will go down because we now have a 16% inclusion rate for a small business or corporation, after an approximate $3.5-million exemption. I'm trying to understand impacts, or how the reduction has an adverse effect on productivity.
5:35 p.m.
Chair, External Advisory Committee on Regulatory Competitiveness, Business Council of British Columbia
I am more of an expert in productivity as it relates to the regulatory topics we're talking about.
Productivity, simply put, is the amount of output per worker. The more efficient we can be, the more we can produce. That translates into being paid more, which is something that's important for all Canadians. Productivity is a concept that sounds boring but is actually very important to all Canadians.
When it comes to the regulatory side of things, of course we need rules to keep us safe and protect the environment, but make sure we are doing almost a minimum dose. We need to do that without going overboard, so rules can help lift productivity. Making sure our taxes are reasonable so that we're competitive is also important for productivity. When taxes are too high, employers don't have as much to invest in the equipment that helps make us more productive, produce more per hour and get paid more per hour.
5:35 p.m.
Conservative
5:35 p.m.
Conservative
Stephanie Kusie Conservative Calgary Midnapore, AB
Thank you very much, Mr. Chair.
Mr. Greco, the last time the Chamber of Commerce was here, April 10, I asked you a question on the impact of the $2.5 billion promised in carbon tax revenues that has not been returned to small businesses since 2019. In budget 2024, the Minister of Finance stated that she has now created the new Canada carbon rebate for small businesses, which will return this $2.5 billion to small and medium-sized businesses.
Do you think it's disingenuous for this government to present money it already owes to these businesses as new funds?
5:35 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
I think, at the end of the day, we want to look at how things can be more affordable for Canadians. What we've said is that any carbon tax revenue for SMEs has to be returned back to revenue in order to help with the machinery, equipment and technology that help small businesses grow. If we don't have affordability in the minds of Canadians, it's a challenge. We have companies that have made investments for net zero, and that has to be protected as well.
5:35 p.m.
Conservative
Stephanie Kusie Conservative Calgary Midnapore, AB
Thank you. I think, unfortunately, that this is a theme with this government.
Are you concerned this will be a one-time commitment and the government will not continue to return what is owed to Canadian small businesses because it does not provide a future path within this budget?
5:35 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
At the end of the day, it goes back to what I said. It's about affordability. Everything we're talking about today needs to go back to our tax system as a whole. If we don't do comprehensive tax reform, we won't have companies being able to prosper and grow. It's long past due to do that.
5:35 p.m.
Conservative
Stephanie Kusie Conservative Calgary Midnapore, AB
Another organization that testified at this committee, the CFIB, stated that small businesses pay about 40% of the carbon tax but are eligible for only approximately 5% of the rebates. This is already a decrease from the previous 9% they could claim.
In your opinion, how would this impact Canada's productivity and the ability for small businesses to grow?
5:35 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
At the end of the day, you have to look at not just taxing but also all of the different mechanisms in terms of permitting, regulatory environment, investment supports and others to help governments help Canadians succeed. I don't think you need to have environmental and financial outcomes for businesses sacrificed. Everything can go together, but it requires a whole, comprehensive approach, as I said, for tax and regulatory reform.
5:35 p.m.
Conservative
Stephanie Kusie Conservative Calgary Midnapore, AB
In another recent CFIB survey, 82% to 85% of members were “against the carbon tax”; 56% of small businesses said they “will need to raise their prices”; 45% said they “need to freeze or reduce wages”; and 33% will have “less capacity to invest in environmental initiatives and reduce their emissions”, something this government has tried to claim as their flagship.
Do you feel this carbon tax is effective, when it's only increasing costs on small businesses and preventing a third of businesses from investing and reducing their emissions?
5:35 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
At the end of the day, Ms. Kusie, when you look at investments for small businesses, I just think they need to have a better environment for doing business in Canada, simply put.
5:40 p.m.
Conservative
Stephanie Kusie Conservative Calgary Midnapore, AB
In your opinion, how will the continued increase in the carbon tax impact Canada's current cost of living crisis, when 56% of small businesses are raising prices while also freezing or reducing wages?
5:40 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
I think, again, it's about looking at a much more competitive business environment for Canadians. At the end of the day, government has to be able to get out of the way and make it easier to do business. It's about getting the fundamentals right for Canadian businesses to succeed.
5:40 p.m.
Conservative
Stephanie Kusie Conservative Calgary Midnapore, AB
I'll turn back to the questions raised by my colleagues in the first two rounds.
In a letter to the Minister of Finance on May 9, the Chamber of Commerce stated, “generational fairness should consider the actions we are taking today at the expense of our future prosperity.” You also state, “this measure will limit opportunities for all generations and make Canada a less competitive, and less innovative nation.”
What specifically will be impacted by the increase in the capital gains tax?
5:40 p.m.
Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce
I think, when you look at generational fairness, you have to consider the actions we are taking today. Based on what has been proposed, it's at the expense of our future prosperity and our economic opportunity. I think we're at a point right now where we've had a lot of complicated different tax measures, different carve-outs and different caveats. I think we have to get away from that. Otherwise, we're undermining innovation and growth in Canada.
