Government Operations Committee on June 12th, 2024

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you.

I was smiling because Mr. Bains perked up when you started praising his government's initiative. I guess that's how it works.

Perhaps I can ask Ms. Jones a question.

You mentioned the example of sick notes. I think that one would resonate with a lot of Canadians. They would understand how inefficient it is to have highly paid, highly trained medical professionals sitting there writing out sick notes for people who aren't able to go to work that day because they're feeling under the weather.

I wonder what other examples would similarly resonate with people as seeming like regulations that aren't achieving their desired objective and could be restructured with very little cost to protection.

[Laura Jones]

I don't think you have to look very far before you find examples of overly complicated language that would be difficult for people to understand in most government forms and processes. That would be one that is high on the list there.

One of the interesting things they did in Nova Scotia with that doctor's example that I looked at was a lot of shadowing. They did a lot of really getting down and understanding what the world of the people they regulate looks like. Sick notes were one example. They found another one, which was a form that doctors have to fill in so that patients can qualify for income assistance. This was another incredibly complicated form. Again, thousands and thousands of hours have been saved, and life has been made better for the doctors and also for those patients who are trying to get access to government programs.

I don't think you're going to have to look very far. One of the challenges is that there are just so many examples. They're not all earth-shaking examples, but if you add them up, they add up to a lot of frustration and wasted time for Canadians. I just think there's huge opportunity here, and it's one of the reasons that the external advisory committee on regulatory competitiveness really recommends that the regulators stay close to those they regulate and that they understand what the consequences are of these rules: How are they working? Is there unneeded burden that could be reduced in order to free up time, increase our productivity and make things more affordable for Canadians—all the good things that we want?

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Colleagues, you're probably aware that I've let each intervention run quite a while past because the answers were very good. If you just keep an eye on your time, please, going forward, that would be great.

Mr. Lawrence, welcome back to OGGO. The floor is yours.

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

Thank you, Mr. Chair. It's a pleasure.

I'm going to follow up a bit on the questions that were asked by my colleague, Mr. Morantz. I want to talk specifically.... We'll start with some of the claims that the government has made with respect to the capital gains increase. One of its claims is that only 0.13% of Canadians...and that 99.87% of people will be exempt from this tax. What does the Canadian Chamber of Commerce feel about that? Also, what are you hearing from your members?

[Alex Greco]

What we're hearing from our members is that there's a lot of frustration right now in terms of carve-outs happening with these tax-and-spend policies, frankly. I think we all want to have fairness in the tax system. We understand that there need to be taxes that are paid, but as a result of this tax, there's a risk of losing productivity and losing investment to south of the border at a time when, in 12 out of the last 15 quarters, our productivity numbers are down; we virtually had almost no GDP growth.

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

Our GDP per capita, depending on which metric you use, is down in seven out of eight quarters, which is really our income for Canada. Just maybe further on that.... What does your organization, what do your members, think the impact of the capital gains tax will be on productivity and GDP, for growth?

[Alex Greco]

It doesn't help it at all right now. The fact is that, going back to 2018 with regard to the level of productivity, we're back to where we were back then, and then we've had no growth. As I mentioned in my remarks, we're the second lowest in the OECD in terms of business investment. When you look at the ease of doing business, you will see that, according to the World Bank, we were sixth in 2006. Now we're 23rd.

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

We have some difficulty, then.

Speaking of the ease of doing business, one of the under-reported stories with respect to the capital gains exemption is how much more complicated the government has made it. For example, if you sell your business, you're going to pay at least four different inclusion rates and probably a couple of marginal rates...tax difference. On one transaction, you could be paying tax at six or seven different rates because you have a capital gains exemption, the $250,000 exemption, the Canadian entrepreneurs' incentive, and the full rate. What are your organization's thoughts with respect to the current complicated state of the Income Tax Act and to the capital gains increase making it more complicated?

[Alex Greco]

We feel that the tax system is completely too complicated. That's why we've called for comprehensive tax reform. I think having a royal commission to be able to develop that, look at it and focus on outcomes-based measures.... Right now, with the tax system as it is, SMEs are not encouraged to grow and scale up. They should be rewarded in terms of whether they're willing to invest. With how the Income Tax Act is structured right now, there's no incentive, because then they're paying more taxes, whereas when you go to another U.S. state with lower taxes, they're more incentivized on top of different incentives that they have made available with the Inflation Reduction Act and other avenues to help them do business.

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

Thank you.

One of the most troublesome issues I've seen has actually been not the technical provisions but the attitudinal direction of this government. You've heard this really ramped-up, torqued-up rhetoric about people who are successful, who are being demonized—business owners and job creators. Those are some of your members, and many of them aren't rich.

I want to get to those specifics here. If, in fact, your members had more capital, isn't it correct, Mr. Greco, that they would use that money to create jobs, reinvest in the economy and even make additional charitable donations?

[Alex Greco]

It's not just jobs; it's also investment in machinery, equipment and technology, particularly in manufacturing. They'd be looking at automation.

This has to be a whole.... It can't be a partisan affair. All different parties have to be able to come together to make this happen. If we don't have jobs, that affects Canadians in terms of getting things delivered, whether it's an appliance delivered in Quebec, or essential goods they need in the event that we have future crises, or even simple food and other basics for Canadians.

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

In the past, the Chamber of Commerce, among other business organizations, has been successful in backing progressive Liberal governments off some of these punitive measures they put in place to hurt the economy and ultimately the most vulnerable.

Could you tell us whether you have any plans to launch websites and to have media campaigns? If you don't, I think now would be the time to start. You have five Liberal members here. You should tell them exactly the impact this is going to have on the Canadian economy.

[Alex Greco]

I think—

[The Chair, Conservative, Kelly McCauley]

You have time only for a yes-or-no answer.

[Alex Greco]

We're working on it.

[The Chair, Conservative, Kelly McCauley]

Thanks.

Mr. Sousa, go ahead, please.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Thank you for the opportunity to have a discussion about being competitive. That's the whole point. It's to try to lessen the cumulative burden on regulation, but at the same time to enhance the ability of Canada to be an attractive place to invest. We have been a pretty top destination for FDI, foreign direct investment. We have accumulated quite a number of investments from outside of Canada to come here. We are trying to nurture and monetize and scale up local companies and businesses to succeed and compete internationally, and that also means having a carbon pricing system in place that enables us to compete in terms of trade requirements, because putting in carbon pricing is built into the trade requirements.

We are doing what we can to try to improve ourselves internationally or through interprovincial issues. I'm thinking now specifically of a situation involving a co-operative securities regulator, for example, in which we tried to bring all of the provinces together to have one capital structure to be competitive. Of course, politics gets in the way and different elections happen in different provinces.

We're onside with making Canada competitive, but at the same time we're also onside with making Canada safe. I believe we're on the same page you are: To not have political interference when it comes to regulation for things like the Bank of Canada or the Ontario Securities Commission or the provincial regulatory systems. We brought in FSRA, the Financial Services Regulatory Authority from FSCO. It's at arm's length to keep political interference and rhetoric out of the system and to protect the interests of consumers as well, because doing that is built into it.

We're all trying to do that, and your recommendations are good. The recommendations made by the other witnesses were also important, because dialogue is important here.

Tell me, do you know what the proposed capital gains rate is going to be for the United States? Do you know what they're doing? Are you aware of what our competitor is trying to do with capital gains relative to what Canada is doing?

[Alex Greco]

I understand what you're saying, but I also think you can't look at just the capital gains. You have to look at everything else that the United States—

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Absolutely, and that's how I premised my question. Canada's doing quite a bit, but on the issue of capital gains that is being put to you, are you aware of what the United States is proposing to do?

[Alex Greco]

Here's what we know about what's happening with the United States right now. They've had many more incentives around the Inflation Reduction Act, which has put—and, yes, Canada has tried to respond, but when it comes to the United States, you can't look at just one single tax measure—

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Mr. Greco, we've been doing a great job with inflation. We're battling it and we're keeping an arm's length away from the Bank of Canada, the governor, because we don't want to interfere with them.

Again, my question to you is what is the United States proposing to do with capital gains, on that one issue?

[A voice]

Double it.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

What are they proposing to do? In terms of being competitive with Canada, what are they going to do?

[Alex Greco]

I don't think you can look at one single—

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

I'm asking you that one particular question, Mr. Greco. What are they going to do?