Status of Women Committee on March 13th, 2008

[Nancy Peckford, Director of Programmes, Canadian Feminist Alliance for International Action]

Absolutely. We really look forward to your questions.

It's wonderful to be here today and have this opportunity to reflect on the federal budget and where we can go from here.

As you know, FAFIA, which is an alliance of women's and human rights organizations, has been a long-time advocate for gender budgeting. In fact, we've just gotten back from the UN Commission on the Status of Women, where FAFIA was present and an active participant with a number of delegates from across the country. This year's theme, for those of you who may not be aware, was financing for gender equality and women's empowerment. Part of the reason we were there is because we're so intensely interested in questions of financing women's equality initiatives, how you do that, and what that looks like.

One of the things that really came across is there's a lot of momentum right now, in terms of really being very sophisticated, very precise, and also very well planned, in terms of how you think about the financing for the gender equality piece.

To that end, many of the discussions, conversations, and high-level panels included gender budgeting as a key element of how you actually finance for women's equality in ways that are tangible, that have meaningful outcomes, and that in fact benefit entire countries, nations, families, etc.

Just to give you a bit of a flavour, the International Development Research Centre here in Canada funded a panel on gender budgeting, where they featured the work of organizations in countries or governments that are doing work on gender-based analysis. Those countries included the Philippines, Malaysia, and Kenya. There are very sophisticated conversations going on right now about tax policy incidence and how in fact you design tax systems in a way that is equitable to women. As Kathleen, I think, said earlier today, what we're finding—and what countries around the world are finding—is that if you're not careful with how you not only spend public money but collect the revenue, it is often women who increasingly are bearing the burden of funding the tax system. So you have to be really informed about what it means to design a tax system in certain kinds of ways to give breaks in one direction, thinking that it may have a reverberating impact when it may not.

The other thing that really struck us was how many countries—at both the non-governmental and governmental level—are doing gender budgeting, aside from IDRC-supported projects; IDRC is a Canadian agency. These include Israel, the United Kingdom, South Africa, India, Uganda, and Nigeria. What is helpful to us, in thinking about this, is that this is not simply a phenomenon of countries in the global south; it is actually a phenomenon of countries the world over. It's not simply for the purposes of better or more effective development aid that you engage in gender budgeting; it's something you do if you are committed to accountability, transparency, responsive government, and really good governance, and that's one of the messages I want to bring back today.

In the brief time I have before your questions, I want to say that we did note the inclusion of and commitment to an action plan in the federal budget. We're pleased to see that there is a commitment to an action plan. As my other colleagues have said today, it's incredibly important to us that the action plan be based upon the Beijing Platform for Action and that it build upon an existing action plan, the federal plan for gender equality, which was a very, very elaborate exercise among governments in Canada regarding how you do gender-based analysis and how you make good public policy that takes women into account.

The federal plan for gender equality is still available on the Status of Women Canada website. It's a very accessible document. It explains very thoroughly the conditions under which gender-based analysis should occur.

I thought I'd just remind you what the federal government's articulation of gender-based analysis is. They say, and I quote:

Gender-based analysis begins with the assumption that social, economic, cultural and political arrangements are entwined with all public policy. Such a complex reality requires a complex set of policy responses. Central to this assumption is the need to assess the different impacts that policies may have on women and men.

A gender-based approach ensures that the development, analysis and implementation of legislation and policies are undertaken with an appreciation of gender differences. This includes an understanding of the nature of relationships between men and women, and the different social realities, life expectations and economic circumstances facing women and men.

To get to the federal budget of 2008, I understand that the finance department and other departments have been making some efforts toward doing a GBA. I, sadly, do not have evidence that the GBA is being based upon this framework.

I am very concerned that gender-based analyses that may be occurring are not necessarily up-fronting women's equality considerations. The only reason we would do gender-based analysis of a federal budget is that we are concerned that women are differently located in the economy, in society, and in their families, and that as a consequence, budgetary measures—on the revenue or the expenditure side—will affect them differently. This is really important to keep in mind when we're thinking about a gender-based analysis.

We have been told, and one of our member groups that participated in a ministerial round table was told, that a GBA was being done on all aspects of the federal budget in its development prior to its release. Sadly, at this point we are not assured that this gender-based analysis is substantive enough, meaningful enough, or equality-oriented enough to actually produce positive outcomes.

I have a couple of recommendations for the committee before I stop to welcome your questions, as will Armine and Kathleen.

One is that one of the things FAFIA is now advocating is the establishment of a gender equality commissioner within the Auditor General's office. This is something we put into the Alternative Federal Budget process, which as you know is a parallel budgetary process that uses the same numbers and economic realities.

We think there needs to be a fundamental accountability mechanism, and the Auditor General's office is well equipped to provide it. There is already an environmental sustainability commissioner, and the addition of a gender equality commissioner is extremely appropriate at this time.

The other thing I would like to say about federal Budget 2008 is again that one of the key tenets of gender budgeting, and one of the things that all countries engaged in gender budgeting have identified, is that gender budgeting is a mechanism through which the development of budgets is made a more transparent and engaged process.

I have, sadly, limited evidence that the development of this budget and its potential gender analysis was done in consultation with civil society groups, left, right, or centre. We have sparse evidence that a couple of women's organizations were consulted through ministerial round tables, but that level of consultation and the terms under which that consultation takes place is simply insufficient for the purposes of coming up with a budget that is truly gender-responsive, that truly acknowledges and tries to respond to women's economic realities.

For any federal budget going forward, and it is incumbent upon this committee to say this very clearly, it is important that there be a key consultation process built in that includes women's organizations and that is situated within an equality framework.

The last thing I'll say before getting to your questions is that one of the other purposes of doing gender budgeting is to help countries reconcile international commitments with domestic realities.

One of the best ways Canada could do this is to look at the recommendations that came from the UN Committee on the Elimination of Discrimination Against Women back in 2003. There is a set of recommendations on the table that deal with a range of women's realities, whether it be affordable housing, poverty, employment, child care, discrimination against aboriginal women, or other matters.

I can provide copies of these recommendations to the committee. They are publicly available.

Part of what gender budgeting should mean in Canada is looking at our human rights record, looking at what that human rights record has been for women—by “human rights” I mean social and economic equality, not strictly civil or political equality—and evaluating how budgets can better respond to some of these recommendations. In the absence of that, I'm not optimistic that gender budgeting will in fact be a fruitful, useful, worthwhile exercise for those who are asking for it and for those who stand to benefit from it.

What we have heard today is that women, because they dominate the lower income bracket, need very specific measures. If you can't do it within an equality framework, if you can't do it without truly up-fronting and naming women's economic realities, it won't be a success.

Finally, my last comment would be that I have prepared some questions that I think a gender-based analysis exercise should include. They are: what are the gendered impacts of recent tax reforms; what are the gendered impacts of fiscal decentralization; is fiscal policy responsive to people's needs; are there adequate safety nets and social insurance systems in place; and what are the impacts of different debt reduction strategies?

Those are some of the questions that I think you need to ask as a committee of the finance department and other departments and that must be embedded in a rigorous and worthwhile gender budgeting exercise.

I look forward to your comments and questions, and I thank you very much for the opportunity to present.

[The Chair, Liberal, Yasmin Ratansi]

Thank you very much.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Madam Chair, may I ask that a copy of the questions just referred to get to the clerk?

I think Ms. Yalnizyan referred to sending a document in, but we haven't received it.

Oh, it hasn't been translated?

Thank you.

[The Chair, Liberal, Yasmin Ratansi]

We go to the first round of questions.

Ms. Minna is first, for seven minutes.

[Maria Minna, Liberal, Beaches—East York, ON]

Thank you, Madam Chair.

Thank you, all three of you, for coming back again to meet with us. We've been going through some interesting discussions and meeting with a lot of different people, and I think we're working our way through some stuff.

I have some specific questions to do with the tax structure. I have to say I was quite surprised, because I hadn't even thought about bringing the taxes down to 15%. The assumption has always been that it benefits the low-income people only, that it doesn't benefit anyone else.

For clarification, could you explain exactly how it happens that someone at a higher income level ends up actually saving more than someone at the low-income level, apart from the fact that there are certain members of society who don't pay taxes at all and therefore don't benefit? Could you help to make that clear?

[Prof. Kathleen Lahey]

Yes. The way the personal income taxes work is that everybody who files a tax return and has taxable income pays exactly the same rate now on their first $37,800 in income. That rate is 15%. If somebody has $1 million in taxable income, they will pay 15% on their first $37,800; they don't go right to their top rate for everything. There's that first little slice of income that is $37,800 and that is taxed at 15% for everybody.

Then the next slice of income for everybody is taxed federally at the 22% rate, so if somebody's taxable income goes above $37,800, they pay 22%—just on that additional income—in their second slice.

Then the third slice is for people who have incomes over $78,000 or so. They pay the top marginal tax rate, just on that third slice or the fourth slice.

Think of it as a triangle and the slices being—

[Maria Minna, Liberal, Beaches—East York, ON]

Like a cake.

[Prof. Kathleen Lahey]

Everybody in the country is getting the benefit of that 1% tax cut, and it's the people whose incomes are stuck in the bottom or the middle of that first slice who are the ones who desperately need more income. Nobody else really needs it.

[Maria Minna, Liberal, Beaches—East York, ON]

Right. I get that.

[Armine Yalnizyan]

May I address this?

There are over 15 million taxpayers. There are 22 million tax filers, but 15 million taxpayers, roughly—I'm rounding it. That 15% goes to 15 million people; 50% of men and 68% of women are in that bottom tax bracket, so it goes mostly to those people.

But just consider this. There are 31% of all tax filers who have incomes so low that they don't pay taxes. So in fact the poorest Canadians are getting nothing from that 15.5% being rolled back to 15%.

Among women, 38% of women will see nothing from any income tax cut, and they are the poorest women—at least, they have the lowest taxable incomes. Most of them are genuinely poor, but there are income-splitting issues too.

[Prof. Kathleen Lahey]

Let me just add, to take that point one tiny bit further, that I went through the most recent tax return statistics reported and did a calculation as to who would get what. I concluded that 22% of all tax filers will get no benefit at all from the 1% tax cut; those are the poorest people in the country. Of that 22%, some 63% are women, so it's definitely an upside-down situation.

[Maria Minna, Liberal, Beaches—East York, ON]

Is my time okay?

Professor Lahey, I have lots of questions, so I'll come back on a third round.

[The Chair, Liberal, Yasmin Ratansi]

Could I take a minute of your time?

I am visualizing a tax return. If the government increases the income level at which a person pays minimum tax, do you factor in that benefit? For example, if it raised it from $22,000 to $38,000, would you factor that in?

[Armine Yalnizyan]

Could you repeat your question, please? What is it that you're raising?

[The Chair, Liberal, Yasmin Ratansi]

I am trying to figure out in my head how you would say that a low income does not benefit, if the government decided that $22,000 was the lowest income cut-off at which somebody pays tax and then changed it to $38,000. I'm just trying to get it into my head. You explained the slice quite nicely, and I wanted to see whether that factor is taken into consideration, and second, whether the basic personal exemption is taken into account.

[Armine Yalnizyan]

Your minimum tax payable will of course take into account the personal exemption; that's where you start off. Whatever that amount is, is the trigger point at which you start paying taxes, unless you're a single parent, where you have equivalent to...or are a single earning spouse.

So it's not raising the threshold to $38,000; it's raising whatever that bottom taxable threshold is. Because of indexation of these brackets now, it automatically goes up year after year after year.

[The Chair, Liberal, Yasmin Ratansi]

And would you take that into consideration?

[Armine Yalnizyan]

Yes. For example, Budget 2008 says there are going to be 700,000 more people taken off the tax rolls between the time the budget was tabled and 2009. That's because the threshold keeps going up. We already have 7 million people not paying taxes.

But there have been changes, such as the escalating of that threshold. Every time you escalate the threshold, as was done in previous budgets under a previous government, you actually take more people off the tax rolls, which means that when you do income tax changes, those people aren't affected because there's nothing to pay. You only get the benefit as a taxpayer.

[The Chair, Liberal, Yasmin Ratansi]

Thank you. I just wanted that clarification.

[Armine Yalnizyan]

It's 31% of the population currently not paying taxes; it will be about 34% by 2009.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

Continue, Ms. Minna.

[Maria Minna, Liberal, Beaches—East York, ON]

Thank you. That's helpful to me as well.

You said something, Professor Lahey, that intrigued me, about income splitting in this last budget. I don't think any of us thought there was any. I'm thinking of the pension splitting, which occurred in the last budget. The only thing I could think of was the $5,000 savings.

Can you elaborate on that whole area? That's a huge part that I think some of us missed—at least I did.

[Prof. Kathleen Lahey]

This is one of the “stealth” items in the budget. The tax-free savings account actually extends the principle of income splitting to investment income for all people, not just people of a certain age receiving pension incomes. If you read the fine print in the ways and means motion, you see that the government is saying they are going to create a legal exemption for the tax-free savings plan.

If parent number one has a lot of money sitting in the bank, that parent can put $5,000 into his or her tax-free savings account, and the earnings on it will then be tax-exempt for the rest of that person's life. That person can also put another $5,000 into his or her spouse's or cohabitant's tax-free savings account and another $5,000 into the account of any child.

So for every family member, another $5,000 can be put in. Functionally, what this means in tax law is that this income can be treated as if it were earned tax-free by the other members of the family, but taxpayer number one, parent number one, keeps legally owning it. It's basically using everybody else in the family as sort of a tax shelter. The attribution rules—

[Some hon. members]

Oh, oh!

[Prof. Kathleen Lahey]

Well, that's the historic role of women in tax planning. There's the gold digger and then there's the tax shelter woman.