Madam Speaker, there are actually two amendments in this group. I would like to speak mostly to Motion No. 10 which was introduced by me. It would strike clause 58 of the act. I am sure that does not enlighten many people.
Essentially what clause 58 does is make the contribution rate increases retroactive. A small portion of the contribution increase to CPP will actually kick in for our 1997 obligation. Of course here we are at nearly the very end of the year talking about legislation which will make Canadians' tax bills for this year higher than they had anticipated.
In our view that is very unfair. It is taxation by stealth. It is something that will be a real hardship for Canadians to have to go back and pay something that they had never anticipated having to pay. Not only will it put their budgeting out of whack but it also will be paper work grief they do not need.
I would like to refer to one example of how clause 58 will impact on at least one sector of the economy. That is with respect to the people who provide temporary services. These temporary services are used by businesses and by government during peak work periods for special jobs or projects, when permanent employees are ill or on vacation. Some of the temporary services provided are office administration and support, data and word processing, industrial, marketing, technical, financial, professional and health care services. So there is a wide range of Canadians employed in this area of temporary employment.
In fact, it is a major entry level for recent immigrants to Canada and also for workers returning to the workforce after an absence. A lot of students are involved in these kinds of temporary employment opportunities and so are recent graduates.
Also retirees and older workers who are moving into retirement are attracted to temporary employment opportunities. So it is fair to say that companies that offer jobs and opportunities for temporary employment are major Canadian employers.
What is going to happen with this retroactive increase that the government is trying to put into place is this. The 1997 contribution rate was 5.85%. If this bill passes the contribution rate for 1997, that is from January 1, 1997, a year ago almost, will go up to 6%, a retroactive increase.
The government will argue that is just a few dollars and it really is not going to make a whole lot of difference. But if we take an increase like that and make it retroactive and put it back on employers, because they have to pay half of this, that can significantly affect their bottom line.
The case of the temporary help industry is just one example. There are other businesses affected very adversely but I will give this example. The payroll that is paid to employees by temporary service employers accounts for about 75% to 85% of the firm's revenue, and that is a lot greater than some other industries. For example, the financial services sector pays only 9% of its expenses to payroll paid to employees. For some businesses this is a significant portion of their cashflow.
Increases or decreases are usually announced in advance of the date at which the rate takes effect. That gives businesses adequate time to adjust.
However, this 1997 CPP rate is an increase, as I said, after the existing rate was confirmed a year ago. What we have is a contribution rate that is going to cost one sector of the economy millions of dollars, and this will take a big bite out of its expected profit and cashflow. These businesses refer to the rate as punitive.
What they did was enter into contracts for 1997 based on their expenses being at a rate of 5.8%, their CPP contribution rate. Now they are going to have to pay 6% and they will not be able to pass the added cost of the rate increase on to their customers. The profits these companies are making are going to be put at risk.
These are companies, as I said, that hire some of those vulnerable workers in our society. Yet what the government is doing in this retroactive tax grab is causing a real hardship to at least this sector of the economy, and it is only one example. There are others but time does not permit me to go into all of them.
There is another consideration that I will bring before the House. This retroactive rate increase is going to be a real administrative cost. What will happen is that, interestingly enough, for governments that use temporary services, companies by law are able to change their bill if there is a retroactive change to the payroll burden. What will happen is that service firms will have to go through their payroll records for every employee, for each assignment that employee had, and prepare invoices to add on this retroactive 1997 CPP rate increase. That invoice will then go to government clients. Then the government will have to go back and double check to make sure that these temporary people were hired on, to make sure that the amounts are calculated correctly and to make up cheques to send back to pay this retroactive rate increase.
It is an administrative nightmare, and it is simply because government did not have the foresight or the administrative expertise to bring in these changes in a way that was fair and reasonable and could be handled with the least disruption possible to the people it affects.
These amounts, we think, should simply be collected another way, if they have to be collected. They should not be collected in a way that is so costly, so disruptive and so unfair to the people they affect. Just because government cannot get it right does not mean that other people should scramble around and have to pick up the ball.
That is why we proposed that clause 58 which brings in this retroactive tax increase be struck and that government go back and find other ways to make up this amount if it feels it has to do it. It is not fair to people who have to pay the freight to do it this way. It is poor form. We really urge the government not to do this to people.
I hope the examples I have been able to give will be persuasive that this is not a compassionate thing to do. It is not a fair thing to do. It is a real hardship. We hope that this amendment will pass.