Madam Speaker, I want to congratulate my colleague, the member for New Westminster—Burnaby, on his new role as finance critic. I also want to thank him, because today is my birthday and, with his opposition day motion, he has allowed to rise in the House to talk about tax fairness, which is very important.
Today I want to talk about tax fairness. That is what the motion is about, and I think it is important. When our government came to power over two years ago, we committed to investing in growth and ensuring fairness for all taxpayers.
Before I get into what we have done to improve tax fairness in Canada, I would like to take a few moments to remind hon. members about the progress we have made so far.
From day one, our government implemented a plan to ensure economic growth, strengthen the middle class, and support social mobility so everyone in Canada can keep moving up in society. We did so by investing in our communities and introducing distinctly progressive measures.
I am proud to say that the investments we made are now paying off. We are seeing definite signs that our plan to boost Canadians' confidence in the future is working. We want them to feel and be better prepared for the future.
With growth averaging 3.2% since mid-2016, Canada's economy is soaring. Our economic growth is stronger than that of any other G7 country. Over the past two years, nearly 700,000 jobs have been created and the youth unemployment rate is near its lowest level ever. The unemployment rate is now at 5.7%, its lowest level in 40 years.
With respect to debt, it is important to remember that the federal debt-to-GDP ratio is shrinking steadily. Canada's balance sheet is the best in the G7. Our government is also working hard to ensure that Canadians have access to opportunities to succeed and that the growth we have seen in recent years benefits as many people as possible.
I would remind hon. members that one of the first things that our government did was lower taxes for nearly nine million Canadians and increase them for the wealthiest 1%. We then put in place a more streamlined, more generous, and better targeted benefit to support families who need it the most in Canada. We did that by replacing the previous child benefit system with the Canada child benefit in our first budget in 2016. In the first year after the child benefit was rolled out, more than 3.3 million families received more than $23 billion. This new benefit helped improve the lives of nine out of 10 families. In the first year of the program, families received on average $2,300 more in benefits for children. It is important to remember that these benefits are non-taxable.
I am proud to say that the Canada child benefit helped lift 300,000 children out of poverty. By the end of 2017, child poverty had been reduced by 40% from its 2013 rate. It should be noted that the Canada child benefit is especially helpful for single-parent families, which are usually headed by a single mother who tends to earn a lower income. Those single mothers are getting the most out of this benefit, which is better targeted and more progressive. I grew up in a single-parent family. According to my calculations, this benefit would have given my mother an extra $1,000 or so a month, tax-free, to raise me and brother. That would have made all the difference to us at the time, just as it is doing today in the lives of thousands of families across the country.
Last fall, when Canada's economic growth was exceeding expectations, thanks in part to the positive impact of the Canada child benefit, we announced that we would continue with the Canada child benefit and build on it in budget 2016 in order to enhance consumers' trust and increase consumer spending. We announced that we would do more and that we would start indexing the benefit to inflation as of July 2018, two years sooner than planned. That means that our government is offering better support more quickly to ensure that the Canada child benefit continues to play a key role in helping families and stimulating our economy. Moving up the date for indexing means that Canadian families will receive $5.6 billion more in benefits from 2018-19 to 2022-23.
This past fall, the government also announced its intention to further enhance the working income tax benefit, or WITB. This is a refundable tax credit that provides important income support and helps offset taxes, supplementing the earnings of low-income earners. It lets low-income workers keep more of their paycheque, encouraging people into the workforce, which has a long-term impact on income security and quality of life. In 2016, the WITB provided more than $1.1 billion in benefits to over 1.4 million Canadians.
To provide even more support and opportunity for lower-income workers, our government proposes to further enhance the WITB by an additional $500 million annually, starting in 2019. This new enhancement will provide even greater support to current recipients by raising maximum benefit levels and will expand the income range of the WITB so more workers can qualify.
Together with the increase of about $250 million annually already set to come into effect in 2019 as part of the enhancement of the CPP, these two actions will boost the total amount the government spends on WITB by about 65% in 2019.
Our government also plans to provide additional support for Canada's SMEs by lowering their federal tax rate.
The small business tax rate will drop to 10% as of January 1, 2018, and to 9% as of January 1, 2019. For the average small business, that means a savings of $1,600 that entrepreneurs and innovators can reinvest in their company and in job creation.
Under this measure, the combined federal, provincial, and territorial tax rate for small businesses will drop from 14.4% to 12.9%, the lowest by far in the G7 and the fourth lowest among OECD countries.
The purpose of these low tax rates is to encourage capital investment in companies, including investments to acquire equipment or more efficient technology, or to hire additional staff, which will make businesses more productive and competitive and enable them to contribute to Canada's economic growth.
This tax cut for small businesses was accompanied by measures to ensure that the benefits of the lower tax rate are shared equitably and that the changes support business owners who invest in their companies, create jobs, and help grow the economy.
For example, in December we issued detailed proposals to simplify and improve the treatment of income sprinkling, which are proposed to be in effect for the 2018 tax year and beyond. The December proposals took into account feedback received from Canadians in the course of the government's consultations on tax planning using private corporations.
As hon. members are aware, income sprinkling involves diverting income from a high-income individual to family members who have lower personal tax rates or who may not be taxable at all. This is not a problem if the family members are making a meaningful contribution to the business. However, in some circumstances, someone earning $300,000, with a spouse and two adult children who do not work in the business, could use a private corporation to get tax savings that amount to roughly what the average Canadian earns in a year, about $48,000. If they are not contributing to the business, this is fundamentally unfair to other Canadians, and the government's proposal to address this practice draws a clear distinction between the two.
To assist businesses in complying with the new measures, the CRA has released detailed guidance on its website that explains how it intends to administer them and what they will mean for taxpayers. I would like to assure the House that the CRA will administer any rules that are ultimately enacted in a way that is fair and that recognizes the reality of operating a small business.
It is also important to note that the vast majority of private corporations will not be impacted by the income-sprinkling measures. Based on the revised proposals, fewer than 45,000 family-owned private businesses benefit annually from income sprinkling. Just to put this in perspective, this represents only about 3% of Canadian-controlled private corporations.
This initiative is consistent with our goal and our desire to achieve greater tax fairness in Canada. We know that we must do more to ensure that as many people as possible benefit from a growing and more innovating economy, which creates more opportunities for success for everyone.
A fair tax system allows the government to keep corporate tax rates low and to help support families through such programs as the Canada child benefit, which I spoke about, or the working income tax benefit.
Addressing the unfair aspects of the tax system is central to our plan for sustainable, long-term growth and also fulfils the basic promise made to middle-class Canadians. Tax fairness is a complex goal that requires sustained efforts on many fronts.
Internationally, Canada is working closely with the other members of the G20 and the OECD to make recommendations in order to address what is termed “base erosion and profit shifting”. This expression refers to international tax planning strategies used by multinational companies to minimize tax payments. For example, some companies will carry out transactions for the sole purpose of transferring their taxable profit outside the jurisdiction where the underlying economic activity took place to another jurisdiction with a lower tax rate in order to avoid paying their fair share of taxes.
Our government is also redoubling its efforts to combat international tax evasion by improving the exchange of information between tax administrations. Under the common reporting standard developed by the OECD, the automatic exchange of financial account information held by non-residents is an important tool that promotes compliance with the rules, combats international tax evasion, and ensures that taxpayers report their income from all sources. To date, more than 100 administrations have committed to implementing the new standard.
These measures represent real progress, but our government will continue to identify and combat tax evasion and aggressive tax avoidance to ensure that the system is working as effectively and equitably as possible.
As we continue to implement this plan, making strategic investments and promoting greater social justice, we will continue making our tax system one that is as fair and as equitable as possible for all Canadians.
I think it is always useful and important to remember the potential cost of failing to take action to make our system fairer. An unfair tax system undermines public confidence. We need to have rules that are fair for everyone. The government must take steps to ensure that tax rules apply in a way that is equitable and in line with their original intent. For that reason, as our government lowers the small business tax rate to 9% by 2019, we must also ensure that this tax cut helps small businesses invest in their operations, create more jobs, and grow our economy. It is not meant to give the wealthy another tax advantage that is out of reach for most Canadians. As the economy continues to grow, everyone must pay their fair share and everyone should benefit from this growth.
