THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
SAINT JOHN, Thursday, November 23, 2017
The Standing Senate Committee on National Finance met this day at 1 p.m. to study the Minister of Finance’s proposed changes to the Income Tax Act respecting the taxation of private corporations and the tax planning strategies involved.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on National Finance. My name is Percy Mockler, senator for New Brunswick and chair of the committee. At this time I would like to ask senators to introduce themselves starting on my left, please.
Senator Cools: My name is Anne Cools. I’m a senator from Toronto, Ontario.
Senator Neufeld: Richard Neufeld, British Columbia.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Ontario.
The Chair: I also take the opportunity to introduce a former MP for Restigouche, New Brunswick, Mr. Maurice Harquail.
Thank you for being here, Mr. Harquail.
Mr. Harquail: Thank you, Mr. Chair.
The Chair: Today, in Saint John, New Brunswick, our committee continues its special study on the proposed changes to the Income Tax Act. The committee received its mandate from the Senate of Canada on September 26, 2017, and is planning on tabling a report to the Senate of Canada on December 15, 2017.
I officially thank our first panel of witnesses this afternoon for accepting our invitation so that they can share with our committee their comments, their opinions and their recommendations, which will help us to table a document that reflects the concerns of Canadians from coast to coast to coast.
Our first panel Jennifer J. Dunn, Tax Service Line Leader, Atlantic Canada, from BDO Canada LLP; Barry Van Steeg, Vice President, Tax and Estate Planning, from Owens MacFadyen Group; and Dean Mullin, Partner, from Steeves Porter Hetu & Associates Inc. Thank you for being here.
To my left is the clerk of the committee, Gaëtane Lemay, and to my right is our chief analyst, Sylvain Fleury. I have been advised by the clerk that the witnesses will each make a presentation. We will start with Ms. Dunn, to be followed by Mr. Van Steeg and Mr. Mullin. Questions will be asked by the senators after their presentations.
Ms. Dunn, the floor is yours.
Jennifer J. Dunn, Tax Service Line Leader, Atlantic Canada, BDO Canada LLP: BDO Canada is a leading professional services firm in the Canadian market, providing tax services to Canadian private businesses, and the families and individuals owning these businesses.
Although my work spans the entire Atlantic provinces, I live on Prince Edward Island. I have a keen understanding of how the proposed tax measures will impact Islanders. P.E.I. Premier Wade MacLauchlan recently appointed me as the chair of one of four regional economic advisory councils. Our mandate is to make recommendations regarding opportunities for growth within the region and the P.E.I. economy. Two of our three largest industries are farming and fishing. Businesses in these sectors are predominantly family owned. As a result, many Islanders were very concerned after the release of the July 18 consultation paper Tax Planning using Private Corporations.
Due to the announcements made by the federal government throughout the week of October 15, which significantly modified the original proposals of July 18, my time today will focus on our firm’s remaining concerns.
Our primary concern is the need for a comprehensive tax review. There has not been a thorough review of Canada’s tax system in 50 years. Such a review is long overdue. BDO Canada recommends that the private corporation proposal should be set aside and reconsidered when a comprehensive tax review is undertaken. Instead of introducing increasingly complex legislative solutions that target narrow issues, a broader tax reform effort would examine policy and provide integrated recommendations. Such a review should focus on balancing objectives such as fairness, simplicity and efficiency for all Canadians while fostering sustainable economic growth.
Another concern is the impact of these proposals on Canada’s competitiveness. To support sustainable economic growth, Canada’s tax system should reinforce our competitive position in the global economy and provide the proper incentives for business owners to take risks and invest in our economy. The revised proposal still reflects significant tax policy changes, which could act as a barrier to business investment and job creation by further raising the cost of doing business in Canada, threatening our competitive position in the long run.
A fair tax policy has strong bearing on competitiveness and growth. Raising revenue in a way that is generally accepted to be fair is more likely to achieve voluntary compliance. Tax administration that implements tax law consistently and makes the tax regime predictable fosters investment. Efficiency in tax administration reduces the amount of an economy’s resources that has to be devoted to revenue collection. Reducing the complexity of a tax system helps lower the compliance costs and burdens placed on small business owners. As a result they have more time to focus on growing their business and creating jobs.
This reform has been framed as simply closing loopholes for the very wealthy. This is not accurate. Instead, this overly complex legislation has far-reaching consequences. The resulting tax system will not be perceived to be fair, will not be predictable, will be expensive to administer, and will place significantly more burden on its taxpayers.
I would now like to briefly address the income sprinkling and passive investment proposals. On the income sprinkling proposals the wording of the draft legislation in respect of the tax on split income, or TOSI rules, is complex, broad, and in many cases very difficult to interpret. The Department of Finance proposes to use a highly subjective reasonability test that must be considered for any dividend paid to a family member. We are not aware of any other tax jurisdiction that applies a reasonableness test to dividends. There is concern that Canada Revenue Agency has not had enough time to develop its positions and related guidance required to administer the new rules and to provide compliance advice to taxpayers and their advisers. This will result in uncertainty, disputes and expensive tax litigation,
With respect to the passive investment proposals, the federal government announced that it will move forward with measures to limit the tax deferral opportunities related to passive investments, while providing business owners with more flexibility to build a cushion of savings for business purposes. The federal government intends to exempt all past investment and income earned from these investments and to provide an annual $50,000 passive income threshold before applying their measures. While we welcome the reduction of the broad application of these proposals, the suggested approaches are extremely complex and will substantially increase compliance costs for private Canadian companies.
There’s still a considerable lack of clarity over which proposals will proceed as originally announced, which proposals will be amended, and which proposals will be abandoned. Further, it is unclear when the various proposals will take effect. Taxpayers and tax practitioners need ample time and sufficient detail to review and understand these complex tax proposals and to determine their implications. These proposals in many respects run counter to the basic principles of sound tax policy: fairness, simplicity, competitiveness, efficiency, certainty, appropriately targeted and consultative.
At BDO, we serve thousands of hard-working Canadian business owners, families and individuals who are true entrepreneurs and drivers of the Canadian economy. In the interest of pursuing best practices, BDO recommends the Department of Finance introduce a formal process for designing new tax legislation that adheres to principles of procedural fairness, transparency and consultation,
Thank you for allowing us to share our views, and I look forward to your questions
Barry Van Steeg, Vice President, Tax and Estate Planning, Owens MacFadyen Group: Owens MacFadyen Group is a private wealth management company with over 70 employees located in Halifax, Moncton, Saint John, and recently in downtown Toronto. We work with over 500 private companies and more than 1,000 professionals, executives and retired individuals. One of the services we provide to all our clients is financial planning and in-depth modelling of their situations.
Our main concern with the July 18 proposals and subsequent changes is the government’s complete lack of understanding of the outcomes and consequences of the proposals on people’s lives. Their entire approach was to shine a light on a specific detail at a specific point in time while completely ignoring the bigger picture and the whole story.
Our process after the July 18 announcements was to understand the proposals, understand the impact of the changes by doing a detailed analysis, and lastly by engaging in the debate if required. That is why we are here today.
I provided you with detailed information but in the interest of time I will focus on a couple of key issues and look at summaries of the analysis.
According to this government the purpose of the proposals is to provide fairness in the tax system. I will share the outcomes and consequences of the proposed changes and leave it to you to determine if they are fair.
The example I share with you is similar to the approach used in the July 18 proposal comparing a business owner to a salaried employee. Both are age 35, earn $150,000 in income, will retire at age 65, and have identical lifestyles of $87,000 per year indexed by 2 per cent until death at age 90. We assumed the current rules in place where the business owner has a Canadian-controlled private corporation from which he will take out dividends, income split with his spouse and do all his saving inside a CCPC, whereas the employee will earn a salary, be part of a defined contribution pension plan, receive employee benefits and the Canada Pension Plan.
Here are the results of our in-depth analysis.
During their working years, they each save approximately $1.3 million. However, the difference is that the employer contributed over $400,000 of that amount, or 30 per cent for the employee, whereas the business owner contributed the full $1.3 million.
As a result of those savings, at age 65 when they retire the employee will have savings assets of $3.5 million compared to $2.9 million for the business owner; a difference of $600,000.
Why the large discrepancy? All the employee savings are in tax preferred vehicles like RRSPS, defined contribution pension plan, CPP and tax-free savings accounts where the growth is not taxed. All of the business owner’s savings is in a taxable account where the tax rate in New Brunswick is 52.67 per cent.
Also, the employee receives indexed CPP during retirement while the business owner does not. Many business owners take a dividend instead of salary to avoid having to contribute to CPP because they will need to contribute twice the premium for the same benefit as an employee. CPP is not a good investment for the business owner.
As you can see, even though there was no difference in the total amount being saved, there were measurable differences in outcomes.
When it came to paying tax, they both paid a similar amount of tax during their lifetime. The difference between the two is that the business owner pays less tax in the early years due to the ability to split income. This difference decreases over time when the business owner will pay more tax at 52.67 per cent as his investments increase inside his corporation. This is one of the main reasons the government has been focusing on these proposals. They say the business owner has an unfair advantage because, and this is key, at a certain point in time he is paying less income tax than a salaried employee, thus allowing him to accumulate more savings inside his corporation.
Let’s be clear that a business owner requires funds inside the business for the following reasons: to build cash for future growth of the company; to buy other businesses; to diversify corporate holdings; to improve the balance sheet for financing requirements, as RRSPs cannot be used as collateral; to provide security for the company during economic downturns, maternity leaves and disabilities; to fund taxes for intergenerational transfers; and, if there is money left, to provide taxable income for retirement.
It is crystal clear from this in-depth analysis that the business owner has no unfair advantage under the current rules. When you take into account all the benefits the salaried employee receives that the business owner does not receive, like employer’s contribution to pension, CPP, employee benefits, EI, continuing education, vacation days, sick days, statutory holidays, et cetera, we can only conclude that the salaried employee has the advantage over the business owner.
Now let’s look at the revised July 18 proposals and do the same analysis. In this case the business owner does no income splitting with his spouse and only accumulates up to $1 million in passive investments inside his corporation. This approximates the amount of capital required to earn $50,000 of exempt passive income, assuming a 5 per cent interest rate. The rest is paid out in taxable income to the business owner.
Again, here are the results of our in-depth analysis.
During the owner’s working years the owner will have saved $500,000 less under the proposed rules, leaving the owner with $1 million less in savings at age 65. As a result, assuming the same lifestyle income, the owner will run out of money at age 81 under the proposed rules.
If we compare the business owner under the proposed rules to the employee taking the same income, the employee has $1.5 million more savings at 65 and still has $2.8 million at age 90, whereas the owner runs out at age 81. We find that shocking.
We have done this comparative analysis at different income levels. We have found that the higher the income level, the larger the discrepancy. For example, at the $300,000 income level where many doctors would be found the owner’s savings assets at age 65 is over 57 per cent less than under the current rules, and they will run out of capital at age 74. Or, if they did not want to run out of capital they would need to reduce to their income in retirement to $60,000 in today’s dollars, which is only 20 per cent of pre-retirement income. Do you wonder why the medical professionals who are business owners are so unhappy about the proposals? Now you know.
It also affects those business owners at lower income levels, even though on numerous occasions Prime Minister Trudeau and Finance Minister Morneau stated that those business owners making $150,000 or less can use RRSPs and TFSAs to adequately fund their retirement. You can see their quotes in the Table B appendix that I provided. For example, at the $100,000 income level, the owner’s savings at age 65 is over 25 per cent less than under the current rules and they will run out of capital by age 82.
What we do not understand is how can our leaders make numerous statements that are categorically wrong? Either they have not done their homework and thus do not realize the impact of these proposals, or they are deliberately misleading Canadians. We believe or hope it is the former.
Now I’d like to briefly discuss a couple of key issues. First, the federal government is concerned about private Canadian companies, CCPCs, accumulating too much passive investments. That is why they have proposed a cap of $50,000 in passive income.
What is not mentioned is that current rules are already harmful to CCPCs. The current tax rate on passive income earned inside a CCPC is between 49 per cent and 55 per cent, depending on the province. Most people are surprised when they hear that the current rates are that high. Everyone is shocked when they hear the proposed rate on passive income above $50,000 will be closer to 73 per cent.
Foreign owned private companies and public companies based in Ontario pay 26.5 per cent on the same passive income with no restriction on how much they can earn. Our prime competitors, RBC, TD and other banks, only pay 26.5 per cent. Because we are a CCPC we pay double.
The Chair: The document that you have provided to the committee is incorporated in the work of the committee. I would ask you to wrap up. You’ve gone beyond the time that the clerk talked to you about.
Mr. Van Steeg: In conclusion, I stated at the beginning that I would let you decide whether the proposals are fair. These proposals are directed solely at Canadian-controlled private business owners. Based on our detailed analysis, thousands and thousands of Canadians will be materially and negatively affected by these outcomes, and we believe that is unfair.
We believe that successful people and companies have choices. If the tax burden increases to 73 per cent and if the cost of saving for retirement and children’s education almost doubles, people, companies and capital will flee the country. This is a certainty. Some are already preparing for it.
If the Government of Canada’s goal is to create fairness in our taxation system, this set of proposals takes us in the wrong direction. This isn’t our opinion. It’s supported by facts.
Thank you for your time and attention.
The Chair: You have provided us with the Table A appendix which is very descriptive.
Dean Mullin, Partner, Steeves Porter Hetu & Associates Inc.: Good afternoon and thank you for the opportunity to appear before this committee to discuss the impacts the proposed changes will have on small business owners, their employees and the economy in general.
I am currently a partner in a local CPA firm in Quispamsis that focuses on owner-managed businesses and personal taxes. I have been a CA since 1997 and I have been working in tax since 1999, both in public accounting and as an in-house tax specialist. From my experience these changes have resulted in the most sustained opposition that I have seen because it impacts all CCPCs.
How will these changes impact CCPCs? First is income splitting. I use splitting as opposed to sprinkling because I think it’s a funny term that is used to make it sound bad.
Limiting the ability for business owners to pay dividends to their family members will dramatically increase the tax burden on these owners. It will also increase the burden on their employees, customers and suppliers.
For example, if the owner is subject to an additional $20,000 in tax on the income they need to maintain their lifestyle or to fund education for their children, they will need to remove an additional $50,000 approximately from their business. This will require changes to create this additional $50,000. This can come from increased revenue or from negotiations with suppliers for better prices, but remember that the suppliers may be in the same position. However, the likely place to generate this cash is from reducing head count in the business which means that the laid-off employee will not be able to spend and grow the economy as their salary is now used to pay taxes. You can see that these changes have a ripple effect throughout the economy.
At the same time as the income splitting restriction was being confirmed, Minister Morneau announced a reduction in the small business rate to 9 per cent by 2019. Although any help is appreciated by businesses, a maximum cash savings of $7,500 on $50,000 of income will not influence a business decision.
The other side of this tax reduction is a tax increase to the shareholder when a dividend is paid out. In most provinces this increase in personal tax is approximately the same as a decrease in small business tax.
Finance has said that dividends can be paid out if they are reasonable and that the rules will be clear. Regardless of how finance amends the wording of the reasonability test, subjectivity will be part of the test.
Yes, reasonability is part of the Income Tax Act with respect to salaries, expenses, et cetera, but these all have arm’s-length comparable amounts. These arm’s-length comparisons are not available for dividends and therefore the comparison is not meaningful.
Further, retired business owners who have been using their corporation as part of their retirement plan have been splitting this income with their spouse. On January 1, their taxes will go up, but someone who has a registered income plan can still income split with their spouse, each doing the same thing but with a different result.
Under current rules CCPCs pay a tax of approximately 53 per cent on passive income. On a go-forward basis, the arbitrary threshold of $50,000 of passive income, which we’re assuming to include dividends, interest and rent, based on an arbitrary rate of return, is difficult to understand as being appropriate when looking at retirement savings, business growth, business protection or maternity leave.
For example, a government employee with a registered defined pension plan could have an accumulated value in their plan of approximately $2 million at their retirement and have no risk in maintaining this capital, as it’s guaranteed by us. Please note that a government employee is used as an example as this is publicly available information.
The business owners, if limited to $1 million of capital before they are taxed at the higher rate, will have a much harder time to save within their corporations as RRSPs do not allow the required flexibility needed for business cycles.
Further, the concept of grandfathering is causing concern as it will be difficult to define and extremely difficult to administer. There are additional costs associated with trying to administer and to comply with the anticipated complexity of these rules, including the additional documentation required to meet the standards of reasonableness and the lost time and professional fees to defend the use of dividends as many will likely end up in court to deal with reasonability.
The CRA is already overwhelmed with their workload with processing times exceeding 40 weeks for standard adjustments. These changes are not setting them up for success. As well, regardless of what they come up with, the tracking of passive investments will not be simple.
Finally, money is mobile and will seek out certainty. If a business owner sees they can make more money in a different country, measured as cash in their jeans, they will grow in that other country. For professionals I would expect the established ones, ones near the end of their career, will not leave the country but will reduce their hours. Younger and mobile professionals will likely seek out opportunities in other countries. I know new grads are being encouraged to look beyond our borders to ensure they can earn a good living without paying 50 per cent to 75 per cent of their earnings in tax.
I leave you with what we think are positive steps that can be made to advance Canada. First, walk away from all proposed changes from July 18 and further suspend any changes made in the last two years in favour of establishing a full review of the income tax system including corporate, personal, international, et cetera. These will allow all parties to work together to make a system that works for everyone, No one is saying the current system is perfect but these and other recent changes are doing and will do real harm.
Failing the first option, spouses should be exempt from the income splitting rules. A couple is linked to the success of a business regardless of whether you can put a number on what each spouse does.
Third, failing the above two, establish an election to allow dividends out of a corporation to be treated as a retirement dividend and be eligible for pension splitting.
Finally, make the tax repaid on passive income comparable to what a public company would pay to level the playing field. The public company currently has a tax advantage on the CCPC when it comes to passive income. This should be removed, not increased as the anticipated rules will do.
I welcome any questions you may have.
The Chair: Thank you, Mr. Mullin.
Senator Marshall: Thank you very much. I will start with Ms. Dunn because she raised something that is of particular interest to me.
You indicated in your opening remarks that you were chair of some government committee. I was interested in hearing the mandate of the committee and anything you can tell us about the work of the committee.
However, before you do, has any position on the proposed tax changes been taken by the provincial government or have they remained neutral to this point in time?
Ms. Dunn: They’ve remained somewhat neutral in their position. However, I’ve been lobbying and trying to educate our premier, our MPs and our MLA that economic growth is important, and to achieve that we need to have what is considered a fair tax system.
Our mandate with the four regional economic advisory councils is economic growth. It’s also looking at retaining our youth, creating employment, looking at our labour markets and increasing our population.
We call ourselves “The Mighty Island.” I think we are leading the region in economic growth but we need to do more. I really appreciate the opportunity to speak to you today and to represent P.E.I.
Senator Marshall: How long has the committee been in place? Is it fairly new?
Ms. Dunn: The committee is very new. I believe we were appointed in May or June of this year. We had our first meeting in September.
Senator Marshall: You would be looking at the impact of the proposed changes.
Ms. Dunn: Absolutely.
Senator Marshall: My next question is for Mr. Van Steeg. I will go right to your presentation because I am interested in a couple of things in it. The first was that you say either the government has not done their homework and thus does not realize the impact of these proposals, or they are deliberately misleading Canadians.
I can tell you now that the Parliamentary Budget Officer released a report this morning on passive income. He is estimating that 47,000 businesses will be affected by the passive income proposal and that the effect on the government revenues will be about $1 billion in the short term, which would be one to two years; $3 billion to $4 billion in the medium term, which is five to ten years, if the businesses survive; and $6 billion in the long term. I agree with you.
The minister has been asked whether there was an economic impact analysis carried out. He didn’t answer the question, so I’ve concluded that they haven’t. The point that you make there is very, very valid. Of course your comment that thousands and thousands of Canadians will be materially affected is also correct.
This is a question I’ve been asked by the media, but we really haven’t talked about it in the committee. I would like to get your views on the record. I mean these changes will affect businesses and owners of businesses, but it doesn’t really affect the common man on the street. Would you have any comment on that statement?
Mr. Van Steeg: I would disagree strongly with that statement. I think I told you how many clients we have. We’ve talked to a number of them and the first thing they’re looking at stopping is giving donations to charities.
Senator Marshall: That’s correct.
Mr. Van Steeg: That’s the first place they’re going. The next place they’re going is to their employees, so there will be job losses.
The third thing they will be doing is looking at decreasing their investment in their businesses because they’re going to start looking after themselves. They will be looking at: Where are we going to get the money to make up the shortfall?
Those are the three areas the businesses will be going to. Our business owners are talking to their employees about these proposals. They’re warning them about what the impacts could be, and it could end up in job losses.
I disagree with that statement. It will certainly have a big impact on all Canadians.
Senator Marshall: Mr. Mullin, if you could also put your views on the record, I would appreciate it very much.
Mr. Mullin: As indicated in my presentation, the misnomer is that it only impacts the very few or the very rich corporations. Every CCPC will be impacted by it because their costs will go up. If their costs go up or if their personal taxes go up because of the lack of being able to income split appropriately and legally with their spouses, then they will need more cash out and will have to restrict their charitable donations and reduce their headcount.
Even if they didn’t reduce their headcount, it will be very expensive to track the multiple pools that have been speculated to be around the passive investments. The documentation that has been commented on that would be approached in level of the contemporaneous documentation necessary in transfer pricing to support the reasonability of any dividend will be very expensive to repair.
You’re talking an ordinance of magnitude of two, three, four or who knows how many times their current professional fees. Just that will be a hardship. Businesses will look at how to recover that cost either through increased prices or decreased service or decreased headcount. It will impact throughout. It’s not limited to the 1 per cent. I’m thinking more like 100 per cent.
Senator Marshall: Do I have time to ask all the witnesses another question? Mr. Mullin raised the issue of passive income, and I want to get everybody’s opinion on that.
The Chair: Yes, senator.
Senator Marshall: Yesterday we had quite a lengthy discussion on passive income. I was looking through the Department of Finance website trying to find a definition of passive income. I don’t think it’s defined under the Income Tax Act. It’s probably something more like a generally accepted definition. It’s always possible that when Budget 2018 comes out the government could put a new definition on passive income.
Could I get each of you to talk a bit about passive income? What do you think is included in passive income right now?
Ms. Dunn: That’s a great question. I would view passive income as being investment income. You’re looking at companies’ dividend income, interest income and capital gains.
The interesting part about capital gains that we don’t know yet is: When a capital gain is generated, will 100 per cent of that capital gain form the passive investment income or is it only the 50 per cent?
There is still a lot of uncertainty. Until we see the draft legislation, it will be hard to know exactly what it is.
Mr. Van Steeg: I agree with your answer. Another way of looking at it is there’s something in the Income Tax Act that talks about active business, so I would say anything that is not active business income would be another way of looking at it.
Senator Marshall: That would depend on the interpretation of the Canada Revenue Agency also, would it not?
Mr. Van Steeg: Oh, for sure. No question.
Senator Marshall: Yes, I thought so.
Mr. Mullin: Mr. Van Steeg indicated that anything that’s not active is passive. That likely includes, in my determination, rental just because right now it’s sort of common to consider as a passive or property income.
One thing I found rather interesting was that yesterday they released the national housing plan for the next 10 years to increase the number of housing, to encourage the development of affordable housing units, and to encourage the investment in these new units.
If that’s the case and if passive income is captured, you will not get a lot of pickup of people wanting to invest in new housing units that will create additional passive income which will be potentially captured under any rules that come out.
Senator Marshall: Right, or even whether companies that currently engage in that business will survive this in order to help with the housing strategy.
Mr. Mullin: Exactly, without the capital and the backing equity. It’s a lot easier to get money when you have money.
Senator Neufeld: Thank you. Mr. Mullin, earlier you said, “. . . walk away from all proposed changes from July 18 and . . . suspend any changes made in the last two years in favour of establishing a full review . . . .” I agree with you on the full review. They should park what they’re doing, but why did you go back two years?
Mr. Mullin: In the last two years the federal government has introduced certain changes within the Income Tax Act that have dramatically upset the applecart, I’d say, in a lot of traditional ways that businesses operate with respect to restrictions on inner-corporate dividends and restrictions on how businesses have been structured and operate which have really caused a lot of hardship, angst and concern in small businesses that for years have operated one way. With a flick of a pen, their operations have been called into question as to whether they can continue doing what they’ve been doing.
CRA has not really looked at that yet. There’s uncertainty and there’s angst because of these changes in the business community. They’re saying, “What do we do here?” We don’t know yet because it hasn’t gone to court. We have a lot of anxiety, and when you have anxiety things don’t happen.
By putting a pause on it we may be able to take a look at whether it establishes a policy decision and get back to people spending money in the right way as opposed to trying to figure out something that will be up to the whims of a CRA auditor to say whether or not it’s appropriate.
Senator Neufeld: When you say those kinds of things, in listening to your testimony, it’s kind of a move forward. You saw things changing in the last two years that were detrimental to small business and now we see another move.
Are you expecting to see something else in the future that could be detrimental to business also, if these guys go ahead with this?
Mr. Mullin: Yes. If you’re talking about speculation on what’s happening at Finance, I’m neither qualified nor dare to tread. One of the comments made in the last budget was looking at capital gains. Could it be taken that they’re socializing the concept of raising the capital gains inclusion rate? Perhaps, but that would be more than just for CCPCs. That would be for every investor or every person that has any investments, whether corporate, personal or otherwise. If they change it from 50 per cent to 75, that’s a huge lop off of somebody’s investments. Yes, I do expect more.
Senator Neufeld: That’s more disturbing than what we’ve heard so far, I can tell you. Although there’s lots of speculation around, this is just one move of many that will tax us more.
Maybe for all of you, to me continuing to raise all taxes on people will actually finally curtail any investment in Canada of any kind. Do we have a government that thinks they can spend all our dollars better than individuals can?
Mr. Mullin: I made the comment to someone a while ago that extra taxes hurt, but if you had confidence and the ability to see that it was being well managed and stewarded correctly, it might not hurt so much. When you see things happening that are not being utilized to maximum efficiency and the concept that the government can do better with the money than say you or I can, that is what hurts.
Yes, these changes on July 18, to use an expression, are the straw that broke the camel’s back. It was just a pile-on, and enough was enough. How much is enough? Is 50 per cent or 53 per cent enough? In New Brunswick at one point we were at 58 per cent but that sort of walked back a little bit.
Ms. Dunn: We have to look at raising tax revenue in a way that is broadly accepted to be fair. You will have a higher incidence of voluntarily compliance. Fairness is a desirable goal, but we have to balance fairness with complexity. When we look at these proposed rules, there’s a real concern that Canada Revenue Agency will have a problem interpreting these rules.
There is much uncertainty and the compliance burden to be placed on small business owners will be disproportionate to the revenue that will be generated.
Mr. Van Steeg: I realize that all governments have goals and things they want to fund and achieve. A major way of funding that is through taxes, but our issue is that they haven’t given any thought to these tax proposals. They’re taking advice from who knows? Who is actually talking to them and saying, “You should go after these people because they have an unfair advantage?” They really have no idea what the actual impact is.
That’s our concern and I think it will continue while this government is in play because honestly I don’t think they really care about the impact on people.
Senator Neufeld: My philosophy has always been grow the pie to grow the revenue, not take more out of the pie to get revenue. It works actually much better than this process.
Senator Marshall talked about the Parliamentary Budget Officer saying that about 47,000 businesses would be affected. When you look at raising $1 billion to $2 billion or $5 billion to $10 billion or $6 billion, I guess it is correct, if there’s anything left to raise it from. Just that says to me I know that they targeted or were targeting health, our doctors and other professionals, those kinds of people. They were very vocal about that.
I assume you folks are all from New Brunswick. The doctors have come to us and said if they do this, they’re going to retire early, going to leave, or going to stay and just quit practice. That’s the effect.
I know what happens, having spent time in the British Columbia government. It’s the provinces that pick that up. It’s not the federal government. They pay a share. There’s no doubt about it. It’s relatively small. It’s the provinces that pick that up. I can only suppose that the provinces will go to the same people and say, “We need more money to actually provide health care.”
Does that really bother you a whole bunch? Does that make you want to actually tell Mr. Morneau to please use some rationale here rather than just looking at dollars?
Mr. Van Steeg: For sure, yes. Those 47,000 businesses are our best businesses. They’re the ones making the money. They’re the ones driving the economy. Basically they’re picking on them. Why are we doing that? Wouldn’t we want more of these best businesses? Wouldn’t we want more of these in Canada?
You’re scaring them away. They will go away. It will become less and less. It’s having the opposite effect, and that’s what really concerns us. Yes, I’d love to tell him, but he’s not taking our calls, seriously.
Senator Neufeld: Any other comments?
Mr. Mullin: Some 85 per cent of the CCPCs don’t have any passive income. If you look at a corporate structure, you could have 10 companies in that structure. You could have nine of them actively involved in business and one central cash company or one bank call. You could have 10 corporations but only 10 per cent of them have any passive income that is all owned by one shareholder. It is probably right to say the corporations or the CCPCs are the ones that don’t have any passive income, but it is probably much higher if you look through the structures at the actual business owners that have passive income within a corporation.
If we had the opportunity to talk to Minister Morneau, the message that I would like to relate is: What have you got against success? Why are you putting both a physical and mental roadblock in the way of people trying to achieve more? Why are you making it more difficult for people to do better than the person next to them? Why don’t you encourage the person next to them to do better than the person next to them? Why is it them and us? Why is it subtraction all the time? Why does it need to be taken away from somebody because this person over there doesn’t have it? Why can’t it be an addition? Why can’t we all benefit?
The Chair: Ms. Dunn, do you have a comment?
Ms. Dunn: If I were to meet with Minister Morneau, I would ask him: Why are you failing to consider all of the implications of these changes? I would have thought they would have learned their lesson on the specified corporate income rules.
I’d like to give you an example of that because it had a significant impact on our farm community in P.E.I. and well across the nation. Those rules looked to limiting access to the small business rate and the multiplication of the small business limit.
Our dairy farmers sell to cooperatives. These dairy farmers hold shares in these cooperatives but a very small percentage. In the way the rules were originally written, the small business limit would have to be shared between the co-op and all of the farmers that were selling to that cooperative. That would have meant that the corporate tax rate of dairy farmers on Prince Edward Island would have gone from 15 per cent to 31 per cent.
We successfully lobbied the government on this issue and they did change the legislation. If they had consulted first with the tax community, we could have avoided this issue altogether.
Senator Neufeld: My time is up. It’s obvious that the Ministry of Finance or the minister doesn’t understand the tax system very well. I don’t know why he didn’t go after public companies. There are wealthy people in public companies. They’re home free. We all know who’s in the public companies.Thank you.
The Chair: I thought there was another question.
Senator Neufeld: I just wanted to get that on the record, sir.
Senator Eaton: Two of you have talked about compliance. Now it came out last week that the Ontario government was short $2 billion in income tax revenue. I think the year before or last year the federal government was $1.5 billion short.
If these taxes go through on the first of January, do you see more tax planning? That’s the excuse the Ontario government put out. They were sure that more of their citizens were tax planning. Do you see more tax planning? Do you see an increase in your clientele coming to you asking, “What can we do about this? We don’t want to go from 52 or 53 per cent to 72 or 73 per cent?”
Ms. Dunn: It has been suggested that the accounting firms will benefit from some of these proposals. Yes, we will be looking at tax planning for our clients.
Senator Eaton: They are numbered accounts in Alberta.
Ms. Dunn: Correct, but a number of my clients are small business owners and they’re not wealthy. To see professional fees increase so that I can help them to do tax planning or to help them interpret these complex rules will be a burden.
I believe it was Mr. Mullin, and maybe Mr. Van Steeg as well, who alluded to the fact that there’ll be a trickle-down effect in terms of there could be job layoffs because they don’t have the same resources.
I’m also concerned that maybe they won’t consult with me because they cannot afford to and instead will try to get their advice from Canada Revenue Agency. The Auditor General’s report came out yesterday, and it was alarming when taxpayers call CRA that in 30 per cent of the instances the advice they are given is wrong. That’s a concern for us.
Senator Eaton: It’s more than a concern. It’s frightening.
Mr. Van Steeg, what do you say? If governments are failing to meet their revenue targets because of lack of compliance, what do you think will happen if these come through?
Mr. Van Steeg: Oh, I think it will be a boon for the tax planners. Clients are already talking: What can we do to get around these rules? What can we do to decrease our taxes?
We can’t really answer right now because we don’t even know what the actual rules are, but it’s on everyone’s mind.
Senator Eaton: Do you see flight of capital? Have you had clients talk to you about flight of capital?
Mr. Van Steeg: We know there are clients already moving to the States. I’ve heard from a colleague out west that they’ve had over 20 clients with $3 billion leaving the country already, and these rules aren’t even in place yet. They don’t trust this government so they might as well leave. That’s their opinion.
Yes, for sure, capital is leaving.
Mr. Mullin: I agree 100 per cent that money is smart. It will go where it makes the most sense to go. There will be tax planning. There will be new products put out from organizations to allow people, once the rules are understood, to invest income in ways that will not be impacted by these rules.
It will leave the country. It will be put to different uses. It won’t be reinvested. It will be taken out.
Ms. Dunn’s comment is accurate. For accounting firms like mine and Mr. Van Steeg’s, we will see a short-term uptick, but it will not be for the long term because people will not have the money to spend. Once they’re set up, they’ll either leave or not require that much help. It’s a short-term uptick for firms. In the long run I think it will actually go down.
Senator Eaton: We heard yesterday from one tax expert how in Canada we’re already at a terrible tax disadvantage. Would you agree with that?
Mr. Van Steeg: Yes.
The Chair: Thank you to the witnesses. You’ve been enlightening. You’ve certainly shared your experience with us. In the event that you want to add to the work of the committee as we go forward in order to table our report on December 15, please do not hesitate to share your information or your documents through the clerk.
Our final panel is from Unifor, Ian Hutchison, Atlantic Council Chair, and Michelle Doucet, Chairperson, District 508, Local 2002.
I have been informed by the clerk that you will each make a presentation. Mr. Hutchison, the floor is yours.
Ian Hutchison, Atlantic Council Chair, Unifor: Thank you.
My name is Ian Hutchison, and I am chair of the Atlantic region for Unifor.
Unifor is not a company; it’s Canada’s largest private sector union. We represent 315,000 working class people from coast to coast. Our members work in every sector of the economy and are represented at every income decile.
Our members pay their taxes and contribute in multiple ways to building the society that we all live in. On behalf of our members, their families and their communities, I am pleased to provide our views on the fair taxation of income of CCPC owners in Canada.
Unifor advocates for and supports the progressive tax structure that ensures our governments at all levels have the revenue necessary to provide high quality, efficient and effective public services. That tax structure also needs to acknowledge the income, the wealth and the equality present in our society today and to ask those who earn more to pay their share.
Taxes pay for the basic services that we rely on every day from health care to infrastructure to addressing some of the most pressing needs of today including poverty elimination, reconciliation and leadership on the environment.
The issue we’re discussing today is the inequality in our tax system that allows some people to opt out of paying their fair share of the revenue governments need to pay for these services.
The Government of Canada is proposing to close some tax loopholes that allow incorporated small business owners to avoid paying the same amount of tax on their income as earners who work for employment income and make the same amount of money.
Some 60 per cent of the top 0.1 per cent of income earners in Canada own shares in a CCPC. Only 5 per cent of middle income families do the same. That means that 60 per cent of the highest income earners in Canada have the ability to opt out of our progressive tax system through these loopholes while the rest of us have been paying our fair share all along.
Most small business owners do not benefit from these loopholes either. A business owner has to have a very high income and a particular family structure to accrue significant benefit from the loopholes that are being discussed. Two thirds of small business owners make less than $75,000 a year, so most small business owners do not earn enough money to exploit the loopholes.
Unifor supports the government’s initiative to increase fairness in the income tax system by closing unfair tax loopholes that are currently available to high income earners who have incorporated a small business but are not available to people who work for a salary or wages, both low and high earning. The results of exploiting these loopholes mean that some earners have higher disposable income or a larger investment portfolio than others simply because of the structure of their business.
The loopholes under scrutiny today have meant two earners with similar incomes and a similar family structure, one with a CCPC and one without, will pay two very different effective tax rates. These different effective tax rates result in two very different levels of disposable income today and two very different levels of savings in the future.
The tax benefit of these loopholes accrue to the highest earning CCPC owners. Furthermore, research from virtually every economist and policy expert who has weighed in on the subject has found that benefits of the tax loopholes only accrue once the CCPC owner’s income has surpassed a certain level. Income splitting, for example, does not provide a significant benefit to anyone making less than $90,000.
Business associations and other advocacy groups have tried to paint the proposed changes as a tax grab on the middle class. This is not the case. The tax changes will lead to more high income earners paying the same tax rate of their salary and wage earning peers. I pay 27 per cent tax rate on my earned income. Everyone else should have to do the same if they’re in the same tax bracket.
Where this issue affects the middle class is ensuring income earners in the same income decile before tax are in the same income decile after tax. Business associations and other advocacy groups have tried to paint the proposed changes as a drag on investment, innovation and entrepreneurship. The reality is these tax loopholes have very little to do with innovation or business investment. Governments can and should develop systems that support innovation and business investment, but the current system is one that incentivizes neither.
This proposal is about protecting the integrity of Canada’s progressive tax system. Canadians believe in paying their fair share of taxes. While there is more to be done, this is certainly a step in the right direction. I thank you for listening to me.
Michelle Doucet, Chairperson, District 508, Local 2002, Unifor: Good afternoon. I am an elected representative of 314 call centre workers here in Saint John. We are unionized by Unifor Local 2002. Unifor Local 2002 represents 13,000 members from coast to coast to coast in a variety of industries. Workers in this community are very supportive of the federal government’s plan to close tax loopholes. High income earners in the country need to stop using Canadian-controlled private corporations to avoid paying their fair share of taxes. The proposed changes are an important first step in bringing more fairness into our tax system for all Canadians.
Current tax rules allow wealthy, self-employed Canadians to pay less in personal income tax by setting up Canadian-controlled private corporations. Personal income is being filtered into these corporations and used to split income among lower earning family members. This option is not available to other working Canadians.
High wage earners who own CCPCs can pay themselves in capital gains, only 50 per cent of which are taxed at the personal tax rate. Current tax rules make it possible for someone earning $300,000 per year to save more in taxes than the average Canadian worker makes in the same year. This is unfair to all Canadians.
I consider my taxes to be an investment in my country. I ask that you please ensure that all Canadians are investing fairly in our country. Thank you.
Senator Marshall: Thank you very much for being here today. Mr. Hutchison, in your opening remarks you were talking about individual taxpayers paying their fair share.
Has Unifor done any type of analysis or assessment of these proposed tax changes? The federal government hasn’t done any type of assessment, so we’ve been talking to individuals and individual business owners about their individual situations in order to get a handle on it. Has anything been done by Unifor?
Mr. Hutchison: You’re relying on a business owner who’s in a tax loophole to tell you the true meaning of what they’re saving as well, right? There has been some stuff done by our economist who suggests that there’s probably $500 million worth of possible tax money there to be made for the government. The share is about $250 million federally and $250 million provincially.
I look at the simple thing. If you look at all the math on it, like I said I’m at the 27 per cent bracket for my earnings. If I could afford a CCPC it would drop me down 16 per cent to about 11 per cent, which is quite significant. That would give me about $15,000 a year to take home and spend on something else besides taxes. It’s a significant amount of money for me.
Senator Marshall: You’d have to have a business. In my own particular situation, if I could incorporate, I would also save money but I am not. I am just a salaried person. I am not a business person. I would be in the same situation as you.
The Department of Finance has provided examples which would support what you are saying now. We’ve had individuals as well as tax experts come in and they’re disputing the examples. When you follow the math through you can see where the math of the Department of Finance is incorrect.
This is why I was wondering if there was any type of analysis that had been done by Unifor. They are a large union so they would have the resources that they could do something like that.
Mr. Hutchison: We did a little bit. That’s why I said about two thirds of all business are less than $75,000. They likely wouldn’t be affected by this.
Senator Marshall: Yes, but they will be.
Mr. Hutchison: Only if they become bigger.
Senator Marshall: No. We had experts here that have said that they will also be impacted. We’ve had a lot of witnesses come in. I wasn’t going to debate with you. I was just wondering if there was some type of analysis.
Also, you were talking about the progressive tax system. You say you’re at 27 per cent and then of course as you make more you would go up to 33 per cent. There is a progressive tax system.
You also referred to everybody paying their fair share. One of the issues we’ve been debating and discussing is: What is a fair share? In a progressive tax system we know it is 27 per cent, 29 per cent and 33 per cent. Would you have any views on exactly what the term fair share means?
Mr. Hutchison: I make $100,000 to $120,000 a year and I’m at the bracket where I’m at because of RRSP investment. I probably should be at the 33 per cent but I’m not.
Senator Marshall: You manage to get it down.
Mr. Hutchison: Because of my RRSP donations I make out of my pocket. When I look at fair share, I would think that someone who makes similar money on a business should be paying the same tax. That’s what I look at as fair share.
Senator Marshall: Ms. Doucet, you were saying that you work for a call centre.
Ms. Doucet: Yes, I do.
Senator Marshall: They’re unionized. Would you know whether your employer will be impacted by these proposed changes?
Ms. Doucet: My employer is Air Canada, so I don’t expect that.
Senator Marshall: You don’t expect that they will be, but there would be people who would be impacted. We’ve had a lot of witnesses in who have indicated that their businesses will be impacted to the extent they might leave the country or they might have to downsize. Would that be of concern to you?
Another thing that probably would affect everybody is we’ve had a lot of physicians in who have indicated that they’re mobile and they could move to another country or they could decide to reduce their number of hours. Right now in the health care system most provinces are experiencing a shortage of doctors. The impact on small businesses, would that be of concern to your members?
Ms. Doucet: My members are very concerned in the health and welfare of Canada. They believe that doctors, lawyers and accountants are also Canadians and need to properly invest in the country.
Senator Marshall: Is there no concern with regard to physicians leaving the country or scaling back their hours? Has that been a topic of discussion?
Ms. Doucet: That has not been a topic of discussion at this point. Perhaps they’re waiting to see if the doctors suggesting that are going to put their money where their mouth is.
Senator Eaton: We’ve heard from a lot of people over the last three weeks. They’ve talked about Canada’s tax disadvantage and our failure to attract. The amount of new money we attract every year to start businesses is going down. Also the trickle-down effect that we heard from the bigger businesses to smaller businesses, as you say, that might be below the $75,000 a year level but depend on larger businesses. We’ve also heard about job loss, which I’m sure being members of Unifor you care about that.
Just to continue on what Senator Marshall was saying, we’ve had many doctors and farmers, hearing about this sprinkling effect or splitting of income. If either of you have been on a farm, you know the family is involved. What do they do? Do they fill out a time sheet if they go out to milk the cows or feed the chickens?
Something that I remember very clearly was a young doctor in Brampton. She said, “I graduated from medical school after 12 years of study with a $250,000 student debt and I opened my own practice.” As you two know, Health Canada doesn’t pay for the machinery in a doctor’s office or in a hospital. Doctors have to pay for that. She was a young woman. She was about your age. She said, “If I decide to have children, nobody pays me maternity leave. That’s something I have to take out of money I save out of the business. After I’ve paid off my debt, paid for my office equipment and maternity leave, I have to start thinking about my pension.”
Unlike a member of Unifor or somebody like me who works as a senator, nobody is paying into their pensions. Nobody is supporting her. She has to put everything in. Nobody’s helping her with her benefits. She has to pay her staff benefits.
What would you say to somebody like that when we’re going to cap their passive income to save for their old age or pay down their debt? What would you say to her? How would you present your case to somebody like that? She’s probably not working eight hours a day. She’s probably working close to 12 and she’s probably on call. What would you say to somebody like that?
Mr. Hutchison: I don’t know where you’re getting the capping of their passive income. We’re looking at closing a loophole that is a tax avoidance.
Senator Eaton: Mr. Morneau is capping $50,000 a year, up to $1 million. Your pension would be much more than $1 million.
Mr. Hutchison: My pension?
Senator Eaton: Your nest egg from which you will draw your pension.
Mr. Hutchison: You don’t know RRSPs very well, do you? I’ll never have $1 million in RRSPs.
Senator Eaton: No, but you have a pension.
Mr. Hutchison: No, I don’t. I have an RRSP plan. It is different.
Senator Eaton: Your employer doesn’t pay into a pension plan for you.
Mr. Hutchison: No. I’m an RRSP plan, defined contribution. You’re a defined benefit with the government. I’m defined contribution, which is completely different.
Senator Eaton: RRSPs don’t work for private businesses because they can’t pull them out and put the money back in if they have a downturn or for maternity leave. They can’t do that. It’s not the same.
Don’t you feel sympathetic to the doctors?
Mr. Hutchison: Do I feel sympathetic to a doctor? I know a doctor and I know a couple of dentists. I’m actually friends with a couple of dentists who actually partake in this CCPC. Their spouses work for them and they pay them minimum wage. I think their children work in the summertime for them. I believe the government actually pays them a subsidy to hire the children because they’re students.
Do I feel sorry for them? No. Do I believe they’re all going to leave the country? No.
We talked about trickle-down effect. Do I believe trickle-down economics works? I guarantee it doesn’t. Have you seen investment in Canada in the last 10 years? No. We’ve been doing trickle-down politics for 12 years. No, I don’t agree that the doctors are going to leave. I don’t agree that all the large businesses are going to close shop and all the small businesses are going to fail. It hasn’t happened yet.
The trickle-down economies that you’re talking about, that the big business will hire the small business, the small business will hire the people, and we’ll all grow, that was a lie that happened about 14 or 15 years ago federally and didn’t come true. All that happened with that money is that what businesses weren’t paying in taxes went to the CCPCs, to the Panama files and paradise files. They’ll keep releasing more stuff and there’ll be more people named in hidden offshore tax loopholes. Trickle-down doesn’t work. I don’t believe anyone’s going to leave the country because of these small changes that they’re looking at.
Do I feel for the small, small business, the true legitimate? Yes, I do. That’s why I said what’s being affected with these changes will not affect those small business owners. They will have an opportunity to grow, and hopefully they’ll pay their fair share of taxes in Canada like everyone else should.
Senator Eaton: I think you’re very lucky. You obviously have two champions in Minister Morneau and Prime Minister Trudeau.
Senator Cools: I was listening to you with some care. Ms. Doucet, you kept referring to the loopholes. I wonder if you could tell me about the loopholes you were referring to.
Ms. Doucet: Both my husband and I are employees of corporations. We are not permitted to do income splitting even though he is employed at a higher tax bracket. It would be beneficial if we could move part of his income to my income. We’re not permitted to do that. A CCPC is permitted to do that.
A dentist could employ his wife and whether she’s actually working in the business or not, he would be transferring income that he’s truly earning to her or vice versa. It could be she, the dentist.
Senator Cools: That is one of the characteristics of the CCPCs. All of these professionals were pressured years ago into setting up those CCPCs. Those are the characteristics of the CCPCs. You just can’t look back retrospectively at a perfectly legitimately process that was designed and set out by the government to be followed by many and say, “Oh, oh, now we’ve changed our minds. It is now loopholes.” You can’t do that. There’s a principle in law that you cannot legislate retroactively.
Ms. Doucet: Nobody is suggesting that we should retrospectively change the taxation from 10 years ago.
Senator Cools: That’s what government is doing. That’s what they are doing right now.
Ms. Doucet: We’re talking about going forward. CCPCs going forward should not be permitted to transfer income from one member of a family to another because that opportunity is not offered to all Canadians. It’s only offered to Canadians who are self-employed.
Senator Cools: I have another question for you. I have always understood that money is a coward which will flee whenever it senses stress or discomfort. Why do you think government under the Minister of Finance would bring in income tax reforms a year before an election?
Mr. Hutchison: The same reason why other governments would offer income tax relief the year before an election. I understand there’s an election coming two years from now, right?
Senator Cools: Any time. It could be any time.
Mr. Hutchison: It could be any time, but it’s likely to be two years. I doubt they’re going to go early. Like I said, it is the same reason why governments offer tax breaks. They want to get re-elected.
Senator Cools: There are no tax breaks in this.
Mr. Hutchison: No. This is fixing something that has been flawed for the last 14 years. It’s a step in the right direction. Is it enough? No. You talked about retroactively fixing something. It doesn’t retroactively fix anything.
Senator Cools: I didn’t say retroactively fixing. To people who are saying they are legitimate they are now saying that those are loopholes. They were never positioned there as loopholes. They were put into the process most deliberately.
Mr. Hutchison: To what? Allow huge tax breaks to people who make --
Senator Cools: No, I think you’re speaking about a lot of people in very unfair terms. The government is currently taking the position that many processes that were perfectly legal and acceptable are now loopholes. That’s what they’re saying now, but that’s a description. Perhaps the government can get away with saying and doing it, but I don’t think other people can.
The Chair: Mr. Hutchison, there was a question asked of you. Can you give an answer? I don’t want an argument.
Mr. Hutchison: Okay. Repeat the question.
Senator Cools: It doesn’t matter. In any event, we keep throwing the word fairness around. There’s a principle in law that says you cannot judge retroactively or punish people for things done retroactively, unless those things were offences at the time that they did them.
The government is now choosing to say that certain things are loopholes that they didn’t say were loopholes years ago when they created the possibilities to do them. I’m saying to you that is a violation of basic human rights. You do not change the law retrospectively. You cannot do it. That’s a huge principle.
The Chair: On that comment, do you have a comment, Mr. Hutchison and Madam Doucet, or don’t you?
Ms. Doucet: Over the course of our history there have been many changes in legislation. Things that were fair and just or deemed fair and just at one time are no longer deemed fair and just. New opportunities are seen and legislation changes.
At one point the death penalty was in place. It’s no longer seen as fair and just. I’m not saying that any of these loopholes should be related to that. However changing tax legislation to meet the new and modern way of true fairness is the right thing to do.
Senator Marshall: Could you just tell us a bit about your positions? Mr. Hutchison, you’re Atlantic Council Chair with Unifor and Ms. Doucet, you’re Chairperson of District 508. I’m thinking that has something to do with the call centre. Could both of you just tell us a bit about your organization and how this fits in?
Mr. Hutchison: As Atlantic Council Chair I represent the 40,000 members in Atlantic Canada between Newfoundland, Nova Scotia, New Brunswick and P.E.I. I’m also a local union president in Saint John.
Senator Marshall: In Saint John, here.
Mr. Hutchison: New Brunswick, yes. I’m elected every three years. I am on my first term. I basically speak on behalf of the national for the members in Atlantic Canada.
Senator Marshall: You’re here today representing the Atlantic Canada part of Unifor.
Mr. Hutchison: Yes.
Ms. Doucet: My elected position is to represent the workers in my call centre, in my workplace. I work day to day with actual taxpayers, members, workers.
Senator Marshall: How many people did you say were in the call centre?
Ms. Doucet: There are 314. My local represents 13,000 members in a variety of industries including Air Canada, Jazz Aviation, Porter, and many, many, many.
Senator Marshall: Would Unifor have put forward a national position on the tax changes? I don’t remember if I saw it or not.
Mr. Hutchison: They did put forward a national.
Senator Marshall: That would have gone to the Minister of Finance.
Mr. Hutchison: They presented to the ministers, yes.
Senator Marshall: That was in response to the July proposal but not the amended proposal.
Mr. Hutchison: Actually the presented at the end of September so that would have been probably the amended proposal.
Senator Marshall: No. I think the amended came out in October.
Mr. Hutchison: Was it October?
Senator Marshall: Yes, it was October. They presented in September.
Mr. Hutchison: At the end of September.
Senator Marshall: They supported the changes.
Mr. Hutchison: Yes.
Senator Marshall: Perfect.
Mr. Hutchison: Actually we supported them but we wanted them to go deeper.
Senator Marshall: I think I may have read the proposal.
The Chair: To the witnesses, thank you very much for coming here to share your opinions and views. You said you came here to reflect what Unifor presented nationally so we will respect that. We have access to what was presented in the other house.
Honourable senators, as the end of our hearings on this special study is nearing, I would like to thank you for your interest and your dedication.
To all witnesses I say thank you very much. We are going back to Ottawa next week richer for the testimony we’ve heard and the people we’ve met. The hearings we’ve held and the travelling we have done is a process that Canadians were waiting for. We are really pleased at the turnout and the wide range of viewpoints we have heard in all regions of Canada.
In order to make that kind of large-scale operation happen and run smoothly, a whole team of support staff had to be mobilized as we travelled and in Ottawa to support our ongoing daily activities.
To the two clerks, Ms. Gaëtane Lemay and Ms. Joelle Nadeau, and to their team who made it happen, on behalf of all senators on the committee I say thank you. As you know, public hearings cannot happen without an array of people whose roles are very essential in helping with the witnesses.
As we conclude, I would like to share with our witnesses some statistics about the hearings. In the last few weeks we heard from 58 witnesses in Ottawa over 13 public meetings, 33 witnesses in Western Canada over 8 meetings, and 43 witnesses in Eastern Canada over 8 meetings. A job well done, everyone.
To the witnesses and to the public, if you feel that you want to add anything before we table our report to the Senate of Canada on December 15, please do not hesitate to share it with clerk of the committee, Ms. Lemay.
On this, honourable senators, I declare the meeting adjourned.
(The committee adjourned.)