Proceedings of the Standing Senate Committee on
National Finance
Issue No. 13 - Evidence - June 20, 2016
OTTAWA, Monday, June 20, 2016
The Standing Senate Committee on National Finance, to which was referred Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, met this day at 3 p.m. to give clause-by-clause consideration to the bill.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Good afternoon, everyone. Welcome to the Standing Senate Committee on National Finance. Today we begin our clause-by-clause consideration of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures. This bill is the first implementation bill of the March 2016 budget.
[Translation]
As you know, dear colleagues, the committee has held several meetings and heard many witnesses in the course of its preliminary study of Bill C-15. We also received a number of briefs.
[English]
Before we begin, I would like to remind senators of a number of points in terms of the mechanics of the process. First, when more than one amendment is proposed to be moved in a clause, amendments should be proposed in order of the lines of the clause.
Second, some amendments that are removed may have consequential effects on other parts of the bill. We will endeavour to keep track of these places where subsequent amendments need to be moved, and we will draw your attention to them if necessary.
Third, because no notice is required to move amendments, there has been no preliminary analysis of the amendments. So if any member wishes to propose an amendment, please allow your colleagues and our staff sufficient time to review them before opening the floor for debate.
Finally, I wish to remind senators that if there is ever an uncertainty as to the results of a voice vote or a show of hands, the most effective route is to request a roll call vote, which obviously provides unambiguous results. Senators are aware that any tied vote negates the motion in question.
Are there any questions on any of the issues I have relayed? If not, we can proceed.
Senator Patterson: Mr. Chair, the observations will be dealt with when, please?
The Chair: After we go through the whole process and through the actual document itself.
Senator Patterson: I have some comments on the observations.
The Chair: Fantastic.
Senator Andreychuk: In the same vein, are we going to discuss the observations?
The Chair: It would be my understanding that we would discuss both, yes.
Senator Andreychuk: Thank you.
The Chair: In terms of the actual clause-by-clause consideration, we have all of the documentation with us. We will do it in sections.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed? Do we have agreement on that?
Hon. Senators: Agreed.
The Chair: Shall clause 1, which contains a short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Is it agreed, with leave, that clauses be grouped according to the parts of the bill as described in the Table of Provisions of Bill C-15? There are four parts to the bill.
Hon. Senators: Agreed.
The Chair: We will start at Part 1, "Amendments to the Income Tax Act and to Related Legislation.'' Shall Part 1, which contains clauses 2 to 62, carry?
Some Hon. Senators: No.
The Chair: Do we have anyone on the other side?
Senator Mitchell: We just cancelled clauses 2 to 62. Could I ask you why you've done that?
Senator Eaton: Having spent the last month to six weeks looking at this budget, I find the whole thing a mess. Whether it's pensions, the tax to small business, the way they have reconfigured the child tax, some of the tax write-offs they have taken away, I can't agree with a thing that is in this budget.
Senator Mitchell: By doing away with, let's say, the child tax, Canadian families not only won't get a bigger child tax —
Senator Eaton: Grant, I'm not here to — you have not been to one budget meeting. May I say only Senator Pratte from the non-aligned senators and Liberal senators have been here.
Senator Mitchell: I actually have been here for a number.
Senator Eaton: Well, good.
Senator Mitchell: And I was certainly here for the child tax credit, so I would like to ask you about the child tax credit.
Senator Eaton: I am not supporting the budget.
Senator Mitchell: Oh.
The Chair: Senator Harder?
Senator Harder: Colleagues, as I said in debate at second reading, I think this is an important bill for the government, and certainly it is a budget that reflects the promises that the government made in the campaign and the delivery of those promises.
I do know that there have been periods when the Senate in this period of transition, shall I say, has found ways of allowing senators to express their concerns without voting against a budget, as such. I would suggest, if the chair is so willing and other colleagues are willing, that we, on division, accept the clause under discussion.
Senator Marshall: Where are your people?
Senator Harder: My people?
Senator Marshall: Well, yes, your people.
Senator Harder: I think there are two issues at play.
Senator Marshall: We are the opposition.
Senator Harder: I understand that. There are two issues at play. One is that the Senate, in its wisdom, has not yet apportioned representation on committees that reflect the existing division in the Senate. Notwithstanding that, there have been other occasions when in the early years of the previous government and in the early years of the government before that, Mr. Chrétien's government, when the Senate representation did not reflect the representation of new governments in the other chamber, the way of dealing with this on budget matters, and perhaps other matters on which the Senate wished to express itself, was to accept on division the bill as presented from the other chamber.
I'm not for a moment suggesting that senators aren't in their right to express themselves, but I do think that we would not, as a chamber, be serving the public interest, and indeed the Senate interest, to defeat a government bill on the budget.
Senator Eaton: Senator Harder, this is the implementation, you're quite right, of the last campaign. For those of us who do not agree with going into deficit, who do not agree with the whole philosophy, it is very difficult for us who have come to this meeting seriously to be faced by non-aligned senators who either don't like the committee, get bored with the committee, don't come to the committee, and who now want us to vote against our consciences. This is perhaps one of the most important committees of the Senate, along with Legal and Constitutional Affairs. For people not to get organized to have people here who can support the Prime Minister's vision, I think, I'm sorry to say, shows a terrible lack of discipline or work ethic.
I cannot support this budget that I disagree with so heartily because, "Well, you know, it would be a nice thing to do and it's an important document for the government.'' If it was an important document for the government, I'm sure the government would have found people to sit across from us, to question the witnesses and to support the bill.
The Chair: Senator Mitchell, you have a point?
Senator Mitchell: I see that there are two kind of parallel arguments here.
The Chair: We welcome Senator Cools. She is a new member to the group.
Senator Cools: Thank you. I wouldn't mind if somebody could say something to let me know what is really going on.
The Chair: Right now we are at the point where we are supposed to review Bill C-15 on a clause-by-clause basis. We have started the process. We have objection from one side of the room that does not want to support the first section, which is Part 1. There are four parts.
Senator Cools: When you say the "first section,'' you mean the first clause?
The Chair: No. It's divided into four parts. There is an objection to passing clauses 2 to 62.
Senator Mitchell: It seems to me, colleagues, that there are two arguments being made here. One is disapproval of the budget. The other is that it seems Senator Marshall's central point and at least a parallel point for Senator Eaton is was that they are unhappy with the behaviour of some senators who have chosen not to appear here. If we're turning down a budget because certain senators didn't appear here, clearly that would be inappropriate.
Senator Eaton: If they chose to appear, you could support the bill.
The Chair: Please, Senator Eaton, let him have his say.
Senator Mitchell: Secondly, one of the reasons why this committee was understaffed, as it were, by senators is because the Selection Committee didn't meet to approve the new Senate positions ever since Senator Marshall resigned from the chair of that Selection Committee. So to hold that against the committee's work seems to be inappropriate to me and a red herring.
The fact is that it is one thing to express discontent with the budget; it's another thing to vote against the budget or gut the budget's intent because you're unhappy with it, particularly given the significance of the circumstance of a financial bill, which is central to an elected government's ability to govern and that some points in this section that have been deleted are critical and arising out of the campaign platform of the government that was elected.
Let me give you a specific example. Senator Eaton says she is very unhappy with the child tax benefit. If we do away with these sections, then not only do Canadian families not get a bigger child tax benefit than they were to get, they won't even get the child tax benefit they were getting.
Essentially, by taking that feature out of this budget, Canadian families will not get the $6,300 child tax benefit for families of a certain income and the $5,600 annual child tax benefit for incomes over that threshold level.
I think that it is very unfortunate and very inappropriate to express discontent with the membership of the committee, which in part is the responsibility of the Committee of Selection that failed to meet. I'm not going to say who was responsible for that, of course. But clearly the majority in the Senate, the largest group in the Senate, has the majority on the Senate Committee of Selection. It's very inappropriate to hold that against the work of this committee. It's also very inappropriate to hold hostage, because you're unhappy in that regard or you're unhappy with the outcome of the election, this important central policy document — and no more important central policy document exists for a government — simply because you're unhappy.
Express your concern, put in observations that do that, speak at third reading, outline all the problems, but don't say to Canadian families that they are not getting $6,300 in child tax benefits or $5,600 in child tax benefits because you're unhappy with the way this committee ran. It just seems fundamentally inappropriate to do that and very, very petty.
So there. So vote against Canadian families.
Senator Pratte: There are things I like in the budget. There are things I don't like, as I think was clear in my line of questioning many times. I agree with the spending on infrastructure, but I think there may be too much money being spent, and I'm concerned about how the government would be able to control all that spending.
Anyway, if there are votes before I leave, I will vote for the budget because I just think the government has a clear popular mandate to implement that budget. It was clearly to implement those measures that the government was elected, and it's always been clear in my mind that the Senate cannot defeat a bill that has a clear popular mandate, so I will vote for that budget.
Senator Cools: I'm trying to figure out what the problem is here. It isn't evident to me or isn't clear. What is the issue before us? Is it that some members of the committee disagree with parts of the budget, or is it disagreement around the fact that the committee should be proceeding to clause-by-clause consideration? What is the problem?
The Chair: We started the process, senator. The challenge is that it appears the majority on one side of the room does not want to approve the clauses, and we don't have substantial representation from the other side of the room to be able to counterbalance by saying, "Well, we want to vote for it, so that we'd have a vote that would be for the bill, on division, with a split group.''
Senator Cools: It has to be on division. I see no alternative.
I've just asked the clerk for a copy of the list of members. From what I can see, all the members are here except two, one being Larry Campbell — maybe the clerk could tell us — but it seems to me that a good, clean majority of the members of the committee is present at the time.
The Chair: Right.
Senator Cools: So I don't see that there is a barrier to moving through the bill clause by clause.
The Chair: Well, we can do that.
Senator Cools: It's very improper for a group of people or some people just to announce that they are against it as if somehow or the other that qualifies the fact that we have to move through it clause by clause.
The Chair: We have started the process. The problem appears to be that we don't have sufficient numbers from the other side to be able to have a balanced vote.
Senator Cools: Maybe I'm missing something profound here.
The Chair: Without being critical, if you look at the room, there seems to be a number of people on one side of the room, which are on one side, and we have people potentially on the other side of the room who may have another point of view.
Senator Cools: Are you talking to the fact that maybe there is a lack of members of the Liberal Party present at the committee; is that the problem?
The Chair: That would appear to be one of the issues.
Senator Cools: Yes, but they're not members of the committee. The committee meets in accordance with its membership, not with other people who could be members or should have been or maybe could have been.
The Chair: Right.
Senator Cools: The committee has the list of its members, and from what I can see there are only two members missing: Mockler and —
The Chair: Larry Campbell.
Senator Cools: A good majority is here. So unless we're proposing that the committee not continue to meet, or that the committee just cease and abandon its duties, I see no alternative other than to proceed in an orderly way.
The Chair: Thank you.
Senator Marshall: I'm prepared to vote "on division.''
Senator Harder: Great.
Senator Marshall: I do want to make one point. I don't like the budget.
The Chair: Hold on, please. Let's hear Senator Marshall.
Senator Marshall: I would like to make a point. The whole budget is called "Growing the Middle Class.'' At every meeting we would ask select witnesses about the middle class. Define "middle class'' because everything in this book is to grow the middle class. Nobody can define the "middle class'' for us. So at the end of the day, how do we know that the government actually grew the middle class? Like the whole foundation for the budget is rocky, to say the best. Growing the middle class — nobody knows who the middle class is. Even the minister couldn't define it and even Department of Finance officials. Go back and look at the transcripts. Nobody knows who the middle class is. So how do we know we're growing the middle class? With all the initiatives in that budget, we'll never know if we grew the middle class. So I'm prepared to vote "on division.''
The Chair: Thank you.
Senator Eaton: I am too, but next time there's not enough people who support the thing, we'll shoot it down.
The Chair: What I'd like to do with your permission —
Senator Eaton: We're the opposition; we're not here to support the government.
The Chair: What I'd like to do, with your permission, can we go through this? Then I'd like to go through our report, which covers a lot of the issues in here. I'd like to have our report cleared up so we could table our report because I think it's an outstanding piece of work done by all of the people who have been here the majority of the time.
Senator Marshall: All the time.
The Chair: All the time.
Senator Harder, I need your help because you are the leader representing the government. Through your channels, perhaps you could get together with Senator Cowan and try to influence him to make sure that we get proper representation from Liberal non-affiliated people so we could get these people on the committee so we can work this committee properly.
Senator Harder: I would be happy to do so.
Senator Eaton: We asked him twice, senator. Just for your record, Senator Harder, we've asked him twice to send us independent Liberals to the committee since Larry Campbell resigned, and no one has come up.
Senator Harder: I will take this on board. This is the first time it has been brought to my attention.
The Chair: Right.
Senator Harder: Unfortunately Senator Cowan is not in town this week, but I will diligently pursue this with Senator Cowan and Senator Day, who is his successor, because I do think that we need to ensure that we have appropriate representation that reflects the representation in the Senate, as well as an appropriate understanding of how we work through committee consideration of bills going forward.
The Chair: We want to make sure, just so we all understand in the room here, that we want that in line for the start of the new session when we come back in the fall.
Senator Harder: In September, absolutely.
The Chair: I just want to count on your word because the people in this room — and Senator Cools is new. Senator Pratte — effectively with Senator Mitchell on a part-time basis — Senators Marshall, Ataullahjan, Eaton, Mockler and Andreychuk have really done the heavy lifting through this process. As we go through the bill clause by clause, I would like you to be in the room with us to understand the report that we will be tabling because I think it reflects the outstanding work that our senators have done.
Second, we're doing a study on infrastructure and we haven't started the study on the aging population, but these are two critical topics for the future of not only Canada but for the government in place at this particular time. We just want to make sure that we have the proper support from the internal workings of the government. We realize we're in a fluid situation. We realize things are changing, but it just builds animosity when we see things slipping through the cracks because we don't have the proper management support.
It's not a criticism of you because I think you've done a pretty good job of trying to create some organization in a fluid situation, but the weakness comes from the other side.
Senator Harder: I hear you and I will do my utmost to respond.
The Chair: We thank Senator Marshall and Senator Eaton for assisting us.
Senator Andreychuk: You made some comments and I just want to put some things on the record.
I was added to the committee and I think that's the right process. When someone wants to go off a committee, they don't go off the committee until there is a replacement. At least that has been the rule historically, and the leadership has to manage that. So I've read through the material, and I think we have a Westminster model and we're the loyal opposition in that broader scheme. I think that Senator Eaton, Senator Marshall, yourself and others who have come into the committee have done their job. They've questioned and questioned and questioned.
But this is the conundrum of this new system, because this new system is who carries the bill throughout from the day it comes in? Senator Cools can give a much better speech on that than I can. That's the problem we have here. I'm confused between independent Liberals and the so-called independents and the government representatives. The thing is that we don't have rules. Someone says you can be independent, and so half of us are following the Rules of the Senate and the other half are developing rules for the Senate. I don't mind the development, but we stay on the rules we have until we get new ones.
I think it's an issue that Senator Harder had better take up with the government, not necessarily with Senator Cowan or Senator Day. I think it's government-created and it should be government-resolved to the best interests of governance for all of us.
I appreciate the strong sentiments of Senator Eaton and Senator Marshall, because they have done their homework and they're right. I don't agree with this budget either, probably as strongly as they do, but I understand that I have to balance it with the budget process, the historical way we work here. Therefore, the hue and cry will come through the observations and on the floor of the Senate.
The Chair: Which we will get into.
Senator Andreychuk: We had better know whether that tradition is going to continue. So Senator Harder has a task before him, and that's with the government.
The Chair: Absolutely.
Senator Patterson: I appreciate the opportunity to make some comments, because I'm just a substitute for Senator Neufeld. I would like to, as a full member today, make some comments.
The Chair: You'll be open to do that, sir.
Senator Patterson: Thank you.
I have some serious concerns about this budget. I think that we've started on a reckless trend to deficit financing that worries me philosophically. I will mention a few things I'm concerned about.
I think the small business tax reversal, which was not signalled in the election campaign, is a betrayal of the small business community, the engine of job creation in Canada, and is a big disappointment in the budget.
I think the reversal of the OAS changes made by the previous government is not logical, not based on evidence and will burden future generations with a staggering $9 billion expense when it kicks in.
On the other hand, I do welcome the commitment to spending on infrastructure, though I'm genuinely concerned that those billions will get swallowed up in —
The Chair: Can I interject for one second to try to get us to move in a certain direction?
We have a sentiment in the room, obviously. There's a newness to some of our members. There's also the issue of how we're going to run this committee with a coordinated effort from the other members, from the non-affiliated Liberals and the non-affiliated "non-affiliateds,'' or whatever these folks would like to be called. We recognize there are some shortfalls about the budget, and that has been expressed by members. What I would ask is your indulgence.
If we can go through this particular issue on the clause-by-clause consideration, then I'd like to go through the actual work that we did.
The comments that you bring up, Senator Patterson, are very relevant, and I'd like to have a full discussion with the members in the room about the strengths and weaknesses of the budget.
Normally we would do all of these things before, if we had the time. It would be more effective to not do things at the last moment, but these are the cards that we've been dealt. I would ask for your indulgence.
Let's go through this, get it done, and then highlight the areas — I think you'll see in our report where we go over, substantially, a lot of the issues that you've just mentioned, Senator Patterson. I'd like to have a full discussion. Would that be okay in terms of the process?
I would again thank the members for demonstrating their maturity and flexibility. I know the frustration they feel because it is a frustration shared by all of us, but sometimes you have to go through a situation to get a better situation, and hopefully the better situation will evolve from what we've brought up today.
Could we go through this, please?
Senator Eaton: Yes, let's do clause by clause.
The Chair: Thank you.
Shall Part 1, which contains clauses 2 to 62, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Thank you.
Shall Part 2, which contains clauses 63 to 71, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: On division, thank you.
Shall Part 3, which contains clauses 72 to 78, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 1, which contains clause 79, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 2, which contains clauses 80 to 116, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 3, which contains clauses 117 to 122, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 4, which contains clauses 123 to 125, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: On division, thank you.
Shall Part 4, Division 5, which contains clauses 126 to 168, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 6, which contains clauses 169 to 179, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: On division, thank you.
Shall Part 4, Division 7, which contains clause 180 to 181, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: Agreed.
The Chair: Shall Part 4, Division 8, which contains clauses 182 to 187, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 9, which contains clauses 188 to 191, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 10, which contains clauses 192 to 200, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 11, which contains clauses 201 to 206, carry?
Hon. Senators: Carried.
The Chair: Shall Part 4, Division 12, which contains clauses 207 to 231, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 13, which contains clause 232, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall Part 4, Division 14, which contains clauses 233 to 236, carry?
Hon. Senators: Carried.
The Chair: Shall Part 4, Division 15, which contains clauses 237 and 238, carry?
Hon. Senators: Carried.
The Chair: Thank you.
Shall schedule 1, page 178, carry?
Hon. Senators: Carried.
The Chair: Is that all right with everyone? Carried?
Some Hon. Senators: On division.
The Chair: On division.
Shall Schedule 2, page 179, carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: On division.
Shall clause 1, which contains the short title, carry?
Some Hon. Senators: Carried.
Some Hon. Senators: On division.
The Chair: On division.
Shall the title carry?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Shall the bill carry?
Some Hon. Senators: Agreed.
Hon. Senators: On division.
The Chair: Does the committee wish to consider appending observations to the report? When I read that out, we will have, with your indulgence, the short and long version attached to the report. Agreed?
Hon. Senators: Agreed.
The Chair: Is it agreed that I report this bill, with observations, to the Senate?
Hon. Senators: Agreed.
The Chair: Does everyone have a copy of the draft bill on Bill C-15? Just so we understand the process, we are going to discuss appropriation bills 19 and 20 which covers report 5 and report 6.
We have drawn up the report which shall constitute report 7. This is the report that we will table tonight, with your indulgence.
On this particular report, we will have proposed observations for the two appropriation bills that we have coming up. I apologize for that procedural error on my part.
What I'd like to do, with your indulgence, is to go over the report that we've just created, which is the short and long version of the draft report on Bill C-15. This was reviewed last Friday afternoon.
Senator Cools: You're talking about C-19 and C-20.
The Chair: It is confusing to the extent we have a report on supplementary estimates and Main Estimates that we submitted. They were tabled and approved.
Senator Cools: They are not on the bill. They are on the mains, yes.
The Chair: Sorry, I apologize for my ignorance.
Would you like to go in camera to discuss the observations that you have?
Senator Cools: I don't feel a need to. If others do, they can say so.
The Chair: What would you suggest? Would you like to go in camera to discuss this?
Senator Andreychuk: I don't. This is the first time I've seen a short version and a long version, so obviously someone has put a lot of thinking into that. I'd like to know how we got the two.
The Chair: In recent reports we started to take a little different approach. In the fifth and sixth reports you'll see we have what they call observations or executive summaries. Those would form a short report because they have bullet points. Then we go on to the rest of the report, which is the complementary discussion supporting the bullet points.
Senator Andreychuk: Are you saying if we adopted the short version that would be the executive summary?
The Chair: Yes.
Senator Andreychuk: And if we adopt the long version, that's the traditional attachment of observations to a bill?
The Chair: Effectively, you're right. The short version is the bullet points.
Senator Andreychuk: That is the summary. That clarifies it.
The Chair: The other is the same but it's basically a long form.
Senator Andreychuk: It's the attached observations to the report that will form part of your report to the Senate?
The Chair: On Bill C-15.
Senator Andreychuk: On Bill C-15, yes. Well, that's what it says here.
Senator Cools: (Inaudible).
The Chair: You're absolutely right, Senator Cools, and thank you for that. As you can see, it has been a very interesting period.
Can we look at the short form of the draft report on Bill C-15?
Senator Cools: Do you think I could have a copy, chairman? I have a copy of the long version but not the short.
The Chair: Thank you. We're making copies, Senator Cools.
Senator Cools: Okay, thanks.
The Chair: If you are able to piggyback off Senator Mitchell, that would be great. We thank you for that.
Colleagues, let's take a look at the observations on the short form, if you wouldn't mind. I would like to go through these quickly, then I'd like to have your comments. That may tie in, Senator Patterson, to some of the issues, and Senator Eaton, Senator Marshall, Senator Ataullahjan, any of our colleagues, please —
Senator Eaton: We approve them all. We wrote them.
The Chair: Absolutely. But I'd like to get your feedback because that gives an outlook in terms of how you look at the actual bill itself.
Sections 9, 26 and 34 of the bill propose maintaining the small business tax rate at 10.5 per cent rather than the gradual reduction of 0.5 per cent each year currently provided for in the law, which would drop the rate to 9 per cent by 2019. Your committee recognizes the immense contribution of small businesses to the Canadian economy and believes that the government must support their development to enable them to grow and create jobs. Your committee is concerned about the potential impacts of the proposed measure, which would take $825 million in additional tax each year from the pockets of small businesses.
If you go forward into the long version, you will see feedback from our witnesses, such as:
The representative from the Canadian Federation of Independent Businesses (CFIB) is, for her part, against the proposed measure. She explained that 83 per cent of respondents to a survey of its members, who represent more than 109,000 small and medium-sized businesses across Canada and who collectively employ over 1.25 million Canadians, believe that the reduction of the small business tax is the measure that has most helped their businesses.
We had government come in and say to us that there is another side to the story, but many witnesses in their testimony have said that the small business tax reduction has been an important element in the success of small business.
The other thing that has come up is that the government made a commitment in its election campaign to continue the reduction, I believe, of the small business tax credit.
So there is some controversy around this particular clause.
Senator Harder: This was a subject of discussion in the Senate when Minister Morneau appeared in Question Period. It was a subject when he appeared before this committee. It was a subject in Question Period of honourable senators of me, and I think that this accurately reflects the committee's concerns.
The government has been answered by ministers and by myself and has formed a view that the anticipated reduction of the rate for this year is going forward, but there is a broader set of considerations with respect to SMEs that the government is putting forward in its budget. It's entirely appropriate and legitimate for the Senate to raise its concerns and continue to monitor this issue as we go forward. I have no problem with honourable senators forming a view on this subject.
The Chair: Are there any other comments on the small business issue?
Senator Patterson: Agreed.
The Chair: Is there anything else colleagues would like to discuss on the small business issue, which is point 1?
Point 2 concerns replacing the Canada Child Tax Benefit and Universal Child Care Benefit with the new Canada Child Benefit. The issue there, of course, was the Office of the Parliamentary Budget Officer said the proposed measure would cost $3.8 billion more than the existing two benefits for a total of $22 billion a year. And we put in our comment in point 2:
While your Committee supports the purpose of the Canada Child Benefit, it is nevertheless concerned about the high cost of this measure at a time when the government is forecasting an annual deficit of $29.4 billion for the 2016-17 fiscal year.
Are there any comments on that particular observation?
Senator Mitchell: For the record, I want to say that no mention is made in this observation, of course, of the stimulative impact of this $3.8 billion on the economy. This money, given that much of it will go to medium- to lower- income families — in fact, it doesn't go to upper-income families to the extent that it used to — will be spent. It won't be saved. It will be spent and put into the economy very directly.
While it will help the quality of life, standard of living and reduce poverty of families, it will also be extremely stimulative because it will go to those people with incomes where they need the money. They will spend the money in the economy, and that will have economic development and expansionary impacts at a time when we all know the economy is slow because oil prices are very low.
None of that is reflected here. I would like to say, for the record, that it should be reflected in this document. It shouldn't be taken in isolation or in the negative sense portrayed in this particular observation.
The Chair: The point that was raised, in fairness to show some balance, if you look on page 3:
According to the Minister of Finance, 9 out of 10 families would receive more money under the proposed benefit than in the current system. According to him, eligible families would receive on an average $2,300 more a year.
That's in the full report. All I'm trying to say is that the Minister of Finance has made a point about what the program will do.
I think anyone recognizes that, whether it's the old system or the new system, there is a benefit to families. The issue is whether the new system is better than the old system. I think it will be proven over time.
The challenge that we face as the committee is that there's an additional hole of $3.8 billion that could be a deficit. That clouds the picture in terms of the deficit number, and that's why the committee as a group felt there was some sensitivity to the implementation of that. It is not that the whole program didn't make sense, Senator Mitchell. It's the cost of doing the program. Will the costs and benefits balance or will the costs outweigh the benefits? Will the benefit outweigh the cost? There are some issues here.
Senator Harder, did you have a point to raise?
Senator Harder: No, I just wanted to comment that the longer report does have the balance that you spoke of.
The Chair: Right.
Point 3: The tax credit for mineral exploration is a temporary measure that was instituted in 2000 to mitigate the impact of the global slowdown in exploration on mining communities across Canada. Section 35 of the bill would extend the tax credit for mining exploration for one year. The observations state:
Your Committee recognizes the important contribution of mining companies to the Canadian economy. However, in light of the testimony it heard, it believes it is time for the government to evaluate the results of the tax credit program for mining exploration to determine if it's still relevant in the current fiscal context.
Colleagues, this tax credit has been reviewed every year since 2000. In the past history of government, we saw the same thing occurring year after year. I think the feeling of the group was that yes, it's done at the last minute each year, but should it exist today in the context of where business is at?
Senator Patterson: Mr. Chair, I don't know if it's possible to make changes to these observations in light of the need to table it tonight, so I hesitate to make a critical comment. But you heard from a witness from the University of Calgary who questioned the return on flow-through shares. I don't believe you heard from the Prospectors & Developers Association of Canada or the Mining Association of Canada, who would have said that there is clear evidence that the mineral exploration tax credit leads to concrete economic dividends.
I would respectfully say that rather than a negative inference here, which comes from the phrase "However, in light of the testimony heard,'' it would be better to say, "In the absence of evidence both ways, the committee believes it is time for the government to evaluate the results of the tax credit program.'' Delete the phrase "However, in light of the testimony heard,'' because that phrase suggests there is some doubt about the worth of the program. I believe you could have found evidence to the contrary if you heard from the mining industry. I'm suggesting a more balanced approach if possible.
Senator Mitchell: I would like to second Senator Patterson's points. In fact, experience from my province shows that when the oil sands were given the status of mining companies in the late 1990s and could write off their costs in the way that mining companies did in an expedited manner, the oil sands significantly grew. There is all kinds of evidence that this kind of tax credit is very stimulative for the mining industry, including the oil sands. It has been instrumental in the development of the oil sands, which the previous government and this government and most Canadians understand has been extremely important to the growth in the Canadian economy since the late 1990s but even before that. So to blatantly suggest that the tax credit for mining exploration is not stimulative is, I think, very misleading and doesn't do this committee's observations justice.
The Chair: Any comments on that? Senator Cools?
Senator Cools: I have a very brief comment.
Your Committee recognizes the important contribution of mining companies to the Canadian economy. However, in light of the testimony heard, it believes it is time for the government to evaluate the results of the tax credit program for mining exploration . . . .
The paragraph should end there. You don't recommend that anybody evaluate the particular determined result in advance. It is not proper. Let's just say, ". . . for the government to evaluate the results of the tax credit program for mining exploration.'' Leave it there.
Senator Patterson: Period.
Senator Cools: You can't ask them to determine a particular conclusion. That's so improper. Put a full stop at "exploration.'' Let the government make its evaluation and tell us the results.
The Chair: I think one of the reasons this text was created was that since 2000 this tool has been reviewed each year. I think part of the thought process was, well, if this is so good, why does it have to be reviewed each year? Why don't you, like some policies, have it as part of the ongoing policy direction within that particular department? There seems to be an inference that if it's reviewed each year, there's something about it that may not justify it to be a long-term solution.
Senator Cools: That's a different question, chairman.
The Chair: It is a different question.
Senator Cools: You're introducing a whole new point and a whole new question.
The Chair: Right, but you have to understand that in our discussions, we brought this point up amongst ourselves numerous times by saying, "Well, why is it being reviewed every year?''
I've got a suggestion if it would be okay with you. Why don't we just say, "However, it believes it's time for the government to evaluate the results of the tax credit program for mining exploration.'' That is in line with what you came up with, Senator Cools.
Senator Cools: Yes, I think so.
The Chair: Senator Mitchell, if we take out "in light of the testimony heard'' —basically we want to see why this thing is reviewed each year.
Senator Mitchell: I agree.
Senator Marshall: Why would we take out that phrase? It is based on the testimony of witnesses. I do appreciate what Senator Patterson has said. I mean in the budget document itself this government now says it's going to pursue evidence-based decision making. I think what we have there is fine based on what the government now says it's going to do. We're not saying to cut it out. We're just saying based on the testimony that we heard, we think that they should evaluate the program and it's right in line with what the government says it's going to do anyway.
Senator Cools: Leave it there.
Senator Patterson: It's just that the testimony heard said that it's not a good tax credit. I respectfully suggest you could have had evidence from the Mining Association of Canada or PDAC showing how it does yield economic growth.
Senator Marshall: Even if we had those witnesses in and received two conflicting opinions, we would still say that based on the evidence we heard it's time to go back and evaluate the program because we can't get people to decide on whether it's a good thing.
I don't see anything wrong with what's there. We're just saying that we heard testimony that says it's kind of dubious, but we never swallowed that hook, line and sinker. We're just saying that it looks like that program may be doubtful, and the government is now saying it's going to make its decisions based on evidence, using expert advice, so now this is a good way to go.
Senator Mitchell: Two things: One would be a question and one would be a support point.
A witness told the committee "according to studies.'' It looks to me as if the witness is the author of "Rates of Return on Flow-Through Shares.'' Flow-through shares are very different from the write-off that a corporation itself gets. Flow-through shares are something an individual investor gets the write-off for, yet we're talking about a tax credit extension for mining exploration.
You're mixing apples and oranges. I'm not certain from that reference that that witness was talking about this at all. Flow-through shares are not the same, by any means, of a tax credit extension for mining exploration.
The second thing I'd like to emphasize is very positive. For the last decade or so there has been no recognition that tax credits to the mining industry or to any industry, tax credits therefore to the oil sands, were actually a subsidy — in fact, quite the opposite. The denial was that the oil companies, the oil sands, were not subsidized. I want to emphasize this, because it's very important, given where it's coming from. This line says that:
. . . these generous tax subsidies cost about half a billion dollars annually to the federal government and lead to inefficient investment.
These are generous tax subsidies to mining companies, including oil sands companies. That is a fundamentally different point of view than has been emphasized by the previous government over the last decade.
Senator Andreychuk: Committees generally stick to the evidence they have heard. I think to try to reopen the debate now and bring in extraneous — on Senator Patterson's point of view, take out "However, in light of the testimony,'' because it's obviously "in light of.'' Just say that the committee believes it is time and just leave it at that, and leave everything else there because it's contextual to your committee.
The Chair: Right.
One of the things I want to make sure we emphasize is that we have created this report from the people in the room at the time, and now we have some new members. We have some people who are coming in, like you, Senator Patterson, which we appreciate; but we don't want to be reincarnating this whole thing because we have been through this, and we want to move forward with what we have got.
The right thing to do, if it's okay with everyone, is just say, "However, it believes it is time for the government to evaluate the results of the program.''
Senator Patterson: Agreed.
Senator Andreychuk: Just take out, "However, in light of the testimony,'' because that's redundant. Just say, "The committee believes,'' and you have got everything you want after that.
The Chair: Take out "in light of the testimony heard,'' and just put, "However, it believes . . . .''
Senator Andreychuk: No. The clerk has it, I believe. "The committee believes . . . .''
Senator Cools: I would like to raise an issue on the sentence before that, lines 92 to 94. It begins:
A witness told the committee that according to studies, the tax credit for mineral exploration had negative economic effects. According to him, these generous tax subsidies cost about half a billion dollars annually to the federal government and lead to inefficient investment.
I would suggest that one opinion can't lead to such a major conclusion about the government or anybody. I would just leave it at "annually to the federal government.'' Full stop. His one opinion that this is an inefficient investment shouldn't carry —
The Chair: Senator Cools, this is the first meeting you have been at, and we appreciate you're here —
Senator Cools: But I've been to thousands of these meetings before.
Senator Eaton: I know, but you weren't here when we did this for hours.
Senator Cools: It doesn't really matter. That is immaterial.
The Chair: If you want to make a change, then we will just put it to a —
Senator Cools: I said just delete those few words. His conclusion is that it will lead to inefficient investment. There is nothing else that supports his one opinion. Why should the committee hinge itself to one lone opinion?
Senator Eaton: Perhaps we thought he was credible.
Senator Cools: Perhaps you didn't think at all.
The Chair: Senator Cools, please, let's avoid that type of attitude.
Senator Cools: It started over there, chairman, the beginning of it.
The Chair: Please.
Senator Cools: There is no need to say "please'' to me.
The Chair: I'm just asking you, and everyone in the room, let's control ourselves. This is not the way we run our committee, and it's surely not the way we're going to run our committee moving forward.
Senator Cools: I'm not used to being called out like this across the floor in any committee.
The Chair: Senators Cools, please. Let's all of us settle down.
Let's go with the original change that we have, which says, "However, the committee believes . . . .'' We will take out ". . . in light of the testimony heard . . . .'' Correct?
There is a relationship, Senator Mitchell, between giving a company a tax benefit and the flow-through shares because you can't do one without the other. I've been an active participant on a losing note in many flow-through share schemes, which I don't do anymore in my mature years, but I can tell you that one thing is connected to the other. Because you couldn't have the flow-through shares unless the program was initiated with a corporation or corporations. So there is a link. I'm not going to get into a big debate.
Senator Mitchell: That's fine. I disagree. I won't argue.
The Chair: Point 4 reads:
According to the existing legislation, the refundable tax credit for a labour-sponsored venture capital corporation (LSVCC) is 5 per cent.
We recognize that the former government was phasing this out. The new government is reinstating it. Witnesses noted that:
. . . many independent studies have shown that by offering a tax credit for LSVCCs, the government is doing significant harm to the economy and has done so since the introduction of this measure in the early eighties.
So we recognize this is not one government. This is history.
One of the real issues the government will have to address moving forward is the venture capital and what we're going to do.
Anyway, let's move forward unless there are any other comments.
Point 5 deals with the Income Tax Act and the Canada Revenue Agency. The sharing of information was a topic written up in the press. The comment we made is:
Your committee believes that the Canada Revenue Agency and the Chief Actuary should develop a robust information sharing agreement that stipulates taxpayer information is only shared to the extent needed and includes strong privacy protection measures.
That is a topic I think hopefully we can all agree upon.
We had a higher amount of money asked for by StatsCan because this is the year of the long form census. Every five years, there is a significant blip in terms of the money required.
Point 6 is the StatsCan methodology change, and there are two issues. There is the StatsCan request to do a long- term summary of the census and the northern territories.
We had the Premier of the Northwest Territories on Skype with us the other day. I think you're all aware of the fact that with the change in methodology by StatsCan, the calculation was changed. The Northwest Territories had $88 million less than they expected. The government came back and adjusted the numbers so that they had a higher number, which was restored to $67 million. The point here is that the small provinces and territories need the money more urgently sometimes than the bigger territories. The committee asked the government to return to negotiations with the territories in order to reinstate the shortfall in territorial financing. We think that is something the government should take a serious look at.
Point 7 goes to the parliamentary authority to increase market borrowing. We recognize that in 2007 the former government instituted the ability to make executive decision without having to go to the Governor-in-Council. Senator Moore argued that point for probably five years. The new government has put in a combination of making sure you go to Parliament when making an extraordinary ask, and at the same time the extraordinary powers will still rest with the government in case of extraordinary circumstances. All we want to make sure is that there is a balance between both systems. If extraordinary powers are needed, fine. If extraordinary money is required, Parliament has to be recalled. We want to make sure there is a balance.
Point 8 is the issue of Old Age Security. We were told that 80,000 folks now fall into that 65 to 66 bracket. The government made the move to take care of the 80,000 to 100,000 seniors who would be impacted by working to the age of 67 because they would be losing income. This is why they rolled it back.
The experts we spoke with said that with living longer, tremendous stress will be put on the system by rolling it back, and we suggested the government take a look to make sure that they are making the right decision. We think they might want to look sometime at extending it back out to 67 because most major countries in the world are looking at having people work longer with the demographic age being extended.
Point 9, "Defining the Middle Class'': We have asked for definitions of the "middle class.'' We have asked for some form of understanding what the middle class is. This really reflects on Bill C-2, which I brought up with Senator Harder in Question Period, but there is definitely an issue. If you're going to tax the rich, you make sure that it goes to the people that you want, which is your $45,000 to $90,000 group. It should not be going to $110,000, $120,000, $140,000, $160,000 or $180,000 when that was not the intent of what was asked. We'll have a discussion on that when Bill C-2 comes out. But that is tied into the budget as we move forward.
We should define middle class Canadians are so that the budget measures have their intended effect. Simply said, if you're going to give from the people earning $200,000 to someone earning $180,000, $170,000, $160,000, or $150,000, it doesn't make sense. Target the money where it should go.
Point 10: The bill was divided between the National Security and Defence Committee, the Banking Committee and the Social Affairs Committee to address particular issues. Those issues are on the last page. Lines 257 to 259 relate to the Defence Committee and the benefits for injured Canadian Forces members. You will see the following:
the proposed changes to the Permanent Impairment Allowance and condition of "totally and permanently incapacitated'' can be assessed only once the regulatory changes are known; and
the increase in Earnings Loss Benefits from 75 per cent to 90 per cent is a step forward, but the increase would be minimal for veterans in the lower ranks.
Those are two of the controversial issues that came out of those particular reviews by the National Security and Defence Committee.
For the Banking, Trade and Commerce Committee, there are four points:
extending the current statutory sunset date for the renewal of financial institutions' governing legislation by two years, which would provide more time to conduct a review of legislation;
providing protection for provincially regulated cooperative credit societies that are in the process of becoming federal credit unions;
creating a bail-in regime whereby the Canada Deposit Insurance Corporation would be able to convert debt into common shares of a domestic systemically important bank in the unlikely event of its failure; and
amending the trade remedy procedures in the North American Free Trade Agreement.
Basically, that just says that in cases where small claims could be made, they should be reviewed anyway.
So those were the points from the Banking Committee. They had no problems with those particular issues.
For the Social Affairs Committee, there were two issues. There was insufficient clarity and transparency with respect to the criteria used to determine EI economic regions. This flows from some of the regions that weren't given the EI break when the disaster took place out in Western Canada with oil prices plunging and then followed up by the Fort McMurray fires. It states at line 280 that "small businesses may be negatively affected by the decrease in the waiting period for the payment of EI benefits.''
A lot of content was discussed and reviewed and is put in our report. We would hope that in presenting this report that senators will take the time to go over at least the executive summary with the bullet points, and we would hopefully have a chance to influence the government to take a further look at the points that have been outlined.
Are there any other comments?
Senator Patterson: Mr. Chair, I'm very grateful that the committee paid such attention to the shortfalls in the territorial transfer and went out of its way to hear from territorial witnesses.
Just a small point, and I make this respectfully: The bullet on the territories, point 6 in the short form, describes them as "small jurisdictions.'' Now I know the population is small — I will readily admit that — but they are the largest jurisdictions in Canada. So I wonder if the committee might consider describing them simply as "jurisdictions.'' I would respectfully suggest saying, "As these jurisdictions rely heavily on federal transfers, your committee urges the federal government . . . .'' That would also require a corresponding change to line 162 of the long form.
I am wondering about the reference to the $88 million in that phrase.
The Chair: Slow down for a second, Senator Patterson.
At line 49 we would take out "small jurisdictions'' and it would then read, "As these are jurisdictions that rely on federal transfers . . . .''
Senator Patterson: These jurisdictions rely heavily on federal transfers. I would say it's about 90 per cent in Nunavut. So, "As these jurisdictions rely heavily on federal transfers . . . .'' Take out that they are small. Some people will be touchy about that.
If you could put in "annually'' for the $88 million, I think that would be helpful.
The Chair: Is that an accurate number when you say "annually''?
Senator Patterson: Yes.
The Chair: That's what the jurisdictions want; correct?
Senator Patterson: It was changed from $88 million annually to $67 million annually. I just wonder if "annually'' would assist.
The Chair: It depends on the negotiation. I would like to leave that where it would be, Senator Patterson. I understand where you're going with it. Let's make sure this is a negotiation that takes place. Let's not preclude what the actual numbers are because it will be negotiated annually. Is that fair?
Senator Patterson: Thank you.
The Chair: If there are no other questions, is it agreed that I report this bill, with observations, to the Senate?
Hon. Senators: Agreed.
The Chair: Thank you.
Is there anything else to do?
I thank you all. That was almost as invigorating as physical workout. Thank you very much.
(The committee adjourned.)