Taxation, Education and Immigration: Enhancing Canada’s Competitive Advantage

May 29, 2008

Thank you for the opportunity to appear this afternoon to discuss the provisions of Bill C-50. 

The views of the Canadian Council of Chief Executives on Budget 2008 are a matter of record.  We believe that it builds on the important tax cuts announced in the October 2007 Economic Statement by adding several measures that will have a positive impact on Canada’s competitiveness at relatively low cost to the treasury. 

I will offer some thoughts on three specific provisions of this bill: those affecting Employment Insurance, student aid and immigration.  But first I would like to highlight the results of some recent research that we commissioned on corporate taxation.  Tax policy plays a central role in enabling Canadian communities to attract business investment that creates well-paid and highly skilled jobs and is especially relevant to large companies doing business internationally. 

Last year, we agreed to work with PricewaterhouseCoopers (PwC) to produce a comprehensive picture of the tax revenue generated by the activities of major Canadian enterprises.  PwC’s Total Tax Contribution framework measures four types of payment: taxes borne directly by businesses; taxes collected by businesses from customers and employees that are remitted to governments; other payments such as rents and royalties; and tax compliance costs. 

 
Three key messages emerge from this first Canadian study:

1. Corporate income tax is only one aspect of the corporate tax burden.  Corporate income tax represents only two of 49 different taxes and 18 other payments.  (This long list of taxes and fees includes only property tax at the municipal level.)  For every dollar in federal and provincial corporate income tax, companies paid an additional 82 cents in other taxes and 67 cents in other payments to governments. They also were required to collect and remit a further $3.41 from customers and employees.


2. Large enterprises make significant tax contributions.  In 2006, the 39 companies that participated in this survey bore $10.5 billion in Canadian taxes and collected a further $19.8 billion on behalf of governments.  Those with the 10 largest contributions (25 percent of the sample) accounted for 64 percent of the taxes borne and 68 percent of the taxes collected.


3. The complexity of Canada’s tax system makes compliance costly.  Participants spent an average of $2.1 million and required 11 full-time employees in 2006 just to gather data, make payments, deal with revenue ministries, analyze legislation and pay external tax consultants. 

Canada’s largest enterprises are well-recognized as drivers of innovation and productivity, but many Canadians do not appreciate how important they are as taxpayers. 

The activities of even a handful of major enterprises can generate tens of billions of dollars in tax revenue.  If Canadians care about maintaining high-quality public services, we need to ensure that public policies encourage the growth in Canadian communities of enterprises with the scale to compete and win globally.

With that, let me turn to three other drivers of competitiveness that are addressed specifically in Bill C-50.

With respect to the Employment Insurance system, the business community has argued for years that Employment Insurance premiums should be set by an arms-length body and that the funds collected through these premiums should be managed in a segregated fund.   We therefore strongly support the creation of the proposed Canada Employment Insurance Financing Board. 

We have a continuing concern about the tendency to use the Employment Insurance system to provide benefits that might better be characterized as social programs.  Over the longer term, we believe that money raised through Employment Insurance premiums should be focused more precisely on its core mandate of providing insurance against temporary job loss and that other programs should be funded through general revenue.  However, the creation of the new Board marks a critical step in the right direction.  

Next, let me speak to the issue of student aid.  In an increasingly knowledge-based economy, we must ensure that every single Canadian is both able and motivated to participate in post-secondary education.  This may be through university or college, through apprenticeships or through other forms of training and lifelong learning within and beyond the workplace. 

The Canada Millennium Scholarship Foundation got off to a rocky start, but over time found ways to work with provincial governments and became a catalyst for innovation in improving access to post-secondary education.  The government has opted to dissolve the Foundation and replace its scholarships with a new and more robust approach to student aid.  The design of the new rules will be critical in ensuring that federal resources allocated to student aid are as effective as possible in overcoming financial barriers to success in post-secondary education. 

I also believe that the government should preserve and build upon the Foundation’s research capacity.  I would suggest passing its research mandate to the Canadian Council on Learning, which has become an important and credible source of information about how Canada is doing in education and what policies work best.  This in turn will require renewal of the CCL’s federal funding, which otherwise will expire next April.

Finally, I would like to speak to the provisions of Bill C-50 that affect immigration.  Canada is facing serious and growing shortages of skilled labour.  These shortages are most acute in the resource sector, but they are affecting businesses of all sizes, in every industry and in every region.  These shortages will only get worse as our population ages.

Both Canadian employers and potential immigrants today face a huge backlog of some 900,000 applications that under current rules must be processed in the order they are received.  The result is that a skilled worker, ready to contribute to Canada’s economy, may have to wait years before even having his or her application processed.

This legislation would give the Minister of Citizenship and Immigration some discretion to set priorities within the system.  This provision should help to speed the flow of immigrants with skills that are urgently needed in our economy.  While any legislative provision for ministerial discretion may cause concern, the process outlined in this bill for issuing ministerial instructions does provide both transparency and accountability. 

The current system is not working for immigrants and is not working for Canada.  We need improvements now and we cannot waste years more in pursuit of perfection.  Whatever flaws anyone may see with the process proposed here, it represents a clear improvement that will start to make a difference right away.

On all three of these issues — Employment Insurance, student aid and immigration — Bill C-50 moves public policy toward better solutions.  In each case, there is more work to be done.  But we support the intentions of the bill and are prepared to work with the government to ensure that the resulting new programs and institutions achieve the best results possible for Canadians.