Ottawa skipped internal study on $550M tax credit

Relied instead on Canadian Federation of Independent Business.

November 20, 2014   by CANADIAN PRESS

OTTAWA — The Harper government passed up conducting its own internal analysis on the job-creation potential of its $550-million small-business job tax credit, relying instead on numbers produced by an interest group, the finance minister revealed.

Joe Oliver told the parliamentary finance committee Ottawa’s decision to introduce the measure was based on the research of the Canadian Federation of Independent Business.

“The department does not analyze every measure that we introduce,” Oliver told the hearing as he responded to a question.

“If we don’t do it, we look to those who have expertise and we did in this case to the Canadian Federation of Independent Business.”

The Canadian Federation of Independent Business has estimated the credit would create 25,000 person-years of employment over the next several years. A position that employs a worker for one year amounts to one “person-year.”

But Canada’s parliamentary budget office has argued the credit will create only 800 net new jobs in 2015-16, while a freeze in employment insurance premiums could cost the economy 10,000 jobs over the same period.

The budget watchdog’s study said that overall, the credit would create about 1,000 “person-years” of employment with a price tag of $555,000 for each person-year.

Beginning in 2015, the measure will effectively lower EI premiums for small businesses with annual contributions of less than $15,000.

Critics of the job credit have said the government should have gone further and made a direct cut to premiums, which they say would provide an immediate benefit to all businesses and employees.

The government has indicated a broader reduction to payroll taxes won’t happen until 2017.

At the committee hearing Nov. 19, Oliver was also asked whether he was aware of the methodology used by the Canadian Federation of Independent Business to produce its estimate.

He replied: “I am aware that they have spoken to their members and they do the regular type of analysis that you’d expect them to do.”

When queried whether he asked his department to look into the study released by the parliamentary budget office, Oliver replied that he receives many estimates from a variety of organizations.

“Sometimes one looks at them and decides on the face whether they seem to make sense,” he said of the many estimates his office receives, noting it was worth listening to the Canadian Federation of Independent Business because of its “expertise on the ground.”

“When the CFIB said it’s a big, big deal for small business, it’s good news for people looking for jobs,” he said.

“We’re influenced by that when they say that small businesses should be thrilled with this announcement, because time and time again they’ve told us that payroll taxes like EI are the biggest disincentive to hiring.”

Oliver said he is confident the measure will lead to significant job creation.

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