Entries in CPP (3)


CPP enhancement could spell the end of the ORPP

From the Ontario perspective, the agreement in principle to enhance the Canada Pension Plan is a good thing for business.  The solution is one that will still have impact, but less so than what we were facing here in Ontario. 

According to Ontario Finance Minister Charles Sousa, this will be the end of the Ontario Retirement Pension Plan (ORPP), should the agreement be ratified by July 15, 2016.  If that happens, there will not be a new 1.9 percent payroll tax.  It means the government administration required to manage the ORPP will no longer be needed.  It means that small businesses in Ontario will not have to add a line to their payroll deductions.  It means that a province-by-province approach to pension reform is avoided and that would have been a costly venture.  

“A province-by-province approach would have increased regulatory fragmentation and thus administrative burden.  Ontario is doing the right thing by moving away from the ORPP in order to support a coordinated solution,” said Allan O’Dette, President & CEO, Ontario Chamber of Commerce.  

The devil is in the details.  The nine ministers have agreed in principal to the following: 

  • The income replacement level will be increased to one third of income
  • The upper earnings limit will be targeted at $82,700 upon full implementation in 2025
  • There will be a gradual 7-year phase-in beginning on January 1, 2019 consisting of:
    • A 5-year contribution rate phase-in below the Yearly Maximum Pensionable Earnings (YMPE), followed by:
    • A 2-year phase-in of the upper earnings limit
  • An increase to the Working Income Tax Benefit (WITB) to help low-income earners
  • Tax deductibility for the enhanced portion of the employee CPP contributions 

The Peterborough Chamber was very vocal in presenting the impact of ORPP to the provincial government through presentations to the Associate Minister of Finance and letters to the Minister of Finance.  Through the Ontario Chamber of Commerce, the Chamber Network was able to delay proposed implementation of the ORPP by one year to 2018.  

Both the Peterborough and Kingston Chambers of Commerce were at the leading edge of pension reform when recommendations were submitted to government in 2015 asking that employees be allowed to contribute up to 1.9% more to CPP.  The goal of the recommendations was to see an enhanced CPP in order to avoid a piecemeal province-by-province approach.  

When the CPP enhancement is fully phased-in by 2025 the total increase in CPP contributions by employees and employers will be 1%, which is almost half the ORPP.

“While we were hoping to see little or no impact on businesses, we are glad to see that consideration has been given to the need for a long phase-in period,” said Stuart Harrison, President & CEO, Peterborough Chamber of Commerce. “The ability for businesses to prepare and understand changes is paramount to ensuring Ontario stays competitive.”

The ministers also agreed to three measures for implementation: 

  • introducing a long and gradual phase-in starting on January 1, 2019 that will allow more time for businesses to adjust
  • enhancing the federal Working Income Benefit as a means of offsetting the impact of increased contributions on low-income workers
  • providing a tax deduction - instead of a tax credit - for employee contributions associated with the enhanced portion of CPP in order to avoid increasing the after-tax cost of saving for Canadians

 The Canadian Chamber of Commerce (CCC) still has concerns about the cost of the program and impact the plan will have on cash flow and business investment.  However, because the business community has been at the table for the breadth of the discussion around pension reform, we hope to continue to work with the federal and provincial governments as they move forward.  

Quebec and Manitoba are the only provinces not to sign on.  Quebec is interested in some enhancement that works better with the Quebec Pension Plan.   

The goal is to have the plan ratified by Friday, July 15, 2016.


Federal mandate letters reveal government's stance on business

There was great interest last week when Prime Minister Trudeau released the mandate letters outlining the responsibilities and commitments of his new cabinet.  

In truth, the business community can be connected to every ministry of government, however, there are a few including Small Business, Employment, Workforce Development and Labour and Finance that have direct impact.

In the mandate letter to Finance Minister Bill Morneau, Prime Minister Trudeau asks him to “meet with your provincial and territorial colleagues at your earliest opportunity to begin a process to enhance the Canada Pension Plan to provide more income security to Canadians when they retire.” 

“There is some comfort, in that, there doesn’t seem to be a rush to action on CPP as was felt there might be when the Liberals were elected,” says Hendrik Brakel, Senior Director Economy, Finance and Tax Policy, Canadian Chamber. “However, the Canadian Chamber is watching with concern any possible increases to payroll taxes such as CPP as employer contributions act as a tax that makes it more expensive to hire staff, which can depress employment.” 

At the Canadian Chamber of Commerce (CCC) Annual General Meeting in Ottawa last month just prior to the election, the Peterborough and Kingston Chambers of Commerce put forward a policy resolution on reforming the Canada Pension Plan to allow employees the option of contributing more to the plan.  

The CPP discussions could also have an impact on the implementation of the proposed Ontario Retirement Pension Plan (ORPP).  The next opportunity to learn more about the plan will be in December when an economic analysis by the Conference Board of Canada is released.

Meanwhile, the Minister of Employment, Workforce Development and Labour MaryAnn Mihychuk is tasked with, “improving our Employment Insurance (EI) system so that it is better aligned with the realities of today’s labour market and serves workers and employers”.  Included in the seven specific tasks identified are reducing EI premiums and ensuring EI contributions are only used to fund EI programs. 

While that statement seems to be promising, the concern is that workforce training is still considered part of EI programs. That is an issue Brakel also speaks to: “the other major payroll tax, employment insurance, has been pulling in far more money than it was paying out for many years and so it was set to decline from 1.88% to 1.47% in 2017. The Liberals have promised to tax an extra $500 million of revenues from keeping the EI rate at 1.65% in order to pay for additional training. The Canadian Chamber has for a long time been vehemently opposed to using EI premiums for purposes other than funding the insurance it provides.”

The Minister of Small Business and Tourism Bardish Chagger has been asked to work with the Minister of Finance as the small business tax rate reduction is implemented.  This is a previous government promise that the Liberals are keeping.  The small business tax rate will be reduced from 11 percent to 9 percent over the next few years.  Also in the Small Business mandate is a request to work with the Minister of International Trade to ensure that a new international trade strategy is supportive of small and medium-sized enterprises (SMEs), so that they are able to take advantage of government financing and export-oriented supports.  

Brakel also identified an interesting point in the Finance Minister’s letter: the creation of a Canadian Infrastructure Bank to provide low-cost financing (including loan guarantees) for new municipal infrastructure projects in our priority investment areas.  “The federal government has a very high credit rating, making this type of financing available will help municipalities,” says Brakel. “The Chamber is very much aware of the need for economic infrastructure and this will support municipalities with their infrastructure needs.”

Further to the commitment of the Chamber Network nationally, heading into the CCC AGM, Chambers across Ontario signed onto a resolution emphasizing the need for infrastructure to be a focus of government. One of the five recommendations is to provide stable, predictable and equitable financing in all projects, including advance notice of available funds, criteria and application processes to ensure the projects needed have access to the funds available in a timely manner.  The resolution was passed by delegates at the AGM.  

By and large, the mandate letters fall very much in line with the campaign promises of the Liberal party.  As the government continues to unfold its mandate and release its throne speech in the first week of December, the Peterborough Chamber will be watching and commenting as necessary to ensure the legislative framework helps strengthen business. 

Comment through the "Peterborough Chamber" group of LinkedIn.



What's on the minds of Peterborough businesses?

The stack of issues impacting the business community is growing.  In fact, you could say that 2015 has been a growth year, but not always in a good way.  With all of the issues and concerns that our local businesses must wade through to stay compliant, to plan for their future, to know if their business is moving in the direction they want and whether or not they’re ready to hire, perseverance is required.  Peterborough has seen a number of new businesses open in our downtown and industrial park, and along our two other main commercial thoroughfares, Lansdowne and Chemong. For that, we thank you.  

At the Peterborough Chamber of Commerce we’ve been working with the Chamber network to make sure your concerns are heard at all levels of government.  This includes programs to help bring taxes to a level consistent with other like communities, red tape and regulation, pension plans, workplace insurance, infrastructure needs for transportation of goods, trade deals, and reaching new markets. 

Municipally, we have fought to get the Tax Ratio Reduction Program back into the City of Peterborough budget.  Our partners in this venture the Kawartha Manufacturers Association and Peterborough and the Kawarthas Association of Realtors see the value in the program, which will put Peterborough on a more level playing field with communities like Barrie.

Provincially, the list of areas of concern has grown over the past year.  The proposed Ontario Retirement Pension Plan (ORPP) is still set to come into effect January 2017 on a phased in basis.  Employers would pay 1.9% for each employee to a maximum of $1,643 per year.  Employees would contribute a matching amount. There are some exceptions and the provincial government is currently saying that if the Canada Pension Plan (CPP) is improved upon then there may be no need for the ORPP.  The Peterborough and Kingston Chambers of Commerce successfully presented a policy resolution in Ottawa asking the federal government to allow employees to contribute more to CPP should they choose.  The Canadian Chamber of Commerce will now be able to take that recommendation from the business community to the federal government.

The rate framework of the Workplace Safety and Insurance Board is in the midst of major overhaul.  Some of the changes include the number of rate groups and how a rate is determined.  The Peterborough Chamber was involved in a taskforce examining the issue and submitted a report to the provincial government representing the business perspective.  

Federally, the business community and the Chamber Network are advocating for projects such as Energy East, which will not only be a national job creator but an opportunity to use more of Canada’s natural resources in our own country.  Also on the list is help for innovation investment in new energy technologies, a place in the Trans Pacific Partnership (TPP) deal, and an improved and more open relationship between the business community and rail.

The graphic shows a number of issues the Peterborough Chamber of Commerce is currently working to address through our lobbying and advocacy efforts. If there is an issue you feel we have missed please let us know through  sandra@peterboroughchamber.ca or 705.748.9771 x215.

The mission of the Chamber is to strengthen the business community, speak as one to government, and push for legislative change that allows Peterborough businesses to stay competitive.

Look for our Policy Report Card 2014 under "Lobbying" at peterboroughchamber.ca

Comment through the "Peterborough Chamber" LinkedIn group.