Yesterday, at a meeting in Vancouver between the provincial governments and the Government of Canada, an agreement in principle was reached over expansions to the Canada Pension Plan, or CPP, which will begin in 2019. This would replace the Ontario Retirement Pension Plan, or ORPP, which had been a source of grave concern to many Ontario businesses. Is it all good news, though? Read more below.
The Government of Canada, at a meeting with representatives of the governments of British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador, has come to an agreement in principle over expanding the Canada Pension Plan, or CPP. Quebec and Manitoba have agreed to remain part of future discussions.
The Government of Ontario had previously committed to enacting the Ontario Retirement Pension Plan, or ORPP, at the provincial level. The business community and the Chamber network were apprehensive about the Plan, citing increased costs that essentially functioned as a payroll tax at a time when the cost of doing business in Ontario was already steep and increasing. The provincial government has repeatedly stated that it would abandon the ORPP if it felt there was a suitable replacement at the federal level, however.
Now that the federal and provincial governments have reached this agreement in principle, it appears that the ORPP is off the table. The new agreement is an improvement, and will certainly save Canadian taxpayers in overheads, administrative costs, and potential overruns, since the CPP is building on existing administration rather than creating it from whole cloth. The longer and more gradual roll-out period will also make it easier for businesses to adjust than the ORPP would have.
However, the new agreement is not ideal for Canada’s businesses, as it still proposes mandatory increased costs that will practically function as a payroll tax for employers and employees alike. While the situation is somewhat better for businesses in Ontario, who were looking at increased costs through the ORPP and have now had something of a reprieve, it is worse for businesses elsewhere in Canada, now anticipating brand-new payroll expenses.
In partnership with the Ontario and Canadian Chambers of Commerce, our advocacy to governments at both levels stressed that businesses were incurring increasing costs, and we asked that government not add additional burdens on top.
We suggested that pension reform would be best tackled by a voluntary option for employees to contribute more to their own retirements, rather than a mandatory requirement for employees and employers to contribute alike. Policy alternatives such as more options for tax-free savings and investment, or tax incentives for employers to offer pension schemes as part of an employee benefits plan, would also have been good choices. In all cases, the policy direction is the same: Canadians and Canadian businesses would retain the option to decide what is best for themselves.
After all, a recent survey showed that more than 4 in every 5 Canadian households are in a good financial position for retirement, even amongst reports of increasing personal debt and decreasing saving. Increasing pension contributions for every worker and every business in Canada to cover the 17% who are less than comfortable is a blanket solution to what is not a general problem.
We would hope, at the least, that the Canadian and Ontario governments would offset some of these costs for business by making a serious effort to lower electricity and energy prices, for instance, or to reverse recent cuts to tax credits for research and development. The GNCC has lobbied for both of these, and will continue to do so. We will endeavour to remain a part of the conversation on pension reform, and are committed to representing the interests of the Niagara business community in that conversation.
Read the Government of Ontario’s announcement.
Read the Government of Canada’s announcement.