The Canadian Bankers Association is pleased to provide its comments with respect to the 2014
Ontario Pre-Budget Consultations.
The Canadian Bankers Association works on behalf of 59 domestic banks, foreign bank
subsidiaries and foreign bank branches operating in Canada and their 275,000 employees. The
CBA advocates for effective public policies that contribute to a sound, successful banking system
that benefits Canadians and Canada's economy. The Association also promotes financial literacy to
help Canadians make informed financial decisions and works with banks and law enforcement to
help protect customers against financial crime and promote fraud awareness.
In 2013, Canada’s banks were once again recognized as being the strongest and soundest in the
world – the sixth consecutive year that the World Economic Forum has ranked the Canadian
banking industry ahead of its international peers. The global recognition of our domestic banking
industry has generated a strong sense of pride in the way we bank in Canada. While other major
economies are working towards strengthening their respective financial systems through the
implementation of new regulatory standards, Canadians recognize the value that their banks
provide to them and to the broader economy. Canadians have confidence in their financial
institution – in their day-to-day banking as individuals, as business owners, investors, or planning
for a secure retirement.
A strong banking industry is integral to the Ontario economy as it is an important hub of Canada’s
financial services sector. In 2012, the banking industry accounted for 4.4 per cent of the provincial
economy, contributing approximately $30 billion to the gross domestic product. Banks directly
employ almost 160,000 people in Ontario in their headquarters, regional offices and in 2,700
branches across the province. Banks also support the economy by acting as a key source of credit
to help businesses grow and thrive in Ontario. As of September 2013, total authorized credit to
Ontario businesses totaled $505.5 billion, of which $75.3 billion was for small and medium-sized
Our submission offers the banking industry’s views and recommendations on a number of important
issues to help improve the lives of Ontarians, including a competitive tax policy, Pooled Registered
Pension Plans, the cooperative capital markets regulatory system, registered disabilities savings
plans, and financial literacy.
Competitive Tax Environment
The Government of Ontario has made significant strides to improving the competitiveness of the
provincial tax system by reducing the corporate income tax rate (CIT rate) from 14% in 2009 to
11.5% as it stands today. While improvements have clearly been made, the CBA believes the provincial government can take further steps to improve the competitiveness of its tax system in
order to promote economic growth and job creation in the province.
We applaud the government’s efforts to reduce its deficit through the careful management of
spending and are pleased it is on track to eliminate the deficit by 2017-2018. Since a balanced
budget lays the groundwork for a strong economy, the CBA has been supportive of governments at
all levels in their efforts to eliminate deficits. In that regard, we agree with the Minister of Finance
that stronger economic growth is the most effective path towards balancing the budget. A
competitive tax environment stimulates growth by providing a strong incentive for businesses to
invest and innovate in Ontario rather than other jurisdictions. More investment and innovation in
Ontario facilitates job creation leading to a broader tax base. And with greater economic activity the
government will benefit from increased revenues to fund important investments in health care,
education and infrastructure to improve Ontario’s standard of living. This is particularly true in times
of economic uncertainty when it is important that governments maintain a competitive tax system
despite fiscal challenges.
Following Budget 2012, we had expressed concerns with the announced delay in the planned
corporate income tax rate reduction to 10 per cent on July 1, 2013. In that announcement, the
government committed to resuming the corporate income tax rate reduction schedule once the
budget was balanced. We believe that the government should remain committed to tax
competitiveness since this is one of the keys to sustainably making the economy more
productive. Now that Ontario is on track to balance its budget, we would encourage the
government to announce a schedule for reducing the corporate income tax rate to 10 per cent
according to its previous commitment. This would provide greater certainty to businesses that
require significant lead time to develop their investment plans.
We also appreciate the steps taken by the Ontario government in recent years to eliminate capital
taxes, particularly those on financial institutions. We continue to be concerned however with recent
measures and proposals in some provinces to increase or possibly re-introduce these
counterproductive taxes. Taxing the capital of financial institutions undermines international efforts
to strengthen the financial system and economic stimulus measures closer to home. Each dollar of
capital held by a financial institution supports many dollars of financing to businesses in other
sectors of the economy. Hence every dollar of capital directly lost to taxation at the provincial level
also reduces, by a significant multiple, the amount of credit available to businesses across Canada.
The government should announce a schedule for returning to its commitment to reduce the
corporate income tax rate to 10 per cent, thereby providing certainty to businesses to make
plans for investment in the province and stimulate job creation.
Continue to support the elimination of the capital taxes that target financial institutions.
Pooled Registered Pension Plans
The CBA commends the Ontario government for moving ahead with a consultation on a framework
to allow Pooled Registered Pension Plans (PRPPs) to be offered in Ontario, as agreed by federal,
provincial and territorial finance ministers in 2010. Ontario’s commitment in this area is vital for
creating a truly national solution that meets the needs of many Canadians who have no access to a
workplace pension due to the cost, complexity and risk associated with establishing workplace
The CBA participated in the government’s recent public consultation on a PRPP policy framework
and shared our views on how the PRPP could be structured to meet the government’s policy
goals. Overall, we believe that the success of the PRPP in Ontario and across Canada is best
achieved by measures that encourage participation so that the benefits of scale are fully
realized. Investment and administration costs will decrease as the number of participants (both
employers and individuals), and the total assets under management, increase. Accordingly, the
regulatory regime must not impose costs in excess of what is required to meet the needs of
employees and protect their financial interests. This means that, to the extent possible, PRPP
legislation should be harmonized on a national basis to reduce the costs and complexity of
Banks are well-placed to deliver a low-cost savings vehicle given their relationships with almost 1.6
million SMEs across Canada, as well as significant experience in financial and risk
management. In particular, the PRPP can complement the array of business accounts, financing
options, payment and payroll services, and SME tools and resources that banks offer and which
help support the success of SMEs. We believe it is important to move the PRPP file forward on a
national level and not allow it to be delayed by continuing debates about other elements of
Canada’s retirement savings system.
Ontario should enact PRPP legislation to expand pension plan coverage for individuals in
order to offer an additional vehicle for retirement savings. The framework should ensure
harmonization with the federal PRPP framework, avoid imposing undue obligations and
costs on employers and administrators, and allow banks to be PRPP administrators.
Registered Disability Savings Plans
The federal government introduced Registered Disability Savings Plans (RDSPs) legislation in 2008
to assist in providing long-term financial security for individuals with disabilities. The legislation
combines elements of tax-deferred savings with an assistance program providing grant and bond
payments to individuals. The plan may be opened by the beneficiary or by a parent if the plan is opened for a minor child. The plan holder is responsible for the operation of the plan and makes
decisions regarding contributions, investments and withdrawals.
In certain instances, problems have been identified when the beneficiary of an RDSP is over the
age of 18 and lacks capacity to enter into a contract due to the nature of his or her disability.
Current rules effectively limit plan holders to only being the beneficiary’s legal representative.
However, appointing legal representatives normally involves a lengthy and expensive court process
to seek a declaration that the beneficiary is legally incompetent. Questions of appropriate legal
representation in these cases are a matter of provincial and territorial responsibility. In 2012, the
federal government enacted a temporary solution to allow adults with cognitive disabilities a better
opportunity to participate in RDSPs by expanding the definition of who may be the plan holder. This
temporary solution allowed qualifying family members to become the plan holder in situations
where the individual’s ability to enter into a contract is in doubt. Since this change will cease to
apply at the end of 2016, however, the federal government has sought to work with the provinces to
implement a more standardized and streamlined process to better meet the needs of these
The CBA has been an active participant in the Law Commission of Ontario’s consultation on the
question of legal representation in the context of an RDSP. We are currently in the process of
preparing a submission for that consultation process to provide a more detailed report of the
industry’s views. The banking industry has been and will continue to be a very strong supporter of
the RDSP program and any comments we provide will be made in efforts to ensure the continued
effectiveness of the RDSP.
We urge the Government of Ontario to continue working with the other provinces and the
federal government to develop a harmonized and permanent solution to address the issue of
legal representation for individuals seeking to establish an RDSP.
A Cooperative Approach to Securities Regulation
The CBA congratulates the Ontario government for its ongoing leadership and commitment to the
creation of an efficient national securities regulatory framework. The joint agreement with British
Columbia and the federal government to establish the cooperative capital markets regulatory
system is a significant step forward to improving investor protection, providing greater efficiencies in
capital markets, and reducing the cost of raising capital. For many years, the CBA has advocated
for efficient securities regulation through a national framework. We appreciate the leadership
shown by the three governments to address the current fragmented system. It remains important
for all provinces and territories to participate in this cooperative approach to truly achieve the most
streamlined and efficient regulatory system possible. The banking industry is committed to working with all governments in Canada and will continue to encourage other provinces to join in the
discussions to establish the cooperative capital markets regulator.
The CBA commends the Government of Ontario for its commitment to providing financial literacy to
young people in the classroom. Financial literacy is a priority for the CBA and its members. Banks
are an active and essential part of the daily life of most Canadians – 96 per cent of Canadians have
an account with a financial institution, and millions turn to banks every day for services and advice
to help them save, plan for retirement, start businesses and buy homes. As a result, banks already
provide their customers and potential customers with a wealth of educational material, information,
tools and services geared to helping them make the best financial choices.
Banks in Canada are also leaders in supporting financial literacy activities and initiatives in
communities across Canada. There are many community organizations delivering financial literacy
to vulnerable groups across Canada and many of these programs are supported by banks and
individual bankers. For its part, the CBA has provided financial literacy to young people for over 13
years through its Your Money Students seminar program. In Ontario, local bankers have
volunteered to deliver close to 2,800 seminars to 78,000 young people over that time, teaching
them the basics on budgeting, saving, investing, using credit wisely and fraud prevention. The CBA
is also currently developing a program for seniors to assist those who are entering retirement in
managing their finances and avoiding financial abuse and fraud. The Your Money Seniors program
will launch later in 2014.
We encourage the Government of Ontario to implement public policies that will foster job creation,
maintain Ontario’s position as an attractive destination for business investment and ensure that
residents have a sufficient retirement income. As a major contributor to Ontario’s economy and the
well-being of Ontarians, the banking industry believes the recommendations contained herein can
help the Ontario government achieve these objectives.