The Quebec Employers Council issues a call to Finance Ministers of Canada, the provinces and territories about the negative impact of a potential CPP/QPP increase for Canadian employers

MONTREAL, Dec. 12, 2013 /CNW Telbec/ - With the annual meeting of the Finance Ministers of Canada, the provinces and territories about to take place at Meech Lake in a few days, the Quebec Employers Council took advantage of the occasion to send the following letter to decision-makers participating in this forum:

"Dear Ministers:

On the eve of the annual meetings of the finance ministers of Canada, the provinces and territories, the Quebec Employers Council wishes to convey the deep concerns expressed by many Quebec and Canadian employers about the issues which could potentially lead to major impacts on the competitiveness of companies and on the overall growth of the Canadian economy.

Indeed, over the last few months, some of the provinces and union organizations in the country have come out in favour of various proposals to enhance public pension plans, namely the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP).

While being sensitive and favourable to the objective of encouraging saving for retirement and promoting more financial security in retirement, particularly considering the aging demographic, the Employers Council still has serious reservations about the relevance and benefits of such a measure.  At the same time, the Council reiterates it is strongly opposed to any increase of the tax burden for Quebec and Canadian employers in terms of payroll taxes, and to any hike in contributions to public pension plans that are not offset by a revision of the benefits paid out by these programs or an equivalent reduction of contributions in other programs.

It is worth noting that, internationally, Canada ranks well in terms of retirement savings, although there will surely be major challenges that must be met in the coming years, with increasing the level of savings among Canadians being among these challenges. But, as many recent studies and analyses have confirmed, the problem of maintaining one's standard of living in retirement isn't generalized.

A detailed analysis by the McKinsey firm shows the majority of Canadian households are well prepared and are likely to maintain their standard of living in their retirement years. But close to 23% of Canadians won't be able to generate an adequate retirement income to maintain their standard of living once they are no longer a part of the active population.

There is a wide variance in the percentage of households that won't be able to maintain their standard of living - it ranges from 4% for older, low-income households, to 41% for older, high-income households. It should be noted this estimate doesn't consider certain types of savings, such as those derived from real-estate assets.

In this sense, the Employers Council believes the proposal to enhance the CPP/QPP doesn't necessarily respond to a real need and, contrarily, it risks having a negative impact on the economy, investments, employment and wages, especially if certain jurisdictions go their own way and offer a more generous pension plan than elsewhere in the country.

Moreover, while the federal, provincial and territorial governments have made efforts to tighten control over spending increases, and are forced to deal with increasingly limited resources in terms of public finances, a hike in their contributions to the CPP/QPP, as employers, will only further reduce their room to manoeuvre in the budget.

Such an enhancement would not encourage the extending of an active life, which is the objective we should be accentuating in the current aging demographic context; it would instead encourage people to take early retirement.

Beyond a simple debate on enhancing public pension plans, we believe it is imperative that the federal, provincial and territorial governments act quickly and concertedly in addressing the issue of funding the various programs paid by payroll contributions and further harmonize the offer in this regard between the various jurisdictions. These payroll taxes are, in effect, to be factored into the overall taxation which employers have to incur, and a steady increase in this ever growing tax burden can hamper investments and job creation. As an example, in 2013, for an employee with an annual income of $40,000, these taxes represented an average cost of $4,013 for Canadian employers - a 10% hike in the nominal salary paid out.

In the hope these few comments will help provide you and your provincial and territorial counterparts with some food for thought in this important matter, please accept, honourable ministers, my most cordial regards.

Yves-Thomas Dorval
President
Quebec Employers Council"

The Quebec Employers Council brings together many of Québec's largest companies and the vast majority of sector-based employers' groups, making it Québec's sole employer federation.

SOURCE: Conseil du patronat du Québec

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