I call this meeting to order. Welcome to meeting number 51 of the House of Commons Standing Committee on Finance.
Pursuant to the order of reference of May 10, 2022, the committee is meeting on Bill , an act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures.
Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application. Per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask, except for members who are at their place during proceedings.
I'd like to make a few comments for the benefit of the witnesses and members.
Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike. Please mute yourself when you are not speaking.
There is interpretation for those on Zoom. You have the choice, at the bottom of your screen, of floor, English or French audio. Those in the room can use the earpiece and select the desired channel.
I'll remind you that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your patience and understanding in this regard. I request that members and witnesses mutually treat each other with respect and decorum.
I would now like to welcome today's witnesses.
For our first panel, from 10:00 a.m. to 12:00 p.m., as an individual, we have Vass Bednar, executive director, Master of Public Policy in Digital Society program, McMaster University. I believe Ms. Bednar will be with us only until 11:40 a.m. this morning.
From the Canadian Dental Association, we have Lynn Tomkins, president, and Aaron Burry, acting chief executive officer. From the Canadian Manufacturers and Exporters, we have Matt Poirier, director of trade policy. From the National Marine Manufacturers Association Canada, we have Sara Anghel, who is the president.
From the Philanthropic Foundations Canada, we have Jean-Marc Mangin, president and chief executive officer; and from Les producteurs de cidre du Québec, we have Marc-Antoine Lasnier, president, and Catherine St-Georges, director general.
Our other witness is from Wine Growers Canada. We have Dan Paszkowski, president and chief executive officer. Mr. Paszkowski is in the room, members.
We'll now begin with Ms. Bednar, with her opening remarks for up to five minutes.
Good morning. Thank you to the chair and to this committee for the opportunity to appear.
We haven't quite met before. You've heard that my name is Vass Bednar and that I am the executive director of McMaster University's MPP in digital society program, where I am also an adjunct professor of political science. I actively participate in Canada's policy ecosystem as an Action Canada fellow, a Public Policy Forum fellow and a senior fellow at the Centre for International Governance Innovation, known as CIGI.
In addition to my leadership role at McMaster, I'm one of the country's most vocal advocates for competition modernization. I have engaged Canadians on the merits and need for competition reform in modest but meaningful ways through opinion editorials in The Globe and Mail, the National Post, collaborative research published by McGill University and commissioned by ISED, various podcast inerviews and my newsletter, which has a funny name, “Regs to Riches”.
Due to that general focus on competition in Canada and my own intellectual anchoring in digital policy issues, I am going to focus my brief remarks on the amendments that pertain to the Competition Act.
As you know, that act was last updated modestly after the “Compete to Win” report that was initiated in 2008, and 2008 is the same year that Apple's App Store launched. It's when Uber and Airbnb were founded, and later Slack, Venmo, and so many more. In many ways, that year is a hinge of sorts for the acceleration of the digital economy.
There are plenty of good reasons to support competition modernization beyond the passage of time. As an Ipsos poll from earlier this year highlighted, “Most Canadians say we need more competition as it's too easy for big business to take advantage of consumers”. It's 88%.
As noted in President Biden's historic executive order on competition from last spring, economists find that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth and racial inequality widen.
Competition is a key catalyst of productivity. It attracts investment, stimulates the creation of high-skilled jobs, and fuels exports of Canadian products, services and ideas.
I recently appeared before your colleagues at INDU to discuss these proposed changes to the Competition Act in greater detail. During that meeting, I expressed support for the amendments because they clearly serve the public interest at a time when Canadians are under intense economic pressure. They will improve the enforcement of the current act. They were clearly foreshadowed in a February press release from the minister. They are aligned with analysis from the Competition Bureau, and they've been discussed at length in the public domain.
I also acknowledge that, while the Budget Implementation Act is an imperfect democratic tool, policy windows of opportunity are scarce and must be seized.
Another reason for my general support is that these proposed amendments start to bring Canada in line with best practices in peer jurisdictions. It also sends a good signal that we are moving, however slowly, in the right direction, especially on making references to artifacts of the digital economy. I want to be clear here. In general, we're playing catch-up in Canada except on wage-fixing, where no one jurisdiction is really ahead or has figured out the optimal implementation of that policy goal.
Going forward, you should or could strike a panel of Canadian academics that focuses on competition issues as your digital policy task force. I would like to encourage this committee to consider the merits of an all-of-government approach to digital regulation that can complement competition reform efforts and help us achieve a truly interoperable policy environment. This is something I've written about.
These changes are a down payment on competition reform in Canada, modernization that is long overdue. They are not perfect, but no policy choice is. As I joked on Twitter, where honestly I spend a lot of my time on the Internet nowadays, we don't write the law in stone anymore, and that's a good thing. I see no reason to treat this suite of legislative changes as if it cannot be further refined and improved as we go forward. In fact, perhaps we can review the Competition Act every five years, as we do the Bank Act, to keep it fresh, flexible and responsive.
While I am not entirely sure if this is relevant, I also want to note that, in last year's federal election, it was the Conservative platform that spoke most explicitly to competition reform. It acknowledged that we need to ensure a level playing field for Canadian businesses. It promised harsher penalties for executives and companies that fix prices or abuse their dominant positions. The platform also supported workers, noting that mergers that reduce competition and lead to layoffs and higher prices will be rejected. These were compelling proposals that I was excited to read.
To conclude, I'd like to thank everyone responsible for drafting the language that we've read in the budget implementation act and for supporting these important, initial improvements to the Competition Act.
I am looking forward to continuing to engage on these issues and to further discussion.
Thank you very much.
Good morning to all the members of the committee.
I am a dentist here in Toronto, and I am president of the Canadian Dental Association. My name is Lynn Tomkins. I am joined today by my colleague, our interim executive director at the Canadian Dental Association, Dr. Aaron Burry.
I am speaking to you from Toronto on the traditional territory of the Huron-Wendat, the Haudenosaunee, the Anishinabe, and the Mississaugas of the Credit First Nation.
I appreciate this opportunity to discuss budget 2022 and its proposed investment of $5.3 million towards access to dental care. I would also like to thank Mr. Chambers, Mr. MacDonald and Mr. Blaikie for meeting with the Canadian Dental Association on this topic over the past few weeks.
At the Canadian Dental Association, we know that oral health is an essential component of overall health. We believe that Canadians have a right to good oral health. That is why we fully support efforts by all levels of government to improve Canadians' oral health and to increase their access to dental care. We applaud this historic federal financial commitment.
Poor oral health strains other parts of the health care system, whether through hospital visits for dental emergencies or managing the long-term impacts of poor oral health on systemic health, for instance, cardiovascular disease or diabetes. While Canada compares favourably to many other countries, too many people still do not receive the dental care they need. More than six million Canadians each year avoid visiting the dentist because of the cost. This is especially true for low-income families.
Today I would like to comment briefly on how the federal government can best ensure this funding will quickly and efficiently benefit the Canadians who need it most, namely by collaborating with provinces and territories to stabilize and enhance the existing provincial and territorial dental programs.
Yes, many of these programs have flaws. Some of them cover only limited services, and others target only a narrow segment of the population, for example, only children or only low-income families. Many reimburse dentists at rates far below the cost of providing treatment. However, this only underscores why it is vital for the federal government to work with its provincial and territorial partners to stabilize their programs and to use their existing infrastructure to deliver enhanced, federally funded coverage. It makes no sense to construct a new stand-alone federal dental care program on top of strained provincial foundations.
A one-size-fits-all, Ottawa-knows-best approach has many drawbacks. Difficulties in setting up a new federal program could actually jeopardize dental care access for millions of Canadians who already have some sort of employer-sponsored coverage. Sixty-eight per cent of Canadian households earn less than the proposed $90,000 threshold, so we risk defunding or elimination by the provinces or territories of their existing programs. This would divert hundreds of millions of public dollars away from dental care and towards other priorities.
At a time when the federal government has difficulty providing passports to Canadians—and this is a function we have undertaken for over a century—it is fair to ask whether it could quickly and successfully set up a program that directly provides health care to the general public, an area where it has little relevant expertise. The spectre of a lengthy federal procurement process and the contracting out of the delivery of billions of dollars in health care spending to a private, for-profit insurance company is also unsettling. Pursuing either of these routes would be a mistake.
Furthermore, there are massive jurisdictional issues at play. Broad-based health care programs are the exclusive jurisdiction of the provinces, and efforts by the federal government to sidestep the premiers could lead to squabbles and court challenges. This would impede rather than improve access to care for the very Canadians that such a program would be designed to help.
There have also been questions about whether the federal government has the constitutional or legislative authority to deliver such an initiative directly. Premiers such as John Horgan and François Legault have already called for these funds to be transferred to their governments to support provincial delivery of dental care. Liberal governments in Newfoundland and Labrador and Yukon, as well as the Progressive Conservatives in P.E.I., have also recently made huge strides on access to dental care. In this environment, the federal government cannot and should not go it alone.
In late March, health minister outlined three principles for intergovernmental collaboration on health care: sharing responsibility, respecting jurisdiction and focusing on results. Since then, we have appreciated the hard work done by him, by his team and by his officials on this file, as well as how much they have consulted with the CDA and other stakeholders. Dr. Burry and I had an excellent meeting with him just a few weeks ago. I encouraged the minister to continue this collaborative approach by working on this file with provincial and territorial colleagues in the weeks and months ahead.
Likewise, the day after the budget, CDA was happy to hear both and—
Thank you, Mr. Chair, and good morning, everyone. It's my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss Bill .
The manufacturing industry is 10% of Canada's GDP, produces two-thirds of Canada's value-added exports and employs 1.7 million people in high-paying jobs across the country.
In the lead-up to the budget, CME issued its 2% challenge. That is, the federal government should attract 2% of OECD manufacturing investment into Canada, up from our current 1%, by instituting a national industrial strategy. Doubling that investment to 2% would revolutionize Canadian manufacturing, create hundreds of thousands of jobs, and increase our GDP and standard of living.
To get there, we must address our most pressing challenges: labour shortages, supply chain disruptions and declining investment and export performance. While there's a sprinkling of help in all those areas in budget 2022, we believe more must be done to help Canadian manufacturing grow. I will outline that plan now.
First, on labour shortages, manufacturers big and small are struggling to fill the 81,000 vacancies across Canada. All this is happening even though our sector is one of the highest-paying industries in the country.
We can tackle this problem in many ways, but the main drive should be to plug our labour shortages through immigration. Budget 2022 talked about processing backlogs, but we encourage the government to dedicate more resources to the problem. We must also speed up the introduction of a trusted employer stream to the temporary foreign worker program and reduce the administrative burden on companies applying to the program. Ultimately, however, the temporary foreign worker program is merely a pressure release valve. We need to aggressively increase our immigration intake targets to 500,000 per year in the economic stream alone. We need workers.
Second, on supply chain bottlenecks, according to a CME survey, nine out of 10 Canadian manufacturers report encountering supply chain issues. The added challenge for Canadian manufacturers is their lower position in the pecking order for critical components. We currently have the situation in Canada whereby a company can have an increase in customer orders and a workforce ready to go, but nothing to build because it's waiting on parts. The national corridors fund to facilitate the movement of goods and other initiatives announced in the budget will help, but in addition to long-term investments and modernizing our trade infrastructure, we must address the short-term problem by providing temporary financial assistance to manufacturing companies still feeling supply chain disruptions.
Lastly, on investment and exports, Canada lags behind other OECD countries in non-residential business investment, and this is leading to deterioration in our international competitiveness. On the net-zero transition, Canada's manufacturing industry has already started, but smaller companies are falling behind. On trade, while we enjoy some of the best free market access of any country on earth, our goods exports are stuck in neutral.
To respond to all of these challenges, the budget announced some measures that CME has long called for. The Canada growth fund and tax changes for SMEs are positive, as are the promises to look into adopting a patent box regime and SR and ED reform. A tax credit for investments in clean technology and a refundable tax credit for carbon capture will support manufacturers as they work to decarbonize their industrial processes.
While these are all positive developments, we worry that the money allocated to these measures may not be sufficient, so we urge the government to put up the money necessary to make these changes have a real impact. We also need to better incorporate SMEs into the design of these programs so they can qualify for them and be helped through the process of using them, particularly on the net-zero transition and growing exports front.
Before I conclude, I want to register our concern with the proposed luxury tax on planes, boats and autos. I echo all the others who have spoken out against this tax. We understand the allure of such policies but they are a siren's song, as they do a lot of damage to domestic manufacturing. Manufacturers and organized labour are united in their calls for this tax to go, and we urge the government to do just that.
In conclusion, while CME is pleased to see many policies we have long championed included in the budget, this is just the starting point. We look forward to working with you all to tackle our industry's challenges and ensure our economic prosperity for years to come.
Thank you for inviting me. I look forward to the discussion.
Good morning, Mr. Chair, members of the committee and ladies and gentlemen.
My name is Sara Anghel and I'm president of the National Marine Manufacturers Association Canada. I'm here to express the recreational boating industry's concerns with the proposed luxury tax on boats valued above $250,000.
The boating industry has a GDP impact of $5.6 billion. It has $10 billion in revenue and employs more than 75,000 Canadians in the core of the industry. Our industry has faced many headwinds since the start of the pandemic. Supply chain disruptions, production delays and inflation have affected our members. Tourism and recreational businesses were closed for months due to the pandemic restrictions and border closures. On top of that, we are now facing an impending luxury tax on boats.
Our industry understands the government's need to raise revenue in the wake of the pandemic. The luxury tax is not the way to achieve this. The history of luxury taxes shows that consumers will simply choose to take their discretionary spending elsewhere. That is what dealers and manufacturers are hearing from customers. The result will inevitably be a dip in revenue and hundreds or even thousands of job losses across the country.
According to an economic impact study by economist Dr. Jack Mintz in partnership with Ernst & Young, the proposed tax would result in a minimum $90-million decrease in revenues for boat dealers and potential job losses of at least 900 full-time equivalent employees. In short, the tax will hurt the very middle-class families the government is trying to help.
The problem with this kind of tax is that it can easily be avoided by consumers either buying other goods or purchasing and keeping their boats abroad, in Florida or Seattle, for example. They may bring a boat into Vancouver for the day, but keep it stateside.
The expected drop in sales will significantly impact the bottom line of many manufacturers and dealers, which will then be forced to scale back their operations and staffing levels. While we saw a boom in boat sales during the pandemic, the supply chain disruption has been very difficult for our industry. In fact, dealers are expecting a significant drop in sales due to material shortages. Ontario dealer Crate's Lake Country Boats in Orillia expects a drop of 70% in sales by the end of 2022. That doesn't account for what will happen once the luxury tax is in place.
The tax also threatens the survival of Canada's domestic boat manufacturing base, which has already been hollowed out by years of competition from low-cost jurisdictions and offshoring for many. For some yacht builders, such as Neptunus Yachts in St. Catharines, Canadian sales have been the foundation of their business for 30 years. Neptunus Yachts expects to see these Canadian sales drop to virtually zero.
We can also expect a ripple effect of job losses at marinas and service shops. Fewer new boats sold means less work for the marina service industry, much of which is concentrated in rural and coastal communities.
In the early 1990s, the U.S. introduced a similar tax on boats that devastated the industry. It was eventually repealed following the loss of thousands of jobs and a net revenue loss for the government. New Zealand, Italy, Norway, Turkey and Spain have also previously introduced a luxury tax on boats. In each of these cases, the tax was ultimately repealed due to the net negative economic effects. There is no reason to think the same will not happen here in Canada.
We are also troubled by the singling out of recreational boats and not other recreational products. Boating is a cherished pastime for millions of middle-class Canadian families. In this unaffordable recreational property market, many families choose to purchase a boat valued above $250,000 as their cottage.
At a time when governments are trying to attract investment and rebuild our economy, a tax that guts homegrown manufacturing and retail businesses makes no sense. Instead of supporting our industry as a vital part of Canada’s recovery, this tax is picking winners and losers in outdoor recreation.
The luxury tax also has the potential to damage Canada’s trade relations. Concerns have been raised by the boating industry in the United States that this tax directly attacks our Canada-U.S.-Mexico agreement. Similarly, our trading partnership with the U.K. and the European Union could be hurt by what many see as an indirect tariff on boats.
Finally, I saw this morning that the PBO has released a new report on the tax and projects a $2.9-billion loss in sales and that 75% of that loss will come from boats. This is what our industry has been trying to communicate to the government—that this tax will destroy the industry and cause job losses across the country.
Thank you very much for the time to speak to you today.
Mr. Chair, members of the committee, thank you very much for this opportunity to discuss the serious and unintended consequences of Bill for the charitable and non-profit sector.
Like many other organizations in the sector, Philanthropic Foundations Canada, which is the largest national network of private and public foundations in the country, welcomed the government's budget announcement that it would adopt the spirit of Bill , the purpose of which is to treat organizations that contribute to the common good on an equitable basis even if they do not have official charitable status.
However, Bill does no such thing. In fact, if passed in its present form, it would undermine the operational environment by adding more complexity and risk through overly prescriptive statutory measures. I believe that the government and opposition parties are fully aware of the problems involved and that there is a common willingness to correct these unintended effects.
With Imagine Canada, Cooperation Canada and leading charitable lawyers, we have provided three simple amendments that would remove the worst of these unintended consequences. These have already been submitted to the clerk of this committee. Together, we continue to offer our co-operation to fix Bill .
Given the vast and complex set of urgent challenges facing our communities, our collective focus must be to encourage adaptive, learning-oriented results management, not to impose, in law, seven narrow and mandatory measures on all forms of partnership.
The former—that is, Bill —offers real accountability to funders and communities alike who work across a myriad of partnerships. The latter—that is, Bill in its current form—is a straitjacket that will hinder social innovation, continue the damaging colonial practices of de facto direction and control, and ultimately restrict the flow of charitable dollars to those who need them the most. Let's focus on outcomes—
Good morning, everyone.
My name is Catherine St‑Georges, and I'm the director general of the Producteurs de cidre du Québec.
First, by way of introduction, I would like to introduce our association. It was founded in 1992 and will celebrate its 30th anniversary this year. It represents all cider producers in Quebec. We have 81 voluntary members and represent the interests of all cider producers in our efforts to optimize Quebec's cider-producing potential and secure the industry's future.
I have some interesting numbers for you.
I told you we have 81 voluntary members, but there are 118 permit holders producing cider in Quebec, 84% of whom also grow apples in the province.
Cider volumes rose from 3.2 million litres in 2016 to 5.1 million litres in 2021, a net increase of 60% in 5 years. The cider industry is thus truly thriving. We calculate that 11% of all apples grown in Quebec are processed as cider, and that volume is increasing as the industry grows. The total value of cider sales in Quebec is $51 million.
There are 9,000 jobs in Canada's cider industry as a whole. If you include all production-related sectors, such as restaurants, transportation and agritourism, cider production represents tens of thousands of jobs.
What has caught our attention and brought us here today is the reinstatement of the excise tax. Here's a brief history of that tax.
In 2006, 100% Canadian wines were exempted from excise duty. Ciders fall into the wine class for excise tax purposes. As a result of a complaint filed by Australia, we lost our case before the WTO and the excise tax was reinstated in July 2022.
Our industry thus operated without that tax for about 16 years. Today, many owners don't even know that the tax was previously in force or that it could be again.
The tax is roughly equal to the current net margins on our products. From what we've heard, a compensation program is already being developed. We'd like to bring that program to your attention because, if it isn't generous enough, we can expect that businesses will shut down over the next few years. If businesses in our sector close their doors, that could affect related businesses and sectors, such as apple production and the tourist and restaurant industries.
We have very few diversification options in our sector. Regulation is very strict, and we operate on a vertically integrated apple business model.
I can give you an idea of the potential impact that reinstatement of the excise tax may have. The tax represents approximately $200,000 for my business, Cidrerie Milton. However, my net annual profit is less than $200,000. So I expect to operate at a loss unless a compensation program is developed.
Our demands are very specific, and Cider Canada has previously outlined them to the committee. We are making the same demands here today: that the government increase the budget allocation so the program can support the entire cider industry, extend the program until 2030, and provide a timeframe for the implementation of the excise tax so that it coincides with the program's coming into force and our tax disbursements.
Thank you very much for your attention.
That completes our presentation.
Thank you, Mr. Chair, and thank you to all members of the committee for the invitation to discuss budget 2022.
Wine Growers Canada represents the national and international interests of the Canadian grape wine industry, which consists of over 700 grape wineries and 1,800 independent grape growers producing 75 million litres of grape wine in six provinces. We support over 37,000 high-paying jobs and contribute more than $9 billion annually to the national economy. As a result, every dollar spent on Canadian wine sold in Canada generates over $3.50 in gross domestic product.
For over 16 years, I've been meeting with parliamentarians and government officials to talk about the tremendous growth and job creation opportunities in Canada's wine industry, driven by investments in capacity, quality research, innovation and experiential tourism infrastructure. The major challenge is that wine is subject to excise duty and other agricultural products are not.
I'm not here today to deliver a positive message. Today, like the cider industry you just heard from, I'm here to tell you that Canada's wine industry is at a crossroads.
In addition to the challenges of postpandemic recovery, skyrocketing inflation on the cost of goods, and supply chain disruptions, the long-standing excise duty exemption that fuelled investment and industry expansion will be repealed on July 1. As you may know, 16 years ago, the 2006 budget established the federal excise duty exemption on 100% Canadian wine to incentivize strategic investments to modernize, grow and enhance the quality of wines produced in this country. As a result, 400 new wineries were constructed, increasing the quality and quantity of Canadian-produced wines while increasing annual production of 100% Canadian wine by 45 million litres. This growth helped generate an additional $4.8 billion in annual national economic impact in return for $42 million in forgone excise revenue—a fantastic return on investment.
Between 2006 and 2017, the excise exemption on 100% Canadian wine was not a major concern for import producers as they watched their sales grow across Canada. However, this all changed when the 2017 federal budget legislated annual alcohol excise duty increases indexed to the consumer price index. Legislated inflation indexation, better known as the excise escalator, raised the ire of major wine-producing nations around the world, prompted a WTO challenge from Australia and led to the pending repeal of the excise exemption through a negotiated settlement to end the trade dispute. Effective July 1, all 100% Canadian wine, including non-packaged wine produced prior to this date, will become subject to excise duty.
Canadian wineries agreed to the terms of the negotiated settlement with the Government of Australia, based on advice from Global Affairs Canada and the Liberal government's promise, made by then finance minister Morneau, to ensure the long-term success of grape growers and winemakers. However, budget 2021 announced funding for a limited 18-month support program, which we immediately confirmed was insufficient to address the loss of the excise exemption and the remaining 100% Canadian wine inventory that was produced excise-free. Clearly this was an error in the budget.
Between budget 2021 and, most recently, budget 2022, Wine Growers Canada repeatedly stressed that the only way to grow the industry was to increase the $101 million in funding announced in the budget, extend the program beyond 18 months to encourage investment and bank financing, and zero-rate the excise duty payable on all wine inventories produced before July 1, 2022, all of which were produced in a legislated excise-exempt environment.
While budget 2022 did not respond favourably to Wine Growers Canada's request, the budget reported $390 million in forecasted federal excise revenue over the next five years as a result of the repeal of the excise exemption, with $135 million of that for year one and two, or $34 million more than was provided in budget 2021.
Excise duty on Canadian wine is not a consumer tax but a production tax, because we cannot pass it on to the consumers. This is because imported wines represent over 70% of Canada's domestic wine sales market, forcing Canadian wines to be price-takers in our home market.
Investor confidence has waned as successive trade agreement concessions have benefited imports and has stalled since the 2020 negotiated settlement with Australia. The excise exemption will be repealed in four weeks, and wineries, grape growers, employees, investors and creditors remain uncertain of the industry's ongoing viability or the results of the wine support program, which has not been announced yet.
Without an adequately funded wine support program, the lost revenue will have dire economic impacts on the entire supply chain. Wine Growers Canada's research estimates that the loss of the excise exemption would result in a 12% drop of total industry sales, the closure of over 300 wineries, 2,400—
Thank you very much, Mr. Chair, and thank you to all of our witnesses. What a vast and rich panel we have here today.
Unfortunately, I won't have time to get to all the questions I'd like to, but after listening to your opening interventions, it seems to me that the government seems to be attempting to tax the country's way to prosperity. Whether that's with the wine industry, whether that's on manufacturing, I think that's a lesson we should be all taking away from this.
I'd like to start with a few questions to Ms. Anghel from the National Marine Manufacturers Association.
Ms. Anghel, you referenced potential job losses not just for your members but also across the industry. When this tax was proposed by the government, what kinds of consultation were there with your industry about the potential impacts? Did you feel that you were consulted?
Thank you to all the witnesses for being here today.
I would like to start my questions with Ms. Tomkins.
In your opening remarks, you talked about the need for the federal government to work with the provinces and territories on the implementation of dental care. You had some strong views as to how that should or shouldn't be done.
When I think about analogies to this, I think about child care. I'm wondering what your thoughts are on the manner in which child care agreements were reached recently. Do you support that type of model for the implementation of national dental care?
Thank you, Chair, and thank you to all our witnesses for sharing their testimony today. It's been very informative and very interesting. It's my very first time attending this committee, and I look forward to participating.
I'm going to follow up on some of the very brief testimony that we heard from Mr. Mangin and hopefully talk a bit about some of the issues around Bill and the .
The reason I want to do this is that we didn't get the opportunity to hear from Mr. Mangin, but this is an issue that's very, very important to me. I know it's very important to many members of Parliament, but I come at it from a bit of a special perspective, I guess, which is that I have been working on changing the direction and control legislation in this country since 2005. We have known that this is a paternalistic and a colonial piece of work within CRA that has needed to be changed for a very long time and has impacted the ability of the charitable sector to actually do the work they are mandated to do. It is in no way reflective of participatory, democratic good practice in charities. It needed to be changed.
When Senator Omidvar came to me and to many other parliamentarians to speak about the changes to direction and control within her bill, Bill , we of course were all delighted. We were all on board. We were all working with her. The sector has worked very closely with her, and legal experts have worked very closely with her and her team to develop a really strong piece of legislation.
Of course, when we saw in the that it was named and that the spirit of Bill was going to be implemented, I think many of us within the House of Commons and many more within the charitable sector were delighted. When we saw what was actually being proposed, the delight turned a bit to disappointment.
I'm going to read from a few different places for you, and I'd like to put some of this testimony into the record. Then I'm going to pose some questions to Mr. Mangin that he can respond to in writing, bilingually, when he's able to do so.
First of all, I want to start with a letter that was written to the government by Cooperation Canada. For those who don't know, Cooperation Canada is an organization that represents many of the charitable sector groups that work in Canada. It's a very long-standing organization that has been in place for over 50 years. It is very well respected and knowledgeable on this file and has certainly taken a lead on it.
In the letter they addressed to the government, they say:
...the BIA reinforces the colonial and paternalistic approach to the relationship between charities and the partner organizations supporting their charitable purposes. It makes the current regime more challenging for organizations to fulfill their charitable purpose by embedding a rigid and prescriptive approach to funding non-qualified donees inside and outside Canada in legislation. It makes the system more confusing, risky and challenging for registered charities and non-qualified donees to work together, and as such, impedes philanthropic and charitable resources flowing to communities that need them the most.
The serious concerns that the sector has with the BIA and that we would like to see changed within the BIA are the proposed definition of a qualifying disbursement, the proposed language relating to directed gifts and the prescribed conditions for qualifying disbursements to grantee organizations.
I know that this committee has received information from Imagine Canada; I wanted to make sure that that information from Cooperation Canada was also included.
I also wanted to give a little bit of insight into what this looks like on the ground. For example, if you're looking at perhaps an indigenous partnership and perhaps there is a requirement to work with indigenous groups that do not, for whatever reason, have charitable status, what we have in the BIA impedes the ability for charities to support indigenous groups that are doing the work within their communities. I think that's something that no Canadians want as we deal with truth and reconciliation in this country.
There's another example when we look at working internationally. Right now, we have an incredible crisis that is happening in Ukraine. I think it's really important that everyone on this committee recognizes that if we don't get this BIA right, if we don't get the direction and control right, those organizations that can do the best work in Ukraine and can do the best work with refugees who have fled Ukraine, Romania, Poland and other countries won't be able to work with Canadian charities because of the aspect of direction and control that we have in this BIA.
As Mr. Mangin was, I suspect, going to tell us, we need to amend the language on direct giving. This would allow Canadian charities to contribute to pooled funds and support non-qualified donees.
We need to remove the reference to disbursements meeting prescribed conditions and replace it with a requirement that the charity instead takes reasonable steps to ensure that the resources are disbursed and used exclusively in furtherance of a charitable purpose. We need to delete proposed regulation 3703 in its entirety. This would allow for regulations to remain in the CRA guidance documents.
Thank you, Mr. Chair.
First of all, thank you to all the witnesses for joining us this morning.
Given the significant interest of Canada's wine industry in my riding of Niagara Falls, particularly in the town of Niagara-on-the-Lake, I'm going to be spending most of my time questioning Wine Growers of Canada and Mr. Paszkowski.
Mr. Paszkowski, in your testimony you had talked about how the sector had flourished since 2006 with the excise exemption that the previous Conservative government had brought in, and since that time how the sector has grown. Near the end of your commentary, unfortunately, you were getting to the end of your time.
I'm hoping you can get your comments into the record on how you think this new excise tax that will apply as of July 1 will impact the sector. How is it at risk?
Yes, as I mentioned, there's been significant growth as a result of the excise exemption that was put into place.
You have to understand that the excise duty takes place right after the producer's price on a bottle of wine. As that moves through the price chain, ending up all the way down to the liquor retailer, it's picking up a lot of different ad valorem taxes at the liquor retail level, such as the GST and PST, etc.
The 52¢ per bottle tax, depending on what jurisdiction you're in, will more than double. In the case of the LCBO, that 52¢ per bottle may increase the price of a bottle of wine by roughly $1.15. When you only own 30% of your market, if we pass that tax on but the imports don't, we're going to lose that consumer to imported wine. It's a significant tax that hurts every single wine producer in Canada.
We still don't have the final details of the wine support program. We worked with trade lawyers and experts from agriculture, finance and global affairs to develop a trade-legal program that allowed all wine produced in Canada from fresh fruit to benefit through a grant program based upon the litres of wine produced in Canada. It could not be concentrate or imported concentrate but had to be from fresh fruit, and it applied to both domestic and imported fresh fruit.
By putting a program like that in place, you'd allow the producers to get funding from the federal government to be able to address the investments that they need to make, as they have over the past 16 years under the excise exemption, which grew the industry significantly. That program would work 100% for every wine, cider, mead and sake producer in this country. Every apple producer and grape grower would be a significant beneficiary as a result.
I'm happy to answer that question.
We were very pleased to see the creation of those programs. We're still awaiting a lot of the details of how they'll be structured and what they'll look like, but at first glance, it's something that we called for, so we're certainly very happy on that front.
As I said in my remarks, we caution the development of these programs on two fronts. There's adequate money in the program to incent the transition, but particularly for SMEs that struggle with, one, knowing about government programs, and two, navigating them and using them to full benefit, in the structuring of the program, how do we hold them by the hand and take them through it so that the pickup is there and the results are there as well? We really need to think about that.
As I mentioned, what we're seeing right now is that the big companies, the big manufacturers, have already begun net-zero transition, with specific government help in many instances, but we're not seeing that same thing happen with the SMEs. They're not even thinking about it in many cases, depending. That's a problem that we want to tackle and that we're alerted to, because most of our companies are SMEs. We're going to get massive reductions in greenhouse gases by tackling the big ones, but most of our companies are SMEs, so we need to bring them along for the ride too.
That was sort of a long-winded way to get at the question, but again, it's the SME component. It's very important for us to get that right.
We've done a lot of work over the past few years on this, so I would be more than happy to share that research and those policy recommendations with the committee. Perhaps we can connect offline afterward.
At a high level, what I mentioned before was the SME piece. That's important. The big companies are going to do it, but they'll also drag up all the companies that are in their supply chains already along those lines, so it's an awareness function for the SMEs to realize that this is the future and that they need to help to transition to it.
One of the problems government has is that they have excellent programs, but they're not well known and it's not a default reflex for an SME to wonder what the government is doing. I think it's leveraging trade associations like us—like CME, like my colleagues here on the panel today—to help deliver the message.
There is a bit of capacity building within that, too. If we're going to use exports, for example, some of the agencies like the trade commissioner service and EDC will embed employees and resources within the trade associations to try to access those SMEs better. It's that type of model that will really be needed, at least for our sector.
Good morning to my colleagues and all the witnesses.
My question is for Mr. Lasnier and Ms. St‑Georges.
Australia filed a complaint against Canada respecting grape-based wine, as a result of which an amendment will be made to the excise tax. That affects you too because the federal government draws no distinction between wine and cider. We note that the federal government didn't conduct a study on the impact that will have on your industry before penalizing you in this manner. However, you say you've done your own study.
In the next two minutes or so, would you please give us more details on the 4,000 jobs that may be lost? For example, are they jobs in regional or urban areas? How many producers will that affect?
There are many, as you've alluded to. Treatment of children for early childhood cavities—or caries, as we call them—can take up a lot of time in operating rooms in hospitals. That's one thing.
Very small children, if you have an age.... I see one on our call here, and I hope she's brushed her teeth today. As soon as kids have teeth, they can get cavities, and children who are susceptible have a higher rate of decay and sometimes end up at the age of two or three in the operating rooms of hospitals having fillings done, including the baby tooth version of root canals in their molar teeth. That's a tremendous event for a small child and their parents to go through. It's very traumatic, and it also has a high cost to the health system. The other thing is it's one of the most common causes of children losing time from school. Also, they can't eat properly if they have toothaches, and infections can make them very sick.
Our goal would be to have every child seen as soon as possible in a dental office, within six months of the eruption of the first tooth, to identify children who are at higher risk for dental decay and to put preventive measures and education measures in place so that over a lifetime a child will need less dental care. That is our aim: that children will need less dental care. The earlier we can identify those types of problems in children, the better.
Unfortunately, there are higher rates of dental cavities and dental problems in new Canadian populations, where perhaps the emphasis on dental care has not been the same or they've been brought late to the dental office, so by the time they do get to the dental office, they have a lot of dental problems.
Another aspect of prevention for children is community water fluoridation, which still makes a tremendous difference in the rate of decay in children. We're fully supportive of community water fluoridation to reduce the amount of dentistry overall, which will also reduce the environmental burden of a child's treatment over their lifetime.
Can you hear me? I was having some connectivity problems here in rural New Brunswick. It's common.
My questions today are for Mr. Paszkowski with Wine Growers Canada.
Mr. Paszkowski, considering that excise taxes negatively affect both consumers and wine producers, you would think it would have been clear that government would need to find a better solution. Of course, that's my opinion, but do you agree that this excise tax has the potential to produce real income losses across wages, profits and other returns to labour and capital in this industry?
As an anecdote, at the association level, whenever we hear from our members that it's the worst is whenever we have blockades or transportation network disruptions. It affects them the most, and certainly manufacturers are the biggest users of Canada's transportation network.
We approach this from the angle that everyone has the right to protest. Everyone has a right to do that. However, there are.... We have done the exercise of deeming certain things to be critical infrastructure, and we would argue that transportation networks are critical infrastructure. Our industry is held hostage every time they're shut down. Our solution is to designate those and make them out of bounds for protest activities. However we want to design that designation is a discussion we can have, but from a fundamental perspective, that's how we view it. It would still leave 99% of the country open for legitimate protests.
Just ensure that those networks are protected on that front, because the reputational damage that Canada takes every time we have to close down our transportation network, whether it's for a strike, a blockade, or what have you, is significant. Our members tell us that they have to have really tough discussions with headquarters and other countries to justify why they're still making stuff in Canada and operating in Canada.
We don't want our members to have to do that. It's unnecessary, and it's a big threat to that 10% of GDP.
That's good. I'm glad you said “designed in Ottawa”, because I'm on the east coast and we are quite different from some other parts of the country.
Mr. Poirier, we've heard a lot and seen a lot over the past number of years about protectionism. We talk a lot about diversifying our markets, and we are dependent on our biggest trading partner south of the border. We've also seen disruptions in global supply chains and so forth. How do we plan for a future that eliminates some of these possible consequences, especially for your sector?
When you hear “buy America” or what have you, or when you see China set rules and regulations, even most recently with COVID-19, how do we overcome that? What's your sector's opinion on ensuring that we continue trade, which is so important to the economy of our country?
Certainly it is our perspective that in co-operation and collaboration with the provinces, the federal money that has been set aside for dental care was distributed to the provinces to sustain and stabilize the existing programs. Across the country, all of the programs are in need of some sort of support. There are better programs than others in certain areas, but there's no one perfect system.
I can't give you a single province that I think you should single out for special treatment. It's Canada; we need to treat everybody equitably.
Yes, there are existing programs, and there are existing administrations, and there are existing relationships among the stakeholders within the provinces, so we don't really need another top-down, administration-heavy, stand-alone program. What most of the programs need is funding so that they can increase the funding levels to cover the cost of providing treatment, because a lot of them don't even cover the cost of providing treatment. Any dentist or dental office that treats a patient on some of these provincial programs is subsidizing the programs out of pocket, and that's not sustainable.
I think that going with the existing programs would be the way to go. The people are there, and they can expand the program to include more people according to the goal that the federal government has, such as the zero-to-12 age group. It would be much better to do it that way, rather than creating a top-heavy, top-down, new administrative program that might capture people who already have dental plans. The eligibility criteria may capture people who already have dental plans. We're already hearing some hints that some employers might be saying that they'll drop their dental plans for people who would be covered by the federal plan, so there would be this unintended consequence.
We feel very strongly that the best way is to flow the money through the existing programs.
I want to put on record that Ms. Bednar's comments in terms of the changes with regard to the Competition Act, which and have championed in the budget and now in the BIA. I applaud them with full vigour. They are long overdue and well needed. It's great to see us tackling the issue and ensuring that there is competition within the economy and within sectors, that anti-competitive policies are being addressed, and that the Competition Bureau and the Competition Act are being given more teeth and more resources to ensure that Canadians are put first in consumer choice.
I want to speak to Mr. Poirier from the Canadian Manufacturers and Exporters.
Mr. Poirier, I've interacted with you folks for many years and have had a lot a great meetings. York Region area, where I live and which I represent, is a manufacturing hub. We have the largest auto parts supplier in the world, Magna, and the third largest in Canada, Martinrea, which is about a kilometre and a half from my constituency office. We are an agri-food processing hub. We are a place where a lot of folks invest and work. We are a logistics hub. We have the largest CP intermodal facility, the busiest one in the country, in my riding. Vaughan has the largest CN yard in Canada, and I know Peter loves to hear that.
I want to ask some questions about the issues that we need to address on the supply chain. We have a supply chain working council. We have put money into the funds, and we have the national trade corridor fund. We are making progress on the supply chain, although it is difficult.
Could you provide any sort of recommendations that you think, top of mind, would assist us in addressing the issue even further?
That's a great question, and it's something we have been talking to some of your colleagues about, because across the country right now there is a shortage of dental assistants. Even before COVID, there was a shortage, and since COVID, that shortage has been exacerbated, because the demands on a dental assistant....
A dental office operates like a small hospital. Any of you who have been to your dentist, especially since COVID, have seen all the barriers and PPE and everything going on, and the people who actually make all that happen are the dental assistants. They're highly trained and they're very technical. It is not an easy job, and it requires education. In most provinces, it's regulated.
We are applying to the federal government on a project in collaboration with the Canadian Dental Assistants Association and looking for ways that we can increase the number of dental assistants entering into the profession as well as for ways of retaining them in the profession, because with respect to the supports for mental health, for instance, they have been tremendously affected, as have all other frontline workers during the pandemic. It will be a bit of a concern if we get a sudden influx of new patients coming into the system. Dentists and dental office staff will do their best to handle that influx, but there is a shortage of dental assistants.
I think there's another study going on looking at the care economy in the public health system, and we're concerned that we don't forget the health care that's being delivered in private settings, such as dental offices, because if you end up attracting more people into one aspect of the health system, you don't want that to be at the detriment of the private delivery.
There are dental assistants who work in public health. Dr. Aaron Burry himself works in a public health office one day a week, but the majority work in private dental offices and the majority are female, so all the issues around child care and schooling at home and all of that stuff that took place during the pandemic had a tremendous effect on the workforce.
Thank you, MP McPherson.
I will just reiterate, members, that if you want to send in questions, Mr. Mangin will provide answers in both official languages back to the committee. Thank you for that.
We want to thank all of you witnesses for providing us with your time and your expertise and for coming before our committee to answer many questions. I know we had many of you here on our first panel, and we really appreciate, as I said, your coming before us. On behalf of the committee, the clerk, the analysts and the interpreters, we thank you and wish you a great day. Thank you very much.
Members, at this time we're going to suspend for a couple of minutes as we transition to our second panel.
Good afternoon Mr. Chair and members of the committee.
Thank you for the invitation to appear before you today.
We are pleased to be here to discuss the analysis of your study of Bill .
With me today are Xiaoyi Yan, Director, Budgetary Analysis.
In compliance with the mandate of the Parliamentary Budget Officer, which consists of providing independent and non-partisan analyses to Parliament, we published our analysis of the 2022 budget on April 22. In the report, we identified several key issues to assist parliamentarians in their budgetary deliberations, and also presented updated fiscal and economic projections.
I will now continue my remarks in English.
In terms of transparency, budget 2022 includes long-term economic and fiscal projections, which improve fiscal transparency and contribute to sustainability analysis. However, the analysis provided in the budget would be further enhanced by the inclusion of additional details, such as long-term projections of old age security, employment insurance and children's benefits.
It's also worth noting that while the budget includes some of the measures from the Liberal Party's 2021 election platform, the implementation of any remaining platform measures and additional commitments not accounted for in the budget, such as pharmacare, will impact the budgetary balance going forward.
Our report also notes the continued misalignment of financial reporting, as budget 2022 was tabled a month after the government's main estimates. Parliamentarians could be well served by adopting a new legislative or administrative framework to enforce better alignment among the government's various financial reports.
Following this assessment, on May 17 we published a stochastic debt sustainability analysis of the medium-term outlook presented in budget 2022. The report provides a stress test of the government's financial position. Based on past experience, our results suggest that the government could maintain debt sustainability over the medium term. However, our results also suggest that on balance, there is upside risk to the budget 2022 projection of gross debt as a share of GDP.
In addition to our reports, my office has also released independent cost estimates of selected measures contained in budget 2022, including the mobility tax deduction for tradespersons and indentured apprentices and the luxury goods sales tax.
We would be pleased to respond to any questions you may have regarding our analysis of budget 2022 or other PBO work.
Thank you, Mr. Chair.
Thank you very much, Mr. Chair.
Mr. Giroux—and I see you have one of your staff with you today—thank you very much for appearing at our committee. It's wonderful to have you here. I think back to the time before we had the Parliamentary Budget Officer. I think the work that you and your office do certainly makes our job as parliamentarians easier. It also increases our confidence level in some of the financial discussions we have at this table. Thank you very much.
You mentioned that you did some work on the luxury tax. I'd like to spend a bit of time there, but before I do, Mr. Chair, I'd like to provide notice to this committee of a motion. I do not wish to debate this motion, but I did want to table it here publicly. I have sent it to the clerk.
Following on the good work of the Parliamentary Budget Officer, the motion is that this committee, in respect of the luxury tax, will ask the Department of Finance to table a report to this committee on or before September 19, which would include an economic impact study of the select luxury tax items, including a breakdown on the expected employment and expected tax revenue, on or before October 24; that the Department of Finance provide a detailed written progress report on the efforts by the department to address some of the issues that we've heard; and that by November 21, 2022, the department reappear before this committee so that we can discuss its findings.
Thank you very much. We'll discuss that at a later date with my peers.
Mr. Giroux, thank you for providing some economic basis. We have not seen an economic impact assessment done by the government of this luxury tax, so I was very interested in what you shared with us.
At a high level, I saw some significant loss in sales, about $2.9 billion. The lion's share of that was affecting the vessels, the boating industries—about 75%, or $2.1 billion. There are assumptions that go into that, but I want to talk at a high level about what we could expect to see, even just the direction of economic activity.
As you pointed out, we did estimate the impact on sales from the introduction of a luxury sales tax on automobiles, vessels and aircraft, and we found that the bigger impact would be on vessels.
With the reduction in sales of vessels, we can expect a potential reduction in the manufacturing of these vessels, and aircraft to a lesser extent, and automobiles. However, we haven't done an economic study, because that would be a significant undertaking for a small office like ours, so it's not clear whether there would be a full substitution in exports for that loss of sales, or whether it would be mostly imports or domestically produced goods that would be suffering. It would probably be a mix, but we have not done that study.
However, it is clear that with a reduction in sales, there would inevitably be a reduction in the sales tax that would otherwise be collected. One can think about the GST, but there is also the provincial sales tax and the HST.
In a nutshell, at a high level, that's what we can expect: a reduction in sales of almost $2.9 billion over a five-year horizon, and a commensurate reduction in sales tax collected.
Ideally, there would be a budget that would happen earlier in the cycle—for example, in February—so that budget items would be reflected in the main estimates. As that is the vehicle through which the government finances its operations, you then as parliamentarians, when you review the main estimates, would be able to make the connection back to budget items, as opposed to having main estimates that are not complete and that do not paint a complete picture of the government's finances and so do not include the budget estimates.
You'd have a much easier job, I would say, of approving or scrutinizing government expenditures, or the government's requests for money that would include budget items, which is currently not the case with the budget tabled way after when the main estimates have to be prepared and tabled.
Of course. It's not an easy question to answer, because the analysis is rather technical. For the econometricians who may be listening, I would say that the analysis is based on a series of analyses and simulations using the Monte Carlo method, which has nothing to do, unfortunately, with the eponymous tax haven. We made use of parameters from the past 30 years, meaning from 1990‑1991 up to the period immediately prior to the pandemic. We consider the various economic variables, like GDP, inflation and the interest rate, and observe how these variables behave themselves over this lengthy period. We then put all of that into a model whose starting point is right now.
What do we get as the future trajectory of the debt if the economic and macroeconomic parameters vary from what we have seen over the past two decades? We get a distribution of the possible scenarios, and that's what we base our estimates of probabilities on. They're not really probabilities, but rather a range of possibilities within which the government might or might not meet its objectives.
In short, we look at what happened in recent decades, we introduce the data into a model based on current parameters, and by looking at the past, we can see what the future might hold for us. This does not of course take extraordinary events like a pandemic or a war into consideration, but it gives us a very good idea of the future debt trajectory.
Good morning, Mr. Giroux and Ms. Yan. Once again, I'd like to join my colleagues in thanking you for the work you do. It's very helpful and widely used. It's very important for us to have access to an objective point of view on everything pertaining to the budget so that we can do our work effectively.
My questions will begin by addressing your note on the estimation of the sales tax for luxury goods, and the update to this note that was published this morning.
I'll begin with a comment, a reminder to the effect that when we talk about public debt in Canada, it's important to also look at provincial debt. Just about every year, you provide an update in the fiscal sustainability report. In the end, it's the provinces that bear the financial burden.
The committee asked the Department of Finance whether it had, before introducing the sales tax on luxury goods, conducted a study on the impact on the targeted industries in order to identify potential impacts, such as how many jobs and how much revenue would be lost. This was not done, and I believe that it was a serious omission.
I'd like to ask you some questions in order to clearly understand what the boundaries of your study were.
You began by estimating the costs and revenue for the state, for the federal government, but not their impact on the industries affected. Is that correct?
Okay. Thank you very much.
The industry is very worried about the impact of this part of the bill on business aircraft. The bill's intent is not to apply this luxury tax on these aircraft and yet, according to the almost incomprehensible 170 pages of the soon to be adopted bill on the new tax, they are. That's what we're being told.
There's the issue of the threshold and the activities of charter aircraft. When companies buy a business aircraft, and it is not in use, they can allow a charter aircraft company to use it, and there is a risk that the charter company will lease the aircraft for personal use. In cases like this, the aircraft manufacturer might be subject to the tax, even though it sold the aircraft to a company. In fact, if the aircraft is used for personal purposes for at least 10% of the time, the 20% tax could be applied.
In view of all this uncertainty, many clients have been cancelling their orders from builders of business aircraft. Most business helicopters and airplanes are exported, but the companies have to collect taxes. What they tell us is that they may have to wait a long time, sometimes up to six or even nine months, before the taxes are reimbursed. That generates significant cash flows, repercussions and uncertainty.
The factors I have mentioned are not measured directly in your note. But they should have been included in the Department of Finance impact study, should they not?
Dr. Yan just told me that in response to the previous question, the distance is 150 kilometres. I apologize for that.
With respect to your question on the alignment of the budget and the estimates, it's fairly easy to see which items were not in the main estimates that could have been in the main estimates. It's virtually all budget items that had expenditures or that have expenditures in the current fiscal year. Because the budget is not and was not tabled before the production of the main estimates by the Treasury Board Secretariat, these items could not be included in the main estimates. There are multiple expenditures that were included in the budget that are not in the main estimates. The list is very long. It's probably a few hundred items.
The impact is that when you as members of Parliament and your colleagues in the Senate look at the main estimates, you don't have the numbers when you look at specific departments or specific initiatives, or even the totals. You don't have the full picture of the government's plan when it comes to spending. You only have the state of the world as it was on March 1, so anything that's in the budget will be reflected later in supplementary estimates (A), supplementary estimates (B) or even supplementary estimates (C). It makes your job significantly more complicated, because you have to approve main estimates that are a very incomplete picture of the government's plans when it comes to spending.
That's why I'm saying, and I've been saying for a little while now, that it would be beneficial for transparency purposes and it would facilitate your work as legislators if the budget items were included in the mains. That would mean either tabling the main estimates later or—and more easily done, I think—by tabling the budget sooner, so that officials in the Treasury Board Secretariat have sufficient time to incorporate these items into the main estimates.
In response to your previous question, additional money for CRA that was not in the mains is a very good example. It could have been, had the budget been tabled earlier or the main estimates tabled a bit later.
When we look at additional money for the CRA for enforcement of tax provisions, we find that the expected returns that the CRA or the government expects seem to be going down. That's a bit surprising, because the additional money that the government indicated would be recovered through previous exercises or previous investments or spending initiatives was slightly higher. There's not a lot of detail, so it's a bit surprising in that it doesn't indicate to us why the government would be expecting lower returns with this series of additional spending for the CRA.
However, what we have also noted in the budget is that there's no provision—or no explicit provision, at least—for subsequent activities after additional audit activities. There's no significant amount that's identified. Maybe it's there, but it's implicit rather than explicit. There are no additional amounts for what will inevitably lead to or result in additional opposition to and appeals of these additional audits.
It's one thing that we have flagged in addition to an absence of significant details on the areas that will be the focus of these additional sums for CRA.
My first question is to the Office of the PBO.
There was a stunning negative revelation outlined in your update document, which stated that the new luxury tax will result in over $2.8 billion in lost sales over five years. Someone called it a “torpedo tax” before you ask the questions, and I think this might work. I've heard it called this a few times. I've heard other members call it a torpedo tax, and that is valid. I liken what this government has chosen to do as being similar to a submarine targeting an unsuspecting merchant ship in the dead of night. This government is firing a massive torpedo at the Canadian car, boating and aerospace manufacturing sectors, among others.
Considering the struggle that all sectors are having after the pandemic, including manufacturing, are you of the opinion that this tax needs to be put on hold or done away with altogether?
Thanks very much, Chair. Thank you, Monsieur Giroux, for being here with us today.
I'd like to go back to Canada's fiscal position.
The budget that was introduced projects a declining deficit, getting down to, I believe, $8.4 billion in fiscal year 2026-27. I think there's a conscious effort behind these numbers, and certainly the decisions being proposed in the budget to achieve those numbers demonstrate the government's commitment to seeing the debt-to-GDP ratio decline. I think you spoke about that a little bit in your interactions with Ms. Chatel.
On April 28, S&P Global Ratings reaffirmed Canada's AAA credit rating. They noted S&P Global Ratings' “view that Canada's high wealth, economic diversification, and ample fiscal and monetary buffers are helping the country recover from the impact of the COVID-19 pandemic, and leave it well-positioned to face future potential shocks.”
Mr. Giroux, my question is this: Do you agree with this assessment by S&P?
As I have only two and a half minutes left, I'll ask my questions in succession.
My first question is about the new tax on certain luxury goods.
This tax will increase the federal government's revenue, but it will decrease provincial revenue because the number of sales will drop and the provincial sales tax on such goods will apply to a smaller tax base. I'd like confirmation that I've understood this properly.
My second question is about Bill . I'm afraid that the committee will not be able to fully study this mammoth bill of over 400 pages in length, and which includes many parts and divisions.
Do you and your team have any warnings for us, or anything they would like to point out to us, in connection with Bill ? I don't know whether you've had enough time to examine the entire bill, and Part 5 in particular.
I'm thinking, for example, of division 9, which concerns the Special Import Measures Act and other areas. Do you think there are any dangers here?
Is division 15, which is about the Competition Act, put together coherently?
And what of division 16, in connection with the Copyright Act, and division 17, with respect to patents?
I'm also surprised to see, in a budget implementation bill, that there should be a mention of the Civil International Space Station Agreement Implementation Act. That's in division 18.
And division 19 addresses prison strip searches.
Suggested amendments to the Immigration and Refugee Protection Act and the Employment Insurance Act are also found in this bill.
Are you looking at all of that, because it's a budget implementation bill, or are you somewhat overwhelmed, as we are, by the scope of this bill?
Do you have any warnings for us?
Thank you very much for having asked these two questions.
With respect to your first question, it's true that the tax on luxury goods will increase federal revenue, but unfortunately decrease provincial revenue, at least for provinces that have a sales tax on goods of this kind.
Your second question was about warnings. We haven't studied the parts or divisions that did not include financial provisions or that did not generate considerable expenditures.
However, we did note that division 6 of Part 5 is identical to what is in Bill . I'm talking here of the transfer of $2 billion to the provinces to reduce health care wait times. These two provisions have exactly the same goal; at least that's how I understand it. I believe that it is included because the government expects to have Bill adopted before Bill . We believe that this deserves the attention of parliamentarians, to avoid duplication in the objectives and expenditures. We are, after all, talking about $2 billion.
Thank you very much. I'm glad to be back.
I wanted to follow up on questions about the CRA, particularly the expenditures in regard to recovery and the diminishing return you outlined in your report.
There's one thing I've been trying to get to the bottom of. I don't know if it's represented in some of the numbers in your report or if this would be in addition to them. I'm wondering if you're in a position to be able to provide any comment on the investment that the government is making, including some money in this bill, to go after people who applied in good faith for the CERB when they were told to, who don't have much income themselves, who are already living below the poverty line, and whom the government seems intent on pursuing for that money.
I'm wondering how good an investment you think it is to chase the poor for money that they don't have, how likely government is to recoup that money and if you're aware of any data. We've asked government directly. I would say that we haven't had an adequate answer on how many people they believe owe the government money under this program, how many people are below the poverty line, how much debt they think they're owed or how much they actually expect to recover.
I'm wondering if you're in a position to be able to provide any commentary on that as well in terms of what data is available, and how it might help us understand the return on investment, so to speak, although I don't think that's the appropriate term when we're talking about people who are already in financial distress.
First of all, I was worried when you asked me if I had anticipated that. I was worried you would blame me for that. Thankfully, you didn't.
In response to your question, it's not that difficult to provide these long-term expenditures, or at least an estimate of these long-term expenditures. We do that. We are a small office. As part of our fiscal sustainability report, we incorporate longer-term trends and projections when it comes to old age security, child benefits, equalization payments and transfers to provinces. It's not super-easy to do, but it's doable. In fact, it's good practice, and recognized by the OECD and other international institutions, that governments should provide or undertake that type of long-term projection to have an idea of whether their policies are putting the country's finances on a sustainable or unsustainable medium and longer-term track.
We do that on an annual basis. There's no reason that the Department of Finance and the government could not do the same.
With an expected reduction in deficits from the very high levels of the pandemic, what we anticipate is a substantial reduction in the deficit going forward, to about 0.3% of GDP in 2026, if I'm not mistaken. If that materializes, that would put the debt-to-GDP ratio on a downward trajectory, which would be key in restoring Canadian long-term sustainability, at least at the federal level.
However, as I mentioned before, that doesn't take into account potential additional investments or spending items when it comes to platform commitments of the 2021 election campaign, or calls for Canada to increase its defence spending or health care transfers to the provinces. However, that doesn't mean that if the government were to fulfill all these commitments and respond favourably to these pressures, it could not reach its debt-to-GDP targets or achieve the reduced level of deficit; it would just mean that it would require additional revenues and increased taxes.
All that is to say that we are on a relatively good track as a country, when we look at the federal level, for a reduction in the deficit and a reduction of the burden of the debt as a share of the economy, but that depends a lot on what will be done in the future to respond to pressures that the government is faced with.
Thank you, MP MacDonald.
We want to thank the Parliamentary Budget Officer for appearing before our committee. On behalf of all of the members of the committee, thank you for your insights, your reports and the work that you do, and for answering so many of our questions. We also thank Dr. Yan, who is with you today.
Thank you, Mr. Giroux.
On behalf of the clerk, the analysts and everyone here at committee, we thank you for appearing before us.
Members, on that, I want to let you know that Monday's meeting will start at 3:30 rather than at 11 a.m. On Tuesday, FINA is meeting from 11 to 1 and again from 3:30 to 5:30.
On that, shall we adjourn?
Some hon. members: Agreed.
The Chair: Thank you, members. Have a great day.
The meeting is adjourned.