Finance Committee on April 27th, 2023

[Ed Fast, Conservative, Abbotsford, BC]

All right—the sooner the better.

[Erin Hunt]

Thank you.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

I'd like to now address a question relating to division 33 of part 4, which would be threats of foreign interference. Foreign interference is a very live issue in Canada today.

First of all, I would ask you, sir, to perhaps take a minute to give us a very brief summary of the steps that have been taken in budget 2023 to address foreign interference.

[The Chair, Liberal, Peter Fonseca]

You have about 90 seconds left, Mr. Fast.

[Manuel Dussault, Acting Director General, Financial Institutions Division, Department of Finance]

Thank you, Chair, for the question.

My name is Manuel Dussault. I'm an acting director general for the financial institutions division.

Here's a very quick overview.

First, OSFI's mandate for financial sector oversight will be expanded to include supervising financial institutions in order to determine whether they have adequate policies and procedures to protect themselves against threats to their integrity and security.

Second, the proposal is to enhance the superintendent's and the minister's authorities in regard to security and integrity with respect to supervision, ownership approvals and taking control of institutions for national security reasons.

[Ed Fast, Conservative, Abbotsford, BC]

If the superintendent of financial institutions were to take over a financial institution due to national security concerns, what criteria would be applied by the superintendent to determine whether the financial institution should remain in operation or whether it should be immediately closed down?

[Manuel Dussault]

Thank you, Chair, for the question.

[The Chair, Liberal, Peter Fonseca]

Give a short answer, please.

[Manuel Dussault]

The criteria are in the legislation. They include where the integrity and security of the financial institution are at risk, where all shareholders have been precluded from exercising their voting rights or where there are national security risks.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Fast.

Now we'll go over to the Liberals.

MP MacDonald, you have five minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

I just want to go back to Ms. Wong on the Bank of Canada's remittance issue.

We've had several narratives surrounding this issue, and I just wanted to be clear that it does not affect the fiscal behaviour of the government's budget. Is that correct? Is that a fair statement?

[Gloria Wong]

Yes, it is a fair statement.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you. I just wanted that on the record.

Ms. David, we talked a little about the investment in the Canada growth fund and how important it is for competition in this country. Can you remind the committee of the objectives of the growth fund and how these amendments would help expedite its launch?

How does your department help to expedite this process for the Canada growth fund?

[Anne David]

As you pointed out, budget 2022 announced the Canada growth fund to catalyze private investments in Canada's clean economy.

What the growth fund would do is invest in a way that would absorb risks in order to encourage private sector investment in new technologies, as well as SMEs and various other supply chains, in order to grow Canada's economy at a speed and scale to meet net zero.

The reason for selecting PSP Investments to manage the growth fund is exactly that: to speed up the implementation of the growth fund.

We don't want the growth fund to be slow to start. We want it to be in a position to invest in the first half of 2023 as was indicated in the 2022 fall economic statement. The reason for selecting an experienced and expert investment team was exactly to have the growth fund operational in the first half of 2023, so it could quickly start investing to meet Canada's climate and other economic goals.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you so much.

I'm going to jump to the equalization formula, though I don't know whom to direct this to.

I come from the smallest province in Canada, so equalization is extremely important to me. That's why I'm asking.

First of all, can you brief us on some of the minor technical changes that were implemented in the BIA?

[Suzanne Kennedy, Senior Director, Federal-Provincial Relations, Department of Finance]

I'm Suzanne Kennedy, senior director of equalization and territorial formula financing policy.

In the BIA, there are two changes concerning equalization.

One is to extend the authority to make payments. The authority to make payments is reviewed every five years, and it expires March 31, 2024. The BIA will extend that for another five years. The government announced in budget 2023 that it would also make technical changes following consultations with provinces and territories. Those will be mainly brought forward through the standard regulatory process.

There is one change in the BIA concerning miscellaneous revenues. Right now, miscellaneous revenues are grouped with property taxes for the purpose of equalization. The proposal is to distribute them across all of the relevant non-resource revenue sources. Those would include personal incomes, business income taxes, consumption taxes and property taxes for the purpose of equalization.

[Heath MacDonald, Liberal, Malpeque, PE]

Could the miscellaneous revenues be incorporated into any one of those items you're talking about, or are they going to be a separate entity? I guess what I'm trying to figure out is this: Are the miscellaneous revenues something that government is not accountable for to the extent of those items in the tax bases you're talking about?

[Suzanne Kennedy]

Right now, for calculating fiscal capacity in respect of miscellaneous revenues, it's assumed that they're related to property taxes. So they're just measured on that basis. After a study of the issue, there's evidence that they're related to a number of the bases, so it's inappropriate to equalize them only on the property tax basis. The change would distribute them across the relevant non-resource bases.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP MacDonald. We did stop the time to allow the witnesses to come to the table.

We're off to MP Ste-Marie now for two and a half minutes, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Ms. Kennedy, I would like to continue to ask you questions, to limit the game of musical chairs with senior officials.

In the proposed amendments, can you explain what is meant by, “Include unremitted net income of hydro-producing government business enterprises in the business income tax base to improve accuracy by measuring fiscal capacity that is currently excluded”?

[Suzanne Kennedy]

Thank you for the question.

Currently, we take into account only the remittance portion of the net income of these companies. This is for the measurement of resource-related fiscal capacity. We do not include the unremitted portion of these companies' net income. The proposal that was developed in consultation with the provinces and territories is for that unremitted portion, since not all hydro-producing companies remit the same portion of their net income to the provincial government. This proposal would take that unremitted portion and include it in the corporate income tax base.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much.

If Bill C‑47 goes forward, it will be implemented for 2024‑2025 payments. However, if these changes were implemented for the 2023‑2024 fiscal year, payments to provinces would decrease for Quebec and increase for Manitoba. Is that right? Would there be other consequences, for example, for Prince Edward Island or elsewhere in the Maritimes?

[Suzanne Kennedy]

We have indicated only the most significant decrease and increase. Yes, there would be other variations.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Could you provide us with a written list of variations for all provinces and territories? We would appreciate it. Thank you very much.