Finance Committee on Nov. 6th, 2017

[Gervais Coulombe]

In that sense, negotiations will follow, yes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay. Provinces, there you go. Get ready.

[The Chair, Liberal, Wayne Easter]

Next, we have Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Chair.

Thank you very much, Mr. Coulombe.

I'd like clarification on something the member across the table brought up. My understanding is that, through these legislative measures, it will be possible to establish the legal framework the Minister of Finance, as Governor in Council, needs to negotiate tax rates for cannabis products with the provinces and territories. Is that correct?

[Gervais Coulombe]

Thank you for your question, Mr. Fergus.

That is correct. The list of powers that such an agreement may include appears on pages 233 and 234 of the bill. At this point, I can't confirm or deny the position that the government will take in the negotiations. This involves the framework. I can't comment on anything further.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Very good. Thank you.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Boulerice.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

My first question is simple. Why are we planning for individual tax agreements with the provinces, rather than one agreement for the entire country? Why is there not a consistent framework for all of the provinces and territories? What sort of flexibility is the government looking for, here?

[Gervais Coulombe]

Thank you for the question.

If you look at previous agreements, in the case of harmonized sales tax, for example, you will see that the rates can vary slightly from one province to another. I'm not an expert on the HST, but I believe that it's 8% in Ontario, and around 9% or 10% in Prince Edward Island, so slight variations are possible. In addition, tax bases can differ in certain cases.

Again, I would point out that I am not here to discuss how the government is going to implement these amendments during the negotiations, in other words, whether bilaterally or multilaterally. It is possible that some agreements may be similar, from one province to the next, but the precedents show that, generally speaking, agreements are negotiated on a bilateral basis, even if it means whole provisions are repeated in each agreement.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Once the tax agreement has been signed, the federal government's payments to the provinces will not have strings attached, will they?

As things stand, there is no mention of dedicated funding. It is not specified, for instance, that the money has to go towards youth prevention or awareness in terms of the risks associated with cannabis use. The measure talks about payments, but the provinces will be able to use the money however they please.

[Gervais Coulombe]

The authority allowing the payments to be made will be defined in the agreements, which may or may not include such conditions. That's part of the regime. The payment specifics appear in proposed new section 8.81 of Bill C-63.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Chair.

As I already said, I don't claim to be an expert, but from what I understand, it's similar to the tax regime in place with the provinces in the case of the cigarette sales tax. This framework provides some flexibility when it comes to negotiating the tax rates that the provinces implement.

Is that correct?

[Gervais Coulombe]

I don't want to get into the details, but I must point out that, in the case of the tobacco tax, the government does not have coordinated tax agreements in place with the provinces and territories. Each is free to do as it pleases. In fact, Canada has 14 tobacco tax regimes, the federal regime, as well as those of the 10 provinces and three territories. Such an approach necessarily means a heavier burden and more red tape, making it more difficult for companies to comply, among other things.

In the very specific case of the legalization of cannabis, the government has repeatedly stressed the importance of using tax measures wisely. The government is of the view that establishing taxation agreements with the provinces and territories will go a long way towards achieving the objectives of the legislation.

As far as I know, the government has not yet announced the terms and conditions, framework or excise taxes. What we are looking at here deals with the authority for the taxation negotiations with our provincial and territorial counterparts to continue.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you for clarifying that.

[The Chair, Liberal, Wayne Easter]

It looks like we've exhausted the questions.

Mr. Coulombe, on Mr. McLeod's question, maybe you should just send us a note on that, rather than have us be left in the dark on whether or not it applies. Double-check it, and send the clerk a note on that question relative to provinces and territories.

[Gervais Coulombe]

Very good. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much for your explanations.

Now we'll turn to division 1 of part 5, the Bretton Woods and Related Agreements Act.

We have Mr. Brunelle-Côté, director of international policy and analysis division in the international trade and finance branch, and Mr. Sajkunovic, chief of international monetary and financial policy in the international trade and finance branch.

Welcome. The floor is yours.

[Antoine Brunelle-Côté, Director, International Policy and Analysis Division, International Trade and Finance Branch, Department of Finance]

Thank you very much.

We are here to discuss the amendments to the Bretton Woods and Related Agreements Act, which governs Canada's engagement with the International Monetary Fund, or IMF, and the World Bank Group, or WBG, and provides the Minister of Finance with authorities related to these institutions.

The proposed amendments are intended to ensure that the Bretton Woods and Related Agreements Act reflects the modern realities of the Canada-Bretton Woods relationship, reasserting the act as the primary legislation governing Canada's relationship with these institutions.

Aside from a few small tweaks over the years, the Bretton Woods act has remained largely unchanged since it came into force in 1985. As you may imagine, a lot has changed over the last 30 years in how countries engage financially with these institutions. For example, in addition to contributing permanent share capital, IMF members now also make temporary lines of credit available to the IMF in times of elevated global risk. It's also now common to channel grants and loans through World Bank trust funds or related bodies, rather than directly to the institution.

None of these ways of interacting with the Bretton Woods institutions were features of the relationship 30 years ago.

Consequently, over the past 30 years, in order to conduct these kinds of transactions, Canada's finance ministers have had to rely upon interpretations of their authorities under other statutes not directly linked to the IMF or the WBG, such as the Financial Administration Act and the Royal Canadian Mint Act.

The administrative changes being proposed would consolidate, within a single piece of legislation, the authorities necessary for financial transactions with Bretton Woods institutions.

The proposed changes do not grant additional powers to the Minister of Finance, and there are no new spending or fiscal implications with any of these changes.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Brunelle-Côté.

We'll start with Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you.

Is there a consensus by G20 countries that these new changes need to be put in place, or is this something the government has come up with on its own, in consultation with the IMF? Where do these changes stem from?

[Antoine Brunelle-Côté]

There is consensus on the new ways to grant money to the IMF and the World Bank. A lot of countries do this. I will take the example of the bilateral loans that many countries made to the IMF following the crisis. It's just that in Canada there is no clause in the current legislation, the Bretton Woods act, that allows us to do this. We have to rely on legislation in other acts to do the transactions.

We're just consolidating all the different authorities under one act to be able to do these transactions. It's just good governance. There are no significant changes.

[The Chair, Liberal, Wayne Easter]

I'll just rephrase that question, if I could. What is different under this proposal in division 1 from what happens now, other than legislative?

[Antoine Brunelle-Côté]

It doesn't grant any new power. It just transfers authorities from different laws to the Bretton Woods act. That's all it does.