Finance Committee on May 1st, 2018

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Mercille, pardon me for interrupting you.

You just said double taxation or double pricing.

[Pierre Mercille]

In situations, which we don't think exist right now....

This is a piece of legislation. Yes, it's 200 pages, but it's going to apply to an infinitely complex situation in Canada in which fuel is distributed. There may be a situation in which there's a risk that there will be double pricing. I'm not saying there is: there may be a risk—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Mercille, I can confirm that it actually will be happening. There was an exchange between Mr. Fergus and Mr. Coulombe in French about la tarification du carbone.

The GST—HST in some provinces—is going to be applied on the carbon tax. That's already double taxation. So I can tell you, it's already going to happen. It's $100-plus million in revenue that it is going to generate the federal government. This is already going to happen.

Could that exemption be used here?

The reason I bring it up is that you're going to exempt people from being taxed unfairly. Well, there's an entire electoral system designed around people having their say at the provincial level to refuse to have the carbon tax. We have an election coming up in Ontario in June; there's an election coming up in Alberta in 2019. There's a very strong chance that those provincial governments will change their minds.

[The Chair, Liberal, Wayne Easter]

I think we can let Mr. Mercille answer the question first, and then we'll get back to that point.

Mr. Mercille.

[Pierre Mercille]

We're not here to comment on potential political situations that may happen in Canada. We're to describe the instrument that is presented before you.

You just mentioned the GST and HST. This provision is not there to solve what you perceive to be an issue. It's a policy decision that the GST or HST applies on the final selling price of property or services. It includes the gas tax, and it will include carbon pricing because it will be built into the price of the fuel that's going to be sold.

The double imposition I'm talking about would be a double imposition under this particular piece of legislation where it is not the intention.

[The Chair, Liberal, Wayne Easter]

Mr. Kmiec.

Mr. Albas.

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

Thank you, Mr. Chair, and thank you to our witnesses for coming and sharing what you can—although I'm getting the distinct impression that there are many things you cannot. I hope you all appreciate in the back of your minds that the role of parliamentarians is to hold the government to account. That's something we will certainly do the next time we have the minister here.

With respect to the bill that's before us, first of all, did the Minister of Justice provide either department with a view on the constitutionality of the imposition of federally imposed financial legislation in what are really areas under provincial jurisdiction? Provinces have largely used the energy lever, so to speak. My question would be, is there anything that says that this particular bill is constitutional and will survive any challenge in any court process?

[Pierre Mercille]

I'm going to answer this, but I'm pretty sure you're not going to like the answer.

Essentially, the government believes that the plan is legally sound. I'm not at liberty and no one on this panel is at liberty to discuss whether there was legal advice provided. If it had been provided, it would be the subject of solicitor-client privilege.

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

Again, then, it's about “belief”: you said “the government believes”. There are many things that my spouse would probably say I believe that she disagrees with. That doesn't stop our having a good conversation, but it really does for others. The premier of Saskatchewan says that his government believes it's not constitutional.

I will simply leave that line of questioning. However, the fact that we are not receiving any kind of modelling yet, or that this is subject to solicitor-client privilege does not lend itself to a belief, in my opinion, that it's 100% sound.

Switching gears, though, I would like to go to the modelling.

Mr. Moffet, I believe you've probably authored several different replies to the Standing Joint Committee on the Scrutiny of Regulations on behalf of Environment Canada. Is that something you've done a number of times over the years?

[John Moffet]

Yes. I was the designated review officer for over 10 years for Environment and Climate Change Canada.

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

I feel that I already know you just by your correspondence.

[Voices]

Oh, oh!

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

Many letters would have come in, and I think today is consistent with that.

In regard to it, you mentioned earlier that the government is proceeding with pricing. Again, this is a Pigovian tax. Basically, by raising the price, it will alter the way that people respond in a market—again, this is just basic microeconomics. Since you're really only dealing with Northwest Territories, Nunavut, and Saskatchewan, because I believe that in most other jurisdictions, this won't apply, why has there not been any economic modelling given for that province and those territories?

[John Moffet]

There are a couple of points. First of all, the system is designed to be as durable and flexible as possible. It's designed so that it can be applied anywhere in Canada. Also, as your colleague aptly pointed out, it's conceivable that there will be changes in provincial policies in the short term, and therefore that the backstop might be needed in more than those limited jurisdictions you talked about.

Second, we have actually done significant detailed analysis in conjunction with each of the three territories, and we've shared those studies with the three territories. We did that for the territories, so the analysis is the property of the territorial governments. One of those governments has publicly shared that analysis. The others, I can't speak for. They're using it, but I can't speak for their intention. We have done detailed work with those jurisdictions.

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

And with provinces?

[John Moffet]

We've also been working closely with each of the other provinces, including modelling of various types of pricing options that they are each considering—P.E.I., New Brunswick, Newfoundland and Labrador, Nova Scotia, Manitoba. We actually have a delegation of modellers and policy analysts going to the Province of Saskatchewan in a couple of weeks to do exactly the same kind of analysis for that government. We're providing our analytical capacity to those governments to enable them to make decisions. Then, again, when they make a decision, we will all be able to know what the policy will look like and then be able to do a final modelling and disclose those results to Canadians.

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

So you'll only disclose this after it has been imposed. Is that the intention of the government?

[John Moffet]

My point was that after a province makes a decision....

For example, the Northwest Territories is looking at its own system. They have announced an intention, but they haven't fully disclosed all the details, understandably, because they have not all been worked out yet. When they do, then it will be possible to do full modelling of the likely impact of that system. We are deferring to that jurisdiction to allow them to make up their own mind and to announce their own system.

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

Which territory has already disclosed this publicly?

[John Moffet]

I believe that Yukon has publicly disclosed their analysis. The Northwest Territories undertook an extensive engagement process with its residents to talk about the likely impact of pricing and different design options, both for pricing and for revenue use and, as I say, is now very close to finalizing a design. I can't speak for what their plans are, or when they plan to disclose them. Of course, that's consistent with the normal development of any policy.

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

What you're saying is that the federal government has chosen not to allow parliamentarians to be able to have the information. Elected leaders from those jurisdictions will share that information government-to-government, but it won't be to disclosed to parliamentarians until after this legislation is passed—if a province or territory does not cooperate with the regime that's being imposed.

[John Moffet]

Sorry. That's actually not what I intended to say.

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

Could you just answer whether that is the case?

[John Moffet]

No, that's not the case. What I'm trying to explain is that we are giving time to provinces and territories to make their own decisions. It's not for the federal government to tell Canadians what the impact of a provincial decision might or might not be until that province has actually made up its own mind. Once it does, then that information will be made public.

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

It will be a little bit late for my purposes, in terms of where my interests are. I've been very frank that I don't believe the Northwest Territories or the people of Nunavut should be imposed on in this way. I think we should be finding other ways.

To go to a different subject then, in regard to the provisions around the importation of fuel, I believe MP McLeod had mentioned earlier that certain territories receive their fuels from different sources. The Northwest Territories get theirs from Alberta. Obviously, that's not imported, but I believe he said that Nunavut, for example, will receive imported oil.

If it's purchased through, let's say, Quebec, would they then have to pay the cap and trade in Quebec, or since it's imported, would they then pay this federal backstop price?