Finance Committee on May 8th, 2018

[John Moffet]

In theory, any government, including the Canadian government, could acquire foreign credits.

[Pierre Poilievre, Conservative, Carleton, ON]

How would that work? Would it provide money in exchange for credits?

[John Moffet]

That's essentially how it would work, but again the precise details have not been worked out in the UN framework convention.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. Where would the government get the money to purchase those credits?

[John Moffet]

I can't speculate. This is not something the government is planning to do. This is not something the government has announced it is doing. I would be completely speculating as to whether the government will do it and how it will do it.

[Pierre Poilievre, Conservative, Carleton, ON]

The next question is for Finance.

As you know, American businesses are now paying significantly lower taxes than they were even a couple of years ago. Their tax burden is just in percentage now slightly lower than that in most Canadian provinces. In addition to that, American companies are able to write off 100% of capital investments in the year they're made rather than having them amortized over the life of the asset, which gives a real cost of money advantage to our U.S. competitors.

In most American states there is no carbon tax. Therefore this burden will pile on to the competitive disadvantage that already exists.

Does the carbon backstop in this bill foresee the usage of revenues from backstop provinces going towards business tax reductions in the province in question?

[John Moffet]

It's straightforward. If the government returns the revenue to provincial governments under the provisions in the act, then the government would not impose any conditions on the use of that money. We already know that is a possible use of revenues because that is, in part, the way British Columbia has used its revenues.

[Pierre Poilievre, Conservative, Carleton, ON]

What about in provinces where the government has not asked for a backstop and therefore the federal government is responsible for recycling the revenue? Would any of that money be used for personal or corporate tax reductions?

[John Moffet]

At this point I can't answer that question, because the government has not articulated whether it will exercise its authority under this legislation to return money to designated persons, and if it does, how it would choose to exercise that authority.

[Pierre Poilievre, Conservative, Carleton, ON]

Can businesses be considered designated persons under this?

[John Moffet]

Yes. A person is a term of art in law, which can refer to a corporation as much as to an individual human being.

[Pierre Poilievre, Conservative, Carleton, ON]

Does “return” mean a reduction in another tax, or must it mean some sort of cash rebate under this law and in instances where the federal government is administering the backstop directly to persons?

[Pierre Mercille]

I think the legislation provides for the return of the revenues. The legislation doesn't provide for amending other statutes.

[Pierre Poilievre, Conservative, Carleton, ON]

To comply with the obligation to return the revenues to the jurisdiction of origin, could the federal government reduce taxes uniquely in the jurisdiction in question?

[Pierre Mercille]

The provision of the legislation says that the Minister of National Revenue, in the case of part 1 of this bill, must pay the amount.

[Pierre Poilievre, Conservative, Carleton, ON]

Therefore, it can't be done. There's no chance then that there will be corresponding tax reductions?

[John Moffet]

There's no chance there will be corresponding federal—

[Pierre Poilievre, Conservative, Carleton, ON]

No, no, I understand that. That's why I have specifically and repeatedly said that I'm talking about whether the federal backstop kicks in and if it's being administered to persons. I'm not talking about where you're giving the province money. I'm talking about where you're giving to persons.

[John Moffet]

Pierre, I think your interpretation is correct.

[Pierre Poilievre, Conservative, Carleton, ON]

Okay. There's no chance. In essence, it can't be revenue neutral because the only commitment here is that you're going to spend the money, albeit within the province from which it was originally collected, but it's just taxes to spend.

Revenue neutral would imply that the government would, through one tax cut, reduce its revenue enough to neutralize the increase in revenue it obtained from another tax increase.

[John Moffet]

I don't think I can comment on that, other than to repeat the government's position that it will not keep any of the revenue. The purpose of the legislation is not to raise revenue in order to spend revenue, but the revenue is raised as an artifact of the way the pricing system works.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. Okay. That's good.

[The Chair, Liberal, Wayne Easter]

I was just going to say that I hope that's good.

Mr. Kmiec, we do have witnesses here for several other parts and divisions that we would also like to get to. Our schedule is getting very tight.

Go ahead, Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Maybe we'll just change the pace. I have questions about sections 94 and 96 in division 6, subdivision B, and section 141 in subdivision K. It's about carbon tax investigations and amounts paid. Can you help me understand how this would work? Is it similar to other portions of legislation, like the Income Tax Act that's overseen by the CRA. Under section 94, it talks here about appointing: “The persons that are necessary to administer and enforce this part are to be appointed, employed or engaged in the manner authorized by law.”

Is that pretty similar to other legislation?

[Pierre Mercille]

Yes, it is. Essentially, these powers allow the minister, in a very simple way—it's not the minister herself who's going to do all the tasks—to delegate to officers, who are the people who work at the Canada Revenue Agency.