Finance Committee on May 27th, 2019

[The Chair, Liberal, Wayne Easter]

I'll call the meeting to order.

Pursuant to the order of reference of Tuesday, April 30, 2019, we are examining Bill C-97, an act to implement certain provisions of the budget tabled in Parliament on March 19, 2019, and other measures.

We'll start with clause-by-clause consideration of part I.

I'm pretty confident everybody knows the procedure. We have officials here if you have any questions as we go through it. I'll go through the various clauses, and the officials are open for discussion.

On part 1, which deals with clauses 2 to 69, we have officials here.

We have Mr. McGowan, Director General, Tax Legislation Division. It's not his first time here for sure.

We have Mr. LeBlanc, Director General, Personal Income Tax Division.

We have Ms. Lavoie, Director General, Business Income Tax Division.

Finally, we have Mr. Langdon, Director, Charities, Personal Income Tax Division.

That is our list of witnesses for part 1.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, is postponed.

There are no amendments for clauses 2 to 22.

Is it agreed that we carry those on division?

[An hon. member]

Agreed.

[The Chair, Liberal, Wayne Easter]

(Clauses 2 to 22 inclusive agreed to on division)

(On clause 23)

[The Chair, Liberal, Wayne Easter]

Turning to clause 23, we have amendment NDP-1.

Go ahead, Pierre.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Greetings to everyone who is here today for clause-by-clause consideration of the bill.

My first amendment pertains to clause 23, which deals with the assistance being made available to print media. The purpose is to change the formula used to calculate the labour tax credit for eligible newsroom employees, by replacing line 14 on page 18. The current formula in the bill is based on an amount of $55,000, which I am proposing be raised to $85,000.

The motion addresses the comments we heard from the Fédération nationale des communications representatives. Ms. St-Onge and her team took a detailed look at the tax impact of the three proposed measures targeting print media: the labour tax credit, the tax incentive to encourage charitable donations to journalism organizations and the tax credit for digital new subscriptions.

According to the Fédération's estimates, amounts flowing from the digital news subscription tax credit and the charitable donation tax incentive would be well below the government's projections. Therefore, even if the salary cap for the labour tax credit increases, it wouldn't affect the overall envelope for the media support fund, which is nearly $600 million. Some might say that it would cost more, but the Fédération estimates that the overall amount would stay the same.

The amendment would bring the salary amount more in line with what an average unionized newsroom employee in Quebec makes, $76,000. The officials who appeared before the committee—and who are here again today—referenced an average salary of $55,000 for journalists in Canada, as per Statistics Canada, but it's $76,000 in Quebec.

That is my rationale. I hope that my fellow members will support increasing the salary cap in the bill, which will have no impact on the overall envelope of the support program.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Dusseault. This amendment, however, requires a royal recommendation and therefore would be inadmissible. This part of Bill C-97 seeks to amend the Income Tax Act by establishing a formula to calculate the qualifying labour expenditure, and this amendment attempts to modify that formula.

House of Commons Procedure and Practice, third edition, states on page 772:

Since an amendment may not infringe upon the financial initiative of the Crown, it is inadmissible if it imposes a charge on the public treasury, or if it extends the objects or purposes or relaxes the conditions and qualifications specified in the royal recommendation.

Therefore, I rule the amendment inadmissible.

(Clause 23 agreed to on division)

(Clauses 24 to 42 inclusive agreed to on division)

(On clause 43)

We have amendment CPC-1.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I'm going to speak to this one.

After hearing from the officials on the creation of this tax credit and this subsidy program, we're proposing to delete the definition of “qualified Canadian journalism organization”.

That's pretty simple. That's what deleting these lines would do. You all saw the announcement that Unifor is in this whole group that's going to be appointed to the panel, so we have absolutely no faith whatsoever that this will be non-partisan based on their past behaviour.

[The Chair, Liberal, Wayne Easter]

Just to clarify here, NDP-2 and LIB-1 cannot be moved if CPC-1 is adopted.

Is there any discussion on the motion by Mr. Kmiec?

Peter—or Mr. Fragiskatos.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Peter is fine also, Mr. Chair.

First of all, thank you very much.

The amendment is not something that I can support and is not something that our side can support. The reason is that by removing a definition that's necessary for all three journalism measures in the bill—namely, “qualified Canadian journalism organization”—and a definition that's necessary for the measures that extend “qualified donee” status to certain non-profit journalism organizations—namely, “registered journalism organization”—the result is that it would effectively render the proposed journalism measures impossible to administer.

Further to this, the definition of a “qualified Canadian journalism organization” is critical for the administration of these measures, because it outlines key eligibility criteria, such as being Canadian owned and controlled and that eligible organizations must produce original news content of general interest to Canadians.

[The Chair, Liberal, Wayne Easter]

Is there any further discussion?

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I'll just say that after seeing Unifor appointed to the group, that's the point: They'll determine who is on the panel. It totally undermines the supposed non-partisanship. That was originally what the government talked about.

That is exactly the point: to not proceed with this media bailout plan, because it will be partisan. Unifor is an ally of a political party that the government is part of: the Liberal Party of Canada. Because of Unifor's participation, there is absolutely no way that in good conscience we can allow this tax credit to go through. They are not in any way a non-partisan organization. They're not neutral in any way, and now they'll be deciding who is going to get access to this panel group. They'll be deciding who is appointed. It's absolutely ridiculous, and I can't believe the government is insisting on proceeding with it.

(Amendment negatived [See Minutes of Proceedings])

[The Chair, Liberal, Wayne Easter]

On NDP-2, we have Mr. Dusseault. If this amendment is adopted, LIB-1 cannot be moved.

The floor is yours, Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

The amendment I'm proposing obviously deals with the topic we were just discussing, media support, but in this case, it has to do with qualifying journalism organizations.

The amendment seeks to remove all references to the famous “body” appearing at the end of subclause 43(2) on page 36. This body came up a number of times during the committee's study of the bill, and, as we speak, the term has still not been defined. Last week, we heard from the panel of experts that may clarify the nature of the body as well as the eligibility criteria.

I don't think the body is needed, plain and simple, so the amendment would remove that provision and retain only the objective criteria already contained in the bill. Therefore, a Canadian corporation, partnership or trust would be eligible if it met the following criteria: it was resident in Canada; a certain value of the interest was held by individuals; it published a certain type of content; and it was not a Crown corporation, municipal corporation or government agency.

Those are very objective criteria based on which, the minister responsible for enforcing the Income Tax Act, the Minister of National Revenue, is entirely capable and fit to determine the eligibility of an organization. The minister would merely have to check whether an organization met the criteria to determine whether it qualified for support under the program. Since the Minister of National Revenue is entirely capable of making that determination, it isn't necessary to establish an undefined body. Doing so would be akin to giving the government carte blanche to determine who would evaluate the applications submitted by organizations and their eligibility for tax credits.

Hence, the amendment seeks to remove the reference to the body to streamline the process and get right to the point. In other words, the Income Tax Act sets out criteria and the Minister of National Revenue is responsible for determining whether they are met. It's as simple as that.

[The Chair, Liberal, Wayne Easter]

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Good morning, everyone, and happy Monday.

I wish to thank my honourable colleague for putting forward the amendment. However, having read it over, I disagree in terms of the intent of the amendment. This amendment should be rejected, in my view, because obviously, it would remove the requirement for journalism organizations to be designated before they could qualify for the purpose of the three journalism tax measures.

Also, it would remove the requirement for the participation of a body of experts who would then be able to apply their expertise to questions such as what constitutes original news content.

Finally, Budget 2019 is very clear about the independence of the media, indicating that an independent body must determine whether journalism organizations are eligible for the three tax measures.

Chair, those are my remarks.

[The Chair, Liberal, Wayne Easter]

Thank you.

Is there any further discussion?

(Amendment negatived [See Minutes of Proceedings])

We will turn to amendment LIB-1. Who is speaking to the amendment? It is assumed to have been moved.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Chair, with this amendment to clause 43, we recognize that for a well-functioning democracy, a strong and independent news media is critical. Budget 2019 was clear in enunciating that an independent—and I emphasize independent—administrative body would be involved in recognizing eligibility of journalism organizations for these measures.

What this amendment does is it clarifies the process for designating journalism organizations by requiring the Minister of National Revenue to consider the recommendations of an independent body when determining whether an organization qualifies for these measurers.

Thank you, Chair.

(Amendment agreed to [See Minutes of Proceedings])

(Clause 43 as amended agreed to on division)

(Clauses 44 to 52 inclusive agreed to on division)

(On clause 53)

[The Chair, Liberal, Wayne Easter]

There's a proposed amendment to clause 53. It's LIB-2.

Ms. Bendayan.

[Rachel Bendayan, Liberal, Outremont, QC]

Mr. Chair, the amendment to clause 53 would allow plug-in hybrids with a battery capacity of at least seven kilowatts, rather than 15, to be eligible for the zero-emission vehicle writeoff or rebate. This amendment to the battery size threshold better reflects the current market availability of plug-in hybrids while still ensuring that the tax incentive remains effective.

I would add that amending the battery size threshold is reflective of the current plug-in hybrid vehicle market. It is a fact that hybrids equipped with smaller batteries still provide significant environmental benefits as compared with their traditional counterparts given that they can still run solely on battery power for a decent range.

That is the reason for my amendment.

Finally, if I could, I would add that expanding this eligibility to more plug-in hybrids further encourages businesses to transition to a zero-emission fleet, thereby contributing to meeting our country's greenhouse gas emission reduction targets.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I'd like to thank my fellow member for her amendment.

That said, it makes me wonder about the direction we are moving in. I'm trying to figure out whether we are indeed talking about zero-emission vehicles here. Plug-in hybrids are already allowed, and now, the government is proposing that the battery threshold size of those vehicles be reduced.

The bill refers to zero-emission vehicles, so I have a hard time wrapping my head around how a hybrid vehicle—plug-in or not—equipped with a 7 kilowatt per hour battery can classify as a zero-emission vehicle. By definition, a hybrid vehicle is going to emit greenhouse gases from time to time, just as a traditional vehicle would. It won't be the entire time it is running, of course, but I'd still like to hear where the officials stand on how a “zero-emission passenger vehicle” is defined.

What's more, doesn't reducing the battery size threshold, as proposed, call into question the very title of the measure, which is meant to support the purchase of zero-emission passenger vehicles? We are talking about vehicles that emit greenhouse gases, after all.

[The Chair, Liberal, Wayne Easter]

Ms. Lavoie, I believe you're prepared to go.

[Maude Lavoie, Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance]

Thank you for your question.

It is true that vehicles with larger battery capacity will tend to run on electric power over a longer range. However, even vehicles with a smaller battery capacity, whether the kilowatts per hour are 10, 14 or 15, can still run solely on electric power, at least initially.

The question is how many kilometres will these vehicles be able to run on electric power for, and that depends on the model. Once the battery is charged, it is effectively a zero-emission vehicle. Once the battery power fully runs out, though, the hybrid vehicle will run on gas power. How many greenhouse gases it emits will depend on how much long-range driving the vehicle is used for. That is the variable.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Why, in that case, wasn't the term “low-emission vehicle” used? Why refer to “zero-emission passenger vehicles” when the definition includes hybrid vehicles?

[Maude Lavoie]

That is the choice the government made. That is the definition it opted to use. It was initially proposed that the battery threshold size be set at 15 kilowatts per hour to enhance the environmental benefits. I see that a seven kilowatt per hour battery threshold is now being proposed, the presumption being that such a threshold would still yield environmental benefits.