Evidence of meeting #62 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was clause.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Trevor McGowan  Acting Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
Glenn Campbell  Director, Financial Institutions, Financial Sector Policy Branch, Department of Finance
Jean-François Girard  Senior Project Leader, Financial Sector Policy Branch, Department of Finance
Eleanor Ryan  Senior Chief, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Clerk of the Committee  Ms. Suzie Cadieux

3:30 p.m.

Liberal

The Chair Liberal Wayne Easter

I'll call the meeting to order.

As you'll note on the agenda, pursuant to Standing Order 81(5), we're dealing with supplementary estimates (B), 2016-17, and pursuant to the order of reference of November 15, 2016, we're studying Bill C-29, a second act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures.

We have the minister and his senior officials here to talk about those issues, both the estimates and Bill C-29, in one hearing.

Welcome, Minister. The floor is yours.

3:30 p.m.

Toronto Centre Ontario

Liberal

Bill Morneau LiberalMinister of Finance

Thank you.

Good afternoon, Mr. Chair and members of the committee.

I am pleased to be here to discuss Bill C-29, A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures.

I thank you for giving me this opportunity to share with you the progress we have made for middle-class Canadians over the past year. I will be happy to answer your questions.

As Minister of Finance, my overarching goal is not only to grow the economy, but to do so in a way that benefits families, workers, and the most vulnerable members of our society. You will have heard me say before that we simply can't claim progress unless we all share in the prosperity that we create together. I can tell you that this has now truly become a global challenge. The world's attention has been focused recently on the fact that many of our citizens haven't seen the benefits of the growth we've had over the last several decades. Unfortunately, hard work doesn't always equal progress anymore. It's what Canadians asked us to fix when they elected our government a year ago. It's what we're working to fix with measures like the ones contained in the budget implementation act that we're reviewing today.

Just a few days ago, I had the privilege of travelling to the United Kingdom to tell Canada's stories. I met with students studying at the London School of Economics, where I studied myself just a few short...well, maybe more than a few short years ago. I met with members of the editorial teams at the The Economist and at the Financial Times. I spent some time at the BBC. I met with investors who are looking for opportunities to invest in our country and in our people. Across the board, the feedback I got was this: it's nice to hear from a country that has such a positive story to tell. I can say that I felt very proud to be Canadian after that trip, and we all should. That's because we were one of the very first countries to put our finger on the fact that when you have an economy that works for the middle class, you have a country that works for everyone.

You know the story well, but I'd like to provide a few highlights of what this means.

In the past year, we took some big, important steps towards helping families regain the confidence they'll need to drive our economy forward. We cut taxes for nearly nine million people and introduced the new Canada child benefit, which puts more money in the pockets of nine out of 10 families with children.

With the budget implementation act that we're discussing today, we'll help ensure that the Canada child benefit will be indexed to inflation starting in 2020 so that families can count on the real value of this benefit well into the future.

Over the past year, we also increased Canada student grants for students from low- and middle-income families, and part-time students. We increased monthly payments for the most vulnerable seniors and struck a deal with the provinces to strengthen the Canada pension plan so that this generation of young Canadians and future generations will be able to retire in dignity. Know that we'll be discussing ways of making the Canada pension plan even better at the upcoming meeting of provincial and territorial finance ministers in December in the context of the triennial review.

In our fall economic statement, we clearly indicated that Canada's success in the economy of the future rests on investment and openness. We act in the way confident countries do. We invest in our country and its population by supporting the growth and prosperity of today's middle class, while generating economic growth for the years to come.

Thanks to our measures, Canadians will get home faster after work. They will spend more time with their children. They will breathe clean air and have quality drinking water. They will be able to live in better neighbourhoods and will have confidence in their future.

In this same economic statement, we also took steps to facilitate the process we are undertaking for the future. Over the coming months, we will co-operate with you in order to devise a more coherent calendar for the presentation of the budget and the main estimates.

I know this will be an improvement we will all appreciate.

Mr. Chair, allow me to come back specifically to the bill we're studying today and focus on two measures in addition to the ones I've already mentioned. The first is tax fairness, which is a central pillar of the promise we made to middle-class Canadians. The second is consumer protection.

On tax fairness, let me be very clear. We believe that everyone should pay their fair share of taxes, period. Budget 2016 committed $444 million in new resources for the Canada Revenue Agency to address offshore tax evasion and aggressive tax avoidance. This will enable the Canada Revenue Agency to enhance its assessment capabilities through the hiring of additional auditors and specialists who will have the resources needed to undertake more expansive and comprehensive investigative work.

In addition, we're committed to combatting international tax evasion and aggressive tax avoidance by strengthening existing efforts at home and abroad by introducing new measures. The introduction of the common reporting standard for the exchange of information between national revenue agencies on financial accounts held by non-residents is an important global development. Canada will implement the standard consistent with our commitment to the G20 and similar commitments made by more than 100 other jurisdictions.

Similarly, we're proposing to implement one of the key recommendations from the G20 and the Organisation for Economic Co-operation and Development to address so-called base erosion and profit shifting, BEPS, by multinational firms. With our international partners, we are proposing to require large multinational enterprises to file a country-by-country report with a tax authority in their headquarters jurisdiction. The reports will provide revenue agencies with a high-level overview of the firms' global operations to assist them in performing more effective risk assessments.

Through this second budget implementation act, we also want to amend the Bank Act in order to strengthen and modernize the financial consumer protection framework. We are introducing enhancements to financial consumer protection to strengthen access to basic banking services, business practices, disclosure, complaints handling, corporate governance, and accountability. Together these enhancements will make the regime easier to understand and accommodate consumers' needs in a rapidly changing sector, as well as allow Canadians to benefit from an efficient national banking system from coast to coast to coast. We'll be working collaboratively with stakeholders to support the implementation of the framework.

I want to thank the committee for your work on this important piece of legislation.

Consequently, Mr. Chair, whether we are talking about the Canada Child Benefit, protecting consumers, or measures to guarantee tax fairness, you can see that our document makes the interests of middle-class families our priority.

By supporting Bill C-29, A second Act to implement certain provisions of the budget tabled in Parliament in 2016, you will support us in continuing our plan to put people at the heart of the economy and to give them the help they need right now, while investing in the years and decades to come.

I would now be pleased to answer your questions.

3:35 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Mr. Minister.

We'll go to five-minute rounds so that we can get everyone in.

Mr. MacKinnon.

3:35 p.m.

Liberal

Steven MacKinnon Liberal Gatineau, QC

Thank you Mr. Chair.

Minister, thank you for being here with us once again. You are well on your way to setting a record for appearances before this committee. We congratulate you.

The committee spent considerable time on the issue of base erosion and the fact that profits are not recorded or taxed in the appropriate country. You alluded to the international efforts made in this regard in your statement.

Can you tell us more about these international efforts? Are they producing results, and is the G20 taking this issue seriously? Is Canada making its voice heard with regard to base erosion?

3:40 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

Thank you very much.

That is a very important question.

The first time I attended the G20 with the Prime Minister, base erosion and profit shifting were on the agenda, because it is important to have an approach that works everywhere in the world so that businesses with international operations pay their fair share of tax. This is very important.

As you know, G20 countries and the OECD are working to find an approach that works. It is not very easy, but there has to be a common reporting standard everywhere in the world. Canada is taking the lead to make sure that this happens. We have made a lot of progress and this will continue to be an important issue for us.

We have to ensure that enterprises pay taxes to Canada on their activities and that the system functions well in this regard.

3:40 p.m.

Liberal

Steven MacKinnon Liberal Gatineau, QC

Let's move on to the Canada Child Benefit. Our New Democrat friends have proposed an amendment to index this benefit now. However, you only intend to index the benefit in 2020.

Could you explain that decision to the committee? To what extent will Canadian families benefit from the Canada Child Benefit you have implemented? Why is it important to only begin indexing it in 2020?

3:40 p.m.

Liberal

The Honourable Bill Morneau Liberal Bill Morneau

The Canada Child Benefit is very important for Canadian families. It will really change their situation everywhere in the country. In fact, it is going to improve the situation of 9 families out of 10. It will mean an enormous change for children who are now living in poverty. Our Child Benefit will improve the situation of 300,000 children.

However, we have to be fiscally prudent. This is a big change that will have an enormous impact. We know we have to improve future inflation rates. That is why we decided it was important to begin indexing this benefit in 2020.

As you are aware, the inflation rate is not very high at this time, but it will be important that this benefit be indexed in the future. We chose to act to make a major improvement to the situation right now, and we will do the same in future thanks to our decision to index the benefit.

3:40 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you both. Mr. Deltell, you have five minutes.

3:40 p.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

Thank you, Mr. Chair.

Minister, it is always a pleasure to welcome you here, particularly in French. I am happy to congratulate you again on the quality of your French.

You travelled to London. You met people from the BBC and the London School of Economics, as well as investors. That is very nice, but did you tell these people when Canada would again have a balanced budget?

3:40 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

We focused more on Canada's debt-to-GDP ratio. The situation of the United Kingdom is much more difficult than ours because that country's debt-to-GDP ratio is much higher than Canada's. Its expenditures-to-GDP ratio is also higher than Canada's. We explained that it was very important for Canada to invest in the future to improve our growth rate. This was received with great enthusiasm.

3:45 p.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

Canadians would be very enthused to find out when we will see a balanced budget. For the twelfth time, I am asking you: when will Canada restore budget balance?

3:45 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

I can say to you as I did the last time that it is very important for us to be prudent in our investments. We want to see the debt-to-GDP ratio diminish during our mandate. We think that our investments will generate a higher growth rate and that this will improve our future situation.

3:45 p.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

May I point out for the third time that according to Canadians, the Minister of Finance has made no plan to balance the budget, which is not good news.

Mr. Chair, in reference to the Canada Child Benefit earlier, the minister said, “We have to be fiscally prudent.” I want to remind the minister that during the election campaign, he and his party committed to ensuring that the cost of this benefit program would not be higher than it was under the previous government. The additional cost was supposed to be nil. However, these people made a $3.4 billion mistake.

Minister, how can you explain this poor management of public funds?

3:45 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

We decided that it was very important to improve the situation of Canadian families and of the middle class in Canada. We made two very important decisions. First we decided to reduce income tax for the middle class, a measure that affects 9 million Canadians, and to implement the Canada Child Benefit, which will help families with lower incomes as well as middle-class families. Our objective is really to establish a system that works and will provide more money for middle-class Canadians. In this way, their children will have a better future. I think this program will be very important, and that it will allow more families to work in our economy and improve their situation in the future.

3:45 p.m.

Conservative

Gérard Deltell Conservative Louis-Saint-Laurent, QC

That is a very nice principle, Mr. Chair, but the problem is that these people got themselves elected by saying that this program could be brought in at zero cost. However, the Parliamentary Budget Officer showed in black and white that this would mean additional expenses of $3.4 billion as compared to the initial budget. In addition, in the initial phase, these people forgot indexation.

The minister has in his private life managed billions of dollars, which is very nice for him, but how would he have reacted if an accountant had presented a budget to him in which he forgot indexation, as he did in the case of the Canada Child Benefit?

3:45 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

As I already said, we want to invest in the future of our country. We began with investments aimed at improving the situation of Canadian families and setting out the opportunities they will have in the future. In addition, we invest in the future by means of investments in infrastructure, particularly. By doing so, we will have a higher rate of growth, which is very important, and a better fiscal situation.

3:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Caron.

3:45 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Thank you very much, Mr. Chair.

Thank you, Minister.

I like the fact that everyone is talking about our Canada Child Benefit proposal. As Mr. Deltell mentioned, the non-indexation of the program was an oversight. I think that is obvious. The government did not mention indexation until we saw the results of the non-indexation in the report of the Parliamentary Budget Officer.

What is also clear is that by 2020, if the benefit is not indexed, we will find ourselves in a situation that will not be very different to the one that would have prevailed had the program not been modified.

If this had not been an oversight on the part of the government, would it have studied the possibility of changing the level of the benefit to allow indexation, rather than letting the amount of the benefit deteriorate over four years, which would represent a loss of buying power for Canadian families?

3:50 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

The Canada Child Benefit is going to have an enormous impact on Canadian families. It will change their lives. We made the decision to do something now to help families in a significant way. We know that this is one of the most important initiatives we will take. We decided it would be advisable to index the benefit in future. In this way, we can ensure that the program will continue to have an impact. We have already observed an impact on Canadians, and I am confident that this will continue.

3:50 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

My question is also on indexation. Canadian families are going to experience a significant loss of buying power over four years.

Once again, could the government have studied the possibility of setting the benefit at a different level by indexing it right from the beginning?

3:50 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

We decided on the current level of the Canada Child Benefit. This decision means that in the beginning, Canadian families will enjoy a considerable improvement, which was our aim.

We know that thanks to this benefit, the situation of 300,000 children will be improved. That was our objective.

We also determined that it would be necessary to improve the situation later, and that we would do so in 2020.

3:50 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

You say that when the program was created, the government had decided not to index it for four years and allow families' purchasing power to deteriorate during those four years.

3:50 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

We believe the most important thing is to help families now by setting the benefit at a high level.

3:50 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

The second topic I would like to hear your opinion on involves the protection of consumers with regard to banking services.

Last week, we heard from representatives of the Public Interest Advocacy Centre, who spoke to us about the issue of jurisdictions. This is a paragraph taken from their brief:

More simply stated, C-29 invites constitutional wrangling, instead of promoting legal certainty, which will harm consumers and banks.

This was the result of the centre's legal analysis, which highlighted the weak power of federal laws and regulations in connection with common law and the Civil Code, as well as the greater protection afforded by provincial elements.

I would like to know why the government is stubbornly pursuing this, as it did in the case of the Investment Industry Regulatory Organization of Canada. It tried to supercede the Supreme Court's ruling regarding provincial jurisdiction, despite losing many cases.

Are you not concerned that Quebec and other provinces will challenge this decision before the Supreme Court, and that the government will again lose time and money to try to establish jurisdiction in an area that is not federal at this time?

3:50 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

We think it is very important to have a system that works for Canadian consumers. We think it is desirable that the system be the same everywhere in the country.

In addition, it was necessary that there be a level of clarity for consumers everywhere in the country. That is why we decided to have some rules, as we explained.

There is nothing different, but it is now clear to consumers that they are protected everywhere in the country.