Finance Committee on Feb. 3rd, 2020

[Andrew Marsland]

I'm not going to comment on particular taxpayers, but I'd begin by saying that there is nothing wrong in principle with deducting interest. That's all part of the calculation of income. Where that becomes a challenge is where debt is allocated between jurisdictions, which reduces the tax base of a particular jurisdiction at the expense of another, and so on.

That's the thing that we of course look at very carefully, along with other measures. In successive budgets, we bring forward proposals to protect the Canadian tax base.

While I'm not responding directly to your question about specific corporations, I can assure you that we examine and analyze the corporate tax base very carefully to make sure that—

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

I have a request for you. If possible, could you get back to us with an estimate of how many companies are using the schemes in Canada? Without naming any specific cases, as I just did, how many companies using the schemes have you identified? As we know, it’s perfectly legal in the current tax regime, but the Prime Minister has asked the Minister of Finance to make precisely that change. How much would Canadian tax authorities be able to collect if such a change were made?

How much time do I have left, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

You have half a minute.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Oh, wonderful.

I'd like to discuss another point in the letter. The Prime Minister asked the finance minister to introduce a new 10% tax on luxury boats, cars and personal aircraft over $100,000.

Again, I'd like to know whether you’ve done an estimate of how much such a tax would bring in.

[Andrew Marsland]

I'm not really in a position to comment on proposals, particularly prior to a budget, but I would say that we're, of course, in the process of working on the issues that were outlined in the minister's mandate letter, in preparation for providing advice to the government in the context of the budget.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

All right.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll have Mr. Julian and then Mr. Cumming.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

I'd like to thank the witnesses for being here today.

I want to come back to the question that Mr. Ste-Marie just asked about the overall erosion of our tax base, because the last time we met as a committee, back on June 21, we had in our hands the PBO report that was fresh off the press. It came out that very same day. It talks about an erosion of our tax base because of overseas tax havens, which they calculated—and the PBO was very clear that this is a conservative calculation—at $25 billion a year.

That's an erosion of our tax base of $25 billion. When we think of the crisis in affordable housing, the fact that we don't have in place basic dental care or pharmacare, we look at $25 billion being eroded from our tax base. That is a considerable sum of money that could resolve many of the challenges that so many Canadians face.

Mr. Ste-Marie asked whether you have done an evaluation. I'll come right back to that. Specifically, does the department have an evaluation of whether that $25 billion figure is conservative or whether the ministry feels it is excessive? What are the numbers the Ministry of Finance has to compare with the amount that was put forward by the Parliamentary Budget Officer, who was of course working in the interest of all Canadians?

[Andrew Marsland]

I can't really comment on the Parliamentary Budget Officer's numbers. I'd have to go back and look at the methodology used, but I will commit to the committee to come back to you with our comments on that report.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you. I take from that there has been more evaluation done since the PBO report came out in June.

[Andrew Marsland]

These kinds of evaluations are very sensitive to how you measure them, what the baseline is and what assumptions you use. On that basis, I don't really want to comment on whether I agree with that assessment or not.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I understand, but I just want to be specific on this: the department has not done an evaluation since the PBO report came out on June 21.

[Andrew Marsland]

The department continues to examine the corporate tax system. It continues to examine issues on a multilateral basis with the OECD and to implement measures to protect the base. We look at specific arrangements that we consider contrary to the policy, and we bring forward measures in every budget to address those. For example, in the last budget there were measures to reinforce the anti-dumping rules and to reinforce the transfer pricing rules, which relate to that, and to deal with withholding tax issues around securities lending arrangements, to give some examples.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay, thank you for that.

As Mr. Ste-Marie mentioned, if there is any material available through the ministry, I think it would be something that we would all be seized with.

I want to go to the Trans Mountain pipeline.

As I mentioned, I asked the finance minister last spring whether there had been an evaluation of the updated construction costs. As I'm sure you're well aware, the shippers' contracts are dependent on that update. They haven't been updated for years and construction costs are escalating in British Columbia.

Since the spring, has the Ministry of Finance done an evaluation of what the updated construction cost would be for that pipeline?

[Evelyn Dancey, Associate Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance]

Thank you. I can take that question.

The responsibility for costing the project rests with the Trans Mountain Corporation, the company that owns the underlying asset and is responsible for the project. It's the board of directors' responsibility to undertake that costing exercise rather than the Department of Finance's, to be clear about our role versus their role. At this time, the board of directors has not approved and released an updated cost estimate. If you were looking at something, I believe $7.4 billion was the last number that was put into the public realm.

As members can appreciate, I'm sure it has been an uncertain time for the project, in terms of the regulatory uncertainty, the legal challenges, etc. The board of directors has to take into account the actual costs of where the pipeline will run and the details of construction in a climate that has been quite unpredictable.

We are hopeful of receiving updated costing, but at this time there isn't a number available that I can share.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

And the Ministry of Finance has not been involved in any way in updating those costs, which are now estimated to be twice as much as what were originally projected a few years ago.

[Evelyn Dancey]

This is a responsibility that rests with the Crown corporation rather than the finance department.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay, thank you.

For my final question, I want to go to the Hoskins report and the recommendation around universal public pharmacare.

Has the Ministry of Finance done any costing or evaluation of how best to financially approach putting in place universal public pharmacare in Canada?

[Nicholas Leswick]

Mr. Chair, I'll invite my colleague Suzy McDonald back to the table.

[The Chair, Liberal, Wayne Easter]

You might as well stay at the table, Ms. McDonald.

I was going to tell you that before you took off when I wasn't looking.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Have yourself a glass of water. Settle in.

[The Chair, Liberal, Wayne Easter]

Go ahead, Ms. McDonald.

[Suzy McDonald]

With great pleasure. Thank you.

On the question of universal pharmacare, that work is ongoing within the Department of Health and the Department of Finance.

The question, I think, was specifically about whether or not costing of universal pharmacare itself has taken place. Is that correct?

[Peter Julian, NDP, New Westminster—Burnaby, BC]

It's whether the Ministry of Finance has done an evaluation as to how to implement and put into place universal public pharmacare, on the basis of the Hoskins report.

[Suzy McDonald]

That work is ongoing in terms of discussions with provinces and territories around what pharmacare would and could look like moving forward.