Finance Committee on Feb. 5th, 2020

[Brian Kingston]

It's an important recommendation and it's derived not just from the experiences that people receive when they deal with the CRA, which is well documented by that report, but also from what companies face when they have to file their taxes to report income. We think it's high time for comprehensive tax reform. Other countries have gotten far ahead of this. The economy is digitizing, and it's a totally different economy now than what it was decades ago. These piecemeal changes that have been made to the tax system just continue to increase the size of the Income Tax Act and, frankly, make us less competitive.

Not only would comprehensive tax reform be an opportunity to look at Canada and see how we compare with our OECD competitors to ensure that we're attracting investment—which we're not doing—but it would also be an opportunity to streamline the system, to digitize services that the CRA provides and make tax filing something that you can literally do on your phone, which we've seen happen in other countries. There's a benefit to individuals, but there's also a benefit to corporations if you do this right, and I don't think we can afford to wait another decade to tackle this.

[The Chair, Liberal, Wayne Easter]

Mr. Poilievre, do you want to wrap it up in two minutes?

[Pierre Poilievre, Conservative, Carleton, ON]

Yes.

Mr. Bradley, we often talk about the insanity of selling our oil on the cheap to the Americans in the west and buying it expensively from foreign sources in the east. Sometimes we ignore that we're doing the same with electricity in Canada. For example, in Ontario we're paying eight or nine cents a kilowatt hour on average, and in Quebec, right next door, they're selling hydro to the northeastern United States for two cents a kilowatt hour. Quebec hydro could make more money and Ontario could have lower energy prices if we actually traded more, although we do some interprovincial purchases from Quebec.

Is there a potential for a national corridor or electrical transmission or just better interprovincial trade in electricity that we could pursue as a country, and if so, what are the obstacles to making it happen?

[Francis Bradley]

The principal obstacles right now are essentially in the provincial capitals. On the one hand, this is a question of what the relative priorities are in the provincial capitals. On the other hand, there are also very active discussions that are taking place now between a variety of provinces. It has been reported in the news that there are discussions between Quebec and Newfoundland that are very far advanced, and the Government of Quebec and the Government of Ontario are also discussing this on an ongoing basis.

The current electricity trade that we see between Canada and the United States is one that has evolved historically because of the economic opportunities that have been there. They've also resulted in some pretty significant benefits overall to our shared North American airshed because every kilowatt of clean Canadian electricity—it's surplus that is sold into the U.S. market—displaces, in most cases, coal down in the U.S.

[Pierre Poilievre, Conservative, Carleton, ON]

That is positive.

[The Chair, Liberal, Wayne Easter]

I'm sorry, Pierre. We split the time with Mr. Morantz.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

I will tell you this: it's 14.37¢ per kilowatt hour in P.E.I.

Go ahead, Mr. Sorbara.

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

Thank you, Mr. Chair. It's great to be here and it's nice to see everyone's presentations.

Mr. Kingston, no one wants to leave money on the table. We never do that in our daily lives, yet it seems that money's being left on the table in Canada when it comes to being able to grow our economy and to create more jobs. Senior Deputy Governor Wilkins gave a speech today outlining some of the things that you and some of the business writers have commented on.

On the interprovincial trade front and the regulatory front, but more so on the interprovincial trade front—and Governor Wilkins alluded to this today—would you identify three areas where we could work together with the provinces to reduce barriers and move things along more quickly?

[Brian Kingston]

I think the first area would be on labour standards. I think that's an important area where you have divergence between different labour and certification standards, particularly in some trades. Second, we still do not have a common securities regulator in this country, despite years of trying. Progress is being made, but that should be finalized once and for all. Lastly, it's the regulatory piece that's been created by the CFTA. There's a regulatory co-operation table, but it's simply not moving quickly enough. I think at this point we need a coalition of provinces willing to advance this beyond the current discussions.

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

Yes, because time is limited.... In the last session, our government did a lot. We moved the needle a lot on interprovincial trade. There's much more to do, and we need to continue on that path.

I'm happy to see that the senior deputy governor identified interprovincial trade barriers, increased education and skills training, which was a centrepiece of number of our budgets in the last couple of years, more R and D spending—and we know where we stand on that—and efforts to optimize the tax and regulatory environment. On the tax front, in a prior pre-budget consultation and in our report that we generated, we did identify a comprehensive tax report as very important.

Moving on to Mr. Taylor and Ms. Taylor at Mortgage Professionals Canada, I just wanted to get an update on the speech that was given by the individual from OSFI on January 24. There were comments made that “the difference between the average contract rate and the benchmark rate has been widening more recently, suggesting that the benchmark is less responsive to market changes than when it was first proposed”. What's the difference as of today?

[Paul Taylor]

Right now, there's about a 240-basis-point gap between the insured rates and the A-class uninsured rates and the 5.19% benchmark.

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

I was wondering about that. The individual from OFSI did give a pretty expansive speech, which I've read a couple of times to make sure I understand everything. The qualifying rate, the benchmark rate, may just not be responsive or flexible enough and go over that 200-basis-point spread that was identified under B-20.

[Paul Taylor]

You are exactly right. Bond yields have been falling, since probably October of last year, and the bank's posted rates have really not followed the direction of that reduction, so there's been a widening gap between the qualification rate and the actual contract rate. This means, proportionately, that people are being stress-tested harder today than they were last year.

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

I do note on this that TD—I believe it was TD—did come in and reduce the five-year rate by 35 basis points—

[Paul Taylor]

That's right.

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

—earlier on today, if I'm not mistaken.

[Paul Taylor]

I don't know if that discounts the poor policy rationale of using the Bank of Canada rate, though. I do think the banks use that rate for interest rate differential penalties and other internal business practices. They certainly don't have a concern about public policy rationale when they're setting those rates.

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

I just need two seconds, Mr. Chair.

The stress test was a necessary macroprudential policy position, in my eyes, and I was glad to see in the mandate letter to the finance minister that a review will happen—obviously through OSFI and so forth. I am happy to see that happen.

[Paul Taylor]

As are we.

[The Chair, Liberal, Wayne Easter]

As always, we are rapidly running out time.

Mr. Khan, I think you made a compelling argument on the importance of AI, yet no questions were directed your way. You did say that government really has to fuel the AI economy, I think, with the quantity of data available. You said that Canada lags behind, and I can tell you this: If there's anywhere in the country that not only lags behind but where we're not even in the game, it's Atlantic Canada, east of Montreal.

Could you tell us how we could work within government to get there? We have regional development agencies right across the country. Is there anything they can do? Or does it have to come through ISED? How do we create the emphasis on AI?

I also chair the Canada-U.S. meetings. I'll tell you that at some of the meetings down in the U.S. this is what they talk about. We don't even talk about it here. Can you give us some suggestions, either through regional development agencies or government as a whole, as to how we should get there?

[Bilal Khan]

Thank you for the question. I'll try to be more controversial the next time.

[Voices]

Oh, oh!

[Bilal Khan]

It's a great question. I'd actually focus the question on our talent, certainly east of Quebec, as you mentioned, and in other parts of the country. We have a real and serious challenge and an upcoming problem around upskilling our people and ensuring that people have a purpose and a role and a job to participate in the AI- and data-driven economy.

One thing we lack, and frankly do a terrible job at from coast to coast, is capturing data and information on unemployment and the roles and responsibilities that people currently have. I advocate strongly for mapping skills across this country and across industries. Part of that mapping exercise will allow us to identify and make clear connections between existing jobs and existing roles in the marketplace and how a specific role can easily be upskilled to a role driven by data or AI or automation or analytics. The data and AI economy will be fundamentally predicated on skills, knowledge and ideas, which will be driven by people, but if individuals don't have the ability to upskill, with the resources to better understand their role in the new economy and to have the opportunity to participate, frankly, then I think there will be a massive gap in our ability going forward.

[The Chair, Liberal, Wayne Easter]

Okay. That is helpful.

Thanks to each and every one of you for your presentations and for coming here, as I said earlier, on short notice. Thanks for answering our questions.

With that, committee members, we will suspend for five minutes.