Finance Committee on Dec. 8th, 2020

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much, Chair.

I'll ask only one question so I don't eat into my colleague's time this go-round.

The question really comes from a line of argument that I've seen the NDP making in the House of Commons and earlier at this committee, and that's the effort to conflate the direct support measures that have targeted Canadian households and businesses with the liquidity support that's been provided to the financial sector.

Obviously the direct support has involved money that the federal government is spending to help particular initiatives, mostly to keep households whole and to allow businesses to keep their doors open or keep workers on the payroll. Would one of the witnesses care to distinguish the direct support provided to households and businesses from the liquidity support and demonstrate that it's not, in fact, the federal government cutting cheques to big banks, as the NDP has suggested?

[The Chair, Liberal, Wayne Easter]

Who wants to take it?

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

I would say, on a point of order, that that's a complete deformation of what I've been saying. I could certainly rebut him.

[The Chair, Liberal, Wayne Easter]

That is debate, Mr. Julian.

Does somebody want to take that question? It relates to the liquidity issue.

Can anybody take it? Mr. Marsland, I believe you were....

Go ahead, Mr. Leswick.

[Nicholas Leswick]

I'll try my best, but I don't know what value my response could add.

There are various tranches of liquidity support that the government has put in play in the eight months over the course of this pandemic. One is liquidity support in the form of tax deferrals, such as corporate tax deferrals and remittances of GST or HST for corporations.

A second one is the liquidity support that was operationalized through the Office of the Superintendent of Financial Institutions, providing capital relief, which in theory would allow financial institutions more capital space in order to effect lending.

Third is the straight-up liquidity programs that the government has put in play through a whole menu and catalogue of credit programs sponsored through our Crown financial institutions.

Those are the three tranches of liquidity support. Hopefully, that provides some added substance.

[The Chair, Liberal, Wayne Easter]

We'll turn to Ms. Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thanks so much.

Thanks to all of you for being here today and for all of your hard work in answering all of our questions.

You know, for the average Canadian it's really hard to digest a lot of our numbers: the 80% jobs coming back, the 8.9% unemployment rate, 52% debt-to-GDP ratio, one trillion dollars in debt, or the $381-billion deficit. Do we loosely track ourselves in terms of our progress compared to that of other countries? If so, who do we do that with? If no, just tell me no, and I'll go to my next question.

[Nicholas Leswick]

Yes. In the fall statement that was released last week, we tried to showcase some of the progress we've made in the pure output and employment indicators, compared to that of some of our G7 partners. What we've shown is that the rebound in Canada was quite strong over the second quarter and early parts of the third quarter.

As the minister said, we've recovered over 80% of the jobs lost, and output has bounced back to within 4% or 5% of pre-pandemic levels. Clearly, there are still output gaps and labour gaps, but I think this puts us slightly ahead of some of our G7 comparators in terms of the strength of the recovery. The hand-off is to this so-called recovery phase, where additional fiscal and other policy support are clearly necessary to get the economy back on track.

[Julie Dzerowicz, Liberal, Davenport, ON]

Great.

If I have time for one more question—

[The Chair, Liberal, Wayne Easter]

You do. You have time for two if they're short.

[Julie Dzerowicz, Liberal, Davenport, ON]

Okay, that's great.

My next question is—and I know I've done this—we've really encouraged our businesses to move online. Are we losing federal tax dollars because we have more businesses moving into the digital economy?

[Andrew Marsland]

Perhaps I'll answer that, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Marsland.

[Andrew Marsland]

Clearly, the digitization of the economy poses challenges for the tax system, and as I'm sure you saw in the fall economic statement, there were three measures proposed in that statement to address some of the sales tax challenges of digital goods and services of non-resident, non-registered suppliers supplying through Canadian fulfillment warehouses and the use of platforms to supply short-term accommodation.

I think the minister commented on some of the income tax challenges and the efforts that are under way at the OECD to find common ground to revisit the international tax architecture, which is predicated on a physical presence in a jurisdiction, to have it adapt to the digitization of the economy and the government's proposed next steps in relation to that.

[Julie Dzerowicz, Liberal, Davenport, ON]

Then we're looking at it both from a domestic and an international perspective, right?

[Andrew Marsland]

I think the essence of the problem is it's neither domestic nor international, but there is value created in Canada that isn't necessarily created by entities with physical presence in Canada, and that's really the nub of the problem in terms of both the allocation of tax revenues between countries and ensuring that businesses operating in Canada through the virtual space appropriately pay or collect tax.

[The Chair, Liberal, Wayne Easter]

Okay, thank you all.

We'll go to Mr. Ste-Marie for two and a half minutes, and Mr. Julian will get to wrap it up with his two and a half.

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

I will start with a comment for the finance officials.

Over the spring and summer, the Minister of Finance provided 10 biweekly updates, the last of which was dated August 6. They were extremely useful and informative because they made it possible to track each of the policies and provided an overview. I want to thank you for that.

I have another comment, this one for Mr. Fraser, a government member on the committee. When Parliament was prorogued, those updates stopped. It would help us assess the policies if the government were to bring back a similar reporting mechanism. I have a question for the witnesses about that.

According to your latest data, where do things stand with the Canada Recovery Benefit, the Canada Emergency Wage Subsidy and the Canada Emergency Rent Subsidy?

Are the programs effective? We are hearing about some of the failings, especially in relation to the Canada Recovery Benefit and artists, people in the entertainment and cultural industries, and self-employed workers.

[Andrew Marsland]

Perhaps I'll start with the second question and ask colleagues to respond to the rest.

The CRA publishes data on the wage subsidy on, I think, a weekly basis, and clearly many firms and, as I think the minister mentioned, up to four million employees have been supported, or jobs have been supported, through that. In that sense, the support is going out, and I think the committee is very much aware of both the original program and the adjustments that took place in the summer.

On the rent subsidy, it's early days. I think the latest data I saw was that applications are coming in and being paid out, but we'd expect a little bit of a lag.

I think it's successful in the sense that it's been successfully launched and many businesses are applying for it. I think it's probably too early to tell just how many, but I would expect that the pattern would follow that of the wage subsidy.

[The Chair, Liberal, Wayne Easter]

Does anybody else have anything they want to add? We're a little over on Gabriel's time, but we'll take the time.

Is that it?

Mr. Julian, wrap it up.

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

Thanks, Mr. Chair.

First, I have a bit of a rebuttal to Mr. Fraser. What I've been saying all along is that when you provide $750 billion in liquidity supports, you're socializing the risk. The $29 billion so far, during the pandemic, that Canada's big banks have earned is privatized profit.

That is my objection. There are absolutely no conditions banks need to respect, unlike other countries where there are strict criteria for this magnitude of support.

I also remind Mr. Fraser that the Liberals were critical when the Conservatives provided $160 billion in liquidity supports back in 2008-09. That is my rebuttal there.

The other element today, in terms of the financial practices of the government, is the PBO's report on Trans Mountain. It indicates that the most likely scenario now is rising prices, again, with $13.9 billion for construction. The Parliamentary Budget Officer estimates it could go well beyond that. It's not a viable project, and ultimately it will lose money unless the government doesn't proceed with any further plans to combat climate change. Only one out of 18 scenarios shows that Trans Mountain can ever earn money.

Given the size, scale and magnitude of the money involved in this project, has the Department of Finance been consulted to do an analysis of the viability of the project and the impacts on climate change? Is it advisable for the federal government to spend $14 billion of taxpayers' money now to construct this project that will almost certainly lose money?

[The Chair, Liberal, Wayne Easter]

Ms. Dancey, go ahead.

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

With regard to today's PBO report, we actually took some pride in the conclusions made by the PBO. It found that the government has continued to act in terms of this project on a commercial basis, and that the likely outcome is that the government is looking at a net present value for its efforts of about $600 million.

The report did talk about certain scenarios, future scenarios, that were tested. These are not necessarily the most likely scenarios. We would also debate some of those future assumptions lying behind the demand forecasts and the usage of the pipeline. Overall, we were comfortable with the PBO's methodology and certainly with its finding regarding the commerciality of the project.

[The Chair, Liberal, Wayne Easter]

We will have to end it there. Thank you for that thorough answer, Ms. Dancey.

Thank you to the officials from the Department of Finance for their very intense work over the last year, as well as for appearing before the committee and answering whatever questions you could. Some of them reflected into policy decisions, I know.

We even had the odd debate today, and a few suggestions, so there's lots of food for thought for the department to go forward with as well.

Committee members, we will meet again on Thursday.

Officials from the department, thanks for coming, and thank you for the efforts you make for Canadians.

The meeting is adjourned.