Finance Committee on March 17th, 2021

[Stéphanie Laurin]

Okay. I'm sorry.

[The Chair, Liberal, Wayne Easter]

No, it's not your fault. Just check your screen, Ms. Laurin. At the bottom of the screen, you'll see that it says “translation” or “interpretation”, so make sure it's on French when you're speaking French, and it will come through more clearly to us.

[Stéphanie Laurin]

Okay. I think it has been resolved.

[The Chair, Liberal, Wayne Easter]

Okay.

[Stéphanie Laurin]

Does it work?

[The Chair, Liberal, Wayne Easter]

Yes. Go ahead. The floor is yours.

[Stéphanie Laurin]

My name is Stéphanie Laurin, and I am the president of the Association des salles de réception et érablières du Québec, the ASEQC. I own a sugar shack that welcomes nearly 80,000 people in the spring, over some eight weeks. Our establishment also hosts between 200 and 300 marriage celebrations every year.

Last spring, when COVID-19 arrived, our facility had invested nearly $300,000 to kick off the sugar shack season. Without warning, just before the start of the season, we had to shut down operations. I have personally contributed to the fight against COVID-19. We have manufactured several hundred thousand protective masks. We acquired about 60 sewing machines last spring, and we have transformed our sugar shack into a mask manufacturing facility.

Unfortunately, none of that was sufficient. Last July, we had no income, as all the events and banquets were postponed until 2021. It was a blank calendar and a 95% drop in our sales that made me decide to contact my competitors, owners of reception halls and sugar shacks of Quebec. I then realized how disastrous the situation was for our industry, which consists of sites for large gatherings. So I decided to create the association I now preside over, the ASEQC. This is a registered non-profit organization that represents our establishments in dealings with various government bodies.

After that, we worked on saving Quebec's sugar shacks because there are very few of them. Prior to COVID-19, there were about 240 sugar shacks, and we have already lost about 100 of them so far. There are now fewer than 140 establishments representing sugar shacks and maple internationally.

Faced with this problem and knowing that the 2021 season may also be in jeopardy, we decided to create a project called “Home Sweet Home”.

“home sweet home”.

This is a system of boxed lunches Quebeckers can order to have the sugar shack experience at home. I am seeing little thumbs up on the screen. We went to great lengths to launch this project. With no cash flow and no means, we have created a platform that brings together nearly 75 sugar shacks in a single transactional marketplace. We officially launched on February 22, and so far, 1.5 million people have visited our website. Soon, we will have generated $7 million in income for the participating establishments over slightly more than two weeks.

We are really experiencing incredible success. We have managed to remain resilient. We are part of an industry that decided to roll up its sleeves. Unfortunately, I can tell you today that I am unsure this will be enough, as we are seeing that our calendar for the next 12 months is still empty. Summer marriages and banquets have been postponed until 2022. We have managed to survive without income over the past 12 months, but that could prove much more difficult over the next 12 months.

This is my testimony to you today.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Laurin. I would highly recommend that sugar bush experience with the syrup on the snow.

Mr. Cochrane, with Canadians for Tax Fairness, the floor is yours.

[DT Cochrane, Policy Researcher, Canadians for Tax Fairness]

Thank you kindly for having Canadians for Tax Fairness comment on this bill. If I'm not mistaken, members of every party, in the course of speaking to Bill C-14, expressed support for tax fairness. That's music to the ears of our organization. Now we just need to see some real action.

Before I discuss taxes, let me touch on the other side of the ledger—spending. This bill will provide needed funds for some important measures. Unfortunately, it does not go far enough. Parents need more support. Students need more support. People with disabilities, our elders, workers, local businesses and the poor need more support. It was true before the pandemic. The crisis just made it starker.

Predictably, even insufficient support has led to fearmongering about the debt. Most of the concerns are misguided and misleading. The federal government's debt is not like the debts of households or businesses or other levels of government. The federal government literally spends money into existence. There is no limit to its financial resources.

That does not mean there is no limit to the government's spending. The limits are imposed by the real resources that money can command. Eventually, if increases in money circulating in the economy do not increase the products, services and assets that we want to buy, we will get inflation.

At the moment, this is a remote concern. Despite worries at the beginning of the pandemic and misinformed fears recently, inflation remains well below the Bank of Canada's long-standing target of 2%. Taxes are an important tool for controlling inflation, as they draw money out of the economy. However, just as importantly, they are a tool for controlling inequality.

We have a trickle-up economy. Consider the money given directly to people at the bottom of our economic hierarchy. Some of that money gets spent on rent, which goes to a landlord. The landlord uses it to cover the mortgage, which goes to a lender. The lending company uses some of that money to pay its workers, while some will be used to pay its own creditors, and some may go to dividends. Those workers will buy food at a grocery chain, which again will pay workers as well as creditors and equity owners. As the money spent into the economy circulates, portions of it are continually siphoned off to asset owners.

The work of Thomas Piketty and his collaborators shows that the wealthy get wealthier simply by virtue of the highly unequal distribution of asset ownership. Their income from owning assets is not a reward for entrepreneurial risk or innovation. It is not a reward for hard work. They accumulate wealth simply by already being wealthy. The wealthy are able to use their money to shape our society in detrimental ways. They fund think tanks that defend their interests while presenting as neutral commentators. They hire lobbyists to influence lawmakers on policies that benefit them. They employ an untold number of people to bend tax laws and exploit offshore tax havens. This applies to both wealthy families and powerful corporations.

Wealth taxes and excess profit taxes, alongside more progressive income taxes, are powerful tools to address inequality and its myriad harms, as well as being sources of government revenue. Additionally, government should act promptly to close tax loopholes and end the use of tax havens. These measures would create fiscal space for the kind of bold government initiatives that we need to support people and resurrect our economy coming out of the pandemic.

The pandemic teaches us that we are all in this together. The myth that the market justly rewards what is socially valuable must be abandoned. When the pandemic struck and we needed decisive action to keep the essential parts of our economy functioning, it was not wealthy people, via the market, who made that happen. It was government.

The same is even more true of the climate crisis. The government needs to spend large amounts of money to transition our economy to carbon neutrality. That money will inevitably trickle up, where it will unjustly empower the wealthy.

Measures like wealth taxes, excess profit taxes and closing tax loopholes will keep that money moving so that it can serve our shared interests. These must be key components of the fiscal tool kit as we deal with the aftermath of the pandemic and the ongoing climate crisis.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cochrane.

We're turning now to Mr. Wudrick and the Canadian Taxpayers Federation.

Welcome, Aaron. The floor is yours.

[Aaron Wudrick, Federal Director, Canadian Taxpayers Federation]

Thank you very much, Mr. Chair, and thank you to the committee, of course, for having me appear again today.

For those who are unfamiliar with the Canadian Taxpayers Federation, we're a national non-profit, non-partisan group. We have 235,000 supporters across the country. Our advocacy is really focused on three general areas: lower taxes, less government waste, and accountable and transparent government.

I don't want to shock anyone on the committee, but the CTF has something of a reputation as being the biggest skinflints around town, and that's a tag that we're not at all ashamed of having in a town where there's really no shortage of people asking for more spending and very few asking for less. We think it's important, as part of that debate, that there be a counterweight to what effectively are endless pleas for “more everything”, and we're very proud to play that role.

Insofar as we apply that lens to a tidal wave of spending, if I can call it that, that has washed over the country during the course of this pandemic, I don't think the concern is about demanding perfection from government, but just asking for a little humility. These temporary emergency programs are very expensive programs, and they're very blunt instruments, which is understandable given that they had to be conceived, designed and implemented in a matter of days or weeks, as opposed to the usual months or years.

Given the circumstances, I think most fair-minded people will agree that a little slack deserves to be cut in terms of their implementation, but it's also fair to ask the government to take steps to improve and recalibrate these programs as they go along, in order to ensure that what is being spent is actually being spent well. A couple of examples can illustrate the ways in which the government arguably has overshot the mark thus far.

When you look at StatsCan data, it shows that between the first and third quarters of last year, aggregate private sector earnings dropped by about $15 billion, a significant sum in terms of lost income, but during the same period, the government sent out $103 billion in transfers, primarily from employment insurance and the emergency response benefit. What that means is that for every dollar Canadians lost in income, the government sent $7 out the door. If the goal of these policies was income replacement, it's an enormously expensive overshoot.

Also, looking at the business side, if you look at the emergency wage subsidy, which was designed to save private sector jobs—an appropriate objective—it has also been incredibly expensive, with each saved job coming at a cost of $180,000 in government spending. This is happening at a time when we're hearing stories in the media of large corporations banking record profits or boosting executive pay or issuing special dividends to shareholders. I don't think that's what most people envisioned in terms of what the wage subsidy was supposed to be used for.

These examples are just two that suggest there's room for improvement in terms of targeting pandemic support to achieve the results we're looking for, but at a lower cost.

With respect to Bill C-14 specifically, the main concern we have about this bill is the requested increase in the debt borrowing limit. I know that the minister and Mr. Fast had an exchange on this issue at a previous meeting, but with respect, the minister's insistence that there's a chart on page 141 of the fall economic statement that explains everything was not very persuasive.

First of all, the chart she cites includes spending projections out to 2024, so that does not explain why the minister requires such a huge increase in the debt ceiling today, in 2021. It also bakes in the projection of $100 billion in stimulus, which the minister has committed to spend without deciding what she wants to spend it on. In our view, that has it backwards and is putting the cart before the horse.

With all due respect, rather than demanding that the opposition push through the bill and get more borrowing room, we think the minister's time would be better spent presenting a federal budget, which we haven't had in two years. I understand that the government insists that things are in flux and presenting one is difficult. I think that was a reasonable argument a year ago. I think it's a lot more difficult to make that argument today, especially when you consider that all our peer countries and every province in Canada except Nova Scotia have managed to present one.

I'm certain that this government does not want to leave the impression that it is somehow uniquely incapable of presenting a budget at this time. We just urge them to get on with that and produce a federal budget at the earliest opportunity.

[The Chair, Liberal, Wayne Easter]

Thanks very much, Mr. Wudrick.

We're turning to Moodys Tax Law LLP, with Kim Moody, chief executive officer.

Welcome back, Mr. Moody. The floor is yours.

[Kim G.C. Moody, Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Tax Law LLP]

Thank you, Mr. Chair.

Good afternoon, committee members. Happy St. Patrick's Day. I see some of you are wearing green, so I hope it's a great day.

Thank you for the opportunity to appear to discuss to Bill C-14.

My name is Kim Moody. I'm a chartered professional accountant and the CEO and director of Moodys Tax Law and Moodys Private Client in Calgary, Edmonton and Toronto. I have a long history of serving the Canadian tax profession in a variety of leadership positions, including chair of the Canadian Tax Foundation, co-chair of the Joint Committee on Taxation of the Canadian Bar Association and CPA Canada, and chair of the Society of Trust and Estate Practitioners, to name a few.

Given the limited time we have this afternoon, I'm going to keep my comments rather short and comment on only two matters: the proposed amendments to the debt ceiling in the Borrowing Authority Act contained in Bill C-14 and the fact that Canadians are now approaching the second anniversary, in two days, of the federal budget.

I will start with the proposed amendments to the BAA, the Borrowing Authority Act. While I am a tax specialist and certainly not a BAA expert, currently section 4 provides that the total amount of debt must not exceed $1.168 trillion at any given time. This limit is subject to certain exceptions, provided for in section 4, in conjunction with section 6 of the BAA. Bill C-14 proposes to amend both section 4 and section 6 with a highlight amendment, as Mr. Wudrick said, to increase the current upper limit to $1.831 trillion, an increase of $663 billion, or 56.7%, from its current ceiling. That is a material increase by any measurable standard.

With the exceptions provided for in section 6, I guess the question is why there is a need today to increase the ceiling so substantially. Where is the plan? Is the government intending to utilize that increased borrowing capacity? If so, again, where is the plan? Shouldn't that be accompanied by a financial budget? I'll say more on that later.

Further, what will such increased borrowing do to inflation and interest costs? Is that part of the plan too? What about the plan to repay this debt? Does it include a reasonable repayment period that will not saddle our children's future with high borrowing costs that compromise central government services?

How will this increased borrowing capacity affect our country's taxation policies? Will we see an across-the-board tax increase, or will the wealthy be asked to pay just a little bit more, thus causing even more capital flight to greener pastures?

What's being asked to be passed in Bill C-14 can be depicted in an overly simplistic example of how I disagree with the witness Mr. Cochrane when he says that you can't compare government debt to household debt. Frankly, I think you can, and yes, there are differences, but debt is debt by any measurable standard.

Let's consider the case of Mr. Apple. He lost his job as a result of his employer being forced to shut down because of strict public health restrictions. His savings are rather modest. He does not have the ability to pay his ongoing bills, so he applies for and receives various government support programs. However, the support he receives is not enough to maintain the lifestyle that he is accustomed to, and, being the rational person that Mr. Apple is, he develops a plan and makes necessary adjustments to his lifestyle, cuts back on non-necessities and ultimately tries hard to survive on the reduced income that he has. Eventually Mr. Apple is able to secure new employment and slowly get back to the lifestyle that he is accustomed to.

Now, let's consider the situation of Mr. Apple's friend, Mr. Orange. He's in exactly the same situation as Mr. Apple. He lost his job. He doesn't have enough savings to maintain his normal lifestyle. However, instead of cutting back on non-essential expenditures as Mr. Apple does, he applies to get his credit card limit increased by 56.7% and some crazy credit card company decides to grant him that limit.

He now has the ability to borrow a lot more money. He does that so he can maintain his existing lifestyle. Mr. Orange has no plan to repay. He simply wants to maintain his lifestyle, and he eventually reaches the maximum of his limit and has a large debt to repay. The credit card company is charging interest, which is adding to the debt. Eventually he returns to normal employment, but his earnings are not sufficient to materially reduce the debt. He has a problem and he falls behind on making his normal payments. The credit card company demands that he repay, but he cannot. His options are limited, and ultimately all the options are ugly.

In the above scenario, who's in a better spot? Obviously, it is Mr. Apple. For Canada, for whom do we want to be comparable? Obviously, it is Mr. Apple, with a plan and a path forward.

Do we have a plan with respect to the increased ceiling amount under section 4 of the BAA? If so, it is not obvious to me, and Canadians need that plan, let's say, at this point. I'll share Mr. Wudrick's comments about the fall economic statement. The information in it was lacking, in my view.

This leads me to my second and final comment. March 19, 2019: Does that date mean anything to anyone? Well, it should. That was 730 days ago. That was the last time the federal government released a budget. That's a record.

Our government continues to use COVID as the excuse for not releasing a plan. This is what former parliamentary budget officer Kevin Page said in October of 2020: “Budgets are fiscal plans, and to say that 'because there’s too much uncertainty, we’re going to manage without a plan' is kind of bizarre. The reason we have plans is because there is uncertainty.”

I absolutely agree. In this day and age of uncertainty, a fiscal budget and plan are needed. The recent November 30 fall economic statement is not that plan.

Esteemed economist Dr. Jack Mintz stated the following in the National Post on December 3, 2020:

I was hoping our new minister of finance, once a fine journalist, might produce a fall fiscal statement written clearly and to the point. Instead, we are treated to 237 pages of repetitive back-slapping and cliché-laden phrases that few will bother to read.

I agree.

Kevin Page stated the following in a CBC News article on December 6, 2020, after the release of the fall economic statement:

We don't really have a good view—almost no view—of the government spending today. We have estimates of what the government thinks it will spend for 2020, 2021. But those are not the actual monies that are going out the door.

Accordingly, it is critical for our country's fiscal future to develop a well-thought-out budget, and to do it quickly. Transparency and accountability are not luxuries. They are requirements for Canadians.

Thank you. I'd be happy to take questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Moody.

Before I turn to the last panellist, the lineup for questions in the first round will be Mr. Fast, Mr. Fragiskatos, Mr. Ste-Marie and Mr. Julian.

We turn now to the independent workers of Quebec and Ms. Caroline Bédard, chairman and chief executive officer.

Welcome. The floor is yours.

[Caroline Bédard, Chairman and Chief Executive Director, Travailleurs autonomes Québec]

Good afternoon, everyone.

I would like to begin by explaining the mission of Travailleurs autonomes Québec. We are trying to get recognition for self-employed workers' rights, and to provide them with support and guidance in running a successful small business.

Another one of our missions is to get self-employed worker status legally recognized, as it is still not legally defined. The lack of a clear and precise definition is hurting many self-employed workers in all facets of their daily lives.

I just want to inform you that Canada had nearly 3 million self-employed workers before the pandemic. Unfortunately, we will certainly have fewer players after the pandemic, if that is not already the case. The pandemic we are going through very clearly shows a deficiency when it comes to that status, as no program is adapted to the reality of self-employed workers.

Let's start with the second version of the subsidy for commercial rent, the Canada emergency rent subsidy. The application form asks for the BN—business number—which is the GST number at the federal level.

Did you know that over 60% of self-employed workers in Quebec earn an income of less than $30,000 and, therefore, have no GST number?

With this being the case in Quebec, we can get an idea of what is happening in the rest of Canada's provinces and territories. If the government was thinking of helping self-employed workers pay their commercial rent, that unfortunately won't happen, as six self-employed workers out of 10 don't have a business number.

Let's now move on to the Canada recovery benefit, or CRB. Once again, we are seeing that the application forms are not adapted to self-employed workers' reality. They are once again asked what their BN is, whether they are seeking employment, whether they left their job voluntarily, whether they refused a job, and so on. Did you know that a self-employed worker is not looking for a job, but is rather looking for clients or contracts?

When businesses are forced to close by our governments because of a lockdown, and they are not deemed essential, self-employed workers are still asked to seek employment. If they say they are not looking for a job when they apply for the CRB, their application is automatically refused. Asking a self-employed worker to look for a job is a lack of respect for their small business and a very clear message that they must be salaried to receive assistance. That is actually what most agents of the Canada Revenue Agency, CRA, are currently saying on the telephone to hundreds, even thousands, of self-employed workers.

Concerning CRA agents, we can imagine that talking to them is often a nightmare and causes significant psychological distress for thousands of self-employed workers, as there is no solution. Since January 18, CRA agents have been conducting mass verifications of taxpayers who have received the Canada emergency response benefit, or CERB. They are checking earned incomes of $5,000 and more before the first CERB application. An announcement was made that it would take two to four weeks to carry out the verifications, but in reality, it is taking from six to 10 weeks and sometimes longer for some self-employed workers. We have seen it take as long as 18 weeks.

It should be pointed out that no CERB applications can currently be made while verifications are being conducted. Imagine the ordeal for those who have no other source of income during that period. Not to mention that the tone of some agents is disrespectful, to put it politely. We agree with verifications being carried out. That is normal. However, can they be limited to $5,000 of income, as stated in the messages?

Why is a self-employed worker who declared more than $25,000 in income and is calling an agent to obtain information on their file suddenly being told that, in the end, the CRA will check a host of other elements in their file? This only excessively extends wait times. That said, we cannot do anything about it, as we are currently somewhat dependent on CRA agents.

When self-employed workers say that, during the verifications, they have no other source of income, CRA agents are telling them all sorts of things. For instance, they tell them there are food banks and social assistance in their province, that it's not the agents' problem they decided to be self-employed, or that they should find themselves a job if they don't want to have problems.

The basic issue is that this status is not recognized. Let's collectively ask ourselves a question: how can we help nearly 3 million self-employed Canadians in a crisis?

Thank you.

[The Chair, Liberal, Wayne Easter]

Thanks very much, Ms. Bédard.

We will turn to the round of questions. We're going to cut this round back to five minutes so that we can get a few more people in.

Mr. Fast, you have five minutes.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

Because my time is short, I'm going to cut to the chase here. I'm going to go directly to Monsieur Moody and Mr. Wudrick, or “Mr. Skinflint”, as he calls himself.

As you have rightly noted, Bill C-14 dramatically increases our debt ceiling by $663 billion. That's historic, as you know. That includes a hundred billion dollars' worth of stimulus funding that is effectively unallocated. In other words, the minister has refused to tell us where that will be spent. There's another $223 billion in unallocated borrowing capacity that she says she really won't need, but we know they blew past the last debt ceiling, and we fully expect that will happen again.

Therefore, to the two of you, Messieurs Moody and Wudrick, given that this comes at a time when we haven't had a budget tabled for two years, would you comment on the merits of increasing the debt borrowing capacity of the government so dramatically at a time when we don't even have a budgetary framework in place to assess what this means for our country?

[The Chair, Liberal, Wayne Easter]

Who wants to start? Mr. Wudrick?

[Aaron Wudrick]

Sure. Thank you for the question.

Look, it's troubling, to say the least. This would be troubling even if we did have a budget. We don't. I think the very fact that the minister has committed to spend money without knowing what to spend it on is getting the entire budgetary process backwards.

In a policy debate or discussion, normally you figure out what you want to do, you figure out how much money you need for it, and then you make your case for it. That's not what she has done here. She has already committed to spending money, but she doesn't know what she wants to spend it on. That is a recipe for trouble.

What's also curious.... I cited some of the statistics earlier about overspending, and again I am not suggesting that the government had to get it perfect. I understand that they were in a hurry and that not everything was going to be perfect, but by their own admission.... I believe the term she used was “pre-loaded stimulus”. We have seen that even into the lower income deciles, a lot of Canadians are banking a lot of this money, so the minister has said, “Well, we've preloaded this stimulus, so hopefully when things turn around, people will go out and spend.” However, she also wants to spend the $100 billion in the name of stimulus.

I don't understand. She has spent more than she planned to, but she says, “Don't worry, that will turn out to be stimulus”, and she also says that we still need to spend $100 billion; we just don't know on what.

Look, if the minister has a plan, I think she's entitled to make the case for that. She should do it in a budget. She should not be asking Parliament to increase the debt ceiling unless she can present a budget and explain what she wants to spend the money on.

[The Chair, Liberal, Wayne Easter]

Mr. Moody, if you want in, go ahead, but be fairly quick so that we can get in another question.

[Kim G.C. Moody]

I wholeheartedly agree with Mr. Wudrick, and I wholeheartedly dismiss, for a whole variety of good logic, the assertion that trickle-up economics works, that there are tax loopholes to close down and that we can just go offshore and grab all that money. That's nonsensical and it just will not work as a way to deal with this increased ceiling, and I hope it's not increased spending. That's probably all I have to say.

[The Chair, Liberal, Wayne Easter]

Ed, we'll go back to you.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

The government has also recently abandoned the idea of fiscal anchors, even though the finance minister's mandate letter actually references fiscal anchors. In fact, they've instead used “fiscal guardrails”, which relate to the stimulus spending.

I ask you to comment on whether fiscal anchors are necessary, especially in a critical time like this, when we've just come through the worst pandemic of our lifetime. Mr. Wudrick, with the massive fiscal management challenge we're going to have, how important is it for this government to put in place fiscal anchors that will guide the government when it comes to the management of our national finances?

[Aaron Wudrick]

I would actually disagree that they “recently” abandoned them. They abandoned them very early on, when they came into office. They promised a balanced budget. They didn't deliver it, and then the debt-to-GDP ratio started to creep up, so it's not a new phenomenon.

On the minister's insistence on fiscal guardrails, she says she's going to impose them, but she doesn't want to do it until later on. It's a bit like saying, “Well, we don't want to put guardrails where the cliff is, so we're going to wait until we get back down on level ground, and then we'll put up some guardrails.” I think it's important to have something to measure your level of risk, and not having any anchor at all....

I recognize that today a balanced budget would be a pretty aggressive one, but you need to have something. There's a similar reason that we need a budget. I think that not having one is very worrisome.

[The Chair, Liberal, Wayne Easter]

Okay.

Mr. Fragiskatos, you have five minutes.