Finance Committee on April 15th, 2021

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

I'd like to quote our beloved Canadian writer Rex Murphy, from the National Post, who recently wrote the following:

It is not right, and it is not proper, that politicians...at any time play politics under the cover of tragedy. It is also neither right nor proper to “use” a crisis to bring in policies or programs — that absent such a crisis — they would not bring in or could not bring in. It is equivalent to saying “well, we could do such and such in normal times, but now that people are distracted by anxiety, or off their centre of balance because of the hard times we are going through, if we act now — we'll get it past them.

Would you agree?

[Philip Hemmings]

I would agree with this in principle, but I can't think of a specific example of Canadian policy myself. Maybe you have some.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Okay, that's fine. I appreciate that.

Your report also mentions that shortages of affordable housing could be addressed through measures that increase supply, such as reducing rent controls and relaxing zoning and land regulations. I'd like to quote my colleague Pierre Poilievre, who said how insane it is that we live in one of the least densely populated nations on Planet Earth—there are only four Canadians for every square kilometre in this country—yet have some of the most expensive real estate. There are more places in Canada where there's no one than there are places where there is anyone, yet Vancouver is the second and Toronto is the sixth most expensive housing market in the world.

When we compare median incomes to median housing price, it's more expensive than New York, more expensive than L.A., more expensive than London, England, and even more expensive than a tiny island nation called Singapore. All of these places are vastly more populated, yet less expensive to live in.

Why? Is it because our central bankers print money to spur demand and our local governments block construction and therefore constrain supply? With demand up and supply down, the price rises.

Would you agree that government intervention at all levels and in myriad ways is the source of the housing crisis here in Canada?

[Philip Hemmings]

I wouldn't say it's the source. The difficulty from monetary policy is that they wanted to support the economy. Their main lever for doing that is their policy rate, so they lowered the policy rate. Interest rates have been low for many years, and this has fuelled housing markets throughout the world.

To counteract that, what governments have been doing, including the Canadian government, is what they call macroprudential policy, which tries to place limits on mortgage borrowing so that it doesn't drive house prices up. You can also introduce supply-side measures, as I've mentioned.

One thing to think about with countries that statistically have a very low population density.... I used to work in Australia, and in a way Australia had the same sort of housing market issues. Australia has a very urban population, and I think that's probably true of Canada, in the sense that a huge percentage of the population live in urban areas. They're rather like islands, if you like.

You're absolutely right. If you view Canada's population density, it doesn't seem to make sense, but people want to live in cities, and that drives the price up. It might change with more teleworking. We'll see.

[The Chair, Liberal, Wayne Easter]

Thank you both for that interesting round.

We'll turn to Ms. Koutrakis and then over to Gabriel Ste-Marie.

Go ahead, Annie.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

Thank you to all our witnesses this afternoon for your very thoughtful, interesting and important presentations.

Mr. Hemmings, thank you so much for appearing before our committee. Your testimony, I'm sure, is very important to everyone on the committee and to all Canadians who are listening.

I will refer to the economic survey by the OECD that was released on March 11 of this year. It notes that the expected fiscal stimulus package, the historic fiscal stimulus package in the U.S., could boost Canadian exports and the economy as a whole.

What areas of the Canadian economy will benefit most from this stimulus? Can you share some thoughts on how Canada can fully take advantage of stimulus spending in the American economy to generate growth here at home?

[Philip Hemmings]

I don't have a very precise answer. Of course, in principle, it looks very much like the U.S. stimulus package will provide a lift to Canada's economy, principally through exports. I guess, as we've been talking a little bit about tourism, one issue there is that it depends to what extent people will be able to move around. That's one factor.

The other thing I'm aware of is that the connection between the U.S. stimulus package and the Canadian economy is probably a complicated one, because a lot of the exports from Canada to the U.S. are sort of raw materials or intermediate products. Ultimately, it depends on whether the demand and extra spending in the U.S. will go to the final products that Canadian inputs go into. Those kinds of supply chains will influence the effect on the Canadian economy. It's not an easy thing to calculate, to be honest. The effect could be reasonably substantial.

Exactly what you could do about that, I'm not 100% sure, but I suppose the more rapid vaccination is and the more people can move around and spend their money, the better it is, basically. It comes back to that point about the faster everyone gets vaccinated, the better things are.

[Annie Koutrakis, Liberal, Vimy, QC]

That's a great segue into my next question, because I was going to speak to you about Canada's vaccination efforts compared to our other international partners.

Currently, Canada is third in the G7, behind only the U.S. and the U.K., and it ranks third when compared to members of the G20 based on available data. To me that seems like a reasonable effort.

Can you talk about where Canada is placed in vaccination rollout compared to OECD partners and how the efforts have been increasing?

[Philip Hemmings]

I'm not an expert on this, I will say straight off. I just look at the available data, as I suppose many people do.

It looks as though Canada had a slowish start, but now, in terms of the daily vaccination numbers, it's moving up the ranking, so to speak. Clearly it's an improved situation, but I wouldn't really want to comment a huge amount on that, as I'm not an epidemiologist.

[The Chair, Liberal, Wayne Easter]

This is your last question, Annie.

[Annie Koutrakis, Liberal, Vimy, QC]

How important, in your view, is the supply of affordable and high-quality child care to Canada's economic recovery?

[Philip Hemmings]

It's important. Canadian governments have been trying to improve the availability of affordable child care for many years. There has been some progress, but it does look like there's still work to do, and our report emphasizes that. It's great that the problem is recognized, and it seems quite widely, but it just needs more work.

[Annie Koutrakis, Liberal, Vimy, QC]

I think we're lucky. In my own home province of Quebec, I think we have an excellent example of what a national child care system could look like. I know our Deputy Prime Minister and Finance Minister follows the work of our committee very carefully. I'm sure she would agree with that statement.

[The Chair, Liberal, Wayne Easter]

We'll have to end it there.

We'll go to Mr. Ste-Marie, followed by Brian Masse.

[Brian Masse, NDP, Windsor West, ON]

Sorry, Mr. Chair; I just want to say that I have to leave for the House.

[The Chair, Liberal, Wayne Easter]

Okay.

[Brian Masse, NDP, Windsor West, ON]

I just want to thank the witnesses and yourself for the courtesy today. I apologize for leaving early. I have to go to the House. My time could be given, Mr. Chair, to whomever, and thank you again.

[The Chair, Liberal, Wayne Easter]

Thank you, Brian. Good luck in the House. Say the right things.

Then we'll go to Mr. Ste-Marie, followed by Mr. Kelly.

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

Thank you, Mr. Chair.

My question is for Mr. Hemmings, but I would also like to hear from Mr. Létourneau.

A few days ago, CBC/Radio-Canada revealed that, in the Panama Papers affair that occurred five years ago, Canada recovered 15 times less money than the United Kingdom and 12 times less than Germany, which puts it fairly low on the list. Even Revenue Quebec recovered more money than the Canada Revenue Agency.

The OECD suggests a series of actions to combat tax evasion and avoidance. Clearly, Canada is lagging behind in terms of concrete implementation of the suggested actions compared to other OECD member countries.

Mr. Hemmings and Mr. Létourneau, what do you think?

[Philip Hemmings]

I will say straight off that I am not a tax expert, and so I really wouldn't like to speak for my colleagues in our tax department on whether Canada is a laggard. It's a very technical area. If you want to write to me, I can put you in touch with someone and you can talk to them.

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

Fine, thank you.

Mr. Létourneau, do you have any comments related to actions to combat the use of tax havens?

[Jacques Létourneau]

I am not a tax expert, but I know that, even today, Canada is unfortunately a real sieve for those who transfer money to tax havens to avoid paying their taxes in Canada.

We are part of the coalition that has been calling on the Canadian government and provincial governments for several years to take action on this issue, especially at a time when the Canadian government has taken steps to support the economic activity of small businesses as well as workers affected by the pandemic. How will Canada's debt eventually be paid down? It is, of course, through the taxes generated by the economic recovery. This brings me back to the question I was asked earlier about the notorious GAFAs.

We need to ensure that companies and people who get rich in Canada pay their taxes in Canada. All necessary mechanisms must be in place to prevent the movement of wealth to tax havens to avoid Canadian or provincial taxation. In fact, as long as we cannot work cooperatively within the framework of the OECD or other international organizations, hundreds of millions of dollars will escape the Canadian tax system and unfortunately will not be part of the so-called redistribution of wealth among the population.

In fact, we had appeared in committee on this two or three years ago. I don't remember the numbers, but the amount of money that was escaping the Canadian tax system and ending up in tax havens was pretty staggering.

I thank you for the question.

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

Thank you very much.

Do I have any time left, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

No, sorry. You're a little over your time, Gabriel.

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

Thank you.