Finance Committee on May 17th, 2021

[Justin Brown]

At first instance, as previously said, we fully intend to consult with the implicated businesses and professions on the model. We'll be able to take on board their feedback on the methodology. The regulations should provide quite a good sense of how those costs will be calculated and will provide a great deal of transparency to those businesses and professions. In addition to our informal consultations, there will be the formal Gazette consultation process. Again, that would be public. They'd have an opportunity to comment through the normal government regulation-making processes.

Assuming these amendments get passed and assuming the regulations come into force as well, following that, FINTRAC intends to have ongoing outreach with regulated entities on the issue of cost recovery. We've had discussions with OSFI, who have similar outreach on a regular basis, to go over projected changes to their costs, for example, and explain where those costs would be going. We expect a great deal of transparency and interaction with those sectors.

Last, FINTRAC is subject to corporate reporting. It reports to Parliament via the Minister of Finance. FINTRAC's intended changes to compliance costs would be laid out in its annual reporting. That would provide further transparency to the public. If any reporting entities had any concerns, in addition to being able to voice them with FINTRAC, they would be able to voice them with the Minister of Finance, who would be reviewing that annual reporting before it went to Parliament.

[The Chair, Liberal, Wayne Easter]

Thank you for that.

I would just say that in terms of taking on feedback, sometimes people really have to hear, on these costs, what it means on the ground versus what it means in Ottawa. I mean, we have to do it, I know, but....

Ms. Jansen.

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

Thanks.

If these pass, what are the added costs, and how does that compare with cost recovery?

[Justin Brown]

We don't have a specific fixed cost, but our internal analysis at this point suggests that the compliance cost would be around $30 million at FINTRAC. At this point, that's the estimated amount that would be recovered from industry.

[The Chair, Liberal, Wayne Easter]

Thank you, all. I believe that completes division 7.

With no further questions, we'll turn to division 11, entitled “Federal-Provincial Fiscal Arrangements Act (Fiscal Stabilization Payments)”.

Who's on deck here?

[Suzanne Kennedy, Acting Director General, Federal-Provincial Relations Division, Federal-Provincial Relations and Policy Branch, Department of Finance]

Thanks. That would be me.

I'm Suzanne Kennedy, acting director general of the federal-provincial relations division at the Department of Finance.

Division 11 amends the Federal-Provincial Fiscal Arrangements Act to implement the modernization of the fiscal stabilization program that was announced in the fall economic statement. By way of background, the program provides financial assistance to provinces that are facing significant declines in their revenues, resulting from extraordinary economic downturns. The program provides financial help to any province faced with a year-over-year decline of more than 5% in its non-resource revenues, or more than 50% in its resources revenues, with adjustments for interactions between the two. Payments are currently capped at $60 per person for a given fiscal year.

This enactment raises the maximum from $60 per capita to $166 per capita for 2018-19, and indexes the cap to grow thereafter in line with total Canadian economic growth per person. It also specifies that the cap cannot decline. The higher cap will apply to claims for 2019-20 and onward. It works out to a cap of about $170 per person in 2019-20 and 2020-21, as was announced in the fall economic statement.

In addition, it makes technical changes to the calculation of fiscal stabilization payments. These technical changes would apply to claims for 2021-22 and onward. Briefly, the enactment amends the act to measure a province's personal and corporate income tax revenues based on assessments completed over the following calendar year rather than the tax year to which the assessments apply. It also sets an earlier deadline for provinces to apply for payments. Together, these changes would enable claims to be finalized roughly one year earlier, as was announced in the fall economic statement.

The enactment also amends the program to include revenues from transferred tax points in revenues eligible for stabilization, and eliminates an inconsistency in the program's treatment of declines between 0% and 5% in resource and non-resource revenues.

I'll stop there.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Kennedy.

I have on my list Mr. Kelly, Mr. Fast and Mr. Julian.

Pat.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

This will implement what was announced in the fall economic statement, the increase from $60 to $170, but is it correct, then, that at $170 per capita this means less than a billion dollars in fiscal sustainability money back to Alberta, a province that has continued to pay out many billions of dollars? We heard at the finance committee that it's about $4,000 per person.

Are these numbers roughly correct?

[Suzanne Kennedy]

I can say that the maximum for Alberta would be raised to about $750 million for 2020-21, and then the maximum amount is indexed to growth in GDP per capita from there on.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Given that this is a measure to help mitigate volatility in provincial drops in revenue, which would necessitate a province to continue to pay into the equalization system based on long-term averages despite sudden catastrophic drops in revenue, why have a cap at all? I'm sorry; that is a political question and better put to the minister, but there was a recommendation in our dissenting report to just do away with the cap altogether. A cap harms the ability to address the purpose of the funds.

Can you give us some explanation of the thinking behind continuing to have a cap?

[Suzanne Kennedy]

I can't speak to the decision by the government, but I can say that considerations around the cap would include the exposure of the federal government. If there's no cap, then there's no cap on the exposure to any drop in revenues.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

There's no cap the other way, though. This is where you capture the fairness of the overall system. However, these are political questions, so I'll leave that for now.

I want to make sure that we're clear about this, that raising the limit to $170, so $750-odd million for Alberta, is really not much.

[Suzanne Kennedy]

Perhaps I should add that provinces do not pay into the fiscal stabilization program, or into equalization, for that matter.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I have no further questions, Wayne.

[The Chair, Liberal, Wayne Easter]

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Actually, Pat just asked the questions that interested me.

The only question I'll ask is about some money that was paid to Alberta and Saskatchewan, and I believe Newfoundland and Labrador. I think Alberta received about a billion dollars.

I'm assuming that this additional fiscal stabilization payment to Alberta would be incremental to that $1 billion, correct?

[Suzanne Kennedy]

The higher cap would apply to claims for 2019-20 and onward. Thus far there have been no claims made.

[Ed Fast, Conservative, Abbotsford, BC]

There are no retroactive claims available to be made. Is that correct?

[Suzanne Kennedy]

That is correct.

[Ed Fast, Conservative, Abbotsford, BC]

Why is that?

[Suzanne Kennedy]

The cap is being applied right now. The government has taken other actions to assist oil-producing provinces.

[The Chair, Liberal, Wayne Easter]

Are you okay with that, Ed?

[Ed Fast, Conservative, Abbotsford, BC]

I think so, for now.

[The Chair, Liberal, Wayne Easter]

Okay.

We turn to Gabriel Ste-Marie.

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

Thank you for your presentation.

I have two questions.

Firstly, you stated that the government was taking other measures to support the provinces. Can you tell us what they are?