Finance Committee on May 25th, 2021

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

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

We'll go to Mr. Julian, followed by Mrs. Jansen.

Go ahead, Peter.

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

Thanks very much, Mr. Chair.

My next questions are for Ms. Gervais and Mr. Norejko.

The context of this so-called luxury tax is that many countries have adopted wealth taxes. Canada has not been the exception in terms of the profits that we've seen in certain sectors during this pandemic. In fact, a few dozen Canadian billionaire families have increased their wealth by about $80 billion.

What many countries have done is put a wealth tax in place. That's certainly what many Canadians were calling for in this budget. Instead of the wealth tax, which the Parliamentary Budget Officer said was a legitimate tool and would have brought in billions of dollars of support, the government seems to be spinning around this so-called luxury tax. In a sense, it seems to be making your industry a scapegoat for what really should be a broader fiscal taxation approach that the government has not put in place.

I'm wondering what the impact is of targeting your industry, pilots and owners when the government should have actually put into place a broader wealth tax that—certainly for those who've benefited the most from the pandemic—would have actually been a much more fair and equitable approach.

Do you feel targeted? Do you feel this makes any sense? What is the impact of this government's political spin on this tax, which seems so misguided?

[Christine Gervais]

I will let Anthony go first this time and then I'll follow him.

[Anthony Norejko]

I appreciate that, Christine.

What I would add first—and I appreciate the question—is that, with respect to the luxury tax, we need to understand the impact on the industry. On average, business aviation as a whole generates $33 million in GDP for the country every single day. Canadians who are employed in the business aviation sector earn, on average, $95,000 per year, so we have an employee base. When you look at the provinces where these employees are based, we can talk about Quebec, with just under 11,000 jobs; Ontario, with over 5,000; Alberta, with over 2,500; and B.C., with 2,300. The potential impact here is about looking at the impact to businesses as a result of these changes.

Look at manufacturers such as Bombardier, CAE and Pratt & Whitney, to name just those few. They are critical for how we connect across the globe. A line that we use is “we need to move at the speed of business”. Whether it was the earlier conversations around tourism and the requirement for a consistent plan.... The challenge of a luxury tax is that while we have in place today GST and PST, as the question alluded to, if you're using the aircraft for personal use, those taxes are already contemplated, and the Income Tax Act states what aircraft could or couldn't be used. That definition is sufficient.

On balance, the luxury tax does hurt the Canadian industry, the employees involved and the businesses that need to stay connected around the globe.

[The Chair, Liberal, Wayne Easter]

Ms. Gervais, did you want to add a bit to that? Then we'll have to move on to the next questioner.

[Christine Gervais]

Yes. I wanted to add that we definitely do feel targeted. There is this preconceived notion that anyone who has an aircraft is super-rich. People watch these TV shows where they're jet-setting in their private jets from one country to the next, but as we can see from my presentation, those are not the people who are actually flying these private aircraft.

The people who actually own these aircraft are the ones who are going to be penalized. It's going to be the flight training schools. It's going to be the agricultural industry. It's going to be the Canadian manufacturers. They're the ones who are going to be penalized. It's not this preconceived notion of who these private aircraft owners are.

[The Chair, Liberal, Wayne Easter]

Thanks to all of you.

Mrs. Jansen is next, followed by Mr. Fraser.

Go ahead, Mrs. Jansen.

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

Thank you.

I'd like to direct my first question to Ms. Gervais.

During your presentation, you talked about the fact that in this budget there is an equivalency flaw when you compare an airplane to a boat or a luxury car. You used the term “highly unrealistic”. You mentioned the medical professionals, small business owners, farmers and aircraft training centres and said that these are the people who are going to be impacted.

I'm just wondering. Considering the massive amount of impact, how much consultation did your industry have with the Liberal government before they put this into place?

[Christine Gervais]

Thank you for that question.

When they first introduced the question in late 2019, we did submit some feedback as to how this would impact our industry. Much of it addressed what I've said. To give you an idea, there are about 36,000 registered aircraft in Canada, and 83% of those are general aviation aircraft. Most of those general aviation aircraft are used for flight training—more than half are used for flight training.

That is the extent of the consultation that was done for us. We provided some feedback at the end of December or November of 2019, and that's about it.

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

You would say, then, that either they didn't hear what you put forward or they didn't ask enough questions.

[Christine Gervais]

I'd say both.

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

You definitely said that pilot shortages will be inevitable under this new legislation. Could you maybe broaden out on that?

[Christine Gervais]

There is already going to be a pilot shortage. Those expectations were done even prior to the pandemic and, now, with all of the layoffs that happened during the pandemic, many pilots will not be returning to their flying careers. They will be choosing other careers instead, where they don't have to risk their livelihoods. There is already going to be a shortage when the economy reopens and the flights resume.

Of course, a lot of the flight training being conducted right now in Canada is from overseas, so they're taking up a lot of the flight instructors. Flight instructors will be going to the regional airlines and the regional airlines will be going to the larger carriers, so we're going to be missing a lot of the instructors. If there are no instructors, there is no one to instruct the new generation. Then, when you add cost on top of that, flight schools just can't make ends meet anymore.

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

Right.

Mr. Norejko, you mentioned that this is going to impact business suits to construction boots.

You said that actually very few of these aircraft fall into the personal luxury dimension. You also said that this is going to incent them to hold onto their older planes, which means we will not be reducing our carbon footprint and that people will probably purchase and register elsewhere.

I wonder if you can explain this to me. You said there was no distinction made between personal and commercial. Could you broaden out on that?

[Anthony Norejko]

Sure, and I appreciate the question.

With respect to personal, the way it was presented there is still some room for interpretation with respect to certain commercial activities. There is language that states that an aircraft under 39 seats doesn't qualify.

What we're trying to recognize is that it's the importance of not just the industry within Canada—that is to say, aviation and aerospace—and the importance of research and development and those things that go on. On the matter of sustainability, we can celebrate when we talk about the first fused winglets on 1977 business aircraft and when we talk about the first business aircraft to use that technology.

When we go to this definition, that's some of the work that's still required, with perhaps a backgrounder being put out, but in the end what needs to be recognized is that for the amount of revenue extracted from this tax on aircraft, the associated cost to the Canadian economy far outweighs any benefit from the potential revenue that would be extracted.

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

It is really shocking that the tax far outweighs....

[Anthony Norejko]

The cost...yes.

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

It is very shocking, and I just wonder why it went that way.

Mr. Ahmed, now I have a question for you.

I was on the health committee in the beginning, when the pandemic began, and there was a lot of discussion about the strategic stockpile. Now you're talking about a critical drug reserve.

We had a pandemic plan in place, and for some reason it didn't seem to function. I'm wondering what this government would do differently. We should have had the critical drug reserve and we didn't. I know they mentioned that they were focusing on antivirals. They didn't seem to focus on the kinds of things we actually needed.

Could you speak to how we are going to make that better going forward?

[Dr. Saad Ahmed]

Thank you for the question.

I think what you're alluding to is the national strategic emergency stockpile, which we know had funding cut in the lead-up to the pandemic. Certainly there were challenges, I think, in administration. There was PPE that was expired. It's supposed to have some of these other medications that we would need for people who would get sick with a viral illness, like COVID, and it's supposed to have ventilators as well.

My hope, going forward, would be that this critical drug reserve, which presumably is the new name for the strategic stockpile, would be funded and would continue, and we would actually have ongoing analysis of international supply chains.

The challenge is obviously that if we keep some of these medications in stockpiles, they often expire. When I've talked to different organizations and industry experts as well, there have been suggestions that perhaps we could actually get factories overseas, or some of our factories here, to hold the precursors for the drugs or even stockpile that way, so that we have industry managing it. It might actually be that they are just better at doing that, so let government do what it does best.

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

I like that.

[Dr. Saad Ahmed]

There have been different proposals. It's something that really needs further investigation.

I think the critical drug reserve is definitely a step in the right direction, and it could be that in the future, after this pandemic, we say.... The research, for example, that I am doing at the University of Toronto has to do with 20 drugs that we really need to make sure are in supply. Maybe we could work out an agreement with these four suppliers that are providing us imports of these drugs to hold onto a certain supply and to keep reporting to us, and that would be the new form of the critical drug reserve. There could be some shape or form.

[The Chair, Liberal, Wayne Easter]

We're well over on that one.

We'll go to Mr. Fraser, followed by Mr. Fast.

Go ahead, Sean.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you, Chair.

My first question is for our guest from Startup Canada. Thank you very much for being here. I really appreciate your testimony.

You mentioned during your remarks that we need to not focus exclusively on the next billion-dollar valuation, the so-called unicorn, when we're focusing on start-up cultures. Rather than those home runs—if you'll allow me a baseball analogy—we should focus on the base hits, those people who are starting businesses because they need to and so that they can find work in their own community.

You discussed in some specificity the importance of advisory services. I've seen certain services on the ground, whether it's through CBDCs or through the community futures program, financing programs that are fully funded by the federal government but also paired with those advisory services. Lo and behold—and this will be no surprise to you—those clients who have that kind of advisory service tied to their financing have a much higher degree of success in the first few years, as compared to that of other businesses.

My question to you is how we can design a federal program that actually plugs those entrepreneurs in communities right across Canada into the kinds of advisory services that are going to help them succeed. Is it by rolling them into the CBDC programs that already exist? Is it through something new, or is there some different policy that I've not thought of that you can coach us towards here?

[Natasha Hope Morano]

Thank you very much for the question. I do appreciate the baseball analogy. I'm a Toronto Blue Jays fan, so there we go—it's on the record.