Finance Committee on Oct. 5th, 2023

[Edgar Lopez-Asselin]

Thank you, Mr. Ste‑Marie.

I would like to come back to two points that I brought up in my opening remarks.

First, significant progress has been made with respect to the GAAR. For our part, we defended the need to penalize offenders. In other words, not simply forcing them to repay the amounts that would have been subject to tax evasion, but also ensuring that a penalty would be imposed in order to further deter offenders. That has been done, and we are very pleased with the step forward.

I also have to come back to the beneficial ownership registry. I know that there is still a lot of discussion about this from a legislative standpoint. The issue is ongoing, but I invite Canadian MPs to ensure that the only taxable rate at which a person or business must disclose their identity as an effective beneficiary is set at 10% of a company's shares, not 25%. This is a mistake that has been made by a number of countries, starting with the United Kingdom, one of the first countries to establish such a registry.

If I may, I would like to continue with a few of our recommendations, which is what the member asked me to do a little earlier.

One of our first recommendations, which addresses the need to unmask avoidance mechanisms, is to make the CRA more transparent and accountable to Canadians. Last April, the Collectif Échec aux paradis fiscaux had the opportunity to organize a collective action in front of the CRA offices in Montreal to demand more transparency. We obviously have to provide the CRA with the necessary means to carry out its mission, but we also have to ensure that, every year, the CRA is required to submit a report on its activities as part of the federal budget. That is an important element. We hope that the new Minister of National Revenue will do so as soon as possible.

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

Thank you very much.

[Edgar Lopez-Asselin]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie. We'll now go back to Winnipeg with MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you, Mr. Chair.

Mr. Lopez‑Asselin, we know that, for decades, the federal government, whether Liberal or Conservative, has been letting a lot of revenue go by because of tax loopholes. Why do you think the federal government is content to let so much revenue go by the wayside? It's not productive.

[Edgar Lopez-Asselin]

I will let my colleague Philippe Hurteau say a few words about that.

[Philippe Hurteau, Member of the Coordination Committee, Collectif Échec aux paradis fiscaux]

I can certainly clarify. I'll be brief.

We're obviously not in the minds of government decision-makers, so we can't know what's going on there. However, we are seeing a certain reluctance in terms of intervention, which has repercussions.

I will talk about my situation and that of the members I represent in the health and social services sector in Quebec. That said, this is a Canada-wide reality, not just a Quebec one. These members are still struggling with funding issues. They lack the resources to properly compensate employees and help them do their jobs properly, and they do not have the resources to provide adequate services to the public. Of course, that comes with a great deal of frustration, which has been growing over the years.

The inaction you described, Mr. Blaikie, is absolutely incomprehensible for the people who work on the ground and whose mandate is to serve the people of Quebec and Canada and to provide them with good services.

Unfortunately, I don't have an explanation for you. It becomes very difficult to follow. For more than 20 years, everyone has known that tax havens are a problem because they prevent the various countries in the world from fulfilling their social mission. Once that statement is made, as I am doing today, the measures never follow or the measures that are taken remain very unsatisfactory.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

The irony is that, if we were to hire people to collect that money, it would pay the salaries and it would give the government the resources to provide the services that Canadians need.

So it's not just a question of cost; it's an investment. The federal government needs to change the agreements that have been made in the context of tax loopholes. If that work were done, we could have more resources. It's not a question of what it would cost the government; it's a question of the government doing the right thing.

Is that a fair description of the situation?

[The Chair, Liberal, Peter Fonseca]

We don't have time for that answer, because we're well over time, but maybe we will in another round.

Thank you, MP Blaikie. I'm sure they'll have an opportunity to answer that in another round.

We're going to the Conservatives and MP Hallan, please, for five minutes.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thanks, Chair, and thanks to all the witnesses for being here.

My questions will be for Mr. Cross and Mr. Dehejia.

By the Liberals' own admission inside their budget, Canada's economic growth rate or GDP per capita will be the worst for many decades, until 2060. That's by their own admission. On top of that, it will be the worst in all of the OECD or developed countries.

You have both mentioned mistakes that governments have made in the past and also how we're heading down a kind of scary path right now. I'd love to get some more insight from both of you about similarities, about mistakes that governments are currently making, from the past. What would be the consequences of these mistakes?

[Vivek Dehejia]

Thank you, Mr. Chair.

Just briefly, I'm really perplexed and frankly disturbed that we have not learned the lessons from our mistakes in the seventies and eighties. I think Mr. Cross mentioned—or someone mentioned—the John Crow disinflation, which was extremely painful. We had that in Canada. The U.S. had fixed their problem by that point.

The kinds of ideas being talked about—wage and price controls and so forth—only make the problem worse. Again, it's the simple.... The ideas really are simple. We have to have sensible regulation that protects consumers, obviously, but doesn't stifle business; sound monetary policy, which has been sorely lacking—and now we're paying the price for a decade or more of loose money; and sound fiscal policy. We've had reckless fiscal deficits, so it's not that hard to figure out.

I'm afraid that we seem to have unlearned the lessons of the seventies and eighties. It's really quite perplexing.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you.

[Philip Cross]

The thing I would add is that what strikes me most when I look at the current economic environment is the very strong upward pressure we're seeing on longer-term interest rates here and in the U.S. That's an acknowledgement by investors that inflation and interest rates are going to be higher for longer. We've seen the stock market back off as a result, and we're seeing cracks in demand in housing in Canada and the U.S., but I don't think people have realized yet the scale of what we're going through.

We're ending a period of well over 10 years of low interest rates—almost free money—and we're returning to a world of more normal interest rates. That's going to be a shock. I think there are a lot of business models out there that were based on the assumption that interest rates would stay low for a long time, and I think there's going to be a lot of fallout from this new regime. One obvious place, for example, would be commercial real estate. Coming out of the pandemic, we see vacancy rates of 50% in downtowns. A lot of money, particularly in the private sector, went into investing and borrowing at low rates. They invested in these buildings, and it's going to be difficult to make money in these investments.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you. I have another question for both of you.

We've seen the current Liberal finance minister, Chrystia Freeland, admit that deficits fuel inflation. Former Liberal finance minister John Manley summarized what's happening today: The Liberal deficits are like pressing the gas, and the Bank of Canada is slamming on the brakes with higher interest rates. We've seen inflation at 40-year highs, but we've also seen this Liberal government spend more than every government before it combined. At the end of the day, that made the Bank of Canada raise interest rates at a rapid pace that we haven't seen in 30 years.

In both your opinions, are the government's deficits, its spending and its policies today working against the monetary policies of the Bank of Canada?

[Philip Cross]

I'll start briefly on that, because I think I already touched on it in one of my earlier answers. Then I'll turn the majority of time over to you. I would add, yes, but of course it's not just fiscal policy. As I mentioned, there's a wide range of government decisions that affect prices—and we should be aware of all of these—through regulations, taxes and decisions authorized by marketing supply management boards, for example. You have to look at all government actions and not just spending.

[Vivek Dehejia]

I'll just add to that. Yes, indeed. It's as if the federal government is pressing on the gas and the Bank of Canada is forced to press on the brakes even harder. Interest rates are high, then, in part because we still have massive fiscal deficits.

We just haven't learned the lesson. The massive spending in the pandemic has yielded very little in the way of productivity, so yes, indeed, a high fiscal deficit is worsening our problem and forcing the bank to set higher interest rates.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Hallan.

Now we go to MP Weiler, please.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair, and I'd also like to thank all of our witnesses for being here today. There's been some really interesting testimony thus far.

I'd like to first ask my questions of the Canadian Federation of Agriculture. This has been a very difficult year in Canada with the extreme weather events we're seeing right across the country. It's obviously been headlined by the worst wildfire season we've had in Canadian history, and that was by the end of June. I know that my province of B.C. was hit very hard, with wildfires particularly impacting a lot of the key agricultural areas, including some of our most productive crops.

I was wondering, Mr. Currie and Mr. Berrigan, if you could provide some information to this committee about the level of economic losses you expect this year from the forest fires and other extreme weather events, and how you see this projecting forward over time.

[Keith Currie]

I'll start, and I can let Brodie jump in on all the technical stuff, because he's the smart one and I'm just here because of my good looks, I think.

It's certainly not something you just recover from easily. Our farms are generational, and when you're devastated through a flood or a drought, or when fires affect what's happening, it takes years to build back the capital that's lost in an instant. To put an exact dollar on what that would look like is very difficult.

However, we do have some business risk management programs in place right now that, with some tweaking and changes, can actually make the programs respond more quickly to help out those farmers and ranchers who are affected by it. There was an ask by Saskatchewan of the AgriRecovery program at the end of June or July, I think, and we're still waiting to hear back from the government on whether that's going to get approved or not.

These people still have to live. They still have to pay their bills and all their expenses, with, in some cases, a dramatic loss or total loss of income. We can't have programs that are that slow in response, so we need to make some changes to programs like that.

Brodie, do you want to add more to that?

[Brodie Berrigan, Director, Government Relations and Farm Policy, Canadian Federation of Agriculture]

Keith is absolutely right. Without the ability to speak to specific numbers in terms of impact losses—although we can certainly provide the committee with that information if it's interesting—I think the issue from our perspective is having a risk management framework in place that is responsive, timely and there to support farmers when they need it.

Certainly, we've seen, as Keith said in his introductory remark, an increasing incidence of extreme weather events across this country. There have been floods, forest fires, drought, too much rain or not enough rain, and hurricanes. It's really quite something.

The problem is that our risk management framework is not equipped to deal with that level of incidence of extreme events. Programs like AgriRecovery are just not as responsive as their U.S. equivalents and the U.S. Department of Agriculture, for example. Therefore, when a drought hits Saskatchewan and it's hitting that whole area into the U.S., U.S. farmers are able to access some emergency support and purchase feed for their farms much more quickly than we can here in Canada, which really puts us at a serious disadvantage.

For example, I know that Saskatchewan has a request in right now for an AgriRecovery program to support them for some drought conditions they've experienced, and they made that request in July. We still haven't heard the response on that, and that's just the first step in the process. There are several that need to come after that before we actually will get some money.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you.

On a bit of a different track here, in your opening you mentioned the need for making sure that sustainability initiatives are farmer focused. In my riding, I've seen a number of smaller-scale farms especially that have adopted regenerative farming practices as a way of being able to increase production and sometimes reduce costs by having lower input costs.

When you mentioned that these sustainability initiatives need to be farmer focused, I was hoping you could maybe speak a bit more to that and how you see the government's role in being able to help with the sharing of best practices as well as on the capital side.

[Keith Currie]

There is a wide range of ways that the government can help with the focus on farmers. When it comes to sustainability initiatives, really what we want the government to do is to be a partner and work with us.

The best-laid plans that aren't practically implementable are not very useful to us, so we want to be a partner with the government to go forward on the various different types of practices and best management practices we can use, keeping in mind that if you look across this country, no two regions are the same. We are very diverse right across the entire country, so it can't be a one-size-fits-all approach.

There has to be flexibility built in within the program to allow farmers to adapt to what their specific regional geographic needs are and even the farming types that are there, but there are some basic principles like soil health that are at the base of everything.

We're all worried about climate change and what's in the air. The reality is that it doesn't matter. What's under our feet is what really matters most, and that's going to be the solution to all things climate going forward. We need to focus on soil health and practices across the country, depending on the climate, the soil type and how we improve the soil health under our feet.

There are a myriad other practices—technologies, for example—but technologies are good only if we have connectivity to be able to use the technology, and that requires a lot of investment, too.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Weiler.

Members and witnesses, I'm just looking at the time. We have enough time to get through one more round.

We are starting with MP Hallan for five minutes.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thanks, Chair. Once again my questions are for Mr. Cross and Mr. Dehejia.

We know that the demand for oil and gas is going to be strong until 2050. Mr. Cross, you mentioned things like regulations, and that we don't have enough pipelines in this country. We've been saying that. For the last eight years, we've seen a Liberal government that's anti-energy and anti-growth. I think one of your papers, Mr. Cross, literally says that Canada's anti-business culture undermines our growth. We've seen anti-energy bills like Bill C-69, the “no new pipelines” bill. We've seen a carbon tax that hasn't really helped the environment or helped emissions come down, and it's just made the cost of everything go up.

Would you both agree that some of these laws and some of these anti-energy bills are not letting Canada's growth rate increase and increase jobs in our economy?

[Vivek Dehejia]

I'll just make one comment just very briefly, then I'll have Mr. Cross use most of the time.

I'll just say that there is a cautionary tale out there, and that's Germany, with a government that has the Greens as one of its coalition partners but has had to walk back from a very aggressive green agenda. Guess what? The German public realized what the cost would be, and they balked, so let's be realistic about what we can accomplish in the context of high inflation and a serious crisis in housing and affordability generally.