Finance Committee on Oct. 10th, 2023

[Bobby Morrissey, Liberal, Egmont, PE]

Is that here in P.E.I.?

[Shelley Muzika]

Yes. That's here in P.E.I.

[Bobby Morrissey, Liberal, Egmont, PE]

Good.

My next question, Chair, is for Mr. Mueller on aerospace.

You made a reference to the SIF for aerospace. How are Atlantic Canada and P.E.I., in particular, being disadvantaged?

If they are being disadvantaged, I assume what you're referencing under this program is the inability to access funding through SIF. I take it that's where you were going.

[Mike Mueller]

Thank you for the question.

There are significant challenges that our companies are seeing with the strategic innovation fund. I should say kudos to the government. Budget 2021, I believe, provided $1.75 billion through the strategic innovation fund for aerospace. I wouldn't say any one region is being disadvantaged under SIF, but we are seeing some pretty significant challenges in going through the process.

[Bobby Morrissey, Liberal, Egmont, PE]

Could you elaborate on those challenges?

[Mike Mueller]

Yes. It's not as responsive to aerospace. Aerospace has long been—

[Bobby Morrissey, Liberal, Egmont, PE]

Is that in general, across the country?

[Mike Mueller]

In general, across the country, aerospace has very long lead times. Developmental projects are long-term. In the past, there used to be very specific funding programs for aerospace that were well received by the industry. When SIF was created—

[Bobby Morrissey, Liberal, Egmont, PE]

When were those?

[Mike Mueller]

Those were up until, I think, 2017, and then the strategic innovation fund took over. The strategic innovation fund is sector-agnostic. It takes everything in. What we're seeing is a lot of back-and-forth with respect to understanding the industry and a long time to get approvals on funding programs. We're seeing companies actually not pursuing it because the lead times are too long for their business realities.

We have some very specific recommendations for the strategic innovation fund. How do you bring in sector-specific evaluators who understand the industry? That's an example. How do you change some of the repayment rules? How do you shorten down the application process?

Industry really thrives on predictability and certainty, and we need more of that within that program.

[The Chair, Liberal, Peter Fonseca]

That's your time, MP Morrissey. It goes quickly.

We'll go to MP Ste-Marie, please.

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

Mayor, ladies and gentlemen, good morning. Thank you for your presence and for welcoming us to your beautiful island. Once again, your presentations are both very relevant and rich in content.

My name is Gabriel Ste‑Marie. I'm the Member of Parliament for the riding of Joliette, which is located northeast of Montreal.

Mayor, everything you've raised about the gas tax, inflation, infrastructure funding delays and climate change challenges, I've also heard from the mayors in my riding. I'm always impressed by the pragmatism of municipal elected officials. You deal with residents every day, you hear first-hand reports. What happens in Ottawa is often somewhat removed from the people. So it's good to be able to hear your feedback and assessment.

The same applies to all witnesses. The face that we aren't asking questions of each and every one of you doesn't mean we won't be taking notes to ensure that your recommendations appear in the committee's report when it's presented to the Minister of Finance.

Mr. Mueller, thank you for attending. It's a pleasure to see you in Charlottetown.

I'll begin with the luxury tax that's currently in effect, a subject you touched upon. Let me remind you that the aim of the luxury tax was to increase the contribution of the wealthy to the tax effort. Our concern before this tax was introduced was that it would harm a strategic industry of the Canadian economy instead of achieving the goal of having the wealthy contribute more to the tax effort.

So, I'd like a rundown. You referred to the study carried out by Professor Roy for the Aerospace Industries Association of Canada in connection with these concerns. What is the current situation?

[Mike Mueller]

Thank you for the question.

I very much appreciate it.

We have significant, major concerns about the so-called luxury tax. I call it more of a tax on manufacturers, because that's really what it is.

The original goal for the government, I believe, was to bring in around $9 million on that tax. The tax came into effect on September 1, 2022, and to my knowledge, no tax has been collected at all. Instead, what we're seeing is a loss of $1.1 billion in revenue for aerospace companies. I should say that a large portion of that loss is related to the supply chain right across the country, so it's absolutely critical.

We're seeing a loss of up to 4,000 jobs within the industry as a direct result of this tax. We're seeing a $274-million loss in salaries to workers, and these workers are in high-paid, family-supporting jobs. We're seeing the government lose $55 million in income tax off that, and then there's $55 million lost in GST sales.

I'm seeing a lot of people losing. No one seems to be winning from this tax, and the tax seems to be doing the exact opposite of taxing these products. Instead, it's the workers and the industry right across the country that are taking the brunt of it.

It was interesting, because the United States brought in a similar tax and saw similar results. It's something we've been warning about. It was within two years, I believe, that the United States repealed that tax because of the impact on workers, the impact on jobs and the loss of revenue. It was not only that, but also the loss of capacity and capability within the country. There's also a reputational aspect here that goes around the world. We have a world-leading aerospace sector. We should be doing everything we can to support it, instead of putting on this punitive tax.

I should add that, when I was here in the past, union representatives were also with me. When you have manufacturers and union representatives all saying, “Rethink this tax; it's not good,” I think there are some significant negative repercussions.

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

I would like to thank you for those comments, but they are devastating. With this tax, the government was seeking to raise $9 million a year. As far as you know, however, it brought in zero dollars per year and instead lost $55 million in taxes and an amount I didn't catch in GST or sales tax, plus all the repercussions on the chain. So you could say that the goal has been completely missed at this point.

I would have liked to ask you more technical questions about the tax, such as the effectiveness of the export exemptions or how well the 10% recreational use threshold works. However, as this tax seems to be an abject failure, I imagine that what the industry is requesting, as you said, is that it be scrapped, since it doesn't work, has very negative effects and completely misses its target. Is that right?

[Mike Mueller]

Thank you for the question.

I don't see any positives out of this at all.

Our ask is that aircraft be removed from the tax on manufacturers. I may not have mentioned it, but we've seen 19 aircraft sales not go through because of the tax. Again, this represents over a billion dollars in revenue for aerospace companies and their subsequent supply chains right across the country. It's very significant across the board.

We put—

[The Chair, Liberal, Peter Fonseca]

You were almost at seven minutes.

Thank you. I'm sure you'll be able to expand through another question.

We're going to the NDP and MP Blaikie now, please.

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

Thank you very much.

For the witnesses in this session, my name is Daniel Blaikie. I'm fortunate to be able to serve as the member of Parliament for Elmwood—Transcona, which is in the northeast corner of Winnipeg, Manitoba.

Carrying on, Mr. Mueller, when the government was first designing this tax, there was some talk about alternative ways of having a luxury tax, whether that would be.... Rather than putting it on the manufacturer's product—and manufacturers are competing in an international marketplace, and it reduces their competitiveness—there was talk about directing or assessing the tax on the use of luxury aircraft in Canada, whether it's on the time that it's rented by consumers of luxury aircraft or otherwise.

Do you want to talk a bit about some of the other suggestions that were on the table for how to structure a luxury tax that wouldn't have had the same impact on manufacturers?

[Mike Mueller]

Thank you for the question.

We put forward numerous suggestions to lessen the impact of the tax. In fairness to the government, they did make some adjustments with respect to the exportation and cash flow considerations for companies. We were thankful for that, but after a year of the tax being implemented, we've seen the devastating results that have occurred, with, again, $1 billion in lost revenue.

We do feel that there are some tweaks that could be made, but seeing the negative impacts of the tax, our recommendation is that aircraft be removed. That happened in the United States when they implemented a similar luxury tax. It was repealed within two years.

From my knowledge, we're the only country in the world doing this type of tax. I think there's a pretty significant reason. We were warning about the negative impacts that we would see with the implementation of this tax. Now we're seeing the actual real-world results start to play out, and it's very concerning.

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

Thank you.

Ms. Muzika, I wanted to ask about something that the government had committed to but did not follow through on, I think it's fair to say, when it comes to the bilaterals on the Canada health transfer. That was the dedicated mental health transfer. That's not to say that there are no resources for mental health at all in those bilateral agreements, but it's not a steady and consistent dedicated amount for mental health.

How important do you think it is to establish dedicated funding for mental health services from Ottawa to the provinces in order to build up a reliable mental health infrastructure across the country?

[Shelley Muzika]

It's very important. Nationally, our organization has certainly put forward that our medicare system needs to include the pieces for mental health so that there's access to that for counselling and social services. Those may be accessible for people who have access to a health care plan through their employment. They're not necessarily accessible for people who don't, and not necessarily for ongoing services. There may be supports initially, but then there's usually a financial cap. That is a barrier for people to access resources. It's also perhaps a barrier for people who are not maybe in an urban centre where there's more opportunity to access services.

It's very important that we have those supports for community-based mental health.

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

Earlier you had talked a little bit about some of the challenges in the labour market for mental health services. Do you want to elaborate a little bit on that, including some of what you think the solutions look like?

[Shelley Muzika]

As a charity, which we are, in the non-profit world, employees don't come to work in a charity or work in the non-profit world for the money. That's pretty obvious. They do it because they care, they're passionate and they want to help people. At the same time, there's the expectation that there will not be a significant financial barrier to that.

As I mentioned, we received some support provincially to leverage our wages so that we were at least within the realm of what they were paying provincially, but that's a challenge. The labour shortage also makes it a challenge. Here in P.E.I. we have 100 staff providing services across the island. We are constantly recruiting individuals for positions. We're no different from anybody else in the province, but it's a challenge. It's a challenge for our sector particularly, so it's important.

There's not an easy answer. As I said, people don't expect to be paid what is paid provincially or federally, but they certainly don't expect the gap to be huge.

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

In terms of having ongoing services, you were talking before about the establishment of the new line and some of the follow-up services that people require. Do you want to speak a little bit more to what those services are and how they should be gotten up and running?

[Shelley Muzika]

Certainly there's community-based mental health care provided by NGOs or charities such as ours. Some of our areas do clinical work. We don't do clinical here in P.E.I., but there's also providing the support to leverage that. As I said, sending people to emerg or to their GP is not the answer to get continuing care. You can go through the wait times to see a psychiatrist or a psychologist, but when your next appointment is in a month or six weeks, what happens in that in-between time? How are you getting support? How are you doing well?

The services that we provide, and that other agencies like ours provide, give that opportunity to have that ongoing support. There's peer support from people who have lived experience who can support you. They've not exactly walked in your shoes, but they can help you out. We have social rehabilitation services to help people meet others who are challenged. We offer housing, education, employment and life skills.

All those pieces come together to help people become more resilient. They have more tools in their tool box about how to better cope with depression, anxiety or whatever issue they are struggling with.

[The Chair, Liberal, Peter Fonseca]

Thank you very much. That was very good, but we are well over time.

Thank you, MP Blaikie.

Members and witnesses, we are now moving into our second round of questions. Times are a little different here in terms of what's allocated.

We're starting with MP Bragdon for five minutes.