Finance Committee on June 3rd, 2024

[Corey Tochor, Conservative, Saskatoon—University, SK]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Tochor.

We now go to MP Thompson, please, for seven-plus minutes.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

I'll begin with Mr. Daniels on the indigenous loan guarantee program.

Thank you for your opening comments and certainly for highlighting how important this is for indigenous governments and communities. Also, thank you for the advocacy work you've done.

What are you hearing from first nations communities on the revenue-creating potential of the program, and what are the types of projects that are now open to bringing in stable sources of revenue?

[Ernie Daniels]

Thank you for that question. It's a really good question.

What we're hearing is that first nations want to participate in these projects by equity. It's really important, because a lot of these projects cross different territories of our nations across the country, not even including first nations, Métis and Inuit.

Just to give you an example of some of the projects that nations are really interested in, there are a few projects in B.C. In one major project that we're involved in, first nations are going to have a majority ownership.

The point that's really important for the nations in terms of how they can participate is support for equity. A loan guarantee program will help with that equity portion of it. It will also, in theory, bring down the interest rate. The FNFA is speaking here today because our interest rates are going to be the lowest that a first nation can get for any type of project. We operate in the capital markets. We're about 300 basis points below bank prime already. A loan guarantee program may or may not help lower that. At the same time, once you do that, nations have more revenue that they can invest in their other projects, the projects needed in their community, like infrastructure and so forth.

I'm going to ask my colleague Steve Berna to add to that to see if I missed anything.

Steve, did I miss anything?

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. Please just continue with that.

I want to add a link that may help expand your answer: The program is self-agnostic. How is this going to allow for the ultimate flexibility that really serves indigenous self-determination?

[Steve Berna, Chief Operating Officer, First Nations Finance Authority]

Thank you.

I think there are two things that are pretty well known.

First of all, Canada's budget is insufficient to meet the needs of first nations on the infrastructure gap.

Second, there's a very large infrastructure gap and in some cases an internal capacity gap. If the budget cannot help fulfill those holes, then the alternative is economic participation.

FNFA's regulation change that we're asking for isn't mission creep. It's basically following what all parties in 2006 in Parliament put up their hands and voted for—that FNFA's act should change over time as the political climate, the economic climate and the needs of first nations also changed over time. There is a section in our act, section 141, that allows for an evolution of FNFA as continuing changes occur.

Economic participation has become how reconciliation is now defined. The projects out there are mostly in the resource sector and they change territory by territory, but Ernie and I aren't presenting equity participation here just hoping that this is something that will work: We have already canvassed the capital markets, the pension plans, the life insurance companies and the investors out there as to whether they would support equity participation, and the answer is yes.

If Canada's budget cannot help close the internal capacity or infrastructure gap, then allow economic participation by all and put a loan guarantee around a special purpose vehicle. FNFA is not for profit and we're not going to benefit by this, but first nations that cannot meet certain vetting tests will now be able to be included.

Our act is not about low rates; it's about providing increases in capacity and wealth management within first nations. It's imperative that all first nations whose projects are passing territorial areas now have the right to participate. This regulation will allow that to occur.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you so much.

I'm going to switch quickly now to Mr. DiCaro with Unifor.

We have heard in this committee from Canada's Building Trades Union that the labour requirements attached to ITCs are the best definition of prevailing wages in Canadian labour history. For companies to receive the maximum benefit, they must pay good wages, and that's really union wages and benefits.

Given your industrial policy and a drive for a thriving economy, how important are measures like labour requirements in ensuring that workers are at the forefront of the green transition and that we don't slide back to lower wages and temporary jobs?

[Angelo DiCaro]

Great. Thank you for the question. I'll also invite my colleague Kaylie to weigh in on this.

We have no issues with the labour conditions that were attached to some of the investment tax credits. It's important to also reflect on the parameters of those labour conditions, which were very much modelled on what was done in the U.S. through their Inflation Reduction Act legislation but were very much focused on the construction and building of some of these big capital assets, like factories and different plants.

One of the concerns we had was the lack of extension of those same credits to look at it through the production phase of the operation of some of these factories. However, we're certainly happy with the fact that some of these labour conditions have been put in place.

Our view on this is certainly not to replace this approach but to build on the spirit of it. That's why, in our opening remarks, you heard us speak about the importance of connecting some of these big public-funded projects to union neutrality provisions. We know the prevailing wage exists for the construction phase of a project, but moving forward, make sure that the investments Canada puts into these projects ensure that these employers receiving the benefits of that public funding, whether through tax credits or direct subsidies, stay neutral when employees choose to explore joining a union or accessing collective bargaining.

We think there's ground to gain here, but it's certainly a wonderful provision that was introduced by the government through these credits.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. DiCaro and MP Thompson.

Now we'll go to MP Ste-Marie for seven-plus minutes.

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

Thank you, Mr. Chair.

Greetings to all the witnesses, and thank you for your presentations and responses. We very much appreciate your efforts.

My questions are for Ms. Alepin, whom I thank for being available and present, and for her presentation. I must say I found it very troubling.

First, you reminded us that the incomes of the taxpayers who form the richest 0.01% have increased 450% in 30 years, while their effective tax rate has declined 27.5%.

Do you think that governments have failed in their duty to redistribute wealth? How does Canada compare with other countries in that regard?

[Brigitte Alepin]

Thank you for your questions.

I'm going to answer the first one, which concerns governments' redistribution obligation, but my answer will also touch on the second question.

Wealth gaps exist, as does the phenomenon of vast fortunes that manage to escape their fair share of tax. Canadian statistics prove this. It can't be said that this doesn't exist, because the numbers speak for themselves. We also see it elsewhere, in France and other countries. The problem definitely needs to be addressed.

I also distributed some other tables that I didn't discuss in my remarks. For example, table 2 shows that the top 0.01% continued to grow substantially richer from 2016 to 2021, increasing their wealth by 125% in 6 years, while their effective tax rate continued to decline significantly.

It was a 10.5% drop, and a comparison with the situation of 99% of taxpayers suggests a different trend: The tax rate of the latter group rose slightly, and there were no tax cuts.

Action has to be taken because these wealth gaps aren't just a matter of numbers. They may undermine the belief of 99% of taxpayers that our tax system is fair and that wealth is fairly redistributed.

We therefore need effective action to solve this problem.

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

Thank you very much.

I'm overwhelmed by your presentation and data. As you showed in your second table, the data concerns the years from 2016 to 2021. Consequently, even the present government has allowed a cut in the effective tax rate of the richest 0.01% of Canadians. As you said, they enjoyed a 125% increase in income while their tax rate declined. It's very troubling, and I think it has to change.

I approve of the proposed alternative minimum tax, even though your presentation shows that its impact on the effective tax rate of the richest 0.01% will still be quite marginal.

The alternative minimum tax proposals clearly won't be enough. What could the government do to ensure greater tax fairness relative to the richest 0.01%?

Then I'll discuss the charitable sector.

[Brigitte Alepin]

The numbers speak for themselves. The alternative minimum tax proposals aren't enough to increase the effective tax rate of this class of wealthy taxpayers. So what can you do?

First, you can ask yourselves what the fair share of tax of a taxpayer who earns $12 million a year might be. The tax rate set in our federal tax laws is 33% and 27.5% with the abatement.

If you think that the tax rate stated in our tax legislation reflects society's wishes, then you should take the necessary steps to move closer to it. The current effective tax rate is around 17.5%, as I said in my presentation. It's really important that you take action to make sure the alternative minimum tax works, if you feel that the effective tax rate should be substantially increased to move it closer to the tax rate set forth in our tax legislation.

It's really important to ensure that the alternative minimum tax works because it's what would help to show Canadian taxpayers that our income tax legislation can require wealthy taxpayers to pay their fair share of tax. We don't need a new form of taxation, for example, such as a wealth tax. I'm very much in favour of doing the necessary work to ensure that the alternative minimum tax guarantees that wealthy taxpayers pay their fair share of tax.

Before suggesting that you consider another form of taxation or another tax system that would tax wealth rather than income and increase the complexity of our tax laws, I'd like to ensure that you introduce an effective alternative minimum tax.

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

Thank you very much. Duly noted.

I have 30 seconds left, perhaps a little more. You say there are two possibilities for the charitable sector: either increase foundations' charitable obligations or reduce the tax gifts offered to donors and foundations.

Considering what's done elsewhere in the world, which way should we lean?

[Brigitte Alepin]

I haven't—

[The Chair, Liberal, Peter Fonseca]

Give a very short answer, please, Madame Alepin.

[Brigitte Alepin]

I've taken a good look at what's being done in other countries; I'm doing an exhaustive piece of research on the subject.

The tax gifts offered to donors in Canada are significant. Perhaps you should ask yourselves whether donors should be rewarded to that degree. This is an issue that you should probably consider socially. However, since it's quite clear that the charitable sector is important, you should avoid making decisions that would make it less important. Consequently, it has to be made tax-effective, which it currently is not.

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

That's very clear. Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Now we have MP Davies again.

You'll be our final questioner. You're our closer here for today. This is also our final panel of witnesses and is our 12th panel. These will be the final questions. There's no pressure, but this is the last seven minutes. Go ahead, MP Davies.

[Some hon. members]

Oh, oh!

[The Chair, Liberal, Peter Fonseca]

There you go. Let's hear it.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Thanks to all the witnesses. They've all been fantastic throughout all the panels, and this last session was no exception.

To the First Nations Finance Authority, I think it's a really positive thing that we have this $5-billion indigenous loan guarantee program, but I'm wondering if the finance authority was meaningfully consulted prior to the announcement of this program.

[Ernie Daniels]

I'm going to let my colleague Steve answer. He was part of the committee that was looking at this with NRCan, but prior to the announcement, we weren't notified.

[Steve Berna]

Don, I was invited to be a participant for FNFA along with others at the NRCan committee, which outlined how a loan guarantee program would possibly work or even whether a loan guarantee program was warranted or wanted. The decision made about a loan guarantee did state that it looks like it is a good idea, but now the time has come to put details behind it.

Last week, Ernie and I met with the deputy minister at NRCan, and I think the door is open for FNFA to have input, because we have 362 first nations that have voluntarily joined our act. We have 170 from B.C. to Newfoundland to the Northwest Territories that have been vetted to become FNFA members. They're now looking for the benefits of this loan guarantee, and we're hoping that we can put our input into it so that it will be structured properly.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Have you received any indication from the federal government as to when the program will go into effect?