Finance Committee on Sept. 19th, 2024

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

On a point of order, Mr. Chair, I'm not comfortable with disrespecting a Canadian's name. We should address someone as “Mr.” or “Ms.”. I think we can leave out the disrespectful adjectives.

[The Chair, Liberal, Peter Fonseca]

What you are asking for is respect.

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

Last spring, just to add to that, Bloc member Mr. Ste-Marie in this committee voted in favour of calling Mr. carbon tax Carney to the committee. I was listening in question period today, and Mr. Davies also asked a question on carbon tax Carney, so I think this motion should pass with ease.

I move:

That the committee invite the Prime Minister’s special advisor, Mark Carney, to appear by himself for 3 hours, no later than October 4th, 2024, to address his role with the Liberal Party of Canada, economic, fiscal, and monetary policy.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Hallan.

I do have a speaking order. We have witnesses who are giving us great testimony on our changes to capital gains, and we would like to get back to them.

I have MP Ste-Marie, PS Bendayan, and MP Davies after that.

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

Thank you, Mr. Chair.

The same motion was moved before the Standing Committee on Access to Information, Privacy and Ethics. My colleague René Villemure, from my political party, voted against this motion, and I will be voting against it for the same reason. Mr. Carney is neither a public servant, nor a Department of Finance employee or official. He is a policy adviser to the Liberal Party. It is not our committee's duty to summon a party's policy adviser. He did not hold that position when we voted on another motion last spring.

I will therefore be voting against this motion.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Next we have PS Bendayan and MP Davies.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Mr. Chair.

While I appreciate the motion that my colleague put on the table, we are in the middle of a Conservative study. We have several witnesses who haven't spoken, and therefore, Mr. Chair, I move to adjourn debate.

[The Chair, Liberal, Peter Fonseca]

The question is to adjourn debate on the motion.

(Motion agreed to: yeas 6; nays 5 [See Minutes of Proceedings])

We are back to our witnesses.

MP Morantz, you have just under three minutes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

Ms. Wilson, I want to come back to some of our discussions. I have an article here called “Capital gains changes disproportionately impact engineering firms”. It was published in Canadian Consulting Engineer. You're familiar with this article, because you're mentioned in it. I presume you're familiar with it, right?

[Montana Wilson]

I've read it, yes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

This article says that the Association of Consulting Engineering Companies reached out to the federal government to ask for a meeting with finance minister Freeland and revenue minister Bibeau. Ultimately, you got a meeting with revenue minister Bibeau. Is that correct?

[Montana Wilson]

That's correct. It was an online meeting.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Were you given a reason that the finance minister wouldn't meet with you?

[Montana Wilson]

Not to the best of my knowledge. I'd have to ask the association folks if they were given a reason, but I don't know of one.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

By and large, tax policy is designed within the Department of Finance and not within the Department of National Revenue. That's why I'm curious about it. The role of the Minister of National Revenue is to oversee the operations of CRA, essentially, but not to make tax policy. The person you met with was likely not involved in the creation of this policy, which is too bad.

It would have been better if the Finance Minister had actually shown you some respect, shown up and talked to you directly about why she was basically increasing taxes on your industry and your clients.

You did meet with Minister Bibeau. Can you tell me about that meeting? What did you tell her?

[Montana Wilson]

We spoke about the impact on small businesses, much like I've spoken about today. She further explained the position on why it is supported from the government's perspective. We let her know the challenges. We aren't the 1% that it's affecting. We are not that 1%.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Did you ask her, or did it come up, whether or not the government had any data on how many people this was actually going to be affecting and whether or not it would result in a...?

Actually, my question is, did the government have any data on what the effect of this tax increase would be on our GDP? Did that topic come up?

[Montana Wilson]

It wasn't discussed, no.

[The Chair, Liberal, Peter Fonseca]

Thank you. That's our time. Thank you, MP Morantz.

We'll go to MP Dzerowicz, please.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thanks so much, Mr. Chair.

I just want to thank all the witnesses for their excellent and very important testimony today.

I'm going to start with you, Ms. Wilson, just for a second.

I always find it very heartwarming when we have small businesses come before us. We are a small business economy in Canada. We care about our small businesses. It's important for us to hear testimony from our small businesses, so thank you for being here.

I will say to you, though, that in our last meeting we asked the question around Prime Minister Mulroney, who when he was in office actually increased the capital gains inclusion rate to 75%. That increase was wider in scope and didn't include the threshold that we have, which is $250,000. We asked some economists who had done some studies whether, after the increase to 75%—which was much higher than what we have proposed, which is 66%—there was a hit on productivity and innovation and whether there was an impact of massive job cuts for Canadians. We heard that this wasn't the case.

I want to let you know that this is definitely something that's a concern for us, and it's something that's been on our mind, but in the evidence we have heard from other economists, that's been the evidence that's come before us.

I also find it very compelling that in your testimony you say we really want to retain as much money as possible within our own business because we want the next generation to also be able to grow a business or get into these businesses. Part of our logic for adjusting this inclusion rate was that we were hearing from our Gen Zs and our millennials that they were feeling disproportionately impacted by income taxes. We wanted to introduce more programs, particularly around housing, to provide them with a better chance of having different housing options. It's a key reason, and I just wanted to let you know that this was a key part of our logic behind all this.

I want to say thanks to Mr. Davies. I often say to him that he takes all my notes and steals them, because he literally says the things I'm going to say. I was going to also list a number of things that we've introduced for small businesses. I'd actually love to hear from you, and not as part of this committee, on whether or not they're actually helpful to you, because when we're introducing things for small businesses, we want them to be helpful.

The other thing I would say to you is I know that a few years ago we reduced our corporate tax rates to 9% because we wanted to keep them among the lowest in terms of competitors.

Anyway, I just wanted to mention that to you and to say in response to that very compelling testimony that we do care and that we'll continue to follow the evidence around all these decisions.

Could you take maybe two seconds to comment on that? Then I do have a question for Mr. Genest-Grégoire and Mr. Olivier Jacques. You don't have to comment if you don't want to.

[Montana Wilson]

No, I just want to express my appreciation for your listening and for having this opportunity. I come from a town of 30,000 people. I don't get this opportunity every day, for sure, so I appreciate it.

What I do want to say is that I think the economic environment is different now. We are finding our younger staff have a lot of challenges getting capital to buy into the firm or participate in those discussions. I purchased my first house for under $300,000, and now the average home price is a million dollars in the same area. They have capital challenges. I haven't heard the historic stats that you've just presented, but we need to look at those holistically to see if it's the same scenario we're in today.

Thank you.

[Julie Dzerowicz, Liberal, Davenport, ON]

I'm going to go to Monsieur Genest-Grégoire or Monsieur Jacques, and either one can respond. I just want to know whether cutting the capital gains inclusion rate in the past has led to more business investment.

The second part to that is whether this has ultimately benefited the average Canadian worker over the past 40 to 50 years. I'm not sure who wants to respond first.

[Olivier Jacques]

I think there is no evidence that increasing the capital gains taxes a bit would have a negative effect on the economy, as there is not much evidence that decreasing the capital gains tax has had a positive effect on the economy.

What we do know, for example, is that decreasing the capital gains taxes led to more inequality. There's almost causal evidence for that. However, if we look over history, our periods of best growth were when we had higher capital gains. If you compare across countries, it's not because you have higher capital gains taxes that you have lower growth. It's very hard to establish that evidence. I don't think there's strong evidence for this.

[Antoine Genest-Grégoire]

I would like to add something briefly, if I may.

The research shows that the changes to the capital gains tax will have the biggest impact when people choose to act. Except in the event of death, this is a form of taxation whose timing can be controlled, that is, the timing of the sale can be chosen. When rates change, we see the impact when people act. For example, we suspect there will be more capital gains this year than last year, because people moved up sales so they could take place before the rate changed. Next year, there will probably be abnormally fewer.

Ultimately, we mostly see changes over time. Basically, people will sell their assets a little later to compensate for taxes that will be slightly higher. So if the asset is profitable, they may keep it a little longer, because the profitability will offset the additional tax. It may be possible to make the same amount of money from the sale of the same asset simply by selling it two or three years later.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

We are getting into our third round. I am going to try to get through it, but we have to be really tight. It's going to be MP Stewart for the first five minutes.