Evidence of meeting #153 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was changes.
A video is available from Parliament.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Again, I'd have to go back to my notes, but for the clean fuel regulations, there's an estimate of about 16¢ to 17¢ per litre, when the regulations are—
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Can I get you to please table with us what's on each litre—the carbon tax one, the clean fuel standard and then the GST and HST on top of that, per litre? Maybe we can do that for all provinces. I think that would give us a good idea.
I'll move on.
Liberal
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Thank you, Chair.
Thank you to all the witnesses for being here.
Mr. Giroux, I'll start with you.
First, I'd like to clarify whether I understood correctly. I know that you've done a study on the financial impact of this new tax increase, but you're planning to do another study, are you not?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes. That's what we plan to do, but with a better matching of tax returns over a period of time, to see who pays the higher inclusion rate, whether a person appears on the radar once in their lifetime or whether it's the same individuals showing up several times over a period.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
When you do this study, will you also study the impact of the expenses related to this new revenue?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I imagine you're asking me if we're going to consider what the government will do with this additional revenue.
No, we don't consider that aspect. We only estimate the revenue that will be generated if the capital gains inclusion rate is higher. We won't comment on how the government is going to spend that revenue, because that money goes into the federal government's consolidated revenue fund, not into a specific expenditure fund.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
I understand. That said, my Conservative colleague raised the issue of the carbon tax. To assess the impact of this tax, we have to assess not only the cost, but also the benefits to society of protecting our environment and reducing financial costs, among other things.
If we assess the financial cost and the benefits in the case of the carbon tax, wouldn't it be appropriate, in the case of an increase in the inclusion rate, to assess not only the costs—people will indeed pay more taxes—but also the positive effect on society? That way, we would really assess the impact of this measure.
It's not as if the money is going to be given to the government and disappear. It's going to be spent on something. The government has set out its intention in the budget with respect to new spending and programs, such as housing.
Wouldn't it be appropriate to evaluate that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a good point, and it comes up often.
My office has a mandate to estimate the cost and impact of certain measures. In general, the government is very good at talking about the benefits of its proposals. Where there is often an information asymmetry is when we talk about the costs or repercussions of certain measures. If I were doing cost-benefit analyses, as is sometimes suggested, my office should have a mandate that is considerably different from its current mandate.
Furthermore, it would be difficult to estimate the benefits of a measure such as the capital gains inclusion rate, because it would then have to be determined where the funds would be paid. The government said it would use the funds for certain purposes, but it could have generated revenue in other ways. If we did cost-benefit analyses, it would force us to become policy analysts and to comment on the merits of certain very specific policies.
That is why we only estimate the costs of certain measures. We leave it to parliamentarians to arbitrate and determine the ratio between costs and benefits. For our part, we provide the information on the costs. The government, on the other hand, often provides very good information on the benefits. By putting all that together, legislators—in this case you and your colleagues—are able to make good trade-offs and arrive at good decisions.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
I completely understand what you're saying, but I don't completely agree with you. You say that it's up to us, as members of Parliament, to assess the ratio between costs and benefits. You're going to provide us with information on costs, but as far as benefits are concerned, you're not going to study that aspect. I'm not saying you should get into the politics of whether a particular measure is a good decision or a bad decision. I'm just wondering if you could provide us with the information on the costs and benefits so that we can evaluate the proposed measure.
My colleague Don Davies just gave the example of child care and the positive impact it can have on the economy. I've read the studies you've done in the past. In fact, you're conducting some very interesting analyses. In addition, you were able to estimate the economic impact of various programs.
Couldn't you add that to what you're looking at? I think it would help members of Parliament from all parties make more informed decisions.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
For me to venture into this territory, I think it would be more prudent if Parliament were to review the mandate of my office. That would allow me to move forward on slightly more familiar ground and have more solid parameters, rather than simply deciding to do cost-benefit analyses.
Liberal
The Chair Liberal Peter Fonseca
Members, we're getting into our third round. I'm going to take us through this third round, and then we'll be done.
MP Chambers is first up for five minutes.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you, Mr. Chair.
Mr. Chaffe, thank you for coming and for the work you and farmers do. On behalf of all those who are served by your members, thank you for providing food for our tables, as well as trade and commerce in this country.
I'm curious about the conversations you're having with the next generation of farmers or with current farmers who are thinking about exiting the business. From the feedback you get, are people more or less interested in entering the farming business after these changes were implemented?
Officer at Large, Canadian Cattle Association
It's a concern for that next generation coming into farming because it's big dollars and big risk.
As I stated in my testimony earlier, the most important part of capital gains within farming is having that intergenerational transfer exemption. I can give you an example. My grandfather retired in the early 1990s. When he sold his farms, we used part of that intergenerational transfer to set me and my brother up. Currently, we're going to use that to bring the next generation in—two of my sons.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you very much.
I have a final question, because I'm going to be tight on time.
It was suggested that people who have corporations.... Maybe your farm is incorporated. You could just pull the money out and put it into an RRSP. However, what if your tractor goes down and you have to buy a million-dollar piece of machinery?
If you've pulled that money out of your corporate account, where would you get that from?
Officer at Large, Canadian Cattle Association
Normally, farmers don't invest in RRSPs because they put everything back into their land and equipment.
Conservative
Adam Chambers Conservative Simcoe North, ON
Okay. Thank you very much. That's perfect.
I have to move fairly quickly here, so I apologize.
Mr. Moody, there are some rumblings that the government might be considering a wealth tax. I'm curious. You have some experience with capital gains and some clients.
Have you had more people exploring leaving the country now after the capital gains tax? What would happen if they brought in a wealth tax?
Moodys LLP Tax Advisors, As an Individual
Thanks, Mr. Chambers.
I've written about this extensively in my weekly columns. The short answer is this: Things like a wealth tax, high personal tax rates and now the capital gains inclusion rate—despite some of the other witnesses' comments—have a significant impact on people leaving Canada. My office is just filled with cases that we're working on presently and has been for quite a while.
Conservative
Liberal
Julie Dzerowicz Liberal Davenport, ON
I have a point of order, Mr. Chair.
It seems like they have no more questions about the capital gains tax, so they have to invent a wealth tax that's not going to be introduced by our government.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Ms. Dzerowicz.
We are on capital gains. Let's be relevant, MP Chambers.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you, Mr. Chair.
I assume I'll get that time back.
It was with respect to whether you have seen more inquiries into your office since the capital gains tax has been introduced. If the government brings in a wealth tax, would it be even more?
I think that was a confirmation of yes, but, Mr. Moody, could you just give a yes or no for whether you've seen an increase in inquiries in your office?
Moodys LLP Tax Advisors, As an Individual
The short answer is yes. I've seen a significant increase.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you very much.
I'll note that maybe we could take it to the bank that a Liberal MP said there will be no wealth tax.
I'll pass it over to my colleague, Mr. Morantz.
Thank you, Mr. Chair.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Thank you, Mr. Chambers.
Mr. Chair, I had put a motion on notice that I'd like to move at this time. I'll read it into the record.
It states:
That, with regard to the provisions of Budget 2024 and the subsequent motion passed by the House of Commons regarding changes to certain provisions regarding the administration of capital gains and the provisions related to the taxation of capital gains earned by both individuals under the Income Tax Act and corporations (both publicly traded and Canadian-controlled private corporations) including but not limited to the increase in the inclusion rate from 50% to 66 2/3's %, the Department of Finance provide the following to the House of Commons Standing Committee of Finance on or before November 1, 2024:
A detailed written 'economic impact study' on the implementation of the aforesaid changes including:
a) a breakdown of the expected impact on private sector employment including jobs related to trades and construction;
b) an estimate of the anticipated new tax revenue expected;
c) a breakdown of the effect the changes will have on Canada's GDP both gross and per capita;
d) an analysis of the impact on the equity positions of publicly traded corporations with a specific focus on the direct impact on share value;
e) an estimate of the impact on the equity position of the Canada Pension Plan;
f) an estimate of the impact on investment in SMEs, start-ups and R&D including impact on scaling;
g) an analysis as to whether these changes will be a disincentive for the construction of purpose-built rental units and multi-unit housing projects.
I don't expect this motion will be particularly controversial, but it will certainly aid this committee in completing its study.