Finance Committee on Nov. 7th, 2024

[Dr. Terry Rock]

They wouldn't, unless they get to 5%, in which case that's the.... That doesn't happen very often.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Kelly.

Now we'll go to PS Bendayan.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Mr. Chair.

It's always a pleasure to welcome the experts from HEC Montréal, an institution located in the riding I represent.

Professor Pineau, in their haste to do away with climate action-friendly policies, the Conservatives say that the pollution tax must be eliminated. One of their arguments is that this tax makes gas more expensive. However, you recently said something very interesting, that it was likely consumers wouldn't see a significant drop in the price at the pump even if the carbon tax is eliminated. Can you explain that?

[Pierre-Olivier Pineau]

Domestically and internationally, we're seeing massive fluctuations in gas prices from week to week, based on a set of geopolitical and sometimes local factors. Carbon pricing is completely invisible and very minor compared to the fluctuations that can occur when the price of a barrel of oil goes up $5 or $10. So the price of carbon is drowned out by international fluctuations.

I very clearly point out in the brief I submitted that we are an increasingly wealthy society. Generally speaking, that level of income prevents us from noticing the small differences that can be attributed to—

[Rachel Bendayan, Liberal, Outremont, QC]

I appreciate that.

You also told Radio-Canada in March that scrapping carbon pricing would make Canadians poorer.

[Pierre-Olivier Pineau]

There are two elements to that.

First, Canadians will no longer receive the cheque that the government sends to those living in the provinces paying the carbon tax. Then there's a dynamic aspect: Canadians will adjust less and be less likely to adopt modes of transportation that use less gas; they will keep vehicles that are too big and too heavy, create traffic congestion and use too much gas. However, if we give them an incentive, they will save money by using cheaper modes of transportation.

[Rachel Bendayan, Liberal, Outremont, QC]

Right now, there's a bill supported by the NDP, the Bloc Québécois and the Conservatives that seeks to make farming machinery and farm fuels exempt from carbon pricing. As you may know, Équiterre is also in my riding and has opposed the bill, claiming that it would create a significant gap in the carbon pricing system. What do you think?

[Pierre-Olivier Pineau]

The goal is to have carbon pricing that covers as many sectors as possible. So we mustn't grant exemptions, but rather begin to expand carbon pricing to sectors that are not yet subject to it. In other words, we have move in the other direction. There's a climate crisis, and we know what we need to do. We have technologies that make it possible to do things better. We have to help farmers, among others, to change how they do things, but we mustn't remove the incentives that lead them to do things differently and do better. Above all, we have to focus on the need to do better.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you, Professor Pineau.

I have a question about live music.

Erin, it was a pleasure to speak to you briefly about the issue of La Tulipe in Montreal. I represent the Mile End and the Plateau. As you probably know, La Tulipe is there, but so are many independent live music venues on “The Main” on Saint-Laurent and on Saint-Denis.

Perhaps you could talk a bit about our smaller venues and the importance of maintaining them, both for the quality of life that residents enjoy when we have access to them and from a business perspective and a tourism perspective.

[Erin Benjamin]

Thank you so much for that excellent question. I appreciate it.

It's very interesting hearing my colleagues from other sectors talk about the incubation required to build and sustain an industry, and live music is absolutely no different. Those clubs are where it happens for live music. When you're an artist, when your kid takes violin lessons and they end up playing in a band, that is where they're performing. That is where they're growing their audience. That is where they're starting to take the first steps towards stardom, and that is where every amazing Canadian artist you have ever heard of started: in a small club in a city or a town somewhere in Canada.

We think that live music venues are just going to be there. The pandemic quickly proved that was simply not the case. As I said, it's a business with very razor-thin margins, so we are paying very close attention to their health, sustainability and capacity because of their interconnectedness to the rest of the ecosystem.

We think of small live music venues as venue ladders. There are small, medium and large venues where artists can slowly grow their careers. These incubator, grassroots, independent small clubs are fundamental to that experience for the artist and then to the tourism piece, obviously attracting folks to come to a neighbourhood to enjoy a show, to discover a new act, to have dinner in the neighbourhood and so on.

[Rachel Bendayan, Liberal, Outremont, QC]

One last question—

[The Chair, Liberal, Peter Fonseca]

I'm sorry, Ms. Bendayan; we're out of time.

We're moving to our third round now, members, and we start with MP Hallan.

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

Thanks, Chair.

To Mr. Clarke, Canada is in a break-glass productivity crisis, according to the Bank of Canada. We've seen investments, businesses, jobs and talent leaking at quite an alarming rate to the U.S. In fact, somewhere around half a trillion dollars of investment went from Canada to the U.S., and just recently there was some news that even Brookfield, whose head is carbon tax Carney, has packed up and is looking to move to the U.S. now.

What does this increase in the capital gains tax do for businesses when they're looking to scale up? Does it disincentivize them to want to scale up in Canada versus the U.S.?

[David Clarke]

I would say from our perspective that it's really about risk versus reward, and these are risky investments when you're talking about scale-up companies. When you change the reward structure, when you change the rewards available at the end of the investment, it makes it that much riskier to do. In that way, it would disincentivize those types of investments.

With regard to the carve-outs for entrepreneurs, in most cases, as we've heard, those don't apply to outside investors in those companies, so they would end up paying typically more capital gains tax at the end of the day.

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

It would be more of an incentive to go where there's more of a reward for the risk that you take. In this case, it would be the U.S., compared to Canada, because of this increase in the capital gains tax rate. Is that correct?

[David Clarke]

It could be. I mean, it could be any number of places.

I would say that's really what's at the core of our recommendation here: Leave the cottages alone or, if you really want to tax them, go ahead, but you could really focus on keeping the rate on Canadians investing in Canadian companies the same or even lowering it, and it works in that incentive structure.

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

Mr. Rock, the same question goes to you in regard to the the companies that you deal with.

[Dr. Terry Rock]

Yes, the incentive structure is aligned that way.

I think that we have to look at all of it: availability of talent, availability of capital and availability of customers. When our ecosystem is incented for growth, all of those things come into alignment. I believe that we're putting friction in right now and causing people to look elsewhere.

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

Mr. Rock, concerning the companies that you deal with, would you say that the ones that are impacted the most with this capital gains tax hike are categorized as ultrawealthy?

[Dr. Terry Rock]

No, they are not. These are a lot of people who, honestly, are sometimes very young. They're just getting started. A few of them are people who are on their second or third try, but the vast majority in a place with high growth like Calgary are people who are going at it for the first time.

No, they are not. These are ordinary people. They're your neighbours.

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

Then they're not this magical 0.13% that the government keeps claiming. They don't fall under that category. Is that correct?

[Dr. Terry Rock]

They don't. Some investors would, and I want to be clear about that.

We are most concerned here with the ripple effects. If those investors are disincentivized, all this other part gets swept up in that, and that's where we're seeing a lot of friction.

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

How about you, Mr. Clarke? Would you say they fall in the ultrawealthy category?

[David Clarke]

What I would add here is that the vast majority of investors in the venture companies I've been talking about today are retail investors. They're average people saving for their retirement, by and large.

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

Again, they would not fall in the magical 0.13%, in your opinion.