Finance Committee on Feb. 10th, 2022

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

I just want to start by thanking all of our witnesses for joining us here today.

I'm going to direct most of my questions to Mr. Cochrane from Canadians for Tax Fairness.

Mr. Cochrane, I think you alluded to this in your opening statement, but I wanted to circle back. One of the justifications that we hear for the large cut in the corporate tax rate over the last 20 years is that it would incent investment in productivity.

What are some of the metrics that one would look to in order to be able to evaluate that, and how has Canada performed according to those metrics?

[Dr. D.T. Cochrane]

There are a lot of different ways to measure this.

We put out a report recently looking at corporate taxes as a share of revenue. In that report, we make the point that the cuts haven't led to investment. We looked at the machinery, equipment and intellectual property assets as a share of total assets of non-financial corporations. At the same time as taxes were being cut and profit margins were rising, those shares were falling. Corporations are putting that money to all other sorts of uses, most of which don't produce the growth and jobs that they're supposed to.

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

When those larger corporations aren't reinvesting the revenue that they get through corporate tax breaks, who picks up the tab for that, then? Who's left holding the bag?

[Dr. D.T. Cochrane]

A lot of the productivity gains that we probably could achieve if we were investing in innovation just simply aren't happening. A lot of the economic activity that could be there, isn't. We could have government funding the types of jobs we actually want. We've been told for so long that we need to just leave this to the market and to the private sector. That's gotten us where we currently are. We know massive changes need to happen, but we aren't taking the steps needed to do that—which is proper public investment in the type of economy we actually want.

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

You talked also about the housing market, which is a preoccupation of the committee right now, and rightly so. You talked about special tax treatment for REITs and about the low inclusion rate for the capital gains tax.

I'm wondering if you could speak a little bit to how that's contributed to the financialization in the housing market and why Canadians should be concerned about that effect.

[Dr. D.T. Cochrane]

Any time you give any kind of preferential tax treatment to some segment of the corporations, capital will move into that segment. That provides funds to the REITs to start buying up the housing stock.

With ultra-low interest rates, the total cost of purchasing a home hasn't gone up that much. What has become the huge barrier is the massive down payment that a lot of people just can't afford. But for these corporations, getting over that hurdle is really no problem. They have just a much easier time gobbling up and privatizing our housing stock and a lot of our other forms of real estate, which they can then use to further leverage to get more loans to further expand the assets. They think of these houses as assets when what we want them to be is homes.

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

How long have these special tax measures been in place for real estate investment trusts?

[Dr. D.T. Cochrane]

I don't know the beginning date. My knowledge is mostly at a time when the entire government recognized, oh, this special trust treatment is a huge problem and we need to eliminate it. It was eliminated everywhere except for real estate, for some unknown reason. It's not talked about enough, the way the failure to eliminate that special treatment has affected our housing market, even though everyone is concerned about our housing market.

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

Not that long ago, the Parliamentary Budget Officer released a report indicating that Canada is now in a position where 1% of the population owns and controls 25% of the entire wealth created in Canada. It's been a long time since we've been in that position, where so few people have owned so much of the wealth. I believe you mentioned a wealth tax in your opening statement. Of course, the NDP has proposed such a tax. Other jurisdictions are seriously looking at implementing a wealth tax and have advocates in those jurisdictions.

I wonder if you could speak a little bit to what a wealth tax is and why it's important to tax wealth as opposed to income when we talk about Canada's wealthiest people.

[Dr. D.T. Cochrane]

An income tax is a tax on a flow. That's the money that's moving into people's accounts. A wealth tax is a tax on a stock. The wealth tax that has been proposed would really affect the 1% of the 1% but generate tens of billions of dollars in revenue. That in and of itself wouldn't reduce inequality that much, but where you could start reducing inequality with those funds would be by providing greater supports at the bottom of the hierarchy.

A wealth tax is a way to get wealth that has become locked into the accounts of the ultra-wealthy moving through the economy again. Our financial assets are supposed to do good for us by moving through the economy. Instead, they get stuck, and that contributes to the excessive power of the ultra-wealthy.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie. That is the time.

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

Thank you.

[The Chair, Liberal, Peter Fonseca]

We are moving into our second round, members, starting with the Conservatives.

Mr. Stewart, you're up for five minutes.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

My questions are for Manny Jules and the First Nations Tax Commission.

Manny, you always gave me solid advice when I was Minister of Aboriginal Affairs in New Brunswick. I always looked forward to our conversations. Today I have a few questions for you.

I'm very happy to hear how successful the First Nations Fiscal Management Act has been for the many first nations across Canada who are scheduled in that act. I know that my party has been a strong supporter of the FMA and the work of the FMA institutions from day one.

What specific recommendations does the First Nations Tax Commission have for this committee to make in its report?

[Clarence T. (Manny) Jules]

Thank you for that, Jake.

I have six recommendations. The first is that the government amend the First Nations Fiscal Management Act to create a first nations infrastructure institute.

Recommendation two is that the government amend the First Nations Fiscal Management Act to enhance the mandates of the FMA institutions created by that act, support the publication of more FMA statistical information and provide statutory funding for these institutions.

Recommendation three is that the government support the inclusion of the sales tax on fuel, alcohol, cannabis and tobacco—the FACT tax announced in the budget—as a new fiscal power under the FMA.

Recommendation four is that the government utilize and enhance the FMA framework with the inclusion of the first nations infrastructure institute to support the monetization of major capital transfers and an improved risk management framework to lower insurance premiums for interested indigenous nations.

Recommendation five is that the government continue to support the evolution of a revenue-based federal-provincial fiscal relationship by expanding the first nations fiscal powers within the FMA for first nations goods and services sales tax; and other cannabis, tobacco, fuel and alcohol taxes. As the young lady mentioned, I think we need a first nations resource charge to help further develop this country.

Finally, we recommend that the government support the development of an indigenous land title and registry system framework for additions to reserve, as advanced by the First Nations Land Management Resource Centre.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Manny.

You are proposing to expand the successful FMA legislation that provides an effective jurisdictional option for interested first nations, away from the Indian Act, supported by indigenous institutions.

This framework has generated more economic growth, more first nations public revenues, passed more first nations laws, certified more first nations financial frameworks and it has also generated more access to capital than any other first nation legislation in the history of this country. That is a very impressive record and resumé.

The First Nations Fiscal Management Act was supported unanimously in 2005, I believe, as well.

When do you think these legislative proposals will be brought forward?

[Clarence T. (Manny) Jules]

We're working with government right now on these proposed amendments. I urge this committee to include my recommendations to support these amendments in your report this year, and perhaps we could get it into the budget implementation act. We need to implement these changes now.

As you see how impatient Canadians are after two years of COVID restrictions, we've had 150 years of this, so please don't delay on our options. You're in a position to help first nations right across this country.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Manny.

I have one final question, and I appreciate your answers, as always.

You spoke of the large and growing infrastructure gap, and you touched on it briefly in your presentation. How will the proposed first nation infrastructure institute help close this gap, and how can government or the committee help?

[Clarence T. (Manny) Jules]

There is at least $30 billion in an infrastructure gap. This won't be closed with a program. It must be closed with sufficient fiscal powers to maintain the infrastructure. It must be closed by providing the necessary capacity support to raise infrastructure standards. It must be closed by better financing, construction, operations and maintenance.

To close these gaps, we propose amendments, especially by setting up the first nations infrastructure institute, with better access to capital and lower insurance premiums for interested first nations.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, Mr. Stewart. That is your time.

We are moving to the Liberals and to Ms. Dzerowicz, for five minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thanks so much, Mr. Chair.

I want to thank all the witnesses for their excellent presentations today.

If we don't get around to asking some of you or one of you questions, know that your presentations and your recommendations have been recorded.

My first couple of questions are going to the Great Lakes Fishery Commission.

Sometimes we forget just how important the Great Lakes are, so it's really great that you are here today. This is an exceptionally important body of water for us to be very concerned about, with 20% of the world's fresh water, with its important aquatic ecosystem and wildlife, and the jobs, industry and tourism it supports.

Can you just be very clear with this committee? What is your ask of budget 2022?

[Robert Lambe, Executive Secretary, Great Lakes Fishery Commission]

Thank you for your question.

Our ask is actually for $19.44 million. That would close the gap between what we need to deliver the programs that were designed to fulfill the mandate as outlined within the convention or the treaty under which we were formed. The $19.44 million would close the gap of $8.84 million that currently exists. That's the ask.

I should point out that these programs are developed from the ground up. We develop the programs with the mandate in mind and we cost the programs, and then the programs are apportioned to each country in concert with the treaty agreement as to how each country would contribute.

The U.S. has met its obligation in fulfilling those programs as they have been costed, but there is a gap in Canada, and the U.S. for quite some time now has been subsidizing that gap. After years of that subsidy, however, we now see that subsidy going away for various reasons in the United States.

This is why we're sort of at a critical point right now. There is no surplus in our budget, so as that subsidy goes away, that gap is really critically important, or else the programs have to be curtailed, which would be devastating to us.

Bear in mind that these—

[Julie Dzerowicz, Liberal, Davenport, ON]

Can I just ask my second question? I think you're getting ahead of me a little bit, Mr. Lambe.

I think you're starting to get on to this. What happens if Canada does not provide these funds and continues to underfund the commitment we currently have to the Great Lakes Fishery Commission? What would be the impact on the Great Lakes?

[Robert Lambe]

The impact is that the programs would have to be curtailed. I'll give a couple of examples of the devastation that would create.

We would have to really cut back on the delivery of sea lamprey control in Canada. The other biggest impact is that the research that really drives fishery management decision-making would have to be significantly curtailed as well, simply because we wouldn't have funding for that any more.

To address this gap, we're looking to be able to, for the most part, continue the programming we have right now, to be able deliver the objectives and the results that are required based on the mandate.

The point I was going to make about lamprey is that they rebound very quickly. They're like a coiled spring. You take your hand off the spring and they recoil and rebound very quickly, as we've seen twice during the last 30 years or so. If we were to curtail the programs, then we would see a quick rebounding of the lamprey population, and each lamprey kills 18 kilograms of fish during its 18-month to two-year cycle in its parasitic phase.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Mr. Lambe. I'm sorry, I do have to go on to one more question and one more questioner—