Finance Committee on Feb. 14th, 2022

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay, so we're talking about millions of dollars—$2 million to $3 million—whereas an exemption, by its very essence, doesn't cost anything to administer.

How long will a farmer have to wait for the rebate versus the exemption?

I would appreciate the chair's leniency here with my time, as the officials were taking ample time.

[The Chair, Liberal, Peter Fonseca]

Sure, just a quick answer because we've reached the five minutes now.

[Maximilian Baylor]

Yes. In this case, it's done through the tax system, so when they file, they claim the credit. They would do the same for the exemption presumably.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I would just ask the chair for 20 more seconds, just to sum up here. As I said, some of the participants took a long time to answer.

Mr. Chair, if we compare an exemption to the rebate on the equity, on the recovery percentage, on the cost to administer and on the cost of borrowing, farmers are the losers. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Lawrence.

Okay, we are moving to the Liberals, and we have Ms. Dzerowicz, for five minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thanks so much, Mr. Chair.

I want to start off by saying thanks to all the officials for being here today and for their work on this very important legislation.

I'm actually going to start off with a statement from budget 2021 regarding the 1%, the reason behind the 1% tax on unused property within our municipalities by non-residents of Canada.

In the 2020 Fall Economic Statement, the government announced that it would take steps over the coming year to implement a national, tax-based measure targeting the unproductive use of domestic housing that is owned by non-resident, non-Canadians. This will help to ensure that foreign, non-resident owners, who simply use Canada as a place to passively store their wealth in housing, pay their fair share.

Also, in our Deputy Prime Minister's budget speech, she said:

Houses should not be passive investment vehicles for offshore money. They should be homes for Canadian families. Therefore, on January 1, 2022, our government will introduce Canada's first national tax on vacant property owned by non-resident non-Canadians.

I was little surprised, Mr. Chair, to hear officials indicating that the only reason for the 1% tax was actually just to raise revenue. I actually don't believe that that was the case, and I think that our Deputy Prime Minister and Minister of Finance has been very clear about the incentive behind that. I think it's very clear that in this country we have an affordability crisis. We also have a housing affordability crisis and an affordable housing crisis. As a result of that, our government is taking a number of measures, including this one, the 1% tax, in order to try to address this issue.

Saying that—and I don't know which official would be best able to respond to that—my understanding, based on the consultations that happened, is that there was an intention to exclude vacation properties from this tax. Can that be confirmed, please?

[Robert Ives]

I can take this one, Mr. Chair.

Yes, the government announced a proposed exemption for vacation properties in economic and fiscal update 2021. The details are still to be finalized, but the details of the announcement are on page 83 of the English version of the economic and fiscal update document and page 93 of the French version.

[Julie Dzerowicz, Liberal, Davenport, ON]

When you say that the details are yet to be finalized, many of us are asking questions because we're getting a lot of comments coming through, whether in telephone calls or emails, about this particular tax.

The types of emails I'm getting, Mr. Ives and all the other officials who are online, are about things like vacation properties that have been around for 100 years in people's families. They are not residences; they are not winterized, and they are obviously vacation properties, but some of them in some parts of the country fall just within what they could call the greater municipal lines. I wonder whether those are going to be taken into consideration as we tighten up the rules.

Is there someone who is able to comment on that?

[Robert Ives]

I'm happy to take the question, Mr. Chair.

The scope of the exemption, of any exemption from the tax, is for the government to decide. We provide advice to the government, and they can choose whether or not to take it. That's all I can really say about that.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

Please go ahead, Mr. Mercille.

[Pierre Mercille]

Because, as you said, the cottages are not winterized, the legislation already has an exception for residential properties that are not suitable for year-round use as a place of residence. That's just to address that small comment you made.

[Julie Dzerowicz, Liberal, Davenport, ON]

That's actually extremely helpful, Mr. Mercille, so thank you so much for that.

How many minutes do I have left, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

You have a minute, Ms. Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

My last question is about rapid testing.

I know Bill C-8 will provide an additional $1.72 billion to the Ministry of Health for the procurement and distribution of rapid tests to provinces and territories.

My question is what accountability mechanisms are there to report back to the federal government about where those rapid tests are actually being distributed?

[Cameron MacDonald, Assistant Deputy Minister, Strategy, Integration and Data, COVID-19 Testing Secretariat, Department of Health]

Hi there.

In terms of accountability measures, there is a reporting system, a cycle of reporting that PTs have provided to the federal government.

As of January, as you would be aware, the level of tests being procured and shipped to provinces has accelerated greatly, and we've been moving our reporting processes with PTs from what I'll call usability towards deployment. We're trying to get better access and visibility into where they're deploying these tests and where they're using them, rather than getting usage results. As you would know, the testing packages come in different sizes, but to get results of each test is not feasible.

[Julie Dzerowicz, Liberal, Davenport, ON]

Just to be clear—

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

—I'm not looking for the results; it's more about where they are distributing them—to the private sector, to the public sector, to schools, to hospitals or to businesses. Do we get that type of accountability back to the federal level?

[The Chair, Liberal, Peter Fonseca]

Just answer yes or no, please.

[Cameron MacDonald]

Yes.

[The Chair, Liberal, Peter Fonseca]

Okay. Thank you, MP Dzerowicz.

We are moving to the Bloc and MP Ste-Marie for two and a half minutes.

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

First, I have a point of order, Mr. Chair.

During the questions that my esteemed colleague Mr. Lawrence asked, the interpreters informed us that the sound quality during Lindsay Gwyer's testimony wasn't good enough for accurate interpretation. It might be helpful to test the sound before Ms. Gwyer has to answer any further questions.

I wanted to bring that your attention.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

I agree wholeheartedly. I did also have a little difficulty hearing Ms. Gwyer.

I believe we had some challenges. We do have 16 officials with us and in terms of sound testing—I'll stop the time on this—we went with the officials who were making opening remarks.

We will look to fix this for the next time.

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

All right.

First, I want to thank Mr. King for his explanations in response to my previous questions. They were very instructive.

I'm still on part 2 of the bill, more specifically the amount of the tax, which is equal to 1% of the value of the residential property. I agree with Ms. Dzerowicz. The aim of a tax is indeed to collect revenue, but it's also to modify behaviour. That's what we understood from the Minister of Finance's remarks.

This is similar to the idea advanced by economist Arthur Pigou, after whom Pigovian taxes are named. Why are tobacco and alcohol taxed at higher rates? To encourage people to buy smaller quantities of those products, given their associated negative externalities. That's how this tax should be interpreted based on the analysis.

I have a question on that subject for Mr. King, Mr. Mercille, Mr. Ives or anyone else who can answer it.

Do you have projections, analyses and evaluations at the department to help you determine whether this tax, which would be equal to 1% of the value of the property, would help curb rising real estate prices in certain regions, the purchase of properties by foreign interests and rising rents?

I'd like to know if you've evaluated that and, if so, what results you've reached. What causal links have you established?

[Phil King]

Thank you. I'll take this question.

I'll make one remark, first, on the nature of the tax. To be a tax, the primary purpose of an instrument has to be to raise revenues. That is the primary purpose of the unused housing tax. It's not the only purpose but it's the main thing. It has a secondary purpose of potentially encouraging people who are holding unused real estate assets to put them on the market.

In terms of the rate itself, I note that this was what the department was tasked with doing by the government. I understand it was an election commitment at some point. I forget which election, one of the last two. We were asked to design a tax with a rate of 1%, and that's the work we have done.