Finance Committee on Feb. 14th, 2022

[Greg McLean, Conservative, Calgary Centre, AB]

With due respect, the right hand has to know what the left hand is doing in the federal bureaucracy.

Can you please figure out how much money we're going to lose to foreign jurisdictions because of a jurisdictional overstep that we're making in this legislation?

I'll move on here.

We are talking about effectively building taxes. There are seven parts in here, one of which, of course, is this overstep in taxing. We do have a housing crisis in Canada. Is there a better way to approach that housing crisis and address the foreign buyers here, which might be better money-laundering laws, that you can implement to finance?

Is that a possibility you would consider?

[The Chair, Liberal, Peter Fonseca]

MP McLean, maybe you could direct the question to someone else.

Mr. King may want to answer.

[Phil King]

Yes, I'm happy to answer questions about Bill C-8 and the contents of the bill, and none of that is in the current bill.

Thank you, Mr. Chair.

[Greg McLean, Conservative, Calgary Centre, AB]

You're right, that isn't in the bill.

What is in the bill is an ineffective approach to Canadians' losing a whole bunch of money on their properties in foreign jurisdictions with very little impact. You're suggesting $750 million over five years. I'm trying to understand a little more clearly what your end outcome is here, because right now, again, it's seems like virtue signalling that's accomplishing nothing in Canada but costing Canadians a whole bunch of money.

I will yield the rest of my time to the next speaker.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. McLean.

We are moving to the Liberals with Mr. Baker for six minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Mr. Chair.

Thank you to all of our witnesses who are here today.

I would also like to speak about the vacancy tax or the underused housing tax.

Could one of our officials speak to the purpose of this measure?

[Phil King]

Very simply, the idea is to raise some revenues from non-resident non-Canadians who may be holding real estate in Canada where that real estate is underused. It's a tax, pure and simple.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Mr. King, I'll ask you to expand on that, if you can.

Why do we want to do that?

[Phil King]

It's to raise revenues.

I think the government's stated objective, if I recall, is to help fund some of the other programs in general, but perhaps programs more aimed at the housing situation in Canada. Fundamentally, it's just a tax to raise revenues.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

One thing that Mr. McLean spoke to just a moment ago in his questioning of you was about—I know you can't answer and I'm not going to ask you to—the issue of what other jurisdictions might do that. I think that's highly speculative, but it's certainly a question that can be put to the right folks in government. I think it's too early to speculate on what other countries might do or how they might react, if at all.

Going back to you, Mr. King, one of the things I want to talk about is the enforcement of this.

Can you talk about who this vacancy tax would apply to, for instance, individuals, corporations or both, etc.?

[Phil King]

Yes, it would be.

In fact, I might ask my colleague, Rob Ives, who is also on the line, to answer that question.

[Robert Ives, Senior Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance]

Mr. Chair, this tax applies to any person who is the owner of residential property in Canada consisting of three or fewer units. It would apply to both individuals and entities that may own residential property.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you.

Further to that, how are we thinking about making sure that folks who are owners disclose?

If they're non-residents, I don't know, but I suspect that a large number of these folks wouldn't necessarily pay taxes in Canada on a normal basis nor would be filing with CRA or something like that. How do we make sure that everyone provides the information needed so that you can enforce the measure?

[Robert Ives]

Mr. Chair, this regime is a self-assessment regime. Individuals and entities that own residential property that are not excluded under the statute are required to make that annual declaration every year.

If the annual declaration is not made, there is a penalty regime that applies under the legislation. Later on down the line, if a time comes when a non-resident who hasn't complied with the filing requirements attempts to dispose of the residential property, they would be subject to rules under the Income Tax Act that currently apply on the disposition by a non-resident.

A compliance mechanism that applies to things like capital gains would also be utilized here for ensuring compliance under the underused housing tax.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Chair, do I have about a minute and a half?

[The Chair, Liberal, Peter Fonseca]

That is correct.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Briefly, Mr. Ives, Mr. King or whoever can answer this, how would the value of the property be determined in that situation?

When someone files, would they disclose the value of the property? How would that be determined?

[Robert Ives]

Mr. Chair, the tax applies to the greater of the most recent sales price or the assessed value used for municipal taxation purposes. Those amounts would need to be reported in the annual filing.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you very much.

My last point is just a comment, not a question.

When I asked about the purpose of this act, Mr. King talked about raising taxes and how that would presumably help fund some of the housing programs the government is trying to put in place to help address the housing crisis people are facing. I certainly agree with that.

The other point I will make is that, clearly, putting in place a tax on vacant properties owned by non-residents would incent non-residents to make sure that their properties weren't vacant, which I suspect will help address the supply problem we've heard about in this committee in terms of housing. Presumably, this would help increase the supply of housing that is out there, which of course would address the skyrocketing prices of housing.

I thank you all for your time today.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

Now we're moving to the Bloc with MP Ste-Marie.

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

Thank you, Mr. Chair.

First, I want to greet all the officials and thank them for taking part in this meeting of the committee. We're grateful to them for doing so.

I won't be very original here because my first questions will be about part 2 of the bill.

Does the federal government currently collect other property taxes, or is this the first one?

Mr. King, Mr. Mercille or Mr. Ives, can one of you or someone else answer me?

[Pierre Mercille]

I can't give you a definitive answer on that because we're here to discuss Bill C‑8, not anything else.

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

As far as you know, Mr. Mercille, does the federal government collect property taxes?

[Pierre Mercille]

Not to my knowledge, but that's not part of my expertise.

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

I see.

I'd like the departmental representatives to give the committee an answer on this point because, as far as I know, this would be a first.

Let me be clear here. We of the Bloc québecois agree on the essential points of Bill C‑8. We're obviously very sensitive to the issue of soaring real estate prices because we believe that foreign buyers may be playing a role in this inflationary trend.

Consequently, we welcome the measures the government is taking to rein in soaring prices. On the other hand, we're very much concerned about the fact that, to our knowledge, this is the first time the federal government has ventured into the property tax field, the last tax field where Ottawa had no presence.

Allow me to explain. The municipalities currently occupy this field in Quebec, which means it's indirectly the prerogative of the provinces. When the federal government begins to occupy a new tax field, even temporarily and for a good reason, our concern is that it might not withdraw once the measure has been introduced, even on an exceptional basis, and that it may develop an ongoing liking for that field.

We know that was the case with the personal and corporate income taxes during the two world wars. Those measures were supposed to raise money and be temporary, but the federal government subsequently continued collecting those taxes. We also know that the municipalities have serious problems with their tax receipts and are facing major challenges. If they had to share this tax field with the federal government in future, their resources would be further limited within 5 or 10 years. This is a major concern for us.

So my question was going to be about that, Mr. Mercille. We think this is a first, and it troubles us.

However, I'd like to go back to the decision that was made to set the percentage of the value of the residential property concerned at 1%. What were the reasons for choosing 1% rather than 0.5% or 2%?

That question is for anyone who can answer it.