Thank you, Mr. Chair.
I would like to start by thanking the members of the committee for inviting me today.
I will keep my remarks brief, focusing only on the underused housing tax.
Let me be clear. I am not criticizing the appropriateness of the policy measure. In the midst of a housing crisis, with prices soaring, the measure is probably a good idea. As a citizen, at least, I see it as a good idea. As a public law professor, I don't have the expertise to say whether the measure can be effective.
However, being a good idea is not an excuse to flout our constitutional principles. From the Charter of Rights and Freedoms to the division of powers, the spirit and letter of the Constitution must be respected. Without the prior consultation of the provinces or an agreement with them—in other words, without some legal due diligence—this good idea has vulnerabilities.
It is clear that the pith and substance of the measure involve the regulation of housing law, and there is no doubt that the provinces have exclusive jurisdiction over housing when it comes to private law, specifically, property and civil law and, generally, in relation to social policies and local affairs.
To overcome that obstacle, to find a way around the division of powers set out in the Canadian Constitution, the drafters of the bill have endeavoured to disguise a regulatory measure—one intended to penalize certain housing practices—as a tax, a new tax. With this tax, the federal government is, for the first time in the history of Confederation, at least, to my knowledge, encroaching on a form of taxation thus far left, and rightly so, in the hands of local authorities at the municipal and provincial levels. I am referring to the property tax.
I see two possible scenarios. The first is to frame the measure as a way of regulating housing law, which would likely make the measure unconstitutional because it goes beyond the jurisdiction of Parliament.
In other words, the bill is obviously and directly linked to the housing law. Therefore, the bill is unconstitutional. The essential character of the bill, its pith and substance, is provincial.
That is the most logical way of framing the measure. Ultimately, only the courts can confirm that interpretation of the situation, after the fact, and if they do, it will automatically lead to the nullity of the measure.
Otherwise, the second scenario, or possible interpretation, is to conceal the true character of the measure behind the tax penalty associated with this federal regulation of housing law. To do so would be to claim that this is merely a tax, setting a dangerous precedent. Introduced without the benefit of co‑operative federalism, the measure would likely upset the delicate fiscal balance of the Canadian federation.
In other words, if the bill is interpreted as a new tax, the bill will be unfair. Without negotiations and the co-operation with the provinces, a federal property tax compromises our fiscal balance. Since Confederation, the property tax has been a local and provincial tool. It's not a good idea to borrow this tool from local authorities.
In short, if co‑operative federalism means anything, the very least the government can do is consult the provinces and negotiate agreements to implement this policy, in keeping with the spirit and letter of the Constitution. The co‑operative mechanism should not, for that matter, allow the federal government to exert any authority over property tax.
To be sure, Canadian federalism involves competition over taxation. The federal government has the right to use all fiscal tools, but the measure in question would genuinely have to be a tax.
It's not enough to call it a tax for the courts to believe it. In all cases, federal authorities must act with a minimum of co‑operation to give every partner in Confederation the necessary and appropriate fiscal space to do what it needs to do.
History has taught us that, once the federal government enters into a taxation arena, it never leaves. During the First World War, the corporate income tax that was introduced was supposed to be temporary. During the Second World War, the personal income tax, warranted under the exceptional circumstances at the time, was also supposed to be temporary. Ultimately, when the government levies a form of taxation, it has a hard time rolling it back.
In conclusion, property taxation is a highly valuable tool, not just for the provinces, but also for local authorities under provincial jurisdiction, so school boards and municipalities.
The fiscal balance within the Canadian federation is already extremely delicate, but will grow more so in the years ahead. Federal underfunding of health care, coupled with skyrocketing needs and backlogs caused by the COVID‑19 pandemic, will put a significant strain on provinces' financial resources. This is not the time to borrow from their fiscal tool box.
Under federalism, the exclusive jurisdiction of the provinces over housing is supposed to be respected and the obligation of co‑operation among the partners in Confederation is supposed to be fulfilled, especially in the area of taxation. There are many ways to solve the problem. It might seem as though they require more time and negotiation, but that is always preferable to a court decision repealing the measure after the fact.
In its current form, the bill has legal vulnerabilities. Even if the courts were to deem it valid, it would likely stifle, or compete with, the very modest fiscal capacity of municipalities and school boards, not to mention provinces.
Thank you.