Finance Committee on May 2nd, 2022

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

Minister, I'd like to ask you a question on the luxury tax. You are familiar, I'm sure, with the law of unintended consequences, and many in the boat business, many in the aircraft business and many in the car business are saying that the law of unintended consequences is going to catch up to you on this luxury tax. It is a complicated tax. It's a tax on not only boats. It's a tax on not just aircraft. It's also on improvements made after the fact to those products.

So my question is this. There are serious fears that this is going to undermine the competitiveness of those industries. There are serious concerns that the timing and implementation of this tax are going to mean that contracts are going to be lost because many of these products are custom-made to a purchaser's specific requirements, and they are now starting to cancel contracts because the tax has been applied after the fact, after these contracts have actually been finalized.

Has Finance Canada done an assessment of the economic impacts this tax will have on the boat, car and aircraft manufacturing sectors in Canada, and if so, what did those assessments show?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

It's very interesting, Mr. Fast, to hear a Conservative criticism of the luxury tax. We have a very clear mandate from Canadians to introduce this tax. Our government first proposed it in the budget last year, and it was clear in the campaign that this was something we intended to do. I certainly found widespread support at the door for this measure, so I think Canadians would be very interested to hear that Conservatives oppose it.

This is an absolutely reasonable measure that ensures that everyone in Canada pays their fair share.

[Ed Fast, Conservative, Abbotsford, BC]

On a point of order, Mr. Chair, the minister has unfortunately misconstrued my comments. This was not a question about opposing this particular luxury tax—

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Point of order.

[Ed Fast, Conservative, Abbotsford, BC]

—but rather about the implementation of that tax. She knows that—

[The Chair, Liberal, Peter Fonseca]

There's another point of order.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

That was not a point of order, Chair.

[The Chair, Liberal, Peter Fonseca]

Yes, it was not a point of order.

We are moving now to the Liberals and MP Chatel for five minutes.

Go ahead, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Good morning, Deputy Prime Minister. Welcome to the committee.

We are witnessing a global economic transition to a greener digital economy. Some are even calling the next decade the "decade of action".

Would you please inform this committee about the government's measures to assist small and medium enterprises in making the transition to a green economy? I'm referring especially to small and medium enterprises in more rural areas. How will the government help them carve out a prime position in tomorrow's economy?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for your question.

Ms. Chatel, I want to thank you for your hard work on this committee and in your rural riding.

I completely agree with the two ideas you proposed in your question.

First, the green transition is of key importance for Canada and the entire world. Second, it's absolutely essential that we include the rural economy in that green transition, and the budget absolutely tends in that direction. I want to emphasize that much work remains to be done and that I'm eager to forge ahead with you.

I want to point out that a provision outlined on page 84 of the budget concerns the rural economy and the measures we're taking. We understand that there are special needs.

I'm going to talk about a few important measures, the first of which is the critical minerals strategy, which represents a $3.8 billion investment. It's important for the entire country, but especially for the rural communities. Furthermore, the decision to double the labour mobility tax deduction to $4,000 will be very effective in helping people move around the country. This is a very important decision concerning the labour shortage in rural communities.

There are a lot of other measures, but I'll stop there so you can ask another question, if you wish.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Deputy Prime Minister.

One of the very important aspects of the budget is investment in housing. As you know, the housing crisis is also raging in rural areas, not just urban areas.

We've been told there are many problems with the applications being made to certain existing programs. Announcements have been made through the budget, but I'd like to hear what you have to say about helping rural communities access government housing support.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for your question.

To begin with, I'd like to say that I agree with you that housing is a key issue for all Canadians, both in major cities such as Toronto, where I am today, and in rural communities.

It's an extraordinarily important challenge because Canada is a country that believes in population growth. Our country believes that immigration is an integral part of our society and of our economic growth plan. However, a country with a growing population has to build more houses. That's a fundamental challenge.

Certain measures will really help people living in rural communities. The tax-free first home savings account is very important for young families.

I also want to discuss a measure for creating strong rural communities. We're going to increase the maximum amount of forgivable Canada student loans by 50%, which means up to $30,000 in loan forgiveness for nurses and up to 60,000 for doctors working in rural communities. As you very well know, that's very important for young families that want to stay in rural communities and for seniors.

[The Chair, Liberal, Peter Fonseca]

Thank you very much, Ms. Chatel and Deputy Prime Minister.

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

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

Mr. Chair, my speaking time should be six minutes, since we're starting a new round.

[The Chair, Liberal, Peter Fonseca]

Oh, I was just moving, MP Ste-Marie, into the third round.

I was moving through the third round the same way, so I did provide five minutes to the Conservatives and five minutes to the Liberals, with a little bit of overrun—

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

With all due respect, Mr. Chair, I appeal your decision.

When a minister appears in committee to answer our questions, we traditionally start another round of questions in the second hour. I won't really have the time to address the issues of concern to me in two and a half minutes.

I appeal your decision, and I ask that all the members present be allowed five minutes.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

I am looking to the members, and yes, everybody is in agreement.

Okay. It's MP Ste-Marie for five to six minutes.

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

Thank you very much, Mr. Chair. I apologize for the inconvenience.

Good afternoon, Minister. Thank you for being here and for your presentation.

My team and I have begun to examine the budget implementation bill. It's very long and complex but contains a lot of interesting measures. So I see it as a positive.

As my speaking time is limited, even though it was just doubled, my questions will focus more on problems.

I'd like to have some clarification of what Mr. Fast said.

The Bloc Québécois agrees with the principle of the tax on certain luxury items. However, about an hour ago, the finance department representative confirmed that no study had been done on the potential impact this tax would have on the sales, jobs and revenues of the manufacturing sectors and thus on gross domestic product. We obviously condemn the fact that no study was done before the tax was introduced.

Now I would like to discuss more specifically the luxury tax that would apply to luxury aircraft. It wouldn't apply to an aircraft that's to be used for business but would if it were used for personal purposes. The entire aerospace industry in Canada and Quebec, as well as the Quebec business community, are up in arms because the bill, as drafted, raises many concerns and doubts about the application of this tax.

Those doubts and concerns may be summed up in two points. The first is the 90% threshold for business use. The second is the fact that the tax has to be paid on all manufactured items, including those that'll be exported.

I won't dwell on the first part, which concerns the 90% threshold.

This issue was raised by the industry. An hour ago, the department representatives told us that, when company A purchases an aircraft for business purposes, it will often assign management of that aircraft to company B when it's not using it, given the high cost of the aircraft. Company B then leases the aircraft to other clients, to business people. However, it may also lease it for personal purposes. The department representatives told us an hour ago that, when that aircraft is subleased for personal purposes, it falls within the 10% margin and isn't considered as being used for business.

Is that correct?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for your question.

We agree, as would nearly all Canadians, that a luxury tax is a good idea. The tax is fair and equitable. At the same time, it's important to support Canadian industries. The reality is that this is a new tax. It's very important to consider carefully all the details of its implementation.

I want to emphasize that the first return of the proposed luxury tax would not be due until the end of January 2023. I know your team and mine have previously discussed your detailed questions. We're also talking with the industry. We're absolutely prepared to continue the discussion to ensure the measures do what they're supposed to do. Everyone agrees on that.

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

Can you guarantee us that we and the industry will get the answers to our questions before we vote on the budget implementation bill? I'm referring in particular to the tax on imported items that will have to be paid in advance and to the application of the 90% threshold.

This is major point for us, for the industry and for Quebec's economy. For the moment, we have more questions than answers.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I can assure you we're aware of those two issues.

You mentioned the two most important ones. I've asked my officials to review the situation. We absolutely understand how important it is to continue the discussion with you and the industry.

I want to stress that we're absolutely convinced of the importance of this tax. It's a fair and equitable tax. During the election campaign, I found, as I hope you did as well, that Canadians understand the idea behind this tax. Since it's a new tax, it's important to clarify all the details. That's what we're going to do.

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

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

We are moving to the NDP and MP Blaikie for six minutes.

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

Thank you very much.

Minister, I want to follow up on a question having to do with the GIS clawbacks. I understand there is a small part of this bill that is meant to make some tweaks to help ensure that seniors aren't penalized for having availed themselves of pandemic benefits.

However, there isn't anything similar for working-age families who rely on the Canada child benefit, who have also experienced clawbacks of the CCB as a result of having taken CERB or other kinds of pandemic income support. I want to ask what your government's plan is to address those folks.

I've had meetings with parents who have been affected by that CCB clawback. One thing that's come out loud and clear from that group is that, unlike some of the seniors who were quite prepared to come forward and tell their stories, there are a lot of recipients of the Canada child benefit who are worried about telling their story. They're worried about the stigma and shame that can come with being a working-aged person who's been facing difficult circumstances and now having to ask for help. They've expressed concern about people their kids go to school with hearing about them and being made fun of on the playground if their parents are telling stories of hardship publicly. It's made it harder to make the issue a political issue for the government, because they haven't been willing to come forward and tell their stories. However, their suffering is no less real.

I'm asking you what the government's plan is to address families who have been affected by the Canada child benefit clawback.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you very much for the question, and thank you for your hard work and the collaboration. Thank you for pointing out the work we have done together on the GIS and seniors who received the CERB. I think there was a widespread consensus in Canada that our most vulnerable seniors were particularly hard hit by the pandemic, and the hardship it imposed and that this was an important action to take. We're glad to be following up on it.

This was something we were very clear about before tabling the budget. When it comes to further measures associated with pandemic support, it was very important in this budget to turn the page. It was very important to be clear that we had undertaken extraordinary spending during the pandemic. That was the right thing to do. It supported a lot of vulnerable people. We're also seeing that it was economically the right policy. We prevented scarring, and Canada's economy really has come roaring back.

It was also very important to make clear with this budget that the period of extraordinary pandemic support was over. We were facing a new set of economic challenges. I'm very sensitive—and you make a very strong point—about families and children and the inappropriate but real social shame that people may feel if they are poor. That's wrong, and I want to acknowledge that I'm grateful to you for making that point.

I will say this is a budget that believes in supporting working people. The Canada workers benefit will start to be delivered to people and will make a real difference.

Finally, I also want to point to the fact that unemployment today, at 5.3%, is at the lowest level it has been since comparable figures were collected. That is a real accomplishment of our whole country and supports working people very much.