Finance Committee on May 2nd, 2022

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I think I have about a minute left.

This is a question written to our folks at Global Affairs whom I believe are represented here today.

In the act, there is a measure that would allow Canada to seize and cause forfeiture and disposal of assets held by sanctioned people and entities.

Do we know approximately what the value is of the assets that are held by those people and entities sanctioned by Canada because of their support for Russia's invasion of Ukraine?

[Isabelle Jacques, Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

I do not have those numbers, but I will turn to colleagues from Global Affairs. They may be able to provide additional comments on this.

[Dr. Lynn McDonald, Director General, International Economic Policy, Department of Foreign Affairs, Trade and Development]

Good morning. I hope you can hear me. My name is Lynn McDonald, director general of international economic policy at Global Affairs Canada.

In fact, those numbers are disclosed to the RCMP. We are not in possession of the latest figures, but those would be disclosed by Canadians' financial institutions and others as a result of the dealings prohibition of SEMA, and they would be directed to the RCMP, whom I understand keep a careful up-to-date record of the latest information in that regard.

Unfortunately, I'm not in a position to disclose that information because we may not have the most recent figures.

[The Chair, Liberal, Peter Fonseca]

That's the time we have.

Now we will have questions from the Bloc.

MP Ste-Marie, the floor is yours for six minutes.

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

Thank you, Mr. Chair.

Good morning, everyone.

Thanks to all the officials for being here.

My first questions are for the people from the Department of Finance and concern the new tax on certain luxury items such as motor vehicles, aircraft and boats.

First, I would like to know whether the department has assessed the economic impact the creation of this tax will have on Canada's manufacturing sector. What effect will the tax have on turnover and sales? Will there be job losses?

[Miodrag Jovanovic]

We haven't done that type of assessment. However, the government has conducted an exhaustive consultation of the sector to ensure it minimizes the impact the tax will have on the private sector.

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

Thank you for that answer, even though I find it really disturbing.

We agree on the objectives because they're noble. However, a 20% tax can have a significant impact on many jobs, on many segments of the industry. I find it appalling the government hasn't done an assessment. I think it's unacceptable.

My second question is also for the departmental representatives.

Apart from the tax, do you know any other ways to achieve the same goals without putting so much pressure on jobs and economic activity in the crucial manufacturing sector?

[Miodrag Jovanovic]

The tax was designed to have marginal impact on vehicles sold at very high prices.

I have nothing more to say on that question.

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

All right, thank you.

Now I'm going to be more specific.

The entire aerospace industry in Quebec and Canada, as well as the Quebec business community, really seem to be up in arms here.

With respect to the interpretation and application of the tax, there's considerable concern and uncertainty about the aircraft that will be exported and about the part concerning personal use relative to business use, which is fixed at 90%.

I addressed this point several times during the briefings on the notice of ways and means motion. The industry is still up in arms, and we have to get some answers and clarification on the application of this tax. As regards the 90% threshold, I was told many times during the briefings that it would depend on how the Canada Revenue Agency interprets it.

I'll repeat the examples I was given. I'd like to know whether the Department of Finance or the CRA can answer these questions. We have to get some clarification before we vote on the bill.

The business use threshold is currently set at 90%.

Let's say a business, which I'll call company A, purchases an aircraft for business use. When the aircraft isn't used by the business, it's leased to a charter flight business, which I'll call company B. Now let's imagine that company B leases that aircraft for personal use.

Can the officials at this meeting tell me whether that aircraft is considered as being used for personal or business purposes, given that company B subleased the aircraft to be used for personal purposes?

[Miodrag Jovanovic]

If the aircraft is used for personal purposes, the flight hours won't be included in the 90%. The purchaser's essentially responsible for ensuring, in the contracts, that the use of the aircraft is eligible and that the aircraft isn't being used for personal purposes, at least not more than 10% of the time.

So it's actually the responsibility of the purchaser.

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

Thank you. That's the first time we've had such a clear response to that concern. However, that's not the answer the industry was expecting. Consequently, there'll be a lot of concern over this, but I'll be able to put the matter to the minister again in a few minutes.

The industry tells us that the aircraft manufacturer must ensure that the purchaser, company A, will be using it for business 90% of the time. However, company A doesn't have complete control over the hours during which the aircraft is being used because it doesn't do business with company B, which doesn't know in advance what the percentage of use will be.

We're being told this will be very difficult to apply. I hope regulatory or legislative amendments are made in short order. That would help make it all more flexible and usable. As we all know, the aerospace industry was hit hard by the pandemic.

The commercial aviation sector is recovering more quickly. So the entire cluster is relying on this, but we now have an act that raises more problems for the industry.

Having said that, I want to thank you for giving me a clear answer.

Mr. Chair, how much time do I have left?

[The Chair, Liberal, Peter Fonseca]

The time is actually up, Monsieur Ste-Marie.

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

Thank you. Then I'll ask more questions later.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

Now, we're going to hear questions from the NDP, MP Blaikie, for six minutes.

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

Thank you very much.

I want to start with a question about the proposed changes to establish an EI board of appeal or a new way of doing that. One of the mentions in the bill says that the board of appeal wouldn't be able to consider any questions of a constitutional nature. Now, I know that earlier this year the tribunal issued a decision highlighting sex discrimination in the EI Act, particularly in regard to maternity leave provisions and the way they interact with eligibility for regular benefits.

I'm wondering if that exclusion in the act would, first of all, mean that the tribunal could no longer issue decisions like that, which lean on the Constitution to provide feedback about the overall EI system, and whether that could have any retroactive effect on decisions like the one from earlier this year.

I'd put that question to whomever the most appropriate official from the Department of Employment and Social Development would be.

[Rouba Dabboussy, Director General, Benefits and Integrated Services Branch, Department of Employment and Social Development]

Good morning.

Any cases that are already in the system will continue to their conclusion without any impact. New cases that have constitutional elements will go directly to the second level and will be heard by the SST appeals division.

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

Okay, so it's not that cases like that couldn't be heard at all; it's just that they would proceed immediately to the most senior level of appeal. Is that a fair understanding of what's being proposed in the bill?

[Rouba Dabboussy]

That is absolutely correct.

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

Thank you.

In respect of measures in the act that are essentially assuming the burden of what was in Bill C-17, there's health transfer money there for surgery backlogs, and also some money for a combination of housing and transit. It's not exactly clear the terms and conditions under which that money is supposed to be provided to provinces and, therefore, I think it's kind of hard for parliamentarians to know what they're being asked to authorize in that provision.

Can someone from the department give some character to how they see funds rolling out—I think it's $750 million total in that package—and what the plans are for reporting on that money and what's been secured with that money?

[Alison McDermott, Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

I'm happy to take that question.

Your question was about how the original payment authority, which was included in Bill C-17, was essentially—I think to answer that in simple terms—just merged into this new bill so that when this bill receives royal assent, the government will have the authority to make those payments.

You then had some questions about what the requirements were. The government wanted to provide this funding to help municipalities deal with the revenue shortfalls associated with the public transit ridership declines that occurred during the pandemic. They wanted to do a little bit more in terms of incenting provinces to support housing construction as well. So, there are a couple of broad requirements that were asked of provinces in order to be eligible to receive the funding. There is a requirement to match the federal contribution. There was a requirement to allocate more or less according to transit ridership among their municipalities, so it's to pass on that funding to municipalities to achieve the objective of the payment. That was meant to be used towards transit operating shortfalls or could be used towards investments in transit capital or investments in housing.

There was an understanding or a request that provinces agreed to undertake to work with their municipalities to accelerate their efforts to improve housing supply in collaboration with those municipalities.

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

I guess that's where I'm trying to figure out how the money really is to be spent. Saying that the federal government wants to continue to support operating funding shortfalls for transit authorities across the country is pretty straightforward. We've seen the government do that from time to time during the pandemic.

How does the federal government see these potential housing interactions take place? Can you give a concrete example of a policy that a province or a municipality could adopt that would satisfy the federal government that there is some kind of meaningful investment in housing that's somehow related to transit? I think we're a little starved for examples of what the government has in mind.

[Alison McDermott]

To give you a sense of what was actually asked of provinces, there were exchanges of letters with provincial governments, and conversations. Basically, the federal government asked them to commit to taking further action on housing, working with their municipalities. We have letters from all the provinces, committing to do that. They also committed to report publicly on the kinds of changes they make.

Through the Canada-B.C. expert panel on housing—but Ontario also has its own panel—the kind of advice we've received from these experts suggests that a lot of the impediments to housing development are actually at the municipal level. This is why the federal government thought that, in providing some housing support to municipalities, it would be useful to get some assurances back from them that they're committed to—

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

Why wasn't the national housing strategy used to deliver that?

[The Chair, Liberal, Peter Fonseca]

We're well over time. Thank you, MP Blaikie.

We're moving now to our second round of questions. We have, first up, MP Chambers for the Conservatives, for five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Thank you to all the officials who've joined us today. It takes a lot of work to put together a bill of this size. It's one of the largest we've seen, so thank you for all of your hard work. I'm glad we're not billing by the hour with the number of people we have, but it's good to have so much intellectual capacity here.

My colleague Mr. Baker started by talking a little bit about fiscal responsibility, so perhaps I'll take the opportunity just to ask a few high-level questions. What is the spending growth from this year, projected, versus the year just before COVID? That's the 2019-2020 year versus the 2022-23 projected year.

While we look it up, I'll give you the numbers I see. Maybe we can see whether they're correct. In 2019-20, it was $360 billion. In 2022 it was about $450 billion. I'm rounding some these numbers. That includes the debt management charge. Is that about right?