Finance Committee on May 3rd, 2022

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much.

Mr. Baylor, this question is probably coming to you. Along similar lines, for companies that have income subject to both the general and small business corporate tax rates, how would income be allocated among the different reduced tax rates on the zero-emission technology manufacturing?

[Maximilian Baylor]

It's set up to effectively favour the taxpayer in this situation. They're allowed to use the proportion for the small business amount. First they'll get that preferential lower rate, and then it would move up to the general rate based on the amount of income up to the total amount of income that they have available for the zero-emission technology manufacturing amount.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

This is proportionate. Is that what I hear you saying?

[Maximilian Baylor]

It starts with the small business rate, because that's the more preferential one, and then it uses that.

My colleague Jenna Robbins looks like she wants to jump in and add a bit of detail on that.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Sure. That would be great.

[Jenna Robbins, Senior Director, Strategic Planning and Policy, Business Income Tax Division, Tax Policy Branch, Department of Finance]

Hi, it's Jenna Robbins.

It goes the other way because you're halving the rates. When you half the general rate, it's a greater rate reduction than if you half the small business rate.

As my colleague says, it's preferential to the taxpayer. It gives the best result. It's like an ordering. You order your income first into the general rate and then you apply the reduced small business rate for manufacturers, and then on to your ordinary income, your general rate and then your small business rate.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I appreciate that. Thanks so much, Jenna.

[Maximilian Baylor]

My apologies for misspeaking, I got it reversed there somehow.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

That's okay. That's why we have so many of you here on the call, to make sure that detailed questions get the precise answers they need.

On the capital cost allowance for clean energy equipment, can somebody just talk about what clean technologies are being made eligible for the accelerated depreciation?

[The Chair, Liberal, Peter Fonseca]

Give a short answer, please, if you have it.

[Oliver Rogerson, Director, Resources, Environment and Special Projects, Business Income Tax Division, Tax Policy Branch, Department of Finance]

It's Oliver Rogerson from the tax policy branch.

What's being added are effectively some geothermal, the wave and tidal that was not eligible before, and most of the technologies that would be eligible under the zero-emission tax manufacturing rate cut that were not eligible under class 43.1 in the capital cost allowance.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Baker.

Members, we are moving to our third round. I have the Conservatives up first, with MP Chambers for five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

I appreciate all the officials spending time with us here today, as I always do. I hope someone can answer my first question. If not, perhaps we can follow up.

Were there savings booked from the closure of border crossings for small vessels by CBSA, drastically reducing them from about 400 to 80? How much were those cost savings?

[Lindsay Gwyer]

I don't think there would be anyone on this call who could answer that. These are all tax people from the Department of Finance, so there might be someone on Thursday who would be able to answer that question.

[Adam Chambers, Conservative, Simcoe North, ON]

Fair enough. Perhaps the clerk could record that question. We could follow up.

I ask because there seems to be a misconception about the travel and tourism sector as it relates to boating. If you want to enter Georgian Bay, under the new rules of closing these CBSA crossings, you actually have to go 355 kilometres out of your way one way or 230 kilometres out of your way another way. The tourism sector, especially in my community, is on its knees, and it's on its knees across the country. We're going to make it harder for people to visit our communities.

That leads into the luxury tax. Do we have a breakdown? Can you provide to the committee a breakdown of the luxury tax expected revenues by the asset class? Is that something we could get for the committee?

[Phil King]

I can answer that question. I could follow up with a written response too. Of all the three asset classes, around 70% of the revenues, we believe, will come from automobiles, roughly 20% from boats and the remainder from aircraft.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you. That's very helpful. I would appreciate a written response on that to confirm, but I certainly appreciate that.

The challenge is that people are making decisions for recreational activities. I noticed that we're not including RVs. I'm not suggesting that you should, but you're creating now a disparity, an inequality, between recreational opportunities for people. You cannot buy a cottage now for under, in some communities, $400,000, $500,000 or $700,000. People are deciding how they want to access recreational activities. Now the government's saying, “If you boat, we have to tax you.” It's middle-class people who are now—or were—substituting boats for cottages. This is happening all across Ontario.

In particular, my community has 25 marinas and 15 boat dealers. These are jobs in communities that thrive on the sale and maintenance of these vessels and we're creating a really disadvantageous system for a number of our communities. We're not going after really expensive art. We're not going after that really expensive watch. We've decided to target vessels, because I think there's a misconception that only rich people buy boats, but it couldn't be further from the truth. I hope that people from the government come to my community. I invite them all to come and I'll show them who's purchasing some of these vessels.

It's not for officials to answer a policy question, so I'll just ask whether other asset classes, like RVs, were considered as part of the luxury tax. I don't have to ask why they were not included, but were they considered?

[Gervais Coulombe]

Thank you for the question.

In respect to RVs, when the tax was originally announced as part of budget 2021, there was already an exemption for RVs proposed, so a carve-out from the vehicles subject to the tax.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

I would submit that the reason the carve-out was imposed was that it would be political suicide to include a luxury tax on a recreational vehicle. Someone's going to have to explain to me.... It's not a fair question for the officials, but the government is going to have to explain to Canadians why they've created this unequal footing. It is, I think, completely unfair and it's going to be an assault on a number of small communities that rely on tourism and these jobs.

I'm getting messages from people today who are saying they have to lay people off. I'm also getting messages from people saying they have workers, salespeople, who are quitting their jobs because they don't think there's a future for them in the industry anymore.

Mr. Chair, I believe that's my time, so I'll pass it off to the next person. Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We're moving to the Liberals and MP Sorbara for five minutes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair. It's great to be here with my honourable colleagues.

Chair, it is 12:52 and I know I have five minutes in my allotment of time, but we do have resources here with us, the great folks who work here at the House of Commons and Parliament, until 1:30 today. I would like to see if we have, not unanimity, but a majority consensus to continue on until 1:30.

[The Chair, Liberal, Peter Fonseca]

Yes, we do have resources and we do have officials available to us until 1:30.

You would know, as you have sat on this committee for many years, that the practice has been that when we are interrupted by votes, we do, if possible, tack on that time and try to get as much time as we can, especially when we have this many officials with us.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Chair, there's not unanimous consent, so—

[The Chair, Liberal, Peter Fonseca]

Unanimous consent, MP Albas, is not required for this.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

You need to have a majority vote, so we should have a debate about that.