Finance Committee on May 3rd, 2022

[Terry Beech, Liberal, Burnaby North—Seymour, BC]

My understanding is that as long as the resources are here, delays from votes happen often so a motion to adjourn the committee is always in order, but otherwise the committee, I think, is good to proceed.

[The Chair, Liberal, Peter Fonseca]

That's correct, MP Beech.

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

I'm always prepared to work, but I will tell you that I have other appointments that I'm going to have to cancel now and it's because this government decided it would do an orders to the day motion.

Do you know what, Mr. Chair? Maybe you could feed this back to your whip that perhaps they should not be doing procedural motions that interfere with our work.

That being said, let's continue.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Albas.

MP Sorbara, you have the floor.

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

Thank you, Chair.

I always find it great to learn a lot when the officials come to the finance committee, or any committee for that matter, so the more time we have to ask them questions, whether those on the other side agree with some of the measures or not, the better. It's good to ask them questions and the more time we have with them the better.

Moving on to part 1, paragraph (l) of the summary of the bill mentions the measures in the BIA for registered charities that allow them to enter into charitable partnerships with organizations other than qualified donees under certain conditions. I would like to get an explanation of that from the officials.

One reason, obviously, is that during COVID, charities were impacted considerably across Canada and our government stepped up and assisted them in many venues and with many measures. How is this measure effective for charities? I believe it has long been asked for by charitable organizations.

[Blaine Langdon, Director, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance]

Thank you very much for the question.

My name is Blaine Langdon. I'm the director of the charities section at the Department of Finance.

The measure we're proposing here is effectively designed to facilitate the ability of charities to work in partnerships with others.

To explain the existing rules, currently registered charities are able to use their own resources in one of two ways: either on their own charitable activities or as gifts to qualified donees. Then they can work with non-qualified donees, such as organizations internationally if they so choose, but under the current rules, they would have to enter into structured agreements with these organizations and exercise a level of direction and control over the intermediary such that the activity could be considered their own.

Therefore, what we have proposed here, in response to the concerns of charities that these rules were too onerous, is to allow charities to engage in a third type of activity, which would be to make grants to non-qualified donees in certain circumstances. This would facilitate their ability to make a grant to a foreign entity or to a domestic entity that is not a qualified donee, provided that the grant were made in furtherance of the charitable activity of the charity; that the funds were, in fact, applied to charitable activities; and that the organization followed certain accountability measures that are spelled out in the BIA.

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

Blaine, I'm going to hop in here, because I do have a second question to ask.

I think the work we have done for charities within the BIA needs to be applauded. I have a lot of respect for that. I was a former PS on the revenue side. In my second session, I was able to meet regularly with the charitable committee that we put forward as the government, and I know a lot of the asks that were made and how much work we have done.

Changing gears here, I was happy to speak to the Canada's Building Trades Unions' members here last week in Ottawa. My riding is home to the training facilities of the largest private sector unions in Canada, or I should say in Ontario as well. The LIUNA Local 183 headquarters is being built in my riding, and the Carpenters Union Local 27 headquarters and training facility are both in my riding, and Local 675 as well.

We put in a measure, which I advocated for strongly, a labour mobility deduction for temporary relocation of tradespeople. Why is this important? It is for many reasons. We have shutdowns that happen across this country. I know that in my younger days I worked at a pulp and paper mill for a couple of summers. I visited extensively facilities across this country where tradespeople come in and out. Tradespeople do have to relocate.

A deduction is a very powerful incentive that allows workers to move and allows them to have some financial flexibility and a financial incentive. Can we get some feedback on the labour mobility deduction?

[The Chair, Liberal, Peter Fonseca]

MP Sorbara, I know the time goes by quickly, and that is the time.

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

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

Thank you, Mr. Chair.

My question is for Mr. Baylor, to follow up on what we spoke about 20 minutes ago.

Mr. Baylor, from what I understand, amongst the measures that allow for immediate expensing of eligible property by certain businesses, there are three measures that provide for immediate expensing in the field of innovation. One of the measures is targeted, and the others are more far-reaching. I see that only one of the three measures is actually more wide-ranging, that it is for small or medium businesses of all industries, including the oil industry, and that it is capped at $1.5 million and has a specific timeframe.

From what I see, the department has not calculated the proportion of the various sectors within the economy that will be eligible for this measure. What's more, I see that no other immediate expensing measures with wide-ranging effect are contained in the bill currently.

Can you confirm all of this?

[Maximilian Baylor]

There are many measures providing for immediate deductions. The bill only contains those that you mentioned, which concern private businesses.

In the 2018 economic update, following tax breaks that were given in the United States in 2017, an accelerated capital cost allowance of 100% was offered for manufacturing, processing, machinery and equipment...

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

Mr. Baylor, thanks for that, but my question was about the current budget implementation bill.

[Maximilian Baylor]

I just wanted to make that clear.

Many measures exist, but the current bill contains measures that were in the 2020-21 budget as well as those announced last February. As you stated, the measures are wide ranging.

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

Going to the tax incentive for zero-emission technologies, does the measure concerning hydrogen produced by hydrolysis exclude all hydrogen directly or indirectly made with petroleum products, such as natural gas?

[Maximilian Baylor]

Yes, that is the case.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baylor.

Now we are moving to the NDP and MP Blaikie for two and a half minutes.

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

Thank you.

I think we touched on this briefly before, but I want to come back to the provisions around the direction and control of resources for charitable organizations. Of course, there's a private member's bill in the Senate, Bill S-216, that deals with the same subject matter, and I understand that many of the provisions in the BIA are similar to those in Bill S-216. My understanding is that the control of the percentages, as it were, of an organization's resources is what has been added in the BIA beyond what's in Bill S-216.

I'm just wondering if someone from the department could confirm that for us, and highlight any other differences that exist between what's contained in the BIA and Bill S-216. Then give a rationale for why that kind of ratio of expenditure was chosen as a control and what the government hopes to achieve by that.

[Blaine Langdon]

Thank you for the question.

I'm not certain I understand correctly your point about a percentage or a ratio. I'll try to outline the differences between the two bills.

Bill S-216, of course, is a Senate public bill that is currently before the House of Commons. It proposes effectively to allow registered charities to make grants to non-qualified donees, provided that the charity puts in place reasonable steps to assure their resources are used for charitable activities. I'm summarizing it a little bit.

The budget proposes to do effectively the same thing, so registered charities would be allowed to make grants to non-qualified donees. It eliminates the requirement that they direct and control the activities of the partner organization.

The difference between the two would be that in the budget proposals, we've proposed specific accountability requirements. The organization would be required to have a written agreement in place, to receive periodic reporting from the organization and to receive final reports from the organization. You'll see this outlined in proposed regulation 3702.

There isn't a specific percentage associated with the amount of control that needs to be exercised. That may be something that is being confused with the budget proposals on the disbursement quota, but beyond that, there's no specific requirement for that proposed here.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Blaikie. That's the time.

We are moving to the Conservatives and MP Fast for five minutes.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you very much.

I have two very quick questions.

First, I want to confirm that the Department of Finance did not do an economic impact assessment of the imposition of the luxury tax that the budget and the BIA has proposed. Is that correct?

[Phil King]

Thank you.

Mr. Chair, yes, as per the answers provided yesterday by the minister and Mr. Jovanovic, that is correct.

[Ed Fast, Conservative, Abbotsford, BC]

All right. No assessment was done, so we don't know what the economic impact would be.

Did the department consult at all with the Parliamentary Budget Officer to provide some guidance on what the economic impacts of this tax would be?

[Phil King]

We consulted with many people—industry, in particular—from the three different sectors affected, but it's not at all usual or normal for us to consult with the PBO.

If I can point out something, Mr. Chair, the PBO in their legislative note when they costed the luxury tax said there would be a behavioural impact, but they weren't sure of what that would be, because it's uncertain.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

I'll go to my next question, which is on the implementation of that tax as it relates to boat builders. I understand the department has now agreed to delay the implementation of that tax until the end of 2022.

Am I correct in understanding that?

[Gervais Coulombe]

The technical change you are referring to is in relation to agreements that may have been entered into in writing ahead of a certain date. You may know that the department released draft legislative proposals as of March 11. In those draft legislative proposals, the grandfather rule for those agreements was that they had to be entered into before the budget date of 2021. That rule has been extended, so that agreements entered into before January 1, 2023, will be subject to the grandfather rules.

This basically means that the delivery of such a vote on other subject items could happen after the coming into force of the luxury tax without the application of the tax.

[Ed Fast, Conservative, Abbotsford, BC]

That sounds like good news for the boat industry and any other industry that's captured by the luxury tax that was introduced. Thank you for that clarification.

Those are the only questions I have, Mr. Chair.