Finance Committee on May 31st, 2022

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Albas.

I have Mr. Chambers and Mr. Ste-Marie.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

We obviously had a lot of time to hear from the stakeholders during our consultations on the bill, so I won't relitigate that issue, or the fact that the tax is coming in. We agree on many things in this room, but on this one I know we disagree. I am in favour of having the wealthy pay the taxes that are owed. In general, I think we need to be focused on actually enforcing the tax code that we have on all individuals and corporations, before we bring on more taxes. That's perhaps a different discussion.

I don't believe it will just be the wealthy who pay in this instance, like my colleague Mr. Albas. It's the workers and individuals who rely on these industries for their livelihood. The International Association of Machinists and Aerospace Workers, as an example, has raised some concerns.

Given that we obviously knew about the ideological differences on this tax, the CPC amendments in this section were done in a constructive way to help mitigate some of those impacts. When we get to them, I would be happy to give the rationale. At least the last one, which was provided yesterday on the thresholds but has since been updated.... From a principled perspective, if we are going to be increasing excise tax on items on the basis of inflation every year, surely when we impose taxes on goods on a threshold value we should make the same kinds of concessions or acknowledgements that inflation actually makes that $100,000-a-year threshold significantly different in 10 years from what it is today. That's the rationale behind indexing the thresholds to inflation. I think it's fairly reasonable, but I recognize and respect members' opinions on that. I'm encouraged to hear Mr. Blaikie on the motion, asking the government to provide some additional details on the economic impact. That would be a constructive way that we could hear from government on the impacts of this tax.

I hope that before we rise for the summer we'll have a vote on that motion, which I think is maybe the second-best option for us to get some more details, to give some comfort to the industry and to the people in my community of Simcoe North and others who are affected. I appreciate that co-operation. I think there is some precedent for that, by the way, in previous Parliaments. Instead of trying to amend the bill, perhaps we can get some more information from the government on this front. I would very much look forward to that information and just point out that many jurisdictions I have looked at, and that many have looked at, have actually walked back versions of their luxury tax, because of the economic impact. That's obviously something I'm very concerned about and interested to get the government's opinion on. We'll obviously move these amendments in good faith, but certainly appreciate members letting us know where they stand. We look forward to the ongoing discussion.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chambers.

I have Mr. Ste-Marie. He's the last one to speak.

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

Thank you, Mr. Chair.

I want to start by thanking my fellow members for making their positions clear on the suite of amendments to this clause.

This is obviously the most problematic clause in Bill C-19. We are talking about a new tax, 170 pages' worth. My party and I support the principle of taxing luxury items. It allows for a better balance of wealth, whereby everyone contributes to public services on the basis of what they can afford. We support that principle.

What industry manufacturers and unions told us, however, is that this tax was poorly thought-out. Since it will probably be adopted, it will have significant consequences. If the amendments are defeated, I sincerely hope that, come the fall, the government will fix the situation and we'll end up with a tax that does not hurt the industries in question or jobs. Obviously, we'll believe it when we see it, as Quebec comedian Yvon Deschamps used to say.

In the case of this tax, it's easier for the government, the state, to tax the manufacturer, when the consumer should be paying the tax. There is a lot of bias in the 170 pages that deal with this tax.

For example, most aircraft subject to the tax are exported, somewhere in the neighbourhood of 90% or 95%. My sense is that laziness is to blame for the way the bill is drafted, in other words, taxing every aircraft that is manufactured and providing for the possibility of a refund afterwards. Department officials told us that this was done on a quarterly basis, but manufacturers told us that aircraft often had to undergo numerous modifications and that it could take six, nine or 12 months before the refund is issued.

Manufacturers are being saddled with an administrative burden. They need cash, but they have to fork out hundreds of millions of dollars upfront, all because the tax is poorly designed. BQ‑6 would make clear that aircraft intended for export are excluded from the tax.

These amendments are meant to make the tax better and fix the problems with it. What members need to understand is that those problems will not be fixed. Industry stakeholders told us about instances where a company purchases an aircraft for business use and entrusts another company with managing the aircraft. That company can, in turn, rent out the aircraft when it's not in use. At the time of sale, the manufacturer must ensure that the aircraft purchased by the company and managed by an air charter company will not be rented out for personal use more than 10% of the time. All of that places a disproportionate burden on manufacturers' shoulders. It's virtually impossible to impose such a thing from the outset.

The amendments would help solve those problems. Lowering the proportion of business use from 90% to 75% would give manufacturers some breathing room and ensure that the tax does indeed target luxury items, instead of crippling the aerospace sector. Essentially, the idea behind the amendments was to make the tax less punitive for the oh-so-important aerospace sector and the other affected sectors.

The intent was not to have wealthy people who buy luxury goods pay less. It was to make the tax work better so that it doesn't unduly hurt manufacturers. At the end of the day, in its current form, the tax hurts manufacturers because it applies to activities that the spirit of the act does not cover. The administrative burden created by this measure is terribly onerous.

I want to stress to committee members that our aerospace sector faces fierce competition from players elsewhere in the world, in particular, Seattle, in the United States, and Toulouse, in France. Every other country has policies to support its aerospace economy. The aerospace sector adds tremendous value to our economy.

Canada is the only country with an aerospace sector of this size not to have a policy that supports the industry, such as through government procurement. On top of that, the government is bringing in a new tax. Industry representatives told us this measure would hurt the sector's reputation. The International Air Transport Association said that it might move. That shows that this is damaging the industry's reputation.

Even if all the problems were fixed in the fall—again, we'll have to see it to believe it, to quote Yvon Deschamps—it would still mean months of uncertainty. Meanwhile, the industry will realize that, if it wants to grow, it should go somewhere other than Canada. After all, the government is sending the message that it does not plan to help the industry. Canada would be the only country in the world not to support its own industry. It's beyond me. All of this is mind-boggling.

I thank my fellow members for expressing themselves so clearly, but if all the amendments being proposed are defeated, the economy and good jobs are going to take a major hit. The message being sent would fuel uncertainty and hurt Canada's credibility when it comes to building and strengthening the domestic aerospace cluster and supporting those jobs.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Members, shall amendment BQ-5 carry?

[Yvan Baker, Liberal, Etobicoke Centre, ON]

May we have a recorded vote?

[The Chair, Liberal, Peter Fonseca]

Could we have a recorded vote, please, Mr. Clerk?

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

[The Chair, Liberal, Peter Fonseca]

Members, we're still on clause 135. We have amendment BQ-6.

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

The purpose of this amendment is to exclude aircraft intended for export from the tax.

[The Chair, Liberal, Peter Fonseca]

Shall amendment BQ-6 carry?

[Yvan Baker, Liberal, Etobicoke Centre, ON]

May we have a recorded vote, please?

[The Chair, Liberal, Peter Fonseca]

Could we have a recorded vote, please, Mr. Clerk?

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

[The Chair, Liberal, Peter Fonseca]

We are still on clause 135, moving to amendment BQ-7.

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

As I said before, this amendment ties in with BQ‑5. It would give the government the authority to designate prescribed aircraft models. The government would have more power.

[The Chair, Liberal, Peter Fonseca]

Shall BQ-7 carry?

[Yvan Baker, Liberal, Etobicoke Centre, ON]

May we have a recorded vote, please?

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

[The Chair, Liberal, Peter Fonseca]

Members, we are on clause 135, amendment CPC-6.

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

We have decided not to move this motion, so we can move on, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Okay, so it's not being moved; we are still on clause 135, with another amendment by the Bloc.

On BQ-8, Mr. Ste-Marie, go ahead.

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

Thank you, Mr. Chair.

BQ‑8 gives the government the authority to prescribe by regulation the price threshold in the case of subject aircraft. In other words, it would broaden the government's power.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

The ruling from the chair is that Bill C-19 enacts the select luxury items tax act. Amendment BQ-8 seeks to modify the price threshold of $100,000 in the case of a subject aircraft, so that it would be set by regulation. House of Commons Procedure and Practice, third edition, states on page 772 that “An amendment is also inadmissible if it exceeds the scope of the ways and means motion on which a bill is based, or if it imposes a new charge on the people that is not preceded by the adoption of a ways and means motion....”

In the opinion of the chair, the amendment could oblige certain entities to bear an additional charge; therefore, I rule the amendment inadmissible.

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

I'd like to say something, if I may, Mr. Chair.

Normally, I would challenge your ruling, but I won't since we already anticipate that the amendment will be defeated.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

Mr. Chambers, this is on amendment CPC-6.1.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

As was previously mentioned, as a matter of fairness, you can conceive of 10 years going by fairly quickly and these thresholds being out of date given inflation, which is certainly where we are now. If we apply things like the automatic escalator to excise taxes, the same principle applies here.

I think it would serve future Parliaments and the industry well to have these automatically adjusted for inflation every five years. It would be not an every year thing but rather every five years, and then would be rounded to the nearest $5,000, which, to my understanding, is similar to the way we do adjustments to reflect inflation or other thresholds in other pieces of legislation.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chambers.

Members, at this time we're going to suspend for a minute or two, as the legislative clerk would like to see if this is admissible or inadmissible.