Finance Committee on Nov. 21st, 2022

[The Chair, Liberal, Peter Fonseca]

Welcome to meeting number 67 of the House of Commons Standing Committee on Finance.

Pursuant to the Standing Order 108(2) and the motion adopted by the committee on Wednesday, November 16, 2022, the committee is meeting to discuss the subject matter of Bill C-32, an act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022, and certain provisions of the budget tabled in Parliament on April 7, 2022.

Today's meeting is taking place in a hybrid format. Pursuant to the House order of June 23, 2022, members are attending in person in the room and remotely using the Zoom application.

I'd like to make a few comments for the benefit of the witnesses and members. Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you're not speaking.

For interpretation for those on Zoom, you have the choice at the bottom of your screen of either the floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

All comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your patience and understanding in this regard.

I wish to inform the committee members that all the witnesses have been tested for today's meeting. One of the witnesses is still experiencing some technical difficulties, and that is Benjamin Myers. There is one witness, Mr. Kanji, who has not been able to join us.

We're going to open it up to the departments. We have the Canadian Space Agency, the Department of Crown-Indigenous Relations and Northern Affairs, the Department of Employment and Social Development, the Department of Justice and the Department of Finance.

Each will have up to five minutes for opening remarks. The total will be 25 minutes before we get to members' questions.

We will start with the Canadian Space Agency, please.

[Jason Wood, Executive Director, Space Exploration and Space Industry Policy, Canadian Space Agency]

Thank you, Chair.

Thank you for the invitation to appear here today.

My name is Jason Wood. I'm the executive director of space exploration policy at the Canadian Space Agency. I'm joined today by colleagues from the labour program at Employment and Social Development Canada.

In 2020 Canada signed a treaty with the United States to enable Canada's participation in the lunar gateway, a small space station that will orbit the moon. Canada's contribution to this partnership includes Canadarm3, which is a cutting-edge, smart robotic system that will contribute an estimated $71 million annually to Canada's GDP and will create and maintain 630 high-quality jobs for Canadians over a 12-year period.

Implementing legislation is required for Canada to fulfill its obligations under the treaty. The majority of the required legislation was enacted through Budget Implementation Act, 2022, number 1, under division 18, part 5.

One item remains to be implemented, and that is division 4 of part 4 of this bill, which amends the Government Employee Compensation Act to implement the cross-waiver of liability contained within the treaty.

Thank you, Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Wood.

Now we'll go to the Department of Crown-Indigenous Relations and Northern Affairs.

[Luc Beaudry, Director, Engagement Policy Directorate, Indigenous Institutions and Governance Modernization, Resolution and Partnerships, Department of Crown-Indigenous Relations and Northern Affairs]

Good afternoon, Chair.

My name is Luc Beaudry, and I'm from Crown-Indigenous Relations.

Today I'm appearing before you from the traditional unceded territory of the Algonquin. I'm joined by Mazin El-Ghadban, who's the subject matter expert, should questions arise.

The purpose of the legislative initiative is simply to repeal the First Nation Land Management Act and to replace it by a short and more concise legislation that would ratify and give force of law to the framework agreement on first nation land management and to resituate it as a central authority through which first nations govern their lands.

The First Nations Land Management Act and the framework agreement on first nation land management work together at supporting first nations in transitioning away from the application of 44 land-related provisions of the Indian Act.

First nations—194 of them—were signatory to the framework agreement to develop their unique land codes and set of laws that address their land governance approaches. These land codes are developed and confirmed based on a community ratification process, and first nations are supported in their transition by the Lands Advisory Board, a first nation institution responsible for negotiating the content of the framework agreement with the Government of Canada and providing advice and services to signatory first nations through its resource centre.

In conclusion, the proposed legislation would simplify the ratifying statute and remove inconsistencies between the legislation and the framework agreement. It would also simplify the process to amend the framework agreement by reducing the need for returning to Parliament each time the framework agreement is amended.

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Beaudry.

Now we will move to the Department of Employment and Social Development.

[Atiq Rahman, Assistant Deputy Minister, Learning Branch, Department of Employment and Social Development]

=Thank you, Chair.

I am one of the representatives from the department. I could go first. I don't know if there are others too.

[The Chair, Liberal, Peter Fonseca]

Please commence.

[Atiq Rahman]

Thank you, Chair.

This is about Canada student loans and Canada apprentice loans.

Division 5 of part 4 proposes to amend the Canada Student Loans Act, the Canada Student Financial Assistance Act and the Apprentice Loans Act to permanently eliminate the accrual of interest on Canada student loans and Canada apprentice loans, starting on April 1, 2023.

This builds on the two-year elimination of interest that was instituted on April 1, 2021 and is set to expire on March 31, 2023. This part also proposes to amend the Apprentice Loans Act to clarify when the repayment should begin of Canada apprentice loans during this two-year waiver that is already in effect.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you very much for those opening remarks.

Members, as I mentioned earlier, we are having technical difficulties with Mr. Myers from the Department of Justice, so we're moving to the Department of Finance now.

[Lindsay Gwyer, Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance]

Thank you, Mr. Chair.

I'm Lindsay Gwyer. I'm the director general for income tax legislation at the tax legislation division at Finance.

I'll provide a brief overview of part 1, and I have colleagues here who can provide an overview of parts 2 and 3.

Part 1 contains the income tax amendments in the bill, as well as some related amendments to other statutes. There are 21 measures in part 1. They were all announced in budget 2022 or earlier. Draft legislation for all of these measures has been released to the public for consultation in the past.

Given that I have only five minutes, I won't give an overview of all of the measures. I'll give a quick rundown of which budget 2022 measures are in part 1 of the bill.

There's a rule to address flipping of residential properties.

There is the creation of the tax-free first home savings account.

There is a phase-out of flow-through shares for oil, gas and fossil fuel sector activities.

There's the creation of the critical exploration mining tax credit.

There's the creation of the Canada recovery dividend, which is a one-time 15% tax on the income of banks and life insurers above a billion dollars. There's also an additional tax on banks and life insurers, which is a new permanent 1.5% additional tax on the income of banks and life insurers above $100 million.

There is the doubling of the first-time homebuyers' tax credit from a $5,000 credit to a $10,000 credit, calculated at a 15% rate.

There's the extension of the medical expense tax credit so that it would cover expenses related to surrogacy.

There is the creation of a new multi-generational renovation tax credit, which would allow deductions for expenses of up to $50,000 to create a secondary unit to allow a senior or a person with a disability to live with a relative. That's a 15% credit calculated on up to $50,000 of expenses.

There's a change to the phase-out rate for the small business deduction, so that it would phase out more slowly. Where a Canadian controlled private company has taxable capital in Canada above $10 million, the rate reduction, instead of being fully phased out at $15 million, would be phased out at $50 million.

There are changes to the taxation of insurers to address new international financial reporting standards: IFRS 17.

There are changes to the disbursement quota applicable to registered charities.

There are amendments to the general anti-avoidance rule to allow it to be applied to tax attributes that have not yet been used.

There are integrity rules to address what are called “coupon stripping arrangements”, which are arrangements whereby non-residents try to avoid Canadian withholding tax.

Finally, there are amendments to add air-source heat pumps to the clean technologies that benefit from various incentives.

In addition to that, there are some other measures that were announced in budget 2021 or earlier. I won't list them all, but in general they are integrity measures and measures that are intended to increase the CRA's ability to audit and to gather information from taxpayers.

We would be happy to provide more detail on any of those measures during the question portion.

I'll turn it over now to one of my colleagues, who will talk about part 2.

[Jack Glick, Senior Advisor, Sales Tax Division, Department of Finance]

Thank you, Lindsay.

Thank you, Mr. Chair and good afternoon.

My name is Jack Glick and I'm a senior policy adviser in the excise policy section of the Department of Finance.

Part 2 of Bill C-32 implements measures announced in budget 2022 regarding the taxation of cannabis products. In particular, amendments in the bill permit certain smaller licensees to remit excise duties on a quarterly rather than monthly basis, while other amendments are of a more technical nature. Those include permitting the transfer of packaged but unstamped cannabis products between licensees. The quarterly remittances have been administered by the CRA beginning on April 1 of this year, while the remaining amendments would come into force upon royal assent.

Part 2 also brings forward amendments to the framework for the taxation of vaping products, which was introduced in budget 2022 and already implemented via the budget implementation act, 2022, No. 1. These vaping-related measures provide for more clarity on markings and custom storage rules and on excise duty liabilities for these goods. The modifications proposed are largely technical in nature and would allow the CRA and the CBSA to ensure proper administration of the vaping product taxation regime. The proposed amendments in these respects would be retroactive to October 1, 2022, which was the coming into force date of the overall taxation framework for vaping products. We've previously consulted the public on both the cannabis and vaping-related frameworks and the specific measures noted above.

I look forward to any questions you might have, and I'll turn it over to my colleague for part 3.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Glick.

[Pierre Mercille, Director General, Sales Tax Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance]

Good afternoon. My name is Pierre Mercille. I am the director general responsible for the sales tax legislation at the Department of Finance. I'm going to talk about part 3, which is essentially amendments under the Underused Housing Tax Act. That act was made into law through Bill C-8 earlier this year.

The amendment to the Underused Housing Tax Act addressed minor issues of a technical or housekeeping nature. This being a brand new act, minor deficiencies were identified and are now being fixed. It also implements the underused housing tax regulation, which implements an exemption from the underused housing tax for personal use vacation properties generally located in rural areas of Canada. The regulation also gives the Minister of National Revenue the authority to require that individuals provide, where applicable, their social insurance number in returns required to be filed under the Underused Housing Tax Act.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Those are the remarks from Finance.

For the witnesses and the members, as we move into the first round of questions right now, the members from each party will have up to six minutes to ask questions.

Members, as we have so many witnesses with us today, can you specify what department and what witness would most appropriately be able to answer your questions.

We're going to start with the Conservatives for six minutes. I've got MP Chambers up first.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Thank you to all of our civil servants who are joining us at this committee this afternoon. I know you work very hard on these budget bills. I would just note the notable absences of those from the CRA and Treasury Board, and particularly the CRA, who are not only charged with administering a number of these measures, but also with respect to some of the responses to the Cameco case. Nonetheless, I have provided some written questions to the chair that I hope to get answers from with respect to some very specific technical questions.

I'd like to start with Mr. Rahman on the Canada student loans interest removal. How many students who otherwise are not accessing post-secondary education will be eligible to access post-secondary education as a result of this measure?

[Atiq Rahman]

Thank you, Chair.

It is difficult to say how many students would not be going to school without this measure. What we do know is that some of those in repayment, those who have gone to school and then are in repayment, are struggling with rising costs. As you know, in Canada student aid is provided by the federal government and provinces in a sixty-forty split, usually. Many of the provinces have already eliminated interest on their student loans to make it more affordable for those who are struggling to repay their student loans.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

I can appreciate the response. We're going to spend $500 million a year. The question is, how many more students are going to be able to get to post-secondary education with the spending of $500 million a year?

If the answer is that you haven't done that study or don't have an estimate, that's okay. I'm curious as to whether the government has done a study or if you've provided advice to the minister that says how many more students will access post-secondary education if we do this measure.

Does a study, a number or some estimate exist?

[Atiq Rahman]

This measure is targeted at making load repayment more affordable, so I do not have the number of how many students might go to post-secondary because of this measure.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

Do you know what the average student debt is in Canada for post-secondary—for college and university?

[Atiq Rahman]

For the federal student loans, it's about $14,000 when they graduate. In addition, they also have provincial student loans.

[Adam Chambers, Conservative, Simcoe North, ON]

When you add that up, that's about $30,000.

Does that sound correct?

[Atiq Rahman]

It would likely be less than that. It could be somewhere in the mid-twenties.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. We're going to spend $500 million helping students who are already in post-secondary education, as opposed to providing the same amount of money in grants to help students who couldn't otherwise go to school get to school.

That's all right. I know you don't make the policy decision. I just wanted to put that on the record.

I would like to ask some questions about the housing anti-flipping tax.

A lot of discretion is provided to the CRA minister to decline to issue certificates on the disposition of property. Will guidelines be published on how the minister will exercise such discretion in terms of the circumstances in which somebody will not have to pay the flipping tax?

If they move and they have a medical issue or they move beside a house that—God forbid—becomes an Airbnb, do they have to go, cap in hand, to the minister or will some published guidelines be forthcoming?

[Lindsay Gwyer]

Mr. Chair, I could answer that question and then one of my colleagues may have more to add.

The legislation doesn't contemplate any specific guidelines, but it is the CRA's policy that they would typically make information available to taxpayers on their website with respect to how they would interpret and apply rules. My expectation is that they would provide additional guidance.

There's no sort of certificate process. It would just be a situation where, if a taxpayer thinks they qualify for one of the exemptions, they would file their tax return on that basis. Then it would be up to the CRA to audit that and see if they agree that the taxpayer has complied.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Ms. Gwyer.

It sounds like we're going to create a lot of steps for taxpayers.

Maybe I'll just stick with the tax-free home savings account. There is a lot. I read through the technical details. It's quite complicated. We're creating significant complexity in the tax code to create a new account, which, by the way, won't be ready for a number of years.

Instead, the government could have just not required people to repay the homebuyers' plan.

Was that option ever considered as a quicker way to provide people with help? Was that option on the table?

I'm just trying to get an understanding of why we're creating additional complexity in the tax code when a simple change would have accomplished the same goal.