Evidence of meeting #67 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was chair.
A video is available from Parliament.
Assistant Deputy Minister, Learning Branch, Department of Employment and Social Development
That is what the fall economic statement said, yes.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Baker.
Now I will go to the Bloc and MP Ste-Marie, for two and a half minutes.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
In Bill C‑32, there are changes with respect to foundations or charities in relation to the disbursement quota. I would like to have this explained to me with concrete cases.
How many organizations are affected?
What does Bill C‑32 change?
Blaine Langdon Director, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Thank you for the question.
If I'm understanding correctly, the question is on how many foundations are impacted by these changes.
To break it down as precisely as possible, there are about 11,000 foundations: 6,000 private foundations and about 5,000 public foundations.
The changes that we've proposed here, which would be to increase the disbursement quota from 3.5% to 5% for assets over $1 million, would impact 4,000 foundations and other charities, but primarily foundations, because these are the organizations that report having assets above that.
To grind into it one further stage, most foundations already spend more than they're required to on their disbursement quota. Based on our analysis, we anticipate that an additional 1,400 organizations will have to increase their expenditures each year in order to meet the higher disbursement quota.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
So the goal is to make sure that these foundations spend more.
I would like to understand the situation. A foundation or a charity that accumulates money and only pays the interest earned on the principal, on the total amount, can still end up paying out 5%. Is that right?
Director, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Yes. The disbursement quota is based on the value of property not used in charitable programs or administration. Based on the value of what is effectively their investment property, we would require foundations to spend a minimum of 5% of that value on charitable programs or as gifts to other qualified donees, or grants—under the new regime—to other organizations that carry on charitable programs.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Ste‑Marie.
Now we will go to the NDP.
MP Blaikie, you have two and a half minutes, please.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you.
I think this question properly belongs with Mr. Baylor.
In regard to the Canada recovery dividend, I'm wondering if you could first of all provide us with the revenue estimate for that one-time tax, and then secondly, speak to the level of support offered at the beginning of the pandemic to financial institutions. I'm not just talking about cash transfers, I'm also talking about liquidity support and the ways in which financial institutions may have benefited from the policy of quantitative easing that was in place at the time.
Could give us both of those numbers, what was provided to financial institutions as part of the pandemic support package and then what is being recovered on the dividend?
Senior Director, Saving and Investment Section, Business Income Tax Division, Tax Policy Branch, Department of Finance
I can perhaps start with the cost that you asked for.
The Canada recovery dividend is a one-time tax imposed, effectively, on the income of large financial institutions—above $1 million—in the two years of the pandemic. While it's imposed in 2022, there are five years for the banks to pay that. If you take the total, our estimate is roughly $3.8 billion for that tax.
In terms of the second question, the notion is that the financial institutions did better than other sectors during the pandemic. They had a relatively strong performance. That, in part, is due to the federal pandemic supports, as you mentioned, for people in businesses. That helped to de-risk their balance sheets.
That's very intangible in terms of trying to really assess what exactly the financial institutions.... I don't have the total amount of pandemic support here, but—
Senior Director, Saving and Investment Section, Business Income Tax Division, Tax Policy Branch, Department of Finance
It's really the notion, in a way, that they benefited from the support.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
I recall numbers being thrown around in the spring of 2020 that were in the order of $300 billion or $400 billion, in terms of quantifying the kind of benefit that financial institutions were receiving from early government action.
Do you think that measuring that support in the hundreds of billions of dollars is a reasonable order of magnitude?
Senior Director, Saving and Investment Section, Business Income Tax Division, Tax Policy Branch, Department of Finance
Again, it's tough to make a direct link.
What does seem clear is that there was—as you point out—very substantial support provided to the economy. That helped support the balance sheets of those financial institutions. They benefited from that.
That's what this measure is trying to get at.
Liberal
The Chair Liberal Peter Fonseca
Thank you MP Blaikie.
Moving to the Conservatives, we have MP Morantz for five minutes, please.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Thank you, Mr. Chair.
This question is more about fiscal and economic impacts. I'm hoping someone here at the meeting can address that. Perhaps it's Mr. Leblanc or someone else.
I just want to go over one thing the finance minister said in her foreword to the fall economic statement. She said, “we cannot support every single Canadian in the way we did...[during] the pandemic. To do so would force the Bank of Canada to raise interest rates even higher. It would make life more expensive, for everyone, for longer.”
I'm just wondering if the department advised the minister on that statement and if you agree with it.
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Mr. Chair, I would just note that we are here as officials to respond to questions on the subject matter of Bill C-32, which does have some measures from the fall economic statement, but it also has measures from budget 2022 and previous budgets, as explained by my colleagues.
We're not the ones who are well-positioned to respond to that question, given the subject of the meeting.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Bill C-32 hasn't passed the House yet and this is a prestudy on the fall economic statement, so it's disappointing that question couldn't be answered by one of the officials here.
Well, they're not here; they're online.
I'll ask this question anyway, but I suspect you'll just give the same answer.
In the fall economic statement, the Parliamentary Budget Officer identified that $52 billion in new spending was announced.
Do you think that new spending, given what the finance minister said, will exacerbate the situation in causing more inflation and possible interest rate hikes?
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Mr. Chair, I regret that I have to give the same answer.
We're here to discuss what was on the notice for the meeting, which is the subject matter of Bill C-32.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Could you take those two questions back to the shop with you and provide us with answers in writing?
Did we lose them?
Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance
Yes, we can take the questions back.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Okay. That would be great.
In the Parliamentary Budget Officer's report, another thing they identified was something they called “non-announced” spending. It was $14.2 billion, which is, by any standard, a lot of money.
Can you tell us what that means? What's “non-announced” spending?
Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Mr. Chair, we'll have to treat that as we've treated the last few questions given that it's on the fall economic statement and not on Bill C-32.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Okay. Well, if you could provide an answer to the committee in writing....
I have to say, I'm quite surprised that the officials here aren't going to answer basic questions about the fall economic statement given the fact that we're in a prestudy and that Bill C-32 hasn't passed the House. It's very odd.
Let me go back to something that perhaps you can answer.
On the issue of the gain on disposition of a Canadian housing unit, is that a housing unit that's purchased by anyone for any reason? For example, somebody purchases a house and moves their family in. They sell it within a year and there's a gain. Will it be treated as business income and not capital gain? Do I have that right?
I think that would be Ms. Gwyer.
