Finance Committee on Feb. 2nd, 2023

[Mike Mueller]

Obviously, the aerospace sector was hit harder than most through the pandemic with the restrictions in place. Budget 2021 submitted $1.75 billion dedicated to aerospace through the SIF program, which we were grateful for, and then the aerospace regional recovery initiative, which was $250 million for small and medium-sized businesses.

As part of our recommendations to the committee, we are making some recommendations with regard to those two programs in order for companies to access the programs in an easier manner and to have more companies access them in a timely manner. We're seeing slow uptake and a slow process in getting some of the announcements. It was announced in budget 2021, and we're now just starting to see announcements. We're recommending that the program specific to ARRI be extended even further to enable those small and medium-sized businesses to take advantage of the program that is there.

I think it's important to note also that in the context of all this, what is very much required is an aerospace strategy. We have funding on the innovation side and we're recapitalizing the air force as we're moving forward, but we don't have that overarching strategy that our competitor nations do, and it is very much required.

We were encouraged by Minister Freeland's comment on industrial strategies. We are looking forward to those kinds of discussions. They're absolutely critical for our industry in particular.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I really appreciate that constructive input, Mike. Thank you.

I'm going to switch gears. I think I have about two minutes left.

Ms. Grynol, like other members, I will try not to take it personally that you didn't mention Etobicoke on your list of locations where we could build hotels.

[Voices]

Oh, oh!

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Nevertheless, I'm interested in your sector and the contributions it makes to my constituents and people across Canada, so I'll ask you a question about that.

During your introductory remarks, I wrote down what you said—forgive me if I have misquoted you—about the supports provided during COVID. You said that they were “the reason we have an industry today”. Did I accurately portray what you said earlier?

[Susie Grynol]

Yes. That is accurate.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay. I appreciate that.

One thing we hear from some members, unfortunately, in the House—I can be frank about this—is that the support provided during COVID was wasteful spending. We hear that. I think you've probably heard that. Do you agree with that characterization?

[Susie Grynol]

Certainly I don't, for the hardest-hit sectors. We have been on life support for the last two years. We had absolutely no way of operating over that time period. If the government had not chosen to invest in our employees so that we could maintain those relationships and had not chosen to invest in the fixed costs support, we would have lost all the assets across this country.

At the time of the COVID period, we were forecasting, month after month, that more than 60% of the industry would have shuttered permanently.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I appreciate that. I have only a little bit of time left, so I'll just say thank you for that.

I guess what I would say is that my takeaway from this is that after more than seven years of this government, a lot of the problems that were there when we took office are actually being fixed.

Thank you, Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

Now we're off to hear from the Bloc and our colleague MP Ste-Marie.

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

Thank you, Mr. Chair.

Greetings to all the witnesses and thank you for being here today. It's nice to see some witnesses in person. Hello to all those with us by videoconference as well.

This is our last day of consultations before we make our recommendations. Because time is limited, I won't be able to ask everyone questions, but I want the witnesses to know that all of their testimony, recommendations, briefs and reports are being read and considered. We really want our recommendations to reflect all voices, including those who may not have had the opportunity to come before this committee and provide testimony. We received 706 reports and they are being reviewed. I hope our committee will take note of them.

My questions will be directed to Mr. Mueller of the Aerospace Industries Association of Canada.

Thank you for your recommendations, Mr. Mueller. I will try to come back to them in another round. I'd like to ask you first about the select luxury items tax.

On this committee, we're really concerned about the form of the luxury tax. I, for one, am all for the principle of taxing the wealthiest in our society to ensure greater redistribution of wealth. However, I may have concerns about how this tax is applied and the impact it may have.

My colleague Mr. Chambers introduced a motion about this, and we passed it, asking the department to do a real, concrete impact study. I must point out that the tax was passed without an impact study. We're waiting to meet with officials and read the final report. We will challenge the minister on this at committee to see what can be done.

The impact study still hasn't been done, but I understand that a certain study was done, and that's a very good thing.

Before talking about that study, Mr. Mueller, I have a question for you. Over the past few months, we've heard the government say that Canada's aerospace companies are doing well, which means the luxury tax has not affected them.

What are your thoughts on this?

[Mike Mueller]

Thank you very much for the question.

It's a very good question, and those are very good comments.

I'd like to thank you, Mr. Ste-Marie, for your support for our industry, in addition to that of your colleague, MP Savard-Tremblay, who is on our parliamentary aerospace caucus.

While I'm thanking people, Mr. Chambers, I thank you too for moving that motion, because we were very concerned with respect to not knowing the clear economic impact of this tax from the government, which is what led us to go out and get an independent study done by HEC Montréal and Professor Roy.

The results were even worse than what we had predicted. We had gone out to industry, and we did some consultations, just in trying to get a sense of the impact. I think that was before the committee report predicting the potential for over 1,000 jobs being lost, but the report came back and was showing over 2,000 jobs being lost because of the tax.

I don't understand the rationale behind this kind of tax, because it's a tax on manufacturers. It's a tax on those producing the goods versus a tax on those who are using the goods, as you've pointed out.

As I said before, we were very grateful to the government for putting money in budget 2021, which is needed and is being accessed by industry, but then, on the flip side, it's counterproductive to put a 10% tax on aerospace products. As I said before, lots of times folks think of the aerospace sector as being predominantly in Montreal, but it's right across the country. We see the impacts of the tax, and they're going to be spread right across the country. We have companies in British Columbia, companies in P.E.I. and companies in Winnipeg and right across the board here.

We're very concerned about the impact of the tax. We're very concerned that the government did not do an economic analysis before bringing the tax into place. We're eagerly awaiting some of your deliberations on that matter.

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

On the same matter, the government claims to have consulted with industry and changed the tax to reflect issues raised by the aerospace industry. Can you confirm that?

Is that enough for your industry?

[Mike Mueller]

There was some consultation. We did consult on it, but we don't think it was enough consultation, obviously, because of the lack of economic impact information from the government and not knowing what would be coming into place. They did take our recommendation on amending a certain piece of the legislation with respect to how money is taken from industry when the product or the aircraft is being exported. There would have been some pretty significant cash flow considerations if that hadn't been changed.

We are appreciative of the government's making that change, but there are still significant recommendations we are making with respect to charter services. I know that some companies are having issues with that. Also, the threshold for how one defines “personal use” versus “business use” is unrealistic, in our view.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Now we're going to the NDP. Welcome, MP Green, to our committee.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you, Mr. Chair.

Thank you to the committee members for welcoming me here today. Thank you to the witnesses.

I am sitting in for my colleague and dear friend Daniel Blaikie, who could not be here but sends his regards. He certainly has a keen interest and will be following up accordingly.

The questions that I have prepared today are in response to Ms. Sarangi and Campaign 2000.

Ms. Sarangi, welcome back to the finance committee. Thank you for taking the time to meet with us today.

In the 2022 pre-budget consultations—almost exactly a year ago now—Campaign 2000 spoke about the need for the CERB repayment amnesty for low-income Canadians. Now, in 2023, there is still no plan in place for this low-income repayment amnesty.

You referenced some of this in your opening remarks, but perhaps you could share with us what has changed since last year for low-income Canadians who are struggling with CERB debt.

[Leila Sarangi]

Through the Chair, thank you so much for your question, Mr. Green, and for inviting me back to speak.

We have been tracking the impact of the CERB since the early days of the pandemic, around April 2020, when it had interactions right away with people who were on social and income assistance in most provinces and territories.

The lowest-income people in our communities were experiencing clawbacks because they received the CERB, and they received the CERB at that time because they were being told by their caseworkers, by CRA and by government discourse, “Apply for these benefits. We are leaving nobody behind.” Threshold eligibility requirements were changing constantly, especially in those early days.

We've been asking for a CERB repayment amnesty. We are coming into the third year of the need for this.

Over time, what we all know has happened, especially over the past year, is this unprecedented rise in inflation when food costs—food inflation—are outpacing overall inflation. People do not have the money to deal with CERB debt, and they are really struggling to meet their basic needs. These are our basic human rights.

We have government obligations and commitments—multiple commitments that we've made—and things are so dire for people, especially over this last year. It is really when you're in the community and speaking with constituents that you can see there is nowhere for people to turn. I think we've all seen these pictures of people lined up outside food banks. Social assistance and disability assistance programs are what people are turning to, but those are leaving them in destitution.

People are having a really hard time. Putting a debt that goes up to $14,000 onto these folks and asking them to enter into repayment plans of $5, $10 or $15 a month, which is a debt they would carry for 40 years, goes against all of our obligations and commitments, and it puts a lot of pressure on these folks.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you. Certainly those stories are very difficult to hear.

I want to reference for a moment the report that just came out called “A Just Recovery for Hamilton”. It's a 2023 report that was released in my city just this week by a coalition of 20 social service agencies, and it referenced the good that CERB did.

You may or may not know, but in Hamilton, we had a pilot for basic income. The way in which it lifted people out of poverty.... In Hamilton, for instance, the CERB and CRB program impacted 20% of Hamilton residents, allowing them to buy essential goods for their families, yet now we have this scenario in which the CRA seems intent on pursuing them.

However, when I reference headlines, they say it wouldn't be worth the effort to review all of the ineligible pandemic payments that relate to wage subsidies. That's billions of dollars that went to big corporations that then laid people off and in many cases paid out significant shareholder bonuses, including to ridiculously wealthy CEOs.

The Auditor General's report examined the CRB and the CEWS. It estimated that $27.4 billion “should be investigated further”, and of that, $15.5 billion was paid out to the wage subsidy, meaning that it went to employers directly.

Can you talk a bit, from your perspective, about the opportunity cost of having the CRA—which is spending our money, good money after bad—doggedly pursuing the lowest-income people who are struggling to get by in record-high inflation, while simultaneously allowing the wealthiest corporations in this country to walk away without any type of liability?

[Leila Sarangi]

Thank you for pointing out that important point.

I believe that the federal government has earmarked over a quarter of a billion dollars to pursue these individuals on low income, who just do not have.... Even $5 or $10 a month out of their budget means they're making choices around what food they're not going to buy for their kids or what medication they're going to skip that month.

We're really concerned with reports that the wage subsidy is not going to be looked at in the same kinds of ways. The focus is going to be on pursuing these low-income individuals and families, who really need government support right now, while letting big corporations and their wage subsidies off the hook.

We know that the government didn't ask for.... The Auditor General report that came out just last month says that they didn't even collect enough data to find out if the wage subsidy did what it was supposed to do, which was keep employees on the payroll. That is what the government should be investigating. That is where the government should be putting its attention towards recouping amounts and revenues. It shouldn't be from individuals and families who are struggling.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Green.

Members and witnesses, we're moving into our second round. In this round, the time is a little different for each of the parties. We're opening up with the Conservatives for five minutes.

MP Lawrence, you have five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

I think, as you said, Mr. Lansbergen, maybe we saved some of the best for last. There has been some great testimony today.

Three of the critical elements for economic growth in any industry are innovation, labour and capital. It's my assertion—and I think we'll establish and prove points—that this Liberal government has been undermining all three of these elements.

I'll start with you, Ms. Grynol. As we look forward—and your industry was obviously hit very hard in 2020 and 2021 through the pandemic—can you talk a bit about the labour challenges your industry is experiencing?

How is the government helping you by having a 2.1-million-person backlog in the immigration system? Are we getting the newcomers we need to help you with your industry?

[Susie Grynol]

The labour challenge in our sector is acute, as I've indicated. It is the single biggest barrier to our growth.

The biggest challenge with the immigration system, whether people are coming in the short term or they're coming in permanently, is that the in-demand workers we need in our sector are not allowed in through that system. Fundamentally, there needs to be reform over the long term if we're going to solve this challenge. We have also put recommendations forward around what we can do in the short term and the immediate term.

In the immediate term, we are recommending a program that would support newcomers to Canada. It's one we've run successfully with the government in the past. It's called “destination employment”. That would be the lowest-hanging fruit, targeting, in particular, Ukrainians who are here. Many of them are unemployed and could easily come into our sector. We could accommodate any skill level and any language ability. We have all kinds of training opportunities for these individuals. That's the immediate opportunity.

We're also looking for reforms to the temporary foreign worker program, in which we could have a dedicated stream.

It really comes down to prioritization and processing. I will say that at this point in time, our industry is not a priority.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much. It is very telling.

The other issue—and then I'll move on to the Council of Canadian Innovators—is, of course, the marginal effective tax rate. For a low-income parent, it is around 75% to 80%. As I understand it, a lot of the people in your industry are women and a lot of them, of course, have children as well. They're going to keep only 25¢ or 20¢ on their next dollar earned. That's a real challenge for you. As I said, I think the government has systemically, over the last eight years, undermined the labour market.

I'll move over to the Council of Canadian Innovators.

When it comes to innovation in Canada, I don't think I'm.... According to the OECD and other multinational measures, Canada is lagging behind. Nicholas, am I incorrect in that? Is that a fair commentary?

[Nicholas Schiavo]

That is correct.

Our economic output per capita has been the worst among advanced nations in the OECD since the 1970s, and this a trend that we expect to continue until 2060.