Evidence of meeting #77 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was spending.
A video is available from Parliament.
12:50 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mrs. Chatel.
We'll go to MP Ste-Marie, please, for five-plus minutes.
12:50 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
First I'd like to welcome the three witnesses and thank them for being with us. We are finally able to meet. At the last committee meeting before the holidays, a tragic event prevented us from holding this meeting.
Mr. Coulombe, we recognize that you receive orders from the government, in this case the Minister of Finance. You are told to introduce a tax, and you must do it. That's your role. In previous sessions of Parliament, when this tax was introduced, I was surprised and even shocked to learn that there was no economic impact study to go with the introduction of this new luxury tax.
For example, the folks at the Aerospace Industries Association of Canada have said over and over again that they support the principle behind the tax. That's also my political party's position. However, we must keep perverse and negative effects from harming industry to such an extent that they neutralize the original objective to make the rich pay. I'm thinking in particular of the devastating effect that the aerospace industrial cluster had in Quebec and Canada.
When a policy like this is being rolled out, I find it unacceptable that no impact study has been conducted to assess it. It's even more obvious when we think of the sobering example in the United States. They brought in a similar tax in the early 1990s, but then withdrew it precisely because the impact had not been properly evaluated.
The Parliamentary Budget Officer expects that this tax will cause a shift in buyer behaviour.
Is a change in behaviour like this being considered in the impact study you are currently conducting?
12:55 p.m.
Senior Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance
Thank you for the question.
Again, it wouldn't be appropriate for me to start discussing the content, assumptions or methodology presented in the economic impact study. I'm sure you understand that the committee's motion was passed on October 22, I believe. So colleagues have been working for several months to complete the study.
Your panel today consists primarily of witnesses who are trained jurists. We truly specialize in drafting legislation. A team at the Department of Finance specifically deals with the economic aspects. You should be able to find the answer to your question in the report to be tabled within two weeks.
12:55 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Actually, I was expecting the team in charge of the economic aspects and carrying out the study to come report to us and tell us how far along they are. We could have discussed it more thoroughly.
The Parliamentary Budget Officer is expecting a change in behaviour. I would simply like your team in charge of the economic aspects to be advised that we—at least that's my position and the position of the majority of my colleagues here, I believe—we expect that change in behaviour as a result of the tax being introduced to be factored into their study. I'd like you to convey that message to them.
With respect to the aerospace sector, HEC Montréal professor Jacques Roy has done an impact study that takes that aspect into account. I want to make sure you tell your economist colleagues to ensure that aspect is taken into account. We need to see what their position is on this.
We're hearing that in the aerospace sector alone, 2,000 jobs are on the line as a result of the tax as it stands. As far as the impact study is concerned, we need to get an idea of how the department's study stacks up on that.
12:55 p.m.
Senior Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance
The only comment I'd like to add is that, as you mentioned, we were supposed to appear before the committee on December 9. That was postponed because of Mr. Carr's tragic death. So thank you for your comment about the timing perhaps not being ideal, but today is the day we were asked to appear on the first report.
12:55 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you very much.
In closing, I'd like to address you, Mr. Chair, and my esteemed colleagues. I think we are looking forward to the economic impact study being tabled. We look forward to seeing it and analyzing it. I feel we might want to make sure that the people who did the study can appear alongside the Department of Finance team at a future meeting to answer specific technical questions about the assumptions used.
I'd like to thank the three witnesses for being with us today. I also thank them for their work.
12:55 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Ste‑Marie.
Now we'll go over to MP Blaikie to finish off this panel.
You have five minutes.
12:55 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much, Mr. Chair.
I'll start with some honest feedback about the progress report that your department prepared. I have to say I found it disappointing. I think what I had hoped to see in a progress report were some lessons learned from the initial months of implementing the tax. It was very light on that, if there was anything. What it provides is a little bit of history as to how we got to the point of implementing the tax in its current form.
I've heard the answer many times—in terms of the impact of the tax overall, we're to wait for the economic impact study. I am interested to know, given that you've been in the process of implementing the tax now for several months, what you have learned. What kind of friction has there been in the implementation of the tax? What kind of information have you needed from companies, for instance, on the ratio of personal use to business use? What's the reporting regime for that? Is that beginning to come together? I know there were questions before the legislation was passed about what that would look like and how that would be reported. What are the new mechanics that your department has had to adopt to implement the tax as is, and what have you learned in that implementation?
That's what I was expecting to see in the progress report.
1 p.m.
Senior Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance
The luxury tax is to be remitted on a quarterly basis. Ths first quarter effectively covered the September 1 to December 31 period.
When a quarter is completed, taxpayers have until the end of the following month to file the return with the CRA and to remit the luxury tax revenues to the Receiver General for Canada. The reality is that that process was just completed a couple of weeks ago. As a result, the department has not yet received microdata with respect to how much revenue has been collected by the luxury tax. We will start receiving that information in the near future.
When we look at parallel new tax measures that we have implemented over the years, we see that it takes a few months after we start receiving returns to have a broader sense of the situation, the lay of the land.
That said, we have worked extensively with the CRA and with the CBSA to ensure that those two administrative agencies were providing technical assistance to taxpayers. My understanding is that the CRA website, in particular, includes a list of notices intended for the various audiences, those who have to register under the tax. In that sense, the lessons learned...are likely to continue to have a good working relationship—
1 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
I have a quick follow-up question before we run out of time.
Given the letter of comfort that was issued on November 29, 2022, with respect to sales of subject aircraft or subject vessels entered into before 2022, do you expect, for that first quarter, that there would have been aircraft sold that were covered by an agreement signed in 2022, as opposed to prior to 2022? In that sense, are you expecting any revenue from the luxury tax on aircraft for this quarter, or are you anticipating that the aircraft sold in that period would have been covered by pre-2022 agreements, and therefore not subject to the tax?
1 p.m.
Senior Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance
We booked for 2022-23, the first fiscal year, about $79 million of overall luxury tax. On the subject of aircraft, we're expecting to generate about $5 million of revenue during the initial fiscal year.
I don't have the breakdown as to whether those revenues were expected to come in the first reporting period or the second. The technical adjustments that we made, including through that comfort letter, were in respect of aircraft that we did not consider to be part of the base. In that respect, I don't expect to see a huge impact on the revenue profile.
Again, I'm speculating here. We will see....
1 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Indeed, but it is a possibility that the first quarter would return no revenue from the luxury tax in respect of aircraft, given that comfort letter.
Is your projection for the entire 2022-23 fiscal year?
1 p.m.
Senior Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance
The numbers that I provided to you are in line with the fiscal profile we provided to the committee on May 3 of last year with respect to the first fiscal year.
1 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
We want to thank Department of Finance officials for appearing before us and for your testimony for this study.
Thank you on behalf of the committee.
Members, that concludes our day, so shall we adjourn?
1 p.m.
Some hon. members
Agreed.