Finance Committee on May 17th, 2023

[Peter Davis]

Thank you for the question.

We certainly see that in our offices as well throughout the year. Individuals come in, and they haven't filed in several years. Typically, they think they owe money or that they may be in trouble with the government. When we have a chance to work with them, it is not uncommon to see lower-income Canadians walk out of our offices with large five-figure refunds. In fact, we even had an individual, earlier this tax season, who had a $100,000 accrued refund.

These are life-changing amounts of money that just would not be captured or realized through an automated tax filing system. To answer your specific question, yes, there needs to be more mechanisms in place to ensure that there's outreach to these individuals to help them understand that filing their taxes can be a very significant financial benefit.

I'm not sure if CRA has necessarily—

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Davis.

We're going to go to the Liberals and MP MacDonald, please, for six minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

I see my colleague started an extension of time. It's all good.

I'm going to go to Mr. Northey of Pulse Canada.

I remember having your team in my office, and I learned quite a bit from Pulse Canada about what they do. I want to give kudos, first of all, because I think, in the agriculture sector, you are leading the way. You gave us some numbers in your reduction of GHG emissions.

On Prince Edward Island, for example, as you're fully aware, we have potato crops. Over the past year, there's been a real uptake in cover crops, and we've started using them more extensively. In the potato fields last year, 50% of the acres that had potatoes in them were actually cover crops. I always look out the window when I'm flying home, and I used to see red clay everywhere. Now I see green cover crops, so kudos to you.

There have been quite a few things in the budget that are relevant to nitrogen management. It's somewhere around $35 million or $36 million to support nitrogen management practices by farmers, particularly in eastern Canada. We were hit obviously with the tariffs on Russian fertilizer, but this will assist optimization. I want you to expand on how this will help farmers, especially in eastern Canada, if you could.

[Greg Northey]

Thanks for the question.

Throughout COVID, particularly with the amount of fertilizer we import from Russia and Ukraine, there was a large disruption and a lot of worry within the sector around having enough nitrogen to grow a crop. The focus for the sector, at the time, was to try to ensure that the funds—the extra tariffs—would go into supporting farmers in the future, as far as being able to ensure they have the crop nutrients they need. There are obviously a lot of ways for the sector to reduce nitrogen. Pulses are one way, because we fix the nitrogen from the fertilizer, but there are a lot of other beneficial management practices that can be focused on.

I'd say the big concern for us around that was more in the phrasing of it. We always like to think about not just reducing fertilizer but the efficient use of fertilizer. The one thing that gave us pause in there.... Certainly, supporting the ability to reduce nitrogen or at least increase the efficiency of nitrogen use is very important, but any kind of target or perspective that says, “Thou shalt reduce the amount of fertilizer or nitrogen you use to a certain level” is very concerning for the sector. I think you would have seen that with certain fertilizer targets the government was proposing a few years ago as well. It's highly sensitive because we are looking to maximize our yields. We are exporting to the world, ultimately.

While it is important to recognize that, it is also important that we do it in a right way, one that recognizes we still need these inputs. We are just looking for ways to maximize their efficiency.

[Heath MacDonald, Liberal, Malpeque, PE]

I know that, at the time, when we started talking about 30%, there was a narrative around that we had to reduce our nitrogen by 30%, but it wasn't that at all. I'm glad you clarified that.

The other thing is that the budget has $13 million to increase the interest-free limits for loans under the advance payments program from $250,000 to $350,000, in order to offset the impact of Russia's illegal invasion and the global supply chains, obviously.

How will this benefit the farmers you represent?

[Greg Northey]

These are very important loans for the sector.

We have providers throughout western and eastern Canada, obviously, who use those advance payment programs. When you're managing the risk that is agriculture and the biological system that.... We look at Alberta right now, where there's a moisture deficit in some areas. Irrigation districts are really suffering. There's always risk in getting a crop in. Producers often need upfront cash to pay for inputs—your seed, fertilizer and everything else.

All improvements to those kinds of programs are always very important, especially for advance payment.

[Heath MacDonald, Liberal, Malpeque, PE]

I think I read somewhere that we're losing, in Prince Edward Island, about one inch of soil a year. If we don't plant cover crops, we're basically losing two inches of soil, because of the crop going back in—if it is potatoes—to some extent. It's very interesting.

We had the Federation of Agriculture here before this committee. At that time, we asked them specifically what they wanted to do with the funding relevant to the Russian issue. They came back and said the same as what you're saying.

To me, sometimes farmers get a bad rap for what they do, in relation to carbon emissions and so on and so forth. I'm going to ask you to repeat what you said in your preamble, because I think it's important that people at home—anybody listening to us tonight—hear exactly what Pulse Canada and your farmers are doing to reduce carbon emissions.

[Greg Northey]

Thank you. That's quite the platform. I appreciate that.

Pulses have a built-in advantage in that we don't have to use nitrogen fertilizer. The pulse crop pulls the nitrogen from the soil, so we don't have to use nitrogen fertilizer. There's a massive.... The numbers I cited are literally because we are not applying nitrogen fertilizer. We're reducing it. Our goal, as a sector, is to increase the number of pulses on acres. The beneficial aspect of pulses is that they need to be used in rotation. You use a pulse, and the next year you use canola. That canola gets a beneficial nitrogen bump, as well, because we're fixing that nitrogen in the soil. We have a great advantage.

Obviously, pulses are huge elements of food security, globally. We're seeing a burgeoning processing side. We're seeing lentil flour, pea flour and pea protein going into a variety of different food products. We see it as a win-win for climate change, the entire farm rotation and the farmer, as well as for health, nutrition and everything else.

We're quite lucky with the intrinsic value of pulses, for sure.

[The Chair, Liberal, Peter Fonseca]

That's the time. Thank you, MP MacDonald and Mr. Northey.

Whoever ate today, let's thank a farmer for that.

We're going to the Bloc and MP Ste-Marie.

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

Thank you, Mr. Chair.

Like you, I would like to thank all the witnesses for accepting our invitation on such short notice and with so little time to prepare. It's very much appreciated, and I thank you for it.

I would like to say hello to Mr. Kelly and tell him that an all-party caucus is currently working on entrepreneurship with his organization and a number of his colleagues. For my party, Sébastien Lemire is co-hosting the event with several of my colleagues at the moment.

My questions will be for the representatives from Option consommateurs. I would like to thank Ms. De Bellefeuille for her presentation and Mr. Plourde for being here.

Ms. De Bellefeuille, you raised three very important topics that are addressed in Bill C‑47: air transportation, banks and usurious credit. I will have a few brief turns to speak and I will try to come back to these three elements.

I'll start with the banks. There will be changes, and you told us that Bill C-47 will put an end to banks' ability to choose the external body that will handle complaints against them.

Can you give us an example of what that means and what it changes? Could you then explain to us why that organization's recommendations will remain non-binding?

[Alexandre Plourde, Lawyer and Analyst, Option consommateurs]

If I may, I will answer your question.

We raised two main problems with the external handling of complaints in the banking sector. The first problem is essentially solved by Bill C-47. It is the ability of banks to choose which external body will handle consumer complaints. Up until now, banks have had the option of choosing between two bodies to deal with complaints they received from their clients. Clearly, this is a very specific situation that, from consumers' point of view, raises a number of questions about the independence and impartiality of the body that will make decisions concerning banks. It also adds complexity to the system. Creating a system where a single body handles external complaints is a good part of this bill.

However, the problem that will remain and that will not be solved by Bill C-47 is that this body's decisions will not be binding, as you mentioned. The decisions made will only be recommendations to the banks and, theoretically, they will not be required to follow them.

So we can imagine a scenario where a consumer files a complaint against their bank, wins a case in a decision by the ultimate decision-making body, but the bank simply refuses to implement the recommendation. The consumer then ends up having to turn to the courts and fight in court, which can be quite difficult, considering the means at banks' disposal.

We see this as an unacceptable risk to consumers. If a system is created that is supposed to be impartial and fair, there is no reason for the decisions made by the external body not to be binding.

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

Thank you. That is very clear.

In committee, we can look at whether the bill should be amended to make the body's recommendations more binding. We can discuss it among colleagues.

Ms. De Bellefeuille, I like the idea of aligning the usurious rate set out in the Criminal Code with the Bank of Canada's key interest rate or economic conditions. You referred to the fact that regulatory exceptions to the usurious rate would be maintained. You said that this would enable payday lenders to offer loans.

Can you comment on that and tell us why it should be considered usurious credit?

[Sylvie De Bellefeuille]

Thank you very much for the question.

It is important to know that payday loans really tend to go after extremely vulnerable clients. Currently, the Criminal Code provides for an exception—that is to say that payday lenders can charge interest fees of well over 60%. That can amount to interest costs in the order of 300% for some loans, for example. This is sometimes justified in the community by saying that these are small, risky loans. When we talk about small loans, this exception applies only to loans under $1,500.

The problem is that this really targets extremely vulnerable clienteles. These are situations where people will sometimes have to use these types of loans for basic needs. The costs are so high that, ultimately, because of the additional fees, these people will still need additional loans to be able to cover their needs. So it makes no sense.

Moreover, in Quebec, in principle, this type of loan is not possible. There are other problems with some of the other types of loans, though. I know that this exception applies in other Canadian provinces. In our opinion, since this is aimed at extremely vulnerable clienteles, it is not justified.

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

Okay.

Thank you very much.

We can also look at whether the bill needs to be amended.

Based on your presentation and your comments, it is clear that this should not exist and that it should be abolished.

I have a few seconds left, and I would like to talk to you about the fixed rate of 35%. You say that it's better than nothing, but why do you prefer a variable rate aligned with the key interest rate?

[Sylvie De Bellefeuille]

Simply because it would make the situation much more flexible. The current rate has been in place for many years. The economic context has changed, and it took 30 years before we decided to ask the question again.

Similarly, in the Consumer Protection Act, new rules were introduced in 2018 that provide for high-cost loans. Again, this high rate is calculated based on the key rate. That allows for some flexibility and helps avoid having to go through a legislative process again to change the rules along the way.

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

Thank you very much, Ms. De Bellefeuille.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

We'll now go to MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much, Mr. Chair.

I'd also like to thank our witnesses for having been able to appear on short notice.

Ms. Sarangi, I want to start by asking you a two-part question.

In the budget implementation act that we're studying, there are provisions to allow for the Canada workers benefit to be paid out in four installments over the course of the year. What I find interesting—I don't oppose it, but I find it interesting for reasons that I'll elaborate on soon—is that the government has said that, if the eligibility criteria change during the end of the year, it will adjust the final payment but it's not going to go after amounts that were paid out based on the previous year's income.

To me, what that says is that there's been an acceptance by the government, with respect to this program, that a certain amount of bad debt on a public program is acceptable. We haven't seen anything like that when it comes to CERB repayment, and you mentioned that in your opening remarks. We know there are a lot of low-income Canadians, who in good faith, sometimes at the behest of provincial governments, applied for the CERB during the pandemic when they were desperate. They haven't been able to get the compassionate, case-by-case approach that they've been promised by the government.

When it comes to the CWB, we have the acceptance of a bad-debt principle, but there is no acceptance of such a principle when it comes to the CERB. In fact, the government's going to throw a lot of good money after bad trying to get blood from a stone, from people who don't have the money to pay it back anyway.

The second part of this question is to notice that, with regard to the emergency wage subsidy program, there was well over $15 billion paid out that shouldn't have gone out the door to companies that were either making record profits, paying dividends, paying scab labour during the pandemic or repaved their parking lots three years earlier—for a golf club here in Ottawa, for instance. There's not even an effort to recover any of that money.

Could you take a moment to speak about the difference in approach across these three programs? How do you think Canadians would benefit, from a public finance point of view, if the government were willing to accept the principle of bad debt when it comes to low-income Canadians on the CERB program, as it has done for the CWB to some extent and as it has done completely when it comes to the emergency wage subsidy program?

[Leila Sarangi]

Thank you for that question.

The differential treatment between the three programs doesn't make any sense at all. This government said at the beginning of pandemic that they were not going to leave anybody behind. The dominant narrative was “just apply for CERB and we won't leave anybody behind”. Everybody was in crisis, and we know that benefit really helped people.

There have been some groups of people whose CERB debt has been written off, such as low-income seniors, the self-employed to an extent and students to an extent.

For those low-income individuals and families who still have this repayment, it doesn't make any sense why they're being targeted. That's how they feel. They feel like they are being targeted by the government. When they explain to me how it feels, it feels like the letters are harassment letters because they're getting them over and over again. They don't understand. There's not clear communication. It's really inconsistent, and they don't know where to turn for help.

That the strategy is to keep increasing how much money the CRA gets to pursue for those individuals and families makes no sense whatsoever. Particularly, as you've mentioned, in the wage subsidy, a lot of money was given there. The Attorney General report that I mentioned earlier even talks about how the government didn't collect enough data to be able to make an assessment as to whether the integrity of that program was met. We don't even have the data to say whether it worked well or not, or whether it kept people on the payroll or not.

That's where we should be really focusing our efforts. We should be focusing on recovering large amounts of debt—not five dollars or $10 for the next 15 or 20 years from individuals who are already really struggling.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much for that.

You talked a little bit about the initiative for an auto tax filing in your opening remarks as well.

I wonder if you could speak to the value of not only having an auto-filing system, but also automatic registration of Canadians for income support benefits like the guaranteed income supplement as part of that process.

[Leila Sarangi]

From our perspective, automatic tax filing and automatic benefit registrations are low-barrier ways to reduce poverty for low-income individuals, seniors and families. Putting the onus on individuals who may be dealing with a whole lot of other things in their lives to find a clinic, pay for services, gather all of their papers and things like that, when CRA has most of their information anyway, doesn't make a lot of sense.

For us, an automatic tax filing program and automatic benefit registration would go a long way to keeping people updated and getting their benefits annually. We do think that it should go hand in hand with a parallel income benefit cash distribution system that works in partnership with charities for those who don't file taxes, who may not ever engage or who are not comfortable engaging right now with the federal government around taxes. There are different reasons why people do that. Oftentimes it's mental health, houselessness, fleeing violence or not having the right kind of documentation.

Charities are already fundraising and giving money to those folks. We want the federal government to invest and formalize those programs in partnership with those charities that are connected to communities. While we're expanding the personal income tax system through automatic tax filing and benefit registration, we're developing a parallel process that reaches those who are even further away from getting into the system, so they also get access to the benefits they're entitled to.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

I'm sure you'll have much more time for more questions in the next round.

We are going to the second round.

MP Morantz, you're up for five minutes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

Mr. Kelly, I'm sorry you're not feeling well. I hope to hear that you're on the mend.

I don't know if you were watching the meeting before this. We had representatives here from food banks, and we got some very disturbing testimony. Mr. Hetherington from Daily Bread said that we are in a crisis. We heard statistics that first-time users of food banks are at an all-time high. Before the pandemic, there would be about 65,000 food bank customers a month. Now it's 270,000 people a month in Toronto alone. They said many of their clients pay 100% of their income for housing. One of the witnesses said that 5% of Mississauga uses food banks. Both representatives from each of the food banks said that the grocery rebate will not help. Mr. Hetherington from Daily Bread said, “What's on the ground should be terrifying.” Another thing that they said was not before the pandemic was that 30% of food bank users are employed workers.

The reason I'm going through this with you is that I noted under “Tax and Regulatory Costs” in your 2023 submission, you said the following: “Based on a recent survey of our members, savings generated from a reduction in tax burden would benefit employees”, in that 59% of businesses would increase wages and benefits, and 32% said that they would “mitigate the need to increase prices”.

Many members of this committee, not in our party, have made the argument as recently as today that they can't see why tax reductions would help workers. Can you explain it to them?

[Daniel Kelly]

Sure. Thank you for the question.

Look, there are lots of pressures on lots of Canadians from different walks of life, including small business owners. Related to some of the previous questions, one of the big worries on my plate right now is the deadline for the Canada emergency business account loans, the 900,000 loans given to small and medium-sized firms during the pandemic. Many business owners are calling us every day asking how on earth they are going to repay this loan in order to keep the benefits by the end of this year. There are big worries from small business owners on that front too.

With respect to your specific questions, small business owners are really struggling themselves and are dealing with giant expectations for wage increases at all levels among their employees. Wages have gone up dramatically among SMEs this year, and expectations are for that to even.... We've seen record-level increases from our members at a time when they just can't afford it.

More money left in the pockets of the business owner does allow them to reinvest that in terms of higher wages, investing and growing their business and putting more shifts on the floor. Tax reductions really can help. Sadly, we've moved in the opposite direction. Rather than keeping taxes low, we've raised so many taxes, including profit insensitive taxes like EI and CPP. Every Canadian at the beginning of this year saw a drop in their take-home income because EI went up and CPP went up, at a time when many Canadians couldn't afford it. The business owner had to dig deeper to pay their share of the EI and CPP premiums at that moment.

This means the business owner has fewer resources to pay better wages to their employees, which could help, of course, on a virtuous circle of reinvesting those dollars into their workers for them to pay their bills.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Kelly.

I have a question for you, Mr. Davis, on the issue of the CRA preparing tax returns. I think you were essentially saying that there's a massive conflict of interest here. In a way, as a lawyer, I couldn't help thinking that it's like having the prosecutor also act as defence counsel when you're asking CRA to prepare people's tax returns for them. Would you agree?