Finance Committee on Dec. 13th, 2021

[The Chair, Liberal, Peter Fonseca]

My apologies, Monsieur Ste-Marie.

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

But I would like to ask more questions and make more comments in a subsequent round.

My thanks to Mr. McGowan and Mr. Baylor for their specific answers.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Ms. Dzerowicz, go ahead.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I have a couple of questions for Finance officials as well. This whole bill is about urgently getting money to hard-hit industries and the workers within those hard-hit industries, in particular in tourism and recreation, and many in the arts and culture sector. I don't know if this question is for Mr. McGowan or if there is someone else who can better respond to it. If this amendment as proposed is passed, what would be the impact of this amendment on the program as a whole? Would it delay in any way supports getting to the workers or to the businesses that need them?

That's part one. Two, would this amendment in any way actually penalize any businesses or corporations for doing business in a legitimate way?

Those are my two questions.

[Trevor McGowan]

Maybe I'll start with your second question first. As noted, there's a concern that because the rules apply to all dividends and not just dividends paid on the publicly listed shares, they could require repayment of the wage subsidy where one entity in a corporate group is moving funds to another entity in the corporate group for the group's purposes and not actually returning any amounts to shareholders. That's a very common way for public companies and large corporate groups to move money around and ensure that funds are in the correct legal entity. Likewise, it could adversely affect corporations that have issued preferred shares as part of their corporate financing programs. I think those are probably the two largest.

In terms of what impact the amendment would have on the administration and enforcement of the rules, of course the Canada Revenue Agency has been working tirelessly to put these structures and programs in place in order to implement the new measures contained in Bill C-2. Any change to them could require the Canada Revenue Agency to tweak its systems. While I don't know—I'm not involved in the development of the Canada Revenue Agency's IT systems—that does seem to be a risk.

Conversely, public corporations could be required to proceed with the rules without necessarily having full certainty as to how they are intended to apply—for example, whether it applies to the qualifying period that ends after the date of royal assent, or before, or whatnot.

So there would be those concerns. Unfortunately, I don't know enough about the Canada Revenue Agency's technical systems to advise or to opine on whether they would need to be redesigned, but that is something that I think we'd want to check.

[Julie Dzerowicz, Liberal, Davenport, ON]

Mr. McGowan, before you or someone else within the finance department answers my second question, I just want to be clear. I like putting things into plain language. I always have to put things into terms I understand. My understanding of your first point is that there's a legitimate reason why a number of corporations might move money around. It would be seen as dividends moving around, but it has nothing to do with giving dividends.

The intention of this amendment is to say that if there are dividends given out to shareholders, that company should not be receiving the wage subsidy. You're saying there are legitimate reasons to move dividends within companies. That's a normal course of business and they do it for a number of different reasons in an everyday way. That's the first part.

For the second part, you're saying there are some technical things that the CRA might have to change if this amendment passes, and we don't quite know how easy it would be for the CRA to do that.

[Trevor McGowan]

That's absolutely correct.

Of course, I would not speak on behalf of the Canada Revenue Agency about their IT and system requirements. I know they've been working tirelessly on implementing the systems required to get the mechanisms under the bill.

If it would be helpful to clarify things, I always find it's best to think of concrete examples. Let's say you have a public corporation that has two subsidiaries. One subsidiary operates in one market, and the other subsidiary operates in another. One of the subsidiaries is doing a bit better. It has some extra retained funds, so it could pay a dividend, tax-free, up to the parent company. That would allow the parent company to contribute those extra funds to the other subsidiary to help it weather whatever crises or issues it's facing, and maybe pay off some of its receivables or wages. That's the type of movement within a group that I was referring to.

[Julie Dzerowicz, Liberal, Davenport, ON]

My second question was, if this amendment goes through, will there be a delay in supports getting to the workers and/or corporations that need them?

[Trevor McGowan]

As I noted, I'm not certain whether or not the Canada Revenue Agency.... I'm not certain what kinds of delays in the delivery of the programs this would lead to with the CRA systems. I'm sorry. I don't know that.

[Julie Dzerowicz, Liberal, Davenport, ON]

No, thank you. I appreciate the response. I understand now.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Go ahead, Mr. Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

It might help to simplify things. There is already a restriction in this bill for companies that choose to pay or increase executive compensation. The challenge is with someone gaming the system, as mentioned by our well-informed official, and paying dividends after the period is over. The exact same criticism could also apply to share repurchases.

This amendment, now that it is not retroactive, at least provides a significant amount of time for CRA officials to do what they have done plenty of times previously, which is to draft an interpretive note on how it will interpret this section. This would cause any public company that's asking for government funds to subsidize its wages to think very hard about the choices it's going to make before it asks for and receives government funding.

We have the executive compensation restriction. It is an incredibly reasonable amendment. Now its subamendment, on a go-forward basis, gives companies time to plan well in advance and think very hard before they take public funds.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chambers.

Go ahead, Mr. Blaikie.

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

Thank you.

One thing that low-income families and low-income seniors do when they have a surplus in their account is transfer it to the grocery store to buy groceries. They may transfer it to a mechanic to fix their car. They may transfer it to creditors in order to pay down their debt or to cover interest. I guess it's too bad they can't call that a dividend payment, eh? Wouldn't that be nice? Then maybe they'd have more champions around this table. But they can't.

That didn't stop the government from having very strong opinions about whether or not it was appropriate for them to have taken pandemic benefits in the first place, particularly if they received the Canada child benefit or the Canada worker benefit or the guaranteed income supplement. Nobody said, “Well, hey, let's call it a dividend and call it a day.” They said, “Let's take the money back. And if we're going fix it up at all, we're going to do it after having dragged it out for months.”

Some of them are living in their cars. Others are living on the street. Others have eviction notices coming up while they try to pay for their medication and figure out what they're going to do as winter sets in. Maybe we as a committee need to look at how we could classify the essential transfers of seniors to get the essentials they need as “dividends” so that they could have the same protections these large companies seem to have. I think that's maybe something we should mark down for work on the agenda of this committee on a rather urgent basis.

It was very nice to get a technical answer from department officials. I believe, if I'm not mistaken, these are the same officials who were here earlier in the week or last week. Pardon me; it's all blending together. There have been a lot of meetings.

I felt like I got a more clear technical answer about my own amendment than I did about the bill they helped design for the government. I'm going to have to spend some time reflecting on that. I hope they will too, because the kind of technical response they came prepared to give today is exactly the kind of technical response we've been demanding of them for well over 14 hours now on the bill they helped draft. Now we know they're capable of it. That's a new discovery as of tonight. If this amendment has served to do nothing else, it's proved that departmental officials actually are a lot smarter than they sometimes give themselves credit for at this committee. I hope we see a commitment going forward to their continuing to show this kind of competence as we continue to ask questions.

I would say also that I just don't accept the argument that this was a rush job. I mean, come on; we had an election, and how long did it take for Parliament to come back? It's no secret at this table that I'm a member of the fourth party. We have 25 seats in Parliament. That's not news to anybody. We have a government that says they actually agree with the principle of the amendment. Why is it me trying to draft the amendment through the House of Commons drafters, without any of the technical expertise of the department, when the government members say they're on board? It's not like I was in the room and said, “No, don't put that in there” and then I changed my mind. They knew about this.

In fact, this committee in the last Parliament made recommendations on this very issue, so it's a little rich to hear from government members that they're on board, if only we had more time. They controlled the time. They drafted the bill, so no more crocodile tears around here, thank you very much, on questions of timing or technical expertise.

I'll continue to do the best job I can with the resources I have. New Democrats will continue to ask Canadians to give us more resources at election time so that this kind of dog-and-pony show is no longer the rule but just the exception.

All of that said, I do actually have a question for the officials. If we were to pass this amendment, and if the companies applying for wage subsidy support on a go-forward basis were to get a letter explaining to them the very things that departmental officials explained today at the table, they would have the information they needed in order to make an informed decision, as Mr. Chambers rightly pointed out. Would they not also be getting more notice about the implications of their application for pandemic help than seniors on the guaranteed income supplement received when they applied, in good faith, to the CERB and were not notified that it would later come out of their guaranteed income supplement? Is it fair to say that they'd be getting more notice?

That's a nice, crisp, yes-or-no answer, please. I am prepared to answer the question as well, if departmental officials aren't sure which one to choose or if they don't have a coin to flip.

[Trevor McGowan]

I can provide a short answer, which is that the Canada Revenue Agency has been developing guidance on rules. With any amendment in the bill, they would continue to do so, so that taxpayers are apprised of their rights and obligations through the bills that are enacted by Parliament.

In terms of a relative comparison between the amounts of information under the wage subsidy and what was provided under the GIS, I'm not familiar enough with those other programs to provide a real comparison.

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

Alas, I fear the moment of clarity has passed. May it soon return.

Incidentally, the answer is yes. They would be getting more notice than seniors on the guaranteed income supplement did when they applied in good faith, just in case there was any doubt in the minds of any members around the table.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie.

I have Mr. McLean and Monsieur Ste-Marie. I think Mr. Poilievre also raised his hand.

Go ahead, Mr. McLean.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

I find myself squished here, because I totally agree with the intent of Mr. Blaikie's motion, and Mr. McGowan's explanation of why we need to tighten this up is very succinct. Preferred shares are not shares to common equity, and we are looking at distribution of common equity shares. We can probably tighten that language so it is about dividends payable on common equity—that is, dividends that corporations choose to pay to shareholders.

Let's recall that what happened here throughout CERB was a transfer of wealth from certain parts of society to certain other parts of society. It is a gross imbalance between asset holders, who are getting incredibly wealthy through this process, and people without assets. To not continue to fund the transfer of wealth from regular Canadians to rich Canadians is exactly what the intent of this motion should be, and we need to find the wording to make sure that it applies.

Mr. McGowan, I'd say we will talk about common equity, because we know that preferred equity is actually required at that point, like a debt instrument, if you will. We also understand that some of these dividends are transferred between different arms of the same corporation and there's no payout. It is only a transfer mechanism; it is not a distribution from the corporation to its shareholders.

We can tighten up that language, and I would encourage Mr. McGowan, because he understands the intent here, to submit something that would tighten it accordingly, so we don't continue with this wealth transfer, which is exactly what Canadians are tired of seeing. We're paying attention to their wealth here, to their taxes. We're not just flushing it into the system—I'm sorry, Mr. Baker, for using that word again—and pushing up inflation, pushing up the wealth of Canadians and the asset inflation that has occurred over the last year and a half here without anybody minding the store.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. McLean.

We have Monsieur Ste-Marie, Mr. Poilievre and then Madame Chatel.

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

First, I have a point of order, Mr. Chair. Then I'll speak more generally to amendment NDP‑3 as amended.

I completely agree with the suggestion from my colleague Mr. McLean. Would it then be a new subamendment to make the wording more specific?

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

May I say something on the same point of order?

[The Chair, Liberal, Peter Fonseca]

Go ahead, Mr. Blaikie.

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

One of the options that might be available to the committee—if a member who had the floor and wasn't speaking on a point of order might see fit to move it—would be to table this amendment until the end and have a legislative drafter in the interim try to find that wording. That way, we could return to this at the end of clause-by-clause and carry on with the other amendments for consideration in the meantime.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie.

Go ahead, Monsieur Ste-Marie.

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

I agree with my colleague Mr. Blaikie's proposal, that we set this amendment aside and come back to it at the end of this meeting, when we have found the appropriate rewording to reflect the objective of the amendment.