Finance Committee on Oct. 6th, 2026

[The Chair, Liberal, Karina Gould]

Thank you, Ms. Jansen.

We will continue now with Dr. Martin for five minutes.

[Danielle Martin, Liberal, University—Rosedale, ON]

Thank you, Madam Chair.

Thank you to the witnesses.

I want to focus on Ms. Scoffield's testimony.

Thank you for continuing our ongoing conversation here at the finance committee about the importance of automatic tax filing and, therefore, associated automatic benefits, which I believe for many people living in poverty across Canada could be a game-changer. Too often, at both the provincial and federal levels, we force people to jump through hoops in ways that can feel quite humiliating to a low-income person, a person with a disability or an older person who's struggling. Making more of these processes automated would be of tremendous benefit.

If I can paraphrase your testimony, you spoke about the possibility of acceleration. You estimated that we're aiming to touch five and a half million people by 2029 with this project. You shared that there are estimates that the number of people who could potentially benefit may be double that or even more. Can you speak about what version of acceleration you think would be most responsible?

Given the seriousness of getting this right, I think it makes sense to tread carefully and to make sure that we put in place systems that will work. Do you think that acceleration should focus, for example, on the number of people? Should it focus on the number of benefits that could be accessed through automatic benefits once taxes have been filed? Can you say more about this concept of acceleration?

[Heather Scoffield]

Sure. First of all, I absolutely recognize that some caution is warranted. We're dealing with vulnerable people for the most part, and we certainly don't want to jump into a situation that makes things any worse or that disrupts the flow of benefits that they've been able to set up for themselves, but we have been talking about automatic filing for quite a long time. There have been many considerations in this committee and within the bureaucracy about how to do this right. When we talk about prefilling the tax forms, that's something where we have all that information, and it's probably being done a bit here and there, but I do wonder if we can't speed it up, prioritize it and get it going.

Deemed filing has some problems that need to be worked through in terms of privacy measures. Yes, government absolutely needs to take care that there are no privacy issues there, but let's confront this and get it going instead of spreading this process out over several years. We've already spent several years talking about it, and it seems to be taking a very long time.

[Danielle Martin, Liberal, University—Rosedale, ON]

It sounds as though you feel it's appropriate that we work carefully in order to make sure that there is no disruption in this process, but that, once we figure out how to do this well, we should try to make sure that as many people as possible are able to access this program.

I want to turn to this question of the sharing of data and reciprocity. I think it's certainly important in the case of people living with disabilities. You mentioned that more than a million such people live below the poverty line in this country. There are huge numbers of forms that those people need to fill out and that their health care providers need to fill out in order for them to be able to access provincial benefits. Having a reciprocal acknowledgement, once a person has been deemed to have a disability, for example, by either the federal or the provincial government, has been a point of advocacy in the disability community for some time.

Do we have any functioning examples of reciprocal data sharing of this kind between the federal government and the provinces and territories? What are we doing that we could build on in order to learn how to do this well?

[Heather Scoffield]

We have some research coming out tomorrow on this, and I'd be pleased to share it with you. I believe it's New Brunswick that already takes the disability tax credit and bases its provincial disability assistance on the DTC. There is a sharing of a list there that has already happened.

I do wonder why that hasn't been able to.... Obviously there's protection of data, and there's federal and provincial jurisdiction and so forth, but they figured it out at a very basic and technical level, and I think it would be pretty interesting if the other provinces could figure out how to do the same thing.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. Scoffield. We're going to have to end it there.

Thank you, Dr. Martin.

We will now continue with Mr. Garon for two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Madam Chair.

Greetings to the witnesses.

I would like to direct my questions to you, Ms. Scoffield.

You talked about automatic tax filing mechanisms. Some countries, such as Japan, have truly democratized this concept. For example, taxpayers in Japan get a postcard from the revenue agency that provides a summary of taxes owing and other information. People can either complete the longer return or simply sign the postcard and send it back. The interesting thing about these countries—and Japan is not the only one—is that they have really expanded this approach to a broader segment of the middle class.

Do you think the Government of Canada's proposal could be improved?

Also, would it be worthwhile to expand this program so that more people, at the very least, can opt for this approach to simplify filing taxes?

[Heather Scoffield]

Absolutely. However, I think we should start with the people who need social programs.

If we start with vulnerable low-income people first, then we can move further, but right now, people with more money have more means to be able to—

[Jean-Denis Garon, Bloc, Mirabel, QC]

Basically, what you're saying is that this is a first step, and it could be expanded.

You also talked about simplifying things.

As you know, Quebec already collects taxes on behalf of the federal government. Revenu Québec collects the GST for the federal government. Quebec doesn't have a tax collection agreement with Ottawa; it establishes its own tax base. In other words, the foundation is already in place.

Everyone knows that Quebeckers are attached to having their own income tax and their own institutions.

For several years now, the Bloc Québécois has been calling on the federal government to streamline everything by letting Quebec have a single income tax return for individuals, as well as for provincially incorporated businesses.

Do you think that having a single tax return in Quebec would be a useful way to simplify things for taxpayers?

[Heather Scoffield]

I absolutely think that having a harmonized system between the federal and provincial governments could make things simpler for—

[Jean-Denis Garon, Bloc, Mirabel, QC]

Could it be a provincial system in Quebec's case, given its unique institutional characteristics?

[Heather Scoffield]

I don't know enough about the differences between the two systems to say whether it would be simpler for Quebec to collect or for the federal government to collect, but absolutely, simplification is going to help everybody, and I would hope to see some collaboration there.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. Scoffield.

Thank you, Mr. Garon.

We'll continue now with Mr. Guglielmin for five minutes, please.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you, Chair.

Ms. Lee, what does the current tax treatment mean for Canadian jobs and sales? Could you give us one specific example?

[Tania Lee]

The current tax treatment means one thing. It means that the sale is not made in Canada and the sale goes to the U.S. We exist in small border communities. We are not a big industry, but we are big employers in the communities that we are in.

When you start to lose sales to the U.S. because of the tax treatment, then the sales are just not made here. This is a specialized industry of 40 years. We have perfected our supplier networks. We have perfected the relationships that we have in our communities.

The tax treatment is a simple thing for us in our industry. It is to recognize that we are export and we are mandated as export to give us consistent export treatment. We live up to the intent of the policy in which it is. We are not asking to remove the tax. This is revenue-positive back to Canada, and it makes sense to us, because we want to support Canadian businesses. We want to support our border communities.

If a sale isn't made in the duty-free, it just goes to the U.S. We lose every sale, and we lose the ancillary sales we have, which could be purchases of souvenirs such as maple syrup from our Canadian producers. That is what's important to us. We want Canadian jobs to still be there, and we want our industry to still be there.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

There was an exchange earlier when we were talking about the obvious loss in cross-border sales, but it sounds like you're saying that a lot of the revenue loss is coming directly from tax policy. How much of the loss would you say is a direct consequence of tax policy here in Canada?

[Tania Lee]

When we look at the decrease in sales, it has been remarkable. Most definitely it has been attributed to a decrease in crossings into the U.S., messaging because of what people are able to buy, and confusion: “Can I bring these products in or not? Can I stop in your shop?”

At the end of the day, we still have consumers who are crossing over. We can still sell to those consumers. If we can sell more Canadian goods to them and keep those dollars in Canada, that makes a lot of sense to me. We can mitigate those decreases that we are seeing today.

Some of our stores are down 40%. I know my store in Blue Water Bridge is down 40% versus where we should be. We are down more than I think we should be, because we have consumers who are crossing now and not buying the amount that they should. Our sales per customer are down, to your point, indicating that they are coming in but not buying as much as they should be buying.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

What specific action can the government take today to help businesses like yours compete?

[Tania Lee]

The specific action could be treating us with the export policy through which we were created. There is one specific policy that exists today that confers excise tax on our products. This is embedded in the price before we sell to the consumer.

At the end of the day, the consumer has a choice. They can determine where they want to buy and how they want to buy things. If it is too expensive to buy in a Canadian land border duty-free and they can go two minutes across the border into the U.S., there is a wide array of goods they can buy there. It is the most competitive market in the world, with a lower tax jurisdiction and lower prices. They will buy there. We want them to buy here. We want them to buy in our Canadian businesses, and we want them to support our border communities.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you.

Ms. Scoffield, the PBO distinguishes between prefilled returns for existing filers and the automatic filing for people who don't file. Their estimate says their initial non-filing target is 3,000, and it will rise to around 50,000.

What's the most important change you think is needed to reach Canadians who are missing benefits?

[Heather Scoffield]

Are you asking about the difference between prefilling and automatic filing? I think they have to go together. I'm reluctant to rank them. It's a package that.... I start from the point of who's not getting those benefits, which groups and which demographics are missing out the most, and then what's going to benefit them the most.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Guglielmin.

We will conclude this hour with Mr. Turnbull for five minutes.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Madam Chair.

Thanks to all the witnesses for being here.

Ms. Scoffield, I'll start with a few questions for you.

I'll start by saying I appreciated your opening remarks and your acknowledgement that the immediate expensing measure has been extended and made permanent, which I think is a good thing.

I take your point of how it impacts start-ups. Does it disproportionately impact or help other businesses that are larger?

It's interesting. I ran a company for many years. I advised start-ups for a living for quite a while. I understand that some of them would not have a tax burden early on. They probably don't have the revenues either, yet, just because an expense is able to be immediately claimed, it does not mean they have to do that. They can still depreciate any of those purchases of assets over a number of years and can claim it on future years. I wanted to add that in, because I think it's important for us to keep that in mind.

The initial immediate expensing measures did apply to IT networks, equipment and machinery, energy efficiency, research and development, and IP protection. Some of those, I think, would have applicability to start-ups. My colleague and I were talking about this after your comments, but start-ups also have other programs that can help them.

I think your question about the impact is a really good one. How do we measure the impact? When the productivity superdeduction was first introduced, we saw—within the first quarter, I think it was—a pretty large spike in new business investment in machinery and equipment. It went up 10%, and IP protection went up to 13%, which was significant, so the data showed that it was having an impact. I think seeing that it was impactful is part of what led to going further.

To your point, though, we should be measuring how effective it is. It's a costly measure, for sure, in terms of foregone tax revenue. How do you think we should measure it?

[Heather Scoffield]

I think we have to figure out what the baseline is and what the finance department has used for its modelling. What would be done otherwise? What's the counterfactual here? If this deduction did not exist, how much investment would we get over time, and how much would we get right away?

Let's set the baseline and then measure it. We have to figure out a few things. We have to figure out what additional new investment there is as a result of this measure and what investment is brought forward and made more quickly rather than down the road, and then measure that against what would have happened otherwise. It's $36 billion over five years in foregone revenue. That's a lot of money. It's not enough just to say that investment has gone up; therefore, $36 billion is getting what we paid for. I think we need to figure out what would have happened otherwise, because there are a lot of things going on. There are a lot of moving pieces in the investment world. It's not just tax measures that encourage people to invest.

[Ryan Turnbull, Liberal, Whitby, ON]

I'll just say two things in response to that.

One is that if you were to borrow money to make a purchase of new machinery and equipment, for example, in an environment that we're in today, which is strained, with lots of uncertainty in the market, those businesses would be able to better service debt, because they would have less tax burden. I think it opens up the opportunity for more investment from that perspective as well.

Then, two, all the categories that it's being applied to seem to be productivity boosting. If you look at the tax revenue that would come, the higher living standards and the higher wages outpacing inflation, which we've seen under this government so far, all of those would be positive outcomes that we should—I agree with you—be measuring as a result of these measures.

I want to flip to Ms. Lee, because I know the duty-free stores have been hard hit, and I'm very empathetic to their position.

Can you just clarify and walk us through the asymmetry? You've said, Ms. Lee, that you don't want the removal or reduction of excise tax. You're actually proposing to right the asymmetry that's there. Can you just walk us through that quickly?