Evidence of meeting #53 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cra.

A video is available from Parliament.

On the agenda

Members speaking

Before the committee

Roe  Lawyer and Program Director, Healthy Communities, Ecojustice Canada
MacKenzie  Director, Public Affairs, Advocacy and Strategic Communications, March of Dimes Canada
Khanna  Vice-President, Government Relations and Public Policy, United Way Centraide Canada
Lefebvre  Richmond—Arthabaska—des-Sources, CPC
Stapleton  Principal, Open Policy, As an Individual
Toor  Vice-President, Public Affairs, Mortgage Professionals Canada
Drobina  Vice-Chair, Tax and Incentives Committee, National Apartment Council
Priori  Coordinator, Pesticide Victims of Quebec, Association pour la santé publique du Québec
Batstone  President and Chief Executive Officer, FP Canada
Gratton  President and Chief Executive Officer, Mining Association of Canada
Fair  Vice-President, Strategy and Development, Prosper Canada
MacLennan  National Head, Policy and Government Relations, FP Canada

11:45 a.m.

Vice-Chair, Tax and Incentives Committee, National Apartment Council

Peter Drobina

We're missing a lot of housing supply in probably the next 18 to 36 months. The current supply is sufficient for the demand, but because of uncertainties in taxation, rebate application and high interest rates, the industry has a feasibility problem. It cannot start new projects today that will deliver the housing needed in three to four years. That's when the CMHC is projecting we will need those units. It takes three to four years to deliver them. If we start now, we might be able to get those numbers a bit higher in a couple of years.

The Chair Liberal Karina Gould

Thank you, Mr. Drobina. We're going to have to cut it off there.

Mr. Lavoie, it's your turn for five minutes.

Steeve Lavoie Liberal Beauport—Limoilou, QC

Thank you, Madam Chair.

Thank you to the witnesses for being with us this morning.

My first question is for you, Mr. Stapleton. I wholeheartedly support anything that makes tax filing easier for low-income taxpayers. It makes you wonder why we haven't done this yet. You said the CRA already knows the answers to 41 of the 43 questions being asked.

The first thing that popped into my head when I heard the proposal is that it's too easy. I'm a cautious person by nature, so that may be why I'm questioning it. Why wasn't this done before? Why is it going to work now? Could automating the process lead to more fraud? Where there is money, there are scammers. What are the blind spots? When I'm being told that we know the answers to 41 of the 43 questions, it sounds straightforward and I think we should go ahead. Before we do, though, I want to know whether there are any blind spots we should pay attention to, so that the money goes to the right place and helps the right people?

11:50 a.m.

Principal, Open Policy, As an Individual

John Stapleton

The first and best answer is to do what other countries do, which is prepopulate the tax form, send it out to people and ask them whether it's right, so they have that opportunity.

How did we get here? We started with refundable credits in 1978, when the first child benefit was brought in, and then over time, we brought in the GST credit, child benefits and the Canada workers benefit. It slowly grew until, between 1978 and 2020—you have 42 years—the refundable credit system became a major part of our income security system.

It was always based on this linchpin of filing your taxes, and we haven't really taken a good look at what's involved in doing that. Let me give you one example of where we could simplify things.

We know that anybody who is filing a return where the amount of income they made is below the basic personal amount—which is about $12,000, $13,000 or $14,000—cannot benefit from any non-refundable credits. They cannot benefit from the charitable credit or the medical credit—that sort of thing. Why do we continue to take all those people with those very low incomes through a gauntlet of questions on credits that simply don't apply to them? They can't get them. There's no refund for them. It's like taking a coupon into the grocery store, handing it to the cashier and expecting something in return.

In terms of the prevention of fraud, I think we have a greater opportunity to prevent fraud, because the government, with what it has and what it knows, can tell people what that is and give the tax filer the opportunity to change it. If the tax filer makes a mistake in the return, then you deal with it, but you're dealing with it as an exceptionality as opposed to the rule.

Steeve Lavoie Liberal Beauport—Limoilou, QC

Thank you, Mr. Stapleton.

Ms. Toor, the real estate market tends to be volatile, making it hard to plan. It goes through cycles. Some cycles are much longer than others and drive home prices up, as we've seen over the last 10 or 15 years.

You made some recommendations at the beginning of the meeting. If you could pick only one, what measure would you prioritize to bring long-term predictability, stability and certainty to the market, in the face of all the potential volatility? I want to hear the measure you think would make a difference in housing affordability going forward.

11:50 a.m.

Vice-President, Public Affairs, Mortgage Professionals Canada

Jasmine Toor

The government's actions on GST relief have signalled meaningful change. We're currently in a situation in which the government is doing a lot of things to incentivize home ownership. However, we have a trade situation. Generally, when people feel fearful for their jobs, they're less inclined to go out and buy a new home. These are problems we have to contend with, but I think GST relief is very meaningful, and we're hopeful that we'll see some long-term GST relief on housing.

I was just at a conference with developers, and they were talking about the meaningful impact they're seeing on the ground in the housing market. I think the government is up to some great work on this, and we hope to see more of it in the future.

Steeve Lavoie Liberal Beauport—Limoilou, QC

Thank you.

The Chair Liberal Karina Gould

Thank you, Mr. Lavoie.

Now it's over to Mr. Garon for two and a half minutes.

Jean-Denis Garon Bloc Mirabel, QC

Thank you, Madam Chair.

Mr. Drobina, I think there's a consensus that we need more rental housing built. Obviously, when vacancy rates are low, those who rent new apartments pay a lot more. There are also those in existing rental apartments who feel trapped; they're afraid to leave because it will cost more to live somewhere else. That reduces mobility. It reduces productivity as well, because it keeps someone from accepting a better-paying job. That's a problem.

On top of that, what we've seen in recent years is that the market has wrongly favoured the construction of new condos over rental units. I'm aware that your organization has long been calling on the government to reinstate the multi-unit residential building tax incentive. I believe the Liberals had even made it one of their campaign promises or commitments in the last election.

I'd like you to tell us why the incentive works, why it would work if the government restored it and how it would help the construction of rental housing. Why is it taking the government so long to reinstate it?

11:55 a.m.

Vice-Chair, Tax and Incentives Committee, National Apartment Council

Peter Drobina

Affordability and rental supply are huge issues across Canada. What I see from my perspective is that the federal government is providing incentives, but the other side of the government, the CRA, is still aggressively pursuing additional GST, even on fully affordable components and co-ops, and applying enhanced rebate eligibility rules in an aggressive manner to reject the rebate versus looking into ways to apply the rebate to providers that provide today's rental product and will provide rental product in the future.

Jean-Denis Garon Bloc Mirabel, QC

You're saying that, at this point, we have more of an enforcement problem than a legislative problem. Is that what you're saying?

11:55 a.m.

Vice-Chair, Tax and Incentives Committee, National Apartment Council

Peter Drobina

A legislation issue on the enhanced rebate is having the start of construction be on one day. If the CRA determines that you started your project at 11:59 p.m. on September 12, you're on the hook for the full HST. If you started two minutes later, on September 13, your full rebate applies. There are also issues with interpretations of the word “intent” as defined in the legislation, which the CRA uses heavily to reject rebates today on affordable housing, on co-op housing and for any other provider that is struggling.

Jean-Denis Garon Bloc Mirabel, QC

Thank you very much.

Thank you, Madam Chair.

The Chair Liberal Karina Gould

Thank you, Mr. Garon.

Ms. Jansen, you have five minutes.

11:55 a.m.

Conservative

Tamara Jansen Conservative Cloverdale—Langley City, BC

Ms. Toor, Bill C-31 proposes increasing the CMHC's mortgage guarantee ceiling from $800 billion to $1 trillion—that's another $200 billion in potential capacity—yet the CMHC currently has only $577 billion in guarantees outstanding. If we're nowhere near the existing ceiling, what exactly is the additional $200 billion going to accomplish? Is the CMHC increasing it because developers are struggling to secure private financing?

11:55 a.m.

Vice-President, Public Affairs, Mortgage Professionals Canada

Jasmine Toor

No. I mentioned in my remarks that many lenders rely on the securitization of their mortgages in order to offer lower-cost solutions for Canadians on their mortgages. This would help with that. It would also help with some of the changes on multi-unit housing. That's what I think the increased funding would be for.

Tamara Jansen Conservative Cloverdale—Langley City, BC

Are they perhaps increasing it because they anticipate more mortgage defaults and financial distress?

11:55 a.m.

Vice-President, Public Affairs, Mortgage Professionals Canada

Jasmine Toor

When we talk about mortgage defaults in Canada, we have to take them with a grain of salt. We still have the lowest default rates among the G20 countries. We have very low default rates relative to other comparative countries, so defaults in Canada—

11:55 a.m.

Conservative

Tamara Jansen Conservative Cloverdale—Langley City, BC

Are they increasing it to allow the CMHC to guarantee riskier mortgages that private lenders might otherwise avoid?

11:55 a.m.

Vice-President, Public Affairs, Mortgage Professionals Canada

Jasmine Toor

I don't think the mortgages would be.... We're not referring to private mortgages and the securitization of mortgages. We're referring to mortgages by.... Some banks rely upon the securitization of these mortgages, as do non-bank lenders. Oftentimes, these are very secure investments.

11:55 a.m.

Conservative

Tamara Jansen Conservative Cloverdale—Langley City, BC

Are they increasing it to shift more mortgage financing risk from private financial institutions onto taxpayers?

11:55 a.m.

Vice-President, Public Affairs, Mortgage Professionals Canada

Jasmine Toor

I would not characterize it in that manner. I think this is a well-established way that mortgage financing is done in Canada. I don't think it's the government assuming more risk.

11:55 a.m.

Conservative

Tamara Jansen Conservative Cloverdale—Langley City, BC

I'd like to bring it back to the area where I am from. The CMHC reports that metro Vancouver condo construction starts fell 40% in the first half of this year. WorkBC reports that construction employment fell by 4,800 jobs across B.C. in August alone.

When construction is slowing this dramatically, what does that tell you about the financial viability of building homes in B.C.?

Noon

Vice-President, Public Affairs, Mortgage Professionals Canada

Jasmine Toor

One thing that would have helped very much in British Columbia is GST relief. This is something we were really pushing the provincial government in B.C. to introduce. Unfortunately—

Noon

Conservative

Tamara Jansen Conservative Cloverdale—Langley City, BC

My question was more about viability. If projects aren't financially viable, will expanding mortgage guarantees actually get those projects built?