Finance Committee on Oct. 22nd, 2025

[The Chair, Liberal, Karina Gould]

I call this meeting to order.

Welcome to meeting number eight of the House of Commons Standing Committee on Finance. Today's meeting is taking place in a hybrid format.

I would like to mention a few rules for those participating today. Please wait until I recognize you by name before speaking. If you are on the video conference, please click on the microphone icon to unmute yourself. When you're not speaking, your mike should be on mute.

For those on Zoom, at the bottom of your screen you can select the appropriate channel for interpretation: floor, English or French. Those in the room can use the earpiece and select the desired channel.

For members participating in person or via Zoom, please raise your hand if you wish to speak. The committee clerks and I will do the best we can to maintain that consolidated speaking order.

This is a reminder that all comments should be made through the chair.

Pursuant to the order of reference of Thursday, June 12 and the motion adopted on September 22, 2025, the committee shall resume consideration of Bill C-4, an act respecting certain affordability measures for Canadians and another measure.

I would like to say a few words about how committees proceed with the clause-by-clause consideration of a bill.

As the name indicates, this is an examination of all the clauses in the order in which they appear in the bill. I will call each clause successively, and each clause is subject to debate and a vote.

If there are amendments to the clause in question, I will recognize the member proposing it, who may explain it. The amendment will then be open for debate. When no further members wish to intervene, the amendment will be voted on. Amendments will be considered in the order in which they appear in the package each member received from the clerks.

In addition to having to be properly drafted in a legal sense, amendments must also be procedurally admissible. The chair may be called upon to rule amendments inadmissible if they go against the principle of the bill or beyond the scope of the bill, both of which were adopted by the House when it agreed to the bill at second reading, or if they offend the financial prerogative of the Crown.

During debate on an amendment, members are permitted to move subamendments. Only one subamendment may be considered at a time, and that subamendment cannot be amended.

Once every clause has been voted on, the committee will vote on the title and the bill itself. An order to reprint the bill may be required if amendments are adopted, so that the House has a proper copy for use at report stage.

I thank the members for their attention and wish everyone a productive clause-by-clause consideration of Bill C‑4.

I would like to welcome our witnesses, who are available to answer technical questions related to the bill.

From the Canada Revenue Agency, we have Isabelle Brault, director general, legislative policy directorate; and Hélène Lacasse, director, financial institutions and real property division.

From the Department of Finance, we have Gervais Coulombe, director general, legislation, sales tax division; Lindsay Gwyer, director general, legislation, tax legislation division; Pierre Leblanc, director general, personal income tax division; Amanda Riddell, senior director, real property and financial institutions; Stefania Bartucci, director, strategic projects, personal income tax division; and Nina Gormanns, director, excise policy, sales tax division.

From the Privy Council Office, we have Rachel Pereira, director, democratic institutions.

Thank you all for being with us today.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, is postponed.

We will go to clause 2.

(On clause 2)

Mr. Davies, NDP-1 is deemed moved pursuant to the routine motion adopted by the committee on June 16, 2025.

I see, Mr. Davies, you are here. I invite you to say a few words if you would like to do that.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Madam Chair. It's good to be back at this committee. What did I miss? I am teasing.

I will speak briefly to the motion. Essentially, NDP-1 proposes a new federal income tax bracket of 37% on taxable income over $1 million per year. The new tax bracket would raise an estimated $1.3 billion in 2025, affecting the top 0.135% of tax filers, or about 43,000 people.

This revenue would partially offset the $28.24 billion cost, over five years, of reducing the lowest personal income tax rate from 15% to 14%, a measure that disproportionately benefits higher-income Canadians.

According to the Parliamentary Budget Officer and independent analysts, the average savings from the tax cut are significantly greater for wealthier individuals and families, with low-income Canadians receiving minimal or no benefit. Only 14% of those living in poverty will see any gain, averaging just $11 annually compared to $310 for the richest 10%.

When looking at the various forms of census families, the average savings range from $50 a year for low-income single seniors to $750 for high-income couples with children.

Canada's tax system has become increasingly regressive. In fact, a recent report titled “Canada's shift to a more regressive tax system, 2004 to 2022” found that the top 5% of Canadians were paying a lower overall tax rate than the bottom 95%. The top 1% is paying an even lower rate.

Finally, Madam Chair, this amendment helps to restore progressivity to Canada's tax system. It ensures that those most able to contribute do so, and it better aligns the proposed tax cut with its stated goal of supporting the middle class.

Thank you for allowing me to move this motion.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Davies.

Bill C-4, in part 1, “amends the Income Tax Act to reduce the marginal personal income tax rate on the lowest tax bracket to 14.5% for the 2025 taxation year and to 14% for [next year]”.

The amendment attempts to create a new tax bracket and increases the marginal tax rate for this new tax bracket. In my opinion, by creating a new tax bracket and increasing the marginal tax rate for this new tax bracket, the amendment would oblige certain entities to bear an additional charge, and it is contrary to the principle of the bill. Therefore, the amendment is inadmissible.

Thank you.

Moving on to CPC-1, Mr. Hallan, would you like to move this motion?

[Jasraj Singh Hallan, Conservative, Calgary East, AB]

Thanks, Chair.

Yes, I would like to move this motion. This was a part of our campaign platform. It was a “bring it home” tax cut, which would save average families and individuals more. This tax cut would be dropping the tax rate on the lowest-income earners by 15%, and the tax bracket would go from 15% to 12.75%, meaning an average worker who earns anywhere around $57,000 would save $900 a year. Anyone with a two-income family would save $1,800 a year.

[The Chair, Liberal, Karina Gould]

Great. Thank you, Mr. Hallan.

Mr. Turnbull.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks.

We're open to debate on this now, obviously.

[The Chair, Liberal, Karina Gould]

Yes, we are.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Chair.

I have a number of questions about this proposed change.

For the officials, I'm going to ask you a bunch of questions. Maybe you can choose who's best to answer, because it's not always easy to identify who the most knowledgeable person is.

My understanding is that this proposed amendment to the lowest tax bracket would have a pretty significant fiscal impact. Could someone on the panel speak to just how big that fiscal impact would be?

[Pierre Leblanc, Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance]

Madam Chair, I would like to thank the member for his question.

Basically, what the government is proposing in Bill C-4 is to reduce the first marginal personal income tax rate by one percentage point. That starts at about $5.5 billion. If you're going to reduce the rate to 12.75%, that's reducing it by 2.25 percentage points instead of one percentage point. You can just multiple our cost estimate of $5.5 billion by 2.25 to arrive at that number.

I would just add that it would have been a measure that the Parliamentary Budget Officer costed during the recent campaign. That would give you a pretty good sense of what it costs.

[Ryan Turnbull, Liberal, Whitby, ON]

That's in the range of about $14 billion annually. Is that correct?

[Pierre Leblanc]

It's more towards the end of the fiscal planning period, but it would approach that.

[Ryan Turnbull, Liberal, Whitby, ON]

My understanding is that the Parliamentary Budget Officer analyzed the Conservatives' election platform promise and costed it at about $44 billion over five years. Is that consistent with your estimates?

[Pierre Leblanc]

Again, they would be in the same ballpark.

[Ryan Turnbull, Liberal, Whitby, ON]

Okay, so it's significant.

I find it interesting that the Conservatives are standing up every day in the House of Commons and speaking to what they call “deficit spending”, yet here they are at committee, proposing to increase that dramatically. It's pretty interesting to see that that's their proposal here.

Let me take this a bit further. I remember when the minister came to our committee. We identified an issue related to the specific tax break to 14% that we've proposed in this bill. The minister mentioned the fact that we were aware that individuals receiving a disability tax credit, for example, might be worse off in some cases, because it would reduce their taxable income amount. He said they were working on a solution for that.

Is this proposed amendment going to exacerbate things for a number of individuals who may be more vulnerable or at the lower end of the income and tax brackets? Would they be worse off in some circumstances?

[Pierre Leblanc]

The income tax reduction proposed in Bill C-4 will benefit about 22 million Canadians. The amount by which they'll benefit will depend on two things. First, it will depend on their taxable income, because it goes up to a taxable income of about $57,400 in 2025. Second, it will depend on the amount of their non-refundable credits, because most non-refundable credits are calculated at the same rate as the lowest personal income tax rate.

How the legislation works—that's before you work—is that as the bottom tax rate is reduced from 15% to 14%, so too is the non-refundable rate. While it is true that the value of those non-refundable tax credits will be reduced for the very large majority of people claiming the disability tax credit who pay tax, the benefit of reducing the bottom tax rate will be greater than the impact of reducing non-refundable tax credits, including the disability tax credit. Again, if they're paying tax, in the large majority of cases they will receive a tax reduction if the legislation goes forward.

What I could add is that in very rare cases.... Again, there are two factors at play. One is how much less tax they are paying on taxable income up to $57,375 in 2025, and the other is the reduction in their non-refundable credits. In very rare cases, what we see is that there are individuals whose total non-refundable tax credits calculated at the lowest rate are greater than the top of the first bracket threshold. There are some disability tax credit claimants in that group, but there are others as well. There are different reasons you can claim those really large amounts of non-refundable credits. Basically, in those cases, it flips, and the loss in value of the non-refundable tax credits is greater than the benefit from paying less tax on taxable income.

To get more closely to your question, that's basically a function of how big the tax rate reduction is. The bigger the tax rate reduction for that extremely small group, the greater the negative impact will be in those cases.

As you noted, when the minister was before you a couple of weeks ago, he emphasized that the government is talking with and listening very closely to stakeholders representing persons with disabilities and is committed to a resolution.

I just wanted to underscore that.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

I focused in particular on non-refundable tax credits for individuals living with a disability, but I think there are a number of others. Can you name some of the other ones, just so we're clear? I think there's a medical expense tax credit. There are a few others. Can a member of the panel refer to any of the other ones that would be impacted, just so we're clear on what segments of the population could be negatively impacted by what the Conservatives are proposing?

[Pierre Leblanc]

If we're talking about that very small group, basically, we're talking about less than 0.3% of tax filers, just to emphasize how small that group is. They are going to be very much one-time cases for those individuals in the large majority of cases. It could be things like a large medical expense.

Another example might be someone who's been in school and has earned tuition tax credits, but often while you're in school you don't have enough taxable income to use them. You can carry them forward. Maybe you've accumulated enough when you get your first job and you have enough taxable income and then you can bring in these very large non-refundable tax credits.

I think that example is a good illustration of how temporary—how one-time—that effect can be for, again, an extremely small number of people. Going forward, as that individual continues to work, they would benefit from the tax reduction.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you very much. That's helpful.

Does this measure increase any complexity in terms of solving the challenge? The minister indicated that they were looking at possible solutions. I think what the Conservatives proposed was to reduce the tax rate on that lowest income bracket over a number of years. Does that increase any complexity in looking at possible solutions? As you said, I recognize that it's a limited number of people, although those people matter and they are some of the most vulnerable people in some circumstances.

By saying that, I'm sure you're not indicating that we don't care about the circumstances of those individuals, because I think we can all agree that some of those individuals living with disabilities, for example, are maybe disproportionately impacted already by virtue of, in some cases, not being able to work, through no fault of their own. Of course, we don't want to inadvertently leave them worse off.

I guess what I'm trying to say is that to solve the problem in looking at options, an implication of the Conservative amendment here is that it makes that more complex to solve. Is the problem a bit more complex to solve as a result of this if it passes, Mr. Leblanc?

[Pierre Leblanc]

Madam Chair, I would like to thank the member for his question.

I would characterize it as more a matter of degree. Just to underscore once again the commitment made by the minister to address any of those unintended consequences, that's very important for him. I think you could address it in similar ways. It's just that the extent to which it would make a difference would depend on how much the initial effect is, which would depend on the size of the tax reduction.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that. I appreciate it.

It's a matter of degree, as I got from your response. It may not change the solution, but how we implement it, or the specific nature of the solution, may change.

I wanted to go back to the fiscal impact. This is moving from essentially a tax cut that would cost about $6 billion per year to one that would cost $14 billion annually when it's at its full scope. What pressure might that put on the fiscal framework? That's a pretty significant difference. As you said, it's more than double the reduction in tax that we've intended with this measure. What pressure might that put on the government across the fiscal framework?

[Pierre Leblanc]

I think what we can say is that the difference in the fiscal impact that you note is a fair characterization, so it would have that magnitude of effect. As for the ways in which that would impact the fiscal framework, that is best answered by people other than us. That would be the difference in the fiscal impact.

We'll leave it there.

[Ryan Turnbull, Liberal, Whitby, ON]

Just by virtue of the size of the fiscal impact of this particular amendment, doesn't it exceed the scope of what was intended, what was actually put in writing, in terms of the ways and means motion?

[Pierre Leblanc]

I think others would be better qualified to judge the extent to which it.... I don't know if any colleagues would jump in there.

The ways and means motion, yes, was based on a reduction of one percentage point. This would be a larger tax reduction. I don't want to add too much more than that.

[Ryan Turnbull, Liberal, Whitby, ON]

That's fair enough.

The summary of the thing that we voted on here, Bill C-4, which I know we had unanimous consent in the House on, was very explicit about.... Maybe I'll just read the portion that's relevant here. It says:

Part 1 amends the Income Tax Act to reduce the marginal personal income tax rate on the lowest tax bracket to 14.5% for the 2025 taxation year and to 14% for the 2026 and subsequent taxation years.

It seems that, instead of a 1% tax cut, we're now talking about a 2.25% tax cut. That has a significant fiscal impact. My understanding is that things that often have a significantly greater fiscal impact require either a royal recommendation or a ways and means motion to give, essentially, the room and scope to things like this.

Could you potentially comment on that?

[Pierre Leblanc]

Madam Chair, while I thank the member for his question, I'm not in a position to add much.