International Trade Committee on June 19th, 2023

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call this meeting to order.

Welcome to meeting number 72 of the Standing Committee on International Trade. Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022; therefore, members are attending in person in the room and remotely using the Zoom application.

I need to make a few comments for the benefit of the witnesses and members. Please wait until I recognize you by name before speaking. When speaking, please speak slowly and clearly. For those participating by video conference, click on the microphone icon to activate your mike. Please mute yourself when you are not speaking. With regard to interpretation, for those on Zoom, you have the choice at the bottom of your screen of either the floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

I should have all of that memorized by now.

Oh, I have a new reminder. They always put something in here. I would ask all participants to be careful when handling your earpieces, especially when your microphone or your neighbour's microphone is turned on, in order to prevent feedback. Feedback can be extremely harmful to the interpreters and cause serious injuries. I would invite the participants to speak only into the microphone their earpiece is plugged into and to place earpieces on the table, away from the microphone, when they're not in use.

All comments need to be addressed though the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. Thank you for your patience and understanding.

Please also note that during the meeting, it's not permitted to take pictures in the room or screenshots on Zoom.

Pursuant to Standing Order 108(2) and the motions adopted by the committee on Monday, May 29, 2023, and Monday, June 12, 2023, the committee is continuing its study of the impacts of the underused housing tax on Canadian border communities.

Our witnesses today are from the Canada Revenue Agency. We thank them very much for coming to provide us with information. We have Adnan Khan, director general, business returns directorate, assessment, benefit and service branch; Luisa Rizzo, director general, GST/HST rulings directorate, legislative policy and regulatory affairs branch; Jason Charron, director general, small and medium enterprises directorate, compliance programs branch; Alexander Lawton, director, non-resident compliance division, compliance programs branch; and Geoff Trueman, special adviser to the commissioner of the Canada Revenue Agency.

Welcome to all. We will start with opening remarks and then proceed with questions.

Mr. Khan, I invite you to make an opening statement of up to five minutes, please.

[Adnan Khan, Director General, Business Returns Directorate; Assessment, Benefit and Service Branch, Canada Revenue Agency]

Madam Chair, thank you for the invitation to be here today to participate in the committee's study of the impacts of the underused housing tax on Canadian border communities.

My name is Adnan Khan, and I am the director general of the business returns directorate in the assessment, benefit and service branch of the Canada Revenue Agency, or CRA. My directorate is responsible for the development and processing of various business returns and elections, including the underused housing tax return and related elections.

I have a number of colleagues with me today. Mr. Geoff Trueman is the special adviser to the commissioner of revenue on behalf of the legislative policy and regulatory affairs branch at CRA. Mr. Trueman will speak to the interpretation of tax legislation, including the underused housing tax. The legislative policy and regulatory affairs branch is the CRA’s interface with the Department of Finance, and coordinates proposals for legislative changes within the CRA.

Ms. Luisa Rizzo is the director general of the GST/HST rulings directorate. Her directorate is responsible for providing the CRA’s official position on the interpretation of the Underused Housing Tax Act. This service is provided nationally to clients by responding to written requests for rulings and interpretations, and by publishing technical publications. The directorate’s clients include individuals, businesses, tax professionals and other CRA branches.

Mr. Jason Charron is the director general of the small and medium enterprises directorate in our compliance programs branch. His directorate is responsible for developing and deploying intervention strategies to encourage, assist and enforce tax compliance with respect to the underused housing tax, among other responsibilities.

Mr. Alexander Lawton is the director of the non-resident compliance division of the compliance programs branch.

As you know, the Department of Finance is responsible for the development of tax policy, in this case the development of the underused housing tax, while the CRA is responsible for the administration of the Underused Housing Tax Act.

My colleagues and I would be happy to answer any questions you may have.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Khan.

We will go to our members for up to six minutes.

We have Mr. Baldinelli, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

I'd like to thank our officials for being with us today.

Thank you for your time.

As you probably are aware, this underutilized housing tax or underused housing tax is a huge issue in my community of Fort Erie. We have about 900 American residents, according to the mayor. U.S. Congressman Brian Higgins has indicated that he did a survey. He has been contacted by about 400 individuals. In a survey of about 162 residents, 50% of them or more have owned residences in that community for 50 years or more.

On the implementation of this tax, for example, Mr. Khan, as you mentioned, Finance developed it. They undertook their consultations during the election period of 2021. I asked the question: How many residents in Niagara have you heard from? The response was “zero”. Well, just because of these hearings, we have 150 submissions right now with regard to the tax.

The U.S. trade representative met with the international trade minister in May and specifically referenced the underused housing tax and the concerns of the American government. Mr. Higgins has said that he wants to avoid a situation, a race to the bottom, but he's prepared to introduce legislation in the United States, and the impact that could have on Canadian snowbirds.... I don't want to get to that situation. I want to get to a resolution. There's a solution to be found to the concerns that are being brought forward.

I was wondering, based on the consultations and on the U.S. trade representative's bringing forward the concerns, has the minister directed you to look into the fact of additional changes that could be made or put forward to address some of the concerns, primarily in the rural communities such as Fort Erie?

[Adnan Khan]

Ever since we rolled out the underused housing tax and put out the information on our website, we have been engaged and continue to be engaged with various stakeholders outside of the agency. that, by the way, does include the feedback we've been getting from taxpayers, either through our contact centre or through our outreach to industry, including, for example, Canadian small and medium-sized businesses and CPA Canada. I'll let my colleague provide more details.

[Geoff Trueman, Special Advisor to the Commissioner of the Canada Revenue Agency, Canada Revenue Agency]

Thank you.

As you highlight, the situation of U.S. residents holding a property in Canada was understood, in fact, in designing the tax. Part of it, I understand, in the work by our colleagues at the Department of Finance was to include that filing requirement. The intent of the levy is to identify non-resident owners of housing in Canada.

For the situation you describe, the legislation also includes the vacation property exemption, which makes some accommodation for seasonal use properties within a touristic zone. That would likely be of application, potentially, to some of these Fort Erie residents.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Again, specifically to the Fort Erie area, you're hearing concerns that it doesn't address the situation.

I have an American who's had that property for a century. If you think about it, the Buffalo Canoe Club was established in 1891 in Fort Erie of all places. In the community, it's not an international border that separates us. It's just a river that divides two friends. We're finding situations where she's had a house for a century and, 450 metres away, her neighbour is exempt but she has to pay. You're still running into situations.

My concern is this: Does the Canada Revenue Agency even have the ability to implement and enforce such a tax? How would you know, for example, if someone submits or not?

[Geoff Trueman]

The role of the Canada Revenue Agency absolutely is to interpret and administer the legislation. Where there's a desire for a substantive change to the legislation itself, then that would have to fall under the purview of the Department of Finance and, ultimately, parliamentarians.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Again, my situation is this. We're trying to find a resolution to a problem that I think the government has created on its own. I don't want to see a situation where we end up with a reciprocal agreement or a reciprocal tax being placed on Canadian snowbirds, because if that becomes the situation, I'd invite all of you to come to work in my office and take those phone calls from Canadian snowbirds once that happens.

Again, we're talking about specific situations. Based on the 150 submissions right now, your office has been getting calls, and there's no look right now by your department to try to rectify the concerns that exist in my community with regard to the UHT.

[Adnan Khan]

I think administratively we can certainly talk about what the agency has been doing and can do going forward to administratively assist those people. There are, of course, close to 15 exemptions available.

Of course, we have put out a lot of information. We continue to engage with the communities across Canada and we continue to put out more information.

That's the limit to the administrative part. What can we do within the confines of the administration of the legislation? That has been the focus of our efforts.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Your time is up.

Mr. Charron, were you attempting to add some information there?

[Jason Charron, Director General, Small and Medium Enterprises Directorate; Compliance Programs Branch, Canada Revenue Agency]

Thank you, Madam Chair.

In the course of the activities we undertake with respect to compliance, we provide support to taxpayers with regard to their obligations to submit their taxes in due form.

We have had opportunities to prepare and present various information sessions or webinars. Information we provide in those fora makes it easy for them to submit and to meet their tax obligations. In those sessions there are Q and A sessions as well, from which we capture information, and that then influences and informs our future actions in this area.

We also are working in partnership to collect more data and more information so that, whenever we are engaging with taxpayers who are seeking to meet their obligations, we have this information, the data, in support of our risk-based assessments.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. McKay, you have six minutes. Go ahead, please.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Thank you all for being here.

Like Mr. Baldinelli, I, too, have had long sessions with Mr. Higgins in his office. I still haven't come to ground as to whether this is a tempest in a teapot or, really, this is just a tempest.

Moving out in scope, what are the other areas that are proving to be contentious? We know the Lake Erie area is contentious. Are there any other border areas or even non-border areas in which you're hearing some feedback, intemperate or otherwise, from people affected by this tax?

[Adnan Khan]

As I mentioned, we do hear from industry and we also hear directly from individuals or corporations trying to fill out, for example, the form. We have created a dedicated phone line to assist those clients of ours. I cannot provide you a breakdown of where exactly those calls are originating from, but I can tell you we have received close to 30,000 phone calls on the topic since January this year, during which a variety of questions have been asked.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I think Nova Scotia would be another area that would have challenges. Is that an area that's receiving complaints about the tax?

[Adnan Khan]

As I mentioned, I don't have data broken down by the geographical areas across the countries to show where those calls might be originating from.

[John McKay, Liberal, Scarborough—Guildwood, ON]

It seems to me that the major issue comes when the census metropolitan area is used as the delineation of what constitutes rural and what constitutes non-rural. Am I correct about that?

[Luisa Rizzo, Director General, GST/HST Rulings Directorate, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency]

We would follow whatever the law says with respect to determining that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm sorry, but I didn't understand what you said.

[Luisa Rizzo]

I'm sorry. I said we would follow however the law is written when interpreting those aspects.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm not sure how to respond to that answer. It seems distinctly unsatisfactory.

[Luisa Rizzo]

We do have a notice, UHTN14, that talks about how you can determine what area it is in order to determine whether or not you fall in one of those areas.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Once you're in the area, you're toast.

[Luisa Rizzo]

Again, based on how it's written and how it's determined, you would have to follow and apply the rules.