Debates of May 22nd, 2018

Department of Finance—Main Estimates, 2018-19

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we have been working with partner countries at the OECD to develop and implement common approaches or standards to better share information and limit the ability of large multinational corporations to use tax avoidance strategies to minimize their global tax liabilities. This is an important initiative that will allow us to make sure that organizations pay their taxes in the place where those revenues are earned. This is an effort that is ongoing. We are collaborating closely with other countries. The best approach, in our estimation, is to ensure that we tax companies in the jurisdictions in which they should be taxed.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Chair, on another related topic, the government signed two new tax information exchange agreements with Antigua and Barbuda and with Grenada not that long ago, in 2017. Can my colleague, the Minister of Finance tell us the tax rate of these two countries with which we recently signed agreements? It was under his mandate, so I imagine that he has the information right now.

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we will continue to sign tax exchange agreements with countries that give us information and allow us to assure ourselves that corporations are paying the appropriate level of tax.

For specific questions on tax rates around the world, I would again direct the member to a source of information that will provide him with that information in his leisure time.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Chair, the answer is zero, and the foreign companies established in those countries pay zero taxes. He is saying that the purpose of the tax information exchange agreements is to exchange tax information. That is obvious.

Did the Minister of Finance know that foreign companies in Grenada do not have to pay taxes and do not have to file an income tax return with a revenue agency?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, the point we are trying to get across is that companies cannot avoid paying taxes here. The issue, really, is that we have an agreement with those countries to facilitate trade. Our agreement does not allow them to avoid paying taxes in Canada; it allows them to make investments in other countries. We have a territorial tax system, pretty much like every other country on the planet. The U.S. is now moving to that approach. This is an approach that clearly is a consensus among other countries and one that is working for the global community.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Chair, I am going to quote the agreement because the minister does not seem to understand all the ramifications and effects of such an agreement. The backgrounder for the agreement that was tabled in the House says that the active business income from a Canadian company's foreign affiliate can be paid to the Canadian parent company in the form of dividends that are exempt from Canadian taxes.

Can the minister confirm that, under these provisions, the dividends paid to the Canadian parent company are exempt from Canadian taxes?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we have a territorial tax system, which means that should a company make an investment somewhere else and make profits, it is subject to the tax rates in that other place. Should it make investments in Canada and make profits, it is subject to the tax rates in Canada. We have international agreements to make sure that we have insight into how monies flow between countries. It is an approach, a territorial tax system, that is consistent with the approach of virtually every other country on the planet.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Chair, in the time I have left, I would like to move on to another topic and another Liberal government promise. The Liberal government voted in favour of one of our motions on the stock option deduction loophole. The minister himself used the stock option deduction in his company, Morneau Shepell, and he promised to review and cap it.

What does he believe is the tax objective of this stock option deduction?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, to be clear, I have never myself had a stock option.

What I can say is that we have not made any decisions with respect to possible changes in this regard. We have come forward with approaches that we know have been enabling Canadians to be in a positive situation, with tax reductions for nine million Canadians. We will continue to ensure that our tax system provides advantages to middle-class Canadians that allow them to be successful in raising their families.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Chair, it is unfortunate that the minister did not answer my question about the objective of this tax tool that is used by hundreds of business executives.

What is the Department of Finance breakdown of the heaviest users of these stock options in Canada by income?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we have taken an approach that has looked at the importance of tax fairness. As a very first measure, we decided that we would raise taxes on the top 1% of Canadians. We used that revenue to lower taxes for nine million Canadians. We then moved forward to improve the situation of nine out of 10 families by increasing the Canada child benefit.

Our approach has clearly been to create an environment that makes sense while allowing us to continue with broad-based support for businesses in this country.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Chair, it is unfortunate that the Department of Finance does not have the breakdown of such an important tax tool.

According to the information we have, $500 million in stock option deductions were used by 75 senior business executives. Obviously, we are talking about the most profitable companies in Canada. That is an average of $6 million per executive.

Can the minister confirm whether those numbers are correct?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I am not in the practice of memorizing numbers, as I have said before. What I can say is that we will continue to support innovative businesses, but we will also make sure that our system creates tax fairness for all Canadians. We think that by ensuring that middle-class Canadians, people raising families, are in a very advantageous tax situation, we can provide incentives for them to continue to create value for themselves, their families, and our overall economy.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Mr. Chair, I am pleased to have this opportunity to address the committee. Tonight I would like to take my time to raise an issue that I personally find especially important: reconciliation with indigenous peoples. I propose to allocate my time with remarks of about 10 minutes, to save some time for questions and answers.

The government is committed to reconciliation with indigenous peoples, and we have backed up this commitment with important action. In our time in office, our government has taken real and concrete steps to advance reconciliation, improve the quality of life of indigenous peoples, and promote skills and opportunities that will empower first nations, Inuit, and the Métis nation. Together, Canada and indigenous peoples are forging a new relationship, a relationship based on trust, respect, and a true spirit of co-operation.

The first step toward this new relationship began with budget 2016, which included investments of close to $8.5 billion over five years to expand opportunities for indigenous people, to improve the socio-economic conditions in communities, and to bring about real transformational change. Budget 2016 helped turn the page. With our first budget, we offered investments to better support indigenous children in achieving futures as bright and as prosperous as every other child's future in Canada. The 2016 investments in education, infrastructure, training, and other programs are contributing to a better quality of life for all indigenous peoples and to helping build a stronger and better Canada.

Our government did not stop there. Budget 2017 created even more opportunities for indigenous peoples, with another $3.4 billion over five years to increase access to post-secondary education, support better health services, and improve community infrastructure. The latest budget, tabled in February, builds on these significant investments. It takes further steps towards reconciliation by investing in priority areas that were identified by first nation, Inuit, and Métis nation partners. Yes, partners.

Through budget 2018, the government will help remove barriers to indigenous peoples' success by supporting them as they build and refine their skills, by helping them have access to high-quality education, and by enabling them to fully participate in the economy, leading to more prosperous communities. By increasing the contribution of first nations, Inuit, and Métis to the Canadian economy, the 2018 budget will help narrow the gap in the quality of life of indigenous and non-indigenous Canadians.

We know that our latest budget will have an impact, because we can already see results from our past investments. For example, since we came into office in November 2015, more than 60 long-term drinking water advisories for public water systems on reserves have been lifted.

To understand why it is necessary to act, we all must be aware of the extent of the work that has yet to be done. I would like to put things in context.

First, no one in Canada should be afraid to drink the water that comes out of their taps. As I just said, over 60 drinking water advisories have been lifted, but a lot of work remains. About 75 long-term advisories are still in place on public systems on reserves. The government is committed to ending all those long-term drinking water advisories by March 2021. To this end, budget 2018 provides an additional $173 million to ensure this happens more quickly in many communities.

Second, no Canadian should be forced to live in overcrowded and unsafe housing. Unfortunately, one in five indigenous people live in a house that is in need of major repairs. One in five also live in housing that is overcrowded. Access to adequate and affordable housing is a particular challenge for indigenous women. Budget 2018 included funding to support distinctions-based housing strategies for first nations, Inuit, and the Métis nation.

Third, there is no greater priority than ensuring the safety, security and well-being of children. Indigenous children under the age of 14 make up less than 8% of all children in Canada, but they represent more than half of those in foster care. To help address this, budget 2018 included more than $1.4 billion in new funding for first nations child and family services.

We cannot ignore the significant gaps in health outcomes between indigenous and non-indigenous people. Compared to the Canadian population, infant mortality rates of first nations and Inuit children are up to three times higher. Diabetes rates are up to four times higher. Suicide rates among first nations youth is up to seven times higher. This is unacceptable, as I am sure members will agree.

Then there is the issue of tuberculosis. This disease was once the leading cause of death in Canada, back at the end of the 19th century. Thanks to medicine and antibiotics developed in the 1950s, this disease is now eradicated. However, among Inuit, the reported rate of active tuberculosis in 2015 was over 270 times higher than the rate among the Canadian-born non-indigenous population. That is 270 times higher, in Canada, in the 21st century. This is unacceptable.

Budget 2018 provides $1.5 billion over five years to keep indigenous families healthy. This will help end tuberculosis in Inuit communities, enhance the delivery of culturally appropriate health services in first nations communities with high needs, develop a health strategy with the Métis nation, and close the gaps in health outcomes between indigenous and non-indigenous peoples.

Renewing the relationship with indigenous peoples also involves recognizing that members of the first nations, the Inuit and the Métis nation have an important role to play in Canada's economic prosperity. Indigenous peoples are less likely to be employed than non-indigenous people, and those who work typically earn less. This is another gap that must be closed. It is the right thing to do.

That is why it is so important that budget 2018 provides $2 billion over five years for the creation of an enhanced skills and employment training program for indigenous peoples. It is the right thing to do for indigenous people in Canada and it is the smart thing to do for Canada's economy.

These investments are good investments. The government is taking action so that all indigenous communities have access to clean drinking water, so that delivery of culturally appropriate health care services for first nations continues, and so that jobs continue to be created for indigenous people. All Canadians should be proud of budget 2018 for these measures alone.

The government's investments are enabling first nations, Inuit, and Métis nations to have a better future. Too many generations of indigenous people have suffered and lived in subpar conditions for too long. It is clear that actions were needed to ensure a better quality of life for indigenous people and to promote their skills and opportunities. Work remains to be done but a lot has already been accomplished.

It is true that the last three budgets addressed areas of critical need in indigenous communities. The recent announcement to connect 16 remote first nations in northwestern Ontario is another example of an investment that will improve the quality of life for indigenous communities.

I wonder if the Minister of Finance could elaborate on how much progress is being made in regards to self-determination and self-government agreements between Canada and indigenous people. This is also an important aspect.

I think we all agree that the recognition and implementation of rights is another essential part of advancing reconciliation. However, the pace of progress has been uneven and many indigenous communities are forced to take on debt in order to participate. This is probably not the best way to facilitate agreements.

Could the minister explain the government's plans to shorten the time it takes to successfully conclude these treaties, to lower costs to all parties, and to support the recognition and implementation of rights and self-determination?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, there are times in the House when a member comes forward with a question or a speech that is truly exceptional. The member for Newmarket—Aurora in this instance exceeded even his own very high standard with the calibre of that question.

He does raise a very important point. Canada has advanced a number of modern treaties and agreements since the 1970s, but in many cases the pace of progress has just been too slow. Negotiations can take a decade or more. To my colleague's point, indigenous communities are forced to take on debt to be able to negotiate. The government recognizes that this is not right. Budget 2018 includes new measures to increase the number of modern treaties and agreements.

For example, the government will replace the use of loans with non-repayable contributions to fund indigenous participation. The government has also created separate permanent bilateral mechanisms to better serve first nations, Inuit, and the Métis nation. This will allow us to enable crown-indigenous co-operation on priority setting and joint policy development.

The government is also moving forward with the dismantlement of old colonial structures, including replacing Indigenous and Northern Affairs Canada with two new departments.

Moving forward, Crown Indigenous Relations and Northern Affairs Canada will ensure there is progress on the recognition of existing rights and that new treaties and new self-government agreements are consistent with the principles underlying reconciliation and a renewed relationship.

At the same time, Indigenous Services Canada will work with indigenous partners to improve the quality of life of first nations, Inuit, and the Métis nation and close the gap between indigenous peoples and non-indigenous Canadians on issues such as housing, education, health care, and access to clean water.

[Shannon Stubbs, Conservative, Lakeland, AB]

Mr. Chair, in 2016, foreign investment in Canada fell by 42% overall and again by 27% last year. U.S. investment in Canada decreased by half, while Canadian investment in the U.S. is up two-thirds since the Liberals were elected.

Brett Wilson, Canoe Financial chairman and co-founder of FirstEnergy said, “Americans aren’t investing here because they’ve got a choice of tax rates. You pay 30, 40, 45 per cent in Canada, or 20-21 per cent in the U.S. You’re not going to come to Canada by choice.”

How can Canada possibly compete with the United States, which is cutting taxes and red tape, while the Liberals are doing the exact opposite in Canada?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, the member opposite brings up an important point. We always need to be listening to ensure we maintain our competitive edge. We are competitive today. We have shown that level of competitiveness through our ability to grow at the fastest pace among G7 countries. What we know to be true is that this is having positive results on Canadian families. We are getting more people working, which is supporting our business sector. We are seeing wages go up. We are actually seeing wage growth, a sign of a positive situation for Canadians.

We realize that changes in the global economy, changes in trading opportunities are important for us to consider. We are working hard to deal with NAFTA and find a way to get to what we hope will be a better situation. We also are ensuring that our tax rate is staying competitive by looking at where the U.S. is today versus where it was yesterday and how businesses can compete. This is an ongoing exercise, and we will certainly have more results to share in the future.

[Shannon Stubbs, Conservative, Lakeland, AB]

Mr. Chair, the consensus of economists, experts, investment firms, and private sector proponents is that Canada is getting obliterated with respect to its competitiveness. Even last week, the president of ATCO said:

...governments in Canada “are busy” bringing in “multiple and compounding policies and regulations” that are “layering considerable costs on businesses and individuals alike, undermining the confidence of investors, eroding the attractiveness of our industries and weakening the confidence of the public.”

It goes without saying that in our increasingly globalized economy, capital flows will continue to seek certainty.

In 2016, the energy sector accounted for approximately 10% of Canada's GDP, but the Bank of Canada predicts new energy investment in Canada will decline in 2018 and then drop to zero the next year.

Given the importance of energy investment to the Canadian economy, does it concern the finance minister that Canadian energy investment is dropping dramatically, which is a fact? Specifically, what measures in the federal budget will stop energy investment from leaving Canada?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we will continue to work toward ensuring Canada is a competitive place to do business. We have now a situation where our tax rates for small and medium-sized businesses are the lowest among G7 countries, significantly lower than we see in other countries. We know that the U.S. changes in tax rates create a different situation of competitiveness than was the case prior to those changes.

That said, we still have a competitive tax environment, one that we are examining to ensure we get it right and have the opportunity for businesses in the future. We know that our positive results have put us in a position so we can consider those changes from a position of strength. What we will not do is move forward without doing the appropriate analysis and without listening to Canadians to ensure we get this right. That is the approach we are taking. We are listening. We will ensure that the competitiveness we have had for so long continues.

[Shannon Stubbs, Conservative, Lakeland, AB]

Mr. Chair, speaking of analysis, earlier tonight the finance minister said that the purpose of this budget was to help the economy work well. The fact is that more than 100,000 energy workers have lost their jobs under his watch since 2015. According to economist Trevor Tombe, young people, especially 55% of Canadian males between the ages of 15 and 24, have been disproportionately impacted and unemployed as of April 2018.

Given the finance minister's emphasis on his budget's gender-based analysis, what does he say to the young men in Lakeland and across Alberta and in the energy sector across Canada who are struggling to make ends meet?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we are continuing in our efforts to ensure that Canadians across the country, in all sectors, find themselves with successful opportunities for the future. We know that in the oil and gas sector this has been a challenging time. We had a significant change in oil prices during the course of 2015 through until recently where oil prices have started to climb. However, the challenge remains.

We know, however, that from an employment situation, we are in the best situation we have been in since about 1976, a 5.8% unemployment. We will continue to work. There is always more to be done, but that is a very positive situation, better than was the case for the entire time during the previous government.

[Shannon Stubbs, Conservative, Lakeland, AB]

Mr. Chair, in fact, more energy investment has left Canada under the Liberals than in any other two-year time period in 70 years, more than half a century. The collateral damage of this is that hundreds of thousands of Canadians are out of work, and job losses have rippled throughout other sectors.

What would create jobs in the energy sector are pipelines. The Trans Mountain pipeline was approved as being in the national interest a year and a half ago, but there is chaos and uncertainty around pipelines in Canada right now. The deadline for the Trans Mountain expansion is nine days away, seven of which are sitting days. It is important for government budgets. The Conference Board of Canada estimates that the Trans Mountain pipeline construction in its first 20 years of expanded operations will deliver $46.7 billion in provincial and federal government revenue.

The messages from the government have been all over the place. Since April 8, the Prime Minister, the finance minister, and the natural resources minister have all promised legislation on the Trans Mountain expansion. I hope the finance minister can provide clarity tonight.

On May 16, he said that the federal government was “willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated.” Will the finance minister bring forward another piece of legislation or revise the budget estimates to account for expenditures on, or indemnification of, the Trans Mountain expansion?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I would like to acknowledge the importance of the Trans Mountain expansion project, a project we see as being in the national interest of Canada.

I would like to acknowledge that we have moved forward with federal approval of this project, which was followed up by provincial approval. We have moved forward with a robust environmental assessment process that has led to a significant investment in oceans protection. We see this as being in the national interest.

We have been clear that we are seeking a financial approach to ensure this project gets done, and I have a level of confidence that this will happen. I was in discussions today. I am not in a position to provide more colour on those discussions, but sufficed to say, we believe this can be done in the commercially appropriate way.

We will be able to do something that the previous government was not able to do in 10 years, which is to get approval to construct a pipeline that will allow us to move our resources to international markets.

[Shannon Stubbs, Conservative, Lakeland, AB]

Mr. Chair, Kinder Morgan has already invested $1 billion in the Trans Mountain expansion and estimates that it has lost $200 million for every month of delay.

Could the finance minister at least answer whether the indemnification will be retroactive?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I can reiterate that we see this project as commercially viable. We see it as being in Canada's national interest. We see it creating 15,000 jobs. We will provide more information on that subject as more information is available.