Proceedings of the Standing Senate Committee on
National Finance
Issue No. 84 - Evidence - December 5, 2018 (5 p.m. meeting)
OTTAWA, Wednesday, December 5, 2018
The Standing Senate Committee on National Finance, to which was referred Bill C-86, A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures, met this day at 5:03 p.m. to give consideration to the bill.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: I am Percy Mockler, senator from New Brunswick and chair of the committee.
[Translation]
I would now like to ask the senators to introduce themselves, starting on my left.
Senator Forest: Éric Forest from the Gulf region of Quebec.
Senator Pratte: André Pratte from Quebec.
Senator Forest-Niesing: Good evening and welcome. Josée Forest-Niesing from northern Ontario.
Senator Moncion: Lucie Moncion, her fellow senator from northern Ontario.
[English]
Senator Wetston: Howard Wetston, Ontario.
Senator M. Deacon: Marty Deacon, Ontario.
[Translation]
Senator Dagenais: Senator Jean-Guy Dagenais from Quebec.
[English]
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Ontario.
Senator Boehm: Peter Boehm, Ontario.
Senator Klyne: Marty Klyne, Saskatchewan.
[Translation]
The Chair: Minister Morneau, thank you for accepting our invitation. Your presence is greatly appreciated.
[English]
I also wish to welcome all those who are with us in the room and viewers across the country who may be watching on television or online.
Honourable senators and members of the viewing public, the mandate of the committee is to examine matters relating to federal estimates generally, as well as government finance.
Today, honourable senators, we continue our consideration of Bill C-86, which was referred to us by the Senate of Canada yesterday, December 4.
Honourable senators, we are very pleased to welcome the Minister of Finance of Canada, the Honourable Bill Morneau.
[Translation]
The minister is accompanied by his officials, including Andrew Marsland, Assistant Deputy Minister, Tax Policy Branch. Thank you for joining us, Mr. Marsland.
[English]
Mr. Minister, we thank you very much for being with us this evening. We appreciate and know you have a busy schedule. We can tell you that we’ve heard from various government officials from your department and other departments prior to you being with us this evening.
[Translation]
Mr. Morneau, we would now like to hear you talk about Bill C-86. If we have enough time, we’ll move on to a question-and-answer period after your comments. Each senator will have two questions. Having said that, Minister Morneau, we’re honoured to have you here. Thank you for always being willing to appear before us. The floor is yours.
[English]
Hon. Bill Morneau, P.C., M.P., Minister of Finance: Thank you. I’m pleased to be here. I would like to start by thanking all members of the committee and the members of the other committees who have studied or looked at or done anything with respect to our Budget Implementation Act, Bill C-86.
In particular, I’d like to thank Senator André Pratte for all of your work. You’ve had a big task. It’s not a small bill, and I know you had to do an awful lot of work to sponsor this bill. Thank you very much for your assistance in that regard.
Today I would like to spend my time with you talking about the state of the Canadian economy and our government’s proposals to build a stronger Canada, one where we know we all share the goal of everyone having a real and fair chance at success.
At its heart, Bill C-86 that we are talking about today is about strengthening and growing the middle class in our country. It’s about making investments that will ensure that our economy is strong today and growing tomorrow, investments that we know will make a long-term difference. It’s about giving Canadians a more open and level playing field to realize their dreams and to build better lives for themselves and for their families.
[Translation]
Bill C-86 includes measures to encourage greater participation of women in the labour market and to help low-income workers join the middle class. It also aims to build a greener economy through measures that will benefit all Canadians.
[English]
The bill we’re discussing today promotes equal opportunity for all Canadians to participate in the economy. Of course, we know that the benefits go both ways. When people have more opportunities to succeed, to achieve their potential, it drives stronger economic growth that benefits all of us.
Since our government took office in 2015, we’ve been working hard to deliver real progress for Canadians, especially for the middle class and for people working hard to get ahead.
We started by asking the wealthiest in our country to pay a little more so that we could lower taxes for the middle class, putting more money in the pockets of more than nine million Canadians. After that, we introduced the Canada child benefit to help families with the high cost of raising their children, and then we indexed the benefit to inflation two years ahead of schedule.
We also lowered the small-business tax rate, making it easier for entrepreneurs to create more good, well-paying jobs. The results tell us that the plan is working. In the last three years, Canadians have created over half a million full-time jobs. The unemployment rate is now at the lowest that we’ve seen in four decades.
To put things into perspective, the last time the national unemployment rate was lower than it is now, road signs in Canada were in miles per hour, and the CN Tower was under construction. I think that that gives a little bit of a better demonstration of where we are at.
[Translation]
The Canadian economy experienced the highest growth rate among the G7 countries in 2017. Economists expect it to remain among the most dynamic economies of the G7 this year and next year. More importantly, we know that this growth has had widespread benefits in Canada. All the provinces experienced positive economic growth in 2017.
[English]
It is also worth noting that the results we’re seeing are not privileging just an elite few in our country. Unemployment is down and employment rates are up sharply among groups of Canadians who are under represented in our economy. This means that thousands of women, young Canadians, Indigenous people, recent immigrants and people working hard to get into the middle class now have a new job and are able to chart a better future for themselves and for their families.
At the same time, wages are growing at a rate that’s outpacing inflation, and we are seeing the wage growth across the board in the country, with especially strong growth among people with the lowest incomes.
The net result is positive. Canadian families now have more money to save, invest and grow our economy. In fact, thanks to the middle-class tax cut and the Canada child benefit alone, by this time next year, middle-class families of four will receive about $2,000 more each year to invest in the things their families need most.
We know there is always more to do, and that’s what we’re trying to do with Bill C-86.
One of the important measures announced in Budget 2018 is the new Canada Workers Benefit. As I mentioned when I appeared before this committee back in May, the new Canada Workers Benefit will allow low-income workers to take home more money while they work, encouraging more people to join and stay in the workforce. To give you a sense of what this will mean for Canadians, a low-income worker earning $15,000 could receive nearly $500 more from the Canada Workers Benefit in 2019 than they would have had under the old Working Income Tax Benefit. We know this is good news for Canadian workers.
We also know that this benefit only really works when it helps to reach the people it’s actually intended to help. In addition to making the benefit more generous, we are also proposing, as you know, to make it more accessible, by allowing the Canada Revenue Agency to calculate the Canada Workers Benefit for anyone who has not claimed it themselves in their tax return. We are doing this to ensure we get the help to those who need it the most.
[Translation]
This measure could be particularly beneficial for people with reduced mobility, people who live far from points of service and people who don’t have internet access.
Bill C-86 will also help Canada make progress on gender equality, which will benefit all Canadians. The Royal Bank of Canada’s economic services estimate that adding more women to the labour market could boost Canada’s gross domestic product by at least 4 per cent.
[English]
One of the ways we can make progress on gender equality goals is by taking action to close the wage gap that exists between women and men. To that end, Bill C-86 proposes to introduce proactive pay equity legislation, requiring federally regulated employers with 10 employees or more to establish and maintain a pay equity plan. This would apply to the 1.2 million Canadians working in federally regulated sectors, ensuring that women receive equal pay for work of equal value.
We also propose to establish a new pay equity commissioner to ensure this new law is followed. This commissioner would deliver an annual report to Parliament on the act’s administration and enforcement.
We know, however, that equal pay is one thing and equal opportunity is another. At a time when child care duties still fall disproportionately to women, we need to consider what can be done to ensure that women have equal opportunities to work, succeed and grow our economy. For this reason, Bill C-86 proposes to increase the number of weeks of parental benefits if both parents agree to share that parental leave. This will encourage all parents, including fathers, to take some leave when welcoming a new child. We’ll also give greater flexibility for caregivers, particularly for mothers, to return to work sooner, if they so choose.
Bill C-86 also includes three ways of strengthening consumer protection for Canadians in their dealings with banks. First, it requires banks to have internal business practices that better serve consumers’ interests. Rules would have to be in place to ensure that consumers’ financial needs are taken into account when selling banking products and services. Banks would also have to set up a whistle-blowing program. This program would prohibit retaliation against employees who report wrongdoings.
Second, this bill gives the Financial Consumer Agency of Canada more tools to protect consumers’ rights and interests. For example, the agency could direct a bank to comply with its legal obligations, for instance, by paying restitution when fees have been improperly collected.
Third, this bill would empower and protect consumers in other important ways. For example, it would require banks to use electronic alerts to help consumers manage their fees. It would also stop banks from applying undue pressure when selling products or services.
Another important element of this bill is its contribution to fighting climate change. As you’ve likely heard, the effects of climate change are projected to cost the Canadian economy $5 billion per year by 2020. It is a tremendous cost, and one that we know demands a responsible and effective response. Here, the vast majority of economists agree. Fighting climate change requires putting a price on carbon pollution. A price on pollution creates incentives for individuals, households and businesses to choose cleaner options.
[Translation]
The Pan-Canadian Framework on Clean Growth and Climate Change gives our provinces and territories the flexibility to develop their own pollution pricing systems that meet federal minimum standards or the ability to request the implementation a federal regime in their jurisdictions. Four provinces have done neither of these things.
[English]
That’s why the government announced that a federal backstop system will be in place in 2019 in Ontario, Manitoba, Saskatchewan and New Brunswick. The system has two parts: A regulatory charge on fossil fuels and an output-based pricing system.
I want to be very clear, though, that this fuel charge is not about raising revenue. It’s about protecting our environment for our kids and our grandkids, and putting money back into the pockets of Canadians. All direct proceeds from the federal carbon pollution pricing system will be returned to the province of origin. The bulk will go directly to individuals and families residing in those four provinces through what we will call climate action incentive payments starting in early 2019.
To do so, legislative changes are required. This is what Bill C-86 proposes. It allows the Canada Revenue Agency to make payments to families in those four provinces, with payments varying by family size and by province. Residents of small and rural communities will also receive an additional 10 per cent on their climate action incentive payment in recognition of their higher energy needs and more limited options for transportation. The remainder of the direct proceeds from the fuel charge will be used to support other sectors that we expect will be affected, including small- and medium-sized businesses, cities, schools, universities, hospitals, non-profits and Indigenous communities.
Direct proceeds from the output-based pricing system for large industrial facilitates will also be returned to their jurisdiction of origin.
[Translation]
In conclusion, Mr. Chair, Bill C-86 is helping to support the Canadian economy. It promises to step up the government’s efforts to ensure that everyone can contribute to the country’s economic growth and reap the benefits of that growth.
Three years ago, Canadians made a choice. They turned their back on austerity and opted for an optimistic and ambitious approach. Bill C-86 respects that choice. It will help make Canada a more egalitarian and generous country and make its economy more sustainable.
I would be happy to answer your questions on our economic update or on any other topical issue.
The Chair: Thank you, Minister Morneau.
[English]
Honourable senators, I will need your full cooperation. In view of the great number of senators who wish to ask questions I will ask senators to limit themselves on the first round to two questions and to be succinct. Time permitting, we will look at a second round.
Senator Marshall: Thank you, minister, for being here today. My question will be succinct.
When I was looking at the budget and also looking at your fiscal update, I was looking for something on Trans Mountain. Can you tell us how much the government has spent on the Trans Mountain pipeline so far?
Mr. Morneau: As you may know, we don’t look at that as spending, but as an investment. The reason we have moved forward on that, of course, is to try and ensure we have an approach to dealing with the political challenges between British Columbia and Alberta.
The purchase price for the pipeline and for the expansion opportunity was $4.5 billion, and that includes a tax payment that came back to us, which I believe was approximately $375 million. Doing the math, if that number is correct, it’s approximately $4.1 to $4.15 billion net of that tax.
Senator Marshall: That was the initial investment. What other finances have been put into it? Because the numbers I have been looking at, I did see there is a $5.2 billion loan from Export Development Canada from the Canada Account, so that’s $5.2 billion, and then there is also another billion of support for working capital and a $1 billion loan guarantee. I have been looking into various areas trying to get an overall picture as to exactly how much the government has invested. I was trying to get a total number.
Mr. Morneau: I do not have the balance sheet in front of me on the company, but the other way to look at it would be that we purchased an asset that is a company that’s actually producing returns. We purchased that and it’s a profitable enterprise producing returns for the government. If you would like more information on the balance sheet of the Trans Mountain pipeline, we would be happy to get that to you.
Senator Marshall: I would also like to know whether there are any other agencies besides Export Development Canada and the Canada Development Investment Corporation. Are there any other Crown corporation, government agency or government department investing in Trans Mountain so we can get an overall picture as to how much the government has invested in Trans Mountain?
Mr. Morneau: Once again, for clarity, the purchase price was $4.5 billion and I think the way to understand that is $4.5 billion and then a net amount would be less than that because of the tax the company had to pay on that purchase. If you would like more information, we would be happy to get it for you from the department.
Will there be two questions per senator? I’m worried we’re not necessarily going to get through this.
The Chair: That would almost be your third question. Senator Marshall, I have to move on to the others, please.
Senator Pratte: Minister, there has been, in the last few days, discussion in the province of Quebec, my home province, about the impact of the adoption of the bank customer part of Bill C-86 on the applicability of provincial laws on consumer protection.
Would you care to clarify, in your view, what will happen once the bill is adopted to provincial laws that seek to protect consumers, especially in the cases where, in some instances, provincial laws may be more stringent than the federal law, and the reverse may also be true in other cases?
Mr. Morneau: Thank you for the question and, again, thanks for the work that you’ve done on this, because it’s very much appreciated. We recognize that it was important to get this right so we went through a consultation process with the provinces following the more recent discussions around consumer protections. I actually released a letter this morning to respond to some of the questions that came from the Quebec government.
Our intent in moving forward with these consumer protections was to make sure that anything we did would be complementary and that we would not be superseding, in any way, the consumer protection responsibilities of the Quebec government, in this case, or any other province, for that matter, but, at the same time, recognizing the federal responsibility around banking.
That was the intent. We believe we have achieved that to the extent that, in the specific example you gave, where there was something that was in the Quebec consumer protections that were in excess of the consumer protections afforded by Bill C-86, that would apply. That protection from the Quebec government would apply and, in reverse, the federal one would apply.
We actually have some examples of how it might work, if you’d like me to go into them, that might provide even a greater level of clarity.
For example, on alerts and fees, one of our proposals is that banks provide electronic alerts to consumers when they are at risk of incurring fees so that when a credit card balance exceeds a certain limit or the deposit balance falls beyond a certain threshold, Quebec has rules that prohibit certain credit card fees.
Under our proposed legislation, these fees would still be prohibited but Quebec consumers would benefit from electronic alerts on deposit accounts or other products. Both of those issues would be, in effect, protecting consumers in Quebec.
Another example is that we propose that banks reimburse consumers if fees are improperly charged. Quebec law allows consumers to claim damages if provincial law requires in certain circumstances. Under the legislation, banks would be required to reimburse improperly collected fees and Quebec consumers would continue to be able to make claims under provincial law.
We see this as complementary and we are working to ensure that it works in that regard.
Senator Pratte: Thank you.
Senator Eaton: Minister, reading all of Bill C-86’s 800 pages, I realize there is about $500 million applied toward Inuit initiatives, but it also includes two new programs to support the Feminist International Assistance Policy. They are allocated $1.5 billion over five years and $500 million of ongoing funding after that. This week, we had the Prime Minister promise $50 million via a tweet to a celebrity TV host for a global children’s charity. There are despite needs in Canada and I have had the opportunity to see a lot of it.
The President of the Nunavut Housing Corporation alone estimates 3,000 units are required to close the housing gap between Nunavut and the rest of Canada, but he says the 10-year plan you announced in the Budget 2017 will build only 48 units per year. Nunavut does not have access to Internet speeds beyond 10 megabytes per second and communities that could be connected to the electrical grid are powered by aging diesel generators instead.
There is also the question of food security, which is dire in the North, having lived through it myself with some of my Senate colleagues last September.
The Kivalliq Inuit Association is partnered with a private-sector firm to propose a hydroelectric and fibre-optic transmission line from Churchill to Rankin Inlet. The project could save upwards of $40 million annually in reduced subsidies on diesel power while addressing environmental concerns, and another $60 million in savings for the mining industry. But they need the federal government to take a 30 per cent stake to get this project off the ground. The payback is there. They’re ready to go, but they need your help.
Why are we spending billions overseas when we’re failing the people of Northern Canada? It’s a bit like feeding your neighbour’s children but not feeding your own.
Can you tell me where your project is in terms of your saying yes or no to it? Why aren’t we spending more money in the budget on the dire needs of the North?
Mr. Morneau: We would be pleased to go into the details of the initiatives we’ve put forward over the last number of years in terms of making sure that we’re enabling Indigenous peoples across the country to be more successful —
Senator Eaton: I’m talking about the Inuit, not Indigenous peoples.
Mr. Morneau: — specifically those that are on reserves or those who live in our North.
I wouldn’t want to diminish the enormous challenge in any way. The challenges in the North are obviously very significant. Most recently in our Fall Economic Statement, you might have noted that we increased funding to Nutrition North, recognizing this as an important challenge.
It’s always going to be an important issue for our country both to recognize the challenges we have here and to deal with them in an appropriate way, and also to be part of a global community that recognizes that we need to do our part around the world. We certainly seek to do both of those things at the same time.
In terms of our efforts in the North, we’ve been focused on infrastructure, as you point out, and we’ve been focused on food security. We’ve been focused on reserves, in particular, and on some of the particular challenges that we face there —
Senator Eaton: I guess what I found so upsetting today is listening to three people talking about international aid, how we weren’t doing enough, $1.5 billion and they didn’t like this or that. I thought, “We’re not spending 1.5 billion in this budget on the North.” They would be only too happy to have it. So I appreciate your ongoing efforts, but we have —
Mr. Morneau: I will say that while it’s always important for us to figure out the appropriate balance, the focus on Indigenous peoples in our country over the last three years has been significant. We’ve been focused —
Senator Eaton: But not the Inuit.
Mr. Morneau: We’ve been focused broadly and specifically on communities we see that have enormous challenges. That will be our continuing approach, and we will need to try and do that while doing the other things that Canadians expect us to do as a country that’s making a difference around the world.
Senator Eaton: Thank you, minister.
[Translation]
Senator Forest: Thank you for joining us, Minister Morneau. First, I want to thank you for listening to our arguments regarding the distribution of the cannabis excise tax. You understood how this bill would affect the municipalities, and you decided to reconsider the approach to redistributing the tax revenues.
My question concerns the carbon tax, a measure that I fully support. In some cases, you’ve set out relief measures for fishers, farmers, greenhouse operators and residents of rural communities.
However, the municipalities must handle street clearing or garbage collection. They even want to increase the pace in order to protect the environment more effectively by collecting organic waste. That said, in reality, the municipalities aren’t receiving any returns from the tax. This will affect their budgets, since costs will increase. We know that 75 per cent of the municipal revenues come from property taxes. To absorb the increased costs, the municipalities will be forced to increase their property taxes. This will reduce the benefit that the residents were supposed to receive from the revenues generated by the carbon tax.
Haven’t you considered following the example of the GST by reducing the impact of the tax effort when it comes to the carbon tax for municipalities?
Mr. Morneau: Thank you for your very important question. We believe that, with the proposed changes, the municipalities will face challenges. Clearly, we must find a way to improve their situation. At the beginning, we took into account the people who will need to bear the cost of these changes. This means that most of the tax revenues will be returned to taxpayers. However, we also have a measure in place for municipalities, universities, schools, hospitals, colleges, and so on.
We’ve explained the figures in the budget. However, we haven’t yet explained how the money will be distributed. That said, clearly the municipalities will be a significant part of this challenge. For example, in Ontario, in 2019-20, $50 million will be provided to the municipalities. This amount will continue to increase each year, which will help the municipalities in this situation.
We should have more information in the coming months on how we’ll proceed.
Senator Forest: For inspiration purposes, the excise gasoline tax refund model is excellent.
Regarding climate change, last week there was a major storm in the Îles de la Madeleine. During these global warming phenomena, we can see that all municipalities in the coastal regions of Canada are dealing with shoreline erosion.
Have you received requests from the Federation of Canadian Municipalities, the Union des municipalités du Québec or a roundtable on environmental protection, for example, regarding the possibility of creating a climate change adaptation fund that would help local communities deal with global issues that have a local impact?
Mr. Morneau: We can provide information on what has already been done. We know that significant challenges were encountered in the past three years, since there were major disasters. During this time, I was able to see the need to provide money to the provinces. We must think about how to improve the situation in the future, and we’ll try to obtain more information for you.
Senator Dagenais: Thank you, Minister Morneau. The Barreau du Québec has strongly criticized Bill C-86 by calling it an omnibus bill that undermines democratic debate. The Barreau du Québec has also said that this would lead to a lack of consultation with regard to Quebec law.
I think that you should have at least obtained an analysis of how the bill would affect the consumer protection regime in Quebec. If this type of analysis has been conducted, could you send it to us? Otherwise, why wasn’t this analysis concerning Quebec’s consumer protection regime conducted?
Mr. Morneau: Your question is somewhat similar to Senator Pratte’s question.
We consulted with the provinces to ensure a complementary approach. We received a letter from the Quebec government, and I responded to it. I explained that our approach would be complementary from the outset, and that nothing would reduce the protection available to consumers in Quebec. I know that some people have questions, but we can explain exactly how it will work. In our opinion, we’ve found a method that will take into account the situation in Quebec and across the country in the banking sector.
Senator Dagenais: You’re talking about the letter to the Minister of Finance and Minister of Justice. In their letter, they said that the protections were weaker than the protections set out in the Quebec legislation. They also said that this could create confusion in the application of the rules in Quebec. Do you agree that this will create confusion in the application of the rules?
Mr. Morneau: With regard to your first point, if the protections in Quebec are stronger than the protections at the federal level, it means that the protections provided in Quebec will be more significant. As a result, the two regimes could be complementary. We think that we need to work together. We believe that this approach can work and that working together doesn’t constitute a major challenge.
Senator Dagenais: Thank you, Minister Morneau.
Senator Moncion: Thank you for joining us, Minister Morneau. The amendment proposed in Bill C-86 regarding charitable organizations and expenses related to political activities is based on the findings of a focus group report. The consultations conducted to prepare the report were held mostly with people involved in the charitable sector or in non-profit organizations. The focus group that prepared the report is composed solely of people from the sector. The report doesn’t necessarily provide the views of political science experts who specialize in elections and democracy or of legal experts. These people may have a slightly different opinion.
Even though the measure is aimed at a respected sector in Canada, such a fundamental change to the nature of the legal entity could have a negative impact.
Why does the amendment propose to increase from 10 per cent to 100 per cent the charitable organization funds that can be used to participate in political activities?
Mr. Morneau: We must clarify why we thought that it was important. Clearly, many organizations have trouble understanding how they can advance their public objectives within our system. We believe that it’s necessary to have an approach that will improve their ability to make a difference. At the same time, we want to ensure that the objectives don’t become partisan. Our approach is no different from the approach used in other countries. We looked at what other countries were doing to see the differences between our approach and their approaches.
Lastly, we believe that this gives organizations the chance to be part of the system and to carry out activities that align with their objectives. In our opinion, this is important.
Senator Moncion: My second question concerns the Canada Labour Code. You’ve made significant changes, in particular with regard to the number of additional days of leave. You’ve also made some changes in terms of costing for SMEs. SMEs have benefited from tax cuts in the past year. However, all aspects of sick leave and parental leave, for example, involve significant costs for companies. I want to know whether an impact study was conducted before the decision was made to implement these changes.
Mr. Morneau: I’ll ask the team whether anyone has made these findings. This may help me answer your question.
The Chair: One of your officials is about to enter. Do you want to continue?
Senator Moncion: It’s okay. You can move on to another question.
[English]
Senator Boehm: Minister, for the past year you’ve been chairing the G7 Finance Ministers’ meetings, hosting and chairing one here in Canada and others in other parts of the world. There has been a traditional financial market and global economy strand through all of these discussions, but it seems that this year it was a bit different in terms of discussion on non-market economies, the impacts of jobs of the future and, indeed, moving away from traditional sorts of tax evasion and tax avoidance issues, although I know you were into that as well, and base erosion and profit shifting.
I’m wondering if you have any reflections on a year that was quite turbulent in terms of financial markets and also some of the trade issues that have come along the way.
Mr. Morneau: At the G7 table, we did continue with those themes that you mentioned as the continuing themes. We continued to talk about the importance of getting our international tax systems working in an effective way. We talked about some of the challenges that are presented through the international flow of money, like anti-money laundering and terrorist financing challenges. Those were important issues at the table.
I think you’re correct. There were some other issues that came up that we thought were important in the context of some of the trade discussions going on around the world.
Specifically, we talked about some of the differences that non-market economies have in terms of how they allow for intellectual property transfer. That was an area of importance to all of us.
In the context of Canada, we want to continue to promote an international rules-based trading approach, and addressing the places where the rules may not actually be working as intended by the World Trade Organization, we think, is a positive enabler for continuing effective trading relationships. So we took a role, together with other G7 countries, to talk about the way that we might be able to advance that.
In the context of the current discussions going on between the United States and China, it’s obviously particularly important, because some of the issues we discussed were important in those discussions.
The discussions around jobs of the future, which you mentioned, those were a recognition that some of the most significant challenges that our economy and other industrialized economies are facing are held in common in the sense that automation and globalization present challenges to the nature of jobs in industrialized countries.
There’s been a continuing discussion, previously led by the Italians last year in their role as President of the G7 and by us this year, in thinking about whether there are approaches we have in common to deal with the incredible changes we’re likely to see through things like artificial intelligence and other issues in terms of jobs.
So I would say it was a pretty robust G7 discussion this year, and one that maintained that focus on some core issues and also addressed some of the emerging challenges we’re pretty sure are going to get bigger and bigger.
The Chair: Before we go to Senator Klyne for the next question, I see, minister, that we have your two officials. I would ask for the record that the two officials introduce themselves. Then we’ll go back to questions.
Barbara Moran, Director General, Strategic Policy, Analysis and Workplace Information, Labour Program, Employment and Social Development Canada: My name is Barbara Moran. I am the Director General of Strategic Policy, Analysis and Workplace Information at the Labour Program.
Charles Philippe Rochon, Senior Policy Analyst, Labour Standards and Wage Earner Protection Program, Labour Program, Employment and Social Development Canada: I’m Charles Philippe Rochon. I am a Senior Policy Analyst with the Labour Standards and Wage Earner Protection Program.
Mr. Morneau: To summarize, the way I took the question was in the context of a positive environment for small businesses, one in which we lowered small business taxes significantly and found ourselves in that positive outcome, and whether we considered the labour force changes that were put into Budget 2018 and the impacts they have on small- and medium-sized businesses.
The question is both the nature of the consultations and the impacts that were considered.
Ms. Moran: Having mentioned the consultations, I’ll start there. The consultations that we did for the Labour Code amendments started out over the course of about a year. We started, first, by consulting with a range of stakeholders we had previously consulted with on labour standards amendments, asking them to write in and give us their thoughts on how labour standards should be modernized, given the changing world of work. We also then did a series of stakeholder round tables with a range of different stakeholders, employers, as well as unions and others.
We also did a survey that was posted. Finally, we had a group of experts whom we consulted. We had a virtual forum of experts — about 75 or so — who provided feedback in terms of a range of different questions that we provided to them on how to modernize labour standards.
In terms of the expected impacts of these changes, depending on what employers already provided, we calculated the average total cost of the proposed amendments to the Labour Code to be between 0.1 and 0.5 per cent of their combined annual payroll, or between $72 and $333 per employee per year. Those costs, though, are expected to be higher for smaller employers, since they’re generally less likely to offer the large compensation leave entitlements and benefits. For those smaller employers, the cost of the proposed changes is expected to range from 0.2 to 0.9 per cent of annual payroll, or between $95 to $453 per employee per year.
Senator Klyne: Minister, there was a recent study done by the Tax Justice Network, which issues their international financial secrecy index on the secrecy surrounding tax havens. Unfortunately, Canada currently ranks twenty-first on their 2018 index.
Mr. Morneau: Out of how many?
Senator Klyne: Twenty-first.
Mr. Morneau: Out of?
Senator Klyne: I don’t know, but there’s —
Mr. Morneau: One hundred and ninety countries or so.
Senator Klyne: My only point is we’re twenty-first.
Mr. Morneau: Okay.
Senator Klyne: The focus is mostly on the opaque relationship between our banks with those of Caribbean countries like Barbados. Further concerns were expressed by the C.D. Howe Institute about our disclosure of beneficial ownership.
That being said, what is the government doing to strengthen Canada’s capacity to recover tax dollars that leave through these loopholes through this legislation?
Mr. Morneau: This is a really important issue. I was asking “out of how many” because I do think it’s a really important question for us to consider different countries’ situation and ensure that we do well against international standards. In some cases, we have some barriers in Canada that we need to address and that require cooperation across the country.
The area you mentioned in particular is a challenging one. Beneficial ownership is important. Most companies in our country are not federally registered companies; most of them are registered in the provinces. So for us to get an understanding of who owns companies, we need to get at those beneficial ownership issues on a province-by-province basis.
This is something that I’ve seen as important since I’ve come into this role. We’ve been talking about this at the Ministers of Finance of Canada meetings over the course of the last couple of years. We have gotten agreement with the provinces that they will work toward providing beneficial ownership information, because if we don’t know who owns the organization, we can’t properly figure out what they might be doing.
That has to go hand in hand with what’s called the Common Reporting Standard, which is something we’ve signed onto with the OECD. Those two mechanisms, knowing who owns companies and then having the ability to understand what’s actually going on in reporting in banks in other countries, are critically important.
That will allow us to, from our perspective, continue on our path to try to ensure that we have Canadians paying the appropriate amount of tax and not using potentially inappropriate means.
Another way we’re doing that is making sure we have adequate funding of the Canada Revenue Agency, which, as you probably know, has been a very important issue for us. We’ve put significantly more funding into the CRA, especially in Budget 2016 and Budget 2017. That is having results. We’re seeing a positive return on those dollars given to the Canada Revenue Agency.
Senator Klyne: As a way to reduce taxes, some Canadians choose to use foreign entities to place their assets outside the view of the CRA. Do you have any estimates on the amounts that will be captured if this legislation passes?
Andrew Marsland, Assistant Deputy Minister, Tax Policy Branch, Department of Finance Canada: I believe my colleagues briefed the committee a couple of days ago on a few somewhat technical but important measures in the bill that deal with the foreign accrual property income rules. These rules effectively ensure that where money or property is invested abroad, for example, in a foreign affiliate of a Canadian enterprise, the income from those funds is taxed on the current basis.
There are measures in the bill to strengthen those measures with respect to tracking interests in corporations.
Senator Klyne: I was wondering if you had a dollar amount.
Mr. Marsland: We don’t have an estimate of that. These kinds of measures are often difficult to cost. We do believe it’s a significant strengthening of the rules.
Senator Klyne: Thank you.
Senator M. Deacon: Thank you, minister and your team, for being here today. No question, this is a big, robust bill.
One of the areas I want to bring up is around the pay equity section of the bill. I wanted to follow up on something I listened to yesterday in the Senate from one of my colleagues concerning the proposed pay equity act and one of its applications. In the stated purpose of the act, it says that “the purpose of this act is to achieve pay equity,” and it goes on a little bit, “while taking into account the diverse needs of employers.”
My colleague had complaints about this phrase, “diverse needs” — concerns I’ve been thinking about myself and about which I share some thoughts. I’m really thrilled to see the government wanting to ensure women are paid equal wages for equal work, and is taking action to see that becomes a true reality, but I worry about the inclusion of that phrase if it makes the law even less absolute — that pay equity will not take priority in certain situations. I’m wondering why it was put in there, and would it take away from the bill if it was removed, diverse needs of employers, because of so many places where it is elsewhere in the bill.
Mr. Morneau: The background to that clause is a recognition that federally regulated employers, while we think of them as large institutions, are not all large institutions. We have the banking sector, the telecommunications sector, the transportation sector, that can include large and small organizations.
We want to recognize that there is a significant difference in those organizations. The purpose clause itself doesn’t create any legal obligations.
I appreciate the question. It doesn’t, in and of itself, do anything other than acknowledge that diversity of the situation. We think it’s appropriate in that regard because we are expressing the need for hurdles that will have to be dealt with differently based on those different scales of organizations.
Senator M. Deacon: Thank you.
Senator Wetston: Minister, I want to thank you for introducing the beneficial ownership provisions in the legislation. It’s a great start. I recognize we have, I think, up to 14 corporate registries in Canada, so taking the leadership role on this is important, particularly under the CBCA. I want to congratulation for you doing that. Unfortunately, there is more work to do, but nevertheless, it’s a good start.
My question involves the Fall Economic Statement and the estimates of public debt charges, which will increase over 60 per cent, as I understand it, from 2017-18 to 2023-24.
Following from that statement is the reliance, and you note that Canada’s strong fiscal position has allowed the government to maintain the debt-to-GDP ratio on a downward track and protect the long-term fiscal sustainability of Canada’s economy.
I begin this question being a bit of a contrarian when it comes to economic models. Within your survey of economists, 14 private-sector economists suggested good news; the Canadian economy would grow between $77 billion and $101 billion annually between 2019 and 2023.
The heart of my question, minister, is that while this is occurring, the debt-to-GDP ratio remains on a downward track despite the planned deficit spending during this period and, obviously, servicing the debt will be a very significant number and, perhaps, challenge for Canada over this next period.
Do you have any reflections on why you continue to rely on the debt-to-GDP ratio as the cornerstone for this position? I’m sure you rely on many other economic indicators. Could you provide insight into that?
Mr. Morneau: We look at, effectively, the balance sheet of the country in order to determine our resilience in the face of challenges. I think what I’m hearing from you is a sense that we need to be prepared for challenges, because you are apparently questioning the consensus view of economists that we used to look at the economic output.
We start with how we are doing, in the same way that a family is going to be more resilient to deal with a member of the family losing a job if their mortgage is lower than if their mortgage is higher. We are in a particularly favourable position in Canada that our debt as a function of our economy is very low compared to other economies. We don’t think that relieves us from the responsibility of being fiscally prudent.
What you see when you say you were looking at those economists’ views on page 101 of the Fall Economic Statement is a variety of those views. You see that the top four economists’ views, for example, would put us into a very favourable economic situation quite quickly, but if you had a more dire prognostication, it would take us a little longer.
Under any scenario, what you see is we are able to reduce our debt as a function of economy. We’re also able to reduce our deficit as a function of the economy.
The question which people appropriately ask is the speed with which we do that, and I think that is the heart of your question: Should we be going faster to that outcome?
Our conclusion in the Fall Economic Statement, with the very positive situation we found ourselves in economically, because revenues are obviously significantly higher than we expected, is do we focus on our competitive environment vis-à-vis the United States and other countries to ensure that investments continue, or do we potentially more rapidly change our fiscal situation? Our conclusion was that we could do both, and that would be the path that we would choose. The alternative path would have been, perhaps, a deficit as a function of the GDP that was declining faster, but in that situation, we might not have the investments that create the growth and positive jobs that we need for tomorrow and the day after.
In the six months before the Fall Economic Statement, I went out and spoke extensively to the largest investors in our country to determine whether the concern we had, the specific concern around the accelerated depreciation that the U.S. put in place, would significantly disadvantage us for their next investment, and the overwhelming response was yes, so we felt that was important to deal with.
It would have been much more difficult to deal with if we didn’t have such a positive economy, but we’ve been able to do both, and we will continue to be conscious of fiscal prudence as we move forward.
Senator Wetston: Thank you.
[Translation]
The Chair: Senator Forest-Niesing and Senator Marshall, please ask only one question each, because the minister needs to leave.
[English]
Senator Forest-Niesing: My question relates to the creation of the position of the pay equity commissioner.
[Translation]
I want to give you the opportunity to further clarify the scope of the powers that will be given to the commissioner. What measures can the commissioner take to address the complaints received?
Mr. Morneau: I’ll see whether anyone in the room has more information about the commissioner.
[English]
Lori Straznicky, Executive Director, Pay Equity Task Team, Labour Program, Employment and Social Development Canada: My name is Lori Straznicky, Executive Director of Pay Equity at the Labour Program at ESDC.
Mr. Morneau: If you could give a sense of what the specific tasks of the commissioner would be and why it will make a difference.
Ms. Straznicky: The pay equity commissioner would have tasks when it comes to enforcing the act by having powers like conducting audits on their own, but also having the power to go to employers and ask them to conduct an internal audit and then provide the pay equity commissioner with the results of that audit, which they could then commence an investigation if they saw something that caused them some concern.
The benefit of doing it that way is that it allows the commissioner to use resources in other areas, such as dispute resolution, encouraging parties to come to solutions on their own, and also turning resources to educating different workplace parties on their rights and obligations under the act.
Senator Marshall: I was looking through your fiscal update and your budget for additional funds for irregular migrants, for capital projects for National Defence. I didn’t find anything. The line that says, “Fiscal impact of non-announced measures,” what would be in that?
Mr. Morneau: We made a commitment to bring more transparency to the accounts. Obviously, previous governments did not provide the level of transparency to show that. What it demonstrates is that we have some commitments that are pending cabinet approval that are not able to be fully elaborated upon because of potential secrecy issues — issues around trade agreements — but we do want to give some transparency so people can understand that those are issues we are going to have to address.
Senator Marshall: Thank you.
Mr. Chair, the minister indicated that his officials could give us the total funding for the Trans Mountain projects. I had a $7.2 billion figure, and I don’t know if it’s correct.
The Chair: Mr. Minister and Assistant Deputy Minister, there are two questions I would like to remind the officials of. A question was asked by Senator Marshall on Trans Mountain — if you could look into that question to follow up — as well as the question from Senator Forest on the municipalities.
With that, minister, thank you very much. You have been very generous with your time, but we all have to appreciate we have the same common denominator: transparency, accountability, predictability and reliability.
[Translation]
I want to thank the officials for their time and for their answers to the senators’ questions.
[English]
Mr. Morneau: Thanks very much.
(The committee adjourned.)