THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, May 11, 2021
The Standing Senate Committee on National Finance met by videoconference this day at 9:30 a.m. [ET] to study the subject matter of all of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, I would like to take this opportunity as chair and on behalf of the Finance Committee through the clerk, Ms. Maxime Fortin. On behalf of the National Finance Committee, we want to acknowledge and say thank you to all of you and the leadership of the clerk for their dedication and tenacity in organizing our meetings. The meetings are comprised of senators, witnesses and senator staff. The meetings are well prepared, Ms. Fortin. Thank you for a job well done.
Before we begin, I would like to remind senators and witnesses to please keep your microphones muted at all times unless recognized by name by the chair.
[Translation]
If you are experiencing technical difficulties, in particular with the interpretation, please let the chair or the clerk know. We will work to resolve the issue. If you are experiencing other technical difficulties, please contact the ISD using the technical support number provided.
[English]
Honourable senators, the use of online platforms does not guarantee speech privacy or that eavesdropping won’t be conducted. As such, while conducting committee meetings, all participants should be aware of such limitations and restrict the possible disclosure of sensitive, private and privileged Senate information.
Honourable senators, participants should know to do so in a private area and to be mindful of their surroundings.
[Translation]
We will now begin the official part of today’s meeting.
[English]
My name is Percy Mockler, senator from New Brunswick, chair of the committee. I would like to introduce the members of the committee who are participating in this meeting: Senator Boehm, Senator Dagenais, Senator M. Deacon, Senator Duncan, Senator Forest, Senator Klyne, Senator Loffreda, Senator Marshall, Senator Pate, Senator Richards and Senator Smith.
Honourable senators, I wish to welcome all the viewers across the country who are watching on sencanada.ca.
This morning, we will begin our study of the subject matter of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures, which was referred to this committee on May 4, 2021, by the Senate of Canada.
Today, we welcome several officials from the Department of Finance. Welcome to all of you and thank you for accepting our invitation. For the first meeting, honourable senators, we will focus on parts 1, 2 and 3 of the bill called “the tax-related measures.”
Honourable senators, I also understand through Mr. McGowan that there will be no presentation or comments from the officials. We will go directly to Question Period. I would like to tell senators that for this meeting you will have a maximum of eight minutes each for the first round. Therefore, please ask the questions directly to the witnesses. Witnesses, please respond concisely. The clerk will make a hand signal to show that the time is over.
To the witnesses, I ask you to please identify yourself when answering a question. It is imperative for the Finance Committee record that you identify yourselves exactly with your title.
I will ask Mr. McGowan to help our committee direct questions to the witnesses who will respond.
Senator Marshall: My first question is on the wage subsidy and the rental subsidy. It’s in Part 1(r). I have several questions regarding that. My understanding is that it’s extended to September 25, but that there is also provision for further extension to the end of November by regulation. The regulations have to be gazetted, correct? Can you give me the timeline on the gazetting of the regulations?
Trevor McGowan, Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance Canada: Thank you for your question. As noted, my name is Trevor McGowan. I’m the director general of the Tax Legislation Division at the Department of Finance.
The bill does, as was suggested, extend the Canada Emergency Wage Subsidy and the Canada Emergency Rent Subsidy to September with the ability to extend to the end of November. The parameters for any two new periods for the wage subsidy and the rent subsidy would be done through regulation. That is done through the normal regulatory process by order of the Governor-in-Council on advice of cabinet. It gets published in the Canada Gazette.
There is no fixed timeline for these processes.
Senator Marshall: That’s all I needed to know. I have a number of other questions.
Mr. McGowan, there is no provision past November, but if the government did want to extend it further, is new legislation required, or can it be extended past November by regulation? I’m asking the question because when we heard from some business leaders, they were saying some sectors might need targeted support. Would we see new legislation, or could that be done by regulation?
Mr. McGowan: It cannot be done by regulation. It would require new legislation before Parliament to extend past the end of November.
Senator Marshall: It references that revenue decline for the eleventh period cannot be less than the revenue decline for the ninth period. What do you compare in order to get the decline?
Mr. McGowan: There is a default method for comparing revenue decline and an elective alternative method. The default method is basically month over month. You would look at, for example, December 2020 versus December 2019. However, the alternative method looks at the average of January and February of 2020 compared to the current reference.
Senator Marshall: I’m going to interrupt because I only have seven or eight minutes.
What I find with the Department of Finance is they will put a lot of detailed information on the website. Would the information be on the website so we can see the numbers and how they correlate? It’s something you did in the summer when you first implemented the programs and you did the same for the Canada Child Benefit. Is that information on the website?
Mr. McGowan: Yes, it is. In fact, the budget supplementary information has some very helpful tables for showing all that information.
Senator Marshall: In Part 1(f), the advanced life deferred annuities, which you can roll over from the RRIF or the RRSP, have to be less than 25% or $150,000. That’s something new, isn’t it? I’m wondering what the impetus for that change was.
Mr. McGowan: Thank you for the question. It is a new type of investment that is intended to provide greater flexibility to save for retirement. The basic impetus, to answer your question, is that it can allow payments to start when the person attains the age of 85, and it helps protect against the risk of outliving your investments.
Senator Marshall: The briefing notes state this is provided certain specified conditions are met. What does that mean? Because the devil is in the details. It seems like there are some restrictions, and I couldn’t see where they were outlined.
Mr. McGowan: There are a number of conditions that need to be met in order to qualify for advanced life deferred annuities, or ALDA. Perhaps my colleague Mr. LeBlanc can provide a bit more detail on what those conditions are. As with any tax provision, there are certain conditions that need to be met in order for an annuity to be considered an ALDA.
Senator Marshall: Mr. LeBlanc, if you could be brief and if there is a link you can provide us with so I can look at it later on, that would be great.
Pierre LeBlanc, Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance Canada: What I would suggest, for the sake of time, is we follow up and provide you with written information on that.
Senator Marshall: That would be great. My next question — and you will have to stop me, Mr. Chair, when I’m past my time — is in regard to the Canada workers benefit. Are all the rules in the Income Tax Act, meaning that any changes would require legislation, or can the changes be made through regulation?
Mr. McGowan: Thank you for the question. The changes in respect to the Canada workers benefit are in the Income Tax Act. Further amendments would need to be done by legislation. As a refundable tax credit, these would be administered on Royal Assent of Bill C-30.
Senator Marshall: Part 1(u) discusses limiting transfers of pensionable service into individual pension plans. Could somebody explain that? I read the notes but didn’t quite grasp what was happening there.
Mr. McGowan: This measure is in response to tax planning that had been developed in order to circumvent some limitations that are currently in the act. When you have a certain type of pension plan, you can transfer amounts to an RRSP or another pension plan. There are limitations on how much you can transfer to your RRSP.
Planning had developed whereby individuals would establish their own individual pension plans and transfer a much larger amount than was allowed under the transfer to their RRSP. They would use the pension-to-pension transfer rules to get around that limitation. What this measure would do is close down that type of planning and ensure that if you are transferring pension entitlement to essentially your own account, then the limitations for RRSPs would be applicable.
The Chair: Thank you, Senator Marshall. You’ll be in the second round.
Mr. McGowan, I would like to acknowledge and thank you on behalf of the committee for providing your written answers on the due date that we had shared. Thank you.
Do we agree that today’s questions and answers that will be sent in by writing will be provided to us on or before May 19? I see Mr. LeBlanc saying yes. Thank you. We will aim for that due date of May 19.
[Translation]
Senator Forest: My thanks to the witnesses for joining us this morning to discuss Bill C-30.
My first question goes to Ms. Lavoie, and is about the Canada Recovery Hiring Program (CRHP).
We have seen very prosperous companies take advantage of the wage subsidy program. I have commented about this on a number of occasions. Some were even able to increase their dividends, increase their executive salaries, or even buy back their own shares, while making use of the wage subsidy. In the context of the pandemic we are experiencing and the emergency programs we have established, that seems to me to be quite immoral.
What measures have been put in place to make sure that this new hiring program does not benefit very prosperous companies that could use it to buy back their own shares, thereby allowing them to increase their dividends or their executive salaries?
Maude Lavoie, Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance Canada: With the new hiring program, employers that are public companies will not be eligible for the program.
As your question seems to be about dividends and benefits to shareholders, let me repeat that, in this case, public companies will not be eligible. The eligible employers will be Canadian-controlled private corporations, charitable organizations and not-for-profit organizations.
As for the program’s eligibility criteria, employers will have to demonstrate that they are facing a drop in revenue in the qualifying period. The program will begin in June. Calculations will be done in the same way as for the wage subsidy. We have used the same platform in order to make access to the program easier.
Senator Forest: If I understand correctly, no company listed on the stock exchange will be eligible for the program.
Ms. Lavoie: Yes, that is correct.
Senator Forest: Thank you.
My next question is about the eligibility criteria for the Canada emergency rent subsidy. Is the Lockdown Support that comes as a wage subsidy available to, say, a worker returning to the country after a pleasure trip, for vacation or the like?
[English]
Mr. McGowan: I would be happy to answer that question. As I understand it, the question is whether or not the Lockdown Support under the rent subsidy would be available in respect of an employee who has returned from vacation outside of the country or the area in which the business is situated.
Senator Forest: Exactly.
Mr. McGowan: The Lockdown Support in connection with the rent subsidy is available for employers who have had their businesses shut down or their activities restricted as a result of a public health restriction. If the activities of the business, say a restaurant, are required to close because restaurants are not allowed to be open anymore in the jurisdiction, then the Lockdown Support can be available in order to support rent or certain expenses associated with owning property, such as a mortgage or property insurance and so on.
The Lockdown Support is available to provide support for businesses and qualifying not-for-profits in respect of the rent they pay and so the wages and the activities of the employees are not directly relevant to that program. It’s really a rental and property ownership expense support program.
The wage subsidy and the new hiring program — Canada Recovery Hiring Program — are based upon wages paid to employees. If you would like, I could speak to those to further answer. In those cases they are based upon declines in revenues for active or furloughed employees. If the employee is active, the rule does not test other than testing whether or not they are active employees who are getting paid by the employer. It does not look to the behaviour of the individual employees. The wage subsidy and the new recovery hiring subsidy would be available for employers regardless of the movements of their employees, as long as they are active employees or, for the wage subsidy, even furloughed employees.
[Translation]
Senator Forest: So that means that an employee coming back from a vacation abroad and for whom the employer submits an application could receive a subsidy during the quarantine?
[English]
Mr. McGowan: The Lockdown Support is available in respect of rent and not employees so those two are unconnected, but the wage subsidy provides subsidization to employers and the employers can receive a percentage of qualifying salary and other remuneration expenses paid to their employees. The amounts aren’t going directly to their employees. Employers receive a subsidy based on how much compensation they paid. It can help the employees indirectly.
[Translation]
Senator Forest: An article that appeared in The Globe and Mail on May 8 revealed that the list of companies that received the wage subsidy had been removed from the website for technical reasons in January, and that it has not been available since.
How can we explain that the names of companies that have received those subsidies are not publicly disclosed? When will the list be available again?
How can we explain that, five months after the data was put online, it is not available? Journalists are saying that they have to use the Access to Information Act. In my opinion, that’s not right.
Ms. Lavoie: I will answer that question. As I understand it, the Canada Revenue Agency website allows people to search by company name, in order to check whether a particular company has used the wage subsidy.
As for your other questions as to how that process is handled by the Canada Revenue Agency, it would be better to put the question to the agency. The Department of Finance Canada is not responsible for managing the list.
Senator Forest: Thank you. We will ask the Canada Revenue Agency for that information.
[English]
Senator Klyne: Welcome to our panel guests this morning. My first question is around Canadian journalism and the supports. Part 1(p) of the legislation proposes income tax measures to support Canadian journalism through changes to labour tax and customer digital news subscription tax credits. It also defines that an eligible or a qualifying journalism organization must be primarily engaged in the production of original news content.
For the record, I am of the opinion that independent, credible journalism is the cornerstone of democracy and good decision-making depends on citizens and industries having access to reliable, accurate facts being put in a meaningful context.
Can you please explain to this committee what changes to the labour tax and customer digital news subscription tax credits are being proposed and how? To what extent will these changes support independent and credible Canadian journalism?
Mr. LeBlanc: Thank you for your question, senator. I didn’t introduce myself last time. I’m Pierre LeBlanc, Director General of the Personal Income Tax Division at Finance Canada.
Back in 2019, three tax measures supporting Canadian journalism were adopted by Parliament. You mentioned a couple of them: the labour tax credit and the tax credit for digital news subscriptions. There was also allowing non-profit journalism organizations to become qualified donees, which gives them charitable-like status. Those main measures were adopted in 2019. These measures are largely technical amendments, the goal of which is to fine-tune the measures adopted in 2019 so that they better achieve the objectives set out when those measures were adopted. There are certain ones for each measure. Would you like me to go into detail on any of them?
Senator Klyne: Not specifically. The specific question would be more around what the impact will be to support the existence of the credible news.
Mr. LeBlanc: There isn’t any significant change in these measures. The support comes from the three main tax measures that were adopted back in 2019. This is to make sure that they operate as intended.
Senator Klyne: When it was introduced, it was something like $600 million to support the newsroom labour?
Mr. LeBlanc: Across the three measures, the total cost over five years was $600 million.
Senator Klyne: Regarding the definition, I think that is new in terms of the definition changes of a qualifying journalism organization being primarily engaged in the production of original news content.
Will the procurement of credible content from news wire services such as the Canadian Press, Associated Press or Reuters or from other newspapers affect the definition of a qualified journalism organization? They aren’t necessarily the author of that, but they did purchase the news.
Mr. LeBlanc: I wonder if a colleague could address the wire service question.
Mr. McGowan: I can follow up. The definition of a qualified Canadian journalism organization is a general definition that applies for the purposes of all three of the tax supports for journalism that we’ve discussed. It provides the basic threshold that needs to be met in order for a qualifying journalism organization to qualify for any of the three supports. Each of the supports has their own additional qualifications that would need to be met in addition to meeting the basic definition of a qualified Canadian journalism organization.
When the requirement for an organization to be primarily engaged in the production of original news content was removed from that definition, then some more precise requirements tailored to the specific programs were introduced.
In the case of the newsroom tax credit that you were asking about, the basic requirement in the definition of qualifying Canadian journalism organization that they may be primarily engaged was removed. Then there was a requirement added that the newsroom employees eligible for the labour credit would need to spend at least 75% of their time engaged in the production or original written news content. You moved from more of a focus on what the organization was doing, what they were publishing and so on, to what the employees being subsidized were really doing.
So some organizations, many papers, get a fair bit of their published journalism from wire services. Maybe some are less than 50% and maybe some are a bit more, but they can still be doing real journalism that is so important to society. This moves the focus away from the 50% threshold for everyone and looks to what the employees being subsidized are doing.
Senator Klyne: It’s less on the content amount and more focused on the labour amount of what they’ve been doing, which makes sense.
Mr. McGowan: That’s right. It’s not counting the number of papers or articles that come through the wire versus our original. It is just looking at what the employees are doing.
Senator Klyne: That makes sense.
This is regarding the digital service tax, which has garnered much interest with the introduction of the digital service tax of 3%, sometimes referred to as the “Netflix tax” requiring multinationals to collect GST or HST on digital products such as software applications and services like audio streaming.
If I understand correctly, that applies to non-resident vendors or multinationals selling digital services that offer engagement, data and content to Canadians, and specifically those vendors realizing revenue from Canadians in excess of $20 million. How is that threshold of $20 million established? If I understand correctly, this will amount to $1.2 billion being collected over five years. Essentially, it will be the Canadian consumers who will pay for this.
Mr. McGowan: I would say the new digital services tax that was announced in Budget 2021 and described in the budget supplementary information is a new tax that would be introduced. It is not contained in this bill. The government intends to release draft legislative proposals relating to this new digital services tax in the summer of 2021.
Senator Richards: Thank you to everyone for being here today. Senator Marshall asked my first question, and Senator Klyne asked my second question. I will try to rephrase them. Maybe I will not ask about the advanced life deferred annuity, although I think at the age of 85 it is a bit late. Maybe it should be at the age of 80. It may be much better for our citizenry if it was.
I’ll change my question a bit. How many journalistic organizations received publisher grants in 2020? Was the money given to the organizations or to the journalists? I know you kind of answered that. How much money was given? Which organizations applied? Does this mean that the journalists in any way abrogate their journalistic independence? That’s a question you probably can’t answer, but I thought I would ask it.
Many people in the journalistic field today take it off the wire anyway; they take it off Reuters or AP and sit in their cubicles and write their stories. If anyone can answer part of that, I’d be happy. Thank you.
Mr. McGowan: I can speak briefly to the journalistic independence point and then turn it over to my colleague Pierre LeBlanc for the more numbers-related aspect of the question.
In connection with the support for journalism organizations, there is an independent advisory panel providing advice, and membership in that is drawn from the news industry. They provide advice on who should qualify or not as a journalism organization in order to help maintain the independence of the news sector and prevent any sort of perceived pressure on that.
In terms of the numbers, I turn that over to Mr. LeBlanc.
Mr. LeBlanc: Thank you for the question, senator. In terms of numbers, the process is just starting. The three measures that were adopted in Budget 2019 are just getting under way. It’s a bit early to provide specific numbers of how many organizations have qualified as qualified Canadian journalism organizations.
If I could take another example. People are filing their 2020 tax returns now, and this is the first year that people can claim the digital news subscription tax credit. So that’s something, I think, in the next little while that we’ll start to see numbers on.
On the other point, given the importance of transparency and the independence of the process, there is the independent advisory board on qualifying Canadian journalism organizations and advising ministers.
Senator Richards: Thank you. It still is a bit sticky because I’ve been a writer and I’ve written 30 books, so I know how this works. It’s often very subjective on how you qualify or don’t qualify for certain types of grants.
That being said, I have a question about the Registered Disability Savings Plan and who ceases to be eligible for the Disability Tax Credit and when they are. Maybe you could get that to me in writing because I didn’t quite understand that part when I was reading it. It didn’t resonate with me. If you could get that to me in writing, I’d be pleased. Anybody.
I’ll just end by saying I don’t have much else to say, and I want to thank you all very much. It is important for the average Canadian citizen to be able to follow any government document. Some of this is cluttered, and it seems intensely obfuscating. The language is obscure. I don’t think that’s a benefit for anyone who wants to relate to their tax department. I would like, perhaps in the next budget, that it is a bit clearer. I know we’re dealing with all kinds of numbers and sentiments, but I still think it could have been a little clearer for the average Canadian. Thank you very much.
Senator M. Deacon: Thank you to all for being here today. I really thought getting through the BIA was the finish line and an accomplishment in itself, but I realize it’s truly just the starting line. There was a lot of technical language certainly to work through.
Housing, housing — certainly a big issue in this country. I would like to address the GST new housing rebate conditions. According to the briefing notes, the measure modifies the rebate conditions to provide that if two or more individuals purchase a new home together, only one of the purchasers must be purchasing the home for use as their primary use of residence or as the primary place of residence for a relation.
In the rules that exist now, is the idea that this new housing rebate was to be intended for couples? With this change, two friends or business partners can invest in property together but only one needs to use it as their primary residence. They would then qualify, I believe, for the rebate. Am I, first of all, correct in this understanding?
Pierre Mercille, Director General, Sales Tax Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance Canada: I can address this question. My name is Pierre Mercille. I am the director general responsible for legislation in the Sales Tax Division of the Department of Finance.
This is a very technical amendment that is being proposed here. I’m going to give you the scenario that triggered that change. Essentially, the rule before was that if two persons were signing on the purchase and sale agreement, the two people needed to use the place, the new home, as their principal place of residence or the principal place of residence of one of their relations. It could be a son or daughter.
In the case where someone doesn’t have all the financing and asked for a friend of the homebuyer to act as a co-signer or guarantor and was registered on title, CRA would take the position that there were two purchasers and both purchasers had to use the home as the principal place of residence. That is the situation that this relieving amendment is intended to address so that if there is a guarantor or a co-signer, only one of the people on the purchase and sale agreement needs to use the home as their principal place of residence.
Senator M. Deacon: Thank you. I’m just going to follow up with that first question and come back and say this. It is interesting there that there is a price limit of $450,000 to qualify for the rebate I just talked about. An average home in Ontario in March of this year was $862,000. Move over one province to Manitoba and the average price is $329,000. That $450,000 limit would seem to be almost discriminatory based on geography.
Can you tell us how that limit was determined? Are we relying on subsequent provincial housing policy to offset the price discrepancies from province to province?
Mr. Mercille: The decision of that threshold was made by the government of the day at the time the GST was introduced. A decision to change that threshold would be a decision for the government to make, so I don’t have much comment to make on this.
Senator M. Deacon: Thank you. I can’t remember how long it’s been, but thank you very much.
Senator M. Deacon: The other question I was going to ask is regarding the provision in Part 1 that would require publicly listed corporations that increase top executive pay to repay wage subsidy amounts under certain circumstances. I’m happy with this approach to make sure that corporations aren’t profiting off well-intentioned pandemic relief, but from what we saw over the last year, it was the dividend payments and share-buyback programs that some wage subsidy recipients undertook that did raise eyebrows. Is there anything in this budget that proposes a similar clawback for corporations receiving the wage subsidy that participate in these stock buybacks and dividend payments? If there isn’t, maybe you can tell me why. Thank you.
Mr. McGowan: Thank you for the question. I can confirm that there is no provision in the bill that would require repayment of wage or other rent subsidy received as a result of dividends or share buybacks from corporations, as was noted.
There is a new provision that would require repayment of the wage subsidy with respect to active employees based on increases in top executive compensation for publicly listed companies. That’s between 2019 and 2021. However, as I noted, there is no requirement to repay based upon dividend repayments.
I don’t know if Ms. Lavoie has any comments on the policy rationale, except to say that the issue of the wage subsidy being paid to companies that end up enriching top executives was something that the government saw and that’s how they chose to respond, amongst a variety of options that you listed.
Senator Boehm: I would like to thank our witnesses for being here and, of course, all the hard work they’ve been doing day in and day out for the past year and a half and beyond.
I’d like to focus my questions on the Canada recovery hiring program. I understand that the program itself is meant to offset the costs of increasing employees’ hours, hiring additional employees as well, as businesses start to open, but many businesses don’t have much of a capital base anymore. It’s going to be very difficult for them.
I’m wondering about the timelines because you’ve got a sunset date of November 21. Also complicating that is the fact that provinces will be opening their economies at different times across the country, and there might be some pullbacks, further restrictions and ups and downs. What sort of flexibility is built into this program that will allow for a fairly smooth transition?
Mr. McGowan: Thank you for the question. The legislation relating to the recovery subsidy provides scheduled rates for the subsidy for each of the relevant periods. For the seventeenth qualifying period to the nineteenth qualifying period it’s 50%. It then goes down to 40% for the twentieth qualifying period, and the twenty-second qualifying period, which ends in November, it’s a rate of 20%. Those rates can be changed by regulation should differing circumstances require. That is provided in the bill a bit later on.
I would say again, after an earlier comment, any extension of the program past November would require new legislation and parliamentary approval.
Senator Boehm: Okay. That’s good. Thank you.
There is, of course, a huge fiscal cost, in terms of the recovery hiring program, of $595 million.
As you were putting this together, did you have an estimate of how many additional jobs or hours worked would result from the adoption of this program?
Ms. Lavoie: Perhaps I can take that question. The department did this cost estimate that you’re noting, $595 million. It’s very difficult, however, to do these estimates at this point. There are a lot of unknowns in terms of how the pandemic will evolve, how quickly the economy will reopen and so on.
In terms of specific number of jobs, this is not information I can provide. I just want to note that there is a lot of uncertainty around all of these cost estimates. It’s the same for the wage subsidy and the rent subsidy. As we learn more, these numbers will be updated, but it’s just a very uncertain environment, so it’s difficult to provide that information, unfortunately.
Senator Boehm: I just wondered how you landed on the number, but that’s fine.
This goes back to an earlier question that my colleague Senator Forest was asking, and that is on the Canada Emergency Wage Subsidy. I suspect this question will be for you as well, Ms. Lavoie.
I’m just trying to wrap my head around the fact that Bill C-30 provides that only publicly listed corporations will need to repay their wage subsidy. This means only corporations whose shares are listed in public markets, if I understand that correctly. There are, of course, large companies that are benefiting and are private in nature. Could you can guide me through the decision on this?
Ms. Lavoie: For the companies that are public, there are requirements under the securities law that we can rely on because they have to report the salaries they pay to their main executive officers. So the provision is based on that information, which is publicly reported, is transparent, and is information that the CRA can use. This type of information in a private company setting or in the case of [Technical difficulties] and so on would be a lot more difficult to access, audit and verify.
I would add that in terms of concerns that were raised by stakeholders and various members of the public, these were focused on, perhaps, the largest companies, which do tend to be public. For practical reasons, it was limited to those that are publicly listed.
[Translation]
The Chair: I would like to recognize Senator Moncion, who has just joined us.
[English]
Senator Moncion is the sponsor of Bill C-30, the BIA. Thank you for joining us, Senator Moncion.
Senator Duncan: Thank you to all of our officials who have joined us this morning. Your work is truly appreciated.
I’d like to address Part 1(i), increasing the basic personal amount. I would like the officials to address the background information on the increase, how this particular amount was chosen. It’s well below what any Canadian anywhere would need to live. Was there any consideration given to a more significant change in light of the discussions and desire of some provinces, such as P.E.I. and the Yukon Territory, to pilot or examine a basic income guarantee? If the officials could address that, please.
Mr. LeBlanc: Thank you very much for the question, senator.
This is basically the increase the government chose to implement. You might remember it was based on a pledge they made in the last election campaign. This is implementing that pledge.
One thing I would note is that it certainly has a significant fiscal cost because of the large number of taxpayers it reaches. Basically, we’re looking at something that costs roughly $6 billion annually once fully phased in. That’s something any government would want to consider if it were to go further. Any further increase would also have a significant fiscal cost and would benefit, at least as this is designed, the large majority of taxpayers. Those are things that any government would want to be mindful of in any subsequent changes.
Senator Duncan: Thank you for that. It’s also a sliding scale, and it seems quite complex to administer. Senator Marshall asked a number of questions with some details. Senator Richards used a very good word, “obfuscate,” this morning.
I had a look back at some of the committee’s work before I was a senator. The December 2017 report Fair, Simple and Competitive Taxation: The Way Forward for Canada talks about how the Income Tax Act on November 6, 2017, was 3,129 pages. I can only imagine what it is now with all of the measures that we have tried to wade through in briefing ourselves in preparation for these discussions.
Could the officials address what measures might be taken to assist the average Canadian in trying to appreciate the administration and these new changes from the tax department? You are dealing with individual Canadians on a regular basis when they call in. How are these changes being administered in terms of working with Canadians? Many of them are quite complex.
Mr. LeBlanc: Thank you for the question, senator. I guess governments are always trying to balance different objectives. Just as you say, one objective might be keeping things straightforward and simple for Canadians; another objective is who benefits from any change.
One thing the government decided with this change is it didn’t want the wealthiest Canadians to benefit. What it decided to do adds a little complication, but not too much, and here is how you can think of it: All the way up to the fourth income tax bracket, which in 2021 is about $152,000, you get the full increase. Across the span of the fourth income tax bracket, which in 2021 that’s from about $152,000 to $216,000, that increase will be phased out gradually. Once you hit the top bracket, which starts at about $216,000 of taxable income, you will have the basic personal amount you would get without the legislation.
It does add a little complexity, but I think you could say a manageable amount. Over 90% of Canadians are filing now using software, so it’s something the software calculates for you in a straightforward way. For the small number of Canadians who still file using paper returns, it does add a step to the calculation.
But you do make an important point, and it’s something we are certainly mindful of in the design of any tax policy measure.
Senator Duncan: I appreciate that you have addressed, Mr. LeBlanc, the basic personal exemption, but there are many details that were discussed this morning already. [Technical difficulties]
Senator Loffreda: Thank you for all the work you have done to help us through this pandemic. My question is on changes to the stock option deduction of employees. We have many different scenarios through this pandemic. We’ve seen employees that could not find work; we have seen employers who could not find qualified personnel and employers who could not attract and retain top talent.
Has there been any analysis or anything you could share with us and elaborate on the impact these changes will have on Canada and corporate Canada attracting and retaining top talent?
Mr. LeBlanc: Thank you for the question, senator. I think this has been an issue that the government has been working on for some time. The government has, I think, been clear in its public statements that it’s really trying to balance two objectives in the changes set out for the stock option deduction. On the one hand, recognizing the point you have made that the stock option deduction is an important tool, especially for start-up, scale-up and emerging companies as they recruit top talent, but at the same time noting that the benefits of the stock option deduction primarily accrue to very high-income individuals.
The proposal you have before you is trying to balance those two objectives. The new limitation would not apply to Canadian-controlled private corporations. It would only apply to other types of corporations if their annual revenues were $500 million or greater. I think it’s in recognition of smaller companies that often face constrained cash flow, and one of the ways for them to compensate and to recruit highly talented employees is to offer a share of the future earnings of the company by offering stock options. That’s the balancing act that the proposal represents.
Senator Loffreda: Thank you for your answer. I’m concerned because we are in an era of the digital economy accelerating and in an era when we need intelligence in the health field and health expertise. It has always been an attractive way of retaining and attracting top talent, so that is my concern on that. Thank you for your response.
I would like to question you on the change in use and rules for the multi-unit residential properties. There are many multi-unit residential properties in Montreal and certainly across Canada.
Could you elaborate on the intended result of this measure? Is there more to it than what we see and read in Part 1 of the bill?
Mr. McGowan: Thank you for the question, senator. I would be happy to elaborate. This is a very technical tweak to the tax rules, and if it seems as such and limited in scope, that’s an accurate reflection.
There are currently rules in the act that allow deferral of tax that would ordinarily arise when you change a housing unit from an income-producing use, say you are renting it for personal use, so it’s your personal residence. Currently, that is not available where you have a multi-unit residential property. For example, if you have a duplex and you are renting out both parts and you convert one from a rental property to a place you are going to live, so it’s your principal residence. Currently, the tax deferral of the income that would ordinarily arise on that change in use is not available for multi-unit residential properties. This measure would better align the tax rules that apply in a change of use of multi-unit residential properties so that they line up with those that exist for stand-alone properties. It is a technical fix, but it does improve the coherence of the tax system and makes it work better for those who are changing the use of a multi-unit property.
Senator Loffreda: In other words, the percentage being used could be used as a principal residence and exempt from any capital gains in the future when the property is sold.
Mr. McGowan: On future increases in value, yes.
Senator Loffreda: Future increases in value.
Mr. McGowan: That’s right. It’s not an exemption from the tax that would normally arise between the time it was acquired as an income-producing property and the time you change it to a personal-use property, but it is a deferral of that.
Senator Loffreda: It makes sense because it’s only your principal residence when you do occupy and change the rules on that, so it makes a lot of sense. Thank you for that.
Many senators have questioned wage subsidy and rent subsidy. We have briefly touched on the end date, September 25, 2021, extending into November. What will be the criteria or the analysis that has been made as to why it will be extended if it is extended? Is there any analysis supporting that? What factors will be considered? Is there any analysis of the effects it will have on unemployment and insolvency? Hopefully we are making great investments and they will keep most of those businesses open.
Is there any analysis as to when the wage subsidy and rent subsidy do end, what will be the effect on businesses that have received those subsidies? Can you share any analysis with us? Hopefully many of them will remain open and they have been good investments on our part.
Mr. McGowan: I will turn it over to my colleague Ms. Lavoie who is the policy lead on the file. I would note the rates for the rent and wage subsidy are currently legislated to gradually decline towards the September date so there would not be a sharp cut-off. It would be a gradual decline. At the same time, the recovery hiring program is available in respect of wages and salaries to help increase growth for companies that are looking to rebound from the pandemic.
The previous iterations of the wage subsidy have been extended, of course, as we all know. Those have been in response to the pandemic lasting longer than we thought, worsening conditions and the like. I remember the initial version of the wage subsidy was set to be extended no later than September 2020, and it’s been extended a few times after that based upon the ongoing effects of the pandemic, its longevity, severity, whether or not there are additional lockdowns and business restrictions happening and things like that.
Ms. Lavoie, do you have anything to add?
[Translation]
Ms. Lavoie: As for the number of employees who have taken advantage of the subsidy and the impact that the assistance had on the companies that received it, the agency’s website has a lot of information on the number of employees for each of the four-week periods of the wage subsidy, and the number of employees supported by the program. The information is also sorted by industry, by province and by territory. So let me invite you to consult that data.
The department will be publishing an evaluation of the wage subsidy programs in the coming months. That will also be communicated. The information will be posted on our website, together with the names of the committee members.
[English]
Senator Loffreda: Second round, please.
The Chair: Thank you. Before we go to Senator Smith, Senator Duncan had two minutes left. Senator Duncan, do you have another question?
Senator Duncan: Yes, thank you very much. I appreciate the opportunity to ask my questions. What I was looking for was information from the officials. Part of it was just answered in the evaluation of the wage. I’m interested in the growth of the Income Tax Act. Is there any work being undertaken by the department of reviewing the measures as has been called for previously by this committee and by many of the witnesses that this committee has heard from over the short time I have been a member? The committee’s other reports and recommendations have often stated that there should be a review of the Income Tax Act, and the official just mentioned a review of programs. Is there any work being undertaken, despite the pandemic, in terms of reviewing the Income Tax Act and all of these measures?
Mr. McGowan: Thank you for the question. I would be happy to speak to the complexity of the Income Tax Act. Just building upon something my colleague noted earlier, I would draw a distinction between the inherent complexity of the tax code — and I use that term borrowing the American term, because it is very similar to the computer code. There is the complexity of the underlying act, which is tremendously complex, but it is important to keep in mind that for many Canadians, the user interface, the part they actually deal with, is significantly easier.
The Canada Revenue Agency has been engaged in a lot of work to try to simplify what you have to do to file your taxes, somewhat similar to the tremendous complexity in your phone. I’m sure I couldn’t understand the computer code, but I know I can tap on a button and make a phone call or check my email because the user interface is much easier. That’s why the Canada Revenue Agency has engaged in activities to allow for the pre-population of tax returns and so on.
In terms of the complexity of the act, I would note the act serves a lot of functions beyond the raising of revenues for the government. We have heard from industry people that, for example, there is a concern about people outliving retirements. We have added new rules to allow for the advanced life-deferred annuities providing more flexibility for pension investors, so the VPLAs were announced, providing incentives for green energy so you had zero-emission vehicle changes and things like that.
You also have integrity measures intended to prevent — [Technical difficulties]
The Chair: Mr. McGowan?
Mr. McGowan: — that led to complexity as well. These are all considerations. To briefly sum up, we are often looking to try to simplify the tax code where possible, given the constraints of what it’s being asked to do.
Finally, I would note the increase in the basic personal amount would mean more Canadians don’t have to file taxes because they don’t have to pay income taxes.
The Chair: Thank you.
[Translation]
Senator Dagenais: My question goes to Mr. McGowan. I would like to talk about the new measures on tobacco products. In Quebec at the moment, we are seeing major seizures of contraband cigarettes. Last week, 13 tonnes of tobacco were seized in a Quebec truck that was making a delivery in Ontario.
Do you have any figures to prove that smuggling is not directly related to the tax increases? In other words, do the taxes encourage organized crime?
[English]
Mr. McGowan: Thank you for the question. I would turn it over to my colleagues who work in the excise tax area. I don’t know if Mr. King is available to answer.
Phil King, Director General, Sales Tax Division, Tax Policy Branch, Department of Finance Canada: Thank you for the question. You are absolutely right that illicit activity in the tobacco market is something you have to be mindful of when changing tobacco tax rates. There are two underlying reasons for this measure. One is to raise revenues. A related goal is to help reduce smoking. Tobacco taxes are a fairly effective means of reducing smoking rates, but you do have to be mindful that you don’t raise taxes too much too quickly, which will stoke the illicit market. That will have the opposite effect. It will affect your revenues, and it won’t help with the quit rates.
A couple of things would mitigate that in current circumstances. First of all, it’s only happenstance but the fact that we are under a COVID lockdown — various degrees of lockdown — across the country will mitigate or lessen the availability of illicit tobacco. That’s not going to last forever, of course, but it does give a chance for the price increase to be built into current smokers’ expectations. The price increase itself is consistent with what other provinces have done over recent years — $4 per carton of 200 cigarettes, so it’s about 50 cents on a pack, which I understand costs about $13 or so. It’s not an enormous increase relative to the price itself.
It’s also important to remember this is not really a binary situation where you go from everybody in the legal market to everybody being in the illicit market. It’s a fairly vague line, but you are absolutely right. It’s something to be mindful of when changing the price of these products.
[Translation]
Senator Dagenais: I’d like to go back to the tax credits given to media companies.
We know that it is becoming common practice these days for media companies to use former athletes, who sometimes do not write the texts that appear in the media as coverage of sporting events, for example. You see the same thing happening with former politicians who are all over the pages of the newspapers.
Do you have criteria to establish whether the tax credits are used to pay the salaries of professional journalists or whether they are being used to pay sport stars or big-name politicians?
[English]
Mr. McGowan: Thank you for the question. There are rules in the Tax Act that do seek to limit the availability of the labour tax credit for journalist organizations to real journalists. It does draw lines in order to help ensure that the people being supported are doing real journalism. For example, this bill would provide that newsroom employees, in order to be eligible for the labour tax credit, would need to spend at least 75% of their time engaged in the production of original written news content. There are those safeguards. There are requirements that need to be met in order for an organization to qualify for the subsidies. The Canada Revenue Agency has the tools to help ensure enforcement, through their audit activities, to make sure that the rules are complied with.
The bill would also introduce an explicit process. This is not relevant to the labour tax credit but rather to the measure that allows for journalism organizations, if they qualify, to have qualified donee status so they can issue tax receipts for donations. There would be an explicit process included in the legislation for deregistration of their status in case they don’t follow the rules. So there are measures in place to help ensure that the support is targeted as intended. The CRA does have audit and enforcement tools to help ensure they are followed.
[Translation]
Senator Dagenais: As you were explaining, the labour tax credit for media organizations, for example, must be eligible according to Canada Revenue Agency criteria.
The ones that interest me are the ones that are not eligible. Can you tell us how many organizations have had their tax credits rejected because they were not eligible? Also, for which reasons were those tax credits rejected?
Mr. LeBlanc: Thank you for that question.
As far as I know, we do not have information on the number of organizations that have been declared ineligible or on the reasons why they were rejected.
Senator Dagenais: Could you tell us how much money in the current budget is allocated to meet the urgent needs of publishers whose advertising revenue, principally the revenue from the government’s advertising purchases, have gone into the hands of the owners of social networks?
Do you know how much money is allocated in the budget at the moment?
Mr. LeBlanc: I believe it would be an overall amount, because the government has taken a number of measures to support that sector. We are talking about tax credits—as we were discussing a few minutes ago, I believe. In a five-year period, we are talking about $600 million through those three measures.
[English]
Senator Pate: This question relates to the measure in Bill C-30 that applies to the short taxation year rule — to the Accelerated Investment Incentive for resource expenditures. Could you please describe what the Accelerated Investment Incentive is and clarify whether it provides a subsidy to the oil and gas sector and what the impact of Bill C-30 is on that subsidy?
Mr. McGowan: The Accelerated Investment Incentive is a measure that provides for accelerated deductions to be able to be taken in respect of qualifying costs. In general, the Accelerated Investment Incentive relates to depreciable capital properties. The general rule in the Income Tax Act is you are allowed to take tax depreciation or capital cost allowance that generally follows the useful life of an asset, and so it allows the cost of an asset to be spread and deducted over its useful life. The Accelerated Investment Incentive was introduced a few years ago in order to provide more upfront deductions in respect of these depreciable capital properties and to help provide more support to businesses, particularly in the context of similar changes having been made in the United States.
A second component is that it also provides accelerated deductions in the context of certain resource expenditures. Right now, the tax rules provide — the short taxation year rule to get to your question — where taxation year is less than 365 days. Currently for the Accelerated Investment Incentive — that’s the general tax depreciation aspect of it — there is a rule that applies to properly apportioned expenses where the taxation year is less than 365 days. This measure would introduce a similar rule into the resource context. It would better align the two aspects of the Accelerated Investment Incentive and ensure a more coherent set of tax rules in relation to them.
Senator Pate: So you do indicate, then, that it does provide a subsidy to the oil and gas sector in this respect?
Mr. McGowan: I would turn to my colleague, Maude Lavoie, to see if she has any sectoral data or information relating to the subsidies.
Ms. Lavoie: The Accelerated Investment Incentive is available to all businesses that make capital investments— the depreciable property that was alluded to. It’s available in all sectors of the economy, such as the oil and gas sector but also all other sectors that make capital investments.
Senator Pate: So it’s a subsidy for all, including the oil and gas sector?
Ms. Lavoie: Yes, all industries.
Senator Pate: Thank you. My second question is this: Bill C-30 also expands access to the Canada workers benefit. While Budget 2021 notes that no Canadian working full time should live in poverty, the 100,000 people this measure would move above the poverty line by a margin of a few hundred dollars, in most cases, represents, at most, 3% of the 3.2 to 4 million people below the poverty line.
According to economist Dr. Evelyn Forget, about half of those below the poverty line are working paid jobs but not earning enough to get by. Many more are looking for work, contributing to their communities through unpaid work. As we have seen during this pandemic, working hard or wanting to work is too often no guarantee against poverty.
What is the rationale, if not antiquated negative stereotypes, about those below the poverty line for measures like those that distinguish between people who are working and those who are not, in ways that deny vital income assistance in the midst of a global health and economic health crisis?
Mr. LeBlanc: Thank you for the question, senator. What I can say is that this has been an important measure for the government for some time in creating the Canada workers benefit, which took effect in 2019, doubling at the time. It was seen as an important measure to support workers with lower wages. This measure accounts for almost doubling the program, so an extra $1.7 billion a year. By pushing out income levels at which the benefit starts to be phased out, it will reach many more workers, especially those who work full-time or close to full-time hours. About a million more people will get CWB than get it now.
Senator Pate: Thank you very much for that. Picking up on Senator Duncan’s question, what income support measures is the government envisioning as part of the COVID-19 response for the 97% of people in need who would remain in poverty if this measure passes? This is particularly in light of the provinces and territories that have already indicated wanting to take additional measures like a guaranteed livable income.
Mr. LeBlanc: We can speak to the measures in this bill. The Canada workers benefit is an important aspect of that. Other measures were announced in Budget 2021, from the increase in the Old Age Security for those 75 and older, looking forward to the Canada disability benefit, but we can’t speak to those because they’re not in the bill.
Senator Pate: Can you speak to why those who aren’t working are not being considered by this bill or other measures the government is undertaking? What advice are you providing to the government in this respect?
Mr. LeBlanc: We can speak to the measures in the bill.
The Chair: Honourable senators, I see that we don’t yet have a connection with Senator Smith. On the second round, Senator Marshall, please.
Senator Marshall: I know that the officials indicated in response to Senator Richards that information on the Registered Disability Savings Plan would be provided, but I have a couple of questions.
If someone no longer qualifies for the credit, how long can the savings plan remain open? I got the impression it could be forever or until they are deceased or the government changes the rule. I’m wondering what it is now. How did it change? That’s my first question.
Mr. LeBlanc: Thanks for your question, senator. Essentially, the plan is required to be wound up in a couple of years unless a doctor certifies that the individual is likely to become DTC eligible again. This allows the plan to stay open and doesn’t require the repayment of Canada Disability Savings Bonds and Canada Disability Savings Grants, which are an important part of this program.
As with others, as with those who remain DTC eligible, because of the way the RDSP works, once these individuals turn 60, you have to start to draw down amounts from the plan because of the grants and bonds that have been received.
Senator Marshall: I also understand from the briefing notes that the individual who qualified for the Disability Tax Credit, they can transfer their plans to another individual. If they transfer it to another individual, does that individual have to be in receipt of the Disability Tax Credit or can it go to anybody? Because that’s what I understood.
Mr. LeBlanc: There are two provisions related to transfer, senator. One is being able to transfer from your own RDSP to another RDSP that you have. Often we have multiple RRSPs and TFSAs and we transfer assets from one to the other. This allows people, even if they’re not DTC eligible anymore, to transfer from one RDSP that they own to another they own.
The second measure that relates to transfers is the ability of a parent or grandparent to give RRSP proceeds on a tax-free basis to the RDSP. The proposals also open this up to individuals who are able to keep their RDSP open even though they’re no longer DTC-eligible.
Senator Marshall: But they can’t transfer whatever is in their plan to anybody?
Mr. LeBlanc: No. It’s transferring RDSP proceeds from yourself to yourself or from another relative, a parent or grandparent on whom you are financially dependent.
Senator Marshall: With regard to GST for the new housing rebate, did the government take into consideration that might stimulate the housing sector that’s already overheated in certain places?
Mr. Mercille: The cases where this amendment applies are extremely limited, so we don’t think this will have an effect on housing prices. These are exceptional circumstances.
Senator Smith: I have a general question. There are numerous income tax-related changes in Part 1 of Bill C-30. Some of the changes are designed to update and provide more clarity on tax deductions, ownership rules, strengthening foreign affiliates and dumping rules, et cetera.
Can you explain the overall impact of these changes on the government’s tax revenues? Has the government undertaken any projections in this regard? That will lead me into my next question.
Mr. McGowan: Perhaps I can start and say that a number of measures were announced in Budget 2020, and the budget supplementary information for that provides cost and revenue estimates for each of the measures. Being mindful of time, I won’t go through them now. A number of measures were also from Budget 2019, which likewise had costing for each of the measures in the budget supplementary information.
Senator Smith: Have you done any projections internally of what these changes will amount to in terms of dollars for the government?
Mr. McGowan: We do have costing information for each of the measures.
If you’re asking for totals, I don’t know, maybe my colleagues on the economic side, Mr. LeBlanc or Ms. Lavoie, could comment.
Senator Smith: The reason I ask the question is because it leads into the next one. Basically, the PBO, or Parliamentary Budget Officer, warned in their report on the budget that any new and permanent spending would either increase the debt-to-GDP ratio and have to be financed with revenues and spending reductions. I guess once we look at what you’ve implemented in trying to determine what revenues you’re going to get, the next question is: What’s going to happen on the other side in terms of the individual taxpayer? Will there be potential tax increases? If so, has all this been discussed between Finance and the members of Finance?
Mr. LeBlanc: Thanks for the question, senator. I guess what we can say is that every measure included in this bill — and as Mr. McGowan said — were introduced or proposed in Budget 2021, so the fiscal impact would have been presented in Budget 2021. But there are others where the fiscal impact was presented earlier. Just to take maybe the biggest ticket item, which is the basic personal amount. The government made that announcement in December 2019 and the total fiscal cost, which is about $25 billion over the five-year period, that was presented. So that would have been presented and booked at that time.
So basically, over a combination of budgets and economic statements, all the measures here are currently incorporated in the fiscal baseline. That was presented in Budget 2021.
Senator Smith: With all that’s been done and with all the calculations you have had a chance to implement and discuss amongst yourselves, how much time do you have before — and everyone appreciates the money that’s been given to businesses and Canadians, et cetera — there will be a tax increase? What type of projections has Finance done? You’re obviously looking at both sides of the coin. If you’re giving things and programs, then there has to be some takeaway somewhere if the spending still continues to grow. The PBO has said the spending is continuing to grow. I’m just asking for a comment, just to give us some sense. Is this something you’re monitoring on an active basis and where are we?
Mr. LeBlanc: Thanks for the question, senator. We’re probably not in the best position to speak on questions of overall fiscal policies and fiscal stance, which will ultimately be either our minister or other colleagues in the department.
Senator Smith: Chair, can I ask one more question before I go?
The Chair: Yes, please, Senator Smith.
Senator Smith: Just to go back, hopefully it hasn’t been asked, the Canada Recovery Hiring Program designed to offset costs with reopening and rehiring staff in the midst of continued revenue declines. I guess let’s look at a specific example. I laud the initiative, but in the first wave you probably had how many restaurants in Toronto? Take Toronto as a city and a major restaurant centre. How many of those restaurants have gone bankrupt or how many of those restaurants took the $40,000, put up all the glass and the distancing and dividers and they’re out of business again?
What are the chances of people who have gone out of business — because we’re talking about huge numbers of restaurants that have gone out of business. My question is: By reinitiating this program, what are the chances of success when probably a large percentage of businesses have gone out of business in the restaurant area long ago? How effective will this program be?
Ms. Lavoie: In terms of the hiring program, it’s going to be put in place in June. At that point in time, the expectation is that an important proportion of Canadians will have received their vaccine and will be, hopefully, in a position to start reopening the economy. Just as businesses in that process, those that will be hiring could benefit, potentially, from this new hiring program. If certain businesses have gone bankrupt and they will not necessarily benefit from this program, but hopefully those that are still around and are able to participate in their recovery will have the help of this program in terms of the new people that they hire.
Senator Smith: Right. I guess my question is if a large percentage of the restaurants are already out of business, whether in the Toronto market or in major centres or any centres, you’re not going to get people who have already been bankrupt and suddenly come back into the game, even with this program. I’m just wondering about the real efficiencies and the chance of success that the program is going to have. Was that considered by you when you did some of your costing?
Ms. Lavoie: It will not benefit those who are bankrupt, but hopefully it will benefit all of those businesses that are still around and will be able to benefit from this program.
Senator Smith: All right. Thank you very much.
The Chair: Thank you, Senator Smith. Now we will go on our second round with Senator Loffreda to be concluded with Senator Forest.
Senator Loffreda: Thank you. I would like to follow up on the efficiency of the excise measures on tobacco products, as they have been making media headlines all over Canada, here in the province. I’d like to have maybe a three-year historical of the additional revenues that the excise tax increases have had in Canada. Do we have stats on smokers? Have they decreased over the years? What percentage of Canadians do smoke? If we do have those statistics, maybe we can measure the efficiencies of the tax increases on tobacco products. Hopefully they are having an impact on increasing revenues and decreasing smokers and not just increasing the illegal tobacco market.
Mr. King: Thank you for the question. We do have data on smoking prevalence in Canada. It’s around 15% right now, and this is down considerably from — I have information from back as far as 1999, when it was around 25%. So a fairly considerable drop in Canadians who are smoking.
In terms of the revenues raised by tobacco excise taxes, I don’t have that information at my fingertips but it is published in the Public Accounts every year. That’s something we can certainly dig up and provide to the committee.
Senator Loffreda: Yes, please do. Thank you.
Mr. Chair, do I have some more time?
The Chair: You have two minutes and 40 seconds, Senator Loffreda.
Senator Loffreda: Thank you. I’m pro-environment and totally for the environment. I think we have to keep improving our environment, our green economy, et cetera. It will lead to a question I will have later on this afternoon.
There is a policy that’s extending to a wide array of eligible automotive equipment and vehicles via 100% capital cost allowance write-offs for business investments in certain zero-emission vehicles. Maybe you can elaborate on how many businesses will take advantage of that new policy, how many businesses are converting their automobiles or corporate automobiles to electric, zero-emission vehicles. Do you have any analysis done on that? Maybe later this afternoon I will ask about the loss of revenue that we will have eventually over the years as we no longer need gas and as our vehicles all become electric vehicles. Maybe you can look into that and not answer it in the two minutes we have right now, but maybe this afternoon I’ll come back to that. Do we have any statistics on that?
We have to look at both sides of the balance sheet, the revenues and the expenses. I think it will be a big concern going forward, although we’re all pro-climate and pro-environment, it must be done. We have to mitigate that risk. As a banker, we have risks and mitigating factors and we have to mitigate that risk going forward.
Ms. Lavoie: I can provide a short answer to that question. I don’t have all the answers with me, but in terms of the revenue foregone, we estimate that from 2021 to 2024-25, over that timeframe, the measure will cost $62 million. It’s technologies. There is a lot of interest from the mining sector for the excavators and all the types of vehicles that you can use on mining sites for that measure. It’s also a measure that could be broadly used in many sectors from forklifts, Zambonis, drones, golf carts. There are a lot of different types of vehicles that potentially could qualify from the measure as the technology develops and as it’s being used more.
We will see from firm tax data how many firms actually do the transition towards these types of equipment. There is not that much granular data at the moment, but hopefully with the measures in place, we will be able to gather a bit more information about the range and the number of businesses that are able to make that transition.
Senator Loffreda: But based on what we have, we do have positive expectations that many will adhere to, and the loss of revenue that you mentioned is strictly for this measure, right?
Ms. Lavoie: That’s correct.
[Translation]
Senator Forest: My question is very simple and has to do with Part 2(b). I’d like to know the impact, on Canada Post and the customs services, that will come from imposing the GST and the HST on electronic commerce.
Will more staff be needed to make sure that taxes on tangible products coming into Canada have been paid properly and according to our rules? If so, have government organizations made their needs known and assessed the cost of that tax collection measure?
Mr. Mercille: The measures in this bill do not apply to goods sent to Canada from outside Canada.
There are three different measures. The first applies only to digital products and services; the borders are therefore not affected. The next measure deals with cases where a platform facilitates the sale of goods already in Canada to a person in Canada. If the seller is not registered, the platform will have to collect the tax.
The third measure applies to short-term accommodation platforms, like Airbnb.
Senator Forest: So those three measures will have no impact on management costs?
Mr. Mercille: None of those three measures applies to goods sent to Canada from abroad.
Senator Forest: I understand. So that means that the measures will not cause an increase in the number of staff or the management costs. Implementing the measures is seen to have no financial impact?
Mr. Mercille: Not for the border services. The Canada Revenue Agency will be establishing a simplified program for registration and the payment of taxes for non-resident suppliers who have no company established in Canada.
Senator Forest: Thank you.
[English]
The Chair: Honourable senators, this brings us to the end of our meeting this morning. Thank you very much to the witnesses.
To Mr. McGowan, thank you for the information that you have provided following the questions. If you feel that there are one or two answers that we identified should come in writing, as we agreed, please provide them on or before Wednesday, May 19, through our clerk.
Our next meeting is scheduled for this afternoon at 2:30 p.m. Ottawa time. Thank you very much, senators.
(The committee adjourned.)