THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, May 31, 2022
The Standing Senate Committee on National Finance met with videoconference this day at 4 p.m. [ET] to Bill C-8, An Act to implement certain provisions of the economic and fiscal update tabled in Parliament on December 14, 2021 and other measures; and the subject matter of all of Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, before we begin, I would like to bring some information to your attention in light of a possible vote with a one-hour bell. To the Deputy Prime Minister and Minister of Finance, honourable senators, it is reported that our agenda could somewhat change a bit because of a vote in the Senate and possibly in the other place. Therefore, we will suspend in order to accommodate the vote, and then we will resume our meeting of the Standing Senate Committee on National Finance. For specific information, we will suspend for the last 15 minutes of the one-hour bell to permit going to the Senate Chamber for the vote, and then come back as soon as possible so we can resume the National Finance Committee. The clerk will follow the procedures very acutely.
Honourable senators and witnesses, it is important that all your microphones be muted at all times unless recognized by name by the chair.
[Translation]
If you have technical challenges, particularly in relation to interpretation, please signal this to the chair or the clerk and we will work to resolve the issue. If you experience other technical challenges, please contact the ISD Service Desk with the technical assistance number provided to you.
[English]
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. Participants should know to do so in a private area and to be mindful of their surroundings.
[Translation]
Honourable senators, we will now begin with the official portion of our meeting. I wish to welcome all of the senators as well as the viewers across the country who are watching us on the Senate website.
In a few minutes, I will have the opportunity to introduce the Minister of Finance and Deputy Prime Minister of Canada.
[English]
My name is Percy Mockler, senator from New Brunswick and I am the Chair of the Senate National Finance Committee. I would now like to introduce the members of the National Finance Committee who are participating in this meeting: Senator Boehm, Senator Dagenais, Senator Duncan, Senator Forest, Senator Gerba, Senator Gignac, Senator Loffreda, Senator Marshall, Senator Pate, Senator Richards and Senator Moncion.
This afternoon, honourable senators, we are continuing our study of Bill C-8, An Act to implement certain provisions of the economic and fiscal update tabled in Parliament on December 14, 2021 and other measures, which was referred to this committee on May 10, 2022, by the Senate of Canada.
[Translation]
Our study also includes the subject matter of all of Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, which was referred to this committee by the Senate of Canada on May 4, 2022.
Honourable senators, ladies and gentlemen, we are pleased to welcome the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance of Canada.
[English]
Minister Freeland will be with us for 90 minutes to discuss Bill C-8 and Bill C-19. Officials will then remain with us for an additional 30 minutes to help answer further questions.
[Translation]
Minister, as Chair of the Standing Committee on National Finance, I thank you for accepting our invitation to appear before the committee today. I would also like to thank you publicly for our recent telephone discussion on the work of the National Finance Committee, as you have been very generous with your time. We are well aware of your very hectic schedule, and we thank you for being here.
[English]
The minister is accompanied in the room and virtually not only by senior officials of the Department of Finance Canada, but also by officials of other departments who will give support in answering some of the questions.
I will ask them to introduce themselves if ever they are invited to speak regarding an answer for the record.
[Translation]
Welcome to all of you and especially to you, minister. Thank you for accepting our invitation to appear before the Standing Senate Committee on National Finance.
[English]
Deputy Prime Minister of Canada and Minister of Finance, I have been informed that you have remarks that you would like to deliver to the Finance Committee. Minister, the floor is yours.
[Translation]
The Honourable Chrystia Freeland, P.C., M.P., Deputy Prime Minister and Minister of Finance: Thank you, Mr. Chair, for the invitation and the introduction.
Before we begin, may I ask your permission to take 30 seconds to vote? There’s a vote going on in the House of Commons right now; I can vote virtually, if you’ll allow me to do that, and it will take 30 seconds before we start.
The Chair: Absolutely, permission is granted, Madam.
Ms. Freeland: Thank you, Mr. Chair.
The Chair: You have the floor for your opening remarks.
Ms. Freeland: Thank you for inviting me to speak to Bill C-8 and Bill C-19.
The budget I tabled last month and the subsequent Budget Implementation Act were released against the backdrop of Canada’s remarkable and rapid economic recovery from the COVID-19 recession. However, we still face challenges. Inflation in much of the world is driving up food and energy prices in Canada and worldwide. That is why the investments proposed in Budget 2022 and Bill C-19 are designed to grow our economy and make life more affordable for Canadians. In addition, it builds on the measures in Bill C-8. These measures will provide important support to Canadians and Canadian businesses and ensure that we are prepared for future waves.
[English]
I will start by briefly highlighting some of the key measures in Bill C-8. This bill will expand the eligible educator school supply tax credit, which will put money directly into the pockets of teachers shortly after Royal Assent. It will also extend the northern residents deduction, which will provide certainty to northerners who have filed their tax returns.
By investing up to $100 million through the Safe Return to Class Fund, Bill C-8 will improve ventilation in classrooms and make schools safer for our children. It will ensure that provinces and territories have the rapid tests they may need for any new waves of COVID-19.
I know that time is short, Mr. Chair, so let me just briefly go through some of the key measures in Bill C-19 that I hope senators will support. Bill C-19 will legislate a two-year ban on foreign investors in Canadian housing and will make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST and HST purposes. It will double the home accessibility tax credit’s annual limit to $20,000, which will help make home upgrades, like wheelchair ramps, more affordable for seniors and people with disabilities.
It will introduce a labour mobility deduction for tradespeople to provide tax relief on eligible travel and temporary relocation expenses. This will be important at a time when we are facing labour shortages across the country.
Bill C-19 will enable the government to implement 10 days of paid sick leave in the federally regulated private sector by the end of this year. It will put money back in the pockets of Canadians more regularly by moving the climate action incentive payments to quarterly payments. It will implement a luxury tax on private jets, yachts and luxury cars.
[Translation]
Bill C-19 will help provinces and territories address the backlog in surgery with a $2 billion supplement to the Canada Health Transfer. It will provide up to $750 million to help municipalities address public transit shortfalls caused by the pandemic. It will accelerate the establishment of a public registry of federally incorporated companies by the end of 2023.
[English]
Bill C-19 would also make Canada the first G7 country to allow the government to cause the forfeiture and disposal of assets held by sanctioned people and entities. This is particularly important given the war in Ukraine and the very high costs of rebuilding that we can already foresee. I’d like to particularly thank Senator Omidvar for her hard work and foresight in championing similar measures through her Bill S-217.
Bill C-19 contains changes to the Parliament of Canada Act to provide increased resources for the Senate and senators, a measure of particular relevance to this committee.
Then, finally, senators raised an issue with the Budget Implementation Act, 2021, which led to an inconsistent clause reference in the Old Age Security Act. This issue, raised by you, is corrected in Bill C-19. I’d like to thank the Senate for noticing that.
[Translation]
Mr. Chair, these are just a few examples of how Bill C-8 and Bill C-19 will make a real difference in the lives of Canadians.
I hope that all honourable senators here will support its speedy passage. Thank you, and I look forward to answering your questions.
The Chair: Thank you, minister.
[English]
Thank you very much for your statement. Having you here before us today allows this committee to really zone in on our four main principles in the motto of national finance — transparency, accountability, reliability and predictability. Your presence is appreciated.
Now, we will proceed to questions. I would like to share with the senators that you will have a maximum of five minutes each for the first round and two minutes maximum for the second round. Therefore, please ask your questions directly. To the witnesses, please respond concisely. The clerk will inform me when the time is over by raising her hand.
Senator Marshall: Thank you, minister, for being here today. I wanted to ask you some questions regarding revenue sources. I’m looking at Bill C-8 and Bill C-19, and I see the unused housing tax is there and the luxury tax in Bill C-19, so it’s obvious that you’re looking for more revenue.
Then I look at yet another promise of a beneficial ownership registry. Based on what I’ve been reading, this will probably help with the issue of tax evasion and will probably enable the government to access not millions of dollars but possibly billions of dollars. Unfortunately, we have been promised the beneficial ownership registry for many years now. I went back over the last six years, back to 2017, and there were even promises back then. It just seems like we can’t quite get it off the ground. Every year, we’re told a little variation of the previous year.
I asked you a question last year on the beneficial ownership registry. The target date was 2025, but you only provided $2 million in funding, which wasn’t enough. This year, the implementation date has been moved up to 2023, but I don’t see any money in the budget for it. So we’re promised something different every year. I’m getting to the point now where I’m not really expecting that new system to be implemented by 2023.
In addition to that, you have now broken it into two phases. My question is this: What is the problem that keeps the beneficial ownership registry from getting off the ground? We have been promised it for years. We get a different variation every year, but we still haven’t seen an end result.
Ms. Freeland: Thank you very much for the question, senator. I do really welcome it because I am personally a very big champion of getting a transparent and fully searchable beneficial ownership registry. This is important, as you say, when it comes to collecting revenue. It’s also very important in countering corruption, and I think Russia’s war in Ukraine has really underscored that value. This is something that I absolutely champion.
I’m glad, senator, that you’ve pointed out that with this budget that we tabled last month we have actually shown greater ambition on creating a beneficial ownership registry in Canada. As you said, we have brought forward that date to 2023. I’m delighted to hear senators raising this. This is very important to do, and it’s something our government is fully committed to.
It is challenging because of the federal-provincial relationships in Canada and the issues of federal-provincial jurisdiction, but it is something the federal government is fully committed to do. I think it is important when it comes to raising revenue. It is important when it comes to transparency. It is important in the international fight against corruption. That’s why, in the budget tabled last month, I brought the date forward to do it more quickly.
Senator Marshall: I do agree with you that it’s a greater ambition to have it in by 2023, but I would like to see greater results. We have been waiting quite a while, but I doubt very much that it will be implemented in 2023. I do hope, minister, that you will prove me wrong.
My next question is relating to the financial situation in Canada. We have a number of economists now who are predicting a recession. When inflation was going up, a lot of people were saying, “Oh, it’s transitory,” including the Bank of Canada. Of course, now we’re hearing, “No, there’s not going to be a recession,” but some economists are still predicting one.
I want to know from you and your officials in the Department of Finance about the sorts of preparatory work you are doing in advance of the possibility of a recession.
Ms. Freeland: First of all, let me point out, senator, that Canada is extremely well positioned in this time of global economic volatility. Today is a really good day to be pointing that out because our Q1 GDP numbers came out, and Canada’s GDP for the first quarter is 3.1%.
Let me point out that that is the highest growth rate in the G7. Canada was at 3.1%, France at -0.8%, Germany at 0.9%, Italy at 0.5%, Japan -1%, the U.K. at 3% and the U.S. at -1.5%.
It’s important for us to bear in mind that our starting point at this time, indeed, of global economic volatility is from a position of real strength. It’s a position of strength not only when it comes to the growth of the economy, but also when it comes to our fiscal position. As senators will be aware, after I tabled the budget in April, S&P Global, the ratings agency, reaffirmed Canada’s AAA rating with a stable outlook going forward.
Senator Marshall: Well, despite your optimism, the country is taking on more debt, but so are Canadians. If there are vulnerabilities in the system, this is one of them: the household debt of Canadians. Do you have any concern about the increasing household debt of Canadians? Who do you see as being the most vulnerable group?
Ms. Freeland: Senator, when it comes to Canadian households, what I look at first and foremost is employment. I think all of us would agree that when it comes to managing our household finances, the single most important thing for the overwhelming majority of Canadians is to have a job. This is the metric that our government focused on when the COVID recession hit. We were very concerned that 3 million Canadians lost their jobs, and that’s why we focused so relentlessly on ensuring a strong jobs-driven recovery. That’s why I’m glad, senator, to share with you the great news that Canada has now recovered 115% of the jobs lost to the pandemic compared to a 95% recovery in the United States.
Senator Marshall: But Canadians are still coping with the effect of very serious inflation. What exactly is in this budget for Canadians and for those who are affected by inflation the most: low-income earners? The government responded during the pandemic to help people. What are they doing for the people who are suffering the effects of inflation of almost 7%?
Ms. Freeland: When it comes to inflation, senator, I’m glad to get the question because I think it’s important for Canadians and for this Senate committee to understand the Canadian situation in a global context and to understand that inflation is very much a global phenomenon. Again, let me share some numbers. The latest inflation number in Canada was 6.8%. That is lower than that of the U.S. at 8.3%, Germany at 8.7%, the U.K. at 9% and the Euro area average of 8.1%.
I agree that it’s important for the government to continue to help Canadians with the cost of living, and this budget includes some specific measures to do precisely that. I see that Senator Mockler wants me to come to an end, so let me just mention two quickly. One is dental care, and the other is the $500 payment for Canadians who are struggling with housing affordability.
[Translation]
Senator Gignac: Thank you, minister, for being with us today. My first question, as the sponsor of Bill C-8, is about the 1% annual tax that will be applied to unused housing. As we’ve heard many times during the debates in the House of Commons committee, there is a constitutional sensitivity to this taxation in an area of jurisdiction that is usually reserved for local governments. Could you tell us what kind of consultations have taken place between your department and the various stakeholders, and will there be any consultation with the provinces and cities to ensure that there is no duplication of taxation to combat real estate speculation?
Ms. Freeland: Thank you, senator, for your work, for our conversations and for your question. As you well know, our government campaigned on this issue and it is now important for us to honour our commitment to Canadians, especially today, when housing continues to be a central concern of Canadians. I agree with you that it is very important to be careful about jurisdiction, and I want to assure you that our government has no intention of using this as a basis to interfere in provincial jurisdictions. That is why the tax only targets certain types of markets and properties that are of greatest concern to Canada’s financial stability and to the affordability of housing, which is a very important economic issue for the entire country.
Senator Gignac: My second question concerns the budget in Bill C-19. I commend you for bringing back five-year financial projections. It was difficult to forecast for the longer term during the pandemic, but you have begun to do so again, and even the parliamentary budget officer has pointed that out. In this energy transition challenge, Canada will need significant capital and investment to make this transition to a low-carbon economy. I myself have said that even pension funds will have to help. What is in this budget, in a very concrete way, to fight climate change? How do we encourage domestic investment? What is the role of the private sector, governments and pension funds in this?
Ms. Freeland: Thank you very much for that very important question, senator. I read with great interest the interview you gave to David Parkinson of The Globe and Mail on this subject. You said:
[English]
The federal government, with provincial governments, [need] to have a discussion with pension funds about what Canadian policy-makers have to do to create the winning conditions for Canadian pension funds to become more interested in Canadian investment.
[Translation]
I think you have asked a question and raised a very important issue. I totally agree with you that the federal government has to do things to ensure a green transition, but it can’t do it alone. We need investment from the private sector. In the budget, we are proposing the Canadian Growth Fund to attract investment, but the question of the role of the private sector in terms of funding is very important.
You may recall that in our program to create a universal child care system across Canada, we looked to Quebec as an example. I think it’s very important to look at what each province is doing, including Quebec, of course. You know that at the Department of Finance, we know very well how Quebec’s funds are used because of the expertise of the people who work here. I think that the federal government may have been inspired by Quebec’s practices in this regard.
Senator Gignac: Thank you.
Senator Forest: Thank you, minister, for being with us. It is always interesting to hear your views on issues that concern us. Before I ask my questions on Bill C-8 and Bill C-19, I would like to come back to something that is upstream and very important, namely, Bill C-208, which we passed in June 2021, to facilitate intergenerational transfers of small and medium-sized businesses. This is an important bill, particularly for the agricultural community, which has been welcomed by all sides. I would have expected your government to use the Budget Implementation Act to make the adjustments you feel are necessary.
Unfortunately, all that has been announced in Budget 2022 is a consultation process. This is a bit disappointing.
When will you commit to introducing the legislative changes required to address this problem? In the meantime, a farmer or a father who wants to transfer his farm to his daughter cannot benefit from the flexibilities provided for under Bill C-208.
Ms. Freeland: Thank you for the question. I agree with you that intergenerational transfers are an important issue. I am very pleased that we now have a system to encourage them.
As far as the improvements we have talked about, I think it is very important for us to be sure that these improvements are subject to consultation and that all the people involved agree that these improvements are necessary. For that reason, I think it is very important that we do it properly through consultation, and that is what we will do.
Senator Forest: In your mind, how long is the time frame? The next budget or January 1, 2023? Do you have a perspective to give these people?
Ms. Freeland: I would say as soon as possible.
Senator Forest: We are in agreement.
You promised a tax on luxury goods during the election campaign; Bill C-19 delivers on that promise. We agree that the wealthy should be taxed.
However, we have had a lot of contact with representatives of the industrial sector, who are worried that the tax could have a major impact on order books worth $500 million to $1 billion and on jobs.
Have we measured the potential impact of this tax on employability and revenues? I am thinking in particular of the aerospace industry, where Quebec has a major niche of excellence. Have any forecasts been made as to the gains that could be made from this tax? Does the payoff outweigh the pain, or is it the other way around?
Ms. Freeland: Thank you for the question. I want to say three things.
Firstly, at a high level, I agree with you that this tax is a good idea. I know that as a politician because, during the election campaign, I spoke with many Canadians. When you think about the pandemic and the much needed large expenditures, it makes a lot of sense to say that someone who can afford to spend over $100,000 on a plane or a car or over $250,000 on a boat can afford to contribute a little more.
I would point out that it is a good thing that people in Canada can afford to buy such goods. However, as a society, we agree that it makes sense to ask these people to increase their contribution. That’s a high standard.
Secondly, I assure you that I agree with you that the aerospace sector is very important for Quebec and Canada. It is truly a centre of excellence for us as a country. When we talk about the economic impact of this sector, it’s not only for the jobs that are directly in it, but it has a big effect. I think that the COVID-19 pandemic has shown that it is important to have manufacturers, engineers, and so on in our country. I’m with you on the importance of supporting the aerospace sector.
Thirdly, I know that people in this sector are asking questions. There is a lot of talk with the aerospace sector. I am confident that the sector will continue to be very strong in Canada, even after these taxes are implemented.
Senator Forest: Thank you, minister.
[English]
Senator Richards: Thank you for being here, Madam Minister. I was going to ask about the luxury tax, but I won’t. I have another question.
I have always been interested in this because my grandfather was a patient of Banting and Best, and he died of diabetes long before I was born. Yesterday, I realized that the House of Commons Finance Committee unanimously adopted an amendment to Bill C-19, moved by fellow New Brunswicker and fellow Miramichier Jake Stewart, to expand the eligibility of a disability tax credit. With this amendment, 300,000 Canadians with Type 1 diabetes will automatically qualify without the need to rely on a confusing and arbitrary process to prove they require 14 hours per week of life-saving therapy for an incurable condition that requires insulin 24-7.
Does the government support the unanimous amendment of the committee to immediately help Canadians with Type 1 diabetes, Madam Minister?
Ms. Freeland: First of all, senator, let me say — and sorry for being so personal — thank you for sharing that remarkable family story. I would be very interested at some point to hear whether there are any family recollections of personal encounters with Banting and Best. That is really remarkable.
When it comes to the amendment, it is something that we are looking at very closely. I think that an important issue has been drawn to our attention, but I would also like to say that we are speaking carefully with officials and with other departments to be confident that we understand fully the implications.
But I do want to say that this is a very important issue that touches many Canadians. Anyone with compassion will, I think, be mindful of the importance of the issue you’ve raised.
Senator Richards: Okay. Thank you for that, and I just have a quick follow-up. It’s rather complex, so if I could get it in writing from one of your staff, I’d be just as pleased as you answering it.
It concerns the dosage with the amount of exercise for juvenile diabetes. That research foundation doesn’t find it very clear. How did the Canada Revenue Agency intend to inform doctors and individuals with diabetes on how to interpret what activities related to dietary or exercise restrictions or regimes are directly related to the determination of the dosage of the medication, and what does that mean?
I know you look confused. I’m confused with it too. Perhaps some of your staff could answer that and make it clear to me and, therefore, clear to our committee. You don’t have to do it now. You could do it within maybe the next week or two.
Ms. Freeland: I will admit, senator, to not being a medical expert in any respect and certainly not an expert when it comes to insulin dosage or insulin dosage in juvenile diabetes.
Thank you for raising this issue. I will certainly raise it with my officials and with the Canada Revenue Agency.
Senator Richards: Thank you, Madam Minister.
[Translation]
Senator Dagenais: Good morning, minister. The current surge in inflation can be analyzed in many ways. Canadians are losing their purchasing power because wages are not keeping up with consumer price increases. For some, it could even mean losing their homes—those who have managed to buy one.
When I see in the budget $31 billion of new spending over a five-year period, I must admit that I find it somewhat lacking in seriousness. You’re projecting new spending over a five-year period, yet in March you couldn’t predict what the situation would be in April or what the situation is right now for Canadian consumers. How can you use the words “fiscally responsible” in your speech when your government has no plan to reduce the deficit?
Your government is currently financing itself by raising taxes on consumer products.
Ms. Freeland: Thank you for the question, senator.
With great respect to you and the committee, I must disagree. I think it is important not to speak from your perspective or mine, but from that of independent experts. I’m going to quote what are perhaps the most respected experts on this issue of fiscal responsibility, and that is S&P Global.
A few days after our budget was presented, S&P Global once again confirmed that Canada has an AAA rating. That is the highest possible rating. I also want to point out that we have the lowest debt-to-GDP ratio and the lowest deficit in the G7.
Canada’s fiscal position is very, very strong; that is not my personal view, but the view of economists and experts whose job it is to decide which country has a fiscally responsible position.
Senator Dagenais: Allow me, minister, to say that, with inflation currently forecast at 6.8%, the indicators are aligned for the Bank of Canada to raise its policy rate. Are we going to see another round of fiscal improvisation, like during the pandemic? Do you have a plan to support families?
Ms. Freeland: Again, senator, I think it is very important to remember that we had two years of pandemic, as well as the most difficult recession that Canada has experienced since the Great Depression. All over the world, in all the industrialized countries, we are seeing a very high level of inflation.
As you well know, Canada is better off than comparable countries. Inflation in Canada is 6.8%; in the United States it is 8.3%; in the United Kingdom it is 9%; in Germany it is 8.7%. This means two things: first, that international external factors are causing inflation; second, that Canada’s tax and inflation situation is truly one of the best in the world.
Senator Dagenais: I would say that we are the least worst of the worst, but thank you very much, Madam Minister.
[English]
Senator Pate: Thank you, minister, for joining us. The government is to be congratulated on the child care initiatives, the dental care initiatives and the desire to leave nobody behind. However, despite this, we don’t see as much in the budget around poverty reduction as many of us would have hoped to have seen and were inspired by, certainly, what we had heard being touted before the budget was introduced. So, I’m curious as to what other measures will be looked at to lift additional folks out of poverty.
I recognize that since 2015, 435,000 children have been lifted out of poverty and that with the International Monetary Fund there has been work done on poverty reduction internationally. However, we don’t see the efforts to lift more than 100,000 people out of poverty in these measures despite the fact that we’re talking about during this pandemic alone more than 3.5 million people being left behind.
Given the Attorney General’s report that was released today, what additional measures are the government intending to implement that would ensure income supports as well as housing affordability for those who are currently still being left behind?
Ms. Freeland: Okay. A very big and important issue, senator. Let me make a few comments.
First, you’re quite right to point to poverty reduction and supporting the most vulnerable as something our government has focused on from day one. Of course, the job is not yet done, but I do think it’s important to recognize progress when there is progress because that’s how we keep on doing the right thing.
I do want to take this opportunity to underscore that the Canada child benefit, which is indexed to inflation, has lifted almost 300,000 Canadian children out of poverty. The Guaranteed Income Supplement, also indexed to inflation, has helped over 900,000 seniors.
When we formed government, there were more than 5.1 million Canadians living in poverty. The most recent numbers on poverty go back to 2019, unfortunately, but those figures show that the number of Canadians living in poverty had dropped to below 3.8 million. Still too many but real progress. That would be point one.
Point two, there were significant measures in the budget announced in 2021, but are coming into effect today, that help the most vulnerable Canadians. Yes, early learning and child care. Also the 10% increase in the Old Age Security. And the Canada workers benefit, which we should be talking about a lot more, because that helps millions of low-wage Canadians — people who I believe today need help the most. In the budget specifically, a $500 payment to Canadians who are struggling to afford a place to live, and dental care will make a big difference.
I also want to point out that many of the most important payments are indexed to inflation.
Let me say one final thing because I can see you rustling and maybe have another thing to ask. Two more quick things to support the most vulnerable. One is jobs. I believe that one of the greatest tragedies that can befall a person, especially a vulnerable, poor person, is to lose their job and be living in an economy where it is very really hard to get a new one. The fact that unemployment is at 5.2%, the lowest since comparable statistics were collected, really helps vulnerable Canadians. We’ve seen that in the wage gain of 3.8% in the first quarter of this year.
Finally, on helping vulnerable Canadians, I do believe that a fiscally responsible approach, which we did demonstrate in the April budget and which was confirmed by the AAA credit rating from S&P, is also about helping vulnerable Canadians because they need to have a government which is managing the public finances in a responsible way and which is able to get inflation under control.
Thank you, senator.
Senator Pate: Thank you very much for that. I’m also curious, though, about what you plan to do for those who cannot work. Certainly, you have addressed those who are working, many of whom are working poor as well, as you’ve indicated.
In terms of housing, while the priority policy decisions around affordable housing are certainly laudable in terms of their intent, the estimation is that what you are actually going to address will not decrease the housing affordability issue for many people and won’t create sufficient housing for those who are currently homeless or struggling to be housed. I’m curious what other supports you are looking to develop for those who are most marginalized and whether there are plans, particularly around some of the negotiations that provinces like P.E.I. are trying to do around guaranteed livable income and others, to engage in those kinds of negotiations in the FTP relationships.
Ms. Freeland: Let me focus on saying a few words about housing. I see Senator Mockler wants me to stop talking. Is that correct?
The Chair: In 30 seconds.
Ms. Freeland: Very quickly, on housing, I do think it’s important for us to be honest with each other and with Canadians that there is no silver bullet when it comes to the challenge of housing affordability. This is a really big, complicated issue, and it would serve Canadians poorly for any of us to claim that any measure we put forward is going to solve everything once and for all, in one fell swoop. The housing challenge is one that we need to keep working on year after year after year.
I will point out that housing was one of the key focuses of the budget that we tabled in April. Overall, there is close to $9 billion in the budget devoted to a series of measures to make housing more affordable, and crucially focusing on increasing the supply of housing in Canada, which I believe is core to the issue.
The Chair: Thank you, senator, and thank you, minister.
Senator Boehm: Minister, it’s good to have you with us today. I want to go beyond the Budget Implementation Act and ask my questions with respect to Budget 2022. Canada is one of many members of the Organisation for Economic Co-operation and Development’s G20 Inclusive Framework on Base Erosion and Profit Shifting that joined the two-pillar plan on international tax reform agreed to in October 2021. I’m sure you were there. Pillar one is reallocation of taxing rights, and pillar two, on which I want to focus, is global minimum tax. Of course, pillar two would ensure that large multinational entities pay a minimum effective tax rate of 15% on their profits in every jurisdiction in which they operate. This framework is now largely finalized. Countries have signed on — Canada has signed on — and are taking steps domestically at this time. In the next year, the budget proposes to implement pillar two with a domestic minimum top-up tax and will also launch public consultations.
Minister, this framework is an excellent example of the good work that can be done multilaterally when countries work together. We are being inundated with messages from concerned Canadians who are not convinced that international institutions are really helping our cause — or indeed the global cause — and there’s a perceived impact on our sovereignty and our ability to act domestically in policy terms. I’m wondering how you see this. How do you see selling this to Canadians as we proceed?
Ms. Freeland: Thank you very much for the question, Senator Boehm. I was thinking of you the last time I sat around a table with G7 finance ministers talking about this question because that was not last week but the week before in Germany, a country you know extremely well.
I think that the Organisation for Economic Co-operation and Development tax agreement is one of the most important international accomplishments in recent decades. It shows that we are able to work together to modernize the international financial architecture so that it suits the 21st century economy, and it shows that we’re actually able to reach a global agreement on such a key issue. It’s an important question, and this is a really big deal.
It’s quite right for Canadians to also ask, is this in the Canadian national interest? Is this good for me as a Canadian and for us as Canadians? Senator, I am 100% convinced that this is a great agreement for Canada. Why is it a great agreement for Canada? Two core reasons.
First, when it comes to pillar two — the global minimum tax — the fact is that there are countries in the world that have been engaged in a race to the bottom when it comes to taxation in the belief that if they lower their taxes enough they can attract corporate activity, or at least corporate headquarters, to their jurisdictions. Canada, as we have just been discussing, is a country that believes in having a social safety net. A social safety net means we need to raise revenue. So in a world where there are no limits on the taxation race to the bottom, Canada will not prosper. That’s one reason that this is a great deal for Canada.
The second reason this is a great deal for Canada concerns pillar one. Pillar one addresses the reality that the world is no longer exclusively about brick-and-mortar economies. The digital economy, as we all know, is critically important in the global economy today, but the international tax system is not designed for that, and that also hurts Canada and Canadians. Pillar one does a great deal to address this. In addition to being a triumph of multilateralism, this is a really good deal for Canada and helps solve two inequities that globalization has visited on the Canadian economy.
Senator Boehm: Thank you very much, minister.
Senator Duncan: Thank you, minister, for your appearance before us today. I’d also like to focus on one part of Budget 2022, but a whole-of-government issue.
Budget 2022 commits $25 million over two years for the pilot project menstrual equity fund to make menstrual products available for those in need. It’s under the lead of the Minister for Women and Gender Equality and Youth, Marci Ien. In the Yukon, a project by the Council of Yukon First Nations and the Government of Yukon to address free public distribution of such products was announced on May 4. Funding is provided by Indigenous Services Canada and the Government of Yukon. I’m a great supporter of government-to-government-to-government relationships and of this initiative of pan-Canadian provision of free menstrual products. I am worried about the duplication of funding and the dynamic of one department being unaware of what another department is funding or what a territorial or provincial government has undertaken as initiative.
Minister, you just referenced a few moments ago managing the public finances in a responsible way. How do you, in your role as finance minister, ensure that potential duplication of funding does not take place? How do you ensure coordination of delivery among departments in your government’s whole-of-government approach?
Ms. Freeland: Senator Duncan, thank you for the excellent, careful and thoughtful question. One way to do that, of course, is to listen very carefully when senators ask smart questions.
I also want to say thank you for raising the issue of menstrual equity. It’s actually something that I really believe in as a mother of teenagers, in particular.
This can be really challenging for women and girls across the country. When I was foreign minister, I co-hosted a meeting with Frederica Mogherini of all the women foreign ministers in the world. Before having that meeting, I held a meeting with a group of high school students in Toronto to ask them for their input into what they wanted the women foreign ministers to work on. The top issue these young women rose was menstrual equity. They talked about how embarrassing it was to be in school, to get your period and not to have a tampon or a pad with you. We were all young women in high school at one point — well, not everyone around this table, but some of us were. It’s an important issue. I’m glad you raised it and I was glad we put it in the budget.
In terms of being sure that departments are all talking to each other, point well made. On this particular issue, Senator Duncan, I don’t think Canada is at the stage yet where we’re doing too much on menstrual equity. I think we have a way to go before we get there.
Senator Duncan: Thank you, minister. I don’t think you quite addressed the question. Let me put it another way.
As Minister of Finance, do you ensure that monies that are appropriated to address issues reach the designated recipient community? If we look at Indigenous Services Canada, our committee has repeatedly noted the department’s performance indicators lack in detail and in actualization. And 22.7% of employees in the Department of Indigenous Services work for internal service programs compared to 16% in the government as a whole. The department had planned to spend $12.8 billion and employ 5,958 full-time equivalents, yet it actually spent $16.4 billion and employed over 6,000 full-time equivalents. I have heard from the Indigenous community that continually submitting funding applications is a less than ideal way to deliver programs and services.
With these numbers and without real performance indicators, how can you as the Minister of Finance assure Canadians that the monies intended for a feminist economic policy or intended to meet recommendations from the Truth and Reconciliation Commission actually reach those that they’re intended to meet?
Ms. Freeland: Senator, that is a very good question, and it’s a good question when it comes to the important resources that our government is devoting to reconciliation and to ensuring that Indigenous people receive the same level of service that non-Indigenous people receive. It’s actually a very good question for all of the work that the government does.
I believe that we need to work harder every day to deliver services more effectively, and that includes cost effectively. I spent most of my life working in the private sector and I think that’s an approach that government needs to take as well.
You will have noted that in the budget tabled last month, we did include a plan to look carefully at government spending, reviewing precisely how programs are being delivered. That is something we’re absolutely committed to do and we put it in the fiscal framework.
Senator Loffreda: Thank you, Minister Freeland, for being here today with us.
My question is on the disability tax credit. There is a section in Bill C-19 that deals with the disability tax credit and further expands the list of qualifying mental functions to be eligible for the tax credit. I think this is great news and I support this particular initiative. However, I think Canada’s disability community may have expected the government to reintroduce an updated version of the bill it tabled last June with respect to the Canada disability benefit act. However, instead of reintroducing the bill, the government is currently engaging with provinces and territories on the design and implementation of the anticipated Canada disability benefit.
Can you provide our committee with an update on these discussions? Will the government eventually fulfill its commitment and introduce a disability benefit?
Ms. Freeland: Thank you very much for the question, senator. My colleague Minister Carla Qualtrough is 100% committed to this work. She is committed to this benefit and she is committed to this legislation. I want to assure you she will be continuing her work on this and moving forward in practical, significant ways.
Senator Loffreda: Do I have time for another question?
The Chair: Absolutely.
Senator Loffreda: Our Banking Committee undertook the review of Part 5, Division 16 of Bill C-19, which deals with the 20-year extension term for copyright holders. As I understand it, we are the only G7 country without the general protection of 70 years after the life of the author. We heard from various witnesses during our meeting with a wide range of opinions, and there is obviously no consensus on the matter.
Could you provide us with the government’s rationale not to require rights holders to register, at their own discretion, their copyright to enjoy the 20-year extra protection instead of automatically extending it by 20 years? As you know, the House Industry Committee published a report on the issue. It felt that having a registration requirement would mitigate some of the disadvantages of term extension, promote copyright registration and increase the overall transparency of the copyright system. The witnesses who did appear before our committee certainly provided us with lots to consider on this specific issue.
Ms. Freeland: Thank you very much, senator, for the question. Copyright is a very important economic issue. It’s a very important rights issue. In addition to the points that you’ve raised, I would add that an important consideration for Canada in this particular space is our trading relationships and our trade negotiation with the United States. It does have some significant bearing on this issue.
Senator Loffreda: I would like to turn our attention to Part 6 of Bill C-8. Parliament passed Bill C-10 in March, which allowed Minister Duclos to make payments of up to $2.5 billion in relation to COVID-19 tests. Bill C-8 is also asking for $1.72 billion for the same purpose.
Are these additional funds at this point, given where we are in the pandemic, still needed at this time, or are the provinces and territories still relying on these sums for COVID tests? If we pass this bill, will the health minister consider the payments to the provinces or perhaps re-evaluate the amount of each transfer?
Ms. Freeland: Thank you for the question, senator. I am absolutely convinced that this is a really important element in the measures that we are putting forward. When one speaks — as I’m sure all the senators around this table do, both physically and virtually — with public health experts, there are a lot of people who are cautioning about the potential of additional waves of COVID, particularly in the fall, and who are also cautioning that while Omicron has been very transmissible, it has not been very virulent.
We should not exclude the possibility of further waves and of waves which could be even tougher for us than Omicron has been. For that reason, I am very pleased at the further support for rapid testing that we’re putting forward in this bill.
Senator, I would be delighted if I were to turn out to be wrong and COVID would turn out to be totally behind us.
However, one thing that two years of the pandemic has taught us is that it’s best to adopt the precautionary principle and to be ready for what the fall might bring.
Senator Loffreda: Thank you.
[Translation]
Senator Moncion: Welcome, Madam Minister. I’m happy to be able to ask you some questions directly.
My first question has to do with Division 30 of Part 5 concerning the public registry of beneficial ownership information for corporations governed by the Canada Business Corporations Act.
I wasn’t here at the start of the meeting, but I think Senator Marshall asked you a question about it. I checked to make sure it wasn’t the same, and it wasn’t.
You moved up the entry into force of these provisions to 2023, and I commend you for that. I want to talk about the next steps. Could you tell us what work is being done on this with the provinces and what provisions are being studied to determine beneficial ownership for corporations that are registered on behalf of legal firms?
Ms. Freeland: Thank you very much, Madam Senator. I’ll begin by thanking you for your work on this bill. Thank you very much.
With respect to the registry, you’re right: Senator Marshall has already asked a question on this issue. I want to assure you that the idea of having such an open registry is a personal project for me. I think it’s very important for us. It’s important economically, but it’s equally important in terms of global corruption to protect Canada from global corruption. That is why, in the budget in April, we said we would do it faster than we had previously promised. However, you are right that it will not be easy. There are provincial and federal jurisdictions, and it will be complex.
It is good that two senators have raised this issue. I hope your questions and interest will help me and Minister François-Philippe Champagne, with whom I work closely. We will work with the provinces to ensure that this work is done by 2023.
Senator Moncion: And for the law firms?
Ms. Freeland: We are really talking about a transparent registry. It is necessary to allow Canadians to know who the owner really is. We don’t want to know who works for the owner, but who the owner really is.
Senator Moncion: Thank you very much. Do I have any time left, Mr. Chair?
The Chair: You still have two minutes, Madam Senator.
Senator Moncion: My second question concerns Division 7 of Part 5 of the Budget Implementation Act, which refers to certain extraordinary loans that were taken out under paragraph 46.1(c) between March 23, 2021, and May 6, 2021. The purpose of this provision is to ensure that these amounts are included in the maximum amount provided under the Borrowing Authority Act, and that such borrowings are reported as ordinary debt in the total, so that they are included in the total debt amount, to ensure greater transparency on the state of the government’s debt and accountability to Parliament for the total amount.
Could you tell us how this great transparency will be ensured? How will we be able to monitor the evolution of COVID-19 — specific loans or the measures put in place at that time, if you integrate it into the overall debt and if all this is managed from the overall debt? How will we be informed of the reduction of this debt?
Ms. Freeland: That’s a good question, Madam Senator. I’ll give you three answers.
First, we have a legal, judicial and fiduciary obligation to be transparent with Canadians, the House of Commons and the Senate with respect to all government debt. The debt can only grow with the permission of the House and the Senate and by decision of both houses, and we must be transparent about the amounts. That’s the first thing.
Second, we must — and we do — publish the results after the end of each fiscal year. The budget is something, as you well know, that is done in advance. We think it will be our expenses and our revenues; it’s our plan, but when the year is over, we have to publish the results. I want to share one small thing. The good news is that with all of this unpredictable experience with COVID, we have budgeted more than we actually spent, and we have budgeted less revenue than we got. We saw this last Friday when we published the results for 2021 and 2022. The good news is that the deficit will be $95.6 billion. The budget predicted that the deficit would be $113.8 billion. So it is much better.
The Chair: Thank you. I have no doubt in my mind as chair, Madam Minister, that you can make further comments. The committee is also open to the possibility of getting written answers. I’ll talk to you about it in a few minutes.
Senator Gerba: Thank you, Madam Minister, for your precious time. It’s greatly appreciated.
You referred earlier to the importance of the digital economy in the global economy. My question has to do with the cryptocurrency industry and stablecoins.
Bill C-19 calls on your department to conduct a five-year review of this sector with a view to examining the robustness of the regulatory framework to ensure the integrity of the financial system, promoting fair competition and protecting both the finances of Canadians and our national security, among other things.
Madam Minister, given the current volatility of the digital asset market and the recent loss of more than 50% of its global value, can you tell us what specific measures your department intends to put in place to protect inexperienced Canadian investors in the short term?
Ms. Freeland: Madam Senator, that’s an excellent question; thank you very much. It’s a very timely issue, so thank you very much for the question.
I agree with you that one of the strengths of our country is that we have a very stable and well-regulated financial sector. When we talk to investors abroad, we hear that this is one of the advantages of investing in Canada.
I spoke earlier about S&P Global and their decision to confirm Canada’s triple-A rating. S&P pointed out that we have a very stable and well-regulated financial and banking system. I think that even with the evolution of forms of payment, including the creation of cryptocurrencies, it is very important for Canada to continue the tradition and to maintain a financial system in which people and the national economy are protected by rules and institutions. We made that commitment in the budget.
Senator Gerba: Okay.
Are there specific measures that will be put in place to protect our Canadian citizens from this industry?
Ms. Freeland: Of course we do. We need specific measures in the whole regulatory system. This is a very serious issue and that is why we said that we would do an analysis and a consultation. I’m not going to announce today what we’re going to do. However, I want to assure you that I take this issue very seriously. I agree with you that we need to act, and we will.
Senator Gerba: Thank you.
The Chair: Madam Minister, before we adjourn, I think you could probably complete some of your answers in writing. If you and your officials would like to add some points to clarify, could you send us your answers in writing?
Ms. Freeland: First of all, Mr. Senator, thank you for the opportunity to have this conversation and for allowing me to vote at the beginning of the meeting. I believe that you, senators, must also vote today.
With respect to the questions that were asked, I tried to answer them as best I could, but as you know, five minutes is not enough to give a full answer on all the issues. I will follow up with my officials and my team.
The Chair: Thank you, Madam Minister.
[English]
Honourable senators, before I adjourn, and if this is the case, minister, and you want to share any closing remarks for a couple of minutes, that is also possible.
Senators, our next meeting will be Thursday, June 2, at 11:30 a.m. EST to continue the study on the subject matter of Bill C-19.
[Translation]
Having said that, do you have any comments to make before we adjourn, Madam Minister?
Ms. Freeland: I would perhaps like to add a few words.
[English]
Let me just conclude by thanking each of you for your hard work and your thoughtful questions. Your work really matters. It matters to me. It matters to Canadians. I cited in my opening remarks a change we made based on an observation made by senators, so thank you for delving into the details. Thank you also for the issues that you raised, for example, the repeated focus on beneficial ownership, the point about crypto and the point about the Organisation for Economic Co-operation and Development two pillars. It’s important for me and Canadians to hear your areas of concern, and that will certainly provide some important guidance to me and my team.
[Translation]
Thank you very much. I am grateful for your work.
[English]
The Chair: As we conclude, Deputy Prime Minister and Minister of Finance, written responses are through the clerk by the end of the day on Monday, June 6, 2022, so we can meet our agenda for tabling our reports.
I will now declare the meeting adjourned. Thank you.
(The committee adjourned.)