Moved third reading of Bill C-78, An Act respecting temporary cost of living relief (affordability).

She said: Honourable senators, I have the privilege to rise today at third reading of Bill C-78, An Act respecting temporary cost of living relief (affordability).

The Senate’s work on this bill has been particularly diligent and productive. I am pleased to build on that momentum today.

Bill C-78 seeks to address a very specific challenge. According to the Parliamentary Budget Officer, this bill is clearly consumer-oriented and the stated purpose is to make life more affordable in terms of consumer spending.

Total consumer spending per capita has remained low since the pandemic, which has prevented the Canadian economy from operating at its full potential. That is partly due to high inflation and high interest rates, which are inevitable consequences of supply chain disruptions. Such disruptions were first caused by the pandemic and then by global energy shocks resulting from Russia’s illegal invasion of Ukraine. It may take time before the positive effects of lower interest rates influence the economy and consumer habits. According to the Bank of Canada, it could take 18 to 24 months before we see the effects of the lower rates on the national economy.

At the National Finance Committee, we heard about the productivity problem in Canada. David Dodge, former governor of the Bank of Canada, explained:

. . . our main problem in the country is that we have low productivity; hence, the real income that we as Canadians can earn, in fact, has really stagnated since the great financial crisis in 2010.

Our collective problem is to find a way to raise the investment to improve the productivity of workers and, hence, to improve their incomes and their ability to buy products. To do that, we need to make investments, both from the government’s side, and that’s investment in the capital services the government provides, such as transportation and so on, justice, everything, to complement private investment, which will provide workers with the additional tools they need in order to raise their productivity and, hence, raise their incomes.

I am glad that Bill C-78 is sparking discussion around productivity. This issue is complex and can be measured in different ways. Some economists have criticized the use of labour productivity as a sole indicator, which is output divided by hours worked, ignoring capital.

In an opinion piece in The Globe and Mail entitled “Canada’s productivity problem isn’t that big if we exclude oil,” an economics professor at McMaster University explains, “’Productivity’ should refer to total-factor productivity (TFP), which measures output relative to inputs used (labour and capital).” When we exclude the oil sector, we do see that Canadian productivity has grown at the same rate as in the U.S.

Indeed, the federal government sees the importance of investing in productivity. The Budget 2024 contained key measures to increase productivity, such as massive investment in targeted artificial intelligence to help stimulate the development of AI infrastructure in Canada. The government also enhanced research support with $3.5 billion in new strategic research infrastructure and federal research grants. We also saw investment in a new electric vehicle supply chain tax credit, support for Canada’s biofuels sector and many other key measures aimed at boosting research, innovation and productivity.

These strategic investments will not solve our productivity issues overnight, but with consistent and targeted investment in key sectors, we can trust in the long-term prosperity of our country.

In the meantime, however, Canadians continue to feel the financial burden of the past few years, and consumer behaviour reflects that sentiment. We know that this is having a very real adverse impact on the wider economy. Despite inflation having cooled and interest rates dropping, per capita consumer spending remains subdued, and the Canadian economy is operating below its potential capacity.

To address this very real challenge, Bill C-78 offers a solution. In short, it proposes to provide a two-month goods and services tax/harmonized sales tax, or GST/HST, break on purchases like groceries that are not normally tax-free, restaurant meals, drinks, snacks, children’s clothing and toys from December 14, 2024, through to February 15, 2025. As we have discussed, we note that there is a sound theoretical basis for this sort of support. Government interventions in the economy under the right conditions — for example, through measures like government support or tax reduction — can result in a positive shift within the economy and boost consumer spending.

The measures in the bill are also calibrated to meet the current challenges with respect to consumer sentiment lagging in relation to the broader range of economic indicators that are improving. This is because the measures are temporary and targeted to have a very muted impact on inflation. With inflation having cooled and interest rates dropping, they would thus support Canadian consumers and businesses in a way that is not going to stimulate inflation but will help Canadians make ends meet and continue driving economic growth.

We heard from representatives of Canada’s retail and food service sectors, who expressed their support for the temporary stimulus measures in Bill C-78.

The representative from the Retail Council of Canada, Karl Littler, Senior Vice-President, Public Affairs, concluded that:

. . . we support this policy initiative for a GST holiday and see some real and significant benefits to consumers and retailers alike. . . .

As Mr. Littler explained:

. . . even those who don’t sell the affected goods could see a benefit as these measures reduce pressure on consumers’ wallets . . .”

He added that, “That’s the demand-side benefit.”

He went on to explain that:

. . . there is another benefit to retailers, in cash terms . . . Because these newly included goods are zero-rated, that means that retailers themselves will have a larger value of input tax credits. Those, in turn, reduce GST otherwise payable to government. That benefit is calculable and real to each retailer.

The representative from Restaurants Canada, Maximilien Roy, Vice-President, Federal and Quebec, was even more forceful in his support for Bill C-78. As Mr. Roy noted:

. . . Bill C-78 is more than a temporary measure, it’s a lifeline for a struggling industry and a catalyst for economic recovery. It’s good for businesses, good for workers and good for Canadians. . . .

Once again, Mr. Roy’s observations show that the positive ripple effect that occurs when money circulates within an economy leads to even greater economic spinoffs.

As Mr. Roy also pointed out, this could significantly impact the restaurant sector, and beyond. He told us the following, and I quote:

According to our chief economist, this tax break could generate nearly $1.5 billion in additional sales for our industry during this period. That figure demonstrates the positive impact such a move could have, not only for restaurant owners, but for the economy as a whole.

All told, the witnesses we heard from were very helpful in providing real-world insight into how the stimulus included in Bill C-78 will benefit them.

Yes, it is true that we heard from some witnesses that the tax relief offered by Bill C-78 would place administrative burden on the businesses that would have to adjust the GST/HST on the goods specified in the bill. Their concerns were not related to the tax incentive created by Bill C-78 or its financial impact on businesses and the economy, but, rather, to the amount of work generated prior to after HST/GST adjustments. We also heard from these witnesses that the Canada Revenue Agency, or CRA, has been active and proactive in providing increased support to businesses to help with the implementation of the proposed relief.

Some witnesses were also clear that the benefits for businesses in the wider economy would outweigh any administrative burden. As Mr. Littler from the Retail Council of Canada stated:

Those issues do not detract from the fact that the GST holiday will save consumers in the order of $1.6 billion. We are under no illusion that we are the primary beneficiaries here. This is designed and delivered as a consumer measure, but we are major ancillary beneficiaries.

Those who sell newly zero-rated goods will have a customer base that finds all-in pricing on those goods more affordable. . . .

These views from representatives of the retail and restaurant sectors about how Bill C-78 will support the economy are also backed by the work of professional economists.

For example, following the government’s announcement on November 21, 2024, of the GST/HST relief measures contained in Bill C-78, BMO Economics revised its growth forecast upward, reporting that “. . . the GST/HST rebate will drive additional spending. BMO Economics is boosting Q1 —” 2025 “— GDP growth from 1.7% to 2.5% . . .”

I wish to make a comment, colleagues. We are talking about $1.5 billion more in sales just for the restaurant business. If you take the portion of HST and GST that is going to be part of the $1.5 billion that the Parliamentary Budget Officer has identified, the sales will be even greater, so we have to consider the ripple effect that this will have. If customers are going to be saving $1.5 billion in HST, how much in sales will that generate? We have to really consider the volume.

Colleagues, all of this highlights what I clearly said at the start of my speech today: The Senate’s work on this bill has been extremely thoughtful and productive. We noted that Canada is facing a slow recovery in consumer spending, even though inflation is back down to its target range, interest rates are stabilizing and overall economic conditions related to employment and growth are solid. We also noted that this obstacle to consumer confidence is preventing the economy from achieving its full potential.

We learned that Bill C-78 will temporarily increase aggregate demand at a time of year when Canadians are struggling with higher than usual expenses. This legislation will temporarily lower costs for Canadians, with an anticipated positive impact on the economy and consumer confidence.

We also know that this is the right measure at the right time. With the slowdown in inflation and drop in interest rates, Bill C-78 allows the possibility of supporting Canadian consumers and companies without fanning the flames of inflation. Instead, it will help Canadians make ends meet. The measure is limited and targets clearly-defined sectors, including some that are feeling the pinch of the current economic climate especially hard.

Representatives from the retail and restaurant sectors told us why they support the bill and how it would help not only their sector, but the economy as a whole. Some economists at major banks raised their growth forecasts for the Canadian economy following the announcement of this support. These are valid economic reasons to support Bill C-78.

As the government has made clear, the bill will give Canadians a little extra money at a time of year when they tend to spend more, to help offset the cost of the things they need. They’ll be able to focus more on spending time celebrating with family and friends, and less time worrying about their finances.

It’s also a way of acknowledging that the government is counting on Canadians to continue fuelling a strong economic recovery through to the end of this year and even into 2025.

I’d like to share with my colleagues a comment published in The Globe and Mail by journalist Shannon Proudfoot. She wrote:

But this week, Finance Minister Chrystia Freeland appeared before the Senate finance committee to defend her government’s two-month GST holiday. And because it was a Senate and not a Commons committee, the manner of working was completely different. It was not recognizably partisan and there were no histrionics or cheap games, just precise and technical questions seeking real answers.

She concluded her article, saying:

The senators on the finance committee, in their calm and careful questioning this week, performed a public service by playing it out for all to see.

I would like to thank my honourable colleagues, who did an excellent job taking all aspects of Bill C-78 into account in their analysis. They have clearly understood the political and economic implications of this bill. They questioned its merits and feasibility. They assessed the economic aspects of the proposed new measures, both in terms of the financial situation of households and the economic impact on their respective provinces.

With this in mind, I encourage you to support Bill C-78 on behalf of Canadians who really need it.

Thank you for your attention.

I wonder if the senator would take a question.

I will take all questions, senator.

Thank you. Five days ago, Prime Minister Trudeau tweeted:

In under two weeks, you’ll be paying less for groceries at the register. Canadians are getting a tax break — starting December 14.

How would the Prime Minister know how independent senators are going to vote?

That’s a very good question. He presumed that senators would vote in favour of this bill. That’s all I can say. I don’t know what he was thinking at the time, senator.

Don’t you think it’s an affront to the Senate that Liberal MPs are currently running ads indicating that we’ll have a tax break on December 14 before the chamber has actually voted? If that’s the case, are we not participating in a bit of a charade here, with people standing up with good intentions, giving speeches and making remarks? It’s all a sham. Would you share that concern, given that there are public ads appearing across Canada saying that on December 14 we will have a tax break?

Thank you, Senator Downe. I’m disappointed that you feel this way about the work we do and that you see the work we do as a sham. This bill was not looked at in the House of Commons. It was sent to the Senate for a thorough review, which was done by the Standing Senate Committee on National Finance. The work that we did and do on every bill is important whether we vote for the bill or not. What we do here is extremely important for Canadians.

As the journalist said, we did the work diligently, and we asked good questions. That’s where it ends. I find your other comments disappointing because the work we do here is important.

We often hear from the House of Commons that a certain number of people voted in favour of this or that. In this case, what we do here is extremely important, and together we will decide the outcome of this bill today or this week.

You didn’t answer my question. It’s not coming from the House of Commons; it’s coming from MPs running newspaper ads presuming what the Senate will do. How is that not a reflection on this chamber and on the people putting work into it, including all the members of the Finance Committee?

Senator, I don’t necessarily agree with the comments that you’re making, because for any bill we work on, we receive so much information from many people dictating how we should vote on that bill.

Bill C-78 is not any different. If the Prime Minister has decided that we should vote in favour of this bill, then it is his prerogative to say that. As with many comments we hear, the value we place on any of them depends upon how we receive them and how we choose to use them.

First of all, senator, I would like to thank you for your work and also for your diplomacy, not to mention your courage in sponsoring this bill, which is called An Act respecting temporary cost of living relief (affordability).

As you know, I no longer sit on the National Finance Committee, but I have been an observer at the meetings. The title of the bill is An Act respecting temporary cost of living relief (affordability), and the committee members came to the following conclusion based on the testimony they heard, and I quote:

 . . . that Bill C-78 will not adequately meet the needs of Canadians struggling to afford necessities including food and shelter.

How did my colleagues come to that conclusion?

Thank you, Senator Gignac, for the question. I attended the committee’s meetings. Inflation was discussed at length, and the rising cost of living over the past few years was also covered. Food and housing are probably the two most expensive and most important costs that Canadian consumers have to bear. Unfortunately, people have to eat, if not three times a day, then at least twice.

Although this legislation isn’t a definitive solution to the affordability issue, it helps. It gives people a little more money at a time of the year when they spend more on food because they buy items purchased less often at other times of the year. The goal is to give people a little more spending money at a time that is potentially a bit harder for families.

Although I will be supporting this bill, I had a reaction to something you said. You said that the bill had been well thought out. I was a bit taken aback by that. Even though I told you privately, and I’m saying here and now, that I will be supporting the bill for all kinds of reasons, not necessarily economic, to your knowledge, in the last 30 or 40 years, has there ever been a tax measure that benefits some Canadians more than others, depending on the province where they live? In Ontario, people will benefit from a 13% rebate, since it has a harmonized sales tax. In Quebec, where we administer and collect the GST, and do everything for the federal government, people will save only 5%.

Since you said this measure was carefully thought out, have you ever seen a government bring in a tax measure like this that benefits Canadians in one province more than another?

Thank you for your thoughtful question, Senator Gignac. What I can tell you about that is that the senators who served on the committee reflected on Bill C-78. That is what I meant when I said it was well thought out. If you’re asking me to look back at the past 40 years, I can tell you that we’ve had to pass bills while holding our noses. That often happens with private members’ bills. There have been a whole host of private members’ bills recently where we had to hold our nose and pass them. We do not need to look back as far as 40 years to see that.

Senator, I’m presuming that the committee members did their job. I was there. I will say that, on one side of the room, we had the “French connection,” including some economists and former bankers, and on the other, we had the “other province connection.” The questions that were asked were excellent and well thought out. I would add that those questions were almost always asked by women. Even the questions that came from the group were excellent.

Although this bill may make us uncomfortable for all sorts of reasons, it comes from the government and it seeks to help Canadians at a time where things may perhaps be more difficult.

Thank you for the question. First, about the article, I took out of the article the portion that was praising the work that the Senate did and that the National Finance Committee did. I think it was important to commend my colleagues for the excellent work that they’ve done.

As for the choices that were made by the government, it was the government of the day’s decision to make. We can discuss these things, we can agree or disagree, but at the end of the day, this is what we are working with, Bill C-78, and the ins and outs that have been brought into that bill. That’s as far as I go on the questioning. These questions were raised at the committee, and senators seemed to be okay with the report that was presented.

Thank you for the question. As for the comment on productivity, it was with respect to the comment that was provided by David Dodge, the former governor of the Bank of Canada. It was related to the measure that he presented in the committee. The argument that I present in my speech is a different argument, or a counter-argument, where we’re looking at productivity with removing the portion on the oil sector. Having a more accurate picture of our productivity and with the conclusion that this economist comes up with is that we have had productivity that is similar to the U.S.

As for the amount of work that is going to be generated for small- and medium-sized businesses, depending on the size of the business, it is a concern, the amount of work it is going to generate for the reprogramming of the systems to accommodate the sales tax and the benefit that is associated with it. It is a concern. It is the intention of the government to look into this situation — not at the moment, but down the road — to see how this is going to turn out at the end of the two months and see what can be done, if anything will be done.

The premise here is that most businesses will profit from this with the $1.5 billion savings — the cost of the tax reduction from the Parliamentary Budget Officer’s report, that’s just the GST and the HST. In some provinces, that’s $1.5 billion. I haven’t even made the math to tell you how many sales are going to be generated to bring the $1.5 billion in cost savings.

Will you take another question?

Yes.

Thank you very much. Perhaps this is a carry-on from the conversation we’re having now. I’ve been trying to bring this into context. Over the weekend, perhaps not intentionally, I ended up meeting with a number of business owners.

It could be that this is something new and it’s a bit of a panic because it’s change or people trying to adjust to some short-term pieces, but the real piece I listened to was around the point of sale. You talked about it a moment ago. Especially the smaller businesses are saying, “You know what, our customers stopped shopping a week and a half ago, they’re waiting for reduced prices on the 16th, I don’t have staff, I can’t staff up anyway, and now I think each transaction is going to take us two or three times longer.” The one thing that also seems to dominate those conversations was, “Come February 15, will there be a program or helpline set up to help small businesses work through the steps and answer questions when they bring back the GST?”

Those things seem to be the concerns — whether they have the staff, the loss of income — not a gain — because of the pause in shopping right now at the busiest time of year, trying to work themselves through it and that policing at the end. I’m just wondering, through you speaking today and through the National Finance Committee, if there is any one of those for which you can bring comfort for folks going through this.

Thank you for the question, senator. We had officials from the Canada Revenue Agency, or CRA, who were there. Since November 21, they’ve started answering questions, and they’ve been working with the different businesses on how this is going to work.

You might not have noticed, but Bill C-78 doesn’t have any penalties or any sanctions within the bill, and that was made purposefully. We had people from the CRA saying that they’re going to be working with different owners to work through all of the situations, and honest mistakes are going to be looked at. There seems to be a comprehensive framework that is going to be put forward. It’s not the intention of the government to penalize, but it’s the intention of the government to work with the business owners to make this project work.

I did read that penalty thing and I tried to express that. I don’t know if it’s coming off of COVID or other pieces, but there is concern about that follow-up.

As you had the conversations with the CRA and spoke with different folks, do you know if the small business folks or the folks not in huge businesses had a chance to be consulted when this bill was put together through your hearings?

Thank you for the question. It was a question that was asked prior. Without having been consulted, the government worked with the businesses from November 21 on different aspects of this bill. Without official consultations, work has been done with different businesses.

Would the senator take another question?

Yes.

Thank you, Senator Moncion, for everything that you’ve shared. I did have the opportunity to watch the finance minister’s testimony before the committee. The committee did a good job. They were asking very good questions. I found the answers somewhat short or even evasive, I might say.

In my area of the world, for the three provinces in the Maritimes that have the HST, there was no consultation. The Province of New Brunswick — which is where I’m from — found out about it the evening before the announcement. Premier King in Prince Edward Island found out through a press release, and Nova Scotia was in the middle of an election. Given there was only minimal, if any, consultation with them and given the financial impacts, should the House not have had — whose members, as I understand, were also caught a little short by all of this, and possibly the cabinet members — their committee give that initial review of this taxation policy before it came over to the Senate? It seems the elected people should have had that opportunity. Would you agree? Why didn’t it happen?

I find it difficult to agree or disagree because I’m not necessarily privy to how some of these things are worked out in government.

What I can say, though, senator, is that so far Newfoundland and Labrador, P.E.I. and Ontario have waived their portion of the HST. The federal government is working with New Brunswick and Nova Scotia to find grounds for agreement and understanding on how they’re going to work through this.

I understand there have been discussions with the provinces that you’ve mentioned, so there will obviously be some type of offset that will occur. In the case of New Brunswick, it’s a $70-million hit. In the HST agreements with the provinces, there’s a 1% rider, if you will, that says if there’s something that’s above the 1%, it’s an automatic ping; it’s a legal requirement. That has not been respected by the government.

For those provinces that you mentioned, there must be a trade-off. Regarding New Brunswick, I can’t comment on their discussions, but I can comment that there’s going to be a tax hit of $70 million in my province — a province with a population that isn’t the wealthiest in Canada.

How do the provinces that don’t get compensated deal with this with respect to their own taxation regimes? It’s going to be paid for by taxpayers one way or another.

The threshold of 1% is still there, senator. It’s going to be worked out within the thresholds that are in place. It’s not a cost that is going to be assumed by the taxpayers — in the end, yes, with the loss of revenues from the HST, it does hit the government’s financial statements. However, with the threshold, the provinces will not be out of pocket from this.

May I ask a last question?

You can ask as many as you want.

It’s going to be my last one. I have other questions.

Similar to Senator Marty Deacon from Ontario, last week I had the opportunity to speak with a number of small business owners in my hometown of Saint John. There wasn’t one of them who was happy, other than a few of the restaurant owners, potentially. Other small businesses are going to be spending up to $1,000 to reprogram machines that are going to be in effect for two months, and then they will have to change it back again.

Should the small businesses that incur costs be compensated, or should there be a negotiation with them similar to what you’re suggesting is happening with the provinces?

Thank you, Senator Quinn, for the question.

We know there are costs that are going to be incurred by small- and medium-sized enterprises, or SMEs, but there are also revenues that will be incurred. The government believes that most of these SMEs are going to be making more money through more sales than what it is going to cost them to program their systems.

Like I said earlier, at the end of the process, the government is going to be looking at this and will be having discussions on the different caveats that this bill has brought. There are no promises here, but there are discussions that will occur on this particular item.

Thank you for the question. This bill is not amending an act; it’s creating a new section to the act. That is in the document that was provided when Bill C-78 was brought forward.

Honourable senators, I commend Senator Moncion for her service in sponsoring this bill. I’m the designated speaker for the Canadian Senators Group. I promise I won’t be speaking for 45 minutes, but I appreciate having an opportunity to speak about this bill.

Honourable colleagues, this has been an incredibly tough few years for small businesses. Then as retail businesses entered what was likely going to be their busiest time of what could be a good year, Canada Post workers went on strike. A week later, on November 21, they were conscripted into delivering a two-month GST/HST tax break on a random list of products. This is no small task, as we’ve just heard.

When the Prime Minister and Deputy Prime Minister announced the GST/HST holiday, the Prime Minister stated, “For two months, Canadians are going to get a real break on everything they do . . . .”

He went on to say:

Our government can’t set prices at the checkout but we can put more money in peoples’ pockets. That’s going to give people the relief they need.

In the Prime Minister’s words, the initial announcement also included a $250 working Canadians rebate “To help them buy the things they need and save for the things they want . . . .” Conversely, today, far too many Canadians are entirely focused on past-due bills, not on savings accounts. This proposed one-time working Canadians rebate is intended to provide 18.7 million Canadians earning under $150,000 in 2023 with a $250 cheque in early spring 2025.

When thinking of those who are struggling the most to afford groceries, I don’t first think of those making $150,000 per year. That almost includes most people in this room.

The next day, the Prime Minister stated that what families need is to be able to afford their groceries. He’s right, and you will hear me repeat his important statement often during this speech, but there is no GST on groceries.

What was the genesis of the November 21 policy announcement? It’s been reported, and not denied, that the Prime Minister and Deputy Prime Minister did not consult with their cabinet or their caucus colleagues who are accountable to their constituents. They also didn’t consult the Canada Revenue Agency, or CRA, officials responsible for providing businesses with GST guidance and compliance. In committee, when I asked CRA officials if they’d been consulted, I received the blunt one-word answer, “No.”

I gather that one or two provinces were given a heads-up, but most were not. Now there is an effort to shame the provinces into proactively participating. The Deputy Prime Minister repeated the word “proactively” in committee, but using that word in this situation I think is disingenuous at best.

In her The Globe and Mail column reporting on our National Finance Committee’s excellent work, Shannon Proudfoot offered that this strategy is like, “. . . announcing unilaterally to your siblings that you’ve bought your parents a big-screen TV. . .” and “. . . they each owe you $500 . . . .” That would not have worked in my family.

Bill C-78 dubbed as a “tax break for all Canadians act” just includes the GST and HST pauses with amendments to the Excise Tax Act.

Who should receive the $250 cheques is still being negotiated with the NDP. If passed, Bill C-78 will create a $90-million hole in Nova Scotia’s budget months after the province announced several decisions to permanently reduce fees and taxes.

Under its HST contract with Nova Scotia, the federal government is obliged to reimburse the province if their unilateral decision reduces aggregate provincial revenues by more than 1% in a calendar year. Given that contractual obligation, I’m deeply troubled that this government is trying to strong-arm my province into taking responsibility for this federal decision.

Most disappointing is the fact that there was no consultation leading up to this policy announcement. Caucus was conscripted, federal departments were conscripted, businesses were conscripted and now efforts are underway to conscript the provinces.

Colleagues, here is why I am completely against Bill C-78.

First, there is no underlying logic to the random list of items selected for inclusion. The minister repeatedly stated in committee that the bill will eliminate GST and HST on groceries. However, there is no GST or HST on essential groceries only on more expensive prepared foods. When you consider the list and who will benefit the most, it is certainly not those who need the most help. The majority of items on the list are non-essential. Families who are struggling to pay for groceries will see little benefit. This contradicts the Prime Minister’s assertion that what families need is to be able to afford their groceries.

Second, the department responsible for Bill C-78’s implementation and compliance, the CRA, was never consulted. This is a serious mistake, and small businesses are the ones who will pay the price. Maybe not in penalties but certainly in GST or HST that is owing but not collected, and given that this is implemented over two different tax years, this is a risk in liability that will not go away anytime soon. Failure to consider implementation and compliance should be reason enough to reject this new policy or program.

Third, federal departments that are actively pursuing policy goals opposite to this announcement were not consulted. For example, consuming junk food and candy is neither recommended by Health Canada nor is it they aligned with Bill C-252, a bill supported by this government and that is at third reading here in the Senate. The purpose of Bill C-252 is to reduce the consumption of unhealthy foods, particularly by children. Again, what families need is to be able to afford their groceries.

Fourth, this policy shows no consideration for small businesses who are being forced to implement this measure. Front-line staff will have to explain the randomness of the very specific list of qualifying items to customers and deal with any resulting frustration. I have personally heard small business owners expressing real concern over customer backlash if they refuse to believe the unexplainable.

There is an inverse cost to small businesses. This is going to be very inexpensive to implement for large businesses. But they will have to do it twice for small businesses, and you are doing that as a one-off, often as a small mom-and-pop shop.

Fifth, the implementation of the required point-of-sale changes favour our largest retailers who have the systems, technical support and accounting expertise that enables them to make one central change and then roll that out nationally. Defending and explaining those changes to customers is easier because they have a national advertising campaign available to them. Defending their actions to the CRA is unlikely to resemble that facing small business.

As Senator Moncion said, yes, we did hear words like “reasonable efforts,” “honest mistakes,” “that a practical approach to compliance will be taken,” but they will still be responsible for the GST or HST that they do not collect if there is a mistake, and they will have to pay that for up to the next two years. This is a significant risk for them if they do not do it right.

Defending explaining the changes to customers in a big business is going to be much easier than it is for our smallest businesses. I wonder when we’re going to start to respect our small businesses more than we certainly are showing that we do.

Sixth, Canadians who will benefit the most from the GST/HST holiday are those who can afford to spend the most. Struggling families can only dream of being able to spend Finance Canada’s example of $2,000 on qualifying goods such as children’s clothing, shoes, toys, diapers, books and video games, snacks for the house and restaurant meals. Struggling families are not the ones who will realize GST or HST savings over the two-month period.

Colleagues, when announced, this one-time GST or HST holiday was accompanied by a proposed one-time $250 cheque for Canadians who earned up to $150,000 of income in 2023. It excludes those who are retired or disabled and doesn’t include up to the top 5% of earners. That cheque is not targeted to those who need the most help. Quite the opposite. Again, what families need is to be able to afford their groceries.

Colleagues, this giveaway was not in the Liberals’ 2021 election platform. What was in that platform was a firm commitment to implement consumer-driven banking, otherwise known as open banking, by January 2023. Yet Minister Freeland has consistently and repeatedly delayed implementation despite extensive consultations starting in 2018 — over five years ago — with strong and enthusiastic support from the Standing Senate Committee on Banking, Commerce and the Economy in 2019, unrelenting support from finance department officials, provinces, businesses, consumer groups and every other group that you could consider, except for Canada’s five big banks.

Why do I raise this now? What does giving consumers secure control over their financial data have to do with Bill C-78 and the announcement made on November 21? It matters because had Minister Freeland implemented that 2021 election promise, Canadians would already be saving an average of $250 per person every year in the elimination of excess bank fees and costs.

This is the finding of North Economics when comparing the profits of Canadian banks to those in the U.K. where consumers do control their data. Consumers use their data to get cheaper loans, lower fees, higher interest on savings and a reduced risk of fraud. Their study found $8.5 billion per year in excess profits in Canada’s biggest banks. That is because, based on this study, open banking has not been implemented and our banks continue to use our data for their benefit, not for ours.

Fitch Ratings has just reported that Canada’s biggest banks have benefited from a 13% year-over-year increase in revenues, and Saturday’s The Globe and Mail reported that executive bonuses at Canada’s biggest banks jumped 12% in 2024 to $23.75 billion. Executive bonuses at Canada’s biggest banks totalled $23.75 billion in 2024.

If this government had fulfilled its 2021 election promise, Canadians would be benefiting from an average of $250 per year in savings at no cost to taxpayers. The government’s delayed action on its election promises has caused Canadians to pay some of the highest fees and costs globally, and this is especially detrimental to those in greatest need.

Colleagues, the decision we’re debating is about the November 21 announcement and its initial representation in Bill C-78. It’s not just about an estimated $1.7 billion for the GST portion of that announcement but about the provincial HST portion of $1.4 billion, because it will be paid by taxpayers whether the Prime Minister and Deputy Prime Minister choose to honour the federal government’s responsibility or not.

Surely, if we pass this bill, we are signalling our support for another $4.75 billion to be given away in $250 cheques. That is a total of $7.85 billion. But now NDP leader Jagmeet Singh wants the $250 to be delivered to all adults whose income is under $150,000 and who did not earn employment income in 2023.

In 2022, according to StatCan, there were roughly 33 million Canadians 18 years of age or older earning less than $150,000. That would mean about $8.2 billion in $250 cheques if Jagmeet Singh gets his wish. As a result, the total cost of the November 21 back-of-the-envelope announcement could reach over $11 billion.

So what will this $8-billion or $11-billion expenditure do for Canadians? We know it does little for families who are struggling to afford groceries, but what is the opportunity cost of this policy announcement? What other major risks are we facing today?

To answer that, I reflected back to the first ministers’ meeting in Halifax last July where the premiers predicted the future we now find ourselves in where our economic stability urgently requires the federal government to see security and defence as an economic issue. They were unanimous in their belief that continuing to ignore our 2% NATO spending target could cause enormous harm to businesses, employment, communities and families.

In the words of Manitoba Premier Wab Kinew:

I want Canadians to see this as a national security thing. It’s an investment in the Canadian Armed Forces, but I encourage Canadians to think about this also as an investment in trade. . . . If we’re not meeting our responsibility to our NATO allies, it is going to have an impact on [the Canada-United States-Mexico Agreement] renewal. It is going to have an impact on the relationship.

A few days after the Prime Minister and Deputy Prime Minister made their November 21 announcement that we’re debating today, president-elect Donald Trump posted his 25% tariff declaration, echoing the prediction of Canada’s premiers.

Investing up to $11 billion in junk food, beer, video games, Christmas trees and other giveaways rather than border security and defence could cost us dearly. If the incoming president does what he continues to threaten, January 21 will mark the beginning of a devastating recession for Canada, regardless of any retaliatory tariffs that Canada may impose.

In the words of former Bank of Canada governor David Dodge, in his testimony to the Standing Senate Committee on National Finance, “. . . it’s candy today in exchange for future pain.”

Colleagues, when the Prime Minister called me and granted me the honour of being appointed to the chamber, he made one request of me. You have heard me say it before. His request was this: “Challenge the government.” He made a similar request to many of you.

We are the only parliamentary body to meaningfully consider this policy. We are generally deferential to spending bills in this body. However, when faced with such an ill-considered, decidedly unserious policy and this bill in the context of an increasingly dangerous world, awash with security risks and economic uncertainty, we cannot rest on tradition.

Remember the Prime Minister’s announcement? “What families need is to be able to afford their groceries.”

Bill C-78 doesn’t help them. However, $11 billion could go a long way towards demonstrating how seriously we take North American and NATO security and defence, potentially helping to avoid a devastating recession.

Colleagues, please consider what it might cost us if we endorse this ill-conceived bill. I know this is a money bill and it is the government’s prerogative to spend money however they like. However, Bill C-78 has demonstrated such profound disregard for small businesses, such profound disregard for where we find ourselves today that I cannot support it, not in any way. Thank you, colleagues.

Yes.

I was trying to follow along with you. I will ask you to restate, if you could, the point of the question.

Senator Batters, at this point in time, we’ve been given nothing other than a few statements of support for the fact that businesses will be treated with care. But, yes, at this stage, anybody I have spoken to has said to me that, yes, the penalties still stay in place. They may be waived, but they still stay in place. If you have not collected HST or GST that you should have collected, you will have to pay it.

Senator Deacon, you used the word “random.” I think all of us have been listening to the small retailers in our own areas. I’ve been inundated with stories: Sticker books are not included in this, but colouring books are. If, in a gift basket, 90% of the goods are GST-free, then you can make the whole thing GST-free, but that has required many retailers to go in and repackage what’s in the basket. This is time-consuming and costly.

There was another example given about model planes. With the glue included, it’s GST-free, but if you buy the glue separately, it’s not. This is insanity for anyone who is trying to run a store.

The thing that is troubling me — but I would have you comment on that as well, to follow up on Senator Batters’ question — is that people are being told that if they’ve bought things before December 14 and they go to return them, then they will have to apply to the CRA for a refund and fight with the retailer about that. Shopping online is also now being restricted because delivery service infrastructure is being paralyzed by the postal strike. It seems that we will be in pre-Christmas chaos here.

I would summarize it this way: I heard Senator Moncion speak about the fact that there are thoughts that this will increase sales for business. I sure hope that’s the case, but I have not met anyone who thinks that will be the case.

I am certain that for the largest retailers in the country, this won’t harm them at all; they may absolutely benefit. But I am very concerned about the complexity that this brings to smaller retail businesses. It’s not nearly that same complexity for restaurants. It might have an effect in January; there’s a possibility of that. But if you can afford to go buy a meal in January at a restaurant, then a few per cent one way or the other will not make a difference.

I don’t know. I hope that if this bill passes, it has an increase for small business because they sure need it. This is a devastating period for those who rely on shipping. This is very confusing. I do not think any of us understand how hard it is to manage all of these issues that you could not plan for as a small business.

Sometimes the burden becomes very heavy. This showed an utter disrespect for that at a time following many tough years, and this is a tough time of the year. They are already dealing with huge costs: Businesses committed to free shipping to encourage shipping of different items are now suddenly paying shipping costs that are two or three times more than what they budgeted for. This is a tough period. I hope the predictions that Senator Moncion mentioned are correct.

On the question of returns, I was in two different stores on the weekend and they were already starting to feel this because, of course, the government is advertising it, even though this has not been passed duly. But they are getting the returns now. They may have sales after December 14, but they are not new sales. They are the same sale. They have incurred the cost of returning, repackaging, refunding and then selling it again the morning of December 15.

I did not hear a question. Senator Gold, please.

Would you take a question, senator?

Absolutely.

Thank you for your speech. Senator, you made reference to reports suggesting that cabinet and caucus were not consulted on Bill C-78 but, most importantly, you have not mentioned the votes in the House. Would you confirm to us that cabinet, caucus and, indeed, a majority in the other place, which is the house of Parliament directly accountable to Canadians on tax measures, have indeed cast their votes to support this tax relief?

I am certain that is the case, Senator Gold. I would be intrigued — I do not know whether it was a whipped vote.

I have a supplementary question.

Senator Deacon, do you believe that it is the role of the Senate to vote down and defeat tax policy duly passed by the other place, which embodies the principle of no taxation without representation and, indeed, our whole constitution?

Senator Gold, I completely respect your question. I know what I am suggesting goes against the tradition in this chamber.

However, I cannot explain how deeply, in my opinion, this goes against so many fundamental principles of good governance in how this was structured, coming out of the blue with a lack of consultation, with no appreciation of the effects this would have on intended groups in terms of implementation and no coherent logic to it, so I have chosen to vote against it. I do not know what my colleagues will do. I have made that choice because I cannot support a piece of legislation done up randomly at the last minute, it appears, without consultation, that conscripts so many groups that must be part of it. I find it deeply troubling.

Honourable senators, as we consider Bill C-78 today, let’s not lose sight of the fact that this is a time of year when we gather and celebrate all for which we are grateful and appreciative — a time that encourages us to reach out, especially to those who are struggling, homeless, hungry or otherwise marginalized by place or circumstance.

These short, cold days bring into sharp relief the differing realities for those who do not have the privilege of a warm home, a full belly or hope for the coming year. We must work together to address poverty and need. We cannot continue to leave so many behind.

Since the COVID-19 pandemic, homelessness and particularly homeless encampments have increased significantly. Instead of being recognized for what they are, a symptom of Canada’s systemic failure to uphold equality rights and the human right to housing for all, rhetoric and policy around encampments have become ever more cruel and punitive.

Despite federal commitments to reduce poverty by half by 2030, government data indicates that the number of people below the poverty line is rising. Unaffordable rents have left people to make impossible choices between food and shelter. More Canadians than ever are using and being turned away from overwhelmed food banks and shelters.

Official government statistics alone — that 1 in 10 people in our wealthy and well-resourced country are being abandoned to poverty — should impel us to action. Anti-poverty experts indicate, however, that in reality, the situation is worse: Closer to one in four Canadians are struggling in poverty, unable to afford food, shelter and other essentials for themselves and their loved ones. The rate of children living in poverty in particular is growing for the first time in a decade and with alarming speed.

When people are plunged into poverty, they must make impossible, unthinkable and unfair choices between food, heat, medicine, shelter and safety. They are abandoned to risks of health issues, crises, isolation, victimization and criminalization that those of us in privileged positions simply do not face.

The human, health and social costs of poverty, approximately $80 billion per year, are exacerbated by the consequences of poverty for the health care system, the criminal legal system, our social support systems and our economy.

These costs are not inevitable. COVID-19 supports — and especially the federal government’s CERB program — cut poverty in half during the pandemic. Canada has the ability to eliminate poverty, yet those with the power to make a difference have instead made a choice not to act.

The stated aim of Bill C-78 is to alleviate the cost of living for some, but it was not designed for those most in need. The Prime Minister says it is designed for “. . . hard-working middle-class Canadians . . .” This is a stark shift in policy from a government that earlier in its mandate set a clear, welcome and long-overdue expectation that the role of government is to help those who are being left behind.

Bill C-78 proposes a two-month break from GST/HST on certain items. If combined with the proposal announced by the government at the same time for one-time $250 cheques for those with employment income under $150,000 per year, we are looking at a cost of more than $6 billion. That is far more than would be needed to cover the net annual cost of a guaranteed livable income, an approach that could begin to generate billions in downstream savings, improve health, prevent crime, allow people to rebound out of poverty and homelessness and create choice and hope.

At the National Finance Committee, witnesses did not pull punches when it came to the value of Bill C-78 from the perspective of addressing economic security and need.

David Macdonald of the Canadian Centre for Policy Alternatives prescribed, instead of Bill C-78, increases to existing forms of basic-income-type measures, such as the GST tax credit or the Canada Child Benefit. He noted:

We already have programs of basic income for particular groups . . . . How can we change them to improve them, particularly to target people in the lowest poverty, and really try to reduce poverty rates?

Sylvain Charlebois, food security expert and professor at the Dalhousie University Faculty of Management, testified that:

Instead of just sending out cheques and submitting to the economy an influx of temporary capital. It is more important to stabilize the economy with a constant, predictable flow of revenues for households that need it. I would certainly prefer to look into a guaranteed minimum income.

Why is a guaranteed livable income for those in poverty deemed too expensive, yet Canada can afford to pay twice as much for minuscule one-time benefits to those with more income?

Why, via Bill C-78, does the government choose to feed narratives that portray fair and progressive taxation as a cause of economic insecurity rather than a means of funding the programs we need to redress it?

By framing the bill as rewarding those who are “hard-working” and “working hard to join the middle class,” the government fuels harmful myths and stereotypes that poverty can simply be overcome by hard work. We know, including as a result of research from the University of British Columbia, that navigating poverty — trying to care for yourself and your family with far too little and worrying about whether there will be a roof over your head tonight — can exhaust people’s cognitive bandwidth.

Poverty is not a test to be passed by the deserving. It is a cruel, exhausting and judgmental trap fed by systemic inequalities and which must be redressed via systemic solutions.

Why does this bill seem content to pretend otherwise? Why, as so many are struggling without adequate housing and food, does Bill C-78 focus on middle-income earners instead of those most in need?

Honourable colleagues, this holiday season, Bill C-78 will leave people out in the cold. We know that reducing poverty saves money and creates healthier, safer and more just and inclusive communities and, therefore, benefits us all. We know what to do to help those most in need to rebound out of poverty. We have the resources, tools and ingenuity to deliver meaningful solutions, such as a guaranteed livable income.

Especially at this time of year, I must again ask us all to consider and demand action.

Meegwetch. Thank you.

Colleagues, I’m pleased to speak to Bill C-78, which introduces a one-time, two-month tax holiday.

First of all, I’d like to stress something that the vast majority of people agree on: Canadians, particularly the most vulnerable members of our society, have suffered in recent months as a result of inflation.

Heating bills have soared, along with the cost of groceries. Whether one rents or owns, housing has become much more expensive. In this context, the government’s intention to offer taxpayers some respite is commendable. Unfortunately, a 5% tax holiday for two months on a limited range of products is not a substantive measure likely to have a significant impact on households.

When this measure comes to an end in March, the cost of essential goods, such as housing, heating, food and clothing, will be just as high as before.

What’s more, as Quebec Finance Minister Éric Girard pointed out, retailers, manufacturers and restaurateurs may absorb this benefit by raising their prices. He said:

It’s not clear that consumers will reap the full benefit either. Vendors may keep some of it. The drop in prices might not be as big as expected.

When professor Sylvain Charlebois testified at the Standing Senate Committee on National Finance, he brought up a similar precedent: When the Harper government permanently lowered the GST from 7% to 5%, it didn’t have much of an impact on consumers.

Testimonies at the Finance Committee also shed light on the fact that temporarily reducing a tax is one of the worst ways to help citizens. For one thing, it creates a heavy administrative burden for merchants. They will have to reprogram their point of sale machines twice in two months. It costs a lot of money to do that and they’ve barely recovered from the pandemic. For another thing, a tax holiday doesn’t target the people who truly need it.

Low-income families will certainly appreciate paying less for diapers, for example, but generally, the more a person consumes, the more they will benefit from this measure. What’s more, professor Luc Godbout explained that the wealthiest 20% of households spend three times more at restaurants than the poorest 20%. So this help is regressive. In fact, those who need help the least will receive more of it.

While thousands of children aren’t getting enough to eat and shelters are overflowing, a 5% discount on gaming consoles, bottles of wine or beer seems to be a bad priority.

Instead of passing this complicated and poorly targeted measure, the government could have chosen to use existing tools, such as the GST credit, which actually targets low-income taxpayers. This system is already in place and the benefit could simply have been topped up, like Quebec’s Allocation famille, which is increased at the start of the school year to help with the purchase of school supplies. This solution has the added advantage of allowing beneficiaries to decide how to use the money without any obligation to spend. Other options could include paying off a credit card, paying heating bills or buying medication.

Finally, I’d like to share the words of professor Luc Godbout, who criticized the improvised nature of this public policy. Allow me to quote him:

 . . . let’s not forget that he federal government still hasn’t presented an economic update. While it may be acceptable, in certain situations, for a tax policy to add to the deficit — for example by wanting to fight climate change in the name of intergenerational equity — granting a GST holiday on soft drinks and potato chips clearly doesn’t qualify.

The reasons provided should have been enough to abandon such a project; in short, I will tell you that the GST and HST holiday is a bad tax policy.

In conclusion, I don’t want to throw the baby out with the bathwater. I believe Canadians need a break from the tough times they’ve been through, some more than others. However, based on my most cherished values, and given the current budgetary context, my humble opinion is that public funds should be used to support the most economically vulnerable Canadians. I would have liked to see more carefully targeted, more substantive measures to help them. Strengthening the Competition Act to bring prices down by boosting market competition was one such measure. Unfortunately, Bill C-78 is not in line with that thinking.

Thank you.

Honourable senators, I’m rising today to speak to Bill C-78, An Act respecting temporary cost of living relief (affordability).

By way of introduction, I’ll read the Standing Senate Committee on National Finance’s observations and findings, which are set out in its twentieth report concerning its study of Bill C-78. The report states the following:

Your committee agrees, in principle, with the intended goals of Bill C-78 to “put more money back into the pockets of Canadians” to help them with the cost of living.

The committee feels, however, that this measure may fail to make a real difference for those who are facing affordability issues. The committee heard testimony given regarding the administrative burden that will be shouldered by certain small and medium enterprises, as highlighted by representatives from a variety of business organizations and tax experts. Moreover, provinces and businesses were not officially consulted on the proposed tax changes.

The committee brings to the attention of the government witness testimony emphasizing that Bill C-78 will not adequately meet the needs of Canadians struggling to afford necessities including food and shelter.

In other words, the committee noticed a disparity between the bill’s intended goal and the means chosen to achieve it, namely a two-month GST holiday.

First of all, colleagues, I want to talk about how this bill was passed in the other place. The usual rules were suspended by two closure motions. Here’s how Conservative MP John Nater, from Perth—Wellington, put it:

What is interesting about Motion No. 43 is that it is a guillotine motion that has itself been guillotined by a guillotine motion. This is a motion that would introduce closure on a motion that is about closure and stopping debate.

At the end of debate, the Speaker said that the bill was “deemed referred” to a committee of the whole, “deemed considered” in committee of the whole, “deemed reported” without amendment, “deemed concurred in” at report stage and “deemed read a third time and passed.”

In other words, the bill was studied on the fly, debates were rushed, MPs were muzzled, and no witnesses were heard.

I’m pleased that our study of this bill will be more serious and befitting of our usual practices. In that sense, the importance of our role of providing sober second thought is only magnified tenfold. Our Standing Senate Committee on National Finance did remarkable work in a very short amount of time to organize its business. What’s more, beyond the wonderful team that supports our committee and to whom I express my deep gratitude, I want to thank the committee members, or my Senate colleagues who truly did thorough and methodical work. My thanks also goes to all the witnesses who generously came to share their point of view with the committee.

An editorial in Saturday’s Globe and Mail on the work of the Standing Senate Committee on National Finance came to a very interesting conclusion:

The senators on the finance committee, in their calm and careful questioning this week, performed a public service by playing it out for all to see.

The committee identified many problems. There are so many problems with this bill that I could talk about them for several hours, so I’m going to have to check myself and get straight to the point.

I would still like to mention the problematic aspects of the bill that I won’t have time to explore in my speech. Let me give you a list of what I won’t be talking about. I won’t be talking about the lack of consultation with the provinces, the absence of an economic statement when this bill will come to a vote, the impact of the bill on Canada’s debt, the inflationary effects of the measure and the risks of increased consumer prices.

Some other aspects I won’t be talking about include the disparity between the provinces, the costs to the provinces, the agreements between the provinces and the federal government, the measure’s real and imaginary economic benefits, the discrimination involving religious items from different religions, the risk of error facing merchants in coding zero-rated items — and consequently, the risk of being found in default before the Canada Revenue Agency, all over two different fiscal years — the specific costs and impacts for Quebec, the counterproductive effects of the bill, and the cumbersome processes for merchants.

Lastly, I won’t talk about problems with the CRA, which lacks resources to administer the measure and respond to merchants who run into problems; the impact on the provinces; and whether or not provinces with a harmonized tax will forgo the compensation they would be entitled to receive from the federal government. That amount is estimated by the Parliamentary Budget Officer at $1.3 billion, which could be added to the total if the provinces don’t waive compensation.

Now that I don’t have to address these 16 flaws with Bill C-78, I have only 16 more to address in my speech.

First, let’s look at the purpose of the legislation. In her testimony on December 4, Minister Freeland put it this way:

Inflation has cooled and interest rates are dropping, but we know that life is still hard for Canadians. That is why now is the time to give them a bit of help. Our government cannot set prices at the checkout, but we can give Canadians more money in their pocket to help them afford the things they need and save for the things they want.

Essentially, the goal of the bill is to put more money in people’s pockets for two months, the duration of the tax measure in Bill C-78.

Regarding this noble objective, Senator Forest questioned the wisdom of this measure.