Proceedings of the Standing Senate Committee on
National Finance
Issue No. 97 - Evidence - June 5, 2019
OTTAWA, Wednesday, June 5, 2019
The Standing Senate Committee on National Finance met this day at 2 p.m. to study the subject matter of all of Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures.
Senator Percy Mockler (Chair) in the chair.
The Chair: My name is Percy Mockler, a senator from New Brunswick and chair of the Standing Senate Committee on National Finance.
I wish to welcome all those who are with us in the room and viewers across the country who may be watching on television or online.
[Translation]
I’d also like to remind those watching that the committee hearings are open to the public and available online at sencanada.ca. I’d like to ask the senators to introduce themselves, starting on my left.
Senator Forest: Good afternoon and welcome, Minister Morneau. I’m Senator Éric Forest from the Gulf division, in Quebec.
[English]
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Ontario.
Senator Neufeld: Richard Neufeld, British Columbia.
Senator Andreychuk: Raynell Andreychuk, Saskatchewan.
[Translation]
Senator Pratte: André Pratte from Quebec.
[English]
Senator M. Deacon: Marty Deacon, Ontario.
Senator Duncan: Patricia Duncan, Yukon.
Senator Boehm: Peter Boehm, Ontario.
[Translation]
Senator Forest-Niesing: Josée Forest-Niesing, from northern Ontario.
[English]
Senator Day: Joseph Day, New Brunswick.
The Chair: Thank you, honourable senators.
Honourable senators, and members of the viewing public, today we continue our consideration of the subject matter of Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures.
This afternoon we are very pleased and honoured to welcome the Minister of Finance of Canada, the Honourable Bill Morneau.
Minister, we thank you again for being here this afternoon. We know the heavy agenda that you have but you are always available for when our committee asks for your presence. I want to acknowledge that and thank you very much.
[Translation]
Minister Morneau, I see that you’re joined by Brian Ernewein, Assistant Deputy Minister, Legislation, Tax Policy Branch, at the Department of Finance Canada.
[English]
I have been informed that a large group of officials is also here, ready to come to the table should we need their help to answer questions or provide clarification. I want to welcome them.
Minister Morneau, let me share with you that we have heard from numerous government officials from your department and others, and these meetings were very fruitful. We have also heard from several experts, academics, individuals and stakeholders across Canada interested in specific elements of the bill.
[Translation]
We want to hear your comments on Bill C-97. After you’ve finished speaking, the senators will ask you questions. The floor is yours.
[English]
Hon. Bill Morneau, P.C., M.P., Minister of Finance, Department of Finance Canada: Thank you to all of you for having me here. I’ll note that it’s going from 2 p.m. to 3 p.m., so I’m doing this in lieu of being in Question Period in the House of Commons, so I’m looking forward to your questions and I might add I am quite pleased to have the opportunity to answer them in more than 35-second clips. It’s a pleasure to be here.
I also need to recognize that this committee, and, more broadly, the Senate, is engaged in ensuring that the measures we put forward in the budget and, in particular, the tax measures, meet all of our expectation of tax fairness. My first effort here today is to take the opportunity to thank the committee for its work in highlighting the importance of tax fairness in its twenty-fourth report titled: Fair, Simple and Competitive Taxation: The Way Forward for Canada.
As you’re aware, since we came into office, our government has had a plan to strengthen the economy by investing in the middle class and in people and communities across the country, but we know we need to make those investments in the context of a fair, efficient and competitive tax system.
That’s why we’ve tried to make decisions since day one to ensure that we have that fair tax system. Along the way, we’ve tried to listen to Canadians and business owners and tried to base our actions on what we’ve heard.
As a result, I think you know we started out by delivering a middle-class tax cut, which is now benefiting more than 9 million Canadians across our country. And to support Canada’s hard-working entrepreneurs, we cut the small-business tax rate down to 9 per cent at the start of this year. It was the second small-business tax rate reduction in two years. Small businesses will save up to $7,500 in federal taxes each year as a result of these cuts compared to 2017 as a base year, savings that they can reinvest in purchasing new equipment, developing new products or creating new jobs.
The measures we introduced in our last Fall Economic Statement will make sure that Canadian businesses continue to benefit from a tax advantage in attracting new investments. With those in place, businesses in Canada now have the lowest overall tax rate in the G7 on that next business investment, a rate that we know is significantly lower than that in the United States.
Our goal is to create the right sort of conditions for businesses to succeed, because we obviously know that good, well-paying jobs rely on business success. But at the same time, we don’t want to create unfair tax advantages for the wealthiest among us at the expense of all other Canadians. The taxes that we pay as Canadians build the infrastructure that helps us get goods to market, helps families to find affordable childcare or get to the doctor. So when some Canadians don’t pay their fair share, we know that it affects us all.
That’s why we’ve taken steps to ensure that our corporate tax system is being used to support jobs and growth, rather than to create unfair tax advantages. We’ll continue to review the tax system on an ongoing basis to ensure that it’s fair, supportive of business growth and job creation and, importantly, supports investments in the creation of jobs.
[Translation]
This approach and these investments are the result of a decision made by Canadians almost four years ago. At that time, Canadians chose to invest in the things that matter most to them. These things include good, well-paying jobs to ensure more help for families facing higher living costs; stronger, better-connected communities; and better opportunities for everyone, including our children and grandchildren.
Canadians have chosen the promise of a better future and a stronger middle class. The legislation that we’re discussing today ensures that we can keep this promise.
[English]
It helps young Canadians to access the education and training they need to get the jobs they want. By waiving interest payments on Canada student loans during the six-month grace period after graduation, the BIA that you’re considering would help approximately 200,000 student borrowers each year.
At the same time, this legislation recognizes that learning is not just something that young Canadians need to get started in life. Rather, it’s a process that unlocks new opportunities for success throughout our lives. That’s particularly the case in a world where the nature of work is changing so rapidly.
That’s why, in Budget 2019, we helped Canadians in the future to get the training they need to continually excel in their current jobs or to prepare for new ones. We do that by introducing the Canada training benefit, which will give workers the time and money to improve their skills. It includes a new Canada training credit to help with the cost of training, a new Employment Insurance training support benefit to provide income support when an individual requires time away from work to pursue training and a commitment to help make sure they have a job to come back to after the training is over.
By making the Canada training credit a reality, the BIA will create new opportunities for working Canadians to succeed long into the future.
While helping to open new doors for Canadians, the BIA is also making sure that others aren’t closing on them. We know that for some Canadians buying a house or a condo is challenging. We also know that it’s probably the most important investment most Canadians will make in their lifetime. Unfortunately, for too many hard-working Canadians, especially for young people, current market conditions are making them feel as though home ownership is beyond their reach, especially in large urban centres. To put it back in their reach, Budget 2019 builds on Canada’s national housing strategy with new actions to improve affordable housing for first-time home buyers. By reducing the monthly payments to buy a home, the first-time home buyer’s incentive would give greater flexibility in managing their ongoing costs. To further leverage Canada’s home-buying purchasing power Budget 2019 also proposes to increase the home buyers plan withdrawal limit to $35,000. It will provide first-time home buyers with greater access to their registered retirement savings plan to buy a home.
The importance of this legislation goes well beyond those starting out in their adult life. After raising children, supporting their families, building strong communities and growing the economy, Canadian seniors deserve a secure and dignified retirement, free from financial worries. In Budget 2019 we’ve built on this understanding with new investments to help make retirement more financially secure for Canadians. Many older Canadians, for example, want to stay involved and stay active in their communities through work but face reductions in narrow income supplement or allowance benefits for each dollar of income above the current $35,000 earnings exemption and those self-employed don’t have access to that current exemption at all. To put more money in their pockets, the BIA would enhance by providing a full or partial exemption of up to $15,000 and extend that to include self-employment income.
It would also proactively enroll Canada Pension Plan contributors who are 70 years of age or older starting in 2020 to help ensure that they receive the CPP retirement benefits they contributed to. With these measures, the BIA will put more money in seniors’ pockets so they can focus on the things that matter and worry less about making ends meet.
[Translation]
Seniors aren’t the only people who have more money in their pockets as a result of this legislation. Our government knows that more can be done to help hard-working families pay their monthly electricity bills. To this end, Budget 2019 proposes to invest over $950 million to increase energy efficiency in residential, commercial and multi-unit buildings. This support would go a long way to improving the energy efficiency of Canada’s homes and buildings and reducing the electricity bills of Canadians, whether they’re homeowners, renters or building operators. This type of investment will pay off now and over the long term. Our government has made these types of investments since coming to power.
[English]
The results of these investments speaker for themselves. More than 1 million jobs have been created by Canadians since the fall of 2015. Last year, all employment gains were in full-time positions. The unemployment rate is at its lowest level for more than 40 years and wages are currently rising faster than inflation. Moreover, these employment gains have been widely shared among groups that are often under-represented in the job market like recent immigrants, single mothers, Indigenous peoples living off reserve, young Canadians and people who don’t have a high school degree. That’s the sort of progress that’s making a positive difference in Canadians’ lives.
Hard-working Canadians deserve to benefit from new opportunities in the rapidly evolving workplace of the future. They deserve to know that home ownership is within their reach. After a life of hard work, they deserve the benefits they’ve worked so hard to achieve and they deserve to benefit from new, clean technologies that will save them money while protecting the environment.
By delivering this progress, the BIA takes the next steps in our government’s plan to invest in the middle class and grow the economy today and in the future.
Mr. Chair, I’d be pleased to take any questions that your fellow senators may have.
The Chair: Senators, I will need your full cooperation with the minister. We have only one hour with him. If we’re concise, succinct and stick within the four-minute band for the first round, all senators will be able to ask their questions. We will facilitate that.
Senator Marshall: Thank you, Minister, for being here today.
My question is on the middle class, and you referenced the middle class quite often in your opening remarks. One of the primary objectives of your government was to grow the middle class. In fact, all of your budgets — and I brought them along in case you thought nobody was reading them — all of your budgets focus on the middle class along with many of your programs and even the Fall Economic Statement is devoted to the middle class.
In previous meetings with our committee, we asked you on a number of occasions to define the middle class. After all, how can you determine if you’ve grown the middle class if you don’t know who is in it. You never did define for us the middle class.
Earlier this year the OECD, of which Canada is a member, issued a report on the middle class. It was covered by our national media. According to the OECD report, the middle class in the 36 members that they covered, is shrinking and it includes Canada. In fact, middle class shrinkage was sharper in Canada than the OECD average.
My question is this: Why have you never reported to Canadians that despite the four budgets dedicated to the middle class and despite the many, many programs initiated by your government, it now appears that your government has been unsuccessful in growing the middle class?
Mr. Morneau: Thank you for your question and I think I need to thank you for your diligent reading of our four budgets and your continued focus on this issue. I think it is important that we recognize that when asked the overwhelming majority of Canadians self-identify as being in the middle class. We’ve taken the view that we need to focus on how we can ensure that prosperity in our country is shared with the broadest possible cross-section of Canadians. We obviously started with some measures that were very focused on Canadians that are in middle income. The very first thing we did in that first budget is to reduce the income tax on the category of earnings from 45,000 to roughly $90,000, by 7 per cent. We added the Canada child benefit, which we means tested, so that it made an enormous difference for Canadians in lower and middle income and by the time family income got to $150,000, they were no longer eligible for it.
So that’s a continuing focus of our government.
I think what we can see and report on is that we have been successful, of course, in getting people into jobs. We have the highest labour force participation among working-age Canadians that we’ve ever seen in the history of this country. That’s a very positive outcome over the last four years. We are seeing wage growth that’s a result of that success in getting more people into work.
The OECD reported that the middle class in developed countries is challenged. The nature of our economy is changing in a way that creates some real rewards for those of us who are best prepared in the world of work that comes with increasing technology. They also reported in another report, their better living report, that, in fact, in terms of well-being and happiness, Canada was number one among G7 countries. Not only among G7 countries, we were right at the very top with the Scandinavian countries, Switzerland and Australia. So I think there is a recognition that Canada is doing well in those comparisons. Our observation is that there is always more to do. The challenges people are facing are very real. The pace of work and the challenges that presents of people needing to be up to their skills is important and we continue to work on that.
Senator Pratte: Thank you, minister, and all your staff for being here. Considering my background, you won’t be surprised I will ask a question about help to journalism organizations.
I know that most media organizations are appreciative of the programs that you’ve announced in the budget, but they do have concerns that some tweaking could be helpful. I’m sure you’ve heard about this, but they consider that the salary level, the threshold, should be increased and that the payroll tax credit should go from 25 to 35 per cent. They believe — they may be right or wrong — this could be done at zero cost because the expenses for charitable tax incentives and subscriptions, they believe, were way overestimated.
So I’m just wondering whether you’re aware of these concerns, whether you would be willing to amend this proposal to accommodate these concerns; or if not, what could you do to try to alleviate these fears?
Mr. Morneau: Thank you. Indeed, I’m not surprised that you have a question on this subject. I think you reflect, and the questions that have been reflected, both in the House of Commons and I think in the Senate, as well as more broadly, the importance of this issue. I mean, we see that the challenge for a strong and independent press is significant, that the journalism sector more broadly is facing challenges because of the changing nature of how advertising is going to different kinds of organizations. That meant that we took a look at this issue and considered how we could best ensure that we have a strong journalism sector to help ensure that we have a strong and healthy democracy.
So I think we have a shared sense of the importance of that issue. I also think that you would recognize, and I think people in the sector would recognize that it’s important to have an approach to dealing with this that creates some independence from government.
We see the need to adjudicate the organizations that would be able to be eligible for these tax advantages carefully, so that government has got arm’s-length experts involved in this, and that some of these decisions are informed by their insights. So that’s critically important to us.
I will tell you that in my now coming on four years as finance minister, I’m very wary when people tell me things are free. It is very rarely the case. That is the conclusion we come to after doing the analysis. But I understand there have been some observations about both the level of the salaries that could be considered in this tax advantage and the size of the tax credit. I understand that. There will always be people who have a different point of view on those things.
We tried to come to a balance that made sense. We’re obviously interested in your observations, but I would ask my colleague, Brian, just if you have anything to add just in terms of those limits and the process for consideration.
Brian Ernewein, Assistant Deputy Minister, Legislation, Tax Policy Branch, Department of Finance Canada: The revenue estimation in relation to the tax credit for employees of qualified journalism organizations was based on our best evidence in terms of the information we had as to salary level and number of employed journalists and those related to the journalist profession. The possibility remains that the numbers may not prove to be entirely accurate. But we think that they reflect the best evidence or are reflective of the best evidence we have at that level.
Again, the new measures, if you will, in terms of how many people will subscribe for digital subscriptions and how many will claim the tax credit in respect of that, that is more speculative, it is agreed. It is also true that the estimate in respect of the qualified donee treatment for journalist associations is — again, there may be some that exist, but the question is one of behavioural change and whether more will be created. We don’t see a basis at the moment to think that our numbers are unreliable.
Senator Pratte: Are you willing to entertain amendments on this issue or other issues, because there are many issues in the Senate where people think that Bill C-97 should be amended?
The Chair: Was that a question or a comment?
Senator Pratte: No, no, it was a question. Would you be willing to entertain any amendments?
Mr. Morneau: I’m always careful about answering hypothetical questions, so I will await your deliberations anxiously.
Senator Eaton: Thank you, minister. It’s always nice to have you with us. Yesterday we had a representative from the chartered professional accountants, and he said our corporate tax advantage had been eliminated, our personal income tax rates were uncompetitive. As an example, he said it no longer makes economic sense for some companies to even apply for the scientific research tax credit because it’s too complicated, costs too much, and the results are too uncertain.
As you know, only too well, the Income Tax Act is 3,220 pages long and it takes an average of 131 hours for a company to prepare and file taxes.
It’s been 50 years since the last tax review was undertaken. Have you considered, or why have you not undertaken a comprehensive review of the tax system to make us more competitive? Or have you done so and just not let us know?
Mr. Morneau: Well, thank you for the question. I think I’d like to, if I might, address the things that you said in your statement. I think it’s always important to listen to people who come in, and I’m hearing what that gentleman said, or woman said, through you.
But I would say that our corporate tax rates, I think largely when people are looking at our corporate tax rates, they compare our situation to the United States, our closest trading partner. And we now are in a situation where the average corporate tax rate in Canada for large corporations is 27.8 per cent or so, whereas the average in the United States is 26.8 per cent. So we’re in a very competitive band and also competitive with other OECD countries.
In terms of the next investment, which is what I was reporting on in these remarks, we see ourselves as having an advantage because we’ve given an accelerated capital cost appreciation to a broader class of assets than the U.S. has. So we do think that’s competitive.
On a personal income tax basis, the second issue you brought up, I think it’s important to recognize that in the case of middle-income Canadians we are extremely competitive. So the family with two children that’s earning the median income in Canada is at a very low tax rate, certainly low compared to the OECD —
Senator Eaton: Would that be under $95,000 or $150,000? What are you thinking?
Mr. Morneau: Yes. The median would be in the $55,000 to $60,000. A family would be in the range of $100,000. So we are very competitive in places, and we have a progressive tax system, which is certainly different than some other countries.
Senator Eaton: What about a review of our whole tax system?
Mr. Morneau: Finally —
Senator Eaton: Yes.
Mr. Morneau: — I think there are many companies who very much appreciate our SR&ED program. I think that is important for many businesses, which I hear. We made some changes to that program which I think will be helpful.
Around a tax review, we are constantly reviewing the tax system. There is a large team of tax professionals in the Department of Finance and we review on an annual basis many issues around taxation to make sure we keep up-to-date.
As you rightly pointed out, the last big commission was 50 years ago. There’s been a number of finance ministers before me, I assume, that could have been asked the same question. We will continue to take a look to ensure that our tax code stays up-to-date and try to create efficiencies where possible and make sure that we’re competitive.
Senator Eaton: Thank you.
[Translation]
Senator Forest: Thank you for joining us today, Minister Morneau. People have been showing more and more interest in a review of the tax system, based on the objectives of fairness, equity, effectiveness and competitiveness. We’re in an increasingly global market. I’m speaking to you about this because we have a desperate need for foreign workers, particularly in the agricultural and seasonal sectors. I hear about this need on a regular basis in the Bas-Saint-Laurent region, where it takes a long time to process applications. Given the challenge presented by demographics, some employability rates have reached record highs. These workers are essential for a good harvest. Is there a way to drop the preliminary market studies? I know that this measure isn’t related to Bill C-97. However, this economic sector affects the whole country, from coast to coast to coast. There’s a huge need. Over 120,000 workers are needed, but delays are jeopardizing the upcoming season.
Mr. Morneau: This issue isn’t exactly in our bill. However, it’s very important to our economy. Given the current low unemployment rate, we know that the demand for workers is high. We’re continuing our discussions with the provinces to ensure that the system works. It’s a little more difficult right now because of the recent changes in government, but we’ll continue to hold discussions. In my opinion, we can make changes together with the provinces that want to help in certain sectors, particularly the sector that you just mentioned.
Senator Forest: It’s still important, given that the harvest season is short. I think that some effort is required in this area.
[English]
Senator Neufeld: Thank you, minister, for being here.
The budget has brought forward a cost allowance for electric vehicles, non-emitting vehicles, to businesses. In the first year, the allowance is $55,000 per passenger vehicle and light, medium and heavy-duty vehicles would be 100 per cent of their cost. I’m wondering whether there was a cost analysis done on how much these subsidies will actually relate to a cost of one tonne of greenhouse gas reduction. We know that the Montreal Economic Institute did a study on both Ontario and Quebec. Ontario has since removed their subsidies, but Quebec’s, as they have quoted, is $288 a tonne. That’s relatively expensive in the world we live in today, but maybe that’s where your government is going.
I’d like to know whether those cost analyses were made for the new programs that you have in place.
Second, to my knowledge, light-, medium- and heavy-duty vehicles are quite a long way away? Or maybe you have some insight on where light-, medium- and heavy-duty vehicles will be available for businesses in the future?
Mr. Morneau: Thank you very much. I can, on the one hand, give you a quick answer but maybe give a little more detail. As with any measure that we put into a budget, we’ve done an analysis of the cost of the measure and the expected impact of the measure. I will ask Mr. Ernewein to talk a little bit about that as well.
I want to identify that we see the idea behind creating incentives to use zero-emission vehicles, both for individuals as well as for corporations — the ones that you’re talking about — is about helping ensure that industry has an important push toward it, so we actually have a greater amount of adoption of that approach. That adoption can be considered both in the immediate impact of those vehicles and it can also be considered in terms of the broader impact around making it more likely that there’s a market for these vehicles and the things that go along with the vehicles, the charging stations and the other things that are required. They will only be economically viable if there’s enough demand for the vehicles. We’re trying to make sure we create that dynamic.
Our analysis, by definition, has to consider the current impact and it can’t effectively consider that longer-term impact which we actually think will be quite important because it would be too hypothetical to put numbers behind it.
Suffice it to say, we think the importance of dealing with our carbon emissions is done not only through the pricing of pollution but also through measures that encourage people to adopt different sorts of purchasing in their day-to-day lives. Also, we encourage businesses to invest in technologies that they might not otherwise invest in at a more rapid pace in order to get us to where we’re trying to get in terms of our reduction in carbon emissions over time.
Maybe, Mr. Ernewein, I can ask you to go through more specifically the analysis we did to come to these conclusions.
Mr. Ernewein: Thank you. I can only speak to part of it in terms of the economic analysis being from the tax shop. We have estimates we can provide. They’re in the budget so I won’t dwell on it, but we did provide estimates of the cost of the business income tax incentive. That is the fast write-off or immediate write-off for zero-emission vehicles. It ranges from $14 million in the first fiscal year 2019-20, to $100 million in 2023-24.
There is a ZEV credit for consumers — a rebate for consumers buying zero-emission vehicles. We can get that number for you but I’m not aware of the estimate offhand.
Just to echo the minister’s point in terms of overcoming behavioural change or the market lag or market failure, there is a purpose in trying to induce this, not just to reward people for action they would have taken without the incentive but actually to create the incentive. That’s a factor in it.
The last point is just in terms of getting people to change. The measure is time-limited with a view again toward thinking the market will adopt this on a more wholesale basis and, at that point, the incentive isn’t required.
Senator Neufeld: I can assume there was no cost analysis on what it would cost per tonne of reduction with these new subsidies? Is that what I’m to take away from this?
Mr. Ernewein: I think it’s derivable. I don’t have the number in front of me, no.
The Chair: On this, Mr. Ernewein, you did mention that you could provide more information. Would you please do that through the clerk?
Mr. Ernewein: I will provide what I have, yes.
The Chair: Thank you.
Senator Duncan: Thank you for being with our committee today. The Mineral Exploration Tax Credit flow-through shares mechanism has been extended for another five years. This is part of many, many years of extension of this particular credit which was originally thought to be temporary. I and other former territorial finance ministers of all stripes are on record as lobbying the Finance Minister and supporting this particular tax credit.
We as Canadians generally do not often hear of the success of programs like this unless we’re paying attention to territorial politics or the industry itself. You’ve spoken earlier in your answers about cost-benefit analysis and reporting.
Because we’ve had so many years of that tax credit, I’d like to ask that that information be forwarded through the clerk and that it be shared with Canadians, and that you consider reporting on the benefits of that. I’d also ask that you give consideration to permanently enshrining credits such as this in future documents so that it’s an actual tax credit as part of the complex tax system. As Senator Eaton noted, we have received representation on how complex the tax system is for Canadians and the industry, for business and the average Canadian. We heard powerful and convincing arguments about a complete review of the tax system.
If you had some thoughts, if you ever had some time, is that complete review on your “I’d like to do this,” list for you and your officials? So two things: Can the extension permanently enshrine the Northern tax credit; and is the notion of a review of Canada’s complex tax system on the radar?
Mr. Morneau: Thank you. First of all, I’m pleased to hear that you’re an advocate for what we put in the budget. Normally what I’d like to do when I get a comment like that, I’d like if it was a last question. I would like to end on that. Perhaps, Mr. Chair, if you could organize these things in a way that created the right cadence in this discussion, it would be very helpful.
From the standpoint of that initiative in this year’s budget, we saw that that was something that was creating economic opportunity and the annual review which I’d gone through now three times, we concluded we could move forward to a five year. We’re not yet at a place where we have considered anything further than that, so I don’t have anything to report in terms of longer term. So we’ll certainly take that back.
I think your second comment was you’d like to make sure that Canadians understood the advantage of this, and I will take back that thought and see if there is more information we can provide, helping people see what happens through a credit like this, which I think people in the North recognize does have some advantage in terms of development.
Finally, with respect to the idea of an expansive tax review, that’s not on our government’s agenda right now. We have been very focused on how we can ensure that we’ve got a fair tax system. I will say that from the perspective of some of the work we’ve done, we’ve been looking very carefully at not only how we can ensure that middle-class Canadians have a very competitive situation dealing with the challenges that they have, faced with the cost of living and some challenges over the last generation in terms of increase in income. Also, we’ve been looking at the international taxation regime so that we can ensure that our system doesn’t allow people to be evading or avoiding taxes.
In that regard, stepping away from your question a little bit, from our standpoint we’ve been very focused on looking at the issue around money laundering and issues happening increasingly in our world. Internationally, it’s a focus on anti-money launders and anti-terrorist financing, nationally you’ve seen reports of concerns about money-laundering. We’ve been very focused on this for the last four years. I will be meeting with Finance Minister Attorney General in British Columbia next week as well as inviting all the provincial ministers to be involved in a call to talk about how we can continue to move forward on ensuring that money laundering isn’t happening in our country and we see that as critically important.
As anything, it’s a question of priorities. We see that as an important priority and that’s going to consume our efforts now and on an ongoing basis.
Senator Andreychuk: I’ll make two comments. The first is the fact of the tax reform. We’ve said it in this committee and we’ve heard from witnesses that 80 per cent of Canadians are looking for a tax reform to something that they can understand. Who are you listening to that says that we don’t need it? So that would be my first question. I’m baffled because we keep getting from professionals, from young entrepreneurs saying: I can’t take those tax credits, I’m a young entrepreneur, I’m a woman starting out in business, you want me to fill out these forms, I can’t do all that and grow my business from the back of the kitchen. So we keep hearing we need something simpler, et cetera, and you’re saying you don’t need it, it’s not your priority. Eighty per cent of Canadians have said they would like it in one form or another. Who are you listening to? The 20 per cent that say we don’t need it?
Mr. Morneau: It’s always important to be listening to people who come forward, either in your committee or in different venues.
We all would like to have a tax code that is simpler. That is a goal that we share. We all would like to make sure that our tax code stays fair and I think we share that system or objective as well. We are on an annual basis trying to make sure that we simplify and deal with issues that are too complex. We also have demands from sectors that Senator Eaton just spoke about the SR&ED program. Well, we simplified the SR&ED program this year for some people, but some people would argue that we made it more complex because that is another way people make sure they get access to that credit.
Similarly Senator Duncan talked about the fact that we made a change with the mineral exploration tax credit. I obviously get a lot of people talking to me about taxes and I’m sure you do at this committee as well. We will make sure we are responsive. A complete overhaul of the tax code is not currently something on our agenda. We are focused on other things that we think add more important value for Canadians.
The reason I gave the example of money laundering is because as we think about international taxes, it’s critically important. Getting at things that can make a really big difference for our system, that’s always a question of prioritization. We are prioritizing where we think we can have the biggest impact positively on our economy and on Canadians.
Senator Andreychuk: I’m concerned about the freedom of press reporting. It’s something that we have to worry about around the world. We have to worry about intrusions into our systems from less-than-credible sources. You used terms on this tax credit that there will be some independence from government, and I think you used the word “some.” I’m going to look at that transcript again. But you needed to adjudicate where the money is going to go.
That gives me concern because you may start out with that laudable goal, but you are setting the parameters of a committee and then that committee is going to transfer some terms of reference to another committee. Then eventually there will be applicants. That, to me starts to show a trail that we have been very consciously saying that our government will not — will, in fact, do the opposite, will support the freedom and the distance of the press to do their job well. I’m worried about comments like “some independence.”
Mr. Morneau: I’d be happy to look at the transcript as well. To be absolutely clear —
Senator Andreychuk: I want to be sure I get it.
Mr. Morneau: — we are ensuring independence from government by setting up an independent group to examine who would be able to get these credits and that independent group would be comprised of people separate from government to come to that determination. So if I did, in fact, use a different word earlier, for clarity that was my intention.
Senator Andreychuk: But you will be selecting the committee through a process in the government?
The Chair: Thank you. Thank you, senator. Thank you, minister.
Senator Day: Minister, I have two areas I’d like to question you on basically just to gather some information. One is the importation of intoxicating liquors act and the other deals with pensions. So I’ll start with the pension side of things.
Mr. Morneau: I normally need the liquor before I talk about pensions.
Senator Day: I was worried —
Mr. Morneau: It’s your choice on the order.
Senator Day: I’m concerned that there is a counterintuitive rule with respect to RRSP mandatory withdrawal after age 71. When we have individuals working longer and living longer, there’s a lot of pension programs that are underfunded that could easily become funded if we increase the age when they were able to be accessed. We don’t hear much these days about Freedom 55 and rightfully so. There are a lot of very productive people who could continue to provide for the Canadian economy if we looked at some of these items. Could you talk specifically about the RRSP situation and your plans in relation to that?
Mr. Morneau: We’re all pleased, of course, that we have longer life expectancy, and that’s a good thing. We also recognize that some people certainly do want to work longer. That’s something that some people think is going to be helpful for them to live a very productive life.
So as we see that aging demographic we are seeing the age of retirement move up, it has moved up, and partially that’s because of the baby boomers getting older. It’s not yet 65 years of age, the average in this country, it’s below 65. So that is just the fact of where we’re at.
We did create in this budget, and the budget bill you’re looking at, the ability for people to be able to earn more money in retirement and not to have a clawback from the old age security system. So we recognize there are more people doing that. It creates an advantage for them.
Our RRSP system is designed to allow people to accumulate funds to prepare for their retirement in a tax-advantaged way and then to disperse once they hit a certain age.
So I recognize there are people who are asking about the age when people need to move to the registered retirement income fund. It’s something we have looked at, and it’s something we’ll continue to look at.
But we came to the conclusion that the place where we could have the biggest impact this year was by enabling people to earn more money without having that clawback on the old age security, which we think creates an incentive for people to do what they want to do, if that’s in their goals, and that will help them financially.
I really do want to get to the question on liquor, if possible.
The Chair: Do you have any comments on that second question?
Mr. Morneau: I haven’t had the question yet, so I can’t —
The Chair: Thank you.
Senator M. Deacon: With some remorse, my question is not on liquor.
I do appreciate the way you unfolded your presentation this afternoon almost with the life cycle of young people, and housing incentives, and retirement, sort of through that whole life cycle. I’m wondering at this moment if I could shift away from Bill C-97 for a moment and ask you about a 2019 budget document that ties to our youth concerning Canada’s food policy.
You might be well aware that motion 358 was served in the Senate Order Paper and it urges the government to initiate consultations with the provinces, and territories, Indigenous people, and other groups to develop this adequately funded national cost shared universal nutrition program with appropriate safeguards and educational components.
Of course this motion had my complete support, and when we had to receive the budget we were thrilled to see that the government intends to work on this with provinces and territories toward the creation of a national school food program.
So I wanted to take this opportunity in June to see if the discussions had begun with provinces and territories to get this important national program under way; if so, and on the side, what role you see the federal government playing in such a program?
Mr. Morneau: Thank you. You know, we obviously thought it was important to put in our budget. We saw the importance of a national food policy broadly and there were a number of measures, not just the one that you’re talking about. I’m not sure the status of those discussions. I might have someone with me who might have more information. Allow me to check.
Senator M. Deacon: You have a team.
Mr. Morneau: No, there are no volunteers to report back to you. What I can commit to you, Senator Deacon, is that we will get back to you directly to give you a sense of where that discussion is at.
Senator M. Deacon: Thank you.
Mr. Morneau: I have been appointed by the Prime Minister also for the minister of intergovernmental affairs, so I suspect I would have known had the discussions started, but I will make sure we get back to you.
Senator M. Deacon: Thank you.
Senator Klyne: Thank you very much, minister, for being here this afternoon. It’s always special when you’re here.
You mentioned in your remarks that the budget proposes to invest money aimed at increasing energy efficiency in residential, commercial and multi-unit buildings, and that’s to be delivered by the Federation of Canadian Municipalities, as I understand it, through the green municipal fund. So two questions. The first one you may want to send the information in if it’s not at your grasp.
Are the amounts and priorities prescribed by region or municipalities and/or type of real estate with respect to that?
The second question is more focusing through the lens of residential. Is this aimed at or for new builds or upgrades to existing efficiencies?
Mr. Morneau: I think you invited me to have the opportunity to send information in. I’ll see if any of my colleagues have more details on how, exactly, that will be administered by the municipalities.
What we were trying to achieve is to make sure that we created incentives for people to do home and business retrofits so that they could be more energy efficient. That would have an advantage, both for the costs of them, whether the homeowner or the business owner in terms of heating and air-conditioning, but also have a broader positive impact on our carbon emissions. We recognize that actually administering that was going to be much easier through the municipalities because they had an already-existing approach to do that. But for details on how they do that, again —
Mr. Ernewein normally knows almost everything off the top of his head, but in this situation he apparently needs to do a little more work, so I think we can commit to making sure you can have the information.
Senator Klyne: My focus on the residential side is I would think there will be quite a take-up given the carbon pricing and people looking to lessen their footprint there and maybe get a net benefit. Thank you.
Senator Boehm: Minister, nice to see you here. I have a question, it’s a general one. It’s similar to what I asked in the Senate chamber the other day when you came to speak to us, and that is on the volatility of the global economy and the pressures that are there that affect everything from trying to forecast deficits, growth, and indeed the measures you announced just the other day, the safeguard measures for steel diversion.
I’m wondering whether you have any comments as to just what the trend line is, or are we really looking for a rocky time as we go ahead because of trade pattern changes, indeed the pressures that those have created?
Mr. Morneau: Well, this is obviously a really important question as we develop our longer term forecasting. We always need to think about what those long-term trends are. I think I can address it in the short-term and the longer term.
In the short-term, I’ve been astonished at the ability of the professional team at the Department of Finance to come up with forecasts that are quite close to the actual. So in the course of the last few years, given that it’s a $2.2 trillion or so economy, very close estimates in terms of where we’re going to end up.
In the short-term we have a pretty good process, and that process is informed by the private sector economists who give us their forecasts in terms of growth and other factors that lead us to determine where we think we’ll end up.
In the longer term, of course, the kind of volatility that you point out in terms of trade and other issues can have a significant impact.
I think we need to acknowledge that our world is more volatile in terms of trade than we might have thought five years ago.
We’ve obviously dealt with that successfully in the case of, say, the dealing with the steel and aluminum tariffs with the United States. When I say that we’ve dealt with it successfully, it would have been better not to have had that challenge.
We went through a period of volatility to get to an answer that is positive for the Canadian economy. It would be better if we didn’t have that situation. There was, by definition, a drag on our economy in that we created inefficiencies by having tariffs on people, by having to put in remission orders. If you think about that writ large in other countries, they are also exposed to these tariff situations, and it does have a broader drag.
It’s an issue of concern. The reason you’re seeing some slight downgrades in terms of global growth expectations from the International Monetary Fund or the OECD is because our concern around trade is real. It does come back to some of the things I was talking about in my opening remarks, and some of the things we’ve talked about here, and that is with the changing pace of our economies, technologies and the advantages of some of those exciting new technologies going to the most prepared, it leaves other people feeling like they may be less prepared, and, therefore, they’re left out of those advantages, creating political incentives for people to question the overall benefits of our international trading system.
That’s why we start by dealing with the core issue, which is do we have an economy that works for everyone? Can we give people the sense of optimism that it’s working for them, which will give people the ability to say that trade is in our best interests and these technologies are going to provide an advantage?
It’s a collective challenge among developed countries. Canada can be a country that can show how we can deal with this issue face-on. I think we are doing that, but there is certainly more to do.
[Translation]
The Chair: I have a question about the local media assistance program. We know that the budget amounts to about $595 million. There are a number of regional newspapers in Atlantic Canada, including Le Gaboteur, in Newfoundland and Labrador; Le Courrier de la Nouvelle-Écosse; La Voix Acadienne, in Prince Edward Island; L’Acadie Nouvelle and Le Moniteur Acadien, in New Brunswick; and Le Saint-Jeannois, in Saint John, New Brunswick.
In a letter to Minister Rodriguez and Minister Joly, the Association de la presse francophone stated that it’s important that:
... Part VII of the Official Languages Act (OLA) require federal institutions to apply criteria that take into account the realities and needs of OLMCs when developing programs and services.
Can you confirm whether your new program complies with the Official Languages Act?
Mr. Morneau: Of course.
The Chair: Can you send the information to our clerk?
Mr. Morneau: We can help you by sending you more information if necessary.
The Chair: I know that you were supposed to leave two minutes ago. Do you want to make any additional comments before leaving?
Mr. Morneau: No, thank you.
[English]
As I said, it is always a pleasure to be here. I suppose theoretically I could get to Question Period for the last five minutes, but I think they don’t allow me to come in in the middle.
The Chair: We could take the five minutes here.
Mr. Morneau: I want to thank you for having me. We always want to make sure we’re providing the information required. We have a few things to come back to you on, which we will endeavour to do. As always, we look forward, hopefully, to your support on what we think is an important bill to continue our approach to making sure Canadians are confident about their future.
The Chair: Minister, this committee will always continue to remind Canadians and bring to their attention that our objective, number one, is transparency, accountability, predictability and reliability. Thank you for sharing your opinions with us and answering our questions.
(The committee adjourned.)