Evidence of meeting #138 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was products.
A video is available from Parliament.
Noon
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Savard‑Tremblay.
Now we'll go to MP Boulerice, please, for two and a half to three minutes.
Noon
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you, Mr. Chair.
Mr. Giroux, I have two questions, if it's possible for you to answer both in the time allotted to me.
A few days ago, you published a report on the housing backlog in Canada, and you say that we should have 1.3 million additional housing units, whether houses or apartments, to close the gap. The Canada Mortgage and Housing Corporation, on the other hand, is talking about 3.5 million units for the same period. How do you explain this difference between your two analyses?
Noon
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The difference can be explained quite simply. Conceptually, we looked at the demand that comes from demographics and repressed demand, and came up with the estimate you mentioned. Our aim is not to re-establish a particular price level. CMHC, for its part, made its estimate by assessing the number of units that would be needed to return to the level of affordability that existed in 2003–2004. It therefore probably includes in its estimates a notion of price decline to return to the level of affordability that existed some twenty years ago.
Noon
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Perfect, thank you very much. That's very enlightening.
Last October, you published a report on the estimated costs of a single-payer universal drug plan. With such a plan, people will buy more drugs, since they're currently going without because prices are too high. We expect an increase in drug purchases of just over 13%.
Despite this, you say that the savings we could collectively achieve on drug prices would be on the order of $1.4 billion in 2024-25 and could reach $2.2 billion in 2027-28. How do you reconcile these two phenomena?
Noon
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Since there wouldn't be much cost to individuals, there would be an increase in demand. In other words, people who go without drugs because of their cost would become more willing to take the drugs they need.
This would be offset by the economies of scale associated with group purchasing. We make this estimate on the assumption that the federal government, or a government that would be a payer, could negotiate savings or rebates based on the savings already achieved by certain group purchases. In addition, this government would benefit from rebates that are more or less secret or confidential, but which we have been able to estimate at around $2 billion, according to our sources. That's where the savings you cited come from, which can therefore be attributed to group purchasing and the significant negotiating power of a single payer.
Noon
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Boulerice.
Now we will go to MP Lawrence, for five minutes.
Noon
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Thank you. Perhaps unsurprisingly, I'm going to spend my time asking questions of Mr. Giroux.
Mr. Giroux, my eye was caught by something I thought was unusual in the budget. There were a couple of different tax provisions, one of which raised the excise tax on cigarettes and vapes, and that went into effect immediately. However, the capital gains inclusion increase was delayed, I believe, until June 25, if I've got that correct.
Do you have any thoughts as to why that is, and what might happen as a result of delaying the implementation?
Noon
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I was as surprised as you were by the differential treatment and timing of these tax changes.
The cigarette tax increase came into effect immediately, because we didn't want people to rush to the convenience store to buy cheaper cigarettes. However, on capital gains, we don't mind giving two months' heads-up to those who could rearrange their taxable business or affairs to escape the higher capital gains rates. I don't know why; that's surprising, to say the least.
The impact is that, on the cigarette tax, it's fairly straightforward; it was difficult to escape the tax increase. However, for capital gains, it's very likely to lead to a phenomenon where people will sell some assets before June 25, so that their capital gains will all be taxed at 50% rather than at the higher two-thirds rate. We are likely to see an increase in capital gains taxation, or the taxes collected on capital gains, in the current fiscal year, and probably a lower amount, or a displacement of capital gains tax revenues, from future years to this year.
12:05 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Yes, and I think they predicted just that in the budget.
Did you happen to catch how much revenue would result from this fire sale, if I may use that term, before June 25?
12:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Right now, we just have the government's estimates for the entire fiscal year, and I think they put capital gains tax revenues from this measure at $6.9 billion, if I'm not mistaken.
12:05 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
That was my read as well.
Now this is subject to change, potentially. It's based on behaviour. So if, for example, the NDP were way up in the polls and Jagmeet Singh took to the mic and said, we're going to cancel this when we come into government, that could reverse that $7-billion windfall for the government relatively quickly, could it not?
12:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes. If there was to be a credible prospect of this change being reversed or other changes to capital gains tax, it's quite possible that those with substantial amounts at stake could alter their behaviour in the hopes of avoiding this increase or taking advantage by doing what's likely to be most beneficial for them.
12:05 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
If in fact that $7 billion was backed out of the financial projection, I think that it would put the government off two of their three fiscal anchors. Is that correct? Maybe you can comment on that.
12:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think that if we were to remove that $6.9 million of revenues from the revenue side, that would obviously push the deficit higher by an equivalent amount.
12:05 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Thank you very much.
That's it. Thank you, Mr. Chair.
12:05 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Lawrence.
We go to MP Weiler now for the next five minutes, please.
12:05 p.m.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you, Chair.
I do want to thank our witnesses for being here today and for the great work that they do on behalf of Canadians as well.
I want to start my round of questioning with you, Mr. Giroux, in particular on the work that you've done on studying carbon pricing in Canada. I was hoping you could explain to this committee whether, when looking at the economic and fiscal costs of carbon pricing, you compared that to other forms of reducing emissions and, if so, if those other forms might cost Canadians more or less.
12:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
When we looked at carbon pricing, we looked at what is being proposed and implemented by the government, which is a carbon tax. As we all know, it's a pricing on pollution as well as an output-based pricing system, so that's what we consider.
My office does not have the mandate to self-initiate looking at alternative proposals that could be better or worse than what is being proposed, unless I'm requested to do so by a House or Senate committee, which has not been the case for this, so we have not looked at alternative ways of reducing Canada's greenhouse gas emissions.
However, there is a strong consensus among economists that a price on greenhouse gas emissions is a very efficient way—very often the most efficient way—of reducing greenhouse gas emissions. If we were to try to cost alternative ways of reducing greenhouse gas emissions, we would likely find that the cost is at least equivalent overall for the economy.
12:05 p.m.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you.
When you did your economic and fiscal assessment of the carbon price, did you model the positive potential impacts of that carbon price or simply the potential costs?
12:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Given the mandate of my office, we are often asked to cost the cost of proposals rather than their benefits. It's very difficult to estimate the benefit of a carbon tax, and it's typically not something we do. We don't generally do cost-benefit analysis. That's the reason why we have not done it in the case of the carbon tax. In most cases, we don't do a cost-benefit analysis. It's something that's been asked often. For example, when we were costing a guaranteed basic income, there would be savings in terms of social services, but that was not something that we costed or estimated because we generally don't do cost-benefit analysis.
12:10 p.m.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you.
I think it's pretty clear that it doesn't give the whole picture, then.
Given that I have limited time, I would like to turn to the Competition Bureau for some questions.
We've heard a significant amount of testimony that mirrors your recommendation on greenwashing, such as that we look at all environmental claims rather than simply just products of companies. We've also received submissions suggesting particular legislative changes to the act to cover claims overall, and, rather than requiring companies to prove those claims, as is necessary with individual products and can be done, to require those companies to provide evidence to back up that claim.
I was hoping you might be able to comment on this as a measure going forward and as a legislative change, and whether and when the Competition Bureau would be ready to act on those types of changes if they are brought forward.
12:10 p.m.
Commissioner of Competition, Competition Bureau Canada
Thank you for that question.
As I said earlier, we are recommending further study on expanding it to include business general claims, environmental claims or brand general environmental claims.
In terms of the specific recommendations that this committee has received with respect to greenwashing, it's probably best if we don't take a particular position.
What I can say is that if there is a move to have very prescriptive rules about what a company can and can't say when it comes to environmental claims or what a company must disclose in relation to environmental claims, I would suggest that the Competition Act probably isn't the right vehicle for that kind of regulation or legislation. That might be an Environment Canada thing or a provincial thing. Ours is a law of general application that has general provisions, as opposed to specifically saying what a company can and can't say, or what they have to provide at the time of making a statement.
I think that would probably be the best answer in terms of the bureau's view on these things, because we like to try to maintain the line that the Competition Act is a law of general application without very specific, targeted provisions relating to those sorts of things.
12:10 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Weiler.
That finishes our second round.
Now we're in our third round, and we're starting with MP Morantz for five minutes.
April 18th, 2024 / 12:10 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Thank you, Mr. Chair.
Mr. Giroux, I have a few questions for you.
You talked earlier about the effect of the carbon tax on the inflation rate. You said it might go down if the carbon tax were eliminated or it just might not go up as quickly. I think I've paraphrased you correctly on that.
The bank governor was here on October 30, I think. He confirmed that the carbon tax, at the time, added 0.06% to inflation, and that the increase from $65 a tonne to $80 a tonne would add an additional 0.15%. I think that if he were here today, after April 1, he would say that the carbon tax adds 0.75% to inflation. If it were eliminated today and if inflation is 2.9% today, arguably it would go down by 0.75 percentage points and it would be roughly 2.1%.
Just a couple of weeks ago, during the economic policy report, the bank governor said that they were holding fast on interest rates—they're holding the policy rate at 5%.
I am curious about your opinion. If the carbon tax didn't exist and the inflation rate had been 2.1% on that day, wouldn't it have been harder for the governor not to reduce the policy rate two weeks ago, saving thousands of dollars for every Canadian who has loans and mortgages?
12:15 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I wouldn't want to contradict the Governor of the Bank of Canada on something as fundamental to his mandate as inflation.
On the other hand, I don't want to suggest what the governor could or should have done had there not been a carbon tax. It's clear that economic theory would have it that if the carbon tax had been eliminated or didn't exist, inflation would have been lower. Whether it would be 2.1%, 2.5%, 2.8% or 2.9% is debatable, but certainly lower inflation would probably mean that interest rates would come down sooner and maybe would have come down in April.
It's very hard to predict exactly what would have happened.