Hon. Éric Forest: Colleagues, I would first like to thank Senator Marshall for her speech and her comments, which are always relevant. I would also like to congratulate our colleague, Senator Gignac, on his maiden speech in this chamber. His experience will allow him to make a very valuable contribution to the Senate and to the Finance Committee.

I would like to speak briefly today on Bill C-8 to express my discomfort with the tax on underused housing. I would first like to point out that the bill to implement the economic update and budget tabled last fall contains several measures that I deem to be essential. I am thinking in particular of the northern resident tax deduction and the fuel charge refunds for farmers, although this does not apply in Quebec, which is exempt from this charge because of its own carbon pricing system.

Of course, I also support increasing the Canada Emergency Business Account, which saved many businesses during the pandemic by providing over $49 billion in interest-free loans with partial write-offs.

Finally, as you know, in eastern Quebec, as in many regions of Canada, there are several seasonal industries. I think it would be important for the government to renew the flexibility of Employment Insurance so as not to penalize seasonal workers. These transitional measures are essential, but I must say that this patchwork tinkering with the program frustrates me. I look forward to the end of the government consultations on EI reform so we can finally have a modern EI system that affords proper coverage to seasonal workers and self-employed workers, as well as other workers in precarious situations.

Allow me to digress for just a moment. I noted with interest that Senator Bellemare recently introduced Bill S-244 to strengthen social dialogue by establishing an employment insurance council where EI contributors could sit down as equals and discuss the level of coverage they wish to have. This proposition is a nice contribution to the debate and I urge you to consider it.

Coming back to Bill C-8, my problem is with Part 2 of the bill, which seeks to enact the underused housing tax act. Essentially, the government would implement an annual national tax of 1% on the value of vacant or underused residential property owned by non-resident non-Canadians. I share the objective sought by the government to reduce housing prices in this manner to make housing more accessible to Canadian residents. My problem is the way the bill is going about it. First, there is the regulation of housing law. That is a provincial jurisdiction that falls under private law, specifically, property and civil law, and, more generally, social policies and local affairs.

Furthermore, to penalize a practice that is deemed to be undesirable in the housing sector, the government is imposing a punitive tax on the value of the property. It is an area of taxation that, by mutual agreement, had always been reserved for local authorities or local governments. I would like to quote constitutional expert Patrick Taillon on this aspect of the bill:

I see two possible scenarios. The first is to frame the measure as a way of regulating housing law, which would likely make the measure unconstitutional because it goes beyond the jurisdiction of Parliament.

The essential character of the bill, its pith and substance, is provincial.

That is the most logical way of framing the measure. Ultimately, only the courts can confirm that interpretation of the situation, after the fact, and if they do, it will automatically lead to the nullity of the measure.

Otherwise, the second scenario, or possible interpretation, is to conceal the true character of the measure behind the tax penalty associated with this federal regulation of housing law. To do so would be to claim that this is merely a tax, setting a dangerous precedent. Introduced without the benefit of co-operative federalism, the measure would likely upset the delicate fiscal balance of the Canadian federation.

[English]

In other words, if the bill is interpreted as a new tax, the bill will be unfair. Without negotiations and the co-operation with the provinces, a federal property tax compromises our fiscal balance. Since Confederation, the property tax has been a local and provincial tool. It’s not a good idea to borrow this tool from local authorities.

[Translation]

As you know, history has taught us that once the federal government wades into an area of taxation, it never leaves. Senators will recall that, during World War I, corporate income tax was supposed to be a temporary measure. The same thing happened during World War II, when personal income tax was to be short-lived. You know as well as I do that these areas of taxation are still the purview of the federal government, even though its tax base is far greater than that of the provinces, which are grappling with exponentially huge health care costs.

I appreciate that the underused housing tax does not represent a significant source of revenue for the government. I object more to the principle of it. I have a hard time imagining how the federal government can meet its objective without interfering in an area of taxation that is already too narrow to meet the needs of municipalities, which have been handed an increasingly long list of responsibilities over the years.

As you know, it is well documented that municipalities rely on property taxes. Cities in Quebec draw nearly 70% of their revenue from property taxes, according to a 2018 estimate by UMQ. This reliance is exacerbated by the dematerialization of the economy. Online shopping, remote work and Airbnb-type short-term rentals all contribute to a loss of commercial spaces and a shrinking municipal tax base. Municipalities’ reliance on property taxes has adverse effects in terms of real estate development, which is often done at the expense of the environment, wetlands and agricultural areas.

I fear that by acting like a pickpocket, the federal government is depriving municipalities of revenue sources and accelerating the fiscal imbalance phenomenon I described earlier. In fact, the underused housing tax act does the exact opposite of what the municipalities were asking for in the municipal white paper presented 10 years ago by the Union des municipalités du Québec. At the time — and it is still the case — they called for tax and financial reforms to allow them to diversify municipal revenue sources. This request was based on the idea that the municipality is the most appropriate political body to meet the needs of citizens at the local level.

Furthermore, in this capacity, municipalities should have the jurisdiction and authority necessary to respond to the present and future needs of their citizens, the discretion to make decisions in the local public interest, and the means to put in place to respond to those needs. They should also have the autonomy to establish and finance these measures. Another thing they need is for higher levels of government to refrain from dipping into their local sources of revenue.

Ultimately, the UMQ hoped to obtain new sources of independent funding to allow municipalities to move away from property taxes. No one ever imagined that the federal government would dip into the tax base normally reserved for municipalities. The Union des municipalités du Québec wrote to Minister Freeland on April 19 to express its opposition to the federal government’s proposal to impose a tax on the value of underused residential buildings.

I would like to quote the letter:

On the one hand, the proposed tax would set an unfortunate precedent, given that property taxes represent the only significant source of independent revenue available to municipalities.

On the other hand, municipalities already have a competent and efficient bureaucracy to administer property taxes. Duplicating this bureaucracy would represent additional costs for Quebec and Canadian taxpayers, at a time when municipalities are already facing recruitment difficulties in several areas. This measure would exacerbate this concrete issue that is affecting many municipalities.

According to the UMQ:

It would be more appropriate for the federal government to use tools other than property taxes to positively affect the housing market. Such tools could include increased investment in social and affordable housing, as was the case in the 2022-23 budget.

To conclude, I believe that the federal government is playing a very dangerous game by intruding into an area traditionally reserved for local governments. Even if the courts were to rule that the bill is valid, there is a risk that the federal government would compete with the very modest fiscal capacity of municipalities. We cannot forget that. At the very least, the federal government must have an ongoing conversation with the provinces on this issue and consider other more respectful and effective ways to address the country’s significant housing shortage.

[English]

At the very least, I invite my colleagues who will study this bill in committee to seriously consider this issue which calls into question the foundations of fiscal federalism in the country.

Thank you, meegwetch.