Finance Committee on May 21st, 2013

[The Chair, Conservative, James Rajotte]

Ms. Glover, you have about 30 seconds.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thanks. I also want to add that credit unions, since 40-plus years ago, have changed the way they do business. They now sell insurance, which they didn't do before. They now issue shares to non-members, so they are able to raise capital. I just wanted that to be on the record.

I'm sorry, Mr. Phillips, that we don't agree. But in fact, I believe this is in line with our intention to make sure that there's tax fairness across the board, particularly when we're talking about our small businesses. I certainly know that if we raised taxes on corporations, as suggested by the opposition, it would have a much more severe implication for our credit unions, including our caisse populaires , etc.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

I'm sorry, but we are out of time, unfortunately. We do have a second panel appearing immediately hereafter.

I want to thank all of our witnesses for being here. I want to thank Mr. Manness for being with us from Winnipeg.

I think, Ms. Proud, you mentioned that you wanted to submit something to the clerk. Please feel free to do so. We will ensure that all members get it.

I'll suspend for a minute and we'll bring the second panel forward.

[The Chair, Conservative, James Rajotte]

I will call this meeting back to order.

This is a continuation of our panel today discussing Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

I want to welcome our second panel of witnesses here for the discussion of this piece of legislation. Again, we have six presenters to hear from this morning.

First, as an individual, we have Professor Mike Moffatt, from the Richard Ivey School of Business.

We also have, from the Canadian Cancer Society, Mr. Rob Cunningham; from the Canadian Federation of Agriculture, Mr. Ron Bonnett; from the Canadian Meat Council, Mr. James Laws; and from the Canadian Psychological Association, the CEO, Karen Cohen. Welcome.

And from the Multiple Sclerosis Society of Canada, we have the president and CEO, Monsieur Yves Savoie. Bienvenu à ce comité.

You will each have five minutes for an opening statement, and then we'll have questions from members.

We'll begin with Mr. Moffatt.

[Prof. Mike Moffatt, Professor, Richard Ivey School of Business, As an Individual]

I would like to thank the committee for inviting me to speak today.

My name is Mike Moffatt. I'm a professor in the business, economics and public policy group at the Richard Ivey School of Business. I have researched and taught international trade for a number of years at Ivey. As well, I have spent the last eight years as a private sector trade and regulatory consultant to the chemical industry.

I'm here to discuss two tariff changes in Budget 2013, the first of which, the elimination of tariffs on baby clothing and some sporting equipment, is greatly welcomed.

The second, the so-called modernization of Canada's general preferential tariff program, or GPT program, has serious unintended consequences and should be reconsidered. Fortunately, there is time to do so as the GPT changes are not a part of Bill C-60.

There are a lot of things to like about the government's two proposed tariff changes as they address three existing drawbacks to the customs tariff. The first is that the customs tariff is out of date, with the obvious examples of tariffs designed to protect industries in Canada that no longer exist, such as hockey equipment manufacturing. The general preferential tariff is out of date. I'm in full agreement with the government that changes are needed here, and exporting powerhouses such as China and Korea no longer need preferential tariff treatment.

The second difficulty is that for many products, high tariffs are contributing to the price gap between American and Canadian product retail prices, as described in the report of the Standing Senate Committee on National Finance. The government has taken a step in the right direction here through this elimination of tariffs on sporting goods and baby clothes.

The third difficulty is the sheer complexity of the customs tariff. The so-called iPod tax is a prime example, with importers left not knowing the steps they need to take to be eligible for the 9948 exemption.

Another example of the complexity of this system is the fact that hockey helmets were originally erroneously left out of the tariff reductions, and this omission took weeks to detect. I have to admit, I completely missed it myself.

Given this complexity, it is no wonder that past reports of the Auditor General have identified an alarming rate of errors and discrepancies in tariff classifications of importers. Much more needs to be done to simplify the system, but the government's move here to increase the number of zero-rated goods is definitely a step in the right direction.

Now that I have told you what I think is right with the changes, I'm going to focus on their drawbacks. The most obvious drawback is that it's going to raise the tariff on thousands of goods. These tariffs really aren't going to be paid for by Chinese companies; rather, they're paid for by Canadian importers and retailers and, at the end of the day, by Canadian consumers.

The net effect will be to increase this price gap with the United States, which is already one of the big problems with the customs tariff. This will inevitably lead to an increase in cross-border shopping. The border town of Windsor, Ontario, for example—in my neighbourhood—has an unemployment rate of 9.6%, so the last thing it needs is a decline in the retail sector.

There is a far simpler way to modernize the tariff system while also addressing the price gap and complexity issues. Once Canada and the EU sign a free trade agreement, which we're told should be coming in a matter of weeks, there will be only 16 jurisdictions, representing roughly 5% of Canadian imports into Canada, that will fall under the highest most favoured nation, MFN, tariff treatment.

There will only be 16 nations that have worse tariff treatments than China and Korea. If we want to make a level playing field, all we need to do is reduce the tariff treatment on those 16 nations down to the GPT level by basically harmonizing the most favoured nation and the general protective tariff treatments. This would greatly simplify the tax code as we'd be eliminating a tariff treatment entirely, and this would reduce the tax bill on Canadian importers, retailers, and Canadian consumers, leading to a reduction in the retail price gap.

My professional recommendation is that, before implementing tariff changes, the advice contained in the Senate report of a comprehensive review of Canadian tariffs be followed. This review should include a full costing of harmonizing the GPT and MFN tariff treatments.

Thank you for having me, and I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Moffatt, for your presentation.

Mr. Cunningham, please.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Thank you, Chair and members of the committee.

My name is Rob Cunningham and I am a senior policy analyst with the Canadian Cancer Society.

Thank you for the opportunity to testify before this committee today.

My testimony will focus on clauses 53 to 61 of Bill C-60, which contain a tobacco tax increase for the category described as “manufactured tobacco”, and roll-your-own tobacco in particular. We support this increase, and we recommend that all members of Parliament endorse these provisions.

Let me emphasize the crucial role that higher tobacco taxes play in reducing tobacco use, especially among youth, who have less disposable income. There are more than 100 studies that confirm the obvious: mainly, that as tobacco prices go up, tobacco consumption goes down.

Bill C-60 takes action on a long-standing loophole that has seen roll-your-own tobacco taxed at a much lower rate than regular cigarettes. It used to be that one gram of roll-your-own tobacco was needed to make one cigarette, but now, because of modified tobacco industry manufacturing practices to exploit the tax structure, only half a gram is needed to make one cigarette. Thus, the industry strategies have in effect reduced by half the tobacco tax rate on roll-your-owns.

Lower taxes lead to lower prices. That keeps many people smoking or results in more cigarettes smoked per day. Obviously, this is detrimental to public health.

The changes in the tax structure because of Bill C-60 take action in this regard. I have some examples with me. As you can see, Export 'A' says “100% more” right on the label. You get twice as many roll-your-own cigarettes as you used to be able to, because of the types of different manufacturing practices. It says on the label that you only need 0.47 grams to roll one cigarette.

This bill responds to that by helping to address a loophole where you had to get the same number of cigarettes for half the tax. We appreciate and support that. You can see that there are other brands that do the same thing and say “100% more”. They say on the label how much you get. That's a loophole that is bad for public health.

As well, federal tobacco tax rates had not changed since 2002, 11 years ago. Thus, a proportion of the tobacco tax change in this bill is merely an inflation adjustment.

The sales volume of roll-your-own tobacco varies across Canada, from only 1% of the market in Ontario to 13% or more of the market in five provinces. Thus, this tobacco tax change will be particularly beneficial in some provinces.

A surprising proportion of youths use roll-your-own tobacco. Data from the 2009 Canada-wide youth smoking survey found that among high school students 62% of boys and 30% of girls had used roll-your-owns in the previous 30 days.

This measure will raise a projected $75 million in revenue for the federal government. It should be noted that this tax increase will apply to other forms of loose tobacco, such as chewing tobacco, snuff, and water-pipe tobacco, in addition to roll-your-own tobacco. These product categories are far more popular among youth and young adults than those aged 25-plus and illustrate a further reason why Bill C-60 will reduce youth tobacco use.

I have some examples with me. This bill will apply to this new phenomenon among youth of hookah and shisha water-pipe smoking, with cherry, coconut, and orange flavours. It will also apply to the smokeless tobacco, such as cherry, mint, lime, and so on.

Tobacco use remains the leading preventable cause of disease and death in Canada, causing 37,000 Canadian deaths each year from cancer, heart disease and stroke, emphysema, and other diseases. The overwhelming majority of new smokers are underage youths, and tobacco taxes are a crucial part of a comprehensive tobacco control strategy.

The tax measure in Bill C-60 is a win-win for public health and public revenue. We urge all members of Parliament to support this measure.

Merci. I look forward to questions.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from Mr. Bonnett, please.

[Ron Bonnett, President, Canadian Federation of Agriculture]

Thank you for the opportunity to attend and make a presentation.

Many of you will likely be aware that the Canadian Federation of Agriculture represents about 200,000 farmers from across the country. We work back and forth with Finance on a number of issues, but specifically today we're talking about some of the key aspects of Bill C-60. In the package that went out earlier, there are some statistics on the actual size of the agricultural sector in Canada, and I think sometimes it is a bit underestimated.

There are a few things that I want to touch on, and one is that we do produce 8% of the GDP. One in eight Canadian jobs depends on agriculture. Increasingly we're becoming an important factor in trade, and when we look at the value chain, the impact on communities is tremendous.

There are a couple of key issues facing agriculture right now. One of the big ones would be constraints with respect to labour, making sure we have access to both skilled and unskilled workers. The vacancy rate for agriculture positions is higher than in other occupations. Sometimes it's because of the skill set that's required; sometimes it's because it's very low-skilled labour that's required.

One of the things that has to be captured is the fact that this is an issue of competitiveness. The Canadian agricultural sector pays higher wages than our counterparts in North America, particularly our neighbour to the south, which has very low labour rates for agricultural wages.

Some of the key comments we have with respect to Bill C-60 include our support for the $165 million investment in Genome Canada and $20 million in Nature Conservancy Canada, targeting research and conservation. I will talk a bit later about the fact that these are good investments. However, in isolation without a long-term strategy, we're not sure how everything fits together.

The idea of supporting a Canada first labour policy, I think is important. However, we should make sure that the temporary foreign worker program is designed to bring people into the permanent workforce, so they actually become Canadians working for Canadian companies. Changes to the program should minimize the labour market opinion delays for sectors, so that there isn't a holdup in getting the workers that are required. Industry labour task forces should be adequately consulted in developing cost recovery fees and implementing other changes.

Going back to the comment on research, I think the investment in Genome research is going to be very important for Canada, and agriculture in particular. We're seeing a lot of exciting opportunity to increase productivity by using Genome research. What we are seeing is a bit of a mix in messages on research. We're seeing investment in project funding for things like Genome research, but at the same time we see lay-off notices at Agriculture Canada for staff researchers. I think a discussion has to take place on what is needed for core research funded by government and what is needed in project funding, and I think there needs to be a long-term strategy around that.

We also have basically the same comment on the $20 million for Nature Conservancy Canada. I think it's a very positive move, and agriculture has an opportunity to be part of that. We've made this presentation to the environment committee as well, about looking at how we pull all of this together to make sure it's not bits and pieces that we're dealing with but an overall strategy for investment in conservation initiatives.

On the labour side, we're seeing some initiatives to try to reduce fraud and misuse of temporary foreign workers. Those types of things are admired. As I said, we're already paying prevailing wages to our farm workers that are higher than some other jurisdictions we're competitive with.

As I mentioned early, I think we need to make sure this whole thing is taken in context. As we bring temporary foreign workers in, how do we build them into long-term residency here, and staffing for these companies?

One of the things that is important is the seasonal worker program that agriculture has used for a number of years. It is basically intact, and I think the concerns around the temporary foreign worker program were not there with the agricultural seasonal worker program, because that was a negotiated contract between the groups.

The final point I'm going to touch on is about looking at the whole agrifood sector as a value chain. Indeed, Mr. Laws will be speaking later. We are integrated: we need our processors to buy our products. I think a number of the issues we need to look at are complementary.

We appreciate the capital cost extension that was granted, which does encourage business to make the investments and get the writedowns if necessary. But I think in closing, what I would say is, whether you're talking about labour, capital investment, research, or conservation strategies, you have to make sure that you're dealing with these things in a long-term way, and there has to be a long-term strategy in place to deal with them.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, very much, Mr. Bonnett.

Mr. Laws, your presentation, please.

[James Laws, Executive Director, Canadian Meat Council]

Thank you.

Good morning. My name is Jim Laws, and I'm the executive director of the Canadian Meat Council here in Ottawa.

The meat processing industry is the largest component of Canada's food processing sector, with annual revenues valued at over $24 billion and total employment of over 70,000 people.

Canada's meat processing industry adds value to the live animals born and raised on Canadian farms, provides a critical market outlet, and supports the viability of thousands of livestock farmers. I am pleased to provide three brief comments on Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

First, we are pleased with part 1 of Bill C-60, which provides for a two-year extension of the temporary accelerated capital cost allowance for eligible manufacturing and processing equipment. The changes to the income tax regulations state that a taxpayer who acquires a property after March 18, 2007 and before 2016 that is manufacturing or processing equipment may elect to include the property in class 29 of schedule 2. That effectively allows a classification with a higher percentage depreciation rate. Given the high value of the Canadian dollar, it is critical for our meat processing industry to make capital investments to become more competitive in the long run. We believe that the accelerated capital cost allowance should be made permanent. If that cannot be done, we recommend that the accelerated capital cost allowance be extended for a period of at least five years. This is the typical time it takes to plan, budget, commission, and complete a significant capital project.

Second, in Part 3 of Bill C-60, Canada's meat industry supports the government's proposal to extend the preferential tariff treatments for developing and least-developed countries that was established in 1974. Bill C-60 will change sections 36 and 40 of the Customs Tariff, from an expiry date of June 30, 2014, to December 31, 2024, or on an earlier date that may be fixed by the order of the Governor in Council.

Canada should do this because preferential tariffs are intended to increase the export earnings and promote the economic development of developing and least-developed countries. At the same time, we also support the government's intention to modify the list of beneficiary countries and withdraw from the general preferential tariff eligibility the 72 countries that have achieved significant shifts in income levels and trade competitiveness.

We also believe that the government should put these measures in place on a permanent basis. It should, however, review the list of countries that are classified as either developing or least developed on a much more regular basis. We fully support the government of Canada in its efforts to eliminate tariffs by opening more markets to our goods, especially Canadian meat products, and by diversifying our trade with more reciprocal trade agreements, such as the Canada-European comprehensive economic and trade agreement, and the Trans-Pacific Partnership free trade agreement.

Our third and last comment is that Canada's meat industry is very concerned with Division 9 of Part 3 of Bill C-60 that amends the Immigration and Refugee Protection Act to authorize the revocation of temporary foreign worker permits, the revocation and suspension of opinions provided by the Department of Human Resources and Skills Development with respect to an application for a work permit, and refusal to process requests for such opinions.

We are also concerned that Bill C-60 authorizes fees to be paid for rights and privileges conferred by means of a work permit, while at the same time exempts those fees from the application of the User Fees Act. Continued access to foreign workers is not only critical to the meat industry, it is of significant benefit to Canadian farmers, workers, consumers, and municipalities. Unfortunately, a combination of misinformation and allegations of potential misuse by a few seem to be putting in serious jeopardy the best interests of the many.

Canadian meat processing companies are always looking to hire Canadians first. The clearly documented reality of our industry is that the jobs available at many locations exceed, by far, the number of Canadians who are able and willing to perform the physically arduous tasks that are required. Many of the unfilled positions would require that Canadians relocate to rural communities.

Unlike some of the stories we've heard in the news, our experience has been that the costs associated with employing temporary foreign workers are substantially greater. Foreign workers are members of the same labour unions and receive the same salaries and benefits as Canadians in Canada's meat industry. In addition, there are additional employer expenditures, such as the return airfare to the home country, worker compensation, housing standards, etc.

Foreign workers perform tasks for which there is an insufficient number of Canadians available. The important contributions they make will allow meat processing plants to remain in operation, thereby supporting jobs for thousands of Canadian workers.

[The Chair, Conservative, James Rajotte]

Okay—

[James Laws]

For the sake of our economic growth—

Thank you. I'd be pleased to answer any questions afterwards.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Laws.

We'll now go to Dr. Cohen, please, for your presentation.

[Dr. Karen Cohen, Chief Executive Officer, Canadian Psychological Association]

Thank you for the invitation to present today.

The Canadian Psychological Association is the national association for psychology in Canada. There are about 18,000 psychologists in Canada, making us the country's largest group of regulated specialized mental health care providers.

I'm here today to highlight how the current language in the budget concerning the GST could lead to unintended consequences for Canadians seeking mental health treatment. If passed without clarification or amendment, Canadians will now have to pay taxes on certain psychological services that were once exempt.

Budget 2013 makes changes to the GST so that reports and services provided solely for non-health care purposes, even if supplied by health care professionals, are not considered basic health care and will not be eligible for exemption. It goes on to explain that taxable supplies would include reports, examinations, and other services performed solely for the purpose of determining liability in a court proceeding or under an insurance policy.

It is CPA's view that psychological assessments, even those that determine liability in a court proceeding or under an insurance policy, must be considered a basic health service. Let me explain why.

When it comes to the treatment of mental illness in Canada, privately insured services are the norm and not the exception. Psychological services are not covered by our provincial and territorial health insurance plans, and are paid out-of-pocket by taxpayers or through private insurance. Unfortunately, limits on private insurance coverage are frequently too little to allow for meaningful service.

Medical legal assessments and insurance assessments are used to determine the nature of a health problem and to recommend the type and length of the treatment required. These assessments are necessary to demonstrate that the person has met the eligibility criteria to access the service and to receive the funds to pay for it.

Determining liability in a court proceeding or under an insurance policy is therefore essential for many Canadians to gain access to the mental health treatment they need.

Here are a few examples. A child with a developmental disorder might need a complex psychological assessment to determine the nature of the disorder and identify his or her specific cognitive and behavioural needs. This identification may be necessary to establish eligibility for specialized care through insurance or other programs that might offer financial relief for this care.

In another instance, a Canadian may suffer health effects as a result of having been a victim of crime. They may have a brain injury or post-traumatic stress disorder for which they must seek the services of a psychologist to establish a claim for treatment in a civil suit. While the need for an assessment might be identified immediately after the incident, it is not unusual for it to be identified later on. Someone with a brain injury may present symptoms such as lack of initiative, problems with concentration, or trouble problem-solving, that can take some time to accurately identify and distinguish from other conditions. Recovery can take months or years, and symptoms may never fully resolve. With the proposed changes, not only would this person have to cover the costs for the assessment and any necessary treatment, they would now also have to pay GST.

Finally, when someone is hurt in a motor vehicle accident, they require approval from an insurer for a needed psychological assessment to be covered. If the request for the assessment is denied by the insurer—and this can happen even with a physician referral—an independent examination is then triggered. With the changes outlined in the budget, any psychological assessment that is ordered or delivered after an examination is triggered will no longer be considered basic health care and will be subject to GST. We strongly believe it should not be up to the insurer to decide whether or not an assessment has a health care purpose.

It's important to note that this isn't a pocketbook issue for psychologists. It's not the psychologists who will have to pay this tax. It's going to be hard-working Canadians who have a health need that is not met by Canada's publicly funded health care system.

It's CPA's position that an assessment or intervention, when delivered even in a medical/legal context, or when privately insured, is a necessary basic health service. There's some urgency for clarity, given that changes outlined in the budget are retroactive to March, 2013, and many psychologists are also small-business owners.

We have brought forward the following recommendations for the consideration of the committee: that the budget be amended to note that psychological assessments and treatments are a necessary health service, and that psychological assessments used to determine liability in a court proceeding or under an insurance policy are basic health services and should therefore remain GST-exempt.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Mr. Savoie, you have the floor. You may begin your presentation.

[Yves Savoie, President and Chief Executive Officer, Multiple Sclerosis Society of Canada]

Thank you, Mr. Chair and honourable members.

On behalf of the Multiple Sclerosis Society of Canada, I thank you for the opportunity to speak to Bill C-60.

The society's mission is to take a leading role in efforts to find a cure for this disease and to help people with multiple sclerosis improve their quality of life. I want to point out that we are a member of Imagine Canada.

I plan to speak today about measures in Bill C-60 that strengthen the capacity of the Canadian charitable sector and support families and individuals living with a chronic illness or a disability.

We are encouraged by the recognition in Bill C-60 of the importance of and need to foster and promote a culture of giving in Canada. From 1990, the percentage of tax filers claiming donations has dropped from 29.5% to 23% in 2011. This is alarming. Over this period the number of tax filers has increased by approximately one-third, but the numbers claiming a donation have increased by just 3%. The “Canada Survey of Giving, Volunteering, and Participating” found that a majority of Canadians would give more if better tax incentives were in place. Therefore, the inclusion proposed in the budget of a new temporary first-time donor super credit for first-time claimants of the charitable donations tax credit will encourage young Canadians, in particular, and newcomers to Canada to donate to charity.

So that new credit will help stimulate the development of a new generation of donors. That's an urgent priority, given the reality many charities are facing today.

Furthermore, to build capacity in this charitable sector we recognize, as this committee did in its recent report, “Tax Incentives for Charitable Giving in Canada”, the importance of considering future and additional measures such as the stretch tax credit, which provides incentives for existing donors to give more. The stretch tax credit for charitable giving would increase the federal charitable tax credit for individuals by 10% on all new giving that exceeds previous donation levels. This proposal, I would suggest, must be given priority in planning for next year's budget or as soon as our budget is returned to fiscal balance, and would build very nicely on the super credit introduced this year. They are companion pieces in promoting this culture of giving that I've spoken about before.

Bill C-60 also proposes to expand the GST and HST tax exemption for publicly funded homemaker services to include personal care services such as bathing and feeding provided to individuals who, due to age or living with a disability, require such assistance at home. This is of particular significance to people affected by MS across the country, as MS is a lifelong, often disabling condition affecting all aspects of life for individuals and their families, including employment and financial security. Overwhelmingly, people with disabilities, including those with MS, choose to live at home and in the community, and therefore the exemption is a welcome measure.

We are also pleased to see a commitment to improving labour market opportunities for Canadians living with disabilities. For people living with MS, the impact of illness on employment is far too high. Up to 60% of people with MS leave the workforce entirely between five to 17 years after diagnosis. We're hopeful that the additional research funds to the Social Sciences and Humanities Research Council of Canada and the creation of a Canadian employees' disability forum can help to improve employment rates for persons with disabilities, including those affected by episodic disabilities like MS, disabilities that vary over time.

We also believe that creating a more supportive and flexible sickness benefit in the employment insurance program would support the labour market participation of people with disabilities. We hope to see continuing improvements in the EI regime and also in the RDSP program.

Finally, I would just like to applaud and acknowledge the investment and commitments to fund world-class research and innovation in the Canada Foundation for Innovation and Genome Canada, and the announcement of $15 million in new money that was allocated to the Canadian Institutes of Health Research's strategy for patient-oriented research.

The CIHR's flagship SPOR strategy, as it's known, is critical to harness innovative discoveries and to translate them for the benefit of Canadians.

I want to thank you, once again, for your invitation to testify. I am available to answer your questions.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will begin the members' question period.

Ms. Nash, you have the floor.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Good morning, everyone. Thank you for being here today.

I'd like to start with some questions for Professor Moffatt on the general preferential tariff increases. We understand that these tariff increases to 72 countries will increase the consumer prices of a wide variety of goods. Of course, tariff increases are passed on to consumers if these are items they need to buy.

Can you give us a sense of the scope of the impact these tariff increases will have on Canadian consumers?

[Prof. Mike Moffatt]

Sure.

These tariff increases are on thousands and thousands of products. Just imagine an example. You get up in the morning and you brush your teeth; well, there's now a higher tariff on the toothbrush. You go downstairs, you get your newspaper that's lying on the doormat; well, there's a higher tariff on the doormat now. You go into your kitchen, you pour yourself a bowl of cereal; well, there's now a higher tariff on the bowl, the spoon, and your little plastic milk dispenser.

I could go on like this for the next five minutes. You get the general idea. From bicycles, to my daughter's little red wagon, a variety of products are seeing their tariffs increase.

[Peggy Nash, NDP, Parkdale—High Park, ON]

As was pointed out in the last panel, many of these items are not manufactured in Canada. So we rely on imports from one country or another to get many of these consumer goods.

Something you pointed out, Professor Moffatt, is that the tariff legislation is already quite complex. Tariffs are extremely complex and these changes will put a further unnecessary burden on Canadian businesses that are trying to navigate their way through these tariffs. One example that's being debated is the tariff that applies to certain MP3 devices and iPod packs. As I understand it, it's the 9948 code. Is that correct?

[Prof. Mike Moffatt]

Yes.

The 9948 exemption may or may not apply to these items depending on whom you ask.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Can you describe for us this increased complexity as opposed to having a more simple system? You were describing this increased complexity. What does that mean? You talk about the impact on consumers. What about the impact on Canadian businesses?

[Prof. Mike Moffatt]

The system as it stands right now is already incredibly complex. Whenever the Auditor General looks at this, which goes back 20 or 30 years, he or she finds somewhere between one in five to one in three of these products being classified incorrectly by the importer. You have importers paying either too much or too little tax, because they're applying these tariffs incorrectly. This is a very, very burdensome system. There's a lot of red tape here. We really need to look at how we can decrease that. One of the ways we can decrease it is by having fewer tariff treatments. If we can harmonize MFN and GPT, that's one less thing that importers need to worry about.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Do you fear there's going to be an increase in red tape for Canadian businesses as a result of this? This is already a very complex tariff system.