Finance Committee on Oct. 16th, 2017

[Carey Bonnell]

That's both a public policy consideration and an industry consideration. Again, looking to Iceland, they have a zero discard policy. If you catch it, you bring it in, and they deal with it through the quota structure and arrangement they have in place. We don't have that here, and that's a bit of a problem, I think, in Canada. That's a public policy issue.

On the culture side, there was a great quote made by the head of the Ocean Cluster House in Iceland, Thor Sigfusson, when we met with him a couple of weeks ago. I asked, “How did you get here, Thor? How did you get this far ahead?”

He said, “We had to move away from the culture of 'good enough'. We'd always fished with gillnets, so it's good enough. We've always only used the fillet, so it's good enough”. Boy, I took that message and brought it back home and I've been talking a lot about this in various forums in the past number of weeks, because here we have that culture, the culture of “good enough”, and we have to shift that culture more toward the value proposition that I have been outlining here today.

There is tremendous opportunity, some great stuff, but we have to shift our mindset and shift that position. We can indeed get more value from what we've traditionally thrown away.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

Mr. Foley, I'm going to start with you and hopefully I'll have enough time to move on to someone else.

My mother runs a bed and breakfast and has done so for decades, so I know how hard it is and how difficult the hospitality business is.

What's the mix of the hospitality industry in Newfoundland and in Labrador? I've never been there. Are there a lot of mom-and-pop operations, small and family-owned? Are there some medium-sized groups, or is it large scale like we have back in Alberta, like Brewster, for instance?

[Craig Foley]

We have about 2,600 tourism operators in the province. The big chains you'll see in the major centres, but then it goes down to smaller independent hotels. Certainly the vast majority would be small mom-and-pop operations.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I was looking at your website too. You have a large policy section on there itemizing all the problems or identifying the issues that your industry has.

I have two questions. One, you mentioned during your presentation equity and fair rules for the accommodation industry. You were talking about Airbnb. What does equity mean to you in your industry?

I'll let you answer that and then I'll move on to the second one after.

[Craig Foley]

As your colleague mentioned earlier around legislation, part of the problem we're finding as we work through this is that there is no one real piece of legislation that affects every piece of operation that an operator has.

In a hotel you're dealing with not only the tourism licensing legislation, but you also deal with a liquor board, you also deal with workers' compensation, and you deal with municipal legislation. Because there is so much complexity around the legislative piece, things are able to fall through the cracks, or there is not one bullet that takes care of it all.

That's where the equity piece comes in because if somebody is not in the legitimate business, we'll say, of paying the business tax or being registered or licensed with the government, they don't have those extra responsibilities and commitments.

By bringing people into the business, and that's what we're really asking for—not to get rid of them, but to bring more in and have them apply and use the same rules as the other operators—we would achieve equity. That then allows for equity in pricing, it allows for equity in profit, and it allows the growing of the tourism industry.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Online you have a section that talks about regulatory burden. It says to “work with provincial and federal partners to reduce unnecessary and burdensome administrative and regulatory requirements to tourism operators.”

One of those things is doing your books at the end of the year, summing up your financial year, and that's always a problem for all of these smaller businesses, like the one my mom runs, a small bed and breakfast. You're rushing to put your books together because you're thinking about running your business, not trying to comply with the government rules for it.

A lot of the new proposed Liberal tax changes for small business, though, introduce this concept of the reasonableness test. They're going to make it harder for people to prove that family members in their business are actually doing the work.

I remember many times my mom waking me up at 4:00 a.m. and having to go in at 5:00 a.m. because the rooms needed to be cleaned because there were guests coming in or the bedding needed to be changed. How much of an impact...? Have you heard from your members on this small business tax proposal?

[Craig Foley]

We have, but again, much of the time we had for consultation was high season so many people still had their heads down and were busy doing their work.

Like your mom and other small business operators, they're not going to fully understand the impact of any of this until their tax accountant or tax professional really brings it to them. I think that's when we're expecting to hear the most feedback, once they actually know, in a tangible way, how these things are going to affect them.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

You're saying that because of the timing of when it came down it wasn't possible for most tourism operators to participate.

[Craig Foley]

Definitely, timing was an issue, for sure.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

You're thinking that when tax time comes around, whenever their year end filing date is, their accountant is going to tell them there is a problem.

[Craig Foley]

These are fairly complex questions that professionals need to get to the bottom of and there are different opinions on that. A tourism operator is not necessarily a tax professional. I think that once they fully understand and see how these things are going to affect them we'll probably hear more feedback then.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Is the burden of complying with federal-provincial regulatory and administrative requirements going up or down for your industry?

[Craig Foley]

I would say up because of the complexity of the industry and the different pieces of legislation, and indeed, we do find many of our operators are hampered because of the complexity of those requirements. The inequitable part of the sharing economy is that there is somebody operating next door who has none of those and I think that's a fundamental gripe that our members would have.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

One of the things in the business my mom is in, is that she has just moved to.... Like in many of these smaller businesses, my mom is older. My mom grew up in communist Poland. There was no Internet back then. We didn't even have a colour TV. I came to Canada and there was colour TV and I thought that was pretty neat. That was in 1985, but it sold me on Canada.

She just moved to Booking.com. As an operator she complies with all the rules, but it's not all that much different from Airbnb, and you have a lot of operators using Airbnb.

What is the difference between the two? She is a legitimate operator. Many of the businesses here—the 2,600 operators you spoke about who are complying with all the rules—they may move on to Booking.com and it's just a method of doing business. It's a platform. They could also take advantage of Airbnb, so what is it about the regulatory rules surrounding the sharing economy that's a problem for your membership?

[Craig Foley]

I think that's a good point. I referenced Airbnb because this is a very new topic and hard research is hard to come by.

Things are evolving. Toronto is just releasing things and Quebec just introduced new legislation, but this report by the Hotel Association of Canada was actually something concrete that we could refer back to. The channel is not the issue. It's not Airbnb necessarily that our members have an issue with. It's an effective channel because through technology they're meeting the consumers where they want to be met, online. They're providing the right booking mechanisms. People are paying online.

All of that stuff is good. We just want to bring that channel into the tourism industry because we see it as a great channel. We may be talking about Airbnb this year. It may be a different channel next year. It's just a matter of making sure that everybody is complying with the same rules and adhering to the same standards.

[The Chair, Liberal, Wayne Easter]

Should that include them paying HST, the same as the hotel industry?

[Craig Foley]

We would say yes.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

That's tax fairness.

[The Chair, Liberal, Wayne Easter]

That is tax fairness, Tom.

Mr. Russell, on your investment proposal, I guess Canadians are good innovators, poor commercializers. We innovate a lot of things, and then they get sold off. We seem to be a little allergic to risk as compared with many other countries. Would this investment proposal you're talking about help us in that regard?

[Ian Russell]

It's a great question. The answer would be yes, for two reasons. The first is the overall shortage of risk capital for small business. What typically happens is that we don't have a problem incubating new companies and starting them out. The clusters have worked very well in Toronto, Waterloo, and in other parts of the country. Montreal would be another example. The problem that comes as these companies become profitable and start to grow—they could be tech or non-tech—is access to sufficient capital, particularly if it's a rapid growing phase. That has an adverse impact.

A second concern that would reinforce the need to try to boost domestic Canadian capital, and as you say there are some good reasons, is that there's a lot of risk aversion in the Canadian marketplace, for sure. We've seen that half the private equity venture capital—this is the venture capital that comes in—is U.S. based, so it's coming from a lot of either U.S. venture capital outfits, a lot of them focused on tech, or it's coming from some of the large tech enterprises in the U.S. such as Google, Apple, Facebook. They all have a big presence in Canada. They're ready to pounce on any Canadian company that has a great idea, great technology, and an opportunity to take it to the next stage. Then, even though a lot of these entrepreneurs want to stay independent, they end up getting lucrative deals to simply sell out. At the end of the day, whether it's a U.S. venture capital company or an Apple or a Google or whatever, technology is mobile and those companies are probably gone from Canada over time.

It has happened in Canada not just in high-tech companies. If you look at a company like Lululemon or Aritzia, these are very successful. They were in the fashion business, athletic fashion business in the case of Lululemon. Once you get capital from U.S. venture capitalists, there are usually controls around it and the management, the direction, starts coming from offshore. Then when it comes time to list the company, if it does go public, it will list on Nasdaq. It will bypass the Canadian marketplaces completely. I'm not saying that capital is the only answer, but I think it is an important element in this whole small business equation.

To comment a little further, one concern...and we raised it in the context here of the private corporation tax proposals. I'm not going to get into any of the discussion around that, but I'll just say that Mr. Foley made the comment that they really didn't have time to assess the impact of those proposals on his members. I think that's generally a problem. Whether you think the tax proposals are good or bad, and there's some fluidity obviously in what they were, there just wasn't enough time in the 70-day comment period over the summer.

Now the government is going forward with a reduction in the corporate small business tax, from 10.5% apparently down to 9%. Again, there is an argument out there that we shouldn't have two separate tax rates. That creates a disincentive for small companies to grow—to come back to the point I was talking about—because suddenly you move to a different level. Tax rates are higher, but more importantly, incentives such as the SR and ED benefits, which are very attractive to smaller companies, especially the SR and ED grants, are a real disincentive to get bigger.

Without commenting on the proposals per se, why don't we have an open consultation over a considerable period of time and maybe covering the broader aspects of tax, when these proposals come forward? Again, I don't want to belabour the point on the small business tax. Maybe it's a good idea, but I think it's being taken as a reaction to the small business tax proposals.

I think the bigger issue here is that we need to come at these tax changes in a more comprehensive way, taking our time and assessing what the impacts are going to be on the Canadian economy.

[The Chair, Liberal, Wayne Easter]

Thank you for that.

I have one question, and if anybody else wants one, we have time for another quick one from a member here, if anyone wants to go with one.

Mark, the Canadian Food Inspection Agency—

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I just want to let you know that I haven't had my turn yet.

[The Chair, Liberal, Wayne Easter]

Oh, you didn't. Okay. We'll get to you in a minute. I thought we had gone to you, but we didn't.

Mark, on the CFIA, Canadian Food Inspection Agency, how would it enhance productivity and competitiveness in the aquaculture industry if that lab were here?