Finance Committee on May 9th, 2018

[Raj Grewal, Liberal, Brampton East, ON]

Mr. Kingston, welcome back to our committee. It's always good to see you.

You spoke about competitiveness, and obviously there's been a lot of chatter around the uncertainty with NAFTA, the uncertainty with the administration down south and the recent corporate tax changes there. I don't think anybody's going to disagree with you that people on Bay Street are very concerned about Canadian competitiveness. However, the numbers don't suggest that. There was still strong GDP growth and strong job growth numbers last year and this year in the first quarter.

Obviously, if NAFTA settles well, do you think there'll be a reflux of capital coming into Canada?

[Brian Kingston]

On the numbers point, you're absolutely right that 2017 was a very strong year for the Canadian economy, both in terms of GDP and unemployment numbers, but we're concerned about the outlook going forward.

Right now you see that GDP growth will moderate to around 2.1%, and according to the Advisory Council on Economic Growth chaired by Dominic Barton, our long-term GDP potential is around 1.5% a year. We think we're coming off a bit of a high from last year. We're also worried about some of the more recent data on FDI in Canada, which for 2017 showed that we're at an eight-year low. We think there's a worrying trend. I mentioned some of the forward-looking survey data, which shows that a majority of our members see U.S. tax reform as probably or definitely having an impact on their investments in Canada. We're quite worried, looking at the forward-looking survey data.

You're absolutely right, though, that NAFTA plays a huge role in that. It's hard to decipher between the effects of U.S. tax reform and NAFTA, and only time will tell. I hope that if NAFTA is resolved, that will restore some certainty. For example, if you're a company thinking about investing in Ontario and your intention is to exports goods to the U.S., I think right now you'd be thinking twice about that until NAFTA is resolved. Hopefully, if it's resolved shortly, that will help some of this, but we still think competitiveness is a serious issue, and tax reform needs to be addressed.

[The Chair, Liberal, Wayne Easter]

Thank you.

Thank you, all.

Now we're turning to Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you to all our witnesses for being here today. I'm going to continue along the same line of questioning as Mr. Grewal.

First, I believe it was either Marshall or Keynes who said that in economics you'll often have two different forces coming together, in this case one being NAFTA and the other being tax reform. It cuts like a scissor. It really doesn't matter which blade hits first or the hardest; it eventually cuts.

Would you say that right now tax reform and the lack of competitiveness may be the worse of the two, or should we be advocating that the government look at things like the capital cost allowance as a way forward until we can see more investments, because I think these are at an eight-year low?

[Brian Kingston]

Yes, tax reform is definitely having the most immediate impact because it was passed, it's in force, and companies right now are staring at marginal effective tax rates that are significantly different between Canada and the U.S.

NAFTA, going forward, creates more uncertainty, but we know from speaking with member companies that tax reform in the States is having an immediate impact on investment decisions in Canada.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Grewal also raised job numbers. The PBO said that since last October, when they came out with their quarterly report, 60% of the jobs that were created were actually in the public sector and that the reduction in the unemployment rate actually had to do with more people leaving the work force, the labour market.

Are those things concerning to you?

[Brian Kingston]

Absolutely. We want to see a vibrant private sector in Canada, and we want to see policies put in place that support that and support the growth of companies into global champions.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Harford, my understanding is that when you add a higher price to anything, whether it be taxes or input, that means there will be fewer people purchasing it at a given price. So, if your industry is on a permanent escalator tax, and you see the excise tax going up while competitors such as the United States are actually reducing theirs, that means there will be less consumption of your product right off the bat—and that's not even to say whether there's a legal market for it or not.

[Luke Harford]

As I mentioned in my remarks, we've had 45 tax increases across the country on beer. Taxes on beer since 2010 have increased at twice the rate of inflation. We've seen a 10% decline in per capita beer sales over the course of the last decade, and that has implications for government revenue in the long term.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

What do you hear with regard to your industry? Are they bullish, or are they more bearish, in terms of big investments?

[Luke Harford]

Right now, their number one concern is what they are going to get hit with next by way of tax.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Again, are some of your members considering investments south of the border versus here in Canada?

[Luke Harford]

It's definitely in the mix for our larger members, the ones with a footprint crossing into the United States. They're doing a deep dive to see how attractive Canada remains with the result of both the roll-back in beer excise tax in the United States that U.S. brewers are going to enjoy, that U.S. facilities are going to enjoy, and the tax reform.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Those of you who are here regarding the cannabis issue, were all four of you consulted on this excise tax before the government made these changes in budget 2018, and if so, what was the response to the concerns I'm sure you raised?

[The Chair, Liberal, Wayne Easter]

Who wants to start?

Were you consulted, Annie?

[Annie MacEachern]

I was, yes. I spoke with both members of Parliament, Sean Casey and Wayne Easter, with regard to the excise tax.

Sean Casey originally declined my invite to speak at an event around the excise tax. He sent forward a statement on behalf of the Liberal party, but he didn't seem to understand. I've continuously brought patients to him to share stories. I think that's the most important thing. There's a really large stigma that is shading many people's view of medical cannabis patients. The more we can humanize them, the more people seem to understand.

[The Chair, Liberal, Wayne Easter]

Are there any others?

[Jonathan Zaid]

Yes, we at Canadians for Fair Access to Medical Marijuana were consulted by Finance. We also reached out to members across all parties, to senators, as well as to different bureaucrats in different departments.

With that said, I think the consultation was not as effective as we would like to have seen, in the sense that the submissions that were made overwhelmingly—the vast majority, from our understanding—in support of eliminating tax on medical cannabis.

As I mentioned, a coalition of very large, credible, respectable organizations—including the Arthritis Society, the Canadian Pharmacists Association, and the Canadian Nurses Association—has put forward a submission as part of that consultation process, but we don't feel that the government is adequately listening.

There was a small step to exempt low-THC oils, but that is a tiny percentage of the market. It shows a complete misunderstanding of what patients are using it for, and beyond that, it's not a decision that's based in evidence. The evidence, as James mentioned, is very strong and conclusive for the treatment of chronic pain in adults, MS spasticity, and nausea and vomiting induced by chemotherapy. That's for THC, and that is subject to excise tax.

[The Chair, Liberal, Wayne Easter]

Dan, you have time for one more.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

That's great.

The Parliamentary Budget Officer released a report on this tax, which notes that the cannabis tax won't raise much revenue, because even a fairly modest tax would enable the black market to continue and the government wouldn't get any of the revenue. Do any of you have any comment on that? It would seem that the government is suggesting that it will raise revenue on the backs of those who are actually struggling to pay for access to medical marijuana, while completely ignoring the fact that it may not raise as much revenue to begin with.

[Jonathan Zaid]

I would absolutely agree, in the sense that this excise tax is using patients to build this new legalized program. Patients have already been suffering with the continued application of GST/HST. That situation means that six out of 10 Canadians who use cannabis for medical purposes can't afford their full dose. That number is unfathomable.

This government is considering pharmacare because one in 10 Canadians can't afford prescription medications. Then they go around and apply an excise tax to medical cannabis when six in 10 Canadians can't afford a dose. That makes no sense.

[The Chair, Liberal, Wayne Easter]

Before I turn to Mr. Dusseault, Mr. Harford, on the 10% decline in beer sales, does that include craft breweries?

[Luke Harford]

It's the total market.

[The Chair, Liberal, Wayne Easter]

The total market. Okay.

[Luke Harford]

Yes. It's on a volume basis.