Finance Committee on Oct. 3rd, 2018

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Merci beaucoup for your frankness on your comments.

I want to do one follow-up question, and then I want to move on. In baseball, there's an analogy that you hit the ball towards the gap, and in Canada we have a gap in our coverage for pharmacare, if you want to use that term.

There was a report in the last two or three days from the Macdonald-Laurier Institute about the type of program we could possibly implement. I think that almost 75% of Canadians have a great program, and I personally don't want the New Zealand model, which I know other parties favour, because their coverage of the formulary isn't very good. You don't get the good medicines. You don't get the most up-to-date medicines. It's good populist rhetoric, but it's actually not good policy.

With your global footprint and knowledge, especially in Europe, I would like to hear your company's view with regard to how we cover those Canadians who don't have coverage.

[Jennifer Chan]

Thank you, Mr. Sobara.

The terminology is “Don't throw out the baby with the bathwater.”

To your point, frankly, the majority of Canadians in fact have some form of coverage, whether it be public or private. There's been a recent Conference Board of Canada analysis that's been done. I know that the coverage systems in Canada are very complicated and difficult to navigate. I work in the pharmaceutical ecosystem and I have to sit down and figure out what my own coverage is and help my parents.

Nonetheless, I think a lot of this is about working together to truly scope the issue and to really identify, at the end of the day, the issue that we're trying to solve. It's to scope the issue and identify the uninsured population in Canada and the under-insured population in Canada. I believe that's truly the population of Canada that we are trying to solve this for.

A recent Mowat report looked at what they call a “targeted approach” in addressing the gap of the uninsured and under-insured. They were looking at the potential costs to run such a program—

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I'm going to stop you there, because I do want to move on. I would like to take the conversation with you offline.

[Jennifer Chan]

Very good. Thank you.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

To Mr. Frappier and Ms. Cicciarelli, I went to your organization's brief and saw it has a lot of interesting comments. There is a lot there, and you did speak for quite a long time, but could you just nail down your top two recommendations with regard to the social economy?

I read through the brief and there is quite a bit of material here with regard to advancing the social economy.

[Laura Cicciarelli, Partnerships Officer, Chantier de l'économie sociale]

The first one would be an analysis of the program that already exists for enterprises and to pinpoint the problems or the obstacles for social economy enterprises.

The second one is for the social innovation, to make sure that the ecosystem that already exists, such as the social economy in Quebec, will be respected as a player in this strategy and that we do not duplicate effort and create things that may already exist.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Our government has invested a lot of resources in Canadians overall, but also specifically into the superclusters on the innovation side and the Canada Council for the Arts on the arts and culture side. There are a number of policies for small and medium-sized enterprises, and we've partnered with large corporations as well, including in yesterday's $275-million investment to build a lovely $40-billion LNG facility in the area that I grew up in, which was great to see. We're doing a lot.

Are there any existing programs on the social economy side that you're already benefiting from in terms of what we've done, and could we do more?

[Laura Cicciarelli]

There are definitely programs that already do exist. The issue is more in programs that exist for small and medium-sized enterprises that because of some restrictions are not open to non-profits, co-operatives or social economy enterprises as it is.

It's usually because of their forme juridique. The problem is to pinpoint where these programs have a shortcoming for the social economy enterprises.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

That's it.

Mr. Kelly is next.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I'm going to turn to Mr. Lesage from Collectif Échec aux paradis fiscaux.

Parliament has recently been seized with this issue. We had debate on Bill C-82 last week. Do you have any data on the size or scale of the problem of tax evasion through tax havens?

This is illegal activity that we're talking about. It is always difficult to quantify and difficult to understand what we're dealing with because the whole essence of the problem is to evade detection. However, can you share with this committee what you believe is the size and scale of the problem?

[Samuel-Élie Lesage]

I'm going to answer in French.

You are saying that it's very difficult to quantify because it's illegal. It is even more difficult to quantify when people abuse largesse or profit from gaps or grey areas in the law. No, we don't have data, because practically no one has any yet.

The Canada Revenue Agency, the CRA, has since 2016 been conducting a major study on the tax gap. It deserves to be congratulated, as few countries are doing that. We are waiting for the completion of that examination, whose last report will be about the private sector. If I remember the figures contained in the most recent CRA report on this correctly, for 2014 alone, we are talking about an amount of $1billion to $3 billion for wealthy Canadian taxpayers who do not comply with tax rules. We don't have precise data on that, but the CRA data alone is enough to prove that the problem is real.

The CRA's methodology and some of the choices it made for its analysis could be criticized. You were talking for instance about illegal activities. For our part, we are interested in cases where the law does not provide a sufficiently rigorous framework, one which makes tax evasion possible, through abuse or aggressive tax planning. One example would be a precautionary agreement between Canada and a tax haven to prevent double taxation. Tax avoidance is legal in that case, but is it morally desirable? We think not. However the CRA does not take those financial transactions into account in its analysis, and it it did so, it would come up with even bigger numbers.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Your first recommendation was to establish of some type of registry for beneficial ownership. Can you describe how that registry would work? To whom would its data be available? Have you thought of how the privacy of Canadians could be protected, even with a registry of beneficial ownership?

This committee had studied this aspect, and there were recommendations made to it. I'm not sure if your organization participated in that study or not. This is your opportunity to tell us what you think a national registry of beneficial ownership would look like.

[Samuel-Élie Lesage]

I don't want to get into the technical details, especially since I do not have any technical documents about this with me. We could discuss this outside of these consultations.

The objective of such a report would be to ensure that tax authorities, in particular, know where the funds are coming from and what characterizes and identifies the investors. The idea is that to some degree that information allows them to better track where those monies are going. So it is important to ensure that the tax base is not eroded. The objective is to give Canadian tax authorities all of the necessary tools to ensure that taxes are paid. As I said, we can discuss the more technical aspect later.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Could you expand on your second recommendation? You talked about changes to tax law that would.... Well, where do you stand on that?

[Samuel-Élie Lesage]

The example we chose was the Google Tax. It has been in place in England for several years, and its objective is to tax the profits that are shifted. So, they do a type of profit estimation of the income that should be taxed, but is not. It is taken for granted that there is abusive fiscal optimization. After that, the various ways in which that income can be captured must be carefully examined. In one pilot project conducted in the European Union, a 3% tax was applied to the gross income of one enterprise.

Once again, we are trying to ensure that the profits and income accrued in the country are adequately taxed, given that currently, there are loopholes in our laws, our tax laws particularly, that allow some to slip through the cracks in the system and thus to abusively reduce their tax bills.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

You would recommend to review or abolish certain existing agreements. You mentioned Barbados and the Cayman Islands. If you abolish an agreement, you have no agreement at all. Does that present problems with enforcement and repatriation of offshore money?

[Samuel-Élie Lesage]

In writing that, we did not wish to call into question the existence of tax treaties to avoid double taxation, or tax information exchange agreements. As we said, the purpose of the BEPS framework is to automate that process, simplify it and include a maximum number of countries. The fact that this exists is a good thing. The problem, as we see it, is that those agreements are sometimes concluded with countries where given their policies, the effect of those agreements is to reduce tax bills.

How is it that tiny Mediterranean or Caribbean countries sign these agreements? These are countries where the tax rate is negligible, and they are not economic powers. How is it that so much money finds its way there and tax treaties authorize this?

There is a problem there. To change that, we have to determine exactly what is done in notorious and well-known tax havens.

[The Chair, Liberal, Wayne Easter]

Mr. Lesage, the committee did investigate money laundering, terrorism financing and proceeds of crime. Beneficial ownership will be one of the key topics in that report, or one of the topics in that report when it comes out, but that report hasn't been done yet. It was expected to be done last April.

Mr. Julian is next.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

I thank all of the witnesses for their participation.

This is very interesting and I have a lot of questions to ask.

Ms. Chan, I won't put questions to you right now, but I want to say that you just raised an important point, which other witnesses also raised, which is that budget cuts to health care under the previous government, which continue under the current government, are having an adverse effect on our health care system. We hear you. But what you just explained in that regard is important. We knew that those cuts would have a devastating impact, and we now see that that funding has to be restored.

I will begin with you, Ms. Drouin. Thank you for the work you do with ADISQ artists. I greatly admire all of the country's francophone artists and the work done by ADISQ.

However, something does surprise me. Our government has just purchased an old very leaky pipeline for $4.5 billion. We'll have to add $10 billion to build an extension to that pipeline, which will create barely 50 permanent jobs in British Columbia.

It seems to me that you ask for very little, given the importance of the sector you represent. Also, when I see the increase in the French-language music market in Europe and Africa, it seems to me that our artists are getting crumbs. However, with crumbs you nevertheless manage to accomplish much.

What could you do in an ideal situation where the government would fund and fully support artists, both nationally and internationally? What recommendations would you have for us?

[Solange Drouin]

That is an excellent question.

Yes, we are used to managing and to doing miracles with crumbs. We agree that the amount of$10 million we are requesting is an additional sum. Over the years, the funding provided to the Canada Music Fund has been approximately $22 million or $23 million. That is where it is at currently. Of course, that is not enough given the current state of affairs. We could not include everything in our 20-page brief. We submit much longer briefs to the CRTC.

Just to give you a figure, from 2005 to today, the music industry in Quebec lost 72% market share. In 2005 we sold 13 million albums, and we sold fewer than 3 million in 2017. It's a slaughter. This is really important.

The money from public sources is important, but we are used to living with and to taking risks as entrepreneurs. We will continue to do that, but in the meantime we are asking the government to amend laws such as the Copyright Act and the Broadcasting Act.

There are people and businesses that benefit from our work, from the artists' work, by selling bandwidth, which is mainly—not only, but in the main—used to consume cultural content. These Internet access providers are Canadian businesses. I am not talking about foreign businesses but about Bell, Videotron, Shaw, Rogers. These businesses don't contribute to the production of content.

We are also asking the government to support us in maintaining our production capacity, and we are asking it especially to give us the means to go and get the funding where it is, that is to say not necessarily from the pockets of consumers and Canadian taxpayers, but from the businesses that make money on our products. I am referring to Internet access providers and online music businesses or companies like Netflix. We are asking for a host of measures. Ten million dollars does not seem like much. It would be added to public funding. Of course, it isn't enough, but that is one of the measures we ask that the government put in place.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you.

My next question is for Mr. Lesage and Mr. Vaillancourt.

We are talking about Netflix, and Google. Other witnesses also referred to them. If those companies pay no tax, if they don't pay the HST or GST, is that not another type of tax haven we are providing for these big Internet companies?

With regard to these tax havens, to tax loopholes and the fact that big multinationals pay nothing to contribute to Canada's economic development, what impact does this have on our competitiveness in general?

The health care system, pharmacare and children's services are all systems we need, but we are losing tens of billions of dollars a year because of this gap in our tax system.

[Claude Vaillancourt]

Yes, exactly.

I agree completely on that point. Large businesses profit enormously from this entire system in Canada, that is to say a good health care system, a good educational system. We need to say so. It is advantageous for those businesses to deal with people who are healthy and educated.

We ask them for a financial contribution. That contribution is not always made. We are very concerned about trade agreements that are clearly to the advantage of these big companies, and not sufficiently helpful for small and medium businesses.

We have just negotiated NAFTA and some aspects of the new agreement concern us. First, there is supply management of course. Once again, it's always small business, for instance, Quebec dairy producers, who are the losers, whereas big enterprises will be able to benefit from a free market.

We are also concerned about culture. We did protect the cultural exemption, but did we protect the electronic culture? We were just talking about Netflix. Will it be free to chose the content that will be presented to Canadians? Will we be able to ask it to broadcast Quebec content, for instance? According to what we have seen, the answer is no. It's not in the agreement. One specific clause in the new United States-Mexico-Canada Agreement, and a series of other points in fact, show to what extent that sector is not protected.

I was praising a different economy, one that depends much more on local activities, short circuits and what businesses are doing.

My sense is that Canada is once again favouring the large transnational businesses. Those businesses don't have as much impact on the Canadian economy as small and medium enterprises.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

Mr. Fergus, you have seven minutes.

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

Thank you very much, Mr. Chair.

My questions are addressed mainly to the representatives of the Chantier de l'économie sociale, and to the Canadian Community Economic Development Network.

I'd like to make a comment on what Mr. Vaillancourt said with regard to the cultural exception. I am not looking for a reply, it's really a comment. L'actualité said this week that under the new agreement, platforms like Netflix, Amazon, Spotify, Apple and others of that type will be subject to the cultural exception. This is not the first time. It applies not only to the cultural sector, but to the entire agreement, and so to the digital area as well. I think that's very important; it's the future. We really have to step up to ensure that Canadian and Quebec cultures are showcased in the digital world.

Can you tell me what you think about that, very briefly?