Finance Committee on Feb. 5th, 2019

[Pierre Poilievre, Conservative, Carleton, ON]

It's income tax revenues.

[Trevor McGowan]

Okay.

I can ask my colleagues in the personal income tax division. Unfortunately, we have our treaty expert here.

I can look into it.

[Pierre Poilievre, Conservative, Carleton, ON]

You can provide that.

Thank you. That's good.

[Kim Rudd]

On a point of order, Mr. Chair, I guess I'm somewhat confused with regard to this bill, because Mr. Poilievre is talking about personal income taxes. Are we not having a conversation about corporations and individuals offshore? I guess I'm confused as to how Mr. Poilievre's question fits with this bill.

Maybe he could explain that.

[Pierre Poilievre, Conservative, Carleton, ON]

It's quite obvious that income tax that has not been paid because it's been improperly declared abroad or hidden in foreign accounts obviously reduces the tax revenues paid by individual in question here in Canada.

[Kim Rudd]

I didn't think your question was that specific. You were basically saying "all". Not everyone sends their money offshore. Are you looking at just those specific people?

[Pierre Poilievre, Conservative, Carleton, ON]

No.

[Kim Rudd]

Again, I'm not sure I see the relevance to this bill.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you for your comment.

Thank you very much for agreeing to provide the information.

[The Chair, Liberal, Wayne Easter]

I guess what it comes down to is that it may not apply to this bill, but that said, there are two ways of getting at this question. One is as a question on the Order Paper, and the other is having Mr. McGowan provide it at committee. Either way, the information will become available, I gather. Mr. McGowan agreed to try to find the information. We'll leave it at that.

With that, thank you both for your detailed answers on a very complicated bill. It's a technical bill, I guess, which has a lot of implications. Thank you for the background material and your answers to our questions today.

With that, we shall turn to committee business. I neglected at the beginning of the committee to go through the committee report, because it really related to the witnesses we're having today.

You have the 13th report, the report of the Subcommittee on Agenda and Procedure of the Standing Committee on Finance. Do you want me to read it, or does somebody want to move that, and we'll see if there's any other business? I'll read it:

Your Subcommittee met on Thursday, January 31, 2019, to consider the business of the Committee and agreed to make the following recommendations:

1. That, with respect to Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting:

a) the Committee invite departmental officials to appear on the Bill on Tuesday, February 5, 2019;

We just heard from them. The report goes on:

b) the Committee invite witnesses to appear on the Bill on Thursday, February 7, 2019;

Those witnesses have been invited.

c) the Committee invite the Minister to appear on the Bill during the week of February 18, 2019; and

d) members of the Committee submit their prioritized witness lists to the Clerk of the Committee no later than 5:00 p.m. on Monday, February 4, 2019

That's been done. Finally:

2. That, pursuant to the Orders of Reference of Monday, January 28, 2019, the Committee study the Supplementary Estimates (B) and the Interim Estimates and invite the Minister of Finance and the Minister of National Revenue to appear prior [to] the end of March 2019.

That is the motion, moved by Mr. Fergus and seconded by Mr. Sorbara.

Is there any discussion? Peter.

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

Thank you, Mr. Chair.

When we spoke last week, we talked about the number of witnesses. It was unclear at that point the number of witnesses that would be submitted. We've submitted a dozen. I'm not sure how many my Liberal and Conservative colleagues have submitted. It would appear to me that we may need to have more than just the one session this Thursday as a result.

If it's just us, then we can get through them all in one day, but if we have an equal number from the other two parties, then it's quite possible we'll need an additional day. I wanted to make sure that adopting this does not preclude having that additional session on the bill.

[The Chair, Liberal, Wayne Easter]

By the looks of it at the moment, we probably won't even need the two hours, because a lot of the witnesses that the three parties requested to appear have declined to do so. It looks like we won't need an extra day.

It's been moved and seconded.

(Motion agreed to on division)

Is there any other business?

Mr. Sorbara.

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

Thank you, Mr. Chair.

I tabled a notice of motion a few days ago with regard to the Standing Committee on Finance undertaking a study of open banking. I believe the clerk forwarded this notice of motion to all of the esteemed members of this standing committee. I would like to put forward the motion and have a brief discussion on it, but then quickly go to a vote so that we can adopt it and begin a study on open banking.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Do you want to read the motion and give your arguments for it?

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

Yes, of course, Chair. It reads:

That, the Standing Committee on Finance undertake a study on open banking and report back to the House on: a) whether open banking could provide benefits to Canadians; b) how potential risks related to consumer protection, privacy, cyber security and financial stability could be managed; and c) what steps, if any, the Government should take to implement an open banking system?

Mr. Chair, open banking represents the next step in financial innovation for the Canadian banking system. Not only for the Canadian banking system, but worldwide, we've seen other countries, their legislatures and their pertinent committees studying open banking, looking at its impact on consumer choices, competitiveness and the overall financial system.

I'm just reading some of the information with regard to open banking that is out on the Internet. It is already taking place, and if I could give the example, if you go to your regular bank and do your daily banking or weekly banking there, which millions of Canadians do, there are obviously a number of what I would call “interlopers”, a number of institutions that aren't banks, creating services that banks and consumers utilize. With regard to paying bills, apps and wealth management, there is much innovation going on with regard to financial choices available for consumers.

Briefly, I'm going to mention a technical term, “open bank data”. If I could read a description, “open banking helps financial services' customers to securely share their financial data with other financial institutions. Benefits may include more easily transferring funds, comparing product offerings to create a banking experience that best meets each user's needs in the most cost-effective way. Open banking is also known”—and which I think is very important in this study—“as 'open bank data'.”

In the study, we should investigate how the data is being used and shared. I think this is something that Canadians may not think about every day, but participate in it every day. They should know that the standing committee on finance has looked at open banking judiciously and diligently, and has undertaken a study to see how this financial innovation is affecting consumer choice and the financial services sector.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

This is open for discussion.

Mr. Julian.

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

I have a series of questions for Mr. Sorbara.

First, I don't yet understand his definition of “open banking”. It may be close to what others define as “alternative banking”. If that's the case, then what we're talking about is “alternative financial institutions”—for example, the credit union sector, and co-operative financial institutions.

I'd be interested in hearing back from him on the extent to which he thinks this study would be tackling the issues of co-operative financial institutions, credit unions and other alternative banking institutions that have been part of the Canadian mosaic, of course, since the foundation of our country—certainly in the last century.

If he could explain a little more—perhaps after my colleagues have had a chance to intervene—what he means and what the parameters are around the study, because that is not yet clear to me.

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

Thank you for the question, Mr. Julian.

As the chair of the all-party committee on credit unions, I would say that financial innovation is affecting not just the schedule I banks, if you want to define that term. It's also impacting credit unions across Canada, whether it's the larger ones out west or the Caisse centrale Desjardins in Quebec.

With regard to the study, I would look at this within the realm of the financial innovation that is taking place globally in financial services. Open banking will not only impact the larger Canadian schedule I banks, but also the co-ops that you identified, and the credit unions located in both rural and urban Canada. It behooves us to make sure we understand open banking, what that really means in the context and how it impacts credit unions and other financial institutions across Canada. They and their members have as much at stake as account holders at your traditional schedule I banks.

[The Chair, Liberal, Wayne Easter]

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Like Peter, I have a bunch of questions as well.

The motion just seems a little incomplete. It uses some terms that I think are vague. I had the same question about open banking meaning different things to different people. I agree.

It sounds like you want to look at both the financial services and how data is dealt with. I don't know if it really falls to the Standing Committee on Finance to look at data. There is a committee of the House, the access to information and privacy committee, which is taken with the issue of social media data and how that's shared on Facebook and other platforms. That committee has more specialty in the privacy of information, how it's dealt with, how it's traded, how it's exchanged between institutions. It's a very broad subject. You could have an entire study just on that particular issue.

With regard to the issue of alternative banking methods, there are also things like Canadian Tire money and institutions that provide points, and how points are monetized and traded. That's an entire kind of rabbit hole that you could go down.

I would like more clarity as to exactly what we mean. Do we mean to make it so broad? It seems like it could be a study forever. I looked at the calendar, and we have about 23 meetings—fewer now—to look at this. I would hope that we don't use up 23 meetings on open banking.

There are a lot of interesting issues that the finance committee could look at. I've given you some ideas. I've tried to table them and suggest studies that the finance committee could have on different subjects. You all know my great interest in the stress test and mortgages and everything related to it. That's much more focused than what I see before me here.

Another part too is that it's big "G" government. It reads, “what steps, if any, the Government”, in general terms, “should take to implement an open banking system”. It seems like a very broad statement.

You also don't say how many meetings you want to spend on this. Do you have an idea, Francesco, of how many meetings should be dedicated to the study? You haven't mentioned whether a report should be written, and whether recommendations should be provided and whether we should compel the government to provide an answer within a fixed amount of time.

I generally don't like open-ended study motions. I could be convinced, obviously, to vote for it, but generally I don't like it. I like studies to be very specific: giving the government a report with recommendations and a fixed timeline by which to respond to them publicly.

If this is an issue that you believe most Canadians are taken with, and especially I think on consumer protection, privacy, the cybersecurity side of things, especially privacy of financial information.... We saw what happened with Statistics Canada and the dragnet of the 1.5 million households who would have their private information tapped into.

Do you see that being part of the study as well? Is Statistics Canada going to be brought before the committee to talk about the pilot projects, or any other such projects that they're thinking about doing? That's the industry committee, then.

What I'm trying to suggest is that the study could go a lot of places.

[The Chair, Liberal, Wayne Easter]

If I could add to Tom's question, Francesco, do you anticipate travelling for this study? What would the deadline be to have it done? I mean, where is the open banking concept in place already, or where has it started, or whatever?

What you anticipate in terms of travelling and hearings is I guess what I would add to Tom's question.

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

At first glance and first estimation, I think it would be sufficient to have potentially three to four meetings here in Ottawa.

To alleviate Tom's concern, obviously it would not be an open-ended study. I don't like that either, Tom; I agree with you there. I think three to four meetings with due diligence, having the witnesses, the officials, come in, and even various regulatory agencies if we needed to ask them their views....

In terms of travel, England has adopted an open banking system. It came into effect, I believe last year, in 2018. The European Union has also mandated an open banking system, so if we did have the opportunity to travel....

We didn't travel to the United States in terms of pre-budget hearings. We weren't afforded that opportunity this year. It didn't work out. We could put on the docket a trip to the U.K. to meet with their officials in terms of how they implemented an open banking system. If we were really aggressive, we could even go to Brussels and meet with officials there, in terms of how the European Union has mandated its open banking system.

[The Chair, Liberal, Wayne Easter]

Mr. Julian.

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

I'm not sure I'm comfortable making a decision right away on this. I'd like to come back to the definition of open banking. As Mr. Sorbara has mentioned, the U.K. and Europe have implemented an open banking process. I'm struggling to understand what the characteristics of an open banking system are.

We're not talking about online banking or alternative banking. It's a term I'm not familiar with. If Mr. Sorbara could take a moment to explain what open banking is, as opposed to our existing system, it would certainly be helpful to me.

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

I'll answer Mr. Julian's question by working backwards. Think about all those millions of small businesses in Canada that millions of Canadians work for and run and put their efforts into every day. Open banking allows them to utilize products that allow them to be more efficient, to utilize their resources better. For example, PayPal's been invented, and people use it every day. E-transfer of funds is used within our banking institutions.

It's basically the development of products, financial innovation, that users can utilize with their traditional banks, but these products have been developed by third-party providers. It's really meant for ease of use in terms of the transfer of data. When I use the word “data”, I don't use it in terms of names, but in terms of financial data. For small and medium-sized businesses, it allows them to be more efficient. It allows them to use their resources better, and it gives them better, more up-to-date information.

In fact, Tom, with regard to your example of mortgages, open banking of financial data would allow, and in some places is allowing.... Say consumers wish to know mortgage rates, how much they can borrow from a financial institution—and we'll exclude the stress test right now. They can have that information at the tip of their hands without even going to the traditional schedule I bank or credit union or another provider or lender. They could have that information in their hands, because there are apps out there that allow them to do that. But they could do it only if the app or the provider is synched in with where their financial data is maintained or contained.

The term really speaks about innovation, Mr. Julian. It's something that is very important for Canadian consumers and people who run small businesses.