Evidence of meeting #95 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was pbo.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
Are there any other comments?
Well, the discussion was educational, for sure. Thank you both.
Shall amendment PV-2 carry?
(Amendment negatived [See Minutes of Proceedings])
Shall clause 23 carry?
(Clause 23 agreed to on division)
There are no amendments for clauses 24 to 102. I'll give you a moment to think about whether we want to carry them in a group.
Okay, can we go from clause 24 to clause 41?
Liberal
The Chair Liberal Wayne Easter
(Clauses 24 to 41 agreed to on division)
That included part 2, amendments to the Excise Tax Act.
Part 3 is on amendments to the Excise Act, the Excise Act, 2001, and the Economic Action Plan 2014 Act, Number 1, under clauses 42 to 67.
(On clause 42)
Mr. Albas.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Mr. Chair, I certainly appreciate that at committee a number of witnesses from various industries said this will be very harmful not just to the producers of beer, wine, and spirits—Canadian companies—but also to those who support them. For example, there will be a demand change for everyone, from the farmers who make the hops all the way through to restaurants. That entire chain contributes greatly to this country in terms of taxes and productivity.
Liberal
The Chair Liberal Wayne Easter
I have to interrupt for a second.
We've had a discussion on this and there are no amendments in this section. However, I think we are agreeable to having a discussion about these points and giving people some flexibility to have the floor to make their points.
I just want to make that point, because we're not speaking to an amendment.
Go ahead.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Mr. Chair, I appreciate the clarification. I will keep it rather succinct.
In my work as a member of Parliament previous to this 42nd Parliament, I had a chance to engage with people involved in the beer- and wine-producing industries. My area is a wine-producing region. I'm proud to say that today it is also a beer-producing region, with microbreweries opening in Kelowna, West Kelowna, and Summerland.
Mr. Chair, I think the challenge is that there are certain producers who will just decide not to grow or will decide to let go of certain staff to offset the cost increase that will happen here so they can maintain competitiveness. You also have the people who have entered into this industry in good faith under a business plan. Their markups provincially are very high. Again, they are not just paying GST and income tax and corporate income tax. They are also paying provincial markups as well as licensing fees, etc. These kinds of year-over-year excise taxes, when you add the GST on top of those, will make the industry less competitive.
For example, there's one large-scale producer that produces in both Canada and the United States. They have a 105,000 hectolitre deficit. There's more demand in Canada than not, and if you do not.... You know, they could go either way.
If we are adding costs that make them less competitive, they will go to where they, first of all, can sell much more easily, places like the United States where they don't have the same kind of interprovincial trade laws. For those that are just not big enough to have that choice, they will let jobs go. They will choose not to replace equipment.
Again, as I said to the minister, we're at the lowest levels of business investment since 1981. A year-over-year escalator is not in anyone's interest, not just for the industry, but I would say for the taxpayer. I think, year over year, you'll see a reduction in investment, as well as a reduction in jobs, and a reduction in the taxes from lower levels of production.
Thank you.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
I just want to echo what my colleague said, to inform my colleagues across the way that the witnesses were perfectly clear on this issue. The experts disagreed on other issues, clauses or parts of the bill. However, in this case, their opinions were aligned. The witnesses were clear and specific. If my memory serves me correctly, the five witnesses before us all disagreed with these increases, particularly the increases that will be adjusted based on inflation.
I'm talking about clauses 42 and 43, which seek to increase, in line with inflation, the excise duties on beer. I'm talking about both clauses. My colleagues can support an increase in excise duties on beer once, on this occasion only. However, I urge them to reject clauses 42 and 43, which seek to adjust the increase in excise duties based on inflation.
I think this will be extremely harmful to the industry. It's not only my opinion. I'm echoing what the witnesses told the committee, in particular the beer industry representatives, who are obviously directly affected by clauses 42 and 43. Later, we'll talk about wines and spirits, which are covered further down in part 3 of the bill.
I want to point out that the witnesses were unanimous, especially when it came to the increases based on inflation. I implore my colleagues to reject this component of Bill C-44, because it will clearly harm the industry. It will impose tax increases indefinitely, for an indeterminate number of years. It will also create a constitutional issue, as indicated by the beer industry representatives. They said,
no taxation without representation.
This measure seeks to increase taxes indefinitely in future years, and Parliament won't even need to approve the increases each time. If we approve this measure today, the excise duties will keep increasing indefinitely. The parliamentarians will never again have the opportunity to vote on the matter, unless other amendments are made to the Excise Act, 2001. Therefore, I implore my colleagues to reject this indefinite increase. Their desire to support a relatively small increase in excise duties is understandable. However, the increase should be made only on this occasion. Please don't support an indefinite increase.
Liberal
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I won't repeat what my colleagues Mr. Albas and Mr. Dusseault said, but just say that I certainly concur with those comments.
The other thing that was very clear from several of our guests, and we have in recent weeks had a number of indicators, is that this particular initiative will trigger some trade contracts that we have internationally. We are already under severe pressure with the United States. Why, over a few dollars, we would poke at an international trade agreement is beyond me. I think it needs to go on record here today, and we will put it on record, that these escalators are going to trigger an international trade dispute that this country, frankly, does not need.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Liepert.
Keep in mind, if anybody has any questions for the witness from the Department of Finance, Mr. Bourgeois, that is possible, too.
Mr. Ouellette.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
There is a witness, and we totally forgot. We were conversing across the way here.
One thing that I think has really been forgotten in a lot of this debate is the health implications. It wasn't something that was raised by any of the witnesses until I had the opportunity, so it's something that's been absent from this whole debate. In fact, I actually heard one of the witnesses make the same arguments that big tobacco made many years ago, that we can't do this, that those studies are all fake, and they're not true.
At the end of the day, we know that alcohol has a huge impact on a lot of communities, and prices haven't gone up for a lot of these products. Maybe we need more witnesses to come to testify about the health impacts of alcohol on various communities, not only in Winnipeg Centre but also, I'm sure, in Quebec and in Alberta. I'm sure the effects of alcohol are very important to a lot of communities.
When I look at the excise tax and the escalator, the thing I see is stability. I see a way of offering businesses a long-term vision of what the costs are going to be for them, and they can calculate those. They won't have a new government showing up after 10 years, saying that they had forgotten to raise those excise taxes for the last 10 years and maybe they should increase them by 15% or 20% because they haven't kept pace with inflation and the cost of actually providing these services and ensuring how much it actually costs to calculate this, and the cost to society. I think that's really important.
I was reading in greater detail.... Perhaps they were unable to explain it. At the same time, you have a Canadian primary product—Canadian wheat or Canadian grapes used in these products—and you use Canadian labour and you produce it in a Canadian place; there is no excise tax, which is what I heard. At the end of the day, for instance, for a case of beer it's 5¢ on a case of 24. To me that doesn't seem like a whole lot.
I'm really supportive of this measure, because I think it's moving in the right direction.
Finally, there is this idea of taxation without representation. I disagree with that. We were elected and we're standing here right now, and I think we're offering a long-term vision. Every one of the witnesses who came here to testify to the finance committee had the opportunity—
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Was that in the platform? It wasn't in the platform.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
—to vote for an elected representative, so they all have representation. It is not the case of Washington, D.C., where they don't have a congressman or it's not a state. They have the opportunity of being represented in this place by us, so for me it's a misnomer to say that they do not have representation. They do.
I do have a question for Mathieu Bourgeois, the witness, perhaps to his chagrin; I'm not sure. We'll find out.
Mathieu Bourgeois Tax Policy Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
Hello.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
Could you give us some of the reasons behind this increase?
Tax Policy Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
My name is Mathieu Bourgeois. I'm a tax policy officer at Finance Canada, for the sales tax division.
To respond to your question, basically it's all based on the fact that alcohol excise duty rates have not been adjusted to account for inflation in the last almost three decades, and in that sense it has lost some of its value over time. The change we would introduce today would be to ensure that the effectiveness of those rates will be maintained going forward. It's purely a matter of maintaining the effectiveness of those rates.
Liberal
The Chair Liberal Wayne Easter
On the point of this escalator, could you give us the figure? You've indicated there have been no increases for x number of years—I didn't catch the number. If those weren't in place in the past 20 years, what would be the excise tax today? If this clause had been in place 25 years ago, what would be the excise tax today? Going forward 25 years, it is going to be in place if it passes this committee.
Tax Policy Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
Without doing all the calculations off the top of my head, I think it would be about a 90% increase for the last 30 years. It would basically be the consumer price index at the rough average of 2% per year, so every year it would have meant a 2% increase for the last 30 years.
Liberal
The Chair Liberal Wayne Easter
If the consumer price index went up to 9% or 10%—and I was around when it was 10%, and I remember interest rates very well at the time—is that how much the excise tax would go up as well?
Tax Policy Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
Correct, but in the last 10 years, the average was roughly 1.9%.
Liberal
The Chair Liberal Wayne Easter
You're a little like my son. He believes interest rates are never going to go over 6%. I've seen them at 23%.
Mr. Dusseault.