Evidence of meeting #2 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was billion.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Nicholas Leswick  Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Andrew Marsland  Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
Suzy McDonald  Associate Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Evelyn Dancey  Associate Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance
Soren Halverson  Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Ben Brunnen  Vice-President, Oil Sands, Fiscal and Economic Policy, Canadian Association of Petroleum Producers
Ed Holder  Mayor, City of London
Craig Stewart  Vice-President, Federal Affairs, Insurance Bureau of Canada
Philip Cross  Senior Fellow, Macdonald-Laurier Institute
Bruno Letendre  Chair, Les Producteurs de lait du Québec
Alain Bourbeau  Director General, Les Producteurs de lait du Québec
Barbara Zvan  Chief Risk & Strategy Officer, Canada’s Expert Panel on Sustainable Finance, Ontario Teachers' Pension Plan
Melanie Bechard  Executive Board Member, Canadian Doctors for Medicare
Catherine Cobden  President, Canadian Steel Producers Association
Toby Sanger  Executive Director, Canadians for Tax Fairness

6:55 p.m.

Vice-President, Federal Affairs, Insurance Bureau of Canada

Craig Stewart

Correct. Canada is becoming a more difficult and costly place to reinsure for insurers, so reinsurers are paying more in terms of reinsurance. Then, of course, that means average Canadians are paying more as well.

6:55 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

Do you have data on uninsured losses?

6:55 p.m.

Vice-President, Federal Affairs, Insurance Bureau of Canada

Craig Stewart

Typically, uninsured losses run at about $3 for every $1 insured, so a $1.3-billion loss was $5 billion for taxpayers last year.

6:55 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

That's right, and that's borne directly out of the pockets of Canadian taxpayers.

6:55 p.m.

Vice-President, Federal Affairs, Insurance Bureau of Canada

Craig Stewart

That's correct.

6:55 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

There's a lot of scare in that sort of answer, but to take Ms. Zvan's advice and to look not just at the burden but also the opportunity.... I know Mark Carney's name has come up. He's flagged what might be a global $23 trillion to $26 trillion opportunity in the green economy.

In the one minute or so that I have left for my questions, where we can have the biggest impact? It sounds like the cost of solving the problem is less than the cost of ignoring the problem. Where are we going to get the most bang for our buck in terms of emissions reductions and economic opportunity if we make these investments?

7 p.m.

Chief Risk & Strategy Officer, Canada’s Expert Panel on Sustainable Finance, Ontario Teachers' Pension Plan

Barbara Zvan

In pillar three, we laid out key sectors with regard to investing in clean technology and having a real path in terms of the areas you focus in on. It will be in the oil and gas sector. You are losing investors, because they don't see the long-term viability of that sector, and that's what you really need to deal with. It's commitment and it's strategy in terms of how the oil and gas sector in Canada will survive in a world where we want less emissions. It's infrastructure. Infrastructure always creates jobs, and sustainable infrastructure is what's needed for there to be resilience from a climate point of view. Then it's residential. Buildings have a huge emissions impact. It's thinking about how they're built, how they're renovated, and how they're financed. There are a lot of small projects, and it's about how to bring them together.

All of those topics would be key areas.

7 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

Excellent.

Thank you, Mr. Chair.

I want to say thank you to each of these witnesses, because I believe they will end our session.

7 p.m.

Liberal

The Chair Liberal Wayne Easter

Spinning off from that last infrastructure question, I do have a question for Mr. Brunnen. I see that Mr. Liepert is here, and he would want to ask it as well.

In terms of infrastructure and oil prices in Canada, can you explain to us the Alberta discount—why we have it, what it would take to get rid of it, and what it's costing the country a day or a year?

7 p.m.

Vice-President, Oil Sands, Fiscal and Economic Policy, Canadian Association of Petroleum Producers

Ben Brunnen

When looking at the heavy price discount for Canadian oil down into the United States—that's really where the market is for our heavy crudes, largely the oil sands—what we have is effectively a supply and demand imbalance. We have oversupply for our product, with not enough capacity to ship our crudes to the refiners—largely on the gulf coast but also in the Midwest. That's driving a fair amount of the discount.

If you were to look at this, it would be a natural discount. When looking at it from a transportation and quality basis, that, ideally, would be the price discount you'd see for our crudes. What we've been seeing with the excess supply is that we're getting a higher discount for our crudes as a result of that. Pipeline access has been the greatest factor, but it's also a market power piece in the absence.... We are effectively price takers for these U.S. refineries

The unnecessary discount probably costs the Canadian economy approximately $2 billion a day, if I recall correctly. I would have to check those numbers. I haven't looked at those recently.

7 p.m.

Liberal

The Chair Liberal Wayne Easter

It's $1.8 billion.

7 p.m.

Vice-President, Oil Sands, Fiscal and Economic Policy, Canadian Association of Petroleum Producers

Ben Brunnen

Thank you: $1.8 billion. That's excellent. You're doing some fine work there.

There's been some good news on Line 3 today, with some of the announcements in the United States. We're hopeful that we'll see some favourable decisions as well going forward. I haven't seen the TMX update today.

7 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Brunnen.

Thank you to all the witnesses. I think everyone got to ask questions, and that is great. Thank you to all for coming on short notice.

We'll suspend for about three minutes while we bring forward the next witnesses.

7:05 p.m.

Liberal

The Chair Liberal Wayne Easter

We'll reconvene. We're dealing with the study of the pre-budget consultations for 2020.

We have three witnesses to handle in the next hour.

Welcome, folks, and thank you for coming on such short notice; the call only went out on Friday.

We have a fairly intense time frame in which to get some recommendations in from the pre-budget consultations.

We'll start with the Canadian Doctors for Medicare, Dr. Bechard, executive board member.

The floor is yours.

7:05 p.m.

Dr. Melanie Bechard Executive Board Member, Canadian Doctors for Medicare

Thank you to the members of the Standing Committee on Finance for the invitation to speak today. I'm here not only as an executive board member of Canadian Doctors for Medicare, but also as a pediatrician currently training to be a pediatric emergency specialist at the Children's Hospital of Eastern Ontario here in Ottawa.

Founded in 2006, Canadian Doctors for Medicare provides a voice for doctors from coast to coast to coast, advocating for evidence-based, values-driven reforms to our public health care system.

At present, Canada is the only developed nation with universal health care and no corresponding coverage of prescription drugs. Medications administered in hospital are covered, yet once patients are discharged to home, they must deal with a patchwork of systems to obtain their necessary medications. These inefficiencies have contributed to higher drug costs. Canada currently spends $1,012 per capita on prescription medications, the third-highest in the world only after the United States and Switzerland, and well above the OECD average of $709.

In Canada, 36% of drug costs are funded through private insurance plans, 36% through provincial drug plans, and 22% through patients' out-of-pocket funds. This means that many Canadians face financial barriers when trying to access the medications needed to keep them healthy.

Studies have shown that one in 10 Canadians are unable to afford their medications as prescribed. In 2016, about one million Canadians reported cutting back on essentials like food and heating in order to afford their medications. When Canadians cannot afford their medicine, their health suffers. In addition to the very real personal consequences of poor health, cost-related non-adherence can also create wider social and economic burdens. When people cannot take the medicine needed to keep them well, health problems can worsen to the point where more serious and expensive acute care is required.

As a pediatric emergency doctor, I have seen children coming into our department because their parents could not afford their asthma inhalers. Studies have shown that for every 1% increase in the proportion of income spent on asthma medications, children are 14% more likely to present with asthma attacks requiring care in urgent care clinics and emergency departments. This should not be happening in Canada, and we can do better.

This is why Canadian Doctors for Medicare advocates for universal, single-payer public pharmacare to improve access to necessary medications for all Canadians. The June 2019 Hoskins report, “A Prescription for Canada: Achieving Pharmacare for All”, provides a detailed roadmap for how to achieve this vision. The first steps include creating a national, evidence-based formulary of medications that are clinically effective and cost-effective. Provinces and territories could then opt into pharmacare by agreeing to national standards and funding parameters. Hoskins recommended copayments of $2 to $5 per medication, with no household paying more than $100 per year.

Studies have demonstrated that universal public drug coverage in Canada could reduce total spending on prescription drugs by $7.3 billion. Bulk purchasing and thoughtful, evidence-based drug selection would help to reduce costs. Pharmacare could save the private sector an estimated $8.2 billion. Employers and unions that sponsor increasingly expensive and unsustainable private drug coverage plans could benefit and enjoy significant savings for their businesses.

Anticipated costs to government could increase by about $1 billion, with a best-case scenario of actually saving our government $2.9 billion. These estimates do not include other potentially significant cost savings, such as decreased tax subsidies for employers to sponsor private plans, reduced administrative costs and the very promising benefits of a healthier population.

Too often, we need to choose between what is right and what is financially feasible. Pharmacare offers a rare opportunity to do both. We can have a tremendously positive impact on the health and lives of Canadians with the potential for great economic benefit. This is the unfinished business of medicare. It is a rare opportunity to build upon our Canadian legacy.

Thank you very much for your time and consideration. I would love to hear any questions or discussion.

7:10 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

We will turn now to Catherine Cobden, president of the Canadian Steel Producers Association.

Welcome again, Catherine.

7:10 p.m.

Catherine Cobden President, Canadian Steel Producers Association

Thank you very much, Mr. Chair and members of the committee, for having me.

My name is Catherine Cobden, and as mentioned, I am the president of the Canadian Steel Producers Association. We thank you very much for the opportunity to provide input to you in terms of your pre-budget deliberations.

I'm here today representing our member companies, who are the producers of steel. They produce approximately 15 million tonnes of steel products, and they support approximately 123,000 direct and indirect jobs.

Canada's steel sector plays a strategically important role in the North American economy. We are advanced manufacturers of a 100% recyclable product, and we are also a critical supplier to other key Canadian sectors, such as the automotive sector, the energy sector, the construction sector and many other general manufacturing operations. Given the important role we play, it is imperative that we maintain a steel sector that is strong, competitive and addressing its climate emissions. Our input into your budget deliberations today will focus on three strategic goals: driving investments to create the low-carbon economy, leveraging climate policy to Canada's competitive advantage, and addressing ongoing global trade risk and uncertainty.

The Canadian steel industry has reduced greenhouse gas emissions by approximately 31% since 1990. This is a track record that we are immensely proud of as a very large emitter. To go further, however, in our reductions, we'll require breakthrough technologies and solutions that, unfortunately, simply do not exist today. The scale and investment that will need to be dedicated to our transformation require partnership with our government and others, and together we can get it done. The steel sector is prepared to find solutions, and we do have ongoing collaborations. We are looking at working with our suppliers, our customers and the clean-tech industry to find these solutions, but frankly, we have an urgent need to accelerate this development and to do more to support our decarbonization efforts.

As a very first step, we urge the government to ensure that the revenue generated by the federal pricing system is recycled back to large emitters like ourselves and that existing programming is deepened with funding directed specifically to the decarbonization of key sectors. This should be done immediately to help spur the development of the necessary breakthroughs for dramatic emissions improvements in the longer term.

We also recognize that Canada's climate leadership offers both an immediate opportunity, as well as some risk, for our sector. We know that our greenhouse gas emissions profile is significantly less than that of foreign steel being imported from places such as China and other faraway jurisdictions. This is a very important opportunity to ensure that the inherent values and benefits of carbon, of Canadian steel in Canadian projects, are recognized through the domestic procurement efforts right across the country. We also know that more renewable or non-emitting energy sources will play an important role in Canada's steel sector.

On the other hand, we stand at a disadvantage compared to other steel-producing nations that do not face carbon costs. This is the dilemma. While we want and commit to doing our part, we urge the government to investigate whether there are interim means to levelling the playing field to support our sector while we actively seek solutions to this pressing problem as others lag.

Now the North American steel market faces a relentless flow of unfairly traded steel imports due to a global overcapacity of steel to the tune of 440 million extra tonnes of steel. This is a significant amount. We continue to face challenging market conditions, as well, throughout North America. This reality creates a very difficult footing for our sector to advance our climate objectives, but advance them we must.

Canada has more work to do, however, to modernize our trade remedy system. For example, we call for improvements and increased resources for Canada's import permit system. This is necessary to increase the frequency and accuracy of import monitoring. Ideally, in our view, this would include the reinstatement of import permits for all shipments into Canada. It's a tall order, but it's required.

We are grateful for the Canada-U.S. understanding—and for the team Canada approach it took to make it happen—that was really established between the governments of Canada and the U.S. in May 2019. We're also excited about and supportive of the recently signed CUSMA.

We urge the government to continue to explore opportunities to work with the U.S. and Mexico on a North American perimeter to trade—that's what we're about—to strengthen the competitiveness of our North American region and to address global steel overcapacity that affects the entire North American region and to deal with unfairly traded steel imports that affect the North American region.

These collective efforts will strongly support the steel sector's ability to be competitive and to position us for the future of advancing our climate objectives.

Thank you, Mr. Chair, for the time.

7:20 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Catherine.

Our final witness is Canadians for Tax Fairness, Toby Sanger, executive director.

Welcome, Toby.

7:20 p.m.

Toby Sanger Executive Director, Canadians for Tax Fairness

You're welcome, and thank you very much for inviting us, Chair and members of the committee.

Congratulations to all members on your election or re-election and your appointment to the finance committee.

I'd also like to commend all of you and the staff of the finance committee for holding these consultations on such short notice. I'm always impressed with how efficiently and graciously you work under tight timelines.

For this year's pre-budget consultations, the committee asked interested groups and individuals, in particular, to provide advice on the theme of climate emergency, the required transition to a low-carbon economy. Finance minister Bill Morneau seems to have already taken your advice, as he said that the environment would be a major focus of this budget, and our supporters also identified addressing climate change as a top-five priority. So I'm going to start with this issue.

We agree that this budget must be a climate action budget with substantial federal investments to make the transition to a low-carbon economy. The Green Economy Network has done some research into this area. It called for an additional $81 billion in investments over the next five years. That works out to about $16 billion per year in building retrofits, renewable energy and energy efficiencies in different industries, public transit and high-speed rail. It estimates that this could reduce our greenhouse gas emissions by up to 35%, which would meet our targets for 2030, and these investments could also create an estimated one million person years of employment. It would be good for the environment and the economy.

How could this be paid for? First of all, the federal government should finally eliminate subsidies to the fossil fuel industry, as these work contrary to our climate goals. The parliamentary budget office estimates that the federal government could recover over $2.5 billion annually by eliminating a few tax subsidies for oil, gas and mining corporations.

Second, the federal government should strengthen its carbon tax framework by limiting the preferences for large emitters. It should convert the cap and trade program to a transparent carbon tax but with border carbon taxes and rebates, as the EU is planning to do, so you have border tariffs on the imports and then rebates for exporters. This would maintain the competitiveness of Canadian industries, such as the steel industry, and provide an incentive for other countries to also take action.

The federal government could also generate many billions more by closing regressive and ineffective tax loopholes, as we've argued for a number of years.

We're glad to see the government planning another review of tax expenditures and that this one is going to be public, but it could achieve far more than the $1.5 billion that was projected in the fall economic statement. This review could be truly public and involve broad public consultations and input, and perhaps the finance committee could play a role in this as well.

One of the most regressive tax loopholes is, of course, the stock option deduction. I was glad to see the government take some steps on this, but we feel that it should be completely eliminated instead of the complicated and somewhat unfair proposal that was included in the 2019 budget.

We're also glad all parties agree that large foreign e-commerce companies should be required to pay tax on the business and revenue they generate from Canadians and that this is included in the platform and the plans for the government.

Applying the GST and sales taxes to imports of all digital services, including advertising, is essential to level the digital playing field and to making Canadian producers competitive.

Applying a digital sales tax to the revenue of large foreign e-commerce corporations is also an important step on the route to real international corporate tax reform, which is now under discussion at the OECD.

Together with this, Canada should certainly put limits on the interest payments that corporations can deduct from their profits, particularly to offshore subsidies. We're glad that the government is planning this, but the cap should be reduced to 20% or lower. The OECD recommended 10% to 30%.

The federal government could also end the ability of corporations to shift profits to offshore affiliates, by requiring corporations to demonstrate that these affiliates carry out actual economic activity. There was a recent report by the IMF that calculated that approximately 40% of the foreign direct investment overseas is actually in shell corporations. It's not for any actual economic purpose.

Ultimately, we should shift to an international corporate tax system with unitary taxation of corporations and apportionment of their profits according to a formula that reflects real economic activity just as we allocate corporate profit for tax purposes between provinces in Canada. The U.S. does the same thing as well.

We also need increased investments in the Canada Revenue Agency. Funding for the CRA only just recovered last year to what it was 10 years ago in real dollar terms. We were glad to see the Conservatives also pledge for increased investment in tax compliance and enforcement, as this would pay back many times in increased revenues to reduce the large tax gap.

I welcome any further questions and discussions. Thank you very much.

7:25 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Sanger.

I think we'll restructure the rounds. The first round will be four questions at five minutes apiece, and the second round four questions at four minutes apiece. That will give eight people a chance to ask questions.

Mr. Martel, and then Mr. Fraser.

7:25 p.m.

Conservative

Richard Martel Conservative Chicoutimi—Le Fjord, QC

Good afternoon.

My first question is for Ms. Cobden.

I want to know whether the assistance that you received to address the American tariffs was beneficial.

February 3rd, 2020 / 7:25 p.m.

President, Canadian Steel Producers Association

Catherine Cobden

Absolutely. I'm assuming you're talking about the investment assistance through the strategic innovation fund that took place as a result of the tariffs. It's important to understand that the tariffs had a deep and relentless effect on the Canadian steel industry. They were uncalled for, and they put us back on our heels. Certainly, that was an important step, an important program, for us.

7:25 p.m.

Conservative

Richard Martel Conservative Chicoutimi—Le Fjord, QC

I want to further discuss the assistance that you received to address the American tariffs. The SMEs in the aluminum sector believe that they were treated unfairly with regard to this assistance. Do your members also believe that they were treated unfairly in this area?

7:25 p.m.

President, Canadian Steel Producers Association

Catherine Cobden

It's important to recognize that the government was working with what it could. Definitely, the SIF program generated important investments that focused on our competitive position, started some of our green transformation, and helped to ensure that our industry had an opportunity to attract investment.

However, the facts are that we lost about a billion dollars of investment over that period of time. We cannot underestimate the impact of the tariffs on the industry, which was my earlier point, but at the same time, we're very grateful to have had a program that helped us get some investment happening again in the sector.

7:25 p.m.

Conservative

Richard Martel Conservative Chicoutimi—Le Fjord, QC

With respect to rare earth, do you feel that our industry is lagging behind in terms of competitiveness and innovation?