Finance Committee on May 5th, 2020

[James Cumming, Conservative, Edmonton Centre, AB]

Do you think we'll get to a point where we can lessen the complexity—and this may go against your business model—particularly for students and seniors whose taxes could be effectively filed for them, much like the U.K. model? That allows your business to focus on those more complex returns.

Are we getting close or should Canada be headed in that direction?

[Peter Davis]

We have here in Canada, as you know, a voluntary compliance system. The onus is on the taxpayer to declare their income to the government. In making that declaration, it's the government's role to then conduct audits and do enforcement as it deems necessary. It's a good system. Like any system though, it's not perfect and there are always opportunities to improve.

When it comes to the level of tax complexity, it's a difficult question to answer on the surface because, in some instances, complexity is not necessarily a bad thing. What that typically means is that there are more benefits and deductions available to Canadian taxpayers to claim. That said, there has to be a balance where those segments you identified—students, seniors and lower-income Canadians—also have the ability to file with some measure of ease versus those individuals with more complex tax situations.

It's an ongoing discussion among the industry, taxpayers and the government to make sure we continue to have an appropriate balance in place.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

Mr. Littler, you mentioned the potential of a loan program directed toward the retail sector. A lot of us talk about the labour component, the wage subsidy, which is a variable cost. They'll bring on people as their revenues go up. They'll start to bring their people back in, but you make a valid argument that they have significant fixed asset costs, inventory costs and leasing costs.

Can you give us some idea of how you would apply a loan program? Would it be on the basis of revenue or on the basis of fixed costs? It would be difficult to administer but I certainly understand where the problem is.

[Karl Littler]

There are obviously going to have to be parameters. We have a bunch of entities that are operating at close to full capacity. One of the tests, as with the other program, would be a revenue-drop threshold.

Obviously, you're going to have a situation where that threshold is going to be at a higher level with respect to grants that are coming in than would necessarily be the case with a loan program. Our sense, therefore, is that the primary qualification would be revenue laws. What we don't believe it should be related to is enterprise size in a traditional sense, because essentially everybody affected is in a like condition. There are also retailers who do own real property. In those instances, they may be able to actually securitize those assets in a way that rental tenants are not able to.

I think the difference with respect to the CECRA is that we've seen this as involving some assumption of risk and a haircut by the landlords, but with the bulk of rent obviously still being borne by the tenants, notwithstanding that many of them can't operate their physical facilities. Unlike a situation where what is in effect a grant under the CECRA—it's a forgivable loan—goes to the landlord, in this case our assumption is that it would be a debt to the tenant. Our point is that it should be a manageable debt because the challenge of trying to securitize what is in essence frozen inventory is extremely difficult. The cost of capital in that environment, even presuming that it's available, is going to be so high that it's going to be very difficult for entities to emerge.

Our view would be that the benefit that government can bring to this space is its lower cost of borrowing, and also its capacity to calibrate the repayment to the recovery period. It's assumed that everybody who is going to be viable is going to pay every cent back, but to try and get that in the commercial market is just not plausible for most retailers at this point.

[The Chair, Liberal, Wayne Easter]

Thank you, all, on that round.

We'll go to Mr. Fragiskatos, and then we'll go to single questions as far as we can, starting with Mr. Brunelle-Duceppe.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much, Mr. Chair.

Thank you to the witnesses for their excellent presentations.

I'm particularly interested in the place and position of not-for-profit organizations and charities, not just now but as we address the crisis at hand and the recovery that will eventually take place.

I'll start with Mr. Roth.

I know, Mr. Roth, that you can't speak for the sector at large, but from your point of view, what are a couple of things that are really crucial going forward for the federal government to keep in mind as it puts in place a strategy for recovery? Where can not-for-profits fit in, and what are the best ways to help this sector?

I really believe that charities and not-for-profits have not just a role to play but a fundamental role to play. We heard from Imagine Canada last week. Bruce MacDonald put it quite well when he said that not-for-profits and charities, because of the specialized jobs that they do, are much better positioned to carry out vital services in a more efficient and effective way than government.

What is the role of the not-for-profit and charity sectors going forward in the recovery when it comes to COVID-19?

[Doug Roth]

I have a few thoughts, and Andrea may want to add on.

As I mentioned earlier, we're very concerned, not just about the short term but about the medium term and long term, and as you were saying, what this recovery looks like.

There are a number of areas where I think non-profits can help. One, and maybe it's not the first one that comes to mind, is around research. Something like COVID shines a light on how important science and research are in helping us better understand this and the issues that are at play. I think the fear is that it could get forgotten or be thought unimportant and that major investments in research could get interrupted part way through or never started.

In terms of low costs, a lot of our organizations are very volunteer driven, but that takes resources to drive, to be able to support patients who are in different situations. The infrastructure, as it's getting cut back, all of a sudden could get destroyed. The ramifications of that in the short term, medium term and long term could be devastating.

This may not be exactly on point, but I think charities are very interested in pivoting. I know that at the Heart and Stoke Foundation, at the Canadian Cancer Society and at others, we're not trying to stay the way we are. We're trying to change, leverage technology and be able to adapt to what the world will look like, but when you can't make your rent, can't pay your staff and can't fund your research, it really hamstrings every facet. We want to be part of the solution, but we're in a crisis and all the strings are kind of pulled apart against us.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much, Mr. Roth.

I want to put the same question to Ms. Seale and Mr. Koffler Fogel. I'll go to Ms. Seale first.

Andrea, do you have any thoughts on the role that not-for-profits and charities can play in the recovery? Perhaps I was unfair to Mr. Roth; the question was quite general. I'd like you to focus on it from a health care lens, seeing as Mr. Roth is with the Heart and Stroke Foundation and you're with the Cancer Society. Could you tell us the role that not-for-profits and charities could play in the recovery, specifically when it comes to helping people and their health?

[Andrea Seale]

One thing we're seeing is that as we start to get to what is hopefully the other side of the most acute crisis of the pandemic, the impact on the health care system will continue to be with us for quite a long time. The surge of people coming into the system is going to be high at first, and then the backlog is going to take many months to work through. That's what we're seeing. I think the extra needs that people have from a health care point of view and the extra support that health charities give will be with us for as long as it takes for the health care system to recover.

To add on to what Doug said previously, we see this as having a very long-term impact, not only because of the impact to the economy in the general sense that people will have less to give, but also because social distancing has such a dramatic impact on our fundraising. We have to assume that the events, the volunteers and the different kinds of grassroots efforts are going to be impacted for as long as there is social distancing.

As for the timeline, social distancing is going to be with us for a long time, and there may be a resurgence of COVID and new measures put in place again. This is what creates the real uncertainty for the charitable sector, as it really is not able to predict how long it has to prepare for lower donations. This is why we have to make pretty dramatic decisions right away to try to make sure that we survive. Charities generally don't have reserves to fall back on and don't take out loans to cover downturns. It's just not possible for us to operate that way.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

We are going to end it there, Peter. You're a little over.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I apologize to Mr. Koffler Fogel.

[The Chair, Liberal, Wayne Easter]

We'll turn to Mr. Brunelle-Duceppe, and then to Mr. Julian, Mr. Morantz and Mr. Sorbara.

Alexis.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Thank you, Mr. Chair.

I'd first like to thank all of the witnesses who took the time to speak to us today.

My question is for the Retail Council of Canada.

Mr. Littler, a lot of small business owners in my riding have called me to say that the credit card interchange fees they're required to pay are cutting into their profits, especially in the context of COVID-19. Cash is practically not used at all. Credit cards are primarily being used. The interchange fees charged by credit card companies in Canada and Quebec vary between 2% and 3%, but in Europe and Australia, these rates are set at 0.3%.

Do you think this would be a quick, effective and simple measure that would be good for all of the members you represent?

[Karl Littler]

Unquestionably, and that's certainly been our advocacy over a number of Parliaments.

The situation in Canada is that the rates have come down slightly from what was, on average, about 1.64% back before 2015. They came down to 1.5% and were supposed to be 1.4% right about now, actually, but because of programming issues and other issues, that is going to be captured at the end of the year.

The reality is that they're still four or five times what they are in Europe, and of course the volume of credit cards is going up massively because they're eating a bigger and bigger share of the wallet, especially in the COVID-19 situation. Frankly, the reductions we have received have basically been speed bumps in what has been a growth trajectory for the credit card companies, and obviously that cost gets passed on to consumers. In some respects, you get a reverse Robin Hood problem: People are cross-subsidizing the rewards for people who have high-value credit cards.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Yes, but it is also cutting into profits. It's really cutting into profits—

[The Chair, Liberal, Wayne Easter]

Thank you.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

Is that it, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

Alexis, we'll have to end it there.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

I hope everyone got that.

[The Chair, Liberal, Wayne Easter]

Mr. Julian, there will be just one question apiece for this last round.

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

Thank you.

Thanks to all the witnesses today.

My last question will be to National Chief Bertrand.

You've raised very compelling arguments today about the level of support that is required to make sure that indigenous people across the country, urban or living on reserve, have the ability to withstand this pandemic.

Do you believe that you are being heard? Is there a sense that there is movement from the government to provide the supports that are needed?

[National Chief Robert Bertrand]

Mr. Julian, I would like to thank you so much for your question.

To answer it as honestly as I could, I deeply feel that CAP is not listened to. We have talked to CIRNAC and we've talked to ISC. I don't know how many letters I've sent to the Prime Minister's office for a meeting with him, and the people answering his letters say that, unfortunately, he is too busy to meet with me.

It's very discouraging, the answers we are receiving, but I'm not usually the type of person who will take no for an answer. We will keep on knocking on doors. We will keep on trying to meet with all the concerned ministers, because indigenous constituents, our communities, rely on us. I can assure you, Mr. Julian, that we—me, the board of directors and all our reps—will not let these people down. We will continue knocking on doors. We will get what rightfully should be coming to our people, and we will not stop until we get the job done.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Morantz and Mr. Sorbara will wrap it up.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

Mr. McNaney of the National Airlines Council, I want to ask you a question.

Since the crisis started, I've been hearing consistently from constituents who had purchased airline tickets and then had to cancel them because of government travel restrictions. It's become a bit of a thorn in the side of many constituents who have been laid off and had paid money for their tickets. I realize it's a complicated issue. There are a number of different fare categories, some refundable, some not, but under these circumstances, why not do what the Americans did and refund these tickets to people who were not able to take their flights in the first place?