Finance Committee on March 25th, 2021

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

Thank you very much, Mr. Chair.

My thanks to our witnesses for joining us today.

We hope that your families and yourselves will remain healthy and safe during this difficult period, in which the third wave of the pandemic has unfortunately already begun.

I have a lot of questions for you and I would like to start with Mr. Ross.

Mr. Ross, thank you for joining us today

You talked about putting an end to tax havens and making the tech giants pay. You even talked about a wealth tax. Until now, the government simply decided to impose a minimal sales tax on the tech giants.

How important is it to put measures like these in place?

We have a pandemic raging and a government preparing to make 50% cuts in the programs, starting on April 1 and continuing into the next financial year.

However, how much could we raise with good financial management and a fair tax system?

[William Ross]

Thank you for the question, Mr. Julian.

With respect to your question about how much money we could go after, the answer is really not easy to provide insofar as multinationals are generally not at all transparent, and there is a lack of country-by-country profit reporting.

Canada participates in country-by-country profit reporting programs, which we can basically use to find out the actual economic activity of a company like Amazon on Canadian soil. But that data is not made public. That makes it hard for researchers and economists to know what to focus on.

Estimates show us that a lot of profits are made by companies like Facebook on advertising or Google and Amazon on web hosting services, and they don't pay their fair share of tax.

So, first, these giants are competing unfairly with Canadian businesses. Second, in an economy that has basically gone digital over the course of the year, as most people have turned to giants like Amazon to be able to shop when the stores are closed, money and economic activity is flying under the Canadian taxman's radar. That is extremely problematic, especially in a situation where public spending is exploding for entirely legitimate reasons.

It has often been said that we had a war economy of sorts during the pandemic. In a war economy, it's only right that everyone should put in their fair share of effort and that some sectors are harder hit than others for a time, since activity is concentrated in certain sectors only.

With this in mind, I think it's a crying shame that they didn't go ahead with the original plan to introduce a diverted profits tax on April 1, 2020. We missed out on the worst year to be able to do it. The OECD is still negotiating on it, and there is no guarantee that we will have an international policy until 2022. So—

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

I am going to interrupt you so that I can ask a second question. Then I would like to turn to Mr. Littler.

You mentioned the public beneficial ownership registry. That is missing in Canada and we had proposed it. Yet the majority of the Standing Committee on Finance rejected our proposal.

Why is it important to know who the beneficiaries of these companies are?

[William Ross]

Actually, first of all, it's a question of traceability. Whenever the Canada Revenue Agency, for instance, tries to find out who is being delinquent on their taxes and it runs into a shell company based in the Bahamas or Bermuda, it hits a wall at a certain point as it hunts for information and it's unable to trace the people responsible for those tax crimes.

That's a problem in terms of tax evasion and tax avoidance, but also in terms of money laundering. Organized crime does a lot of that, particularly in real estate investments across Canada as well.

For all these reasons, it's absolutely crucial that we know who the beneficiaries of these companies are.

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

Thank you very much.

Mr. Littler, I'm going to go to you. If you could tell us a bit about the impact.... We've just spoken about web giants not paying any income tax at all. What is the impact on retail merchants across this country when you have a whole sector that isn't even paying taxes but competing with members of your association? What would you like to see done so that there isn't that unfair competition anymore?

[Karl Littler]

The first thing I would say is that the government, of course, is making some moves with respect to the platform sellers with respect to tax collection there. Certainly one of the challenges that Canadian retail merchants have faced was the situation where a marketplace seller was not collecting provincial taxes and therefore their all-in price was inevitably going to be lower than the price that was tax-inclusive. The federal government can make some moves in that area because of GST, and obviously HST in harmonized provinces, but it doesn't have the capacity currently to move with respect to the provincial taxes. So that's going to be a partial solution to that problem.

There's also a move afoot to make sure that the landed price, which is the price on importation in bulk, is not the basis of taxation, and that the basis of taxation is that which is charged to the end-user, being an individual consumer.

We are in somewhat better shape than we were perhaps worried about being prior to the renegotiation of NAFTA, because there was a significant push from the U.S. to gain access at very high levels of de minimis thresholds for its members.

I think it's probably beyond us to understand the full corporate tax implications and the sort of domicile and declaration of profitability. Our primary push has been to make sure, at least on a sales tax basis and also with respect to things like environmental stewardship fees and those sorts of issues, that they're even-handed and that they apply equally to an online vendor, whether domestic or a Canadian resident, and to somebody operating in a bricks and mortar store.

[The Chair, Liberal, Wayne Easter]

We are going to end it there and go to Mr. Kelly, followed by Mr. Fragiskatos for five-minute rounds.

Pat, you're up.

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

Thank you, Mr. Chair.

My first question, to Mr. Littler, is about the rent subsidy.

In your remarks, you pointed out the transition from the CECRA program—which, with all due respect to the necessity of designing programs quickly on the fly, just didn't make a lot of sense. It was, I think, an example of Parliament working together to create better programs. The opposition offered many suggestions for improvement that were included in the ultimate current rent subsidy. However, there are still issues with that program, and I'd like your comments on them.

For one thing, can you comment on the prohibition around related parties and how this works itself out among small businesses that may be, for example, required by their bank to have a separate holding company and a separate operating company? Now the landlord and the tenant are not at arm's length, and yet the operating company is the one that can apply for the rent subsidy—or even related parties where members of the family would own the building and the younger generation is operating the company.

[Karl Littler]

Yes. To be honest with you, I'm not sufficiently familiar with the related party rules. We did look at that at the time the rules were put into place, but I wouldn't know how widespread that problem is or the different configurations that might be reasonable in business terms but would offend against the CERS rules. I'm sorry that I can't be much help in that regard.

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

Okay.

You actually very briefly mentioned something that's a bit of a sensitive topic, but you brought it up, and that is the competition with the CERB benefit for employees. Would you mind commenting a little bit more on that? This is something that at the constituency level small business owners have mentioned.

[Karl Littler]

Sure. There was a significant move to address that.

When the CERB was first introduced, it was a flat $2,000-a-month benefit. It precluded any income from employment. Therefore, we had the odd situation, especially with respect to part-time employees, where the government was offering more money than they would gain through employment, so there was this forced choice that was presented between whether you go to work amidst a pandemic and take that on, or whether you are better off under the program.

Given that part-time workers are, obviously, a very central element within the retail workforce, our request, which was ultimately accepted by government, was that $1,000 in monthly income be permitted. Obviously, that has evolved over the course of time.

That didn't solve every problem, because, again, it was a binary situation. If you made $1,001, you lost your entire CERB benefit. Therefore, we had the oddball situation of people saying, “I will take some hours, but make very sure that I'm not going to make over $1,000 a month because there is this really hard notch or cliff where I lose all of my CERB benefit.”

It not only created some prospective hardships for the employees individually, but for the HR people in companies it became this huge juggling act of having some people who might be willing to work some hours in order to add to their family income, but who are also worried about butting up against this consequence that would cost them their CERB benefit.

That has never been completely sorted out. It has become a little less material in our space, as there has been a significant return of the workforce. We're now down about 100,000 jobs, so it's not insignificant.

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

So the improvements that were made on recommendations from stakeholders such as yourselves and from opposition parties that had made this argument.... That was helpful, but there is still a lingering issue around that.

[Karl Littler]

Yes. It's a lesser issue, certainly, than the first challenge.

[The Chair, Liberal, Wayne Easter]

I think Mr. Wilson and Mr. Ryan were shaking their heads, too. I don't know if they want in. We will not take time from you, Pat.

Did you want in, Mr. Wilson? Okay.

Go ahead, Pat.

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

I am going to switch and ask Ms. Besse about both the HASCAP and the BCAP programs.

First of all, I want to make sure that I understood correctly your response to Ms. Dzerowicz's question. Did you say that none of your members have even made application under the BCAP program?

[Shelley Besse]

That's correct.

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

Wow. This was announced as a.... This is not a small program. It's quite a significant one.

It's not just a question of non-approval; it's that nobody has even applied. Is that correct?

[Shelley Besse]

That's correct. I believe we have done five or six facilities of the co-lending program.

[The Chair, Liberal, Wayne Easter]

You can ask a fairly quick question, Pat. You're a little over time, but go ahead.

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

I will just let you comment on HASCAP. Have you had any traction with that?

[Shelley Besse]

We have not launched HASCAP as of yet. We are in the final couple of days or perhaps week before we launch it to our members.

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

All right. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Fragiskatos is next, followed by Mr. Ste-Marie.

Peter, go ahead.

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

Thank you very much, Mr. Chair.

Thank you, especially, to the witnesses—really thoughtful presentations today and a lot of insight for the committee.

I want to start with Mr. Wilson.

You said in your presentation that 53% of your members received the wage subsidy support throughout the pandemic. Is that correct?

[Mathew Wilson]

Yes. We did a survey of the manufacturing community in the fall, and 53% of the respondents to that survey said they had used the wage subsidy program.