Evidence of meeting #47 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was budget.
A video is available from Parliament.
12:25 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, both.
Just quickly, Mr. Brush, there were no questions to you. Do you have anything you want to add before we close?
12:25 p.m.
Interim Chief Executive Officer, Habitat for Humanity Halton-Mississauga Dufferin
Thank you. I just want to say that this is a great opportunity. That's number one. Number two, at a local level, we are trying to take advantage of the RHI funding as well, along with the other types of funding the federal government is giving. I understand that more has been opened up. At a local level, we are looking for that opportunity.
12:25 p.m.
Liberal
12:25 p.m.
Interim Chief Executive Officer, Habitat for Humanity Halton-Mississauga Dufferin
I will. Thank you.
12:25 p.m.
Liberal
The Chair Liberal Wayne Easter
I want to thank all the witnesses for their appearance today. As with most panels, we covered a fairly wide map.
Mr. Neumann, I think Peter said it on behalf of us all. On behalf of the whole committee, thank you for your life's work. Putting pressure on governments of all types is part of the job that you've had. It leads to better policy, regardless of political stripe.
We wish you well in your retirement and all the best.
12:25 p.m.
National Director for Canada, National Office, United Steelworkers
Thank you very much.
12:25 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, everyone.
Committee members, we will suspend and then come back to the next panel.
12:30 p.m.
Liberal
The Chair Liberal Wayne Easter
We will reconvene and call the meeting to order.
We welcome the second panel of witnesses to meeting number 47 of the House of Commons Standing Committee on Finance.
We are, as you well know, meeting on Bill C-30, an act to implement certain provisions of the budget tabled in Parliament on April 19, 2021, and other measures. I should call it the prestudy on Bill C-30, because it hasn't been referred to us as of yet.
With that, welcome, again, to all the witnesses. We will start with the Canadian Union of Public Employees.
If you could keep your remarks roughly to five minutes, we will have more time for questions. We'll start with Ms. MacEwen, senior economist, National Services, CUPE.
Welcome, Angella.
12:30 p.m.
Angella MacEwen Senior Economist, National Services, Canadian Union of Public Employees
Thank you very much. It's nice to be here with all of you.
The Canadian Union of Public Employees is Canada's largest union, with over 700,000 members. Our members work in a broad cross-section of the economy such as health care, education, municipalities, libraries, universities, social services, public utilities, emergency services, transportation and airlines.
With regard to this budget, we want to reiterate that investment in the care economy, including health care, child care and social services, will have social and economic returns far higher than the current cost of borrowing. A vibrant, accessible care sector ensures that everyone can participate in the workforce, which will be essential throughout the economic recovery. Government investment in care improves labour market outcomes for women and overall productivity, allowing governments to recoup the upfront costs at the end, so we're very glad to see the investment in child care that was proposed with the provinces.
To make sure this reaches its full potential, we need to see a strong workforce development plan alongside the proposed child care spending to make sure that we have enough trained workers and to ensure that the lower costs of child care we want to see for parents is not being subsidized by pushing the wages of workers even lower than they already are.
In terms of employment insurance, CUPE has long asked for some of the reforms to employment insurance that we see temporarily implemented here such as the lower-paying Canadian entrance requirement and the extra five weeks in high unemployment locations.
We were disappointed to see that the promised extension of EI sickness benefits to 26 weeks has been delayed until the summer of 2022, because that leaves a substantial number of long-haul COVID patients without the economic supports they'll need. They will have exhausted all other benefits, and implementing the EI sickness benefits right now would have been a way to kind of bridge that gap for a lot of people.
We are happy that there is substantial money for training; however, nearly all of it is being targeted for employer-led and employer-developed training. There is no direct support for workers themselves and no support for worker-selected training. The need for training supports and flexibility on training will only grow more urgent as Canada's economy transitions to create more green jobs.
On the minimum wage, CUPE is happy to see the federal government establish a federal minimum wage of $15 per hour. We recommend that the federal minimum wage be adjusted upward annually faster than CPI for the first five years, recognizing that the costs of essentials such as food, water and shelter are increasing faster than the overall rate of inflation, and the $15 rate is what was proposed several years ago and has already been eaten away by several years of inflation.
In terms of tax fairness, this budget was a big disappointment. Tax cuts since 2000 have reduced federal revenues by over $50 billion annually, and the major beneficiaries of these tax cuts have been large corporations and the wealthiest Canadians. These cuts have left a huge hole in federal budgets and have had a ripple effect across provincial budgets as the federal government stepped back from funding essential public services.
The federal government could have increased revenues by over $50 billion without increasing tax rates on middle- and low-income Canadians with fair tax measures like restoring the federal corporate tax rate to 21%; eliminating wasteful and regressive tax loopholes; changing how we tax capital gains deductions, the benefit of which goes to the top 10% of income earners; cracking down on tax avoidance in ways that we know will make a difference rather than just continuing consultations; and introducing a wealth tax on estates over $20 million. The federal government should also still consider introducing an excess profits tax that could raise up to $8 billion, even if it's only on 15% of excess profits for one year.
In terms of transparency and accountability for public supports, unions asked the federal government, when it was implementing supports such as the wage subsidy, to make sure the rules for this program were fair. What we've seen is that did not happen, so lots of very profitable companies have taken public money at the same time as they were paying out big bonuses to executives and dividends to shareholders, laying off or locking out workers and using the wage subsidy as a way to push workers to accept lower working conditions and wages.
There's substantial room for improvement in terms of the transparency of corporate support to ensure the effectiveness and fairness of public spending. CUPE has recommended several ways in which the government could strengthen these conditions and improve transparency and accountability. These include clauses that mandate labour protections for workers, including protection of benefits and health and safety protocols, and ensure protections for whistle-blowers. When there is a union in the workplace, include them in the negotiations for wage subsidies and other supports. For a year after a corporation receives public subsidies or loans, implement prohibitions on dividend capital distribution and share repurchases.
As well, make information about all of this, about how public money is being spent, clear and publicly available.
Thank you.
12:40 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Ms. MacEwen.
We'll turn now to the Council of Canadian Innovators and Jim Balsillie.
Mr. Balsillie, go ahead.
12:40 p.m.
Jim Balsillie Chair, Council of Canadian Innovators
Thank you, Mr. Chair.
I'm Jim Balsillie, presenting on behalf of the Council of Canadian Innovators. I'll make two observations about the structure of the modern economy in relation to the budget and conclude with one recommendation.
The accelerated pace of innovation and the digital transformation over the past 30 years has created a new kind of economy in which the basis of wealth and power is derived from the ownership of valuable IP and control of data. Concurrently, the new technologies of this era, centred on the nexus of automated decision-making and machine learning, are reshaping our social and political spaces. Intangible assets comprise 91% of the S&P 500's $28-trillion total value.
This shift is unprecedented in its degree and rapidity, particularly with the emergence of high-profit firms with monopoly positions based on IP rights and control of data assets. Wage growth is now concentrated on the small workforces of firms rich in IP and data, which drives inequality. These firms have a low propensity to invest because they generally don't produce tangible goods. Rather, the marginal production costs of their intangible goods is near zero. Additionally, the nature of the taxation system on the profits of intangible assets allows firms to deploy effective tax-minimization strategies, resulting in tax base erosion for Canada.
Countries around the world, starting with the U.S. in the 1980s, have retooled and recalibrated their prosperity strategies to fit with the shift from the traditional economy to the economy of intangible assets. Canada's prevailing policy orthodoxy, still visible in this most recent budget, is to stick with the traditional production economy strategies for growth, even though such an approach continues to result in weak productivity, lower rankings in innovation indices and, most acutely in the last decade, a decline in our GDP per capita compared with the U.S. As the chart in my appendix shows, Canada's deficit on IP payments and receipts is widening at an alarming rate. This deficit would be much larger if the value of net flows of data was included.
In the contemporary economy, the objective is to generate and control IP and data stock assets for their economic and non-economic benefits amidst rivalrous international economies. Canada's prosperity strategies are not only inadequate but often also counterproductive. The first is creating foreign direct investment agencies and programs that have no contemporary analytical framework, unlike our peer countries globally. The second is a 15-year spree of signing free trade agreements despite economists writing, as early as 2003, that international trade treaties have shifted to dealing with strengthening protections for IP owners rather than traditional tariff reductions. The third is making enormous investments in scientific research without adequate IP policies and strategies. Fourth is the underfunded and outdated mandates for critical regulators in the modern-day economy, such as foreign investment, privacy and competition.
The federal budget reflects an outdated approach to a contemporary economy. It also fails to recognize the real limitations of our institutions. It is irresponsible to pack 270 measures into a 700-page document and expect that they will be implemented. It's futile to invest enormous public funds without updated frameworks and clear strategies that would yield desired outcomes for Canada. While the risk remains high for turning a dollar of taxpayer investment into 10¢, there is also the risk of continued counterproductive measures where taxpayer funds generate negative returns for Canada.
Finally, the redistribution of a fixed economic pie or the prudent fiscal anchors many are advocating for are insufficient without a strategy to generate new wealth. Canada urgently needs growth strategies attuned to contemporary realities and budgets to reflect them.
I offer one recommendation that can foundationally help improve Canada's budget planning and implementation—namely, rebuild the Economic Council of Canada to create in-house capacity for the analysis of the contemporary economy. The nature of today's global economy requires an unprecedented amount of horizontal integration, analytical depth and rapid response to deal with the accelerated pace of innovation and the powerful feedbacks and spillovers that emerge in our networked society. A properly built economic council would lead in the very necessary revival of our policy community and help the government rebuild critical capacity that favours national interest, including post-COVID economic recovery.
In closing, I reiterate that misunderstanding our changed economic realities comes with real consequences to our prosperity, security and ultimately our sovereignty. Helicoptering money does not work like it used to, because the volume of credit needed to produce one unit of GDP growth tripled between 2007 and 2015. Simply chasing jobs with an assumption of relatively homogeneous firms is a race-to-the-bottom strategy that will worsen inequality.
Canada has the potential to build back better, but it begins with knowing what we need to build and how we need to build it.
Thank you.
12:45 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Balsillie.
We turn then to FlightSimple Aircraft Sales and Michael Wilton, president.
Michael.
12:45 p.m.
Michael Wilton President, FlightSimple Aircraft Sales
Good morning, everyone.
I apologize. I'm not likely to be as eloquent as some of the other speakers here. I'm just some simple farm kid from the Prairies, but I did want to speak today about the luxury tax that's been proposed to be imposed on aircraft.
I grew up in the Prairies. My introduction to aviation was from my grandfather who was actually a flying doctor in Manitoba. He had a very modest house and a very modest car and a very modest manner about him. He chose to spend his money to have a four-seat single-engine airplane so that he could travel from Winnipeg to outlying communities and provide very beneficial consultation services for his gall bladder surgery process to outlying communities in Manitoba.
That was how I was introduced to aviation. My very earliest form of joy of aviation was travelling with him while I was visiting in the summer and spending time in places like Gimli and Baldur, Manitoba, travelling around at the airport and going to the local ice cream shop, but I at no time thought he was a big jetsetter. That was not his style. He was a pretty low-key guy.
That's really what general aviation is and I think the concern is that the budget may have lost sight of that situation, especially with the $100,000 lower limit. The impact on the economy of the GA community is quite extensive. I was recently on a trip where I went to see a client in Maple Creek and then a client in Regina and a client in Saskatoon. That trip normally takes about three and a half days in the car from Calgary, with obviously a much higher carbon footprint, being on the road, and then there are the dangers of travel, not at this time of year but certainly in the winter. I was able to do that trip in my own airplane in less than two days and be back in time to pick my young boys up from school and have supper with them on day two. Not only that, but I bought fuel in Maple Creek, I purchased fuel in Regina, I rented a hotel room in Regina, took two cab rides in Regina, one to the hotel and one back, as well as some FBO services in Saskatoon.
The economic impact of what would be considered a very short trip in my business but a very essential one in an effort to see my customers, who can't readily move their aircraft to my location for review and sale, was critical. The reason we do that and the reason I own the aircraft for that business purpose—I am by no means rich and my bank account can definitely attest to that situation—is that our realtor wouldn't ask us to bring our house over to have the pictures taken and the sale done. That is really how we treat aviation for my clients. We can't reasonably expect them to travel to us in the airplane. For the most part, we need to travel to them.
There are a lot of other underlying items, like flight training. The large jets that we were lucky enough to travel on a couple of years ago, prior to the COVID pandemic, of course, are flown by students who fly 40-year-old to 50-year-old aircraft in their training regime. The imposition of this tax is going to limit flight schools' ability to purchase new and more up-to-date equipment to train our new pilots, to the detriment to our aviation industry and the aviation industry worldwide.
One of the other major issues with this is that this tax will affect agricultural aircraft, which are critical, especially in wet years, to ensure that Canada is still feeding the world, as we are known as the breadbasket. Our aging fleet is really getting to that point where $100,000 doesn't buy you much of an airplane anymore. A brand new Cessna 172, such as you would see for training purposes, is upwards of $500,000 plus Canadian dollars. It's going to be very difficult for flight training units to bring in new and updated equipment if there's a large tax imposed on that piece of equipment. They're eventually going to have to slough that down onto their students who are going to end up having to pay more for flight training, which is going to cause a ripple effect of a reduced workforce in the aviation industry.
It's important to note that as much as people say that people with airplanes are rich folks, which is certainly the case sometimes, no question, most of my clients are pretty normal people. They're farmers. They're ranchers. They're business people. They own a small shop. They've just chosen aviation as their given enjoyment.
I have friends with multiple vehicles and half-million dollar houses and cottages at the lake and ski boats, and they're called very successful. I don't have any of that, but I have an airplane and I'm called a rich guy. We don't think that's fair, that Canadian aviators and owners should be brushed with the same stroke as somebody who flies around in a $150-million gold-plated jet.
Thank you very much.
12:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Wilton.
Turning to the Retail Council of Canada, we have Karl Littler, senior vice-president.
We're not hearing you, Karl. You could be muted in two different ways. We'll get IT to give you a call.
We'll go to the next witness, Jerry Dias, who has been here many times, and Kaylie Tiessen. Jerry is the national president of Unifor.
The floor is yours, Mr. Dias.
12:50 p.m.
Jerry Dias National President, Unifor
Thank you very much, Mr. Easter.
Good afternoon, Mr. Chair and members of the committee. I’m pleased to be here today to provide input on the budget implementation bill. My name is Jerry Dias, and I'm the national president of Unifor.
Just as an aside, it's always my pleasure to appear before many MPs I have had some stimulating debates and conversations with over the years. Once I give my presentation I'm going to have to get off the call. I'll be speaking to the Prime Minister very shortly on a variety of things, but also I have my national executive board meeting going on as we speak and I'm going to get to that once I'm finished with the Prime Minister.
Since the beginning of the pandemic, Unifor has advocated for governments at all levels to put policies in motion to build a fair, inclusive and resilient economic recovery. We call it our “build back better” plan. This year’s budget and the first budget implementation bill show the government is at least on the right track. There are a number of items in the bill that are a good start but need some improvement.
These are the items I will bring to your attention today. First, I want to address the minimum wage. Reinstating the federal minimum wage and increasing it to $15 an hour is a long overdue move. It will significantly impact more than 67,000 people working in the federally regulated sector, but $15 an hour is no longer adequate. The truth is that we’ve been calling for a $15 minimum wage for many years now. It may have been enough five years ago, but it's certainly not enough today.
Frankly, the government was talking about implementing this in 2019, and even then it would have been somewhat short. The minimum wage should be set at 60% of the median wage for full-time workers. This was the recommendation of the government’s own expert panel on modern federal labour standards. Following this policy would set the minimum wage at $16.73. Government should be adjusting the minimum wage annually by inflation or by the average annual wage increase, whichever is higher, and establishing a federal low-wage commission to monitor the impact of low wages on workers and the labour market.
Second, I want to address the employment insurance and recovery benefit extensions.
Extending the wage subsidy program is an important step in keeping workers employed during this tumultuous time. The ramp-down rates make sense in many circumstances, but for the hardest-hit sectors, such as air transportation, this change can make the difference between a worker keeping their job or not. We recommend increasing the top-up rate for companies with significant, persistent revenue decline, as they may not be eligible for the Canada recovery hiring program because they are not yet ready to hire new workers.
The executive compensation rule for publicly traded companies should be applied for all wage subsidy support received in 2021, and not just what is received after June 5.
The extension of the Canada recovery benefit and the temporary changes to employment insurance are important. Together, EI and the CRB have illustrated the incredibly important role income support plays in stabilizing workers' lives and the need to fix our currently broken EI system with permanent reforms. We recommend some additional items to strengthen the positive effects these programs can have, including reducing the qualifying hours from the current 420 to 360, and maintaining the minimum benefit rate at $500, while increasing the income replacement rate.
Third, the budget takes an important step in stabilizing employment at airports by reducing some of the negative effects of contract flipping. We support the change and encourage consultation on the regulations in order to ensure all workers are protected by it. In order to further reduce the negative effects of contract flipping, government should extend successor rights.
Fourth, implementing the digital tax on digital giants and extending HST to streaming services are important steps to creating a level playing field and ensuring that large, digital corporations are paying their fair share. We're very concerned that the laws put in place will result in the digital giants not paying their fair share. That outcome would be unacceptable.
Fifth, the modest changes to OAS acknowledge that the current retirement security system does not provide adequate income for retirees, but it is not enough. Government should be exploring innovation in providing defined benefit plans for workers instead of looking to modest changes for the worst off and annuities that mimic retirement security provided by a DB plan, but deliver less.
Finally, the nod to the importance of Canada-made, zero-emission vehicles through tax incentives is incredibly important and a worthwhile endeavour. I will take a moment to remind folks that we do not yet build ZEVs in Canada. We have to keep this in mind as we consider ways to encourage consumer adoption, but we don't need millions in public dollars subsidizing imports. If we want to build this industry in Canada, and I think we do, all policies, including the development of charging stations, must move in lockstep with our industrial development plans.
Thank you. Kaylie will look forward to taking your questions.
Once again, thank you all very much for your time today.
12:55 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Jerry.
You can say hi to the Prime Minister from all of the members.
12:55 p.m.
National President, Unifor
Whether or not he's in a good listening mood, he will listen today.
12:55 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay. Is Karl Littler on, even by voice?
Karl, we might be able to hear you by voice. Try it again.
12:55 p.m.
Karl Littler Senior Vice-President, Public Affairs, Retail Council of Canada
Is this any better?
12:55 p.m.
Senior Vice-President, Public Affairs, Retail Council of Canada
It's a gaming headset from my daughter, but hopefully it will pass muster.
Good afternoon. I want to thank the committee for the invitation to appear today on behalf of the retail sector.
For those of you who may not be familiar with RCC, we represent over 70% of core retail sales nationwide. Our members are drawn from general merchandise, grocery, pharmacy and specialty retailers, both in bricks and mortar stores and online. Retail is Canada's largest private sector employer, albeit one that has been severely impacted by successive waves of COVID. When at full capacity, more than two million Canadians work in our sector.
I want to focus my remarks on several aspects of the 2021 budget, both on flagship measures to deal with the economic impact of the COVID pandemic and on a couple of issues of particular interest to retailers.
The major business support programs, CEWS and CERS in particular, have been vitally important lifelines during the pandemic. While we've suffered a significant number of closings and job losses, some of them regrettably permanent, COVID impacts would have been far worse but for the support that our merchants and workforce have received.
On behalf of the retail sector, we want to express our appreciation to the government for its leadership and to the opposition parties for working collaboratively to ensure that these supports continue to be provided through what we hope will be the conclusion of the final wave of COVID.
I want to turn briefly to a largely retail-specific measure that was raised in the budget, the matter of skyrocketing credit card acceptance costs. The move to online and curbside transactions and the growth of contactless payments, amidst hesitancy around the use of cash, has had a major impact on the cost of payment acceptance. Even pre-pandemic, Canada was seeing huge growth in credit card transactions, with $615 billion spent on credit in 2019, which is up 16% from the year before, according to Payments Canada.
On an average cost of 150 basis points, that represents $9.2 billion in costs to Canada's merchants. In reality, the average costs are higher, because corporate and prepaid cards are not covered by limits in the current stream. We don't have complete data for 2020 or 2021, but even allowing for the fall-off of spending on travel and hospitality, we would expect that the number would now be in excess of $10 billion annually, the vast majority of it falling on Canadian retailers and, ultimately, on Canadian consumers in the form of higher prices.
To be clear, Canadian credit card fees are much higher than in most other countries. In the 27 member-states of the EU, credit card fees are capped at 30 basis points, or one-fifth of the Canadian average level. They're also tightly constrained in Australia, Israel, China, India, Switzerland, and the list goes on. That's why our retailers are delighted to see the government's budget commitment to review these fees in the fall of 2021 and to act to reduce them.
We would suggest adding another criterion for the study and looking at reducing the gaps between fees charged for bricks and mortar transactions and the higher fees charged for e-commerce transactions.
In the five minutes allocated for remarks, it's tough to cover all the bases, but briefly, among RCC's recommendations that were not addressed in this budget was the call for a reduction on import duties, especially on apparel and footwear, which bear the heaviest costs. Those businesses have been devastated through the pandemic. Overall, these customs duties cost $4.5 billion annually. They're hidden in the price of goods, but they do drive up costs for retail businesses and the prices paid by Canadian consumers.
Lastly, we think it's high time that the government revisit the 2007 decision to eliminate the visitors tax rebate. Essentially, every other country with a federal sales tax has such a program in place, making destinations more attractive for tourist spending and, indeed, for tourism overall. You may note that this recommendation was also put forward by TIAC, the Tourism Industry Association of Canada, as both TIAC and RCC understand how important an issue this is for attracting high-spending tourists to Canada. RCC has a study available on this topic for those members who may be interested in the issue.
To close, I want to thank members again for today's opportunity to present a retail perspective on the 2021 budget.
I look forward to answering any questions that members may have.
Thank you, Mr. Chair.
1 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you to all the witnesses.
The lineup for the first round of questions is Mr. Fast, Ms. Koutrakis, Mr. Ste-Marie and Mr. Julian.
Keep in mind that Ms. Tiessen is here for Unifor.
We'll start with Mr. Fast.
You have six minutes, Ed.
1 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Thank you, Mr. Chair.
My questions will be directed to Mr. Balsillie.
Jim, thank you for sticking around to answer questions, because I'm sure we're going to have many.
Before I ask those questions, I want to commend to my colleagues on this committee a submission that Mr. Balsillie made to the industry committee, which is arguably one of the most thought-provoking analyses of our industrial policy in Canada today, showing how it fails to meet the challenges of a completely and dramatically changed environment.
Jim, you have, of course, highlighted the fact that the world has moved from a tangibles economy to an intangibles economy—especially Canada should know that—and that countries such as the United States or the European Union have recognized that. They have adapted a host of policies to reflect it.
You've had a chance to look at this budget now. Does it adequately respond to that completely different playing field?