Finance Committee on April 18th, 2024

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much. Your explanation clarifies things.

Since we are talking about sectors where, in my opinion and that of others, there are issues with competition, what’s happening with our telecommunication sector, monthly cell phone plans, data plans and roaming fees?

We are one of the worst countries in the world. I’ve been a federal MP for 12 years and I’ve heard about these problems since I got here, again six years ago, four years ago and then two years ago. I’m still hearing about this today. What should we do? What needs to be done?

[Matthew Boswell]

The bureau does an incredible amount of work in the telecom sector. We're regularly providing competition advice or input to the CRTC on how it can take steps to enhance competition in that sector. We made a huge submission in 2019 to early 2020 on competition in the wireless space. Ironically, it was in that submission that we pointed out how important facilities-based, regional wireless disruptors were to drive down prices. At that time, the poster child we pointed to—or one of the poster children—was Shaw in the west. We saw that Shaw in the west, SaskTel, and Vidéotron in Quebec pushed down prices by up to 35% where they were present because they were challenging the big three, the incumbents.

We need to encourage these regional, facilities-based ones to challenge the incumbents, which have upwards of 90% of the market across the country. It's a significant problem, but we have to do more.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Boulerice.

We want to thank the Competition Bureau—Commissioner Boswell and his team—as well as the Office of the Parliamentary Budget Officer—PBO Giroux and his team—who are here with us. Thank you for the two hours of the many questions that you were able to answer. We highly appreciate it. We wish you the best for the rest of your day. Thank you for coming here for Bill C-59.

At this time, members, we are going to suspend while we transition to our next panel.

Thank you.

[The Chair, Liberal, Peter Fonseca]

We have a new panel of witnesses with us now for the next hour.

We have the Association des producteurs d’acers du Québec. From the association, we have the vice-president, Nicolas Baron; the secretary general, Vincent Lambert; and the treasurer, Patrice Plouffe. Welcome.

From the Canadian Society for Disability and Oral Health, we have with us the vice-president and advocacy committee chair, Joan Rush. Welcome, Ms. Rush.

From the Montreal Economic Institute, we have the president and chief executive officer, Daniel Dufort; and the vice-president of communications, Renaud Brossard.

We're going to start with the Association des producteurs d’acers du Québec, please, for five minutes.

[Nicolas Baron, Vice-President, Association of acers producers of Québec]

Good afternoon, Mr. Chair and distinguished members of the committee. I want to thank you for the invitation to appear before you today.

My name is Nicholas Baron and I am the vice-president of the Association of Acers Producers of Quebec, the AAPQ. I’m also the co-owner of Domaine du Cap, located in Acton Vale, in Quebec. With me today is our treasurer, Mr. Patrice Plouffe, owner of La ferme du loup, in Saint‑Paulin, in Quebec. I also have with me our secretary general, Mr. Vincent Lambert.

Acers, otherwise known as maple wines, were invented in Quebec in the early 1990s. They are the fruit of an effort to give maple syrup added value. These wines are alcoholic beverages whose alcohol content is obtained primarily through the complete or partial fermentation of concentrated maple water or diluted maple syrup. Fermentation consists of transforming maple sugar into alcohol using yeast. This process yields products that cannot exceed 22.9% alcohol. In other words, “acer” is to maple what wine is to grapes, cider to apples or mead to honey.

Quebec’s artisanal producers must comply with the general conditions for obtaining and maintaining a small-scale production permit to produce alcoholic beverages made from sap or maple syrup. This ensures that local products are used and manufacturing practices are put in place to guarantee the quality of products. Artisanal producers are small businesses that employ 1 to 15 full-time employees annually. They each have their own sugar bush and produce their acers under the small-scale production permit for alcoholic beverages made from sap or maple syrup. That’s a requirement. Many of these businesses offer agritourism activities on their sites. By welcoming a large number of visitors each year, they contribute to the vitality of the communities in which they operate.

Given Quebec’s constantly growing supply of artisanal alcoholic beverages, acer producers decided to join forces. They set up an organization to represent their interests and ensure the development of their industry. Thus, on October 30, 2023, the AAPQ was officially founded following its first general meeting.

The acer production chain is restricted by an extensive regulatory framework that prevents businesses from reaching their full potential, especially from an economic standpoint. Furthermore, post-pandemic recovery presented a range of significant new challenges. In this difficult context, imposing excise duties represents a major challenge for the profitability of acer producers, as well as for this industry’s growth and success.

In 2018, Australia filed a complaint with the WTO, the World Trade Organization, on the grounds that Canada was violating free-trade principles by promoting local producers at both the federal and provincial levels. In 2021, both parties came to an agreement at the WTO. Canadian wine producers would have to pay the same excise tax as foreign producers. In 2022, excise duty notice EDN75 was published. It repealed the excise duty exemption for 100% Canadian wine.

Two years ago, however, the Standing Committee on Finance heard from Cider Canada and the Association of Mead and Honey Alcohol Producers of Quebec. They came to ask for the continued exemption of Canadian ciders and meads from excise duties. Thanks to your support, these products are currently exempt from excise duties. Indeed, the definition of “wine” under the Food and Drug Regulations applies exclusively to wine produced from grapes. This is consistent with the initial complaint before the WTO, where the subject of the dispute was solely grape wine.

For the same reasons applicable to cider and mead, the Association of Acers Producers of Quebec requests that you reintroduce the excise tax exemption not only for maple wines, but also for all wines not made from grapes. In point of fact, the reestablished excise tax should not apply to them. This proposal is in keeping with the Standing Committee on Finance’s recommendation 332, which proposed that the government of Canada “[c]hange the excise duty exemptions for all-Canadian wine produced from honey or apples to also include all fermented products other than grapes.”

Lastly, I would like to draw your attention to the fact that maple wine producers are mainly small and very small businesses. Every tax increase can significantly affect their financial viability. These companies don't just provide local jobs. They're also key players in our economy that contribute to the vitality of the areas where they operate. To preserve these jobs and foster economic growth in our communities, the excise duty exemption on our products must be extended.

I would like to thank you again for your time and attention. We look forward to answering your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baron.

Now we will hear from the Canadian Society for Disability and Oral Health, please.

[Joan Rush, Vice-President and Advocacy Committee Chair, Canadian Society for Disability and Oral Health]

Chair Fonseca and committee members, good afternoon.

My name is Joan Rush, and I'm here on behalf of the Canadian Society for Disability and Oral Health, or CSDH. We thank you for this opportunity to speak to Bill C-59 and the Canada dental care plan, or CDCP. In addition to my comments to you, please refer to our written brief, which includes more detailed information on our recommendations to the committee.

The CSDH is a pan-Canadian, not-for-profit society run by expert oral health professionals and committed volunteers. We advocate for needed change to Canada's systems for oral health care delivery, education, research and governance to ensure equitable access to medically necessary oral health care for persons with disabilities.

More than 27% of Canadians live with a disability, half of them with a severe disability. Canadians with disabilities have the highest rates of dental disease among all Canadian adults and face the greatest barriers to accessing oral health care.

The CDCP presents an opportunity to lower these barriers and has the potential to enable Canada to meet its legal obligations to Canadians who live with disabilities. The CSDH applauds the federal government, which worked closely with its minority government colleagues, for creating the CDCP.

However, the CDCP will succeed in improving the oral health of Canadians who live with disabilities only if Canada's health, education, research and governance systems support it.

Regarding Bill C-59, the CSDH understands that the provision of the bill concerning sharing taxpayer information is necessary to administer the CDCP; however, we are concerned that not all persons who live with disabilities have filed their taxes or applied for the Canada disability tax credit. We recommend that your committee encourage the CRA and relevant federal ministries to work with the provincial and territorial ministries of social services to ensure that every person with a disability is assisted to file a tax return and to complete all administration necessary to qualify for the CDCP.

Our CSDH recommendations concerning the CDCP flow from Canada's legal obligations. The Canada Health Act enshrines the equal right of every Canadian to access medically necessary health care. Canada's private delivery system for oral health care fails to ensure equitable access to medically necessary oral health care to persons with disabilities, causing them pain, suffering and a loss of their oral and overall health.

Canada ratified the Convention on the Rights of Persons with Disabilities in 2010. Article 25 requires health professionals to provide care of the same quality to persons with disabilities as to others, including through training and the promulgation of ethical standards for public and private health care. Canada fails to meet either of these requirements of the convention.

Canada also breaches sections 7 and 15 of the Canadian Charter of Rights and Freedoms, which guarantee persons with disabilities security of the person and protection against disability-based discrimination. As lawmakers, I'm sure you agree that Canada must rectify this glaring failure to meet its legal obligations to persons with disabilities.

The CSDH makes the following six recommendations for changes to Canada's oral health care systems to meet Canada's legal obligations to Canadians who live with disabilities.

One, Health Canada should define oral health care for persons with disabilities as health care under the Canada Health Act, consistent with the World Health Organization's 2021 recommendation.

Two, the CDCP should recognize the additional treatment time necessary to treat a patient with a complex medical or intellectual disability.

Three, Canada must ensure access to essential medical infrastructure for patients with complex disabilities, including hospital or general anaesthesia facilities.

Four, Canada must train oral health providers to treat persons with disabilities to address the serious lack of appropriately trained professionals.

Five, Canada must collect data about the oral health status of persons with disabilities and research best practices to address their oral health needs.

Six, Canada must provide federal oversight to ensure the outcomes and the effectiveness of the CDCP.

Thank you again for offering the CSDH an opportunity to address you today. I will be pleased to answer your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Rush.

Now we'll hear from the Montreal Economic Institute, please.

[Daniel Dufort, President and Chief Executive Officer, Montreal Economic Institute]

Thank you, Mr. Chair.

I would like to thank you for inviting us to discuss issues that significantly affect the quality of life of all Canadians.

One of these issues is productivity. This topic may seem harsh and difficult, but it has real implications. For example, lagging productivity means that Canadians work more hours per week than Germans. However, their incomes are no higher than the incomes of Germans.

The further we fall behind, the more our quality of life declines. Canada ranks sixth among the G7 countries in terms of productivity. The value produced by a Canadian worker averages $53.3 per hour. The G7 average is $63.9, over $10 more per hour. In the United States, hourly productivity exceeds $70 per hour. In short, the United States simply isn't in the same league as us.

Unfortunately, the gap is widening. Canada is completely off track. We've had 13 consecutive quarters of declining productivity. Right now, we're back to 2016 productivity levels.

One factor that explains our relatively low productivity is the lack of private investment. In Canada, private investment in human capital averages $17,000 per worker per year. In the United States, the figure is closer to $27,000. Roughly speaking, this amounts to an annual investment gap of $200 billion compared to our American neighbours. Clearly, it's far-fetched to think that government investment could fill such a huge gap. This would amount to about 40% of Canada's budget, which is absurd.

As a result, we must focus on creating a tax and regulatory framework that encourages and increases investment in Canada. The last thing needed at this stage is to increase taxes on investments. When you tax something, you get less of it.

Let me be even less subtle. The recently proposed measure to increase the capital gains inclusion rate amounts quite simply to shooting ourselves in the foot. It's the opposite of what needs to happen. Any elected official who cares about the standard of living of Canadians and raising that standard should try to block the measure or overturn it at the earliest opportunity.

Canada's future prosperity and rising standard of living over time are vital to mobility and social cohesion. The current situation is particularly concerning.

Another topic at hand today is competition. The economic literature is quite clear on this topic. In a given industry, no number of competing companies is better than another number. Rather, it's always better everywhere to have fewer barriers to entry, and a regulatory framework that allows competition and that doesn't artificially raise prices.

For example, in the case of the telecommunications industry, spectrum auctions may be a practical way to increase government revenue. However, these auctions are ultimately paid for by all Canadian consumers.

In short, it would be futile for the Canadian government to attempt to control the number of companies active in a given industry, or to prevent transactions, particularly for companies looking to gain efficiencies. However, the government should conduct a rigorous exercise to take stock of all the barriers to entry created by Canada's regulatory framework, with a view to removing these barriers in a systematic and orderly manner.

Thank you for your attention. We look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you.

We'll now go to members' questions in the first round.

We have MP Morantz up for six minutes, please.

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

Thank you, Mr. Chair.

First, Mr. Baron, I have to say that I didn't know what an acer was before I read your report. The real question for you is, did you bring any samples with you?

In all seriousness, though, you want an exemption from the Excise Tax Act. You say that it's not wine and these are small shops that have limited production capacity and shouldn't be subject to the excise duty. Is that correct?

[Nicolas Baron]

Yes.

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

Thank you.

Mr. Dufort, like you, I'm shaking my head about this increase in the capital gains tax.

All of the indicators from all the experts, including Deputy Governor Rogers, are that we have a productivity crisis in this country. We lag behind Europe, and we lag behind the United States. In my mind, when you increase taxes on capital gains, you're actually taxing productivity, because what you're taxing is the increase in wealth derived from the combination of investment and labour inputs that created that wealth.

Why on earth would a government choose a policy that would further damage our productivity capabilities at the very time we can't afford it?

[Daniel Dufort]

It is an absolutely self-defeating measure.

Even when you look at the prospect of raising government revenues, we are faced with government spending that increases year over year, each time reaching new levels; meanwhile, this proposed tax has regressive revenues, in that it is slated to generate fewer and fewer revenues over time. How it is useful to the government to raise that tax, in particular, quite frankly baffles me.

However, what is more important is that when you tax something, you get less of it. Yes, the main driver of productivity is investment. If you tax investment, you get less productivity. If you have less productivity, you have decreasing standards of living for all Canadians.

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

Thank you.

One other thing I found curious about it is that if you're a sole proprietor—say that you own a flower shop and you own it as a sole proprietor—you get the $250,000 threshold exemption, but if you own it through a Canadian-controlled private corporation—the exact same shop, which could be across the street—you don't.

Is that fair, in your mind?

[Daniel Dufort]

No, it's not.

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

Okay.

Mr. Chair, I'm sharing my time with Mr. Williams, and I'm going to pass the mic.

[The Chair, Liberal, Peter Fonseca]

You have three minutes.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Mr. Dufort, I'm going to follow the same line.

We believe that you cannot tax your way to prosperity. I think Mr. Winston Churchill said that once. However, in this budget we see that our government is trying to hike taxes on investment, and anyone with experience in entrepreneurship investment sees how that will stifle growth. We're at a moment when capital is harder to access than at any time in the past generation. High interest rates and economic uncertainty mean that many high-growth companies and innovative products struggle to secure growth capital.

You've already made a pretty stark recommendation, but what should we be doing in Bill C-59, and in others, in order to ensure that we get growth and better investment and, as you said, productivity in our companies?

[Daniel Dufort]

What Canada needs is a low-tax environment and a light touch on regulation. We need to make sure that we have assessment processes that ensure projects can actually happen in this country.

It does feel like we are unable to get shovels in the ground, either because of various regulations or because the numbers don't make sense. We are making the financial requirements that are needed to make sure that investments are coming to Canada. This is all getting trickier by the minute and with each passing budget. The situation is becoming, quite frankly, untenable.

[Ryan Williams, Conservative, Bay of Quinte, ON]

One of the biggest problems also is a shortage of highly skilled talent in Canada. One thing that highly innovative companies offer as a form of compensation is stock options, which are subject to the capital gains tax.

Can you speak to the skilled labour shortage and how that's contributing to our productivity problem and our low-growth problem in Canada?

[Renaud Brossard, Vice-President, Communications, Montreal Economic Institute]

If I may, I think you're absolutely right in pointing out that a lot of corporations are going to offer stock options. A lot of corporations that are rather small but growing fast are doing that because they're not able to pay the same amount to their employees as a fully mature corporation.

For a lot of the employees, a change in capital gains means that this sort of compensation is a lot less attractive. Essentially, not going forward with the change in the inclusion rate for the capital gains tax would certainly help make it easier for innovative companies to attract and retain the talent they need in order to achieve significant growth.

[Ryan Williams, Conservative, Bay of Quinte, ON]

For my last question, one of the biggest barriers we're finding is interprovincial trade barriers. I know your organization has written extensively about this. Freeing those barriers could free up between $110 billion and $200 billion in GDP in Canada in the long run.

This is a bigger topic than we have one minute for, but in one minute, what do we need to do to release these trade barriers? Should this have been in Bill C-59 and others to increase competition and productivity? What can we do about interprovincial trade?

[Renaud Brossard]

I think one thing that needs to be addressed is the issue that we still don't recognize a lot of training for professionals between provinces. Whereas a province like Alberta has been leading the pack in the number of different goods and services for which it's easier to do interprovincial trade—it has much lower barriers than all the other provinces—it is unfortunately at the very back of the pack when it comes to recognizing skilled trades. For instance, if a nurse who trained in Manitoba were to move to Alberta, they would not be able to practise their trade without undergoing significant retraining. Now, as far as I know, an Albertan's arm is very much the same as a Manitoban's arm, yet we still have to do that retraining.

I think it would be about working with the provinces to make sure that a lot of those provincial regulatory requirements are dropped or at least significantly reduced, so that it becomes easier to trade.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Williams.

We now go to MP Thompson, please.