Finance Committee on May 30th, 2024

[Vivek Dehejia]

This is part of the record of the committee. One hundred well-known economists, including some of my own colleagues at Carleton, have signed this letter. That doesn't mean it's correct.

In the world of the textbook, you can shift curves around and get the optimal outcome, but in the real world, it doesn't work that way. There's a whole political economy of taxation, so if you get things wrong, you can add the risk of regulatory capture. There's a large amount of literature on this. I'm not sanguine that just going by textbook economics can fix the problem.

There's a larger problem here. I'll make this very brief. Global warming—climate change, which is real—is a global problem. If Canada, which is not one of the world's major contributors, says we're going to tax ourselves and pollute less, well, guess what. China and India will rub their hands and say, “Super. We can spew more carbon since Canada is doing the work for us.” It makes no sense.

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

In your written reply, you said, “Unfortunately, I believe that the letter is naive and ideologically driven.” Could you expand on that statement?

[Vivek Dehejia]

Sure. It's naive because it assumes that the textbook world can be reproduced in practice, and we know that isn't true. I think it is driven ideologically by a theory that used to be called scientific socialism: that the all-benevolent, all-knowing central planner, the government, can solve every problem. Professor Hayek, whose name has come up here, didn't believe that.

For those reasons, I think it's naive, it's ill-timed and it's ideological. Even if we thought that it could work in practice, which I seriously doubt, we're in the middle of an affordability crisis. Now is certainly not the time to be the knight in shining armour and tell China and India to spew more carbon into the air.

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

Thank you, Professor.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Morantz.

Now we will go to MP Baker for two to three minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks, Chair.

I'm going to direct my questions to Mr. Thurlow.

It's good to have you back at the committee. I wanted to ask you about the investment tax credits. You and Dow Canada have been proponents of investment tax credits, as I understand it, not only as a means for profitability, but also for the decarbonization of your operations, basically making your operations more environmentally friendly.

I'm wondering if you could talk a bit about how you or Dow would use the investment tax credits that are in Bill C-69, the budget—both the clean technology manufacturing tax credit and the clean hydrogen investment tax credit.

[W. Scott Thurlow]

There are two things I would add to the record that I think are of value.

The first one is that investments in the decarbonization space are incredibly expensive. On paper, it's very difficult to make them pencil. I believe the allegory Mr. Dehejia used was the textbook: The textbook doesn't always work so perfectly.

These tax credits allow for the chasm between the cost and recovery of those investments to be shrunk considerably, so yes, we are pledging to get to a zero-emissions future by 2050. This is the first example of that in our fleet of facilities. We expect that many of the learnings we will have in Fort Saskatchewan will be replicated in other places around the world, and those tax credits are incredibly important to attracting investment.

It was only when we saw that the tax credits were going to be put in place that our board of directors was able to look at the total value of the investment and say that it was something we were willing to do. I would like to point out that Canada was in deep competition with several other geographies around the world. When you're in competition with those geographies, you won't be able to replicate perfectly what they produce, but you assign a value to all of the different variables, and those variables will help the board of directors make a final decision.

[The Chair, Liberal, Peter Fonseca]

That's the time.

We're going to MP Ste-Marie for a couple of minutes.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

I am going to continue with Mr. Thurlow.

In light of what you have just said, how would you describe the support Canada offers your sector of the economy in terms of international competition during the transition? Are the support measures or credits equivalent to, or better or worse than, what is done elsewhere?

[W. Scott Thurlow]

To use a tired expression, there's an apples and oranges problem here. We do our very best to do a strict economic comparison, but the tax rates are different in different jurisdictions. For example, in the gulf coast and Texas, tax rates are set by the local parishes. Those parishes have different rates and different rules from the municipalities. The municipality tax rates are assisted and guided by provincial rules.

The answer to your question is that we made a risk-based decision on which investment climate we thought was the best for the first investment of many in deep decarbonization. These tax credits have a value based on how much we believe we will be able to use them as we build a new facility and expand the existing facility we have in Fort Saskatchewan.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

Our final questioner will be MP Davies for the last couple of minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Ms. Hosak, B.C. has had its own pharmacare program since 1974. It was brought in by Dave Barrett's NDP government. I know there still is an income-based deductible for that program.

The national pharmacare program contained in this budget, with $1.5 billion to get it started, will eliminate these costs not only for British Columbians, but for every resident of any province or territory whose provincial government signs up because it will provide first-dollar coverage. That means people will no longer have to pay a deductible, copayment or any other out-of-pocket costs. In other words, you walk into the pharmacy, you hand over your prescription and you walk out and have your diabetes medication or device.

In your view, what impact would such a program have on you and the people you associate with in the group that you represent?

[Ramya Hosak]

Forgive me. The first bit cut out, but I think I got most of it.

I hear about the deductible a lot. It's a lot. Living with type 1 diabetes is very expensive. The cost of living is so high now, and I hear from people that the cost of the deductible does prevent them from seeking the best health care solutions available. For example, the insulin pump I have right now is $7,000. I wouldn't have been able to have it otherwise. For the government to address the payment issue is huge. I think it would really change the lives of many people out there.

[Don Davies, NDP, Vancouver Kingsway, BC]

I have very little remaining time. I would rather turn my time over to you for any thoughts you have that you'd like the Government of Canada to know about people living with diabetes and what policies we can pursue to help them with that condition.

[Ramya Hosak]

Thank you so much.

It's an honour for me to be here to represent the voices of 750 individuals I know in B.C. who are struggling with their diabetes.

It's a 24-7 job. We think about it all the time. Even with the technology available, we struggle with having low blood sugar and high blood sugar. I have my monitor here sitting next to me making sure I don't go too high or too low so that I can make sense today. It impacts our day for hours at a time. My husband has type 1 diabetes as well and I see how it impacts him. If he has low blood sugar, he's out for a couple of hours.

To have these health care solutions available and not allow universal coverage and access for all Canadians is a travesty. I can absolutely attest to the fact that these health care services and products have changed my life.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Davies.

Let's thank our excellent witnesses.

Thank you, Ms. Hosak, for sharing your personal story and for advocating for so many diabetics.

Thank you, Dr. Elliott, for your words and answers to the many questions.

Of course, Professor Dehejia and Mr. Thurlow, welcome back to our committee. Thank you for coming before us and answering the many questions from members.

With that, we are going to suspend.

[Adam Chambers, Conservative, Simcoe North, ON]

I have a point of order, Mr. Chair. We lost the doctor. Are we able to submit a question in writing and have him respond through the clerk?

[The Chair, Liberal, Peter Fonseca]

MP Chambers just asked if members would be able to submit questions to Dr. Elliott. Yes, you can, and hopefully Dr. Elliott will be able to get back to us in short order with some answers.

We are going to suspend, members, before we go to our fourth and final panel for today.

Thank you again to our witnesses. We wish you the best with the rest of your day.

[The Chair, Liberal, Peter Fonseca]

Welcome back, everybody.

This is our fourth panel of witnesses today.

Joining us, from Momentum, we have the executive director, Jeff Loomis. He's online. Welcome.

We have, from the Public Health Agency of Canada, Wendy V. Norman, co-director of the CART contraception research lab and professor at the University of British Columbia. Welcome, Dr. Norman.

From the Union québécoise des microdistilleries, we have Vincent Lambert, general secretary.

Finally, joining us from Wealthsimple, we have the head of government and regulatory relations, Jessica Oliver. Welcome.

Witnesses, you'll have up to five minutes for an opening statement and remarks. Then we'll get to members' questions.

We will start with Momentum and Mr. Jeff Loomis.

[Jeff Loomis, Executive Director, Momentum]

Thank you, Mr. Chair, for the opportunity to speak with you and the committee today.

Momentum was grateful to see important steps to improve the financial inclusion of Canadians in the budget. Momentum is a community organization in Calgary that connects people living on low incomes to economic opportunity. Our big goal is to create a local economy that works better for everyone. One of our key approaches to working with people living on lower incomes is to help them learn about and save money, or what we call becoming financially empowered.

We worked with a newcomer named Timothy several years ago whose experiences highlight the important changes proposed in the budget. Timothy moved to Canada from Nigeria. After arriving, he struggled in survival jobs and ended up couch surfing. When his mother got sick in Nigeria, he took out a $400 payday loan to cover her medical expenses. By the time he paid off the payday loan, it cost him $2,400. While struggling to pay off his loan, he was connected to Momentum. He participated in a savings program where people earn a match to their savings while they learn about money. Timothy also managed to open an RESP and access the Canada learning bond for his child. Despite the challenges, Timothy became financially empowered. Several policy announcements in the federal budget will create opportunities for more Canadians like Timothy to become financially empowered.

We have specific proposed changes we would like to highlight today. These include the following.

The first key change is automatic enrolment for the Canada learning bond. We know education is a direct gateway for people to earn more money. We also know that children with an education savings account are much more likely to attend some form of post-secondary education. Momentum and community partners in Calgary worked for many years to promote the Canada learning bond to families living on low incomes, which contributed to increased uptake of the CLB from 20% to over 50%. That is one of the highest uptake rates currently for any municipality in Canada.

To reach the other 50% of children who still weren't getting the CLB to access education savings, we completed education savings policy research that recommended greater auto-enrolment. As a result of the change proposed for auto-enrolment, approximately 130,000 children born after 2024 could receive the Canada learning bond every year. At a lifetime value of $2,000 per child, an additional $260 million in annual education savings may go directly to families living on low incomes. However, including the auto-creation of a social insurance number for Canadian children living on lower incomes would make this policy change more effective. Auto-enrolment in the Canada learning bond is an important step towards intergenerational poverty reduction and a huge boost to Canada's future skilled workforce.

The second key change we'd like to highlight is automatic tax filing. Canadians living on lower incomes are the most likely to not file taxes. The expansion towards greater automatic tax filing will support up to two million Canadians in accessing benefits that can help them make ends meet. Since the average low-income tax filer receives an additional $3,500 in annual income from filing their taxes, this change is a key step to reducing poverty in communities across our country.

The third key thing we want to highlight is lowering the criminal rate of interest. We are very pleased to see the government reiterate the commitment made in budget 2023 to lower the criminal rate of interest to a 35% annual rate. The proposal to improve enforcement of the criminal rate of interest in this budget is also a promising step to ensure Canadians are adequately protected from high-cost credit. Based on Timothy's experience with a payday loan, we encourage the government to consider no longer exempting payday loans from the criminal rate of interest.

The fourth key highlight, and the last one we want to feature today, is investment in community financial empowerment supports. Prosper Canada is proposed to receive $60 million over five years to expand community-delivered financial help services to approximately one million lower-income Canadians. This is much-needed financial support, as many community-based, not-for-profit organizations like Momentum that deliver financial empowerment services receive very little government funding for this work. With the rising cost of doing business for non-profits like us, this funding can stabilize existing programs and enable important expansion.

Many Canadians are struggling to make ends meet, especially with the rising cost of living. Those challenges are even more significant for Canadians living on low incomes. At Momentum, we recognize the wisdom that people without an adequate income can't get by and that people without assets can't get ahead. The proposed changes in the budget can help more people get by through better access to benefits via automatic tax filing, and will support Canadian children in getting ahead by improving access to critical education savings.

Thank you so much for the opportunity to share with the committee today.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Loomis, for everything you are doing.

We'll now hear from the Public Health Agency of Canada.

Professor Norman, go ahead, please.

[Wendy V. Norman, Professor, CART Contraception Research Lab, University of British Columbia, Public Health Agency of Canada]

Thank you very much, Mr. Chair and members of the committee, for the opportunity to speak here today.

By way of introduction, I'm a family physician and a professor at the University of British Columbia, and I hold the Public Health Agency of Canada's chair in family planning research. I serve as the external chair for Statistics Canada's sexual and reproductive health advisory committee, and I lead the largest Health Canada sexual and reproductive health fund project to advance equitable access to family planning nationally. I also advise the World Health Organization on sexual and reproductive health and preconception health.

There are two issues I wish to highlight for you here today. First, universal single-payer, first-dollar contraception coverage has been demonstrated around the world and in Canada to be the most cost-effective government investment to lower health system costs and improve health equity and health outcomes. Second, universal access to free contraception to prevent unintended pregnancies will support positive, immediate, lifelong and intergenerational impacts on individuals, their families and society that improve health and equity.

To begin, evidence from health systems around the world has found that universal contraception coverage costs governments less than it costs to manage unintended pregnancies in universal health systems. The cost to provide universal free contraception is always less than the cost to manage pregnancies. In the U.S., after they implemented universal coverage through the Affordable Care Act, they found a savings of $7.09 for every dollar that they invested. Similarly, Public Health England saves nine pounds for every pound invested with universal first-dollar, single-payer coverage for all contraceptive methods. Our analyses in a CIHR-funded study working with the government of B.C. have modelled that within a few years, they will begin saving five dollars every year for every resident of B.C. in health costs because the cost of providing everybody with whatever contraceptive method they require is lower than the current cost to manage unintended pregnancies.

An important factor in contraception is the difference between universal first-dollar coverage and fill-the-gaps coverage. Contraception is a very stigmatized prescription, particularly among equity-deserving populations. Our studies have found that reproductive-age people, particularly women and pregnancy-capable people at the ages of highest fertility, are the least likely in our society to have prescription benefits. Among those few who do have coverage, the primary insurance holder is often a coercive partner or a parent. Many do not have confidential or private access to contraception coverage and would instead forego this opportunity.

Analyses under way by UBC's Dr. Laura Schummers, using the B.C. health administrative and pharmaceutical databases before and after B.C. introduced universal first-dollar, single-payer coverage for contraception last year, found that in addition to nearly 30,000 people who had unintended pregnancies before this policy—many of whom were unable to afford contraception at all—40% of those who obtained a contraceptive in B.C. paid 100% out-of-pocket for that method. Additionally, another 20% were paying copay for the cost.

After B.C. introduced their single-payer plan, we saw a massive shift with a big uptake in contraceptive methods overall, and a shift away from the less effective, less expensive methods towards those that are the most effective in preventing unintended pregnancy. Fewer than 10% of people paid any amount out-of-pocket for the very limited number of contraceptive methods that are not covered under the plan.

In Canada, 40% of pregnancies, or over 160,000 per year, are unintended, and the most common outcome is birth. These unplanned births can have devastating effects as they move forward. All outcomes for unintended pregnancy could have lifelong effects. These intergenerational consequences not only affect the pregnant person and the unplanned child, but also reduce the supports available for other children and extended relatives already in the home. More effective contraceptive methods offer families a better and safer start for planned and spaced children and allow family members to pursue advanced education and workforce opportunities. In contrast, people who are unable to afford contraception demonstrate lower education achievements, lower household income, higher exposure to intimate partner violence and suffer lower chances for their children to have food safety and adequate shelter during their development.

There are very few investments in health with the potential to offer health system savings, improved equity and a healthy quality of life for children and families across Canada. The investment the government is proposing to provide universal single-payer, first-dollar contraception has the potential for intergenerational and society-wide impacts on Canada and all Canadians.

[The Chair, Liberal, Peter Fonseca]

Thank you, Dr. Norman, for your hard work and for the many different organizations you lead.

Now we're going to hear from the Union québécoise des microdistilleries.

Monsieur Lambert, please go ahead for up to five minutes.

[Vincent Lambert, General Secretary, Union québécoise des microdistilleries]

Thank you, Mr. Chair.

Mr. Chair and distinguished committee members, my name is Vincent Lambert and I am the general secretary of the Union québécoise des microdistilleries, the UQMD.

With over 50 members, the UQMD represents the two permits that regulate distilleries in Quebec: industrial permits and small-scale production permits. UQMD members generate annual sales of spirits in excess of $100 million in the province.

I want to thank you very much for giving me your time and attention today to talk to you about excise duties on Canadian spirits.

I am therefore going to take the time I am allowed to present our proposal, which is based on the introduction of a progressive taxation model and is modelled on best international practices, and is intended to support the sustainable economic development of our local distilleries.

Small and medium enterprises are the essential drivers of our regional economies. They create local pride and play an important role in the economic fabric. However, they are at a disadvantage vis-à-vis the big international corporations because of their modest size and limited resources. Progressive excise duty rates, similar to those applied in the Canadian brewing industry and in several other industries in various countries, would strengthen our Canadian microdistilleries' ability to compete.

In Quebec, approximately 75% of the sale price of a bottle of spirits goes to taxes and markups. This means that when a bottle of spirits with 40% alcohol content sells for $40, less than $10 ends up in the distillery's pocket.

The United States, one of Canada's major competitors in sales of spirits, has reduced its excise duty for small and medium distilleries: excise duties are $0.71 U.S. per litre of absolute alcohol, or about $0.98 Canadian. In Canada, excise duties on spirits are $13.93 per litre of absolute alcohol. Excise duties on a bottle of spirits from Canada amount to about $4, while excise duties on an equivalent American bottle are about $0.29 Canadian. This additional taxation, over 1,300% more, makes our Canadian spirits much less competitive.

Note that the UQMD's proposal applies to distilleries that sell fewer than 100,000 litres of absolute alcohol a year, while the United States applies its excise duty relief to distilleries that sell up to 370,000 litres of absolute alcohol a year.

To summarize, the American government has waived a portion of initial excise revenue in order to reap much greater financial gains, and promote job creation in the long term, in return.

Reducing excise duties would not necessarily result in a net loss of tax revenue. On the contrary, this measure could stimulate economic growth and job creation and thereby increase tax revenue in the long term. Local distilleries will be able to invest in innovation, improvements to their facilities, and expanding their operations, and this would have a multiplier effect for the economy.

The spirits value chain encompasses a host of activities ranging from agriculture to distilling, retail sales, and the tourism associated with the products. Reducing excise duties could generate significant employment-related economic benefits and thereby contribute to strengthening our local communities and families and boosting the economy as a whole.

Numerous countries have successfully adopted tax-based approaches in order to develop their national industrial sectors, as Canada has done in the beer industry. Historic examples show that introducing these kinds of measures has enabled new industries to develop, create jobs and make a significant contribution to the economy, through SMEs. By adapting these strategies to the spirits industry, we could also encourage the emergence of innovative, sustainable local distilleries.

A progressive taxation model compatible with the principles of the World Trade Organization, the WTO, would be a solution. The WTO encourages member states to put in place trade policies that comply with their international commitments while taking into account their national economic and social development goals. The WTO also acknowledges the legitimacy of measures to promote domestic industries, as long as they do not create intentional discrimination or serious distortion of international trade.

In conclusion, this proposal is not simply a tax measure; it is a statement of intent that would reflect a firm commitment to a dynamic industry on the international scene. A reduction in excise duties would offer our enterprises concrete support and thereby create an environment in which smaller distilleries would be able to prosper and make a significant contribution to our economies.

I am therefore asking, distinguished committee members, that you consider this proposal seriously and call on the government to make the necessary changes for the good of our enterprises, our economy, and our local communities.

Thanks again for your attention and I will be pleased to answer your questions.