Finance Committee on Feb. 14th, 2022

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

The issue, of course, is that they're pushing investment out of our resource industry, and it's not being replaced with anything else as far as our balance of trade goes; it is a gap.

I know I have about a minute and a half left, Mr. Moody, and I know that you didn't get enough time to go through recommendation number four.

[The Chair, Liberal, Peter Fonseca]

It's actually three minutes, Mr. McLean.

[Greg McLean, Conservative, Calgary Centre, AB]

Go ahead, Mr. Moody, if you want to finalize where you were when you started at recommendation number four.

[Kim G. C. Moody]

In my notes, yes, just very quickly.

Amend the tax on split income regime; lots of people have appeared before you on that. On those rules, while there may be a compelling policy argument to have an anti-income splitting regime, this regime just needs a complete rethink.

Number five is to repeal the journalism tax incentives. Those are just very poor policy.

Number six, which MNP did comment on, is to release the amendments to Bill C-208. That's very important.

Lastly, abandon the so-called luxury tax on automobiles, airplanes and boats. In my notes what I said is if that's good policy—which it's not, it's good politics—if a luxury tax on planes, automobiles and boats is good policy, then why not a luxury tax on handbags, expensive cellphones, jewellery, furniture, appliances, homes, etc.

There's too much politics in the Income Tax Act already, and in the Excise Tax Act, we don't need more.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Moody.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Mr. McLean, you do have another minute and a half still.

[Greg McLean, Conservative, Calgary Centre, AB]

I'll yield that to my colleague.

[Adam Chambers, Conservative, Simcoe North, ON]

Thanks, Mr. Chair.

I have two quick questions. One for News Media Canada is just to confirm that you're not asking for any government money this year. Is that correct?

[Paul Deegan]

That's correct. We're not seeking government money with this. The Australian model doesn't involve taxpayer dollars.

[Adam Chambers, Conservative, Simcoe North, ON]

Wonderful. Thank you very much. We always appreciate those stakeholders who come before this committee and don't request additional government financing.

The second question, sticking with News Media, is that it's been floated that as a final arbiter the CRTC may act as an arbiter between the large tech firms and publishers. Do you believe that the CRTC is in a conflict-free position to act as an arbiter?

[Paul Deegan]

We would see that whatever the body is that they're essentially putting forward a list of arbitrators who are independent of government, and that the news media publishers and the platforms would choose from that list. We see it as independent from government, but obviously the government would have to assemble the list and we would go through it with the platforms.

[Adam Chambers, Conservative, Simcoe North, ON]

Wonderful. Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chambers.

We are now moving to the Liberals and Madame Chatel.

You have up to seven and a half minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

If possible, I'd like to share my speaking time with my colleague Julie Dzerowicz. I'm therefore going to speak for three minutes.

My question will be for Mr. Arnold.

Thank you for being with us today. We are very appreciative of your time.

I have a few questions for you. I'll ask them and if we have time within that period you could answer, but if not please answer in writing.

I will take you up on your offer to send us the list of all the flaws that you see in our general anti-avoidance rule.

I have three questions for you, Mr. Arnold. The first one is about the case that the government lost at the Supreme Court, Alta Energy Luxembourg. This was a case of treaty shopping. I'm worried that our tax base, especially on our natural resources, leaves this country and goes to the benefit of, for example, Luxembourg. The GAAR was argued, but the Supreme Court declined to apply the GAAR.

What's your view on the capacity of the court to apply the GAAR? What could the government do to prevent abusive cases of treaty shopping following this decision?

The second question is that currently the application of the GAAR does not result in the imposition of a penalty. Would it be a deterrent effect if we were to apply a penalty? Would that enhance the effectiveness of the GAAR?

The third question I have for you, Mr. Arnold, is the GAAR applies only to transactions that are currently abusive. This is a test that is sometimes very difficult to satisfy in court as we saw in the Supreme Court case. Is the test for determining if a transaction is abusive under the GAAR effective or not? Could it be made more effective, and if so how?

I know it's a lot of questions, Mr. Arnold, but please, you have one minute to answer.

[Prof. Brian J. Arnold]

In my view, treaty shopping is a serious problem. The gains that went untaxed as a result of the two treaty shopping cases that have gone to the courts are almost a billion dollars. That's a lot of money to use for other things.

I think the difficulty is that the government needs to take some specific action to deal with treaty shopping. It cannot rely on the GAAR as a result of the Supreme Court's decision, and it cannot rely on the new rules that have been added to Canada's tax treaties, because the result is going to be the same. And—

[The Chair, Liberal, Peter Fonseca]

Thank you. That's the time.

[Sophie Chatel, Liberal, Pontiac, QC]

May I have the reply in writing after the meeting? Thank you.

[The Chair, Liberal, Peter Fonseca]

I believe MP Dzerowicz has some questions now.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Mr. Chair. I also want to say thanks to my colleague for ceding 50% of her time. I really appreciate that. Happy Valentine's Day, everyone.

I want to thank all the presenters, but I will be directing my questions to News Media Canada.

Mr. Deegan, you indicated that the Australian model that's in place was a good model. Do you think that is the model we should be following directly, or would you recommend some adjustments?

[Paul Deegan]

We believe it can be adapted to Canada on a very straightforward basis. What we're looking for, essentially, is the ability to negotiate collectively with the big tech platforms, backed up by baseball-style final offer arbitration. There may be some unique tweaks that could be required for Canada, but we believe it's a terrific model.

We've seen that it works for publishers large and small, and that's obviously very important. News Media Canada represents not only large publishers like Torstar, The Globe and Mail and Postmedia, but also all sorts of very small publishers that are serving a very small community, where newspapers are effectively run off someone's kitchen table.

We believe it is a terrific model. It's worked in Australia. What it really means is hundreds of millions of dollars for news publishers annually in Australia without government money. We see that as a real win-win.

[Julie Dzerowicz, Liberal, Davenport, ON]

Because I think it's important to state it very clearly, you indicated that legislation requiring digital platforms to compensate news organizations for the use of their content is coming soon.

Can you explain why this legislation is important, particularly for smaller news organizations?

[Paul Deegan]

Certainly.

Right now, as Jamie outlined, the decline in ad revenue has been going on for the better part of a decade, but the pandemic has exacerbated this situation. It's really an urgent situation for publishers.

We were certainly heartened this summer, during the election, when the various parties supported similar legislation in their platforms. The Liberal Party was very clear, saying they'd introduce legislation within 100 days. We're awaiting legislation, hopefully, in the next couple of weeks.

Introducing legislation is great, but what we really want is parliamentarians across party lines to work together—both the House and the Senate—and get this passed by June, because it is urgent. If we don't get it passed, we're going to have more and more outlets go out of business, creating news deserts in Canada, which doesn't serve our democracy well at all.

[Julie Dzerowicz, Liberal, Davenport, ON]

In addition to this legislation, if we were to introduce it, what are other measures, whether short- or long-term, that would support existing news organizations and also allow smaller start-ups to emerge and grow? Would you have any recommendations?

[Paul Deegan]

This is an important step—this type of Australian legislation—but it is not a silver bullet. There are certainly other issues that need to be addressed. I think we need to make sure that the Competition Bureau has the tools it needs to go after and look at these big tech companies.

If you look at the lawsuits in the United States right now.... States' attorneys general are basically alleging ad auction rigging by Google and Facebook. These are very serious issues, and we have to make sure that Canada has the resources at the Competition Bureau as well as the laws to address these companies and what are really monopolistic practices that don't serve Canadians or anyone else around the world all that well.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you very much.