Evidence of meeting #44 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cider.
A video is available from Parliament.
Executive Director, Cider Canada
I can't say that I have any knowledge of the topic or had any discussion around that at all.
Conservative
Ed Fast Conservative Abbotsford, BC
Well, I can confirm that in fact there is no such adjustment mechanism in place. In other words, Canadians who pay a carbon tax are treated much less advantageously than American companies are.
My second question is to Mr. Hinton.
Yours is one of the most sobering assessments that this committee has ever heard about our lagging innovation performance in Canada.
You listed a number of challenges...there was actually quite a long list of challenges that undermine our competitiveness, especially within the innovation space.
Could you quickly go through that list again, and then perhaps put special emphasis on two elements that I picked up. One is the patent box, and the second is the $10 billion in university investments that the federal government makes, which really never get repaid because those companies that receive support eventually become non-Canadian.
Intellectual Property and Innovation Expert, Own Innovation, As an Individual
Yes. Thank you.
I think I counted 16 or more aspects of the budget bill that touch on innovation. With regard to the two you pointed out, the patent box is something that's been implemented in other jurisdictions. However, you can do it 99 ways wrong and maybe one way right.
Really, when implementing these types of policies, it's about tax competitiveness and how we encourage Canadians companies to grow, scale and stay here in Canada, and not put them at a disadvantage against their global peers. Patent box shouldn't be about attracting foreign direct investment or chasing jobs because that's in the 9% tangible strategy.
When it comes to the other aspects, our current research funding is significantly underperforming. As I mentioned with Canadian universities, we fund billions of dollars for research and development. Fundamentally, Canadian universities are great at creating talent and basic research, but there's no incentive or strings attached to encourage economic development. In countries like Finland, there are three: education, basic research, as well as economic return.
Universities have started to encroach and get money in the name of innovation, and innovation is invention plus commercialization, using that technology in the market. Universities are not actors of innovation. Those are Canadian firms, global firms. What we see today is that more than half of all of the industry partnerships that happen, and the resulting IP, end up with foreign companies, the likes of Huawei and Google, as I mentioned.
Conservative
Ed Fast Conservative Abbotsford, BC
How do we protect that investment that Canadian taxpayers make in our universities? What is the mechanism we would use to make sure that those companies either stay Canadian or that we recover the investment, plus perhaps a return on that investment, going forward?
Intellectual Property and Innovation Expert, Own Innovation, As an Individual
Yes, and we've seen initiatives across the country. In Quebec, there's Axelys, and Ontario has IP Ontario. B.C. and Alberta are looking at this issue and starting to take action on it, because they're the other half of the public funders for these.
What we need to do is to ensure the proper stewardship of intellectual property for the benefit of Canadian companies. Right now, in the academic space, you have to publish. If you publish without protecting, that's innovation philanthropy. You're effectively giving away this technology to anybody who can capture it.
At least ensure that there's proper stewardship of this IP, prioritize Canadian companies and make sure that Canadian companies are the ones that get the outputs of this investment. Deprioritize doing those deals with Fujitsu and all of those other players that really don't need the help from Canadian taxpayers.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Hinton and MP Fast.
Now we're moving to the Liberals.
MP Baker, the floor is yours for questions.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Thanks very much, Chair.
My first question is for Mr. Cochrane.
I want to go back to the beneficial ownership registry, if I may. I know this is something your team has been advocating for.
Keeping in mind that my constituents in Etobicoke Centre are watching this, how would you convey to them why a beneficial ownership registry is important?
Economist, Canadians for Tax Fairness
Our organization was part of putting out a recent report on snow washing, which is the use of Canada's reputation as a country with a solid rule of law, that is financially stable and that has a relatively robust tax system. However, the anonymity that's available with business registries allows people to hide their money and flow it through Canada. It then acquires the reputation of effectively having been sanctioned by Canada.
Canada is now part of the international network of tax havens, which I don't think is how Canada wants to function as part of the global economy. The system of international tax havens has trillions of dollars that does not get taxed, and it is connected to illegal activity and terrorism. Eliminating the ability of people to hide behind the businesses that get established as part of their ownership networks is a way of combatting the role of Canada within that network.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
That makes a lot of sense.
Could this also be impacting housing prices in Canada?
Economist, Canadians for Tax Fairness
Yes, absolutely. While we're targeting foreign owners, it wouldn't be too difficult to appear to be a Canadian owner if you were buying this asset via a Canadian ownership vehicle.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
What I hear you saying is that a beneficial ownership registry allows us to better understand who's investing in Canada, particularly when it comes to assets like real estate. Therefore, it allows us to make sure that those who are investing are following the rules that apply to them if they're investing from abroad. I guess it allows us to also make sure to do a better job of tracking how the funds are flowing and perhaps whether they're being used for criminal purposes.
Is that a fair summary?
Economist, Canadians for Tax Fairness
That's absolutely a fair summary. Obviously, our organization's main concern is the role of anonymity and the role of these corporate registries in being able to avoid taxes. Knowing who holds beneficial ownership will empower the CRA to make sure that all of the taxes that should be paid to Canada are being paid.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Yes, that makes sense.
Of concern to all of us on this committee and to all MPs is Russia's recent invasion of Ukraine and the global implications. Can you talk a bit about why, in light of Russia's invasion of Ukraine, this type of registry might be more important?
Economist, Canadians for Tax Fairness
If the government wanted to sanction oligarchs who are connected to the Putin regime, to make sure that they're not able to flee from their culpability and do business in Canada in a way that is ultimately serving the Russian war machine—for lack of a better term—it would be almost impossible. This is because of their ability to hide under layers of ownership so that you can't identify, necessarily, what assets are owned by these oligarchs.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
I appreciate that.
I think I only have about 50 seconds left. The chair will correct me if I'm wrong.
In those 50 seconds, could you help folks understand—me and people watching at home—why people are able not to be transparent about what they own or who owns these assets? Why is that so concealed?
Economist, Canadians for Tax Fairness
It's because companies can own companies. You can have one company own another company in another country, which owns another company in another country. The ability to track where assets are actually owned, and who they're owned by, becomes incredibly opaque, because you're dealing with different legal systems in each of these countries.
Canada introducing a beneficial ownership registry is obviously not going to solve the global problem, but it will be a huge step forward and give Canada the basis to push others to do the same.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Cochrane and MP Baker.
We are now moving to the Bloc and Monsieur Ste-Marie for two and a half minutes.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
The discussion today is very informative.
I am going to turn once again to Mr. Rooke, from Cider Canada. I want to pick up where he and Mr. Albas left off.
Mr. Rooke, if I understood correctly, the excise duty would apply to artisanal cider makers who use the juice from Canadian apples to make their cider in the same way that it would to manufacturers who import American apple juice to make their cider in provinces that allow the use of imported apple juice in cider making.
Is that correct?
Executive Director, Cider Canada
I would have to double-check and confirm that, but my understanding is that the cost of the excise duty is borne at the time the fruit is converted into the alcohol process. If you're purchasing apples from abroad or whatnot, you still have to pay the tax—the duty portion—when you convert the juice to the actual product. That's the point where the excise becomes applicable. If the apples are a lot cheaper, or the juice that comes in with the information along with it allows that process to happen.... That might be where some producers are looking to go.
Gabriel Ste-Marie Bloc Joliette, QC
The government really needs to consider the provisions in question if it wants to support a booming industry made up of artisanal cider makers. It should encourage producers and make sure that the legislation does not have a negative impact on them.
Mr. Rooke, in your opening statement, you spoke about how the excise duty the government is imposing through Bill C‑19 could negatively affect the industry.
Can you talk more about those negative consequences?
Executive Director, Cider Canada
The large consequences we're seeing are, again, based on the ability of an organization to continue to operate and produce product, because the margins are already so small. These are, again, small farmers adding this as an opportunity to use apples they have on their lands, and small, medium and large businesses that support Canadian restaurants, orchards and so on.
With apples having such a huge impact—the largest fruit producers in the country, essentially—this has a large potential to be quite impactful not just on cider producers but on the surrounding economies as well.
Liberal
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you.
Mr. Hinton, one lesson I drew from my time on the international trade committee in the last parliament is that Canada is not alone in emphasizing free trade in global marketplaces and reducing access barriers in trade agreements.
Where we do stand out is this. Our governments under both stripes have tended to believe that part of the free trade ethos is a laissez-faire attitude to industry at home, whereas our international competitors don't take that same view. They're equally aggressive in trying to reduce barriers to market access for their industrial players. They're much better at working with them on strategies to take that paper access to market and turn it into real market access for companies. They have an idea about what kind of work they want to protect and how they want to drive job creation in their own domestic market as a result of access to international markets.
It's something we've heard a lot of different industries talk about. I wonder what you think about that as a general assessment, and whether you see it at play in the industry in which you have a very particular expertise.