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.
12:25 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
That's the time, MP Blaikie.
Now we move to the Conservatives and MP Albas.
12:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Thank you, Mr. Chair.
Thank you to all of our presenters today for your expertise and individual opinions and for wanting to come and share what Bill C-19 means to some of the stakeholders out there.
I'm going to start with Mr. Rooke.
Mr. Rooke, in my riding we have wineries, absolutely, but we also have cideries like Left Field Cider Company just outside Logan Lake, Dominion Cider, Millionaires' Row, Summerland Heritage Cider, and NOMAD Cider, and that's only in Summerland and Logan Lake. There are others.
I want to talk to you a little bit about the trade challenge that has been the reason the government says we have to make these amendments to the Excise Act, especially to the sections on wine.
My understanding is that the government completely capitulated to the Australians and didn't fight it in the WTO. That's where we are. Unfortunately for you, because your industry is defined under the Excise Act as being under wine, you were thrown in there indiscriminately.
12:25 p.m.
Executive Director, Cider Canada
Yes, we were. Because cider has grown so quickly in the last 10 to 15 years, there was never that original thought that cider was separate. It is separate in most other countries because it is large enough to be separated out. We were under wine. As a result, because of those challenges, it does mean that our sector has been caught up with this process. Just to add to it, our members are often not even aware of what excise duty is. They started their companies not even thinking that this was going to be an impact.
12:25 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I would like to ask you about that, because certainly there is a bottling deadline. Enter Bill C-19, in the English on page 106, subclause 129(2) says, "Subsection (1) comes into force, or is deemed to have come into force, on June 30, 2022, but does not apply to wine packaged before that day". That also could mean cider.
Are your members aware that anything that is bottled as of July 1 will have this extra excise tax added to it?
12:25 p.m.
Executive Director, Cider Canada
It's been a challenge to get the word out because, again, it's very new and often involves very small organizations. We're concerned that maybe half of the cider producers don't know that the excise duty is coming into play. They don't know that they have this new tax they are going to be charged starting on July 1. They don't know that if they have product that's waiting that could be bottled to save them that process, they should be doing it.
There are also, of course, major challenges in glass, in transportation and in cardboard. There was a great study that just came out earlier today noting that, here in Ottawa, places are reusing glass options because what used to be available in one week now takes up to six months to get access to.
12:30 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
If your industry were given another three to six months, that would be at least be helpful for those (a) who are unaware, and also (b) for those who are having supply chain issues for glass etc. for bottling.
12:30 p.m.
Executive Director, Cider Canada
That process would allow us to be able to get to a point where we could, if a producers' program were put into place, when funds start to come back, to reduce that gap and really help with cash flow and the hardship overall.
12:30 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I'm going to point something out to the government, because government members don't always think about it in these terms—not these government members, but just the government itself. Most of our population is along the U.S. border. In Washington state, they can make large-scale operations; they can dump a huge amount of product, such as apples, onto a market if they wanted to.
All the companies I listed here are proud that they use Canadian products. They work with farmers locally to make sure there is less wastage. By making these changes, the economies of scale are going to be drastic.
How many of your members do you think will have to start utilizing, or may decide to start utilizing, United States' apples versus Canadian local product?
12:30 p.m.
Executive Director, Cider Canada
I wouldn't be able to give you a specific number, but I think what we've been talking about is that if Canadian producers want to stick with Canadian products, those prices are rising so quickly and with so much competition that they're not going to be able to be financially viable. Their margins are already very tight, a lot tighter than in the beer, wine and spirits sector as a whole.
That might be an opportunity to switch. In some provinces, it's required to be all Canadian within the province. For example, in Quebec, you can only use apples from that province.
12:30 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Obviously, a bottle of wine usually sells for more than perhaps than a bottle of cider.
Is that correct?
12:30 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
These changes will impact cider more than wine.
Is that correct?
12:30 p.m.
Executive Director, Cider Canada
That is correct. When you add on the provincial taxation, it adds more to it because there's tax on tax.
12:30 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Okay.
Thank you, Mr. Chair. Hopefully, the government will come to its senses and be open to amendments.
12:30 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Albas.
Now we will hear from the Liberals.
We have MP Chatel for five minutes.
May 16th, 2022 / 12:30 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you, Mr. Chair.
Thank you to the witnesses for being here today. Their input on Bill C‑19 is very helpful.
Mr. Hinton, I was especially struck by what you said about the lack of Canadian intellectual property.
We've seen small and medium-size businesses in Quebec come up with innovative products. As soon as the product becomes commercially viable and profitable, however, the business is bought by an American company most of the time.
Do you have any recommendations on how to improve that situation, and keep Canadian businesses and their intellectual property in Canada?
12:30 p.m.
Intellectual Property and Innovation Expert, Own Innovation, As an Individual
Thank you.
The issue you raise in Quebec is one that we see across the country. A lot of the Canadian IP that's generated is offshored or being sold, and it's really because Canadian companies don't have the freedom to operate. The underlying IP is already owned by those players that acquired them, and it happens across the sector.
If you think about something like critical minerals and the whole electric vehicle value chain, success is having Canadian companies owning critical IP across the entire value chain. What the Americans and the Chinese do is that they watch Canadian companies start to grow, and they say, okay, this is a company that's going to help reinforce our electric vehicle value chain, and so we will acquire that IP now for, let's say, three to 10 times its worth, because we know that if we have the whole value chain, we can get those innovation returns.
These companies are specifically being targeted. The U.S. Department of Energy, I believe, has a list of the critical IP-holding companies. It goes and shops around and buys these companies for more than they are worth today, recognizing that these are going to be of critical value for the entire electric vehicle, critical mineral continuum of valuable IP.
It's not an open market. It's happening, and the Chinese and the Americans are best known for doing that.
12:35 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you.
There is obviously no comparing Canada with the U.S. or China.
You mentioned small open economies such as France and Korea earlier. You said they had adopted strategies that could be put in place here.
Can you briefly describe those strategies?
I would also appreciate it if you could send the committee your answer in writing afterwards.
12:35 p.m.
Intellectual Property and Innovation Expert, Own Innovation, As an Individual
What we see is that those companies really prioritize the IP generation and retention of valuable IP. Right now we're actually doing a lot of our innovation policy the wrong way. We're investing in that tangible economy, giving billions of dollars for manufacturing jobs, while the Americans get to hold all of the IP. That further perpetuates the problem.
What these countries have done through what we had initially called “sovereign patent funds”.... But now, with the Innovation Asset Collective and Canada's patent collective...acquire and retain intellectual property for the benefit of Canadian companies. So having a pool of intellectual property that Canadians companies can access to give that scale.... There are no Canadian companies that are in the top 100 patent owners, and without those 5,000 to 10,000 patent portfolios, we don't have the bench strength to be able to go toe to toe with those bigger players, and so the snowball starts to melt instead of get bigger.
12:35 p.m.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you, Mr. Hinton.
Mr. Cochrane, the committee previously heard from Brian Arnold. He spoke about the general anti-avoidance rule and had some very practical recommendations on how to better implement the rule to ensure that everyone paid their fair share of taxes.
I am also particularly concerned about tax avoidance strategies, including treaty shopping.
I would like you to provide your answer in writing, since you clearly won't have much time to answer this now. I would like to know what practical recommendations you have on the subject.
12:35 p.m.
Economist, Canadians for Tax Fairness
As an economist, my area of expertise is less about how this needs to be specifically designed.
I actually respect your expertise in this area, Ms. Chatel, and Mr. Arnold is certainly an expert in this area.
What I know, as an economist, is that GAAR is incredibly out of date because the global economy has become much more digital, and the ability to shift intangible assets makes it so much easier to book profits in the most tax-favourable centre. The need to update it is long overdue, and I would absolutely defer to Mr. Arnold on what that could actually look like.
12:35 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Chatel.
Members, we're moving into our final round. I know we lost a bit of time at the midway mark, so I will hold everybody to their time and we'll end up finishing a little after 1:00.
We're starting with the Conservatives, and MP Fast for five minutes.
12:35 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Thank you.
My first question is for Mr. Rooke.
Thank you for mentioning Taves Estate Cidery in Abbotsford, B.C. Loren Taves shared with me that this new excise tax on cidery products will be devastating for his business. It will basically gut his company's profits and not allow him to get a payback on his capital investment. He also mentioned the impact that carbon taxes have on his viability, when American cideries don't have to pay such a tax.
Are you aware of any effort by this government to implement a carbon border adjustment mechanism to offset this disadvantage that Canadian companies have, especially in the cidery space?