Finance Committee on May 26th, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order. Welcome to meeting number 51 of the House of Commons Standing Committee on Finance.

Pursuant to the order of reference of May 10, 2022, the committee is meeting on Bill C-19, an act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures.

Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application. Per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask, except for members who are at their place during proceedings.

I'd like to make a few comments for the benefit of the witnesses and members.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike. Please mute yourself when you are not speaking.

There is interpretation for those on Zoom. You have the choice, at the bottom of your screen, of floor, English or French audio. Those in the room can use the earpiece and select the desired channel.

I'll remind you that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your patience and understanding in this regard. I request that members and witnesses mutually treat each other with respect and decorum.

I would now like to welcome today's witnesses.

For our first panel, from 10:00 a.m. to 12:00 p.m., as an individual, we have Vass Bednar, executive director, Master of Public Policy in Digital Society program, McMaster University. I believe Ms. Bednar will be with us only until 11:40 a.m. this morning.

From the Canadian Dental Association, we have Lynn Tomkins, president, and Aaron Burry, acting chief executive officer. From the Canadian Manufacturers and Exporters, we have Matt Poirier, director of trade policy. From the National Marine Manufacturers Association Canada, we have Sara Anghel, who is the president.

From the Philanthropic Foundations Canada, we have Jean-Marc Mangin, president and chief executive officer; and from Les producteurs de cidre du Québec, we have Marc-Antoine Lasnier, president, and Catherine St-Georges, director general.

Our other witness is from Wine Growers Canada. We have Dan Paszkowski, president and chief executive officer. Mr. Paszkowski is in the room, members.

We'll now begin with Ms. Bednar, with her opening remarks for up to five minutes.

[Vass Bednar, Executive Director, Master of Public Policy in Digital Society Program, McMaster University, As an Individual]

Good morning. Thank you to the chair and to this committee for the opportunity to appear.

We haven't quite met before. You've heard that my name is Vass Bednar and that I am the executive director of McMaster University's MPP in digital society program, where I am also an adjunct professor of political science. I actively participate in Canada's policy ecosystem as an Action Canada fellow, a Public Policy Forum fellow and a senior fellow at the Centre for International Governance Innovation, known as CIGI.

In addition to my leadership role at McMaster, I'm one of the country's most vocal advocates for competition modernization. I have engaged Canadians on the merits and need for competition reform in modest but meaningful ways through opinion editorials in The Globe and Mail, the National Post, collaborative research published by McGill University and commissioned by ISED, various podcast inerviews and my newsletter, which has a funny name, “Regs to Riches”.

Due to that general focus on competition in Canada and my own intellectual anchoring in digital policy issues, I am going to focus my brief remarks on the amendments that pertain to the Competition Act.

As you know, that act was last updated modestly after the “Compete to Win” report that was initiated in 2008, and 2008 is the same year that Apple's App Store launched. It's when Uber and Airbnb were founded, and later Slack, Venmo, and so many more. In many ways, that year is a hinge of sorts for the acceleration of the digital economy.

There are plenty of good reasons to support competition modernization beyond the passage of time. As an Ipsos poll from earlier this year highlighted, “Most Canadians say we need more competition as it's too easy for big business to take advantage of consumers”. It's 88%.

As noted in President Biden's historic executive order on competition from last spring, economists find that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth and racial inequality widen.

Competition is a key catalyst of productivity. It attracts investment, stimulates the creation of high-skilled jobs, and fuels exports of Canadian products, services and ideas.

I recently appeared before your colleagues at INDU to discuss these proposed changes to the Competition Act in greater detail. During that meeting, I expressed support for the amendments because they clearly serve the public interest at a time when Canadians are under intense economic pressure. They will improve the enforcement of the current act. They were clearly foreshadowed in a February press release from the minister. They are aligned with analysis from the Competition Bureau, and they've been discussed at length in the public domain.

I also acknowledge that, while the Budget Implementation Act is an imperfect democratic tool, policy windows of opportunity are scarce and must be seized.

Another reason for my general support is that these proposed amendments start to bring Canada in line with best practices in peer jurisdictions. It also sends a good signal that we are moving, however slowly, in the right direction, especially on making references to artifacts of the digital economy. I want to be clear here. In general, we're playing catch-up in Canada except on wage-fixing, where no one jurisdiction is really ahead or has figured out the optimal implementation of that policy goal.

Going forward, you should or could strike a panel of Canadian academics that focuses on competition issues as your digital policy task force. I would like to encourage this committee to consider the merits of an all-of-government approach to digital regulation that can complement competition reform efforts and help us achieve a truly interoperable policy environment. This is something I've written about.

These changes are a down payment on competition reform in Canada, modernization that is long overdue. They are not perfect, but no policy choice is. As I joked on Twitter, where honestly I spend a lot of my time on the Internet nowadays, we don't write the law in stone anymore, and that's a good thing. I see no reason to treat this suite of legislative changes as if it cannot be further refined and improved as we go forward. In fact, perhaps we can review the Competition Act every five years, as we do the Bank Act, to keep it fresh, flexible and responsive.

While I am not entirely sure if this is relevant, I also want to note that, in last year's federal election, it was the Conservative platform that spoke most explicitly to competition reform. It acknowledged that we need to ensure a level playing field for Canadian businesses. It promised harsher penalties for executives and companies that fix prices or abuse their dominant positions. The platform also supported workers, noting that mergers that reduce competition and lead to layoffs and higher prices will be rejected. These were compelling proposals that I was excited to read.

To conclude, I'd like to thank everyone responsible for drafting the language that we've read in the budget implementation act and for supporting these important, initial improvements to the Competition Act.

I am looking forward to continuing to engage on these issues and to further discussion.

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Bednar.

Now we'll hear from the Canadian Dental Association, for five minutes of remarks, please.

[Dr. Lynn Tomkins, President, Canadian Dental Association]

Thank you, Mr. Chair.

Good morning to all the members of the committee.

I am a dentist here in Toronto, and I am president of the Canadian Dental Association. My name is Lynn Tomkins. I am joined today by my colleague, our interim executive director at the Canadian Dental Association, Dr. Aaron Burry.

I am speaking to you from Toronto on the traditional territory of the Huron-Wendat, the Haudenosaunee, the Anishinabe, and the Mississaugas of the Credit First Nation.

I appreciate this opportunity to discuss budget 2022 and its proposed investment of $5.3 million towards access to dental care. I would also like to thank Mr. Chambers, Mr. MacDonald and Mr. Blaikie for meeting with the Canadian Dental Association on this topic over the past few weeks.

At the Canadian Dental Association, we know that oral health is an essential component of overall health. We believe that Canadians have a right to good oral health. That is why we fully support efforts by all levels of government to improve Canadians' oral health and to increase their access to dental care. We applaud this historic federal financial commitment.

Poor oral health strains other parts of the health care system, whether through hospital visits for dental emergencies or managing the long-term impacts of poor oral health on systemic health, for instance, cardiovascular disease or diabetes. While Canada compares favourably to many other countries, too many people still do not receive the dental care they need. More than six million Canadians each year avoid visiting the dentist because of the cost. This is especially true for low-income families.

Today I would like to comment briefly on how the federal government can best ensure this funding will quickly and efficiently benefit the Canadians who need it most, namely by collaborating with provinces and territories to stabilize and enhance the existing provincial and territorial dental programs.

Yes, many of these programs have flaws. Some of them cover only limited services, and others target only a narrow segment of the population, for example, only children or only low-income families. Many reimburse dentists at rates far below the cost of providing treatment. However, this only underscores why it is vital for the federal government to work with its provincial and territorial partners to stabilize their programs and to use their existing infrastructure to deliver enhanced, federally funded coverage. It makes no sense to construct a new stand-alone federal dental care program on top of strained provincial foundations.

A one-size-fits-all, Ottawa-knows-best approach has many drawbacks. Difficulties in setting up a new federal program could actually jeopardize dental care access for millions of Canadians who already have some sort of employer-sponsored coverage. Sixty-eight per cent of Canadian households earn less than the proposed $90,000 threshold, so we risk defunding or elimination by the provinces or territories of their existing programs. This would divert hundreds of millions of public dollars away from dental care and towards other priorities.

At a time when the federal government has difficulty providing passports to Canadians—and this is a function we have undertaken for over a century—it is fair to ask whether it could quickly and successfully set up a program that directly provides health care to the general public, an area where it has little relevant expertise. The spectre of a lengthy federal procurement process and the contracting out of the delivery of billions of dollars in health care spending to a private, for-profit insurance company is also unsettling. Pursuing either of these routes would be a mistake.

Furthermore, there are massive jurisdictional issues at play. Broad-based health care programs are the exclusive jurisdiction of the provinces, and efforts by the federal government to sidestep the premiers could lead to squabbles and court challenges. This would impede rather than improve access to care for the very Canadians that such a program would be designed to help.

There have also been questions about whether the federal government has the constitutional or legislative authority to deliver such an initiative directly. Premiers such as John Horgan and François Legault have already called for these funds to be transferred to their governments to support provincial delivery of dental care. Liberal governments in Newfoundland and Labrador and Yukon, as well as the Progressive Conservatives in P.E.I., have also recently made huge strides on access to dental care. In this environment, the federal government cannot and should not go it alone.

In late March, health minister Jean-Yves Duclos outlined three principles for intergovernmental collaboration on health care: sharing responsibility, respecting jurisdiction and focusing on results. Since then, we have appreciated the hard work done by him, by his team and by his officials on this file, as well as how much they have consulted with the CDA and other stakeholders. Dr. Burry and I had an excellent meeting with him just a few weeks ago. I encouraged the minister to continue this collaborative approach by working on this file with provincial and territorial colleagues in the weeks and months ahead.

Likewise, the day after the budget, CDA was happy to hear both Prime Minister Trudeau and—

[The Chair, Liberal, Peter Fonseca]

Ms. Tomkins, could you start wrapping it up? We're well over time. Thank you.

[Dr. Lynn Tomkins]

Yes. I have four sentences left. I should have talked faster. I apologize to the committee.

Recently, the Prime Minister and the Deputy Prime Minister said they looked forward to intergovernmental collaboration on dental care, as had recently taken place with child care.

We have a historic opportunity to make a big difference in the oral health of millions of Canadians. Let's get this right.

Thank you very much for the opportunity to present today. Dr. Burry and I will be happy to answer any questions. My apologies for going over time.

[The Chair, Liberal, Peter Fonseca]

It's not a problem; thank you, Ms. Tomkins.

Now we'll hear from Canadian Manufacturers & Exporters.

Mr. Poirier, you have up to five minutes, please.

[Matt Poirier, Director, Trade Policy, Canadian Manufacturers and Exporters]

Thank you, Mr. Chair, and good morning, everyone. It's my pleasure to be here on behalf of Canada's 90,000 manufacturers and exporters and our association's 2,500 direct members to discuss Bill C-19.

The manufacturing industry is 10% of Canada's GDP, produces two-thirds of Canada's value-added exports and employs 1.7 million people in high-paying jobs across the country.

In the lead-up to the budget, CME issued its 2% challenge. That is, the federal government should attract 2% of OECD manufacturing investment into Canada, up from our current 1%, by instituting a national industrial strategy. Doubling that investment to 2% would revolutionize Canadian manufacturing, create hundreds of thousands of jobs, and increase our GDP and standard of living.

To get there, we must address our most pressing challenges: labour shortages, supply chain disruptions and declining investment and export performance. While there's a sprinkling of help in all those areas in budget 2022, we believe more must be done to help Canadian manufacturing grow. I will outline that plan now.

First, on labour shortages, manufacturers big and small are struggling to fill the 81,000 vacancies across Canada. All this is happening even though our sector is one of the highest-paying industries in the country.

We can tackle this problem in many ways, but the main drive should be to plug our labour shortages through immigration. Budget 2022 talked about processing backlogs, but we encourage the government to dedicate more resources to the problem. We must also speed up the introduction of a trusted employer stream to the temporary foreign worker program and reduce the administrative burden on companies applying to the program. Ultimately, however, the temporary foreign worker program is merely a pressure release valve. We need to aggressively increase our immigration intake targets to 500,000 per year in the economic stream alone. We need workers.

Second, on supply chain bottlenecks, according to a CME survey, nine out of 10 Canadian manufacturers report encountering supply chain issues. The added challenge for Canadian manufacturers is their lower position in the pecking order for critical components. We currently have the situation in Canada whereby a company can have an increase in customer orders and a workforce ready to go, but nothing to build because it's waiting on parts. The national corridors fund to facilitate the movement of goods and other initiatives announced in the budget will help, but in addition to long-term investments and modernizing our trade infrastructure, we must address the short-term problem by providing temporary financial assistance to manufacturing companies still feeling supply chain disruptions.

Lastly, on investment and exports, Canada lags behind other OECD countries in non-residential business investment, and this is leading to deterioration in our international competitiveness. On the net-zero transition, Canada's manufacturing industry has already started, but smaller companies are falling behind. On trade, while we enjoy some of the best free market access of any country on earth, our goods exports are stuck in neutral.

To respond to all of these challenges, the budget announced some measures that CME has long called for. The Canada growth fund and tax changes for SMEs are positive, as are the promises to look into adopting a patent box regime and SR and ED reform. A tax credit for investments in clean technology and a refundable tax credit for carbon capture will support manufacturers as they work to decarbonize their industrial processes.

While these are all positive developments, we worry that the money allocated to these measures may not be sufficient, so we urge the government to put up the money necessary to make these changes have a real impact. We also need to better incorporate SMEs into the design of these programs so they can qualify for them and be helped through the process of using them, particularly on the net-zero transition and growing exports front.

Before I conclude, I want to register our concern with the proposed luxury tax on planes, boats and autos. I echo all the others who have spoken out against this tax. We understand the allure of such policies but they are a siren's song, as they do a lot of damage to domestic manufacturing. Manufacturers and organized labour are united in their calls for this tax to go, and we urge the government to do just that.

In conclusion, while CME is pleased to see many policies we have long championed included in the budget, this is just the starting point. We look forward to working with you all to tackle our industry's challenges and ensure our economic prosperity for years to come.

Thank you for inviting me. I look forward to the discussion.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Poirier.

We'll hear from Sara Anghel for the National Marine Manufacturers Association Canada.

Ms. Anghel.

[Sara Anghel, President, National Marine Manufacturers Association Canada]

Good morning, Mr. Chair, members of the committee and ladies and gentlemen.

My name is Sara Anghel and I'm president of the National Marine Manufacturers Association Canada. I'm here to express the recreational boating industry's concerns with the proposed luxury tax on boats valued above $250,000.

The boating industry has a GDP impact of $5.6 billion. It has $10 billion in revenue and employs more than 75,000 Canadians in the core of the industry. Our industry has faced many headwinds since the start of the pandemic. Supply chain disruptions, production delays and inflation have affected our members. Tourism and recreational businesses were closed for months due to the pandemic restrictions and border closures. On top of that, we are now facing an impending luxury tax on boats.

Our industry understands the government's need to raise revenue in the wake of the pandemic. The luxury tax is not the way to achieve this. The history of luxury taxes shows that consumers will simply choose to take their discretionary spending elsewhere. That is what dealers and manufacturers are hearing from customers. The result will inevitably be a dip in revenue and hundreds or even thousands of job losses across the country.

According to an economic impact study by economist Dr. Jack Mintz in partnership with Ernst & Young, the proposed tax would result in a minimum $90-million decrease in revenues for boat dealers and potential job losses of at least 900 full-time equivalent employees. In short, the tax will hurt the very middle-class families the government is trying to help.

The problem with this kind of tax is that it can easily be avoided by consumers either buying other goods or purchasing and keeping their boats abroad, in Florida or Seattle, for example. They may bring a boat into Vancouver for the day, but keep it stateside.

The expected drop in sales will significantly impact the bottom line of many manufacturers and dealers, which will then be forced to scale back their operations and staffing levels. While we saw a boom in boat sales during the pandemic, the supply chain disruption has been very difficult for our industry. In fact, dealers are expecting a significant drop in sales due to material shortages. Ontario dealer Crate's Lake Country Boats in Orillia expects a drop of 70% in sales by the end of 2022. That doesn't account for what will happen once the luxury tax is in place.

The tax also threatens the survival of Canada's domestic boat manufacturing base, which has already been hollowed out by years of competition from low-cost jurisdictions and offshoring for many. For some yacht builders, such as Neptunus Yachts in St. Catharines, Canadian sales have been the foundation of their business for 30 years. Neptunus Yachts expects to see these Canadian sales drop to virtually zero.

We can also expect a ripple effect of job losses at marinas and service shops. Fewer new boats sold means less work for the marina service industry, much of which is concentrated in rural and coastal communities.

In the early 1990s, the U.S. introduced a similar tax on boats that devastated the industry. It was eventually repealed following the loss of thousands of jobs and a net revenue loss for the government. New Zealand, Italy, Norway, Turkey and Spain have also previously introduced a luxury tax on boats. In each of these cases, the tax was ultimately repealed due to the net negative economic effects. There is no reason to think the same will not happen here in Canada.

We are also troubled by the singling out of recreational boats and not other recreational products. Boating is a cherished pastime for millions of middle-class Canadian families. In this unaffordable recreational property market, many families choose to purchase a boat valued above $250,000 as their cottage.

At a time when governments are trying to attract investment and rebuild our economy, a tax that guts homegrown manufacturing and retail businesses makes no sense. Instead of supporting our industry as a vital part of Canada’s recovery, this tax is picking winners and losers in outdoor recreation.

The luxury tax also has the potential to damage Canada’s trade relations. Concerns have been raised by the boating industry in the United States that this tax directly attacks our Canada-U.S.-Mexico agreement. Similarly, our trading partnership with the U.K. and the European Union could be hurt by what many see as an indirect tariff on boats.

Finally, I saw this morning that the PBO has released a new report on the tax and projects a $2.9-billion loss in sales and that 75% of that loss will come from boats. This is what our industry has been trying to communicate to the government—that this tax will destroy the industry and cause job losses across the country.

Thank you very much for the time to speak to you today.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Anghel.

Now we'll hear from Philanthropic Foundations Canada.

Jean-Marc Mangin, you have up to five minutes, please.

[Jean-Marc Mangin, President and Chief Executive Officer, Philanthropic Foundations Canada]

Mr. Chair, members of the committee, thank you very much for this opportunity to discuss the serious and unintended consequences of Bill C‑19 for the charitable and non-profit sector.

Like many other organizations in the sector, Philanthropic Foundations Canada, which is the largest national network of private and public foundations in the country, welcomed the government's budget announcement that it would adopt the spirit of Bill S‑216, the purpose of which is to treat organizations that contribute to the common good on an equitable basis even if they do not have official charitable status.

However, Bill C‑19 does no such thing. In fact, if passed in its present form, it would undermine the operational environment by adding more complexity and risk through overly prescriptive statutory measures. I believe that the government and opposition parties are fully aware of the problems involved and that there is a common willingness to correct these unintended effects.

With Imagine Canada, Cooperation Canada and leading charitable lawyers, we have provided three simple amendments that would remove the worst of these unintended consequences. These have already been submitted to the clerk of this committee. Together, we continue to offer our co-operation to fix Bill C-19.

Given the vast and complex set of urgent challenges facing our communities, our collective focus must be to encourage adaptive, learning-oriented results management, not to impose, in law, seven narrow and mandatory measures on all forms of partnership.

The former—that is, Bill S-216—offers real accountability to funders and communities alike who work across a myriad of partnerships. The latter—that is, Bill C-19 in its current form—is a straitjacket that will hinder social innovation, continue the damaging colonial practices of de facto direction and control, and ultimately restrict the flow of charitable dollars to those who need them the most. Let's focus on outcomes—

[Jean-Denis Garon, Bloc, Mirabel, QC]

I have a point of order, Mr. Chair. There has been no interpretation for the past 20 seconds. I think there's a sound quality problem affecting the interpretation or cutting it off.

[The Chair, Liberal, Peter Fonseca]

Clerk, there's a point of order on the interpretation. Can you share with us what's happening?

[The Clerk of the Committee, Mr. Alexandre Roger]

Yes.

Mr. Mangin, I believe your mike hasn't been selected. On the left at the bottom of your screen, you'll see the Mute/Unmute button with an arrow pointing upward. Can you tell me what's selected under Select a Microphone?

[Jean-Marc Mangin]

It's Microphone Array (Realtek Audio).

[The Clerk]

If you see no other choices, it appears your headset isn't detected. Would you please unplug it and then plug it back in it?

[Jean-Marc Mangin]

Yes.

[The Clerk]

It should reinitialize.

Has a new option appeared under Select a Microphone?

[Jean-Marc Mangin]

No.

[The Clerk]

Then the system isn't recognizing your mike.

Mr. Chair, there's nothing we can do. This is not a House-recognized device on his head.

We were told yesterday that he would appear virtually. We didn't have time to send out a headset.

Mr. Mangin, do you have another headset or another audio system? For instance, do you have any iPhone earpods with you?

[Jean-Marc Mangin]

Yes.

[The Clerk]

I know the iPhone system has previously been useful in solving this kind of problem. There's an integrated mike on the earpod wire. If you raise it close to your mouth, it might work and help the interpreters do their job.

[Jean-Marc Mangin]

All right.

Is it working better now?

[The Clerk]

No, it's the same. The system's picking up your voice but isn't producing sound quality good enough for the interpreters.