Finance Committee on May 18th, 2023

[Darren Hannah]

I believe, according to Finance officials, the retroactive amount is $195 million, which represents about 5/100 of 1% of tax revenue.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

There's going to be an argument about whether it should be retroactive or not—and we all have views—and whether the tax, in fact, should be put in place.

Is there an issue of whether, in fact, these services should be taxable?

[Darren Hannah]

Yes.

To the discussion earlier, it's an unusual thing to do to be increasing taxation on a service at the same time as you are trying to lower the cost of card acceptance.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Your argument was that the incidence of any increase in taxation would fall on whom?

[Darren Hannah]

The incidence of any taxation will ultimately fall on the users of the card system, which are both the consumers—because they are customers of the issuers—and the merchants—because they are customers of the acquirers.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Sorbara.

Now we'll go to Mr. Ste-Marie, please.

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

Mr. Chair, I'm going to start with a point of order.

[The Chair, Liberal, Peter Fonseca]

You have a point of order.

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

If members or witnesses don't have their microphones on when they start speaking, the interpreters can't do their job. I just want us to make sure that our mike is on before we speak. That was my point of order, Mr. Chair.

I want to thank all the witnesses again. This is a really fascinating panel. Unfortunately, we only have a certain amount of speaking time. That said, just because we haven't been able to ask you all our questions doesn't mean we haven't listened carefully or that we're not taking your testimony and the measures you're proposing into account.

For my last turn, I will address Mr. Robertson and Mr. Brock.

Mr. Robertson, you said that mining activities require a geat deal of computational ability, but artificial intelligence requires even more. We're developing expertise in Quebec and in Canada through businesses that have that computational ability. If Bill C‑47 passes as is, it will hinder the development and future of this key business sector.

In the few minutes I have left, I'd like to hear what you have to say about this or about other factors related to your requests.

[Daniel Brock]

I'll make a quick comment on that, and maybe you can walk through the legislative proposal.

What this sector is doing right now is building the infrastructure for high-performance computing. Today, the economics of supplying that computing power to companies that use it to mine bitcoin are very attractive, which is why that computing power is going there. The highest return for the investment in that computing power is coming from that sector.

We don't know what the future's going to hold in terms of the development more broadly of high-performance computing. We have an expectation there will be other areas of the economy, other areas of innovation, that are going to be created, and we'll be able to draw on that capacity. This sector is laying the groundwork for that. It's attracting significant investment. It's enabling us to train young people in this new area of innovation and commerce.

Yes, what's happening here is on a relatively small scale, but it's the beginning of something that's going to be quite significant, and Canada is uniquely positioned to play a leadership role in supplying clean computing power to the world.

[David Robertson]

That's the exciting part, the side benefits.

The number of companies that are selling the heat from their computers to their local community centres, that are coming off the grid and not using natural gas, using immersion technologies to cool these machines and transfer that heat so we're not contributing to global warming, high-speed Internet to rural communities....

This is my challenge with.... We're not asking for it to be this huge exemption. What we're asking is that the Canadians who have the computers be specifically excluded if they're selling their services to a non-resident mining pool.

As I said at the beginning, the problem with the legislation is that it's basically saying, “Your customer is using it for crypto-asset mining, so we're going to treat you that way.”

All we've done—we've put it together—is ask for a very simple amendment to be added to the legislation.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Robertson and Mr. Ste-Marie.

Go ahead, Mr. Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much, Mr. Chair.

Mr. Gray, I expect we may not agree on all the finer points of employment insurance policy, but one thing that I know both the Canadian Labour Congress and the Canadian Federation of Independent Businesses have talked about is the decision of the government to attribute 25 billion dollars' worth of CERB debt to the EI account. The EI account has a legislated mandate to balance over a seven-year horizon. This is essentially going to push up premiums without any added value to the employment insurance program.

I'm wondering if the Canadian Chamber of Commerce also has a concern about this decision to allocate that debt to the EI account, as opposed to keeping it on the general ledger.

[Alex Gray]

I think it's a pretty reasonable concern to have. It's not something that's come across my desk. However, that seems at first glance to not make a whole lot of sense, to be honest.

It's actually something I'd be happy to discuss further.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Right on.

Mr. Chapman, I was curious to know about this. We're obviously making an exception to the excise tax rules as written. As somebody who thinks it's important for Parliament to approve financial matters, that principle of having an automatic escalator tied to inflation for things like the excise tax has never sat comfortably with me.

I wonder if you think there are some lessons learned there about choosing to proceed with excise tax increases in this way more generally.

[Luke Chapman]

This tax mechanism has been in place since 2017. I think 2023 is the perfect example of why we have opposed this since 2017.

These annual increases are determined using an inflation indexing formula. As inflation rises, the size of each annual increase goes up. As I noted in my opening remarks, this year's increase was triple the previous five-year average. In those past five years, none of the increases went before Parliament for a vote.

Looking forward to next year, it's going to be another outsized increase of between 4% and 5%, because of the nature of inflation. This is going to be an ongoing headache until inflation gets below or around 2%.

From our perspective, our industry would love to see these annual increases—or any increases—go before Parliament for a debate.

I'll end by saying thank you, Mr. Blaikie and the NDP, for your support in raising this issue leading up to the federal budget. We appreciate your meeting with our union reps. They see this as a big threat to their jobs during a period of declining beer sales. Taking more money away from the businesses reduces their ability to negotiate with their bosses.

We appreciate the NDP's support in raising the issue. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie.

Now we go to the Conservatives and Mr. Lawrence for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

I'll start with the Canola Growers, if I can. Either Mr. Carey or Mr. White, feel free to respond.

The interswitching program was changed in 2017 to a program that, to my understanding, due to red tape and bureaucracy, was no longer usable. This budget is going to put forward a pilot program for interswitching again.

Some of the critics have raised some objections to that. I'd like you to have the opportunity to dispel some of those myths, such as that there might be a slowing in rail traffic or a loss of employment for the railways.

Could you please tell me why I'm wrong?

[Rick White]

Thank you for the opportunity to respond to that. We've heard the myths being portrayed by the railways that this type of pilot project would be bad for the economy, bad for the supply chain resilience and bad for labour. We've heard all [Technical difficulty—Editor]

[The Chair, Liberal, Peter Fonseca]

We're having some technical challenges, so we'll wait until we get Mr. White back.

Mr. Lawrence, continue if you like.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I think I saw Mr. Carey. We have the in-person version, too.

[Dave Carey, Vice-President, Government and Industry Relations, Canadian Canola Growers Association]

There's certainly been a lot of rhetoric about this. Interswitching has been used in Canada since the 1900s. Railways are consistently switching the locomotives or train cars. Actually, every shipment that goes to the port of Vancouver, whether it's CP or CN, ultimately gets put on a CN locomotive to go over the bridge. Those 160 kilometres are a good start; however, it will handle only about 90% of grain handling facilities. It misses massive growing regions of our country, such as northern Alberta and northern Saskatchewan. Interswitching is the only tool we have, with the duopoly of class 1 railways, to incentivize any competition.

The key part of interswitching is not its use; it's that the threat of its use allows shippers to negotiate with their originating carrier to try to get a better rate and better service.

The other one around labour is that there is an agreement among the International Brotherhood of Teamsters that says that U.S. crews cannot come up into Canada and Canadian crews cannot go into the United States. Every railway that's running in Canada is run by a Canadian union crew. There are a lot of myths out there. I'd say a lot has been dramatized for dramatic purposes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

I'm going to switch to Ms. Grynol.

Your members have been through a very difficult time, whether it be COVID or now the labour shortage. My questions for you are going to be specifically with respect to the carbon tax.

We had the original carbon tax, which I would assume would hurt the travel industry, as it makes travel more expensive. That's set to triple over the coming years. In addition, we just heard from my colleague, in talking about the Parliamentary Budget Officer, that there's a brand new carbon tax that's set to add another 17¢ to the cost of a litre of gasoline. I'm wondering whether you believe that is helpful or hurtful to your industry.

[Susie Grynol]

Any time there is cost introduced into the system, it makes it more expensive to travel. That's obviously not a good thing.

I will say that when we look at the global traveller across the world, almost every data point suggests they are planning to travel in the immediate future, notwithstanding rising costs. If you look back to the recession in 2008, in fact, travel was one of the few counterweights to other sectors that would typically see regression over that time period. We are fairly confident that travel is a really good investment. At this point, I think our focus is more on how we maximize that investment, because it seems at this point in time that people are planning to travel regardless of those rising costs. It's one of the few things they are not prepared to part from—maybe because it was taken away for two years—and so it's here to stay.

Our biggest fear, of course, is that Canada doesn't capitalize on our market potential, because we have labour policies that don't allow us to have hotel rooms open and have a functional tourism industry.