Thank you, Chair, and thank you to the members of the committee for inviting our association to speak with you this evening.
My name is Anne Kothawala, and I serve as the CEO of the Convenience Industry Council of Canada, the CICC. We are the voice of the country's 23,000 local convenience stores, employing more than 200,000 Canadians.
Allow me to paint a brief picture of the economic realities facing our local businesses.
Over the past two years, we have seen our store locations decline by 5%. That translates into three convenience stores closing their doors for good every single day. That not only impacts our employees and their families, but also affects the entire community, particularly in rural and remote areas, where we're the only source of essential goods.
We are heavily regulated businesses, so the future of our stores in Canada is heavily dependent on smart government policies.
We are deeply concerned by the inaction on credit card interchange fees and contraband tobacco in the 2023 budget. In the last 12 months, credit card fees have increased by 55%. These fees represent the second-highest cost to Canada's convenience stores, next only to payroll.
We also face a double whammy on credit card fees, as we pay both the interchange fee on the product sold itself plus an interchange fee on the tax of that product. This is an issue that our stores have worked with the federal government on since its initial campaign promise to address fees in 2019.
Despite years of work on this file, it is now clear that the government has caved to pressure from card networks and financial institutions. Make no mistake: The vast majority of small businesses will be excluded from this policy. Today's announcement doesn't change the fact that the government is allowing credit card companies and banks to force retailers to pay for their credit card loyalty programs.
The details of the scheme announced earlier today will help only the smallest micro-businesses in Canada. It treats most local businesses no differently than large corporations like Walmart or Costco. What's worse is that large corporations like those I just mentioned have the negotiating power to demand better rates than small businesses, so we are actually worse off than these major corporations.
No high-volume, low-margin business will be able to access this new rate, and even qualifying businesses will see, at most, a $1,000 return to their bottom line. This is hardly the relief that we were promised.
This approach also penalizes our local businesses by asking them to pay for the privilege of being a tax collector for government. Tax alone accounts for 42% of our sales. Because convenience stores sell heavily taxed products like gasoline, tobacco and alcohol, we are further penalized by this short-sighted approach.
I'd like to share with you a quote from a local retailer, Jamie Arnold, who is a CICC board member and with Ontario-based Little Short Stop, on today's announcement. He said it was very disappointing to him as a small convenience retailer, because he wouldn't qualify, plain and simple. He said the government had promised to address this issue, but had not delivered. During the pandemic he kept stores open despite a massive decrease in sales, and it would have been nice to see the government acknowledge the essential role convenience stores play in communities by reducing their second-highest cost of doing business.
Bill C-47 presented an opportunity for the government to make good on its promise and do much more to rectify these punitive fees on our businesses. Instead, the government has caved to pressure from card networks and financial institutions, leaving local businesses like ours holding the bag.
While the government missed the mark today, there are other steps it can take to help our stores on interchange fees, namely, removing the interchange fees charged on the HST/GST portion of the sale. The government could also fix rates for fuel purchases made by credit cards to 10ยข, which is in line with utility payments. I'm happy to speak to either of these proposals in the Q and A.
I would be remiss not to mention another area of inaction in Bill C-47, which is on the issue of illegal, untaxed tobacco. The proliferation of contraband contributes to organized crime and results in millions of dollars in lost tax revenue for governments annually. Federal leadership is needed on this issue, which was once contained to central Canada but is now a national problem.
Members, as you can see, there are no shortage of challenges facing our businesses. We strongly urge that the budget be further strengthened by revisiting the approach to interchange fees and by dedicating resources to addressing the long-standing issue of illegal tobacco, both of which impact our stores nationally.
I look forward to answering any questions you may have and discussing solutions with you on these issues.
Thank you.