Finance Committee on Oct. 6th, 2026

[The Chair, Liberal, Karina Gould]

I call this meeting to order.

Welcome to meeting number 52 of the House of Commons Standing Committee on Finance.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Members are attending in person in the room and remotely using the Zoom application.

Before we continue, I would ask all in-person participants to consult the guidelines written on the cards on the table. These measures are in place to help prevent audio feedback incidents and to protect the health and safety of all participants, including the interpreters. You will notice a QR code on the card, which links to a short awareness video.

I would like to remind participants of the following points.

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

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Pursuant to the order of reference of Wednesday, June 3, and the motion adopted by the committee on Tuesday, September 22, the committee will resume consideration of Bill C-31, a second act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.

I would like to now welcome our witnesses.

For the Alliance for a Visitor Tax Refund, we have Jean-Christophe Bédos, the co-founder, who is joining us via Zoom. We also have the Frontier Duty Free Association and Ms. Tania Lee, president. Finally, from the Canadian Tax Observatory, we have Ms. Heather Scoffield, chief executive officer.

You will now have five minutes each for opening remarks.

Monsieur Bédos, we will start with you, please.

[Jean-Christophe Bédos, Co-Founder, Alliance for Visitor's Tax Refund]

Thank you very much, Madam Chair.

Good afternoon, honourable members.

I am pleased to be here today. I will deliver my remarks in English, but I will be happy to answer your questions in both languages.

Madam Chair and members of the committee, thank you for this opportunity to appear before you today.

My name is Jean-Christophe Bédos, and I'm here on behalf of the Alliance for a Visitors Tax Refund. The Alliance for a Visitors Tax Refund is a coalition representing Canadian businesses across our retail, hospitality and tourism sectors. We created this coalition to advocate for a policy that we feel brings significant benefits to the Canadian tourism industry and, specifically, to small and medium-sized businesses.

As your committee examines the budget implementation bill, I'm here to advocate for Canada to reinstate a modernized digital visitor tax refund program on GST and HST for eligible retail purchases made by international visitors.

There are three main reasons why Canada should adopt a modern VTR system. VTR stands for visitor tax refund.

The first reason is the benefits to Canadian workers and small businesses. First, this proposal brings new visitors to local businesses across Canada, resulting in more local spending, new jobs and more vibrant main streets. This is because small and medium-sized businesses represent 99% of the tourism sector in Canada. Longer tourist stays and higher spending directly benefit local retail, but also restaurants, hotels, local attractions, entertainment and everything that attracts tourists to our country.

It is important to note that this proposal is supported by key industry leaders, including the Tourism Industry Association of Canada, or TIAC, and the Retail Council of Canada, or the RCC. Both recognize the real impacts of a VTR program for local retailers and tourism operators.

Moreover, what do the actual results look like? An independent analysis by the Centre for Economics and Business Research, the CEBR, based out of London, U.K., shows that a VTR system would bring an additional 200,000 new visitors to Canada, generate nearly $700 million of additional spending every year and create more than 38,000 new jobs across the country. This is important for our economy.

The second reason the VTR is critical is a matter of Canadian competitiveness. Canada, as we know, is a proud, pro-free-trade economy, which means a lot in today's world, I suppose. We believe Canada's approach to international tourism should reflect this commitment, yet today, retail purchases by foreign tourists are Canada's only taxed export. When international visitors shop here, we tax the goods they take home.

Numbers show that Canada is actually currently lagging behind competing global destinations. We are one of only three OECD countries without a VTR system. Consequently, we are missing out on a massive opportunity to be a strong tourism economy. The numbers provided by Statistics Canada show that tourists gladly visit our beautiful country. However, they spend very little compared to what tourists spend in countries offering a VTR system. In fact, over the last 20 years, the spending per capita by individual tourists in Canada has decreased year on year, every year. Tourists come to our country, but they do not spend in our country as much as they do when a visitors' tax refund system is offered—

[The Chair, Liberal, Karina Gould]

Monsieur Bédos, you have about 15 seconds left.

[Jean-Christophe Bédos]

I'll give you a third reason quickly. It's the practicality offered by modern digital technology. A modern, fully digital VTR system would provide a simple, secure refund process for visitors and merchants, with robust fraud controls—

[The Chair, Liberal, Karina Gould]

Thank you, Monsieur Bédos. I'm going to have to conclude it there. I'm sure there will be lots of questions for you during the question and answer period.

We will continue now with Ms. Lee for five minutes.

[Tania Lee, President, Frontier Duty Free Association]

Thank you, Chair and members of the committee.

I represent our association and the operators of 31 land border duty-free stores in small communities across Canada. My family has operated our store at Blue Water Bridge for more than four decades. We employ Canadians, buy Canadian products and contribute to our community and border economy.

I want to clarify what land border duty-free actually is. We are not simply retailers located at the border that are given a tax break. Our stores were created by the federal government as a highly regulated export industry to capture a Canadian sale from a traveller already leaving the country before the sale moves to the U.S. Our stores are federally licensed and overseen by the Canada Border Services Agency, or the CBSA. We cannot sell into the Canadian domestic market. Goods are sold tax- and duty-free because they are leaving Canada. If they return, applicable taxes and duties are assessed through normal customs processes.

Our only market is a departing traveller, and we compete only with U.S. retailers and U.S. duty-free stores metres away in the U.S. For more than 40 years, operators have built viable businesses around that mandate, supporting Canadian jobs, suppliers and border communities.

Today, we are under extraordinary pressure from circumstances we did not create and cannot control. When the trade dispute began, Canadian leaders encouraged Canadians to reconsider travel to the U.S., and Canadians listened. In August, automobile travel by Canadians to the U.S. remained more than 27% below 2024 levels. For most businesses, losing customers on that scale means finding another market. We cannot. We are export only, yet travellers still cross today. These are customers we can continue to serve. Our opportunity is to compete for those sales and keep that spending in Canada.

Today, I have two asks. First, ensure that Canadian land border duty-free shops can access a regional tariff response initiative, if needed. We are viable Canadian businesses directly exposed to Canada-U.S. trade disruption through no fault of our own.

Second, remove Canadian barriers that make it harder for us to compete for an export sale. Canadian excise is embedded in the price of tobacco sold through our stores, even though the product is sold exclusively for export. Consumers choose where they shop and what they buy. If we are not competitive, they can buy the same or substitute products in the U.S. without Canadian excise embedded in the price. The customer does not disappear. The sale simply moves outside of Canada. A 2024 econometric study found that every dollar lost in a tobacco sale in a duty-free store takes another $1.15 of other duty-free purchases. That is lost to the U.S.

We are not asking Parliament to eliminate the tax or reduce the rate. We are asking for consistent treatment of a verified export channel. That precedent already exists. The Excise Act already provides relief for Canadian manufacturers exporting tobacco to foreign countries with proof of verified export, yet when that same product is sold through a Canadian land border duty-free store, which is also a verified export channel, the excise tax is embedded in the price before it even reaches us. That is the asymmetry we are asking the government to correct today.

Our proposal is simple. Do not collect the excise before the product leaves Canada. If it comes back to Canada and tax is owed, collect it at that point, the border, through the normal customs process. The tax is not eliminated. The collection point is moved. Canada retains its ability to tax Canadian consumption, the CBSA retains oversight, and Canadian businesses can compete for a sale that would otherwise move across the border. This is revenue-positive for Canada.

Our stores were created to keep travellers' spending and economic activity in Canada. Ensure that we can access federal tariff support, and remove the Canadian barriers that make it harder for us to compete.

We are not asking for special treatment. We are asking for consistent export policies to be applied to a verified export channel so that we can compete effectively and keep more sales, jobs and economic activity in Canada. That is the mandate of duty-free.

Thank you.

[The Chair, Liberal, Karina Gould]

Thank you very much, Ms. Lee.

Ms. Scoffield, you have five minutes.

[Heather Scoffield, Chief Executive Officer, The Canadian Tax Observatory]

Thank you for the invitation to discuss Bill C-31 and tax policy as a tool in solving economic problems.

The Canadian Tax Observatory is a new think tank that undertakes research and public engagement towards tax policy that is pro-growth, pro-equality and pro-simplicity, and I don't need to tell you how hard it is to balance those three legs of a stool.

Most of the tax items in Bill C-31 are technical in nature. I'll focus my remarks on a couple of aspects of the bill that we've looked at more closely—delivering automatic federal benefits for low-income individuals, and immediate expensing. They both speak to key priorities for Canadians right now. Automatic filing impacts affordability, and immediate expensing affects productivity.

I'll start with automatic filing.

For many years, the government has signalled its intention to move toward automatic filing for low-income individuals with simple tax situations, so it was a relief to see this measure show up in black and white in the federal budget.

The notice of assessment that the CRA issues taxpayers after filing an income tax return is the golden ticket to many federal programs.

Research done by the Parliamentary Budget Officer suggests, however, that up to $2 billion in federal benefits goes unclaimed every year. Academic studies say about 10% to 12% of adult Canadians do not file an income tax return. We need a deeper appreciation and a more modern update of these numbers and demographics. Especially since there's a growing tendency to deliver social programs and income supports through the tax system, it's imperative that the federal government makes sure the system functions properly and without interruption.

The plan that is established in the budget moves cautiously, perhaps too cautiously, adding elements over a couple of years and then ramping up volumes to reach 5.5 million people in 2029. We can do better than that with the amount of income data that all levels of government already have about their citizens, with modern technology and with the need for government support growing as our economy struggles.

Closer collaboration between the federal and provincial governments is the place to start. If the provinces could share their provincial assistance program data with the federal government, Ottawa would have an excellent list of people who would benefit the most from automatic reporting.

In particular, I need to mention the Canada disability benefit. It started flowing in 2025 to help low-income people with disabilities make ends meet. To qualify, though, you need to file an income tax return, and you need to be certified for the disability tax credit, even if you've already been deemed by the province to have a disability. This is needlessly complicated. Our research shows that 1.2 million people with disabilities live below the poverty line, and only 17% of people who start filling out the digital application for the disability tax credit actually press send.

The application system is riddled with pitfalls that drive away vulnerable people. We have the technology and the data to make things much easier than this. I'd caution that if, somehow, automatic filing becomes the norm, we will still need a human touch in this process. The numerous volunteers, navigators and helpers who bridge government administration and vulnerable people are building the essential bond of trust between a people and its government that technology can't deliver.

I'd like to turn now to immediate expensing. Last fall, when the government announced immediate capital cost allowances for some industries, my initial thought was that it was a decent measure to drive innovation and investment at a time we really needed it, but it was too temporary and too targeted. Fast forward to last month when the Prime Minister announced what he calls the productivity mega deduction, and he's addressed both of those elements. The new measure is permanent and extends to about two-thirds of Canadian business and capital investment.

That's major, and it comes at an important time. The goal is to drive active investment in Canada, boosting productivity, growth and jobs, and we really need all of those things in the face of American protectionism.

It's important to note that companies can't take advantage of this measure without making real investments. They have to invest to take advantage of it.

They can't get something for doing nothing.

Still, we have questions, mainly about which companies won't be able to take advantage of the measures and what kinds of outcomes the federal government projects as a result of the $36-billion move. What happens to companies and investors that are not making a profit right now and don't have tax bills to write down? I'm thinking about start-ups here. What happens to companies and service industries that are often leaders in innovation but don't have the types of material purchases of machinery and equipment that the new measure encourages?

In other words, does the new measure disproportionately favour big, established, capital-intensive companies, especially those involved in manufacturing and goods production, and is that where we really want to push our economy of the future?

The observatory would also like to know more about what would have happened without the mega deduction in terms of modelling. How much of the expected pickup would have happened anyway, and how do we measure how effective the new deduction is?

It's expensive, and it's important. The observatory is hoping to work with you to find those answers.

[The Chair, Liberal, Karina Gould]

Thank you very much, Ms. Scoffield.

We'll start with Mr. Lefebvre for six minutes.

[Eric Lefebvre, Richmond—Arthabaska—des-Sources, CPC]

Thank you very much, Madam Chair.

Good morning to all my colleagues.

Thank you to the witnesses for being with us this morning.

I'll start with you, Ms. Scoffield.

You talked about tax policy, specifically simplicity and automatic filing. You also said that we need a human touch. Can you explain what you meant by that?

[Heather Scoffield]

Certainly.

A lot of very vulnerable people right now rely on navigators, on a very large volunteer segment, on accountants who give their time to help out at tax season. Right now, they're forming that bridge between the system and the people who don't find their way to filling in the tax forms to make sure they get their benefits.

Automatic filing can be very helpful, but I don't think it completely replaces that human touch. There are people who don't have access to computers. There are people who just don't trust the system. There are people who, for any number of reasons, are not going to be caught up in an automatic process. I think if we can fast-forward a couple of years to when the system is.... Even when it's working perfectly—if it can work perfectly—we will still need those volunteers and those navigators to help people steer through the system, which is extremely complicated and excludes many people right now.

[Eric Lefebvre]

Do you have any idea what percentage of people need human assistance? Would you be able to put a number on it?

[Heather Scoffield]

I don't have those numbers. I would point out that of the work that's been done about benefits that people are missing out on.... The PBO says it's two billion; academic studies say it's 10% to 12% of people. Those are not up-to-date numbers, and they're not detailed, so it's hard to know exactly how many. I'm relying on information from talking to people and to civil society groups that are working with those people on the front lines. To add up a big macro number is very hard. I would really like to know.

There's a whole other area of research to be done, too, in terms of indigenous populations and reluctance to file tax forms because of a trust bond or for various reasons. We don't know—we don't thoroughly understand—what that dynamic is.

[Eric Lefebvre]

Another point you talked about that really resonates with me is the idea that provinces could share data. I myself entered federal politics after spending time in provincial government. We're seeing that departments often don't talk to each other. Freer flow of information between them would be beneficial.

How could the provinces currently help in this regard by sharing data?

[Heather Scoffield]

The provinces give social assistance to the bulk of people who are living on low incomes, and they have a whole bunch of data that the federal government does not have access to. When the federal government goes about using the tax system, as it does increasingly, to deliver social programs, it's aiming at that very same population that the provinces are already dealing with, yet they're not talking to each other in terms of sharing that data back and forth.

Think about it from the person's point of view, the person who's applying for a benefit at the provincial level and then has to go and redo the whole process at the federal level and share that data yet again. That's a barrier to accessing those benefits.

You can do it at a very technical level of just swapping or sharing that data for social assistance. I think that would go a long way to alleviating the bureaucratic load for regular people.

[Eric Lefebvre]

That's a good point. We're talking about cutting red tape and making life easier for Canadians. That would be one way. The idea would be to suggest that the government share this information with the provinces so as to, again, reduce red tape and increase efficiency. I think that's what those of us on this side want.

Thank you very much, Ms. Scoffield.

The minutes are flying by.

I'll go to Ms. Lee next.

I understand the issues at hand, such as the objective of keeping money here, in Canada, just before it crosses the border.

You talked about a verified export channel for which the tax collection point would be moved. Can you elaborate on what you mean by moving the collection point, which you touched on a little earlier?

[Tania Lee]

If I am understanding correctly, you would like to understand how we are a verified export channel.

[Eric Lefebvre]

Yes, exactly.

[Tania Lee]

Thank you for that question.

The duty-free industry, to be able to sell tax- and duty-free, was created as a federally licensed industry. The government created a structure around that to ensure that it controls, through CBSA, all the inventory coming into the duty-free shops, from the point that it's in there to the point of it being sold to the consumer and exported out of the country.

We are mandated only to sell to travellers who are leaving the country. We cannot sell to anyone in Canada. I can't buy my own inventory. I couldn't even sell candy to a Canadian during COVID. Everything is segregated to one point, and that's export out of the country. If a Canadian traveller does not shop in our store, they will be a few seconds away into the U.S., and they will shop there instead.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. Lee. We're going to have to end it there. That concludes the six minutes.

We're going to continue now with Mr. Sawatzky for six minutes, please.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you, Chair, and thank you to our witnesses for being with us today.

My first question is for Ms. Lee.

The last time the Duty Free Association appeared was during pre-budget consultations. I believe we had the executive director here, so it's great to have your organization back.

As you mentioned in your opening remarks, there have been major disruptions in Canada-U.S. relations. Could you elaborate on the effect these disruptions have had on cross-border traffic and how that has affected the duty-free industry?

[Tania Lee]

On it being a major disruption, our duty-frees are located between Canada and the U.S., right in the middle. When there are tariff disputes, messaging from provinces or changes to the way people can shop, it creates uncertainty in the industry.

Uncertainty is the last thing consumers want. They don't like change, and they don't like to be uncertain. For the people who cross the border, they may not cross, or they may decide not to shop. At the very end of the day, if we have people who are uncertain, that leads to fewer sales in the duty-free channel.

The uncertainty continues on to our operators as well. They are having a very hard time understanding what they need to do. The messaging keeps changing, and the environment keeps changing. How do you then plan your sales? How do you plan and forecast for your infrastructure, supply chain and routes to market? All of those things are now pressures that come to bear upon us.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you very much.

My next question is for Ms. Scoffield.

You mentioned that one of the key measures in Bill C-31 is the automatic tax filing system for eligible lower-income Canadians. Of course, many people are entitled to federal benefits but may not receive them, maybe because they can't file their income taxes or they just don't. The minister was before the committee yesterday and highlighted the potential for this measure to reach about five million Canadians, at a time when affordability is very much top-of-mind for many people.

From your perspective, what impact could automatic tax filing have on service delivery for low-income Canadians, particularly in helping them access federal benefits and supports they're already entitled to?

[Heather Scoffield]

It can be very helpful if it's done efficiently and with the end-user in mind. As you alluded to, there are a number of reasons people don't file: The tax code is too complicated, they don't owe money so they don't immediately understand that by filing they would be able to get some government support, they have not been filing and they're afraid that they might owe money so they don't, or they're just too caught up in the pressures of getting through the day-to-day to actually wrap their head around a complicated system.

There are all those federal benefits that are tied to filing and getting CRA to give them their notice of assessment so they can actually get their benefits. They're leaving a whole bunch of money on the table, money that they have a right to. There are things like the RRSP and TFSA for middle-class and upper-class people, but for low-income people, they need that notice of assessment to get benefits that would actually help them make ends meet and live a decent life. It can make a huge difference.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you.

As a follow-up, could you speak to the administrative burden that might be relieved from not only the individuals themselves but also the organizations that are helping folks navigate the benefit system?