Industry Committee on Nov. 7th, 2024

[Brian Masse, NDP, Windsor West, ON]

Okay. This is part of the reason I wanted this study to begin with.

It didn't cover the interest rates. That's very important.

I think my time's up. That's really what I wanted to get to.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Masse.

Mr. Perkins, you have the floor for five minutes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair. Thank you, witnesses.

I'd like to start off where MP Rempel Garner ended her round of questioning with regard to the interchange fees and the tax case.

It's the claim by Stripe that somehow they're uniquely hurt by the GST/HST change, which isn't really a change, as I understand it. Maybe we could tackle that part first.

The GST being applied this year isn't new, is it? They received a 12-month reprieve, essentially, but they're paying what they were paying before.

[Amanda Riddell, Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance]

Yes, there's been no change. This is a long-standing policy that's been in place since the GST was introduced in 1991. It was well understood. Banks are often ambitious when it comes to challenging laws, and they took a swing at it. They lost at the Tax Court. They won at the Federal Court of Appeal. We introduced legislation to unwind that decision, which was contrary to long-standing policy, and the tax was reintroduced, so it's not a new tax. It's not a new cost.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

It's not a new tax.

[Amanda Riddell]

No.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

It's not a tax that applies strictly to Stripe, is it?

[Amanda Riddell]

No. It applies to all acquirers.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

It applies to all of them.

So far, they are the only company I'm aware of that has come out and said that they are not going to apply the reduction, although a number of other providers have been silent. Are you aware of whether any other company that is providing these interchange services or these processing services is saying that they will not pass it on?

[Amanda Riddell]

I'm not aware of any others.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

What has the department done to reverse their perspective on it?

[Amanda Riddell]

We have had many conversations. In fact, this was quite a hot topic, if you recall, back in budget 2023. We had a lot of conversations with industry. We had a lot of conversations with MPs and parliamentarians. This should be a settled issue by now.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

There can be only one of two reasons that Stripe is refusing to pass it on: Either they're not as good at doing their job as their competitors and don't have as robust a technology that allows them to absorb this, or they're just gouging consumers. Do you have any idea which it is?

[Amanda Riddell]

I can't speak to Stripe's business practices, but what I would say is that the GST on the network fee is a very, very small cost as a percentage of the cost. They have many costs they need to absorb—labour costs, technology costs or you name it. To blame one small input to their overall costs for not passing this on to would seem to us to be a bit disingenuous.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I think so too. Thank you.

I'm not sure which finance official to pose this one to, but I want to talk about Interac.

You may have been aware that we've had a little chat here around all these Interac fees. We had a board member here in committee who didn't seem to know what the pricing was of the company for which he was a board member. That shocks me. For every company on which I've been a board member, I knew what our pricing structure was, so I'm not sure how truthful he was.

At the end of the day, the e-transfer fees range from six cents to 43¢, apparently. Apparently, if you are on the board of Interac, and in particular if you're a co-chair of Interac, you're one of the two companies, coincidentally, that get the six cents. If you're not there, you have to pay the 43¢ as a provider.

Has the department looked at all into the anti-competitive behaviour of Interac and the way it treats other financial institutions in the pricing?

[Nicolas Marion]

Thank you for the question.

We do work with Interac. On matters related to competition, we defer to the Competition Bureau. I think the specifics of your question would be better posed to them.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

But when you're forming public policy.... I served eight years in a minister's office a long time ago. The department is always working with the minister to look at public policy issues. Certainly the Department of Finance and the Minister of Finance should be concerned with competition in financial services, and particularly in fees that are gouging consumers.

Are you telling me that the minister and the department have never looked into this anti-competitive behaviour by Interac that gives preferential treatment to the co-chairs of the board and treats everybody else differently, gouging them at a 98% margin difference?

[Nicolas Marion]

Again, we do work with Interac. There are a number of areas of interest with respect to pricing and so on. We haven't entertained agreements in terms of setting certain pricing for Interac. It's not something that stakeholders have raised with us. In fact, merchants that I deal with value—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Do stakeholders have to raise something for you to look at an issue? I mean, the issue here is that if you're being charged $1.50 on each end of the transaction—that's three dollars—and Royal Bank and TD are paying six cents. That's a monstrous amount of profit. Has the department not looked into that?

I also take it that the department hasn't looked into the return on equity percentages on credit card business. I worked at a bank. I know that at the bank where I worked, the return on equity was 52% on the credit card business. Their defence of this industry is BS in terms of the fact that generally the return for the entire bank is 10% to 12% to 13% in terms of their target.

Does the department not look into any of these issues? Does it not put forward policy to try to correct when you have usury returns on credit cards or you have usury returns by two of the key banks, if not four, on Interac charges? Do you not look at those issues at all?

[Nicolas Marion]

We look at a number of issues.

With respect to Interac, as I was going to say, merchants do value the services that it provides and want to maintain their access to Interac, whether it's payment receivable through e-transfer, payment expediency through e-transfer or their debit service offerings.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Van Bynen, the floor is yours.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I want to make sure that we have the proper understanding of the question that was put to you with respect to the letter that would outline the information that we're looking for.

I guess I would ask Ms. Hamel this: If the letter is sent to you from the chair of the committee, will your department respond directly to those questions?

[Judith Hamel]

Do you mean regarding the consultation?

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Yes, that's correct.