Thank you for the invitation to appear today as part of your pre-budget consultations.
The Canadian Apprenticeship Forum was happy to submit a brief to summarize our recommendations for your budget as you consider designing the upcoming economic competitiveness piece of it.
Apprenticeship was offering young people work-integrated learning well before it became fashionable. It is the most intensive example of employer engagement in skills development and is entirely responsive to workplace demand. Apprenticeship prepares young people with a talent for problem-solving for a long-term, well-paid career in more than 300 occupations. It is a practical solution to the talent shortage that keeps Canada's employers in sectors such as construction, manufacturing, forestry and mining awake at night, yet apprenticeship isn't well understood.
Parents, youth and many government decision-makers believe apprenticeship to be a last-resort post-secondary pathway for non-academic students. While many Canadians know that employers deliver apprenticeship in the workplace, few grasp the challenges of work-based training. The reality is that apprentices in most trades need strong essential skills and advanced knowledge in math and science to be successful. They rely on consistent employment in order to progress, to complete and to become certified. Because our system treats apprentices like employees rather than learners, apprentices are vulnerable to economic conditions. This also serves to place the majority of the training burden on small and medium-sized employers.
Lately, the federal discussion around apprenticeship training has been quite narrow. Yes, there is room for more women, indigenous people, newcomers and at-risk populations in apprenticeship training, but there remain important advances for these groups in all aspects of Canadian life and work, from corporate boardrooms to research labs. The Canadian Apprenticeship Forum urges you to consider a number of broader opportunities to assist apprentices and their employers, because, frankly, Canada needs more tradespeople.
As a starting point, we would urge government to ensure that programs do not inadvertently value one post-secondary pathway above another. This means that programs under the youth employment strategy banner and those focusing on supporting school-to-work transition should be inclusive of all learners. We urge you to take into account the unique nature of apprenticeship training as you consider deepening commitments to work-integrated learning. For example, platforms designed to connect students to employers should also be mindful of the critical need for the apprentices to remain gainfully employed.
We also ask the committee to reflect on the value proposition that a small investment in apprenticeship research would have for Canada's skilled trades community. An annual investment of $5 million would ensure that employers understand the return on their investment in apprenticeship training, would give parents and youth insights into employment outcomes and would collect feedback from today's apprentices about the realities they face. When young apprentices understand the economic value of their trade certification, they will be more inclined, we believe, to complete their training. While research and data collection have been priorities of the federal government, the apprenticeship community has not yet been a net beneficiary of these investments.
Our submission also speaks to more tangible opportunities.
CAF is calling on the federal government to work with its public sector unions to hire apprentices across federal operations and to implement contracts protecting employment to the point of certification. If there is an expectation that small and medium-sized businesses must invest in training the next generation of tradespeople, the federal government must set the example.
Further, we recommend a review of the employment insurance system, which for too long has been ill-equipped to deal with apprentice training.
Finally, from among our ideas to enhance apprenticeship training, I would like to highlight a couple of examples that appear on page 5 of our submission. Initiatives in B.C. and Manitoba address the housing crisis and employment shortages among indigenous peoples by engaging local youth to build energy-efficient homes and community buildings. These programs support skills development, offer sustainable employment and lead to trade certification. With funding support from the federal government, these initiatives stand to have a generational impact.
It is an economic certainty that we need young men and women to become skilled tradespeople. In your deliberations about innovation and productivity, I encourage you to consider how we can best support apprenticeship learners on their journey to become certified. It will be this group that will make up the next generation of builders, fixers, operators and creators.
Thank you for the opportunity to be here today.
Our association represents the 252 credit unions and caisses populaires that are outside of Quebec. We contribute $6.5 billion to Canada's economy. We have 5.7 million members. Collectively, credit unions and regional centrals employ almost 29,000 people, and we manage over $225 billion in sector assets. Last year alone, we contributed $62.3 million to communities. That's 5% of our after-tax income.
Credit unions are owned by the people who bank with them, which puts customer service at a premium. That's why, for the 13th year in a row, CFIB has ranked us first for customer service excellence, ahead of federally chartered banks. I'd also like to note that in 380 communities across Canada, credit unions are the sole financial institution. Mr. Chair, I would underline that this includes six communities in Prince Edward Island.
These are just some of the things that enhance our competitiveness. I would speak to workforce diversity, as well.
Unfortunately, disproportionate regulation and uneven taxation rates take away from our competitive ability. That brings us to our recommendations for the next federal budget.
First of all, I'd like to thank you all for your help in getting us the Bank Act exemption, which allows credit unions to continue using generic banking terms. It was a big win for us. You may have noticed that the budget said that regulated financial institutions could use those terms, subject to disclosure.
That brings us to our first recommendation for the next budget. Really, it's a red tape avoidance recommendation. In our sector right now, we're working on a voluntary market conduct code. I'll call it the MCC. We're looking at some of the work that's emerging from the federal government and some of the work that already exists in Saskatchewan, where they've had a voluntary code in place for more than a decade, and comparing that to institutionalizing credit union values and the high level of service that already exists.
We would like to avoid new federal regulation in this sphere for credit unions, and in particular we'd like to avoid any new regulation for banking terminology disclosure. We ask for the committee to support that work and to avoid any costly new regulation for credit unions.
Moving on now to financial sector regulation, I think everyone would agree that over the decades policy has helped to cement the dominant position of banks in the financial sector. In our view, that results primarily from two policy dynamics. The first is a one-size-fits-all regulatory approach, and the second is a trend toward the internationalization of financial sector policy-making.
You may have heard of Basel III. It is one example. The Basel Committee on Banking Supervision started developing the Basel III standard in 2010 in response to failures of large banks during the global financial crisis. I think we just celebrated the 10-year anniversary. I'm always quick to point out that credit unions played no role in that crisis.
Basel III has been finalized as of last December, and while the increased regulatory burden of Basel III may help to improve the safety and soundness of Canada's financially complex and internationally active big banks, it will do nothing or very little, we believe, to enhance what is already a high standard of safety and soundness for credit unions. In short, members, we believe that you get what you regulate for. If we see regulation only for big banks, we will ultimately only have big banks.
We are fortunate that the federal Department of Finance has acknowledged these emerging trends or challenges. We saw that acknowledged in budget 2018. Specifically, the government has suggested that the upcoming 2019 review of financial institutions will be an opportunity to address these issues. Last year, our association provided several recommendations during the second stage of that consultation, and several of the recommendations link directly to enhanced competitiveness. Others were related to governance recommendations. These are actually about the regulation of federal credit unions, and they would really help to advance regulation into the modern age. For example, we support amending the Bank Act to allow for electronic voting in advance of annual general meetings.
To summarize, this recommendation is to ensure, first of all, that the government institutionalizes the perspectives of credit unions. Second, we recommend that you consider the input of CCUA's prior recommendations to the Department of Finance regarding membership thresholds and other governance matters aimed at increased diversity and competitiveness by credit unions.
Finally I'm going to talk about taxing credit unions as co-operatives.
The fair tax treatment of credit unions as co-operatives remains an evolving policy matter in Canada. The Government of British Columbia has recently signalled that it will enhance the lending capacity of credit unions by making their co-operatively oriented tax status permanent. We used to have a similar treatment at the federal level, but it was eliminated in 2013, and it left credit unions with a framework that imposed higher taxes, suitable perhaps for joint stock banks but not for co-operatively structured credit unions.
Our association asks to re-establish the competitive balance in the tax system, and we recommend that the committee and the Department of Finance consider new ways to do so.
Thank you for your attention.
I thank the committee for giving us an opportunity to appear before its members today. I am speaking on behalf of the Canadian Federation of University Women, a non-profit organization with more than 100 clubs across Canada that has been working for nearly 100 years to improve the status of women in Canada and elsewhere.
Current statistics show that Canada's economic system does not work for everyone. Canada has the seventh largest pay gap among the OECD countries. Women, representing half of Canada's population, are underemployed and underpaid, and their work is undervalued. This is especially true for women with disabilities, immigrant women, indigenous women and racialized women.
To ensure economic competitiveness, Canada must implement social and economic policy that actually works for all women to ensure their economic security. Our brief contains several recommendations that align with this goal, but today I will speak to the recommendation related to early learning and child care.
We recommend that the government commit to universal child care, a publicly funded, high-quality, affordable, accessible and inclusive early learning and child care. Additionally, we recommend that the government allocate $1 billion for the next fiscal year and plan for total annual child care spending to reach 1% of GDP. The reality is that for many Canadian families, child care fees are unaffordable and child care spaces are unavailable and inaccessible. Forty-four per cent of Canadian families live in child care deserts with fewer than one licensed child care space for every three children. In addition, there are large discrepancies in services and fees from one province to another, as well as low wages for educators in this sector.
The reality is also that both funding and the policy framework around child care are inadequate. Budget 2017 designated federal spending of $7.5 billion over 11 fiscal years starting in 2017, with an average spending of $540 million in each of the first five years. This represents only half of what was promised more than 10 years ago by Paul Martin's government. At just 0.3% of the GDP, Canada's current annual spending on child care falls significantly short of the UNICEF international benchmark spending of 1% of a country's GDP.
Also, the ongoing three-year bilateral agreements established by the multilateral framework present parameters that are too broad. Federal transfers must be conditional to evidence-based practices and provincial-territorial plans, timetables and measurable targets that focus on accessibility, affordability, high quality and inclusivity. Right now, provinces can use the federal transfers for parent fee subsidies or tax credits, which does little to build public not-for-profit systems affordable for all.
We know what Canada-wide universal child care can do for women, children and our economy. We know that universal child care can have a strong, positive impact on women's economic security by increasing their ability to get a job, to pursue education and skills training, or to increase their work hours and advance their career. We know that universal child care can guarantee the best developmental outcome for children, and that higher pay for educators will result in higher quality.
We know that universal child care can have a significant impact on Canada's economic growth. The IMF recognized that if the current gap of seven percentage points between male and female labour force participation with high educational attainment were eliminated, the level of real GDP could be about 4% higher today.
We know all this because there is an abundance of research and reports accumulated throughout decades that support increased federal public spending and federal policy on child care. Women's organizations, child care advocates, and unions, and now financial organizations such as the Bank of Canada, the IMF and the OECD, all agree. Last year, this committee also recommended that the federal government fund universal child care, a recommendation that was echoed over the summer by a report of the House of Commons Standing Committee on the Status of Women.
With budget 2018 depending primarily on the mass entry of women into the workforce to generate economic growth, we really fail to understand why no additional funding was given to build universal child care. We no longer want to see these reports being disregarded, and we really hope that this committee will continue to push on this issue this year.
Thank you very much, Mr. Chair.
Thank you to all the members for having us here today. As mentioned by the chair, my name is Stephen Laskowski. I'm president of the Canadian Trucking Alliance. I am joined by my colleague Jonathan Blackham.
By way of background, the Canadian Trucking Alliance is a federation of the nation's provincial trucking associations. We have approximately 4,500 members, a cross-section across the country of different commodities. We employ a membership of around 150,000, and we move about 70% of the nation's freight.
As noted, the committee is looking for topics that are related to economic growth and ensuring Canada's competitiveness. While there are a host of issues in CTA's documents—and we had to shrink them even more due to your word count requirements, which kept our wordiness down a bit—I'm going to keep our opening remarks to three main topics. There are others in our submissions. We're happy to take questions, but we'll deal with the top three we're going to highlight: what we refer to as Driver Inc., which is an underground economy issue; Canada's competitiveness compared to that of the United States; and the truck driver shortage in Canada.
I'll start with what is known as Driver Inc. A number of drivers and carriers are entering into agreements whereby drivers incorporate themselves and then sell their services to the carrier. It is important to note that these drivers are not traditional independent contractors, known as owner-operators in our industry, as they do not own, lease or operate a vehicle. These drivers drive the carrier's vehicles and are virtually indistinguishable from a normal employee. In this scheme, no source deductions are made, and often drivers will be claiming small-business deductions they are not entitled to. In fact many, we believe, are just not paying taxes, period.
It is difficult to pinpoint the exact percentage of misclassified drivers or those who are not paying taxes. We believe that we are probably looking at an underground economy of close to $1 billion. At even a fraction of the driver population—and we're looking at probably 20%—that $1 billion continues to grow.
We need action. If this practice continues unchecked, CTA expects the entire industry will move to this model, given the competitive savings and the driver shortage. Quite frankly, people are using this as an incentive to get people to come to work for them in a tight labour market. It's costing the real trucking industry—those who are compliant—people, and it's costing the taxpayers of Canada $1 billion in an underground economy. It's time for action.
On Canada's competitiveness compared to U.S. competitors, at the U.S. border this year there will be around 11 million two-way truck movements. Those trucks will carry $400 billion in Canada-U.S. trade. In the past, around 68% of these movements were related to Canadian registered trucks. However, we must always remember that the Canadian trucking industry competes internationally. What do we mean by that? There are U.S. trucks up here and they compete for our members' business, those 150,000 people.
Competition with large U.S. fleets with natural advantages related to economies of scale is an everyday reality for Canadian fleets. A large fleet in Canada is 1,500 trucks. In the United States that's probably not even mid-sized. You're looking at fleets of over 10,000 to 15,000 trucks.
One area Canada could improve on is capital cost allowance rates. U.S. capital cost allowance rates are far more advantageous, allowing U.S. carriers to write down trucks in half the time. While this advantage has existed for well over a decade now, the tax advantage for U.S. trucking companies over their Canadian counterparts has hit new levels with the corporate tax reductions introduced by President Trump. In the past, we have been told that, due to the competitive advantage we had on corporate tax rates, this was, in essence, a wash. It no longer is, with what Mr. Trump has done.
Canada must address this growing tax inequity between Canadian and U.S. fleets. As a possible step, the government could provide an accelerated CCA rate for carbon-reducing trucking equipment, as identified by Environment and Climate Change Canada's phase 1 and phase 2 heavy truck regulations, which were introduced this year, the details of which could be worked out between government and industry.
The last issue is driver shortage. As a result of growing industry demand and a stagnant supply of drivers, the truck driver supply and demand gap is estimated to reach 34,000 people by 2024. Today, it is estimated the industry is short between 10,000 and 15,000 drivers. On the ground, this is evidence of the struggles carriers are facing to find qualified drivers to fulfill current contractual obligations. Many fleets have unseated trucks, which means that those trucks could be on the road but, because there are no qualified drivers, they sit by the side of the fence. What this means to the economy is that eventually freight is going to sit at their doors and not make it to customers, and the growing threat of NAFTA will be increased by not fulfilling north-south trade.
Not only does our industry have one of the oldest and most rapidly aging workforces, but it simultaneously struggles to attract new drivers. That's something our industry needs to deal with, but there's also a role for government.
We are already starting to see customers and shippers affected. It won't be long until customers, the general public, will start to be affected. In fact, I am somewhat happy to say that customers are calling the Canadian Trucking Alliance asking, “What are we going to do about truck driver shortage?” I have to tell you, I've been in this business for 20 years and I've never had those calls before.
As for the silver bullet for driver shortage, there really isn't one. There's some responsibility on the part of our membership, and we're doing that. I'd be happy to take some questions on how we're addressing it, but, as with everything, there's a role for government as well.
The industry has recently completed a report on the temporary foreign worker program. CTA would like to see those recommendations acted upon, including the creation of an expedited program for trucking. Currently, if we wanted to bring over immigrants from across the world—and there are many qualified truck drivers who would love to be Canadians—we simply can't do it. It's much more difficult for our industry, compared to others. We also want to attract Canadians who are here in Canada looking for a job. We're going to have 34,000 vacancies soon, so there's opportunity.
What would we like to see the government do? CTA would like to see funds made available for training in the trucking industry, as in other sectors. Currently, we do not have the same sort of access to funds that other sectors do, particularly the skilled trades. Unfortunately, our government has referred to truck drivers as unskilled. That holds us back, not only with training, but with immigration, and we'd like to work with the government on resolving that.
We'd be happy to take questions when the appropriate time comes. Thank you.
Good afternoon, and thank you very much for inviting us.
Most come here asking you to spend more money, whether through tax cuts or increasing spending in particular areas. We're coming here with ways for you to generate more revenue so you can pay for some of those other recommendations. I hope you welcome our suggestions.
As you are well aware, there is much pressure from business lobby groups, including the Business Council of Canada, the Chamber of Commerce, the C.D. Howe Institute, and the Fraser Institute, to respond to Trump's tax cuts with additional cuts for business and high incomes in Canada as well. I strongly urge you not to succumb to this pressure. The reality is that Canada has had declining rates of business investment for the past two decades. Deep cuts to corporate and business taxes have done nothing to stop that, as you can see clearly from the chart included in our submission.
Instead, business tax cuts have contributed to over $700 billion in corporate surpluses, dead money that isn't being reinvested in the economy. More of the same tax cuts that primarily benefit larger profitable corporations will not change this. The tax cuts south of the border are primarily benefiting top incomes and shareholders, with much going into unproductive share buybacks.
I'm also skeptical of the economic wisdom of allowing full immediate expensing of capital investments, for reasons I would be happy to explain later. Instead, we should focus on measures that will improve productivity and competitiveness for all businesses—for example, a national universal comprehensive pharmacare program. This could save employers approximately $4.5 billion annually, not to mention many billions for households as well.
As a top priority, the federal government must eliminate the tax preferences it provides to foreign e-commerce companies at the expense of Canadian businesses, producers and workers. It has been five years since the OECD first identified this as a top priority in their BEPS, or base erosion and profit shifting, action plan. Over 50 nations, including the overwhelming majority of G20 and OECD nations, have adopted rules in accordance with the OECD guidelines. Despite the loss of tens of thousands of jobs and the closure of dozens of media outlets, our federal government has been missing in action on this issue. Why are we giving tax preference to foreign digital giants, the largest companies in the world, at the expense of Canadian businesses, Canadian workers, Canadian culture, and also at the expense of federal and provincial revenues?
We also urge the federal government to take additional specific actions to crack down on international tax evasion and aggressive tax avoidance, consistent with the OECD recommendations. There should be a cap on the interest payments that corporations can expense to offshore subsidiaries, and corporations must be required to demonstrate that their offshore subsidiaries carry out actual economic activity.
The federal government should also invest more in training and technology at the CRA to better combat sophisticated tax evasion, which the Professional Institute of the Public Service has called for.
We were pleased this summer that federal and provincial finance ministers pledged to improve Canada's corporate and beneficial ownership transparency rules, another area where we rank poorly in relation to other G20 countries. Canada is increasingly a destination for money laundering, including through real estate and casinos, with billions lost through tax avoidance. To combat this, we need a publicly accessible registry of the beneficial owners of companies. More details are included in our submission.
We also urge the government to follow through on its election commitment to conduct a wide-ranging review of tax expenditures and cancel unfairly targeted tax breaks. Some action has been taken, which is appreciated, but more needs to be done. Most tax expenditures provide greater benefits for top incomes. Eliminating just a few of these could raise billions in additional revenues and make the tax system fairer.
Finally, we support the federal government's proposal for a national carbon price backstop, but it should be progressive, with measures to ensure that lower and middle incomes are fully compensated for their increased costs, and with border adjustment tariffs so Canadian producers remain competitive.
Thank you very much. I look forward to your questions or comments.
You did a pretty good job.
Thank you, Mr. Chair and committee members, for the invitation to appear before you today as part of the pre-budget consultations. Our message to you is very simple: Canada's international assistance program should invest significantly more in women's rights organizations. Specifically, we are asking the federal government to invest $2.2 billion of our international assistance spending over 10 years.
The MATCH International Women's Fund is Canada's only global fund for women, girls, and trans people. Working at the intersection of women's rights and innovation, we fund creative and courageous women and their organizations to dismantle barriers, challenge perceptions, and change the world.
Our recommendation is not new. In fact, increased support for grassroots women's organizations was a recommendation from the House Committee on Foreign Affairs and International Development in its 2016 study on women, peace and security. Furthermore, the G7's Gender Equality Advisory Council recommended new and substantial financing for women's rights organizations, including long-term, predictable and core support to build organizational capacity.
Our dollar-figure ask is also not unprecedented. In previous years, Canada has made significant global investments in maternal, child and newborn health. In fact, these programs totalled approximately $2.2 billion over 10 years. We urge you to make a similar commitment to women's rights organizations globally.
Why would this be an effective investment? First, these organizations are the ones that drive change on the ground. For example, the MATCH fund supports HarassMap in Egypt. This small organization originally used a geo-mapping technology to document rape and harassment on the streets of Cairo during the Arab Spring, but it didn't end there. The initiative was so popular that it grew to cover the whole country.
These activists started participating in national conversations. They engaged universities, developing the first-ever sexual harassment policy for Cairo University. They recruited teams of men to hold conversations with other men. They worked with Uber to train drivers on appropriate conduct. HarrassMap is just one example of how women's organizations work at so many levels—policy dialogue, social norms, delivering services to women—all the while developing new and innovative approaches.
A second reason is that despite their effectiveness, women's rights organizations in developing countries lack the funding to put their plans into action. Global resources are just not invested in these organizations. A survey conducted several years ago found that, on average, these organizations operate on less than $20,000 U.S. per year.
Third, to date, these groups have not received Canadian support. In the last year we have data for, women's rights organizations received only 0.3% of Canada's gender equality-focused assistance. That's not 0.3% of overall assistance, but 0.3% just of the funding going to gender equality issues, already representing a small percentage of the entire development budget.
Recently, we have seen some positive moves to reverse these trends. The 2017 announcement of the women's voice and leadership initiative was a key first step. As well, earlier this year signalled her government's intention to invest up to $300 million to leverage new resources to support these grassroots organizations.
These two announcements are a good start. However, additional investments are needed to put Canada in a global leadership position.
Increasing overall ODA investments would allow for more funding flexibility. We also recommend improving the current Global Affairs Canada funding structures so that resources to women's rights organizations can be delivered more quickly and effectively.
In conclusion, Canada's international assistance is a crucial reflection of Canadian values. How much we invest and where we invest it are vital indicators of the extent to which our actions in the world correspond to what we believe in as Canadians.
A national survey of Canadian millennials commissioned by the MATCH fund will be released on Monday. It demonstrates widespread support for Canada to play a lead role in bringing about global gender equality. Stay tuned for the details.
Ambitious new investments in women's rights organizations and feminist movements would truly allow Canada to claim the laurel and label of global leader.
Yes, thanks very much, Mr. Chair.
Thanks to all our witnesses. I wish I had half an hour to question you all. You're giving a lot of depth to your presentations. I only have five minutes, though, and I'm splitting it with Ms. Malcolmson.
Mr. Sanger, that was a very interesting presentation. We know already that in terms of competitive advantages, our universal health care system has a competitive advantage of about $3,000 a year per employee. A Canadian company doesn't have to pay that cost. An American company does. That is a major advantage to any Canadian company.
I understand from your presentation that you're talking about child care and pharmacare as further investments that should be made to improve the competitiveness of Canadian companies, including that $4.5 billion that would be taken off the books of Canadian companies and assumed through a universal pharmacare plan.
You raised the issue around e-commerce companies and the fact that they are getting off the hook from paying a wide range of taxes and obligations that Canadian companies have. You also raised the issue around the $700 billion basically being parked—dead money—with that surprising statistic that as tax cuts have kicked in for the corporate sector over the last 20 years, business investment in machinery and equipment has actually declined.
These are, I think, surprising and important things for the committee to note. Could you add anything in terms of what this committee needs to consider before we put forward our recommendations in the pre-budget report?
I have watched many governments and different sectors of industry really try to improve the work environment and the training opportunities for aboriginal people. The diamond mines in my riding have done many things that seem to be working. They've introduced literacy programs right at the work site. In the remote camps, they have literacy programs.
They've introduced mobility assistance programs. Some industries will bring in a worker from the west coast or the east coast and pay their way, but they won't pay for the aboriginal guy to come from the next community, even though he has no vehicle. They've introduced some mobility assistance programs that really help.
I watch some of the indigenous governments as they start to get involved in providing a lot of post-secondary support, and that seems to help. We still see large government projects that have nobody who is aboriginal on the job.
Do you think there are any programs we could introduce to encourage the government and any project that is government-funded or partially government-funded to force people or encourage people to start hiring and training indigenous people?
We have over 155,000 indigenous people sitting unemployed in our communities. Indigenous people don't normally migrate to where the work is, but there are reasons for that, and if there's a way to make it work.... If we're going to have true reconciliation, we need economic reconciliation. If we're going to do that, we need to start training people and we need to allow them to participate. Is there anything that you can recommend to us?
My comments will be very brief and reflect what's in the formal submission.
Thank you, Mr. Chairman and members of the committee, for the invitation to appear here today.
In 2017, the domestic brewing industry employed 14,800 Canadians and paid $1 billion in wages. It also made 85% of the beer purchased by Canada's 10 million beer drinkers. Today, on average, the cost of a case of beer in Canada is 47% tax. Half the cost of beer is beer-specific tax.
In 2017, the federal government implemented legislation that raises the tax on beer automatically every year by the rate of inflation. The members of Beer Canada have been urging the government to repeal this automatic approach and replace it with a process that is sensitive to changes in the economy, a process that considers the circumstances of the brewer and the beer drinker.
In Canada, we have natural advantages in brewing beer: a large supply of fresh water, locally grown malt and barley that the federal government itself is investing in, and even locally grown hops, which are now making a return. These are the essential ingredients in beer. The fact that we can source them locally is a natural competitive advantage.
Beer generates a lot of tax revenue for governments in Canada. The federal excise tax remitted by Canadian brewers alone last year was $572 million. Adding in sales taxes, payroll taxes, corporate taxes, property taxes, and licensing fees, along with provincial liquor board markups, the sale of beer generated $5.7 billion in tax last year, according to a Conference Board of Canada report published in January. This represents a significant tax tab, ultimately shouldered by the Canadian beer drinker.
Since 2010, provincial governments have increased beer taxes 45 times, making beer less and less affordable with each increase. There are lots of changes taking place in the beer space, but high taxes are not helping brewers meet today's challenges. Per capita beer sales since 2010 have declined by 8.6%. The 2% increase to the federal excise duty announced in 2017 was a surprise, but it is the legislation to increase the duty rates every year that concerns brewers the most. Left as is, this tax mechanism will run in the background, eroding the competitiveness of Canadian beer with no process for considering market conditions or changing economic circumstances.
In our submission, we highlight several circumstances that have changed since the government's new tax policy was introduced.
The hot, dry summer has affected the quality and quantity of malt and barley coming from farms in Canada, the U.S., and Europe. This has pushed up the price of malt and barley, and upward pressure is expected to get worse in 2019.
The U.S. has imposed tariffs on Canadian aluminum, and Canada has retaliated with tariffs on aluminum cans made in America. Brewers are facing a tariff-on-tariff situation that is adding millions in cost to their companies. All the 473-millilitre cans used by Canadian brewers, especially popular among small brewers, are sourced from the United States.
In August, Statistics Canada reported that the annual inflation rate was running at 3%. That is 50% higher than the rate the government assumed when it modelled the revenue it would generate from its new policy on beer in budget 2017. The U.S. reduced federal beer taxes for American brewers as part of its Tax Cuts and Jobs Act. This rollback will benefit beer drinkers in the U.S., and it will make American brewers stronger and more competitive in export markets like Canada.
These are just a few examples of the economic variables that have changed since the government legislated automatic annual tax increases on beer. Tax policy needs to be sensitive to what is going on in the economy, sensitive to the things that are affecting the wallets of consumers and the business plans of producers. Legislating automatic annual tax increases is not the way to ensure Canada's competitiveness.
On behalf of Canada's brewers, I ask that the committee recommend repealing the annual inflation adjustment legislation set to increase the tax on beer every April 1. The specific sections are in our formal submission. In place of automatic annual tax hikes linked to inflation, I ask that the committee recommend that the federal government return to reviewing excise rates from time to time, taking inflation into account as a guide and proposing future tax increases to Canadians.
Thank you very much for your time. I would be glad to take any questions.
Thank you for the opportunity to appear today regarding the study of the pre-budget consultations in advance of budget 2019.
As introduced, my name is Jack Froese. I am a fourth-generation family farmer from southern Manitoba and currently serve as president of the Canadian Canola Growers Association. CCGA is a national association of canola farmers, with members from Ontario to British Columbia. I'm here today with Rick White, CCGA's chief executive officer.
The canola sector has a plan for sustainable growth that will contribute to the government's growth target of $75 billion of agricultural exports by 2025. Our sector contributes $26.7 billion to the economy and employs 250,000 Canadians. We are export-dependent and appreciate the government's efforts on trade. We look forward to a successful resolution to NAFTA, a swift ratification of CPTPP and moving ahead with an FTA with China.
Today I would like to discuss the most pressing issues for Canada's 43,000 canola producers: taxation, the Pest Management Regulatory Agency and a long-term plan for Canada's transportation infrastructure.
First, a competitive tax environment in Canada supports industry and stimulates economic growth and innovation. Taxation levels are important considerations that influence competitiveness and investment decisions throughout the value chain. For agriculture, value chains are global, and Canadian farmers compete with farmers in other countries for market access and for investment dollars, be it investment in research and bringing in a new crop protection product or seed variety to our market, or in Canadian infrastructure.
The recent taxation changes in the United States are expected to negatively impact Canada's long-term competitiveness. To ensure alignment, we recommend lowering the combined federal and provincial corporate tax rates to 20% and matching the accelerated capital cost allowance provisions available to U.S. companies. This would help ensure that our entire value chain remains competitive and enables investments in the industry infrastructure required to grow our exports and generate economic spinoffs for Canada's middle class.
I would like to extend my appreciation for the new approach to passive investment held within a corporation, announced in budget 2018. To see farm businesses continue to innovate and invest in our economy, CCGA recommends indexing the $50,000 adjusted aggregate investment income and excluding farm rent from passive income. Indexing the limit maintains its value year to year. Renting farm land is a common form of passive income, particularly for farmers looking to transition the farm to the next generation and prepare for retirement.
Second, farmers use a variety of crop protection products to effectively manage weed, insect and disease problems that threaten their crops. We rely on the Pest Management Regulatory Agency to provide a predictable, transparent science- and evidence-based regulatory approval process to ensure the safety of these products while providing an attractive environment for companies developing crop inputs to invest in the Canadian market.
In recent years, the agricultural sector has experienced various challenges with the re-evaluation process. Farmers are very concerned that they'll lose access to effective solutions due to incomplete processes and lack of real-world data, and more largely, that investors will start doubting the Canadian investment climate. The high number of re-evaluations included in the agency's work plan and the pace of scientific advancements highlight the need to outfit the agency to appropriately keep pace. To this effect, it is crucial that the PMRA have the resources it needs to appropriately, effectively and efficiently make robust science- and evidence-based decisions that lead to the safe and sustainable use of crop protection products in Canada.
Lastly, we recommend that the government coordinate and invest in long-term strategic infrastructure improvements. Investments need to continue in the supply chain to consistently and efficiently service our global customers. This is core to our reputation as a trusted supplier of high-quality grains and oilseeds, and to achieving a diversified export program. On average, prairie farmers' grains travel 1,500 kilometres to reach an export port. Transportation corridors such as the Vancouver gateway need considerable funding to be upgraded to handle not simply the goods of today but the increased volumes of the future as Canada works to diversify its trade flows.
Government initiatives such as the modernization of the Canada Transportation Act and the national trade corridors fund are good starting points, but a long-term, ambitious and fully resourced plan is required.
This will not be easy, as it will require multi-party collaboration among government, the provinces, municipalities, railways, terminal asset-owners and the port. Long-term strategic investments would proactively position Canada as an export powerhouse and provide the infrastructure to reliably and consistently service global markets. We need to think and invest in the future, and that needs to start today.
In conclusion, I would like to thank you for including the canola growers in your deliberations.
Thank you, Mr. Chair and committee members, for inviting me to speak today about budget 2019. While this is taking place over the dinner hour, I'm happy to see some of the members enjoying fresh fruit and vegetables on half their plate during committee, which, interestingly enough, will tie into my comments.
Under the theme of competitiveness, CPMA submitted five key recommendations for the committee to consider, which we believe would greatly benefit the industry and ensure long-term competitiveness for the sector. My remarks will address the following recommendations: progressive changes to the small-business deduction, funding for a new food policy and national food policy council, the development of a long-term data strategy for agriculture and agri-food, and funding to support an innovative fruit and vegetable industry in Canada.
CPMA is advocating today for two progressive changes to the small-business deduction, which would more accurately reflect modern agricultural small businesses and their operational requirements. These include changes to the limits within the small-business deduction and an expanded exemption for affiliated corporations.
Increasing the federal business and capital asset limits with regard to the small-business deduction would modernize the tax code by adjusting limits to 2018 numbers and tying them to inflation moving forward. The federal business limit for the small-business deduction has not increased since 2009, and the capital asset limits have not increased since they were established in 1994. The most significant impact for agricultural small businesses would be from increasing the capital asset limits, which are used to qualify for the small-business deduction. As you know, modern agricultural businesses, even small businesses, are capital-intensive and require significant capital investment by producers. Now is the time to modernize the limits of the small-business deduction and recognize the capital-intensive nature of modern agricultural small businesses.
Second, we are calling on the government to exempt agricultural businesses from the recent changes to the rules of affiliation and their impact on the eligibility for the small-business deduction. Under the rules released in 2016, which took effect this current tax-filing year, affiliated corporations must now divide their small-business deduction pro rata between the affiliated corporation and its shareholders, a stark change from the previous policy, which allowed both the corporation and its shareholders to individually claim their small-business deduction.
For the fresh produce industry, affiliated corporations are an effective business structure to consolidate product across multiple farms, share costs for packing and marketing, and allow retailers to deal with a single point of contact rather than multiple farming operations in an area.
Knowing this, we urge the government to expand the current exemption under these new rules offered to agricultural co-operatives to any affiliated corporation in which the majority of shareholders derive farm income as defined by the Canada Revenue Agency. We believe that the policy change has had an unintended impact on the agricultural sector, sometimes in the hundreds of thousands of dollars per company, and that a blanket agricultural exemption would recognize the unique nature of agricultural businesses and business structures that are used in order to be competitive in the marketplace.
Our third recommendation relates to the upcoming food policy in Canada. Recognizing the tight time frames you have here at committee with your need to go to the House, I will just quickly note that our request is simple. We're asking for a fully funded food policy for Canada, including the creation of a national food policy council. We've had over 45,000 Canadians participate in the consultations, and that clearly indicates that this is of importance to them from coast to coast. We believe that a new food policy would have great potential to establish an action plan that would help us grow the economy, address important social issues, and provide a road map for the future of food in our country. We are one of 50 organizations that have signed a letter of support to create a national food policy council, and funding would be essential to drive that forward.
Our fourth recommendation to the committee is on a perennial issue for all agriculture: the lack of data. Unlike many countries, such as the U.S. and Australia, Canada has a significant data deficit when it comes to agriculture. We're calling on Agriculture and Agri-Food Canada and Innovation, Science and Economic Development Canada to strike a joint data working group to develop a long-term agriculture and agri-food data strategy. Our hope is that such a strategy would identify current data gaps and outline a path forward on how data could be utilized to increase our competitiveness in the global marketplace.
Our members consistently ask us for data that is not currently available or requires significant funds to acquire through a third party provider. Information such as purchasing choices, consumer trends, import-export numbers and commodity-specific information would allow our members to identify new market opportunities and new product development and increase their competitiveness.
Finally, our fifth recommendation is on innovation. CPMA has recently begun its process of developing and implementing a new innovation strategy for the fresh produce industry. This strategy will aim at connecting CPMA members with Canadian researchers, new start-ups and post-secondary institutions through a virtual innovation hub. Furthermore, CPMA will be launching a new national hackathon geared at post-secondary students and start-ups aimed at addressing the biggest challenges to promoting innovation in our industry and driving our businesses.
CPMA supports the current government's initiatives to promote innovation, but encourages an expanded innovation strategy, potentially including joint funding mechanisms, which would enable all industries, including small and medium enterprises, to participate in an innovation ecosystem and scale up to drive their competitiveness.
Thank you to the committee for allowing me to speak. I look forward to questions later.
The Canadian wine industry is a $9-billion industry that manages 31,000 acres of vineyards, produces 85 million litres of wine, employs 37,000 Canadians and pays $1.7 billion in annual wages. In addition, Canada's wine sector attracts roughly four million tourists every year.
As as result, the national economic impact of a bottle of 100% Canadian wine is $90, or six times more than a bottle of imported wine sold in Canada. This poses an opportunity and a challenge: an opportunity because Canada is the wine market with the second-fastest sales growth in the world, and a challenge because we're the world's sixth-largest wine importer, with 91% of wine imports entering Canada tariff-free.
In our pre-budget 2019 submission, the CVA has proposed two recommendations.
The first is the immediate need for the federal government to prioritize the removal of interprovincial barriers for both personal transport and direct-to-consumer delivery of alcohol across Canada. Significant attention is rightly paid to international trade agreements, but we cannot forget to lead by example at home. Barriers to alcohol trade are long-standing, unjustifiable and costly trade irritants that must be resolved. Vulcanizing our already small domestic market and making it harder for Canadian wineries to grow and realize the economies of scale and other efficiency attributes of larger international competitors must be eliminated. This would benefit all Canadians through greater interprovincial commerce.
More than six years have passed since the historic passage of Bill , yet only three provinces, representing 19% of the Canadian population, have amended their laws to allow for personal transport and interprovincial winery-to-consumer delivery. As such, it was a positive signal that the new 's mandate letter outlined the importance of collaborating with provinces and territories and eliminating barriers to create a stronger, more integrated Canadian economy while fully exercising federal jurisdiction as outlined by section 91.2 of the Constitution Act and Supreme Court decisions on the regulation of trade and commerce.
When the first ministers conference takes place this fall, it is critical that the federal government lead by example and take every measure possible to allow Canadian wineries to enter the 21st century by supporting the implementation of interprovincial winery-to-consumer delivery across Canada.
Our second recommendation calls on the federal government to amend the Excise Tax Act and to eliminate the legislated annual inflation indexation of the excise duty on wine. Canada already has among the highest wine excise duty rates of any wine-producing country in the world, and inflation indexation will continue to negatively impact Canada's wine value chain. This is too rigid a tax policy.
Not only do economic circumstances vary across all regions of Canada, but Canadian wine producers risk losing market share to much larger global players if we pass the increased excise duty cost on to consumers. Canadian wines compete against thousands of wine brands, with imports representing the majority share of both value and premium-priced wines. It is important to reflect upon the size of our industry, considering that each of the top eight wine companies in the United States produces more wine than the entire Canadian wine industry. With a 33% market sales share in Canada, we lack pricing power, and as a result the unintended consequence is a government-imposed producer tax, placing business revenues, wages, taxes and jobs at risk.
Today, the Canadian excise duty on wine is double the rate of our largest trading partner, the United States. To make matters worse, effective January of this year, the U.S. government reduced its excise duty from 37¢ per litre to as low as 2.4¢ per litre by way of an excise tax credit, with full excise paid only beyond 2.35 million litres of wine.
The impact of inflation indexation and changes to a competitive tax policy is why parliamentarians should have the final say on all tax increases. Given the broad economic implications of legislated excise duty indexation on the entire wine value chain from producer to restauranteur, the CVA recommends that the government amend the Excise Tax Act to remove the legislated annual excise duty inflation adjustment.
Thank you very much.
Thank you very much, Mr. Chair.
We're here today in the middle of beer, wine and spirits. However, in our discussion before we came in here today, I think we all agreed that mental health issues affect all aspects of society. We are here today to talk about a very tough topic, which is suicide. You might be asking yourself, why is the commission here today to talk about suicide when the focus of this committee is Canada's economic growth and competitiveness? We're here to tell you that suicide isn't just a public health crisis. Make no mistake: It is also an economic crisis. Every death by suicide costs the Canadian economy an estimated $1 million.
By 2030, depression will be the global leader in disease burden, and it is a major contributor to suicide. If this isn't compelling enough, consider that for every suicide, 125 people are deeply impacted. Suicide is the leading cause of death among our young people in this country, and that number is five to seven times higher among indigenous youth. We should all be sitting up and paying attention, because indigenous youth are the fastest-growing demographic in Canada.
For 11 years, the commission has been prioritizing the mental health and wellness of Canadians. This work has to continue, but we aren't here talking about preservation of the commission. What's driving us is the fact that suicide rates have remained stubbornly unchanged for decades. Every single day in Canada 10 people die by suicide. There have not been any improvements in many years.
Two years ago, we came to this committee calling for an investment in suicide prevention. We weren't successful, but we took this experience and we learned from it. We're a resilient organization. When our proposal for suicide prevention was turned down the first time around, we were undeterred. We turned to the provinces and sought their partnership. The fact is that we are all invested in the mental health of our communities, and that's what our newest project is all about.
Roots of Hope is a community-based suicide prevention project. It's starting to effect real change in communities such as the Burin Peninsula in Newfoundland and right across the country. We owe these communities help and we owe them healing. All communities deserve roots of hope.
I will now pass the floor over to my colleague, Ed Mantler, who will give you some specifics of the program.
Louise has captured the urgency, the why behind Roots of Hope, and I'm here to talk about the how.
Roots of Hope is the first large-scale community suicide prevention research demonstration project of its kind in Canada. Similar initiatives in other countries have been shown to reduce the incidence of suicide by up to 20%, an extraordinary feat when we consider that Canada's suicide rate has been stagnant for decades.
Roots of Hope is revelatory, because it doesn't presume to know the answers; it starts by asking questions. It builds on what's already working in communities. It offers greater resources, a more formal structure and improved supports, and it works. Today there is no wait-list for mental health and addiction services counselling in Grand Banks, Newfoundland. That's right: There's no wait-list. The provincial government has eliminated the wait-list, which previously was upwards of eight months.
Roots of Hope is taking existing activities and programs and enhancing them. That's why it will never be replicated in exactly the same way in two communities. We believe that's why it works.
Roots of Hope is founded on international best practices: specialized supports like crisis lines, support groups and access to services; training for leaders and physicians, first responders and other gatekeepers; public awareness campaigns; means restriction; and research. To date, the commission has begun phase one of Roots of Hope planning and preparation, with funding secured from three provinces: Newfoundland and Labrador, New Brunswick, and Saskatchewan. Funding commitments are pending from provincial governments in three additional provinces.
At the commission, we envision expanding the number of communities participating in the project to fully represent Canada's population and demographics. Federal funding would enable the commission to put down Roots of Hope in all provinces and territories, while participating provinces can use funds to expand existing services.
Let's work together to make Canada a country where Roots of Hope branches out and flourishes from coast to coast to coast.
Canadians are rightly concerned with the decline in the competitive position of Canadian business. Canadian spirits manufacturers are to a great extent the proverbial canary in the coal mine of the effects of policy-makers taking their eye off the ball and allowing a competitive challenge to deteriorate to a crisis. Canada has long imposed higher excise duties on spirits than those imposed by our American competitors, but a significant historical competitive disadvantage has in recent years devolved into an existential threat.
Canada has a dozen commercial-sized distilleries and some 170 small local producers. From the largest and the oldest to the newest and the smallest, we all agree that the core problem with Canada's excise duty structure is the automatic annual escalator clause introduced in the March 2017 budget. The automatic escalator clause made a bad tax even worse.
Alcohol excise duties are among Canada's oldest taxes and fail the most basic principles of sound, modern tax policy, things like transparency, equity, effectiveness, neutrality and being broadly based. The decision to automatically increase excise duties annually irrespective of the economic realities of the day, all without any input or oversight by members of Parliament or this committee, magnifies these structural deficiencies in the excise duty framework.
Some have postulated that the annual increases are only pennies a bottle and are largely insignificant. As finance department officials admitted themselves, however, these changes were adopted with no analysis or consultation. I want to say that again—no analysis or consultation.
With the increase coming into effect on April 1, 2019, the federal treasury will have stripped nearly $50 million off the top from the resources available to Canadian spirits companies to deploy in the market over the coming 12 months, and $50 million is a lot of pennies. That's $50 million not available to develop and introduce a new Canadian whisky brand, $50 million not available to take advantage of the new free trade agreement between Canada and Ukraine, $50 million not available to get ready to enter Vietnam once the CPTPP comes into effect, $50 million not available to buy new barrels to lay down whisky distillate, $50 million not available to upgrade equipment in our facilities and $50 million not available to promote and compete in the marketplace.
I mentioned earlier that a huge weakness in the automatic escalator clause is that it does not consider the current economic environment. What is that environment? Well, in March 2017, inflation in Canada was running at 1.5%. In July 2018, it hit 3%. So, the escalator clause will be double that anticipated at the time of its introduction.
At the same time, as Canada decided to automatically increase excise duties on alcohol, the United States adopted a historic decrease in its own excise duties. Now we have a situation where Canadian spirits manufacturers have some $50 million less to invest in the market in 2019, while American bourbon and spirits companies have $285 million in tax relief to deploy. That's simply a scenario for disaster for investment in Canadian spirits manufacturing or in the Canadian whisky franchise.
From excise duty officials' point of view, all of this is largely irrelevant. Their sole perspective is the revenue stream for treasury derived from the application of excise duties, and these federal revenues are the same whether the product is Canadian, made by Canadians from Canadian-grown barley, corn, rye or wheat, or whether the product was made halfway around the world.
Canadians will always drink spirits, and excise will always get its pound of flesh. The question before us is whether or not we will be the last generation of Canadians to enjoy the economic benefits accruing from a vibrant, globally competitive domestic spirits manufacturing industry. No country in the world so disadvantages its signature beverage alcohol export in its own market. Scotland doesn't do it with scotch. We just talked about the tax relief provided to American bourbon, and certainly Mexico takes great pride in supporting tequila's growth around the world.
Here in Canada, Canadian whisky and Canadian rye whisky are hammered with exorbitant fiscal burdens, often restricted in places they can sell and now subject to further annual increases in excise duties. It's simply not sustainable.
I close and call on your support for three recommendations to help sustain more than a century-old primary manufacturing industry filled with tradition and craftsmanship.
The first is that the government eliminate the automatic escalator annual increase on federal excise duties on beer, wine and spirits.
The second is that the government reduce federal excise duties on Canadian spirits to mirror those imposed on American spirits by the United States government.
The third is that the government ensure that Canadian out-of-province alcohol manufacturers are provided the best policy treatment available to licensed in-province producers—the interprovincial barriers, which my colleague alluded to.
Thank you for your time and consideration.
I'm going to start with Beer Canada, Spirits Canada, and the Vintners Association, purely because all three of you raised two of the same issues.
The first one is the interprovincial trade barriers. I think all three of you raised that issue. We're having a lot of trouble in this country right now dealing with trade negotiations with the United States and other countries, but it's crazy to think that even within our own country we have these issues around trade. I think about the fact that some of my favourite wines are from Prince Edward County. When I'm here, that's fine, but if I'm at home in Alberta, I can hardly find them anywhere. The same goes for B.C. The B.C. wines are great wines. I can usually get them in Alberta, but here it's a little more of a challenge. I think about some of my favourite beer. One of my favourite beers is from the chair's home province. I'm not trying kiss up here or anything, but there's Sir John A's Honey Wheat Ale, and it's great, but I can't get it in Alberta. Those are some examples. It's crazy to think that here in Canada we can't even trade these products across our own provincial borders. That's just astounding.
The other issue was the escalator tax, or the excise tax. I just want to give you all an opportunity to talk a bit more and briefly touch on the impacts it would have on your industry. I want to hear a bit more about the impacts that you see from that escalator tax, in particular when you think about the fact that that's essentially taxation without representation. What happens there is that taxation gets increased every year, and not one single politician, not one single person who's representing anyone in this country, has to stand up and be counted for the changes that are being made and the taxes that are increased every single year. Tell me about the impact that this will have on your industry. I particularly want to hear about the smaller ones, the craft distilleries, the craft brewers and the ones that are trying to get started.
I often hear this from winemakers, and you'll know this one, Mr. Paszkowski: "How do you become a millionaire in the wine industry? You start with $10 million."
We have increased the numbers since the last time we were here. To your point about the opiate deaths, we now know from a recent statistic that 31% of hospitalizations from opiate overdoses are actually incidents of self-harm. Your point is very well taken and very accurate.
We believe this is a modest request but it would allow us to do a research demonstration project. We don't want to keep researching this forever. This would allow us to take action and will save lives while we are researching it. After that, we would be looking at scaling up when we have evidence.
To the earlier point, whether we have data yet to show that we can have the same, or better, statistics in Canada as elsewhere, we don't know, but we believe that to be true. You may be aware of our last project, At Home/Chez Soi, which was a $110-million project over five years. The outcomes we were able to demonstrate through that research were significant, and it has now impacted public policy provincially and federally.
We do believe that would serve us well. However, if we were given more, we would certainly make good use of it.