The Chair (Mr. James Rajotte (Edmonton—Leduc, CPC)):
I call this meeting to order.
This is meeting number 35 of the Standing Committee on Finance. Our orders of the day, pursuant to the order of reference of Tuesday, April 8, 2014, are the study of Bill C-31, An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.
Colleagues, we have two panels before us this afternoon.
In the first panel, we're very pleased to welcome Mr. John Richardson, and, from the Canadian Bankers Association, the acting vice-president, Mr. Darren Hannah. From the Canadian Council of Chief Executives, we have Mr. Brian Kingston, and from the Office of the Privacy Commissioner of Canada, we have Privacy Commissioner Madam Chantal Bernier.
Bienvenue. Each of you will have five minutes maximum for your opening statement.
We'll begin with Mr. Richardson, please.
Mr. John Richardson (As an Individual):
Thanks very much for the chance to appear today.
I did take the time to watch yesterday's session, which was actually enormously helpful to me, as I'm sure it was to you. I have a couple of thoughts, though, that are my own but directly link to that. The signing of the FATCA IGA can be seen as either good news or bad news.
First, interestingly, is the good news. It's the point that Professor Cockfield made yesterday. In fact, what this does ensure is that Canada is absolutely 100% in compliance, no ifs, ands, or buts about it. That's what it means to have signed that agreement.
Interestingly, the agreement specifically states that nothing happens until Canada makes it clear that it has done all of the legwork needed to actually implement the agreement, which I would assume to be all of the enabling legislation that we find in Bill C-31. Given that's the case, as Professor Cockfield pointed out, there's absolutely no reason to rush this whatsoever, absolutely none. This should not be in the dark recesses of an omnibus bill. It should in fact be brought to see the light of day in a separate bill.
The second aspect of this that's very interesting in the IGA itself—and this question was asked yesterday—is who this applies to. It applies to U.S. persons and is defined in the agreement as “U.S. citizens or residents”. Now, what is extremely significant is that U.S. citizens are defined solely by the United States today, tomorrow, and forever. That means that someone who is a U.S. citizen today might not be a U.S. citizen tomorrow—and I'll have more on this as we continue the discussion—but given that the U.S. has the right to define who a citizen is, given that I presume Canada would cede that right to them, I think it's extremely important, absolutely essential, under any FATCA agreement that the definition of a U.S. citizen could never, never, never include any Canadian citizen who is a resident in Canada.
Third, we've got the whole problem of what FATCA actually means. Having watched a few of these committees, I see a lot of technical discussion of FATCA and a lot of discussion of regulations. In other words, there's a lot of talk about how to implement this agreement, but precious little on what it actually means in terms of the lives of Canadians, and precious little in terms of what it means in terms of the country itself.
The simple fact of the matter is that FATCA, once implemented, will allow the U.S. to put a permanent capital tax on Canada every day of every year for as long as this agreement is in effect, simply by virtue of using U.S. citizens in Canada to tax and siphon revenue out of the country. It is a myth, an absolute myth, and it is completely wrong that under U.S. tax laws, U.S. citizens will not owe tax to the IRS. This is for two reasons. The first is that the U.S. tax code is hostile to anything foreign, and that would include anything in Canada in general, but secondly, anything that involves tax deferral, and it is plainly obvious that all of the pillars of Canadian retirement planning do in fact involve tax deferral.
So it is a myth that U.S. citizens would not owe tax. It is a myth. Interestingly, as I read in something yesterday, the opposite of truth is not the lie: the opposite is in fact the myth. This agreement will have severe consequences for Canada and Canadians.
Mr. Darren Hannah (Acting Vice-President, Policy and Operations, Canadian Bankers Association):
My name is Darren Hannah. I'm the acting vice-president of policy and operations with the Canadian Bankers Association.
I'm very pleased to be here today at the committee's invitation.
The CBA strongly supports the government's decision to enter into the intergovernmental tax information sharing arrangement with the U.S., because it relieves Canadians of the burden they would otherwise face due to the U.S. Foreign Account Tax Compliance Act.
As you know, FATCA, as legislation, was passed in the United States in 2010 and is intended to detect U.S. persons who are evading tax using financial accounts held outside the U.S. Under FATCA, non-U.S. financial institutions would be required to report relevant information to the U.S. tax authorities about financial accounts held by identified U.S. persons.
The CBA has been very clear on FATCA from the beginning. We understand that the U.S. government is attempting to address tax evasion; however, we have opposed how they're going about it with FATCA. Canada is not a tax haven, and Americans do not move here to evade taxation. We actively opposed FATCA publicly and appeared before and made submissions to U.S. government authorities.
Unfortunately, despite worldwide efforts by the CBA and others, U.S. officials have no intention of repealing FATCA, and simply ignoring FATCA is not an option. Non-compliance would mean that both financial institutions and every customer of that financial institution, both in Canada and around the world, would face a 30% withholding tax on U.S. source income and the sale of any U.S.-source investments, and potentially a withholding tax on Canadian source income due to so-called “foreign pass-through payment” provisions.
This means that any bank customer or retiree who has mutual funds, stocks, or bonds would face potentially billions of dollars of lost income to withholding tax even if they had no other ties to the U.S.
For financial institutions, non-compliance would effectively mean that they would no longer be able to do business in the U.S. capital markets or with any institutions that do business in U.S. capital markets, which is effectively every major financial institution in the world.
To ensure that Canadians did not face the substantial negative consequences that would have come with FATCA, the Canadian government announced on February 5, 2014, that it had entered into an intergovernmental agreement with the U.S. government under the existing Canada-U.S. tax convention. The requirements of the IGA are reflected in the proposed changes to the Income Tax Act in Canada under Bill C-31, and financial institutions in Canada will be required to comply with the changes under Canadian law.
We have agreed with the federal government that entering into an intergovernmental agreement is the best approach under the circumstances. We recognize and support the efforts that the Canadian government has made.
Under the intergovernmental agreement, financial institutions in Canada will report relevant information on accounts of U.S. persons to the Canada Revenue Agency rather than directly to the U.S. Internal Revenue Service. The CRA will then exchange the information with the IRS through the provisions of the existing Canada-U.S. tax convention. The 30% FATCA withholding tax will no longer apply to retail clients of Canadian financial institutions.
So what does this all mean for bank customers in Canada? Well, for the vast majority of Canadian bank customers who are not U.S. persons, the IGA has no impact at all. Under the intergovernmental agreement, banks would be required to review their customer information. If there is no information indicating that an individual may be a U.S. person, then they won't have to do anything. If a customer has an existing account and there is an indication that they may be a U.S. person, or if they're opening a new account, their financial institution may ask them to provide additional information or documentation to demonstrate that they're not a U.S. person.
Under the intergovernmental agreement and Canadian banking law, proof of citizenship is not required to open a banking account. The vast majority of Canadians can open an account with a financial institution in the way they always have; however, if there is some indication in a new or existing account that they might be a U.S. person, then the financial institution may ask them to self-certify that they are or are not a U.S. person for tax purposes.
In conclusion, as I've said, FATCA is here to stay, and ignoring it is not an option. We fully support the government's work in putting in place an intergovernmental agreement.
I look forward to your questions. Thank you.
Mr. Brian Kingston (Senior Associate, Canadian Council of Chief Executives):
Mr. Chairman and committee members, thank you for the invitation to appear before you concerning part 5 of Bill C-31.
The Canadian Council of Chief Executives represents 150 chief executives and leading entrepreneurs in all sectors and regions of the country. Our member companies collectively administer $4.5 trillion in assets, employ more than 1.4 million people, and are responsible for the majority of Canada's private sector exports, investment, and training.
The CCCE supports the government's decision to enter into an intergovernmental tax information sharing arrangement with the U.S. The agreement will ensure that Canadians are not exposed to punitive U.S. withholding taxes on income from their investments under the Foreign Account Tax Compliance Act, or FATCA. Fortunately for the overwhelming majority of Canadian account holders, the agreement will have no impact on how they deal with their financial institutions.
The CCCE is of the view that Canada should have been exempt from the FATCA. Canada is not a tax haven, and has a good reputation for sharing information that assists other governments in collecting their taxes. Unfortunately, an exemption from FATCA was not considered.
Without this exemption, obligations to comply with FATCA would have been unilaterally and automatically imposed on Canadian financial institutions and their clients. This would have required Canadian financial institutions to sign agreements with the Internal Revenue Service under which they would have to identify their U.S. account holders and report directly to the IRS. If a Canadian financial institution did not comply with reporting requirements, the financial institution and its clients would be exposed to punitive U.S. withholding taxes of 30% on income from their investments. This would also mean that non-compliant financial institutions could no longer do business in U.S. capital markets or with any institution that does business in U.S. capital markets.
Given the size and importance of the Canada-U.S. relationship, non-compliance was simply not an option. Canada cannot risk our partnership with the U.S., which has delivered enormous benefits to both countries over many decades.
Canada is not alone in negotiating an intergovernmental agreement with the U.S. The U.S. has engaged in negotiations with over 80 countries to reach intergovernmental agreements, and 32 other countries have signed such agreements.
The agreement is consistent with the government's support for recent G-8 and G-20 commitments intended to fight tax evasion globally. G-20 leaders have committed to the automatic exchange of tax information as the new global standard, and endorsed a proposal by the OECD to develop a global model for the automatic exchange of tax information. The OECD has also signaled an intention to begin exchanging information automatically on tax matters among G-20 members by the end of 2015.
Going forward, it is important that there is coordination among G-20 members. This exercise will not prove effective if not properly coordinated, with countries imposing unilateral measures.
This is part of a global trend toward tax transparency. In line with this trend, the CCCE recently released a report that shows the tax contributions made by our members to all levels of government. There is ever-increasing public interest in how much tax is paid by companies. This report shows that Canadian companies are significant taxpayers, with an average total tax rate of 33.4% of profits.
In conclusion, the CCCE strongly supports the intergovernmental agreement negotiated by the government and looks forward to its full implementation.
I'd be happy to answer any questions. Thank you.
Ms. Chantal Bernier (Interim Privacy Commissioner, Office of the Privacy Commissioner of Canada):
Thank you, Mr. Chair.
Thank you, members of the committee, for inviting me to discuss the privacy implications of Bill C-31.
Like my colleagues, I will focus on the United States Foreign Account Tax Compliance Act, or FATCA, and I will conclude with some brief comments on two other parts of the bill that have privacy implications.
FATCA is a U.S. law which requires financial institutions in countries outside of the United States, including Canada, to report certain information on accounts of a U.S. person to the U.S. Internal Revenue Service, or IRS. Bill C-31 includes an agreement to implement this through the Canada Revenue Agency.
While there is a long-established practice of information sharing between nations for the purposes of taxation enforcement, all information sharing activities must be undertaken in a way that respects privacy obligations. These obligations include limiting the amount of personal information collected to only that which is necessary for the stated purposes and safeguarding it appropriately.
The risk to privacy here, then, is mainly related to over-collection, over-reporting, and information security. To avoid over-collection and over-reporting, education and outreach to institutions affected by this new reporting requirement will be crucial. To address information security considerations, appropriate technological measures, as well as controls, will be called for.
Beyond this, Bill C-31 introduces other legislative amendments that affect privacy.
First, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act—the PCMLTFA—will be modified in a way that broadens the amount of personal information collected and increases information sharing capabilities and requirements by the Financial Transactions and Reports Analysis Centre of Canada, FINTRAC.
I'm encouraged, however, by the provision of Bill C-31 that requires FINTRAC to destroy the personal information it receives that is not related to the suspicion of criminal or terrorist activity. This corresponds to our recommendations in our audits of FINTRAC.
Second, changes to the Income Tax Act will allow for broader disclosure of taxpayer information to law enforcement authorities. This means that if CRA officials have reasonable grounds to believe that taxpayer information provides evidence of certain crimes, they may disclose this information to law enforcement. It appears that this information would be shared between the CRA and law enforcement authorities without judicial oversight. We would urge the committee in its examination of this provision to seek demonstration that this provision is necessary, and if it is necessary that appropriate oversight mechanisms will apply.
In closing, thank you, Mr. Chair and members for the opportunity to discuss this issue. I welcome your questions.
Mr. Andrew Saxton (North Vancouver, CPC):
Thank you, Chair.
Thanks to our witnesses for being here today.
My first question is for Brian Kingston.
Absent an intergovernmental agreement, I understand that obligations for Canadian financial institutions to comply with FATCA would be unilaterally and automatically imposed on them by the U.S. as of July 1, 2014.
Can you please explain what the consequences would be for Canadians and Canadian financial institutions had the IGA not been signed and also any special provisions that Canada was able to obtain in FATCA that other countries do not have?
Mr. Andrew Saxton:
My next question is for Darren Hannah.
Mr. Hannah, the IGA negotiated by the late finance minister contains several notable concessions for Canada that were not necessarily granted by the U.S. to other countries. For financial institutions and their clients, the IGA will help by reducing the compliance burden, exempting certain types of accounts, and exempting certain types of financial institutions, such as those credit unions under $175 million in assets. It also satisfies Canadian privacy laws, since it will be subject to a previous agreement that has been in place for a number of years.
Would any of these special provisions contained in the IGA be extended to Canada if the IGA had not been passed prior to July 1?
Hon. Scott Brison:
Okay, but I would suggest.... Look, this IGA gets Canadian banks off the hook from reporting. It does not get Canadian citizens who happen to be considered American persons off the hook. That's very important. You used the term “vast majority”.
Mr. Kingston, you used the term “overwhelming majority”.
What about the million Canadians who are affected? That's the concern. None of us disagree with the idea of negotiating an IGA, but the reality is that you can negotiate a better IGA, given our relationship with the Americans.
Mr. Chrétien and Mr. Clinton had a remarkable relationship that enabled them to do deals that were not available to other countries. Mr. Reagan and Mr. Mulroney had an exceptional relationship. In fact, Mr. Reagan wasn't exactly a big environmentalist, but he agreed to an acid rain treaty with Mulroney at that time. Relationships do matter.
We don't quarrel with the idea of having an IGA, but we think there could have been a better IGA had we had stronger relationships in Washington.
Madam Bernier, in an earlier response to Mr. Rankin, you seemed to indicate there may be a concern regarding a potential charter challenge around the privacy issue. I want you to expand on that. Is there a potential charter challenge inherent in this?
Mr. Gerald Keddy (South Shore—St. Margaret's, CPC):
Thank you, Mr. Chairman.
Welcome to our witnesses.
There have been a number of interesting points and facts raised here today, Mr. Chairman, but I have a couple of specific questions.
Mr. Hannah, you mentioned—and I think Mr. Kingston mentioned it as well—that Canada is not a tax haven, and that Americans, quite frankly, don't move here to avoid their taxes. I'd say that most people around this table agree with that statement.
There seems to be some discussion, though, about who actually is an American citizen, and there is some confusion on the opposition benches on who an American citizen is. I've never heard the term “American person” before. You're either an American citizen or you're not an American citizen, or you're a foreign entity working in the United States with a green card.
But quite frankly, the idea that somehow this is new is incorrect. American citizens have always had a tax liability due to their citizenship and, quite frankly, we can't change that. All we can do is put some parameters and some rules around it, and that is what FATCA has done.
Mr. Brison started to ask the question, and really didn't follow up on it, about whether Canada is better positioned under this agreement or not, so I'm going to ask you that question.
Mr. John Richardson:
Oh my God, to abandon U.S. citizenship voluntarily is called a “relinquishment” under U.S. law, specifically, section 349 of the Immigration and Nationality Act. The practical effect of it, since 2008, has been that a large number of people who are deemed U.S. citizens will actually be subject to an exit tax, whereby all of their world assets are, first, identified, and then second, there is a deemed sale of those assets and they have to pay a capital gain on money they've never received. That's only for the property. If it's a pension plan or something, the full thing is valued and deemed paid out.
That's not for everybody, but applies to people who are called “covered expatriates”, those who have a net worth of over $2 million, which realistically is an awful lot of people in major urban areas who are in their fifties and sixties. Or, significantly, these are people who cannot demonstrate five years of U.S. tax compliance. Since a lot of these people didn't even know they were U.S. citizens, they're obviously not tax compliant, so they're hit with the absolutely horrendous cost of that five years of tax compliance, which may be more than taxes and penalties.
It is an unbelievably expensive undertaking. You do not leave U.S. citizenship for free—
Mr. Mike Allen (Tobique—Mactaquac, CPC):
Thank you very much, Mr. Chair.
I want to follow up a bit on Mr. Caron's line of questioning to Mr. Hannah, please.
I represent a New Brunswick riding that's on the border with Maine. I do know a number of people, some of them very close to me, whose families, because of...I won't call it an accident, but they actually had to go across because that's where the local hospital was. The child was born, they were there three days, and they came back to Canada. They had never been in the U.S. from the standpoint of having a U.S. tax identification number. They never had a U.S. passport, never anything.... There's quite a number of them who are in that situation.
Under that basis, and given the comments you made before, Mr. Hannah, what is the likelihood of any of them being picked up in the sweep by the bank?
Mr. Nathan Cullen:
Ms. Bernier, I have a question about where the Privacy Act fits in all of this, because we expect to see—and we've already seen—court challenges coming forward. Some have cited our charter and some have cited the Privacy Act.
Under section 7—we've talked about section 8 maybe being subsumed—it is stated, “Personal information under the control of a government institution shall not, without the consent of the individual to whom it relates, be used by the institution”, with a couple of provisos.
On the surface of what we're talking about, once the information...once the CRA plays the role of middleman between the IRS and the institutions Mr. Hannah represents, is there an obligation under the Privacy Act that they must by law be made aware?
Mr. Nathan Cullen:
We've heard a number of witnesses, even those who are in favour of this initiative, say that this is more of a data grab than it is a tax grab. Canada is not a tax haven. This is not about the U.S. trying to collect that money. This is much more about data.
My last question is to Mr. Richardson or anyone who wishes to answer.
What kind of information can be gleaned about a person—Mr. Hannah, maybe you can come in on this—by their tax information? If I could see your tax information, what could I learn about you?
Mr. Dave Van Kesteren:
I would agree with that.
I guess here's what I'm trying to understand. Because there were some suggestions made, as my colleague pointed out, that those who really had no ties to the United States would be swept into this, as opposed to those that maybe have set up residency here in Canada. We welcome them. I think Americans are great people. As well, I have relatives in America too.
But there's a difference between that being the case and somebody who was born and raised in the States and, for whatever reasons, chose Canada for its dual citizenship, but still has an affiliation with the United States, and one that's rather fond, as opposed to maybe a draft dodger or something.
Mr. Mark Adler (York Centre, CPC):
Thank you very much, Chair.
Thank you, witnesses, for being here today.
I do want to clarify one thing before I begin my questioning. I just want to clarify Mr. Brison's selective recollection of history. He made a number of points about our prime ministers' relationships with U.S. presidents. Let me highlight two from the Chrétien years. One was when the director of communications in the Prime Minister's Office referred to President Bush as a moron. The other one was post-9/11, when Prime Minister Chrétien said that U.S. foreign policy might be part of the causes of terrorism. Those are two highlights, in fact, of the Canada-U.S. relationship that existed under Prime Minister Chrétien. I just wanted to clarify that for the record.
Let me ask Mr. Hannah the following. Given the onerous regulations of FATCA, we've seen that a number of foreign financial institutions, such as HSBC, Deutsche Bank, and Credit Suisse, have been closing brokerage accounts for U.S. citizens. To your knowledge, was that ever contemplated by Canadian banks as an option?
I call this meeting back to order.
We are resuming discussion, pursuant to the order of reference of Tuesday, April 8, 2014, on a consideration of Bill C-31, an Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014.
I want to thank our second panel of guests for being with us here and by video conference.
First of all we have, as an individual, retired captain Mr. Sean Bruyea.
From the Canadian Bar Association, we have Cindee Todgham Cherniak.
Welcome to the committee.
From the Canadian Consumer Specialty Products Association, we have Ms. Shannon Coombs, president.
From the Chemistry Industry Association of Canada, we have vice-president Mr. Gordon Lloyd.
As an individual, we want to welcome, from Vancouver, Professor Dominique Gross from Simon Fraser University's School of Public Policy.
Thanks to all of you for being with us.
You each have five minutes maximum for an opening statement, and we will then go to members' questions.
We'll begin with Captain Bruyea, please.
Mr. Sean Bruyea (Retired Captain, Columnist, Media Personality and Academic Researcher, As an Individual):
Thank you, Mr. Chair and honourable members of the committee, for the invitation. You have much on your plate, so I will skip further formalities.
On May 29, 2012, coincidental with the announcement not to appeal the class action lawsuit involving the Canadian Forces insurance plan known as SISIP, the Government of Canada committed to cease offsetting the Pension Act pain and suffering monthly payments from four other plans: the earnings loss benefit, the Canadian Forces income support, the war veterans allowance, and civilian war-related benefits. I will speak specifically about the earnings loss benefit, or ELB.
The ELB is an income loss program and a key pillar of the controversial legislation commonly known as the new Veterans Charter. Bill C-31 provides retroactivity in returning to the veterans the Pension Act pain and suffering deduction offsets of ELB from May 29 to September 2012.
During the launch of the new Veterans Charter, including the earnings loss benefit, on April 6, 2006, Prime Minister Stephen Harper promised that:
||Our troops’ commitment and service to Canada entitle them to the very best treatment possible. This Charter is but a first step towards according Canadian veterans the respect and support they deserve.
If the government decided that the policy of offsetting monthly Pension Act payments for ELB is not what our troops deserved on May 29, 2012, did our troops deserve the unfair deductions on May 28, 2012? For that matter, did our troops deserve the unfair deductions for any day back to April 6, 2006, when the earnings loss benefit program was created?
ELB is clearly an income loss program. The Pension Act is indisputably a program for pain and suffering. Our courts have long stipulated that income loss is to be maintained completely separate from general damages, otherwise known as pain and suffering payments. No other provincial civilian workplace insurance program in Canada deducts pain and suffering payments from income loss programs. Why have our disabled veterans and their families been subjected to an unjustifiable lesser standard from April 2006 to May 2012?
Even if we ignore the strong legal precedent of not deducting pain and suffering payments from income loss programs, this arbitrary retroactive date of May 29, 2012, comes across as petty. The indefensible retroactive date creates an additional class of veterans once again. Those in the SISIP class action lawsuit had their problem rectified back to when SISIP began offsetting Pension Act payments. Why are ELB recipients not accorded the same dignity?
Justice, or the appearance of justice being done, is plainly not being offered in Bill C-31. Should you pass the legislation as is, you will force the most disabled veterans under the flagship Conservative veterans benefit program known as the new Veterans Charter to enter the paralytic morass of years of unnecessary and bitter legal battles. These battles will sap the health, the family stability, and the dignity of military veterans and their families.
We say that we honour our injured veterans as a nation and as a government, but Parliament's actions often speak otherwise. Before we hesitate because of cost, please remember that these disabled veterans never hesitated when Parliament ordered them into harm's way, knowing full well that many would die or become disabled for life.
Major Todd, the architect of the Pension Act philosophy of pain and suffering payment, stated in 1919 that
||Those who give public service do so not for themselves alone but for the society of which they are a part. Therefore, each citizen should share equally in the suffering which war brings to his nation.
This is just one tangible and clear example of the debt we keep promising to pay to our veterans, but we do not
What is also troubling about Bill C-31 is what is absent: the further debts we must pay. The earnings loss benefit is not being increased to 100% of military release salary while providing lost potential career earnings, yet civilian workplace compensation schemes recognize this loss potential. Boosting ELB to 100% has been emphatically pushed by the major veterans groups and the two VAC advisory groups established to study the matter, as well as the House committee on veterans affairs.
There are also no provisions for providing child care and spousal income assistance to the most disabled veterans. The most disabled are not supported for education upgrades or to pursue any employment opportunity to better themselves or improve their esteem. The monthly supplement provided under Bill C-55 in 2011 is denied those seriously disabled veterans collecting the exceptional incapacity allowance under the Pension Act.
My first of now eight parliamentary committee appearances was in front of the Senate version of this committee, the national finance committee, on May 11, 2005. I raised then and continue to raise serious concerns about the charter. My concerns were generally ignored by government, but not by veterans and the public. Had substantive action been taken then, we would not be in year eight of the tragic mess regarding how our veterans are mistreated and often pushed aside by the new Veterans Charter and Veterans Affairs Canada.
I also warned Parliament of the harassment of those who oppose the new Veterans Charter. This was also ignored, only to explode on the national media agenda five years later, with what some call the largest privacy breach in Canadian history—my privacy. As such, provisions such as those in Bill C-31 that would allow CRA to voluntarily hand over confidential taxpayer data to the police without approval of a judge send shivers down my spine, as they should for every Canadian. Surely the magnitude of Bill C-31 is disconcerting. The consequence of ignoring Canadians' and veterans' input is indeed a perilous road.
Undoubtedly, parliamentarians and the public service work hard for democracy. However, none can claim to have sacrificed what our military has sacrificed to preserve our democratic way of life. The omnibus budget bill does not meet Canada's democratic standard. It allows many changes to Canada's laws to enter the back door of government policy without full participatory and democratic due process. Ramming through legislation without proper scrutiny is an insult to the dignity of all that the military has sacrificed in Canada's name and at Parliament's order.
The omnibus budget bill is a perversion of democracy, in my mind, a democracy for which almost 120,000 Canadians have lost their lives and for which hundreds of thousands more have lived and continue to live with lifelong disabilities as a result of serving our nation.
Surely Parliament can do better.
Ms. Cyndee Todgham Cherniak (Chair, Commodity Tax, Customs and Trade Section, Canadian Bar Association):
Thank you, Mr. Chair and honourable members.
I am Cyndee Todgham Cherniak, and I am chair of the Canadian Bar Association's commodity tax, customs and trade law section. The CBA is pleased to appear before you to provide views with respect to part 6, division 29, of Bill C-31.
The Canadian Bar Association is a national association representing over 37,500 members of the legal profession. Our primary objectives include improvement in the law and the administration of justice. It is through that lens that we have examined the portion of the bill.
We have carefully reviewed the Administrative Tribunals Support Service of Canada Act, which intends to restructure the administration support services of 11 federal administrative tribunals. The CBA's position is that division 29 of part 6 should be withdrawn from Bill C-31 for further consultation with the affected tribunals, the users, and the stakeholders. Should this portion of the bill proceed, the CBA recommends, at a minimum, the removal of the Canadian International Trade Tribunal, the Public Servants Disclosure Protection Tribunal, and the Canada Industrial Relations Board from the legislation.
We must consider the potential risks of the proposed merger. My comments will focus on: one, the risk that the merged entity will be inconsistent with Canada's international obligations; two, the risk that the separation of the staff from the individual tribunals will cause delays in the litigation process; three, the risk that putting the tribunal staff in a merged entity will diminish expertise; and four, the risk that the effectiveness of the tribunals will be diminished if their impartiality and independence is brought into question.
Impartiality and independence may be affected by the reporting structure of the merged entity, which may lead to actual bias, an apprehension of bias, and/or conflicts of interest. It is proposed that the merged entity will report to the Minister of Justice. The Minister of Justice is also the minister responsible for the Department of Justice.
For my part, as an international trade lawyer, I will focus on the impact the merger may have on the Canadian International Trade Tribunal. Canada's international trading partners may perceive the administrative staff of the CITT as protectionist and biased in favour of the Canadian government and Canadian businesses. Under the merged entity, the staff will report to the same minister as the lawyers who bring anti-dumping and customs enforcement actions against exporters and who defend the government procurement challenges filed by foreign bidders. Canada's trading partners may therefore question the independence, impartiality, and objectivity of the decisions of the Canadian International Trade Tribunal.
Turning to the risk of inconsistency with Canada's international obligations, our trading partners may question whether the merged entity is contrary to Canada's obligations under various WTO agreements and free trade agreements. I can assure you that it will not take long before a lawyer raises apprehension of bias, conflict of interest, and failure to abide by treaty obligations as reasons for challenging a CITT decision in a Canadian court, before the WTO dispute settlement body, or under an FTA dispute settlement mechanism.
Canada cannot control the outcome of a decision rendered pursuant to the WTO dispute settlement understanding or a free trade agreement. Negative decisions in the international arena are a real risk. If an international trade dispute is raised against the institutional procedures of the merged entity or the Canadian International Trade Tribunal itself, Canada may find itself having to compensate a foreign party or face retaliation under an international treaty.
If the remedy ordered by an international dispute settlement panel is a monetary amount—like NAFTA chapter 11—the cost may exceed any potential cost savings of the merger or, if retaliation is in the form of increased duties on Canadian goods by a foreign trading partner, Canadian manufacturers may be negatively affected in the international marketplace. The Department of Justice lawyers will have to defend challenges, and this will by itself result in a cost to the government.
There are also risks associated with possible delays in the litigation process. The risks of litigation increase if the timeliness of tribunals are affected by the structure of the merged entity. I can tell you that, based on personal experience, the legislative timeframes of cases before the Canadian International Trade Tribunal do not allow for delays.
The preliminary injury decision in an anti-dumping or countervailing duty case is 60 days from the date of initiation. A final injury decision must be released within 120 days of the preliminary determination of dumping. Cases before the CITT are not like litigation before the courts, which can drag on for years.
Lastly, there's a risk that the expertise of the tribunals may be diluted by the merger of the administrative support services. I can tell you from my own personal experience that the staff at the Canadian International Trade Tribunal have specialized expertise in trade matters that is unlike the expertise of the other 10 tribunals' staff.
Staff at the other tribunals cannot quickly step into the role of a CITT researcher who prepares anti-dumping injury questionnaires or compiles data for the pre-hearing staff report. Staff at the other tribunals do not have the same economic and trade analysis skills that the staff at the CITT have developed over the years. Legal support services staff would not have the same in-depth knowledge of Canada's international obligations.
Finally, the CITT staff receive confidential information from the parties who appear before the tribunal, and this confidential information is fundamental to finding the facts, applying the law, and coming up with the correct decision. The Canadian International Trade Tribunal staff are sensitive to the issues of confidentiality within the CITT act and the tribunal rules.
The credibility of the tribunal is at stake. We would like you to consider these important concerns in your deliberations.
Ms. Shannon Coombs (President, Canadian Consumer Specialty Products Association):
Good afternoon, Mr. Chair and honourable members of the committee. It's a pleasure to be here today to provide support and a suggested amendment for Bill C-31.
My name is Shannon Coombs, and I'm the president of the Canadian Consumer Specialty Products Association. I have proudly represented this industry for 15 years in our many accomplishments as a proactive and responsible industry.
The CCSPA is a national trade association that represents 37 member companies across Canada in what is collectively a $20-billion industry employing 12,000 people in more than 100 facilities. Our companies manufacture, process, package, and distribute consumer, industrial, and institutional specialty products such as soaps and detergents, domestic pest control products, disinfectants, deodorizers, and automotive chemicals, or as I call it, everything under your kitchen sink.
I have provided to the clerk copies of our one-pager, which has a picture of our products. I'm sure many of you have used them today. Also, you would have received our goody bag a few weeks ago,that is, assuming your staff chose to share it with you.
Voices: Oh, oh!
An hon. member: I understand. Mike?
Ms. Shannon Coombs: You can ask for another one for later.
An hon. member: Well, the chair obviously got his goody bag.
Ms. Shannon Coombs:
The CCSPA supports the amendments to the Hazardous Products Act in Bill C-31. These amendments will put in place a regulatory framework that will be harmonized with that of our major trading partner, the United States.
Included in Prime Minister Harper's and President Obama's 2011 joint action plan under the Regulatory Cooperation Council, the globally harmonized system, or GHS, for classification and labelling is a key initiative.
We are supportive of all the efforts to bring these new regulations to fruition, but the benefits of implementing the GHS can only be realized with a high level of alignment between the U.S. Occupational Safety and Health Administration and Health Canada. Canada cannot meaningfully implement the GHS by creating unique Canadian requirements that will result in different or costly labels that impact trade.
Our sister associations, the Consumer Specialty Products Association and the American Cleaning Institute, have also publicly supported these amendments, and the United States has already begun its implementation of GHS for workplace chemicals. Adopting GHS in Canada will allow our members to use one safety data sheet and one label for products used in the North American workplace.
At this time we are proposing one amendment to Bill C-31. In proposed paragraph 14(b), under Hazardous Products Act, we're looking for an additional provision that would clearly allow for product that is imported into Canada for the purposes of relabelling to be compliant with the act. As it currently stands, product imported must be labelled prior to entry. Depending on your country of origin, this is not always practical. Allowing Canadian suppliers to import product for relabelling will allow industry to have more quality control and flexibility with respect to ensuring compliant labels in the workplace.
Mr. Chair, we appreciate this opportunity to comment on this important piece of legislation. We support this amendment and we look forward to working with the government on the subsequent regulations and guidance that are developed and harmonized with the U.S. OSHA.
Mr. Gordon Lloyd (Vice-President, Technical Affairs, Chemistry Industry Association of Canada):
Thank you, Mr. Chair and committee members, for allowing us to present before you.
This discussion about the Hazardous Products Act is quite important to the Chemistry Industry Association. We're the voice of Canada's chemistry industry. Our members produce industrial chemicals across the country and we're major exporters.
I think a number of you know of our Responsible Care program. It's our industry's commitment to sustainability. It started in Canada, and it has spread to over 60 countries. It's something that I think all Canadians can be quite proud of. We won the prestigious GLOBE Award for Sustainable Leadership this year because of the Responsible Care program.
The Hazardous Products Act amendments that we are talking about here today are the first step in modernizing Canada's workplace hazardous materials information system, WHMIS, to achieve closer alignment with its counterpart in the U.S. The second step will be the regulatory changes that will take place after you've passed these amendments and the Hazardous Products Act has been modified. Shannon has already described what WHMIS is about—both of us addressed that in our briefs—with labels and material safety data sheets and training. It's been quite a unique and successful initiative.
Over the last several years, Health Canada has conducted extensive consultations with industry and others to better align the system with the system in the U.S. under the international agreement of a globally harmonized system, but Canada and the U.S. have rightly decided to focus on aligning their systems with each other.
The U.S. regulations were out in 2012. They're ahead of us. They're in a transition phase right now. They're going to have to be in full compliance by June 1, 2015. Our agreement with the Americans is that we will collaborate with them in changing our regulations, which will be in force by the same date of June 1, 2015. There's been a number of important steps taken, which are outlined in our brief, to further that objective.
The changes to WHMIS that we're looking for through these legislative and regulatory changes will further the government's agenda of regulatory cooperation with the U.S. They should help make Canada more competitive, improve the efficiency of our regulatory regime, and maintain worker protection. To maximize the benefits that we can achieve from that, we need to implement the changes in the same timeframe as the Americans. We're a bit behind the ball on that.
To catch up, the transition period for the GHS regulatory changes to WHMIS in Canada needs to start this year. In the second half of this year, the Americans are going to start using their new labels and safety data sheets. Our member companies want the flexibility to do the same. They want to be able to transition to the GHS-based labels and safety data sheets in both countries at the same time. American companies want to do this as well. That's illustrated by the letter from the American Chemistry Council, our sister association, which is attached to our submission.
For this to happen, several important things need to occur. First of all, the amendments to the Hazardous Products Act that are part of this bill need to pass. That needs to be done very soon, and then the regulations can be implemented. Most importantly, the amendments have to pass in a way such that the government can introduce the regulatory changes this June. If that is not done, we fear there will be significant delays.
The June deadline for the regulations is necessary and possible, for a number of reasons. The normal gazetting process will occur. There will be the Gazette, part I, regulations and draft, and then they will go to final regulations in the Gazette, part II. But because there's already been very effective and extensive consultations by Health Canada with stakeholders on these regulations, they can be issued pretty much right after the legislation to the Hazardous Products Act is changed.
We are also looking for—
Mr. Gordon Lloyd:
—a very short period for comment before the Gazette
, part II, goes forward. We hope that would occur some time this summer. That should be enough time to allow us to get what we're asking for, which is that we will be able to implement the changes in Canada starting this fall, in the same timeframe as the Americans will be doing.
Now, if that doesn't happen, if they aren't introduced in June, the delay will probably be longer than just a few weeks. The way we understand the government regulatory process works, the regulations will have to go through Treasury Board. It doesn't normally sit in the summer, and it could be as late as the fall until the regulations would be introduced. That will be too late for the Canadian companies to take full advantage of the opportunities that are here and to implement these changes in the same timeframe as the U.S.
In conclusion, getting the regulatory alignment that the Prime Minister and the President committed to will be important for trade and competitiveness and is readily achievable. But the potential benefits will only be fully realized if Canada passes the required legislation in the kind of timetable that I've talked about.
Other associations that have also written to you, such as the Canadian Paint and Coatings Association and the Canadian Chamber of Commerce, have made similar points in their briefs.
Dr. Dominique Gross (Professor, School of Public Policy, Simon Fraser University, As an Individual):
Thank you, Mr. Chair and committee members.
My presentation is about establishing monetary penalties for the temporary foreign worker program by amending the clause in the Immigration and Refugee Protection Act.
The regulations must be followed, and it is expected that penalties will be imposed if that is not the case. Introducing penalties for employers who do not meet the conditions for hiring temporary foreign workers is a positive thing.
Having to pay large fines could incite certain employers who are inclined to abuse the system to change their behaviour. However, that kind of amendment would not likely give Canadians systematic priority access to available jobs.
The goal of the temporary foreign worker program is to help businesses keep operating without interruptions when there are shortages of labour domestically, that is, when employers cannot find suitable workers for their vacancies. Moreover, such a program must allow filling jobs with foreign workers until the labour gaps are eliminated thanks to wage adjustments and training.
This implies two conditions: first, there must be certainty there are no available domestic workers for vacancies; and second, the use of temporary foreign workers is only for the short term. Then the government must penalize employers who abuse the system.
In Canada, all occupations can be filled by temporary foreign workers, and for many jobs employers must confirm through the labour market opinion there are no available domestic workers. In such a context, and especially for low-skilled occupations, businesses may be inclined to overuse the program as long as there is no complaint about abuses.
Through the temporary foreign worker program, employers have access to the world supply of low-skilled workers. They can easily find candidates who perfectly match their vacancy requirements. In addition, it is very likely that these workers will be fully reliable.
Foreign low-skilled workers usually see themselves as privileged to have a job in Canada. It is a guaranteed improvement for their family life in their home country, thanks to having a steady job with a high wage for themselves. So businesses have access to very reliable and productive workers for several years, but at a relatively low legal wage compared to what would have to be paid to Canadian workers. As time passes, this makes employers increasingly dependent on such workers.
Two highly undesirable consequences arise from such a situation. Employers lose incentives to raise the wage to attract domestic workers from other regions, and they lose incentives to train local unemployed workers. These are additional costs that do not have to be incurred with access to temporary foreign workers. Thus, the labour shortage, if it exists, is not solved over time. If there is no shortage of labour, unemployment rises.
Detailed information about labour shortages for occupations in local areas is a necessary condition for a temporary foreign worker program to fill its goal effectively. Relying on employers to confirm a labour shortage with no possibility to check on whether their statement at the time of the LMO application is correct is not adequate. The government should be able to control employers' LMO statements and ensure priority is given to domestic workers at the time of hiring. With detailed information on labour shortages, application conditions in LMOs can be easily and quickly verified. Then employers will definitely be less inclined to use the program extensively.
In addition, detailed information about labour shortages would allow the creation of an accurate list of eligible occupations with deep shortages of labour and allow employers to have easier access to foreign workers. The list could also be revised regularly. Such a policy choice would not only reduce abuses, but when shortages are not deep, it would induce businesses to train unemployed workers if necessary, or to raise wages and make occupations more attractive to domestic workers.
In conclusion, an effective temporary foreign worker program should stimulate incentives to hire and train domestic workers and should not be used to fill long-term jobs. This is particularly important when there is high unemployment for various groups of people like low-skilled workers, youth, or aboriginals. Policy changes that prevent negative impacts on domestic workers at the time of hiring ensure the effectiveness of the program. Adding penalties for abuses is useful, but it is unlikely to correct the present negative consequences of the temporary foreign worker program.
Mr. Nathan Cullen:
Thank you, Chair.
Madam Gross, thank you very much. I listened to your presentation and read your paper. I see how the basic supply and demand system that we have all accepted and welcomed in the Canadian labour market has been contorted and distorted by a temporary foreign worker program, in which, as you say, training workers or raising their wages in regard to short supply is in fact discouraged behaviour for employers.
I offer apologies both to you and to the other panellists, but I need to ask Sean some questions that I think are incredibly important.
First things first, I hope that all our witnesses and those watching aren't under any illusion that what we're doing here is a proper study of this omnibus legislation. In two short meetings, we're going to be dealing with almost 300 pages in part 6 alone, affecting all the things we have talked about today and many more. That's the process that's happening. They say that you don't want to watch bills and sausages being made, but this is taking it to another level.
Specifically on veterans and specifically on this arbitrary decision, we asked Veterans Affairs officials at our briefing what the policy basis was for not extending compensation when this payment was first clawed back. We were told that it was a political decision, that there had been no assessment and no analysis of costs.
The Conservative government used $35 million of taxpayers' money to fight veterans in the courts for six years. They spent $28 million celebrating the War of 1812.
Is there an estimate of costs for properly compensating veterans who have been injured while serving their country and for taking this payment back to 2006 rather than to this arbitrary, politically chosen date of 2012?
Mr. Andrew Saxton:
Thank you, Chair.
Thanks to our witnesses for being here today.
My first question is for Cyndee Cherniak.
Ms. Cherniak, you say that staffing will be affected due to expertise being lost. However, under this change, it's been clear that all staff currently with the tribunals, as well as related departmental resources, will transfer to the ATSSC. Expert staff will continue to be dedicated to their respective tribunals.
How can you say this, then, when it's so clear that the change values the expert analysis and those working with tribunal chairs and members?
Hon. Scott Brison:
Thank you, Chair.
Thanks to each of you for joining us today and for your testimony.
The fact that in an hour at the House of Commons finance committee we are discussing issues around veterans benefits, international trade law, consumer products labelling, and temporary foreign workers speaks to the absurdity of the exercise. It's extraordinarily frustrating as a parliamentarian to witness and to actually be a participant in a charade in terms of not having the capacity to adequately scrutinize legislation, which is our job.
I want to thank you for your service, for what you've done on behalf of Canada, Captain Bruyea, in the past, but also for what you're doing today.
On the arbitrary date of May 28, 2012, has the government explained why that date? Why not go back further? What is the defence?
Mr. Gerald Keddy:
To Dominique Gross, we have spent a fair amount of time at this committee talking about training, youth employment, and temporary foreign workers. One of the things we discussed, and one of the things you actually mentioned, is the process of determining whether you need temporary foreign workers. Can you explain how that works in European countries? If you have occupational shortages and it's a structural problem, then you would think you would respond to that with training initiatives. We're starting to do that in Canada.
What we've learned in our study is that most of the European nations, quite frankly, are faster. I don't want to say that they're better—they may be—but they're certainly faster than we are. Do you want to just explain that a little?
Dr. Dominique Gross:
Thank you for your question.
If we think about the European countries that have a long history with the temporary foreign worker program—Germany and Switzerland—they both have a characteristic: that is, they have local federal labour agencies that handle the matching between vacancies and the unemployed or people who are looking for jobs.
Those local agencies have perfect information about the state of the labour market, which is the first point. The companies that need temporary foreign workers need to apply to those labour agencies. They first offer the work to the available unemployed people and then, if nobody is really suitable, they give the authorization. That is one point.
Another point that those countries have is the surveys of businesses. They ask questions about their ability to fill their vacancies and their success in terms of skills and in terms of type of occupations within the past semester, for example, or, in Switzerland, the past three months. There is a continuous set of questions that businesses answer about what their need is and how easy it is for them to fill those jobs.
That's information that's useful for training, for young people who learn where there are jobs and where they are likely to have very good jobs, and also for the temporary foreign worker program.
Mr. Guy Caron:
Thank you, Mr. Chair.
I would like to thank all of the witnesses who appeared before us this afternoon. Unfortunately, my time is limited, so most of my questions are for Ms. Gross.
According to your presentation and your report for the C. D. Howe Institute, it is clear that adequate information about the labour market is absolutely vital to the success of the temporary foreign worker program. But that is not what we have right now.
This is 2014. Canada is one of the richest countries on the planet. We have all of the advanced technology we need to collect information about this, compile it, analyze it and synthesize it. Even so, we still do not have adequate information on the subject.
Why is that so? What can the federal government do to resolve this issue as quickly as possible?
Mr. Guy Caron:
You have just laid out part of the crux of the problem with the temporary foreign worker program. I would like to quote another of your conclusions:
||Labour shortages can result from workers being discouraged from looking for jobs or not considering some jobs because of low pay....
Clearly, this program encourages companies to compare what they would have to pay a Canadian employee with what they can pay a temporary foreign worker.
We have a labour market situation where employers cannot find Canadian workers at the rates they're offering. Instead of offering to pay more, these employers waste no time saying that they have fulfilled all of the conditions and that they absolutely need foreign workers even though they have not done all of the searching they are supposed to or taken all of the steps to fill those vacancies, many of them permanent, with skilled Canadian workers.
Is that an accurate summary of the situation?