CIIT Committee Report

SUPPLEMENTARY OPINION

NEW DEMOCRATIC PARTY OF CANADA

INTRODUCTION

The NDP thanks the committee members, staff, analysts, and the witnesses who participated in this study of “Progressive Canadian Enterprises and SMEs Through Electronic Commerce”.

The NDP recognizes that the world of business changes rapidly and is becoming more reliant upon internet sales, social media, website advertising and the digital world. The NDP also recognizes that this expanding platform can greatly impact the success of Canada’s small and medium-sized enterprises (SMEs), and we encourage the federal government’s recognition of the help they must provide these SMEs to navigate a quickly growing and changing business environment.

These supports can come in the form of training and educational programs offered through various institutions within federal departments, but must also come in the establishment and maintenance of fast, reliable, secure and affordable digital infrastructure, regardless of whether you are based in an urban centre or a rural area.

In addition, witnesses’ emphasized their concern with the government’s ability and/or willingness to safeguard the privacy and security of Canadians’ personal and business information.

The NDP supports fair and progressive trade and taxation practices, which has become a key factor in e-commerce over the last decade. We certainly heard from many witnesses during this study whose concerns were not covered completely by the committee’s main report, especially those regarding fair taxation practices.

New Democrats understand the importance of e-commerce for the future of business in Canada and we believe the federal government must look to the future and help all businesses prepare for an ever-changing technologically-driven world.

TRAINING AND EDUCATION

As the world of e-commerce and technologies is constantly changing and always improving, the NDP recognizes that this can be daunting for some business entrepreneurs who work tirelessly to ensure their businesses are successful and who want to compete in larger markets.

This educational opportunity can occur on a variety of levels: whether through the help of a business website, a presence on social media, digital advertising or internet sales.  Canadian entrepreneurs want to provide more options to their customers and access the global marketplace. The NDP believes that the Government of Canada has a responsibility to provide Canadian SMEs with the necessary supports to ensure their success. This includes training or the provision of educational opportunities to those entrepreneurs who may not have the skills or experience to create a webpage or setup a potentially complex e-commerce presence.

The committee specifically heard form Startup Canada who requested that through the Trade Commissioners and Export Development Canada, the Government of Canada create streamlined, easy-to-access programs for these entrepreneurs to learn how they can quickly and easily take advantage of the digital marketplace.

The NDP believes that the government must increase awareness about its already existing programs and services and enhance them so they can best help Canadian SMEs who wish to engage in e-commerce activities.  This enhanced awareness should occur through an effectively communicated federal marketing campaign.

DIGITAL INFRASTRUCTURE

The NDP heard from witnesses that many communities, especially those more rural and remote, have difficulty accessing fast, reliable, secure and affordable internet. Often, despite companies purchasing high-speed or broadband internet services, those in smaller, rural, northern or indigenous communities are not provided the same level of internet service as other more urban-based companies. This can have a detrimental impact on a business’ ability to provide services to their customers and grow their clientele.

The Canadian Manufacturers and Exporters stated that, “Canada needs to have better digital infrastructure. It is often too expensive and not up to necessary speeds for modern manufacturing to operate in a digital e-commerce world”.

The NDP believes that without appropriate connectivity and specific federal assistance, the benefit of the internet and a digital economy are muted in places where it could be of must use to level the geographic playing field. Those businesses in poorly serviced areas will suffer an inability to grow, both economically and physically. Communities in rural and remote regions deserve reliable, high speed service that can support this growth and it is the responsibility of the federal government to plan for this.

PRIVACY AND SECURITY

The committee heard from witnesses that Canadians do not have trust or confidence that their personal information and sales are sufficiently protected and that their information is being used appropriately.  In light of the recent investigations into Facebook and Cambridge Analytics, this fear is completely justified. In order for the government to better facilitate e-commerce in Canada, witnesses told the committee that they must ensure fraudulent emails scams and anti-spam legislation is tough and up-to-date. According to Dr. Michael Geist, Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, the government must ensure that Canada’s privacy legislation keeps pace with global standards. Dr. Geist also addressed issues around restrictions on data localization or data storage and emphasized the dangers of foreign governments’ push within trade deals and negotiations to lift restrictions on data storage. He said, “The Canadian government should resist those efforts within NAFTA, or within the restarted TPP 11, to limit the ability of federal or provincial governments to establish legitimate privacy and security safeguards through data localization requirements. Limitations on data transfer restrictions, which mandate the free flow of information on networks across borders, can raise similar concerns. The U.S. has been seeking a ban on data transfer restrictions, and I think we ought to ensure that our privacy and security rules aren't superceded by trade agreements such as NAFTA or the TPP 11.”

The NDP agrees that data storage changes must not prevent governments from requiring that data be stored on local Canadian servers and that protection of Canadians’ information must be of high concern to the government.

TAX FAIRNESS

The NDP believes that Canadians deserve comprehensive, progressive tax fairness. We also believe that taxes are investments into building a fairer society for everyone. This inequality in taxes was addressed by many witnesses at the committee. Several directed their comments at large foreign companies such as Netflix, Amazon, Google, Facebook, Uber and AirBnB, who directly profit from online purchases and advertising, but who don’t pay taxes in Canada. Currently, over $20 billion of annual revenue is lost to tax havens and loopholes and the NDP feel this creates unfair competition against Canadian businesses, workers and creators who must pay sales and corporate income taxes.

The Canadians or Tax Fairness told the committee that, “failure to update our tax policy creates unfair competition; causes significant job losses in the journalism, media, and cultural sectors; threatens the vitality of Canadian culture; and squanders the opportunity to raise several hundred million dollars in tax revenue for both federal and provincial governments.”

In the media industry specifically, foreign producers are not required to collect sales tax on digital products or services imported into Canada, even though they make a profit in Canada.

The Canadian Union of Public Employees (CUPE) voiced concerns about this and stated, “this creates a very significant bias against Canadian producers. Not only are our governments losing out on significant revenues, but we're suffering economically and culturally, with a loss of jobs, main street businesses, and a weakening of our media.”

The Canadian Freelance Union – UNIFOR, also came before the committee to represent the concerns of their 310,000 members; those who work on the front lines of the digital field as journalists and media workers. This witness emphasized a problem with Canada’s free trade agenda, as focused on capital and business interests instead of workers and human rights.  The Canadian Freelance Union – UNIFOR expressed the need for companies like Netflix and Google, who are capturing a growing share of Canadian audiences’ subscriptions, to also be regulated by the government to commit funds to the creation of Canadian content, like their competitors.

The Canadian Freelance Union – UNIFOR also addressed the need for special attention to be paid to the production of local cultural content. They said, “Canada and the provinces must be free to regulate to ensure there is space for Canadian artists, creative professionals, and cultural producers. There should be extra care given to workers' rights and working conditions even for workers in freelance positions. Fair compensation, a safe work environment, paid time off, sick leave, overtime, secure retirement, these are some of the things that many Canadian workers enjoy as a consequence of generations of workplace struggle.”

CUPE voiced concerns for their members who are employed in the media industry and noted that, “the culture and communications industry is unanimous on the need for legislative change so that Canadian companies can compete on a level playing field in a global marketplace made possible by the Internet.

The Chief Executive Officer of La Maison Simons Inc., Peter Simons stated that, “Access to open global trade networks is not a right. It is a privilege that has been built by hard work over the past decades. It comes with responsibilities…We must understand that it is citizens who require services, and thus taxation must be accrued at the points of consumption… Canada must participate in a movement to redefine corporate taxation based on where actual sales, consumption, employees, citizens, and physical assets are located.”

Mr. Simons stated, “For my part, all the products I sell are fully taxed and subject to customs duties. That is not true for other companies, however, so there is an imbalance or unfairness in terms of competition. I am not asking for my business to be subsidized or protected, but simply for things be fair.” This succinctly points to many of the concerns the NDP has with tax fairness.

NDP RECOMMENDATIONS

1. That the Government of Canada provides training and educational supports and programs that would assist Canadian entrepreneurs to engage in e-commerce activities.
2. That the Government of Canada improves Canada’s digital infrastructure to support urban and rural Canadians’ ability to make online purchases, conduct business and overall increase the competitiveness of Canada’s firms.
3. That the Government of Canada applies corporate income taxes on the e-commerce-related profits that are earned in Canada by the country’s firms and foreign sellers, provided that the income exceeds a specific threshold.
4. That the Government of Canada ensures that any provisions regarding data localization preserve Canada’s ability to make substantive domestic law protecting Canadians’ personal data and privacy rights.
5. That the Government of Canada retains Canada’s strong net neutrality regime, and reject all attempts to weaken net neutrality in Canada or “harmonize” with the United States on this policy.
6. That the Government of Canada ensure that Canada’s taxation and regulatory policies support the production of Canadian news and entertainment.
7. That the Government of Canada commits to a de minimus threshold that does not harm Canadian e-commerce activities.
8. That the Government of Canada eliminates tax loopholes and prevent the loss of revenue resulting from the use of tax havens in order to ensure that adequate funds are available for investments in sufficient and modern digital infrastructure in Canada and in the education and skills-training of Canada’s workforce.
9. That the Government of Canada eliminates the deductibility of advertising expenses on foreign internet-delivered media.
10. That the Government of Canada create opportunities provided by the negotiation of free trade agreements to establish circumstances that would encourage strong working conditions and competitive compensation for workers in Canada’s web-building sector.