Good morning.  Thank you for the invitation to speak at the House of Commons Standing Committee on Finance on Bill C-47, the Budget Implementation Act. My name is Darren Hannah, I am the Vice President of Personal & Commercial Banking at the Canadian Bankers Association. I am joined by my colleague Angelina Mason, General Counsel and Vice President, Legal & Risk.  

The CBA is the voice of more than 60 domestic and foreign banks that help drive Canada’s economic growth and prosperity. The CBA advocates for public policies that contribute to a sound, thriving banking system to ensure Canadians can succeed in their financial goals. 

While Bill C-47 is extensive and the Committee is studying numerous provisions, our remarks will be focused on Part 2 clauses 114-116,  which retroactively amend the Excise Tax Act. This is a very small component of the Budget Implementation Act, but it has profound implications on how businesses, entrepreneurs and investors, both domestic and international, view the opportunities and risks of doing business in Canada. Simply put, the government is attempting to legislatively override a decision by the Federal Court of Appeal and retroactively change the GST treatment of payment card clearing services literally back to the introduction of GST in 1991 by expressly overriding the general legislative limitation periods under section 298 of the Excise Tax Act. The effect is therefore to retroactively tax transactions that happened  as long as 30 years ago. In doing so, the government is ignoring the widely accepted positions among taxpayers and tax professionals as well as their own published guidelines for the appropriate and exceptional use of retroactive legislation. 

The government’s position is inconsistent with its own treatment of payment card network services as financial services for the purposes of regulatory oversight by the Financial Consumer Agency of Canada. Moreover, through this proposed measure, the government is adding this tax burden at the very time that the government is claiming to lower the cost of card acceptance fees for small businesses. Increasing taxes on card issuers and acquirers will inevitably impact the cost of card acceptance for merchants.

Retroactively taxing past transactions, especially in the face of court rulings to the contrary, erodes investor confidence in Canada. Period. This is a concerning signal to investors, entrepreneurs and business owners. Core to the decision-making criteria of where to invest is certainty and predictability – not only in the rule of law and in its application, but also in the ability to ensure that I can access the legal system to get fair treatment if I feel that the law is being applied incorrectly. Indeed, this proposed measure fundamentally challenges the traditional understanding of tax law. This approach not only raises serious questions about fairness and legal certainty, but also potentially inhibits future economic activity. Imposing such a retroactive burden undermines trust in the certainty of the tax system. While it might seem like an easy fix to fiscal shortfalls, it is important to consider the long-term implications of such a precedent-setting move. The retroactive tax measures in Part 2 contradict these principles and, in doing so, undermine investor confidence in Canada at the very time that we need to be attracting new investment both at home and from abroad. A recent study by RBC indicated that Canada will need an estimated $2-trillion over the next 30 years to finance the transition to a low-carbon economy. These are large, long-term investments that Canada is seeking from investors to pivot our economy to a low-carbon future. An investor will only make that type of commitment if they are certain that terms, conditions, and business environment upon which they made their investment decision are respected, that the government will not suddenly seek to retroactively revisit those conditions, and that they have recourse to the legal system should they need it.  

That’s why we strongly encourage MPs to take action to restore investor trust in the Canadian economic and legal environment by removing the retroactive provisions of Part 2.  

I thank the Committee for your invitation and look forward to your questions.