Mr. Speaker, I rise today in proud support of Motion No. 574, introduced by my New Democrat colleague, the member of Parliament for Marc-Aurèle-Fortin.

Across Canada and in Scarborough—Rouge River, small and medium-sized businesses employ the vast majority of residents and are important job creators. They are the engines that drive the economic development and vitality of our communities. They have been asking the government to reduce the merchant fees charged by credit card companies for years, and I am proud that the official opposition, the New Democrats, are actually hearing their call.

Small and medium-sized enterprises have a large impact on the Canadian economy. Data from Industry Canada's 2013 key small business statistics show that together, small and medium-sized businesses represent 99.8% of Canada's employer businesses. They employ over 80% of the people working in the private sector in Canada.

These companies are faced with rising costs and razor-thin margins. Therefore, the fact that Canadian small and medium-sized businesses pay some of the highest transaction fees in the world is both unfair and unsustainable. These businesses need our support.

We are speaking of merchant fees. What are they, one might ask? Every time a customer makes a credit card purchase, the merchant must pay the credit card company a premium on that purchase. The interchange fee comprises the majority of the fee or the charge the merchant pays to the credit card company. The Retail Council of Canada estimates that interchange fees averaged 1.7% in 2014 for MasterCard and 1.61% for Visa.

We can look at some of the sister countries we compare our country to, such as Australia. The interchange fees there have been capped at 0.5%, and in Europe, many of the countries' interchange fees will be capped at 0.3% as of September 2015. That is a significant difference.

Furthermore, under the terms of their service agreements with credit card companies, merchants are not allowed to pass these fees on to their customers, as this would increase the price overall of the merchandise.

In 2012, retailers paid $832 million in credit card fees. Eventually, as the retailers' costs remain high in a highly competitive industry and demand continues for lower prices, these costs will inevitably be passed on to consumers, whether intentional or not.

Hence, consumers should know about these fees. Therefore, New Democrats want more transparency from the credit card companies. We are asking them to always disclose to the customer the transaction cost related to the payment method chosen.

The government has been consistently supporting its friends. We know who they are: their wealthy insider friends. Small businesses have watched their tax rate drop 1% since the Conservatives took office, from 12% to 11%. While they worked so hard and created the jobs in our communities, they saw corporate income tax rates drop seven percentage points, from 22% all the way down to 15%, which included a now defunct surtax, over that same period. Following an NDP proposal, the recent budget proposes to drop the small business tax rate by 2% by 2019, but we will have to see if that actually happens and if the changes materialize.

We want to extend a helping hand to small businesses, the real job creators in Canada, and stimulate investment and innovation in manufacturing.

This is not a new issue. Since 2008, several retail associations, such as the Canadian Federation of Independent Business, the Retail Council of Canada, and the Small Business Matters Coalition, have lobbied against these exorbitant merchant fees. In fact, in July 2013, the Competition Tribunal said that the conditions imposed on Canadian businesses by Visa and MasterCard were anti-competitive and that the fees they charged were excessive. The tribunal called on the government to regulate the industry. Clearly, the Conservative government has not regulated the industry effectively, since the credit card merchant fees in Canada remain among the highest in the world.

The government's form of regulation was that in November 2014, MasterCard and Visa submitted a voluntary proposal to the federal finance minister to reduce their interchange fees to an average rate of 1.5% for five years, as of April 2015. That is the government's way of taking action: just accepting the credit card company's voluntary proposal and calling it a day. Remember that in Australia, the interchange fees are capped at 0.5%, and in Europe, they will be capped at 0.3% later this year.

Instead of taking on the task of regulating the industry, the Minister of Finance issued a news release stating:

As a result of the voluntary proposals, there is no need for the Government to regulate the interchange rates set by the credit card networks That is not really government action.

The minister did indicate that the government could take action if MasterCard and Visa did not comply with their public commitments. However, the Minister of Finance did not ensure that the credit card companies needed to make the merchant fees significantly lower.

When the announcement was made by the credit card companies, Yves Servais from the Association des marchands dépanneurs et épiciers du Québec said, “We are skeptical about the voluntary agreement between the government and Visa and MasterCard. There is no information on how to ensure compliance with the agreement, and no government agency has been mandated to handle the follow-up and annual evaluation.”

The fact that the fee reduction is not significant enough and the fact that there is no one charged with enforcing this reduction are both big problems.

The NDP has proposed the creation of an ombudsman responsible for working with private sector partners to reduce credit card fees. Clearly, the government is not paying attention, and small businesses deserve to have a person committed to working with them.

This is an important middle-class issue. Too many Canadian families are struggling and cannot continue to pay higher fees on all of the merchandise they are purchasing.

The Conservatives have abandoned small businesses in favour of more profitable and prosperous corporations, like the credit card companies, who they support.

Gary Sands, chair of the Small Business Matters Coalition, wrote to the government in November 2014 saying:

Members of the Small Business Matters Coalition, representing thousands of businesses across Canada, urge the Government of Canada to reduce credit card swipe fees and to bring fairness and transparency to the Canadian Payments Industry.

In turn, our members pledge that the reduction in credit card fees will be to the benefit of consumers and communities across Canada, through improved competitiveness, increased investment, job creation and reduced consumer prices.

Are those not all things that we do want to see in this country?

Nevertheless, the Retail Council of Canada is committed to continue to press for deeper cuts to bring interchange in line with the fees charged elsewhere. The NDP has joined this commitment, and we will continue until we have a more fair and just system that respects the economic engines of our communities, the small and medium-sized businesses.

When credit card interchange regulations were introduced in Australia in November 2003, both Visa and MasterCard predicted that the card payment system in Australia would suffer badly from this reform. MasterCard stated that the setting of interchange fees is such a delicate balance that to interfere with it could lead to a death spiral process.

However, evidence shows that, contrary to these predictions, credit card usage has continued to increase strongly since Australia's reforms of credit interchange. Card issuer profitability has not been harmed by the reforms. Issuers have reduced costs and increased efficiency. The Reserve Bank of Australia has concluded that the lower costs for merchants are flowing through into lower prices for the consumer due to the competitive environment in which most merchants operate.

What the Australian experience demonstrates to us is that, despite significant reductions in the interchange fees, credit card usage has continued its strong growth. Card payment systems can operate healthily and grow strongly despite regulated reductions in interchange income for issuers.

At a time when Canadian small businesses are facing increasing pressures from the weak Canadian dollar, rising inflation, and other increasing costs, it is integral that the government acts to support small and medium enterprises.

I strongly support Motion No. 574, and I am pleased to stand with the official opposition New Democrats in support of small and medium-sized businesses in Canada.

Rathika Sitsabaiesan

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