Ottawa should implement a windfall tax on grocers if the Competition Bureau finds they are generating excess profits on food items, the parliamentary agriculture committee says.

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Canada’s grocers could soon face windfall tax if Competition Bureau finds price gouging Back to video

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The windfall tax is one of 13 recommendations made by the committee in a report, released on June 13, which comes at a time when Canadians are feeling the pinch of rising inflation, especially during their weekly grocery run.

“While the food and beverage retail sector has been facing … cost pressures related to supply chain issues and labour shortages, they have also over the same period recorded an increase in their net income,” wrote the committee. This has “led some to speculate as to whether Canada’s five largest retailers, who control 80 per cent of the grocery market, are engaged in ‘price gouging.’”

The major grocery chains have argued they are not. In March, the chief executives of Loblaw Cos. Ltd., Metro Inc., and Empire Co. Ltd. appeared before the parliamentary committee and testified under oath that they were not profiteering off of higher grocery prices.

“Reasonable profitability” is part of operating a successful business, said Galen Weston, president of Loblaw. Those profits are reinvested into the company, he added.

“Our profit doesn’t go to me,” he said. “It goes back into this country.”

Grocers’ bottom lines would take a hit if the government eventually decides to implement a windfall tax, pending the findings of the Competition Bureau. The federal regulator is currently conducting a study of food inflation.

“Many factors are thought to have study of food inflation including extreme weather, higher input costs, Russia’s invasion of Ukraine, and supply chain disruptions,” the bureau wrote in an Oct. 24 press release. “Are competition factors also at work?”

The Competition Bureau’s study is set to conclude this month.

Some advocates don’t think the windfall tax is warranted.

“I see no evidence of greedflation,” Gary Sands, vice-president of government relations at the Canadian Federation of Independent Grocers, said.

He said price increases aren’t limited to the big grocery chains, but are apparent in smaller grocery stores as well, and all are just responding to price hikes from suppliers.

Sands, who appeared before the committee, said the recommendation is a slippery slope.

“If there’s going to be a windfall tax for retailers, then you’re also going to have to look at a windfall tax for suppliers, because the industry is interconnected and interdependent,” he said.

The government is not picking on grocers. It is committed to making sure everyone pays their “fair share” of tax, Adrienne Vaupshas, press secretary of the federal minister of finance’s office, said in an emailed statement. The government has in the past imposed taxes on other companies such as banks and insurers, she added.

The industry’s price hikes stem from several macroeconomic trends, not greed, according to Michelle Wasylyshen, spokesperson for the Retail Council of Canada.

“The combined roles of cost spikes for feed, fuel and fertilizer, compounded by supply chain disruptions, labour shortages and climate events, have been the real drivers of food price inflation,” she said in a statement. “We would caution against increased government intervention in the operational aspects of the retail food business” because “there is no evidence to suggest that prescriptive government intervention would do anything to lower food prices for Canadians.”

But some believe government intervention is the only way to control Canada’s grocery oligopoly.

For years, advocates have called for the creation of a grocery code of conduct, like those present in Australia and the United Kingdom, to help limit the power of Canada’s grocery chains. That code of conduct is nearly complete now that the steering committee has consulted with industry players. The code of conduct could be put in place before the end of 2023, said Agriculture Minister Marie-Claude Bibeau.

The agriculture committee argues that the code should be “mandatory and enforceable,” rather than voluntary. Otherwise, it’s not guaranteed that all the major grocers will sign on.

• Email: mcoulton@postmedia.com | Twitter: marisacoulton