Bill C-59

Fall Economic Statement Implementation Act, 2023

An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023

Part 1 implements certain measures in respect of the Income Tax Act and the Income Tax Regulations by
(a) limiting the deductibility of net interest and financing expenses by certain corporations and trusts, consistent with certain Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations;
(b) implementing hybrid mismatch rules consistent with the Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations regarding cross-border tax avoidance structures that exploit differences in the income tax laws of two or more countries to produce “deduction/non-inclusion mismatches”;
(c) allowing expenditures incurred in the exploration and development of all lithium to qualify as Canadian exploration expenses and Canadian development expenses;
(d) ensuring that only genuine intergenerational business transfers are excluded from the anti-surplus stripping rule in section 84.1 of the Income Tax Act ;
(e) denying the dividend received deduction for dividends received by Canadian financial institutions on certain shares that are held as mark-to-market property;
(f) increasing the rate of the rural supplement for Climate Action Incentive payments (CAIP) from 10% to 20% for the 2023 and subsequent taxation years as well as referencing the 2016 census data for the purposes of the CAIP rural supplement eligibility for the 2023 and 2024 taxation years;
(g) providing a refundable investment tax credit to qualifying businesses for eligible carbon capture, utilization and storage equipment;
(h) providing a refundable investment tax credit to qualifying businesses for eligible clean technology equipment;
(i) introducing, under certain circumstances, labour requirements in relation to the new refundable investment tax credits for eligible carbon capture, utilization and storage equipment as well as eligible clean technology equipment;
(j) removing the requirement that credit unions derive no more than 10% of their revenue from sources other than certain specified sources;
(k) permitting a qualifying family member to acquire rights as successor of a holder of a Registered Disability Savings Plan following the death of that plan’s last remaining holder who was also a qualifying family member;
(l) implementing consequential changes of a technical nature to facilitate the operation of the existing rules for First Home Savings Accounts;
(m) introducing a tax of 2% on the net value of equity repurchases by certain Canadian corporations, trusts and partnerships whose equity is listed on a designated stock exchange;
(n) exempting certain fees from the refundable tax applicable to contributions under retirement compensation arrangements;
(o) introducing a technical amendment to the provision that authorizes the sharing of taxpayer information for the purposes of the Canadian Dental Care Plan;
(p) implementing a number of amendments to the general anti-avoidance rule (GAAR) as well as introducing a new penalty applicable to transactions subject to the GAAR and extending the normal reassessment period for the GAAR by three years in certain circumstances;
(q) facilitating the creation of employee ownership trusts;
(r) introducing specific anti-avoidance rules in relation to corporations referred to as substantive CCPCs; and
(s) extending the phase-out by three years, and expanding the eligible activities, in relation to the reduced tax rates for certain zero-emission technology manufacturers.
It also makes related and consequential amendments to the Excise Tax Act and the Excise Act, 2001 .
Part 2 enacts the Digital Services Tax Act and its regulations. That Act provides for the implementation of an annual tax of 3% on certain types of digital services revenue earned by businesses that meet certain revenue thresholds. It sets out rules for the purposes of establishing liability for the tax and also sets out applicable reporting and filing requirements. To promote compliance with its provisions, that Act includes modern administration and enforcement provisions generally aligned with those found in other taxation statutes. Finally, this Part also makes related and consequential amendments to other texts to ensure proper implementation of the tax and cohesive and efficient administration by the Canada Revenue Agency.
Part 3 implements certain Goods and Services Tax/Harmonized Sales Tax (GST/HST) measures by
(a) ensuring that an interest in a corporation that does not have its capital divided into shares is treated as a financial instrument for GST/HST purposes;
(b) ensuring that interest and dividend income from a closely related partnership is not included in the determination of whether a person is a de minimis financial institution for GST/HST purposes;
(c) ensuring that an election related to supplies made within a closely related group of persons that includes a financial institution may not be revoked on a retroactive basis without the permission of the Minister of National Revenue;
(d) making technical amendments to an election that allows electing members of a closely related group to treat certain supplies made between them as having been made for nil consideration;
(e) ensuring that certain supplies between the members of a closely related group are not inadvertently taxed under the imported taxable supply rules that apply to financial institutions;
(f) raising the income threshold for the requirement to file an information return by certain financial institutions;
(g) allowing up to seven years to assess the net tax adjustments owing by certain financial institutions in respect of the imported taxable supply rules;
(h) expanding the GST/HST exemption for services rendered to individuals by certain health care practitioners to include professional services rendered by psychotherapists and counselling therapists;
(i) providing relief in relation to the GST/HST treatment of payment card clearing services;
(j) allowing the joint venture election to be made in respect of the operation of a pipeline, rail terminal or truck terminal that is used for the transportation of oil, natural gas or related products;
(k) raising the input tax credit (ITC) documentation thresholds from $30 to $100 and from $150 to $500 and allowing billing agents to be treated as intermediaries for the purposes of the ITC information rules; and
(l) extending the 100% GST rebate in respect of new purpose-built rental housing to certain cooperative housing corporations.
It also implements an excise tax measure by creating a joint election mechanism to specify who is eligible to claim a rebate of excise tax for goods purchased by provinces for their own use.
Part 4 implements certain excise measures by
(a) allowing vaping product licensees to import packaged vaping products for stamping by the licensee and entry into the Canadian duty-paid market as of January 1, 2024;
(b) permitting all cannabis licensees to elect to remit excise duties on a quarterly rather than a monthly basis, starting from the quarter that began on April 1, 2023;
(c) amending the marking requirements for vaping products to ensure that the volume of the vaping substance is marked on the package;
(d) requiring that a person importing vaping products must be at least 18 years old; and
(e) introducing administrative penalties for certain infractions related to the vaping taxation framework.
Part 5 enacts and amends several Acts in order to implement various measures.
Subdivision A of Division 1 of Part 5 amends Subdivision A of Division 16 of Part 6 of the Budget Implementation Act, 2018, No. 1 to clarify the scope of certain non-financial activities in which federal ‚financial institutions may engage and to remove certain discrepancies between the English and French versions of that Act.
Subdivision B of Division 1 of Part 5 amends the Trust and Loan Companies Act , the Bank Act and the Insurance Companies Act to, among other things, permit federal financial institutions governed by those Acts to hold certain meetings by virtual means without having to obtain a court order and to permit voting during those meetings by virtual means.
Division 2 of Part 5 amends the Canada Labour Code to, among other things, provide a leave of absence of three days in the event of a pregnancy loss and modify certain provisions related to bereavement leave.
Division 3 of Part 5 enacts the Canada Water Agency Act . That Act establishes the Canada Water Agency, whose role is to assist the Minister of the Environment in exercising or performing that Minister’s powers, duties and functions in relation to fresh water. The Division also makes consequential amendments to other Acts.
Division 4 of Part 5 amends the Tobacco and Vaping Products Act to, among other things,
(a) authorize the making of regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by His Majesty in right of Canada in relation to the carrying out of the purpose of that Act;
(b) provide for related administration and enforcement measures; and
(c) require information relating to the fees or charges to be made available to the public.
Division 5 of Part 5 amends the Canadian Payments Act to, among other things, provide that additional persons are entitled to be members of the Canadian Payments Association and clarify the composition of that Association’s Stakeholder Advisory Council.
Division 6 of Part 5 amends the Competition Act to, among other things,
(a) modernize the merger review regime, including by modifying certain notification rules, clarifying that Act’s application to labour markets, allowing the Competition Tribunal to consider the effect of changes in market share and the likelihood of coordination between competitors following a merger, extending the limitation period for mergers that were not the subject of a notification to the Commissioner of Competition and placing a temporary restraint on the completion of certain mergers until the Tribunal has disposed of any application for an interim order;
(b) improve the effectiveness of the provisions that address anti-competitive conduct, including by allowing the Commissioner to review the effects of past agreements and arrangements, ensuring that an order related to a refusal to deal may address a refusal to supply a means of diagnosis or repair and ensuring that representations of a product’s benefits for protecting or restoring the environment must be supported by adequate and proper tests and that representations of a business or business activity for protecting or restoring the environment must be supported by adequate and proper substantiation;
(c) strengthen the enforcement framework, including by creating new remedial orders, such as administrative monetary penalties, with respect to those collaborations that harm competition, by creating a civilly enforceable procedure to address non-compliance with certain provisions of that Act and by broadening the classes of persons who may bring private cases before the Tribunal and providing for the availability of monetary payments as a remedy in those cases; and
(d) provide for new procedures, such as the certification of agreements or arrangements related to protecting the environment and a remedial process for reprisal actions.
The Division also amends the Competition Tribunal Act to prevent the Competition Tribunal from awarding costs against His Majesty in right of Canada, except in specified circumstances.
Finally, the Division makes a consequential amendment to one other Act.
Division 7 of Part 5 amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to exclude from their application prescribed public post-secondary educational institutions.
Subdivision A of Division 8 of Part 5 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things,
(a) provide that, if a person or entity referred to in section 5 of that Act has reasonable grounds to suspect possible sanctions evasion, the relevant information is reported to the Financial Transactions and Reports Analysis Centre of Canada;
(b) add reporting requirements for persons and entities providing certain services in respect of private automatic banking machines;
(c) require declarations respecting money laundering, the financing of terrorist activities and sanctions evasion to be made in relation to the importation and exportation of goods; and
(d) authorize the Financial Transactions and Reports Analysis Centre of Canada to disclose designated information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions.
It also amends the Budget Implementation Act, 2023, No. 1 in relation to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and makes consequential amendments to other Acts and a regulation.
Subdivision B of Division 8 of Part 5 amends the Criminal Code to, among other things,
(a) in certain circumstances, provide that a court may infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime and specify that it is not necessary for the prosecutor to prove that the accused knew, believed they knew or was reckless as to the specific nature of the designated offence;
(b) remove, in the context of the special warrants and restraint order in relation to proceeds of crime, the requirement for the Attorney General to give an undertaking, as well as permit a judge to attach conditions to a special warrant for search and seizure of property that is proceeds of crime; and
(c) modify certain provisions relating to the production order for financial data to include elements specific to accounts associated with digital assets.
It also makes consequential amendments to the Seized Property Management Act and the Forfeited Property Sharing Regulations .
Division 9 of Part 5 retroactively amends section 42 of the Federal-Provincial Fiscal Arrangements Act to specify the payments about which information must be published on a Government of Canada website, as well as the information that must be published.
Division 10 of Part 5 amends the Public Sector Pension Investment Board Act to increase the number of directors in the Public Sector Pension Investment Board, as well as to provide for consultation with the portion of the National Joint Council of the Public Service of Canada that represents employees when certain candidates are included on the list for proposed appointment as directors.
Division 11 of Part 5 enacts the Department of Housing, Infrastructure and Communities Act , which establishes the Department of Housing, Infrastructure and Communities, confers on the Minister of Infrastructure and Communities various responsibilities relating to public infrastructure and confers on the Minister of Housing various responsibilities relating to housing and the reduction and prevention of homelessness. The Division also makes consequential amendments to other Acts and repeals the Canada Strategic Infrastructure Fund Act .
Division 12 of Part 5 amends the Employment Insurance Act to, among other things, create a benefit of 15 weeks for claimants who are carrying out responsibilities related to
(a) the placement with the claimant of one or more children for the purpose of adoption; or
(b) the arrival of one or more new-born children of the claimant into the claimant’s care, in the case where the person who will be giving or gave birth to the child or children is not, or is not intended to be, a parent of the child or children.
The Division also amends the Canada Labour Code to create a leave of absence of up to 16 weeks for an employee to carry out such responsibilities.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Davies.

We want to thank our witnesses for their compelling testimony, their advocacy, and the work they do in our communities from coast to coast to coast. We truly appreciate your coming here on Bill C-59.

Thank you. Have a great day.

Members, at this time, we are adjourned.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

I'm going to continue with Mr. German.

I was quite blown away by your presentation and all your answers to my fellow members' excellent questions.

Coming back to Bill C-59, I have a two-part question for you.

First, what would you recommend to improve the bill in terms of amendments? If you don't have them all now, it would be appreciated if you could get back to the committee in writing.

Second, what measures should Canada and the other levels of government implement to better combat money laundering, based on the experience of the European Union, the United States and other jurisdictions?

[Don Davies, NDP, Vancouver Kingsway, BC]

Now, Bill C-59 would also permit a court to “infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime”. That is “if it is satisfied, given the circumstances of the offence, that the manner in which the accused dealt with the property or its proceeds is markedly unusual or the accused's dealings are inconsistent with lawful activities typical of the sector”.

How can courts effectively apply the inference provision to determine the “knowledge or belief or recklessness required” for money laundering offences?

[Don Davies, NDP, Vancouver Kingsway, BC]

I think you touched on this, but I want to explore a bit the notion that Bill C-59 would require entities that provide acquirer services in relation to private automated banking machines to register as money services businesses. In your view, what impact will that have? What criteria should entities providing acquirer services for private ABMs be required to meet to register as money services businesses?

[Don Davies, NDP, Vancouver Kingsway, BC]

Thanks.

Dr. German, Bill C-59 would permit FINTRAC to disclose designated information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions. What impact do you expect this provision to have on the investigation and prosecution of money laundering, terrorist financing or sanctions evasion offences?

[Dr. Peter German, Chair, Advisory Committee, Vancouver Anti-Corruption Institute]

Thank you for the invitation to appear before this committee.

I wish to address certain amendments related to money laundering that are contained within Bill C-59.

Before doing so, allow me to introduce myself and to apologize for not being there with you.

I've been engaged in the field of anti-money laundering since Canada adopted proceeds of crime legislation in 1989. That work included being director general of financial crime for the RCMP, completing graduate degrees on the topic, teaching at law schools, providing expert opinion evidence, speaking within Canada and internationally, and working as a consultant. I'm the author of a text published by Thomson Reuters, which has been on the market since 1998 and is the only current service dealing with Canada's proceeds of crime legislation.

The Vancouver Anti-Corruption Institute is an entity created in part as a response to two reports written for the then attorney general David Eby: “Dirty Money” and “Dirty Money—Part 2”.

Mr. Jeffrey Simser, who appeared before this committee on April 9 of this year, is a professional colleague of mine and has a distinguished record of service in the province of Ontario, including being the first director of civil forfeiture in Canada. We endorse the comments he made to this committee and will not repeat them.

In British Columbia, there are virtually no prosecutions under way for money laundering. Police officers and prosecutors cite a plethora of reasons why. Most revolve around the wording of the Criminal Code and judicial decisions. As a result, most asset forfeiture in B.C. occurs by way of civil forfeiture. British Columbia has a very successful civil forfeiture regime. This is good; however, it simply removes money and goods from criminal actors, which they should not have in the first place. The individuals are not sanctioned, they are not charged and they do not go to jail. We need a robust Criminal Code regime that deals with money laundering.

For many years, the major complaint of police and prosecutors has been the difficulty in connecting dirty money to its predicate crime, which is a requirement of the offences. Bill C-59 attempts to overcome that obstacle in the case of third party money launderers. These are individuals who do not necessarily commit predicate offences, such as drug trafficking, but specialize in the laundering of money. Internationally, we now use the term “global money-laundering organizations” to identify third party money-laundering entities that contract their services. In many cases, they operate out of major financial hubs.

Canada has witnessed a considerable uptake in money laundering. We are an easy target for laundering organizations for any number of reasons.

I am pleased to see the amendments to the Criminal Code that attempt to deal with third party money laundering. I'm also very pleased that the undertaking requirement that was previously located within the “Special search warrant” and “Restraint order” provisions of the Criminal Code is being removed.

My only disappointment is that it has taken us since 1989 to make these changes. This is symptomatic of a greater problem. We are tweaking our legislation; we are not grabbing it, shaking it and making sure it is effective. Without going into detail, I fully anticipate that there will be further amendments to the very amendments being considered today.

I also wish to support the inclusion of white-label ATMs under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. People, such as I, have been calling for this change for probably 20 years. It is well overdue.

Members of the committee, we can do better. Canadians do not want their country to become a haven for money launderers. This will require political and bureaucratic will and a continuing commitment to rid Canada of this vice.

Thank you. I am most pleased to answer any questions you may have.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Mr. Chair and members of the committee, thank you for this opportunity.

My name is Rob Cunningham. I'm a lawyer and senior policy analyst for the Canadian Cancer Society.

My testimony will focus on the provisions in Bill C-59 for the cost recovery fee for tobacco and vaping companies in clauses 217 and 218 and the vaping tax administration and enforcement provisions in clauses 145 to 167.

With respect to the cost recovery fee, it would provide enabling authority for regulations to require tobacco companies and vaping companies to reimburse the federal government for the $66 million annual cost of the federal tobacco control strategy. We strongly support this measure and thank, with appreciation, the government for bringing it forward. Indeed, we thank all parties for their unanimous 323-to-zero vote at second reading in support of this measure.

The cost recovery fee has a long history. In 2021, this committee recommended the fee in its pre-budget report. In the 2021 federal election, it was in the Liberal, Conservative and NDP platforms. In the 2019 federal election, it was in the Conservative platform and called for by the NDP. It was in the health minister's 2021 mandate letter. MP Don Davies, now on this committee, has been a long champion, with motions introduced in the current and previous Parliaments.

It shouldn't be all Canadians who are paying for the government's strategy to reduce smoking, a strategy that also now regards vaping. It should be the tobacco industry with the principles of accountability and fiscal responsibility. The tobacco industry has caused the tobacco epidemic and vast health devastation, and it should be responsible for the cost of reducing tobacco use.

Moreover, the vaping industry has benefited significantly financially due to high rates of youth vaping, with many previous teenagers now older, addicted and vaping as adults. They may be addicted to nicotine for life. It should be noted that the tobacco industry is a major player in the vaping industry as well.

In the U.S., a cost recovery fee has been in place since 2009, administered by the FDA. Each year, $712 million U.S., more than $900 million Canadian, is recovered from tobacco companies on the basis of market share to reimburse the FDA's tobacco control budget. If the U.S. can have a cost recovery fee, surely we can in Canada.

Here in Canada, we've had a cost recovery fee on the cannabis industry since 2018. If we can do it for cannabis, we can do it for tobacco and vaping.

The tobacco industry, on average, over a nine-and-a-half year period, has increased their own prices, not including tax, by $30.40 a carton. They increased their own prices by 180% in a period when cumulative inflation was just 28%. As a result, they have incremental revenues of $2 billion a year or more. Can they afford $66 million a year to pay to the federal government? Yes, they can.

For the cost recovery fee, we have three proposed amendments to strengthen the implementation. The amendments are short and simple and would advance the bill's objectives and the government's objectives. Draft legislative text with rationale for these recommended amendments has been provided to the clerk.

First, we urge the legislation to require that companies pay upfront: Unless the company has paid the fee, they can't sell the product. That's the way a tobacco excise tax works. The government shouldn't have to be chasing companies after the fact.

Second, the maximum fine for contravening cost recovery fee provisions should be increased from just $50,000 to $500,000, a maximum already found frequently elsewhere in the act. A fine of only $50,000 would merely be the cost of doing business for a tobacco company.

Third, the legislation should explicitly state that the Service Fees Act does not apply to tobacco and vaping cost recovery fees, just as the Cannabis Act states that the Service Fees Act does not apply to the cannabis cost recovery fee. It is not the case here that there is a service, and thus a fee for that service, such as an approval of a patent or a prescription drug.

With respect to the vaping tax administration and enforcement provisions, they are important to ensure that the vaping product tax works well, including to reduce youth vaping.

Finally, I want to highlight the category of disposable e-cigarettes. They are very popular with youth and have recently taken off in Canada. They are very inexpensive and are undermining the objective of the vaping product tax of reducing youth vaping. Before the Senate finance committee recently, even Imperial Tobacco urged an increase in the tax rate for disposable e-cigarettes.

Thank you. We look forward to your questions.

[Joan DiFruscia, Chair, Otonabee-South Monaghan Food Cupboard]

Good afternoon, Mr. Chairman and members of the Standing Committee on Finance.

I am honoured to be here to speak to you on the issue of affordability from the perspective of people who are living in poverty, such as the families served by the Otonabee-South Monaghan Food Cupboard, also known as the OSM Food Cupboard.

The OSM Food Cupboard is a rural food bank located in Keene, Ontario, in the riding of Northumberland—Peterborough South. The OSM Food Cupboard opened over 10 years ago as an outreach project of Keene United Church, and it supports residents of the township and Hiawatha First Nation.

Please consider this: When you leave this meeting today, I assume that you have a safe place to go, where you will be sleeping tonight, the next night and so on. Tomorrow you will make choices for breakfast, lunch and dinner. But what if you are food-insecure? For example, with Ontario Works, the basic social assistance program in Ontario, you receive just over $700 a month, the same as in 2018. After you pay rent, if you can find a place for, say, $700—please don’t laugh at that comment—and pay for utilities, for gas, as your friend drives you to a training program, for a cellphone, for receiving calls for potential jobs.... Whoa. You ran out of money long ago. And then what about food?

The reality is that there just isn’t enough money to cover the costs of even the essential items. With all the stress, what is a person’s health like, physically and mentally?

At the OSM Food Cupboard, between November 2023 and February of this year, the number of families with children doubled. Children now make up one-third of the individuals supported by our food bank. Keep in mind that whether it's one member or six members, families come to our food bank only when they need to, and select the foods they need.

The volunteer staff and committee members are dedicated and compassionate in working to support the families. The Food Cupboard is a reliable and consistent source of food, and also offers a listening ear. A family can pay their electricity bill knowing that there is help with food needs. Over time, special relationships have developed between the staff and the families, along with respect for each other. Please know that people do want to improve their lives. The fact is that when one lives in deep poverty, it is, like a deep hole, extremely difficult to climb out of.

In this amazing country of Canada, what solutions are there for dealing with the root cause of poverty, which is low income? One solution is a guaranteed livable income.

A second solution is governments of all levels and stripes collaborating with the shared goal of lifting people out of poverty. Mechanisms need to be in place to prevent clawbacks, such as during the rollout of the Canada disability benefit, thus improving the lives of people living on disability.

A third is that supports to cover benefits during a transition period from social assistance to even a part-time minimum-wage precarious job would encourage people to leave the social safety net.

Four, affordable housing, such as Otonabee Court in Keene, allows long-time residents of the area to continue to live in the community, paying either market rent or geared-to-income rates, depending on their income.

Financially, there are costs to all of society when people live in poverty. The already stressed health care system responds as best it can, as adults living in poverty are more likely to need treatment for such chronic conditions as heart disease and diabetes, plus mental health conditions. There are also costs to the justice and education systems. There is a tremendous cost to not making changes, which also prevents people from living up to their full potential.

I have been involved with food banks for over 40 years. The system is broken. Food banks are not helping people get ahead. Recently, food insecurity has grown substantially, partly due to inflation, but it's a global phenomenon and not something unique to Canada. For our food cupboard, which distributes food once a month, I have heard this comment: “I live for two weeks and then I exist for two weeks—until the next food distribution day.” That is not acceptable in this country.

Members of the Standing Committee on Finance, you have a responsibility to ensure that government investment responds to the needs of Canadians.

Bill C-59 aims to implement elements of the 2023 fall economic statement, but shortly you will also likely have a role to play in implementing elements of budget 2024.

I am here today to tell you that we are facing a food insecurity crisis that needs to be urgently addressed. As you consider Bill C-59 and eventually budget 2024, I urge you to consider prioritizing the needs of low-income Canadians.

I just want to thank MP Lawrence for the opportunity to speak today.

Thank you.

[Konstadin Kantzavelos, President, Canadian Fabricare Association]

Honourable Chair and respected members of the Standing Committee on Finance, good afternoon. My name is Konstadin Kantzavelos. I have been operating my business, TSC Wetclean, in the city of Mississauga since 1988.

I am a proud member and president of the Canadian Fabricare Association, where I have sat on the board since 2013. It's an honour to represent and lead an organization rooted in our industry since 1949 that currently represents over 10,000 jobs across Canada.

The CFA is the governing body of professional dry cleaners, wet cleaners, launderers and allied trades dedicated to providing fabric and textile care services and solutions from coast to coast by establishing good management, ethical conduct and proper operating procedures. Today is our association's most important opportunity to represent our interests. Please allow me to shed light on our industry's contribution to the Canadian economy and the challenges we have faced. More importantly, please allow me to illustrate how the Canadian government and the CFA can work together to revitalize and reinvigorate business across Canada.

No industry suffered more than the fabric care industry during COVID-19. We saw up to a 90% drop in revenue across the country for over two years. Over 50% of our fabric care locations closed nationwide. Working from home was the key element in these declining numbers. For many Canadians, suits, shirts, ties, skirts and dresses are the uniforms worn for work, similar to everyone in this room today.

I am here today to celebrate the major contribution of the small business owners of the Canadian Fabricare Association across Canada. We are members of a small business community that constitutes 98% of all businesses in Canada—small companies. Small businesses employ over 10 million Canadians and are responsible for 50% of Canada’s GDP.

According to Statistics Canada, the average person spends approximately 10 hours weekly on unpaid work. The primary work we're talking about here is laundry. An Ipsos Reid poll conducted on behalf of GE Appliances revealed that 30% of Canadians find they only get around to it when they've run out of clean underwear, 25% of Canadians confessed that they've left their clothes in the washer or dryer for days before tending to them and 41% said they simply guess at methods of stain removal.

Most recently, as read in the Financial Post this past March, the Bank of Canada's senior deputy governor, Carolyn Rogers, spoke on the declining state of Canadian productivity. According to Rogers, Canada must tackle weak productivity to inoculate the economy against factors driving future inflation.

The Organisation for Economic Co-operation and Development revealed that Canada ranks 29th among 38 OECD countries for labour productivity. To put this in layman’s terms, in the time a Canadian worker produces one dollar's worth of goods and services, an American worker produces $1.30. That's a 30% advantage.

These statistics are important because despite most industries having raised their prices on consumers, the members of the CFA have kept their prices relatively unchanged because of our investment in the proper technology and advanced productivity.

In February 2021, during the height of the pandemic, Swedish consumers who turned their laundry, dry cleaning and clothing alterations over to professional cleaners received a tax deduction of 25% of the cost. The Swedish association put forward a plan to educate its government on how that incentive could work.

The CFA is no different. It looks at our diversity as a strength and at our employees as our greatest asset. We are a green circular industry. We focus on proper textile care, which extends the life of fabrics and removes uncertainty from the consumer. Our members are certified through the CFA, which means they meet the required environmental, economic and social standards. Committee members may be interested to know that all our industry members continually deliver towards the preservation of our environment and our ecosystem by adhering to all federal government guidelines on waste management.

By implementing a tax incentive, the Canadian government will demonstrate its commitment to a greener economy. Considering that we live in times of viruses and harmful diseases, what better way to promote cleanliness to every Canadian household than with a tax incentive to have their fabrics and garments cleaned professionally?

As the president of the CFA, it is my job to inform you of the importance of what our industry stands for in our communities—the preservation of our environment and our economy. What we are proposing is a tax credit of 25% to incentivize using the services of professional fabric care in every Canadian household. This is where Bill C-59 can assist. Just as in Sweden, the CFA can be a resource for the Government of Canada in paving the way for maintaining the stability and economic growth of the Canadian fabric and textile care industry.

We request that this committee make a focused choice to work with the Canadian Fabricare Association and ensure that our proposal for a tax incentive can become a reality and prevent our small businesses from disappearing.

Here are some suggestions for requirements for this tax incentive. You must be at least 18 years old, live in Canada and pay taxes on at least 90% of your total income. The maximum amount of annual cleaning expense to use the tax incentive would be $5,000 per household. The professional garment care provider must be registered with the Canadian Fabricare Association, and you do not need to own your property to receive the incentive.

Which services are covered for this deduction? They include dry cleaning, wet cleaning, laundry wash and fold, clothing repairs and alterations, area rug cleaning and upholstery cleaning.

Thank you very much for the time today.

[David Robinson, Executive Director, Canadian Association of University Teachers]

Great. Thank you, Chair.

I'm very grateful for the invitation to be here today on behalf of the Canadian Association of University Teachers. We represent 72,000 faculty, librarians and professional staff at more than 120 post-secondary institutions in all provinces across the country.

I want to focus my remarks today on Bill C-59's proposed exclusion of public post-secondary institutions from the Companies' Creditors Arrangement Act and the Bankruptcy and Insolvency Act.

The CAUT fully supports these important changes. Corporate insolvency and bankruptcy processes are inappropriate and unnecessary for publicly funded universities and colleges and are counter to the fundamental values and principles of those institutions, including collegial decision-making and academic freedom.

We learned this lesson the hard way. As we heard earlier, in February 2021, Laurentian University in Sudbury was the first-ever publicly funded university to apply for and receive CCAA protection. As the Auditor General eventually concluded in her report on the matter, invoking the CCAA was unnecessary, inappropriate, costly and a destructive decision by the university's administration. It was unnecessary because mechanisms to deal with the institution's financial challenges already existed.

First, the university did not follow the normal, broader public-sector precedent and refused financial assistance that was offered by the provincial government.

Second, it deliberately ignored contractual obligations with the Laurentian University Faculty Association that provides for a process to deal with instances of bona fide financial shortfalls. Virtually every faculty association in Canada has negotiated so-called financial exigency provisions in their collective agreements that specify how the academic community as a whole can manage financial crises, while protecting core educational values. Instead, the administration of Laurentian used the CCAA to ignore the collective agreement and withhold financial information, and turned to an expensive, combative and unnecessary process.

In pursuing protection under the CCAA, the administration also betrayed the fundamental values of the university. Historically, financial exigency clauses arose in collective agreements to protect the principles of collegial academic decision-making and academic freedom. Financial exigency processes ensure that decisions about academic restructuring and program closures are made not by administrative diktat, but with the active participation of the academic community, those who have the expertise on educational matters.

Financial exigency language also protects the foundational value of all universities. That's academic freedom. It grants academic staff the right to teach, research and express views without institutional censorship or reprisal. Academic freedom, as the Supreme Court of Canada has noted, is necessary to “allow free and fearless search for knowledge and the propagation of ideas” and is “essential to our continuance as a lively democracy”. Financial exigency language ensures that administrations do not use a financial crisis as a cover to violate academic freedom by targeting academics they find controversial, difficult or unpopular.

Finally, the CCAA process was also extremely and needlessly costly. Laurentian University spent tens of millions of dollars on lawyers and consultants while nearly 200 faculty and staff positions were lost and 69 programs were cancelled, many of which were unique French-language and indigenous programming, including the only indigenous bilingual midwifery program serving northern Ontario.

In the wake of what happened at Laurentian, CAUT commissioned a report by lawyer Simon Archer and Virginia Torrie, a former professor of law at the University of Manitoba. They concluded:

The policy objectives of public institutions, such as universities, are inconsistent with the core rationale of insolvency law to promote commercial risk-taking. Applying the CCAA to such institutions changes the ground rules on which they operate. This...undermines university governance, internal decision-making, and transparency.

The report concludes by emphasizing the pressing need to amend the CCAA and Bankruptcy and Insolvency Act to preclude its use by public universities and colleges.

I therefore urge the committee to support those amendments.

Thank you.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

First, I would like to thank the mayor and all the witnesses for being here and for their testimony. There has been a lot of very poignant testimony today. Time is limited, but we are taking notes, and we'll try to improve Bill C‑59.

My questions are for the representatives of the Union des municipalités du Québec.

Mr. Damphousse, hello again. My colleague Xavier Barsalou‑Duval also sends his regards.

I'll first talk about the gas tax program and Quebec's contribution. Since I was elected in 2015, this is the first time we've received so many copies of municipal resolutions sent to the government to say, as you mentioned, that the funds must be released and that an agreement must be reached quickly. Can you explain to us again the importance of taking action, and of doing so now?

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. I will share my time.

I'd like to begin with the Laurentian University Faculty Association. I'm not sure which one of you would like to answer, or if you'll both want to come in on this.

Certainly, changes in the bill have been a long time coming, and you know this from your difficult experiences in 2021. Ontario's Auditor General said there was a strong argument that the CCAA is an inappropriate and perhaps damaging remedy for public entities. Bill C-59 moves in the same vein.

How do you see the provisions in the bill protecting institutions like yours in the future and promoting alternative ways of dealing with financial challenges?

[Linda St-Pierre, Executive Director and Chief Steward, Laurentian University Faculty Association]

The CCAA is designed as a remedy for commercial companies, not for our public universities. The public good that universities offer is undermined by an insolvency law designed for private companies that put the interest of big creditors ahead of the mission of our universities.

When Laurentian University filed for protection under the CCAA, it meant that decisions on what happened at a public university supported by taxpayer dollars were made based on a balance sheet and not what is best for students or public education and research.

Post-secondary institutions have commercial elements, but they are not governed by the market interest alone—or even primarily. They meet a variety of socio-economic considerations, such as linguistic and cultural diversity, and regional and equity development. Unless public post-secondary education institutions are removed from being under the CCAA, they are at risk of being defined solely by commercial interests, which is the opposite of what they should be.

In the case of Laurentian University, the use of the CCAA also meant additional costs for a public institution. The process is needlessly expensive compared to the normal financial exigency option, where universities work collaboratively with the provincial government and the faculty association in times of true financial stress.

The Auditor General's report highlighted that Laurentian University administration spent tens of millions of dollars on lawyers and consultants to work through the CCAA process. Instead of using university funds—which come largely from government grants and student tuition fees—to save education programs and mitigate the damage of their financial situation, they went to lawyers and consultants.

Division 7 of Bill C-59 changes the definition of “corporation” and “company” in the CCAA and the Bankruptcy and Insolvency Act to exclude post-secondary education institutions. We were happy to see this included in Bill C-59. This is an essential step to making sure that what happened at Laurentian doesn't happen at another public institution. It creates a more secure future for post-secondary education.

I urge the committee to support this section of the legislation, particularly in light of the harsh lessons learned from Laurentian University.

Marsi. Meegwetch. Thank you.

[Nicholas Schiavo, Director, Federal Affairs, Council of Canadian Innovators]

Thank you.

Good afternoon to the chair, the vice-chairs and members of the Standing Committee on Finance. Thank you for the opportunity to present today on Bill C-59 and the efforts to implement budget 2023 and the corresponding fall economic statement.

My name is Nick Schiavo, and I am the director of federal affairs for the Council of Canadian Innovators, or CCI. I am joined by my colleague Laurent Carbonneau, director of policy and research.

CCI is a national business council representing 150 of Canada's fastest-growing companies. Our member companies are headquartered here in Canada, employ north of 52,000 employees across Canada and are market leaders in the sectors of health, clean and financial technologies; cybersecurity; AI; and more.

There is no denying the tough economic position Canada finds itself in today. For years we've heard about this precarious position, often referred to as the great Canadian slump, as the lost decade or even most recently, by the senior deputy governor of the Bank of Canada, as a productivity “emergency”. Regardless of the choice of words, the warnings are clear: Canada is facing a rising cost of living, stagnating growth and declining productivity. Taken together, these factors are having a negative impact on our GDP per capita and, by extension, the quality of life that Canadians expect.

Currently this stagnation is predicted to make Canada the worst-performing economy in the OECD from 2030 to 2060. Taken together with a variety of structural challenges facing our country, such as climate change, war and cyberwarfare, health care issues and a lack of competition, the status quo is simply not working. Canada needs to chart a new path forward for sustained growth and prosperity rooted in a strong innovation economy.

Looking back to budget 2023 and the fall economic statement and, more importantly, looking ahead to budget 2024 and beyond, Canada must develop and implement a smart industrial strategy that builds wealth, enhances productivity and aligns with our other strategic priorities. At the heart of this strategic lens must be industry-led reforms to Canada's research and development frameworks and procurement mechanisms at all levels of government, alongside other important innovation levers, including a patent box regime.

In the spirit of the government's central theme of budget 2023 to build a stronger, more sustainable and more secure Canadian economy for everyone, today I'd like to speak to two opportunities to do exactly that.

First is enhancing the scientific research and experimental development tax credit to maximize the full benefits of R and D performed in our country, and second is reforming Canada's outdated procurement processes to spur economic growth and better service delivery for Canadians.

CCI has spent months engaging with Canadian innovators and the tech ecosystem to develop comprehensive research reports to enhance both SR and ED and procurement in Canada. These timely reports are tabled for the committee alongside these opening remarks.

Canada's scientific research and experimental development tax credit, or SR and ED, is the single largest science and innovation policy lever in the federal government's tool kit. For over five years, CCI has called on the government to update this critical innovation program, and we are pleased to see the ongoing consultation at this time. With an expected budget of nearly $4 billion in 2024, it is 10 times larger than any other science and innovation policy tool. Now more than ever, in a constrained fiscal environment, the government should be seeking to maximize the long-term benefits of SR and ED for the national economy.

Unfortunately, despite the long history of SR and ED dating back to the 1940s and other research tax incentives, gross expenditure on research and development and business enterprise R and D, also known as BERD, is low in Canada by the standards of other advanced economies. In 2020, Canada's BERD was the second lowest in the G7 after Italy, despite having more generous tax support for business R and D than all but the U.K. and France. Canadian firms also make less use of intangible assets compared to global firms. For context, intangible assets like intellectual property make up 70% of the value of firms listed on the TSX and over 90% on the S&P 500.

As such, Canada should incentivize early investment in IP development and protection so that firms maintain the ability to export into large markets. This is referred to as the freedom to operate, and it is critical for companies looking to scale, export, compete globally and ensure strong economic growth for the Canadian economy.

Additionally, SR and ED needs more transparency. The net benefits of the program to Canada should be made public on an ongoing basis so that Canadians understand what SR and ED is doing for their economy. Wherever possible, more of the benefits should flow directly to firms performing innovative activities and less to intermediaries such as tax preparation consultants by simplifying administration.

Similarly, the current culture of government procurement, both federally and provincially, is not serving the Canadian economy and is not serving government's own purposes. In fact, in 2021, procurement amounted to 14.6% of Canada's GDP, translating into billions of dollars and a meaningful force that shapes our economy. Canadian governments especially struggle to buy innovative, novel products and services, which does little to help Canada’s other innovation problems.

There is no single solution to improving our performance in government technology procurement. However, the government should begin by tackling the big problems—excessive risk aversion, processes that don’t allow for iterative innovation, low capacity and expertise and a lack of pathways from procurement to the market—and use a variety of tools to address them in tandem.

Ultimately, governments across Canada need to build a culture where an empowered public service can find novel solutions to the problems they face, where innovators are confident that selling innovative products and services to government will be worth their time and will help grow their business and where the public ultimately benefits from more agile, solutions-oriented government.

Thank you. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting number 137 of the House of Commons Standing Committee on Finance. Pursuant to the order of reference of Monday, March 18, 2024, and the motion adopted on Monday, December 11, 2023, the committee is meeting to discuss Bill C-59, an act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023, and certain provisions of the budget tabled in Parliament on March 28, 2023.

Today's meeting is taking place in a hybrid format, pursuant to Standing Order 15.1. Members are attending in person in the room and remotely using the Zoom application.

I'd like to make a few comments for the benefit of members and witnesses.

Although this room is equipped with a powerful audio system, feedback events can occur. These can be extremely harmful to interpreters and cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to a microphone. We therefore ask all participants to exercise a high degree of caution when handling the earpieces, especially when your microphone or your neighbour's microphone is turned on, to prevent incidents and safeguard the hearing health of the interpreters. I invite participants to ensure that they speak into the microphone into which their headset is plugged and to avoid manipulating the earbuds by placing them on the table away from the microphone when they are not in use.

As a reminder, all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your patience and understanding in this regard.

All virtual witnesses for this meeting have been tested, and everybody is ready to go.

With us today, as we start our afternoon panels, from the Council of Canadian Innovators, we have Laurent Carbonneau, director of policy and research, and Nicholas Schiavo, director of federal affairs.

From the Daily Bread Food Bank, we have Neil Hetherington, chief executive officer.

From the Laurentian University Faculty Association, we have Fabrice Colin, president, and Linda St-Pierre, executive director and chief steward.

From the Union des municipalités du Québec, we have Martin Damphousse, president and mayor of Varennes, and Samuel Roy, strategic policy adviser. They are with us via video conference.

Welcome to all.

With that, we are going to start with opening remarks of up to five minutes.

We will start with the Council of Canadian Innovators.

Go ahead, Mr. Schiavo.