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.

Members, the meeting this afternoon will be in room 320 of the Wellington Building.

As well, members, with regard to the deadline for amendments, the clerk's email from March 19 explains the process for the amendments. The clerk has indicated that the legislative clerks need a certain amount of time. We're asking that amendments on Bill C-59 be set for 5 p.m. on Monday, April 22, if everybody is good with that.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

I want to give my last time to you, Ms. MacEwen. We're debating Bill C-59 now. We have a budget coming Tuesday. What advice would you give the federal government in terms of something you'd like to see done to help spur our economy?

[Fanny Labelle, Administrator, Board of directors, Mouvement autonome et solidaire des sans-emploi]

Good afternoon.

I am appearing before you on behalf of the Mouvement autonome et solidaire des sans-emploi, or MASSE, which represents 17 groups advocating for the rights of the unemployed workers of Quebec and New Brunswick. We will celebrate our 25th anniversary this year. The organization acts as a kind of collective memory in the unemployment field.

First of all, MASSE truly applauds the addition of 15 weeks of benefits in the case of adoptions because that was lacking. We believe that this measure helps in recognizing many valid parenting models and that it will have a positive effect on the rights of LGBTQ+ persons.

However, since I'm not here just to make compliments, allow me to put these benefits in the specific context of Canadian parents and to discuss the actual role of the employment insurance fund.

Did you know that, when a person—it's usually a woman—loses her job during, or too infrequently after, her maternity leave and parental benefits period, she winds up without an income? We have been requesting a change to this situation for a very long time. It would be easy to do by amending the act to rescind the rule, provided in subsection 12(6), regarding the combining of weeks of benefits to a maximum of 50 and by including, as a ground for extending the benefit period, the fact that the claimant has received maternity, parental or adoption benefits.

Nowhere in Bill C‑59 is any attempt made to achieve the fundamental objective of providing protection in the event of unemployment, which is the purpose of the employment insurance. Parents who take leave to care for their children shouldn't have to worry about whether they'll have an income once their leave is over. These people will often lose their jobs as a result of restructuring or because positions have been cut.

Nearly 3,000 women a year are denied employment insurance because they haven't accumulated enough insurable hours as a result of maternity leave. Our elected representatives are aware of this situation, which is unjust and discriminatory toward women. Press conferences have been held and testimony given in the House of Commons. MASSE condemns the government's refusal to act as long as the constitutional appeal of six women represented by the Mouvement action-chômage de Montréal is before the courts. In our view, this shows a clear lack of political will on the government's part.

We nevertheless wish to note that the employment insurance fund was established to compensate workers who have lost their jobs, not for the purpose of introducing social measures. The government stopped contributing to the fund in 1990. It has denied its responsibility for unemployment and special measures and for special benefits, which are part of the present program. Payments of special benefits continue to increase. In 1999, they represented barely 17% of total benefits paid by the program but have since increased by 36% in 2023‑2324.

It would be impossible for me to complete my remarks without claiming better protection in the event of loss of employment. For us, better protection would mean broader eligibility for the plan. We believe that applicants should be eligible for benefits once they have accumulated 350 hours for 13 weeks of work.

Better protection should also include a 70% benefit rate. A period of unemployment currently triggers a descent into poverty and indebtedness. The 55% benefit rate makes no sense in the current context of inflation and housing crisis.

We also believe that the government would solve the seasonal industry's black hole problem by providing a minimum of 35 weeks of benefits for everyone rather than add pilot project after pilot project, as was announced in the fall economic statement.

I will conclude by saying that we applaud the new measure providing 15 weeks of benefits in case of adoption, but we lament the fact that, for many years now, there have been interminable consultation phases and no genuine employment insurance reform.

Thank you

[Alexander Vronces, Executive Director, Fintechs Canada]

Thank you so much for having us here today. It's always an honour.

Fintechs Canada is an industry association of Canada's most innovative financial technology companies. Our mission is to make Canada's financial sector more responsive to the needs of Canadians.

A few years ago, the White House issued an executive order that would get the whole of the U.S. government to promote more competition in the American economy. Not long afterward, the American financial consumer protection regulator put out a draft rule to jump-start competition in American banking.

“Making banks work harder for you”—that's literally what the government of the United Kingdom said it would do in 2016. The United Kingdom had already set the foundation for a more competitive banking system by modernizing its payment system. In 2016 the U.K. said it would do more—it would implement open banking. It delivered on that promise just a couple of years later.

Canada has yet to do what our peers have done to make banks work harder for Canadians.

In competitive markets, two things are supposed to happen: Prices are supposed to go down, and the quality of services is supposed to go up. In Canadian banking, we're not seeing that. Prices are going up. Our banks are making more money from non-interest income—in other words, the fees they charge Canadians, the service fees on bank accounts, investment management fees, payment processing fees and administrative fees on mortgages and other loans.

We can see, based on public data, that the fee-based income banks are making per Canadian account holder has increased by 8% over the past five years to just under $3,000 in 2023. That's per year, and banking has largely stayed the same. My banking—how I save my money and how I pay my bills—hasn't changed for years. There are Canadians who wonder why they're paying more but not getting more.

High fees aren't the only cost of a banking sector closed off from competition. The lack of competition also hinders Canada's productivity growth. Banks aren't just vaults for our money; they are also intermediaries investing in other sectors to make them more productive—at least, that is what's supposed to happen,. However, a C.D. Howe Institute report from 2019 says that our financial sector's contribution to productivity growth has been underwhelming. To be more productive, we need our businesses to grow. It has been said that Canada is good at getting businesses started but not good at getting businesses growing.

One of the reasons is that small businesses in this country aren't getting what they need from banks to fuel their growth. According to OECD data, loans are more costly for small businesses in Canada than they are in other advanced economies.

According to the CFIB, 15% to 25% of loan applications end up being rejected by the big five banks. In fact, from 2012 to 2022, the total number of loan applications approved for small businesses decreased by almost 30%. The lack of competition in banking costs us not just as customers of banks but as Canadians.

Fintechs Canada believes in whole-of-government approaches to complex issues. Promoting more competition in the financial sector is one part of the broader solution to make Canada a more affordable and productive place to live. That's why we're glad to see Bill C-59 contain amendments to the Canadian Payments Act. These changes will promote competition in banking by giving fintech companies and credit unions access to the new payment system being built by Payments Canada. Industry insiders call this new payment system Real-Time Rail.

These changes are good for competition because you can't operate in the financial sector if you can't access a payment system. Outdated laws give only Canada's biggest banks access to the system right now. These biggest banks in turn resell their privileged access to everyone else. This puts the competition in an untenable position. They have to do business with their competitors in order to compete with them.

Access to Real-Time Rail will level the playing field as it is right now. For that to happen, though, we need Payments Canada to actually launch Real-Time Rail, with no more delays. According to the World Bank, Canada is one of the few countries in the world without Real-Time Rail. We support the amendments to the Canadian Payments Act in Bill C-59, but by themselves they're not enough. Our G7 counterparts have done so much more. If we want to make Canada a more affordable and productive place to live, it's time that we also do more.

Thanks again for having us. It's been an honour to share our perspective with all of you.

[William Robson, Chief Executive Officer, C.D. Howe Institute]

Thank you very much for having me. It's an honour to be invited to present to this group. I apologize for doing it online.

I accepted right away when invited to appear in front of the committee. It's part of my job and, as I said, an honour, but I have to admit that after accepting, I had doubts. You know this already, but I'll stress that Bill C-59 is 524 pages long. The summary at the front alone is six pages. I counted very quickly about 60 bullet points, or bullet-like points, about provisions that are explicitly identified as affecting 20 pieces of legislation. I don't know how many more are not explicitly identified.

The Liberal Party's 2015 election platform contained a plank to ban omnibus legislation, and it's unfortunate that it didn't happen. Critics say that omnibus bills prevent parliamentarians from doing their jobs, and I agree. I don't think parliamentarians should acquiesce in things that prevent them from doing their jobs.

Given the size and heterogeneity of Bill C-59, I think it's better to use the rest of my opening time to underline the scale of the challenge facing Canada’s economy and Canadian living standards.

If you had a chance to look at the Bank of Canada’s Monetary Policy Report yesterday, there was an eye-catching figure showing that real GDP per person has been falling since the third quarter of 2022. The bank expects that decline to continue through the first half of this year. We know people are feeling squeezed and having trouble making ends meet. Eight quarters in a row of declining real output per person will do that. The average Canadian has fewer resources for food, clothing, housing and paying taxes, let alone supporting cultural institutions or donating to charities.

Why is that happening? It's because of low investment. Capital investment creates the tools that make people more productive. It makes people able to earn more for every hour they work, but capital in Canada per worker is falling. Nothing like this has happened since the 1930s and the Second World War.

I want to underline that it's also not happening anywhere else in the developed world, and it's certainly not happening in the United States. At the C.D. Howe Institute, we track business investment per member of the workforce in Canada versus the United States, adjusting for purchasing power. We've never quite been on a level, but 15 years ago, for every dollar of new investment that the typical U.S. worker enjoyed every year, the typical Canadian worker got close to 75¢, about three-quarters as much. Ten years ago, for every dollar of new investment per U.S. worker, the Canadian worker got about 66¢, so we were down to two-thirds as much. By the end of last year, in the fourth quarter of 2023, for every dollar of new investment per U.S. worker, her or his Canadian counterpart got 52¢—barely half as much.

That spells trouble for competitiveness and the future earnings of Canadian workers. My friend and former federal finance minister Bill Morneau warns in his book that a steady erosion of Canadian living standards will make Canada less attractive to talent, and this is a vicious circle playing out as we speak.

What could turn this around? We'll be happy to take questions on that.

To conclude, I want to return to the impossibility of scrutinizing long and heterogeneous bills such as this one properly. Other witnesses have commented on specific provisions they thought were poorly drafted or could stand improvement. I note that the bill itself corrects some drafting problems in previous legislation.

One of the discouragements that I hear a lot about, when it comes to people speculating about why investment in Canada is weak—this includes members of the C.D. Howe Institute’s monetary policy council, who think low investments and low productivity growth are making inflation harder to control and thus keeping interest rates up—is policy uncertainty.

That's true on every level. Some of it is the threat of more populist tax measures, and I think we have a couple in this bill. It's also just sheer incompetence in execution. I'll mention in passing the bare trust debacle. You need effective parliamentary scrutiny to avoid confidence-destroying mistakes, and a bill of this length and heterogeneity precludes effective parliamentary scrutiny.

Thank you for having me here, and I'm sorry to conclude on a down note. I look forward to your questions.

[Angella MacEwen, Senior Economist, National Services, Canadian Union of Public Employees]

Thank you for the opportunity to present CUPE's views on Bill C-59.

The Canadian Union of Public Employees is Canada's largest union, with over 750,000 members. CUPE members take great pride in delivering quality services in communities across Canada as they work in a broad cross-section of the economy, including health care, education, municipalities, libraries, universities and colleges, social services, public utilities, emergency services, transportation and airlines.

Bill C-59 has a number of elements related to taxation that we think are important to economic fairness.

Prominent tax economist Gabriel Zucman has estimated that corporations shifted more than $25 billion U.S. in profits out of Canada in 2019 by reporting income that they earned in Canada in a different tax jurisdiction. This cost Canada an estimated $4.5 billion in corporate income tax revenue for 2019 alone.

Implementing a digital services tax is an important part of closing that gap and levelling the playing field for Canadian businesses. CUPE has long advocated in favour of a digital services tax. We followed the negotiations at the OECD on base erosion and profit shifting very closely. We were disappointed when the process on pillar one stalled and when the proposals there were watered down from what's needed.

We think that Canada is smart to move forward with its own digital services tax. Pillar one continues to face roadblocks, and its future remains uncertain. The legislation put forward here in this bill is much more effective than what's currently on the table in the OECD process.

However, the DST as proposed explicitly excludes the sale, licensing and streaming of digital content, as well as the sale of other digital goods and services. This is a giant, glaring hole. It excludes revenues associated with Netflix, Amazon Prime, Apple Music, Spotify and many more services. We believe that a fair tax model is a better approach than other approaches we're taking in that industry.

We're also disappointed to see that the deadline for the implementation has been removed from this bill.

Even if these improvements were made, the digital services tax is not enough to close this gap. We encourage the federal government to go further. Greater transparency of multinationals' tax and financial information is another powerful deterrent to profit-shifting. Australia and the EU are far ahead of us on this.

Requiring multinationals to publicly report country-by-country financial information would give us more insight into how much tax is being paid or avoided. This would assist in the administration of the digital tax.

We also encourage the federal government to welcome the new United Nations process on international tax governance. As part of this process, international labour groups have called for a framework tax convention that would formalize international tax governance at the United Nations under an inclusive, accountable and more effective institutional setting than what we've seen with the OECD.

CUPE is also very interested in the establishment of the proposed department of housing, infrastructure and communities. Much of the preamble located in this bill reflects CUPE's views about the importance of public infrastructure to healthy local communities and our national economy. However, we believe that the clause referring to the use of innovative financial tools to attract investment from the private sector puts all of those benefits at risk. This approach has consistently failed to result in building the type and scale of public infrastructure that is required to foster a healthy, equitable, prosperous economy and society.

Finally, I personally have concerns about employee ownership trusts being used to avoid taxation. However, I was encouraged to see several elements in this legislation that move toward a more democratic involvement of employees in determining the direction of the trust.

Thank you.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you. I think that's an astute observation.

Should Bill C-59 be amended to remove cost awards from the Competition Tribunal Act entirely, in your view?

[Keldon Bester]

Certainly, and it's a great credit to Bill C-59 for really narrowing that window.

I think it not only discourages the bureau from taking cases, but, somewhat perversely, discourages the bureau from taking cases against the biggest companies, those with the biggest legal firepower, and says that if you want to take a less risky approach, we can maybe go after more medium-sized and smaller players. I think there's a chilling effect.

Also, there's then a specific shaping that the bureau is there to go after folks that regular Canadians cannot, and I think this runs counter to that.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Mr. Bester, in your written submission, the Canadian Anti-Monopoly Project said this:

...Canada's competition law treats the Bureau effectively as a private litigant, with the risk of being responsible for a portion of a defendant's legal fees should it lose in court. Most recently, this resulted in the Competition Tribunal ordering the Bureau to pay $13 million of taxpayer's money, nearly a fifth of its annual budget, to multibillion dollar telecommunications firm, Rogers.

C-59 makes progress on this front but does not remove cost awards entirely. Instead, it limits the circumstances where a judge could order the Bureau to pay these costs.

In your view, does the current potential for cost awards discourage the Competition Bureau from bringing cases?

[Julie Dzerowicz, Liberal, Davenport, ON]

I want to say thank you. You have encouraged us to implement the ITCs ASAP, which means passing Bill C-59 as soon as possible, which we've heard from industry as well.

I'll go to my second question, which is a follow-up.

The Dow group was with us on Tuesday. They've set up a net-zero facility in Fort Saskatchewan. They spoke to us about the importance of having a market-based carbon trading regime and about its revenue generation capabilities for net-zero facilities like theirs. I'm wondering if you would agree with companies like Dow about the profitability that carbon pricing will ensure for businesses well into the future.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank all the witnesses for their excellent testimony. I wish I had time for each one of you, but I do not.

I'm going to start off with you, Mr. Bester, for maybe a minute or so. I want to put onto the record that we did have our competition commissioner come before our committee on Bill C-59. He's also been before the Senate, and he was actually before the Senate when he made the following statement:

Fortunately, the changes proposed in C-59, together with the recent reforms made in Bills C-19 and C-56, represent a generational upgrade in our competition law framework. I applaud the Government, Parliamentarians and citizens from across the country for their efforts in shaping this modernization process. It is the product of years of public and expert dialogue and parliamentary debate. The changes deliver on a significant number of the Competition Bureau's recommendations, and will help bring our competition regime in line with international best practice.

I wanted to put that in.

I also want to thank you. You've made some excellent recommendations, and I really appreciated your exchange with Mr. Williams. I actually think there's a lot more we could be doing, but I think we have done a significant amount and I think it's very, very critical that we acknowledge that. I personally would love to see a review right across our whole government around what's stopping competition from happening. I think if we did a whole-of-government review, that would be another excellent step forward.

My next couple of questions are for the Canadian Chamber of Commerce. I'm a very big fan of the work the Canadian chamber does. You do very important work.

Mr. Detchou, you started off by saying the economic competitiveness in the last 12 quarters has significantly declined. I want to put on the record that in the last three years, from 2021 to 2023, we were coming out of a pandemic, so the whole world was dealing with the after-effects of an economic heart attack. I think, as you will see from a lot of what we've put into Bill C-59, that we are transitioning our economy from competitive, growth and productivity perspectives.

On that, I know the chamber was very supportive when we announced the investment tax credit, so thank you. There are some companies, such as Dow, that are already benefiting from the ITCs, and they are creating significant opportunities for workers. Can you maybe initially speak to how important these are in driving investment, innovation and economic competitiveness?

After that I will have a follow-up question.

[Ryan Williams, Conservative, Bay of Quinte, ON]

You can tell by my name tag that I'm not a permanent member, but I'm happy, Mr. Chair, to be here again. It's always nice to be at the finance committee.

Thank you to our witnesses for joining us today.

Mr. Bester, it's great to see you back again to talk about the changes to the Competition Act.

We've had a series of bills to amend the Competition Act in this Parliament. The first was my bill, Bill C-339, to eliminate the efficiencies defence. I had another private member's bill, but that was taken with the last government bill on open banking, which is always great. The government followed our lead with Bill C-56 and Bill C-59.

I know we've had a lot of input from your group into these bills, but I want to start with what's missing. What recommendations did not get included that are really important to this bill and to competition in Canada?

[Fernando Melo, Federal Policy Director, Canadian Renewable Energy Association]

Good afternoon, Chair.

Thanks to you and this committee for inviting me to testify on behalf of the Canadian Renewable Energy Association, also known as CanREA.

As part of this chamber study on Bill C-59, the fall economic statement implementation act, 2023, I would like to start by acknowledging that I am joining you today on the traditional and unceded territory of the Anishinabe Algonquin people.

CanREA is the voice for the wind energy, solar energy and energy storage solutions that will power Canada's energy future. Our 300-plus members are uniquely positioned to deliver clean, low-cost, reliable, flexible and scalable solutions for Canada's energy needs. With the passage of this bill, they will be able to do so at a pace and scale like never before, thanks to the proposed clean technology investment tax credit.

My members and the whole team at CanREA are very optimistic about the opportunities that the clean technology investment tax credit will create. This measure will allow companies to invest in a variety of low-carbon technologies to recoup between 20% and 30% of their project's capital costs as a refundable tax credit. When the enabling legislation for this investment tax credit is passed, it will rapidly accelerate the deployment of technologies like battery energy storage, solar systems and wind across Canada by strengthening the economics of renewable energy projects and crowding in capital to the sector.

As you well know, achieving Canada's climate goals will require a doubling or tripling of our generation capacity, but this is not the only reason to invest in new renewable electricity generation. The International Energy Agency notes that electricity consumption from data centres, artificial intelligence and the cryptocurrency sector could double by 2026. If Canada wants to stay ahead in a rapidly digitizing global economy, we will need more electricity generation, and the clean technology investment tax credit and the forthcoming clean electricity investment tax credit will enable that.

With these investment tax credits in place, Canada will be a competitive market for international developers of wind, solar and energy storage projects to invest in. Their relatively straightforward design and refundability will put the country in a competitive position relative to the U.S. and other jurisdictions that are looking to decarbonize their electricity systems. Companies looking to invest in renewable energy have also stated that the fact that the clean technology investment tax credit is available out to 2034 gives them confidence that Canada will remain competitive in the long term.

That said, CanREA members and their capital providers have made it clear that without these credits, they will invest in the U.S., the EU and other markets where a path to profitability is clearer. In a world where the demand for electricity is significantly growing, projects and capital will move to the area of highest return.

The reason I emphasize the importance of both the clean technology investment tax credit and the clean electricity investment tax credit, which has not had its enabling legislation introduced, is that the clean technology investment tax credit fails to include CanREA's indigenous members. CanREA and its members are committed to economic reconciliation, and this is why partnership with indigenous communities and companies is the industry norm.

This norm has been institutionalized, with every province and territory that has issued a call for power recently requiring that all projects bidding into these processes have some component of indigenous equity ownership. The exclusion of indigenous entities from the clean technology investment tax credit makes it incredibly difficult for bids into calls for power to be structured and renders the industry's traditional limited partnership ownership structure unworkable.

CanREA has been advocating change since the draft legislation for the clean technology investment tax credit was introduced in the summer of last year. Including indigenous entities as eligible entities to receive the clean technology investment tax credit will resolve the issues I've outlined.

For further details on this, I would encourage members of this committee to refer to CanREA's submission, which accompanies my testimony today.

Thank you very much for your time and consideration. I look forward to your questions.

[Jessica Brandon-Jepp, Senior Director, Fiscal and Financial Services Policy, Canadian Chamber of Commerce]

Moving on to competition policy, we remain concerned by the ad hoc approach to changes to the Competition Act and we encourage the government to carefully review our submission and continue to consult with the business community, including the U.S. Chamber of Commerce, on changes to the act.

In particular, there are concerns around overwhelming the Competition Tribunal with frivolous claims, and there has been a lot of talk about structural presumptions in merger reviews pointing to misguided interpretations of U.S. merger guidelines as inspiration. These issues, among others, have the potential to make Canada’s competition regime less effective, rather than improving it.

That brings us to new corporate taxes and the digital services tax. The irony is that just as we’re contemplating ITCs and refinements to our competition regime to spur private sector investment, innovation and growth, a range of new and potential business taxes threaten to repel investment, create uncertainty and discourage new players from entering the Canadian marketplace.

Specifically, we call on the government to avoid imposing new taxes on the business sector, which Bill C-59 proposes to do with a digital services tax. A DST is particularly concerning, as it includes a retroactive tax to 2022 on online services that Canadians have come to rely on, even though over 120 countries, including our largest trading partner, the U.S., have agreed to delay imposing such taxes. The DST is the latest proposed tax that violates several critical tax principles of providing clarity, certainty and stability for businesses and help ensure Canada remains a competitive environment for investment.

First, we strongly object to the concept of tax retroactivity, which has been a concern in the latest proposals regarding both the DST and EIFEL. The effective date of proposed taxes should be during the following tax year or, at a minimum, upon proclamation. Retroactivity robs businesses of the certainty they need to make productive investments in innovation and growth, and it has a chilling effect on future investment across the economy.

Second, we oppose any measure that will increase costs for businesses and Canadians when both are facing challenging economic headwinds.

This new tax will affect far more than just large multinational corporations; if enacted, the DST will ripple across the Canadian economy, affecting many small and medium-sized businesses and hurting Canadians. In fact, this tax will disproportionately impact businesses with low profit margins, because unlike corporate income taxes, digital services taxes are levied on revenues rather than profits. As a result, there is a disproportionate tax burden being placed on companies with low profit margins, such as the online travel sector.

Third, and finally, we must sound the alarm that successive administrations in Washington have signalled that enacting a DST could provoke damaging trade retaliation, potentially against key sectors of the Canadian economy. We are hearing directly from business owners in many sectors beyond the digital services space who are concerned that their products may be impacted by retaliatory tariffs.

At a very minimum, we call for the punitive and retroactive application of the DST to be cancelled and for the introduction of a safe harbour for low-margin businesses similar to the OECD's amount “A” of pillar one, in which there is a safe harbour provision.

Bill C-59 and the forthcoming 2025 budget present an opportunity for decisive action. We urge Ottawa to adopt pro-growth policies that will invigorate Canada’s economy, instead of regressive taxes—

[Bryan Detchou, Senior Director, Natural Resources, Environment and Sustainability, Canadian Chamber of Commerce]

Thank you, Mr. Chair and honourable members.

We are pleased to appear before you on behalf of 400 chambers of commerce and more than 200,000 companies of all sizes from every sector of the economy and every region of the country.

The Canadian Chamber of Commerce's main concern today is that Canada's economic competitiveness is declining at the same time as our productivity has shrunk in 11 of the past 12 quarters. This means that Canadians have fewer opportunities to pursue their personal goals and that they have to spend more to maintain the same lifestyle.

The government should treat all businesses, whatever their size, as essential partners in our collective successful endeavours, because they can generate investment and growth, and help meet the productivity challenge.

The committee has already received our formal submission on Bill C‑59, which included seven specific recommendations and proposed amendments. Today we will focus our comments on investment tax credits, competition policy and the digital services tax.

First, on Canada's new investment tax credits, overall the Canadian Chamber of Commerce applauds new investment tax credits such as the CCUS ITC as tools to unlock private sector investment in a low-carbon economy. In order to maximize the impact of the clean technology manufacturing tax credits, we recommend that they be refined to include intangible property and mine development investments.

Further, we believe the clean technology ITC should be expanded to include pension plans, similar to the fall economic statement inclusion of real estate investment trusts. We recommend expanding the eligibility of this tax credit to encourage investment in housing and in commercial real estate that supports the decarbonization of Canada's economy.

Given the current uncertainty around the permitting environment in Canada, we also recommend extending the timeline for phasing out the clean technology manufacturing ITC and the clean electricity ITC in order to secure large investments within the Canadian mining, manufacturing and electricity sectors.

Finally, it is imperative that all the new ITCs be implemented as soon as possible, with clarity on procedure and eligibility, so that the private sector can fuel the next wave of long-term investment in our economy.