If I understand correctly, any interest paid by the government of Canada, for whatever reason and to whomever, is taxable that year. However, the interest paid by taxpayers or companies cannot be deducted from their income tax. This is patently unfair. I understand that interest may be deducted for an investment on which one has collected a profit but, in the case of a loss on that investment, that loss will be deductible later from other income or might be deducted from taxes already paid.
Finally, you said that the interest paid by the government of Canada is clawed back, in a way, through the income tax but, in the case of interest paid to the government of Canada, a significant portion is not deductible from future income tax.