Evidence of meeting #7 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was interest.
A video is available from Parliament.
Liberal
Conservative
Pierre Poilievre Conservative Carleton, ON
Okay. Thank you, Wayne.
I don't think they will do that, because we're in a minority. Had they, God forbid, had a majority government, I think it would be done already.
Conservative
Pierre Poilievre Conservative Carleton, ON
Anyway.... We have the censor-in-chief over there. I'll try to stay on his good side to keep my time.
The next question is on this limiting of the deductibility of interest. When someone lends money to a company and they collect interest on that loan, are they not taxed on that interest?
Conservative
Regional Tax Leader, MNP LLP
It depends on whether it's an individual lending it or a corporation lending it.
Regional Tax Leader, MNP LLP
If it's an individual lending it, they're taxed at the T4 income rate.
Conservative
Pierre Poilievre Conservative Carleton, ON
Okay. If you're taking away the ability of the company to write off its interest expense, or a portion of its interest expense, and then you're taxing that same interest in the hands of the lender, are the dollars not going to be double-taxed?
Regional Tax Leader, MNP LLP
They would be. In any situation where the interest is limited, there's going to be a double-tax component. The recipient of the interest is going to pay tax at either their corporate rates or their individual rates, whatever the case may be.
February 6th, 2020 / 4:10 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
Right. The borrower will be taxed on it as corporate income, and the lender will be taxed on it as personal income, presuming it's a person.
Regional Tax Leader, MNP LLP
When it's an individual who lends, that's correct.
Conservative
Pierre Poilievre Conservative Carleton, ON
Right, so they could be setting up a double taxation scenario here with this proposal.
Regional Tax Leader, MNP LLP
They could be. I would like to reiterate that with interest deductibility limitations in other countries, they did it with three prongs. They dropped corporate rates at the same time.
Conservative
Pierre Poilievre Conservative Carleton, ON
Yes, I see that. Basically, they lowered corporate tax rates and enhanced capital expenditure incentives, and only then did they limit interest deduction limitation.
Even then, though, what is the rationale for limiting the amount that a corporation can claim as an interest deduction? We all acknowledge that when you pay interest, it is an expense. What is the public policy advantage of punishing debt interest? I don't understand what the rationale is here.
Regional Tax Leader, MNP LLP
Currently in the Income Tax Act, there are restrictions on deducting interest, so you can deduct interest only if it's for the purpose of gaining or producing income.
Regional Tax Leader, MNP LLP
If it's for capital in nature, you can't deduct it anyway. What we think is happening is that there are some cross-border transactions where the interest might be leaving Canada without being subject to tax. If that's the case, then they should be focused on that one issue.
Liberal
The Chair Liberal Wayne Easter
We will have to leave it, as we're substantially over, but it was a very good discussion.
Mr. McLeod.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you, Mr. Chair.
Welcome to the presenters.
My question is for the Mining Association of Canada. Mr. Marshall, welcome back. I always appreciate your submissions, because there's a reference to the north in them, and I think we need as much attention on the north as we can get.
We've heard from a number of witnesses this week who have called on the government to put priority on northern infrastructure and have emphasized the important goal of having federal support being both significant and accessible to northern applicants.
In your recommendations, you talk about northern infrastructure. Could you explain how MAC's recommendations on the trade and transportation corridors initiative, and also the Canada Infrastructure Bank, would assist in meeting this goal?
Vice-President, Economic and Northern Affairs, Mining Association of Canada
Absolutely. Thank you for the question. It's always a pleasure to be back.
I think a bit of context is important in order to answer that question.
Canada is the second-largest land mass in the world. That's something we can take for granted. North of 60 within Canada is 3.4 million square kilometres; that's the size of western Europe. When you think about a population density comparison, there's one person for every 33 square kilometres north of 60; there are 500 million people who live in western Europe.
What that amounts to in our case is a massive per capita infrastructure deficit. When you think about the challenges that many northerners and many indigenous communities have, and the challenges that industry faces in operating competitively and developing projects in that region, ostensibly it drives back to that infrastructure deficit.
MAC has done research on that cost differential. I'm happy to share that report with the committee, but to get down to brass tacks, it's two to two and a half times more expensive to build the same mine in the north compared to the south. It's 70% more expensive to operate it.
The future of our industry lies increasingly in remote and northern regions. Decreasing the infrastructure deficit improves project economics, because if they're not there, that goes on the front end of the balance sheet for the company.
How can we generate a win-win on infrastructure in the north? I think the government's priorities—regardless of stripe—have been that social and economic development are critical for remote and northern regions. Arctic sovereignty has been a critical priority and persists in regime over regime.
Reducing the infrastructure deficit is an opportunity to increase wealth, which will drive the closing of the gap in quality-of-life indicators between north and south within Canada. The mining industry, as the single largest private sector industry in the north and the single largest private sector employer in the north, is well positioned to drive a good portion of that social and economic development.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you for that. I certainly agree with you. I think the NWT Chamber of Commerce is also saying the same thing. We need to deal with the infrastructure deficit. We need to be able to sort out the issue of land tenure with indigenous people if we're going to.... The mining association, the mining people, need more access to land, and that's a big issue for us.
You also talked about skills training. Given that the mining industry is the backbone and you probably train more indigenous people than any other sector, could you talk about the importance of providing resources for indigenous skills training?
Vice-President, Economic and Northern Affairs, Mining Association of Canada
Absolutely.
It's interesting that you mention that, because Sean Boyd, president and CEO of one of our member companies, gave a lunch talk at the Northern Lights Conference today and announced an additional $5 million in training from his company, specifically targeted towards indigenous people in Nunavut.
The reality is that for many community representatives in remote northern regions, an opportunity for employment at a mine site will, in some cases, be the first type of professional employment they will have. Companies are trying to meet folks where they're at to provide these opportunities. In some cases we're opening bank accounts for individuals so that cheques can be deposited. It is difficult for us in a southern location to appreciate the gap of the many conveniences and quality of life that we take for granted. If that is the baseline you're looking at, there are often huge training requirements in order to get people job-ready and site-ready. Our industry is very committed to that. Our companies invest a significant amount of money to do that.
We would support expansion of existing programs at the federal level to match that funding. ISET would be one of those programs, and we participated in a review of that. At the end of the day, many of our members are committed to increasing employment levels from indigenous communities in their companies on site in all levels, whether it's an entry-level position, a managerial position or a C-suite position. That is the goal and the objective for the companies that are operating in proximate communities. We have programs in place, and amplifying those programs is very important to ensure that the benefit can be obtained by all parties involved.