Finance Committee on Feb. 29th, 2024

[The Chair, Liberal, Peter Fonseca]

MP Weiler, please.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Chair.

I also want to thank all of our witnesses for being here today.

In a moment, I do want to ask some questions on the CCUS tax credits. I don't know if there's someone who will be joining the table for that.

First, Mr. Greene, you mentioned some of the other countries that already have a digital services tax. I was hoping you might be able to mention which countries those are and for how long they've had a similar DST in place?

[James Greene]

Well, there are DSTs currently in place in France, the U.K., Italy, Spain, Austria, Turkey and India. Most of those were put in place in 2020 or 2021. The Indian tax, I think, is a little bit older. It was in 2017 or 2018, I think.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

That's very helpful. Obviously we're not the first country to be contemplating this, and certainly not even a first mover on it.

I'll move over to the carbon capture utilization and storage tax credit. I know this is something that has been long in the making. This is probably our first big investment tax credit that we're bringing out and, really, in response to a lot of the measures in the Inflation Reduction Act in the United States.

I hear from constituents all the time who are concerned about this. One of the main recipients of these tax credits is going to be the oil and gas industry, which is one of the largest and most profitable industries out there. I know that our tax credit is different from what the United States has brought in, and I was hoping that you might be able to speak to how our tax credit treats enhanced oil recovery. I know that in the U.S. this tax credit is actually used to increase oil production. What are all of the eligible uses for this tax credit?

[Maximilian Baylor, Director General, Business Income Tax Division, Department of Finance]

I can take that one.

To answer the question directly, enhanced oil recovery is not eligible for the investment tax credit for CCUS.

From a functional perspective, the way it works is that if your equipment is capturing and storing carbon in eligible uses, which is what you were referring to, then there are two of those. There are geological storage and storage in cement. Then you're eligible for the investment tax credit. If you are storing in ineligible uses, such as CCUS, then you would be ineligible to the extent that you're storing in one versus the other.

There's essentially a mechanism to determine if there are mixed-use projects. Obviously, if one project is all eligible use, then you get the full credit. If it's all ineligible use, then you get none of it. If somehow the project is split, there are rules that ensure the part that is dedicated to an ineligible use does not get the tax credit.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you for that.

One of the other differences with the U.S. tax credit, the 45Q, is that theirs is a production tax credit. It's ongoing, looking at year after year. Ours is different. It's an investment tax credit. That funding is provided up front.

A concern I've heard about this tax credit is that carbon capture and storage projects haven't actually met what they're expected to meet over time. We've had some experience in Canada with, for instance, the Boundary bay dam project in Saskatchewan, where only about 50% of the carbon was actually captured.

Given that this money is provided up front in a tax credit, what integrity measures are provided over time to ensure those targets are actually met and what impact will that have on the tax credit itself that's advanced to the company?

[Maximilian Baylor]

There may be two ways to answer that.

The first, perhaps, is in terms of the process, how you can apply and receive a credit and what is being envisaged there. Effectively, there is a pre-approval process in which all proponents who want to access this investment tax credit—all investors—have to submit their project plans to the Department of Natural Resources. Then, as we were discussing earlier, those project plans will be evaluated to determine to what extent the project is going to eligible versus ineligible uses and the equipment is meeting the requirements of CCUS.

Then further to that, as we discussed, there's a regime to ensure that the credit is apportioned between eligible and ineligible uses. Finally I would say, of course, given that this is a tax program, that the CRA will have a number of controls and verification mechanisms in place, as they do for all other tax programs, to verify that ultimately the investments are being dedicated to their intended use. Of course, if they are not, well, then there is recapture. There are consequences for that.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Weiler.

Now I go to MP Ste-Marie.

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

Thank you, Mr. Chair.

First of all, I'd like to welcome all the officials and thank them for being here. It's rather awkward that we've had to suspend our work for half an hour, as we have a lot of questions to ask them and we're running out of time. I would also like to thank them for the documents they have provided. The briefing book on Bill C-59, which is some 800 pages long, is very useful, as are the other documents they have provided us with and those provided by the analysts. It's high-quality work that helps us a great deal in our work.

Since I have a lot of questions to ask and I'm running out of time, I'm going to hurry, even though it's difficult for elected officials.

First of all, I'd like to know if there's been an update of the table you provided when you appeared before us on March 30, 2023, which showed a breakdown by year and by item of the $83 billion granted in the form of environmental tax credits. I had also asked you to provide a breakdown of these expenditures by province. If the data has changed from the table you provided, I would like you to send a written update to the committee, and I would be very grateful if you could provide a breakdown of these expenditures by province, if possible.

[Maximilian Baylor]

Yes, absolutely.

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

Thank you very much.

I will now turn to a completely different subject, namely the tax exemption for counselling therapy services.

[The Chair, Liberal, Peter Fonseca]

I apologize, MP Ste-Marie. I'm sorry, but we're going to suspend for one second. We're having some issues with interpretation on Zoom.

[The Chair, Liberal, Peter Fonseca]

You may continue, and I apologize for interrupting.

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

Thank you, Mr. Chair.

With regard to the tax exemption for counselling therapy services, many psychoeducators in Quebec have contacted us to find out whether they are covered. They are able to get a psychotherapist's licence, but they're not sure whether the bill covers them in its current form.

Does the reference list in this part of the bill refer to the one defined by Employment and Social Development Canada, which includes a whole category of counselling services, such as the services of art therapists, psychotherapists, sex therapists, movement therapists, and so on? Are you in a position to answer me today?

[Dominic DiFruscio, Director, General Operations and Border Issues, Department of Finance]

I would like to thank the hon. member for his question.

This measure will exempt psychotherapy and counselling therapy services, which are currently subject to GST under the Excise Tax Act. Certain professions fall into the category of psychotherapy and counselling therapy services.

In general, a bill deals with fairly common situations. The act will therefore be changed so that the exemption applies to the services that are mentioned verbatim in the bill before you, that is, psychotherapy and counselling therapy services. Since it is the Canada Revenue Agency and Revenu Québec, in Quebec, that are responsible for administering the GST, in the future, it is these agencies that will provide guidelines and more details regarding the implementation of this measure and determine the specific professions to which it will apply, based on specific circumstances.

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

Thank you very much, your answer was very clear. If I understood it correctly, you could tell the psychoeducators who are asking us today whether they are covered by Bill C-59 that it will depend on how Revenu Québec's guidelines are interpreted.

[Dominic DiFruscio]

That's exactly right.

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

Very well, thank you very much.

My next subject is completely different. It's about the clean technology investment tax credit, more specifically for zero-emission vehicles. I'd like to know whether this applies to non-road vehicles described in Class 56.

In Quebec, we have a non-road zero-emission vehicle industry, such as snowmobiles, personal watercraft, pleasure boats, all-terrain vehicles, side-by-side vehicles, airport vehicles, unregistered vehicles, mining vehicles and others. Based on the definition in the act, can we understand that these types of vehicles will be eligible for the clean technology investment tax credit?

Since the list in part (1)(h) on page 20 of the document is not comprehensive, I would like to know whether this will be included or not. If you are unable to answer us now, you can provide us with a written answer.

[Lindsay Gwyer]

I think it includes Class 56 vehicles, but certain conditions apply. I think it would be better to provide you with a written answer later.

[The Chair, Liberal, Peter Fonseca]

Ms. Gwyer, I'm told it's inaudible.

If you could move your mike closer to where you're speaking, we'll see if that works.

Go ahead.

[Lindsay Gwyer]

I can repeat that.

It includes class 56 vehicles, but there are some conditions on that. We can return in writing with the details.

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

Thank you very much.

We have heard concerns about the rules limiting excessive interest and financing expenses. Several groups that carry out large electricity projects with provincial authorities could see their interest deductions reduced, which could increase the cost to consumers.

In part 1)(a), Questions and Answers, on page 3 of the documents you provided us with, you say that there are certain requirements for a public-private partnership. Can you elaborate on this? Can you give us examples of what would be needed to be exempt under this change? Can you give an example of what the rules would change?

[Lindsay Gwyer]

I can answer the question. To make sure my answer is clear, I'm going to answer in my first language.

The definition is set out in the legislation. It requires that you have a project that is owned by a public authority. The interest paid has to be borne by the public authority. It is typically in these kinds of arrangements where the cost of the interest is built into the pricing terms, so it's indirectly borne by the public authority. The interest has to be paid to an arm's-length person so it can't be internal interest. There is a rule to allow for situations where there could be back-to-back interest payments, but, ultimately, it has to be interest paid to an arm's-length person.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Now we're going to MP Blaikie.

I will note that we had some news from you yesterday, MP Blaikie. I know you've made a decision. You won't be with us after the end of March. I know you're going to be with us still for the one week we have when we come back in March.

I want to thank you for all of the collaboration and the contributions you've made on the many studies here at this committee and for the last three and a half years you've sat here with us. We thank you very much for that work.

The floor is now yours.

[Hear, hear!]