Finance Committee on April 9th, 2024

[Trent Vichie]

The way that the investment tax credit creates certainty is by reducing the overall cost to the market. There are carrots and sticks. You have the stick of carbon taxes, etc. This is the carrot on the production side to drive these investments forward. This is, I would say, critical to getting these investments going. It's critical to starting the process of delivering efficiencies in scale. This is a huge problem that we need to solve, and establishing these industries is imperative today.

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

Thank you.

How are the ITCs examples of Canada's leveraging a competitive advantage with renewable energy resources?

[Trent Vichie]

Canada has a very good wind regime. It has very good renewable generation capacity, so combining that capacity with the ITCs puts Canada in a leading position. There are other parts of the world that are looking to be leaders in this space as well, including the Middle East, Australia, South America and other parts of the world. These businesses, you will find [Technical difficulty—Editor] you will see the industry develop.

In terms of starting this process along, what it does is that it plants a seed to build the scale in the region. Like the seed that eventually grows into an oak tree, you need to invest, give it time and be an early leader.

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

Thank you.

If I could switch for a moment—I think I still have some time—I'll move to Ms. Woo Dearden.

Thank you for your opening comments. I want to ask you about your role as a psychotherapist within multidisciplinary care—particularly mental health services—and about mental health, obviously, as being part of health care.

I sat on a committee yesterday for perinatal mental health. I certainly see your services as part of that stepped care approach in ensuring that there are many doors, with the appropriate door at the right time, for people who have mental health concerns, and what the GST exemption does in terms of enabling more people to avail themselves of this very important service.

[Stephanie Woo Dearden]

Thank you for your comments.

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

I'm sorry, but can you comment on the role that you play in that multidisciplinary primary care approach to health care, and on mental health being part of health care?

[Stephanie Woo Dearden]

I'm a psychotherapist in private practice, so I see people who are coming from different segments of the health care system. I will comment that they are interlinked, but right now I exist in the fractured system—so I do my best. However, what we see, in terms of improving and addressing mental health care, socio-emotional care and relational care, is that it directly impacts people on a physical health level.

You talked about perinatal. We're talking about people, the life they're carrying and their ability to care for that newborn when they come into the world. That's impacting not just one person but their whole system, so that's why I think it is of upmost importance right now. Removing this tax would help people access the mental health care that is so important at that stage of someone's life.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Thompson.

Now we go to MP Sébastien Lemire.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

I'd like to ask Mr. Powell or Mr. Smith from Electricity Canada a question. I'd like them to clarify certain problematic points in the new Bill C‑59 rules restricting excessive interest and financing expenses.

This new regime aims to make it more difficult to use tax havens, and to do so by attacking two schemes: the deduction of interest between subsidiaries, and hybrid arrangements. This is what the OECD, the Organization for Economic Cooperation and Development, recommended to combat tax evasion.

You, on the other hand, would like to see private companies that generate electricity excluded from these provisions, since you consider them to be public utility companies.

Can you give us examples of electricity generation projects that would be at risk if this amendment were adopted?

We're trying to get a clear picture of the consequences and of which companies would be affected. You mentioned Nova Scotia and its small modular reactors. Is it the same for the nuclear industry in Ontario? Would it also be affected?

[Michael Powell]

Thank you for the question.

We have provided a map as part of our submission that gets into where individual electricity companies are impacted. The primary areas are in Nova Scotia, as Derek outlined, but also in Alberta and in parts of British Columbia. It depends on what that is. As an example, it wouldn't impact Crown corporations like Ontario Power Generation, which has the most advanced small modular reactor program, but in the future others that may consider building one would be impacted by regulations.

To the point on the OECD, that is a good process. It is the kind of thing that Canada should be pursuing, but what has happened is that, in a very broad net, we're getting caught as bycatch. There's an unintended consequence, which will have an impact on individual Canadians in some provinces when it comes to their bills.

Just as our counterparts in the United States, the United Kingdom and Ireland have found, we think it makes the most sense from an affordability perspective to carve out regulated utilities for the reasons I outlined. Namely, they are already very regulated. Dollars are affirmed by a local regulator and spent in Canada, and there is that public interest element when it comes to energy affordability.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Can you explain the relationship between the companies that will be created, the next Canadian parent companies, and their financing subsidiaries? Are public-private partnerships, or the famous PPPs, at risk, or are we essentially talking about large private companies in the energy field?

[Michael Powell]

I'm sorry. Could you please repeat the question?

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Can you explain the relationship between Canadian parent companies, the ones that will be created next, and their financing subsidiaries? Are public-private partnerships, or PPPs, at risk, or is it essentially the large private energy companies that will be affected?

[Michael Powell]

It would be any private company. The exemption we're looking for is for those that operate in Canada in a regulated utility market.

I think Derek would probably be in the best position to talk about the relationship between a parent company and a local affiliate, given the nature of Emera and Nova Scotia Power.

[Derek Smith]

The rules effectively come into play for parent companies that hold private utilities in Canada, but also have investments in foreign operations, be they utilities or a non-utility. There are costs that are at the parent company that effectively are borne by the parent but influence what happens down at the regulated utility level.

Again, this isn't a pure Canadian concept. It applies to the extent that you have foreign investment above a de minimis amount of $5 million.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Can you explain how your proposal helps your industry without making it easier for multinationals to deduct false interests?

[Michael Powell]

That's why we're being very specific in where our push for the exemption is, which is just on regulated utilities in Canada on the gas and the electric side. These are companies that work through provincial regulatory processes like the Régie de l’énergie in Quebec or the Nova Scotia Utility and Review Board, where they have to get capital and spending plans approved by the regulator. There is a tremendous amount of public scrutiny involved in that. That way, you know the dollars are being spent in Canada with that public interest measure put in. That's how we have worked backwards.

When you scope things in that very narrow box, you can help address the unintended affordability challenge that comes with the EIFEL rules as they are, while making sure that you're meeting the overall objectives of the BEPS process.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I'd like to ask one last question, given the problem that has arisen on the interpretation side.

What safeguards would your proposed change provide?

I'd like to say that I'm very concerned about the problem of tax havens. We're talking here in particular about nuclear and gas companies. Do we really want a tax break for them?

[Michael Powell]

Yes. I think the key thing here is that these are—

[Derek Smith]

Can I help with that, Michael?

[Michael Powell]

Yes, absolutely, Derek.

[Derek Smith]

The proposed legislation change that Electricity Canada put forth focuses very specifically not just on a general exemption but on an exemption for specific debts. Those debts need to be traced under the typical classical interest deductibility tracing principle. You need to trace those debts to a good purpose, and that good purpose is that it's related to a regulated utility that sets rates through a regulator and the proceeds of those debts are used indirectly or directly in that utility business.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Lemire.

MP Davies, go ahead, please.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair. Through you to all the witnesses, I thank them for their testimony here today.

Ms. Woo Dearden, I'd like to start with you. In 2021 my colleague Lindsay Mathyssen introduced Bill C‑218. That legislation would exempt psychotherapeutic services delivered by psychotherapists and counsellors from the GST/HST. That was almost three years ago. I understand that she was inspired to introduce that important piece of legislation because you asked her to take action on the issue. I want to thank you for your advocacy on this. Because of your tireless advocacy and that of your colleagues, the government has agreed to include the provisions of Bill C‑218 in the fall economic statement, as you know. The implementation legislation is before us today. I think it's a good-news story when it shows citizens working positively and influencing policy.

Now, we've heard clearly, from you and others already today, the positive impacts that this measure will have on clients. I'm curious to know how the elimination of the GST/HST on counselling therapy and psychotherapy will impact the overall health care system, in your view.