Finance Committee on May 7th, 2024

[Lindsay Gwyer]

It's not a tax credit per se. It's just that right now, if they're operating a business, they would be entitled to just the regular deductions that anyone who's operating a business or earning income from property is entitled to—

[Don Davies, NDP, Vancouver Kingsway, BC]

I'll rephrase it. Do you have any value of the deductions that are being inappropriately claimed?

[Lindsay Gwyer]

We don't have that information now.

Again, it's really hard to estimate the number of short-term rentals that are non-compliant, because it is based on municipal and provincial laws and it's also an area where many provinces and municipalities are currently in the process of putting in place those restrictions on short-term rentals. At this point, we don't have a lot of information to be able to estimate those amounts.

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay. Thank you.

In terms of the volunteer firefighters and search and rescue volunteer tax credits, do you have an estimate of the total value of these tax credits and approximately how many Canadians might qualify for them in a given year?

[Pierre Leblanc]

We estimate that this measure would generate $105 million in extra tax relief over the 2023-24 to 2028-29 period, or about $20 million a year. Currently, about 44,000 individuals claim the volunteer firefighters' tax credit and another 6,000 claim the search and rescue volunteers' tax credit. There might be some increase from that, but that gives you a sense of the current claimants of these credits.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Turning to the refundable income tax credit to qualifying businesses for certain “clean hydrogen projects” and clean-tech manufacturing, I know that in December of last year the Department of Finance released draft legislation for the clean hydrogen investment tax credit and the tech manufacturing tax credit.

What changes, if any, were made to the draft legislation based on consultations with stakeholders? Was there anything significant?

[Maximilian Baylor]

Maybe I will start with the clean technology manufacturing investment tax credit and then I will let my colleague take clean hydrogen. There was a fair bit for clean hydrogen.

On clean technology manufacturing, there weren't many changes. I think one of the key things that came out of the consultations and what we heard was about polymetallic mining and the difficulties and the lack of clarity there. Changes in that regard to allow polymetallic mining, mostly relating to copper, were announced in budget 2024, but those measures aren't part of this bill.

I will let my colleague answer on clean hydrogen, because there were a fair number of changes and he's more familiar with them.

[Don Davies, NDP, Vancouver Kingsway, BC]

Do I get credit for all the steps I'm generating?

[The Chair, Liberal, Peter Fonseca]

It's not 10,000 yet, but we're working on that.

[Tyler Minty, Director, Industrial Decarbonisation Taxation, Department of Finance]

Thank you for the question.

I'm Tyler Minty, director of the business income tax division.

With regard to the high-level design of the investment tax credit, the ITC, there were no changes to the initial design details that were provided in budget 2023 and then followed up in the fall economic statement of 2023.

There were a number of technical adjustments that really don't relate to the high-level design of the tax credit, as well as additional details in terms of administration, the compliance period and that type of thing.

[Don Davies, NDP, Vancouver Kingsway, BC]

Obviously these tax credits are intended to help Canada meet our overall strategy for reducing greenhouse gas emissions.

Is there any estimate of what impact these measures may have over time in that regard?

[Maximilian Baylor]

I can take that one.

As you indicated, that is clearly the intent of these tax credits.

In the government's approach for estimating emissions, as you're probably aware, every year they put out the emissions projection for the economy. It takes into account the suite of measures that the government has put forward to achieve its objectives, and those projections look at those suites of measures.

These investment tax credits are part of those suites and are therefore entrenched in those projections.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Davies.

Members and witnesses, we're moving into our second round. Times are a little different in this round.

MP Lawrence, go ahead for the next five minutes, please.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair.

We have heard from the senior deputy governor of the Bank of Canada, Carolyn Rogers. We have heard from Bill Morneau, John Manly, the C.D. Howe Institute, the Fraser Institute and Dr. Ian Lee, among many others, about Canada's productivity crisis.

I would like to go over these three sections. Maybe you could quickly point out to me which sections will improve our GDP and by how much you expect GDP per capita to improve.

We will start with section 1. Could someone tell me which sections will improve our productivity?

[Maximilian Baylor]

I will start with a broad response.

The investment tax credits are meant to address investment and competitiveness and to basically enhance the competitiveness of the economy.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you for that.

Could you table with the committee any analysis that your department has performed demonstrating that these ITCs will improve productivity?

[Maximilian Baylor]

We don't have specific numbers. I can see what we can....

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

We will move on.

Thank you, sir.

[Maximilian Baylor]

I'm sorry.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

With respect to part 2, how much will the implementation of part 2 improve Canada's productivity?

[Lindsay Gwyer]

We don't have specific numbers on part 2. It's a measure, as Peter explained, that's something being done on a global basis along with our peers. It's really about ensuring the competitiveness of Canada's tax system in terms of Canadian companies and ensuring that Canada can collect its appropriate share of tax in that context.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I understand. Its goal is not to increase productivity.

[Lindsay Gwyer]

I think that's a fair statement.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

In part 3, what provisions will improve our productivity, and by how much?

[Gervais Coulombe]

Thank you for the question.

Part 3 essentially contains measures to generate additional tax revenue. For example, measures on tobacco and vaping products will raise up to $1.6 billion. To my knowledge, there are no measures specifically aimed at increasing productivity.