Finance Committee on June 3rd, 2024

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Davies.

We want to thank our terrific witnesses very much for their testimony here on Bill C-69. I know some of the members have asked you questions on information that you may not have at this time, but you will provide it in writing. If you could do that through the clerk so that information could then be distributed to the members, we'd appreciate that.

We wish you the best with the rest of your day.

Members, we are now going to suspend as we get ready for our final panel today.

[The Chair, Liberal, Peter Fonseca]

I call the meeting back to order.

We are back, everybody. This is our fourth and final panel of witnesses today.

We have with us the Canadian Nuclear Association's vice-president of government relations and international affairs, George Christidis.

From the First Nations Finance Authority, we have the president and chief executive officer, Ernie Daniels, as well as the chief operating officer, Steve Berna, via video conference.

From Unifor, we have Kaylie Tiessen, national representative of the research department, and the director of the research department, Angelo DiCaro.

Welcome to everyone.

On that, we are going to hear opening remarks from the Canadian Nuclear Association for up to five minutes, please.

[George Christidis, Vice-President, Government Relations and International Affairs, Canadian Nuclear Association]

Thank you very much. I really appreciate the opportunity to be here today at this very important hearing on Bill C-69, another budget implementation bill.

As stated, my name is George Christidis. I am vice-president of government relations and international affairs at the Canadian Nuclear Association.

I'd like to begin by acknowledging that we are on unceded territory of the Anishinabe Algonquin first nation.

The Canadian Nuclear Association is a non-profit organization that represents over 100 members from the nuclear industry across Canada. The Canadian nuclear industry employs 76,000 Canadians in highly skilled trades and professional jobs, directly and indirectly. Currently, Canada's CANDU nuclear reactors generate about 15% of Canada's electricity, representing over 60% of the electricity in Ontario and over 30% in New Brunswick. These assets provide clean, reliable, non-emitting baseload power. More and more provinces are increasingly looking at nuclear technologies as part of their electricity needs.

The Canadian nuclear industry is a key employer of first nations communities, particularly in northern Saskatchewan. For instance, the Cameco uranium mining corporation is one of the largest employers of aboriginal peoples. The Canadian nuclear industry is also a major supplier of isotopes, which is key to fighting certain cancers and to other nuclear medicine procedures.

It is clear from an international and domestic perspective that attaining climate and energy security goals will require significantly more nuclear energy, as well as a strengthened nuclear fuel cycle and supply chain capability. The Canadian nuclear industry is a global leader in this regard. The Canadian nuclear industry advantage is based on the successful operation and refurbishment of its CANDU nuclear fleet and the nuclear cycle and supply chain that is necessary for its operation.

This effort to meet climate and energy security goals is really foundational to what the Canadian Nuclear Association's recommendations are. Canada, as a leader in the nuclear industry, is a tier one nuclear nation, with nuclear companies recognized around the world across the supply chain and across nuclear research, such as at the national laboratories at Chalk River or the nuclear waste management initiatives being led by the Nuclear Waste Management Organization and Chalk River nuclear laboratories. Based on that foundation, the recommendation is to strengthen the nuclear industry, and we encourage all parliamentarians to implement quickly the decisions that have been made in the last few budgets.

We've seen a significant increase or inclusion of nuclear power in key foundational policies in Canada and abroad. At COP28, there was a recognition of the need to triple nuclear energy. At Sapporo 5 there was a recognition of leveraging the nuclear industry in Canada and other like-minded countries to meet energy security goals to help delink from Russian energy assets.

We applaud these measures. However, we recommend a timely and strategic approach in implementing and operationalizing the investment tax credits, the clean manufacturing tax credits, and similar initiatives that have been announced. We have to move quickly. There is a competitive bent to it as well, as we see the United States proceeding to implement the Inflation Reduction Act.

I must reiterate that the link between domestic and international initiatives is very important and that energy security, national security and climate initiatives are all interconnected. With that in mind, we recommend that there be an appropriate definition of small modular reactors to enable technologies that are chosen for Ontario and Saskatchewan to be eligible for investment tax credits. The definition should be 1,200 megawatts thermal to ensure that projects are included and can proceed, as well as an operational requirement for modularization that the current technology does not meet.

Making leasehold property models clearly eligible for the investment tax credits is also crucial for any potential partnerships between nuclear utilities and first nations. These financial tools enable nuclear utilities to enter into partnerships with first nations while complying with nuclear licensing requirements. The Canadian Nuclear Association also recommends that the definition of eligible refurbishments and expenditures include all components that enable clean energy assets to continue operations.

We also recommend that uranium be added to the list of qualifying materials and the inclusion of conversion and fuel fabrication in the list of qualifying materials eligible for the clean technology manufacturing tax credit. This is essential to strengthen a key component of the nuclear industry.

Finally, the definitions that will be used for the hydrogen investment tax credit framework need to include nuclear to ensure that Canada does indeed achieve its hydrogen goals.

These recommendations have been presented as a way to strengthen the Canadian nuclear industry, but they are also a means to strengthen Canada's economic, social and environmental credentials and capabilities, which all, again, have a very strong national security and energy security bent.

Thank you very much. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Christidis.

Before I go to our next witness for opening remarks, I failed to mention that we also have a fiscalist who is here as an individual witness, Brigitte Alepin. Welcome.

We'll go now to the First Nations Finance Authority, please, for opening remarks.

[Ernie Daniels, President and Chief Executive Officer, First Nations Finance Authority]

Thank you to the committee members for inviting us to testify today.

I'm calling from the Westbank First Nation in British Columbia.

Very briefly, for background, the First Nations Finance Authority was created under federal law with support from all parties in Parliament. We are a first nations-led organization very much driven by the priorities of the first nations we serve.

Our primary function is to find and secure financing in domestic and international capital markets for first nations. The financing we secure, primarily through the issuance of debentures, is securitized by the own-source revenues of qualifying first nations.

While historically the financing support we provided was primarily for infrastructure such as roads, schools and community centres, we are now in many discussions that are equity-based opportunities that present communities with a path to a state where they would be able to thrive and grow. I can share with confidence that FNFA lending to first nations for equity investments is economic reconciliation realized.

We have followed with great interest the development of the indigenous loan guarantee program that Bill C-69 proposes to create. We are all aware of the vast potential for a wide range of large resources and energy projects across Canada.

Many of these, such as rare earth element extraction and electrical transmission lines, are vital to achieving Canada's clean energy goals in the manufacture of zero-emission vehicles. Others, like natural gas, support the transition to a low-carbon future. All of them have vast potential to support employment and economic development in the first nation communities they touch. FNFA is ready and able to support the desire of communities to participate, thus realizing these important economic and environmental ambitions.

There was a time when a specified number of guaranteed jobs or supply contracts would be deemed sufficient as the benefits that indigenous communities could expect from development on their traditional lands. Today, though, first nations and other indigenous communities want the long-term benefits that ownership brings. They want to be full partners, with both the benefits and the obligations that partnership implies. In other words, they want equity, and first nations equity translates to economic growth and increased productivity for Canada.

FNFA is well positioned to deliver the financing for the large projects that we understand the loan guarantee program is intended to support. Having issued 10 debentures with a loan portfolio in excess of $2 billion and having recently migrated from the municipal to the federal index, FNFA now has access to vast amounts of capital for equity stakes in these projects, and because of the model on which FNFA is based, we can provide capital to first nations at much lower interest rates than they would get from commercial lenders. This means that they can retain more of the revenue their equity stakes generate, resulting in greater financial capacity for vital infrastructure or for programs that communities desperately need. It also means more revenues that they can leverage through the FNFA up front for investment and community priorities.

The current governing legislation for the FNFA, the First Nations Fiscal Management Act, prevents the FNFA from lending to special purpose vehicles, such as limited liability partnerships. Last week we had the opportunity to meet with a range of decision-makers and parliamentarians from all parties. Among the issues we discussed was a regulatory change that would allow FNFA to lend to special purpose vehicles in cases when a federal loan guarantee is in place. This would provide a financing option in circumstances where multiple first nations organize themselves. This would open the opportunity for participation to those first nation communities that otherwise might not have been able to participate.

In this scenario, communities that participate in an investment opportunity will be better positioned for economic growth and capacity building on their own terms. As they advance and become more familiar with us, they will see the potential benefits of becoming certified and obtaining membership.

We see this as a real opportunity that would create wins for Canada and for the first nations. We invite members of this community to support our efforts in this regard.

Thank you. We'd be happy to answer any questions you might have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Daniels. I'm sure there will be many questions from the members.

Now we're going to hear opening remarks from Unifor.

[Angelo DiCaro, Director, Research Department, Unifor]

Thanks very much.

Good afternoon, Chair and members of the committee.

My name is Angelo DiCaro. I'm the director of research for Unifor, which is Canada's largest labour union in the private sector, representing 320,000 workers across the country.

I'll be sharing my time with my colleague Kaylie Tiessen, an economist who leads the union's budgetary analysis work.

We want to thank the committee for the invitation to participate in this review of the budget implementation bill.

Unifor recognized the federal government for presenting what was, by many measures, a social progress budget in 2024. It's one that responded to persistent economic inequities, affordability pressures and stubbornly high interest rates. Over consecutive budgets, the government has established durable public goods programs, including first-phase pharmacare, as well as dental care, child care and student nutrition programs that will serve Canadians now and for generations to come.

Nevertheless, the absence of promised employment insurance reform, a program that will serve as the core economic stabilizer for unemployed workers on the path to net zero, is a glaring hole in budget 2024.

Our commentary today will focus on curated elements of Bill C-69, but it by no means constitutes Unifor's full or comprehensive assessment of the legislation.

Unifor supports the proposed Income Tax Act amendments that increase maximum labour expenditures for newsroom employees from $55,000 to $85,000, as well as the proposed increase to the Canadian journalism labour tax credit rate to 35%.

That support extends also to the $10-million capital gains exemption on the sale of a business to an employee ownership trust. These measures provide opportunity for local and national media outlets, keeping them viable and delivering the journalism Canadians need.

In the clean energy and advanced manufacturing sectors, Unifor supports the proposed investment tax credits, including the clean technology manufacturing credit, which already appears to have been instrumental in securing significant future investments in the auto sector.

However, Unifor has stated publicly its desire to see these tax credits developed in a manner that ensures good-quality union jobs. This includes explicit requirements that companies receiving public funds commit to union neutrality covenants. Such a covenant would allow workers to exercise their constitutional right to join a union and collectively bargain free of employer intimidation, threats, harassment and reprisal.

[Kaylie Tiessen, National Representative, Research Department, Unifor]

Although not explicitly tied to Bill C-69, we want to express concern over the absence of new capital funding toward the strategic innovation fund in budget 2024. That's a cornerstone investment vehicle that has served the industrial economy well for many years. Recapitalizing this fund should be considered for 2025.

For Unifor members in the health care sector, we support proposed amendments to the Federal-Provincial Fiscal Arrangements Act that will establish a 5% growth guarantee to the Canada health transfer for eligible jurisdictions, marking a long-awaited increase to the transfer payments. Unifor is, however, very disappointed that such requirements do not include efforts to ward off privatization schemes or establish minimum standards for long-term care.

Finally, Bill C-69 proposes various important amendments to the Canada Labour Code. Proposed changes to the code clarify that workers shall be presumed an employee if they are remunerated by an employer. Reassigning the burden of proof to employers when determining employment status is a long-standing demand of our union and an important step for combatting worker misclassification in the federal sector.

Further, the bill introduces a new policy on disconnecting. It's a requirement under the code that follows developments in other jurisdictions, like Ontario. Unifor supports this amendment to the code, but with three specific amendments that we have appended to our submission and can send to you once we get the translation.

Amendment one proposes that Bill C-69 explicitly require the policy to detail how non-working-hour communications will be limited and what opportunities exist for employees to disconnect.

Amendment two removes the proposed exemption for those working non-standard hours. Amendment three requires these changes to come into force one year after Bill C-69 is passed and not over an indeterminate amount of time.

We thank you again for the opportunity to present. We look forward to answering your questions.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you to both of you and to Unifor.

Now we're going to hear from Brigitte Alepin, as an individual, for up to five minutes, please.

[Brigitte Alepin, Tax Expert, As individual]

Thank you for your invitation.

My name is Brigitte Alepin. I am a tax expert and fiscal policy specialist and have previously appeared before some 15 committees of this kind in Quebec, Canada and France.

My presentation today will focus specifically on the alternative minimum tax and specific related issues.

My first question is as follows: Under the proposed amendments to the alternative minimum tax, will it be possible to tax the richest Canadians, the top 0.01% of taxpayers, so that they pay their fair share of tax?

It's important to ask this question because, in the past 30 years, the top 0.01% have enjoyed a 450% increase in their average total income, which reached $12 million a year in 2021, and a 27.5% reduction in their effective federal and provincial tax rates.

These figures appear in table 1, which I submitted to you.

These numbers come from a Statistics Canada table entitled, “High income tax filers in Canada”, which doesn't show the federal tax burden separately. However, a related Statistics Canada table entitled, “Federal and provincial effective tax rates of census families”, specifically shows federal effective tax rates. Since the tax rate for the richest 1% of taxpayers is 17.5%, there's every reason to believe that the rate would be similar for those in the top 0.01% group. We may therefore assume that the top 0.01% would actually be taxed at a rate of 17.5% at the federal level.

To determine whether the richest 0.01% of taxpayers could be taxed under the proposed amendments to the alternative minimum tax so that they pay their fair share of tax, you have to understand that, according to the 2023 and 2024 budgets, the amendments to the alternative minimum tax would generate additional revenues of approximately $500 million a year, 80% of which would be paid by taxpayers earning more than $1 million annually. However, that taxpayer group, which obviously includes the richest 0.01%, already pays approximately $25 billion in federal tax and consequently would bear an additional tax burden of $400 million, that is 80% of the $500 million, as a result of the amendments made to the alternative minimum tax. Little change would therefore be made to their effective tax rate. The amendments that would be made to the alternative minimum tax might have little or no impact on the effective tax rate of the richest 0.01% of Canadians.

My second question is this: Would the amendments to the alternative minimum tax ensure that the tax arrangement proposed by charities benefits Canadians?

It's important to ask this question as well because the tax savings granted to donors and charitable foundations under the present tax system exceed the donations that the foundations receive over time.

I also distributed table 3 to you and invite you to look at it.

As this table shows, under current tax rules, assuming a 5% rate of return and a 5% charitable obligation, as the act provides, an initial donation of $100 million would result in a $36.5 million public finance deficit after 20 years of activity.

Under this scenario, one would have to wait approximately 40 years for the services provided by the foundations, assuming a 5% charitable obligation, to begin to exceed the tax gifts granted to the founders and the foundations. In many instances, it actually takes much longer, particularly since the organizations' operating costs are factored into the 5% calculation.

Lastly, to correct this situation, either the foundations' charitable obligations must be increased or the tax gifts afforded to donors and foundations decreased. The alternative minimum tax could prove to be an effective tool in reducing the tax gifts made to donors.

The initial amendments to the alternative minimum tax presented in the 2023 budget were a good start, but considering the 80% rate as proposed in the 2024 budget, the tax gifts to donors remain too high to balance the public finances within a reasonable period of time.

Thank you for your attention.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Alepin.

Now, members, we are going to get to questions for the witnesses.

Each party will have up to six minutes to ask questions—actually, I'm looking at the time, members, and we'll just do the one round. It'll be about seven minutes per party so that we don't have transition.

MP Tochor, you'll be first up for about seven minutes or so.

[Corey Tochor, Conservative, Saskatoon—University, SK]

Thank you very much.

We often hear from our allies that Canada needs to do more to help protect the free world. One way we can contribute is by enhancing our contributions to global energy security. Given Putin's unjust and illegal war of aggression against Ukraine and a global reliance on Russian energy imports, particularly nuclear imports, it would seem that increasing uranium production in Canada could help improve global security.

Could you elaborate on how Canadian uranium could help our allies and defend the free world?

[George Christidis]

Indeed, since the war in Ukraine, we've seen a significant amount of interest in the Canadian nuclear industry, and particularly the uranium industry, in which, as many of you may be aware, one of the key companies is Cameco.

That spirit of identifying the goals of enhancing the Canadian nuclear industry domestically will definitely have a benefit in providing options to allies as they're considering means by which they could delink from Russian energy sources. You're particularly seeing this in eastern Europe and you're seeing it in other spaces in Asia.

For that reason, I believe that Canada did join the Sapporo 5 agreement, which committed to using the Canadian nuclear industry, along with other like-minded countries' nuclear energy industries, to do just that: to provide options. By strengthening the Canadian uranium fuel cycle sector here, you're strengthening it for our allies as well.

I need to add that it's the same story as it relates to small modular reactors and large reactors, whether they're CANDU or others: The domestic acceleration of deployment of these technologies has a direct international benefit. For example, on small modular reactors, the project in Ontario that's being led by Ontario Power Generation is linked to Saskatchewan, which is also considering the same technology, which in turn is linked to options being considered in Poland. It's all of that.

Thank you.

[Corey Tochor, Conservative, Saskatoon—University, SK]

Thank you.

Could you provide some more information on the economic benefit that uranium and the nuclear fuel cycle have for Canada and Canadian workers?

[George Christidis]

It's a foundational piece of the Canadian nuclear industry in terms of exports and jobs, particularly in the northern communities, and particularly first nations communities in Saskatchewan. I would be happy to provide any further details as a follow-up identifying the specific details around that. However, in terms of Canada's exports and capabilities, the Canadian uranium industry is very foundational to the sector and to Canada.

[Corey Tochor, Conservative, Saskatoon—University, SK]

This is a government that has recently classified nuclear in the same category as other sin taxes, such as tobacco, firearms and alcohol. We're grateful they've backtracked on that, but once again, on the critical elements, the fact they've excluded uranium is once again a slap to the face of the energy workers who work in the mines, in the factories and in the power plants. Half of the government is coming to terms with nuclear, and I'm grateful for that. The other half I'm not sure about; they're a little unsure of using the microwave. However, there seems to be a progression, at least, from this government, and they're warming up to nuclear.

Would you agree that this is the case?

[George Christidis]

Yes. We've definitely seen, and we applaud, the decisions made by the government to include nuclear in some really foundational policy pieces, whether it's the climate, energy security through the Sapporo agreement or the inclusion of nuclear investment tax credits in the budget, and you alluded to the change in the definition for green bonds. All of that has been very supportive and very foundational to the industry in terms of positioning Canada as a leader. We certainly would encourage all parties to continue supporting this industry, which, again, increasingly has a climate, energy security, and, dare I say, national security bent as allies are considering options.

[Corey Tochor, Conservative, Saskatoon—University, SK]

It does seem like common sense is breaking out.

Along those lines, would you agree that green-lighting green projects makes common sense for Canadians?

[George Christidis]

I can't say no to that. I think green-lighting all critical infrastructure energy projects to proceed, particularly those that have the non-emission category, is foundational.

To the point on the Canadian uranium industry, the inclusion of it in the clean manufacturing tax credit is, I think, foundational as well.

[Corey Tochor, Conservative, Saskatoon—University, SK]

It's my understanding that Cameco is one of the largest employers of first nations people in the country. What could greater investment in the uranium industry do to benefit economic reconciliation?

[George Christidis]

I represent the industry, but certainly Cameco is part of that. They would probably say that the economic opportunities provided to first nations are a foundational point for first nations to consider as part of their reconciliation efforts. I think it's foundational from that perspective as well.

[Corey Tochor, Conservative, Saskatoon—University, SK]

Could you provide the committee with further information on the damaging effects of the current SMR classification?

[George Christidis]

In the way the investment tax credit definitions include small modular reactors right now, it's partly an evolution of the technologies and how these technologies are evolving. A more correct definition of an SMR for these projects that are identified in Ontario and Saskatchewan particularly is closer to 1,200 megawatts thermal. The reason that's important is that as these technologies are being developed, they're finding they can actually produce a bit more electricity out of the technologies. Therefore, to be able to fully access the investment tax credit, it's foundational that this definition be reflected.

Also, one must remember that small modular reactors and nuclear power are being considered by key provinces in terms of their own climate and energy security needs. Ontario, Saskatchewan, New Brunswick and Alberta are looking at these technologies, so getting the definition right enables those provinces to be part of the solution on these common goals.

[Corey Tochor, Conservative, Saskatoon—University, SK]

Thank you so much.

It is a bit of a head-scratcher when we have a change in classification that would help reach our environmental targets, but for whatever reason, they decided to draw the line where they did, which is going to hurt northern Saskatchewan, northern people and our economic outlook for the country.

What are some other impacts? I'm thinking of potash and how SMRs could benefit potash mines, which currently use a fair bit of natural gas. What would that look like?

[George Christidis]

The small modular reactor opportunities really have two or three key buckets.

One is the on-grid opportunity that many know. That's the on-grid SMRs replacing particularly, let's say, coal plants. That's an option.

Then there are the very small reactors that could be used in the resource development sector or the industrial processes. Those companies and those sectors are starting to look at how small modular reactors could be a source of non-emitting electricity to reduce their emissions in order to meet those goals. You're seeing that in some key sectors, whether it's in Ontario, Alberta, Saskatchewan and the like, which are looking at these very small reactors as an enabler to meeting climate goals.

It's quite real. You're seeing very specific conversations occurring in exploring these technologies. The investment tax credit regime is very foundational to making those investments occur.