Finance Committee on May 3rd, 2022

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

These amendments are extremely important if we want to ensure that all Canadian taxpayers do indeed pay their fair share of tax. I'm particularly concerned by the practice of treaty shopping. I simply want to make sure that the department is looking at legislative solutions to solve the problem of treaty shopping after the judgment rendered in Canada v. Alta Energy Luxembourg S.A.R.L..

[Trevor McGowan]

Thank you for the follow-up question.

Yes, of course, the department is very much involved in studying and analyzing the impacts of the Alta case. Recently, through an act of Parliament, Canada enacted the multilateral instrument, which is a rule developed with a number of other international partners to help address some of the issues that came to the fore in the Alta decision, to which I understand was being referred.

That is something that is definitely a focus at the department, but just note there have been other tools that may be relevant in the context of treaty shopping, which was an issue in that case.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. McGowan.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chatel.

We're now moving to the Bloc and Monsieur Ste-Marie for two and a half minutes.

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

I would firstly like to recognize the fact that my colleague, Ms. Chatel, is wearing pink, and to tell her that I appreciated her quote from Simone de Beauvoir, who is always most inspiring.

My next question deals with part 1, which contains 15 measures on income tax. My question is more specifically about the measure seeking to allow the immediate expensing of eligible property by some Canadian businesses. These measures are meant to reduce the cost of investments made by businesses who wish to increase the efficiency of their manufacturing processes or to reduce their carbon footprint. Many of these investments were already eligible for the accelerated capital cost allowance, but the possibility of deducting the entire amount the first year will reduce costs even further.

From what I understand, the measures are wide-ranging and do not exclude businesses who are active in the oil industry. I simply want to know if those businesses are targeted by the measures.

If they are, given the huge investments that are forecast in the gas and oil sector with the Minister from the Environment's blessing, I would like to know if the department already has an idea of the percentage that will go to the oil and gas sector.

[Maximilian Baylor, Senior Director, Saving and Investment Section, Business Income Tax Division, Tax Policy Branch, Department of Finance]

As you have said, the measure is indeed wide-ranging. The idea was to promote economic recovery after the COVID‑19 pandemic. Measures were announced in the 2020‑2021 budget, and more recently in February, another measure was announced for individuals who own a business that is not incorporated.

The measure that you mentioned is aimed at small and medium businesses, but obviously, there would be a cap of $1.5 million, which would limit the investments that could be made, such as those that you gave examples of. Moreover, the property has to be acquired and ready to use before 2024.

It is basically a general measure to stimulate the economy.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baylor and Mr. Ste-Marie.

The time is up.

We'll move to the NDP and MP Blaikie for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I want to touch base on the zero-emission technology manufacturing tax credit that's foreseen in the BIA here.

First of all, could the department provide some concrete examples of the types of technology it thinks companies may adopt under this tax credit?

I'd also like to know, with regard to the tax credit, the extent that the investment in these technologies is likely to leverage. What is the cost the government is anticipating in forgone revenue?

Finally, I'd like an estimate of how much the government intends, or believes, emissions will be reduced as a result of the tax credit. Ideally, it would be nice to have an “emissions per dollar” figure, at least as an estimate, in terms of what the government is thinking it's going to buy in emissions reductions for its tax credit.

I would be happy to receive that in writing. It doesn't have to be at the moment if folks don't have that information ready in hand. Whatever you can provide now, verbally, is welcome, but if you could please follow up in writing with all of those details, that would be greatly appreciated. I doubt we'll get a full answer in my remaining two and a half minutes.

[Maximilian Baylor]

I'll try to address the different questions one by one.

The first question was, I believe, in terms of examples of the types of technology manufacturing that would be available for the rate reduction for zero-emission technology manufacturers. A few examples would be the manufacturing of wind turbines, solar panels, equipment used in hydroelectric facilities, geothermal energy systems, zero-emission vehicles, electric vehicle charging systems and energy storage equipment. It would also include the production of biofuels from waste and the production of hydrogen by electrolysis of water.

To your broader question about the cost and the expectation, there are maybe two points. I can give you the exact figure and the estimate, but one key point is that these are all very much nascent technologies.

Excuse me. I see you talking there. I can't hear you. I'm sorry.

[The Chair, Liberal, Peter Fonseca]

I think the member was saying that if officials would be able to find that information to follow up with the member's questions, they could then provide it to the member and committee.

[Maximilian Baylor]

Sir, I have the information now. Are we out of time?

[The Chair, Liberal, Peter Fonseca]

We are out of time, yes. We've gone well past time, but thank you very much, Mr. Baylor.

We are moving to the Conservatives. I have MP Stewart up for five minutes.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

Thank you to the officials as well.

Yesterday I asked a question of the finance department. The question I asked was one that all Canadians need answered before any of us parliamentarians can objectively vote on this bill. The question was this: What in Bill C-19 addresses the inflation crisis Canadians are facing today?

Yesterday the department's response to the question was that the department is focusing on macroeconomics. They said that the bill is taking the edge off of inflation over the coming quarter, that the bill is trying to get back on target and that it will also normalize the fiscal and monetary policies.

With inflation in crisis mode throughout Canada, this causes something else for Canadians. It causes a cost of living and affordability crisis stemming directly from the inflation crisis. That's stemming from all the printed money that often wasn't necessary. I'm going to ask my question again today. I really have no preference for who answers it, but today I'm hopeful that I'm actually going to get a real answer.

Again, what in Bill C-19 addresses the inflation crisis that Canadians are facing today?

[Lindsay Gwyer]

I think the answer to your question was provided yesterday by people who are in a better position to give you an answer than the officials on this call today. I can appreciate that you were not satisfied with the answer you received yesterday.

In terms of those of us who are here today, we're really here to talk about the technical tax aspects of this bill. Unfortunately, I don't think that anyone will be able to give you an answer that would be more satisfying to you today.

[Julie Dzerowicz, Liberal, Davenport, ON]

On a point of order, Mr. Chair, I think this question might be putting our officials in a bit of a tough position.

It is a political question in terms of how we are addressing the cost of living for all Canadians in federal budget 2022. It's a bit unfair to be asking our officials this question.

[The Chair, Liberal, Peter Fonseca]

Officials are here to answer technical questions of the BIA, MP Stewart.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Mr. Chair, with all due respect, when you put a bill together and a budget that adds new taxes to Canadians during an inflation crisis, my question isn't really a political question. It's a very good question. We have thousands of civil servants in Canada. There are 56 of them here today. They can't stand behind their own work.

Obviously, there's a minister. I understand that.

[Sophie Chatel, Liberal, Pontiac, QC]

I have a point of order, Mr. Chair.

The minister answered this question during her presence. I understand that the opposition didn't like the answer, but she provided the answer. The officials are here to respond to technical questions related to Bill C-19.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

I should tell you, officials are here to answer our technical questions. That's their job. They do an excellent job.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Mr. Chair, I appreciate all of the commentary, but nobody answered my question yesterday. It's great to have the excuse that 56 people also can't answer it today, but I didn't ask the question in poor faith. I asked a very good question for the people of Miramichi—Grand Lake. It's not an argumentative point. I just want an answer to the question. What's the bill doing?

We have an entire bureaucracy who wouldn't answer yesterday, and they can't answer today. Either way, I get no answer. Whether it's technical today and not yesterday, nobody answered my question.

The people of Miramichi—Grand Lake are facing 7.4% inflation in New Brunswick, whereas it's 6.7% in the country. We have an affordability crisis stemming from the inflation crisis, which stems from the problem of this government printing too much money.

When I ask a legitimate question, I expect an answer. I don't think it's too much for me to ask them to answer my question. I really don't. I'm really ashamed of the fact that they can't answer that question. I'll ask a different question, and hopefully I'll get a different answer.

[The Chair, Liberal, Peter Fonseca]

MP Stewart, your time is up.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Isn't that convenient?

Thank you.

[The Chair, Liberal, Peter Fonseca]

We are moving now to the Liberals, and we have MP Baker up for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

I would like to ask our officials some questions. I want to thank them very much for their time and their service on behalf of Canadians. I think a lot of times, the work that our officials do is almost always invisible to most Canadians and even to elected members of Parliament. I want to thank you for all of the work that you do behind the scenes to make a budget bill like this possible for the benefit of Canadians. Thank you.

My question relates to some technical elements in regard to the rate reduction for zero-emission technology manufacturers. Some companies in this sector might engage in multiple business activities. How would the government determine the eligible income for the reduced tax rates on zero-emission technology manufacturing?

[Maximilian Baylor]

I can take that one.

The process is very similar to what used to be used for manufacturing and processing. This process figures out what portion of your income is attributable to zero-emission technology manufacturing. Essentially it looks to the amount of capital and labour used as inputs for that manufacturing process. It determines, for a company that has both zero-emission technology manufacturing and other manufacturing activities, what proportion of labour and capital is used for the one versus the other. Then it effectively applies that proportion to the business income of that entity. It's on that basis that the amount of income is subject to the preferential rate being introduced, and it is determined for companies with multiple streams.