Finance Committee on May 25th, 2026

[Alexandre Laurin]

Another pandemic that would increase the debt by about 13 percentage points would have very detrimental effects, yes. We're nearing the limit where another major crisis like that would have very serious consequences. It would significantly increase the debt and interest costs, affect credit rating agencies, and so on.

The issue is that we don't know what level the net debt, as a percentage of GDP, would have to reach to push us into a new financial crisis. No one knows, but—

[Jean-Denis Garon, Bloc, Mirabel, QC]

I'll stop you there, because I have another question.

I understand that we're in a vulnerable position. I really appreciated what you said. For example, you recommended that profits not be taxed except when they're redistributed. So there wouldn't be any immediate tax on profits.

I'd like to hear your proposals on how to reduce tax evasion and aggressive tax planning by multinational companies. I'm thinking in particular of the use of transfer pricing to take advantage of tax systems where tax rates are lower.

In your document, what do you recommend specifically with regard to profit taxation in order to ensure that Canadians aren't taken for a ride?

[Alexandre Laurin]

It's true that the second option, that of taxing profits only when they've been distributed, completely changes the corporate tax regime. In the study, there is a full page outlining various other provisions that must also be implemented to protect the tax base.

[Jean-Denis Garon, Bloc, Mirabel, QC]

What about tax evasion? I have 14 seconds left.

[Alexandre Laurin]

If tax rates are reduced, there will inevitably be less tax evasion.

[Jean-Denis Garon, Bloc, Mirabel, QC]

If we tax these companies less, they won't want to rob us anymore.

[Voices]

Oh, oh!

[Alexandre Laurin]

It will reduce incentives.

[The Chair, Liberal, Karina Gould]

Thank you to you both.

These exchanges are always interesting.

Ms. Cobena, we will continue with you for five minutes, please.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Thank you, Madam Chair.

My questions will be directed to the C.D. Howe Institute.

Mr. Laurin, in your recent paper, you wrote about the government's sovereign wealth fund, and you concluded with “This new sovereign wealth fund will not resolve Canada's investment challenges on its own.” Could you expand on that? What exactly do you mean by this?

[Alexandre Laurin]

We don't know a lot of the details right now about the sovereign wealth fund anyway, but what I meant is what I presented today, basically. What we need is something that is much more aggressive: a reform that signals a change that is much more important than just a $25-billion-or-more sovereign wealth fund that is more money borrowed being reinvested. There are all sorts of ways the government already does that. We don't know yet how that sovereign wealth fund would be different from what is already done, but I presume it will be. We'll know when we know it.

It's not a lot. When we calculate the investment impact of our reform, it's much greater than $25 billion, obviously; it's enormous. That's because of the size of the Canadian economy and the size of private investments already in the economy. The point of the last sentence you just read is that we need a big bang reform. We need a big bang in this country much more than just saying, well, the government is going to invest in those projects, which he will be choosing, these amounts, etc.

It's okay, and it helps, but it's not nearly enough.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

You also note in your piece, of course, that it isn't the lack of capital availability that's the issue with poor investment in Canada. It's the regulatory regime that is blocking development. Can you speak more specifically about this?

[Alexandre Laurin]

One reason we have the Major Projects Office is that there are a lot of regulatory hurdles on major projects in Canada, and we want to speed the projects up. The fact that there's red tape and a lot of regulatory issues within the private sector for blocking private sector investment is not new. The point we're making is that it's another aspect.

Government could fix the issues instead of choosing a few projects that deserve to move forward and be fast-forwarded. It's good that the government's doing this, but if it went forward even further and concentrated on the source of the problem, we would have even more investments. That's the point here. This sovereign wealth fund is one initiative, but it's small in comparison to the challenge that we're facing.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Of course, what we know is that the seed money for this fund is $25 billion of debt. Are you aware of any other country that has set up a wealth fund through debt?

[Alexandre Laurin]

To be honest, I haven't researched substantially what other countries have done regarding sovereign wealth funds. You could label them differently. It's possible that other countries have done it, but I don't know.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

There's some very high-level research that I did. The only country that I found was, in fact, China. What is typically the source of funds, then, for sovereign wealth funds, based on what your research has told you so far?

[Alexandre Laurin]

The ones that we know and are popular are the sovereign wealth funds from oil-producing nations, including Norway. There's also some kind of sovereign wealth fund in the province of Quebec, where the dividends from Hydro-Québec are reinvested in the generations fund. That's another type of sovereign wealth fund where there's a dedicated revenue source, and the Quebec government has recorded surpluses many years during the time that it has had the generations fund. We can't say that all of these investments were from a situation of deficit. They were not in many years. That's another example.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Laurin.

Thanks, Ms. Cobena.

We'll continue now with Mr. MacDonald for five minutes.

[Kent MacDonald, Liberal, Cardigan, PE]

Thank you, Madam Chair.

I'll start with Mr. Laurin with the C.D. Howe Institute.

You spoke a lot about major tax reform right away. I was wondering what you feel are our biggest challenges in Canada to our long-term economic competitiveness. Is tax reform the first thing we have to do, or are there other issues we have to address?

[Alexandre Laurin]

There are certainly other things we have to address. When I do my own research, I concentrate on fiscal and tax policies. It's something that I have read repeatedly and something that I became convinced of—that we need a more competitive tax system in Canada. We are a little bit off base, as I said, with respect to the amount of revenues as a proportion of our economy that we collect from income taxes, corporate and personal.

Other advanced economies, most of them, even the European ones, collect less. It's just something that has happened and, I believe, something we would benefit greatly from changing. It doesn't mean necessarily collecting less revenue. It's just changing the structure of the tax system. That's something that I hear repeatedly that needs to be done. I don't know if that's the greatest factor hurting our competitiveness, but I know it's a major one.

[Kent MacDonald, Liberal, Cardigan, PE]

I thought you were maybe going to answer “productivity”. That leads into the next question.

To offset productivity and the low rates of productivity in Canada, we put in the tax superdeduction. That's generally aligned with the manufacturing incentive for more manufacturing. In the previous hour here, we heard from the speakers who suggested adding it into the construction trade.

I meet with a lot of agricultural representatives. They'd like to see the tax superdeduction in the agricultural community, because everything we're going to do to increase productivity is going to be capital-cost extensive. To offset this, we have to have some type of tax credit in place so that individuals and businesses will invest. Can you comment on that?

[Alexandre Laurin]

Private capital investment per worker is lower in the United States and Canada. That's been the case for many years. It's also now lower than the average of the OECD. Therefore, we lack investment. You're right that the accelerated depreciation that has been introduced is for manufacturing and equipment. It's mostly the manufacturing sector that benefits from it, but it does leave out a lot of other sectors.

For example, if you look at our study, the marginal effective tax rate on new investments in the manufacturing sector is negative with the superdeduction. This means that on that return on investment, from investment in manufacturing, there's practically no tax, so it's negative. However, in other sectors like construction, it's 20%. It's the same for transport. Transportation is higher, wholesale trade is higher, retail trade is higher and services are higher. It's not neutral.

[Kent MacDonald, Liberal, Cardigan, PE]

I'm going to jump in because I want to get another question in, if I can. Thank you for your answer.

On old age security for seniors, your $100,000 may seem like a high number, but I don't think it is. Is it a flat rate for Canada? Did you do any comparisons where living costs, electricity rates and the price of a litre of gasoline are higher?

I'm looking at Atlantic Canada because I represent Atlantic Canada. We have a higher proportion of seniors who retire in Atlantic Canada. Maybe they put in their productive years somewhere else in the country, but then we have to deal with that. Did you do any analysis that way?

[The Chair, Liberal, Karina Gould]

Please give a very brief response of 20 seconds.

[Dr. Paul Kershaw]

It's a flat rate across Canada, as it is for the Canada child benefit. I would ask you how we justify phasing out the CCB at $81,000 of household income, when we wait until $185,000 for retirees, regardless of where they live in the country.