Finance Committee on June 2nd, 2026

[The Chair, Liberal, Karina Gould]

Good afternoon. I call this meeting to order.

Welcome to meeting number 43 of the House of Commons Standing Committee on Finance. Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders.

Before we continue, I'd like to remind participants of the following points. Please wait until I recognize you by name before you speak. For those participating by video conference, click on the microphone icon to activate your mic. Please mute yourself when you are not speaking.

We have all virtual witnesses today. For those on Zoom, at the bottom of your screen you can select the appropriate channel for interpretation: floor audio, English or French. For those in the room, you can use the earpiece and select the desired channel. This is a reminder that all comments should be addressed through the chair.

Pursuant to Standing Order 83.1, the committee resumes its pre-budget consultations in advance of the 2026 budget.

I would like to now welcome our witnesses.

We have Frédéric Laurin, professor of economics at the Université du Québec à Trois-Rivières's school of management and researcher at the Institut de recherche sur les PME.

We also have Luc Godbout, professor of taxation and public finance at the Université de Sherbrooke.

From the Conseil du patronat du Québec, or Quebec employers' council, we have Michelle LLambías Meunier, president and chief executive officer, as well as Norma Kozhaya, vice-president of research and chief economist.

From the Fédération des chambres de commerce du Québec, or Quebec federation of chambers of commerce, we have Mathieu Lavigne, vice-president, public and economic affairs, and Hubert Rioux, economic director.

Mr. Laurin, we will start with you, and you have five minutes for your opening remarks.

[Frédéric Laurin, Economics Professor and Research, École de gestion, Université du Québec à Trois-Rivière, Institut de recherche sur les PME, As an Individual]

I would like to thank the Standing Committee on Finance for this invitation to testify before you today.

I am a professor of economics at the Université du Québec à Trois-Rivières. I specialize in regional economic development.

My remarks will focus on public funding for regional development. Here's the problem: Both Canada and Quebec lag behind the United States in productivity. Quebec is also lagging behind Ontario. The pace of business transformation is slower than we would like, whether in terms of the digital transition, automation or the use of artificial intelligence, among other things.

Our companies are not innovative enough to develop innovative processes and products. The same is true for market diversification: Our companies aren't doing enough for exports outside the United States. There is nonetheless a very broad range of government programs to support productivity, innovation and market diversification, both federally and provincially, as well as at the Business Development Bank of Canada, Canada Economic Development, Investissement Québec and other organizations. We're talking about tax credits, direct support, grants, low-interest loans and so forth.

Yet many companies are not responding to these financial incentives. Why? In the vast majority of small and medium-sized businesses, the problem is not project funding. So what's the problem? Every business and every business project involves a degree of risk and uncertainty. How can that be properly assessed? The more information the company gets, the better able it is to properly assess and manage risk, the less uncertainty there is.

Business leaders don't know everything, though. Owing to a lack of information, they often tend to overestimate the risk and the level of difficulty. So the company's project remains at the idea stage or is postponed. At the Institut de recherche sur les PME, that is one of the main barriers to the development of small and medium-sized businesses.

I often ask companies that export to the United States why they don't go to Europe. They say it's much more complicated. Why are they not adopting new technologies? They say they don't even know where to start, who to call first and what technology to adopt because things are changing so quickly. So you can imagine that a public servant waiting in his office for those companies to come and apply for those programs will never see them, because the project remains at the idea stage.

That's why I'm proposing a much more proactive approach on the ground, which would involve visiting companies and analyzing their ability to carry out various development projects. So we want to encourage projects that would not otherwise move forward, based on the companies' ability and the assurance that the company will then be able to count on a range of support. That's what I call extreme upstream action. It comes along when the project is just a tentative idea, when the company CEO is just vaguely thinking of it. The goal is to create a breakthrough, to trigger an activation process.

Companies could also be invited to join communities of practice, co-development cohorts or regional sector tables to promote the sharing of information and best practices, self-promotion or mutual support in particular. For example, they could get together to develop a market in Europe or to adopt an integrated management package in a business. That way, they can share the costs and help each other.

My question is this: Who is responsible for organizing these events in the regions? That kind of proactive approach on the ground is part of organizing economic development in the area, commonly known as orgware. This concept is hard to explain in the time I have, but I can summarize its three components: coordinated and consistent strategies; mobilized socio-economic factors, including businesses; and businesses working together. Everything is orchestrated by moderators and leaders in the regional ecosystem, but who is responsible for that in the regions?

It is also very difficult to fund projects of that kind. There are a lot of programs that support an individual business or community, particularly in terms of infrastructure. In the case of collective projects carried out independently by a number of businesses and stakeholders, it's more difficult. We're told that it doesn't meet the program criteria, tick the boxes. So greater flexibility is needed in defining and implementing programs. We also need to encourage those kinds of structural and collective projects.

With that, I thank you for your attention.

[The Chair, Liberal, Karina Gould]

Thank you, Professor Laurin.

Professor Godbout, you have the floor for five minutes.

[Luc Godbout, Professor, Chaire en fiscalité et en finances publiques, Université de Sherbrooke, As an Individual]

Thank you very much.

Good morning, everyone. Thank you for the invitation.

As part of the pre-budget consultations, I'm going to rhyme off about a dozen recommendations.

First, the new fiscal framework presented by the government needs to be better defined. Like the Parliamentary Budget Officer, I recommend improving transparency on so-called capital investment measures, which are actually similar to asset creation. The International Monetary Fund, while noting the usefulness of the new budgeting framework, also noted that more work is needed.

Second, a debt anchor or debt-to GDP ratio should be established, for example, as the International Monetary Fund has once again suggested.

Third, the impact of defence spending on the fiscal framework should be more transparently assessed and reported on. The latest economic update in the spring reiterated that Canada is on track to invest 5% of GDP in the defence sector by 2035, which is less than 10 years from now, but it doesn't say whether that is built into the fiscal framework.

Fourth, before implementing the $6 billion for skilled trades training initiative, which was also in the spring economic update, the federal government must hold discussions with the provinces, for the simple reason that training falls under provincial jurisdiction and encroaches on their areas of jurisdiction. The federal government should also learn from certain past experiences and be careful not to repeat mistakes that were made with any of the provinces. So they should put some kind of guardrail in place to optimize the results of this new initiative.

Fifth, in our opinion, the federal fuel excise tax exemption seems ill-advised from a public finance standpoint. It would be better not to extend this tax holiday and to maximize the chances of restoring the tax as it was and eventually indexing it. I would remind you that a tax holiday of this nature benefits higher-income households more than low-income households. So in order to facilitate the reintroduction of the tax, consideration should probably be given to putting it into a community development fund or some other fund dedicated to that.

Sixth, in the current housing context, it would be more beneficial to contribute to increasing the supply of affordable rental housing rather than adding another measure or enhancing the many existing measures for home ownership. The federal government should therefore think about certain avenues, such as converting residential buildings to non-market housing, which would cost much less than the subsidies mentioned. One option is to defer the capital gains deferral to private building owners if they sell to a non-profit organization in order to reinvest the proceeds of that sale into the construction of new housing. In fact, that was an election promise. Another option would be to assess the possibility of a capital gains exemption when someone gives a rental property to a non-profit organization, which turns it into non-market affordable housing. These are not very expensive ideas that could be worth analyzing.

Seventh, with respect to the $1.7 billion in federal funding for housing to be provided to the provinces to improve housing supply, the federal government must ensure that each province receives its fair share. Provincial differences could make it more difficult for some of them.

Eighth, we must not give up on international taxation. Canada's tax system needs to be reassessed in light of juxtaposed systems, including the global minimum tax.

Ninth, even though the digital services tax has been scrapped, we need to rethink that kind of tax. On the one hand, France, Italy and the United Kingdom have retained that tax method. On the other, its abolition does not seem to have helped Canada make any gains in settling the trade dispute with the United States. This tax on the digital economy might even help us better capture the profits that will be made from artificial intelligence and that could reduce some other more traditional tax bases.

Tenth, without going into detail, I would also suggest establishing a framework for the taxation of cryptoassets.

I know that time is running out, so let me conclude by saying that a lot of budget announcements are made outside budget periods, whether it's the traditional budget period or economic updates. So, for my eleventh recommendation, in the absence of a national emergency, it would probably be a good idea to make the announcements within more specific budget frameworks.

[The Chair, Liberal, Karina Gould]

Thank you, Professor Godbout.

Your time is up.

[Luc Godbout]

Perfect.

[The Chair, Liberal, Karina Gould]

Thank you for your opening remarks.

Ms. LLambías Meunier, representative of the Conseil du patronat du Québec, you have the floor for five minutes.

[Michelle LLambías Meunier, President and Chief Executive Officer, Conseil du patronat du Québec]

Thank you.

I would like to thank the members of the committee for the invitation.

At the Conseil du patronat du Québec, or CPQ, we represent 70,000 employers across the province.

In the context of the current trade war, the major transformation in our relationship with our main economic partner and, obviously, geopolitical tensions that are placing increasing pressure on energy prices, the CPQ believes it is more necessary than ever to focus our efforts on what we can actually control here in Quebec and Canada.

We need to be able to strengthen our business environment, stimulate investment, increase our productivity and competitiveness, diversify our markets, of course, and support our capacity for innovation. It is under these conditions that we can make our economy resilient and maintain our standard of living.

The recommendations we are making today are part of that perspective of strengthening our economic and industrial fabric to better deal with the uncertainty we are facing on a daily basis as well as the challenges looming on the horizon.

First, on the regulatory front, project approval processes in Canada are too long, too complex and not well coordinated. That's what we hear on a daily basis from our many members. Multiple players and the lack of alignment among the various bodies are delaying the completion of projects, both public and private, and slowing investment. We recognize the government's desire to make improvements in this area, but it still has a lot of work to do to achieve its goals. The CPQ supports these efforts to simplify and speed up authorization processes, but more needs to be done.

More broadly, our regulatory framework must evolve to foster innovation, investment and competitiveness, while continuing to meet the objectives of health, safety and the protection of the public, of course. Adding new counterproductive constraints should also be avoided, particularly in specific strategic sectors where speed of action and investment ability are key.

Competitive, stable and predictable taxation is an essential instrument to attract investment and support business growth. The CPQ recommends, among other things, reducing the tax on reinvested profits in order to stimulate productive investment, maintaining a competitive advantage over the United States, and retaining effective measures such as super-productivity deductions. We are also thinking of strengthening tax credits for research and development by expanding eligibility for pre-commercialization and commercialization expenses, which are phases that can be described as a valley of death, since they are particularly difficult for many businesses. We also maintain that any tax increase, whether general or sectoral, must be avoided, as it would further weaken business competitiveness. In this context of the trade war, targeted measures are still needed to support the sectors directly affected by the tariffs, including the steel, aluminum, automotive, wood and copper sectors.

Beyond ad hoc support, it's mainly a question of helping businesses to adapt, diversify their markets and better integrate into national and international value chains. This requires, among other things, increased support for exports as well as initiatives that promote trade within the Canadian market itself. Once again, we see the efforts that have been made to promote interprovincial trade, but the results remain to be seen.

The CPQ also urges the government to pay particular attention to strategic sectors such as telecommunications and the life sciences, in particular by modernizing certain regulatory components. At the same time, we need to accelerate the integration of new technologies, particularly artificial intelligence, into Canadian businesses to increase their productivity and competitiveness.

On the energy front, we should focus on a diversity of supply sources as well as principles of energy efficiency and frugality, and using the right energy for the right use at the right cost, while strengthening our energy self-sufficiency.

In terms of government procurement, we believe the government needs to use its purchasing power more strategically. Where appropriate, preference should be given to local suppliers and consideration should be given to the economic benefits of public contracts, particularly in sectors affected by tariffs, while respecting the principles of competition and the sound management of public funds. Such an approach would promote not only innovation, but also greater participation by small and medium-sized businesses in Quebec and in Canada. We believe that Canada's defence industrial strategy must contribute to strengthening Canada's industrial fabric through—

[The Chair, Liberal, Karina Gould]

Ms. LLambías Meunier, you have about 10 seconds left.

[Michelle LLambías Meunier]

Perfect.

Let me conclude by saying that we recommend, among other things, reinvesting in the national trade corridors fund, particularly in the St. Lawrence corridor, making the required investments in municipal infrastructure and guaranteeing funding for public transit, as we just talked about a few minutes ago.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. LLambías. That concludes your time.

[Michelle LLambías Meunier]

Thank you.

[The Chair, Liberal, Karina Gould]

We will now continue with you, Mr. Lavigne, representing the Fédération des chambres de commerce du Québec. You have the floor for five minutes.

[Mathieu Lavigne, Vice-President, Public and Economic Affairs, Fédération des chambres de commerce du Québec]

Good afternoon, Madam Chair and committee members.

Thank you for the invitation and the opportunity to share our main expectations for the 2026‑27 budget.

The Fédération des chambres de commerce du Québec, or FCCQ, represents more than 40,000 organizations across Quebec, in every sector and region.

In the context of trade tensions, a sharp economic slowdown, persistent destabilization of supply chains and growing concerns about inflation, our recommendations have a central objective, which is to strengthen the competitiveness, resilience and growth capacity of Quebec and Canadian businesses.

We focus on four key priorities.

The first key priority is to strengthen business competitiveness. To achieve this, we recommend adopting tax and financial measures to support investment. Canada is laggard in tax competitiveness, in part because of a higher corporate tax rate than the average for Organisation for Economic Co-operation and Development countries. In a context where the U.S. has permanently reduced federal corporate income tax and consolidated a number of permanent incentives for investment, it is becoming urgent to act.

The first recommendation in the brief we submitted is therefore to reduce the general corporate tax rate and enhance the small business deduction. Our second recommendation is that the superdeduction incentives for productivity be made permanent. These are two essential measures to reduce the pressure on companies' cash flow and stimulate investment, which is currently stagnating.

Moreover, the tariff war is putting direct pressure on our manufacturers. Since April 6 and the application of section 232 tariffs on imports, the situation has become unsustainable.

That is why we make two other recommendations: expand the financial support programs for affected businesses by enhancing their non-refundable component; and restore the horizontal or automatic rebates of Canadian retaliatory tariffs on American steel for all manufacturing sectors, not just the automotive and aerospace sectors.

The second key priority is maximizing market access for our businesses. Despite this tariff war, our trade dependence on the U.S. remains high. The decline in exports to the U.S. is only partially offset by other destinations.

To support diversification, our fifth recommendation is to introduce a refundable tax credit for the exploration of new markets. This would mitigate risks and amortize the significant costs associated with diversification, particularly for our small and medium-sized businesses. Our sixth recommendation is to overhaul the CanExport SME program to promote sustainable international implementation rather than ad hoc activities, such as trade shows or business development.

Our seventh recommendation is to better support strategic sectors, including access to capital for dual-use advanced technologies and defence.

Our eighth recommendation is to provide our private companies with incentives to adopt sovereign digital solutions.

The third major priority is a permanent one for businesses in every region of Quebec, especially for SMEs, which is to offset the labour shortage. Labour scarcity remains an everyday challenge for businesses. In Quebec, there are more than 112,000 vacant positions, and 70% of those are located outside of Montreal. Restrictions to the temporary foreign worker program, or TFWP, have a major economic impact on businesses, as they jeopardize their growth and, in some cases, their survival. Moreover, the labour market is rapidly changing, particularly as a result of automation, which is affecting or will soon affect a significant portion of jobs.

That is why we recommend that the parameters of the TFWP be restored immediately to their September 2024 state, but also that employment insurance benefits be amended by tying them more directly to Quebec's occupational retraining programs.

The fourth major priority is to support the vitality of our regions, whose traditional economic sectors are suffering from economic instability.

As such, we recommend further support for the forestry sector by maximizing the use of wood in infrastructure and construction, encouraging and accelerating critical and strategic minerals development by giving the same incentives as we do for green technologies, and investing heavily in port and airport infrastructure to smooth out and expand our logistics corridors' capacity. The St. Lawrence corridor in particular is a strategic lever to increase Canada's logistical competitiveness.

In summary, our recommendations have a common theme and priority: empowering businesses to invest, innovate and conquer new markets in a more competitive economic environment. In a context of uncertainty and transformation, the next federal budget will be crucial.

Thank you for your attention. We look forward to your questions.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Lavigne.

Mr. Lefebvre, you have the floor for six minutes.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Thank you, Madam Chair.

Thank you, witnesses, for joining us.

Mr. Lavigne, with regard to negotiations with the U.S., Canada is currently putting a lot of energy into concluding agreements other than the one between Canada, the U.S. and Mexico.

What are your thoughts on that? Do you think it's more important to put energy into the agreement with the U.S.?

[Mathieu Lavigne]

In my opening remarks, I forgot to introduce my colleague, and I give myself a slap on the wrist for that. I'll let my colleague Hubert Rioux, the economic director of the Fédération des chambres de commerce du Québec, answer the question.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Okay.

[Hubert Rioux, Economic Director, Fédération des chambres de commerce du Québec]

Thank you, Mr. Lefebvre.

This is indeed a top priority for us. As we've said, since April 6, tariffs imposed on the fly have been unsustainable for a lot of manufacturing companies, especially those that make high-value-added products. They're the ones suffering the biggest shock. Without a doubt, the issue of tariffs must be a priority in the Canada—U.S.—Mexico Agreement renewal negotiations.

Until an agreement is reached, there are things we can do on our side. That's why we recommend enhancing the financial assistance programs for companies affected by the tariffs and, above all, reinstating the horizontal rebates on Canadian countertariffs, which affect American steel importers in particular. If they were relevant until last January, they are even more relevant today.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

If the Canadian Prime Minister were here and you had to give him two recommendations about negotiations with the U.S. and the efforts needed to resolve this issue as quickly as possible, what would they be?

[Mathieu Lavigne]

What my colleague just talked about is certainly extremely important. There are businesses whose survival is at risk. We've seen in the news that for the last few weeks or months, businesses have been closing down. These targeted measures are definitely extremely important.

As I said at the outset, the main priority is to adjust our own taxation. Our tax rate is too high. We're not competitive enough with the U.S. While they were imposing tariffs, the U.S. permanently cut taxes, which was already making us less competitive. It's a lever the federal government controls, regardless of what the Americans do. That's something we control. That's our first recommendation.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

My question is for you, Mr. Rioux, but I'd also like Ms. LLambías Meunier to answer the following question.

How can we accelerate AI integration in our businesses? As we know, Canada lags far behind when it comes to its businesses' productivity. How could AI help us in that regard?

[Hubert Rioux]

Things have been moving in the right direction in recent months, including through the Canadian sovereign AI compute strategy and the related infrastructure program. We welcomed that. What's missing is a strategy for first adoption of Canadian-developed technological solutions—AI, but also cloud computing, for example—in medium and large private companies.

We think creating tax incentives for technological investment, enhanced when our large private companies invest in Canadian and Quebec technology solution suppliers, would strengthen the federal approach to digital sovereignty. We'd be killing two birds with one stone, since it would accelerate the adoption of technologies by our companies and the development of our start-ups and SMEs that offer sovereign technological solutions.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Ms. LLambías Meunier, I'd like to ask you the same question. You also talked about accelerating AI integration in our businesses. I'd like to hear your thoughts on that.

[Michelle LLambías Meunier]

Quite a few companies have already completed what we call the diagnostic phase, meaning they've identified the potential uses and needs AI or new technologies could meet within their companies. Where they have difficulty once they've completed the diagnostic phase is deploying an internal action plan or deploying these technologies internally. I'm talking mainly about SMEs, because they don't necessarily have the necessary capacity, either financially or in terms of expertise, to deploy an action plan and measure the impact on productivity within 12 months, 18 months or 24 months.

Specific programs would be needed for support. It also has to be a progression format: diagnosis, support and efficiency measures.

I agree with my colleagues from the Fédération des chambres de commerce on tax incentives to encourage businesses to turn to local suppliers, whether in Quebec or elsewhere in Canada. Measures exist, but they're not sufficiently known.