Thank you very much, Mr. Chairman.
Good morning to all.
I will begin my remarks with a brief overview of the role of the Tax Policy Branch. I will then say a few words about the Department of Finance's actions in relation to fossil fuel subsidies and the steps we are taking to address recent recommendations by the Auditor General of Canada.
The main responsibility of the Department of Finance with respect to taxation is to support the government in its development of federal tax policy. For the Tax Policy Branch, this involves developing, analyzing and evaluating potential tax measures or adjustments to existing measures. It also involves drafting legislation and supporting its passage through Parliament.
Our analysis is guided by sound tax policy principles, in line with the objectives of ensuring a competitive, efficient, fair, and simple tax system. The analysis, review, and evaluation of either new or existing tax measures are carried out by finance employees with in-depth knowledge of the Canadian tax system. Our systematic and thorough analysis is ultimately presented to the minister for decisions.
In supporting the government in making decisions about the implementation of the G20 commitment to phase out inefficient fossil fuel subsidies, the department took a broad approach. You may know that there is no agreed definition of “inefficient fossil fuel subsidy” among the G20 for the purposes of the commitment. In this context the department has consistently identified, as potential fossil fuel subsidies, all federal tax measures that provide preferential treatment to the sector. The list of these measures is published annually by the department, along with their costs, in our reports on federal tax expenditures, which is tabled with the main estimates.
After identifying measures that potentially fall within the scope of the G20 commitment, the department has carefully analyzed whether or not these are inefficient measures, which in our view is an expression that refers to a broad spectrum of considerations. In that respect, the department's analytical framework, which we have shared with the Office of the Auditor General, can include detailed assessments of the need for policy intervention; an assessment of the effectiveness of a measure in meeting its policy objectives; whether measures meet fundamental policy objectives, such as fairness and simplicity; whether the measures give rise to any environmental concerns; as well as other legal, social, or fiscal considerations.
Canada has made significant progress toward the G20 commitment. As the Auditor General states in his report, Canada has announced action on eight tax measures that we consider to be inefficient fossil fuel subsidies. These measures include the phase-out of the accelerated capital cost allowance for oil sands in 2007; the reduction in deduction rates for intangible capital expenses in oil sands projects; phase-out of the Atlantic investment tax credit for oil and gas and mining in 2012; phase-out of the accelerated capital cost allowance for mining; reduction in the deduction rate for pre-production mine development expenses; and allowing accelerated capital cost allowance for liquefied natural gas to expire as scheduled in 2025. Most recently, budget 2017 included the rationalization of Canadian exploration expense treatment for oil and gas, as well as the phase-out of the ability of oil and gas producers to reclassify certain development expenses as more favourably treated exploration expenses.
Before I end, I would like to thank the Auditor General for the constructive feedback provided in the report. In response to his recommendations, the department has documented the definition it uses to analyze the G20 commitment, will continue to review benchmark tax measures that are specific to the fossil fuel sector, and will, of course, continue to provide high-quality analysis to the minister with respect to the G20 commitment.
I will be very happy to answer any questions from the committee.