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FINA Committee Report

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CANADIAN IDEAS: LEVERAGING OUR STRENGTHS

Chapter 1: Introduction

In 2019, growing concerns about climate change risks spurred demonstrations across the world and prompted parliaments in Canada and many other countries to declare a “climate emergency.”[1]

It was within this context that, in Summer 2019, the Standing Committee on Finance from the 42nd Parliament invited Canadians to share their proposals for the 2020 federal budget, notably in relation to the “required transition to a low-carbon economy.”[2] On 29 January 2020, the Standing Committee on Finance of the 43rd Parliament (the committee) adopted a motion to consider these proposals as part of its pre-budget consultations in advance of the 2020 federal budget.[3]

Following presentations from nearly 70 organizations and individuals during the pre‑budget hearings in Ottawa from 3–6 February 2020, and after having received more than 270 briefs submitted in Summer 2019 or in support of testimony in 2020, the committee presents its report on the proposals that should be included in the 2020 federal budget.

Chapters Two, Three, Four and Five highlight the themes of the proposals related respectively to the environment and climate change, people, communities and businesses made by the organizations and individuals who appeared before the committee. These chapters also contain the committee recommendations in each area.

Chapter Six highlights the themes of the proposals concerning the government’s fiscal policy and regulatory framework, and presents the committee recommendations in these areas.

The proposals that organizations and individuals made through presentations before the committee and briefs are categorized in Appendix A. The topics that were addressed in the briefs received during the summer of 2019 are presented in Appendix B.

Chapter 2: Environment and Climate Change

According to the United Nations’ Intergovernmental Panel on Climate Change (IPCC), increased concentrations of greenhouse gas (GHG) emissions are negatively affecting people and the environment around the globe. This includes altering ecosystems beyond the survival capabilities of their natural inhabitants, increasing the frequency of dangerous weather events, and creating food and water shortages. Figure 1 shows the GHG emissions of G7 countries on a per capital basis. In 2017, Canada had the second highest per capita GHG emissions of the G7 after United States.

Figure 1—Per Capita Greenhouse Gas Emissions, G7 Countries, 2007 and 2017 (tonnes of CO2 equivalent per capita)

Figure 1 is a bar chart displaying tonnes of CO2 equivalent per capita in G7 countries for 2007 and 2017. For reference year 2007, the per capita emissions were 7.1 tonnes in Italy, 7.2 tonnes in the United Kingdom, 7.3 tonnes in France, 10.2 tonnes in Japan, 11.0 tonnes in Germany, 19.6 tonnes in Canada and 19.8 tonnes in the United States. The data was sourced from the Organisation for Economic Co-operation and Development and the International Monetary Fund.

Note:      Organisation for Economic Co-operation and Development’s data on GHG emissions excludes land use, land-use change and forestry (LLCF).

Source:  Figure prepared using data from: Organisation for Economic Co-operation and Development, Greenhouse gas emissions and International Monetary Fund, World Economic Outlook Database, October 2019, Population, accessed 12 February 2020.

On the topic of the environment and climate change, witnesses focused their testimony on issues surrounding climate change policy, carbon pricing, environmental assessments, transitioning to a low-carbon economy, specific federal supports and Canadian land, parks, and waters.

With respect to climate change policy, witnesses highlighted a national climate change strategy, funding to municipalities, various energy efficiencies, international climate financing, model farms, agricultural approvals, a low-carbon building workforce, energy sector transitioning, circularity in Canadian economy, the low-carbon economy fund, single-use plastics, and Article 6 of the Paris Agreement.

Speaking on the Canadian Carbon pricing regime, witnesses focused on revenue use, fuel exemptions, farming activities, Canadian imports, large emitters, and northern challenges. Topics put forward with respect to environmental assessments included external expert advisory panels, Canada’s environmental assets, and collaborations with Indigenous and First Nations peoples.

Witnesses who spoke on transitioning to a low-carbon economy discussed sustainable finance, climate-related data analytics and emission inventories, zero-emission vehicles, farming practices, infrastructure retrofits, plastic packaging, fuel subsidies, Canadian shipping, and related legislative proposals.

The committee heard a number of requests for specific federal support and/or funding for green infrastructure projects, transit, heavy-duty vehicle de-carbonization, the Greenhouse Gas Reduction Fund, the Waterfowl Management Plan, zero-waste business investment, pest control, geospatial data, Statistics Canada’s environmental statistics, the Chemicals Management Plan, “agri-environmental” programs, and the efforts of territorial governments.

With respect to Canadian land, parks, and waters, witnesses touched on protected area management such as Indigenous and marine protected areas, a “Nature-Based Solutions Fund,” wetland and grassland restoration, geographic data collection, abandoned fishing equipment, water monitoring, Great Lakes’ initiatives, ministerial responsibilities, bird migration, and the enforcement or enhancement of the Canadian Environmental Protection Act, 1999, the Fisheries Act and the Species at Risk Act.

“What will success look like? It is when climate-conscious investment and risk management become business as usual. It needs to become embedded in everyday financial decisions, products, and services. It is when we stop referring to “sustainable finance” because it has become synonymous with simply finance—and let's understand that today, it is not.”

Barbara Zvan

Recommendation 1

Adopt the recommendations of the Expert Panel on Sustainable Finance that are within federal jurisdiction and support other jurisdictions and the private sector to do the same.

Recommendation 2

Adopt a transparent environmental framework with legislated five-year GHG reductions targets to achieve net-zero emissions by 2050, and publish the government’s ongoing progress in mitigating the impacts of climate change.

Recommendation 3

Develop and implement a fully funded strategy to transition to a low-carbon economy, which would limit some of the most devastating impacts of climate change for our generation and those to come while putting justice for Indigenous people, workers and the least fortunate at the heart of the transition to a green economy.

Recommendation 4

Expand the network of rapid charging stations for electric vehicles.

Recommendation 5

Examine ways to encourage more Canadians to transition to zero-emission vehicles and manufacturers to produce and sell a greater number of such vehicles.

“The government should move forward on its commitment to offer incentives for purchasing used electric vehicles. The purchase incentive could be retooled so that the scale of the incentive correlates with income level. Low-income Canadians benefit most from the cost savings that come from owning an electric vehicle, but low-income Canadians are not always in a position to spend more up front even if they see the long-term benefit.”

Clean Energy Canada

Recommendation 6

Create a rebate for used electric vehicles.

Recommendation 7

Continue to help establish and maintain Indigenous protected areas and conservation areas so that Canada fulfills its international commitments to protect biodiversity by 2020 and beyond.

Chapter 3: People

Canadians collectively embody a rich mosaic of various cultures and traditions. And, like Canada’s vast geography, they personify the regional character of their respective communities as well as their province or territory. Given the wide range of their individual realities, federal programs and services seek to meet the diverse needs of Canadians.

During its 2020 pre-budget consultations, the committee heard from witnesses who proposed various measures to improve the lives of Canadians. These topics ranged from improving health services, making education more accessible, modifying the personal income tax regime, and implementing measures for childcare and caregiving. Specific measures for Indigenous communities, seniors and under-represented groups were also proposed.

Health

According to the Patented Medicine Prices Review Board,[4] Canadian public drug plan expenditures represent a significant portion of the overall healthcare budget. It concluded that “the total cost of prescription drugs in Canada was $33.7 billion in 2018, with the largest component (42.7%) financed by the public drug plans and the remainder paid by private plans (36.6%) or out of pocket by households and individuals (20.7%).” Relative to the other G7 members, pharmaceutical spending stood at $794 USD per capita in Canada in 2016. As demonstrated in the Figure 2, this is in line with the G7 average of $761 USD.

Figure 2—Per Capita Pharmaceutical Spending, G7 Countries, 2016 (USD)

Figure 2 is a vertical bar chart displaying pharmaceutical spending in G7 countries on a per capita basis measured in United States dollars for 2016. In 2016, per capita pharmaceutical spending was US$452 in the United Kingdom, US$572 in Italy, US$649 in France, US$794 in Canada, US$800 in Germany, US$838 in Japan and US$1,220 in the United States. The data was sourced from the Organisation for Economic Co-operation and Development.

Source:  Figure prepared using data from: Organisation for Economic Co-operation and Development, Pharmaceutical Spending, accessed 12 February 2020.

Witnesses made proposals which focused on a range of public health initiatives. These items included proposals relating to health research, homecare, pharmacare and mental health. Furthermore, propositions for funding were requested for a variety of charitable organizations involved in the promotion of health-related initiatives.

Health Research

Proposals regarding health research focused on providing support to initiatives that examine the health impacts of climate change on individuals, communities and businesses. Other recommendations included modernizing the health care system through innovation and providing targeted investment in pediatric cancer research and aging.

Recommendation 8

Invest $10 million annually over three years towards paediatric cancer research.

Mental Health

With regard to mental health, propositions focused on adapting existing programs to deal with the psychological impacts of climate change, additional resources be made available to prepare communities to adapt and cope with the consequences of climate change, funds be put towards the development of new programs and services, and funding be earmarked to modify the delivery model for dementia patients.

“[M]ental health is a serious problem not only for firefighters but also for all the first responders of this country.”

Canadian Association of Fire Chiefs

Recommendation 9

Invest $2.5 million to provide all firefighters with mental health awareness training.

“The stated commitment to mental health sends a clear message to people in Canada, who increasingly see mental health as important and who are working together to break down stigma around mental illness. People from all walks of life are demonstrating an unprecedented level of honesty and engagement, and with it, a desire for change.”

Canadian Mental Health Association

Recommendation 10

Consult with industry stakeholders and healthcare providers to help address funding needs to coordinate mental health services across the country.

Recommendation 11

Invest $16 million over four years to enable Inuit, Métis and First Nations communities and organizations to foster Indigenous leadership and involvement in mental health care, and to effectively respond to the disproportionate impacts of climate change on the mental health of Indigenous peoples and communities.

Pharmacare

Multiple organizations called for the establishment and implementation of a universal pharmacare program. Witnesses also testified that funding for vaccines and various types of insulin should be part of the program.

“Canada is the only developed nation with universal health care and no corresponding coverage of prescription drugs.”

Canadian Doctors for Medicare

Recommendation 12

Implement a universal, public, national pharmacare program.

Public Health Initiatives

Witnesses proposed the implementation of a national diabetes strategy, that investment be put towards diabetes research, and that the strategy be tailored to facilitate Indigenous specific approaches regarding its implementation. There was also a call for the creation of a national registry for patients with type 1 diabetes. Other witnesses recommended the implementation of an annual cost-recovery fee on the tobacco industry, increased funding towards the improvement of cardiac-related health services, and continued support be put towards the federal framework for post-traumatic stress disorders.

“Tobacco use is the leading preventable cause of disease and death in Canada, killing 45,000 Canadians annually including 30% of all those who die of cancer. While significant progress has been made, there are still five million Canadians who smoke. An enormous amount of work needs to be done to achieve the federal government's objective of under 5%.”

Canadian Cancer Society

Recommendation 13

Increase the federal tobacco tax, which has proven effective in reducing tobacco use among youth.

“There are no resources or mandate to roll cardiac care data up into a national comparative report, as we do in cancer care with … the Canadian Partnership Against Cancer. Provinces and territories have few tools with which to do a comparative analysis to understand how other places are improving their systems, how they're gaining efficiencies and how they're delivering better care.”

Canadian Cardiovascular Society

Recommendation 14

Support the existing work of the Canadian Cardiovascular Society (CCS) on cardiac benchmarking in Canada to create a permanent national cardiac benchmarking program in accordance with the CCS plan, by making a three-year investment of $2.5 million each year to enable the CCS to sustain the program.

“We expect that we can reduce the number of Canadians diagnosed with diabetes by 110,000 per year once [D]iabetes 360° is implemented. I should note that those benefits begin to accrue from year one. At a cost of only $150 million total over seven years, [D]iabetes 360° would only need to prevent 12,000 cases of type 2 diabetes to pay for itself. Put another way, the payback period for this program is less than a month and a half.”

Diabetes Canada

Recommendation 15

Support the implementation of a new national diabetes strategy based on the Diabetes 360˚ framework and facilitate the creation of Indigenous-specific strategic approaches led and owned by Indigenous groups.

Recommendation 16

The government move forward with dedicated funding to improve access to rare disease treatments in the upcoming fiscal year.

Other Health-Related Proposals

Witnesses discussed the importance of a transparent and equitable process regarding federal funding programs for health organizations. They also suggested that additional funding be allocated towards the Strategic Innovation Fund, the CAN Health Network, digital platforms in health organizations and home care.

Recommendation 17

Invest in comprehensive home care for people who cannot keep living in their homes.

Education and Training Skills

According to Statistics Canada’s publication Education Indicators in Canada: An International Perspective 2019, the majority of international students in tertiary education in Canada for reference year 2016-2017 were registered in Bachelor’s or equivalent level programs. Figure 3 presents the number of international students by region who have crossed a national or territorial border for the purpose of education and are enrolled in Canada. For the academic year ending in 2017, figures from the UNESCO Institute for Statistics show that over 124,000 students came from Asian countries (82,310 students from East Asia and Pacific countries and 42,113 students from South and West Asian countries).

Figure 3—Number of International Students by Region of Origin Enrolled in Tertiary Education Institutions in Canada, 2017

Figure 3 is a horizontal bar chart displaying the number of international students grouped by geographic region enrolled in tertiary education institutions in Canada in 2017. In 2017, 82,310 students came from East Asian and Pacific countries, 42,113 from South and West Asian countries, 31,566 from North American and Western European countries, 17,577 from Sub-Saharan African countries, 12,756 from Arab States, 12,582 from Latin American and Caribbean countries, 4,812 from Central and Eastern European countries and 900 from Central Asian countries. The data was sourced from the UNESCO Institute for Statistics.

Source:  Figure prepared using data from: UNESCO Institute for Statistics, Inbound internationally mobile students by region of origin, accessed 12 February 2020.

Witness proposals focused on improving the accessibility of Canada Student Grants to graduate students and supporting projects to improve energy efficiency on college campuses. With respect to skills training, proposals included the promotion of skilled trades nationwide and supporting skilled trades in industries that minimize their environmental impact. Other recommendations included supporting private sector organizations who provide skills training with additional tax credits and granting additional access for international students to obtain work experience during their studies.

Recommendation 18

Invest in a national campaign to promote skilled trades as first-choice careers and provide funding for data collection of local and regional labour market information, so that all levels of government, employers, and other relevant organizations are able to better match Canadians with available job and career opportunities. This will also allow governments to manage future labour skills requirements.

Employment and Labour

The Organisation for Economic Co-operation and Development (OECD) stated that “employment growth in Canada has increased markedly, along with strong rises in population and labour force participation in 2019.”[5] Moreover, the OECD indicated that the “unemployment rate has continued falling to record lows in Canada.”[6] Figure 4 below presents the unemployment rates in G7 countries in 2019. Once again, Canada’s unemployment rate was similar to the G7 average.

Figure 4—Unemployment Rate in G7 Countries, 2019

Figure 4 is a vertical bar chart displaying the unemployment rate in G7 countries in 2019. In 2019, the unemployment rate was 2.4% in Japan, 3.2% in Germany, 3.7% in the United States, 3.8% in the United Kingdom, 5.8% in Canada, 8.6% in France and 10.3% in Italy. The data was sourced from the International Monetary Fund.

Note:      International Monetary Fund’s estimates for 2019.

Source:  Figure prepared using data from: International Monetary Fund, World Economic Outlook Database, October 2019, accessed on 12 February 2020.

Organizations stressed the need to improve employment insurance by expanding benefits, changing eligibility requirements, and implementing projects to assist seasonal workers. Other proposals included sector specific initiatives to deal with labour shortages as well as support for initiatives directed towards youth and experienced workers.

“I want to insist on one point that was supposed to be addressed and, in our opinion, is still not. This is the famous black hole faced by seasonal workers who, because they do not have enough hours of work, can still access the employment insurance program, but not for long enough. So they go through a period when they are still unemployed but not receiving employment insurance.”

Confédération des syndicats nationaux

Recommendation 19

Undertake a comprehensive review of the Employment Insurance system, including the “black hole” and to guarantee the independence of the fund.

“[A]ccording to a study by the Parliamentary Budget Officer released in April 2019, the additional cost of extending sickness benefits, if they were increased from 15 to 50 weeks, would be $1.1 billion by 2020.”

Conseil national des chômeurs et chômeuses

Recommendation 20

Increase the duration of EI sickness benefits from 15 weeks to 50 weeks.

Recommendation 21

Work with the various hotel and tourism associations in Canada to develop and implement a program to address seasonal labour shortages.

Recommendation 22

Replicate the new three-year immigration pilot program for the agri-food sector, which gives temporary foreign workers the option of becoming permanent residents, in the hospitality industry in order to mitigate the negative effects of the labour shortages that industry experiences.

Recommendation 23

Review and update the Temporary Foreign Worker Program by reducing application fees, simplifying the process for workers submitting new applications and creating a path to permanent residence.

Recommendation 24

Establish measures that will encourage recent graduates and immigrants to accept jobs in rural regions.

Personal Finances and Taxation

According to a publication of the Library of Parliament, “personal income from almost all domestic and foreign sources is taxed, including labour income from employment or self‑employment, pension income, capital income, real and intellectual property income, and most government benefits.”[7] This publication also explains that “Canada’s personal income tax system is progressive, and individuals with higher incomes pay more in taxes and pay a greater percentage of their incomes in taxes.”[8] Figure 5 compares the combined federal and provincial income tax rates for the 2019 tax year.

Figure 5—Combined Top Federal and Provincial Income Tax Rates in Canada, 2019 (%)

Figure 5 is a vertical bar chart displaying the combined top federal and provincial personal income tax rates in Canada for 2019. In 2019, the combined top federal and provincial personal income tax rate was 44.5% in Nunavut, 46.2% in Ontario, 47.1% in the Northwest Territories, 47.5% in Saskatchewan, 48.0% in Alberta, 48.0% in Yukon, 49.7% in Prince Edward Island, 49.8% in British Columbia, 50.4% in Manitoba, 51.3% in Newfoundland and Labrador, 53.3% in New Brunswick, 53.3% in Quebec and 54.0% in Nova Scotia. The data was sourced from the Canada Revenue Agency.

Note:      The combined top federal and provincial income tax rate for Quebec includes the Quebec Abatement, which provides a reduction of 16.5 percentage points of federal personal income tax for all tax filers in Quebec.

Source:  Canada Revenue Agency, Canadian income tax rates for individuals - current and previous years.

Proposed measures on taxation included no increases to the personal income tax rates and the capital gains inclusion rates. There were also suggestions to freeze planned changes to the taxation of stock options and amend measures related to income splitting. Proposals were made on existing tax credits and deductions which included changes to Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) withdrawal rules, medical expenses, and incentives for home ownership. Moreover, changes to business succession provisions were also recommended in order to facilitate the transfer of ownership within families.

Concerning proposals on consumption taxes and excise duties, sector-specific proposals were made relating to duties being applied in the alcoholic and non-alcoholic beer, automotive, and short-term rental accommodation industries. Furthermore, measures relating to the taxation of tobacco and e-cigarette products were presented.

“We commend the government for making family farm succession a priority. We believe this is an issue for every Canadian family business. Currently, Canadian business owners experience a penalty when selling a business within their family, such that there is often double tax.”

MNP LLP

Recommendation 25

Make changes to the succession planning measures related to family business and farms to ensure fairness and certainty in intergenerational transfers, and that such transfers are done in an equitable way.

Indigenous Priorities

Indigenous organizations made a series of proposals that touched on supporting education and skills training in First Nations communities. These initiatives called for financial support for all educational levels. This includes reinforcing regional education models with additional financial support. Moreover, proposals were made to support Indigenous children by reinforcing the need to financially back the implementation of the following legislation: An Act respecting First Nations, Inuit and Métis children, youth and families and Indigenous Early Learning and Child Care Framework. There were also recommendations to support language instruction and industry-specific skills training relating to employment, entrepreneurship strategies for Indigenous women and economic development programs.

Public security is also a priority to Indigenous communities and organizations called for the creation of new initiatives. These proposals included providing additional investment to police agencies, supporting the existing security infrastructure, and implementing restorative justice programs in indigenous communities across Canada. Furthermore, providing financial backing to develop institutional governance was addressed as well as the establishment of an Arctic infrastructure bank.

Infrastructure priorities for Indigenous communities included improving road networks and water infrastructure. Other proposals focused on low-cost housing, housing affordability and income assistance.

“Right now, about 1.5 days per year are allocated to each land claim table. In the Northwest Territories, Colville Lake has a work plan to get to its self-government agreement in five years, but based on the federal government's allocation of 1.5 days of work per land claim table, that would draw it out to 20 years. From a reconciliation perspective and from an economic certainty perspective, this needs to be addressed.”

Northwest Territories Association of Communities

Recommendation 26

Address the backlog of land claim and self-government negotiations with Indigenous organizations by increasing the staffing levels of federal negotiators.

“Investing massively in [F]irst [N]ations housing would contribute to reducing the social problems observed, while benefiting all partners seeking to stimulate economic and social development.”

Assembly of First Nations Quebec-Labrador

Recommendation 27

Increase its support for Indigenous housing, including dedicated funding for northern communities.

Recommendation 28

Speed up work to improve Indigenous communities by:

  • Providing clean drinking water;
  • Renovating existing housing and building new housing;
  • Implementing Bill C-92, which addresses child and family services.

Recommendation 29

Recognize Indigenous police services as essential services under the law to ensure they can obtain stable long-term funding like other police services, and expand these services in northern territories.

“Impossible to overlook, [I]ndigenous languages are another key area of focus. First [N]ations want to ensure the survival of their ancestral languages, in accordance with the UN guidelines set out in the resolution proclaiming 2019 the International Year of Indigenous Languages.”

Assembly of First Nations Quebec-Labrador

Recommendation 30

Include stable, predictable and sustainable funding in its next budget to implement the provisions of the Indigenous Languages Act.

Recommendation 31

Implement the Truth and Reconciliation Commission’s 21st Call to Action by providing “sustainable funding for existing and new Aboriginal healing centres to address the physical, mental, emotional, and spiritual harms caused by residential schools, and to ensure that the funding of healing centres in Nunavut and the Northwest Territories is a priority.”

“At the end of the day, many of our members are committed to increasing employment levels from [I]ndigenous communities in their companies on site in all levels, whether it's an entry-level position, a managerial position or a C-suite position. That is the goal and the objective for the companies that are operating in proximate communities. We have programs in place, and amplifying those programs is very important to ensure that the benefit can be obtained by all parties involved.”

Mining Association of Canada

Recommendation 32

Provide incentives for hiring, retaining, and training Indigenous workers.

Child care and Caregiving

Organizations proposed the development of legislation on child care, the creation of a secretariat to coordinate the work at the federal and provincial levels, and increased funding towards child care programs to be in alignment with existing international benchmarks. Other proposals included raising the quality of child care services and ensuring its affordability.

Caregiving proposals focused on providing additional resource support to communities to provide such care. These supports came in the form of aligning and improving employment standards between the federal government and the provinces, making amendments to existing tax credits such as employment insurance and the Canada caregiver credit, and extending the maximum period for caregiving benefits.

Recommendation 33

Continue to negotiate bilateral funding agreements with the provinces and territories to enhance the quality of child care services by improving wages, working conditions and training for workers; to improve access by significantly increasing the number of quality, licensed child care services that offer inclusiveness and flexibility for all age groups, based on a planned and publicly managed approach; and to make child care affordable for parents.

Poverty, Seniors and Under-Represented Groups

According to the Organisation for Economic Co-operation and Development, “long‑run increase in income inequality does not only raise social and political but also economic concerns: income inequality tends to drag down GDP growth, and it is the rising distance of the lower 40% from the rest of society which accounts for this effect.”[9]

Figure 6 compares the level of income inequality in G7 countries using the Gini coefficient, the most commonly used measure of inequality. In 2015, Canada had a lower level of income inequality than the average of G7 countries. The United States was the most unequal country of the G7, while Germany was the most equal one.

Figure 6—Income Inequality, G7 Countries 2015 (Gini Coefficient)

Figure 6 is a vertical bar chart displaying the Gini Coefficient, which is a measure of income inequality, in G7 countries for 2015. A Gini coefficient of 0 means complete equality, while a Gini coefficient of 1 means complete inequality. 2015 is the most recent year for which Gini coefficients are available for all G7 countries. In 2015, the Gini coefficient was 0.29 in Germany, 0.30 in France, 0.32 in Canada, 0.33 in Italy, 0.34 in Japan, 0.36 in the United Kingdom and 0.39 in the United States. The data was sourced from the Organisation for Economic Co-operation and Development.

Notes:    A Gini coefficient of 0 means complete equality, while a Gini coefficient of 1 means complete inequality. 2015 is the most recent year for which Gini coefficients are available for all G7 countries.

Source:  Figure prepared using data from: Organisation for Economic Co-operation and Development, Income Inequality, accessed 10 February 2020.

Proposals aimed at individuals with disabilities focused on the accessibility of programs to ensure that there are no barriers to access. This included increasing access to Health Canada approved treatments. Moreover, it was demanded that the recommendations made by the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities’s report on Canadians living with episodic disabilities be implemented. Some of the measures mentioned were amendments to eligibility criteria for the Canada Pension Plan Disability benefits and making the disability tax credit fully refundable. Other measures considered were simplifying the tax system to consider individuals with disabilities and the automatic qualification of the disability tax credit for individuals with type 1 diabetes.

Proposals aimed at the LGBTQ2 community called for policy reforms to ensure discriminatory practices in governmental programs and service delivery are eliminated. There were also calls to improve data collection and research on the LGBTQ2 community as well as Indigenous women, and to fully integrate gender-based analysis in the research process.

Measures aimed at improving programs for seniors were also recommended. Organizations called for the creation of a federal pension insurance program, insolvency legislation to extend pension liability in the event of corporate insolvency, increasing the benefits of existing programs such as Old Age Security, the Guaranteed Income Supplement and the Canada Pension Plan survivor benefit.

It was also proposed that a new indicator be created to measure poverty in Canada in order to replace the existing market-basket measure.

“The costs of paying for medication, services, equipment and treatment are a significant burden for people with [multiple sclerosis] and their families. Intertwined with this burden are complicated application processes, requirements for numerous verified medical forms and strict eligibility criteria for programs. When [multiple sclerosis] stops people from working, they should be able to access adequate income and disability support. This situation is amplified for women. In Canada, MS affects women three times as often as men.”

Multiple Sclerosis Society of Canada

Recommendation 34

Modify the eligibility criteria for the Canada Pension Plan disability benefits and the disability tax credit to include people with episodic disabilities under the new definition of disability in the Accessible Canada Act.

Recommendation 35

Amend the requirements for the disability tax credit by reducing the hours to qualify and institute automatic qualification for all Canadians who require life sustaining therapy.

Recommendation 36

Amend the disability tax credit to make it refundable.

Recommendation 37

Eligibility for the disability tax credit (DTC) and a registered disability savings plan (RDSP) be uncoupled so that individuals who are denied the DTC do not have their RDSP government co-contributions clawed back.

“[T]hey face a number of costs. Some seniors go without medication because they don't have enough income.”

Réseau FADOQ

Recommendation 38

Include withdrawals from Registered Retirement Savings Plans and Registered Retirement Income Funds that are made for medical reasons among the income exemptions for the Guaranteed Income Supplement.

Recommendation 39

Establish measures for employers to support employee training and retention for those age 65 and over who want to work, and raise the maximum income that seniors can earn before losing part of their Guaranteed Income Supplement payment.

Recommendation 40

Increase the Canada Pension Plan and Quebec Pension Plan survivor’s benefits.

Recommendation 41

Extend to three months the duration of the period during which Old Age Security benefits are paid to a deceased individual for the benefit of the surviving spouse.

“LGBTQI2S communities experience the largest gaps in housing access and income security. Twenty to 45 per cent of Canada's homeless youth population identify as members of the LGBTQI2S community. LGBTQI2S Canadians experience stigma and discrimination within the health care system [and] continue to experience discrimination in the workplace.”

Egale Canada

Recommendation 42

Introduce a fund to support community organizations that advance the human rights of LGBTQI2S Canadians.

Recommendation 43

Invest in veterans issues, particularly to eliminate the delays veterans experience while awaiting a decision regarding their request for financial support.

Chapter 4: Communities

Canadian communities play their own role in our country’s economy and have requirements that are distinct from the individuals and business who live and work within them. In order for communities to flourish, they must be safe, secure, and equipped with the infrastructure that enables their economic and social activities. Charities, not-for-profits and social enterprises also play an important role in our communities, as they provide a public benefit that can meet the specific needs of their regions.

Safety and Security

Levels of criminal activity are an important factor in the safety of a community, and correspondingly, its economic activity. Figure 2 shows the rates of Criminal Code violations, including traffic violations, across Canada. In 2018, the rates of Criminal Code violations of the three territories and the four western provinces were significantly higher than the Canadian average.

Figure 7—Rates of Criminal Code Violations Including Traffic, by Province or Territory, Canada, 2018 (violations per 100,000 population)

Figure 7 is a horizontal bar chart displaying the rate of Criminal Code violations, including traffic, per 100,000 population by province and territory in 2018. In 2018, the rate of Criminal Code violations, including traffic, per 100,000 population was 44,869 in the Northwest Territories, 39,314 in Nunavut, 21,131 in Yukon, 12,245 in Saskatchewan, 9,719 in Manitoba, 9,019 in Alberta, 7,725 in British Columbia, 5,868 in Newfoundland and Labrador, 5,827 in Canada, 5,624 in New Brunswick, 5,422 in Nova Scotia, 5,202 in Prince Edward Island, 4,311 in Ontario and 3,770 in Quebec. The data was sourced from Statistics Canada.

Source:  Figure prepared using data from: Statistics Canada, "Table 35-10-0177-01: Incident-based crime statistics, by detailed violations, Canada, provinces, territories and Census Metropolitain Areas," accessed 11 February 2020.

With respect to the safety and security of Canadians, witnesses highlighted issues surrounding flooding, flood mapping, earthquakes, national fire advisors, firefighting and firefighter mental health initiatives, the Joint Emergency Preparedness Program, Heavy Urban Search and Rescue task forces, Project Lighthouse and cyber security capabilities, beneficial ownership registries for property, high-risk insurance, and the Royal Canadian Mounted Police’s recruitment and staffing.

“[M]oney launderers are able to do what they do because of their ability to be “invisible” and “anonymous”. A publicly accessible registry of beneficial ownership would help address that concern.”

Appraisal Institute of Canada

Recommendation 44

Work with the provinces and territories to create a national public registry of the beneficial owners of corporations operating in Canada.

“Prospective homeowners, developers and the mortgage-lending industry rely, in part, on information gathered by appraisers to make their buying, lending and development decisions. Updated flood maps that would be made available to the real estate industry, and in fact to the public, would assist appraisers in providing more accurate information to those relying on their reports.”

Appraisal Institute of Canada

Recommendation 45

Partner with the provinces and territories to complete all flood maps in Canada to ensure citizens have a fuller understanding of the risks faced when purchasing a home and introduce a national flood insurance program that recognizes the varying levels of risk faced by Canadians depending on their location and relevant demographic factors.

“[The Disaster Adaptation and Mitigation Fund] was heavily oversubscribed in the previous iteration. We know across the country that the demand far outstrips the dollars that are available.”

Federation of Canadian Municipalities

Recommendation 46

Commit additional funding for the Disaster Adaptation and Mitigation Fund.

“In order to improve that resiliency and to provide a healthier work-life balance, which can only lead to improved service delivery and a safer Canadian public, the RCMP needs more police officers.”

National Police Federation

Recommendation 47

Increase funding for the Royal Canadian Mounted Police to strengthen its capacity to recruit and train more officers.

Housing and Infrastructure

Certain witnesses touched on housing issues related to the mortgage “stress test,” 30‑year amortization periods, the National Housing Strategy, the National Housing Co‑Investment Fund, land write-downs, long-term rental assistance, co-operative housing, retrofit subsidies, protections for seniors, regional requirements, affordable housing, provincial/territorial funding partnerships, and the National Building Code.

Witnesses who spoke about Canadian infrastructure requested that the Committee consider proposals on public transit electrification, funding and partnerships with municipalities, the Disaster Mitigation and Adaptation Fund, the Canada Infrastructure Bank, the National Trade Corridors Fund, 5G infrastructure, a climate adaptation fund for critical energy infrastructure, the use of the Gas Tax Fund, the Trade and Transportation Corridor Initiative, flood defence, data collection, and rail connectivity.

Speaking specifically on rural and/or northern regions, witnesses focused their testimony on issues surrounding rural broadband, a pan-territorial infrastructure strategy, a dedicated northern infrastructure fund, all-season road networks, a long-term infrastructure plan for agriculture, regional fiber internet feasibility, telecommunications, and energy needs.

“Let us not forget that a lack of affordable housing puts a brake on economic development and that community housing is an amazing solution to the labour problem, especially in the regions.”

Association des groupes de ressources techniques du Québec

Recommendation 48

Maintain current subsidies for social housing agreements while increasing budgets for building, renovating and remodelling social and affordable housing.

Recommendation 49

Launch a national housing forum that would bring together provinces, territories, municipalities and the federal government to analyze municipal and regional housing requirements and coordinate action on key solutions to affect housing affordability, including both demand and supply-side measures, as well as rental housing and supply and data gaps.

Recommendation 50

Establish a program to provide home energy audits for homeowners and invest in home energy retrofits.

“[The] commitment to make Energy Star certification mandatory for all home appliances by 2022… has created great uncertainty in the market. Some retailers are rethinking their purchasing decisions because they do not want to be left with inventory that can no longer be sold in two years.”

Association of Home Appliance Manufacturers Canada

Recommendation 51

Examine the impacts of any plans to make Energy Star Certification mandatory by 2022.

“Applying the stress test on borrowers who may want to switch lenders at renewal could prevent consumers from obtaining the most competitive interest rate and terms that might otherwise be available in the marketplace.”

Appraisal Institute of Canada

Recommendation 52

Exempt mortgage renewals from the stress-test where the mortgagor has already met the obligations of their original mortgage.

“Transportation accounts for almost one quarter of Canada's emissions. Based on recent Government of Canada estimates, we know there are at least 1.5 million tonnes of pollution to be saved by electrifying public transit buses and trains. Depending on where you are in the country, an emissions-free bus will pollute 40% to 90% less than its diesel counterpart.”

Clean Energy Canada

Recommendation 53

Introduce a dedicated fund to assist municipalities that wish to electrify their transit fleets in partnership with the federal government. Investments would be focused on buses and the required infrastructure needed to keep them operational. Because of the difficulties inherent in switching en masse from a diesel system, a pilot project model offers the best path forward from a technical and financial perspective.

“The decay, just on public infrastructure, will be in the order of $1.3 billion, which is huge for a little jurisdiction of 42,000 people. Neither the communities nor the territorial government has the ability to absorb those sorts of additional costs.”

Northwest Territories Association of Communities

Recommendation 54

Make the investments necessary to significantly reduce the northern infrastructure gap to address the transportation, connectivity, energy, and climate-based challenges Northerners face.

Recommendation 55

Create a green renovation program with a commercial building component providing fiscal support that would cover both energy efficiency renovations and heating system electrification.

“Canada's hospital infrastructure is ancient. Much of it is made up of 50-year-old hospitals, and yet Canada's research hospitals and health organizations continue to be excluded from most federal infrastructure funding programs, including the disaster mitigation and adaptation fund, and many others.”

HealthCareCAN

Recommendation 56

Allow hospitals to be eligible for green retrofitting funding through various existing and new funding streams, including disaster mitigation funding.

Recommendation 57

Implement the second phase of the Connect to Innovate program and release the funding rapidly.

Recommendation 58

Render small regional airports eligible for the same funding available to large airports.

Charities, Not-For-Profits and Social Enterprises

Witnesses underscored certain topics related to Canadian charities, not-for-profits and social enterprises. These topics included support for the Canadian Juries Commission, the Vanier Institute of the Family, Statistics Canada’s charitable sector data collection, a National Inuit Strategy on Research, and the need to ensure that these types of organizations are eligible for business subsidies aimed at reducing their climate impact.

“Despite its core function, jury duty has been vastly overlooked, undervalued, and underinvested in, and it has not kept pace with the modern world.”

Canadian Juries Commission

Recommendation 59

Provide $20 million in funding over 10 years to the Canadian Juries Commission to support juror mental health.

Chapter 5: Businesses

Businesses are the means by which Canadians get most of the goods and services that they, as consumers, need or want. Businesses also employ the majority of Canadians and corporate income tax is the second largest single source of federal revenue after personal income tax.[10] Corporations that are resident in Canada are required to pay tax on all taxable income earned worldwide, and some are eligible for size and/or sector‑specific corporate income tax rate reductions. Capital cost allowance rates also reduce the amount of tax payable as the cost of certain assets is deducted over their economic life.

During this year’s pre-budget consultations, witnesses focused their testimony on various aspects of corporate taxation, trade and tourism, mining, the energy sector, agriculture, fisheries, and supports for business innovation.

Corporate Taxation

As shown in Figure 8, the corporate tax rate on general income decreased by 21 percentage points from 36% in 1980 to 15% in 2020, while the corporate tax rate including the small business deduction decreased by 6 percentage points from 15% to 9% in 2020.

Figure 8—Federal Corporate Tax Rate on General Income and Corporate Income Tax Rate Including the Small Business Deduction, Canada, 1980 to 2020 (%)

Figure 8 is a line chart displaying the federal corporate tax rate on general income and corporate income tax rate including the small business deduction in Canada from 1980 to 2020. The corporate tax rate on general income was at its highest in 1980 at 36% and it was at its lowest in 2020 at 15%. When the small business deduction is included, the corporate tax rate was at its highest in 1980 at 15% and it is at its lowest in 2020 at 9%. The data was sourced from various years of the Income Tax Act.

Note:      The Corporate Tax Rate on General Income does not include the corporate surtax that existed between 1970 and 2007.

Source:  Figure prepared using data obtained from: Income Tax Act, various years.

On the topic of corporate taxation, witnesses presented proposals on various subjects, including taxation of the digital economy, tax avoidance, provisions regarding the interest deduction, the employee stock option deduction and the reduction of the corporate income tax rate.

Furthermore, some witnesses suggested amending the Income Tax Act to extend the accelerated capital cost allowance eligibility provisions.

With respect to the taxation of the digital economy and corporate tax avoidance, witnesses argued for the taxation of the revenues generated by large foreign e-commerce companies in Canada. Other witnesses focused their testimony on issues surrounding the use of offshore corporations, the taxation of Internet platforms and the collection of sales taxes by non-resident vendors.

On the topic of interest deduction, witnesses spoke about the recent interest deduction limitation rule proposed by the federal government, offshore subsidiaries and the need for more government consultations with the business community.

With respect to the employee stock option deduction, witnesses focused their testimony on the draft legislative proposals that were tabled in June 2019 and the use of stock options by small and medium-size enterprises (SMEs).

Certain witnesses advocated for a reduction in the federal corporate tax rate to maintain the competitiveness of Canadian corporations following the recent corporate tax rate reduction in the United States.

Regarding capital cost allowances, some witnesses expressed concerns about eligible types of investments, particularly in the aluminum and the mining sectors.

The committee also heard a number of specific proposals about small business reorganizations, the flow-through share tax regime, the withholding tax, assistance to print news media and reforms of large corporation tax administration.

“[L]arge foreign e-commerce companies should be required to pay tax on the business and revenue they generate from Canadians.”

Canadians for Tax Fairness

Recommendation 60

Ensure all corporations operating in Canada through a digital medium pay corporate income tax on their Canadian operations.

Recommendation 61

Amend the Income Tax Act to clearly define that income earned by private campgrounds who employ less than five full-time employees year-round be considered as “active business income” for the purpose of determining their eligibility for the small business deduction.

Recommendation 62

Examine the potential use of a tax credit for rural development similar to the Atlantic investment tax credit.

Recommendation 63

Review the rules defining passive and active business income, including the five‑employee rule for small businesses.

Recommendation 64

Examine the use of flow through shares to raise market capital for green tech companies/start-ups and beyond the green tech sector

“[A]ccess to capital has been very substantive for our industry from an impact perspective, particularly for the small and medium-sized producers... flow-through shares and funding to help assist with reclamation and remediation are a couple of tools in that regard.”

Canadian Association of Petroleum Producers

Recommendation 65

Examine the use of fiscal tools, such as a flow-through share instrument similar to the Canadian Exploration Expense, to incentivize and facilitate capital investment for decommissioning inactive wells, facilities and pipelines.

“Of all beer sold in Canada, 85% is made here, and brewing makes up three-quarters of the GDP generated by the entire domestic beer, wine and spirits industries combined. The sale of beer in Canada supports 149,000 Canadian jobs and $5.7 billion in combined federal, provincial and municipal tax revenues.”

Beer Canada

Recommendation 66

Encourage Canadians to lead healthy lifestyles by reducing the excise duty rates applicable to beer products at or below 3.5% abv and exempting non-alcoholic beer products from excise duties in order to stimulate growth and investment in this underdeveloped space of Canada’s beer market.

Trade and Tourism

On the subject of trade and tourism, the committee heard proposals on topics such as funding for specific programs support for Canadian exporters, trade and investment agreements and border and customs issues.

Witnesses requested specific federal support and/or funding for Destination Canada, Canadian Experiences Fund, renewable energy solutions and clean-tech investments.

With regards to trade and investment agreements and support for Canadian exporters, witnesses focused on Export Development Canada, the Trade Commissioner Service and the Canada-United States-Mexico Agreement. Figure 9 shows that 75.4% of total Canadian exports went to the United States in 2019, 3.9% to China, 3.3% to the United Kingdom, 2.1% to Japan, 1.2% to Mexico, while the 14.0% remaining went to other countries.

Figure 9—Share of Total Canadian Exports, by country, 2019 (%)

Figure 9 is a pie chart displaying the share of total Canadian exports by country in 2019. In 2019, 75.4% of Canadian exports went to the United States, 3.9% to China, 3.3% to the United Kingdom, 2.1% to Japan, 1.2% to Mexico and the remaining 14% went to other countries. The data was sourced from the Government of Canada’s Trade Data Online.

Source:  Figure prepared using data from: Government of Canada, Trade Data Online, accessed 12 February 2020.

The witnesses who spoke about border and customs issues highlighted problems with the visa application process, the Electronic Travel Authorization program for temporary residents and they requested more investments in the Canadian transportation infrastructure.

“Simply put, tourism matters. It matters to our economy through the $102-billion contribution it made last year. It also matters to the 1.8 million people who work in this industry from coast to coast to coast.”

Tourism Industry Association of Canada

Recommendation 67

Continue and enhance investments through both the Canadian Experiences Fund and Destination Canada to support the diversification and international marketing of Canada’s tourism sector.

“According to the IMF, we're talking about a potential 4% GDP boost if we address [internal trade barriers] for real, once and for all.

Business Council of Canada

Recommendation 68

Further reduce internal barriers to free trade.

Recommendation 69

Ensure the continued integrity of the labels “Product of Canada” and “Made in Canada” by maintaining the current level of Canadian content and continuing to require the imported content of dairy products to be indicated.

“The outcome of CUSMA negotiations goes far beyond the dairy market access concessions that were made. CUSMA imposes export charges on skimmed milk powder, milk protein concentrates and infant formula beyond a specified amount.

Dairy Farmers of Canada

Recommendation 70

Ensure that export duties under the Canada-United States-Mexico Agreement, which are imposed after a specific threshold on certain dairy products—milk protein concentrates, skim milk powder and infant formula—apply only to the exports of CUSMA signatories.

“[B]order officers need to have the expertise to determine whether they are dealing with milk, cream or powder. If we really want to control the products coming in, border measures will have to be rigorous.

Dairy Farmers of Canada

Recommendation 71

Provide the Canada Border Services Agency and the Canadian Food Inspection Agency with the resources they need to properly enforce regulations and standards regarding dairy imports at the Canadian border.

“The Canadian government has stated repeatedly that it wants a dynamic and strong dairy sector that generates growth, creates jobs and promotes investment. If it wants this to happen, it must provide compensation to restore confidence in the sector. It will provide the stability that dairy farmers need to move forward.

Dairy Farmers of Canada

Recommendation 72

Meet its commitment to fully and fairly compensate dairy farmers in order to mitigate the impacts of the Canada-United States-Mexico Agreement.

“The Dairy Farmers of Canada estimates that the market access granted under the WTO agreements; the Canada-European Union Comprehensive Economic and Trade Agreement, or CETA; the Comprehensive and Progressive Trans-Pacific Partnership Agreement, or CPTPP; and the Canada-United States-Mexico Agreement, or CUSMA, represent a loss equivalent to 18% of the country's dairy production.

Dairy Farmers of Canada

Recommendation 73

Continue to provide dairy farmers with the remaining seven years of compensation, in the form of direct payments, to mitigate the impacts of agreements with transpacific countries and the European Union and include the total amount in the estimates for the upcoming fiscal year.

Natural Resources

With respect to mining and energy, the committee heard proposals on various topics, including renewable energy, energy efficiency, the oil and gas sector and different specific requests for support and/or funding.

On the topics of renewable energy and energy efficiency, witnesses talked about technology, regulations, financing, tax incentives and the transition to a low-carbon economy.

Regarding the oil and gas sector, witnesses focused their testimony on innovation, regulation, the environment and taxation.

Witnesses also talked about mineral exploration, market development, value-added production and Natural Resources Canada.

“The mineral industry generates significant economic and social benefits across Canada in remote and indigenous communities and in metropolitan centres, employing over 600,000 workers and contributing nearly $100 billion annually to our GDP.

Prospectors and Developers Association of Canada

Recommendation 74

Create a rare-earth minerals strategy.

“Canada ranks at the top of major oil-producing countries in terms of control of corruption, rule of law, government effectiveness, environmental protection and social progress. With global energy demand expected to increase, along with an increased focus on GHG emissions reduction, Canada is uniquely positioned as the global hydrocarbon supplier of choice.

Canadian Association of Petroleum Producers

Recommendation 75

Enhance resource shipping capacity in western Canada by approving new pipeline projects to safely transport oil to new markets, and within Canada.

Recommendation 76

Examine allowing businesses to use Qualified Environmental Trusts to set aside funds for the future remediation of oil and gas wells.

Recommendation 77

Launch a major initiative to modernize the forest industry by:

  • Extending the production chain through a program supporting investment in wood processing businesses;
  • Supporting research and development in the forest industry;
  • Supporting projects involving biomethanation of forest waste;
  • Supporting local initiatives that produce added value from forests: foraging, tourism, recreational fishing and hunting;
  • Funding the battle against invasive species in all affected regions.

Agriculture and Fisheries

On the topics of agriculture, food and fisheries, witnesses presented proposals related to fisheries management, the dairy sector, as well as specific requests for support and/or funding.

Speaking about fisheries management, witnesses focused their testimony on stock assessment, monitoring capacity and data transparency.

Witnesses who spoke on the dairy sector focused on the content threshold, regulations, and the Canada-United States-Mexico Agreement.

Witnesses made specific requests for support and/or funding respecting sustainable agricultural practices, risk management, competitiveness, innovation, research and the environment.

“Our treaty is premised on cross-border partnerships and a pledge by both nations to fund the commission's work. … The U.S. has fulfilled its funding commitments, but Canada has been behind for many years.”

Great Lakes Fishery Commission

Recommendation 78

Comply with our bi-lateral treaties with the United States regarding the Great Lakes and honour these commitments by increasing funding to the Great Lakes Fisheries Commission, starting with $13.15 million for fiscal year 2020–2021 and $19.44 million in fiscal year 2021–2022 and every year thereafter.

“Whether it's trade disruptions in key markets, extreme weather events or the rising costs of inputs, Canadian farmers are facing significant financial pressures.”

Canadian Federation of Agriculture

Recommendation 79

Provide funding for Agriculture and Agri-Food Canada with the objective to enter negotiations with the provinces to improve farm safety nets.

Innovation

Research and development (R&D) is one of the key drivers of innovation, which in turn is a key driver of economic growth. In addition, innovation could be leveraged by countries to meet complex global challenges such as climate change while at the same time continuing to improve the economic well-being of their citizens.

According to the Organisation for Economic Co-operation and Development, “R&D expenditure is one of the most widely used measures of the innovative efforts of firms and countries.”[11] Figure 10 compares the gross domestic expenditures on R&D as a percentage of gross domestic product (GDP) of G7 countries. In 2017, Canada had the second lowest gross domestic expenditure on R&D as a percentage of GDP, 1.6% compared to the G7 average of 2.3%.

Figure 10—Gross Domestic Expenditure on Research and Development, G7 Countries, 2017 (% of Gross Domestic Product)

Figure 10 is a vertical bar chart displaying the gross domestic expenditure on research and development as a percentage of gross domestic product (GDP) in G7 countries for 2017. In 2017, the gross domestic expenditure on research and development as a percentage of GDP was 1.4% in Italy, 1.6% in Canada, 1.7% in the United Kingdom, 2.2% in France, 2.8% in the United States, 3.0% in Germany and 3.2% in Japan. The data was sourced from the Organisation for Economic Co-operation and Development.

Source:  Figure prepared using data from: UNESCO Institute for Statistics, GERD as a percentage of GDP, accessed 10 February 2020.

On the topic of innovation, the committee heard proposals related to support for businesses, research and development, tax incentives and specific requests for funding.

Regarding support for businesses and research and development, some witnesses raised the issue of access to venture capital, grants and contributions, while others talked about industrial sustainability, environmental protection and the silver economy, which refers to the production of goods and services dedicated to the needs of seniors.

With respect to tax incentives, witnesses talked about tax credits for scientific research and clean tech companies, corporate tax rates for income derived from patented inventions and the flow-through shares tax regime.

The committee heard a number of specific requests for federal support and/or funding related to the Strategic Innovation Fund, the digital economy, the plastic industry, agriculture, steel, the mining and coal sectors, artificial intelligence, 5G networks and the transition to a low-carbon economy.

Recommendation 80

Urgently assemble an Economic Strategy Table on Creative Industries to unlock the full innovative potential of these sectors, produce world class content, and share its creative works both at home and abroad.

Chapter 6: Federal Fiscal Policy and Regulatory Framework

Fiscal policy can be described as the way the government spends public funds, such as through transfers and programs, and the way in which it raises revenues, such as through personal and corporate income taxes or other taxes, in order to influence economic activity and achieve policy objectives.

The government may also implement policy objectives by adopting regulations, which impose substantive or administrative requirements on businesses. To minimize the compliance costs for businesses, federal regulators must comply with the One-for-One Rule, which requires that any new regulation be offset by the removal of an existing regulation, and apply the small business lens to ensure their particular needs and circumstances are considered when regulatory changes are made.

Witnesses invited by the committee to present their priorities for the next budget spoke on various topics related to the government’s fiscal policy and regulatory framework.

Federal Finances and Public Service

As shown in Figure 11, the net debt of all levels of Canadian government as a percentage of gross domestic product (GDP) in 2019 was 26.4%, the lowest among G7 countries. The G7 average in that year was 84.1%.

Figure 11—Government Net Debt as a Percentage of Gross Domestic Product, G7 Countries, 2019 (% of GDP)

Figure 11 is a vertical bar chart displaying government net debt as a percentage of gross domestic product (GDP) in G7 countries for 2019. In 2019, government net debt as a percentage of GDP was 26.4% in Canada, 40.1% in Germany, 76.1% in the United Kingdom, 80.9% in the United States, 90.4% in France, 121.3% in Italy and 153.8% in Japan. The data was sourced from the International Monetary Fund.

Note:      According to the International Monetary Fund’s October 2019 Fiscal Monitor (see p. 36 of the full text version), for cross-country comparability, the IMF statistics on net debt levels exclude unfunded pension liabilities of government employees’ defined benefit pension plans.

Source:  Figure prepared using data obtained from: International Monetary Fund, World Economic Outlook Database, October 2019, accessed on 10 February 2020.

In speaking about federal finances, witnesses made proposals related to intergovernmental relations, fiscal transparency, procurement, the public service and other measures.

Regarding intergovernmental relations, witnesses discussed provincial and territorial transfers, including the Canada Health Transfer and transfers for housing, and federal support for municipalities. Witnesses who spoke on fiscal transparency mentioned the need to disclose all federal support measures to the oil and gas sector and include Inuit priorities in federal budgets. With respect to procurement, the committee heard proposals about Canadian content, low-carbon footprint purchases and the National Shipbuilding Strategy. Proposals about technology adoption by the public service and associated training were also made. Lastly, witnesses urged the government to prioritize income creation rather than distribution and to prioritize targeted rather than universal programs.

Recommendation 81

Examine changing the formula for calculating the Canada Health Transfer by adding a variable that reflects the aging populations of the provinces and territories.

Recommendation 82

Continue to prioritize the reduction of government’s debt relative to gross domestic product.

Recommendation 83

Require the Canada Revenue Agency to publish estimates of tax gaps every three years.

Recommendation 84

Resolve the problems with the Phoenix pay system.

Recommendation 85

Eliminate targeted corporate welfare programs. Examples include: $50 million to Mastercard, $40 million to Blackberry, and $12 million to Loblaws, etc.

Tax Reform and Compliance

With respect to tax reform and compliance, witnesses commented on a review of the tax system, compliance issues and the Canada Revenue Agency.

Several of the committee’s witnesses proposed that the government undertake a comprehensive review of the tax system. Some of them also noted that such a review should take global competitiveness into consideration. Regarding compliance, witnesses touched on tax avoidance, voluntary compliance for the short-term rental industry, international corporate taxation and compliance simplification for small businesses. Others spoke about additional resources for the Canada Revenue Agency.

“If Canada’s economy is to become cleaner and low‐carbon, digital and data‐driven, and more globally integrated and competitive, Canada’s tax system is not up to the job. These were not the underlying economic trends in the 1960s when Canada’s tax system was last reviewed. If Canada is to move to a low‐carbon, climate‐resilient economy, for example, the tax system should support and encourage that transition. We have allowed our tax system to grow untended to the point that it is inefficient for today’s economy, much less tomorrow’s.”

Chartered Professionals Accountants Canada

Recommendation 86

Appoint an expert panel to undertake a public comprehensive review of the Canadian tax system through a ‘made in Canada approach’ ensuring a fair tax system that closes corporate loopholes and strengthens the competitiveness of Canadian business, drives innovation, and reduces the administrative and compliance burden for all users of the tax system which may include, but is not limited to examining:

  • Succession of business;
  • Canada Revenue Agency and the publishing of information on the number and value of tax deductions and rules;
  • Tax information exchange agreements and tax treaties that Canada has signed;
  • Interest payments that businesses can deduct from their profits, including foreign subsidies;
  • Corporations who transfer profits to their foreign subsidiaries;
  • Tax regimes that distributes corporate profits using a formula that reflects real economic activity;
  • Tax evasion;
  • Taxation of digital giants and corporations with no physical presence in Canada;
  • All disability-related tax measures;
  • Capital cost allowance and other tax incentives;
  • Inflationary excise on alcohol; and
  • The application of corporate income taxes and GST/HST to short-term rental platform operators.

Recommendation 87

Simplify the tax system for people with physical disabilities and mental infirmities.

Recommendation 88

Require a review of the resources the Canada Revenue Agency has to investigate tax havens and the legislative measures that could force large businesses operating in Canada to pay their fair share of taxes.

Regulatory Environment

In focusing on the regulatory environment, witnesses talked about ways to reduce the regulatory burden, regulatory changes in the financial sector and federal regulators.

The committee heard proposals aiming to reduce the regulatory burden of businesses, including in the utilities sector and in relation to the data-driven economy. Witnesses who spoke on changes in the financial sector focused on the anti-money laundering regime, insurance and the Ombudsman for Banking, Securities and Investments. Lastly, the committee heard about the need for additional resources for federal regulators supervising the use of toxic substances.

“Canada should be more ambitious in its approach to improving our costly, burdensome regulatory environment. We should aim to become the world's most efficiently regulated jurisdiction, thereby strengthening the country's ability to attract jobs, boost business confidence and encourage badly needed investment.”

Canadian Chamber of Commerce

Recommendation 89

Legislate economic growth and competitiveness considerations into regulator mandates, where appropriate.

Recommendation 90

Review its policies and programs to reflect the need for the modernization of aluminum production in Canada in order to maintain its competitiveness, and reduce the administrative burden on this sector.

Recommendation 91

Ensure that credit card networks meet their commitments made in 2018 to reduce the interchange and other fees charged to Canadian businesses for the use of their cards.

Recommendation 92

Eliminate transaction fees charged to businesses on Goods and Services Tax and Harmonized Sales Tax amounts paid by credit card.

Chapter 7: Conclusion

The committee thanks all participants who provided briefs and/or testimony for their valued input in the development of the recommendations presented in this report. These recommendations, which aim to support Canadians, communities and businesses as well as Canada’s transition to a low-carbon economy amidst climate change, will inform the decisions of the government in its 2020 federal budget.


[1]              International Monetary Fund, “The Economics of Climate,” Finance and Development, December 2019, p. 12.

[2]              Standing Committee on Finance, “Canadians are invited to share their priorities for the 2020 federal budget,” News Release, 13 June 2019.

[3]              House of Commons, Standing Committee on Finance, Evidence, 1st session, 43rd Parliament, Meeting 1, 29 January 2020.

[4]              Patented Medicine Prices Review Board, “Annual Public Drug Plan Expenditure Report 2017/18 Compass Rx,” 5th Edition, Ottawa, September 2019, p. 2.

[5]              Organisation for Economic Co-operation and Development, “OECD Economic Outlook,” November 2019.

[6]              Ibid.

[7]              Library of Parliament, “A Primer on Federal Personal Income Taxes,” Publication No. 2011-43-E, Ottawa, 8 June 2011.

[8]              Ibid.

[9]              Organisation for Economic Co-operation and Development, “In It Together: Why Less Inequality Benefits All,” 2015.

[11]            Organisation for Economic Co-operation and Development, “Innovation: the path to stronger, smarter and greener growth,” Remarks by Angel Gurría, OECD Secretary-General at a Luncheon meeting with Keidanren, Tokyo, 18 November 2009.