THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, December 9, 2025
The Standing Senate Committee on National Finance met with videoconference this day at 3 p.m. [ET] to examine the subject matter of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: I welcome all the senators, as well as all the Canadians watching us on sencanada.ca. My name is Claude Carignan, I am a senator from Quebec and chair of the Standing Senate Committee on National Finance.
I would like to ask my colleagues to introduce themselves.
Senator Forest: Good evening. Éric Forest from the Gulf division in Quebec. Welcome.
Senator Galvez: Rosa Galvez from Quebec.
[English]
Senator Cardozo: Andrew Cardozo, Ontario.
Senator Ross: Krista Ross, New Brunswick.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
The Chair: Honourable senators, today we continue our study on the subject matter of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
For our first panel this afternoon, we are pleased to welcome Mr. Ben Chalmers, Senior Vice-President, and Ms. Photinie Koutsavlis, Vice-President, Economic Affairs and Climate Change, at the Mining Association of Canada. Joining us by video conference, we welcome Joe Waterman, Executive Vice-President and Director of Communications at the Chartered Professional Accountants of Ontario.
Thank you very much for joining us today. We will now hear opening statements from Ms. Koutsavlis, followed by Mr. Waterman.
You both have four to five minutes. The floor is yours.
[English]
Photinie Koutsavlis, Vice-President, Economic Affairs and Climate Change, Mining Association of Canada: Chair, honourable senators, thank you for the invitation to appear before you today.
Mining is foundational to Canada’s economy. Our sector contributed $117 billion to GDP in 2023, generated $151 billion in exports and directly and indirectly employs more than 700,000 Canadians. We also remain the country’s largest private-sector employer of Indigenous Peoples by a proportional basis.
Minerals and metals are now strategic assets. They underpin clean-energy technologies, advanced manufacturing, defence systems and telecommunications. In a period of geopolitical tension, supply instability and rising trade barriers, they are essential to Canada’s economic resilience.
The global context has shifted. China’s predatory pricing distorts global markets and makes many Canadian projects uneconomic. China controls most global processing capacity for rare earths, nickel, graphite and several other critical minerals, and has repeatedly depressed prices by oversupplying markets with low-cost production.
Chinese smelters and refineries also set global benchmarks with artificially low processing costs that undercut Canadian smelting and refining operations.
At the same time, the United States has moved toward greater onshoring and is building up its domestic mining industry. Trade tensions have affected many Canadian sectors. Mining is one of the few sectors that have remained resilient in this environment. The United States depends heavily on secure Canadian supply to support its manufacturing base, defence needs, clean energy technologies and infrastructure ambitions.
Because U.S. industry cannot meet its own demand for key inputs such as copper and nickel, our exports have seen limited disruption and Canada has largely avoided major U.S. tariff actions.
This relative stability presents an important opportunity for Canada to expand domestic mining and processing and contribute to economic resilience at a time when other sectors face heightened trade exposure.
This brings me to Budget 2025.
Budget 2025 is the most significant budget for our sector in a generation, and we appreciate that several elements reflect the recommendations of the Mining Association of Canada, or MAC. Let me address the measures the committee has asked about.
First, the Mineral Exploration Tax Credit, or METC, and the Critical Minerals Exploration Tax Credit, or CMETC. The METC has been a cornerstone of Canada’s exploration ecosystem since 2000. It mobilizes high-risk private capital for early-stage exploration and supports jobs in rural, remote and Indigenous communities. Exploration is the beginning of every mine, and strengthening this pipeline is essential as Canada faces declining production in key minerals and metals. Important refinements remain outstanding.
Broadening support for the earlier stages of the mining cycle will be critical to ensuring that promising discoveries do not become orphaned projects. Expanding Canadian exploration expenses to include technical and feasibility studies would help de-risk early-stage exploration and strengthen the pipeline of future mines. These studies are essential but extremely costly, often running into the tens of millions of dollars, and many otherwise viable projects stall at this stage without additional support.
Second, the CCUS Investment Tax Credit. We welcome the extension of the full CCUS credit rate to 2035. This is important for long horizon decarbonization planning in the oil sands, where CCUS is a viable option to reduce emissions. Large industrial facilities require long lead times and significant capital to design and build carbon capture and storage infrastructure, and extended credit certainty is essential to support these investment decisions.
Third, the Clean Technology Manufacturing Investment Tax Credit. By lowering the eligibility threshold for projects, Budget 2025 better reflect Canada’s polymetallic geology and provides investment certainty for several near-term copper projects. Key design issues do remain.
Eligibility should be extended to include brownfield expansions, which are an effective way to maintain and increase Canada’s mineral output in the near term. These projects already have permits, community and Indigenous support and existing infrastructure, which reduces cost and risk. They also require significant capital to implement new mine plans. Including underground development and other Canadian development expenses, such as shaft sinking, ventilation and lateral and vertical development to the investment tax credit, would significantly strengthen the economics of both new and existing mines.
Beyond tax measures, Budget 2025 introduces several tools intended to support investment and project development. But implementation will determine success. Programs need to move quickly and operate at the speed of business. Permitting timelines must continue to improve, and companies require clarity and predictability to make multi-decade investments. The next step is timely implementation and addressing outstanding issues, so these measures translate into projects, production and economic stability for Canadians.
Thank you. I look forward to your questions.
The Chair: Thank you, Mr. Waterman, you now have the floor.
Joe Waterman, Executive Vice-President, Chief Communications Officer, Chartered Professional Accountants of Ontario: Thank you, Mr. Chair and honourable members of the committee, for inviting me to speak today.
It’s a pleasure to be here representing the regulatory body for more than 105,000 Chartered Professional Accountants in Ontario, almost half of the CPAs across Canada.
I know that several members of the committee are CPAs, and you are aware that CPAs play a crucial role in the Canadian economy. As auditors, CPAs maintain the public trust in our financial system. As innovators, they help Canadian start-ups and scale-ups succeed. And as tax practitioners, they understand first-hand how tax policy can encourage investment, entrepreneurship and growth in our economy or become a barrier to the same. Which is why the tax measures in Bill C-15 and Budget 2025 are of great interest to CPAs.
There is no shortage of challenges facing our country: lagging business investment; weak productivity; and, of course, a very unpredictable global trade environment. And it is encouraging to see Bill C-15 propose some important measures to help address these.
For example, given how critical Canada’s innovators and entrepreneurs are to our future, the simplification and expansion of the SR&ED tax credit was a welcome change, and one the sector has long advocated for.
There is no denying that Canada’s economy has shifted, we are increasingly a knowledge-based economy with data and intellectual property, or IP, the building blocks to prosperity.
Canada’s tax system must reflect this reality by encouraging the commercialization and retention of IP, and supporting investment and capital formation.
Historically, Canada has struggled in this regard which is why the extension of the accelerated investment incentive included in Bill C-15 through the productivity super-deduction is a positive measure, one that will help to boost investment by allowing faster depreciation of capital assets. It will enable firms to recover capital costs more quickly, enhancing cash flow and encouraging reinvestment.
At the same time, long-term investment requires certainty. The extension of the accelerated investment incentive and other provisions in the productivity super-deduction would be more impactful if they were made permanent.
Notwithstanding these welcome changes, I do want to make one thing abundantly clear: Canada’s tax system is too complex, and that complexity is a barrier for investment and growth. Decades of piecemeal tax policy has resulted in a patchwork system ill-equipped for today’s economy. Tax competitiveness is about more than just achieving the lowest marginal rate. It’s about removing inefficiencies so capital can flow to where it can be put to the best use.
Chartered Public Accountants can see tax complexity diverting resources from more productive economic activity every day. In fact, in a survey we conducted, 88% of CPAs across Ontario emphasized the importance of reforming the personal and corporate income tax system, with 84% calling it overly complex.
Bill C-15 includes some measures to simplify the tax code with the proposed elimination of a few inefficient tax expenditures. However, a comprehensive review of all tax expenditures using similar criteria, to study whether they are achieving their objectives without undue compliance costs, could remove layers of complexity.
We are still a long way off from a necessary and, frankly, overdue broad review of Canada’s tax system, a robust expert review that could be used as the blueprint for a tax system that drives growth, competitiveness and productivity for Canada.
In closing, Budget 2025 is an important signal that Canada is addressing its competitiveness, and we appreciate the government’s efforts and direction, but now is the time to be bold. Comprehensive tax reform can help attract the capital, talent and growth that Canada needs. Thank you, and I would be pleased to answer any questions you may have.
[Translation]
The Chair: Thank you very much, Mr. Waterman.
[English]
Senator Marshall: My first questions are for the Mining Association of Canada. You were talking about the different tax credits, the mineral exploration, the critical minerals, the clean technology. Why are there so many tax credits? We just heard from CPA Ontario talking about the complexity of the tax system.
First, has there ever been an evaluation of those tax credits to see how successful they are? Second, is it possible to combine those tax credits into one super tax credit? I get the impression that companies or individuals could claim a variety of those tax credits. Could you talk about that?
Ms. Koutsavlis: The Mineral Exploration Tax Credit and the Critical Mineral Exploration Tax Credit play an important role in helping junior mining companies attract private capital into early stage projects, especially in rural and northern Indigenous regions. Both of these credits work through the flow-through share system. Flow-through shares allow a junior company to pass its exploration expenses on to investors who then deduct those expenses on their own tax return. Investors pay a premium for these shares because they receive a deduction and the accompanying tax credit. The company itself keeps the full cash amount, and it uses it to fund exploration.
The Mineral Exploration Tax Credit is a 15% tax credit and the Critical Mineral Exploration Tax Credit is a 30% tax credit that is specific to 15 critical minerals. This budget increased the number of critical minerals that are now able to leverage a tax credit.
These two tax credits are meant to support early-stage grassroot exploration. Those are the individuals and companies that actually find the deposits and help them fund their exploration. These companies do not generate any revenue, so through this flow-through system they are able to utilize the cash that they receive from investors to fund their exploration activities. That’s the early stage of the mining cycle.
Senator Marshall: It is two different tax credits, but I get the impression that individuals or companies can utilize both types of tax credits. Is that correct? You either go with the 15% or 30%. So why is one 15% and one 30%? Is that just a government decision, or do you think both should be at 30%? Have you ever looked at that?
Ms. Koutsavlis: The original tax credit was the Mineral Exploration Tax Credit. As I mentioned in my opening remarks, that was developed in the year 2000 to help support and develop the pipeline of mining projects, actually find the mining projects and where the geological deposits are. This tax credit has been renewed almost on an annual basis over the last how many years, and the most that it has been renewed is for five years at a time.
Senator Marshall: You’re saying it’s been renewed and renewed and renewed. Does it go back to the point you were making earlier that companies like clarity and predictability and, therefore, renewing something every year or every second year is not the way to go?
Ms. Koutsavlis: Senator, that was exactly what my next point would have been. We have the Mineral Exploration Tax Credit dating back to 2000. The Critical Mineral Exploration Tax Credit was developed when critical minerals became an important priority for our economy and for our governments. In the year 2022, we wanted to incentivize explorers to go into our country and be able to find where the critical minerals were located and where those economic and sustainable projects could be developed for critical minerals. That is why you saw the bump up from 15% to 30%, to incentivize the development of critical minerals.
However, you are absolutely correct that there has been industry advocacy that has been suggesting or recommending that the Mineral Exploration Tax Credit be established for a five-year basis or even on a permanent basis for exactly the reasons you mentioned: It provides certainty to investors and junior mining companies, especially as they go into their field season, so that they will have the funds they require to be able to undertake exploration. Being renewed on a yearly basis does not provide that level of certainty and predictability. However, it has been renewed since the year 2000, so it becomes almost an automatic until it doesn’t happen, and then that will absolutely be a challenge to the sector as well.
[Translation]
Senator Forest: Thank you for joining us. My first question is for the Mining Association of Canada. Bill C-15 includes several measures to generate activity in the mining sector, especially the mining of critical minerals. However, some sectors are already overheating. According to the Mining Industry Human Resource Council, the sector will need 100,000 new workers over the next 10 years. How do we address this monumental challenge? Is the government supporting the industry to make sure it has the necessary workforce? It’s not the only sector to have a major labour shortage. What is your industry doing to resolve this issue?
[English]
Ben Chalmers, Senior Vice-President, Mining Association of Canada: Thank you for the question, and apologies for not responding in French. You’re right; we have a very significant labour shortage in our industry, and it is imperative that we work to address that labour shortage as we continue to build the supply chains for the critical minerals that our country and allies need into the future.
The projection is for about a 100,000-worker shortage per year, and that is professional as well as trades across the sectors. We have been working with an organization that we partner with called the Mining Industry Human Resources Council. It is a council made up of our members but also organized labour. They are funded by ESDC; in fact, they just had a renewal on their funding to manage labour market research and promote our industry, and build and manage trades accreditation. They have been a key part of our work to try to attract young people into the industry and to look at how we can broaden the appeal of our industry to women as well as immigrants. Basically, if we’re going to fill the labour shortage, we need to attract new workers from a broad demographic.
We also contribute to this ourselves. Last year, we partnered with the Prospectors & Developers Association of Canada, the Canadian Institute of Mining Metallurgy and Petroleum, and the World Gold Council to fund a campaign called “Mining Needs You” which is meant to attract young people into skills programs and educational programs, such as engineering schools, geology schools and trades. We are funding that for a five-year commitment for $1 million a year, and it’s aiming to reach a million students per year to help them understand that mining is a career of the future.
[Translation]
Senator Forest: You mean following the Mining Needs You campaign. Have you seen any tangible results from that campaign? Were you able to attract new types of workers for your businesses?
[English]
Mr. Chalmers: It’s only in its first year, so it is early to look at results, but it is hitting its targets in terms of how much students it is meant to reach. Those messages have been tested with students, and they appeal to them. We expect it will start to achieve results fairly quickly.
[Translation]
Senator Forest: Thank you. I’d like to thank the witnesses for their availability.
[English]
Senator Cardozo: I have two quick questions.
First, to Mr. Waterman, you seem to be saying you want fewer tax credits in the system, but I want to ask you about another one: We have a serious youth unemployment crisis in Canada. Would it help if there were a tax credit that encouraged employers to employ young people? Would that be an efficient tax credit?
For our friends from the Mining Association of Canada, I know you were talking about youth unemployment — that’s a bit of an opposite question from what I just asked. Why is China so dominant in rare earth minerals? Do we have those minerals under our earth, and what should we be doing to mine and process them? Mr. Waterman first.
Mr. Waterman: Thank you for the question, senator.
When we start to think about unemployment across Canada, we need to provide wraparound services to individuals to support them throughout their careers, from education through their early experience in the workforce. I can’t sit here and advise regarding specific tax measures that may support that program, but I think there are a number of levers that would need to be pulled to ensure we can provide the future for Canadians that they deserve in this fantastic country.
From a CPA Ontario perspective, those types of wraparound services are put in place to ensure that we go into high schools and share the potential what the CPA profession can provide. How that, then, turns into particular tax measures — I don’t think I’m in a position to provide specific technical advice on that, but I think it’s down to looking at a number of levers that are going to provide the opportunities for future generations of Canadians.
Ms. Koutsavlis: Thank you for the question. I’ll answer it in a few parts.
First, yes, Canada has reserves and resources of rare earth elements. We have the geological deposits within Canada. China has been developing its rare earth-elements-processing sector as well as their own deposits over the course of the last number of decades. It’s all been through state-funded approaches. Because China has been able to control this segment of the mining sector — rare earth elements, the processing technology as well as the actual processing of these elements — they are able to distort prices.
In terms of predatory pricing, should you have a mine and you want that mine to be economic, you would like the price of a certain commodity to be at a point where it makes that mine sustainable and economic. China floods the market with very low-priced or cheap products — and by cheap, I mean by price — that actually crowd out any kind of possibility that a project can be economic at a certain price point. Their strategy is essentially being able to flood the market with low-cost products, which makes projects elsewhere in the world not sustainable to move forward because it depresses the global prices of that particular commodity.
I was reading earlier today that the G7 Finance Ministers just recently had a meeting with Australia, Chile, India, Mexico and the Republic of Korea. On their communiqué, an important section stated:
An important point of consensus was the concern regarding the application of non-market policies, including export controls, to critical minerals supply chains, citing significant negative macroeconomic consequences, increased price volatility, and a deterioration in global growth prospects.
That’s essentially what China does: It takes complete control of the pricing, processing and smelting of critical minerals, and it depresses prices so low that companies cannot survive.
Over the last decade, Canada has lost about four refineries and smelters, and China has been able to keep the treatment and refining charges — what they charge for companies to bring ore into their smelters and refineries — so low that it makes it uneconomic for smelters and refineries to remain competitive globally.
Senator Ross: I come from New Brunswick, the home of 21 of the 34 critical minerals in Canada, with significant deposits of 13 and one of the largest undeveloped tungsten resources in the Western world. I have a question about mining.
Other than extending and making permanent the tax credit you mentioned and discussed with Senator Marshall, are there any other gaps or opportunities that you see that you would have wished to have seen in Bill C-15 that would support the industry, domestically, and also increase our competitiveness internationally?
Ms. Koutsavlis: Thank you very much for the question.
In terms of a wish list for Bill C-15, we did get most of our wishes from the mining sector perspective. However, there were two outstanding items: One would help support early-stage development in the junior mining sector, and the second would be to support current projects that are looking to expand their production.
On the first, it would be the inclusion of technical and feasibility studies in Canadian exploration expenses. These studies are needed. They are engineering and technical studies to prove out your deposit; that it is actually economic, and that it is worthy and valuable to move forward with pursuing that deposit. Those studies sometimes take up to tens of millions of dollars.
For a junior mining company that does not generate any level of revenue, these studies are very costly. Junior mining companies depend on capital markets to raise the funding they need to essentially keep the lights on and keep moving forward in terms of the work they need to do.
Our recommendation was that technical and feasibility studies be included in Canadian exploration expenses. That allows companies to expense the cost and use their available capital to keep their projects moving forward into a final investment decision.
Also, a lot of projects, beyond being able to claim the exploration tax credit or the Critical Mineral Exploration Tax Credit, do become orphaned because they don’t have the capital and cannot raise the capital to get through the feasibility, pre‑feasibility and technical studies. That is one recommendation that MAC made that we did not see in Bill C-15.
The second recommendation we had made was on the Clean Technology Manufacturing Investment Tax Credit. That is a 30% tax credit on the purchase of equipment and machinery that a mining company acquires to produce one of the six battery metals. This budget actually added an additional six defence-related critical minerals to the list as well.
We had recommended to also include in this investment tax credit something called development costs, Canadian development expenses for brownfield expansion. This would be a company currently operating, looking to expand their production — let’s say, put in another shaft and build out to extract more ore. They are then able to leverage this tax credit for their ventilation, electricity or other development expenses.
The reason we made that recommendation is that if we wish to have critical minerals production increased in the near term, the likelihood for us to find these critical minerals would be in the expansions of currently producing companies. If we have brand new companies and greenfield production, it will still take time for that project to be developed, to get through construction and then into operation. If you are looking at a brand new project today, it will take a number of years to see ore being extracted in that project. However, those projects that are actually operating today already have their permits. They have their indigenous partnerships, and they also have infrastructure. How could we incentivize those projects to actually produce more? Can these develop costs do that for us if they’re included in the investment tax credit?
Senator Kingston: I guess you are going to spend a lot of time talking about investment tax credits, and mine are mining questions.
I turn again to the Clean Technology Manufacturing Investment Tax Credit. They have expanded the number of minerals covered under that. In your opinion, how would this change or influence investment decisions regarding polymetallic copper extraction projects?
Ms. Koutsavlis: I’ll go back to my wish list again. Bill C-15 did address one of the challenges we had with respect to polymetallic deposits. When Finance Canada first introduced the investment tax credit, the threshold to be able to leverage the tax credit was that the value of the mine’s production needed to be 90% of one of those identified critical minerals.
Because of Canada’s geology, our deposits come along with other things. For example, copper comes with gold, silver and zinc. It was impossible for any copper project to meet that threshold of producing copper with 90% of the value of the production being copper.
Through our advocacy, as well as working with our members and with the Government of Canada, we were able to demonstrate to them that if you want to build out copper projects and produce more copper, you must reduce that threshold so that copper projects can meet it. The 90% was impossible to meet. This last budget brought that threshold down to 50% which will allow for polymetallic mines and copper projects to move forward.
Senator Kingston: Thank you. What about the environmental sustainability aspect? I’m told there is a mine that is almost ready to go in Saskatchewan, doing a particular type of carbon capture. It might be unfair to ask you about this, but could you tell me a little more about that from your perspective.
Ms. Koutsavlis: Are you asking about the mine or about the carbon capture?
Senator Kingston: Well, the mine will go; that is my understanding, but the capture aspect is different.
Ms. Koutsavlis: Unfortunately, I will not be able to speak to that specifically. I would have to be able to speak to our member if you are speaking about the Foran mine. They are one of our members. They are probably best able to respond to that question.
Senator Kingston: How does it interact with something like a tailing pond? Does it lessen the need for a tailing pond, or is that an entirely different process?
Mr. Chalmers: I can’t answer on the dynamic with the carbon capture, but I suspect it would not change the need for a tailings pond. I don’t know for sure. We could certainly go back to our member and get you more information.
Senator Kingston: That would be great. Thank you very much.
[Translation]
The Chair: For your information, the flashing lights mean there will be a vote in the chamber. Given that there will be a 64‑minute question period with a minister, the vote will take place at 5:30 p.m. We have time to finish with this panel, and even begin to hear the next panel before we need to leave to take part in the vote. No need to worry.
I apologize for these routine proceedings in the chamber.
[English]
Senator Galvez: Thank you so much for being here and answering our questions. I know the measures in Bill C-15 are mainly to increase the competitiveness relative to other nations like China who have 95% of the market on rare earth elements.
There are 15 listed plus two other rare-earth elements. Why are we not giving the whole list and just giving some elements? I think there are 11 or 12. Why not give the whole thing?
My other question is this. I agree with you, Ms. Koutsavlis, that China inundates the market and has lower labour costs and dominates there, but those are not the only reasons. If those were the only reasons, then we forget and we don’t do anything, but we want to compete with them. Not many people know that China recuperates rare earth metals from its residues. It is an expert at recycling its residues. Actually, a lot of it comes from iron ore.
When we talk about Canada, are we looking into that, too? Because Canada has tons of iron ore everywhere in all provinces. Are we thinking about that?
Ms. Koutsavlis: Can I ask for a point of clarification on your first question with rare earth elements?
Senator Galvez: The number, yes, because there are 17 rare earth elements, but in the list in Bill C-15, there are only 11 or 12.
Ms. Koutsavlis: This is the list for the Critical Mineral Exploration Investment Tax Credit that you are referring to?
Senator Galvez: Yes, to expand the eligibility of the Critical Mineral Exploration Investment Tax Credit.
Ms. Koutsavlis: Okay. Unfortunately, I cannot speak on behalf of decisions that are made by the Government of Canada or the Department of Finance in terms why they selected these particular elements. I think a number of them have to do with defence applications and which ones are actually related closely to defence applications, but that’s a question better asked to Finance Canada and the Government of Canada.
In terms of your second question, there are efforts and work under way looking at how tailings ponds and tailings can be repurposed, looking at value from tailings, including one of our members, Rio Tinto, that is actually looking at the value of scandium from their properties as well. So definitely something that is happening within Canada.
I cannot speak to how far along it is in comparison to what China is doing and how much China is able to extract from their tailings. However, Canada has been moving in that direction as well. As you mentioned, there are tailings within companies’ properties that could be of value for them to look at reassessing and being able to extract from that particular property.
Senator Galvez: Would they be eligible for this tax credit?
Ms. Koutsavlis: Would they be eligible for this tax credit? I cannot answer that because I’m not certain. That is something we would have to look at quite closely in the Income Tax Act and the legislation. I don’t want to hazard a guess.
Mr. Chalmers: Can I add to that? There is another organization called Regeneration that is run by an organization called RESOLVE, which is a group we partner with from time to time. They are building a business model of taking on orphaned and abandoned mines and going in and reprocessing them to extract added value from residual ores and tailings. They are focused right now on Western Canada but are looking at deposits across the country.
The point here is there are multiple facets to a desire to look at how we can process the existing value of the waste products that are already on the surface better.
Senator MacAdam: You mentioned in your introductory remarks that there have been calls for a comprehensive review of the tax system for many years and a comprehensive review has not happened in decades. Budget 2025 does not include a commitment for a comprehensive review. What do you think are the biggest challenges that Canada is facing that would benefit most from a comprehensive tax review?
Mr. Waterman: Thank you for the question. We have talked to our members a lot about the tax system here in Canada and the complexity within that tax system. A comprehensive review would enable us to look at a number of things. It would enable us to remove inefficient tax measures to ensure that we are investing and enabling capital to flow where it is needed most and where it delivers the outcomes intended. It would also help drive our competitiveness. If you look at Canada’s tax system vis-à-vis other Organisation for Economic Co-operation and Development, or OECD, countries or vis-à-vis the U.S., our competitiveness has slipped in the past decades. This is an opportunity for us to look at the tax system in a way that is bold and really reflects the realities of the economy today.
When we speak to CPAs, they tell us that one of the biggest barriers to upgrading our competitiveness is just the sheer complexity. To put that in perspective, when the Income Tax Act came out in 1917, it was just 44 pages long. When we look at the Income Tax Act in 2024, it is 3,700 pages long. Within that, there are 3,900 regulations associated with the tax system and administration. When we are starting to think about productivity, we must ensure that tax flows to where it is needed most. That level of complexity does put barriers in place. A wholesale review of the tax system would enable us not just to make sure we are competitive; it would enable us to set up a tax system that enables us to be prosperous for generations to come.
Senator MacAdam: There are many categories of taxes. There are personal, corporate and consumption taxes. What do you think is most in need of tackling first in terms of a comprehensive review?
Mr. Waterman: That’s a great question and a difficult one to answer. We need to learn from history. When we did a comprehensive tax review back in the 1960s, it took four years. When Jack Mintz looked at the corporate tax environment in the 1990s, it took two years and another seven years for some of those to come into play. So we don’t have the benefit of time when we look at the environment we operate in today. I would say that there are many opportunities for us to look at a review. We cannot make this a long-drawn-out process. We need to get started. We know there is going to be increasing pressure from our neighbours to the south when it comes to corporate tax. So that may be an area we could begin to look at. The Prime Minister certainly signalled that was an area that could potentially be looked at.
But if we are going to really reform our tax system and set Canada up for decades of prosperity and growth, then we need to look at our tax system as a whole. The government, as part of Bill C-15, removed two inefficient tax areas. In our conversations with CPAs, there are many more items that could be looked at that may not be delivering the outcomes that are intended and could be reinvested elsewhere.
Senator MacAdam: Okay. In terms of Budget 2025, what did CPA Ontario think were some of the most important measures that were in the budget and maybe some of the disappointments?
Mr. Waterman: Thank you for the question. When we provided a pre-submission to the budget, there were some areas where we were really looking for change. The Scientific Research and Experimental Development, or SR&ED, tax incentives are one area. CPAs were pleased to see the changes that happened to SR&ED. It addresses some of the issues that we hear first-hand from CPAs operating in this environment, whether entrepreneurs or managing the income tax system. There is a lot of complexity and many barriers to growth. So incorporating private Canadian companies certainly is removing a disincentive to scaling up and to going public. And introducing elements such as pre-approval really brings certainty to investors at a time when they need it most.
We also saw the reintroduction of the accelerated investment incentive. To the point raised earlier by the Mining Association of Canada, we would have liked to see that become permanent. We know that capital requires confidence, and investors are looking at 10 years out, not 4 to 5 years out. A great move by the government to make that permanent would have been ideal.
We saw areas of simplification. Areas where we would have liked to have seen more — and you have touched on broad tax reform. I think one area that CPAs were curious about was the lack of a domestic patent box regime. That is something that has been mooted and would really enable us to commercialize intellectual property, or IP, and keep that growth potential and that IP in Canada and prevent us losing that to other countries, especially those to the south of the border.
There are a couple of areas that CPAs were looking for, but certainly recognize there are steps forward in Bill C-15 that really drive competitiveness and support growing areas of our economy.
[Translation]
The Chair: My question is for Mr. Waterman. Many of my friends are chartered professional accountants, mainly in Quebec. Every time we see each other, they bring up the communication system used by Canada Revenue Agency service agents. They are very critical of wait times, the quality of information shared and follow-ups.
In its budget, the government says it wants to improve service quality by investing in communication technologies, namely chatbots. Have you had the same experience as my friends? What to you think about using chatbots to interact with clients?
[English]
Mr. Waterman: Thanks for the question. We spoke to CPAs in Ontario about the complexity within the tax system more broadly, recognizing that it places significant challenges when you are looking to support clients or individuals in certain circumstances. We did not go into details about the CRA specifically but more broadly talked about the fact that providing clear guidance — and that is something that we would say in the context of Bill C-15 is incredibly important to communications: Ensuring there is timely, relevant and easy-to-understand guidance to support those who are administering the tax system is going to be key. That is something they brought up quite regularly.
Additionally, just the complexity around having so many temporary measures and build-on measures make managing the tax system quite challenging. Obviously, that can result in a number of questions being asked of the CRA and others to get clarity. When we think about the population at large and trying to understand the tax system, the clearer and simpler we can make it, the better it would be.
To your point about using bots or technology or AI, a lot of organizations are looking to implement technology to drive efficiency and optimization. Obviously, there are a lot of considerations to be taken into account when you do that and execution is critical.
I would say there are opportunities to use technology to provide increased service to optimize resources and investment. But obviously, measures need to be put in place to ensure that is implemented effectively, privacy concerns are met and there is effective communication in terms of how things are rolled out and what individuals can expect to receive, are absolutely important.
[Translation]
The Chair: Thank you very much. Do you have a question to ask in the second round, Senator Marshall? I apologize, I took the liberty of asking a question before you, since you don’t always have questions for our witnesses.
[English]
Senator Pupatello: Good afternoon. I would like to go back to the question of what the government should include to encourage local processing. I appreciate the comments on dumping. Could you comment on how you would stop them doing that given it’s a state, or not, company that is doing that? It is happening in other sectors as well, steel dumping, electric vehicles, or EVs, some would argue. Even 100% tariff on an EV still makes the EV less costly than a North American made. So kind of interesting.
What would you do? The International Grains Council that sets the grain pricing globally, is that an area you could reach for those critical minerals, or is it that they are available in so few places it would not make sense?
Ms. Koutsavlis: Thank you, senator, for your question. I’ll take the first part on processing. Being able to build out our midstream in Canada is very important. That way we are able to capture the value of every link of the value chain within Canada.
The thing about processing is you need to be able to have the ore, extract the materials that require to be smelted and then refined. It is a little bit of a chicken-and-egg type of scenario where we need to be able to produce more to be able to feed these smelters.
Many of our current smelters are not operating at capacity because they do not have the domestic feed to put through that processing facility. Some of our smelters import their feed from other parts of the world to keep their operations open and be able to keep them functioning.
So it is more the ability for Canada to be able to open more mines, extract more ore and then have that value proposition, and the business case for smelters and refineries, to be able to also be required beyond what we currently have.
At the same time, we have the other perspective or other issue challenge from China where they are able to charge very low prices — to the point where it’s even become negative pricing — for the smelting and refining part of that processing part of mining. It makes it also very uneconomic for smelters and refineries to be constructed and developed within Canada.
We need to protect the ones we currently have now to be able to continue operating. We need to develop and build more mines in Canada and extract more ore to be able to sustain the ones we have now and develop the business case for more processing capacity within Canada. That’s essentially what is required.
Now, in terms of China’s predatory pricing and flooding the market, it is not something we can stop. They also impose export bans on many products that create supply chain fragility and vulnerabilities on materials needed, whether it is for magnets or military applications. It’s not currently in the bill, but Budget 2025 announced a $2 billion sovereign fund for critical minerals. This is a fund that will be available to critical mineral projects and would include essentially various tools in the tool box to ensure projects are economic and are able to attract investment. So that can be a price floor, an offtake agreement with the Government of Canada, a loan guarantee, an equity position the Government of Canada takes in companies to ensure their viability and be able to make them attractive to bring in investment into those projects.
Another area that was recently announced was the G7 critical production minerals alliance. That was the Friday before Budget 2025. It was G7 allies and countries that Canada was able to leverage; I think it was 25 different partnerships, investments, into six critical mineral projects in Canada that were roughly about $6 billion in value. We cannot outplay China being China.
Senator Pupatello: That was mining?
Ms. Koutsavlis: That was mining, correct. Once again, you need the mining to create the economics to need more processing in Canada.
Senator Marshall: My next question is for CPA Ontario. I read your report Tax Reform for Growth in Canada and I know you were just talking about the tax system. In your report you were saying, there are other changes essential to move Canada forward. You gave a few examples, cutting red tape and improving fiscal discipline. We do have a Red Tape Reduction Act embodied in Bill C-15.
I wonder if you have any comments on either the Red Tape Reduction Act — which some of us feel is lacking in transparency and accountability — and improving fiscal discipline, or any other area that you feel that Canada needs to address in order to move forward?
Mr. Waterman: Thank you, senator. And thank you for reading our report. I welcome any questions you have on that.
Within the report we say tax reform is incredibly important, but it is one lever of many. And that needs to be aligned with levers such as you have talked about regarding red tape. I cannot sit here and talk knowledgeably about the red tape element within Bill C-15, but I would say it is a combination of factors that will drive our competitiveness forward.
As we outlined in the report, we know tax reform is not a silver bullet, but it is a powerful lever that can drive the growth, prosperity and competitiveness that we need.
In the report you would have seen 20 bold recommendations. If other people are interested in having a look at that it’s at cpaontario.ca/taxreform.
One of the things we talk about is how do we start to look at the tax mix? If you look at Canada’s tax mix vis-à-vis other countries, it is very different.
We recognize tax reform is not easy, it is not politically easy necessarily but it is critical. And it is critical at times when bold decisions are needed.
What we try to outline in the report is a broad-brush review and look at what tax reform could enable and lead to. But I think a review is important, and our CPAs would say that, but it’s also looking at the tax mix and ensuring that tax is flowing to the right areas that are going to drive growth, prosperity and competitiveness.
Senator Marshall: The graphs you presented were very striking and made the point. Thank you very much.
Fiscal discipline. Any comment on that? Because you raised it in the report. I’m interested in fiscal discipline, so comments that you have would be appreciated.
Mr. Waterman: What I would say is when we spoke to CPAs they place high value on fiscal responsibility, so it is something that is in front of mind for CPAs in Ontario.
When we look at tax reform, there are fiscally responsible paths for reforming the tax system, paths that don’t need to come at the cost of public services and that don’t need to shift the tax burden on to lower or middle-income families. I would say that fiscal discipline is something that is a consideration that needs to be looked at, and when we did a survey of our members, of CPAs across Ontario, it ranked very highly in terms of their focus.
They identified that there was a need to drive a more competitive and growth-oriented economy, but there was also a need to look at fiscal discipline as well. It’s interesting that you brought that up. It is certainly front of mind for CPAs across Ontario.
[Translation]
The Chair: Thank you for joining us today. We wish you the best of luck in your respective professions, and much success in your businesses.
We are pleased to welcome our second panel: Sharon DeSousa, National President, Liam McCarthy, Director, Negotiations and Programs Branch, and David-Alexandre LeBlanc, Assistant Director, Negotiations and Research Branch at the Public Service Alliance of Canada. We also welcome Bryan Detchou, Senior Director, National Resources, Environment and Sustainability, and Alex Greco, Senior Director, Manufacturing and Value Chains, at the Canadian Chamber of Commerce. Finally, we welcome Angella MacEwen, Director of Research, at the Canadian Union of Public Employees.
Welcome, and thank you for joining us. We are now ready for your opening statements.
Ms. DeSousa, you have the floor.
[English]
Sharon DeSousa, National President, Public Service Alliance of Canada: Good afternoon and thank you for inviting us to appear as part of your pre-study on Bill C-15. I am the President of the Public Service Alliance of Canada, or PSAC.
The Public Service Alliance of Canada is Canada’s largest federal public sector union, representing over 190,000 national public service workers who deliver vital services that make Canada more resilient, inclusive and responsive to the needs of its people.
However, the recent budget will put the ability of the public service to provide these services at risk. The decision to slash the jobs of 30,000 workers who deliver critical programs hurt workers, families and communities across the country. Cuts mean longer wait times for passports, employment insurance, child care and pension benefits; fewer social programs; more unanswered calls at the Canada Revenue Agency; and a government that can’t be there for ordinary people when they need it most.
We know that these cuts aren’t what the public wants or what Canada needs. This is why we are asking the federal government to stop these reckless cuts and to work with PSAC and other unions to find other cost savings.
I’d like to turn my attention to two issues that I believe are of interest to the committee. The first, commonly known as “25 and out,” will make changes to the Public Service Superannuation Act, allowing public safety workers to retire with dignity after 25 years of service, without penalty. For decades, PSAC has been fighting to see this change made so that frontline border services staff, firefighters and other public safety officers are treated the same as other law enforcement agencies across Canada. This is a long-awaited change for workers that recognizes the commitment and sacrifices these workers make each and every day to keep Canada safe.
As the federal government moves forward with implementing this early retirement regime, we encourage it to work with public sector unions to ensure that it will meet the needs of these workers and that it is extended to all workers who perform similar demanding frontline services.
The second issue I would like to address is the newly proposed early retirement initiative. To manage cuts to the public service, the federal government has announced a new early retirement incentive program, or ERI, that would allow eligible employees to retire early, without penalty. To date, as many as 68,000 public service workers have received notice.
Under our collective agreements with Treasury Board, the employer has an obligation to make every effort to ensure that any reduction in the workforce will be accomplished through attrition. PSAC understands ERI can play a role in preventing involuntary layoffs. However, similar incentives already exist as part of the Workforce Adjustment Appendix, which is embedded in our collective agreements. The appendix was won through hard-fought negotiations at the bargaining table and is a process that needs to be respected. The early retirement initiative does not provide the same entitlements, such as the lump-sum payment based on years of service, and it risks implementing a worse employment transition process than was previously agreed to.
This is not acceptable. Any early departure program that the government wants to bring in should not sidestep the employer’s contractual obligations and must be negotiated with workers.
The recent budget is proposing big changes for federal workers, and the critical services they provide. PSAC is ready to work with the federal government to help ensure these changes respect the rights of workers and have minimal impacts on the services Canadians rely on.
Thank you.
[Translation]
The Chair: Thank you very much, Ms. DeSousa.
Mr. Detchou, Mr. Greco, you now have the floor.
Bryan N. Detchou, Senior Director, Natural Resources, Environment and Sustainability, Canadian Chamber of Commerce: Mr. Chair, honourable senators, thank you for inviting the Canadian Chamber of Commerce to appear before the committee. Our organization represents more than 400 chambers of commerce and business councils, as well as more than 200,000 businesses in every region and every sector.
[English]
With 565 days between Budget 2024 and Budget 2025, this year’s budget was highly anticipated. While framed by government as a historic and transformational document, we offer a more measured view: It takes meaningful steps in the right direction and lays a solid foundation for further progress.
For brevity, we will highlight two areas where the budget advances Canada’s economic agenda, before we turn to what is needed next.
[Translation]
First, Budget 2025 strengthens Canada’s strategic economic and industrial capacity. It recognizes the importance of increasing Canada’s role as an energy and natural resources superpower. We support investments in critical minerals, clean energy, artificial intelligence, natural resources and defence, all sectors essential to Canada’s long-term competitiveness, and its economic and national security.
[English]
Initiatives such as the Canadian Sovereign AI Compute Strategy and the proposed critical minerals sovereign fund, increased defence spending and the recognition of LNG’s important export role and decarbonization potential are all constructive.
[Translation]
To ensure those commitments translate into results, Canada must modernize procurement, speed up AI adoption and significantly improve project development timeliness and consistency. It is essential to establish clearer deadlines, to strengthen federal-provincial cooperation and to create a more agile public service. The regulatory modernization agenda must also apply to all projects according to transparent service standards and a clear approach of one project, one evaluation, whether the projects are tagged as being of national interest and regardless of their size.
[English]
Second, the budget advances Canada’s productivity, investment and innovation agendas. The productivity super-deduction is a meaningful tool to engage investment in productivity-enhancing capital. Improvements to SR&ED, reduced administrative burden and improved refundability for smaller research-intensive firms are similarly positive. Added clarity on capital gains taxation also supports better business planning and investment certainty.
Together, these measures are all progress, though further modernization, particularly to support commercialization and scale-up to make both the productivity super-deduction and the accelerated investment incentive permanent, will be critical. We also welcome the amendment to the greenwashing provision in the Competition Act, which brings greater alignment with international practices and reduces unintended consequences for responsible companies.
[Translation]
I will now give the floor to my colleague Alex Greco, Senior Director of Manufacturing and Value Chains, who will talk about the necessary next steps.
[English]
David-Alexandre Leblanc, Assistant Director of Negotiations and Research Branch, Public Service Alliance of Canada: Looking ahead, Canada now needs a long-term productivity, investment and trade strategy to build on this budget.
In response to U.S. industrial policy and the One, Big, Beautiful Bill, Canada should prioritize predictability, stability and tax competitiveness. Modernizing capital cost allowances and simplifying the system rather than layering on boutique measures.
Regulatory reform remains urgent. Legislated competitiveness mandates, clearer service standards, predictable impact assessments, and, stronger federal-provincial coordination are essential. Canada also needs a public service culture focused on timeliness, collaboration and practical problem-solving.
On trade, Canada must strengthen North American competitiveness ahead of the 2026 CUSMA review by reducing non-tariff barriers, improving border efficiency, modernizing conformity assessments and coordinating energy and critical-mineral supply chains. Ensuring small- and medium-sized enterprises, or SMEs, can participate fully in continental trade will be key.
Senators, ultimately, the real test for Budget 2025 will be implementation — an area where Canada has struggled and cannot afford to fall behind again. Timely execution of funding programs, regulatory reforms and strategic initiatives will determine whether this Budget translates into higher productivity, stronger investment and greater economic security. Global competition is accelerating and Canada does not have the luxury of time.
A whole-of-government approach, supported by a modern, delivery-focused public service, is essential. If implemented with urgency, Budget 2025 can position Canada for long-term success. If not, we risk falling further behind at a moment when Canada cannot afford to come up short.
We look forward to working with Parliament, government and partners across Canada to help deliver that future.
Thank you for your time today. We look forward to the questions and discussion.
Angella MacEwen, Director of Research, Canadian Union of Public Employees: The Canadian Union of Public Employees, or CUPE, is Canada’s largest union with over 800,000 members across Canada. The members of CUPE take great pride in delivering quality services in communities in a broad cross-section of the economy, including health care, education, energy, utilities, transportation and airlines. We want to thank you for the opportunity to present our thoughts on this budget implementation bill.
I want to speak briefly about four issues of concern to CUPE: The personal support worker tax credit; changes to the definition of library materials; the so-called red-tape reduction; and, changes to public sector pensions.
Subdivision A.7 of Part 1 implements the personal support worker tax credit. This tax credit gives some personal support workers a temporary income boost in provinces and territories where they did not negotiate permanent wage increases with the federal government from the previous budget.
These personal support workers do critical work, and they deserve fair compensation for it. This tax credit is a step in the right direction and will provide eligible workers with some relief, but it’s only temporary and is not a proper substitute for living wages.
Division 2 of Part 5 calls for the repeal of the definition of “library material” in subsection 2(1) of the Canada Post Corporation Act, and it repeals Canada Post’s ability to set reduced or free rates for the shipment of library material, including free shipment of materials specifically for the blind.
Since this was noticed, the minister’s office has given a verbal commitment that library materials will continue to be shipped at a reduced rate and materials for the blind will be shipped free of charge. But removing these clauses from the legislation means there is no guarantee of this. The federal government has a responsibility under the Universal Postal Convention at the United Nations to have legislation that guarantees free postage on accessible materials. If it is not in law, there is no power to hold the government or Canada Post accountable for the promise to continue it.
Aside from the obvious negative impact on accessibility of library materials for persons with print disabilities, any change to the cost of shipping library materials would have a large cost associated for small, rural and remote libraries especially, who are already struggling to maintain service levels.
Division 5 of Part 5 allows a minister to exempt any entity from any laws or regulations under their jurisdiction for a period of up to three years — except for the Criminal Code — if they deem it to be in the public interest and the rewards outweigh the risks, under the guise of red-tape reduction. This measure is quite alarming in its potential consequences, lack of transparency and flies in the face of democratic principles. It should be removed from the budget implementation bill.
Division 19 of part 5 amends the Pension Act and the Royal Canadian Mounted Police Superannuation Act, paragraph 371 states that the RCMP disability pensions will now be indexed according to the consumer price index, or CPI, alone.
Currently RCMP disability pensions are adjusted annually at the greater of either CPI or an average wage composite calculation. Prior to 1985 it was indexed at CPI alone, and when the change was made to go to the two tests it was justified on the grounds that indexing on the basis of CPI alone was unfair to veterans.
This budget change is set to take effect starting January 1, 2027, and would presumably affect members who are already on disability pensions.
The budget says that this change will save $5.8 billion over four years, which is a staggering figure that is not explained in any detail in the budget or in the budget implementation act. These savings must come out of a reduction to the value of benefits provided under the disability pension program. But if you look at what the government’s total contribution to the RCMP pension plan is, it’s $370 million next year, so it’s not clear how over four years they would save $5.8 billion. We need more detail about what this change entails and what it means for RCMP veterans.
We would also like to point out that this change, and other changes made to public sector pensions introduced in the budget, and in the budget implementation bill, were not negotiated with unions on behalf of the members who will be affected. Changes to pension plans should not be implemented unilaterally by government but agreed to at bargaining tables. Thank you.
[Translation]
The Chair: Thank you very much.
[English]
Senator Marshall: My first question is for Ms. DeSousa or Ms. MacEwen. I want you to bring us up to speed on what is happening with the $1.9 billion, the non-permitted surplus that went over to the Consolidated Revenue Fund. I read quite a lot of material on it and it makes it sound like the government is in discussions with the unions.
Can you just bring us up to speed on that and whether there’s been any decision — the 1.9 billion I can see in the Public Accounts, but I certainly didn’t get the impression that it’s being held in a separate pot? I’m getting the impression that maybe the early retirement program is going to be funded with that money. I’d like to hear your views on that.
Ms. MacEwen: It’s our understanding that they are using that surplus to fund the early retirement. I think Paul Martin did the same thing. As far as I’m aware, no unions with members that are affected have been involved in negotiations for that to happen.
Senator Marshall: Reading some of the material online it gives the impression that there are discussions happening between government and the union. Are you saying that’s not correct?
Ms. DeSousa: I can guarantee you there hasn’t been any discussion between the Government of Canada and the Public Service Alliance of Canada in regards to that consolidated revenue.
We were told there would be a forum in which stakeholders would be consulted, but there’s been nothing to date.
Senator Marshall: So no consultation.
Ms. MacEwen, in your opening remarks you talked about the Red Tape Reduction Act.
That’s an interesting piece of legislation. You used the word “alarming.” Can you give us some idea of what areas of that piece of legislation you are concerned about?
Ms. MacEwen: That’s the thing. It’s any law or regulation. I work with health and safety specialists who say every regulation is earned with blood, and we have many regulations for very good reasons, and sometimes things get outdated and need to change, but they should change for everyone if that’s the case.
Specifically, I’m concerned about regulations around privacy. If we are encouraging more development of AI, I’m concerned about privacy. I’m concerned about environmental regulations and health and safety regulations in terms of encouraging some of these projects, interprovincial trade. I’m really concerned there will be something that no one has thought of that seems like it makes sense to the people who want it removed but would have very negative consequences.
Senator Marshall: There are a number of us very concerned about the transparency and accountability. As the Canadian Union of Public Employees, have you released any analysis of that or anything in writing that we could read?
Ms. MacEwen: We have not yet, and it would be very difficult to do because you are trying to imagine all federal legislation that could potentially be exempted and what that potential implication could be. We have specialists who work in the area of privacy and AI and its impact on work, and we have specialists on health and safety. That might be something we will turn our mind to, and if we do, we will share it with you.
Senator Marshall: Is there any consideration to putting something in writing?
Ms. MacEwen: Yes, we would share something in writing with you.
[Translation]
Senator Forest: Thank you for joining us. My first question is for Ms. DeSousa. How does a public servant find out if they’re considered a surplus resource? How do they find out if they’re eligible for the early retirement program? Is there some sort of mechanism in place? Is it based on each individual’s goodwill or are there established standards or markers?
[English]
Ms. DeSousa: It is based on your years of service and your age, but more particularly, in order to access it, you must have been working within the federal public service for a minimum of two years and be over the age of 50. The government has issued 68,000 letters to everyone who meets that demographic. Depending on who is eligible, that’s another criteria altogether. No one will know whether they will be eligible based on their departmental needs.
[Translation]
Senator Forest: That’s sort of what I was getting at. If the criteria are that I need two years’ experience in the public service and that I need to be at least 50 years old, then it has nothing to do with my position, my experience or my contribution to the government as a whole. The two rather minimalist criteria are two years of experience and at least 50 years of age — which I find quite young.
[English]
Ms. DeSousa: My understanding is that is what is written in the budget. There is further deliberation that needs to occur in assessment depending on the department you work for. Right now, these notifications have gone out to everyone, and technically I would be eligible being over the age of 50 and having worked within the federal government. But there needs to be further criteria, and that’s the piece that needs to be communicated from this government, the implementation.
However, we do have something within our collective agreements that we negotiated that outlines this. It is called workforce adjustment. It contains a provision with specific rules around how and when this occurs.
[Translation]
Senator Forest: What you’re saying is the government still needs to establish those criteria. Although around 68,000 public servants have already received an eligibility letter, those other criteria have yet to be established. Has your union asked to participate in this process or be consulted? Have you notified the government that you’d like to be consulted?
[English]
Ms. DeSousa: We have asked for information as to what will be the basis of how these departmental agencies will assess the criteria. However, we don’t have any information. There is no information forthcoming as to how the department heads will make the decision.
[Translation]
Senator Forest: I’d like to thank the witnesses for joining us.
[English]
Senator Ross: Mr. Greco, after the budget was presented, there was a statement that quoted you as saying, “The government’s proposed SR&ED reforms are a welcome and necessary step toward modernizing Canada’s innovation framework.”
You talked about incentivizing companies and helping them to invest in innovation and so on. Given that industry has said in the past that the challenges with SR&ED were inconsistent review decisions, slow audit and review processes, burden of documentation, outdated definitions of research and development, complexity of claim preparation, and even uncertainty of refunds, how many of those issues do you believe are adequately addressed in the changes that are being recommended? It is certainly difficult in particular for smaller businesses to participate. How should collaboration with industry be structured?
Alex Greco, Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce: Thank you for the questions, senator. A number of positive steps have been taken in this budget around the levelling of the playing field between publicly traded companies and private companies, increasing the expenditure limit, taking steps to reduce the administrative burden, particularly focusing on the pre-approval process for SR&ED claims.
There are still some issues that need to be addressed in terms of focusing on the length of time, on how that pre-approval process is structured, looking at anywhere from 12 to 36 months. When we look at a cap on eligible activities, a lot has changed since the program was introduced. Looking at updating those definitions, especially dealing with manufacturing equipment and processing, being more specific on that would be helpful. Third, looking at retraining Canada Revenue Agency agents on full and proper definitions.
Before the pandemic, there had been a focus on-site visits so CRA agents could understand what happened in manufacturing facilities, understand the operations. Focusing on that and also providing eligibility and updating guidance would be appropriate. For that collaboration to happen, at the Canadian Chamber of Commerce we have many provincial chambers of commerce, boards of trade, many member companies that could work collectively to establish how that can be done, either through our newsletter updates or a collaborative round table on research and development so we can focus on the implementation of the changes that were in the budget but then build upon processes moving forward.
Senator Ross: The overall complication of the whole program has been the biggest complaint I have heard from businesses in the region that I come from, just the fact that they are not even able to do that paperwork themselves. They are required, basically, to hire consultants to support them in that endeavour.
Mr. Greco: Yes.
Senator Ross: Do you think that will be addressed in these changes?
Mr. Greco: Potentially. The implementation is critical. For that to happen, there needs to be updated guidance to give the small- and medium-sized enterprises the resources that are necessary. When companies have gone to apply, particularly SMEs, it is so complicated. You mentioned consultants. Sometimes it takes 12 months, and then they think, “Why do I even invest in this program? There isn’t a return on investment.”
For that to happen, there needs to be authentic consultation with industry. I know the Canada Revenue Agency has started that. It has to work with industry around that implementation, looking at a prototype in terms of what that process could look like, how they are reducing administrative burden. Some of the T22061 forms the government is looking to modernize, work with us on that prototype and provide feedback. From there, look at implementation. If that happens, and we are very detail oriented, I think we can get there.
Senator Ross: Do you see that happening?
Mr. Greco: Possibly. I think for that to happen, there has to be a whole-of-government approach between CRA, Finance Canada and Innovation, Science and Economic Development Canada, and then working closely with members of Parliament, hearing them, particularly in the public service to say, “What are you hearing in your communities?” Getting that feedback, ensuring that open dialogue. When we talk about SR&ED claims or red-tape reduction, it is not just looking at reducing the burden. It is also looking at having different departments talk to each other and not having broken telephones. Because sometimes departments are pointing at each other and then that coordination doesn’t happen.
If that can happen, along with some of the comments I made earlier, I’m cautiously optimistic, but the devil is in the details.
Senator Ross: Thank you.
Senator Galvez: My question is for Ms. MacEwen. Earlier, we had a strong discussion about the regulatory sandbox expansion. We agree with you that lack of transparency and accountability and undermining certain measures and public interests are definitely concerns. But apart from that, I would like to have your opinion concerning the erosion of parliamentary oversight, the regulatory uncertainty and arbitrage and the risk of legal challenges that can arise from this situation.
Ms. MacEwen: Absolutely. We have made several commitments under international free trade deals, for example, where companies receive — we promise to give them the same treatment. It is called “national treatment.” So if you give one company this treatment or one entity this treatment, and you don’t expand it to everyone, you could be subject to a claim under international law. Presumably, there could be similar claims domestically, but you could also just apply for that exemption as well.
There are concerns on that front around national treatment for the international free trade deals. But we also have in our labour chapters and in our environmental chapters of international free trade deals something called a non-derogation clause, where we say we will not reduce environmental or labour legislation in order to attract investment. But that is what they are doing here potentially is reducing labour standards or health and safety standards or environmental standards in order to attract investment. So that could bring us into some legal challenges under international free trade deals as well.
While they say they are going to publish some of the details around the decisions, they reserve the right to keep some details private. So there is not a lot of transparency. How did this decision get made? Why is one decision approved and another one is not, that kind of thing? It very much moves away from a parliamentary democracy to something that is tailored at addressing corporate interests and corporate interests only, which is concerning.
Senator Galvez: My question is for the gentleman from the Canadian Chamber of Commerce. Earlier, we had the Mining Association of Canada representatives. They said that China dominates the rare earth elements market because they flood the market and the costs are so low. Now, hearing what Ms. MacEwen is saying about the fact of reducing labour standards and environmental regulations, is this what you think the industry is looking for in order to compete better with foreign entities?
Mr. Detchou: Thank you for your question, senator. I had the pleasure of being seated at the back while our good friends at the Mining Association of Canada were presenting. On their analysis of some of the challenges that the rare earth and critical mineral sectors are facing, we certainly agree with that. We agree with their analysis of a lot of China’s practices in that space.
One point that I believe my good friend Photinie Koutsavlis made is our desire to compete with China is not a desire to replicate their model. That is not what I would say the industry here in Canada is trying to do or achieve. I would say we are looking at different mechanisms in terms of competing with an actor like China who does not play by the same rule book. My colleagues from the Mining Association of Canada could tell you about the various initiatives that exist. I would speak to the G7 Critical Minerals Action Plan, which not only states some measures in regards to labour but talks about different collaborations that G7 partners, including a few non-G7 countries, can do to compete with China.
So no, it does not include decreasing labour standards, and it does not include decreasing environmental standards. It is looking at different ways that those groups of countries can pool together resources and expertise in order to compete with China. So I guess the short answer to your question is no, that is not something that industry is looking at.
Senator MacAdam: My question is for Ms. DeSousa and it is regarding the early retirement incentive program. I’m just wondering what has been your membership’s reaction so far and are you getting a lot of inquiries and what the nature of those inquiries are. Also, I read your comments in a recent CTV news report that you do not expect to see many members sign up for the early retirement incentive given the high cost of living, and that taking the early retirement incentive could mean giving up a lump sum payment based on years of service. I wonder if you could speak to those issues please.
Ms. DeSousa: Thank you so much for your question, senator. What this comes down to is: The average salary of our members is about $75,000. In this day and age, to be able to retire with dignity and have a fulfilling life, there is no way with that type of a pension you would be able to do so. Will there be some people who will be interested? Sure, there will be. However, for the majority I can see it being extremely difficult for them if they have children or dependents that rely on them. That would mean they would have to seek alternative employment elsewhere.
When it comes to inquiries from our members, our members are confused. They have a provision within their collective agreement that clearly articulates what their rights are and what they are entitled to, and there is a provision for a lump sum benefit if you follow the Workforce Adjustment Appendix.
So the question is: They are looking at this new retirement incentive and wondering how it connects with each other. What takes precedence over the other? How will the decision be made? Right now, the decision is made by the deputy heads. But under what criteria? Whereas within the workforce adjustment, there is an actual step-by-step process and criteria that are looked at. That is where there is concern. There is a lot of confusion. We hear comments in the media but we don’t have anything tangible as to how this will move forward.
Senator MacAdam: With regard to potential operational impacts such as loss of expertise or service capacity, if a significant number of employees should retire early, how can departments plan for that loss of knowledge? Hopefully, there are controls in place so that doesn’t happen, but there seem to be a lot of unknowns in terms of how this is going to roll out.
Ms. DeSousa: Well, senator, it is called chaos. You have issued 68,000 letters to public service workers across Canada that you could be eligible for something. You haven’t given them criteria or told them if it is dependent on the department. You have not indicated if it is the agency. There are no criteria or looking at organizational memory and how this will happen. After all, just look at it this way: Right now, the government has stated they are going to expand the Canada Border Services Agency as well as DND.
What if the majority in the demographics are coming from that agency and department; what does that say? You are looking to recruit 1,000 more border services officers, and that’s great, but how are you going to do that if you will lose X amount who are eligible now?
To me, this has created a lot of confusion and chaos when, in fact, you have something already in a collective agreement. You could have done the actual work to see which departments and agencies require streamlining and put those offers forward under the workforce adjustment appendix. That’s not what they are doing, though.
We are concerned that this is setting some people up with the expectation there may be an incentive for them only for them to find out there is not.
Then it comes to organizational planning: What is the next step? We have seen this before.
I just want to point out something out, as I would be remiss not to. We had a new pay system introduced; everyone has heard of Phoenix. It is 10 years as of February next year, and we still don’t have people accurately paid on time.
Here we are again: They launched a new system, and they, then, got rid of the backup desks that contained all that material and they let go of the compensation advisors. They realized it wasn’t working, and they tried to rehire. Most people had moved on.
We don’t want to see that kind of disaster ever again. There are ways around doing this. There are much more thoughtful ways, and there are people who do this on a regular basis; we need to be consulted. That’s our members and the unions that represent them.
Senator MacAdam: Thank you.
Senator Kingston: I would like to go back to the personal support worker tax credit. According to the information that we have been provided, the 2024 Fall Economic Statement announced the federal government would pivot from those bilateral agreements — you spoke about some of them; I have a list — and provide personal support workers financial assistance through the tax system.
I have a number of questions. First, if there is a pivot, does this mean that there is no thought of going to other provinces to reinstate the process with provinces that do not have bilateral agreements?
Second, in the bilateral agreements that have happened, is there some equity among the provinces as to how much personal support workers are actually learning? The maximum of 1,100 means that a lot of people are not getting that much. Is there any equivalency for someone living in my province of New Brunswick who, I believe, do not have a bilateral agreement and somebody in British Columbia who hopefully has benefited from some of these adjustments? Could you address those issues?
Ms. MacEwen: Sure.
Our understanding is that, yes, they have moved away from negotiating agreements with the remaining provinces. The provinces that got agreements have workers who are better off than the provinces that are getting this temporary bump.
There is a limit on it. It is a certain percentage of your income but only up to a certain amount, so it is not the same as a wage increase. You only get it when you do your taxes, so you are not getting it every week as you are working. As soon as this tax credit is phased out, because it is temporary, then you are back to where you were.
Some of our concerns are that workers in B.C. might think they get this temporary tax credit because they don’t realize there is an agreement, or that workers who work in developmental services who should qualify because they are a residential service but they are not in health care — they might think they don’t qualify because they put it with unimproved health care facilities and they are under social services, provincially, potentially.
We want to make sure that everyone who is eligible for it understands the situation, and that all the employers have to register for it so they know how to do that. We want the information to be out there, but we also want to work with provinces, through bargaining mostly, in order to permanently increase the wages of personal support worker. The problem there is that, often, these agencies are under a few levels of sub‑provincial budgets, and their budgets don’t get increased enough to increase the wages of staff. Their budgets are not increasing at the rate of inflation or at a rate that is enough to pay people a living wage. That’s a big problem.
We definitely would have preferred if all of the provinces had been willing to do that work to increase wages.
Senator Kingston: One last point of clarification: You said that, in a province like B.C., for instance, developmental care workers would think they are covered. When the bilateral agreement happened, were they also bumped up in their wages as personal support workers?
Ms. MacEwen: I’m concerned now that people — for the tax credits — might not realize they would be eligible as developmental support workers. There are only three jurisdictions that I deal with — B.C., Newfoundland and the Northwest Territories — and each was different. The provinces all have different names for the people who do this type of work, such as continuing care and all these types of things. They are regulated differently, too. I get a whole bunch of questions for people across Canada: Does this include us?
There is not a lot of clarity around that. We would like to better understand what the standard is going to be because the three deals were all different.
Senator Kingston: Thank you.
[Translation]
The Chair: I have a question for the Canadian Union of Public Employees. How is it you have nothing to say about the use of pension fund surplus? I don’t understand that. Is it because the surplus has reached more than 125% or something like that? I don’t understand how a government, or an employer in this case, can play around with surplus without consulting anyone.
Actually, they did consult someone. A witness from a previous panel told us they had been consulted after the fact. Some were part of the management committee . . . The pension fund management committee, anyway. That said, the authorities and leaders that appeared before us were not part of the decision. Do you have any explanation for that?
[English]
Ms. DeSousa: I can tell you that the unions have not been consulted at all regarding the use of the surplus, whether it is for the retirement incentive or anything else. In fact, the law states that you can only keep 125% within the fund; after that, you need to move the money.
The Public Service Alliance of Canada has made numerous presentations on a variety of ways in which that surplus can be used that can benefit both the employees as well as the employer. You can look at a holiday, or you can look at removing the two-tier system that is currently in place. I’m not sure if you are aware that those who are hired prior to January 1, 2013 — you only have to work to the age of 55 and retire early. Those who have gained employment after that need to work to the age of 60. It has created an unfair retirement plan depending upon whom you are working beside.
We have asked the government, noting there are ways they can reinvest that money to eliminate that.
The other piece we have been lobbying about is with regard to pension reform, which is “25 and out.” We have provided this government a variety of options in order to restrategize and use that surplus to benefit everyone. Yet, this is the announcement we received. It is very disappointing.
[Translation]
The Chair: Thank you. My next question is for the Canadian Chamber of Commerce. You said you agree with the reduction of red tape. I’ve looked closely, but I didn’t see anything on that in the document. In fact, based on what we’ve seen this morning, there are 3,000 rules, most of which are obsolete and yet are being kept.
That creates what we call sandboxes where multiple exceptions are authorized based on guidelines. This means multiple exceptions will be granted over the next three years based on additional guidelines. Once those three years are done, the obsolete rules will once again be in effect. There’s nothing in here about eliminating obsolete rules, only dealing with cases individually.
I’m sorry, but it looks like the government based its decision to create and multiply regulations on our blond neighbour to the south’s model. That’s what I see. That said, the obsolete rules — that’s the terminology used — are being kept. As we’ve seen with the unions in the pension plan file, it’ll be chaotic — that’s the term you used. Things might also get chaotic from a rules standpoint. Doesn’t the uncertainty of managing by exception worry you?
[English]
Mr. Greco: Thank you for the question. It has to be done carefully when we look at red-tape reduction and societal, environmental and economic norms. In the budget, they did talk about regulatory sandboxes, but the devil is in the details, and there’s a lack of details right now.
I know the Treasury Board of Canada Secretariat is now undergoing a horizontal review of regulations across many different government departments. It has to be focused on outcome-based measures. What are we trying to achieve around red-tape reduction? It’s not just about reducing business costs. What does it mean for health and safety and for supporting investment and innovation? While generally, in principle, we support it, if it’s not done properly and smartly with a focus on evidence-based measures, then it could potentially go sideways. That’s why at the Canadian Chamber of Commerce, we have talked about focusing on outcome-based measures, proper cost-benefit analysis and evidence-based regulations, as well as looking at having government, industry and academics all come to the table and focus on a proper lens regarding regulatory reduction and modernization.
In the past, governments have talked about red-tape reduction and have said they would cut this regulation and that regulation and nothing happens. It goes back to my point to Senator Ross on the SR&ED example. Government departments have to talk to each other. It can’t just be cited on this regulation or in an example. It has to focus on what the implications are for the different departments, and they must consult industry early, not just focus on when a regulation goes to Canada because then we’re talking about a repeal. It has to be a constant stream of communication. I’m afraid if we don’t do it that way, it will have implications not only for industry but also the prosperity and safety of all Canadians.
[Translation]
The Chair: We’ve been meeting for a little over five hours now, although the session was suspended for a few minutes because of technical issues. I think we’ve covered everything for today.
Thank you very much for your hard work and participation. Good luck in your projects, and good luck to the unions for what’s coming. If you get the total number of public servants impacted before the Treasury Board Secretariat does, we’d appreciate the information.
Happy holidays.
The meeting is adjourned until tomorrow, Wednesday, at 6:45 p.m. Thank you.
(The committee adjourned.)