THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, December 10, 2025
The Standing Senate Committee on National Finance met this day at 6:47 p.m. [ET] to study the full text of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025; and in camera, to consider the Supplementary Estimates (B) for the fiscal year ending March 31, 2026 (consideration of a draft report); and in camera, to examine and report on the practice of including non-financial matters in bills implementing the provisions of budgets and economic statements (consideration of a draft report).
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: Welcome to all senators and Canadians who are joining us on the sencanada.ca website. My name is Claude Carignan. I am a senator from Quebec and chair of the Standing Senate Committee on National Finance.
I would now like to ask my colleagues to introduce themselves.
Senator Forest: Good evening and welcome. Éric Forest from the Gulf Division in Quebec.
Senator Cardozo: Good evening. Andrew Cardozo from Ontario.
[English]
Senator Kingston: Good evening. Joan Kingston, New Brunswick.
Senator Ross: Welcome. Krista Ross, New Brunswick.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
The Chair: For our panel tonight, we are pleased to welcome Jasmin Guénette, Vice-President, National Affairs, and Christina Santini, Director, National Affairs, from the Canadian Federation of Independent Business. Welcome.
We also welcome Mr. Eli Yufest, Executive Director, and Ms. Prerna Mathews, Vice-President and Head of Exchange-Traded Funds at Mackenzie Investments, of the Canadian Exchange-Traded Fund Association. Thank you for accepting our invitation.
We will begin with short presentations of four to five minutes each. Mr. Guénette and Ms. Santini will start. They will be followed by Mr. Yufest.
Mr. Guénette, Ms. Santini, you have the floor.
Jasmin Guénette, Vice-President, National Affairs, Canadian Federation of Independent Business: Good evening. We would like to thank the committee for this kind invitation. The Canadian Federation of Independent Business, the CFIB, represents 100,000 small business owners in all sectors of the economy and in all regions of Canada.
Our November Business Barometer shows that confidence among SME owners remains below the historical average. The main cost pressures are taxes and regulations, commercial insurance and payroll costs. Insufficient demand, and therefore low sales, remains the main factor limiting business growth.
On November 4, the government tabled its budget. In our view, the most positive measures in the 2025 budget are the reinstatement of the Accelerated Capital Cost Allowance and immediate expensing; confirmation of the increase in the cumulative capital gains exemption to $1.25 million, retroactive to June 2024; the formalization of the non-taxable nature of the Canadian Carbon Rebate for small businesses, and the extension of the 2024 tax return deadline to access the first tranche of the rebate; and finally, the abolition of the tax on underutilized housing.
Now, here are our main concerns about this budget. No reduction in the federal tax rate has been granted for small businesses. The deduction threshold for SMEs, which has been at $500,000 since 2009, has not been increased. The Regional Tariff Response Initiative implemented by regional economic development agencies misses its target and excludes the majority of SMEs. The $51 billion Community Development Fund favours unionized labour, which excludes more than 95% of SMEs. Finally, the budget deficit and debt servicing costs remain too high.
My colleague will present our recommendations for improving the 2025 budget.
[English]
Christina Santini, Director, National Affairs, Canadian Federation of Independent Business: Senators, even if 53% of our members support the productivity super-deduction, 42% say they don’t have enough funds to take advantage of it. Only 19% say they are in a position to use it.
Budget 2025 needs to make both the accelerated capital cost allowance and immediate expensing available to all businesses in all sectors of the economy and lower taxes so that small businesses have more money to invest. The current federal small-business tax rate is 9%. It needs to be lowered and set closer to the rate provinces are applying. Reducing the small business taxes from 9% to 6% would only cost about $2.1 billion, a lot less than most programs the government could design.
Less than 1% of SMEs have applied to the Regional Tariff Response Initiative delivered by the regional development agencies so far, and another 8% are considering applying for it, a fraction of those who paid counter tariffs.
This program needs to be completely overhauled. The funds collected through counter tariffs should be given to all impacted SMEs in all sectors of the economy. This should be done through simple tax cuts or a rebate using a mechanism similar to the carbon rebate, not through the regional development agencies.
Overall, only 25% of our members support the creation of the $51-billion building communities fund. If government does move forward with this program, it needs to stop prioritizing union labour and treat all companies the same, unionized or not. We should say, the way in which it is designed is what they are primarily against.
Our members also want to know that the government has plans to return to an overall balanced budget. This is not included in the current budget. Small businesses face mounting costs, trade disruptions and heavy tax and regulatory burdens. They need policies that will bring back optimism, growth and overall balance and profitability. Thank you. We are looking forward to your questions.
The Chair: Thank you. Mr. Yufest?
Eli Yufest, Executive Director, Canadian ETF Association: Honourable chair, senators, thank you for the opportunity to appear before you today on behalf of the Canadian ETF Association, otherwise known as CETFA. As you may know, an exchange-traded fund, or ETF, is an investment fund that holds a basket of securities, such as stocks, bonds or commodities, and trades on an exchange throughout the day, much like a stock.
Unlike mutual funds which can only be bought or sold at the end-of-day price, ETFs offer intra-day liquidity, greater transparency and, typically, lower fees, making them a more flexible and cost-effective option for Canadian investors.
The Canadian ETF Association represents the full spectrum of Canada’s ETF ecosystem, from issuers to exchanges, custodians, capital markets and service partners. Our members collectively account for 96% of the $760 billion in ETF assets under management in Canada. ETFs are no longer a niche investment product; it is a mainstream savings vehicle and a central pillar of how middle-class Canadians build wealth, save for retirement and increasingly use their tax-advantaged accounts. In fact, more than one in five Canadians now own shares in an ETF.
While Canada created the world’s first ETF 35 years ago and has consistently led in ETF innovation, we are now facing a competitive imbalance that is growing, structural and directly relevant to the issues before you today as you study the budget 2025 implementation act.
My message today is straightforward and urgent: Canada must level the competitive playing field for our own ETF ecosystem, or we will watch it erode in real time to the advantage of the United States. U.S.-listed ETFs face none of the regulatory, tax or fee burdens that Canadian-listed ETFs shoulder here at home. Today, 30% of every dollar invested by Canadians in ETFs goes to U.S.-listed products, amounting to roughly $250 billion held outside our domestic ecosystem. These ETFs are seamlessly accessible to Canadians through domestic brokerages and trading platforms, making the capital outflow effortless. And while investor choice is important, federal policy must acknowledge that an uneven playing field weakens Canada’s capital markets and erodes our long-term fiscal capacity.
To unpack this further, Canada’s rules for domestic ETF issuers are materially heavier than U.S. requirements. These add cost, create operational drag and discourage product innovation, all while U.S. Exchange-traded funds sold into Canada face no equivalent obligations.
Issues like allocation to redeemers and the application of HST on management fees all create frictions that simply do not exist in the U.S. market. These are direct competitive disadvantages imposed by Canadian law and policy.
Let me take a moment to explain the issue of allocation to redeemers. This is, without question, the single greatest competitive disadvantage Canada faces in the ETF industry. In brief, the CRA replaced long-standing industry practices, which previously prevented double taxation, with a formulaic rule that does not work. It results in unpredictable tax outcomes for investors, including paying taxes earlier than they should. Put simply, the government has created a situation where investors who do not sell their ETFs can still receive a tax bill triggered by someone else’s redemption. This stands in stark contrast to practices and outcomes in the United States.
This tax issue is just one example of the broader regulatory and cost pressures facing Canadian ETFs. Some provinces, namely British Columbia and the BC Securities Commission, have recently introduced higher fees and assessments on investment funds and dealers, costs that flow straight through to investors. Once again, U.S. ETFs face none of these provincial charges.
Finally, with over $12 trillion in assets, U.S. ETFs enjoy natural scale advantages. That is all the more reason Canadian policy should not add hurdles that widen the gap. The ETF industry in Canada is one of the most promising globally competitive segments of our financial services sector. It supports thousands of high-quality jobs across product design, trading, research, compliance and capital markets. It supports innovation at the Toronto Stock Exchange and Cboe and across our banking and asset-management ecosystem. But without deliberate policy choices, we will witness a gradual hollowing out of this domestic expertise.
We are not asking for protectionism nor seeking special treatment. We are asking for fairness, coherence and a healthy basis for competitiveness, so that Canadian investors and the Canadian economy benefit from a strong domestic ETF industry.
Specifically, in our 2025 pre-budget submission, we are calling for, one, the restoration of a workable allocation-to-redeemer outcome that reflects how ETFs function and protect Canadian competitiveness; two, advance a Canadian-branded “Maple TFSA” concept that anchors Canadians’ savings in Canadian-listed products and provides incentives to invest domestically; three, the reduction of excessive regulatory layering and taxes; four, the initiation of interprovincial dialogue to avoid fragmented fee increases that penalize Canadian investors; and, five, ensuring that federal and provincial policy-makers consider cross-border competitive effects whenever introducing new taxes, fees or rules on Canadian investment products.
These are practical, achievable recommendations, and they do not require major fiscal outlays. CETFA stands ready to work with Parliament, the Department of Finance, provincial regulators, the Senate and all stakeholders to build a system that rewards innovation, supports investors and keeps Canadian capital in Canada and ensures the survival of an industry that Canada pioneered. Thank you for your time tonight, and we look forward to your questions.
The Chair: Thank you, Mr. Yufest.
Senator Marshall: I will start with Mr. Yufest because I was very interested in your opening remarks. What departments do you interface with? I am wondering what the consultation process is. I am familiar with the Canadian Federation of Independent Business, but not with your organization.
Mr. Yufest: Thank you for the question. Frankly, I do not remember all the departments that we’ve engaged with over the last number of months but Finance, CRA and Treasury Board.
Senator Marshall: [Technical difficulties] — go through multiple contacts. The issue with the Canada Revenue Agency, when did that start? You made it sound like it was something very recent.
Prerna Mathews, Vice-President and Head of ETFs, Mackenzie Investments, Canadian ETF Association: Thank you for the question. In 2019, the CRA and Finance undertook a consultation and study to make changes to what a long-standing practice was on allocation to redeemers. This was as a result of one bad actor in the ETF ecosystem that was essentially using the mechanism to cleanse funds of income that should have been income. It goes back to 2019 but was enacted in 2022. Since then, the industry has seen that in action.
Senator Marshall: That’s good. I wanted to ask the federation a question with regard to the carbon tax rebate. I was very interested in that. Could you give us an update on that?
Ms. Santini: Absolutely. As you may very well know, the government was a little slow in getting small businesses the rebates that they were owed. It was promised back in 2019, and cheques started rolling out in 2024 in lump sum amounts that would be largely taxable for small businesses and treated as income.
This budget bill proposes that this lump sum amount and the final payment that started going to small businesses just this past week will be considered nontaxable. That is something we’ve been asking for, for a long time, particularly given the initial sums were received all of a sudden and maybe not necessarily in the fiscal year when they should have been owed, and, two, because individuals and the amount that they receive are not taxable.
Senator Marshall: Is that the $4.2-billion pocket of tax there that has to be rebated? Is that what it is?
Ms. Santini: It was $2.5 billion from 2019 to 2024, and in the last fiscal year, 2024-25, I believe it was $623 million.
Senator Marshall: Did you say that the cheques are starting to go out?
Ms. Santini: They have started going out, yes.
Senator Marshall: Businesses are starting to see them.
This question is for both of you. Within the budget 2025 implementation act, there is an act called the Red Tape Reduction Act. I’m sure both of your organizations would be interested in reducing red tape. I am curious if either of you have taken a look at that part of the budget 2025 implementation act? It is Division 5, Part 5, and we have had quite a lot of comments from other witnesses on it.
Mr. Guénette: For CFIB, red-tape reduction is a very important priority of our association. Our most recent evaluation estimated that the total cost of regulation in Canada amounts to $51 billion. Of that, close to $18 billion is considered red tape, so regulation that can be removed without any harm to anybody.
What we are looking for in any bills that government would introduce is the introduction of the two-for-one rule, meaning that for every new regulation implemented, two would be removed.
Senator Marshall: That’s not in there, but I would really appreciate it if you would take a look at that act within the budget bill and send in any comments that you may have.
Mr. Yufest, have you read that part of the budget bill?
Mr. Yufest: I haven’t read that part of the bill specifically, but I can tell you, generally speaking, in the ETF world, we deal with 13 different regulators across the country. We have great relations with them. Many are quite collaborative.
In terms of the very specific red-tape regulation, I haven’t looked at it, but I will.
Senator Marshall: I would very much appreciate it if both your organizations could both look at it and send any comments you have to the clerk. Once you read the bill, I think you will be interested.
[Translation]
Senator Forest: My first question is for Mr. Guénette. I would like to follow up on my colleague’s comments regarding Part 2 of Bill C-15, which allows the department, under the sandbox principle, to bypass a set of regulations, with the exception of the Criminal Code. In your analysis, will this be effective? Should we consider certain guidelines to prevent abuse? Indeed, we are opening up certain areas very widely. Do you think this measure is effective?
Mr. Guénette: For us, the important thing is that the government find effective ways to reduce the paperwork imposed on SMEs. I don’t know if the sandbox approach is the best one, but we must encourage the government to reduce red tape. As I mentioned earlier, what we really want is for the government to implement the two-for-one approach, meaning that every time a new rule is introduced, two rules are removed. This would reduce the level of unnecessary regulation faced by Canadian entrepreneurs. Whether this is done through the sandboxes you mention or in other ways, we want the government to be proactive in reducing regulation.
Senator Forest: Earlier, you mentioned productivity and said you were disappointed with the 2025 budget. In your opinion, it does little to help SMEs meet the productivity challenge. What could the government have done better to help them?
Mr. Guénette: It could have lowered the tax rate for SMEs. Currently, the federal tax rate for SMEs is 9%, which is very high. The province with the highest rate is Quebec, at 4%. Ontario pays 3.2%. Most Canadian provinces have a rate of around 2% for SMEs. The federal rate of 9% is far too high; if we really want to encourage entrepreneurship and SMEs in Canada, we need to leave more money in their pockets immediately. Lowering the tax rate for SMEs would achieve this goal much faster than any program the government could put in place.
Senator Forest: We need to refer to regional economic development agencies. These are not agencies that your members are used to dealing with. Do you have any comments on communication, which can be more complex? This is because development agencies are more often other types of organizations that work with regional development agencies.
Mr. Guénette: My colleague may wish to add to my response, but I would say that, in general, regional economic development agencies are slow and require a lot of paperwork from SMEs that want to interact with them. There is a program to help SMEs affected by counter-tariffs and the tariff war, which is managed by the agencies. We are very concerned about this, because it is not the right model for getting money back into their pockets quickly. We really want the government to readjust its approach as quickly as possible.
Senator Forest: The model you would like to see would be one that reduces the tax rate rather than creating an agency.
Mr. Guénette: There are several ways to return the money from counter-tariffs rather than going through the bureaucracy. The rate applicable to SMEs could be reduced, which would help them immediately. Alternatively, it could be similar to the discount model granted to SMEs for the carbon tax. This was discussed in response to a question from Senator Marshall. It is another way of quickly returning the money to SMEs.
Senator Forest: In your presentation, you said that the government has not done enough to combat youth unemployment. You are proposing an incentive to hire young people. Can you explain the measure you are proposing to this end?
Ms. Santini: Thank you very much for the question. We propose that the government create incentives aimed primarily at reducing employer contributions by giving them a break on employment insurance premiums. This measure would be an incentive to hire and create opportunities for young Canadians. Another way to create opportunities for young people would be through a well-known program, the Canada Summer Jobs wage subsidy program.
I would like to return to your previous question.
[English]
Awareness among business owners of government programs is very low, but one of the most well-known programs is actually Canada Summer Jobs. If you wanted to create a special wage subsidy program, if you wanted to create incentives to encourage employers to hire youth, that could be one of your better levers. Simple tax incentives, EI premium holidays and increasing the Canada Summer Jobs in terms of duration, the amounts potentially subsidized, total funds available, but also making the application year-round. Right now, the deadline for Canada Summer Jobs is on December 11. I can tell you very few small businesses are now thinking about who they will hire or whom they will need on staff come June.
Senator Cardozo: I want to pursue the question on youth unemployment. First, I want to make an observation in terms of what you were saying from CFIB. We hear most businesses say something like they need a tax reduction, and what you have costed is $2.1 billion, and at the same time, you want the government to reduce its deficit. You realize that mathematically, there is a slight problem there. If there are going to be expenditures in some areas or a tax reduction, it has to be paid somehow.
What would you want the government to cut? Would you want them to raise tax rates on something else?
You can touch on that. It’s just an observation. I find it a contradiction.
In terms of incentives for youth, as you noted, Canada Summer Jobs has a high takeup. That’s good to hear. I think I heard you say that you’d like it to be year-round. I tend to agree.
The way I looked at the figures during a back-of-the-envelope calculation, what the government has announced in the budget is largely temporary youth programs for the summer, which would end up covering about 10% of the unemployed youth. We have over 350,000 youths who are unemployed, and about 100,000 of them will get 8 weeks or 16 weeks of work, which is really not much. It’s kind of nothing.
What would you like to see the government do in terms of incenting businesses to hire more youth?
Ms. Santini: Absolutely. We are proposing that intake for Canada Summer Jobs be year-round.
Senator Cardozo: What does that mean?
Ms. Santini: That means that the eight weeks that you apply for could be in December or January. It doesn’t necessarily need to be in June, July or through the summer months. This would provide more flexibility.
Senator Cardozo: Your belief is there are young people who are available to work year-round?
Ms. Santini: It may also include or extend opportunities to individuals who have graduated in the winter months and who are getting that first job right out of school. It provides more flexibility in that regard.
Senator Cardozo: Does eight weeks make a difference to the employee? Isn’t it rather difficult for an employer to train somebody for eight weeks of work?
Ms. Santini: We do know among our membership they would like to see the number of weeks eligible increased. That doesn’t necessarily mean that all employees who would be hired would be for eight weeks, but, for example, if you take a university student, they would be available from May through to September. Something that would cover the whole period would definitely be welcomed. If you take someone who is coming out of CEGEP, it might be June through the end of August. So understanding that some youth and some postings could be available for longer, and that subsidy would be welcome.
Senator Cardozo: Are there other measures that could help small businesses hire?
Ms. Santini: Absolutely. We were discussing or suggesting an EI premium holiday. If you hire an individual under a certain age, EI premiums wouldn’t have to be paid for the first three or four months of that employment. Those could be simple initiatives to implement that wouldn’t require a lot of administration.
Senator Cardozo: From a government point of view, is that easy enough to monitor?
Ms. Santini: The CRA would be able to audit, based on our records of employment, how long the individual is employed for and at what point EI contributions were remitted.
Senator Cardozo: If there were programs, what kind of takeup could there be in terms of numbers of young people?
Ms. Santini: That’s a very interesting question. Let’s say a simple EI holiday. If it’s applicable, it’s done at payroll and would be for any employee that qualifies. It really would be the business owner or the accountant who would be able to apply when they do their remissions.
When it comes to the Canada Summer Jobs program, there you have limited funds. Of course, if you make the duration or the periods more generous, fewer positions might end up being funded, so you have to increase the amount available as well.
Senator Cardozo: Could small businesses get the full 100% of the wage or do they get a portion of the wage from the government?
Ms. Santini: It’s a portion of the wage tied to the minimum wage.
Senator Cardozo: And how much is that, 50%?
Ms. Santini: I admit I’m foggy on the details, but I do know it’s linked to the minimum wage. So for those employers who offer more than the minimum wage, it wouldn’t cover the full amount.
Senator Cardozo: But you would get the full minimum wage amount?
Ms. Santini: I can get back to you on that.
Senator Cardozo: Thank you.
Senator Ross: For the CFIB, I’m interested in your comments. The increase of the limit under the lifetime capital gains exemption probably caused your members to have some more confidence and comfort, but I’m wondering how they’re feeling about the previous inclusion rate confusion, shall we say, where it was supposed to be and then it was deferred and now it has been cancelled. Are your members feeling confident in that cancellation? Where are they at on that?
[Translation]
Mr. Guénette: We understand that the proposals put forward under the previous minister to increase the inclusion rate are no longer on the table. We are pleased that the cumulative exemption has been confirmed at $1.5 million. We were concerned that this increase would not happen, since the inclusion rate was not increased. From this perspective, there is a certain degree of confidence. The government has clearly stated that it will not increase the inclusion rate on the capital gains tax. We have taken many steps to show how misguided this policy of increasing the inclusion rate is. We are pleased to see that the government has not moved forward with it.
Under this policy, the incentive for Canadian entrepreneurs was to reduce the capital gains inclusion rate following the exemption. This measure was abandoned in the 2025 budget. This is unfortunate, because it could have helped entrepreneurs. However, with regard to the increase in the inclusion rate, we are pleased that this measure has been completely eliminated and we do not want it to return.
[English]
Senator Ross: Thank you. In your opinion, does this fully address your call for the lower taxation of capital gains?
[Translation]
Mr. Guénette: No, not completely.
Given the difficult economic climate we find ourselves in, with the fairly low level of optimism among entrepreneurs and the tariff war with the United States, it is really important that the tax system encourages and supports entrepreneurship. We therefore need to reduce the level of taxation. As I mentioned earlier, this mainly involves the tax rate for SMEs, which is currently 9% at the federal level; this is far too high. There is also the deduction threshold for SMEs, which is currently $500,000; this threshold needs to be raised. There is a lot of work to be done to improve the tax system in Canada for SMEs.
[English]
Senator Ross: Just to follow up on Senator Cardozo’s question about Canada summer jobs, what has the CFIB’s position been on the eligibility of international students for Canada summer job grants?
Ms. Santini: We haven’t taken a position necessarily at the moment. We’ve mainly been focusing on the employer’s ability to apply to the process. It can be quite onerous, so we are focusing on simplifying it, making the intake more flexible and also increasing the duration for which the amounts are available.
Senator Ross: The Canadian Chamber of Commerce has taken a position to include international students, but the CFIB has not taken that position?
Ms. Santini: We haven’t taken the question to our membership.
[Translation]
Senator Hébert: Mr. Guénette, in your introductory remarks, you mentioned the $50 billion fund for construction. You said in your statement that, unfortunately, this will help unionized workers more, or something to that effect. I would like you to explain a little more clearly what you meant by that statement.
Mr. Guénette: As we understand it, as indicated in the 2025 budget, the government will establish the Canada Community Development Fund to build infrastructure: larger projects and smaller projects. It is written in black and white that they will give preference to unionized labour. We are concerned about this because it will exclude more than 95% of SMEs from even being eligible to contribute to building communities and participating in the Community Development Fund.
We conducted a survey of our members fairly recently: 97% of SMEs are not unionized. The government is setting up a $51 billion fund to build roads or perhaps even libraries, but 97% of SMEs will be excluded simply because they are not unionized. This is truly discriminatory. If the government is serious about its goal of helping SMEs and ensuring that they can contribute to the country’s economic success, policies like this will not get us there. In our opinion, the program should be available to all businesses, whether unionized or not, and the best should win.
Senator Hébert: Especially since the construction sector is made up of a very large majority of SMEs across the country.
Mr. Guénette: Of course. I think that in the case of very large companies, about 30% are unionized. Ninety-seven per cent of smaller companies are not. We really need to change the parameters of this program.
Senator Hébert: Unless what we meant when we talked about unions was more about companies that work with workers affiliated with the Commission de la construction du Québec, for example, or organizations like that. Perhaps this should be clarified.
Mr. Guénette: There may be clarifications of this kind to be made, senator, but it also sends a strange message. It’s as if a non-unionized company doesn’t do its job properly, doesn’t have skilled workers and doesn’t pay its workers well, when in fact the opposite is true.
Senator Hébert: I understand.
Mr. Guénette: We really need to readjust our approach as quickly as possible.
Senator Hébert: I understand.
I would like to come back to the issue of paperwork. This is an issue that the CFIB has been working on for several years. I was with you 15 years ago and we were already talking about it then. You do a lot of awareness-raising on this issue.
We recently discussed the issue of sandboxes, which is also addressed in the budget bill. At the same time, it is said that there are currently around 3,000 regulations that are either obsolete, in need of revision or unnecessary. What is preventing us from doing a major clean-up of all these regulations and the duplication of paperwork and forms?
Mr. Guénette: I think there are several ways to answer your question, senator.
First, there needs to be much more transparency. Canadians and legislators need to know how many regulations and laws there are in Canada. It’s all very opaque.
Second, it really needs to become a priority, not only to know how many there are, but how we can actually reduce them. This could be a regulatory budget. The government essentially does two things: it taxes and it regulates. From a taxation perspective, we have a budget every year. From a regulatory perspective, we could also have a regulatory budget every year, set targets and measure them to see if we have been able to achieve them.
For example, we want the government to adopt a two-for-one approach: setting clear targets and evaluating those targets. Have we achieved the targets year after year? If we haven’t, we put the necessary mechanisms in place to achieve them.
There is a lot of talk about regulation, but little action. I think it’s time to walk the talk.
Senator Dalphond: I will begin with a topic that is of particular interest to the president and myself: carbon pricing rebates for SMEs.
You explained the part that applied before 2024 and the $600 million in 2025. I asked the Department of Finance about this and we were told that it represented approximately $230 million in tax refunds, i.e., the portion that had been taxable and became non-taxable. Do you know if businesses will have to pay interest on these refunds to Revenue Canada?
Ms. Santini: We were not advised as to whether we had to pay interest, no.
Senator Dalphond: We have learned that the tech giants, to whom the tax no longer applies, are being reimbursed with interest. This is perhaps something you should look into to ensure equality for all.
My second question is for you, Ms. Mathews.
[English]
Ms. Mathews, you recently wrote for McKinsey that the year 2025 had a record-breaking growth for exchange-traded funds in Canada. It says that Canada’s ETF industry continues this remarkable expansion this year. Canadian-listed ETFs will do more than $108 billion in net influx by the end of November, well surpassing 2024 for a year record. Do we have a crisis with ETFs or are we very uncompetitive?
Ms. Mathews: It’s a great call out. Thank you for the quote.
The ETF industry has definitely seen record inflows. This is the first time in 35 years that we have seen this much inflow. Let’s put that into context. Our mutual fund industry in Canada for many reasons has continued to be in net redemptions. Part of the flow is being captured by Canadian-listed ETFs, but part of that is going down to the U.S. The U.S. this year has already set a record of $1.4 trillion of net flows into U.S.-listed ETFs. That’s total. From a Canadian investor, it’s about 30 cents of every dollar that continues to go down south. So while in absolute-dollar terms, the Canadian EFT industry has brought a lot of flow, it’s a very small portion compared to the slippage that we are seeing and will continue to see grow.
Now, keep in mind, those are dollars that are supported by jobs here in Canada. Those are revenues for the government. Those are taxes for the government. Those are fees for our regulators. Those are fees for our exchanges, our custodians. It’s not just the asset manager that is benefiting in any way. There is an entire ecosystem, and that is a $2.5-trillion investment fund industry here in Canada that ETFs are a part of, and the fastest-growing part.
Senator Dalphond: Your colleague referred to many things that could be done to make us more competitive with the U.S. market, but what would be the important element? If we have to recommend something in our report, what should we push for?
Ms. Mathews: The allocation-to-redeemer issue that we have highlighted, which is the tax change that was made, was a sweeping change with not a lot of thought to the repercussions from it. We would invite an open dialogue again with Finance and CRA to say, can we get to a better formula that can ensure that Canadian investors are treated fairly?
Senator Dalphond: Thank you.
Senator MacAdam: For my first question, I will get both organizations to answer. We have heard from various witnesses that there is a need for a comprehensive tax review in this country. It’s been decades since our tax system had been studied in a comprehensive way. It was mentioned that it obviously could take some time, but it’s important to get started. Some witnesses mentioned that maybe the corporate would be the best place to start.
I want to get your thoughts on that. Do you feel there is a need for a comprehensive review of the tax system?
Ms. Mathews: I will speak to the average investor again. Our tax regime as it relates to investment funds in this country is for mutual funds. Exchange traded funds, while they’ve been around for 35 years, are governed in much the same way as mutual funds, which in some ways make sense but, in many ways, it does not. This is where we do invite more of the dialogue to the fastest growing portion of investment funds here to say, if the average investor in Canada is now actively selecting ETFs over mutual funds, does our tax regime actually consider that in a more meaningful way? We don’t believe that that is the case today.
Mr. Guénette: Our tax system in Canada is very complex. If there were a review and conversation about our tax system and how to make it work better for businesses, we would certainly be happy to participate in such conversation; that’s for sure.
Senator MacAdam: Have you advocated for that at any time?
Mr. Guénette: We often talk about the need to have simplicity in our tax system. Many small-business owners find it quite difficult at year-end to fill out their forms and so on. We hope that eventually we could have a conversation on how to make it simpler, easier to understand.
We have, among our membership tax practitioners who help businesses fill out their taxes. They, themselves, say it is quite complex. I believe we would go in the right direction by having a conversation on how to make sure it is easier and simpler.
Senator MacAdam: I had a number of other questions but they were already asked. Thank you.
Senator Kingston: I was intrigued by your recommendation number 2, that the government create a tax-advantaged savings account, a Maple Investment TFSA, for Canadian investments, including Canadian-listed ETFs. When you speak about the average Canadian, most Canadians who can save money do use that very simple, very accessible tool. Could you tell me a little bit more about how you see that happening?
Ms. Mathews: Thank you for the question, senator. We believe that it is ironic as we continue to look at registered plans in Canada, registered accounts in Canada, that the average taxpayer is in many ways subsidizing an investor when they choose to take their savings to a foreign fiduciary. I want to be clear on the association’s position. We are not advocating for a foreign content limitation. We are solely focused on foreign fiduciaries populating registered accounts that are essentially subsidized by the average taxpayer.
We believe that creating an opportunity that further incents the buying of any kind of stock, wherever it is in the world, or if you’re going to go with a fiduciary managing your assets, that it be a Canadian-regulated fiduciary, that there is oversight provided by our regulators and that those funds stay in this country through that fiduciary. We believe that additional incentives for savings could drive more of the flow back up north from U.S.-listed ETFs in registered accounts today.
Senator Kingston: Thank you. The next question is for the Canadian Federation of Independent Business. I’m wondering about your sixth recommendation, to increase the Canadian Pension Plan exemption amount. What is the thinking behind that, right back to why is it $3,500 as of 1997, and why have you picked the amount that you have now?
I assume that taxpayer or the employee is saving money by not having to pay into that increased amount, but tell me about it.
Ms. Santini: Absolutely. Many of our members really appreciate and value their older, more experienced workers. We started developing certain recommendations to try to create a tax system that would incentivize keeping them. This is where this recommendation came from.
Once retired or even going into retirement, we looked into the CPP and saw that they must pay contributions for any amounts from $3,500 up to the yearly maximum pensionable earnings, but the $3,500 bottom line hadn’t changed from 1997. Prior to 1997, it was 10% of their yearly maximum payable amount. They decoupled it, but had it had been increased or indexed, you would either take the average wage — or if you bring it to the consumer price index, it would be anywhere from between $6,000 or $71,000 right now.
You could earn more because the minimum wages have gone up. But if you work as much, you actually work a lot fewer hours, and you get to that ceiling. Allowing individuals to work just as many hours as they used to back in 1997 without paying CPP is what we are encouraging government to consider.
There is a tradeoff. It means they wouldn’t be paying into the CPP plan until much later. If the concern is about youth saving for their retirement, at least try it for the post-retirement benefit. The older workers are already getting a retirement benefit. Allow them to keep more of their earnings up front, and only have that CPP post-retirement benefit start being payable when it is at 10% of their yearly maximum pensionable earnings amount.
Senator Kingston: Thank you.
[Translation]
The Chair: Several of my questions have already been answered, but I have one for Mr. Yufest and Ms. Mathews.
In your pre-budget brief, you talk about creating a Maple Leaf TFSA, a kind of “maple leaf” savings fund that would promote Canadian products. Could you elaborate on this concept, which you see as a savings tool and which, I imagine, would be used to invest in Canadian companies? What would be the impact of this savings tool?
[English]
Ms. Mathews: Thank you for the question. It would need some form of incentive over existing registered accounts. There has to be some reason why an investor would say, “This account is what I’m going to focus on first in terms of registered savings.” That could be in the form of room potentially moving from the existing TFSA, to a “Maple TFSA” where, again, that further incentive could be driven to purchasing Canadian-listed ETFs or Canadian investment funds.
The Chair: Thank you.
Senator Marshall: Again, this is for Ms. Mathews or Mr. Yufest. Has your budget submission been sent in? I don’t recall seeing it. That is my first question. My second question is, have you ever appeared before a committee of the House of Commons? So those two questions.
Mr. Yufest: I can tell you that we did submit it as part of the pre-budget cycle over the summer, and we submitted it to the Finance Committee as well. I am happy to send you the link afterwards. It is publicly available.
Senator Marshall: I would appreciate that.
Mr. Yufest: Sure. Happy to do that.
With regard to appearing in front of a parliamentary committee, no, I have not.
Ms. Mathews: We have not.
Senator Marshall: Okay. I would certainly appreciate that link. I am very interested because you have indicated that you approached the heads of several government departments, and it seems like you are not — I guess not only are you not getting anywhere, but I wasn’t aware of the issues that you’ve raised. They are different than the Canadian Federation of Independent Business. So I would be very interested in following up on that. Yes, if you could send me that information, that would be very much appreciated.
Mr. Yufest: Happy to.
Ms. Mathews: We are making headway with the CRA and Finance, I would like to hope. They are willing and able to come to the table and have shown some engagement in our constructive discussion.
Senator Marshall: Thank you very much.
Senator Cardozo: I just wanted to further the question that Senator Ross asked you. She followed my question and then raised another issue, which is immigration. To what extent are small businesses okay with the cuts in immigration, both permanent and temporary? The point that is often made is that Canada needs to cut immigration because young people are unemployed, and lots of people are unemployed, and we should give Canadians the first opportunity. What are your thoughts on those issues?
Ms. Santini: So, clearly, small business owners are very much aware and sensitive to the current public perception around immigration. They understand that immigration programs probably do need to be tightened and realigned with the country’s key economic priorities. That being said, what they would like the government to consider as a key priority is making sure immigration is more closely aligned with local labour market needs. The realities of Montreal may not necessarily be the same as Boisbriand in Quebec, for example. They are all grouped up in the same census metropolitan area. But the North Shore has an unemployment rate around 4.6%, whereas Montreal is a lot more elevated, but those from Montreal aren’t necessarily willing to travel to the North Shore for available jobs. So not creating blanket policies and being more sensitive to the realities that employers may face in specific regions, particularly more small or rural communities that can be captured in census metropolitan areas.
Looking at permanent immigration policy and trying to use those policies to help keep existing workers in Canada, but also looking at — not completely closing the tap off the Temporary Foreign Worker Program because many are there to deliver services Canadians very much need and that businesses wouldn’t be able to offer without these workers.
Senator Cardozo: What is the situation in the big cities in terms of immigrants and temporary foreign workers?
Ms. Santini: Absolutely. In big cities, we do see there are still some concerns in specific subsectors and for specific shifts that Canadians have not traditionally demonstrated huge interest for. That being said, when it comes to the Temporary Foreign Worker Program, employers still have to go through the Labour Market Impact Assessment, or LMIA process, and there is value in that. Let it do its job. Make the employer demonstrate that they have done everything that they could to recruit locally. They have not been successful in doing so. And once they have demonstrated this, also that — without filling this position, there would be a negative impact. That’s what we hear from our members is if they don’t have enough individuals to staff certain shifts, they are not open during those shifts or reducing their production. So provide them the opportunity to make the case, and if they made it, great, but making the case doesn’t guarantee a positive net assessment. It doesn’t guarantee that the department will find that this foreign worker will have a positive impact on the Canadian economy, which is what the LMIA process is supposed to do.
Senator Cardozo: I hear many employers who have had a temporary foreign worker and really need that person to continue but their visa is up and they have to leave, and they’re not going to have anybody and have to go through the process all over again. Is that a common concern?
Ms. Santini: We are hearing similar concerns where, because of the refusal-to-process policy that is in place in their community or because of the cap, employers can’t retain the workers whom they have already spent a lot of money and a lot of time training and who is now fully operational. When it comes up for renewal — and a lot of them will come up for renewal in early 2026 — chances are they won’t be able to retain that foreign worker.
Ninety per cent of our members who — of small business owners who have turned to the Temporary Foreign Worker Program to fill persisting needs state that they are concerned they won’t be able to retain those workers, and just as many don’t think that there is local labour available.
We will be facing issues in the new year as this plays out where some business owners will be making tough choices, potentially reducing shifts and hours of operations, delaying delivery on certain contracts or cancelling certain services.
Mr. Guénette: If I could add briefly, one recommendation that we are making in that context is to put in place a grandfather clause so that the businesses who already have their workers in their business don’t lose them so that they can keep them. We would hope that the government would introduce such a clause.
[Translation]
The Chair: Many thanks to the witnesses; that concludes our panel for this evening. Thank you very much to the witnesses, your participation has been greatly appreciated. We wish you a happy holiday season.
(The committee continued in camera.)