Income Tax Act

Honourable senators, the Senate is resolved into a Committee of the Whole in order to study the subject matter of Bill C-19, An Act to amend the Income Tax Act.

Honourable senators, in a Committee of the Whole, senators shall address the chair but need not stand. Under the Rules, the speaking time is 10 minutes, including questions and answers, but, as ordered, if a senator does not use all of their time, the balance may be yielded to another senator. The committee will receive the Honourable François-Philippe Champagne, P.C., M.P., Minister of Finance and National Revenue. I would now invite Minister Champagne to enter, accompanied by his officials.

(Pursuant to the order of the Senate, the Honourable François‑Philippe Champagne and his officials were escorted to seats in the Senate Chamber.)

Minister, on behalf of all senators, welcome to the Senate.

As I have informed my colleagues, the question-and-answer period will be divided into 10-minute blocks. These blocks will be shared between two or three senators and will include time for your responses. I thank the honourable senators and minister for their concise questions and concise answers.

I would ask you to make your opening remarks of at most five minutes.

Thank you, Mr. Chair. It’s always a privilege and a pleasure to be among you, honourable senators. As you know, Mr. Chair, there will be three votes in the House of Commons, so there will be some interruptions. Out of respect for my colleagues, I wanted to mention that off the top and remind them that I’ll have to excuse myself for a few moments.

Before I begin, Mr. Chair, I would like to say a few words about the tragedy in Tumbler Ridge, British Columbia. The news is shocking, of course, and deeply upsetting for all Canadians. My thoughts are with the families of the victims, the survivors, the students whose lives are forever changed, and the entire community. This has been a difficult week, because there was also another serious incident in a community not far from here.

I’m here today because senators are beginning their study of Bill C-19, the Canada Groceries and Essentials Benefit Act.

The fact that this legislation is before the Senate today is, in my view, a credit to what members of the House of Commons can accomplish when they work together for Canadians. I am confident that a similar spirit of collaboration will inform the Senate’s consideration of this very important bill.

This is the third piece of legislation, Your Honour, that I have had the honour of introducing as the Minister of Finance and National Revenue. The first bill, Bill C-4, put more money into the pockets of Canadians with a middle-class tax cut. The second bill, Bill C-15, which I hope will come to you very soon, is the budget implementation act, which will help lay the groundwork for generational investments included in Budget 2025.

Bill C-19 is a key part of our government’s response to a rapidly changing and increasingly uncertain world that is leaving economies, businesses and workers under a cloud of uncertainty. Some would say we live in a more uncertain world than at any time since 1945 or 1989. In other words, Your Honour, we have a long-term vision that is focused on building a strong and resilient Canadian economy while at the same time remaining focused on the more immediate needs of Canadian workers and families.

We know, for example, that, while inflation has cooled since its post-pandemic peak, food inflation remains stubbornly high. Global supply chain shocks caused by tariffs, geopolitical disruptions and climate change have all caused food prices to rise around the world. In fact, a new report by the Bank of Canada found that the majority of recent increases in food prices in this country have been driven by higher import costs rather than domestic pressures.

Our government is focused on what it can control: on building a stronger economy while charting a course to a less dependent and, naturally, more resilient economy. That’s why we’re proposing to create the Canada groceries and essentials benefit. All told, more than 12 million Canadians will benefit from it. With Bill C-19, we’re putting forward a responsible and pragmatic approach that tackles the long-term structural deficit while recognizing the need for action now, to help Canadians struggling with the cost of living.

It is both a bridge and a median boost.

As you know, this new benefit will replace the GST credit. What’s important, however, is that it’ll be more generous in order to address the current situation. As honourable senators know, the GST credit is one way to make our tax system fairer. With Bill C-19, we propose to increase this benefit by 25% for five years, starting in July 2026.

This year, we’re going to offer an additional one-time payment amounting to 50% of the current benefit. Since 2020, excess inflation has cost the average household $782. That is precisely what we’re going to try to offset for Canadian families and households. All things considered, it’s going to make a big difference.

Right now, a person living alone who is eligible for the GST credit can receive a maximum of $443 for the 2026-27 benefit year. With Bill C-19, that same person would receive approximately $950 in total from the one-time payment and the support provided for the 2026-27 benefit year, which includes the 25% increase in benefits. For a couple with two children, the amount would increase from approximately $1,086 to $1,890. As Food Banks Canada recently indicated, these sums would make a meaningful difference in the lives of Canadians, especially those who are more vulnerable.

Your Honour, I see you looking at me. That means that my time is probably up, so I will say this: Let’s seize the moment. Let’s be there for Canadians at a time of need, and together, let’s build Canada strong. I will be more than pleased to take questions from the honourable senators.

Thank you, minister.

Honourable senator, when you are in government, you have to make choices. This is a choice we are making. We are choosing Canadians. I am glad to say that even the opposition approved of that measure. Your colleagues in the House of Commons saw fit to support Canadians in this time of need.

You know that the pressure on affordability is the main concern of G7 countries. I can tell you, as a member of the G7 — and I chaired as the G7 finance minister last year — this is the concern of everyone. If you look at Canadian families, you will see that their first concern is with respect to shelter. Their second concern is food. After that, you would go to car loan payments, cellphone bills and student loans.

The first thing we did when we came into government was to cut taxes for 22 million Canadians. That measure is helping 12 million Canadians across the board. We did it using a vehicle that is well known to you, senator, and Canadians, which is the GST tax credit.

Let me tell you about the thinking behind it. We looked at the numbers and saw that if you look at the excess food inflation since COVID, it was about $782. That’s what we tried to do. That’s the boost. The bridge is that, obviously, we have a vision to 2030 to increase GDP per capita with the investments that we expect and plan to see coming into the Canadian economy. That’s why it is both a boost and a bridge for Canadians to be able to benefit from the increase in GDP in Canada.

That’s an excellent question, senator. Over the past six months, we have signed 12 strategic agreements on four continents. When I was in Europe and the Middle East with the Prime Minister recently, it became clear that Canada is the envy of the world. Canada attracts talent. Canada is one of the few G7 countries with a manufacturing industry that produces cars, ships and aircraft. Canada is one of the few countries that have the critical minerals that will be needed for the 21st-century economy. Canada has an abundance of energy resources and is the only G7 country that has free trade agreements with all other G7 countries.

Let me give you some examples. I was with the CEO of Volkswagen and we discussed some very significant investments. You know, the largest of the so-called mega-factories outside of Germany will be located in Canada. We’re talking about an $8‑billion to $9-billion investment in St. Thomas, Ontario.

I could give you a long list of examples. If you look at what BHP has invested in Canada, what Shell has done with LNG Canada Phase 2 and the discussions we’re having with various investors, it’s obvious that, in today’s world, stability, predictability and the rule of law are in demand, and supply is quite limited. Canada therefore stands out in that regard.

Indeed, in Budget 2025, which you will have the opportunity to review during your consideration of Bill C-15, you will notice many measures that put Canada ahead of the game. Canada has the second-highest growth rate in the G7 according to the International Monetary Fund. Canada also has a lower marginal tax rate than any other G7 country. Given the productivity deduction we proposed, if you talk to CEOs — and I know that you know a number of CEOs around the world — you will see that Canada is a leader and is in an enviable position within the new economy compared to a number of other countries.

Minister, welcome to the Senate.

Thank you, sir.

Since 2022, your government has implemented four time-limited expansions of the GST credit. In 2023, you summoned grocery CEOs to Ottawa and threatened them with consequences if food inflation remains above headline inflation, and food bank usage has reached record levels. Our food inflation is twice that of the U.S. and the highest in the G7.

Why should Canadians now believe that this latest cash transfer will succeed where previous high-profile interventions failed to reduce grocery prices or halt the exploding reliance on food banks in this country?

Senator, you would know that food inflation across the G7 is a complex set of circumstances and one of the challenges that Canada is facing. There are the benefits we are increasing, but we are also making structural changes. Having talked to farmers’ associations in the country, that’s why we’re putting $500 million to increase our supply chain in Canada. You would know that, in terms of produce, Canada imports about 30% a year. When winter comes, we import 80% to 90% of our produce in Canada. Therefore, we’re subject to currency fluctuations. We’re subject to trade measures. We’re subject to drought. That’s why we wanted to provide this bridge and a boost to Canadians.

At the same time, you will see, for example, we did the immediate expensing for greenhouses, something that the industry has applauded, and we’re also making more structural changes so that food security is top of mind. I know the people you represent, and it is true where I come from — but I would say when I talk to different premiers across the nation, they would certainly applaud the focus of the government on food security and being a bit more resilient. When you look at the numbers, you would see that about 50% of the food inflation that you have noticed is with respect to very few items. They are beef, pork, chicken, coffee, somewhat sugar and lettuce. But they represent only 10% of the CPI basket.

We need to do more. We need to produce more. We need to become more resilient as a nation. That’s why this bill, with the approval of the Senate, will allow Canada to become more resilient in a very challenging world.

Thank you, minister. You are also asking Parliament to authorize a one-time payment plus a five‑year 25% increase in maximum GST credit amounts at a projected cost of $11 billion to $12 billion over the next few years. How does the government plan to pay for this measure? Will you cut spending? Will you increase taxes? Are you just going to continue to print money? We know what money does: It drives inflation.

I’m happy, senator, that you pointed to savings. I’m sure you have seen that in Budget 2025, but in Bill C-15, this government has been able to identify $60 billion of savings. I would say if you compare that with what Prime Minister Chrétien did at the time or what Prime Minister Harper did, we have done that in record time and at a similar level or above what was done at the time. This was warranted. We took tough decisions to bring back the finances of Canada to a sustainable level.

I would also refer you to the International Monetary Fund. Canada is the only country of the G7, along with Germany, with a AAA credit rating, the lowest net debt-to-GDP ratio and one of the lowest deficit-to-GDP ratios. I can tell you that when I sit at the G7, everyone wants my job, but it is not going to happen. They all like Canada. They see Canada with a very strong foundation, and, also, Canada is what people want.

I go back to talent. We have the most educated workforce, critical minerals, energy, which is a proxy for growth.

I would say, despite the headwinds that the world is facing, when you compare Canada to other G7 nations, that’s why I feel confident. I know that we all believe in Canada. I believe in Canada, and I’m sure every member of this house believes in Canada. We will build Canada strong together.

Thank you.

Good afternoon, minister, and welcome.

Senator, I’m sorry to interrupt. I believe that the minister has parliamentary obligations to attend to.

Go ahead, minister. We will pick up where we left off as soon as we can.

Thank you again, minister, for joining us this afternoon and for answering our questions.

Bill C-19 provides that only eligible individuals who filed a tax return can receive the benefit. As you know, however, millions of low-income Canadians don’t file annual tax returns, often because they lack the necessary resources or tax knowledge, which deprives them of essential benefits that they’re entitled to receive.

I want to congratulate you on the budget. Some people have announced a phase-in of automatic prefilled tax returns expected to reach 5.5 million people by 2028. Has the government estimated the number of low-income individuals who would have been eligible under Bill C-19 during the transition period leading up to that deadline, and who would therefore be excluded from receiving payments during that period?

Thank you. My apologies, I didn’t mean to interrupt you earlier, senator.

All is forgiven.

That’s an excellent question. First, the automatic filing project came out of a concept dating back to when we asked the Canada Revenue Agency for a 100-day plan. At the time, I asked for ways to improve processes and technology to see how we could help Canadian families. I was told that there was a pilot project under way to make it easier for people to file their tax returns. That’s when we decided to change the pilot project into a program so that it could be extended to as many Canadians as possible.

We have set a target of 5.5 million people by 2028. I think it’s moving as quickly as possible. There will certainly be people who will gradually be able to file their tax returns automatically. We based our approach on what the Nordic countries, particularly Sweden, are doing. You’re right, this is something we will continue to promote because, as you said, many Canadian individuals and families could benefit from the tax credit.

I would point out, honourable senators, that one of the reasons we used the GST rebate as a vehicle is because it is familiar and fast. There’s no need to create a new formula, because one has been in place since 1991. We already had a vehicle to get it done quickly. Canadian families have told us that they understand our 2030 vision and they support our plan to build the country, but they need immediate help.

As some of your colleagues have already mentioned, the Food Banks Canada report talks about support that will really make a difference for families. That money will flow quickly, depending on the vote in the Senate and Royal Assent. That’s why the House made such a wise choice. We all know it’s crucial to help people now, while continuing to grow the Canadian economy. However, I can assure you that we will advertise to make sure —

Thank you, minister.

Welcome to the Senate, minister.

Affordability is a concern for Canadians, and grocery inflation remains a serious concern. Bill C-19 directly helps affordability through increased GST-style benefits and other affordability-enhancing measures.

It is well known that two major challenges in Canada are productivity and lack of competition in certain sectors. A few years ago, you were contemplating measures or government initiatives to attract foreign grocers. Is there any update on these initiatives? I do applaud your food security resilience measures that you have taken.

Thank you, senator, for that. I said at the time it’s hard work, but it’s worth doing. We need to push for more competition, not only at the grocery store level but in the whole supply chain. It is a fairly complex supply chain, but we need to keep the pressure on.

I’ll give you an example. Some foreign grocers had looked at the Canadian market in some detail, but you know what? They found out that what we call restrictive covenants in leases were not allowing them to go into what they call “Site A” premises. That’s why we changed the law to make sure we would push for more competition because, believe it or not, that has led to what they call “food deserts.” If you had a major grocery chain leave a commercial centre, the restrictive covenant in the lease would continue. No one could take the premises within a certain radius.

We have learned. We have adapted, I would say. We made sure that we have done more. Today, the Competition Bureau is on top of these covenants to make sure that whenever they see something that would restrict competition, they can act.

I am just giving you some of the challenges we were facing at the time. People will say — and it is true, I did have conversations with a number of them — that there were structural issues that we needed to remove; we did that. We always encourage the Competition Bureau to do more because — you are right — it is a complex change, but changes like that with respect to restrictive covenants in leases are the kinds of things that make a difference over the mid-to-long term.

Thank you for being here to contribute to our discussion, minister. It is very helpful.

Enhancing the GST credit to help low-income families is an excellent initiative, but it is still a temporary solution to a structural problem. It also promotes competition. With that in mind, why not eliminate or simplify taxes on food, as some experts are proposing? It is rather absurd that a muffin sold for $4 is taxable, while another sold for $3.80 is not.

Can you tell us whether other more structural measures are being considered to tackle inflation in the food sector?

That’s an excellent question, senator. We looked at all possibilities to help families. As you know, the tax rate on food is zero in most cases, except for prepared foods, which have a different rate. However, our analysis revealed that the fastest and broadest way to help families, since it affects 12 million Canadians, was with a measure that could be introduced immediately.

I believe that leaving money in people’s pockets so they can make their own choices is a good thing. People can choose the products they can afford to consume. I assure you that we assessed this carefully, because there were different solutions for tackling the problem of food inflation. We concluded that this was the most effective way to do so.

I’d like to come back to what you pointed out, senator, regarding the fact that the bill you’re going to be studying also contains more lasting measures. I spoke with Martin Caron, the president of the Union des producteurs agricoles, who gave me some ideas about what structural changes could be made. He said that there needs to be more slaughtering, we need more resources to produce fruits and vegetables in Canada and we need more refrigerated sites. Many measures have also been put in place to provide immediate assistance to families, because making lasting changes for Canadian families is all well and good, but they are still somewhat out of reach.

We have therefore found a good balance between structural measures — such as greater food self-sufficiency — and faster assistance for people, because, as you know, their primary concern is food. This is an almost daily concern, unlike concerns about rent, which are monthly. There is constant pressure on families, which is why we wanted to respond in a timely, rapid but also structural manner.

Thank you.

Honourable senators, we’re going to suspend the sitting until the minister has attended to his parliamentary obligations. We’ll pick up where we left off as soon as possible.

Thank you, Mr. Chair.

Good afternoon, minister. Thank you for being with us today.

Most tax experts and economists agree that the temporary increase in the GST credit provided in Bill C-19 is an excellent way to help families and probably more appropriate than a temporary reduction in the GST, as we saw a few quarters ago. On the other hand, the public purse will lose $12 billion in revenue over the next five years. Can you assure us that the federal government can afford such a measure without jeopardizing its viability or even its AAA credit rating?

Thank you, Mr. Chair. At the rate I keep interrupting you, I’m not sure I will ever be invited back.

Thank you for your understanding, Senator Gignac. I was quickly told that there were a few minutes left for voting.

You’re absolutely right. You are a renowned economist, senator. You know this better than most in the country. I thank you for informing Canadians so that they can weigh the facts.

Obviously, Canada’s fiscal situation is the envy of the G7. As I was saying, Canada is the only country along with Germany that has a AAA credit rating. Our debt-to-GDP ratio is the lowest in the G7. Indeed, we have the capacity to do this.

Our economy will grow. People understand our vision for 2030 and the investments we made in Budget 2025.

To give you an idea of its scope, our investment plan in infrastructure, housing, productivity and defence is comparable to that of Germany. The German infrastructure plan is seen around the world as one of the largest. It amounts to roughly €500 billion over 12 years. If you convert to Canadian dollars, their plan is roughly $800 billion over 12 years. The Canadian plan amounts to roughly $500 billion over five years. Many would say that Canada’s infrastructure and investment plan is the most ambitious in the G7, even without comparing it to Germany’s larger economy.

According to statements from the International Monetary Fund, Canada has the fiscal capacity to make that choice today. It is important to be there for people in these difficult times. That is part of our Canadian values.

Is your goal of achieving a positive operating balance within four years still viable with this new measure, which will deprive you of revenue, given that it is pretty much the only budgetary anchor we have now, since there’s no real target for the debt-to-GDP ratio? Do you still intend to balance your operating balance, meaning that your deficit will be explained solely by capital expenditures within four years?

Absolutely, and it will happen in 2028-29, as stated in the budget.

Thank you.

Minister Champagne, welcome back to the Senate. Thank you for your opening remarks.

One of the key policy recommendations made by Food Banks Canada that you referenced earlier was to implement targeted financial support for low-income households, like the Canada groceries and essentials benefit reflected in Bill C-19, providing up to nearly $1,900 for a family of four and impacting 12 million Canadians, as you have mentioned. To put this into practical perspective, what does this type of money mean for a Canadian family, in your opinion?

Thank you, senator, for your comments and the question. If you were to look at Food Banks Canada, they would say it’s a meaningful difference.

Thank you also for allowing me to say you have to couple that with the number of measures that we have implemented to help Canadian families. I can only name a few, but think of the Canada Child Benefit, which impacts 6 million families; the National School Food Program, which impacts 400,000 kids; the Canada Disability Benefit, which impacts 465,000 Canadians; the $10-a-day child care program, which helps 900,000 families; the Canada Workers Benefit, which impacts 3 million workers; and the Canadian Dental Care Plan, from which 6 million Canadians benefit. This is part of a suite of measures to really bring Canadians along.

It’s nice that we talk about the growth of the economy, but I can tell you, if you’re like me and talking to people on the street, as I know you do, people say, “Okay, but we need support now.”

I do my groceries, and I can assure you that Canadians and people whom I represent come up to me, and that’s certainly one of the things they have noticed the most. Rent is the other one. Other things have come down. The price of fuel has come down, the price of cellphone plans has come down, and the price of child care in the provinces that adopted the measure has come down, but we have to accept the fact that millions of Canadians, Canadian families — as you mentioned in the Food Banks Canada report — need our help. I think it’s part of our Canadian values.

We have to help each other in times of need, and you’ve seen the nation come together again this week in a very different context. When it’s difficult, we close ranks and we stand with each other. I think that measure is really in the spirit of standing with the most vulnerable Canadians.

Thank you. Also, from your perspective, what role do partnerships, especially with provinces, territories and industry, play in addressing the structural measures and challenges you addressed earlier?

Thank you for your question. We put $500 million from the Strategic Response Fund, for example, to help capacity in the country in terms of food production, and the immediate expensing for greenhouses, which will help to produce more food in the country. We hope that provinces and municipalities will join with us because these are structural measures. We’re looking at a national food security strategy, which will be coming, to ensure that our country becomes more resilient.

However, food security is something which is top of mind for Canadians, I think, as well as economic security and energy security, and I think people are really mindful of us becoming more resilient as a nation.

Thank you.

Welcome, minister.

Bill C-19 will undoubtedly help families breathe a little easier when doing their grocery shopping. I am delighted about that, of course. However, this policy doesn’t address the root causes of this rapid rise in food prices. There are, of course, causes beyond our control, such as geopolitical tensions and climate change. However, domestically, are there not also grocery chains that are raking in excessive profits? Does our dependence on food imports in winter contribute to inflated prices? What are you doing in this regard to achieve greater affordability?

Thank you, senator. I think you hit on two essential points.

The first is competition. We must always increase competition in the grocery sector.

The second is slightly more direct and immediate measures that are structural. As I was saying, after speaking to Quebec’s Union des producteurs agricoles, we could see that some sectors need structural measures. The $500-million fund will certainly help. We talked about things like slaughterhouses in certain regions, refrigeration and transportation.

The foods that have caused the most inflation are beef, pork, chicken, lettuce, coffee and sugar. Some things will always have to be imported, and that makes us more vulnerable to global fluctuations, such as climate change, exchange rates and trade restrictions. That said, investing in things like our greenhouse production and more resilient supply chains and introducing a grocery code of conduct are some of the measures that will work together to help us become more resilient. It is in the national interest to make the country’s food production and distribution systems much more resilient.

What will you do in five years? What makes you think that inflation will stabilize or that the poverty rate will fall? It will be hard to turn back the clock.

Indeed. In English we said that we wanted to raise the amount in order to offset the $782 in excess food inflation. At the same time, we provided a bridge. Based on our vision, we are sure that the Canadian economy will have grown by 2030. Economic growth will raise the per capita GDP and create wealth in the country. That was the idea behind the measure.

Thank you, minister.

Minister, welcome back to the Senate. I want to ask you a few questions about the bill. I compliment you on the bill. I think you’re focusing on low-income people, but I’d like to focus on youth and ask about expanding the Canada Summer Jobs program, either through this bill or the budget implementation bill.

You’re well aware that the youth unemployment rate is double that of Canadians at large, and that certainly results in young people being discouraged and frustrated about the future of their country and their future in this country. I’m asking you if you would consider — and I don’t need a “yes” or “no” now; I want you to think about this — doubling the number of students who would benefit from 100,000 to 200,000, doubling the number of weeks so they all have 16 weeks. I am asking for you to take a leadership role with your provincial and territorial counterparts, as well as the private sector, and ask them all to engage in a national project. Right now, the projects that are outlined in the budget cover about 10% of unemployed youth. There’s a lot we’re not covering. We need a national approach to deal with this crisis.

I think you have a vote coming up.

I do have a vote. Is it okay if I excuse myself, Mr. Chair?

Yes. We’ll suspend again and allow the minister to vote. We’ll resume when he returns.

Senator Cardozo, please complete your question.

I completed my question, but I will summarize it. Would you consider convening your provincial and territorial counterparts, as well as the private sector, to take a major new initiative to deal with the crisis of youth unemployment?