Honourable senators, Part 4 of Bill C-32 will provide the Minister of Finance with $2 billion to buy shares in an unnamed, non-existent corporation. The bill provides no information on the corporation except to say that it will be:

 . . . a wholly-owned subsidiary of the Canada Development Investment Corporation that is responsible for administering the Canada Growth Fund.

The bill does not explain what the term “administering” means. The corporation has yet to be created, and there is no information on the corporation. The bill provides no information on the composition of the board of directors or even if there will be a board. There is no information on the mandate and function of the corporation, no information on the governance structure, nothing on whom the corporation will report to and nothing as to how the corporation will report to Canadians and parliamentarians.

There is also no information as to the financial management and control over the $2 billion. Since the corporation does not exist, what does the minister intend to do with the $2 billion? Will she retain the money until the corporation is created, or will she invest it — and if so, where?

Of equal concern is the provision in the bill that provides the minister with the authority to draw down, as the bill says, “ . . . any greater amount that is specified in an appropriation Act . . . .” There is no dollar limit affixed to this greater amount.

Honourable senators, the part of Bill C-32 that legislates the spending of $2 billion and more is a mere 17 lines in length and provides no details regarding the $2 billion and more, nor does it provide any information on the referenced subsidiary corporation. In fact, the subsidiary corporation at this point in time does not even exist.

In its Fall Economic Statement, the government indicates that its revenues characterized as “projected other revenues” have been revised downward “due to the impact of higher interest rates on the Bank of Canada’s income.” The Bank of Canada has now reported its first financial loss in its 87-year history — in its third-quarter financial statements — in the amount of $522 million.

Unlike losses relating to the purchase of government bonds, which are covered by an indemnity agreement with the government and which will be paid by the federal government, the indemnity agreement does not cover these losses. With the rise in interest rates, interest on deposits at the bank is increasing. However, interest earned on the Government of Canada bonds, which the bank purchased during the pandemic, is at much lower interest rates. It is this mismatch of interest revenue at lower rates and interest expense at higher rates that is creating the loss for the Bank of Canada.

So the question arises as to how the bank and the government will treat these losses. I had expected that the Fall Economic Statement would indicate how these losses would be treated. Will the government reimburse the bank for these losses? Or will the losses be accumulated on the bank’s balance sheet? Since these losses are expected to continue into the future, parliamentarians and Canadians should be told as to the disposition of these items.

Honourable senators, the timeliness of the financial reporting of the public accounts continues to be a problem. This year, the public accounts were tabled on October 27, somewhat better than the tabling of last year’s public accounts, which occurred on December 14, but still short of September 30, which would be six months after the fiscal year-end.

While the public accounts were tabled this year on October 27, the Auditor General Report was actually dated September 12, after which it took the government 45 days to table it in Parliament. On average, over the past decade, the public accounts have been tabled more than two months after the conclusion of the Auditor General’s audit. In other words, it appears that the government is withholding the tabling of the public accounts.

At a recent meeting of the Senate Finance Committee, Auditor General Karen Hogan assured us that her office would complete the audit of the public accounts in time to allow for a pre‑September 30 tabling. She went on to further say that, typically, she signs off at some point in early September and she would be ready to advance that a few weeks if needed in order to meet all the publication deadlines.

The International Monetary Fund’s advanced standards on financial reporting recommend that governments publish their annual financial statements within six months of the fiscal year‑end. Parliamentarians and Canadians require access to this information on a timely basis so that the information provided is current and not historical.

Honourable senators, the Canada workers benefit is a refundable tax credit to help Canadians who are working but earning a low income. The Fall Economic Statement announced a change in the government’s policy for the Canada workers benefit. Single individuals will receive $1,395 if their adjusted net income is $22,944 or less. For incomes between that amount and $32,244, the benefit is reduced. Families will receive $2,403 if the adjusted family net income is $26,177 or less. For family incomes between that amount and $42,197, the benefit is reduced.

Of the $52 billion of new spending announced in the Fall Economic Statement, $4 billion relates to changes in the Canada workers benefit. Beginning next year, all workers who qualify for the Canada workers benefit based on their income for the previous year will receive an advance payment of the benefit every three months rather than a lump sum payment after filing their tax returns.

However, the revision to the benefit has also introduced a new change. Under the old system, the payment would not have been made until after the worker had filed their tax return. If the worker had opted for a partial advance payment under the old system, any overpayment determined after the worker had filed their tax return would have to be refunded to the government. Under the new system of quarterly advance payments — paid prior to the filing of tax returns — any overpayment calculated when the tax return is filed will not have to be refunded. The substantial cost of this change — $4 billion — is largely due to the government’s decision not to recover these overpayments when workers become ineligible for benefits or eligible for lower benefits.

However, the new system introduces unfairness in the tax system and in the program itself. For example, it will create situations whereby two workers receiving the same salary in a given year will result in one worker receiving the Canada workers benefit because they qualified for the benefit in the previous year. If a worker was eligible for the benefit last year but has a higher income this year, exceeding the ceiling for benefits, that worker will still receive the Canada workers benefit and not have to repay any overpayment. Compare this situation to that worker’s colleague who receives the same salary for that same year but did not qualify for any benefit the previous year. That worker will not receive any of the Canada workers benefit. Not requiring repayment of a benefit for ineligible recipients is a departure from the existing federal tax system.

The Parliamentary Budget Officer told us that the substantial cost of this measure is largely due to the government’s policy decision not to recoup these advance payments when recipients’ incomes rise and they become ineligible for benefits or eligible for lower benefits. He said that not requiring repayment of federal benefits for ineligible individuals is a pronounced departure from the existing federal tax and transfer system.

Honourable senators, two of the proposed amendments within Part 1 of Bill C-32 relate to the Canada Revenue Agency. Part 1 (q) of the bill strengthens the rules on avoidance of tax debts when a taxpayer transfers assets to a non-arm’s-length person for insufficient consideration.

The second amendment is in response to a court decision which called into question the extent to which Canada Revenue Agency officials can require people to answer all proper questions, and to provide all reasonable assistance relating to the administration and enforcement of the Income Tax Act.

The amendment is intended to strengthen the Income Tax Act and other legislation to ensure the Canada Revenue Agency has the authority to require a person to respond to questions orally or in writing. Unfortunately, Canada Revenue Agency officials appearing before our National Finance Committee were unable to explain whether these amendments respond to their recently released Overall federal tax gap report: estimates and key findings for tax years 2014-2018, and whether the amendments will assist the agency in collecting taxes that are part of that so‑called tax gap.

In their recently released report, the agency estimates that the tax gap is in the range of $35 billion to $40 billion. The tax gap is a measure of potential tax revenue loss resulting from tax non‑compliance. Despite recognizing that the tax gap exists and attaching an estimate to it, the Canada Revenue Agency is not making progress to collect the monies owed. Rather, the perception is that the agency focuses on already tax-compliant taxpayers. The collection of even a portion of the $40 billion tax gap would significantly reduce the government’s deficit, and more efforts to collect these monies should be made.

In the Fall Economic Statement, there is a listing of new initiatives along with additional initiatives implemented since Budget 2022. Together, they total $52 billion over six years through to the end of March 2028. However, of the $52 billion, $14 billion represents funding for which no information is available. The Parliamentary Budget Officer, upon testifying at our National Finance Committee, said the unexplained $14 billion is not a one-off, it is the largest amount announced without specific detail since 2016 and the precise number suggests that the government knows exactly what it is going to do with the money. However, when the government does announce the initiatives for this $14 billion, it will not relate back to the $14 billion. Parliamentarians will not be able to reconcile the $14 billion back to anything. We will not know whether the $14 billion will be used, what it will be used for or whether it is simply another a buffer or contingency.

This is not uncommon for this government. It builds in contingencies for expenses, and in establishing its new debt ceiling two years ago, it included a buffer of 5% for additional new borrowings along with a duplicate of the buffer provided five years ago when the debt ceiling was established at that time. The government likes to give itself lots of room to manœuvre when spending and borrowing, and transparency is not top of mind.

In Budget 2022 in April, the government announced two spending reviews that would focus on the overall level of government spending. First, there would be a strategic policy review to assess program effectiveness, identify savings and reallocate resources to adapt government programs and operations to a new post-pandemic reality. The strategic policy review was estimated to save $6 billion over three years beginning in 2024-25.

In a second spending review, the government said it would review previously announced spending plans with a view to reduce spending that has yet to occur — that is the term they used — by up to $3 billion over the next four years, or $750 million a year starting in 2023-24. Note that the government itself made the commitment to focus on spending that has yet to occur and it was this future spending that was to be reduced. In its Fall Economic Statement, the government announced it had already achieved the total targeted savings of $3 billion and more because the uptake of COVID-19 supports in the previous fiscal year — that is, 2021-22 — had exceeded the $3 billion target.

Honourable senators, the government’s commitment in Budget 2022 was to reduce spending in future years, not go back to a time that predates their commitment and use completed programs to take credit for savings that actually occurred before they made their commitment to reduce spending. Obviously, the government is not up to the task of managing their spending. Surely, the government can do better than this. Canadians deserve better.

Before I conclude my comments, I once again raise the issue of much-needed tax reform. The last major review of Canada’s tax system occurred in 1967. Much has changed since then: How we live and work has changed, Canadians are living longer, technology is constantly changing and the proportion of women in the workforce has increased significantly. Our tax system has become a patchwork of new rules, amendments, incentives and so on. It is now over 3,000 pages long. Incidentally, the first income tax legislation in 1917 was — I thought it was 10 pages long, but Senator Loffreda said 11, so we’re close. Our Income Tax Act has become inefficient and complicated for Canadians, businesses and professionals, such as accountants and lawyers. Maybe we would not need so many accountants and lawyers if our tax system was reformed.

It has even become complicated for the government to administer, especially the Canada Revenue Agency, as evidenced by an audit carried out by the Auditor General of Canada in 2017, during which responses to tax questions provided by the Canada Revenue Agency to auditors were incorrect almost 30% of the time. Many professional organizations and many individual Canadians support a comprehensive tax review, including the Chartered Professional Accountants of Canada, the Business Council of British Columbia and the Canadian Chamber of Commerce, as well as committees of both the Senate and the House of Commons.

Once again, I encourage my colleagues to support a comprehensive review of Canada’s tax system. This concludes my comments on Bill C-32. Thank you.

Senator Marshall, going back to this non-existent corporation, did I understand you correctly that not only will this non-existent corporation the government is creating under Bill C-32 receive $2 billion by virtue of this bill, but it will also potentially receive additional unspecified money? If so, is there a limit put on that unspecified amount?

Thank you very much. Your interpretation of the bill is correct. It allows for the $2 billion that is specifically carved out. That is a statutory payment. There is also a provision that the minister can also requisition money from the Consolidated Revenue Fund, and there is no limit on that at all. We have no idea as to how much money is going to be channelled into that fund once it’s created.

I was also quite shocked to see the response that you received from Finance Minister Freeland when you questioned her about this non-existent corporation last week at the Senate Finance Committee. As Blacklock’s reported, you asked her:

. . . $2 billion with no explanation within the bill over how the $2 billion is going to be controlled. The company is not even created. What are you going to buy shares in? There is no company yet.

Minister Freeland replied that the green transition is essential. Blacklock’s reported: “The finance minister did not explain why the measure was not detailed in a separate bill.”

Senator Marshall, I’m recalling the early days of the COVID pandemic. The Trudeau government used one of their early pieces of legislation to create what I called at the time the “giant government corporation” — the ability to buy massive corporations to use them for government purposes. At that point, they were able to create a corporation. Why didn’t they do a similar thing with this?

I have no idea, Senator Batters. I think you’re talking about the LEEFF corporation. They created that. Actually, that did come up at the Finance Committee and the Department of Finance provided us with all the information. The other corporation you can compare it to, which is probably — well, Senator Loffreda mentioned this, and it’s probably not a good example — the Canada Infrastructure Bank, which wasn’t very successful, but nonetheless, they did create a separate corporation. They actually had the legislation for that corporation, which was included in a budget bill, and we were able to go through it and ask about specific details.

In this case, there is just nothing there. There is no information there at all. It just focuses on the $2 billion-plus. It’s not just $2 billion; I call it $2 billion-plus. We don’t know anything about how it’s going to be controlled or the financial controls. We don’t know anything about it.

I know people are looking at the backgrounder and saying there is a lot of information in the backgrounder. There is some information there, but what should have happened is that all of that information in the backgrounder should have been included in the legislation, and more besides, so that is a big shortcoming.

Will Senator Marshall take a question? Thank you for your speech, always very insightful.

Would you not agree that a common first step for every corporation and investment is the acquisition of shares, and this is exactly what’s going on here? We’re acquiring $2 billion in shares for a Crown corporation, a subsidiary that is wholly owned by Canada Development Investment Corporation at this time, and after the acquisition of shares, we will put a CEO and a board of directors in place, we will put the structure in place. There is a technical backgrounder that is very detailed as to the objectives and values.

As I mentioned in my speech, in my experience — I was saying 20 years of auditing, and I always think I’m 40, but I’m 60, and 1984 is a long time ago — the top challenge with mergers and acquisitions was integrating the acquisition, getting the values: Do they have our values? Our values will be different.

This is a new Crown corporation. We’re acquiring the shares. We have a clean slate, as I said in my speech, and going forward, we can build on it, get the right CEO and board of governors. Wouldn’t you agree with that? Wouldn’t you agree that a common first step is the acquisition of shares? How else could it be done?

No, I can’t agree with you, Senator Loffreda. The first step should have been creating the corporation by a statute, and it should have been included in the bill. All of this information that you’re talking about, the boards and whatever is included in the backgrounder — the government should have had that; that should actually be in the bill.

The corporation doesn’t exist — you’re saying you have to buy shares in the corporation, but the corporation doesn’t exist. What’s the minister buying shares in? What’s the control over the $2 billion? And it’s not just $2 billion — it’s $2 billion-plus, so she can requisition additional monies out. There is no information on the corporation. There is nothing there.

As parliamentarians we should be very concerned that we have a section of a bill that talks about $2 billion to buy shares of a corporation that doesn’t exist. Not only that, we don’t know anything about the corporation. All we’re depending on is a couple of pieces of paper called the backgrounder. If it’s so important, put it in the bill so we can debate it.

No, I don’t agree with you. I would call it non-existent controls over $2 billion and more.

Would you not agree that something as important as the Canada growth fund, which in the technical backgrounder you did read, and I’m sure you read it three times, as I did, so I’m not questioning that — and good job on your speech, by the way — but wouldn’t you agree that the right way to go about it is to start a new Crown corporation and not include it in, as I mentioned in my speech, like the Canada Infrastructure Bank, where the values and the objectives of an existing corporation are totally different from this Canada growth fund, which has clear objectives?

As you’ve seen in the technical backgrounder and in the Fall Economic Statement, there are clear objectives. It is clear as to what the government intends to do with this growth fund, what the objectives are and where the money will be invested. This is $2 billion to buy shares; the CEO will come next, then the board of directors, and the investments will come afterwards.

Would you not agree that the best way to do it is to have a new slate when it comes to technology especially, because equipment and technology become obsolete very quickly?

Going forward, would you not agree that a clean slate is the best way to go? Create a new corporation, and the purchase of shares is the first common step of creating any corporation. Would you not agree with that?

I cannot agree with you, Senator Loffreda, because the corporation hasn’t been created. There is no corporation there. The bill says, “Give the minister $2 billion so she can buy shares in a subsidiary corporation.” So I said, “Oh, what’s the name of the corporation so I can look it up?” And somebody says, “Oh, don’t worry, it hasn’t been created yet.” There is nothing in the legislation, and for you to look and say, “Oh, we have a backgrounder with information, oh, yes” — listen, I want to see it in the legislation. That’s the right way to do it.

Would Senator Marshall take a question?

Yes, of course.

Thank you. I always listen closely when you speak, and for good reason. Often, we pay more attention to the end of a speech, particularly if it is long. What struck me about the end of your speech is that you invited us to work on the tax reform. You said that the current system dates back to 1967, so there have been successive governments in office since that time.

In your opinion, what should the priority be for this comprehensive tax reform?

I think the priority should be the entire system. How the government goes about it, I would leave it up to the government, but they need to have some sort of task force with a good cross‑section of representatives from both the business and charitable communities. You need a good cross‑section of people. I think it’s going to be a big undertaking.

Ever since I’ve become involved with the National Finance Committee, I’ve been raising the issue. Senator Loffreda and Senator Duncan have raised it. But despite all the people and organizations who are saying to the government, “Please reform our taxation system,” it seems that the government hasn’t made any attempt at all.

I’ll give you an example. I talked about the taxation of corporations. Someone needs to look at how corporations are taxed, this thing with the share buybacks. What’s happening is the government is bringing in all these new measures, whether it’s raising revenues or spending revenues, and you have a big mishmash of 3,000 pages. The government needs to set up some sort of task force to look at the overall tax system. I don’t think they can do it just piecemeal. I think it has to be a comprehensive review, and there have been jurisdictions that have done it in more recent years.

I can remember the tax changes back in 1967, which kind of dates me. The government really needs to do something. The tax act is very difficult to read. I’m an accountant and even I’m muddled by it.

I’m sorry, Senator Dupuis, but Senator Marshall’s time has expired. Would you like to ask another question?

As always, yes.

Senator Marshall, are you asking for five more minutes to answer questions?

Yes.

Thank you for your answer, Senator Marshall. I understand very well the idea of creating a fairly large group with broad representation to review the entire system. You mentioned a government initiative. Do you believe that the Senate, in one way or another, would have a role to play? For example, could the Standing Senate Committee on National Finance perhaps undertake this kind of reflection?

A number of individual senators on the Finance Committee have been promoting it and encouraging it, and we’ve included it in our Finance Committee reports. I would like to see more senators talking about it. If we did that, then maybe government would edge itself toward undertaking something or at least considering it.

Senator Marshall, in your speech you mentioned tax evasion and the work of the Canada Revenue Agency. I wonder what your view is given that in April 2016 the Panama Papers were disclosed, and there were 894 Canadians with accounts there. As we know, it’s not illegal to have an account overseas, but it appears that the Canada Revenue Agency has now determined there is over $9 million in unpaid taxes for those 840 Canadians. That was in 2016.

Countries around the world that had citizens there have been able to recover $1.2 billion from the Panama Papers. Australia recovered $92 million; Germany, $183 million; even Iceland recovered $25 million. Canada hasn’t recovered one cent, and no one has been charged. What would you suggest we do about the Canada Revenue Agency?

I think the Canada Revenue Agency should start doing their job. They have been very well resourced. They have even been given resources specifically to look after the tax gap. They are measuring it, but they are not doing anything about it. The Canada Revenue Agency should step up to the plate, and start doing the job that they are being paid to do.

I think it undermines Canadians’ confidence in the tax system when, over 10 years ago, in one bank in Liechtenstein, there were accounts of 106 Canadians. Again, money was owing. Again, no one was charged.

Two years later, there was one bank in Switzerland with over 1,700 Canadians. Again, no one charged, and no one convicted — contrary to every other country in the world who were charging people recovering money.

Do you think there is a double standard in Canada? You referenced this briefly in your speech. Canadians receive a T4 slip and pay their taxes. The Canada Revenue Agency does an excellent job on domestic tax evasion. But if you can lawyer up and hire accountants, your chances of being prosecuted are nil to none. Would you agree with that statement?

Yes, I would agree with that. I have raised it now several times at Finance Committee, even when the Canada Revenue Agency has appeared before us.

On one occasion when we were talking about the tax gap, and not going after people who owed money, I remember an example of a student who had graduated from university, had moved out to Calgary and was claiming some travel expenses. They were telling me how the Canada Revenue Agency was constantly after them to pay a couple of hundred dollars in taxes.

I said to the Canada Revenue Agency, “The perception being left with taxpayers is that you’re picking the low-hanging fruit.” That’s the way I put it. “You’re picking the low-hanging fruit, and you’re not going after the big guys.”

The other thing that is happening is that everybody looks at high-income earners or corporations as possible tax evaders. There are many corporations and high-income earners out there that are paying all the taxes that are owed to the government. Yet, you can look and see that we have a tax gap of $35 billion to $40 billion. How come they are getting away with it? How come they are not paying their fair share?

That’s what the Minister of Finance keeps saying. Everybody has to pay their fair share. What about these individuals and corporations that are caught up in the tax gap? They are not paying their fair share. It’s time for the Canada Revenue Agency, and the government, to start collecting the taxes that are owed.

We would have a better-looking bottom line.

Senator Marshall, your time has expired. I know Senator Loffreda has another question. Are you asking for more time so that you can take his question?

Is leave granted, honourable senators?

Leave is not granted.

I, too, rise to speak on Bill C-32, the fall economic statement implementation act, 2022. I will focus my remarks on one tiny subsection of the act. You guessed right; it is about charities. I urge you to be charitable to me as I encroach on your time at this late hour, and for good reason, colleagues.

During — and after — the pandemic, when Canadians were in need, it was Canada’s many charities that stepped up to the plate to deliver essential services. It was not easy. This is not a sector that has the resources to pivot easily, but it did. In doing so, it provided much-needed services to young people in stress, to women in shelters and to poor people in need of food.

Now, post-pandemic, they are adjusting to new demands and a new reality. On the one hand, demands for their services are rising and, on the other hand, the level of donations is sinking. It is, again, the charities that are taking the brunt. They will be relieved and supportive of the measure in the bill that raises the disbursement quota for foundations from 3.5% to 5%. This measure, as Senator Loffreda has stated, will generate close to $400 million, or more, for charities throughout Canada.

As pointed out by the government, every year, charities are required to spend a minimum amount based on the value of their investment. If you set up a private foundation with an initial investment of $10 million for which you receive a charitable tax credit, there is an expectation that some base amount of the returns will be disbursed annually in pursuit of the charitable purpose of the foundation; this is known as the disbursement quota, or DQ. In the charitable sector, we call it the DQ, so I will call it the DQ as well. It ensures that charitable donations are being invested into our communities and not, instead, being hoarded in investment accounts.

In 1976, the government set the DQ at 5%. It subsequently lowered it to 4.5%, and it remained unchanged for 20 years — until 2004 when it was reduced from 4.5% to 3.5%. The policy rationale was that it needed to be more representative of historical, long-term real rates of return at that time. If you remember, there was a meltdown at that time. However, since then, the market has not only stabilized, but has generated returns of 10% or more, but the DQ has remained static at 3.5%.

Following consultations with the sector in 2021, Bill C-32 proposes to introduce a new, graduated disbursement quota for charities. For investment assets exceeding $1 million, the rate of the disbursement quota will be increased from 3.5% to 5%. This new, higher rate will boost support for the charitable sector, while being set at a level that is sustainable, and ensures the continuous availability of funding over the long term.

Colleagues, I support this measure for obvious reasons: It brings more private funding to charities. It brings us in line with similar jurisdictions, like the U.S. It is a modest change from 3.5% to 5%. Some advocates have pushed for a DQ of 10%, which would have seen more money go to charities. I believe that a jump to 10% would have been a leap too far, and would have seriously destabilized the sector. I am in full support of this cautious approach.

Who will this impact? There are roughly 5,800 private foundations in Canada with an asset base of $80 billion or so. In addition, there are charities like the YMCA who have endowments and trusts. Altogether, as Senator Loffreda has mentioned, they have an asset base of $116 billion.

Estimates suggest that the new proposed threshold of 5% for the DQ will trigger somewhere between $300 million to $500 million annually as incremental disbursements starting in 2023. Colleagues, this is not chump change. Given the needs of the hour — reconciliation, racial justice and equity, to name a few — an increase in the DQ is a reasonable policy ambition.

As always — in the foundation sector as well — there are leaders and laggards. Some foundations already disburse more than 3.5%; others don’t meet the floor. As just one example of leadership, colleagues, last week The Winnipeg Foundation received $500 million from an individual, Miriam Bergen — the biggest single donation ever in Canadian history from an individual. The Ivey Foundation — a storied foundation in Canada — announced last week that they would not just meet the disbursement quota, but they would spend down their entire capital of $100 million over the next five years. They will spend themselves out.

This, colleagues, is just to give you a flavour of the generosity of Canadians. However, there are many endowments, trusts and foundations that do less than the bare minimum. There are many so-called mom-and-pop foundations that do less than we would expect of them given that they reap significant tax benefits on set-up.

Foundations are, by the way, also a growth market, growing at a higher rate than other charities. This is, of course, good. For one, it signifies that people are generous and that wealth is growing at a rate fast enough for individuals to set up such institutions. For another, it means that more money is going into the community to meet various needs that are considered charitable under the law.

This change in the disbursement quota comes at the right time. You will remember that in June of last year, we passed Bill C-19, which created a third way for charities to work with non-charities that wouldn’t be stuck in the “own activities” or “direction and control” tests. It provided a reasonable, accountable path to get rid of the deeply imbedded form of systemic racism that was contained in the Income Tax Act, which made any intellectual property that was owned by the partner to be owned by the charity. I won’t go over the arguments. You approved it unanimously, and, thankfully, it was passed into law.

Colleagues, these are big and important changes. In its place will be strong and effective partnerships. The increase in the disbursement quota will increase the absolute amount of money spent on causes, and because of the new changes, it will create a more equitable distribution of charitable funds that will reach Indigenous, BIPOC and local development communities in the global south.

I should tell you that although I agree with this proposal, there was some initial feedback from foundations that I’d like to share with you.

First, we know that the markets have been in economic turmoil this past year, and foundations are concerned about their returns in the moment.

Second, some foundations have bylaws that require the retention of their initial capital in perpetuity — these charities and foundations may find themselves in the unenviable position of taking on riskier investments to meet the new higher disbursement quota.

However, my position is that what goes up must come down, and what goes down must go up — at least I tell myself that every time I view the returns on my own investments.

In addition, should a foundation or charity be in severe straits, they are able to ask the Canada Revenue Agency for special consideration and an agreement can be reached to disburse less than the 5%. Under this new bill, the Canada Revenue Agency would be required by law to publish all such arrangements in the interest of transparency. This is new, and a welcome change.

Colleagues, if the principle of this bill is to encourage more charitable giving into the community, then the bill does miss an important opportunity because the amendment does not cover the fastest-growing instrument of charitable giving in Canada, and that is donor-advised funds.

Donor-advised funds enable a group or individual to give money to an existing charitable foundation or corporate foundation and the foundation handles all the administration, governance and reporting, for which it charges a fee, generally a percentage of total assets. The donor gets a tax receipt for the full amount at the moment they create the fund, but there is no requirement for them to disburse from it on an annual basis. Instead, the investment can grow in the fund, invested by the institution and not disbursed for important causes.

Since donor-advised funds are simpler to set up than a private foundation, many philanthropists are choosing this new and simpler route. There is less governance, less management and fewer headaches, which is all good. However, the problem lies in the disbursement.

The holding entity, which is usually a community foundation or corporate foundation, likely has many sub-funds. If, in total, on an aggregate level, they disburse 5%, then they are fine, but there is no requirement for every single fund to meet the threshold of 3.5% or 5%.

Perhaps this is the next measure the government can look at in the future — I’m not making an amendment, colleagues — given that the value of donor-advised funds in Canada today stands at $4.5 billion.

In addition, there is a growing group of enlightened foundations that want to bring their whole selves to their charitable purpose. They are not satisfied with disbursing a mere 5% of their total assets. They are investing their assets not in the financial market but in what we would call program-related investments — in climate change, housing and reconciliation — and there is no allowance for them to include such progressive thinking in the disbursement quota.

Colleagues, in conclusion, I really welcome this measure and I encourage the government to look into future possibilities in the Income Tax Act to create greater fairness for both taxpayers and charities. Thank you.

Honourable senators, today I wish to add my voice to the debate on Bill C-32.

I was a little surprised by the debate we had on the Growth Fund. I may have been a little surprised, but not entirely. I do want to share some of my concerns about the Canada growth fund, but I would rather put it into context.

When I first looked at Bill C-32, I saw a number of very good measures in it and I thought it was very important that they pass. Consider, for example, the measures for students and for home ownership.

My interest for the Canada growth fund only grew after reading the bill, because I had looked at the Inflation Reduction Act of 2022, which was introduced in the U.S. last fall. That legislation provides for a set of measures aimed at reducing the impact of inflation on Americans, but also measures to stimulate American investment, promote the green transition and increase productivity while generating growth that will help reduce the deficit. The Inflation Reduction Act seeks to address a whole range of challenges.

At the same time, the legislation provides nearly $400 billion to companies in the form of tax credits and loans. I saw more tax credits than loans, but the Department of Finance saw more loans than tax credits. It depends how you interpret the American legislation.

In a nutshell, the U.S. Inflation Reduction Act contains a package of measures to stimulate business investment in the context of the transition to a greener economy. It is worth nearly $400 billion, not including the leverage effects that these measures are trying to achieve.

I understand that following the enactment of this U.S. legislation, the Government of Canada felt the need to take action, and that the bill before us includes a measure known as the Canada growth fund. When the minister appeared before the committee — I wasn’t there, but I read the testimony — it was obvious that she was making a case for the urgent creation of a fund of up to $15 billion, which had been announced. She put it in this bill in order to immediately start making potential investments in businesses.

It is true that this raises many questions because the bill is relatively succinct and provides for $2 billion in shares held by the government, which will look to the Canada Development Investment Corporation to potentially make investments and oversee the transition.

Many senators obviously asked questions in committee. Senator Marshall asked some very interesting questions, as did Senator Gignac, Senator Loffreda, Senator Galvez, Senator Moncion and Senator Cardozo, who were all interested in this fund and in the lack of information — let’s be honest — that was made available to us.

That said, we do learn a little more when we read the technical document for the Canada growth fund and the government’s objectives for this measure.

I will read some excerpts. You will see that my goal is not so much to defend this measure as to try to suggest some elements the government could use in the next version of the bill, where there will be more information on the institution being created. I think this is a good opportunity to tell the government to include these elements in the next version. That’s why I’m quoting from the fund’s objectives:

Because Canada’s economic prosperity has traditionally been built on natural resources and other emissions-intensive industries, a substantial transformation of our industrial base will be required to meet our climate targets and ensure long‑term prosperity for Canadians and the Canadian economy. Canada needs to build the technology, infrastructure, and businesses to reduce our carbon reliance, but this will not occur without rapidly increasing—and then sustaining—private investment in activities and sectors that will strengthen Canada’s position as a leading low-carbon economy.

It goes on:

The CGF is designed to invest in a manner that mitigates these risks that currently limit private investment, and unlock the domestic and foreign capital that Canada needs now.

Those are the objectives the fund seeks to achieve, in terms of the transition, on a rather broad scale.

The debate also made it clear that the situation is urgent. We also see in the newspapers that there are companies that started making investments, risky investments, that may decide to go invest in the United States without too many penalties being imposed. The fund therefore helps to somewhat defend the Canadian strategy and to say to companies that the government will also help them with technology and the more at-risk sectors, or at least that is how I see it.

The argument itself is not all that convincing, but the technical backgrounder lets us see the magnitude and complexity of the issue. In the technical backgrounder, we learn what risks the fund is trying to mitigate for businesses. We’re not talking about small risks. These are big risks.

First, there’s demand risk, which is associated with the uncertainty around end market pricing. There’s also policy risk, which is related to uncertainty around climate regulations, such as a carbon price or clean fuel standards. Then there’s regulatory risk, which is a big one that has to do with what the provinces can do with respect to project assessments and permitting approvals for construction projects. Finally, there’s execution risk from building first-of-a-kind commercialized products and companies.

All of this is lingo to say that our companies are facing major risks. In this sense, the government will use this fund to find financial instruments that will allow it to receive returns on its investments and mitigate all various forms of risks at the business level.

This is what the government wants to do, but for the moment there’s not much in the legislation that describes this measure, except for the information in the technical document.

In my opinion, the government should have introduced targets in the bill. It would have been quite simple to propose concrete greenhouse gas emission reduction targets. Those targets, as well as the elements and criteria to define them, are also found in the technical document, on the last page. There are several of them, I won’t read them all, but the document could have stated that the first objective is to quickly and significantly reduce greenhouse gas emissions and to help reach Canada’s climate targets.

The bill should also include potential performance metrics, such as annual greenhouse gas emissions reductions through the fund’s investment in technology improvement projects and the fund’s investment in businesses.

That said, I think we should give it the benefit of the doubt and wait for the next government bill. We have to tell the government that we want to see three things in its bill: results-based objectives, targets to achieve concrete results, and much broader governance than what was planned and described in committee.

In committee, the department mentioned that it had provided for governance by experts, finance experts who will be able to adopt the best instruments to lower investment risks for companies. Unfortunately, I’m not sure whether this is enough.

We heard some very interesting ideas from witnesses about the fund’s governance. I’m thinking of Gil McGowan, the president of the Alberta Federation of Labour. He is a trade unionist who came to present elements of a report produced by the Alberta Federation of Labour entitled Skate to where the puck is going. In its report, the Alberta Federation of Labour provides for transition elements and an industrial strategy for Alberta. Mr. McGowan told the committee that the Canada growth fund lacks vision, and that the government should have one. Interestingly enough, he suggested that the Canada growth fund should be managed in a bicameral structure. I will read a excerpt of what he said in English, because I think it is clearer:

I’ve shared the report with the clerk, so I would encourage you to take a look at the seven pathways we identified. The one thing about the growth fund that I want to emphasize and I mentioned it in passing in my opening remarks has to do with governance. We’re suggesting that instead of simply creating an arm’s-length organization that is run by investment managers that we have a bicameral structure where we have a stakeholder board on the top that will help provide direction and then an operational board that would handle investments.

We actually have a bicameral structure like that for our big pension plans in Alberta. I acted of the chair of what we call the sponsor board to set general policy and then we had an operations board.

What we’re suggesting to the government is that, in the next version of the bill, which should be arriving soon, there should be a governance structure of this nature to ensure that the projects that are chosen will facilitate a more macroeconomic transition rather than small, specialized projects.

Something else occurred to me when I compared the present situation to the experience in Quebec. Indeed, Quebec had a green fund. There was legislation, that has since been changed, there was a somewhat bicameral structure and results-based objectives. However, it takes time before there is any clarity in all this because it is a relatively complex issue. In my opinion, there’s something missing in Canada to be able to make this highly necessary transition. We have the money, we know what we need to do, but there is no cooperation between the key economic players. Every government wants to do things in accordance with what the government in place decides.

In my opinion, the macroeconomic problem would require the creation not just of a fund, but of a Canadian prosperity council. Let’s institutionalize a council of the provinces, the federal government, as well as representatives from the economy, namely businesses and the workforce.

It is a colossal challenge. If we created this type of council, we could give it the necessary vision to spend the money we have all around. There’s money in Quebec; we’re going to get some. This is what I hope for from the government: results-based objectives, a bicameral governance and a prosperity council.

Thank you very much.

Are senators ready for the question?

It is moved by the Honourable Senator Loffreda, seconded by the Honourable Senator LaBoucane-Benson, that the bill be read a second time. Is it your pleasure, honourable senators, to adopt the motion?

All those in favour please say, “yea.”

All those opposed please say, “nay.”

I see two senators rising.

Do we have agreement on a bell? The vote will take place at 9:31. Call in the senators.