Canadian Chamber of Commerce Appears Before the House of Commons Finance Committee

On April 11, our Senior Director, Fiscal and Financial Services Policy, Jessica Brandon-Jepp, and Senior Director, Natural Resources, Environment and Sustainability Bryan Detchou appeared before the House of Commons Finance Committee on Bill C-59. They highlighted the critical role of investment tax credits in stimulating private sector investment, especially in transitioning to a low-carbon economy, and expressed concerns about the implications of the Digital Services Tax on businesses.

The video recording and full remarks are available below.

Mr. Chair, Honourable members:

Nous avons le plaisir de nous présenter devant vous au nom de 400 chambres de commerce, et de plus de 200 000 entreprises de toutes tailles, de tous les secteurs de l’économie et de toutes les régions du pays.

La principale préoccupation de la Chambre de commerce du Canada aujourd’hui est que la compétitivité économique du Canada s’affaiblit, tandis que notre productivité a reculé au cours de 11 des 12 derniers trimestres. Cela signifie que les Canadiens ont moins d’occasions de poursuivre leurs objectifs personnels et qu’ils doivent dépenser plus pour maintenir leu même style de vie.

Le gouvernement devrait considérer les entreprises de toutes tailles comme des partenaires essentiels de notre réussite collective, capables de stimuler l’investissement et la croissance et de contribuer à relever le défi de la productivité.

The committee has already received our formal submission on C-59, which included seven specific recommendations and proposed amendments: today we will focus our comments on investment tax credits, competition policy, and the digital services tax:

First, Canada’s new investment tax credits:

Overall, the Canadian Chamber applauds new investment tax credits like the CCUS ITC as tools to unlock private sector investment in a low-carbon economy. In order to maximize the impact of the Clean Technology Manufacturing Tax Credit, we recommend they be refined to include intangible property and mine development investments. 

Further, we believe the Clean Technology ITC should be expanded to include pension plans, similar to the Fall Economic Statement inclusion of Real Estate Investment Trusts.  We recommend expanding the eligibility of this tax credit to encourage investment in housing and commercial real estate that supports the decarbonization of Canada’s economy.

Given the current uncertainty around the permitting environment in Canada, we also recommend extending the timeline for phasing-out the Clean Technology Manufacturing ITC and Clean Electricity ITC in order to secure large investments within the Canadian mining, manufacturing and electricity sectors. Finally, it is imperative that all of the new ITCs are implemented as soon as possible, with clarity on procedure and eligibility, so that the private sector can fuel the next wave of long-term investment in our economy.

Second, competition policy:

We remain concerned by the ad hoc approach to changes to the Competition Act and would encourage the government to carefully review our submission and continue to consult with the business community, including the US Chamber of Commerce, on changes to the Act. 

In particular, there are concerns around overwhelming the Competition Tribunal with frivolous claims and there has been a lot of talk about structural presumptions in merger reviews pointing to misguided interpretations of the U.S. merger guidelines as inspiration.  These issues, among others, have the potential to make Canada’s competition regime less effective rather than improving it.

Which brings us to new corporate taxes and the digital services tax:

The irony is that just as we’re contemplating ITCs and refinements to our competition regime to spur private sector investment, innovation and growth, a range of new business and potential taxes threaten to repel investment, create uncertainty, and discourage new players from entering the Canadian marketplace.

Specifically, we call on the government to avoid imposing new taxes on the business sector, as C-59 proposes to do with a Digital Services Tax. DST is particularly concerning as it includes a retroactive tax to 2022 on online services Canadians have come to rely on, even though over 120 countries, including our largest trading partner, the U.S., have agreed to delay imposing such taxes.

The proposed DST is the latest proposed tax which violates several critical tax principles, which provide clarity, certainty and stability for businesses and help ensure Canada remains a competitive environment for investment.

First, we strongly object to the concept of tax retroactivity, which has been a concern in the latest proposals regarding both DST and EIFEL.  The effective date of proposed taxes should upon proclamation or the next tax year. Retroactivity robs businesses of the certainty they need to make productive investments in innovation and growth and has a chilling effect on future investment across the economy.

Second, we oppose any measure which will increase the costs for businesses and Canadians when both are facing challenging economic headwinds. This new tax will affect far more than just large multi-national corporations:  if enacted, the DST will ripple across the Canadian economy to affect many small and medium businesses and hurt Canadians.

In fact, this tax will disproportionately impact businesses with low profit margins because unlike corporate income taxes, digital services taxes are levied on revenues rather than profits. As a result, there is a disproportionate tax burden being placed on companies with low profit margins, such as the online travel sector.

Finally, we must sound the alarm that successive administrations in Washington have signalled that enacting a DST could provoke damaging trade retaliation, potentially against key sectors of the Canadian economy. We are hearing directly from businesses in many sectors beyond the digital services space who are concerned that their products may be impacted by retaliatory tariffs.

At a very minimum, we call for the punitive and retroactive application of the DST to be cancelled, and the introduction of a safe-harbour for low-margin businesses similar to OECD Pillar One, Amount A in which there is a safe harbour provision.

Bill C-59 and the forthcoming Budget 2025 presents an opportunity for decisive action. We urge Ottawa to adopt pro-growth policies that will invigorate Canada’s economy instead of regressive taxes which will continue to deter investment and make life less affordable. As ever, we stand ready to facilitate collaboration between policymakers and the business community to make this happen.

Thank you.