Submission to Senate Standing Committee on National Finance Regarding Bill C-69

Summary of Recommendations

• Proceed with implementation of the proposed investment tax credits in a timely manner, including the proposed extension of eligibility for the mineral exploration tax credit by one year. Expand the clean technology manufacturing property investment tax credit to capture investments in intangible property and development costs.
• Remove Division 28 of Part 4 from C-69 for further consideration as a separate bill with a view to creating a regulatory environment that boosts business confidence and minimizes risks.
• Proceed with the advancement of the Indigenous Loan Guarantee Program, particularly given that the program is sector agnostic, providing a level-playing field for all participants. The Canadian Chamber encourages the government to continue robust and meaningful engagement with stakeholders throughout the development of the Indigenous Loan Guarantee Program.
• Remove Section 326 from Bill C-69 to ensure the integrity of the regulatory process to approve and bring therapeutic products to market.

Introduction

The Canadian Chamber of Commerce welcomes the opportunity to provide written feedback to the Senate Standing Committee on National Finance as part of their study of Bill C-69, the Budget Implementation Act, 2024, No. 1.

Budget 2024 comes as Canada’s competitiveness is slipping and our productivity continues to decline. This means Canadians have fewer opportunities to pursue their personal goals and have to pay more just to maintain their standard of living. We must pursue growth if we are to continue to provide the services Canadians require.

In order to grow and innovate, businesses require confidence in and clarity about Canada’s business climate. While Bill C-69 advances critically important proposals to help incent investment and innovation, the Canadian Chamber remains concerned by Canada’s broad economic climate, specifically the cumulative impacts of several new taxes such as the proposed increase to the capital gains inclusion rate and the proposed digital services tax. These will impede our country’s ability to drive investment and economic growth.

These tax changes are the latest in a series of measures that are increasing uncertainty, stifling investment and signaling to the world to do business elsewhere. Particularly concerning is the increasing politicization of Canada’s tax system. Business and government must work together if Canada is to succeed in driving productivity and economic growth, which underpin our quality of life.

Bill C-69 signals that the government heard the business community on issues such as the need for advancing the implementation of proposed investment tax credits. We all agree on the need for measures that will help drive innovation, provide clarity, and ease the burden of doing business in Canada. Additional work is needed to advance a comprehensive approach to industrial and economic growth to ensure that the impact of new incentives is not being negated by tax increases and new regulatory processes.

The Canadian Chamber represents companies committed to growing our economy, investing in this country and creating more opportunities for Canadians. Together, we want to ensure Canada remains the best country to live, work, play and invest. We’re prepared to roll up our sleeves and work with you to help Canada get there.

About the Canadian Chamber of Commerce

We are Canada’s largest and most activated business network — representing 400 chambers of commerce and boards of trade and more than 200,000 businesses of all sizes, from all sectors of the economy and from every part of the country — to create the conditions for our collective success. We use deep local connections to create a powerful national vantage point no other network can equal. And, from working with government on economy-friendly policy to providing services that inform commerce and enable trade, we give each of our members more of what they need to succeed: insight into markets, competitors and trends, influence over the decisions and policies that drive business success and impact on business and economic performance.

Recommendations

Investment Tax Credits

The Canadian Chamber supports the timely implementation of investment tax credits to incentivize growth and rebuild investor confidence. We commend the government’s announcement of the EV Supply Chain Investment Tax Credit and the proposed extension of eligibility for the mineral exploration tax credit by one year is an encouraging development as the Canadian Chamber has long advocated for the importance of government investment in critical mineral mining in the transition to net-zero.

Investment Tax Credits (ITCs) are instrumental in driving investments toward decarbonization, facilitating the transition to low-carbon energy solutions across various sectors of Canada’s economy. That said, businesses are eager to understand the full implementation details of these credits and without them are limited in their ability to forward plan their business operations. We eagerly anticipate engaging with the government to refine the specifics and ensure these credits maximize their impact on advancing Canada’s decarbonization efforts.

We have stated that the clean technology manufacturing ITC is too narrowly defined and largely limited to investments in physical property. To serve as a meaningful incentive for critical mineral development – and to begin to level the playing field with the U.S. and European Union – this credit should be expanded to capture investments in intangible property and development costs. Every sector of the global economy is rapidly adopting new advanced technology and using it to create competitive advantages. For firms competing in the manufacturing sector, investment in intangible property, such as software to operate equipment, patents and copyrights on novel assets, and other technical knowledge, can be just as significant as the physical assets deployed. For instance, while every mining project differs in its technical and financial requirements – intangible property and development costs usually account for 75-85 per cent of total capital requirements for mine development. Recent research shows that larger firms with higher intangible intensity experience increased profitability in a global market.1 Unfortunately, Canada ranks 14th in the world in intangible asset intensity, at 72% compared to the US at 90%.2 If the government does not act quickly to incentivize investment in intangible assets, Canadian firms will find themselves at a substantial competitive disadvantage.

Recommendation: Proceed with implementation of the proposed investment tax credits in a timely manner, including the proposed extension of eligibility for the mineral exploration tax credit by one year. Expand the clean technology manufacturing investment tax credit to capture investments in intangible property and development costs.

Impact Assessment Act

Canada will not meet its net-zero goals, let alone become a reliable global supplier of responsibility sourced natural resources, if we cannot get major projects built. Project approvals cannot continue to take 10 or more years — whether what’s proposed is a major Carbon Capture Utilization and Storage project that would continue to reduce emissions or a transportation gateway that would help ensure Canadian businesses can get goods to market reliably and efficiently. Regulatory certainty is essential to generate the investment and growth our nation requires, which cannot be achieved without private sector partners committed to long-term projects. Though governments have made several commitments in recent years to improve regulatory efficiencies, streamline permitting for major projects and clear permitting backlogs, the status quo remains. This multijurisdictional process certainly has many actors involved, but the federal government has a unique role to play to ensure Canada rids itself of the reputation of a place where major projects can’t get built. The recent Supreme Court decision on the constitutionality of the Impact Assessment Act (IAA) has wrought further uncertainty on the assessment process.

Division 28 of Part 4 amends the IAA in response to the majority opinion of the Supreme Court of Canada on the constitutionality of that Act, to, among other things,

(a) align the preamble and purpose provision with the primary objective of that Act, which is to prevent or mitigate significant adverse effects within federal jurisdiction — and significant direct or incidental adverse effects — that may be caused by the carrying out of physical activities;
(b) replace the definition “effects within federal jurisdiction” with “adverse effects within
federal jurisdiction” and, in doing so,
(i) restrict the definition to non-negligible adverse changes,
(ii) limit transboundary changes to those involving the pollution of transboundary waters and the marine environment, and
(iii) include, in respect of federal works or undertakings and activities carried out on federal lands, non-negligible adverse changes to the environment or to health, social and economic conditions;
(c) ensure that the impact assessment process applies only to those physical activities that may cause adverse effects within federal jurisdiction or direct or incidental adverse effects;
(d) ensure that, in deciding if an impact assessment of a designated project is required, one factor that the Impact Assessment Agency of Canada must take into account is whether another means exists that would permit a jurisdiction to address those effects;
(e) amend the final decision-making provisions to provide for an initial determination as to whether the adverse effects within federal jurisdiction and the direct or incidental adverse effects are likely to be, to some extent, significant, and then, if so, provide for a determination as to whether those effects are justified in the public interest; and
(f) improve cooperation tools to better harmonize the impact assessment process with the processes for assessing effects that are followed by provincial and Indigenous jurisdictions.

The proposed amendments to the IAA demonstrate that the government’s priority after the Supreme Court’s ruling was to ensure the IAA’s constitutionality rather than improve clarity on its applicability, timelines, and decision-making authority. As a result, we risk missing a key opportunity to create a regulatory environment that boosts business confidence and minimizes risks.

Recommendation: That Division 28, Part 4 be removed from Bill C-69 for further consideration as a separate piece of legislation.

Indigenous Loan Guarantee Program

Division 25 of Part 4 authorizes a corporation that is to be incorporated as a wholly owned subsidiary of the Canada Development Investment Corporation to provide loan guarantees as part of an Indigenous loan guarantee program and authorizes the payment out of the Consolidated Revenue Fund by the Minister of Finance of amounts that are required in respect of those guarantees.

Recommendation: We are pleased to see the advancement of the Indigenous Loan Guarantee Program, particularly given that the program is sector agnostic, providing a level playing field for all participants. The Canadian Chamber encourages the government to continue robust and meaningful engagement with stakeholders throughout the development of the Indigenous Loan Guarantee Program.

Regulatory Approval of Therapeutic Products

Section 326 proposes a path for ministerial circumvention of the approval process for therapeutic products. The proposed measures would extend the Minister of Health’s extraordinary prerogative that can be used to impose restrictions on a wide range of therapeutic products including drugs, medical devices and natural health products.

Canada has a rigorous regulatory approval process for therapeutic products, involving analysis by a number of subject matter experts. The tool proposed under Section 236 would allow the minister to circumvent the regulatory approval process for therapeutic products, allowing the minister to impose restrictions on previously approved products at their discretion without having to prove harm or violation of license for a product and providing no appeal process other than expensive and lengthy legal processes. The regulatory process for therapeutics is lengthy, thorough and expensive and should not be subject to political or competitive interference. This is a potentially dangerous precedent that effectively permits circumvention of the established regulatory process, and which could have unknown implications for many players within the Canadian economy.

Recommendation: Remove Section 326 from Bill C-69.