The Canadian Chamber Appears Before Senate National Finance Committee on Bill C-59

On March 20, the Canadian Chamber’s Senior Vice President of Policy and Government Relations, Matthew Holmes and Senior Director, Fiscal and Financial Services Policy, Jessica Brandon-Jepp appeared before the Senate Committee on National Finance to address Bill C-59. They emphasized the importance of Canada’s economic competitiveness and productivity — noting that Canada’s productivity has declined in 11 of the last 12 quarters — and highlighted the need for businesses to be viewed as critical partners in driving investment and growth to address these challenges.

Focusing their comments on competition policy, investment tax credits and the digital services tax proposed in Bill C-59, they expressed concerns about changes to the Competition Act and recommended specific safeguards for new “private rights of action” to prevent frivolous claims.

The full remarks and video recording can be viewed below.

*The following remarks were adjusted slightly in the final delivery.

Mr. Chair, Honourable senators:

It is a pleasure to appear before you again on behalf of 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.  

The Canadian Chamber of Commerce’s primary concern this evening is that Canada’s economic competitiveness is slipping, while our productivity has declined in 11 of the last 12 quarters. This means Canadians are poorer overall, have fewer opportunities to pursue their personal goals, and have to spend more just to keep up with everyday life.

Businesses of all sizes should be viewed by government as critical partners in our collective success, which can drive investment and growth, and help turn the tide on our productivity challenges.

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

First, competition policy:

As we raised during your study of C-56, we remain concerned by the ad hoc approach to changes to the Competition Act and would encourage the government to continue to consult with the business community on changes to the Act.

In particular, C-59 could overwhelm the Competition Tribunal and businesses with frivolous claims through new “private rights of action”. The Canadian Chamber’s submission recommends specific safeguards consistent with Canadian class action statutes to ensure claims are evaluated on a consistent basis, and funds are properly distributed to the consumers affected by the conduct, rather than their lawyers.

Recently there has been a lot of talk about structural presumptions in merger reviews: we saw the Competition Bureau file a brief with this committee advocating for its inclusion in C-59 pointing to the U.S. merger guidelines as inspiration. We are aware of the U.S. Chamber of Commerce’s letter to this Committee on the matter, and would encourage you to review it carefully as structural presumptions are not codified into US law, and there is no serious legislative attempt in the U.S. Congress to make structural presumptions the law. Competition agencies should continue to comprehensively examine a merger’s likely efforts on competition and consumers, including arguments that the merger would benefit consumers.

Second, 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 and Investment 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 life insurers, similar to the Fall Economic Statement inclusion of Real Estate Investment Trusts.  Life insurers often manage assets on behalf of pension plans. However, because pension plans are non-taxable entities, long-term investors cannot utilize the Clean Technology ITC, which will hamper long-term investment in 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.

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

The irony is that just as we’re contemplating ITCs to spur private sector investment, innovation and growth, a range of new business 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 the U.S., have agreed to delay imposing such taxes.

First, we strongly object to the concept of tax retroactivity, which 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 mom-and-pop shops, small businesses, rural tourism operators, and independent makers (primarily women) who help pay the bills through “side hustle” start-ups–not to mention all of us who enjoy picking up some takeout after a long work week or booking a stay-cation close to home.

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. As ever, we stand ready to facilitate collaboration between policymakers and the business community to make this happen.

Thank you.