Bill C-52 (Historical)

Budget Implementation Act, 2007

An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007

Part 1 implements income tax measures proposed or referenced in Budget 2007 to
(a) introduce a tax on distributions from certain publicly traded income trusts and limited partnerships, effective beginning with the 2007 taxation year;
(b) reduce the general corporate income tax rate by one half of a percentage point, effective January 1, 2011;
(c) increase the age credit amount by $1,000 from $4,066 to $5,066, effective January 1, 2006;
(d) permit income splitting for pensioners, effective beginning in 2007;
(e) introduce a new child tax credit of $2,000 multiplied by the appropriate percentage for a taxation year, effective beginning in 2007;
(f) increase the spousal and other amounts to equal the basic personal amount, effective beginning in 2007;
(g) increase the age limit for maturing registered retirement savings plans, registered pension plans and deferred profit sharing plans to 71 years of age, effective beginning in 2007;
(h) expand the types of investments eligible for registered retirement savings plans and other deferred income plans, effective March 19, 2007; and
(i) increase the contribution limits for registered education savings plans and expand eligible payments for part-time studies, effective beginning in 2007.
Part 1 also amends the Canada Education Savings Act to increase the maximum annual grant payable on contributions made to a registered education savings plan after 2006.
Part 2 amends the Excise Tax Act to clarify the legislative authority that allows the Canada Revenue Agency to pay refunds of excise tax directly to end-users, where fuel subject to excise has been used in tax-exempt circumstances. It also amends that Act to repeal the excise tax on heavy vehicles and to implement the Green Levy on vehicles with fuel consumption of 13 litres or more per 100 kilometres. It also provides an authority for the Canada Revenue Agency to pay a refund of the Green Levy for vans equipped for wheelchair access.
Part 3 implements goods and services tax/harmonized sales tax (GST/HST) measures proposed or referenced in Budget 2007. It amends the Excise Tax Act to exempt midwifery services from the GST/HST and to zero-rate certain supplies of intangible personal property made to non-GST/HST registered non-residents. It also amends that Act to repeal the GST/HST Visitor Rebate Program and to implement a new Foreign Convention and Tour Incentive Program, which provides rebates of tax in respect of certain property and services used in the course of conventions held in Canada and the accommodation portion of tour packages for non-residents, and establishes new information requirements in the case where rebates are credited by the vendor.
Part 4 implements other measures relating to taxation. It amends the Customs Tariff to increase the duty-free exemption for returning Canadian residents, from $200 to $400, for absences from Canada of not less than 48 hours. It amends the Federal-Provincial Fiscal Arrangements Act to clarify that when a federal corporation listed in Schedule I to that Act pays provincial taxes or fees, wholly-owned subsidiaries of that corporation also pay provincial taxes or fees. It also authorizes the Minister of Finance to make payments totaling $400 million out of the Consolidated Revenue Fund to the Province of Ontario to assist the province in the transition to a single corporate tax administration. This last measure is consequential to the October 6, 2006 Canada-Ontario Memorandum of Agreement Concerning a Single Administration of Ontario Corporate Tax.
Part 5 enacts the Tax-back Guarantee Act, which legislates the Government’s commitment to dedicate all effective interest savings from federal debt reduction each year to ongoing personal income tax reductions. That Part also commits the Minister of Finance to report publicly at least once a year on personal income tax relief provided under the Guarantee to Canadians.
Part 6 amends the Federal-Provincial Fiscal Arrangements Act to set out the amounts of the fiscal equalization payments to the provinces and the territorial formula financing payments to the territories for the fiscal year beginning on April 1, 2007 and to provide for the method by which those amounts will be calculated for subsequent fiscal years. It also authorizes certain deductions from those amounts that would otherwise be payable under that Act. In addition, it makes consequential amendments to other Acts.
Part 6 also amends that Act to provide increased funding for the Canada Social Transfer beginning on April 1, 2007, and to provide for the method by which the Canada Social Transfer and the Canada Health Transfer amounts will be calculated for subsequent fiscal years, including per capita cash allocations. It also provides for transition protection.
Part 7 amends the Financial Administration Act to modernize Crown borrowing authorities.
Part 8 amends the Canada Mortgage and Housing Corporation Act to permit the Minister of Finance to lend money to the Canada Mortgage and Housing Corporation.
Part 9 amends the Bankruptcy and Insolvency Act, the Canada Deposit Insurance Corporation Act, the Companies’ Creditors Arrangement Act, the Payment Clearing and Settlement Act and the Winding-up and Restructuring Act to allow the Governor in Council to prescribe the meaning of “eligible financial contract”. Those Acts are also amended to provide that, after an insolvency event occurs, a party to an eligible financial contract can deal with supporting collateral in accordance with the terms of the contract despite any stay of proceedings or court order to the contrary. This Part also includes amendments to the Bankruptcy and Insolvency Act and the Winding-up and Restructuring Act to provide that collateral transactions executed in accordance with the terms of an eligible financial contract are not void only because they occurred in the prescribed pre-insolvency or winding-up period.
Part 10 authorizes payments to provinces and territories.
Part 11 authorizes payments to certain entities.
Part 12 extends the sunset provisions of financial institutions statutes by six months from April 24, 2007 to October 24, 2007.
Part 13 amends the Department of Public Works and Government Services Act to provide the Minister of Public Works and Government Services with the power to authorize another minister, to whom he or she has delegated powers under that Act, to subdelegate those powers to the chief executive of the relevant department. That Act is also amended with respect to the application of section 9 to certain departments.
Part 14 amends the Financial Consumer Agency of Canada Act to allow the Minister of Finance to provide funding to the Agency for activities related to financial education.

Budget Implementation Act, 2007

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Speaker, I appreciate the fact that I can voice my opinion on some very important issues. One is in particular to me and to my home province of Newfoundland and Labrador and it concerns the recent debacle about equalization.

I will quote the Minister of Finance who said in his speech on the budget, “We are keeping our commitments on equalization”. He said:

We are returning Equalization to a principled, formula-based program....As we promised, every province will be better off under the new plan. Under the new plan, provinces will get the greater of…

Notice he said, “As we promised, every province will be better off under the new plan”. Therein lies a very good point. Recently in Newfoundland and Labrador we received the opinion of an independent economist who stated quite clearly that we were not, in Newfoundland and Labrador. I will illustrate those points in a few moments.

Before I do, I want to bring up the issue of equalization and the imposing of a cap. On February 14, 2005, we signed the Atlantic accord agreements, which provides offset payments for Newfoundland and Labrador, allowing it to be the principle beneficiaries of our resources, particularly when it comes to oil and gas. I will quote from November 4, 2004. This is from the then leader of the Conservative Party, now Prime Minister. He stated:

Unfortunately, the solemn word of this Prime Minister turned out to be not good enough. The Prime Minister ignored letters from Premier Williams on June 10, August 5 and August 24 urging him to confirm his promise. Suddenly, the Prime Minister and his Minister of Natural Resources fell silent.

There is an eerie similarity between what was then and what is now. Let me go on to also say what the Prime Minister brought to the House in 2004. He said, “Additional annual payments that will ensure the province effectively retains 100% of its offshore revenues”. Therefore, he endorsed the fact that Newfoundland and Labrador should keep 100% of its royalties. Then he quoted the minister:

—for an eight-year period covering 2004-05 through 2011-12, subject to the provision that no such additional payments result in the fiscal capacity of the province exceeding that of the province of Ontario in any given year.

He goes on to say that the eight year time limit and the Ontario clause, which effectively is the cap, gutted the commitment made to the people of Newfoundland and Labrador during the election campaign. That is very interesting because the then leader of the Conservative Party now Prime Minister stated unequivocally in 2004, he did not agree with the idea of a cap. He goes on to give several examples from his own experiences. He said:

Why should Newfoundland's possibility of achieving levels of prosperity comparable to the rest of Canada be limited to an artificial eight year period? Remember in particular that these are in any case non-renewable resources that will run out. Why is the government so eager to ensure that Newfoundland and Labrador always remain below the economic level of Ontario?

Therefore, he is saying why should Newfoundland and Labrador be subject to a cap, when in fact they should be principle beneficiaries of their own resources?

However, all that I have said in the past little while and all the evidence that has been given here in the House on November 4, 2004, suggests unequivocally that the current Prime Minister did not believe in a cap.

Let us fast forward three years later, 2007. The budget states, and the Minister of Finance said this to the House:

A fiscal capacity cap will provide fairness by ensuring that Equalization payments do not result in a receiving province ending up with a fiscal capacity higher than a non-receiving province.

In other words, it is not to go above the level of Ontario currently in that situation.

What happened between 2004 and 2007 to change his mind? A couple of campaigns happened. In that campaign again they stated non-renewals out of the equation, no caps, no hindrances whatsoever, for it is Newfoundland and Labrador and Nova Scotia that should be the principal beneficiaries of their own resources.

I will go on to say what he also said. I am quoting the Prime Minister because I thought he made a good argument on why we should not have a cap, certainly for Nova Scotia, whether it be the natural gas projects, such as Deep Panuke, or in Newfoundland and Labrador, Hibernia, White Rose and Terra Nova. He said:

This is what happened in the case of my province of Alberta. Alberta discovered oil and gas in the 1940s and 1950s. Alberta was a have not province. From 1957 until 1965, Alberta received transfers from the equalization program.

Here is the key. This is good stuff. He went on to say:

Alberta was allowed to keep 100% of its oil royalties and there was no federal clawback.

In other words, Alberta was allowed to punch through any idea of the cap.

What has happened since then? As the Prime Minister pointed out:

This is what allowed Alberta to kick-start its economy, to expand and diversify, to build universities, to advance social services and to become one of the powerhouses of the 21st century Canadian economy.

That is a very good point for being a principal beneficiary of one's own resources.

If we look at the financial circumstances which Alberta is under today, it is quite astonishing and quite successful. Why? Because it was allowed to be the principal beneficiary of its own resources.

Today we find ourselves in this situation where Newfoundland is not allowed to receive that privilege.

The Prime Minister before he was here said that he was president of a company that should have understood. I would think that the current Prime Minister would understand as well given the fact that he speaks so eloquently of it. He said that when the Atlantic provinces rejected the latest federal offers, the caps, the limits and the exclusion, the government engaged in a clumsy divide and conquer tactic, a tactic that gave away its obvious objective of holding back the development of the Atlantic provinces.

The current government set out to fix this fiscal imbalance but it has created a brand new one: a fiscal imbalance between provinces, between those that are rich and those that are poor, but those are relative terms.

Many members in this House perhaps do not realize it but Newfoundland and Labrador, believe it or not, based on a per capita GDP export, has the highest in the country, not particularly poor but particularly in debt.

When we set out to negotiate the Atlantic accords, we knew that by 2020 we would become that economic powerhouse that the current Prime Minister bragged about Alberta being. We would be that place. We would be, as my colleague addressed, the economic jewel of the north Atlantic, buy we do that by taking ownership of our own resources and being that principal beneficiary.

I mentioned a while ago that an independent economist had several things to say about the situation going on now in the 2007 budget and the implementation act and he ran some numbers through. He got all his information and he looked at it and originally came out with a number that stated that if Newfoundland and Labrador went to the new equalization formula touted by the Minister of Finance and the Prime Minister, Newfoundland and Labrador would gain $5 billion into 2020. However, here is the catch. Several days later, after several inquisitions, Dr. Wade Locke came to realize that the new formula did not work that way.

Interestingly enough, prior to that, the Minister of Fisheries and Oceans, the regional minister of Newfoundland and Labrador, even praised Dr. Wade Locke by saying that the provinces do gain. However, when new information was brought forward last Friday, Dr. Wade Locke had a look at those numbers again and put out a release talking about what he had to look at. He said:

The Equalization changes contained in the 2007 budget gave the Government of Newfoundland and Labrador an option of which Equalization formula would apply.

However, s.84 of the budget implementation Act (C-52) makes a significant change to the 2005 Implementation Act...

This was the Atlantic accord deal that was reached when we were in government.

Section 84 states:

The definition “fiscal equalization payment” in section 18 of the Act is replaced by the following:

“fiscal equalization payment” means

(a) for the purposes of section 22, the fiscal equalization payment that would be received by the Province for a fiscal year if the amount of that payment were determined in accordance with section 3.2 of the Federal-Provincial Fiscal Arrangements Act, without regard to section 3.4 of that Act....

That is a very key point. That information was not available when he first ran his numbers.

Let us look from now until 2020. We did the Atlantic accord in two sections, until 2012 and then to be renewed, if still in equalization, until 2020. If those accords were left alone today this is what would follow.

Dr. Locke looked at three revenue streams coming into the provincial treasury of Newfoundland and Labrador. Oil revenue was one, the accord payments or offsets was the other and equalization. The total number came to $18.53 billion in that period over the Atlantic accord. I congratulate some of my colleagues who made that happen, particularly the member for Halifax West.

Dr. Locke took the $18.53 billion and the three revenue streams and put them into the new formula under the old assumptions. He came out with $22.76 billion. Yes, , there were over $5 billion extra with this new formula. However, after talking to finance officials, Dr. Locke brought forward several questions and put them in his release. He asked them the following:

In calculating the accord under the new arrangement, it is my interpretation that the province is entitled to receive the accord [payments] so long as it qualifies for equalization before the cap is imposed, rather than after. Is that correct?

Just last week federal officials said that the legislation before the House proposes that under the new arrangement the test for determining whether Newfoundland and Labrador qualifies for the 2005 accord is whether or not it would receive equalization payments under the base O'Brien formula, that is 50% of inclusion plus the cap--it is bad--effectively the cap on our accords.

If it received equalization under that formula, then the next steps would be taken to determine how much, in this case the offsets would be determined before the cap was applied. The cap is applied when equalization is calculated. This is a pre-cap issue.

Lo and behold, there is a new twist. Instead of $22.76 billion, after clarifying with federal finance what this is all about, the provinces will actually receive $17.5 billion. That is $1 billion less than what we would have received under the Atlantic accord.

Let me remind the House what was said by the Minister of Finance during his budget speech. He said:

As we promised, every province will be better off under the new plan. Under the new plan, provinces will get the greater of--

However, the provinces were not. They are actually losing money under the new--

[Dean Del Mastro, Conservative, Peterborough, ON]

No, that is not true.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Do not say no. The member for Peterborough would like to say no but he does not understand it.

I would suggest that the member go to downtown Peterborough, talk to the people at Haaseltons Coffee & Sweets and find out just how the budget is not selling to the people of southern Ontario as well as Newfoundland and Labrador.

Every province is supposed to be better off and yet an independent assessment by Dr. Wade Locke proves that is not true.

It seems to me that in this run up right now we also had a quote from the Minister of Finance during his budget speech. He said that the era of bickering between provinces is now over.

I would not say that our premier, Danny Williams, is bickering or that he is troubled. He is downright angry. As I have just pointed out, he has every right to be angry. He was promised in two campaigns that there would be a total exclusion of non-renewable resources, no caps, nothing of that sort, no hindrances.

If he had followed through on his promise, he would have given the province of Newfoundland $11 billion more than what it was to receive under the accord.

Let me illustrate just how angry the province of Newfoundland and Labrador is in light of us now being in an era of no bickering. Danny Williams is not the only premier. He just happens to be mine.

In a recent release on April 13 entitled “Federal Government Misled Province on Impact of New Equalization Program”, the minister of finance, Tom Marshall, said:

We identified this problem more than a week ago and immediately wrote the federal government seeking clarification. We have yet to hear back from them.

It is funny because they seemed to be quite chatty back in 2004 and 2005.

The fact that they don’t bother to respond to us, but manage to find the time to speak with and offer clarification to independent economists, is insulting to the elected government and people of Newfoundland and Labrador. The Government of Canada has an obligation to explain themselves.

It tried to but it did not work out.

The federal budget legislation contradicts everything we have been told by Ottawa.

The minister said it is increasingly clear that the cost of the Prime Minister’s broken promise is significant. Dr. Locke’s numbers suggest that the shortfall from the Prime Minister’s commitment is now $11 billion. What’s more, it appears to be more financially advantageous for the province to opt to stay with the existing equalization program as it provides approximately $1 billion more than the new equalization program.

But for all, the Minister of Fisheries and Oceans has said unequivocally that Newfoundland and Labrador would not be worse off. As a matter of fact, the Minister of Fisheries and Oceans put out a press release complimenting Dr. Locke on his findings before he ran those numbers again, before receiving all the information and clarification from the finance department of the Government of Canada. He was quite pleased that we were getting an additional $5 billion but yet not much has been said since we truly found out that we would be receiving $1 billion less.

Did the Minister of Fisheries and Oceans know or did he not know? Was he not properly briefed? It is a question for Newfoundlanders and Labradorians and certainly a question for his own riding of St. John's South—Mount Pearl.

The press release goes on to state:

These numbers contradict everything the federal government and [the] Fisheries and Oceans Minister..., in particular, have said since budget day.

Mr. Marshall also states:

Despite assurances from the Federal Minister of Finance that the accords would be protected, fundamental amendments to the legislation implementation implementing the 2005 Atlantic Accord agreement had been proposed without any consultation with the Government of Newfoundland and Labrador. These amendments can be found in the 'consequential amendments' section of the 2007 Federal Budget Implementation Act. Consequential amendments are normally reserved for housekeeping items to fix technical issues. It is not a place to shroud fundamental changes of this magnitude.

In other words, the second half, up to 2020, is now in jeopardy and hidden somewhere in the back of Bill C-52, this so-called implementation act.

I would like to thank the people of Newfoundland and Labrador for standing behind us 100%.

The House resumed consideration of the motion that Bill C-52, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007, be read the second time and referred to a committee, and of the motion that this question be now put.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, I listened to what was quite a technical speech by the member.

Several things keep coming back as being obvious such as, if the Atlantic accord is better, the budget allows the government of Newfoundland and Labrador to keep the Atlantic accord exactly the way it was and we will continue to honour that accord. It also instills some fairness in the equalization program. It is a principled equalization process. Thank God we got back to principles on equalization because it is a redistribution of federal tax dollars. These are not dollars that are taken from any given provincial government. These are federal revenues that are redistributed. Why should any province receive additional money over and above the fiscal capacity of Ontario, my home province? Why should federal tax dollars go to make one region wealthier than another region? It absolutely should not. The federal government has brought forward a principled approach on equalization, one which we can stand behind.

I believe the government of Newfoundland and Labrador should take whatever deal is best for it. If it is the Atlantic accord, wonderful. Take it 100% and we will gladly honour that accord, but we will also stand up for all Canadians in all other parts of the country who deserve a federal government which deals with equalization on the basis of principles.

[The Acting Speaker, Royal Galipeau]

I would like the attention of all members. We are having a question and comment period and I will recognize all members, but the rule of thumb should be that if I can hear the speaker, then everything is okay, but if I cannot hear the speaker, it is because too many people are speaking.

I recognize the hon. member for Bonavista—Gander—Grand Falls—Windsor.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Through you, Mr. Speaker, I would like to address this to two members in the House, to the member of Parliament for South Shore—St. Margaret's and to the member of Parliament for Avalon who are present here.

Did they hear what was just said? How dare we actually go beyond the level of prosperity of Ontario. Let us look at the situation we have here. The fiscal capacity cap which the Conservatives illustrated so eloquently during the campaign that this was not an issue and that they would never impose it, yet here we have it right in our laps.

I do not think the member really understands the true nature of the Atlantic accord and the whole nature of being principal beneficiaries of which his leader preached for years, not just Newfoundland and Labrador, not just Nova Scotia, but Saskatchewan as well and British Columbia and the whole country. Yet the Conservatives have created this fiscal imbalance that exists between provinces. That is what they are doing, juxtaposing one province against the other. This is not the way this federation is supposed to work, yet they turn it around.

I would suggest to the hon. member in this situation that the Atlantic accord is not protected. As my hon. colleague pointed out a few weeks back, he probably does not know the difference between the Atlantic accord and a Honda Accord for goodness' sake. He seems to think it is protected but the independent economists says it is not. And there are caps implied within it.

I suggest at this point that the hon. member touch base with his hon. colleagues from Atlantic Canada who do understand what this is about.

[The Acting Speaker, Royal Galipeau]

Order, please. Before I recognize another member, I would like to point out to the hon. member for Bonavista—Gander—Grand Falls—Windsor page 522 of Marleau and Montpetit on mentioning the presence or absence of other members. I hope this is the last time I have to mention this.

Questions and comments, the hon. member for Scarborough Centre.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Speaker, I am sure those comments from the member for Peterborough are going to cost a few votes for his colleagues from Newfoundland and Labrador and Nova Scotia.

I listened very carefully to the member for Bonavista—Gander—Grand Falls—Windsor as he eloquently presented the statistics. He knows very well that when the Liberal government brought forward the Atlantic accord, the then opposition Conservative Party voted against it. Why did Premier Danny Williams not stand up and speak then? He knew he had an accord. How did he sell it to the voters of that region to vote against the Liberal government which said that it believed in fairness? Now the premier is saying that the Conservatives cannot be trusted and that they lied. What happened? Could the member elaborate? My constituents in Scarborough Centre are very confused and upset.

I am glad that he mentioned that Alberta and the provinces should have the right to build on their resources and build their economies. The Atlantic region should also have the opportunity to prosper and provide for its people, seniors and youth especially. Could the member elaborate on that for me?

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Speaker, I thank you for reminding me of the rules. I would like to extend my apologies to all members in this House.

In response to my hon. colleague's question, indeed it has been a tumultuous event over the last three years to say the least. When the whole idea of being principal beneficiaries started, we talked about the fact that under the Atlantic accords we would be able to prosper much like Alberta did back in the 1950s and the 1960s and become an economic powerhouse. The Prime Minister pointed out, and as a matter of fact the current Minister of Intergovernmental Affairs pointed out the same facts and she was quite right. I would be disappointed if I lived in Saskatchewan which is next door to Alberta because Saskatchewan with its oil resources now faces the cap. It was not faced by Albertans way back when. There is a question of fairness to be resolved.

In the case of Newfoundland and Labrador and Nova Scotia, the deals were signed. The offsets were agreed to right up to 2020 which covers a substantial part of development certainly for the oil and gas sector off Newfoundland and Labrador. The second part of that also helped in the case of Nova Scotia, which would be particularly disconcerting for it given that it is now in jeopardy.

Buried within the details as the economists point out is the implementation of these accords which the government says it is protecting. In fact, even the Minister of Finance said in a CBC interview that after 2012 we are done and that is it. Whatever happened to 2020? As I pointed out, even if it goes to 2020 under the new formula, we are getting $1 billion less despite the fact that there were no caps, there were no hindrances whatsoever. We were 100% beneficiaries.

The government even said that the province would not be worse off, yet we are getting $1 billion less. One billion dollars sounds like quite a bit of money. I am sure my colleague from Cape Breton would agree.

[An hon. member]

It is a lot of money.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

It is a lot of money, Mr. Speaker.

Nobody on that side would agree. We have to sell what we put out there, which is perhaps the politics of deception at its best.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, after the comments from the member for Peterborough I suppose I should meekly get up and say on behalf of Atlantic Canada that we are proud to be part of Canada. We are proud to be part of a Canada social transfer program, CST, that was developed in 1977, that transferred tax points to the provinces, and which has been very favourable to all provinces.

I wonder what my Newfoundland colleague thinks about keeping the Canada social transfer--

[The Acting Speaker, Royal Galipeau]

The hon. member for Bonavista—Gander—Grand Falls—Windsor has 30 seconds to respond.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Speaker, therein lies the crux of one of the problems, equalization and the fair principle of it. The Constitution talks about equal services provided across the country based on a needs basis. Certainly the measures taken in 1977 with tax points, or as those members called it, back door equalization, was not back door for us. It--