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.

Motions in Amendment

[The Acting Speaker, Royal Galipeau]

The hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup. Please keep the question short, since other members would also like to ask questions.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, at the report stage, we are studying an amendment that would make it easier for tourists attending conventions to get GST rebates. I would like my colleague to tell us whether the government intends to give further thought to reaching a similar conclusion for duty-free shops. A program that was a great incentive for tourism was scrapped. Now, the newspapers show just how important it is.

Could the parliamentary secretary assure me that in the coming months, the government will give further consideration to restoring this incentive to what had been planned, in order to attract tourists to Quebec and Canada?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Speaker, as the member pointed out, this program was not working previously. We have introduced it in a form which we believe and which the industry believes will help our foreign visitors and tourism in a very big way. In fact, it ensures that the goods and services tax do not apply in certain circumstances to the supply of a convention admission to a non-resident person. It also will help bring tour groups and other activities to Canada.

It has been applauded by the industry and by the provinces. We are very proud of it.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Mr. Speaker, what plans and what in the budget responds to the very desperate situation that exists today in the manufacturing sector? We had the Canadian Labour Congress here last week, speaking very passionately and emotionally about the job loss in the country in that sector.

Could the parliamentary secretary please let us know what we might look forward to in the budget which will deal with that?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Briefly, Mr. Speaker, there is the accelerated capital cost allowance for the purchase of machinery and equipment that will help the sector. There are also job training measures in the budget and lower taxes for everyone involved in the sector. We have a strong economy that we believe will help everyone in whatever sector they are in to succeed.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Speaker, I will focus my 10 minutes on a single theme, which is that the finance minister, through his actions, has demonstrated himself to be more out of his depth than any finance minister in living history. As if honest incompetence was not enough, in some instances there was less than total candour involved as well.

I will make my argument through five exhibits.

Exhibit one goes back a bit in history when the minister was a very senior member of the Ontario government. It ran an election campaign on a balanced budget, which turned out to be a $5.8 billion deficit. Therefore, it was incompetent to have a $5.8 billion deficit, but it was less than candid to claim to be running on a balanced budget.

Exhibit two is he raised the income tax and cut the GST. He paid for the GST cut by raising income tax. Not only is such a move denounced by every economist on the planet, but I think most Canadians would rather have more money in their wallets through an income tax cut than an extra penny on the price of a cup of coffee. To compound this economic incompetence with the lack of candour, he keeps referring to a cut in income tax when all Canadians know that he raised the lowest rate of income tax.

Exhibit three is the feebate structure in the auto sector. This is an incredible design where 75% of the money goes to one model, which is not particularly better than others environmentally speaking and it is made outside Canada.

Mr. Dennis DesRosiers, who I know the gentleman and who usually speaks very mildly, was so moved to say the following:

(Honda) felt so slighted by this stupid `feebate' that they have...come out guns ablazing. The feds now not only have a policy in place that does not work, they have also turned the company most willing to work...to address the auto issues of the day into an advertising juggernaut criticizing the federal government's policies.

That is another piece of evidence suggesting he is out of his depth.

Exhibit four is interest deductibility. Here again we have people who do not usually use such strong language in respect to a minister of finance. Allan Lanthier, retired senior partner of Ernst & Young, has said it is “the single most misguided policy I've seen out of Ottawa in 35 years”.

Claude Lamoureux, chief executive of the Ontario Teachers Pension Plan, has said, “This is unbelievable. I don't know who in finance looked at this. I can't believe any sensible person would do this”.

At the end of the day those people and the Liberal Party plan got to the minister because he did a flip-flop on interest deductibility, but it was even an incompetently executed flip-flop. The solution that he has gone to is not the right solution.

The abuse in this area is related to debt dumping, not double-dipping. To paraphrase former President Bill Clinton, it is debt dumping stupid, it is not double-dipping that is the problem.

Last but by no means least, there is the issue of income trusts. Here again we have people who normally use moderate language. I will quote two international experts, who make me somewhat embarrassed to be a Canadian in the face of this incompetence.

We have the Gartner Letter, a well-known London expert who sends his letter to people in the financial world all over the world. He said the Canadian finance minister's “idiotic 'trust' taxation decision rendered last October 31st, which we still believe ranks as one of the worst decisions ever rendered by a person in a position of monetary authority”. That is from a British expert in the financial markets and it goes out all over the world.

If that is not enough, here is what an American expert said.

It is interesting that a program which was originally designed to enhance 'tax fairness' may end up not only costing the government revenue but ownership is passing from Canadians to foreign entities. I doubt this was the plan.

The question now is, how much of this can the government take? Will they admit this was an ill-conceived idea, revise it, drop it or dig in their heels and in the face of the evidence which is starting to build, stay the course and let the foreigners buy up Canadian assets on the cheap?

That is from a U.S. income fund report.

We in the Liberal Party have fought the government's income trust plan from the beginning. We have sought allies from our colleagues in the other opposition parties.

I should add that at the beginning of the debate, the Bloc was with us on this. Together, we tabled a report in the House and we presented two options: the Liberal option and the Bloc option. Naturally, I found the Liberal option to be the better of the two, although the Bloc option was much better than the status quo.

Last week, in committee, I was astonished to see the Bloc vote against its very own proposal. The Bloc, which claims to stand up for the interests of Quebeckers, failed to stand up for the interests of Quebeckers; instead, it voted against its own proposal.

If the Bloc's problem is a lack of courage, the NDP is beyond the pale. Let me quote Don Francis, a 63-year-old individual who has lost $70,000 and who said the following before committee:

The NDP needs to rethink its position. This proposal targets hard-working Canadians for the benefit of all those fat cats. This is as clear a case of those fat cats eating the mice as this country has ever seen. Tommy Douglas is spinning in his grave to see NDPers like you acting like fat cats.

I would like to conclude by addressing all those hundreds of thousands of Canadians who lost millions and billions of dollars because of the government's broken promise on income trusts. I would like to tell those people that the fight is not over. We are at the beginning of the end of the battle and the battle will continue.

Even if this bill should pass the House, as it probably will, there is still the Senate. Even if that does not work, we will fight the income trust issue across the country. We have had many town halls before. Thousands of Canadians have attended. The Liberal Party will be holding one in the finance minister's riding soon. We will fight this proposal in the Senate and in town halls across the country throughout the summer. Last but not least, we will fight this in the next election.

The Liberal policy is clear. We are standing by our policy. It is better for the country. It provides help for all those income trust holders who lost thousands, millions, or billions because of the Conservative government's broken promise. We will get re-elected and we will bring back our own income trust policy, which will be a fine replacement to the terrible disastrous broken promise that has been imposed by the government, aided and abetted by the NDP, on hard-working Canadians.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, that is quite the panacea the member is living in over there, I suppose, by his closing comments and I will start with that. I find it remarkable that the Liberal Party, with the support of nobody else in the House and nobody who came before committee, has made the proposal on income trusts that it has made. I really want to get to something that is more important.

The member is from Ontario. He should know that the government of Ontario specifically talked about what a great budget this is for Ontario. It is great for all of the country because it gives more to all regions and provinces but specifically Ontario. This budget will give Ontario $12.8 billion in 2007-08. There is $8.1 billion for health transfers and $3.8 billion for Canada's social transfer, including a 40% increase in post-secondary spending alone.

How could the member stand in the House and oppose this budget? Does he stand up for his constituents or not? This budget works for his constituents. Dalton McGuinty loves this budget. I cannot understand why the member does not. He can take the fight wherever he wants, but hard-working Canadian families and Canadian small businesses know this budget works for them. That member is not down with them at all.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Speaker, it is noteworthy what the member did not say. He did not refute any of my five pieces of evidence pointing to the desperate incompetence of the Minister of Finance, so I can only assume he agrees with me on the essential point.

It is a bit much to suggest that the Conservative government supports Ontario when it gutted the Canada-Ontario agreement that had been passed by the previous government. The Conservatives took billions out of the pockets of Ontarians by gutting that agreement, not to mention that their environment policy was slammed by the premier and the environment minister. The Conservative government is not standing up for Ontario. Ontarians are not fooled.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I listened with interest to my colleague's speech. I would like to correct some of the information he provided.

In a report of the Standing Committee on Finance, the Bloc Québécois put forward a proposal to mitigate the negative impact of the income trust issue.

However, had we amended the budget implementation bill, we would have prevented it from going through and prevented implementation of the budget, which, financially at least, made it possible to partially correct the fiscal imbalance for Quebec. Quebeckers would never have forgiven us. As to income trusts, a basic issue had to be resolved. However, as to implementing the bill, further consideration may be required. We could not continue in that direction.

Does my colleague agree that in light of the situation, the Bloc did the right thing by choosing Quebec, by working toward eliminating the fiscal imbalance and by asking for more discussion on this matter?

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Speaker, the facts are very straightforward. The Bloc itself recommended a 10-year period. Yet, in the end, the Bloc voted against its own proposal. The Bloc abandoned Quebeckers and Canadians who had bought into income trusts. That is what I said: the Bloc abandoned Quebeckers on this issue.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Mr. Speaker, I am having a hard time this morning sorting out the Conservatives from the Liberals on some of this debate. The Conservatives have moved to a position now where they are beginning to close some of the loopholes that we as New Democrats have always complained about. The Liberals at one point agreed with that, although when they were in government they certainly did not move to resolve that issue.

The member is aggressively and passionately opposed to closing some of these loopholes. How does he propose that we get the taxes that Canada needs to continue to provide health care, housing and drug coverage, et cetera, to the many seniors whom he purports to be the champion of here this morning when we that kind of money is taken away from the public purse?

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Speaker, what the hon. member does not seem to realize is that there is no such thing as a tax leakage. The government is losing revenue from its income trust policy. I return to my earlier point that Tommy Douglas would be spinning in his grave when that party that purports to be social democrats abandons hundreds of thousands of Canadians of--

[The Acting Speaker, Royal Galipeau]

Resuming debate. The hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, we are debating report stage of Bill C-52, the budget implementation act.

Of course, it is very important for the Bloc Québécois to see this struggle through to the end. We are the ones who raised the fiscal imbalance issue in this House. We feel that this government has taken some steps, thanks to the Bloc Québécois' support—because without this support, Parliament would not have passed this budget. In order to at least improve the fiscal, financial, monetary imbalance, it was to our advantage to support the government on this.

We continue to believe this, and we know that Quebeckers support our position. The Bloc Québécois has led other parties in this House to adopt the same position. Only the Liberal Party does not support this position. Furthermore, it is voting against this budget, when all is said and done.

Today's debate at report stage allows for an amendment that results from an ill-considered decision on the part of the Conservatives, who decided to eliminate the GST-HST visitor rebate, thereby reducing Canada's appeal as a tourist destination. As evidence that this step had a negative impact, the Canadian Tourism Commission has had to shift some of its budgeted funds intended for Canadian tourism within Canada and use them to attract tourists from outside our borders, because we are losing ground to the tourism appeal of other countries.

Given the criticism and arguments received, particularly from the Bloc, in order to allow outfitters and conferences, for example, to continue to benefit from such a program, the Conservative government decided to propose an amendment in the context of budget implementation. This will help correct the situation, at least for outfitters and conferences.

This does not address the issue of duty-free shops, which remain victims of the government's decision. Initially, in the fall of 2006, the government made a series of rather drastic cuts to various sectors without really analyzing the situation, and it got rid of this program—which cost something to administer but attracted tourists—instead of modifying it and finding other solutions. In response to representations from various organizations, supported by the Bloc, the government made a partial correction.

What has still not been corrected is the situation of duty-free shops, which also play an important role in promoting tourism. Previously, when tourists visited duty-free shops, they obtained a credit that they could spend in the shop right away. As a result, the money quickly went back into the system.

In my opinion, no one, not even the Conservatives, is denying the aim of this program. The problem lay in the cost of administering the program. Instead of throwing the baby out with the bathwater, the government should have let the program keep on attracting tourists and found other ways of funding it. I hope that discussions will continue and that a satisfactory result can be reached.

Today, at the report stage, adopting this amendment will correct the situation with regard to outfitters and conventions. Representations were made by groups including the association of Quebec outfitters. When a convention is being planned and organizers want people to hunt and fish with the help of our outfitters, we have to make this prospect as attractive as possible so that people will choose to come here instead of going to other countries.

One of the benefits of coming here had been removed. Now, thanks to the amendment that is before us, we can maintain that benefit. It will therefore be important to adopt this bill at the report stage. The Bloc Québécois will support the bill at this stage, as it has done at all the other stages, so that the bill reaches third reading as soon as possible and the government can finally finish putting in place the measures to correct the fiscal imbalance.

It is clear how much Quebec needs this money. An important debate was held in the National Assembly of Quebec last week and for good cause; in the end, additional money from Ottawa became available. However, that is a monetary solution. A complete, legislative, fiscal solution is needed, which would transfer tax points to Quebec in order for it to no longer be dependent on the federal government's decisions, the vitality of the Canadian economy and other such factors. As of today, this is a three-year program that will have a significant financial impact and that is why the Bloc supports this bill. However, it will not resolve the matter permanently.

In fact, the Conservative government itself, which says that the fiscal imbalance is solved, has run attack ads against the Liberal Party and its leader stating that, if the Liberal Party were to return to power, it could overturn the decision on the fiscal imbalance. The Conservative Party has contradicted itself. On the one hand, it says it has solved the fiscal imbalance and, on the other, in ads taken out to denounce the Liberals, it says that the decision could be overturned. The solution is to ensure that permanent arrangements are made and that the transfer of tax points is put in place.

The starting point remains the same: the needs are found in the provinces and Quebec, but it is the federal government that holds the money. The announcement last week that last year's surplus is about $13 billion illustrates this reality better than any explanation. The federal government still collects a great deal more money than it needs and allocates most of it to paying down Canada's debt.

It makes sense that some of the funds should be allocated to that, but in the meantime, the provinces need money. They need money to pay for their own services. They have to be able to develop multi-year programming and plans. The Bloc will continue to work toward eliminating the fiscal imbalance once and for all through tax point transfers. Then, when Quebec wants to implement social programs and programs to support business, it will be able to do so within its jurisdiction because it will have the necessary financial means.

After the report stage, the bill will come back to the House for third reading. It also includes measures that will affect the manufacturing sector. We followed a number of recommendations from the Standing Committee on Industry, Science and Technology. However, the Conservative government will have to do better than the positions it has put forward on this issue. For example, the committee recommended accelerated capital cost allowance over five years for businesses to buy equipment to improve their productivity. The government is only offering this over two years.

Nor is it giving refundable tax credits to businesses that do not make much profit, which is now the case in several sectors that are in trouble because of global competition. The government should be even more creative, and it should follow the 22 recommendations of the Standing Committee on Industry, Science and Technology instead of barely touching on them or following the ones that suit it best. That is the next step, to come with the fall economic update.

In the meantime, I think that Quebeckers have made their views known: they agree with the Bloc Québécois, which supports the Conservative budget because it delivers considerably more money to Quebec. Quebeckers want to truly correct the fiscal imbalance. Thus, the Bloc Québécois is representing the will of Quebeckers, and wants the budget implementation bill to be passed as quickly as possible. We have made a significant and positive contribution towards achieving that, and we want the money to be available this year and in years to come based on what was announced in the budget. So no matter what government is in power in Quebec, the necessary funds will be invested, the proper political debates held and the money spent on the right things.

But there is a big problem: we have no guarantee that these funds will be available. This is a weakness of the Canadian confederation and Canada's federal system, which must be permanently corrected by the transfer of tax points. Let us hope that the Conservative government will move in that direction as soon as possible so that we achieve this permanent and long fought for correction. For four years, the Bloc has been arguing for this. I remember the member for Saint-Hyacinthe—Bagot and the member for Joliette, who preceded me as finance critic. We hammered away at this repeatedly. The parties in the National Assembly did the same thing, and today we are taking another step towards putting this in place. Let us hope that it will come about as soon as possible.

[Tony Martin, NDP, Sault Ste. Marie, ON]

Mr. Speaker, I appreciate the member's particular focus on the tax rebate for tourists who come into the country. In my own community, an area where tourism is very important, that hit very hard. From what I am gathering from people in that industry, what the government has brought forward by way of replacement is very narrow and will not benefit everyone. It will benefit a few, mostly in larger centres, but it will not benefit in a significant way or attract tourists to my area.

I also want to ask the member about the fiscal imbalance. This weekend I was listening to some of the conversations in the media, particularly by the Federation of Canadian Municipalities, stating that the fiscal balance has probably hurt municipalities and communities more than any group or government in this country. How does he see this response working its way down so that municipalities now get the money they need to provide the services they are asked to provide?