Bill C-48 (Historical)

Technical Tax Amendments Act, 2012

An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation

Part 1 of this enactment implements, in accordance with proposals announced in the March 4, 2010 Budget and released for comment on August 27, 2010, amendments to the provisions of the Income Tax Act governing the taxation of non-resident trusts and their beneficiaries and of Canadian taxpayers who hold interests in offshore investment fund property.
Parts 2 and 3 implement various technical amendments in respect of the Income Tax Act and the Income Tax Regulations relating to the taxation of Canadian multinational corporations with foreign affiliates. The amendments in Part 2 are based on draft proposals released on December 18, 2009. Among other things, Part 2 includes the amendments to the foreign affiliate surplus rules in the Income Tax Regulations that are consequential to the foreign affiliate changes to the Income Tax Act announced in the March 19, 2007 Budget. The amendments in Part 3 are based on draft proposals released on August 19, 2011. Among other things, Part 3 includes revisions to the measures proposed in a package of draft legislation released on February 27, 2004 dealing primarily with reorganizations of, and distributions from, foreign affiliates.
Part 4 deals with provisions of the Income Tax Act that are not amended in Parts 1, 2, 3 or 5 in which the following private law concepts are used: right and interest, real and personal property, life estate and remainder interest, tangible and intangible property and joint and several liability. It enacts amendments, released for comments on July 16, 2010, to ensure that those provisions are bijural, in other words, that they reflect both the common law and the civil law in both linguistic versions. Similar amendments are made in Parts 1, 2, 3 and 5 to ensure that any provision of the Act enacted or amended by those Parts are also bijural.
Part 5 implements a number of income tax measures proposed in the March 4, 2010 Budget and released for comment on May 7, 2010 and August 27, 2010. Most notably, it enacts amendments
(a) relating to specified leasing property;
(b) to provide that conversions of specified investment flow-through (SIFT) trusts and partnerships into corporations are subject to the same loss utilization restrictions as are transactions between corporations;
(c) to prevent foreign tax credit generators; and
(d) implementing a regime for information reporting of tax avoidance transactions.
Part 5 also implements certain income tax measures that were previously announced. Most notably, it enacts amendments announced
(a) on January 27, 2009, relating to the Apprenticeship Completion Grant;
(b) on May 3, 2010, to clarify that computers continue to be eligible for the Atlantic investment tax credit;
(c) on July 16, 2010, relating to technical changes to the Income Tax Act which include amendments relating to the income tax treatment of restrictive covenants;
(d) on August 27, 2010, relating to the introduction of the Fairness for the Self-Employed Act;
(e) on November 5, 2010 and October 31, 2011, relating to technical changes to the Income Tax Act;
(f) on December 16, 2010, relating to changes to the income tax rules concerning real estate investment trusts; and
(g) on March 16, 2011, relating to the deductibility of contingent amounts, withholding tax applicable to certain interest payments made to non-residents, and certain life insurance corporation reserves.
Finally, Part 5 implements certain further technical income tax measures. Most notably, it enacts amendments relating to
(a) labour-sponsored venture capital corporations;
(b) the allocation of income of airline corporations; and
(c) the tax treatment of shares owned by short-term residents.
Part 6 amends the Excise Tax Act to implement technical and housekeeping amendments that include relieving the goods and services tax and the harmonized sales tax on the administrative service of collecting and distributing the levy on blank media imposed under the Copyright Act announced on October 31, 2011.
Part 7 amends the Federal-Provincial Fiscal Arrangements Act to clarify, for greater certainty, the authority of the Minister of Finance and of the Minister of National Revenue to amend administration agreements if the change in question is explicitly contemplated by the language of the agreement and to confirm any amendments that may have been made to those agreements. Part 7 also amends the Federal-Provincial Fiscal Arrangements Act and the First Nations Goods and Services Tax Act to enable the First Nations goods and services tax, imposed under a tax administration agreement between the federal government and an Aboriginal government, to be administered through a provincial administration system, if the province also administers the federal goods and services tax.
Part 8 contains coordinating amendments in respect of those provisions of the Income Tax Act that are amended by this Act and also by the Jobs and Growth Act, 2012 or that need coordination with the Pooled Registered Pension Plans Act.

The House proceeded to the consideration of Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation, as reported (without amendment) from the committee.

Technical Tax Amendments Act, 2012

[The Speaker, Andrew Scheer]

There being no motions at report stage, the House will now proceed, without debate, to the putting of the question on the motion to concur in the bill at report stage.

[Lisa Raitt, Conservative, Halton, ON]

moved that the bill be concurred in.

[The Speaker, Andrew Scheer]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[The Speaker, Andrew Scheer]

(Motion agreed to)

When shall the bill be read the third time? By leave, now?

[Some hon. members]

Agreed.

[Lisa Raitt, Conservative, Halton, ON]

moved that the bill be read the third time and passed.

[The Speaker, Andrew Scheer]

On debate, the hon. Parliamentary Secretary to the Minister of National Revenue.

[Cathy McLeod, Conservative, Parliamentary Secretary to the Minister of National Revenue]

Mr. Speaker, I am pleased to begin third and final reading at debate stage of this important piece of legislation for taxpayers and tax professionals, Bill C-48, the Technical Tax Amendments Act, 2012.

I have to admit that it is certainly not the most riveting or the most exciting piece of legislation that has ever come before Parliament. However, it is a very important piece of legislation and it is going to go a long way and a significant way toward the goal of simplifying Canada's tax system.

As previous Parliaments' efforts to adopt these technical tax amendments were unsuccessful for a variety of reasons, we have seen a considerable backlog develop over the years, making it more important now to act and to finally pass these technical tax amendments.

We all recall even the Auditor General of Canada recently cautioning over a growing concern, and outlining that concern in a 2009 report. She said:

Taxpayers’ ability to comply with tax legislation depends on their understanding of how the rules apply to their own circumstances. ... Uncertainty about how the law should be applied can also add to the time taken and costs incurred by tax audits and tax administration.

Of course, I could not agree more with the comments from the Auditor General. Furthermore, I would also like to flag that the Auditor General also made some important observations about the impact of not dealing with this issue in a timely manner, an impact with far-reaching implications.

Among the many negative effects for taxpayers of the uncertainty over the backlog of outstanding income tax amendments, the Auditor General's report identified:

higher costs of obtaining professional advice to comply with tax law; less efficiency in doing business transactions; inability of publicly traded corporations to use proposed tax changes in their financial reporting, because they have not been “substantively enacted”; ...and increased willingness to use aggressive tax plans.

Before continuing, let me pause here to thank my colleagues on the finance committee from all sides for their timely and swift consideration of the technical tax amendments, 2012, earlier this year. I also want to thank them for giving their unanimous support to the legislation. It is little wonder, as during the multiple hearings the finance committee held, we heard from dozens of witnesses ranging from the Certified General Accountants Association of Canada to the Canadian Institute of Chartered Accountants to the Canadian Tax Foundation, and many more. They were all calling for the timely implementation of today's legislation.

Permit me to share with the House and with all Canadians some snippets of what we heard at committee, all underlining the lengthy process to get this legislation to this stage and the importance of Parliament finally adopting it.

First, allow me to quote from the Canadian Institute of Chartered Accountants, which said:

Bill C-48 marks the end of a very long road, one with many twists and turns over the years. The last technical bill on income tax received royal assent in 2001....

That speaks for itself. It was a long time ago. They continued to say:

...it is fair to say that we greet the technical tax amendments act of 2012 with a sense of relief. We support Bill C-48. The CICA understands how important it is for taxpayers to have greater certainty and a clearer understanding of Canada's federal income tax system.

We listened to the Canadian Tax Foundation, and again I will quote at length. The CTA said:

We live in a rapidly changing world, and this legislation must respond dynamically to changes in commercial transactions. Can you imagine how much work would be required if you made no repairs to your home or your car for more than 10 years? That is what has happened with these two statutes. The last bill addressing technical amendments was passed in 2001. ... [The Technical Tax Amendments Act, 2012] represents 10 years of repairs and maintenance in updating the Income Tax Act and the Excise Tax Act. Its passage is important to all Canadians. ... I want to emphasize it again. Its passage is very important to all Canadians. ... Delays in the passage of tax legislation leave taxpayers and their advisers in a no man's land of uncertainty. My message for the Standing Committee on Finance is that you should encourage passage of this legislation....

I will give the House another example. The Certified General Accountant's Association of Canada told finance committee:

...we encourage you to move swiftly to pass this important piece of legislation. The bill deals with a massive backlog of unlegislated tax measures. Its passage would, in our opinion, bring greater clarity to the tax system and strengthen the integrity of our laws.

We all know these delayed technical amendments cause serious difficulties for taxpayers, businesses, professional accountants and their clients, and of course, government. We heard some very vocal support for the technical tax amendments act, 2012 at finance committee from these and many other public interest organizations and tax professionals. The support was a big part of the reason the legislation received unanimous support from all members, from all parties, on the committee.

For those watching at home, and parliamentarians, I want to briefly recap the content of the technical tax amendments act, 2012. As I alluded to earlier, the vast majority of these amendments have already been publicly released in either a previous budget or a previous technical tax bill. In addition to that, the vast majority of it was previously and extensively released prior to introduction during the multiple public consultation phases. The ultimate legislation, in point of fact, incorporates a tremendous amount of the feedback provided by Canadians during those many public consultations.

Today's act, among other things, would further simplify Canada's tax system through numerous technical amendments to the Income Tax Act, the Excise Tax Act and related legislation. I would like to further add that today's legislation also takes key steps to close some tax loopholes to create a stronger and fairer tax system for all Canadians.

I want to quickly review the legislation, part by part, to highlight some key measures and what they hope to achieve. Even though today's act is obviously extremely technical in nature and includes seven different sections, I will keep my remarks brief.

I will commence with Part 1 of the bill, which would modify the Income Tax Act by taking into account comments we received during our extensive consultations and which would create simpler rules for non-resident trusts.

Parts 2 and 3 deal directly with the taxation of Canadian multinational corporations with foreign affiliates, implementing changes, some of which date all the way back to 2004, that would make Canada's tax system more fair and equitable, and of course, easier to administer. As is the case with the majority of measures contained in the bill, these changes, again, are the result of extensive public consultations.

Part 4 of the bill deals with the concept of bijuralism. More specifically, it contains amendments that will ensure that the bill will function effectively under both common and civil law. This means that amendments dealing with certain legal concepts, such as rights, interest, real and personal property, life estate and remainder interest, tangible and intangible property, and joint and several liability, will accurately capture common and civil law in both official languages.

Part 5 of the bill is designed with fairness for taxpayers in mind and sets out to close tax loopholes to ensure that Canadians would carry their fair share. The act would close tax loopholes related to specified leasing property, ensure that conversion as specified investment flow through trusts and partnerships into corporations are subject to the same rules as transactions through corporations—

Bill C-48 — Time Allocation Motion

[Gail Shea, Conservative, Minister of National Revenue and Minister for the Atlantic Canada Opportunities Agency]

Mr. Speaker, I move:

That, in relation to Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation, not more than five further hours shall be allotted to the consideration of the third reading stage of the Bill; and

that at the expiry of the five hours provided for the consideration of the third reading stage of the said Bill, any proceedings before the House shall be interrupted, if required for the purpose of this Order, and, in turn, every question necessary for the disposal of the said stage of the Bill shall be put forthwith and successively, without further debate or amendment.

[The Acting Speaker, Barry Devolin]

Pursuant to Standing Order 67(1), there will now be a 30-minute question period.

The hon. member for Gatineau.

[Françoise Boivin, NDP, Gatineau, QC]

Mr. Speaker, I have a lot of questions for the minister. This is ridiculous. Here we have another time allocation motion for the bill to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation.

We are all very aware, as are Canadians, that the government is up to the same old tricks. We have stopped counting, but the number keeps climbing. The government has used this same method 34 or 35 times now. That is likely what it will be known for in years to come. It has already earned the title of the most undemocratic government Canada has ever had. It is all the more astounding and ridiculous given that these people were elected in 2006 by making Canadians believe that they would be transparent, open and not like previous governments. They promised a change in culture. They essentially signed an agreement, a contract, with the Canadian people.

What are they doing? They insist on staying the course and what is even worse is that they are doing the same thing they criticized previous Liberal governments for doing. What is going on here boggles my mind. We have a total of five hours to discuss some extremely important issues. If that is not considered muzzling, I do not know what is.

I have a very simple question for the minister. Is she not embarrassed to rise in the House and tell Canadians that what she is doing is democratic? She is muzzling democratically elected members of Parliament more often than is necessary, which prevents them from representing Canadians. I would be embarrassed if I were her.

[Gail Shea, Conservative, Egmont, PE]

Mr. Speaker, I can assure the hon. member that I am very proud of what our government has done for Canadian business and taxpayers.

It has been over a decade since Parliament last passed a comprehensive package of technical tax amendments. This particular bill has been in Parliament for nearly 200 days now. Surely 200 days is long enough. Let us show some respect for Canadian taxpayers and get moving on this bill.

Even before this bill was introduced, it was consulted on literally for years in advance, with repeated public consultations. We know that all sides support this bill. All sides recognize that it is a technical bill. All parties supported it at second reading at finance committee, without amendment.

We need to get on with it. We need to do this for Canadians.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, once again we are witness to the government House leader's inability to negotiate in good faith with the opposition parties. That is really what is lacking.

Typically what one would expect is the government House leader approaching opposition parties to give them some sort of an indication of what it is the government would like to be able to get through, in terms of a legislative agenda. Opposition parties would in turn try to work with the government to recognize those bills that the opposition is quite comfortable in passing, to make sure there is proper time given and ultimately bills would be passed.

The government should be going to time allocation as a last resort. In the past, political parties at the federal and provincial levels have resorted to time allocation. What makes this rather unique is the fact that never before in the history of the House of Commons, from what I understand, have we seen a government incorporate time allocation into the process of passing its legislation.

Time and time again, well over 30 times now since the last federal election, the government has stood in its place and moved time allocation, which restricts the ability of members of Parliament to represent their constituents. It restricts the ability of the opposition and the government backbenchers to afford comment on important pieces of legislation.

My question to the member is, why has the government made the decision to use time allocation as a part of a process, which is most inappropriate given the prestigious House in which we sit?

This is a majority Conservative Reform-type of government that has taken an attitude that has put democracy last in terms of processing legislation through this House.

My question is, why?