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.

Technical Tax Amendments Act, 2012

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Mr. Speaker, if nothing else I found that somewhat amusing. I find it interesting how the member for Winnipeg Centre makes reference to the NDP government in Manitoba and he talked about small business. I was inside the chamber when the New Democrats were reducing small business tax but at that time I was actually in favour of the reduction of small business tax. What the member did not crow about was that it was the provincial NDP that continuously reduced corporate taxes. This was at the same time that the New Democrats in Ottawa were criticizing the corporate tax cuts that were being made in Canada, so the member is very selective of what he chooses to say.

At the national level, the Liberals were against the corporate tax cuts that were being made in 2010 and the provincial Liberals were against the NDP corporate tax cuts that were made in 2009-10. Therefore we can both be selective in terms of what we want to—

[The Acting Speaker, Conservative, Bruce Stanton]

Order, please. I am just wondering if the Winnipeg caucus might want to take it outside and discuss this and get it sorted out.

The hon. member for Winnipeg Centre.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, it is important to correct the record because this is some of the great revisionist history of the Liberal Party. The Liberals still cannot believe they were thrown out of power. They are still mourning from the traumatic event here. They would have us believe that if we had just elected them one more time it would have been nirvana. It would have been Camelot. We would have a national daycare system and we would have a Kelowna accord.

However, in actual fact, every time the Liberals had a balanced budget and every time they did get a surplus, and there were seven or eight surpluses in a row, they gave it to their buddies on Bay Street in increasingly large corporate tax cuts. They were in a race with the Conservatives, a race to the bottom. They will not be happy until there are zero corporate taxes on the macro scale. Every single time they had an opportunity, instead of spending it on social programs and turning the tap back on that they had turned off to balance the budget, they chose to give it to their Bay Street buddies. Hypocrites.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, I appreciate the member for Winnipeg Centre providing his wisdom to the House. He talked about a race to the bottom between the Conservatives and Liberals to see who could be most incompetent and most ineffective in terms of administration. That was the race.

What we have with the bill here is the opposite. We actually have the Liberals and Conservatives competing to see who can be the slowest to bring in the necessary changes to the tax system. Between the two of them, they waited 14 years. The incompetence of both governments is incredible.

Could the member for Winnipeg Centre just tell us which government is more incompetent: the Conservative government or a Liberal government? Which one is most incompetent, according to him?

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, that is a really tough question. I do not know if I can answer that.

After four majority governments in Manitoba of competent, capable public administration, we keep getting rewarded for the balanced budgets and for the fine work we do in the socialist party in Manitoba. It has been a long time since we have had a Liberal government in Manitoba. They were tossed on the trash heap of history.

It is overdue. If we were doing regular maintenance with some underlying principles of what we want our tax system to look like, it would not be getting increasingly complex and we would not have to wait for an omnibus bill that is going to bury tax accountants and tax lawyers in 1,000 pages once every decade. We could be doing this on an annual basis, guided by some fundamental principles of equality and the goal of fair taxation.

[Jean Rousseau, NDP, Compton—Stanstead, QC]

Mr. Speaker, I always find it amusing to listen to my two colleagues from Winnipeg. They have a very particular sense of humour. Unfortunately, I do not share that same sense of humour.

I will take 10 minutes to try and talk about a bill that I thought was a bookend when I first saw it. When I saw how big it was, I was taken aback. If you wait a decade to make changes to a system that so obviously needs them, it is clear that special attention needs to be paid once you do make them. This 942-page document is more like a pillow than bedtime reading.

As I said, there are nearly 1,000 very technical pages to be studied in 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.

For many people, myself included, it will likely take another decade to analyze and understand what this mammoth bill, this huge document, is all about.

In all, Bill C-48 will amend close to 20 acts and regulations. That is a huge number and it shows that the Minister of Finance, the Prime Minister and others have clearly failed to take action in this regard over the past few years.

Basically, part 1 will implement 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 will implement various technical amendments, once again, relating to the taxation of Canadian multinational corporations with foreign affiliates.

As a result, many Canadian businesses will have to meet new tax obligations in order to abide by the new rules set out in Bill C-48.

Since other changes will be made to this tax framework, businesses will also have to deal with the International Financial Reporting Standards, the infamous IFRS, which require businesses to identify the impact of the changes to the tax legislation and to the tax rate for the period in which the legislation is in the process of being adopted. However, for the purposes of the United States' generally accepted accounting principles or GAAP, the proposals must be adopted.

Do Canadian companies that prepare their financial statements using the accounting standards for private enterprises in accordance with the tax method that has yet to be implemented also have to identify the impact of the changes to the tax legislation and to the tax rate for the period in which the legislation is in the process of being adopted?

If so, companies that present their financial information using the IFRS will have to take into account the changes set out in Bill C-48 when preparing their financial statements for the fiscal years ending after November 20, 2012. On the other hand, businesses that present their financial information using the United States' GAAP will not have to take into account the changes set out in Bill C-48 until the bill is passed or, more specifically, until it receives royal assent.

Needless to say, the CGAs and accounting firms of this world will be fairly busy in the coming weeks and months. What is more, the NDP sincerely believes that we must fight tax avoidance and tax evasion, while preserving the integrity of our tax system. I am sure that this is very important to all members of the House. We therefore support the changes set out in Bill C-48, particularly those that seek to reduce tax avoidance.

In my riding, when people come to see me about the Income Tax Act—which happens more often than one might think, especially middle income earners who are having a hard time making ends meet—they often talk to me about tax evasion. They are really worried about their future.

It is certainly not by weakening regional economies with repressive employment insurance measures, with measures that are no good for a social climate that is already deeply troubled by the Conservative government's inaction when it comes to economic development for the regions of Quebec, that the population will be delighted by or care about a document that is nearly 1,000 pages, like Bill C-48.

The main concern of the people in my region, which was once so prosperous in the manufacturing, farming and forestry sectors, is jobs, jobs, jobs. The Conservatives claim they have created 900,000 jobs. I am not seeing these 900,000 virtual jobs. People are beginning to recognize this sham, and they are disappointed.

This document is a perfect example of an omnibus bill, and that is the only thing my constituents will remember. This bill's massive size is proof that there is still work to be done in transforming such technical amendments into legislation, and in a timely manner, otherwise it will penalize the business community and complicate Parliament's work.

The most recent technical tax bill was passed in 2001. Since then, any changes made between the passing of the two technical tax bills have been made by the Department of Finance through comfort letters. Most of these changes become common practice afterwards, even if they are not enacted in any tax legislation. This was even confirmed by the Auditor General.

In 2009, the Auditor General expressed concern that more than 400 of these comfort letters had not yet been passed into law. As some of my colleagues pointed out, more than 200 of these letters are in the bill to amend various tax laws.

Most tax practitioners are pleased with the comfort letter process. However, the Auditor General's report indicated that they had expressed a need for the legislative changes that the comfort letters identified.

The vast majority of the amendments contained in this bill have already been announced in press releases, the finance department's comfort letters and the budgets for the 11 years that have elapsed since the last technical bill was passed.

The government says that it is worried about the economy. I would like to point out that it has shown a certain neglect and skepticism.

We believe that these amendments will result in increased revenues, which is a good thing, and that they are a good way to reduce tax avoidance. As I pointed out, the vast majority of these measures were put into practice several years ago, and tax measures usually go into effect as soon as they are announced.

The sweeping nature of this bill shows that the government must be more responsible in managing tax laws, and it must ensure that proposed changes to these laws are adopted on a more regular basis.

In closing, we nevertheless support this effort because, as I mentioned, most of these measures have been in effect for a number of years and they should increase government revenues.

What my colleagues and my constituents want is for tax dollars collected as a result of these measures to be invested in our communities that really need them.

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Speaker, the fact that the Liberal and Conservative governments took so long to rework the tax laws has cost our small and medium-sized businesses.

The complex nature of these laws is a constant source of frustration, at least for the small and medium-sized businesses in my riding.

There is one element that cannot be overlooked. Who benefits from not paying taxes? What allows companies to not pay taxes? That question needs to be asked.

When companies or individuals are honest, they pay their taxes. I believe that the responsibility should be shared by all businesses. They should pay their taxes because it helps improve society.

I would like to know if my colleague could tell us who benefits from tax havens, for example.

[Jean Rousseau, NDP, Compton—Stanstead, QC]

Mr. Speaker, the bigger companies benefit, of course. The more complex laws are, the more small businesses will suffer.

Small business entrepreneurs must develop their products and their markets. If they have to take one day a week, four days a month, to deal with their taxes, meet with their accountant and put things in the hands of someone they trust, that takes time. However, they do not have that kind of time because they are small business owners. They need all of their time to develop their products.

It is not difficult for large businesses. They deal with numerous accountants, finance experts and lawyers, all of whom are highly qualified. They work with people who are capable of helping them. Small businesses do not have the same means, and that hurts them.

[François Choquette, NDP, Drummond, QC]

Mr. Speaker, I congratulate my hon. colleague on his excellent speech. All of the points he raised were very pertinent.

One thing I would like to say about this omnibus bill is that it is too long to examine as thoroughly as we should. At least this bill is a step forward in the fight against tax evasion. But it is not enough.

The NDP believes that fighting tax evasion should be given greater priority. The NDP has even organized information sessions on this. The Leader of the Opposition gave a speech to demonstrate that we support this fight, which should be a priority.

Unfortunately, the Conservative government did not work hard enough on the fight against tax evasion and I would like to hear what my hon. colleague would recommend in that regard.

[Jean Rousseau, NDP, Compton—Stanstead, QC]

Mr. Speaker, tax evasion is costing our economy hundreds of thousands of jobs. That money could be invested in our country and in our regions, which desperately need it, whether for small businesses or for environmental projects, in the manufacturing sector or in research and development.

Hundreds of millions of dollars lost to tax evasion could help Canadians, reduce unemployment in remote areas and help first nations populations. Loads of projects are awaiting funding. This bill is a first step towards fighting tax evasion, but it is extremely complicated. What can we do with all this?

Large corporations just have to hire an army of accountants who know tax evasion inside and out. We need to get tougher on those corporations and be relentless, because this is costing the Canadian economy hundreds of thousands of jobs and billions of dollars.

[The Acting Speaker, Conservative, Bruce Stanton]

Before I recognize the hon. member for Saint-Hyacinthe—Bagot, I want to inform her that I will have to interrupt her at 5:30 p.m. because the time for government orders will have expired.

There is approximately six minutes left. The hon. member for Saint-Hyacinthe—Bagot.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, first, I want to say that we support Bill C-48 because it will have some positive effects on revenues, and the changes it makes will help deter tax avoidance, which is good.

I find it interesting that the bill talks a lot about tax avoidance. Members know that the middle class, which pays taxes, can rarely use tax avoidance tactics to pay less and have a little breathing room. The people who have the means to pay taxes also have the means to find ways to avoid them, while the middle class is suffocating under the weight of all of the government's cuts. I think it is good that this bill addresses the issue of tax avoidance. I wanted to share that with my colleagues. Our tax system must be managed much more responsibly, and we must ensure its integrity.

I have a question for the government. Why did it wait so long to legislate measures that have been around for 10 years? Some of these came into effect in 1998. I was 13 years old in 1998. That was a long time ago. The government opposite is not the only one to blame, because it has not been in power since 1998. Thank goodness, since who knows what the House would look like. I get the impression that they suddenly woke up and decided they needed to legislate some tax measures. I find that a little odd.

I do not claim to be a financial expert. I probably never will be. It is not a topic that interests me as much as housing, which I talk about all the time. I am no financial expert, but it seems to me that a competent government should have woken up a little sooner.

When I look at how long this document is, I pity the poor Standing Committee on Finance, which has to examine it. The word “omnibus” also comes to mind. I will certainly never approve of this way of doing things and neither will my party, obviously. The government has a tendency to put everything in one bill, and I do not agree with that practice. For example, Bill C-48 amends the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act and the First Nations Goods and Services Tax Act.

Given the importance of these four laws, the length of the bill and the need for the measures set out in this bill, I am afraid that the committee will do a poor job of examining the bill, which would be too bad considering how important it is.

Honestly, I find that this bill, which is coming from a government that claims to be so concerned about the health of our economy, is really late, and I think that it should be examined in a different manner. The Minister of Finance himself admitted that the government failed to take action. I would not like to be part of the Conservative cabinet right now.

That being said, given the government's inaction on so many matters of vital importance to our country, I am not really surprised to see that it has been so negligent with regard to tax avoidance and the integrity of our tax system.

I am talking about inaction. I am talking about a government that does not understand the importance of homelessness and affordable housing programs, for example. I am talking about a botched EI reform at a time when workers need EI the most. I am talking about a government that barely makes any investments in the environment, thereby endangering the quality of life of future generations. I am talking about a government that neglects infrastructure to the point where I am now afraid to drive on the Champlain Bridge, and I believe that is a legitimate fear.

When this bill is passed and tax avoidance is being discouraged, can we hope to see revenue increase?

In my riding, there is a lack of affordable housing. Homelessness is on the rise and agricultural businesses are losing skilled employees because of the EI reform. What is more, many environmental organizations are fighting to give our children a habitable earth. Clearly, we also need health infrastructure, a commuter train and a tunnel in order to promote the economic development of our region. Once this measure is implemented, will others follow?

I will stop there.

[The Deputy Speaker, NDP, Joe Comartin]

The member for Saint-Hyacinthe—Bagot will have five minutes to finish her speech another time.

The House resumed from February 27 consideration of the motion that 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, be read the second time and referred to a committee.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Mr. Speaker, I am pleased to participate in this important discussion. I want to speak to the matter of taxes, generally, as opposed to specific elements of the bill, as my other colleagues will do so.

Creating jobs and growth in our economy is the government's top priority. Rest assured, we are working on a number of fronts to create optimal conditions for sustainable growth. We are making it easier for Canadian businesses to successfully compete in the global economy and are making it more attractive for others to invest in this country, with the end goals, obviously, being more jobs for Canadians and a healthy and thriving economy.

Key among the strategies we are employing is our government's low-tax plan for jobs and growth that has made Canada the best place in the world to invest. It began in 2007, when Parliament passed a bold tax reduction plan that started us down the road to branding Canada as the lowest-tax jurisdiction for business investment.

At the same time, our government also encouraged the provinces and territories to collaborate in supporting investment, job creation and growth in all sectors of the Canadian economy by establishing the goal of a 25% combined federal-provincial-business tax rate. Today we have made substantial progress toward that agenda.

The final stage of Canada's incremental reduction in federal business tax rates came into force on January 1, 2012. These substantial tax reductions have lowered the federal general corporate income tax rate from 22.12% in 2007 to 15% in 2012. Also in 2012, the last of the provincial general capital taxes will be eliminated. This follows the implementation, in 2006, of the federal capital tax and the introduction, in 2007, of a temporary financial incentive to encourage provinces to eliminate their general capital taxes.

I do not want to use my time rhyming off a list of measures we have taken since 2006 to fuel job creation and spur economic growth. However, I do want to cite several that are key. They include the provision of a temporary hiring credit for small business to encourage additional hiring by this vital sector; reducing the federal income tax rate that applies to qualifying small business income to 11% in 2008 and increasing the amount of income eligible for this rate to $500,000 in 2009; supporting manufacturing and processing activities by introducing a temporary accelerated capital cost allowance rate for investment in manufacturing or processing machinery and equipment and extending it to eligible assets acquired before the year 2014; eliminating tariffs on imported machinery and equipment and manufacturing inputs to make Canada a tariff-free zone for industrial manufacturers by 2015; and improving the availability of Canadian businesses to attract foreign venture capital by narrowing the definition of taxable Canadian property, thereby eliminating the need for tax reporting under section 116 of the Income Tax Act for many investments.

The fact is that our government's low-tax plan is working, and the world is increasingly noticing.

As a result of these and other tax changes, Canada now has an overall tax rate on new business investment that is substantially lower than any other G7 country and below the average of member countries in the Organisation for Economic Co-operation and Development. This is a significant advantage for Canada in the global economy and will be a key contributor to Canada's long-term economic prosperity. Little wonder that Statistics Canada announced that employment increased in February by 50,700 jobs. With February's strong growth, over 950,000 net new jobs have been created since the depth of the global recession in July 2009. It is important to note that 95% of these are full-time, and nearly 80% are in the private sector.

These are positive signs that we are on the right track for Canada's economic growth. Indeed, Canada has the best job growth record among the G7 countries in recent years, and we do not intend to stop there.

The next phase of Canada's economic action plan continues our efforts to preserve this country's advantage in the global economy, to strengthen the financial security of Canadian workers, seniors and families, and to provide the stability necessary to secure our recovery in an uncertain world.

As members know, Canada weathered the global economic and financial crisis well, particularly when compared to most other developed nations. At the same time, Canada is not immune to the challenges that emanate from beyond our borders. That is why I was extremely pleased to note that as he prepares budget 2013, the Minister of Finance has stated clearly that this is not the time for dangerous new spending that would increase deficits and raise taxes. In uncertain times such as these, the most important contribution the government can make to bolster confidence and growth in Canada is to maintain our sound fiscal position. That means maintaining our focus on fostering prosperity for Canadians and their families by growing the economy and helping to create high-quality jobs. In other words, we have to do everything we can to keep taxes low for Canadian families and businesses.

Since there is only one level of taxpayer, all governments must work together to ensure that Canada's fiscal house is in order, return to balanced budgets and prepare for future economic turmoil. It is important to add that balanced budgets are not important for their own sake.They are important for what they make possible and for what they avoid. Reducing debt frees up tax dollars that would otherwise be absorbed by interest costs. These dollars can then be reinvested in the things that matter most to Canadians: health care, public services, and of course, lower taxes.

Reducing debt keeps interest rates low, encourages business to create jobs and invests in our future. It preserves the gains made in Canada's low-tax plan, fostering long-term growth. It will create more and better-paying jobs for Canadians. Canadian tax reductions that play an important role in supporting economic growth are those that enable businesses to invest more of their revenues in their own operations. Such investments boost efficiency and productivity. It is this productivity growth that allows businesses to hire additional workers or to offer higher wages in order to expand production and earn more profits.

Our government is committed to lower taxes for all Canadians, and that is why we intend to introduce broad-based tax relief with more than 140 tax reductions, such as lowering the GST from 7% to 6% to 5% and introducing the tax-free savings account. Our strong record of tax reliefs is saving the typical Canadian family of four over $3,100 each and every year. What is more, our government has been aggressive in closing tax loopholes used by a small group of taxpayers to avoid paying their fair share of taxes. Ensuring tax fairness helps to keep taxes low for all Canadians and their families. I encourage all members to support this legislation before us today and to help create a better tax system and greater fairness for all Canadians.

I appreciate this opportunity to discuss what to many people are some very technical tax changes. In the end, the simple way of explaining the changes to average people like me is to state that we are making the system better. We are making the system fairer. We want to make sure that when people utilize tax loopholes unnecessarily, which causes the rest of us to pay more taxes, we are going to close those loopholes so that we can continue to create lower taxes and make Canada a better place in which to live and raise a family.