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

[Robert Aubin, NDP, Trois-Rivières, QC]

Mr. Speaker, I do not have the tax expertise my colleague does, so I would like to benefit from his wisdom.

The Conservative government is always talking about cuts, particularly cuts to employment insurance. We could make a whole list.

Could my colleague tell me just how much the government loses to tax evasion?

How much revenue would the government be looking at if the problem was tackled head-on?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Speaker, this is obviously a serious case.

We have talked a lot about tax havens. Unfortunately, Canadian practices have been assessed at $9 billion by Mr. Lauzon, director of the socio-economic studies lab at the Université du Québec à Montréal.

We are talking about duly incorporated companies being used as tax havens. We are not talking about organized crime. This $9 billion involves duly incorporated companies and individuals who are using illegal methods, namely, tax evasion.

[Claude Gravelle, NDP, Nickel Belt, ON]

Mr. Speaker, I thank my colleague for his speech.

Earlier, the member for Renfrew—Nipissing—Pembroke stood up and said that this bill has been debated for 100 days. I checked, and it has actually been only nine hours. There is a big difference between nine hours and 100 days of debate.

I think the Conservatives are frustrated. Could my colleague please give me his opinion on the Conservatives' frustration?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Mr. Speaker, my answer will be brief.

We have had nine hours of debate on a 1,000-page text that includes 200 comfort letters. We are forced to abandon our legislative authority and trust the drafters.

No one can tell me that a single Conservative MP has read these 1,000 pages. It is obviously shoddy, haphazard work, makeshift work. This is nonsense. We are ramming through 200 comfort letters. No one better tell me that this is our responsibility.

We had nine hours to talk about 1,000 pages of text. I challenge any Conservative member to tell me that they read and understood them.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Mr. Speaker, I am pleased to speak in this House today to Bill C-48, the technical tax amendments act, 2012.

Before I continue, I must say that I do find it remarkable that the opposition has delayed timely consideration of this highly technical bill for weeks on end, for no other reason than to stand in this House and tell us that they agree with its passage. It is truly bizarre.

Despite much of the bill's content having been made public already, despite extensive consultation and endorsement from key stakeholders, and despite pre-study by parliamentarians and the House of Commons finance committee, the NDP stands in this place once again delaying the passage of this legislation for absolutely no apparent reason.

It is not as if it does not know or will not support the bill. These are the words of the NDP finance critic speaking to our government's technical tax amendments at the committee earlier this week:

Obviously we support the goal of closing tax loopholes and making the tax system in Canada clearer and easier to understand for Canadians. [...] it is important that these technical changes be adopted so that there is clarity and certainty in our tax legislation.

However, it is not just the NDP. At the same meeting of the finance committee, the Liberal MP for Markham—Unionville made it clear that these delay tactics are nothing more than partisan games when he admitted, and I quote, “all parties are supporting this bill”. Parliamentary procedure tricks aside, delaying this legislation has very real implications for the Canadian taxpayer. Parliament has not passed a technical income tax bill in over 10 years, and both the experts and the opposition agree that it is long overdue.

For those watching at home who may not be familiar with this legislation, the technical tax amendments act moves to clear the backlog of outstanding technical tax amendments created as a result of Parliament's delay in passing such a bill.

What is remarkable with the opposition's delay tactics is that the government provided them with an advance copy of the bill before it was introduced in Parliament and indicated it would work with them to make any necessary changes to the legislation. However, that was not the opposition's only opportunity.

One would never know from the NDP's blustering partisan rhetoric that the government conducted a wide range of open and public consultations on the majority of the proposed amendments included in this legislation. Specifically, from 2009 to 2011, the government had no fear of any of these consultations that were inviting comments from Canadians, including NDP members. If the NDP had concerns, it could have shared them with the government in December 2009, July 2010, August 2010, November 2010, December 2010, March 2011, August 2011, October 2011, or at any point thereafter.

Instead of working co-operatively to bring certainty for Canadian taxpayers, the opposition has chosen petty delay tactics at the taxpayers' expense. It is not only that, but the NDP needles over a 100-day filibuster and has gotten so out of hand that groups like the Canadian Institute of Chartered Accountants have come to Ottawa to plead with Parliament to end this ridiculous charade.

The NDP has heard this message loud and clear. Why will it not show some respect for taxpayers and get moving on Bill C-48? While the NDP drone on about process, despite the bill having been before Parliament for over 100 days, failure to move it has real consequences for the Canadian economy, and the experts have warned us of these consequences.

It was just this week at finance committee that Larry Chapman, executive director and CEO of the Canadian Tax Foundation, reminded parliamentarians of the importance of swift passage of this legislation. This is what he had to say:

...it represents 10 years of repairs and maintenance in updating of 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.

I urge my colleagues in the NDP to listen carefully to his words, which bear repeating. This is very important to all Canadians.

It is not just members of the tax community urging swift passage of this bill. Indeed, the Auditor General of Canada, in a recent report, identified the existing backlog of technical amendments as a pressing issue requiring Parliament's immediate attention. Our government agreed with each of the Auditor General's recommendations and moved quickly to bring forward technical amendments to address them, amendments currently delayed by the NDP in the House.

During its recent appearance before the finance committee, the Office of the Auditor General went even further and explained why delay would do nothing but fan the flames of uncertainty, resulting in lost tax revenue for the government and higher costs for taxpayers.

Let me quote one of those comments at length for the benefit of the opposition, and perhaps it will come to its senses. It states:

Our system of income taxation depends on taxpayers self-assessing their tax obligation based on a clear understanding of the law.

Legislative clarity is important if taxpayers are to easily self-assess and correctly calculate their taxes. When the intent of the legislation is not clearly conveyed by the words, taxpayers may face higher costs to obtain professional advice, may be more willing to use aggressive tax plans, and may need to re-file a tax return at additional cost.

Uncertainty about how the tax law should be interpreted can also affect the efficiency of tax administration. For example, there are higher costs for the Agency to provide additional guidance and interpretation to taxpayers and tax auditors.There are also increased administrative costs for the Agency to obtain waivers from taxpayers to extend the limitation period for audit reassessments until the uncertainty is resolved.

It may even result in lost tax revenues. One would think that those words alone would be enough to bring the NDP onside, especially with its $56 billion in proposed new spending. It could be planning to make up the difference with the $21 billion carbon tax. I do not know.

Nevertheless, the Auditor General has made it clear that we cannot put up with the NDP hyper-partisanship when it comes to the simplest of routine proceedings. While the NDP wants to filibuster a highly technical bill, the majority of which has been in the public domain for years, it feigns ignorance of the need for its timely passage.

In closing, let me recount the recent exchange between the NDP finance critic and an expert tax witness, and Canadians can decide for themselves the true motives of the NDP's needless delay. In response to a question from the member for Parkdale—High Park asking whether it is negative for our economy if we do not pass these amendments in a timely manner, expert witness Gabe Hayos of the Canadian Institute of Chartered Accountants replied, “Absolutely. [...] there's just no doubt about it”.

With that, I urge the NDP to show some concern for our economy, demonstrate respect for Canadian taxpayers and get moving on Bill C-48.

[Claude Gravelle, NDP, Nickel Belt, ON]

Mr. Speaker, I find it unfortunate that the member would falsely accuse the NDP of holding up this bill. It is perhaps because he is frustrated. If he had been listening this morning, he would have heard that I checked with the table and we have been debating this bill for nine and a half hours. Where I come from, nine and a half hours is a long way from a hundred days. I did not know there was that much of a time difference between British Columbia and northern Ontario.

He also said in his speech that the NDP was filibustering this bill. Until today, there has not been a single Conservative MP who has stood up to speak to the bill. All of a sudden, today the Conservatives are filibustering the bill. Why are they so frustrated, and why can they not tell Canadians the truth about debating the bill for nine hours?

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Mr. Speaker, a simple challenge to the member, then, would be to vote in favour and pass the bill.

The Certified General Accountants Association of Canada, representing over 75,000 tax professionals, stated:

Some of the measures contained in today's bill [Bill C-48] were initially proposed as early as 1999....

With unlegislated tax measures, taxpayers and professional accountants must maintain their records and forms—sometimes for years—to be in a position to comply, even without knowing when and if these measures will be approved by Parliament and enacted. This uncertainty and unpredictability places an enormous compliance burden on taxpayers, businesses, professionals and their clients.

Again, I would ask the NDP to pass this bill.

[Pierre Lemieux, Conservative, Parliamentary Secretary to the Minister of Agriculture]

Mr. Speaker, certainly the NDP do not have a good track record when it comes to supporting the financial initiatives of the government. I think of past budgets and the estimates process. Estimates have just moved through many committees, all of which were voted against by the NDP. Now we have some common sense tax amendments that build on other things we are doing.

I would ask my colleague why it is he thinks the NDP have voted against all of these measures. The fruit of these measures are seen in 50,000 new jobs created in the month of February and 950,000 new jobs since 2009.

I would ask my colleague for his thoughts on why the NDP absolutely refuse to support good common sense measures, such as these tax amendments that we have in front of Parliament today.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Mr. Speaker, the simple answer is that I do not know. A lot of these measures simply make sense, as the hon. member stated in his comments. Obviously, they make sense to a lot of other taxpayers and to us as a government.

The challenge I made before to the NDP members is that they simply let us get this done and pass the bill.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Mr. Speaker, as I mentioned, I have the pleasure of sitting on the Standing Committee on Finance.

However, I see that my colleague knows what he is talking about more or less.

Given the scope of the bill, I had to focus on particular sections, such as clause 195, which provides a number of definitions including the one for restrictive covenants.

Tax experts have approached me and thanked me for tackling this matter because the definition seems to be inadequate. However, we will have to pass Bill C-48 in a rather haphazard manner.

Can my colleague assure me that we will find the time to address certain problems with C-48? The proposed measures are poorly defined or somewhat obsolete.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Mr. Speaker, it is interesting that this member would consider it a botched process.

According to the Certified General Accountants Association of Canada, they welcome Bill C-48.

As the last technical income tax bill was passed by Parliament in 2001, a significant backlog has accumulated and must be addressed.

My colleague might make comments according to your experts, but we have experts, too, who say that the bill needs to be passed. Experts and Canadians would agree that it needs to be done.

[The Acting Speaker, Conservative, Barry Devolin]

Before we resume debate, I would remind all hon. members to address their comments to the chair rather than to their colleagues.

The hon. member for Cumberland—Colchester—Musquodoboit Valley.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Mr. Speaker, I appreciate the opportunity to speak today on Bill C-48, the technical tax amendments act of 2012. The bill proposes amendments to the Income Tax Act, the Excise Tax Act and related legislation. It would close tax loopholes and create a fairer tax system for all Canadians.

The bill also contains proposals that have been public for quite some time, some going back the late 1990s, as well as measures that have been previously released for public consultation.

The proposals in the bill reflect the feedback the government has received from Canadians and aim to ensure that everyone pays their fair share of tax and is treated equitably under our tax laws.

After all, there are few areas where the integration between governments and citizens is more direct than with respect to taxation.

Our governments collect taxes to fund health care, social programs and other vital services for Canadian citizens. The vast majority of Canadians pay their taxes willingly and they pay them honestly. In return, they expect the government to manage their tax dollars wisely and to take no more from each taxpayer than is their fair share. Canadians can count on this Conservative government to do both.

The efficiency and fairness of the tax system should be improved on an ongoing basis by closing tax loopholes as they are identified. The bill before us would go a long way to doing this in respect.

In the 2010 Speech from the Throne, the Conservative government committed to taking aggressive steps to close tax loopholes that allow a few businesses and individuals to take advantage of hard-working Canadians who pay their fair share of tax.

By broadening and protecting the tax base, we are helping to keep Canadian tax rates competitive and low, thereby improving incentives to work, save and invest here in Canada.

In keeping with this commitment, the legislation before us today proposes to strengthen Canada's tax system by closing tax loopholes and improving fairness for all Canadian taxpayers. The bill would also make the tax system easier to comply with, which is what Canadians have been asking for.

For example, it would make changes to the Income Tax Act to better target rules relating to non-resident trusts. The bill also includes amendments to rules dealing with foreign affiliates of Canadian multinational corporations. These changes would enhance the fairness and integrity of Canada's international tax system.

The bill before us today would also line up many loose ends already contained in the tax system. Indeed, it has been over a decade since Parliament last passed a comprehensive package of technical income tax amendments. This has created a significant backlog of outstanding measures that need to be addressed to provide certainty for Canadian taxpayers.

The Auditor General of Canada has identified the backlog of technical amendments as an issue requiring pressing attention by the government. The amendments proposed in the bill address the backlog through the inclusion of outstanding income tax and sales tax amendments, the vast majority of which have already been released for open and public consultation.

The bottom line is this: the legislation would provide certainty in the application of our tax system, making it easier to comply with and administer and improving fairness for Canadian taxpayers.

Our government has great successes in creating jobs, growth and long-term prosperity. The future of this country depends in no small part upon strengthening business competitiveness. Strong economic framework policies foster competition, attract new investment and help businesses thrive and create jobs.

In Canada's economic action plan, the government has taken action to strengthen business competitiveness by promoting an open investment framework and by making fundamental changes to reduce red tape for business. By providing a strong environment for investment and reducing red tape, our government is helping to ensure that Canadian businesses have increased access to the resources required to compete in the global economy and create high-value jobs. This plan is working.

Only today, Statistics Canada announced that employment has increased in our country by over 50,000 net new jobs created in February. Even better, the unemployment rate remains at a post-recession low of 7%, the lowest level in four years.

February's strong employment gains, along with the over 950,000 net new jobs created since the depth of the global recession in July 2009—and of these, 90% are full time and 80% are in the private sector—are very positive signs that we are on the right track with Canada's economy.

What is more, unlike what others would have us believe, Canada has the strongest job growth record among every single one of the G7 countries in recent years.

Furthermore, lower Canadian tax rates play a particularly important role in supporting economic growth by enabling businesses to invest more of their revenues back into their operations. These business investments in machinery, equipment, information technology and other physical capital will boost Canada's productivity. Additional capital boosts businesses' competitiveness, encouraging firms to grow and create more better-paying jobs for Canadians, thereby raising everybody's living standard. As a result of the bold tax reduction plan passed by Parliament in 2007, Canada's tax advantage has continually improved.

The final stage of our step-by-step reduction in the federal business tax rate came into force at the beginning of 2012. It is the accumulation of a process that has seen the federal corporate income tax rate fall from over 22% in 2007 to just 15% today. This has allowed Canadian businesses and Canadians who work for those businesses to drive Canada's economic recovery and future growth.

We eliminated the capital tax at the federal level and encouraged provinces to do the same with their general capital taxes, and the provinces have agreed to do that.

These and other tax changes have allowed Canada to achieve an overall tax rate on new business investment that is lower than any other country in the G7. Indeed, the Canadian Manufacturers and Exporters had this to say only this week about what our low-tax plan has meant for them. They said:

...lower corporate income taxes attract more investments and therefore have a positive result on government revenues, at all levels of government. This is good news for our economy, and I am confident our tax environment will attract more investments in the years to come.

There is great support for this government's tax plan. Nevertheless, Canada faces a fast-changing global environment with increasing competition from emerging market countries and a global economy that remains fragile and uncertain.

I assure members that our government remains committed to keeping Canada strong and prosperous by creating the right conditions to enable Canadians and Canadian businesses to feel confident and to invest, create jobs and grow our economy.

Canada's performance has been one of the most resilient amidst considerable global uncertainty. Compared to most advanced economies in the world, we are in a relatively good position. Since our government introduced Canada's economic action plan to respond to the global recession, Canada has recovered more than all the output and all the jobs lost during the recession.

We will continue to treat Canadians with the utmost fairness and respect with regard to Canada's taxation system. Canadians deserve nothing less, and that is why I call upon all parliamentarians to support Bill C-48.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I have a very simple question. I listened to my esteemed colleague and he did not mention comfort letters. He did not talk about the very essence of Bill C-48, the 200 comfort letters that are being incorporated into the Income Tax Act or the 1,000 pages of text accompanying these 200 amendments.

Did my esteemed colleague bother to read these 1,000 pages? Does he understand the legislative path an Income Tax Act comfort letter takes?

His speech clearly shows that he understood nothing and that he did not read a single one of the 1,000 pages.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Mr. Speaker, I can tell members what I do understand. I understand that on our side of the House we believe in jobs, growth and long-term prosperity and on that side of the House they believe in raising taxes. Raising the carbon tax, raising the iPod tax, raising corporate tax rates, raising the GST are all part of the NDP plan for the future of Canada. That is not our plan, that is their plan. We believe in low taxes. We believe in creating jobs, growth and long-term prosperity.