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

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Speaker, I would like to thank my colleague from Bruce—Grey—Owen Sound for his comments on the technical tax amendments act. Indeed, my colleague is very wise. Everyone would be better served if we could just get rid of this backlog of technical amendments.

I wanted to ask him today about something really important to me as the member of Parliament for Oshawa. He talked about Canadian manufacturers and exporters and their support for us and our government. There have been so many challenges facing manufacturers, especially in Ontario.

I wonder if I could get his comments on the different approaches. We have a Liberal government in Ontario that put in a green energy program with feed-in tariffs and we have seen recently how horribly this has affected our economy. It has driven up costs for manufacturers, small businesses and everyone in the province. They have lost at the WTO. It has just been a horrible disaster.

I would like to ask my colleague in his wisdom if he could contrast our plan as a government to lower taxes to continue investing in manufacturers and exporters versus the opposition's plan. He mentioned the topic of taxes. We see from the opposition consistently that they just want to raise taxes and bring new ones in. He talked about the carbon tax and also the $50 billion in unfunded promises from the opposition.

If he could comment on how that is going to affect manufacturers, and contrast the two approaches, it would be beneficial to us here in the House.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Speaker, the member for Oshawa is the best member that Oshawa has ever had, and I thank him for the great question.

I do not have enough time here today to talk about the amount of taxes or the will to add taxes that the opposition members would like to see. As we all know, the New Democrats have never seen or heard of a tax they would not like to put in, and the Liberals, when they are in, have never seen a tax that they have not put in, and we all know what that does to young families.

I have three young sons trying to get started out, and I can tell members that lower taxes help them to raise their families and get a better start in life, not the opposite. It is the same with small businesses.

In my riding, agriculture and tourism are probably the two biggest industries, but small businesses and small manufacturing businesses are what we have there. That is our trademark and what makes our riding. Although we had some problems through the recession, the same as most ridings did, our small business owners were able to cope, with the lower taxes and tax rates that this government has put in. It is the only way, long-term, that businesses can do it. If we do not create a climate where government can let businesses compete and be profitable on their own, we are not doing our job.

We have had nothing but praise from small business owners on this, and that is why we are going to continue in that direction.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Speaker, I want to inject some numbers into this debate.

The hon. member said that reducing debt keeps interest rates low, yet when the Conservative government took office, the debt was $480 billion and it is now $605 billion. The Conservatives have added $125 billion of debt to Canada.

He said that reducing corporate tax rates is important so that there is money to invest in the corporate sector, yet Mark Carney, the outgoing Bank of Canada governor, said it has $500 billion sitting on the sidelines. Unemployment is higher today than when the Conservatives took office.

The hon. member said the number one focus is on economic growth. I wonder if he can tell us what Canada's economic growth has been over the last six years, in percentage terms. That is what I really wanted to know. Does the member know the answer to that question?

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Speaker, the amount of feedback that I talked about in my opening remarks, from representatives of different organizations who certainly support the cuts to business taxes, and the number of net jobs that we have created over recent years, say it all. My hon. colleague can ignore those comments and numbers all he wants, but the reality is that they are out there. We have had great support for a lot of things we have done in our budget, and that is why we are going to continue in that direction.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Mr. Speaker, first of all, I would like to say that I will be sharing my time with my colleague, the hon. member for Sherbrooke.

Contrary to what we just heard, while the government is trying to make up stories about a non-existent carbon tax, Bill C-48 has to do with actual tax-related issues.

This is not a platform for Conservative members to invent stories. No, this is a very important process. We are looking at how the system will change, as well as at the implementation of certain procedures and recommendations that came out of letters sent by the Minister of Finance, communications with accountants, for example, and pre-budget consultations.

We certainly support the various measures in the bill. As a result, we will be supporting the bill today at third reading.

However, a number of aspects of the overall process are problematic, and some issues have to be given due consideration. We were given 1,000 pages all at once. People will wonder how we can support what is basically a 1,000-page omnibus bill after we opposed the omnibus budget bills introduced in the past year. The answer is simple. The difference today is that we are discussing a bill that deals with the same subject, namely, various related acts. This is not like what happened last year. For example, Bill C-38 covered employment insurance reform, environmental protection and so on. For that reason, we do not have a problem with this bill.

What does bother us about the omnibus nature of this bill is that many of these measures have been dragging on for over a decade. We are not the only ones saying so. The former Auditor General also commented on the situation in her 2009 report. At that time, she pointed out that there were 400 measures that had not yet been enacted. These measures were proposed in comfort letters from the Minister of Finance or previous finance ministers in recent years, but none of them had been legislated.

I will explain how this works for the benefit of our viewers. Unlike with other bills, tax-related measures such as these are initially implemented through comfort letters in order to expedite their application. However, the House of Commons must later pass a bill to truly finalize these measures.

What the former Auditor General meant was that 400 measures had been proposed but that the House had not yet passed legislation on them. Bill C-48 contains only 200 of these 400 measures, so there is still a great deal of work to be done.

I mention this because the former Auditor General is not the only one who raised this problem. Various members of the business and accounting communities have also done so. They have testified before the Standing Committee on Finance and written letters to the Minister of Finance and the various MPs who have held that position in the past 10, 12 or 13 years, while these measures have sat on the shelf.

These people have said that it is not good for the business community, small businesses or people who have to deal with the tax code or the tax system. There is a great deal of uncertainty. The finance minister tells them that certain measures are going to be implemented but then the government waits 5, 10, 13 or 15 years before it passes legislation on these measures.

This creates a certain amount of uncertainty, which is not good for the economy, or for business people and individuals who are trying their best to understand issues that are already quite complex. Very few people outside the accounting community can really stand up and say that they truly understand the entire tax code. It is extremely complex. Fortunately, we have accountants who can help us to understand it. However, they are the ones who are saying that this somewhat haphazard approach is causing them problems.

Although we support these measures and therefore the bill, I believe that this process and this debate highlight the fact that the process needs to be reviewed and made faster.

If the minister is going to promise measures to business people, accountants and everyone concerned, those measures need to be passed in a timely manner, which has not happened in the past. Another issue that was raised is the fact that a number of measures are being passed at the same time. We need to avoid that.

As I explained, this omnibus bill is less problematic than the budget implementation bills. However, to wake up one morning to all these measures and so many related tasks will create a lot of work for accountants, business people and the public, who want to understand how the government manages the taxes they pay. It is important to make the process easier, and that is what the government should be focusing on.

As I already mentioned, we need to look at how the world is currently evolving. Tax season brings with it television ads encouraging people to buy tax software. People are making money off that, which is fine. I am not out to attack or criticize them. However, let us put ourselves in the shoes of someone who is not a tax expert. In my opinion, if the government simplified the process and made it more efficient and easier to comprehend, the public would be in a better position to understand how the system works. People would be more inclined to trust the government and how it spends taxpayers' money.

Just look at the current climate: people do not have a lot of faith in how their elected representatives are spending their tax dollars. This would be a step in the right direction and a good way to regain the public trust. Of course, this is not the ultimate solution. However, the government should have a closer look at this issue, and that is what the bill before us proposes.

I am not a member of the Standing Committee on Finance, but I had a chance to read the testimony given at that committee. It is quite interesting, because it shows just how out of touch past Liberal governments and the current Conservative government have been with reality as expressed by various accountants' associations during pre-budget consultations. They stated repeatedly that the government really needs to re-evaluate the situation.

The bill contains measures that have been under discussion since 1998. The time frame is completely absurd. If I were a small business owner who had to pay taxes and was trying to understand these measures, I would see that some of these measures were supposed to have been incorporated into our tax law in 1998 or 2001. It is 2013, and they have not yet been incorporated.

These measures are not yet part of the legislation. I see that as a serious problem. The process really needs to be re-evaluated. Every political party in the House would agree to that. Furthermore, members of the Standing Committee on Finance could examine it.

I will close on that point, Mr. Speaker. I am pleased to have had the opportunity to speak to the process, because although we support the bill, this has really highlighted some of its flaws. I think we need to use this debate as an opportunity to address these flaws and find ways to improve the system. We should not have to do this every 15 years, nor should we have to add hundreds of tax measures at the same time. A more appropriate approach would be better for taxpayers, entrepreneurs and accountants, to name a few.

Thank you, Mr. Speaker, and I now invite questions and comments from my colleagues.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, I listened with great interest to my hon. colleague, who obviously has done a great deal of study on the bill.

The issue we are talking about here, in terms of this massive omnibus tax legislation that would bring the code up from many years, going back, as my colleague pointed, to 1999, is the fact that it is being done in an atmosphere in which the government is actually shutting down debate. The bill has been sitting there, but we have not done our job in the House of Commons of fully debating it.

When people back home wonder how we could possibly lose $3.1 billion, I would say to them that when we have a government that has numerous pieces of very technical information pushed through the House so that it cannot be debated, that is how we end up making mistakes.

I would like to quote Thomas McDonnell, one of the tax lawyers who spoke on the bill. He said that the changes run to well in excess of 900 pages. Further, he said:

[I]t will be passed without...informed debate in the House. Most parliamentarians voting on it will admit that they have not read it, let alone tried to fully understand the consequences of voting for (or against) it. This is not how Parliament is supposed to deal with one of its essential functions—the raising of revenue. It's sad to say it, but I don't think most of our parliamentarians understand this aspect of the role of Parliament, or, if they do, have the courage to go to the wall in defending it.

I would like to ask my hon. colleague what he thinks of the failure of the Conservatives, particularly the Conservative backbenchers. They tell us that they want to stand up when its on a woman's right to choose, but when it is about the obligation of Parliament to vet bills on raising revenue from taxpayers, nobody on that government side is interested in looking at the issue fully and having a full debate so that we understand what the issues are and protect the taxpayer.

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Mr. Speaker, I thank my colleague for his question and for the quote he just shared. That is precisely the problem.

When they move a time allocation motion to shut down debate, they sometimes accuse us of wasting time on bills that we support.

This bill is a perfect example. We support it, but as my colleague said so well, this is a good opportunity to study something that is very complex and important for taxpayers in every one of our ridings. We have an opportunity to debate the bill and I must admit that I am no expert on the subject matter. Nevertheless, having the opportunity to share my point of view on this bill allowed me to study the issue and understand the concerns that have been raised.

Even though we support the bill, we must point out any major flaws on behalf of our constituents, the people we represent. Missing out on this opportunity is simply unacceptable, but that has happened to us some 30-odd times since the 2011 election. It is unacceptable, shameful and unfortunate and we are seeing it more and more from this government.

As my colleague said so well, when it comes to the taxpayers' money and complex tax issues, losing this opportunity to study and debate this issue is truly unfortunate. It is too bad that there are not more people across the way who share this opinion.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

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

He spent a few minutes briefly going over the economic consequences of having a very complex tax system. Adding measures that are hard even for experts to understand and making frequent changes to the system can make it even more complex.

How detrimental is it to the economy when businesses and individuals have a hard time navigating our laws and our tax system?

[Matthew Dubé, NDP, Chambly—Borduas, QC]

Mr. Speaker, I would like to thank the member for his question, which is exactly what we are asking ourselves here today.

If we look at the measures themselves, some of them will work for the people and for businesses, for the very people we represent. However, the problem is the impact they have on the economy. That is what people told the Standing Committee on Finance during pre-budget consultations. They pointed out that waiting 10, 12, 13 or 15 years for the government to incorporate promised measures creates a climate of uncertainty that is not good for the economy.

I must say that it is a bit ironic for a government that claims to manage the economy so well to foster this climate of uncertainty. That is why we are raising this issue today. The government may not be so great at managing the economy after all. This issue is proof of that.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I would like to thank the member for Chambly—Borduas for agreeing to share his time with me. I am very grateful.

I am pleased to rise today to speak to Bill C-48, which is a step any government would need to take in order to update our Income Tax Act. It is a relatively complex law. To begin, I would like to point out that I am not a tax expert or an accountant. I did study the bill, which is about 950 pages long. I did not read the whole thing because, unfortunately, I ran out of time this morning. I do understand the broad strokes of the bill, however.

As a parliamentarian, I must say that it is always disappointing to be faced with bills of such scope. I would be surprised if a single one of my colleagues has read the entire 950 pages, one by one, and knows exactly what is in this bill, unless they happen to be one of the public servants who wrote it. It is always disappointing to see such massive bills, which no average person has the time to read or reflect on. We are asked to vote on these kinds of bills, as was the case for budget implementation Bills C-38 and C-45, which were 400 pages each.

They were mammoth bills, like today's. I must say that these are important and useful measures. They have their purpose, but it is important to mention that more frequent updating could have at least made things easier for MPs. We would not have had to read 950 pages today if tax laws had been updated more frequently over the past 10 years.

The most recent technical bill of this nature dates back to 2001, and it is now 2013. As a result, some things have been dragging on for over a decade and need to be changed for the better. This bill is not flawed, but before going into details, I wanted to point out that a bill of this size is problematic for MPs and prevents them from doing their job properly.

With a 950-page bill, we need to wonder whether the government has done a good job. Why did the government wait so many years to introduce it? Why not introduce it earlier? More frequent updates would have helped. That point was raised several times in committee. I did not have the opportunity to be there, but I read the transcript.

As the member for Sherbrooke, I agree with the principle of having a clearer system and more frequent updates to allow for more effective management, particularly for businesses and individuals who do their taxes each year and must comply with fairly complicated legislation. The Income Tax Act must be one of Canada's largest pieces of legislation at hundreds of pages long.

Of course, the NDP believes that we must fight tax avoidance and tax evasion while preserving the integrity of our tax system. That is why we support the changes proposed in this bill, for they are meant to address issues that allow tax avoidance. This is not a mammoth bill like the budget implementation bills, Bill C-38 and Bill C-45, but still, it is nearly 1,000 pages long. There is a difference though. This time, these are very technical measures that we supported and that we will support again at third reading.

These changes are important. I would like to talk about the major changes, so that the viewing public can understand what they mean.

Part 1 of the bill deals with offshore investment fund property and non-resident trusts in accordance with proposals announced in budget 2010 and August 2010. These measures will ensure the taxation of Canadian residents' worldwide income from all sources.

Part 1 will therefore update the legislation in order to guarantee the integrity of the tax system and prevent tax avoidance. Of course, the NDP supports this change in order to try to keep our tax system as clear as possible. The NDP also wants to make tax avoidance impossible in any way, shape or form.

We realize that the existing legislation has some loopholes that people can use to avoid paying part of their taxes or to evade taxes in other countries. This fight will never end. People will always try to find ways to get around the law. Unfortunately, that is just how society is; some people will always try to abuse the system. As legislators, we must ensure that these people are punished or amend the legislation so that these things never happen again.

Parts 2 and 3 of the bill deal with taxation of corporations with foreign affiliates.

Part 4 deals with something important that I wanted to address as well, and that is bijuralism, an important aspect of our Canadian legal system. In Quebec we have civil law and the rest of Canada has common law. These are two different types of law. Part 4 deals with this situation that can sometimes be unclear and cause confusion.

It is therefore important in the Canadian context that these legal systems be respected in our federal laws, laws that apply to the entire country. There are differences between civil law and common law when it comes to real property, personal property and joint and several liability. The bill addresses these issues and clarifies them for individuals and businesses that have to deal with these differences.

Most of the changes are based on the specific circumstances of people in industry. In their testimony, they made their case to the legislators and the government to have the changes made. As the member for Sherbrooke, I pay taxes every year like everyone else, but I cannot put myself in the shoes of those whose tax circumstances are different or who are part of a business, for example. It is therefore important to have their comments so that we, as legislators, can change things that are flawed. Obviously, nothing is perfect.

In closing, I take issue with the size of the bill and the fact that the government waited so long to introduce such a technical bill. I am in favour of having a clearer, more precise process that is used more frequently so that the necessary changes can be made more quickly with smaller bills that are easier for parliamentarians to understand.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, my friend who just spoke talked about the length of time it took to get to this piece of legislation. In 2009, the Auditor General identified 400 technical changes that should have been completed at that point. She commented that this went back to 2001, when the Liberals were in government. Questions were raised about why the Liberal government failed to pass regular technical changes at that time.

Obviously, we have 1,000 pages before us today addressing only 200 of the 400 technical changes required. Oftentimes these changes slide into the system, even though they are not law yet, which makes things complicated. They are complicated for citizens and tax lawyers who are trying to deal with it.

Is the member aware of any plans on the government's part to start putting in these technical changes with a certain regularity?

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I would like to thank the hon. member for his question.

I hope that in the future there will be a plan and that the government will be more alert and focused on making significant technical changes to the tax system on a regular basis.

As the hon. member stated, 400 changes were proposed by the Auditor General of the time, but only 200 of them were included in the bill. There is still work to do. That said, if all of these changes had been included, the bill would have been 2,000 pages long. This is how the Conservatives do things.

I would prefer that these changes be made more often. They should also be shorter and more understandable to the average person, who expects to be able to understand tax law in order to properly obey it.

Of course the ultimate goal is to make all this clear to Canadians and to businesses, who have to file their tax returns every year and understand why they pay taxes, why they have such and such a credit or why they are in such and such a position.

In my view, these changes should be introduced as often as possible for the sake of clarity, to enable Canadians to be better informed.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, before I ask my question, do you see quorum in the House? I do not.

[The Acting Speaker, Barry Devolin]

I believe that there is quorum in the House.

Questions and comments, the hon. member for Malpeque.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, it was just like watching ants come out of an ant hill as we asked for a quorum. Members are almost like the Prime Minister; they are in hiding over there today.

In any event, we are talking about the bill and various areas of tax relief. I wonder what the hon. member thinks of the fact that the government continues to reduce taxes to the corporate sector to the point that companies are sitting on about $560 billion of cash. They are not using that money to increase productivity, to create jobs or to develop new investments in technology. Is that not an area the government should be looking at to bring in revenues? The fact is that the tax system is out of balance, and the corporate sector is not pulling its weight.