Bill C-60 (Historical)

Economic Action Plan 2013 Act, No. 1

An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures

Part 1 implements certain income tax measures proposed in the March 21, 2013 budget. Most notably, it
(a) allows certain adoption-related expenses incurred before a child’s adoption file is opened to be eligible for the Adoption Expense Tax Credit;
(b) introduces an additional credit for first-time claimants of the Charitable Donations Tax Credit;
(c) makes expenses for the use of safety deposit boxes non-deductible;
(d) adjusts the Dividend Tax Credit and gross-up factor applicable in respect of dividends other than eligible dividends;
(e) allows collection action for 50% of taxes, interest and penalties in dispute in respect of a tax shelter that involves a charitable donation;
(f) extends, for one year, the Mineral Exploration Tax Credit for flow-through share investors;
(g) extends, for two years, the temporary accelerated capital cost allowance for eligible manufacturing and processing machinery and equipment;
(h) clarifies that the income tax reserve for future services is not available in respect of reclamation obligations;
(i) phases out the additional deduction available to credit unions over five years;
(j) amends rules regarding the judicial authorization process for imposing a requirement on a third party to provide information or documents related to an unnamed person or persons; and
(k) repeals the rules relating to international banking centres.
Part 1 also implements other income tax measures and tax-related measures. Most notably, it
(a) amends rules relating to caseload management of the Tax Court of Canada;
(b) streamlines the process for approving tax relief for Canadian Forces members and police officers;
(c) addresses a technical issue in relation to the temporary measure that allows certain family members to open a Registered Disability Savings Plan for an adult individual who might not be able to enter into a contract; and
(d) simplifies the determination of the Canadian-source income of non-resident pilots employed by Canadian airlines.
Part 2 implements certain goods and services tax and harmonized sales tax (GST/HST) measures proposed in the March 21, 2013 budget by
(a) reducing the compliance burden for employers under the GST/HST pension plan rules;
(b) providing the Minister of National Revenue the authority to withhold GST/HST refunds claimed by a business where the business has failed to provide certain GST/HST registration information;
(c) expanding the GST/HST exemption for publicly funded homemaker services to include personal care services provided to individuals who require such assistance at home;
(d) clarifying that reports, examinations and other services that are supplied for a non-health-care-related purpose do not qualify for the GST/HST exemption for basic health care services; and
(e) ending the current GST/HST point-of-sale relief for the Governor General.
Part 2 also amends the Excise Tax Act and Excise Act, 2001 to modify the rules regarding the judicial authorization process for imposing a requirement on a third party to provide information or documents related to an unnamed person or persons.
In addition, Part 2 amends the Excise Act, 2001 to ensure that the excise duty rate applicable to manufactured tobacco other than cigarettes and tobacco sticks is consistent with that applicable to other tobacco products.
Part 3 implements various measures, including by enacting and amending several Acts.
Division 1 of Part 3 amends the Customs Tariff to extend for ten years, until December 31, 2024, provisions relating to Canada’s preferential tariff treatments for developing and least-developed countries. Also, Division 1 reduces the rate of duty under tariff treatments in respect of a number of items relating to baby clothing and certain sports and athletic equipment imported into Canada on or after April 1, 2013.
Division 2 of Part 3 amends the Trust and Loan Companies Act, the Bank Act, the Insurance Companies Act and the Cooperative Credit Associations Act to remove some residency requirements to provide flexibility for financial institutions to efficiently structure the committees of their boards of directors.
Division 3 of Part 3 amends the Federal-Provincial Fiscal Arrangements Act to renew the equalization and territorial formula financing programs until March 31, 2019 and to implement total transfer protection for the 2013-2014 fiscal year. That Act is also amended to clarify the time of calculation of the growth rate of the Canada Health Transfer for each fiscal year beginning after March 31, 2017.
Division 4 of Part 3 authorizes payments to be made out of the Consolidated Revenue Fund to certain entities or for certain purposes.
Division 5 of Part 3 amends the Canadian Securities Regulation Regime Transition Office Act to remove the statutory dissolution date of the Canadian Securities Regulation Regime Transition Office and to provide authority for the Governor in Council, on the Minister of Finance’s recommendation, to set another date for the dissolution of that Office.
Division 6 of Part 3 amends the Investment Canada Act to clarify how proposed investments in Canada by foreign state-owned enterprises and WTO investors will be assessed and to allow for the extension, when necessary, of timelines associated with national security reviews.
Division 7 of Part 3 amends the Canada Pension Plan to ensure that the Canada Revenue Agency can accurately identify, calculate and refund overpayments made to the Canada Pension Plan and the Quebec Pension Plan in a particular year by contributors who live outside Quebec.
Division 8 of Part 3 amends the Pension Act and the War Veterans Allowance Act to ensure that veterans’ disability benefits are no longer deducted when calculating war veterans allowance.
Division 9 of Part 3 amends the Immigration and Refugee Protection Act to authorize the revocation of temporary foreign worker permits, the revocation and suspension of opinions provided by the Department of Human Resources and Skills Development with respect to an application for a work permit and the refusal to process requests for such opinions. It authorizes fees to be paid for rights and privileges conferred by means of a work permit and exempts, from the application of the User Fees Act, those fees as well as fees for the provision of services in relation to the processing of applications for a temporary resident visa, work permit, study permit or extension of an authorization to remain in Canada as a temporary resident or in relation to requests for an opinion with respect to an application for a work permit.
It also provides that decisions made by the Refugee Protection Division under the Immigration and Refugee Protection Act in respect of claims for refugee protection that were referred to that Division during a specified period are not subject to appeal to the Refugee Appeal Division if they take effect after a certain date.
Division 10 of Part 3 amends the Citizenship Act to expand the Governor in Council’s authority to make regulations respecting fees for services provided in the administration of that Act and cases in which those fees may be waived. It also exempts, from the application of the User Fees Act, fees for services provided in the administration of the Citizenship Act.
Division 11 of Part 3 amends the Nuclear Safety and Control Act to authorize the Canadian Nuclear Safety Commission to spend for its purposes the revenue it receives from the fees it charges for licences.
Division 12 of Part 3 enacts the Department of Foreign Affairs, Trade and Development Act, sets out the powers, duties and functions of the Minister of Foreign Affairs, the Minister for International Trade and the Minister for International Development and provides for the amalgamation of the Department of Foreign Affairs and International Trade and the Canadian International Development Agency.
Division 13 of Part 3 authorizes the taking of measures with respect to the reorganization and divestiture of all or any part of Ridley Terminals Inc.
Division 14 of Part 3 amends the National Capital Act and the Department of Canadian Heritage Act to transfer certain powers, duties and functions to the Minister of Canadian Heritage from the National Capital Commission. It also makes consequential amendments to the National Holocaust Monument Act to change the Minister responsible for the construction of the monument to the Minister of Canadian Heritage from the Minister responsible for the National Capital Act.
Division 15 of Part 3 amends the Salaries Act to add ministerial positions for regional development responsibilities for northern Canada, and northern and southern Ontario. It also amends the Salaries Act to replace a reference to the Solicitor General of Canada with a reference to the Minister of Public Safety and Emergency Preparedness. It also makes an amendment to the Parliament of Canada Act to provide that the maximum number of Parliamentary Secretaries who may be appointed is equal to the number of ministers for whom salaries are provided in the Salaries Act.
Division 16 of Part 3 amends the Department of Public Works and Government Services Act to remove the requirement for the Minister of Public Works and Government Services to obtain a request from a government, body or person in Canada or elsewhere in order for the Minister to do certain things for or on their behalf. It also amends that Act to specify that the Governor in Council’s approval relating to those things may be given on a general or a specific basis.
Division 17 of Part 3 amends the Financial Administration Act to give the Governor in Council the authority to direct a Crown corporation to have its negotiating mandate approved by the Treasury Board for the purpose of the Crown corporation entering into a collective agreement with a bargaining agent. It also gives the Treasury Board the authority to require that an employee under the jurisdiction of the Secretary of the Treasury Board observe the collective bargaining between the Crown corporation and the bargaining agent. It requires that a Crown corporation that is directed to have its negotiating mandate approved obtain the Treasury Board’s approval before entering into a collective agreement. It also gives the Governor in Council the authority to direct a Crown corporation to obtain the Treasury Board’s approval before the Crown corporation fixes the terms and conditions of employment of certain of its non-unionized employees. Finally, it makes consequential amendments to other Acts.
Division 18 of Part 3 amends the Keeping Canada’s Economy and Jobs Growing Act to provide for increases to the sums that may be paid out of the Consolidated Revenue Fund for municipal, regional and First Nations infrastructure through the Gas Tax Fund. It also provides that the sums may be paid on the requisition of the Minister of Indian Affairs and Northern Development.

[Ron Bonnett, President, Canadian Federation of Agriculture]

Thank you for the opportunity to attend and make a presentation.

Many of you will likely be aware that the Canadian Federation of Agriculture represents about 200,000 farmers from across the country. We work back and forth with Finance on a number of issues, but specifically today we're talking about some of the key aspects of Bill C-60. In the package that went out earlier, there are some statistics on the actual size of the agricultural sector in Canada, and I think sometimes it is a bit underestimated.

There are a few things that I want to touch on, and one is that we do produce 8% of the GDP. One in eight Canadian jobs depends on agriculture. Increasingly we're becoming an important factor in trade, and when we look at the value chain, the impact on communities is tremendous.

There are a couple of key issues facing agriculture right now. One of the big ones would be constraints with respect to labour, making sure we have access to both skilled and unskilled workers. The vacancy rate for agriculture positions is higher than in other occupations. Sometimes it's because of the skill set that's required; sometimes it's because it's very low-skilled labour that's required.

One of the things that has to be captured is the fact that this is an issue of competitiveness. The Canadian agricultural sector pays higher wages than our counterparts in North America, particularly our neighbour to the south, which has very low labour rates for agricultural wages.

Some of the key comments we have with respect to Bill C-60 include our support for the $165 million investment in Genome Canada and $20 million in Nature Conservancy Canada, targeting research and conservation. I will talk a bit later about the fact that these are good investments. However, in isolation without a long-term strategy, we're not sure how everything fits together.

The idea of supporting a Canada first labour policy, I think is important. However, we should make sure that the temporary foreign worker program is designed to bring people into the permanent workforce, so they actually become Canadians working for Canadian companies. Changes to the program should minimize the labour market opinion delays for sectors, so that there isn't a holdup in getting the workers that are required. Industry labour task forces should be adequately consulted in developing cost recovery fees and implementing other changes.

Going back to the comment on research, I think the investment in Genome research is going to be very important for Canada, and agriculture in particular. We're seeing a lot of exciting opportunity to increase productivity by using Genome research. What we are seeing is a bit of a mix in messages on research. We're seeing investment in project funding for things like Genome research, but at the same time we see lay-off notices at Agriculture Canada for staff researchers. I think a discussion has to take place on what is needed for core research funded by government and what is needed in project funding, and I think there needs to be a long-term strategy around that.

We also have basically the same comment on the $20 million for Nature Conservancy Canada. I think it's a very positive move, and agriculture has an opportunity to be part of that. We've made this presentation to the environment committee as well, about looking at how we pull all of this together to make sure it's not bits and pieces that we're dealing with but an overall strategy for investment in conservation initiatives.

On the labour side, we're seeing some initiatives to try to reduce fraud and misuse of temporary foreign workers. Those types of things are admired. As I said, we're already paying prevailing wages to our farm workers that are higher than some other jurisdictions we're competitive with.

As I mentioned early, I think we need to make sure this whole thing is taken in context. As we bring temporary foreign workers in, how do we build them into long-term residency here, and staffing for these companies?

One of the things that is important is the seasonal worker program that agriculture has used for a number of years. It is basically intact, and I think the concerns around the temporary foreign worker program were not there with the agricultural seasonal worker program, because that was a negotiated contract between the groups.

The final point I'm going to touch on is about looking at the whole agrifood sector as a value chain. Indeed, Mr. Laws will be speaking later. We are integrated: we need our processors to buy our products. I think a number of the issues we need to look at are complementary.

We appreciate the capital cost extension that was granted, which does encourage business to make the investments and get the writedowns if necessary. But I think in closing, what I would say is, whether you're talking about labour, capital investment, research, or conservation strategies, you have to make sure that you're dealing with these things in a long-term way, and there has to be a long-term strategy in place to deal with them.

Thank you.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Thank you, Chair and members of the committee.

My name is Rob Cunningham and I am a senior policy analyst with the Canadian Cancer Society.

Thank you for the opportunity to testify before this committee today.

My testimony will focus on clauses 53 to 61 of Bill C-60, which contain a tobacco tax increase for the category described as “manufactured tobacco”, and roll-your-own tobacco in particular. We support this increase, and we recommend that all members of Parliament endorse these provisions.

Let me emphasize the crucial role that higher tobacco taxes play in reducing tobacco use, especially among youth, who have less disposable income. There are more than 100 studies that confirm the obvious: mainly, that as tobacco prices go up, tobacco consumption goes down.

Bill C-60 takes action on a long-standing loophole that has seen roll-your-own tobacco taxed at a much lower rate than regular cigarettes. It used to be that one gram of roll-your-own tobacco was needed to make one cigarette, but now, because of modified tobacco industry manufacturing practices to exploit the tax structure, only half a gram is needed to make one cigarette. Thus, the industry strategies have in effect reduced by half the tobacco tax rate on roll-your-owns.

Lower taxes lead to lower prices. That keeps many people smoking or results in more cigarettes smoked per day. Obviously, this is detrimental to public health.

The changes in the tax structure because of Bill C-60 take action in this regard. I have some examples with me. As you can see, Export 'A' says “100% more” right on the label. You get twice as many roll-your-own cigarettes as you used to be able to, because of the types of different manufacturing practices. It says on the label that you only need 0.47 grams to roll one cigarette.

This bill responds to that by helping to address a loophole where you had to get the same number of cigarettes for half the tax. We appreciate and support that. You can see that there are other brands that do the same thing and say “100% more”. They say on the label how much you get. That's a loophole that is bad for public health.

As well, federal tobacco tax rates had not changed since 2002, 11 years ago. Thus, a proportion of the tobacco tax change in this bill is merely an inflation adjustment.

The sales volume of roll-your-own tobacco varies across Canada, from only 1% of the market in Ontario to 13% or more of the market in five provinces. Thus, this tobacco tax change will be particularly beneficial in some provinces.

A surprising proportion of youths use roll-your-own tobacco. Data from the 2009 Canada-wide youth smoking survey found that among high school students 62% of boys and 30% of girls had used roll-your-owns in the previous 30 days.

This measure will raise a projected $75 million in revenue for the federal government. It should be noted that this tax increase will apply to other forms of loose tobacco, such as chewing tobacco, snuff, and water-pipe tobacco, in addition to roll-your-own tobacco. These product categories are far more popular among youth and young adults than those aged 25-plus and illustrate a further reason why Bill C-60 will reduce youth tobacco use.

I have some examples with me. This bill will apply to this new phenomenon among youth of hookah and shisha water-pipe smoking, with cherry, coconut, and orange flavours. It will also apply to the smokeless tobacco, such as cherry, mint, lime, and so on.

Tobacco use remains the leading preventable cause of disease and death in Canada, causing 37,000 Canadian deaths each year from cancer, heart disease and stroke, emphysema, and other diseases. The overwhelming majority of new smokers are underage youths, and tobacco taxes are a crucial part of a comprehensive tobacco control strategy.

The tax measure in Bill C-60 is a win-win for public health and public revenue. We urge all members of Parliament to support this measure.

Merci. I look forward to questions.

[Prof. Mike Moffatt, Professor, Richard Ivey School of Business, As an Individual]

I would like to thank the committee for inviting me to speak today.

My name is Mike Moffatt. I'm a professor in the business, economics and public policy group at the Richard Ivey School of Business. I have researched and taught international trade for a number of years at Ivey. As well, I have spent the last eight years as a private sector trade and regulatory consultant to the chemical industry.

I'm here to discuss two tariff changes in Budget 2013, the first of which, the elimination of tariffs on baby clothing and some sporting equipment, is greatly welcomed.

The second, the so-called modernization of Canada's general preferential tariff program, or GPT program, has serious unintended consequences and should be reconsidered. Fortunately, there is time to do so as the GPT changes are not a part of Bill C-60.

There are a lot of things to like about the government's two proposed tariff changes as they address three existing drawbacks to the customs tariff. The first is that the customs tariff is out of date, with the obvious examples of tariffs designed to protect industries in Canada that no longer exist, such as hockey equipment manufacturing. The general preferential tariff is out of date. I'm in full agreement with the government that changes are needed here, and exporting powerhouses such as China and Korea no longer need preferential tariff treatment.

The second difficulty is that for many products, high tariffs are contributing to the price gap between American and Canadian product retail prices, as described in the report of the Standing Senate Committee on National Finance. The government has taken a step in the right direction here through this elimination of tariffs on sporting goods and baby clothes.

The third difficulty is the sheer complexity of the customs tariff. The so-called iPod tax is a prime example, with importers left not knowing the steps they need to take to be eligible for the 9948 exemption.

Another example of the complexity of this system is the fact that hockey helmets were originally erroneously left out of the tariff reductions, and this omission took weeks to detect. I have to admit, I completely missed it myself.

Given this complexity, it is no wonder that past reports of the Auditor General have identified an alarming rate of errors and discrepancies in tariff classifications of importers. Much more needs to be done to simplify the system, but the government's move here to increase the number of zero-rated goods is definitely a step in the right direction.

Now that I have told you what I think is right with the changes, I'm going to focus on their drawbacks. The most obvious drawback is that it's going to raise the tariff on thousands of goods. These tariffs really aren't going to be paid for by Chinese companies; rather, they're paid for by Canadian importers and retailers and, at the end of the day, by Canadian consumers.

The net effect will be to increase this price gap with the United States, which is already one of the big problems with the customs tariff. This will inevitably lead to an increase in cross-border shopping. The border town of Windsor, Ontario, for example—in my neighbourhood—has an unemployment rate of 9.6%, so the last thing it needs is a decline in the retail sector.

There is a far simpler way to modernize the tariff system while also addressing the price gap and complexity issues. Once Canada and the EU sign a free trade agreement, which we're told should be coming in a matter of weeks, there will be only 16 jurisdictions, representing roughly 5% of Canadian imports into Canada, that will fall under the highest most favoured nation, MFN, tariff treatment.

There will only be 16 nations that have worse tariff treatments than China and Korea. If we want to make a level playing field, all we need to do is reduce the tariff treatment on those 16 nations down to the GPT level by basically harmonizing the most favoured nation and the general protective tariff treatments. This would greatly simplify the tax code as we'd be eliminating a tariff treatment entirely, and this would reduce the tax bill on Canadian importers, retailers, and Canadian consumers, leading to a reduction in the retail price gap.

My professional recommendation is that, before implementing tariff changes, the advice contained in the Senate report of a comprehensive review of Canadian tariffs be followed. This review should include a full costing of harmonizing the GPT and MFN tariff treatments.

Thank you for having me, and I look forward to your questions.

[The Chair, Conservative, James Rajotte]

I will call this meeting back to order.

This is a continuation of our panel today discussing Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

I want to welcome our second panel of witnesses here for the discussion of this piece of legislation. Again, we have six presenters to hear from this morning.

First, as an individual, we have Professor Mike Moffatt, from the Richard Ivey School of Business.

We also have, from the Canadian Cancer Society, Mr. Rob Cunningham; from the Canadian Federation of Agriculture, Mr. Ron Bonnett; from the Canadian Meat Council, Mr. James Laws; and from the Canadian Psychological Association, the CEO, Karen Cohen. Welcome.

And from the Multiple Sclerosis Society of Canada, we have the president and CEO, Monsieur Yves Savoie. Bienvenu à ce comité.

You will each have five minutes for an opening statement, and then we'll have questions from members.

We'll begin with Mr. Moffatt.

[Sean Casey, Liberal, Charlottetown, PE]

The very first sentence in our briefing note says, “The amendments introduced by Division 8 of Part 3 of Bill C-60”—that's what we're talking about today—“result from the Federal Court decision dated 1 May 2012 in the Manuge case.”

Do you agree with that?

[Garth Manness]

Thank you, Mr. Chairman, and committee members, for providing the opportunity to appear before you today to offer the perspective of Manitoba credit unions on Bill C-60, specifically the measure to phase out the additional deduction for credit unions.

Credit unions are an important part of the economic fabric of Manitoba. The province's 40 credit unions have 191 branches in 117 distinct communities, serving the needs of local consumers, businesses, and farmers. In 67 towns and villages, the credit union is the only financial institution operating to serve the community.

Many credit union branches are in communities that other financial institutions vacated because they were not deemed profitable enough. Our business model, paired with fair tax policy, like the additional deduction, has made it possible and attractive for credit unions to grow in places where our competitors have retreated. Although credit unions have a profit-for-service mandate, not the service-for-profit mandate of other financial institutions, they do need to be profitable to remain viable. That income is their primary source of funds with which to build capital. It is also an important source of funds for key investments in new technology and new services, which they must make to be competitive with the much larger chartered banks.

Since the financial crisis, regulators have been increasing the reserve capital requirements for all financial institutions. Despite the fact that credit unions performed very well during the crisis, stepping up to meet consumer and small business lending demand when other financial institutions stepped back, they are not immune from the higher capital requirements. As Mr. Phillips mentioned, the bulk of credit union capital comes in the form of retained earnings, which come from net income. In order to meet higher capital requirements credit unions need to increase net income by increasing margins, which means being less competitive on rates; by increasing service fees, which means increased costs for our members; or by reducing expenses, which could eventually mean a reduction in service and, potentially, job losses

The removal in Bill C-60 of the additional deduction for credit unions will simply compound the impact of regulatory demands by requiring credit unions to pay a higher portion of their net income in federal tax, and further reduce their ability to build capital, invest in new technology, and stay competitive. The decision to phase out the additional deduction comes at an extremely challenging juncture for the financial services industry. Speaking for credit unions, our members face increasing competition from large, powerful institutions, including federal crown lending agencies, a monetary environment with unprecedented low interest rates, which are driving low margins and reducing interest income; and increasing levels of compliance, which disproportionately impact smaller financial institutions like credit unions.

Now credit unions alone face the possibility of having to pay more of their net income in federal tax. Just as the banks did before us, it is no exaggeration to say that some people may begin to question the future viability of credit unions in many communities in rural Canada. Not only could people be left without access to a nearby financial institution, valuable and stable jobs at the credit union could be lost.

According to our analysis, based on 2012 financial results, 21 credit unions in Manitoba benefited from the additional deduction. Those credit unions have branches in 50 Manitoba communities, where the credit union is the only financial institution. The impact of removing the additional deduction, once fully implemented, would be $4.5 million per year. This may not seem like a large amount, but to the credit unions working with narrow margins and increased regulatory requirements and service needs of their members, it certainly is.

Removal of the additional deduction for credit unions, as proposed in Bill C-60, is characterized as closing a tax loophole. A loophole, by definition, is an ambiguity in the wording of contract or law that provides a means of evading compliance. The additional deduction for credit unions was never a tax loophole by definition or design. It was an intended feature of tax legislation, created when credit unions first became taxable in 1972, designed to help credit unions retain capital to meet regulatory requirements and to grow, thereby to provide effective competition in the financial services industry, a goal that this government and credit unions share.

Although the financial landscape is different from 1972, the need for this deduction to help qualifying credit unions accelerate the growth of the retained earnings continues to exist. Since the deduction was introduced in 1972, it has functioned exactly as intended.

I would argue that this tax deduction has proven to be good public policy. If it were to remain in place, it would continue to be good public policy as it will help credit unions provide effective financial services that can assist with the federal government's stated desire to increase competition in this sector. It would also represent good public policy by helping to maintain strong financial services in as many communities as possible and helping to contribute to the sustainability of the many communities in rural Canada where credit unions are the only financial institutions.

For these reasons, Mr. Chairman, I respectfully ask the committee and the federal government to reconsider this proposed change.

[Karen Proud, Vice-President, Federal Government Relations, Retail Council of Canada]

Thank you, Mr. Chair. I'd like to thank you and the committee for inviting the Retail Council of Canada here today on Bill C-60.

Today I have the privilege of speaking for an industry that touches the daily lives of Canadians across this country and one that is a critical component in Canada's economic well-being. We are the largest employer in Canada, providing employment for more than 2 million Canadians and contributing more than $75 billion to Canada's economic well-being. The RCC represents more than 45,000 storefronts of all retail formats across Canada. This year, we celebrate our 50th anniversary of being the voice of retail for Canada.

Today I plan to focus my remarks on part 3 and division 1 of the bill, as well as more generally on product tariffs and the government's plan to review the general preferential tariff.

I'd like to start by thanking the minister and his officials for eliminating the tariffs on baby clothes and sporting equipment. We look at this as a pilot project and believe that this is just a first step in a much broader exercise to address all outdated and unnecessary tariffs. We are committed to working with the government to demonstrate that when tariffs are eliminated, Canadians will benefit from lower prices.

With regard to the bill itself, the RCC does have some recommendations for additions to the list of products that should be added to this pilot project. We feel that some items were missed when the review was taking place on baby clothing and sporting equipment, and we've prepared a comprehensive list of these items, which I will provide to the clerk for your consideration. The items on the list include specific athletic footwear, such as soccer shoes, as well as protective headgear for a variety of sports.

As mentioned, we believe this to be just a first step in addressing the tariff issue. The minister has indicated a willingness to look at further tariff eliminations, and the Standing Senate Committee on National Finance, in their recent report on the Canada-U.S. price gap, also recommended that the minister look at the tariffs and do a complete review.

In fact, we believe that this committee should be tasked with undertaking that review. We feel that it would actually be a fairly simply exercise. The committee could look at the 1,400 pages of the Customs Tariff—2013, line by line, to see if there is little or no domestic manufacture of those products. If so, that tariff should be eliminated. If this were to happen, the Retail Council's concern with the proposed review of the general preferential tariff and the effect on Canadian consumers would be greatly, if not completely, eliminated.

This brings me to my comments related to the proposed review. While we understand the government's policy intent whereby countries like China should not be given preferential tariff treatment to boost their export capacity, we do have concerns with its implementation and scope, which we've relayed to the minister's office and to the department.

To address these concerns, we've asked the government for four things. We've asked for more time. The process for sourcing products internationally is highly complex and takes time. We greatly appreciate that the government listened to us during their first round of consultations on this and has already extended their proposed timeframe from mid-2014 to January of 2015. But if retailers have any chance of finding other sources of products, they need at least two years to implement these changes, so we've asked for more time for that review.

We've asked for specific product exemptions. We feel that for some products where there are no alternative sources of products, and where these products represent a staple and a requirement for Canadians—things like canned tuna—they should be exempt from the changes to the general preferential tariff.

[Martin Lavoie, Director of Policy, Manufacturing Competitiveness and Innovation, Canadian Manufacturers and Exporters]

Thank you, Mr. Chair.

Thank you, Laura.

Thank you for inviting me today to discuss Bill C-60, the Economic Action Plan 2013 Act.

On a general note, our organization and our members were very pleased with the recognition in the budget of manufacturing as an important driver of our economy, when it comes to innovation, research and development, exports, and value-added activity.

The budget partially responds to some of our priorities that were identified in our pre-budget submission. I will focus here on three: the accelerated capital cost allowance, which is a tax incentive for the acquisition of machinery and equipment; labour training and facilitating the hiring of foreign workers; and new direct support for manufacturing, research and development, and innovation.

Let me start with the ACCA. This is by far the most popular measure among our members. The ACCA, which has been in place since 2007, has boosted Canadian manufacturers' investments in machinery and equipment by 45% between 2009 and 2012.

In fact, Canadian manufacturing investments and all capital assets have surpassed the United States, in both 2010 and 2011, for the first time since 2006. There is still a lot to do, but we're happy to see that these tax incentives are working well and are meeting their objectives.

Let me talk a bit about labour training. It shouldn't be a surprise to anybody that we're strong supporters of the Canada job grant that was introduced in the budget. In our last three budget submissions, we have strongly recommended that the government introduce a tax credit to support the training of new hires and to increase the skill levels of existing employees.

The second part of the challenge, of course, that our members face is the hiring of foreign workers to fill labour shortages that are not being addressed by the domestic labour supply. While we're working with the governments to make appropriate improvements to the program, we're concerned with the manner that user fees will be managed for the labour market opinions under Bill C-60. Division 9 of part 3 of the bill states that the fees to be charged for labour market opinions will be exempt from the User Fees Act.

While I haven't received any confirmation from government officials so far with regard to the meaning of this, I presume that this means that the government would not consult stakeholders on the level of the fees charged, they would not be bound to ensure that service standards are tied to the fees, there wouldn't be, necessarily, any impact assessment, no tabling or publication of proposed new fee structures, etc.

CME, as a whole, has generally agreed that it is reasonable to pay user fees, but not under these conditions. The User Fees Act was established specifically—because of the abuse of user fees by government departments and agencies—as a way to increase revenues to cover off cost, rather than finding more efficient ways to deliver services, or working on the street to establish effective user fees. This clause sets a very bad precedent, in our view, and we strongly recommend that the fees charged for labour market opinions not be exempt from the User Fees Act.

Finally, I would like to comment on the new direct support mechanisms for business innovation that were announced in the budget. As you remember, last year the government told the industry that this $660 million cut under the SR and ED program would be reinvested entirely in new direct funding for business R and D. The government has done it. But there are still a lot of questions with respect to equity of access to this funding across industry sectors, and across the nation.

While we support the new funding provided to the automotive, aerospace, and forestry sectors, in particular, as well as the new advanced manufacturing fund for southern Ontario manufacturers, we must realize that going from the broad taxed base approach, like SR and ED, to a direct funding mechanism is going to penalize manufacturers that do not match these geographic and industry criteria.

We're hopeful that the government will eventually ensure that these direct funds for business innovation be accessible across the country, and across various manufacturing sectors. We're very concerned that the significant reductions that we'll see in the SR and ED tax credit until 2017 will have a detrimental impact on business innovation.

I'd like to conclude by recognizing that this budget is a great step toward a better recognition of the importance of manufacturing for our economic growth and for our capacity to innovate. However, a lot of work remains to be done to ensure that government policies do not discriminate against certain sectors, or certain regions of the country.

We're confident, however, that the government shares our concerns, and we'll work together toward achieving these objectives.

Thank you.

[The Chair, Conservative, Greg Kerr]

Good morning, everybody.

We had set aside two meetings, as you know, to discuss the subject matter of clauses 156 to 160, with regard to the Pension Act and the War Veterans Allowance Act, in Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

We have presentations this morning. I will say that the Legion was invited to be one of the presenters. They've sent us a letter saying that they support what's in the proposed changes; they're supportive of the bill as is and decided they didn't need to appear to make that point. Other than that, we have our witnesses, who we'll get to in a moment.

We start this morning with a face that is familiar. We'd ask Mr. Bernard Butler, director general in the policy division of the department, if he'd open with some comments, and then we'll do our usual round of questions. Away we go.

Good morning.

[The Chair, Conservative, James Rajotte]

I call to order the 122nd meeting of the Standing Committee on Finance. I want to welcome all of our guests here this morning.

Our orders of the day, pursuant to the order of reference of Tuesday, May 7, 2013, are to study Bill C-60, An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

Colleagues, we have six people who will be presenting, five here in Ottawa, and one, I understand, by teleconference from Winnipeg.

Mr. Manness, I just want to check with you first. Can you hear me okay?

Business of the House

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons]

Mr. Speaker, this afternoon we will continue the debate on today’s opposition motion from the NDP. Pursuant to the rules of the House, time is allocated and there will be a vote after the two-day debate.

Tomorrow we will resume the third reading debate on Bill S-9, the Nuclear Terrorism Act. As I mentioned on Monday, I am optimistic that we will pass that important bill this week.

Should we have extra time on Friday, we will take up Bill C-48, the Technical Tax Amendments Act, 2012, at report stage and third reading.

When we come back from constituency week, I am keen to see the House make a number of accomplishments for Canadians. Allow me to make it clear to the House what the government's priorities are.

Our government will continue to focus on jobs, growth and long-term prosperity. In doing that, we will be working on reforming the temporary foreign worker program to put the interests of Canadians first; implementing tax credits for Canadians who donate to charity and parents who adopt; extending tax credits for Canadians who take care of loved ones in their homes; supporting veterans and their families by improving the balance for determining veterans' benefits; moving closer to equality for Canadians living on reserves through better standards for drinking water, which my friend apparently objects to; giving women on reserves the rights and protections that other Canadian women have had for decades, something to which he also objects; and keeping our streets and communities safer by making real improvements to the witness protection program. We will of course do more.

Before we rise for the summer, we will tackle the bills currently listed on the order paper, as well as any new bills which might get introduced. After Victoria Day, we will give priority consideration to bills which have already been considered by House committees.

For instance, we will look at Bill C-48, which I just mentioned, Bill C-51, the Safer Witnesses Act, Bill C-52, the Fair Rail Freight Service Act, and Bill S-2, the Family Homes on Reserves and Matrimonial Interests or Rights Act, which I understand could be reported back soon.

I look forward also to getting back from committee and passing Bill C-60, , the economic action plan 2013 act, no. 1; Bill S-8, the safe drinking water for first nations act; and Bill C-21, the political loans accountability act.

We have, of course, recently passed Bill C-15, the strengthening military justice in the defence of Canada act and Bill S-7, the combating terrorism act. Hopefully, tomorrow we will pass Bill S-9, the nuclear terrorism act.

Finally, we will also work toward second reading of several bills including: Bill C-12, the safeguarding Canadians' personal information act; Bill C-49, the Canadian museum of history act; Bill C-54, the not criminally responsible reform act; Bill C-56, the combating counterfeit products act; Bill C-57, the safeguarding Canada's seas and skies act; Bill C-61, the offshore health and safety act; Bill S-6, the first nations elections act; Bill S-10, the prohibiting cluster munitions act; Bill S-12, the incorporation by reference in regulations act; Bill S-13, the port state measures agreement implementation act; Bill S-14, the fighting foreign corruption act; Bill S-15, the expansion and conservation of Canada’s national parks act, which establishes Sable Island National Park; and Bill S-17, the tax conventions implementation act, 2013.

I believe and I think most Canadians who send us here expect us to do work and they want to see us vote on these things and get things done. These are constructive measures to help all Canadians and they certainly expect us to do our job and actually get to votes on these matters.

I hope we will be able to make up enough time to take up all of these important bills when we come back, so Canadians can benefit from many parliamentary accomplishments by the members of Parliament they have sent here this spring.

Before taking my seat, let me formally designate, pursuant to Standing Order 81(4)(a), Tuesday, May 21, as the day appointed for the consideration in a committee of the whole of all votes under Natural Resources in the main estimates for the final year ending March 31, 2014. This would be the second of two such evenings following on tonight's proceedings.

[The Chair, Conservative, Ed Komarnicki]

Thank you for that exchange.

We're going a little past the time, and I know that Monsieur Lapointe wanted to make some comments.

I would say, just as a reminder, and I know that some latitude needs to be given, that the letter required us to consider the subject matter of clauses 161 to 166 of Bill C-60, and to provide recommendations with respect to those clauses and any associated amendments, which primarily deal with the revocation and suspension of opinions provided by the Department of Human Resources and Skills Development, and the authority to refuse to process generally in that area.

We're looking at the legislation and what we might want to do with it, whether to change it or not. It is not so much a study of the temporary foreign worker program or the policies that are currently in existence. That's what we're doing here, which is far narrower in scope than a general study might be. I just want members to keep that in mind.

Monsieur Lapointe.

Opposition Motion — 2013 Spring Report of the Auditor General of Canada

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Mr. Speaker, I would like to congratulate my NDP colleague from Pontiac on his excellent speech and excellent initiative.

He has moved a motion that asks a fairly simple question: where has taxpayers' money gone? How can the Conservative government lose $3.1 billion and not know what happened to it?

With Bill C-60, we see a government that wants to meddle in the negotiations of crown corporations' collective agreements. This paternalistic and condescending government is telling them that they are incapable of managing public money and that the President of the Treasury Board has to be at the negotiating table because he wants to ensure that public money is well spent.

Why does the government feel that it is in a position to give crown corporations advice on how to run their affairs when it cannot keep track of $3.1 billion?

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I understand Bill C-60 allocates $5 million to Indspire. Who does Indspire help and how many people per year benefit?

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Great. Thank you. Budget 2013 promises $100 million to Nunavut housing. Why is Bill C-60 advocating $30 million immediately?