Bill C-31 (Historical)

Economic Action Plan 2014 Act, No. 1

An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures

Part 1 implements income tax measures and related measures proposed in the February 11, 2014 budget. Most notably, it
(a) increases the maximum amount of eligible expenses for the adoption expense tax credit;
(b) expands the list of expenses eligible for the medical expense tax credit to include the cost of the design of individualized therapy plans and costs associated with service animals for people with severe diabetes;
(c) introduces the search and rescue volunteers tax credit;
(d) extends, for one year, the mineral exploration tax credit for flow-through share investors;
(e) expands the circumstances in which members of underfunded pension plans can benefit from unreduced pension-to-RRSP transfer limits;
(f) eliminates the need for individuals to apply for the GST/HST credit and allows the Minister of National Revenue to automatically determine if an individual is eligible to receive the credit;
(g) extends to 10 years the carry-forward period with respect to certain donations of ecologically sensitive land;
(h) removes, for certified cultural property acquired as part of a gifting arrangement that is a tax shelter, the exemption from the rule that deems the value of a gift to be no greater than its cost to the donor;
(i) allows the Minister of National Revenue to refuse to register, or revoke the registration of, a charity or Canadian amateur athletic association that accepts a donation from a state supporter of terrorism;
(j) reduces, for certain small and medium-sized employers, the frequency of remittances for source deductions;
(k) improves the Canada Revenue Agency’s ability to provide feedback to the Financial Transactions and Reports Analysis Centre of Canada; and
(l) requires a listing of outstanding tax measures to be tabled in Parliament.
Part 1 also implements other selected income tax measures. Most notably, it
(a) introduces transitional rules relating to the labour-sponsored venture capital corporations tax credit;
(b) requires certain financial intermediaries to report to the Canada Revenue Agency international electronic funds transfers of $10,000 or more;
(c) makes amendments relating to the introduction of the Offshore Tax Informant Program of the Canada Revenue Agency;
(d) permits the disclosure of taxpayer information to an appropriate police organization in certain circumstances if the information relates to a serious offence; and
(e) provides that the Business Development Bank of Canada and BDC Capital Inc. are not financial institutions for the purposes of the Income Tax Act’s mark-to-market rules.
Part 2 implements certain goods and services tax/harmonized sales tax (GST/HST) measures proposed in the February 11, 2014 budget by
(a) expanding the GST/HST exemption for training that is specially designed to assist individuals with a disorder or disability to include the service of designing such training;
(b) expanding the GST/HST exemption for services rendered to individuals by certain health care practitioners to include professional services rendered by acupuncturists and naturopathic doctors;
(c) adding eyewear specially designed to treat or correct a defect of vision by electronic means to the list of GST/HST zero-rated medical and assistive devices;
(d) extending to newly created members of a group the election that allows members of a closely-related group to not account for GST/HST on certain supplies between them, introducing joint and several (or solidary) liability for the parties to that election for any GST/HST liability on those supplies and adding a requirement to file that election with the Canada Revenue Agency;
(e) giving the Minister of National Revenue the discretionary authority to register a person for GST/HST purposes if the person fails to comply with the requirement to apply for registration, even after having been notified by the Canada Revenue Agency of that requirement; and
(f) improving the Canada Revenue Agency’s ability to provide feedback to the Financial Transactions and Reports Analysis Centre of Canada.
Part 2 also implements other GST/HST measures by
(a) providing a GST/HST exemption for supplies of hospital parking for patients and visitors, clarifying that the GST/HST exemption for supplies of a property, when all or substantially all of the supplies of the property by a charity are made for free, does not apply to paid parking and clarifying that paid parking provided by charities that are set up or used by municipalities, universities, public colleges, schools and hospitals to operate their parking facilities does not qualify for the special GST/HST exemption for parking supplied by charities;
(b) clarifying that reports of international electronic funds transfers made to the Canada Revenue Agency may be used for the purposes of the administration of the GST/HST;
(c) making amendments relating to the introduction of the Offshore Tax Informant Program of the Canada Revenue Agency;
(d) permitting the disclosure of confidential GST/HST information to an appropriate police organization in certain circumstances if the information relates to a serious offence; and
(e) clarifying that a person cannot claim input tax credits in respect of an amount of GST/HST that has already been recovered by the person from a supplier.
Part 3 implements excise measures proposed in the February 11, 2014 budget by
(a) adjusting the domestic rate of excise duty on tobacco products to account for inflation and eliminating the preferential excise duty treatment of tobacco products available through duty free markets;
(b) ensuring that excise tax returns are filed accurately through the addition of a new administrative monetary penalty and an amended criminal offence for the making of false statements or omissions, consistent with similar provisions in the GST/HST portion of the Excise Tax Act; and
(c) improving the Canada Revenue Agency’s ability to provide feedback to the Financial Transactions and Reports Analysis Centre of Canada.
Part 3 also implements other excise measures by
(a) permitting the disclosure of confidential information to an appropriate police organization in certain circumstances if the information relates to a serious offence; and
(b) making amendments relating to the introduction of the Offshore Tax Informant Program of the Canada Revenue Agency.
In addition, Part 3 amends the Air Travellers Security Charge Act, the Excise Act, 2001 and the Excise Tax Act to clarify that reports of international electronic funds transfers made to the Canada Revenue Agency may be used for the purposes of the administration of those Acts.
Part 4 amends the Customs Tariff. In particular, it
(a) reduces the Most-Favoured-Nation rates of duty and, if applicable, rates of duty under the other tariff treatments on tariff items related to mobile offshore drilling units used in oil and gas exploration and development that are imported on or after May 5, 2014;
(b) removes the exemption provided by tariff item 9809.00.00 and makes consequential amendments to tariff item 9833.00.00 to apply the same tariff rules to the Governor General that are applied to other public office holders; and
(c) clarifies the tariff classification of certain imported food products, effective November 29, 2013.
Part 5 enacts the Canada–United States Enhanced Tax Information Exchange Agreement Implementation Act and amends the Income Tax Act to introduce consequential information reporting requirements.
Part 6 enacts and amends several Acts in order to implement various measures.
Division 1 of Part 6 provides for payments to compensate for deductions in certain benefits and allowances that are payable under the Canadian Forces Members and Veterans Re-establishment and Compensation Act, the War Veterans Allowance Act and the Civilian War-related Benefits Act.
Division 2 of Part 6 amends the Bank of Canada Act and the Canada Deposit Insurance Corporation Act to authorize the Bank of Canada to provide banking and custodial services to the Canada Deposit Insurance Corporation.
Division 3 of Part 6 amends the Hazardous Products Act to better regulate the sale and importation of hazardous products intended for use, handling or storage in a work place in Canada in accordance with the Regulatory Cooperation Council Joint Action Plan initiative for work place chemicals. In particular, the amendments implement the Globally Harmonized System of Classification and Labelling of Chemicals with respect to, among other things, labelling and safety data sheet requirements. It also provides for enhanced powers related to administration and enforcement. Finally, it makes amendments to the Canada Labour Code and the Hazardous Materials Information Review Act.
Division 4 of Part 6 amends the Importation of Intoxicating Liquors Act to authorize individuals to transport beer and spirits from one province to another for their personal consumption.
Division 5 of Part 6 amends the Judges Act to increase the number of judges of the Superior Court of Quebec and the Court of Queen’s Bench of Alberta.
Division 6 of Part 6 amends the Members of Parliament Retiring Allowances Act to prohibit parliamentarians from contributing to their pension and accruing pensionable service as a result of a suspension.
Division 7 of Part 6 amends the National Defence Act to recognize the historic names of the Royal Canadian Navy, the Canadian Army and the Royal Canadian Air Force while preserving the integration and the unification achieved under the Canadian Forces Reorganization Act and to provide that the designations of rank and the circumstances of their use are prescribed in regulations made by the Governor in Council.
Division 8 of Part 6 amends the Customs Act to extend to 90 days the time for making a request for a review of a seizure, ascertained forfeiture or penalty assessment and to provide that requests for a review and third-party claims can be made directly to the Minister of Public Safety and Emergency Preparedness.
Division 9 of Part 6 amends the Atlantic Canada Opportunities Agency Act to provide for the dissolution of the Atlantic Canada Opportunities Board and to repeal the requirement for the President of the Atlantic Canada Opportunities Agency to submit a comprehensive report every five years on the Agency’s activities and on the impact those activities have had on regional disparity.
Division 10 of Part 6 dissolves the Enterprise Cape Breton Corporation and authorizes, among other things, the transfer of its assets and obligations, as well as those of its subsidiaries, to either the Atlantic Canada Opportunities Agency or Her Majesty in right of Canada as represented by the Minister of Public Works and Government Services. It also provides that the employees of the Corporation and its subsidiaries are deemed to have been appointed under the Public Service Employment Act and includes provisions related to their terms and conditions of employment. Furthermore, it amends the Atlantic Canada Opportunities Agency Act to, among other things, confer on the Atlantic Canada Opportunities Agency the authority that is necessary for the administration, management, control and disposal of the assets and obligations transferred to the Agency. It also makes consequential amendments to other Acts and repeals the Enterprise Cape Breton Corporation Act.
Division 11 of Part 6 provides for the transfer of responsibility for the administration of the programs known as the “Online Works of Reference” and the “Virtual Museum of Canada” from the Minister of Canadian Heritage to the Canadian Museum of History.
Division 12 of Part 6 amends the Nordion and Theratronics Divestiture Authorization Act to remove certain restrictions on the acquisition of voting shares of Nordion.
Division 13 of Part 6 amends the Bank Act to add regulation-making powers respecting a bank’s activities in relation to derivatives and benchmarks.
Division 14 of Part 6 amends the Insurance Companies Act to broaden the Governor in Council’s authority to make regulations respecting the conversion of a mutual company into a company with common shares.
Division 15 of Part 6 amends the Motor Vehicle Safety Act to support the objectives of the Regulatory Cooperation Council to enhance the alignment of Canadian and U.S. regulations while protecting Canadians. It introduces measures to accelerate and streamline the regulatory process, reduce the administrative burden for manufacturers and importers and improve safety for Canadians through revised oversight procedures and enhanced availability of vehicle safety information.
The amendments to the Railway Safety Act and the Transportation of Dangerous Goods Act, 1992 modernize the legislation by aligning it with the Cabinet Directive on Regulatory Management.
This Division also amends the Safe Food for Canadians Act to authorize the Governor in Council to make regulations respecting activities related to specified fresh fruits and vegetables, including requiring a person who engages in certain activities to be a member of a specified entity or organization. It also repeals the Board of Arbitration.
Division 16 of Part 6 amends the Telecommunications Act to set a maximum amount that a Canadian carrier can charge to another Canadian carrier for certain roaming services.
Division 17 of Part 6 amends the Canada Labour Code to allow employees to interrupt their compassionate care leave or leave related to their child’s critical illness, death or disappearance in order to take leave because of sickness or a work-related illness or injury. It also amends the Employment Insurance Act to facilitate access to sickness benefits for claimants who are in receipt of compassionate care benefits or benefits for parents of critically ill children.
Division 18 of Part 6 amends the Canadian Food Inspection Agency Act to provide that fees fixed under that Act for the use of a facility provided by the Canadian Food Inspection Agency under the Safe Food for Canadians Act as well as fees fixed for services, products and rights and privileges provided by the Agency under that Act are exempt from the application of the User Fees Act.
Division 19 of Part 6 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things, enhance the client identification, record keeping and registration requirements for financial institutions and intermediaries, refer to online casinos, and extend the application of the Act to persons and entities that deal in virtual currencies and foreign money services businesses. Furthermore, it makes modifications in regards to the information that the Financial Transactions and Reports Analysis Centre of Canada may receive, collect or disclose, and expands the circumstances in which the Centre or the Canada Border Services Agency can disclose information received or collected under the Act. It also updates the review and appeal provisions related to cross-border currency reporting and brings Part 1.1 of the Act into force.
Division 20 of Part 6 amends the Immigration and Refugee Protection Act and the Economic Action Plan 2013 Act, No. 2 to, among other things,
(a) require certain applications to be made electronically;
(b) provide for the making of regulations regarding the establishment of a system of administrative monetary penalties for the contravention of conditions applicable to employers hiring foreign workers;
(c) provide for the termination of certain applications for permanent residence in respect of which a decision as to whether the selection criteria are met is not made before February 11, 2014; and
(d) clarify and strengthen requirements related to the expression of interest regime.
Division 21 of Part 6 amends the Public Service Labour Relations Act to clarify that an adjudicator may grant systemic remedies when it has been determined that the employer has engaged in a discriminatory practice.
It also clarifies the transitional provisions in respect of essential services that were enacted by the Economic Action Plan 2013 Act, No. 2.
Division 22 of Part 6 amends the Softwood Lumber Products Export Charge Act, 2006 to clarify how payments to provinces under section 99 of that Act are to be determined.
Division 23 of Part 6 amends the Budget Implementation Act, 2009 so that the aggregate amount of payments to provinces and territories for matters relating to the establishment of a Canadian securities regulation regime may be fixed through an appropriation Act.
Division 24 of Part 6 amends the Protection of Residential Mortgage or Hypothecary Insurance Act and the National Housing Act to provide that certain criteria established in a regulation may apply to an existing insured mortgage or hypothecary loan.
Division 25 of Part 6 amends the Trade-marks Act to, among other things, make that Act consistent with the Singapore Treaty on the Law of Trademarks and add the authority to make regulations for carrying into effect the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks. The amendments include the simplification of the requirements for obtaining a filing date in relation to an application for the registration of a trade-mark, the elimination of the requirement to declare use of a trade-mark before registration, the reduction of the term of registration of a trade-mark from 15 to 10 years, and the adoption of the classification established by the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks.
Division 26 of Part 6 amends the Trade-marks Act to repeal the power to appoint the Registrar of Trade-marks and to provide that the Registrar is the person appointed as Commissioner of Patents under subsection 4(1) of the Patent Act.
Division 27 of Part 6 amends the Old Age Security Act to prevent the payment of Old Age Security income-tested benefits for the entire period of a sponsorship undertaking by removing the current 10-year cap.
Division 28 of Part 6 enacts the New Bridge for the St. Lawrence Act, respecting the construction and operation of a new bridge in Montreal to replace the Champlain Bridge and the Nuns’ Island Bridge.
Division 29 of Part 6 enacts the Administrative Tribunals Support Service of Canada Act, which establishes the Administrative Tribunals Support Service of Canada (ATSSC) as a portion of the federal public administration. The ATSSC becomes the sole provider of resources and staff for 11 administrative tribunals and provides facilities and support services to those tribunals, including registry, administrative, research and analysis services. The Division also makes consequential amendments to the Acts establishing those tribunals and to other Acts related to those tribunals.
Division 30 of Part 6 enacts the Apprentice Loans Act, which provides for financial assistance for apprentices to help with the cost of their training. Under that Act, apprentices registered in eligible trades will be eligible for loans that will be interest-free until their training ends.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

That's great.

Mr. Anderson, you describe the cap on roaming rates contained in Bill C-31 as a welcome step. You also explain that it will have positive downstream effects. Could you elaborate on that please?

[Steve Anderson, Executive Director, OpenMedia.ca]

Thanks for the opportunity to present to the committee on Bill C-31.

I'm Steve Anderson, the executive director of OpenMedia.ca. We were founded in 2008. We're a civic engagement organization working to safeguard the open Internet. For those who aren't familiar, OpenMedia.ca is perhaps best known for our Stop The Meter campaign that engaged over half a million Canadians on metered Internet billing, or usage-based billing. It is the largest online campaign in Canadian history. In addition to our civic engagement work, we also regularly participate in policy processes and produce policy reports.

My comments today will be focused on clauses 239 to 241, which pertain to the Telecommunications Act.

I'll start with a little bit of context. Canadians are upset that we pay some of the highest prices in the industrialized world for cellphone service. Canada ranks among the 10 most expensive countries within the OECD in virtually every category, and among the three most expensive countries for several standard data-only plans. We rank near last on pricing, yet Canadian operators rank fourth in the OECD in mobile revenues. Mobile usage is growing everywhere in the world, yet carrier revenue per user is going up only in North America, and particularly in Canada.

Last year OpenMedia.ca released findings in our report “Time for an Upgrade”, which showed Canadians face systemic mistreatment at the hands of the big three cellphone providers. Lack of choice in the marketplace is the cause of our woes. The Competition Bureau examined the wireless market for a CRTC submission earlier this year and found that incumbent wireless providers have significant market power, which they define as “the ability of a firm or firms to profitably maintain prices above competitive levels”.

The mistreatment and high prices persist because we have three large incumbent conglomerates, Bell, Rogers, and Telus, that control over 90% of the market. The big three have achieved this oligarchic level of market power because they control upwards of 85% of the spectrum available for use. Much of that was handed to them for free. Spectrum, of course, is the digital highway in the sky that cellphone providers use to deliver wireless service.

I appreciate that the government and opposition parties recognize these facts and have committed themselves to fixing our broken cellphone market. While there has been some positive movement by the CRTC and government to follow through on these commitments, so far prices have increased. In fact, in March each of the providers increased its rates.

In 2008 in the AWS spectrum auction, the government ensured an influx of new cellphone choices for Canadians by dedicating spectrum to new entrants. However, these new entrants did not get the regulatory support they needed to gain the market penetration required to be sustainable. With Telus recently taking over independent provider Public Mobile, Canadians now have actually less choice than they had one year ago.

I'm going to move to the cap on roaming charges that's within the legislation.

The provisions to cap roaming rates in Bill C-31 are a welcome interim step. The measures in the bill will make it so that the big three providers cannot charge new entrant competitors more for roaming than they charge their own customers. This is a welcome step because, as Industry Minister James Moore said, the big three incumbents now sometimes charge new entrants “more than 10 times what they charge their own customers”. There is no way an independent provider can compete with those terms.

To be clear, we're not talking about directly regulating the roaming rates Canadians pay, but rather the cost that independent cellphone providers pay to utilize the big three's spectrum infrastructure. While the measures in this bill do not directly regulate retail service, they should begin to level the playing field between incumbents and new entrants, and thereby have a modest downstream effect of lowering prices for Canadians. These measures should also increase the chance that independent cellphone providers will survive and remain available for wireless customers.

I initially emphasized this as a positive interim step because, one, the bill takes on only one of many unfair impediments to real cellphone choice, and two, it also simply limits the inflation of costs for new entrants to service Canadians rather than going the full distance to ensure players have the same basic costs of delivering service.

Basing infrastructure costs on retail revenue essentially means the new entrants are paying for the cost of access, plus other factors that play into retail price, such as the cost of advertising, branding and promotion; device subsidy; customer support; retail, legal, and regulatory work; network operations; and much else. While the cap is a useful step in the right direction, new entrants should not, in the longer term, be subsidizing the big three.

To have a true level playing field for cellphone service and innovation, infrastructure must be available at a cost-based rate. Thankfully, the CRTC is also in the process of reviewing roaming agreements. I expect the CRTC will establish cost-based rates for roaming, which they have successfully done to some degree for wireline telecom services. If they do not establish cost-based rates, I'm afraid that it will fall to the government to take additional action on this matter.

I want to highlight, to end here—

Yes?

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen. Bonjour à tous.

Welcome to the 22nd meeting of the Standing Committee on Industry, Science and Technology. Pursuant to Standing Order 108(2), we continue our study on the subject matter of clauses 175 to 192, Atlantic Canada Opportunities Agency and Enterprise Cape Breton Corporation; clauses 239 to 241, Telecommunications Act; clauses 317 to 368, amendments relating to international treaties on trademarks; and clauses 369-370, reduction of Governor in Council appointments, of Bill C-31, an act to implement certain provisions of the budget tabled in Parliament on February 11, 2014.

We have with us today, from OpenMedia.ca, Steve Anderson, executive director. We have from the Public Interest Advocacy Centre, John Lawford, executive director and general counsel, and Geoffrey White, counsel. Mr. Lawford's also here for the Consumers' Association of Canada.

Mr. Anderson, could you please go ahead with your opening remarks, and then we'll go on to Mr. Lawford.

Tabling of Treaty—Speaker's Ruling

[The Speaker, Andrew Scheer]

I am now prepared to rule on the point of order raised on April 28, 2014, by the member for Westmount—Ville-Marie regarding the procedural acceptability of Bill C-31, an act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.

I thank the member for Westmount—Ville-Marie for having raised the question, as well as the Leader of the Government in the House of Commons and the House leader for the official opposition for their comments.

In raising the point of order, the member for Westmount—Ville-Marie contended that Bill C-31 is not properly before the House nor the Standing Committee on Finance since, prior to its introduction in the House, the government failed to table a copy of a treaty included in the bill, namely:

The Agreement between the Government of the United States of America and the Government of Canada to improve international tax compliance through enhanced exchange of information under the convention between the United States of America and Canada with respect to taxes on income and on capital.

In his view, the government’s routine tabling of treaties at least 21 days prior to introducing implementing legislation, pursuant to its Policy on Tabling of Treaties in Parliament, has evolved into a parliamentary custom and is therefore a prerequisite to debate.

While recognizing that the policy allows for exceptions, the member for Westmount—Ville-Marie argued that in this instance the government had violated its own policy, thereby infringing upon a custom of the House and creating what he described as a legislative defect.

The Leader of the Government in the House of Commons replied that the process governing the tabling of treaties is in fact a government policy and thus is not found in the rules or practices of the House, nor is it under the purview of the Speaker. He cited numerous Speakers' rulings in support of this position. In addition, he noted that the policy does provide for exceptions, and thus that what is being done in the case of Bill C-31 is in fact consistent with the provisions of the policy.

The Leader of the Government in the House of Commons added that since the treaty was being implemented through legislation, opportunity existed for the House to debate it and vote upon it before it is ratified.

In raising this matter, the member for Westmount—Ville-Marie made reference to what he considered to have been procedural irregularities. It is important to understand in this case what type of procedure, departmental or House, is being referenced. As well, the member asked the Chair for clarity on whether the use of this policy on treaties has become regular enough to deem it a parliamentary custom such that any deviation from it has a procedural impact. In other words, is this a matter of parliamentary procedure, one over which the Chair has any authority?

It is clear to me that the policy in question belongs to the government and not the House. It is equally clear that it is not within the Speaker's authority to adjudicate on government policies or processes, and this includes determining whether the government is in compliance with its own policies.

In a recent ruling, on February 7, 2013, I reminded the House of this at page 13869 of Debates:

It is beyond the purview of the Chair to intervene in departmental matters or to get involved in government processes, no matter how frustrating they may appear to be to the member.

The Chair has nevertheless reviewed the sequence of events described by the member for Westmount—Ville-Marie to ascertain whether there are procedural grounds, as opposed to departmental directives, to support the idea that treaties must be tabled in the House, let alone debated here.

Not surprisingly, the review revealed that many standing orders and statutes deal with the tabling of documents, and House of Commons Procedure and Practice, second edition, on pages 430 and 609 actually enumerates the types of documents that must be tabled in the House. These include certain returns, reports, and other papers that are required to be tabled by statute, by order of the House, or by standing order. Treaties are not mentioned. In fact, the rules and practices of the House are silent with regard to the tabling of treaties.

This leads the Chair to conclude that the manner in which the government has usually chosen to interpret its own policy on treaties cannot be construed as the House having adopted that policy as its own. As always, the rules and practices of the House must emanate explicitly from the House itself. That is not to gain the merits of receiving essential information before considering legislation. However, the distinction between governmental procedures and House procedures remains and must be acknowledged.

Therefore, the Chair cannot find evidence to support the member's contention that Bill C-31 is not properly before the House because of what he has characterized as a deviation from what he contends is the usual practice.

Therefore the Chair cannot find evidence to support the member’s contention that Bill C-31 is not properly before the House because of what he has characterized as a deviation from what he contends is the usual practice.

I thank all hon. members for their attention.

I understand there is a point of order from the hon. member for Burnaby—New Westminster.

[Prof. Lindsay Tedds]

Thank you.

My name is Dr. Lindsay Tedds. I am an associate professor of economics in the school of public administration at the University of Victoria. My primary area of expertise is Canadian tax policy, with a particular focus on design and implementation.

With that, I would like to thank the committee for allowing me the opportunity to share my views on two tax-policy measures that are contained within Bill C-31. This is mainly the elimination of the need for individuals to apply for the GST/HST tax credit, allowing the Minister of National Revenue to automatically determine if an individual is eligible. I'd also like to talk about yet another one-year extension of the mineral exploration tax credit for investors in flow-through shares.

With respect to the GST/HST credit, one of the biggest challenges levied against the tax itself is that it is regressive. However, there are features of the implementation of this tax that offset its regressivity, and a very important part of that is the GST tax credit. This tax credit puts money in the hands of low- and middle-income households to offset the tax that they are paying on their consumption.

Without the passage of Bill C-31, the status quo for applying for this important tax credit will remain and that is very unfortunate. The current administration of this tax credit requires individuals to apply for it every single year by checking a box on their tax application. By using this opt-in method, low-income individuals who overlook the box, or more importantly, do not understand the box and do not check it, miss out on this very important tax credit. Through Bill C-31, the federal government is making a very significant and very important reform to the administration of the GST/HST tax credit by eliminating the need for individuals to apply for the credit and allowing CRA to automatically determine if an individual is eligible for the credit, as we do with most credits in the tax system.

I applaud this move away from an opt-in method towards an assessed method because the credit is an important way to get money into the hands of low- and middle-income Canadians and this simple change will actually increase the money going to these households.

With respect to the mineral exploration tax credit, in form and function this tax credit dates back to 2000 when it was called the investment tax credit for exploration. The impetus for this 15% non-refundable investment tax credit for investors in flow-through shares in mineral exploration companies was the low prices of metals that occurred in the 1990s, and those low prices caused a significant contraction in mineral exploration. Now, metal prices have rebound significantly since 2000 and that tax credit, which originally was set to expire in 2003, has unfortunately been continually renewed since that time. The METC was last set to expire on March 31, 2014, but Bill C-31 extends it for yet another year. This is despite the fact that mineral taxes are at historically high levels and in fact have increased threefold since the tax credit was implemented.

Not only have the conditions that prompted the creation of the tax credit disappeared, there is actually no evidence to support the existence of the tax credit. There is no evidence that the credit induces increased exploration activity over that stimulated by commodity prices. On the investor side, the credit subsidizes high-risk investments that are used predominantly for tax planning purposes by high-income taxpayers rather than for calculated investment purposes.

The dire consequence of it is that the tax credit channels investment money away from other more lucrative but unsubsidized investments. In fact, the rate of return of investments that qualify for this tax credit is very poor, suggesting that the tax regime is the sole purpose for these investments. On the administrative side, the METC regime is associated with high administrative and compliance costs benefiting only tax lawyers and accountants.

It is time to end this tax credit that benefits wealthy investors and subsidizes poorly performing investments. Doing so will help restore fairness to our tax system and close a loophole with little discernable benefits for the taxpayers who fund it.

In closing, I'd like to thank you for providing me with an opportunity to provide you with my views on these two measures, and I look forward to your questions.

Thank you.

[Dennis Howlett, Executive Director, Canadians for Tax Fairness]

Thank you for this opportunity to comment on the parts of Bill C-31 related to tax havens.

We support the implementation of several measures that aim to go after tax cheats using tax havens that were announced in the 2013 and 2014 federal budgets, which are contained in Bill C-31. But we feel these limited measures do not go far enough in dealing with what is a growing problem. We would like to suggest some additional measures that should be considered if the government is serious about going after tax cheats using tax havens.

First of all, we welcome the improvements to the Canada Revenue Agency's ability to provide feedback to the Financial Transactions and Reports Analysis Centre of Canada and to law enforcement agencies. These are fairly minor changes, but they will help make enforcement more efficient. There may be some reduced privacy aspects here, but we feel they are justified in view of the social benefit as a whole.

Second, in terms of reporting, some of the changes on tightening up provisions and the regulation of electronic transfer of funds are also a welcome step, especially including casinos, which are a preferred method of money laundering. Tax cheaters and organized crime syndicates are always trying to find ways to circumvent the regulations, so it is logical that the government should be always trying to stay a step ahead and close off any holes in the monitoring system.

Third, on the offshore tax informant program, information from informants is one of the ways in which tax authorities are able to lift the veil of secrecy that is the hallmark of tax havens and identify individuals and companies that are evading paying their fair share of taxes. But we should not expect that this program is going to result in that many convictions.

The IRS Whistleblower Office in the U.S. just published a 2013 report that shows the U.S. collected $367 million as a result of whistle-blower information from just six cases last year. There were 12 cases in 2012, and a slightly larger amount of money was collected. Canada is roughly 10% of the U.S. economy, so we are not likely to see more than a few cases in a year.

The U.S. Whistleblower Office annual report also notes that cases typically take five to seven years from receipt of submission to be settled and claims paid, so it may be a number of years before we will see any tangible benefits to Canada.

Maybe the most important aspect of this measure may be the deterrent effect, which will be hard to quantify. But in order to maximize the deterrent effect of this measure, the government needs to do a more energetic job of public promotion and education. This is one program where spending some public advertising dollars, raising awareness about this program, would be justified.

The other issue that needs to be addressed is the protection of confidentiality of whistle-blowers coming forward. I have personally been contacted by several potential whistle-blowers who were seeking information on how they should go about accessing the offshore tax informant program, but were very worried about their safety. I know there are some provisions to protect tax confidentiality, but the CRA website does not give adequate assurance, and the government needs to do more to reassure potential informants.

The tax haven problem is growing, as we have recently shown in a Statistics Canada report on direct offshore investment abroad. They are up 10% over last year.

On some of the additional measures that we feel are needed, one would be to provide the CRA information needed by the Parliamentary Budget Office to complete a tax gap estimate. Second, increase the capacity of the Canada Revenue Agency to go after tax cheats. Third, make amendments to the general anti-avoidance rule to include a clear statement that economic substance is required in any transactions to be considered. Fourth, Canada needs to support substantive reforms of the international corporate tax rules that are being developed through the OECD base erosion and profit shifting process.

I'd be happy to answer questions about that, if you like.

[Pamela Fralick]

Thank you very much, Chair.

Honourable committee members, we do thank you for the invitation to testify today.

We strongly support the tobacco tax increase included in the federal budget and in Bill C-31. This measure will reduce youth smoking and it will save lives. It is that simple. Higher tobacco taxes are the single most effective strategy to reduce smoking, especially among youth. We want no new smokers.

We urge all parties to support this measure. In fact, the increase to federal cigarette taxes in Bill C-31 of $4.03 per carton of 200 cigarettes is merely an inflationary adjustment, though a very much needed adjustment. Prior to this change there had not been a net increase to federal tobacco taxes since 2002, a stretch of fully 12 years. This meant that the real federal tobacco tax rate was actually decreasing once inflation was factored in. There is a vast body of worldwide evidence that confirms the obvious. As tobacco prices go up, tobacco consumption goes down. The studies show that a 10% increase in the after-inflation price results in a decrease in tobacco consumption of about 4%, and even more with youth.

The tobacco tax increase is a win-win, benefiting public health and public revenue. Tobacco use and tobacco-caused disease and deaths will decrease, and almost $700 million in incremental annual federal tobacco tax revenue will be generated.

Let me address the contraband issue. Many associations funded by the tobacco industry responded to the federal tobacco tax increase by referring to contraband. These organizations have a long history of opposing tobacco control measures. Here are some facts.

Contraband has decreased substantially in Canada, as admitted by the tobacco industry. In our binder, which I hope you have, tab 1, a graph from British American Tobacco says that Canada-wide contraband was 17% in 2006; 22% in 2007; 33% in 2008; and then down to 19% in 2010. A graph on that same tab from Philip Morris also indicates a declining trend. As well, federal and provincial government tax-paid sales data for these years, as well as subsequent years, confirm a dramatic decrease in contraband.

Tab 2 of our binder shows a massive growth in price-discounted cigarettes sold legally by tobacco companies. The tobacco industry has reduced prices by $20 or more per carton on some brands, and the federal tax increase of $4 per carton counters only part of this.

Tab 3 of our binder contains a graph showing provincial and territorial tobacco tax rates. Tobacco taxes are far higher in western Canada than in Ontario and Quebec, yet contraband volumes in western Canada are minimal. This graph illustrates that the cause of contraband, as we have it in Canada today, is not high tobacco tax rates. Higher tobacco taxes and low contraband are both possible, as the western provinces have shown.

There's no doubt that additional contraband prevention measures would have a further beneficial effect. We support the announcement in the budget for an additional $92 million over five years for contraband enforcement, and we continue to endorse Bill C-10, the tackling contraband tobacco act.

As well, we have other recommendations for contraband prevention.

First, the RCMP should pay more attention to blocking the supply of raw materials, such as leaf tobacco, cigarette paper, and cigarette filters intended for illegal factories. Second, the federal government should modify plans to move the Cornwall border post to a new location in Massena, New York. Instead, there should be a two-part border post with checkpoints in both Massena and Cornwall to better intercept contraband. Third, the federal government needs to persuade the U.S. government to shut down the illegal factories on the U.S. side of Akwesasne.

The tobacco tax increase and contraband prevention measures in the federal budget are essential components of a comprehensive strategy that should also include, one, a ban on flavoured tobacco products; two, plain packaging, as has been implemented in Australia; and three, sustained, well-funded programs by Health Canada.

Tobacco use remains the leading preventable cause of disease and death in Canada, killing more than 37,000 Canadians each year. Smoking is still responsible for 30% of all cancer deaths, and there are still five million Canadians who smoke, and too many children.

I will finally comment, as I close my presentation, and express support for another measure in the federal budget, lotteries and the proposed legislative change to allow charities to use computers and other modern technologies in their lottery ticket sales and operations. It will reduce administration costs and allow the Canadian Cancer Society and other charities to direct more money to their important program services and research.

Thank you so much.

[The Chair, Conservative, James Rajotte]

I call this meeting back to order and encourage colleagues and our next panel to take their seats, please. We are resuming discussion here of BillC-31, an act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.

At our second panel here this afternoon and evening, we have four individuals presenting. First of all, from the Canadian Cancer Society, we have the president and CEO, Ms. Pamela Fralick—I always forget, is it Fralick or Frolick?

[Carole Presseault]

Thank you.

When we saw clause 31 of Bill C-31, we had some concerns around the timelines, and we worked out a table. With the committee's patience, I'll walk you through it.

In June 2013, we had Bill C-48, which removed that considerable backlog. Sometime this year, subject to parliamentary approval, Bill C-31 would be published, and then in October this year, we'd have a report covering the fiscal year 2012-13. That's what it would do. That's what this bill does.

October 31, 2015, presumably will be right after an election. There will be no list, no table. In October 2016 there would be no report. So the earliest we would have the next report would be 2017, covering that period since the writ was dropped.

Basically, over the next three years, you have a report covering 2012-13, and a report covering the period up to March 31, 2016, which you'll have only in 2017. I'm sorry, this is just the way that we worked through the dates.

The report that Parliament will get in October 31, 2017, will be for up to March 31, 2016, but will not cover the period before the writ was dropped. That's where our major challenge is with that. We've called it cumulative

for lack of a better word.

That's the word we've used. The problems that were identified by the Auditor General, the former Auditor General previously, was this issue that we're not able to pinpoint the backlog.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

It is my turn to say hello to all the witnesses joining us this afternoon.

My question is for Mr. Eljarrat.

Not so long ago, in 2012, Mr. Eljarrat was representing his organization at a meeting of a Quebec parliamentary commission. The topic of discussion was breaches of confidentiality of information.

We know that the Canada Revenue Agency has a lot of power to obtain information. We also know that we have a voluntary compliance system in place for the Income Tax Act. However, the negative impact of measures such as the one proposed in Bill C-31 is huge, not to mention the fact that the agency has also concluded information exchange agreements with the Quebec revenue department, among others. While I was a member of the Quebec National Assembly, the Ordre des comptables professionnels agréés du Québec and the Barreau du Quebec told the minister that proposing such a measure was really inappropriate. One of the experts in attendance was Mr. Eljarrat. I would like him to remind the committee members of the negative impact a measure like the one proposed in Bill C-31 can have.

[Carole Presseault, Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada]

Mr. Chair, ladies and gentlemen members of the committee, thank you for the invitation to appear before you today to speak to Bill C-31 concerning the government's Economic Action Plan 2014. We appreciate this opportunity.

You have come to know us well through our many appearances before this committee. CGA-Canada is currently working with the Chartered Professional Accountants of Canada—CPA Canada—to integrate operations under the CPA banner.

Unification will enhance the influence, relevance and contribution of the Canadian accounting profession, both at home and internationally.

In the midst of global economic uncertainty, CGA Canada recognizes the federal government's strong economic leadership to balance the budget and achieve a surplus in 2015. While this bill is deep and wide in its scope, includes a vast array of measures, and affects several federal acts, our comments today will focus on one measure.

We support the proposal in clause 31, part 1 of Bill C-31, on outstanding tax measures. I initially thought that was a typo, but it is clause 31, part 1 of Bill C-31, which amends the Financial Administration Act.

The purpose of this clause is to require the Minister of Finance to table annually in Parliament a list of legislative proposals, but this is not just any list. This list will include publicly announced proposals that have not been enacted by Parliament since the last federal election.

While this measure is definitely a step in the right direction to better manage changes to the Income Tax Act, you have the ability today to further improve clause 31. In its current form, this measure requires the minister to report only the outstanding tax measures from the current Parliament. As a consequence, the list will not include, potentially, the outstanding tax measures that date beyond that Parliament.

Committee members may want to follow the example of Bill C-549, introduced by one of your colleagues, the member of Parliament Mike Allen. Similar to clause 31, Bill C-549 amends the Financial Administration Act to require the Minister of Finance to table a report listing tax measures, which the government publicly announced its intention to legislate.

However, Bill C-549 goes further by requesting cumulative reports as opposed to reports that only start from the last election. Bill C-549 also requires a parliamentary committee to review the report tabled by the minister and submit its findings to Parliament.

We believe it would be preferable for the Minister of Finance to report all outstanding measures without making a distinction between past and present Parliaments. A cumulative list of proposals would greatly improve transparency.

As some of you will remember, it took 12 years for Parliament to pass the latest income tax technical bill. I'm of course referring to Bill C-48. It was almost 1,000 pages in length and enacted hundreds of outstanding tax measures.

To this, we heard very loudly from many parliamentarians, “Never again.” We agree. Canadian taxpayers deserve a more effective and efficient process to manage introduced and legislated outstanding tax measures. In this spirit, we recommend you consider making a minor technical amendment to strengthen the intent of clause 31 to ensure cumulative reporting of unlegislated measures.

CGA-Canada thanks the committee for recommending that the federal government explore ways to simplify Canada's Income Tax Act to reduce complexities and inefficiencies.

We urge you to continue to champion this important issue. Whether it is through the creation of an independent expert panel or an office of tax simplification, or through a parliamentary committee study, we need a national dialogue. Taxation affects every single Canadian, yet there hasn't been any meaningful discussion on Canada's income tax system since the Carter Commission in the 1960s. It is time for parliamentarians, stakeholders, academics and Canadian taxpayers to talk about tax reform.

Mr. Chair and honourable members of the committee, thank you for your time. We look forward to participating in the ensuing discussion.

[Beatrice Raffoul, Vice-President, Public Affairs, Association of Canadian Academic Healthcare Organizations and Canadian Healthcare Association]

Mr. Chair, thank you.

I'm the vice-president of public affairs of the new organization formed by the recent merger of the Association of Canadian Academic Healthcare Organizations and the Canadian Healthcare Association. We represent the institutional voice for research hospitals, regional health authorities, their research institutes, community hospitals, and long-term care facilities. For the past four months we have been known under the hyphenated version of our two names, and I invite you to stay tuned for the announcement of our new name on June 1.

The association is pleased to have been invited to appear before the committee to participate in the study of the main estimates and, more specifically, to discuss clauses 56 to 60 of Bill C-31, concerning hospital parking and GST/HST.

In budget 2013, supplies of paid parking were deemed to be taxable, whether provided by the private or public sector, including charities, as it was perceived that all supplying of paid parking was determined to be a commercial activity in order to maintain competitive equity with private sector suppliers. It should be noted that, since the introduction of the GST, paid parking has been excluded from the general exempting provision for supplies made by a public sector body, PSB, for the purposes of the GST/HST. A PSB is a municipality, university, public college, school authority, hospital authority, charity, non-profit organization, or government.

Budget 2013 proposed two measures to clarify that certain special exempting provisions—supplies of the property or service that are made for free, or occasional supplies of paid parking by a PSB such as those made as part of a special fundraising event—would continue to qualify for the exemption.

The Association of Canadian Academic Healthcare Organizations, on behalf of our members and the broader hospital community, immediately brought the implications of such measures to the attention of the Minister of Finance and through him, to the government. To the credit of the minister and the government, implementation of these budget 2013 elements was delayed. Mr. Flaherty and his staff recognized the unintended consequences that they were being apprised of required further analysis. As well, the government recognized that these measures, at the very least, required more consultation. We assisted the government in this consultation process, and we thank them for that opportunity.

A large number of hospitals across the country, although not all, had their foundations or auxiliaries as the operators of their parking facilities. These additional revenues contributed greatly to their donation envelopes for research, medical devices, medical equipment, patient care, and other important items that hospitals and research institutes require, all in the service of better care, better health, better value for the population they serve. In addition, it had been noted that the impact was not just the GST but the full HST where harmonization had taken place.

The late Minister Flaherty's announcement, on January 24, that the proposed amendments to the Excise Tax Act to provide an exemption from the goods and services tax/harmonized sales tax, GST/HST, for hospital parking for patients and visitors was welcome news to the health care community, and for the most part would reverse the budget 2013 proposed measures.

We are very pleased to see these amendments reflected in sections 56 to 60 of Bill C-31, and urge the members of the committee to approve these sections.

I am happy to answer any questions you may have. Thank you.

[Mark Tonkovich, Associate, Baker and McKenzie LLP, As an Individual]

Thank you, Mr. Chair.

Thank you to the committee for the invitation to appear in front of you today. I've had the privilege of seeing tax disputes from many different angles: as a lawyer in private practice, as counsel to the federal Department of Justice, and as judicial clerk to the Federal Court of Appeal.

My current legal practice focuses exclusively on helping taxpayers resolve controversies with Canadian tax authorities. But I am here today as an individual, and my comments reflect my personal views, not necessarily those of my firm nor our clients.

Against this background, I am pleased to offer whatever assistance I can to the committee as it consider parts 1 to 4 of the federal budget bill. But I'd like to take the opportunity to highlight two initiatives that stem from the budget.

Canada is working hard to balance budgetary needs and foreign policy against the sophisticated tax planning that exists on the global stage. One continuing challenge is ensuring that the CRA has the tools it needs to maintain the integrity of the tax system while respecting the basic taxpayer rights of consistency, predictability, and fairness. After all, our society and our laws correctly recognize each taxpayer's right to arrange his or her affairs in the most business-savvy and tax-efficient manner.

Returning to the bill, Bill C-31 contains provisions touching on two new information-gathering tools aimed at helping the CRA to achieve its mandate. The first is the introduction of the new electronic funds transfer, or EFT, reporting regime in part XV.1 of the Income Tax Act. The second deals with the CRA initiative today called the offshore tax informant program, or OTIP.

The Department of Finance released legislative proposals relating to the new EFT reporting regime this past January, and the proposed rules are contained in Bill C-31. The rules will require most financial intermediaries to file reports with the CRA days after completing an electronic fund transfer of $10,000 or more, flowing into or leaving Canada at a client's request. The new regime includes detailed provisions defining which financial entities must submit reports, a corresponding record-keeping obligation for those entities, the creation of an offence for the failure to comply with that obligation, and rules explaining that EFT information can also be used for non-income tax purposes.

Although the CRA will need resources to properly monitor and analyze this new EFT information, the proposed regime will undoubtedly provide a fuller picture of traditional fund transfers across our borders. In turn, this will make it easier for the CRA to consider whether those funds have been properly accounted for, for tax purposes.

Moving to the second initiative, the offshore tax informant program, this a whistle-blowing program that was first announced in 2013 budget and was formally launched by the CRA in January of this year. OTIP aims to pay awards of between 5% and 15% of federal tax collected as a result of tips provided to the CRA concerning major international tax non-compliance. Anecdotally, I understand that a number of would-be informants have already started approaching professional advisers and have begun opening informant files with the CRA.

In contrast to the detailed legislative framework for EFT reporting, there are no legislative rules defining the new informant regime. There are a number of provisions in Bill C-31 that relate to the informant program—which I've set out in a schedule to my speaking notes—but these generally touch on how award moneys will be taxed, and how informants will be kept abreast of the status of their file.

Otherwise, all rules pertaining to OTIP are left to the CRA. This includes who can be an informant, whether awards could be paid for information concerning domestic non-compliance as opposed to international non-compliance, whether there are limits on how tax information can be obtained, and whether an informant's identity will be protected down the road.

Leaving the framework to the CRA is efficient in some respects. It allows the rules to be changed without the need to pursue legislative amendments, but it also falls short in certain other respects. For example, without legislative rules or regulations, the extent to which CRA policies can be relied upon or enforced by informants is unclear, as is the breadth of the CRA's authority to pay awards out of taxpayer dollars.

There's also a lack of clarity concerning how information can be obtained, and whether viable tips can, or should, be acquired by breaking the law or breaching professional or ethical obligations. An important public institution such as the CRA should not be seen as encouraging taxpayers or their advisers to cheat or steal to obtain potentially helpful tax information in order to make a buck.

Finally, the scope of the informant's obligations in any future tax assessment or enforcement proceeding is unclear. It's also unclear as to what ends the CRA will go to protect an informant's identity.

Legislated rules providing a certain degree of protection for informants would make the system easier to administer and more reliable for taxpayers. For these reasons, we propose legislative rules or regulations would assist in bringing clarity to the program.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is meeting number 33 of the Standing Committee on Finance, orders of the day pursuant to the order of reference of Tuesday, April 8, 2014, continuing our study of Bill C-31, an act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.

I want to welcome our guests to the committee this afternoon. For the first panel of discussion on this bill we have, presenting as individuals, Mr. Stéphane Eljarrat. Welcome.

We have Mr. Mark Tonkovich, associate with Baker and McKenzie LLP. Welcome.

From the Association of Canadian Academic Healthcare Organizations and Canadian Healthcare Association, we have Ms. Beatrice Keleher Raffoul, welcome. She is vice-president for public affairs.

We have from the Certified General Accountants Association of Canada, Ms. Carole Presseault, vice-president. I understand this will be her last appearance before our committee in this capacity today. Welcome back to the committee.

We have the president of the Search and Rescue Volunteer Association of Canada, Mr. Harry Blackmore. Welcome to you, sir.

You will each have five minutes, maximum, for your opening statements, and we will then go to questions from members.

We'll begin with Mr. Eljarrat, please.

[Françoise Boivin, NDP, Gatineau, QC]

Thank you, Mr. Chair.

Minister, unfortunately, we will not have a full hour with you. While we would like to be able to discuss a bit more in depth the major issues we are studying, the members in the House are debating another time allocation motion on a democratic reform bill. That is more than 60 time allocation motions introduced by the government.

It is quite a strange process. We are studying the main estimates, which are quite voluminous, and there are some aspects that fall under your responsibility since they concern the Office of the Director of Public Prosecutions, the Commissioner for Federal Judicial Affairs, the Canadian Human Rights Commission, the Supreme Court of Canada, the Department of Justice's entire budget, the courts administration service and the Canadian Human Rights Tribunal. However, we have to study all that with only five minutes for questions each.

I will try to be brief and I would like the answers to be brief as well.

My first question has to do with the budget of the Supreme Court. Are we to understand that you are going to appoint someone to the Quebec position that is still vacant? Is that part of your main estimates? When are you going to start spending those funds? In other words, are you going to proceed with the appointment as soon as possible?

I have a second question for you.

In these estimates, the Department of Justice funding for transfers to provinces for legal aid services drops significantly. That funding comes from t. We know that the provinces are asking for a bit more funding in that area because the needs are huge. I don't understand why savings are being made at the expense of legal aid.

Here is my third question.

Bill C-31 is creating a new administrative tribunals support service as an act. Do you expect this service to involve spending? I am not sure your estimates list the financial impact of the 11 tribunals that will fall under this service. Do you expect to save money with this service? Or do you expect to have a period of transition?

I would have liked to have more than five minutes to have an intelligent discussion. I doubt I will be able to have answers to all those questions. Perhaps you can promise to provide us with the answers later, if you don't have time to answer all my questions.

I assume that I will have to ask your colleague, the Director of Public Prosecutions, about his mandate, as described in the main estimates, and about his role in the RCMP. I will come back to that later.

Mr. Chair, are we going to come back to committee after the vote?