Bill C-4 (Historical)

Economic Action Plan 2013 Act No. 2

A second 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) increases the lifetime capital gains exemption to $800,000 and indexes the new limit to inflation;
(b) streamlines the process for pension plan administrators to refund a contribution made to a Registered Pension Plan as a result of a reasonable error;
(c) extends the reassessment period for reportable tax avoidance transactions and tax shelters when information returns are not filed properly and on time;
(d) phases out the federal Labour-Sponsored Venture Capital Corporations tax credit;
(e) ensures that derivative transactions cannot be used to convert fully taxable ordinary income into capital gains taxed at a lower rate;
(f) ensures that the tax consequences of disposing of a property cannot be avoided by entering into transactions that are economically equivalent to a disposition of the property;
(g) ensures that the tax attributes of trusts cannot be inappropriately transferred among arm’s length persons;
(h) responds to the Sommerer decision to restore the intended tax treatment with respect to non-resident trusts;
(i) expands eligibility for the accelerated capital cost allowance for clean energy generation equipment to include a broader range of biogas production equipment and equipment used to treat gases from waste;
(j) imposes a penalty in instances where information on tax preparers and billing arrangements is missing, incomplete or inaccurate on Scientific Research and Experimental Development tax incentive program claim forms;
(k) phases out the accelerated capital cost allowance for capital assets used in new mines and certain mine expansions, and reduces the deduction rate for pre-production mine development expenses;
(l) adjusts the five-year phase-out of the additional deduction for credit unions;
(m) eliminates unintended tax benefits in respect of two types of leveraged life insurance arrangements;
(n) clarifies the restricted farm loss rules and increases the restricted farm loss deduction limit;
(o) enhances corporate anti-loss trading rules to address planning that avoids those rules;
(p) extends, in certain circumstances, the reassessment period for taxpayers who have failed to correctly report income from a specified foreign property on their annual income tax return;
(q) extends the application of Canada’s thin capitalization rules to Canadian resident trusts and non-resident entities; and
(r) introduces new administrative monetary penalties and criminal offences to deter the use, possession, sale and development of electronic suppression of sales software that is designed to falsify records for the purpose of tax evasion.
Part 1 also implements other selected income tax measures. Most notably, it
(a) implements measures announced on July 25, 2012, including measures that
(i) relate to the taxation of specified investment flow-through entities, real estate investment trusts and publicly-traded corporations, and
(ii) respond to the Lewin decision;
(b) implements measures announced on December 21, 2012, including measures that relate to
(i) the computation of adjusted taxable income for the purposes of the alternative minimum tax,
(ii) the prohibited investment and advantage rules for registered plans, and
(iii) the corporate reorganization rules; and
(c) clarifies that information may be provided to the Department of Employment and Social Development for a program for temporary foreign workers.
Part 2 implements certain goods and services tax and harmonized sales tax (GST/HST) measures proposed in the March 21, 2013 budget by
(a) introducing new administrative monetary penalties and criminal offences to deter the use, possession, sale and development of electronic suppression of sales software that is designed to falsify records for the purpose of tax evasion; and
(b) clarifying that the GST/HST provision, exempting supplies by a public sector body (PSB) of a property or a service if all or substantially all of the supplies of the property or service by the PSB are made for free, does not apply to supplies of paid parking.
Part 3 enacts and amends several Acts in order to implement various measures.
Division 1 of Part 3 amends the Employment Insurance Act to extend and expand a temporary measure to refund a portion of employer premiums for small businesses. It also amends that Act to modify the Employment Insurance premium rate-setting mechanism, including setting the 2015 and 2016 rates and requiring that the rate be set on a seven-year break-even basis by the Canada Employment Insurance Commission beginning with the 2017 rate. The Division repeals the Canada Employment Insurance Financing Board Act and related provisions of other Acts. Lastly, it makes technical amendments to the Employment Insurance (Fishing) Regulations.
Division 2 of Part 3 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to remove the prohibition against federal and provincial Crown agents and federal and provincial government employees being directors of a federally regulated financial institution. It also amends the Office of the Superintendent of Financial Institutions Act and the Financial Consumer Agency of Canada Act to remove the obligation of certain persons to give the Minister of Finance notice of their intent to borrow money from a federally regulated financial institution or from a corporation that has deposit insurance under the Canada Deposit Insurance Corporation Act.
Division 3 of Part 3 amends the Trust and Loan Companies Act, the Bank Act, the Insurance Companies Act and the Cooperative Credit Associations Act to clarify the rules for certain indirect acquisitions of foreign financial institutions.
Division 4 of Part 3 amends the Criminal Code to update the definition “passport” in subsection 57(5) and also amends the Department of Foreign Affairs, Trade and Development Act to update the reference to the Minister in paragraph 11(1)(a).
Division 5 of Part 3 amends the Canada Labour Code to amend the definition of “danger” in subsection 122(1), to modify the refusal to work process, to remove all references to health and safety officers and to confer on the Minister of Labour their powers, duties and functions. It also makes consequential amendments to the National Energy Board Act, the Hazardous Materials Information Review Act and the Non-smokers’ Health Act.
Division 6 of Part 3 amends the Department of Human Resources and Skills Development Act to change the name of the Department to the Department of Employment and Social Development and to reflect that name change in the title of that Act and of its responsible Minister. In addition, the Division amends Part 6 of that Act to extend that Minister’s powers with respect to certain Acts, programs and activities and to allow the Minister of Labour to administer or enforce electronically the Canada Labour Code. The Division also adds the title of a Minister to the Salaries Act. Finally, it makes consequential amendments to several other Acts to reflect the name change.
Division 7 of Part 3 authorizes Her Majesty in right of Canada to hold, dispose of or otherwise deal with the Dominion Coal Blocks in any manner.
Division 8 of Part 3 authorizes the amalgamation of four Crown corporations that own or operate international bridges and gives the resulting amalgamated corporation certain powers. It also makes consequential amendments and repeals certain Acts.
Division 9 of Part 3 amends the Financial Administration Act to provide that agent corporations designated by the Minister of Finance may, subject to any terms and conditions of the designation, pledge any securities or cash that they hold, or give deposits, as security for the payment or performance of obligations arising out of derivatives that they enter into or guarantee for the management of financial risks.
Division 10 of Part 3 amends the National Research Council Act to reduce the number of members of the National Research Council of Canada and to create the position of Chairperson of the Council.
Division 11 of Part 3 amends the Veterans Review and Appeal Board Act to reduce the permanent number of members of the Veterans Review and Appeal Board.
Division 12 of Part 3 amends the Canada Pension Plan Investment Board Act to allow for the appointment of up to three directors who are not residents of Canada.
Division 13 of Part 3 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to extend to the whole Act the protection for communications that are subject to solicitor-client privilege and to provide that information disclosed by the Financial Transactions and Reports Analysis Centre of Canada under subsection 65(1) of that Act may be used by a law enforcement agency referred to in that subsection only as evidence of a contravention of Part 1 of that Act.
Division 14 of Part 3 enacts the Mackenzie Gas Project Impacts Fund Act, which establishes the Mackenzie Gas Project Impacts Fund. The Division also repeals the Mackenzie Gas Project Impacts Act.
Division 15 of Part 3 amends the Conflict of Interest Act to allow the Governor in Council to designate a person or class of persons as public office holders and to designate a person who is a public office holder or a class of persons who are public office holders as reporting public office holders, for the purposes of that Act.
Division 16 of Part 3 amends the Immigration and Refugee Protection Act to establish a new regime that provides that a foreign national who wishes to apply for permanent residence as a member of a certain economic class may do so only if they have submitted an expression of interest to the Minister and have subsequently been issued an invitation to apply.
Division 17 of Part 3 modernizes the collective bargaining and recourse systems provided by the Public Service Labour Relations Act regime. It amends the dispute resolution process for collective bargaining by removing the choice of dispute resolution method and substituting conciliation, which involves the possibility of the use of a strike as the method by which the parties may resolve impasses. In those cases where 80% or more of the positions in a bargaining unit are considered necessary for providing an essential service, the dispute resolution mechanism is to be arbitration. The collective bargaining process is further streamlined through amendments to the provision dealing with essential services. The employer has the exclusive right to determine that a service is essential and the numbers of positions that will be required to provide that service. Bargaining agents are to be consulted as part of the essential services process. The collective bargaining process is also amended by extending the timeframe within which a notice to bargain collectively may be given before the expiry of a collective agreement or arbitral award.
In addition, the Division amends the factors that arbitration boards and public interest commissions must take into account when making awards or reports, respectively. It also amends the processes for the making of those awards and reports and removes the compensation analysis and research function from the mandate of the Public Service Labour Relations Board.
The Division streamlines the recourse process set out for grievances and complaints in Part 2 of the Public Service Labour Relations Act and for staffing complaints under the Public Service Employment Act.
The Division also establishes a single forum for employees to challenge decisions relating to discrimination in the public service. Grievances and complaints are to be heard by the Public Service Labour Relations Board under the grievance process set out in the Public Service Labour Relations Act. The process for the review of those grievances or complaints is to be the same as the one that currently exists under the Canadian Human Rights Act. However, grievances and complaints related specifically to staffing complaints are to be heard by the Public Service Staffing Tribunal. Grievances relating to discrimination are required to be submitted within one year or any longer period that the Public Service Labour Relations Board considers appropriate, to reflect what currently exists under the Canadian Human Rights Act.
Furthermore, the Division amends the grievance recourse process in several ways. With the sole exception of grievances relating to issues of discrimination, employees included in a bargaining unit may only present or refer an individual grievance to adjudication if they have the approval of and are represented by their bargaining agent. Also, the process as it relates to policy grievances is streamlined, including by defining more clearly an adjudicator’s remedial power when dealing with a policy grievance.
In addition, the Division provides for a clearer apportionment of the expenses of adjudication relating to the interpretation of a collective agreement. They are to be borne in equal parts by the employer and the bargaining agent. If a grievance relates to a deputy head’s direct authority, such as with respect to discipline, termination of employment or demotion, the expenses are to be borne in equal parts by the deputy head and the bargaining agent. The expenses of adjudication for employees who are not represented by a bargaining agent are to be borne by the Public Service Labour Relations Board.
Finally, the Division amends the recourse process for staffing complaints under the Public Service Employment Act by ensuring that the right to complain is triggered only in situations when more than one employee participates in an exercise to select employees that are to be laid off. And, candidates who are found not to meet the qualifications set by a deputy head may only complain with respect to their own assessment.
Division 18 of Part 3 establishes the Public Service Labour Relations and Employment Board to replace the Public Service Labour Relations Board and the Public Service Staffing Tribunal. The new Board will deal with matters that were previously dealt with by those former Boards under the Public Service Labour Relations Act and the Public Service Employment Act, respectively, which will permit proceedings under those Acts to be consolidated.
Division 19 of Part 3 adds declaratory provisions to the Supreme Court Act, respecting the criteria for appointing judges to the Supreme Court of Canada.

[Professor Adam Dodek, Vice-Dean, Research, and Associate Professor, Faculty of Law, University of Ottawa, As an Individual]

Good morning. My name is Adam Dodek.

I am the vice-dean of research and an associate professor in the common law section of the University of Ottawa.

I teach in the areas of public law and legal ethics. I also teach a seminar on the Supreme Court of Canada, which I would pause to say, as you can well imagine, has been very interesting for our students this year.

I have co-edited three books relating to the Supreme Court of Canada and judicial independence, and have written numerous articles about the Supreme Court, the role of government lawyers, and other matters. Like my colleague Professor Mathen, I am appearing today wholly in my individual capacity.

In my prepared remarks I will address two issues: first, clauses 471 and 472 are not a proper subject of a budget bill; second, by bringing a reference to the Supreme Court about these very provisions, the government is interfering with the proper work of this House.

I recognize that members of the committee may have questions about the interpretations of sections 5 and 6 of the Supreme Court Act and the impact of clauses 471 and 472, and I am very happy to address any questions on that subject.

First, on the appropriateness of inserting clauses 471 and 472 into a budget bill, Bill C-4 is entitled “A second act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures”. As the members of this committee are well aware, clauses 471 and 472 have nothing to do with the budget that the Minister of Finance tabled in Parliament on March 21, 2013. They are instead proposed amendments to the Supreme Court Act. The government's position is that they are declaratory and are not substantive amendments. By this admission, they have no monetary impact and no connection whatsoever to the March 21, 2013 budget.

You will no doubt hear from other witnesses that they do not agree with the government's position that clauses 471 and 472 are simply declaratory. I would say that even if they are correct in that position, there is still no connection whatsoever with the March 21, 2013 budget. Thus, there is no substantive connection, and there is also no temporal connection, between clauses 471 and 472 and the March 21, 2013 budget.

Clauses 471 and 472 relate to a controversy that erupted over the appointment of Justice Marc Nadon, an appointment that began with the announcement on Monday, September 28, 2013 by the Prime Minister, fully six months after the Minister of Finance tabled the budget in the House. It is a factual impossibility to connect something that happened six months later to a budget tabled six months earlier.

Justice Fish announced his intended retirement on April 22, 2013. Again, that was after the budget was tabled.

The controversy over clauses 471 and 472 show that they are not the proper subject of a budget bill. These are not matters that are uncontroversial or mere technical amendments. The government knew the issue was uncertain, and that's the reason it commissioned and then released the opinion from the Honourable Ian Binnie. As well, the directing of the reference to the Supreme Court on these very issues demonstrates the uncertainty of the issue.

I believe that what is at stake here is no less than the democratic features of the House of Commons. Bills such as this one are a threat to democracy in Canada.

Clauses 471 and 472 should be the subject of an independent bill because they raise separate and important public policy issues. I would just pause to say that is my position, notwithstanding my agreement with the government that these provisions are simply declaratory and make no substantive changes to sections 5 and 6 of the Supreme Court Act.

We have a Constitution similar in principle to that of the United Kingdom, and we have often learned and we cherish our constitutional history. Members of this House, I believe, would be wise to heed the warnings from Parliament in Westminster.

Erskine May, in the 23rd edition of Parliamentary Practice, states:

In former times, the Commons abused their right to grant Supply without interference from the Lords, by tacking to bills of aids and supplies provisions which, in a bill that the Lords had no right to amend, must either have been accepted by them unconsidered, or have caused the rejection of a measure necessary for the public service. This practice infringed the privilege of the Lords, no less than their interference in matters of finance infringes the privileges of the Commons.

On December 9, 1702, the House of Lords passed a resolution which stated:

That the annexing any Clause or Clauses to a Bill of Aid or Supply, the Matter of which is foreign to, and different from, the Matter of the said Bill of Aid or Supply, is Unparliamentary, and tends to the Destruction of the Constitution of this Government.

That was then converted into a standing order that had not needed to be invoked as the basis for rejection of a Commons bill since 1807.

In the United Kingdom the rules of order of the House of Commons exclude the possibility of a foreign matter from being tacked on to such bills by way of amendment, and respect for constitutional practice prevents the inclusion of such matters among their original provisions.

Second is the impropriety of legislating and referring the question to the Supreme Court for its consideration at the same time. It is highly unusual for a government to ask Parliament to enact legislation at the same time as it directs a reference to the Supreme Court. Why is this unusual? Because the purpose of directing a reference to the Supreme Court is to obtain the court's advice on a legal question or questions before proceeding with a course of action. The Senate reference that the Supreme Court heard last week is certainly a good example of that. As well, the government's prior reference, the securities reference directed by the government, is another example.

Based on my research, the last time the government directed a reference to the Supreme Court while or after enacting legislation was in 1976 in the Anti-Inflation Act reference when the government of Pierre Trudeau directed a reference to the Supreme Court three months after Parliament had enacted the Anti-Inflation Act. That situation was different. There was a perceived national crisis of double-digit inflation. I would submit to you that the uncertainty regarding sections 5 and 6 is not a cause for a national crisis. It's also highly unusual for a government to, in effect, be challenging its own legislation.

I believe this raises the question as to how the Attorney General of Canada, as the legal adviser to the Governor in Council, can both vouch for the legality of clauses 471 and 472 at the same time as he is questioning them in his advice to the Governor in Council directing the reference on the very same subject. The two simply cannot co-exist. Either the government believes that it is within its power to enact clauses 471 and 472, or it is uncertain and requires the advice of the Supreme Court.

I believe that this odd state of affairs puts the members of this House in an untenable position. They are being asked to vote in favour of two provisions with the assurance by the government that such provisions are legal, indeed constitutional, while at the same time the government is questioning that very advice by directing a reference to the Supreme Court.

Thank you. I look forward to your questions.

[The Chair, Conservative, Mike Wallace]

Ladies and gentlemen, I call this meeting to order. This is meeting number five of the Standing Committee on Justice and Human Rights.

We are studying the subject matter of clauses 471 and 472 of Bill C-4, A second act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures. Today we have witnesses to deal with the clauses that were referred to this committee.

We have Professor Carissima—is that how you say it?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you.

Bill C-13, in 2006, also had $500 million for the Mackenzie gas project impact fund. Can you outline the difference between budget 2006 measures in Bill C-13 and the measures in Bill C-4?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

The question is simply that this section is a result of a B.C. Court of Appeal decision which found that Canada's anti-money-laundering and anti-terrorist-financing regime contravenes section 7 of the Canadian Charter of Rights and Freedoms.

Can you explain how Bill C-4 addresses a response to that B.C. Court of Appeal decision?

[Andrew Saxton, Conservative, North Vancouver, BC]

As was asked earlier regarding tax loopholes, C-4 closes a number of overly exploited and outdated tax loopholes.

Can you address the positive effects this will have down the road?

[Geoff Trueman]

That refers to the changes we're making with respect to class 43.2. Class 43.2 provides an accelerated capital cost allowance for certain assets that are acquired for clean energy generation.

Two changes are included in Bill C-4.

First of all, there is biogas production equipment that uses a broader range of feedstock. Eligibility is currently limited to equipment that uses sludge from an eligible sewage treatment facility, food and animal waste, plant residue, and wood waste. Bill C-4 proposes including equipment that will use pulp and paper waste and waste water, beverage industry waste and waste water, and separated organics from municipal waste. It simply expands the range of eligible feedstocks and will allow biogas production to take place on a more comprehensive scale.

Second, a broader range of cleaning and upgrading equipment that is used to treat gases from waste to obtain biomethane will be included. This simply expands the range of eligible equipment so we can facilitate that on a more comprehensive basis as well.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Bill C-4 also encourages businesses to invest in clean energy generation technologies.

Can you provide details on how this measure will expand biogas production?

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair.

Thank you to our witnesses for being here today.

I'd like to follow up on Mr. Hsu's questions as well.

Bill C-4 expands on the government's ongoing effort to make the tax system fair across industries. It follows through on our government's G-20 commitments to eliminate inefficient fossil fuel subsidies.

Can you elaborate on the phase-out of tax preferences that have favoured the mining industry?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

The Conservative Party has certainly argued that higher corporate taxes lead to fewer jobs. As part of the research done in preparing Bill C-4, did the department do any analysis on how the tax measures referred to in paragraph (k) of part 1 in the summary of Bill C-4 might impact employment in the mining sector?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Switching now to mining expenses, how many mining companies in Canada are expected to be affected by the measures in Bill C-4 to increase tax revenues from the mining sector? This is with regard to the accelerated capital cost allowance. How many mining companies?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Does Bill C-4 change that?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay, and how long do individuals have to hold an LSVCC share in order to benefit from the tax credit? Is it eight years? Does Bill C-4 change that time period?

[The Chair, Conservative, James Rajotte]

I call this meeting to order.

This is the sixth meeting of the Standing Committee on Finance. We are televised today. Our orders of the day are pursuant to the order of reference of Tuesday, October 29, 2013, the study of Bill C-4, A second act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

We're very pleased to have with us many officials from the Department of Finance and other departments to analyze this bill for us and to help us address our questions and comments on the bill.

In particular, we have three Department of Finance officials before the committee today: Mr. Ted Cook, senior legislative chief, tax legislation division, tax policy branch; Mr. Sean Keenan, director, sales tax division; and Mr. Geoff Trueman, general director, analysis, tax policy branch.

Welcome, gentlemen, and thank you for being with us.

Colleagues, I propose that we proceed this way. There are obviously three parts to the bill. I've asked Mr. Cook to give a brief opening statement focusing in particular on some of the items that members of the committee have identified to me as areas which they wish the committee to focus on.

Mr. Cook will give a brief opening statement and then we'll have questions from members. There will be an allotted time for questions, and we will proceed in the normal questioning order. I am proposing that we do it by parts. We'll start with part 1, move to part 2, and then do part 3.

Mr. Cook, could we have your opening statement at this time, please.

The Budget

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, I am pleased to present a petition on behalf of hundreds of Canadians from Quebec who are denouncing the decision made by the government on Bill C-4 to terminate the tax credit on the labour-sponsored venture capital funds, which will clearly end a huge economic benefit and destroy a system providing retirement income for many.

[The Chair, Conservative, Phil McColeman]

Good afternoon everyone, and welcome.

This is meeting number 3 of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.

Today is Thursday, November 7, 2013.

Today we begin our examination of the subject matter of clauses 176 to 238 (divisions 5 and 6 of part 3) of Bill C-4, A second act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures.

Before we begin today's meeting, I would briefly like to point out that Department of Labour officials are not here today to speak to the one clause pertaining to electronic administration of the Canada Labour Code found in division 6. We'll deal with all of the issues in division 6, as you wish, as a committee today, except this one clause. The reason is that we have employment and social development officials here who are prepared to answer any aspect of division 6, except the Canada Labour Code. However, at our next meeting, Labour department officials will be prepared to answer any questions on the one clause contained in division 6.

I would kindly ask that if you had prepared any questions on this topic you hold off your questions until the next meeting.

We are joined today by witnesses from the Department of Employment and Social Development Canada: Alexis Conrad, Atiq Rahman, and Catherine Allison. We're also joined by David Dendooven of the Privy Council Office.

Before we move into our presentations and rounds of questions, I'll point out per the meeting notice that our committee will recess at 5:15. I may take some liberties to recess a bit earlier than that, at 5:10, depending on how the discussions are going and what the committee chooses. Then we'll move into committee business because we have four such items to deal with today.

I know that the witnesses have prepared some remarks to open our discussions on Bill C-4. I believe Alexis is going to be doing the presentation.

We'll go to you, sir.