Bill C-43 (Historical)

Economic Action Plan 2014 Act, No. 2

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

Part 1 implements certain income tax measures proposed in the February 11, 2014 budget. Most notably, it
(a) extends the intergenerational rollover and the lifetime capital gains exemption for dispositions of property used in farming and fishing businesses;
(b) extends the tax deferral provision with respect to breeding animals to bees, and to all types of horses that are over 12 months of age, that are kept for breeding;
(c) permits income contributed to an amateur athlete trust to qualify as earned income for RRSP contribution limit purposes, with an election available to taxpayers for up to a three-year retroactive application;
(d) extends the definition “split income” to include income from a business or property that is paid or allocated to a minor child from a partnership or trust where a person related to the child is engaged in the activities of the partnership or trust to earn that income;
(e) eliminates graduated rate taxation for trusts and certain estates with an exception for cases involving testamentary trusts whose beneficiaries include individuals eligible for the Disability Tax Credit;
(f) eliminates the 60-month exemption from the non-resident trust rules;
(g) allows an individual’s estate to carry back charitable donations made as a result of the individual’s death;
(h) expands eligibility for the accelerated capital cost allowance for clean energy generation and energy conservation equipment to include water-current energy equipment and a broader range of equipment used to gasify eligible waste fuel;
(i) adjusts Canada’s foreign accrual property income rules in order to address offshore insurance swap transactions and ensure that income from the direct or indirect insurance of Canadian risks is taxed appropriately;
(j) better circumscribes the existing “investment business” definition in the foreign accrual property income regime;
(k) addresses back-to-back loan arrangements involving an intermediary; and
(l) extends the existing tax credit for interest paid on student loans to interest paid on a Canada Apprentice Loan.
Part 1 also implements other selected income tax measures. Most notably, it
(a) alleviates the tax cost to Canadian-based banks of using excess liquidity of their foreign affiliates in their Canadian operations;
(b) ensures that certain securities transactions undertaken in the course of a bank’s business of facilitating trades for arm’s length customers are not inappropriately caught by the base erosion rules;
(c) modernizes the life insurance policy exemption test;
(d) amends the foreign affiliate rules to ensure they apply appropriately to structures that include partnerships and makes generally relieving changes to certain of the base erosion rules to ensure they do not apply in unintended circumstances;
(e) amends the rules for determining the residence of international shipping corporations;
(f) provides for the appropriate taxation of taxpayers that invest in Australian trusts;
(g) amends the foreign affiliate dumping rules to ensure the rules apply in appropriate circumstances and, if applicable, provide appropriate results;
(h) excludes from the definition “non-qualifying country” in the foreign affiliate rules those countries or other jurisdictions for which the Convention on Mutual Administrative Assistance in Tax Matters is in force and effect;
(i) avoids unintended tax consequences with respect to the British Overseas Territory of the British Virgin Islands;
(j) simplifies the rules for the Canadian Film or Video Production Tax Credit regime;
(k) amends the trust loss restriction event rules to provide relief for investment trusts that meet specific conditions; and
(l) increases the maximum amount that may be claimed under the Children Fitness Tax Credit and makes the credit refundable starting in 2015.
Part 2 implements certain goods and services tax/harmonized sales tax (GST/HST) measures by
(a) ensuring that pooled registered pension plans are subject to similar GST/HST treatment as registered pension plans;
(b) implementing real property technical amendments that provide for the consistent treatment of different types of housing and ensure that the special valuation rule for subsidized housing works properly with the GST/HST place of supply rules and in the context of a GST/HST rate change;
(c) clarifying the application of GST/HST public service body rebates in relation to non-profit organizations that operate certain health care facilities; and
(d) relieving the GST/HST on services of refining precious metals supplied to a non-resident person that is not registered for GST/HST purposes.
Part 3 amends the Excise Act, 2001 to provide a refund of the inventory tax, introduced in the February 11, 2014 budget, on cigarettes that are destroyed or re-worked, in line with the refund of the excise duty that exists for tobacco products that are destroyed or re-worked.
Part 4 enacts and amends several Acts in order to implement various measures.
Division 1 of Part 4 amends the Industrial Design Act to make that Act consistent with the Geneva (1999) Act of the Hague Agreement Concerning the International Registration of Industrial Designs and to give the Governor in Council the authority to make regulations for carrying it into effect. The amendments include provisions relating to the contents of an application for the registration of a design, requests for priority, and the term of an exclusive right for a design.
It also amends the Patent Act to, among other things, make that Act consistent with the provisions of the Patent Law Treaty. The amendments include reducing the requirements for obtaining a filing date in relation to an application for a patent, requiring that an applicant be notified of a missed due date before an application is deemed to be abandoned, and providing that a patent may not be invalidated for non-compliance with certain requirements relating to the application on the basis of which the patent was granted.
Division 2 of Part 4 amends the Aeronautics Act to authorize the Minister of Transport to make an order, and the Governor in Council to make regulations, that prohibit the development or expansion of or any change to the operation of an aerodrome. It also amends the Act to authorize the Governor in Council to make regulations in respect of consultations by the proponents and operators of aerodromes.
Division 3 of Part 4 enacts the Canadian High Arctic Research Station Act, which establishes a new federal research organization that is to be responsible for advancing knowledge of the Canadian Arctic through scientific investigation and technology, promoting the development and dissemination of knowledge of the other circumpolar regions, strengthening Canada’s leadership on Arctic issues and ensuring a research presence in the Canadian Arctic. It also repeals the Canadian Polar Commission Act and makes consequential amendments to other Acts.
Division 4 of Part 4 amends section 207 of the Criminal Code to permit charitable or religious organizations to carry out, with the use of a computer, certain operations relating to a provincially-licensed lottery scheme.
Division 5 of Part 4 amends the Federal-Provincial Fiscal Arrangements Act to adjust the national standard for eligibility for social assistance to provide that no minimum period of residence is to be required for Canadian citizens, for permanent residents, for victims of human trafficking who hold a temporary resident permit or for protected persons.
Division 6 of Part 4 amends the Radiocommunication Act to:
(a) introduce an administrative monetary penalty regime;
(b) explicitly prohibit jammers, subject to exemptions provided by the Minister of Industry;
(c) provide for the enforcement of rules, standards and procedures established for competitive bidding systems for radio authorizations;
(d) modernize wording relating to the powers of inspectors and the requirements to obtain warrants;
(e) authorize inspectors to request information in writing and to seize non-compliant devices; and
(f) authorize the Minister of Industry to share information with domestic and foreign bodies for the purpose of regulating radiocommunication.
Division 7 of Part 4 amends the Revolving Funds Act to correct an error in the heading before section 4 by replacing the reference to the Minister of Foreign Affairs with a reference to the Minister of Citizenship and Immigration. The amendment is deemed to have come into force on July 2, 2013.
Division 8 of Part 4 amends the Royal Canadian Mint Act to eliminate the anticipation of profit by the Royal Canadian Mint with respect to the provision of goods and services to the Government of Canada.
Division 9 of Part 4 amends the Investment Canada Act to require foreign investors to provide notification whenever they acquire a Canadian business through the realization of security on a loan or other financial assistance, unless another Act applies. It also allows public disclosure of certain information related to the national security review process and makes related amendments to another Act.
Division 10 of Part 4 amends the Broadcasting Act to prohibit a person who carries on a broadcasting undertaking from charging a subscriber for providing the subscriber with a paper bill.
Division 11 of Part 4 amends the Telecommunications Act to provide the Canadian Radio-television and Telecommunications Commission (CRTC) with the authority to impose certain conditions concerning the offering and provision of services on providers of telecommunications services that are not telecommunications carriers, to prohibit providers of telecommunications services from charging subscribers for the provision of paper bills, to allow for sharing of information between the CRTC and the Competition Bureau, to provide the CRTC with the authority to impose administrative monetary penalties for violations of the Telecommunications Act, CRTC decisions and regulations, to provide the Minister of Industry with the authority to establish a registration system and update other processes relating to telecommunications apparatus in order to assess conformity with technical requirements, and to update inspection powers for ensuring compliance with that Act.
Division 12 of Part 4 amends the Business Development Bank of Canada Act to clarify the financial and management services that the Business Development Bank of Canada is authorized to provide, including financial services in respect of enterprises operating outside Canada. It also makes some changes to the governance provisions of that Act.
Division 13 of Part 4 amends the Northwest Territories Act — enacted by section 2 of chapter 2 of the Statutes of Canada, 2014 — to provide that, if the election period for the first general election under that Act would overlap with the election period for a federal general election, then the maximum duration of the first Legislative Assembly of the Northwest Territories under that Act may be extended until five years from the date fixed for the return of the writs at the last general election under the former Northwest Territories Act (chapter N-27 of the Revised Statutes of Canada).
Division 14 of Part 4 amends the Employment Insurance Act to allow for the refund of a portion of employer premiums paid by small businesses in 2015 and 2016. An employer is eligible for that refund if its premium is $15,000 or less for the year in question.
It also amends that Act to exclude from reconsideration under section 112 of that Act decisions of the Canada Employment Insurance Commission made under the Employment Insurance Regulations respecting the writing off of penalties owing, amounts payable or interest accrued on any penalties owing or amounts payable.
Division 15 of Part 4 amends the Canada-Chile Free Trade Agreement Implementation Act in order to implement amendments to the dispute resolution mechanism of the Canada-Chile Free Trade Agreement.
Division 16 of Part 4 amends the Canada Marine Act to provide for the power to make regulations with respect to undertakings that are situated in a port. It also authorizes those regulations to incorporate by reference documents, including the laws of a province. Finally, it authorizes port authorities to acquire federal real property or federal immovables and to lease or license any real property or immovable other than federal real property or federal immovables.
Division 17 of Part 4 amends the DNA Identification Act to, among other things,
(a) create new indices in the national DNA data bank that will contain DNA profiles from missing persons, from their relatives and from human remains to assist law enforcement agencies, as well as coroners, medical examiners and persons or organizations with similar duties or functions, to find missing persons and identify human remains;
(b) create a new index that will contain DNA profiles from victims of designated offences to assist law enforcement agencies in identifying persons alleged to have committed designated offences;
(c) create a new index that will contain DNA profiles derived from bodily substances that are voluntarily submitted by individuals to assist in either the investigations of missing persons or designated offences;
(d) establish criteria for adding and retaining DNA profiles in, and removing them from, the new indices, and transferring profiles between indices;
(e) specify which DNA profiles in the existing and new indices will be compared with each other;
(f) specify the purposes for which the Commissioner of the RCMP may communicate the results of comparisons of DNA profiles and the purposes for which that information may be subsequently communicated; and
(g) specify the uses to which the results of comparisons of DNA profiles may be put.
It also makes consequential amendments to the Access to Information Act and the Public Servants Disclosure Protection Act.
Division 18 of Part 4 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to provide that certain foreign entities that are engaged in the money-services business are included in the definition “foreign entity”.
Division 19 of Part 4 amends the Department of Employment and Social Development Act to eliminate the limit on the number of full-time and part-time members of the Social Security Tribunal.
Division 20 of Part 4 amends the Public Health Agency of Canada Act to create a new position of President as deputy head of the Public Health Agency of Canada, thereby separating the responsibilities of the Chief Public Health Officer from those of the deputy head of the Agency.
Division 21 of Part 4 amends the Economic Action Plan 2013 Act, No. 2 in order to provide that certain provisions of Division 8 of Part 3 of that Act apply to any corporation resulting from an amalgamation referred to in that Division, and to provide that certain provisions of the Blue Water Bridge Authority Act continue to apply to the Blue Water Bridge Authority after its continuance.
Division 22 of Part 4 amends several Acts to discontinue supervision of provincial central cooperative credit societies by the Office of the Superintendent of Financial Institutions, to eliminate tools for federal intervention in relation to those centrals and to provincial local cooperative credit societies, and to facilitate the entry of provincial cooperative credit societies into the federal credit union system by simplifying the process for continuation and amalgamation that applies to them.
Division 23 of Part 4 amends the Financial Administration Act to authorize Her Majesty in right of Canada to neither pay nor collect low-value amounts, except amounts owed by Crown corporations to persons other than Her Majesty in right of Canada, amounts payable to Crown corporations by such persons, amounts payable under the Air Travellers Security Charge Act, the Excise Act, 2001, the Excise Tax Act, the Income Tax Act or the Softwood Lumber Products Export Charge Act, 2006, and amounts related to the public debt or to interest on the public debt. It also provides Treasury Board with the authority to make regulations to set a low-value threshold, to specify circumstances for the accumulation of amounts and to exclude amounts, as well as regulations generally respecting the operation of the authority to neither pay nor collect low-value amounts.
Division 24 of Part 4 amends the Immigration and Refugee Protection Act to, among other things,
(a) replace references to an opinion provided by the Department of Employment and Social Development, with respect to an application for a work permit, with references to an “assessment”;
(b) authorize the Minister of Citizenship and Immigration or the Minister of Employment and Social Development to publish on a list the name and address of an employer who, among other things, has been convicted of certain offences; and
(c) authorize the Governor in Council to make regulations
(i) regarding the publication and removal of the names and addresses of employers,
(ii) regarding the power to require documents from any individual or entity for inspection in order to verify compliance with regulatory conditions,
(iii) requiring an employer to provide prescribed information in relation to a foreign national’s authorization to work in Canada for the employer,
(iv) governing fees to be paid for rights and privileges in relation to an assessment provided by the Department of Employment and Social Development with respect to an application for a work permit,
(v) governing fees to be paid in respect of the compliance regime that applies to employers in relation to their employment of certain foreign nationals,
(vi) regarding the collection, retention, use, disclosure and disposal of Social Insurance Numbers, and
(vii) regarding the disclosure of information for the purposes of cooperation between the Government of Canada and the government of a province.
Division 25 of Part 4 amends the Judges Act and the Federal Courts Act to implement the Government’s Response to the Report of the Special Advisor on Federal Court Prothonotaries’ Compensation with respect to the salary and benefits of the prothonotaries of the Federal Court.
Division 26 of Part 4 amends the Canadian Payments Act to make changes to the governance structure of the Canadian Payments Association and to add new obligations in respect of accountability, including by
(a) changing the composition of the Board of the Directors of the Association and the procedures for selecting the directors of the Board;
(b) establishing a Member Advisory Council;
(c) expanding the power of the Minister of Finance to issue directives to the Association; and
(d) adding new obligations in respect of the preparation of annual reports and corporate plans.
Division 27 of Part 4 amends the Payment Clearing and Settlement Act to expand and enhance the oversight powers of the Bank of Canada with respect to systems for the clearing and settlement of payment obligations and other financial transactions, so that the Bank is better able to identify risks related to financial market infrastructure and to respond in a timely and proactive manner. It also makes minor consequential amendments to other Acts.
Division 28 of Part 4 enacts the Extractive Sector Transparency Measures Act in order to impose the following obligations on entities that are engaged in the commercial development of oil, gas or minerals for the purpose of implementing Canada’s international commitments in the fight against corruption:
(a) the obligation to report to the responsible Minister certain payments made to payees; and
(b) the obligation to make reported information accessible to the public.
For the purpose of verifying compliance, the Act provides for an inspection regime and gives a power to the responsible Minister to require an entity to provide certain information. Finally, the Act provides for certain offences relating to the obligations under the Act.
Division 29 of Part 4 amends the Jobs and Economic Growth Act to provide that Canadian Nuclear Laboratories Ltd. (CNL) is an agent of Her Majesty in right of Canada, effective as of the date of CNL’s incorporation, and to provide that CNL will cease to be an agent on the day on which Atomic Energy of Canada Limited disposes of CNL’s shares. The Division also amends that Act to provide that the Public Service Superannuation Act will apply for a transitional period of three years to persons who are employees of CNL on that day.
Division 30 of Part 4 repeals a provision of the Economic Action Plan 2013 Act, No. 2 that amended a provision of the Public Service Labour Relations Act. It also amends provisions of the Economic Action Plan 2013 Act, No. 2 that amended the Public Service Employment Act in respect of the staffing complaint process.
It also makes a technical correction to a coordinating amendment in the Economic Action Plan 2013 Act, No. 2.
Division 31 of Part 4 transfers the pensionable service that is to the credit of certain Royal Canadian Mounted Police pension contributors under the Royal Canadian Mounted Police Superannuation Act to the Public Service Superannuation Act and deems those contributors to be Group 1 contributors under the Public Service Superannuation Act. It also amends the Royal Canadian Mounted Police Superannuation Act to repeal provisions relating to members of the Royal Canadian Mounted Police not holding a rank.

[The Chair, Conservative, James Rajotte]

I call this meeting back to order. This is meeting number 57 of the Standing Committee on Finance and we're dealing with Bill C-43, a second act to implement certain provisions of the budget.

We have with us another five individuals who are attesting from five organizations. From the Canadian Airports Council, we have the president, Mr. Daniel-Robert Gooch. From the Canadian Network of Northern Research Operators, we have Professor James Drummond, who is from Dalhousie University. From the Canadian Polar Commission, we have the executive director, Mr. David Scott. From the International Arctic Science Committee, we have a professor from the University of Alberta, Mr. David Hik. From Romero House, we have Ms. Jenn McIntyre, director.

Welcome to the committee.

You will each have five minutes, maximum, for your opening statement. Then we'll have questions from members.

We will start with the Canadian Airports Council, please.

[Daniel MacDonald]

I guess, first off, from my understanding of what British Columbia put in place, it was a global restriction, so it applied to those arriving from the rest of Canada and from out of country. To the extent that the specific proposal in C-43 is that a minimum residency requirement could not apply to Canadian citizens, so those who were coming from other provinces and moving to B.C., that would still constitute a violation of the Canada social transfer today, and so the Minister of Employment and Social Development would be required to embark upon the withholding process that is laid out in the act and refer the matter to Governor in Council for a withholding as it saw fit.

[Jay Aspin]

Are you aware of any other groups, other than refugee claimants, who are eligible for social assistance and could be subject to a waiting period should division 5 of C-43 be enacted?

[Dr. Lindsay Tedds, Assistant Professor, University of Victoria, As an Individual]

Good afternoon. I am Dr. Lindsay Tedds. I'm an associate professor here in the School of Public Administration at the University of Victoria.

My primary area of expertise is in Canadian tax policy, particularly with respect to design and implementation. I've written a number of peer-reviewed journal articles in this area, along with book chapters, technical reports, and two books.

I'd like to thank the committee for this opportunity to share my views on two tax policy measures included in Bill C-43 that includes the income contributed to an amateur athletic trust, as well as the children's fitness tax credit.

With respect to the amateur athletic trust changes, under Canadian tax rules Canadian athletes must claim any athletic prize money, as well as any income from endorsements and other remuneration-related activities. They have to report that as taxable earned income. Amateur athletes, though, can defer paying tax on this earned income by placing it in an amateur athletic trust. Tax on this earned income then is deferred until it is paid out by the trust and back to the athletes.

While the athletic money is considered to be earned income and eligible for determining RRSP contribution room, this recognition does not occur if the income is instead placed in an amateur athletic trust—that is, the money is never treated as earned income either at the time of placement in the trust or upon disbursement when the taxes are paid. As a result, the athletic money never qualifies toward determining an athlete's annual RRSP contribution limit.

Through Bill C-43, the federal government is changing the rules to ensure that this earned income in an amateur athletic trust is recognized as such for the purposes of determining an athlete's annual RRSP contribution limit in the year it is earned. It's eliminating a penalty that these athletes unwittingly incurred when using a government-sanctioned tax deferred vehicle and recognizes the importance for everyone to be able to garner RRSP room from the income they earn from their endeavours.

With respect to the children's fitness tax credit, this tax credit was introduced in 2007 with the stated goal of increasing enrolment of children in sport. This tax credit has been shown through at least four studies now to be ineffective in achieving this goal. Only about 15% of parents agree that this tax credit enables them to enrol their children in the program when they would not otherwise have been able to, subsidizing the behaviour of 85% of households. As a result, this tax credit does little more than subsidize behaviour that normally would otherwise occur.

It's also been shown this subsidy disproportionately goes to high-income households. About half of the households that claim the credit earn more than $100,000 annually. This regressivity is not going to be undone by making the tax credit refundable. This is due to the fact that the size of CFTC claims increase with income. That means high-income households obtain a greater and greater benefit from the credit.

Economists have long been calling for an end to these types of boutique tax credits because they are poorly targeted and ineffective in achieving their goals. The goal of a tax system is to raise the most revenue with the least distortions in a progressive manner, while minimizing administrative and compliance costs. These boutique tax credits mean that statutory rates are higher than they would otherwise be, distorting work and other effort; revenue is sacrificed that could be used more effectively; our progressivity is compromised; and time and money is wasted on administering the program and complying with the rules.

Do you really want hard-working Canadians to keep more of what they make, whether they be families or otherwise? Eliminate these wasteful boutique tax credits and instead cut tax rates. Doing that respects the principles of efficiency, equity, and economic growth, all while reducing administrative costs.

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

Thank you.

[James Michael Kennah, Co-President, IT International Telecom Inc.]

Thank you to the committee for the time.

Also thanks to Mr. Scarpaleggia, who has worked with us for about two years trying to get us here.

Who are we? We're a Canadian company. We're an offshoot of Teleglobe Canada, from the time when it was privatized and subsequently sold. We have facilities in Quebec, Nova Scotia, and British Columbia. We're also a large lessee for Ports Canada in Nova Scotia.

What do we do? We're involved in the submarine fibre optic business through our vessels in our international shipping company. We transport and deliver fibre optic cable throughout the world and Canada. For example, in the next 18 months one of our ships will have gone to the United States, Norway, the U.K., Germany, Chile, Ghana, Venezuela, American Samoa, Hawaii, Algeria, and then back to Newfoundland.

What's the importance of fibre optics, you may ask. Well, your cell phones only go to the nearest tower; 95% of the world's communications operate on fibre optics, which is basically a glass hair around the world. It's seamless and the most reliable communications system ever developed.

Why is it important to Canada? Canada has the longest coastline of the world. We are a marine country. We have so many lakes—I couldn't even find out how many we had. But as an example, we do communicate to our islands by fibre optics: Vancouver Island, Prince Edward Island, even across the Quebec north-south divide of the St. Lawrence River, and to Newfoundland, as well as in many lakes throughout the country.

Why are we here? Most of our business, as I said, is involved in the transportation and delivery of submarine cables by our ships. We can remain competitive by using the international shipping provisions of the Income Tax Act to operate our vessels through our Barbadian subsidiary. This allows us tax incentives and reduced operating costs. It's important to equalize these low-cost foreign shipping competitors. That is the problem. It also provides us the capability to reinvest in equipment and vessel upgrades. It allows us to keep the Canadian expertise in Canada. We are the only company in the country that does this, just us.

Why exclude cable laying? That's what happened with Bill C-43; you put a new provision in saying that cable laying is excluded from international shipping. Why does the government feel it necessary to exclude International Telecom from access to beneficial international shipping regulations that put us on an equal footing with our competitors throughout the world? These sections of the Income Tax Act, 250(6), were set-up for this exact purpose, to encourage Canadians in the international shipping industry. We are the only Canadian company that does cable laying.

How does this hurt the regulations? Companies like Canada Steamship Lines and Teekay Shipping use these regulations to remain competitive throughout the world.

How will this change hurt us? Well, we've suffered through a communications meltdown in the year 2000, and our company and our industry has struggled. We have allowed ourselves to remain in business by utilizing some of the beneficial income tax regulations. If we lose these, we will be disadvantaged against our international competitors who have these advantages.

The conclusion and summary of this is that cable laying needs to be removed from Bill C-43. We require the status quo. Canada cannot afford a brain drain again. We are the only guys, and our people will go to other international companies and not remain in Canada. It is so important in the upcoming few years with Plan Nord, which will be hooked by telecommunications primarily, and also the Arctic development. I think everyone would agree that we would rather have Canadians installing this than foreign companies.

That concludes my little talk, and I stand ready to answer any questions. I thank you for your attention and hope you have a chance to read my brief.

Thank you.

[James Carman, Senior Policy Advisor, Taxation, Investment Funds Institute of Canada]

Mr. Chair, thank you for this opportunity to provide the views of members of the Investment Funds Institute of Canada at this hearing. We are the voice of Canada's investment fund industry. By connecting savers to Canada's economy, our industry contributes significantly to Canadian economic growth and job creation.

In my remarks today, I will be focusing on the amendments to the loss restriction event, LRE, rules in Bill C-43.

First, I would like to thank the government and the minister for the amendments. We believe that these amendments will address many of the concerns faced by our members. As originally enacted through the Economic Action Plan 2013 Act, No. 2, a trust would be subject to an LRE if an issuance or redemption of trust resulted in an investor or a group of investors holding more than 50% of the units of the trust. The trust would have a deemed year end, resulting in potential distributions to investors, be required to file a tax return and provide tax reporting to investors, and any previous loss carry-forwards and accrued losses on its investment portfolio that could not be applied in the deemed year end, including against accrued gains, would be lost.

The principle intent of the legislation was to ensure the majority investor could not buy into a fund that had suffered extensive losses and take advantage of these losses to offset future gains within the fund. While the department's intent to protect the Canadian treasury against lost revenue due to aggressive tax planning was completely appropriate, the scope of the legislation was too broad and had unintended consequences.

The original legislation did not take into account important distinctions in events that result in LRE that are simply situational in origin, and have no aggressive tax planning intent. Some examples include changes in majority ownership that frequently occur when an investment fund is in a start-up or wind down phase. During these periods, a single investor may easily end up holding 50% or more of a fund because of the small number of other investors and capital. Fund-on-fund situations where a bottom fund has a small number of investors, primarily widely held top funds, are also problematic.

The application of the LRE rules is also unfair to minority investors where the result is that the trust loses previous loss carry-forwards and accrued losses. Minority investors are entitled to benefit from their share of the losses and have no control over changes to majority ownership.

The amendments in Bill C-43 address many of the significant issues that I've just outlined. However, as IFIC noted in our submission dated October 31 to the department, there is still one more important issue that needs to be addressed.

Bill C-43 defines the conditions to be met in investment trusts in order that what would otherwise be an LRE is disregarded. A key component is the definition of “portfolio investment fund”, which contains elements drawn from the specified investment flow-through trust rules, or the SIFT rules. These rules were enacted for a totally different tax policy reason, to shut down income funds. The definition of “portfolio investment entity” includes a condition that will require trusts to ensure that they do not hold more than 10% of the equity value of an issuer. This is not a concentration test applied to prospectus-qualified funds that are subject to National Instrument 81-102. The test will require investment managers to make portfolio investment decisions that they wouldn't otherwise make. Also, the definition of “portfolio investment fund” effectively means that funds that invest in portfolio securities, Canadian and foreign real estate, or resource issuers, cannot qualify.

It is our hope that we can work with the government to find a solution based on the investment restrictions in National Instrument 81-102.

Mr. Chair, that concludes my opening statement. Once again, we appreciate this invitation and would be pleased to answer any of your committee's questions.

[Caitlin Imrie, Director General, Passport Operational Coordination, Department of Citizenship and Immigration]

Good afternoon, Mr. Chair and honourable members of Parliament.

My name is Caitlin Imrie, I'm the director general of passport operational coordination at Citizenship and Immigration Canada.

I am here today to answer any technical questions you may have related to the change to the Revolving Funds Act, under part 4, division 7 of Bill C-43.

This is a technical amendment to update the relevant provisions of the Revolving Funds Act to reflect the transfer of responsibility for the passport program from the Minister of Foreign Affairs to the Minister of Citizenship and Immigration, which took effect on July 2, 2013.

This amendment changes the title preceding section 4, while subsections 4(1) and 4(2) have already been changed.

Thank you, and I look forward to any questions you may have.

[Daniel MacDonald, Chief, Canada Health Transfer (CHT)/Canada Social Transfer (CST) and Northern Policy , Department of Finance]

Good afternoon, Mr. Chair, and honourable members of Parliament.

My name is Daniel MacDonald. I am the chief of Canada health transfer/Canada social transfer and northern policy group in the federal-provincial relations division at the Department of Finance.

I am here today to answer any technical questions you may have related to the changes to the Federal-Provincial Fiscal Arrangements Act, under part 4, division 5 of Bill C-43 as they relate to the operation of the Canada social transfer itself.

The Canada Social Transfer (CST) is a federal block transfer to all provinces and territories in support of three broad areas of social policy. The first is post-secondary education, the second is programs for children, and the third is social assistance and other social programs.

In 2014-15 the total CST transferred to all provinces and territories is almost $12.6 billion. It has grown at 3% annually since 2008-09 and will continue to grow at 3% annually at least until 2024 when the next review of the CST legislation will take place.

These funds are allocated to provinces on an equal per capita basis so that each province receives its population's share of the total amount of the transfer. With respect to accountability, provincial and territorial governments are fully responsible for the design and delivery of programs in the areas supported by the CST, and are accountable to the residents and legislatures, not the federal government, for outcomes achieved and dollars spent.

Starting in 2007-08, the federal government enhanced the transparency of its support by notionally allocating the total transfer across each of the three priority areas: post-secondary education, social programs, and children's programs. These notional allocations are not binding, explicitly recognizing provincial and territorial government flexibility to invest in these areas according to their own priorities.

With respect to conditionality, the Federal-Provincial Fiscal Arrangements Act currently states that, in order to receive their full CST funding, provinces or territories must not impose minimum residency requirements for social assistance.

If a province violates the minimum residency prohibition stated in the FPFAA for the CST, the act requires the Minister of Employment and Social Development to engage the province in the withholding process described in statute. If the minister concludes that the province is not in compliance, the minister must then refer the matter to the Governor in Council who may direct that the province's CST amount be reduced by whatever amount it considers appropriate.

Should this proposal pass as part of Bill C-43, provinces will able to impose a minimum residency requirement on certain foreign nationals, as described by my colleague earlier, without triggering the statutory withholding process for the CST.

No other elements of the CST will be affected. In particular, the total transfer amount and the provincial and territorial equal per capita cash allocations will be unaffected if the provinces and territories impose minimum residency requirements consistent with the current proposal. There is no link between the legislated CST amount and allocation and the actual social assistance expenditures of a province or territory.

Thank you, and we look forward to any questions you may have.

But first, I will pass to my colleague Caitlin Imrie.

[Michael Hennessy, President and Chief Executive Officer, Canadian Media Production Association]

Thank you, Mr. Chair.

I will skip over a few paragraphs, but I've timed myself out just to make sure I do that five minutes.

Good afternoon. As the chair said, my name is Michael Hennessy and I'm the president and CEO of the Canadian Media Production Association, known as the CMPA.

On behalf of the over 350 primarily English-language independent producers of Canadian film, television, and digital media, we appreciate the invitation to contribute to the committee's important work on implementing certain provisions of the budget bill, tabled in Parliament earlier this year.

Our sector has become a success story because of increased focus on audience in export markets, and equally important, due to the support of government over the past 20 years through its tax incentives and regulatory policies.

The success of that investment is measurable. We work with the Department of Canadian Heritage and the Quebec producers' association on “Profile”, an annual economic report that tracks the production sector. According to “Profile”, expenditure on Canadian film and television production in Canada is now just under $6 billion. Included in that figure is approximately $1.5 billion of spending by other countries in Canada, particularly Hollywood on U.S. shows shot here, like Suits, Covert Affairs, and Once Upon a Time. They shoot here not only because of the attraction of investing here, but because of the quality of our talent and crews, which have been developed under the regimes I talked about earlier. These productions not only attract investment, but help create over 30,000 jobs annually.

But the real success can best be measured by popularity with audience, and last year we hit home runs. According to the Canada Media Fund, over 26 TV shows had audiences of over one million. Original shows like Saving Hope, Orphan Black, Rookie Blue, and Murdoch Mysteries are just a few examples.

Canadian content is no longer just for domestic consumption. CanCon sells overseas and the export value of our works is now almost $2.5 billion annually. Over 127,000 full-time jobs, according to “Profile”, are sustained because of this system of private and public partnership.

Predictable tax incentives, such as the Canadian film or video production tax credit program, have helped create an industry that has gained international respect. The program-related amendments in Bill C-43 are important to further improve the efficiency of the current system. These progressive changes are the fruit of many years of dialogue between the sector and the government, and they will provide both clarity and guidance to Canadian producers when closing business deals and securing financing.

But in parallel, as the industry moves into more a globally competitive and consumer-driven model for broadcasting, anchored by pick-and-pay options and increased competition from the Internet, we will be working closely with government on further increasing the efficiency of the program to maximize its intended return to producers and to the economy at large.

From a broader perspective, we believe growth will come from exports and increased inward investment in the sector. Accordingly, we want to collaborate with government going forward to increase export opportunities and partnerships with other countries to better exploit the intellectual property that Canadians create.

We believe that in a global information economy film and TV are not merely cultural products but an economic opportunity to build new and global markets and trade in content. Just as government support was critical in building a world-class domestic system, we believe government, through its trade arm, could help facilitate access to international film, television, and digital media markets, and related financing opportunities. Through export and other dedicated international programs, government and its agencies could actively support and promote the efforts of Canadian producers in securing foreign financing and increasing their business potential around the globe.

All of this will lead to even more jobs in Canada, more business opportunities, and more business and investment revenues for the Canadian economy.

In closing, I'd like to thank the committee again for allowing me, on behalf of the CMPA, to appear before you today. But I would be remiss if I did not end with thanks to the government and the taxpayers it represents for its faith that the incentives it put in place two decades ago would deliver returns in terms of popular content, high-value jobs, and increased inward investment in Canada. A spinoff of this is a reputation that, when it comes to entertainment, Canada is a favourite destination to do business.

I'll be pleased to answer your questions at the appropriate time, Mr. Chair.

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is meeting number 57 of the Standing Committee on Finance. Orders of the day are pursuant to the order of reference of Monday, November 3, 2014, our study of Bill C-43, a second act to implement certain provisions of the budget tabled in Parliament on February 11, 2014, and other measures.

Colleagues, we have two panels at this session, and we're very pleased—

Mr. Saxton, you have a point of order.

[Heidi Illingworth]

Thank you for inviting us to appear before the Standing Committee on Justice and Human Rights today.

Our agency is a federal not-for-profit corporation that was created in 1993 with a goal to provide a voice for persons harmed by serious crime in Canada. We offer advocacy, information resources, and emotional support to survivors. We're here today in support of Bill C-32, but we're calling for several amendments.

We believe that persons victimized by crime need to feel supported, retain their dignity, and be guaranteed a certain standard of treatment by our government. This bill means victims still go without legal status, a cause of action, or an appeal, should they not be satisfied. In my presentation today, I will highlight some of the amendments we are suggesting to strengthen this important legislation.

Information is power for victims, who are often left wondering what has happened, where to get help, or how their case will proceed. Bill C-32 addresses the need of victims for information, but it provides it to them only upon request. We feel that information should be offered to victims proactively. They should not have to request it given the trauma they've suffered and their general lack of knowledge about the criminal justice system or where to get help.

We also feel the language of the bill is too vague, in that it does not specify who is to provide this information to victims, how the information is provided, or how victims will even know they have such a right to request information. We cannot rely on the goodwill of professionals in the criminal justice system to provide the information. We must require them in legislation to do so. As such, we recommend the bill be amended to state:

Police and Crown prosecutors shall automatically provide victims of crime with:

general information about their rights under the Bill and how to exercise them, the criminal justice process, and support services available to them;

specific information about the progress of the case, including information relating to the investigation, prosecution and sentencing of the person who harmed them by the responding.

Information shall be provided to victims in the medium of their choosing, whether by mail, over the telephone or electronically.

Where a federal conviction has been secured, victims shall be provided instructions by the Crown's office on how to register with the PBC and CSC in order to receive information about the offender who harmed them.

With regard to the right to protection, the bill does not state which criminal justice authorities are responsible for the safety and security of victims, how victims' security will be considered in reality, or what reasonable and necessary measures are taken in each case. Without specifically requiring police and crowns to address these issues in each case where a victim raises concerns, victims' safety and protection may be overlooked. We recommend the bill be amended to state:

Police and Crown officials are responsible for consideration of the victim's security and privacy; and upon request of the victim, shall take reasonable and necessary measures to protect them from intimidation/retaliation, to protect their identity and privacy, and to provide access to testimonial aids. Where a victim raises a concern, each authority shall respond to the victim directly stating how the concern will be addressed.

With regard to the right to participation, the bill is unclear and does not specify to whom victims can convey their views or how their concerns will be formally addressed or acknowledged. We feel this bill is an important opportunity to ensure that judges make sure that victims who wish to be heard can do so at sentencing through impact statements, something that does not happen consistently across Canada currently. We recommend the bill be amended to state:

victims have a right to directly convey their views to police and Crown prosecutors about decisions to be made and that each entity must respond in a timely manner to indicate that the victim's concerns have been considered. Judges shall ensure that victims are provided an opportunity to address the court when the sentencing phase or sentencing hearings occur.

In Canada, our experience in working with victims of fraud tells us that restitution orders are very difficult for victims to enforce without incurring additional financial costs. Victims need practical help to enforce restitution orders, otherwise they are useless. It is especially difficult for victims to enforce such orders once the offender completes their sentence, and/or their parole period, because there's no longer an incentive for this offender to pay the balance of the order against them. Victims also commonly report to us that they have difficulty accessing information to help them gain access to funds they're owed because privacy laws protect the offender. We recommend the bill be amended to state:

each province and territory shall develop a restitution collection assistance program for victims based on the successful program currently offered to victims in the province of Saskatchewan.

I have some information about that and I can leave it with the clerk.

For rights to be meaningful in Canada, we feel that the victims bill of rights must offer appropriate recourse in the event that a victim's rights are infringed. In Bill C-32, the avenue for recourse is a requirement that federal departments and agencies establish internal mechanisms to receive and review complaints and then recommend remedial action. It does not state what recourse victims would have, if any, if internal complaint mechanisms did not resolve a situation to their satisfaction. We feel that this lack of recourse risks further aggravating and frustrating victims.

In the debates in the House, the minister said that the Office of the Federal Ombudsman for Victims of Crime will provide some of the recourse and redress to victims if there are failings within the provincial and territorial system, to assist victims in trying to alleviate their concerns. We are concerned because this bill does not specifically mention this office, and it is questionable what it can provide to victims when it has no investigative powers or jurisdiction to look at the failings of the provinces.

Paragraph 25(3)(c) requires every federal department agency or body to notify victims of the result of the complaint reviews and of the recommendations, if any were made. This is problematic as we see it, because departments are investigating themselves and are not even required to provide an official recommendation to address the complaint. Also, we know that since provinces are responsible for the administration of justice, most of the complaints are going to be related to provincial matters involving investigation and prosecution of cases, and not federal departments.

We recommend that the bill be amended to require that federal, provincial, and territorial departments that receive complaints from victims respond in writing to all complaints, including an explanation of policy change or other outcomes, even where department officials deem them minimal. Offices that investigate complaints shall also have the authority to require a curative or restorative remedy from FPT departments where it is found that a victim's rights were infringed, including requiring crowns and police officers to receive education about the bill or to write letters of apology where it is deemed a victim's rights are infringed.

There are other significant gaps in the bill that we wanted to highlight for you. We feel that it is lacking a clear right to support services in the aftermath of what has happened to victims. In the interests of community resiliency, we feel that victims must be guaranteed support services to help them recover. This bill should be amended to reflect this.

Another major concern of ours is that the bill does not apply to victims in the military, and we feel that it should be amended to include this group. We know that victims of sexual assault and harassment in the military have a particularly difficult experience. Recent research has highlighted the fact that those who file complaints face mockery, ostracism, and even threats. Victims clearly do not feel safe to come forward and report these crimes to superior officers.

Lastly, with regard to monitoring, implementation, and enforcement of this bill, we're concerned about how it's going to be enforced uniformly across Canada, since it is the provinces and territories that are responsible for the administration of justice. We believe it's critically important to monitor and assess how this legislation is implemented and enforced, so that in practice victims every day are not denied their rights.

We recommend that each province and territory establish an agency with an oversight function to help monitor the rights of victims and their fair treatment by criminal justice practitioners. Such offices may investigate both the statutory violations of victims' rights and alleged mistreatment by criminal justice practitioners in a neutral and objective manner. We feel that this office could also make recommendations to provincial and territorial authorities for change and should be required to report to the Policy Centre for Victim Issues annually about the number and circumstances of crime victims whose rights have been infringed.

We also recommend that the policy centre for victim issues provide a biannual monitoring report to Parliament so that criminal justice stakeholders and members of the public are aware of how victims' rights are being implemented and enforced, how many complaints are received, and how many are resolved to the victims' satisfaction while enhancing FTP cooperation in this regard.

To conclude, we view the Canadian victims bill of rights as a valuable piece of quasi-constitutional legislation that for the first time recognizes some of the needs of people who are harmed by crime in Canada. However, we feel that this bill requires victims to seek out the rights provided to them rather than being offered them automatically. It's also difficult to see how we're making victims' lives easier if we don't provide real recourse to them when their rights are violated. If we don't provide victims the ability to enforce their rights, the bill doesn't have the desired effect of changing the existing legal culture, which often excludes victims from criminal processes.

Nor will it hold criminal justice authorities to account in terms of respecting the rights it enshrines. We must do better than this for persons harmed by crime in Canada.

Thank you.

[The Chair, Conservative, David Sweet]

Mr. Côté, we have two panels today, just one hour for each panel. I was already expressing some concern that that always means some members may not get the full portion of questioning.

We'll try to squeeze in as much as we can at the end. I want to respect your request and I want to respect all of the members' capability of questioning. I have no problem with that, but we'll try to keep it as brief as we can.

Also on that point, I wanted to mention that my legislative assistant had called everyone's office to let them know that we need to have all of the witness lists in for the study by next Monday, if we can, so that we'll have a good opportunity to question the material regarding Bill C-43.

If you could do that, our clerk could make the most of his time and make sure that when we come back, panels will be set up, so that we can continue our study. That would be appreciated.

[The Chair, Conservative, David Sweet]

This is meeting number 28 of the Standing Committee on Industry, Science and Technology where we will be studying Bill C-43.

I received a letter from the Chairman of the Standing Committee on Finance, dated November 4, where he asked us to consider certain portions of Bill C-43 that were germane to the industry department and that's what we're pursuing right now.

I'm going to introduce our witnesses in a second.

Colleagues, if I could just do a bit of business. I will take the opportunity to forward this letter to you, but I wanted to just bring it up at a committee meeting.

We were invited by an organization called Startup Canada to partake in an information breakfast with them with prominent entrepreneurs. One of the hosts will be Sir Terry Matthews, accompanied by Dr. Adam Chowaniec.

I will make sure that this information gets to your offices. I wanted to let you know that it will be on November 25 and you're expressly invited as members of the Standing Committee on Industry, Science and Technology.

Monsieur Côté.

[Deborah Elder, Acting Director, Pensions and Benefits Sector, Treasury Board Secretariat]

At that time we were just focusing on the pension reform of the four major public sector pension plans: the members of Parliament, the public service, the RCMP, and the Canadian Forces. When Bill C-42 was tabled, at that time the public service pension plan had a retirement age of 60, and therefore that's why these provisions weren't included in that bill.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Mr. Chair, again I have removed that amendment and replaced it with the following. I have it here for the clerk.

It says that Bill C-2 in clause 5 be amended by replacing lines 35 to 38 on page 8 with the following:

located that provides rationale for and endorses the application for the exemption

This is with respect to municipalities.