Bill C-29 (Historical)

Budget Implementation Act, 2016, No. 2

A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures

Part 1 implements certain income tax measures proposed in the March 22, 2016 budget by
(a) eliminating the eligible capital property rules and introducing a new class of depreciable property;
(b) introducing rules to prevent the avoidance of the shareholder loan rules using back-to-back arrangements;
(c) excluding derivatives from the application of the inventory valuation rules;
(d) ensuring that the return on a linked note retains the same character whether it is earned at maturity or reflected in a secondary market sale;
(e) clarifying the tax treatment of emissions allowances and eliminating the double taxation of certain free emissions allowances;
(f) introducing rules so that any accrued foreign exchange gains on a foreign currency debt will be realized when the debt becomes a parked obligation;
(g) ensuring that amounts are not inappropriately received tax-free by a policyholder as a result of a disposition of an interest in a life insurance policy;
(h) preventing the misuse of an exception in the anti-avoidance rules in the Income Tax Act for cross-border surplus-stripping transactions;
(i) indexing to inflation the maximum benefit amounts and the phase-out thresholds under the Canada child benefit, beginning in the 2020–21 benefit year;
(j) amending the anti-avoidance rules in the Income Tax Act that prevent the multiplication of access to the small business deduction and the avoidance of the business limit and the taxable capital limit;
(k) ensuring that an exchange of shares of a mutual fund corporation or investment corporation that results in the investor switching between funds will be considered for tax purposes to be a disposition at fair market value;
(l) implementing the country-by-country reporting standards recommended by the Organisation for Economic Co-operation and Development;
(m) clarifying the application of anti-avoidance rules in the Income Tax Act for back-to-back loans to multiple intermediary structures and character substitution; and
(n) introducing rules to prevent the avoidance of withholding tax on rents, royalties and similar payments using back-to-back arrangements.
Part 1 implements other income tax measures confirmed in the March 22, 2016 budget by
(a) allowing greater flexibility for recognizing charitable donations made by an individual’s former graduated rate estate;
(b) clarifying what types of investment funds are excluded from the loss restriction event rules that otherwise limit a trust’s use of certain tax attributes;
(c) ensuring that income arising in certain trusts on the death of the trust’s primary beneficiary is taxed in the trust and not in the hands of that beneficiary, subject to a joint election for certain testamentary trusts to report the income in that beneficiary’s final tax return;
(d) clarifying that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase; and
(e) implementing the common reporting standard recommended by the Organisation for Economic Co-operation and Development for the automatic exchange of financial account information between tax authorities.
Part 1 also amends the Employment Insurance Act and various regulations to replace the term “child tax benefit” with “Canada child benefit”.
Part 2 implements certain goods and services tax and harmonized sales tax (GST/HST) measures proposed or confirmed in the March 22, 2016 budget by
(a) adding certain exported call centre services to the list of GST/HST zero-rated exports;
(b) strengthening the test for determining whether two corporations, or a partnership and a corporation, can be considered closely related;
(c) ensuring that the application of the GST/HST is unaffected by income tax amendments that convert eligible capital property into a new class of depreciable property; and
(d) clarifying that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase.
Part 3 implements an excise measure confirmed in the March 22, 2016 budget by clarifying that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase.
Division 1 of Part 4 amends the Employment Insurance Act to specify what does not constitute suitable employment for the purposes of certain provisions of the Act.
Division 2 of Part 4 amends the Old Age Security Act to provide that, in the case of low-income couples who have to live apart for reasons not attributable to either of them, the amount of the allowance is to be based on the income of the allowance recipient only.
Division 3 of Part 4 amends the Canada Education Savings Act to replace the term “child tax benefit” with “Canada child benefit”. It also amends that Act to change the manner in which the eligibility for the Canada Learning Bond is established, including by eliminating the national child benefit supplement as an eligibility criterion and by adding an eligibility formula based on income and number of children.
Division 4 of Part 4 amends the Canada Disability Savings Act to replace the term “child tax benefit” with “Canada child benefit”. It also amends the definition “phase-out income”.
Division 5 of Part 4 amends the Royal Canadian Mint Act to enable the Royal Canadian Mint to anticipate profit with respect to the provision of goods or services, to clarify the powers of the Royal Canadian Mint, to confirm the current and legal tender status of all non-circulation $350 coins dated between 1999 and 2006 and to remove the requirement that the directors of the Royal Canadian Mint have experience in respect of metal fabrication or production, industrial relations or a related field.
Division 6 of Part 4 amends the Financial Administration Act, the Bank of Canada Act and the Canada Mortgage and Housing Corporation Act to clarify certain powers of the Minister of Finance in relation to the sound and efficient management of federal funds and the operation of Crown corporations. It amends the Financial Administration Act to provide that the Minister of Finance may lend, by way of auction, excess funds out of the Consolidated Revenue Fund and, with the authorization of the Governor in Council, may enter into contracts and agreements of a financial nature for the purpose of managing risks related to the financial position of the Government of Canada. It also amends the Bank of Canada Act to provide that the Minister of Finance may delegate to the Bank of Canada the management of the lending of money to agent corporations. Finally, it amends the Canada Mortgage and Housing Corporation Act to provide that the Bank of Canada may act as a custodian of the financial assets of the Canada Mortgage and Housing Corporation.

Budget Implementation Act, 2016, No. 2

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

moved that Bill C-29, A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, be read the second time and referred to a committee.

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, it has been just over a year since the previous federal election, and I think we would all agree it has been a tremendous year for all of us in this House. Twelve months ago, many felt the momentum building throughout the country. We were confident in our vision for Canada, and, as it turns out, so were Canadians.

In this past year, especially as a first-time MP, I have been thrilled to be working on behalf of Canadians, helping to impact their lives for the better. It is a pleasure for me to rise in this chamber and speak about the investments that the Government of Canada will be making to keep Canada and its people strong and growing for the long term.

Canada is one of the first countries in the world to put into practice the idea that when you have an economy that works for the middle class, you have a country that works for everyone.

In the last year we took some important steps towards helping families regain the confidence they will need to drive our economy forward. We cut taxes for close to nine million Canadians, and we introduced the Canada child benefit, which puts more money in the pockets of nine out of ten families with children.

We increased Canada student grants for students from low- and middle-income families and for part-time students. We increased monthly payments for the most vulnerable seniors. We signed an agreement with the provinces to enhance the Canada pension plan to provide young people and future generations of workers with a stable, dignified retirement.

We have also begun making unprecedented investments that will help the middle class grow and prosper today, while delivering economic growth for years to come.

We will continue to build on this momentum.

This second budget implementation act proposes items that will complete the implementation of outstanding measures from the Government of Canada's first budget, growing the middle class.

As a government, we are particularly proud of our first budget. This is a budget that puts people and family first. It introduces investments that take an essential step to growing the middle class. It is the first step of a long-term plan to restore hope and revitalize the economy for the benefit of all Canadians. This is a budget and a plan that is not only resonating with Canadians, but is gathering international praise around the world as well.

The Financial Times called Canada's approach a glimmer of light. The Wall Street Journal called our finance minister “the poster child” for the International Monetary Fund's global growth strategy. Christine Lagarde, head of the International Monetary Fund, praised our approach as well. At the recent IMF annual meetings, Madame Lagarde said, “Look at Canada.... They're using all possible levers to move the needle towards positive and more growth”. That is what all countries can do.”

Our budget earned these endorsements. I firmly believe that we as a government are focused on exactly the right things: on people, and on growing the economy for the long term in a way that will benefit all Canadians.

The bill before us today, budget implementation act, 2016, No. 2, completes the implementation of the measures we introduced in budget 2016. It provides additional assistance to the people who are the heart of our economy, Canada's middle class.

The bill we are debating today will help foster a strong Canadian economy and will enable Canadians in the middle class and those working hard to join it to keep more of their money to save, invest, and ensure economic growth.

This bill includes measures that will help families, give seniors a little more flexibility, protect consumers, and improve the quality and integrity of our country's tax system.

One of the cornerstones of our plan to strengthen the middle class is also a cornerstone of our first budget. In budget 2016, we introduced the new Canada child benefit. This benefit will help parents better support what is most precious to them, their children.

The Canada child benefit is simpler and more generous than the benefits it is replacing. It is also tax free and better targeted to help those who need it most in our society.

The Canada child benefit will lift hundreds of thousands of children out of poverty in Canada. That is because since the benefit was first rolled out in July, nine out of ten families are now receiving more money than they did under the previous system.

Whether that extra money is being used to buy school supplies, groceries, or warm coats for the winter, the Canada child benefit will help parents cover the growing cost of raising their children.

Let me explain how this benefit will help Canadian families. Parents of children under 18 will receive a maximum annual benefit of $6,400 per child under six and $5,400 per child aged six through 17.

Supporting this budget implementation bill will help ensure that the Canada child benefit will be indexed to inflation, so that families can count on this extra assistance today and for years to come.

This budget implementation act would also support seniors by helping them to retire in more comfort and with dignity. Canada's retirement income system has been successful in reducing the incidence of poverty among Canadian seniors. However, some seniors continue to be at heightened risk of living with low income. In particular, single seniors are nearly three times more likely to live with low incomes than seniors generally. Budget 2016 would help seniors retire comfortably and with dignity by making significant new investments that support them in their retirement years.

In budget 2016, we repealed the provision of the Old Age Security Act that increased the age of eligibility for old age security and guaranteed income supplement benefits from 65 to 67 years of age and allowance benefits from 60 to 62 over the 2023 to 2029 period. Restoring the eligibility age for old age security and guaranteed income supplement benefits to 65 will put thousands of dollars back into the pockets of Canadians as they become seniors and look to retire. That is the right thing to do.

Budget 2016 also increased the guaranteed income supplement top-up benefit by up to $947 annually for the most vulnerable single seniors, starting in July 2016. This is helping those seniors who rely almost exclusively on old age security and guaranteed income supplement benefits, and may therefore be at risk of experiencing financial difficulties.

These enhancements more than double the current maximum guaranteed income supplement top-up benefit and represent a 10% increase in the total maximum guaranteed income supplement benefits available to the lowest income single seniors in our country. This measure represents an investment of over $670 million per year and will improve the financial security of about 900,000 single seniors across our nation.

In this second budget implementation bill, we are delivering on the promise we made in budget 2016 to support senior couples who face higher costs of living and are at an increased risk of poverty because they must live apart.

This second budget implementation bill amends the Old Age Security Act in order to make the program more flexible. When couples who are receiving the guaranteed income supplement and the spouse's allowance have to live apart for reasons beyond their control, each of them will receive benefits based on their individual income.

By extending this treatment to couples receiving the guaranteed income supplement and spouse's allowance, the government is improving fairness for seniors and helping them live with the dignity they deserve and need in retirement.

Canadians deserve financial consumer protection that keeps pace with people's needs. In line with this, budget 2016 contains plans to strengthen and modernize the financial consumer protection framework.

Budget implementation act, 2016, No. 2 would amend the Bank Act in order to strengthen and modernize the financial consumer protection framework in our country. The financial sector plays an important role in supporting economic growth in this nation. Each day, the nation's financial institutions support the financial needs of consumers and large and small businesses, and enable payments and transactions. They form the infrastructure of our market system.

Canada's financial sector weathered the 2008 financial crisis well. We are seeking to build on this strength. We want to make sure that the financial sector is able to adapt to new trends, including emerging financial innovation and technologies that will challenge existing business models, evolving consumer preferences and customer relationships, changing demographics, and continuing globalization.

Budget 2016 proposes to modernize the financial consumer protection framework by clarifying and enhancing consumer protection in the Bank Act, and working with stakeholders to support the implementation of the framework. This legislation proposes to consolidate and streamline existing consumer provisions into one chapter of the Bank Act, and introduce amendments to the Bank Act to enhance consumer protection in the areas of access to basic banking services' business practices, disclosure, complaints handling, as well as corporate governance and accountability.

The federal government is showing leadership by implementing targeted measures to better protect consumers of financial products and services in Canada. These measures include improving access to basic banking services, setting limits on certain business practices, and improving disclosure of information to make it easier for consumers to make informed choices. These reforms reiterate the federal government's intent to have a system of exclusive consumer protection rules to ensure an efficient national banking system across the country.

Fairness is one of Canadians' fundamental values. That is why the government of Canada committed to implement an action plan to combat international tax evasion and aggressive tax avoidance that contains new measures and builds on the efforts that are currently being made both here in Canada and abroad. This work will help protect the tax base and boost Canadians' confidence in the fairness of a system that ensures that everyone pays their fair share of the tax burden.

As part of an international effort to combat tax evasion, budget 2016 confirms the government's intention to implement the common reporting standard developed by the Organisation for Economic Co-operation and Development, OECD. Under the common reporting standard, Canadian financial institutions will be expected to have procedures in place to identify accounts held by non-residents and to report information on those accounts to the Canada Revenue Agency.

Tax administrations in foreign jurisdictions will likewise collect information from their financial institutions about accounts held by residents of other countries, including Canada. The CRA will formalize exchange arrangements with foreign jurisdictions, having verified that each jurisdiction has appropriate capacity and safeguards in place. Then the financial account information will begin to be exchanged on a reciprocal bilateral basis.

The introduction of the common reporting standard is an important global development, which will help enhance tax compliance and eliminate opportunities for tax evasion in our country. Canada intends to implement the standard consistent with our commitment to the G-20 and similar commitments by more than 100 other jurisdictions.

The budget also announced plans to implement a new requirement for country-by-country reporting. This is an initiative agreed to under the G20/0ECD project to address tax avoidance by multinational enterprises through base erosion and profit shifting.

Under these new rules, large multinational enterprises will be required to file information with tax authorities providing a high-level profile of their activities in each jurisdiction in which they operate. These reports will enhance transparency and assist tax administrations in performing effective risk assessments.

Going forward, Canada will continue to work with the international community to ensure a coherent and consistent response to tax avoidance. In addition to these new legislative tools, budget 2016 also announced $444 million in new resources for the Canada Revenue Agency to address offshore tax evasion and aggressive tax avoidance.

In conclusion, budget 2016 represents a giant step forward in our plan to put people first and to deliver the help they need now while investing for the years and decades to come. With these investments, and inspired by a sense of fairness, we are ensuring that Canada's best days lie ahead. Our plan is about creating the necessary conditions to ensure that hope and hard work will not be wasted but will be rewarded in this country where our children and our grandchildren can flourish.

The Government of Canada is focused on the larger picture of ensuring prosperity for Canadians well beyond its 150th birthday. I therefore encourage all members in the House to support the bill. This is right for Canada. This is right for families. This is right for the middle class.

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

Madam Speaker, instead of calling it growing the middle class, they should be calling it breaking the middle class, because what we see is a deficit that is out of control.

I would like to ask the Parliamentary Secretary to the Minister of Finance if, when he was campaigning a year ago, he was telling people at the doorstep that there would be a $10-billion deficit. What would they say to him had they known that we are now at $30 billion and growing, with no plan to keep spending under control? The Liberals are not helping the middle class.

We look at our job numbers. We look at what is happening to our youth. We have serious concerns in Canada in terms of the direction the government is taking us.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Madam Speaker, I welcome the question from my colleague, for whom I have enormous esteem for her interest in our economy. I had the privilege, as a member of Parliament and a parliamentary secretary, to criss-cross this country on budget 2016, from Moncton to Yellowknife. People told us two things: to help them and their families, and to grow the economy.

To help the middle class, we reduced taxes for the middle class. That is the first thing this government did for Canadians. We then introduced the Canada child benefit, which is one of the most innovative social policies in our country since universal health care. We went on to amend the CPP and made sure that we did something for seniors and students.

People asked us to be bold and to take the initiative to grow the economy. That is why we proposed to invest $120 billion over 10 years in our infrastructure. It is an historic announcement this government has made to invest in innovation. Canadians from Moncton to Yellowknife told us to invest in this country, invest in the middle class, and invest in Canadians.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Madam Speaker, first of all, I find it truly ironic that in this budget the Liberals are taking credit for indexing the Canada child benefit. They had not originally intended to index the benefit, but the parliamentary budget officer's report forced their hand.

He indicated that by 2020 or 2021, the Liberal program would be less generous than that of the Conservatives. The same afternoon that the report was released, the Liberals announced that they would index the benefit starting in 2020 or 2021. I would have liked the government to be a little more forthcoming and at least admit that they made a mistake and that they had forgotten to index the program, which will obviously increase the cost of delivering it.

I would also like to follow up on an issue that was not mentioned by the parliamentary secretary in his speech, and that is the privatization of Government of Canada assets. Yesterday, in committee, Dominic Barton, chair of the Advisory Council on Economic Growth, did not deny that the government is moving toward privatization.

Could the member explain why he did not mention this in his speech? Could he also tell us when exactly during the campaign did the government talk about privatization?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Madam Speaker, I first want to commend the incredible work my colleague across the aisle is doing on the Standing Committee on Finance. It is a tremendous pleasure to work with him on that committee.

I am sure he did not mean to question my integrity or that of the Minister of Finance regarding the last budget. In the interviews he gave, the Minister of Finance clearly indicated that the benefit would be indexed, and that is what we are doing. This is included in the second budget implementation bill.

I understand that his wish has now been fulfilled. I am sure that he wants the Canada child benefit to be indexed, as do all parliamentarians.

As for his other question, we are pleased to have an advisory council that provides the Minister of Finance with innovative ideas on economic growth in this country. As we have said many times, we have asked the Advisory Council on Economic Growth to be ambitious and come up with innovative ideas to help ensure growth in Canada, and that is exactly what it is doing.

I would remind my colleague that these are recommendations, no final decisions have been made, and these are not government policies. We will consider any good idea that helps boost the country's growth. That is what Canadians expect, and that is exactly what we are going to do.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Madam Speaker, I want to thank my hon. colleague for that wonderful speech. I have a question for him regarding the Canada child benefit.

I spend a lot of my weekends in the hockey arenas in my riding. I have two young boys who play hockey. What I am hearing is how this fundamentally changes the lives of so many people in my riding. Parents can afford things for their kids that they could not before. People are now playing hockey and sports in my riding who were not able to before.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

You took the sports tax credit away.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Madam Speaker, tax credits do not work. We all know that if a person does not have the money to pay in the first place, boutique tax credits do not work.

I want the member to elaborate on how the Canada child benefit actually provides opportunities for so many children. Three hundred thousand children were lifted out of poverty because of this measure.

Would the member please elaborate on that?

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I just want to remind members of the opposition that they will have a chance to ask another question. If they restrain themselves and allow people to speak, that would be great.

The Parliamentary Secretary to the Minister of Finance.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Madam Speaker, I could hear the members on the other side. Their interest in the Canada child benefit is very vocal, and we appreciate that. It is very good to hear them comment on it, because, as my hon. colleague mentioned, this is making a difference for families.

He talked about his riding. Let me talk about my own riding.

The Canada child benefit is helping about 18,000 children. Ten thousand families are better off now because of the Canada child benefit, which is tax free, which is more targeted, and which is providing more money.

When someone comes from a riding like mine, Saint-Maurice—Champlain, where we have gone through economic difficulties, where the economy is in transformation, and where the median income is probably among the most challenging in our country, and we give people that amount of money, we increase disposable income by about 5% to 10% for families. It makes a difference.

I would invite members on each side to talk to families, as we are on this side, to make sure that they understand the difference.

I have people walk into my constituency office saying that this is transformative for them and their children, because it is tax free, because it is targeted. That is what people were asking for. We went across the country. About a quarter of a million people engaged with us on budget 2016 and asked us to help them and their families.

This is what we are delivering. This is right for Canadians. This is right for Canadian families.

[Sylvie Boucher, Conservative, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Madam Speaker, I thank my colleague opposite for his speech. However, I need to understand a few things. We all know that you made some lofty promises during the election campaign—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order, please, I would remind the member that she must direct her comments to the Chair.

[Sylvie Boucher, Conservative, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Madam Speaker, the Liberals made some very fine promises during the election campaign, but what Canadians are most worried about are the things they did not tell people they would do, things they have been doing quite merrily for some time now. They brag about investing millions of dollars in infrastructure.

Promising money is all well and good, but when will they act on that promise?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Madam Speaker, I thank my colleague for her question. I have a lot of respect for her, as she knows. She represents her constituents well.

I would like to talk about what we have said and what we have done. One of our campaign promises was to cut taxes for Canada's middle class. That was the first bill we introduced in Parliament. During the campaign, we also promised to help Canadians. That is why we created the Canada child benefit, which, as my colleague well knows, will lift hundreds of thousands of children out of poverty. I know the member personally, and I know that she is on board with lifting Canadian children out of poverty.

As the hon. member said, we made some very fine promises to our seniors. That is exactly why we improved the guaranteed income supplement and lowered the retirement age from 67 to 65, like seniors asked us to.

We also promised to help students and that is what we did in our budget. We promised Canadians growth and that is why we made an historic $120 billion investment over 10 years in infrastructure. We promised Canadians innovation and that is why we presented a plan for innovation.

As my colleague can see, we made fine promises, but more importantly for Canadians, we kept them. We will continue doing more of the same.