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

[Wayne Stetski, NDP, Kootenay—Columbia, BC]

Madam Speaker, in my previous life I was mayor of a community called Cranbrook, and one of the burdens that our taxpayers ended up living with was a failed public-private partnership. A new recreational complex was built in Cranbrook, a public-private partnership that failed. The city ended up having to buy out the private partner, and we were locked into about 15 years' worth of loans at 8% that we could not even borrow money to pay down, because the loans were locked in.

What are some of my colleague's other concerns about privatization of infrastructure? It certainly was a failure in Cranbrook.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Madam Speaker, there would not be enough time to say what happens when governments partner with private companies. Most of time when we join with private companies, they seem to get the bigger benefit and the public side always seems to get the shortfall. In Ontario, we paid millions and millions of dollars for Highway 407. Then it was privatized and all of a sudden its owners are making millions of dollars, which we said we could not do. I am having some difficulty with any kind of privatization, but if it is going to happen, we have to make sure that it will be of benefit to Canadians and not just to corporations.

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, I will be sharing my time with the member for Mount Royal.

I am pleased to have the opportunity to speak to two aspects of budget implementation act, 2016, No. 2. This bill makes significant amendments to the Canada Disability Savings Act and the old age security program.

At first glance, these two programs seem to be different. However, they have the same goal, namely to ensure that the most vulnerable Canadians enjoy a good quality of life and live with the dignity they deserve.

First of all, I would like to remind the House that the Canada Disability Savings Act governs how the grants and bonds provided by the government are paid into registered disability savings plans, or RDSPs.

RDSPs were created in 2008 in order to help people with disabilities and their families save in order to provide long-term financial security. Canadian residents who are entitled to the disability tax credit can open a RDSP until the end of the year in which the recipient turns 59. Parents or guardians can open an RDSP on behalf of a minor. There is no annual contribution limit, but the lifetime limit is $200,000.

The gains accumulated are tax free until withdrawn from the RDSP. The government contributes to the RDSPs of eligible recipients by providing grants or bonds, or both, up to a maximum amount.

The bill being debated today would amend the Canada Disability Savings Act. These changes are required because the act refers to the Canada child tax benefit. As all members know, that benefit was replaced by the new Canada child benefit last June. Every year, the amount of the grant or bond that the recipient is entitled to is calculated on the basis of adjusted family income.

With regard to RDSP benefits for youth under the age of 18, this adjusted income, the amount used to determine the government's contribution in the form of a grant or bond, was also used by the government to calculate the amount of the Canada child tax benefit. Since that benefit no longer exists, we need to amend the provisions of the Canada Disability Savings Act that mention that benefit. We also need to amend the provisions that mention “phase-out income”.

As members know, the amount of the bonds decrease for those with higher incomes. The threshold at which the bonds start to decrease is called the “phase-out income”. It is important to understand this concept because the formula used to calculate the phase-out income includes the Canada child tax benefit.

As a result, the following three consequential amendments will be made to the Canada Disability Savings Act. First, the references to the Canada child tax benefit in five provisions of the Canada Disability Savings Act will be replaced by references to the new Canada child benefit. Second, the definition of “phase-out income” will be changed to include the Canada child benefit income threshold in the formula. Third, the definition of “child tax benefit” in the definitions section of the Canada Disability Savings Act will be removed since it will no longer be necessary.

Thanks to these amendments, the income thresholds for eligibility for the Canada child benefit and the Canada disability savings bond will be harmonized. The increase in the income threshold will produce a slight increase in total payments made for the bond in the RDSP of persons with disabilities. Persons with disabilities are not the only group that needs additional government assistance. The income security of our country’s seniors is another government priority.

That is why we will be formulating provisions to help Canada’s seniors enjoy a good quality of life. Seniors are important members of our society, who contribute actively to the well-being of their families and of our community, as well as to the growth of our economy. We have one of the lowest rates of senior poverty in the world.

In 2013-14, the most recent year for which data were collected, the Government of Canada paid Canadians over $79 billion under the Canada pension plan and old age security. These programs have contributed greatly to reducing the low-income rate for seniors over the last 30 years. However there still remains a great deal of work to do.

In 2014, the most recent year for which data were collected, 3.9% of the country’s seniors were living below the low-income cut-off established by Statistics Canada, representing some 200,000 people. Nearly 80% of these low-income seniors, or the vast majority, are single, and most of them are women.

That is why we have also increased by $947 per year the amount paid as the guaranteed income supplement to low-income single seniors. This measure will support the most vulnerable seniors who depend almost exclusively on their old age security pension and guaranteed income supplement, and who are thus at risk of experiencing financial difficulties.

Similarly, this measure will improve the financial security of some 900,000 seniors all across Canada, and we estimate that it will help lift nearly 13,000 of the most vulnerable seniors in Canada out of poverty.

We already support senior couples, in cases where the two members of the couple are receiving the guaranteed income supplement, have high living expenses, and are at high risk of poverty due to the necessity of living apart, for example, when one of the spouses is forced to live in a nursing home.

In some senior couples, one partner receives the guaranteed income supplement and the other the spousal allowance, but they have to live apart for reasons beyond their control, such as one of them needing long-term care. We are in the process of amending the Old Age Security Act to ensure that such couples receive higher benefits based on each individual's income.

I would like to point out that the allowance is paid to people 60 to 64 years of age with low income whose spouse or common-law partner receives the guaranteed income supplement.

Our government also reversed the decision to increase the age of eligibility for old age security from 65 to 67, which should come into effect in 2023. That change will give low-income seniors up to $17,000 per year. With these key measures, we will provide essential support to the most vulnerable Canadians.

The Government of Canada cares about seniors. Canadians work tirelessly their whole lives. We should all have a chance to live into old age without worrying about making ends meet. That is why our minister was given a mandate to improve income security for low-income seniors. These measures are how we are keeping that promise.

We promised to help more Canadians escape poverty. To me it is unimaginable that in a country like Canada there are still people who are unable to meet their basic needs. This is unacceptable and we doing something tangible to correct this situation.

I believe we all agree that no one should grow old in poverty or isolation. I cannot emphasize enough how important this issue is to our government.

I would also like to take a moment to discuss the Canada pension plan, another important pillar in our retirement income system. Retirement income security has to start with solid and stable public retirement plans such as the Canada pension plan.

We are also working with the provinces and territories to strengthen the plan. Earlier in October, we introduced a bill to amend the plan in order to help middle-class Canadians achieve their goal of living a dignified life in retirement with guaranteed income security.

We are making a considerable investment in the well-being of seniors. Canadians who work hard contribute to our society throughout their lives and our government believes that every Canadian deserves to grow old with respect and dignity.

Laurentides-Labelle has more of an aging population than most other ridings. The 2011 census found that the average age in the riding was 49.5. I look forward to the results of the 2016 census, but I would be surprised if the average age had not risen considerably.

Seniors' issues are crucial; we must improve their quality of life without delay. We can always do more, but I think we are on the right track with this bill and with this budget. Canada has always been a leader when it comes to delivering services to seniors. Our retirement income system is considered one of the best in the world.

I strongly urge my colleagues to help make sure it stays that way by supporting this bill.

[Anthony Housefather, Liberal, Mount Royal, QC]

Madam Speaker, I want to repeat in English what the hon. member said in French about senior citizens and the changes that are being made to allow senior couples, who have to live apart for reasons that are no fault of their own, to be spared having money come off the seniors' supplement. One party is earning money but they are not living together, which increases their costs.

I met a lot of couples like that in the election where one spouse was in a retirement home because they were too sick to live with their spouse. I was just wondering if my hon. colleague also had similar experiences in the election and met couples who were affected by that measure.

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, my own family was affected by this. My grandparents lived in adjacent units in Lac Saint-Louis, I think it was that riding, for the last couple of years of their lives.

We see the reality of the situation. It is very important that we take care of our seniors in every possible way that we can.

[Sheri Benson, NDP, Saskatoon West, SK]

Madam Speaker, I want to thank my colleague for his very detailed presentation speech on some of the measures that are contained in the bill, which is close to 234 pages long. I am disappointed that it is being presented in this way and that we are not having enough time to really give it proper consideration and study.

I would like to share with my colleague my disappointment with one part of the bill; that is, the decision not to index the child benefits over the next few years. Actually, the indexing will not happen until the next federal election. That will have a bigger impact on low-income families, which are the majority of families in my riding.

I wonder if you would agree with me that was a bad decision and that indexing should happen sooner, not in the next election.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I want to remind the member to address the questions to the Chair and not to the individuals.

The hon. member for Laurentides—Labelle.

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, I thank the member for drawing our attention to this very good program that, at least in my riding, is expected to help about 4,000 people out of poverty. It is an incredibly important program. It is an incredibly progressive program. I am really proud to support it. I am looking forward to the future changes that we make as we go forward.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Madam Speaker, I have a simple, common-sense question for my colleague. How does he explain the difference between a modest $10-billion annual deficit and a $30-billion annual deficit? How does a government member explain to the people of his riding, who placed their trust in him, this change in attitude once his party took power?

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, I have no problem explaining that. I believe that the deficit exists everywhere you go: it exists in our infrastructure, in our society, and in our government. Personally, I want us to invest in the future of our country, in our infrastructure, in all the programs that we need to implement. I do not want to ignore those things in order to achieve a certain number. I want to invest, and that is what our government is doing.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Madam Speaker, my question is with regard to the whole issue of consultation. I met an interesting individual, Kourosh Doustshenas, who had raised an issue with me. I want to ask the member what he thinks of consultation and the importance thereof.

For example, this individual talked about the homebuyers' plan and how it has helped close to three million people since 1992. He believes that the government needs to take a look at that particular program.

I wonder if my colleague would just talk about the importance of consultations.

[David Graham, Liberal, Laurentides—Labelle, QC]

Madam Speaker, for just over a year now we have consulted. My riding is a huge riding. I have 43 municipalities and 300-and-something city councillors. In my office, we met with all of my city councillors, my seven chambers of commerce, my four regional development agencies, every organization we could find to get their input, and that consultation is what fed our ability to contribute to this process.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order, please.

It is my duty, pursuant to Standing Order 38, to inform the House the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Essex, Dairy Industry; the hon. member for Regina—Lewvan. Infrastructure; and the hon. member for Beauport—Limoilou, Veterans Affairs.

Resuming debate, the hon. member for Mount Royal.

[Anthony Housefather, Liberal, Mount Royal, QC]

Madam Speaker, it is a pleasure to rise today on this second act to implement certain provisions of the budget.

Many of my colleagues who were former municipally elected officials would join me. As mayors and councillors, we frequently passed budgets that were in the $50-million range and, in some cities, in the $1-billion range, like the regional government in Montreal, and yet meetings were very sparsely attended. There may have been one or two people in attendance to see a $1-billion budget pass and yet if there was a meeting on a dog run, there would be 400 people. The reason is that it is very difficult to understand bills that consist of 243 pages and go into very minute financial detail. It is not sexy, but it is important.

I am proud of the budget that we delivered earlier this year and I am pleased to talk about this bill, as well as the investments that the Government of Canada has been making to keep Canada and its people strong and growing for the long term.

This second budget implementation act proposes items that would complete the implementation of outstanding measures from the Government of Canada's first budget. As a government, and as the MP for Mount Royal, I am proud of our first budget. It put people and families first. It introduced investments that were an essential step to grow the middle class, such as, of course, the improved family allowance. I was particularly happy to see it targeted at families who needed it the most on a tax-free basis. This 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, by the way, that not only resonated with many Canadians but is garnering international praise as well. The Financial Times called Canada a glimmer of light. The Wall Street Journal called Canada 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.

The Economist magazine has put Canada's approach on its cover, with a story entitled, “Liberty moves north”. It stated, “the world owes Canada gratitude for reminding it of what many people are in danger of forgetting: that tolerance and openness are wellsprings of security and prosperity, not threats to them”. Our budget earned endorsements because we, as a government, are focused on the right things. We are focused on people, growing the economy for the long term, and doing so in a way that should benefit every Canadian.

Canadians deserve financial consumer protection that keeps pace with their needs. In line with this, budget 2016 contained plans to strengthen and modernize our financial consumer protection framework. Budget implementation act, 2016, No. 2, a very sexy title, would amend the Bank Act in order to strengthen and modernize the financial consumer protection framework.

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

Budget 2016 proposed to modernize the financial consumer protection framework by clarifying and enhancing consumer protection in the Bank Act and to work with stakeholders to support the implementation of this framework. This legislation proposes to consolidate and streamline existing consumer provisions into one new 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, and complaints handling, as well as corporate governance and accountability.

The federal government is exercising leadership by taking targeted steps to strengthen financial consumer protection. This includes measures to improve access to basic banking services and enhance disclosure to facilitate informed decision-making by consumers. These reforms would reaffirm the federal government's intent to have a system with exclusive rules for consumer protection to ensure an efficient banking system from coast to coast to coast.

As part of an international effort to combat tax evasion, budget 2016 confirmed the government's intention to implement the common reporting standard developed by the Organisation for Economic Co-operation and Development.

Under the common reporting standard, Canadian financial institutions would 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 would likewise collect information from their financial institutions about accounts held by residents of other countries, including Canada. The CRA would formalize exchange agreements with foreign jurisdictions, having verified that each jurisdiction has appropriate capacity and safeguards in place. Then the financial account information would 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. Canada intends to implement the standard, consistent with our commitment to the G20 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/OECD project to address tax avoidance by multinational enterprises through base erosion and profit shifting. Under these new rules, large multinational enterprises would be required to file with tax authorities information providing a high-level profile of their activities in each jurisdiction where they operate. These reports would 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.

Budget 2016 represents a step forward in our plan to put people first and to deliver the help they need now, while investing for 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 rewarded, where our children and our children's children can flourish. The Government of Canada is focused on the larger picture of ensuring prosperity for Canadians well beyond our 150th birthday.

There are so many times I look at the House and wonder whether partisanship can ever be overridden. I was so proud earlier today when the government congratulated the official opposition on the way it negotiated the CETA treaty when it was in government. Both acknowledged the other party's steps in advancing the treaty, working to put it forward, and getting it ratified. That was the House at its best. All of us should always strive to be at our best in the House. The budget implementation bill is something we should all look forward to supporting on a non-partisan basis.

[Colin Carrie, Conservative, Oshawa, ON]

Madam Speaker, as a newer MP, my colleague has a great attitude as far as working together is concerned, but there are certain realities that we have to face. Coming from Oshawa, a manufacturing community, I recognize that even though we want to work together, sometimes we have to face certain realities when we are competing with our biggest competitor right next door. The Americans do not have policies such as state or federal carbon taxes. They are not increasing their payroll taxes, as we know the government is doing. He knows as well that we are saddled in Ontario with the highest electricity rates in North America.

I am wondering about his thoughts on our international competitiveness. If we start putting these policies forward, as former prime minister Mulroney was quoted as saying over the weekend, we should not foolishly put ourselves at competitive disadvantage. Is there anything he sees coming forward in their budgets that are going to compensate for those non-competitive policies that have been put forth by the Liberals?