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

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Madam Speaker, one of the things my colleague mentioned near the end of his speech was indexing of the Canada child benefit, but what Canadians probably did not hear is that it will not happen until 2020. That is four years from now. If indexing is important, and we believe it is, why did the Liberals not include it in their spring budget? Why is it not happening now instead of waiting four more years, until well after the next election?

[Raj Grewal, Liberal, Brampton East, ON]

Madam Speaker, we campaigned heavily on the Canada child benefit because it would provide more money for families that needed it the most. The members opposite kept on campaigning on the fact that the universal child benefit had two problems: one, it went to millionaires across the country who did not need the benefit; and second, it was taxable. The Canada child benefit gives more money to those who need it the most. It is after-tax, and now it is indexed to inflation. It is a great benefit that helps middle-class families and the people who need it the most. I encourage the members opposite to support this benefit.

[Cheryl Hardcastle, NDP, Windsor—Tecumseh, ON]

Madam Speaker, I would like to further explore the hon. member's comment that Bill C-29 would ensure that Canadians are protected financially, and that this is an ideal time for Canada to invest in its future.

Is the member concerned at all that Bill C-29 speaks to the Liberals' infrastructure bank as a scheme that would use private and public financing? The issue of privatization inherent to terminology like “asset recycling” is of great concern. Could the member speak to that issue and how it conflicts with the financial security of Canadians?

[Raj Grewal, Liberal, Brampton East, ON]

Madam Speaker, we campaigned on revitalizing our economy and economic growth. There are studies across the board by economists suggesting that the best way a government can instill economic growth is to do two things. One is through innovation, which we are doing, and the other is through infrastructure. We think the infrastructure bank is a great idea, and Canadians recognize that as well.

Our partners at the provincial and municipal levels recognize there is a huge infrastructure deficit across our country from coast to coast to coast. This is going to make it easier to address those concerns. We are going to get people back to work. We are going to build Canada. We are going to ensure that middle-income families have more resources to get them back home on time, because we are going to invest in transit, we are going to build roads, and we are going to build bridges.

[Marco Mendicino, Liberal, Eglinton—Lawrence, ON]

Madam Speaker, I want to thank my colleague from Brampton East for all his remarks this morning and all his hard work in his riding.

He spoke at length this morning about the budget implementation act. I wonder if he might take a moment to elaborate on the positive impacts of the middle-class tax cut that was implemented as part of budget 2016, as well as the Canada child benefit plan.

[Raj Grewal, Liberal, Brampton East, ON]

Madam Speaker, I want to thank my hon. colleague from Eglinton—Lawrence for the question. This young man is doing a great job in his riding. He is being a very accessible member of Parliament. We could all learn a thing or two from him.

His question is a very important one, especially on the tax cut. Nine million Canadians have more money in their pockets today because of our government. The Canada child benefit is helping nine out of 10 families. When I went door-knocking in August in my riding of Brampton East, the first thing people did was thank me very much for the extra help. They said they were very happy about the Canada child benefit because it really made a difference with back-to-school shopping and buying the necessary supplies for their children—new clothes, new backpacks—and putting an extra apple in their lunches.

This is about helping families become better, join the middle class, and stay in the middle class and investing in Canada across the board.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Madam Speaker, I am pleased to rise in the House to debate Bill C-29, budget implementation act, 2016, No. 2, the Liberal government's first budget, which was much criticized and the source of much disappointment.

This budget implementation bill addresses many issues. Given that it is more than 250 pages long, I will focus on just a few of its elements, such as the OECD country-by-country reporting implementation announced in budget 2016. A number of other countries are participating in this project, which will fight tax evasion, a crucial issue.

I will also speak a little about the Canada child benefit, which was changed a bit in the budget implementation bill in response to some harsh criticism. Finally, I will try to speak to the principle of asset recycling, which was announced in the budget. This term is synonymous with Canadian infrastructure privatization.

Let us talk about country-by-country reporting. As I said, the idea comes from the OECD and has to do with multinationals that do business around the world, of course, through numerous subsidiaries. Unfortunately, some unscrupulous accountants and tax experts strive to make a living from getting around tax rules and finding the best way for multinationals to avoid paying their fair share of taxes in countries where they nonetheless benefit from public services and infrastructure, such as highways and airports. They also benefit from the money of taxpayers and employees who live in those countries. They do not pay their fair share of taxes and manage to evade the tax system.

Country-by-country reporting ensures that the subsidiaries of a same multinational whose annual revenues are 750 million euros or more are subject to new rules. Some experts criticized this threshold saying it was too high. Seven hundred and fifty million euros annually is a substantial amount. It is estimated that between 10% and 15% of multinational companies around the world meet this criteria. In other words, 85% of businesses will not be subject to these new rules since their revenues do not reach this 750-million euro threshold.

That being said, the companies concerned will have to report information in the countries where they are located. Again, there are a number of ways to avoid that. There are companies with “non-resident” status for tax purposes. Tax experts already have the means to get around the rules. Nonetheless, this reporting will ensure that these multinationals declare their revenues and how many employees they have in every country. This will help the Canadian government and other governments find disparities in the numbers.

Take for example a company that does very little business in a given country but reports all of its profits there. I will not name a country, but let us say that it is a Caribbean country with a small population where there is not a lot of business activity. In that case, country-by-country reporting would show us how much profit that company is making.

That would allow the world governments to identify discrepancies in tax returns and determine which companies could be committing tax evasion or abusing the transfer pricing principle, that is, when many subsidiaries of the same multinational corporation exchange services or bill each other for royalties or patent rights and then report their profits in countries with much lower tax rates.

This measure is still a step in the right direction. Although many other measures were presented to the OECD, this one was discussed and it is relatively good, aside from the threshold of 750 million euros. That was strongly criticized.

Some people mentioned that this amount could be lowered to $60 million. Take for example the Association of Canadian Financial Officers, which recommended lowering that threshold to $60 million a year and requiring the multinationals in question to provide the Canada Revenue Agency with more detailed information on their activities in every country.

I would like to mention that the Canada Revenue Agency should also publish this information so that Canadians can see the fiscal arrangements of these multinationals that they do business with on a daily basis. It might be interesting for consumers to have the option of looking at the tax practices of the stores they shop in at the mall.

I said I was going to talk about the Canada child benefit in my speech. I want to criticize the fact that this benefit was not indexed. When it was announced, there was no plan to index this benefit, and that was strongly criticized by experts, obviously.

Fortunately, after hearing these criticisms, the Liberals incorporated indexing into the budget implementation bill, indexing that will not take effect until 2020, unsurprisingly. They admitted their mistake, saying that it was not a good idea, that they had forgotten about indexing, and that they were not going to include it until 2020. What a huge oversight!

This will certainly have a major impact on families in Sherbrooke who receive this benefit. They will see a decrease in the real value of their benefits, which will remain at the same level until 2020. The cost of living is rising in Sherbrooke, as is the cost of groceries. People regularly tell me that their grocery bills are climbing, and that their incomes are unchanged. Their purchasing power is shrinking, and this mistake will not help the situation in Sherbrooke.

We hope that this will be corrected once again, and that the Liberals will listen to reason on this issue, just as they listened to reason in the case of very clear, concise arguments about the lack of indexing. So I do not see why they would not listen to reason on the idea that indexing should be introduced earlier, or even immediately.

On another note, I also wanted to talk about the issue of asset recycling, an expression used by the government in the 2016 budget document tabled in the House to announce the government’s plans for the following year. A number of people have wondered about the expression “asset recycling”. What does “asset recycling” really mean?

We have also heard rumours about the Canada Infrastructure Bank, which the Liberals talked about during the election campaign. They had previously alluded to this project to establish a Canada Infrastructure Bank. Perhaps we will hear more about this in today’s economic statement.

However, the government is considering the idea of privatizing existing infrastructure, which is known as asset recycling. Privatizing government assets or putting them back in private hands generates revenue for the government. How do you generate revenue from infrastructure? By introducing a fee system. That is how you can successfully bring in revenue.

The same principle would be applied to the Canada Infrastructure Bank, so that it could continue to grow and we could continue to invest. Obviously, private investors will demand a good return on their investment. To get a return on infrastructure, you put in pay stations so that users have to pay to use the infrastructure, which should be public and accessible to everyone.

As I mentioned at the beginning of my speech, every person should pay his or her fair share of tax. If we pay income taxes, it is for the purpose of getting services from the government, and we should not have to pay a second time when the government provides services to us.

I hope the government will listen to reason on this issue as well.

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

Madam Speaker, I will pick up on the member's last point. I know a number of New Democrats have mentioned the whole idea of infrastructure and how it is ultimately paid for.

Four or five years ago, the NDP government in Manitoba dealt with it by bringing forward legislation supporting P3s, which included private sector and government-sponsored infrastructure projects. My question for the member is this. Obviously at the provincial level it is a different thing, but do the New Democrats at the national level believe that the private sector plays no role whatsoever in infrastructure?

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Madam Speaker, I thank my colleague for his question.

First of all, I would like to say that a public-private partnership is not the same thing as the idea of having an investment bank that collects money from the private and public sectors to carry out projects that need to show a return. It is quite obvious that a bank does not work if there is no return. That is quite different from a public-private partnership. It is important to have good infrastructure, of course, but I do not think, as I said in my speech, that users should have to pay for infrastructure that has been paid for by the public. Who is the public? It is the users. Why would we ask users to pay for the same thing twice?

So I would tell my colleague to take money from taxpayers who pay taxes every year to provide infrastructure that they will use. However, I do not understand the idea of asking them to pay twice.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Madam Speaker, my colleague had lots of good math facts in his speech. When it comes to the math facts about this budget, we hear a lot of rhetoric about the middle class, but it seems to me that if they give people a $900 tax cut and then take away $1,100 when they do the CPP and then they add a carbon tax and an Internet tax on that, they are really not helping them out. With seniors, I would say that giving them an extra $60 a month in GIS is nice, but then Kathleen Wynne comes along and takes away $130 a month, and then there is the carbon tax and the Internet tax, and they are not better off.

I wonder if the member could comment on whether he thinks this budget would make the people of Sherbrooke better off.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Madam Speaker, I thank my colleague for her question.

It is true that taxpayers, and my fellow citizens in Sherbrooke, are being squeezed tighter and tighter. Their incomes keep shrinking, and the cost of living keeps rising. Clearly, the proliferation of measures that force them to pay more and more is not a positive thing. What we want as a government is to have fellow citizens who can participate fully in the economy because they have money in their pockets that they can reinvest in the economy. Citizens who have more money in their pockets are citizens who will go shopping more often and reinvest in the economy. The money does not vanish.

It is also important to have good salaries. To that end, I suggest that the government study the proposal to increase the minimum wage at the federal level. That would be a first step. Increasing the minimum wage creates a domino effect that makes the economy stronger and allows consumers to play a bigger role and spend more.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Madam Speaker, we have heard for the last couple of days about how this budget would help middle-class people, especially at the level of about $180,000, where they would get a $900 tax credit. We have also heard in the last couple of days how this would help low-income families with children by giving them the child tax benefit.

Could my friend answer this question? How does this help the low-income middle-class people who are earning around $44,000? How would they benefit from this budget?

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Madam Speaker, I thank my colleague for his question.

The short answer is, not at all. I used the word “taxpayer” a lot; perhaps that is because of my role as national revenue critic. Citizens who have incomes below a certain threshold are not getting any help from their government. In the government’s first budget, we learned that the members of the upper middle class were getting the most. Where we live, an income of $44,000 is relatively high. If we do not help people whose incomes are below that threshold, it makes no sense economically.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Madam Speaker, today I am speaking about C-29, a second act to implement certain provisions of the budget tabled in Parliament on March 22, 2016, and other measures.

We are putting into action our promise to Canadians to help build a stronger and more prosperous middle class. This is what we have done over the past year, and it is what we will continue to do, not only over the next year but for the long term.

The government has an ambitious plan to better the middle class, and with that, the entire country. We have received support around the world on the steps we have taken, from the Financial Times, The Wall Street Journal, the OECD, and the IMF managing director, Ms. Lagarde, who cites Canada as a role model for its ability to mobilize all possible levers to generate growth.

This is possible because our government has taken measure of the situation by listening to Canadians in tough economic times. We have not hesitated to take action either. Since July 1, Canadians families can receive up to $6,400 per year for a child under six, and $5,400 per year for a child aged six to 17. Nine out of 10 families have seen their benefits increase by $2,300, on average.

That is why I am proud to return to Surrey and speak with my friends, neighbours, and colleagues about how budget 2016 will positively affect their lives. Surrey Centre is home to young families who are keen on making their homes and lives in Surrey, and as a national government we have a duty and responsibility to support them when and where we can. The new Canada child benefit is our government's response to this. We are putting forward a more generous, simpler, and income-tested benefit that benefits more Canadian families than ever before.

It is with a vision to the long term for our country that this second budget implementation bill would amend the Old Age Security Act. It would restore to 65 the age of eligibility for old age security and the guaranteed income supplement. In this way, Canadians would have thousands of dollars more when they retire at the age of 65. Better yet, the 2016 budget would increase the amount to the guaranteed income supplement, which targets the most vulnerable seniors, providing up to $947 more per year.

With this second budget 2016 implementation bill before us today, we are delivering on the promise, set out in budget 2016, to support senior couples who must live apart for reasons beyond their control. If one member is located in a long-term care centre and find themselves suddenly faced with new and unexpected expenses, we are putting forward a proposal that ensures that they receive high benefits, based on the individual incomes of each individual. Again, the government is true to its promise of fairness to seniors and allowing them to retire with the dignity that they so deserve.

Our plan stimulates growth by giving more financial leeway to those who need it: middle-class families and seniors. Canadians also need to feel supported and protected as consumers. The federal government is showing leadership with the bill, as it would strengthen the framework that protects consumers who use financial products and services. We want to ensure that Canada's financial sector is capable of adapting to an aging population in an age of globalization, while still innovating and using the emerging technologies that challenge existing business models.

These new measures would include: first, improving access to basic banking services; second, imposing limits with respect to certain commercial practices; and third, finally improving disclosure of information to help consumers make better and more informed decisions.

Canadians also expect that financial institutions in this country have the means and resources to ensure that the integrity of our tax system is maintained. It is to ensure that everyone pays their fair share of taxes, and when I say everyone, I also include multinationals that operate in many jurisdictions. That is why our government is committing to working with our G20 partners to develop and implement an international plan to fight tax evasion and tax avoidance. It is a plan that will enhance our current measures and adopt new ones.

One of the key instruments behind our government's plan on cracking down on tax evasion is to help support the G20 and OECD declarations on tax evasion. This is an instrument that will force major companies to report on their activities in each jurisdiction in which they operate as well as the nature of these activities. This will also allow Revenue Canada to have a global view of these large multinational corporations. This is the first in the fight on tax evasion.

I should also add that the 2016 budget provides another important measure to counter tax evasion, allowing Canada to be part of the global standard for the automatic exchange of information, which was developed by the OECD. When this law is passed and these new measures are applied, Canadian financial institutions can and will identify accounts held by non-residents and will have to report these accounts to Revenue Canada.

Meanwhile, foreign financial institutions will collect more information on accounts held by foreigners, including Canadians. There are more than 100 countries and jurisdictions, including the Cook Islands, which just last week became the 106th jurisdiction to join the most powerful international instrument against offshore tax evasion and avoidance.

This government is putting forward a plan that is based on fairness. It would provide Canadians with an optimistic view of the future. We are working to ensure that Canada continues to move forward and lead the international community, particularly with the implementation of our bold economic policies that put a focus on growing the middle class to ensure the prosperity of our country.

I encourage all members to vote for the bill.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Madam Speaker, one of the issues that is covered in Bill C-29 is the indexing of the Canadian child benefit beginning in January 2020, which is four years from now. The parliamentary budget officer has estimated that this could cost an additional $42 billion over the next five years. In fact, it would double the original amount budgeted, yet the parliamentary secretary said the Liberals are going to go ahead with this measure regardless of what it is going to cost.

Where will the Liberal government find the money to pay for this inflated cost? Will it be through increased taxes, taxing our jobs and small businesses out of existence, or will it simply be to add to the budget deficit that is already ballooning and is currently at $30 billion? It is estimated that over the next 10 years, the interest costs alone on that deficit would increase by $10 billion. Where will the Liberals find the money to fund this promise?