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

[Randeep Sarai, Liberal, Surrey Centre, BC]

Madam Speaker, this government is implementing a budget that is based on infrastructure, innovation, and growth. It is through innovation, infrastructure, and growth that Canadians will increase the economy. Companies will be able to grow and expand, and therefore, our tax base will accordingly be expanded.

The costs of these measures will come from the growth of this economy, which has been stagnant for too many years and too long. It will expand through the growth of the revenue that will be received through much-needed infrastructure growth, and the income tax revenue from the middle class will increase when the growth of the middle class happens. It is all included in the growth strategy of this government, and I think these measures will be funded accordingly.

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

Madam Speaker, I have asked this question to another of the member's colleagues, but I was not sure I received a satisfactory response regarding the understanding of the infrastructure bank and the terminology of “asset recycling”.

Canadian municipalities are sounding the alarm about the Liberals' plan to take promised money for housing and transit, and instead put it into their infrastructure bank scheme. Does the member understand that this new bank requires that a project pay a return on investment?

[Randeep Sarai, Liberal, Surrey Centre, BC]

Madam Speaker, I believe the infrastructure bank and its mandate are still to be determined. The rules and the implementation of it are still to be determined. However, municipalities and cities can rest assured with the commitment this government has made to infrastructure spending, and the 50% on infrastructure projects shall remain.

The goal of the infrastructure bank is actually something that a lot of these municipalities have been asking for, which is a base they can rely on for satisfactory funding at low cost to implement a lot of the infrastructure projects that they have been dreaming of for so long. We can go coast to coast to coast to the major cities in this country and we will see failing infrastructure projects, sewer systems that are outdated, bridges that are falling apart, and highways in need of repair. This infrastructure bank will only help in implementing those projects that are beyond perhaps some of the scope of the infrastructure funding.

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

Madam Speaker, I am always happy to take part in the discussions of the House.

I had the opportunity to spend a good part of yesterday afternoon here, and I heard the speeches on all sides. I remain a little perplexed at what the Liberals are saying.

For my part, I am here in the House to present a timeline of the evolution of the Liberal plan.

At the beginning of the election campaign, in August 2015, they were talking about a modest deficit that would allow the government of Canada to create employment, and enable the Canadian economy to prosper and develop some infrastructure projects. Later in that same election campaign, we were hearing that the deficit would be quite small, only $10 billion. Last March, we were hearing that all the services the government wanted to offer Canadians would cost taxpayers $30 billion. We are not counting the same things: this is not what Canadians had been promised.

Recently, we heard that the deficit might be $35 billion or even higher. I wonder if our prime minister is going to wake up one day. The deficit may be even higher because he doesn’t really know how to count. He is spending our money, taxpayers’ money, my money, my daughters’ money and my grandson’s money. He is spending extravagantly. There is very little left for Canadians. Now who is going to have to pay this bill? I am going to pay part of it, but the biggest share will be paid by future generations, those who come after us, my grandchildren and great-grandchildren.

To listen to the Liberals, there seems to be no problem: look, they want a beautiful Canada for our children! According to the Liberals, it’s nothing serious if they don’t have any money later — they will see to that later on. I don’t know what they are smoking, but in any case, we are stronger on this side of the House.

We should have seen economic growth in the wake of the Liberals’ spending. We should have seen a difference. Given all the money they have waved under our nose, we should have seen that difference. But instead, what we are seeing at this time is job losses across the country and infrastructure investments with nothing concrete accomplished. They promised a lot of money for infrastructure. No one on either side of the House has seen the first ground-breaking ceremony. If someone has, please tell me, because in my riding I can say that nothing has been done.

They have talked about programs which, according to the Liberals, are helping nine Canadians out of ten, programs that will be paid for by their new carbon tax. They had promised us job creation. But job creation is stagnant. We have just learned, from the finance minister himself, that future jobs, the jobs of our children and those to come after, will once again be unstable jobs, seasonal jobs. We are well paid, here in the House, as we represent our fellow citizens, but there is nothing concrete for those who will come after.

Where are the Liberals’ fine promises? They have hoodwinked us. They think that, when they get up, the good lord goes to bed. They think they are the best, but the best at what? They are the best at putting us in the red, that much is true. They are the best at taking pretty pictures with people. All very pleasant, but it doesn’t provide anything to eat or anything for our children.

The mismanagement of public funds does not stop there, under the Liberals. In Bill C-29, the Liberals are going to index the Canada child benefit to inflation starting in January 2020. The parliamentary budget officer has estimated that this indexing would cost $42.5 billion over the next five years. Where are the Liberals going to find that money? In the pockets of my daughters, whose jobs are already unstable? In the pockets of Mr. and Mrs. John Q. Smith who are working for a pittance? Where will they find that money? Growing on trees? The environment is very nice, but if they have a tree that grows money, I would like to have one in my yard. That is not the way things work. What will we have to do to pay for the Liberals’ extravagance? Stop eating? Will we tell people not to pay their electricity bill because the carbon tax is costing them a bundle? We shall see next month: we shall see how the budget will be balanced. Is this what Canada’s Liberals stand for?

Meanwhile, the cost of living is not stagnant. There are fewer jobs and the cost of living is going up. It’s a simple calculation: Canadians will no longer have the same quality of life. The previous government, on the other hand, believed in the ability of Canadians. It believed that Canadians could think for themselves and spend their money as they saw fit. Their money stayed in their pockets instead of in government coffers.

The Liberals talk a lot about the middle class. For them, the middle class is made up of those who earn $90,000 or more per year. We are part of the middle class. I can tell you that, in my riding, the middle class is quite a bit poorer than we are. The middle class does not have the means to go to $1500-a-plate fundraising parties just to meet the pretty little MP who smiles and takes nice photos. I would not engage in that sort of thing either, because I have far more integrity than the Liberals.

With the Liberals’ budget, we ought to have rules introduced to guarantee the long-term stability of the real estate market. Well, we shall see. The Liberals have also said that increasing contributions to the Canada pension plan will be good for the economic health of Canadians in the long term, that is, in 40 years. My 86-year-old mother is presently ill and hospitalized. She could use that money now. I don’t think she will still be here in 40 years. I don’t think she will be able to benefit from this. I think that this is more hoodwinking of Canadians coming from the government opposite.

I find it deplorable that the government members across the aisle are holding Canadians hostage with their lip service, their big smiles, and their sunny ways. Sooner or later we are going to hit a wall, and average Canadians will be left to pay for everything, even though they are not millionaires and have no money left despite how hard they work just to earn a living. I believe in Canadians' capacity to think for themselves. I am tired of centralist governments that think that if things are going well, they are responsible.

We have to be realistic and stop being partisan. We have to look at the facts: this government is putting us in the red. I want to repeat what I said last week; my father often used to say that heaven is blue and hell is red. I really have no desire to be in the red because of this government.

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

Madam Speaker, I do believe that, in good part, the member has missed the mark if we take a look at something very tangible that the Government of Canada has done with the money and with taxpayers. We believe it is a reflection of what Canadians want, and this demonstrates the degree to which the Conservative Party is really out of touch with what Canadians expect of their government.

Let me give members a specific example. The guaranteed income supplement will in fact enhance incomes for the poorest of our seniors in every region of our country. Yes, it is costly, but people believe we need to support our seniors.

The Canada child benefit will also lift tens of thousands of children out of poverty. Yes, it is costly, but Canadians want us to deal with poverty.

Does the member not acknowledge that the government has a role to play in dealing with poverty in Canada?

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

Madam Speaker, I thank my colleague for his question.

If he thinks I do not understand, I would like to say that, just because I am a woman, does not mean I do not understand. Yes, I understand. Moreover, I understand exactly what my constituents are telling me.

Poverty has always existed. I myself have been poor, so I know what I am talking about. However, when I was poor and having a hard time paying for housing and groceries, the government did not come and take money out of my pockets. It let me keep my money, because I was having a hard time making ends meet.

Now the government is centralizing everything. I do not know whom it consulted, but it was certainly not the middle class or Canadians living in poverty. If that had been the case, there would be no carbon tax, and you would have stopped taxing Canadians, who would then have more money in their pockets.

[The Assistant Deputy Speaker, Carol Hughes]

I would remind the member to address her remarks to the Chair.

Questions and comments, the hon. member for Windsor West.

[Brian Masse, NDP, Windsor West, ON]

Madam Speaker, one of the things the member mentioned was the previous record of the Conservative government, and we are talking about consumption taxes. In particular, the Conservatives are responsible for the GST and then the son of the GST, which would be the HST. Therefore, the—

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

Come on. We cut it.

[The Assistant Deputy Speaker, Carol Hughes]

Order. The member will have a chance to answer the question. She needs to respect the person who has the floor right now.

The hon. member for Windsor West.

[Brian Masse, NDP, Windsor West, ON]

Madam Speaker, I have never been heckled by the person of whom I was asking a question, but at any rate, it is never too late to learn.

The process of that was a $6-billion contribution—$4 billion to Ontario and $2 billion to British Columbia—at a time of a deficit. I had the House of Commons do some analysis about those borrowing costs. Because we were in a deficit, it is going to be more of an $8-billion to $10-billion expenditure with the borrowing costs rolled in.

I would ask the member about the history of the Conservative Party that actually borrowed $6 billion to $8 billion to $10 billion, approximately, to bring in a consumption tax that affects every age, every consumer, and every income, versus that of an income-based tax.

Again, why do the Conservatives feel that the HST was so important for Canadians? Generally speaking, consumption taxes hurt all, not just the individuals who should pay for those things.

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

Madam Speaker, the party on this side of the House is the one that cut the GST.

I remember the 2006 election campaign, when I ran for the first time. Mr. Chrétien had promised to cut the GST, but that never happened. On the contrary, the Liberals increased the GST. Typical Liberal promises.

During the 2006 election campaign, we Conservatives promised to cut the GST, and we cut it to 5%. People can say what they want about the Conservative Party, but one thing is certain: when Mr. Harper, our former prime minister, promised something, he kept his word.

Over time, we have gotten used to the Liberals making fine promises in front of the cameras, but they have reneged on everything from the word go. I will vote against this budget because it is not good for the middle class.

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

Madam Speaker, today I rise in the House to participate in the debate on the Liberal government's second budget implementation bill. In the spring, the Liberals presented their first budget. The actual implementation comes in two phases: Bill C-15, budget implementation act, 2016, No. 1, which was passed last spring; and now we are implementing the next phase of the budget, known as budget implementation act, 2016, No. 2, which are the technical measures to make the budget law.

Left with a $2.9 billion surplus by the Conservative government, confirmed by the parliamentary budget officer on October 24, the Liberal government, which campaigned on controlled deficit spending, blew through its promises and did not just double its projected spending but tripled it. If that was not enough, it has now been made clear by the Bank of Canada, the International Monetary Fund, and the OECD that Canada's forecasted growth will be much less than anticipated. This means the deficit will actually be larger than three times the government's original promise. In fact, TD Bank estimates that the deficit will be approximately $34 billion.

If we consider debt charges alone over the course of the government's mandate, interest charges increased by almost $10 billion. Over the next four years, the interest costs alone will rise from $25.7 billion to $35.5 billion. That is just interest alone. This is a lot of money that could be invested better, perhaps reducing taxes, especially for the small business sector.

Canadians believed the Liberal Party when it said that the deficit spending it would undertake would lead to prosperity and growth. Following the release of the budget, my office sent out surveys to every household and business in my riding, asking whether they supported the out-of-control spending of the Liberal government. Of the responses I received, over 90% of my constituents did not support these ballooning deficits and unnecessary spending.

Canadians will remember the stimulus spending the Conservative government undertook during the recession years of 2008 to 2010 and the ability of that government to lift Canada out of the recession stronger than any other G7 country. On top of that, our Conservative government kept its promise to return the budget to balance and, as I said before, even left the Liberal government with a surplus of $2.9 billion.

However, we are not seeing the promised results of the Liberal deficit spending. Just a year ago, the Liberals promised that they could spend their way to prosperity and growth. Hard-working Canadians trusted them to borrow just a modest sum. They said that they would create more jobs and put more money in their pockets. Canadians are still waiting.

By most measures, Canadians are worse off than they were a year ago and the unemployment rate has not changed since the Liberals took office. Good jobs are in short supply. The vast majority of new jobs created under the Liberals have been part time, which helps explain why weekly earnings for the average worker have not budged. Meanwhile, the cost of living has gone up and it is now harder for Canadians to afford new homes. The new federal rules announced last month mean even fewer will be able to buy a first home.

During the summer, I invited the member for Barrie—Springwater—Oro-Medonte, who was the critic for economic development for southern Ontario, to my riding to participate in a manufacturing round table. There was a great turnout and I was pleased to listen to the concerns of many in the Waterloo region.

In addition to a number of small business owners, also present were the Cambridge and Greater Kitchener Waterloo Chambers of Commerce. One point that came up time and time again from business owners was they cannot operate businesses for very long by borrowing for operating costs.

All of us realize that a major capital investment, such as a home or new equipment, will require sensible borrowing, but to borrow more and more for operating costs is a recipe for disaster. It is really only a matter of time until businesses are finished. The same principle needs to be operative at the federal level of budgeting. We cannot continue to borrow to operate a bloated government.

Another issue that was brought up during the round table were the increased challenges the Liberal government was forcing on businesses such as changes to the CPP program, and, at the same time, the prospect of a national carbon tax. With both of these changes being implemented in the near future, these job-creating businesses in the Waterloo region will be forced to make hard decisions and limit their own growth or perhaps even lay off workers.

The Waterloo region has a strong manufacturing sector and for the Liberal government to be putting unnecessary pressure on these businesses simply does not make sense.

In addition to these manufacturing businesses, other small businesses in my riding and members of the agricultural community have great concerns with the Liberal government's changes to CPP and the implementation of a national carbon tax. Small businesses have learned already through the Liberal government's broken promise to lower their tax rate that this government is not making decisions that are in the best interest of job creators.

However, if that were not enough, just like the manufacturing businesses I heard from, the increase in mandatory CPP paycheque hikes would cost these companies jobs. It would force them to reject the proposal for expansion, postpone new initiatives, or to put off hiring that new employee.

Layered on all of this is the government's new top-down mandatory carbon tax. In my riding, there are over 1,200 farms, approximately 1,400 farms in all of Waterloo region. This new tax will raise their operating costs by thousands of dollars per year, which will in turn raise the grocery bills of Canadians from sea to sea. The cost of living under the Liberal government keeps rising, while employment and wages are stagnant or, in fact, on the decline.

Over the past several months I have been petitioning the Minister of Transport, through letters and questions during question period, on the topic of ultra low-cost carriers. My office has been contacted directly by Jetlines and the Waterloo international airport, asking the Minister of Transport to change the foreign ownership rules for carriers so companies, such as Jetlines, can operate in Canada.

Nine months ago, the pathways report was made public, and this clear recommendation came to the transport minister. Here we are, nine months later, and still no action. This change would provide Canadians with low-cost and convenient travel, as these carriers would primarily be servicing secondary airports across Canada. This is an absolutely clear issue. This has the potential to create thousands of new jobs and offer a more affordable option for travel. However, the Liberal government remains committed to standing in the way of private enterprise.

The Liberals said a massive deficit would create jobs. The parliamentary budget officer's employment assessment said that after a year of Liberal borrowing, there have been zero new full-time jobs created. Job growth is at half the rate of the previous government, and all of the jobs are part time. Despite the low dollar, there are 20,000 fewer manufacturing jobs than there were a year ago.

I would like to talk about the tax credits the government has abolished with this new budget and the introduction of the Canada child benefit.

The Liberal government's removal of the student textbook tax credit has big impacts on the Waterloo region, which is home to several universities and colleges. With the cost of tuition increasing and fewer and fewer job prospects, students need help covering costs. This was one method the government was able to help them.

The Waterloo region is also home to many great sports clubs and associations. Our previous government introduced the child fitness tax credit to help families pay for the cost of their children's sports fees. This helped many families that otherwise might not have been able to afford it and it also encouraged health and wellness through sport, which in turn reduces health care costs.

The Liberals defend these cuts by citing their Canada child benefit, but recently we discovered that their own budgets did not allow for indexing to inflation. This would mean that Canadians would actually be losing money each year under this new plan. In an effort to remedy this monumental error the government has included in this legislation updates to the program allowing for indexation.

The parliamentary budget officer had estimated that indexing and enriching the Canada child benefit would cost $42.5 billion over the next five years. The parliamentary secretary said that the Liberals were going forward with this regardless of the financial pressure it put on public finances. The parliamentary budget officer found the program would cost more than double the original amount budgeted if indexed over the next five years. Where will the Liberals find money for this new spending?

As we have seen already over the past year, and I have made clear in this speech, the government will be digging deeper and deeper into debt without any plan of ever returning the budget to balance.

It is clear that the government's uncontrolled spending and poor policy decisions have been, continue to be, and will be over the next three years, disastrous for the Canadian economy. That is why I cannot support the legislation. I ask the Liberal government to reconsider the poor economic decisions that are included in the bill.

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

Madam Speaker, the member spent a vast majority of his time commenting on deficits, so my question is with respect to deficits.

I have said many times in the House that we provided Stephen Harper and his government with a multi-billion dollar budget surplus. Virtually every year since he took office, he had a running deficit. In fact, he had the largest running deficit of any other government in the history of Canada, in excess of $150 billion.

Given the track record of the Conservative Party on deficits compared to Liberal governments that have consistently had balanced budgets, why does the member believe the Conservatives have any credibility on the issue of balanced budgets?

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

Madam Speaker, I want to remind everyone that one of the ways the previous Liberal government balanced its budget was to cut $25 billion from the health care and social transfers to the provinces. Our provinces and municipalities are still suffering from those cuts.

What my colleague fails to remember as well is that our Conservative government paid down over $40 billion of the national debt. During 2008 to 2010, we did go into deficit to fund infrastructure projects and to create jobs. Our job creation record was incredible. It was the strongest in the G-7. Well over one million new jobs were created as a result of the investments we made, This is in contrast to what we find here of not one new job in spite of all of this borrowing.