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

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, I think my hon. colleague and I both share concerns about the huge debt that families are seeing. Especially over the last year, families have been carrying enormous debt. With that, we are seeing a significant increase in the rate of child poverty in Canada, which is estimated to be as high as 11.2% by the Minister of Families, Children and Social Development. In my riding of Courtenay—Alberni, in Alberni itself one-third of the children living in Alberni Valley are living in poverty, and one in five children in Courtenay are living in poverty.

I know the member cares a lot about child poverty so I want to ask her this. Why did the child poverty rate become so high under the Harper government? Maybe the member can answer some of the questions I have around that.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Mr. Speaker, actually Statistics Canada shows the child poverty rate went down overall. However, I would also admit that was not in all communities.

As the former mayor of the city of Surrey, we created our child poverty reduction plan. We have to look at each community in a different way. As we look at the country as a whole, there are measures we can put in but we have to work together with communities to make sure we are taking care of those left vulnerable. I am sure the member knows from his community the great work of Clyde Hertzman, who had a benchmark that looked at all the indicators that were causes of child poverty. We cannot take our foot off the gas on this issue. We have to continue to ensure that our kids and our communities are resilient, and that our kids are school-ready when they get into kindergarten.

[John Nater, Conservative, Perth—Wellington, ON]

Mr. Speaker, I met this morning with a particularly troublesome constituent to speak about the debt the Liberal government is accumulating. My two-year-old daughter wanted to know whether or not the member agrees that saddling her generation with multiple billions of dollars of debt and $10 billion to $15 billion more in debt financing charges is fair to her generation, and our children and grandchildren.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Mr. Speaker, I have met the member's beautiful daughter, and it just breaks my heart to know that child is going to grow up with that kind of debt.

When we see a government that has absolutely no plan to pay down the debt or to balance the budget, that it is not even on the horizon, this should be troublesome to every single Canadian across the country, because it will come back to haunt each and every one of us, our children, and our grandchildren.

[The Assistant Deputy Speaker, Anthony Rota]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Nanaimo—Ladysmith, Status of Women; the hon. member for Vancouver Kingsway, Health; the hon. member for Saskatoon West, Indigenous Affairs.

Resuming debate, the hon. member for Joliette.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, we are debating the second and last budget implementation bill. Unfortunately, the needs expressed by Quebec citizens and organizations are still not addressed in the budget. With respect to the health, education and social service transfers, the cuts announced by the Conservatives have not been reversed. In short, Quebec still gets nothing.

Our students' education and textbook credits were cut and they have not been adequately offset. In the case of Quebec students, for example, we are talking about a net loss of $120 million. They have been shortchanged, and the bill does nothing to address the situation. That is very disappointing. The government has really disappointed us. There is nothing for our strong economic sectors such as the green economy, high technology, aerospace, and informatics, nor is there anything for our farmers and unemployed workers.

In short, we are disappointed that Quebec's needs are not among the government's priorities. However, that is not a big surprise. Canada and Quebec are such completely different nations that for years now millions of Quebeckers have understood that we would be rather better served by being masters in our own house.

This bill basically deals with two things. The first is the indexing of the Canada child benefit. It is reasonable and appropriate that it be indexed. The second is a host of small changes to close tax loopholes that allow tax avoidance. For example, the bill eliminates the possibility of claiming the small business tax credit multiple times. That does not make sense. Companies that own companies that own companies and so on down the line like nesting dolls will no longer be able to use this strategy.

However, if the government really wants to crack down on tax avoidance, it is missing the mark. It does not realize that, while it is trying to put out the fire in the recycling bin, the whole house is going up in flames.

When it comes to tax avoidance, the root of the problem lies primarily with the banks, the financial industry, and the multinationals that happily and legally send their billions of dollars to tax havens. That is shameful. For Canada's five big banks alone, we are talking about $6 billion a year in lost revenue for the governments, whether it be the federal government, the Government of Quebec, or the other provincial governments. That has nothing to do with the amounts announced in this bill. The Liberals have missed the boat.

What is more, we do not need to renegotiate international agreements to solve the real problem with tax avoidance. The government can take action right here and now.

I would like to remind members of a little known fact: no treaty or law authorizes the use of tax havens. For example, Canada's tax treaty with Barbados stipulates that companies entitled to any special tax benefit in Barbados, or in other words companies that are entitled to a ridiculously low tax rate of 0.25% to 2.5% rather than Barbados' usual tax rate of 25%, must pay taxes in Canada. It says so in article XXX of the treaty.

Tax avoidance is legal because of backdoor changes that have been made to Canada's tax regulations. Previous governments put these regulations in place without even allowing MPs to debate or discuss them.

I would like to make a positive contribution to the debate by suggesting one simple, practical thing that could be done to resolve an essential element of the problem of tax evasion. We simply need to get rid of two regulatory changes.

First there is paragraph 5907(11.2)(c), which invalidates article XXX of the Canada-Barbados tax treaty, a subparagraph that stipulates that taxes must be paid here. Thanks to that regulation, Barbados became a tax haven for Canada just over 20 years ago. That regulation passed quietly, and it might even be illegal.

That regulation was put in place without a vote in the House, and it made it possible for banks and multinationals to legally profit from tax havens. It is high time that we outlawed something that is unethical, in the name of justice and fairness.

We also need to get rid of the amendment to subsection 5907(11) that was passed in 2009. With the stroke of a pen in the regulations, the government opened up 22 other tax havens.

As soon as Canada has a comprehensive tax information exchange agreement with a tax haven, any profits that come back to Canada are tax-free, plain and simple. Once again, that amendment was passed quietly.

It can be found in a schedule to one of the mammoth budget implementation bills, tucked in the section “medical expense tax credit” even though it is totally unrelated. That shows bad faith, and not just a little.

Again, when it comes to tax avoidance, we have to tackle the root of the problem and make illegal what is unethical. Tax avoidance is a legal practice that puts enormous pressure on public finances. It is not right that people who are paying more and more taxes and user fees are seeing public services disappear, while big corporations and major banks shirk their responsibilities.

Inequality is growing and we have to change that. It is time to take action. However, we will have to start by changing the culture of Parliament and of successive governments. Even though Canadians generally deplore tax avoidance, as Quebeckers do, the banks have so much power that the government, the party in power, and the official opposition continue to wash their hands of the matter, just as Pontius Pilate did in a well-known story. The time has come for elected officials to start truly representing Canadians, rather than the economic interests of the giants.

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

Mr. Speaker, I thank my colleague for his speech. I always enjoy his colourful speeches. I would also like to congratulate him on the work he is doing to fight tax havens, a serious issue facing our generation and one that the House must tackle as quickly and effectively as possible.

I would like to hear my colleague's thoughts on the part of the bill about country-by-country reporting standards for multinationals. If the bill passes and the OECD country-by-country reporting standards are implemented, multinationals with revenue in excess of 750 million euros will be subject to this new rule. What does my colleague think of that?

Also, what does he think of the 750-million euro threshold for country-by-country reporting, which would give Canada access to more information about the activities of multinational entities in all the countries in which they are present and trigger a more in-depth analysis of these companies and their activities?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague for his intervention and for the work he and his party are doing to combat tax evasion and the diversion of profits to tax havens.

Country-by-country reporting is a good initiative that was introduced as part of the OECD's work. However, it is but a very small step in the right direction, and infinitely more needs to be done immediately. There is no need to wait for every country in the world before we take action ourselves. There are things that Parliament could do right now to address this.

For instance, the 750-million euro threshold could be much lower. That is a small step in the right direction, but much more needs to be done right now, including getting rid of the two regulatory amendments that were mentioned.

Canada could be doing much more right now, but it needs to stop deferring to the banks. It needs to stop asking them for substantial assistance in the drafting of tax legislation. We need to represent our constituents and take action now.

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

Mr. Speaker, I thank my hon. colleague for his speech. He is young and I would like him to tell me how we can trust a government that changes its tune the way the Liberal government has in the past year.

A year ago, during the election campaign, the Liberal Party's platform promised a modest deficit of $10 billion over the first two years. It said that at the end of the next two fiscal years, the deficit would decrease and the investment plan would allow Canada to return to balanced budgets in 2019-20.

However, when the budget was tabled, we learned that the deficit would not be modest; instead we would have a massive $30-billion deficit. Yesterday, during the economic update, we found out that another $32 billion is being added to this debt over the next six years. In other words, the deficit will be $111 billion within the next few years.

Given the Liberal government's unimpressive results after just one year, does the hon. member believe that we can trust the government to manage the economy?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague for his question.

In fact, it is very worrisome. They are playing with Canadians' money. People want services in exchange for the taxes they pay. When managing the budget of a country like Canada, the government must always be conscientious and prudent. Our party is more concerned about Quebec's interests. If the government must run a deficit, it has to ensure that it will stimulate the economy in an efficient and effective manner. It certainly has not proven it will do that. We can reasonably wonder about people's confidence.

With respect to the deficit, I was referring to just the five major banks. If we closed the tax avoidance loopholes in tax havens made possible by regulations that were passed in secret without elected officials having a say on these amendments, we could recover at least $6 billion more a year.

That would mean less pressure on our finances. There is growing pressure on middle-class taxpayers, on ordinary people, while the big players, who have or at least seem to have ties to government, are getting a free ride.

It is high time that situation changed, and deficits should never be taken lightly.

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I would like to begin by telling the House how disappointed I am with Bill C-29 and the measures it contains, or rather the measures it does not contain. More specifically, there is a significant lack of practical measures for SMEs, families, the middle class, unemployed workers, and the most vulnerable members of our society.

I would also like to point out that this bill, which was introduced on Tuesday, October 25, contains 146 provisions and amends 13 laws, and we started debating it just three days later. We had only three days to grasp the scope of the changes that these 146 provisions make to 13 laws. Members will agree that that gave us very little time to conduct a full and comprehensive review of the bill and to properly understand all the details and the scope of its content. It is very easy to see what is missing from this bill, and that includes larger health care transfers for the provinces and many other things.

As a progressive MP who represents the people of Saint-Hyacinthe—Bagot, I am opposed to this bill because it is sorely lacking in substantial measures for middle-class families, unemployed workers, and the most vulnerable members of society. This party promised to stand up for the middle class, but we are once again seeing that all of its fine promises were nothing more than empty rhetoric.

Yesterday, we got the government's economic update. It offered no compensation for dairy producers and nothing for Bombardier. Basically, all it contains is a privatization plan that will take $15 billion of the funding promised for infrastructure and invest it in a privatization bank designed not to meet the needs of communities but to meet the needs of companies and provide investment returns. It means that much less funding for municipalities in my riding, which will be disappointed.

My riding has massive infrastructure needs, including the Casavant Boulevard tunnel, the Saint-Pie and La Présentation community centres, and dire waste water treatment needs. These are just some of the major projects that are very important to my riding.

Municipalities and citizens were under the impression that money would be allocated to these projects because that is what they were told repeatedly. What the Liberals never told us was that their plan was to make investments by privatizing our infrastructure. In the 2016 budget, they brought up the possibility of asset recycling. That sounds pretty good, but what it really means is privatization.

Why did this government not promise privatization during the election campaign? Because it is not something that works. That is why we did not hear a peep about this during the election campaign. On the contrary, any time we talked about tolls or the Champlain Bridge, the Liberals kept saying that they would never ask the bridge users to pay a toll. That might be true, but what they failed to mention was that they would charge tolls everywhere else.

When did the Liberals tell Canadians that instead of the public infrastructure and public investments promised, Canadians would have to pay user fees and tolls, because their taxes would not be used for those things? They never said anything of the sort.

Bill C-29 does contain some positive measures that of course we support, but its contents do not even come close to fulfilling the Liberals' election promises or combatting inequality.

As my party's critic for families, children, and social development, I am still disappointed that the Liberals decided not to index the Canada child benefit to inflation. They could have fixed that yesterday, but no, they are going to wait four years.

The result of that political decision is that families back home in my riding, and all across Canada, are going to be out over $5,000. The Liberals keep repeating that that benefit is going to lift thousands of children out of poverty, but in reality, families are going to have $5,000 less over the next few years.

In the end, this benefit lifts families out of poverty for a month or two. To a family struggling to make ends meet every month, $5,000 is a lot. It boggles the mind to hear my Liberal colleagues brag about lifting children out of poverty, when in fact, families are losing thousands of dollars.

Families cannot afford to wait for the new Canada child benefit to be indexed to inflation in 2020. By 2020, low-income families will be getting only $6.50 more a month than they were from the Harper government. The difference between the Conservatives and the Liberals is $6.50 a month.

Giving an extra $6.50 a month is hardly anything to brag about. That is not even enough to buy a loaf of bread and some milk. When I talk about this with organizations in my riding that work with low-income families, they are shocked to learn how much families will really be getting at the end of the day. They are disappointed and I understand that. They know that families have felt the difference since July and are disappointed.

This decision will clearly hurt families, especially low-income families that are counting on this money. In the next four years, low-income families will receive about $500 less. Canadians are disappointed with all these broken promises.

That said, I applaud the measure that will prevent a multiplication of access to the small business deduction, and prevents tax avoidance to some extent. This will help the government recover $55 million to $60 million a year, but many other measures could have been introduced.

For some time, the NDP has been calling for measures that would provide tax relief to SMEs, which are the real drivers of job creation. We are disappointed that the Liberals have broken their promise to reduce the small business tax. They had promised to lower it to 9% by 2019. Job creators in our ridings were counting on this tax cut. It is disappointing that another promise has been broken. The Liberals, and the Conservatives before them, gave huge tax breaks to the most prosperous corporations in Canada. They have once again let down our SMEs.

I am so proud to represent a riding with SMEs that are constantly innovating. According to a Canadian Federation of Independent Business study, Saint-Hyacinthe is the sixth most entrepreneurial city in Quebec and the 20th in Canada. However, in order to ensure that these businesses survive, we need to give them a leg up. That is why the NDP cannot accept a bill like this one that does nothing for families, SMEs, or the middle class.

In short and in conclusion, I want to repeat that I am disappointed, as are the people of Saint-Hyacinthe—Bagot, with these measures that do nothing to help our SMEs, the many dairy producers in my riding, Bombardier, located in the neighbouring riding of Valcourt, municipalities, families, unemployed workers, the most vulnerable members of our society, or the middle class.

[Wayne Long, Liberal, Saint John—Rothesay, NB]

Mr. Speaker, let me congratulate my friend and colleague for her speech. We both sit on the human resources committee, and we have a passion to reduce poverty that is unequalled.

Some of the things my colleague said in her speech are a little puzzling. Let us not forget that the NDP ran in the last election on austerity and balancing the budget. I feel that it was a party that lost its way and obviously lost its base.

The member's party supported the UCCB, which gave the same amount to millionaires as it gave to those who make $20,000 a year. Will she not concede that the Canada child benefit is a much better program than the UCCB, that it is transformational, and that, starting in July, it will help families that are living in poverty?

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I said it before and I will say it again, poverty is not a partisan issue.

In the time that I have been working with poor families and low-income individuals, I have relied on facts. The fact is that the benefit these families have been receiving since July will not be indexed to the cost of living. As the years go by, and as we move toward 2020, they will be getting less money from that benefit. Those are the facts and that is why I am criticizing the fact that this benefit is not being indexed immediately and for subsequent years.

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

Mr. Speaker, I would like to thank my colleague for her passionate speech about the budget and life in her community, Saint-Hyacinthe—Bagot, which is quite similar to what I am experiencing in Sherbrooke, which is a few dozen kilometres from Saint-Hyacinthe.

Since coming to power, the new Liberal government has promised major investments in infrastructure and much more of them. I was wondering whether anything has materialized in her riding over the past year and whether work on infrastructure projects has begun. Not much is happening in my riding. From what I can see, not much is happening across Canada.

Is my colleague concerned about how slow the infrastructure program is being implemented and the fact that the fine promises are not materializing? Is she concerned that the promises will not be kept because the Liberals are not taking this seriously?

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, after the election a year ago, municipalities had very high expectations.

When I met with them, they all had projects, and they all expected those projects to be funded after the budget. After the budget was tabled, I had to tell them that there was nothing for small municipalities in ridings like mine. In the first year, everything went to big cities.

Their disappointment did not end with yesterday's economic update. They have massive needs. That is what they are saying.

I have not yet seen any infrastructure funding for my riding even though municipalities have submitted proposals and have needs as they cope with bigger and bigger responsibilities. Small municipalities are the ones having the hardest time meeting their obligations. As I have said many times, they are barely keeping their heads above water, so any little wave that comes along puts them under. Nevertheless, all of the funding is flowing to big cities.

Yesterday, the government announced that it will invest billions over an 11-year period, and I could not believe it. Municipalities are going to be disappointed for 11 years. That is unacceptable.

Many of us here in the House represent rural ridings that do not have big cities in them and we are not seeing any money coming in. We have to keep speaking out on behalf of these small municipalities that are always having to wait their turn.