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 want to thank the member for his speech and for talking about investments in mitigating the impact of climate change in particular.

Right now, heavy rainfall has led to a state of emergency at the Tseshaht First Nation in Port Alberni. These flood warnings are expected to continue throughout the coming week.

We know that climate change has moved from a future threat to a present danger. Extreme weather events such as floods are increasing in frequency and in severity. The PBO predicts that storms, hurricanes, and floods linked to climate change will cost the federal disaster fund $900 million annually over the coming five years. That compares to an average of just $54 million a year for the period from 1970 to 1994.

The disaster financial assistance program operated by Public Safety Canada is heavily underfunded. Therefore, I would ask the member if he supports increased funding to mitigate climate change, to invest in a national flood strategy so that we have a plan, so that we can budget and pre-empt a lot of the costs that are going to be created by flooding in our communities.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, that is an excellent question. However, I think the member is preaching to the converted on this side. He might talk to his colleagues to the right.

For a long time, I have been supporting investment in mitigation, because, as I said earlier, it is hurting us more than anyone else. Therefore, I am certainly in support of this type of funding, and, in fact, even internationally. I tabled a bill about eight years ago for those people who had lost their country because of this type of disaster and had no place to live as their homes were inundated, and that would make them eligible for a category under immigration as refugees.

I certainly support the direction the member has suggested, but I do not know the technical details.

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

Mr. Speaker, when I think of the budget implementation bill, there are a lot of things that we could be talking about. However, one of the big policy announcements that was made early on upon taking government was the idea of having that extra tax on Canada's wealthiest, the 1%, and at the same time producing a tax benefit for Canada's middle class. This is something I expected all members of this House would support, but, unfortunately, that is not the case.

I wonder if the member would provide his thoughts in terms of how important it was to provide that tax break for Canada's middle class.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, I thank the member for the question, because it allows me say something else. As I said, I did not have time to get in a couple of other things from the budget that were so exciting for us, which were pan-Canadian.

First of all, of course, the middle-class tax credit goes to so many people in the north. It helps us more than anything else, because the cost of living is so much higher.

One of the reasons I got into Parliament was to fight poverty. We have increased money for low-income students, for the poorest of seniors in the OAS supplement, for women's shelters, and for services for veterans. There are also the categories for people in the housing strategy and poverty work, as well as money for the people who really need it, which is very important to me.

[Jenny Kwan, NDP, Vancouver East, BC]

Mr. Speaker, the BIA will not index the new Canada child benefit to inflation until 2020. The member spoke about his role in wanting to reduce poverty. I wonder whether he can comment on that, and if he would agree and urge the government to index it so that it would not fall behind with respect to inflation.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, yes, the child benefit is a sea change in Canada, it is huge. It is the biggest thing for my riding with thousands of new dollars for parents. I think it went way ahead, and would have covered indexing for a few years. The sooner indexing comes in, the better for me. I am happy when the government does put it in.

[John McKay, Liberal, Parliamentary Secretary to the Minister of National Defence]

Mr. Speaker, I am thankful for the opportunity to participate in this debate. It gives me an opportunity to talk about a town hall I attended a week ago today. The town hall was at the University of Toronto's Scarborough Campus, UTSC, and was hosted by six Scarborough MPs: the members for Scarborough Southwest, Scarborough Centre, Scarborough—Agincourt, Scarborough North, Scarborough—Rouge Park, and myself, the member for Scarborough—Guildwood. It was a really good event. It was an opportunity to invite the Parliamentary Secretary to the Minister of Finance to talk about the very subject we are discussing today.

As everyone can appreciate, this budget is of great interest to the people of Scarborough. In particular, as we know, Scarborough is the eastern cornerstone of the GTA. It has a population of 600,000 or 700,000 people and is very ably represented by all of its MPs.

The big message out of this town hall was transit, transit, transit. The reason it is transit is because this is a severely under-serviced area in the GTA.

The location where this town hall took place, as I said, was UTSC. UTSC is a community of scholars. At this point, there are 13,000 students, a mix of both graduates and undergraduates. It is going up to 15,000 in a couple of years, yet it can only be accessed by TTC buses. That is a very poor way of getting that volume of people on and off of the campus on a daily basis.

Principal Kidd introduced the evening by talking about this need, but also the larger needs of the campus, particularly with respect to infrastructure. He made the point, or maybe I made the point for him thereafter, that UTSC had been home to the top scholars at the University of Toronto for the last four years running. Think about that. This is a suburban campus in the eastern-most part of the GTA and for the last four years it has been home to the top scholars at the University of Toronto. This gives us a feel for the quality of education that one would receive on a campus like that.

In addition to UTSC, there is also Centennial College, which would probably have double the number students if we add in part-time and full-time students. We are talking in the order of 40,000-plus students coming and going in the eastern GTA, in Scarborough, from two of the top schools not only in Ontario but in all of Canada. Centennial College has received quite a number of awards recently for the quality of its scholarships and job training.

The point of the principal and of the people who attended the event, and the point of us in Scarborough, was that transit was the number one ask. That is entirely consistent with the direction this government is going. There is a consensus that governments need to invest not only to boost economic growth in the short term but to set the stage for long-term growth as well. That is exactly what the Minister of Finance and the Prime Minister are doing today.

They are talking to some of the most savvy investors in the world, inviting them to give Canada a real look. In giving Canada a real look for potential investments in all kinds of infrastructure projects, we may actually be able to free up a serious amount of money so we can make the investments necessary to address what I and others have described as an infrastructure deficit.

The beauty of having a town hall such as this is that we get to hear what the people want. The worst thing in politics, and I know because you are a very successful politician, Mr. Speaker, is that 90% of politics is just showing up, listening to what people want. When we can have a useful and constructive dialogue such as we had last Monday night, we can then respond in a way that deals with fiscal realities, but also deals with the needs and wants of Canadians.

This is why that town hall in particular, which was well attended, was very successful. We heard from a variety of interests. Naturally because we were on a university campus, the interests of students was of considerable concern. They particularly appreciated some of the relief that had been given to students in the last budget. Naturally, and not surprisingly, they are looking for more. Nevertheless when we hear what they have to say and they hear about other competing needs, they realize the government has a bit of a balancing act to stay fiscally sustainable but simultaneously that they may also be able to meet many needs right across the spectrum.

We are rather fortunate as a nation that we have some fiscal capacities. The discipline from the Chrétien-Martin years has stood us in good stead. We drove down the amount of the national debt. We had our debt-to-GDP ratios down to levels that were sustainable. Because of the work of Prime Ministers Martin and Chrétien, we are able to contemplate investments in the future.

I would like to say the same would be true of Mr. Harper's government, but I would note that the Conservative government added $150 billion to the national debt. I would not say that totally constrains our fiscal capacities, but it does have some constraint. One wishes that some of the decisions around revenue depression and expenditures had been made differently, but we are where we are. It is still a position that is relatively good, and exceedingly good compared to many other nations.

Hence the sales job by the Prime Minister and the Minister of Finance gets a lot easier when they can say the debt-to-GDP ratio runs around 30% on an annual basis and is on track to maintain or reduce that slightly. That enables those who would be investing literally billions and billions of dollars in our country to have some confidence that the fiscal management of our nation is in good hands.

The final point I want to make is with respect to many middle-class Canadians feeling they are working a lot harder. This speaks to an alienation that we have seen reflected in other countries, but we are not immune from it. It is the distribution of the wealth in our country. There is a feeling of concern that some people are doing exceedingly well, referred to as the 1% and sometimes as the 1% of the 1%. In the efforts on the part of the government in the last budget and in this budget implementation bill to address that concern, there is a need to have some redistribution of wealth so all Canadians feel they have a stake in this nation.

We have seen populist uprising in a whole variety of nations. A lot of that is driven by the fact that some people feel they are getting left behind. Fairly, unfairly, rationally, or otherwise, that is the feeling. The Prime Minister and the Minister of Finance addressed that somewhat in the last budget. None of us are immune from that sense of alienation.

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

Mr. Speaker, my colleague mentioned the good management of the Martin-Chrétien years. I need to remind him that was done by simply cutting $25 billion from transfers to the provinces and municipalities. The municipalities are still suffering from those cuts.

Later on in his speech he said that the fiscal management of the government was in good hands. How can actually say that when we realize that the interest costs alone between today and 2020 are rising by $15 billion per year? The interest costs per year that we will pay on our deficit will be $15 billion higher in 2020 than it is today. Yet he says that the fiscal management is in good hands.

Could he square that circle for me?

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, my hon. colleague has been here for quite a while. He would know that when Prime Minister Chrétien and then-finance minister Martin took over from the previous Conservative administration, the New York Times had designated Canada as an honorary member of the third world based upon its debt-to-GDP ratio, which was approaching, if not north of, 70%. Something major had to be done so there was some fiscal discipline imposed upon all levels of government.

I would take note that the relationship between the federal government and municipalities has substantially improved, primarily because we are now in a fiscal situation where we can.

On the interest costs, it is a Conservative double-think to prattle on about how the Conservatives think they are great fiscal managers when, out of the 10 budgets they presented, eight were deficit budgets and one was the biggest deficit budget in the history of our nation. They pretend they know something about fiscal responsibility. They added $150 billion to the national debt, and the rest of us are paying for that.

[Tracey Ramsey, NDP, Essex, ON]

Mr. Speaker, when my colleague mentioned that he thought politics was only 90% showing up, I hope he misspoke. Clearly the people from Essex who elected me to be in the House expect more than just showing up. If that is what the Liberal government represents, the member opposite will have questions to be answered in his own riding.

He mentioned setting the stage, and that is true. However, the government is setting the stage for privatization, something it has no mandate to do, something the Liberals were not elected to do. There is a danger in this.

As we face trade deals like CETA coming forward, the TPP, the potential of reopening NAFTA, there is a danger in privatizing things that are in the public sphere because of investor state challenges that can brought against us for doing so.

In these trade agreements, there are clauses called “ratchet” and “standstill” that determine things that can be brought back and forth between public and private. There is a real danger that once it is privatized, these deals will make it nearly impossible for us to bring things public again.

Does the member understand that this is a threat to Canadian democracy?

[John McKay, Liberal, Scarborough—Guildwood, ON]

I just take note, Mr. Speaker, that I have enjoyed some success in this place. I have gone through seven elections and this is my 19th year. When I offer my hon. colleague some advice, it is gratuitous. I appreciate that maybe it is not worth what is paid for it. However, I take note that Canadians like to be talked to. The strange concept is that they are asking us to talk to them because they are reasonable people and, by and large, they are. We return the telephone calls and answer the letters. When I say that 90% of the game is showing up at the events, that is actually fairly good advice, which I gratuitously offered to the hon. member.

As to trade deals, I have yet in 19 years to see a trade deal that the NDP could endorse—

[Don. Davies]

South Korea and Jordan.

[John McKay, Liberal, Scarborough—Guildwood, ON]

South Korea, son of a gun, we nailed one. I appreciate the clarification from the hon. member, Mr. Speaker.

As to privatization, there is good privatization and there is bad privatization. I will give an illustration of bad privatization. When I say transit, transit, transit, the 407, handled by the Conservative government of Ontario, was a bad privatization. It was a good privatization under the previous NDP government.

[Christine Moore, NDP, Abitibi—Témiscamingue, QC]

Mr. Speaker, I am pleased to speak to Bill C-29 and some of the budget provisions. I would like to put some things on the record and frame them in the context of what is happening in my riding.

Under Bill C-29 the child benefit will not be indexed. It is estimated that low-income families will lose roughly $5,500 by 2020. If we consider the rising cost of living, low-income families will lose roughly $500 in four years. It is sad that no one thought about the fact that the cost of living will continue to rise for families and that the child benefit was not indexed accordingly.

There are some things people fail to mention about the child benefit. For example, people keep saying the child benefit will help lift children out of poverty, but no one ever says that to be entitled to it we have to have an up-to-date tax file, as do our former spouse and our new spouse. If not, benefits will not be provided until the situation is rectified.

Some services are available only during tax season, which means that people can get help with their returns for the current year, but no help is available to them if they have not done their taxes for four years. Help is not available.

Every week, people come to my office to tell me that they have not received child benefit payments for months or years because they cannot get their Canada Revenue Agency file in order. They may be asked to produce documents proving that their child lives with them. In shared custody or access rights situations, among others, that can be extremely complicated. A parent with a two-year-old or a three-year-old who does not go to day care may have a hard time proving that the child actually lives with him or her. A friend has to declare that he or she knows the parent well and that the child lives with that parent.

Also, information provided by both parents has to match up. Is a former partner who does not receive the child benefit because he or she has access rights but not custody likely to get in touch with the Canada Revenue Agency in a hurry to sort things out? Sometimes the answer is no, and that can create very complex situations that result in some people being denied the child benefit for long periods of time.

My riding office has helped fix the situation for some people who have not been receiving any child benefits for years. They were sometimes owed $20,000 in unpaid benefits from the federal government alone. That money could have helped them when they needed it. However, this is difficult to do because the appropriate services are not in place. People do not always think to contact their MP.

In the past, there was a Canada Revenue Agency service counter in Rouyn-Noranda, in my riding, but it is now closed. The government no longer provides direct services to people. The counter is still there and the office is still open because there are still investigators who work there, but people can no longer go to the CRA office to get help. People are being left with no resources. Often it is those most in need and with a lower level of education who are unable to resolve their situation and get access to the money they are entitled to.

This bill does nothing about the tax system, which most people find extremely complicated. How many people are owed tax refunds each year but do not get them because they do not realize they are entitled to them? These people do not have the money to pay someone to file their tax return for them. They do their best to do it themselves.

Every year, some of the money that is earmarked to help poor people remains in the government coffers because people do not know that they are entitled to it. However, the government is not doing anything to fix that situation.

Child benefits can in fact help lift people out of poverty, but for that to happen, parents need to have access to those benefits and be able to receive that money. If CRA does not offer services that enable people to access their money, we go around in circles, because people are not getting help.

Consider the example of a family of four children where the eldest has a different father than the other three. More information will be needed on that child, because the statements from the two former spouses will not match. The child benefits will be frozen not only for the child in question, but for all four children, even though there is no problem with the other three children's benefits. We want to make sure that people can get their money if there is a problem regarding the amounts.

Also, the new calculation is done in July. This means that if any clarifications are needed, if there is a problem with the file, it will be frozen in July, right before kids go back to school, which is when parents need to spend a bunch of money on school supplies and clothes to make sure that their kids are ready for school. However, that is right when the family benefits would be frozen.

Often services are not accessible. A person tries calling and it may take three or four tries and three or four hours of waiting before they manage to get someone on the phone. People get discouraged. It takes months to correct the situation. For many people, the family allowance represents more than half their income.

I want to move on to something equally important and that is the infamous infrastructure bank, which is actually a privatization bank. The $15 billion that was earmarked for government-funded, public infrastructure projects is being put in a bank, and foreign investors are being sought to fund the infrastructure projects. Obviously, if we are getting foreign funding from private investors, they are going to want a return on their investment. What these private investors want is to get money back in exchange for their investment.

In other words, how do they get a return on their investment when we are talking about roads, bridges, and other infrastructure such as water systems? By charging surcharges, tolls, and user fees. The Liberals never mentioned during the election campaign that they were considering using these fees and privatizing our public infrastructure network to help rebuild what we need built.

What is more, these projects and programs are designed for big cities. What are the chances that I will be able to attract a foreign investor who is willing to invest in a bridge in a small town in northern Abitibi—Témiscamingue? They are very slim.

In reality, the small municipalities and rural regions will be the ones that suffer. They will be completely forgotten in the Liberal government's infrastructure plan. That is a surprise because the Liberals never spoke about privatization. Meanwhile, these municipalities will continue to struggle to try to find solutions to keep their heads above water.

In many cases, the needs are great because all the villages in Abitibi—Témiscamingue were settled around the same time. As a result, the infrastructure was all built around the same time and will all need to be replaced at the same time. That time is now. Some municipalities have five or six bridges in their villages that need to be replaced. They do not have the money to do that. It is impossible for them. What will the municipalities tell people? Will they have to buy people's houses from them and tell them to go live elsewhere because they do not have the money to pay for infrastructure and the government is privatizing infrastructure and investing in Canada's big cities? The government has completely forgotten that people live a few kilometres north of the St. Lawrence River.

That is not what we should have to tell people. Canadians who live in rural regions contribute greatly to Canada's economy. They make sure the large corporations in the big cities have the resources they need. If the government does not support Canada's rural regions, it will destroy our country's economy.

I look forward to my colleagues' questions.

[Adam Vaughan, Liberal, Parliamentary Secretary to the Prime Minister (Intergovernmental Affairs)]

Mr. Speaker, the concerns raised about small towns not having the borrowing capacity to participate in the infrastructure program are exactly why the campaign promise was fulfilled. We have moved to create an infrastructure bank that would give smaller communities, in groups, access to world markets, to borrow and to do things like build water plants, which cost an extraordinary amount of money, which small towns quite often do not have the capacity to build. It is not a program for privatization. It is specifically designed to give smaller communities access to world capital.

If this happens, would the member opposite not agree that the increased capacity to build cleaner water plants might result in the delivery of clean water to smaller communities at a rate they could afford, as opposed to previously, according to even her own admission, when they had no access to world capital because they were too small?