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.

Second Reading

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

Madam Speaker, I do not think it is. I am passionate about it. One only needs to go to priority neighbourhoods. The priority neighbourhood I went to, in particular, was Crescent Valley, where upwards of 50% to 60% of children and families are living in poverty. They do not have enough money to heat their houses and eat and are making decisions on a daily basis. I think we got it just right.

[Don Davies, NDP, Vancouver Kingsway, BC]

Madam Speaker, during the election, the Liberals made a number of promises to Canadians. One promise was that their tax increase on the wealthiest Canadians would pay for the tax cut for middle-class Canadians. It turned out that this is not the case. It is off by about $1 billion. They promised a tax cut for the middle class, and when they brought in that budgetary measure, it turned out that almost 50% of Canadians actually experienced no benefit from that tax cut whatsoever.

The Prime Minister is now backtracking on his claim to bring in electoral reform.

There are a number of legitimate concerns Canadians have.

One thing that was very clear was that the Liberals promised Canadians that if they were elected, they would build public infrastructure and invest tens of billions of dollars to build necessary public infrastructure. I think that was a positive promise.

What they did not tell Canadians was that once in office, the Liberals would consider selling off public assets, like airports, or privatizing roads. I would ask my hon. colleague if he told the people in his riding during his campaign that if he was elected, he would be part of a government that would sell off publicly owned assets that make money for taxpayers.

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

Madam Speaker, what I told people in Saint John—Rothesay is that we were prepared, as a government, to have strategic programs of infrastructure investment to re-stimulate the economy. People in my riding, a unionized industrial riding, were shocked and puzzled by the NDP approach in their campaign. They ran on balanced budgets and austerity, yet now that we are in the House of Commons, they are saying that we are not spending enough. It is such a mixed message. My constituents and residents across Canada were confused. The New Democrats went so far right that I do not think anyone really knew what they stood for anymore.

To answer the member's question, I believe that my riding, in particular, was very proud of the infrastructure spending. They are pleased and are seeing tangible, real benefits from that spending.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Madam Speaker, I am pleased to have the opportunity to rise in the House to speak to Bill C-29, which seeks to implement the series of budgetary measures and tax changes announced in budget 2016, tabled in Parliament on March 22, 2016.

First, I would like to thank the Canadians who are watching at home right now, particularly those from my beautiful riding of Beauport—Limoilou.

It is rather ironic that I am rising in the House today to speak to Bill C-29. Two weeks before the House adjourned for the week of Remembrance Day and we returned to our respective ridings, I tried to see if I could participate in this debate, but I was not able to get a time slot. I was quite disappointed, but this week, I am able to debate this bill during a very special week for Canadian businesses and the entire world, Global Entrepreneurship Week.

Under the leadership of my colleague from Louis-Saint-Laurent, our finance critic, and through the arguments that the Conservative Party has been presenting over the past two weeks concerning Bill C-29, we have been able to see that many aspects of this bill are harmful to our small and medium-sized businesses.

Last week in my riding, I visited over 100 companies. I usually try going door to door to see my constituents at least two evenings per week. This time I visited businesses. Why? Because I am organizing a business reception for Thursday evening, not only to mark Global Entrepreneurship Week, but also to speak with small business owners in my riding, to find out exactly what they think of the Liberal government's budget, and to hear what they are most concerned about right now.

I would like to remind the House that these are our businesses. Canada has over 1.16 million small and medium-sized businesses that employ nearly 10.5 million people. It is therefore safe to say that small businesses are definitely important job creators and wealth creators for our Canadian nation.

Here is something interesting. I googled “Global Entrepreneurship Week” today, and one of the first hits was a statement from Canada's Prime Minister. His statement said:

The Government of Canada is committed to helping Canadian entrepreneurs grow their businesses and thrive—here at home and abroad.

I find it ironic that the Prime Minister made that statement today to mark Global Entrepreneurship Week. It is entirely appropriate and de rigueur, but I am not so sure his actions are consistent with today's statement.

For example, the government introduced measures that hurt small and medium-sized businesses, including those in my riding of Beauport—Limoilou. Those measures will be implemented by Bill C-29. He brought in the Liberal carbon tax and hiked Canada pension plan costs, though that does not affect Quebec as much as it does the other nine provinces. He broke his promise to cut the small and medium-sized business tax rate. The way I see it, that is probably the worst thing the Prime Minister has done to small businesses. He made that promise during the election campaign, as did the Conservatives and New Democrats. His decision to break that promise boggles the mind. He got rid of several tax credits, which I will talk about later. To top it off, two weeks ago, the minister announced plans to abolish several more yet-to-be-determined tax credits. We do not know yet which ones, but I hope we will find out soon.

Let us talk about Bill C-29 and why it is disappointing. It is disappointing because it is the next phase of the Liberal government's plan, which is clearly not working.

Let us not forget what the original idea was behind this plan that was developed a year ago following the federal election. The idea was to create jobs by investing heavily in infrastructure. When we look at the facts, including those presented by the parliamentary budget officer, we see that only $3.8 billion of the $25-billion deficit will be invested in infrastructure and not a single job has been created so far. The plan is not working. That is the only real conclusion we can come to.

Bill C-29 is disappointing because of the uncertainty. The minister is unable to say when there will be a return to balanced budgets. The economic update talks about a $25-billion deficit and the only reason it is not $30 billion is because the government used the $6-billion contingency fund it had created barely six months before to bring the total down.

Rudy Le Cours from La Presse calls the disappearance of this $6-billion contingency fund a shell game. Even Gérald Fillion from Radio-Canada, whom I follow religiously, says the government fiddled with the numbers to make the deficit appear smaller. Radio-Canada seems to support what the Conservative Party is saying in this debate, which is rather extraordinary. What is more, not a single job has been created in Canada in a year. On the contrary, we are losing jobs and the unemployment rate keeps going up.

The Canada child benefit is the brainchild of a bunch of amateurs, while our program was viable and gave Canadian families money they could use. The Liberals not only abolished existing programs, but their new program is not revenue neutral. It will cost more than $4.3 billion over the course of its second year and $3.4 billion this year. Since they forgot to index it, they are going to have to find an extra $42.5 billion by 2020.

Bill C-29 is a reflection of our national accounts. It is a reflection of a government's exactness and strength. Through Bill C-29, this Liberal government is showing us several things. First, it is showing us that it is unable to calculate a balance sheet properly, as evidenced by the fact that the government forgot to index the Canada child benefit. Second, as the bill tells us, the government is not being careful with taxpayers' money because it promised a deficit of $10 billion per year but is now planning to run a deficit of $30 billion per year, and it does not have a specific date for returning to a balanced budget. Third, the government did not invest taxpayers' money properly and did not create jobs to help grow the economy. Finally, and this is my favourite point, this bill shows that this government is simply arrogant because it did not want to correct its mistakes and change its plan, even though it is not working at all.

Bill C-29 represents one broken promise after another. Breaking promises is becoming standard practice for this government. That is shameful because it is causing organizations and individuals in Canada to become ever more cynical.

This government broke its promise to run a modest deficit by borrowing three times more than necessary. It did not even need to borrow the $10 billion because we are not in a recession. It broke its promise to lower the tax rate for small and medium-sized businesses and its promise to offer a revenue-neutral fiscal plan. Take, for example, the infamous tax cut for low-income Canadians that my Liberal colleagues have been bragging about since early this afternoon. This tax cut will not help low-income Canadians because it does not apply to those who earn less than $45,000 a year. Instead, it will help Canadians with an annual income between $140,000 and $170,000. The NDP and the Conservative Party both raised that point.

Once again, what I dislike about this government is its arrogance. It is selling Canadians a dream, making wild claims about the wealthiest 1% having a monopoly, and inventing tax cuts in flamboyant speeches. I am therefore very disappointed with Bill C-29.

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

Madam Speaker, I thank my colleague from Beauport—Limoilou for his speech. I would like to ask him a fairly simple question. He talked about the Canada child benefit in a negative way. He said that it is terrible because it is not going to help every family.

If I recall correctly, the Conservative program handed out $160 a month to billionaires. Did that make sense?

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Madam Speaker, I will answer the question asked by my colleague from Laurentides—Labelle. I am beginning to know the names of my colleagues' ridings, which is a good sign.

Since the election, I have knocked on 30,000 doors in my riding. The comment I hear most about the government's child benefit is that the $2,000 or $3,000 paid out to people with two or three children lets them buy a few bottles of wine or bigger steaks.

They laugh when they say that because they know that they or their children will be stuck with the bill in five or ten years. Mothers have told me that they put this money in a bank account that only their children can access because they will have to pay for the deficit caused by this benefit.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Madam Speaker, I was surprised to learn that privatization was an integral part of the Liberal's infrastructure strategy. Can my dear colleague tell us whether he was surprised by that?

Does he understand the differences between a strategy financed solely by public funds and one that receives significant funding from the private sector?

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Madam Speaker, I thank my colleague for his question, which reflects the NDP approach, and that is very good.

I do not know if it will be more private than public because I have not really looked into the matter. However, it is symptomatic of another problem that is clear to everyone on this side of the aisle: the Liberals have spent so much that, to roll out their infrastructure plan, which is supposed to be their priority, they have to look for money in places other than the public treasury. To me, that is what we are seeing here.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Madam Speaker, I believe integrity is important to Canadians. When we make a projection or promises, we try to follow through on them.

Could the member comment on the record of the present Liberal government in its first year, in terms of its integrity, bad management, and looking at its balanced budget?

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Madam Speaker, I thank my colleague for his question.

I do not like having to say this in the House, but unfortunately the government has no integrity whatsoever. It breaks all of its promises.

Take electoral reform. The Prime Minister of Canada recently said that electoral reform might not be a priority because Canadians wanted reform while the Right Hon. Stephen Harper was in office. Now that we are in wonderland and the Liberal government is in charge, the Prime Minister has decided on his own that reform might not be such a great idea after all.

In answer to my colleague's question, I would say that the government has no integrity.

[Raj Saini, Liberal, Kitchener Centre, ON]

Madam Speaker, our government was elected because Canadians wanted a change from a government stuck in the ways of the past. Canadians wanted a government that was bold enough to look to the future and embrace a new vision for Canada.

The need for a new vision, a forward-thinking plan for the future that embraces innovation and places Canada on the international stage in the realm of science and technology, is a concept that has been embraced in my riding of Kitchener Centre. As a part of the Kitchener—Waterloo region, our potential for growth and prosperity was stymied by a lack of attention that the previous government paid to science, research, and innovation. Thankfully, our government has put us back on the right path, one that will support industry and growth while fostering knowledge and innovation.

I know that there will be some on the other side of the House who will argue that they did not ignore science or research. Well, my background is in science, and this background in an evidence-based field means that I like to have the hard facts in front of me. Let us talk about some facts.

In 2012, the Canadian government invested less in research and development, $28.8 billion U.S., than the government did in 2004 when it invested $22.7 billion. That approach did not make a lot of sense. In order for Canada to maintain its position as a world leader in research and development, growth and investment are essential. Doing our part by investing in research and development is an obvious path to ensure growth and prosperity.

There is a metric that is used to quantify how a country is doing with its investments in R and D called GERD, or gross domestic expenditure on research and development. Simply put, GERD is the amount of money a country spends on research and development. Unfortunately, if we look at how Canada compares to other countries, we are not doing so well on this front. In fact, in 2012, Canada fell from its spot in the top 10 to 12th in terms of real spending for research and development, which is not a great performance to be sure.

However, as in many other cases, the raw spending only tells half the story. In order to compare Canada's spending on R and D to that of other countries, it is far more useful to use GERD as a percentage of GDP. This is a commonly used measure internationally as an indicator of the country's degree of R and D intensity. In my opinion, it conveys how important R and D can be to a country and to an economy. Unfortunately, we do not perform well on this front either.

According to the OECD, the OECD average ratio of GERD to GDP in 2013 was 2.36, with Israel, Japan, South Korea, Sweden, and Finland leading the world. Calling Canada laggard is being generous. Looking at the ranked list of countries, we do not even make the top 20.

In 2013, Canada's ratio of R and D spending as a percentage of GDP was 1.69, down from 1.79 in 2012. Among G7 countries, Canada ranked fifth in 2013 and its ratio of GERD to GDP was lower than the United States, which was 2.73. It is difficult to imagine how Canada could be competitive on the world stage if we were to continue falling behind in R and D spending.

A Globe and Mail piece in 2013 noted that “...in one vital area where governments really can make a difference—innovation—Ottawa’s commitment has been inconsistent and its investments wanting”. I think that quote really sums up the previous government's lack of interest in prioritizing science, research, and innovation.

We know that when government chooses to make a difference by investing in innovation, we can create good middle-class jobs, develop the technology of the future, and create a more competitive Canada. I am sorry to say that the previous government failed to take advantage of Canada's potential in this area.

However, I am pleased to say that we are committed to turning this around. This is why I am so proud to see that our government is developing an innovation agenda that we firmly believe will position Canada as a world leader in turning ideas into solutions, science into technologies, skills into jobs, and start-up companies into global successes. Our budget recognizes the importance of research, development, and innovation.

I would like to take a few moments to talk about some of the highlights of our budget that are demonstrative of just how committed to this advancement of science, innovation, and technology we really are.

First, our government is investing $2 billion over three years in strategic infrastructure at post-secondary institutions. I cannot say just how vital this is.

If we want to be able to perform world-leading research we need to have world-leading facilities. With this investment, not only would our students be able to work in some of the best facilities, but we would also have the opportunity to make our facilities some of the most environmentally friendly ones in the world. Imagine the best minds conducting cutting-edge research at some of the most up-to-date modern sites available.

My region is home to many excellent post-secondary institutions. While we often talk about the value and importance of post-secondary education, there is much less focus on the details behind post-secondary education. Tuition rates have risen sharply over the last decade, with little relief for students. That is why measures like increasing the amounts available under the Canada student grants program are so vital to ensuring the continued success of our students. We need to do our best to make sure that education remains accessible to as many students as possible and that we continue to back our desire for increased access to post-secondary education with concrete actions to make that possible.

Canada has some world-leading research facilities. It is essential that we fund them properly so they are able to do their work properly. Our government is investing $30 million in the Canadian Institutes of Health Research; $30 million in the Natural Sciences and Engineering Research Council; $16 million in the Social Sciences and Humanities Research Council; and $19 million in the research support fund to support the indirect costs borne by post-secondary institutions in undertaking federally sponsored research.

In addition, our government is providing an additional $46 million to the granting councils. These councils, namely, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, and the Canadian Institutes of Health Research, support and promote high-quality research in a vast array of areas. We must do our part to support them.

As someone with a background in science, I was stunned when the previous government cut funding to the Experimental Lakes Region in northern Ontario. What really surprised me, however, was how public the opposition to that was. Who would have thought that cutting funding for such a program would galvanize the public the way it did? Not only has the government restored funding to the Experimental Lakes Area, but we have also increased our funding for ocean and freshwater science, including monitoring and research activities.

Science is important to our government, and it is not just Canadians that will benefit from our renewed focus on data and evidence. People across the world will benefit from the research we conduct here at home.

Speaking of evidence-based policy, our government made it a priority to restore the mandatory long form census. The data collected by the census is essential for planning and spending purposes. Not only did we restore it, but Canadians responded extremely enthusiastically to its return. We made international headlines when in our eagerness to complete the census, we crashed the website. Now that is something we can be proud of.

As an MP from the Kitchener—Waterloo region, I was thrilled to see that the Perimeter Institute received $50 million. For those who do not know, the Perimeter Institute is a world-leading facility in the field of theoretical physics. The finance minister got it right when he said that the Kitchener—Waterloo region is home to some of the most brilliant, innovative minds and companies in the world.

I am excited to see the developments that come from this funding. We are working hard to lay the foundation so that our researchers, thinkers, and dreamers will be able to see their projects carried through to fruition. Our future is so bright, and we have such potential that is waiting to be tapped, harnessed, and encouraged. I am confident that while we have had some fantastic achievements in the past, they are nothing compared to what we will see in the future.

I would like to commend the Prime Minister and the Minister of Finance for their commitment to championing a research and innovation agenda, one that I am sure will serve Canadians well, now and into the future.

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

Madam Speaker, there are parts of the member's speech that I totally agree with. Waterloo region is home to some of the best post-secondary education and research facilities in the world. I could not disagree with him on that at all.

I am wondering if he is up front with his constituents that the government is adding $15 billion per year in deficit spending, a load that we will be responsible for. Just the interest costs alone are going up by $15 billion a year between today and 2020.

Which generation does my colleague think will be able to pay off this huge Liberal debt?

[Raj Saini, Liberal, Kitchener Centre, ON]

Madam Speaker, I would like to thank my good friend, neighbour, and someone who always looks out for me and always gives me advice. Therefore, I would like to give him a little advice today.

Economically we know right now in the world we have zero lower bound interest rate. When we look at the 10-year government bond rate, whether it is in the United States at 2%, or in Germany at 0.5%, or in Japan at 0.2%, we know the inflation targets right now are less than 1%. This is absolutely the best time in our history, in the history of the world probably, where investment in infrastructure is so important, whether it is public infrastructure, public transit infrastructure, social infrastructure, or environmental infrastructure.

[Matthew Dubé, NDP, Beloeil—Chambly, QC]

Madam Speaker, the member just eloquently explained why we must invest in infrastructure. That is something we agree on.

What we do not support is the plan to privatize our public infrastructure. That is exactly what the government is proposing to do with the infrastructure bank. Today, no less than eight ministers and the Prime Minister were asked to attend a meeting of multibillionaires in Toronto. The purpose of the meeting was to explain how they were going to charge us twice, once by taxing us and the second time by charging tolls to finance our public infrastructure.

It is all well and good to speak of who campaigned to the left or to the right. However, can my colleague now admit that after all the big progressive promises to invest in public infrastructure, they will dare to go even further than the Conservatives by selling off our public infrastructure and making taxpayers pay twice rather than once?

[Raj Saini, Liberal, Kitchener Centre, ON]

Madam Speaker, as I mentioned earlier, this is the best time in our history to invest in infrastructure, and we have a very bold and ambitious agenda. When there is a bold and ambitious agenda, we have to keep an open and broad mind about everything. I am quite confident the government will be responsible and ambitious in its approach. I hope my hon. friend will work with us to ensure we create the right infrastructure for all Canadians.