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

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, I congratulate my colleague on an excellent speech. He reminded the House about all of the promises the Liberal government made and has kept, promises relating to youth, seniors, the middle class, and economic growth.

Can my hon. colleague talk about the impact those promises have had on youth, seniors, growth, the middle class, and job creation in his riding? I am sure he can share many examples from his riding because the Liberal plan is all about growth.

[Steven MacKinnon, Liberal, Gatineau, QC]

Madam Speaker, I thank my colleague from Saint-Maurice—Champlain.

Gatineau is a very dynamic city. It is constantly growing, and its population is younger than average. Its needs reflect that. The fact is that we have a growing need for basic infrastructure, such as roads, water and sewage, and waste water treatment.

The infrastructure investments our government will be making in partnership with the Government of Quebec and our municipal partners will enable us to meet the needs of a steadily growing community like Gatineau.

As a demographically young community, Gatineau has families and middle-class families with young children, all of whom benefit greatly from the Canada child benefit. For example, hockey and gymnastics clubs and our cultural associations will thrive because children will have more opportunities to participate in various activities. With an extra $520 or so per month tax free, parents will be able to invest in their children. This measure will help them make ends meet.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Madam Speaker, I am pleased to share my time this afternoon with the member for Richmond—Arthabaska.

It gives me great pleasure to speak to bill C-29, the budget implementation act. Seven months after tabling the budget, Canadians are beginning to recognize the consequences, and the picture is not pretty. Being as it is Halloween, it is appropriate that we refer to the budget as downright scary. It is like a vampire sucking the blood out of most Canadians. The Liberals love spinning the budget into a huge spiderweb to catch people. Small businesses are upset, thinking it is Frankenstein who has come back from the dead.

Even with the low Canadian dollar, the Liberals have generated 20,000 fewer manufacturing jobs in our country. I thought for a moment it was Houdini, because these jobs just vanished. My province of Saskatchewan has lost 4,000 jobs in August over the same period from last year. The trend continued in September with 6,000 fewer people working during the same period as the year before. We have 42,000 unemployed in Saskatchewan currently.

Doug Elliott, the publisher of Sask Trends Monitor, says that going back to 1986 this is the highest number of unemployment in the month of August. Saskatchewan could very well see its first year of negative job growth since the year 2001, and that is scary. We have not seen unemployment levels like this in over two decades. Small business owners do not want the trick or treat, they want an opportunity. They know how best to grow the economy. The Liberals promised a reduction in their tax from 11% to 9%, and we have yet to see that.

Then we have Dracula with his fangs out ready to suck more out of the economy with the proposed carbon tax. This dark cloud hanging over this haunted house will not help with job creation in our country. It is hard to suck blood out of a stone, but the Liberal government seems determined to try. The carbon tax was never mentioned a year ago during the election, and now we know it always was behind one of its trap doors.

To quote Marilyn Braun-Pollon of the Canadian Federation of Independent Business, the state of business health in our country has deteriorated. Hiring plans remain very weak, with only 10% of business owners looking to hire full time, while at the same time 17% are foreseeing layoffs. This is deeply concerning as we head into the holiday season where generally more opportunity exists, mainly though for part-time employment. Retail spending is effectively flat in our province this year, a broad category that includes everything from automobiles, to clothing, to furniture and food. When we adjust for inflation, that means the total sales volumes in the province have declined by more than 2% over last year at this time.

Even thefinance minister was quoted as saying that Canadians should get used to the so-called job churn. No wonder our youth were upset last week at the Prime Minister during a briefing. Our youth right now are experiencing record unemployment, and it is not what was promised to these millennials by the Liberals a year ago. It was all about sunny ways. Now we find out the clouds have rolled in and the government has no answers.

The full moon though has returned. The Liberals have gone back to their old ways of pay to play. Have they not heard from their previous skeletons in the closet? There are more ghosts and goblins as the Bank of Canada has determined more bad news for this economy, downgrading the country's growth outlook yet once again.

Ted Mallett, who is the CFIB's chief economist, says that employment is a big area of concern. While employment plans tend to experience, as we all know, seasonal fluctuation, this October's downward turn was sharper than we have ever seen it in the past. Investment plans have also dropped to a post-recession low.

Nearly 50% of Saskatchewan's small businesses plan to freeze or even cut salaries. We have not factored in the cost of a CPP increase or the much talked about carbon tax. This is more evidence that now is not the time for this carbon tax. I guess it is like CETA. The Liberals played a disappearing act and now they want to be Casper the Friendly Ghost, but I want to remind the House that it was the Conservative government that did all of the heavy lifting for this CETA agreement.

While the Liberals promised a modest deficit of $10 billion to stimulate the economy, it looks like they were dead wrong. They continue to throw more deficit dollars at this problem. Let us remember that a year ago, the Liberals promised they could simply spend their way into prosperity. By most measures, I would say Canadian families are worse off than they were a year ago. Good jobs are in short supply and the vast majority of these new jobs created under the current government are really part time, which explains why weekly earnings for the average worker in this country are lower.

On the weekend, I was home in my riding of Saskatoon—Grasswood and had an opportunity to talk to several young people. Many said they had two and three part-time jobs just to make ends meet. Saskatchewan people, as many know, have always had a work ethic, but there comes a time when they see no light at the end of the tunnel.

Instead of growing the middle class, the government is breaking the middle class. Just last week, the Parliamentary Budget Officer confirmed that our Conservative budget would have resulted in a $2.9 billion surplus for the year 2015-16, but we all know that a surplus is not in the Liberals' vocabulary. They continue to run massive debts. Where it will stop, no one knows. When will this circus stop?

The child care benefit will not be indexed until the year 2020. The PBO has estimated that indexing, in fact enriching, the CCB would cost over $42 million over the next five years. Where, then, will the Liberals get this money? This program would cost more than double the original amount budgeted if indexed over this five-year period.

The current government reminds me of the show a way back called The Munsters. It was televised back then in black and white. I ask the current government to step out of the dark ages and realize it is spending our children's and grandchildren's money, with no hope of ever balancing the budget.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I would remind the member to address his comments to the Chair and not the government.

Questions and comments, the hon. Parliamentary Secretary to the Minister of Finance.

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, for all of those watching and listening to us, what is really scary is that the Conservatives just do not get it. They voted against the middle-class tax cut, they do not believe in climate change, they do not believe in investing in Canadians, and they do not believe in a plan for growth. That is really scary. That is why people watching should be scared of members who voted against the tax cut for the middle class.

Our plan to invest in growth in this country, in Canadian families, in innovation, and in infrastructure was not only applauded by Canadians, it was applauded around the world. The IMF managing director said that she wished Canada's plan would go viral around the world. The front page of The Economist this week said that Canada is an example to the world.

My question is simple. Why did the member, for whom I have enormous respect, vote against the middle-class tax cut for Canadians in this country?

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Madam Speaker, it is interesting that Liberals talk about nine out of every 10 Canadians benefiting. However, I should mention, because I am a former sportscaster in my city, that they eliminated the sports tax rebate and arts tax rebate. The middle class was what the previous government believed in. Families cherished those two programs, in particular. It provided a chance for kids to get off the couch and participate. Those are two programs that sorely need to be reinstated in this country right now.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Madam Speaker, I appreciate my colleague's words. They were very haunting. Some of the statistics he mentioned were bone-chilling. It is quite spooky when we look at the horizon.

I am from Ontario and the member is from Saskatchewan. We see that the same staffers from Queen's Park who ran the McGuinty-Wynne Liberals have moved all the way up to Ottawa. We paid their expenses. They are welcome. When we look at their 12 years of massive Liberal spending, we see more taxes, more government red tape, and more jobs leaving. He listed a bunch of statistics about how his province is hurting, too. Maybe he could tell us how and why this type of thinking does not work.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Madam Speaker, yes, our province was the driving engine of this country for years, and now we are not. We are hurting, along with Alberta and Newfoundland and Labrador. We have seen commodity prices go down, but at the same time, the government wants to impose a carbon tax. Would our previous government in 2008 have imposed a tax against the auto manufacturers of Ontario? No, we did the right thing back then. We propped them up, because we knew the economy of Ontario was in serious trouble back in 2008 and 2009.

Here we are with a government that wants to impose a carbon tax against our province and the rest of Canada at a time when Canadians, and my province of Saskatchewan, simply cannot afford it.

[Sheri Benson, NDP, Saskatoon West, SK]

Madam Speaker, we are trying to address an ever-increasing child poverty rate. The last 10 years of the previous government saw this rate increase. I wonder if the member could comment on why today we find a poverty rate for children of over 11%.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Madam Speaker, I want to thank my colleague from Saskatoon West. In her former job as director of United Way in our city, she did a lot of work helping our community for years and years.

She knows, as well as everyone in our city, that we have a poverty issue with children in our city and in our province right now. The food banks are used more than ever before. However, with a strong economy we can hope that this poverty issue can get dealt with in our province.

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Madam Speaker, when my finance critic colleague asked me whether I wanted to speak today to the government's budgetary measures in Bill C-29, I jumped at the opportunity. I would even say that I am pleased to speak to this bill today.

Those familiar with my political career know that before being elected to the House of Commons, this grand institution, I tried my hand at provincial politics and was the mayor of Victoriaville. They know why I am in politics and what my motivations are. Those have not changed since 2003, when I first considered entering politics. They are also shared by many Canadians.

One of the reasons I got into politics was my concern over how the government is managing public finances and the debt burden it is placing on future generations, our children and our grandchildren. I see every level of government taking the easy route and spending money, which always leads to Canadians paying more taxes, even if those taxes are sometimes used to fund investments.

The other very important reason I got into politics is the cynicism that people have about politicians. I will elaborate on that a little later in my speech. When I asked people what they thought about my going into politics, they told me that politicians never keep their promises. That seems to be true of those across the way, the Liberal government having failed to deliver on a number of its promises. I will name a few, but first I want to talk about federal public finances.

How many times have the Minister of Finance and his colleagues refused to accept here in the House a report from the parliamentary budget officer in which he confirms what we in the official opposition have been saying, specifically, that we left the House in order when we were voted out of office in the last election? Canada had sound public finances and was in the black.

Despite all that, at every possible opportunity and in every forum, the Minister of Finance and the Prime Minister kept saying that we left the country in disarray and in massive debt. I invite those listening to consult the archives or even simply Google “Minister of Finance” and they will see the minister was in denial.

When he appeared before the Standing Committee on Finance on October 24, 2016, the parliamentary budget officer confirmed that the Conservative government left a surplus of $2.9 billion in the 2014-15 budget. For those who may not know this, the parliamentary budget officer is neutral. He is neither Liberal, Conservative, NDP, nor a member of the Green Party. He works independently to analyze Canada's public finances.

One of the government's first promises, which set it apart from the second official opposition party, was that it would only run up a small deficit of $10 billion. On the contrary. Today, as we can see, the deficit stands at more than $30 billion and it is spiralling out of control. It is not the official opposition pointing this out. The economists at Canada's major financial institutions have been telling the government for weeks to stop spending. TD Bank and the Bank of Montreal have told the government that enough is enough, and that it has lost control of its finances.

We are not against borrowing to stimulate the economy. There are times when we must. Everyone agrees with that. The problem with the Liberal government is that it does not have a repayment plan. I will use an analogy for the people watching at home. If a person wants to buy a house, goes to the bank, and applies for a loan to purchase a house worth about $200,000, what does the banker do? He evaluates the borrower and looks at his income to determine whether he can make the payments. Then with the help of a spreadsheet, the banker calculates the number of monthly payments it will take to pay the mortgage, which is the loan that makes it possible to create wealth, be a homeowner, and have access to a home for his family and children.

The government is borrowing money. The problem is that it does not have a plan to pay that money back. It is like me going to the bank and saying that I need $200,000 to buy a house but that, unfortunately, I do not have enough money to make monthly payments to pay back the loan and I have no plan to do so. I would have to ask the bank to wait four or five years before we revisit the issue and figure out how I will pay the money back. What would happen if I did that? They would send me packing and ask that I do my homework next time and present them with a realistic proposal. It makes me tear my hair out to watch this government continue to lie to Canadians by not giving them the real numbers, by telling them lies about the situation, and by not being straight with them.

When they voted for this government a year ago, Canadians had very high expectations. Today, no one knows how the government is going to pay back this out-of-control deficit.

We might ask ourselves what options the Liberal government has for repaying that money. It so happens its recent announcements shed some light on the matter. The Liberals intend to tax and tax some more. What is more, they are offering no constructive measures to stimulate the economy.

They claim to have provided tax relief to families. I am sorry, but the people that I talk to who want their children to be active or to get involved in cultural activities had their tax credit cut.

They even had the audacity to reduce the amount of savings that a father or mother can set aside and watch grow tax-free, money they can use one day when they need to purchase something, thereby keeping our economy going.

The Liberals are implementing a system that will make Canadian families pay more for the Canada pension plan. I think that once Canadians realize this, they might revolt and demand that the government not change the CPP, because everything the government touches seems to turn into a deficit later on.

What we need is not a government that runs deficits, but rather a government that creates wealth. Spending more and taxing Canadians is not the way to create wealth. Instead, we need to help businesses by lowering corporate taxes and introducing job creation and R and D programs.

When we look at the situation, we see that major institutions like the IMF, the OECD, and the Bank of Canada have downgraded their forecasts for Canada. It has become very clear that this government's approach is not working.

Today I ask this government to do its homework. I ask this government to stop taking more taxes and more taxes and more taxes from Canadians, and to listen to leading economists who are urging the government to stop spending in order to stimulate the economy. There are other ways to achieve that.

This brings me to my closing remarks. The Prime Minister broke his promises immediately upon taking office. He broke his promise of running a modest deficit by borrowing three times more than he said he would. He broke his promise to lower the small business tax rate from 11% to 9%.

He broke his promise to offer a revenue-neutral fiscal plan. He even said that family benefits would be cost neutral, but that did not happen, either.

I am pleased to have had the opportunity to speak to this issue.

The House resumed consideration of the motion that Bill C-29, A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures, be read the second time and referred to a committee, and of the amendment.

[The Speaker, Liberal, Geoff Regan]

The House has five minutes for questions and comments.

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

Mr. Speaker, my question is related to the budget itself. We saw a commitment to reduce the middle-class tax bracket, which would provide millions of dollars for nine million plus Canadians. We saw a special tax increase on Canada's wealthiest. What surprised me is that in the past the Conservatives talked about giving tax breaks to Canadians, yet when it really came down to it, the Conservative Party voted against the tax decrease for Canada's middle class.

My question is fairly simple. Why did the Conservative Party vote against the tax decrease for Canada's middle class?

[Alain Rayes, Conservative, Richmond—Arthabaska, QC]

Madam Speaker, I thank my colleague opposite for his question.

The answer is extremely simple. When I take a good look at this budget and try to sum in up in a few words, it is pretty straightforward: more taxes, more taxes, and more taxes. An out-of-control deficit is enabling the government to spend money and make investments while downloading those costs onto our children and grandchildren. When I look at the statistics and the real facts, I see that there are fewer full-time jobs in Canada right now. If my colleague thinks that is good for Canadians, then we will never see eye to eye, unfortunately.