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

[Hedy Fry, Liberal, Vancouver Centre, BC]

Madam Speaker, again, there is no one solution to any problem.

You talk about accumulating debt and passing it on to our children, at the same time—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I remind the hon. member to address the question to the chair.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Madam Speaker, the member knows that if we actually give people assistance in getting their children an education and in getting an affordable, stable, safe, and secure place to live, we begin to start helping people along that cycle, and their children do better and get better jobs.

It is not simply a matter of saying how much debt when we are also helping the next generation to get jobs and when we are building new industries in the creative sector for those people to get jobs. When we are investing in skills, training, and education, we are at the same time lifting that next generation and are not placing them in debt.

[Celina Caesar-Chavannes, Liberal, Parliamentary Secretary to the Prime Minister]

Madam Speaker, I want to thank my colleague for her speech. Central to that speech was housing. I would ask the member how housing is the foundation for ensuring that all parts of our budget lead to a good and improved quality of life for people in her riding and especially for seniors, families, and the most vulnerable.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Madam Speaker, housing is essential to the quality of life people live. The evidence shows us that people who live in substandard housing or people who spend more than 70% of their money on housing in unaffordable rental housing, which people are doing in my riding, cannot afford food. They cannot afford to feed themselves properly. Women cannot afford to go to work, because they cannot afford to leave their children with anyone, because they do not have the means by which to do it.

It is all about how one thing plays into another. If we look at this as a holistic thing, if we look at housing as being a bedrock for creating strong and stable families, then we are actually moving forward in the right direction.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, before I begin, I would like to inform you that I will be splitting my time with the member for Hamilton Mountain. I want to wish everyone a happy Halloween.

Today we are dealing with the sequel to the first Budget Implementation Act. Once again, we see that Liberals seem to be emulating the Conservatives with another omnibus bill. This one is tipping the scales at a good 231 pages, while the previous one, which was Bill C-15, was 179 pages.

I remember debating Bill C-15 in June when it came before us for third reading. That bill changed 30 different statutes. I remember that the NDP at that time argued that several portions of the bill should be split so that members in this House could do their due diligence, both here in the House and at finance committee. Unfortunately, those recommendations were not agreed to by the government and we had to again go through the omnibus bill.

I remember that the Liberals at that time were extolling the virtues of their so-called middle-class tax cut and the fact that they were bringing in the child benefit and had made some significant changes to employment insurance. It seems that for the second budget implementation act, we are hearing much the same arguments. It seems to be a chance for the Liberals to again put forward the arguments put forward in March in their budget speech, and so on.

The bill amends 13 separate pieces of legislation. I would have hoped for a little bit more time to study each individual one, but I hope that the finance committee will get its opportunity to do that. Some of the major acts that will be changed by the bill concern the Income Tax Act, the Employment Insurance Act, and the Old Age Security Act, among others.

One of the things we in the NDP have been concerned about that we have been hearing from the Liberal government both last week and this week, and what I suspect will be formalized in the economic update tomorrow, is the privatization of our infrastructure. This is very worrisome to me and to many of us on this side, and indeed to many Canadians, because it was an agenda that was never presented in the Liberals' election platform.

I am one who believes fundamentally that when we put forward a platform and use it to get votes, we should honour it, and there should be no hidden surprises. I feel that with this privatization agenda, the Liberals are taking a page from their provincial cousins in Ontario and that consumers and Canadians will be the ones who end up paying in the long run.

I believe that the real change that was promised last year was not supposed to be just a coat of red paint over the old blue one. There was supposed to be a whole new vehicle for Canadians. I think we are seeing a lot of the same arguments come forward. The Liberals did not run under these promises.

I will say that the Liberals are very good at acting like New Democrats during an election, but when it comes to governing, they are very good at acting like Conservatives.

The biggest problem is the fact that this was never outlined in their platform. I will go into further detail about that.

The first point is that the Liberals stated in their platform that they would establish a Canadian infrastructure bank, and I believe they will be going ahead with that. This bank was to provide low-cost financing for new infrastructure projects, but again, nothing was mentioned about privatization.

The second point is that the federal government would use its strong credit rating and lending authority to make it easier and more affordable for municipalities to build the projects their communities need. Again, nothing was mentioned about privatization, nothing about taking those assets and selling them to the private sector for private interests.

The third point was that when a lack of capital represented a barrier to projects, the Canadian infrastructure bank would provide loan guarantees and small capital contributions to provinces and municipalities to ensure that projects were built. Again, there is no mention of privatization of infrastructure assets.

I believe that Canadians were misled and will be in for a surprise at tomorrow's update.

At this point, I would like to acknowledge the hard work of my colleague from Rimouski-Neigette—Témiscouata—Les Basques. He has done some amazing work as our finance critic and really has led the charge for our party in exposing these plans and raising our party's concerns about them.

In budget 2016, we got a hint about what was to come and we started to see the term asset recycling. We found out that the government was now asking Credit Suisse for advice on the benefits of privatizing airports. This advice is coming from a company that buys airports. This is a clear conflict of interest. It would be like me asking a senator on whether it is a good idea to abolish the Senate. I do not think I would get an honest answer to that question.

I believe the infrastructure bank that is being proposed is going to be largely funded with private funds, and those are ultimately going to bestow a high cost on our society. Any company that invests in infrastructure is going to demand a high rate of return. It is not going to act in the public interest, and that is an important point to establish. It will be working on behalf of private shareholders.

Infrastructure projects by their very nature are a public institution. Everyone depends on them. When we start selling those off, it is very hard to get them back and it becomes very hard to implement policies for the public good. On this side, we are all about that. We are about ensuring the public good is recognized and maintained for all policy options.

When companies want that rate of return on their infrastructure events, it means having user fees or tolls, and those charges are always passed on to the consumer. The consumer will not have any effect on changing those user fees or tolls because they will not have a democratically elected government in charge of them anymore.

We have seen experiences where public infrastructure projects have been privatized. I think of BC Ferries in British Columbia. The whole B.C. ferry system was made into a corporation. We have seen no stop of user fees and ticket prices go up and up, making life really unaffordable for the coastal communities.

This is all coming under the context of the Liberals having hidden their true plans, and it is a fundamental betrayal of the trust of Canadians.

The term asset recycling is no more than a cover word for privatization. We have seen experiences of this in other governments around the world. For example, the right wing government of Tony Abbott in Australia tried to introduce asset recycling schemes. The Australian senate saw through the use of this language and it gutted and retitled the bill to call it “encouraging privatization”. Perhaps that is what we should be calling this bill.

I will go back to B.C. The B.C. Liberal government has become an expert in this. It sold off a ton of public assets to balance the books. To me, that is short-term gain for long-term pain.

Asset recycling will fundamentally rob future governments and budgets of the ability to regulate and generate revenue. The Advisory Council on Economic Growth was started up in March to advise the the Liberal government. The chair of this group is none other than Dominic Barton, who has spent 10 years with the McKinsey consulting group, which promotes massive private involvement in infrastructure. If that is the advice the government is getting, it is easy to see exactly what we will see in the update tomorrow.

On October 20, the Advisory Council on Economic Growth published three reports with recommendations. One of those key recommendations was that Ottawa should privatize some of its existing assets as a way of raising money to spend on other infrastructure.

The road map seems pretty clear to me: to sell off our public assets that were funded by taxpayer dollars so private interests can start generating their own revenue streams on them. This is contrary to what was promised to us in the election. The NDP can never support a bill that would sell off our communal assets to make a quick buck. It has been shown not to work. That is why we stand opposed to the bill and the general economic policy of the government.

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

Madam Speaker, I think there were a great many Canadians who were disappointed on how the New Democratic Party voted on the budget issue, and this is a budget implementation bill.

If we look at finances, we see a movement toward the equalization of the distribution of wealth. For example, there is a substantial increase in taxation for Canada's wealthiest and a substantial decrease for Canada's middle class of hundreds of millions of dollars, which will affect nine million Canadians. We are seeing thousands of the most vulnerable seniors being lifted out of poverty through the GIS. Through the Canada benefit plan, thousands of children are being lifted out of poverty.

For all intents and purposes, I and many would argue that this is a very progressive budget. Therefore, could the member tell members of the House and his constituents what budget was more progressive than this budget, and why the NDP would vote against it?

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, with the budget implementation bill being an omnibus bill, there were a number of items we agreed with, but there were also a lot we did not. The problem with bills like this is that they have to pass the House in their current form. Therefore, because there were those poison pills in the budget, we could not support it.

With respect to the tax breaks, we agreed to raising the tax rate for people who earned over a certain amount. It was the so-called middle-class tax cut, because the true maximum benefits for that came into effect for people earning between $89,000 and $200,000 a year. As I have stated in the House many times, that was the equivalent of every single Liberal member of Parliament giving themselves a tax break. However, when the median income in Canada is $31,000 a year, the constituents in my riding get nothing. I did not come to the House to give myself a tax break, and I certainly stand by my decision earlier this year.

[Erin O'Toole, Conservative, Durham, ON]

Madam Speaker, I would like to seize upon the question just asked by my Liberal friend from Winnipeg, who seems to assess the progress and nature of budgets by how big their deficit is. Certainly, burdening our future with the debts of today is not progressive. I would contrast this, and the hon. member touched on it in his speech, with the fact that in the last election the NDP tried to offer a plan for the future that was not just runaway deficits. Also, a number of the tax provisions the Conservative government provided for low-income families, particularly cutting the GST, which consumed most of the lowest income level earners household income, would be progressive.

In reference to what the member for Winnipeg North just asked, suggesting that the Liberals' budget was the most progressive in history, is that just from their running a deficit? I noticed he mentioned that the Liberals liked to run as the NDP in elections and then govern in an entirely different way. Would the member comment further on that?

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, I welcome the opportunity to go over our electoral platform for the benefit of all members in the House.

The NDP is often asked how it will pay for these things, but no mention is ever made by the Liberals or the Conservatives about the current low corporate tax rates. That fits in nicely with the infrastructure programs I talked about earlier. A large number of the infrastructure that exists in Canada has been funded by the taxpayers. A lot of that infrastructure, such as the bridges and the rails we have built, benefit corporations because they are able to move their goods efficiently.

However, the fact is that we have put all that public money into that infrastructure and we still have a very low corporate tax rate. Therefore, what we argued in the NDP was that corporations, particularly the very wealthy ones, should pay a bit more to ease the burden off the rest of society. For far too long, we have had this trickle-down economic theory where we think that if we lower the corporate tax rate to these really low levels, somehow all of this money will magically trickle down to the lower classes. Instead, as the former governor of the Bank of Canada has pointed out, the corporate bank accounts are simply swashing full of millions of dollars right now, which is dead money not being reinvested into the Canadian economy. We asked for fairness, and that was what we ran on.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Madam Speaker, it is my honour to rise today to speak to Bill C-29, a second act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures. I am also pleased to rise today so I can express my complete disappointment with how the bill has been introduced and the structure of the bill.

Bill C-29 is 234 pages, has 146 clauses, and would amend 13 pieces of legislation. How is this bill supposed to get proper review, study, and consideration? It simply will not, and the government know that and it is counting on that.

This kind of behaviour comes from a government that either has something to hide or does not want the public to know what it is up to. I suspect that a government which has not lived up to its promises on so many fronts, such as electoral reform, on the relationship with first nations, on meaningful reform to the Canada pension plan, and on its commitment to help the workers and former workers at U.S. Steel Canada is now finding it is necessary to hide its real intentions, and that is to fudge the facts, invent new and meaningless buzz words, and obscure the truth.

I need to take a moment to speak about what is to me an unfolding example of the government's desire to mask its real intentions behind a wall of rhetoric and doublespeak. I refer to the government's plan to privatize public infrastructure by selling off public assets and creating a new infrastructure bank to monetize future infrastructure projects.

As a former city councillor, I know about the dire state of our local infrastructure. I know about the lack of assistance for municipalities to help fund vital infrastructure rehabilitation. I have also seen the effects of both the federal and provincial governments downloading the costs for infrastructure projects onto the municipalities. This has helped create a staggering crisis.

No one should be fooled by the government's plan for infrastructure. The Liberals plan to privatize. No one should be fooled about what this means. It means user fees. It means toll roads and toll bridges. It means downloading the costs onto me, other members and all our constituents.

The finance minister's advisory panel on economic growth issued a report, and we expect some of its recommendations in the minister's economic statement tomorrow. Among those recommendations were the following: first, develop a focused federal infrastructure strategy which is in line with the government's economic growth agenda; second, create a Canadian infrastructure development bank to leverage institutional capital and deliver over $200 million with the projects over 10 years; and, third, create a flywheel for investment by catalyzing the participation of the institutional capital in existing assets.

We all know and agree that there needs to be new investment in infrastructure. Canadians from coast to coast have been calling on the federal government to take meaningful and substantial action for years. However, we are concerned by reports of the Liberal plan to privatize our infrastructure.

The Federation of Canadian Municipalities has expressed some serious concern that the government will take money that has been promised for housing and local projects and instead put it into its new infrastructure bank. That would mean less money for local priorities. That would mean less money for communities that were counting on addressing urgent infrastructure needs.

There are also reports that suggest the Liberals are moving ahead with plans for selling off existing public infrastructure, like airports and bridges. Having failed to sell their privatization schemes by calling them asset recycling, they have now invented the new term, “flywheel for reinvestment”. Do not be fooled. This is just a new word for privatization. Why do the Liberals want to sell off the valuable infrastructure that hard-earned dollars of Canadians have built? To pay for their budget shortfalls. This is just another example of the government trying to keep its promises from and then trying to use sleight of hand to fool Canadians into thinking otherwise.

The bill before us today is just another example of how the government is trying to pull the wool over our eyes. The bill is far too big and far too complex, and the time allotted for debate is far too short to allow for the in-depth consideration and discussion that a budget should receive.

We have discovered, however, that the bill does contain some positive measures that the NDP has fought for, but it comes nowhere near what the Liberals have been promising, and nowhere near what is necessary to strengthen our economy and to combat inequality.

We are disappointed that the Liberals have decided to let the value of the new child benefit erode over the next four years, taking the equivalent of $500 away from families. We wanted to see more aggressive action to ensure tax fairness, including more to combat tax evasion by multinational corporations, and to close the stock option loophole for wealthy CEOs. It is also unacceptable that the Liberals are making adjustments to eligibility for small business taxes without restoring the promised tax cuts for small businesses.

Canadians were hoping for better from the current government. Many people have been left shaking their heads wondering why the government, which promised change, is acting like the Conservative government.

I can tell members that people in my community are shaking their heads, especially the 25,000 workers and retirees of U.S. Steel Canada, who thought that the current government would stand up for them through the bitter corporate restructuring currently taking place. Instead, we have seen a government and a Prime Minister turning their backs on the people of my community. This is a Prime Minister who, during the election, promised to do everything he could to help, but has left our pensioners and workers out in the cold.

One year after the election there has been not a word from the government or the Prime Minister about providing any help at all. It is shameful, and the people of Hamilton are not soon to forget. People in my community expected better, but like all Canadians, they have been left shaking their heads.

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

Madam Speaker, I am sorry the member feels as if the Prime Minister has left his constituents out. I can tell him that the Prime Minister has done no such thing. We have a Prime Minister who is committed, in a very significant way, to assist and work with Canadians with unprecedented consultations and policies that will make a difference for the everyday living conditions of all Canadians.

The member may want to reflect on some of the initiatives taken. We can talk about the tax breaks for the middle class, the additional tax on Canada's wealthiest, the Canada child benefit, the increase in the GIS, and many other initiatives that have been taken by this government in one year, which will do well for his constituents and in fact all Canadians.

Would the member not at the very least acknowledge that we have seen more done in the last year than we had in the previous 10 years under the Harper government?

[Scott Duvall, NDP, Hamilton Mountain, ON]

Madam Speaker, yes, we have seen a little bit of positive change, but not what was promised when the Liberals rolled out their promises. Almost everything they promised to change has been watered down.

If you look at your child tax benefit—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I would remind the member to address his comments to the chair.

[Scott Duvall, NDP, Hamilton Mountain, ON]

If we look at the child tax money that the Liberals have handed out, they now do not even want to index it at the rate of inflation for another five years.

If we look at the Canada pension plan enhancement, people are surprised that it will only help future retirees and does not do anything for people now, or for people who are out there on disability, or for those who have been raising their children and do not get credit for having done so, because they did not make contributions.

To finish my answer, yes, there have been some changes, but they are watered down changes, and we expected better than that.