Bill C-59

Fall Economic Statement Implementation Act, 2023

An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023

Part 1 implements certain measures in respect of the Income Tax Act and the Income Tax Regulations by
(a) limiting the deductibility of net interest and financing expenses by certain corporations and trusts, consistent with certain Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations;
(b) implementing hybrid mismatch rules consistent with the Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations regarding cross-border tax avoidance structures that exploit differences in the income tax laws of two or more countries to produce “deduction/non-inclusion mismatches”;
(c) allowing expenditures incurred in the exploration and development of all lithium to qualify as Canadian exploration expenses and Canadian development expenses;
(d) ensuring that only genuine intergenerational business transfers are excluded from the anti-surplus stripping rule in section 84.1 of the Income Tax Act ;
(e) denying the dividend received deduction for dividends received by Canadian financial institutions on certain shares that are held as mark-to-market property;
(f) increasing the rate of the rural supplement for Climate Action Incentive payments (CAIP) from 10% to 20% for the 2023 and subsequent taxation years as well as referencing the 2016 census data for the purposes of the CAIP rural supplement eligibility for the 2023 and 2024 taxation years;
(g) providing a refundable investment tax credit to qualifying businesses for eligible carbon capture, utilization and storage equipment;
(h) providing a refundable investment tax credit to qualifying businesses for eligible clean technology equipment;
(i) introducing, under certain circumstances, labour requirements in relation to the new refundable investment tax credits for eligible carbon capture, utilization and storage equipment as well as eligible clean technology equipment;
(j) removing the requirement that credit unions derive no more than 10% of their revenue from sources other than certain specified sources;
(k) permitting a qualifying family member to acquire rights as successor of a holder of a Registered Disability Savings Plan following the death of that plan’s last remaining holder who was also a qualifying family member;
(l) implementing consequential changes of a technical nature to facilitate the operation of the existing rules for First Home Savings Accounts;
(m) introducing a tax of 2% on the net value of equity repurchases by certain Canadian corporations, trusts and partnerships whose equity is listed on a designated stock exchange;
(n) exempting certain fees from the refundable tax applicable to contributions under retirement compensation arrangements;
(o) introducing a technical amendment to the provision that authorizes the sharing of taxpayer information for the purposes of the Canadian Dental Care Plan;
(p) implementing a number of amendments to the general anti-avoidance rule (GAAR) as well as introducing a new penalty applicable to transactions subject to the GAAR and extending the normal reassessment period for the GAAR by three years in certain circumstances;
(q) facilitating the creation of employee ownership trusts;
(r) introducing specific anti-avoidance rules in relation to corporations referred to as substantive CCPCs; and
(s) extending the phase-out by three years, and expanding the eligible activities, in relation to the reduced tax rates for certain zero-emission technology manufacturers.
It also makes related and consequential amendments to the Excise Tax Act and the Excise Act, 2001 .
Part 2 enacts the Digital Services Tax Act and its regulations. That Act provides for the implementation of an annual tax of 3% on certain types of digital services revenue earned by businesses that meet certain revenue thresholds. It sets out rules for the purposes of establishing liability for the tax and also sets out applicable reporting and filing requirements. To promote compliance with its provisions, that Act includes modern administration and enforcement provisions generally aligned with those found in other taxation statutes. Finally, this Part also makes related and consequential amendments to other texts to ensure proper implementation of the tax and cohesive and efficient administration by the Canada Revenue Agency.
Part 3 implements certain Goods and Services Tax/Harmonized Sales Tax (GST/HST) measures by
(a) ensuring that an interest in a corporation that does not have its capital divided into shares is treated as a financial instrument for GST/HST purposes;
(b) ensuring that interest and dividend income from a closely related partnership is not included in the determination of whether a person is a de minimis financial institution for GST/HST purposes;
(c) ensuring that an election related to supplies made within a closely related group of persons that includes a financial institution may not be revoked on a retroactive basis without the permission of the Minister of National Revenue;
(d) making technical amendments to an election that allows electing members of a closely related group to treat certain supplies made between them as having been made for nil consideration;
(e) ensuring that certain supplies between the members of a closely related group are not inadvertently taxed under the imported taxable supply rules that apply to financial institutions;
(f) raising the income threshold for the requirement to file an information return by certain financial institutions;
(g) allowing up to seven years to assess the net tax adjustments owing by certain financial institutions in respect of the imported taxable supply rules;
(h) expanding the GST/HST exemption for services rendered to individuals by certain health care practitioners to include professional services rendered by psychotherapists and counselling therapists;
(i) providing relief in relation to the GST/HST treatment of payment card clearing services;
(j) allowing the joint venture election to be made in respect of the operation of a pipeline, rail terminal or truck terminal that is used for the transportation of oil, natural gas or related products;
(k) raising the input tax credit (ITC) documentation thresholds from $30 to $100 and from $150 to $500 and allowing billing agents to be treated as intermediaries for the purposes of the ITC information rules; and
(l) extending the 100% GST rebate in respect of new purpose-built rental housing to certain cooperative housing corporations.
It also implements an excise tax measure by creating a joint election mechanism to specify who is eligible to claim a rebate of excise tax for goods purchased by provinces for their own use.
Part 4 implements certain excise measures by
(a) allowing vaping product licensees to import packaged vaping products for stamping by the licensee and entry into the Canadian duty-paid market as of January 1, 2024;
(b) permitting all cannabis licensees to elect to remit excise duties on a quarterly rather than a monthly basis, starting from the quarter that began on April 1, 2023;
(c) amending the marking requirements for vaping products to ensure that the volume of the vaping substance is marked on the package;
(d) requiring that a person importing vaping products must be at least 18 years old; and
(e) introducing administrative penalties for certain infractions related to the vaping taxation framework.
Part 5 enacts and amends several Acts in order to implement various measures.
Subdivision A of Division 1 of Part 5 amends Subdivision A of Division 16 of Part 6 of the Budget Implementation Act, 2018, No. 1 to clarify the scope of certain non-financial activities in which federal ‚financial institutions may engage and to remove certain discrepancies between the English and French versions of that Act.
Subdivision B of Division 1 of Part 5 amends the Trust and Loan Companies Act , the Bank Act and the Insurance Companies Act to, among other things, permit federal financial institutions governed by those Acts to hold certain meetings by virtual means without having to obtain a court order and to permit voting during those meetings by virtual means.
Division 2 of Part 5 amends the Canada Labour Code to, among other things, provide a leave of absence of three days in the event of a pregnancy loss and modify certain provisions related to bereavement leave.
Division 3 of Part 5 enacts the Canada Water Agency Act . That Act establishes the Canada Water Agency, whose role is to assist the Minister of the Environment in exercising or performing that Minister’s powers, duties and functions in relation to fresh water. The Division also makes consequential amendments to other Acts.
Division 4 of Part 5 amends the Tobacco and Vaping Products Act to, among other things,
(a) authorize the making of regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by His Majesty in right of Canada in relation to the carrying out of the purpose of that Act;
(b) provide for related administration and enforcement measures; and
(c) require information relating to the fees or charges to be made available to the public.
Division 5 of Part 5 amends the Canadian Payments Act to, among other things, provide that additional persons are entitled to be members of the Canadian Payments Association and clarify the composition of that Association’s Stakeholder Advisory Council.
Division 6 of Part 5 amends the Competition Act to, among other things,
(a) modernize the merger review regime, including by modifying certain notification rules, clarifying that Act’s application to labour markets, allowing the Competition Tribunal to consider the effect of changes in market share and the likelihood of coordination between competitors following a merger, extending the limitation period for mergers that were not the subject of a notification to the Commissioner of Competition and placing a temporary restraint on the completion of certain mergers until the Tribunal has disposed of any application for an interim order;
(b) improve the effectiveness of the provisions that address anti-competitive conduct, including by allowing the Commissioner to review the effects of past agreements and arrangements, ensuring that an order related to a refusal to deal may address a refusal to supply a means of diagnosis or repair and ensuring that representations of a product’s benefits for protecting or restoring the environment must be supported by adequate and proper tests and that representations of a business or business activity for protecting or restoring the environment must be supported by adequate and proper substantiation;
(c) strengthen the enforcement framework, including by creating new remedial orders, such as administrative monetary penalties, with respect to those collaborations that harm competition, by creating a civilly enforceable procedure to address non-compliance with certain provisions of that Act and by broadening the classes of persons who may bring private cases before the Tribunal and providing for the availability of monetary payments as a remedy in those cases; and
(d) provide for new procedures, such as the certification of agreements or arrangements related to protecting the environment and a remedial process for reprisal actions.
The Division also amends the Competition Tribunal Act to prevent the Competition Tribunal from awarding costs against His Majesty in right of Canada, except in specified circumstances.
Finally, the Division makes a consequential amendment to one other Act.
Division 7 of Part 5 amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to exclude from their application prescribed public post-secondary educational institutions.
Subdivision A of Division 8 of Part 5 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things,
(a) provide that, if a person or entity referred to in section 5 of that Act has reasonable grounds to suspect possible sanctions evasion, the relevant information is reported to the Financial Transactions and Reports Analysis Centre of Canada;
(b) add reporting requirements for persons and entities providing certain services in respect of private automatic banking machines;
(c) require declarations respecting money laundering, the financing of terrorist activities and sanctions evasion to be made in relation to the importation and exportation of goods; and
(d) authorize the Financial Transactions and Reports Analysis Centre of Canada to disclose designated information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions.
It also amends the Budget Implementation Act, 2023, No. 1 in relation to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and makes consequential amendments to other Acts and a regulation.
Subdivision B of Division 8 of Part 5 amends the Criminal Code to, among other things,
(a) in certain circumstances, provide that a court may infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime and specify that it is not necessary for the prosecutor to prove that the accused knew, believed they knew or was reckless as to the specific nature of the designated offence;
(b) remove, in the context of the special warrants and restraint order in relation to proceeds of crime, the requirement for the Attorney General to give an undertaking, as well as permit a judge to attach conditions to a special warrant for search and seizure of property that is proceeds of crime; and
(c) modify certain provisions relating to the production order for financial data to include elements specific to accounts associated with digital assets.
It also makes consequential amendments to the Seized Property Management Act and the Forfeited Property Sharing Regulations .
Division 9 of Part 5 retroactively amends section 42 of the Federal-Provincial Fiscal Arrangements Act to specify the payments about which information must be published on a Government of Canada website, as well as the information that must be published.
Division 10 of Part 5 amends the Public Sector Pension Investment Board Act to increase the number of directors in the Public Sector Pension Investment Board, as well as to provide for consultation with the portion of the National Joint Council of the Public Service of Canada that represents employees when certain candidates are included on the list for proposed appointment as directors.
Division 11 of Part 5 enacts the Department of Housing, Infrastructure and Communities Act , which establishes the Department of Housing, Infrastructure and Communities, confers on the Minister of Infrastructure and Communities various responsibilities relating to public infrastructure and confers on the Minister of Housing various responsibilities relating to housing and the reduction and prevention of homelessness. The Division also makes consequential amendments to other Acts and repeals the Canada Strategic Infrastructure Fund Act .
Division 12 of Part 5 amends the Employment Insurance Act to, among other things, create a benefit of 15 weeks for claimants who are carrying out responsibilities related to
(a) the placement with the claimant of one or more children for the purpose of adoption; or
(b) the arrival of one or more new-born children of the claimant into the claimant’s care, in the case where the person who will be giving or gave birth to the child or children is not, or is not intended to be, a parent of the child or children.
The Division also amends the Canada Labour Code to create a leave of absence of up to 16 weeks for an employee to carry out such responsibilities.

[Dr. Jennifer Quaid, Associate Professor and Vice-Dean Research, Civil Law Section, Faculty of Law, University of Ottawa, As an Individual]

Mr. Chair, Deputy Chairs, members of the House of Commons Standing Committee on Finance, good morning.

For those who don't know me, I'm an associate professor and vice-dean of research at the University of Ottawa's Civil Law Section. My areas of expertise are corporate criminal law, general criminal law, business law, corporate regulation and competition law.

I am very pleased to appear before you to share my thoughts on section 6 of Bill C‑59, namely competition-related measures.

Let me add that, although I have prepared this statement primarily in English, I will, of course, be happy to answer your questions in the official language of your choice.

This is the first time that I am appearing before FINA—I'm glad to be here—but it is not the first time that I have appeared before parliamentary committees over the past couple of years, as the government has undertaken a major reform of the Competition Act, the first since 2009. As you know, the reform has been split into three parts: Bill C-19, enacted in June 2022, then Bill C-56, enacted in December 2023, and now Bill C-59 before you.

In the interests of time and given the scope of the proposed reform to the Competition Act, I will make four general points rather than going into detail about the extensive changes proposed, but I am at your disposal to answer questions on any aspects of the reform, and I may very well submit a brief if I have time.

Let me start by saying that the reform has made a lot of changes to the Competition Act, but not enough. Given the amount of political and public attention being directed at the state of competition—or the lack thereof—expectations for positive change flowing from this reform are very high, but are they warranted? To me, this is the central question that cuts across all aspects of the reform. Will we have better and more effective enforcement against anti-competitive practices and will we also at the same time promote better market and business conditions to promote a dynamic and innovative economy?

In my opinion, whether these expectations can be met depends on whether we are prepared to do what is necessary to operationalize the reform in a way that respects the spirit of what is driving the changes. It is also essential that we adopt a mindset of competition law and policy as a dynamic process that adapts to an ever-evolving economy while remaining true to the underlying values that Canadians share.

While there have been many changes to the act, fundamentally, it's still a cumbersome, overly detailed legislative text. This in the past has led to the development of complex analytical frameworks requiring specialized expert evidence. Obtaining remedies to anti-competitive behaviour is difficult, expensive and uncertain.

Many of the changes in the act right now are designed to respond to long-standing criticisms and to enforcement challenges, but I worry, to be frank, that fixing these problems is only.... We're not really addressing the underlying structural problems of how the act is designed. The fact that we've got all of these little different ways of going about characterizing conduct is actually just going to generate new problems. We haven't really done the rethink we need.

I could give one example. There's been an attempt to standardize the way we approach different reviewable practices, but in doing so, the fundamental question is, do we need to do that or could we just have one recourse for anti-competitive practices? Why, all of a sudden, are we blurring the lines between all of these different recourses? To me, that's creating a legal ambiguity that's not going to help anyone. I have other examples, but I'll talk about that in the questions, because I see my time going.

The second thing we need is a mechanism by which the act can be updated on a regular basis. Even with a perfect reform right now, we can't just stop and rest on our laurels. I think it's prudent to think about that now. We've had 15 years between the last reform and now; that's too long. What that means is that we've had to take on a huge reform and split it over three bills, but we've done it in two years. Everyone is still catching their breath, it's been so fast.

Given the pace at which technological and societal changes are occurring, I think it would make sense to plan for periodic review at maybe a three- or five-year interval. That way, we could do things in manageable chunks and not have to use this sort of wholescale giant process and then put it in a budget bill. I think we have to get into that mindset.

The third thing I'm going to raise is that for this reform to work it needs to be supported by adequate resources and expertise. Bill C-56 and Bill C-59 especially add considerable components to the bureau's mandate, and I don't see any new resources coming here. The last ones were allocated in 2021, as far as I know.

I worry for things like understanding labour impacts in mergers and trying to determine whether the bureau can issue a certificate for expertise in environmental issues. Are those things that we should just leave to the existing resources? I think we need to ask ourselves that question: Do we have the resources to make this work?

Finally, this is not the end—and I will close quickly, Mr. Chair. At the beginning of this process a couple of years ago, there was a lot of energy and enthusiasm, and it seemed like there was more audacity and willingness to think outside the box. Then we kind of got into a more technocratic mindset, and what we have before us are a lot of changes, but they are mostly technical and legal.

I think we still need to have that broader conversation about what competition law and policy in the 21st century look like, and we need to do that by consulting people and talking to Canadians about what they want and then maybe having a broader process of approaching it. There's a lot of energy. There are a lot of new voices to the conversation. There's a lot of enthusiasm. I really wish they would do that.

Thank you.

[Olivier Surprenant, Public Policy and Health Analyst, Union des consommateurs]

Good morning, members of the committee.

First of all, we welcome the changes to competition law. Increasing competition can be a way of reducing the price of goods and services. Both the Competition Bureau and the Competition Tribunal must therefore have the right tools giving them greater power so that, ultimately, they can fulfill their mandate properly.

We particularly welcome the expansion of remedies available to private parties. In our view, this amendment is worthwhile in terms of defending consumer rights, particularly given the addition of remedies for deceptive commercial practices.

We also welcome the intention to frame the right to repair and the government's intention to consult on this issue, as confirmed in Tuesday's budget.

In short, we believe that the federal government should draw inspiration in particular from the French legislation surrounding repairability and durability ratings.

When it comes to regulating grocers and suppliers, we believe that industry self-regulation through the Canada Code will not achieve the desired objectives. It is essential to adopt a mandatory code of conduct between grocers and suppliers, to provide it with sanctions, to have its application supervised by an independent authority, in this case the Competition Bureau, and above all to ensure that consumer groups are consulted as part of its development.

In addition to the competition measures set out in Bill C‑59, we believe that other measures would help reduce the effect of the rising cost of living, particularly when it comes to food.

That is why we are proposing, for one, to abolish the Goods and Services Tax, or GST, pertaining to essential goods and products, including all food products.

We are also proposing that the government tackle the problem of shrinkflation by imposing mandatory display of quantity changes to products for a period of six months, following the example of Brazilian legislation.

In summary, we believe that Bill C‑59 provides some very promising measures to tackle the rising cost of living. We believe, however, that the bill could go even further, including by making a code of conduct for grocers mandatory and by abolishing the GST on food products.

Thank you very much for your attention.

[Maxime Dorais, Co-Director general, Union des consommateurs]

Ladies and gentlemen of the committee, good morning.

My name is Maxime Dorais, and I'm co-CEO of Union des consommateurs.

I would first like to thank Mr. Gabriel Ste‑Marie for inviting us to appear before the committee to present our analysis of Bill C‑59.

First, let me introduce you to our organization. Union des consommateurs represents 14 consumer rights associations. Our mission is to promote and defend consumer rights, with a particular focus on low-income households.

In addition to consumer law, Union des consommateurs' team of risk analysts also takes a keen interest in social policies. On top of research and public awareness work, the union undertakes collective actions to support consumers and advance consumer law.

As part of the bill currently under study, we were primarily interested in measures affecting competition and affordability in grocery stores.

I'll now hand over to my colleague Olivier Surprenant, public policy analyst.

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting number 138 of the House of Commons Standing Committee on Finance.

Pursuant to the order of reference of Monday, March 18, 2024, and the motion adopted on Monday, December 11, 2024, the committee is meeting to discuss Bill C-59, an act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023.

Today's meeting is taking place in a hybrid format, pursuant to Standing Order 15.1. Members are attending in person in the room and remotely using the Zoom application.

I would like to make a few comments for the benefit of the members and the witnesses.

Although this room is equipped with a powerful audio system, feedback events can occur. These can be extremely harmful to interpreters and can cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to a microphone. We therefore ask all participants to exercise a high degree of caution when handling the earpieces, especially when their microphone or their neighbour's microphone is turned on, in order to prevent incidents and to safeguard the hearing health of our interpreters.

I invite participants to ensure that they speak into the microphone into which their headset is plugged and to avoid manipulating the earbuds by placing them on the table away from the microphone when they are not in use.

I remind everyone that all comments should be addressed through the chair.

For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the raise-hand function. The clerk and I will manage the speaking order as well as we can. We appreciate your patience and understanding in this regard.

With us today as individuals are witnesses David Brown, realtor; and Jennifer Quaid, associate professor and vice-dean of research, civil law section, Faculty of Law, University of Ottawa. She will be joining us shortly. From the Canadian Dental Association, we have Aaron Burry, chief executive officer. From the Union des consommateurs, we have Maxime Dorais, co-director general, as well as Olivier Surprenant, analyst, public policy and health.

Welcome, everyone.

David Brown is here. We'll start with him for five minutes.

Go ahead, please.

Carbon Pricing

[Steven MacKinnon, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I would respond to the hon. member that he should just advance a couple of rows up here. I could introduce him, if he would like to speak to the opposition House leader. Bill C-234 is completely in their hands. If they would like to bring it to the floor for a vote, we could deal with it.

While I am on my feet and we are talking about doubling, Bill C-59 is something he could also do something about. It would bring the carbon rebate to double what it is today. Let us pass that today, have a positive impact for the constituents he serves and bring a better carbon rebate to rural Canada.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Mr. Speaker, today New Brunswickers can look forward to receiving a Canada carbon rebate payment in their bank account.

For example, this year, a family of four in New Brunswick will receive $760 through the Canada carbon rebate. That is $183 more than they received last year. If the Conservatives stop obstructing Bill C‑59, families in rural communities will receive an additional 20% of the amounts I just mentioned.

Our plan is making Canadians better off. Our carbon pricing system is putting more money back in the pockets of eight out of 10 Canadians through the Canada carbon rebates, while building a better future for our children and grandchildren.

The future of our planet and coming generations is more important than the official opposition's slogans.

Climate Change

[Lena Metlege Diab, Liberal, Halifax West, NS]

Mr. Speaker, in 2015, Canada was on the wrong track. The Canadian government at the time had no climate plan. It was free to pollute and emissions kept going up. Now, because of work done in Nova Scotia and across the country, our emissions have declined by 8%.

For the first time ever, we are on track to meet our 2026 climate target, thanks in no small part to pollution pricing and the Canada carbon rebate.

Starting today, a Nova Scotia family of four will receive the first instalment of their $824 rebate. For the average family in my province, that is $157 more than they will pay out over the year. For rural families, they will get more when Conservatives finally stop blocking the 20% top-up in Bill C-59.

While the other side tries to ruin the rebate, hurting lower-income Canadians, we will continue our work to help Canadians leave a healthier planet for our grandkids.

Climate Action

[Mona Fortier, Liberal, Ottawa—Vanier, ON]

Mr. Speaker, for the first time ever, we are on track to meet our 2026 climate target.

Most importantly, Ontario families, including those in Ottawa—Vanier, will receive $1,120 this year through the Canada carbon rebate, starting today. That means an extra $255 in their pockets. If the Conservatives stop their delay tactics, rural Ontario families can expect an extra 20% with the passage of Bill C‑59.

In 2015, Canada was clearly off track when it came to greenhouse gas emissions. The Conservatives had no plan, polluting was free and emissions kept rising. Today, thanks to the efforts of Canadians and our government, Canada's emissions have dropped by 8%.

The Conservatives refuse to fight climate. They prefer to chant slogans rather than help Canadians. On this side of the House, we are reducing emissions while making life better for eight out of 10 Canadians.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Davies.

We want to thank our witnesses for their compelling testimony, their advocacy, and the work they do in our communities from coast to coast to coast. We truly appreciate your coming here on Bill C-59.

Thank you. Have a great day.

Members, at this time, we are adjourned.

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

Thank you, Mr. Chair.

I'm going to continue with Mr. German.

I was quite blown away by your presentation and all your answers to my fellow members' excellent questions.

Coming back to Bill C-59, I have a two-part question for you.

First, what would you recommend to improve the bill in terms of amendments? If you don't have them all now, it would be appreciated if you could get back to the committee in writing.

Second, what measures should Canada and the other levels of government implement to better combat money laundering, based on the experience of the European Union, the United States and other jurisdictions?

[Don Davies, NDP, Vancouver Kingsway, BC]

Now, Bill C-59 would also permit a court to “infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime”. That is “if it is satisfied, given the circumstances of the offence, that the manner in which the accused dealt with the property or its proceeds is markedly unusual or the accused's dealings are inconsistent with lawful activities typical of the sector”.

How can courts effectively apply the inference provision to determine the “knowledge or belief or recklessness required” for money laundering offences?

[Don Davies, NDP, Vancouver Kingsway, BC]

I think you touched on this, but I want to explore a bit the notion that Bill C-59 would require entities that provide acquirer services in relation to private automated banking machines to register as money services businesses. In your view, what impact will that have? What criteria should entities providing acquirer services for private ABMs be required to meet to register as money services businesses?

[Don Davies, NDP, Vancouver Kingsway, BC]

Thanks.

Dr. German, Bill C-59 would permit FINTRAC to disclose designated information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions. What impact do you expect this provision to have on the investigation and prosecution of money laundering, terrorist financing or sanctions evasion offences?

[Dr. Peter German, Chair, Advisory Committee, Vancouver Anti-Corruption Institute]

Thank you for the invitation to appear before this committee.

I wish to address certain amendments related to money laundering that are contained within Bill C-59.

Before doing so, allow me to introduce myself and to apologize for not being there with you.

I've been engaged in the field of anti-money laundering since Canada adopted proceeds of crime legislation in 1989. That work included being director general of financial crime for the RCMP, completing graduate degrees on the topic, teaching at law schools, providing expert opinion evidence, speaking within Canada and internationally, and working as a consultant. I'm the author of a text published by Thomson Reuters, which has been on the market since 1998 and is the only current service dealing with Canada's proceeds of crime legislation.

The Vancouver Anti-Corruption Institute is an entity created in part as a response to two reports written for the then attorney general David Eby: “Dirty Money” and “Dirty Money—Part 2”.

Mr. Jeffrey Simser, who appeared before this committee on April 9 of this year, is a professional colleague of mine and has a distinguished record of service in the province of Ontario, including being the first director of civil forfeiture in Canada. We endorse the comments he made to this committee and will not repeat them.

In British Columbia, there are virtually no prosecutions under way for money laundering. Police officers and prosecutors cite a plethora of reasons why. Most revolve around the wording of the Criminal Code and judicial decisions. As a result, most asset forfeiture in B.C. occurs by way of civil forfeiture. British Columbia has a very successful civil forfeiture regime. This is good; however, it simply removes money and goods from criminal actors, which they should not have in the first place. The individuals are not sanctioned, they are not charged and they do not go to jail. We need a robust Criminal Code regime that deals with money laundering.

For many years, the major complaint of police and prosecutors has been the difficulty in connecting dirty money to its predicate crime, which is a requirement of the offences. Bill C-59 attempts to overcome that obstacle in the case of third party money launderers. These are individuals who do not necessarily commit predicate offences, such as drug trafficking, but specialize in the laundering of money. Internationally, we now use the term “global money-laundering organizations” to identify third party money-laundering entities that contract their services. In many cases, they operate out of major financial hubs.

Canada has witnessed a considerable uptake in money laundering. We are an easy target for laundering organizations for any number of reasons.

I am pleased to see the amendments to the Criminal Code that attempt to deal with third party money laundering. I'm also very pleased that the undertaking requirement that was previously located within the “Special search warrant” and “Restraint order” provisions of the Criminal Code is being removed.

My only disappointment is that it has taken us since 1989 to make these changes. This is symptomatic of a greater problem. We are tweaking our legislation; we are not grabbing it, shaking it and making sure it is effective. Without going into detail, I fully anticipate that there will be further amendments to the very amendments being considered today.

I also wish to support the inclusion of white-label ATMs under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. People, such as I, have been calling for this change for probably 20 years. It is well overdue.

Members of the committee, we can do better. Canadians do not want their country to become a haven for money launderers. This will require political and bureaucratic will and a continuing commitment to rid Canada of this vice.

Thank you. I am most pleased to answer any questions you may have.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Mr. Chair and members of the committee, thank you for this opportunity.

My name is Rob Cunningham. I'm a lawyer and senior policy analyst for the Canadian Cancer Society.

My testimony will focus on the provisions in Bill C-59 for the cost recovery fee for tobacco and vaping companies in clauses 217 and 218 and the vaping tax administration and enforcement provisions in clauses 145 to 167.

With respect to the cost recovery fee, it would provide enabling authority for regulations to require tobacco companies and vaping companies to reimburse the federal government for the $66 million annual cost of the federal tobacco control strategy. We strongly support this measure and thank, with appreciation, the government for bringing it forward. Indeed, we thank all parties for their unanimous 323-to-zero vote at second reading in support of this measure.

The cost recovery fee has a long history. In 2021, this committee recommended the fee in its pre-budget report. In the 2021 federal election, it was in the Liberal, Conservative and NDP platforms. In the 2019 federal election, it was in the Conservative platform and called for by the NDP. It was in the health minister's 2021 mandate letter. MP Don Davies, now on this committee, has been a long champion, with motions introduced in the current and previous Parliaments.

It shouldn't be all Canadians who are paying for the government's strategy to reduce smoking, a strategy that also now regards vaping. It should be the tobacco industry with the principles of accountability and fiscal responsibility. The tobacco industry has caused the tobacco epidemic and vast health devastation, and it should be responsible for the cost of reducing tobacco use.

Moreover, the vaping industry has benefited significantly financially due to high rates of youth vaping, with many previous teenagers now older, addicted and vaping as adults. They may be addicted to nicotine for life. It should be noted that the tobacco industry is a major player in the vaping industry as well.

In the U.S., a cost recovery fee has been in place since 2009, administered by the FDA. Each year, $712 million U.S., more than $900 million Canadian, is recovered from tobacco companies on the basis of market share to reimburse the FDA's tobacco control budget. If the U.S. can have a cost recovery fee, surely we can in Canada.

Here in Canada, we've had a cost recovery fee on the cannabis industry since 2018. If we can do it for cannabis, we can do it for tobacco and vaping.

The tobacco industry, on average, over a nine-and-a-half year period, has increased their own prices, not including tax, by $30.40 a carton. They increased their own prices by 180% in a period when cumulative inflation was just 28%. As a result, they have incremental revenues of $2 billion a year or more. Can they afford $66 million a year to pay to the federal government? Yes, they can.

For the cost recovery fee, we have three proposed amendments to strengthen the implementation. The amendments are short and simple and would advance the bill's objectives and the government's objectives. Draft legislative text with rationale for these recommended amendments has been provided to the clerk.

First, we urge the legislation to require that companies pay upfront: Unless the company has paid the fee, they can't sell the product. That's the way a tobacco excise tax works. The government shouldn't have to be chasing companies after the fact.

Second, the maximum fine for contravening cost recovery fee provisions should be increased from just $50,000 to $500,000, a maximum already found frequently elsewhere in the act. A fine of only $50,000 would merely be the cost of doing business for a tobacco company.

Third, the legislation should explicitly state that the Service Fees Act does not apply to tobacco and vaping cost recovery fees, just as the Cannabis Act states that the Service Fees Act does not apply to the cannabis cost recovery fee. It is not the case here that there is a service, and thus a fee for that service, such as an approval of a patent or a prescription drug.

With respect to the vaping tax administration and enforcement provisions, they are important to ensure that the vaping product tax works well, including to reduce youth vaping.

Finally, I want to highlight the category of disposable e-cigarettes. They are very popular with youth and have recently taken off in Canada. They are very inexpensive and are undermining the objective of the vaping product tax of reducing youth vaping. Before the Senate finance committee recently, even Imperial Tobacco urged an increase in the tax rate for disposable e-cigarettes.

Thank you. We look forward to your questions.