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.

Fall Economic Statement Implementation Act, 2023

[Jamil Jivani, Conservative, Durham, ON]

Mr. Speaker, this is what I mean when I say Liberal elites and everybody else.

These guys want me to stand here and listen to them quote their buddies from the universities instead of listening to what people on the ground across this country, everyday hard-working families, are experiencing under their rulership. This is exactly what I am talking about. They disregard the evidence from everyday people, who are struggling today, and they want to say, “Well, my friend with a Ph.D. said everything's all right.” Well, I am not here to represent their buddies with a Ph.D. I am here to represent people who are lined up in grocery stores, people who are concerned about making mortgage payments and rental payments after these guys have doubled them.

It is also interesting that, earlier today in the debate, their friend, the Liberal MP from Whitby, was quoting Warren Buffett, as though he is an authority on whether we are having a good experience or not. I might need to go back and ask Warren what he thinks.

[Monique Pauzé, Bloc, Repentigny, QC]

Mr. Speaker, the commissioner of the environment appeared before the Standing Committee on Environment and Sustainable Development yesterday. He has a different perspective with respect to homes and mortgages. Here is an excerpt from his presentation:

...a major lender recently announced that it would no longer accept new mortgages for homes in high-risk flood zones. The consequences of such decisions on the value of residential housing, which for many households is the main asset, could prove quite dire.

Although the Conservative Party is always focused on the carbon tax or on what is happening with the environment, it never comes up with any solutions for people who are dealing with floods, droughts and deteriorating health.

[Jamil Jivani, Conservative, Durham, ON]

Mr. Speaker, unfortunately, I think our colleague has conflated a couple of things. The carbon tax is not an environmental plan. The carbon tax is a tax plan. We have advocated for, and I am very proud to say this because the riding I represent, Durham, is home to a fantastic nuclear energy facility, is technology and not taxes to respond to environmental concerns across this country.

The idea that the carbon tax is somehow going to address the hon. member's concerns seems completely misguided to me, and the idea that middle-class families have to pay more for groceries at the grocery store to respond to these environmental concerns seems like a completely backwards connection between the decisions made in Ottawa and the consequences at home.

[Lisa Marie Barron, NDP, Nanaimo—Ladysmith, BC]

Mr. Speaker, we see that corporate landlords are increasing renovictions. Rents are being increased, and corporate landlords are swooping in and buying up affordable homes. However, I do not hear from the Conservatives often about the importance of having rent protections in place. Could the member please share the Conservative stance on making sure that people have an affordable place to live?

[Jamil Jivani, Conservative, Durham, ON]

Mr. Speaker, I share the member's concerns about big corporations buying up a bunch of residential properties, being able to control the cost of rents and whether middle-class families can afford a house in this country.

The thing I would draw her attention to is that the NDP's partner in the government, the Liberal Party, just approved a merger of Blackstone to purchase Tricon, which would allow an American company to control an insane amount of residential property in Canada.

[Greg McLean, Conservative, Calgary Centre, AB]

Mr. Speaker, it is a pleasure to rise today in the House of Commons and speak to this motion, the fall economic statement.

I will note it is May 10 and we are debating the fall economic statement here in the House of Commons. Earlier this week, we debated the budget implementation act. Nothing shows the government's lack of control over an agenda more than debating the fall economic statement on May 10, three weeks after the budget address, which is the main financial statement made by the Government of Canada.

There is a problem here. There is a pace that has to happen in the House of Commons for legislation to get through and become law so that Canadians understand what their economics are going to be going forward. Today, once again, we are debating the fall economic statement, which is something that was delivered in the fall that we have not implemented into Canadian legislation. However, the government is acting as if that legislation has passed. Everything we see is the government pretending that there is no debate to be had here, that it has already been instituted into law and it expects this to be had going forward. Likewise, it put the budget on the table three weeks ago, and we debated the budget implementation act for the first time in the House in the last few days.

I am going to note for the sake of Canadians that the budget implementation act has very little to do with the budget that was delivered in the House of Commons three weeks ago. A number of measures in the budget implementation act, which was debated earlier this week, are from the fall economic statement. Somebody needs to explain to Canadians how these things do not match going forward. There is a litany of all kinds of virtue on paper but no plans to implement what is going forward here. The problem with understanding the budget implementation act is this: If the government is going to put the fall economic statement into the budget implementation act, people are going to have to understand what their budgets will look like. There is no detail or announcement of any of the government's tax increases in the budget implementation act; there are no details at all, so Canadians are still left guessing about the details it is putting forward here in the budget.

Budgets matter to Canadians and to businesses across Canada, but it is my job here in the House of Commons to try to bring some financial discussion about what is in these budgets, so let me talk about some of the issues the government talks about.

In Canada, real GDP is down. The government talks about an economy that is going well, but real GDP continues to decline. GDP per capita continues to go down. That means the amount of economic output per person in Canada is continuing to decline at a steady rate. The government uses a ratio here called the debt-to-GDP ratio. I know I have gone on about it previously, but I will go into some detail here because I hope that people will understand it a little better.

Canada's debt right now is approximately $1.3 trillion. That is the federal government's accumulated debt. Canada's GDP last year was approximately $2.1 trillion. If we take $2.1 trillion divided by $1.3 trillion, it gives us a debt-to-GDP ratio equal to 62%. That is our debt-to-GDP ratio, yet our government pretends it is in the 40% range, at 42%. Although 40% was the number it said it would not cross several budgets ago, it continues to cross that and let it grow.

How did the government get to this number of around 42%? It added back the pension fund assets of Canadians. That includes about $600 billion from the Canada pension plan, which is money that is deducted directly off the paycheques of Canadians. Those contributions by Canadians into the Canadian pension plan fund were raised again this year, so there is about $600 billion sitting in Canada's pension savings to distribute to Canadian pensioners when they retire.

The Quebec pension plan, similarly, has about $100 billion of savings in it for Quebeckers alone. In total, it is $700 billion, but this is not a $700 billion pool for the government.

The thing about pension accounting is that it is about assets and liabilities, as is all accounting. Although there is a balance on their financial statements, there is also the liability of paying that to the people who paid into it for years. Last year, Canada's chief actuary determined that, all things going well, the Canada pension plan system is sustainable to pay the pensions that Canadians expect for 75 years.

What that means is that it is okay; it is balanced. However, the assets and the liabilities are in balance; everything collected in there is going to be paid out to the people that put the money into it. Therefore, if I may say, it is not the government's financial asset. It belongs directly to Canadians, from money that was deducted from their paycheques, and it should not be used in their debt-to-GDP ratio.

I am also going to talk about where we are going with this, because pensions are a major part of Canada's sustainability going forward. Pensions matter in many respects. The government is moving in a direction to try to change that pension management system; it wants to oversee the system through its regulatory arm, the Office of the Superintendent of Financial Institutions. That has to stop.

These are organizations that need to manage one thing, and that is the outcome for the people whose money they are saving. That is what they should be doing. Whenever anyone asks a regulator to go in and change what is happening at an organization, such as a pension, they are effectively saying, “Take your eye off the ball about what is supposed to be done here, and put your eye on something else.”

Let me tell the House what that leads to. That leads, as in the United States, to bank failures. There were bank failures at smaller banks, where they were not matching their assets and their liabilities. As a result, when interest rates changed, a whole bunch of smaller banks had a run on their capital and could not meet their liabilities. They went under.

That is an example of where people in the financial industry are distracted by other regulations being put on their plate by governments and regulators. This takes away from what they should be doing for their client base, which is managing their money effectively. Every pension manager, every money manager in the world has one mandate, which is to make sure that they are not losing money for their clients and are actually making money, hopefully at greater than the rate of inflation. We are not doing that in Canada right now. This is the reason we have falling GDP per capita. We have more Canadians coming into the country, and they are not keeping up in the economy.

Now let us look at and tear down what actual gross domestic product is. It includes the contribution of everybody. It also includes the contributions of governments. Government spending goes into GDP. I am going to suggest that, if the government's spending going into the GDP increase was not there, we would actually be in a very negative scenario. Pardon me, Madam Speaker, I should say overspending; again, the planned overspending is $40 billion this year.

The problem is that these things have to balance over time. We are a productive economy. We had a good economy before the current government monkeyed around with it and decided that it could replace private sector investment with direct public sector investment. It is wrong.

We continue to run deficits. There is a cliff we are going to hit at some point in time here, where we are no longer able to meet our needs going forward, because everything that we put into our savings is going to be whittled away into interest payments on our debt. This coming year, that interest payment is $54 billion. This is the government's number of what that is going to be. I suggest it might be higher, as the debt is going to be higher than it realizes.

That is $54 billion from Canadian taxpayers to pay bondholders, and it is going up. Even the government's documents say that ratio has doubled in the last few years. That is a significant increase, a significant weight on the pockets of Canadian taxpayers, who need to make sure that they are sustainable going forward here. It is madness.

I am telling the few people that I see actually taking notes on what I am telling them here that we have to get back to balance. This budget, every budget, should be about getting to balance. I request that they go back to the drawing board and look at what they can do here to get our economy back to balance and actually sustain this country going forward.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

It being 12:54 p.m., pursuant to an order made on Thursday, May 4, it is my duty to interrupt the proceedings and put forthwith every question necessary to dispose of the report stage of the bill now before the House.

The question is on Motion No. 1.

If a member participating in person wishes that the motion be carried or carried on division, or if a member of a recognized party participating in person wishes to request a recorded division, I would invite them to rise and indicate it to the Chair.

The hon. member for Kingston and the Islands.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Madam Speaker, I request a recorded vote.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

Pursuant to Standing Order 45, the division stands deferred to Tuesday, May 21, at the expiry of the time provided for Oral Questions.

The hon. member for Kingston and the Islands is rising on a point of order.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Madam Speaker, I believe if you seek it, you can find unanimous consent to see the clock at 1:30 p.m., to start Private Members' Business.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

Is it agreed?

[Some hon. members]

Agreed.

The House resumed from May 10 consideration of 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, as reported (with amendments) from the committee, and of Motion No. 1.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

The House will now proceed to the deferred recorded division on the motion at report stage of Bill C-59.

The question is on Motion No. 1.

(The House divided on Motion No. 1, which was negatived on the following division:)

Vote #763