Finance Committee on April 25th, 2023

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

Thank you, Mr. Chair.

I would like to come back to a question I asked Mr. Mercille in the briefing. I would just like to get a confirmation, again.

There are companies here in Quebec and in Canada that have huge servers connected to very high speed fibre that lease their computing and data transfer capacity. That is their work.

They contacted us because some of their clients are outside Canada. Some of them are engaged in mining cryptocurrency. The changes to the GST as they are worded don't seem to consider those transactions to be business activities that would allow them to deduct their GST on inputs, and that would force them to bear the burden of the tax even in cases where their sale is for export.

Could you confirm that if Bill C‑47 is not amended, that will in fact be the case?

[Amanda Riddell]

Hi there. I think it would help if we just stepped back a little bit. It's a topic that's relatively complex, as Mr. Chambers was mentioning.

The GST is a very effective revenue source. As the economy is evolving, we need to protect the tax base. The way in which the ETA, the Excise Tax Act, is structured at the moment is that it's based on there being a supplier and a recipient and there being consideration. Unfortunately, with crypto it's a bit of an unusual situation. You have miners who are providing a service that would otherwise normally be subject to GST/HST but is being provided to a decentralized network of users. As a result, there's no recipient to which they can charge tax. They don't know what rate to charge—for example, if it's an export or not—and there's no consideration, because you're winning rewards. So clarity was needed.

In looking at this issue over some years, we've discovered that miners fall into three buckets, if you will. The first type of miner is a solo miner. A solo miner is what you might imagine. It's somebody in their basement doing crypto mining on their individual computer. Hopefully, if they're lucky enough, they win a reward and get some bitcoin. There's very little or none of that left, we understand, in the industry, because the computations have become a bit too complex.

The second type of miner is when solo miners are working collectively in a mining pool and are sharing rewards. If one of them gets a reward, they can share it. In that particular case, they're kind of like a solo miner, but it's like they're all acting collectively as one large solo miner. The rules apply to those types of miners. There's no identifiable recipient. Again, we're talking about a decentralized network of users. These amendments would take it out of the GST, because it doesn't fit within the framework of the GST. Effectively, the miners would provide the service. They would be relieved of the requirement to charge GST/HST since, again, they don't know who the recipient is or what rate would be charged. Because they're not charging GST, they would also not be entitled to input tax credits. There are other examples of that kind of thing in the GST act as well.

There's an important exception. That exception applies when there's an identifiable recipient, an identifiable arm’s-length recipient, who's not part of that pool. You're not sharing rewards. You're providing computer services to an identifiable recipient. If that recipient is offshore, then you would be subject to the normal GST/HST rules. You would charge GST. If you know that the arm’s-length identifiable recipient that's not the pool operator is offshore, then you would charge 0% and you'd be able to claim ITCs. The regular rules would apply. To our understanding, this would apply to a lot of the people involved in the crypto mining industry in Canada.

I hope that answers your question.

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

Yes, absolutely. Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you very much, Ms. Riddell and MP Ste-Marie.

Now it's over to MP Blaikie for two and a half minutes, please.

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

Thank you very much.

The act talks about implementing the model reporting rules for digital platforms developed by the OECD. I'm wondering if someone could speak to what exactly those are and why it's important that this be done.

[Kevin Shoom, Senior Director, International Taxation and Special Projects, Department of Finance]

Thank you for the question.

The model rules for reporting on digital platforms was developed by the OECD to address concerns about under-reporting in the sharing and gig economy. Many of the participants in the sharing and gig economy who would be providing services through these online platforms might be unaware of the tax consequences of the income they're receiving, or if they are aware, in some cases they might not have been voluntarily reporting their income.

The rules were developed to provide a mechanism for essentially third party reporting. It's similar to the third party reporting that many of us are familiar with with respect to sources of income, like employment and investment income, where an intermediary, like a bank or the employer, would provide that information to the tax authority.

This reporting regime would require digital platforms to provide information to the tax administration on the amounts received by people providing services through these platforms. It would also apply to sales of goods by third parties through an online platform.

Another important aspect of this is that in many cases, these platforms might not be located in the country where the individual providing the services or selling the goods is located. In this case, the logic behind the system is that with different countries implementing similar rules, they would require the platforms located in their countries to report on the sellers whom they have on their countries of residence. That would mean the tax administration would have information on the local residents and then could exchange information with other countries on the sellers who are residents in other countries.

Another dimension to this is the reporting that the platforms are to provide to the tax administration. They will also provide the same information to the sellers themselves to help ensure that those sellers are aware of their tax obligations.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Shoom and MP Blaikie.

Now we have the Conservatives with MP Morantz, please, for five minutes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

I want to ask questions about the changes to the registered disability savings plan.

Is one of you able to speak to that?

Yes, that's you. Thanks.

This particular program was brought in by Jim Flaherty when he was finance minister. It was really one of his major accomplishments as Stephen Harper's finance minister.

In fact, after it came out, my wife and I were able to avail ourselves of this plan for our son. It's a very good thing for people with disabilities in our country. It hits home personally for me.

I just want to make sure that we understand what these changes are for. Do they make, for example, registered disability savings plans more accessible for families? Is the process going to be easier for them? Will more people other than parents be able to set these plans up, for example, siblings, close relatives or other people? What do these changes entail?

[Pierre Leblanc]

Thank you very much for the questions.

I think they will make RDSPs more accessible for an important group of people. If you look at RDSPs for adults who are eligible for the disability tax credit, typically the individual is the holder of the plan; but, in some cases where the individual, because of their disability where their ability to enter into an RDSP contract isn't out, the question is who can be the plan holder. Absent this measure, because property comes under provincial law, it would require guardianship. Guardianship is something that can be a time-intensive process. It can also reduce the individual's autonomy in important ways.

This measure was first introduced in 2012 and has been extended a couple of times. What Bill C‑47 proposes to do is to extend it one more time. It allows in those cases what's called a “qualifying family member” to be the plan holder. The measure does two things. First, the qualifying plan holder measure would expire at the end of 2023. The bill proposes to extend those three years, until the end of 2026. The second thing it does is that, currently under the current provision, it's either parents or a spouse who can be a qualifying family member, and this proposes to add siblings. It proposes to add brothers and sisters to the list. Those are the two main changes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I have a couple of questions out of curiosity. Why isn't this a permanent provision? Why does it have a sunset?

[Pierre Leblanc]

That's a really good question. It's been extended a couple of times because, as I mentioned before, questions of property are provincial. You've had several provinces.... You mentioned Minister Flaherty's important role in encouraging provinces to have streamlined approaches to have family members represent the individual with a disability. That would be both easier to sign up for than guardianship and also less intrusive for the person with the disability.

Most provinces have done that. In fact, in the last couple of years, to give you just to give a couple of examples, P.E.I. and New Brunswick have recently adopted legislation with flexible, streamlined approaches to representation. There are a couple of jurisdictions that still need to act. One thing that was mentioned in the budget was strong encouragement for those remaining provinces to take action so that basically, no matter where, there would be a streamlined approach under provincial law. So you can think of this as bit of a backstop, and then, for those provinces that have enacted it, it provides this option.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Morantz. Those were great questions, and it's a great program.

We have MP MacDonald for the Liberals for five minutes to finish off our second round.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

I thank everyone for being here and for the work you've done on the budget. It's no easy task, no small task.

I have a few different questions.

Can you clarify for us what the impetus is behind the changes to the Income Tax Act as they relate to veterans and active military armed forces?

[Mark Maxson]

This amendment concerns a number of benefits provided by Veterans Affairs Canada and the Department of National Defence generally to ill and injured members or former members. These are long-standing benefits that have historically been treated administratively as completely non-taxable. They're not reported on slips to taxpayers.

Recently there were some questions asked about whether that treatment was supported under the Income Tax Act, or whether, in fact, they should be taxable under current law. This amendment essentially confirms the historical treatment of these benefits, that they would be non-taxable, and it makes an amendment retroactively just to provide clarity.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

I want to go back to...MP Dzerowicz.

With the automatic tax filing, the Canada child benefit is something we see as an opportunity for many low-income families.

Based on the automatic tax filing, do you have any numbers on who or how many persons or families will be able to access that Canada child benefit going forward?

[Pierre Leblanc]

Thanks for the question.

I don't think I have those numbers with me. As the budget made clear, it's a priority for the government and this is work to be done. It's work that the government will be doing going forward.

[Heath MacDonald, Liberal, Malpeque, PE]

It's also going to be retroactive, from what I understood.

How many years are you going back to allow these people to be able to claim the Canada child benefit?

[Pierre Leblanc]

I think details like that are to be worked out.

[Heath MacDonald, Liberal, Malpeque, PE]

All right.

If you could get those answers, I would appreciate it. If it was broken down regionally, it would be appreciated by all members around this table, I assume.

[Pierre Leblanc]

I think that's an analysis the government would be doing going forward. I can say that it's not information that the government has currently.

[Heath MacDonald, Liberal, Malpeque, PE]

The BIA moves forward with the development of Canadian dental care.

I want this to be on the record. I've had several people question whether this benefit will be taxable or affect other income-tested benefits like the GST tax credit.

[Pierre Leblanc]

No. It's the same answer as it was for Mr. Baker: It won't be taxable and it won't affect income-tested benefits.

[Heath MacDonald, Liberal, Malpeque, PE]

Bill C-47 introduces a crackdown on predatory lending by bringing the criminal rate of interest from the equivalent of 47% annually down to 35% annually.

How will this measure help Canadians avoid crippling debt cycles? Can you please explain that?

[Pierre Leblanc]

That's in part 4, so I would ask our colleagues when they come before you on those measures.

[Heath MacDonald, Liberal, Malpeque, PE]

Okay.

Do you want to go, Sophie?