Mr. Speaker, today we are in third reading of Bill C-70. As I outlined when I spoke previously, the intention of my speech is to encourage the House to accept the final reading of this in the House of Commons as quickly as possible and to outline in a very factual way what the act intends to to do. It is related to the budget of 1994. This is one of two bills that deal with the amendments to the Income Tax Act.
In addition to what I outlined previously in the House, new rules are provided for debt securities that are not required to be marked to market. These rules deal with the measurement of income while the securities are held and the treatment of gains and losses on disposition.
Bill C-70 also amends the rules for the taxation of resident shareholders of foreign affiliates. This action is being taken as a result of the government's ongoing monitoring of developments in this area. The changes expand the categories of income of foreign affiliates that must be reported as income of their Canadian affiliates. Another modification prevents the use of an affiliate's foreign active business losses to reduce Canadian shareholders' income. This change also protects the Canadian tax base. The amendments are generally effective for taxation years commencing after 1994.
There are also a number of measures that were announced after the 1994 budget. These include six new tax measures that I would like to outline briefly.
First, this bill addresses the issue of eligible prepaid funeral and cemetery arrangements. Under this legislation individuals making such arrangements will not have to declare interest on their deposits up to a $15,000 maximum contribution as income, provided the deposit is not withdrawn for other purposes. The provider of eligible funeral and cemetery arrangements is, however, required to include in income the total amount received from an eligible arrangement.
Turning to the next measure, the bill proposes that real estate trusts with publicly traded units be allowed to qualify as mutual fund trusts. This measure responds to representations from the real estate sector, which is interested in expanding the available methods of financing real estate. We believe the proposed change will facilitate the restructuring and refinancing of this sector.
The third of these post-budget measures is a measure that will help mutual funds to reduce overhead costs and improve services to investors. These amendments will allow mutual fund corporations to convert to mutual fund trusts on a tax free basis and also allow tax free mergers of mutual fund trusts.
This bill also proposes new rules to speed the resolution of objections and appeals, particularly by large corporations. Large corporations will now have to specify the issues under dispute, the amount of relief sought, and the facts and reasons for objecting. The rules also limit the ability of large corporations to raise new issues in a notice of objection where the objection relates to reconsideration of an assessment. However, new issues raised by Revenue Canada on such reconsiderations may still give rise to a notice of objection.
In addition, the legislation will ensure that the new requirements relating to the notices of objection will not apply to assessments that have been appealed to courts before this legislation receives royal assent.
The final measure I want to highlight deals with the tax treatment of dividend compensation payments and other amounts connected with securities lending.
The Income Tax Act currently provides that the lender of securities not be treated as having disposed of the securities under these arrangements. As well, payments to the lender as compensation for dividends are treated as dividends in the lender's hands. While these dividend compensation payments are generally not tax deductible, a special rule established in 1989 allows security dealers to deduct two-thirds of such payments. This legislation extends the use of the two-thirds rule, thus ensuring that our securities industry remains competitive. However, the deduction of these payments will be somewhat limited.
I can assure hon. members that the government will continue monitoring these measures to make certain they can operate effectively.
Other changes clarify the effect of certain dividend rental arrangements and the meaning of securities dealers registered or licensed to trade in securities for the purpose of the Income Tax Act.
In closing, Bill C-70 amends the Income Tax Act effectively and equitably. It seeks to better target tax assistance delivered to certain business sectors while at the same time broadening the tax base and thus protecting government revenues. The legislation contained in this bill also clarifies a number of important issues related to the act.
Given all this, I have no hesitation in encouraging all of my hon. colleagues to support this bill.