I will provide a short overview of each of these measures in the order in which they appear in the bill.
The first measure in part 1 provides a temporary enhanced capital cost allowance, which is essentially tax depreciation in respect of the purchase of new zero-emission vehicles. These are fully electric, fully powered by hydrogen or a plug-in hybrid with a battery capacity of at least 15 kilowatt hours. It also increases the capital cost limit for zero-emission passenger vehicles to $55,000, in terms of what can be depreciated, from the existing limit of $30,000 for passenger vehicles.
The second measure removes the requirement that property be of national importance in order to qualify for the enhanced tax incentives for donations of cultural property, while retaining the requirement that the property be of outstanding significance.
The next measure introduces further enhanced rates of capital cost allowance. It provides an enhanced 100% capital cost allowance rate, which provides a full first-year deduction in respect of certain manufacturing and processing machinery as well as certain green-energy equipment. In addition, it provides, effectively, three times the normal first-year allowance for other sorts of depreciable property, that's to say, almost every other type of depreciable capital property.
The next measure relates to kinship care programs. It ensures that the receipt of amounts under a provincial kinship care program will not adversely affect entitlement to the Canada workers benefit. In addition, it ensures that such amounts are not included in computing a recipient's income and do not reduce entitlement or include it for purposes of determining means-tested benefits.
The next measure removes taxable income as a factor in determining a Canadian-controlled private corporation’s entitlement to the enhanced scientific research and experimental development tax credit, while retaining the taxable capital factor that is currently in place.
The next measure relates to providing support for Canadian journalism. In particular, it provides three separate benefits. First, it allows registered journalism organizations to be qualified donees for income tax purposes, which, in addition to providing an exemption from income tax, allows them to issue charitable donation receipts. Second, it introduces a 25% refundable tax credit on salary or wages paid to eligible newsroom employees for certain qualified Canadian journalism organizations. This credit will be subject to a cap on labour costs of $55,000 per eligible employee, which works out to a $13,750 tax credit benefit per employee. Third, it provides a temporary, non-refundable 15% tax credit on amounts paid by individuals in respect of certain digital news subscriptions.
The next measure introduces the Canada training credit, which is a refundable tax credit providing support for eligible training fees for individuals between the ages of 25 and 64. This credit accumulates at an amount of $250 per eligible year in a notional account up to a lifetime limit of $5,000. The credit can be applied against up to half the cost of eligible training fees.
The next measure updates a cross-reference in the Income Tax Act relating to the use of cannabis for medical purposes, to reflect the currently existing regulations that apply to cannabis.
The next measure applies in respect of the rules in the Income Tax Act that prevent the inappropriate multiplication of access to the small business deduction. Currently there is an exception that applies where farming or fishing products are sold to an arm's-length co-operative organization. This measure would expand that exemption, providing a benefit to affected farmers in any case where a farmer or a fisher sells products to an arm's-length corporation, and removing the requirement that the purchaser be a co-operative corporation.
The next measure extends the currently existing mineral exploration tax credit for an additional five years. This credit provides a 15% credit in respect of certain grassroots mineral exploration.
The next measure applies in respect of certain communal organizations and in particular it ensures that income earned in a deemed trust that arises in respect of those communal organizations retains its character as it is flowed out through the deemed trust to the members of the congregation.
The next measure relates to the homebuyers' plan, and has two components. First, it increases the homebuyers' plan withdrawal limit from $25,000 to $35,000. In addition the measure also provides that, subject to certain conditions, individuals who experience the breakdown of a marriage or common-law partnership can be permitted to participate in the homebuyers' plan even if they do not meet the first time homebuyer requirement.
The next measure relates to liability for income tax in respect of income earned in a tax-free savings account. Generally, income earned in TFSA is tax free with two important exceptions. One is income from carrying on a business in the TFSA. Most commonly, that can be thought of as day-trading types of activities. Currently, TFSAs are liable to tax on income from carrying on a business. The trustee of the trust, generally the financial institution providing it, is jointly and severally liable. This measure would cap the liability of the trustee at the amount of assets in the trust. In addition, it would extend joint and several liability to the TFSA holder, who would be in the best position to know whether or not the TFSA is carrying on a business.
The next measure relates to relief from overpayments of salary or wages. It is intended to help alleviate cash flow issues where an amount is paid to an employee and an amount is withheld in respect of the salary or wages and remitted to the government. Under the current tax rules, the employee would have to reimburse their employer the gross amount of the payment and apply to the Canada Revenue Agency for a refund of the taxes that have been withheld and remitted. This allows the employee to return to the employer only the net amount they received, and allows the employer to obtain the refund of the withheld taxes from the Canada Revenue Agency, thus helping to alleviate the cash flow issued for the amount that had been withheld but not received by the employee.
The next measure relates to providing enhanced capital cost allowance rates under clauses 43.1 and 43.2 of the regulations, and these are at rates of 30% and 50%. These are extended in respect of eligible electric vehicle charging stations and a broader range of electrical energy storage equipment. It's important to notice an accelerated 100% capital cost allowance rate is going to be provided in respect of the accelerated investment incentive I'd mentioned earlier. That would apply in respect of this measure as well. They would have a permanent 30% or 50% capital cost allowance rate but also be eligible for the temporary accelerated investment incentive measure.
I think I would say there are two reasons. One is historical and the other more policy focused. Some time ago, rules were introduced to prevent inappropriate multiplication of the small business deduction. A classic example of that is a law firm with 100 partners, say, and under the basic scheme of the small business deduction rules where you have one business, you share your $500,000 small business deduction limit.
Tax planning had arisen in which each of the members of the partnership in my example might set up a side corporation that would provide services to the partnership, thus multiplying access to the small business deduction from the intended $500,000 to, in my example, say, up to $50 million. That's sort of the paradigm example of the types of transactions these were trying to address.
In response to that measure, the department heard from a number of farming and fishing businesses that legally were in a structure that was very similar to the one I described, where they were members of a co-operative and because of the requirements to be a member of the co-operative, they had to have membership interests in the co-operative that were treated as shareholdings for the purposes of these small business deduction rules.
They were providing their farming products and fishing catches to this co-operative and found themselves within the ambit of the rules despite not being within their policy intent because they weren't participating in the profits of the co-operative. It was a different type of business structure from the one that was envisioned by the anti-multiplication rules. That's why, in a previous budget, the rules were amended to create an exception for agricultural and fishing sales to a co-operative organization.
The issue that this measure responds to is as a result of further communications and responses from stakeholders in the farming and fishing industries. A number of business structures are in place that are economically and structurally very similar to the co-operative structure that the government provided an exception for but that do not, for technical reasons, qualify as co-operatives. In the farming and fishing industries, the same types of concerns that apply in other industries are not as acute.
The decision was taken to extend the relief provided in the co-operative context to all farming and fishing businesses, again, recognizing that economically they're very similar and it was considered to be an inappropriate tax consequence that they be treated differently for tax purposes when the main difference is that one technically qualifies as a co-operative and the other doesn't.
In other industries—I'm going back to my law firm example—those same considerations would not apply.
Mr. Chair, I'm doing this as I have a lot of motions before the committee, but this one, I think, is pertinent at the moment because of China's trade actions against Canada that specifically affect canola farmers. Now there's talk that it's expanding to soybeans and our pork products, and it seems to be that there are widening trade actions being implemented against us.
As you heard the mention, one of the actions that we should be taking, not so much in retaliation, but in response to China's trade actions, is to pull out of the Asian Infrastructure Investment Bank. Members will know this: We looked at this two years ago, and it went through Parliament. It was forced through. We tried several motions at committee and then in the House of Commons to remove this funding.
There are several reasons to do it; it's not just the trade actions. There's a worsening human rights situation in western China, specifically affecting Uighur Muslims. Also, there was a public consultation held by the finance department. I have now lodged a complaint with the Information Commissioner because I was lied to by the department, and I'm going to explain it. I have letters and confirmation here. I just want to show that I did my homework before bringing this before the committee.
First, maybe just on the AIIB, we can recap. The federal government decided to purchase a 0.9% share in the Asian Infrastructure Investment Bank, a bank that is specifically meant to further the foreign policy interests of the People's Republic of China. It's a bank that is financing three pipeline projects overseas. We all heard the responses from the minister about how there's this great project in the suburbs of Beijing that would take suburban Beijing dwellers off coal and allow them to use cheap natural gas. What he failed to mention was this: I don't see how the Canadian taxpayers should be subsidizing any of these things when we have perfectly good pipelines that we're trying to build in Canada and when we're trying to get these products to overseas markets. These are our products.
One of the projects that the AIIB is funding is the Trans-Anatolian line, which will compete with Canadian products on the international markets.
There's another pipeline project in Bangladesh that's also being financed.
The case against participation in this is made stronger because of China's trade actions against us. I think that it would be a measured response to take against the government just to show that we also have bargaining chips in this. It isn't just a one-sided relationship where we can't do anything on behalf of canola farmers in Canada.
There's been too little action so far, and it's been too slow, especially on the technical side, to respond to these actions by Chinese officials to block perfectly good, high-quality, internationally well-regarded canola products, and now pork and soybean products. It has a huge impact on the western Canadian economy.
I mentioned before that the Asian Infrastructure Investment Bank is furthering the foreign policy interests of the People's Republic of China. I have an official I want to quote here who said, “...political, political, political (sic): never forget that. It's the extension of a new policy under President Xi to dominate the South China Sea and to dominate Asia.”
It will “promote a version of China's state capitalism, not transparent markets,” said a 2015 article in The Wall Street Journal, “China Trounces U.S. Smart Power”. I got these two quotes from “The Asian Infrastructure Investment Bank: Multilateralism on the Silk Road” by Mike Callaghan from the Lowy Institute for International Policy.
There's ample evidence from speeches made by President Xi that the AIIB is simply another tool in their tool box to further their foreign policy interests, which is why I want to look at it. If that is what this bank is for, then we should not be participating in it.
Now is the perfect time to apply some Canadian pressure to resolve this canola dispute with the Chinese government. It's a measured response. We're not going overboard. The government said that we'd participate back in 2017. We haven't spent all of the money. We have spent under $100 million, but about $256 million is still committed to be spent for the first tranche of purchases for these shares. What I'd like to see us do is back away from it and actually get rid of the shares as our initial response to this.
Now, there was a public consultation held by the department. It started November 9, 2018, and closed on December 21, 2018. It was a public consultation that all Canadians could participate in, so on November 28, I created a web page so that Canadians who care about it—many of them have contacted me from across the country—could participate in it. What I then also did was blind-copy myself on every single email sent from that web page so that I could have a copy of what people were sending and could then follow up with them. Over 1,200 Canadians participated in this public consultation. Then I did an access to information request for which I got an answer on March 15, 2019. In it, it said, “” This is on official letterhead. My file number is 1199283, and our file is A-2018-01679-CL.
It tells me that no such thing existed.
When my staff followed up with the officers, saying that they could forward them every single one of the blind carbon copy emails, within five minutes they apologized, and on April 11, they corrected themselves and said that a search of their departmental records identified 1,243 pages in connection with our request. They're actually right here; I printed every single email so I could have a record of it.
Initially telling me that no such documents existed is an absolute failure of the access to information system. I'm not accusing the minister of hiding anything. I really do believe this is a departmental problem. It shouldn't require me to blind carbon copy myself on emails I'm receiving to ensure that the public consultation is being held in a fair and open way and that parliamentarians can have access to information.
I filed a complaint with the Office of the Information Commissioner. I've yet to hear back whether they will take up this matter.
There are only two things that could have happened. One is that they were incompetent in collecting the emails. I would have thought there would just be some Outlook account and they would have just copied and pasted everything while hiding people's personal information so I wouldn't see it and they would have just provided it to me.
I just wanted to see whether anybody had said yes to participate in it and what types of arguments they were making. In fact, I don't have any of those emails because not one person from the email stack that I received said that Canada should continue to participate in the AIIB, which reinforces the need for this committee to look at it. I think there's time in June to do so. I know that's not ideal because we have to look at the budget bill. At the earliest moment we can, we should review the AIIB. In my motion, I don't have a fixed number of meetings that we should have to do so.
We should be mindful of the impact that the People's Republic of China trade actions against Canada have had on canola farmers. They are going to be deciding very quickly in the next few weeks what they are seeding. There's going to be an impact on soybean farmers and pork farmers all across Canada. We should be seriously considering pulling out. I would say we need to pull out in order to show that we have the ability to respond. Make it a measured response; there's no need to go over the top. It's something that they will pay attention to. You heard our leaders. There were three easy points. I think the third point about pulling out of the Asian Infrastructure Investment Bank is a timely thing to do. This is a half a billion dollars of taxpayer money that's eventually going to be funding these different pipeline projects. There's a list of these projects online and some of them might be worthy; some of them might be really reasonable, but I really don't think that the minister's response during question period today holds up to scrutiny at all. China is the second-largest economy in the world. They literally do not need a half a billion dollars of Canadian taxpayer money to finance a pipeline project in and around the suburbs of Beijing to get them off coal power, so they can use clean-burning natural gas. They really do not need that.
It's a measured thing that we could do. We could take a look at it over one meeting and then recommend to the government that they pull out. It would be a simple thing for us to do to take stock of the current situation. Perhaps in 2017, the government.... I remember officials before this committee making a case for it and defending the logic of that decision. I disagreed with it, but two years later we can review it. I think it's incumbent upon committee members to provide the best advice that we can to the . Perhaps the minister is hearing advice from other people. I am worried, based on the fact that this access to information request that I filed initially received the response that no such documents exist. I had to then inform them that they had made a mistake for which I have a paper trail that I have provided now to the Information Commissioner.
To me, everything around this AIIB participation decision stinks. Therefore, I think it's time for a study—a review. I don't say how many meetings we should take. I don't even know how much time we should put aside for it, but I think it's worth our time to then recommend—and hopefully other committee members will agree with me—that Canada should pull out of the AIIB.
We already participate in the Asian Development Bank led by Japan. We should definitely participate in that one, but this one, which is led by Beijing and run out of Beijing....
This is a measured response to their trade actions against canola farmers in Canada. Farmers here need to know that we're on their side and this is something that we could do that would not harm Canada's economy directly. We're not proposing to shut out Chinese products. We're simply saying we should not participate in their bank.
The one other thing I will mention is that I submitted an order paper question with my colleague , who was a member of the finance committee before, asking whether any Canadian companies or Canadian jobs have been created through this bank and our participation in it. I got back an answer of zero.
There was an answer in the media—there was an article written in the media just a few months ago—that potentially one Canadian company may have received a subcontract for one of these projects. A half a billion dollars for one subcontract, maybe, is simply not enough. My order paper question was government documentation saying it was not aware of any private sector jobs being created or any Canadian companies obtaining work.
It's timely. Farmers need to know we're behind them, that we're going to back up our rhetoric with real action. A quick study with a recommendation to the government is the right thing to do at the moment. I'm hoping that all my colleagues on the opposite side and this side will support me.
I will lead off with an explanation of part 2. My name is Carlos Achadinha. I'm the senior director responsible for GST policy matters—goods and services tax and harmonized sales tax matters. This particular section, part 2, covers a couple of modest and minor enhancement amendments that are included in the budget with respect to the application of the GST.
Basically, there are four measures in this bill with respect to the GST. Three are related to health measures. They are basically expanding the existing health measures currently under the GST. There's relief for basic health care services, so you don't pay tax on basic health care services. There are basically three additions to that type of relief.
The very first one is at clauses 76, 78 and 79. GST relief is provided to supplies and importation of human ova and on importations of in vitro embryos. This is intended to assist people who are increasingly turning to assisted human reproduction to help build their families; so for people who are suffering from certain infertility issues, this is a means to help them deal with that sort of issue. This provides relief for acquisitions of those particular materials.
The second measure deals with various foot care products. There is currently an exemption for various foot care products—for example, controlled ankle movement walkers, heel braces and compression anti-embolic stockings. These materials are currently exempt when they are basically purchased on the order of a physician. What we're doing now is expanding that to allow them also to be purchased on the order of a licensed chiropodist or a podiatrist. These are other health practitioners who are really very much whom people see when they have to deal with these foot issues. This is just an expansion of what is an existing relief.
The third measure in the health area is providing explicit relief for what we refer to now as multi-disciplinary health care services. Basically this is a measure intended to deal with rehabilitation programs where you may have different health care practitioners come together to provide you with one service, a rehabilitation service. If these were all provided separately, there would be an exemption, but it's not clear that when they are provided together as a single service there is explicit relief for this particular measure in the act. This provides explicit relief for those multi-disciplinary health care services.
The fourth measure is just a consequential measure. There has been discussion here with respect to the income tax expanded threshold for business deductions for the zero-emission vehicles. Under the GST, businesses are entitled to recover their tax paid on inputs they use for business purposes. Consequential to the changes in the deduction threshold in the Income Tax Act going from $30,000 to $55,000 for zero-emission vehicles, there will be an increase in what you can claim for input tax credits to that same threshold.
That covers very quickly the GST modifications.
I'm the director general of the sales and excise tax division at the Department of Finance. I'm going to talk briefly about clauses 81 to 86. These propose to implement the new THC-based duty rate on certain cannabis products. This proposal builds on the current excise duty regime that came into effect when cannabis for non-medical purposes became legal in October of last year.
Currently, the legal classes of cannabis products permitted for sale are fresh and dried cannabis, cannabis oils, seeds and seedlings. However, new classes of products namely edibles, extracts and cannabis topicals will be permitted for legal sale later this year under the Cannabis Act. The government is proposing that the excise duty framework for cannabis products be amended to more effectively apply the excise duty to these new classes of products as well as to cannabis oils, which are already legally for sale.
In particular, part 3 implements amendments so these products are subject to excise tax based on the total quantity of tetrahydrocannabinol, THC, which is the primary psychoactive component of cannabis. The introduction of this new THC-based rate has been informed by the feedback that we received at the department from the CRA and from the cannabis industry.
The current excise duty framework for cannabis products imposes the higher of one of two rates. One, either a flat duty rate based on the total weight of cannabis plant inputs to a product, or two, an ad valorem duty based on the producer's price. However, cannabis producers have expressed some concerns regarding the potentially complex calculation of excise duties on oils when basing them on the quantity of cannabis material inputs.
Having one flat rate based on total THC content for certain cannabis products would simplify compliance. It would allow these producers, as well as the CRA and other administrators, to more easily calculate and verify excise duties for cannabis edibles, extracts and topicals.
At the same time, this proposal better aligns the excise duty regime with recommendations from the health care community because it bases the duty on the intoxicating component of cannabis that is THC. In that respect, it's similar to how excise duty is applied to alcohol products like spirits. This measure would come into force on May 1, 2019.