Committee, come to order, please.
Today we're dealing with the Budget Implementation Act 2016, Bill .
There are a couple of items before we get to departmental officials. First, we need a budget to hear from witnesses. That schedule is all laid out according to a previous motion of this committee, but a cost has been calculated for us to do the hearings on Bill C-29, which will all be in Ottawa. We need to request $10,100.
Does somebody want to move that? It is moved by Mr. Liepert.
Is there a seconder? It is seconded by Mr. Sorbara.
All those in favour?
We don't need a seconder. Sorry; I'm used to Robert's Rules of Order.
All those in favour?
(Motion agreed to)
The Chair: You had a point you wanted to raise, Dan, before I go to witnesses.
In fact, I think they raised some good questions in their brief. There may be an opportunity to discuss some of those questions with departmental witnesses today. I expect you'll be on your toes and do that.
This is the way we will proceed, just to get a kind of a feel of where we're at here so maybe we can finish in the two hours.
We will deal with the bill in its parts: part 1, part 2, part 3, and part 4. On part 4, there are seven different divisions. We will deal with them division by division in case people have questions on those sections.
If any committee member has a particular area where they think they are going to have a lot of questions, if it's down the list on part 3, part 4, or divisions, you could indicate that to me, and we'll maybe try to get there a little faster.
In any event, we will start with part 1. Officials will give a brief overview of what that section means in terms of the legislation. For part 1, Amendments to the Income Tax Act and to Related Legislation, we have with us Mr. McGowan, Mr. Greene, and Mr. LeBlanc.
Mr. McGowan, I believe you're to lead off. The floor is yours.
I'll provide a brief overview of the bill so that we can get to the questions section. I'll proceed measure by measure, aligning with when they first appear in the bill.
The bill replaces the existing eligible capital property regime in the Income Tax Act with a new class of depreciable property, which is intended to replicate, to the extent possible, the old eligible capital property regime, but in a simpler way, as for any other class of depreciable property. These amendments include simplification measures to, for example, allow taxpayers to eliminate small balances in their eligible capital property pools within the first 10 years after the transition.
It extends what are known as the back-to-back rules of the Income Tax Act in three important ways. These are rules designed to apply wherever certain tax consequences apply when a transaction occurs between two entities that typically are related. It prevents the avoidance of tax consequences when those entities interpose a third party between the two of them. The classic example is using a company in a low-tax treaty jurisdiction to make a loan through that treaty jurisdiction to a Canadian entity and thus obtain a lower rate of withholding tax on interest.
These rules are extended, as I said, in three important ways. The first is to apply to rents, royalties, and similar payments. The second is to prevent their avoidance through the use of character substitution transactions or the introduction of multiple intermediaries, meaning that rather than back-to-back, there might be back-to-back-to-back arrangements. Third, it prevents the avoidance of the shareholder loan rules through the use of the back-to-back techniques I described.
Next, it provides rules for the valuation of derivatives, ensuring that if they're held as inventory, they cannot use the “lower of cost or market” method.
Next, it applies to the sale of linked notes to ensure that the tax consequences arising on a sale before maturity of a linked note align with the tax consequences on maturity.
It introduces tax rules to clarify the tax treatment of emissions allowances under emissions trading regimes.
It prevents the use of so-called “debt parking” techniques to avoid a realization of an accrued foreign exchange gain on the repayment of a debt denominated under a foreign currency.
It closes loopholes relating to the use of life insurance policies to extract income, free of tax, from a corporation.
It provides for the appropriate use of an exception to our existing anti-surplus-stripping regimes, which prevent the use of somewhat artificial structures by foreign multinationals to make use of an exception that is intended only for Canadian companies.
It indexes the Canada child benefit, beginning in the 2020-21 benefit year.
It includes measures that are intended to prevent the multiplication of the small business deduction.
It prevents the tax deferral on switches between classes of shares in what's called a “switch fund” mutual fund corporation.
It would introduce the country-by-country reporting standard for transfer pricing for multinationals.
It contains rules relating to estates donations to provide more flexibility for giving by certain graduated-rate estates.
It refines and improves the trust loss restriction event rules, in particular to ensure that they apply appropriately in the case of investment funds.
It again amends rules relating to spousal and similar trusts to provide more flexibility and to ensure appropriate tax consequences on the death of the primary beneficiary under such a trust.
It allows for alternative arguments to be presented in support of an assessment after the expiry of the normal limitation period, provided the total amount on assessment does not increase.
Last, it introduces the OECD common reporting standard. That's a tax information sharing standard designed to prevent fiscal evasion, and it provides for the sharing of account information between tax authorities.
Those are each of the provisions in part 1 of the bill, with a fairly short bit of detail.
Thank you for the work you do. I'm glad you could be here to talk about this today.
I'm going to start with the common reporting standard and work my way backward.
The common reporting standard has come under a fair bit of scrutiny by various groups, particularly the credit unions, in that it imposes a one-size-fits-all regime. We all obviously want to keep the integrity of our tax system and align with other jurisdictions, but unlike the FATCA regulations that were brought into place a few years ago, where there was a risk-based assessment of 2%, these common reporting standards are actually slightly different. They require a slightly different bit of information to be sent on, and there is no risk-based assessment. All credit unions, regardless of size, have to comply.
I have the Summerland Credit Union in my riding, with a staff of about 10, and this actually seems to be quite an onerous process.
Could you please address why the law was written in such a way so as not to allow the same treatment as under FATCA?
Thank you, Mr. Chairman.
The agreement with the United States with respect to FATCA, of course, was a bilateral agreement. The common reporting standard is a similar system in the sense that it involves a requirement on financial institutions to identify accounts that are held by non-residents and to share that information with the CRA, which will then provide it to the tax authority of the person's residence.
It's essentially an extension to the kind of reporting on financial accounts that we've been used to for many years, the idea that if you open.... If you're a Canadian resident and you have a bank account in Canada, the income you earn on that bank or investment account will be reported to the CRA through a T5 slip or a T3 slip. However, when accounts are held by a non-resident, that person's home country has no way of knowing that information unless the person reports it.
The common reporting standard is an international arrangement by which countries have agreed to collect this information from their financial institutions and to exchange it among their financial criteria. The international community, when it was looking at this approach, considered the fact that the U.S. FATCA agreements have a carve-out for certain small institutions. There were discussions around that, but there was no agreement that small institutions should be exempted.
There was a concern, essentially, that if a group of institutions was carved out, they could then become a pathway for non-reporting. If people know that if they place money in a certain kind of institution, they'll be safe and it won't be reported, this could create an incentive to use those institutions.
More than a hundred countries have now agreed to this standard. I'm not aware that any country has departed from the standard in that way.
Mr. Chairman, I think the government recognizes that for smaller institutions, regulatory requirements of all kinds have, relative to their size, become more significant, and I think that is a real issue, as you indicate.
As I say, the intent with this standard has been to try to have it operate in as streamlined a way as possible and, with respect to accounts that are less than $1 million, to allow institutions to do a relatively straightforward paper-based search through their records. They're entitled to rely on the address on file, in which case, as long as it isn't a non-resident address, they're not required to make further inquiries.
On a go-forward basis, it simply means that when somebody opens a new account, the institution has to ask the person to indicate their jurisdiction of tax residency and to record that accordingly.
The government and the international community, in devising this standard, have certainly tried to devise it in such a way that the burden is minimized, but it's not zero.
You can see the hamster.
Probably the best way—and I'm trying to think of the clearest way to answer that question—is to go through how the rules work and also, somewhat, how they address the current issues, because they were intended to be put in to clarify and provide rules for the taxation of emissions allowances.
Right now all we have are somewhat general tax principles. There are no specific rules in the Income Tax Act saying how to treat them nor, as I understand, are there any accounting principles. Beyond the obvious uncertainty problem, there is a real issue of double taxation that can arise. If you, for example, receive a free emissions allowance from the government, that could be taxable, and then you could be taxed again when it's used to satisfy an emissions obligation.
What the rules essentially do, through kind of a rolling balance mechanism, is they treat emissions allowances as inventory, as you said. That means that the purchase and sale of them is an income account. They're held as inventory, although they're not able to use the lower of cost or market rule, as some other types of inventory property could.
When they're received, they're held at their cost, and to the extent they can be used to satisfy emissions allowances, you can get a deduction. If they're not used in that year, then in the following year you get an inclusion and then another deduction for when they are used. This cycle of inclusions and deductions ensures that you can accrue the deduction not just in the year you get it but until it's used.
Last, I'll talk about the disposition, when you give up one of these emissions allowances to satisfy your obligations under an emissions regime. It's not when you sell it to a third party if you're a trader or what not, but it's when you give it up to satisfy your obligations under one of these regimes. Then there's no gain or loss on the satisfaction of it. It allows you to deduct, in essence, your cost accrued year to year until ultimately it's used to satisfy an obligation.
These rules, of course, govern the tax treatment, which is often aligned with accounting treatments, but that's not necessarily the case. If in the future accounting standards are developed that are inconsistent, these rules will still be what they are and govern the tax consequences, which we consider to be appropriate in the circumstances.
I said that there were no existing clear rules on how to tax these emission allowances that are purchased, sold, and used to satisfy obligations under these regimes, but it wasn't completely the Wild West. There were different interpretations of how, under the general principles in our tax system, they ought to be taxed. One of those theories, and a basis upon which I understand some taxpayers filed or people thought was the correct answer, was actually to treat them as inventory, which is what we have here.
I understand they could also have arguably been treated as eligible capital property. That is the class of property akin to depreciable property, soon to become a new class of depreciable capital property, but that's probably not the appropriate treatment, for a number of reasons. It's intended to apply to property with enduring value, whereas the emissions allowance is for one-use property. Often you'd imagine capital property declining in value, where that's not necessarily going to be the case for emissions allowances.
There were different theories of how it should be taxed, and this provides certainty by legislating that the inventory approach, which we consider to be the best approach, is the one to be used.
Also, you can see in the coming-into-force rule that there's an election that would allow taxpayers who either have been filing on the basis that it is inventory or who could be subject to double taxation to elect to have the rules apply retroactively to them. In the case that they determine that this is a benefit and this is how we've been considering them, it helps us out in avoiding double taxation. People can actually elect to have it apply back a number of years, so it's not a whole new system that's kind of made up ad hoc. Rather, it's legislating what we consider to be the appropriate approach to taxation.
If I may, Mr. Chair, I think the issue is essentially the same.
What the Income Tax Act is trying to do in these cases is recognize that in a regulated system that involves creating allowances to emit or control a substance and then requiring firms to provide the permits in order to make the emissions, those permits have value that fluctuates up and down, so there's a potential for profit and loss in those situations.
Basically, the Income Tax Act is just trying to establish the rules by which we will recognize those profits and losses. The situation with SOx trading is akin to the issue that we have today with carbon trading.
The systems in the 1980s applied to a very small number of taxpayers, but there was and has always been a certain amount of uncertainty, as my colleague has been saying, about how those transactions should best be treated for tax purposes. The purpose of the provisions in this bill is essentially to codify the treatment and to remove some of these questions around the proper way to account for these in tax terms.
You could argue that in the 1980s there might have been a case for providing more clarity, but a strong case was not made.
Cross-border surplus-stripping is unfortunately a bit of technical jargon. “Surplus” in this case refers to the retained earnings in a corporation. Normally when they are paid out, they are paid out as dividends. Dividends, when they cross a border, are generally subject to a 25% withholding tax, which can be reduced under tax treaties. In a parent-sub situation, it's usually reduced to 5%, but of course 5% is still more than 0%.
These cross-border—Canada to another country—surplus-stripping techniques, which is the extraction of these retained earnings from a Canadian entity up to its foreign parent, free of Canadian withholding tax, are of course contrary to tax policy. They typically rely upon an exemption under Canada's tax treaties whereby dividends might be subject to a 5% withholding tax rate, but a sale of shares of a Canadian entity can be tax-exempt under the terms of the treaty.
In very general terms, a dividend involves moving a certain amount of cash from Canada up to the parent, but when you sell shares, that also involves moving cash from the purchaser to the seller. If you contrived a situation that could be as simple as one Canadian subsidiary buying shares of its Canadian sister company from the parent, you can have money going from a Canadian company up to its foreign parent, but as proceeds from the disposition of another Canadian company's shares. That could be exempt from tax, absent these anti-surplus-stripping rules.
It essentially addresses two issues relating to the use of life insurance products to extract profits from a corporation free of tax. I'll discuss them separately.
The first—I'll call it a loophole—involves the fact that when a corporation receives proceeds from life insurance, the amount of the proceeds is added to what's called their capital dividend account, but it's not the whole amount of the proceeds. It's the amount by which the proceeds exceed the policyholder's adjusted cost basis in the policy. The benefit of the capital dividend account is you can pay capital dividends out of a corporation to shareholders free of Canadian tax.
As I said, the formula for an addition to your capital dividend account is based upon your proceeds from the insurance policy, the amount by which it exceeds the adjusted cost basis to the policyholder. However, if the proceeds go to one corporation in a group, and the policyholder is another corporation, for example, that type of planning was used so that the entity receiving the life insurance proceeds wasn't a policyholder, so it didn't have an adjusted cost basis. Therefore, instead of $100 proceeds minus a $20 cost base for an $80 capital dividend account increase, they could just add the $100. The first set of amendments clarifies that n that situation, you take into account the basis of the policy, and even if it's held by another entity, it's still the same calculation.
The second type of planning involved the transfer of life insurance proceeds or life insurance policies to a non-arm's-length corporation. Normally when you transfer life insurance policies to an arm's-length person, your proceeds are included in your income. However, there's a special rule in the tax act that deals with transfers of these life insurance policies to related companies. It's called the policy transfer rule. It says that you're considered to receive, as the transferor, the cash surrender value in respect to the policy. That's the amount of cash you could get for the policy if you were to transfer the policy to the issuer of the policy.
That, in many cases, is going to be the value of the policy, but that's not always the case. If, for example, there's a reasonable likelihood that the policy is going to pay out sooner than initially anticipated—perhaps the insured is sick, or for whatever reason—
The department has also heard from a number of stakeholders, including the medical community. I can't speak to any specific discussions, but I can make a few points.
First, it applies to partnerships and corporations. As you said, in these joint medical arrangements one question is whether it has to be a partnership or if it is in fact a cost-sharing arrangement to which the rules would not apply.
Second, as I said earlier, the rules are of general application and are intended to ensure that where you have one business operated through a partnership, you have one $500,000 small business limit, and that limit cannot be multiplied. For example, if you have 10 partners each entering into this type of structure, it could go from $500,000 to $5 million or $5.5 million, I suppose. It's a broad application, and it ensures the integrity of the small business deduction rules without regard to the industry in which the people practise.
I'm sure there's a question about the benefits to be spent on medical research or paid to doctors. I think one tax policy question is whether or not additional incentives or funding ought to go to a particular business or category of business through the maintenance of a loophole in the tax system that they've been using, or if it ought to be done through direct spending. I think that's one important consideration.
Also, I think that in order to respond to specific comments, it's necessary to understand what exactly from a business perspective these expenditures are preventing. Of course, if a researcher is paid a salary, that's paid out of pre-tax dollars, which, regardless of the tax rate, would not be affected. As I said earlier, if you have a cost-sharing arrangement rather than a partnership, that's not going to be affected. There are a lot of details and specific facts in any particular case that can come to bear on the extent to which a particular industry or type of business is affected.
To summarize, ultimately it comes back to the question of whether or not this is an integrity rule intended to protect the integrity of the small business deduction and to ensure that the policy of one $500,000 limit for one business is maintained. To the extent that the exclusion from an integrity rule for a particular industry creates a tax preference for that industry, there might be a question as to whether it's appropriate to deliver those revenues through the maintenance of a technical provision like this in the tax act versus through direct spending. It is probably an important question as well.
I certainly appreciate your explanation for the change. I believe we've probably all been receiving the same volume of emails as many other members of Parliament, particularly in Ontario. The arrangement that the provincial government has with research hospitals to be able to have this work done requires them to be in a partnership.
While I totally understand your argument that in order to keep the integrity of the tax code we shouldn't have one particular type of preference, this is again the province saying that they want it done a certain way. Now the federal government is saying that they can't do that.
The inevitable consequence of that, if it's a bit of a standoff, is that often these private doctors will just say, “I'll just go and practise by myself in something else where I don't have to deal with these kinds of rules.” Then the public value of that research and all the consternation that goes on will affect both provincial members of Parliament as well as members of Parliament here.
Has there been any outreach, specifically with the Government of Ontario, with representatives of doctors who are currently regulated under this practice and who are utilizing the small business deduction in this current arrangement? Has there been any consultation to be able to ensure that this is a smooth transition?
One thing my colleague reminded me that I may have glossed over in terms of numbers is that the current small business tax rate is 10.5% on active business income and the general rate is 15%. What we're talking about here in terms of the impact of qualifying or not for the small business deduction is that 4.5% point spread.
Without getting into specifics, I can say that the Department of Finance has heard from stakeholders. We've been in consultation with stakeholders and are familiar with the issues raised by those in the medical community. We have heard from not just one jurisdiction, as well.
We have, then, been consulting with stakeholders. Whether that extends specifically to the Province of Ontario, which you mentioned, I can't say, but I know we've been having numerous consultations with affected stakeholders and have heard some of the same points.
Provincial regulatory authorities require you to be operating in partnership, although one question that came up is whether it really is a partnership, because I think one agreement said, “This is not a partnership,” or, “This is not to be construed as a partnership”. That's why I mentioned earlier that there are some technical things we are working through with stakeholders in trying to come to a better understanding, and not only with external stakeholders but also with Canada Revenue Agency as to how they would apply these new rules.
Good afternoon. My name is Pierre Mercille. I am the senior legislative chief of the Department of Finance Sales Tax Division.
As you said, part 2 of the bill deals with the goods and services tax, or GST, and the harmonized sales tax, or HST. Part 2 starts at clause 89 and ends at clause 99.
There are four GST/HST measures in this bill.
The first measure provides a GST/HST relief for exported call centre services. More specifically, the relief will apply to supply of a service of rendering technical or customer supports to individuals by means of telecommunication. We understand “by means of telecommunication” as by telephone, by email, by webchat. The relief will apply if the service is supplied to a non-resident who is not a consumer of the service and if the person is not registered for GST/HST purposes. The amendment will allow Canadian call centres to compete more effectively with call centres located outside Canada.
The next measure is fairly technical, and it deals with the “closely related” test under the GST/HST.
Under the GST/HST, there are special relieving rules that allow members of a closely related group of corporations or partnership to neither charge nor collect GST on intercompany supplies. To qualify, each member of this group must be considered to be closely related to each other member of the group by having a degree of common ownership of at least 90%. The amendment in this part will require that in order to meet the closely related test in the future, in addition to having that degree of common ownership of 90%, a corporation or partnership must also hold and control 90% or more of the votes in respect of every corporate matter of the subsidiary corporation.
The next amendments are consequential to the repeal, effective January 1, 2017, of the eligible capital property regime. That was explained earlier because these amendments to the Income Tax Act are included in part one. Because some provisions of the GST/HST refer to those amended provisions in the Income Tax Act that are being amended, the amendments are made to ensure that the application of the GST/HST in this area is not affected. Essentially, these amendments ensure that there's no change for GST/HST.
The last measure in part 2 of this bill is an administrative measure. It clarifies that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided that the total amount of the assessment does not increase. This measure is similar to a measure that is included in part 1 of the Income Tax Act because it originated in the Income Tax Act, and it's made under the GST legislation to ensure greater consistency across administrative provisions throughout the tax act, the federal tax statutes.
I will take just a few seconds here just to say that this last measure that I explained, the administrative measure, is the only amendment that is included in part 3 of this bill. Part 3 includes amendments to the Excise Act 2001. That's a different piece of legislation that deals with excise tax on alcohol and tobacco. Again, this amendment is made to ensure greater consistency in administrative provisions across federal tax statutes.
That concludes my presentation.
The intent behind that “closely related” test is to identify when you have a group of corporations that essentially act as one entity because the overall control of everything is under the same person, essentially.
These rules were working well and still work well, but given the fact that there are more and more complex corporate structures and types of shares put forward by corporations, there are a few scenarios that went to the CRA to ask whether, in certain situations, the closely related test was met when technically, according to the old working of the legislation, it could have been met but it was not the intent.
To give you an example, you could have a corporation that holds 90% or more of the value and number of shares that have only one vote, and the other 10% of shares have 100 votes associated with them. Essentially a person asked CRA whether the corporation that holds the 90% of single-vote shares would be closely related to another corporation.
That's not the intent, because even if that person held 90% of the value of the corporation, they don't really control the corporation, so they are not acting as one person when the group is making decisions.
Thank you very much, Mr. Chair.
My name is Annette Ryan. I'm director general of employment insurance policy at Employment and Social Development Canada. I'm joined by Janique Venne, who is director of our regular benefits policy, also at ESDC.
Let me answer the honourable member's question from the last round of questions before treating this measure. I would simply say that there has been no change to the family supplement portion of employment insurance. It remains as it always has been, and the name change has no policy import for that section of the EI program.
To turn to the legislative proposal, I would start, Mr. Chair, by saying that the proposal is not a change of policy or program operations in any way. The measure is a limited technical legislative proposal that's intended to strengthen the initial regulatory implementation of one of the government's main Budget 2016 EI commitments.
Starting from that description, that the measure is essentially technical, I'll describe it further. The measure speaks to the definition of what is not “suitable employment” within the Employment Insurance Act. The act has had a long-standing provision that creates an obligation for our claimants to actively look for and be willing to accept suitable work.
This concept of what is suitable work, and more specifically “not suitable employment”, was included in the Employment Insurance Act prior to 2013. Considerable jurisprudence was established through time to inform how this concept should be interpreted by Service Canada agents, workers, and employers.
In Budget 2012, new measures were introduced under the rubric of connecting Canadians with available jobs. Under this initiative, provisions specifying what is “not suitable employment” in the EI Act were repealed, and the question of what is suitable and not suitable employment was established fully in regulation at that time.
The EI regulations were amended to prescribe specific criteria on these fronts. They spoke to what the claimant is expected to search for and accept through the duration of their claim, based on the claimant category to which they belong. These criteria, established in regulation in 2013, introduced different treatments for different EI claimants, depending on their work history, while the criteria relating to daily commuting time to and from work and those types of measures were also then specified in regulation.
Moving ahead to Budget 2016, the government set forth an initiative to simplify job search responsibilities for EI claimants and reversed the criteria adopted in regulation in 2013. At the time, we made those changes fully in regulation, to be in effect by July 3, 2016.
Specifically, criteria relating to the length of commuting time, offered earnings, and the type of work were repealed and replaced by provisions specifying what is “not suitable employment” as set out in the EI Act prior to 2013. Essentially, we went back entirely to the previous text that had been in place prior to 2013, but we placed it in regulations, whereas prior to 2013 that text had been in legislation.
Other policy changes were made, effective July 3, 2016. References to such claimant categories as long-tenured workers, frequent claimants, and occasional claimants as tied to their job search responsibilities were removed from the criteria determining what constitutes “suitable employment”.
The question was essentially subsequently raised within the regulatory process as to whether the specific concept of “not suitable employment” would be better established in legislation, as had been the case prior to 2013, rather than in regulation.
Essentially, limited technical amendments are proposed today to legislate the provisions related to the definition of what is not suitable in the EI Act. Provisions related to the criteria for determining what constitutes “suitable employment” will remain in the regulations.
If I may make an editorial statement, let me say that the measures that will remain in the regulations are essentially new measures that are favourable to EI claimants, whereas the measure of what is “not suitable employment” reconstitutes entirely the legislative fabric in place prior to that time, which essentially adjudicated claims that the worker might want to press.
Essentially, the proposal to adopt the provision in legislation is intended to align even more fully and directly with past jurisprudence. It does not alter the policy intent of what was adopted in July 2016 in any way.
I will conclude there, Mr. Chair.
I'm happy to take questions.
This was done in the past, but there were always limitations ensuring that the provisions were not addressed satisfactorily. Mr. Chair, I agree with you that it should have been sent to the Standing Committee on Human Resources. That said, it is up to us, and I have a question about the definition of “reasonable interval”, which seems a bit arbitrary to me. We are saying that, after a reasonable interval, the available job, which could be in another field or have less favourable conditions, might once again become suitable.
Who decides the length of the reasonable interval?
Is it a rigid provision that doesn't take into consideration particular circumstances?
In my region, for instance, seasonal employment is an important part of the economy. Eliminating the suitable employment distinction created serious problems. If we impose this definition of reasonable interval, which doesn't consider regional realities, we will somehow end up in the same situation as before. I'm concerned about the arbitrary nature of this notion of reasonable interval.
Mr. Caron, your question touches on the general logic of this measure and the changes from 2013 and 2016. It is logical to determine whether it is preferable to clarify these definitions in the context of regulations or an act, or even on the basis of the case law.
In this case, we have implemented the government's platform very faithfully in order to reverse changes that were made in 2013. The tendency is to revert to case law, as a basis, to clarify these definitions.
That said, I will continue in English and consult my notes in order to give you a more specific answer to your question.
The reasonable interval refers to the period starting when a claimant has become unemployed to the time that subsequent employment was offered to the claimant. This is only for employment to be considered suitable when it falls outside a claimant's usual occupation or at a lower wage scale.
A reasonable interval is not a fixed period, and it varies according to the circumstances. Case law has provided some guidance in determining a reasonable interval through the circumstances of each particular case, with factors including an active job search, consideration of reduction in salary, drastic change in occupation, shortage of work, but as a general rule, case law has held that essentially two to three months is a reasonable period of time before a claimant needs to be more flexible and less restrictive in determining a suitable employment.
To conclude, it's a case-by-case approach.
While I totally agree with you that probably the committee is not the best forum for it, obviously, since you're here, Ms. Ryan—and I appreciate that you've brought a number of your working associates with you here—I want to make the best use of time for the taxpayer so that I can say to people that we're doing our work.
I want to touch upon the point at which Mr. Caron left off. I sat on the Standing Joint Committee for the Scrutiny of Regulations for a period of time. I'm not sure whether I accidentally kicked my whip's dog or what, but I was gifted enough to be on that committee for quite a while.
One of the conversations it would have is that oftentimes regulations are put in place to provide better protections for individuals, so that we have less discretion by....
I have to say, I find our public servants here in Ottawa, and I'm sure right across this great country, Mr. Chair, to be very capable. In fact, I was of the opinion that when you hire someone qualified and you pay them well, you should give them as much discretion as you can, because we want them to be able to apply good judgment, but at that committee regulations were put forward to make sure that there are not inequities inadvertently done by doing one-offs. When you say we're pulling away regulations and are allowing old rules to take their place that aren't as clear, I wonder whether there is more capacity for someone who is not as well trained....
For example, I know that our demographics in the public service are changing and that many people are retiring. Do you feel that there is a greater chance that there could actually be more arbitrary decisions that thus end up being brought to the tribunal?
It's a pretty loaded question.
There are a series of excellent questions embedded in that question. Let me start with the idea of discretion being provided from regulations.
Essentially what this measure would propose to do is to take text from the regulations that were established in July 2016 and place it in legislation rather than in regulation, to give the greater certainty of line of sight to the will of Parliament to these measures than would be in place via regulation.
I'm speaking from the policy intent. I'm not a lawyer, and I would hesitate to get further into the mechanics or theory, but I would offer this as very much the intent: to align more fully not just with the legislation, but also with the jurisprudence that was established prior to 2013, when this specific text existed in legislation.
That's my response to the first half of your question.
In response to the question of whether there is sufficient knowledge, experience, and so on to adjudicate these cases on a case-by-case basis, essentially I would offer that this jurisprudence has been established over a number of years and that the desire to maintain the line of sight to jurisprudence and give greater certainty to new people as they enter the system and so on is very much our intent. I feel that all appropriate measures are being taken to make sure that new staff are appropriately trained to replace retiring staff.
I'm Nathalie Martel, director of old age security policy at Employment and Social Development Canada. I'll be quick.
Division 2 of part 4 amends the Old Age Security Act to allow more low-income couples to receive higher benefits when they must live apart for reasons beyond their control.
Allow me to explain.
Senior couples who must live apart for reasons beyond their control—for example, when one spouse must live in a nursing home—face higher costs of living and are most at risk of living in poverty.
In the case of low-income couples, when both spouses receive the guaranteed income supplement and must live apart for reasons beyond their control, the legislation already allows the guaranteed income supplement to be paid at the higher single rate based on their individual incomes rather than on the combined income of the spouses. This generates higher benefits.
However, for other low-income couples, when one spouse receives the guaranteed income supplement and the other spouse receives the allowance, the act is silent and thus does not permit the same advantage.
By the way, the allowance is provided to low-income individuals aged 60 to 64 whose spouse or partner receives the guaranteed income supplement.
I will continue in French.
The amendment proposes extending the same right to couples in which one member is receiving the guaranteed income supplement and the other is receiving the benefit. We estimate that about 750 couples will benefit from this change, for an annual cost of $2.6 million. The change will enter into effect on January 1, 2017.
Canadians use RESPs, registered education savings plans, to save for the post-secondary education of their children. The RESP savings grow tax-free until the child is enrolled in a post-secondary education institution and can pay for part-time or full-time studies.
The Government of Canada administers two education savings incentives linked to RESPs.
There is the Canada education savings grant, which consists of a 20% grant on the first $2,500 in annual contributions and an additional grant amount of 10% or 20% for low- and middle-income families.
Then we have the Canada learning bond, which is available for children in low-income families who were born after 2004. It's a maximum of $2,000, with no personal contributions required.
Until June 2016, the CLB was payable for a beneficiary who receives the national child benefit supplement, the NCBS. The NCBS was based in part on the number of qualified children in a family and the adjusted family income. With the introduction of the CCB, the Canada child benefit, which replaced, among other benefits, the NCBS, an amendment to the eligibility requirement for the CLB is required.
The new eligibility requirements are very similar to those of the NCBS. More specifically, the new eligibility requirement is based also on the number of children in a qualified family as well as on the adjusted family income.
In support of this change, the Canada Education Savings Act is being amended to include the replacement of the term “child tax benefit” with “Canada child benefit”.
This is a large part of the act, so I had a rather lengthy statement. I will cut it down in the interests of time.
I'm going to cover part 4, division 5 of Bill , which includes proposed amendments to the Bank Act with respect to the federal financial consumer protection framework for banking, covering clauses 117 to 135 of the bill, on pages 179 to 226.
The proposed amendments modernize and enhance the consumer provisions of the Bank Act. These amendments fall into four main categories: first, consolidating and modernizing the framework under a single part or chapter of the act; second, introducing guiding principles to help banks and consumers interpret the legislation; third, implementing targeted enhancements to strengthen specific consumer provisions; and fourth and finally, affirming exclusive federal jurisdiction over consumer protection rules for banks and banking.
I will now quickly cover each of the four categories of the amendments.
The first category is consolidating and modernizing the act. The existing provisions are currently spread across the Bank Act and two dozen regulations. Existing legislative and regulatory requirements are consolidated into a new part of the act. The intent is to combine provisions together, make the rules easier to understand, and demonstrate the comprehensive nature of the framework.
This will also allow for more consistent treatment across various banking products and services. Modernizing the framework would also allow the provisions to be more flexible and better able to accommodate future changes in the sector, such as the shift to a digital economy. For example, the rules would cover disclosure through paper as well as verbal, electronic, and mobile channels to keep up with changing industry and consumer preferences.
The second category is the introduction of new guiding principles. Consumers and stakeholders have long signalled the need to make the provisions easier to follow and to communicate. The five code-like principles align or map to each of the five elements of the legislation as structured. They are as follows.
First, basic banking services should be accessible. Second, disclosure should enable an institution's customers and the public to make informed financial decisions. Third, a bank's customers and the public should be treated fairly. Fourth, complaints processes should be impartial, transparent, and responsive. Fifth, a bank should act responsibly, considering its customers and the public as well as the efficiency of its business operations.
The third category consists of specific amendments to strengthen consumer protection in banking. These elements are categorized along the lines of access, business practices, disclosure, complaints, and accountability. I will cover only the new specific revisions, in the interests of time.
The new enhancements strengthen the rules by allowing consumers to choose from a more flexible list of personal identification documents regarding opening of accounts. Two pieces of identification will be required to open an account or to cash a government cheque. The new provisions will make it easier for Canadians to open basic deposit accounts, cash cheques, and use more available identification documents.
There are existing rules around business practices. There are several that I won't go into at length, but the new enhancements strengthen these by, for example, expanding the provision to capture undue pressure; clearly prohibiting banks from applying such pressure or coercing a person for any purpose; specifying that advertisements must be accurate, clear, and not misleading; and adding new cancellation periods for a wider range of products and services.
For example, cancellation periods would now apply to all deposits in savings accounts and, with a few exceptions, credit products. By and large, if consumers obtained a product in person or through a website, they would have three business days to cancel free of charge. For products obtained via telephone or mail, that cancellation period is 14 business days now.
Regarding disclosure, the new enhancements make disclosure more flexible and more consistent across a range of products and services. For example, the use of summary information boxes, which consumers have found useful, will be broadened across more bank products and services, such as deposit and savings accounts. Summary information boxes highlight key information about a product for customers in language they can understand to help them make choices that are right for them.
Regarding complaints handling, the existing consumer provisions set out a dedicated complaints handling system that is timely, efficient, and free for customers. The new enhancements would strengthen this by requiring banks and external complaints bodies to report on the nature of consumer complaints.
Enhanced reporting on complaints would provide greater transparency to the public and policy makers on consumers' concerns, becoming more important as this complex industry evolves. In turn, banks would have an even stronger incentive to focus and address those areas that would generate complaints. Banks and external complaint bodies now have to report on the number of complaints, and in the future they will have to expand that to deal with the nature of complaints as well.
Regarding corporate governance and accountability, new enhancements are proposed in these areas. A board of directors would be required to oversee a bank's operational procedures, put in place by management, to comply with all consumer provisions of the act. Banks would also have to report on what they do to address the challenges faced by vulnerable Canadians: consumers facing accessibility, linguistic, or literacy challenges.
Fourth and finally, Mr. Chair, is the category of amendments. In the affirmation, the Bank Act sets out a comprehensive and exclusive regime in relation to banks' dealings with customers and the public. These amendments are proposed to clarify the scope of federal jurisdiction. Amendments to the preamble to the act are to ensure consistency with the new part, a new purpose clause states the objective of exclusive federal regulation, and a new paramountcy clause expresses the intent that the new part be paramount to provincial consumer protection laws and regulations.
Together these proposed amendments will provide that the Bank Act is the exclusive set of rules that protects consumers when they deal with their banks. This is intended for consumers to have clear, comprehensive, and uniform protections when dealing with their banks, no matter where they live, work, or travel in the country.
An exclusive federal regime would be intended to avoid the overlap of federal and provincial laws, which can be confusing and not in the consumer's interest. It would create clear rules that Canadians can follow and to which the government can hold banks accountable.
Thank you, Mr. Chair, and thank you to our witnesses here today for the work they do for Canadians.
In regard to this conversation, going back to Summerland Credit Union, one of the staff mentioned this point. I raised it with Minister Flaherty, who at the time looked at it and then eventually came back and took action with regulations and so on.
Maybe, Ms. Ryan, you can lend some clarification on this subject. Parliament has already delegated the authority to the Minister of Finance. The Minister of Finance used his delegation power at the time to put in the regulations.
I do know that one thing regulations offer is flexibility if there are changes or circumstances that allow for it to be changed, so when we go back now and put it back into the actual law, that cements it much more and reduces the flexibility of the bureaucracy or the minister to be able to respond.
What I see from what you said is there's not going to be that much difference that Canadians will notice. Second, to me it actually takes away the flexibility of the Minister of Finance to be able to clarify things in a timely basis.
Can you confirm whether or not that's the case?
Budget 2016 proposed adjustments to the Royal Canadian Mint Act. Amendments to the act are proposed to facilitate effective and efficient operation of the Royal Canadian Mint. The following are the proposed amendments.
First, clause 136 amends the Royal Canadian Mint Act to restore the ability of the Mint to anticipate a profit from the provision of goods and services to the Government of Canada and its agents. This includes the sale of Canadian coins to the Department of Finance for resale to financial institutions. By restoring the capacity of corporations, the corporation will benefit from its transactions with the government and its agents. This change will foster innovation and improve processes, and lead to lower costs to the government as a whole.
Next, clause 137 amends the Royal Canadian Mint Act by clarifying in section 4 the specific types of incidental activities that the Mint may undertake. As currently worded, section 4 refers to four general activities relating to coins and metals, which may leave room for interpretation. The proposed amendments to section 4 clarify the activities that the Royal Canadian Mint may undertake and includes activities such as marketing, consulting, storage services and exchange-traded receipts for precious metals associated with the gold and silver reserves of the Royal Canadian Mint. These amendments will help to clarify the corporation's mandate and will help to minimize the operational and reputational risks to the corporation and the Government of Canada.
Furthermore, clause 138 amends the Royal Canadian Mint Act by adding provisions to ensure that $350 coins minted between 1999 and 2006 have legal tender status. This clarification stems from the fact that the Royal Canadian Mint Act, as it existed between 1999 and 2006, did not include references to $350 coins.
Lastly, clause 139 amends the Royal Canadian Mint Act by removing the requirement that the Mint's directors must have experience in the field of precious metal fabrication or production. This will help significantly broaden the pool of candidates available for appointments to the board of directors. Collectively, these amendments will encourage and facilitate effective and efficient operation of the Royal Canadian Mint.
My colleague and I will be pleased to answer your questions.