Bill C-59

Fall Economic Statement Implementation Act, 2023

An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023

Part 1 implements certain measures in respect of the Income Tax Act and the Income Tax Regulations by
(a) limiting the deductibility of net interest and financing expenses by certain corporations and trusts, consistent with certain Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations;
(b) implementing hybrid mismatch rules consistent with the Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations regarding cross-border tax avoidance structures that exploit differences in the income tax laws of two or more countries to produce “deduction/non-inclusion mismatches”;
(c) allowing expenditures incurred in the exploration and development of all lithium to qualify as Canadian exploration expenses and Canadian development expenses;
(d) ensuring that only genuine intergenerational business transfers are excluded from the anti-surplus stripping rule in section 84.1 of the Income Tax Act ;
(e) denying the dividend received deduction for dividends received by Canadian financial institutions on certain shares that are held as mark-to-market property;
(f) increasing the rate of the rural supplement for Climate Action Incentive payments (CAIP) from 10% to 20% for the 2023 and subsequent taxation years as well as referencing the 2016 census data for the purposes of the CAIP rural supplement eligibility for the 2023 and 2024 taxation years;
(g) providing a refundable investment tax credit to qualifying businesses for eligible carbon capture, utilization and storage equipment;
(h) providing a refundable investment tax credit to qualifying businesses for eligible clean technology equipment;
(i) introducing, under certain circumstances, labour requirements in relation to the new refundable investment tax credits for eligible carbon capture, utilization and storage equipment as well as eligible clean technology equipment;
(j) removing the requirement that credit unions derive no more than 10% of their revenue from sources other than certain specified sources;
(k) permitting a qualifying family member to acquire rights as successor of a holder of a Registered Disability Savings Plan following the death of that plan’s last remaining holder who was also a qualifying family member;
(l) implementing consequential changes of a technical nature to facilitate the operation of the existing rules for First Home Savings Accounts;
(m) introducing a tax of 2% on the net value of equity repurchases by certain Canadian corporations, trusts and partnerships whose equity is listed on a designated stock exchange;
(n) exempting certain fees from the refundable tax applicable to contributions under retirement compensation arrangements;
(o) introducing a technical amendment to the provision that authorizes the sharing of taxpayer information for the purposes of the Canadian Dental Care Plan;
(p) implementing a number of amendments to the general anti-avoidance rule (GAAR) as well as introducing a new penalty applicable to transactions subject to the GAAR and extending the normal reassessment period for the GAAR by three years in certain circumstances;
(q) facilitating the creation of employee ownership trusts;
(r) introducing specific anti-avoidance rules in relation to corporations referred to as substantive CCPCs; and
(s) extending the phase-out by three years, and expanding the eligible activities, in relation to the reduced tax rates for certain zero-emission technology manufacturers.
It also makes related and consequential amendments to the Excise Tax Act and the Excise Act, 2001 .
Part 2 enacts the Digital Services Tax Act and its regulations. That Act provides for the implementation of an annual tax of 3% on certain types of digital services revenue earned by businesses that meet certain revenue thresholds. It sets out rules for the purposes of establishing liability for the tax and also sets out applicable reporting and filing requirements. To promote compliance with its provisions, that Act includes modern administration and enforcement provisions generally aligned with those found in other taxation statutes. Finally, this Part also makes related and consequential amendments to other texts to ensure proper implementation of the tax and cohesive and efficient administration by the Canada Revenue Agency.
Part 3 implements certain Goods and Services Tax/Harmonized Sales Tax (GST/HST) measures by
(a) ensuring that an interest in a corporation that does not have its capital divided into shares is treated as a financial instrument for GST/HST purposes;
(b) ensuring that interest and dividend income from a closely related partnership is not included in the determination of whether a person is a de minimis financial institution for GST/HST purposes;
(c) ensuring that an election related to supplies made within a closely related group of persons that includes a financial institution may not be revoked on a retroactive basis without the permission of the Minister of National Revenue;
(d) making technical amendments to an election that allows electing members of a closely related group to treat certain supplies made between them as having been made for nil consideration;
(e) ensuring that certain supplies between the members of a closely related group are not inadvertently taxed under the imported taxable supply rules that apply to financial institutions;
(f) raising the income threshold for the requirement to file an information return by certain financial institutions;
(g) allowing up to seven years to assess the net tax adjustments owing by certain financial institutions in respect of the imported taxable supply rules;
(h) expanding the GST/HST exemption for services rendered to individuals by certain health care practitioners to include professional services rendered by psychotherapists and counselling therapists;
(i) providing relief in relation to the GST/HST treatment of payment card clearing services;
(j) allowing the joint venture election to be made in respect of the operation of a pipeline, rail terminal or truck terminal that is used for the transportation of oil, natural gas or related products;
(k) raising the input tax credit (ITC) documentation thresholds from $30 to $100 and from $150 to $500 and allowing billing agents to be treated as intermediaries for the purposes of the ITC information rules; and
(l) extending the 100% GST rebate in respect of new purpose-built rental housing to certain cooperative housing corporations.
It also implements an excise tax measure by creating a joint election mechanism to specify who is eligible to claim a rebate of excise tax for goods purchased by provinces for their own use.
Part 4 implements certain excise measures by
(a) allowing vaping product licensees to import packaged vaping products for stamping by the licensee and entry into the Canadian duty-paid market as of January 1, 2024;
(b) permitting all cannabis licensees to elect to remit excise duties on a quarterly rather than a monthly basis, starting from the quarter that began on April 1, 2023;
(c) amending the marking requirements for vaping products to ensure that the volume of the vaping substance is marked on the package;
(d) requiring that a person importing vaping products must be at least 18 years old; and
(e) introducing administrative penalties for certain infractions related to the vaping taxation framework.
Part 5 enacts and amends several Acts in order to implement various measures.
Subdivision A of Division 1 of Part 5 amends Subdivision A of Division 16 of Part 6 of the Budget Implementation Act, 2018, No. 1 to clarify the scope of certain non-financial activities in which federal ‚financial institutions may engage and to remove certain discrepancies between the English and French versions of that Act.
Subdivision B of Division 1 of Part 5 amends the Trust and Loan Companies Act , the Bank Act and the Insurance Companies Act to, among other things, permit federal financial institutions governed by those Acts to hold certain meetings by virtual means without having to obtain a court order and to permit voting during those meetings by virtual means.
Division 2 of Part 5 amends the Canada Labour Code to, among other things, provide a leave of absence of three days in the event of a pregnancy loss and modify certain provisions related to bereavement leave.
Division 3 of Part 5 enacts the Canada Water Agency Act . That Act establishes the Canada Water Agency, whose role is to assist the Minister of the Environment in exercising or performing that Minister’s powers, duties and functions in relation to fresh water. The Division also makes consequential amendments to other Acts.
Division 4 of Part 5 amends the Tobacco and Vaping Products Act to, among other things,
(a) authorize the making of regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by His Majesty in right of Canada in relation to the carrying out of the purpose of that Act;
(b) provide for related administration and enforcement measures; and
(c) require information relating to the fees or charges to be made available to the public.
Division 5 of Part 5 amends the Canadian Payments Act to, among other things, provide that additional persons are entitled to be members of the Canadian Payments Association and clarify the composition of that Association’s Stakeholder Advisory Council.
Division 6 of Part 5 amends the Competition Act to, among other things,
(a) modernize the merger review regime, including by modifying certain notification rules, clarifying that Act’s application to labour markets, allowing the Competition Tribunal to consider the effect of changes in market share and the likelihood of coordination between competitors following a merger, extending the limitation period for mergers that were not the subject of a notification to the Commissioner of Competition and placing a temporary restraint on the completion of certain mergers until the Tribunal has disposed of any application for an interim order;
(b) improve the effectiveness of the provisions that address anti-competitive conduct, including by allowing the Commissioner to review the effects of past agreements and arrangements, ensuring that an order related to a refusal to deal may address a refusal to supply a means of diagnosis or repair and ensuring that representations of a product’s benefits for protecting or restoring the environment must be supported by adequate and proper tests and that representations of a business or business activity for protecting or restoring the environment must be supported by adequate and proper substantiation;
(c) strengthen the enforcement framework, including by creating new remedial orders, such as administrative monetary penalties, with respect to those collaborations that harm competition, by creating a civilly enforceable procedure to address non-compliance with certain provisions of that Act and by broadening the classes of persons who may bring private cases before the Tribunal and providing for the availability of monetary payments as a remedy in those cases; and
(d) provide for new procedures, such as the certification of agreements or arrangements related to protecting the environment and a remedial process for reprisal actions.
The Division also amends the Competition Tribunal Act to prevent the Competition Tribunal from awarding costs against His Majesty in right of Canada, except in specified circumstances.
Finally, the Division makes a consequential amendment to one other Act.
Division 7 of Part 5 amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to exclude from their application prescribed public post-secondary educational institutions.
Subdivision A of Division 8 of Part 5 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things,
(a) provide that, if a person or entity referred to in section 5 of that Act has reasonable grounds to suspect possible sanctions evasion, the relevant information is reported to the Financial Transactions and Reports Analysis Centre of Canada;
(b) add reporting requirements for persons and entities providing certain services in respect of private automatic banking machines;
(c) require declarations respecting money laundering, the financing of terrorist activities and sanctions evasion to be made in relation to the importation and exportation of goods; and
(d) authorize the Financial Transactions and Reports Analysis Centre of Canada to disclose designated information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions.
It also amends the Budget Implementation Act, 2023, No. 1 in relation to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and makes consequential amendments to other Acts and a regulation.
Subdivision B of Division 8 of Part 5 amends the Criminal Code to, among other things,
(a) in certain circumstances, provide that a court may infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime and specify that it is not necessary for the prosecutor to prove that the accused knew, believed they knew or was reckless as to the specific nature of the designated offence;
(b) remove, in the context of the special warrants and restraint order in relation to proceeds of crime, the requirement for the Attorney General to give an undertaking, as well as permit a judge to attach conditions to a special warrant for search and seizure of property that is proceeds of crime; and
(c) modify certain provisions relating to the production order for financial data to include elements specific to accounts associated with digital assets.
It also makes consequential amendments to the Seized Property Management Act and the Forfeited Property Sharing Regulations .
Division 9 of Part 5 retroactively amends section 42 of the Federal-Provincial Fiscal Arrangements Act to specify the payments about which information must be published on a Government of Canada website, as well as the information that must be published.
Division 10 of Part 5 amends the Public Sector Pension Investment Board Act to increase the number of directors in the Public Sector Pension Investment Board, as well as to provide for consultation with the portion of the National Joint Council of the Public Service of Canada that represents employees when certain candidates are included on the list for proposed appointment as directors.
Division 11 of Part 5 enacts the Department of Housing, Infrastructure and Communities Act , which establishes the Department of Housing, Infrastructure and Communities, confers on the Minister of Infrastructure and Communities various responsibilities relating to public infrastructure and confers on the Minister of Housing various responsibilities relating to housing and the reduction and prevention of homelessness. The Division also makes consequential amendments to other Acts and repeals the Canada Strategic Infrastructure Fund Act .
Division 12 of Part 5 amends the Employment Insurance Act to, among other things, create a benefit of 15 weeks for claimants who are carrying out responsibilities related to
(a) the placement with the claimant of one or more children for the purpose of adoption; or
(b) the arrival of one or more new-born children of the claimant into the claimant’s care, in the case where the person who will be giving or gave birth to the child or children is not, or is not intended to be, a parent of the child or children.
The Division also amends the Canada Labour Code to create a leave of absence of up to 16 weeks for an employee to carry out such responsibilities.

[Jean-Denis Garon, Bloc, Mirabel, QC]

My colleague Mr. Masse knows how much esteem and respect I have for him, but I don't understand why so much success on the part of the NDP generates so much anger. It's part of the benefits of an agreement with the government to see that what you put in your own bills ends up in the government's.

For my part, I'm in favour of legislative simplicity and against duplication. If the people in the Senate are listening to us—let's assume they are—we can send them the message today that we find this element important and that they should not remove it from Bill C‑59. I submit to my colleagues that, if the Senate removes this part from Bill C‑59, quite logically, they won't mind removing it from a private member's bill.

So, while reiterating the fact that this is a very important point, I feel that, for reasons of legislative simplicity, it would be advisable to vote against this amendment.

[Brian Masse, NDP, Windsor West, ON]

It's a backstop, but that's the whole point. The problem is that we don't have enough supports in our systems, and we don't control what the Senate's going to do. Maybe the Liberals are going to take this out of Bill C-59 in the Senate. We could have that happen. We don't know what they're going to pass, but what we can do is pass this here and tell the Senate that we're supporting this change.

What we're telling the Senate right now, if we don't pass this, is that we don't really care about this. That's what we're telling the Senate. They're dealing with the legislation, so if we take this out, the message to the Senate is that they can take it out as well, because we're not being consistent in protecting what we want. That's the reason I think it's important.

I don't know what their objective is on this, but clearly, there is an objective here in the sense that, if we say to the Senate right now that we don't care about this and that we're going to pass a bill without it, we've just told them that they can tinker with that because the House of Commons has now defeated it, and that bill will be inconsistent with what we're dealing with right here. That will be the message that we send them.

On this particular issue, it's pretty germane to what's taken place with Canadian competition and the offence that's taken place to the Competition Bureau. That's what we're dealing with now, and that's why I think the redundancy that we've proposed here today is actually important.

I'm a little upset with it because we're telling the Senate right now, again, that we're reversing course, that we're changing sails, and a House of Commons committee with the government voting against this is telling the Senate that they don't care about this issue, that they don't support consistency and that they have mixed messages. On top of that, they could actually take those messages and turn that around to amendments that will then come back to the House of Commons, further delaying the passage of Bill C-59, because if the bill actually gets amendments in the Senate, then we have to deal with it again in our chamber.

This is why I'm a bit concerned about this. I think it's a bigger issue than it is because I don't understand why the Liberals just wouldn't say, “Do you know what? It's redundancy, but that's okay. We have a backstop here. Let's go. We'll send the message to the Senate that we're clear, that we're good on these things and that we want it passed.” Instead what they're doing is saying that they have second thoughts about protecting the Competition Bureau, second thoughts about the competition commissioner getting sued by large conglomerates, including Rogers, and second thoughts about other things to protect Canadian consumers.

That's the message being told here, and I'm totally concerned with their position on this because I don't know if they have another agenda in the Senate. I don't know if we now have to have delays to get the bill passed because it has to come back again, but that's what we're telling them.

They'll look at this. They'll look at the testimony here, and they'll say, “Well, do you know what the government's saying? It's saying that it doesn't want to do it anymore.”

Again, I think we should just pass it because it's consistent, and I think consistency's important to get it done.

Thank you.

[Brian Masse, NDP, Windsor West, ON]

There's no downside to making sure that this happens.

I'm kind of concerned that the Liberals, again, are counting on something that hasn't taken place, whereas this is going to ensure that there's consistency in this. We are facing right now the same situation with the Privacy Commissioner by creating a tribunal that the Liberals want. It's why they filibustered two days of this committee, not moving on Bill C-27 because of that. It was because we are at odds with regard to their creating a tribunal that could then cost Canadian taxpayers.

It's not just the Competition Bureau that lost in this case. It was Canadian taxpayers, who had to pay money out of their pockets to Rogers because the Competition Bureau didn't have the protection necessary to go at the case, and it's having a cooling effect out there. How many other large corporations, conglomerates and oligopolies are going to be allowed this type of exemption and be told that it's okay for them to go after the Competition Bureau in their rulings?

That's a cooling effect that's really hard, and it also takes resources away from the Competition Bureau. They're short $5 million from their funds right now to protect Canadians, because Rogers went after them on this specific case. It sends the message as well that we're going to pass this over and say, “Hey, it's okay. We're going to basically allow you to continue this type of behaviour, and we're going to green-light it.”

That's what this is about. It's fine if it is a little bit redundant with regard to what has taken place with another bill that's in another chamber that we can't guarantee will get done. The Liberals are going to oppose it for just that alone, not for the real reasons for doing that. That's fine. They can be on the public record for doing that, for giving them another pass. When they come here, it almost looks like an audition for them, looking at their board of directors, because we've seen the history of what's taken place when people leave here and where they go.

I can tell you this much, this at least is the most modest thing that has been proposed by a progressive bill, which is going to send a message to Canadian companies that they're not going to abuse our competition commissioner and the bureau anymore. I hope that this will get support to get done, because it is very much, at the very least, going to have the control that we have in this part here....

I'm not willing, but I guess the Liberals are willing to turn over the reins to the unelected Senate. With regard to this, I'm not willing to do so, because they could do an amendment on that bill that takes this out. We don't have the ability to know what they're going to do or when they're going to pass it. We would then have to deal with that back in the House of Commons as well. Maybe it's a precursor to this. Maybe it's their plan to take this out of Bill C-59 in the Senate bill and put in back in the House. That could be their strategy perhaps, because it doesn't make any sense for them to oppose what they put in the legislation before, which we can't control right now. However, we can do it at this moment and make sure that we send a strong signal to the Competition Bureau and the commissioner.

[Ryan Turnbull, Liberal, Whitby, ON]

My understanding of this is that the way that it was initially drafted, it inadvertently allowed for cost awards against the Crown in its original formulation. The NDP has tried to fix that drafting error, which is now duplicative of what's already in Bill C-59, which is a simpler and more elegant fix, so I don't see the need to pass this. We can vote against it, and we will be doing so.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I'm really pleased to move this amendment. I would think this at least would get passed, especially if you are concerned about the abuse of Rogers and other telcos on Canadian consumers. This is dealing with the tribunal claim costs from the bureau and making sure that it incorporates parts of Bill C-59 in clause 13 of Bill C-352. This would serve the purpose of ensuring the amendment is made in a case where clause 266 of Bill C-59 is not passed by the Senate in its current form.

Again, coming from the department of redundancy, it is to make sure we actually have this pass here. What I'm concerned about, and I think lots of Canadians are, is that the tribunal has passed on costs to the Competition Bureau to do its job.

I'll leave it at that. Hopefully, we can pass this to make sure it gets done. Again, we can't predict what the Senate's going to do.

[Samir Chhabra]

It would take a route that would increase the burden and workload on all, including on the bureau, but not actually achieve the desired effect, because it would then allow them to still continue to benefit from a one-year period.

I think it's important to note that we've already taken steps in previous bills, including specifically in Bill C-59. There was consultation on this issue through the overall consultation on competition reform. It was seen to be important to provide more time for the commissioner to review, but not in cases where the bureau isn't aware of the transaction in advance. That's the difference between Bill C-59's approach and what's being proposed here, aside from the drafting issue I just noted.

It comes down to a question of why you'd want to increase business uncertainty over a longer period of time when an organization has already gone through the step of advising the bureau in advance of its activities of the proposed merger.

[Samir Chhabra]

Thanks very much for the question.

From our reading, this amendment imports about half the formulation or language that was voted on through Bill C-59. It essentially allows parties to benefit from a shortened limitation period when applying for an advance ruling certificate. That is a mechanism to ensure that the bureau is aware of a transaction, but it doesn't make this allowance for fully notified mergers, as Bill C-59 does. In that sense, it's a half-measure.

What it will do is create two different pathways by which an organization can do that kind of notification approach, and it will create a lot of administrative burden for the bureau as well as for companies because it will simply encourage them all to apply for advance ruling certificates rather than simply notifying. That creates a lot of extra work for the bureau to then review, assess and respond to. It essentially becomes an ineffective half-measure. It allows for this extension to occur but only in certain circumstances, which will then incentivize behaviour to take, essentially, the other pathway.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. Hopefully, this one finds a better path.

It increases the one-year limit to commissioners to challenge a notifiable merger to three years. Bill C-59 increased the limit to three years only for mergers for which the commissioner has issued an advance ruling certificate or for not-notifiable mergers but excludes notifiable mergers. We can keep the exceptions for advance certifications under section 102 to align with Bill C-59, but extend three years for all other mergers based on the commissioner's advice that three years would be helpful, which he raised in his testimony.

What we're doing is giving more runway for the commissioner. I don't have to get into further details, but we had a lot of testimony in favour of that, and I think that giving the competition commissioner more time is a modest improvement to what we have.

[Ryan Turnbull, Liberal, Whitby, ON]

My understanding is that this is entirely redundant, given the passage of Bill C-59, which was the fall economic statement bill. We already did this work in that bill.

[Ryan Turnbull, Liberal, Whitby, ON]

Just really quickly, I think this is an attempt to fix and back out. We removed the efficiencies defence in Bill C-56. I think the original clause that was proposed by the NDP threatened to reintroduce that back in. Perhaps that wasn't intended, and I think this tries to fix that. I think it's just simpler to vote this down because we already did the work on this, and let Bill C-56 and Bill C-59 stand.

[Samir Chhabra]

That is, indeed, our understanding as a department. It's probably worth pointing out that, in the last several weeks in deliberations of the House committee on finance as well as in the Senate committee, there have been a number of important changes undertaken to the Competition Act.

Bill C-59 at its outset proposed to enable the tribunal to take into account market share, which it was previously barred from doing. The House committee on finance took that a step further and introduced the structural presumptions approach that essentially reverses the burden of proof and puts it on the merging parties under certain conditions as they have been laid out.

This approach here would then, again, in a matter of weeks—and I believe C-59 is scheduled for third reading in the Senate today, so we can expect that it would move forward to become law shortly—introduce yet another change on top of that series of changes that have already taken place.

[Samir Chhabra]

I understand, with the committee having taken the decision to vote down clause 8, NDP-2, which modifies clause 9, would no longer create the duplication issue that was previously flagged. However, it continues to offer some other challenges, including an outright bar against mergers over 60% market share.

I believe that this committee heard from a number of witnesses who indicated that it would be unprecedented globally and not recommended for a number of reasons. It could lead to undesirable or absurd results, of course, including in a scenario where, as many in Canada's start-up ecosystem have noted, it's often via sale to a larger player that they find an exit strategy. That can also result in some pro-competitive or pro-consumer outcomes as well.

Implementing an outright bar on mergers rather than the approach that was already taken by this committee under Bill C-59, which was to reverse the burden of proof, would be a significant step forward and one that has not been supported by stakeholders and experts.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

On the advice of legislative drafters, given the changes already made in Bill C-59, we have chosen to repeat the text that is found in C-59 and modify it slightly to incorporate structural presumption mergers resulting in over 60% market share, which has been proposed in clause 8.

We heard from the Canadian Anti-Monopoly Project on the eight challenged mergers by the bureau over the last 40 years, and seven resulted in there being market shares above 60%. Four of them were near or literal monopolies, only two of which had any sort of remedy, and none of them were blocked.

We want to help the Competition Bureau rebalance the equation against corporations, monopolies and oligopolies and towards protecting consumers. We would also just recall the testimony from Mr. Péladeau with regard to the telco sector, which is very relevant to this section with potential telecom mergers in the future.

We would like this to be passed and would be hopeful that, given the testimony you had in support of this, we're going to see this actually become reality. Thank you.

[Ryan Williams, Conservative, Bay of Quinte, ON]

The 30% will be law in clause 249 of Bill C-59, and as we heard, a 60% ban was opposed by almost all witnesses, so we'll be voting no on this.

[Ryan Turnbull, Liberal, Whitby, ON]

My understanding is that this amendment would increase the backup calculation for a maximum amount of an administrative monetary penalty in the rare situation where the benefit derived from an abuse of conduct cannot be determined. It's really a backup calculation. It's not actually....

Maybe I'll just quickly ask Mr. Chhabra or any of the team if they could quickly comment on how they see this one interacting with the changes that have already been made in Bill C-56 and Bill C-59.