This site will look much better in a browser that supports web standards, but it is accessible to any browser or Internet device.

Skip to Content

C-40: Sales Tax Amendments Bill, 2006

Honourable senators, I am pleased to rise today to speak to Bill C-40 at second reading, An Act to amend the Excise Tax Act, the Excise Act 2001 and the Air Travellers Security Charge Act and to make relative amendments to other acts.

This bill contains a number of administrative amendments proposed to streamline the operation of the sales tax system. The bulk of this bill has to do with bringing previous legislation in line with the policy intent of the government and implementing previously proposed legislation that required further study. I understand this was done after adequate consultation.

Honourable senators, Bill C-40 is divided into three parts. Part 1 implements measures relating to the Goods and Services Tax and Harmonized Sales Tax; Part 2 contains measures relating to the taxation of wines, spirits and tobacco products; and Part 3, amends the Air Travellers Security Charge Act.

The main problem with this bill is that it is extremely diverse in nature and many of its provisions are completely unrelated to one another. For example, Bill C-40 ensures consistency in the GST/ HST legislation by providing tax-free status to the sale and importation of a blood substitute known as plasma expander. Another provision deals with ensuring the consistent application of the GST/HST to various agricultural products that can be purchased, imported and sold by farmers on a tax-free basis.

It is very unusual for the same legislation to address GST measures, an amendment to the Air Travellers Security Charge Act and measures related to the regulation of tobacco and alcohol. Nevertheless, taken independently, most of these measures make sense and represent a miscellaneous improvement to the consistency of our tax system.

The main feature of these taxation amendments are the provisions pertaining to the rules for applying the Harmonized Sales Tax. I believe that it is much better and much more equitable to Canadians to concentrate on cutting income tax, which is levied on increased income, rather than on cutting sales tax.

The Liberal Party has always been, as far as I can remember, a keen supporter of fairness with respect to using income tax as the basis for fairness towards Canadians. We have to keep in mind that most of the goods that provide us with our basic needs were exempt from sales tax.

The Conservative tax plan will benefit the upper class of our society. Working families will not save 1 per cent on bread and milk, but the friends of the Conservatives will save 1 per cent on their new luxury sport utility vehicles. That is the Conservative plan, or should I say the Reform plan?

In the first part of Bill C-40, one will find mostly GST/HST-related measures with broadly distinct amendments. The bill amends the rules on health, charities, business arrangements and governments and contains certain provisions changing the way in which the GST is applied. An important measure of this part deals with health-related rules. The bill amends the act so that speech-language pathology services are henceforth effectively zero-rated. This change confirms the tax-exempt status of these services, which will make it easier for young people with language problems to access such services.

A second section that caught my attention was the government's initiative to zero-rate sales and importation of a product that can be used to some extent as a blood substitute. Plasma expander makes it possible, for example, to inject a blood substitute during treatment for very serious burns or open fractures Plasma expander provides an alternative during crucial treatment for seriously injured patients.

The government will also offer a GST rebate on motor vehicles that have been used after being specially equipped for use by individuals with disabilities.

Honourable senators, one can only be pleased with such initiatives. May I also say that most of the positive initiatives in this omnibus bill are a result of Liberal budgets.

Furthermore, concerning charities, some amendments will ensure that the exemption of supplies by charities of real property under short-term leases and licences extends to any goods supplied with such real property, for example, video screens and computers. This will mean less financial pressure on charities as they carry out their important social mission.

The third measure concerns business arrangements. The amendment to the GST legislation provides transitional GST-HST relief on the initial asset transfer by a foreign bank that restructures its Canadian subsidiary into a Canadian branch. This measure will act as an incentive to foreign banks in Canada to restructure their subsidiaries as Canadian branches, thereby promoting more competition in the Canadian banking sector.

Bill C-40 removes technical impediments that hindered the use of existing group relief provisions under the GST-HST. This amendment clarifies the rules of application of the legislation that are already in effect. In addition, the bill simplifies compliance by excluding beverage container deposits that are refundable to the consumer from the GST-HST base. In other words, honourable senators, in purchasing, say a six-pack of beverages where there is an added fee for the return of the beverage containers, under Bill C-40 the added fee is not a taxable item. This will make it easier for businesses to manage collection and will lighten the regulatory burden associated with deposits, with a view to promoting more recycling and environmental protection.

Other technical sections deal with the possibility of an agent to claim GST-HST deduction for bad debts and to claim adjustment or refunds of tax in respect of sales made on behalf of a principal where an agent collects or reports tax. Another measure extends the existing agent rules under the GST-HST legislation to persons acting only as billing agents for vendors.

The second part of this bill contains measures relating to the taxation of wines, spirits and tobacco products. A review of the federal framework for the taxation of alcohol and tobacco products resulted in new existing legislation in 2001. With these amendments, it will provide administration and enforcement, updated to reflect the current industry tendencies and practices.

Honourable senators, given that these sections are highly technical, I will not go into detail. The first of the principal measures deals with tobacco and seeks to give greater precision to certain provisions contained in the Excise Tax Act in order to better defend against the smuggling of tobacco products and facilitate collection of taxes on tobacco. The bill includes measures to extend the requirement to identify the origin of tobacco products on all products, including those sold at duty-free shops or for export, consistent with the Framework Convention on Tobacco Control, an international agreement. The bill also specifies that cigarettes, tobacco sticks, fine-cut tobacco or cigars, but not packaged raw leaf tobacco, may be supplied to the export market or the domestic duty-free market.

The second measure concerns alcohol. The bill has two main objectives. First, it authorizes provincial liquor boards and vintners to possess a still or similar equipment, for the purpose of analyzing substances containing ethyl alcohol without holding a spirits licence. This measure aims to avoid the administrative burden and cost of requiring provincial liquor boards and vintners to obtain a permit.

Part 3 of the bill contains provisions relating to the Air Travellers Security Charge. It makes various technical amendments that come mainly as a result of the consultative process with interested parties. These were implemented a few years ago, after the unfortunate events of September 11. They include the announced relief measures and minor changes to the Air Travellers Security Charge Act. There are two main measures. The first is tax relief. The bill relieves, in particular circumstances, the Air Travellers Security Charge in respect of air travel sold by reseller or donated by air carriers. This measure would help charities like the Children's Wish Foundation of Canada, which is dedicated to fulfilling a favourite wish for children afflicted with a high-risk, life-threatening illness. These amendments can only be applauded. From an administrative point of view, the bill provides authority for the Governor-in-Council to add, delete or vary by regulation the scheduled of listed airports.

On a last note, I wish to convey to this house that I have some concern with clause 46 of the bill. As you are aware, honourable senators, the Minister of National Revenue had the power, through the Excise Tax Act, to waive or cancel penalties and interest payable by a person — without any restrictions on how far back they could apply their discretion. However, through the Budget Implementation Act, 2006, those provisions were amended by introducing a 10-year limitation period, which came into application on April 1, 2007.

Clause 46 of this bill would, once again, give the ability to the minister to waive or cancel penalties and interest beyond the 10-year limitation. Is this recognition by the government that its own legislation was flawed? Last year, a 10-year limitation was introduced with the general team of the government on accountability. This year — two months after the 10-year limitation was legislated, introduced and implemented — they are coming back with an omnibus bill removing the 10-year limitation of the Minister of National Revenue to have the ability to waive all penalties and interest.

The bill is about 140 pages long and it is an omnibus bill. If the bill were a means to try to hide the fact that the government either no longer wishes to be accountable or wishes to waive the accountability period beyond 10 years, that has been uncovered here.

Honourable senators, I encourage this chamber to send this proposed legislation to committee for it to follow its due course. I hope the committee will look extensively at the bill and, in particular, at the abolishment of the 10-year limitation on the part of the minister to waive interest and penalties for any person. I certainly do not agree with that.