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His Excellency the Governor General recommends to the House of
Commons the appropriation of public revenue under the circumstances,
in the manner and for the purposes set out in a measure entitled ``An Act
to amend the Excise Tax Act, a related Act, the Cultural Property Export
and Import Act, the Customs Act, the Excise Act, the Income Tax Act and
the Tax Court of Canada Act''.
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This enactment mainly implements proposed measures relating to
the Goods and Services Tax and Harmonized Sales Tax (GST/HST)
announced since March 20, 1997. These measures include initiatives
proposed in the February 24, 1998 Budget. In addition, this enactment
contains some amendments to parts of the Excise Tax Act that do not
pertain to the GST/HST. Specifically, it incorporates the repeal of the tax
regime for split-run periodicals as announced by the government on
July 29, 1998. As well, it includes the measure to lower the tobacco
export tax exemption, as proposed in the February 16, 1999 Budget.
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The GST/HST measures contained in this enactment are principally
aimed at improving the operation of the tax in the affected areas and
ensuring that the legislation accords with the policy intent. In some
cases, adjustments have been made to the legislation as originally
proposed in response to representations from the tax and business
communities.
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The principal GST/HST measures included in this enactment are as
follows:
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(1) Health and Education: provides a rebate of tax in respect of the
cost of specially-equipped motor vehicles for persons with disabilities;
exempts respite care services for individuals who have limited capacity
for self-supervision and self-care due to an infirmity or disability;
maintains the exemption for speech therapy services; ensures that
osteopathic services are exempt; removes the requirement for
psychologists to be registered in the Canadian Register of Health
Service Providers in Psychology in order to provide exempt services;
ensures that the existing exemption for second language training
applies equally where the training is provided by vocational schools and
individual contractors.
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(2) Charities: allows charities operating bottle return depots and
paying out refundable deposits to claim a reimbursement for the tax
component of the amount refunded by the charity; refines the
streamlined accounting method by which charities engaged in
commercial activities determine their net GST/HST remittances; allows
charities to avoid exemption in particular instances where they would
prefer to charge tax so that they and their registered business customers
are in a position to fully recover the tax paid on their purchases.
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(3) Public Service Bodies: refines the rules relating to the
administration of the rebates for hospital and school authorities,
universities, public colleges and municipalities; in the HST
participating province of Newfoundland and Labrador, entitles bodies
that are hospital or school authorities, universities, public colleges or
certain organizations treated like municipalities, and that qualify as
charities or substantially government-funded non-profit organizations,
to claim a 50% rebate of the non-recoverable provincial component of
the HST incurred in respect of certain of their inputs.
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(4) Provincial Gaming Authorities: clarifies the special rules for
determining the net GST/HST that must be remitted by provincial
gaming authorities.
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(5) Provincial Crown Agents: provides that the same capital
property rules that apply to public service bodies such as municipalities
also apply to provincial Crown agents that agree to pay the GST/HST
and recover it by way of input tax credits or rebates in the same manner
as do other registrants.
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(6) Oil, Gas and Electricity Industries: provides several relieving
measures aimed at simplifying compliance with the GST/HST in the
energy sector and ensuring that exports and sales to unregistered
non-residents do not bear unrecoverable tax.
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(7) Non-residents and Cross-border Transactions: extends the
GST/HST visitor rebate in respect of short-term accommodation to
campsite rentals; extends existing relieving provisions for foreign
conventions and domestic conventions attended by non-residents by
allowing a 50% rebate for the tax on the food and beverage component
of the convention fee; removes GST/HST from air navigation services
supplied by NAV CANADA in relation to international flights; ensures
that the tax relief on exports by common carriers is not provided if the
goods are not ultimately exported; ensures that tax does not apply to
imported replacement goods supplied for no extra charge by an
unregistered non-resident warrantor; ensures that there is no
unrecoverable tax on services supplied by a Canadian dealer to a
non-resident warrantor.
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(8) Business Arrangements: clarifies the treatment of exchanges
between members of barter clubs; relieves more small independent
contractors of direct selling organizations from having to register for
GST/HST purposes; allows eligible Canadian partnerships to elect not
to account for otherwise fully recoverable tax on certain transactions
among members of a closely related group; simplifies the GST/HST
treatment of promotional allowances and reflects changes
consequential to the introduction of the HST; corrects a problem of
double taxation in leasing situations typically affecting doctors, dentists
and other exempt suppliers; clarifies and aligns more closely the
GST/HST provisions relating to meal and entertainment expenses with
the treatment of these expenses under the Income Tax Act.
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(9) Financial Sector: provides a level playing-field for credit card
companies by repealing bad debt relief for retailers' related financing
companies; clarifies that management or administrative services
provided to investment vehicles such as pension plans and segregated
funds are subject to tax; clarifies the application of the tax when a surety
fulfils the obligations of a defaulting contractor by completing a
construction project; ensures that precious metal refiners are entitled to
the appropriate recovery of tax on purchases.
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(10) Real Property: corrects a problem of double taxation in
circumstances involving the sale of a new residence situated on leased
land; ensures that condominium fees and related parking fees for single
detached condominium units receive the same exempt treatment as do
multiple-unit condominium fees; ensures that the appropriate amount
of tax applies to a new residential complex such as an apartment
building when the complex is built on leased land.
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(11) Administration and Enforcement: amends several provisions
in the area of the administration and enforcement of the tax system, to
update them relative to current administrative practices, harmonize
certain of the GST/HST, income tax and customs provisions and
improve the efficiency and effectiveness of the assessment, appeals and
collections processes. Specific measures include: permitting the
Minister of National Revenue to accept late-filed applications for
certain GST/HST rebates that are payable to individuals and are
administered under the income tax system; removing the obligation for
a supplier to disclose on an invoice the amount of tax payable on certain
transactions when it is the recipient who is required to report and remit
the tax; clarifying the allowable use by Revenue Canada of third-party
information; clarifying the Crown's ability to advance alternative
arguments in support of an assessment on an appeal; ensuring that
certain enforcement provisions dealing with third parties apply equally
where the third party happens to be the Crown in right of a province.
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(12) HST-related Rules: makes several amendments consequential
on the introduction of the HST, including additional rules to address the
transition from the retail sales taxes in the participating provinces;
modifies previously existing GST provisions necessary to reflect the
15% HST rate; refines the simplified method by which financial
institutions operating in the participating provinces calculate their net
tax remittances.
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Finally, this enactment contains a number of amendments that
update cross-references, including references to the Canada Customs
and Revenue Agency, correct editorial errors, remove inconsistencies
between the French and English versions of the legislation and correct
ambiguities or obvious anomalies in existing provisions of the
GST/HST legislation and the Excise Act.
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The Explanatory Notes relating to this enactment issued by the
Minister of Finance provide a detailed explanation of these
amendments.
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