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Her 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 Bankruptcy and
Insolvency Act, the Budget Implementation Act, 1997, the Budget
Implementation Act, 1998, the Budget Implementation Act, 1999, the
Canada Pension Plan, the Companies' Creditors Arrangement Act, the
Cultural Property Export and Import Act, the Customs Act, the Customs
Tariff, the Employment Insurance Act, the Excise Act, the Income Tax
Act, the Tax Court of Canada Act and the Unemployment Insurance
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, including the sales tax initiatives
proposed in the February 24, 1998 Budget. In addition, this enactment
contains measures relating to other taxes and tariffs. In the area of
tobacco taxes, this enactment implements the proposal, announced on
November 5, 1999, to increase the excise taxes on certain tobacco
products and to make permanent the existing surtax on tobacco
manufacturers' profits. 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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In the area of First Nations taxes, this enactment makes three
technical corrections to provisions of the Budget Implementation Acts
of 1997, 1998 and 1999, which provided authority for certain First
Nations to impose sales taxes on specific products. The amendments
clarify the definitions of ``alcoholic beverage'' and ``alcohol'' for this
purpose and ensure that the GST/HST ``small supplier rules'' apply in
the context of these taxes.
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This enactment also incorporates the repeal of the tax regime for
split-run periodicals, as announced by the government on July 29, 1998.
With respect to customs tariffs, it contains the measures proposed by the
government on June 10, 1999 to increase the duty and tax exemption for
returning residents who have been out of the country for at least seven
days and to increase the quantity of wine that travellers may, in certain
circumstances, bring into Canada on a duty and tax-free basis.
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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;
permits eyeglasses and contact lenses that are intended to be sold on a
tax-free basis under prescription at the retail level to be sold on a tax-free
basis at the pre-retail level as well; 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
refunding bottle 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;
restores the specific exemption for the supply by charities of food,
beverages and short-term accomodation where these are provided in the
course of relieving poverty, suffering or distress of individuals; allows
charities, including those that employ or provide employment-related
assistance to individuals with disabilities, 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; provides
consistent treatment between tax-free international transportation
services and various separate charges that relate to such transportation;
eliminates the requirement that payment for certain air travel from the
United States to Canada be tendered outside Canada in order for the
transportation service to be tax-free; provides that the supply of services
related to a passenger transportation service is treated as having been
made in a particular province if the supply of the passenger
transportation service is made in that province; 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
GSTHST 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 the treatment of sales of accounts receivable;
clarifies that management or administrative services provided to
investment vehicles such as pension plans and segregated funds are
subject to tax; provides a rebate to trusts governed by multi-employer
pension plans of a portion of tax incurred on expenses relating to the
plans; 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) 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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In the area of the administration and enforcement of the tax system,
this enactment contains amendments to the Excise Tax Act, Bankruptcy
and Insolvency Act, Canada Pension Plan, Companies' Creditors
Arrangement Act, Cultural Property Export and Import Act, Customs
Act, Employment Insurance Act (and the former Unemployment
Insurance Act), Income Tax Act and the Tax Court of Canada Act. Many
of these amendments are intended to update the provisions of the
various Acts relative to current administrative practices, harmonize
certain of the GST/HST, income tax and customs provisions and ensure
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 the Canada Customs and
Revenue Agency 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 and ensuring that employment insurance
premiums and Canada Pension Plan contributions that are required to
be remitted by an employer are fully recoverable by the Crown in the
case of the bankruptcy of the employer.
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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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