Briefing binder created for the Interim Deputy Minister of Finance on the occasion of his appearance before the Standing Senate Committee on National Finance on June 7, 2023 on the subject matter of all of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023

On this page

• Committee Member Biographies
• Parliamentary Environment Analysis: Standing Senate Committee on National Finance subject matter study of Bill C-47 (Budget Implementation Act, 2023, No. 1)
• Table 1 : Branch Review: Cost of Measures in Budget Implementation Act 2023, No. 1
• Costing Summary of Bill C-47, Budget Implementation Act, 2023, No 1
• Additional information regarding the GST/HST treatment of payment card clearing services measure in C-47
• Amendments to Bill C-47 (BIA 2023) Adopted by the House Standing Committee on Finance (FINA)
• An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023 – Overviews
• An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023 – Questions and Answers

Committee Member Biographies

Committee Profile

Mandate

The Standing Senate Committee on National Finance has the mandate to examine matters relating to federal estimates generally, including the public accounts and reports of the Auditor General; as well as government finance. In addition, the committee has investigated other topics of interest and importance to the country.

History

The Committee was first created in May 1919 as the Committee on Finance, and in 1968, was renamed the Committee on National Finance. The committee's field of interest is government spending, either directly through the estimates or indirectly through bills that provide borrowing authority or bear upon the spending proposals identified in the estimates. The committee also has a mandate to examine reports of the Auditor General.

Independent Senators Group

Pat Duncan
Independent Senators Group (Yukon)

Pat Duncan is a former premier of Yukon, with extensive experience in business and as a public servant in the community. She holds a Bachelor of Arts from Carleton University.

From 1996 to 2006, Ms. Duncan served as a member of the Yukon Legislative Assembly in various positions, including as the first female premier of the territory from 2000 to 2002. She was involved in reaching land claims agreements with First Nations in the Yukon and the transfer of power from the federal government to the territory, giving her an in-depth understanding of territorial and federal legislative processes.

Before entering politics, Ms. Duncan worked in small business and served as the executive director of the Whitehorse Chamber of Commerce. She later became a public servant in the territorial government and the manager of claimant services for the Yukon Workers' Compensation Health and Safety Board. In 2015, she was appointed as the manager of the Yukon Workers' Advocate Office.

Ms. Duncan has also been an active volunteer in her community. She is heavily involved with sports in the Yukon, including volunteering with the Canada Summer and Winter Games, and serving as President and Treasurer of the Whitehorse Glacier Bears Swim Club.

Ms. Duncan has represented Yukon on the Canadian Advisory Council on the Status of Women, chaired the City of Whitehorse Environmental Health Board, served on the Yukon Advisory Council on Health and Social Services, and acted as the Provincial Commissioner for the Girl Guides of Canada. She also served as a lay member of the Law Society of Yukon.

In 1992 she received the Commemorative medal for the 125th anniversary of Confederation of Canada. For her outstanding dedication to the public service, Ms. Duncan was awarded the Queen Elizabeth II Golden Jubilee Medal in 2002.

Éric Forest, Deputy Chair
Independent Senators Group (Québec – Gulf)

Éric Forest has worked for the development of Eastern Quebec for over 40 years. As the Mayor of Rimouski from 2005 to 2016, he has engaged the Rimouski community through a strategic plan that guides the development of a respectful, united community. Under his leadership, Rimouski is now recognized as one of the best cities to live in Canada, with a strong cultural vitality and an economic structure geared to the knowledge economy.

He entered politics at age 27, as a councillor in Pointe-au-Père – and was elected mayor two years later. After spending some time in the business community, as the co-owner and vice-president of a car dealership, he returned to politics in 1994, as a councillor with the City of Rimouski, before becoming mayor. From 1995 to 2005, he was vice-president and director general of the Océanic hockey club, where he set the goal of making the Océanic an instrument for social cohesion for all of Eastern Quebec.

He became the Mayor of Rimouski in 2005, and he chaired the Union of Quebec Municipalities (UMQ) for almost four years, from 2010 to 2014, in the context of a major crisis of confidence by citizens toward their municipal elected officials. His commitment helped to bring together the municipal sector, through two provincial summits that led to the preparation of a white paper on the future of municipalities.

While Chair of the UMQ, he also implemented a social and professional integration project that enabled youth from youth centres to have an enriching work experience within their city's municipal team. In 2014, he received the Jean-Paul L'Allier Award, which honours a Quebec elected official for outstanding vision, leadership and achievements in urban planning and land use planning. Mr. Forest is also very active in numerous social causes and is particularly committed to encouraging young people and women to become involved in politics, within the scope of his responsibilities with the UMQ and the L'Effet A movement.

Rosa Galvez
Independent Senators Group (Québec – Bedford)

Rosa Galvez, originally from Peru, is one of Canada's leading experts in pollution control and its effect on human health. She has a Ph.D. in Environmental Engineering from McGill University and has been a professor at Université Laval à Québec since 1994, heading the Civil and Water Engineering Department from 2010 to 2016. She specializes in water and soil decontamination, waste management and residues, and environmental impact and risk assessment.

Throughout her career, she has been requested by private, governmental and community organisations to offer expert advice. She has also advised a number of international organisations including on Canada-US and Quebec-Vermont agreements regarding the protection of the Great Lakes and the St. Lawrence River. She also conducted an important study on the catastrophic oil spill at Lac-Mégantic.

Senator Galvez is a member of the Ordre des ingénieurs du Québec, the Canadian Society for Civil Engineering and Engineers Without Borders. Her research has led her around the world to countries such as France, Italy, Belgium, Japan and China.

Senator Galvez was appointed to the Senate on December 6, 2016, representing Québec (Bedford). She lives in Quebec with her partner, Luke, and has three children, Virginie, Lydia and Francisco.

Tony Loffreda
Independent Senators Group (Québec – Shawinigan)

Hailing from the Ahuntsic neighbourhood in Montréal, Quebec, Tony Loffreda is a certified public accountant with 35 years of experience in the Canadian financial industry.

Mr. Loffreda holds a Bachelor of Commerce from Concordia University, and has held numerous positions of increasing responsibility ranging from senior auditor and Regional Vice-President of Commercial Financial Services at the Royal Bank of Canada, Quebec headquarters, to the position as Vice-Chairman of Royal Bank of Canada Wealth Management. 

Mr. Loffreda has served on various boards and committees, including the Concordia University Board of Governors, the Integrated Health and Social Services University Network for West-Central Montréal, "Montréal International", the "Fondation communautaire Canadienne-Italienne" and the Italian Chamber of Commerce in Canada. He also previously served as a member of the executive committee of the Chamber of Commerce of Metropolitan Montréal. 

He is a leading philanthropist, active in service to many communities, having chaired fundraising activities across the province for various causes such as the Giant Steps School, the Montréal Jewish General Hospital and the Montréal Cancer Institute. He is also a frequent and sought-after speaker on economic and community issues. 

Among his many awards and distinctions, he is a recipient of the Queen Elizabeth II Diamond Jubilee Medal and has been awarded the Governor General of Canada Sovereign's Medal for Volunteers, the Lieutenant Governor of Quebec's Gold Medal for Exceptional Merit, the Canadian Senate 150th Anniversary Medal and the Philhellene of the Year Award by the Hellenic Community of Greater Montréal. He was also inducted as an administrator into the Montréal-Concordia Regional Soccer Hall of Fame.

Kim Pate
Independent Senators Group (Ontario)

Kim Pate was appointed to the Senate of Canada on November 10, 2016. The mother of Michael and Madison, she is also a nationally renowned advocate who has spent nearly 40 years working in and around the legal and penal systems of Canada, with and on behalf of some of the most marginalized, victimized, criminalized and institutionalized — particularly imprisoned youth, men and women.

Senator Pate graduated from Dalhousie Law School in 1984 with honours in the Clinical Law Programme and has completed post graduate work in the area of forensic mental health. She was the Executive Director of the Canadian Association of Elizabeth Fry Societies (CAEFS) from January 1992 until her appointment to the Senate in November 2016. CAEFS is a federation of local societies who provide services and work in coalition with Aboriginal women, women with mental health issues and other disabling conditions, young women, visible minority and immigrant women, poor women and those isolated and otherwise deprived of potential sources of support. Prior to her work with CAEFS, she worked with youth and men in a number of capacities with the local John Howard Society in Calgary, as well as the national office. She has developed and taught Prison Law, Human Rights and Social Justice and Defending Battered Women on Trial courses at the Faculties of Law at the University of Ottawa, Dalhousie University and the University of Saskatchewan. She also occupied the Sallows Chair in Human Rights at the University of Saskatchewan College of Law in 2014 and 2015.

Kim Pate is widely credited as the driving force behind the Inquiry into Certain Events at the Prison for Women in Kingston, headed by Justice Louise Arbour. During the Inquiry, she supported women as they aired their experiences and was a critical resource and witness in the Inquiry itself. She also persuaded the Attorney General and Minister of Justice to initiate the Self-Defence Review and appoint the Honourable Madam Justice Lynn Ratushny to review the convictions and sentences of women jailed for using lethal force to defend themselves and/or their children against abusive men. She then worked tirelessly in pursuit of the implementation of the many positive recommendations from both.

Senator Pate has been instrumental in building coalitions across the country with other equality-seeking women's, anti-racism, anti-poverty and human rights groups and organizations; and, in this capacity, has worked with feminist legal scholars, lawyers, other professionals and front-line advocates and activists — from Indigenous communities to transition house and rape crisis centre workers.

Kim Pate is a member of the Order of Canada, a recipient of the Governor General's Award in Commemoration of the Persons Case, the Canadian Bar Association's Bertha Wilson Touchstone Award, and six honourary doctorates (Law Society of Upper Canada, University of Ottawa, Carleton University, St. Thomas University, Nipissing University and Wilfrid Laurier University) and numerous other awards. Her extensive list of publications, national and international speaking engagements and her strategic intervention and advocacy for substantive equality testify to her commitment to broader social, economic and cultural change. She continues to make significant contributions to public education around the issues of women's inequality and discriminatory treatment within social, economic and criminal justice spheres.

Senator Pate strongly believes that the contributions of women who have experienced marginalization, discrimination and oppression should be recognized and respected and she seeks to credit and empower women. She maintains contact with women in prison through her numerous visits to Canada's federal prisons and strongly encourages other advocates, scholars, service providers, judges and parliamentarians to ground their efforts in a similar way.

Conservative Senators

Elizabeth Marshall
Conservative (Newfoundland and Labrador)

Elizabeth Marshall was appointed to the Senate of Canada in January of 2010 having previously spent 30 years with the Newfoundland and Labrador Public Service, the Government of Newfoundland and Labrador, and the Newfoundland and Labrador House of Assembly. Since 1979, she occupied a number of positions in the provincial public service, including Deputy Minister of Transportation and Works, and Deputy Minister of Social Services, as well as several senior positions in the Department of Finance.

She was appointed Auditor General of Newfoundland and Labrador in 1992 and served in that position for 10 years. In 2003 she was elected as the Member of the Newfoundland and Labrador House of Assembly for the District of Topsail and was re-elected in 2007. She served as Minister of Health and Community Services from 2003-2004.

In 2011, Senator Marshall was appointed as the Government Whip in the Senate, a position she held until November 2015. She is currently a member of the Standing Senate Committee on Internal Economy, Budgets and Administration, the Standing Senate Committee on National Finance, and the Standing Senate Committee on Banking, Trade and Commerce.

She holds a Bachelor of Science (Math) degree from Memorial University of Newfoundland and Labrador, and has been a Chartered Accountant since 1979.

Senator Marshall has three children and resides in Paradise, Newfoundland and Labrador, with her husband.

Percy Mockler, Chair
Conservative (New Brunswick)

Senator Mockler was appointed to the Senate by the Right Honourable Stephen Harper in December 2008. Mr. Percy Mockler represents the province of New Brunswick. He is a member of the Senate Standing Committee on Official Languages, member of the Senate Standing Committee on Energy, the Environment and Natural Resources and member of the Senate Standing Committee on National Finance. Senator Mockler is also a member of the Parliamentary Assembly of la Francophonie (Canadian section), for which he is the parliamentary Secretary.

Mr. Mockler was for many years a Member of the Legislative Assembly of New Brunswick, having first been elected in 1982. As a provincial MLA, Mr. Mockler held several portfolios including Solicitor General, Minister for Human Resources Development and Housing, Minister of Family and Community Services, Minister of Transportation, and Minister of Intergovernmental and International Relations. He was also Minister responsible for La Francophonie and presided over the organization of the 2004 celebrations. Mr. Mockler was also Minister responsible for Service New Brunswick, Minister of Wellness, Culture and Sport, and Minister responsible for the Immigration and Repatriation Secretariat.

Mr. Mockler is a former advisory member for the Department of Foreign Affairs' Trade Opportunities Strategy. He has given his time to many organizations within his community. He was the founder and president of the St. Leonard Cross-Country Skiing Club, was a member of the Groupe focus du Nord-Ouest of the University of Moncton, a member of the Center for International Business Studies of the University of Moncton and the University of New Brunswick, a member of the first Economic Development Commission for the region of St. Leonard, the treasurer of the local hunting and fishing association, a member of the board of directors of the Credit Union, and the president of the District 32 Homogeneous School Board.

Mr. Mockler was recognized for his exceptional contribution during the 1998 ice storm by the towns of Saint-Hyacinthe and Beloeil in Quebec. Since February 23, 2002, the Saint-Louis-Maillet Foundation of the University of Moncton (Edmundston Campus) awards the annual Percy-Mockler Scholarship in his honour.

In May 2005, he received a Canadian Red Cross citation for his involvement during the tsunami crisis in Asia. In May 2005, the Canadian Cancer Society also gave him a certificate of recognition for his outstanding contribution to the cause. That same year, he was recognized as alumnus of the year from the Faculty of Administration of the University of Moncton (Moncton Campus). On the National Day of Romania in December 2005, Mr. Mockler was made a member of the Order of Great Friends of Romania.

Canadian Senators Group

Jean-Guy Dagenais
Canadian Senators Group (Québec – Victoria)

Influenced by his father, who served 30 years on the Montreal police force, Jean-Guy Dagenais worked as a peace officer from 1972 to 2011 at the Sûreté du Québec. He held various positions, including patrolman, investigator, team leader, and education relations officer with schools. He also worked in the communications division and the VIP security service.

His involvement with the Association des policières et policiers provinciaux du Québec began in 1984. He served successively as delegate, regional director and vice-president of finance. He was elected president in 2004.

Mr. Dagenais has been a guest speaker at the Fédération québécoise des municipalités conference and has participated in many public security committees. He has also been a board member of both the École nationale de police and the Canadian Police Association. He was made Officer of the Order of Merit of the Police Forces, which recognizes citizens from diverse sectors who have shaped Quebec's development or contributed to its success.

Mr. Dagenais ran as the Conservative candidate in the electoral district of Saint-Hyacinthe-Bagot in the 2011 general election.

He is married to Danielle Comeau.

Larry W. Smith
Canadian Senators Group (Québec - Saurel)

Larry Smith is a widely-recognized and respected figure in Quebec. He graduated from Bishop's University with a bachelor of arts in economics in 1972, and a bachelor of civil law degree from McGill University in 1976. He is well-known in Montreal from his days as a fullback with the Montreal Alouettes from 1972 to 1980, and as President and Chief Executive Officer of the same team from 1997 to 2001 and again since 2004. Working tirelessly to promote professional and amateur football, Mr. Smith also served as Commissioner of the Canadian Football League (CFL) prior to his first term as Alouettes' President.

Outside of football, Mr. Smith has served on a number of civic charitable boards, including as Co-President of the 2001 Montreal Centraide Campaign and on the board of the Canadian Olympic Committee. He also has extensive experience in the business world, including positions with John Labatt, Ltd., and Ogilvie Mills, Ltd., before becoming CFL Commissioner. In addition he served as president and publisher of The Montreal Gazette in 2002 and 2003.

He has received numerous awards over the course of his careers, including the Commissioner's Award for outstanding service and dedication in promoting and preserving the CFL (2001), the 1994 American Marketing Association-Toronto chapter Marketer of the Year (consumer products) and Sports Personality of the Year at the Quebec Sports Gala (1998). Mr. Smith was inducted into the Quebec Sports Hall of Fame on September 30th, 2015 under the category of "Builder for Football".

Mr. Smith resides in Hudson, Quebec, with his wife Leesa. They have three children and two grandchildren.

Progressive Senate Group

Clément Gignac
Progressive Senate Group (Quebec – Kennebec)

The Honourable Clément Gignac is an economist with over 35 years of experience in the public and private sectors. He was appointed as a Senator on July 29, 2021.

From 2012 until he became a Senator, Mr. Gignac held the position of Senior Vice-President and Chief Economist at iA Financial Group. He was the Group's spokesperson on economic matters and chaired the Asset Allocation Committee. He was also responsible for managing diversified funds with assets in excess of $5 billion.

Prior to joining iA Financial Group, Mr. Gignac worked as an economist and strategist for major financial institutions, including as Vice-President and Chief Economist for National Bank Financial from 2000 to 2008.

In 2009, Mr. Gignac was elected as a member of the National Assembly of Québec. He was named Minister of Economic Development, Innovation and Export Trade in the Quebec government, and went on to serve as Minister of Natural Resources and Wildlife from 2011 to 2012.

On the international scene, he chaired the World Economic Forum's council on competitiveness in 2012. He is also a standing member of the Conference of Business Economists, a group of distinguished global economists based in Washington, D.C.

Mr. Gignac was awarded the Gloire de l'Escolle medal from Université Laval and is an honorary member of the Association des économistes québécois, a prestigious distinction that has only been bestowed upon 10 people since its inception in 1992.

Senator Gignac holds a bachelor's degree and a master's degree in economics from Université Laval. He is a married father of three and the proud grandfather of five.

Non-affiliated

Ian Shugart
Non-affiliated (Ontario)

Senator Shugart was appointed to the Senate in September 2022.

Prior to his appointment, Mr. Shugart served as Clerk of the Privy Council and Secretary to the Cabinet from April 19, 2019 to May 27, 2022.

Prior to joining the Privy Council Office, he was Deputy Minister of Foreign Affairs from May 2016 to April 2019.

From July 2010 to May 2016, Mr. Shugart was Deputy Minister of Employment and Social Development Canada and chairperson of the Canada Employment Insurance Commission. Before that, he served as Deputy Minister of the Environment and Associate Deputy Minister of the Environment.

Prior to joining Environment Canada, Mr. Shugart held several senior positions in the Health Portfolio, including Assistant Deputy Minister, Health Policy Branch, Health Canada (1999-2006); Visiting Assistant Deputy Minister, Health Protection Branch, Health Canada (1997-1999); and, Executive Director, Medical Research Council (1993-1997)

While working at Health Canada, Mr. Shugart also served as chair of the Global Health Security Action Group and the Health Task Force of Asia-Pacific Economic Cooperation, and as a director on the World Health Organization's executive board.

Prior to this, Mr. Shugart served as Assistant Secretary to the Cabinet for Social Policy and Programs in the Federal-Provincial Relations Office of the Privy Council Office. He spent several years on Parliament Hill in senior advisory roles to the Minister of Energy, Mines and Resources, the Minister of National Health and Welfare and the Leader of the Opposition.

He is a graduate in political economy from Trinity College at the University of Toronto.

Parliamentary Environment Analysis: Standing Senate Committee on National Finance subject matter study of Bill C-47 (Budget Implementation Act, 2023, No. 1)

Standing Senate Committee on National Finance subject matter study of Bill C-47 (Budget Implementation Act, 2023, No. 1)

Purpose: This document provides an overview of questions and concerns expressed about C-47 by Senators and stakeholders who have appeared at Senate committees.

Background

• Since May 2, the Standing Senate Committee on National Finance (NFFN) has held four meetings to pre-study Bill C-47 (BIA), including one meeting with Tax Policy and Financial Sector Policy officials. Another meeting is planned for June 6, 2023, along with Treasury Board Secretariat officials, to address the Service Fees Act amendments (Part 4, Division 12).
• In addition, eight other Senate committees have collectively held a total of 30 meetings studying parts of C-47 related to their mandates. Five of these committees have reported on the bill, and their findings are summarized below.
• Given the diversity within the Senate there is a wide range of perspectives on C-47. Overall, the bill has been fairly well received in the Senate with no measures appearing to face significant opposition (aside from Conservative Party Senators who, like their colleagues in the House, can be expected to oppose most measures in the bill). Senators' Questions have tended to focus on technical clarifications and building their understanding of the measures.
• Given the diversity within the Senate there is a wide range of perspectives on C-47. Overall, the bill has been fairly well received in the Senate with no measures appearing to face significant opposition (aside from Conservative Party Senators who, like their colleagues in the House, can be expected to oppose most measures in the bill). Senators' Questions have tended to focus on technical clarifications and building their understanding of the measures.
• A recurring concern expressed by a number of Senators is that many of the measures in Part 4 ('Various Measures') should not have been included in a Budget bill. Given their significant impacts, they believe they should have been in a stand-alone bill which would allow Senators to scrutinize them closer.

Senate National Finance Members' Main Interests Related to C-47

• While they have not taken a particularly critical stance on any measures, Senators on NFFN have paid most attention to the GST/HST treatment of crypto asset mining, payment card clearing services and alcohol excise duty.

Treatment of "Mining" of Crypto Assets under the GST/HST (Part 2 (c))

• Questions on this topic have been primarily related to technical clarifications. Senator Moncion (ISG) asked Finance officials about how the government is tracking the individual miners within crypto asset mining pools.
• Senator Dagenais (CSG) asked officials for a summary of the taxes that are applicable on crypto assets and whether these represent a significant source of revenue for the government.
• Senators who are not members of NFFN have also asked many questions about this measure. Senator Deacon (ISG) asked stakeholders if the C-47 measures are a disincentive to providing digital service exports. Other lines of questioning focussed on whether government regulation was hindering the growth of the crypto industry in Canada, and the role cryptocurrencies have in illicit activity such as money laundering and tax avoidance.
• A representative of the Digital Asset Mining Coalition later appeared at NFFN, where Senator Marshall (C) asked if crypto companies would continue to leave if this measure was implemented. It was noted that no crypto companies have decided to move but investments decisions have been put on hold. Questions surrounding provincial competitiveness were also raised by Senator Yussuf (ISG) at a BANC committee.

GST/HST Treatment of Payment Card Clearing Services (Part 2(d))

• The Canadian Bankers Association (CBA) expressed major concerns about the payment card clearing services measures, specifically Part 2, clauses 114 to 116, which retroactively amend the Excise Tax Act. The CBA expressed concern that the retroactivity was unprecedented and criticized the Department of Finance for a lack of consultation before introducing the measures in C-47. However, in response to questions from Senator Loffreda (ISG), Finance officials explained that there had been discussions with banks regarding this measure.
• *Bullet redacted.*

Alcohol Excise Duty (Excise Act and Excise Act, 2001) (Part 3, Division 1)

• Questions on this measure centred on the impact the Excise Tax has on local and small breweries and distilleries. Senator Forest (ISG) noted that he opposes the automatic increase of the Excise Tax, and asked stakeholders if the tax contributed to any significant price difference between large scale and local spirits.

Other Measures of Interest to NFFN Members

• Reporting Rules for Platform Operators (Part 1(n))
  • Senator Galvez (ISG) asked if the government has data on e-commerce transactions, including which platforms are used, where they are located, and tax information. Finance officials noted that with the implementation of this measure they will be able to build a database and increase compliance.
• Canada Growth Fund (Part 4, Division 32)
  • Senator Marshall (C) sought clarity from Alex Gray of the Canadian Chamber of Commerce (CCC) on whether members had asked for the creation of the Canada Growth Fund (CGF), Canada Innovation Corporation, or the Strategic Innovation Fund. He responded that they had not. Mr. Gray further indicated his support for the CGF and his trust in PSP Investments, while noting the structure of the CGF seemed unusual.
• Canada Transportation Act – Supporting Rail Competition (Interswitching) (Division 22, Part 4)
  • Senator Marshall (C) inquired whether there were consultations between the government and the Railway Association of Canada.
  • Senator Forest (ISG) asked what the difference is between this pilot the one from 2014 to 2017. The representative from the Canadian Canola Growers Association (CCGA) responded that the proposed measure accounts for differences in the supply chain over the past six years and welcomed it as it could improve competition through increasing the availability of rail service.
• Air Travel Complaints (Division 23, Part 4)
  • Senator Marshall (C) asked who would be responsible for the additional costs of the Air Passengers Protection Act^{Footnote 1}. The representative from the National Airlines Council of Canada responded that it would fall to the airlines.

Other Standing Senate Committees Views on C-47

Standing Senate Committee on Banking, Commerce, and the Economy (BANC)

In its report on C-47, the committee noted the following concerns:

• Treatment of "Mining" of Crypto Assets under the GST/HST (Part 2 (c))
  • The committee is concerned that despite the consultations held by the Department of Finance Canada in 2022 on this topic, there is still ambiguity related to its implementation. The committee suggests that the department consult again with stakeholders, in particular to address concerns of the Digital Asset Mining Coalition.
• External Complaints Body (Bank Act) (Part 4, Division 1)
  • The committee is supportive of this measure but suggests that a deadline, such as one year after Royal Assent of the bill, be considered for the designation of the new external complaints body. 
• Strengthening The Federal Pension Framework (Pension Benefits Standards Act, 1985) (Part 4, Division 2)
  • The committee notes that they do not have sufficient information on this topic, particularly with respect to issues such as the expected market and scale for variable payment life annuities.
• Legislation to Establish the Canada Innovation Corporation (Part 4, Division 7)
  • The committee suggests that the government conduct an evaluation of the Canada Innovation Corporation three years after its establishment to determine whether it has been successful in meeting its mandate and that it publish the results of this in-depth evaluation in its annual report that should be tabled in Parliament.
  • Additionally, the committee notes its expectation that the government will consult with stakeholders, as certain stakeholders to the committee indicated previous consultations were inadequate.

Standing Senate Committee on Energy, the Environment and Natural Resources (ENEV)

• On the Clean Fuels Regulation Fund^{Footnote 2} (Part 4, Division 36), Senators heard from the Canadian Fuels Association, Pembina Institute and Renewable Industries Canada. While these organizations expressed their support for this measure, they noted that it should be used as a last resort for compliance and that there are outstanding questions related to how the fund will operate.

Standing Senate Committee on Fisheries and Oceans (POFO)

• POFO released its report on C-47 and noted that the Oceans Protection Plan (Part 4, Division 21) measures are very technical in nature and should have been introduced through separate legislation rather than through the Budget Implementation Act. Otherwise, no substantive concerns were raised by Senators regarding Division 21.
• When appearing, the Shipping Federation of Canada noted its concerns with subdivision C of the measure:
  • The new obligations for Ship Masters as the consequences of these obligations are unclear.
  • Concerns over the power given to the Minister of Transport, noting that this could be seen as an erosion of the regulatory process.
• Senators did not seem swayed by the witness testimony and asked if the Government consulted with the Canadian Shipping Federation. Officials stated that the organization was consulted over the last year, and that they provided comments on this proposed measure.

Standing Senate Committee on Foreign Affairs and International Trade (AEFA)

• The committee notes in its report that members have no objections to the parts of the bill related to the Preferential Tariff for Developing Countries, Removal of Most-Favoured-Nation Tariff Treatment for Belarus and Russia, Economic Sanction - Special Economic Measures Act, NATO Climate Change and Security Centre of Excellence - Privileges and Immunities (North Atlantic Treaty Organisation) Act, and Subdivision A of the Measures Related to Money Laundering and to Digital Assets and Other Measures.
• However, during their meetings several Senators asked questions about the Money Laundering and Digital Assets measures.  Senator Coyle (ISG) asked Finance officials whether this measure will protect whistleblowers who report wrongdoing. Senator Gerba (GSP) asked officials if the Bill sufficiently addresses concerns raised by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) regarding the use of new technologies such as cryptocurrencies to conduct illicit activity.
• Regarding the Preferential Tariff for Developing Countries (Part 4, Division 4), Senator Deacon focused her questioning on the Least Developed Country Tariff (LDCT) program. She enquired about whether it would remedy the environmental and societal effects of fast fashion, notably underpaid labour, water pollution and micro plastics.

Standing Senate Committee on Legal and Constitutional Affairs (LCJC)

• Senator Simons (ISG) noted her "delight" that Criminal Rate of Interest, Criminal Code (Division 34, Part 4) measure would lower the rate, but she has remaining concerns that the government will need to monitor the industry to ensure that another, or more predatory institution does not emerge to work around the rules.

Standing Senate Committee on National Security, Defence and Veterans Affairs (SECD)

• In its C-47 report, SECD committee members outline their support for the Legislative Amendments Enabling the Canada Border Services Agency's Traveler Modernization Initiative (Customs Act) (Division 24, Part 4), noting that they recognize the benefits that this measure could bring to travelers.
• However, they outlined four areas of concern:
• Privacy - The Canadian Bar Association raised privacy concerns given the authority this measure gives to CBSA to collect and store personal information.
• Differential impacts on various groups of travelers, for example it is important that the technologies adopted do not have a negative impact on people with disabilities or those who choose not to use a digital device when travelling.
• Border security - There is a concern that this measure may reduce the accuracy in conducting risk assessments of passengers.
• Consultations with CBSA officers' union - CBSA representatives noted that the union was not consulted regarding the changes made to the Customs Act.

Standing Senate Committee on Social Affairs, Science and Technology (SOCI)

• Senator Seidman (C) expressed her support for Strengthening Regulatory Oversight of Natural Health Products (Food and Drugs Act) (Division 27, Part 4), noting the importance of monitoring natural health products.
• Regarding The Canadian Dental Care Plan – Reporting Requirements for Employer-Provided Dental Coverage (Division 29, Part 4), Senator Omidvar (ISG) asked how the government will ensure that Canadians who could benefit from the program, but don't file tax returns, will be able to access it.
• Senator Mégie (ISG) raised the concern that employers may no longer provide insurance benefits as a result of the Dental Care Plan.

Standing Senate Committee on Transport and Communications (TRCM)

• In its report on C-47, the committee expressed its support for the Bill, while noting that the Canadian Air Transport Authority (Amendments to the Air Travellers Security Charge Act) , Canada Transportation Act (Strengthening Data Sharing in Trade Corridors and Interswitching), and Strengthening Air Passenger Rights and Data Sharing (Air Travel Complaints) measures have no clear connection to the government budgetary policy, and in the future these types of measures should be included in a separate bill.  

Table 1 : Branch Review: Cost of Measures in Budget Implementation Act 2023, No. 1

Costing Summary of Bill C-47, Budget Implementation Act, 2023, No 1

The total net fiscal impact of measures in the 2023 BIA No. 1 is $7.0 billion over six years (2022-23 to 2027-28) on an accrual basis (yellow shaded cell in attached Annex).

The largest expenditure measures in the bill are the :

• Canada Workers Benefit (CWB) Automatic Advance: $4.0 billion
• Grocery Rebate: $2.5 billion
• Federal-Provincial Fiscal Arrangements Act (Canada Health Transfer): $2.0 billion

The largest revenue raising measures in the bill are:

• Air Travelers Security Charge: -$1.2B
• Hedging and Short Selling by Canadian Financial Institutions: -$0.8B
• GST/HST Treatment of Payment Card Clearing Services: $-$0.2B

Additional information regarding the GST/HST treatment of payment card clearing services measure in C-47

What was the tax treatment situation in 1991 as of the introduction of the GST?

Supplies of financial services are generally GST/HST "exempt". This means GST/HST is not charged on supplies of financial services and the supplier cannot claim input tax credits (ITCs) on their inputs to these services.

However, non-financial inputs to financial services—even if they are essential to those financial services—are taxable. These include, for example, information technology, payment processing and other administrative services where the service provider is generally not at risk.

The federal government has always been clear that payment card clearing services are taxable administrative services and not GST/HST-exempt "financial services". In particular, in a December 5, 1991, press release the Department of Finance announced its intention to make an amendment to the GST/HST legislation (later enacted) in order to clarify that these services are not "financial services" for GST/HST purposes.

For this reason, payment card network operators (e.g., Visa, Interac) have always charged GST/HST on their services (and they were therefore entitled to claim ITCs).

Purchasers of these services (e.g., banks and acquirers) have always paid GST/HST on these services. And since they themselves are providing exempt financial services, they generally cannot claim ITCs to recover the tax (as was and is the policy intent).

What has the tax treatment been since the recent court ruling. How did the law change from 1991?

CIBC disagreed with the government's policy position, so they challenged it in court.

In 2018, the Tax Court of Canada agreed with the government that payment card clearing services are taxable administrative services.

CIBC appealed and in January 2021 the Federal Court of Appeal held that these services are exempt "financial services".

This recharacterization (from taxable to exempt) entitled all purchasers of these services (e.g., banks and acquirers) to stop paying tax going forward AND to file "tax-paid-in-error" rebate claims with the CRA to recover tax that they had paid on these services in the past.

These rebate claims are windfall gains. They relate to transactions that had been negotiated on the basis that the services were taxable (i.e., on the basis that CIBC would pay GST/HST, and that Visa would be entitled to claim ITCs).

The government disagreed with the FCA decision but did not seek leave to appeal to the Supreme Court of Canada *portion of sentence redacted*.

Instead, Finance Canada developed legislative amendments to counteract the adverse decision, which were announced in Budget 2023.

We understand that Visa continued charging GST/HST for some months after the FCA decision on the expectation that the federal government would either seek leave to appeal or would introduce retrospective amendments.

What is C-47 changing since the court ruling?

Bill C-47 reaffirms and restores the government's policy position that payment card clearing services are taxable administrative services by specifically carving payment card clearing services out of the "financial service" definition.

To counteract the FCA decision, the amendments must apply prospectively and retrospectively. However, they generally only apply retrospectively where the parties had treated the supplies as taxable. If the parties had entered into brand new agreements under which payment card clearing services were always treated as exempt (never taxable), the Bill C-47 amendments would not apply.

Retrospective application is necessary to:

• Prevent significant windfall gains (e.g., rebates to banks, as noted above).
• Protect federal and provincial GST/HST/QST revenues. We estimate that, if the amendment were not made, Canada, and the 5 HST provinces would incur total revenue losses *portion of bullet redacted*.
• Protect suppliers (such as Visa and Interac), who correctly claimed ITCs in the past and were at risk of losing them because the FCA recharacterized their supplies as exempt (thus disentitling them to claim ITCs).

What were the windfall payments to banks?

• Windfall gains relate to the "tax-paid-in-error" rebates claims made in respect of past transactions (described in the table of questions below). *Sentences redacted*.

*Table redacted*

Amendments to Bill C-47 (BIA 2023) Adopted by the House Standing Committee on Finance (FINA)

An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023 – Overviews

Table of Contents

• Part 1 - Amendments to the Income Tax Act and Other Legislation
  • Electronic Filing and Certification of Tax Information and Electronic Payments
  • Doubling the Deduction for Tradespeople's Tools
  • Extending the Residential Property Flipping Rule to Assignment Sales (Anti-Flipping Tax)
  • Taxation of Veterans' and Active Members' Benefit
  • Technical Tax Changes - Gottfriedson Class Settlement Agreement
  • Grocery Rebate
  • Automatic Advance for the Canada Workers Benefit
  • Improving Registered Education Savings Plans
  • Registered Disability Savings Plan – Qualifying Family Member Provision
  • Fixing Contribution Errors in Defined Contribution Pension Plans
  • Mandatory Reporting
  • Technical Tax Changes - Dental Program - Taxpayer Information Sharing for Canadian Dental Care Plan
  • Hedging and Short Selling by Canadian Financial Institutions
  • Reporting Rules for Platform Operators
  • Supplementary Reporting for Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF)
  • Borrowing by Registered Pension Plans
  • Technical Amendments to the Income Tax Act
• Part 2 - GST / HST Measures
  • Treatment of "Mining" of Crypto Assets Under the GST/HST
  • GST/HST Treatment of Payment Card Clearing Services
  • Pension Rebate Limitation Period Fix
  • Freight Transportation of Money (GST/HST)
• Part 3 – Amendments to the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act
  • Alcohol Excise Duty [Excise Act and Excise Act, 2001 (Alcohol Products)]
  • Canadian Air Transport Security Authority (Amendments to the Air Travelers Security Charge Act) [Air Travellers Security Charge Act (Charge Rates)]
• Part 4 - Various Measures
  • A Fairer External Complaints Handling System for Banking (External Complaints Body)
  • Strengthening the Federal Pension Framework (Pension Benefits Standards Act, 1985)
  • Combatting Money Laundering and Terrorist Financing (Measures Related to Money Laundering and to Digital Assets and Other Measures)
  • Supporting the Economic Growth of Developing Countries (Preferential Tariff for Developing Countries)
  • Indefinite Withdrawal of Most-Favoured-Nation Status from Russia and Belarus [Removal of Most-Favoured-Nation Tariff Treatment for Belarus and Russia]
  • Bank of Canada Negative Equity (Non-Application of Sections 27 and 27.1 of the Bank of Canada Act)
  • Legislation to Establish the Canada Innovation Corporation (Canada Innovation Corporation Act)
  • Canada Health Transfer [Federal-Provincial Fiscal Arrangements Act (Canada Health Transfer)]
  • Equalization and Territorial Formula Financing (TFF) Renewal (Federal-Provincial Fiscal Arrangements Act (Equalization and Territorial Financing Renewal and Other Amendments)
  • Changes to Canada's Sanctions Regime (Economic Sanctions - Special Econimic Measures Act)
  • NATO Climate Change and Security Centre of Excellence Privileges and Immunities (North Atlantic Treaty Organisation) Act]
  • Service Fees Act Amendments (Service Fees)
  • Allowing Use of Canada Revenue Agency - Collected Data for Canada Pension Plan Analysis and Evaluation
  • Timely Sharing of Death Information in Employment and Social Development Canada (Department of Employment and Social Development Act)
  • Death or Disappearance of a Child (Canada Labour Code)
  • Electronic Submission of Asylum Claims [(Immigration and Refugee Protection Act (Claims For Refugee Protection)]
  • Improving Client Service in the Private Sponsorship of Refugees Program [Immigration and Refugee Protection Act (Sponsorship Applications)]
  • Better Protecting Immigration and Citizenship Clients (College of Immigration and Citizenship Consultants Act)
  • Citizenship Act Modernization (Citizenship Act)
  • Yukon Act Amendments (Yukon Act)
  • Enhancing the Management of Marine Emergencies and Pollution and Establishing a Vessel Remediation Fund (Oceans Protection Plan)
  • Strengthening Data Sharing in Trade Corridors
  • Supporting Rail Competition
  • Strengthening Air Passenger Rights and Data Sharing (Air Travel Complaints)
  • Legislative Amendments Enabling the Canada Border Services Agency's Traveller Modernization Initiative (Customs Act)
  • Modernizing the National Research Council (National Research Council Act)
  • Amendments to the Patent Act (Patent Act)
  • Strengthening Regulatory Oversight of Natural Health Products [Food and Drugs Act (Natural Health Products)]
  • Banning Cosmetic Testing on Animals [Food and Drugs Act (Cosmetics Testing on Animals)
  • The Canadian Dental Care Plan - Reporting Requirements for Employer-Provided Dental Coverage (Dental Care Measures Act)
  • Amendment to Address the Supreme Court of Newfoundland and Labrador Decision in R. v. Gorman (Canada Post Corporation Act)
  • Royal Titles (Royal Style and Titles Act, 2023)
  • Canada Growth Fund
  • Modernizing Financial Sector Oversight to Address Emerging Risks (Legislation Related to Financial Institutions)
  • Cracking Down on Predatory Lending (Criminal Rate of Interest – Criminal Code)
  • Continuing to Support Seasonal Employment Insurance Claimants (Employment Insurance Act)
  • Clean Fuels Regulation Fund (Canadian Environmental Protection Act, 1999) (Canadian Environmental Protection Act, 1999)
  • Deposit Insurance (Canada Deposit Insurance Corporation Act
  • Improving the Recourse Processes for Employment Insurance Appeals (Employment Insurance Board of Appeal)
  • Canada Elections Act

Part 1 - Amendments to the Income Tax Act and Other Legislation

Electronic Filing and Certification of Tax Information and Electronic Payments

In order to facilitate electronic filing, this measure would make several amendments to the Income Tax Act, Income Tax Regulations, Excise Tax Act, Excise Act, 2001, Tax Rebate Discounting Act, Air Travellers Security Charge Act, Part 1 of the Greenhouse Gas Pollution Pricing Act, and Electronic Filing and Provision of Information (GST/HST) Regulations. These proposed measures would improve the Canada Revenue Agency's ability to operate digitally, resulting in faster, more convenient and accurate service, while also enhancing security.

The following changes would be made:

• Eliminate the legislative requirement for handwritten signatures, allowing for the use of electronic signatures on specific forms. (Would come into force on January 1, 2024).
• Allow for an individual's Notice of Assessment (NOA) to be sent electronically only where the individual files electronically and consents to receive notices and other communications electronically. (Would come into force on January 1, 2024).
• Lower the threshold for mandatory electronic filing of prescribed information returns from fifty to five slips. (Would apply in respect of information returns filed after 2023).
• Allow issuers to provide an electronic version of T4/T5 tax information slips in the electronic account of the recipient without having to also issue a paper copy, unless recipients request a paper copy for these slips, or online portals are unavailable. (Would apply in respect of information returns filed after 2021).
• For tax preparers charging a fee to prepare tax returns, the threshold to file electronically and register as a tax preparer would be lowered from ten to five individual, corporate or trusts returns. The limit on the number of paper returns that can be filed by a tax preparer would be reduced to a maximum of five, rather than ten. (Would come into force on January 1, 2024).
• Eliminate the existing mandatory electronic filing (MEF) thresholds in gross revenue for corporate income tax returns and taxable supplies for GST/HST, and require that all corporations and registrants file electronically, after a phased-in approach from paper to digital, to allow businesses to adjust and comply with the requirement. (Would apply starting in 2024).
• Introduce mandatory electronic payments for remittances over $10,000 under the Income Tax Act; and lower the threshold for mandatory remittances at a financial institution from $50,000 to $10,000, in the GST/HST portion of the Excise Tax Act, the Excise Act, 2001, the Air Travellers Security Charge Act and Part 1 of the Greenhouse Gas Pollution Pricing Act, while also allowing such payments to be made electronically. (Would apply in respect of payments or remittances made after 2023).

Doubling the Deduction for Tradespeople's Tools

The tradespeople's tool expense deduction provides tax recognition for the extraordinary cost of tools that employed tradespeople must provide as a condition of employment. Under current rules, a tradesperson can claim the amount of eligible tool expenses that exceeds the Canada Employment Credit ($1,368 in 2023), up to a maximum of $500.

The proposal would increase the maximum deduction for tradespeople's tools from $500 to $1,000, effective for the 2023 and subsequent taxation years.

Extending the Residential Property Flipping Rule to Assignment Sales (Anti-Flipping Tax)

The Residential Property Flipping Rule helps ensure that profits from flipping residential real estate are taxed as business income. This rule would be extended to profits arising from the sale of a right to purchase a residential property.

Specifically, any person who realizes a gain on the sale of a right to purchase a residential property would be deemed to carry on a business with respect to this right if it was owned for less than 365 days (12-month holding period). Accordingly, this gain would be subject to full taxation as business income, which means that it would not benefit from the 50-per-cent capital gains inclusion rate. The exceptions applying to the Residential Property Flipping Rule would also apply to this extension. They include certain life-event circumstances, such as a death, disability, the birth of a child, a new job, a divorce, a threat to personal safety, and the destruction of the property.

The 12-month holding period would reset once a taxpayer secures ownership of the property. This would ensure the Residential Property Flipping Rule cannot be bypassed when selling a constructed property simply because a taxpayer held the right to purchase the property before it was constructed.

This extended rule would not change the tax treatment for an individual who is already considered to be carrying on a business under existing law. Similarly, where the rule does not apply because of a life event or because a right to purchase a property was owned for 12 months or more, whether profits from the disposition are properly taxed as business income would depend on all the relevant facts. This would be determined in accordance with existing law.

The extension of the Residential Property Flipping Rule would apply in respect of transactions occurring on or after January 1, 2023.

Taxation of Veterans' and Active Members' Benefit

Veterans Affairs Canada and the Department of National Defence provide a number of tax-free benefits to ill and injured veterans and service members, and their families. While these benefits have always been treated as tax-free, they are not explicitly excluded from income under the Income Tax Act. To clarify and confirm their tax-free status, the government proposes to amend the Income Tax Act to exclude the following benefits from a taxpayer's income:

• benefits provided under the Veterans Health Care Regulations,
• rehabilitation services and vocational assistance,
• home modifications benefit,
• home modifications move benefit,
• vehicle modifications benefit,
• home assistance benefit,
• attendant care benefit,
• caregiver benefit,
• spousal education upgrade benefit,
• funeral and burial expenses benefit,
• next of kin travel benefit, and
• education expense reimbursement for ill and injured members.

This measure would apply effective for the 2021 and subsequent taxation years in respect of education expense reimbursement for ill and injured members, and effective for the 2018 and subsequent taxation years in respect of all other benefits.

Technical Tax Changes - Gottfriedson Class Settlement Agreement

On January 18, 2023, the government entered into the Gottfriedson Band Class Settlement Agreement. This agreement relates to a class action proceeding on behalf of 325 Indian Act bands and Indigenous self-governments, regarding the social and cultural harm caused to Indigenous communities by the Indian Residential School system.

The Settlement Agreement, which was approved by the court in March 2023, provides for establishment of a $2.8 billion trust for the benefit of the 325 Indian Act bands and Indigenous self-governments, with a focus on promoting Indigenous languages, cultures, heritage and wellness.

The Settlement Agreement committed the government to make best efforts to exempt income earned by the trust from taxation.

This measure, therefore, would amend the Income Tax Act to exclude the income of the trust established under the Gottfriedson Band Class Settlement Agreement from taxation, in order to fulfill the tax treatment commitment of the Settlement Agreement. The amendment would apply beginning with the 2023 taxation year.

Grocery Rebate

This measure provides temporary financial support for low- and modest-income Canadians through a special, one-time Grocery Rebate delivered through the Goods and Services Tax (GST) Credit system.

The Grocery Rebate would be equivalent to doubling the GST Credit for six months. It would be based on eligibility to the GST Credit in January 2023 and would automatically be delivered by the Canada Revenue Agency. The additional support would be paid as soon as possible following the passage of this Bill, using the GST Credit system.

Automatic Advance for the Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers making work more rewarding and attractive for this group and providing an important source of income support. An individual claims the CWB when completing their tax return, but filers are automatically assessed by the Canada Revenue Agency (CRA) for eligibility if the CWB is not claimed.

This measure would automatically issue quarterly advance payments of the CWB to those who qualified for the benefit in the previous year, starting in July 2023 for the 2023 taxation year. These advance payments would generally total half of the previous year's entitlement and would represent a minimum entitlement for the year. That is, an individual may be entitled to more at the end of the year, which would be provided when filing their tax return, but their entitlement at the end of the year would not be less than their advance payment entitlement for the year.

Improving Registered Education Savings Plans

Registered Education Savings Plans (RESPs) are tax-assisted savings vehicles designed to help families accumulate savings for the post-secondary education of their children. Contributions to RESPs may be eligible for government matching grants. When an RESP beneficiary is enrolled in an eligible post-secondary program, government grants and investment earnings can be withdrawn from the plan as Educational Assistance Payments.

To help ensure that Educational Assistance Payments are used to fund expenses related to post-secondary education, the Income Tax Act places limits on the maximum amount of Educational Assistance Payments that can be withdrawn under the terms of an RESP. This measure would amend the Income Tax Act to raise the limits on Educational Assistance Payment withdrawals as follows:

• for beneficiaries enrolled full-time (i.e., in a program of at least three consecutive weeks' duration requiring at least ten hours per week of courses or work in the program), the withdrawal limit in the first 13 weeks of study would increase from $5,000 to $8,000; and
• for beneficiaries enrolled part-time (i.e., in a program of at least three consecutive weeks' duration requiring at least 12 hours per month of courses in the program), the withdrawal limit per 13-week period would increase from $2,500 to $4,000.

Additionally, this measure would amend the Income Tax Act to enable divorced or separated parents to open joint RESPs for their child or children and to move an existing joint RESP to another promoter.

These changes would come into force on March 28, 2023.

Registered Disability Savings Plan – Qualifying Family Member Provision

Registered Disability Savings Plans (RDSPs) are tax-assisted savings vehicles for people who are eligible for the Disability Tax Credit. To encourage saving in an RDSP, the government supplements private contributions with Disability Savings Grants and Bonds.

Since the assets held in an RDSP are the property of its beneficiary, the plan holder must be the beneficiary, unless they have mental disabilities and their ability to enter into an RDSP contract is in doubt, in which case the plan holder must be their legal representative for matters of property as recognized under provincial/territorial law.

The existing temporary RDSP Qualifying Family Member provision provides a way for a parent, spouse or common-law partner to open and manage an RDSP for an adult whose capacity to enter into an RDSP agreement is in doubt and who does not have a legal representative.

This proposal would amend the Income Tax Act to extend the Qualifying Family Member provision by three years, to December 31, 2026, and expand the definition of a qualifying family member to include a sibling of the beneficiary. After the expiry date, any existing qualifying family member plan holder would be allowed to remain the plan holder.

The expansion of the qualifying family member definition would apply as of royal assent.

Fixing Contribution Errors in Defined Contribution Pension Plans

The rules in the Income Tax Act do not currently permit pension plan administrators to accept retroactive contributions to employee accounts under a defined contribution pension plan in order to correct under-contribution errors in respect of prior years. Although in some circumstances over-contribution errors may be corrected by refunding the excess to the contributor, these rules have been found to be cumbersome.

This measure provides more flexibility to plan administrators of defined contribution pension plans to correct for both under-contributions and over-contributions. The measure permits certain types of errors to be corrected via additional contributions to an employee's account under a defined contribution pension plan to compensate for an under-contribution error made in any of the preceding 10 years, subject to a dollar limit. The measure also permits plan administrators to correct an employee's RRSP contribution limit for pension over-contribution errors in respect of an employee for any of the 10 years prior to the year in which the excess amount is refunded to the employee or employer, as the case may be, who made the contribution.

To simplify reporting requirements, the measure requires the plan administrator to file a prescribed form in respect of each affected employee, rather than to amend T4 slips for prior years. Additional contributions to correct for under-contributions would reduce the employee's RRSP contribution room for the taxation year following the year in which the retroactive contribution is made. To the extent this results in negative RRSP room, it would only impact the employee's contributions in future years. Refunds of over-contributions would generally restore the employee's RRSP contribution room for the taxation year in which the refund is made.

Mandatory Reporting

The Income Tax Act contains rules requiring that certain transactions related to aggressive tax planning strategies be reported to the Canada Revenue Agency (CRA). Early access to information on these transactions provides the government with the opportunity to respond quickly to tax risks through informed risk assessments, audits and changes to legislation. However, the CRA's experience with these rules since their introduction indicates that they are not sufficiently robust to address these concerns.

Budget 2021 announced a consultation on proposals to enhance these mandatory disclosure rules.

This measure enacts changes resulting from the consultation, which are intended to align Canada's rules with the best practices recommended by the Base Erosion and Profit Shifting Project, Action 12: Final Report of the Organisation for Economic Co-operation and Development and the Group of 20 in relation to mandatory disclosure rules, and similar rules which have been implemented in jurisdictions with comparable tax systems.

These changes are intended to broaden the scope of reporting obligations in the case of transactions that are perceived to be aggressive or high-risk from a tax compliance perspective. These changes include:

• lowering the thresholds for transactions to be considered reportable transactions, which are identified through the existence of generic hallmarks in relation to fees, confidential protections and contractual protections;
• the creation of a new requirement to report notifiable transactions, which are the same as (or substantially similar to) transactions designated by the Minister of National Revenue, with the concurrence of the Minister of Finance;
• the creation of a new requirement for certain large corporations to report uncertain tax treatments (i.e., where there is uncertainty over whether the tax filing position will be accepted as being in accordance with tax law) that are generally reflected in their audited financial statements; and
• related rules providing for, in certain circumstances, the extension of the applicable reassessment period and the introduction of penalties.

These changes apply to transactions entered into after royal assent of this bill, except that the changes to rules for uncertain tax treatments apply to taxation years that begin after 2022.

Technical Tax Changes - Dental Program - Taxpayer Information Sharing for Canadian Dental Care Plan

To ensure that taxpayer information is safeguarded, the income tax rules limit the use and disclosure of taxpayer information by the Canada Revenue Agency (CRA) to specific circumstances.

To support implementation of the Canada Dental Benefit, which is the interim dental care program for under 12-year-olds launched in 2022, the Income Tax Act and other tax statutes were amended as part of Bill C-31 to permit the CRA to use taxpayer information to administer and enforce the program and share taxpayer information with Health Canada for the evaluation or formulation of policy for the program.

Since those amendments only apply to the Canada Dental Benefit Act, which is the legislation for the interim Canada Dental Benefit, similar amendments are proposed to the Income Tax Act, Excise Tax Act and the Excise Act, 2001 in order for Health Canada and Employment and Social Development Canada to access taxpayer information for the purposes of delivering the permanent Canadian Dental Care Plan.

These measures would come into force upon royal assent.

Hedging and Short Selling by Canadian Financial Institutions

The Income Tax Act generally permits a Canadian corporation, in computing its taxable income, to claim a deduction (the "dividend received deduction") for the amount of a taxable dividend received on a share (a "Canadian share") that it holds in another Canadian corporation.

This measure was proposed in Budget 2022 and would deny the dividend received deduction for dividends received on Canadian shares where members of a Canadian financial institution group enter into transactions that effectively eliminate the group's economic exposure to the shares through the use of a physical short sale (a "specified hedging transaction"). This would prevent the unintended tax consequences that result from specified hedging transactions where more than one tax deduction is be claimed in respect of the same dividend.

Where a dividend received deduction is denied in respect of the shares in a specified hedging transaction, the proposal would also allow the registered securities dealer to claim a full deduction (instead of the current two thirds deduction) for any dividend compensation payment that it makes under a securities loan facilitating the short sale. Consequently, where a Canadian financial institution group receives a $90 dividend and a registered securities dealer in the group makes a $90 dividend compensation payment (leaving the group economically flat), the new rule would result in that group having a $90 income inclusion and an offsetting $90 deduction rather than a $90 income inclusion and a $150 deduction (a $90 dividend received deduction plus a $60 dividend compensation payment deduction).

The measure would apply to dividends received on or after April 7, 2022, or to dividends received after September 2022 where the specified hedging transaction was entered into before April 7, 2022.

Reporting Rules for Platform Operators

This measure would implement rules for tax reporting by digital platform operators with respect to users (platform sellers) who provide goods or certain services to other users through those platforms. These rules are in line with the OECD model rules and would enhance compliance in that sector. The information reported through this measure would help platform sellers in understanding the tax implications of their activities, and also provide the Canada Revenue Agency (CRA) with more tools to identify non-compliance.

The information sharing rules would fit into the OECD's information sharing framework, which is designed to minimize administrative burden by providing for the sharing of information between tax administrations. An online platform would generally need to report information to only one jurisdiction, and that jurisdiction would then share the information with partner jurisdictions based on the residence of each platform seller earning revenue through the platform (and, in the case of a rental property, the jurisdiction where the rental property is located). The exchanges would take place under the exchange of information provisions in tax treaties and similar international instruments, which provide important safeguards to protect taxpayer confidentiality and ensure that the exchanged information is not used inappropriately.

This measure would require platform operators subject to the rules (reporting platform operators) that provide support to reportable sellers for relevant activities to determine the jurisdiction of residence of their reportable sellers and report certain information on them. The conditions for qualifying as a reportable seller and relevant activity are discussed below.

The rules are targeted at online platforms of the sharing and gig economy, as well as platforms that allow third parties to sell goods to users through their platform. The rules would generally exclude pure payment processors, classified ads boards, and online aggregators.

The measure would generally apply to platform operators that are resident for tax purposes in Canada. The measure would also apply to platform operators that are not resident in Canada or a partner jurisdiction and that facilitate relevant activities by sellers resident in Canada or with respect to the rental of immovable property located in Canada. A partner jurisdiction would be a jurisdiction that has implemented similar reporting requirements on platform operators and that has agreed to exchange information with the CRA on reportable sellers.

For the purposes of this measure, relevant activities would be comprised of the sale of goods and the provision of the following services:

• personal services, for example, transportation and delivery services, manual labour, tutoring, data manipulation and clerical, legal or accounting tasks;
• the rental of immovable property (e.g., residential property); and
• the rental of means of transportation.

A reportable seller would be an active seller who is registered on a platform to provide relevant activities. Sellers that represent a limited compliance risk would not be reportable sellers. These include:

• publicly traded entities;
• large providers of hotel accommodation; and
• with respect to the sales of goods, sellers who make less than 30 sales a year for a total of not more than $2,800.

This measure would apply as of the 2024 calendar year. This would allow the first reporting and exchange of information to take place in early 2025.

Supplementary Reporting for Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF)

Financial institutions are currently required to report annually to the Canada Revenue Agency the payments out of, and contributions to, each registered retirement savings plan (RRSP) and registered retirement income fund (RRIF) that they administer.

The new tax measure would require financial institutions to annually report to the Canada Revenue Agency the total fair market value, determined at the end of the calendar year, of property held in each RRSP and RRIF that they administer, starting in early 2024 in respect of the 2023 calendar year.

Collecting information about fair market values in all RRSPs and RRIFs in Canada will provide an important database for risk-assessment and policy purposes.  Of note, this information would assist the Canada Revenue Agency in its risk-assessment activities regarding qualified investments held by RRSPs and RRIFs.

Borrowing by Registered Pension Plans

Registered pension plans are generally restricted from borrowing money, with two exceptions. The first exception is borrowing money to acquire income producing real property. The second is borrowing for periods not exceeding 90 days, where plan assets are not pledged as collateral, and the borrowing is necessary to avoid the distressed sale of plan assets.

This measure would allow defined benefit registered pension plans to borrow additional money (in excess of what is permitted under the current rules) equal to 20% of the plan's net assets. Additional borrowing under this new rule would be prohibited at any time that a defined benefit plan's funded ratio (assets to liabilities) exceeds 125%. Registered pension plans could also continue to borrow pursuant to the existing two tests described above.

Plan administrators would need to continue complying with the provisions of federal or provincial pension benefit standards legislation that ensure that investments are made in a reasonable and prudent manner and that the plan is funded in accordance with prescribed funding standards.

This measure would apply to amounts borrowed on or after April 7, 2022.

Technical Amendments to the Income Tax Act

This measure would implement several technical amendments to the Income Tax Act. The changes are highly technical in nature, and are generally intended to align the law with its intended policy. They generally fall into the following categories:

• Amendments that correct drafting errors or clarify uncertainties, including typographical errors and differences between the English and French versions of the Income Tax Act.
• Relieving changes that address situations where the law does not apply appropriately in a particular situation, having regard to the policy objectives of the relevant rules.
• Integrity changes that address deficiencies in the wording of the legislation, and which are generally intended to prevent sophisticated taxpayers from obtaining unintended tax benefits through tax planning.

The coming into force dates for the changes in this measure vary depending on the nature of the change. In general, relieving amendments would have retroactive effect while tightening changes would apply as of the date the proposed amendments were first publicly announced.

Part 2 - GST / HST Measures

Treatment of "Mining" of Crypto Assets Under the GST/HST

Cryptoasset mining is generally the use of computing resources to process transactions of cryptoassets (e.g., Bitcoin).

The measure clarifies the GST/HST treatment of cryptoasset mining by providing that where a person performs mining activities—either solo or as part of a mining pool in which the miners share rewards—that person would not be required to collect tax on the provision of their mining services and also would not be entitled to recover GST/HST paid on inputs to those mining services.

The measure also provides for an exception that applies where the mining services are being provided to an identifiable recipient that is not an operator of a "sharing" mining pool of the miner (i.e., where the miner is not sharing in rewards). In these situations, these new rules do not apply (i.e., the normal GST rules would apply).

The measure also ensures that non-resident persons performing mining activities in Canada do not have a GST/HST advantage over Canadian residents performing the same activities.

The measure comes into force on February 5, 2022.

GST/HST Treatment of Payment Card Clearing Services

Payment card clearing services (e.g., payment processing and messaging services in respect of credit, debit and charge cards) are provided by payment card network operators (such as Visa or Interac), to persons such as a payment card issuer (e.g., a bank). As these services are administrative in nature, it has always been a well-understood policy that the Goods and Services Tax/Harmonized Sales Tax (GST/HST) applies to these services; however, a recent court decision found that GST/HST does not apply.

• Payment card clearing services are not be to confused with payment card-related services supplied to merchants or consumers, such as merchant "swipe fees" (or "interchange fees") and credit card annual fees charged to card holders. These other services are "financial services" that would remain GST/HST-exempt.

This measure clarifies that payment card clearing services are subject to GST/HST.

Specifically, the measure clarifies that payment card clearing services rendered by a payment card network operator are excluded from the GST/HST definition of "financial service" (which are GST/HST-exempt services) to ensure that payment card clearing services generally continue to be subject to the GST/HST.

The measure generally applies to all to supplies of payment card clearing services made (1) after March 28, 2023, the date on which the measure was announced in the Budget; and (2) on or before that date, but only generally where these supplies had previously been treated as taxable.

Pension Rebate Limitation Period Fix

Under the GST/HST, a pension entity of a pension plan (the trust or corporation that holds assets of the pension plan) is entitled to claim a 33-per-cent rebate ("the pension rebate") in respect of GST/HST that is payable by the pension entity to a supplier or that a participating employer of the pension plan is deemed to have collected in respect of the pension plan.

The measure concerns an issue where a pension entity may be denied the pension rebate following an assessment by the Canada Revenue Agency of the participating employer or the supplier and the assessment is issued after the expiry of the two-year time limit for claiming the pension rebate. A similar issue arises with the claiming of an input tax credit by the pension entity in respect of the deemed GST/HST.

The measure addresses this issue by ensuring that a pension entity is not deprived of the pension rebate or an input tax credit in these cases by allowing a pension entity to claim the pension rebate or an input tax credit after the expiry of the normal two-year limitation period.

The measure generally applies prospectively to any claim period or reporting period of a pension entity ending after August 9, 2022. However, a transitional rule allows a pension entity to benefit from these amendments in respect of the deemed tax remitted by an employer prior to the August 9, 2022 announcement of draft legislation so long as the employer notifies the pension entity of the employer's assessment and net tax adjustment in respect of deemed tax within one year after the later of (i) the date of the assessment, (ii) the date the employer remitted the deemed tax in its net tax and (iii) the date these amendments receive Royal Assent.

Freight Transportation of Money (GST/HST)

Under the Goods and Services Tax/Harmonized Sales Tax (GST/HST), international freight transportation services are generally zero-rated (i.e., relieved of tax).

This relief measure is based in part on the definition of a "freight transportation service", which currently reads as follows:

"freight transportation service" means a particular service of transporting tangible personal property […]

Canada Revenue Agency officials have determined that this definition does not encompass a service of transporting physical forms of money, such as bank notes or cheques. This is because money is not "property" under the GST/HST and thus is not "tangible personal property." Therefore, a service of internationally transporting physical forms of money is not zero-rated under the current rules.

The exclusion of money from the freight transportation service rules reflects an inadvertent legislative gap, as there is no policy basis for applying the GST/HST to the international transportation of money (but not to other property).

Therefore, an amendment is proposed to the GST/HST freight transportation services rules that would broaden the scope of those rules to include a service of transporting money in physical form. The estimated fiscal cost of the proposed amendment is around $600,000.

The amendment would apply prospectively to supplies of freight transportation services made after August 9, 2022 (the date of announcement). It would also apply retroactively to supplies made on or before that date if tax was not charged or paid in respect of the supply.

Part 3 – Amendments to the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act

Alcohol Excise Duty [Excise Act and Excise Act, 2001 (Alcohol Products)]

Alcohol excise duties are automatically indexed to total Consumer Price Index (CPI) inflation on April 1 of each year.

The measure temporarily caps the inflation adjustment for excise duties on beer, spirits and wine at 2 per cent, for one year only, as of April 1, 2023.

Canadian Air Transport Security Authority (Amendments to the Air Travelers Security Charge Act) [Air Travellers Security Charge Act (Charge Rates)]

Part 3 amends the Air Travellers Security Charge Act to implement the rate change announced in Budget 2023.

The Air Travellers Security Charge (ATSC) is paid by passengers when purchasing airline tickets. The purpose of the ATSC is to fund the air travel security system.

This measure increases the ATSC rates by 32.85 per cent. This means, for example, that the charge on a return trip within Canada would increase from $14.96 to $19.87.

This measure would apply to air travel on or after May 1, 2024, for which any payment is made on or after that date.

Part 4 - Various Measures

A Fairer External Complaints Handling System for Banking (External Complaints Body)

To ensure Canadians have access to a fair and impartial process to address unresolved complaints with their banks, this measure proposes legislative amendments to strengthen the external complaints handling system for banks and put in place a single, non-profit, External Complaints Body (ECB). This measure, which was first announced in Budget 2022, fulfills a mandate letter and a platform commitment.

Division 1 of Part 4 amends the Bank Act to provide for the establishment of a single, non-profit ECB and to introduce new legislative amendments to strengthen the external complaints handling system for banks. In particular, the proposed legislation includes a set of new oversight and enforcement authorities for the Financial Consumer Agency of Canada (FCAC) Commissioner that will help improve the performance and accountability of the ECB system and increase consumer trust in it. This measure will come into force upon Royal Assent. The FCAC will undertake a selection process to recommend a body corporate for the Minister of Finance's designation after which there will be a sole ECB following a transition period.

Strengthening the Federal Pension Framework (Pension Benefits Standards Act, 1985)

Division 2 of Part 4 amends the Pension Benefits Standards Act, 1985 (PBSA) and the Pooled Registered Pension Plans Act (PRPPA) to allow federally regulated pension plans and pooled registered pension plans to establish and offer a variable payment life annuity (VPLA) to plan members at retirement and to make technical housekeeping amendments.

VPLAs are new retirement income vehicles that offer members of defined contribution pension plans and pooled registered pension plans the option of a lifetime stream of retirement income, the payments of which would be adjusted periodically, based on investment returns and changes in life expectancies of participants.

VPLAs are intended to enhance the retirement security of Canadians by reducing the risk of outliving retirement savings.

Combatting Money Laundering and Terrorist Financing (Measures Related to Money Laundering and to Digital Assets and Other Measures)

• The Government of Canada is committed to providing a strong Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime that protects Canadians and the financial system.
• Budget 2023 proposes legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the Criminal Code to strengthen Canada's ability to combat financial crimes and emerging risks, including those stemming from foreign interference and other national security threats. The proposed measures would fulfil a commitment from Budget 2022 to strengthen AML/ATF investigations, prosecutions, and information sharing tools.

Improve Investigation, Enforcement, and Information Sharing Tools

• Budget 2023 announces the government's intention to introduce legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the Criminal Code to strengthen the investigative, enforcement, and information sharing tools of Canada's AML/ATF Regime.
• Unless noted otherwise, these provisions would come into force upon Royal Assent.
• The PCMLTFA amendments would:
  • Improve financial intelligence information sharing between law enforcement and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
  • Introduce a new offence for structuring transactions to avoid FINTRAC reporting.
  • Strengthen the registration framework for money service businesses to prevent their abuse. This measure would come into force on a day to be fixed by order of the Governor in Council.
  • Criminalize the operation of unregistered money services businesses. This measure would come into force one year from Royal Assent to give businesses time to become familiar with the change.
  • Establish powers for FINTRAC to disseminate strategic analysis related to the financing of threats to the safety of Canada.
  • Provide whistleblowing protections for employees who report information to FINTRAC.
  • Broaden the use of non-compliance reports by FINTRAC in criminal investigations, allowing law enforcement and prosecutors to use these reports in a wider array of criminal investigations and prosecutions, such as money laundering.
  • Expand the designated information that FINTRAC is allowed to disclose to law enforcement when it has reasonable grounds to believe that the information would be relevant to investigating or prosecuting a money laundering or terrorist financing offences.
  • Set up obligations for the financial sector to report information on sanctioned assets to FINTRAC. This measure would come into force on a day to be fixed by order of the Governor in Council.
• The Criminal Code amendments would:
  • Give law enforcement the ability to seize digital assets that may be confiscated as proceeds of crime. As a result of this Criminal Code reform, related amendments would also be made to the Parliament of Canada Act, the Mutual Legal Assistance in Criminal Matters Act, and the Seized Property Management Act.
  • Enhance the ability of Attorneys General to obtain, through judicial authorization, disclosure of tax information from the Minister of National Revenue for the purposes of investigating offences that give rise to proceeds of crime, by expanding the number of offences for which this measure would be available.
  • The Criminal Code measures and its related amendments would come into force ninety days after Royal Assent.

Modernizing Financial Sector Oversight to Address Emerging Risks (Protect National Security and Prevent Foreign Interference)

• Budget 2023 also announces the government's intention to amend the financial institutions statutes (Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Office of the Superintendent of Financial Institutions Act), and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to modernize the federal financial framework to address emerging risks.
• Unless noted otherwise, these provisions would come into force upon Royal Assent.
• As it relates to the PCMLTFA, the legislative changes propose to:
  • Provide new powers to allow the Minister of Finance to impose enhanced due diligence requirements to protect Canada's financial system from the financing of national security threats.
  • Allow the Director of FINTRAC to share intelligence analysis with the Minister of Finance to help assess national security or financial integrity risks posed by financial entities. This measure would come into force on a day to be fixed by order of the Governor in Council.
  • Improve the sharing of compliance information between FINTRAC, the Office of the Superintendent of Financial Institutions (OSFI) and the Minister of Finance.
  • Designate OSFI as a recipient of FINTRAC disclosures pertaining to threats to the security of Canada, where relevant to OSFI's responsibilities.

Technical Amendments (FINTRAC Funding)

• Budget 2023 proposes a technical amendment to the Budget Implementation Act, 2021, No. 1 to clarify that FINTRAC should not ascertain and assess its compliance program costs against the persons and entities they regulate until regulations specifying the assessment fees are published and brought into force. This amendment will allow for the launch of the assessments scheme for 2024-25.

Part 4 – Division 10 - Economic Sanctions (Special Economic Measures Act)

Consequential Amendment

• This targeted amendment to the PCMLTFA is intended to support Global Affairs Canada's (GAC) efforts to make, administer or enforce orders or regulations under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act.
• FINTRAC would be authorized to disclose information to GAC when FINTRAC has reasonable grounds to suspect there is money laundering/terrorist financing.

Supporting the Economic Growth of Developing Countries (Preferential Tariff for Developing Countries)

This measure renews Canada's non-reciprocal tariff programs for goods imported from developing countries. Specifically, this measure amends the Customs Tariff to: (1) renew the General Preferential Tariff (GPT) and the Least Developed Country Tariff (LDCT) programs from January 1, 2025 to December 31, 2034; (2) establish a new General Preferential Tariff Plus (GPTP) tariff program over the same period; and (3) simplify the direct shipment requirements under all of Canada's programs.

The new GPTP program builds on Canada's inclusive trade agenda and will incentivize countries to adhere to international standards on human rights, labour conditions, gender equality, and climate change.

The GPT and LDCT will be renewed, and the GPTP established, when this Act comes into force. The regulations on direct shipment requirements will come into force on a day to be fixed by order of the Governor in Council.

Indefinite Withdrawal of Most-Favoured-Nation Status from Russia and Belarus [Removal of Most-Favoured-Nation Tariff Treatment for Belarus and Russia]

This measure amends the Customs Tariff to indefinitely extend the withdrawal of Most-Favoured-Nation (MFN) preferential tariff treatment for Russian and Belarusian imports. This measure achieves the policy objective of providing a clear market-based signal to incentivize importers to source away from imports from Russia and Belarus. The permanent withdrawal reflects the enduring nature of the conflict and aligns with similar trade and tariff measures adopted by Canada's allies.

This measure comes into force upon the expiry of the Most-Favoured-Nation Tariff Withdrawal Order (2022-2).

Bank of Canada Negative Equity (Non-Application of Sections 27 and 27.1 of the Bank of Canada Act)

Division 6 of Part 4 allows the Bank of Canada (Bank) to temporarily withhold remittances until negative equity associated with the Government of Canada Bond Purchase Program (GBPP) has been restored.

In response to financial market stress arising from the COVID-19 pandemic, the Bank introduced in March 2020 the GBPP, Canada's first QE program. Under the GBPP, the Bank purchased Government of Canada bonds in the secondary market and created settlement balances to pay for the purchases.

As interest rates rise, the variable interest (based on the policy rate) the Bank pays on the settlement balances it created to purchase government securities under GBPP has exceeded the fixed interest it receives on the bonds it purchased, so the Bank is now incurring net interest losses.

S. 27 of the Bank of Canada Act requires the Bank to remit any surplus or profits it generates in a particular year. Division 6 of Part 4 overrides section 27 of the Bank of Canada Act, effectively allowing the Bank to retain future profits until such time as it the Bank's GBPP losses are covered, which would facilitate it to exit negative equity.

The proposed solution is similar to the one taken in Australia, where the Reserve Bank of Australia will be withholding future remittances to offset negative equity due to losses from quantitative easing. In the US, the Federal Reserve also uses future income and remittances to cover losses from quantitative easing.

Legislation to Establish the Canada Innovation Corporation (Canada Innovation Corporation Act)

Announced in Budget 2022, and reaffirmed in the 2022 Fall Economic Statement and the CIC Blueprint, the Canada Innovation Corporation's (CIC) mandate is to help solve the problem of low business investment in research and development (R&D) in Canada. Improved business investment in R&D in Canada is needed to foster economic growth, create good jobs in Canada and support Canada's transition to a net-zero economy. Guided by international best practice, the CIC will be established as a Crown corporation with a mandate to maximize Canadian businesses investment in R&D across all economic sectors and regions of Canada to promote innovation-based economic growth, including working with businesses to promote the creation and retention of intangible assets in Canada.

The CIC will be governed by a Board of Directors, and run by a Chief Executive Officer. The day-to-day operations of the CIC will be operationally independent from government, with clear accountability to Parliament through the Minister of Innovation, Science and Industry. The CIC will be a Crown corporation and serve three core functions: foresight and experimentation; provision of advisory services; and, delivery of funding support programming. The National Research Council's Industrial Research Assistance Program (IRAP) will join the CIC over time to build a national-scale platform to support business R&D for firms of all sizes. IRAP will provide a strong foundation upon which the CIC will be able to build a continuum of support, service, and strategy across all sectors and industries in the Canadian economy.

The legislation will come into force on a date to be determined by the Governor in Council. The transfer of IRAP to the CIC will occur on a separate date to be determined by the Governor in Council.

Canada Health Transfer [Federal-Provincial Fiscal Arrangements Act (Canada Health Transfer)]

The legislation proposes to amend the Federal-Provincial Fiscal Arrangements Act to authorize a $2 billion payment to the provinces and territories through the Canada Health Transfer, allocated on an equal per capita basis, to address immediate pressures on the health care system, especially in pediatric hospitals, emergency rooms and surgical and diagnostic backlogs. This authority is for cash transfers out of the Consolidated Revenue Fund.

This funding builds on $6.5 billion in previous one-time top-ups ($500 million in 2019-20, $4 billion in 2020-21 and $2 billion in 2021-22) to the Canada Health Transfer that the Government of Canada has provided to help address the extreme pressures that COVID-19 has put on provincial-territorial health systems, including backlogs of medical procedures.

Equalization and Territorial Formula Financing (TFF) Renewal (Federal-Provincial Fiscal Arrangements Act (Equalization and Territorial Financing Renewal and Other Amendments)

The legislation governing Equalization and Territorial Formula Financing is reviewed on a periodic basis to ensure the programs are meeting their objectives and using the most up-to-date and accurate measures in the determination of provincial and territorial entitlements. The Minister of Finance's authority to make new Equalization and Territorial Formula Financing payments is set to expire on March 31, 2024.

Following consultations with provincial and territorial governments, Budget 2023 proposes to renew these two programs for another five-year period beginning April 1, 2024, along with technical changes to improve the accuracy and transparency of the programs.

Division 9 of Part 4 amends the Federal-Provincial Fiscal Arrangements Act to renew Equalization and Territorial Formula Financing for a five-year period beginning April 1, 2024.

Most of the technical changes will be brought forward through the standard regulatory process. This enactment makes one technical change in respect of renewal by amending the Federal-Provincial Fiscal Arrangements Act to include miscellaneous revenues in revenues to be equalized for all relevant non-resource revenue sources (personal income taxes, business income taxes, consumption taxes and property taxes), rather than including them only with property taxes. In addition, this enactment makes a technical change to the calculation of fiscal stabilization payments.

Changes to Canada's Sanctions Regime (Economic Sanctions - Special Econimic Measures Act)

Canada applies autonomous sanctions against individuals and entities under the Special Economic Measures Act (SEMA), and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA).

In response to Russia's illegal invasion of Ukraine in February 2022, Canada implemented legislative changes to both SEMA and JVCFOA to authorize the Minister of Foreign Affairs to seek forfeiture of seized assets. The forfeited funds can be used in support of reconstruction of a foreign State, to restore international peace and security, and/or as compensation to victims. These amendments received Royal Assent in June 2022.

Over the past year, Canada has expanded its use of sanctions to respond to the situation in Ukraine, but also to impose sanctions against targeted individuals and entities in Haiti, Iran, Sri Lanka, and Myanmar.

Effective implementation of sanctions is a priority for Canada and its allies. An increase in sanctions evasion tactics has been observed over the past year. For example, in March 2023 members of the Russian Elites, Proxies, and Oligarchs (REPO) Task Force (Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Commission) jointly issued a global advisory on Russian sanctions evasion, which includes information on tactics used to evade sanctions.

As a result of both the growing use of sanctions and the necessity to bolster their effectiveness and to counteract sanctions evasion techniques, further amendments to SEMA and JVCFOA are being put forward to clarify certain provisions, make processes more efficient, increase information sharing, and to tighten Canada's sanctions regime.

The first proposed group of amendments, in sections 2 of both SEMA and JVCFOA, aim to clarify the scope of certain sanctions measures, particularly in circumstances where a designated person owns or controls non-designated entities. The amendments clarify that, for the purposes of Canada's autonomous sanctions regimes, any property will be considered to be owned by a designated person if that property is owned or controlled by any entity, whether designated or non-designated, that is itself controlled, directly or indirectly, by a designated person.

These amendments also set out certain criteria according to which a person will be considered to control an entity, including where they own at least 50% of the company, or are able to change the composition or powers of the entity's board of directors or to direct the entity's activities.

The second proposed amendment clarifies that the scope of the Governor in Council's (GIC) authority to seize property does not extend to non-designated persons. Paragraph 4(1)(b) of SEMA and JVCFOA are modified to specify that property can be seized only where it is owned, held or controlled, directly or indirectly, by a person listed in an order or regulation made under paragraph 4(1)(a) of SEMA. For example, the GIC would only be able to seize property of a Russian person if that person was listed under the Special Economic Measures (Russia) Regulations.

Paragraph 4(1)(b) will be amended to include properties owned by either (i) a foreign state, or (ii) any person listed in an order or regulation (instead of only properties owned by a foreign State, a person in that foreign State, or a national of that foreign State who does not reside in Canada).

The third proposed group of amendments streamlines the GIC's ability to list persons in "third" countries that are involved or complicit in the primary State's objectionable conduct in SEMA. The amendments change how such listings are captured in regulation by adjusting provisions to allow for the listing of persons in "third" countries that assist the primary sanctioned State within that State's regulations rather than through making separate regulations for the third country.

To effect these changes, the scope of some provisions in SEMA must be adjusted, as many are drafted in the context of direct links to the primary sanctioned State:

• The prohibited activities listed in paragraphs 4(2)(a) to (c), paragraph 4(2)(e) and paragraphs 4(2)(h) and (i) will be amended to apply to persons outside of Canada who are not Canadian in addition to the foreign State, to persons in that foreign State, and to nationals of that foreign State who do not reside in Canada;
• The list of exceptions in paragraph 5.2(a) to the persons which are still entitled to ranking on the rights and interests they hold on a property subject to an order must also be adjusted to carve out any person that is listed in an order or a regulation.

The fourth proposed amendment clarifies the scope of certain restricted or prohibited activities in subsection 4(2) of SEMA. In particular, it specifies that the transfer of any property to designated individuals is prohibited. The objective of this amendment is to remove any ambiguity and make totally clear that Canada's sanctions legislation captures the widest array of transfers of all types of property.

The fifth proposed group of amendments aims to improve the information-sharing framework related to the making of orders and regulations in both SEMA and JVCFOA, including for property seizure, restraint and forfeiture, between different stakeholders in the federal government. It expands the list of ministers and heads of federal agencies involved in the information-gathering process who are allowed to disclose information with each other. In both subsection 6.1 of SEMA and subsection 7.1 of JVCFOA, the Minister of Transport, the Minister of National Revenue, the Minister of Justice and Attorney General of Canada, and the Minister of Immigration, Refugees and Citizenship are added to this list. These four ministers represent key federal departments that contribute to the making, administration and enforcement of orders or regulations taken under SEMA and JVCFOA.

Subsection 6.2 of SEMA and 7.2 of JVCFOA are also amended to confirm that the Minister of Foreign Affairs can disclose information to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) if it is relevant to the making, administration or enforcement of an order or regulation under SEMA or JVCFOA.

NATO Climate Change and Security Centre of Excellence Privileges and Immunities (North Atlantic Treaty Organisation) Act]

The North Atlantic Treaty Organization (NATO) Alliance, and Canada's leadership role within it, are cornerstones of Canada's international foreign and defence policies, and this role has increased in significance in recent years.

The Protocol on the Status of International Military Headquarters set up pursuant to the North Atlantic Treaty, done at Paris on 28 August 1952 (Paris Protocol), is the standard NATO instrument that governs Allied Headquarters as well as recognized international military organizations operating in a NATO member state. The Paris Protocol makes many of the rights and obligations contained in the Agreement between the Parties to the North Atlantic Treaty regarding the Status of their Forces, done at London on 19 June 1951 (NATO SOFA) applicable to these entities.

Subject to the Paris Protocol, the NATO SOFA applies to Allied Headquarters in the territory of a Party to the Paris Protocol in the North Atlantic Treaty area, and to the military and civilian personnel and their dependents as defined therein, and can be extended to international military organizations.

Canada signed the Paris Protocol in 1952 but remains the only NATO member that has not ratified it, as Canada has not hosted a NATO Allied Headquarters or NATO recognized international military organization to date. Ratification of the Paris Protocol is particularly relevant and time sensitive now as Canada is working to establish a new NATO Climate Change and Security Centre of Excellence (CCASCOE). The CCASCOE will be established pursuant to the North Atlantic Treaty as an international military organization under the Paris Protocol, in accordance with NATO procedures. The Paris Protocol is the standard means for NATO Allies to extend privileges and immunities to NATO Centres of Excellence and their personnel on their territory.

[Division 4 of Part 11] amends Canada's Privileges and Immunities (North Atlantic Treaty Organisation) Act (R.S.C., 1985, c. P-24) in order to enable the obligations contained in the Paris Protocol to be implemented in Canada.

The 2021 NATO Climate Change and Security Action Plan (Action Plan) recognizes climate change as an "overarching challenge of our time" which has a significant and growing impact on the global security environment. Climate change will make it increasingly more difficult for militaries to carry out their tasks, and at the same time, Canada and its NATO Allies may be expected to contribute to a greater number of conflict or crisis situations requiring stabilization or peace support operations.

As part of the Action Plan, NATO called for an Ally to establish a new Centre of Excellence to help address the challenges posed by climate change. At the NATO Summit in June 2021, Prime Minister Justin Trudeau announced Canada's proposal to host the CCASCOE. At the June 2022 NATO Summit in Madrid, it was announced that Montréal, Quebec would be the CCASCOE host city. Canada is currently working toward the establishment of the CCASCOE, together with our NATO Allies. It is on track to begin operations in Montreal by the fall of 2023.

In accordance with the mandate letters of the Minister of Foreign Affairs and the Minister of National Defence and the Canadian Armed Forces, their two departments are co-leading the establishment of the CCASCOE.

The launch and accreditation of CCASCOE as Canada's first NATO COE will be a landmark achievement. The CCASCOE represents an opportunity for Canada to work with NATO Allies to demonstrate leadership on the security challenges and risks of climate change, and to develop expertise on this emerging area of domestic and international policy, programming and practice.

Service Fees Act Amendments (Service Fees)

As part of its efforts to minimize costs to Canadians, the Government is proposing to amend the way fees for government services are administered. It will do this by making changes to the legislative framework governing fees for government services.

The proposed legislation will streamline administrative processes while ensuring continued accountability and oversight.

Key proposed changes that will help reduce administrative burden include:

• Existing legislation will be streamlined to better support government in managing fees processes while reducing duplication of requirements covered in other laws or regulatory processes.
• Minimizing costs for taxpayers, while making sure everyone has equal access to high quality government services. The government will ensure that Canadians are not disproportionately footing the bill.

This amended fee regime will support more cost-effective delivery of services for Canadians. It will also help ensure on-going transparency, oversight, and continued accountability to Canadians.

Division 12 of Part 4 updates the legislative framework for fees in order to achieve the planned objectives.

Allowing Use of Canada Revenue Agency - Collected Data for Canada Pension Plan Analysis and Evaluation

The Department of Employment and Social Development has traditionally used data collected under the Income Tax Act for the purposes of policy analysis, research and evaluation related to the administration of the Canada Pension Plan. The disclosure of taxpayer information to the Department is provided for under subparagraph 241(4)(e)(iii) of the Income Tax Act.

Division 13 of Part 4 amends section 92 of the Canada Pension Plan to clarify that any information collected under the authority of the Minister of National Revenue—including not just information collected under Part I of the Canada Pension Plan, which is under the authority of the Minister of National Revenue, but also information collected under the Income Tax Act—may be shared with the Department of Employment and Social Development for the purposes of policy analysis, research or evaluation.

Timely Sharing of Death Information in Employment and Social Development Canada (Department of Employment and Social Development Act)

Not all Department of Employment and Social Development (ESD) programs, including newly created programs, have the legal or policy authority to collect and use the Social Insurance Number (SIN). This authority is a precursor to accessing information contained in the Social Insurance Register (SIR), including the death notifications we receive from provincial and territorial Vital Statistics Offices.

As a result of this unequal access to the SIN and the information contained in the SIR, the Department is not able to meet client service delivery expectations, in particular when it comes to departmental programs being made aware of a death. Any delays in death reporting to programs can cause administrative and payment related issues.

In line with the Government of Canada's commitment to improve digital capacity, the primary purpose of this amendment would be to improve services delivered by ESD to Canadians by enhancing the department's ability to administer its programs and share available death information through a tell-us-once approach.

The amendment would give the Minister of ESD the power to collect and use the SIN for the purposes of effective administration to any program under their responsibility.

Amending DESDA to grant any program or activity under the responsibility of the Minister of ESD legislative authority to collect and use the SIN would align with the Government of Canada's commitment to improve digital capacity and would improve service delivery to Canadians by ensuring the consistent and effective administration of all departmental programs.

The Government of Canada would also benefit from legislative amendments by helping to reduce benefits overpayments caused by death notification delays and safeguard against other death related issues (i.e., individuals erroneously reported as deceased).

Amendments would also facilitate the delivery and integrity of all existing and new departmental programs. Enabling the use of the SIN in program administration would help programs ensure that they are providing their benefits and services to the correct clients and would protect against identity theft and fraud.

In addition, amendments would aid existing programs to shift to digital delivery by enabling access to current Registration and Authentication tools (through My Service Canada Account (MSCA) or through the department's modernized service delivery platform) and their enhanced security features.

Amendments would come into force upon receiving assent.

Death or Disappearance of a Child (Canada Labour Code)

Division 15 of Part 4 amends the Leave Related to Death or Disappearance (the Leave) under Part III (Labour Standards) of the Canada Labour Code. The purpose of the unpaid leave is to allow employees of the federally-regulated sector to access the corresponding income support program, the Canadian Benefit for Parents of Young Victims of Crime (the Benefit), without fear of losing their job.

The Leave and the Benefit support eligible parents whose child has died or disappeared as the result of a probable Criminal Code offense.

The objective of the proposed amendments is to maintain alignment of the Leave with the Benefit. Changes to the eligibility criteria of the Benefit were approved by Minister Qualtrough under the Treasury Board Policy on Transfer Payments and are set for implementation on April 2, 2023.

In line with changes to the Benefit, the proposed amendments to the leave would:

1. extend the maximum duration of the unpaid leave, from 104 weeks to 156 weeks; and
2. repeal the exception to eligibility that disentitles an employee to the leave if their child (14 years of age or older) was a party to the crime which led to their death.

The proposed amendments are consistent with the Government's action to enhance flexibility in programs for families so that they can get the support they need when they need it most.

Electronic Submission of Asylum Claims [(Immigration and Refugee Protection Act (Claims For Refugee Protection)]

Immigration, Refugees and Citizenship Canada's longstanding position has been that a refugee protection claim may only be made in Canada to an officer in person in accordance with subsection 99(3) of the Immigration and Refugee Protection Act. With the recent shift to enable online submission of information that is required in support of an asylum claim, an amendment to subsection 99(3) is required to clarify the 'in person' requirement, and to ensure that in person appearance occurs following an online submission, in alignment with program integrity objectives.

This amendment will also serve to better differentiate the initial online submission of information and the making of the claim to an officer in person. This distinction will enable complementary regulatory amendments to be pursued that will establish a clear framework for online submissions in support of a claim.

Legislative amendments will also make it clear that the Minister can specify documents and information that must be provided in support of an inland claim for refugee protection, and the form and manner in which they are to be submitted.

These changes, supported by additional regulatory amendments and the recent introduction of the online asylum application portal, will help to generate efficiencies for the asylum system (e.g., reduce time spent on administrative activities) and address program integrity concerns in a context where information is increasingly submitted electronically (e.g., incidences of fraud and non-compliance).

Improving Client Service in the Private Sponsorship of Refugees Program [Immigration and Refugee Protection Act (Sponsorship Applications)]

Unlike other immigration lines of business, the intake of Private Sponsorship of Refugee (PSR) applications is not aligned with the number of privately sponsored refugees that can arrive in Canada in a given year, which is set out in the Immigration Levels Plan.

While the Sponsorship Agreement Holders (SAHs) stream has a cap on the number of refugees that they can sponsor in a given year via an Agreement that SAHs sign with the Minister governing the IRCC-SAH relationship, the other two PSR streams - Groups of Five and Community Sponsors – do not have agreements with the Department in place nor an effective mechanism (caps) to manage overall application intake. The combination of high application submissions and refusal rates, particularly in these two streams, has resulted in growing backlog of applications and long wait times, with processing times in the PSR program reaching close to three years.

IRCC is seeking an amendment to the Immigration and Refugee Protection Act (IRPA) that would clearly enable the Minister to issue instructions to cap the number of sponsorship applications submitted by Groups of Five (G5) and Community Sponsors (CS) each year. These annual caps will complement the cap that IRCC places on SAHs via their Agreements with the Minister. The instructions could be issued for limited periods, and can include instructions that address application intake and processing. The proposed legislative amendment will create the operational environment needed to allow IRCC to put in place measures to improve processing efficiency and client service in the PSR program.

The proposed measures will also provide refugees and their sponsors with shorter, more predictable processing times, of significant benefit to refugees who often face risk abroad while awaiting application decisions. Shorter, more predictable processing times will also benefit sponsors, who will be able to plan more effectively for the arrival of sponsored newcomers, including securing housing, financing, settlement and other vital supports for sponsored refugees and their family.

The importance of addressing wait times in the PSR program has been highlighted in IRCC's Action Plan in response to the Prime Minister's new client service task force. In particular, the Task Force emphasized the need for IRCC to strengthen intake controls in the PSR program in order to improve the processing of immigration applications, focused on reducing wait times, clearing out backlogs, and improving the overall quality of services provided to Canadians. Being able to cap the G5 and CS sponsor streams via Ministerial Instructions will, over time, reduce the inventory and improve processing times – leading to better outcomes for sponsored refugees and sponsors alike.

Better Protecting Immigration and Citizenship Clients (College of Immigration and Citizenship Consultants Act)

The College of Immigration and Citizenship Consultants Act provides the statutory authority that enabled the establishment of the College of Immigration and Citizenship Consultants in November 2021. The College is mandated to regulate the profession in the public interest by protecting both the public and consultants in good standing from dishonest actors who take advantage of vulnerable people.

At present, the College of Immigration and Citizenship Consultants Act does not contain sufficient specificity to be fully effective in areas such as the powers of the Complaints and Discipline Committees of the College; protections for College Directors and other employees/agents; and the College's ability to make by-laws in areas about its operational activities and technical expertise. These gaps hinder the College's ability to govern effectively and ensure compliance of its members. The proposed amendments would remedy these gaps. As such, the expected outcomes of the legislation, once in force, are a stronger and more effective complaints and discipline process, improved overall governance of the College, and enhanced protection from unethical or fraudulent consultants.

Secondly, the Immigration and Refugee Protection Act (IRPA) and the Citizenship Act currently do not allow unauthorized practitioners (those who are not in good standing with a regulator such as the College or a provincial law society) to seek a review of an administrative penalty. This lack of procedural fairness may risk the regime's applicability to unauthorized practitioners. The proposed changes would extend the application of the administrative penalties and consequences regime to all those who provide advice and representation for consideration, as originally envisioned by the Government of Canada and approved by Cabinet in 2018. These changes will result in a legally sound and effective administrative penalties and consequences regime, which will serve as a deterrent to violations of IRPA and the Citizenship Act by those who provide advice and representation for consideration.

Overall, the proposed measure will help newcomers access quality advice and representation, as well as ensure that the investments made by the Government of Canada ($48.3M over four years and $9.84M ongoing) will be fully realized. It also supports the objective of a well-managed immigration system that can maintain public confidence.

This proposal is solely legislative in nature, with no funding requirements, cost implications or implementation timelines beyond the Budget Implementation Act itself.

Citizenship Act Modernization (Citizenship Act)

Canadian citizenship is a valuable status and the final step in the immigration continuum. However, high demand stemming from rising immigration levels and a continued reliance on paper processing and in-person services have strained the Citizenship Program, contributing to client frustration and processing times well beyond the 12-month service standard. The proposed new authorities will enable IRCC to leverage technologies to transform the Program, making it more secure and efficient and providing a vastly improved user experience that is aligned with client expectations in a digital era.

Unlike the Immigration and Refugee Protection Act, the Citizenship Act does not have express authorities to use electronic means to administer and enforce the Program. The Act also lacks the authorities necessary to systematically collect and use a client's biometric information, which is routine in immigration programs. The proposed amendments would address these gaps and significantly improve client service by providing legislative and regulation-making authorities to enable IRCC to:

• electronically administer and enforce the Citizenship Program, including the use of automation and machine-assisted decision-making to support consistent client experiences and reduce processing times;
• require online applications and services (with paper and in-person options, where needed for accessibility), to improve service standards; and
• collect and use biometric information (fingerprints and a digital photo) to quickly and reliably confirm clients' identity and screen for criminality.

These measures will deliver on the Budget 2022 commitment to amend the Citizenship Act to "enable automated and machine-assisted processing and the safe and secure collection and use of biometric information." Authorities will come into force upon dates fixed by order of the Governor in Council and will be followed at a later date by the introduction of regulations. IRCC will not require citizenship applicants to systematically provide biometric information until a regulatory framework is in place.

With these amendments, online applications will become the norm, and automation and machine-assisted decision making will be leveraged to "get to yes" faster on routine applications, which make up about 93% of applications at the intake stage. Biometric information will improve program integrity through more reliable, accurate criminal record checks and identity confirmation. These measures will improve the client experience, lead to greater consistency across IRCC's immigration programs, and enable expedited processing that can better meet the growing demand for citizenship.

Yukon Act Amendments (Yukon Act)

On April 1, 2003, with the signing of the Yukon Northern Affairs Program Devolution Transfer Agreement (Devolution Agreement), Yukon became the first territory to take over land and resource management responsibilities from the Government of Canada. At the time of devolution, there were several abandoned mine sites in Yukon. Some specific sites were identified as having, or potentially having, unfunded environmental liabilities related to remediation (closure). These sites are identified as Type II sites in the Devolution Agreement.

Management of Contaminated Sites

Under the 2003 Devolution Agreement, the Government of Canada was financially liable for remediation of the Faro Mine, a Type II site, with the Government of Yukon responsible for the management of the remediation project. This joint governance model posed challenges for the management of a complex, high-risk, and large-scale project. To address this, the Government of Yukon and the Government of Canada signed a Transition Agreement to transition the site to full federal control. The official Faro Mine project Transition Agreement was signed in September 2020 by Canada and the Government of Yukon.

Transfer of the Faro Site to Canada

With the signing of the Transition Agreement, the Government of Canada has assumed responsibility for the Faro Mine Remediation Project by way of the Government of Yukon Minister's authority under section 37 of the Waters Act (Yukon), including activities such as care and maintenance, urgent works and advancing the overall remediation plan. Under the Transition Agreement, the Government of Canada committed to give the federal Minister responsible for Northern Affairs this authority by way of an amendment to the Yukon Act.

Proposed Amendments

The proposed amendments to the Yukon Act would give the federal Minister responsible for Northern Affairs the same powers with respect to a contaminated site on federal land as the responsible Minister in Yukon has for such sites on land under the administration and control of the Government of Yukon.

These powers have no effect on a Type II site unless the Government of Canada and the Government of Yukon elect to proceed with the transfer of the management of a contaminated site via a signed Transition Agreement. A transition agreement, to transfer the Faro Mine site, has been signed and a transition agreement, to transfer the Clinton Creek and Ketza River mines, is currently being negotiated with the Government of Yukon.

Enhancing the Management of Marine Emergencies and Pollution and Establishing a Vessel Remediation Fund (Oceans Protection Plan)

These divisions aim to enhance marine environmental protection and strengthen marine safety by amending three Acts: the Canada Shipping Act, 2001, the Marine Liability Act, and the Wrecked, Abandoned or Hazardous Vessels Act.

Division 21 aims to enhance marine environmental protection and strengthen marine safety by amending the Canada Shipping Act, 2001.

Enhancing Marine Emergency Management

• In order to enhance marine emergency management, proposed amendments to the Canada Shipping Act, 2001 would:
• empower the Minister of Transport to direct vessels to take measures that are necessary to avoid an undue risk because of unsafe conditions
• empower the Minister of Transport to direct port authorities and persons in charge of port authorities and places to allow vessels to proceed to their location as directed by the Minister
• authorize the Deputy Minister of Transport to make interim orders in response to risks to marine safety or to the marine environment subject to any restrictions or conditions that the Minister specifies
• enable the Governor in Council, upon the recommendation of the Minister of Transport, to make regulations respecting vessel arrangements for emergency services

Preparedness and Response for Hazardous and Noxious Substances Incidents

• In order to ensure appropriate preparedness and response for Hazardous and Noxious Substances Incidents, proposed amendments to the Canada Shipping Act, 2001 would:
• define hazardous and noxious substances in alignment with the Protocol on Preparedness, Response and Co-operation to Pollution Incidents by Hazardous and Noxious Substances, 2000 (OPRC-HNS Protocol)
• update key pollution prevention definitions in the Act to explicitly include hazardous and noxious substances
• ensure certain existing powers and requirements such as reporting discharges and having in place prevention and response plans respecting vessels carrying oil and oil handling facilities apply equally to vessels carrying HNS and HNS handling facilities.
• enable the Governor in Council, upon the recommendation of the Minister of Transport, to make regulations respecting hazardous and noxious substances requirements

Increasing Regulatory Responsiveness

• In order to increase regulatory responsiveness, proposed amendments to the Canada Shipping Act, 2001 would:
• authorize the Governor in Council to incorporate by reference technical and administrative material that the Minister of Transport produces in certain regulations
• empower the Minister of Transport to, by order, modify the operation of regulations respecting vessel navigation and boating safety for a period of up to two years

Strengthening Compliance and Enforcement

• In order to strengthen compliance and enforcement, proposed amendments to the Canada Shipping Act, 2001 would:
• allow the owner of a Canadian vessel to enter into an arrangement with a qualified person under which that person is the authorized representative of the vessel
• clarify and expand the responsibilities of the Authorized Representative to include more responsibilities for preventing pollution discharges on top of their existing responsibilities for vessel safety and environmental protection
• expand the meaning of relevant provision in Part 11 (Enforcement – Department of Transport) of the Act to include provisions of Part 5 (Navigation Services) and Part 10 (Pleasure Craft) which allows expanded enforcement activities for these areas such as the use of administrative monetary penalties. For pleasure craft, this would support provisions in Division ZZ to implement the National Strategy to Address Canada's Abandoned and Wrecked Vessels by helping ensure proper identifying codes and numbers are affixed to the pleasure craft which can support efforts to improve the ability to identify pleasure craft and their owners and to enforce relevant regulations
• increase the maximum amount of fines upon summary conviction for certain offences

Additional Items

• In addition, to support effective marine safety and environmental protection, amendments to the Canada Shipping Act, 2001 would, among other things:
• expand the application of Part 1 (General) of the Act in relation to certain pleasure craft
• expand the exemption powers of the Minister of Transport and the Minister of Fisheries, Oceans and the Canadian Coast Guard to include more eligible entities and be for public interest
• broaden the power respecting fees, charges, costs, and expenses to be paid in relation to the administration and enforcement of matters under the Act for which the Minister of Transport is responsible

Division 21 comes into force in a combination of upon royal assent and upon dates to be fixed by order of the Governor in Council.

Subdivision A proposes amendments to the Marine Liability Act to:

Increase Awareness:

• To increase transparency about the availability of compensation following a major ship-source oil spill, the amendments would:
• expand the public notice requirement to ensure that Canadians have more timely public access to information about compensation from shipowners.

Address Concerns about Compensation for Subsistence Activities:

• To address concerns about the availability of compensation for economic losses associated with all types of fishing, hunting and harvesting activities, the amendments would:
• clarify that shipowners and the Ship-source Oil Pollution Fund are liable to both Indigenous groups and individuals for impacts to fishing, hunting and harvesting related to an Indigenous right protected under the Constitution Act, 1982; and
• expand compensation for future losses to include all types of fishing, hunting and harvesting, and allow claims for future losses from Indigenous groups and communities.

Support the Polluter-Pays Principle:

• To reflect actual risks and costs associated with maritime claims for small and inland vessels, and support expanded insurance coverage, amendments would:
  • increase the statutory limit of liability by 50% for small vessels for loss of life and personal injury as well as all other claims including property damage or pollution claims;
  • expand the application of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 to non-seagoing vessels, including its strict liability and compulsory insurance requirements; and
  • establish limits of liability for hovercraft to support the commercial availability of insurance.

Keep Food on Tables:

• To keep food on tables in the unlikely event of longer-term damage, amendments would:
• Expand compensation for future losses. In the event of an oil spill, compensation would be available for certain economic losses that will definitely, or almost definitely occur before the day on which the loss actually happens, by:
• including lost profits and income from all sectors that could be impacted by ship-source oil pollution, such as the fishing, mariculture, tourism, and marine recreational sectors;
• including economic losses related to all types of fishing, hunting and harvesting subsistence activities – including for Indigenous groups and individuals with rights under s.35 of the Constitution Act, 1982; and
• providing the Administrator of the Ship-source Oil Pollution Fund clear powers and authorities to assess and compensate future losses.

Additional Items

• Ensure clarity in Canada's carriage of goods regime by removing all references to the Hamburg Rules given that s.45 (section that would have given force of law to the Hamburg Rules in Canada) was repealed as part of the 2020 Statutes Repeal Act; and
• Support harmonization with the Wrecked, Abandoned and Hazardous Vessels Act, and the Hazardous and Noxious Substances regime.

Subdivision B and subdivision C proposes to make amendments to the Canada Shipping Act, 2001 (CSA 2001) and the Wrecked, Abandoned or Hazardous Vessels Act (WAHVA) that would support implementation of the National Strategy to Address Canada's Abandoned and Wrecked Vessels, which was announced as part of the Oceans Protection Plan in 2016.

Facilitating Remediation of Abandoned or Wrecked Vessels

• To strengthen enforcement of vessel owner identification requirements, proposed amendments to the Canada Shipping Act, 2001 would:
• Provide the Chief Registrar with the authority to refuse to issue, renew or amend (including transfer) a certificate of registry if any required fee, charge, cost or expense has not been paid.
• Provide the Minister of Transport with the authority to refuse to issue—including by way of renewal or transfer—a pleasure craft licence if any required fee, charge, cost, or expense has not been paid.

• To facilitate remediation of problem vessels, proposed amendments to the Wrecked, Abandoned or Hazardous Vessels Act would:
• Establish an account (called the Vessel Remediation Fund) in the accounts of Canada, under the joint responsibility of the Minister of Transport and the Minister of Fisheries, Oceans and the Canadian Coast Guard to be used to finance activities to assess, address and prevent problem vessels.
• Establish what would be credited to the Vessel Remediation Fund, including: amounts paid under regulations (i.e. proposed future regulatory charges paid by vessel owners); amounts collected from the enforcement of the WAHVA; debts due to Her Majesty under WAHVA; and proceeds from the disposition of vessels under WAHVA.
• Authorize fees, charges, costs and expenses to be paid in relation to the administration and enforcement of the WAHVA.
• Provide the Minister of Fisheries, Oceans and the Canadian Coast Guard authorities respecting the detention order of a vessel if an offence under the WAHVA has been committed by, or in respect of, the vessel (currently only conferred with the Minister of Transport).

Division 21 comes into force in a combination of upon royal assent and upon dates to be fixed by order of the Governor in Council.

Strengthening Data Sharing in Trade Corridors

Breakdowns and inefficiencies in our supply chains pose difficult challenges for Canadians and Canadian businesses. The Minister of Transport was directed in his 2021 mandate letter to reduce and prevent supply chain bottlenecks in Canada's transportation networks through the National Trade Corridors Fund and legislative and regulatory authorities. Budget 2022 announced $136.3M in funding over 5 years to support industry-driven supply chain digitalization, as part of a package of measures aimed at making our supply chains stronger, improving the ability of Canadian businesses to export their goods abroad and delivering essential goods to our communities.

Following a National Supply Chain Summit in January 2022, the Minister launched a Supply Chain Task Force to provide ideas on how we can strengthen our supply chain, now and in the future. Observations and recommendations from the Task Force report, based on extensive consultations with industry and labour representatives across the country, include calls for government to work with industry on data to improve understanding of the transportation network to support resilient supply chains and identify and monitor safety and hazards directly supporting supply chain resiliency and responsiveness to disruption events.

The proposed amendments to the Canada Transportation Act aim to enhance the sharing of information between the Government of Canada and entities involved in transportation supply chains. The goal of this is to enhance visibility and support evidence-based decision making. This includes:

• Providing the Minister of Transport the authority to compel certain federally-regulated entities and entities using the federally regulated transportation system to provide information in cases of unusual and significant disruption to the national transportation system or any portion thereof;
• Provide for an authority to require that federally regulated entities and entities using the federally regulated transportation system share prescribed information with other such entities in a prescribed form and manner while also requiring protection of confidential information; and
• Ensuring transparency amongst the traveling public allowing customers to be better-informed for their future and/or current travel plans by requiring carriers providing air-transportation-related services to publish relevant performance data on their respective websites making this publicly available.

Current planning would see the proposed legislative amendments being introduced in Parliament within the Budget Implementation Act 2023 and coming into force before the summer recess in 2023. This timing is required to support launch of the digital strategy as a pillar of the broader National Supply Chain Strategy.

Supporting Rail Competition

This measure proposes to increase the interswitching limit from 30 km to 160 km in the prairie provinces (Alberta, Manitoba, and Saskatchewan), on a temporary basis
(18-24 months). Interswitching is a competitive access measure that enables rail shippers to have their cars transferred to an alternate rail carrier at an interchange point near to either their origin or destination, at a regulated rate set by the Canadian Transportation Agency. This gives shippers located near a railway line operated by one railway company access to additional rail carriers. The current interswitching limit is 30 km.

In addition to providing easy access to an alternate carrier, access to interswitching enhances competition and provides shippers with leverage in their negotiation with railways, enabling improved rates and service. Extending the interswitching limit to 160 km in the prairie provinces is expected to enhance competition for shippers that are located within the expanded distance, enabling them to access improved options, service, and rates.

The extension of the interswitching limit is a reflection of the Government of Canada's commitment to strengthening rail-based supply chains, and responds directly to the recommendation of the National Supply Chain Task Force Final Report. While that report called for interswitching to be extended across the country, this more geographically and time-limited pilot will limit the potential for unintended consequences, particularly in the already congested Vancouver-Kamloops and Quebec-Windsor corridors. At the same time, the collection of data throughout the pilot will enable the government to more fully assess the impacts of the extension and consider whether longer-term change is appropriate.

Strengthening Air Passenger Rights and Data Sharing (Air Travel Complaints)

In December 2019, the creation of the Air Passenger Protection Regulations (APPR) provided an important framework of rights for Canadians when air travel does not go as planned, clarifying minimum standards of treatment and compensation that must be provided to passengers based on the level of control an airline has over a flight disruption. Our air sector was incredibly hard-hit by the COVID-19 pandemic. Last summer, as the air sector entered recovery from the pandemic and passenger volumes surged, there were challenges that submitted this new passenger rights regime to a previously unimaginable stress test.

These events exposed complexity and a lack of clarity in the regime around eligibility for compensation, leading to a surge in complaints at the Canadian Transportation Agency (Agency). The current regime allows for a broad interpretation of the categories of disruption. A trend is being observed that carriers are increasingly classifying flight disruptions as being within their control but required for safety purposes or outside of their control, to avoid providing compensation, which is resulting in a large backlog of complaints at the Agency and the perception that the onus is on the passenger to prove the merit of their request for compensation even though they are typically unaware of the cause of the disruption. The Agency now has a backlog of over 43,000 air travel complaints, up from 12,934 at the end of March 2022. These events have also exposed other concerns with the system, such as the costs and processes associated with administering the regime being borne by taxpayers.

The proposed amendments to the Canada Transportation Act (Act) will strengthen Canada's passenger rights regime, streamline the processes for administering air travel complaints before the Agency, and shift some of the financial burden from government to industry to enable the Agency to carry out its mandate more efficiently and allow it to generate revenues and offset financial pressures, while providing better service to travellers. These amendments are a continuation of the Government of Canada's commitments to strengthen air passenger rights and align with Transport Canada's core responsibility and commitments to foster an efficient and essential transportation system, implementing rules and policies that promote sufficient choice and improved service to Canadian travellers.

Summary of the measures

As a result of the above mentioned, the proposed legislative changes to the Act will:

• Modify the regulation making authority of the Agency to enable it to remove the broad categories of disruptions from legislation (within the carrier's control, outside the carrier's control and within the carrier's control but required for safety) and, instead, make compensation and standard of treatment mandatory for all disruptions, unless the disruption was caused by circumstances that would be specifically defined in regulation made by the Agency (in consultation with the Minister of Transport), in which case the air carriers would be exempted from the compensation requirement.
• Create a new regulation-making authority for the Agency to regulate, in consultation with the Minister of Transport, for requirements when a baggage is delayed, and to prescribe refunds when there is a Government Travel Advisory.
• Overhaul the current dispute resolution process of passenger complaints, which includes an adjudication process by Governor in Council (GiC)-appointed members, to replace it with a simplified mediation/arbitration type of complaint resolution process conducted primarily by Agency officials. This new dispute resolution process for air complaints includes additional consequential amendments to the Act to:
• Require air carriers to have an internal process in place to deal promptly with claims for compensation requests.
• Give the authority to the Chairperson of the Agency or a person designated by the Chairperson the authority to appoint a mediator/arbitrator/complaint officer to deal with eligible complaints.
• Provide the Agency with the authority to issue binding guidelines to assist the mediators/arbitrators/complaint officers in carrying out the complaint process including the procedures for the mediation/arbitration/complaint processes and to provide guidance on how the APPR or other tariff matters should be applied.
• Require that air carriers must pay for the costs for mediation/arbitration/complaint resolution process of eligible complaints.
• Provide that once a binding decision regarding whether a claim falls within the list of exceptions where compensation is not owed, the Agency would publish general information, including whether the Agency determined that the issue fell under the list of exceptions where compensation is not owed, which would be binding for any other claims related to the same flight.
• Broaden the fee-setting authority of the Agency to allow it to make regulations in consultations with the Minister of Transport to implement regulatory charges.
• Allow the Agency to increase the maximum amount of Administrative Monetary Penalties applicable to the APPR to $250,000 for corporations.
• Provide the Agency with the authority to enter into compliance agreements with air carriers.
• Expand Agency investigation powers for the administration of the air regime.

Regulation-making authority of the Agency with respect to the air passenger rights

As a result of these amendments to the Act, the Agency will be able to amend and strengthen, in consultation with the Minister of Transport, the APPR to make them clearer and less complex for both travellers and air carriers and ensure that travellers are fairly compensated in all cases where disruptions occur except where there are specifically defined exceptions in the regulations.

Dispute resolution process

While more complex or precedent-setting cases would still be referred by the Agency for adjudication to GiC-appointed Members, the changes would increase the Agency's ability to provide timely dispute resolution services to Canadians for both new complaints and for complaints that have been received.

Enforcement Authorities

The changes will provide the Agency with new enforcement tools applicable to the APPR to help ensure that air carriers continue to comply with the APPR.

Broaden the fee-setting authority

This change will ensure that the Agency has the necessary authorities to cost recover for its various responsibilities attributable under the Act, including the APPR, which will also allow it to shift some of the financial burden from government to industry and enable the Agency to carry out its mandate more efficiently and allow it to generate revenues and offset financial pressures, while providing better service to travellers. 

Coming-into-force

To ensure a transition with the new regime, careful consideration will be given to the coming into force of each provision.

Legislative Amendments Enabling the Canada Border Services Agency's Traveller Modernization Initiative (Customs Act)

The proposed amendments to the Customs Act implement the legislative framework for the Canada Border Services Agency's (CBSA) delivery of the Traveller Modernization initiative. Traveller Modernization is a major, multi-year initiative that will streamline the border crossing experience for travellers. The proposed amendments would:

• provide travellers arriving in Canada (including those within a mixed-traffic corridor) with the option of presenting themselves in-person or by a means of telecommunications, where offered;
• require that travellers provide information related to the border clearance process when presenting upon arrival, which may include a photograph;
• require that, in certain circumstances travellers that intend to present themselves by telecommunications provide certain information prior to their arrival in Canada;
• expand the authority for officers to direct travellers to present to an officer in-person to include travellers that present or intend to present by telecommunications or are exempt under the regulations from presentation requirements; and,
• require that commercial air carriers transport baggage to an international baggage area designated by the President of the CBSA, unless exempted pursuant to regulations.

The amendments also include a regulation-making authority to establish classes of persons for the purposes of presentation and authorizations issued by the Minister of Public Safety with respect to such a class. These amendments ensure continuity for certain members of the CBSA's Trusted Traveller programs who currently satisfy presentation requirements by means of telecommunications.

An amendment to the Quarantine Act is also proposed to allow for coordination between the presentation requirement under that Act and the new framework for presentation of persons under the Customs Act.

The proposed amendments would deliver on commitments outlined within the 2021 Budget and the Minister of Public Safety's mandate letter. Specifically, they would enable the CBSA to continue modernizing infrastructure and processes at Canada's ports of entry, including digital and right touch technology for travellers and conveyances. The proposed amendments would ensure that the CBSA is able to adopt new technologies to better meet rapidly changing traveller expectations; facilitate traveller compliance with legislative and regulatory requirements; harness the power of data analytics; optimize and automate traveller processing, and leverage innovative processes.

The amendments would be brought into force upon a day or days fixed by the Governor in Council.

Modernizing the National Research Council (National Research Council Act)

For over a century, the NRC has worked closely with Canadian businesses and other partners, providing access to its national network of facilities and expertise. Budget 2022 directed the NRC to modernize these offerings as well as the way it works with its partners to better support industry and academia to invent, innovate and prosper. To enable this, the 2022 Fall Economic Statement included an investment of $962M to upgrade and renew the NRC's scientific infrastructure within an 8-year timeframe.

Recognizing that the exceptional nature of the NRC's innovation support work, coupled with a recapitalization this large and complex requires an optimized operating environment, Budget 2023 proposed legislative amendments to the NRC Act (as well as any other consequential, coordinating or transitional amendments as necessary). These flexibilities are critical to ensuring that the NRC has the flexibility it needs to speed up capital purchases to match the speed of business and provide its partners with the timely access to specialized facilities and expertise they need to succeed.

Specifically, amendments to the NRC Act would provide the NRC with:

• The ability to procure goods and services directly, while remaining subject to Government Contracting Regulations and Treasury Board Directives, and other associated policies and directives, except where they impose limitations to the delegated authorities or approval requirements related to limitation of liabilities/contractor indemnification;
• Accountability and checks and balances via a Procurement Oversight Board;
• A recognition of IT as central to its mandate in order to greater support its leading-edge unclassified research activities, and a greater sharing of responsibility with Shared Services Canada for the future of IT, while at the same time maintaining security as paramount; and
• Greater ability to directly engage external legal services (with Attorney General approval).

Most of the planned amendments to the NRC Act described above will come into force on the first anniversary of the day on which the Act receives royal assent, or on an earlier day fixed by order of the Governor in Council, with the exception of the clauses and sub-clauses that address the establishment of the new Procurement Oversight Board. These come into force immediately upon royal assent, in order to allow for the preparatory work to establish the Board, prior to the commencement of their duties at the time that the rest of the legislation comes into force.

The ultimate end goal of modernizing the NRC, optimizing its operating environment and positioning it to work more closely with leading Canadian innovators is: increased commercialization of advanced research; technology adaptation and adoption, process innovation; and productivity gain.

Amendments to the Patent Act (Patent Act)

Under the Canada-United States-Mexico Agreement (CUSMA), Canada committed to make best efforts to process patent applications in an efficient and timely manner, with a view to avoiding "unreasonable" or unnecessary delays. If there are "unreasonable" delays in the issuance of a patent, Canada must provide a means to adjust (extend) the patent term to compensate for those delays. CUSMA considers it an "unreasonable" delay when it takes more than five years from filing or three years from a request for examination (whichever is later), for a patent to issue.

Canada has until January 1, 2025 to implement this patent term adjustment (PTA) obligation in CUSMA. In Budget 2023 the Government of Canada proposed to make legislative amendments to the Patent Act, as a first step towards implementation.

Division 26 of Part 4 amends the Patent Act to create a legislative framework for patent term adjustment in Canada. The legislative framework establishes the parameters for PTA and introduces regulation making authorities, so that patent owners, the public and the Canadian Intellectual Property Office (CIPO) will know which patents are eligible for PTA, how it can be applied for, and how it will be calculated. The framework also sets out how a patent may be maintained and specifies the rights that are applicable during any additional term. Lastly, it provides mechanisms for the reconsideration and redetermination of PTA calculations by the Commissioner of Patents at CIPO, and for appeal to the Federal Court.

Strengthening Regulatory Oversight of Natural Health Products [Food and Drugs Act (Natural Health Products)]

The April 2021 audit of the natural health products (NHP) program by the Commissioner of the Environment and Sustainable Development (CESD), which was reinforced by the Standing Committee on Public Accounts (PACP) in 2022, found gaps in the oversight of NHPs, highlighting the need for a modernized approach to regulating these products. This legislative proposal will help to address these gaps to better protect the health and safety of Canadians, as noted in Health Canada's response to the April 2021 audit by the CESD and the June 2022 study by the PACP. There has been no direct mention of the regulation of natural health products (NHPs) in recent budgets, government party platforms, or mandate letters.

Health Canada has accepted all of the CESD and PACP recommendations and publicly committed to addressing them while acknowledging that some of the recommendations would require elements beyond existing authorities, and progress on these elements would be dependent on securing the necessary policy, legislative, and regulatory authorities.

Policy objective

The proposal aims to protect Canadians from potential health and safety risks associated with the use of NHPs by strengthening the Department's ability to deter and address non-compliance. The new authorities being sought through this proposal would provide the Minister with the power to compel a company to recall an NHP if there is a serious risk to health (such as contamination), impose stronger penalties, order a company to modify their product's label or package where it would be necessary to prevent injury to health, or to impose terms and conditions on a product which has already entered the market.

In addition to lacking powers to act when safety issues arise, NHPs are also still subject to fines and penalties that were established in the 1950s, with a maximum fine of $5,000, compared to $5,000,000 for other health products. Lower fines are a disincentive for NHP manufacturers to adhere to product standards.

How the measure will achieve the objective

The proposal would introduce legislative changes to the Food and Drugs Act (FDA) to extend compliance and enforcement authorities introduced for other categories of health products in 2014 through the Protecting Canadians from Unsafe Drugs Act (Vanessa's Law) to NHPs. Extending these authorities to NHPs would increase the Department's ability to manage the safety risks of products on the market and address non-compliance when health and safety risks are identified (e.g., to order a product recall or impose higher fines or penalties for contraventions involving NHPs). It would also level the playing field for industry across different categories of similar health products regulated by Health Canada which are already covered by Vanessa's Law. This change would result in a more robust monitoring, compliance, and enforcement approach by providing the same range of post-market enforcement tools for NHPs that exist for other therapeutic products under the FDA, and enabling better oversight of NHP safety throughout the product's lifecycle.

Expected outcomes of legislation once in force

The new authorities being sought through proposed legislative amendments to the FDA to extend powers conferred by Vanessa's Law to NHPs would provide the Minister with post-market tools to address potential health and safety risks more effectively. For example, the Minister would have the power to compel a company to recall an NHP if there is a serious risk to health (such as contamination), impose stronger penalties, order a company to modify their product's label or package where it would be necessary to prevent the risk of injury to health, or to impose terms and conditions on an authorization. Overall. This legislation is expected to better protect Canadians from potential health and safety risks associated with the use of NHPs.

How the amendment will change the existing measure

Health Canada's authorities to oversee NHPs are currently inconsistent with the authorities available for other similar health products, such as non-prescription ("over-the-counter") drugs, and the Department must rely on voluntary action by the industry when health and safety issues occur. The proposed legislative amendments to the FDA would extend the definition of "therapeutic product" in the FDA to include NHPs, which would help to address the gaps identified in the oversight of NHPs by strengthening Health Canada's ability to collect information and take quick and appropriate action when a serious health risk is identified.

Coming into force

The proposed amendments to the FDA are likely to be considered a Charter compliant, constitutionally valid exercise of Parliament's authority given that it seeks to extend the existing legal authorities generally under sections 21.1 to 21.8 of the FDA to NHPs. Similar to the implementation of Protecting Canadians from the UNSAFE Drugs Act for other health products, while most authorities would come into force upon Royal Assent, some provisions would have a delayed coming into force, and an Order in Council would be needed to bring them into force. This includes the authorities for the Minister to order the conduct of tests, studies, or product assessments and to require mandatory reporting of serious adverse reactions by healthcare institutions.

Banning Cosmetic Testing on Animals [Food and Drugs Act (Cosmetics Testing on Animals)

• The Minister of Health is proposing to ban cosmetic animal testing in Canada through targeted amendments to the Food and Drugs Act (FDA), which would mark a significant step in delivering on the Minister's December 2021 mandate letter commitment to introduce legislation to end testing on animals.
• The proposed amendments to the FDA would prohibit the testing of cosmetics on animals in Canada, false or misleading labelling pertaining to the testing of cosmetics on animals, and the sale of cosmetics that rely on animal testing data to establish their safety, with some exceptions. These exceptions will ensure that existing cosmetics products remain on the market.
• This approach would incentivize ongoing innovative research into the development and validation of alternative methods to animal testing while continuing to support the integrity of other legislative regimes in Canada that still require animal testing data.
• This ban responds to Canadians' concern for animal welfare and support from animal advocacy groups and industry to end cosmetic testing on animals. The proposed amendments would maintain the Government of Canada's ability to protect the health and safety of Canadians with respect to cosmetics.
• While Health Canada currently accepts animal testing data from industry to demonstrate the safety of a cosmetic, the FDA does not require it. The science has now evolved to the point where it is generally possible to satisfy the safety requirements for cosmetic products through alternative methods to animal testing.
• This proposal is not expected to significantly impact the Canadian cosmetics industry or have any negative implications for trade. The ban would align Canada with 41 countries that enacted measures to prohibit cosmetic animal testing (including all European Union countries, Australia, United Kingdom, and South Korea).
• The amendments would come into force six months after Royal Assent.

The Canadian Dental Care Plan - Reporting Requirements for Employer-Provided Dental Coverage (Dental Care Measures Act)

Budget 2022 provided funding to build a comprehensive national long-term dental care program with a commitment to fully implement by 2025 – as a result, the Canadian Dental Care Plan (Dental Plan) will be accessible to Canadians with an annual net family income under $90,000 (with no co-payments for those under $70,000), who do not have access to dental insurance.

Under existing authorities, it would be extremely challenging for Health Canada and Employment and Social Development Canada (Service Canada) to independently and reliably confirm the eligibility criteria for prospective applicants. For example, presently, information on employer-provided dental coverage is not collected by the federal government in any form. When applying for the Dental Plan, each applicant would need to attest whether they and each member of their family have access to dental coverage – but without new authorities there would be no mechanism to verify such attestations. This poses a significant risk that underinsured individuals with employer-provided dental coverage – and not just those who are uninsured as intended – could apply for the Dental Plan, which would increase the risk of displacement of employer-provided dental coverage and significantly impact the cost to deliver the Dental Plan.

As a result, to help determine the eligibility for the Dental Plan, an initiative has been put forward under the 2023 Budget Implementation Act that seeks to establish stand-alone legislation that would allow for the following:

1. the collection of information, via the T4 (Statement of Remuneration) and T4A (Statement of Pension, Retirement, Annuity, and Other Income) forms, as to whether, at the year's end, an employer provides access to dental coverage to their employees and if relevant, to their pensioners.
2. the sharing of the information with officials from Service Canada and Health Canada for the purpose of administrating and enforcing the Dental Plan.

With this authority, Service Canada and Health Canada would be able to automatically and reliably validate the information provided by applicants – ensuring that (1) eligible Canadians are timely enrolled in the Dental Plan, providing Canadians with access to dental care sooner than with manual verifications, and (2) costs are contained as fewer ineligible Canadians are enrolled and the need for manual validations is eliminated.

For employers, this legislation would simply introduce a requirement to disclose whether they provide their employees with access to dental coverage as an employee benefit. To reduce the reporting burden, employers would be required to provide a response to a "yes"/ "no" question via the T4/T4A form.

This amendment needs to come into force for the 2023 tax year to allow the information to be leveraged to inform eligibility decisions for the Dental Plan when it launches.

Amendment to Address the Supreme Court of Newfoundland and Labrador Decision in R. v. Gorman (Canada Post Corporation Act)

The amendment will introduce a "reasonable grounds to suspect" standard to s.41(1) of the Canada Post Corporation Act to address the Supreme Court of Newfoundland and Labrador decision in R. v. Gorman, that found s.41(1) violated section 8 of the Canadian Charter of Rights and Freedoms.

Royal Titles (Royal Style and Titles Act, 2023)

Part 4, Division 31 of the Bill would introduce amendments to the Royal Style and Titles Act, 2023 to update the name of the Sovereign following the demise of the Crown.

The Royal Style and Titles would be changed from, "Elizabeth the Second, by the Grace of God of the United Kingdom, Canada and Her other Realms and Territories Queen, Head of the Commonwealth, Defender of the Faith" to "Charles the Third, by the Grace of God King of Canada and His other Realms and Territories, Head of the Commonwealth."

Canada Growth Fund

The Canada Growth Fund (CGF) is a $15 billion arm's length public investment vehicle that will help attract private capital to build Canada's clean economy by using investment instruments that absorb certain risks in order to encourage private investment in low carbon projects, technologies, businesses, and supply chains.

The 2022 Fall Economic Statement announced that CGF would be initially launched as a subsidiary of the Canada Development Investment Corporation (CDEV), with a permanent, independent structure to be put in place in the first half of 2023. CGF was incorporated as a subsidiary of CDEV in December 2022.

Division 32 of Part 4 proposes amendments to the Public Sector Pension Investment Board Act to enable the Public Sector Pension Investment Board (PSP Investments) to manage the assets of CGF to deliver on the Growth Fund's mandate of attracting private capital to invest in Canada's clean economy.

This will allow PSP Investments to incorporate a subsidiary for the purpose of providing investment management services to CGF, in addition to its current pension fund business.

Division 32 of Part 4 also proposes amendments to the Fall Economic Statement Implementation Act, 2022 to increase the amount that the Minister of Finance may requisition out of the Consolidated Revenue Fund to acquire shares of CGF, and to provide that CGF is not an agent of His Majesty in right of Canada.

This will permit the Minister of Finance to capitalize CGF over time up to $15 billion in total, as well as establish its independence from government.

These measures are in fulfillment of the government's commitment in the 2022 Fall Economic Statement to have the CGF operational in the first half of 2023.

Modernizing Financial Sector Oversight to Address Emerging Risks (Legislation Related to Financial Institutions)

Part 4 amends the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Office of the Superintendent of Financial Institutions Act, and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to modernize the federal financial framework to address integrity or security risks to Canada's financial sector.

The federal financial framework is well-equipped to address a wide range of risks. The Office of the Superintendent of Financial Institutions (OSFI) supervises federally regulated financial institutions (FRFIs) to determine whether they are in sound financial condition and are meeting regulatory and supervisory requirements. The Minister of Finance is responsible for approving the incorporation of FRFIs and their significant owners (above 10 per cent), and has authority to impose terms and conditions, require an undertaking, or amend or revoke approvals.

The proposed legislative amendments would enhance OSFI's financial sector oversight by expanding its mandate and enhancing the Superintendent's and the Minister's authorities. Specifically, the amendments would:

• Expand the mandate of OSFI to include supervising FRFIs in order to determine whether they have adequate policies and procedures to protect themselves against threats to their integrity and security, including protection against foreign interference, and require FRFIs to establish and adhere to such policies and procedures;
• Expand the range of circumstances where the Superintendent can take control of a FRFI to include where the integrity and security of that FRFI is at risk, where all shareholders have been precluded from exercising their voting rights, or where there are national security risks;
• Expand the existing authority of the Superintendent to:
• issue a direction of compliance to a FRFI when its integrity or security is threatened;
• examine the business and affairs of FRFIs, at least once in each calendar year, to determine whether they have adequate policies and procedures to protect themselves against threats to their integrity or their security;
• order the production of information and documents to be satisfied that a FRFI has adequate policies and procedures to protect itself against threats to its integrity or its security; and
• enter into a prudential agreement with a FRFI for the purpose of establishing adequate policies and procedures to protect itself against threats to its integrity or its security;
• Provide new authorities to the Minister of Finance to:
  • direct a person to dispose of all shares of a FRFI where their holding of shares poses a threat to the integrity and security of the FRFI, to Canada's financial system, or to Canada's national security;
  • direct the Superintendent to take control of a FRFI for reasons related to national security; and
  • enable temporary emergency exercise of the Minister of Finance's approval powers under the statutes that govern FRFIs for public interest reasons; and
• Add a requirement for the Minister of Finance to notify the National Security and Intelligence Committee of Parliamentarians and the National Security and Intelligence Review Agency within 30 days after the Minister uses the new authorities for reasons related to national security.

These proposals are supported by separate measures to improve the sharing of information between regulatory authorities, including OSFI, that will improve supervision of the financial sector by regulatory authorities.

Cracking Down on Predatory Lending (Criminal Rate of Interest – Criminal Code)

To combat predatory lending and high-cost borrowing, Part 4 Division 34 proposes legislative amendments to lower the criminal rate of interest to 35 per cent annual percentage rate and ensure that charges for payday loans are capped. These legislative changes will help protect Canadians from falling into a cycle of debt that they cannot afford nor escape.

This measure builds on the Budget 2021 announcement, as well as the Minister of Finance's mandate letter commitment to crack down on predatory lenders. These amendments lower the criminal rate of interest from the current 60 per cent effective annual rate (equivalent to 47 per cent annual percentage rate) to 35 per cent annual percentage rate. A regulation-making authority is also introduced to allow for certain types of loans, such as commercial loans, to be exempt from the criminal rate of interest.

Payday loans are currently exempt from the criminal rate of interest in designated provinces. The proposed amendments introduce a new regulation making authority to allow a limit to be placed on what payday lenders may charge to borrowers, in line with the lowest provincial limit ($14 per $100 borrowed).

To ensure adequate time for businesses to adjust their operations, these amendments will be brought into force on a day or days set by the Governor in Council. Furthermore, any loan agreement signed prior to the effective date of the new criminal rate of interest would not be captured by the new rate.

Continuing to Support Seasonal Employment Insurance Claimants (Employment Insurance Act)

To combat predatory lending and high-cost borrowing, Part 4 Division 34 proposes legislative amendments to lower the criminal rate of interest to 35 per cent annual percentage rate and ensure that charges for payday loans are capped. These legislative changes will help protect Canadians from falling into a cycle of debt that they cannot afford nor escape.

This measure builds on the Budget 2021 announcement, as well as the Minister of Finance's mandate letter commitment to crack down on predatory lenders. These amendments lower the criminal rate of interest from the current 60 per cent effective annual rate (equivalent to 47 per cent annual percentage rate) to 35 per cent annual percentage rate. A regulation-making authority is also introduced to allow for certain types of loans, such as commercial loans, to be exempt from the criminal rate of interest.

Payday loans are currently exempt from the criminal rate of interest in designated provinces. The proposed amendments introduce a new regulation making authority to allow a limit to be placed on what payday lenders may charge to borrowers, in line with the lowest provincial limit ($14 per $100 borrowed).

To ensure adequate time for businesses to adjust their operations, these amendments will be brought into force on a day or days set by the Governor in Council. Furthermore, any loan agreement signed prior to the effective date of the new criminal rate of interest would not be captured by the new rate.

Amendment to the Employment Insurance Act

Division 35 of Part 4 of the Bill amends the Employment Insurance Act (EI Act) to extend, from October 28, 2023, to October 26, 2024, the end date of the current temporary Employment Insurance (EI) rules that provide additional weeks of EI regular benefits to seasonal workers in certain regions.

This extension will enable eligible seasonal claimants in targeted EI economic regions (i.e., 13 targeted regions in Atlantic Canada, Quebec, and Yukon) to continue to have access to up to five additional weeks of EI regular benefits – to a maximum entitlement of 45 weeks – in their off-season.

Clean Fuels Regulation Fund (Canadian Environmental Protection Act, 1999) (Canadian Environmental Protection Act, 1999)

The proposed amendments in Part 4 – Division 36 would modify Part 11 of the Canadian Environmental Protection Act, 1999 (CEPA). Part 11 of CEPA contains provisions relating to the use of economic instruments and market-based approaches under CEPA.

The proposed targeted amendments would establish a fund called the Environmental Economic Instruments Fund in the accounts of Canada for the purpose of administering amounts received as contributions to certain funding programs established by regulations under the responsibility of the Minister of Environment and Climate Change.

At this time, the Environmental Economic Instruments Fund is only contemplated for use under the Clean Fuel Regulations. The Regulations, which require liquid fossil fuel providers to gradually reduce the amount of pollution from the fuels they produce and sell for use in Canada, include a number of compliance mechanisms to help mitigate compliance costs while maintaining the objective of delivering real greenhouse gas emissions reductions. One of these mechanisms allows regulated parties to discharge up to 10% of their annual compliance requirement, starting January 1, 2024, through payment into a funding program that invests in, and obtains, greenhouse gas emissions reductions in the short term.

Budget 2021 provided funding over seven years to contribute to the implementation and administration of the Clean Fuel Regulations, which are an important part in helping Canada on the path to achieving net-zero emissions by 2050. A federal fund, enabled by these amendments, is an integral compliance mechanism within the Regulations, offering a dependable compliance option for the proper operation of the Regulations.

The proposed amendments would also make a technical clarification by replacing the term "tradeable units" with "compliance units" in CEPA, and make consequential amendments to the Canada Emission Reduction Incentives Agency Act to do the same.

The proposed amendments would come into force on Royal Assent.

Deposit Insurance (Canada Deposit Insurance Corporation Act

Part 4, Division 37 amends the Canada Deposit Insurance Corporation Act to authorize the Minister of Finance, upon the Governor in Council's approval, to increase the deposit insurance coverage limit until April 30, 2024.

The Minister could increase the deposit insurance limit where, in the Minister's opinion, it is necessary to promote the stability or maintain the efficiency of the financial system in Canada. The Minister would be required to consult the Governor of the Bank of Canada, the Superintendent of Financial Institutions, the President and Chief Executive Officer of the Canada Deposit Insurance Corporation, and the Commissioner of the Financial Consumer Agency of Canada prior to doing so.

The deposit insurance limit remains at $100,000 per deposit category at this time.

Should the Minister increase the deposit insurance limit, the Minister would be required to publish a report and table it in Parliament on a monthly basis during the period in which the deposit insurance limit is raised.

Finally, the Minister would be required to undertake a review of these amendments after April 30, 2024, and publish a report on the review.

Canada has one of the strongest and most resilient banking systems in the world. Our financial sector is strong and well-capitalized. There is a robust regulatory framework in place and effective contingency tools to safeguard federally regulated financial institutions and support financial stability.

Deposit insurance is one element of Canada's financial system stability framework. It contributes to public confidence in the financial system by protecting depositors' savings in the unlikely event that a deposit-taking institution fails.

The purpose of the proposed legislation is to strengthen the financial stability tools available to the Federal Government in the current economic environment. Specifically, the proposed legislation would provide the Minister temporary authorities to increase the deposit insurance limit to a higher threshold if doing so would, for example, protect financial stability and support consumer confidence in the banking system.

Canada's deposit insurance framework is established under the Canada Deposit Insurance Corporation Act and administered by the Canada Deposit Insurance Corporation (CDIC), a federal crown corporation under the purview of the Minister of Finance.

CDIC's objects include providing insurance against the loss of deposits held at its member institutions, promoting financial stability, minimizing its losses, and acting as the resolution authority for its members.

Part 4 also amends the Canada Deposit Insurance Corporation Act to clarify that the Canada Deposit Insurance Corporation may administer contracts related to deposit insurance entered into by the Minister with any entity under section 60.2 of the Financial Administration Act.

The Financial Administration Act provides the Minister of Finance with authorities to take extraordinary measures upon the Governor in Council's approval where, in the Minister's opinion, they are necessary to promote the stability or maintain the efficiency of the financial system in Canada.

The proposed legislative amendments would clarify that the Canada Deposit Insurance Corporation has the authority to administer contracts related to deposit insurance on behalf of the Minister, in the unlikely event that the Minister needed to exercise those authorities in the future.

Improving the Recourse Processes for Employment Insurance Appeals (Employment Insurance Board of Appeal)

Division 38 of Part 4 amends Part 5 of the Department of Employment and Social Development Act (DESDA) to create a new Employment Insurance (EI) Board of Appeal and make consequential adjustments to the Social Security Tribunal.

Key proposed changes include:

1. establishing the EI Board of Appeal with a regionally dispersed tripartite decision-making model to replace the Employment Insurance Section of the General Division of the Social Security Tribunal for first level EI appeals; and
2. eliminating the requirement for leave to appeal EI decisions to the Appeal Division of the Social Security Tribunal.

This proposal is a revised version of the draft legislation introduced as part of the Budget Implementation Act, 2022, No. 1 (Bill C-19, Division 32) which was removed from the Bill to conduct further consultations prior to revised legislation being introduced in Fall 2022.  Over the summer 2022, consultations with stakeholders were held to review the main issues raised by stakeholders and parliamentarians. In parallel, consultations in the form of an online survey open to the public, including former EI appellants, were also conducted to review certain aspects of the EI appeal process. Based on what was heard during the consultations, the Government has amended the legislation and is now looking to move forward with the creation of the EI Board of Appeal.

The intent is to return to a tripartite decision-making model for first level EI appeals as announced in 2019 as part of the measures to improve the EI recourse process. The legislation provides that appeals will be heard and decided by tripartite panels of part-time members dispersed in the regions. It also provides clients the right to choose between in-person, videoconference and telephone hearing format, except under prescribed circumstances. As a tripartite organization, the new EI Board of Appeal would represent the interests of government, workers and employers, helping put first-level EI appeal decisions back into the hands of those who pay into the EI system. Second-level appeals will continue to be heard by the Appeal Division of the Social Security Tribunal.

The new EI recourse process changes will be implemented at a date to be fixed by Order in Council. Additionally, to support the creation of the EI Board of Appeal, consequential amendments to related legislation will include amendments to the Federal Courts Act, the Labour Adjustment Benefits Act, the Income Tax Act, and the Employment Insurance Act.

Canada Elections Act

Federal political parties are key actors in a healthy democracy and help voters make informed choices through their engagement. Effective engagement requires federal political parties to collect a significant amount and variety of personal information. Canadians rightfully expect that all federal political parties will protect their personal information—no matter where they live—when it comes to the activities they undertake, such as canvassing, fundraising, and polling.

Budget 2023 highlighted the Government's intention to amend the Canada Elections Act (CEA) to establish a uniform federal approach in respect of federal political parties' collection, use, disclosure and retention of personal information. Ensuring that all federal political parties have consistent and appropriate national safeguards in place to protect the personal information of Canadians contributes to broader efforts to protect Canada's democracy.

This commitment is informed by an evolving privacy landscape, calls from experts, and growing expectations from Canadians with respect to the protection of Canadians' personal information.

As a first step, the Budget Implementation Act proposes the establishment of a national, uniform regime in relation to the use, collection, disclosure and retention of personal information.

These amendments would take effect when the Budget Implementation Act receives Royal Assent.

An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023 – Questions and Answers

Table of Contents

• Part 1 - Amendments to the Income Tax Act and Other Legislation
  • Electronic Filing and Certification of Tax Information and Electronic Payments
  • Doubling the Deduction for Tradespeople's Tools
  • Extending the Residential Property Flipping Rule to Assignment Sales (Anti-Flipping Tax)
  • Taxation of Veterans' and Active Members' Benefit
  • Technical Tax Changes - Gottfriedson Class Settlement Agreement
  • Grocery Rebate
  • Automatic Advance for the Canada Workers Benefit
  • Improving Registered Education Savings Plans
  • Registered Disability Savings Plan – Qualifying Family Member Provision
  • Fixing Contribution Errors in Defined Contribution Pension Plans
  • Mandatory Reporting
  • Technical Tax Changes - Dental Program - Taxpayer Information Sharing for Canadian Dental Care Plan
  • Hedging and Short Selling by Canadian Financial Institutions
  • Reporting Rules for Platform Operators
  • Supplementary Reporting for Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF)
  • Borrowing by Registered Pension Plans
  • Technical Amendments to the Income Tax Act
• Part 2 - GST / HST Measures
  • GST/HST Treatment of Payment Card Clearing Services
• Part 3 – Amendments to the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act
  • Alcohol Excise Duty [Excise Act and Excise Act, 2001 (Alcohol Products)]
• Part 4 - Various Measures
  • A Fairer External Complaints Handling System for Banking (External Complaints Body)
  • Strengthening the Federal Pension Framework (Pension Benefits Standards Act, 1985)
  • Combatting Money Laundering and Terrorist Financing (Measures Related to Money Laundering and to Digital Assets and Other Measures)
  • Supporting the Economic Growth of Developing Countries (Preferential Tariff for Developing Countries)
  • Indefinite Withdrawal of Most-Favoured-Nation Status from Russia and Belarus [Removal of Most-Favoured-Nation Tariff Treatment for Belarus and Russia]
  • Bank of Canada Negative Equity (Non-Application of Sections 27 and 27.1 of the Bank of Canada Act)
  • Legislation to Establish the Canada Innovation Corporation (Canada Innovation Corporation Act)
  • Canada Health Transfer [Federal-Provincial Fiscal Arrangements Act (Canada Health Transfer)]
  • Equalization and Territorial Formula Financing (TFF) Renewal (Federal-Provincial Fiscal Arrangements Act (Equalization and Territorial Financing Renewal and Other Amendments)
  • Changes to Canada's Sanctions Regime (Economic Sanctions - Special Econimic Measures Act)
  • NATO Climate Change and Security Centre of Excellence Privileges and Immunities (North Atlantic Treaty Organisation) Act]
  • Service Fees Act Amendments (Service Fees)
  • Allowing Use of Canada Revenue Agency - Collected Data for Canada Pension Plan Analysis and Evaluation
  • Timely Sharing of Death Information in Employment and Social Development Canada (Department of Employment and Social Development Act)
  • Death or Disappearance of a Child (Canada Labour Code)
  • Electronic Submission of Asylum Claims [(Immigration and Refugee Protection Act (Claims For Refugee Protection)]
  • Improving Client Service in the Private Sponsorship of Refugees Program [Immigration and Refugee Protection Act (Sponsorship Applications)]
  • Better Protecting Immigration and Citizenship Clients (College of Immigration and Citizenship Consultants Act)
  • Citizenship Act Modernization (Citizenship Act)
  • Yukon Act Amendments (Yukon Act)
  • Enhancing the Management of Marine Emergencies and Pollution and Establishing a Vessel Remediation Fund (Oceans Protection Plan)
  • Strengthening Data Sharing in Trade Corridors
  • Supporting Rail Competition
  • Strengthening Air Passenger Rights and Data Sharing (Air Travel Complaints)
  • Legislative Amendments Enabling the Canada Border Services Agency's Traveller Modernization Initiative (Customs Act)
  • Modernizing the National Research Council (National Research Council Act)
  • Amendments to the Patent Act (Patent Act)
  • Strengthening Regulatory Oversight of Natural Health Products [Food and Drugs Act (Natural Health Products)]
  • Banning Cosmetic Testing on Animals [Food and Drugs Act (Cosmetics Testing on Animals)
  • The Canadian Dental Care Plan - Reporting Requirements for Employer-Provided Dental Coverage (Dental Care Measures Act)
  • Amendment to Address the Supreme Court of Newfoundland and Labrador Decision in R. v. Gorman (Canada Post Corporation Act)
  • Canada Growth Fund
  • Modernizing Financial Sector Oversight to Address Emerging Risks (Legislation Related to Financial Institutions)
  • Cracking Down on Predatory Lending (Criminal Rate of Interest – Criminal Code)
  • Continuing to Support Seasonal Employment Insurance Claimants (Employment Insurance Act)
  • Clean Fuels Regulation Fund (Canadian Environmental Protection Act, 1999) (Canadian Environmental Protection Act, 1999)
  • Deposit Insurance (Canada Deposit Insurance Corporation Act)
  • Improving the Recourse Processes for Employment Insurance Appeals (Employment Insurance Board of Appeal)
  • Canada Elections Act

Part 1 - Amendments to the Income Tax Act and Other Legislation

Electronic Filing and Certification of Tax Information and Electronic Payments

Q. Why is the government making changes to how Canadians interact with the Canada Revenue Agency (CRA)?

A. Budget 2021 announced a suite of legislative measures to improve the administration of, and compliance with, the tax system. These measures would improve the CRA's ability to operate digitally, resulting in faster, more convenient and accurate service, while also enhancing security.

Q. Who is impacted by the electronic filing and certification of tax information, and how?

A. The legislative changes are targeted at providing individuals and businesses with faster and more convenient services, while also enhancing security.

The measures relate to the electronic filing and certification of tax and information returns, and electronic payments. More specifically, the changes would:

• allow electronic signatures on specific forms;
• lower the electronic filing thresholds for tax preparers;
• make electronic payments mandatory if over $10,000; and
• allow the electronic transmission of certain information returns by issuers.

Q. What if a taxpayer does not want to use the electronic services or does not have access to reliable internet?

A. The legislative changes will not prevent taxpayers from being able to continue using non-digital methods in order to comply with their tax obligations. For example, an individual would continue to receive their Notices of Assessment by mail unless they file their taxes electronically and consent to receive communications electronically.

Q. Do the new electronic payment rules apply to individuals and businesses?

A. Yes. Any person that has to make a payment or remittance to the Receiver General of more than $10,000 is required to do so either at or through a designated financial institution. Taxpayers can also use CRA's My Payment platform. Payments and remittances over $10,000 should not be sent by cheque.

A taxpayer that fails to comply with the new rules regarding electronic payments is liable to a penalty of $100 for each failure.

Doubling the Deduction for Tradespeople's Tools

Q. Which tools are eligible for the tradespeople's tool expense deduction?

A. An eligible tool is a tool (including associated equipment such as a toolbox) that meets all of the following conditions:

• it was purchased by a tradesperson for their job as a tradesperson and it was not used for any purpose before it was purchased,
• the tradesperson's employer certified it as being necessary for the tradesperson to provide it as a condition of, and for use in, their job as a tradesperson, and
• it is not an electronic communication device (like a cell phone) or electronic data processing equipment (unless the device or equipment can be used only for the purpose of measuring, locating, or calculating).

Q. Will this change impact the apprentice mechanics' tool expense deduction?

A. Apprentice mechanics can claim the tradespeople's tool expense deduction, and may be able to deduct some or all of the remaining cost of their tools under the apprentice vehicle mechanics' tools deduction.

The amount that can be deducted under the apprentice vehicle mechanics' tools deduction is the extraordinary cost of tools they must provide as a condition of employment that is in excess of either 1) the Canada Employment Credit amount ($1,368 in 2023) plus the maximum deduction under the tradespeople's tool expense deduction ($500 under current rules), or 2) 5 per cent of their income from employment as an apprentice mechanic, whichever is greater.

The proposal would increase the maximum amount that apprentice mechanics can claim under the tradespeople's tool expense deduction from $500 to $1,000, and consequently reduce the amount that can be claimed under the apprentice mechanics' tool expense deduction for some taxpayers. There would be no net impact on apprentice mechanics who are already claiming the maximum amount of their eligible tool expenses between the two deductions.

Extending the Residential Property Flipping Rule to Assignment Sales (Anti-Flipping Tax)

Q. How many taxpayers are expected to be affected by the extension of the Residential Property Flipping Rule to assignment sales and how much tax revenue will it generate?

A. It is estimated that this extension could affect up to 1,400 taxpayers per year and increase the Government's tax revenue by approximately $1 million annually. In comparison, the original measure, which applied only to residential properties, was expected to affect 3,300 taxpayers per year and increase the Government's tax revenue by approximately $15 million annually.

Q. Will individuals have to provide documentation to prove their assignment sale falls under one of the life event exceptions?

A. Documentation is generally not required when filing an income tax return and claiming a benefit such as an exemption. However, if the CRA were to conduct an assessment review, the taxpayer could be required to submit proof to support their claim. The CRA would be responsible for determining the type of documentation that they would accept as a valid proof.

Q. Certain individuals who entered into purchase and sale agreements for a home will eventually move into the residential property. Would these individuals be subject to the deeming rule if they decided to sell this residential property within 12 months?

A. Yes, those individuals would be subject to the Residential Property Flipping Rule if they decided to sell their home after having owned it for less than 365 days (unless an exception applies). In other words, the calculation of the holding period would reset once a taxpayer secures ownership of the property.

Q. What are the tax consequences for an individual if the Residential Property Flipping Rule does not apply?

A. Where this deeming rule does not apply, for example because of a life event or because a right to purchase a property was owned for at least 365 days, it would remain a question of fact whether profits from the disposition are appropriately taxed as business income. Under existing law, whether a property is considered to be a capital property or inventory in a business depends on several factors, including the individual's purpose when the property was acquired. If the deeming rule does not apply, these factors would continue to determine the individual's tax treatment.

Q. How many taxpayers are expected to be affected by the extension of the Residential Property Flipping Rule to assignment sales and how much tax revenue will it generate?

A. It is estimated that this extension could affect up to 1,400 taxpayers per year and increase the Government's tax revenue by approximately $1 million annually. In comparison, the original measure, which applied only to residential properties, was expected to affect 3,300 taxpayers per year and increase the Government's tax revenue by approximately $15 million annually.

Q. Will individuals have to provide documentation to prove their assignment sale falls under one of the life event exceptions?

A. Documentation is generally not required when filing an income tax return and claiming a benefit such as an exemption. However, if the CRA were to conduct an assessment review, the taxpayer could be required to submit proof to support their claim. The CRA would be responsible for determining the type of documentation that they would accept as a valid proof.

Q. Certain individuals who entered into purchase and sale agreements for a home will eventually move into the residential property. Would these individuals be subject to the deeming rule if they decided to sell this residential property within 12 months?

A. Yes, those individuals would be subject to the Residential Property Flipping Rule if they decided to sell their home after having owned it for less than 365 days (unless an exception applies). In other words, the calculation of the holding period would reset once a taxpayer secures ownership of the property.

Q. What are the tax consequences for an individual if the Residential Property Flipping Rule does not apply?

A. Where this deeming rule does not apply, for example because of a life event or because a right to purchase a property was owned for at least 365 days, it would remain a question of fact whether profits from the disposition are appropriately taxed as business income. Under existing law, whether a property is considered to be a capital property or inventory in a business depends on several factors, including the individual's purpose when the property was acquired. If the deeming rule does not apply, these factors would continue to determine the individual's tax treatment.

Taxation of Veterans' and Active Members' Benefit

Q. Is the government changing the tax treatment of any benefits?

A. Not, all of the benefits in question are currently being treated as tax-free. The proposal would clarify and confirm their tax-free status through an amendment to the Income Tax Act.

Q. What is the purpose of the benefits and who receives them?

A. The benefits are available to ill and injured veterans, service members, and their families. They are intended to help people in the aftermath of an injury by providing funding for healthcare, job retraining and education, and equipment and services to help those living with a disability.

Q. Why is the exclusion of some benefits effective for the 2021 tax year and others effective for the 2018 tax year?

A. The proposal would exclude most of the benefits from income effective for the 2018 tax year to cover the normal reassessment period and ensure that veterans, service members, or their family members do not face tax liabilities on benefits they received in the past. The proposal would exclude education expense reimbursement for ill and injured members effective for the 2021 tax year because that benefit did not exist prior to 2021.

Technical Tax Changes - Gottfriedson Class Settlement Agreement

Q. Why is the Government proposing this measure?

A. The government is proposing this measure to ensure that the income of the trust established under the Gottfriedson Band Class Settlement Agreement, recently approved by the court, is exempt from income tax.

This is the same approach as was taken in respect of other major government-funded trusts such as those established under the first Indian Residential Schools Settlement (2006) and Safe Drinking Water (2021) settlement agreements.

Q. How will the trust fund be used?

A. The trust is for the benefit of 325 Indian Act bands and Indigenous self-governments, with a focus on promoting Indigenous languages, cultures, heritage and wellness. The fund will be invested and disbursed to those Band Class Members in accordance with the Settlement Agreement.

Grocery Rebate

Q. Why did the government choose to provide a Grocery Rebate of these specific amounts?

A. The Grocery Rebate would deliver another $2.5 billion in additional targeted support to GST Credit recipients.

The Grocery Rebate would be equivalent to doubling the GST Credit for six months.

This support strikes a balance between providing help to those that need it most, while not undermining efforts to bring inflation down.

This Grocery Rebate would provide additional support to about 11 million GST Credit families, including more than half of Canadian seniors.

Single Canadians without children would receive up to an extra $234 and a couple with two children would receive up to an extra $467. Seniors would receive an extra $225 on average.

Q. Will all vulnerable populations (e.g. low-income families, seniors and persons with disabilities) receive the proposed Grocery Rebate?

A. The Grocery Rebate would provide additional support to low- and modest-income Canadians across-the-board, including single individuals, families with children, seniors and persons with disabilities.

For example, single individuals without children with incomes in 2021 of $49,200 or lower, or couples with two children with 2021 incomes of $58,500 or lower would receive additional support.

More than half of Canadian seniors would receive the Grocery Rebate.

Eligibility for the Grocery Rebate would be automatically determined, provided an individual has filed their 2021 tax return, and would be based on whether an individual is entitled to the GST Credit for January 2023.

Q. When can Canadians expect to receive the Grocery Rebate?

A. Recipients would not need to apply for the Grocery Rebate. This targeted support would be automatically delivered by the Canada Revenue Agency to eligible GST Credit recipients. The Grocery Rebate would be paid as soon as possible following the passage of this bill, using the GST Credit system.

However, individuals should file their 2021 tax return if they have not done so already to be able to receive the Grocery Rebate.

Q.  Would interest accrue on the Grocery Rebate amount, given that it would be based on eligibility to the GST Credit in January 2023 and would be delivered as a retroactive payment?

A. Interest would not accrue on the Grocery Rebate.

Automatic Advance for the Canada Workers Benefit

Q. What is the Canada Workers Benefit?

A. The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers. It is generally available to individuals 19 years of age and older not attending school full-time. The credit provides a maximum benefit of $1,428 for single individuals without dependants and $2,461 for families (couples and single parents) for the 2022 tax year.

Q. Why is the government changing how the benefit is delivered?

A. The 2022 Fall Economic Statement proposed to automatically issue quarterly advance payments of the CWB to those who qualified for the benefit in the previous year. This would improve delivery of the benefit by providing support to beneficiaries sooner and throughout the year, rather than through an annual refund after filing their taxes.

Q. How will advance payment of the CWB work?

A. The proposal would automatically issue advance payment of the CWB to people who qualified for the benefit in the previous year. Workers would generally receive half of their prior-year entitlement through payments made in July, October, and January. These payments would represent a minimum CWB entitlement for the year, with any remaining CWB being issued through the tax return.

Example of how the automatic advance payment would work:

• Someone who received a $1,200 CWB entitlement for 2022 would now receive three payments of $200 each (in July and October of 2023 and in January of 2024), with any remaining entitlement provided when they file their tax return for 2023. For example, if their entitlement remains the same in 2023, then the remaining half of their CWB entitlement for the year ($600) would be disbursed through their tax return in the spring of 2024.
• If, however, their CWB calculated at tax time happens to be lower than $600, then their entitlement for the year would be the $600 minimum entitlement that was received in advance.

Q. How much will the proposal cost?

A. The proposal would cost an estimated $4 billion over six years, starting in 2022-23, including $68 million in administrative costs over that period.

Q. What do the program costs represent for the automatic advance for the Canada Workers Benefit (CWB)?

A. The proposed change to this program will help provide more timely support to low- and modest-income Canadians throughout the year, paying advance payments to those who received the CWB in the previous year.

These advance payments would constitute a minimum entitlement for the year, and any additional entitlement for the year would be paid when workers file their tax returns for the year.

The program costs represent incremental advance payment entitlements in the year over and above amounts that would otherwise have been received through the tax return at end of year.

Q. What happens if individuals receive more in advance than they are entitled to for the year?

A. The proposed advance payments would represent a new minimum entitlement to the program for a year based on their income in the previous year. Changes to individuals' incomes in the year relative to the previous year would not affect their entitlement to advance payments.

Eligibility to receive advance payments during the course of a year would cease in cases where an individual is incarcerated for a period of 90 days or more; moves out of the country; or dies before the start of the benefit year. Individuals are required to notify the Canada Revenue Agency where any of these changes in circumstance occurs to ensure that payments cease, and it is anticipated that overpayments due to payments made after one of these changes in circumstance would be rare.

If an individual were to receive advance payments that exceed the advance payments to which they are legally entitled, either due to one of the changes in circumstance noted above not being reported on a timely basis or due to a reassessment of their tax return for the previous year, any resulting overpayment would be recovered in the same manner as for other benefits based on prior-year income, such as the GST Credit. For example, the Canada Revenue Agency may keep all or a portion of future payments due to the individual until the amount is repaid.

Q. Who is expected to receive incremental entitlements due to the proposed advance payments?

A. Some individuals would be entitled to more support with the implementation of this minimum entitlement than they would without it. This could include cases that are due to couple formation (such as marrying someone with a higher income, for example). This may also include individuals who received a pay increase during the year, or who saw a very significant reduction in earnings (e.g., because they lost their job or returned to school full-time).

Q. What other recent changes have been made to the Canada Workers Benefit?

A. 2018

  Budget 2018 introduced the Canada Workers Benefit (CWB).

• It is more generous (higher maximum amounts and phase-out thresholds) than the Working Income Tax Benefit, which it replaced.
• Starting in 2019, the Canada Revenue Agency automatically provides the CWB to eligible tax filers, even if they do not claim it.

2021

Budget 2021 further enhanced the CWB by significantly increasing the phase-out thresholds, especially for unattached workers, helping to ensure that full-time, minimum wage workers can receive significant support.

To improve work incentives for secondary earners in a couple, Budget 2021 also introduced a "secondary earner exemption", a special rule for individuals with an eligible spouse. This allows the spouse or common-law partner with lower working income to exclude up to about $14,000 of their working income in the computation of their adjusted net income, for the purpose of the CWB phase-out.

Improving Registered Education Savings Plans

Q. What are Registered Education Savings Plans?

A. Registered Education Savings Plans are tax-assisted savings vehicles designed to help families accumulate savings for the post-secondary education of their children. Government matching grants provide an additional incentive to save, and earnings in these plans accumulate tax-free until withdrawal. When a student attends an eligible post-secondary course, government grants can be withdrawn along with income earned in a Registered Education Savings Plan as an Educational Assistance Payment. These payments are included in the income of the student, who is likely to face a relatively low marginal tax rate.

Q. Why is the Government changing the withdrawal limits for Educational Assistance Payments?

A. The current withdrawal limits on Educational Assistance Payments were first introduced in 1998. In order to reflect changes since then, including higher costs of post-secondary education, the Government proposes to raise the limit on Educational Assistance Payment withdrawals to $8,000 from $5,000 for full-time students, and to $4,000 from $2,500 for part-time students.

Q. When would higher Educational Assistance Payment withdrawal limits be available?

A. The Government proposes to amend the Income Tax Act such that, as of March 28, 2023, the terms of an RESP may permit higher Educational Assistance Payment withdrawal limits. However, it is RESP promoters who administer these plans according to the terms agreed upon with their subscribers.
While some promoters may be able to allow larger education assistance payment withdrawals soon after the announcement, other promoters may require time to amend their plans and make necessary systems changes to administer the new rules.

Q. Why is the Government proposing to allow divorced or separated parents to open joint Registered Education Savings Plans?

A. Currently, married or common-law parents can open joint Registered Education Savings Plans in respect of their children, and can maintain these joint accounts after a divorce or separation. However, they cannot open a new joint RESP after a divorce or separation. In order to improve fairness, and give parents greater flexibility, it is proposed to allow parents to open joint Registered Education Savings Plans in respect of their children after a divorce or separation.

Q. Why is there no cost associated with these measures?

A. The fiscal impact of these measures is expected to be negligible.
Firstly, allowing Educational Assistance Payments to be withdrawn more rapidly would primarily result in a small amount of tax revenue being collected slightly sooner on educational assistance payment income. However, those who wish to withdraw greater amounts were already able to do so after an additional 13 weeks of study passed, or during a subsequent enrolment.

Because Educational Assistance Payments could be withdrawn more rapidly, and these payments include matching grants, it is also possible that a smaller amount of matching grants might eventually go unused and be returned to the government. However, this potential impact would likely be very small.

Secondly, allowing divorced or separated parents to open joint Registered Education Savings Plans would only result in a cost to the government in the event that neither parent would have otherwise opened a plan. It is instead expected that this measure would primarily allow divorced or separated parents to open a plan together, or move an existing plan to a different provider, as opposed to being required to open separate plans for their child or children.

Q. How many Canadians benefit from Registered Education Savings Plans?

A. In a typical year, nearly 500,000 students withdraw funds from a RESP to support their education.

Registered Disability Savings Plan – Qualifying Family Member Provision

Q. Why is the government proposing these changes now?

A. The current RDSP Qualifying Family Member provisionis set to expire on December 31, 2023. The first amendment, to extend the provision by three years to December 31, 2026, is being done now to provide clarity on the future of the provision for impacted families, stakeholders and for financial institutions who issue RDSPs. It would also provide additional time for provinces and territories that have not already done so to develop inclusive solutions to address RDSP legal representation issues. The second amendment, which would expand the Qualifying Family Member definition to include siblings, is being done to enhance access to RDSPs by enabling a sibling to open an RDSP. These changes respond to stakeholder requests.

Q. Why is the Qualifying Family Member provision necessary? Can't a parent, spouse, common-law partner or sibling already open an RDSP by being a guardian of an adult with mental disabilities whose ability to enter into an RDSP contract is in doubt?

A.  Since the assets held in an RDSP are the property of the beneficiary, the plan holder must be the beneficiary, or if their ability to enter into an RDSP contract is in doubt, their legal representative for matters of property as recognized under provincial or territorial law.

Although parents, spouses, common-law partners and siblings may be eligible to become an adult's legal guardian, in many jurisdictions applying for an adult to be placed under full guardianship is the only way to establish legal representation for property, which can be costly and time-consuming. Also, not all families wish to pursue this due to the stigma and limitations for the implicated adults (e.g., for an individual who can make some day-to-day financial decisions but perhaps not investment ones), as it typically requires the adult to give up all decision-making autonomy including in other areas of their life.

The temporary Qualifying Family Member provision was introduced in 2012, as a way for families to open an RDSP for an adult with mental disabilities who has no legal representative and whose ability to enter into an RDSP agreement is in doubt. The definition of Qualifying Family Member currently includes a parent, spouse or common-law partner, and with these amendments would also include sibling of the beneficiary.

Q. Why is the provision only being extended for three years rather than being made permanent?

A. Assets held in an RDSP are the property of the beneficiary, and property matters are the jurisdiction of provinces and territories. The government encourages provinces and territories to develop and offer inclusive and flexible decision-making alternatives to families, so that RDSP access is not hindered for families of adults with mental disabilities whose ability to enter into an RDSP contract is in doubt. The amendment to provide a three-year extension is meant to provide additional time for provinces and territories that have not already done so to develop inclusive solutions to address RDSP legal representation issues.

Q. What would happen if the expiry date of the Qualifying Family Member provision were not extended beyond December 31, 2023?

A. If the Qualifying Family Member provision were to expire on December 31, 2023, any existing plan holder under this provision would be allowed to remain the plan holder beyond the expiry date. However, no new RDSPs could be opened for adults whose ability to enter into an RDSP contract is in doubt without having to arrange guardianship/legal representation for the beneficiary. Unfortunately, some families may face barriers to arranging guardianship/legal representation for the beneficiary, which can be costly and time-consuming depending on the process required in their jurisdiction, or may not wish to do so due to the potential loss of autonomy for the adult in question in other areas of their life.

Q. Why are only parents, spouses and common-law partners, able to be a Qualifying Family Member under the current legislation? What about other family members?

A. The Qualifying Family Member provision is meant to strike an appropriate balance between enhancing access to RDSPs for adults with mental disabilities and safeguarding RDSPs against abuse. The definition of a Qualifying Family Member has been kept intentionally narrow to include close family members—only parents, spouses and common-law partners—so as to minimize the likelihood of financial abuse. To enhance RDSP access to other family members with a close relationship with the beneficiary, the amendments expand the Qualifying Family Member provision to include siblings.

Other family members or close connections of an adult with mental disabilities and without the ability to enter into an RDSP contract may still go through the regular provincial or territorial channels to become the adult's legal representative or guardian, in which case they would be able to be the plan holder.

Q. How many families are expected to use the Qualifying Family Member provision per year, and how much will it cost?

A. Currently, financial institutions that issue RDSPs and enter into plan holder agreements would be aware of their clients' use of the Qualifying Family Member provision. The government is committed to exploring improved tracking methods to monitor the nation-wide uptake of the Qualifying Family Member provision to inform future policy decisions.

Extending the provision by three years and expanding the definition to include a sibling of the beneficiary will cost $13 million over five years starting in 2023-24, and $3 million ongoing. Most of the cost is related to the Canada Disability Savings Grants and Bonds that would be paid into new RDSPs that would not have otherwise been opened in the absence of this provision.

Q. When would the Qualifying Family Member provision come into force?

A. The existing Qualifying Family Member provision is still in forceand does not expire until December 31, 2023. This amendment would extend the provision by three years, until December 31, 2026. The expansion of the Qualifying Family Member definition to include a sibling of the beneficiary would come into effect upon royal assent of this bill.

Q. Would a Qualifying Family Member, including a sibling of the RDSP beneficiary, be able to make withdrawals from an RDSP on behalf of the beneficiary?

A. No, Qualifying Family Members cannot enable RDSP withdrawals. To make a withdrawal from an RDSP on behalf of an individual with mental disabilities whose ability to enter into an RDSP contract is in doubt, a legal representative for the beneficiary, as per provincial or territorial law, would need to be in place.

Fixing Contribution Errors in Defined Contribution Pension Plans

Q. What is the purpose of this measure?

A. This measure will provide more flexibility to plan administrators of defined contribution pension plans to correct for both under-contributions and over-contributions.

The proposals would permit certain types of errors to be corrected via additional contributions to an employee's account under a defined contribution pension plan to compensate for an under-contribution error made in any of the preceding ten years, subject to a dollar limit. Additional contributions to correct for under-contributions would reduce the employee's registered retirement savings plan (RRSP) contribution room for the taxation year following the year in which the supplementary contribution is made.

Refunds of over-contributions would generally restore the employee's RRSP contribution room for the taxation year in which the refund is made to the extent that it was reduced by the over-contributions.

Q. Will this measure increase the administrative burden for plan administrators?

A. To simplify reporting requirements, the measure requires the plan administrator to file a prescribed form in respect of each affected employee, rather than to amend T4 slips for prior years.

Mandatory Reporting

Q. Why is the Government proposing to expand the mandatory disclosure rules in the Income Tax Act?

A. The current mandatory disclosure rules in the Income Tax Act are ineffective as they currently result in almost no reporting by taxpayers.

To address these shortcomings, Budget 2021 announced a consultation on proposals to enhance these rules through the implementation of best practices recommended in the Base Erosion and Profit Shifting Project, Action 12: Final Report of the Organisation for Economic Co-operation and Development and the Group of 20 (BEPS Action 12), and better alignment with similar rules which have been implemented in jurisdictions with comparable tax systems. This measure implements the changes proposed in Budget 2021, taking into account stakeholder feedback received during the subsequent consultation process.

Q. What will the compliance burden be under these new rules?

A. There are three categories of reporting under these new rules.

• Reporting of reportable transactions:
  • There are already rules in the Income Tax Act that require the reporting of reportable transactions. These rules are being amended to comply with the recommendations of BEPS Action 12, including through tightening the filing period (from an annual filing to within 90 days) and lowering thresholds for transactions to be considered reportable transactions, which are identified through the existence of generic hallmarks in relation to fees, confidential protections and contractual protections.
• Reporting of notifiable transactions:
  • This new measure would require reporting with respect to specified tax avoidance transactions within 90 days.
  • These two reporting regimes attempt to strike a balance between the burden associated with additional reporting requirements and the Canada Revenue Agency's (CRA) need to identify high-risk and aggressive tax schemes of interest in a timely manner. Failing to comply with the reporting requirements imposed by this measure could result in penalties and reassessment of the taxpayer's income tax return for the taxation year, in relation to the transaction at issue, would not become statute barred.

• Reporting of uncertain tax treatments:
  • Only a small subset of corporations would be required to report uncertain tax treatments. Specifically, these rules would apply to corporations required to file tax returns in Canada that have $50 million or more in assets, and that prepare their financial statements in accordance with IFRS or other country-specific accounting rules applicable to public companies. Moreover, uncertain tax treatment reporting would only be imposed on corporations that have reported the uncertainty in their annual consolidated financial statements prepared in accordance with relevant accounting standards. Therefore, it is expected that the compliance burden resulting from this new reporting requirement would not be substantial.

Q. What would be the role of the Department of Finance and of the CRA with respect to the proposed notifiable transactions reporting rule?

A. The Minister of National Revenue would have the authority to designate notifiable transactions, with the consent of the Minister of Finance. In practice, this will mean that CRA and Department of Finance officials will work together to identify and designate notifiable transactions.

Q. How will the public be made aware of the designation of notifiable transactions?

A. Transactions designated by the Minister of National Revenue, with the consent of the Minister of Finance, will be listed on the CRA website to facilitate prompt reporting. This approach is consistent with the administrative approaches used with similar rules imposed in the United States and Australia.

Q. How do the rules address information that is subject to solicitor client privilege?

A. Information is not required to be disclosed under this reporting regime if it is reasonable to believe that the information is subject to solicitor-client privilege.

Q. The existing mandatory disclosure rules allowed for one person (either the taxpayer, advisor or promoter) to report a particular transaction, and this would effectively set aside the reporting obligations imposed on others in respect of same transaction. Why have these amendments set aside this approach?

A. Both the rules related to reportable transactions and notifiable transactions require reporting by the person who receives the tax benefit (and, if applicable, anyone who enters into the transaction for their benefit), as well as promoters and advisors to the transaction.

Recommendations in the BEPS 12 Report encourage the collection of separate filings from the various taxpayers, advisors and promoters involved with transactions under aggressive tax planning schemes. Multiple reports can provide tax authorities with a more accurate picture of the tax plan for audit and enforcement purposes. The enhanced transparency offered by this approach is also recognized as a potential deterrent for entering into aggressive tax planning schemes.

Moreover, the scope of advisors who are required to make filings in respect of reportable transactions is relatively narrow. The reporting obligation is limited to advisors who receive fees for providing contractual protection (for example, an insurance company that insures the tax benefit) or fees that are tied to the tax-benefit. Accordingly, it is expected that the number of people who would have a reporting obligation in respect of the same reportable transaction would typically be small. 

In contrast, all advisors (and promoters) have a filing obligation in respect of notifiable transactions if they know, or ought to know, that the transaction is a notifiable transaction. Accordingly, to ease the compliance burden, multiple advisors within the same corporation or partnership would only be required to file one report for the same notifiable transaction.

Technical Tax Changes - Dental Program - Taxpayer Information Sharing for Canadian Dental Care Plan

Q. Why is the Government proposing this change now?

A. Health Canada and Employment and Social Development Canada require access to taxpayer information in order to deliver the permanent Canadian Dental Care Plan. The previous amendments to the tax statues in Bill C-31 only permitted access to taxpayer information for the purposes of administering the interim Canada Dental Benefit.

The proposed amendments will ensure that the authority to share taxpayer information will be in place for the launch of the Canadian Dental Care Plan.

Q. What taxpayer information would be used to administer the Canadian Dental Care Plan?

A. Taxpayer information that would be used to administer the Canadian Dental Care Plan would include information on family net income, residency in Canada for tax purposes and children under the age of 18.

Detailed questions about how this information would be used to administer the Canadian Dental Care Plan should be referred to Employment and Social Development Canada and Health Canada.

Q. How would this taxpayer information be safeguarded to ensure that the information is only used to administer the Canadian Dental Care Plan?

A. Consistent with other instances of the sharing of taxpayer information for the administration or enforcement of specific government programs, Memorandums of Understanding (MOUs) would be established between the CRA and the relevant departments. These MOUs would contain specific conditions and safeguards for the exchange and use of this information to ensure the confidentiality of taxpayer information is maintained.

Questions about the specific conditions and safeguards that would be in place for the exchange and use of this taxpayer information should be referred to the Minister of National Revenue, the Honourable Diane Lebouthillier, and Minister of Health, the Honourable Jean-Yves Duclos.

Questions about how this information would be exchanged and used to administer the Canadian Dental Care Plan should also be referred to these two Ministers, as well as Employment and Social Development Canada who will be partnering with Health Canada to administer the Plan.

Q. Would the benefits provided under the Canadian Dental Care Plan be taxable or affect income-tested benefits?

A. Benefits provided under the Canadian Dental Care Plan would not be taxable under current law. As the benefits would be in respect of medical expenses incurred (which includes dental services), they would not need to be reported for income tax purposes under the current tax rules and CRA administrative policy. These benefits would therefore also not affect income-tested benefits delivered through the tax system under current rules.

Provinces and territories that have a Tax Collection Agreement with the federal government for personal income tax (i.e., all jurisdictions except Quebec) use the same definition of income as the federal government for the purposes of provincial/territorial personal income tax. As a result, the federal treatment of the benefits provided under the Canadian Dental Care Plan would automatically apply in all provinces and territories except Quebec. It would be up to the Government of Quebec to determine its preferred tax/benefit treatment.

Q. Why is the Government proposing changes to the Excise Tax Act and Excise Act, 2001?

A. The proposed amendments to the Excise Tax Act and Excise Act, 2001 would help to ensure consistency across federal tax statutes and would align with the approach taken under the interim Canada Dental Benefit.

The changes to the Excise Act, 2001 would automatically update the information sharing rules for the fuel charge under Part 1 of the Greenhouse Gas Pollution Pricing Act, for the Underused Housing Tax Act and for the Select Luxury Items Tax Act, as those Acts refer to the Excise Act, 2001 rule.

Hedging and Short Selling by Canadian Financial Institutions

Q. Why is the government introducing legislation that denies the dividend received deduction in certain circumstances?

A. Certain Canadian financial institutions have been using hedging and short selling arrangements in aggressive tax planning strategies that allow the corporate group to claim the permitted tax deduction for dividends received on Canadian shares, as well as a second tax deduction in respect of the same dividends. Preventing financial institutions from claiming what is in effect two deductions in respect of the same dividend will improve the integrity and fairness of the tax system.

Q. Budget 2023 also proposes a measure that would deny the dividend received deduction by financial institutions in certain circumstances. Is the introduction of this legislation necessary?

A. Although the measure proposed in Budget 2023 is broader than the measure proposed in Budget 2022, the measure proposed in Budget 2022 is intended to address specific hedging and short selling arrangements used in aggressive tax planning strategies before the measure proposed in Budget 2023 comes into force. The measure proposed in Budget 2022 also addresses the deductibility of dividend compensation payments when the dividend received deduction is denied.

Q. What kind of tax planning is this measure trying to prevent?

A. This measure is trying to prevent transactions that take undue advantage of the dividend received deduction by achieving two deductions with respect to the same dividend.

More specifically, in these transactions, a financial institution (generally, a bank) claims a dividend received deduction for the dividends received on certain Canadian shares, resulting in tax-free dividend income. A registered securities dealer in the group borrows identical shares from a securities lender and sells these shares short, eliminating the group's economic exposure to the Canadian shares. The registered securities dealer claims a deduction for two-thirds of the amount of the dividend compensation payments made to the securities lender under the securities lending arrangement. Overall, the Canadian group realizes two deductions in respect of the same dividend, while having no economic exposure to the Canadian shares.

In this situation, the new rule would deny the dividend received deduction where there was knowledge that the transactions entered into by the registered securities dealer would have the effect of eliminating the group's exposure to the Canadian shares. In this case, where the dividend received deduction is denied, the new rule would provide that the registered securities dealer could claim a full deduction (rather than two-thirds) for the dividend compensation payment paid by it to the securities lender under the securities loan.

The result is that the group includes the dividend in income and gets a full deduction for the dividend compensation payment, reflecting the economics of the transaction. As a simple example, where a financial institution group receives a $90 dividend and a registered securities dealer in the group makes a $90 dividend compensation payment (leaving the group economically flat), the new rule would result in that group having a $90 income inclusion and an offsetting $90 deduction, rather than a $90 income inclusion and a $150 deduction (a $90 dividend received deduction plus a $60 dividend compensation payment deduction).

Q. Why is there no exception in this new rule where the lender under the securities lending arrangement is not a tax indifferent investor, similar to the exception in the synthetic equity arrangement rules?

A. The synthetic equity arrangement rules typically involve total return swaps. The recipient of a swap payment equivalent to the amount of a dividend is not treated as a dividend for tax purposes, and a Canadian taxpayer would include such amount in income without the availability of the dividend received deduction.

The new rule involves securities loans, where the recipient (the securities lender under the securities loan) receives a dividend compensation payment. Unlike with a total return swap, this payment is deemed to be a dividend received by the securities lender who may then be entitled to claim the dividend received deduction.

Q. Why does the new rule deny the dividend deduction for the bank, rather than denying the deduction to the registered securities dealer?

A. The new rule is part of the dividend rental arrangement rules that, in similar circumstances, deny the dividend received deduction to the dividend recipient.

Reporting Rules for Platform Operators

Q. How is this different from the Common Reporting Standard?

A. The Common Reporting Standard is about the exchange of financial account information. It supports taxpayer compliance where people are holding financial assets outside of their country.

The proposed framework addresses similar compliance issues where people are earning income by providing goods and services through online platforms.

The rules are fairly similar to the CRS in the way the reporting and the exchanges will work.

Q. How will taxpayer information be protected under the rules?

A. Any information collected by the Canada Revenue Agency (CRA) would be protected under the taxpayer confidentiality provisions of the Income Tax Act.

The exchanges of information with other countries would take place under the exchange of information provisions in tax treaties and similar international instruments, which provide important safeguards to protect taxpayer confidentiality and ensure that the exchanged information is not used inappropriately.

Q. Would Canada receive information on taxpayers that use a U.S. online platform?

A. Because the U.S. has not indicated that it will be a participating jurisdiction, the Internal Revenue Service will not send Canada information from U.S. online platforms. However, Canada still expects to receive information from U.S. online platforms. Some U.S.-headquartered online platforms may have a platform operator located in Canada, in which case the platform operator would be required to report the information on Canadian sellers and rental property located in Canada directly to the CRA.

Other U.S. online platforms may have a platform operator located in a member state of the European Union to serve markets outside of the U.S. In those cases, Canada would receive the information on Canadian sellers and rental property located in Canada that use such platforms through exchange with the relevant partner jurisdiction in Europe.

If the platform operator serving the Canadian market is not in a partner jurisdiction, then it would have to report the information on Canadian sellers and rental property located in Canada directly to the CRA.

Q. What information would be reported to Canada and when?

A. Reporting platform operators must report relevant information on their reportable sellers to the CRA, including:

• Identifying information, including name, address and any tax identification number (TIN) and its jurisdiction of issuance
• Financial account information
• Where different from the seller, the name of the holder of the financial account to which the consideration is paid
• The seller's jurisdiction of tax residence
• The total consideration paid or credited to the seller during each quarter of the reportable period and the number of relevant activities
• Any fees, commissions or taxes withheld or charged by the platform during each quarter

With respect to immovable property rental services, in addition to the above, the address, and where available the land registration number, of each property listing, the number of days each property listing was rented during the reportable period and the type (e.g., hotel, apartment, parking space) of each property listing must also be reported.

Q. How will the rules affect someone creating an account on an online platform for the first time?

A. The seller may need to provide more information upon creating an account than before the rules. This might include information to enable the CRA to identify the taxpayer and their jurisdiction of residence, to the extent that the platform was not already collecting that information for its own purposes.

Many online platforms were consulted during the development of the rules at the OECD to minimize the burden that the rules would have on the platform and on the sellers.

Q. Canadians are already required to provide information to the CRA as part of their existing filing obligations. Why increase the compliance burden on platform operators?

A. Third-party reporting of income earned by platform sellers will provide a useful backstop to the self-reporting system of taxation that applies in Canada, similar to the reports that the CRA receives of income from employment or interest and dividends.

It is also proposed that platform operators be required to provide the same information to their platform sellers as the platform operators have provided to the CRA. This will support compliance by providing platform sellers with a summary of their online business activity, which will assist them with the tax and reporting obligations associated with their online economic activity.

Q. How will the rules apply to digital platforms based in Canada?

A. Canadian platform operators would need to conduct due diligence procedures to identify reportable sellers and report the relevant information on the reportable sellers directly to the CRA and to those sellers.

If the sellers are resident or the rental property is located in Canada, the CRA would be able to use the information in its tax compliance activities. The CRA would also automatically exchange with each partner jurisdiction the information received from Canadian platform operators on sellers resident in the partner jurisdiction and rental property located in the partner jurisdiction.

In order to minimise the compliance burden on lower-risk platforms, the measure would not apply to platform operators that demonstrate to the CRA that their business model does not allow sellers to profit from compensation received or that the platform does not have any reportable sellers.

Q. How will the rules apply to digital platforms based in partner jurisdictions?

A. The partner jurisdiction would have laws in place that, like Canada, would be based on the model rules. Platform operators located in a partner jurisdiction would need to conduct due diligence procedures to identify reportable sellers, and report the relevant information on the reportable sellers directly to the tax administration of the jurisdiction where the platform operator is located and to those sellers.

The tax administration would then automatically exchange with Canada the information received from the platform operators on sellers resident in Canada and rental property located in Canada.

Q. How can Canada ensure that online platforms based in non-partner jurisdictions comply with this regime?

A. Feedback from consultations indicates that online platforms are willing to comply. The model rules have been designed to minimize the compliance burden and make it easier for them to provide the relevant information to all jurisdictions interested in receiving it.

In order to provide greater assurance that online platforms will comply with the rules, additional penalties or similar deterrents may be contemplated.

Q. Why does the government not simply require direct reporting by all platforms, no matter where they are located, instead of relying on exchange of information with other tax administrations?

A. Using a multilateral exchange framework has many advantages over requiring all platform operators to report directly to the CRA:

• It is easier for a tax administration to deal with a platform operator located in its jurisdiction, including in ensuring compliance;
• Platform operators are likely more comfortable reporting to the tax administration of the jurisdiction where they are located; and
• It is less burdensome for platform operators to report to one tax administration than to all the tax administrations interested in the information.

The proposed measure includes a direct reporting obligation on non-resident platform operators primarily as a back-up for situations where the CRA cannot obtain the information through exchanges with other countries.

Q. How much will government revenues increase because of this measure?

A. The government is expecting that, because of the new reporting requirements, more taxpayers would report the income they earn through online platforms. Data is not available to estimate the magnitude of this increase.

Supplementary Reporting for Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF)

Q. Why is the government introducing new reporting requirements for RRSPs and RRIFs?

A. Non-compliance with tax rules by RRSPs and RRIFs leads to significant tax leakage.

The measure would require financial institutions to annually report to the Canada Revenue Agency the total fair market value, determined at the end of the calendar year, of property held in each RRSP and RRIF that they administer. The information will provide the Canada Revenue Agency with an important data point to assist the development of strategies for monitoring and investigating compliance of high-risk cases.

Q. When does the new reporting requirement take effect?

A. The new filing requirement would apply in respect of the 2023 and subsequent taxation years.

The first filing by financial institutions will occur in the first 60 days of 2024.

Borrowing by Registered Pension Plans

Q. Why is the government proposing to amend the borrowing rules in the Income Tax Act for defined benefit registered pension plans?

A. Relaxed restrictions on borrowing by defined benefit pension plans will provide administrators of such plans greater flexibility in their investment and liquidity strategies.

Q. Why is additional borrowing suspended when the ratio of the plan assets to liabilities exceeds 1.25?

A. The current rules allow deductible employer contributions (to fund pension obligations for employees) until the plan reaches a funding ratio (assets to liabilities) of 1.25, after which the plan's surplus assets should be reduced via contribution holidays. Suspending additional borrowing at a funding ratio of 1.25 is consistent with the current prohibition on employer contributions after that funding ratio is attained.

Q. Will this measure increase the risk to the health of defined benefit pension plans?

A. Plan administrators must continue to comply with the provisions of federal or provincial pension benefit standards legislation which ensure that pension funds are administered with a duty of care, that investments are made in a reasonable and prudent manner and that the plan is funded in accordance with prescribed funding standards. These standards are designed to manage the risks to the promised benefits of plan members and ensure the stability of registered pension plans. The new tax measure does not affect the provisions of federal or provincial pension benefit standards legislation.

Technical Amendments to the Income Tax Act

Q. What is the purpose of this measure?

A. From time-to-time, the Department of Finance releases packages of technical amendments that are intended to improve tax statutes and better align the law with the intended policy effect of the relevant rules. The need for these changes, which are usually of limited application, are identified internally, often as a consequence of reviewing an area of the law in the course of the Department's policy analysis, or by taxpayers or the Canada Revenue Agency in the course of applying the law to particular situations.

The most recent package was released in August 2022 for stakeholder consultation. This measure would implement several of the technical amendments to the Income Tax Act that were included in that release.

Q. What kind of integrity changes are included in this measure?

A. The majority of the tightening changes address deficiencies in the context of corporate reorganizations or international tax. They are important integrity measures that would preclude sophisticated taxpayers from taking advantage of loopholes that are currently being exploited through cross-border tax planning and tax-motivated corporate reorganizations.

Q. What other types of changes are included in this measure?

A. Many of the changes in this measure are relieving changes that have been requested by taxpayers or the Canada Revenue Agency. These changes are generally intended to address situations where a particular rule does not work as intended in a particular context, creating unintended and unfair tax consequences.

While these changes cover a range of different subject matters, many of the changes in this measure relate to registered plans or pensions. This reflects the complexity and specificity of rules in this area, and the need to make technical changes and adjustments over time.

Other changes in this measure would simply correct inconsistencies or drafting errors.

Part 2 - GST / HST Measures

GST/HST Treatment of Payment Card Clearing Services

Q. Will this measure result in merchants or consumers using payment cards having to pay tax?

A. No. The measure would not affect the GST/HST status of "swipe fees" or other fees charged to merchants or payment card users. Other types of payment card-related fees – such as transaction fees charged to merchants accepting payment cards ("swipe fees" or "interchange fees") and membership fees charged to payment card customers – would remain exempt from GST/HST.

Q. If it were the longstanding well-understood tax policy that payment card clearing services were taxable, how did a court arrive at the conclusion that these services were exempt?

A. Under the GST/HST, supplies of financial services are generally "exempt". This means that providers of financial services are not required to charge GST/HST in respect of the financial services that they supply but also that they cannot claim input tax credits (ITCs) to recover GST/HST paid on inputs they acquire to make those exempt supplies.

The definition of "financial service" in the GST/HST legislation is generally intended to be limited to intermediation and risk pooling activities where the service provider is at risk. Other (non-financial) services, such as advisory and administrative services, even if they are essential to the provision of financial services, are intended to be excluded from the definition.

Payment card clearing services have always been understood to be excluded from the "financial service" definition on the basis that they are administrative services, which are carved out of the definition. As a result, suppliers of payment card clearing services such as Visa and Interac have always treated their supplies to payment card issuers as taxable and charged GST/HST on their fees.

This position was affirmed by a 2018 decision of the Tax Court of Canada respecting services provided by Visa to CIBC.

However, in 2021, the Federal Court of Appeal (FCA), in an appeal of the 2018 CIBC decision, determined that the essential element of Visa's services to card issuers (such as CIBC) was not providing administrative services (contrary to the longstanding policy), but rather allowing issuers to make new credit card transactions with merchants in the Visa network. As a result, the court determined that the predominant element of Visa's services was not administrative services and they were therefore not excluded from the "financial service" definition (i.e., they were GST/HST-exempt financial services).

The amendment restores and affirms the longstanding policy that payment card clearing services are non-financial inputs that are intended to be subject to GST/HST, by specifically excluding such services from the "financial service" definition.

Q. Why does this measure apply retrospectively?

A. The amendment applies retrospectively to past supplies to confirm the longstanding and well-understood policy that these supplies are taxable. The retrospective application of the amendment is necessary to:

• protect GST/HST revenues;
• ensure that the court decision does not result in payment card network operators (such as Visa) being denied their right to input tax credits (input tax credits can generally only be claimed to recover GST/HST paid on inputs to taxable services); and
• ensure that the court decision does not result in payment card issuers such as banks receiving windfall gains.

Part 3 – Amendments to the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act

Alcohol Excise Duty [Excise Act and Excise Act, 2001 (Alcohol Products)]

Q. What does the 2% increase mean for a typical alcohol product?

A. Under the proposed 2% cap for 2023-24, the increases for a typical alcohol product would be the following:

• For a typical 750 mL bottle of spirits (40% ABV), the rate will increase by 8 cents per bottle (from $3.91 per bottle to $3.99 per bottle). Had no cap been applied, the rates would have increased by 25 cents per bottle (from $3.91 per bottle to $4.16 per bottle).
• For a typical 750 mL bottle of wine, the rate will increase by 1 cent per bottle (from $0.52 per bottle to $0.53 per bottle). Had no cap been applied, the rates would have increased by 3 cents per bottle (from $0.52 per bottle to $0.55 per bottle).
• For a typical case of 24 beer bottles (24x341 mL), the rate will increase by 6 cents per case (from $2.85 to $2.91). Had no cap been applied, the rates would have increased by 18 cents per case (from $2.85 per case to $3.03 per case).

Part 4 - Various Measures

A Fairer External Complaints Handling System for Banking (External Complaints Body)

Q. Why are we making changes to the external complaints body system?

A. Canadians deserve a fair and impartial process to address unresolved complaints with their banks. The proposed amendments will help improve the performance and accountability of the external complaints handling system and increase consumer trust in it.

Q.  What are the changes we are proposing to make?

A. To strengthen Canada's external complaints handling process and enhance consumer confidence in the system, Budget 2023 announced the government's intention to introduce targeted legislative measures to strengthen the external complaints handling system and to put in place a single, non-profit, external complaints body (ECB) to address consumer complaints involving banks.

Specifically, these measures will:

• Ensure the external complaints body is rooted in best practices (e.g., add principles such as transparency);
• Support and empower consumers (e.g., require the ECB to assist consumers);
• Strengthen impartiality and accountability of the external complaints body (e.g., require the ECB to meet with stakeholders annually); and
• Enhance oversight and enforcement (e.g., require the ECB's policies and procedures to be satisfactory to the Financial Consumer Agency of Canada (FCAC)).

Q. When will the single, non-profit external complaints body be selected?

A. The government aims to select the single, non-profit external complaints body later this year (2023) upon recommendation of the FCAC Commissioner following a selection process led by the FCAC.

Q. Why has the government decided not to implement a binding regime at this time?

A. This set of amendments does not propose that ECB decisions be made binding on banks. Banks have complied with every ECB recommendation over 20 years, with public naming for non-compliance acting as a significant deterrent. A binding regime, which would require necessary safeguards to ensure procedural fairness such as a formal appeals mechanism,

would make the ECB system more legalistic and adversarial than it is now, likely delaying final resolutions for consumers and increasing costs.

As an additional safeguard, the Government proposes that the FCAC specifically monitor low settlements and refusals and, should it find evidence of this occurring, implementing a binding framework could be considered.

Strengthening the Federal Pension Framework (Pension Benefits Standards Act, 1985)

Q.  Who will benefit from the proposed measures?

A. The proposed pension measures would affect members and retirees of federally regulated pension plans. These plans are linked to employment in federally regulated industries, such as banking, telecommunications, interprovincial transportation, some federal Crown corporations, and all private-sector employment in the Territories.

The measures also affect members of federally regulated pooled registered pension plans (PRPPS). These include members linked to employment in federally regulated industries whose employer participates in a PRPP and those who are self-employed in the Territories.

Q. How will the proposed measures enhance retirement security?

A. Unlike defined benefit plans, defined contribution plans and PRPPs do not provide a lifetime retirement income. Instead, members receive a lump-sum pension amount at retirement and generally must manage their savings, and the risk of outliving them, on their own.

VPLAs would enhance retirement security by providing members of defined contribution plans and PRPPs with access to a lifetime stream of retirement income.

Q. How does a VPLA work?

A. For plans that offer a VPLA, members would have the option to transfer all or part of their pension funds into the VPLA, where they would be pooled with the funds of other VPLA participants.

In retirement, each member would receive monthly payments from the VPLA fund for the remainder of their lives.

The amount of these payments would be determined by each participant's initial contribution amount to the VPLA fund and would be adjusted periodically. These adjustments would be based on investment returns of the fund and changes in life expectancies of the participants.

Q. Have any provinces implemented a similar VPLA framework?

A. Quebec passed a legislative framework for VPLAs for defined contribution plans and voluntary retirement savings plans, which are similar to PRPPs, in December 2020. Saskatchewan introduced legislation to establish VPLAs in November 2022. Both provinces' frameworks are not yet in force as they require regulatory amendments to become fully operational.

The Government has engaged and will continue to engage in discussions with provinces to work towards harmonizing VPLA frameworks across jurisdictions where possible.

Combatting Money Laundering and Terrorist Financing (Measures Related to Money Laundering and to Digital Assets and Other Measures)

Q. Why is the government proposing these amendments?

A. Money laundering (ML) and terrorist financing (TF) are threats to domestic and global safety and security and compromise the integrity of the financial system.

Risks continue to evolve as new methods to launder money and finance terrorism emerge.

In response, Canada's Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime is reviewed regularly to ensure that it continues to effectively counter financial crimes and is appropriately aligned with international standards.

Budget 2023 proposes legislative changes to strengthen AML/ATF investigations, prosecutions, and information sharing tools, as well as to address emerging risks to Canada's financial sector, including from foreign interference.

Budget 2023 also highlighted that the government is bringing forward standalone legislation to implement a publicly available beneficial ownership registry through Bill C-42.

These legislative amendments are the next step in strengthening Canada's AML/ATF Regime.

Q. How do the proposed legislative amendments to amend the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) address money laundering and terrorist financing?

A. The proposed measures aim to strengthen AML/ATF investigations, prosecutions, and information sharing, which remain operational challenges in Canada. They help respond to findings from the Commission of Inquiry into Money Laundering in British Columbia, also known as the Cullen Commission, and other domestic and international reviews of Canada's AML/ATF Regime.

The proposed amendments would expand measures in the Criminal Code that may assist in the investigation and prosecution of profit-motivated crimes by:

• Enabling Attorneys General to seek judicial authorization for the search and seizure of digital assets that may be confiscated as proceeds of crime; and
• Expanding the number of offences for which Attorneys General may obtain, with prior judicial authorization, disclosure of income tax information by the Minister of National Revenue for the purpose of a criminal investigation.

The proposed measures would also enhance enforcement and operations under the PCMLTFA by:

• Strengthening the registration framework for money services businesses and creating an offence if they operate while unregistered. The use of unregistered money services businesses is a technique used by money launderers;
• Criminalizing the structuring of transactions to avoid triggering FINTRAC reporting, another money laundering technique;
• Enhancing FINTRAC's tactical information sharing with police, and its strategic intelligence analysis related to threats to national security;
• Providing whistleblowing protections for employees who report information to FINTRAC;
• Requiring regulated businesses to report sanctions-related information to FINTRAC, which enables FINTRAC to develop and use financial intelligence to counter sanctions evasion and identify assets of sanctioned persons;
• Broadening the use of non-compliance reports by FINTRAC in criminal investigations; and
• Making a technical amendment to ensure that FINTRAC's forthcoming cost-recovery program is a success.

Q. What is being done to enable Attorneys General to seize digital assets?

A. Budget 2023 announces the government's intention to amend the Criminal Code to give Attorneys General the ability to seek judicial authorization for the search and seizure of digital assets that may be confiscated as proceeds of crime.

These amendments are necessary to keep pace with evolving financial technologies, as existing Criminal Code authorities are not well-adapted to the search and seizure of digital assets, including crypto currencies.

These amendments would establish an authority in the Criminal Code to search for and seize digital assets in a manner comparable to the search and seizure of conventional property that may be confiscated as proceeds of crime.

The amendments would extend existing safeguards in the Criminal Code, including prior judicial authorization on reasonable grounds to believe and the ability to challenge a search and seizure before the courts, to the new authority.

Q. When could income tax information be disclosed to the Attorney General for a criminal investigation?

A. Budget 2023 announces the government's intention to amend the Criminal Code to expand the number of offences for which Attorneys General may obtain, with prior judicial authorization, disclosure of income tax information for the purposes of a criminal investigation.

The amendment would add corruption and human trafficking offences, extortion, fraud over $5000 and fraud involving a public market offence from the Criminal Code, the offence of foreign bribery from the Corruption of Foreign Public Officials Act, as well as money laundering in relation to any of the listed offences to the existing provisions in the Criminal Code.

There are a number of safeguards contained in the provisions. These safeguards include the requirement to obtain prior judicial authorization on reasonable grounds to believe standard and the requirements that such an order be specific as to the person in relation to which the application is brought and specific as to the nature of the information or document sought.

Q. What changes are being made regarding money services businesses (MSBs)?

A. MSBs are required to register with FINTRAC, and individuals convicted of certain offences, such as money laundering or fraud, are ineligible to register. This registration framework helps uphold the safety and security of the MSB sector.

Budget 2023 proposes measures to enhance the strength and integrity of the registration framework, such as requiring that all MSB owners submit criminal record checks to FINTRAC to ensure they are eligible to register, and to automatically revoke the registration of MSBs when convicted of an offence that make them ineligible.

Law enforcement is increasingly investigating offences relating to the contravention of MSB registration requirements, especially the use of unregistered MSBs in money laundering.

To counter this vulnerability, Budget 2023 proposes to criminalize the operation of unregistered MSBs. This provision would come into force one year after the legislation is passed, to give time for the MSB sector to familiarize itself with the change.

Collectively, these changes are meant to enhance the safety, security, and integrity of the MSB sector and keep Canadians safe from organized crime. Registered MSBs that comply with their AML/ATF obligations are better able to mitigate money laundering and terrorist financing risks.

Q. What is the proposed structuring financial transactions offence and what is its objective?

A. Structuring financial transactions is a commonly observed money laundering technique in which a person intentionally breaks down what would otherwise be a single financial transaction into several smaller transactions. When carried out intentionally, it is done to avoid triggering a financial entity's obligation to report cash and virtual currency transactions of $10,000 or more to FINTRAC.

The offence of structuring financial transactions would only apply where a person structures or attempts to structure financial transactions with the intention of evading reporting requirements to FINTRAC.

The penalty provisions of the proposed offence provide judicial discretion to enable courts to tailor a sentence that takes into account the relevant factors and circumstances associated with each case.

Q. What additional financial intelligence can now be shared between FINTRAC and law enforcement?

A. Budget 2023 proposes to amend the PCMLTFA to clarify the designated information that FINTRAC can disclose to law enforcement when it has reasonable grounds to believe that the information would be relevant to investigating or prosecuting a money laundering or terrorist financing offence. This designated information includes, for example, the names and addresses of people involved in transactions, and the amount and type of currency or virtual currency used.

Q. What is the purpose of FINTRAC conducting strategic analysis related to the financing of threats to the safety of Canada?

A. Budget 2023 announces the Government's intention to introduce legislative amendments to establish powers for FINTRAC to disseminate strategic analysis related to the financing of threats to the safety of Canada.

This change would help address an existing operational gap and meet the demand from federal partners with national security mandates for strategic intelligence assessments related to the financing of threats to the safety of Canada. It would also allow the AML/ATF Regime to align itself with international standards and commitments related to proliferation financing.

FINTRAC's strategic analysis products provide analytical perspectives and aggregated information; they do not include identifiable information on Canadian persons or entities.

Q. Why does the AML/ATF Regime require whistleblowing protections?

A. Budget 2023 announces the Government's intention to introduce legislative amendments to provide whistleblowing protections for employees who report information to FINTRAC.

The reporting of suspicious transactions by reporting entities and their employees plays a critical role in Canada's AML/ATF Regime. In certain cases, employers engaged in misconduct may attempt to prevent their employees from filing reports with FINTRAC or attempt to retaliate against those who have done so.

Adding whistleblowing protections to the PCMLTFA could mitigate the potential for an employee to be discouraged from filing reports and protect employees from potential employer retaliation, such as being fired.

The Criminal Code contains similar protections for employees reporting information to law enforcement.

Q. What sanctions-related information would be reported to FINTRAC?

A. Businesses in the financial sector would be required to report to FINTRAC if they are in possession of sanctioned assets under the Special Economic Measures Act and its Regulations, or the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law).

Q. What is the purpose of broadening the use of non-compliance reports? How do these reports help law enforcement?

A. Budget 2023 announces the Government's intention to introduce legislative amendments to broaden the use of non-compliance reports by FINTRAC in criminal investigations.

Currently, FINTRAC may only disclose a non-compliance report to law enforcement to pursue investigations and charges in cases of serious or criminal non-compliance with the PCMLTFA (e.g., failure to file suspicious transaction reports with FINTRAC).

Broadening the use of non-compliance reports would allow law enforcement and prosecutors to use these reports in a wider array of criminal investigations and prosecutions, such as money laundering.

Q. Why is FINTRAC assessing its compliance program costs against reporting entities? Why is an amendment respecting the coming into force necessary?

A. In 2021, the government amended the PCMLTFA to require FINTRAC to ascertain the costs of administering the Act each year, and to assess those costs against the persons and entities they oversee in a manner to be prescribed in regulations. This measure will ensure that the costs of regulating businesses and professions for AML/ATF purposes are borne by regulated entities and not the taxpayer.

The government proposes a technical amendment to clarify that FINTRAC should not ascertain and assess its compliance program costs against the persons and entities they regulate until regulations specifying the assessment fees are published and brought into force. This amendment will allow a smooth launch of the assessments scheme starting in the 2024-25 fiscal year.

Q. Why are new powers being proposed for the Minister of Finance under the PCMLTFA in relation to national security?

A. Canada's security agencies, including the Canadian Security Intelligence Service (CSIS), have publicly stated that espionage and foreign interference currently pose a significant threat to our economic prosperity and national interests.

Under the PCMLTFA, the Minister of Finance already has powers (under Part 1.1 of the Act) to direct businesses with obligations under the Act to take enhanced due diligence measures to protect Canada's financial system.

The new measures proposed in Budget 2023 would expand the circumstances in which these powers can be used to also cover risks of financing of threats to Canada's national security.

This would further equip the government with tools to mitigate potential threats to its institutions and economy.

Budget 2023 also proposes a targeted enhancement of information sharing powers between FINTRAC and the Minister of Finance for specific national security purposes related to the Minister's duties under the PCMLTFA, financial sector statutes and the Retail Payment Activities Act.

This would provide the Minister with access to information relevant in administering their legislated responsibilities, such as the issuance of Ministerial Directives under the PCMLTFA or the approval of federally regulated financial institutions in Canada.  

The measures announced in Budget 2023 will help ensure that Canada is not a permissive target for hostile actors seeking to undermine the integrity and security of Canada's institutions.

Part 4 – Division 10 – Economic Sanctions (Special Economic Measures Act)

Q. Why does Global Affairs Canada (GAC) need information from FINTRAC?

A. FINTRAC will be authorised to share information in its possession with Global Affairs Canada relevant to the making, administration or enforcement of an order or regulation made under the Special Economic Measures Act and Justice for Victims of Corrupt Foreign Officials Act. FINTRAC must have reasonable grounds to suspect there is money laundering/terrorist financing before the information can be shared. This information sharing is important to the effective administration of Canada's sanction regime.

Supporting the Economic Growth of Developing Countries (Preferential Tariff for Developing Countries)

Q. Why are we renewing the GPT and LDCT until 2034?

A. The GPT and LDCT, two of Canada's tariff preference programs for developing and least developed countries, will expire on December 31, 2024, unless legislative authority is extended in the Customs Tariff. The GPT and LDCT have generally been renewed by Parliament every 10 years.

Q. How are direct shipment requirements being simplified?

A. Direct shipment requirements are used to determine whether apparel imports from beneficiary countries qualify for tariff preferences. Currently, the Customs Tariff only allows one type of shipping document (the through bill of lading) to be used as proof that the goods are shipped directly to Canada. This is amended to allow shipping documents to be set by regulation to be more flexible based on industry practices, thereby making it easier for importers to comply with and access programs benefits. This is also similar to how direct shipment requirements are set to access preferential tariff rates under Canada's Free Trade Agreements.

Q. What is the purpose of a General Preferential Tariff Plus?

A. Under Canada's current non-reciprocal tariff programs, country eligibility is based solely on economic and development factors. The new General Preferential Tariff Plus (GPTP) will provide additional preferences to countries that have ratified key international conventions on labour, environment, good governance, and human rights. This approach aligns with other like-minded partners (the EU in particular) as well as Canada's inclusive trade agenda in free trade agreements (FTAs).  It also provides leverage for the Government to engage with beneficiary countries to address potential shortfalls in these areas.

Q. Why would these criteria not also apply to the other preference programs for developing countries?

A. Tariff preference programs for developing countries are authorized under World Trade Organization's General System of Preference "Enabling Clause", which is based on economic and development factors.

Other like-minded partners, notably the EU's GSP+ program, which has been in place since 2005, provide additional tariff benefits to GPT beneficiary countries who adhere to international countries to adhere to international standards on human rights, labour conditions, gender equality, and climate change.

Q. How will the General Preferential Tariff Plus (GPTP) be implemented?

A. Like the GPT and LDCT, key program terms, such as tariff rates and country eligibility, will be implemented by regulation or Order in Council (OIC), on recommendation of the Minister of Finance. Department of Finance officials will work in collaboration with other departments, who would be involved in compliance, to finalize terms for this program following Budget 2023. Compliance monitoring would rely on existing resources.

Q. In addition to these changes, will there be a transition period for countries who are graduating from the LDCT program?

A. Legislative updates will be complemented by a policy of maintaining full tariff benefits for least developed countries over a three-year transition period once they are set to lose their LDC status at the United Nations.

Indefinite Withdrawal of Most-Favoured-Nation Status from Russia and Belarus [Removal of Most-Favoured-Nation Tariff Treatment for Belarus and Russia]

Q. Why did the Government decide to withdraw Most-Favoured Nation status indefinitely from Russia and Belarus? How is this different than previous withdrawal?

A. On March 2, 2022, Canada withdrew Most-Favoured-Nation status on a temporary basis from Russia and Belarus. Since that time, the General Tariff of 35 per cent has applied on virtually all imports from these countries.

This legislative change makes that withdrawal permanent, to reflect the enduring nature of Russia's illegal invasion of Ukraine (with support from Belarus), and sending an important signal to Canadian importers to incentivize sourcing away from these two countries.

Q. Will fertilizers continue to be subject to the 35 per cent General Tariff?

A. The General Tariff will continue to apply to virtually all imports from Russia and Belarus, including fertilizers.

To help Eastern Canada farmers manage the rising cost of fertilizer, Budget 2023 proposes $34.1 million over three years, starting in 2023-24, for Agriculture and Agri-Food Canada to support these farmers adopt beneficial nitrogen management practices to optimize fertilizer use, and ultimately reduce their operating costs.

There have been no commercial imports of Russian fertilizer since June 2022 and importers have moved to alternative sources of supply.

Q. When does the current MFN withdrawal Order expire?

A. The current OIC will expire on May 5, 2023, based on the current Parliamentary calendar. Therefore, the legislative change is expected to come into force the following day, May 6, 2023.

Q. Is the withdrawal of Most-Favoured Nation tariff treatment consistent with Canada's international trade obligations? Have other countries taken similar measures?

A. Withdrawal of MFN tariff treatment is a response to Russia's unprovoked and unjustifiable invasion of Ukraine, which is a blatant violation of international law and the rules-based international order.

Canada considers that this, and other measures adopted in response to this crisis, are consistent with its international trade obligations as necessary to protect its essential security interests.

Similar measures have been implemented by other trading partners. All G7 countries, as well as Australia and New Zealand, have now implemented tariff increases or import bans against Russian and Belarusian goods.    

Q. Will there be any exclusions from the General Tariff?

A. There are no exclusions set out through this amendment.

That said, the Governor in Council can decide to extend the Most-Favoured Nation tariff rate to any good under Section 31(1) of the Customs Tariff.

In the current Most-Favoured Nation Withdrawal Order, Cobalt-60, a medical good typically sourced from nuclear reactors in Canada and Russia, was excluded from the General Tariff given persistent supply constraints.

Bank of Canada Negative Equity (Non-Application of Sections 27 and 27.1 of the Bank of Canada Act)

Q. Why is this measure necessary?

A. Negative equity is not expected to have any operational impact on the Bank, nor affect the Bank's monetary policy decisions. That being said, no other major advanced economy central bank operates permanently in a negative equity position. While other major central banks that have also experienced significant losses due to quantitative easing, they have instruments/arrangements to address losses and avoid permanent negative equity.

Q. What is the fiscal impact of this measure?

A. The measure has virtually no impact on the Government's budgetary balance. Lower remittances from the Bank of Canada will reduce cash flow for the Government, which will lead to a very small amount of interest costs for the Government.

Q. When will the Bank of Canada be able to start withholding remittances?

A. Once the relevant legislative provisions are adopted by Parliament and receive Royal Assent, the Bank of Canada will be able to start withholding remittances as soon as it once again records positive net incomes.

Q. When does the Government expect the Bank of Canada to return to positive net income? What is the size of latest estimated loss for the Bank of Canada?

A. The Bank of Canada is entering a negative equity position. While the 2022 financial results have no been publicly disclosed, the Bank's latest quarterly financial report showed a loss of $522 million in the third quarter of 2022.

The Bank is expected to continue to experience losses for a few years before returning to a positive net income position. The size and duration of the losses will depend on the path of interest rates and the evolution of the economy and the Bank's balance sheet.

Due to accounting variances, the losses reported by the Bank of Canada may be different from those reported in the Public Accounts.

Q. What are the main drivers for the Bank of Canada losses?

A. In response to financial market stress arising from the COVID-19 pandemic, the Bank of Canada introduced in March 2020 the Government of Canada Bond Purchase Program (GBPP), Canada's first QE program. Under the GBPP, the Bank purchased Government of Canada bonds in the secondary market and created settlement balances to pay for the purchases.

As interest rates rise, the variable interest (based on the policy rate) the Bank pays on the settlement balances it created to purchase government securities under GBPP has exceeded the fixed interest it receives on the bonds it purchased.

Q. The provisions will allow the Bank of Canada to temporarily withhold remittances. How long will this temporary period last?

A. The proposed legislative provisions will allow the Bank of Canada to withhold remittances until it has retained sufficient future income to cover the losses associated with the Government of Canada Bond Purchase Program (GBPP).

Q. Will the measure have an impact on the independence of Bank of Canada?

A. The proposed legislative provisions aim to help the Bank of Canada exit from negative equity due to losses from quantitative easing. It will not change the relationship between the Bank of Canada and the Government, nor will it affect the Bank of Canada's ability to conduct monetary policy independently.

Q. How is this solution compared to those implemented in other countries?

A. Our proposed solution is similar to the one taken in Australia, where the Governor of the Reserve Bank of Australia has secured the support of the Australian Treasurer to withhold future remittances to offset negative equity due to losses from quantitative easing. In the US, the Federal Reserve also uses future income and remittances to cover losses with quantitative easing, although its accounting practice is different than that of the Bank of Canada.

Legislation to Establish the Canada Innovation Corporation (Canada Innovation Corporation Act)

Q. What is the mandate of the Canada Innovation Corporation (CIC)?

A. The CIC will have a focused mandate to increase Canadian business expenditure on R&D across all sectors and regions of Canada. Investments in R&D will help to generate new and improved products and processes that will support the productivity and growth of Canadian firms.

Q. How will CIC achieve its mandate?

A. The CIC will complement existing innovation ecosystem support programs by adding a new and focused, private-sector-led approach to promoting business investments in R&D. It will draw on business and technical expertise and operate with a significant degree of independence – both in terms of program design and day-to-day activities.

It will build in-house expertise to help Canadian companies protect their intellectual property rights as they scale their operations beyond Canada.

The CIC will operate with more flexibility than existing business support programs, and have the ability to quickly adapt to address emerging challenges and opportunities that are presented to Canadian businesses.

Q. Why is the Canada Innovation Corporation (CIC) the best approach to addressing low business investment in R&D?

A. The creation of the CIC follows international best practice. An arms-length organization staffed by individuals with private sector experience and technical expertise has proven to be effective at mobilizing business investment in R&D.

For example, the Israel Innovation Authority has spurred the growth of new R&D-intensive sectors, such as the information and communications technology sector. Business Finland, formerly TEKES, has helped transform Finland's established sectors, such as forestry, into high-technology, prosperous, and globally competitive industries.

Q. How will the CIC support and add value to the existing innovation ecosystem?

A. The CIC will add value and differ from existing federal business innovation programs based on the following:

• Delivery of funding at the speed-of-business: The CIC project evaluation process will be calibrated to the level of funding requested (i.e., streamlined evaluation for smaller projects to ensure that funding can flow to clients quickly, drawing on external expert review for larger-scale project evaluation).
• Program experimentation and strategy development: The CIC will build foresight capacity and robust program evaluation functions to ensure that programming is responsive to technology and economic trends. It will be able to adapt programming more quickly than traditional government supports to respond to evolving business needs.
• Delivery of a flexible suite of funding programs: The CIC will offer a continuum of business R&D funding programs, targeting both early stage and with some capacity to also provide support to later stage/larger scale projects.

The CIC will not offer debt or equity financing.

Q. Will the Canada Innovation Corporation (CIC) be operationally independent?

A. The CIC Blueprint, released in February 2023, announced the government's intent to establish the CIC as a new Crown corporation, accountable to Parliament through the Minister of Innovation, Science and Industry.

The CIC will be run by private sector experts, and operate at the speed of business. The Crown corporation is to be governed by a board of directors and run by a CEO, and will operate independent from government in the design and delivery of its programming under its mandate.

Q. How will the CIC be accountable to Parliament?

A. As is the case with Crown corporations, the CIC's control and accountability framework is governed by Part X of the Financial Administration Act (FAA). The responsible Minister (Minister of Innovation, Science and Industry) will be accountable to Parliament for the CIC. Each year, the Minister of Innovation, Science and Industry will table a summary of the CIC's corporate plan, which outlines its major business lines and performance objectives for the following five years. The Minister of Innovation, Science and Industry will also table the CIC's annual report in Parliament each year.

Q. How will the CIC be funded?

A. The CIC will be funded through an annual statutory transfer. This approach will provide consistent, long-term funding to the CIC to ensure operational stability and the ability to establish lasting partnerships with the private sector. It will operate with an initial budget of $2.6 billion over four years, starting in 2023-24. This initial budget includes funding provisioned in Budget 2022, as well as funding associated with the transfer to the CIC of existing federal program resources (i.e., IRAP). Over the initial four years, the CIC's budget will grow to support the scale-up of its operations. Ongoing funding beyond this initial period will be confirmed and calibrated to ensure the CIC will be able to have a broad impact across the Canadian economy.

Q. Why will the National Research Council's Industrial Research Assistance Program (IRAP) be integrated into the Canada Innovation Corporation (CIC)?

A. Integrating IRAP into the CIC provides a ready-made, credible and existing foundation upon which to position the CIC for success. The CIC will be able to immediately leverage and build upon an integrated platform and continuum of support, service and strategy across all technologies and industries, avoiding duplication across the suite of federal programs, and reducing confusion for business clients by establishing a single-window of business R&D support.

This is similar to the creation of other science-based departments and agencies such as the Canadian Space Agency, Canadian Institutes of Health Research, and Natural Sciences and Engineering Research Council. These organizations all originated as activities within the National Research Council, but continued as distinct organizations to scale their impact.

This evolution of IRAP is happening alongside a broader modernization of the National Research Council. The 2022 Fall Economic Statement announced a historic investment of $962.2 million over eight years, and $121.1 million per year ongoing thereafter to modernize the National Research Council's scientific and business R&D infrastructure.

Q. Did the government consult on the final design of the Canada Innovation Corporation (CIC)?

A. A broad consultation process was undertaken during the summer and early Fall 2022 to inform the design of the CIC.

More than 40 organizations with broad representation from a number of industry sectors, business incubators/accelerators, post-secondary organizations, groups focused on business and innovation, economic development, and equity and accessibility were consulted by ministers and senior officials.

A summary of the information that was shared during these consultations was published last November. IRAP being assumed by the CIC provides a strong foundation upon which the CIC will be able to build an integrated platform and continuum of support, service and strategy across all technologies and industries avoids duplication across the suite of federal programs, and reduces confusion for business clients by establishing a single-window of business R&D support.

Canada Health Transfer [Federal-Provincial Fiscal Arrangements Act (Canada Health Transfer)]

Q. Why is the Government proposing this change now?

A. The government is proposing an immediate unconditional $2 billion CHT top-up to address current health system pressures. Overwhelmed emergency rooms as well as backlogs of surgeries and other medical procedures induced by COVID-19 continue to impact Canadians. Throughout 2022 provinces and territories hit record high levels of emergency room closures, pediatric transfers to open hospital beds. This top-up will provide immediate relief in the short-term.

Q. Given the magnitude of health system pressures, why is the top-up only $2 billion?

A. This funding builds on $6.5 billion in previous one-time top-ups to the Canada Health Transfer to address immediate health system pressures. It also builds on nearly $69 billion in federal COVID-19 support, of which over $20 billion has been provided to provinces and territories, which helped to protect and save Canadians.

This funding is also part of the government's new federal health plan to work with provinces and territories to strengthen public health care by providing $196 billion over 10 years, including $46 billion in new health funding, for which [nine] provinces have already agreed to in principle. The federal government will work with these jurisdictions to develop bilateral agreements.

Q. How will the funding be allocated and how will it affect the Canada Health Transfer base?

A. Amounts would be provided on an equal per capita basis. Amounts would not be added to the transfer base and therefore not subject to ongoing growth from the transfer's escalator.

Q. Is there an accountability mechanism for the top-up?

A. The block funding structure of the Canada Health Transfer provides provinces and territories the flexibility to invest the funds according to the needs and priorities of their residents. However, funds would be expected to respect the conditions of the Canada Health Act, including those respecting universality, comprehensiveness, portability, accessibility, and public administration.

Equalization and Territorial Formula Financing (TFF) Renewal (Federal-Provincial Fiscal Arrangements Act (Equalization and Territorial Financing Renewal and Other Amendments)

Q. What are the technical changes proposed for Equalization and TFF?

A. The following technical changes will be proposed as part of the renewal. Except where indicated, these changes will be brought forward through the standard regulatory process:

• Use population estimates for July 1st instead of June 1st for all major transfers to improve transparency; 
• Include unremitted net income of hydro-producing government business enterprises in the business income tax base to improve accuracy by measuring fiscal capacity that is currently excluded;
• Modernize the fiscal capacity measure for property taxes by:
• Updating relative weights for residential, commercial and industrial and agricultural property tax revenues to improve accuracy.
• Including miscellaneous revenues in revenues to be equalized for all relevant non-resource revenue sources (personal income taxes, business income taxes, consumption taxes and property taxes), rather than including them only with property taxes (this change is part of the legislative package).
• Measuring the non-residential property tax base using non-residential property market values (70 per cent weight) and population (30 per cent weight) to align with the actual taxation practices of governments and to align with the measure used for residential property taxes.
• Update the TFF payroll tax base to automatically reflect changes in jurisdictions' payroll taxes; and
• Update the maximum per capita recovery limit for net aggregate overpayments to be recovered in a fiscal year in relation to Equalization, Fiscal Stabilization and Tax Collection Agreement payments, including an increase to $174 from $140, to account for inflation since it was last adjusted in 2010.

Q.  Were provincial and territorial governments consulted on the proposed changes to the Equalization, TFF and Fiscal Stabilization programs?

A. Yes. The federal government consults regularly with provinces and territories in support of renewal. In addition to discussions at the officials' level, the Minister of Finance consulted her provincial-territorial counterparts on renewal at the February 3, 2023 Finance Ministers' Meeting. The technical changes were generally well-received.

Q. What would be the impacts of the changes on provinces and territories?

A. The impacts of the changes are expected to be relatively small in the context of the total size of the program. The changes are intended to apply to calculations of 2024-25 payments. Actual impacts will depend on fiscal capacities as measured at that time, using data available as of December 2023. Had the changes been in place in 2023-24, impacts would have ranged from a decline of $371 million ($44 per capita or 2.6% of its Equalization payment) for Quebec to an increase of $291 million for Manitoba ($208 per capita or 8.3% of its payment).

Q.  What is the technical change proposed to the Fiscal Stabilization program?

A. The proposed change would enable the Minister of Finance to make an adjustment to account for non-indexation of provincial personal income tax systems when determining Fiscal Stabilization payments. This builds on a change made through Budget 2021 to no longer penalize provinces for indexing their tax systems to account for inflation; with this additional change, it will be easier for all provinces to qualify for the program. This change is proposed to take effect for claims for fiscal year 2021-22, at the same time as the previously announced technical changes.

Changes to Canada's Sanctions Regime (Economic Sanctions - Special Econimic Measures Act)

General questions:

Q. Why is the Government of Canada proposing more changes to Canada's sanction regime?

A. More than one year into the war in Ukraine and with increasing sanctions measures and evasion tactics, it is crucial that the Government of Canada continuously reviews, adapts, and strengthens its sanctions regime.

Canada has also more broadly increased its use of sanctions in response to a number of international crises, including in Iran, Haiti, Myanmar, and Sri Lanka. As Canada and its allies broaden the use of sanctions, we must also continue to modernize and bolster their effectiveness.

Q. How do these changes strengthen Canada's sanctions regime?

A. The Minister of Foreign Affairs is seeking to make further legislative changes to both SEMA and JVCFOA to bolster Canada's autonomous sanctions regime by clarifying certain provisions, making processes more efficient and improving information sharing.

Clear definitions of "ownership" and "control" will provide more certainty to stakeholders as to whether they may deal with specific entities, including the subsidiaries, affiliates and related companies of listed persons. This change seeks to better support those who voluntarily comply with Canada's sanctions, and to better define the authorities to go after those who do not.

Clarifying that transferring any form of property to designated persons is prohibited will ensure that Canada's sanctions regime captures the widest array of transfers.

Enabling the designation of persons or entities in a third country within the regulations pertaining to a State targeted by sanctions (rather than separate regulations) will improve the efficiency of the designation process and provide more clarity to stakeholders by linking the persons in third countries to the circumstances that generated their listing.

Lastly, sanctions enforcement is a whole of government effort. Allowing key Ministers to share information with each other and including FINTRAC will enhance information sharing systems and improve the efficiency and effectiveness of the sanctions regime.

Q. How do these changes align Canada's regime with those of our international allies?

A. The proposed amendments align with the ongoing efforts taken by Canada's allies, who are also focused on ensuring effective sanctions implementation. This includes clarifying how sanctions are to be implemented and tackling the challenges posed by evasion and circumvention.

The proposed amendments to define control of an entity is similar to the "50 Percent Rule" used by likeminded countries, like the U.K. and the U.S., to facilitate assessment of whether a designated person will be considered to control an entity (if they own at least 50% of the company).

On March 9, 2023, G7 Ministers issued recommendations to mitigate the risk of exposure to continued evasion, especially the use of third-party jurisdictions by Russia. The proposed amendments to streamline how the government can list persons in "third" countries that are involved or complicit in the primary State's objectionable conduct will help respond to these challenges.

Q. How will the proposed amendments support implementation and enforcement of Canada's sanctions?

A. Clarifying the scope and application of sanctions provisions will support Canadians and businesses to better understand and implement sanctions obligations.

The proposed amendments to streamline the listing of persons in third countries will support efforts to address risks of sanctions evasion or circumvention.

Allowing key Ministers to share information with each other will improve the efficiency of Canada's autonomous sanctions regime and support enforcement.

The Minister of Transport, the Minister of National Revenue, the Minister of Justice and Attorney General of Canada, and the Minister of Immigration, Refugees and Citizenship are each responsible for federal departments that contribute to making, administrating and enforcing orders and regulations under SEMA and JVCFOA.

Alongside amendments to SEMA and JVCFOA, complementary amendments are being put forward by the Minister of Finance to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to permit the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), when certain criteria are met, to disclose information to Global Affairs Canada that is relevant to make, administer or enforce orders or regulations under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act.

Collectively these amendments will improve Canada's ability to effectively implement and enforce its autonomous sanctions regime.

Q. Do the amendments related to third country listings expand Canada's sanctions regime? Will Canada be imposing extraterritorial or secondary sanctions?

A. The proposed amendments don't expand the reach of Canada's autonomous sanctions. They simply change how persons in third countries can be listed by modifying how Canada can make such designations. SEMA and the JVCFOA would continue to place obligations only on Canadians or persons in Canada who deal with persons or listed entities situated in third countries.

Since Canada would not place obligations on foreign entities or on non-Canadians, sanctions would not be extraterritorial in nature.

Q. Will the government be providing guidance to Canadians and businesses on how to comply with more and increasingly complex Canadian sanctions?

A. Global Affairs Canada will continue to support Canadians and businesses to implement Canada's sanctions by maintaining and regularly updating information on Canada's sanctions regimes on its website, and providing tools such as notifications and consolidated Canadian and UN sanctions lists. The department will continue to respond to inquiries and permits application via a dedicated sanctions phone line and mailbox.

Q. How is the government strengthening its capacity to support sanctions implementation?

A. In recognition of the increased complexity and use of sanctions in Canada's foreign policy, on October 7, 2022, Prime Minister Trudeau announced that the Government will invest $76 million to strengthen Canada's sanctions infrastructure to deliver a sustainable, effective and robust sanctions regime. Global Affairs Canada will use its portion of this investment to expand the capacity of the sanctions policy and coordination team.

Q. What is Canada doing to implement and enforce sanctions?

A. Global Affairs Canada collaborates closely with CBSA, the RCMP as well as with Canadian financial institutions to implement and enforce sanctions.

The RCMP receives information from Canadians and Canadian banks about assets situated in Canada that are owned by listed persons and works with GAC to make, administer and enforce sanctions measures, including consideration for potential seizure and forfeiture of any assets.

The RCMP and CBSA enforce sanctions measures and can impose fines or imprisonment on Canadian entities or individuals who are found to be wilfully contravening Canadian sanctions.

Details concerning the assets in Canada that have been effectively frozen and the financial transactions that have been blocked as a result of the prohibitions in the SEMA Russia Regulations can be found at the following website - Update on the reporting of frozen assets under the Special Economic Measures Act - Russia Regulations | Royal Canadian Mounted Police (rcmp-grc.gc.ca)

New amendments to Canada's sanctions legislation which came into force on June 23, 2022, provide the authorities for the seizure, forfeiture, disposal and redistribution of assets belonging to sanctioned individuals or entities. Funds resulting from asset forfeiture may be used to compensate victims, restore international peace and security, or rebuild affected states.

The first seizure (restraint) order targeting US$26 million linked to oligarch Roman Abramovich was issued in December 2022. The Government of Canada is carefully considering next steps. This is a complex, new and untested scheme that remains unique in the international sanctions context.

The government is also actively engaged in identifying other potential assets that could be pursued under this new regime.

Technical Questions:

Q. Does the "deemed ownership" provision in section 2.1 conflict with the principles of corporate separateness and 'separate legal personality' of corporations?

A. The principle that corporations are legally separate from their shareholders – and therefore that corporate subsidiaries are legally separate from their parents – is a longstanding principle of Canadian common law, reflected in statutes such as the

Canadian Business Corporations Act. GAC takes the position that SEMA and JVCFOA were always intended to apply broadly to private entities controlled by designated persons, even if those entities were not themselves individually listed. An example would be the situation of an unlisted subsidiary of a listed parent.

The purpose of the "deeming" provision in section 2.1 is to provide greater clarity that Canadian sanctions can be applied to private entities that are owned, held or controlled by designated persons, including corporate subsidiaries, even if those entities are not each individually listed under the relevant regulations.

This sort of 'deeming' provision is found in the analogous sanctions regimes of our allies, such as the United Kingdom.

Q. What are the "third countries" that have assisted Russia in evading sanctions?

A. The Russian Elites, Proxies, and Oligarchs (REPO) Task Force has identified certain typologies of Russian sanctions evasion tactics: use of family members and close associates to ensure continued access and control; use of real estate to hold value, benefit from wealth; use of complex ownership structures to avoid identification; use of enablers to avoid involvement, leverage expertise; and the use of third party jurisdictions, false trade information to facilitate sensitive goods shipment to Russia.

Q. Would separate amendments be required on other legal instruments, including on relevant regulations under SEMA?

A. The amendments being made to SEMA and the JVCFOA generally have one of the following objectives: (i) clarify and adjust the Governor in Council's existing authorities to make regulations and orders, and (ii) clarify the definition of certain terms used in SEMA, (iii) expand the Government's ability to share sanctions-related information between relevant departments.

The amendments to SEMA and the JVCFOA will not render anything in the existing regulations or orders legally invalid. The existing regulations made under SEMA and the JVCFOA will only need to be amended if and when the GIC decides to use the new approach to designate persons in third countries established through BIA 2023.

Using the Special Economic Measures (Russia) Regulations ('Russia Regulations') as an example, the legislative amendments to SEMA will not render anything in the current Russia Regulations legally invalid. However, if the GIC wanted to exercise a

new authority created through BIA 2023 – such as the ability to designate (or "list") persons in "third countries" – the Russia Regulations would need to be amended to allow for the listing of persons in "third countries", because the Russia Regulations currently only allow for the listing of Russian nationals or persons in Russia.

Q. How is the government monitoring the effectiveness of it sanctions?

A. The government is monitoring the effectiveness of the sanctions through initiatives such as analyzing export and trade data, and exchanging information with domestic and international partners. We will also monitor potential unforeseen impacts of sanctions implementation, especially on Canadian businesses, through continued dialogue with them.

Q. What type of information would the Ministers of Transport, of Justice, of National Revenue and of Immigration share with the other federal departments?

A. These four Ministers to be included in Canada's sanctions regime information sharing system would only share information relevant to the making, administration and enforcement of orders and regulations. Information sharing between federal departments will be done in accordance with applicable rules and legislation.

Q. What type of information will FINTRAC send to GAC?

A. The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) will be authorised to share information in its possession with Global Affairs Canada relevant to the making, administration or enforcement of an order or regulation made under the Special Economic Measures Act and Justice for Victims of Corrupt Foreign Officials Act. However, FINTRAC must have reasonable grounds to suspect money laundering/terrorist financing is occurring before the information can be shared.

Q. What is the difference between frozen assets and blocked transactions?

A. "Frozen asset" is property in Canada that is effectively immobilized by virtue of its association with a designated person listed under country-specific sanctions regulations – the Russia Regulations, for example – and that is consequently subject to a dealings prohibition. Blocked transactions are attempted transactions associated with listed persons that have been blocked. Both are reported to the RCMP.

NATO Climate Change and Security Centre of Excellence Privileges and Immunities (North Atlantic Treaty Organisation) Act]

Q. Why is it important for Canada to establish and host a new NATO Climate Change and Security Center of Excellence (CCASCOE)?

A. The 2021 NATO Climate Change and Security Action Plan (Action Plan) recognizes climate change as an "overarching challenge of our time". As part of the Action Plan, NATO called for an Ally to establish a new Centre of Excellence (CoE) to help address the challenges posed by climate change.

Canada is seizing this important and timely opportunity to demonstrate leadership and develop expertise on an emerging priority issue for Canada, the NATO Alliance, and global security. The launch of CCASCOE will be a landmark achievement, as Canada's first NATO CoE and first NATO institution hosted on Canadian soil.

Q. How will the establishment of the NATO CCASCOE help Canada and NATO partners address the challenges posed by climate change?

A. Climate change will make it increasingly harder for militaries to carry out their tasks. At the same time, Canada and its NATO Allies may be expected to contribute to a greater number of conflict situations requiring stability or peace support operations.

In this context, CCASCOE will serve as a hub of expertise for decision makers, military and relevant civilian practitioners. It will enhance awareness of climate change effects on the security interests of NATO, Allies, and Partners; support NATO and Allies in adapting and building resilience to the security impacts of climate change, and; develop and share best practices and expertise related to mitigating the climate and environmental impact of the military and defence sectors.

Q. What will be the cost of establishing and hosting CCASCOE for Canada?

A. This proposal requires $40.4M over five fiscal years (2023-24 to 2027-28) and $7.0M per year on an ongoing basis. Of this, the proposal requires $20.2M for GAC and $20.2M for DND over five fiscal years, and $2.5M for GAC and $4.5M for DND per year ongoing.

Q. Why is it important for Canada to ratify the Paris Protocol?

A. Ratification of the Paris Protocol is particularly relevant and time sensitive for Canada as the host and Framework Nation leading the establishment in 2023 of the NATO Climate Change and Security Centre of Excellence (CCASCOE); an international military organization that will be located in Montreal.

The Paris Protocol to the NATO Status of Forces Agreement is the standard instrument for NATO Allies to provide privileges and immunities to international military organizations operating in a NATO member state. It also allows NATO to recognize the CCASCOE as an international military organization, part of the standard NATO Centre of Excellence establishment process.

Q. What do the changes to the Privileges and Immunities (North Atlantic Treaty Organisation) Act mean in practice for Canada?

A. Practically speaking, changes to the Privileges and Immunities (North Atlantic Treaty Organisation) Act (R.S.C., 1985, c. P-24) (Privileges and Immunities Act) will allow Canada to implement the obligations under the Paris Protocol. Under the amended Act, Canada will be able to grant legal status to the CCASCOE as an international military organization in Canada and also extend the privileges and immunities available under the Paris Protocol to the CCASCOE and its international staff. Privileges and immunities will be granted under the Act by means of an Order In Council.

Q. Will Canadians be eligible for exemption from taxation under the privileges and immunities offered under the Paris Protocol?

A. No. Article VII (seven) of the Paris Protocol allows host nations to exclude their nationals from the taxation exemptions otherwise prescribed by the Protocol.

Q. Why hasn't Canada ratified the Paris Protocol before now?

A. Canada signed the Paris Protocol in 1952 but remains the only NATO member that has not ratified it. Canada has not hosted a NATO Allied Headquarters or NATO recognized international military organization to date. Legal and policy subject matter experts in Global Affairs Canada and the Department of National Defence have not identified any legal or policy reason why Canada should not ratify this instrument, as every one of our fellow NATO Allies has already done.

Q. What happens if Canada does not ratify the Paris Protocol?

A. Ratifying the Paris Protocol is the best way for Canada to ensure it can offer the same or similar privileges and immunities for the CCASCOE and its staff as other NATO COEs. Not ratifying the Paris Protocol may result in some Allied nations choosing not to join the CCASCOE. Legally speaking, if Canada does not ratify the Paris Protocol, the CCASCOE cannot be recognized as an international military organization by NATO (Article 14).   Legal status and privileges and immunities for the CCASCOE and its staff in Canada would need to otherwise be provided using Canadian domestic law. The process for finding a way to provide appropriate and similar privileges and immunities through Canadian domestic law would require additional negotiations, legislative processes and significant time to complete. This may adversely impact NATO Allies' willingness to join the CCASCOE, and delay CCASCOE's operational launch in 2023.

Service Fees Act Amendments (Service Fees)

Q. Why make changes to the legislative framework governing fee for government services?

A. As part of its efforts to minimize costs to Canadians, the Government is proposing to change the way fees for government services are managed. It will do this by making changes to the legislative framework governing fees for government services.

The proposed amendments will streamline various administrative processes while ensuring continued accountability and oversight.

Some of the proposed amendments are to address direct feedback received from departments in implementing the requirements of the SFA since in came into effect in 2017.

Key proposed changes:

• Existing legislation would be streamlined to better support government while reducing duplication of requirements covered in other laws or regulations.
• Minimizing costs for taxpayers, while making sure everyone has equal access to high quality government services. The government will ensure that Canadians are not disproportionately footing the bill.

Q. Are fees not a disguised tax?

A. Fees for government services are not a tax. A fee is generally defined as a charge for a service, a product, the use of a facility, or the conferral of a right or privilege. These fees ensure that some businesses benefitting directly from government services pay for them.

Examples of government services for which fees are charged include prescription drug testing for pharmaceutical companies and icebreaking services. In these cases, some businesses receive direct economic benefits from those services beyond those that are received by the general public.

Q.  How do these changes benefit Canadians?

A. Canadians will benefit because an updated fee regime will support more cost-effective delivery of services for Canadians.

Q.  How are fee levels established and what about consultations?

A. Fees are linked to the cost of doing an activity, such as providing a service, the use of a facility, the conferral of a right or privilege or providing a product and in general fees cannot exceed the full costs in providing it.

Depending on how the authority to fix the fee for an activity has been established, departments must follow the appropriate process and must consult with the public / persons that will be affected before the fee amount is fixed. This also applies when a department wants to amend an existing fee amount.

Q. Can Canadians expect new fees to be introduced?

A. The proposed amendments will lead to on-going government accountability, continued transparency, and an improved stewardship of taxpayer dollars by reducing operational costs.

The creation or revision of fees will continue to follow due process, including communications and consultations with stakeholders.

 Q. Why is this Government amending existing legislation through the Budget Implementation Act?

A. The Government is always looking to minimize costs for taxpayers, while making sure everyone has equal access to high quality government services, therefore it is proposing to amend the legislative framework governing fees for government services.

The proposed legislation is being introduced through the Budget Implementation Act because it relates to government spending. It is appropriate that Parliament considers these measures in the context of the Federal Budget.

Q.  Does the amended legislation affect the fee for access to information requests?

A. No, the access to information fee will be exempted from the Service Fees Act, since it has gone through its own recent legislative amendments.

Allowing Use of Canada Revenue Agency - Collected Data for Canada Pension Plan Analysis and Evaluation

Q. Why is the Government proposing this change now?

A. The Department of Employment and Social Development (ESDC) has traditionally used taxpayer information collected under the Income Tax Act for the purposes of policy analysis, research and evaluation related to the administration of the Canada Pension Plan (CPP). The disclosure of taxpayer information to ESDC is provided for under subparagraph 241(4)(e)(iii) of the Income Tax Act.

It has been observed that the provision of the Canada Pension Plan referenced by the Income Tax Act—section 92—could be interpreted to mean that only information collected under Part I of the Canada Pension Plan may be shared with ESDC by the Minister of National Revenue. The proposed amendment clarifies that information collected by the Minister of National Revenue under the Income Tax Act may be shared with the Department of Employment and Social Development for the purposes of policy analysis, research or evaluation.

This proposal was announced in Budget 2022. However, it was not included in of the Budget Implementation Act, 2022, No. 1 or the Fall Economic Statement Implementation Act, 2022.

Q. Why is this measure important?

A. The proposed amendment clarifies that data collected under the Income Tax Act can continue to be used by ESDC to get a more complete view of the Plan's role in overall household income. This will allow the Department to ensure that the CPP continues to respond to the evolving needs of contributors, while also protecting the long-term financial sustainability and affordability of the Plan for all contributors.

   The confidentiality of the information collected under the Income Tax Act for the purposes of policy analysis, research and evaluation related to the administration of the CPP will be stipulated in a Memorandum of Understanding and protected with safeguards similar to those in place for usage of data for the Old Age Security and Employment Insurance programs.

Q. What information will be shared with ESDC?

A. The amendment stipulates that information may be provided only if it is necessary for the purposes of policy analysis, research and evaluation related to the administration of the CPP. Specifically, it allows ESDC to consider sources of household income in order to evaluate the degree to which the CPP and the retirement income system as a whole are meeting their objectives and will inform policy development through analysis of trends that are affecting CPP contributors, in order to ensure that the CPP can adapt to meet their future needs. Access to data under this amendment will be governed by an information-sharing agreement between ESDC and the Canada Revenue Agency, which will be subject to privacy review.

Timely Sharing of Death Information in Employment and Social Development Canada (Department of Employment and Social Development Act)

Q. How will the Minister determine if the collection of the Social Insurance Number (SIN) would result in the "effective administration" of a program under their responsibility?

A. As with any program under my responsibility, an analysis of programs' needs will be undertaken before any new use of the SIN is authorized. This exercise will ensure that program areas are not collecting more information than is necessary for the administration of its specific benefit or service.

More specifically, the exercise of this new authority be based on objective criteria to guide decision-making that align with and respect the principles of "necessity", "effectiveness" "proportionality" reasonableness", and "minimal intrusiveness". Privacy of our citizens will therefore be fully considered and integrated into the decision-making process.

Q. What programs exist today that require the use of the SIN that do not already have authority to collect it?

A. While there are only a small number of existing programs in this situation, such as the Federal Workers Compensation Death/Injury Program, the impact of this amendment will be truly felt when new programs are created to address specific issues, such as our COVID response related measures. New departmental programs would automatically be able to collect the SIN if they are able to confirm this information is needed for the administration and enforcement of the program.

Q. Why is this amendment necessary given the program can obtain the required policy authority from the Treasury Board?

A. Currently, programs must go to Treasury Board for policy authority to collect the SIN as well as determine that the SIN is necessary through an analysis of program needs. This amendment will replace the administrative need to go to Treasury Board with explicit legislative authority thereby reducing the administrative actions necessary for programs under the responsibility of the Minister of ESD to obtain authority to collect the SIN. A formal departmental analysis will still be required, however, to ensure that the program does not collect more personal information than is necessary to administer their program accurately and effectively. These decisions will all involve consultations with the Office of the Privacy Commissioner and subject to their general oversight.

Q. How will the Minister ensure that the SIN is not used in ways not authorized by this amendment?

A. Programs will not be able to collect the SIN unless they are previously authorized to collect this information, or if they have completed a formal principle-based analysis of their program needs in terms of data collection.

Death or Disappearance of a Child (Canada Labour Code)

Q. Why is the Government proposing to amend the Leave Related to Death or Disappearance?

A. The Leave Related to Death or Disappearance (the Leave) corresponds to the income support program, the Canadian Benefit for Parents of Young Victims of Crime (the Benefit). The Leave provides federally regulated private sector employees whose child has died or disappeared as a result of a probable Criminal Code offence with the right to take a job-protected leave of absence. This right enables employees to take advantage of the Benefit. As such, the criteria of the Leave and the Benefit have always aligned, in terms of eligibility, duration of the eligibility period, and so on.

Minister Qualtrough has approved a proposal to revise the Terms and Conditions of the Benefit. These changes aim to improve uptake by making eligibility criteria more flexible and inclusive and are set to come into force on April 2, 2023. Two of these changes require corresponding changes to the Leave, to maintain alignment of eligibility criteria. These are:

• Extending the maximum duration of the leave from 104 weeks to 156 weeks; and
• Repealing the exception to eligibility that disentitles an employee to the leave if their child of 14 years or older was a party to the crime which led to their death.

If the Leave is not amended, an employee could be eligible for the Benefit but not the Leave. This would mean that they would risk losing their job if they access the Benefit or could forego the Benefit.

Q. Why does the proposal extend the actual duration of the leave to 156 weeks, instead of just extending the eligibility period in which the leave can be taken?

A. Since the inception of the Benefit in 2013, the duration of the Leave has always aligned with the duration of the eligibility period of the Benefit.

The intent is to be as generous as possible with the job-protected leave. Parents who have lost a child in these circumstances are often unable to cope, due to the significant emotional impact, including post-traumatic stress disorder. Trauma can impede parents' ability to function at work, and parents who return to work before they are ready run a risk of being long-term unemployed. There is also often a need for involvement in the criminal justice process or search efforts, which requires time away from work.

Parents may need more time off than the 35 weeks of income support provided by the Benefit. Whether or not the full three years of unpaid Leave is used, it is there for parents who need it.

Q. How would the proposed amendments support Government priorities?   

A. The proposed amendments to the Canada Labour Code are consistent with the improved Canadian Benefit for Parents of Young Victims of Crime and with the Government's action to enhance flexibility in programs for families so that they can get the support they need when they need it most.

The proposed amendments to the Canada Labour Code also reflect the Government's commitment to ensure that employees in the federally regulated private sector are better able to balance their work and family responsibilities.

Q. What changes are being proposed to the leave related to death or disappearance of a child? What would they achieve?

A. The proposed amendments to Part III of the Canada Labour Code would align the leave related to death or disappearance of a child with the improved Canadian Benefit for Parents of Young Victims of Crime. Specifically, the proposed amendments would:

• Extend the maximum duration of the leave from 104 weeks to 156 weeks. This change aligns the duration of the leave with the duration of the eligibility period during which an employee can receive up to 35 weeks of income support under the Canadian Benefit for Young Victims of Crime, which is set to be extended as of April 2, 2023.
• This ensures that federally regulated private sector employees have job protection when they receive the Benefit, and that they are able to access the Benefit; and
• The eligibility window of the Benefit was extended from 104 weeks to 156 weeks to increase uptake, as it was found that some applicants are ineligible because they apply outside of the two-year window for a number of reasons.
• Repeal the exception to eligibility that disentitles an employee to the leave if their child (14 years of age or older) was a party to the crime which led to their death.
• Changes were made to the Benefit in 2018 to remove this eligibility requirement with respect to children under 14 years of age. The Federal Ombudsman for Victims of Crime has since recommended that the eligibility requirement be removed with respect to children of any age. The death or disappearance of a child is devastating for parents under any circumstances.

Q. What does Part III of the Canada Labour Code cover and to whom does it apply?

A. Part III of the Canada Labour Code establishes minimum employment conditions in the federally regulated private sector, such as hours of work, minimum wages, statutory holidays and annual vacations, as well as various types of leaves.

The federally regulated private sector includes about 945,000 employees (or 6% of all Canadian employees) working for 19,000 employers in industries such as banking, telecommunications, broadcasting, and inter-provincial and international transportation (including air, rail, maritime, and trucking), as well as federal Crown corporations and certain activities of First Nations band councils. Part III does not apply to the federal public service.

Q. Would the proposed amendments to the Canada Labour Code impact provincial and territorial employment standards legislation?

A. No. Responsibility for labour and employment matters is constitutionally divided between the federal, provincial, and territorial governments. Changes to the leave provisions under the Canada Labour Code would not apply to provincially and territorially regulated employers and employees.

In order for employees under provincial and territorial jurisdiction to have job protection while they are receiving the improved Canadian Benefit for Parents of Young Victims of Crime, provincial and territorial governments would need to make corresponding changes to their employment standards legislation.

All the provinces and territories except Nunavut and Northwest Territories currently provide a leave related to the death or disappearance of a child, although duration and eligibility requirements vary.

Q. Would the proposed amendments to the Canada Labour Code impact collective agreements in the federally regulated private sector?

A. Yes. Collective agreements in unionized workplaces often spell out provisions related to leaves that are provided under the Canada Labour Code. If the Code provides more favourable benefits, the Code will prevail over the collective agreement, as per section 168 of the Code.

Q. How would the Labour Program implement, track and evaluate the success of the proposed amendments?

A. The Labour Program would update existing information products for stakeholders in order to reflect the changes to the Canada Labour Code. Internal guidelines would also be adjusted to assist Labour Program officials before the changes come into force.

Compliance would be monitored through existing enforcement mechanisms and tracking of complaint‑related data, which would also assist with proactive outreach activities.

Q. When would the proposed amendments come into force? 

A. The proposed amendments to the Canada Labour Code would come into force upon Royal Assent.

Electronic Submission of Asylum Claims [(Immigration and Refugee Protection Act (Claims For Refugee Protection)]

Q. Why is the Government proposing these changes now?

A. With the inland asylum intake process shifting towards online submission, there is a need to ensure that there is clarity regarding how online submissions relate to the requirement that a claim eventually be made to an officer in person, particularly once the Temporary Public Policy that currently exempts claimants from the in person claim submission requirement is lifted.

This includes ensuring that there is clarity around what must be submitted as part of the initial submission with a view to making a claim, by when and through what means.

Ultimately these changes will help to lay the foundation for a more streamlined inland intake process when compared to the pre-pandemic paper-based approach, that is modelled to a great extent on the existing online submission process that was initiated under the active Temporary Public Policy.

Q. What impact will these changes have on the Immigration and Refugee Board?

A. These changes impact the asylum intake process administered by Immigration, Refugees and Citizenship Canada, and as such will not directly impact the work of the Immigration and Refugee Board, which will continue to be focused on refugee decision-making.

However, the expectation is that clearer upfront submission requirements, coupled with the ongoing shift to electronic processes, may contribute to more timely processing to the extent that they allow for more complete scheduling ready packages to be referred to the Board for an eventual hearing.

Q. If the in person asylum claim requirement has been in place for years, why is this change needed?

A. The legislative amendment will reinforce the existing interpretation of subsection 99(3) of the Immigration and Refugee Protection Act, to remove any potential ambiguity about its meaning. This will ensure that there is a distinction between when an initial submission with a view to making a claim is made online, and when the claim is considered to be made under the Act, i.e. before an officer.

This distinction is important because when a claim is considered made under subsection 99(3), this results in the issuance of a Refugee Protection Claimant Document and access to supports, such as the Interim Federal Health Program. There are also more serious implications in terms of an individual's future eligibility to apply for asylum in Canada that are linked to when a claim is considered made in person rather than to an initial submission online.

Q. Will there be any conflict between the Minister's authority to determine what documents and information are required and the Immigration and Refugee Board's ability to determine what is required by the rules of the Board?

A. The distinct roles and requirements of each asylum program delivery partner will continue to be respected.

The legislative amendments have been drafted in a way that preserves the Board's existing authority to determine what documents and information are required for the purposes of the Board, while making it clear that the Minister can also determine what documents and information are required as part of the initial submission with a view to making a claim in support of non-IRB functions. This could include functions such as determining a claim's eligibility and completing comprehensive security screening, for example.

Q. Will online submission be required for all asylum claims?

A. No. These changes will only apply to inland claims made in accordance with subsection 99(3.1) of the Act. Individuals who appear before an officer at a Port of Entry make a claim directly to an officer in person and those claims fall under subsection 100(4) of the Act.

Q. How will the new process differ from the status quo?

A. The process for inland claimants will be nearly identical to the current approach that was implemented under a Temporary Public Policy with respect to online submission and the information that must be provided. The key difference is that the statutory framework itself will now better reflect the process that has been in place under the public policy. Individuals will continue to be required to submit the specified documents and information online through the online portal and will eventually be scheduled for an in person interview with an officer, as is currently the case. Since the Temporary Public Policy was implemented in response to office closures during the pandemic the intention was always that it would be lifted once normal processing resumed, so these changes will establish a basis for online intake once that happens.

Improving Client Service in the Private Sponsorship of Refugees Program [Immigration and Refugee Protection Act (Sponsorship Applications)]

Q. Why do we need caps on both the Groups of Five and Community Sponsor streams of the Private Sponsorship of Refugees program?

A. IRCC's Immigration Levels Plan establishes the number of privately sponsored refugees who can arrive in Canada in a given year. Based on the 2023–2025 Immigration Levels Plan, IRCC aims to welcome 27,505 sponsored refugees in 2023; 27,750 in 2024; and 28,250 in 2025. Despite these targets, demand for the Private Sponsorship of Refugees program continues to exceed the level spaces available to it.

In 2012, IRCC introduced a cap on the number of refugees that Sponsorship Agreement Holders can sponsor in a given year. The annual cap is imposed through the agreement SAHs have with the Minister. This cap has helped IRCC manage program application intake, which leads to more efficient processing times.

However, the lack of caps on the other two sponsorship streams (Groups of Five and Community Sponsors) has led to a growing application inventory and longer processing times.

Establishing caps on these two streams will complement the Sponsorship Agreement Holders cap and allow IRCC to better align application intake with available level spaces. Over time, these caps will reduce program inventory and improve processing times.

Timely processing of private sponsorship applications will reduce the amount of time refugees remain in vulnerable situations overseas. It will also help sponsors better plan and prepare for the arrival of sponsored refugees and their families, including securing housing, financing, settlement and other vital supports – leading to better outcomes for sponsored refugees.

Q.  How will the caps be determined each year – what factors will you consider?

A. IRCC will consider a number of factors in determining the caps on the number of refugees that both Groups of Five and Community Sponsors can sponsor in a given year. These factors will include the size of the overall program inventory and the number of private sponsorship spaces available in the Immigration Levels Plan.

Once the amendments come into force, IRCC will assess these factors and develop options on how to best leverage the Groups of Five and Community Sponsors caps to address program inventory and long wait times.

Q. How high is the PSR application inventory and what are current processing times?

A. As of January 31, 2023, there were 73,500 individuals waiting to have their refugee sponsorship application processed. The majority of these individuals are being sponsored by Groups of Five and Community Sponsors.

It currently takes about three years from the time a private sponsor and the sponsored refugee submit a complete application to when the sponsored refugee arrives in Canada.

As noted, IRCC's Immigration Levels Plan establishes the number of privately sponsored refugees who can arrive in Canada in a given year.

Similar to the cap on SAHs, establishing caps on the other two program streams will allow IRCC to better align sponsorship application intake with level spaces available for sponsored refugees. Over time, this will reduce the program inventory and improve processing times – leading to better outcomes for sponsored refugees.

Q.  What has IRCC been doing to address the inventory and lengthy processing times?

A. The annual cap on the number of refugees that the Sponsorship Agreement Holders (SAHs) can sponsor has, to a degree, helped IRCC manage program application intake, which leads to more efficient processing times.

IRCC has also ramped up processing capacity and, as of December 2022, started using automated tools to process Privately Sponsored Refugee (PSR) applications more efficiently.

These tools take on a significant portion of the clerical and repetitive tasks related to sorting sponsorship applications. It helps sort and assign applications to officers at migration offices overseas, based on the office capabilities and officer skillsets, allowing IRCC to take full advantage of our global processing network.

The automated tool can also automatically approve the sponsorship part of routine program applications, allowing officers to focus on more complex cases. However, the tool never refuses or recommends refusing applications. When there is a refusal decision on any part of the application, it is always made by an officer. For more information on how this automated tool is leading to more efficient processing of refugee sponsorship applications, please see this Web Notice.

Despite these improvements, the lack of caps on the other two sponsorship streams – Groups of Five and Community Sponsors – has led to a growing application inventory and longer processing times.

Similar to the cap on SAHs, establishing caps on Groups of Five and Community Sponsors are the only ways that IRCC can align application intake with available level spaces. Over time, these caps will help reduce the overall inventory and improve processing times – leading to better outcomes for sponsored refugees, which is the key goal for everyone involved in the program.

Q.  Will the proposed caps on Groups of Five and Community Sponsors reduce access to the Private Sponsorship of Refugee program, including reducing the number of sponsored refugees who can come to Canada each year?

A. IRCC's Immigration Levels Plan establishes the number of privately sponsored refugees who can arrive in Canada in a given year.

Similar to the cap on Sponsorship Agreement Holders, the proposed caps on Groups of Five and Community Sponsors will help IRCC better manage program application intake, which will lead to more efficient processing times.

These caps will also prevent individual sponsorship groups from submitting a large number of applications, which means new sponsors will be able to access the program. As well, by limiting the number of applications an individual sponsor can submit, the caps will encourage G5 and CS sponsors to focus their efforts on submitting high-quality applications that clearly demonstrate they meet program requirements.

Timely processing will reduce the amount of time refugees remain in vulnerable situations overseas. It will also help sponsors better plan and prepare for the arrival of sponsored refugees and their families, including securing housing, financing, settlement and other vital supports – leading to better outcomes for sponsored refugees.

Q. Has IRCC considered increasing processing capacity instead of capping these two PSR streams?

A. IRCC has ramped up processing capacity and, as of December 2022, started using automated tools to process refugee sponsorship applications more efficiently.

While these investments are helping tackle the inventory, without caps on all program streams, demand will continue to exceed available levels spaces.

Capping all program streams is the only effective way to align application intake to available level spaces, which will lead to more efficient processing times and ensure the long-term sustainability of the Private Sponsorship of Refugees program.

Q. Are you concerned that the new caps will reduce Canadians and permanent residents' interest in sponsoring refugees?

A. The Private Sponsorship of Refugees program has grown significantly over the past few years and there continues to be a high level of interest from private sponsors, reflecting the success of the program.

The proposed caps are aimed at ensuring the long-term sustainability of this program. In particular, they will allow IRCC to align application intake to available level spaces, which will lead to more efficient processing.

Timely processing will reduce the amount of time refugees remain in vulnerable situations overseas.

At the same time, it will provide sponsors with more certainty about when refugees will arrive in Canada, so they will be better able to plan and prepare, including securing housing, financing, settlement and other vital supports. This will help lead to better outcomes for sponsored refugees, which is the key goal for everyone involved in the PSR program.

Q.  Will managing the new caps via Ministerial Instructions influence how the program is run, including the number of sponsored refugees coming to Canada?

A. The proposed caps on Groups of Five and Community Sponsors will not impact the  number of privately sponsored refugees who can arrive in Canada in a given year – this is established through the Immigration Levels Plan.

Similar to the cap on SAHs, the caps on Groups of Five and Community Sponsors will be aligned with the program's level spaces. This will help IRCC better manage program application intake, which will lead to more timely processing times.

Timely processing will reduce the amount of time refugees remain in vulnerable situations overseas.

It will also help sponsors better plan and prepare for the arrival of sponsored refugees and their families, including securing housing, financing, settlement and other vital supports. This will help lead to better outcomes for sponsored refugees, which is the top priority for everyone involved in the Private Sponsorship of Refugees program.

Better Protecting Immigration and Citizenship Clients (College of Immigration and Citizenship Consultants Act)

Q. Why weren't the legislative gaps in the College of Immigration and Citizenship Consultants Act and the Immigration and Refugee Protection Act identified earlier?

A. As most professions in Canada are regulated provincially, self-regulation of a profession by federal statute is a novel area for the Government of Canada, with the College of Immigration and Citizenship Consultants (College) constituting only the second such federal regulator (the first being the College of Trademark Agents and Patent Agents, which was established in June 2021). Given this, most of the legislative gaps that are being addressed by these amendments only became apparent after the College's November 2021 opening, following close monitoring early on by both IRCC and the College to note areas where the effective regulation of consultants could be enhanced through legislative amendments.

Q. In 2019, the Government of Canada announced a new governance regime for Immigration and Citizenship Consultants. What has been accomplished to date?

A. In 2019, Canada announced that it was taking decisive action to hold immigration and citizenship consultants to account by improving oversight, strengthening enforcement, and increasing accountability to protect the public from dishonest consultants who take advantage of vulnerable people.

Following that announcement, later in 2019, a statutory framework for the College to regulate immigration and citizenship consultants, the College of Immigration and Citizenship Consultants Act, took effect. This legislation provides the College new powers and tools to investigate professional misconduct and to discipline consultants, including the powers to:

• enter a consultant's premises to gather information for an investigation
• compel witnesses to appear and testify before its Discipline Committee
• request court injunctions to address unlicensed actors providing immigration or citizenship advice without authorization

The College opened in November 2021 and has governed Canadian immigration and citizenship consultants since that time. The College's full board of directors was appointed in May 2022, and the Code of Professional Conduct for College of Immigration and Citizenship Consultants Licensees took effect in June 2022.

The Government is engaging closely with the College to establish a compensation fund for clients who fall victim to nefarious practices by licensees.

Finally, the Government has launched extensive public awareness activities to help prevent susceptible people from falling victim to fraudulent consulting practices.

Q. What are the next steps in this initiative?

A. The next steps are to develop and implement two sets of governor in council regulation packages. The first, made pursuant to the College of Immigration and Citizenship Consultants Act, will expand on key areas of the College's work such as governance, complaints and discipline, and powers of the Registrar.

The second, to be implemented in both the Immigration and Refugee Protection Regulations and the Citizenship Regulations, will enable the issuance of administrative penalties and consequences by IRCC to those providing advice and representation for consideration on immigration and citizenship applications.

Q. When will the College of Immigration and Citizenship Consultants Regulations take effect?

A. It is currently anticipated that the College of Immigration and Citizenship Consultants Regulations will take effect in 2024.

Q. When will the regulations to implement the administrative penalties and consequences regime take effect?

A. It is currently anticipated that the regulations to implement the administrative penalties and consequences regime, which will be made in both the Immigration and Refugee Protection Regulations and the Citizenship Regulations, will take effect in 2024.

Q. How many authorized immigration and citizenship consultants are there?

A. According to the College's 2022 Annual Report, the licensee base has grown significantly since the November 2021 transition from the Immigration Consultants of Canada Regulatory Council to the College: the number of Regulated Canadian Immigration Consultants (RCICs) grew from 7,985 in 2021 to 11,324 in 2022 (an increase of 3,339 RCICs or 30%).

Unlicensed consultants or unauthorized practitioners are not regulated and their numbers are unknown.

Citizenship Act Modernization (Citizenship Act)

Q. Why does the Citizenship Program need new legislative authorities for electronic administration and automation when it has already launched some digital initiatives?

A. To date, the Citizenship Program has been relying on authorities found in Part 2 of the Personal Information Protection and Electronic Documents Act (PIPEDA) and in the Citizenship Act, as well as general principles of administrative law for its use of electronic means, such as the implementation of virtual citizenship ceremonies. However, these authorities are limited. They restrict automation to basic administrative tasks, and manual review and approval by an officer is still required before a citizenship application can move to the next step.

New authorities will mean that the Program can leverage technology to vastly improve client service, including use of automation to help assess citizenship applications that are low risk and routine. The Program will be able to use tools to "get to yes" decisions faster.

Q. How will IRCC ensure that automated technologies do not result in discrimination or racial bias?

A. With appropriate safeguards, automated and machine-assisted decision-making can be used carefully and effectively. The Citizenship Program has high approval rates (99% in 2021-22), meaning that these technologies will mean a faster "yes" for the vast majority of applicants.

When technology is used to assist with decisions, there are often concerns about accuracy, bias and privacy. IRCC is seeking authorities that are broad enough to enable future innovation, but will move forward with a gradual, cautious increase in the use of technology. This will include engaging policy, privacy, and legal experts to review any new tools or systems, and ensuring that all required government policies and directives regarding uses of advanced technologies are followed – for example, completion of Algorithmic Impact Assessments, as required by the Treasury Board Directive on Automated Decision-Making. The citizenship program will work carefully in developing electronic systems to identify and mitigate the risk of bias.

Q. What will the Citizenship Program gain from the systematic collection and use of biometric information?

A. With authorities to collect and use biometrics, the Program will be able to quickly and reliably confirm a client's identity and assess their criminal history, which will improve the integrity of the Citizenship Program.

Systematic collection of biometrics will help advance the departmental "Tell Us Once" vision of managing clients' identity as they move from immigration, to citizenship, to passport. This change also means that Canada will better align with the US and the UK, where fingerprints are required for all citizenship grant applicants.

Q. How does the Citizenship Program currently screen applicants for criminality?

A. Currently, the Program systematically screens clients for criminality using names and dates of birth. This approach is more vulnerable to people misrepresenting their identity, and can cause delays for clients that have similar names and dates of birth to someone else in RCMP records.

Citizenship is the last federal program still relying on this name-based search system, which the RCMP plans to decommission as soon as 2025. Systematic collection of biometrics (i.e. fingerprints) from citizenship grant applicants will allow the RCMP to meet this time-sensitive priority.

Q. When will the changes to allow electronic administration, automation and biometric collection and use be implemented?

A. Following passage of new legislative authorities, Governor-in-Council and Ministerial Regulations will be developed, where necessary, to outline the parameters for the electronic administration of the program, and the collection and use of biometrics. The planned coming into force of any required regulations is 2025.

The implementation of e-administration and automation is dependent on timelines for the Department's broader digital transformation efforts under the Digital Platform Modernization (DPM) Programme. Work is currently underway to define business requirements.

The systematic collection and use of biometrics will not begin until a regulatory framework is in place. Full implementation of the collection and use of biometric information by the citizenship program is anticipated to take place by 2027. IRCC will work closely with the RCMP on the transition away from name-based criminality searches, including phased or interim measures as necessary.

Q. If no legislative changes are made, what would be the impact?

A. Without new legislative authorities, the Citizenship Program will be unable to require citizenship applications to be submitted electronically, and will remain heavily reliant on manual review and approval. With increased demand from rising immigration levels, this means it will struggle with large inventories and long processing times. Without end-to-end digital service delivery, the Program will continue to be out of step with client expectations and with the delivery of IRCC's immigration and passport programs.

   Further, the RCMP plans to decommission its name-based search system by 2025. Without the ability to systematically collect and use biometrics, IRCC would be required to come up with an alternate solution to screening clients for criminality.

Q. Who will be required to provide biometric information and how will it be collected?

A. The intention is that clients who are 12 and older applying for a grant of citizenship will be required to have a live capture photograph and their fingerprints enrolled with IRCC. To reduce the burden on clients, applicants who previously enrolled their fingerprints and digital photographs with IRCC within the past 10 years during an immigration process (the majority of clients) will not be required to enroll again.

Enrolments are expected to take place at existing Service Canada locations across CanadA. Clients who need to enroll their biometrics will be required to pay an $85 fee (up to a maximum of $170 for families), which is the same fee charged for enrolments in the immigration line of business. Most clients will not be required to pay this fee, as they will have fingerprints and digital photographs already enrolled with IRCC.

Q. How will IRCC use the biometric information collected?

A. Photos will be used by IRCC to help confirm the identity of clients throughout the citizenship application process. They will be compared against evidence of identity submitted with an application, and may be compared with photos already enrolled from a client's previous interactions with the Department.

Fingerprints will be used by the RCMP to screen applicants for criminality that may make them ineligible for citizenship. Once fingerprints are enrolled, the RCMP automatically sends IRCC any new information related to criminal activity associated with the fingerprints. This ensures that criminality screenings are up to date until a client becomes a citizen and the fingerprints are purged.

Q. If the Citizenship Program is reusing biometrics from up to 10 years ago, how will it be sure that a person is who they say they are?

A. A client providing biometric information during an immigration process has their identity validated at the time of initial enrolment. This information is linked to the client's file with IRCC, following them throughout their interactions with the Department.

IRCC confirms the identity of all citizenship grant applicants, including those with biometrics already on file, by requiring identification with their name, date of birth, and photo to be submitted with their application. This information is compared against previous information submitted to the Department. Identity is also verified at other stages of the application process: for example, IRCC officers compare a client's face against their evidence of identity at citizenship knowledge tests and citizenship ceremonies.

Q. How will IRCC ensure the privacy of clients' personal information?

A. Following the proposed legislative changes, Governor-in in-Council regulations will set legal parameters around what biometric information will be collected, from whom, and how it will be used. Fingerprints will be purged from the RCMP's records once a client is granted citizenship.

IRCC has a long history of collecting and safeguarding personal information, including biometrics, from immigration and passport clients. Building on lessons learned, IRCC is committed to a Department-wide approach to ensure biometric information is handled in compliance with the Privacy Act and the Canadian Charter of Rights and Freedoms, and that employees are informed on policies and procedures relating to privacy protections. Once biometrics are systematically collected in the Citizenship Program, IRCC will continue to prioritize the safe storage, transfer and disposal of this information to mitigate risks of privacy breach.

Q. Will there be cost savings for the Citizenship Program once e-administration and automation is implemented?

A. The proposed legislative changes will require supporting regulatory amendments, funding, and program and system redesign for successful implementation. It is projected that this will take between two to five years and require upfront investment. This includes a temporary increase in resources over the next five years, which will offset any initial overall cost savings in the short-term.

In the long-term, enabling automation and machine-assisted decision-making within the Citizenship Program is expected to expedite processing and reduce wait times by automating low risk decisions and administrative processing steps for an estimated 93% of applications at the application intake stage. Once processing efficiencies are realized, the allocation of resources within the program will be re-assessed to determine to what extent reallocations could be feasible (such as reallocations to complex cases and program integrity activities), and an assessment of cost savings compared to investment.

Yukon Act Amendments (Yukon Act)

Q. Why is the Government proposing this change now?

A. The Government of Canada, the Government of Yukon and First Nations have agreed to transition the Faro Mine Remediation Project. As part of this agreement, the Government of Canada has assumed responsibility for the overall delivery of the project.

The agreement helps streamline processes and provides role clarity for the project by establishing a single line of responsibility and accountability for each government.

To enable this transition, the Government of Canada committed to amend the Yukon Act to give the Minister responsible for Northern Affairs the same powers, with respect to a contaminated site on federal land, as the responsible Yukon Minister has for sites under the administration and control of the Government of Yukon through the Waters Act (Yukon).

Q. Were Indigenous groups consulted on the proposed amendments? Were they supportive?

A. Consultations on the proposed amendments to the Yukon Act concluded in December 2020. Consultations took place with all Yukon First Nations and the Yukon Government. No comments were received as a result of the consultations completed in December 2020. The Indigenous groups consulted were supportive, and continue to be supportive of the transfer of the Faro Mine site and the proposed amendments.

Q. Under the proposed amendments, when would the transfer of management of a contaminated site to the Government of Canada occur?

A. If the proposed amendments are passed by Parliament, the powers that would be given to the Minister responsible for Northern Affairs would only take effect once the governments of Canada and Yukon elect to proceed with the final transfer of the management of a contaminated site to the federal government. In the case of the Faro Mine remediation project, this would take effect immediately.

Q. How many Type II contaminated sites exist in Yukon? Would the proposed amendments apply to all of them?

A. There are seven Type II mines in Yukon. The Faro Mine, currently being managed by Canada; the United Keno Hill and Mount Nansen mines, which Canada sold to private industry to manage; Brewery Creek and Minto which are currently considered operating mines; and the Clinton Creek and Ketza River mines which are currently being managed by the Government of Yukon.

These powers have no effect on a Type II site unless the Government of Canada and the Government of Yukon elect to proceed with the transfer of the management of a contaminated site via a signed Transition Agreement. A transition agreement, to transfer the Faro Mine site, has been signed and a transition agreement, to transfer the Clinton Creek and Ketza River mines, is currently being negotiated with the Government of Yukon.

Enhancing the Management of Marine Emergencies and Pollution and Establishing a Vessel Remediation Fund (Oceans Protection Plan)

Q. What are the objectives of the proposed amendments?

A. Collectively, the proposed legislative amendments aim to enhance marine environmental protection and strengthen marine safety to help ensure that Canada's supply chains are resilient and can support inclusive economic growth, keep our oceans and coastlines healthy, advance reconciliation, and build a cleaner future for future generations. The proposed amendments respond to what we have heard from Indigenous groups and stakeholders across all coastal regions and in light of recent marine incidents.

More specifically:

• The proposed amendments to the Canada Shipping Act, 2001 would:
  • Enhance marine emergency management, including on a proactive basis;
  • Ensure appropriate preparedness and response for Hazardous and Noxious Substances incidents;
  • Streamline and modernize Transport Canada's regulatory approaches, including to better address local marine safety and environmental risks; and
  • Strengthen compliance and enforcement, including strengthened vessel owner identification requirements.
• The proposed amendments to the Marine Liability Act aim to:
• Ensure timely public access to information about the availability of compensation following a major ship-source oil spill;
• Ensure that compensation is available for economic losses associated with all types of fishing, hunting and harvesting activities;
• Support the polluter-pays principle by enhancing shipowner liability for small and inland vessels to reflect risks and support expanded insurance coverage; and
• The proposed amendments to the Wrecked, Abandoned and Hazardous Vessel Act would:
• Keep food on tables in the unlikely event of longer-term damage by expanding compensation for future losses.
• Establishing an account (called the Vessel Remediation Fund) to be used to finance activities to assess, address and prevent abandoned and hazardous vessels; and
• Credit to the Fund proposed future regulatory charges paid by vessel owners, which would be authorized by these amendments, and amounts collected from enforcement.

Q. Why are these amendments necessary?

A. Safe, clean, and healthy waterways and coasts are instrumental to keeping Canada's supply chains operating smoothly so that Canadians and business can receive food and essential supplies, and that Canada is connected with our trading partners to support economic growth. Therefore, the federal government is proposing legislative changes to strengthen marine safety, environmental protection, and compensation.

While the number and volume of marine safety and pollution incidents in Canadian waters have been declining consistently since the late 1990s, vessel traffic and cargo volumes have grown, and are expected to continue to grow on all of Canada's coasts. With increases in vessel traffic and cargo diversification, there may be increased risk of interactions between different types/sizes of vessels and/or diverse cargoes.

As well, abandoned and wrecked vessels left in Canadian waters often present a broad range of threats to coastal and shoreline communities across Canada, including damage to the environment and ecosystems, dangers to the public, interference with vessel operations, and negative impacts on local economies. The degree of harmful impacts posed by these problem vessels, along with public expectations and costs associated to address them, will only increase as these vessels continue to age, deteriorate, and lose their structural integrity, which could lead to the release of contaminates.

Proposed amendments to the Marine Liability Act will support the polluter-pays principle by ensuring that available compensation reflects actual risks for small and inland vessels. Amendments will also respond to concerns heard during the Review of the Marine Liability Act about the availability of compensation for losses related to Indigenous harvesting, as well as ensuring compensation for future losses of profit and income, and losses related to harvesting that are directly linked to an oil spill.  

Q. Has Transport Canada engaged Indigenous peoples and stakeholders on the proposed amendments?

A. Yes. While specific engagement activities differed depending on the nature of the proposed amendments, collectively, engagement activities were broad and inclusive with views being sought across all coasts from Indigenous peoples and a wide range of stakeholders. Multiple engagement opportunities were available to interested Indigenous peoples and stakeholders, including: discussion papers, engagement sessions, and responsive meetings to address specific questions and issues.

The proposed amendments respond to comments, advice, and feedback from Indigenous peoples and stakeholders over the past several years, including the first phase of the Oceans Protection Plan, ongoing marine program delivery, implementation of the National Strategy on Abandoned and Wrecked Vessels, and in consideration of recent marine incidents.

Q. Did the Government consult with Indigenous groups as required under the United Nations Declaration of the Rights of Indigenous Peoples Act (UNDA)?

A. Yes. In engaging Indigenous peoples, Transport Canada is guided by the United Nations Declaration of the Rights of Indigenous Peoples (UN Declaration) and the UNDA. This Act requires that the Government of Canada, in consultation and cooperation with Indigenous peoples, take all measures necessary to ensure that the laws of Canada are consistent with the Declaration.

The proposed legislative amendments support shared objectives of safe and clean waters and environmental stewardship, which Indigenous communities have continuously reiterated is of critical importance to them throughout the first phase of the Oceans Protection Plan.

Indigenous peoples have already played a role in the proposed amendments by sharing their perspectives, concerns, and advice over the past several years. Many of the proposed amendments respond directly to concerns raised by Indigenous peoples.

Continued collaboration with Indigenous peoples will be essential to implementing the proposed legislative amendments. If these pass, the federal government will continue to work with interested Indigenous groups as part of future regulatory and program development. Coupled with other OPP initiatives, this will enable Indigenous peoples to play a larger, more active role in Canada's marine safety and environmental protection system.

Q. The proposed legislative amendments do not address all of risks and impacts from vessel traffic. Why aren't these amendments also tackling additional environmental risks such as noise, invasive species, and habitat disturbance?

A. With the longest coastline in the world, Canadians depend on our marine safety system to protect our coasts while also supporting the marine shipping that is critical to our economy and supply chains.

Canada has a comprehensive and robust marine safety system. Transport Canada and its partner departments are already working to address additional marine safety, navigational, and environmental risks from vessel traffic. This includes our existing marine safety, navigational, and environmental regulations and programs. In addition, the federal government is taking further action under the Oceans Protection Plan to:

• Enhance the protection and restoration of vulnerable marine ecosystems and wildlife;
• Improve the efficiency, safety, and sustainability of Canada's marine supply chains;
• Better manage marine traffic navigation and marine incidents of all types (not just oil spills); and
• Advance partnerships and training opportunities for Indigenous and coastal communities.

Q. What qualifies as an emergency that would allow the Minister to use the proposed direction powers?

A. An emergency consists of a situation where the marine environment, and/or the health and safety of seafarers and passengers is at risk. Practically, a situation would be deemed an emergency when there is a clear threat to the safe operation of a vessel; or, a situation onboard could cause harm to crew and passengers the marine environment, or coastal communities. As marine incidents may also impact supply chains and the economy by stopping or slowing the movement of goods, the proposed power would enable earlier response and may prevent an emergency situation or help limit the impact of an emerge.

Strengthening Data Sharing in Trade Corridors

Q. On what basis does the Government of Canada propose to amend the Minister of Transport's order-making powers?

A. Recent events such as the pandemic, floods in British Columbia and the war in Ukraine, have highlighted vulnerabilities in Canada's globally connected multimodal supply chains and the need to build resilience. The Minister of Transport launched an independent National Supply Chain Task Force in late spring 2022 to ensure that we would have access to external expert advice on how to address these key vulnerabilities. Their final report includes recommendations on how to strengthen Canada's supply chains, many of which were acknowledged in the Fall Economic Statement.

The report highlighted that agile, evidence-based decision-making is needed from businesses and policy makers to rapidly adjust to shocks in an increasingly volatile environment. This includes having access to data that provides visibility into the activities and capacity of supply chain players in a timely manner. The findings echo a 2014 Canada Transportation Act Review report, which noted that to be globally competitive, transportation decision makers require authoritative and timely evidence to be able to anticipate, better plan and coordinate, and invest in timely transportation system improvements to ensure that the system continues to support the Canadian economy and the quality of life of Canadians.

In 2023, the Minister of Transport announced the launch of a new call for proposals, under the National Trade Corridors Fund, focused on Advancing Supply Chain Digitization. Through this initiative, Transport Canada is also looking to improve its understanding and monitoring of supply chains to increase its capacity to make informed policy and intervention, notably in the context of major supply chain disruptions.

The proposed amendments to the Canada Transportation Act are necessary to support the digital strategy in cases where proactive disclosure and voluntary data sharing by supply chain players does not fully meet the data and visibility requirements. The proposed amendments would create legislative tools as a legal backstop where voluntary data sharing falls short. They are intended for use when there exists an unusual and significant disruption to the national transportation system or any portion thereof, and such orders would be temporary and would not last more than 90 days.

Q. Why is the Minister of Transport bringing forward these amendments to the Canada Transportation Act now?

A. Transport Canada's preferred approach in closing data gaps related to supply chain performance has been to pursue voluntary and industry-led arrangements. This approach has been effective in certain regions, such as the Lower Mainland of British Columbia, where a strong consensus on the need for collaboration exists. Transport Canada will continue to work on this basis with supply chain partners across the country.

High-profile supply chains disruptions over the last 2 years have highlighted the need for transportation decision makers to have access to a complete national picture of supply chains. Establishing a legal backstop via the proposed amendments will help to ensure that the Minister of Transport has authority to compel and share relevant data to support resilience and speed system recovery, to limit the negative impacts that disruptions have on citizens and businesses, when voluntary approaches fall short.

Q. How will any new data collected by the Minister be protected?

A. As a regulatory department, Transport Canada routinely receives sensitive commercial data from federally regulated entities. This data is protected by a robust legislative and regulatory framework established in part by, for example, the Access to Information Act, the Canada Transportation Act and the Transportation Information Regulations. These and other data are held securely within TC data systems, where access to sensitive data is protected by long-standing governance arrangements.

Any new data that the Minister of Transport receives under the proposed Ministerial Order Power would be protected within the existing framework noted above and would be subject to the same governance provisions and security arrangements as currently in place. The new power for the Minister of Transport to compel data does not include the power to require any personal information within the meaning of the Privacy Act. Any data shared with entities referred to in Section 50 (1.1) of the Canada Transportation Act would be controlled using non-disclosure agreements as a supplement to legislative and regulatory provisions, recognizing explicitly that these persons cannot disclose this information and must protect the confidentiality of the information.

Q. What kind of data will be compelled or shared?

A. The proposed amendments to the Canada Transportation Act are intended to support greater visibility of freight transportation activities and goods in transit. In this context, the types of data collected or shared would describe, for example, activities at an operational level that could be used to develop Key Performance Indicators, or related operational metrics or analytics that provide insight on available capacity or projected demand for service.

Transport Canada will hold consultations in advance of making regulations related to data sharing. These data would be used to support, for example, optimization and operational planning by supply chain players, to provide information to match supply and demand for transportation services, or to provide information on short-term and long-term demand for services to help plan network capacity. In the specific case of an unusual and significant disruption, data may also be required to provide information about the movement of essential goods, the resupply of remote communities, or information on alternative ways of transporting goods to areas of greatest need.

Supporting Rail Competition

Q. What is extended interswitching and how will it help shippers?

A. Interswitching is a competitive access measure that enables rail shippers to access an alternate rail carrier at a nearby interchange, at a regulated rate set by the Canadian Transportation Agency. The current interswitching limit is 30 km. Extended interswitching would increase that limit to 160 km in the prairie provinces. Giving more shippers access to this measure is expected to enhance competitive dynamics, providing shippers with alternatives for rates and service

Q. The National Supply Chain Task Force recommended extended interswitching across the country. Why is this pilot limited to the prairie provinces?

A. While that report called for interswitching to be extended across the country, this more geographically and time-limited pilot will limit the potential for unintended consequences, particularly in the already congested Vancouver-Kamloops and Quebec-Windsor corridors. If there is a significant increase in interswitching movements as a result of this extension, this could have negative impacts on system fluidity and congestion. For this reason, it is prudent not to increase the interswitching limit in those areas where congestion is already a concern, until more analysis can be completed.

Q. This Government had previously decided that extended interswitching was not the best option. Why are you proposing to do this again?

A. The National Supply Chain Task Force was clear that more needs to be done to improve the resilience of rail-based supply chains and ensure that rail shippers are able to access the service that they need. Canada's supply chain is facing new pressures versus those almost 10 years ago. Implementing a temporary extended interswitching pilot will allow the government to reassess, through an evidenced-based approach, the benefits of extended interswitching, alongside an assessment of any potential negative impacts on the fluidity and throughput of the broader supply chain.  The Government is supportive of the outcome that works best for the supply chain and will use the data collected from this pilot to make those decisions.

Q. Will this temporary measure address underlying issues, or help shippers outside of the prairie region?

A. The Government of Canada understands that reliable rail service is critical, not just in the prairies, but across the country. While the extended interswitching pilot is expected to provide immediate benefits to shippers in the prairies, additional steps are also being taken to provide a more holistic understanding of the issues facing the freight rail sector, and to inform further actions to improve resilience and reliability.

For example, on January 9th the Minister of Transport announced amendments to the transportation information regulations. Upon coming into force on April 4, 2023, these amendments will usher in a new era of transparency around freight rail performance in Canada. Canada's main railways will be required to report weekly on an enhanced suite of service and performance information, which will provide greater insight and accountability into freight rail performance in Canada.

Further, Budget 2023 announced new investments to ensure that Canada's transportation and supply chain is resilient and reliable, bringing goods to our communities and enabling our businesses to export their products around the world.

To further strengthen Canada's transportation systems and supply chain infrastructure, Budget 2023 proposes to undertake a number of concrete actions, including:

• Provide $27.2 million over five years, starting in 2023-24, to Transport Canada to establish a Transportation Supply Chain Office to work with industry and other orders of government to respond to disruptions and better coordinate action to increase the capacity, efficiency, and reliability of Canada's transportation supply chain infrastructure
• Collaborate with industry, provinces, territories, and Indigenous Peoples to develop a long-term roadmap for Canada's transportation infrastructure to better plan and coordinate investments required to support future trade growth.
• Provide $25 million over five years, starting in 2023-24, to Transport Canada to work with Statistics Canada to develop transportation supply chain data that will help reduce congestion, make our supply chains more efficient, and inform future infrastructure planning.

Strengthening Air Passenger Rights and Data Sharing (Air Travel Complaints)

Q. Why does Canada's existing air passenger rights regime need to be improved?

A. The creation of the Air Passenger Protection Regulations in 2019 provided an important framework of rights for Canadians when air travel does not go as planned. These regulations were immediately and severely tested by the pandemic, as well as the increase in passenger demand in summer 2022, revealing areas of the regulations that need to be strengthened, which resulted in an excessive number of refusals to compensate by airlines, and many appeals to the Canadian Transportation Agency. A stronger, and simpler system is needed to increase air carriers' accountability and transparency, reduce the incidents referred to the Agency, and streamline the Agency's processes for addressing these.

Q. What changes are being proposed to strengthen air passenger rights?

A. Changes are being proposed to simplify and strengthen the passenger rights regime and ensure increased accountability and transparency of air carriers. This requires amendments to the Canada Transportation Act to give the Canadian Transportation Agency the authority to create regulations which would require air carriers to provide compensation and a standard of treatment for all delays and cancellations, unless they are able to demonstrate that the situation aligns with a clearly defined exception prescribed by regulations, in which case the carriers will be exempted from the compensation requirements.

Q. How will these proposed amendments to the legislation improve Canada's air passenger rights?

A. The proposed amendments would simplify and strengthen the system by removing the complexity and ambiguity of the regime. This will be achieved by making compensation the default for delays and cancellations, unless it is due to an exception that will be prescribed by regulations.

It would allow the Canadian Transportation Agency to streamline its process for addressing complaints, which would increase its ability to provide timely dispute resolution services to Canadians and help reduce the complaint backlog and prevent another one.

Q. When will the new regime come into effect?

A. It is clear that changes are required now. Following the coming into force of the Bill, the Canadian Transportation Agency will have the authority to implement the new complaint resolution process, as well as initiate the regulatory process to amend the Air Passenger Protection Regulations. Regulatory changes to address the proposals will be taken at the earliest opportunity, with a view to completing this by early 2024.

Q. Will there be an opportunity for Canadians and industry to weigh in on possible changes to passenger rights regulations? If so, how will this consultation take place?

A. When the Canadian Transportation Agency revisits the Air Passenger Protection Regulations, they will be consulting Canadians and air industry stakeholders as per the Government's established processes. Both Canadians and industry stakeholders will have the opportunity to provide their input and share their views through the Canada Gazette process. Multiple stakeholders, such as airlines, airports or consumer groups, have also been directly in touch with the Minister and with his Office, through meetings or correspondences, to provide feedback on potential changes to the passenger rights regime. In November 2022, the Minister hosted the Air Sector Recovery Summit, where stakeholders provided feedback on this matter to him directly.

Q. Are you going to implement a system where the onus is on the air carrier to provide compensation?

A. It is clear that the burden of proof must be on the airlines and not on the passengers. The proposed measures are intended to ensure greater clarity in terms of carriers' obligations, so that more passengers receive compensation from carriers in a timely manner without having to go through the lengthy complaint process with the Canadian Transportation Agency.

Q. Will air carriers have to provide compensation up-front, or will the passenger need to file a request?

A. Like in Europe or in the United States, the passenger will need to file a request for compensation with the air carrier. Up-front compensation without an application creates a number of logistical challenges for air carriers. Having said that, air carriers will be obligated to inform passengers about compensation requirements.

Q. What changes are being proposed regarding the Canadian Transportation Agency's authorities with respect to the enforcement of the Air Passenger Protection Regulations?

A. While the current maximum administrative monetary penalties can range from $5,000 to $25,000 for each violation of the Air Passenger Protection Regulations, it is proposed to allow the Canadian Transportation Agency to increase the maximum amount to $250,000 for corporations. In addition, it is proposed to provide the Agency with enhanced inspection powers as well as the authority to enter into compliance agreements with air carriers. These changes will ensure consistency with the Accessible Transportation for Persons with Disabilities Regulations (ATPDR).

Q. Could these measures impose additional costs to airlines, and thus increase fares for passengers?

A. The primary challenge with passenger rights regimes is to strike a balance between protecting consumers on the one hand, and not creating an undue cost burden to air carriers and travellers on the other. While there may be some additional costs to air carriers in implementing this new regime, and sometimes a portion of the costs do get passed on to passengers, the various actions we propose are intended to strengthen Canada's passenger rights regime and we would ensure that a balanced approach is pursued during the development of the updated regulations and new complaints process.

Q. What is creating the backlog in air passenger complaints to the Canadian Transportation Agency?

A. The backlog is due to the volume of complaints, in part because the regime is new and has been tested by extraordinary circumstances, as well as the complexity of the process for addressing complaints.

The Canadian Transportation Agency is seeing high volumes and demand for its dispute resolution services, mostly for low complexity issues such as carriers' compliance to tariffs and the Air Passenger Protection Regulations. Under the current legislative scheme, a passenger who files an air travel complaint with the Agency may go through three phases of dispute resolution, including the adjudication phase.

While a limited number of cases proceed to adjudication, the court-like process is resource-intensive, complex, and lengthy. The current backlog of complaints suggests the existing dispute resolution mechanisms are inadequate to achieve timely resolution of complaints, in a cost-effective manner.

Q. What changes are being proposed to ensure timely air travel complaint resolution?

A. A new regime is being proposed to streamline the way the Canadian Transportation Agency manages air passenger complaints, for both new complaints and for complaints that have been received, by converting the current three-stage dispute resolution process overseen and approved by Governor in Council-appointed members to a simplified, mediation/arbitration/complaint resolution type of process completed and decided by Agency staff.

Q. Why are you applying charges/fees to the Canadian Transportation Agency's complaint resolution services?

A. Through this proposal, we would allow the Canadian Transportation Agency to implement regulatory charges to cost recover for their various responsibilities attributable under the Canada Transportation Act. The regulatory process permitting to impose regulatory charges will take time; in the interim, we are providing the Agency with the ability to set fees to cover the mediation-arbitration/complaint resolution process.

These proposed changes would serve as an additional incentive for the carriers to resolve complaints before they are even referred to the Agency. The changes would also ensure that the Agency can shift some of the financial burden from government to industry, and offset financial pressures while providing better service to travellers.

Q. While we are strengthening the Air Passenger Protection Regulations for carriers, what about other service providers that can also have an impact on the performance of carriers?

A. There are multiple stakeholders implicated in the air travel journey and the Government of Canada notes this proposal put forward by air carriers as we are always pleased to consider additional improvements as part of a policy discussion. While it is important to note that only air carriers have a direct commercial relationship with passengers, we continue to engage with stakeholders on the matter of shared accountability.

Q. Can we obligate air carriers to more precisely track luggage?

A. There are multiple stakeholders implicated in the delivery of baggage, including airlines, airports and third-party contractors, as well as different carriers for many itineraries. Most of the time, the handling equipment is under the airport control and not the air carriers. Therefore, having a system that tracks all steps as part of the journey would need to involve all stakeholders, including connecting air carriers at foreign airports, which would be extremely difficult to obligate. A real practical solution should come from the industry itself, and we continue to look into this matter in collaboration with the industry.

Q. Are there ways to augment air carriers' obligations for mishandled baggage?

A. This matter could be addressed as part of the regulatory process. That said, a provision has been added to ensure that passengers' costs could be covered when baggage is not immediately received. Any change to the regulations will be made with careful consideration of the Montreal Convention, which sets the international standards for lost, damaged and delayed baggage and prescribes the maximum amount that a passenger can claim in an action for damages.

Q. There have been several recent high-profile incidents that received media attention regarding damaged mobility aids. Why are you not addressing these issues as part of these legislative amendments?

A. The Government of Canada is committed to consistently improving the air passenger experience for persons with disabilities and will continue to monitor the Accessible Transportation for Persons with Disabilities Regulations (ATPDR) to identify gaps in protection for these individuals, as appropriate. That said, the objective of these legislative changes is to address systemic issues in the Air Passenger Protection Regulations (APPR) that revealed themselves during the COVID-19 pandemic and which affect the whole travelling public, including individuals with disabilities although not directly targeting them.

Large air carriers operating to, from, or within Canada are subject to the ATPDR, developed by the Canadian Transportation Agency (Agency). The ATPDR includes requirements for the proper handling and transportation of mobility aids, and the measures that must be taken when a mobility aid is damaged, destroyed or lost during transport. These regulations are legally binding requirements and are enforceable by Administrative Monetary Penalties, up to $250,000.

As well, in the context of an accessibility complaint, if the Agency determines that there is an undue barrier to the mobility of persons with disabilities or determines that a complainant has been adversely affected by a contravention of the ATPDR, it may award compensation for pain and suffering and may also award compensation if the undue barrier or contravention of the ATPDR is the result of a willful or reckless practice. Persons with disabilities who experience barriers to their mobility can seek recourse by filing an application with the Agency.

Legislative Amendments Enabling the Canada Border Services Agency's Traveller Modernization Initiative (Customs Act)

Q. What is Traveller Modernization?

A. Traveller Modernization is a major, multi-year initiative that will change how travellers are processed when entering Canada, address challenges in the Canada Border Services Agency's current operating model that make it difficult to manage rising traveller volumes, and better leverage Agency resources. Traveller Modernization will make the travel experience faster and smoother for travellers. The use of new technologies will allow the Agency to meet changing traveller expectations; facilitate traveller compliance with legislative and regulatory requirements; harness the power of data analytics; optimize and automate traveller processing, and leverage innovative processes.

Q. How do the proposed legislative amendments support delivery of Traveller Modernization?

A. The proposed legislative amendments would lay the foundation for initiatives within Traveller Modernization. For example, they would allow travellers to engage with the Canada Border Services Agency (CBSA) prior to arriving in Canada and remove the requirement to present to an officer in-person, where an alternative, such as a mobile processing application, is made available by the CBSA. These are key changes for the deployment of self-service processing tools (e.g., mobile application, kiosk, eGate) that would improve the border crossing experience for travellers and position the CBSA to offer services at more locations. The proposed amendments aim to continue to uphold border integrity, public safety, and public security. Specifically, where further examination is needed, officers would retain their ability to direct a traveller to present in-person, even when the traveller could present using a means of telecommunications. Requirements would also be imposed for the delivery of baggage to a defined area in an airport in order to reduce opportunities for internal conspiracies (e.g., smuggling).

Q. Is there funding associated with this proposal?

A. The Canada Border Services Agency (CBSA) received funding ($337M) as part of Budget 2021 to deliver Traveller Modernization. A portion of this funding ($105M) was unlocked in fall 2022. The remainder of the earmarked funding will be accessed incrementally through 2029.

Q.  What is the funding associated with this proposal allocated for?

A. The Traveller Modernization funding is allocated for the delivery of eight (8) components; four (4) of which are managed as projects with associated internal oversight and governed decision-making (i.e., Digital Traveller Experience, Officer Experience, NEXUS eGate Expansion, and Dynamic Risking). The remaining four (4) components are managed as initiatives, as opposed to projects (i.e., Free-flow International to International Transit, Biometrics, Improved Baggage Delivery, and Advance Canada Border Services Agency (CBSA) Declaration). Deployment of all Traveller Modernization initiatives is expected to be completed by 2029.

Q. How will Traveller Modernization change the way in which travellers are processed at Canada's border?

A. The initiatives within Traveller Modernization will enable faster border processing and improve the border experience for travellers entering Canada by:

• offering more automated, self-service options, such as Advance Canada Border Services Agency (CBSA) Declaration, Remote Traveller Processing, and eGates, which will allow travellers to engage with the CBSA without needing to see an officer in-person;
• streamlining identity verification through the voluntary use of facial recognition technologies; and,
• reducing the need for travellers and officers to exchange physical documents (e.g., passport, receipts, forms, permits, etc.).

Q. What gaps do the proposed amendments seek to address?

A. Prior to the COVID-19 pandemic, the Canada Border Services Agency (CBSA) experienced challenges managing increasing volumes of travellers in an efficient and effective manner, given its reliance on manual processes and limitations with technology and resources.

With traveller volumes expected to rebound by 2024, there is an immediate need to modernize border processing systems to address these operational challenges and position the CBSA to deliver better services to travellers entering Canada.

Q. Will the proposed amendments allow travellers to pay duties and taxes before they arrive at the border?

A. No, all travellers must continue to pay duties and taxes upon arrival to CanadA. However, the proposed amendments will allow the Canada Border Services Agency to streamline the collection of duties and taxes by developing functionality within its self-service processing tools that allows travellers to provide information on goods to be imported as well as their

payment details. The tool would provide an estimate on the amount of duty and taxes that can be paid on arrival. Payment for the imported goods would be made automatically upon arrival to Canada once the traveller finalizes their declaration.

Q. As the Canada Border Services Agency (CBSA) uses more technology, will it look to automate decision-making?

A. No. While self-service processing tools will provide travellers with a streamlined border crossing experience, all administrative decisions that impact travellers, such as immigration enforcement or seizures of goods, will continue to be made by highly trained officers who take into account all facts and related evidence in accordance with the CBSA's mandate and authorities.

Q. The Budget Implementation Act, 2022, No. 1 included authority for the Canada Border Services Agency (CBSA) to electronically administer and enforce the Customs Act. Is there a link between those authorities and the ones being sought through this Bill?

A. The Budget Implementation Act, 2022, No. 1 (2022 BIA) BIA was targeted at improving how the CBSA carries out its activities, while the changes proposed as part of this Bill are targeted at improving travellers' border experience. The current proposal, combined with the amendments included in2022 BIA, include authorities that are foundational to the delivery of Traveller Modernization. The amendments in the 2022 BIA will improve service delivery through digitization and allow the CBSA to modernize and implement electronic processing solutions for both travellers and commercial and trade partners. The amendments proposed through this Bill will build on those from the 2022 BIA as they would allow travellers to engage with the modernized, self-service processing solutions being deployed by the Agency.

Q. How will the Canada Border Services Agency (CBSA) use digital tools, including photographs provided by travellers, as part of Traveller Modernization?

A. As part of Traveller Modernization, the CBSA will use digital tools to make the border crossing experience faster for persons entering Canada. In cases where travellers voluntarily provide information to the CBSA in advance of their arrival, the CBSA would be able to begin processing so that identity verification and border clearance can be quickly finalized upon arrival. Additionally, the information would be assessed to determine the extent to which the traveller will interact with the Agency. For example, a low-risk traveller may enter Canada without interacting with an officer but a traveller whose risk level is considered high (e.g., previous enforcement) or unknown (e.g., insufficient travel history) may be required to undergo further processing.

Q. How will the proposed amendments change the Canada Border Services Agency's (CBSA) use of its Advance Declaration application, which is currently available at most Canadian international airports?

A. The proposed amendments would allow the CBSA to expand use of its Advance Declaration application to additional modes of travel (e.g., land, marine) and unstaffed border crossing locations, where persons would be allowed to present themselves. Currently, for travellers arriving at unstaffed border crossing locations, the pilot or operator of the conveyance must contact the CBSA in respect of the traveller, who cannot contact the CBSA themselves.

Expanding use of Advance CBSA Declaration would ensure that the border experience is improved to a wider population of travellers. Note that this expansion will also be supported by enhancements to Advance CBSA Declaration, including the launch of facial recognition technology, a more simplified duty and tax process, and the use of digitized forms.

Q. When will the modernized processes enabled by these authorities be in place?

A. The Canada Border Services Agency (CBSA) began implementing Traveller Modernization in 2021. The Agency will start enhancing existing self-service processing solutions by introducing new functions (e.g., facial recognition in the Advance CBSA Declaration application) expanding the use of these tools across other modes of travel (e.g., marine, land) and at new border locations. Deployment of Traveller Modernization processing tools is already ongoing and should be completed by the end of 2029.

Q. Do the proposed amendments expand the roles and responsibilities or mandate of the Canada Border Services Agency (CBSA)?

A. No, the proposed amendments would not alter the CBSA's roles and responsibilities nor its mandate. These amendments would not change "what" the CBSA does, only "how" it does it.

Q. How will the proposed amendments change the way the Canada Border Services Agency (CBSA) does its business day-to-day?

A. Once completed, the amendments will allow the CBSA to better leverage resources and focus greater attention on higher risk travellers and activities. The proposed amendments would allow the CBSA to fully implement Traveller Modernization and improve day-to-day operations. By offering self-service processing tools, digitizing the completion and submission of forms, and automating the collection of duties and taxes upon arrival in Canada, fewer resources would be required for administrative, manual, and paper-based tasks.

Q. How will the proposed amendments change the way in which the Canada Border Services Agency (CBSA) conducts risk assessment on inbound travellers?

A. The proposed amendments enable the collection of information from travellers in advance of their arrival, including personal information (e.g., name, date of birth, citizenship, travel document details) and their completed declaration. When travellers voluntarily provide this information, the CBSA would be able to complete preliminary risk assessment in advance of arrival to determine the level of risk a traveller presents and the level of engagement required with an officer. This builds on the existing process for Advance CBSA Declaration (in place at most international airports) and positions the Agency to further facilitate travellers who are deemed to be low-risk.

Q. Will the use of self-service processing solutions deployed as part of Traveller Modernization be mandatory for all travellers?

A. No. The use of self-service processing tools will remain voluntary at locations where the Canada Border Services Agency (CBSA) offers in-person services (i.e., border clearance on-site by a CBSA officer), such as airports.

However, should a traveller wish to enter Canada at an unstaffed border crossing location, they must present and report goods by telecommunications and meet all associated requirements.

Q. How will the Canada Border Services Agency (CBSA) ensure success of Traveller Modernization if use of the digital tools is voluntary?

A. The CBSA will proactively engage with travellers and industry partners to promote use of Traveller Modernization tools. The Agency may also modify operational flows to encourage use of Traveller Modernization tools, which will offer a faster border crossing experience. The Agency has already begun these efforts with the introduction of "Advance CBSA Declaration express lanes", which are available for persons who submitted their customs declaration in advance of arrival. The promotion of Advance CBSA Declaration, coupled with the introduction of express lanes, have ensured the success of this digital tool and will be used as best practices for the deployment of future Traveller Modernization initiatives.

Q. Will travellers always have an option to be processed in-person by a Canada Border Services Agency (CBSA) officer?

A. Yes. Travellers may always choose to enter Canada at a border crossing location that offers in-person services (i.e., border clearance on-site by a CBSA officer).

However, should a traveller wish to enter Canada at an unstaffed border crossing location, they must present and report goods by telecommunications and meet all associated requirements.

Q. Do all travellers entering at an unstaffed border crossing location have to present by telecommunications? What if there is limited or no internet connectivity? What if the person does not have a mobile device?

A. Yes, all travellers entering Canada at an unstaffed border crossing location must present by telecommunications. The Canada Border Services Agency (CBSA) does consider factors such as connectivity when assessing the viability of potential designation locations. While the CBSA attempts to minimize connectivity challenges in selecting locations, should a connectivity issue arise when entering Canada that is outside of the traveller's control, the CBSA officer may exercise discretion in determining the traveller's compliance.

Travellers seeking to enter Canada at an unstaffed border crossing must ensure that they have the ability to use the technology specified for that particular border crossing location. For example, locations may require the use of a mobile application (e.g., Advance CBSA Declaration), telephone, or radio reporting.

Q. How will the proposed amendments impact the border crossing experience for remote communities?

A. The proposed amendments will allow the Canada Border Services Agency (CBSA) to expand self-service processing options (e.g., mobile application, kiosk, eGate) at border crossing locations where use of these tools is specified. For example, travellers in remote

communities will be able to present themselves by a mobile application in addition to the existing options of telephone and radio reporting. With the deployment of self-service processing tools via Traveller Modernization, the CBSA would be positioned to open new border crossing locations, where operationally feasible and sufficient connectivity exists.

Q. Will the proposed amendments weaken the integrity of Canada's border?

A. No. The proposed amendments will allow the Canada Border Services Agency (CBSA) to deploy Traveller Modernization; however, they will not change "what" the Agency does, only "how" it does it. Traveller Modernization will allow the CBSA to modernize its processing of travellers to adopt a "lighter touch" for low-risk travellers and a more in-depth assessment for persons of high or unknown risk. This is facilitated by travellers providing information earlier in the travel continuum that would be used to enhance border clearance processes by re-allocating officers to higher-risk travellers and activities.

Q. What impact will Traveller Modernization have on Indigenous persons?

A. Traveller Modernization, enabled by the proposed legislative amendments, is intended to improve the border crossing experience for all persons entering Canada, including Indigenous persons. Self-service processing tools, where possible, will be made available to all travellers, allowing them to select the option that best suits their needs.

Q. How will the Canada Border Services Agency (CBSA) ensure that the border crossing experience remains accessible to all travellers?

A. While the proposed amendments provide options for travellers to meet presentation requirements when using telecommunications, use of self-service processing tools will remain voluntary at staffed border crossing locations. As the CBSA is committed to meeting the needs of all travellers, including those requiring accommodation, officers will continue to offer conventional, in-person traveller processing at staffed border crossing locations for those who desire and/or require additional assistance.

The CBSA aims to design self-service processing tools in a way that maximizes functionality and inclusiveness for travellers.

Q. How will the Canada Border Services Agency (CBSA) address accessibility concerns?

A. Building on its experience with the ArriveCAN public health platform, the Advance CBSA Declaration tool such as assistive compatibility with assistive technology, scalable font sizes,

colours and contrast for visually impaired individuals and readability at lower grade reading levels for language and cognitive impairments.

Q. Have industry partners been consulted on the proposed amendments? What reaction is anticipated?

A. Yes. Air industry partners have been engaged on the Canada Border Services Agency's vision for Traveller Modernization. This engagement has continuously referenced the need for legislative amendments in order to allow travellers to present themselves in a more flexible manner. Reactions from the air industry have been overwhelmingly positive and it is anticipated that these partners may express public support for the proposed amendments.

Q. Are international partners adopting a modernized border processing framework?

A. Yes. The proposed amendments will allow the Canada Border Services Agency (CBSA) to fully deploy Traveller Modernization, which will align Canada with our allied partners in the Border Five: Australia, New Zealand, the United Kingdom, and the United States. The Border Five are all working towards a border of the future vision that integrates a legal framework similar to that proposed as part of Traveller Modernization, including self-service processing solutions that better serve both inbound travellers and border management organizations. The Border Five are collectively regarded as leaders in border management and it is essential that Canada keep pace with these partners to maintain its role on the international stage.

Q. Why is the Customs Act being amended to allow information to be provided to the Canada Border Services Agency (CBSA) as opposed to an officer?

A. The Customs Act is being amended to support use of voluntary self-service processing tools whereby travellers submit information to the CBSA through a means of telecommunications, such as a mobile application. All information submitted to the Agency would be reviewed by an officer, in order to render a decision to grant or deny their entry to Canada. However, with the amendments, travellers may be cleared without having a direct interaction with an officer.

For example, a traveller would submit their information (e.g., declaration response, biographic details, and a photograph) to the Agency via the Advance CBSA Declaration mobile application and receive an automated message indicating that they are cleared to enter Canada. Though the traveller provided information to the Agency, they did not interact directly with an officer as part of their border clearance process. Nonetheless, an officer would have reviewed the information, made a decision to grant entry without requiring further processing, and pushed the automated message to the traveller's personal device.

Q. What technologies are included within the term "means of telecommunications"?

A. This term may refer to current and future border processing technologies such as a Primary Inspection Kiosk, mobile application, eGates, Remote Traveller Processing (a kiosk-based processing solution in land mode that includes audio-video communication, document and license plate readers, and weather resistant infrastructure), telephone, and radio.

Q. How will the amendments related to the presentation of persons change how travellers are processed today?

A. The proposed amendments would allow the Canada Border Services Agency (CBSA) to facilitate traveller processing and expedite the border crossing experience for persons who choose to present by a means of telecommunication.

Using information provided in advance of arrival, the CBSA would conduct risk assessments and determine which travellers would require further examination and those who can benefit from a "light touch" process at the border. The latter would have an expedited border crossing experience when entering Canada, since they would only need to confirm that their previously submitted information is accurate and has not changed.

Q. How will travellers know which means of telecommunication are available to use at their border crossing location? Where will this information be specified?

A. The Canada Border Services Agency's (CBSA) public website would be updated with information on what self-service processing options are available for travellers at which border crossing locations. This information would be specified on the CBSA Directory.

Additionally, the Agency would launch a proactive media campaign to support use of new self-service processing tools as they are deployed and issue reminders on existing processing options. The CBSA also has extensive signage at border crossing locations that would be updated to reflect new processing options as they become available.

Q. What is meant by the proposed amendment which requires travellers to provide information while presenting?

A. The Customs Act [section 11(1)] currently requires that travellers answer truthfully any questions asked by an officer. This authority is used to require that travellers provide information to the Canada Border Services Agency (CBSA). For example, when travellers scan their passport at a Primary Inspection Kiosk, they are providing information to the CBSA but are not in fact answering questions asked by an officer. Effectively, providing information is currently understood to be an obligation that is implicit within existing Customs Act requirements.

However, as the CBSA modernizes presentation requirements for travellers, it is seeking to ensure that the requirement to provide information is explicit within section 11(1). As more travellers present by telecommunications (e.g., via Mobile Application, eGate, etc.) and "provide information" to the CBSA as part of their obligation to present, these amendments will ensure that this requirement is explicit in the legislation.

Q. Is there any limit on what information the Canada Border Services Agency (CBSA) can require under the proposed paragraphs 11(1.2)(a) and (b)?

A. Yes, the CBSA and officers would only be able to require that travellers provide information that is related to the performance of an officer's duties under the Customs Act or any other Act of Parliament. In practice, this ensures that requested information must be related to the CBSA's mandate and responsibilities that the Agency carries out on behalf of other government departments. Examples of information that would be requested include biographic details (e.g., name, date of birth, gender citizenship) and responses to declaration questions (e.g., whether the person is importing currency or monetary instruments valued at CAD $10,000 or more).

Q. Why would the Canada Border Services Agency (CBSA) only make one manner of presentation available at a customs office?

A. There are many factors taken into consideration by the CBSA when determining the services available at individual border crossing locations. For example, the Agency may only offer presentation by telecommunications at an unstaffed border crossing location that is very far away from the nearest staffed border crossing location and has limited hours of operation. Conversely, the CBSA currently only offers in-person presentation at most land border crossing locations since it is challenging to adapt self-service processing tools to physical land border infrastructure. The CBSA is attempting to provide flexibility in presentation options to the extent possible, while balancing operational requirements.

Q. In what circumstances would travellers be required to provide information in advance of their arrival when presenting by telecommunications?

A. The Canada Border Services Agency (CBSA) would bring forward proposed regulations that would require advance information from travellers seeking to enter Canada at an unstaffed border crossing location. Advance information would be required from these travellers in order to allow the CBSA to conduct risk assessment in advance of the traveller's arrival. Advance risk assessment in this context is key to maintaining border integrity since officers are not present to process the traveller upon their arrival in Canada. As such, it is critical that the Agency conducts the majority of border processing (e.g., review of declaration responses, risk assessment queries) prior to a traveller's arrival in the event that (1) the person must be redirected to a staffed border crossing location, or (2) CBSA officers are required to meet the traveller at their location to conduct further processing.

Q. How will the Canada Border Services Agency (CBSA) advise travellers of the specific information requirements when they are obligated to provide information in advance of arrival?

A. The CBSA will list the required information, as well as the time periods in which this information must be provided, on its website and within publically available Departmental Memoranda.

Q. Why does the Canada Border Services Agency (CBSA) require authority to direct travellers to present to an officer in person? Would this not be a burden on the traveller?

A. The CBSA requires the authority to direct travellers to present to an officer in person to maintain border integrity. This authority would allow the CBSA to direct a traveller to present to an officer in person at a staffed border crossing location where additional processing – facilitative or enforcement-related – is required.

While this authority could require travellers to revise their travel plans in order to accommodate the direction received from an officer, by submitting the required advance information at the earliest opportunity, travellers could be informed of this redirection well in advance of arrival.

Q. In what circumstances would the Canada Border Services Agency (CBSA) direct a traveller to present in person?

A. The CBSA would direct a traveller to present in person if an officer determines that further processing – whether facilitative or enforcement-related – is required. For example, a traveller intending to enter Canada at an unstaffed border crossing location who requires finalization of their study or work permit may be redirected to a staffed border crossing location to complete the required processing.

Similarly, a traveller with previous contraband seizures intending to enter Canada an unstaffed border crossing location would likely be redirected to a staffed border crossing location to undergo additional processing based on the previous enforcement. Presenting by telecommunications is a facilitative service option offered by the CBSA; however, this limitation must exist in order for the Agency to ensure it can effectively manage border crossings and respond to evolving threats and risks.

Q. Why are the proposed amendments in subsections 11(8) and (9) changing the enabling authorities for Trusted Traveller programs, such as NEXUS?

A. These amendments are being made to ensure that the Canada Border Services Agency's Trusted Traveller programs continue to be administered under the regulations. This is required since their primary manner of presentation (i.e., by a means of telecommunications) will no longer be distinguishable as presentation in an "alternative manner", as this manner is being extended to all travellers.

In practice, there will be no change to the CBSA's administration of these programs nor the experience when persons apply to a program or use their membership. The terms, conditions, fees, etc. that apply today will remain unchanged.

Q. What prescribed class of persons would be issued an authorization by the Minister under the proposed authorities?

A. The prescribed classes of persons that may be issued an authorization for membership in a class include travellers who are authorized by the Minister to become a member of a Trusted Traveller program, such as NEXUS, Free and Secure Trade (FAST), and the Commercial Driver Registration Program.

Q. In the near term, is the Canada Border Services Agency (CBSA) planning to offer presentation by telecommunications at Canada's only designated Mixed-Traffic Corridor, located at the Cornwall port of entry?

A. No. While the Agency is planning to launch a Land – Advance CBSA Declaration pilot at three (3) land border crossing locations in summer 2023 to test the viability of presentation and goods reporting by telecommunications for travellers at highway border crossings, the Cornwall border crossing is not once of the pilot locations. Following conclusion of the pilot, the CBSA will assess lessons learned and determine a strategy for the way forward, which could include deployment to other locations.

The amendments to subsection 11.7(1) are being proposed to ensure that the CBSA is positioned to offer this service at Cornwall in future, once enabling technology and operational requirements are in place.

Q. How is the delivery of baggage managed today? Why does the Canada Border Services Agency (CBSA) need to legislate the location where commercial air carriers have to deliver passenger and crew's baggage?

A. The CBSA currently has administrative policies with respect to the delivery of passenger and crew members' baggage, which require that commercial air carriers transport the baggage to the airport's international baggage area, unless otherwise exempt. With no legislative framework, the CBSA's ability to enforce baggage delivery requirements and assess penalties against commercial air carriers for non-compliance has been limited.

The proposed amendments would close this gap and ensure that the CBSA could enforce the existing requirements, and reduce opportunities for internal conspiracies (e.g., smuggling) since air carriers could be assessed an Administrative Monetary Penalty for non-compliance.

Q. The amendments include authority for the Governor in Council to make regulations about exemptions from the general baggage delivery rule. In what circumstances would commercial air carriers be exempted?

A. Commercial air carriers would be exempt from delivering baggage in accordance with the general rule for International to Domestic (ITD), International to International (ITI) and In-Transit Preclearance (ITPC) connections.

For ITD and ITI connections, the baggage would either continue on to the final domestic or international destination without engagement by the Canada Border Services Agency (CBSA). However, only if requested by an officer – commercial air carriers would be required to deliver ITD or ITI baggage to the location specified by the officer as part of a referral or for a secondary examination.

For ITPC connections, where a traveller enters Canada from an international destination and is proceeding to a United States-bound flight at a designated preclearance airport, the baggage is transported directly to the baggage hold area within the designated preclearance area.

Q. To maintain the integrity of its baggage delivery processes, does the Canada Border Services Agency (CBSA) envision bringing forward regulations that would impose conditions on commercial air carriers that are exempt from the general baggage delivery rule?

A. Yes. The CBSA would seek to bring forward regulations that would require commercial air carriers that are exempt from the general baggage delivery rule to comply with existing conditions for alternative baggage delivery programs. For example, for International to Domestic (ITD) transit, the commercial air carrier may offer its passengers the ITD Process at a participating airport if the air carrier provides the domestic connecting flight as a direct service or in partnership with another air carrier. Additionally, any traveller using the ITD Process must be travelling to another domestic location after the first point of arrival from an international point of origin on one continuous voyage and not possess a firearm or live animal (excluding service animals).

Q. In what circumstance would a Canada Border Services Agency (CBSA) officer require that baggage exempted from the general rule be brought to a specified location?

A. An officer may require that exempt baggage be brought to a specified location for referral determination or to facilitate a secondary examination. Additionally, an officer may require that baggage selected for mandatory random screening be brought to a specified location.

Q. How would the Canada Border Services Agency (CBSA) advise commercial air carriers of the location to which baggage must be brought, once requested?

A. The location specified by the officer would be communicated to the commercial air carrier in accordance with existing protocols for each alternate baggage delivery program. For example, when baggage from an International to Domestic is recalled, this direction will be communicated to the air carrier via an automated baggage recall system. The process for communicating baggage recalls is established as part of each alternate baggage delivery program and is agreed to by commercial air carriers and airport authority partners as part of their on boarding process.

Q. Will the Canada Border Services Agency's (CBSA) designation of international baggage areas be made public?

A. Yes, the CBSA would establish a dedicated web page for the Designation of International Baggage Areas. This page would be similar to the CBSA web page that details the Designation of Customs Controlled Areas^{Footnote 3}.

Q. Why is the Quarantine Act being amended as part of this proposal?

A. The change to section 12 of the Quarantine Act is a related amendment that is consequential to the new framework for presentation of persons that is proposed under the Customs Act. The amendments to the Customs Act will allow certain travellers to present without interacting with an officer in-person. Section 12 of the Quarantine Act is amended to establish authority exempting persons from this requirement if they are entering Canada in the circumstances and the conditions prescribed in regulations. The Canada Border Services Agency (CBSA) and the Public Health Agency of Canada (PHAC) would work closely together to bring forward parallel, complementary, and cohesive regulatory frameworks.

Q. Why are the amendments not coming into force upon Royal Assent?

A. As the Canada Border Services Agency (CBSA) must bring forward regulatory amendments under the proposed enabling authorities in order to develop a cohesive legal framework, the legislation would be brought into force upon a date fixed by the Governor in Council. For example, in order for the baggage delivery scheme to operate appropriately, regulations are required to prescribe the circumstances in which commercial air carriers are exempt from delivering baggage to the international baggage area.

Q. Will the Canada Border Services Agency (CBSA) issue administrative monetary penalties for non-compliance with the new provisions?

A. Yes, the CBSA is proposing to amend the Designated Provisions (Customs) Regulations (DPCR) to allow Administrative Monetary Penalties to be issued for non-compliance with certain proposed amendments including: failure to provide required information upon arrival and failure to deliver baggage to the designated international baggage area. Proposed amendments to the DPCR will be brought forward through a dedicated regulatory proposal once the Bill has received Royal Assent.

Q. What are biometrics?

A. Biometrics are distinctive physical or biological characteristics that are unique to each individual and can be measured. These characteristics can include comparing fingerprints, iris, retina, or even the shape of an individual's face.

Q. How do biometrics work in determining identity?

A. Biometric identification is when the identity of an individual is confirmed using their biometric data and comparing it against existing biometric data. Biometric verification or authentication compares biometric data provided at two different points in time to determine a match. For example, using facial biometrics, it can be confirmed that a photograph of an individual associated with an authorized travel document (e.g., e-Passport) matches a live photograph taken of the individual.

Q. What type of biometric would travellers provide voluntarily to the Canada Border Services Agency (CBSA) as part of the Traveller Modernization initiative?

A. As part of Traveller Modernization, the CBSA will collect facial photographs from travellers who voluntarily provide them, as part of certain presentation and reporting options, via telecommunications. The Agency will use facial recognition biometric technology to confirm a travellers' identity against a photograph included with an authorized travel document. For example, a photograph taken at a Primary Inspection Kiosk at an airport would be compared to a scanned ePassport containing a stored photograph. Alternatively, a photo submitted prior to arrival would be compared to a photo taken upon arrival, such as when reporting at an unstaffed border crossing location.

Q. What is a photograph?

A. A photograph is a digital image of a traveller's face. In the context of Traveller Modernization, the Canada Border Services Agency (CBSA) will collect a photograph that will be used for border processing.

Q. What is meant by "a photograph" for the purposes of the proposed legislative amendments?

A. In some circumstances, including if a traveller chooses to proceed with presentation by telecommunications, the traveller will be required to provide a digital image of their face.

This photograph will be used for identity confirmation, for example by comparing it against the digital image stored on their ePassport or a photograph taken upon arrival in Canada.

Q. What is facial recognition and how does it work?

A. Facial recognition is the automated searching of a facial image against an existing facial image. This technology works by identifying and measuring facial features in an image. Facial recognition can identify faces in images or videos, determine if the face in two images belongs to the same person, or search for a face among a large collection of existing images.

Q. How will the Canada Border Services Agency (CBSA) use facial recognition technology as part of Traveller Modernization?

A. Facial recognition will occur via photograph comparison. A photograph of a traveller will be taken and compared against a photograph transmitted to the Agency either on arrival (e.g., in the form of an e-passport) or in advance of arrival as part an Advance CBSA Declaration submission, in order to verify identity and the authenticity of a travel document.

Q. Does the Canada Border Services Agency (CBSA) currently use biometric data to process travellers at the border?

A. Yes, the CBSA currently uses biometric data primarily to facilitate trusted travellers (e.g., NEXUS program) and for border processing (e.g., Primary Inspection Kiosks). Biometric data is used in immigration and refugee processing, enforcement and investigations, and forensics. Generally, the CBSA uses biometrics, including fingerprints and photographs, for the purpose of identity verification.

Q. What is a Digital Travel Credential? Does the Canada Border Services Agency (CBSA) plan to use this tool as part of Traveller Modernization?

A. A Digital Travel Credential (DTC), is a digital document that comprises a traveller's biographic and biometric information (digital photograph). The CBSA plans to permit the use of a DTC as part of Traveller Modernization and will allow travellers to share their DTC with the Agency prior to arrival in Canada.

Q. When would the Canada Border Services Agency (CBSA) require a photograph from a traveller under the proposed amendments?

A. As part of Traveller Modernization, a photograph will only be required by the CBSA where a traveller chooses to present by a means of telecommunication and where it is needed for the use of the specific service processing tool (e.g., Primary Inspection Kiosk) they are using for presentation.

Should a traveller be subject to a secondary examination that results in enforcement (e.g., seizure of contraband) or immigration processing (e.g., issuance of a work Permit), a photograph may be collected as required under existing authorities.

Q. Will the legislative amendments allow the Canada Border Services Agency (CBSA) to require that all travellers provide a photograph when entering Canada?

A. No, under the proposed amendments, photographs will only be collected from travellers who choose to present by means of telecommunications where it is the needed for the use of a specific service processing tool. The reference to provision of a photograph is included to ensure greater transparency regarding what type of biometric information the CBSA may require when a traveller chooses to present by telecommunications using self-service processing tools.

Travellers arriving at a staffed border crossing location will always have the ability to present to an officer in-person without providing a photograph or having one taken by a CBSA device.

Q. Why do the proposed amendments include authority for the Canada Border Services Agency (CBSA) to require a photograph from travellers presenting by means of telecommunication?

A. The reference to persons providing a "photograph" within the proposed amendments has been included to establish greater transparency that the term "any information" (in paragraph 11(1.2)(b)) may include a photograph.

The collection and use of digital photographs will enable the CBSA to make the border crossing experience faster and smoother for travellers entering Canada. It is integral to the use of self-service processing tools that expedite identity verification and streamline the border crossing experience. Additionally, collection and use of photographs will enable the CBSA to strengthen the identity verification processes, better combatting against fraud, and the identification of high risk persons.

The explicit reference to a photograph clarifies the type of biometric the CBSA intends to (1) collect from persons who voluntarily choose to present via telecommunication (where a photograph is used as part of a self-service tool) and (2) use to verify identity (i.e., administration of program legislation).

Q. Has the Canada Border Services Agency (CBSA) consulted with impacted stakeholders, including the Office of the Privacy Commissioner of Canada (OPC), on the proposal to expand use of biometrics as part of the Traveller Modernization initiative?

A. Yes. The CBSA has conducted preliminary consultations with industry partners, including the OPC as well as airport authorities and commercial and carriers, on the use of biometrics. Strong support was expressed for a robust privacy framework to govern the use and retention of biometric data as well as for the ability to expedite identity verification in order to streamline the border crossing experience upon arrival in Canada.

Q. How will the Canada Border Services Agency (CBSA) ensure that photographs are only collected with the free and informed consent of travellers? How will travellers provide their consent?

A. Prior to providing information via self-service processing tools, travellers will be advised as to how their photograph(s) will be collected, used, retain, and disclosed by the CBSA. This will allow them to make an informed decision about whether to provide this information to the Agency. A photograph will only be collected from a traveller once they have acknowledged this information and agreed to provide a photograph to the Agency. This is similar to the CBSA's operation of its Trusted Traveller programs and Primary Inspection Kiosk process where, before a photograph is taken, travellers are advised on how information, including their photograph, will be collected, used, retained, and disclosed.

Q.  Will travellers be able to withdraw their consent if they no longer wish for the Canada Border Services Agency (CBSA) to use their photograph?

A. Yes, travellers who wish to withdraw their consent to the CBSA's use of their photograph may do so, however, travellers may then be required to present to an officer in person upon arrival. Additionally, withdrawing consent may not necessarily result in the immediate deletion of the photograph, should adverse information be discovered.

Q. What would happen to a traveller if their face cannot be matched to the photo on their travel document upon arrival in Canada?

A. In these potential situations, a traveller would be directed to an officer for further processing. An officer would make the final decision about whether to refer a traveller for secondary examination.

Q. How will the Canada Border Services Agency (CBSA) ensure that personal information, including photographs, collected from Canadian citizens are protected and used lawfully?

A. Consistent with current practices, all personal information, including photographs collected from travellers, will be stored in a secure database. Access to this information will be limited to designated users who require access to the data on a 'need to know' basis. The CBSA will also continue to undertake Privacy Impact Assessments to ensure that potential privacy risks related to the use of photographs, are identified and that appropriate mitigation measures are put in place to further safeguard this information.

Q. How long will the Canada Border Services Agency (CBSA) retain photographs collected from travellers?

A. Photographs collected from travellers under the proposed new authorities will be retained for two (2) years, in accordance with requirements established under Canada's privacy laws. This retention period will allow the CBSA to continuously monitor and assess the performance of biometric technologies and allow for necessary updates to ensure that they do not disproportionately impact the travel experience for different demographics of travellers. It will also allow travellers to access their data, upon request, within the two year period. Photographs will be purged from the CBSA's data holdings once two years have elapsed.

Photographs collected under the proposed legislation may be retained for longer than two (2) years only when authorized under by law.

Q. Will photographs collected by the Canada Border Services Agency (CBSA) under the proposed amendments be shared with other federal partners?

A. Photographs collected in accordance with the proposed amendments will only be disclosed as authorized under the Privacy Act and the Customs Act. Additionally, the CBSA will only disclose information as prescribed by these Acts.

Q. Will the proposed amendments with respect to a "photograph" allow the Canada Border Services Agency (CBSA) to conduct surveillance?

A. No, the CBSA does not intend to conduct surveillance on travellers as part of Traveller Modernization. The collection of photographs will be done through a consent-based model, and individuals who wish to provide their photographs voluntarily to the CBSA will be notified about how they will be used, disclosed, and retained prior to collection.

Q. The proposed amendments do not impose an age restriction on the requirement to provide information. Does the Canada Border Services Agency (CBSA) intend to require a photograph from minors?

A. As is the case today with Primary Inspection Kiosks, the CBSA does not intend to collect photographs from travellers under the age of 14.

Q. What measures does the Canada Border Services Agency (CBSA) have in place to prevent against potential privacy breaches?

A. The CBSA has specific safeguards in place to protect the privacy and information of travellers, including protecting the data with strong encryption techniques that ensure traveller information is accessed only by authorized users on a 'need to know' basis. Only relevant data elements will be made available and personal information will be removed or masked when it is not required. Data usage will be monitored with audit logs to ensure data is being used appropriately.

The CBSA prioritizes the protection of personal information and will ensure that privacy is at the forefront of the development of new technologies and tools used for the Traveller Modernization initiative, including through ongoing engagement with the Office of the Privacy Commissioner. With regards to biometrics, the CBSA is committed to protecting the privacy rights of Canadians at every step of the way, including thoroughly analyzing technologies prior to their deployment.

Q. How does the Canada Border Services Agency (CBSA) ensure that private entities it works with comply with Canada's privacy requirements? What are the accountability mechanisms and penalties if a private entity fails to uphold these requirements?

A. Privacy remains at the forefront of the CBSA's programs through a privacy-by-design approach, which embeds privacy standards and principles into the foundation of every program. These same privacy considerations will be specified in each contract to ensure that the private entities that the Agency contracts with comply with Canada's privacy requirements. The CBSA is compliant with Canada's privacy laws and, working with Public Services and Procurement Canada, will identify and resolve any failures to uphold the privacy requirements, should they arise.

Q. Will the Canada Border Services Agency (CBSA) ensure that it does not contract with private companies that have been pre-qualified as suppliers for facial recognition and artificial intelligence (AI) and who have previously been implicated in human rights abuses?

A. Yes. Public Services and Procurement Canada (PSPC) determines whether a supplier is ineligible to do business with the government and manages a government-wide integrity regime that helps foster ethical business practices, ensures due process for suppliers and upholds the public trust in the procurement process. The CBSA is committed to open, fair and transparent contracts and follows the procurement process set forth by the PSPC to help ensure that only ethical suppliers are considered for contracts.

Q. One of the major criticisms of biometric technology is that it is susceptible to racial bias since it is less reliable at identifying racialized individuals (i.e., Black, Indigenous, Asian, etc.). What mechanisms will the Canada Border Services Agency (CBSA) put in place to address racial bias?

A. The CBSA is aware of concerns regarding possible bias associated with higher facial match error rates for certain racialized groups. Should facial recognition technology fail to correctly identity a traveller, the CBSA would direct the individual to an officer for in-person identity verification in order to minimize the impact on a traveller's border crossing experience.

The Agency is studying the overall accuracy of these biometric algorithms with a view to close any gaps in performance across demographic categories. The accuracy of algorithm technology has increased dramatically in the past few years, in part due to the advances in biometrics technology, along with research conducted within the field of biometrics. That said, the CBSA is ensuring that any new biometric systems leverage the most recent and most accurate algorithms available, and that regular algorithm version upgrades will be implemented on an ongoing basis.

Modernizing the National Research Council (National Research Council Act)

Q. Why does the NRC need to modernize now? And why is procurement and IT such a large part of this plan?

A. We are taking Canada's long-standing productivity and business innovation challenges seriously, and so the NRC's support to business innovation role (i.e. its national network of R&D teams and facilities) has taken on renewed importance.

As a departmental corporation operating alongside private sector collaborators, partners and clients, there is an expectation that the NRC undertakes capital purchases and delivers services and support that match the speed of business. In its current operating environment, the NRC struggles to keep pace with the needs of its clients and partners, specifically its business partners.

We can fix this by optimizing its internal processes to accelerate projects and partnerships; upgrading and recapitalizing its mission-critical equipment and facilities; and modernizing its research IT systems and environment.

Many of these opportunities will be addressed via the $962.2M over eight years and $121.1M ongoing in recapitalization funding announced in the 2022 Fall Economic Statement. This is at the heart of NRC modernization.

To avoid inevitable delays associated with this recapitalization and associated short-term negative impacts on business innovation, Budget 2023 announced legislative amendments to the National Research Council Act to provide increased flexibilities in the areas of procurement and IT. These flexibilities are essential, given the increase in volume, speed and complexities associated with the NRC's procurement-heavy $962.2M project, and will better ensure the NRC can provide hands-on support to Canada's innovators through timely access to modern, refurbished and specialized facilities and expertise.

Q. Can you be more specific about what is meant by "increased flexibilities in procurement and IT?"

A. Proposed legislative amendments to the NRC Act relate to providing the NRC with greater flexibility in the areas of procurement, IT and legal expertise to better meet the needs of its clients and partners and recapitalize its mission critical national network of scientific labs and facilities with speed, efficiency and value for the taxpayer.

Specifically, proposed changes would provide the NRC with:

• The ability to procure goods and services directly, while remaining subject to Government Contracting Regulations and Treasury Board Directives, and other associated policies and directives, except where they impose limitations to the delegated authorities or approval requirements related to limitation of liabilities/contractor indemnification;
• Recognition of IT as central to the NRC's mandate in order to greater support leading-edge unclassified research activities, and a greater sharing of responsibility with Shared Services Canada for the future of IT (while at the same time maintaining security as paramount); and
• A greater ability to directly engage external legal services (with Attorney General approval).

Q. How can we be sure the NRC won't create risks for the government when it takes on more responsibility for delivery of its procurement and IT functions?

A. Risks have been discussed extensively with internal policy experts and Government of Canada common service providers, and mitigations have been built into the proposed approach.

With respect to IT, cybersecurity remains paramount and nothing on that side will change. Specifically:

• The NRC will remain within the government's enterprise systems, including its cybersecurity perimeter;
• The NRC will continue to work with the Communications Security Establishment Canada, the Canadian Centre for Cyber Security, Shared Services Canada and Treasury Board Secretariat to maintain the security of its systems; and
• All changes, going forward, with respect to unclassified research IT, will be part of an approved plan involving NRC, SSC and the Chief Information Officer for Canada.

Regarding procurement, transparency, accountability and value for money remain paramount and will not change. Specifically:

• The NRC will remain subject to the Government Contracting Regulations (GCR) and TB policies;
• Where the NRC identifies a complex procurement, it may ask PSPC for advice or to take on the role of contracting authority and lead the procurement;
• A separate external procurement oversight board will be in place to ensure strong governance oversight of NRC's procurement function.

Q. Are we not concerned that this could set a precedent for other government departments? If we provide the NRC with these flexibilities, why not others as well?

A. For over a century, the NRC has been unique among federal departments and agencies. It has always balanced its designation as a Schedule II Departmental Corporation with the quasi-commercial environment in which it operates to deliver fee-for-service research and innovation support to academic, industry and government clients.

Government recognizes the exceptional nature of the work it undertakes, and as such, has provided the NRC already with added flexibilities relative to many other Schedule II entities. For example, it is the largest federal real property custodian outside of Public Services and Procurement Canada and DND; it has the power to incorporate not-for-profit entities; it has the ability to retain and reinvest its revenues in priority areas; it has the authority to perform experimental manufacturing and produce drugs and medical devices; it is able to acquire and dispose of its real property… along with many other powers. 

Looking to other departmental corporations that also have specialized mandates (e.g. Canada Revenue Agency, the Canadian Food Inspection Agency and the Invest in Canada Hub), many of these entities have unique authorities in the areas of procurement, IT, legal, payroll, or some combination thereof, that enable these organizations to deliver on their respective mandates.

Therefore, the NRC is not setting precedent. Consistent with the Government's existing approach of providing special powers and flexibilities where necessary to achieve delivery of mandate, including through legislation such as in the case of the Canada Revenue Agency and the Invest in Canada Hub, the NRC is seeking the flexibilities it needs to partner with business to improve innovation in Canada.

Q.  What kind of message is this sending to our central service providers such as Public Services and Procurement Canada and Shared Services Canada regarding their ability to deliver value across government?

A. The procurement and IT elements of this proposal are the result of several months of consultations and negotiations between the NRC, Public Services and Procurement Canada, the Communications Security Establishment Canada, the Canadian Centre for Cyber Security, Shared Services Canada and Treasury Board Secretariat. It is a proposal that all

partners are comfortable with, and one that acknowledges the value-add that each department and agency brings to this specific situation.

To ensure that IT specific flexibilities are implemented in coordination with critical partners, and that they remain closely engaged, the NRC and SSC will be required to co-develop (for approval by the Government's Chief Information Officer), an implementation plan that maintains security as paramount, while providing delegations of authority that allow the NRC to take on selected IT responsibilities.

To ensure that procurement-specific flexibilities are implemented with appropriate governance and oversight, a Procurement Oversight Board will be established, with members and a chair appointed by the Minister of Innovation, Science and Industry. This Board will review large or complex procurements, approve the NRC's procurement oversight framework, and report annually to the Minister of ISI on the NRC's procurement performance.

Q. Can't these efficiencies be achieved using existing tools and policies?

A. Using existing tools, policies and directives would require exemptions on an ad hoc basis, over long periods of time, resulting in significant delays to projects while these negotiations take place. In addition, delegations and exemptions could change over time, and so this approach would not provide long-term certainty.

In light of the upcoming significant and necessary upgrades to its mission-critical infrastructure and facilities, a necessary condition of NRC modernization is the operational flexibilities that the NRC needs to work at the speed of its business partners and deliver scientific infrastructure renewal on time and on budget.

This can be best achieved by making permanent changes to the NRC's enabling legislation.

Q. At the end of the day, can small tweaks to the NRC Act really make that big of a difference?

A. The importance of optimizing the NRC's operating environment cannot be overstated. The NRC inherently works with collaborators, partners and clients that all rely on timely delivery of unique and specialized services and support to meet their urgent and longer-term innovation goals. The NRC must speed up its capital purchases to match the speed of business if it is to adequately meet the needs of these key external-to-government partners.

With the CIC providing the funding required for more Canadian companies to undertake R&D, demand for experts and advanced facilities to work out and test ideas into new technologies will grow. Many firms, particularly those at the small and medium level, do not have the internal capacity to create multi-disciplinary research teams or build facilities to prototype, work-out and test new technologies. The NRC must have the operating environment required to deliver the experts and facilities that companies need to innovate, with speed and agility.

Overall, these structural measures will position the NRC to work hand-in-hand with the new Canada Innovation Corporation (CIC) and will lead to greater commercialization of advanced research; technology adaptation and adoption; process innovation; and productivity gain for Canada.

Q. Is now a good time to delegate more procurement authorities when the Government is proposing to cut back on professional services?

A. The NRC has a strong procurement team in place today with an appropriate policy framework. This will be augmented to provide appropriate governance and oversight of new procurement authorities, including the establishment of an external Procurement Oversight Board that will report annually to the Minister of Innovation, Science and Industry. Also, the NRC will remain subject to Government Contracting Regulations and Treasury Board Directives.  

Q.  Why create a new Canadian Investment Corporation (CIC) and carve-out the Industrial Research Assistance Program (IRAP) if you can deliver improvements through a change to the NRC Act?

A. The proposed changes are designed to improve the performance of the NRC's research activities and to better enable the NRC and its researchers to partner with business and academia. These changes are also designed to allow the NRC to effectively work hand-in-hand with IRAP as part of the new CIC to jointly support business innovation. The CIC will be set up to provide funding to innovative businesses and the NRC will be able to offer these same businesses access to expertise and facilities to improve their products and services, as well as to bring new technologies to market.

Amendments to the Patent Act (Patent Act)

Q. What is a patent?

A. A patent is a time-limited monopoly granted by the government in order to incentivize innovation. Through a patent, the government gives the inventor the right to stop others from making, using or selling its invention for the term of the patent. To be eligible for patent protection, an invention must be new (first in the world), useful (functional and operative), and inventive (showing ingenuity and not obvious).

Q.  How is a patent granted?

A. The Commissioner of Patents may grant or reject the patent application. A patent application must first be filed with the Canadian Intellectual Property Office (CIPO). The applicant then has four years to request that CIPO examine their application. The examination part of the patent granting process can take anywhere from a couple of months to several years (the average time is currently about 31 months). It is an iterative process which often involves the issuance of one or more examiner's reports from CIPO and responses to those reports from the applicant, sometimes including amendments to the application.

Q. How long is the current term of a patent?

A. In Canada, the length of a patent term lasts for 20 years from when a patent application is filed. A Canadian patent is only effective in Canada once granted by the Commissioner of Patents. In addition, the right of a patent is conditional on the payment of the annual maintenance fees to CIPO.

Q. What is patent term adjustment (PTA)? What is the purpose of PTA?

A. Under the Canada-United States-Mexico Agreement (CUSMA), Canada committed to make best efforts to process patent applications in an efficient and timely manner, with a view to avoid "unreasonable" or unnecessary delays. If there are "unreasonable" delays in the issuance of a patent, Canada must provide a means to adjust the patent term to compensate for those delays. CUSMA considers it an "unreasonable" delay when it takes more than five years from filing or three years from a request for examination (whichever is later), for a patent to issue.

Q. What are the benefits of PTA?

A. The main benefit of PTA to patent owners is that delays caused by CIPO will not erode the effective term of their patent. Added term gives patent owners additional time to generate value from their patent, for example, through longer licensing or sales opportunities or by positioning extra patent term as attractive to investment. However, this comes at a cost to the Canadian economy, as consumers may then have to pay higher prices for a longer period of time due to the extended monopoly.

Q.  Who will benefit more from PTA, Canadian or foreign patent owners?

A. Both foreign and Canadian patent owners will benefit equally from PTA since the provisions are uniformly applied regardless of the residence of the patentee. While it is not known how many of the patents granted by CIPO are owned by non-Canadians, the percentage could be significant considering that only a small fraction of patent applications at CIPO come from Canada. For example, of the 37,155 patent applications filed at CIPO in 2021, 87% were made by foreign filers.

Q.  How will PTA be awarded? Who will be eligible?

A. Patent owners who believe that they experienced unreasonable delay will have to apply to CIPO for patent term adjustment. PTA will be decided on a case-by-case basis. The PTA obligation applies to all patent owners across all fields of technology.

Q. How will PTA be calculated?

A. The legislative framework (i.e. amendments to the Patent Act) essentially sets out the parameters for PTA and introduces appropriate regulation-making authorities so that patent owners, the public and CIPO know which patents are eligible for PTA, how it can be obtained and maintained, and how it is calculated.

Regulations will be developed to accompany the legislative framework prior to implementation. CUSMA allows for certain periods of time to be excluded from the calculation of PTA, such as delays attributable to the applicant. These calculations will be provided for in the regulations.

Q. What happens if someone disagrees with how PTA is calculated?

A. The Patent Act amendments introduce provisions to provide clarity with respect to which patents are eligible for PTA and how PTA calculations may be reconsidered by the Commissioner of Patents at CIPO or appealed to the Federal Court by patent owners or third parties who may be concerned about the consequences of extended patent terms.

In the event that an error is made by the Commissioner in granting PTA, the legislative framework provides a means for the Commissioner to reconsider any determination of extended patent term granted and, if the patentee was granted more extended patent term than they are entitled to, reduce the term accordingly. A means is also provided to enable the Federal Court to reduce the amount of extended patent term if it finds that the patentee was granted more extended term than they are entitled to.

Q.  Will the PTA calculation be impacted by the Certificate of Supplementary Protection (CSP)?

A. CSPs are another form of protection, similar to a patent, that are available to pharmaceutical patent owners when they experience delays in obtaining regulatory approval from Health Canada to bring their patented products to market. CSPs were introduced in Canada as a result of a commitment Canada made under the Canada-EU Comprehensive Economic and Trade Agreement (CETA). The amendments to the Patent Act specify that these two types of delays (i.e. PTA and CSPs) will run concurrently.

Q. Have the US and Mexico introduced a PTA system? How do they compare with the proposed approach if so?

A. The US has negotiated PTA obligations with more than a dozen other countries, including Australia, Chile, Korea, Peru, Singapore and China. While US trading partners' approaches to the implementation of these commitments have varied widely, they

generally do not go beyond what is explicitly required by the treaty text. Some countries have taken steps to limit the issuance of PTA. For instance, in implementing the PTA obligation under CUSMA, Mexico capped the amount of time that can be awarded at 5 years, offers less than a 1:1 ratio of compensation, and requires the patent examination process to be concluded within a maximum of 5 years.

The US approach to PTA, which predates CUSMA, goes beyond the minimum requirements explicitly specified in the treaty, and typically results in high awards of PTA. In 2020, over 50% of patents issued in the US received PTA, and the average term of adjustment was 180 days.

Strengthening Regulatory Oversight of Natural Health Products [Food and Drugs Act (Natural Health Products)]

Q. Why were natural health products (NHPs) scoped out of Vanessa's Law (Bill C-17) when it was adopted in 2014?

A. While NHPs were initially included in the Protecting Canadians from Unsafe Drugs Act (Vanessa's Law), some stakeholders at the time argued that NHPs are inherently safer than other drugs and advocated for their removal. A decision was made by the previous Government to ultimately scope out NHPs. As a result, Health Canada's authorities to oversee NHPs are misaligned with the authorities available for similar health products, and the Department must rely on voluntary action by the industry when health and safety issues occur.

Q. If the proposed legislative amendments are passed by Parliament, what new authorities would be available for the Minister of Health and when would they come into force?

A. The proposed amendments to the FDA would extend the authorities introduced through Vanessa's Law to NHPs. These authorities would provide the Minister of Health with the ability, for example, to order recalls for unsafe products or require companies to revise labels, improving Health Canada's ability to respond to serious health and safety risks.

In the short term, certain authorities would come into force to support immediate program enhancements. This would include authorities such as the ability to compel product recalls and impose stronger penalties.

In the medium and longer term, regulatory amendments to the Natural Health Products Regulations would be proposed to operationalize some of the remaining Vanessa's Law authorities. This includes the authorities for the Minister to order the conduct of tests, studies, or product assessments and to require mandatory reporting of serious adverse reactions by healthcare institutions.

Q. How would these new authorities help protect the health and safety of consumers who use NHPs?

A. Health Canada has seen evidence of industry non-compliance with the Natural Health Products Regulations, resulting in health and safety risks to Canadians that use NHPs. Examples of this non-compliance include product contamination due to non-adherence to Good Manufacturing Practices and ingredients present in products that are not listed on labels. This is occurring at a time when Canadians are increasingly using NHPs.

Extending the authorities introduced through Vanessa's Law to NHPs would increase Health Canada's ability to manage the safety risks of products on the market and address NHP non-compliance when health and safety risks are identified (e.g., order a product recall or impose higher fines or penalties for contraventions involving NHPs).

Q. What were the findings of the recent CESD audit on the NHP program? How does this proposal relate to the findings of the CESD audit?

A. On April 22, 2021, the Commissioner of the Environment and Sustainable Development (CESD) tabled the results of an audit of the NHP program. The CESD report noted that although the current program's pre-market approach to ensure the safety and efficacy of NHPs is appropriate, it is limited with respect to the current post-market tools, including monitoring of NHP product labels, monitoring of false or misleading advertising, and general capacity for inspections and effective compliance and enforcement of marketed NHPs.

Health Canada has accepted the audit recommendations and publicly committed to addressing them while acknowledging that fully responding to some of the recommendations would require new authorities. These findings and recommendations were reinforced in a report tabled by the Standing Committee on Public Accounts (PACP) in June 2022.

Q. Are these legislative authorities necessary for low-risk natural products?

A. Although NHPs are generally considered lower risk than other health products like prescription drugs, they are not without risk. In the recent audit of Health Canada's NHP program by the CESD, auditors found that 88% of the NHPs they reviewed were advertised with potentially misleading information. As noted in the Department's response to the audit, Health Canada does not currently have the necessary tools to effectively deter and respond to health and safety issues when they arise. Extending the authorities introduced through Vanessa's Law to NHPs will give Health Canada additional tools to address risks to health and safety when they arise.

Banning Cosmetic Testing on Animals [Food and Drugs Act (Cosmetics Testing on Animals)

Q. Why is Canada proposing to ban cosmetics testing on animals?

A. In response to public concern for animal welfare, this Government committed, in the Minister of Health's mandate letter, to introducing legislation to end animal testing. The ban on cosmetics animal testing is proposed as an early step to deliver on this commitment as the science has reached the point where it is generally possible to satisfy safety requirements for cosmetic products through alternatives to animal testing. Banning cosmetics testing on animals will encourage the shift away from reliance on animal testing more broadly and contribute to the continued development of alternatives to animal testing.

By implementing this ban, Canada would join the 41 countries that now have laws in place to limit or ban cosmetic animal testing.

Q. What will the ban mean for Canadians?

A. The ban will have no impact on the availability of existing products and is not expected to noticeably impact the availability of future products that Canadians will be able to purchase:

• Products already on the market when the changes come into force will be exempt from the prohibitions, so existing products would not be removed from shelves; and,
• Similar bans enacted in other countries have not been linked to a decrease in the selection of products on the market.

This proposal is expected to further assist consumers' purchasing decisions by improving the accuracy of labels and claims related to the absence of animal testing on cosmetics, as it will require manufacturers to substantiate those claims, upon request from the Minister of Health.

Q. What kinds of activities would be banned under these new amendments?

A. Health Canada regulates cosmetics through a post-market regime under the Food and Drugs Actand the Cosmetic Regulations. While Health Canada currently accepts animal testing data from industry to demonstrate the safety of a cosmetic, the Food and Drugs Act does not require it.

The proposed new amendments would ban the following activities:

• the conduct of tests on animals in Canada that may cause the animal physical or mental pain, suffering or injury for the purpose of satisfying requirements for cosmetics under the Food and Drugs Act or any other country's legislative framework for cosmetics;
• the sale of a cosmetic in Canada if the manufacturer, importer, or seller relies on data derived from animal testing to demonstrate the safety of the cosmetic, when the testing may cause the animal physical or mental pain, suffering or injury, with some exceptions; and
• cosmetic labelling or advertising claiming that the cosmetic has not been tested on animals after the coming into force of the ban unless the manufacturer, importer or seller can provide evidence that validates that claim upon request from the Minister.

Q. Would there be any exceptions to the prohibition on conducting tests on animals in Canada?

A. No, there will be no exceptions to this prohibition (prohibition I, in question 3). No person, including researchers and industry, will be able to conduct a test on an animal to satisfy a cosmetic requirement under the Food and Drugs Act, or any other country's cosmetic requirements. Tests on animals for purposes other than satisfying requirements for cosmetics will continue to be allowed.

If a manufacturer, importer, or seller has conducted animal testing abroad to demonstrate the safety of their cosmetic, they may still sell their cosmetic in Canada only if they can demonstrate safety using alternative, non-animal testing data or data allowable under the exceptions described in question 5.

Q.  Would there be any exceptions to the prohibition on selling a cosmetic that relies on animal testing data to demonstrate its safety?

A. Yes, there would be exceptions to the ban on a manufacturer, importer, or seller's ability to rely on animal testing data to demonstrate the safety of their cosmetic (prohibition ii, in question 3).

First, existing cosmetic products on the market would be able to continue relying on existing animal testing data to demonstrate safety. This is consistent with how other jurisdictions have implemented new requirements for bans on cosmetic animal testing. Over time, as new cosmetics are introduced, and existing cosmetics are reformulated, the requirements would apply to an increasing number of cosmetic products.

Second, manufacturers, importers, or sellers would be able to rely on animal testing data, when it satisfies any of the following conditions:

• the animal testing was done prior to the coming into force of the prohibition on sale;
• the animal testing data was published by the Government of Canada either on its website or in a scientific journal;
• the animal testing data was publicly available, and the animal testing was not conducted by, or on behalf of, the manufacturer, importer, or seller; nor was it sponsored by the manufacturer, importer, or seller; or,
• the animal testing was necessary to meet either a legislative requirement in Canada other than the cosmetic requirements under the Food and Drugs Act or requirements unrelated to cosmetics under another country's legislation (e.g., requirements related to pharmaceutical drugs) in order to sell a non-cosmetic product, and the ingredient that was tested on animals has a valid use in such a non-cosmetic product that is or has been sold where that legislation applies.

Q. Would there be any exceptions to the prohibition on false or misleading cosmetic labelling or advertising claims?

A. No, all cosmetics products on the market will be required to comply with the prohibition on false or misleading labelling or advertising claims. However, the prohibition only applies to claims made regarding animal testing that occurred after the ban on cosmetic animal testing came into effect.

For example, if a manufacturer's product claims 'No animal testing,' then Health Canada would only request substantiating evidence for the time period following the start of the ban on cosmetic animal testing.

Health Canada does not intend to impose any governmental standards for cruelty-free claims relating to animal testing. This is consistent with the European Union's approach. Manufacturers would be able to continue to determine how they want to state claims on their labels, if the claims can be substantiated. Health Canada would only ask for evidence to substantiate a cruelty-free labelling claim if a complaint has been made through the existing web-page 'Report an incident involving a consumer product or cosmetic (canada.ca)'.

Q.  What data can be relied upon to demonstrate the safety of cosmetics?

A. In addition to animal testing data allowed under the exceptions described in question 5 above, data derived from non-animal testing methods can be relied upon. This could include, for example, data derived from testing on cell cultures or relying on computer-based models or existing information on similar chemicals.

Non-animal testing methods are continuously being developed or refined in response to public support to end animal testing. The proposed ban in Canada would support this global shift toward reducing reliance on animal testing by further encouraging the cosmetic industry to focus on developing and using non-animal testing methods.

The proposed ban would not interfere with other legislative regimes in Canada where animal testing is still needed to demonstrate safety to human health, most notably pharmaceuticals and chemicals testing.

Q. Would these new requirements be similar to those in other countries?

A. At this time, 41 foreign countries have already enacted laws that ban or limit cosmetic animal testing. These include Australia, all European Union countries, India, Israel, South Korea, and the United Kingdom. The European Union's model, in place since 2013, is generally considered to have the most comprehensive approach to prohibitions against cosmetic testing on animals and the sale of cosmetics tested on animals. Health Canada's approach generally aligns with the approach adopted in the European Union. Aligning cosmetic legislation with other international jurisdictions

would bring trade benefits to Canada and support Canadian cosmetic manufacturers who wish to sell in other countries.

Q. How will industry comply with the new requirements?

A. The proposed new amendments to the Food and Drugs Act to ban cosmetic testing on animals would create minimal new regulatory burden for the cosmetic industry.

To comply with the new requirements, industry would have to:

• Refrain from conducting, in Canada, any testing of cosmetics on animals for the purposes of establishing their safety to satisfy the safety requirements under the FDA;
• Ensure that the safety of any new cosmetic product sold in Canada can be established relying strictly on permissible data (i.e., data not derived from animal testing, or data satisfying the relevant exceptions); and,
• Ensure that any claims relating to animal testing can be substantiated.

Manufacturers and importers would also be encouraged to submit to Health Canada, with their Cosmetic Notification Form, a voluntary declaration to the effect that they have established the safety of their new or reformulated product without reliance on animal testing data as prohibited under the new amendments. Health Canada would keep records of data submitted and respond to complaints by taking appropriate action, such as assessing any information on record, conducting inspections, or communicating with the relevant regulated party.

Q. When would the new requirements come into effect?

A. Health Canada anticipates that amendments to the Food and Drugs Act would come into force six months after Royal Assent.

Q. Why are we only prohibiting tests on animals in respect of cosmetics under the Food and Drugs Act? What about other product lines?

A. Animal testing would continue to be required under other legislative regimes to demonstrate safety until internationally accepted non-animal alternative methods become more readily available for product lines other than cosmetics, such as pharmaceuticals or chemicals. For example, the New Substances Notification Regulations under the Canadian Environmental Protection Act, 1999 provide that no new substances, including mixed-use ingredients and ingredients intended for use strictly in a cosmetic, can be introduced into the Canadian marketplace before undergoing ecological and human health assessments. These requirements would remain in place to protect the health and safety of Canadians and the environment.

Health Canada would continue to work closely with key stakeholders, including animal rights advocacy groups and industry associations, to understand their concerns and perspectives, and address concerns relating to animal testing to the extent possible while continuing to work with international partners to reduce reliance on animal testing in other domains where practicable and scientifically feasible.

Q. How are the general public and key stakeholders expected to react to the ban of cosmetic testing on animals?

A. Surveys show that most Canadians support the banning of cosmetic animal testing. As found by a third-party public opinion research poll conducted in 2019, 87% of Canadians support a ban on animal testing for cosmetics. This is further evidenced by the exceptional volume of correspondence received by Health Canada from Canadians voicing that opinion (over 68,000 since April 1, 2021). Consistent with approaches in other jurisdictions, this ban will ensure that existing products remain on the market but give people in Canada the confidence that no further testing on animals can be undertaken to establish the safety of imported or manufactured cosmetics under the FDA, and that labels claiming that products were not tested on animals are accurate.

Stakeholder groups are also expected to respond positively to this proposal, as demonstrated by recent media coverage and letters of support sent to the Minister of Health since late 2021, from Humane Canada and a collective of organizations representing the cosmetics industry and its many member companies, retailers, and animal rights advocates.

The Canadian Dental Care Plan - Reporting Requirements for Employer-Provided Dental Coverage (Dental Care Measures Act)

Q.  Could there be unexpected consequences for Canadian businesses from employers disclosing this information?

A. Health Canada and Finance Canada do not anticipate unexpected consequences for Canadian businesses from disclosing this information to Employment and Social Development Canada (Service Canada) and Health Canada.

The information would solely be used to administer the Dental Plan and confirm applicants' eligibility. Decisions taken by Service Canada or Health Canada will only impact the eligibility of Canadians to enroll in the Dental Plan.

As collection of this information would be mandatory, should an employer fail to provide this information on the requisite tax forms (T4 and T4A), there would be penalties. This type of enforcement measure is a standard practice related to information collection on tax forms and is not new to employers.

Q.  What is the consequence for the Dental Plan if employer-provided dental coverage information is not collected?

A. If this information is not collected under the tax structure, Service Canada and Health Canada do not have an independent and reliable method to validate attestations from Canadians related to dental coverage. Potential consequences include:

• Delays in enrolling Canadians in the Dental Plan, which result in delays in Canadians accessing dental care.
• Unknowingly enrolling Canadians in the Dental Plan who have access to employer-provided dental coverage, which increases the overall costs of delivering the Dental Plan.
• Increased administration costs, as Service Canada employees would need to manually validate an applicant's dental coverage status and introduce measures to recover benefits paid, if the applicant provided an inaccurate attestation.
• Complicating the application process as additional information would need to be collected from Canadians applying to the Dental Plan – such as contact information for their employer.
• Eliminating opportunities to introduce automatic re-enrollment for the Dental Plan, as validation would need be done manually on a yearly basis.

Q.  Does it matter if the employer-provided dental coverage is less generous (provides worse access to dental services) than that provided under the Canadian Dental Care Plan (Dental Plan)?

A. At this time, the policy direction for the Dental Plan is to provide dental care to Canadians who make under $90,000 and who do not have access to dental coverage.

Further, there is no measure to examine whether different dental coverages are comparable to that of the Dental Plan as the details of employer-provided dental coverage are not in the public domain.

Q.  What if the coming into force date of the amendment delays collection of the dental coverage information until the 2024 tax year?

A. The Dental Plan is an income tested program – which requires the previous year's tax information to determine eligibility. Therefore, without 2023 taxpayer information, manual workarounds to validate an applicant's access to employer-provided dental coverage would need to be developed.

Amendment to Address the Supreme Court of Newfoundland and Labrador Decision in R. v. Gorman (Canada Post Corporation Act)

Q. What happened in the Gorman case?

A. In R. v. Gorman, Mr. Gorman was charged with trafficking in cocaine after a search of a mailed parcel was conducted by postal inspectors. Mr. Gorman argued that section 41(1) of the Canada Post Corporation Act, which provides the authority to search, violated section 8 of the Canadian Charter of Rights and Freedoms.

On January 11, 2022, the Supreme Court of Newfoundland and Labrador held that section 41(1) violated section 8 of the Charter, and found that unfettered authority to search parcels is not proportionate in light of one's reasonable expectation of privacy under the Charter. The Court did not decide on a remedy at the time to provide Mr. Gorman and the Crown the opportunity to make further arguments.

On April 12, 2022, the Court invalidated section 41(1) of the Act in Newfoundland and Labrador. However, it suspended the issuance of its declaration for a year, or until April 12, 2023, to allow Parliament the time to pass legislation to remedy the issue.

Q. What will happen if legislative amendments are not passed by the deadline of April 12, 2023?

A. If the legislative amendments are not passed by April 12, 2023, all possible steps will be taken to request an extension from the Court or an appeal may be sought in an attempt to stay the Court's decision to provide more time for the Government to pass the legislative amendments.

Canada Post has not been able to identify any mitigation strategies that would reduce the impact of the Gorman decision if the amendment is not in force by the Court's deadline.

Q. What is the effect of invalidating section 41(1)?

A. Invalidating section 41(1) would mean that in the province of Newfoundland and Labrador, postal inspectors will no longer be able to open packages suspected of containing non-mailable matter such as illicit drugs, dangerous substances, explosives, restricted/prohibited firearms, ammunition, as well as other prohibited matter.

Without this regulatory capability, Canada Post will not be able to properly maintain the safety and security of the postal system and its employees working in Newfoundland and Labrador. This could result in serious negative repercussions linked with the trafficking of illicit substances via the mail.

During the suspension period (i.e., until April 12, 2023), Canada Post can continue to inspect parcels. However, once the Court deadline passes, Canada Post will no longer have the authority to inspect parcels in Newfoundland and Labrador unless new legislation, consistent with the Court's reasons, is enacted.

Q. How effective are postal inspectors?

A. According to Canada Post, approximately 95 per cent of inspected parcels are found to contain non-mailable matter such as opioids, ecstasy pills, methamphetamine, and other illicit substances, as well as alcohol destined for dry, prohibited, or restricted Northern and Indigenous communities.

3,457 parcels were inspected in 2021 and 64 per cent of those parcels were destined for Indigenous and Northern Communities.

Q.  What is Bill S-256 and how is it related to this proposal?

A. Bill S-256 was introduced by Senator Pierre Dalphond on November 22, 2022, and would amend the Canada Post Corporation Act to allow law enforcement to search and seize the mail.

The proposed bill would amend sections 2(1), 40(3) and 48 of the Canada Post Corporation Act. The Senate bill is unlikely to be passed quickly enough to remedy the issue, if it were successful at all.

More importantly, as the proposed bill would not amend section 41(1) of the Canada Post Corporation Act, it does not address the R. v. Gorman decision.

Q. What is Canada Post`s Indigenous and Northern Reconciliation Strategy?

A. Canada Post announced the Indigenous and Northern Reconciliation Strategy on November 17, 2020, to renew its long-standing relationship with First Nations, Métis and Inuit people and Northern communities.

As part of this strategy, Canada Post has committed to working to reduce prohibited items, such as alcohol and illicit drugs, that enter these communities.

Q. How does the proposed amendment affect the operations of postal inspectors?

A. The Court decided to invalidate section 41(1) because no standard exists in the Act and not because of how Canada Post applied section 41(1).

The proposed amendments would have little affect on the operations of postal inspectors because Canada Post's postal inspectors have historically applied a higher legal standard before inspecting parcels than that required under the Act.

Canada Post has agreed to align their postal inspection policies with the proposed amendments, once the amendment is passed.

Canada Growth Fund

General

Q. What is the Canada Growth Fund?

A. The Canada Growth Fund (CGF) is a $15 billion arm's length public investment vehicle that will help attract private capital to invest in low carbon projects, technologies, businesses, and supply chains by using investment instruments that absorb certain risks.

Amendments to PSPIB Act

Q. What is the status of the Canada Growth Fund? When will it be ready to make investments?

A. Consistent with the government's commitment in the 2022 Fall Economic Statement to have the CGF operational in the first half of 2023,CGF was incorporated as a subsidiary of the Canada Development Investment Corporation (CDEV) in December 2022 and the Fall Economic Statement Implementation Act, 2022 provided authority for the Minister of Finance to capitalize CGF with $2 billion of initial capital.

Division 32 of Part 4 proposes amendments to the Public Sector Pension Investment Board Act to enable the Public Sector Pension Investment Board (PSP Investments) to manage the assets of CGF to deliver on the Growth Fund's mandate of attracting private capital to invest in Canada's clean economy.

Division 32 of Part 4 will ensure that the CGF will carry out its mandate in association with PSP Investments, so that it can act quickly and start investing to support the growth of Canada's clean economy.

Following the tabling of the Budget, PSP Investments seconded a team to CGF to help CGF begin sourcing and completing deals, with initial deals to be announced by summer 2023.

Should Royal Assent for this Act be granted, CGF and PSP Investments will sign an Investment Management Agreement pursuant to which PSP Investments will manage and invest the assets of CGF.  PSP Investments will provide CGF with the professional investment team needed for CGF to deliver on its mandate over the long term.

Q. Who will be responsible for delivering the Canada Growth Fund?

A. PSP Investments will be enabled to incorporate a new subsidiary to provide investment management services to CGF, in accordance with any terms agreed to by the subsidiary and CGF.

Q. Who will pay the operational costs of providing services to the Canada Growth Fund?

A. The costs associated with the establishment and operation of the PSPIB subsidiary as well as its provision of investment management services to CGF will be paid by CGF. This will ensure that the pension funds are not paying for the costs arising from the provision of investment management services to CGF.

Q. Why is the government relying on PSP Investments to deliver the Canada Growth Fund?

A. Growing CGF from scratch—by having the fund build its own internal infrastructure and recruit specialized investment expertise—would be a lengthy process that would slow down the pace at which CGF can make investments. By partnering with PSP Investments, CGF will be able to move quickly and begin making investments to support the growth of Canada's clean economy in the near-term.

PSP Investments will provide an independent investment team with extensive experience across the range of investment tools that CGF will use to deliver on its mandate and attract new private investment to Canada. PSP Investments will also establish an investment decision-making committee, focused exclusively on CGF, to ensure that investment decisions align with the CGF's objectives, investment principles, and performance criteria.

Q. Will PSP Investments manage the Canada Growth Fund's assets in the same way as it does for pension funds?

A. CGF assets managed by PSP Investments will be separate from and managed independently of the pension assets of PSP Investments. PSP Investments will also establish an independent investment committee, focused exclusively on the Growth Fund, to ensure that investment decisions align with the Growth Fund's objectives, investment principles, and performance criteria.

Q. Will the proposed measure change how PSP Investments manages the assets of public sector pension funds?

A. PSP Investments will continue to manage the assets transferred to it by public sector pension funds with the goal of maximizing risk-adjusted returns. As such, PSP Investments will continue to successfully deliver on its pre-existing pension management mandate.

Q. Will the current regulations, investment policies, standards and procedures applicable to PSP Investments when it invests the assets of pension funds also apply to the Canada Growth Fund?

A. No. Division 32 of Part 4 proposes amendments to the PSPIB Act to exempt the newly incorporated PSP Investments subsidiary from the regulations, investment policies, standards and procedures established in respect of PSP Investments' pension fund business.

This will allow CGF and the subsidiary of PSP Investments to agree on the terms of their investment management relationship.

Amendments to FES Act, 2022

Q. What does it mean for the Canada Growth Fund to be a non-agent?

A. The proposed measure will declare CGF a non-agent of the Crown, for the purposes of establishing its independence in legislation.

Q. Is the government providing additional funding for the Canada Growth Fund?

A. Budget 2022 announced CGF's $15 billion envelope. The FES Act provided authority for the Minister of Finance to provide an initial capitalization to CGF to make early investments. The proposed measure will authorize the Minister of Finance to capitalize CGF with its announced $15 billion envelope over time, to fulfill the Budget 2022 commitment.

Q. What is the funding for the Canada Growth Fund being used for?

A. Funding will enable CGF to make investments to catalyze private investment in projects and companies that meet CGF's objectives. It will also fund administrative costs of CGF (including those borne by PSP Investments).

Q. What type of investments will be made by the Canada Growth Fund?

A. CGF will make investments that will help attract private capital to build Canada's clean economy by using investment instruments that absorb certain risks in order to encourage private investment in low carbon projects, technologies, businesses, and supply chains.

Q. How will the Canada Growth Fund invest its funds?

A. CGF will differ from traditional for-profit private sector investors seeking market returns and traditional public sector grant and contribution programs. Its objective will be to deliver against its strategic objectives while recovering its capital on a portfolio basis and recycling its capital base over the long term. CGF will invest concessionally by accepting, where necessary, below-market returns relative to the risk it incurs.

Q. Why is it important that the Minister of Finance be authorized to capitalize CGF with the entire $15 billion envelope in the short term?

A. In order for PSP Investments to effectively invest CGF funds at the speed and scale needed to deliver on its mandate, CGF needs a stable source of funding. Therefore, the legislative amendments to the FES Act will increase the authority of the Minister of Finance to capitalize CGF up to the $15 billion envelope over time, as announced in Budget 2022.

Other

Q. Budget 2023 announced adding two seats to the PSP Investments Board of Directors for representatives of organized labour. Is this included in this legislation package?

A: To ensure that workers are represented in the governance of PSP Investments, the government will consult unions this spring on adding two seats to the PSP Investments Board of Directors for representatives of organized labour, in keeping with the current recruitment rules for filling positions for board members. The government aims to legislate this change in fall 2023.

Modernizing Financial Sector Oversight to Address Emerging Risks (Legislation Related to Financial Institutions)

Q. Why is the government addressing "integrity and security risks" in the financial sector?

A. The federal financial framework is well-equipped to address a wide range of risks. OSFI already promotes the adoption by management and boards of directors of financial institutions of policies and procedures designed to control and manage risk. The Minister of Finance is responsible for approving the incorporation of federally regulated financial institutions and their significant owners (i.e., above 10 per cent), and has authority to impose terms and conditions, require an undertaking, or amend or revoke approvals. Targeted enhancements to the federal financial framework will better address emerging security and integrity risks and challenges, particularly those stemming from foreign interference.

Q.  Why is the Government making these legislative amendments now?

A. The Government is continuously reviewing its financial sector legislation to ensure that its framework remains robust. Canadians must be confident that federally regulated financial institutions and their owners act with integrity, and that Canada's financial institutions are protected, including from foreign interference.

Q. How do integrity and security risks fit within OSFI's existing responsibilities?

A. OSFI's current mandate includes protecting depositors, policyholders, and financial institution creditors while allowing institutions to take reasonable risks and compete effectively. Enhancing OSFI's mandate complements this approach by embedding management of integrity and security risks, including foreign interference, in ongoing financial sector supervision.

Q. Why does the proposed legislation give new supervisory tools to the Superintendent?

A. The Superintendent has supervisory tools that focus on the financial condition of institutions. The proposed legislation broadens the scope of the Superintendent's existing tools. This includes:

• setting out new circumstances for the Superintendent to take control that include non-prudential scenarios. The procedural steps in the Bank Act, the Insurance Companies Act, and the Trust and Loan Companies Act that are required when taking control remain unchanged;
• enabling the Superintendent to issue a direction of compliance to a federally regulated financial institution when its integrity or security is threatened; and
• enabling the Superintendent to enter into a prudential agreement with a federally regulated financial institution for the purpose of establishing adequate policies and procedures to protect itself against threats to its integrity or its security.

Q. Why does the proposed legislation give the Minister of Finance new powers?

A. The Minister of Finance is responsible for Canada's financial sector, which underpins a sound and stable Canadian economy. The proposed legislation adds to the Minister's authorities by:

• authorizing the Minister of Finance to direct a person to dispose of all shares of a federally regulated financial institution where their holding of shares poses a threat to the integrity and security of the federally regulated financial institution, to Canada's financial system, or to Canada's national security;
• authorizing the Minister of Finance to direct the Superintendent to take control of a federally regulated financial institution for reasons related to national security; and
• enabling temporary emergency exercise of the Minister of Finance's approval powers under the statutes that govern federally regulated financial institutions for public interest reasons.

Q. What safeguards exist to oversee the Minister of Finance's use of the new powers?

A. In addition to the existing safeguards in the statute, such as the right of appeal and judicial review, the Minister of Finance must notify the National Security and Intelligence Committee of Parliamentarians and the National Security and Intelligence Review Agency within 30 days after the Minister uses the new authorities for reasons related to national security.

Q.  What will federally regulated financial institutions have to do?

A. Federally regulated financial institutions will be required to have adequate policies and procedures to protect themselves against threats to their integrity and security, including protection against foreign interference.

The proposed amendments provide institutions with the flexibility to determine how to establish policies and procedures and their scope, subject to any regulatory expectations to be established by OSFI.

Q.  Does the legislation apply only to foreign financial institutions?

A. OSFI will supervise both domestic and foreign federally regulated financial institutions to determine the adequacy of their policies and procedures to protect themselves against threats to their integrity or security, including with respect to foreign interference.

Once the relevant legislative provisions are in force, OSFI will be required to annually examine all institutions to determine their compliance with the new requirement.

Cracking Down on Predatory Lending (Criminal Rate of Interest – Criminal Code)

Q. Why is the government cracking down on high-cost borrowing?

A. Predatory lenders can take advantage of some of the most vulnerable people in our communities, including low-income Canadians, newcomers, and seniors—often by extending very high interest rate loans.

The current criminal rate of interest under the Criminal Code – equivalent to 47 per cent on an annualized percentage rate (APR) basis – can trap Canadians in a cycle of debt that they cannot afford nor escape.

Q. What is the government doing to take action against high-cost borrowing?

A. To combat predatory lending and high-cost borrowing, these amendments lower the criminal rate of interest from the current 60 per cent effective annual rate (equivalent to 47 per cent APR), to 35 per cent APR. A regulation-making authority is also introduced to allow for certain types of loans, such as commercial loans, to be exempt from the criminal rate of interest.

Payday loans are currently exempt from the criminal rate of interest in designated provinces, so long as the province or territory in which they are taking place has legislative measures in place to protect recipients and has been designated by Governor in Council. The proposed amendments introduce a new federal regulation-making authority to allow a limit to be placed on what payday lenders may charge to borrowers, in line with the lowest provincial limit, namely $14 per $100 borrowed.

Q. Are there provincial/territorial high-cost lending regulations in place?

A. Yes, many provinces have complementary high-cost credit regimes in place. Alberta, British Columbia, Manitoba, Newfoundland, Ontario, and Quebec have all introduced or proposed consumer protection measures (e.g., a rescission period) that apply to loans with interest rates above a certain level.

Furthermore, provinces also have payday loan regimes in place. All provinces except Quebec have opted to enact payday lending regimes, with the lowest maximum rate cap of $14 per every $100 borrowed being in Newfoundland and Labrador.

Despite the involvement of the provinces and territories in the high-cost lending space, federal action is required to help address predatory lending because jurisdiction over the criminal rate of interest in the Criminal Code rests with the federal government.

Q. How will a reduction in the rate impact lenders in the market?

A. Lenders in the market will be subject to the lower rates, and all credit agreements that they offer can not exceed 35 per cent APR. Any loan agreement signed prior to the effective date of the new criminal rate of interest would not be captured by the new rate. This includes lines of credit with variable rates, that change over the life of the loan.

A rate change to 35 per cent APR is consistent with the existing maximum rate in Quebec for consumer loans. Quebec is the only province that sets a maximum rate for consumer loans. By lowering the criminal rate of interest, some Canadians who use high-cost credit products may be subject to lower interest charges.

Amendments to the Criminal Code will also include provisions to allow for certain exceptions through a regulation-making authority, to the criminal rate of interest for loans (e.g., commercial loans) that do not fall within the stated policy intent.

Q. How will a reduction in the rate impact access to credit?

A rate change to 35 per cent APR is consistent with the maximum allowable rate in Quebec for consumer loans. Quebec is the only province that sets a maximum rate for consumer loans. By lowering the criminal rate of interest, some Canadians who use high-cost credit products may be subject to lower interest charges.

Q. How did the Department determine a new rate of 35 per cent APR?

A. Last year, the Department undertook a public consultation on the matter, during which it received high-quality feedback from a broad range of stakeholders, including industry, consumer advocates, and provincial governments. Their views helped inform the determination of the new proposed rate, which is equivalent to the maximum interest rate in Quebec. Quebec is the only province that sets a maximum rate for consumer loans.

The Department will continue to engage with stakeholders on any further reductions in the rate, or further revisions to the payday lending exemption within the Criminal Code.

Q. When will the new rate and cap on payday lending come into force?

A. To ensure adequate time for businesses to adjust their operations, these amendments will be brought into force on a day or days set by the Governor in Council. The Department will continue to assess the matter and ensure adequate lead time for lenders to adjust.

Continuing to Support Seasonal Employment Insurance Claimants (Employment Insurance Act)

Amendments to the Employment Insurance Act – Continuing to Support Employment Insurance Seasonal Claimants

Q. What will this extension mean for seasonal EI claimants?

A. This amendment will extend by one year, until October 26, 2024, the current temporary legislated Employment Insurance (EI) rules that provide up to five additional weeks of EI regular benefits to some seasonal workers in certain EI regions. This extension will enable eligible seasonal claimants in the 13 EI economic regions targeted by these rules to continue to access up to five additional weeks of EI regular benefits in their off-season (up to a maximum of 45 weeks).

Without this extension, the temporary rules would expire on October 28, 2023, which could lead to some claimants facing new or longer income gaps between the end of their EI benefits and their return to seasonal work.

Q. Why is the Government extending the temporary rules for seasonal workers instead of implementing a permanent solution for seasonal claimants?

A. Seasonal workers are an important part of Canada's economy and many of them rely on EI for the support they need between work seasons.

Currently, temporary legislated rules provide up to five additional weeks of EI regular benefits. Extending these rules by a year will ensure that eligible seasonal workers can continue to rely on additional income support to mitigate the risk of income gaps, or "trou noir", between the end of their EI benefits and their return to seasonal employment, while the Government contends with a slowing global economy, elevated interest rates around the world, and inflation that is still too high.

The Government remains committed to supporting workers and employers no matter the economic situation. EI is a complex program that serves millions of Canadians annually and modernizing it, including finding a permanent approach to support seasonal industries and its workforce, is a serious undertaking that will take careful consideration and time. Work is ongoing on the development of a plan to modernize the EI program as committed by the Government.

Q. How many seasonal workers are expected to benefit from the one-year extension of the temporary rules for seasonal EI claimants?

A. It is expected that approximately 62,000 seasonal workers who establish a claim for EI regular benefits between October 29, 2023, and October 26, 2024, will benefit from this extension.

Q. How much will the proposed extension cost?

A. The Government is investing approximately $147 million over three years to extend the current temporary rules that provide up to five additional weeks of EI regular benefits to eligible seasonal workers in targeted EI regions until October 26, 2024.

Q. Why is the Budget 2023 asking for 3 years of funding for a one-year extension?

A. The one-year extension will allow targeted and eligible seasonal EI claimants whose claim is established during the period of October 29, 2023 to October 26, 2024 to access up to five additional weeks of regular benefits. Depending on when a claim is established, benefit payments related to these additional weeks of benefits could be made in fiscal years 2023-24, 2024-25 or 2025-26.

Q. Will seasonal workers whose seasonal claimant pattern was affected by the COVID-19 pandemic also benefit from the extended end date of the temporary rules and continue to have access to up to five additional weeks of EI regular benefits?

A. Yes. The Government will maintain the legislative fix introduced in the Economic and Fiscal Update Implementation Act, 2021 (Bill C-8) to ensure that those claimants whose seasonal claim pattern was disrupted due to the COVID-19 pandemic, but who otherwise meet the rest of the eligibility conditions, will be able to continue accessing up to five additional weeks of EI regular benefits under the extension to October 26, 2024 of the current temporary rules for seasonal workers.

Q. What are the eligibility conditions that seasonal workers must meet in order to access up to five additional weeks of EI regular benefits under these temporary rules?

A. In order to access up to five additional weeks of benefits under these rules, claimants must:

• Meet all of the eligibility conditions for EI regular benefits;
• Demonstrate a seasonal claiming pattern;
• Reside in one of the 13 targeted EI economic regions; and
• Establish a benefit period between the dates of September 26, 2021 and October 28, 2023 (reference claim); Budget 2023 will extend this end date to October 26, 2024.

Q. Why is the temporary support for seasonal workers limited to certain regions? Aren't there seasonal workers across the country?

A. The Government recognizes the importance of seasonal workers and their employers and the vital role they play in local economies. Access to up to five additional weeks of EI regular benefits for seasonal workers in the 13 targeted regions below reflects responsiveness to the particular challenges that workers in these highly seasonal regional economies may face in finding off-season employment:

• Newfoundland / Labrador (excludes St. John's)
• Eastern Nova Scotia
• Western Nova Scotia
• Prince Edward Island (excludes Charlottetown)
• Charlottetown
• Madawaska–Charlotte
• Restigouche-Albert
• Gaspésie–Îles-de-la-Madeleine
• Lower Saint Lawrence and North Shore
• Central Quebec
• Chicoutimi-Jonquière
• North Western Quebec
• Yukon (excludes Whitehorse)

Q. Budget 2023 did not mention Employment Insurance modernization. When will changes to the EI program be announced? Why is it taking so long?

A. The Government has always been there for working Canadians and employers, whether through pandemic supports or recent tax credits announced in Budget 2023, and we will continue to support them, no matter the economic situation. Currently, unemployment rates are low, and Canada has the strongest labour market in several decades. Changes to EI need to ensure program improvements make sense for workers and employers in all economic contexts, whether in situations of high or low unemployment.

Modernizing EI, which serves millions of Canadians annually, is a serious undertaking that requires careful consideration and time.

As committed by the Government, work is underway to develop a plan to modernize EI. The plan is being informed by the feedback received from stakeholders and guided by key principles including making the program simpler, more responsive and keeping it financially sustainable. The Government will release its EI modernization plan once this work is complete.

As part of the way forward, Budget 2023 proposes continued investments in the EI program including an extension to the financial supports for workers in seasonal industries, ensuring the Work-Sharing program provides timely supports to employers, improving the recourse process for Employment Insurance appeals and continued investments in the Labour Market Transfer Agreements with provinces and territories.

Q. How is the Government determining what changes to make to the EI program?

A. Work on developing a plan to modernize the EI program is ongoing and will be informed by what was heard during the consultations, longstanding issues with the program, and lessons learned in recent years.

The Government recognizes that the EI program needs to keep pace with labour market shifts and the changing nature of work. The COVID-19 pandemic highlighted longstanding gaps in the program. To address these gaps and better understand the evolving needs of employers and workers, the Government undertook consultations with Canadians and stakeholders on modernizing the EI program, as committed in Budget 2021. These consultations were held over two phases (August 2021-February 2022; April 2022-July 2022), and included stakeholder roundtables, written submissions and an online survey. Topics included EI access and simplification, benefit adequacy, supports for workers experiencing life events, workers in seasonal industries, supports for self-employed workers, the Premium Reduction Program, and EI program financing. "What We Heard" reports from both phases were published online and remain available, online (Phase 1 report – April 2022; Phase 2 report - September 2022).

Across both phases, the Minister led consultations jointly with the EI Commissioners for Workers and Employers, holding over 35 virtual national and regional roundtables with a wide range of stakeholders, including worker groups, employers, and academics. An online survey ran from August to November 2021, which had over 1900 respondents, and the Department received over 160 written submissions through an online portal. In addition, 3 technical workshops were held on the self-employed and gig workers, workers in seasonal industries and EI financing. Representatives from provinces and territories and interested national Indigenous organizations were also separately engaged on EI modernization.

Clean Fuels Regulation Fund (Canadian Environmental Protection Act, 1999) (Canadian Environmental Protection Act, 1999)

Q. Why is the amendment to replace "tradeable units" with "compliance units" required in clauses 1, 2, 3, 4, 6 and 7?

A. This would clarify that the term encompasses both tradeable and non-tradeable units. For example, in the Clean Fuel Regulations, certain credits created by regulated parties will be non-transferable and non-bankable and therefore not "tradeable". The replacement term "compliance units" would better describe the units that maybe created under section 326.

Q. Would proposed subsection 327.1(3) require that interest be credited to every sub-account?

A. Under proposed subsection 327.1(3), only if the Governor in Council has determined the manner and rate, based on the recommendation of the Minister of Finance, would the payment of interest be required. In the absence of a manner and rate, the Minister of Finance would not be able to cause the interest to be paid.

Q. Does the Government know what purposes the Environmental Economic Instruments Fund will be used for?

A. The proposed amendments establishing the Environmental Economic Instruments Fund would allow programs exercising the regulation-making authorities under section 93 (for toxic substances), section 118 (for nutrients), section 140 (fuels), 167 (international air pollution), 177 (international water pollution) or 209 (federal and aboriginal land) to use the fund in the future, provided that its purpose is provided for in regulations.

At this time, only the Clean Fuel Regulations currently prescribes a purpose, and makes a federal fund an integral compliance mechanism option. A federal fund provides reliable compliance flexibility for regulated parties (fossil fuel producers and importers) to discharge up to 10% of their annual compliance requirement through payment into a funding program that invests in, and obtains, greenhouse gas emissions reductions in the short term.

Q. Why is the establishment of a new fund required?

A. The proposed amendments to CEPA to establish the Environmental Economics Instruments Fund would provide the necessary authority to allow a funding program to be carefully designed to deliver on specific regulatory goals of market-based credit systems established under the Act.

As an example, the Clean Fuel Regulations are an important part of achieving the 2030 climate target under Canada's climate plan, A Healthy Environment and a Healthy Economy. These Regulations require fossil fuel producers and importers (the regulated parties) to reduce the lifecycle carbon intensity of the gasoline and diesel they produce and import for use in Canada by a certain amount each year, starting July 1, 2023.

The Regulations include a number of compliance mechanisms to help mitigate compliance costs while maintaining the objective of delivering real greenhouse gas emissions reductions. These include the option of regulated parties discharging up to 10% of their annual compliance requirement, starting January 1, 2024, by contributing into a funding program that invests in and obtains emissions reductions in the short term. These Regulations would trigger the creation of a Clean Fuel Regulations sub-account of the Environmental Economic Instruments Fund that would be set up to meet the specific criteria set out in the Regulations.

Other funding programs that meet the criteria specified in the Clean Fuel Regulations can apply to be recognized as an eligible funding program under the Regulations. However, there is a lack of certainty about whether any programs would meet the criteria and would plan to apply.

The creation of the Environmental Economic Instruments Fund with a sub-account for the Clean Fuel Regulations is the only way to provide regulated parties the security that at least one reliable fund will be in place for compliance purposes.

Q. Why were these amendments not put forward through Bill S-5? Why are other important CEPA reform proposals not included in the Budget Implementation Act?

A. Parliament is currently studying Bill S-5, Strengthening Environmental Protection for a Healthier Canada Act, which proposes amendments to CEPA in two key areas that have been of particular interest to the Standing Committee on Environment and Sustainable Development: creating a right to a healthy environment and strengthening the foundation for the management of chemicals and other substances.

However, the Minister has repeatedly stated publicly that Bill S-5 is a "first step", and the Government will work to introduce additional amendments to CEPA.

These particular amendments are being advanced under the Budget Implementation Act to support the Government's commitment in the 2022 Emissions Reductions Plan for the Clean Fuel Regulations to play a meaningful role in the decarbonization of the transportation sector and to deliver significant reductions from liquid fossil fuels used in Canada. They will ensure a federal fund is in place by January 1, 2024, the date when contributions can first be made by regulated parties to satisfy up to 10% of their annual compliance requirement

Deposit Insurance (Canada Deposit Insurance Corporation Act

Q. How will the recent bank failures in the United States and challenges at Credit Suisse impact Canada's financial system?

A. The Canadian government is closely monitoring current global financial sector developments. Canada is well equipped to cope with a challenging global financial situation.

Our financial sector is strong and well-capitalized. There is a robust regulatory framework in place and effective contingency tools to safeguard federally regulated financial institutions, and to protect insured deposits and financial stability.

Q.  Why are you providing the Minister of Finance with flexibility to increase the deposit insurance limit beyond $100,000?

A. Canada has one of the strongest and most resilient banking systems in the world. Our financial sector is strong and well-capitalized. There is a robust regulatory framework in place and effective contingency tools to safeguard federally regulated financial institutions and support financial stability.

Deposit insurance is one element of Canada's financial system stability framework. It contributes to public confidence in the financial system by protecting depositors' savings in the unlikely event that a deposit-taking institution fails.

The purpose of the proposed legislation is to strengthen the financial stability tools available to the Federal Government in the current economic environment.

Specifically, the proposed legislation would provide the Minister temporary authorities to increase the deposit insurance limit to a higher threshold if doing so would, for example, protect financial stability and support consumer confidence in the banking system.

Q. Are there costs associated with the proposed legislative amendments?

A. There are no costs associated with providing the Minister of Finance with the flexibility to increase the deposit insurance limit through these proposed legislative amendments.

If the Government were to increase the deposit insurance limit, it could result in an increase in CDIC's exposure to loss, which would need to be offset through additional premiums paid by CDIC member institutions.

Q. What is the deposit insurance limit in the United States and has Canada's $100,000 limit been reviewed?

A. The United States deposit insurance limit is $250,000 USD per depositor.

The deposit insurance limit of $100,000 was raised to its current level in 2005. It had previously been a $60,000 limit, which had been in place since 1983. The government completed a deposit insurance review in 2018, which included an assessment of the adequacy of the current $100,000 deposit insurance limit. The study concluded the current limit remains appropriate, and that raising the limit would not enhance protection to the savings of the vast majority of Canadians.

A similar temporary measure to the one proposed in this legislation was passed by Parliament as part of the COVID-19 Emergency Response Act in March 2020. This authority was never used and lapsed in September 2020.

Q. Could there be unlimited coverage if the limit were increased under the proposed temporary authorities?

A. The proposed legislative amendments authorize the Minister of Finance, upon the Governor in Council's approval, to increase the deposit insurance limit until April 30, 2024.

The proposed legislation would require the Minister to set a limit. The Minister would consider international best practices and consult with financial sector regulators should a change in the limit be required to support financial stability.

There is no intention to increase the deposit insurance limit at this time.

Q. How long will the Minister of Finance have this power?

A. The proposed legislative amendments authorize the Minister of Finance, upon the Governor in Council's approval, to increase the deposit insurance limit until April 30, 2024.

Q. Will the increased limit stay in place once this measure is repealed?

A. No, if the limit is increased it will return to $100,000 as of April 30, 2024.

There is no intention to increase the deposit insurance limit at this time.

Q. In what circumstances would the Minister use the flexibility to increase the deposit insurance limit beyond $100,000?

A. The intent is that the Minister would use this authority only in extraordinary circumstances.

The proposed legislative amendments would authorize the Minister, upon the Governor in Council's approval, to increase the deposit insurance limit where, in the Minister's opinion, it is necessary to promote the stability or maintain the efficiency of the financial system in Canada.

Q. Can you explain the oversight regarding the Minister's proposed authorities to increase the deposit insurance limit beyond $100,000?

A. The Minister could exercise this authority with the Governor in Council's authorization. This would ensure that Cabinet is consulted and supportive of any increase.

In addition, the proposed legislative amendments would require the Minister to consult financial sector regulators prior to using this authority. Specifically, the Minister would have to consult the Governor of the Bank of Canada, the Superintendent of Financial Institutions, the President and Chief Executive Officer of the Canada Deposit Insurance Corporation, and the Commissioner of the Financial Consumer Agency of Canada.

This would provide the Minister with the views of federal financial sector regulators regarding potential impacts on the financial sector and consumers, and support coordination across financial sector regulators to ensure actions are aligned.

The Minister would be required to report regularly to Parliament should she use the authority to increase the deposit insurance limit.

Specifically, the proposed legislative amendments would require the Minister to publish a report and table it in Parliament on a monthly basis during the period in which the deposit insurance limit is raised.

Finally, the Minister would be required to undertake a review of these amendments after this time-limited authority lapses.

Specifically, the proposed legislative amendments would require the Minister to undertake and publish the results of a review of the amendments after April 30, 2024, which is the date until which the Minister would have the authority to increase the deposit insurance limit.

Q. Why do the proposed amendments include a provision on the Canada Deposit Insurance Corporation entering into contracts related to deposit insurance?

A. Deposit insurance is one element of Canada's financial system stability framework. It contributes to public confidence in the financial system by protecting depositors' savings in the unlikely event that a deposit-taking institution fails.

Another financial stability tool is the Financial Administration Act whichprovides the Minister of Finance with authorities to take extraordinary measures where, in the Minister's opinion, they are necessary to promote the stability or maintain the efficiency of the financial system in Canada. The Minister may exercise this authority with the Governor in Council's authorization.

The proposed legislative amendments clarify that the Canada Deposit Insurance Corporation may administer contracts related to deposit insurance entered into with any entity by the Minister under section 60.2 of the Financial Administration Act.

They would clarify that the Canada Deposit Insurance Corporation has the authority to administer contracts related to deposit insurance on behalf of the Minister, in the unlikely event that the Minister needed to exercise those authorities in the future

Improving the Recourse Processes for Employment Insurance Appeals (Employment Insurance Board of Appeal)

Q. What legislative changes are being proposed?

A. Legislative changes to the Employment Insurance (EI) recourse process are being proposed to:

• Establish the EI Board of Appeal to replace the Employment Insurance Section of the General Division of the Social Security Tribunal. This Board of Appeal will be composed of regionally dispersed Members and will be a tripartite decision-making model. ; and
• Eliminate the requirement for leave to appeal EI decisions at the Appeal Division of the Social Security Tribunal.

Q. What is the EI Board of Appeal?

A. The EI Board of Appeal would become responsible for hearing first-level EI appeals, which are currently heard by the Employment Insurance Section of the General Division of the Social Security Tribunal. Under the EI Board of Appeal, first level EI appeals will be heard by regionally dispersed part-time three-member decision-making panels. As a tripartite organization, the new EI Board of Appeal would represent the interests of government, workers and employers, helping put first-level EI appeal decisions back into the hands of those who pay into the EI system. Appeals of decisions made by the Board of Appeal will continue to be heard by the Appeal Division of the Social Security Tribunal.

The EI Board of Appeal will be composed of the Executive Head, up to six regional coordinators, part-time members appointed by the Governor in Council, and part-time members appointed by the Canada Employment Insurance Commission (Commission) from employer and worker communities in three equal numbers to the extent possible.

The Executive Head is to be appointed by the Governor in Council. This leadership position for the EI Board of Appeal will be responsible for the performance and management of regional coordinators, members and appeals.

The Executive Head will report on the performance of the EI Board of Appeal to the Commission through the Chairperson of the Commission.

The regional coordinators will also be appointed by the Governor in Council, and will assist the Executive Head in management and administrative duties, as well as be empowered to render some decisions for the efficient processing of appeals, limited to extensions and abandonment of appeals. Only tripartite panels of part-time members will be able to hear appeals and determine questions of law and facts in respect of them.

Q. Why were the legislative amendments for the creation of the EI Board of Appeal removed from the Budget Implementation Act, 2022, No. 1 (Bill C-19, Division 32)?

A. The Government is committed to ensuring that the EI appeals process is quick, easy, and client-centred. To ensure that changes to the appeal process are effective for clients, the Government committed to engaging with stakeholders to inform decision-making.

Stakeholders voiced concerns regarding the legislation in the Budget Implementation Act, 2022, No. 1 (Bill C-19, Division 32), during appearances at House of Commons' committees as well as through other channels.

As a result, the Minister of Employment, Workforce Development and Disability Inclusion committed to undertake further consultations and that new proposed legislation would be introduced in Fall 2022. In Summer 2022, the Government undertook another round of consultations with Canadians and stakeholder groups across Canada. Participants shared their views on the design of a new process to appeal an EI benefits' decision and how an EI appeal hearing takes place.

Q. Were any stakeholder consultations done prior to tabling this legislation?

A. In March 2017, the Minister of Families, Children and Social Development commissioned a comprehensive third party Review of the Social Security Tribunal. Extensive consultations were undertaken throughout the course of this Review including with Canadians citizens, labour groups, unions, employers, advocacy groups, the legal community, clients of the appeal process under the Social Security Tribunal, and client representatives. Focus groups were conducted in cities across the country, allowing for a diverse range of participants to identify opportunities for improvement and suggestions for change. The sessions focused on key discussion topics such as timeliness, accessibility and complexity, communication and interaction, and transparency.

Also as part of the Review, a number of interviews were held with individuals representing internal stakeholders, including the Commissioners for Workers and Employers, leadership of the Social Security Tribunal, Employment and Social Development (ESDC) and Service Canada officials, and the Administrative Tribunals Support Service of Canada (ATSSC).

Following this Review, the Government committed to working with stakeholders to shape the renewal of the EI appeal process. Engagement with key external stakeholders, including the Commissioners and representatives from the employers and workers' communities, were held in 2018 to examine recommendations, discuss other potential improvements, and inform options development.

These consultations helped to shape legislative amendments for the creation of the new EI Board of Appeal in the Budget Implementation Act, 2022, No. 1 (Bill C-19, Division 32). Stakeholders voiced concerns regarding the legislation in the Budget Implementation Act, 2022, No. 1 (Bill C-19, Division 32)during appearances at House of Commons' committees as well as through other channels. As a result, the Minister of Employment, Workforce Development and Disability Inclusion committed to undertake further consultations and that new proposed legislation would be introduced in Fall 2022.

In Summer 2022, the Government undertook another round of consultations with Canadians and stakeholder groups across Canada. Participants shared their views on the design of a new process to appeal an EI benefits' decision and how an EI appeal hearing takes place. These consultations have been a central part of developing the new legislation.

Q. Why has it taken so long to implement the EI Board of Appeal?

A. Reforms to the EI recourse process were originally expected to be implemented in April 2021. Due to a number of significant changes made to the EI program in response to the COVID-19 pandemic, a decision was made to defer EI-specific Social Security Tribunal reforms such as the implementation of the EI Board of Appeal.

Q. What is the difference between the legislation that is being tabled now and what was originally proposed as part of Budget Implementation Act, 2022, No. 1 (Bill C-19, Division 32)?

A. In summer 2022, roundtable sessions were held with stakeholders to review the main issues raised by stakeholders and parliamentarians, to examine possible solutions and to identify any remaining concerns of the proposed legislation. In parallel, consultations in the form of an online survey open to the public, including former EI appellants, were also conducted to review aspects of the EI appeal process.

The new proposed legislation ensures that appeal decisions are made by tripartite panels comprised in part of employer and worker representatives. It includes regional representation to ensure that appeal decisions are made by a panel of individuals with ties to the same region as the client so that the particular circumstances of local communities are taken into account. It also provides clients the right to choose between in-person, videoconference and telephone hearing format, except under prescribed circumstances.

These proposed legislative changes address concerns heard during the consultations.

Q. When will the EI Board of Appeal begin to hear cases?

A. The new EI recourse process changes will be implemented at a date to be fixed by Order in Council. Legislative and regulatory amendments must be made for the EI Board of Appeal to be implemented and start hearing appeals.

Q. Why is the Government reforming the EI appeals process?

A. During a 2017 third-party review of the Social Security Tribunal and subsequent consultations, stakeholders, especially worker groups, expressed a strong desire to return to regionally-based tripartite decision-making panels for first level EI appeals, similar to the previous Board of Referees prior to Social Security Tribunal.

The intent of the reforms introduced in this legislation is to return to a tripartite decision-making model for first level EI appeals. The tripartite nature of the recourse mechanism for first level EI appeals will ensure that appeal decisions are made by tripartite panels comprised in part of employer and worker representatives. It will include regional representation to ensure that appeal decisions are made by a panel of individuals with ties to the same region as the client so that the reality of local

communities are taken into account. It will also provide clients with their choice of hearing format, except under prescribed circumstances.

The creation of the EI Board of Appeal is the final measure of a suite of client-centric improvements to the recourse processes for the EI program following the 2017 review of the Social Security Tribunal.

Q. How does the introduction of the EI Board of Appeal change the EI appeal process?

A. Until the EI Board of Appeal is operational, the Employment Insurance Section of the Social Security Tribunal will continue to hear first level EI appeals. Should claimants or parties wish to appeal a decision regarding a claim for EI benefits, they may appeal that decision through a two-stage appeal process:

• First Level of Appeal to the Employment Insurance Section of the General Division of the Social Security Tribunal, where the General Division provides an impartial quasi-judicial process and hears appeals for the first time and weighs the evidence submitted, and comes to their own independent decision.
• Second Level of Appeal to the Appeal Division of the Social Security Tribunal, where the Appeal Division provides an impartial quasi-judicial process and determines whether the General Division made errors on specific grounds of appeal.

Challenges to Appeal Division decisions are determined by the Federal Court or the Federal Court of Appeal. Federal Court of Appeal decisions can also be challenged to the Supreme Court of Canada.

The EI Board of Appeal will replace the Employment Insurance Section of the General Division of the Social Security Tribunal for first-level EI appeals (except for Constitutional challenges, which will be heard by the Appeal Division of the Social Security Tribunal). The new EI recourse process changes will be implemented at a date to be fixed by Order in Council.

There will be a transition period to ensure a smooth transition, during which the new EI Board of Appeal and the existing Employment Insurance Section of the General Division of the Social Security Tribunal will run in parallel. During this transition period, appeals will be routed to the EI Board of Appeal or the existing Employment Insurance Section of the General Division of the Social Security Tribunal, depending on the stage of the appeal process for each respective appeal when the Board of Appeal comes into force.

Q. What is the cost of these changes?

A. While final costs are contingent upon the timing of the launch date of the tribunal, the costs for implementing the remaining changes should respect the initial Budget 2019 and 2019 off-cycle approved funding. To achieve this, it is expected that the costs could be up to $148.6 million over the first four years and $33 million ongoing.                                          

The increase in costs compared to current costs will be due to the following main cost drivers:

• The establishment of the EI Board of Appeal, including the recruitment, onboarding and training of approximately 400 EI Board of Appeal members;
• An anticipated increase in the volume of first-level EI appeals due to a simplified appeal process; and
• The elimination of the leave to appeal process for the second level of EI appeals, which is expected to increase the volume of appeals proceeding to the Appeal Division.

All costs will be charged to the EI Operating Account.

Canada Elections Act

Q. What are the current privacy requirements for federal political parties?

A. As a result of requirements introduced by the Government in 2018 to the Canada Elections Act (CEA), each party must have a privacy policy as a condition of registration. The CEA requires that the following six elements be included in the policy:

• a statement indicating the types of personal information that the party collects and how it collects that information.
• a statement indicating how the party protects personal information under its control.
• a statement indicating how the party uses personal information under its control and under what circumstances that personal information may be sold to any person or entity.
• a statement indicating the training concerning the collection and use of personal information to be given to any employee of the party who could have access to personal information under the party's control.
• a statement indicating the party's practices concerning:
• the collection and use of personal information created from online activity, and
• its use of cookies.
• the name and contact information of a person to whom concerns regarding the party's policy for the protection of personal information can be addressed.

Q. How does this proposal respond to the recommendations of the Chief Electoral Officer (CEO) following the 43rd and 44th general elections, as well as previous recommendations by the Privacy Commissioner?

A. The Government appreciates the recommendations made by the CEO, as well as the Privacy Commissioner, on improvements that can be made regarding a privacy regime for federal political parties.

We have listened and heard that more needs to be done. That is why the Government is taking another step to protect voters' personal information fairly and consistently across the country.

Q. Is the Government of Canada trying to avoid having more demanding privacy requirements than provincial laws demand?

A. The Government of Canada is committed to raising the bar on the privacy regime for federal political parties in an incremental and appropriate way, continuing our work that began in 2018.

Q. How does this approach respect provincial jurisdiction?

A. The Government of Canada respects that provinces and territories have jurisdiction to legislate with respect to the collection, use, disclosure, and retention of personal information by organizations in their province.

At the same time, the application of multiple regimes across the country would create a confusing patchwork of rules and regulations for federal political parties that are registered or eligible to be registered under the CEA, where the rights of voters and the obligations of federal political parties could vary. The Government's intention is to establish a national, uniform regime for federal political parties governing personal information regardless of they are operating in Canada.

Q. How will a national privacy regime help federal political party volunteers and workers carry out their work?

A. Having a national, uniform regime governing personal information will permit federal political parties to engage and communicate with Canadians fairly, effectively, and efficiently across the country. This means that the way they use, collect, disclose, and retain personal information will follow the same rules regardless of where they are engaging Canadians.

Q. What kind of privacy requirements is the Government considering as part of a national, uniform regime for federal political parties?

A. As part of the Government's ongoing work to strengthen our democratic institutions, we are actively considering privacy requirements to the extent they are appropriately balanced with the need for federal political parties to participate in public affairs by endorsing one or more of its members as candidates and supporting their election to the House of Commons.