Bill C-69 – An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024 (2025)

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1(a) - Short-Term Rentals

Overview

This measure would deny income tax deductions (e.g., capital cost allowance, interest, insurance, and utilities) on income from a non-compliant short-term rental. As such, the gross rents earned from the operation of a non-compliant short-term rental would be subject to income taxation, with no offsetting deductions. This is intended to support the work of provinces and municipalities that have restricted the short-term rental of residential property.

A short-term rental is defined as a residential property that it is offered for rent for a period of less than 90 consecutive days. A non-compliant short-term rental would be a short term rental that operates in an area where it is not permitted or that does not comply with the required licensing, permitting or registration requirements. Accordingly, the proposed measure would be relevant to short-term rentals in provinces or municipalities that either prohibit short-term rentals or require short-term rentals to have a license, permit or registration.

This measure would apply to expenses incurred on or after January 1, 2024. A transitional rule would allow a taxpayer's short-term rental to become compliant with applicable licensing, permitting or registration requirements by December 31, 2024, in which case the new rule would not apply to deny expenses during the taxpayer's 2024 taxation year.

Key Messages

• The Government supports the work of provinces and municipalities that have restricted the short-term rental of residential property.
• This measure would deny income tax deductions for short-term rentals operated in provinces and municipalities that have prohibited such activities or where short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.
• Removing the ability to claim these deductions supports the work of provinces and municipalities in regulating the short-term rental market and would result in greater compliance with provincial and municipal laws.
• The measure provides a meaningful incentive for owners of short-term rentals to return their properties to the long-term market.

Questions & Answers

Q. What does this proposed measure do?

A. The measure would deny income tax deductions for short-term rentals operated in provinces and municipalities that have prohibited such activities, or where short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.

Q. What is a short-term rental under this proposed measure?

A. A short-term rental is a residential property that is rented or offered for rent for a period of less than 90 consecutive days. A residential property is all or any part of a house, apartment, condominium unit, cottage, mobile home, trailer, houseboat or other property, the use of which is permitted for residential purposes under the applicable laws of the province or municipality in which the residential property is located.

Q. Would the proposed measure deny income tax deductions for any short-term rental of less than 90 consecutive days?

A. No. The measure would only deny the income tax deduction for short-term rentals that do not comply with the relevant provincial or municipal laws. For example, the proposed measure would not apply to a short-term rental for 30 consecutive days if a short-term rental for 30 consecutive days is permitted under the relevant provincial and municipal laws.

Q. Would the expense denial rule apply in cases of breaches of other regulations for short-term rentals, such as a requirement to have a certain number of working smoke detectors?

A. No. The rule would apply only in cases of short-term rentals operated in provinces and municipalities that have prohibited such activities, or where short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.

Q. When is the measure proposed to come into effect?

A. The measure would apply to expenses incurred after 2023.

Q. Is any transitional relief available to allow short-term rental operators to bring themselves into compliance?

A. Yes. a short-term rental of a person or partnership would be deemed not to be a non-compliant short-term rental for the person or partnership's 2024 taxation year if the short-term rental is located in a province or municipality that requires registration, a license or a permit to operate and the short-term rental complies with all registration, licensing and permit requirements by December 31, 2024.

Q. In what jurisdictions would this measure apply?

A. The measure is contingent upon a province or municipality enacting rules that prohibit short-term rentals or require a licence, permit or registration for the operation of a short-term rental within that respective jurisdiction. We understand that in all provinces at either the provincial or municipal level, governments have enacted such rules, or are in the process of enacting such rules.

Q. How many housing units would this measure impact?

A. It is difficult to firmly determine the number of housing units that have been converted to short-term rentals and that are not compliant with existing provincial or municipal requirements.

Some provinces and municipalities have only recently began the process of establishing regimes that require registration and/or licencing and permitting. That said, the Department is aware of one 2020 study that estimated that there were approximately 18,900 such units being operated in Montreal, Toronto and Vancouver. Another 2023 study estimated that there were approximately 16,000 such units in British ColumbiA. It is reasonable to expect that there are tens of thousands of such units operating across CanadA. The new digital platform reporting rules, that were enacted as Part XX of the Income Tax Act, apply as of January 1, 2024. The new digital platform reporting rules should help provide a clearer picture as to the level of this activity.

Q. How much revenue does the government expect to raise from this measure?

A. The government's goal is to encourage the return of non-compliant short-term rentals to the long-term housing supply. This measure is not expected to generate significant revenue.

1(b) - International Shipping

Overview

Under international tax norms, income from international shipping is generally not subject to income tax. Canada's approach to taxing international shipping income is generally consistent with these international norms. Canada's current exemption in the Income Tax Act is available to:

• non-residents whose home countries offer a reciprocal exemption for Canadian companies; and
• shipping companies that are managed from Canada, provided they are incorporated in a foreign jurisdiction with a reciprocal exemption and meet certain additional requirements.

The proposed Global Minimum Tax Act also generally excludes international shipping income from the 15-per-cent minimum tax. It would implement the Pillar Two Global Anti-Base Erosion (GloBE) rules of the Organisation for Economic Co-operation and Development/Group of 20 (OECD/G20) Inclusive Framework on Base Erosion and Profit Shifting's two-pillar multilaterally agreed solution for international tax reform. In line with the GloBE model rules, a key requirement for obtaining the exclusion for international shipping income in the proposed Global Minimum Tax Actis that the "strategic or commercial management" of a multinational group's international shipping operations must be located in the same jurisdiction where its income is booked.

Canadian shipping groups that have structured their operations to align with the design of Canada's current international shipping exemption in the Income Tax Act would generally not be able to benefit from the exclusion in the proposed Global Minimum Tax Act since these shipping groups generally book their international shipping income in the foreign jurisdiction where their subsidiaries are incorporated (and deemed to be resident by Canada's current rules) rather than where they are managed (i.e., Canada).

This measure would provide that the exemption for international shipping income in the Income Tax Act be made generally available to Canadian resident companies. These updates would allow shipping companies with management in Canada to continue their operations in line with both the international shipping exclusion in the proposed Global Minimum Tax Actand the exemption in the Income Tax Act. These updates would also effectively remove the incentive that the current tax rules create for shipping companies managed in Canada to incorporate and carry on certain international shipping activities in foreign jurisdictions.

This measure would apply to taxation years that begin on or after December 31, 2023 (to align generally with the effective date of the proposed Global Minimum Tax Act).

Key Messages

• This measure would update Canada's income tax rules for international shipping income to ensure that they are consistent with international norms. It also improves consistency between the provisions in the Income Tax Act and the proposed Global Minimum Tax Act.
• Accessing Canada's current tax exemption for international shipping income requires international shipping companies managed in Canada to incorporate outside of CanadA. This requirement creates two issues. First, it will cause technical issues for international shipping companies (managed in Canada) that will be in-scope of the proposed Global Minimum Tax Act. Second, it creates an incentive for these shipping companies to carry out certain activities in foreign jurisdictions.
• These updates to the tax rules would make the exemption for international shipping income in the Income Tax Act generally available to Canadian resident companies. This would ensure that international shipping companies managed in Canada can obtain both Canada's existing tax exemption and the exclusion in the proposed Global Minimum Tax Act. It would also remove the incentive for these companies to incorporate in foreign jurisdictions.
• Several large international shipping companies, and their tax advisors, were consulted during the development of this measure. This measure responds to their concerns.

Questions & Answers

Q. Why does Canada have an income tax exemption for international shipping income?

A. Under international tax norms, income from international shipping is generally not subject to income tax. Canada's approach to taxing international shipping income seeks consistency with these international norms.

Q. How do the tax systems of other countries treat international shipping income?

A. Most countries either do not tax international shipping income or they tax it at a low rate. Some countries exempt international shipping income from income tax (e.g., Singapore), while others subject it to tonnage taxes (as an alternative to income taxes) that typically result in a very low overall tax rates (e.g., United Kingdom). The United States has both a tonnage tax regime and an income tax exemption for international shipping income.

Q. What is Pillar Two?

A. Pillar Two refers to the internationally agreed framework for a 15-per-cent global minimum tax known as the Global Anti-Base Erosion (GloBE) rules. It is part of the two-pillar multilateral solution for international tax reform agreed to by Canada and 138 other countries. This plan was developed by the Organisation for Economic Co-operation and Development/Group of 20 (OECD/G20) Inclusive Framework on Base Erosion and Profit Shifting

Canada's proposed Global Minimum Tax Act would implement the Pillar Two GloBE rules. It would be effective for fiscal years that begin on or after December 31, 2023. This proposed Act excludes international shipping income from the 15-per-cent global minimum tax, subject to certain conditions, in line with the internationally agreed framework (see A7 for more detail).

Q. Why does Pillar Two contain an exclusion for international shipping income?

A. Characteristics of the international shipping industry, such as its capital intensive nature, level of profitability and long economic life cycle has led countries to introduce alternative or supplementary taxation regimes for this industry that result in low or no taxation. As such, a multilateral agreement was reached to exclude international shipping income from the scope of the Pillar Two global minimum tax rules.

Q. Why are changes to Canada's international shipping exemption being proposed now?

A.Canadian shipping groups that have structured their operations to align with the design of Canada's current international shipping income tax exemption will generally not be able to benefit from the exclusion in the proposed Global Minimum Tax Act because of the technical differences between the designs of the two rules.

This proposal would update the rules in the Income Tax Act so that shipping companies with management in Canada can continue their operations while meeting the requirements of both the international shipping exclusion in the proposed Global Minimum Tax Act and the exemption in the Income Tax Act.

Q. How is Canada's current income tax exemption for international shipping designed?

A. Canada's current exemption is available to non-residents whose home countries offer a reciprocal exemption for Canadian companies. The exemption is also available to shipping companies that are managed from Canada, provided they meet certain requirements and are incorporated in a foreign jurisdiction offering a reciprocal exemption.

Q. How is the Pillar Two exclusion for international shipping income designed?

A. The Pillar Two GloBE model rules (reflected in Canada's proposed Global Minimum Tax Act) generally exclude a constituent entity's international shipping income (as calculated under those rules) from the imposition of top-up tax under Pillar Two when certain requirements are met. A key requirement of the exclusion is that the "strategic or commercial management" of a multinational group's international shipping operations must be located in the same jurisdiction where its income is booked. This requirement is a guardrail to ensure the Pillar Two exclusion applies only where a multinational group has a significant economic presence in the jurisdiction in which it books its international shipping income.

Q. Why can't Canadian-managed shipping groups that are structured to align with Canada's international shipping income tax exemption qualify for the similar exclusion under Pillar Two?

A. Generally, a corporation's income is booked in the jurisdiction in which it is resident for tax purposes. Shipping groups managed in Canada generally book their income in the jurisdiction in which they are incorporated since that is where Canada's current rules deem them to be resident. However, the Pillar Two exclusion is only available to corporations managed from Canada if they book their income in CanadA. As a result, international shipping groups managed from Canada that have structured to align with Canada's current exemption would not qualify for the exclusion under Pillar Two because their income is booked in another country.

Q. How would this measure ensure greater consistency between Canada's international shipping income tax exemption and the similar exclusion under Pillar Two?

A. By making Canada's exemption for international shipping income in the Income Tax Act generally available to Canadian resident corporations, shipping groups managed in Canada could restructure to carry on their international shipping activities through Canadian-incorporated entities and book their income in Canada as Canadian residents. This would prevent inconsistent results between Canada's exemption and the Pillar Two exclusion.

Q. Why are international shipping companies managed in Canada required to incorporate in foreign jurisdictions to benefit from Canada's current exemption?

A. In 1991, Canada's international shipping exemption was amended to deem shipping companies managed in Canada but incorporated elsewhere to be residents in the country in which they were incorporated. This change aimed to allow Canadian-managed companies to compete on equal terms in international markets, provided that the foreign jurisdiction offered reciprocal relief to Canadian residents. Consequently, international shipping companies managed in Canada have typically organized their businesses as foreign-incorporated entities to align with these rules.

Q. When would this measure apply?

A. This measure would apply to taxation years that begin on or after December 31, 2023. This generally aligns with the effective date of the proposed Global Minimum Tax Act implementing Pillar Two in Canada.

Q. What is the fiscal cost associated with the exemption for international shipping income?

A.This measure is not expected to result in a net fiscal cost to the Government. Available data suggests that the direct fiscal cost from the exemption of international shipping income that is currently booked and taxed in Canada is negligible. Furthermore, this measure may encourage shipping companies to restructure their operations in ways that could generate tax revenue for Canada.

1(c) - Tax Treatment of Indigenous Child and Family Services Settlement

Overview

The First Nations Child and Family Services, Jordan's Principle, and Trout Class Settlement Agreement, approved by the Federal Court on October 24, 2023, relates to discrimination in the provision and funding of child and family services, essential services and products to First Nations children. It provides for compensation (a total of $23.34billion) to be distributed for the benefit of the class members through trusts.

In the settlement agreement, the government committed to make best efforts to exempt the income of the trusts established under the settlement agreement from federal taxation. The government also committed to make best efforts to ensure that a class member's receipt of payments would not be considered taxable income and to ensure that federal social benefits and social assistance benefits for class members would not be negatively impacted by payments received pursuant to the settlement agreement.

This measure would amend the Income Tax Act to exclude the income of the trusts that were established pursuant to the settlement agreement from taxation. This amendment would also ensure that payments received by class members as beneficiaries of the trusts would not be included when computing income for federal income tax purposes.

This measure would apply to the 2024 and subsequent taxation years.

Key Messages

• This measure implements the government's intentions in the First Nations Child and Family Services, Jordan's Principle, and Trout Class Settlement Agreement to exempt the income of the trusts established under the settlement agreement from income tax.
• This measure would also ensure that payments from the trusts to beneficiaries would not be included in class members' income for tax purposes and would also not impact income-tested benefits administered through the tax system.

1(j) - Clean Technology Manufacturing Investment Tax Credit

Overview

This measure would implement the Clean Technology Manufacturing Investment Tax Credit (CTM‑ITC), a new refundable tax credit equal to 30percent of the costs of investments by corporations in new machinery and equipment used for clean technology activities.

The CTM-ITC would be available for machinery and equipment used to manufacture or process key clean technologies and extract, process, or recycle key critical minerals, including:

• extraction, processing, or recycling of six qualifying minerals essential for clean technology supply chains: lithium, cobalt, nickel, graphite, copper, and rare earth elements;
• manufacturing of renewable or nuclear energy equipment;
• processing or recycling of nuclear fuels and heavy water;
• manufacturing of grid-scale electrical energy storage equipment;
• manufacturing of zero-emission vehicles; and
• manufacturing or processing of certain upstream components and materials for the above activities, such as cathode materials and batteries used in electric vehicles.

The CTM-ITC would apply to property that is acquired and becomes available for use on or after January 1, 2024.

The credit would be gradually phased out starting in 2032 and would no longer be available after 2034.

Key Messages

• The Clean Technology Manufacturing Investment Tax Credit would support Canadian companies in the manufacturing and processing of clean technologies, and in the extraction and processing of critical minerals.
• The tax credit would be available retroactively for eligible investments in property that is acquired and becomes available for use on or after January 1, 2024.
• Significant consultations with stakeholders have occurred since the government announced the Clean Technology Manufacturing Investment Tax Credit in Budget 2023.

Questions & Answers

Q. Why is the government introducing this credit?

A. The Clean Technology Manufacturing Investment Tax Credit will support Canadian companies in the manufacturing and processing of clean technologies, and in the extraction and processing of critical minerals, ensuring our businesses remain competitive in major global industries and supporting the supply chains of our allies around the world.

More generally, the credit is part of a suite of clear and predictable investment tax credits that will help Canada transition to clean energy.

These credits anchor a made-in-Canada plan that responds to the incentives offered by the U.S. Inflation Reduction Act and will position the country as a leader in the growing and highly competitive global clean economy.

Q. What technologies would be eligible for the credit?

A. Eligible activities for the Clean Technology Manufacturing Investment Tax Credit would include:

• certain extraction, processing, and recycling of six qualifying materials, which are essential for clean technology supply chains: lithium, cobalt, nickel, graphite, copper, and rare earth elements;
• manufacturing of certain renewable energy equipment (solar, wind, water, or geothermal);
• manufacturing of nuclear energy equipment;
• processing or recycling of nuclear fuels and heavy water;
• manufacturing of nuclear fuel rods;
• manufacturing of electrical energy storage equipment used to provide grid-scale storage or other ancillary services;
• manufacturing of equipment for air- and ground-source heat pump systems;
• manufacturing of zero-emission vehicles, including conversions of vehicles;
• manufacturing of batteries, fuel cells, recharging systems, and hydrogen refuelling stations for zero-emission vehicles;
• manufacturing of equipment used to produce hydrogen from electrolysis; and
• manufacturing or processing of certain upstream components and materials for the above activities, such as cathode materials and batteries used for electric vehicle batteries.

1(k) - Tax Treatment of Concessional Loans as Government Assistance

Overview

Under the Income Tax Act, if a taxpayer receives government assistance in the course of earning income from a business or property, the amount of that assistance may reduce the amount of a related expense or the cost or capital cost of a related property or may be included in the taxpayer's income. The amount of assistance may also reduce the amount of an expenditure on which an associated investment tax credit is based.

Historically, non-forgivable loans from public authorities were generally not considered government assistance. This position extended to concessional loans (meaning loans that do not bear interest or that bear interest at below-market rates) from public authorities. However, in a 2021 decision, the Tax Court of Canada held that the full principal amount of a concessional loan was government assistance. This decision was affirmed by the Federal Court of Appeal in 2022.

This measure would amend the Income Tax Act to provide that bona fide concessional loans with reasonable repayment terms from a government, municipality or public authority would generally not be considered government assistance.

This amendment would apply in respect of loans made on or after January 1, 2020.

Key Messages

• If a business receives government assistance, the amount of that assistance may be included in the taxpayer's income and may also reduce eligibility for tax credits.
• Historically, non-forgivable loans from public authorities were generally not considered government assistance. However, a recent court case determined that the full principal amount of a concessional loan was government assistance.
• This measure would amend the Income Tax Act to provide that bona fide concessional loans with reasonable repayment terms from a government, municipality or public authority would generally not be considered government assistance.
• The amendment would apply in respect of loans made on or after January 1, 2020. This would ensure that concessional loans issued during the pandemic or to finance the acquisition of assets eligible for clean investment tax credits would generally not be treated as government assistance.

Questions & Answers

Q. Why does this amendment apply retroactively?

A. The legislative amendment would apply to concessional loans made on or after January 1, 2020. This ensures that concessional loans issued during the pandemic or to finance the acquisition of assets eligible for clean investment tax credits would generally not be treated as government assistance.

1(l) - The Alternative Minimum Tax Reform

Overview

The Alternative Minimum Tax (AMT) is a parallel tax calculation that allows fewer deductions, exemptions, and tax credits than under the ordinary income tax rules. A taxpayer owes either the AMT or regular tax, whichever is largest. This is intended to ensure that high-income Canadians pay a minimum amount of tax.

Budget 2023 and Budget 2024 announced the government's intention to reform the AMT to better target high-income individuals and ensure that they are paying their fair share of tax.

This measure would implement that reform, including the following changes:

• Increase the minimum tax rate from 15percent to 20.5percent;
• Increase the minimum tax exemption amount from $40,000 to $173,205 in 2024 (the start of the fourth federal income tax bracket), and this amount would be indexed to inflation, to better protect lower and middle-income individuals from the AMT;
• Include one hundredpercent of most capital gains in income, as opposed to 50percent under regular tax (or two thirds, under the measure announced in Budget 2024); and
• Disallow 50percent of a broad range of tax credits and deductions to limit the tax relief provided by a larger number of tax preferences. Eightypercent of the Charitable Donation Tax Credit would be allowed under the AMT.

The proposed legislation exempts several types of trusts from the AMT.

The proposed amendments to the Alternative Minimum Tax would apply to tax years that begin on or after January 1, 2024.

Key Messages

• Currently, some high-income Canadians can shelter large amounts of their income and pay little to no tax through the excessive use of deductions, tax credits and exemptions. The Alternative Minimum Tax reform announced in Budget 2023 will go further towards ensuring that the wealthiest Canadians pay their fair share of tax by limiting the significant use these tax preferences.
• The Alternative Minimum Tax reform would raise the minimum tax rate from 15 per cent to 20.5percent and further limit the use of many credits, deductions, and exemptions. The minimum tax exemption amount would also increase more than fourfold, from $40,000 to $173,205 in 2024, to significantly increase the income level necessary to pay the minimum tax.
• The proposed reform to the Alternative Minimum Tax would more precisely target high income Canadians.
• Budget 2024 proposed several additional changes to the Alternative Minimum Tax reform, including allowing donors to claim 80percent of the Charitable Donation Tax Credit.

Questions & Answers

Q. Why do we need a minimum tax? Why is the regular tax system failing to tax wealthy Canadians?

A. A broad range of tax credits, deductions, and exemptions are available to Canadians to recognize individuals' ability to pay tax and to help improve the fairness of the tax system.

However, some high-income Canadians excessively use these tax preferences and as a result, significantly lower their tax bill to pay little to no tax. The Alternative Minimum Tax helps address this issue by allowing fewer preferences than under the regular tax rules to ensure that high-income Canadians contribute their fair share of tax.

Q. Why is the Alternative Minimum Tax exemption amount being raised if the government wants to increase the tax paid by high-income Canadians?

A. The Alternative Minimum Tax exemption is a deduction all Canadians can claim. The exemption allows Canadians to earn a certain level of income before they might owe additional tax. The current amount has not been changed since its introduction in 1986. The increase to the exemption from $40,000 to $173,205 in 2024 (and indexed to inflation thereafter) would account for decades of inflation and do more to ensure that the Alternative Minimum Tax is paid by high-income Canadians and not the middle-class.

Q. Why aren't all trusts exempt from Alternative Minimum Tax?

A. Trusts are also subject to the Alternative Minimum Tax so that high-income Canadians cannot use trusts to bypass the Alternative Minimum Tax and reduce their personal tax liability. Trusts that would be made exempt from the Alternative Minimum Tax include those that are less likely to be used to avoid the tax, such as certain commercial trusts and employee ownership trusts.

That is why Budget 2024 invited stakeholders to share their views on a proposed exemption from the Alternative Minimum Tax for Indigenous settlement and community trusts to ensure that funds intended to support Indigenous communities are not impacted by the Alternative Minimum Tax reform. This consultation would build on the fall 2023 consultation by seeking feedback on draft legislative amendments that incorporate stakeholder comments.

Q. How would people determine if they owe Alternative Minimum Tax?

A. Taxpayers would continue to calculate their tax liabilities under regular tax and under the Alternative Minimum Tax, and would owe whichever is larger. Most Canadians would be able to quickly determine that they do not owe Alternative Minimum Tax because their income is below the $173,205 exemption amount. Canadians with income above $173,000 would owe additional tax only if they derive very large benefits from exemptions, deductions, and credits. The Alternative Minimum Tax applies in very limited circumstances and will affect few Canadians.

Q. Would deductions for business expenses be restricted under the Alternative Minimum Tax?

A. Deductions used to compute net self-employment income would be fully allowed, with the exception of those limited under the current minimum tax. Loss carryovers from other years would be limited.

Q. Why is the government only allowing Canadians to claim half of most credits and deductions? Why is the government targeting credits and deductions that are not typically used by high-income Canadians to reduce their tax bill?

A. The government is not proposing to change the regular treatment of credits and deductions – the reform announced in Budget 2023 is limited to the few circumstances where the Alternative Minimum Tax applies.

The Alternative Minimum Tax limits the tax relief provided by a broad range of tax credits, deductions and exemptions to make it harder for some high-income Canadians who claim very large tax preferences to avoid paying their fair share of tax. Meanwhile, the significant increase to the exemption amount will help ensure that middle-class Canadians do not pay additional tax due to these changes.

These amendments allow full deductions for social assistance, workers' compensation and the Guaranteed Income Supplement (income that is non-taxable) typically claimed by lower-income Canadians, as well as the federal logging tax credit and 80percent of the Charitable Donation Tax Credit.

Q. Why is the Alternative Minimum Tax rate being increased from 15%?

A. The previous minimum tax rate was already at 15percent and many high-income Canadians still paid less than 15percent of their income in taxes. A higher minimum tax rate will be more effective at limiting the benefit high-income Canadians receive from exemptions, deductions, and tax credits.

Q. Why is the government targeting deductions and expenses such as the disability supports deduction?

A. In the limited circumstances in which the new Alternative Minimum Tax applies, the tax relief provided by most credits and deductions will be reduced by 50percent. The significant increase to the exemption amount would make it unlikely that Canadians claiming ordinary amounts of credits and deductions would owe additional tax under the Alternative Minimum Tax.

Q. How does the Alternative Minimum Tax carry forward provide tax relief from the Alternative Minimum Tax?

A. Those who are subject to the Alternative Minimum Tax can generally credit the additional tax paid as a result of the Alternative Minimum Tax against the amount by which regular tax exceeds Alternative Minimum Tax in a later year, for up to seven years. This offers tax relief in future years to some filers who owe Alternative Minimum Tax in one year.

Q. The government announced that it is considering exempting additional trusts, namely, Indigenous settlement trusts, from Alternative Minimum Tax. What trusts will be made exempt and when?

A. Budget 2024 invited stakeholders to share their views on an exemption from the Alternative Minimum Tax for Indigenous settlement and community trusts. This includes trusts created as part of an act, treaty or settlement agreement between Canada and an Indigenous community, as well as trusts established for the benefit of Indigenous communities to help support their economic development.

This consultation is ongoing and would build on the fall 2023 consultation by seeking feedback on draft legislative amendments that incorporate stakeholder comments. Following this consultation, further legislation would need to be tabled by the government to implement this proposed exemption.

Q. Given that an exemption is needed to ensure Indigenous settlement and community trusts are not subject to the Alternative Minimum Tax, does this mean that these trusts are not normally tax exempt under the regular tax system?

A. Most trusts that benefit Indigenous communities are not exempt from tax but are able to operate so that they do not typically owe tax. The proposed exemption from the Alternative Minimum Tax for Indigenous settlement and community trusts will help ensure that this outcome is maintained.

Q. What is the rationale for the specific amendment relating to charitable donations?

A. The government recognizes the very important role that charities play in our society. Charities provide vital services to Canadians, including the most vulnerable that are currently struggling with the increased cost of living.

That is why the government is not proposing to change the general tax treatment of charitable donations – the recent reform that was announced in Budget 2023 is limited to the few circumstances where the Alternative Minimum Tax applies.

When a charitable donor owes Alternative Minimum Tax, 70percent of capital gains on donations of publicly listed securities will remain exempt from tax, and the donor will be able to claim 80percent of the Charitable Donation Tax Credit as announced in Budget 2024. Donors can also delay claiming their donations for up to five years after the gift is made, and donated amounts can be shared between spouses. It is also proposed that graduated rate estates, which are often used to make large charitable gifts, be exempt from the Alternative Minimum Tax

Most donors and donations to registered charities will not be impacted by the changes. Overall, the new Alternative Minimum Tax rules are expected to have a relatively limited impact on charitable donations, and an even smaller effect on overall charitable revenue.

Even with the changes to the Alternative Minimum Tax, Canadian tax incentives for charitable donations are expected to continue to be amongst the most generous in the world.

Q. Why is the government allowing individuals to claim deductions for social assistance, workers' compensation, and the Guaranteed Income Supplement, but not other tax credits and deductions that are not typically used by high-income Canadians to reduce their tax bill?

A. Benefit payments such as social assistance, workers' compensation and the Guaranteed Income Supplement provide much needed support for Canadians in challenging circumstances.

These benefits are tax-free payments and will remain tax-free under the Alternative Minimum Tax by fully allowing the deductions for these payments.

Q. How will the changes to the Alternative Minimum Tax reform announced in Budget 2024 impact the previously announced $3billion increase in revenue generated by the reform?

A. The proposed changes to the AMT reform are expected to reduce AMT revenue by approximately $620million over five years, and roughly $100million ongoing. This estimate accounts for the changes to the AMT reform announced in Budget 2024 as well as the changes to the regular capital gains inclusion rate.

Q. Budget 2023 previously announced that the Alternative Minimum Tax reform would generate $3billion in revenue over five years. How will a higher capital gains inclusion rate impact these estimates?

A. Fewer Canadians are expected to owe the AMT because of the introduction of a higher capital gains inclusion rate and the revisions to the AMT reform announced in Budget 2024. While AMT revenue is expected to fall as a result, the higher regular capital gains inclusion rate would lead to more tax paid over time. This is because regular tax increases are permanent, while additional tax paid because of the AMT can generally be used to lower an individual's regular tax bill in future years using the AMT carry forward.

1(m) - Enhancing the Home Buyers' Plan

Overview

The Home Buyers' Plan (HBP) helps eligible home buyers save for a down payment by allowing them to withdraw up to $35,000 from a Registered Retirement Savings Plan (RRSP) to purchase or build their first home, or a home for a specified disabled individual, without having to pay tax on the withdrawal. Eligible home buyers purchasing a home jointly may each withdraw up to $35,000 from their own RRSP under the HBP.

Amounts withdrawn under the HBP must be repaid to an RRSP over a period not exceeding 15 years, starting the second year following the year in which a first withdrawal was made. Otherwise, amounts due for repayment within a specific year are taxable as income for that year.

The measure proposes to increase the HBP withdrawal limit from $35,000 to $60,000. This increase would also apply to withdrawals made for the benefit of a disabled individual. This change would apply to the 2024 and subsequent calendar years in respect of withdrawals made after Budget Day.

The measure also proposes to temporarily defer the start of the 15-year repayment period by an additional three years for participants making a first withdrawal between January 1, 2022 and December 31, 2025. Accordingly, the 15-year repayment period would start the fifth year following the year in which a first withdrawal was made.

Key Messages

Increasing the withdrawal limit

• To provide first-time home buyers with greater access to their Registered Retirement Savings Plan savings to buy a home, the measure proposes to increase the Home Buyers' Plan withdrawal limit from $35,000 to $60,000.

Temporary repayment relief

• To help recent and upcoming homeowners deal with the high cost of housing, this measure proposes to temporarily extend the grace period during which homeowners are not required to repay their Home Buyers' Plan withdrawals to their RRSP by an additional three years.

Questions & Answers

Increasing the withdrawal limit

Q. Won't the Home Buyers' Plan limit increase just stimulate housing demand and result in higher prices?

A. Increasing the withdrawal limit of the Home Buyers' Plan represents a targeted approach that will help first-time home buyers to make a down payment on the purchase of a home. First-time home buyers represent a subset of all home buyers and only a fraction of them will have the capacity to take advantage of the increased withdrawal limit, in particular when considering the introduction of the Tax-Free First Home Savings Account.

Q. How many individuals are expected to benefit from the increase in the withdrawal limit?

A. More than 13,000 first-time home buyers are expected to benefit from the proposed increase in the Home Buyers' Plan withdrawal limit over the next 5 years.

Q. Why is the government increasing the HBP withdrawal limit when it has just introduced the first Tax-Free First Home Savings Account (FHSA)?

A. Home prices have gone up significantly across the country, and particularly in Canada's major cities. This increase in the withdrawal limit will help many Canadians saving for a down payment in less affordable housing market.

The increase is also expected to support individuals buying or building or a home for a specified disabled individual or non-first-time home buyers experiencing the breakdown of a marriage or common-law partnership. Individuals can use the Home Buyers' Plan for these special circumstances, but not the FHSA.

Temporary repayment relief

Q. Can you give an example of how the new grace period would work?

A. Under the current rules, an individual who participated in 2022 would be required to start making minimum HBP repayments in 2024 and would have until 2038 to fully repay. Under this measure, the individual would not be required to start making minimum HBP repayments before 2027 and would have until 2041 to fully repay.

Q. What about individuals who have started to make repayments to their RRSP in 2024?

A. Under the current rules, any contributions made to an RRSP before the start of the 15-year repayment period that an individual wishes to designate as HBP repayments (i.e., "pre-payments") would be credited against the amount due on the first year of the 15-year repayment period. Any excess pre-payments (i.e., above the required first-year repayment) would reduce the HBP balance when calculating the required repayment due in the next year. Alternatively, an individual could deduct these contributions as regular RRSP contributions provided that they have RRSP contribution room.

• For example, Guillaume withdrew $18,000 under the HBP in 2022. In March and April 2024 he contributed $100 per month to his RRSP ($200 total) because his 15-year repayment period started in 2024 and he anticipated having to repay $1,200 to his RRSP this year ($18,000 divided by 15 years).
• After April, he stopped contributing to his RRSP because of the Budget 2024 announcement and because he had other financial obligations to meet.
• When filing his 2024 tax return (in 2025), Guillaume could designate the $200 as an HBP repayment, in which case his next required repayment (in 2027) would be $1,000 ($1,200 minus the $200 pre-payment).
• Alternatively, Guillaume could deduct the $200 as a regular RRSP deduction (assuming he has the contribution room). This would reduce his tax liability for the year. His next required repayment (in 2027) would be $1,200.

Q. How many individuals are expected to benefit from the temporary repayment relief?

A. The temporary repayment relief is expected to provide support to more than 275,000 individuals, including about 155,000 individuals who have already purchased a home. This is expected to support significantly more individuals than the increased limit because it applies to all HBP participants (vs. only those who have the capacity to use the extra room) and retroactively (the number of HBP participants is expected to decline going forward as people move to the new Tax-Free First Home Savings Account).

1(n) - Penalty in Respect of Reportable and Notifiable Transactions

Overview

The Income Tax Act contains a general provision which provides that a person who fails to file or make a return or comply with certain specified provisions of the Income Tax Act is guilty of an offence, and liable to penalties up to $25,000 and imprisonment up to a year.

This measure would remove from the scope of this general penalty provision the failure to file an information return in respect of a reportable or notifiable transaction under the mandatory disclosure rules in the Income Tax Act. The mandatory disclosure rules include specific monetary penalties that apply in these circumstances, making the application of this general penalty provision unnecessary.

This amendment would be deemed to have come into force on June 22, 2023.

Key Messages

• The Income Tax Act contains a general provision which provides that a person who fails to file or make a return or comply with certain specified provisions of the Income Tax Act is guilty of an offence, and liable to penalties up to $25,000 and imprisonment up to a year.
• The Income Tax Act also contains specific monetary penalties for failure to file an information return in respect of a reportable or notifiable transaction.
• Given that specific monetary penalties apply where there has been a failure to file an information return in respect of a reportable or notifiable transactions, the application of the general penalty provision is unnecessary.
• This amendment proposes to remove from the scope of this general penalty provision the failure to file an information return in respect of a reportable or notifiable transaction.

Questions & Answers

Q. Why are these amendments being proposed?

A. Because the Income Tax Act contains specific monetary penalties for failure to file an information return in respect of a reportable or notifiable transaction, the application of the general penalty provision in these situations would be unnecessary.

1(o) - Employee Ownership Trust Tax Exemption

Overview

An Employee Ownership Trust (EOT) is a form of employee ownership where a trust holds shares of a corporation for the benefit of the corporation's employees. The Government proposed amendments to the Income Tax Act in Budget 2023 to govern EOTs and to facilitate their creation, which are included in Bill C-59.

This measure would provide a $10million exemption on capital gains realized upon a sale of a business to an EOT, provided that certain conditions are met. If multiple sellers sell shares to the EOT, they may all claim the exemption provided the total amount of gain exempted does not exceed $10million.

Notable features of this exemption include a requirement that the individual, or their spouse or common-law partner, had been actively engaged in the business on a regular and continuous basis for a minimum period of 24 months at any point prior to the sale and that immediately after the sale, and at least 75% of the beneficiaries of the EOT must be resident in CanadA.

The tax exemption would be available on qualifying sales between January 1, 2024 and December 31, 2026.

Key Messages

• This measure would exempt up to $10million in capital gains realized on the sale of a business to an Employee Ownership Trust.
• This would encourage owners to sell their business to their employees and help Canadians become employee-owners.
• This measure would apply to qualifying sales made between January 1, 2024 and December 31, 2026.
• This measure includes rules on which types of businesses can be sold, who is eligible to claim the exemption, and the tax consequences if a disqualifying event occurs after the sale.

Questions & Answers

Q. What does this measure achieve?

A. This measure encourages owners to sell their business to their employees and helps Canadians become owners in the businesses that they work for.

Q. How does this measure work?

A. An owner could receive an exemption on up to $10million in capital gains realized upon a qualifying business sale to an EOT. If multiple sellers sell to an EOT, they may each claim the exemption, but the maximum amount exempted cannot exceed $10million.

Q. When does this exemption expire?

A. This exemption would apply to qualifying sales between January 1, 2024 and December 31, 2026. The Department of Finance will monitor the creation of Employee Ownership Trusts. It will provide an assessment on the necessity of continuing this exemption when this 3-year period ends.

Q.Why are professional corporations excluded from this measure?

A. EOTs are intended to encourage broad-based employee ownership, in particular among middle class workers and in businesses with 20 employees or more. In many professional corporations, it is expected that decision-making would disproportionally rest with the professionals and that non-professionals would have little involvement.

Q. Are corporations eligible to claim the exemption?

A. No, a corporation cannot claim the exemption. This is consistent with capital gains incentives for EOTs in the U.K. and the U.S., which are also not provided to corporations.

Q. Are capital gains exempted through this measure included in calculating Alternative Minimum Tax for individuals who claimed the exemption?

A. Capital gains exempted through this measure will not be included in calculating Alternative Minimum Tax for individuals who claimed the exemption.

Q. Which individuals can claim the exemption?

A. An individual, or the spouse or common-law partner of such an individual, that has been actively and continuously engaged in the business for at least 24 months, at any point prior to the sale.

This requirement helps target the exemption to retiring business owners and serial entrepreneurs who have been significantly involved in the growth of their business. It also discourages intermediaries from purchasing a business, seeking short-term increases in business valuation, and selling to an EOT with limited commitment to employee ownership

Q. Why must 75percent of an EOT's beneficiaries be resident in Canada?

A. The exemption is provided to encourage business owners to transition ownership to their employees. This rule ensures that the vast majority of benefits that come from acquiring ownership, including profit distributions, accrue to Canadian workers and not foreign employees.

Q. What is the consequence of a disqualifying event?

A. If a disqualifying event occurs within 24 months after a business sale, the owner is not able to claim the exemption on the sale and is denied any exemption already claimed on capital gains realized upon the sale.

If a disqualifying event occurs after 24 months, the EOT is deemed to realize a capital gain equal to the total amount of exempt capital gains.

Q. What actions constitute a disqualifying event?

A. A disqualifying event occurs when an action occurs that causes an EOT to lose its status as an EOT. This can include loss of a controlling interest in a corporation that employs trust beneficiaries, improper profit distributions, or inclusion of ineligible beneficiaries. This can also occur if less than 50percent of the fair market value of the shares of a corporation owned by an EOT is attributable to assets that are used principally in an active business at the beginning of two consecutive tax years of the corporation. This can occur if, for example, a corporation primarily earns passive investment income.

Q. Can an individual also claim the Lifetime Capital Gains Exemption (LCGE) on a sale?

A. Yes, an individual can access both this exemption and the LCGE on the same sale of shares when they have a sufficiently large capital gain (and otherwise qualify for the LCGE).

Q. Will business sales to worker cooperatives be eligible for this exemption?

A. Budget 2024 proposed allowing sales made to worker cooperatives to qualify for the tax exemption and the tax changes announced in Budget 2023 for EOTs (i.e., the 10-year capital gains reserve and the shareholder loan and interest benefit rules). These provisions are not included in this legislation. More details will be published in the coming months.

Q. How many EOTs will be created as a result of this measure?

A. We anticipate that about 125 EOTs could be created by 2028-29 as a result of the actions taken by the government to support the creation of EOTs in this measure and in Bill C-59, but there is significant uncertainty surrounding these estimates.

(p) - Technical Amendments

Overview

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:

Many of the changes are 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. Other amendments correct drafting errors or clarify uncertainties, including typographical errors and differences between the English and French versions of the Income Tax Act.

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.

Key Messages

• This measure makes important technical changes to the Income Tax Act, many of which were requested by taxpayers or the Canada Revenue Agency.
• Tax legislation is extremely complex. It's necessary for the government to do the work of making timely updates to ensure the tax system works properly and fairly for all Canadians.

Questions & Answers

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 2023 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 types of changes are included in this measure?

A. The changes in this measure are primarily 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.

This measure also includes technical changes related to certain new investment tax credits. These changes are generally intended to ensure consistency between all the proposed investment tax credits and to address questions that have arisen as government officials work to implement these new credits.

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

Overview

Canada is one of 139 members of the Organisation for Economic Co-operation and Development/Group of 20 (OECD/G20) Inclusive Framework on Base Erosion and Profit Shifting that have joined a two-pillar plan for international tax reform. Pillar Two of that plan sets out a framework for a global minimum tax regime.

The Pillar Two rules are designed to ensure that the profits of large, multinational businesses (those with annual revenues of €750million or more) are subject to an effective tax rate of at least 15percent no matter where those profits are earned. This is intended to reduce the incentive for multinational businesses to shift profits into low-tax jurisdictions and to set a floor on tax competition.

Pillar Two is being implemented through changes to each implementing country's domestic tax laws.

The government announced in Budget 2022 its intention to implement Pillar Two, and then in Budget 2023 set out the proposed implementation timeframe, starting in 2024.

The new Global Minimum Tax Act (GMTA) would implement Pillar Two in CanadA. Specifically, the GMTA would implement the primary Pillar Two rule (the Income Inclusion Rule, or IIR) and a domestic minimum top-up tax (which would ensure that Canada can collect any tax applicable under Pillar Two with respect to Canadian profits of multinational enterprises), with effect for fiscal years of multinational businesses that begin on or after December 31, 2023.

Generally, under the IIR, Canada would impose top-up tax on a Canadian-based multinational enterprise where its operations in a foreign country have an effective tax rate below 15%. Under the domestic minimum top-up tax, Canada would impose a top-up tax on a multinational enterprise where its Canadian profits have an effective tax rate below 15%.

As announced in Budget 2023, legislative proposals for the "backstop" rule for Pillar Two (the UTPR) would be introduced in due course and would apply with effect for fiscal years that begin on or after December 31, 2024. Generally, under the UTPR multinationals headquartered in countries that do not implement Pillar Two will be required to pay the global minimum tax to the countries where their subsidiaries are located. The UTPR is critical in ensuring a level playing field between Canadian multinationals and those based in other countries, and provides a strong incentive for countries to implement Pillar Two.

Key Messages

• By introducing the Global Minimum Tax Act, the government is following through with the plan to implement a global minimum tax announced in previous budgets. As announced in Budget 2022 and confirmed in Budget 2023, this measure will implement the primary rule (the Income Inclusion Rule, or IIR) of the multilaterally agreed Pillar Two global minimum tax regime and a domestic minimum top-up tax, with effect for fiscal years of multinational businesses that begin on or after December 31, 2023.

• Legislation for the Pillar Two backstop rule (UTPR) will be released in due course and would apply with effect for fiscal years that begin on or after December 31, 2024, in line with the Budget 2023 announcement.
• Pillar Two is being widely adopted globally, with all G7 countries (other than the U.S.), the member states of the E.U. and several other G20 countries in the process of implementing. Canada's implementation timelines are generally in line with those of other countries.
• Pillar Two is intended to help ensure that large multinational businesses pay their fair share of tax, by making their profits subject to an effective tax rate of at least 15percent no matter where those profits are earned. This will reduce the incentive for multinational businesses to shift profits into low-tax jurisdictions and end the corporate tax race to the bottom. It will also put Canadian workers and businesses on a level playing field with their global competitors.
• Under the multilaterally agreed Pillar Two framework, if a particular country fails to implement Pillar Two in accordance with the framework, multinational businesses headquartered in that country will generally be required to pay the top-up tax to the other countries where they operate, instead of to the country where they are headquartered. This provides a strong incentive for countries to implement Pillar Two.
• The government undertook a public consultation following Budget 2022 on the implementation of Pillar Two in Canada and released draft legislative proposals for public consultation following Budget 2023. The final legislation is being introduced in a separate statute, the Global Minimum Tax Act, and responds to stakeholder comments received as part of theses consultations.

Questions & Answers

Q. Which other countries are implementing Pillar Two?

A. The Pillar Two global minimum tax regime requires coordinated implementation by countries for its effective functioning. The Pillar Two global minimum tax is on track for implementation by a critical mass of countries. Many of Canada's international partners have taken action to implement Pillar Two in 2024, including all G7 countries (other than the U.S.), the member states of the European Union, and several other G20 countries (including Australia, South Africa and South Korea).

Q. Will Pillar Two work if the U.S. does not participate?

A. The current U.S. administration has strongly supported Pillar Two and is part of the Inclusive Framework that developed and agreed to the Pillar Two framework. The current U.S. administration has included measures to facilitate closer alignment of its tax regime with Pillar Two several times in its budget proposals, but they have not been passed by Congress.

The Pillar Two framework is designed to address the possibility that some multinational enterprises would be headquartered in countries that have not implemented Pillar Two. In particular, the Pillar Two framework contains a "backstop" Undertaxed Profits Rule (UTPR), which ensures that any low-taxed profits of those multinational enterprises will be subject to top-up tax in the other Pillar Two implementing countries in which they operate. This is intended to provide a level playing field between multinational enterprises no matter which country they are headquartered in.

Q. Why is Canada implementing a complex, multilateral solution like Pillar Two instead of simply making amendments to the Canadian Income Tax Act to address specific loopholes?

A. The government is always seeking to identify and address loopholes in existing tax laws, and regularly introduces amendments to do so. However, there are limitations to what can be achieved through that process.

The objectives of Pillar Two are to reduce incentives for multinational enterprises to shift their profits from higher-tax jurisdictions to low-tax jurisdictions, and to stop the "race to the bottom" in corporate tax competition. These objectives can only be achieved through international cooperation on multilateral solutions and not through unilateral action alone.

Further, if instead Canada were to unilaterally implement measures to address profit shifting, then our multinationals could be at a competitive disadvantage when compared to multinationals based in other countries. This could cause those multinationals to move their headquarters to another jurisdiction that allows greater profit shifting. It could also result in less business investment in Canada.

In contrast, the co-ordinated implementation of Pillar Two by a critical mass of countries ensures a level playing field globally, since all multinationals will be subject to essentially the same rules.

Q. Will Pillar Two shut down tax havens?

A. By ensuring that large multinational enterprises are subject to a minimum effective tax rate of 15 percent on their profits in every jurisdiction in which they operate, Pillar Two will reduce the incentives to shift profits into tax havens. A number of jurisdictions that historically have had low or no corporate income taxes are taking steps to introduce corporate taxes (where previously there were none) or adopt domestic minimum top-up taxes in response to Pillar Two.

Q. Can tax haven jurisdictions implement Pillar Two or otherwise increase their tax rates in response to Pillar Two while effectively refunding or reducing the effect of these new taxes by providing targeted tax incentives or other benefits to affected taxpayers?

A. There is an OECD-led peer review process in place, including ongoing monitoring, that is intended to identify jurisdictions attempting to offer benefits to multinationals within scope of Pillar Two in order to reduce the companies' tax burden under Pillar Two, and to prevent those jurisdictions from gaining "qualified" status in relation to their Pillar Two legislation. In effect, this will ensure those jurisdictions do not have taxing rights under Pillar Two, and other jurisdictions will step in to apply their Pillar Two rules instead of the jurisdictions providing these prohibited benefits.

Q. Why is Canada only taxing up to 15 percent when MNEs are avoiding Canadian tax at 26 percent?

A. The 15 percent minimum effective tax rate for the new Pillar Two global minimum tax regime was internationally agreed in the October 2021 plan for a two-pillar solution to international tax reform by the OECD/G20 Inclusive Framework on BEPS. This is a multilaterally agreed minimum level of tax that puts a floor on the race to the bottom in corporate tax competition between countries and is designed to reduce incentives to shift profits into low-tax jurisdictions. The Pillar Two agreement does not provide flexibility for countries to implement Pillar Two with a higher (or lower) minimum rate than 15 percent.

Addressing tax base erosion and profit shifting risks through implementation of a coordinated, multilateral solution like Pillar Two is the best way to ensure the continued competitiveness of Canadian-based multinationals and of Canada in attracting investment.

It is also worth noting that Pillar Two provides for a 15 percent minimum effective tax rate, as opposed to a minimum statutory rate. Statutory tax rates are in many cases significantly higher than the actual, effective tax rates paid by companies after taking into account tax credits and other tax incentives designed to incentivize various activities and investments.

Q. What impact will Pillar Two have on Canadian firms that are making use of tax incentives for R&D and for green investments?

A. Pillar Two applies to the largest multinational enterprises that have annual global revenue of €750million or more, and so many of the small and medium sized Canadian firms that make use of such tax incentives are not in scope of Pillar Two and therefore will not be impacted.

For firms that are in scope of the rules, they may still be unaffected depending on the extent of their profits compared to the credits claimed. These firms will be subject to top-up tax under Pillar Two only to the extent these credits reduce their effective tax rate below the 15 percent minimum rate.

Pillar Two also contains provisions that limit the impact on certain tax incentives. These include favourable treatment for refundable tax credits (subject to conditions to prevent manipulation of the rules) – which will be of benefit to, for example, businesses claiming the investment tax credits related to clean technologies. In addition, Pillar Two contains rules to ensure that accelerated tax depreciation (e.g., for clean energy equipment) generally does not result in top-up tax.

Q. Why is the Pillar Two backstop rule, the UTPR, not in the GMTA?

A. Legislation for the backstop rule (UTPR) will be released in due course and would apply with effect for corporate fiscal years that begin on or after December 31, 2024, in line with the Budget 2023 announcement.

Q. Why are the Pillar Two rules introduced in a separate Act and not the Income Tax Act?

A. The Pillar Two rules introduce a global minimum tax regime that operates outside of the normal income tax rules and applies novel concepts that are not used in the Income Tax Act. Introducing the provisions in a separate Act enables the smooth application and administration of the rules.

Q. Are the Pillar Two rules compatible with tax treaties?

A. The Pillar Two rules are designed so that the imposition of top-up tax in accordance with those rules is compatible with the provisions of bilateral tax treaties based on the OECD and UN Models, as stated in the February 2023 publication of administrative guidance agreed by the 145 members of the Inclusive Framework on Base Erosion and Profit Shifting.

Q. Can further changes be made to the provisions in the GMTA (e.g., to introduce new exclusions)? Is Canada giving up sovereignty over its tax policy to the OECD?

A. Consistent implementation of the Pillar Two rules is a key part of the multilaterally agreed solution for international tax reform. Failure to closely follow the Pillar Two rules runs the risk that the Canadian legislation could be found by other countries, as part of the peer review, to not be "qualified". This would leave Canadian-based multinationals subject to the Pillar Two rules of other countries, resulting in a significant compliance burden on Canadian-based multinationals and other countries potentially collecting top-up tax from our multinationals. For these reasons, while changes can be made to the GMTA in some cases to better ensure it achieves the outcomes intended under Pillar two, it is important that the Canadian legislation remain consistent with the multilaterally agreed Pillar Two framework.

Implementing a multilaterally agreed solution to profit shifting and international corporate tax competition is the best way to ensure the competitiveness of Canadian multinationals and of Canada in attracting investment.

Q. What are the estimated revenues from Canada's implementation of Pillar Two?

A. As set out in Budget 2024, the government estimates that the implementation of Pillar Two would increase revenues by $6.6billion over three fiscal years starting in 2026-27: $2.7billion in 2026-27, $1.9billion in 2027-28 and $2.1billion in 2028-29. These estimated revenues depend on a number of assumptions, including which countries will implement Pillar Two, that could affect the actual amount of revenue that the government would raise from Pillar Two. The estimates include a reasonable amount of prudence; nonetheless, actual revenues could be higher or lower.

Q. How many Canadian companies will be affected by Pillar Two?

A. It is difficult to predict the number of Canadian companies that will be affected by Pillar Two, since this would depend on their individual situation and their response to Pillar Two. Based on historical data, in 2019 there were over 220 Canadian multinationals that met the revenue threshold, and more than 2,400 non-Canadian multinationals that met the revenue threshold and that had operations in Canada.

Key Messages

• As part of the 2020 Fall Economic Statement, the government announced the temporary removal of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) on certain face masks or respirators and certain face shields to support public health during the COVID-19 pandemic.
• This temporary measure was proposed to be in effect until the use of face coverings was no longer broadly recommended by public health officials for the COVID-19 pandemic.
• Budget 2024 proposes to end the temporary GST/HST relief of certain face masks or respirators and certain face shields.

Questions & Answers

Q. Why is the government repealing these provisions?

A. As part of the 2020 Fall Economic Statement, the government announced the temporary removal (i.e., zero-rating) of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) on certain face masks or respirators and certain face shields to support public health during the COVID-19 pandemic. This temporary measure was proposed to be in effect until the use of face coverings was no longer broadly recommended by public health officials for the COVID-19 pandemic.

Q. Why is there no revenue impact associated with this relief?

A. There would be no revenue impact associated with ending this relief as it was originally estimated on the basis that the relief would be temporary.

Division 2(a)(b) - Excise Act, Excise Act, 2001 and Other Related Texts (Alcohol, Tobacco and Vaping Products)

Overview

A more robust federal excise duty framework for tobacco and vaping products could help to lower smoking rates towards Canada's target of less than 5% tobacco use by 2035, as well as lower vaping rates among younger Canadians.

Budget 2024 proposes to increase the tobacco excise duty rate by $4 per carton of 200cigarettes, from $33.15 to $37.15, along with corresponding increases to the excise duty rates for other tobacco products, effective April 17, 2024. This increase is in addition to the recent annual inflationary adjustment of $1.49 per carton of 200 cigarettes, along with corresponding increases to the excise duty rates for other tobacco products, which took effect as of April 1, 2024. This measure came into effect on April 17, 2024.

Budget 2024 also proposes to increase the vaping product excise duty rate by 12%, effective July1, 2024. The federal vaping excise duty rates would increase to $1.12 per 2 ml, or fraction thereof, for the first 10 ml of vaping liquid / $1.12 per 10 ml, or fraction thereof, for volumes beyond that.

This measure would come into force on July 1, 2024; i.e., the same day as the effective date for the introduction of the coordinated vaping product taxation regime for Ontario, Quebec, the Northwest Territories, and Nunavut. Under the Coordinated Vaping Product Taxation Agreements between Canada and these provinces and territories, an additional duty equal to the federal rate would apply in these jurisdictions.

Budget 2024 further proposes various measures aimed at improving the integrity of the tobacco and vaping excise framework, including sharing of confidential information under the Excise Act, 2001 with Health Canada for the purposes of the administration or enforcement of the Tobacco and Vaping Products Act; revising the process for prescribing tobacco products; and requiring information returns from tobacco prescribed persons.

These measures would come into force upon royal assent for the sharing of confidential information proposal and on the first day of the month following royal assent to the enabling legislation for prescribing tobacco products and information returns proposals.

Key Messages

• A more robust federal excise duty framework for tobacco and vaping products could help to lower smoking rates towards Canada's target of less than 5% tobacco use by 2035, as well as lower vaping rates among younger Canadians.

Tobacco Excise Duty Rate Increase

• A federal excise duty applies to all tobacco products sold in the Canadian market.
• Budget 2024 proposes to increase the tobacco excise duty rate by $4 per carton of 200 cigarettes, from $33.15 to $37.15, along with corresponding increases to the excise duty rates for other tobacco products, effective April 17, 2024.
• This increase is in addition to the recent annual inflationary adjustment of $1.49 per carton of 200 cigarettes, along with corresponding increases to the excise duty rates for other tobacco products, that took place on April 1, 2024.
• To account for the $4 increase, an inventory tax of $0.02 per cigarette will apply to inventories of more than 30,000 cigarettes held by manufacturers, importers, wholesalers, and retailers as of end of day April 16, 2024.
• This measure came into effect on April 17, 2024.

Vaping Product Excise Duty Rate Increase

• A federal excise duty applies to all vaping products sold in the Canadian market since October 2022.
• Budget 2024 also proposes to increase the vaping product excise duty rate by 12%. This proposed increase would also apply to the additional duty imposed in respect of participating jurisdictions under the coordinated vaping product taxation framework (for example, $0.12 per typical pod in a non-participating jurisdiction, or $0.24 per typical pod in a participating jurisdiction, as the case may be).
• This measure would come into force on July 1, 2024; i.e., the same day as the effective date for the introduction of the coordinated vaping product taxation regime for Ontario, Quebec, the Northwest Territories, and Nunavut.

Sharing of Confidential Information

• To enhance collaboration between the Canada Revenue Agency (CRA) and Health Canada in their respective responsibilities with regards to tobacco and vaping products, Budget 2024 proposes to amend the Excise Act, 2001 to allow the CRA to share confidential information for the purposes of the administration or enforcement of the Tobacco and Vaping Products Act.
• This measure would come into force upon royal assent to the enabling legislation.

Technical Proposals

Budget 2024 further proposes measures aimed at improving the administration of the federal tobacco excise duty framework: revising the process for prescribing tobacco products for export, and requiring tobacco prescribed persons to file information returns.

Process for Prescribing Tobacco Products

• Brands of tobacco products produced in Canada but that are destined for the export market must be prescribed by regulation before the products can be exported without markings and the imposition of a special excise duty. Applications need to be made to the CRA for eligibility assessments, and the CRA would in turn recommend qualifying brands for prescription through the regulatory process.
• To improve the administration of the current process, Budget 2024 proposes to replace the prescription via regulatory process with an authorization for the Minister of National Revenue to specify the brands of tobacco products for export that are exempted from the special excise duty and marking requirement.
• This measure would come into force on the first day of the month following royal assent to the enabling legislation.

Requiring Information Returns from Tobacco Prescribed Persons

• Persons that are prescribed by regulation (i.e., "prescribed persons") may be issued excise stamps for either tobacco products or vaping products, stamps they may then provide to overseas manufacturers of those products to allow the eventual importation of stamped products into CanadA. Generally, prescribed persons do not manufacture tobacco or vaping products in Canada, and excise duties are paid once the products are imported into CanadA.
• Prescribed persons that are issued vaping excise stamps are currently required to file information returns each month, but the same requirement does not apply to prescribed persons that are issued tobacco excise stamps.
• To improve controls and accountability for tobacco excise stamps, Budget 2024 proposes to require tobacco prescribed persons to file information returns for tobacco excise stamps.
• This measure would come into force on the first day of the month following royal assent to the enabling legislation.

Questions & Answers

Tobacco Excise Duty Increase

Q. What is the increase per cigarette?

A. The $4 increase per carton of 200 cigarettes translates into an increase of 2 cents per cigarette. If you add to that the annual inflationary adjustment of $1.49 that took place on April 1, 2024, for a total increase of $5.49, it translates to an increase of 2.7 cents per cigarette.

Q. How much money does the federal government make from tobacco excise duties?

A. According to the Public Accounts for 2022-23, the federal government raised a total of $2.962 billon in tobacco excise revenues. The proposed $4.00 increase is expected to bring in a total of $1.355billion over the next five years.

Vaping Product Excise Duty Increase

Q. Do you have any update on the coordinated vaping product taxation framework?

A. The Government is working with jurisdictions that are interested in joining the coordinated framework. Ontario, Quebec, the Northwest Territories, and Nunavut have signed agreements and will be joining the framework on July 1, 2024. Other provinces that have expressed interest include Nova Scotia, New Brunswick, Manitoba, PrinceEdward Island, Alberta and Yukon. They are slated to join on January 1, 2025.

Q. Do the changes to the vaping duty proposed in this Budget delay the implementation of vaping product taxation agreements with provinces and territories?

A. No. The Government of Canada has signed agreements with Ontario, Quebec, the Northwest Territories, and Nunavut and is working towards a July 1, 2024 implementation date. The proposed increase would apply to the additional duty imposed in respect of participating jurisdictions under the coordinated vaping product taxation framework. The effective combined FPT duty rates in those jurisdictions would be $2.24 per 2 ml, or fraction thereof, for the first 10 ml of vaping liquid / $2.24 per 10ml, or fraction thereof, for volumes beyond that.

Q. Who would benefit from the rates changing?

A. Vaping poses risks, especially to young people. In addition to raising revenues, increasing the duty rate on vaping products could discourage consumption of vaping products, especially among more price-sensitive youth.

Q. Is changing the rates on July 1, 2024 in keeping with the bilateral Coordinated Vaping Product Taxation Agreement signed with PTs?

A. The Government of Canada has signed agreements with Ontario, Quebec, the Northwest Territories, and Nunavut. Under the Coordinated Vaping Product Taxation Agreements between Canada and these provinces and territories, an additional duty equal to the federal rate would apply in these jurisdictions. The proposed increase would therefore apply to the additional duty.

Sharing of Confidential Information

Q. Why is the Government proposing this change?

A. To enhance collaboration between the Canada Revenue Agency (CRA) and Health Canada in their respective responsibilities for tobacco and vaping products; e.g., the administration or enforcement of the Tobacco and Vaping Products Act.

Q. How would this confidential information be safeguarded to ensure that the information is only used to administer or enforce the Tobacco and Vaping Products Act?

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

Technical Measures

Q. Won't the tobacco tax increases stoke the illicit market for tobacco products?

A. Tobacco taxation is an effective and important means of reducing tobacco consumption.

The proposed increase of an additional $4 per carton of 200 cigarettes (i.e., two cents per cigarette) is a small increase in comparison to cigarette retail sale price. According to Statistics Canada, the average retail price for a carton of 200 cigarettes in 2023 was $158.78.

The increase would only add 50 cents per pack of 25 cigarettes and as such, is not expected to have a significant impact on the level of tobacco contraband activity.

If the $1.49 per carton annual inflationary adjustment on April 1, 2024 is also taken into account, the total increase would be $5.49 per carton, which would translate to $0.02795 per cigarette or $0.69875 for pack of 25 cigarettes. It is also not expected to have a significant impact on the level of tobacco contraband activity.

Q. Won't the vaping product excise duty increase stoke the illicit market for vaping products?

A. Budget 2024 proposes to increase the vaping product excise duty rate by 12%. This proposed increase would also apply to the additional duty imposed in respect of participating jurisdictions under the coordinated vaping product taxation framework (for example, $0.12 per typical pod in a non-participating jurisdiction, or $0.24 per typical pod in a participating jurisdiction, as the case may be).

Given the size of the proposed rate increases, it is not expected that the proposal would have a significant impact on the level of vaping contraband activity. To illustrate: on the average spend ($17) on vaping pods per week, $0.12 translates to about 1.41percent for a non-participating jurisdiction, and $0.24 would be 2.82percent for a participating jurisdiction.

Division 2(c) - Excise Act, Excise Act, 2001 and Other Related Texts (Alcohol, Tobacco and Vaping Products)

Overview

On March 9, the government announced modifications to the excise duty rates on alcohol products.

Specifically, the government proposed to:

• Cap the inflation adjustment at twopercent for beer, spirit, and wine excise duties for fiscal years 2024-25 and 2025-26; and
• Cut by half the excise duty rate on the first 15,000 hectolitres of beer brewed in Canada for two years, to provide the typical craft brewery with up to $86,952 in additional tax relief in 2024-25.

Those measures are proposed to come into force on April 1, 2024.

Key Messages

• On March 9, 2024, the federal government announced a two-year extension of the twopercent cap on the annual alcohol excise duty inflation adjustment, and a 50percent reduction for two years on excise duty rates for the first 15,000 hectolitres of beer brewed in Canada.
• In Budget 2023, the government announced a temporary cap on the inflation adjustment for excise duties on beer, spirits, and wine at twopercent, for one year only, as of April 1, 2023. The government first implemented the cap to provide tax relief for small businesses, given the Excise Act and the Excise Act, 2001 require alcohol excise duties to be automatically indexed to total Consumer Price Index (CPI) inflation at the beginning of each fiscal year (i.e., on April 1^st).
• The proposed two-year extension of the twopercent cap recognizes the temporarily increased production costs faced by small craft brewers in particular.
• The twopercent cap on the inflation adjustment for excise duties on beer, spirits, and wine would be extended for two additional years starting on April 1, 2024.
• The government is proposing to reduce by 50 per cent for two years the excise duty rates on the first 15,000 hectolitres (hL) of beer brewed in Canada (1hL equals 100L). All Canadian brewers would benefit from this relief, and 94percent of Canadian brewers that produce below this threshold would see their entire production relieved.
• Canadian brewers currently benefit from lower excise duty rates on the first 75,000hL of beer produced per year, which in fiscal year 2023-24, would have provided relief of up to $868,464 for each brewer. The proposed reduced rates would provide additional tax relief of up to $86,952 for each brewer in 2024-25.

Questions & Answers

Q. How much relief will these measures provide per brewer?

A. The 50percent reduction for the first 15,000hL of beer brewed in Canada would provide up to $86,952 in additional relief for the two years in which the measure applies.

When combined with existing relief for brewers, a brewer could receive up to $972,775.50 for the first 75,000hL of beer brewed in Canada.

Q. How much relief will the extended cap on the inflation adjustment provide?

A. Relief provided by the 2percent cap on the inflation adjustment mechanism would depend on the type of alcohol produced, the applicable rate and the volume produced. Table 1 below provides more specific details on the new rates, and compares them to the inflation-adjusted rates had no cap been applied at all.

Key Messages

• The Government proposes to amend the National Housing Act would increase the in-force limits for guarantees issued by the Canada Mortgage and Housing Corporation (CMHC) in respect of mortgage-backed securities and Canada Mortgage Bonds, and for mortgage default insurance provided by CMHC, from the temporary limits of $750billion to the permanent limits of $800billion.
• These amendments will ensure that CMHC can continue to support multi-unit rental housing construction.
• The amendments will also support the government's September 2023 announcement that it was increasing the Canada Mortgage Bond issuance limit by $20billion annually, from $40billion to $60billion.
• In addition, the government proposes to amend the Borrowing Authority Act to ensure that Canada Mortgage Bonds purchased by the government do not count towards the borrowing limit.

Questions & Answers

Q. What are the legislative limits under the National Housing Act?

A. The government proposes to amend the National Housing Act to increase the in-force limits for guarantees issued by the Canada Mortgage and Housing Corporation (CMHC) in respect of mortgage-backed securities and Canada Mortgage Bonds, and for mortgage default insurance provided by CMHC, from the temporary limits of $750billion to the permanent limits of $800billion.

Q. What was the increase to $750billion during the pandemic?

A. In March 2020, the legislative limits for insurance-in-force and guarantees-in-force were temporarily increased from $600billion to $750billion through the government's COVID-19 emergency legislation to provide liquidity to the financial sector through the CMHC-administered Insured Mortgage Purchase Program (IMPP). The temporary limits revert to $600billion in March 2025.

Q. What amounts of guarantees and insurance does CMHC currently have in-force?

A. According to CMHC's Quarterly financial reports, as of Q3-2023, CMHC's total guarantees-in-force was $493billion while total insurance-in-force was $405billion.

Q. Why is the government increasing the legislative limits now?

A. The Government is proposing to increase the limits to ensure that CMHC can continue to support multi-unit rental housing construction. Increasing the limit now would provide clarity and assurance to CMHC and market participants for business planning.

Q. How will increasing CMHC's legislative limits on insurance-in-force and guarantees-in-force help Canadians?

A. These amendments would support the government's September 2023 announcement that it was increasing the Canada Mortgage Bond issuance limit by $20billion annually, from $40billion to $60billion.

This September 2023 change will unlock low-cost financing for multi-unit rental housing construction.

Q. How many units will the increase in the CMB annual issuance limit translate into each year?

A. The Government announced in September 2023 that the additional $20billion per year will be designated for funding mortgage loans on multi-unit rental projects insured by CMHC. According to CMHC, the additional financing can facilitate the construction of up to 30,000 new rental units annually in communities across Canada. The estimated 30,000 in additional rental apartments per year is based on past CMB funding activity to support multi-unit housing.

Q. What is the process of securitizing insured mortgage loans?

A. Securitization involves bundling insured mortgage loans into securities sold to investors, who then receive cashflows based on the repayments of the mortgages that underlie the securities.

Q. How does CMHC and the federal government support mortgage loan securitization?

A. CMHC oversees two securitization programs: the National Housing Act Mortgage-Backed Securities (NHA MBS) and the Canada Mortgage Bonds (CMB). The federal government guarantees these securities to support their use as low-cost funding sources for mortgage lenders.

Q. How does securitization of mortgage loans support new housing construction?

A. Mortgage loan securitization allows mortgage lenders to bundle mortgages and sell them to investors, which provides funding for lenders to be able to issue new mortgages.

Q. How will the government manage the increased risks to CMHC?

A. The National Housing Act requires OSFI's supervision of CMHC. This includes OSFI supervising CMHC against the Mortgage Insurer Capital Adequacy Test to determine that CMHC is adequately capitalised to manage its risks.

Q. What is a Canada Mortgage Bond / Why was it created?

A. Canada Mortgage Bonds are bonds issued by Canada Housing Trust No. 1. (operated by CMHC). The proceeds of these bonds are used to purchase National Housing Act- Mortgage-Backed Securities from mortgage lenders.

In 2001, Canada Mortgage and Housing Corporation (CMHC) launched the CMB program to help stabilize access to mortgage funding in all economic conditions.

Q. Why is the government purchasing CMBs

A. Canada Mortgage Bonds carry the full faith and credit of the Government of Canada and constitute a direct, unconditional obligation of Canada. However, CMBs are issued at higher borrowing rates/costs than regular government bonds.

Given this this is a product that is guaranteed by the Government of Canada, the government identified an opportunity to use that difference in rates between the two sets of bonds to generate revenue for other programs.

Q. Why do CMBs have a higher interest rate than regular GoC bonds?

A. The interest rate on Canada Mortgage Bonds as well as regular Government of Canada bonds are market driven, the rates are not something decided on by the government.

Q. Why keep the CMB program then?

A. The market consultations that were completed as part of the review of the government's potential participation in the CMB program clearly identified the need for a market mechanism to support pricing of mortgages by lenders.

The government is purchasing $30billion and leaving $30billion to the market to ensure that the market has ample liquidity for hedging.

Q. How many CMBs are outstanding?

A. There are approximately $260billion of Canada Mortgage Bonds outstanding.

Q. How many CMBs are issued annually?

A. Approximately $60billion of Canada Mortgage Bonds will be issued this year.

Division 3 – National School Food Program

Overview

A 2021 mandate letter commitment directed the Minister of Families, Children and Social Development and the Minister of Agriculture and Agri-Food to work with provinces, territories, municipalities, Indigenous partners and stakeholders to develop a National School Food Policy and to explore how more children in Canada can receive nutritious food at school.

First announced on April 1, 2024, and as part of Budget 2024, the Government of Canada committed $1billion over five years in federal funding to create a National School Food Program.

The federal government will be engaging with its provincial and territorial partners to sign bilateral agreements that will provide funding to expand and improve school food programming. Funding will start as early as the 2024-2025 school year.

This legislation will enable the Government of Canada to commence negotiations with provinces and territories and flow funding for this component in time for the 2024-2025 school year.

The National School Food Program will allow governments to work together to increase access to school meals for up to 400,000 additional children annually. It aims to improve children's access to nutritious food, improve academic outcomes and achievement, and help reduce hunger and food insecurity. It will also help support families by reducing food costs. Research shows that school meal programs can provide an estimated $800 per year in relief to participating families.

Key Messages

• Ensuring that every child gets the best start in life is a priority for our government. That is why the Government of Canada is investing $1billion over five years to implement a National School Food Program with provinces, territories, and Indigenous partners.
• A National School Food Program will improve children's access to nutritious food, improve academic outcomes and achievement, and help reduce hunger and food insecurity.
• Funding will be delivered to provinces and territories through bilateral agreements to expand and enhance their existing school food programs in their jurisdictions, starting in the 2024-2025 school year.
• There will also be investments for First Nations, Inuit, and Métis partners, including Self-Governing and Modern Treaty partners, for school food programming. Investments will also support capacity building and engagement with Indigenous partners on the development of current and future programming that is culturally appropriate.
• This investment will allow governments to work together to increase access to school meals for up to 400,000 additional children annually.
• The Program will also help families by reducing food costs. Research shows that no-cost school food programs can provide an estimated $800 per year in relief to participating families.

• The National School Food Program was developed based on extensive engagement with provinces, territories, Indigenous partners, municipalities, school communities, and the general public, including children and youth directly.

  This past Fall, we published a What We Heard Report of these engagement sessions, which outlines our key learnings from these engagements.

• A National School Food Program will complement the significant investments made through targeted social programs and income supplements, such as the Canada Child Benefit, as part of a comprehensive approach to reducing poverty and food insecurity in Canada.

Questions & Answers

Q. Why is the Government of Canada creating a National School Food Program?

A. The Government of Canada is investing $1billion over five years to implement a National School Food Program with provinces, territories and Indigenous partners. This investment will allow us to work together to increase access to school meals for up to 400,000 additional children. This is an important step by the Government of Canada and a generational investment in the future of our children.

Q. What are the benefits of investments in school food programming?

A. School food programming has been shown to improve academic performance, support positive health outcomes and health equity, and foster connections with culture and traditional food systems, all of which have positive lifelong impacts.

Studies have estimated that every dollar invested in school food programs yields a return of two to six dollars in educational, health, social, economic, and environmental benefits.

Additionally, school food programs can reduce food-related spending for families. Research suggests that participation in such programs can save families around $800 per year.

Q. What are the next steps?

A. The federal government will work with provincial, territorial, and Indigenous governments to deliver the National School Food Program, with support beginning as early as the 2024-25 school year.

Q. What is the role of the provinces and territories in school food programming?

A. Provinces and territories play a critical role in school food programming as it falls under their jurisdiction, and all currently provide funding for school meals. The Government of Canada is seeking to build on these existing efforts by working collaboratively with provincial and territorial governments and Indigenous partners.

Q. What will a National School Food Program in Canada cost?

A. Budget 2024 announced $1billion over five years starting in 2024-25, to work with provinces, territories, and Indigenous partners to expand access to school food programs. This includes investments for First Nations, Inuit, and Métis communities as well as Self-Governing and Modern Treaty Partners, many of whom have some of the highest rates of food insecurity in Canada.

Q. Will provinces and territories be required to match the federal spending to implement a national school food program?

A. No. Federal funding announced in this budget will not include a requirement for dollar-for-dollar cost matching of the federal contribution.

Q. Is it certain that up to 400,000 additional children will be reached?

A. Provinces and territories have a range of school food programming, with some focusing on breakfast programs while others offer lunch programs or even both. Each province and territory have a different starting point and we want to provide the flexibility for our partners to invest according to the highest needs in their jurisdiction. The funding provided in Budget 2024, if used on breakfast programming, would reach up to an additional 400,000 children.

Q. Why is the government not creating a universal school food program?

A. This proposed investment will support an ambitious and impactful national program. This historic investment will nearly double the amount of government funding available to school food programs currently. The Indigenous component is designed to reach every child (ages 4-18) on reserve and in a Modern-Treaty Holders and Self-Governing Nation community.

Q. What commitments will provinces and territories be expected to meet to receive this new funding?

A. Provinces and territories have jurisdiction over health and education and are already actively supporting school food programming in their jurisdictions. Given the different "starting points" in school food programs within provinces and territories with current, there will be variation across federal-provincial/territorial school food programming agreements. However, it is important that funding go towards enhancing existing school food programming already in place and funded by provincial and territorial governments or to expanding school food programming to communities where it is not currently available.

Q. What commitments will Indigenous governments and populations be expected to meet to receive this new funding?

A. For Indigenous partners receiving federal investment in school food programming, funding will flow through existing agreements with Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada. Indigenous governments will have flexibility in how best to implement programming in their communities.

Q. Why does the government not transfer money to parents instead of investing in a school food program?

A. Canada has been the only G7 country without a national school food program. School food programming has been shown to improve academic performance, support positive health outcomes and health equity, and foster connections with culture and traditional food systems, all of which have positive lifelong impacts. School food programs provide immediate and long-term benefits for children and their families.

The National School Food Program will complement other recent investments made through targeted social programs and income supplements, like the Canadian Child Benefit, to make life more affordable for Canadians, and specifically families. This in turn helps improve Canadians' ability to meet their basic needs, including access to nutritious food.

Additionally, studies have found that school food programs can reduce families' monthly grocery bills by 5% to 19%, which would amount to about $800 in relief for a family of four in Canada over the course of a year.

Q. Why does the PT program funding start in the first year, while Indigenous program funding starts in the second year?

A. Funding for PTs will flow once bilateral agreements are signed, as early as the 2024-25 school year whereas funding for the Indigenous component will commence in Year 2 (2025-26). This will allow sufficient time for engagement between Indigenous Partners and Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada prior to annual funding cycles for existing agreements with those partners.

Q. Why aren't all Indigenous groups being funded through the Indigenous funding stream?

A. The National School Food Policy provides funding to Indigenous governments for school food programming. The federal government funds First Nations education on reserve, and has commitments (e.g., the Collaborative Modern Treaty Implementation Policy) to support Modern Treaty implementation, self-determination and to uphold the right to self-government.

Q. Does this proposal fulfill obligations set by PMB C-322?

A. If passed, Bill C-322 would require the government to develop, publish, review, and report on a school food program framework. The new National School Food Program announced in Budget 2024 is consistent with the intent of Bill C-322.

Q. Are partners supportive of a federal role in National School Food Policy and Program?

A. Extensive consultations with thousands of Canadians across the country, including PT and Indigenous partners, showed strong support for a National School Food Policy and program.

In response to the Budget 2024 announcement of funding for a National School Food Program, many stakeholders publicly voiced their support for the program. The Breakfast Club of Canada released a statement saying that this program marks "a turning point in the country's commitment to the well-being of all children". The Coalition for Healthy School Food, also released a statement applauding the federal government for the investment, and urged "all premiers in each province and territory to sign on to the federal government's new policy and to provide more nutritious, culturally appropriate, sustainable and affordable food to schoolchildren all across Canada as soon as possible."

Q. Why is there no ongoing funding?

A. With an investment of $1billion over five years, the National School Food Program represents a strong commitment from the federal government towards the long-term goal of every child in Canada having access to nutritious school meals.

Questions & Answers

Q. What is Canada Student Loan (CSL) forgiveness for family doctors and nurses?

A. Canada Student Loan forgiveness is a benefit currently available for family doctors, nurses and nurse practitioners, which complements other provincial/territorial and federal efforts to help address health human resource shortages in rural and remote communities. The benefit provides partial federal student loan forgiveness to healthcare professionals if they work in a designated under-served rural or remote community. This benefit is intended to act as an incentive to graduates who are paying back their federal student loans to work in under-served communities that have challenges accessing care services.

Currently, family doctors and family medicine residents are eligible for up to $60,000 over five years in CSL forgiveness. Registered practical nurses, licensed practical nurses, registered nurses, registered psychiatric nurses, and nurse practitioners are eligible for up to $30,000 over five years.

Q. Why is the Government proposing expanding the list of eligible occupations?

A. Shortages of health and social service workers in rural and remote communities have been longstanding and the COVID-19 pandemic has only increased challenges in recruiting and retaining these workers in rural and remote communities. Budget 2024 committed to expanding CSL forgiveness eligibility to Early Childhood Educators as well as Dentists, Dental Hygienists, Pharmacists, Midwives, Teachers, Social Workers, Personal Support Workers, Physiotherapists, and Psychologists. This will contribute to the Government's efforts to ensure that all Canadians are able to access the healthcare and social services they need.

This measure also aligns with recommendation 9 from the report entitled: Labour Shortages, Working Conditions and the Care Economy (Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities [HUMA], February 2023). It recommends that the Government of Canada support access to care, including both healthcare and child care, in rural and remote communities by providing further incentives for in-demand healthcare and child care professionals to work in these communities, including through loan forgiveness, among other measures.

Additionally, adding new healthcare occupations is responsive to the recommendations of the House of Commons Standing Committee on Health. Expanding Canada Student Loan forgiveness to a wider range of occupations is consistent with recommendation 16 from the report entitled: Addressing Canada's Health Workforce Crisis (Standing Committee on Health, March 2023), namely that the Government of Canada use its powers to create incentives for the recruitment and retention of health care workers within the health workforce generally.

Q. How were these new occupations determined?

A. Several factors were considered to determine the newly eligible occupations including labour market information, stakeholder feedback, and existing efforts by all levels of government to address the workforce crisis in healthcare and in social services. Ultimately, the occupations announced in Budget 2024 were selected because of the important role they play in the delivery of critical healthcare or social services.

Q. Why add Early Childhood Educators, Teachers and Social Workers? Isn't CSL forgiveness focused on healthcare?

A. While Canada faces longstanding health human resource challenges that have particularly impacted rural and remote communities, these challenges have grown to encompass not just healthcare workers, but frontline workers in social service sectors, including early learning and childcare, as well, particularly in the wake of the stresses caused by the COVID-19 pandemic.

CSL forgiveness has traditionally focused on health human resources challenges by supporting family doctors and nurses. However, social services, including early learning and childcare, are essential, and there is a significant need to support and encourage workers in these fields to ensure that all Canadians can get access to the services they need, including children.

Q. Why add Dentists to the benefit?

A. Dentists have been included in the expanded benefit to help address access issues to oral healthcare in rural and remote communities. Dentists, despite a high earning potential, face many of the same labour shortages as other occupations in the healthcare sector and are projected to continue to be in a national labour shortage for the foreseeable future. Dentists play a critical role similar to that of family doctors when it comes to oral health, and it is very important that Canadians are able to access oral healthcare services no matter where they live. Additionally, adding dentists complements other Government of Canada priorities, such as the Canadian Dental Care Plan. The Canadian Dental Care Plan is currently being phased in, and will be open to all eligible Canadian residents starting in 2025.

Q. CSL forgiveness has been in place for over 10 years. Why are there still family doctor and nurse shortages in rural and remote communities? How will this measure help get other occupations into communities where they are needed?

A. CSL forgiveness is only one tool to help address the broad and complex challenge of care workforce shortages. Other factors, such as working conditions, earning potential, professional placement availability, career opportunities, family dynamics, connections to communities, housing, and cost of living inform decisions about work location. However, CSL forgiveness can play a part in attracting and retaining workers to underserved rural and remote communities. In a recent survey of current CSL forgiveness beneficiaries, 50 percent indicated the benefit had a degree of influence over their decision to work in a rural or remote community. The results found the benefit can be especially helpful with workers who already have ties to rural or remote communities.

*Questions and answers redacted*

Q. Who will benefit from an expanded CSL forgiveness benefit for in-demand occupations in under-served rural and remote communities measure?

A. Enhancements to CSL forgiveness will benefit both Canada Student Loan borrowers who meet the benefit requirements as well as rural and remote communities who have long struggled to gain access to the services they need in their own communities.

Q. How much will expanding the list of occupations eligible for CSL forgiveness cost?

A. Expanding the list of occupations eligible for CSL forgiveness is expected to cost $301.8million over four years, and $100.1million ongoing for all ten occupations.

Q. This measure only applies to federal student loans. What about the borrower's provincial student loans?

A. CSL forgiveness is only available for Canada Student Loans, which is the federal share of a government student loan provided through the Canada Student Financial Assistance Program. Depending on their occupation, borrowers may be able to access similar benefits for their provincial loans, such as the British Columbia Loan Forgiveness Program or Saskatchewan Loan Forgiveness for Nurses and Nurse Practitioners.

Q. Will borrowers and communities from the provinces and territories that do not participate in the Canada Student Financial Assistance Program benefit from this measure?

A. Quebec, Northwest Territories, and Nunavut do not participate in the Canada Student Financial Assistance Program, and receive an annual alternative payment to support their own student assistance programs. As a result, borrowers with student loans from those jurisdictions will not directly benefit from enhancements to CSL forgiveness. The Governments of Quebec, Northwest Territories and Nunavut receive annual alternative payments from the Government of Canada in support of their own student aid programs.

Furthermore, communities in the non-participating jurisdictions are included in the definition of "under-served rural or remote community" and have been since the benefit started. All communities in the Northwest Territories and Nunavut are eligible. Rural and remote communities in Quebec are also eligible. Any holder of a CSL who meets the benefit's eligibility criteria and who works in an eligible community is able to access the benefit.

Q. What is the status of the Government's other CSL forgiveness commitments?

A. The Government implemented the Budget 2022 commitment to increase the maximum amount of forgiveness for family doctors and nurses by 50% in November 2023.

Budget 2023 committed to expanding the reach of CSL Forgiveness to more communities, by including all communities with populations of 30,000 or fewer. This expansion is expected to come into effect in Fall 2024, pending approval of necessary regulatory amendments.

Questions & Answers

Q. Why is the Government proposing automatic enrolment to the Canada Learning Bond?

A. The Government of Canada recognizes that post-secondary education, whether it be trade school, college, polytechnics, or university, is essential to getting the skills needed for a good career. The Government of Canada helps families to save for their children's future education in Registered Education Savings Plans (RESP) and offers extra support to families with low income through the Canada Learning Bond.

However, take-up of the Canada Learning Bond is only 42.5%, even after years of sustained outreach and communications.

Budget 2024 announced automatic enrolment to the Canada Learning Bond. With automatic enrolment, the Government of Canada will be addressing the access challenges faced by low-income families. Children born in 2024 and later who are eligible for the Canada Learning Bond will receive it by default. The Government of Canada will open an RESP for each eligible child and pay the Canada Learning Bond.

Through this measure, every eligible child would be able to access the Canada Learning Bond as early as possible to help them aspire to and plan for their post-secondary education.

Q. When will automatic enrolment to the Canada Learning Bond be implemented?

A. Automatic enrolment to the Canada Learning Bond will be implemented for eligible children born in 2024 and after. Families will receive notification letters starting in 2024, and Employment and Social Development Canada will open the first automatic accounts in 2028 when children turn 4 years of age.

Q. Who will benefit from automatic enrolment to the Canada Learning Bond?

A. Children who are eligible for the Canada Learning Bond come from families with low income. Children eligible for unclaimed Canada Learning Bond tend to live in rural communities, be Indigenous or racialized, have a disability, be in the care of child welfare agencies or have a lone parent. This measure will also benefit children living in the Northwest Territories, Yukon, and Nunavut, where take up of the Canada Learning Bond is very low.

Q. How much will automatic enrolment to the Canada Learning Bond cost?

A. The Government of Canada is investing $161.9million from 2024 to 2028 and $148.8million per year ongoing, to introduce automatic enrolment to the Canada Learning Bond.

Q. What about children and youth born before 2024?

A. For children and youth born before 2024, their primary caregiver, or that individual's cohabiting spouse or common-law partner, will be able to open an RESP through a secured online portal such as My Service Canada Account in order to request the Canada Learning Bond. Eligible youth over the age of majority will also be able to open an RESP and request the Canada Learning Bond for themselves.

Q. How many Canadians will benefit from automatic enrolment to the Canada Learning Bond?

A. Approximately 130,000 additional children and youth would receive the Canada Learning Bond each year, starting in 2028, through automatic enrolment, and others would be able to receive the Canada Learning Bond on request.

Q. What if an individual does not want their child to be automatically enrolled?

A. A child's primary caregiver, or that individual's cohabiting spouse or common-law partner will be able to choose to opt-out of automatic enrolment for their child by notifying the Government of Canada. If a child's primary caregiver, or the primary caregiver's cohabiting spouse or common-law partner, has previously declined the Canada Learning Bond the child will also not be automatically enrolled.

Q. What will Canadians be able do with their RESPs when they are automatically enrolled?

A. The RESP beneficiary's primary caregiver, that individual's cohabiting spouse or common-law partner, will be able to take ownership of the RESP opened by the Government of Canada. The beneficiary will also be able to take ownership of their RESP opened by the Government of Canada, upon reaching age of majority. Once an individual takes ownership of the RESP, they will be able to make additional contributions to the RESP or withdraw the funds to pay for post-secondary education.

Q. Who will deliver the RESPs opened automatically?

A. The Government of Canada will deliver the RESPs opened to automatically pay the Canada Learning Bond to eligible Canadians through a secured online portal such as My Service Canada Account. Employment and Social Development Canada will enter into an agreement with a financial organization, through a competitive process, to administer the RESPs and invest the funds held within.

Q. Will Canadians be able to choose an RESP provider of their choice?

A. Canadians will be able to open an RESP with a provider of their choice at any point in time regardless of if an RESP was opened for them by the Government of Canada. Canada Learning Bond funds and earnings will be transferred from the automatically opened RESP to the new RESP opened by clients with their preferred provider.

Q. Who was consulted in the development this initiative?

A. Community-based organizations who are part of the Canada Learning Bond Champions' Network, Indigenous and Indigenous-serving organizations and post-secondary institutions were consulted in the development in this initiative. The Government also consulted student associations, as part of the engagement to develop a long-term approach to student financial assistance, announced in Budget 2023.

Q. Why is the Government proposing to extend the maximum age to apply for the Canada Learning Bond?

A. Extending the age limit to apply retroactively for Canada Learning Bond from 20 to 30 years of age will provide currently eligible youth more time to access the Canada Learning Bond. This change will make post-secondary education more affordable for youth who are more likely to delay their studies, including Indigenous Peoples, youth in or from care, and youth with disabilities. Further, this change helps ensure that youth today will not permanently lose out on funds for which they are eligible.

Q. When will the change to the maximum age to apply for the Canada Learning Bond be implemented?

A. The maximum age to apply for the Canada Learning Bond will be extended to 30 years of age and will come into force at a date to be fixed by order of the Governor in Council. Employment and Social Development Canada will implement this change in 2028.

Key Messages

• The Bretton Woods and Related Agreements Act gives the Minister of Finance the authority to provide financial assistance to foreign states of up to $7billion for any particular foreign state, and up to $14billion for all foreign states combined, so long as the Governor in Council is of the opinion it is in the national interest to do so.
• The proposed amendment would increase the limit to $15billion for any particular foreign country, and to $22billion for all countries.
• Budget 2024 committed to provide $2.4billion in financial assistance to Ukraine for 2024, $2.0billion of which has already been disbursed. TheBudget2024 commitment is part of the Group of Seven commitment to help address Ukraine's urgent financing needs following Russia's war of aggression against Ukraine.
• Canada remains steadfast in its support for Ukraine's brave fight against Russia. Asthe conflict enters its third year, Canada is unwavering in our support of the Ukrainian fight for sovereignty, territorial integrity, and democracy.
• Since the start of 2022, Canada has provided around $6.9billion in financial assistance to the government of Ukraine pursuant to the Bretton Woods and Related Agreements Act.

Questions & Answers

Q. Why is the government proposing to increase the financial assistance ceiling in the Bretton Woods and Related Agreements Act (BWRAA) at this time and why did the government choose to set the ceilings at $15billion for one foreign state and at $22billion for all foreign states combined?

A. The government wants to ensure that it has the necessary flexibility to support foreign states when it is in Canada's national interest to do so.

Budget 2024 announces that Canada intends to provide Ukraine with $2.4billion in financial assistance for 2024.

Since the start of 2022, Canada has provided around $6.9billion in financial assistance to the government of Ukraine under the BWRAA, to help Ukraine deal with the consequences of Russia's unprovoked and illegal war against Ukraine.

Canada remains steadfast in its support for Ukraine's brave fight against Russia. Asthe conflict enters its third year, Canada is unwavering in our support of the Ukrainian fight for sovereignty, territorial integrity, and democracy. Amendments to the Bretton Woods and Related Agreements Act are required to enable future support to Ukraine as well as to other countries as needed.

Q. Does increasing the financial assistance ceiling result in any fiscal impact for the Government?

A. No – changing the ceilings in the BWRAA has no fiscal impact.

Division 7 - Measures Relating to Modernizing International Financial Institutions

Overview

Multiple reform initiatives championed by various countries and stakeholders in international fora, such as the G20, have called on Multilateral Development Banks (MDBs) to improve their efficiency, responsiveness, and to significantly scale up financing for development. The proposed amendments to the European Bank for Reconstruction and Development (EBRD) Act and the International Development (Financial Institutions) Assistance Actwould enable Canada to use innovative financial instruments, such as the purchase of hybrid capital and the provision of guarantees, to bolster regional MDBs' ability to support developing countries. These amendments would mirror Canada's existing legislative authorities provided under the Bretton Woods and Related Agreements Actwith respect to the World Bank Group.

Similarly, the International Monetary Fund (IMF) 16^thd General Review of Quotas was concluded in December 2023, increasing IMF general quotas for all countries by 50percent in proportion to members' existing quotas. This will reinforce the quota-based nature of the IMF and will enhance its capacity to support global financial stability. The proposed amendment to the Bretton Woods and Related Agreements Act increases Canada's IMF quota subscription accordingly.

Key Messages

• Canada and its international partners have called for significant reforms to international financial institutions to make them more efficient and responsive to emerging global threats, and to scale up the resources they can provide.
• The proposed legislative amendments to the European Bank for Reconstruction and Development (EBRD) Act and the International Development (Financial Institutions) Assistance Act will enable Canada to use innovate financial instruments, such as guarantees or hybrid capital, to bolster regional multilateral development banks' ability to support borrowing countries.
• They also enable Canada to support these institutions with a lower fiscal impact.
• These amendments mirror Canada's existing legislative authorities provided under the Bretton Woods and Related Agreements Act,with respect to the World Bank Group.
• The proposed amendment to the Bretton Woods and Related Agreements Act increases Canada's International Monetary Fund (IMF) quota subscription by 50percent, in accordance with the agreed IMF 16^thd General Review of Quotas, concluded in December 2023.
• This will reinforce the quota-based nature of the IMF and enhance its capacity to support global financial stability.

Questions & Answers

Q. Why are these amendments to the European Bank for Reconstruction and Development (EBRD) Act and the International Development (Financial Institutions) Assistance Actbeing made now?

A. Canada and its international partners continue to call on multilateral development banks (MDBs) to undertake significant reforms to scale up the resources they can provide through using innovative financial instruments, such as hybrid capital and portfolio guarantees. However, Canada only currently has the legislative authorities in place to support such initiatives at the World Bank Group. While hybrid capital and portfolio guarantee proposals at the MDBs covered by these Acts have yet to be put forward, these amendments are being made now to ensure that Canada could support such proposals in the future.

Q. Why is the amendment to the Bretton Woods and Related Agreements Act being made now?

A. The International Monetary Fund's (IMF) 16^thd General Review of Quotas was concluded in December 2023, with IMF Governors voting to increase quotas for all countries by 50percent. A legislative amendment is required now to increase the amount Canada is permitted to pay the IMF for quota subscriptions in order to respect the implementation deadline of November 2024 agreed by Governors.

Division 8 - International Financial Assistance

Overview

The International Financial Assistance Act (IFAA) received royal assent in December 2018 and provides the Minister of Foreign Affairs and the Minister of International Development with the powers, duties and functions to support innovative finance programming in support of Canada's development policy objectives.

In Budget 2024, the government proposed introducing legislative amendments to the International Financial Assistance Act (IFAA). The purpose of the proposed amendments is to: 1) establish a statutory authority to allow the Minister of International Development to make payments to FinDev Canada; and 2) provide authority to continue charging the Consolidated Revenue Fund for realized or actual hard currency losses resulting from certain types of transactions, such as loans disbursed in Canadian dollars and repaid in another hard currency. This is a technical amendment to provide ongoing authority of the existing practice. Currency gains are credited to the Consolidated Revenue Fund.

These proposed amendments will provide additional flexibilities to Global Affairs Canada to expand the potential reach of its innovative finance policy and programs. This program aims to strategically use public funding to attract additional capital, including from the private sector, to support sustainable and inclusive economic growth, and help address the annual funding gap required to achieve the Sustainable Development Goals, currently estimated around $4 trillion per year.

The amendments also help fulfil the Minister of International Development's mandate letter commitment to "maintain Canada's international leadership on financing for development and continue to collaborate with new and existing partners in civil society and the private sector, including through the International Assistance Innovation Program [and] FinDev Canada…".

These proposed amendments are consistent with several of Canada's commitments to use innovative finance as part of its international assistance, including the most recent Charlevoix Commitment on Innovative Financing for Development.

Key Messages

• In Budget 2024, the government proposed introducing legislative amendments to the International Financial Assistance Act (IFAA).
• The purpose of the proposed amendments to the International Financial Assistance Act (IFAA) is to establish a statutory authority to give the Minister of International Development the option to make payments to FinDev Canada.
• These proposed amendments will provide additional flexibilities to Global Affairs Canada to expand the potential reach of its innovative finance policy and programs.
• The amendments also seek authority to continue charging the Consolidated Revenue Fund for realized or actual hard currency losses resulting from certain types of transactions, such as loans disbursed in Canadian dollars and repaid in another hard currency.
• This is a technical amendment to provide ongoing authority of the existing practice. Currency gains are credited to the Consolidated Revenue Fund.
• Since Canada's 2018 G7 Presidency and the establishment of the Charlevoix Commitment on Innovative Financing for Development, Canada has used blended finance as one of the ways to advance its development objectives.

Questions & Answers

Q. Why is the Government of Canada proposing changes to the International Financial Assistance Act?

A. The proposed changes to the International Financial Assistance Act (IFAA) will enable Canada to expand the options of its innovative finance programming and leverage the expertise and network of Canada's development finance institution, FinDev Canada.

Q. How do the proposed amendments enable Canada to continue to demonstrate leadership in innovative and blended finance to reach the poorest and most vulnerable?

A. All G7 members, as well as many other OECD peers, have innovative finance programs, which are delivered either via government ministries or Development Finance Institutions. Government ministries tend to focus more on transactions with a higher development impact and offer highly concessional capital, meaning capital below market rates. This allows Government ministries to take on more risk to support innovation and reach vulnerable populations in higher-risk contexts due to greater flexibility of repayment terms. By contrast, Development Finance Institutions take on more moderate risk to reach vulnerable populations in relatively stable development contexts, such as middle-income countries.

The proposed changes to the International Financial Assistance Act would allow Canada to align with best practices globally and could help leverage the respective strengths of Global Affairs Canada and FinDev Canada to achieve both high development impact, and strong private capital mobilization.

Q. How do the proposed amendments relate to Canada's international commitments and priorities related to innovative finance?

A. Canada signaled its commitment to innovative finance through the Charlevoix Commitment on Innovative Financing for Development, a signature initiative of Canada's 2018 G7 Presidency. Looking ahead to Canada's 2025 G7 Presidency, the proposed amendments to the International Financial Assistance Act will reaffirm Canada's position as a global leader in the field of innovative finance, which is likely to be an important theme of the upcoming G7 agenda.

Q. What results have been achieved to date related to the 2018 International Financial Assistance Act?

A. The 2018 International Financial Assistance Act enabled Global Affairs Canada to implement two pilot innovative finance programs: the International Assistance Innovation Program (2018-2023) and the Sovereign Loans Program (2018- 2023).

The International Assistance Innovation Program (IAIP) committed $872.8million for 32 repayable contributions and non-repayable technical assistance grants over the five-year pilot period. Projects include support to improve gender equality, to increase the resilience and sustainability of smallholder farmers, food systems and value chains, and to expand finance to small and medium enterprises. In total, the program's projects are expected to abate 27million tons of greenhouse gases (the equivalent of 7.5million vehicles), reach 4.8million people, and mobilize an additional $3.60 in private sector resources for each $1 invested.

The Sovereign Loans Program was allocated $657.7million to provide sovereign loans to eligible recipients on concessional terms as well as technical assistance grants over the five-year pilot period. To date, four sovereign loans have been successfully deployed to Jordan, Guyana, South Africa and Ecuador in the education, social and energy sectors. *Sentence redacted.*

Q. How does the option for the Minister of International Development to provide funding to FinDev Canada differ from FinDev Canada's existing funding?

A. The proposed amendment would allow FinDev to offer concessional financing alongside its core capital, which can only be deployed on commercial terms. Concessional financing could allow FinDev to invest in riskier, high-value development projects that could not be funded with commercial capital alone. This would allow FinDev to make a broader range of investments with a wider variety of partners to support the Sustainable Development Goals.

Q. Is there a risk of overlap between Global Affairs Canada's and FinDev Canada's innovative finance programs?

A. By taking a whole-of-government approach, Global Affairs Canada and FinDev Canada would leverage their respective strengths and complementary approaches to blended finance investments, which have a dual focus of achieving both high development impact and private capital mobilization.

This change will help to build markets in developing countries by supporting early-stage investments and helping larger investments grow and scale.

Q. How will Canadian companies benefit from the proposed changes to the International Financial Assistance Act?

A. One of the main objectives of blended finance is to encourage the private sector to invest in developing countries to support development outcomes. The private sector is a key partner in blended finance, potentially including Canadian private sector companies.

In addition, Canadian impact investors are enthusiastic about Canada's innovative finance programs. As the impact investment field in Canada matures, more Canadian private investors could potentially pursue blended finance opportunities, including through this program, to grow and expand their operations in developing economies.

Q. Are the overarching policy objectives of the International Assistance Innovation Program still relevant?

A. Yes. The International Assistance Innovation Program's policy objectives are to expand the reach and scope of innovative finance to build markets, mobilize public and private finance, and promote gender equality remain. These remain relevant and are aligned to Canada's international development priorities and public commitments to improve access to financing to support the Sustainable Development Goals.

Q. What is the difference between blended finance, innovative finance and concessional finance?

A. While the terms are sometimes used interchangeably, according to the OECD, blended finance is the strategic use of development funding to mobilize additional public or private funding towards sustainable development in developing countries.

Innovative finance refers to a broad group of creative approaches and financial instruments of which blended finance is one type. Other approaches include support that is partially or fully repayable and pay-for-results structures where funding is only provided following the achievement of certain milestones or specific development outcomes.

Concessional financing refers to support, whether loans, equity or other financing instruments, which is given on more generous terms (e.g. length of the loan, interest rate applied, or other terms) private banks or other commercial financing institutions are offering.

Q. How will these proposed amendments affect the Government of Canada's commitment to transparency in reporting on Official Development Assistance?

A. The proposed amendments to the IFAA will not impact the established reporting processes stipulated under the Official Development Assistance Accountability Act, which applies to all Government of Canada departments and agencies delivering international assistance funding.

As Canada's development finance institution, FinDev Canada is required to report on its Financing and Investment Activities to the OECD, as part of Canada's commitment to report on official development assistance. FinDev Canada will continue to report to these international bodies through Global Affairs Canada. Global Affairs will also continue to report on its delivery of international assistance funding, in accordance with its existing obligations/commitments under the Official Development Assistance Accountability Act.

Division 9 - Export Development Act

Overview

The legislation proposes to amend the Export Development Act (EDA) to set the amount of total liabilities and obligations allowed in respect of Canada Account transactions to $100billion. The amendment would come into force on the day it is made.

Key Messages

• The federal government is proposing to lower the statutory limit for total liabilities and obligations under the Canada Account from $115billion to $100billion.
• The Canada Account limit was increased in 2020 as part of Canada's COVID-19 emergency response measures. With the higher limit, the government was able to implement the Canada Emergency Business Account (CEBA) which provided critical support to Canadian businesses.
• As the CEBA begins to wind down, the government has an opportunity to lower the statutory limit and reduce the use of the Canada Account going forward.
• This is proposed alongside direction to Export Development Canada to leverage its full toolkit and authorities, including by updating internal risk management guidance to facilitate greater risk taking across its portfolio. As EDC takes on more higher-risk, higher-impact transactions itself (including through a new stretch capital envelope), it will reduce the need for direct support through the Canada Account.

Questions & Answers

Q. What is the Canada Account?

A. The Canada Account supports export transactions that exceed the financial or risk capacity of EDC's corporate account but are deemed to be in the national interest. EDC administers Canada Account transactions on behalf of the Government with funding provided from the Consolidated Revenue Fund. Transactions are provided on commercial terms and are authorized by the Minister of International Trade, with the concurrence of the Minister of Finance, as per section 23 of the Export Development Act.

Q. What is the current Canada Account limit and value of transactions under the Canada Account?

A. As part of the Government's COVID response measures, the Canada Account limit was increased from $20billion to $115billion. This increase was undertaken to ensure that the Government had flexibility to respond to the needs of Canadian businesses, including through the implementation of the Canada Emergency Business Account (CEBA).

As published in the 2021-22 Canada Account annual report, at March 31, 2022, the total value of transactions was $64.6billion.

Q. Why have you decided to lower the Canada Account limit at this time?

A. Aligned with the gradual winding down of other measures introduced during the pandemic, and in consideration of the repayment of Canada Emergency Business Account loans, the Government decided to reduce the Canada Account limit.

Q. What will the new Canada Account limit be?

A. In Budget 2024, the government proposes targeted amendments to the Export Development Act to reduce the aggregate limit on the value of the transactions under the Canada Account from $115billion to $100billion.

Q. Will there be further reductions to the statutory limit going forward?

A. The Government announced its plan to reduce the Canada Account limit from $115billion to $100billion. Any future changes to the limit would require legislative amendments.

Q. What transparency measures are in place for the Canada Account? Are the details of the Canada Account transactions disclosed and where can the public find the details on these transactions?

A. All current Canada Account transactions are disclosed on EDC's website on an ongoing basis. EDC also prepares an annual report on the Canada Account that is tabled by the Minister of International Trade, Export Promotion, Small Business and Economic Development in Parliament.

Q. What governance measures are in place for the Canada Account transactions?

A. Funding for transactions is provided through the Consolidated Revenue Fund as approved by the Minister of Finance and the Prime Minister. Transactions over $50million are also subject to cabinet approval. In addition, transactions are authorized by the Minister of International Trade, Export Promotion, Small Business and Economic Development, with the concurrence of the Minister of Finance, as per section 23 of the Export Development Act. Additional governance measures differ by transaction.

Q. Why is the government seeking to shift higher risk transactions from the Canada Account to EDC?

A. The stretch capital envelope will optimize the use of existing capital to ensure EDC's resources are providing the maximum support to Canadian exporters. Through the envelope, EDC will be able to take on transactions that might exceed their current appetite which would reduce the need for funding through the Canada Account and diminish pressure on the fiscal framework.

Division 10 - Financial Administration Act (Exemption Related to Certain Crown Corporations)

Overview

Intelligence and security agencies in Canada and elsewhere, including in the Five Eyes, rely on exemptions from government policies and procedures to undertake and protect classified operations that are essential for national security and defence.

This amendment to the Financial Administration Act (FAA) would add a reference to the Communications Security Establishment of Canada (CSE) under section 85(2) exemption provisions covering requirements for establishing and operating Crown corporations.

This amendment does not seek to introduce any new or novel provisions to the FAA. The RCMP and security services are already referenced under these exemption provisions.

This exemption would bring CSE in line with its federal security partners, better enabling it to deliver on the classified aspects of its mandate, which are critical in supporting Canada's international affairs, defence and security.

CSE's activities would continue to be subject to strong oversight measures, and in instances where they would risk contravening another Act of Parliament or risk interfering with the reasonable expectation of privacy of a Canadian or person in Canada, they are carried out under relevant Ministerial authorizations, with all foreign intelligence and cybersecurity Ministerial authorizations requiring approval from an independent Intelligence Commissioner.

CSE's activities would also continue to be subject to review by the Auditor General and appropriate review bodies such as the National Security and Intelligence Review Agency (NSIRA) and the National Security and Intelligence Committee of Parliamentarians (NSICOP).

Key Messages

• This amendment to the Financial Administration Act would add a reference to the Communications Security Establishment of Canada (CSE) under section 85(2) exemption provisions covering requirements for establishing and operating Crown corporations.
• This amendment does not seek to introduce any new or novel provisions. In fact, the Financial Administration Act already has exemption provisions in relation to establishing and operating Crown corporations which cover the RCMP and security services.
• Intelligence and security agencies in Canada and elsewhere, including in the Five Eyes, rely on exemptions from certain government policies and procedures to undertake and protect classified operations that are essential for national security and defence.
• This exemption would bring CSE in line with its federal security partners, better enabling it to deliver on the classified aspects of its mandate, which are critical in supporting Canada's international affairs, defence and security.
• CSE's activities would continue to be subject to strong oversight measures, and in compliance with relevant Ministerial authorizations, with all foreign intelligence, and cybersecurity Ministerial authorizations requiring approval from an independent Intelligence Commissioner.
• CSE's activities would also continue to be subject to review by the Auditor General and appropriate review bodies such as the National Security and Intelligence Review Agency (NSIRA) and the National Security and Intelligence Committee of Parliamentarians (NSICOP).

Questions & Answers

Q. What is the purpose of this amendment?

A. This amendment to the Financial Administration Act would add a reference to the Communications Security Establishment of Canada (CSE) under section 85(2) exemption provisions covering requirements for establishing and operating Crown corporations. This would bring CSE in line with its security counterparts and better enable CSE to deliver on classified aspects of its mandate.

Q. Why does CSE need this exemption?

A. Intelligence and security agencies in Canada and elsewhere, including in the Five Eyes, rely on exemptions from certain government policies and procedures to undertake and protect classified operations that are essential for national security and defence.

Q. Budget 2024 indicates that this will align CSE procurement authorities with similar authorities of other national security partners. Will CSE be using this exemption for procurement? And what does this mean in practice?

A.Similar to other security and intelligence agencies in Canada and elsewhere, CSE already has contracting authorities that enable it to keep certain procurement activities separate from regular GC procurement processes. This exemption would enable CSE to, with our Minister's approval, create corporations and not publicly report on their activities. Corporations could then be used to interact with suppliers for procurement purposes. This provides an additional practical means for CSE to acquire goods and services such as hardware or software that it requires for classified operations without disclosing information that could compromise Canada's international affairs, defence, or security.

Q. Do other intelligence or security organizations have similar exemptions?

A. The Financial Administration Act already has exemption provisions in relation to establishing and operating Crown corporations which cover the RCMP and security services. This amendment does not seek to introduce any new or novel provisions.

Q. If CSE hasn't previously needed this exemption, then what has changed?

A. CSE has an increasingly complex and rapidly evolving operating environment. It must therefore continually evaluate its requirements to ensure it has the tools necessary to execute its mission. With this exemption, CSE would be better positioned to adapt and keep pace with changing operational circumstances to effectively carry out classified activities under its mandate.

Q. Without this exemption, how has CSE been able to conduct its activities to date?

A. Similar to other security and intelligence agencies in Canada and elsewhere, CSE already has contracting authorities that enable it to keep certain procurement activities separate from regular GC procurement processes. Enabling CSE to create, with our Minister's approval, corporations and not publicly report on their activities simply provides an additional practical means for CSE to acquire goods and services that it requires for classified operations without disclosing information that could compromise Canada's international affairs, defence, or security.

Q. If CSE gets exempt from these standard government requirements, then how can accountability be maintained?

A. CSE's activities are carried out in accordance with operational policies, and in instances where they would risk contravening another Act of Parliament or risk interfering with the reasonable expectation of privacy of a Canadian or person in Canada, they are carried out under relevant Ministerial authorizations, with all foreign intelligence, and cybersecurity Ministerial authorizations requiring approval from an independent Intelligence Commissioner. CSE's activities are also subject to review by the Auditor General and appropriate review bodies such as the National Security and Intelligence Review Agency (NSIRA) and the National Security and Intelligence Committee of Parliamentarians (NSICOP).

Division 11 - Financial Administration Act (Information Disclosure Requirements)

Overview

Amendments to the Financial Administration Act would provide regulation‑making authority to prescribe labelling requirements by deposit-taking financial institutions for government direct deposit payments in customer account statements and online banking records.

Consistent and accurate labelling of government direct deposit payments in customer statements and online banking records would enable Canadians to better identify and understand the different types of government benefits and payments they receive

Key Messages

• Amendments to the Financial Administration Act would provide regulation-making authority to prescribe labelling requirements by deposit-taking financial institutions for government direct deposit payments in customer account statements and online banking records.
• Many Canadians receive multiple types of government payments, prompting confusion when transactions are labeled with generic or truncated descriptions.
• Consistent and accurate labelling of government direct deposit payments in customer statements and online banking records would enable Canadians to better identify and understand the different types of government benefits and payments they receive.

Questions & Answers

Q. Why is the Government seeking regulation-making authority in the Financial Administration Act to prescribe labelling requirements by financial institutions for government direct deposit payments in customer account statements and online banking records?

A. Consistent labelling of government direct deposit payments in customer statements and online banking records would enable Canadians to better identify and understand the different types of government benefits and payments they receive.

Q. Does the Government intend to introduce regulations to prescribe labelling requirements for government direct deposit payments?

A. The government continues to engage with financial institutions to encourage them to adjust their systems to provide for clearer and consistent labelling of government direct deposit payments. Regulations may be introduced in the future, if warranted.

Division 12 - Federal-Provincial Fiscal Arrangements Act

Overview

Amendments are required to the Federal-Provincial Fiscal Arrangements Act to implement the Canada Health Transfer (CHT) five per cent guarantee announced on February 7, 2023 as part of the Working Together to Improve Health Care for Canadians (Working Together) plan.

Under the Working Together plan, the government announced around $200billion over ten years to improve health care services for Canadians. This plan includes guaranteed fivepercent growth to the CHT for five years (2023-24 to 2027-28) to be paid through annual top-up payments to provinces and territories that the Minister of Health confirms have taken steps to improve the collection and management of health data. The last top-up payment will be rolled into the CHT base at the end of the five-year period, resulting in a permanent funding increase.

The CHT five per cent guarantee represents an estimated $15.3billion over ten years, from 2023-24 to 2032-33, in additional funding through the CHT. This estimate is dependent on GDP growth and all amounts, starting in 2025-26, are notional and subject to change.

Amendments to the Federal-Provincial Fiscal Arrangements Act will come into force upon Royal Assent.

Key Messages

• Amendments are required to the Federal-Provincial Fiscal Arrangements Act to implement the Canada Health Transfer (CHT) fivepercent guarantee announced in the Working Together to Improve Health Care for Canadians (Working Together) plan.
• Under the Working Together plan, the government announced around $200billion over ten years to improve health care services for Canadians. This plan includes guaranteed fivepercent growth to the CHT for five years (2023-24 to 2027-28) to be paid through annual top-up payments. The last top-up payment will be rolled into the CHT base at the end of the five-year period, resulting in a permanent funding increase.
• To receive the CHT fivepercent guarantee, provinces and territories must take steps to improve the collection and management of health data, in accordance with the Working Together plan. For a province or territory to be eligible, the Minister of Health must confirm that it is taking such steps by no later than December 1, 2024.
• The CHT five per cent guarantee represents an estimated $15.3billion over ten years in additional funding through the CHT. The value of the CHT fivepercent guarantee is dependent on GDP growth. All amounts, starting in 2025-26, are notional and subject to change.
• Amendments to the Federal-Provincial Fiscal Arrangements Act were not introduced earlier because no top-up payments were required for 2023-24 and 2024-25 given that GDP growth was above fivepercent.
• The additional health funding will benefit all Canadians by supporting provinces and territories in their actions to strengthen the public health care system. All Canadians will also benefit from improvements in the collection and management of health data that will support the public health care system.

Questions & Answers

Q. Why were amendments to the Federal-Provincial Fiscal Arrangements Act not introduced earlier?

A. Amendments to the Federal-Provincial Fiscal Arrangements Act were not introduced earlier because no top-up payments were required for 2023-24 and 2024-25 given that GDP growth was above fivepercent.

Q. What is the value of the CHT fivepercent guarantee?

A. The guarantee ensures that the CHT will grow by at least 5percent per year until 2027‑28 by providing top up payments to eligible provinces when the CHT escalator—which is based on GDP growth—falls below 5percent. As a result, its estimated value depends on GDP growth. The estimated value of the top-up payments, based on the Budget 2024 GDP outlook, until 2027-29 is presented below. All CHT amounts, including the CHT fivepercent guarantee, starting in 2025-26 are notional and subject to change.

The CHT fivepercent guarantee represents an estimated $15.3billion over ten years in additional funding through the CHT.

Q. What steps do provinces and territories have to take to receive the CHT fivepercent guarantee?

A. To receive the CHT five per cent guarantee, provinces and territories must take steps to improve the collection and management of health data, in accordance with the Working Together to Improve Health Care for Canadians plan.

The Minister of Health must provide the Minister of Finance written confirmation that eligible provinces and territories have taken steps to improve the collection and management of health data by December 1, 2024 in order for them to receive the CHT fivepercent guarantee.

Q. Can provinces and territories qualify into the CHT fivepercent guarantee for remaining years if they demonstrate they have taken steps to improve health data after December 1, 2024?

A. No. To access the fivepercent guarantee the Minister of Health must confirm by December 1, 2024 that a province or territory is taking steps to improve the collection and management of health data.

Q. Do provinces and territories have to requalify for the CHT fivepercent guarantee each year?

A. No. Provinces and territories do not need to requalify each fiscal year once they have demonstrated to the Minister of Health that they have taken steps to improve the collection and management of health data.

Division 13 - Private Sector Pension Plans

Overview

Division 13 of Part 4 amends the Pension Benefits Standards Act, 1985 to require that the Superintendent of Financial Institutions publish certain information relating to pension plan investments of certain federally regulated pension plans. The information on plan investments to be published and the pension plans to be included will be set out in the Pension Benefits Standards Regulations, 1985. This proposal was first announced in the 2023 Fall Economic Statement and is intended to improve the transparency of investments of large federally regulated pension plans.

It also amends the Pooled Registered Pension Plans Act to ensure that all members of a pooled registered pension plan receive information regarding the plan when they join it. This would include information related to a member's right to terminate their membership as well as other required information about the plan that is set out in the Pooled Registered Pension Plans Regulations.

Key Messages

Pension Benefits Standards Act, 1985

• Enhancing the retirement security of Canadians is an important goal of the Government of Canada.
• To provide stable and secure retirement incomes for Canadians, pension plans typically invest their funds through diversified portfolios across a wide range of asset classes and geographic jurisdictions.
• It is important that plan members and retirees understand where their pensions are being invested. That is why the Government is committed to improving the transparency of pension fund investments.
• The 2023 Fall Economic Statement announced that the Government would require large federally regulated pension plans to disclose certain types of investment information to the Office of the Superintendent of Financial Institutions (OSFI), and that this information would be made publicly available.
• To implement this proposal, the Government proposes to amend the Pension Benefits Standards Act, 1985 to require OSFI to publicly disclose this investment information.
• The information on plan investments to be published and the pension plans to be included will be set out in regulations.

Pooled Registered Pension Plans Act

• Members of a pooled registered pension plan who are enrolled in the plan by their employer are entitled to receive information about the plan when they become a member.
• Members who join the plan in any other way (e.g., self-employed) are currently not covered by this provision.
• The Government proposes to amend the Pooled Registered Pension Plans Act to address this gap and ensure that all members of a PRPP receive the necessary information when joining the plan.

Questions & Answers

Q. What types of pension plans will be affected by these proposed amendments?

A. The proposed legislative amendment to the Pension Benefits Standards Act, 1985 (PBSA) would affect 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 proposed amendments to the Pooled Registered Pension Plans Act (PRPP Act) would affect federally regulated pooled registered pension plans (PRPPs). This includes PRPPs with members linked to employment in federally regulated industries whose employer participates in a PRPP and those who are self-employed in the Territories.

Q. Why is the government proposing to require public disclosures of pension plan investments?

A. In the 2023 Fall Economic Statement, to improve transparency around pension investments, the government announced that it would require large federally regulated pension plans to disclosure the distribution of their investments, both by jurisdiction and asset-type per jurisdiction, to the Office of the Superintendent of Financial Institutions (OSFI) and that this information would be made publicly available.

The legislative amendment proposed in Budget 2024 is required to allow OSFI to make this information publicly available.

Q. What sort of investment information will be publicly disclosed?

A. The legislative amendment enables OSFI to publicly release information relating to the investments of certain federally regulated pension plans. The regulations would specify what information submitted to OSFI could be publicly released and the pension plans to be included.

As announced in the 2023 Fall Economic Statement, the information to be disclosed would relate to the distribution of plan investments for large federally regulated plans, both by jurisdiction and asset-type per jurisdiction.

Q. Why is the government proposing to make a technical amendment to the Pooled Registered Pension Plans Act?

A. Members of a pooled registered pension plan who are enrolled in the plan by their employer are entitled to receive information about the plan when they become a member (investment choices, process for terminating membership, etc.). However, members who join the plan in any other way (e.g., those who are self-employed) are not covered by this provision.

It is important for all members of a PRPP to receive this information. The Government proposes to amend the Pooled Registered Pension Plans Act to address this gap and ensure that all members of a PRPP receive the necessary information when joining the plan.

Division 14 - Canada Pension Plan

Overview

The Canada Pension Plan (CPP) is a social insurance program that is funded by the contributions of employees, employers and self-employed persons, and by the revenue from CPP investments. While it is mainly a retirement plan, the CPP also provides modest income replacement to contributors and their families upon the disability or death of a wage earner. The amount of benefits is generally based on how much and how long an individual contributed to the Plan.

As joint stewards of the CPP, federal and provincial Ministers of Finance review the Plan every three years to ensure that it continues to respond to the needs of beneficiaries, workers and employers. As part of the 2022-2024 Triennial Review, Canada's Ministers of Finance reached an agreement in principle on a series of changes to the CPP. These changes will begin on January 1, 2025.

Part 4, Division 14 of this bill amends the Canada Pension Plan to,

• provide for a top-up of $2,500 to the death benefit in cases where no other CPP benefit (with the exception of the orphan's benefit) has been paid in respect of the deceased contributor's contributions;
• create a new child's benefit for dependent children aged 18 to 24 who are in part-time attendance at school;
• maintain eligibility for the disabled contributor's child's benefit in cases where the disabled contributor reaches age 65;
• extend the CPP's incapacity provisions to protect the date of application for the disabled contributor's child's benefit;
• preclude entitlement to the survivor's pension in cases where an individual has received a division of unadjusted pensionable earnings in respect of their deceased separated spouse; and
• clarify the determination of the payee of the disabled contributor's child's benefit.

Key Messages

• The federal and provincial governments are joint stewards of the Canada Pension Plan (CPP). Every three years, the federal and provincial Ministers of Finance undertake a review of the financial state of the CPP and may make recommendations regarding changes to the Plan.
• As part of the 2022-2024 Triennial Review, the Ministers of Finance unanimously agreed to recommend five changes to the CPP. In addition, these amendments will clarify the language regarding which parent receives the disabled contributor's child's benefit on behalf of a minor child in cases of joint custody.
• These changes introduce improvements to meet the evolving realities and needs of contributors, and also clarify the intent of the legislation.

Top-up to the death benefit

• The intent of this amendment is to introduce a $2,500 top-up to the CPP death benefit. The top-up will be payable in cases where the deceased contributor was not paid a retirement pension or disability benefits, and no survivor's pension is payable in respect of their contributions.
• The death benefit is a one-time, non-indexed lump sum payment of $2,500, usually payable to an estate upon the death of an eligible contributor. The purpose of the top-up is to provide a modest "return" on contributions in cases where no other CPP benefit (with the exception of the orphan's benefit) has been paid in respect of the deceased's contributions. This will address a perceived inequity in the way that the CPP pools risks, whereby some contributors "benefit more" from the Plan than others.
• The top-up will be payable if the contributor's death occurs after December 31, 2024.

Creation of a new child's benefit

• The intent of this amendment is to create a new child's benefit for dependent children of disabled or deceased contributors. The benefit will be payable to eligible children who are aged 18 to 25 and in school part-time.
• CPP children's benefits provide a monthly flat rate amount ($294.12 in 2024) to help support the dependent children of those contributors whose work has ceased due to disability or death. Currently a dependent child aged 18 to 25 must be in school or university full-time in order to receive the benefit.
• The new benefit recognizes that not all children are able to attend school on a full-time basis. There may be any number of reasons for this: for example, being unable to afford full-time tuition, or having caregiving responsibilities. Often, the child's inability to attend school full-time may not reflect a change in their financial dependency on their parents.
• The amount of the new benefit will be 50% of the amount paid to full-time students. The child must be attending a recognized educational institution on a part-time basis.

Extension of eligibility for the disabled contributor's child's benefit

• The intent of this amendment is to extend eligibility for the disabled contributor's child's benefit in cases where the child's disabled parent reaches age 65.
• A disabled contributor's child's benefit is payable to a child of a contributor who is receiving a CPP disability pension or a post-retirement disability benefit. The disability pension and post-retirement disability benefit are payable until age 65. These benefits are intended to protect disabled working-age contributors, and 65 is the standard age of retirement. Therefore, when these benefits cease at age 65, the disabled contributor's child's benefit also ceases.
• This contingency was infrequent at the Plan's inception in 1966. However, it is more frequent today: individuals are having children later in life, and the disabled contributor's child's benefit is payable up to age 25 if the child is in school.
• Therefore, extending eligibility past the parent's age of 65 addresses the social trend of parenthood starting later in life. It also recognizes that a child's economic dependence on a disabled parent does not necessarily end when the parent's disability benefits cease.

Extension of CPP's incapacity provision to disabled contributor's child's benefit

• The intent of this amendment is to allow the CPP's incapacity provision to be used for the purpose of an application on behalf of a disabled contributor's child's benefit. This will ensure that children of contributors who are both disabled and incapacitated will have their benefit payments protected.
• The CPP's incapacity provision provides discretionary authority to deem a benefit application to have been made at an earlier date, in cases where the applicant is or was incapable of forming or expressing an intention to apply. The provision thereby allows for greater retroactive payment of benefits, since the start date of a benefit is keyed to the application date.
• As currently worded, the provision applies only to the person making an application for benefits on their own behalf. This means that an applicant who is found to be incapacitated can have their application for a disability pension or post-retirement disability benefit back-dated to the time when they were not incapacitated. However, their application for a disabled contributor's child's benefit, made on behalf of their dependent child, cannot be back-dated.
• This amendment recognizes that a dependent child's need for financial support corresponds to the time period that their parent is unable to work by reason of disability. While the incapacity provision protects the most vulnerable of disabled contributors, their dependent children will now receive the same protection.

Ineligibility for the survivor's pension in cases of credit splitting

• The intent of this amendment is to introduce a condition of ineligibility for the survivor's pension in cases where there has been a division of unadjusted pensionable earnings, or "credit split," with a deceased contributor. In other words, individuals who split their CPP pension credits with their separated spouse will not also be eligible for a survivor's pension upon the death of that spouse.
• The credit-splitting provision allows for an equal division of unadjusted pensionable earnings, or "pension credits," earned during a period of conjugal relationship, once that relationship has ended.
• A 1986 amendment to the CPP gave separated spouses access to credit splitting. The rationale was that the separation signals the end of the spouses' relationship and economic partnership. Separated spouses had the same right of access to credit splitting as divorced spouses or former common-law partners.
• However, separated spouses are in the unique position of still being legally married. As such, they are also potentially eligible for a survivor's pension, which is payable upon the death of a spouse (absent that spouse having a common-law partner). The survivor's pension is intended to compensate for the loss of income in a shared household.
• This legislative amendment is intended to close the loophole whereby separated spouses may benefit from both a credit split and survivor's pension. It will ensure consistent treatment of all individuals who end a conjugal relationship, regardless of their marital status.
• By applying for a credit split, individuals would signal that the economic partnership with their separated spouse has ended. Individuals would still have the option of applying for a survivor's pension rather than a credit split, which would signal that there remains some financial interdependence in spite of separation. However, they would no longer be able to benefit from two provisions that are intended for mutually exclusive conditions.
• Separated spouses will have to evaluate the advantages and disadvantages of each option, depending on their particular circumstances. Furthermore, in cases where an individual is in receipt of a survivor's pension and subsequently applies for a credit split, the disentitlement to the survivor's pension will be prospective.

Clarification of the payee for the disabled contributor's child's benefit

• The intent of this amendment is to clarify the determination of the payee for the disabled contributor's child's benefit, in order to make clear that the disabled contributor is the default payee in most cases, per the initial intent of the legislation.
• The purpose of the disabled contributor's child's benefit is to provide financial support for the dependent children of disabled CPP contributors—support which the disabled contributor would otherwise have provided were they able to work.
• The current legislation indicated for the disabled contributor to receive the benefit on behalf of a minor child, save in cases where the child is living apart from the contributor. However, as "living apart" was not defined, it resulted in inconsistent tribunal and court rulings.
• The proposed amendment does two things: first, it modernizes the old terminology of "custody" and "control" with "decision making authority" and "parenting time", as per the Divorce Act. It also specifies that the disabled contributor is presumed to have "decision making authority" and, as a result, receive the benefit on behalf of a minor child, unless they have less than 20% of the parenting time.

Questions & Answers

General Questions

Q. What are the proposed changes to the CPP?

A. On their December 15, 2023, meeting, federal and provincial ministers of finance came to an agreement on a set of five changes to the CPP:

• Adding a top-up of $2,500 to the CPP death benefit for eligible contributors;
• Introducing a new CPP children's benefit for part-time school attendance;
• Preserving eligibility for the Disabled Contributor's Child Benefit (DCCB) in cases where the disabled contributor reaches age 65 and no longer receives a disability benefit;
• Extending the CPP's incapacity provisions to also protect the disabled contributor's child benefit; and
• Ending entitlement to the CPP survivor's pension benefit for separated, but legally married individuals that request a CPP credit split in 2025 or thereafter.

In addition, these proposed reforms will clarify the language regarding which parent receives the DCCB on behalf of a minor child in cases of joint custody.

Q. When will the proposed changes take place?

A. The proposed changes would come into force on January 1^st, 2025. Approvals from two-thirds of the provinces with two-thirds of the population will be required to enact the changes. Once the legislation has passed, provincial Orders-in-Council will be sought.

Q. Would Canadians have to pay higher contributions to the CPP as a result of these changes?

A. No. These proposed improvements to the CPP would not require any increase to the CPP's contribution rates. In fact, the financial impact of these targeted changes is so small that it would not affect the CPP's minimum contribution rates.

Q. Is this a good time for the CPP to make changes given the uncertainties that the Plan and the economy are facing?

A. Canada's Finance Ministers considered the overall health of the Plan and the economy as part of the 2022-2024 Triennial Review. The 31^st Actuarial report on the CPP prepared by the Office of the Chief Actuary as of December 31, 2021, confirmed that the Plan is financially sound and that the current legislated contribution rates are sufficient to sustain the financial demands on the CPP for at least the next 75 years.

Canada's Finance Ministers selected this proposed reform package that has no material impact on the Plan or its financial state but will address long-standing issues, thus making a sizeable difference to impacted beneficiaries.

Q. Would these changes affect individuals who are already receiving their CPP benefits?

A. No. The proposed changes will all be applied on a go-forward basis and only apply to individuals starting benefits in 2025 or later. They do not alter the amounts of benefits currently in pay.

Q. Would these changes have an impact on the Québec Pension Plan?

A. No, the proposed changes will not have an impact on the Québec Pension Plan. The Québec Pension Plan is independently managed by the Québec Government.

While the CPP and the Québec Pension Plan are comparable, they are each enacted by their own legislation, and there are differences between the two plans.

The changes being proposed to the CPP will not, however, impact the full portability of benefits and contributions between the plans, such that workers will continue to be able to move within the country without jeopardizing future pension benefits.

Adding a Top-up to the CPP Death Benefit for Eligible Contributors

Q. Which contributors will be eligible for the top-up?

A. This top-up would be provided to the estate of CPP contributors who die before collecting a retirement or disability pension and leave behind no partner that could collect a survivor's pension.

Individuals who receive a survivor's pension due to having lost a spouse or common-law partner would still be eligible for the top-up, as would those who received children's benefits.

Q. Why is the top-up limited to such a small and specific group of contributors?

A. This top-up is intended to provide an additional benefit to individuals who die without being able to access other CPP benefits, despite having made contributions.

It seeks to rebalance the way that the CPP pools risks between contributors, recognizing that, for such individuals, the CPP death benefit is their only return on their contributions.

Q. How much is this top-up?

A. The top-up is $2,500, effectively doubling the value of the CPP death benefit for those individuals who receive no other return on their contributions to the CPP.

Q. Will the top-up be taxable?

A. Yes. Like all CPP benefits, the death benefit is considered taxable income.

Q. Does this proposed change apply retroactively or only for those who pass away after the passage of the legislation?

A. The top-up to the CPP Death Benefit would only be available to individuals who die on or after January 1, 2025. Applying legislation on a go forward basis avoids confusion in delivery and potential interaction with other benefits and with already fully settled estates. If this were to be applied retroactively, it could be applied as far back as the program inception in 1966.

Introducing a New Children's Benefit for Part-time Attendance

Q. What is the new benefit for part-time school attendance and who will be eligible?

A. This benefit would be provided to the children of deceased or disabled contributors who are at least 18 years old, but under the age of 25, who are attending a recognized educational institution. This mirrors the eligibility criteria for the existing CPP children's benefits.

However, while the existing children's benefits require individuals in that age range to be attending a recognized institution on a full-time basis to be eligible, this new benefit will be available to individuals attending such an institution on a part-time basis, subject to a minimum threshold.

This new benefit would be a monthly flat-rate equal to 50 percent of the existing CPP children's benefits.

Q. Why is the partial benefit half of the full-time benefit?

A. This amount provides a benefit that is significant for part-time students, while also reflecting their reduced educational costs and greater ability to seek additional income, relative to individuals attending school on a full-time basis.

Q. What is or would be defined as part-time school attendance?

A. The CPP regulations will reflect that a student's full-time or part-time status is determined by the educational institution. However, the regulations will also apply a minimum threshold of 20% of a full course load to qualify for any benefit.

Relying on educational institutions' own definition ensures that the administration of the benefit is based on the definition set by the authority best positioned to determine requirements for students, especially given the wide variety in potential educational institutions (i.e. – adult high schools, colleges, vocational schools, universities, etc.). It also simplifies the administration of the benefit and does not add undue administrative burden on educational institutions.

The minimum threshold of 20% ensures that eligible students attend school for a minimum number of hours to receive financial support. This is an important eligibility criterion as educational institutions define part-time school attendance differently and as many do not set a lower limit. The 20% limit is the same minimum threshold used in the Student Financial Assistance Program.

Q. What institution(s) count as a "school" or as a recognized institution to qualify for this benefit?

A. To qualify for the partial benefit for part-time school attendance, an individual would be required to be registered at any primary, secondary, adult high school, or post-secondary educational institution on a part-time basis.

Final criteria for eligibility will be clearly established under coming regulatory amendments.

Extend Eligibility for the Disabled Contributor Child Benefit (DCCB) when a Disabled Parent Reaches Age 65

Q. What is the DCCB?

A. The Disabled Contributor Child Benefit (DCCB) is a monthly flat-rate payment provided to the dependant children of an individual receiving either a disability pension, or a post-retirement disability benefit from the CPP.

Q. What is this proposed change, and why is it necessary?

A. Under the current legislation, eligibility for the DCCB is dependant on the child having a parent receiving a CPP disability benefit. However, CPP disability benefits end at age 65 when the disabled contributor becomes eligible for benefits under the Old Age Security (OAS) program.

While this transition to OAS ensures that the disabled contributor continues to receive income support from Canada's public pensions, the same is not true of their dependant children who lose access to the DCCB.

This proposed change would resolve the situation by ensuring that individuals receiving a DCCB will remain eligible for the benefit so long as they continue to meet the definition of a dependant child. Specifically, a dependent child must be under the age of 18, or under the age of 25 while attending a recognized educational institution on a full-time basis to receive the original benefit, or on a part-time basis to receive the new, proposed part-time children's benefit.

Extending the Incapacity Provisions to protect the Disabled Contributor's Children

Q. What is this change, and why is it necessary?

A. The current CPP legislation protects individuals who are found to be incapable of forming the intent to apply for their benefits, exempting those benefits from the standard 11-month limit on retroactivity. However, these provisions only apply to the applicant themselves, and not their dependents.

This results in situations where children (or their parent or guardian) cannot apply for a disabled contributor's child benefit because their parent is incapable of applying for the disability pension. While the disabled contributor's benefits are protected by the incapacity provision, the child's benefits are not. This means that the 11-month limit on retroactivity applies to the dependent children.

The proposed change would ensure that, when an individual is found to have been incapacitated and granted an extended period of retroactivity for a CPP disability pension, the same extension would apply to any consequential DCCB that were applied for simultaneously.

End entitlement to a CPP Survivor's Benefit for separated but legally married couples that have divided their CPP pension credits

Q. What is CPP credit splitting?

A. CPP credit splitting (formally called the Division of Pensionable Earnings, or DUPE) is a provision which equally divides the pension credits earned by each of the former spouses or common-law partners over the course of their conjugal relationship.

This division recognizes that spouses and individuals in a common-law relationship are economic partners, each of whom contributes to the well-being of their shared household, including the accumulation of assets and pension credits.

Credit splitting ensures that each former partner receives their rightful share of pension credits earned through their joint efforts during their relationship, now that the said relationship and economic partnership has ended, as is the case with other marital assets.

Q. Why is this change being proposed?

A. Under the present legislation, married individuals who separate from each other may request a credit split after living apart for a year. However, despite the end of their conjugal relationship and economic partnership, such individuals remain legally married. As a result, when one of these individuals dies, their former partner is entitled to a survivor's pension as the legal spouse of the deceased, unless the deceased contributor has a new common-law partner at the time of their death.

The intent of the CPP survivor's pension is to provide the spouse or common‑law partner of a deceased contributor with a measure of income replacement to offset the economic impact on the contributor's household. Providing the survivor's pension to a former partner following a separation does not align with the intent of the pension, as the former partner is no longer part of the household and in an economic relationship with the deceased.

Further, this ability to collect a survivor's pension from a former partner only applies to individuals in a specific circumstance and marital status individuals who are separated yet remain legally married. Such individuals remain eligible for the survivor's pension even if they are part of a common-law relationship at the time of the death of their separated spouse.

The proposed change will treat the credit split as the end of the economic partnership, and end eligibility for the survivor's pension, increasing equity between individuals with different martial statuses and ensuring that survivor's pension payments align with the intent of the pension.

Q. What would this change do?

A. The proposed change will alter the eligibility criteria for the survivor's pension to exclude individuals who remain legally married but have separated and gone through the process of dividing their CPP pension credits in 2025 or later. In addition, for separated individuals who are already in receipt of a survivor's pension and then claim a credit split, their eligibility to the survivor's pension will end at the time of the credit split.

It will not apply to individuals who have already divided their credits prior to the legislation coming into force.

Q. What happens if the couple reconciles?

A. Credit splits, once executed, are a permanent alteration to the CPP's record of earnings and are not reversed in the event a couple reconciles. However, this new period of cohabitation would be treated as a new relationship, and eligibility for the survivor's pension would be restored.

Q. What if the decision to remain married despite being separated is deliberate and reflects an ongoing economic dependency between separated spouses?

A. The proposed change would only apply to individuals who establish a separate economic relationship from one another at the end of a marriage, and divide their marital assets, including pension credits. The proposed changes are intended to ensure the CPP's legal framework reflects the desire of both partners to no longer have any economic or interdependent relationship from a legal perspective.

Individuals who remain economically bound and legally married are not obligated to apply for a credit split and may signal their ongoing financial relationship by not making a request.

Clarifying the determination of the payee for the Disabled Contributor's Child's Benefit (DCCB) in cases of joint custody

Q. What would this change do?

A. Under the current legislation, in cases of joint custody, the DCCB paid on behalf of a minor child is provided to the disabled contributor, unless the child is living apart from their parent. This proposed change will clarify the definition of 'living apart' in the legislation to ensure that partial custody is respected, such that a child is only considered to be apart from the disabled contributor if they reside elsewhere more than eighty percent of the time.

Q. Why is the disabled contributor the default recipient of the DCCB?

A. The intent of the DCCB is to defray costs associated with the raising and maintaining of a child, costs which are incurred by the disabled contributor even in cases where they have partial custody of the child. For example, the additional costs of maintaining an additional bedroom are consistent, regardless of if the child is with their disabled parent twice a week or four times a week.

Making the disabled parent the default recipient of the DCCB is also imperative for maintaining the privacy of the disabled parent, and protection of their personal information regarding their disability status.

Division 15 – Public Sector Pension Investment Board Act

Overview

Part 4 of Division 15 amends the Public Sector Pension Investment Board Act to provide for an administrative mechanism for recalling an amount from the Public Sector Pension Investment Board to the Consolidated Revenue Fund in certain circumstances currently defined under the Canadian Forces Superannuation Act, the Public Service Superannuation Act, and the Royal Canadian Mounted Police Superannuation Act.

Amendments come into force upon Royal Assent.

Key Messages

• In Budget 2024, the government proposes to introduce amendments to the Public Sector Pension Investment Board Act to facilitate the transfer of funds between the Public Sector Pension Investment Board (PSPIB) and the Consolidated Revenue Fund.
• When the PSPIB was established in 1999, it was intended to help lower costs, increase sustainability, and establish a new funding framework for the federal public sector pension plans.
• As this funding framework is maturing, the Government is taking steps in anticipation of the eventual need to recall funds from the PSPIB to pay member pension benefits.
• The technical amendment would not expand the Government's authority to request funds from the PSPIB or change the circumstances under which funds could be requested. It simply makes clear that it is the role of the President of the Treasury Board to make this request to the PSPIB and that the allocation of the funds must be made in consultation with other ministers, as appropriate.

Questions & Answers

Q. Why are technical amendments required to recall funds from the Public Sector Pension Investment Board (PSPIB)?

A. Technical amendments are being made to clarify the role of the President of the Treasury Board with respect to the recall function in the existing funding scheme for the public sector pension plans. These amendments do not change any of the existing authorities of the funding scheme. The Canada Pension Plan Investment Board Act contains a similar provision.

Q. Why would the government need to recall funds from the PSPIB?

A. Pension benefits for beneficiaries of the three public sector pension plans are currently paid by active contributions from the employer and plan members. Net contributions are then sent to the PSPIB for investment in capital markets. When the pension benefits being paid out become greater than the incoming contributions to that plan, the government will need to recall funds from the PSPIB to ensure the seamless payment of pension benefits to retirees and dependants. This process is in line with the normal functioning and maturation of any pension plan that is funded by both contributions and investment returns.

Q. Would a recall of funds from the PSPIB affect its operations and investment strategy?

A. When the PSPIB is required to transfer recalled funds, it may need to sell assets to gain the necessary liquidity to facilitate the recall. This is a normal investment management practice that is routinely undertaken by pension fund investment managers. The PSPIB has always considered the eventual need for the government to recall funds when conducting its operations and planning its investment strategy.

Q. Would a recall of funds from the PSPIB affect the future pension benefits of plan members or pension benefits currently paid to plan beneficiaries?

A. No, a recall of funds would not affect future pension benefits of plan members or pension benefits currently paid to plan beneficiaries. The pension benefits of plan members are set out in statute under the Canadian Forces Superannuation Act, the Public Service Superannuation Act, and the Royal Canadian Mounted Police Superannuation Act.

The recall of funds is a normal administrative function that allows those funds to be used for their designated purpose – that is, to support the fulfilment of the pension plan's obligations to retirees and their dependants.

Division 16 - Consumer-Driven Banking Framework

Overview

The 2023 Fall Economic Statement committed the Government of Canada introducing a consumer-driven banking framework through Budget 2024.

The first 2024 Budget Implementation Act introduces implementation legislation for key components of the consumer-driven banking framework through the establishment of the Consumer-Driven Banking Act (CDB Act) and related amendments to the Financial Consumer Agency of Canada Act (FCAC Act).

The coming-into-force date(s) for the CDB Act and amendments to the FCAC Act will be set by order of the Governor in Council.

Establishment of the Consumer-Driven Banking Act

The Consumer-Driven Banking Act (CDB Act) sets out elements pertaining to scope and the process for designation of the technical standards body.

The CDB Act requires the FCAC to maintain a public registry of participating entities in the consumer-driven banking framework.

The initial scope of data that the CDB Act will require participating entities to share, at the direction of the consumer, includes:

• Deposit accounts;
• Registered and non-registered investment accounts;
• Payment products, including credit cards and pre-paid payment products;
• Lines of credit, mortgages and other kinds of loans; and
• Other products or services provided for by regulations.

"Derived data" is out of scope. This refers to data about a consumer, product or service that has been enhanced to significantly increase its usefulness or value.

Functional scope for participating entities will be limited to "read access." This means that participating entities will only be able to see, not change, the data held by another participating entity, should a consumer request it. The scope does not include payment initiation, or "write access" as it is sometimes called.

The CDB Act empowers the Minister to designate a technical standards body to be responsible for establishing the technical standards.

The process for designating the technical standards body is by order, which must be published in the Canada Gazette. When designating the technical standards body, the Minister is required to consider:

• The need to ensure the safe and efficient sharing of data among participating entities;
• The principles of fairness, accessibility, transparency and good governance;
• Any other principles that the Minister considers relevant; and
• Any other principles provided for by regulations.

The Minister must review the designation of the technical standards body every three years and has the power to revoke the designation under certain circumstances.

The designated technical standards body must submit an annual report to the Senior Deputy Commissioner including any changes with significant impact on the technical standards or technical standards body.

Amendments to the Financial Consumer Agency of Canada Act

The FCAC Act is amended to expand the agency's mandate to include supervision of the consumer-driven banking framework. This includes:

• Supervising participating entities;
• Contributing to the safety and security of consumer-driven banking;
• Fostering participation in consumer driven banking; and
• Fostering consumers' understanding of consumer-driven banking related issues.

The FCAC Act is amended to create a "Senior Deputy Commissioner for Consumer-Driven Banking", who will be responsible for the supervision of the framework. The Commissioner of the FCAC retains full administrative control of the FCAC and will continue to report to the Minister of Finance and Parliament.

Key Messages

• An estimated 9million Canadians currently share their financial data by providing confidential banking credentials to service providers. This process, known as screen-scraping, raises security, liability, and privacy risks to consumers and the financial system.
• To protect consumers, the government has introduced Canada's Consumer Driven Banking Framework. It will enable Canadians and small businesses to securely and efficiently access innovative financial technology products and services that can help them improve their financial outcomes.
• To further plan and consult with stakeholders and other levels of governments, the government intends to establish a consumer-driven banking framework by introducing legislation through two phases, starting with the Budget Implementation Act.
• The first proposed legislation establishes the Consumer-Driven Banking Act and focuses on key elements of the framework, such as governance, technical standards, and scope.
• Related amendments to the Financial Consumer Agency of Canada Act are also required to create a new Senior Deputy Commissioner position to supervise the framework. This position will report to the Commissioner of the Financial Consumer Agency of Canada.
• Taken together, the proposed legislation represents a culmination of long-term engagement with industry, consumer groups, and experts and delivers a made-in-Canada solution to the issue of screen-scraping.
• The remainder of the framework would be finalized and introduced as part of the second Budget Implementation Bill in the fall.

Questions & Answers

Governance

Q. Why isn't the whole framework being included in Budget Implementation Act 1?

A. Introducing foundational elements of the framework in Budget Implementation Act 1 will give clarity to stakeholders on governance, scope, and technical standards, areas where there is broad alignment, while also providing the Financial Consumer Agency of Canada time to prepare and build capacity for its expanded supervisory mandate.

Introducing these key elements early in the Budget Implementation process will also give industry more time to build toward implementation readiness while the Department of Finance continues to engage with stakeholders to refine more complex elements, such as the accreditation framework and common rules for privacy, security, and liability, to be introduced in Budget Implementation Act 2.

Q. Why was the Financial Consumer Agency of Canada chosen to oversee consumer-driven banking in Canada?

A. The decision to name the Financial Consumer Agency of Canada was informed by an extensive review of international jurisdictions and is in line with international best practices. It will o ensure Canadians benefit from effective government oversight of financial data sharing.

As an existing consumer protection and market conduct regulator for the financial sector, the Financial Consumer Agency of Canada is well placed to oversee an expanded mandate while minimizing cost to government for initial setup of the framework, and reducing the time required to build capacity.

Consumer-driven banking enables and empowers consumers to use their own financial data to make more informed financial decisions. The FCAC's existing financial literacy and consumer education mandate make it well placed to help guide consumers who engage in consumer-driven banking.

Q. What powers does the Financial Consumer Agency of Canada have to go after companies who commit violation under the framework?

A. The Financial Consumer Agency of Canada has existing supervision powers to safeguard consumers in their interactions with financial institutions. These powers include imposing penalties, imprisonment, publicly naming violators and directing banks to take specific actions to rectify violations. All of these powers would remain with the Financial Consumer Agency of Canada and its mandate would be broadened to capture activities under the consumer-driven banking framework and the technical standards body.

Moreover, the proposed legislation prohibits non-participating entities from claiming that they are part of the framework and any participating entity from knowingly providing false or misleading information. Anyone found guilty of this offence could be punished with a substantial fine or imprisoned.

Q. Instead of creating a new Senior Deputy Commissioner position, why not make the existing Financial Consumer Agency of Canada Commissioner responsible for consumer-driven banking?

A. Given that the consumer-driven banking framework will permit credit unions regulated by provincial governments to opt into participation, establishing a separate position solely dedicated to consumer-driven banking ensures that these entities would only be regulated by the Senior Deputy Commissioner for their activities under the consumer-driven banking framework and would not be subjected to direct oversight by the federal market conduct regulator.

Q. How will the new Senior Deputy Commissioner be chosen and who are they accountable to?

A. The new Senior Deputy Commissioner will be accountable to the Commissioner of the FCAC and with the Minister of Finance's concurrence, be appointed by the Commissioner. The Senior Deputy Commissioner will be solely responsible for the supervision of consumer-driven banking activities.

Q. Why not have a single independent agency regulate consumer-driven banking?

A. Given its consumer protection, market conduct and financial literacy mandate, the FCAC is best placed to supervise consumer-driven banking given its role, experience, and expertise.

The decision to name the Financial Consumer Agency of Canada to oversee the framework informed by an extensive review of international jurisdictions and is in line with international best practices. Factors including complexity, cost, and time to stand-up were also considered.

This approach offers, administrative efficiency and allows for the timely delivery of consumer-driven banking in Canada.

The Senior Deputy Commissioner would be solely responsible for consumer-driven banking and would have full independence of the day-to-day supervision of the framework. The proposed amendments would give the Senior Deputy Commissioner equal power to that of the Commissioner in matters related to consumer-driven banking, which would provide a layer of independence.

Q. Why wasn't the FCAC provided more funding in Budget 2024?

A. The Government is providing $1million initially to FCAC so the agency can prepare for its new responsibilities and to begin development of a consumer awareness campaign. This planning will involve a resource assessment to determine whether additional funding would be required to implement the framework.

The FCAC will transition to a full cost-recovery basis once the framework is in place.

Q. Why aren't you letting market players govern the system?

A. In line with the government's announcement in the Fall Economic Statement of a forthcoming, framework to be overseen by a government-led entity, framework for consumer-driven banking will be supervised by the Financial Consumer Agency of Canada, a federal agency responsible for protecting the rights and interests of financial consumers. Embedding oversight of the consumer-driven banking framework in government ensures the achievement of key public policy objectives, including safety, stability, innovation, and utility for all Canadians. While government will lead on the oversight of the framework, it will continue to engage with industry to determine how best to do so. Industry will continue to lead on the implementation of the framework in key areas including technical standards, with oversight from the FCAC.

Q. How would a federal regulator oversee provincial entities such as credit unions?

A. To facilitate oversight of provincial entities while respecting jurisdiction the governance model will permit provincial entities to "opt-in" to governance, supervision, and participation.

Once in the framework, all entities will be required to adhere to the common rules.

Provincial governments will retain the ability to impose additional rules on credit unions.

As work on the legislative framework evolves, the government will continue to work with provincial and territorial governments to address any potential barriers to participation.

Scope/Accreditation

Q. Why are you only permitting read-access?

A. To ensure the efficient implementation of secure, consumer-permissioned financial data sharing, government will adopt a phased approach to functionality for consumer-driven banking, starting with "read access" where approved organizations can access and retrieve consumer financial data at the request of a consumer.

The government may consider an expansion of the scope at a later date once the consumer-driven banking framework is more mature and other initiatives in the payments space are fully in place.

Q. Can any business choose to become part of the consumer-driven banking framework?

A. Yes, provided they meet the accreditation requirements which will be specified in the second phase of the legislation in the fall, which will include a formal accreditation process, inclusive of process, oversight, and criteria for entities wishing to collect consumer-permissioned data from data holders. Principal among these requirements will include the ability to demonstrate financial and organizational capacity, the ability to provide reciprocal, in-scope data at the consumer's request.

All entities will be required to comply with the technical and security requirements as a condition of participation.

In principle, the framework is impartial to business models, size and activities and only requires that a business meet the accreditation requirements.

Q. Will participating entities have access to all of a consumer's data once they join the framework?

A. No, data can only be obtained if a consumer provides consent to the participating entity. Access to data is limited to what is in scope and is specified in the legislation, which includes chequing and savings accounts operations, investment products, and lending products, such as credit cards, lines of credit, and mortgages. Data that has been materially enhanced by a participant to offer significant additional value or insight will be excluded from scope.

Tech Standard

Q. How will the technical standard be chosen and who makes that decision?

A. Under the proposed legislation only the Minister of Finance has the authority to identify a technical standard based on high-level principles specified in the proposed legislation or in regulations, such as the need to ensure the safe and efficient sharing of data among participating entities. The Minister will also have to review the designation of the technical standards body every three years to ensure full compliance with the principles and may revoke them if their circumstances have changed.

The government recognizes the central role that technical standards play in operationalizing open banking, which is why it is advancing the criteria and process for the technical standard ahead of other elements.

Q. How will the technical standards be supervised?

A. The Financial Consumer Agency of Canada would be responsible for supervising the technical standard body to ensure compliance with the Framework.

Security/Privacy

Q. Will there be national security safeguards in consumer-driven banking?

A. To protect the integrity and security of Canada's Consumer-Driven Banking Framework and maintain Canadians' confidence in the financial sector, the framework will include safeguards and provide authorities to the Minister of Finance that align with existing financial sector statutes.

These authorities will enable the Minister to refuse, suspend, or revoke access to the framework for national security-related reasons. The Minister will also be provided an expanded authority to direct the FCAC to take measures related to the framework for reasons related to national security, to safeguard the integrity or security of Canada's financial system, or in the best interest of the financial system.

Q. Will every participant be required to undergo a security assessment?

A. Yes. Regardless of your business model, risk and size, due diligence of a participants security controls will be conducted before allowing them to participate in the framework. This helps set an equal and high bar for security measures and gives confidence to consumers that their data is safe.

Q. Is Consumer-Driven Banking safe? Can Canadians trust that their data will be secure?

A. Canada has a strong, well-regulated financial sector that has proven to be stable, resilient, and trusted by Canadians. Consumer-driven banking will contribute to the strength of the sector and protect financial consumers. Implementing Canada's Consumer-Driven Banking Framework with government-led oversight of security requirements, technical standards and consumer protections will enable consumers to securely and confidently exercise their right to use and move their data without the use of screen-scraping.

Q. Will participating entities have access to all a consumer's data once they join the framework?

A. No. Access to data is limited to what is in scope and is specified in the legislation, which includes chequing and savings accounts operations, investment products, and lending products, such as credit cards, lines of credit, and mortgages. Data that has been materially enhanced by a participant to offer significant additional value or insight will be excluded from scope. Moreover, data can only be obtained if a consumer provides consent to the participating entity to do so.

Q. What kind of privacy protections will be in place to secure Canadians' data when transferring information with an open banking system?

A. The consumer-driven banking framework will include common rules that address privacy, security, and liability obligations to ensure that Canadians and small businesses have secure access to innovative financial services and products that can help them manage and improve their finances.

In terms of privacy, consumer-driven banking participants will be required to comply with existing applicable legislative frameworks. The consumer-driven banking framework will also include additional privacy rules that are unique to financial data sharing which will address the provision of express consent to access data, consent management, and revoking access to data shared by a consumer. Participants will be required to have a standardized process for consent and revocation that is done in a clear, simple, and not misleading manner.

Q. How will this framework co-exist with Bill C-27?

A. All participants will be required to comply with existing privacy legislation, including, once passed, Bill C-27. The consumer-driven banking framework will also include additional privacy rules that are unique to financial data sharing. The Department of Finance will work with the Department of Industry, Science and Economic Development to ensure that these rules are not duplicative and work with updated privacy frameworks to provide clarity to industry and consumers.

Miscellaneous

Q. How is this different from the Private Member's Bill C-365, An Act respecting the implementation of a consumer-led banking system for Canadians?

A. Consumer-driven banking is a priority for the Government of Canada, which is introducing a comprehensive framework through the Budget Implementation Acts. This legislation meets the intent of Bill C-365.

Canada's Consumer-Driven Banking Framework is a full legislative framework that will address accreditation and technical standards, and will include common rules that address privacy, security, and liability obligations to ensure that Canadians and small businesses have safe and secure access to financial services and products that help them manage and improve their finances.

Q. When will you phase out screen scraping?

A. Canada's Consumer-Driven Banking Framework will eliminate the need for screen-scraping by providing a secure and efficient framework for the permissioned sharing of consumers' financial data.

Once the framework is operational, the Government will work in consultation with stakeholders to determine how and when to phase out screen-scraping. This will include review of other jurisdictions' approaches to screen-scraping.

Q. Which banks will be mandated to participate?

A. Initially, banks that surpass a certain threshold of retail volume, such as deposit accounts, would be mandated to participate. The exact threshold and mechanism to mandate participation will follow, but will include Canada's largest retail banks.

Other banks will be able to elect to participate in the system earlier, provided they can demonstrate conformance with technical and security requirements.

Q. Will this increase costs for consumers?

A. When authorized by a consumer, in-scope data would be shared in its unaltered, original format, free of charge.

Overall, through a consumer driven banking system, consumers should benefit from better financial outcomes through increased choice and secure access to services that facilitate more timely and more informed financial decisions.

Q. Will this mean the government has access to our banking data?

A. No, the government is not collecting personal information or data.

The framework will provide consumers with control over who they share their data with, a mechanism to revoke access to that data and rules governing which entities may access that data and for how they use and safeguard it.

Under a consumer driven banking framework, data sharing requests are only actioned when a consumer directs an organization to do so. Consumers must be informed in advance of any third-party organizations that may also have access to their data when using their chosen product or service.

Questions & Answers

Q. What changes are being made to the Bank Act definitions for deposit-type instruments and principal-protected notes?

A. The definition of deposit-type instrument is being amended to replace a reference to "bankers' acceptance rate," which refers to the Canadian Dollar Offered Rate (CDOR), with a reference to "interest-rate benchmark", which will capture the Canadian Overnight Repo Rate Average (CORRA).

Q. Why are the Bank Act definitions for deposit-type instruments and principal-protected notes being amended?

A. Amendments to the definitions are required to ensure that consumer protection requirements in the Bank Act continue to apply to deposit products as intended following reform of Canada's benchmark interest rate. Reform efforts will see CDOR, a bankers' acceptance rate, replaced by CORRA, a transaction-based, risk-free benchmark. The existing definition of deposit-type instrument contains an explicit reference to "bankers' acceptance rate" as a means of calculating interest for a variable rate instrument. An amendment is required to ensure variable-rate instruments pegged to CORRA are captured by the definition. Additionally, amendments to the principal-protected note definition are required to ensure that variable-rate term deposit products pegged to CORRA are not captured by the definition.

Q. Why are the amendments being made now?

A. CDOR tenors will no longer be published as of June 28, 2024. At that point in time, CORRA will fully replace CDOR as the prevailing interest rate benchmark.

Division 18 - Office of the Superintendent of Financial Institutions Act

Overview

Part 4, Division 18 would amend the Office of the Superintendent of Financial Institutions Act (OSFI Act) to increase the maximum amount that may be advanced to the Office of the Superintendent of Financial Institutions (OSFI) from the Consolidated Revenue Fund at any one time to $100million, up from the current $40million.

OSFI's budget is almost entirely funded by assessments imposed on the entities it regulates through a cost recovery model. OSFI manages its cashflows by drawing down funds from the Consolidated Revenue Fund in advance of the collection of assessments from industry, and paying back the funds once it receives assessments. This cash flow management practice has been in place since OSFI's inception in 1987.

The amount of funds OSFI can draw down at any one time is currently capped at $40million. This limit has been in place since the OSFI Act was first enacted in 1987.

Increasing the ceiling from $40million to $100million would enable OSFI to continue managing its cashflows in an efficient manner while having no impact on the assessment and invoicing process for the entities OSFI regulates.

This proposed measure would not impact OSFI's budget, and it would have no fiscal cost to the Government.

The measure would come into force upon Royal Assent.

Key Messages

• Part 4 would amend the Office of the Superintendent of Financial Institutions Act (OSFI Act) to increase the maximum amount that may be advanced to the Office of the Superintendent of Financial Institutions (OSFI) from the Consolidated Revenue Fund at any one time to $100million, up from the current $40million.
• The amount of funds OSFI can draw down at any one time is currently capped at $40million. This limit has been in place since the OSFI Act was first enacted in 1987, at OSFI's inception.
• Increasing the ceiling from $40million to $100million would enable OSFI to continue managing its cashflows in an efficient manner while having no impact on the assessment and invoicing process for the entities OSFI regulates.
• The proposed measure would have no impact on OSFI's budget and no fiscal cost to the Government.

Questions & Answers

Q. Why is the maximum amount that may be advanced to the Office of the Superintendent of Financial Institutions (OSFI) from the Consolidated Revenue Fund at any one time increasing to $100million, up from the current $40million?

A. Increasing the limit will ensure OSFI is able to continue operating efficiently and effectively while maintaining the status quo for federally regulated financial institutions.

The amount of funds OSFI can draw down at any one time is currently capped at $40million. The proposed amendment would increase the cap to $100million to reflect changing costs and growth in OSFI's operations since the $40million cap was established in 1987 at OSFI's inception.

Q. How does this mechanism help OSFI manage its cashflows?

A. OSFI's budget is almost entirely funded by assessments imposed on the entities it regulates through a cost recovery model. OSFI manages its cashflows by drawing down funds from the Consolidated Revenue Fund in advance of the collection of assessments from industry, and paying back the funds once it receives assessments. This cash flow management practice has been in place since OSFI's inception in 1987.

Q. When would this measure come into force?

A. The measure would come into force upon Royal Assent.

Q. How much will this cost?

A. The proposed measure would have no impact on OSFI's budget and no fiscal cost to the Government. All funds drawn down from the Consolidated Revenue Fund are returned in the same fiscal year.

Q. Is this measure needed because OSFI's budget has been increasing in the last few years?

A. As OSFI's mandate and budget have grown since its inception in 1987, OSFI has increasingly relied on the $40million that it may draw down from the Consolidated Revenue Fund prior to the collection of assessments. Raising the limit to $100million would ensure that OSFI may continue operating efficiently in light of its growth.

Q. When was the last time that the limit was increased?

A. The limit has remained unchanged since the OSFI Act was enacted in 1987, at OSFI's inception.

Division 19 - Bank of Canada Act

Overview

Adoption of the Canadian Collateral Management Service (CCMS) brings Canadian financial markets infrastructures up to global best practices. The infrastructure to support transactions (secured funding) that would be facilitated by CCMS is outdated in Canada thereby limiting the efficiency and volume of these transactions.

*Paragraphs redacted. *

Key Messages

• The amendment to the Bank of Canada Act will support the Bank of Canada's mandates and modernize Canada's financial market infrastructure. Broad adoption of the Canadian Collateral Management System (CCMS) will help the transfer of liquidity in the market and may reduce the likelihood of the need for a Bank of Canada intervention in the market.
• *Bullets redacted*

Questions & Answers

Q. Why is the change to the Bank of Canada Act necessary?

A. The update to the Bank of Canada Act will support the modernization of Canadian Financial market infrastructure. In the most practical sense, the Canadian Collateral Management Service will support the efficiency plumbing of the Canadian financial markets and will by extension support the ability of the government to source stable, low-cost funding.

*Questions and answers redacted*

Division 20 - Canada Business Corporations Act

Overview

Legislative amendments to the Canada Business Corporations Act necessary to establish a beneficial ownership registry of federal corporations were introduced in Budget Implementation Act, 2022, No. 1 and more recently in Bill C-42.

Division 20 would amend provisions introduced by Bill C-42 to the Canada Business Corporations Act in relation to the penalties associated with the beneficial owner registry requirements. The amendments would ensure the penalty provisions are consistent with Canada's criminal sentencing policy and with two other provisions within the Canada Business Corporations Act.

The amendments would come into force upon Royal Assent.

Key Messages

• The use of anonymous Canadian shell companies can conceal the true ownership of property, businesses, and other valuable assets. When authorities don't have the tools to determine their true ownership, these shell companies can become tools of those seeking to launder money, avoid taxes, evade sanctions, or interfere in our democracy.
• The federal government committed in Budgets 2022 and 2023 to implementing a searchable beneficial ownership registry of federal corporations. The registry was launched on January 22, 2024.
• The Canada Business Corporations Act (CBCA) sets out the obligation for federal corporations to submit their beneficial ownership information to Corporations Canada, and the associated penalties for failure to comply.
• The proposed amendments would ensure the penalty provisions are consistent with Canada's criminal sentencing policy and with two other provisions within the CBCA.

Questions & Answers

Q. What are the technical amendments to the CBCA?

A. The amendments introduced to Bill C-42 at committee stage increased both the maximum fine and the term of imprisonment for directors, officers and shareholders who contravene the beneficial ownership reporting requirements, and the related fines applicable to corporations.

The proposed amendments seek to amend the CBCA to ensure that fines for failing to keep records of beneficial ownership information and failure to provide it to law enforcement on request align with those for failure to report the beneficial ownership information to the registry.

Q. How much time will CBCA corporations have to comply to avoid facing the new criminal sanctions?

A. Corporations Canada's compliance program is set to focus on education and awareness as well as administrative compliance for the first few months in 2024 in order to provide a sufficient interval of time to businesses to reorganize their affairs and comply before facing criminal sentences.

Q. Why did the government feel the need to add these amendments?

A. Left unchanged, the penalties could be at risk of being inoperable, and the deterrence that these provisions were intended to create could be muted.

The amendments would ensure that the Public Prosecution Service of Canda can pursue those that willfully contravene the requirement to submit beneficial ownership information to the registry.

The amendments would ensure strong and effective penalties in support of the federal beneficial ownership transparency regime.

Division 21 - Canada Labour Code (Improving Access to Protections for Employees)

Overview

The proposed measure would respond to the Government of Canada's commitment to improve labour protections for gig workers under the Canada Labour Code, as outlined in the 2021 mandate letter to the Minister of Labour and in Budget 2023.

Amendments to the Canada Labour Code

Many gig workers, including digital platform workers, in the federally regulated private sector should be considered employees but are wrongfully classified or "misclassified" as independent contractors by employers, effectively denying them their labour rights and entitlements under the Canada Labour Code (Code).

Amendments to the Code would strengthen existing misclassification provisions. They would introduce a presumption of employee status to Part I (Industrial Relations), Part II (Occupational Health and Safety) and Part III (Labour Standards). Workers would be presumed to be employees unless proven otherwise, but true self-employed entrepreneurs could assert their independent status using the classification tests established in common law and the Civil Code of Quebec.

To improve enforcement on misclassification, the Government would add new prohibitions on misclassification to Part I and Part II of the Code, and amendments would be made to strengthen the existing prohibition under Part III.

Amendments would revise and strengthen the existing prohibition on misclassification in Part III of the Code by removing a requirement that the Labour Program must prove that an employer intended to misclassify a worker. This amendment ensures that misclassification is prohibited under any circumstance, simplifying enforcement.

The amendments would come into effect on Royal Assent.

Key Messages

• Labour protections must continue to evolve to ensure safe and decent working conditions.
• The Government of Canada has introduced amendments to ensure federally regulated gig workers have access to rights, protections and entitlements under the Canada Labour Code (Code).
• The proposed amendments would introduce a presumption that all workers – including gig workers – are employees unless proven otherwise. More specifically:
  • A "presumption of employee status" would be added to the Code to establish employee status as the norm. This would mean that "Independent contractor status" would generally be considered the exception; and
  • In the event that the "employee status" is contested, the burden of proof would be on the employer.
  • For prosecutions, the burden of proof does not fall on the employer.
• These changes would strengthen the prohibition on misclassification that currently exists in the Code. Misclassification is when an employee is wrongfully classified as an independent contractor.
• To improve enforcement on misclassification, the Government would add new prohibitions on misclassification to Part I (Industrial Relations) and Part II (Occupational Health and Safety) of the Code, and amendments would be made to strengthen the existing prohibition under Part III (Labour Standards) by removing a requirement that the Labour Program must prove that an employer intended to misclassify a worker. This amendment ensures that misclassification is prohibited under any circumstance, simplifying enforcement.
• Workers who are true independent contractors would not be affected. For example, independent owner-operators in the road transportation sector would not be affected by the proposed legislative changes because the definitions of employee and independent contractor would not change.

Questions & Answers

Amendments to the Canada Labour Code

Q. How do the proposed amendments to the Canada Labour Code address the Government's commitments?

A. Budget 2023 committed the Government to "amend the Canada Labour Code to improve job protections for federally regulated gig workers by strengthening prohibitions against employee misclassification."

The amendments would deliver on this commitment and the minister's mandate letter by introducing a presumption that all workers are employees unless proven otherwise. This presumption would not apply in cases of prosecution.

To improve enforcement on misclassification, the Government would add new prohibitions on misclassification to Part I and Part II of the Code.

The existing prohibition on misclassification in Part III of the Code would be strengthened by removing a requirement that the Labour Program must prove that an employer intended to misclassify a worker. This amendment ensures that misclassification is prohibited under any circumstance, simplifying enforcement.

The Labour Program will continue to work with officials at Employment and Social Development Canada (ESDC) to ensure better benefits and supports for gig economy workers, particularly through Employment Insurance (EI) modernization to fulfill the second part of the Minister's mandate commitment.

Q. Why are the new amendments being proposed?

A. Because they have been historically treated as independent contractors, gig workers do not have access to the rights and protections for employees under the Code. Wrongfully treating an employee as an independent contractor is known as misclassification.

Misclassification can allow employers to avoid the costs of having to bargain with unionized workers, providing full occupational health and safety protections, and complying with labour standards such as minimum wage, overtime pay, paid sick leave and rights on termination of employment. Employers may also do so because it allows them to avoid payroll taxes such as contributions to EI, CPP/QPP, and workers' compensation.

As a result of misclassification, some gig workers experience precarious working conditions and economic vulnerability, including low and unpredictable earnings,unpredictable schedules, and unpaid work time. Amendments would ensure gig workers can better access their labour rights.

Q. What are the proposed amendments to the Canada Labour Code?

A. The proposed amendments would ensure that gig workers fall under existing rights, job protections and entitlements under the Canada Labour Code.

Amendments would introduce a presumption that all workers, including gig workers, are employees unless proven otherwise. The presumption of employee status would clarify that "employee status" is the norm, and the "independent contractor status" is the exception. In the event that the "employee status" is contested, the burden of proof would be on the employer. In cases of prosecution, the new presumption will not apply, and the burden of proof will not be on the employer.

Amendments would also be made to improve enforcement on misclassification, which is when an employee is wrongfully classified as an independent contractor. The amendments would introduce a prohibition on misclassification in Parts I and II of the Code. They would also strengthen the prohibition that currently exist in Part III of the Code by removing a requirement that the Labour Program must prove that an employer intended to misclassify a worker.

Q. Who would be covered by these new labour protections?

A. The best available estimates suggest that there were up to 41,000 gig workers in the federally regulated private sector in 2016. Most of these workers operate in the road transportation sector (63%), with significant pockets of gig workers in the courier and postal services (15%) and the telecommunication and broadcasting sector (10%). While not all gig workers as misclassified, many of these workers are likely digital platform workers. Due to data gaps, the exact number is impossible to determine.

Some examples of federally regulated gig workers include unincorporated interprovincial truck drivers, parcel-delivery persons, and television and radio broadcasting artists and freelancers hired as independent contractors but who do not have all the characteristics of a true entrepreneur, such as control over their work and investment in the enterprise.

While not considered gig workers, many of the approximately 31,800 incorporated self-employed truck drivers without employees may be misclassified as part of the incorporated business model in which truck drivers are encouraged to self-incorporate although they do not own their vehicle and should be considered employees. Research suggests that between 10 and 30% of employers currently misclassify at least one worker.

Q. How would the new protections work?

A. A presumption of employee status would support gig workers in accessing rights and entitlements under the Code. This would clarify in the legislation that employee status is the norm and independent contractors are the exception and encourage gig workers who think they are being misclassified to challenge their status and support enforcement.

The prohibitions on misclassification in Parts I and II of the Code would provide new avenues for a worker to make a complaint appropriate to the individual's unique situation. An amended prohibition in Part III would simplify the existing complaint process. In addition, the Labour Program would undertake proactive enforcement with an emphasis on employer education to further protect employee rights.

Q. How are the proposed amendments different from changes made to the Code in 2021 addressing misclassification?

A. On January 1, 2021, legislative amendments came into force under Part III of the Code, prohibiting employers from treating a worker as if they were not their employee to avoid their labour standards obligations. They also placed the burden of proof on employers to demonstrate that a worker is an independent contractor should the parties disagree on classification.

The proposed amendments in Part III would build on those changes but eliminate any reference to the intention to deny labour standards protection to an employee through misclassification. This would align with the amendments in Part I and II to prohibit misclassification and support workers' ability to access protections and entitlements under each Part of the Code.

Q. How are the proposed amendments different from measures to address the incorporated drivers model in trucking?

A. While they do not fall under the definition of gig worker, transport truck drivers hired through the incorporated business model also face the misclassification problem. These drivers do not own their own vehicles and exercise little or no control over the work they perform but are legally incorporated as self-employed. Many businesses using the incorporated model cut labour costs by misclassifying their workers and circumventing their obligations under the Code. Labour Force Survey data suggests that there are approximately 31,800 truck drivers at risk of this business model.

In the 2022 Fall Economic Statement, the Government committed $26.3million over five years to the Labour Program to take stronger action against employers in the trucking sector who misclassify employees through proactive enforcement. The proposed amendments would further support misclassified truckers by providing a clear avenue for those employees to access their labour rights by making a complaint to the Labour Program or the Canadian Industrial Relations Board. Truckers who are truly independent owner-operators would not be considered employees and won't be affected by the amendments.

Q. How does the presumption of employee status affect a truck driver who is truly an independent contractor and does not wish to be considered an employee?

A. The presumption can always be rebutted, either by an employer or a worker. There are tests that can determine whether a worker should be considered an employee. The burden of proof would be on the person making a rebuttal against the employee status. The Labour Program or the Canadian Industrial Relations Board would rely on classification tests established in common law and the Civil Code of Quebec. The legislative amendments pose little risk of making job protections overly inclusive by mistakenly treating true independent contractors as employees.

Q. Will the proposed amendments have cost implications for employers?

A. Amendments would not impose new costs on employers who correctly classify their workers. However, some employers could face additional costs if their workers were reclassified as employees following a complaint or proactive enforcement.

It is estimated that employers can face up to between 7% and 11% in additional labour costs when hiring an employee instead of an independent contractor. Additional costs are mostly due to the requirement to provide entitlements under Part III of the Code such as paid sick days, vacation and holiday pay, overtime and workers' compensation as well as the requirement to make contributions to the Canada Pension Plan and Employment Insurance under other legislation.

Based on research estimates that between 5% and 20% of all 41,000 federally gig workers could be misclassified, correcting these cases of misclassification could represent additional annual costs to employers of between $6.8M and $29.3M. Addressing misclassification under the incorporated business model in trucking could represent additional annual costs to road transportation employers of between $10.2M and $40.6M.

Q. What do Parts I, II, and III of the Canada Labour Code cover and to whom do they apply?

A. Part I of the Code governs workplace relations and collective bargaining between unions and employers in the federally regulated private sector.

Part II establishes protections to prevent workplace-related accidents and injuries, including occupational diseases in the federally regulated private sector and the federal public service.

Part III of the 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.

It is expected that most instances of misclassification will fall under Part III of the Code. The federally regulated private sector includes about 990,000 employees (or 6% of all Canadian employees) working for 19,150 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.

Q. Would the proposed amendments to the Canada Labour Code impact provincial and territorial employment standards legislation?

A. No. The presumption of employee status and prohibition on misclassification would not apply to provincially and territorially regulated employers and employees.

While proposed changes could be seen as a standard for some provinces and territories to emulate, individual provinces and territories are best positioned to develop appropriate labour protections for gig workers in their jurisdiction.

Most gig workers work in provincially regulated industries, such as ridesharing and meal delivery.

Q. How would the proposed amendments affect other federal legislation and programs, such as the Employment Insurance Act, the Income Tax Act and the Canada Pension Plan?

A. A change of status under the Code is expected to prompt reclassified workers to seek clarification of their employee status for the purposes of Employment Insurance (EI), income tax and the Canada Pension Plan (CPP).

A worker can seek a ruling from the Canada Revenue Agency (CRA) for this purpose, to determine whether the worker is considered an employee or self-employed for the purposes of those programs.

The Canadian Industrial Relations Board or the Labour Program would inform workers and employers of their obligations under different acts and programs and encourage reclassified workers to seek clarification of their status through the CRA.

The tests used to determine the employment classification of a worker for the purposes of the Code, income tax, EI and the CPP are similar. It is expected that more workers will file their taxes as employees and more employers will contribute to EI and CPP.

Division 22 - Canada Labour Code (Policy on Disconnecting and Other Measures)

Overview

Technical Amendments to the Canada Labour Code Part II

Technical amendments are proposed to Part II of the Canada Labour Code (the Code) (Occupational Health and Safety) to address comments raised by the Standing Joint Committee for the Scrutiny of Regulations:

• The first amendment would ensure sufficient enabling authority under Part II of the Code to set a time limit for filling a vacant health and safety representative position. It would uphold the status quo for filling health and safety representative vacancies within 30 days, prescribed in Section 13 of the Policy Committees, Work Place Committees and Health and Safety Representatives Regulations.
• The second amendment would amend one section of Part II of the English version of the Code by replacing the word "officer" to the word "Head" to align with the French version of the Code.

Protecting Employees' Right to Termination and Severance Pay

Division 22 of Part 4 makes targeted amendments to the Canada Labour Code (the Code) to clarify that employees whose employment is terminated by their employer are entitled to – and may make a monetary complaint to recover–termination and severance pay, even if they could have availed themselves of another recourse under the Code. Existing eligibility requirements for termination and severance pay, such as completing a minimum period of employment and not being dismissed for just cause, would continue to apply.

These amendments are aimed at reversing the effects of a decision of the Canada Industrial Relations Board (CIRB) that concluded that an employee who has access to – but failed to avail themselves of – the Code's unjust dismissal recourse is not entitled to claim severance and termination pay under the Code.

These legislative measures, which are in line with the government's commitment to strengthen labour standards protections for employees in federally regulated workplaces, would:

• Provide consistency in the treatment of monetary complaints related to termination and severance pay provisions of the Code, based on previous interpretations and operational practices of the Labour Program of Employment and Social Development Canada;
• Ensure that all eligible employees have the right to termination and severance pay, and can exercise the option of recovering amounts owed to them through a monetary complaint, even if they could have availed themselves of an unjust dismissal complaint or another recourse under Part III of the Code; and
• Allow the Labour Program's inspectorate to take action, such as issuing payment orders, against employers that fail to comply with the Code's termination and severance pay provisions.

As an additional safeguard, proposed amendments would also confirm that the fact that an employer has provided termination or severance pay does not prevent an employee from seeking recourse under the Code's unjust dismissal, reprisal or genetic discrimination complaint mechanisms.

Other than clarifying employees' right to claim termination and severance pay, these amendments do not modify the formula for calculating these amounts, nor do they expand eligibility to employees who do not meet the conditions already set in the Code.

These amendments would come into force once the Budget Implementation Act, 2024, No. 1 receives Royal Assent.

Policy on Disconnecting — Work-related Communication

Evidence shows that disconnecting from work is critical to well-being and productivity. Right to disconnect policies can reduce the informal expectation that employees must remain constantly connected, while maintaining the flexibility employers need to keep the economy moving.

The proposed measure would respond to the Government of Canada's commitment to complete the development of a right to disconnect policy, in consultation with federally regulated employers and labour groups, as set out in the Minister of Labour's 2021 mandate letter.

More specifically, the proposed amendments would require employers to:

• issue a policy that includes the employer's expectations for work-related communication outside scheduled hours of work and any opportunity for employees to disconnect;
• review and update the policy every three years;
• consult with employees when developing or updating the policy;
• keep records of the policy and consultations;
• post and provide the policy to employees; and
• authorize the Governor in Council to make regulations to specify how labour standards, such as hours of work and overtime, apply to work-related communication outside scheduled hours of work.

Key Messages

Amendments to the Employment Insurance Act

• The Government of Canada recognizes that seasonal workers – including in the fish and tourism sectors in Atlantic Canada and Quebec - play an important part in Canada's economy and many of them rely on Employment Insurance (EI) for the support they need between work seasons.
• Currently, the temporary measure in the Employment Insurance Act that provides additional weeks of support to eligible workers in seasonal employment ends on October 26, 2024. Budget 2024 proposes to extend this measure for an additional two years until October 24, 2026.
• This would enable eligible workers in the 13 EI regions with highly seasonal economies that are targeted by the existing temporary legislated measure to continue to access up to five additional weeks of regular benefits in their off-season, up to a maximum entitlement of 45 weeks.
• Many workers in seasonal employment rely on the EI program, and the additional weeks of regular benefits provided by this temporary measure help get them through recurring periods of unemployment and reduce risk of an income gap or "trou noir."
• The proposed two-year extension in Budget 2024 to the current seasonal measure would provide seasonal workers with continued EI support as they face elevated cost of living and other economic uncertainties.
• Without the proposed extension, the temporary measure will end in October 2024, and some workers in seasonal employment could face new or longer income gaps between the end of their EI benefits and their return to seasonal work.
• The Government remains committed to improve the EI program so that it continues to meet the needs of all Canadians, including workers in seasonal employment. This two-year extension would provide more certainty and stability to seasonal workers who rely on these additional weeks of income support to reduce risk of income gap with periods of re-occurring unemployment.

Questions & Answers

Amendments to the Employment Insurance Act

Q. What will the extension to the Employment Insurance (EI) measure for workers in seasonal employment proposed by Budget 2024 mean for seasonal EI claimants?

A. This amendment would extend by two years, until October 24, 2026, the current temporary legislated EI rules that provide up to five additional weeks of EI regular benefits to some workers in seasonal employment in certain EI regions. This extension would enable eligible claimants in the 13 EI economic regions targeted by the measure 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 measure would expire on October 26, 2024, 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 seasonal measure instead of implementing a permanent solution?

A. Many workers in seasonal employment – including fishing and tourism sectors in Atlantic Canada and Quebec, rely on Employment Insurance for the support they need between work seasons.

Currently, temporary legislated rules provide up to five additional weeks of EI regular benefits to eligible seasonal claimants. Extending this measure by two years would provide continued stability and predictability for eligible workers in seasonal employment.

These workers face the risk of an income gap or "trou noir" between the end of their EI benefits and their return to seasonal employment.

This extension will help mitigate the risk for these Canadians as they continue to contend with affordability challenges, elevated costs for essentials such as groceries and housing and sustained economic uncertainty caused by climate change and other emerging factors.

The Government remains committed to improving EI so that it continues to meet the needs of Canadians including workers in seasonal industries.

Q. How many workers in seasonal employment are expected to benefit from the two-year extension of the temporary EI seasonal measure?

A. It is expected that approximately 62,000 claimants annually who establish a claim for EI regular benefits between October 26, 2024, and October 24, 2026, would benefit from this extension.

Q. How much will the proposed extension cost?

A. The two-year extension until October 24, 2026 of the current temporary seasonal measure that provides up to five additional weeks of EI regular benefits to eligible workers in seasonal employment in targeted EI regions is estimated to cost $263.5M over four years.

Q. Why is the Budget 2024 asking for four years of funding for a two-year extension?

A. The two-year extension would allow eligible seasonal EI claimants whose claim is established during the period of October 27, 2024 to October 24, 2026 to access up to five additional weeks of regular benefits.

Since EI claims can be open for a year or more, depending on when a claim is established, benefit payments related to these additional weeks of benefits could be made into fiscal years 2026-2027 and 2027-2028.

Q. Budget 2023 only announced a one-year extension of the additional five weeks measure, why is a two-year extension of the same measure now being announced?

A. A two year extension of the temporary measure would provide additional stability and predictability for workers in seasonal employment who face re-occurring periods of unemployment, increasing risk of income gap in the off-season.

Q. Will workers in seasonal employment whose seasonal claiming pattern was affected by the COVID-19 pandemic also benefit from the extension of the temporary seasonal measure 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 claiming 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 24, 2026 of the temporary legislated seasonal measure.

Q. What are the eligibility conditions that workers in seasonal employment must meet in order to access up to five additional weeks of EI regular benefits under the temporary seasonal measure Budget 2024 proposes to extend?

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 September 26, 2021 and October 26, 2024.
  • Budget 2024 proposes to extend this end date to October 24, 2026.

Q. Why is the temporary support for workers in seasonal employment limited to certain regions? Aren't there workers in seasonal employment across the country?

A. The Government recognizes the importance of workers in seasonal employment and their employers and the vital role they play in local economies. Access to up to five additional weeks of EI regular benefits for workers in seasonal employment 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)
• Charlottetown
• Prince Edward Island (excludes Charlottetown)
• Eastern Nova Scotia
• Western Nova Scotia
• Madawaska–Charlotte
• Restigouche-Albert
• Gaspésie–Îles-de-la-Madeleine
• Central Quebec
• North Western Quebec
• Lower Saint Lawrence and North Shore
• Chicoutimi-Jonquière
• Yukon (excludes Whitehorse)

Q. Would the extension of the seasonal measure proposed by Budget 2024 also extend the end date for the temporary seasonal measure announced in the 2023 Fall Economic Statement (FES)?

A. No, the extension proposed in Budget 2024 is specific to the legislated seasonal measure that provides up to five additional weeks of benefits to eligible workers in seasonal employment and would not impact the September 7, 2024, end date of the 2023 FES measure:

The 2023 Fall Economic Statement announced a new, temporary measure providing more weeks of EI regular benefits to eligible workers in seasonal employment to mitigate the impact of sudden declines in unemployment rates in regions with high concentrations of workers in seasonal employment and the resulting decline in the number of weeks of benefit entitlement.

Under the FES measure, up to four additional weeks of EI regular benefits are provided to eligible seasonal claimants in the same 13 regions for claims established between September 10, 2023, and September 7, 2024. This is on top of the five additional weeks already available to eligible seasonal claimants under the separate temporary legislative measure.

During the year that both measures are in place, up to nine additional weeks of regular benefits are available to eligible seasonal claimants in 13 targeted EI regions.

While the temporary FES measure ends on September 7, 2024, the two-year extension proposed by Budget 2024 to the legislative measure providing up to five additional weeks of regular benefits means seasonal claimants in the 13 targeted regions would continue to have access to up to five additional weeks of benefits on claims established until October 24, 2026.

Q. Will the government extend the temporary seasonal measure announced in the 2023 FES if unemployment rates decline again this summer?

A. The Government will continue to monitor economic and labour market conditions in all EI regions as part of its ongoing work on EI modernization.

Q. What is the status of the Government's plan to modernize the EI program?

A. EI is a complex system that servesmillions of Canadians each year. Making changes to EI is a serious undertaking that requires significant consideration that accounts for the needs of both workers and employers and the current labour market context.

The Government continues to explore how it can make longer-term improvements to the EI program in a way that is fiscally responsible and aligned with the realities of today's labour market.

As the Government works to build an EI program that is simpler, responsive to all labour market conditions, and financially sustainable, a two-year extension of the current temporary measure for seasonal workers will ensure these workers continue to be supported during the offseason, and that EI remains there for them when they need it most.

Key Messages

• Since 2019, the Government of Canada has been engaged in a comprehensive modernization of Canada's official languages regime. This modernization is at once legislative, regulatory and administrative in nature.
• On the legislative front, the cornerstone of the modernization was Parliament's June 2023 adoption of the Act for the Substantive Equality of Canada's Official Languages, which modernizes the Official Languages Act and creates a brand-new law, the Use of French in Federally Regulated Private Businesses Act.
• On the administrative front, in May 2023 the Government unveiled Action Plan for Official Languages 2023–2028. This strategy represents $1.4billion over five years in new investments for 32 measures to protect and promote the official languages across Canada, in addition to the measures from previous Action Plans.
• Currently, the Government of Canada is preparing three sets of regulations necessary for the effective implementation of the modernized official languages regime. These regulations will be the focus of important consultations this spring.
• In keeping with the Government's commitment to excellence, this amendment seeks to correct an inadvertent omission that occurred during the legislative process leading up to the adoption of the Use of French in Federally Regulated Private Businesses Act in June 2023. The amendment will ensure that all categories of persons who have been granted rights under that Act will be able to file a complaint with the Commissioner of Official Languages for Canada in the event of an alleged violation.

More detailed information:

• This amendment corrects an omission that occurred when amendments were being made to BillC-13—which became the Act for the Substantive Equality of Canada's Official Languages on June 20, 2023—so that former employees and persons who have a demonstrable interest in a position within the business retain their right to make a complaint to the Commissioner of Official Languages and exercise a court remedy if the business violates their rights under the Use of French in Federally Regulated Private Businesses Act in Quebec after the second anniversary of the coming into force of the statute.
• If the amendment is not adopted:
  • Once subsection19(1) of the UFPBA comes into force in regions with a strong Francophone presence, persons who have a demonstrable interest in a position within a federally regulated private business (FRPB) in Quebec and former employees of FRPBs in Quebec will no longer be able to make a complaint to the Commissioner of Official Languages for Canada.
  • Once subsection19(1) of the UFPBA comes into force in regions with a strong Francophone presence, persons who have a demonstrable interest in a position within an FRPB in a region with a strong Francophone presence and former employees of FRPBs in such regions will be unable to make a complaint to the Commissioner of Official Languages for Canada.

Questions & Answers

Q. What does this amendment do?

A. The amendment corrects an omission that occurred when amendments were being made to BillC-13—which became the Act for the Substantive Equality of Canada's Official Languages on June20, 2023—so that, after the 2^nd anniversary of the coming into force of the Use of French in Federally Regulated Private Businesses Act, former employees and persons who have a demonstrable interest in a position within a business in Quebec retain their right to file a complaint before the Commissioner of Official Languages and to seek a court remedy if the business contravenes the rights set out in that Act.

Q. What would happen if this amendment were not adopted?

A. If the amendment is not adopted and subsection19(1) of the Use of French in Federally Regulated Private Businesses Act (UFPBA) is not amended:

• Once subsection19(1) of the UFPBA comes into force in regions with a strong Francophone presence, persons who have a demonstrable interest in a position within a federally regulated private business (FRPB) in Quebec and former employees of FRPBs in Quebec will no longer be able to make a complaint to the Commissioner of Official Languages for Canada.
• Once subsection19(1) of the UFPBA comes into force in regions with a strong Francophone presence, persons who have a demonstrable interest in a position within an FRPB in a region with a strong Francophone presence and former employees of FRPBs in such regions will be unable to make a complaint to the Commissioner of Official Languages for Canada.

Division 25 - Indigenous Loan Guarantee Program

Overview

Budget 2024 announced the creation of an Indigenous Loan Guarantee Program (ILGP) that will provide up to $5billion in loan guarantees to unlock access to capital for Indigenous communities, creating economic opportunities and supporting their economic development priorities.

To establish ILGP, Division 25 of Part 4 authorizes a newly created subsidiary of the Canada Development Investment Corporation (CDEV), a Crown corporation in the Department of Finance Canada portfolio to issue the loan guarantees and administer them.

It also authorizes the Minister of Finance to requisition and pay out of the Consolidated Revenue Fund to the subsidiary any amounts that are necessary in respect of the guarantees.

Division 25 of Part 4 provides that the subsidiary will be an agent of His Majesty in right of Canada for all purposes, to ensure that the guarantees would benefit from the government's credit, delivering a lower interest rate than is otherwise available to borrowers.

Division 25 of Part 4 provides the subsidiary with exemptions from certain restrictions in the Financial Administration Act (FAA), in order to allow the subsidiary to act quickly to protect the Crown's interests under the guarantees, if necessary.

Key Messages

• Division 25 of Part 4 authorizes a wholly owned subsidiary of the Canada Development Investment Corporation (CDEV) to provide loan guarantees as part of an Indigenous loan guarantee program and authorizes the Minister of Finance to requisition any amounts necessary from the Consolidated Revenue Fund (CRF) in respect of the loan guarantees. The total principal and interest guaranteed under the program may not exceed $5billion, or any greater amount authorized by the Governor in Council.
• These provisions will enable the subsidiary of CDEV to administer the Indigenous Loan Guarantee Program and provide the ability for the Minister of Finance to draw on the CRF to honour the government's obligations, in the event that a loan guarantee is triggered.
• Division 25 of Part 4 also specifies that the CDEV subsidiary will be an agent of the Crown for all its purposes to ensure that the guarantees would benefit from the government's credit, delivering a lower interest rate than is otherwise available to borrowers.
• Division 25 of Part 4 provides the subsidiary with exemptions from certain restrictions in the Financial Administration Act (FAA), in order to allow the subsidiary to act quickly to protect the Crown's interests under the guarantees, if necessary.

Division 26 – Red Dress Alert

Overview

In May 2023, the House of Commons unanimously backed a motion by NDP MP Leah Gazan to declare the murders and disappearances of Indigenous women and girls a Canada-wide emergency - and called on the Government to fund a Red Dress Alert, which would notify the public in case an Indigenous woman, girl or 2SLGBTQI+ person goes missing. Such an alert will contribute to ending the national crisis of missing and murdered Indigenous women, girls and 2SLGBTQI+ people.

As a result, and further to the Minister of Crown Indigenous Relations' mandate to accelerate the 2021 Federal Pathway to Address Missing and Murdered Indigenous Women, Girls and 2SLGBTQQIA+ People, and advance the 2021 National Action Plan to address missing and murdered Indigenous women and girls and 2SLGBTQQIA+ people, Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) has been working with other implicated federal partners, provinces and territories, Indigenous partners, families, survivors and advocates to understand how to work towards the implementation of a system that can concretely seek to address existing gaps related to public alerts and awareness surrounding the MMIWG2S+ national crisis.

To help keep Indigenous women, girls, and two-spirit people safe, Budget 2024 proposes to invest a total of $1,300,000 over three years, starting in 2024-25 to co-develop with Indigenous partners, on a priority first phase, a regional Red Dress Alert system. This funding is intended to support Indigenous partners to co-develop a regional pilot for a Red Dress Alert, as well as an assessment following the conclusion of the regional pilot.

The regional pilot will take place in a province or territory, will be informed by engagement with Indigenous partners, and will be assessed after its conclusion, so that its lessons-learned and best practices can feed into the development of a national wider scale approach to a Red Dress Alert.

This initiative builds on the $2.5million Budget 2023 commitment, including to advance discussions surrounding the Red Dress Alert at the National Indigenous-Federal-Provincial-Territorial Roundtable on MMIWG and 2SLGBTQI+ People in February, 2024. A "what was heard" of pre-engagement sessions on a Red Dress Alert was presented at the National Roundtable. Participants included national and regional Indigenous organizations across distinctions, 2SLGBTQI+ partners, as well as federal, provincial and territorial Ministers.

Questions & Answers

Q. What does the Red Dress Alert investment intend to achieve?

A. This funding is intended to support Indigenous partners in co-developing a regional pilot for a Red Dress Alert, with a province or territory, as well as an assessment following the conclusion of the regional pilot.

The regional pilot will take place in a province or territory, be co-developed with Indigenous partners, and be assessed following its conclusion, so that its lessons learned and best practices can feed into the development of a national wider scale approach to a Red Dress Alert.

On May 3, 2024, ahead of Red Dress Day on May 5, the Government of Canada and the Government of Manitoba announced their partnership to co-develop a Red Dress Alert together with Indigenous partners.

Q. What format will the alert system take? What are the options?

A. There are many options for the format of the alert that Indigenous partners could consider with the pilot province as part of the co-development process. Examples include Broadcast Immediate messages such as the National Public Alert System (e.g. the Amber Alert), but also other technological options, including downloadable applications, subscription-based email or text message alerting systems, and existing provincial or municipal alerting systems.

Q. How will you decide which partners receive support to be part of the co-development process? What will the co-development process focus on?

A. Indigenous partners will be identified in collaboration with Indigenous and grassroots organizations in the province where the pilot will take place. It will be important that those included in the co-development process are reflective of the province's Indigenous demographics, and include families and Survivors, distinctions, local Indigenous communities, urban Indigenous people, and grassroots organizations who work with vulnerable Indigenous women, girls and 2SLGBTQI+ people.

The co-development process is expected to explore technical topics such as criteria for issuing an alert, oversight of the alert, format of the alert and the name of the alert. Co-development discussions would also explore different models for managing and administering an Alert, including Indigenous led models, and support services for victims, families, and Survivors that could be integrated with an Alert.

Q. When will this investment be implemented?

A. The government is committed to addressing the national crisis of Missing and Murdered Indigenous Women, Girls and 2SLGBTQI+ people and responding to the 2023 parliamentary motion on a Red Dress Alert. This funding will be rolled out in an expedited fashion, while working with the province and Indigenous partners to ensure the pilot is co-developed in a good way. Budget 2024 provides the $1.3M over three years; the government is determining the timeline to flow this funding with a province or territory and Indigenous partners. The three-year period could provide space for co-development of the pilot over year one, with implementation in year 2, and the assessment of the pilot project for lessons learned and best practices in year 3.

Q. Is this funding going to be sufficient? What else is the government doing to end the violence against Indigenous women, girls and 2SLGBTQI+ people?

A. The funding will support the co-development of an alerting system; future funding may be contemplated for expansion of the alerting system. This investment responds to the national crisis of missing and murdered Indigenous women, girls and two-spirit, gender and sexually diverse people by seeking an immediate way to address issues of safety. This initiative also acknowledges the need for public education and prevention to decrease the number of missing and murdered Indigenous women, girls and Two-Spirit diverse people

Beyond an alerting system, the Federal Pathway, which is the federal government's contribution to the National Action Plan, outlines the whole-of-government approach to end violence against Indigenous women, girls, and 2SLGBTQI+ people. Progress made towards the implementation of the Federal Pathway and advancing the Calls for Justice are reported annually every June 3^rd through the Federal Pathway Annual Progress Report.

The Calls for Justice are aimed at both government and non-government actors and are wide-ranging, including calls for both long-term systemic changes and short-term immediate actions. Of the 231 Calls for Justice:

• 32 call upon the federal government exclusively
• 183 call upon the federal government, provincial, and territorial governments collectively
• 6 call upon provincial and territorial governments exclusively
• 10call upon non-government actors

Across the federal government, work is being done that advances progress on approximately 100 Calls for Justice. Specifically, Crown-Indigenous Relations and Northern Affairs Canada is leading or involved in work that addresses 21 Calls for Justice.

Q. What was heard during the discussions so far on the Red Dress Alert? Will this be integrated into the pilot?

A. This initiative builds on the $2.5million Budget 2023 commitment, including to advance discussions surrounding the Red Dress Alert at the National Indigenous-Federal-Provincial-Territorial Roundtable on MMIWG and 2SLGBTQI+ People in February 2024. A "what was heard" summary of pre-engagement sessions on a Red Dress Alert was presented at the National Roundtable. Participants included national and regional Indigenous organizations across distinctions, 2SLGBTQI+ partners, as well as federal, provincial and territorial Ministers.

During the pre-engagements and at the Roundtable, Indigenous partners expressed that the Red Dress Alert must enhance safety in communities, respond to violence, and raise public awareness about MMIWG2S+. It was also emphasized that there should be protections in place for victims, as well as their data, from predatory offenders, and there needs to be access to wrap-around services for families and survivors. The regional pilot will take place in a province or territory, and the co-development will be informed by what was heard during the earlier engagement with Indigenous partners.

Q. How was Manitoba identified for the pilot? Why not any other province e.g. BC? When will an official alerting system be implemented?

A. In September 2022, Minister Anandasangaree reached out to his provincial/territorial counterparts to note the commitment of the federal government to advance a Red Dress Alert system and invited the collaboration of their governments on an expedited basis. Since then and continuing from the National Indigenous-Federal-Provincial-Territorial Roundtable on MMIWG and 2SLGBTQI+ People in February 2024, several productive conversations about the potential for a Red Dress Alert have taken place with provincial and territorial governments. These discussions have included their willingness and readiness to partner to swiftly advance the important work of co-development with Indigenous partners and piloting a Red Dress Alert.From these discussions, Manitoba has come forward as a willing and ready partner to advance the important work of piloting a Red Dress Alert.

Any pilot project will be used to inform any next steps towards national implementation of an alerting system. Lessons learned from the pilot project will inform timelines.

Ahead of Red Dress Day on May 5, the governments of Canada and Manitoba acknowledge the ongoing national crisis of missing and murdered Indigenous women, girls, two-spirit and gender-diverse people, and commit to the next steps in better protecting them.

Division 27 - Subsidiary of VIA Rail Canada Inc.

Overview

Declare the subsidiary of VIA Rail Canada Inc. incorporated under the Canada Business Corporations Act on November 29, 2022, and currently named VIA HFR – VIA TGF Inc. ("VIA HFR"), and which was operational as of July 2023, an agent of His Majesty in right of Canada by statute. The effective date of this status will be retroactive to November29, 2022. The objective of the declaration is to ensure alignment with the Government's policy direction and to move the project forward. Declaration would ensure that the VIA HFR agent status is clear to all stakeholders and would dispel any uncertainty regarding its status and that VIA HFR is operating with the full confidence and credit of the Government. This will provide certainty to participants in the procurement process, including confidence in the Government financially backing the project, and improve the private sector's confidence in its dealings with VIA HFR. In sending a positive signal to the market, it is expected that the Government would benefit from an effective counterparty to the Pre-Development Agreement between VIAHFR and the private developer partner.

Government commitments – the measure directly taking action

The High Frequency Rail (HFR) project is one of the largest infrastructure projects in Canada's history, with over 1,000 kilometers of new passenger rail service planned between major city-centres, including Toronto, Ottawa, Montreal and Québec City. The Government has made a number of commitments to advance the HFR project, including:

• In December 2021, the Minister of Transport was issued a mandate letter, in which they were directed to: "Launch a procurement process and move forward with the HFR project in the Toronto to Québec City corridor using electrified technology, working towards the ultimate goal of extending the HFR project to Southwestern Ontario".
• Budget 2022 provided $396.8million over two years to Transport Canada and Infrastructure Canada for planning and design steps in support of the project.
• In February 2022, Cabinet provided policy direction to proceed with the procurement process of selecting a private developer partner and the governance structure, including the creation of a new VIA subsidiary, and that it be an agent of the Crown.
• In March 2022, the Governor in Council authorized and directed VIA Rail to procure a wholly-owned subsidiary, in accordance with the Canada Business Corporations Act, with a mandate to develop and implement the HFR project, including the design, construction, financing, operation and maintenance of passenger rail services in Ontario and Quebec through agreements with the private sector, in cooperation with the Minister of Transport (OiCs PC#2022-0261 and PC#2022-0259). On March 24, 2022, the Governor in Council also declared that the provisions that apply only to parent Crown corporations under Part X of the Financial Administration Act apply to VIA HFR, with certain exceptions, in accordance with OiCPC#2022-0260.
• On November 29, 2022, the VIA Rail subsidiary, currently named VIA HFR – VIA TGF Inc. ("VIA HFR"), was incorporated.
• In February 2023, the procurement process was launched, fulfilling the Minister's mandate letter commitment. The procurement process is ongoing and expected to conclude in fall 2024 with the selection of a private developer partner.

Policy objectives – the measure supports or implements, how the measure would achieve the objective, and the expected outcomes of the legislation once in force.

Declaring VIA HFR an agent of His Majesty in right of Canada, through the 2024 Budget Implementation Act, supports and implements the Government policy decision to declare VIA HFR an agent of the Crown by statute during the procurement phase of the HFR project and achieves various Government objectives, including the following:

1. Enhancing private sector confidence

   Designating VIA HFR to be an agent of His Majesty in right of Canada is considered necessary to provide certainty to participants in the procurement process and improve the private sector's confidence in its upcoming dealings with VIA HFR. It would extend to all phases of the project.

   VIA HFR was incorporated on November 29, 2022, with the mandate to develop and implement the HFR project with the private sector, in collaboration with the Minister of Transport. VIA HFR has been operational since July 1, 2023.

   At the end of the procurement process, as an agent of His Majesty in right of Canada, VIA HFR would enter into a pre-development agreement with the private developer partner to advance the project during the Co-development Phase.

   Including this item in the Budget Implementation Act would ensure that the statutory declaration is in place as soon as possible to provide certainty to the participants in the procurement process, taking into consideration that the procurement process is expected to end in fall 2024. In addition, it is crucial to provide certainty to the bidders who have requested clarification from the Government as soon as possible.

2. Government policy decision

   A Government policy decision was made to assume all risks and be financially liable as well as exercise control over VIA HFR, including the procurement phase and, as such, to declare VIAHFR an agent of His Majesty in right of Canada by statute.

   To mitigate the risk of uncertainty related to agency status of VIA HFR if it is not declared an agent by statute, the Government needs to declare VIA HFR an agent of His Majesty in right of Canada by statute. The preferred approach is to declare VIA HFR an agent of His Majesty in right of Canada through the 2024 Budget Implementation Act because securing agent status is time sensitive given the progress of the procurement. The bidders have requested clarification of VIA HFR's status as soon as possible. If VIAHFR does not receive legislative agent status in the Budget Implementation Act 2024, the bidders have advised that they will be seeking a funding agreement/guarantee in support of VIA HFR's payment obligations under the Pre-Development Agreement and Project Agreement.

   Transport Canada does not currently have authority to make such a guarantee under ss.29(1) of the Financial Administration Act, which could result in delays and additional costs. Creating confidence in the financial backing of the project is the most critical to maintaining momentum of the procurement process and launching the Co-development Phase with a private developer partner. Losing this market confidence due to uncertain financial backing from the Government poses a high risk of losing bidders and the value for taxpayers of a competitive procurement. As such, the timing of the Budget Implementation Act is opportune to ensure alignment of the project schedule and key procurement activities and will provide certainty to the private sector players who are participating in the ongoing procurement process for the HFR project led by the Government.

3. Crown immunity, status of land, and land acquisitions

   Agency status would allow VIA HFR to benefit from the immunities, privileges and prerogatives that are enjoyed by the Crown, but reliance on such doctrine may be vulnerable to challenge where there is no statutory declaration of agency. The benefits from interjurisdictional immunity include provincial laws not binding or imposing obligations on the federal Crown even if they purport to do so.

   VIA HFR will be required to acquire a significant amount of land in order to execute the project. As an agent of His Majesty in right of Canada, the property acquired becomes that of the Crown (as per s.99(1) of the Financial Administration Act). Therefore, declaring VIA HFR to be an agent of His Majesty in right of Canada will allow property acquired by VIA HFR to be federal lands, which are immune from application of certain provincial laws and municipal by-laws. However, it is noted that Governor in Council approval or regulations are necessary for the disposal or lease of lands owned by agents of the Crown (s. 99 of the Financial Administration Act). No exemption to this oversight mechanism is proposed at this stage of the project as it is premature to have full visibility on all circumstances under which VIA HFR would need to dispose or lease land.

   It is important that the agency status be declared early in the process so VIA HFR can benefit from the ability to begin the development of the land acquisition strategy as soon as possible, given the significant amount of land required.

4. Procurement

   Securing agent of the Crown status through the 2024 Budget Implementation Act will not only provide certainty to the private sector players participating in the procurement process, but will also provide certainty to the Government in preparing documents in support of the procurement process (i.e., Request for Proposals and subsections on the Pre-Development Agreement and Project Agreement) for the private developer partner.

   The procurement's Request for Proposals, which was launched in October 2023, provided to potential bidders a draft Pre-development Agreement and a draft Project Agreement, both of which will be entered into between VIA HFR and the private developer partner, subject to the necessary future Government authorities. To fully develop the obligations of the parties in these draft agreements, which drafting is continuing to be underway, the Government will need certainty regarding the status of VIA HFR in regard to it being an agent of the Crown that will act on behalf of the Crown. The Pre-Development Agreement needs to be signed in December 2024, which would enable the launch of the Co-Development phase in January 2025.

5. Financial Backing of Project

   Absent agent status, proponents qualified to participate in the Request for Proposals have asked how VIA HFR will have the financial backing of the Government when entering into the Pre-Development Agreement and Project Agreement to "backstop" the payments of VIA HFR to the private developer partner and private partner. Bidders have advised that, should VIA HFR not be granted agent status, they would seek a funding agreement/guarantee in support of VIA HFR's payment obligations under the Pre-Development Agreement and the Project Agreement.

   To give such a guarantee, Transport Canada would need legislative authority to enter into the funding agreement (ss. 29(1) of the Financial Administration Act). This approach results in an added step during the procurement phase which could introduce risk of delays and added costs. If Transport Canada does not receive such guaranteed authorization in the upcoming Appropriation Act, and no declaration of agency is provided in the 2024 Budget Implementation Act, Transport Canada would not be in a position to provide the necessary reassurances sought by bidders prior to the signature of the Pre-Development Agreement. Creating confidence in the financial backing of the project is critical to maintaining the momentum of the procurement process and launching the Co-development Phase with a private developer partner. Losing this market confidence due to uncertain financial backing from the Government poses a high risk of losing bidders and thus the value for taxpayers of a competitive procurement.

6. Contractual Arrangements with the Crown

   Generally, agents of the Crown may not contract with the Crown. However, VIA HFR, in fulfilling its mandate to develop and implement the HFR project in cooperation with the Government, will require flexibility to enter into contracts, agreements, or other arrangements, including leases, with the Government of Canada. As a result, a provision has been included in the Budget Implementation Act to ensure that VIA HFR is able to enter into contracts and agreements. This type of provision has been used in other agent Crown corporations as well.

7. Consultations

   As part of the Crown, VIA HFR will be required to consult and engage with Indigenous peoples and stakeholders. It is the Government's intention that VIA HFR will be part of the Crown, with responsibilities for fulfilling the legal duty to consult as well as the Government of Canada's commitments under the United Nations Declaration on the Rights of Indigenous Peoples Act. Activities would include leading consultations, considering views and Indigenous knowledge, and making recommendations to federal decision-makers. As such, making VIA HFR an agent of His Majesty in right of Canada would support this intention.

Amendments to existing legislation

Not necessary.

Consideration on coming-into-force date of the measure

As the procurement phase is advancing, the coming-into-force date of the measure will be retroactive to the date of incorporation of VIA HFR. This will ensure that there are no gaps in its status as an agent Crown corporation during its legal existence.

Key Messages

• The purpose of the proposed measure is to declare the subsidiary of VIA Rail Canada Inc. incorporated on November 29, 2022, under the Canada Business Corporations Act, and currently named VIA HFR – VIA TGF Inc. ("VIA HFR"), an agent of His Majesty in right of Canada, which aligns with Government's policy decision made in February 2022.
• Declaring VIA HFR as an agent of His Majesty in right of Canada is essential in advancing the Government's policy decision for the High Frequency Rail (HFR) project. The HFR project will be one of the largest infrastructure projects in generations,with over 1,000 km of new dedicated passenger rail lines planned to be built to serve between major city-centres including Toronto, Ottawa, Montreal and Québec City.
• Budget 2022 provided $396.8million over two years to Transport Canada and Infrastructure Canada for planning and design steps in support of the project.
• In October 2023, the Request for Proposals was launched and the threewinning consortia from the Request for Qualifications proposal announced in July 2023 were invited to submit proposals as part of the procurement process. This process will conclude with the selection of a consortium to act as a private developer partner, and co-sign the Pre-Development Agreement with VIA HFR, to advance the HFR project.
• The declaration of status as agent will provide certainty to the procurement process and the three bidders. Agency declaration is critical to respond to and provide the necessary assurances sought by all three bidders, creating confidence in the financial backing of the project.
• This declaration of agent status is also important for the advancement of the HFR project as it will ensure that the status of VIA HFR as an agent of His Majesty in right of Canada is clear to all stakeholders and dispel any uncertainty regarding its status. In addition, the agency status would allow VIA HFR to benefit from the immunities, privileges and prerogatives that are enjoyed by the Crown (e.g., the benefit from intergovernmental immunity, include provincial laws not binding or imposing obligations on the federal Crown even if they purport to do so).
• It would also assist VIA HFR in the development of its land acquisition strategy.As a non-agent Crown corporation, VIA HFR would hold ownership of property in its own name instead of holding it on behalf of, or in trust for, His Majesty in right of Canada.However, as an agent of the Crown, the properties that VIA HFR acquire become federal lands (as per s. 99(1) of the Financial Administration Act), which would be immune from the application of certain provincial laws and municipal by-laws to the extent that they affect vital aspects of federal jurisdiction (e.g. provincial construction liens/legal hypothec, provincial laws and municipal by-laws dealing with land use, building codes, zoning and development are inapplicable to federal lands).
• If VIA HFR does not receive legislative agent status in the Budget Implementation Act 2024, the bidders have advised that they will be seeking a funding agreement/guarantee in support of VIA HFR's payment obligations under both the Pre-Development Agreement and the Project Agreement. Transport Canada currently does not have any legislative authority to enter such a funding agreement/guarantee as per s. 29(1) of the Financial Administration Act.
• If there is no agency declaration in the Budget Implementation Act 2024 and the Appropriation Act does not include any authority for Transport Canada to enter into a funding agreement/ guarantee, Transport Canada would not be in a position to provide the necessary reassurances sought by bidders prior to the signature of the Pre-development Agreement.
• Without these assurances, VIA HFR would lose market confidence due to uncertain financial backing from the Government, which would put at risk maintaining the momentum of the procurement process and launching the Co-development Phase. There is also a very high risk that one or more bidders would drop out of the process, reducing the value for taxpayers of a competitive procurement.

Questions & Answers

Q. What is the VIA subsidiary (VIA HFR-VIA TGF Inc.)?

A. The High Frequency Rail (HFR) project proposes to build a 1,000+ kilometer intercity passenger rail network on mostly dedicated tracks in Canada's busiest and most densely populated travel corridor, resulting in: reduced travel times; more reliable and frequent services; electrified technology; economic growth and job creation.

The new VIA subsidiary, VIA HFR- VIA TGF Inc. (VIA HFR), has a mandate to develop and implement the HFR project through one or more agreements with the private sector in cooperation with the Minister of Transport. VIA HFR was incorporated under the Canada Business Corporations Act on November 29, 2022, as a wholly-owned subsidiary of VIA Rail Canada Inc.

VIA HFR is a Crown corporation and will operate, for the most part, at arms-length from VIA Rail and will act as a dedicated project office for the HFR project. Currently, the Government of Canada is leading a procurement process to select a private developer partner for the project. Once this partner is selected, VIA HFR will, subject to necessary Government authorities, enter into a pre-development agreement with the private developer partner and work with the partner to design and develop the new HFR project.

Q. Why should this new VIA subsidiary be declared as having agent status?

A. Designating VIA HFR to be an agent of His Majesty in right of Canada aligns with the policy direction of the Government. It will also provide certainty to and build the confidence of the private sector, who are participating in the procurement process for the HFR project led by the Government, that VIA HFR is acting on behalf of the Crown. If VIA HFR does not receive legislative agent status in the Budget Implementation Act 2024, the bidders have advised that they will be seeking a funding agreement/guarantee in support of VIA HFR's payment obligations under the Pre-Development Agreement and Project Agreement. Transport Canada does not currently have the authority to give such a guarantee in accordance with ss. 29(1) of the Financial Administration Act and obtaining such authority would result in delays to the project, additional costs, and potentially losing bidders and the value of a competitive process. Declaring VIA HFR an agent of His Majesty in right of Canada is important for advancement of the HFR project as it would ensure the status of VIA HFR as agent of the Crown is clear to all stakeholders and dispel any uncertainty regarding its status and that VIA HFR is operating with the full confidence and credit of the Government of Canada. As such, the Government would be expected to benefit from an effective counterparty to the Pre-development Agreement, which VIA HFR and the private developer partner will sign.

The agency status would also allow VIA HFR to benefit from the immunities, privileges and prerogatives that are enjoyed by the Crown (e.g., the benefit from intergovernmental immunity, include provincial laws not binding or imposing obligations on the federal Crown even if they purport to do so).

Finally, it would assist VIA HFR in the development of its land acquisition strategy.As a non-agent Crown corporation, VIA HFR would hold ownership of property in its own name instead of holding it on behalf of or in trust for His Majesty in right of Canada. However, as an agent of the Crown, properties acquired by VIA HFR become that of the Crown (as per s. 99(1) Financial Administration Act). As such, these properties would become federal lands, which would be immune from the application of certain provincial laws and municipal by-laws to the extent that they affect vital aspects of federal jurisdiction (e.g., provincial construction liens/legal hypothec, provincial laws and municipal by-laws dealing with land use, building codes, zoning and development are inapplicable to federal lands).

Q. Why is the declaration of agent status needed now, when the project will not be completed until the 2030s?

A. This aligns with the policy direction set out in the Government decision of February2022. Declaring VIA HFR as having agent status through the 2024 Budget Implementation Act is important to advance the HFR project as it will ensure that VIA HFR's status as agent of the Crown is clear to all stakeholders and dispel any uncertainty regarding its status.

It will also provide certainty to the private sector players who are participating in the ongoing procurement process and improve the private sector's confidence in its dealings with VIA HFR. The bidders have advised that if VIA HFR is not granted agency status, they will be seeking a funding agreement/ guarantee in support of VIA HFR's payment obligations under the Pre-development Agreement and the Project Agreement.

In giving such a guarantee, Transport Canada requires legislative authority in accordance with ss. 29(1) of the Financial Administration Act, which it currently does not have, to enter into the funding agreement, which adds additional steps to the procurement phase and could introduce risk of delays and added costs. If the proposed legislative measures to declare VIA HFR as agent of the Crown by statute are not adopted in Budget Implementation Act 2024 and such Appropriation Act does not include any authority for Transport Canada to enter into a funding agreement/guarantee, it would not be in a position to provide the necessary reassurances sought by bidders prior to the signature of the Pre-development Agreement.

Creating confidence in the financial backing of the project is most critical to maintaining the momentum of the procurement process and launching the co-development phase with a private developer partner. Losing the market confidence due to uncertain financial backing from the Government risks losing bidders and thus the value for taxpayers of a competitive procurement.

Providing clarity on this point will assist the Government in providing certainty in developing the terms and conditions when drafting the contractual documents that are part of the procurement process, being the Pre-development Agreement and the Project Agreement. The Request for Proposals was launched in October 2023, and will culminate in a draft Pre-development Agreement and draft Project Agreement, both of which will be signed by VIA HFR and the private developer partner, subject to future Government authorities.

Including this item in the Budget Implementation Act 2024 will ensure that such statutory declaration is in place as soon as possible to provide certainty to the bidders in the procurement process, taking into consideration that the procurement process was launched in October2023 and expected to end in fall 2024.

Q. Why should this declaration of agent status be in the Budget Implementation Act and not separate legislation?

A. While separate legislation would be equally effective, securing agent status is time sensitive given the progress of the procurement. The bidders have requested clarification of VIA HFR's status as soon as possible. If VIA HFR does not receive legislative agent status in the Budget Implementation Act 2024, the bidders have advised that they will be seeking a funding agreement/guarantee in support of VIA HFR's payment obligations under the Pre-development Agreement and the Project Agreement.

Transport Canada does not currently have authority to make such a guarantee under ss. 29(1) of the Financial Administration Act, which will result in delays and additional costs. Creating confidence in the financial backing of the project is the most critical to maintaining momentum of the procurement process and launching the co-development phase with a private developer partner. Losing this market confidence due to uncertain financial backing from the Government poses a high risk of losing bidders and the value for taxpayers of a competitive procurement. As such, the timing of the Budget Implementation Act is opportune to ensure alignment of the project schedule and key procurement activities and will provide certainty to the private sector players who are participating in the ongoing procurement process for the HFR project led by the Government.

Q. Why is VIA Rail Canada Inc. a non-agent when the Government is seeking agent status for VIA HFR?

A. VIA Rail's mandate is to operate national passenger rail services on behalf of the Government of Canada. It is not engaging with the private sector in the same manner as the subsidiary VIA HFR is, as per the latter's mandate to develop and implement the HFR project including the design, construction, financing, operation and maintenance of passenger rail services in Ontario and Quebec, through one or more agreements with the private sector in cooperation with the Minister of Transport.

Q. Are there any associated risks that may arise from declaring VIA HFR as an agent to the Crown?

A. The Government would become legally and financially liable for the risks arising from the VIA HFR's activities and conduct.The Government made a policy decision to accept these risks and as such to declare VIA HFR an agent of His Majesty in right of Canada.

Division 28 - Impact Assessment Act

Overview

This measure proposes to amend the Impact Assessment Act (IAA), to bring it into conformity with the Supreme Court of Canada (SCC) Decision issued in October 2023 which found that the designated projects portion of the IAA was ultra vires Parliament, and thus unconstitutional. The SCC Decision provided guidance on the provisions that needed to be changed to address the constitutional overbreadth. The proposed amendments would implement that guidance.

The IAA sets out a predictable and transparent process, including public and Indigenous consultation and engagement, for assessing the positive and potential adverse impacts of major projects, and for preventing or mitigating significant adverse effects within federal jurisdiction that may be caused by some projects.

In accordance with the SCC's guidance, the proposed amendments to the IAA would narrow the scope of effects within federal jurisdiction that are addressed under the IAA, which the SCC found to be too broad. In addition, the amendments would ensure that decision-making functions under the Act are clearly driven by the potential for adverse effects within federal jurisdiction. Other proposed amendments would improve administrative efficiency and promote greater cooperation with other jurisdictions, responding to the need for cooperative federalism in environmental impact assessment, which the SCC confirmed as an area of shared responsibility.

By addressing the areas of the IAA found to be unconstitutional, the proposed amendments would restore certainty for project proponents, the public, and Indigenous Peoples that a clear and operational federal impact assessment regime is in place for major projects to support economic development while protecting the environment and Indigenous rights.

Key Messages

• The Government of Canada's intent was always to have an impact assessment process that supports investment while protecting the environment.
• This package of amendments is about:
  • responding meaningfully to the Supreme Court of Canada's recent decision by anchoring decision-making on areas of clear federal jurisdiction;
  • moving quickly to restore certainty to project proponents and stakeholders; and,
  • re-setting collaborative approaches in support of cooperative federalism.
• These amendments were developed following engagement with Indigenous groups, the provinces and various stakeholders.
• The Act will continue to provide opportunities for meaningful engagement and the participation of Indigenous Peoples throughout the assessment process, with the aim of securing their free, prior and informed consent.
• The United Nations Declaration on the Rights of Indigenous Peoples remains integral to the Impact Assessment Act.
• Overall, a restored and operational Act will ensure that Canada has a federal impact assessment process in place that protects the environment, advances Indigenous reconciliation, and supports growing Canada's economy.
• We remain focused on ensuring that Canada's impact assessment and permitting processes for major projects are effective, efficient and coordinated.

Questions & Answers

Q. What is the Impact Assessment Act (the Act)?

A. The Impact Assessment Act (the Act) is a federal law that sets out a predictable and transparent process, including public and Indigenous consultation and engagement, for assessing the potential positive and adverse impacts of major projects on environmental, health, social and economic conditions, and for preventing or mitigating significant adverse effects within federal jurisdiction.

The Act came into force in 2019, repealing the Canadian Environmental Assessment Act, 2012 (CEAA 2012), following a comprehensive legislative review.

Q. Why is the Government proposing to amend the Act?

A. On October 13, 2023, a majority of the Supreme Court of Canada (the Court) found the "designated projects" scheme in the Act to be unconstitutional because it went beyond Parliament's authority to legislate under its heads of power set out in the Constitution Act, 1867.

The Government of Canada committed to move quickly to introduce targeted and meaningful amendments to the Act to align it with the Court's decision. The Government's priority is to restore certainty in the impact assessment process for proponents, investors, Indigenous partners and the public.

Q. What did the Court say?

A. The Court found that the sections of the Impact Assessment Act that deal with designated projects are unconstitutional.

Key issues raised by the Court were that the definition of 'effects within federal jurisdiction' is too broad, needing to be more clearly linked to matters of federal jurisdiction under the Constitution Act, 1867; and, that the decision-making provisions for designated projects need to be more focused on effects within federal jurisdiction.

The Court confirmed that the environment, and impact assessments in particular, are areas of shared jurisdiction between the federal and provincial legislatures. The Court confirmed that the Parliament of Canada can enact impact assessment legislation to "minimize the risks that some major projects pose to the environment," including for provincially regulated projects – such as mining, electricity generation, or liquefied natural gas production – which have effects on areas of federal jurisdiction.

The Court encouraged governments to work together in the spirit of cooperative federalism to exercise their respective areas of jurisdiction harmoniously towards solutions that serve the country as a whole.

The Court took no issue with many elements of the Act and process steps, such as early planning; the information gathering and assessment stages, including considering effects beyond federal jurisdiction to better inform decision-making; Indigenous consultation and public engagement. The approach to designating projects via the Physical Activities Regulations ("Project List") was also affirmed by the Court.

Q. What will the amendments change?

A. The Court set out guidance on the types of changes required to make the Act constitutionally sound.

The proposed amendments to the Act will address the Court's concerns by focusing on the decision-making provisions, and the definition of effects within federal jurisdiction, while also being responsive to the need for cooperative federalism in impact assessment.

Specifically, the proposed amendments:

• Ensure that decision-making functions, namely the designation decision, screening decision, and the final determinations, are focused on areas of federal jurisdiction.
• For activities that are primarily provincially regulated, clearly align the definition of adverse effects within federal jurisdiction under the Act with federal Constitutional heads of power, and apply appropriate thresholds (i.e. non-negligible adverse impacts on fish and fish habitat, migratory birds, federal lands, narrowly defined transboundary effects, and impacts on Indigenous Peoples).
• Ensure that ongoing prohibitions or conditions are appropriately directed at preventing or mitigating significant adverse effects within federal jurisdiction.
• Increase flexibility in the Act to work with provinces and avoid duplication of processes (e.g. allowing cooperative approaches to substitution of assessments).

Proposed amendments will not impact the legislative requirements for meaningful engagement and the participation of Indigenous Peoples in the assessment process, with the aim of securing their free, prior and informed consent.

Q. Will the amendments change the impact assessment process steps, engagement requirements and Indigenous participation?

A. Early planning, information gathering and assessment, public engagement and transparency in assessments and decision making, the approach to designating projects via the Physical Activities Regulations ("Project List"), strict assessment timelines and consultations with Indigenous groups that advance reconciliation will be retained while amendments to address the constitutional issues are introduced.

The implementation of the United Nations Declaration on the Rights of Indigenous Peoples is and will remain integral to the Act. The Act would continue to provide opportunities for meaningful engagement and participation of Indigenous Peoples in the assessment process, with the aim of securing their free, prior and informed consent.

The legislative tools for working with other jurisdictions continue to exist and will be made more flexible with the amendments in an effort to leverage the respective strengths and expertise of each jurisdiction.

Q. Will the amendments change which kinds of projects are subject to the impact assessment process?

A. There are two ways in which projects may be "designated" as subject to the Act. First, the Physical Activities Regulations (Project List) identify the physical activities – project types and sizes – with the greatest potential for adverse effects in areas of federal jurisdiction and therefore may require an impact assessment. Examples include major projects such as nuclear facilities, and certain mines, oil facilities, bridges, roads and dams. Consistent with the direction of the Court, the proposed amendments would ensure that only projects that may cause adverse effects in federal jurisdiction could be included on the Project List. The Project List will be reviewed through a public regulatory review once the amendments to the Act come into force.

Second, the Minister has a discretionary authority to designate projects that are not on the Project List to be considered for an impact assessment. Consistent with the direction of the Court, the proposed amendments would clearly limit use of this exceptional discretionary authority to projects with a potential for adverse effects within federal jurisdiction. Amendments would also provide for the Minister to consider whether another jurisdiction's processes could address the effects in federal jurisdiction.

Q. What will the amendments mean for proponents who have projects in the impact assessment process?

A. To provide certainty to proponents who chose to advance their project assessment on a voluntary basis during the interim period from the issuance of the SCC opinion and the enactment of amended legislation, the proposed amendments include transitional provisions which will allow certainty and continuity so that no time or effort will be lost in the overall regulatory review.

The passage of the Bill through the parliamentary process will allow the Act to become operational again.

Q. What changes will there be to how the Government works with provinces and territories?

A.The Court confirmed that impact assessment is an area of shared jurisdiction and that is open to both levels of government to exercise this responsibility in the spirit of cooperative federalism.

The Act currently contains several tools for cooperation, including the potential for substitution of the federal process with that of another jurisdiction if all of the requirements of the federal process are met by that jurisdiction, with each jurisdiction remaining responsible for making its own final decision. Proposed amendments to the substitution provisions would provide new flexibility to allow for substitution subject to a cooperation agreement under which the jurisdictions could divide responsibilities for parts of the assessment rather than requiring the other jurisdiction to undertake all parts of the federal process as is currently the case. In addition, the amendments to the designation decision provision and the Agency's screening decision provision will more clearly provide for consideration of, and reliance on, provincial processes to address potential adverse effects within federal jurisdiction.

Division 29 – Judges Act

Overview

Division 29 of Part 4 amends the Judges Act to repurpose 17 previously approved unified family court positions to trial pool positions. This means that it would decrease the number of judicial salaries that may be paid under paragraph 24(4) of the Judges Act from 75 to 58 but would increase the number of judicial salaries that may be paid under paragraph 24(3)(b) from 62 to 79. These legislative amendments will come into force on Royal Assent.

These judicial positions will respond to existing and projected workload pressures and assist the courts in dealing with their caseloads in a timely manner.

Key Messages

• These amendments repurpose 17 previously authorized unified family court salaries to trial pool position which is a "pool" of judicial salaries that may be allocated to the superior trial courts in any Canadian jurisdiction.
• The increase to the judicial complements will respond to existing and projected workload pressures at superior trial courts and assist those courts in dealing with their caseloads in a timely manner.
• Repurposing previously approved funding from Budget 2018 will allow for the timely allocation of judicial resources in a way that allows provincial governments to respond to pressures in the justice system.
• Judges appointed to a trial pool position can hear a variety of matters, including criminal, civil, and family law matters.

Questions & Answers

Q. What do these amendments do?

A. These amendments create authority to appoint additional superior court judges to respond to demonstrated and projected workload pressures and delays.

Q. How will these new 17 judicial positions be reallocated?

A. The reallocation relies on the objective data submitted through the standardized annual process under which provinces and territories are invited to submit requests for increases in the size of their courts.

Q. Why don't the amendments specify which courts will be getting these 17 judicial positions?

A. Authorizing these salaries in a pool position allows for flexibility and responsiveness in allocating the new judicial resources across courts to respond to their demonstrated need. Positions for unified family courts are also authorized under a pool provision; this pool provision (section 24(3)(b) of the Judges Act) is broader in that judges can be appointed to superior trial courts, which have broad jurisdiction and hear criminal, civil, and family law matters.

Q. What is the cost of these 17 judicial positions?

A. Budget 2024 announced $50.2million over 5 years, starting in 2024-2025, and $10.9million ongoing.

The funding for these positions was originally authorized in Budget 2018 for the expansion of unified family courts. However, since 17 of the salaries authorized in Budget 2018 have not yet been used, the funding will be reprofiled to be used in any provincial superior trial court.

The associated costs are for judicial salary and benefits, which are paid under the Judges Act as a statutory draw from the Consolidated Revenue Fund; however, no costs are incurred until a judicial appointment is made. Provincial governments are responsible for court administration costs for provincial superior courts.

The current annual salary for a puisne judge is $396,700. Judicial salaries are indexed to the Industrial Aggregate Index (IAI).

Q. Why are these positions being taken out of the unified family courts?

A. Budget 2018 authorized funding for 39 new judicial salaries to support the expansion of unified family courts across Canada. Four provinces participated in this initiative, and expansion has subsequently occurred in Nova Scotia, Newfoundland and Labrador, and Ontario. However, Alberta has indicated that it will not be proceeding with unified family courts implementation. Rather than allowing those positions to remain unused indefinitely, Budget 2024 allows the government to respond immediately to demonstrated need in other courts by redistributing the 17 positions notionally allocated to Alberta's unified family courts.

Q. Why are new positions being given only to a few courts?

A. The resources included in Budget 2024 respond to demonstrated need in various courts. Multiple factors impact court operations, such as volume and complexity of incoming cases, court procedures, and availability of courtrooms and technology. For those courts that experience sustained pressures, there will be opportunities to support future requests for additions to their judicial complement.

Q. How many judges are there? How many of them are women?

A. As of April 1, 2024, there were 1190 (including supernumerary judges) federally-appointed judges in office. Of those, 46.22 percent (550 of the 1190) were women.

Source.

Division 30 - Tax Court of Canada Act

Overview

Division 30 of Part 4 amends section 17.1 of the Tax Court of Canada Act to:

1. provide that a party that is not an individual shall be represented by counsel in all proceedings under the General Procedure before the Tax Court of Canada; and
2. provide that the Tax Court of Canada may, in special circumstances, grant leave to a party that is not an individual to be represented by a director, an officer, an employee, a member or a partner.

Currently, a corporation or other association that cannot afford a lawyer may decide not to pursue a tax dispute before the Tax Court of Canada. This disproportionately affects, for example, small family businesses or non-profit organizations, which may be particularly vulnerable to economic hardship. Allowing such entities to be represented by a director, an officer, an employee, a member or a partner, in special circumstances, will alleviate unfairness and enhance access to justice. It will also bring the Tax Court of Canada's powers in line with those of the Federal Court and Federal Court of Appeal, both of which have the ability to allow a corporation, a partnership or an unincorporated association to be represented by a non-lawyer in special circumstances.

This measure will help the Government meet its commitment to enhancing tax fairness and public confidence in the tax system and improve access to justice.

These legislative amendments will come into force on Royal Assent.

Key Messages

• This measure will amend section 17.1 of the Tax Court of Canada Act to allow a party to a proceeding that is not an individual, such as corporations, unincorporated associations and other entities, to be represented by a director, officer, employee, member or partner in special circumstances, in an appeal from a tax assessment under the General Procedure before the Tax Court of Canada.
• This legislative change will enhance access to justice since, currently, a corporation or other entity or association that cannot afford a lawyer may decide not to pursue a tax dispute in the Tax Court of Canada. Small family businesses that have chosen to incorporate as well as non-profit organisations may be particularly vulnerable to economic hardship.
• The proposed measure will bring the Tax Court of Canada's powers in line with those of the Federal Court and Federal Court of Appeal, both of which have the ability to allow a corporation, a partnership or an unincorporated association to be represented by a non-lawyer in special circumstances.
• By removing barriers, this measure will help the Government meet its commitment to enhancing tax fairness and public confidence in the tax system and improving access to justice.

Questions & Answers

Q. What does this amendment do?

A. This amendment creates the authority for the Tax Court of Canada (TCC) to allow corporations and other taxpayers who are not individuals, such as, unincorporated associations and other entities, to be represented before the TCC, under its General Procedure, by a non-lawyer in special circumstances.

Q. Why is it necessary for a corporation to be represented by a lawyer before the TCC?

A. Lawyers are the only professionals qualified to represent a client before a court of law and, as such, they play an important role in the efficient administration of justice.

The TCC is a superior court of record and its rules of evidence and procedure are comparable with the rules of other superior courts. That is why the Tax Court of Canada Act provides that, unless a party to a proceeding chooses to appear in person (i.e., as a self-represented litigant), it must be represented by a person licensed to practice as a barrister, attorney or solicitor.

Q. Why should the Tax Court of Canada Act be amended to allow a party that is not an individual to be represented by a director, officer, employee, member or partner?

A. The costs of legal representation, particularly in the field of tax law, can affect a taxpayer's choice to challenge a notice of assessment issued by the Minister of National Revenue. Individuals who are unable to afford a lawyer may choose to represent themselves before the TCC. Corporations and other associations or entities who wish to launch an appeal also face financial hardship. However, unlike individuals, these entities cannot appear "in person". For small family businesses or non-profit organisations, the choice may be between hiring a lawyer or choosing not to challenge their tax assessment before the TCC.

Requiring corporations and other associations or entities to be represented by a lawyer must remain the rule before the TCC to ensure the efficient administration of justice. However, the proposed amendment to the Tax Court of Canada Act would give the Court some discretion to allow a corporation or any party that is not an individual, in special circumstances, to be represented by a director, officer, employee, member or partner, rather than a lawyer. This amendment would bring the TCC's powers in line with those of the Federal Court and the Federal Court of Appeal, as well as most other superior courts, and strike a balance between access to justice and the efficient administration of proceedings before the TCC.

Q. What is the difference between the General Procedure and the Informal Procedure of the TCC?

A. The General Procedure is more formal and its rules of evidence and procedure are comparable to the rules of other superior courts across the country. In contrast, the Informal Procedure is comparable to a small claims court. It applies to tax claims of $25,000 or less, and is designed to allow appeals to be heard expeditiously and informally.

Q. Are there currently tax appeals where non-lawyers can represent taxpayers before the TCC?

A. Yes. When a taxpayer, including a corporation, files an appeal under the TCC's Informal Procedure, they can choose to be represented by either a lawyer or an agent. An agent does not require any professional qualifications and could be a friend or family member.

Q. Why was the TCC not given the power to authorize corporations to be represented by a non-lawyer, when it was given to the Federal Court and the Federal Court of Appeal?

A. The current provision of the Tax Court of Canada Act was introduced in 1991 when the TCC was given the exclusive jurisdiction to hear appeals from tax assessments. The current rule, which requires taxpayers to be represented by a lawyer, was introduced to mark the change from the TCC being an informal court to it being a formal court, with rules comparable to other superior courts across the country. However, nothing suggests that Parliament put its mind to the question of whether the TCC should be given the power to make exceptions in special circumstances. The proposed amendment will enhance access to justice and align the powers of the three courts as they relate to legal representation.

Q. If this proposed amendment improves access to justice for corporations, why doesn't it do the same for individual by allowing them to be represented by non-lawyers, such as accountants?

A. Only a lawyer is properly qualified to represent a client in an appeal under the TCC's General Procedure. The purpose of the amendment is to permit corporations and other associations or entities, in special circumstances, to be represented by a member of its organization, which would be the equivalent of an individual representing themselves. The amendment is not meant to permit representation before the TCC by an external accountant or other tax professional.

Q. Who would be permitted to represent the corporation?

A. Representatives would be non-lawyers within these organisations, being a director, an officer, an employee, a member or a partner who, according to the TCC, can adequately represent the taxpayer before the Court while complying with the TCC Rules.

Q. What are the "special circumstances" where the TCC may grant leave to a corporation to be represented by a non-lawyer?

A. There are a number of Federal Court decisions that set out factors to be considered in determining whether a corporation should be permitted to be represented by an officer or employee. They include the ability of the corporation to afford legal representation, the complexity of the issues, the competence of the individual employee or officer to represent the corporation, the individual's capability to deal expeditiously with the procedural issues and whether the individual will be a witness during the proceeding.

Q. What types of organisations would benefit from this amendment?

A. The corporations and other associations or entities appearing before the TCC who are not individual "flesh and blood" litigants cover a broad spectrum. They may be small private corporations, family businesses, partnerships, sports associations, or non-profit associations.

Q. Once implemented, will this measure require any use of public funds?

A. No

Division 31 – Food and Drugs Act

Overview

Through the administration of the Food and Drugs Act and its associated regulations, Health Canada regulates the safety, efficacy, and quality of therapeutic products before and after the products enter the Canadian marketplace. Health Canada and the Canadian Food Inspection Agency are also responsible for the administration of the food provisions of the Food and Drugs Act. The purpose of this proposal is to introduce new tools for the Minister of Health to better address access gaps or vulnerabilities for food and therapeutic products, including nicotine replacement therapies. In addition, the proposal would also broaden existing regulation-making authorities designed to mitigate drug and medical device shortages to include foods for a special dietary purpose. This proposal will improve regulatory flexibility and responsiveness while maintaining Health Canada's high standards respecting therapeutic products and foods.

Through the Budget Implementation Act, 2024, the Government is seeking to amend the Food and Drugs Act to provide the Minister of Health with three new authorities:

1. Exemption authority: An ability for the Minister to exempt, by order, a person, product or activity (or classes of persons, products or activities) from requirements in the Food and Drugs Act or its regulations. The authority could be used at the Minister's discretion where the Minister believes that the making of such an Order is for a health or safety purpose (e.g., to address a health or safety issue), or is in the public interest, and where it would not introduce unacceptable risk or uncertainty to health, safety, or where applicable, the environment, taking into account the benefits of the Order and the conditions therein.
2. Reliance authority: An ability for the Minister, to make an order, allowing for the reliance on information or decisions of certain foreign regulatory authorities to satisfy requirements in the Food and Drugs Act or its regulations. The authority could be used where the Minister believes that the making of such an Order is for a health or safety purpose (e.g., to address a health or safety issue), or is in the public interest and, would not introduce unacceptable risk or uncertainty to health, safety, or where applicable, the environment, taking into account the benefits of the Order and the conditions therein.
3. Supplementary measures authority: An ability for the Minister to make, by order, measures relating to therapeutic products to prevent promotion or appeal of a product to a population at risk, or to prevent, manage or control risks posed by access to these products for unauthorized use. This would provide the Minister with the authority to impose requirements relating to, for example, marketing, advertising, labelling, packaging and conditions of sale that may go beyond the scope of the existing regulatory regime under the Food and Drugs Act, such as Nicotine Replacement Therapies.

In addition to these three new tools, this proposal would seek to expand the existing Food and Drugs Act to broaden the regulation-making authorities related to shortages to include food for a special dietary purpose. These foods include food for special dietary use, as defined in the Food and Drug Regulations, as well as human milk substitutes (infant formula) and human milk fortifiers. Finally, this proposal would also seek authority to make two additional amendments to the Food and Drugs Act to address technical issues.

Products regulated by Health Canada must meet certain requirements to ensure that they are safe, work as intended, and are of high quality. The Food and Drugs Act and its associated regulations set out the requirements that must be followed when pursuing certain activities including the manufacturing, importing, exporting, and selling of therapeutic products and food in Canada, with additional requirements for food set out in the Safe Food for Canadians Act and its associated regulations. These legislative and regulatory frameworks are designed as rules of general application to provide consistency, certainty, transparency and fairness in the regulation of therapeutic products and food.

While the Food and Drugs Act and its regulations contain some tools to address exceptional issues, such as the Special Access Program for drugs not available for sale in Canada and the ability to make Interim Orders for urgent needs, these authorities are typically either of general application for all products within a category defined by the Regulations and/or intended to act in narrowly pre-established circumstances. No existing tool is sufficiently flexible to allow Health Canada to respond with tailored solutions to a range of potential urgent situations. While Health Canada continuously updates its stock of regulations to ensure that these frameworks work as intended to protect the health and safety of people in Canada, Health Canada needs more flexible regulatory tools to mitigate the impact that events may have on product availability, as well as safety issues that could have negative consequences for the health of people in Canada or for the environment in a timely manner. The increased frequency of events that require tailored approaches, including the COVID-19 pandemic, product shortages, areas of persistent unmet need and issues arising with therapeutic products that can cause harms through unauthorized use, have underscored the need for the Minister of Health to be able to put in place precise regulatory responses, at times very rapidly.

These measures build on previous calls from stakeholders to institute greater regulatory flexibility in appropriate circumstances, including reliance on information and decisions of foreign regulatory authorities. This feedback includes Health Canada's recent consultations on improving access to drugs and other health products in Canada, and engagement around establishing a National Priority List for Pediatric Drugs. Furthermore, many sectors of the health community are expected to be highly supportive of any measures that would help facilitate safe access to therapeutic products and foods which are needed to address areas of unmet need, as well as measures that would address the unauthorized use or intentional misuse of certain therapeutic products, including Nicotine Replacement Therapies.

Most of the proposed authorities would become available to the Minister of Health upon Royal Assent of the Budget Implementation Act. The one exception would be for person-specific (rather than class) exemption orders, which would come into force at a future date by Order in Council. In the event of future issues, disruptions, or vulnerabilities, and where the Minister determines that targeted federal action is required, the Minister would select the most appropriate regulatory instrument to mitigate an emerging issue from the tools available under the Food and Drugs Act. Additionally, the repeal of the Minister's ability to issue marketing authorizations for food will come into force at a future date.

If the Minister decides to use one of these new authorities, a Ministerial Order would be made. The requirements under the Statutory Instruments Act would be followed. As it would be the case for any other regulations, Health Canada would engage stakeholders, pursue regulatory cooperation and regulatory alignment, where appropriate, and coordinate with all levels of government to minimize cumulative and unintended impacts of regulations on people in Canada, businesses, and the economy. While person-specific exemption orders will not be subject to the Statutory Instruments Act, stakeholder engagement principles will still be maintained where appropriate. Finally, any use of these authorities would be done in a transparent manner. Ministerial Orders developed under these authorities would be made publicly available, along with related guidance materials.

Key Messages

• The Government of Canada is taking steps to improve Health Canada's ability to respond to access gaps and vulnerabilities for therapeutic products and food that may affect the health and safety of people in Canada. While Canada's regulations governing the sale of health products and food typically work well , situations can arise where tailoring a regulatory approach is necessary to ensure the safety and availability of the products Canadians rely on to maintain their health.
• There can also be instances when therapeutic products that are developed and authorized for health purposes have the potential to cause downstream health, safety, or environmental issues through unauthorized use or intentional misuse. These amendments will allow Health Canada to rapidly improve regulations and put in place safeguards to protect children and youth around Nicotine Replacement Therapies, particularly nicotine pouches.
• Through the Budget Implementation Act, 2024, the Government is proposing amendments to the Food and Drugs Act to enable precise regulatory solutions to mitigate issues related to product availability, areas of persistent unmet need or unauthorized use.
• These measures will equip Health Canada with the right tools to quickly respond to emerging safety or public health concerns before they evolve into more severe public health issues.
• Where appropriate, the proposed measures would enable:
  • The making of targeted exemptions from the Food and Drugs Act for persons, activities or products;
  • The reliance on foreign information or decisions from select regulatory authorities to support access to health products and food; and
  • The ability to develop supplementary measures for certain therapeutic products that could potentially cause harms through unauthorized use and prevent intentional misuse.
• These proposed amendments would also broaden existing regulation-making authorities designed to mitigate drug and medical device shortages to include foods for a special dietary purpose, such as infant formula.
• Any use of these regulatory measures would be subject to appropriate checks and balances, informed by stakeholder engagement, and the high standards that Health Canada upholds in all its regulatory activities.

Questions & Answers

Q. What are the existing tools under the Food and Drugs Act that the Minister may use to address access issues and vulnerabilities? Why are they insufficient?

A. While the Food and Drugs Act already contains some tools to address exceptional issues, these authorities are typically either of general application and/or intended to act in narrowly pre-established circumstances. No existing tool is sufficiently flexible to allow Health Canada to respond with tailored solutions to a range of potential urgent situations. The new authorities contained in this proposal would complement existing authorities, such as:

• Special Access Programs (SAP), which can authorize the sale of a drug or medical device that is not currently available for sale for patients with a serious or life-threatening condition in an emergency or where conventional treatments have failed, are unavailable or are unsuitable, upon request by a health care professional. The SAP is limited in scope to meet the health needs of individual patients in very specific circumstances.
• The ability to make an Interim Order which allows the creation of tailored regulatory requirements or exemptions to deal with a significant risk, direct or indirect, to health, safety, or the environment, for a maximum of one year. Interim Orders may not be an appropriate tool in all urgent situations given their threshold for use and time-limited nature.
• The regulation-making authority for the purpose of preventing shortages of therapeutic products in Canada or alleviating those shortages or their effects, to protect human health. The regulatory pathway created under this authority has been highly useful to rapidly make additional therapeutic products available to help mitigate a shortage. However, there are gaps in the regulations that constrain the ability to take all appropriate measures to respond to a shortage, and the scope of the regulation-making authority currently does not cover foods for a special dietary purpose, such as infant formula.
• The Advanced Therapeutic Products pathway that allows for the creation of a flexible regulatory model for innovative or emerging therapeutic products that cannot be appropriately regulated through existing regulations. Such a tool is complex and may require an iterative, collaborative approach; it is therefore ill-suited to urgent situations where immediate action may be required.

Q. If the Minister is now exempting companies from Canada's high regulatory standards or relying on information not specific to the Canadian market, how can we be sure that safety, efficacy, and quality standards won't be impacted?

A. The proposed legislation includes specific safeguards outlining that any Ministerial Orders developed to carry out the use of these authorities may only be made if the Minister believes that it is necessary to address a health or safety issue, or is otherwise in the public interest. Additionally, an order can only be made where the Minister believes that it would not introduce unacceptable risks or uncertainties respecting health and safety, or where applicable, the environment, after taking into account the benefits of the Order and the conditions therein.

Situations can arise where it is in the public interest to tailor our regulatory approach to ensure that people in Canada have access to the therapeutic products and food they need. This may involve, for example, allowing therapeutic products to be imported or sold in Canada that have been produced for other markets or that do not meet the exact letter of current Canadian regulatory requirements. This would only be done in cases where Health Canada is confident that these products are safe and the benefits to people in Canada outweigh any potential risks.

Health Canada's high scientific and regulatory standards will be maintained in deciding whether and when to use these authorities and in any decisions made following the application of Orders issued under these authorities. Furthermore, these authorities are not meant to displace the normal functioning of the Food and Drugs Act and its associated regulations. Any use of the authorities will follow existing standards for policy development and consultation requirements, where appropriate, and would meet obligations under the Statutory Instruments Act. As part of this process, feedback from stakeholders will inform the development of any Ministerial Orders. While person-specific exemption orders will not be subject to the Statutory Instruments Act, the applicability of continued high regulatory standards, consultation where appropriate, and transparency will be maintained.

Q. What are some recent instances of supply chain disruptions and/or vulnerabilities that impacted the availability of critical health products and foods?

A. Health Canada and other regulators around the world regularly face challenges associated with disruptions to global markets and supply chains which impacts access to needed therapeutic products and food. The reality of global markets is that critical products or ingredients are often produced in a small number of manufacturing facilities worldwide, and disruptions at a single facility or unexpected increases in demand in one region can have ripple effects on supply across the globe. The increased frequency of events that require tailored approaches, including the COVID-19 pandemic and various critical shortages of certain drugs and foods, have underscored the need for the Minister of Health to be able to put in place precise regulatory responses, at times very rapidly.

One recent example was the closure of a major production facility in Sturgis, Michigan (USA) which resulted in a shortage in Canada of infant formulas (including both specialized and regular formula), human milk fortifiers and certain speciality food products for individuals with rare but serious inherited metabolic disorders. Health Canada needs more flexible regulatory tools to respond to such urgent situations to ensure that people in Canada have the products they need.

In addition to market or supply chain disruptions, Canada's relatively small population sometimes results in companies making the business decision not to market their products here, particularly for products intended for small sub-populations (e.g., for pediatric indications or to treat rare diseases). This can result in gaps in the products available to people in Canada, even if products are available in other jurisdictions such as the United States or Europe. Having in place more flexible regulatory tools, like the ability to leverage reliance on foreign approvals, could expedite the availability of specialized healthcare products and address gaps in treatment that may currently not be available to small sub-populations.

Q. How will these measures impact existing regulated parties (in both the therapeutic products and food industries)? Will the Department provide certainty to parties on how and when these authorities will be used?

A. There would be no immediate impact on parties simply on the basis of these legislative amendments coming into force. These authorities are tools that the Minister of Health can use as needed to respond to specific situations. Consistent with transparency obligations under the Statutory Instruments Act and stakeholder engagement requirements, regulated parties will be apprised of any potential use and have an opportunity to engage. Health Canada will also publish a guide on these new authorities to provide stakeholders with further information on how and under what circumstances the Minister may use these authorities.

Q. With respect to the authority to enact supplementary measures for certain authorized therapeutic products, how will the Minister determine where a product poses downstream risks with respect to misuse or unauthorized use?

A. This authority, when deemed appropriate, would be used based on evidence of potential harms to health or safety from unauthorized use or the misuse of a product, or broader concerns related to potential negative public health outcomes, or environmental harms. Health Canada's intent would be to ensure continued access to these therapeutic products for their intended uses, while mitigating potential harms from misuse or unauthorized use, as well as ensuring that access to veterinary therapeutic products do not adversely affect the environment.

Q. Do other federal statutes permit similar abilities? Do our international partners use similar tools in their regulatory frameworks?

A. Other Canadian product safety legislations, including the Cannabis Act and the Controlled Drugs and Substances Act contain similar exemption authorities. For example, subsection 56(1) of the Controlled Drugs and Substances Act states that the Minister may exempt any person or class of persons from all or any provisions of the Act or regulations made under it if the exemption is necessary for a medical or scientific purpose, or if the exemption is otherwise in the public interest.

International regulatory reliance is a growing practice among certain partners given the globalization of markets and the need to ensure that patients and consumers have access to safe, effective and high-quality products. A reliance authority could help strengthen and diversify the Canadian market for certain products and support further international work-sharing arrangements. Other comparable regulators such as the U.K. Medicines and Healthcare products Regulatory Agency, SwissMedic and the Australian Therapeutic Goods Administration have reliance pathways in place. Through the reliance authority, Health Canada would be able to employ reliance as necessary to respond to needs where the benefits of using reliance outweigh the potential risks.

Q. Is it appropriate for the Minister to facilitate exemptions or require supplementary measures to provisions set out by Parliament or the Governor in Council without any oversight?

A. The Minister's ability to issue exemption orders or require supplementary measures is limited by guardrails. The Minister can only make an exemption order where the Minister believes it is necessary to address a health or safety issue, or where is in the public interest. Additionally, in issuing an order, the Minister will need to believe that the exemption(s) does not introduce unacceptable risks or uncertainties to health, safety, or where applicable, the environment, taking into account the benefits and conditions of the order.

Further, most orders are expected to be class orders which will be subject to transparency requirements that are found in the Statutory Instruments Act and consultation requirements, as in the case for regulations made by the Governor in Council. While orders that only apply to a single person are exempt from the application of the Statutory Instruments Act, these orders will still need to be publicly available.

It should be noted that Parliament has granted the Minister of Health similar exemption authorities under other Canadian product safety legislations, including the Cannabis Act and the Controlled Drugs and Substances Act, which contain similar exemption authorities.

Q. Will any use of the reliance or exemption authorities result in cost savings for industry or the government?

A. The primary objective of this measure is to improve Health Canada's ability to respond to access gaps, vulnerabilities and emerging issues, while maintaining Health Canada's high scientific and regulatory standards for therapeutic products and food. Given that these authorities will be used in a targeted way to address specific situations, they are not intended or expected to result in cost savings for government.

With respect to the use of reliance on information from certain foreign regulatory authorities, as more data becomes available on its use, Health Canada will assess whether there is sufficient material impact on costs to reduce existing fees to be commensurate to the level of regulatory oversight effort, and in light of the public/private benefit.

Q. What are examples of how the supplementary measures authority will be used?

A. Certain therapeutic products that have been developed for a health purpose have the potential to cause downstream health or safety issues because of misuse, unintended or inappropriate use. For example, nicotine replacement therapies are products developed to help adults stop smoking. However, nicotine is a highly addictive substance and if these products are marketed and made available to youth, they have the potential to result in exposure and potentially addiction to nicotine. This is an existing challenge, as companies have developed forms of nicotine delivery that do not contain tobacco, and therefore do not fall under the controls of the Tobacco and Vaping Products Act.

This proposal would provide the Minister with the authority under the Food and Drugs Act to impose additional requirements in relation to, for example, marketing, advertising, labelling, flavors, packaging and point and amount of sale of therapeutic products that may go beyond the scope of the existing regulatory regime under the Food and Drugs Act. The scope of the supplementary measures power would extend to prescription or non-prescription drugs, drugs for animal use, medical devices or natural health products (or products that are combinations of any of these products) that could cause harms through inappropriate use. This would result in the alignment of legislative and regulatory protections across Acts in the Health Portfolio that regulate similar products (e.g., Controlled Drugs and Substances Act, Tobacco and Vaping Products Act).

Q. Will the reliance authority lead to an influx of American companies into the Canadian market and harm Canadian industry?

A. The objective of this measure is to improve access to particular products resulting from access gaps or vulnerabilities. The use of the reliance authority implies an existing inability for domestic suppliers to sufficiently address such access gaps or vulnerabilities. Therefore, it is anticipated that the use of this authority will allow American companies to market products not currently provided by Canadian industry, and will not interfere with Canadian industry.

Q. How have stakeholder views been considered in the development of this proposal?

A. These measures build on previous calls from stakeholders to institute greater regulatory flexibility in appropriate circumstances, including reliance on information and decisions of foreign regulatory authorities. This feedback includes Health Canada's recent consultations on improving access to drugs and other health products in Canada, and engagement around establishing a National Priority List for Pediatric Drugs. Furthermore, many sectors of the health community are expected to be supportive of any measures that would help facilitate safe access to therapeutic products and foods which are needed to address areas of unmet need, as well as measures that would address the misuse or unauthorized use of certain therapeutic products.

Division 32 – Tobacco and Vaping Products Act

Overview

Division 32 of Part 4 proposes to amend the Tobacco and Vaping Products Act (TVPA) to,

1. create the legal entitlement to access customs information from the Minister of Public Safety and Emergency Preparedness pursuant to paragraph 107(5)(b) of the Customs Act for the purpose of the administration and enforcement of the Tobacco and Vaping Products Act (TVPA);
2. authorize the disclosure of information collected under the TVPA to any federal Minister for any reason related to verifying compliance with any Act of Parliament that applies directly or indirectly to a tobacco product or a vaping product or any activity in relation to a tobacco product or a vaping product; and,
3. if the powers to make regulations respecting fees or charges included in Bill C-59 are adopted, permit documents (e.g., forms) developed by Health Canada relating to any future cost recovery-related regulations to be referenced in those regulations so that they can be periodically amended without amending the regulations.

These proposed amendments would allow the Canada Border Services Agency (CBSA) to share certain customs information collected under the Customs Act with Health Canada to support the administration and enforcement of the TVPA, including, if Bill C-59 is adopted, the implementation of the proposed tobacco and vaping cost recovery frameworks. In particular, the amendments would assist in the validation of information received from tobacco and vaping manufacturers that would be used to calculate the fees or charges to be paid.

In addition, these amendments would enable the sharing of information that Health Canada obtains under the TVPA with other federal departments and agencies under specific conditions to support the verification of compliance with any federal legislation that applies directly or indirectly to a tobacco or vaping product or any activity in relation to a tobacco or vaping product, such as the Customs Act and the Excise Act, 2001.

Lastly, the proposed legislative amendments would allow documents (e.g. forms) developed by Health Canada in relation to any future cost recovery-related regulations to be referenced in those regulations so that they can be periodically amended without amending the regulations. As such, any changes to the documents would immediately become part of the regulations without going through the entire regulatory process. This amendment would provide flexibility and increased efficiency for the implementation of the proposed fees and charges to be established under the TVPA if Bill C-59 is adopted.

The proposed amendments would help advance the 2021 ministerial mandate letter commitment to "require tobacco manufacturers to pay for the cost of federal public health investments in tobacco control". This commitment was reiterated in Budget 2023 and the 2023 Fall Economic Statement.

Key Messages

• The proposed amendments would help advance the 2021 mandate commitment to "require tobacco manufacturers to pay for the cost of federal public health investments in tobacco control". This commitment was reiterated in Budget 2023 and the 2023 Fall Economic Statement.
• If adopted, the amendments would enhance the sharing of information related to tobacco and vaping products across the federal government under specific conditions.
• These amendments would support the administration and enforcement of the Tobacco and Vaping Products Act (TVPA). In particular, if the fees and charges provisions included in Bill C-59 are adopted, the amendments would assist in the validation of information received from tobacco and vaping manufacturers that would be used to calculate the fees or charges to be paid.
• If adopted, the amendments would enable the sharing of any information that Health Canada obtains under the TVPA with other federal departments and agencies under specific conditions to support the verification of compliance with other federal legislation, such as the Customs Act and the Excise Act, 2001, respectively.
• The amendments would also allow documents (e.g. forms) developed by Health Canada in relation to any future cost recovery-related regulations to be referenced in those regulations so that they can be periodically amended without amending the regulations. As such, any changes to the documents would immediately become part of the regulations without going through the entire regulatory process. This would provide flexibility and increased efficiency for the implementation of the proposed fees and charges to be established under the TVPA if Bill C-59 is adopted.
• Health Canada would work with the Canada Border Services Agency and any other relevant department or agency to develop standard procedures, including with regards to the protection of information, prior to the sharing of any information.

Questions & Answers

Q. What are the key objectives of the proposed legislative amendments?

A. One of the objectives of the proposed legislative amendments to the Tobacco and Vaping Products Act (TVPA) is to allow for the sharing of certain customs information collected by the Canada Border Services Agency (CBSA) under the Customs Act with Health Canada to support the administration and enforcement of the TVPA, including the implementation of the proposed tobacco and vaping cost recovery frameworks, if Bill C-59 is adopted.

The amendments would also enable the sharing of information collected by Health Canada under the TVPA with other federal departments and agencies, such as the CBSA or the Canada Revenue Agency, under specific conditions. This would support the verification of compliance with any federal legislation that applies directly or indirectly to a tobacco or vaping product or any activity in relation to a tobacco or vaping product, such as the Customs Act and the Excise Act, 2001.

In addition, the proposed amendments would allow documents (e.g. forms) developed by Health Canada in relation to any future cost recovery-related regulations to be referenced in those regulations so that they can be periodically amended without amending the regulations. As such, any changes to the documents would immediately become part of the regulations without going through the entire regulatory process. This amendment would provide flexibility and increased efficiency for the implementation of the proposed fees and charges to be established under the TVPA if Bill C-59 is adopted.

Q. Why are these amendments to the Tobacco and Vaping Products Act necessary?

A. These amendments are necessary to support the administration and enforcement of the Tobacco and Vaping Products Act, including the implementation of the proposed tobacco and vaping cost recovery frameworks if Bill C-59 is adopted.

The customs information collected under the Customs Act and shared with Health Canada could be used to:

• Help identify all importers that would be required to be compliant with the TVPA and its regulations (e.g., submission of information to Health Canada under the Tobacco Reporting Regulations, Vaping Products Reporting Regulations, and any future cost recovery-related regulations if Bill C-59 is adopted). This would support Health Canada's efforts to ensure that all tobacco and vaping importers are accountable and monitored for compliance with the TVPA and its regulations including any requirement to pay a fee or charge.
• Verify the accuracy of information submitted by tobacco and vaping product importers under the TVPA and its regulations, including under the proposed cost recovery provisions of the TVPA in Bill C-59 and any future related regulations as well as under the Tobacco Reporting Regulations and the Vaping Product Reporting Regulations.
• Provide reliable customs information to Health Canada, that could supplement information submitted by manufacturers to support any future Health Canada's fee or charge calculations and invoicing if Bill C-59 is adopted.

The proposed amendments would also enable the sharing of information collected by Health Canada under the TVPA with other federal departments and agencies, such as the CBSA or the Canada Revenue Agency, under specific conditions. This information sharing would support the verification of compliance with any federal legislation that applies directly or indirectly to a tobacco or vaping product or any activity in relation to a tobacco or vaping product, such as the Customs Act and the Excise Act, 2001.

The Statutory Instruments Act limits documents produced by a regulator to be incorporated into a regulation as it exists on a particular date, unless specific authority is provided under the relevant Act. These proposed legislative amendments would allow documents (e.g. forms) developed by Health Canada in relation to any future cost recovery-related regulations to be referenced in those regulations so that they can be periodically amended without amending the regulations. As such, any changes to the documents would immediately become part of the regulations without going through the entire regulatory process.

This proposed amendment aligns with existing regulations-making authorities that are referred to in section 42.5 of the Tobacco and Vaping Products Act. This section specifies that the limitation set out in the Statutory Instruments Act, that a document must be incorporated into a regulation as it exists on a particular date, does not apply to certain powers to make regulations under the TVPA.

Providing this authority for the proposed cost recovery provisions in Bill C-59 would provide flexibility and increased efficiency for the implementation of fees and charges to be established under the TVPA if Bill C-59 is adopted. Without this amendment, any changes to a document referenced in any future cost recovery-related regulations would not take effect unless the regulations are amended to reference the newer version.

Q. Who would be required to pay the fees? Whose information could be shared between Health Canada and other federal departments and agencies?

A. Proposed amendments to the Tobacco and Vaping Products Act included in Bill C-59 would provide the minister the authority to make regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by the Government of Canada related to carrying out the purpose of the Act.

With regards to information that could be shared both by Health Canada with other federal departments and agencies, as well as by the CBSA with Health Canada, the objectives of the amendments are to support the administration and enforcement of the TVPA and to support the verification of compliance with other federal legislation.

Health Canada would have the authority to disclose to other federal departments and agencies under specific conditions to support the verification of compliance with any federal legislation that applies directly or indirectly to a tobacco or vaping product or any activity in relation to a tobacco or vaping product, such as the Customs Act and the Excise Act, 2001.

The information that CBSA would be authorized to share with Health Canada would be limited to certain customs information collected by the CBSA under the Customs Act relating to tobacco and vaping products. This would support the administration and enforcement of the TVPA and its regulations.

On the definition of "manufacturer" or "manufacture" in the TVPA:

The definitions of both "manufacturer" and "manufacture" of the Tobacco and Vaping Products Act are relevant to know who may be required to pay potential tobacco or vaping cost recovery fees or charges. The Act also makes a distinction between retailers and manufacturers.

The Act defines a manufacturer as "in respect of a tobacco product or vaping product, includes any entity that is associated with a manufacturer, including an entity that controls or is controlled by the manufacturer or that is controlled by the same entity that controls the manufacturer."

"Manufacture" is defined as "in respect of a tobacco product or vaping product, includes the manufacture of a tobacco product or vaping product for export, as well as the packaging, labelling, distributing and importing of a tobacco or vaping product for sale in Canada."

Within the Act, a "retailer" is defined as "a person who is engaged in a business that includes the sale of tobacco products or vaping products to consumers."

Q. Do we already have a tobacco cost recovery framework in place via tobacco excise duties?

A. Taxation and cost recovery frameworks do not serve the same purpose. Tobacco excise duties, for example, have been recognized as an element of tobacco control, to discourage smoking for public health purposes. They are not specifically tied to the Government's expenditures for tobacco and vaping activities.

In contrast, cost recovery is the practice of establishing and collecting fees to recover part or all of the costs associated with eligible services or activities. This ensures that businesses pay their fair share while minimizing the burden on taxpayers.

While the Government of Canada has cost recovery frameworks in place for other regulated products such as cannabis products, drugs and medical devices, and pesticides, there has never been a comprehensive federal cost recovery framework that highlights the connection between the tobacco and vaping product industries and the costs of implementing and enforcing our legislative and regulatory framework.

The proposed legislative amendments included in Bill C-59 would provide the minister the authority to make regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers. This would allow the Government to recover the appropriate amount of eligible tobacco and vaping activities costs.

With regards to the amendments that would provide authorities for the sharing of information between Health Canada and other federal departments and agencies, as well as between the CBSA and Health Canada, the objectives of the amendments are to support the administration and enforcement of the TVPA and to support the verification of compliance with other federal legislation.

Q. How would Health Canada calculate the fees or charges? How would information shared by the CBSA be used in relation to the calculation of fees or charges?

A. If adopted, the proposed amendments in Bill C-59 would provide the minister the authority to make regulations to fix fees or charges or provide for the manner to calculate the fees or charges.

Health Canada's approach to cost recovery is guided by specific principles. These guiding principles are accountability and transparency, predictability and sustainability, and stewardship and fairness.

This approach includes transparent fee setting and costing methodologies, meaningful and inclusive stakeholder engagements, established processes for regularly reviewing and updating fees, and consideration of fee mitigation measures, where appropriate.

Before making any regulations, Health Canada would consult with partners, stakeholders, and other interested parties on any details related to the fee or charges, including potential fee mitigation measures and the activities that would be cost recovered.

The customs information collected under the Customs Act and shared with Health Canada could be used to:

• Help identify all importers that would be required to be compliant with the TVPA and its regulations (e.g., submission of information to Health Canada under the Tobacco Reporting Regulations, Vaping Products Reporting Regulations, and any future cost recovery-related regulations if Bill C-59 is adopted). This would support Health Canada's efforts to ensure that all tobacco and vaping importers are accountable and monitored for compliance with the TVPA and its regulations including any requirement to pay a fee or charge.
• Verify the accuracy of information submitted by tobacco and vaping product importers under the TVPA and its regulations, including under the proposed cost recovery provisions of the TVPA in Bill C-59 and any future related regulations as well as under the Tobacco Reporting Regulations and the Vaping Product Reporting Regulations.
• Provide reliable customs information to Health Canada, that could supplement information submitted by manufacturers to support any future Health Canada's fee or charge calculations and invoicing if Bill C-59 is adopted.

Q. When would the cost recovery initiative proposed in Bill C-59 be implemented?

A. Health Canada's approach to cost recovery is guided by specific principles. These guiding principles are accountability and transparency, predictability and sustainability, and stewardship and fairness.

With regards to accountability and transparency, Health Canada's objectives are to ensure meaningful and inclusive stakeholder engagements and ongoing stakeholder communication.

If the legislative authorities proposed in Bill C-59 are adopted, the department would proceed with consultations and the drafting of the regulations. These steps would take place before the tobacco cost recovery framework is implemented.

Pending the completion of those steps, it is anticipated that the collection of fees could begin in 2026-2027.

If the sharing information-related legislative amendments are adopted, Health Canada would work with the Canada Border Services Agency and the Canada Revenue Agency to develop standard procedures, including with regards to the protection of information as necessary, prior to the sharing of any information.

Q. What is the consultation and engagement plan?

A. Throughout the policy development process, Health Canada met with partner departments that conduct tobacco and vaping activities. Health Canada also met with the Department of Finance Canada, the Canada Revenue Agency, and the Canada Border Services Agency with regards to information sharing.

Health Canada looks forward to hearing feedback on the proposed legislative amendments to the Tobacco and Vaping Products Act throughout the parliamentary process.

If the proposed legislative amendments are adopted, Health Canada would consult with partners, stakeholders, and other interested parties prior to making any regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers.

Details of the frameworks, including those related to the fee or charge calculation methodologies, potential fee or charge mitigation measures, and the activities that would be cost recovered would be included in those consultations.

In addition, Health Canada would work with Indigenous Services Canada and Crown-Indigenous and Northern Affairs Canada to engage with Indigenous partners on the fees and charges to be paid by tobacco and vaping product manufacturers on a distinctions basis.

Division 33 - Criminal Code (Criminal Rate of Interest)

Overview

To strengthen enforcement of the criminal interest rate, Part 4 Division 33 proposes legislative amendments to the Criminal Code, which includes a new prohibition against offering or advertising credit at the criminal rate of interest, as well as removing the requirement to obtain Attorney General consent to prosecute illegal and predatory lenders.

This measure builds on the Budget Implementation Act, No. 1, 2023 amendments that would lower the criminal rate of interest from the equivalent of 48percent APR to 35 per cent APR. These amendments will be brought into force, with associated regulations, on a day or days to be set by the Governor in Council.

The legislative amendments to broaden the offence to criminalize the offering or advertising of credit at a criminal rate of interest (35percent APR or above) will be brought into force on a day or days to be set by order of the Governor in Council.

The removal of the requirement to obtain the consent of the Attorney General prior to commencing criminal proceedings related to the criminal interest rate would come into force 30 days after Royal Assent.

Key Messages

• Predatory lenders can take advantage of the most vulnerable Canadians in our communities. Predatory loans, such as installment loans, are a fast growing and widely-held type of debt in Canada, and are disproportionately accessed by low-income Canadians, newcomers, and those with limited credit histories.
• To protect financially at-risk Canadians, in Budget 2023, the government committed to lowering the criminal rate of interest, from the equivalent of 48percent APR to 35percent APR. The government also committed to limit the costs of payday loans to no more than $14 per $100 borrowed.
• To protect vulnerable Canadians from harmful illegal lenders who try to circumvent the criminal rate of interest, Budget 2024 announced the government's intention to amend the Criminal Code to enhance enforcement of the criminal rate of interest.
• The current criminal interest rate offence requires that a borrower enter into an agreement or arrangement to pay interest at a criminal rate, or that a lender has attempted to advance credit at a criminal interest rate by taking substantial steps towards committing the offence. Some borrowers receiving loans at illegal rates of interest may be reluctant to come forward to law enforcement for a variety of reasons. Given this challenge, these amendments would enable law enforcement to directly target illegal lenders by prohibiting offers or advertisements of loans at a criminal rate.
• Additionally, there is currently a requirement to obtain Attorney General consent to prosecute persons who violate the criminal interest rate offence, such as by providing a loan in excess of that rate. These amendments would eliminate this requirement, addressing a barrier identified by stakeholders to enforcement of the criminal rate.
• These amendments follow from the Consultation on Cracking Down on Predatory Lender Faster, held by the Department of Finance in 2023, through which can the government solicited feedback on how to improve enforcement of the criminal rate of interest.

Questions & Answers

Q. What changes is the Government proposing to the Criminal Code?

A. Under current law, there must be an agreement or arrangement to pay interest at a criminal rate of interest in order for a crime to have been committed, or a lender must have attempted to advance credit at a criminal interest rate by taking substantial steps towards committing the offence. The criminal rate of interest offence under the Criminal Code (s. 347), would be amended to broaden the offence to criminalize the offering or advertising of credit at a criminal rate of interest (35percent APR or above).

Also, the Criminal Code would be amended to remove the requirement to obtain the consent of the Attorney General prior to commencing criminal proceedings related to the criminal interest rate.

Q. Why is the Government proposing changes to the Criminal Code?

A. The Government is proposing these changes to address challenges to the enforcement of the criminal interest rate. The amendments would broaden the offence to target conduct that occurs prior to entering into predatory lending agreements. Currently, some borrowers receiving loans at illegal rates of interest may be reluctant to come forward to law enforcement for a variety of reasons, which can hamper investigations and prosecutions. Given this challenge, these amendments would enable law enforcement to directly target illegal lenders by prohibiting offers or advertisements of loans at a criminal rate.

The proposed changes would also remove the requirement to obtain the consent of the Attorney General before commencing proceedings in order to reduce the procedural burden for law enforcement and Crown prosecutors. The intent of this change is to reduce barriers to prosecutions. Through consultations, stakeholders, notably, those in the consumer advocacy space, urged the Government to advance this amendment in order to reduce barriers to enforcement of the criminal rate.

Q. When will these Criminal Code amendments come into force?

A. This measure builds on the Budget Implementation Act, No. 1, 2023 amendments that would lower the criminal interest rate from the equivalent of 48percent APR to 35percent APR. These amendments will be brought into force, with associated regulations, on a day or days to be set by the Governor in Council. The removal of the requirement to obtain the consent of the Attorney General prior to commencing criminal proceedings related to the criminal interest rate would come into force 30 days after Royal Assent.

Division 34 - Money Laundering, Terrorist Financing, Sanctions Evasion and Other Measures

Overview

Part 4, Division 34 proposes amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the Criminal Code, the Income Tax Act and Excise Tax Act to support stronger AML/ATF compliance, enhance information sharing and continue to provide new tools for financial crime investigations, prosecutions, and asset recovery.

Strengthening Supervision and the AML/ATF Framework

Amendments proposed to the PCMLTFA would enable the introduction of regulations to cover cheque cashing businesses, factoring, leasing and financing companies. Coverage of these sectors under the PCMTFLA would ensure comprehensive and consistent coverage of businesses providing financial services in Canada. These amendments require regulations to fully implement and would come into force upon an Order of the Governor in Council.

Proposed amendments to the PCMLTFA would also allow FINTRAC to publish additional information surrounding compliance violations within an administrative monetary penalty notice to improve transparency and promote compliance. These amendments would enable FINTRAC to provide a similar level of information as other regulators in its public notice of violations, which can provide insights to all reporting entities on compliance expectations. The amendments would come into force upon Royal Assent.

Technical amendments are proposed to the PCMLTFA to close a loophole in the registration framework for money services businesses, which would come into force upon an Order of the Governor in Council.

Enhancing the Sharing of Information and Financial Intelligence

Amendments are proposed to the PCMLTFA to enhance the ability of businesses with obligations under the Act to share information with each other while maintaining privacy protections for personal information. Information sharing between private sector entities can improve their risk mitigation practices and promote higher quality reporting to FINTRAC, Canada's AML/ATF regulator and financial intelligence unit. This in turn can lead to better intelligence in support of financial crime investigations and prosecutions.

Consequential amendments are also proposed to Canada's privacy legislation, the Personal Information Protection and Electronic Documents Act. Regulations would prescribe an oversight role for FINTRAC and the Office of the Privacy Commissioner. These amendments would come into force by an Order of the Governor in Council.

Amendments are also proposed to the PCMLTFA to permit FINTRAC to disclose financial intelligence to:

1. provincial and territorial civil forfeiture offices to support their efforts to seize assets linked to unlawful activity. These amendments would come into force by an Order of the Governor in Council.
2. Immigration, Refugees and Citizenship Canada (IRCC) to administer the Citizenship Act. This would help ensure citizenship applicants do not pose national security or organized crime concerns. These amendments would come info force upon Royal Assent.

Improving Tools to Investigate and Prosecute Financial Crimes

Amendments are proposed to the Criminal Code, the Income Tax Act and the Excise Tax Act to strengthen investigative powers and support operational effectiveness of Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime. These amendments would come into force ninety days following Royal Assent.

Two amendments are proposed to the Criminal Code to support the enforcement of laws dealing with money laundering and associated crime.

1. A new order to keep an account open or active for a limited period of time to assist in the investigation of a suspected criminal office. Financial service providers often close accounts suspected to be linked to criminal activity, which can hinder investigations into financial crimes; and
2. A new repeating production order to enable law enforcement to obtain information regarding on-going activity in an account believed to be linked to criminal activity on pre-established dates over a set period of time. This would provide law enforcement more consistent and timely information to support criminal investigations and would include robust safeguards to respect Charter-protected rights.

Both orders would be available to law enforcement based on prior judicial authorization and include measures to protect the interests of those subject to these orders, including measures to limit burden, review mechanisms that enable the court to revoke or to vary an order, and protection from liability for complying with the orders.

Part 4, Division 34 further proposes to create a new offence under the Criminal Code related to laundering proceeds of crime of for the benefit of a criminal organization. This would complement amendments to the laundering proceeds of crime offence introduced in Bill C-59 to support the prosecution of third-party money launderers.

Finally, amendments are proposed to the Income Tax Act and Excise Tax Act to include an additional warrant power to allow the CRA authority to seek, obtain and execute general warrants for certain specified and limited purposes.

Key Messages

• The Government of Canada remains committed to maintaining a strong Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime that protects Canadians from financial crime and maintains the integrity of the financial system.
• Budget 2024 proposes legislative amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), the Criminal Code, the Income Tax Act and Excise Tax Act to support stronger AML/ATF compliance, enhance information sharing and continue to provide new tools for financial crime investigations, prosecutions, and asset recovery.

Strengthening Supervision and the AML/ATF Framework

• Effective deterrence and detection of money laundering and terrorist financing requires strong government supervision and compliance by businesses exposed to financial crime risks.
• To enhance supervision and promote compliance by businesses with AML/ATF rules, amendments are proposed to the PCMLTFA to enable the extension of AML/ATF regulations to cover additional financial service providers, to allow FINTRAC to publish more information surrounding violations of AML/ATF obligations when it issues penalties, and to close a technical loophole.

Enhancing Sharing of Information and Financial Intelligence

• Information sharing between private sector entities can foster better risk mitigation practices and promote higher quality reporting to FINTRAC, Canada's AML/ATF regulator and financial intelligence unit. This in turn can lead to better intelligence in support of financial crime investigations and prosecutions.
• Amendments are proposed to the PCMLTFA to enhance information sharing between private sector entities, while maintaining privacy protections for personal information, including an oversight role for the Office of the Privacy Commissioner under regulations.
• To promote better use of financial intelligence, amendments are proposed to the PCMLTFA to allow FINTRAC to share financial intelligence with provincial and territorial civil forfeiture offices and Immigration, Refugees and Citizenship Canada.

Improving Tools to Investigate and Prosecute Financial Crimes

• A successful AML/ATF Regime requires a modern and innovative framework to support financial crime investigations, prosecutions, and asset forfeiture.
• Improving the tools available to law enforcement to investigate and prosecute financial crime remains an ongoing priority. The 2023 Budget and Fall Economic Statement announced amendments to the Criminal Code to better target third-party money laundering and search, seizure, and restraint of proceeds of crime; expand sharing of tax information; and address digital assets and accounts.
• To support the enforcement of laws related to money laundering and associated criminal activity, amendments are proposed to the Criminal Code that would establish:
  • An order requiring that an account suspected of being linked to criminal activity be kept open for a limited period of time to further a criminal investigation;
  • An order requiring the production, to law enforcement, of information regarding on-going activity in an account on pre-established dates over a set period of time; and
  • A new offence related to laundering proceeds of crime for the benefit of a criminal organization.
• Finally, criminal tax investigations are becoming more complex and require both a variety of investigative tools and assistance from outside law enforcement to access some of these tools.
• Amendments are proposed to the Income Tax Act and Excise Tax Act to provide CRA investigators with additional tools to investigate time-sensitive, sophisticated, and complex tax offence cases more efficiently.

Questions & Answers

Q. What is Budget 2024 proposing in relation to financial crimes?

A. Budget 2024 announces the government's intention to introduce legislative and regulatory amendments to strengthen Canada's Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) framework to support stronger AML/ATF compliance, enhance information sharing and continue to provide new tools for financial crime investigations, prosecutions, and asset recovery.

Q. Why is the government proposing these legislative amendments?

A. Money laundering, terrorist financing, and sanctions evasion are serious threats to the safety of Canadians and the integrity of the financial system.

The government continuously monitors risks and adapts its AML/ATF framework and toolkit to respond to new and increasingly sophisticated techniques to launder money, finance terrorist activities and evade sanctions.

Proposed amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) seek to close gaps in the coverage of financial services under Canada's AML/ATF framework, support stronger AML/ATF compliance and enhance information sharing and use of financial intelligence to detect, deter and disrupt financial crimes.

Proposed amendments to the Criminal Code, the Income Tax Act and Excise Tax Act seek to provide additional tools for law enforcement and Canada Revenue Agency (CRA) investigators and computer forensic analysts to support financial crime investigations, prosecutions, and asset recovery.

The proposed measures respond to feedback from public consultations and findings of the Commission of Inquiry into Money Laundering in British Columbia (known as the Cullen Commission). They also continue to align Canada's AML/ATF framework with international standards and best practice.

Q. Will these measures fix the problem of financial crime in Canada?

A. The rapidly evolving and complex nature of financial crime requires ongoing changes to the legislative and regulatory framework to provide effective tools to confront new money laundering and terrorist financing techniques.

The government has implemented a significant number of measures since 2019 to strengthen and modernize the AML/ATF Regime and has invested close to $379million in combatting financial crimes.

The legislative amendments proposed in Budget 2024 continue to build and adapt Canada's tools to fight financial crime effectively and efficiently. They will support stronger AML/ATF compliance, enhance information sharing and continue to provide new tools for financial crime investigations, prosecutions, and asset recovery.

The government takes financial crimes seriously and will continue to adapt and strengthen the AML/ATF Regime to respond to new and emerging challenges.

Q. Why do private sector businesses need to share information?

A. Information sharing between private sector entities can improve their risk mitigation practices, promote higher quality reporting to FINTRAC, and lead to better intelligence in support of criminal investigations and prosecutions. The Financial Action Task Force, the international standard setting body on AML/ATF, has recognized private-to-private information sharing as an important tool for disrupting money laundering and terrorist financing. Canada's lack of an information sharing framework exposes risks to the effectiveness of Canada's AML/ATF Regime.

Q. How will people's privacy and personal information be protected?

A. To protect privacy, businesses would only be able to disclose information to each other for anti-money laundering, anti-terrorist financing, and sanctions evasion purposes and under conditions to be prescribed in regulations. Regulations would also provide an an oversight role for the Office of the Privacy Commissioner.

Q. How will financial intelligence from FINTRAC help provincial and territorial civil forfeiture offices?

A. By making provincial civil forfeiture offices recipients of FINTRAC financial intelligence, these offices would receive more information to support civil proceedings targeting funds generated from unlawful activity. Civil asset forfeiture serves as a disincentive for crime by making the proceeds generated from unlawful activity at risk of seizure.

Q. Will law enforcement still pursue criminal asset forfeiture?

A. Law enforcement will continue to pursue criminal asset forfeiture. Civil asset forfeiture is not intended to be a substitute for criminal asset forfeiture, rather it is a tool to recover unlawful proceeds.

Q. Why does Immigration, Refugees and Citizenship Canada (IRCC) need financial intelligence from FINTRAC?

A. IRCC is responsible for ensuring that citizenship applicants do not pose national security or organized criminality concerns, as well as for revoking Canadian citizenship when obtained through false representation or fraud.

Financial intelligence disclosures from FINTRAC will enhance citizenship investigations, as well as indirectly support Canada's AML/ATF Regime by reducing the risk that criminals, and those posing national security risks, becoming Canadian citizens.

This measure supports the Government's broader efforts to strengthen the integrity of Canada's immigration system.

Q. Why does the Government want to regulate factoring companies, cheque cashing businesses, and finance and leasing companies for AML/ATF?

A. The lack of AML/ATF requirements for factoring companies, cheque cashing businesses, and financing and leasing companies has been identified as a gap in Canada's AML/ATF framework, which includes obligations on other businesses providing similar services. This represents a loophole in Canada's financial system that can be exploited by criminals to launder illicit funds. Regulating factoring companies, cheque cashing businesses, and financing and leasing companies would remove this money laundering loophole and create a more level playing field across industry.

Q. What additional information would FINTRAC be able to publish surrounding violations of the PCMLTFA when it issues an administrative monetary penalty?

A. The proposed amendment would allow FINTRAC to provide the reasons and contextual information around their decision to issue an administrative monetary penalty. Examples of information provided would include: FINTRAC's analysis of the severity of the violation, details around the organization's compliance activities and any other considerations that formed part of the decision. This is similar to information disclosed by the Financial Consumer Agency of Canada (FCAC) and international AML/ATF regulators in the United States and Australia.

More transparency around violations will help all reporting entities understand compliance expectations and aligns FINTRAC's public reporting on AML/ATF compliance violations with international best practice.

Q. Will disclosing more information within the FINTRAC administrative monetary penalty create undue reputational damage to businesses?

A. The proposed amendment limits FINTRAC to providing only relevant information that informed their decision to issue a penalty and the severity of the violation. Before publication of a public notice FINTRAC engages with the affected reporting entity to discuss and determine what information is included in the notice. This practice will continue and will enable reporting entities to contribute to the development of the notice.

Q. Why is the government proposing amendments to the Criminal Code?

A. The government is proposing amendments to the Criminal Code to support the investigation and prosecution of financial crimes.

The Government has consistently signalled its commitment to respond to economic crime, notably money laundering, in recent years.

In Budget 2023, the Government committed to bringing forward legislative amendments following a public consultation on ways to strengthen Canada's Anti-Money Laundering and Terrorist Financing (AML/ATF) Regime.

Q. How will the proposed amendments to the Criminal Code support criminal investigations?

A. A new order to keep an account open or active for a limited period of time would enable activity in an account to continue for a specific period of time. The objective is to support a criminal investigation.

A new repeating production order would enable the court to issue an order for the production of specified data or documents on multiple, pre-determined dates over a period of up to 60 days after the issuance of the order, regarding activity associated with an account and in anticipation of that activity taking place.

Both of these orders are intended to apply to a wide variety of accounts that a person may hold, and for this reason, the term "account" is not defined.

A new offence related to laundering proceeds of crime for the benefit of a criminal organization would provide a new tool for police and prosecutors to pursue money laundering related to organized crime and complement previous amendments to the money laundering offence to support the prosecution of third-party money launderers.

Q. Will a financial institution that keeps an account open or active when criminal activity is suspected in relation to the account be protected from criminal and civil liability?

A. Persons or entities who are subject to a court order and comply with its terms are protected from criminal or civil liability for complying with a judicial authorization. The court order provides the legal authority to do what it specifies.

Q. Is the Government introducing a U.S.-style racketeering offence to combat auto-theft and money laundering?

A. The Criminal Code offence proposed in Budget 2024, laundering proceeds of crime on behalf of a criminal organization, would complement Canada's existing framework by adding a new tool for police and prosecutors. The measures proposed in Budget 2024 build on previous amendments to the money laundering offence to address third-party money launders, to continue to facilitate investigations and prosecutions of money laundering related to organized crime.

The new measures, while not the same as measures in the Racketeer Influenced and Corrupt Organizations Act or RICO in the U.S., have the common goal of disrupting organized criminal activity and proceeds of crime.

Q. Did the government consult Canadians on changes to the Criminal Code?

A. The Department of Finance, with input from Justice Canada and other departments, publicly released a consultation paper and solicited input from citizens and stakeholders over the course of summer 2023. Justice Canada included a chapter on ideas for CriminalCode reforms and held roundtables and meetings with a variety of justice-sector stakeholders over the course of summer 2023.

Among various positions advanced by stakeholders in their feedback on the CriminalCode, most stakeholders recognized the need for up-to-date investigative measures for law enforcement to combat economic crime. Most stakeholders supported amendments for investigative measures that are consistent with Charter-protected rights.

Justice Canada continues to assess stakeholder input.

Q. Are these changes to the Criminal Code consistent with rights and freedoms protected under the Canadian Charter of Rights and Freedoms?

A. The Minister of Justice has reviewed these amendments for inconsistency with the Charter as required by section 4.1 of the Department of Justice Act. The Minister of Justice will table a Charter Statement that will identify potential effects that these amendments may have on rights and freedoms guaranteed by the Charter.

Q. What amendments are proposed to the Income Tax Act and the Excise Tax Act?

A. The amendments would grant the Canada Revenue Agency (CRA) authority to seek, obtain and execute general warrants for certain specified and limited purposes. Under a general warrant granted by a judge, CRA investigators and computer forensic analysts could use any device, investigative technique, or procedure, or do what is described in the warrant - other than video surveillance or recording - to obtain information concerning the offences investigated under the Income Tax Act and the Excise Tax Act.

The amendments would also streamline the process for the return of things seized. CRA investigators would have the ability to return seized property to their lawful owner without the need for a court order where detention is not required and there is no dispute as to who is lawfully entitled to possession.

Q. Why is access to the general warrant by Canada Revenue Agency investigators needed?

A. Criminal tax investigations are becoming more complex, often extending beyond provincial and national borders. Canada Revenue Agency investigators and computer forensic analysts are authorized to seek and execute search warrants and a range of other Criminal Code warrants and orders to investigate Income Tax Act and Excise Tax Act offences. However, they are not authorized to seek and execute Criminal Code general warrants. Providing CRA investigators with access to some aspects of the general warrant would allow time-sensitive, sophisticated, and complex tax offence cases to more efficiently be investigated without having to rely on law enforcement agencies to execute such warrants.

Q. Will CRA have the same powers as police officers?

A. No. The amendments would grant the Canada Revenue Agency (CRA) authority to seek, obtain and execute general warrants for certain specified and limited purposes. CRA investigators would not be detaining, arresting, or searching or frisking a person, and will not carry firearms or other restricted weapons.

Q. Did the Government consult on these measures?

A. The Government is consulting on an ongoing basis with law enforcement agencies and other investigative bodies on ways to enhance their ability to investigate financial crimes.

Q. What technical amendments are included in this package, and how will they strengthen the AML/ATF framework?

A. Technical amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act would bolster certain requirements to strengthen the registration framework for money service businesses that were introduced through the Budget Implementation Act, 2023, No.1 under general and false information offences. These amendments close a loophole in the MSB registration framework.

Division 35 - Criminal Code (Motor Vehicle Theft)

Overview

The proposed measure has five components. First, it would create two new motor vehicle theft offences for circumstances where i) violence was used, threatened, or attempted against any person, and ii) where the offence was committed for the benefit of, at the direction of, or in association with a criminal organization. Second, it would create two new offences targeting possession and distribution respectively of certain electronic devices that are suitable for committing motor vehicle theft, where the possession or distribution is for the purpose of committing such theft. Third, it would create a new offence of laundering the proceeds of crime for the benefit of, at the direction of, or in association with a criminal organization. These new offences would carry significant maximum penalties ranging from 10 to 14 years imprisonment. Fourth, the proposed measure would create a new aggravating factor applicable at sentencing where there is evidence that the offender involved a person under the age of 18 in the commission of an offence. Finally, the proposal includes amendments to provide additional investigative tools and consequential amendments related to the investigation and prosecution of these new offences.

Responding to Government Commitments

The proposed measures reflect the Minister of Justice and Attorney General of Canada's public commitment, which was reiterated at the National Summit on Combatting Auto Theft (February 8, 2024) and at the Peel Region Auto Theft Summit 2024 (March 20, 2024) to review the Criminal Code and advance amendments to strengthen the motor vehicle theft regime, especially where thefts are committed by violence (e.g. carjackings) or for the benefit of a criminal organization. They would also respond to calls from police for higher penalties for motor vehicle theft to more clearly denounce such conduct. These new measures would also seek to more clearly denounce conduct by offenders who have involved persons under the age of 18 in a crime.

Policy Objectives

The objective of this proposal is to address the rise in motor vehicle theft, especially violent and organized crime related thefts. The proposed measures are intended to: denounce this type of offending while providing law enforcement with new tools to investigate motor vehicle theft and its links to organized crime and violence; signal to courts the needs to impose stronger sentences where there is evidence the offender involved a person under the age of 18 in the commission of an offence; provide courts with the ability to impose higher or more severe penalties upon conviction for motor vehicle theft, where appropriate; introduce new offences to address the possession and distribution of technologies that facilitate motor vehicle theft; aid ongoing efforts to enhance the enforcement of money laundering in Canada and support amendments to the offence of laundering proceeds of crime in Bill C-59 (the Fall Economic Statement); and complement efforts by Innovation, Science and Economic Development Canada to regulate devices certain used to commit motor vehicle theft.

Amendments to Existing Legislation

Criminal Code

The proposed measures modify the Criminal Code as follows:

• The definition of "offence" in section 183 would be amended to add references to subsections 333.1(1) (motor vehicle theft), 333.1(3) (motor vehicle theft when violence used, threatened, or attempted), 333.1(4) (motor vehicle theft for criminal organization), 462.31(1) (laundering proceeds of crime), and 462.31(2.1) (laundering proceeds of crime for criminal organization) to that definition, which would permit wiretap investigations for these offences.
• Section 333.1 would be modified to create two new subsections – 333.1(3) and (4) – that would provide for the new offences of motor vehicles theft where violence is used, threatened, or attempted against any person, and where the offence is committed at the direction of, for the benefit of, or in association with a criminal organization, respectively.
• A new section 333.2 would be added consisting of five subsections: subsections333.2(1) and (2) would provide for the offences of possession and distribution of electronic motor vehicle theft devices, respectively; subsection333.2(3) would provide punishment for these new offences as a maximum of 10years imprisonment by indictment or two year less one day and/or a fine of up to $5000 upon summary conviction; subsection 333.2(4) would provide discretionary authority for a sentencing court to order the device be forfeited upon conviction for either of the new offences; and subsection 333.2(5) which would preclude such forfeiture where the device is the property of a person who was not party to the offence.
• Section 462.31 would be amended to create a new subsection 462.31(2.1) providing for the new offence of laundering proceeds of crime for the benefit of, at the direction of, or in association with a criminal organization. Subsection 462.31(3) provides an exemption for peace officer to engage in laundering activities for the purpose of an investigation or in the execution of their duties. The peace officer exception would be amended to include a reference to the new subsection 462.31(2.1) to permit a peace officer to engage in laundering activities for a criminal organization for the purpose of an investigation.
• Paragraph 462.48(1.1)(f) (disclosure of income tax information) would be amended to add references to subsections 462.31(1) and (2.1) to permit the Attorney General to make an application for disclosure of tax information to investigate laundering proceeds of crime.
• Section 487.04 at the definition of "primary designated offence" would be amended to add subsections333.1(3) (motor vehicle theft when violence used, threatened or attempted), 333.1(4) motor vehicle theft for criminal organization, and 462.31(2.1) (laundering proceeds of crime for criminal organization) to provide for mandatory orders (subject to exception) authorizing the taking samples of bodily substances for the purpose of DNA analysis (DNA orders) from persons convicted of these offences.
• Section 487.04 at the definition of "secondary designated offence" would be amended to add subsections 333.1(1) (motor vehicle theft), 333.2(1) (possession of device for purpose of committing theft), and 333.2(2) (distribution of device linked to theft) to provide for discretionary DNA orders for persons convicted of these offences.
• Section 718.2 would be modified to create a new subparagraph 718.2(a)(ii.2), providing for a new aggravating factor addressing the involvement of a person under the age of eighteen years in the commission of an offence.

Consequential Amendments

The proposed measure would amend the Schedule of Offences to the Canada Business Corporations Act to include the new motor vehicle theft offences at subsections333.1(3) and (4), and the new money laundering offence at subsection462.31(2.1) to provide for obligatory disclosure by corporations bound by that Act of information in the corporation's register of individuals with significant control to the relevant investigative body to investigate these new offences.

The proposed measure would amend subsection 9(3) of the Crimes Against Humanity and War Crimes Act (CAHWCA) to include reference to the proposed new money laundering offence. Proceedings may be brought for laundering the proceeds of crime under the Criminal Code where it is alleged that the proceeds were obtained or derived from the commission of an offence under the CAHWCA. However, subsection 9(3) of that Act requires that proceedings for offences listed in the provision, including the Criminal Code offence of laundering proceeds of crime, can only be commenced with the personal consent in writing of the Attorney General or Deputy Attorney General of Canada, and those proceedings may be conducted only by the Attorney General of Canada or counsel acting on their behalf.

The proposed measure would amendsubsection 2(1)of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act at the definition of "money laundering offence" to include the new money laundering offence at subsection 462.31(2.1) to ensure that the usage of that term through that Act will include the new offence.

Coming into Force

The proposed measures would come into force 30 days after the day on which this Division of the Budget Implementation Act receives Royal Assent.

Key Messages

• The Government of Canada recognizes that motor vehicle theft is a growing and serious concern that affects communities throughout the country. The Government is committed to taking action to keep people in Canada and their property safe. Combatting auto theft requires all levels of government, as well as partners in industry and policing, to work together in a coordinated and focused way.
• Over the past few months, the Government has been reviewing the concerns and challenges identified by provinces and territories, law enforcement, and the automotive and insurance industries regarding the rise of motor vehicle theft.
• The Minister of Justice and Attorney General of Canada made a public commitment to review the Criminal Code and advance amendments to strengthen the motor vehicle theft regime, especially where thefts are committed by violence or for the benefit of a criminal organization.
• Although the Criminal Code already has strong measures to address motor vehicle theft at all stages of the crime, more can be done. This is why amendments to the Criminal Code were proposed in the Budget Implementation Act (BIA), which would respond to the rise in motor vehicle theft, particularly where violence and organized crime is involved.
• The amendments would target:
  • Links between motor vehicle theft and organized crime or violence, including carjacking, by creatingnew offences criminalizing this behaviour with maximum penalties of 14years imprisonment.
• Sophisticated auto thefts by creating new offences criminalizing possession and distribution of certain devices that facilitate auto theft, where possessed or distributed for the purpose of committing motor vehicle theftpunishable by a maximum penalty of 10years imprisonment.
• The amendments would also address:
  • Laundering proceeds of crime for the benefit of a criminal organization by creating a new offence targeting the laundering the proceeds of crime for the benefit of, at the direction of, or in association with a criminal organization punishable by 14 years imprisonment.
  • The involvement of youth in crime by creating a new aggravating factor applicable at sentencing, where there was evidence that the offender involved a person under the age of 18 in the commission of an offence.
• In addition, the Government of Canada is proposing measures that would allow specified offences to be investigated by wiretaps, and, when someone is convicted of these new offences, it will be mandatory or discretionary for courts to order the offender to provide a DNA sample depending on the seriousness of the offence under the Criminal Code.
• These changes will assist law enforcement in their investigations to address motor vehicle theft using violence or specific technologies and its links to organized crime and violence, provide courts with the ability to impose higher sentences where appropriate, and address the problematic use of young persons by organized crime groups in the commission of auto theft and other crimes.

Questions & Answers

General

Q. What would the proposed measures in the Budget Implementation Act (BIA) do?

A. The measures in the Bill propose:

• New offences targeting auto theft and its links to violence and organized crime;
• New offences for possession and distribution of a device used to commit auto theft;
• New offence for laundering proceeds of crime for the benefit of a criminal organization; and,
• New aggravating factor at sentencing if an offender involved a young person in committing an offence under the Criminal Code.
• Additional investigative tools by making wiretap warrants and DNA orders available for auto theft.

Q. What are the objectives of the proposed measures?

A. The proposed measures are intended to:

• Be part of the Government of Canada's larger strategy to crack down on auto theft with a robust plan to disrupt, dismantle and prosecute the organized crime groups involved.
• provide law enforcement with new tools to address auto theft and its links to organized crime and violence, including through new targeted offences;
• signal to courts the need to impose stronger penalties to denounce this type of offending where appropriate, including where there is evidence the offender involved a person under the age of 18 in the commission of an offence;
• address the use of certain technologies in facilitating auto theft;
• complement efforts by Innovation, Science and Economic Development Canada to regulate devices used to commit auto theft; and,
• aid ongoing efforts to enhance the enforcement of money laundering in Canada and support amendments to the offence of laundering proceeds of crime in Bill C-59 (the Fall Economic Statement).

Q. Are these changes really needed?

A. A vehicle is stolen every five minutes in Canada. Auto theft has been described as a national crisis. Provinces, territories, and large urban centres have identified this trend as a growing threat to public safety, particularly due to the increase in violence, carjackings and home invasions related to motor vehicle theft.

Although the Criminal Code already includes a robust framework to address this type of offending, the proposed measures would strengthen the regime and provide additional criminal justice responses to address the concerns of increased violence, links to organized crime, and involvment of people under the age of 18 in the commission of offences, as well as denounce auto theft.

Q. Why are Criminal Code reforms being included in a Budget Bill ?

A. Recognizing the significant impact this issue is having on the lives of Canadians, the Government is swiftly taking action.

Auto theft costs Canadiansmillions of dollars; the need to act now is without question.

Combating auto theft at the earliest opportunity is critical, as it not only poses a significant threat to our property and financial security, but it also undermines community safety and contributes to organized crime networks.

Including these measures in this Bill would allow the government to implement these important changes in the short term.

The Government has committed to take action to combat auto theft and has been working intensely with industry, provincial, territorial, and municipal governments as well as law enforcement on ways to address this issue.

Q. Were there any consultations on these measures?

A. Yes. The federal government has consulted:

• with provinces and territories, law enforcement and the automotive and insurance industries during the Federal National Summit on Auto Theft earlier this year; and
• on strengthening the federal Anti-Money Laundering and Anti-Terrorist Financing during the summer of 2023 indicated support for higher penalties for the offence of laundering proceeds of crime.
• at the Peel Regional Police's Auto Theft Summit, which provided another opportunity to hear concerns from law enforcement.
• The Government of Canada will continue to engage on this issue and support its crucial partners in the prevention of auto thefts and recovery of stolen vehicles.

Q. What impact will this have on overrepresentation of Black and Indigenous people in the criminal justice system?

A. The Government is committed to addressing systemic racism and discrimination in Canada's criminal justice system.

Considering any impacts on Indigenous people, Black people and members of marginalized groups, who are already overrepresented in our criminal justice system, is mandatory and a priority in the development of any law reform, including these measures.

Q. Would the proposed amendments be consistent with the Charter?

A. The Government is confident that the proposed changes are consistent with the Charter.

The potential effects of these proposed measures on rights and freedoms protected under the Charter are detailed in the Charter statement.

Q. What data did the government use as evidence in drafting the offences?

A. The government has relied on a wide range of data sources. For example, Statistics Canada's police-reported data and court data and the Canadian Security Intelligence Service on motor vehicle theft and organized crime. It has also received data and information from various stakeholders, such as Industry (e.g., insurance providers), its PT partners, municipalities, and law enforcement bodies.

Q. Why was consideration not given to mandatory minimum penalties for the new offences or increasing the MMP for the existing offence of auto theft?

A. Crimes involving auto theft pose significant public safety risks and must be treated seriously.

MMPs restrict a court's ability to consider individual circumstances in certain cases, potentially leading to overly harsh sentences. The imposition of MMPs has also been shown to lead to systemic delays in the criminal justice system, including on the length of trials.

The government is continuing to ensure that the courts can impose the right penalty based on the circumstances of the offence and the offender and in a manner that reflects society's disapproval of these crimes, while contributing to a fair, effective and efficient justice system.

Q. Would conditional sentences be available for the new offences?

A. Conditional sentences would not be available to the new offences where they are prosecuted by indictment and linked to organized crime.

Conditional sentences would be available in cases where the court is of the view that a sentence of imprisonment of less than two years is appropriate, that serving the sentence in the community does not pose a risk to public safety, and that imposing a conditional sentence would be consistent with the principles of sentencing, including denunciation.

New Auto theft offences (Clause 369)

Q. Why are you including new offences relating to auto theft?

A. Currently, there is an offence for motor vehicle theft in section 333.1 of the Criminal Code.

In addition, such theft can be pursued under general offences such as theft (under or over $5000) or robbery (where violence occurs).

The amendments in the Bill create specific offences for theft of a motor vehicle in two circumstances, where the theft:

• involves violence; or
• has linkages to organized crime.

These will provide law enforcement and prosecutors additional tools to charge and prosecute these types of offences specifically linked to violence and organized crime.

The offences will carry significant penalties of 14 years or more of imprisonment, to reflect their seriousness.

Q. Do you have any information on how often the mandatory minimum penalty for motor vehicle theft under Section 333.1 of the Criminal Code is used?

A. Preliminary information from Statistics Canada's court data indicate that only a small number of accused are subject to this mandatory minimum penalty.

New possession and distribution of electronic devices (Clause 370)

Q. What are the new offences related to electronic devices and why are you including them?

A. The two new offences are the possession and the distribution of an electronic device that is suitable for committing auto theft for the purposes of committing auto theft.

The Bill proposes that these offences would have a maximum penalty of imprisonment of 10 years on indictment or a term of 2 years less a day and/or a fine of up to $5000, or both on summary conviction.

These new offences are meant to address devices used to commit auto theft, such as cloned fobs or relays, as well as their possession and distribution.

Q. Can you give examples of what type of electronic devices would be captured for the new offences of possession and distribution of an electronic device suitable for committing theft of a motor vehicle?

A. The new offences of possession and distribution of an electronic device can cover a range of electronic devices.

One example is a "relay attack" device that usually involves two pieces of equipment whereby the signal broadcast from the automobile key fob is captured and relayed to grant access to and operate the motor vehicle.

Another example would be a "code grabber/crypto key" device which intercepts the key fob signal and recreates the rolling code or tricks the vehicle into requesting the rolling code to access the motor vehicle.

Q. Does the new offence of possession and distribution of an electronic device suitable for committing theft of a motor vehicle pose a risk of criminalizing legitimate private/commercial uses of these devices?

A. No. The offences require the possession or distribution to be linked to a criminal intent. For example, an intent to commit motor vehicle theft or that the person had knowledge that the device has been used or intended to be used to commit a motor vehicle theft offence. Absent the necessary intent, possessing or distributing an electronic device suitable for committing motor vehicle theft would not be an offence.

Laundering Proceeds of Crime offence (Clause 371)

Q. What is the new proceeds of crime offence?

A. The Bill proposes a new offence of laundering proceeds of crime for the benefit or, at the direction of, or in association with a criminal organization. It proposes a maximum penalty 14 years imprisonment on indictment.

Q. What does proceeds of crime and laundering mean?

A. Under section 462.3 of the Criminal Code, proceeds of crime is defined as any property, benefit, or advantage obtained or derived directly or indirectly from the commission of an offence.

Laundering proceeds of crime is dealing in property that was obtained or derived from the commission of a designated offence with intent to conceal or convert the property.

Activities associated with motor vehicle theft can include concealing the profits obtained from stolen vehicles to fund other forms of serious crime like the trafficking in drugs, people, and firearms.

Q. Why was there a need to create a new proceeds of crime offence if there is already one in the Criminal Code?

A. Criminal organizations frequently rely on specialized money laundering networks to launder their proceeds of crime including from motor vehicle theft – to facilitate the use of their proceeds in the legitimate financial system and to further engage in criminal activity.

Under the Criminal Code, the existing offence of laundering proceeds of crime is a hybrid offence with a maximum penalty of 10 years imprisonment if prosecuted by indictment.

Creating a new offence for laundering proceeds of crime for the benefit of a criminal organization with a higher penalty demonstrates the Government's denunciation of this type of conduct. It would signal to the courts the added seriousness of the offence of laundering proceeds of crime when connected to organized crime.

Having a separate offence with an increased penalty can also disrupt or dismantle specialized money laundering networks that work on behalf of organized crime which can then negatively impact criminal organizations by making it more difficult to fund their operations.

It would also provide a new tool for enforcement and prosecutors to respond to the significant problem of money laundering related to organized crime.

Q. Do you have any data on laundering proceeds of crime under subsection 462.31(1) of the Criminal Code, including with regards to a criminal organization?

A. Data reported by police for the years of 2018 to 2022 indicate that police carried out a total of 255 investigations into the laundering of proceeds of crime involving organized crime groups where laundering proceeds of crime was the most serious offence. Laundering proceeds of crime by organized crime groups accounted for about one-fifth (19%) of all laundering of proceeds of crime incidents [investigated by police, according to police-reported data] during the five-year period (1,375incidents from 2018 to 2022).

With respect to sentencing, 92 cases of money laundering resulted in a conviction between 2017/2018 and 2021/2022, of which almost half (46%) resulted in a custodial sentence. More than one-quarter (29%) of the convictions resulted in a conditional sentence, while 14% resulted in probation and 10% resulted in an unspecified sentence.

Q. How will the Fall Economic Statement (Bill C-59), if implemented, impact the new offence for laundering proceeds of crime for the benefit of a criminal organization?

A. The proposed amendments in the Fall Economic Statement (Bill C-59) aim to address challenges associated with prosecuting third parties who engage in laundering proceeds of crime; to modernize seizure and restraint of proceeds of crime provisions; and, to clarify that production orders for financial data are available for digital assets such as cryptocurrency.

The amendments in Bill C-59 if implemented would be applicable to the new offence of laundering proceeds of crime for the benefit of a criminal organization.

New investigative tools (wiretap and DNA provisions (Clauses 368 and 373)

Q. What are the new investigative tools in this Bill?

A. The amendments would ensure that auto theft offences are eligible for DNA and the wiretap warrants, which would facilitate the investigation and prosecution of these offences.

Q. What are the amendments to section 183 meant to do? (Clause 368)

A. The amendments to section 183 would allow law enforcement to seek an authorization for a wiretap to investigate offences where auto theft or laundering proceeds of crime for a criminal organization is suspected. This is consistent with the current ability for law enforcement to seek wiretaps for auto theft (333.1) and laundering proceeds of crime (462.31) as well as other serious offences.

Q. What do the amendments to the DNA part of the Criminal Code do? (Clause 373)

A. The purpose of taking offender DNA samples is to add them to the DNA databank for comparison against unknown samples in subsequent investigations to identify suspects.

The Bill would ensure that a court must make a DNA order when offenders are convicted of the two new auto theft offences and the new laundering proceeds of crime for a criminal organization offence. The amendments do this by adding these offences to the definition of "primary designated offence" in the Criminal Code.

However, sentencing courts would retain discretion not to issue a DNA order where the offender demonstrates that the impact on the offender's privacy or security of the person would be grossly disproportionate to the public interest.

The Bill would also ensure that courts have discretion to make a DNA order for the new offences targeting the possession and distribution of an electronic device for the purpose of committing auto theft by including them in the definition of "secondary designated offence" in the Criminal Code.

Q. Why do courts have the discretion to make a DNA order for the possession and distribution of an electric device for auto theft offences?

A. The offences for which DNA orders are mandatory capture some of the most serious offences in the Criminal Code (e.g., murder, manslaughter) with the highest penalties (see section 487.04 of the Criminal Code). The discretion to impose a DNA order for these hybrid offences was intended to allow for a DNA order when appropriate considering the circumstances of each case. Listing these offences as "secondary designated offences" would ensure that a court may order a DNA warrant whether the offences are pursued by indictment or summarily.

Aggravating Factor (Clause 374)

Q. What does the amendment do?

A. The amendment would add a new aggravating factor a judge must consider upon sentencing where there is evidence that the offender involved a person under the age of 18 in the commission of an offence.

This provision would provide clear guidance to sentencing courts to consider imposing more severe penalties on offenders who involve youth in the commission of an offence.

The broad application of this aggravating factor is intended to signal to the courts that this type of behaviour – using youth to facilitate crimes – is unacceptable.

Q. Can you give examples of what this might capture? Does it only involve auto theft?

A. Depending on the type of offence, a young person's degree of involvement in the commission of the offence can vary. The proposed aggravating factor would help address instances where there is evidence an adult has used their influence to involve a person under the age of 18 in criminal activity. Being "involved" would capture situations where a young person is susceptible to criminal liability for the offence by being a party to the offence.

For example, in the context of an auto theft offence, an organized crime group, which can include street gangs, may involve young persons by having them steal a vehicle. The young person would not have to be a part of the organized crime group or even associated with the organized crime group for this aggravating factor to apply.

Q. Will this aggravating factor apply to proceedings under the YCJA?

A. No. The YCJA has its own sentencing framework, which recognizes the specific circumstances of youth.

Exceptionally, where a young person receives an adult sentence, the sentencing provisions of the Criminal Code would apply.

Consequential amendments (Clauses 375 - 377)

Q. Could you explain the consequential amendments?

A. A consequential amendment is a change or modification made to a law as a result of another legislative change. These amendments are necessary to ensure that the legal framework remains coherent and consistent after the primary change has been enacted. They may be minor adjustments or more substantial revisions depending on the nature of the primary change.

The Bill makes consequential amendments to three federal statutes and would add:

• the two new auto theft offences and the new laundering proceeds of crime for criminal organization offence to the Canada Business Corporations Act schedule, which lists Criminal Code offences for which there is obligatory disclosure by corporations of information to investigative bodies;
• the new offence of laundering proceeds of crime for criminal organization to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to ensure that the provisions of that Act, which rely on that definition, incorporate the new offence; and
• The Criminal Code offence of laundering proceeds of crime may be pursued against a person who engages in laundering the proceeds of crime obtained or derived from offences committed under the Crimes Against Humanity and War Crimes Act. However, the Crimes Against Humanity and War Crimes Act includes provisions to require that the personal consent in writing of the Attorney General of Canada or Deputy Attorney General of Canada be obtained prior to commencing such proceedings, and to stipulate that such proceedings can only be conducted by the Attorney General of Canada or counsel acting on their behalf. Consequential amendments to the Crimes Against Humanity and War Crimes Act are proposed to include the new proposed money laundering offence within the relevant provisions of this Act.

Q. What is the effect of the coordinating provision? (Clause 378)

A. The amendment coordinates this Bill with Bill C-59, the Fall Economic Statement Implementation Act, 2023.

It would ensure that amendments proposed to section 462.31 through Bill C-59 will also apply to the new offence in 462.31(2.1) (laundering proceeds of crime for criminal organization) should the affected provisions in both bills come into force.

Q. When would the proposed measures come into force? (Clause 379)

A. The proposed measure would come into force 30 days after the day on which this Division of the Bill receives Royal Assent.

This timing would provide provinces, territories, and law enforcement some time to implement these changes.

Division 36 – Radiocommunications Act

Overview

In February 2024, the Government of Canada hosted a National Summit on Combatting Auto Theft, during which the Minister announced the intent to regulate the import, sale, distribution, and use of wireless devices used to conduct auto theft. Expanding on this announcement, Budget 2024 announced the Government of Canada's proposal to amend the Radiocommunication Act (RA)to enable the Minister of Industry to regulate radiocommunication devices that may be used to intercept radiocommunication, including those used for the purposes of auto theft.

Emerging and existing wireless devices are being used to steal automobiles by exploiting the common radiocommunication features which are built into most modern vehicles. Particularly these devices intercept the radiocommunication signals between remote car keys (commonly known as key fobs) and vehicle computer systems. The additions to the RA provide the explicit statutory authority for the Minister of Industry to regulate wireless radiocommunication devices that are believed to be used to facilitate crime, including auto theft.

The proposed changes amend the RA to, among other things, prohibit the manufacture, import, distribution, lease, offer for sale, sale or possession of certain devices, specified by the Minister of Industry. It also amends the RA to establish as an offence or a violation the contravention of that prohibition. The amendments to the Act will come into force upon the Budget Implementation Act (BIA) receiving Royal Assent.

Through these amendments, the Minister would be able to restrict or limit access to relevant devices, including removing them from the Canadian marketplace. In addition, as the technological landscape evolves, the Minister would have the authority to regulate new devices that may become tools for other criminal activity that exploits radiocommunication in the future.

Key Messages

• The Government of Canada is proposing legislative amendments to the Radiocommunication Act, meant to regulate wireless devices used to conduct auto theft.
• Wireless communication devices have been used to facilitate unlawful activities, such as auto theft, by exploiting the common radiocommunication features which are built into most modern vehicles. Restricting access to these devices in the Canadian marketplace will support wider government efforts to combat auto theft.
• Budget 2024 announced the government's intention to amend the Radiocommunication Act to regulate the sale, possession, distribution, and import of devices used to steal automobiles. This follows a previous commitment made by Innovation, Science, and Economic Development Canada (ISED) to restrict wireless tools, which was announced earlier this year during the government's National Summit on Combatting Auto Theft.
• The proposed legislative amendments will give the Minister of Innovation, Science and Industry explicit statutory authority to regulate wireless radiocommunication devices that are believed to be used to facilitate crime, including auto theft.
• The Minister will engage with stakeholders to inform any restrictions he may put into place based on the authority established in the Radiocommunication Act.

Questions & Answers

Q. What specifically would the proposed amendments to the Radiocommunication Act allow the Minister to do, and how does this differ from what he can currently do?

A. The proposed amendments would allow the Minister of Industry to regulate and restrict wireless devices that exploit the common radiocommunication features found in most vehicles to facilitate auto theft. Currently, the Act prohibits individuals from intercepting radiocommunication signals without permission from either the originator or the intended recipient. However, this provision has not proven to be effective in preventing harmful or criminal activity. These amendments would provide the Minister of Industry with explicit statutory authority to regulate or otherwise restrict the wireless devices responsible for facilitating harmful interception, such as what is seen in auto theft.

Q. How will the proposed new legislation function, in practical terms?

A. Should the Minister choose to exercise the authority provided in the amendments to the Act, he or she will issue a ministerial order, which will contain all details as to the regulation or restriction of any devices, as well as an explanation pertaining to the reason for enacting the order. The order may also provide certain exemptions to allow for the legitimate use of devices.

Q. What sort of oversight, or requirements will regulation developed under this new legislation need to meet?

A. The Minister will publish any orders made in the Canada Gazette. Furthermore, orders will be subject to the requirements and procedures set out in the Statutory Instruments Act, which provides for Parliamentary oversight.

Q. How will the Minister decide which devices should be subject to restriction?

A. The Minister will engage with stakeholders to gather information on wireless devices used in auto theft. The Minister will use this information to support his decisions in determining which wireless devices should be subjected to additional regulations and restrictions, and under which circumstances.

Q. What measures will be in place to enforce the restrictions established by the Minister?

A. Anyone violating an order by the Minister may be subject to Administrative Monetary Penalties (AMPs) or could be found guilty of an offence under the existing provisions of the Radiocommunication Act.

Q. How will government action under this amendment keep up with the ever-changing technological environment?

A. Delegation of this authority to the Minister provides flexibility as he can adjust orders, or create new orders, over the course of time as technologies evolve.

Q. What is the purpose of empowering the Minister to incorporate documents by reference?

A. This empowers the Minister to use internal or external documents to support restrictions or exemptions made in an order. For example, the order may exempt members of a specific professional association from the prohibition by pointing to their list of members. Note that any documents incorporated into an order by reference are required to be accessible to the public.

Q. Can the proposed amendments be used to address harmful criminal activities beyond auto theft?

A. Yes. While the immediate policy intent of the proposed amendments is to address the rise in auto theft using wireless devices, the amendments provide flexibility for the Minister to address other instances of harmful interception in the future.

Division 37 – Telecommunications Act

Overview

Division 37 of Part 4 amends the Telecommunications Act to better support consumers in renewing or switching service plans in order to find the right plan to meet their needs. It would require telecommunications service providers to provide their subscribers with a self-service mechanism that allows them to cancel their contract or modify their telecommunications service plan. They would also be required to inform subscribers before the expiry of their contract, as well as in other specified circumstances, of other service plans available to them. It also amends that Act to prohibit the charging of certain fees that may impede switching.

These amendments were committed by the Government in Budget 2024 with the objective of supporting Canadians to better take advantage of lower priced telecommunications services in the market.

The specific details of these provisions will be determined by the independent telecommunications regulator, the Canadian Radio-television and Telecommunications Commission, and come into force by Order-in-Council.

Key Messages

• All Canadians should be able to access essential services at affordable prices, including high quality and affordable telecommunications services.
• The Government of Canada has made significant progress to reduce the cost of internet, home phone, and cell phone plans, and to increase access to these services.
• In the past year, according to Statistics Canada, prices for cell phone plans decreased by 26%, while home Internet plans decreased 15%.
• Budget 2024 proposes amending the Telecommunications Act to better allow Canadians to renew or switch between home internet, home phone, and cell phone plans so that Canadians can find better deals.
• The proposed amendments to the Telecommunications Act announced in Budget 2024 would:
  • Prohibit carriers from charging consumers extra fees to switch carriers;
  • Require carriers to help consumers identify plans, which may include lower-cost plans, in advance of the end of a contract; and
  • Require carriers to provide a self-service option, such as an online portal, for customers to easily switch between or end plans with a provider.
• The Canadian Radio-television and Telecommunications Commission will be responsible for implementing these measures and will consult on specific requirements.

Questions & Answers

Q. Are telecom prices declining in Canada?

A. ISED's 2023 Price Comparison Study of Telecom Services, which spans the period of October 2022 to October 2023, found home internet prices declined across all baskets, with an average decline of 7.7%, and wireless prices declined an average of 18.2% for data plans.

This is consistent with data from Statistics Canada which has shown a 50% decrease in wireless prices in the past 5 years, with half of that decline (-26%) occurring since the Rogers-Shaw and Quebecor-Freedom transactions were approved in March 2023.

Q. These statistics and studies don't reflect what we are hearing from Canadians. How can you be sure prices are declining in Canada?

A. Multiple lines of evidence show this. This can be observed via statistics identified above as well as directly monitoring changes in the marketplace.

For example, in 2022, 20 gigabyte plans were being sold for an average of $73. In late 2023 and early into 2024, these plans were widely available for prices in the range of $30 to $40. Other improvements, like much more attractive international roaming options, have been made as well.

Financial analysts, including at TD and RBC, have noted an increase in competitive intensity and lower prices, which has also been reflected in the financial results of the carriers.

However, these improvements are most apparent for plans currently in the marketplace. Canadians on older legacy plans typically need to contact their service provider or another provider to take advantage of the new plans.

Q. What do you mean when you say providers will have to help customers identify plans in advance of the end of a contract?

A. Service providers will have to send customers a notification that their contract is ending, along with information on current plans in the market.

The Canadian Radio-television and Telecommunications Commission will determine what specifically is in these notifications, but a similar initiative was implemented in the UK with positive results, such as finding savings or upgrading to plans that better met their needs.

Q. What fees specifically will be prohibited?

A. The Canadian Radio-television and Telecommunications Commission will be responsible for determining which fees are considered to be barriers to switching plans or providers.

The CRTC will consult with service providers and consumer advocates, with the goal of making switching plans and providers easier for consumers.

Q. Why does the CRTC need to consult on the provisions?

A. The telecommunications market is very diverse and evolves quickly with changing technology. There are a variety of business-to-business services that are very technical and not intended to be captured by these consumer measures.

The requirements themselves are technical in nature and the details are best confirmed via a regulatory process that can take into consideration the diversity of the market, and can be more nimbly adjusted over time.

Division 38 – Immigration and Refugee Protection Act (In-Canada Asylum System)

Overview

The In-Canada Asylum System has faced mounting pressures in recent years, largely driven by increasing numbers of asylum seekers, resource constraints, and evolving global migration dynamics. The system has been strained by a surge in asylum claims, leading to lengthy processing times and backlogs, and resulting in prolonged uncertainty for applicants.

The proposed legislative measures are aimed at addressing challenges faced by the In-Canada Asylum System through the introduction of comprehensive system-wide efficiencies and enhancements. These legislative amendments aim to address system-wide bottlenecks by simplifying and streamlining the claim process in support of enhanced program integrity and faster processing of asylum claims. To be able to respond to evolving global and domestic trends that affect the asylum system, the Government would benefit from maximum flexibility to adjust the system in the future while respecting its international obligations.

Legislative amendments include measures that impact all stages of the asylum application process, from initial application through decision making to the post-decision stage, to ensure system-wide efficiencies and enhancements as follows:

• Single Online Application: These legislative changes will provide the Minister with clear authorities to specify the information and documents required when an asylum claim is initiated, including requiring that the information be submitted to the Minister online. These changes will ensure that claimants are subject to the same requirements whether they made their claim inland or at a port of entry.
• Minister's Due Diligence: These legislative amendments will increase program integrity and reduce delays at the Refugee Protection Division of the Immigration and Refugee Board of Canada (IRB) by allowing the Minister (IRCC and Public Safety) to analyze and review claims and prepare 'hearing ready' files prior to referral of claims to the Refugee Protection Division for determination.
• Abandonment / Withdrawal: These legislative amendments will ensure the Refugee Protection Division (RPD) has authority to determine that a claim is abandoned when a claimant fails to comply with certain requirements related to their refugee protection application prior to the claim being referred to the RPD (in addition to their existing authority to abandon claims after referral). It also provides new authority for the IRCC Minister to determine a claim is withdrawn (following such a request by a claimant or their representative).
• Coming Into Force of Removal Orders: This legislative amendment will ensure that removal orders come into force the same day a claim is determined to be withdrawn (by the IRB or the Minister), instead of 15 days later.
• Deferred Enforcement-related Measures: These legislative amendments will defer the issuance of removal orders until a claim is rejected by the IRB, which will eliminate the issuance of removal orders for the majority of asylum claimants. The proposal will also make the legislative changes required to clarify officer discretion to prepare inadmissibility reports and issue removal orders, to void removal orders in certain circumstances, and to establish a standard set of conditions (in regulations) to be imposed on all refugee claimants when they make a claim.
• Simplified Refugee Claim Decisions: This legislative amendment will provide clear statutory authority for the IRB Chairperson to require members to render reasons for decisions in a specified format.
• Claim Adjudication Only In Canada: This legislative change will clarify that in-Canada asylum claims may only be adjudicated by the IRB while the claimant is physically present in Canada. Similarly, legislative amendments will clarify that admissibility hearings may only be held while persons are in Canada.
• Repeal of Designated Country of Origin (DCO) Regime: This change is to formally repeal the legislative provisions associated with the DCO regime, which have not been in effect since the de-designation of all DCO countries in 2019.
• Transfer of Scheduling Authorities to IRB: These legislative amendments will remove the current requirement for officers to fix the date of refugee hearings before the RPD and to repeal the related time limits for hearings and decisions to facilitate more strategic case management at the IRB.
• Appointed Representatives for Claimants: This legislative proposal will provide the Ministers of IRCC and Public Safety with the authority to appoint and remunerate a representative for persons who are unable to appreciate the nature of proceedings, including minors.

Canada's asylum system reflects our international obligations under the 1951 Refugee Convention, and the 1984 Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, to protect refugees. A well-managed and efficient asylum system provides protection in line with Canada's international obligations, but equally supports efforts to keep Canadians safe and healthy, and positions Canada for success in an uncertain world.

The legislative amendments will help to address the findings of the 2019 Auditor General Report on "Processing of Asylum Claims" which found that Canada's refugee determination system was not equipped to process claims according to the required timelines due to issues relating to system inefficiencies, gaps in information sharing, and duplication of effort among CBSA, IRCC, and the IRB.

The legislative amendments will also help to support the actions outlined in the 2023 Strategic Immigration Review including to "position the immigration system to adapt quickly and to respond equitably and sustainably to growing global humanitarian crises" specifically to, "explore options to enable the asylum system to better manage higher claim volumes and help ensure that claimants are met with a process that is fast, fair and final." These amendments also support the Minister's mandate to lead the Government's work on irregular migration.

IRCC's 2023/24 Departmental Plan indicates that 'following investments made in Budget 2022, IRCC will continue to advance reforms to strengthen the asylum system, enhance efficiencies and meet Canada's international obligations. This includes working closely with the Canada Border Services Agency (CBSA), the Canadian Security Intelligence Service (CSIS), and the Immigration and Refugee Board of Canada (IRB) to implement strategies to streamline asylum processing, ensure that decision-makers have all relevant information in a timely manner, and maintain the integrity of the system.

Key Messages

• Canada is viewed as a world leader in meeting our international and domestic obligations to protect vulnerable people.
• The international migration context is changing rapidly. The number of people forcibly displaced each year continues to increase due to, but not limited to, political instability, conflict, poverty, and climate change. Canada is not immune to receiving large volumes of people seeking protection. The United Nations Refugee Agency's (UNHCR) Mid-Year Trends 2023 Report ranked Canada as the ninth major country for individual registration of asylum seekers for 2021 and 2022, and noted that in 2023 the number of new individual asylum applications increased globally by more than 50% compared to the first six months of the previous year. The drivers of asylum intake, including changing global migration patterns, are not exclusive to Canada and are often out of the Government of Canada's control.
• The funding outlined in Budget 2024 supports the Government's commitment to addressing the pressures faced by the In-Canada Asylum System (ICAS) due to the continuous increase in asylum claims. This will assist us in adapting the system to today's realities, including enhancements across the entire asylum continuum, services for claimants, and adjusting the system to accommodate the growing volume of claims.
• The proposed legislative measures would reform Canada's Asylum System without compromising its fairness or compassion. These amendments set the system up for success by addressing bottlenecks and improving the effectiveness and efficiency of the asylum system in the face of rising asylum claim volumes.
• The Government's goal is to adapt the system to today's realities and prepare it for tomorrow's challenges, addressing the system's volume, enhancing its efficiencies, and providing services to claimants.
• These actions build on past investments and ensure that claimants are processed quicker and receive the proper services, while decreasing financial pressures on all levels of government and respecting Canada's international obligations.
• The legislative amendments will help to support the actions outlined in the 2023 Strategic Immigration Review including to "enable the asylum system to better manage higher claim volumes and help ensure that claimants are met with a process that is fast, fair and final." These amendments also support the Minister's mandate to lead the Government's work on irregular migration.
• The In-Canada Asylum System aspires to consistently be "Fast, Fair and Final." It should efficiently deliver decisions that result in protection or removal ("Fast"); provide an opportunity to be heard by qualified and impartial decision-makers ("Fair"); and allow the timely removal of failed claimants once avenues of recourse are exhausted ("Final").

Questions & Answers

Q. What are Canada's international legal obligations to asylum seekers?

A. Canada has signed and ratified the 1951 Refugee Convention, and the 1984 Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. Canada implements our international obligations through a variety of domestic mechanisms including the constitutional protections found in the Charter of Rights and Freedoms and domestic legislation like the Immigration and Refugee Protection Act.

Q. Do the proposed legislative changes to the Immigration and Refugee Protection Act respect Canada's international obligations?

A. Yes, the proposed legislative changes allow the Government to respond to a rapidly changing international migration context while respecting its international obligations.

Q. Why have asylum volumes been increasing?

A. There is not one reason why asylum volumes continue to rise. Large-scale population movements have been occurring globally for several years and Canada despite its geographical isolation has not been unaffected. The United Nations High Commissioner for Refugees (UNHCR) estimated in late 2023 that there are 110million forcibly displaced people worldwide as a result of persecution, conflict, violence, human rights abuses and other events, of which 36.4million are refugees. These and other factors have led to influxes of asylum seekers to Canada and other economically-advanced nations. There were 23,860 asylum claims in Canada in 2016 and 143,785 in 2023.

Q. Why have processing delays increased in the past few years?

A. Despite advances in Canada's asylum processing capacities, the system is not equipped to handle such volumes. *Sentence redacted*. However, there were a record-breaking 145,000 asylum claims made in 2023, and those volumes are expected to increase higher in 2024.

Q. How will the proposed legislative changes impact claimant processing times?

A. The proposed legislative changes are expected to decrease the average processing time per claim. In addition, from first point of contact to protection decision, measures are expected to yield system efficiencies *portion redacted* (by reducing duplication and increasing employee productivity).

Q. How will the legislative amendments impact front-end processing of asylum claims?

A. There are several legislative amendments that together will lead to asylum system efficiencies including improvements to front end processing. The amendments would also allow for the expansion of "One Touch" to inland offices, meaning that claimants would have the same requirements whether they claimed asylum at a port of entry or at an inland office. In addition, the IRCC Portal would be leveraged to create a single online asylum application for the asylum claim and basis of claim details, meaning that claimants would only submit their information once and would have the same requirements whether they claimed at a port of entry or inland. This will result in faster access to key benefits and a process that does not rely on where a claimant submits their claim. The single online application will result in faster processing of claimant applications by providing a digital solution and improved client service by reducing duplicative information requirements and providing a more streamlined process. Changes to the process to abandon non-compliant asylum claims and determine that claims are withdrawn will support a streamlined intake process and faster resolution of voluntary withdrawal. Changes to coming into force of removal orders will allow those who no longer wish to pursue a refugee claim to be removed from Canada immediately upon voluntarily choosing to withdraw their claim. Deferred enforcement-related measures will better balance enforcement decision making while streamlining claimant processing in both the port of entry and inland offices.

Q. How will the legislative amendments impact decision-making processing of asylum claims?

A. There are several legislative amendments that together will lead to asylum system efficiencies including decision-making processing improvements. Simplifying and streamlining the process that IRB members follow to document refugee claim decisions will reduce delays between hearings and decisions. Changes to Minister's Due Diligence activities are designed to lead to faster decisions by the Refugee Protection Division of IRB, while maintaining system integrity. Clarifying that in-Canada asylum claims may only be adjudicated by the RPD and Refugee Appeal Division (RAD) of the IRB while the claimant is physically present in Canada will more explicitly align the legislative framework with the underlying policy intent of the in-Canada asylum system and improve the integrity of the asylum system. Transferring the scheduling authorities to the IRB and repealing the regulated time limits for RPD hearings and RAD decisions allows the RPD to schedule hearings once files are ready, thereby reducing delays and postponements. This will provide the RPD and RAD with the flexibility to continue to manage cases strategically and optimize their capacity.

Q. Will these legislative amendments address the existing inventory of pending claims?

A. The proposed measures aim to increase efficiency in the asylum system, including ensuring clients only have to provide information once, ensuring steps are completed in an effective order and streamlining processes. While changes at the intake stage for claims will not address existing inventories, there are some measures that will help improve the processes for cases already in the system, thereby ultimately increasing the timeliness of decisions. However, according to the United Nations Refugee Agency's (UNHCR) Mid-Year Trends 2023 Report the number of new individual asylum applications increased globally by more than 50% compared to the first six months of the previous year. The drivers of asylum intake, including changing global migration patterns, are not exclusive to Canada and are often out of the Government of Canada's control. Measures to improve the system are therefore important in the face of growing volumes.

Q. Will the legislative amendments result in a reduction in fairness or transparency in the inadmissibility decision-making process or the refugee determination process?

A. No. The amendments do not change the nature of the inadmissibility determination process or the nature or independence of the administrative tribunal the Immigration and Refugee Board of Canada (IRB), which adjudicates refugee and immigration matters.

Q. What is the expected timeline for the completion of all legislative reforms?

A. Most of the legislative changes will come into force by an order in council following completion of regulatory changes. In addition some legislative and regulatory proposals will require IT changes that are subject to their own release schedule. Short-term results can be expected in approximately one year.

Q. Why are there legislative amendments linked to the Safe Third Country Agreement if it is already working?

A. The Safe Third Country Agreement (STCA) is a unique tool that supports the management of the number of asylum claimants who arrive in Canada from the United States. Under the Agreement, refugee claimants are required to request refugee protection in the first safe country they arrive in, unless they qualify for an exception to the Agreement. In March 2023, the application of the STCA was expanded to the entire land border, including internal waterways. This drastically reduced the number of claims made by individuals crossing in between ports of entry (i.e., irregularly).

Elements of the proposed legislative changes will strengthen our ability to apply the STCA, including its Additional Protocol, namely through clarified authorities regarding:

• the information to be provided when claims are submitted online; and,
• the ability to address exceptional cases of individuals seeking to re-enter Canada in circumstances where they have been refused entry to the United States following a finding of ineligibility under the STCA (101(1)(e).

Q. What are the reasons for the partial visa imposition on Mexico?

A. Mexico has been Canada's top source country for asylum claims since 2021, and was the only top source country without a visa requirement. In 2023 alone, asylum claims from Mexican citizens accounted for 17% of all claims made that year from all nationalities around the world. The country's asylum claim rate has risen significantly since the visa requirement was first lifted in 2016 (from 260 claims in 2016 to 23,995 claims in 2023). From January 2023 to December 31, 2023, the majority of finalized asylum claims (approximately 60%) were either rejected by the Immigration and Refugee Board of Canada, or withdrawn or abandoned by the applicant.

Q. Are these legislative amendments still needed given the partial visa imposition on Mexico?

A. Yes, the legislative amendments are aimed at strengthening the asylum system and introducing comprehensive system-wide efficiencies and enhancements. The international migration context is changing rapidly. Canada is not immune to receiving large volumes of people seeking protection. The United Nations Refugee Agency's (UNHCR) Mid-Year Trends 2023 Report ranked Canada as the ninth major country for individual registration of asylum seekers for 2021 and 2022, and noted that in 2023 the number of new individual asylum applications increased globally by more than 50% compared to the first six months of the previous year. The proposed legislative measures would reform Canada's Asylum System without compromising its fairness or compassion. These amendments set the system up for success by addressing bottlenecks through system efficiencies and improving the effectiveness and efficiency of the asylum system in the face of rising asylum claim volumes.

Q. Will the Government of Canada's decision in early 2024 to limit the number of temporary students and workers entering Canada lead to fewer refugee claims?

A. Yes, in that the Government's decision will result in fewer temporary students and workers entering Canada and therefore a likely reduction in the volume of asylum claimants as well.

For context, in recent years the number of asylum claimants who are entering Canada on study or work permits and then making refugee claims, has been increasing, and in 2023 a record-breaking number of work and study permit holders were issued a removal order, almost all of them refugee claimants. Therefore, a reduction in the number of temporary students and workers entering Canada should also result in fewer students and workers making refugee claims and less strain on the various asylum system processes.

Q. What is changing about the refugee application and submission process?

A. The process is changing to become simpler and to address inefficiencies and bottlenecks at the front end. The simplified process has been piloted with port of entry (POE) refugee claims, and would now be expanded to all refugee claims including at inland offices. Known as the "One Touch" process, claimants who are assessed as low-risk following the officer's admissibility and refugee eligibility determination would be directed to complete the refugee application documents online using the IRCC refugee portal within a prescribed deadline. The simplified process would lead to significant time savings for officers at the front-end of the refugee process. For claimants who are assessed as high-risk, full case processing by the officer would still be completed.

Q. What is happening to the list of required documents that refugee claimants must fill out?

A. The multiple different documents that refugee claimants must complete as part of their application and that differ whether the claim was made at a port of entry (POE) or an inland office, would be merged to create a single online application process that would apply to all refugee claimants. This includes incorporating the well-known Basis of Claim (BOC) form, in which the person explains the reasons for their refugee claim in detail, into the online application. The amendments would create a more consistent application process and eliminate redundancies and duplicate requirements.

Q. Why does the Canada Border Services Agency want to start authorizing refugee claimants to enter and stay in Canada but stop issuing them removal orders? Are they not inadmissible?

A. Some of the amendments would result in no longer issuing most refugee claimants a removal order at refugee claim initiation that is conditional on the decision of the Immigration and Refugee Board of Canada (IRB), something that non-government stakeholders have also asked for in the past. This measure would make initial refugee claim processing faster and more efficient while at the same time not creating a risk to public safety or the integrity of the asylum system. Instead, removal order issuance would only occur at the point that the IRB rejects the refugee claim, or declares it withdrawn or abandoned.

Despite the time it takes an officer to prepare an inadmissibility report and issue a removal order to a refugee claimant, about 65 percent of all claimants who are found eligible and referred to the IRB have their claims accepted—meaning the removal order does not come into force and so was basically a wasted effort to issue.

The majority of refugee claimants are low-risk, generally compliant, and do not pose a risk to public safety. However, for claimants who are eligible but may be inadmissible for something more serious than not having a PR visa such as criminality, they would still undergo the usual full screening process that includes inadmissibility report and removal order upon making a refugee claim.

Q. Will individuals who continue to be issued an inadmissibility report and removal order still be able to make refugee claims?

A. Yes, they would still be able to make a refugee claim, provided they are eligible. The purpose of keeping the status quo for them by continuing to issue the inadmissibility report and removal order upfront, is that there are elevated inadmissibility concerns that needed to be considered immediately before proceeding.

Q. Why are the amendments eliminating the DCO regime from the Immigration and Refugee Protection Act (IRPA)?

A. The DCO regime was declared unconstitutional by the Federal Court in 2015 and despite not having been used since then, parts of the legislation have not been removed from the IRPA.

Q. Can you briefly explain what the DCO regime is?

A. The DCO regime was based on the principle that some countries respect human rights more than others and therefore do not normally produce refugees; and yet, individuals from these countries still claim refugee protection status in Canada. The DCO regime was meant to deter refugee system abuse by requiring that any claimant from one of the listed DCO countries have their claim processed significantly faster, and by having the bar on having a Pre-Removal Risk Assessment (PRRA), a legislative requirement to remove most inadmissible foreign nationals, increased from one year to three years.

Division 39 – Immigrant Station

Overview

The Canada Border Services Agency (CBSA) is responsible for detaining individuals, including those who pose a risk to public safety, through its mandate to enforce the provisions of the Immigration Refugee Protection Act (IRPA). Detention may only be continued where the independent Immigration and Refugee Board determines it is justified. The CBSA uses immigration detention as a measure of last resort, and only after all suitable alternatives to detention have been considered.

While the CBSA continues to expand the use of alternatives to detention, there remains individuals who have engaged in serious criminal activities or who demonstrate behaviours that make them a risk to public safety.

As a result of recent decisions by provinces to terminate their long-standing immigration detention agreements, the Government of Canada is taking steps to build capacity to house high-risk immigration detainees in federal institutions, including Immigration Holding Centers and federal correctional facilities that will be managed by the CBSA.

Key Messages

• If passed, the legislative amendments that the government proposes to introduce would allow CSC to provide assistance to the CBSA by providing space within in an area of, a correctional facility, for them to house high-risk immigration detainees, as a temporary measure of last resort during a period of transition, while CBSA makes upgrades to their immigration holding centres.
• As a reference point, as of April 12, there are less than 50 individuals who have currently been assessed as posing a risk to public safety detained in provincial correctional facilities or local police agency holding cells.
  • There are more than 12,000 individuals enrolled in alternatives to detention (which includes community supervision programs and electronic monitoring) and 195 individuals detained within CBSA immigration holding centres
• Detention in a provincial facility, in provinces where this measure is still available, is limited to the most difficult cases, when there are assessed dangers to the public, to other detainees, or staff. For example, when someone is held on the basis they are unlikely to appear, they may also have:
  • prior convictions and outstanding charges for violent crimes such as assault with a weapon, attempted murder, assaulting an officer with a weapon, and aggravated sexual assault,
  • have demonstrated violent, non-compliant, and unpredictable behaviour that places them, other detainees, the guards and medical personnel at risk
• The provinces have all taken the decision to end their longstanding agreements with CBSA to provide detention facilities for certain individuals. Regrettable, with a couple of limited exceptions, they have not been open to extending these agreements until such time as CBSA was able to make the necessary arrangements in their own or other facilities. The CBSA is therefore taking steps to house higher-risk individuals in its own facilities.
• The CBSA is currently making infrastructure upgrades and changes to operations and staffing in order to house detainees assessed as posing a higher risk, in separate and enhanced areas in its Immigration Holding Centres.
• In the interim, a temporary solution is required to safely house a small number of high-risk detainees who are currently being held in Provincial correctional facilities.
• The intent of any assistance arrangement with CSC would be for the CBSA to continue operating and staffing its detention spaces, completely independently of CSC and any federal inmates in its care and custody.
• Reflecting the non-permanent nature of the proposal is the inclusion of a sunset clause, which provides that the legislative amendments being proposed are automatically repealed five years after the Bill receives Royal Assent, unless the Governor in Council approves an extension.
• The CBSA and CSC will need to work through a number of details and will share more details once available.

On detention

• The CBSA uses immigration detention as a measure of last resort, only after all suitable alternatives have been considered, and consistent with the Immigration and Refugee Protection Act (IRPA).
• On average, over 30million foreign nationals enter Canada each year and only 0.02% are subject to alternatives to detention or detention. Of those, almost 98% are on Alternatives to Detention, 1.5% are in Immigration Holding Centres, and less than 0.5% in a Provincial Correctional Facility.
• While the CBSA continues to expand the use of alternatives to detention, there remains individuals who have engaged in serious criminal activities or who demonstrate behaviours that make them a risk to public safety.
• Over the past 10 years, there have been at more than 400 immigration detainees in provincial correctional facilities with links to organized crime in the Americas and Asia. These individuals were found to be inadmissible to Canada and CBSA assessed that they would continue to carry out activities related to organized crime and possibly disappear to avoid removal. There have also been numerous individuals who exhibited violent behaviours who would have posed a dander to the public or other detainees had they been released or placed in CBSA's facilities.

Questions & Answers

Q. Will immigration detainees interact with inmates?

A. No, the commingling of inmates and immigration detainees will be prohibited by the legislation, unless exceptional circumstances are found to apply. The exceptional circumstances are also defined in the legislation and only the institutional head of the penitentiary can declare that the exceptional circumstances apply. This aligns with Canada's compliance with international standards and conventions, as Canada has adopted and remains committed to upholding its commitments under the International Covenant on Civil and Political Rights (ICCPR), a multilateral treaty that commits nations to respect the civil and political rights of individuals. Among other things, the ICCPR requires that accused persons, other than in exceptional circumstances, be held separately from convicted persons and subject to treatment appropriate to their status as non convicted persons. The legislative amendments comply with Canada's international commitments to limit contact between inmates and immigration detainees to the greatest extent possible.

Q. What are the exceptional circumstances to the prohibition on comingling?

A. The exceptional circumstances, which will be defined in the legislation, are in the event of a clear and substantial danger to human life or safety of immigration detainees or inmates or to the security of the immigrant station or the penitentiary. Only the institutional head of the penitentiary can declare that the exceptional circumstances exist and the prohibition on commingling remains in place unless the institutional heads makes such a declaration.

Q. How will access between inmates and immigration detainees be separate and distinct?

A. Inmates are not permitted access to the immigrant station, except for the reasons provided in the legislation (e.g., a unless there is a clear and substantial danger to human life). Immigration detainees will only be allowed access to the penitentiary if access is required to fulfill a purpose or obligation under the immigration legislation. The immigration detainee must be escorted by an Agency officer at all times and inmates are not permitted in the part of the penitentiary that is being accessed by the immigration detainee. A similar exception to the prohibition on the presence of inmates will be provided for in extreme circumstances. While our primary concern is to ensure the safety and security of all persons in the facility, inmates, detainees and staff, there may be limited circumstances when an immigration detainee interacts with an inmate. This may occur only in the event of a clear and substantial danger to human life or safety of immigration detainees or inmates or to the security of the immigrant station or the penitentiary. Should such an extreme event arise, both Correctional Service Canada and Agency personnel would take all operational measures necessary to limit contact between inmates and immigration detainees to the greatest extent possible.

Q. What pressures exist that require the Correctional Service Canada to assist the Canada Border Services Agency (the Agency) in 2024?

A. While historically high-risk detainees have been housed in provincial correctional facilities, the Agency will no longer be able to rely on provinces to house high-risk immigration detention cases in their provincial correctional facilities, as they have withdrawn, or signalled their intention to withdraw, from their detention agreements with the Agency.

Unfortunately, the provinces all took the decision to end their longstanding agreements with CBSA before the Agency was able to make the necessary changes to its infrastructure. As of February 2024, Alberta, British Columbia, Nova Scotia, Saskatchewan, and New Brunswick no longer have valid immigration detention agreements with the Agency. The Provinces of Quebec and Manitoba will be withdrawing from their respective agreements as of June 30, 2024, and will stop accepting new immigration detainees in their facilities as of May 1, 2024. The Province of Ontario will withdraw from their agreement as of June 15, 2024, and Prince Edward Island will end their agreement on September 18, 2024. Recently, we have been notified that Newfoundland and Labrador will stop holding immigration detainees in their provincial facilities as of March 31, 2025. As a result of the termination of these provincial agreements, the Agency will no longer be able to house high-risk detainees in provincial correctional facilities for immigration purposes.

Q. How many Correctional Service Canada facilities does the Agencyplan to use for immigration detainees?

A. Discussions between CSC and CBSA are ongoing.

Q. How many immigration detainees are expected to be held in Correctional Service Canada's correctional facilities?

A. The number of detainees will be identified once there is an agreement on a suitable facility,

Q. What are the requirements of, or what will be contained in, the arrangement between Correctional Service Canada and the Agency?

A. In terms of the arrangement between the two agencies, this will be a service agreement wherein the Agency may rely on Correctional Service Canada for services, on a cost-recovery basis, which may include building maintenance, building access, real property services, laundry, food and/or other administrative services. The Agency will be in charge of the immigrant station and of the immigration detainees, including being responsible for guard, transportation, medical services and overall management. Any arrangement between the two agencies must be approved by the Minister of Public Safety.

Q. What role will Correctional Service Canada have in the Immigrant Station and what role will the Agency have in the penitentiary?

A. Under the proposed framework, Correctional Service Canada employees are not expected to be, nor can they be, authorized to have any role in the day-to-day management of a designated "immigrant station." CBSA will also be fully responsible for all aspects of the day-to-day management of immigration detainees. The extent of Correctional Service Canada's involvement in the detention of immigration detainees will be limited to the provision of infrastructure solutions and services needed to assist the Agency to fulfill its duties under the Immigration and Refugee Protection Act.

There is, however, an authority within the proposed amendments that would on a very exceptional basis enable Correctional Service Canada to provide exigent assistance services to the Agency. These services, which entail support to restore order in an immigrant station, or to provide emergency health care where needed to preserve life or treat a serious bodily injury, are exceptional and limited to cases involving a clear and substantial danger to human life, safety of persons, or security of the immigrant station. Only the institutional head of the penitentiary can declare that exigent assistance is necessary. Agency employees will have no role in the penitentiary.

Q. Who will be responsible for the safety and security of immigration detainees held in Correctional Service Canada correctional facilities?

A. Although Correctional Service Canada would provide the Agency space within a Correctional Service Canada facility, the space would be operated by the Agency as an immigration holding centre under the authorities of immigration legislation. The space would be carved out from the federal penitentiary as a separate legal zone, will be operated by the Agency and will house only immigration detainees who are determined by the Agency to be of higher risk. Under the proposed framework, CSC employees are not expected to be, nor can they be authorized, to have any role in the day-to-day management of a designated "immigrant station". CBSA will be fully responsible for all aspects of the day-to-day management of immigration detainees.

There is, however, an authority within the proposed amendments that would, on a very exceptional basis, allow for Correctional Service Canada to provide exigent assistance services to the Agency, if there are reasonable grounds to believe that a clear and substantial danger to human life or safety or to the security of the immigrant station exists, and the assistance of Correctional Service Canada staff members is necessary to avert the danger. This could include a medical emergency or a loss of control of the immigrant station that may have an incidence on the order of the penitentiary (e.g. uncontrolled riot). Only the institutional head of the penitentiary can declare that exigent assistance is necessary.

As with any operational decision, the determination that exigent circumstances exist, and that assistance to the Agency is required to avert danger, would have to be reasonable, having regard to the purpose of the declaration and the relevant legislative provisions.

Q. What is the scope of Correctional Service Canada's exigent assistance authorities in the immigrant station?

A. Under the proposed model, it is conceivable that Agency officers, in having charge of the immigrant station as a legal zone separate from the penitentiary, could encounter circumstances that would exceed their ability, training or operational capacity to respond effectively or in a timely manner. Exigent circumstances could reasonably be perceived if the Agency has exhausted all available control measures, capabilities and training, and Correctional Service Canada assistance is required because the Agency lacks the capacity to maintain control of the immigrant station, or the safety of its staff and immigration detainees. For illustrative purposes, such exigent circumstances could involve a person experiencing medical distress, a serious security incident, an uncontrolled riot, a fire or a natural disaster.

If satisfied that there are reasonable grounds to believe that there is a clear and substantial danger to human life or safety of persons in the immigrant station or to the security of the immigrant station, the institutional head may declare, in writing, a state of exigent circumstances. As long as a state of exigent circumstances is in effect, Correctional Service Canada staff may assist Agency officers in the exercise of Agency officers' responsibilities under the Immigration and Refugee Protection Act.

Q. What recourse, or complaint, mechanism is available to immigration detainees?

A. As detainees will be held in a portion of a facility that is designated as an immigrant station to operate as an immigration holding centre, all methods of recourse available to those held in an existing immigration holding centre will continue to be available to those housed in an immigration holding centre located on Correctional Service Canada grounds. Under the Immigration and Refugee Protection Act, all decisions are potentially subject to judicial review. In some circumstances, immigration detainees may also seek relief through habeas corpus. The Agency has an existing Public Complaints Mechanism. This is an accessible and centralized process by which the public is able to voice their feedback to the CBSA about an unmet expectation relating to the Agency's delivery of services, performance, or processes. There is a process in place to ensure the file is assigned to the appropriate area of the Agency for full review and action. All public complaints received by the CBSA are taken seriously and are handled in an efficient, professional and impartial manner. As well, the Agency will update its related National Immigration Detention Standards to address the circumstances where it operates within a designated area of a Correctional Service Canada facility.

Correctional Service Canada staff members who assist the Agency will continue to report to the Institutional Head, who will remain responsible for the performance and conduct of the staff members. Finally, the legislation requires that any arrangement between the Service and the CBSA includes a complaint procedure that is accessible to any immigration detainee without any negative consequence. The procedure will allow immigration detainees to make a complaint with respect to any activities of staff members of the Service when those staff members are providing additional support to the CBSA in exigent circumstances. The procedure will also cover any complaint by an immigration detainee with respect to a registered health care professional employed or engaged by the Service when that professional is providing health care during exigent circumstances

The amendments are not intended to impact the mandate of the Correctional Investigator. Section 167 of the Corrections and Conditional Release Act describes the function of the Correctional Investigator and that function is specific to the "problems of offenders." Correctional Service Canada staff members acting in an immigrant station to assist Agency officials are not expected to fall within the Investigator's mandate.

Q. What progress is being made towards the Agency's ability to independently house high-risk immigration detainees in Immigration Holding Centres?

A. The Agency is retrofitting its existing three (3) Immigration Holding Centres and recruiting and training additional officers to manage high risk detainees. This will allow the Agency to house high-risk detainees in its Immigration Holding Centres starting in the fiscal year 2024-25.

Q. How does the Agency define high-risk when evaluating whether to hold immigration detainees in a detention facility other than its three (3) immigration holding centres?

A. The Agency uses all available and relevant information to guide detention placement when evaluating whether to hold immigration detainees in a detention facility other than its three (3) existing immigration holding centres. Detention is deemed necessary when: 1) an individual presents a risk to public safety (i.e. when an individual has a documented history or pattern of violent or aggressive crimes/behaviour), 2) the CBSA is unable to establish an individual's legitimate identity, and/or 3) the behaviour of the individual prevents the achievement of program goals (such as immigration proceedings or removal).

High-risk individuals are persons that pose a risk to themselves, other detainees, or staff. These individuals may have a documented history or pattern of violent or aggressive crimes and/or behavior (i.e., assault causing bodily harm, aggravated sexual assault, etc.). They may pose a significant escape risk from legal custody. Individuals may have also demonstrated documented instances of non-compliance with detention facility rules causing a risk to themselves, other detainees or staff.

Q. What is the Agency's position with regards to solitary confinement?

A. The Agency does not use solitary confinement when administering immigration legislation in an Immigration Holding Centre; however, when detained in a provincial correctional facility, the detainee may be subject to solitary confinement. The Agency's National Immigration Detention Standards provide national direction on detention standards and conditions of detention to ensure detainees have the proper access to services and supports while detained.

Q. Could a Structured Intervention Unit (SIU) be designated as an Immigrant Station ?

A. The proposal makes targeted amendments to the Corrections and Conditional Release Act (CCRA) to allow Correctional Service Canada to provide circumscribed assistance to the Agency. The amendments are designed to be limited in scope to what is necessary to house high-risk immigration detainees on Correctional Service Canada premises and to leveraging limited Correctional Service Canada services.

Immigration detainees will not fall within the Corrections and Conditional Release Act definition of "inmates" or "offenders", even where those immigration detainees are housed in designated immigrant station situated within a Correctional Service Canada facility or on Correctional Service Canada lands. As such, the existing legal framework governing the SIU regime will not extend to immigration detainees. No changes to the federal correctional scheme, including the SIU regime, conditions of confinement, and search and seizure provisions for offenders, are proposed. Additionally, it is important to note that the proposed amendments do not modify key elements of the immigration detention scheme, and that the Agency does not use solitary confinement when administering immigration legislation in an Immigration Holding Centre; however, when detained in a provincial correctional facility, the detainee may be subject to solitary confinement. When so designated, an immigrant station located within a Correctional Service Canada facility will be operated by the CBSA, and CBSA contracted staff, as an immigration holding centre.

Q. How do the proposed amendments impact the right of Members of Parliament (MPs) to visit any penitentiary?

A. Parliamentarians play an important oversight role in visiting federal penitentiaries and have provided important recommendations that have emanated through this work over the years. This has assisted Correctional Service Canada in bringing about positive change. Section 72 of the Corrections and Conditional Release Act gives MPs, Senators and judges express rights to enter a penitentiary, visit any part of a penitentiary and visit any inmate who consents to such a visit, subject to such reasonable limits as are prescribed for protecting the security of the penitentiary and the safety of persons. To align with this authority, the legislation provides MPs, Senators and judges with the same rights for the designated immigration station. That is MPs, Senators and judges have the right to enter the designated immigrant station, visit any part of the station or visit any immigration detainee who consents to the visit. The rights are similarly subject to reasonable limits for protecting the security of the designated immigrant station or the safety of any person. The reasonable limits will be prescribed in the regulations. .

Q. Will Non-Governmental Organizations (NGOs) continue to have access to the facility as they do for other facilities?

A. Yes, non-governmental organizations would continue to have access to the designated immigrant station located at a CSC facility. The CBSA's National Immigration Detention Standards provide clear, national direction on detention standards and conditions of detention to ensure that detainees have the proper access to services and supports while detained. To ensure that national standards and international obligations are met, the CBSA welcomes several non-governmental organizations to visit its immigration holding centres.

This includes a partnership with the Canadian Red Cross through the implementation of a formal contract to have them monitor the conditions of detention and the treatment of immigration detainees in CBSA immigration holding centres and other detention facilities. Additionally, the CBSA provides open access to its facilities to non-government organizations, such as the United Nations High Commissioner for Refugees, which provides support to detainees.

Q. What is the approximate total cost to prepare and operate a Correctional Service Canada facility to provide further capacity to house high risk detainees?

A. It is estimated that $82.2M is required over 5 years for retrofits and upgrades to adapt a facility, yet to be named, to meet the Agency's needs and immigration detention standards. As well, $14.5M will be needed annually to operate an immigrant station within the facility.

Q. How will it be decided that an immigration detainee will be held at a designated immigrant station located within a CSC facility in lieu of an Immigration Holding Centre in Toronto, Laval or Surrey?

A. CBSA officers conduct classification and risk assessment processes to ensure that detainees are placed in the most appropriate detention facility. When detention is used, the CBSA's detention system adheres to national and international obligations for the treatment of detained persons.

When legislative amendments to the CCRA and IRPA are approved, a CSC facility with a designated immigrant station will function as an immigration holding centre. Until all infrastructure upgrades are completed at CBSA's immigration holding centres, detainees classified as high-risk may be held at the immigrant station portion of a CSC facility instead of the immigration holding centres in Toronto, Laval, or Surrey; this would be to ensure the safety of the detainees and staff. Once infrastructure upgrades are completed at the immigration holding centres, higher risk detainees could then be placed at either a CBSA facility or a CSC facility with a designated immigrant station.

Q. Are there any services that CSC will continue?

A. The CBSA and CSC are actively discussing CSC's continued provision of services. Although not approved at this time, it is anticipated that CSC would provide food, facility maintenance (i.e. infrastructure repairs), and laundry services. More information will be shared once available.

Q. Will you describe the provisions for repealing the legislation, including the intent for those provision?

A. The legislation contains what is commonly referred to as a sunset clause. Specifically, all legislative amendments proposed would automatically be repealed (sunset) five years after Royal Assent. The provisions of the legislation can be extended, but only with the approval of the Governor in Council on recommendation of the Minister of Public Safety. If the Governor in Council extends the provisions, the provisions cannot be extended any later than ten years after Royal Assent. The sunset clause recognizes the intended temporary nature of the proposal in response to a pressing operational need.

Division 40 – Measures Related to Public Debt and the Borrowing of Money

Overview

Part IV of the Financial Administration Act (FAA) provides the Minister of Finance's authorities related to public debt and the borrowing of money. Subsection 44(3) of the FAA provides authority for the Minister to enter into any contract or agreement for the purpose of carrying out this role. However, there is a risk that the Minister's authority to enter into public debt related goods and services contracts could be viewed as subject to procurement restrictions.

Enacted in 2017, the Borrowing Authority Act provides the Minister of Finance the authority to borrow money up to a maximum overall amount as set by Parliament.

The maximum borrowing amount was set at 1,831billion in May 2021 and the 2024-25 Debt Management Strategy, released as part of Budget 2024, estimates a debt stock of $1,789.8billion by the end of the fiscal year.

Part 4, Division 40 amends the Borrowing Authority Act to increase the maximum borrowing amount permitted under the Act. It would also amend the Financial Administration Act to clarify the exemption of public debt related contracts from the procurement regulations created under the Financial Administration Act.

The amendments would come into force on Royal Assent.

Key Messages

Part IV amendment: Financial Administration Act

• The proposed amendment to the Financial Administration Act will clarify the exemption of public debt related goods and services contracts from the procurement regulations created under the authority of the Financial Administration Act.
• It is consistent with the Minister's mandate for the management of the public debt under the Financial Administration Act and it unequivocally brings these contracts in line with other contracts of a financial nature.
• This is the general practice of sovereigns and sub-sovereigns with respect to contracts used to fund themselves, i.e., related to the borrowing of money.
• International free trade agreements, including those of Canada, exempt financial services and public debt related contracts and agreements from any procurement restrictions, recognizing the uniqueness of such contracts.
• This clarification will remove legal risk around contracts and agreements necessary for the sound management of the public debt, which is critical to Canada's prosperity.

Part X amendment: Borrowing Authority Act

• Enacted in 2017, the BAA provides the Minister of Finance the authority to borrow money up to a maximum overall amount as set by Parliament.
• The maximum borrowing amount was set at 1,831billion in May 2021. It followed the release of the first BAA report in November 2020.
• The proposed measure will raise the borrowing limit for the next three years, to $2,228billion to support smooth financing operations for the government and Crown corporations.
• If Parliament also approves the amendment in Part 4 of Division 40 to remove double counting of Canada Mortgage Bonds, then the proposed maximum borrowing amount would be reduced to $2,126.

Questions & Answers

Q. Why is the government amending the Borrowing Authority Act?

A. This amendment is part of the prudent management of the Government of Canada's debt management program. The current legislative maximum amount is $1,831billion.

*Paragraph redacted*

The increased borrowing amount is being sought to support smooth financing operations for the government and Crown corporations.

Q. Will this impact Canada's Credit Rating?

A. Higher borrowing requirements this fiscal year are not expected to significantly increase Canada's general government net debt to GDP ratio, which is a key indicator used by most credit rating agencies.

The IMF's October 2023 World Economic Outlook noted that Canada has the lowest general government net debt-to-GDP ratio in the G7 by a significant margin.

Budget 2024 surpasses the government's debt-to-GDP fiscal objective, forecasting a significant decline from 2023-24, and onwards. It also reiterates that the government will keep deficits below 1percent of GDP beginning in 2026-27 and future years (p.23)

Q. Is the Government purchasing $102billion in Canada Mortgage Bonds?

A. The government expects to purchase $97.5billion in CMBs between February 2024 and March 31, 2027.

Given the three year horizon of the statutory authority, the government build in a fivepercent buffer in the event of emergencies like was seen with COVID-19.

Should Parliament approve the double counting amendment the buffer would be commensurately reduced by $4.9billion

Budget 2024 surpasses the government's debt-to-GDP fiscal objective, forecasting a significant decline from 2023-24, and onwards. It also reiterates that the government will keep deficits below 1percent of GDP beginning in 2026-27 and future years (p.23)

*Questions and answers redacted*

Division 41 - Legislation Related to Financial Institutions (Diversity Disclosure)

Overview

The Budget Implementation Act 2024, no 1, introducesamendments to adapt and apply the Canada Business Corporations Act (CBCA) diversity disclosure requirements to federally regulated financial institutions (FRFIs).

Specifically, this measure would introduce amendments to the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act requiring FRFIs to disclose information respecting the diversity of boards and senior management to their owners at the same time as they send a notice of an annual meeting. Regulations will prescribe the details of the disclosure of such information.

The change to modernize the financial institutions statutes to include diversity disclosure requirements for FRFIs in line with the CBCA follows public consultations in 2022 as well as consultation and cooperation with Indigenous partners in 2023.

Key Messages

• Budget 2024announced the Government's plan to amend the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to introduce new requirements for federally regulated financial institutions (FRFIs) to disclose information respecting diversity on boards and in senior management.
• Mandated diversity disclosure allows for more transparent and accurate measurement of the representation of diverse groups within institutions and is correlated with steady increases in diversity in governance and leadership.
• Only some FRFIs (i.e., those with publicly listed securities, including largest banks and insurance companies) disclose gender diversity under provincial securities legislation, however, there are currently no requirements to disclose other elements of diversity like racial diversity, Indigeneity, or disability.
• The proposed amendments would require prescribed FRFIs to disclose information respecting the diversity of boards and senior management at the same time as they send notice of an annual meeting. Regulations will set out the details of the disclosure of such information.

Questions & Answers

Q. What is the Government doing to promote diversity on the board of directors and senior management of federally regulated financial institutions?

A. The Government proposes to introduce new requirements to the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act (collectively, the "financial institutions statutes") for federally regulated financial institutions to disclose information respecting the diversity of their boards and senior management, as defined by regulation. These amendments follow similar changes to the Canada Business Corporations Act (CBCA) made in 2018.

Q. Why require federally regulated financial institutions to provide disclosure on diversity?

A. Changes to the governance regime in financial institutions statutes and regulations are generally based on the CBCA with modifications to reflect the specificity of federally regulated financial institutions.

The disclosure model adopted under the CBCA regulations is a "comply or explain" model based on the provincial securities' regime. Rather than prescribing targets or quotas, it requires that corporations tailor gender requirements to its needs, while explaining diversity outcomes and practices.

Q. What will federally regulated financial institutions have to disclose on diversity?

A. The details will be set out in regulations following consultations with stakeholders. Under the CBCA regulations, distributing corporations are required to disclose information concerning all designated groups under the Employment Equity Act, which include women, persons with disabilities, visible minorities, Inuit, Métis, and First Nations Peoples. Specifically, the regulations require the disclosure of:

• The number and proportion of designated groups on the board and in executive positions;
• The corporations' policies on the representation of designated groups on the board and in executive positions, including any measures for identifying and nominating diverse candidates;
• Whether targets for designated groups on boards and executive positions have been adopted, and what progress has been made in achieving them; and
• Whether term limits or other mechanisms have been adopted to promote board renewal.

If the corporation does not have such policies in place, it must explain why not.

Q. How do these amendments align with the securities regulators' gender disclosure requirements?

A. Some federally regulated financial institutions (i.e., those with publicly listed securities, including largest banks and insurance companies) are required to disclose gender diversity under provincial securities legislation. However, there are currently no requirements to disclose other elements of diversity like racial diversity, Indigeneity, or disability.

Q. Will all FRFIs be required to disclose diversity information?

A. The proposed amendments to the financial institution statutes will apply to classes of federally regulated financial institutions prescribed in regulation. The government will engage stakeholders on the regulations.

Q. How does requiring diversity disclosure promote diversity on the board of directors and among senior management of financial institutions?

A. Mandated diversity disclosure allows for more transparent and accurate measurement of the representation of diverse groups within institutions and is correlated with steady increases in diversity in governance and leadership.

Division 42 - Legislation Related to Financial Institutions (Sunset Provisions)

Overview

The proposed measure would amend the Bank Act, the Insurance Companies Act, and the Trust and Loan Companies Act (the Financial Institutions statutes) to extend their sunset date from June 30, 2025, to June 30, 2026.

Key Messages

• The proposed measure would amend the Bank Act, the Insurance Companies Act, and the Trust and Loan Companies Act (the Financial Institutions statutes) to extend their sunset date from June 30, 2025, to June 30, 2026.
• Extending the deadline to 2026 provides the flexibility to address proposals that are higher priority quickly while allowing sufficient time to consider technical issues at a later stage.

Questions & Answers

Q. Why is the government proposing to extend by one year the sunset dates of the financial institutions statutes set at June 30, 2025?

A. Extending the sunset dates will allow full consideration of the proposals raised by stakeholders in the recent consultations.

Q. What are the next steps for the review?

A. The government will continue advancing the review through 2024, including consulting on specific policy proposals.

Key Messages

• The Canada Disability Benefit Act provides that individuals can appeal decisions made under the Act regarding ineligibility and the amount of the benefit, and other decisions that may be prescribed in regulations.
• The proposed amendments, along with regulations to be made under the Act, would establish the appeals process for the benefit.
• After first seeking a reconsideration of a decision, individuals who are dissatisfied with a decision made by the Minister under the Canada Disability Benefit Act would be able to appeal that decision to the Social Security Tribunal (SST).
• The SST would be the single window for appeals of decisions made under the Canada Disability Benefit Act. Similar to appeals under the Old Age Security Act, if a ground of the appeal is related to income, the SST would refer the appeal on that ground to the Tax Court of Canada. The SST would be responsible for hearing all grounds of appeal other than on income, for referring income-related appeals to the Tax Court of Canada, and for issuing the final decision on appeals.
• The SST has experience adjudicating benefits in the context of marginalized individuals. For example, it has implemented a navigator service to support appellants who are unrepresented. The SST also has an Income Security Appeals Consultative Committee that includes members of the external stakeholder community to exchange information and address areas of mutual concern.
• In addition to providing authority to the Tax Court of Canada to hear income-related references from the Social Security Tribunal in respect of appeals made under the Canada Disability Benefit Act, the proposed amendments would provide that such references proceed using the Tax Court's informal procedure, which aims to minimize and simplify the steps in the appeals process.
• Also included among the proposed amendments is an amendment to the Federal Courts Act. This amendment provides that applications for judicial review of SST decisions relating to extensions of time for making requests for reconsiderations under the Canada Disability Benefit Act go to the Federal Court rather than to the Federal Court of Appeal. This is consistent with reviews of such decisions made in relation to the Canada Pension Plan, the Old Age Security Act and the Employment Insurance Act.

Questions & Answers

Q. What is the purpose of the proposed amendments?

A. The Canada Disability Benefit Act provides that individuals can appeal decisions made under the Act regarding ineligibility and the amount of the benefit, and other decisions that may be prescribed.

The proposed amendments, along with regulations to be made under the Canada Disability Benefit Act, would establish the appeals process for the benefit.

The amendments would integrate appeals of decisions made under the Canada Disability Benefit Act into the existing statutory scheme for the Social Security Tribunal and the Tax Court of Canada.

Detailed provisions regarding the appeals process would be set out in regulations made under the Canada Disability Benefit Act.

Q. What would the proposed amendments do?

A. The Department of Employment and Social Development Act would be amended to provide authority to the Social Security Tribunal to hear appeals of decisions made under the Canada Disability Benefit Act and to require that the Tribunal refer decisions or determinations made by the Minister as to income under the Canada Disability Benefit Act to the Tax Court of Canada for decision. Related to this, the Tax Court of Canada Act would be amended to give the Tax Court of Canada jurisdiction to hear income-related references from the Social Security Tribunal in respect of appeals made under the Canada Disability Benefit Act and to extend the Court's informal procedure to such references.

The proposed amendment to the Federal Courts Act would provide that applications for judicial review of Social Security Tribunal decisions relating to extensions of time for making requests for reconsiderations under the Canada Disability Benefit Act go to the Federal Court rather than to the Federal Court of Appeal, consistent with reviews of such decisions made in relation to the Canada Pension Plan, the Old Age Security Act and the Employment Insurance Act.

Q. Why are you proposing to include the Tax Court of Canada in appeals under the Canada Disability Benefit Act?

A. The Canada Disability Benefit will be an income-tested benefit. An individual's eligibility for the benefit and the amount of the benefit will depend on their income, as determined under regulations to be made under the Canada Disability Benefit Act. Consistent with appeals made to the Social Security Tribunal under the Old Age Security Act on a ground related to income, the Social Security Tribunal would refer income-related issues to the Tax Court of Canada, which has experience and expertise in deciding such issues.

Q. Will persons with disabilities have to know which of the two appeals bodies to go to?

A. No. All appeals of decisions made under the Canada Disability Benefit Act will go to the Social Security Tribunal. If a ground of the appeal relates to income, the Tribunal will refer the appeal on that ground to the Tax Court of Canada for decision. The Court's decision will then be communicated to the Tribunal, which will be responsible for hearing all other grounds of the appeal and for issuing the final decision on the appeal.

Q. Were persons with disabilities consulted on the appeals process?

A. During the parliamentary process for the Canada Disability Benefit Act and pre-regulatory engagement (including an online engagement tool and a roundtable on administrative processes), persons with disabilities and other stakeholders advocated for an administrative tribunal to deal with appeals under the Act. A number of stakeholders specifically referenced the Social Security Tribunal and spoke favourably of its navigator service for unrepresented appellants.

Division 44 - Controlled Drugs and Substances Act

Overview

Canada is in the midst of an unrelenting and tragic toxic illegal drug and overdose crisis that has left no community untouched.

Supervised consumption and drug checking services are important evidence-based elements of Canada's comprehensive public health response to substance use harms and the overdose crisis.

Over the past 20 years, Canadian and international studies have consistently shown that, when properly established, supervised consumption and drug checking services help to save lives and connect people who use drugs to social services and treatment.

Data reported to Health Canada indicates that between January 2017 to October 2023, supervised consumption sites (SCS) in Canada received over 4.4million visits, responded to over 53,000 non-fatal overdoses and made over 424,000 referrals to health and social services.

SCS reduce public drug use, the spread of diseases, and strain on emergency services. They provide a safe space to consume drugs with clean consumption supplies, access to care and without judgement.

SCS legally operate pursuant to a ministerial exemption issued under section 56.1 of the Controlled Drugs and Substances Act (CDSA). Some shorter-term supervised consumption services, often referred to as overdose prevention sites, and standalone drug checking services operate pursuant to an exemption issued under subsection 56(1) of the Act.

As the number of supervised consumption and drug checking services has grown significantly across Canada since 2016, so has the evidence in support of their positive impacts on reducing overdose harms. It is time to move away from exemptions, and to instead start authorizing these services through a formal regulatory scheme.

The proposed amendments would allow for the creation of a regulatory scheme so that supervised consumption and drug checking services can be authorized through a structured system with requirements and procedures for obtaining an authorization laid out in regulation. This is expected to provide more stability and transparency for service providers by establishing clear and predictable regulatory requirements, while maintaining strict controls that are consistent with the public health and public safety objectives of the CDSA.

To allow this to happen, in the 2024 Budget Implementation Act the Government of Canada announced its intention to amend the CDSA to repeal section 56.1 and other provisions related to SCS and to introduce new regulation-making authorities that would allow for the creation of a new regulatory scheme to authorize supervised consumption and drug checking services.

These regulation-making authorities will be used to develop a new authorization structure for supervised consumption and drug checking services. The legislative amendments include transitional provisions to ensure that all existing supervised consumption and drug checking services can continue to operate until their exemptions expire, at which time the operators would apply for an authorization under the new regulatory scheme.

Under the new regulations, it is proposed that services would be placed into classes based on:

1. the length of time the service will be operating, with short-term services subject to fewer requirements than longer-term services, and
2. the activities that are proposed to take place at the site (i.e. supervised consumption or drug checking services or some combination of the two).

Within each class, it is proposed that the regulations would set out:

• the amount and type of information required to be submitted as part of the authorization process;
• the level of monitoring (e.g., data reporting) needed for safety and compliance purposes; and,
• the specific requirements and terms and conditions that would apply to the service.

The new regulations would also set out requirements for losses and theft, record-keeping and reporting, disposal, security and storage, and grounds for refusal, suspension or revocation of an authorization.

The legislative amendments and proposed new regulations would not authorize any activities related to prescribed alternatives, nor would they address the issue of decriminalization of illegal drugs for personal possession.

The sale of illegal drugs for consumption at supervised consumption and drug checking services will continue to remain strictly prohibited.

Supervised consumption services could continue to offer clients legal pharmaceutical drug therapies, such as methadone, to help treat substance use disorders, and allow them to refer clients to treatment services.

Provincial, territorial and Indigenous partners, service operators, people with lived and living experience, law enforcement, and other interested parties would be consulted as part of regulatory development to make sure their views are considered.

Communities and people in Canada would also have the opportunity to provide their opinion on the proposed regulations during the public consultation period.

Key Messages

• The Government of Canada is committed to taking actions to address the unrelenting and tragic toxic illegal drug and overdose crisis that has left no community in the country untouched.
• The evidence is clear. Supervised consumption and drug checking services help to save lives. They are an important evidence-based part of Canada's comprehensive public health response to addressing substance use harms and the overdose crisis.
• Data reported to Health Canada indicates that between January 2017 to October 2023, supervised consumption sites in Canada received over 4.4million visits, responded to over 53,000 non-fatal overdoses and made over 424,000 referrals to health and social services. These sites reduce public drug use, the spread of diseases, and strain on emergency services.
• The creation of a regulatory scheme is expected to give more stability and transparency for service providers by establishing clear and predictable regulatory requirements, while maintaining strict controls that are consistent with the public health and public safety objectives of the Act.
• Provincial, territorial and Indigenous partners, service operators, people with lived and living experience, law enforcement, and other interested parties would be consulted as part of regulatory development to make sure their views are considered. Communities and people in Canada would also have the opportunity to provide their opinions on the proposed regulations during the public consultation period.

Questions & Answers

Q. What is the key objective of the proposed legislative amendments?

A. As the number of supervised consumption and drug checking services has grown across Canada. It is time to move away from authorizing these services using a discretionary exemptions framework, and instead start authorizing these life-saving services through a standardized regulatory scheme.

The objective of these amendments is to replace the existing exemptions framework in the Controlled Drugs and Substances Act (CDSA) with a new regulatory scheme that would give service providers more clarity, stability and predictability, while maintaining strict controls that are consistent with the public health and public safety objectives of the CDSA.

Q. What activities does the Government of Canada conduct to address the overdose crisis?

A. The Government of Canada's response to substance use-related harms, including the overdose crisis, is guided by our federal drug strategy – the Canadian Drugs and Substances Strategy (CDSS). Canada's model takes a holistic approach to the overdose crisis, with actions to support both public health and public safety by focusing on several related priorities, including:

• Supporting and improving access to evidence-based substance use services and supports at the community-level, including treatment, harm reduction and recovery services;
• Expanding access to life-saving measures by supporting naloxone distribution and the implementation of supervised consumption sites and drug checking services;
• Providing tools and supports to prevent, delay and lower the rates of substance use among youth and reduce substance use stigma, including public education campaigns and investing in a new Youth Substance Use Prevention Program to provide funding to communities to build their capacity to support data-driven community-led approaches;
• Fostering partnerships with provinces, territories and stakeholders across Canada to advance collective action;
• Strengthening our capacity to collect and analyze accurate, timely, and reliable data and research to guide our policy development and decision making;
• Strengthening efforts to disrupt the illegal drug supply; and,
• Supporting initiatives to understand and address the complex relationship between the overdose crisis and other intersecting factors, including pain management, mental health and homelessness.

Q. Don't we already have a framework in place to authorize supervised consumption and drug checking services?

A. Since there are currently no regulations for supervised consumption or drug checking services, supervised consumption sites (SCS) legally operate pursuant to a ministerial exemption issued under section 56.1 of the CDSA. Some shorter-term supervised consumption services (also known as urgent public health needs sites or overdose prevention sites) and most drug checking services operate pursuant to an exemption issued under subsection 56(1) of the CDSA.

The proposed legislative amendments would introduce new regulation-making authorities that would allow for the creation of a new regulatory scheme to authorize and regulate supervised consumption and drug checking services in a clear and predictable manner, while maintaining strict controls that are consistent with the public health and public safety objectives of the Controlled Drugs and Substances Act.

Q. How will the new authorization framework for supervised consumption and drug checking services compare to the current exemption framework?

A. If the proposed legislative amendments are adopted, they would provide the regulation-making authorities to allow the government to create a new regulatory scheme to authorize and regulate supervised consumption and drug checking services.

The proposed new regulations would create system with clear and predictable requirements and procedures, which would provide more stability and predictability for service providers, clients, communities and the regulator. At the same time, the new regulations would maintain strict controls that are consistent with the public health and public safety objectives of the CDSA.

Under the new regulations, it is proposed that services would be placed into classes based on:

1. the length of time the service will be operating, with short-term services subject to fewer requirements than longer-term services, and
2. the activities that are proposed to take place at the site (i.e. supervised consumption or drug checking services or some combination of the two).

For example, a short-term standalone drug checking only service would be categorized differently from a long-term supervised consumption service, as the length of time the drug checking service would be operating is very short, and because no consumption of illegal drugs would be taking place at the site.

Like the existing exemption framework, the proposed regulations would accommodate a wide variety of service delivery models (including all models of SCS, overdose prevention sites and drug checking that are currently in operation) and allow service providers to adapt their services to address the overdose crisis as it evolves over time. At the same time, the new regulations would maintain strict controls that are consistent with the public health and public safety objectives of the CDSA

Q. Will all existing SCS, UPHNS and drug checking services be included in the proposed authorization framework?

A. These regulation-making authorities will be used to develop a new authorization structure for supervised consumption and drug checking services. The legislative amendments include transitional provisions to ensure that all existing supervised consumption and drug checking services can continue to operate until their exemptions expire, at which time the operators would apply for an authorization under the new regulatory scheme.

Q. How will the proposed amendments affect the P/Ts?

A. Given their jurisdiction over health care service delivery and their role in funding many of these services, the provinces and territories currently play a large role in oversight of supervised consumption and drug checking services.

Authorization of these services by the federal Minister of Mental Health and Addictions and Associate Minister of Health would not impact provinces and territories' ability to regulate matters that fall under their authority.

Health Canada will consult extensively with the provinces and territories during the development of the authorization framework.

Q. What will happen to the P/T class exemptions?

A. The existing class exemptions are currently set to expire on September 30, 2025. Health Canada will be consulting with provinces and territories on this subject over the coming months, and their views will be taken into consideration before deciding whether to extend the class exemptions.

Q. Will the proposed amendments include decriminalization or safer supply initiatives?

A. The new regulations would not authorize any activities related to prescribed alternatives, nor would they address the issue of the decriminalization of illegal drugs for personal possession.

The sale of illegal drugs for consumption at supervised consumption and drug checking services would remain strictly prohibited.

Supervised consumption services could continue to offer clients legal pharmaceutical drug therapies, such as methadone, to help treat substance use disorders, and allow them to refer clients to treatment services.

Q. Will the legislative amendments provide funding for SCS, UPHNS and/or drug checking?

A. The proposed amendments do not provide any funding for SCS, UPHNS or drug checking services.

Q. Will the proposed new authorization scheme for supervised consumption and drug checking services increase the number of SCS and UPHNS operating in Canada, and if so, by how many/year?

A. It is not possible to estimate how many more supervised consumption and drug checking services we could expect to see authorized under the new regulations. We do know that the legislative amendments made in 2017, which significantly streamlined application requirements for SCS, were critical in terms of facilitating the significant expansion of SCS across Canada (at the end of 2015, there was one SCS in Canada – now there are approximately 40). It is expected that the further streamlining of application requirements could lower barriers for smaller organizations, including in rural and remote communities, who may wish to operate a supervised consumption or drug checking service.

However, one of the main barriers to establishing or expanding existing supervised consumption and drug checking services is sustainable funding. The proposed amendments do not provide funding for these services.

Q. When will these amendments be implemented?

A. If the legislative amendments are adopted, provincial and territorial partners, service operators, people with lived and living experience, law enforcement, and other interested parties would be consulted as part of regulatory development to make sure their views are considered. Communities and individuals would also have the opportunity to provide their opinion on the proposed regulations during the public consultation period. These steps would take place before the new regulations are implemented.

The legislative amendments introducing new regulation-making authorities to the Controlled Drugs and Substances Act would come into force upon royal assent. The legislative amendments repealing existing provisions related to SCS would only come into force once the new regulations have been consulted upon and finalized. The regulations and repeals would come into force on the same date.

Transitional provisions are included as part of the legislative amendments to ensure that all existing supervised consumption and drug checking services can continue to operate until their exemptions expire, at which time the operators would apply for an authorization under the new regulatory scheme.

Q. What is the consultation and engagement plan?

A. In 2020-21, Health Canada held a consultation on proposed new regulations for supervised consumption sites and services, which concluded that legislative changes were needed prior to regulatory development.

Provincial and territorial partners, service operators, people with lived and living experience, law enforcement, and other interested parties would again be consulted as part of regulatory development to make sure their views are considered. Communities and individuals would also have the opportunity to provide their opinion on the proposed regulations during the public consultation period.

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