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Departmental Performance Report
for the period ending March 31, 2000: 4
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Section IV: Consolidated Reporting
Transfer Payments
- The Economic, Social and Financial Policies Program makes the following Transfer Payments.
- The Federal-Provincial Transfers Program makes Other Transfer Payments (payments based on legislation or an arrangement which includes a formula) to the provinces and territories under the Constitution Acts, the Federal-Provincial Fiscal Arrangements Act, and the Federal-Provincial Fiscal Revision Act.
Grants, which are unconditional transfer payments, are made to meet Canada's commitments under multilateral debt reduction agreements. They reflect Canada's Paris Club obligations to reduce a country's eligible debt payments coming due over a pre-determined period by an agreed percentage.
Contributions, which are conditional transfer payments, are made to meet Canada's commitments under multilateral debt service reduction agreements. They reflect Canada's Paris Club agreement to accept reductions in a country's planned interest payments on its debts with Canada.
Other Transfer Payments, payments based on legislation or an arrangement that includes a formula or schedule of payments, reflect the encashment of demand notes in accordance with the Bretton Woods and Related Agreements Act.
Sustainable Development Strategy
The department submitted its first Sustainable Development Strategy to Parliament in December 1997. This three-year strategy committed the department to a number of activities related to the following four key issues of sustainable development identified by the department at that time:
- integrating the environment and the economy;
- building the future;
- participating in the global economy; and
- greening internal operations.
Under the Auditor General Act, the Department of Finance Canada, like all departments, is required to update its first Sustainable Development Strategy by December 2000. This Departmental Performance Report provides a summary of the department's implementation of its 1997 strategy. It also highlights areas of progress and the challenges that are relevant to the setting of new sustainable development objectives and commitments for the period 2000–2003.
To address each of the key issues given above, the 1997 strategy established broad objectives that, in turn, were broken down into specific action items or commitments. The identification of these commitments was guided mainly by the mandate of the department, which is to manage the economy and the government's financial resources. It is also guided by the department's definition of sustainable development, adopted from the Auditor General Act: "Development that meets the needs of today without compromising the ability of future generations to meet their own needs."
Most of the commitments in the 1997 strategy concerned the first key issue, "Integrating the Economy and the Environment." These entailed analytical work, undertaken either within the department or in co-operation with other departments and stakeholders. For instance, the department has carried out studies on the influence of the tax system on the choices between renewable and non-renewable energy, and between different modes of transportation.
The department has also chaired the multi-stakeholder Tradeable Permits Working Group, which released a report in June 2000 examining the potential use of a system of tradeable emissions permits for reducing greenhouse gas emissions in Canada. The department has also compiled a catalogue of available information on the structure and level of existing federal and provincial taxes on energy consumption and taxes on transportation in Canada. The catalogue will be circulated to provinces for review, and is expected to be released by the end of 2000. In addition, where changes to the existing tax system were identified (for example, to promote energy efficiency), tax measures were included in federal budgets.
Regarding the second key issue, "Building the Future," the department has focused on activities related to maintaining a healthy fiscal climate, providing funding for health and social programs and restoring confidence in the retirement income system. When the department's first sustainable development strategy was developed in 1997, the elimination of the federal deficit was targeted for fiscal year 1998–99. One of the primary sustainable development goals for the department at that time was to balance the budget and set out a course for reducing the debt-to-GDP ratio. These objectives remain crucial to ensuring intergeneration equity (that is, ensuring that younger Canadians are not left with an unduly large debt burden) and economic sustainability.
Since 1997–98 the federal government has balanced the budget and followed a path of debt and tax reduction, activities which reduce the share of government revenues that need to be devoted to interest payments on the debt and in turn provide greater fiscal flexibility to deal with the priorities of Canadians in the future. In the 1997 Sustainable Development Strategy, the department indicated its interest in learning about others' views on the government's sustainable development goals. Increased attention has been drawn in particular to the needs of Canadians with respect to environmental protection and quality, leading to the inclusion of related initiatives in federal budgets. These include the establishment of a Climate Change Action Fund; funding to support federal environmental legislation; funding for restoration of degraded areas in the Great Lakes; an initiative to develop environmental and sustainable development indicators; a Green Municipal Investment Fund; and a Sustainable Development Technology Fund.
Concerning the third key issue, "Participating in a Global Economy," the department has focussed on understanding and pressing sustainable development issues that arise in international venues. For example, the department has worked with the Department of Foreign Affairs and International Trade on an environmental review of World Trade Organization negotiations and has supported environment-related provisions in recent free trade agreements. In particular, the department has gained a better understanding of links between trade and the environment, and their continuing importance.
In the international sphere, the department has also actively supported the development of multilateral environmental assessment guidelines for export credit agencies at the OECD to achieve the best balance between protecting the environment and protecting the competitive interests of Canadian exporters. Canada also continues to press sustainable development issues in international financial institutions. For instance, it has been a vocal advocate of the need for the World Bank to integrate better environmental considerations into its decision making.
Finally, in terms of the key issue, "Greening Internal Operations," the department was able to undertake a number of activities related to procurement, diversion and reduction of wastes, and improved energy use. The department has also made substantial progress in identifying further areas where performance and performance measurement can be improved in its internal operations.
Notwithstanding these accomplishments, the department will seek to improve upon the 1997 strategy as it prepares its second sustainable development strategy, to be tabled in Parliament in December 2000. This will include responses to observations made by the Commissioner of the Environment and Sustainable Development in a 1998 audit of all departments' strategies. The Commissioner commented upon the extent of stakeholder involvement and feedback during the preparation of strategies; the relationship between departments' commitments and targets, and the status quo; and the ability of departments to measure and report on progress. New expectations of the Commissioner, announced in 1999, will also help guide the development of the department's 2000 strategy and the implementation of its commitments.
Legislative and Regulatory Initiatives
For an explanation of the purposes of the legislative and regulatory initiatives reported in the table below, refer to the 1999–2000 Report on Plans and Priorities (RPP). The page numbers provided in the table here refer to the RPP. Performance is indicated by successful passage of the legislation or regulation, and through feedback and consultations with interested private and public sector parties.
| Legislative or Regulatory Initiative | Expected Results | Results Achieved |
|---|---|---|
| Special Import Measures Act, Canadian International Trade Tribunal Act and related rules and regulations (p. 40). | Will increase the transparency and systemic efficiency of the Canadian trade remedies system, while ensuring that it effectively balances the needs of Canadian industry with Canada's international rights and obligations. | Bill C-35 received royal assent on March 25, 1999, and the corresponding changes to the related rules and regulations were completed during the reporting period, coming into force on April 15, 2000. The changes rationalize the functions of the administrative agencies, clarify public interest provisions and enhance the rules governing the treatment of confidential information. These changes improve the efficiency, fairness and transparency of the Canadian anti-dumping and countervailing duties system, while maintaining a system that is an effective remedy against the injurious effects of dumped and subsidized imports. |
| Customs Tariff (p. 40). | Through the use of orders and other regulations as required, will respond to the competitive needs of Canadian industry and implement Canada's rights and obligations under international agreements and arrangements. | Consistent with tariff policy, the department reviewed requests for duty relief (including duties assessed under the Special Import Measures Act) and provided advice to ministers. During the reporting period, 19 Orders in Council were implemented by the government to help improve the competitiveness of Canadian business. |
| Canada Pension Plan Investment Board Act Regulations (p. 40). | Will subject the newly created Canada Pension Plan Investment Board to broadly the same investment regulations as other public and private pension funds that are subject to the Pension Benefits Standards Act. | The regulations came into effect in April 1999. They ensure that the Board adheres to investment policies, standards and procedures that a person of ordinary prudence would exercise in dealing with the property of others. |
| Will specify additional information and policies that the Board must include in its annual report. | ||
| Will provide for limited provincial access to the Board's funds at market rates and ensure that the Board's domestic equity investments are selected passively to mirror broad market indexes. | ||
| Federal-Provincial Fiscal Arrangements Act and regulations pursuant to the Act (p. 40). | Will improve the measurement of fiscal disparities in the
Equalization program for 1999–2000 through 2003–2004. Will increase Canada Health and Social Transfer (CHST) support to provinces and territories. |
Regulations governing the Equalization program passed in
March 2000. The 1999 budget legislation for $11.5 billion passed in June 1999. |
| Income Tax Regulations – 1994 budget – To amend the Regulations relating to securities held by financial institutions (p. 40). | Will provide a better measure of a financial institution's income from its securities for the year. | Draft amendments have been issued and, as a result of consultations, are to be revised. |
| Income Tax Regulations – 1995 budget (p. 40). | Changes to the Income Tax Regulations are needed regarding scientific research and development (SR&ED), the fiscal periods of certain businesses and the Canadian film and video production (CFVP) tax credit. | Amendments regarding the CFVP tax credit are in progress. SR&ED amendments were drafted and passage is expected in the next fiscal period. The change of fiscal period for certain businesses requires an additional legislative amendment. |
| Income Tax Regulations – Branch Tax Investment Allowance (p. 41). | Will make the calculation of the investment allowance for non-resident corporations that carry on business in Canada in partnership consistent with the calculation of that amount for non-resident corporations that carry on business directly and not in partnership. | This work is in progress. |
| Income Tax Regulations – Reporting Requirements – Mutual Fund Reorganizations (p. 41). | Will reduce the administrative burden of a mutual fund reorganization. | This work is in progress. |
| Income Tax Regulations – Changes in Residence (p. 41). | Will make amendments to the Income Tax Regulations required as a result of amendments to the Income Tax Act. | This awaits enabling legislation currently in the June 5, 2000, Notice of Ways and Means Motion. Draft regulations were issued in December 1998 and a revised draft was released in December 1999. |
| Income Tax Regulations – 1996 budget – Amendments relating to the resource allowance, flow-through shares, and energy (p. 42). | Will make the necessary changes to the Income Tax Regulations to implement the income tax measures in the 1996 budget. | Amendments are drafted. Passage expected in the next fiscal period. |
| Income Tax Regulations – Insurance Reserves (p. 42). | Will provide a better measure of an insurance
company's income by replacing the current reserve rules for insurance policies issued
after 1995 with reserve rules similar to those adopted for regulatory and accounting
purposes. Will reduce the current system's reliance on capital taxes to raise revenue from insurers. |
Amendments passed in June 1999. |
| Income Tax Act – Income Tax Regulations – Segregated Fund Policies and the Foreign Property Limit (p. 42). | Will make the tax treatment of segregated fund trusts more consistent with the tax treatment of mutual fund trusts. | This awaits enabling legislation. |
| Income Tax Act – Income Tax Regulations – Escalating Interest Debt Obligations (p. 42). | Will eliminate the administrative and marketing difficulties that issuers of such obligations have had because they were forced to report interest on a yield-to-maturity accrual basis. | |
| Income Tax Regulations – Prescribed Federal Crown Corporations (p. 43). | Will maintain the comparable treatment of Crown corporations and their taxable competitors. | |
| Income Tax Regulations – Multinational Insurance Companies (p. 43). | Will provide a better approximation of an insurer's
income from its Canadian insurance businesses. Will reduce the current system's reliance on capital taxes to raise revenue from insurers. |
Draft amendments were released in 1996. The passing of revised amendments is expected in the next fiscal period. |
| Income Tax Act – Income Tax Regulations – Impaired Loans (p. 43). | Will harmonize the tax treatment of impaired loans with
the accounting treatment. Will reduce the compliance burden in respect of impaired loans and lead to more equitable treatment of taxpayers for income tax purposes. |
|
| Income Tax Act – Income Tax Regulations – Bill C-28 – Amendments consequent to passage of the Bill (p. 43). | Will make the necessary changes to the Income Tax Regulations to implement the amendments contained in Bill C-28. | Regulations to counter the abusive use of tax shelters
were drafted. Passage is expected in the next fiscal period. Regulation amendments are in progress to designate trusts and corporations for purposes of the foreign property rule. |
| Income Tax Act – Income Tax Regulations – 1998 budget (p. 43). | The relevant changes to the Income Tax Act were tabled as a detailed Notice of Ways and Means Motion on December 10, 1998. After those changes are enacted, consequential changes should be made to the Income Tax Regulations. | Bill C-72 (the 1998 budget bill) received Royal
Assent on June 17, 1999. Regulation amendments are in process relating to an election of December 15 year-end for mutual fund trusts; LSVCCs and foreign property; and qualified investments for Registered Educational Savings Plans. |
| Income Tax Act – Income Tax Regulations – Other (p. 44). | Technical amendments to the Income Tax Act were released
in November 1999. Revised amendments are ready for inclusion in an upcoming bill. The Regulations have been amended to designate certain supplemental plans as retirement compensation arrangements. Regulation amendments are in progress relating to LSVCCs and other venture capital corporations; foreign property; registration rules for registered pension plans; flow-through shares; and qualified investments for RRSPs. |
|
| Income Tax Regulations – Year 2000 Expenditures (p. 44). | Will provide a government incentive to encourage Canadian businesses to ensure that their computing systems are Year 2000 compliant. | Amendments have been drafted, and passage is expected in the next fiscal period. |
| Income Tax Act – Demutualization (p. 44). | Will clarify the timing of the recognition of demutualization benefits and the character of those benefits for income tax purposes. | Amendments were enacted by Bill C-25, which received Royal Assent on June 29, 2000. |
| Excise Tax Act and regulations under Part IX of the Act (GST/HST) – Amendments are required to implement a number of technical GST/HST changes proposed in the Notices of Ways and Means Motions to amend the Excise Tax Act of March 21, 1997, November 26, 1997, August 7, 1998, October 8, 1998, and December 10, 1998 (p. 44). | Will improve the operation of the tax in affected areas, will address industry concerns and provide greater certainty to suppliers and purchasers as to the status of their transactions, will remove certain anomalies in the existing tax structure and will secure revenues and ensure that the legislation achieves the intended policy. | Measures were incorporated in the Sales Tax And Excise Tax Amendments Act, 1999 (Bill C-24) passed by the House of Commons in June 2000 and expected to receive Royal Assent in the fall of 2000, pending approval by the Senate. |
| Excise Tax Act – Administrative/Enforcement Measures – Update and harmonize the GST/HST with parallel income tax administrative and enforcement provisions (p. 45). | Will ensure the efficiency and effectiveness of the administrative and enforcement mechanisms under the Act and ensure consistency with similar income tax provisions where appropriate. | Measures were incorporated in the Sales Tax and Excise Tax Amendments Act, 1999 (Bill C-24), passed by the House of Commons in June 2000 and expected to receive Royal Assent in the fall of 2000, pending approval by the Senate. |
| Excise Tax Act – 1998 budget – Amendments are required to implement GST/HST measures announced by the Minister of Finance in the February 24, 1998 budget (p. 45). | Will make the necessary changes to the Excise Tax Act to implement the sales tax measures proposed in the 1998 budget. | Sales tax initiatives announced in the 1998 budget are included in the Sales Tax and Excise Tax Amendments Act (Bill C-24) passed by the House of Commons in June 2000 and expected to receive Royal Assent in the fall of 2000, pending approval by the Senate. |
| Excise Tax Act and Regulations under the Act – Other amendments to the Excise Tax Act and regulations made under the Act may be required from time to time (p. 45). | Will make the necessary changes to the Excise Tax Act to implement the proposal, announced on November 5, 1999, to increase excise taxes on certain tobacco products. | The Sales Tax and Excise Tax Amendments Act
(Bill C-24) incorporates the proposal, announced on November 5, 1999, to
increase the excise taxes on certain tobacco products and to make permanent the existing
surtax on tobacco manufacturers' profits. The Act also includes the measure to lower the tobacco export tax exemption, as proposed in the February 16, 1999 budget. |
| Excise Act and related rules and regulations – New legislative framework for the federal taxation of alcohol and tobacco products (p. 45). | Will replace the current archaic legislation and complex administration with a modern and flexible tax structure that better recognizes the needs of government and industry. | Draft legislation has been released and input from consultations is being compiled into final legislation for tabling in Parliament. |
| Insurance Companies Act – Bill C-59 – Mutual Company (Life Insurance) Conversion Regulations and Converted Company Ownership Regulations (p. 45). |
Will give all federally regulated mutual life insurance companies the flexibility to pursue a stock company structure and thereby gain access to more sources of capital. | Canada's four largest mutual life insurance companies have opted to convert to stock companies. |
| Bank Act – Amendments are required to enable foreign banks to conduct activities in Canada directly through a full-service or lending branch operation (p. 46). | Will allow foreign banks to branch directly into Canada,
in addition to subsidiaries. Will encourage a healthy foreign bank presence in Canada and promote competition in our financial services sector. Will reduce the regulatory burden for foreign banks that do not wish to take deposits in Canada. |
Sixteen foreign banks have applied to open branches in Canada, and two have been licensed. |
| Proceeds of Crime (Money-Laundering) Act – New legislation and regulations to enhance Canada's anti-money laundering regime (p. 46). | Will help deter and detect money-laundering in Canada and facilitate enhanced international co-operation in combating money-laundering worldwide. | Bill C-22 received Royal Assent
June 29, 2000. Public consultation paper on proposed regulations released in December 1999. |
| Withdrawal of the $1000 note. | This will remove an important money-laundering instrument from criminal use. | The necessary regulatory amendments were initiated in 1999 for the withdrawal of the $1000 note and came into effect in May 2000. |
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