Bill C-56, the Affordable Housing and Groceries Act, covers several topics and the Canadian Bar Association offered suggestions and recommendations in a comprehensive submission from the Commodity Tax, Customs and Trade Section, the Competition and Foreign Investment Review Section and the Construction and Infrastructure Law Section. The most salient ones are summarized below.
Starting with comments from the Commodity Tax, Customs and Trade Section as well as the Construction and Infrastructure Law Section related to Part 1 of the Bill concerning the temporary enhancement to the GST New Residential Property Rebate for new purpose-built rental housing
As the Sections explain, the “Enhanced Rebate seeks to encourage construction of new rental housing by providing a 100% rebate of the GST self-assessed by builders. Under the Excise Tax Act (ETA), builders who construct or substantially renovate rental housing are required to self-assess GST/HST on the fair market value of rental property.” This compares to the existing maximum of 36% rebate of the self-assessed GST for eligible rental units. The rebate amount is being phased out for units valued between $350,000 and $450,000 and eliminated for units valued at more than $450,000.
The Sections generally support the Enhanced Rebate but believe it could be improved to increase the availability of rental housing.
One concern is that the implementation is tied exclusively to when construction begins – which must be after September 13, 2023, and before 2030. An approach the CBA letter calls “unnecessarily blunt and arbitrary.”
“Rental housing builders have indicated that the Enhanced Rebate has the potential to encourage the creation of additional housing units in other projects if it were available to projects already under construction,” the Sections explain. They therefore recommend a more equitable approach for construction already started before September 14, 2023. It could be prorated based on the degree of construction as of that date. The full rebate could also be available to projects under construction before September 14, 2023, if the builder “satisfies a condition to build additional rental housing.”
Additionally, the Sections suggest the effective date for the Enhanced Rebate should be the date the self-assessment is required for GST/HST purposes rather than when construction is considered to have begun. This will remove uncertainty as the term “construction” is not defined anywhere in the Excise Tax Act or in Bill C-56. As the CBA letter says, “several points along the development process could potentially be considered the ‘beginning’ of construction.”
Similarly, there can be uncertainty about when construction is to be “substantially complete” to qualify for the Enhanced Rebate. Given that delays are common in the construction industry, often for reasons outside a builder’s control, the CBA letter recommends removing the proposed 2036 deadline for substantial completion.
Regarding the need for smaller housing projects, commonly known as the “missing middle” between single family homes and large-scale rental buildings, the Sections recommend allowing smaller projects to qualify for the Enhanced Rebate instead of the current minimum of four private apartments or 10 private rooms or suites, which may not be feasible everywhere, and align instead with “municipal policies to address housing shortage through a diversity of housing options, and not favour ‘tall and sprawl’ developments.” The Bill should also allow substantially renovated buildings to qualify for the Enhanced Rebate.
Competition Act amendments
The Competition Law and Foreign Investment Review Section of the CBA says amendments to the Competition Act would not produce expected benefits of bringing about a more competitive, dynamic and innovative economy. In fact, they would have the opposite effect.
The letter supports the November 2023 motion in the House of Commons that proposes amending the Bill to grant the “Finance Committee the power to expand the Bill to ‘allow the Competition Bureau to conduct market study inquiries if it is either directed by the Minister responsible for the Act or recommended by the Commissioner of Competition and require consultation between the two officials prior to the study being commenced.’”
In addition, given the costs and time involved in these inquiries, the Section supports the requirement that the Minister consult with the Commissioner, and “this consultation should include consideration of the expected benefits of conducting an inquiry.” The language of the Bill should also make it clear those inquiries are conditional on the availability of adequate resources to avoid diverting Bureau resources away from law enforcement responsibilities.
Given that market inquiries are not enforcement inquiries or potential precursors to enforcement proceedings by the Commissioner, the Section recommends that “use of the compulsory powers in section 11 be adjusted to reflect the different nature and purpose of a market inquiry.” In particular, the submission reads, the ex parte application process is not appropriate given that the recipients are not under investigation for potentially contravening the Competition Act.
The CBA submission expresses worry that eliminating the efficiencies defence by repealing section 96 of the Competition Act could lead to unintended outcomes such as mergers being prevented that would have resulted in clear benefits to consumers. It recommends incorporating efficiencies as a factor to be considered when determining if a merger is liable to prevent or lessen competition.
As well, the Section is concerned with the speed at which the Bill revised the new legal test for abuse of dominance. “To ensure that Canada’s competition legislation is not viewed around the world as simply an affront on business and our laws remain consistent with our major trading partners,” it writes, “we believe it is important that the legal test for abuse of a dominant position remain broad enough to address a full range of anticompetitive conduct while ensuring that businesses can distinguish between robust competitive behaviour and anticompetitive behaviour when they make business decisions.”