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Short-term rental tax changes left out of Freeland's bill to implement fiscal update measures, here's why

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Deputy Prime Minister and Finance Minister Chrystia Freeland will be tabling an omnibus bill to pass measures she promised in last week's fall economic statement, framing the incoming legislation to advance "the government's economic plan."

Missing from the package are the government's promised plans to crack down on short-term rentals, while Prime Minister Justin Trudeau's promise to double the carbon tax rural rebate top-up, is included.

On Tuesday, the senior Liberal cabinet minister offered an early preview of what the bill will contain, when she tabled notice of what's known as a "ways and means motion," in the House of Commons.

This motion, spanning 527 pages, outlines all of the tax and legislative measures that the government plans to include in the bill – titled the "Fall Economic Statement Implementation Act, 2023—coming on Wednesday if MPs allow. 

Among the economic policies and promises this bill will seek to implement are:

  • Expanding Bill C-56's plans to modernize Canada's Competition Act and the Competition Tribunal Act in light of attention on grocery sector competition and price increases;
  • Create the new Department of Housing, Infrastructure and Communities, from what currently is Infrastructure Canada;
  • Extending Bill C-56 the "affordable housing and groceries" bill's plans to offer a 100 per cent rental rebate off of the GST paid on new purpose-built rental housing, to co-operative housing; 
  • Introducing a 15-week shareable Employment Insurance adoption benefit as well as a new paid pregnancy loss leave for federally-regulated workers;
  • Implementing a suite of carbon capture and clean tech investment tax credits;
  • Removing the GST/HST on psychotherapy and counselling therapy services; and
  • Developing a "tobacco cost recovery framework."

The bill will also advance Trudeau's pre-fall fiscal update promise to double the rural top-up on the pollution price rebate, from 10 per cent to 20 per cent. Targeted towards Canadians in small and rural communities who face higher energy costs, this Climate Action Incentive Payment boost is to come into effect as of April 2024.

Senior government officials, speaking to Canadians on a background, not-for-attribution basis confirmed that the bill will also look to move on measures first promised in the 2023 federal budget presented in the spring, but until now hadn't been acted on.

An example of this is moving forward on implementing the "Digital Services Tax" aimed at ensuring digital companies "pay their fair share of taxes," in Canada, in absence of an international agreement.

While this measure will still require a cabinet order to see it come into effect, Freeland's intention has been to advance a domestic plan as of Jan. 1, 2024, with the window closing for a multinational agreement to come to fruition by the end of 2023.

"This ways and means motion is the next step in very clear, very direct Canadian action… We've been very clear about our intentions with Canadians. We've been very clear about our intentions with our partners around the world. And this legislation is the next step," Freeland said during a press conference unveiling the incoming legislative package.

SHORT-TERM RENTAL CHANGES LEFT OUT

One major pledge from Freeland's economic update missing from this package is legislation to implement her promised crack-down on income tax deductions related to short-term rentals such as AirBnB and Vrbo properties operating in regions with restrictions, in order to expand the long-term rental supply nationwide.

Officials confirmed Tuesday that while yes this measure will require tax law changes, those proposed tweaks regarding short-term stays are not included in this bill. Asked why, officials suggested it is typical for it to take some time to consult on any tax measures that may not be straightforward, before a bill is presented.

The officials suggested that given the plan is for these short-term rental measures to apply to the 2024 tax year, there's still time for legislation to be advanced and in place before those impacted would be filing next year's tax returns.

Despite the absence of this measure, Housing Minister Sean Fraser still used Tuesday's press conference to tout the promise and the "remarkable degree of success" other jurisdictions have had "very quickly" after advancing similar short-term rental rule changes.

"There are things we can do in the short-term to unlock supply that exists today," Fraser said. "New York is one of the leading examples globally where they had 22,000 units on the market and a little more than a month later, after they put new measures in place, 19,000 of those 22,000 actually found their way on to the market for families to rent."

CALLS FOR MPS TO PASS BILL SOON 

While a bill of this size and wide-spanning scope can by definition be considered omnibus, the Liberals have consistently rejected the characterization of their budget bills as being omnibus, citing their central economic theme and focus.

This development comes one week after Freeland presented Canadians with an updated fiscal picture that included a $40 billion deficit and new pledges for fiscal restraint, while vowing to advance measures to "make life more affordable… and build an economy that works for everyone." 

With less than three sitting weeks left before MPs adjourn for a month-long holiday hiatus, the pressure will be on the Liberals to pass this bill quickly so all that they've promised can start being acted on.

Speaking to the bill, Innovation, Science and Industry Minister Francois-Philippe Champagne said the Liberals will be pressing "to make sure these changes are adopted quickly."

The Conservatives, though, have already indicated they will be voting against Freeland's latest economic package, with Conservative leader Pierre Poilievre stating the day the fiscal update was tabled it could be summarized as "prices up, rent up, debt up, taxes up, and time is up. Common-sense Conservatives will vote non-confidence on this disgusting scheme." 

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