Bill C-13 (Historical)

Keeping Canada's Economy and Jobs Growing Act

An Act to implement certain provisions of the 2011 budget as updated on June 6, 2011 and other measures

Part 1 of this enactment implements income tax measures and related measures proposed in the 2011 budget. Most notably, it
(a) introduces the family caregiver tax credit for caregivers of infirm dependent relatives;
(b) introduces the children’s arts tax credit of up to $500 per child of eligible fees associated with children’s artistic, cultural, recreational and developmental activities;
(c) introduces a volunteer firefighters tax credit to allow eligible volunteer firefighters to claim a 15% non-refundable tax credit based on an amount of $3,000;
(d) eliminates the rule that limits the number of claimants for the child tax credit to one per domestic establishment;
(e) removes the $10,000 limit on eligible expenses that can be claimed under the medical expense tax credit in respect of a dependent relative;
(f) increases the advance payment threshold for the Canada child tax benefit to $20 per month and for the GST/HST credit to $50 per quarter;
(g) aligns the notification requirements related to marital status changes for an individual who receives the Canada child tax benefit with the notification requirements for the GST/HST credit;
(h) reduces the minimum course-duration requirements for the tuition, education and textbook tax credits, and for educational assistance payments from registered education savings plans, that apply to students enrolled at foreign universities;
(i) allows the tuition tax credit to be claimed for eligible occupational, trade and professional examination fees;
(j) allows the reallocation of assets in registered education savings plans for siblings without incurring tax penalties;
(k) extends to the end of 2013 the temporary accelerated capital cost allowance treatment for investment in machinery and equipment in the manufacturing and processing sector;
(l) expands eligibility for the accelerated capital cost allowance for clean energy generation and conservation equipment;
(m) extends eligibility for the mineral exploration tax credit by one year to flow-through share agreements entered into before March 31, 2012;
(n) expands the eligibility rules for qualifying environmental trusts;
(o) amends the deduction rates for intangible capital costs in the oil sands sector;
(p) aligns the tax treatment to investments made under the Agri-Québec program with that of investments under AgriInvest;
(q) introduces rules to strengthen the tax regime for charitable donations;
(r) introduces anti-avoidance rules for registered retirement savings plans and registered retirement income funds;
(s) introduces rules to limit tax deferral opportunities for individual pension plans;
(t) introduces rules to limit tax deferral opportunities for corporations with significant interests in partnerships;
(u) extends the tax on split income to capital gains realized by a minor child; and
(v) extends the dividend stop-loss rules to dividends deemed to be received on the redemption of shares held by certain corporations.
Part 1 also implements other selected income tax measures and related measures. Most of these measures were referred to in the 2011 budget as previously announced measures. Most notably, it
(a) accommodates an increase in the annual contribution limit to the Saskatchewan Pension Plan and aligns its tax treatment with that of other tax-assisted retirement vehicles;
(b) clarifies that the “financially dependent” test applies for the purposes of provisions that permit rollovers of the assets of a deceased taxpayer’s registered retirement savings plan or registered retirement income fund to an infirm child or grandchild’s registered disability savings plan;
(c) ensures that the alternative minimum tax does not apply in respect of securities that are subject to the election under section 180.01 of the Income Tax Act;
(d) clarifies the rules applicable to the scholarship exemption for post-secondary scholarships, fellowships and bursaries; and
(e) amends the pension-to-registered retirement savings plan transfer limits in situations where the accrued pension amount was reduced due to the insolvency of the employer and underfunding of the employer’s registered pension plan.
Part 2 amends the Softwood Lumber Products Export Charge Act, 2006 to implement the softwood lumber ruling rendered by the London Court of International Arbitration on January 21, 2011.
Part 3 amends the Customs Tariff in order to simplify it and reduce the customs processing burden for Canadians by consolidating similar tariff items that have the same tariff rates and removing end-use provisions where appropriate. The amendments also simplify the structure of some provisions and remove obsolete provisions.
Part 4 amends the Customs Tariff to introduce new tariff items to facilitate the processing of low value non-commercial imports arriving by post or by courier.
Part 5 amends the Canada Education Savings Act to make the additional amount of a Canada Education Savings grant that is available under subsection 5(4) of that Act available to more than one of the beneficiary’s parents, if they share custody of the beneficiary, they are eligible individuals as defined in section 122.6 of the Income Tax Act and the beneficiary is a qualified dependant of each of them.
Part 6 amends the Children’s Special Allowances Act and a regulation made under that Act respecting payments relating to children under care.
Part 7 amends the Canada Student Financial Assistance Act to provide that the maximum aggregate amount of outstanding student loans is to be determined by regulation, to remove the power of the Minister of Human Resources and Skills Development to deny certificates of eligibility, and to change the limitation period for the Minister to take administrative measures. It also authorizes the Minister to forgive portions of family physicians’, nurses’ and nurse practitioners’ student loans if they begin to work in under-served rural or remote communities.
Part 7 also amends the Canada Student Loans Act to authorize the Minister to forgive portions of family physicians’, nurses’ and nurse practitioners’ guaranteed student loans if they begin to work in under-served rural or remote communities.
Part 8 amends Part IV of the Employment Insurance Act to provide a temporary measure to refund a portion of employer premiums for small business. An employer whose premiums were $10,000 or less in 2010 will be refunded the increase in 2011 premiums over those paid in 2010, to a maximum of $1,000.
Part 9 provides for payments to be made to provinces, territories, municipalities, First Nations and other entities for municipal infrastructure improvements.
Part 10 amends the Canadian Securities Regulation Regime Transition Office Act so that funding for the Canadian Securities Regulation Regime Transition Office may be fixed through an appropriation Act.
Part 11 amends the Wage Earner Protection Program Act to extend in certain circumstances the period during which wages earned by individuals but not paid to them by their employers who are bankrupt or subject to receivership may be the subject of a payment under that Act.
Part 12 amends the Canadian Human Rights Act to repeal certain provisions that provide for mandatory retirement. It also amends the Canada Labour Code to repeal a provision that denies employees the right to severance pay for involuntary termination if they are entitled to a pension. Finally, it amends the Conflict of Interest Act.
Part 13 amends the Judges Act to permit the appointment of two additional judges to the Nunavut Court of Justice.
Part 14 provides for the retroactive coming into force of section 9 of the Nordion and Theratronics Divestiture Authorization Act in order to ensure the validity of pension regulations made under that section.
Part 15 amends the Canada Pension Plan to include amounts received by an employee under an employer-funded disability plan in contributory salary and wages.
Part 16 amends the Jobs and Economic Growth Act to replace the reference to the Treasury Board Secretariat with a reference to the Chief Human Resources Officer in subsections 10(4) and 38.1(1) of the Public Servants Disclosure Protection Act.
Part 17 amends the Department of Veterans Affairs Act to include a definition of dependant and to provide express regulation-making authority for the provision of certain benefits in non-institutional locations.
Part 18 amends the Canada Elections Act to phase out quarterly allowances to registered parties.
Part 19 amends the Special Retirement Arrangements Act to permit the reservation of pension contributions from any benefit that is or becomes payable to a person. It also deems certain provisions of An Act to amend certain Acts in relation to pensions and to enact the Special Retirement Arrangements Act and the Pension Benefits Division Act to have come into force on December 14 or 15, 1994, as the case may be.
Part 20 amends the Motor Vehicle Safety Act to allow residents of Canada to temporarily import a rental vehicle from the United States for up to 30 days, or for any other prescribed period, for non-commercial use. It also authorizes the Governor in Council to make regulations respecting imported rental vehicles, as well as their importation into and removal from Canada, and makes other changes to the Act.
Part 21 amends the Federal-Provincial Fiscal Arrangements Act to clarify the legislative framework pertaining to payments under tax agreements entered into with provinces under Part III.1 of that Act.
Part 22 amends the Department of Human Resources and Skills Development Act to change the residency requirements of certain commissioners.

[The Chair, Conservative, James Rajotte]

Fine. Thank you, Mr. Mai.

I have a ruling on this amendment as well.

Bill C-13 amends the Canadian Securities Regulation Regime Transition Office Act to allow the minister to make additional payments to the transition office above the previous $33-million threshold.

This amendment attempts to restrict the minister's ability to make these payments until such time as the Supreme Court of Canada has rendered a decision in the matter of a reference by the Governor in Council concerning the proposed Canadian Securities Act.

As House of Commons Procedure and Practice, Second Edition, states on page 766:

An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.

In the opinion of the chair, the introduction of this restriction on the minister's ability to make payments is a new concept that is beyond the scope of Bill C-13 and is therefore inadmissible.

The ruling is not debatable, and therefore the amendment is inadmissible.

Thank you.

We'll go, then, to clause 162.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Concerning section 162, we move the following amendment:

(1.1) The Minister shall not make any payment to the Transition Office under subsection (1) until the Supreme Court of Canada has rendered a decision in the Matter of a Reference by Governor in Council concerning the proposed Canadian Securities Act, as set out in Order in Council P.C. 2010-667, date May 26, 2010, and the Minister has taken that decision into account in determining whether he or she should make any payments to the Transition Office.

Right now, as worded in Bill C-13, this section allows supplementary payments to be made to the Canadian Securities Regulation Regime Transition Bureau. As you know, Quebec is opposed to it, as well as six provinces. A $33 million payment has already been approved. We were told by the officials that $14 million have already been spent. All this issue has been referred to the Supreme Court of Canada and we still don't know whether it is constitutional.

Why then spend so much money for something which might be invalidated and which is opposed by Quebec and other provinces? Ironically, the Conservatives said during the 2001 election campaign that they would not proceed until they had a ruling by the Supreme Court.

That is the amendment we move.

[Judy Sgro, Liberal, York West, ON]

When we're talking about the financial abuse issue, whether it's through abuse of the power of attorney or just abuse of a bank account, how do you get into nursing homes and retirement homes with this kind of information? It's a very delicate thing.

I suspect that there's probably a huge amount of what we would term financial abuse going on, yet you can't.... One of the witnesses we had the other day was suggesting that there was a particular clause in Bill C-13 involving the banks that they had some concerns about. You don't want to take away the independence of an individual, and usually it's family involved. I think we're caught, in some ways, in trying to help and trying to protect them from themselves. Sometimes they don't want to be protected and helped either, yet we call it...and it is financial abuse in many ways. It's very difficult to help everybody.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, we heard from organizations and witnesses ranging from the Canadian Association of Retired Persons to the Canadian Home Care Association to the Canadian Caregivers Association--and it was confirmed by financial officials--that the tax credits in Bill C-13 for family caregivers, volunteer firefighters, and children's arts activities are all non-refundable tax credits, and that because of this they exclude low-income Canadians, who most need the help.

In fact, we heard last night from CARP that people who quit their jobs to act as caregivers probably wouldn't qualify for the caregiver tax credit at all because their income is too low.

In my own family situation, my sister, who's a VON nurse, has had to cut back her hours to help take care of my 82-year-old mother, who has Alzheimer's. There are a lot of Canadian families in the same situation. They are caught in a situation where they have to cut down their work hours to take care of a loved one, so there's a negative impact on their family income that would take them below the threshold to actually qualify for this caregiver tax credit.

We believe that excluding the poorest Canadians--the Canadians who have the greatest need--from these tax credits is wrong, morally wrong, and that it will worsen the growing income inequality in Canada. So in an effort to address this constructively, my office has worked with the House of Commons legislative counsel to draft an amendment that would make these tax credits refundable, so that low-income Canadians could qualify for the benefits of these programs.

The legislative clerk has a copy of this amendment. I'd appreciate his advice on the admissibility of the amendment. Specifically, could he advise us as to when and how this amendment can be moved?

[The Chair, Conservative, James Rajotte]

Just to clarify matters, what the chair is doing is calling clause-by-clause consideration. The document we're working with is Bill C-13.

This is the document we're working with. Any documents by the Library of Parliament or by the Department of Finance in addition to this are helpful in informing about this piece of legislation, but the bill is actually what we're going through.

This bill is the document that I'll be working with today. Other documents may be provided to help members in terms of informing them as to the specifics of each clause, but this is the bill I'm dealing with.

I'm dealing with the clauses in part 1, and I'm dealing with clauses 2 to 33 because I don't have any amendments for those, so I was going to call those clauses.

Mr. Julian.

[The Chair, Conservative, James Rajotte]

I call this meeting to order. The orders of the day for the 28th meeting of the Standing Committee on Finance, pursuant to the order of reference of Monday, October 17, 2011, are a discussion of Bill C-13, An Act to implement certain provisions of the 2011 budget as updated on June 6, 2011, and other measures.

Colleagues, you should have in front of you clause-by-clause consideration, as that is exactly what we are doing here today. We do have a number of amendments, which I'll obviously call upon members to introduce and argue for when we get to those clauses.

We are going to proceed by part, and consideration of clause 1 is postponed pursuant to Standing Order 75(1), so therefore we're going to start with clause 2.

Part 1 deals with clauses 2 to 103.

The first clause I have an amendment for is clause 34. In the interests of organization, I'm going to ask if there any amendments on clauses 2 to 33.

No? Okay.

Mr. Julian.

Business of the House

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons]

Mr. Speaker, nobody would be more delighted than I if we could actually not have to use time allocation, but so far we have not seen an indication from the opposition parties that they are prepared to deal with bills on an expeditious basis. We feel the need to actually get things done here and deliver on our commitments.

In fact, in each of these cases since we started in September, each one of those bills continues to be debated in the process in the House of Commons. At committee, they have not even returned here for report stage yet, let alone third reading. Extensive debate is taking place.

The fact is that the parliamentary process is a lengthy one with many stages. We want to ensure that bills have an opportunity to get through those stages so they can become law, so we can keep the commitments that we made to Canadians.

We are making good progress this week, democratic reform week.

We introduced the Political Loans Accountability Act, which will prevent future leadership contestants from bypassing the law’s contribution limits by running up huge interest-free loans from supporters. We saw this in the 2006 Liberal leadership race. Many of those loans do not get paid off and are really donations over the legal limit.

We have also begun debate on Bill C-20, the fair representation act. I am pleased that this bill will be voted on tonight before being referred to committee for study. The bill restores respect for the founding principle of our country at the heart of Confederation, that Canada's first Prime Minister, Sir John A. Macdonald, forged, that of representation by population. The bill moves every single province closer to the principle of representation by population, that each vote should have, to the extent possible, the same weight.

I know that some members may be disappointed that we have not yet had an opportunity this week to debate Bill C-7, which is the Senate reform act, but they can rest assured I will be calling that bill for debate as our first item of business on the Monday following constituency week. It is part of what one opposition member properly calls our comprehensive democratic reform plan.

Tomorrow, I hope we can deal with Bill C-16, the Security of Tenure of Military Judges Act, and Bill C-15, the Strengthening Military Justice in the Defence of Canada Act. I hope both bills, which make important revisions to the military justice system, will garner all party support.

Of course, next week is a constituency week where members will be in their ridings speaking to Canadians about the issues that are important to them.

I know that most Canadians, whom I have spoken with at least, think that the jobs and economic growth issues are the top priority and they expect their government to focus on that right here in the House. With this in mind, the next week that we are back will be a jobs and economic growth week.

Jobs and economic growth week will kick off on Monday afternoon when we will again debate the copyright modernization act. The opposition introduced a motion to keep this bill from ever being debated at committee. This is disappointing. The bill would modernize our copyright laws and encourage job creation in one of Canada's most dynamic and important sectors of the economy.

I understand that the finance committee is meeting later today to conduct its clause-by-clause consideration of Bill C-13, the keeping Canada's economy and jobs growing act, that implements the next phase of Canada's economic action plan. I will give priority to this job creation bill when the committee has completed its study. I anticipate scheduling report stage for Tuesday and Wednesday, which will undoubtedly be the highlight of jobs and economic growth week. This bill would implement important measures from our low tax plan for jobs and growth, including tax relief for small businesses that create jobs and a new tax credit for children who go to dance classes or take arts, music, or language lessons. I hope that it will pass swiftly through the House so that the measures can be implemented for the benefit of our economy and indeed all Canadians.

Finally, Thursday, November 17, will be an allotted day.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thanks, Mr. Chair.

You can see that we want to make sure we get all the information from you. It has been a very interesting discussion, both the questions from the chair and the comments from Mr. Giguère.

Mr. Macdonald, I don't think you had a chance to respond to Mr. Jean. He was being a little over-eager when he was asking questions. I wanted to give you the opportunity to respond a little bit more, because I think this is important. This is where the bubble that Ottawa lives under bursts—when we start talking about Bill C-13, what's missing, and what the reality is out there. There will be 100,000 more breadwinners put out in the streets in the coming months.

You referenced rising inequality. I'd like you to talk about that. I think your institute has done some studies on this. Some people have talked about the late 1920s, saying that the clock has been turned back on inequality, back to those times. Could you confirm to what extent we've turned the clock back, because of the policies of the last few years?

You've talked about the lower-paying jobs and the fact that we have more people without work than in May 2008. That's important. You also talked about the debt load of the average Canadian family. The middle class is living a debt crisis. There's no other way to put it. They have debt loads of 150% of their annual income. Families have been struggling with lower and lower wages by indebting themselves more and more. If you could have this committee revise Bill C-13 so that it actually dealt with some of these realities, what changes would you bring in to address these problems that don't normally penetrate the Ottawa bubble?

[The Chair, Conservative, James Rajotte]

I've been pretty lax with respect to every member with respect to questions on Bill C-13. There's lax and there's lax.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Are we now discussing Bill C-13?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you very much, Mr. Chair.

I am going to ask rather technical questions, and I apologize for that. I will address the first one to Mr. Koeller.

When Bill C-13 was tabled, I did not pay too much attention to this tax avoidance measure proposed by the Revenue Department, and I apologize for that.

After reading your document, I realize that, because of the complexity of the bill, we might have missed something important. It might be interesting to have an official from the Revenue Department to explain to this committee all the complexities of this measure. At first, it is a measure to prevent tax avoidance, because the department realized—as I did—there was some abuse with fiscal planning. There might be some unexpected collateral damage, because as we can see, up to half of the bill itself is worded in a way to reflect the need to close this loophole. In any event, I am examining your document.

My second question is addressed to the CALU representatives and deals with individual pension plans. The department cannot simply look at the question of a small business owner's right to an individual pension plan, they have to look at the whole spectrum, and I quite understand that. They have to ensure tax fairness.

Already, private business owners under Canadian ownership—what is called a CCPC—are eligible to a sizable capital tax exemption. They are allowed to charge a rent to their company for their headquarters. They are eligible to income-splitting. So, very frankly, I think that the department is right to impose some kind of limits, if only for tax fairness purposes.

If you look at the whole spectrum of CCPC owners, don't you agree they already have quite a lot of tax benefits?

[Susan St. Amand, Chair, Conference for Advanced Life Underwriting]

Mr. Chair and committee members, thank you very much for allowing us to appear before you this evening.

My name is Susan St. Amand and I am chair for the Conference for Advanced Life Underwriting. I have run my own small financial services business in Ottawa for the past 22 years now, and prior to that I spent seven years in management with one of the largest Canadian chartered banks. Our brief provides more information on CALU and our sister organization, Advocis, but I want to remind you that more than 10,000 of our members are largely self-employed, independent small-business owners spread out across Canada. Each one of us advises approximately 300 families, many of whom are owners of small to medium-sized businesses.

Like you, we are very concerned about the ability of our business clients to fund their own retirement and the retirement of their employees, while preparing for the succession of their businesses. Although I have not implemented many individual pension plans myself for our clients, I do know they have a very valuable place in our system. When the new IPP rules were first introduced last March, I understood the proposed changes were directed at a small group of business owners who were obtaining unintended tax benefits from their individual pension plans. It appeared that the Department of Finance was now quite properly dealing with this problem. But then I started getting calls from our members, expressing concerns about the general impact of the proposals on the ability of their business clients to participate in defined-benefit-style pension plans.

Based on this feedback, CALU formed a working group of members who had expertise in this area. In mid-September, the working group completed its submission to the Department of Finance, noting a number of issues and requesting more time for consultation. It appears that the finance department was operating under a tight deadline, and Bill C-13 was tabled a mere two weeks after the close of the consultation period. Thanks to previous dialogue and input, the final IPP regulations did contain a change designed to mitigate the impact of one of the proposals.

However, CALU continues to have a fundamental concern with these proposals. We believe the IPP legislation challenges the ability of business owners and key employees to participate in retirement benefit programs with similar terms and conditions available to employees in larger private and even public companies. We see this as a dangerous trend that seems to assume that business owners will abuse employee benefit plans. We don't believe most of our business clients or their professional advisors design plans with the intention of taking advantage of the rules, and we are concerned about this perception and the role it may play as a basis for the development of tax policy.

I would now like to invite Kevin to make some specific comments on the legislation that will hopefully illustrate my points.

[Susan Eng, Vice-President, Advocacy, Canadian Association of Retired Persons]

Thank you very much.

I represent CARP, a national non-profit non-partisan organization with 350,000 members and 50 chapters across the country. We advocate for public policy change that improves the quality of life for all Canadians as we age.

Health care remains a top priority for our members, as it is for all Canadians, but it matters more as we age. Despite the fact that today's generation of older Canadians are living longer, healthier lives, the Canadian health care system serves Canadians very well for acute care, but it's not mandated to provide continuing care for those with chronic diseases for which medicine has no cure. That responsibility falls to informal caregivers and the home-care sector, which is at best a patchwork across the country.

CARP's particular focus today is on clause 23 of BIll C-13, which provides for a non-refundable caregiver tax credit. CARP is recommending that the tax credit be made refundable, that it be increased, that it be targeted at those who provide the heaviest care, and that all of this funding be within the same funding envelope.

The vast majority of Canadians want to stay in their own homes as long as possible, even if they have medical challenges. Being able to do so not only improves their health outcomes but keeps them among their friends and family, all of which adds to their quality of life.

This good social and health policy is also good fiscal policy. A well-integrated and successful home-care strategy has the potential of diverting massive amounts of demand from the formal health care system. It's estimated that home care is 40% to 75% less expensive than institutional care is.

Finally, not only is the comprehensive home-care and caregiver support strategy good public policy, it also makes good political sense. CARP polls its members regularly on our advocacy proposals, and they consistently rank caregiver support as a top priority. They appreciated the attention given to the role of family caregivers in the recent federal and provincial elections. They appreciated the acknowledgment of family caregivers with the specific non-refundable tax credit proposed and now passed in the recent budget, but they would prefer the refundable tax credit or allowance proposed in other platforms. Fifty percent of those polled by CARP last week thought the best way to support caregivers was through an allowance or a refundable tax credit.

The amount set forth in the budget, if it were refundable, would be welcomed by the 2.7 million Canadians now providing care to older loved ones. However, there should be a focus on those providing heavy care: those who are most likely to be reducing their hours of work or quitting their jobs altogether to look after a loved one, either permanently or during an acute period. Such people would not benefit from a non-refundable tax credit unless they had other sources of taxable income. Not only should they receive a refundable tax credit, but the amount should be increased beyond the $300 resulting from the budget changes. We believe it's possible to limit the budget expenditures with such a measure.

One in five Canadians over the age of 45 is providing care to an older person. That's about 2.7 million Canadians, according to Statistics Canada. Of that 2.7 million caregivers, 25% provide heavy care, defined as 30 hours or more of care each week. That brings us down to about 675,000 Canadians. Of the 2.7 million caregivers, some 25% are themselves seniors, and 30%, or some 200,000 people, are themselves over 75 years of age. A modest $1,500 per year for 675,000 caregivers would cost about $1 billion a year.

There are existing models of caregiver support and allowances here in Canada. Nova Scotia targets low-income families. It looks at the 20-hour threshold of care per week, and it provides up to $4,800 per year. It has budgeted a small amount and would look after only about 375 families. Manitoba has an option as well. Germany has something interesting, which is long-term-care insurance that provides a significant amount of care to caregivers.

I will be able to give you some more specific facts and figures, but suffice it to say that if there were an opportunity to divert a massive amount of care, and if you looked at the differential between home-care costs and institutional costs, there is the potential for anywhere from $4 billion to $10 billion a year in diverted costs.

Thank you very much.

[Dale Koeller, Vice-President, Calvert Home Mortgage Investment Corporation]

Thank you very much.

Monsieur le président, ladies and gentlemen of the finance committee, good evening.

It's a great pleasure for me to speak to you today.

I consider it a great opportunity to speak about a matter that affects many honest Canadians, not just business people but also the thousands of people who rely on the specialized services of mortgage investment corporations.

A mortgage investment corporation, known as a MIC, is a business structure created by an act of Parliament in 1975 to increase investment in the mortgage sector and to make home ownership more accessible to Canadians. MIC shares have been eligible for registered accounts, RRSPs, and RRIFs since their creation. The Income Tax Act outlines stringent criteria to maintain eligibility as a MIC. Among the rules are an ownership limit of 25% as a shareholder, and related parties counted together in this 25% include a spouse and minor children.

The current ownership rules were legislated into the Income Tax Act in the late 1990s as a result of a comprehensive review of MICs by the Department of Finance. The rules were implemented with a ten-year penalty-free window for MICs to fall into compliance. MICs represent a legitimate form of lending that was conceived of by people like you. MICs were an excellent idea, and they continue to fulfill the purpose for which they were designed. However, changes to the rules governing registered accounts represented by Bill C-13 will have the effect of moving MIC shareholders into illegitimate and prohibited territory.

We understand the intent behind many of the changes, which is to address inappropriate tax planning schemes. These kinds of schemes do no favours for legitimate lending businesses like ours, and we applaud the government for the priority it places on tightening up the rules.

Bill C-13 accomplishes this in many ways. However, in our view it goes far beyond its therapeutic intent. What should be a surgical instrument aimed at a troublesome issue appears to be more like a sledgehammer that threatens healthy tissue over a much wider area.

Bill C-13 will in effect change the way the government has regarded MICs for more than 35 years. It will effectively limit ownership to 10% for the owner to maintain registered account eligibility of the shares. In addition to the ownership limit being reduced by 15%, those counted together in this maximum will be expanded from spouse and minor children to include any blood, marital, or adoptive relative.

All of this may sound benign or harmless, but from the point of view of those who operate a MIC, the short-term effect will be harsh, punitive taxes. The long-term effect may be the collapse of many businesses across the country and possibly financial ruin. Those who exceed the 10% ownership cap, together with their relatives, people who were all along in compliance with the Income Tax Act previously, will have their RRSP and RRIF taxed in the current year and every year until 2022. At that point, if the shares are still in their registered account, they will have their entire income confiscated with a 100% tax rate.

As you can see, law-abiding business people will be hurt; but more importantly, so will the many thousands of Canadians who hold shares in these companies. Who are these shareholders? A teacher, a farmer, a shopkeeper, a retiree. Together with the managers of the company, we the affected shareholders will have to deregister our retirement savings. The remaining shareholders may also suffer a penalty in the value of a company that must restructure to comply with this change in policy.

My company's a small business. We have only one office with eight employees. We've operated as a lender since 1982 and currently have $26 million invested in mortgages. Most other MICs are equally small. Yet together as an industry, we represent over a billion dollars and hundreds of MICs across Ontario, B.C., and Alberta alone. The contribution to the economy is significant across the entire country. We grant mortgages to builders and renovators, who employ carpet layers and plumbers, and many of these borrowers would be hard-pressed to find the financing they need through institutional lenders. We work with borrowers in small or rural communities, where institutions may not be able to help them.

What we finance directly fuels jobs, fuels economic opportunity, builds communities, and helps to support entrepreneurs and small industry in Canada. We ask for the opportunity to keep these dollars working in an economy that desperately needs our nurturing, and we commit to continue to work hard to invest wisely to support that growth.

In conclusion, I ask that you please remove the sections of Bill C-13 that apply to MICs. I understand your need to close inappropriate tax planning schemes. We have suggestions to help you prevent schemes without negative effects on the MIC industry. We can help you make this work more fairly. I would be at your disposal if I can help in any way.

Again, thank you for the opportunity to share this information with you, and thank you for the leadership and service in your work as members of our federal Parliament. Merci.

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is the 26th meeting of the Standing Committee on Finance.

I want to welcome our guests here tonight and thank them so much for coming in on fairly short notice, and especially for attending the night session of the standing committee.

We are televised, ladies and gentlemen, and pursuant to the order of reference of Monday, October 17, 2011, this is our study of Bill C-13, an act to implement certain provisions of the 2011 budget as updated on June 6, 2011, and other measures.

We have five organizations represented at this panel: the Calvert Home Mortgage Investment Corporation, the Canadian Association of Retired Persons, the Conference for Advanced Life Underwriting, the Canadian Association of Fire Chiefs, and the Canadian Centre for Policy Alternatives.

You will each have a maximum of five minutes for an opening statement, and then we'll have questions from members. We'll begin with Mr. Koeller, please.