Finance Committee on March 20th, 2007

[Andrew Auerbach, Tax Policy Officer, Corporate and International Tax, Tax Legislation Division, Tax Policy Branch, Department of Finance]

I'm Andrew Auerbach, from the Department of Finance.

I don't have a detailed breakdown of the number of people this bill would affect, but in terms of the number of Canadian residents receiving U.S. social security, our estimate is approximately 95,000 filers. I don't have a breakdown of how many are new, from the last ten years.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So we would only be dealing with those who are adversely affected, and presuming that pool is shrinking.

I'm running out of time here, so I'm a bit concerned. Mr. Thrasher or Mr. Gleberzon, if I'm a Canadian living in the U.S. and receiving CPP, versus an American living in the U.S. and receiving U.S. social security, what's the differential in the treatment of those moneys?

[Bill Trasher]

In the United States you're taxed with all the social programs you receive from Canada as if you were receiving U.S. social security. It's taxed the same over there, if you're a resident.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So then moving up north of the border, what is the argument that you wouldn't be treated in the same manner as a Canadian if you're a U.S. citizen moving up or receiving U.S. social security, other than that you had an expectation when you originally were earning the pension?

[Bill Trasher]

That's it?

[John McKay, Liberal, Scarborough—Guildwood, ON]

That's it. I just want to be clear, because it really is a treaty change that drives this bill.

[Bill Trasher]

Correct.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So you can see that there is an inequity between pensioner A and pensioner B, Canadian to U.S., living in Windsor or living wherever. Okay, that's helpful.

My final question has to do with this. If in fact the budget goes through, I take it you would also be entitled to the pension split.

[Bill Trasher]

That's correct.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So we would have a differential treatment, Canadian versus U.S., and we would have a split.

[Jeff Watson, Conservative, Essex, ON]

Presumably Canadian A collecting CPP in Canada and Canadian B collecting U.S. social security would both get the pension income split.

[John McKay, Liberal, Scarborough—Guildwood, ON]

They'd both get the split. Fair enough.

[Jeff Watson, Conservative, Essex, ON]

It's not an advantage suddenly. It's additional to Canadians collecting a U.S. social security cheque.

[The Chair, Conservative, Brian Pallister]

But you could split social benefits before.

[John McKay, Liberal, Scarborough—Guildwood, ON]

No, but the budget proposal is that pension moneys be split, and I'm assuming that includes U.S. pension moneys.

[Jeff Watson, Conservative, Essex, ON]

That's private pension—

[William Gleberzon]

It's only private pension moneys that can be split. We're talking about social benefits.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay, fair comment.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. McKay.

We'll continue.

Next up will be Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you, Mr. Chairman.

I have a few brief questions about the bill, one of which is somewhat technical. Is the proposed amendment to provide for an additional 35% exemption retroactive to the date of the coming into force of the treaty, or would it only apply to future years?

[Jeff Watson, Conservative, Essex, ON]

As the bill is dealt with today, no, that would not be retroactive. I'll probably speak later in terms of whether we want to simply get at reversing the tax implications for those originally affected versus those today. We do have an amendment proposed, and I think it's been translated. It may be circulated to the clerk, where, on that particular issue, if they simply want to deal with those originally affected under the rules of grandfathering, that could be addressed. But no, we're not looking at retroactivity here with respect to the bill.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

That's the nature of Mr. Gleberzon's amendment. The aim was to make the amendment retroactive to address the situation of those who have already had to pay additional taxes further to the tax treaty.

[Jeff Watson, Conservative, Essex, ON]

I'm not familiar with what Mr. Gleberzon is proposing. What I'm simply suggesting is that the bill, as it comes forward, would be on a go-forward basis. So there would be no retroactivity for any harm done, there would be no going back and refiling tax returns for previous years. That would simply be on a go-forward basis.

[William Gleberzon]

We're not suggesting retroactivity.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

In that case, what is the nature of your amendment?