Finance Committee on Nov. 23rd, 2010

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

[The Chair, Conservative, James Rajotte]

You have a minute and a half.

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

I have an additional question, if there's time.

My colleague Mr. Szabo introduced the subject of the tax-free savings account and the changes in Bill C-47. But I don't feel he provided an appropriate amount of time for you to elaborate on the changes that are taking place in that respect.

I'm sure Canadians are becoming aware of the fact that as a Conservative government we've cut taxes in a hundred different areas, in every form of tax that the government collects: personal, consumption, business, and excise.

The tax-free savings account was a landmark change for Canadians. I note that Peter Aceto, the chief executive officer of ING Direct Canada, is known to say:

We think TFSAs are a great gift the government has given Canadians to help them save.... It's the most important thing that's happened in that regard since RRSPs 50 years ago.

Bill C-47 does address some of the abuses that were taking place in the last year. I am wondering if you could elaborate further for the committee on what those changes are.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

We're making some modifications to the TFSA rules. As usual, we had some aggressive tax planning, I think it's called, to try to take extraordinary advantage of the TFSA rules. This was by a small number of people, but we have to nip it in the bud. That's why there are some changes in Bill C-47.

Overall, I'm thrilled. The take-up is approaching five million people. In the last number we have, there are 4.8 million Canadians with tax-free savings accounts. I would encourage all Canadians, young and old, to get one.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Mr. Brison again.

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

Thank you, Mr. Chair.

Minister, you said earlier today that you disagree with the Economist Intelligence Unit and you disagree with Bank of Canada Governor Mark Carney. Both the Economist Intelligence Unit and Governor Carney have spoken of the Canadian housing bubble and the risk that overinflated housing prices represent to Canada.

You also aborted the work being done within the Department of Finance, the Bank of Canada, OSFI, and CDIC to form a financial stability committee. As you said earlier today, you don't believe there's a housing bubble in Canada.

How can Canadians trust your judgment now when you say there's no housing bubble? In 2006, you were the minister who brought in zero down, 40-year mortgages, which led to record high Canadian household debt levels.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

There's a lot in that question. I'm satisfied, Mr. Brison, with how the FISC committee works and how hard it works, and how it gets the job done on behalf of Canadians, watching out for danger signs in our economy on a macro level. I'm also very satisfied, I must say, with the work of the Office of the Superintendent of Financial Institutions with respect to supervising our federally regulated financial institutions in Canada.

There is no evidence of a housing bubble. We have been concerned from time to time and we watch carefully. That is why twice now we have tightened up the rules with respect to high-ratio mortgages, particularly with respect to the size of down payments and discouraging speculative properties being used for high-ratio mortgages.

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

But Minister, were you not the minister who brought in zero down, 40-year mortgages in 2006?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

We have tightened up the market twice, as I say, in 2008 and 2010.

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

But that's because you loosened it, Minister.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The housing market is very important in Canada, and it changes, as you know. Interest rates change, and it's important in Canada that we watch what is a dynamic market.

The new housing market in Canada is one of the great employers in this country, particularly in our metropolitan areas—Montreal, Toronto, Vancouver, and elsewhere, Calgary certainly. We have to not only watch to ensure that we don't have excessive mortgage borrowing and too much risk-taking on that, but we also have to ensure that we have a viable housing industry in this country, because it's good for Canadians.

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

Minister, you brought in zero down, 40-year mortgages in 2006, so you had already let the horse out of the barn in terms of high mortgage debt in Canada. You caused, in part, those inflated personal debt levels. To say you're tightening up now doesn't reflect your role in creating the problem in the first place.

I'd like to have Mr. Pacetti....

[The Chair, Conservative, James Rajotte]

Minister, did you want to respond briefly to that?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I didn't hear a question.

[The Chair, Conservative, James Rajotte]

Mr. Pacetti, you have a full minute and a half.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you for appearing, Mr. Minister.

I have a quick question. It's more of a technical question. I have a constituent who's disabled and would like to open a registered disability savings plan, but before he can he has to be recognized by CRA as being disabled. He has been refused and he has now appealed before CRA. It's in the Tax Court of Canada, but the Tax Court has refused his appeal because he has a zero assessment, a zero taxable amount. He would like his family and the government to also contribute to his registered disability savings plan, but they cannot because he cannot have the disability certificate that CRA requires.

I'm not sure if you're aware of the case. It was also reported in the Star a couple of weeks ago. It may be a technical question, but if I could get your input on it, I would appreciate it.

[The Chair, Conservative, James Rajotte]

Minister, you have about 30 seconds.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'm aware of the case that was referred to in the Toronto Star. I agree with the honourable member that this is not right and needs to be fixed. I have instructed my officials to fix it, and we will correct that situation so that it doesn't happen again.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So we don't see it in Bill C-47, correct?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

No, it was not something that was brought to our attention until more recently than this bill.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So how long before we can see the change?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I can't guarantee how long, but we will get it fixed. Whether it's a regulatory fix or a legislative fix, I'm not sure, but we will get it fixed.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Do we know how many cases would be affected?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

No, I can't give you a number. I agree with you that this is a situation that's not right and we need to fix it, and we will.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Pacetti.

Mr. Menzies, a very brief round, please. One question.