Finance Committee on Nov. 2nd, 2011

[David Macdonald]

The unemployment rate is still--

[Mark Adler, Conservative, York Centre, ON]

To say that there is higher unemployment is really a little deceiving, don't you think?

[David Macdonald]

Clearly the unemployment rate is higher today than it was in July 2008, for instance.

[Mark Adler, Conservative, York Centre, ON]

That's not true.

[David Macdonald]

It is true.

[Mark Adler, Conservative, York Centre, ON]

Well, if you could provide that for the committee, I'd be really happy to see that.

[David Macdonald]

Okay.

[Mark Adler, Conservative, York Centre, ON]

Also, I was just looking at your website. Where do you receive your funding?

[David Macdonald]

It is from individual Canadians, primarily. We are member-funded.

[Mark Adler, Conservative, York Centre, ON]

Where would you place yourself on the political spectrum?

[David Macdonald]

We would be progressive.

[Mark Adler, Conservative, York Centre, ON]

You are progressive, okay.

I notice on your website that you have an event coming up with Stephen Lewis and Michele Landsberg. You refer to the oil sands and tar sands.

[David Macdonald]

It is in Toronto, I believe, yes.

[Mark Adler, Conservative, York Centre, ON]

Okay, thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

We'll go to Mr. Giguère, please.

[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?

[Kevin Wark]

I would agree with the member that there are a number of tax benefits applicable to small-business owners that were put in place to encourage their growth, encourage employment in Canada through that growth, and assist them in transitioning their businesses into larger operations. That is certainly true.

The IPP legislation operates on several different levels. First, we believe that the small-business owner should be entitled to the same benefits as employees of larger operations, as defined by the rules. On the way the rules work, if you have a three-person plan, for example, they're fully impacted by these rules, but by adding one more member to the plan they are excluded from the rules. If you have a four-member plan that becomes a three-member plan, you fall back into the rules.

There just seems to be an arbitrariness to the rules that adversely impacts these individuals. The RRIF minimum rules are retroactive, in effect. They apply to plans that currently exist, as well as new plans. We don't understand that, given the power of the CRA to deal with this issue already. There are already Federal Court of Appeal decisions that support the CRA challenging the specific concerns they have about accumulation of surplus.

There are also a number of technical issues with the rules that make them very difficult for a small-business owner to comply with and administer. So we see a number of elements of tax fairness in the proposals that we feel need to be addressed.

[The Chair, Conservative, James Rajotte]

Okay.

You have 30 seconds left.

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

You talk about tax fairness. There is already a $22,000 limit for deposits into an RRSP, each year. Since 85% of Canadians earn less than $55,000, there must be very few people who can afford to save $22,000 in an RRSP.

Physicians who incorporated...

[The Chair, Conservative, James Rajotte]

Okay. Can you ask your question, please?

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

Talking about tax fairness, I think RRSPs go too far. Don't you think that there comes a time when the department has to prevent tax avoidance?

[The Chair, Conservative, James Rajotte]

Mr. Wark, make a brief response, please.

[Kevin Wark]

If you consider it to be avoidance, why are you only applying it to groups of three or less that include owner-managers? If there is a concern, it should be extended to all taxpayers who are in similar circumstances.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Mr. Koeller, you have my time. This is a complicated issue. Understand that the government is closing a loophole. Can you just dumb this down a little? The way I understand it, a MIC doesn't pay taxes at a regular corporate tax rate. In a sense, the taxes flow through and become part of the mortgage again.

Have I got that right?