Evidence of meeting #94 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site.) The winning word was chair.
A video is available from Parliament.
7:15 p.m.
Conservative
The Chair Conservative James Rajotte
Okay. We'll have a recorded vote on Liberal 2.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
Since Liberal 2 has been defeated, that deals with Liberal 3, Liberal 4, and Liberal 5. We will therefore go to Liberal 6.
Sorry, if Liberal 2 had been adopted, we would not have to deal with Liberal 3, Liberal 4, and Liberal 5. So we will deal with Liberal 3 now.
7:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
7:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
7:15 p.m.
Liberal
7:15 p.m.
Conservative
7:15 p.m.
Voices
Oh, oh!
7:15 p.m.
Conservative
The Chair Conservative James Rajotte
Order. I assume all members have read all of the amendments—all 3,000-plus amendments.
Liberal 5, please.
All in favour?
7:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
7:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
7:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
7:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote, please.
(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])
7:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I would like a recorded vote, Mr. Chair.
(Clause 2 agreed to: yeas 6; nays 5)
(On clause 3)
7:20 p.m.
Conservative
7:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Mr. Chair.
Mr. Chair, this amendment delays provisions related to excess employee profit sharing plan amounts.
If I may, section 8 of the act provides for the deduction of various amounts in computing income from office or employment. Proposed paragraph 8(1)(o.2) introduces consequentials on the introduction of proposed section 207.8, which generally imposes a special tax on excessive allocations to specified employees, as defined in subclause 24(1), under employee profit sharing plans.
Also, proposed paragraph 8.1(o.2) allows a taxpayer to deduct an amount that is an excess EPSP amount, as defined in proposed subsection 207.8(1), in computing income for a taxation year. In general terms, under proposed subsection 207.8(1), a taxpayer's excess EPSP amount, in respect of an employer for a taxation year, is the portion of the employer's total contributions to an EPSP allocated to the taxpayer for the year and that exceeds 20% of the taxpayer's total other employment income received in the year under the employer.
From the “Introduction to Federal Income Taxation in Canada”, 31st edition, under the paragraph entitled “Employer's contribution under a deferred profit sharing plan”:
Employer contributions to a deferred profit sharing plan...are deductible within limits. An employer may deduct an amount which is paid in the year or within 120 days after the end of the year to a trustee to the extent that the amount was paid in accordance with the terms of the plan and was not deducted by the employer in a previous year.
A formula is provided to determine the amount of an employer's contribution to a DPSP that is deductible. Generally, where there is no RPP, the employer's contribution limit in respect of an employee for a year is the lesser of:
(a) one-half of the money purchase dollar limit for the year, as discussed [previously]; and
(b) 18% of the employee's compensation (as defined) for the year.
Therefore, to be deductible in a year, contributions should not exceed the lesser amount computed.
Where an employer participates in both a DPSP and an RPP for the benefit of an employee, the employer's total contribution to both plans is limited. It is rare for an employer to provide both a DPSP and an RPP together.
I draw the committee's attention as well to an article published in The Medical Post by Manfred Purtzki on this issue: “Maximize cash flow with an employee profit sharing plan”. In this article, Mr. Purtzki says:
While the Employee Profit Sharing Plan is not as popular as other tax shelters such as RRSPs or Tax Free Savings Accounts and family trusts, it is an effective tax planning tool for doctors who wish to defer taxes, enhance income splitting with family members, and avoid Canada Pension Plan (CPP) and Employment Insurance (EI) premiums. EPSP is an arrangement where the employer, usually the medical corporation, makes payments with reference to the employer's profits to a trustee for the benefit of those employees who are members of the plan. It is important to note that not all employees of the practice must participate in the EPSP. Further, it can be restricted to just family members, as long as they have a bona fide employment relationship with the medical corporation.
Mr. Chair, according to Mr. Purtzki, setting up an EPSP is easy. It requires a trust document, a director's resolution, in the case of the employer being a corporation, and a separate bank account.
The EPSP, according to this article, allows for a 12-month tax deferral, and any amounts paid by the corporation to the EPSP within 120 days after the taxation year are deductible in that year.
7:25 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Brison. Your five minutes are up.
We'll go to Ms. McLeod, please.
7:25 p.m.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Thank you, Mr. Chair.
I guess there's no point in me expressing the same surprise that my colleague expressed in terms of the Liberals not wanting a full and robust review of their amendments.
Having said that, I think I'd really like to talk about this. As I understand it, this motion was actually delayed by one year, and that's until 2013, the implementation of the employee profit sharing plan. This is an anti-avoidance tax measure, so delaying its implementation is certainly going to provide opportunities for inappropriate interactions, transactions, and certainly some fiscal implications.
I don't know if the officials have any specific comments in terms of that particular clause and the implications of the proposed amendment.
7:25 p.m.
Conservative
November 21st, 2012 / 7:25 p.m.
Ted Cook Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
As I think Mr. Brison pointed out, he talked about some of the tax advantages that EPSPs have, and certainly to deal with them is one of the reasons why the EPSP measure has gone forward with respect to CPP, EI, and the ability to avoid those types of premiums.
