Finance Committee on May 6th, 2014

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

And contributions made to RESPs, RDSPs, and TFSAs by the Canadian government would be considered taxable income by the IRS?

[Brian Ernewein]

Not the contributions per se—

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

I mean earnings from those.

[Brian Ernewein]

My understanding of the question that you raised the last time on grants, particularly from the government, is that under the Canadian tax system those are taxable if and when the grants are paid out to the beneficiary. As I mentioned the last time, from our discussions with the U.S. and our description of the regimes, they suggest that they would not be taxable on contribution to the plan but appear to be taxable by the U.S. as well in the same way we would on payout to the beneficiary.

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

Thank you.

[The Chair, Conservative, James Rajotte]

You have 30 seconds, Mr. Brison.

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

That's it for this section.

[The Chair, Conservative, James Rajotte]

You're done with this section?

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

With this section.

[The Chair, Conservative, James Rajotte]

My understanding from the NDP is that they're done with part 5.

Can we move to part 6?

Do you have a couple of more on part 5?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Yes, but they can move to part 6, if they want.

[The Chair, Conservative, James Rajotte]

I would like to move to part 6 as soon as possible.

Are there a couple of questions?

Mr. Allen, very briefly.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

I have a couple of questions on the annex. One of them is on the due diligence procedures required by the banks.

If I understand correctly, the first round of due diligence is by July 1, 2014. Is there another due diligence process that is required by the banks by 2016 on pre-existing accounts?

[Kevin Shoom]

The due diligence procedures have different requirements for pre-existing versus new accounts. Under the agreement for new accounts, financial institutions are supposed to begin implementing those procedures starting in July of this year, and they should be doing those procedures when those accounts are opened.

For pre-existing accounts, the agreement provides a window, a period of time, under which the financial institutions can complete the due diligence on the pre-existing accounts which are subject to review. That period will stretch out. It depends on the type of account, but it can stretch out into 2015, or in some cases into 2016.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I'd like to ask a question on the amending process. I understand that this is subject to an amendment process. By the end of 2016, I believe, there can be an amendment to the IGA.

To the point that we did get some reciprocity with respect to information coming back from the U.S, it doesn't make sense that there would be full reciprocity because we don't tax based on citizenship, so how could there be full reciprocity in this agreement that way? Would that allow us to maybe look at situations where we could potentially pull up tax evasion of people who have accounts in the U.S. that are not being reported on their Canadian return as part of this agreement?

[Kevin Shoom]

The promise of reciprocity from the United States in the agreement is to pursue equivalent levels of information exchange. It doesn't mean identical, and since we don't tax on the basis of citizenship, we wouldn't be interested in getting information on non-resident and Canadian citizens.

What it could well mean is increased due diligence requirements at U.S. financial institutions to identify Canadian residents who hold accounts there. It could also expand the reporting requirements to equivalent types of information that, under the agreement, Canadian financial institutions are supposed to report. An example of that would be account balances.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Chair. That's it.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Allen.

I want to thank the officials for being here. The parties have been very helpful. They've identified priority sections for them. Two parties have identified division 1, in part 6. I'll ask division 1 officials to come forward for Veterans Affairs.

The next division—I'm going to jump around a bit—will be division 20. I would ask division 20 to be ready.

I'm trying to do as many as I can by 5:30. The divisions that the parties have asked for are 1, 12, 14, 20, 23. Therefore, all the other officials are free to go at this time.

We'll start with 1, and we'll do 20 and 29 as well. That's 1, 12, 14, 20, 23, and 29.

We want to welcome Mr. Butler to the committee. Thank you for being with us today.

I'm going to go right to questions.

Mr. Cullen, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I think I need to say this, Chair.

We have 30 sections in part 6. We have 25 minutes for the committee to study this before the time allocation motion moves us past this part. I hope all committee members won't even pretend that this is proper scrutiny of a 300-plus page omnibus bill. It's an absolute joke of a process. We're going to try to get through some things.

Regarding part 6, division 1, thank you for being here.

Why was the decision taken not to bring back, after the Manuge decision, the earnings loss benefit and Canadian Forces income support, CFIS, from disabled veterans, going back to 2006 when the clawback began?

[Bernard Butler, Director General, Policy Division, Policy, Communications and Commemoration Branch, Department of Veterans Affairs]

Thank you for that question, Mr. Chair.

Essentially, choosing that date was a policy decision of government. That was the date, May 29, 2012, that the government announced it would cease the offsetting. The government decided that it would be the appropriate date.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I understand that is a political decision, but can you clarify that reductions did begin in April 2006 for veterans who received this disability compensation?

[Bernard Butler]

Three programs are impacted by this bill. The war veterans allowance program is a legacy program that would go back to about 1930, at which time offsets would be made. For the new veterans—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I'm sorry, Mr. Butler, it's a bit of an awkward process because, with the time available to us, one of our challenges is that we have essentially a five-minute round with 30 seconds for the official opposition.

I didn't mention this, Chair, but I very much appreciate your efforts to try to line up folks. I'm not sure how to proceed in that we have many questions on part 6, division 1, but we also have questions on other divisions that come up. I'm trying to include them in my five minutes because that is all we've got.

Logistically it seems impossible.

[The Chair, Conservative, James Rajotte]

If you give me a rough idea of how much time you need, I can try to—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

The time I need and the time I have are two different things in this circumstance.