Bill C-274 (Historical)

An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation)

This enactment amends the Income Tax Act in order to provide that, in the case of qualified small business corporation shares and shares of the capital stock of a family farm or fishing corporation, siblings are deemed not to be dealing at arm’s length and to be related, and that, under certain conditions, the transfer of those shares by a taxpayer to the taxpayer’s child or grandchild who is 18 years of age or older is to be excluded from the anti-avoidance rule of section 84.‍1.

Income Tax Act

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, it is a great honour to be standing virtually in the House and speaking to Bill C-208. I would like to thank the member for Brandon—Souris for being the sponsor of this bill. He is the latest in a fairly long line of MPs who have been trying to achieve this legislative proposal.

I was present in the 42nd Parliament when my former colleague, Guy Caron, brought in Bill C-274, and I remember his passionate speech in the House of Commons during its second reading. He was trying to illustrate the reasons why that legislation was so important. It was great to witness that speech, but ultimately it was very disappointing to see the vote results when the Liberal government at the time used its majority to prevent the bill from going any further.

I am glad to see this time it has been different, by virtue of the fact that we are in a minority Parliament and the opposition used its combined numbers to send this bill to the Standing Committee on Finance where it had a good airing. We got to hear from many witnesses, and ultimately the committee decided to send the bill back to us for our final consideration. It is my sincere hope that this bill will be sent off to the other place and that we can look forward to royal assent, hopefully in the near future.

When Bill C-274 was being considered in the previous Parliament, I had a meeting with the Port Renfrew Chamber of Commerce. I was given a 10-minute speaking spot during their AGM, and when I talked about Bill C-274 at that time and about what we were hoping to do, I got unanimous positive feedback from the members of that chamber. For those who do not know, Port Renfrew is on the southwest coast of Vancouver Island. Many people there depend on fishing for their livelihoods. They are either commercial fishermen or are in sport fishing, so they have small fishing corporations. To have the ability put forward to transfer their businesses to family members really meant a lot to them. There was overwhelmingly positive feedback. I ultimately had to give them bad news, but here we are with a real opportunity to try to bring about some positive change.

This bill is pretty much tailor-made for the types of small businesses that exist in the riding I represent, Cowichan—Malahat—Langford. Like so many members before me, I want to acknowledge the pain and suffering that small businesses have gone through over the last year. I think it is incumbent upon us not only to have support programs to help them through the pandemic, but also to bring about long-term systemic change to important statutes such as the Income Tax Act, so that we can make their business operations and their succession planning that much easier.

My riding is dominated by farming as well. Here in the Cowichan Valley we have a beautiful climate. It is, I think, Canada's only Mediterranean climate and we have a very long and storied agricultural history. We have generational family farms here. Some have the fifth generation of a family farming the same plot of land. If we can bring about legislative change that makes succession easier and gives them peace of mind, I think we are doing a good thing.

I also want to give a shout-out to the five chambers of commerce in my riding: Chemainus, Cowichan Lake District, Duncan Cowichan, Port Renfrew and WestShore. They have all been incredible advocates for their members. I have been staying in touch with them quite consistently over the last year and their feedback during this pandemic has been invaluable in helping me, as a member, advocate on their behalf in Ottawa to make sure that the federal government's policies and programs are reflecting their needs.

I will concentrate mostly on family farms, given the nature of my riding and the fact that I am the NDP's critic for agriculture and agri-food. When we look at family farms, we are looking at $50 billion in farm assets that are set to change hands over the next 10 years. History has shown us that roughly 8,000 family farms have disappeared over the last decade.

The National Farmers Union has done an incredible report on the status of Canada's farms, called “Tackling the Farm Crisis and the Climate Crisis”. It not only looks at agriculture in the context of climate change, but also the financial footing that many farms are on and how shaky it is. According to the NFU, Canadian farm debt has doubled since the year 2000. That is in 21 short years. It was listed at $106 billion in 2019.

Many farms have to chase income from off-farm work, taxpayer support programs and other farm sources. That is just a reality for so many small farms. What is really concerning is that we have lost two-thirds of our young farmers since 1991. The family farm is pretty much being systematically destroyed in Canada, and we need to put measures in place that are going to help.

Why is Bill C-208 so important? The owners of small businesses, family farms and fishing operations who want to retire want to be able to sell to their children because it is often their children who have been brought up in the family business and on the family farm. From a young age they have learned the culture of the business and what it does, and they often have a lot invested in that business continuing to succeed. The next generation often has very important ideas about where to take that business.

When parents decide to sell their business to their children, the difference between the sale price and the price originally paid is currently considered a dividend, but if they sell their business to an unrelated individual or corporation it is considered a capital gain. Unlike capital gains, a divided does not include the right to a lifetime exemption and is taxed more heavily. We can make a measurable improvement in allowing families to pass on businesses that might have been part of a family for generations to their children, making it easier for that work to get done.

I want to recognize the work done at the Standing Committee on Finance. I appreciate the witnesses who appeared. Many of them also appeared at the agriculture committee. We heard important testimony from the CFIB, the Grain Growers of Canada, L'Union des producteurs agricoles and, of course, the Canadian Federation of Agriculture, which has been such an incredibly important voice for farmers from coast to coast to coast.

They noted at committee that the average age of Canadian farmers is now above 55, and the opportunities these businesses face will carry into the next generation. It is a sector in which the vast majority of businesses remain family owned, and maintaining the financial health of those businesses across generations is critical. At committee, the CFA very clearly said that it supported Bill C-208 because it would ensure that real family farm transfers could access the same capital gains treatment as businesses selling to unrelated parties, rather than treating the difference as a dividend that was taxed at a higher rate and not being able to access the lifetime capital gains exemption.

We have an important opportunity before us. During the vote at second reading, I was sad to see that 145 Liberal MPs voted against this bill. Two Liberal MPs supported it. It is my sincere hope that when this bill comes to a final vote to be sent to the Senate, Liberals can finally see this as an important opportunity and can represent the interests of small businesses, family farms and fishing corporations by making this much-needed change to the Income Tax Act and doing right by their constituents.

I, for one, will be proud to vote in favour of Bill C-208 and send it on its journey. I look forward to the day when we can finally see it receive royal assent.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I am honoured to rise today in support of Bill C-208 introduced by my hon. colleague, the member for Brandon—Souris, to amend the Income Tax Act to facilitate the transfer of small businesses or family farms or fishing corporations.

We already knew how important this issue was when this bill was introduced for first reading in February 2020. Who would have thought that, barely a month later, COVID-19 would come along and drastically change the landscape for Canada's SMEs?

As an entrepreneur and representative of a region that consistently ranks as one of the most entrepreneurial areas in the country, I was very sad to see the latest survey that the Canadian Federation of Independent Business, or CFIB, released last week, warning that 181,000 small business owners in Canada were considering closing their businesses. That means one in five businesses could close down, despite all the programs and billions of dollars spent by different levels of government and the support services we have provided in our respective ridings.

This is a frightening prospect, since 2.4 million jobs are at risk if the pandemic continues, which is why I want to reiterate how important it is that the government do whatever it takes to fix the vaccine supply problem. We cannot sit back and wait until 2022. After all, we are barely into 2021.

Workers in the tourism and cultural sector are very much on my mind. Last year was devastating for them. The federal government really needs to get creative with its vaccine strategy, and it needs to do it fast so we can at least hope for some degree of recovery for the sector this summer.

September is too late, and 2022 is even worse. Until very recently, small and medium-sized businesses were the backbone of our economy. They created more than 77% of all new jobs between 2002 and 2012. As a Conservative, I am very proud of the Harper government for creating an environment that helped SMEs grow by reducing the corporate tax rate from 22% to 15%, lowering the small business tax rate to 11%, and increasing the income limit for applying this tax rate from $300,000 to $500,000.

As a business owner who created nearly 30 printing and communications jobs in my region, I understand the importance of ensuring our tax system encourages entrepreneurship.

It is important to understand what motivates entrepreneurs to risk all of their savings and their financial security to set up or buy a new business. People go into business for a variety of reasons. Some are motivated by their passion, while others see a service gap in their community that needs to be filled. However, most people go into business to provide for their family, with the hope that, one day, their children will be able to take over the business and build a better future.

In my case, I intend to one day transfer my family business to my daughter, of whom I am obviously very proud. However, I was very surprised to learn that, under the existing Income Tax Act of Canada, it would be better for me to sell my business to a stranger than to a member of my own family. When a business is sold to a family member, the difference between the sale price and the original price of the business is considered a dividend and is taxable at 100%. However, if the sale is between two strangers, the difference is considered a capital gain, only half of which is taxed. What is more, in Canada, the lifetime capital gains exemption that normally applies to small and medium-sized businesses does not apply when the business is sold to a family member.

What message are we sending? Are we trying to discourage people from going to business? I am not the only one asking these questions. According to a 2012 CFIB study, approximately 310,000 business owners, or around 30%, planned to sell or transfer their business within five years. That figure jumped to around 550,000 within 10 years. The figure may have changed during the COVID-19 crisis, which makes passing Bill C-208 all the more urgent for the many family businesses whose future is at stake. It is already bad enough that so many businesses plan to hand their keys over to creditors during this economic crisis.

We must not allow the unfairness in the Income Tax Act to force so many small businesses to hand their keys over to the government. According to the Canadian Federation of Agriculture, “Over $50 billion in farm assets are set to change hands over the next 10 years.” That does not even include the more than 8,000 family farms that have already folded in the past 10 years. Just half of them had a succession plan. As the population ages, three in four farmers plan to retire in the next decade. We need to act quickly to fix this anomaly in the Income Tax Act to prepare for the demographic reality we are facing, in the agricultural sector especially.

That is why I support Bill C-208, introduced by my colleague from Brandon—Souris, and I urge the Liberals to do the same. I remind my colleagues that during the 42nd Parliament, we debated a similar bill that had been introduced by Guy Caron, the former member of Parliament for a riding next to mine. This is a unifying bill. This is not a left or right issue; it unites us all.

I would like to remind members that Bill C-274 received the support of the Conservative Party, the Bloc Québécois and the NDP, but was defeated by the Liberals, who had a majority at the time, because they heeded the advice of public servants rather than that of the people who elected them. Many organizations across Quebec support the bill. The Association des marchands dépanneurs et épiciers du Québec has spoken out against the current situation, and the Union des producteurs agricoles and the Board of Trade of Metropolitan Montreal both indicated that they supported the bill.

This issue was also brought to my attention during the last campaign, in 2019, when I met with UPA producers in Cap-Saint-Ignace, which is in my riding. Last Friday, I received an email from Andre Harpe of Grain Growers of Canada asking us to support Bill C-208.

I want to point out that the agriculture sector is following the debate very closely today. As the saying goes, better late than never. If the Liberal Party really wants to back SMEs, it must support this bill and pass it quickly because Bill C-208 will ensure that all these family businesses will continue to operate and remain intact by facilitating their intergenerational transfer. If this does not happen, a Conservative government will have no problem ensuring that it does.

I would add that with the speeches my colleagues made ahead of me, I think it is clear that the Liberals have no choice but to move forward and support this bill. In any event, they are in a minority. We will move forward with this bill. Whatever it may cost to implement it, not doing so would cost even more, because the value and pride that comes from handing down a family business is priceless. Considering that for the most part, all Canadian businesses started as family businesses, that they represent 90% of the Canadian economy, and that they are the backbone of Canadian entrepreneurship and businesses with fewer than 10 employees, it is essential that people be able to transfer these businesses to members of their own family without being penalized.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, many in this country are away from their loved ones, so before I get started, I note that today is my oldest daughter's 21st birthday. She is on the other side of the country, but I wish Maddie a happy 21st birthday and give her lots of love from everyone here at home.

It is always an honour to rise on behalf of the federal NDP to fight for small business. We know that small business owners are the job creators. Right now they are creating 80% of all new jobs in our country. Bill C-208 is very important for supporting small businesses and local communities and for stopping the economic leakages from small communities in our country. These leakages often end up in the hands of large corporations because of flawed and broken tax rules that create a benefit for selling a business to those at arm's length versus a family member.

I want to thank the member for Brandon—Souris for reintroducing the bill, which shows that there is non-partisanship when it comes to supporting it. As members are well aware, the bill was first tabled as Bill C-274 by the former NDP finance critic and former member from Rimouski, Guy Caron. He fought hard, as the New Democrats continue to do, for small business.

I want to talk about what Bill C-208 would mean for small communities. We know that owners of small businesses, such as family farms and fishing businesses, as in the communities around where I live in coastal Canada, are often selling their businesses to family members. Specifically, the bill would give business owners the same rights they would normally get if they were selling to someone at arm's length. This is important, because nobody should be penalized for selling a family business to a family member, but it is happening now with the current taxation system. The bill is very important to us, and we are excited to be speaking in support of it given what it would mean to rural communities.

I cited the importance of small business for job creation. If people see a barrier to selling to someone at arm's length and will pay more tax, they will do everything they can to pay less tax. With the current structure, for example, if a person sold a family business worth $1 million to a family member, they would end up paying a dividend tax rate of about $350,000. However, if a person were to sell that same million-dollar business to a stranger, someone at arm's-length, they would end up saving $306,000 of the tax they would have paid otherwise. It makes absolutely no sense.

We want to encourage people to keep businesses in the hands of family members and encourage intergenerational business ownership, because we know that it keeps money and profits in our communities. For example, in fishing, if a person were to sell a family fishing operation to someone in their family, they would keep the quota and the jobs in the family. However, if a family member had to pay more tax, they would be more likely to sell to an international company or large conglomerate, which would hoard fishing licences and then lease them out to fishers. The same applies to farmers. Profits then leave the community at the end of the day, which is a huge economic leakage. The money is leaving the community and leaving our country in many cases, and this needs to stop.

Mr. Caron's bill tabled in the last Parliament would have supported small businesses, farmers and fishers, but it was defeated by a margin of only 12 votes. It was voted on after the government misled Parliament. The government cited that the fiscal losses would be up to $1.2 billion, but the PBO put the fiscal revenue shortfall between $126 million and $249 million. That is quite a gap. The Liberal government could have stated what it would have cost Canadians taxpayers to do the right thing to help support the sale of intergenerational businesses by not making them pay more, but instead it said the loss would be an astronomical amount of money. In fact, the PBO's numbers were somewhere between 10% and 18% of what the government had initially cited, which is a big gap.

The cost of the economic leakage and its impact on small communities across our country, and on family members, is worth the price of what we are going to lose in the long run, as we see those profits leave our communities.

We are heading into a huge period of succession in our country. A lot of small business owners belong to an aging demographic. People want to sell their businesses to their family members and keep the ownership in the community, which I assume we want to encourage. We expect over $50 billion in farm assets alone to change hands over the next 10 years, so we are heading into a huge period of succession. For farming alone it is critical that we fix this now, because we have lost 8,000 family farms in the last decade. We need to do everything we can to curb that trend because it is obviously not working for Canadians. Only half of those small business owners actually have a succession plan, while 76% of them are planning to retire over the next decade.

That is important for a lot of people who have developed and built businesses in their families. I had a business for many years. When I started it, I was not informed that if I were to sell my business to one of my three children, I would be penalized with a heavy tax bill. If I sold it to someone at arm's length, I would not have incurred that same tax. It makes absolutely no sense, but most Canadians do not know that this is the current situation.

This is something we need to remedy. I hope that the government will talk about the real numbers that the PBO shared. We saw some Liberal members support the opposition in the last Parliament, so I am hoping those Liberals who decided to vote with their government's misleading information will actually support the PBO and do the right thing to support their communities and small business owners, especially those family businesses that want to maintain intergenerational ownership. In rural communities such as Courtenay—Alberni, where a large part of our main street is made up of local or small businesses, this is a really important piece to our long-term survival. We want to encourage local ownership.

Again, this bill did not pass based on misinformation in the last Parliament. The Liberals continue to make excuses on this bill. They say they will relax the rule for tax avoidance, but we want it to be done carefully to avoid these difficulties and challenges of people avoiding tax rules. If the purchaser or family member retains the shares for five years, the Canada Revenue Agency's concern is that, in the absence of a specific provision, the shares would pass from one family to another. If that five-year provision were in place, it would make that impossible. We want to make sure that we take all the excuses away from the government and alleviate the concerns of taxpayers, so that there are provisions and a system in place to protect against flipping these businesses to avoid paying taxes. This is to keep them in the hands of small business owners.

According to a 2012 CIBC study, close to 30%, or 310,000, business owners were planning to exit ownership or transfer control of their businesses by 2017, in one year alone. We do not have the recent figures. That means that a lot of businesses are changing hands right now.

I want to talk about economic leakages, because we are seeing more businesses being sold and ending up in the hands of large conglomerates. We constantly see local ownership being reduced. This kind of taxation creates a threat to local communities. We want to invest in small communities, and this is a very good way to invest in families and small communities.

Returning to closing economic leakages, we need to do everything we can. This legislation is important, but we also need to make sure that the big banks pay their share, that we cap merchant fees and that we continue to take a holistic approach to supporting small businesses. This is a good bill and I hope the government will support it as well.

Report Stage

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I have just 10 minutes to talk about Bill C-97, an act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures. I would have liked to have my colleague answer my question, since he had the time and it was not too complicated.

When the Liberals were in opposition and during the 2015 election campaign, they promised to stop this trend of including measures that have absolutely nothing to do with the budget in the budget and budget implementation bills. This is an undemocratic measure and practice. It forces us to vote on the budget, which is a confidence vote, and on measures that should be considered separately from the budget.

The Liberals were critical of this practice for four years, but they continue to utilize this undemocratic process.

I would like to talk about Bill C-97 and the budget in general, not necessarily about what is in the budget or the bill, but about what is not there. Over the past four years I have raised some very important issues highlighting how the Liberals did not keep their promises.

The first thing that I wanted from Bill C-97 was to see that the Minister of Finance was keeping his promise to address the issue of tax transfers for businesses and farms. The tax transfer issue is important because, at present, an individual who owns a small business or family farm and wants to transfer it to his children or a family member must pay more tax than if he transferred or sold it to a stranger or someone who is not a family member. There is a very simple reason for this. Selling to a stranger triggers a capital gain with a set of exemptions. However, the profits from the sale to children are treated as dividends and fully taxed.

In 2016, I introduced a private member's bill, Bill C-274, to address this issue. The bill sought to ensure that these two types of transactions received equal treatment and that individuals would not be at a disadvantage when selling their assets to their children.

I spent a year working on Bill C-274. I visited many areas of Canada, particularly the maritime provinces, which are represented by 32 Liberal members. I did not go to speak with MPs, but rather to speak with representatives of chambers of commerce and organizations that advocate for fishers and farmers. Everyone agrees that this legislation is necessary. I would even say that the tax treatment involved when businesses and family farms are sold or transferred is one of the top concerns of small business owners.

I worked on this for a year. At the end of that year, when it was time to begin debating the bill, I had the support of about 25 Liberal members. I had the support of the Conservatives, the Bloc Québécois and the independent members of the House. The only thing missing was the support I needed from the Liberals. I was able to get the support of at least 25 members after making citizens aware, citizens who then spoke to their MPs about it.

The bill made it through its first hour of debate, but then, before the start of the second hour, the Minister of Finance made a surprising announcement. He said that the bill was going to cost the government between $800 million and $1.2 billion in lost revenue. It was surprising because the tax specialists we hired to study the impacts of the bill estimated the tax loss at between $90 million and $100 million, which is hardly peanuts, but still an acceptable cost to insure that we level the playing field, so to say.

Clearly, these are two different price ranges. The Minister of Finance took his department's figures and successfully convinced a string of Liberal MPs that, though he understands how important this bill is for SMEs and family farms, they had to vote against it because losing $1 billion in tax revenue would be irresponsible. He promised that, by the end of this Parliament, there would be a tax measure in the budget that would truly meet those needs. He promised that.

In the meantime, there have been three budgets and five budget implementation bills. There is still nothing to deal with this inequity, this injustice that exists for owners of small business, family farms, and fish companies who want to transfer their business to their children.

I am appealing to the Liberal members who represent rural and farming regions and who have a lot of SMEs in their riding to think about the consequences of voting against Bill C-274. Once again, there is no measure in this budget bill to address the tax inequity and unfairness. That is the first thing I wanted to note. The Minister of Finance broke the promise he made to his own caucus, to correct the situation in a later budget. The election is fast approaching and this still has not been addressed. My colleagues can be sure that this issue will be raised in a number of ridings come election time. Liberal candidates will have to defend the finance minister's position, as well as his failure.

Another issue that is very important to MPs from rural areas is cell coverage. We hear a lot about investment in high-speed Internet, and clearly, there has been some. Not everyone has access, but there has been some investment. However, none of the new Liberal or Conservative programs have included measures for cell coverage, even though it is so important. In my riding, Rimouski-Neigette—Témiscouata—Les Basques, 13 of the 39 municipalities I represent have little or no cell coverage. Over 1,000 people live in the municipality of Squatec, and they have no cell coverage unless they find exactly the right spot on top of a little hill or on the second floor of the high school.

We have raised this issue repeatedly in the House. The member for Abitibi—Témiscamingue has brought it to the government's attention many times during question period. The government's answers always focus on investment in high-speed Internet. Those are two different things. Investing in high-speed Internet does not mean investing in cell coverage. Essentially, telecom companies are not interested in investing in rural regions without adequate population density. Individual companies will not risk making that investment because it could end up benefiting all the other companies. The government needs to intervene because the market has failed, but the Liberal government has done nothing for four years now.

Several members are concerned about this issue. I am thinking of the member for Laurentides—Labelle and the member for Pontiac, who represent large rural areas and who tentatively bring up this issue from time to time. We voted on a motion moved by the member for Pontiac that emphasized the urgent need for action. That is the problem right there. The government talks about the urgent need to act, but it never does, even though it is in a position to do so. If the government does not want to make the necessary investments so that rural regions and rural residents are no longer treated as second class, then concrete action needs to be taken.

If the government does not want to make real investments, it needs to think of another solution to take the responsibility for making investments away from the companies and give it to an independent Canadian agency, for example. That agency would be funded by the companies as a condition of licence, and it could make investment decisions and acquire the necessary spectrum to do so. That would ensure coverage in all of the regions that would not otherwise have it, and all of the companies that made investments could also benefit from the new coverage. That is one solution that the government could implement. Another solution would be for the government to invest in cell coverage as it did for high-speed Internet.

There are solutions. All it takes is a little goodwill. However, since we began raising this issue, I have not seen any goodwill from the Liberals in this regard.

I will not have much time to talk about the third item, but I brought it up in my question to my colleague earlier. It is the fact that the Liberals did not keep their promise to table budget bills that actually focus on budget-related issues. Instead they chose to play petty politics and try to speed through their legislative agenda by throwing in tons of measures that have nothing to do with the budget. This Liberal tactic is as politically cynical now as it was when it was first used by the Conservatives from 2011 to 2015.

For all of these reasons, I find myself unable to vote for this bill. I am happy to have had a chance to explain why.

Opportunity for Workers with Disabilities Act

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I would like to thank my colleague from Carleton for introducing Bill C-395. I believe that this bill addresses a gap in the tax system known as the “welfare wall”, a fairly well-known economic principle. It occurs when those who are receiving social assistance or people with disabilities, as we are talking about here, want to enter the workforce but will lose money to taxes or benefit clawbacks by doing so.

I do not think that this is a result of any level of government acting in bad faith; rather, I think it is an indication of the complexity of our tax system. It is becoming so complex that, despite our best efforts, we have introduced unintended effects into the system that penalize people who want to re-enter the labour market.

I will vote in favour of the bill at second reading so that we can study it at committee. I have questions about some aspects of the bill, such as whether the financial implications for different levels of government are those suggested. I believe that will be the case, but we will be able to do a more in-depth analysis at committee.

This is an example of the left and the right being able to work together because we have a common interest. I believe that we have the greater good at heart. We want to help people who want to work, in this case, once again, people with a disability. Support for the bill introduced by the member for Carleton has come from progressives and Conservatives, including a former representative of the Canadian Tax Foundation, the Canadian Association of Social Workers, Jack Mintz, and Ian Lee, who will never be taken for progressives, as well as the Canadian Association for Supported Employment. The entire political spectrum is represented on this long list of supporters, which clearly indicates that we have a social consensus.

I am saddened by the government's attitude. If I am not mistaken, my colleague, the parliamentary secretary, said that the government will not encourage support for this bill, at least at second reading, which I find very disappointing. The bill by the member for Carleton is clear. It would amend the Federal-Provincial Fiscal Arrangements Act. The various levels of government are subject to conditions with respect to social transfers and health transfers, and these conditions help address any problems that may arise or any issues regarding how different governments use the transfers. When the federal government is able to punish persons with disabilities who want to return to the job market, this will be addressed at the federal level, and it must also be addressed at the provincial level. I am saddened that the speech I just heard had nothing to do with the bill itself, and instead had to do with government measures, since at the end of the day, this bill is worthy of consideration.

If the bill passes, there will be three requirements. The first has to do with the Minister of Finance.

Finance Canada will be asked to calculate the level of taxation and the loss of benefits that would be incurred by the person with a disability in going back on the job market and having a job and wages. Following that, if the earned income is lowered by the effect of taxation and the loss of benefits, then Finance Canada would have to modify or amend in some form the working income tax disability supplement. The same would be asked of the provinces through that modification and the agreement between the federal government and the provincial governments for the social transfer. It is that simple. That is all that is asked here.

I do not see why the government would not study this new measure, which would complement what it proposed in its last budget. At the end of the day, I worry that the government is telling us it can do better than this bill. Personally, I really doubt it.

I introduced Bill C-274 in the House of Commons to fix a specific problem with the transfer of SMEs and family farms. I managed to secure the support of many members. The Conservative Party was on board, as were the independent members and, in theory, 15 to 20 Liberal members. Then the Minister of Finance released a cost estimate for the bill. The tax specialists I had been dealing with had estimated that my bill would cost between $75 million and $100 million.

During the final week of debate, however, the government pulled a rabbit out of its hat and claimed the bill would cost between $800 million and $1.2 billion in lost revenue. That scared off a lot of Liberal backbenchers. Several of those who had initially supported the bill and acknowledged the existence of the problem my bill was trying to fix decided to vote against it.

The Department of Finance misled the members of the Liberal Party, because in a report on the fiscal impact of my bill that was published two months after the vote, the Parliamentary Budget Officer put the fiscal revenue shortfall at about $150 million, not $800 million to $1.2 billion as the finance department led the House to believe.

The government tends to completely ignore positive legislation brought forward by the opposition, especially on fiscal matters. It is trying to undermine the members of the House by systematically refusing all opposition-led tax bills, whether they are proposed by the official opposition or other opposition parties.

In our consideration of Bill C-395, however, we are working on the particular issue of Canadians who are struggling to get over the welfare wall.

The welfare wall exists, and we need to attack it where we can, federally and provincially. It makes no sense.

My colleague, the member for Abitibi—Témiscamingue, actually showed that this is a principle that should be applied everywhere in our tax system. It should be applied, because it makes sense in terms of creating incentives for people with disabilities or people on social assistance or people who want to find an opportunity to work. We need to give them every single opportunity to do so.

Creating walls and keeping a state of affairs where people going to work actually lose money and benefits because they are going to work makes no sense. It is our duty as parliamentarians, it is our duty as people who have been elected by our constituents, to ensure that we correct these problems. The bill tabled by the member for Carleton aims to do exactly that.

I will be asking the government to look at this bill and to send it to committee to ensure that the objectives targeted by this bill would be achieved. This would actually be a positive contribution by this Parliament. It would ensure that people who want to gain some dignity by going back to work and being able to contribute socially in their communities would not be penalized and would not suffer from the shortcomings of our own legislation when we adopt tax measures provincially and federally.

I encourage all members of Parliament in this House to vote in favour of this bill and to send it to committee to try to see what we can do for people with disabilities who want to gain dignity by joining the job market.

Report Stage

[Jean-Claude Poissant, Liberal, La Prairie, QC]

Mr. Speaker, I would like to thank my colleague for her two questions.

With respect to Bill C-274, we knew that we were going to consult people on the ground before passing anything about the transfer of farms. We are currently consulting to determine what will help them the most.

As for the $250 million, we started with a first phase in which producers could apply for compensation. We received approximately 3,000 applications, but there will also be a second phase, since the $250 million has not yet been allocated in its entirety.

There is therefore more to come concerning the remainder of the $250 million.

[Anne Minh-Thu Quach, NDP, Salaberry—Suroît, QC]

Mr. Speaker, I am flabbergasted to hear the Parliamentary Secretary to the Minister of Agriculture talk about how the federal government is encouraging young people to get involved in agriculture, while the Liberals themselves voted against the bill introduced by our current House leader. Bill C-274 would have made it possible to transfer family businesses, especially in the agriculture and fisheries sectors. It would have made it more advantageous for farmers to transfer their land to their children than to strangers. They voted against it. They also said that they would compensate dairy farmers and cheese producers for the free trade agreements with the European Union. It took a single week for the entire $250 million to be allocated. It was done during the summer on a first-come, first-serve basis.

We can easily Imagine the number of farmers who converged on the Hill to meet with us and tell us how unfair and poorly thought out it was and that not all dairy farmers had been compensated.

How can the member opposite believe that opposing Bill C-274 and allocating such a small amount for compensation on a first-come, first-serve basis could encourage young people to get involved in agriculture?

Opposition Motion—Consultations on proposed tax changes

[Tracey Ramsey, NDP, Essex, ON]

Madam Speaker, I rise today to talk about tax fairness for the farmers and small business owners in my riding.

My riding of Essex is a rural riding with five municipalities, where towns are filled with small businesses, and the space between them is filled with gorgeous farm fields. We have some of the richest soil in Canada and the largest amount of acreage under glass in our greenhouse sector.

The hard-working people in Essex are very angry and confused by this consultation by the Liberal government, which is now officially closed. These are hard-working people who have now been told that they did something wrong, that they are tax cheats, or that they were intentionally not paying their fair share.

Paying our fair share is something that is deeply important to New Democrats. Fighting for fairness is the foundation of all of our work. Fair share is a phrase that we use with pride about our contribution to our communities. We pay taxes to our government so that we can collectively take care of each other.

Canadians place trust in the government to fairly distribute the wealth of our society so that we all benefit from services that keep our communities healthy and thriving. This is a basic tenet here in Canada. It is one of the things that I love about Canada. I ran to become an MP to protect and fight for our social services and for their equal delivery.

This is why so many people in my riding are also very proud to pay their taxes, to pay their fair share. They work hard for their families, their communities, their family traditions, and their family businesses and farms. They pay their fair share and they work to pay for the health of their community as well.

This summer when the consultations started, there was a lot of rhetoric being thrown around by the Liberal government about tax fairness. People in my riding were being told that they were cheating the system, that they were taking away from the community they love and helped to build, where they were raised and where they raised their children, instead of adding to it. Not only did they feel targeted by this language, but they were using a system that was in fact perfectly legal and one that they had been encouraged to use to grow.

They understand and support tax fairness, but the main question I get is why the Liberals brought in only these proposals in which they they are only looking at small businesses. Where was the consultation on CEO stock option loopholes, or the consultations on how we end offshoring and snow washing? The Panama papers came up quite a bit.

I understand why farmers and small business owners are angry. What I cannot understand is the Liberal government limiting the scope and the time of this debate in Canada. The government has many opportunities to bring forward real and tangible tax fairness.

I believe in tax fairness, but real tax fairness, not this limited version being proposed by the government.

Real tax fairness could have come when New Democrats stood in the House in March and introduced a motion to eliminate tax havens and the CEO stock option loophole. Why should CEOs be able to hide their salaries and stock options to keep from paying their fair share? The NDP proposed the elimination of the tax break on stock options used by rich CEOs, a loophole that costs the government and communities $800 million per year.

The government voted in favour of our motion but has done nothing to address the issue. I heard Liberals talking about the provisions in the budget that they brought forward, but they do not eliminate the loophole, and these are very different things.

Real tax fairness could have been accomplished by the Liberals if they had passed my colleague's private member's bill, Bill C-274. This legislation would have helped small business owners, like farm and fishing businesses, transfer between family members. We have a system in Canada where farmers pay less tax if they sell their family farm to a stranger than if they sell it to a family member. How on earth is that fair? Again, the government, which says on a constant basis how much it cares about farmers, voted against the bill, which would have made it fairer to succession plan, something that Canadian farm families are struggling with across the country.

I recently spoke with a farmer in my riding who told me that he and his wife had taken on payments to be able to buy the farm from his parents. They have a 16-year commitment to do this, and now they are very worried that they have made the wrong decision and will pay the price for the government's complete lack of understanding about farm management. This is not a multi-million dollar farmer. This is a family that is teaching its children how to farm and keeping our community in fresh local food.

Now, instead of using viable options to make our tax system fairer to tackle the real and serious problem of inequality, the government has put forward consultations, which are now over.

Income inequality in Canada is a real and serious issue for all. Recently, the census revealed that Canada's level of income inequality has worsened over the past 12 years. Due to past government inaction, the richest one per cent of our population has seen a 14% rise in median income. According to the census data, the richest one per cent now earns 6.8 times more than a worker earning Canada's median wage of $34,204 in 2015. The changes that the government is consulting on would do nothing to alleviate this gap. In the Windsor Essex area, the United Way says that about one-quarter of our youth live in poverty, which means that in 2013, 19,900 children under the age of 17 lived in families where the income was less than $17,000 per year.

We need to address this gap and work hard to close it with a serious effort. That is why this consultation must include all avenues to do that, not just the narrow scope of the measures the government is proposing. In fact, the Liberals promised to address these inequalities in their platform, but these measures are so limited in scope that people are learning once again that the Liberals say one thing during an election and never follow through.

If the Liberals are serious about helping small businesses, then where is the small business tax reduction, something that all parties in this House committed to during the campaign? We are two years into the government's mandate and have still not seen that proposal come forward, despite the fact it would be so incredibly important to the 98% of businesses in this country that are small- and medium-sized businesses. If the Liberals are serious about helping small business, then when is this helpful proposal coming forward? Where is the legislation to ensure that business owners can see the tax reduction they were promised and, quite honestly, they were moving forward on and basing their future on? Therefore, it is another broken promise to our most important job creators. No one in Canada thinks that the Liberals are standing up for small businesses.

I want to talk about the consultations for a minute. These consultations released a tidal wave of misinformation that has only scared and worried people across the country. The government caught Canadians off-guard, leaving many small business owners in Essex wondering about the vague language and implications of the proposals, and many others are confused by the complexities of the reforms. I heard some Liberals today in the House talking about whether the NDP would vote on this. To my knowledge, there is nothing to vote on at this point. We do not know what will be proposed. We have a vague understanding, but again small business owners and farmers are confused by these proposals.

The Liberals launched the consultations in mid-July and, as of yesterday, the consultations are over. How could the Liberals not have realized that this time of year would be problematic for farmers? This is harvest season, and many farmers will not be able to get to their accountants or tax planners in time to get detailed advice on how the potential changes to the tax system could affect them. When I travel in my riding, I see all the tractors running at full speed. It has been very tough for those farmers to connect because they simply have had to be on their farms during this critical time.

I also do not understand why the government has decided to rush the consultation process. Surely, it makes sense for the Liberals to post their proposals and wait for honest, well-thought-out feedback. Why do they not give everyone the time to study the changes? If the Liberals are serious about tax fairness, then they will expand the scope, extend the deadline, and have a true comprehensive review.

That is why I move, seconded by the member for Rosemont—La Petite-Patrie, that the motion be amended, (a) by deleting the words, “will have a drastic negative impact on small and medium sized local businesses,” and replacing them with the following, unfairly target small businesses while ignoring the largest abuses of Canada's tax system; and (b) by adding after the word “measures” the following, and to expand the consultations to include measures targeting large corporations, loopholes for CEOs, and tax havens.

Contribution of Ranchers and Farmers

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Mr. Speaker, I am very pleased to speak in support of Motion No. 108. I want to congratulate my colleague from Bow River on his initiative in moving this motion. I am very proud to rise and talk about agriculture and agrifood.

The motion before us today highlights the contribution farmers make to protecting our lands and the environment, and calls for measures to promote the conservation of agricultural land.

The motion proposes two extremely important concepts, namely, environmental protection and the conservation of Canada's agricultural heritage. This is very timely given that we are celebrating Canada's 150th birthday this year. We will have the opportunity to talk about the history and evolution of agriculture, as well as the investments that have been made and the changes that have taken place over the years.

The motion warrants special consideration because, despite how clear it is, it gives us the opportunity to raise several issues that are important to farmers and the future of agriculture in Canada. As agriculture and agrifood critic, I think it is important to talk about the extraordinary work done by Canada's agricultural producers when it comes to protecting our environment, improving our lands, and ensuring sustainable development. With that in mind, the government needs to continue to invest more to fight climate change, working closely and in partnership with farmers, providing them with the means to protect the environment and their lands using new technology.

Recently, private member's Bill C-274 was introduced in the House of Commons. The government needs to put measures in place to encourage the transfer of family farms. This bill sought to put an end to an injustice and make it easier to transfer farms. Canada lost more than 8,000 family farms over the past 10 years. In my riding, the regional municipality of Maskinongé has lost 146 family farms since 1979. Over $50 billion in farm assets are set to change hands between 2016 and 2026. The government needs to be reminded that it missed a golden opportunity by failing to send Bill C-274 to committee for further study. The bill had the support of some 100 organizations across Canada. I would like to commend my colleague from Rimouski-Neigette—Témiscouata—Les Basques for his initiative.

It is very important for family farms to be transferred to members of the same family, as doing so helps preserve agricultural land and ensure the survival of agriculture across Canada. As everyone knows, agricultural lands are not renewable, and we need to do everything that we can to protect them.

The NDP is the only federal party to have consulted stakeholders from across the country when developing an agriculture strategy. This bill, this policy, supported the conservation of agricultural land and raised the very important issue of our food sovereignty. The government announced that it will be holding consultations about this policy, and I will be following this very closely.

Our vision connects Canadians from farm to fork. That is why we need to assess the whole situation and bring an integrated approach to federal policy that connects agriculture, rural development—we must not forget access to high-speed Internet in the regions—health, and income security. Adopting a pan-Canadian food strategy such as the one proposed by the NDP will ensure that young people and new farmers can access the capital and land they need to work in the agriculture sector.

Furthermore, a food strategy recognizes that the federal government has a key role to play in working with the provinces and territories to protect critical watersheds that cross provincial boundaries, to mitigate and adapt to climate change, and to reduce food waste.

Essentially, a food strategy aims to ensure that everyone eats well and can access healthy and affordable food. It is important to ensuring that our agricultural communities are sustainable for generations to come and that Canadian products find growing markets both at home and abroad. We must protect our agricultural heritage because this is about food sovereignty.

I want to remind members about an issue that we debated at length in 2012. The previous Conservative Party eliminated the Prairie Farm Rehabilitation Administration program in an omnibus bill. This was a really important program because it was responsible for rehabilitating lands affected by drought and erosion in the provinces of Manitoba, Saskatchewan, and Alberta.

We know that the previous government dismantled the program without the benefit of an environmental impact study. After it was dismantled, the pastures were transferred to the provinces. However, the problem is that, in some cases, the provinces sold the lands to private investors, and in most cases, they continue to lease them to ranchers, but at higher rates and with fewer services, all while ignoring the need to protect the environmental integrity of the Prairies.

This issue affects many stakeholders, including environmental groups, wilderness conservation groups, farmers, ranchers and young people who want to take up farming.

This issue is very important to the Prairies, but especially Saskatchewan, where there are still many pastures left to be transferred. We know that the transfers of these community pastures and lands will soon be complete, in 2018.

There is still time for the Liberal government to do something to save these prairie lands, and we are calling on it to do so.

I also want to touch on our supply management system. I think that, at one point, my most common utterances in the House of Commons were “protecting our supply management system” and “diafiltered milk”. We are asking the government to take action because concrete action is vital to protecting our supply management system. We know that the government has fallen short at times in terms of border control and protection, and that has led to financial losses for dairy producers.

Two weeks ago, the Auditor General of Canada told us that the Canada Border Services Agency should have assessed $168 million of customs duties on imports of quota-controlled goods. Producers suffered huge losses because the government fell down on border protection. Now our producers are paying the price and losing out on more revenue.

The federal government must implement concrete measures that will really make a difference and protect our supply management system to safeguard our family farms and ensure their long-term survival. Just recently, the Standing Committee on Agriculture and Agri-Food went to Washington. We met with a number of elected officials and explained to them why it is so important to protect our supply management system. Those were really important conversations.

We import between 8% and 10% of what we consume. The Americans import 2%. That is why it is important to have these meetings, especially with the prospect of NAFTA renegotiations looming.

Once again, I would like to congratulate the member for Bow River on moving today's Motion No. 108, which gives us an opportunity to talk about the importance of protecting agriculture in Canada.

We truly hope that the Liberal government will implement measures to facilitate the transfer of family farms and that it will invest more in the fight against climate change.

Income Tax Act

[The Speaker, Geoff Regan]

The House will now proceed to the taking of the deferred recorded division on the motion at the second reading stage of Bill C-274.

The House resumed from February 6 consideration of the motion that Bill C-274, An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), be read the second time and referred to a committee.

Taxation

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, in each of our ridings there are small business owners, farmers, and fishers who want to retire and sell their business to the next generation. The problem is that a farmer who wants to sell his farm to his children must pay hundreds of thousands of dollars more in taxes than if he sold it to a stranger.

My bill, Bill C-274, would level the playing field while minimizing tax avoidance opportunities. Amendments could be made to minimize them even more, but instead of working with me, the government will clearly whip the vote to defeat this bill without even proposing an alternative. Why will the Liberals not allow a free vote?

Income Tax Act

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Madam Speaker, I am very pleased to speak to conclude this debate on my private member’s bill, Bill C-274.

In each of our ridings, there are small and medium-sized business owners, farmers and fishers. At present, these people do not belong to the wealthiest class, in spite of what the government is trying to say. They are the very definition of middle-class, and people who start up a small business are often people who aspire to join the middle class.

I am extremely disappointed that the government is opposing this bill. I believe they are opposing it for reasons I think are absurd, and I will explain why.

First, the Minister of Finance and his parliamentary secretary believe the bill will cost between $300 million and $1.2 billion. I worked with tax experts on this bill to make sure it will not be too costly for the government. We estimated that, in terms of lost revenue, it will cost between $75 million and $100 million. Is that excessive? The goal is to level the playing field.

In Montreal, the owner of a small window and door business who wanted to transfer his business to his child had to pay over $110,000 more in taxes than if he sold it to a stranger, a person who was not family.

Obviously, there will be costs in terms of lost revenue, but the goal is to level the playing field and allow these businesses to stay within the family for a second or third generation. The figures the government is suggesting can and must therefore be disputed. They should be examined in committee.

That is why I am asking the government and all members of the House to adopt the bill at second reading, so that we can analyze these figures and compare the analyses I have done with various tax experts and the figures from the Library of Parliament, the Union des producteurs agricole, and Raymond Chabot Grant Thornton and other accounting firms, with the government’s figures.

Another argument that the government has made against the bill is the fact that at present, parents may transfer their business to their children and receive a capital gain. That is true, if the child is not incorporated. However, children increasingly are incorporated, since incorporation carries several advantages, including lower interest rates when they borrow and less tax on the amount to be paid to the parents.

I know there are extremely complex issues and tax policy is complex. Nonetheless, Bill C-274, which I have brought forward, is an appropriate response to the injustice that is an incentive for owners of small businesses, family farms and fishing boats to sell their businesses to strangers rather than to their children. They do not do that because they will get rich; they sell their business so they can retire.

I would like to reassure the government that my intention is not for the bill to be too costly. The intent is to bring the bill to committee so it can actually be studied and if needed, if it is really too costly, to be amended. I can guarantee every member in this House that with the numbers the government is putting forth, if the bill will be as costly as it is saying, I will volunteer to actually withdraw it from consideration. I am saying that because I am sure it will not be.

In conclusion, I encourage all members of the House to consider how this bill will affect their constituents. I have the support of more than 150 organizations across the country in Quebec, Ontario, the west and the Maritimes, organizations such as chambers of commerce, municipalities, and organizations that represent farmers and fishers.

If this bill dies before going to committee for an in-depth study of the costs and impacts, those people will be extremely disappointed. They are not likely to have forgotten this by the time the next election rolls around.

I therefore urge all members of the House to vote for this bill at second reading so we can study it in committee.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Madam Speaker, it is an honour to rise in support of Bill C-274, an act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation).

As the small-business critic for the progressive opposition, as a former business owner and executive director of a chamber of commerce, and as the co-chair of the all-party entrepreneur caucus, I am proud to stand today in support of Bill C-274 and speak to its many strengths. I am grateful for the work of my colleague, the member for Rimouski-Neigette—Témiscouata—Les Basques, for putting forward an excellent piece of legislation on tax fairness for Canadian small-business owners.

In debates, committee meetings, and in legislation, small business is an important focus for parliamentarians. We understand that small-business owners are the real job creators in Canada, as 80% of all jobs are created by small business. Some 30% of our GDP comes from small business. Small businesses are an economic driver of our local economies.

The bill is about keeping jobs in Canada, keeping our wealth in our local communities, supporting family-owned businesses, and supporting community economic development by plugging economic leakages. It is about fair tax laws for Canadians. It is about correcting an unreasonable provision in the Income Tax Act. It makes no sense that our current laws make it easier to sell a business to a stranger than to a family member. Why would we do that? Let us make it easier to enable Canadian businesses to be passed from generation to generation, not harder. Let us not penalize the very people who have put their heart and soul and a lifetime into developing their local businesses. Let us support Canadians who support their communities.

I know I do not have time to do a full speech, so in closing, the government has an opportunity to show Canadians it is fighting for working-class Canadians by supporting the bill. The working class is family business. It is hard-working entrepreneurs who are the foundation of our economy and the real job creators. Nobody has a deeper connection to community or understands the importance of keeping the wealth in their community better than family business owners.

Canadians deserve fair succession tax laws on their family-owned small businesses. We need to make it easier to sell a business to a family member. We need to keep jobs local, and our money in our local economies. We need to give our business owners the tools to thrive in our communities. Right now, the Income Tax Act makes it easier to sell a business, like I said, to a stranger than to a family member. Bill C-274 would correct that mistake. I urge all parliamentarians to support small-business owners across Canada by supporting the bill.

[Ginette Petitpas Taylor, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, today I am speaking on behalf of the government about Bill C-274.

We all agree that small businesses are key to our prosperous communities. They provide important goods and services, create jobs, and weave themselves into the fabric of our communities, in which they have a genuine interest.

The Government of Canada wants the small business sector to remain stable and dynamic. Is Bill C-274 in the best interest of small businesses? The government's position, which I support, is this: the bill is well-intentioned, but the government is very concerned about its unintended consequences and whether it will really work.

The main problem is that it will open the door to tax avoidance. The Government of Canada cannot allow that possibility. The stated purpose of this bill is to amend the Income Tax Act to facilitate the transfer of small businesses and family farm and fishing corporations among family members.

To that end, the bill would dilute two long-standing anti-avoidance rules found in the Income Tax Act. First, we must answer the following important question: why are these anti-avoidance rules in place? Their objective is certainly not to discourage the transfer of small businesses to family members. These rules exist because without them certain individuals would have greater opportunities to engage in inappropriate tax avoidance.

Measures that would introduce tax loopholes would not be consistent with the principles of fairness, economic efficiency, and responsible fiscal management.

As I mentioned, the bill would dilute two long-standing anti-avoidance rules found in the Income Tax Act; specifically, it would amend sections 55 and 84.1 of the act.

I would now like to focus on section 84.1. This anti-avoidance rule may apply when an individual sells shares of one corporation to another corporation that is linked to the individual. When an individual sells shares of a Canadian corporation to a linked corporation, section 84.1 of the Income Tax Act deems that the individual has received a taxable dividend from the linked corporation rather than a capital gain, which is taxed at a lower rate in certain circumstances. Why? It is because the linked corporation could use the proceeds of the dividend paid by the Canadian corporation and give it to the individual in exchange for shares.

In other words, the individual is taxed based on the principle whereby dividends can be extracted from the Canadian corporation in order to be paid to the individual and should be taxable in his or her hands as dividends. Without this rule, such sales between related parties could be used to convert dividends for an individual into capital gains that are taxed at a lower rate, including gains eligible for a lifetime capital gains exemption.

Bill C-274 proposes narrowing the scope of section 84.1 by removing the sale of shares of certain companies from its application. These companies include eligible small businesses and family farm or fishing corporations sold by an individual to another firm owned by an adult child or grandchild of that individual.

This change will allow the owner-operator of a family business to convert the dividends of the corporation into taxable capital gains at a lower tax rate. Such conversions of corporate dividends into capital gains taxed at a lower rate could be done as often as the owner-operator wants to extract the corporation's surpluses and receive a fiscal benefit.

While the main purpose of section 84.1 is to limit the application of the lifetime capital gains exemption, there are similar concerns regarding cases where no exemption is requested because of different personal income tax rates that apply to taxable dividends and capital gains.

In 2017, the highest combined federal-provincial personal income tax rate on capital gains is roughly 17.8 percentage points lower than the rate applicable to dividends.

This difference in personal income tax rates means that for every extra $100,000 that is converted into a taxable capital gain, the federal-provincial savings can be as high as $17,800.

It is important to note that there is nothing stopping a parent from selling their shares of the family business directly to their child or grandchild and claiming the lifetime capital gains exemption on the capital gains, and then claiming as taxable capital gains any other gains from the sale of the shares that are not eligible for the lifetime capital gains exemption.

The anti-avoidance rule set out in section 84.1 applies when the shares are sold to a company owned by the child or grandchild of that taxpayer. The tax rules already allow for the intergenerational transfer of a business directly to a child or a grandchild.

Adopting the proposed changes to section 84.1 would open the door to new avoidance possibilities. This would unfairly benefit wealthy individuals instead of members of the broader middle class.

Based on a series of reasonable assumptions on how Canadians would react to this measure, the Minister of Finance believes that the proposed amendment would cost the federal government between $350 million and $1.2 billion a year. This clearly goes against the government's overall objective to strengthen support for the middle class and those working hard to join it.

It is also important to point out that, according to analyses conducted by third parties, Canada has a good tax system and is an excellent place to do business. According to a KPMG study, total business tax costs in Canada are the lowest in the G7 and 48% lower than those in the United States.

The government is currently making unprecedented investments in infrastructure and innovation that will expand opportunities in the country and result in stronger and more inclusive growth. What is more, the government has lowered taxes for nearly nine million Canadians, and 9 out of 10 families with children now receive higher benefits through our new Canada child benefit program.

That means more disposable income for middle-class Canadians and a stronger economy, which will benefit small businesses.

In closing, I understand the reasons behind Bill C-274. We all want the tax rules to be simple, fair, and conducive to small business growth. However, ultimately, the opportunities for tax avoidance that would arise from the passing of Bill C-274 far outweigh any possible benefit.

Bill C-274 would not make the tax system any fairer. On the contrary, it would give wealthy individuals the opportunity to use private corporations for tax planning purposes. It would result in pressure to weaken other anti-avoidance rules.

For these reasons, I urge the members of this House to vote against Bill C-274.