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

Sponsor

Guy Caron  NDP

Introduced as a private member’s bill. (These don’t often become law.)

Status

Defeated, as of Feb. 8, 2017

Subscribe to a feed (what's a feed?) of speeches and votes in the House related to Bill C-274.

Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

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.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, provided by the Library of Parliament. You can also read the full text of the bill.

Votes

Feb. 8, 2017 Failed That the Bill be now read a second time and referred to the Standing Committee on Finance.

Opposition Motion—Consultations on proposed tax changesBusiness of SupplyGovernment Orders

October 3rd, 2017 / 11:20 a.m.
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NDP

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.

September 21st, 2017 / 4:05 p.m.
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NDP

Ruth Ellen Brosseau NDP Berthier—Maskinongé, QC

I think it's really important that we look at these measures. We are the agriculture committee. I know the finance committee will be looking at the subject eventually. What I'm really concerned about is that the consultations started in the middle of summer.

I represent a rural riding. We had floods in the springtime. Many of my constituents weren't able to work and plant as they wanted to. It was a really rough year for certain people who owned land by the St. Lawrence. When this consultation was announced, they were out working. Now and for the last little while we've been getting a lot of calls, letters, and emails.

I think it's really important that as the agriculture committee, which is supposed to stand up for farmers and agriculture here in Canada, we better understand the proposed changes. There is an opportunity to demystify what they are and maybe calm some of the fears.

Last year we had a wonderful bill before the House of Commons. I talk about it often, and I won't stop talking about it. It was my colleague Guy Caron's bill, Bill C-274, about transferring family farms, small businesses. Most of the members on this committee supported it. I don't know whether Mr. Saini or Madame Nassif supported that bill, but it was a really important bill. It would have helped the transfer of family farms. Sadly, that bill didn't even get to committee.

I think, then, that it is even more important that we, as members of the agriculture committee, look at these changes. In my constituency I get a lot of phone calls about this matter; I'm sure you get a lot of phone calls about it too. It's our duty to look at this.

My fear is that once it gets to finance committee, agriculture will just be puffed off. We are the experts. We have to look at this. I'm really hoping that the members on the other side would be open to looking at the matter.

We know that the government, the Minister of Finance, is consulting. I think we should extend the consultation period. We should be consulting and looking into this deeper at agriculture committee. I'm not saying that we stop doing this study on food policy, but I think we need to look at the subject, maybe after this study is done, because it has to be done in November.

We have 10 meetings—

Contribution of Ranchers and FarmersPrivate Members' Business

May 29th, 2017 / 11:30 a.m.
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NDP

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 ActPrivate Members' Business

February 8th, 2017 / 6:10 p.m.
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Liberal

The Speaker Liberal 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.

TaxationOral Questions

February 7th, 2017 / 2:45 p.m.
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NDP

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 ActPrivate Members' Business

February 6th, 2017 / noon
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NDP

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.

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:55 a.m.
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NDP

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.

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:45 a.m.
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Moncton—Riverview—Dieppe New Brunswick

Liberal

Ginette Petitpas Taylor LiberalParliamentary 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 longstanding 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 longstanding 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.

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:40 a.m.
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NDP

Robert Aubin NDP Trois-Rivières, QC

Madam Speaker, this magnificent Monday morning, we have the good fortune to be talking about the bill introduced by my colleague from Rimouski-Neigette—Témiscouata—Les Basques. I gather from members' remarks that there is broad consensus around this bill. The only concerns I have heard people express from the start have to do with the cost of the bill. Barring petty partisanship, I see no reason why we should not send this bill to committee after the second reading vote for a closer look at its real costs. This bill is very important to the economy and to the development of both Quebec and Canada.

Everyone knows our society is aging. We are facing major changes to which we will have to adapt quickly and as best we can. We are used to analyzing health and education issues and changing our policies on the basis of demographic trends, but there is just as much urgency in other sectors that tend to be ignored. That is why I think my colleague's bill, which tackles one of the most significant generational shifts, is so important.

By 2020, as many as 350,000 business owners will be 50 or more and will be considering selling or transferring ownership of their business to a family member or selling it to a stranger. With the population ageing, it is reassuring to see that the next generation of entrepreneurs is available, skilled, competitive, and ready to face the challenges that come with taking over the reins from the previous generation.

Why are so many businesspeople raising their concerns with me over entrepreneurial succession? Well, they have done the math and they recognize how unfair the difference can be in the sale of a business to a family member or to a third party. Although my colleague's bill is not the first to address this issue, it is by far the most comprehensive and deserves the support of all parliamentarians in the House.

However, for the uninitiated who are following the debate and who are not aware of the problem, let us try to sum up what it means to transfer a business. If business owners want to get out of the business world, then they have two choices. They can sell their business to one of their children, thereby ensuring that the business remains family-run and deriving satisfaction from the act of passing down the business from one generation to the next. The owner gets to see his or her efforts carry on. The second choice in principle is just as commendable. The owner can sell to a stranger. It is easy to say that this is a personal choice and that everyone is free to make their own decision. However, that is less true when we know that both avenues do not produce the same profits from a sale at the same price.

At this point in time, if the business person sells their business to a stranger, the difference between the sale price and the original price is considered a capital gain taxed at between 23% and 29% by the provinces and also benefits from a tax exemption of about $824,000. However, if the owner sells his business to one of his children, the same difference between the sale price and the original price is considered a dividend, which is taxed at between 35% and 51%, depending on the province, and does not benefit from a tax exemption.

To put it simply, the owner who sells his business for $1 million and reports a capital gain, compared to the owner who reports a dividend on the same amount, would come out ahead by about $306,000. We have to admit that makes selling to a family member somewhat less appealing.

This is what Bill C-274 would do. It would allow the owner and buyers from the same family to enjoy the same rights and privileges resulting from a transaction between two people without any family ties. Consequently, Bill C-274 would help keep businesses in the hands of local people, foster entrepreneurship, and contribute to the creation of local jobs.

What is more, in order to prevent any type of tax avoidance, an argument that members have been raising since this morning, my colleague had the foresight to include an obligation in the bill under which the family member who purchases the business must remain the owner for five years following the transaction. We are not the only ones who are saying that it is high time to eliminate this unfair business transfer tax.

Since I am running out of time, I will not read the incredibly long list of people who support my colleague's bill. I must admit that I do not see what reason any member would have to vote against a bill that has garnered so much support. I therefore hope that Bill C-274 will be sent to committee, because we are always open to making necessary improvements. I also look forward to the day when the House will send a clear message to entrepreneurs across the country telling them that they can sell their company to whomever they choose and still pay the same rate.

Need I mention that I strongly urge all members of the House to vote in favour of the bill introduced by the member for Rimouski-Neigette—Témiscouata—Les Basques?

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:30 a.m.
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Conservative

Jacques Gourde Conservative Lévis—Lotbinière, QC

Madam Speaker, I am very pleased to rise here this morning to take part in the debate on Bill C-274.

I want to thank my colleague from the New Democratic Party for introducing this bill, an act to amend the Income Tax Act regarding the transfer of small business or family farm or fishing corporation. The member for Rimouski-Neigette—Témiscouata—Les Basques, from the province of Quebec, is the finance critic for the second opposition party.

I feel compelled to speak to this issue because many people in my riding, Lévis—Lotbinière, have expressed their concerns about this matter and what the Canada Revenue Agency is supposed to do.

Furthermore, my colleague from Portneuf—Jacques-Cartier had intended to move a motion or introduce a bill to change this situation after a number of his constituents expressed their serious concerns and fears. As everyone here knows, all parliamentarians have to wait their turn in order to introduce a bill or motion in the House. Unfortunately, my colleague was 214th in line to be able to introduce his bill, which meant he was very unlikely to introduce it before the end of the 42nd Parliament, which will end in October 2019.

This bill should go through second reading so that we can study all the tax implications and, most importantly, determine how it will contribute to the economic development of the regions of Quebec and Canada.

We believe that this government has not done what is necessary to support the economic development of our regions, and here is why. It appointed just one minister to look after Canada's six economic development agencies, when that minister is not familiar with the realities of all the regions of Canada, particularly those of Quebec, and likely never will be.

The Liberals have been in office for over a year, yet they still have not managed to sign a softwood lumber agreement. They also have not managed to create any jobs in Canada, except perhaps at the Office of the Conflict of Interest and Ethics Commissioner. They are setting up an infrastructure bank for projects of $100 million or more. They are even saying that investors would prefer projects of $500 million or more. However, if projects of $100 million or more or $500 million or more are required, the Lotbinière RCM, whose municipalities have an average population of 2,200, will not see a penny of that money for many years to come.

What is more, the government set up only a modest compensation program for farmers and cheese producers. However, these days, our dairy producers are very concerned, particularly with regard to the new and upcoming NAFTA negotiations. I can see why they are concerned, given the government across the way.

Let us not forget the most important thing: the government did all of this while completely losing control of the deficit. It announced a $10-billion deficit, which is huge, but now it seems the deficit is going to be closer to $30 billion. What is worse, the budget will not be balanced until 2055. There are many people here in the House who will not even live to see that happen.

This bill has to pass second reading stage so that we can provide a tool to help protect our seasoned Canadian entrepreneurs. This will also help ensure the prosperity of a business supervised by a parent who is committed to the success of the business. Parents are excellent mentors for the business, especially if they have been working at the business for 40 years. They have weathered a few storms and are certainly able to give the best advice to the future generation, often their own children or grandchildren. These entrepreneurs worked hard on developing their businesses. The least we can do is take the time to address this issue in the House.

Let us build on what Quebec did when faced with the same problem involving the sale of businesses between members of the same family. In 2015, the finance minister included measures in his budget to ensure that this type of transaction is taxed fairly and equitably for family members of small-business owners.

We must also encourage family solidarity and in doing so, protect our small and medium-sized businesses to ensure their survival and allow children and grandchildren to take over the operations and maintenance of their family business, both in Canada's cities and its vast rural regions.

Many business people are not motivated to transfer their cherished business to a family member. Imagine that you had to pay between $250,000 and $1 million more in taxes on a small business. This is quite different than selling the business to a non-family member. That is the lesser evil. What is scandalous is the demise of these businesses, which results in the loss of 15, 20, or 30 jobs in small communities of 1,000 people.

Future generations work in the family business. However, when the owners want to retire and enjoy a well-deserved lifestyle after having worked to build a good business, they do not want to give their money to the different levels of government. We all know that the best place to invest money in order for it to grow is in the pockets of Canadians and not in those of a Liberal government.

Anyone who can count and who is an entrepreneur at heart will perhaps prefer, unfortunately, to sell their business to someone else rather than to a family member, because today's tax system is not accountable to anyone and does not respect the contributions of those who have developed these businesses for the past 40 years.

We believe that the aging of our population will result in increased business transfers, and that most small businesses will sadly not make it out in one piece. The survival of small businesses is vital to job markets all across Canada, especially in the regions. Young entrepreneurs are having a hard time coming up with the capital needed to take over the business, especially since they have to borrow 30% more to ensure that their parents can have a decent retirement. Many entrepreneurs want their children or grandchildren to take over their business, which is only natural. When people invest 40 years of their life in a business, they usually want it to continue after they are gone.

We believe that horizontal equity, when it comes to taxation, is a fundamental part of ensuring a fair and competitive business environment. It is only fair that all Canadians should be treated equally when it comes to taxation, and not two different ways. It is unfair that there are two separate tax structures depending on whether business owners sell to their children or grandchildren, or to a stranger. We believe that the Income Tax Act penalizes families who want to keep the business in the family.

In closing, for all these reasons, and more importantly, because this government has not taken the necessary steps to support and develop our regions, which is very important, this bill needs to pass second reading. This tool will help protect Canada's experienced business owners and help guarantee millions of jobs for future generations. This is a good initiative and we will support it.

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:20 a.m.
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Liberal

Emmanuel Dubourg Liberal Bourassa, QC

Madam Speaker, I am pleased to speak to Bill C-274, which has to do with the transfer of family businesses, a subject I have been interested in for quite some time.

The first document I consulted was the December 2010 report by Suzanne Landry for Raymond Chabot Grant Thornton, a chartered professional accountants firm. Ms. Landry, who is now a professor at the École des hautes études commerciales de Montréal, identified a number of possible solutions in her report.

This bill targets one of the most complex parts of the Income Tax Act: the sections about transfers and the capital gains deduction, among others. We are talking about butterfly transactions. This has all kinds of implications.

Subsection 84.1, which this bill would amend, was included in the Act under tax avoidance to prevent fraudulent transactions involving the transfer of businesses among family members. Caution is vital here.

I wanted to bring in legislation on this when I was a member of another Parliament, the Quebec National Assembly. The finance minister and I had several meetings on the matter. I decided not to go forward because he told me that it would cost a lot of money and that this was the type of measure that needed to be passed by the Parliament of Canada in Ottawa.

Fast forward to November 2013 when I arrived in Parliament. I was still working on ways to rectify this injustice. That is why I introduced Bill C-691, but unfortunately, the session ended in June 2015 and we did not have the chance to debate it.

Let us talk about the impetus for this bill. Let us look at the statistics. We were told that 45% of jobs and 80% of new jobs in the private sector were created by small businesses. The Canadian Federation of Independent Business, the CFIB, said that 66% of small businesses would change owners over the coming decade and that a third of small and medium-sized business owners wanted to sell to family members. That is to say nothing of the youth unemployment rate.

Then there are the reasons why this bill is essential. I can also say that business succession is at the heart of this bill. Business succession represents an economic challenge because it requires a succession plan and choosing the successor. We must encourage the sale of businesses to family members because selling a business to a stranger could result in its relocation, benefiting the strangers.

The safeguards in this bill will ensure that the ones to benefit will be the middle-class families. Ensuring the sustainability of small businesses is also essential to the job market.

This bill has an end goal. The concept of transferring a business to a family member is simple, but the solution is complex. When a parent sells his or her business to a person who is not related by blood, marriage, or adoption, the parent can choose to not pay tax on the first $824,000 of taxable capital gains. However, if the business is sold to the son, the parent cannot use the capital gains deduction. This bill will address an unfair element of the law.

When I introduced Bill C-691, measures also had to be taken to prevent abuse.

First, I included a gradual cap so that, if a company's taxable capital was less than $15 million, the company would be eligible for the deduction. If the company made between $10 million and $15 million in taxable capital, then the deduction would be reduced because we do not want large companies to benefit from this type of deduction.

Second, after placing this cap on taxable capital, I introduced a measure that required that an affidavit of the transaction, issued by an independent assessor and indicating the fair market value of the business, be presented to meet the conditions of the transaction. The buyer also had to be over the age of 18. What is more, if the buyer had to resell the shares after less than two years, the initial transaction would be deemed to have never occurred.

When I introduced the bill, it received the support of my NDP colleague and the the Canadian Federation of Independent Business, which was very important. When I held a press conference about the bill, representatives from the Canadian Association of Family Enterprise or CAFE were there with me to show their support. The Canadian Federation of Agriculture, which is made up of all the main farming associations in the country, and the Regroupement des cabinets de courtage d’assurance du Québec also supported the bill. It is important to mention that, in recent years, the Quebec CPA Order has raised this issue every time it has participated in pre-budget consultations.

In conclusion, I am certain this bill is the solution. I am glad that both the NDP and the Bloc Québécois decided to reintroduce it. However, there are a number of things to consider when we vote on this bill, cost being one of them.

I consulted the people at the Library of Parliament, and they told me that, in 2012, transactions involving eligible shares of small and medium-sized businesses amounted to more than $5 billion. In their tax returns, people cannot specify which transactions occurred at arm's length, so the Library of Parliament's findings are based on estimates.

They told me that, in 2012, transactions totalling $5 billion were carried out by more than 20,000 people. Supposing one-third of the transactions occurred between related individuals, such as 6,000 parents selling their businesses, giving them favourable tax treatment would cost the public purse no less than $300 million.

The Liberal government stated that it absolutely wants to help the middle class. Bourassa, the riding I represent, is struggling economically. Every month there, 19,000 children collect more than $8 million in Canada child benefit payments. By comparison, the cost of this program is exorbitant because it would cost $300 million to help 6,000 people.

In conclusion, yes, it is not fair, but present circumstances dictate that we take all of the factors into account to make the right decision. That is what we will do on Wednesday when we vote on Bill C-274.

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:10 a.m.
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NDP

Karine Trudel NDP Jonquière, QC

Madam Speaker, today I am so very pleased to add my voice to the chorus of those across Canada who support Bill C-274, an act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation). I would like to thank my colleague from Rimouski-Neigette—Témiscouata—Les Basques for introducing this bill. I know he worked long and hard to make sure this bill is written in such a way as to protect everything that matters to our small businesses.

As we all know, our small and medium-sized businesses are the bedrock of our economy. Whole families make a living thanks to them.

I am from Saguenay—Lac-Saint-Jean, where life can be very different from that in big cities. Many of my colleagues, such as those from Abitibi and the Lower St. Lawrence, as well as some of the other provinces, are familiar with those differences.

The reality in our regions, in places like Saguenay—Lac-Saint-Jean, is that there are often only two, three, or four large businesses that contribute to their economies. Most of the time, small and medium-sized businesses are the main contributors. Many of our small businesses have only three or four employees, but they are what are sustaining our regions. We are seeing this more and more. The men and women of our regions are developing projects and new ideas and are doing their part every day to keep our regional economies going.

At the same time, our small and medium-sized businesses are facing many problems that make it harder for people back home to succeed. For example, the customer base is much smaller in our region.

Another problem is the shortage of young people willing to take over these businesses. It is really hard for SMEs to find people to take over, so when an entrepreneur is lucky enough to have someone in their family they can count on to take over the family business, that creates wealth for our communities. When people are lucky enough to have a family member to carry on a family business, it means they can pass down traditions, and for some, even memories. It means they can pass on what they have learned through experience and hard work.

Unfortunately, there is a great injustice. Federal legislation penalizes business owners and dissuades from passing on their life's work to members of their family. The reason is quite simple: when a business is sold to the owner's children or another relative, the profit from the sale is considered a dividend and is taxed as such under the Income Tax Act. On average in Canada, a dividend is taxed at roughly 35%.

If the business is sold to someone who is not part of the family, who is not a relative but a stranger, then the profit is considered a capital gain. In that case, there is a lifetime exemption of roughly $825,000 for a business and about $1 million for a farm or a fishing vessel. The remaining capital gain is taxed at about 25%, on average. That explains the difference between the sale to a stranger and the sale to a child or another family member.

We have to do something about this unfair situation. I have met with business owners in my region. They all agree on this. That is why various stakeholders in the Saguenay—Lac-Saint-Jean region support Bill C-274.

I will quote Carl Côté of the Saguenay-Le Fjord chamber of commerce and industry.

Business succession is a major economic issue, especially in remote areas. Family businesses play an important role in economic development and they must have support. At present, they are subject to very unfair tax treatment. Family business succession is an issue that we are following closely...

The former president of the Union des producteurs agricoles du Saguenay—Lac-Saint-Jean, Yvon Simard, believes that it is appalling that, in 2016, the dismantling and sale of companies to a stranger is subject to less tax than the sale or transfer to a family member, someone who could pursue their parents' dream and continue farming in the Saguenay—Lac-Saint-Jean region.

When we contacted businesses in my riding, dozens responded and supported the NDP's efforts. Many deplore the current situation and hope that this injustice will be addressed.

I would like to read a few comments I received about this. They paint a clear picture of the reality facing small businesses and what the people of Saguenay—Lac-Saint-Jean are going through.

A motel owner said that this is a major problem and that his father thought about selling the business to a stranger because it was more beneficial for him than to sell it to a family member.

Another business owner said the following: “I co-own a business with my son, so who do you think I will sell my shares to? However, by selling to my son, I am going to lose a lot of money. It is not fair.”

Finally, the owner of a small business said, “Two years ago, I sold my business to my son. It is unacceptable that I was penalized because of this unfair provision. It is a double standard.”

It is completely unacceptable for these business owners to be penalized for selling their company to a family member. We are not talking about opening the door to tax avoidance. We are talking about correcting the inequity that exists in the Income Tax Act, which considers the sale of a family business or farm to be a capital gain. Things should work the same whether the business is sold to a family member or a stranger. Bill C-274 simply seeks to correct the inequity, so that the process is the same regardless of whether the company is sold to a family member or a stranger.

In my opinion, my colleague's bill is well written and prevents tax avoidance. The bill is very clear about that. Our SMEs should not be penalized because of this inequity.

It is high time we abolished the unfair tax on the transfer of family businesses. When a business is transferred, potential buyers who are related to the owner should have the same rights and privileges as those who are not.

In closing, I would like to emphasize that all regions will benefit from this. This bill is good for everyone. It is good for our small and medium-sized businesses. In my region, Saguenay—Lac-Saint-Jean, this is the kind of positive change we really need to help revitalize our local economy.

I invite my colleagues in government and in opposition to consider the economic and social benefits of the bill. Facilitating the transfer of family businesses will help make our regions stronger. Something we talk about a lot in the regions is the retention of young people. My riding, Jonquière, is home to many farms and small businesses. We talk about the exodus of young people, who leave to work in big cities. Bill C-274 will boost local economies. Family farms are usually passed down from generation to generation. I visited a farm last winter, and the owners told me that it had been in their family for four generations.

I invite all my colleagues to vote in favour of Bill C-274, introduced by my colleague.

Income Tax ActPrivate Members' Business

February 6th, 2017 / 11:05 a.m.
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Conservative

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

Mr. Speaker, I am proud to rise in the House today as the MP for a rural riding with an abundance of small and medium-sized businesses and plenty of family farms that go back more than 10 generations.

The work they do contributes to Montmagny—L'Islet—Kamouraska—Rivière-du-Loup's prosperity and entrepreneurial culture. I want to inform my colleagues that the Canadian Federation of Independent Business recently named Rivière-du-Loup the top entrepreneurial city in Canada in its fall 2016 ranking, this just a year after it was recognized as the most entrepreneurial city in Quebec.

There is no doubt that my riding and Rivière-du-Loup in particular are going full entrepreneurial speed ahead.

As a Conservative, I am proud of the previous government's record with respect to job creators. Our government reduced the corporate tax rate from 22% to 15% and the small business rate to 11%. It also increased the maximum revenue threshold for small business tax rate eligibility from $300,000 to $500,000.

As an entrepreneur myself who has created 20 or so jobs over the past 25 years in the printing industry in my region, I understand the importance of maintaining a tax system that favours entrepreneurship. Small businesses are the backbone of our economy. They created over 77% of all new jobs from 2002 to 2012.

People go into business for a variety of reasons. Some people are motivated by their passion, while others see a service gap that needs to be filled in their respective communities. For the most part, people go into business in order to meet their needs and those of their family. That is what I did myself in 1993 when I started my business.

We do so with the fervent hope that, one day, our children will take over our businesses, and we are eager to see them make our businesses flourish and build an even better future for our regions.

In my case, I fully intend to transfer some or all of my family business to my daughter at some point. I am extremely proud of my daughter, who has been working with me in my business for the past three years now.

I was very surprised to learn that, under Canada's current tax laws, it would be better for me to sell my business to an outside third party rather than to a member of my own family.

Essentially, 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 as regular income 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 in this case.

What type of message does that send? Does this not discourage people from starting a business?

What we want is to ensure that our country's economic growth continues to expand. For that we need to encourage people to get into business. When people who have been in business for 25, 30, or 40 years are ready to hand over their shares to their children, it is not right to put them at a disadvantage. The same advantages should apply whether the business is sold to a third party or a family member.

An estimated 550,000 business owners are going to want to sell or transfer ownership of their business over the next decade.

According to the Canadian Federation of Agriculture, over $500 billion in farm assets are set to change hands over the next 10 years. That is not to mention the over 8,000 family farms that ceased operations in the past decade. The population is aging, yet only 50% of these farm owners have a succession plan.

I would like to remind members that the Lower St. Lawrence region has one of the largest aging populations in Canada, which means that there are fewer opportunities to sell our businesses to future generations.

Given the aging population, three out of four farmers intend to retire in the next 10 years. It is therefore urgent that we correct the discrepancy in the Income Tax Act so that we are prepared for the upcoming demographic reality. That is why I support Bill C-274, which was introduced by my riding neighbour, the hon. member for Rimouski-Neigette—Témiscouata—Les Basques.

This bill caught the attention of the Rivière-du-Loup RCM in the Lower St. Lawrence region, which wrote a letter in the fall indicating its support for Bill C-274. The Rivière-du-Loup RCM's chamber of commerce did the same. Support is growing across Quebec. The Association des marchands dépanneurs et épiciers du Québec has spoken out against the existing situation, and the Union des producteurs agricoles and the Board of Trade of Metropolitan Montreal have both indicated that they are in favour of this bill. All of the major opposition parties support this bill. It remains to be seen whether the Liberal government will also support it.

I think this is a good opportunity for the Liberals to redeem themselves after breaking their election promise to cut corporate taxes from 11% to 9%, voting for an increase in CPP contributions, and imposing a carbon tax on a still fragile economy.

Bill C-274 is an opportunity for the NDP, the Conservatives, and the Liberals to join forces and quickly pass a bill that would recognize that small businesses and family farms are important to Canadian society. I encourage each one of my colleagues to say yes to Bill C-274.

In closing, I would like to add that there is widespread support for this bill across Canada and especially in rural areas, where families create small businesses and support them from one generation to the next. I sincerely believe that these families must have this opportunity. Just imagine that I were to sell my business to my daughter. I would have to pay 100% of the tax instead of 50%. If I only had to pay 50% of the tax, I could continue to help my daughter grow her business. That money would certainly go back into the economy.

Once again, I invite all my colleagues to support Bill C-274.

The House resumed from November 24, 2016, 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.