Bill C-208 (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.

[The Chair, Liberal, Wayne Easter]

I call the meeting officially to order.

Welcome to meeting number 23 of the House of Commons Standing Committee on Finance. Pursuant to the order of reference of January 27, 2021, the committee is meeting to study Bill C-224, an act to amend an act to authorize the making of certain fiscal payments to provinces, and to authorize the entry into tax collection agreements with provinces. We will be meeting on Bill C-208 in this committee meeting as well. Larry Maguire will present his bill.

Today's meeting is taking place in a hybrid format, which we've all become used to, pursuant to the House order of January 25, 2021. Therefore, members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website.

We will not go through the rest of the formalities.

We will start with Mr. Gabriel Ste-Marie's bill, Bill C-224. We will go through clause-by-clause consideration. I hope people have the bill before them. It's not like we're in Parliament, where we can hand around fairly short bills.

Pursuant to Standing Order 75(1), consideration of the preamble will be postponed.

(On clause 1)

I will call for the vote on clause 1, which has four proposed subsections.

I expect you want a recorded division on this, Mr. Ste-Marie.

[The Chair, Liberal, Wayne Easter]

Next week is tied up with the law clerk and Bill C-208. The following week, there will probably be another session on Bill C-208. That's Larry Maguire's bill. We'll have to see what comes at us from Parliament after that.

Our intent is to keep going with witnesses on COVID-19. You can see the good ideas that are coming forward. We can be helpful to everyone in terms of providing that information up the line. That's the intent.

I'll ask the clerk to confirm, but we already have 40 or 50 witnesses on the lists from the parties. We'll have to sit down as a steering committee and set some priorities after we get through next week.

Thanks to all.

The meeting is adjourned.

[Daniel Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business]

Thank you very much, Chair and members of the committee. It's great to be with you again.

I want to share with you some new data from CFIB—we just put some out this morning. Of course we also have a few recommendations for you.

A deck was sent around in English and French. You should have that, members of the committee. I wanted to walk you through that.

Businesses in Canada remain really shut down. On average across Canada, only 51% of businesses are fully open at this stage. The number is lowest in Ontario, while some provinces, particularly Atlantic Canada and some of the prairie provinces, are doing better than that.

On the staffing side, only about 40% of businesses are at normal levels of staffing, meaning 60% of them have fewer staff than is normal for them at this time of the year. Most concerning of all, only 25% of business have normal or better revenues than they usually do at this stage in the game.

Small businesses are deeply concerned about the economic repercussions of COVID. Of course, this started out as a health care emergency and quickly morphed into an economic emergency, but there are a great many worries on the part of small business owners, such as economic repercussions, consumer spending concerns even following COVID, the sluggish vaccine rollout, their business cash flow, debt and stress. These are some of the things small business owners are telling us.

I want to flag some brand new data that I mentioned we just put out today. One thing the committee should be very concerned about is the amount of COVID-related debt small businesses have incurred since the start of the pandemic. Right now, across Canada, it is $170,000 on average for a small firm in new COVID-related debt directly attributable to the pandemic. Bankers will tell you it's not that businesses have been rushing out and borrowing a whole bunch more money. It's typically unpaid bills that are the largest chunk of the debt. A lot of that is due to landlords, in part due to some of the failures of earlier rent relief programs. I agree with the previous speaker that the new rent support program is a much better version, but it's still not delivering in sufficient quantity to businesses that are being affected. That's $170,000 in debt, on average, across Canada.

Our estimate at CFIB, based on our member data, is that one in six businesses across Canada is at significant risk of closing. That means there could be 181,000 fewer small, independently owned and operated businesses across the country that go bankrupt or wind down permanently, directly as a result of COVID and the damage they sustained over the course of the emergency. That would represent 2.4 million Canadian private sector jobs being taken out at the same time.

Data from StatsCan will tell you that in fact business bankruptcies to date are actually lower than is normal. They too have been affected by the COVID emergency. Many firms are existing right now on government subsidies, and as those subsidies start to be taken out of the economy—and we all hope one day we can replace subsidies with sales—many business owners are worried they're not going to make it, especially, as I shared previously, due to the amount of debt they've gained over the course of the pandemic. That's one in six businesses, or 181,000, on top of the 60,000 Canadian businesses that have already gone bankrupt over the last little while. That means there could be a full wipeout of 20% of Canada's small and medium-sized businesses.

The government has created a number of very helpful programs, and I credit the finance committee and the government itself—with opposition parties, of course, contributing to this as well—for the creation of many of these programs. It was slow. It was incomplete. There remain hundreds and hundreds of different exemptions and rules that have made tens of thousands of business owners slip through the cracks of the program, but many have been helped. Sixty-five per cent of our members have used the CEBA bank account, which has now been topped up to $60,000 loans. Fifty-nine per cent of our members have used the wage subsidy—the CEWS program.

The Canada emergency response benefit—CERB—or the new one under EI has been used by entrepreneurs themselves. Twenty-eight per cent of business owners have used those programs. However, even now only 26% of small businesses are able to use the rent support program, because there remain a number of significant gaps.

We've put forward six major recommendations. We've presented these to Finance. Let me just run through them quickly.

We're asking the government to extend and expand COVID support until the entire economy can recover, including reopening Canada's borders. Really, the sign that government can start to scale back subsidies is when federal and provincial governments can stop telling Canadians to stay at home. Until we're at that point, we would not advise ratcheting back the subsidies that are provided to businesses to keep them alive, because so many businesses need that face-to-face interaction with a customer in order to make a living.

We're asking you—we're pleading with you—to put a moratorium on any new taxes and costs to small businesses. We just can't handle them. We're unhappy that CPP premiums went up at the beginning of this year, in the middle of this terrible time. We're asking you to delay further increases in CPP and the increases planned for the carbon tax—or at least to provide a full rebate to the businesses that are affected by it—and to freeze the liquor tax escalation.

We really think that forgiving more small business debt is a chunk of the solution here, and there are pathways in existing programs. One-third of CEBA is now forgivable if you repay the balance. Something similar to that could be adopted with the new HASCAP program, which we think has some potential.

A hiring incentive would be a good idea as we transition from a shut-down economy to a reopened one. Cutting red tape should be made a priority, as should holding off on any consumer stimulus. I'm really worried that the government may embark upon a big consumer stimulus measure. While that might be helpful to some, if we do that too early, businesses that rely on face-to-face transactions, which have been the ones that have been hardest hit, will not benefit from it, because of course that money will be going to the parts of the economy that have remained open.

As I close, I also just want to commend the finance committee on the great recommendations in its recent report. Many of the all-party recommendations, as well as some that were put forward by the parties, make a lot of sense.

One of the ones I want to highlight, which we love, is making good on the Liberal party promise to small business owners to eliminate credit card processing fees on sales taxes. That, we believe, would save small businesses $500,000 a year. It was a promise in the 2019 Liberal party platform, but we've seen no signs of that proceeding and we urge the committee to keep the pressure up.

We strongly support Bill C-208, which the Conservatives have put forward. That would allow for the same tax benefits for parents selling their farm or small business to a child or family member. That's a great move and would be welcomed by farmers and business people across the country. We have listed a few others there as well, but I know we're tight on time.

Thank you, again, committee. A lot of good work has been done, and I'm happy to take any questions at the appropriate time.

[The Chair, Liberal, Wayne Easter]

Okay, we are going to have to end it there. We have a hard stop at 6:00 tonight Ottawa time.

I think Julie raised a question raised on where and how many job losses outside of Quebec. Whether you can answer that or not, I'm not sure, but if you could send any information on that to the clerk, that would be helpful.

Usually when we talk to CRA, it isn't an exciting discussion as a rule, but as Julie and Michael said, this was a really interesting discussion this afternoon, and I want to thank all of you for outlining your points pretty directly. We had a very good discussion, so thank you very much to the witnesses for that.

To committee members, on Bill C-208, we haven't made a lot of decisions on how we want to handle that. We know that Mr. Maguire is coming before the committee.

Could I suggest, for the moment, that we try to arrange a three-hour meeting for witnesses on Mr. Maguire's bill? We could have two panels, an hour and a half each, and four witnesses on each of those panels. We could start with eight witnesses. That would be a start. It might be enough to complete it; I don't know.

In any event, if members could have their witnesses in as soon as possible from the various parties, that would be great. We'll start with eight, we'll try for a three-hour meeting and we might be able to get it. We'll see what happens.

If there's no disagreement on that point, all right, folks, the meeting is adjourned.

Again, thank you to the witnesses for the presentations today and a very interesting discussion.

Agriculture Day

[Alex Ruff, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Speaker, today is Canada's Agriculture Day, when we show our appreciation to our resilient and hard-working farmers and farm families. I have heard first-hand from farmers in my riding how they have overcome immense adversity since the start of the pandemic, with processing delays and border restrictions affecting the movement of workers and products.

The government has the opportunity now to take action and reduce the burdens on our farmers by implementing rapid testing at the border, to reduce the isolation period for temporary foreign workers, thus allowing workers to start on time; by adopting Bill C-206, which would cut costs for farm families by exempting propane and natural gas from the carbon tax for farmers; and by adopting Bill C-208, in order to maintain the strong tradition of family farms in Ontario and Canada. Finally, the government must stand up for Enbridge's Line 5, as it is a crucial lifeline for our farmers, other industries and the environment. Replacing this pipeline would require 2,000 trucks or 800 rail cars daily to meet the current need.

On Canada's Agriculture Day, I urge the government to implement these tangible measures to support our farmers. For all they do for us, it is the least we can do for them.

[Raj Saini, Liberal, Kitchener Centre, ON]

Mr. Albas, as you can appreciate, M-34 was sent by the House, just like Bill C-206, I believe, or Bill C-208 was sent from the House. Those are two separate things. This is a Liberal Party motion, just like the other parties are putting in other motions, but the other two studies referred to are from the House, not from a particular political party.

Canada Labour Code

[Eric Duncan, Conservative, Stormont—Dundas—South Glengarry, ON]

Mr. Speaker, it is a pleasure to rise here today in support of the positive words and well-deserved comments made so far on Bill C-220. I congratulate my colleague from Edmonton Riverbend for his work on this and for garnering support. Hopefully, if we go by the optimism and tone tonight, we can get it to committee to get more feedback and work together on how we can support caregivers and people in their time of need.

I am proud to be one of the members to have seconded this bill. It was good to get bipartisan support for the idea it puts forth in the first hour of debate we had on this bill last fall.

We have had a pretty good week when it comes to votes on private members' bills. There was Bill C-208, a Conservative bill, on the transfer of family farms. It got good bipartisan support. It is a very good common-sense piece of legislation that is moving forward. There was also Bill C-204, which takes real action on environmental protections by banning the export of plastic waste. When we get back from the break week, if we have a vote on this, I hope we will have another Conservative private member's bill that is making good progress and helping people.

For those who are not as familiar with it, the bill before us deals with compassionate care leave. We have that in our country for up to to 28 weeks through the EI system to help those who need to provide care to loved ones in their final days. One of the challenges we have is as an NDP member said in the first hour of debate in noting that there is a bit of a rough edge when it comes to the end of compassionate care leave. When caregivers lose their loved ones, they are expected to go back to work quickly. We need to address that. This bill certainly makes progress in doing that.

I want to give context and clarification to my constituents in Stormont—Dundas—South Glengarry who are watching this and Canadians who are interested in supporting this bill.

Due to a technicality in the private members' bills process, my colleague from Edmonton Riverbend cannot propose the spending of dollars without a royal recommendation and technical process. We cannot force the government to spend dollars through the regular EI program; that would have to be proposed by the government. I think getting this bill further, making that progress and passing this bill would build momentum to encourage the government to act on this.

What we are able to do as a Parliament through the private members' bills process is to amend the Canada Labour Code covering federally regulated workplaces, such as air transportation, banks, radio and television communications, railways, Crown corporations like Canada Post, and telecommunications. I think of our family trucking business, which would fall under this because of our cross-country work. Many trucking businesses would fall under this. Therefore, through this private member's bill we are able to address it in the Canada Labour Code.

The bill addresses a gap in compassionate care leave with respect to bereavement. The statistics show that about one in every four workers is a caregiver to someone in need. Currently, we have the EI process that has seen a lot of positive modernizations by governments. I am proud of our Conservative record when we were in government of expanding EI for maternity leave, looking at compassionate care leave, and making enhancements over the years. This is something that can build on that next layer, that next level of support that we need to do.

Here is why we need to do this. There are about three key points in this.

First, if the loved ones of family caregivers pass away, the family have to go back to work within a matter of a couple of days. We are lacking in that respect in our compassionate care policy in this country.

Second, there are a lot of things that family members need to attend to from a technical perspective, such as a funeral, insurance benefits and estate situations. In my constituency office we work with a lot of families on the CPP death benefit or other paperwork and things that need to be returned or closed on a file.

The third point is very relevant, but we have not talked about it as much during this whole debate, and that is the mental health of those caregivers as part of the bereavement process. It certainly has been tough during COVID-19, but that has always been the case when people have to return back to work quite quickly. I was proud to see many colleagues from all parties celebrate the amazing progress we have made with the Bell Let's Talk Day in raising awareness and reducing the stigma of mental health challenges.

This bill is a perfect example that we can go back to our constituents with and say that we are actually making things better, that we are doing things here in Ottawa that can help people in their time of need.

My colleague's bill, which I am proud to support, does that. It looks at where we are able to make these changes so that we can give up to three weeks of additional compassionate care leave in federally regulated workplaces to an employee to deal with grieving and bereavement after their loved one's life has ended.

What I like about this is our effort on this side of the aisle to show pragmatism and talk about a sliding scale, where someone could get up to three weeks of compassionate leave, depending on how much leave they had taken before their loved one's passing. I think it is pragmatic and reasonable, and it is exactly what we need to do to make a step in the right direction. If we can get this is in place we could also encourage the government and Canadians to support enhancements to EI in how we do this.

I want to note the overwhelming support from stakeholders who deal with caregivers, bereavement and illness across this country. There is a great cross-section of people on board in support of this bill: the Canadian Grief Alliance, the Canadian Cancer Society, the MS Society of Canada, the Heart and Stroke Foundation—

Opposition Motion—Special Committee on Canada-United States Economic Relationship

[Larry Maguire, Conservative, Brandon—Souris, MB]

Madam Speaker, it is an honour to be able to speak to the opposition day motion put forward today. I want to thank my colleague, the member for Calgary Centre, for his excellent presentation and for sharing his time with me today.

When we look at the nations Canada trades with, we see there is nothing more important than our relationship with the United States. As with all relationships, though, we cannot take this one for granted. As a farm leader, an MLA and now a member of Parliament, I have had a front row seat to some of the ups and downs of the politics of that trade relationship.

Throughout the years, I have attended many Midwestern legislative conferences in the U.S., as well as some in Manitoba when I was there, which provide an opportunity for elected Canadian representatives across the Prairies to meet with their American counterparts from the Great Plains and Midwest industrial states.

At those conferences, there was an opportunity to meet countless people, and I quickly learned that they are facing many of the same challenges we are. I mentioned the Midwestern legislative forums. I attended them in Michigan; Kansas; Des Moines, Iowa; and one in the Pacific Northwest, out in Whitefish, Montana, as well.

At these conferences, we learned a lot about the interchange of the relationship that we have with our American counterparts. As I said earlier, many of the issues are very common, particularly on the trade side. When the U.S. put its first farm bill in place in 1986, I was in Kansas.

Whether it is logistical or regulatory barriers, or just plain old politics, we get a better understanding of what is at the root of some of the trade disputes that still linger to this day. We do not have to look far for those examples, such as with softwood lumber or the country-of-origin labelling that we had for beef.

Trade disruptions over the years have negatively impacted numerous Canadian exports. More recently, NAFTA was renegotiated, and we witnessed the former U.S. administration impose a 25% tariff on imports of Canadian steel, and a 10% tariff on imports of Canadian aluminum.

Regardless of who occupies the White House or controls Congress, we must always be cognizant that with the stroke of a pen many of our industries and people's jobs could be severely impacted. I applaud our Leader of the Opposition for taking the proactive step of putting forward this motion to create this new special committee.

When I was first elected to the House of Commons in 2013, the now Leader of the Opposition was the parliamentary secretary to the Minister of International Trade. At that time, the Canada-Europe trade agreement was still being negotiated. The member for Durham visited my constituency to meet with agricultural and business leaders about this new opportunity, and what an opportunity it was.

Trade is at the heart of our region's economy. Western Manitoba's exports are based primarily on agriculture, livestock and natural resources, alongside manufacturers, such as Behlen Industries, which are major employers in our region. To put a number on it, the latest data from the Government of Manitoba on agricultural exports stated that the American domestic market is worth over $2.6 billion per year for the province of Manitoba.

Let us never forget, there are almost as many people living in the National Capital Region as in the entire province of Manitoba. By far, Americans are Manitoba's largest foreign customer, with the second-largest being Japan. Trade with Japan amounts to roughly $896 million a year.

Manitoba's canola exports alone to the United States are worth over half a billion dollars, followed by processed potatoes, oilseed cakes, hogs and cattle. The economic prosperity of almost every community in my region is directly tied to the success of exporting many of these agricultural products.

Due to the importance of this trade relationship, coupled with the new U.S. administration, it is imperative we have an ability to work on this issue, in conjunction with whatever our committees decide to study.

As with many issues, there is a lot of crossover between the various parliamentary committees and stakeholders. The agriculture, industry, natural resources and transport sectors want to be heard and will want to know the government's strategy moving forward.

Just this week in Congress, Tom Vilsack, who was nominated by President Biden to be his agricultural secretary, received a unanimous vote from the Senate agriculture committee and is expected to be confirmed by the overall Senate in the days ahead. Secretary Vilsack even joked that it felt like Groundhog Day during his Senate confirmation hearing, as he was President Obama's agriculture secretary during his entire eight years in office.

The United States and Canada enjoy the world's largest bilateral agricultural trade relationship, with almost 120 million dollars' worth of food and farm products crossing the border every day. In the last couple of years, the United States Department of Agriculture has created an undersecretary of trade position within the Department of Agriculture itself to work solely on trade policies directly related to agriculture. I say this just to emphasize the importance of that trade arrangement.

As is to be expected, the U.S. is on the offence. It is looking to expand its market opportunities not only here in Canada but also around the world. Americans might be our friends and allies, but I have always stated they are also our competition.

In the spirit of collaboration, I truly hope we can pass this motion and immediately get this new committee up and running, because I think the Liberal government could benefit from the insights and experience of many of our Conservative caucus members. While I am not lamenting this, there is not a Liberal MP from Winnipeg to the greater Vancouver area, and between those two points there are thousands of farmers and agri-food industries. As a member who represents a lot of farmers, I have grave concerns about the government's track record on agriculture.

As an example, we saw how long it took the government to respond to the Chinese government blocking Canadian canola shipments. In fact, we had to call emergency committee meetings to even discuss the issue. I remember the procedural manoeuvres the government took to ensure we could not even request an emergency debate in the House. My point is not to rehash these issues, but to learn from them. We must be proactive on potential trade disruptions. I believe this new special committee will provide an appropriate avenue to do so.

We know there are going to be issues in the coming months relating to pipelines, as has been mentioned by many of my colleagues today, and the buy America procurement rules. Our Canadian economy cannot afford any more trade disruptions. We need to get all our sectors back up and running, and we cannot afford to be caught asleep at the wheel. Our constituents are counting on us to get this right.

As a believer in free trade and free markets, I want to create the right conditions for entrepreneurs, business people and farmers to flourish. It is part of the reason I brought forward Bill C-208 yesterday in the House. I thank my colleagues for their support on that. Canada must be a place where no ambition is too big and no federal government will stand in the way of people working hard to get ahead.

A dynamic economy where businesses are forming and hiring is what is needed. A free market economy is a social institution that harnesses human creativity and ingenuity for the benefit of everyone. There is not enough money in all the government coffers in Ottawa to replicate what entrepreneurs and risk-takers do every single day. Let us work together to make sure our farmers, businesses and manufacturers have a stable and predictable American market they can sell into.

(The sitting of the House was suspended at 5:39 p.m.)

(The House resumed at 5:55 p.m.)

The House resumed from February 1 consideration of the motion that Bill C-208, 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.

Income Tax Act

[Larry Maguire, Conservative, Brandon—Souris, MB]

Mr. Speaker, I ask for a recorded vote on my private member's bill, Bill C-208.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Mr. Speaker, it is my privilege to be here in the House today. As I said on November 25, “it truly is a humbling moment to stand in this chamber and put one's name to legislation and ask one's colleagues to support it.” That is an extremely important part of private members' bills and it has been recognized by my Liberal colleague today, and I thank him for his comments as well. I will refer to that in a moment.

I want to thank my colleagues in the House for supporting this bill on small businesses and the idea making it fairer for people to sell their business to their own family members directly, as opposed to selling it to a complete stranger or a third party that they may not have any connection with.

The bill and the bipartisan support I have seen in the House are tremendously important. Here I want to congratulate my former colleague, the interim leader of the NDP, Mr. Guy Caron, for bringing this bill forward to start with and for the support of the Bloc, which a couple of speakers have pointed out here today, as well as in the first hour of the second reading of the bill on November 25.

This legislation impacts every corner of Canada. It impacts every one of us in the House, all 338 of us. We all have small businesses in our ridings and I want to refer to the words “small businesses”, as some of my colleagues who have spoken today have addressed the fact that this is for small businesses, not big businesses. There is a huge difference that I want to point out to my colleagues in the House, and they know that.

The bill refers to family operations in fishing, farming and other small businesses in Canada that have been built on the pride of ownership and the hard work that their families have done throughout Canada, and it in no way is trying to provide any kind of loopholes. In fact, the bill is very clear and has gone to great lengths, which Mr. Caron and I have studied, to make sure that its wording will not allow those types of situations. As I said, it would be pride of ownership for people to be able to build a small business into a larger business, but once they do that, the things we are talking about in this bill are not relevant to those businesses.

The outcome of bill will have very little impact on the government, as my colleagues have pointed out today. It will have very little financial impact on the federal government, but a huge impact on the currency that is available through small businesses to every region of this country, particularly during this pandemic. All small businesses are struggling. It is not their fault, but they are struggling right now and the bill would go a long way toward helping all of them alleviate some of the stress and strain of being able to hand their business directly down to their own son, daughter, granddaughter or grandson. That is whom this applies to. It is very narrow in its scope in that way.

It is inherently unfair for small business persons to pay disproportionately higher taxes if they sell their operation to their own children than if they did to a complete and absolute stranger. We have referred to the difference between selling to their family as a dividend, or to a stranger as a capital gains exemption, which amounts to a difference of hundreds of thousands of dollars to small businesses.

In making this change, it will allow the next generation to become business owners and to be able to carry on those businesses and to keep jobs in their local areas. Moreover, the funds the younger generation provide to the older generation are generally used for retirement, because a lot of funds that are earned during the small business development are going into the business to keep it afloat and expanding so that they can have that pride of ownership for their families in the future.

I want to close by asking all members to support Bill C-208 to encourage small business development in our country.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mr. Speaker, today's debate is about Bill C-208, an act to amend the Income Tax Act with respect to the transfer of small business or family farm or fishing corporation. This is a very important issue, and I am concerned about the government's ongoing failure to take action on it. This problem comes back year after year, and it has still not been resolved.

In Quebec, one in three SMEs is a buy-out. That means that one-third of Quebec's small businesses were existing businesses bought by someone else. That is a big deal, yet the government penalizes people who want to transfer their business to a family member. In 2018, it was estimated that 30,000 to 60,000 Quebec businesses would not find a buyer in the years to come, yet the government is actively penalizing people who want to buy out the family business. It would rather those businesses disappear or be sold to strangers. That is just great.

In the agricultural sector, Quebec is losing one farm a day. We know this, we talk about it and we speak out against it. The fishing sector is no different. Fifty years ago, fisheries were flourishing in the regions, but today, fishing villages are disappearing one after the other. This is sad, but it is partly due to inaction by this government and, obviously, governments before it.

During my previous term, from 2015 to 2019, I introduced Bill C-275 to address this issue by allowing family businesses to be transferred to members of the same family. I was made aware of this issue by some of my constituents, including Mr. Tremblay, from Armoires Tremblay in Saint-Mathieu-de-Belœil. Mr. Tremblay was in his 30s and his father owned a small, family-owned cabinetmaking business. His father wanted to retire and was waiting to sell his business to his children, in the hopes that one day the act would be amended and allow him to do so without being penalized.

Right now, the government assumes that people who sell their business to their children are fraudsters. It thinks that they will not set the price at fair market value, so it decided to tax the entire profit generated by the transaction. The problem is that a small company can quickly grow to be worth one, two or three million dollars, even if it does not employ a million people, but rather three, four, five, six or 20.

We cannot ask young people who want to take over from their parents to withdraw two million dollars from their bank account. Very few people in their twenties and thirties can withdraw one million dollars from their bank account. That is the problem. The government thinks that people who sell their business to their children are fraudsters because they will give them a better price.

That means that they will not be able to sell unless they sell to strangers. Businesses will have to close because there will be no one to take the reins. It is really frustrating to see how the government refuses to recognize and resolve this problem year after year.

Not so long ago, I was discussing this with an old school friend, Marc-André Daigneault. His parents have a company called Revêtement RJ. The same thing happened to him. His parents wanted to wait to sell their company in the hope that the rules would one day change. He is saddened by the fact that young people cannot take over their parents’ companies because the government does not want to modernize and change the legislation.

At the time, I had tabled a bill that was similar to Bill C-208. The NDP found the bill so appealing that it decided to copy it, and the former NDP member for Rimouski, Guy Caron, tabled it himself. I would not want to take all the credit for the bill, because this is something the Bloc Québécois has been fighting for for 15 years. As early as 2005, a Bloc Québécois member introduced a bill seeking to address the problem of passing down family businesses from one generation to the next.

I am an accountant by training. In my university years, when I learned the tax rules and understood that people could not pass a business down to their children—well, it is possible but very disadvantageous from a tax perspective—I was really frustrated and could not get over it. All of my classmates and professors agreed with me. If we visited a tax school, an accounting office, a lawyer’s office or any university and asked an accounting or tax professor what they thought of this, they would tell us that it makes absolutely no sense. Unfortunately, the government is digging in its heels and preventing family businesses from being passed down to the next generation.

In June 2015, however, the Liberal member for Bourassa introduced a bill concerning the passing down of family businesses. He said that it was his first bill and that it was extremely important. That was in June 2015. When the Liberals came to power in October 2015, just a few months later, they were suddenly against it. It seems that the Liberals promise all sorts of things when they are in the opposition but do not follow through when they get to power .

As my colleague from Rivière-du-Loup pointed out earlier, this is not a partisan approach. My Conservative colleague said he thinks transferring family businesses is important. I mentioned my NDP colleague earlier. I do not know the Green Party's position, but I know a lot of Liberals are not happy with their party's position and agree that it is ridiculous, so much so that the government now finds itself in an awkward position.

We have seen several economic updates and budgets since 2015. The government said it would tackle the problem and try to fix it. Now here we are in 2021, and it is still not fixed. The Bloc has been fighting for this since 2005. This is unacceptable.

There are solutions, however. The government is going to tell us that we would be opening up loopholes, but our tax law is full of loopholes. People use tax havens, and the government does not go after them, but it prevents the transfer of family businesses. How does that make any sense?

The government says that it is impossible, but we have tabled a number of bills to resolve the problem. In 2016, Quebec's Minister of Finance announced a solution to the problem in his budget. Since January 1, 2017, four years ago, Quebeckers have been able to pass down their business to their children without a tax penalty, but the federal government is unable to do the same. We do not know why, but it cannot do it. I think that the problem is stubbornness more than anything else.

Let us examine this question more in depth. The capital gains deduction in 2021 is $892,000. That means that you can sell a business you spent your entire life building without paying income tax on the first $892,000. It is similar to the sale of a tax-exempt home.

We also know that people with small businesses often do not have an RRSP. They pay themselves dividends or a small salary, and they have just as much as they need to get by. I am thinking about the neighbourhood mechanic or your local farmer. Often, they do not have any money put aside because they put everything back into the business. When they come to retire, they are very happy to have the $892,000, because retirement is expensive, and they need enough money to last the rest of their lives.

Unfortunately, the government does not allow them this $892,000 if they sell their business to their children. Selling their business to a stranger gets them an $892,000 deduction, but they have to pay tax on that amount if they sell to their children. Even worse, the tax payable on capital gains is normally half the amount. If they sell the business to their children, they have to pay income tax on the profit as if it were ordinary income or a dividend.

It boggles the mind that the government insists on voting against the bill when it is well aware of the problem, when we have been telling it for years, and when a number of bills have been tabled to resolve the situation. I try to understand, but I cannot. That is why I am very pleased that we have a minority government today and that, with the three opposition parties, we will be able to pass the bill.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Mr. Speaker, I thank the Bloc member for raising that point of order.

Bill C-208 also proposes amendments to section 55 of the act, which generally applies to corporations that seek to inappropriately reduce capital gains by paying excessive tax-free dividends between corporations, which the act considers to be a capital gain.

Two exemptions to these anti-avoidance rules authorize businesses that are restructuring to allow company shareholders to split company shares between them while deferring taxes. The first exemption applies to the restructuring of related corporations, and the second applies to all corporate restructurings. Bill C-208 would broaden the first exemption so that it applies to brothers and sisters, despite a standing long-term tax policy that considers brothers and sisters to have separate and independent economic interests for these purposes. Any changes to this exemption could risk eroding the tax base.

Spouses, as well as parents and their children, are already eligible for this exemption because it is presumed they have shared economic interests. Although brothers and sisters cannot restructure their participation in a corporation on a tax-deferred basis under the related corporation's exemption, they can do it under the second exemption of section 55, which applies to all corporate restructurings. This is called the butterfly exemption, and there are fewer tax avoidance opportunities under it.

If the proposed amendments of section 55 included in Bill C-208 were passed, siblings could undertake business restructurings in which otherwise taxable capital gains realized between corporations would be converted into tax-free intercorporate dividends. This would create new opportunities for tax avoidance.

In conclusion, these are important considerations to take into account when reviewing the merits of Bill C-208. Our government remains committed to working with family businesses, including farming and fishing businesses, to make it more efficient, or less difficult, to hand down their businesses to the next generation. However, we must exercise caution to not create loopholes and opportunities for the wealthy to use private corporations for tax avoidance purposes. This would dilute our base protection of anti-avoidance tax rules. Moreover, this would create a tax system that caters to the wealthy at the expense of the middle class.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Mr. Speaker, I thank the member for Brandon—Souris for bringing forward this bill. I know that private members' business can generate some good bills from throughout the House. A lot of people do not fully appreciate the amount of work that goes into private members' business, which one only knows if one has gone down that road. Just for taking the time to go through the process to bring this piece of legislation forward, and all the work that went into it, the member deserve a lot of credit.

I am pleased to take part in the debate today over this private member's bill, Bill C-208, which aims to facilitate the transfer of family businesses between family members. This is an admirable goal. Indeed, our government recognizes this important issue, as evidenced by the mandate given by the Prime Minister to the Minister of Finance and the Minister of Agriculture and Agri-Food to work together on tax measures to facilitate the intergenerational transfer of farms.

Ensuring the sustainability of small businesses, family farms and fishing corporations is essential to our economy and to the communities these businesses serve. This has been underscored by their crucial role in supporting families and communities as we continue to fight against COVID-19.

Our government understands that this is a fact. From the onset of the pandemic, through Canada's COVID-19 economic response plan, we have introduced a range of supports for small business owners to help bridge them to the other side. Simply put, we have their backs, and this extends to helping family businesses thrive for generations to come.

Encouraging the sale of businesses to family members often means those businesses will remain in and continue to benefit their communities, as well as their families, who have fought hard, sacrificed and, through pure determination and entrepreneurial spirit, succeeded. It is with this spirit in mind that Bill C-208 is to bear full and careful consideration.

Bill C-208 seeks to amend two of the Income Tax Act's most important and complex anti-avoidance rules. These rules deal with intercorporate dividends, share sales and circumstances in which the lifetime capital gains exemption is claimed. Any relieving changes to these sections of the act must be done cautiously and follow rigorous study and debate to avoid the unintentional creation of loopholes that would disproportionately benefit the wealthy, instead of protecting the middle class and those who are struggling to join it.

Section 84.1 of the act, in particular, is in place to apply anti-avoidance rules when, as appropriate, an individual sells shares of one corporation to another corporation that is linked to the individual, such as one of a family member. When the individual sells shares of a Canadian corporation to a linked corporation, section 84.1 of the act deems, in certain circumstances, that the individual has received a taxable dividend from the linked corporation rather than the capital gain.

This prevents the individual from realizing the proceeds from the sale on the tax-free basis using the lifetime capital gains exemption. This rule is meant to ensure that taxpayers cannot use linked corporations to, in effect, remove earnings from their corporations using a contract sale. Without this rule, such sales between related parties could be used to convert what should be dividends of an individual shareholder into capital gains that are tax-free under the lifetime capital gains exemption.

Bill C-208 proposes narrowing the scope of section 84.1 by removing the sale of certain shares of small businesses, family farms or fishing corporations from its application when being sold by an individual to another corporation that is owned by their adult child or grandchild. This change would allow the owner-operator of a family business to convert the dividends of the corporation into tax-free capital gains.

In order to better illustrate how this would work, I will use an example. Let us say Darryl and Emily own a potato farm in P.E.I., which has grown to be a major regional supplier. After decades of hard work, they are now planning their retirement and want to pass down their business to their two adult children, both of whom already own successful small businesses in the community.

By applying the proposed amendments in Bill C-208, Darryl and Emily would sell non-voting preferred shares from their farm corporation to the two corporations controlled by their children. In doing this, they could claim tax-free treatment of the resulting capital gain from the sale under the lifetime capital gains exemption in a manner that allows the sale to be financed by the sold corporation's own assets without relinquishing control of the farm corporation.

Darryl and Emily could then use this planning to convert their annual dividend income into tax-free capital gains as often as they want, up to an amount equal to their lifetime capital gains limit. In this case, each parent could reduce his or her income tax by up to about $45,000 for each $100,000 of business profits distributed.

It is important to note that there is currently nothing in the act to stop a parent from selling their shares of their family business directly to their child or grandchild on a tax-free basis by using the lifetime capital gains exemption, which currently shelters up to $1 million in capital gains on qualified farm and fishing properties.

The issues sought to be addressed by Bill C-208 arise only in multi-tier corporate structures in which one corporation owns a second corporation. Adopting the proposed changes to section 84.1 could open the door to new tax avoidance opportunities. This would unfairly benefit wealthy individuals instead of the middle class.

Bill C-208 also proposes amendments to section 55 of the act, which generally applies to corporations that are seeking to inappropriately reduce their capital gains by paying excessive tax-free dividends between corporations, which the act considers to be a capital gain.

[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 milion 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.