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.

[Trevor McGowan]

I suppose there are two things to discuss there. The first relates to the decision-making process in terms of the press release. In that, the department follows the regular approval process that we use for all of our public communications projects, in alignment with the requirements of the federal communications policy.

In terms of the substantive portion of the question, as I said, on June 29 Bill C-208 produced its effect and amended the Income Tax Act. The government's announcement on June 30 was that the government proposes to introduce legislation providing that the amendments would apply only as of January 1, 2022. It's perhaps a technical point that the June 30 amendment would amend the Income Tax Act, which had been amended by Bill C-30 ahead of time, but the government was announcing its intention to table legislation to provide a January 1, 2022, application date.

[Ed Fast, Conservative, Abbotsford, BC]

Well, let me say this: I'm so glad that you're now acknowledging that Bill C-208 became the law on June 29. It's something that was not reflected in your June 30 press release.

I want to know who it was in your department, or who it was in government, who made the decision not to respect Bill C-208 and issue the press release that led to the confusion, and quite frankly the bewilderment, of the small business community in Canada.

[Trevor McGowan]

Just to be technical in the terminology, when Bill C-208 received royal assent, it became effective. It became part of law. It amended the Income Tax Act. On June 29, the date of royal assent, Bill C-208 amended the Income Tax Act. As of that date, the provisions it had amended were part of Canadian law. That's the date on which it came into law. That's just a fact and not something that could be changed.

[Ed Fast, Conservative, Abbotsford, BC]

Okay, so after royal assent, somebody in government, maybe in Finance or maybe in the Prime Minister's Office, made the decision to announce that Bill C-208 would not be applied. In other words, it wouldn't be implemented right away. Is that correct?

[Trevor McGowan]

As was stated, my colleague Shawn Porter and I appeared before the House finance committee and the Senate committee on agriculture to discuss Bill C-208 and provide comments on the technical aspects of the bill. During that time, we provided technical commentary and analysis in respect of the bill, but our involvement was limited to that. We weren't suggesting amendments, but certainly we did raise some of the concerns that are alluded to or mentioned in the July 19 press release.

[Ed Fast, Conservative, Abbotsford, BC]

All right. Your recent press release, the finance department's press release dated July 19, highlights four specific loopholes that it feels should be fixed in Bill C-208. My question to you is, when you appeared before committee as a witness to discuss this bill, did you or any of your officials recommend amendments that would have addressed the shortcomings Bill C-208 had, and specific wording for those amendments?

[Ed Fast, Conservative, Abbotsford, BC]

Well, thank you, Mr. Chair. My questions will be for Mr. McGowan.

Trevor, you've been at parliamentary committees many times before, as the chair has suggested, so you know the drill. When private members' legislation comes before a committee, we generally have a robust discussion about the legislation. The government, through its MPs, has the ability to bring forward amendments that would fix loopholes or deficiencies in those bills.

Mr. McGowan, you were present at committee as a witness, as Bill C-208 was being discussed. Is that correct?

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order. Welcome to meeting number 60 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 108(2), the committee is meeting to study the coming into force of Bill C-208, an act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation).

We went through the rules for this room this morning, on the pandemic and social distancing and so on, so we don't need to go through those again.

We'll start with the witnesses.

I see, Ms. Aitken, you've been working steadily. We've had you on screen here and you've been getting a lot of work done while you've been waiting for us to come on.

We welcome Ms. Aitken, executive director and senior general counsel, finance legal services, law branch. Then we have Mr. Jovanovic, associate assistant deputy minister, tax policy branch; and Trevor McGowan, director general, tax legislation division, tax policy branch.

Trevor is no stranger to this committee. I think he has spent pretty near as many hours as some of us have. Am I right, Ed?

I don't believe there's an opening statement. If there is, raise your hand or yell. Otherwise we'll start with questions, six-minute rounds, with Mr. Fast, Ms. Dzerowicz, Mr. Ste-Marie and Ms. Mathyssen.

Mr. Fast, you're first on deck. Welcome. Go ahead.

[Julie Bissonnette]

Yes, thank you.

I certainly agree with Ms. Robinson and Mr. Ross. As I said earlier, criteria have already been put in place in Quebec, and things seem to work. We really have seen no evidence to the contrary. Perhaps we should start by looking at what is being done there. We heard that recommendation often during the consultations on Bill C‑208.

In addition, as I mentioned earlier, there is no reason why farm transfers should be affected by the criteria, given that tax evasion is not the purpose of business transfers.

Of course, we hope that the safeguards will not add barriers to future transfers.

[Julie Dzerowicz, Liberal, Davenport, ON]

Okay. No problem. Then I have a lot of time.

I want to thank you for convening this session today, and I want to thank all my colleagues for making it out today. It's actually nice to see people in person.

It was quite clear from the news release put out yesterday by our government that we're committed to implementing Bill C-208. We're also committed to protecting the integrity of the tax system.

Ms. Robinson and Ms. Bissonnette, as we are intending to bring forward these amendments, what messages would you send to the federal government as our officials work on these amendments? That's the first part.

Second, Ms. Robinson, you made a very clear plea to make sure that officials connect directly with grassroots farmers. Are there any other groups we should make sure to touch base with?

Maybe we could start with Ms. Robinson, follow with Ms. Bissonnette, and then transfer whatever time I have left to Mr. Gerretsen.

[Rachel Bendayan, Liberal, Outremont, QC]

On a point of order, Mr. Chair, I'd certainly defer to you on the rules regarding relevance, but I believe that this meeting was called to discuss the coming into force of Bill C-208.

[Julie Bissonnette]

Thank you for your question.

As I said, the last few months have not been easy. There has been added stress, but last night we had confirmation that the situation was resolved.

As for the future, for now, Bill C‑208 has come into force and the legislation is being implemented. That's what we've been hearing for the last little while. We assume that the situation is resolved. Of course, every business is different and every transfer is different. It is up to each business to actually validate the farm transfer.

For us, the bill has been in effect since it received royal assent. Clearly, we will be watching with great interest to see what happens next. For now, we are reassured by yesterday's confirmation and this morning's confirmation of the nuance that we were missing. We consider that it is settled.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Mr. Chair.

First, perhaps because I am not a regular member of the committee, I do not share the enthusiasm of my colleague from the Bloc Québécois about the comments of the parliamentary secretary and yesterday's news release.

I would remind you that Bill C‑208 was voted on by Parliament, but all members of cabinet voted against it. The Department of Finance issued a news release noting that the bill would not be implemented until January 1, 2022.

As a former chief of staff, I can tell you that a news release of this nature is not issued by the Department of Finance without at least someone in the minister's office having seen and approved it. It's a very important item and a major change in terms of finance. More importantly, it is a major change in terms of the implementation of legislation that has been passed by Parliament. A news release of this nature could not be issued without the approval of the office of the Minister of Finance.

My question is for Ms. Bissonnette, whom I know well because I have met her on several occasions.

Without being afraid, would you be able to recommend, today, that a family proceed with the transfer of its farm, knowing that the government has already announced that there will be amendments to Bill C‑208?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good morning to all the witnesses.

Thank you for your very interesting presentations.

I will begin with a comment for Ms. Bissonnette.

Thank you for your presentation. You had a question. It could even go to the senior officials this afternoon. I was delighted to hear that we already had the answer from Ms. Bendayan, who was speaking on behalf of the government. She assured the companies that will be doing family transfers that the next bill amending Bill C‑208 will not be retroactive.

I commend and thank the government for sharing this commitment with us.

Before I turn to questions, I have a comment in response to the discussions we have heard at this meeting.

Senior officials in the Department of Finance may have had concerns about the implementation of a bill, but I don't think that's at all an excuse. In the previous hour, Mr. Dufresne, the Law Clerk of the House, appeared and told us that. He knows full well, as does everyone here, that, when a bill has no implementation date, it comes into force on the day it receives royal assent.

Mr. Dufresne reminded us that the government, the Minister of Finance, the Prime Minister and everyone else in government, relies on the Department of Justice to advise them on this matter. There is no better resource than the Department of Justice for advice on how legislation works. Everyone in the government knows full well that when royal assent is received, the legislation is in force, that is how it works. Even if the government did not know that, the senior officials have no excuse and cannot say that they did not know either. The minister and the government are responsible. If they didn't know, they are like boy scouts in short pants and that's inexcusable. It is completely unacceptable.

I have one other comment. According to yesterday's Radio‑Canada article, between the first reading of Bill C‑208 and royal assent, there were 527 days, or a year and a half. At each stage, at first reading, second reading, third reading, report stage, committee and Senate, the government could have proposed amendments. If it had done its job as a government in any serious manner and if it had said that it had concerns about tax evasion, which are perfectly valid, why did it let this go on for 527 days? Then it decides to have a new bill, and we gather that it will likely be after the election. They are creating uncertainty by saying that they are going to propose their amendments. Yet they had 527 days to do so. Once again, it smacks of boy scouts in short pants. It is really sad.

My last comment before my questions is this. Yesterday, we received the news release that corrected the situation and the Parliamentary Secretary, Rachel Bendayan, spoke on behalf of the government. Phew! We saved the bill, it's in effect and it will be implemented. I am very pleased about that.

I want to commend the work of all the members of the committee. I think the fact that the committee called an emergency meeting enabled the government to make this correction. I particularly want to raise my hat off to the chair of the committee.

Thank you for this meeting, Mr. Chair. It has changed everything.

Let me proceed with the questions.

I'll start with Ms. Bissonnette.

Your presentation was excellent. You mentioned that 70% of Quebec farmers want family succession. You have a dairy farm. How much is an average dairy farm worth when you include the fields for grain and everything else? On average, what is it worth in Quebec?

[Rachel Bendayan, Liberal, Outremont, QC]

This was mentioned earlier this morning, further to questions from different members. I would really like to unequivocally confirm on behalf of the government that any amendments to safeguard our tax policy or to avoid artificial tax planning in connection with Bill C-208 would not be retroactive. As stated in the press release of yesterday, new proposals would apply as of the later of either November 1, 2021, or the date of publication of the final draft legislation. I hope that clarifies matters for my friends and colleagues.

I also want to add my voice to those of the previous speakers and stress the importance of parliamentary supremacy.

So my first question is for the representatives of two organizations that are here to represent our dear farmers.

Thank you very much for joining us today.

As Parliamentary Secretary to the Minister of Small Business, Export Promotion and International Trade, I am particularly interested in the issue of intergenerational transfers.

As we all know, most farms are SMEs. The 2016 census showed that more than half of all farms are sole proprietorships, and nearly a quarter of those report as family businesses.

I feel that our government has demonstrated that we are here to support our SMEs in all sectors, including the agricultural sector, which I believe has 200,000 businesses in this country. If we look at our government's record during the pandemic, we see that it has provided $1.4 billion to the agricultural sector through our wage subsidy and $50 million, in the agricultural sector alone, for rent assistance.

There is also $5 billion in additional funding for Farm Credit Canada, $125 million for AgriRecovery to help producers with the additional costs of COVID‑19, $50 million for redistribution of unsold products, and more.

My question is about the Act to amend the Income Tax Act (transfer of a small business or family farm or fishing corporation). Now that we have clarified that this act has actually been in effect since June 30, what are the biggest issues you are facing today, from a tax perspective?

Ms. Bissonnette, you have noted that the transfers are quite complex. Could you start?

Do you have any suggestions or concerns from a tax perspective that you want to mention to the government today?