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.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Okay. I know we're sort of getting into the nitty-gritty, but is it common, when the government says it plans to introduce amendments that would honour the spirit of Bill C-208? Is there a precedent explaining that? Is that language that's commonly used by government? Is there something more precise to that, legally?

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

Thank you. That is very clear.

At the beginning of your opening remarks, you reminded us that you advise Parliament, the House, its committees and elected officials, and you said that this is more or less what the Department of Justice does for the government.

Let me add an editorial comment. I would be very surprised if the Department of Justice officials thought that not including a date in the bill meant that the government could put it into effect whenever it wanted.

I think the government, the Prime Minister and his team, thought that this bill was not quite working for them and that they would try something. I am sure that the Department of Justice would never have misled the government in that way, which is why the emergency meeting of the committee today was so important and why I think an updated news release was issued.

Larry Maguire, who is here with us, can correct me if I am wrong. In a CBC article yesterday, we are reminded that the first reading of Bill C‑208 took place on February 19, 2020. It's now 2021. Yesterday, the journalist reminded us that 527 days passed between the first reading of the bill and its implementation following royal assent.

Mr. Dufresne, can you remind the members of the committee and those listening of the normal stages that a bill must go through? Also, at each of these stages and during those 527 days, when could the government officials have suggested amendments or proposals to make the bill consistent with what they wanted to do, as they said they wanted to do through a future bill?

[Philippe Dufresne]

The problem with the first news release was that it pointed out that Bill C‑208 did not provide for an implementation date. It stated so in the beginning, in the first paragraph. It ended by stating that the government intended to include new legislation to clarify that those amendments would apply at the beginning of the next fiscal year.

That's what was more surprising or potentially confusing, because it gave the impression that the absence of a date in the legislation indicated a failure or an area that needed clarification, when this was not the case. The Interpretation Act makes it very clear that a bill comes into force when it receives royal assent. This could have suggested that the entire bill would not come into force until later, retroactively.

The updated news release replaces the first one and indicates that the legislation is in force and that the legislative amendments being considered by the government will address specific issues, not the coming into force date.

[Philippe Dufresne]

I'm satisfied that in the release yesterday, the government has recognized that Bill C-208 is in force and has expressed its intention to introduce future amendments.

[Peter Fragiskatos, Liberal, London North Centre, ON]

As a final point, Mr. Chair, I voted for Bill C-208. I think it's a necessary measure. A number of Liberals voted for Bill C-208 as well.

Mr. Dufresne, you are Parliament's lawyer, if I can put it that way. Once again, are you satisfied that yesterday's press release makes it clear that Bill C-208 is recognized by the government as a bill that will be put in place?

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

My friend and colleague Mr. Kelly did not expand on it—I do not think he had time—but put a forward a claim that yesterday's press release, in his view, indicates that the government is not looking at or serious about moving forward with C-208.

I'm not sure where that observation comes from. I looked at the press release closely, and it says—and you put this is your testimony, sir—that unintended consequences that could come about with C-208 will be addressed. That is not inconsistent with the recognition that this is law and that Parliament is supreme. Would you say that's accurate?

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair.

It's good to be here in Ottawa after a lot of time. It's nice to see colleagues in person once again, and I hope everybody has kept healthy and safe and that everyone's loved ones are okay too.

Many thanks to you, Chair, along the way. I know this is the final set of meetings the finance committee will have with you at the helm, and it's been absolutely great and a wonderful experience working with you, as I've told you over the years.

To the staff behind the scenes, too, here at Parliament, and our own staff, thank you very much. This committee has been very active over the past year and a half, without any stops, and that continues.

Mr. Dufresne, you've answered this, I think, but I want to be crystal clear here. Is the press release that we saw yesterday consistent with the view that Parliament is indeed supreme and that Bill C-208 is in force? The press release recognizes that, I think, but could you elaborate?

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you so much, Mr. Dufresne, for appearing today and for the clarity you've brought to this issue. Let's just get right to it.

Bill C-208 became law on June 29. Is that correct?

[Philippe Dufresne, Law Clerk and Parliamentary Counsel, House of Commons]

Thank you, Mr. Chair, members of the committee, for your invitation to appear today following the Department of Finance Canada's June 30 news release respecting Private Member's Bill C‑208, and the clarification issued by the government yesterday which replaced that June 30 news release.

As the Law Clerk and Parliamentary Counsel for the House of Commons, I am pleased to be here today to address any questions that the committee may have on this matter. My office provides comprehensive legal and legislative services to the Speaker, the Board of Internal Economy, the House and its committees, members of Parliament and the House Administration.

As counsel to the House, its committees and members, we serve the interests of the legislative branch of government, and provide similar types of legal and legislative services to the House as the Department of Justice provides to the government.

I am accompanied by Michel Bédard, Deputy Law Clerk and Parliamentary Counsel, Legal Services, and I hope that our answers will assist the committee.

Before turning to Bill C-208, I want to take a few moments to highlight the rules applicable to the coming into force of legislation. These same rules apply equally to legislation implementing tax measures.

Enacting new laws and amending existing ones is a process that culminates in a legislative text receiving royal assent. However, a distinction must be made between the date on which a legislative measure is enacted by Parliament and the date on which it comes into force. A bill becomes law after it has been passed by both Houses in the same form and has received royal assent, but its provisions will produce their effect and become enforceable only when they are brought into force.

The Interpretation Act, which applies to all federal legislation, contains the provisions governing the coming into force of statutes, including the timing of that coming into force. Generally, a statute will come into force either on the day of assent or on another date as provided by the legislation itself. The other date could be a specific day set out in the act, or the act could leave it to the government to determine the date of the coming into force by an order in council.

If no coming-into-force provision is included in an act, the default rule found in subsection 5(2) of the Interpretation Act applies, and the entire act comes into force on the day on which it receives royal assent.

I will now say a few specific words about the implementation of tax measures.

Governments will, from time to time, implement proposed legislative changes respecting taxation, for example for new capital gain inclusion rates or new GST rates, before their formal legislative enactment. The actions of taxpayers will then be influenced by the proposed measures—that are oftentimes already implemented administratively by the Canada Revenue Agency—in anticipation to the subsequent legislative enactment that would have retroactive effect to the date the proposed legislative changes were announced.

House of Commons Procedure and Practice summarizes this practice as follows:

It is the long‑standing practice of Canadian governments to put tax measures into effect as soon as the notices of the ways and means motions on which they are based are tabled in the House of Commons, with the result that taxes are collected as of the date of this notice, even though it may be months, if not years, before the implementing legislation is actually passed by Parliament.

Implementation of the tax measures often starts when their announcement is made, including by the tabling of a ways and means motion, but is always contingent on the tax measures being ultimately enacted by Parliament.

Bill C-208, an act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), received royal assent on June 29, 2021.

The bill does not contain a coming-into-force or a commencement provision, so, in accordance with subsection 5(2) of the Interpretation Act, the date of coming into force is the date of royal assent. This means that the new provisions apply as of that date, in this case, June 29, 2021.

There is nothing unusual about this. On June 30 the government proposed legislation to clarify that the Bill C-208 amendments to the Income Tax Act would apply at the beginning of the next taxation year, starting on January 1, 2022.

Yesterday, the government issued a new statement replacing the June 30 news release and affirming that as Bill C-208 has been passed by Parliament and has received royal assent, it has become a part of the Income Tax Act and that the changes contained in Bill C-208 now apply in law.

The government also clarified that it intends to bring forward amendments to the Income Tax Act that honour the spirit of Bill C-208 while safeguarding against any unintended tax-avoidance loopholes that may have been created by the bill.

Because the bill is now law, making any changes to it would require new legislation. Such new legislation could provide for any amendments to the Income Tax Act to apply retroactively, including applying to events that take place before the day on which the new legislation comes into force.

I would now be pleased to answer any questions you may have.

Thank you.

[The Chair, Liberal, Wayne Easter]

We will call the meeting to order.

Welcome, everyone, to meeting number 59 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).

Given the ongoing pandemic situation, and in light of the recommendations from health authorities to remain healthy and safe, all of us attending the meeting—it's the first time all of us have been in a committee room for 16 months—are to maintain the two-metre physical distancing. We must wear a mask when circulating in the room. It's highly recommended that a mask be worn at all times—though I don't think members can be expected to—and we must maintain proper hand hygiene by using the hand sanitizer at the room entrance.

I will try to enforce those measures, but I don't think enforcement will be necessary. I know there's only one staff per party allowed in the room. I thank members for their co-operation.

In our first hour of this session, by video we have with us Mr. Philippe Dufresne, the law clerk and parliamentary counsel, who has been before the committee a number of times, and Michel Bédard, deputy law clerk and parliamentary counsel, from the Office of the Law Clerk and Parliamentary Counsel.

Welcome to both of you. I imagine you have an opening statement. There was considerable controversy. A number of us said that.... I think MPs believe Parliament is supreme. There was a little difference of opinion, I think, between us and the Department of Finance and maybe others.

We'll turn to you for an opening statement. Then we'll go to questions.

Budget Implementation Act, 2021, No. 1

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Madam Speaker, I thank my esteemed colleague from Drummond for his question.

My answer will be mixed. There have indeed been actions taken to support farmers, but often they are inadequate one-offs, involving meagre amounts that, I just said earlier, are used to make “mini-announcements” rather than bring in anything permanent.

There are requests, and I will give three examples. If the House feels strongly about the question asked by my colleague from Drummond and wants to do something for the farming community, Bill C‑216 protects supply management once and for all. All parties voted overwhelmingly in favour of this bill, which was referred to committee and must now come back to the House. I wish it had come back before we leave.

Bill C‑208 is currently before the Senate. I find it very fishy that it is taking so long. I hope the Senate passes it before Parliament rises.

There are several measures like that.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

I understand that you are considering it. I would like to ask you some more questions before my time runs out.

There is a great desire to increase exports, and we agree on that. At the same time, we see the parallel threat of complaints from the U.S. We know that we're respecting the agreement, but it is something that is never ending.

There are two very important bills right now. There's Bill C-216, which addresses that issue, and there's another one on farm succession, Bill C-208. I would imagine that these bills are progressing well and that we can count on the government's support for farm succession, among other things.

This is an issue that is near and dear to your heart, isn't it?

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Madam Speaker, I am pleased to be speaking this morning about Bill C-30, budget implementation act, 2021, no. 1.

My colleagues will recall that the Bloc Québécois voted against the budget because some of our important conditions were not included. However, we will be voting in favour of the budget implementation bill, which contains plenty of promising measures.

All the same, that does not mean that we will be giving up the fight, in particular with respect to health transfers. In my opinion, it is inconceivable that a government that is running a deficit of more than $350 billion this year still refuses to help the levels of government that have the responsibilities stipulated in the original agreement.

The federal government used to pay 50% of the costs, not 22%. At this rate, it will only be paying 20% five years from now. What the provinces and Quebec are unanimously asking for is 35%. That corresponds to $28 billion, which by purest coincidence is equal to the leeway that the government decided to subtract from its deficit. I certainly think the Liberals could afford this.

Our other major condition was a decent increase in old age pensions. I am not talking about the increase of about $1.75 given to those who received the largest increase. That will just about buy them one extra coffee a year. I am talking about a decent increase of $110 a month, which is not asking much.

It feels like we keep repeating the same things. Sometimes repetition is the only way to get a point across. At a time when the government wants to launch a recovery plan involving more than $100 billion in spending, how can it justify not giving seniors some breathing room by providing $110 a month?

It is a small amount. These people will not be putting it in the bank for later, they will be spending it. That is exactly what we need for our economy this year. We need a recovery, some breathing room, help for these people who were hit so hard by the pandemic.

Another concern we have about Bill C-30 is that it lays the foundation for a Canadian securities regulation regime. Historically, the Bloc Québécois has always been opposed to this, and we are not alone. The Quebec government and Quebec's business community are unanimous in rejecting the idea. The Fédération des chambres de commerce du Québec, the Chamber of Commerce of Metropolitan Montreal, Finance Montréal, the International Financial Center, Mouvement Desjardins, the Fonds de solidarité FTQ and most companies, including Air Transat, Transcontinental, Canam, Québecor, Metro, La Capitale, Cogeco and Molson, all agree.

Why are all of these economic stakeholders in Quebec saying that Quebec should not be losing more control to Ontario?

It is because this amounts to an attempt to move a strong financial centre to Toronto. I know that I am in the House, that I must remain calm and watch my language, but it is pretty darn hard to stay calm when faced with this constant financial expropriation. What the government wants to do is to make Quebeckers dependent, so that they think they need the rest of Canada and that they want to remain a part of it. That is the bottom line.

Why fix something that is not broken?

Quebec's securities commission is extremely effective, and it is important to have a strong economic centre. This is the institution that insisted on keeping the Montreal Stock Exchange in Montreal even after it was sold to the Toronto Stock Exchange. I will be so bold as to say that, if it had been up to Toronto, there would not be a stock exchange in Montreal anymore.

There are many jobs involved. The financial sector accounts for 150,000 jobs and contributes $20 billion to the GDP. Montreal is the 13th-largest financial centre in the world. The 578 head offices in Quebec account for 50,000 jobs. Since these are head offices, these jobs are not just ordinary jobs. They are 50,000 well-paying jobs that create more jobs. When a company's head office is located in Quebec, because that is where the financial centres are and where decisions are made, the company tends to hire within Quebec and to adapt its strategy accordingly.

That is what the federal government wants to eliminate. Well, I have news for the government: We will not allow it. We will work on it and propose amendments. I hope that the people in the government will see reason and defend Quebec's interests. I would remind them that there are elected officials from Quebec in their party.

Of course, Bill C-30 is massive and does not cover everything. We do applaud the extension of the special assistance programs, such as the Canada emergency wage subsidy and the Canada emergency commercial rent assistance program, until September 25.

However, I think that the rates are dropping rapidly. Companies are not quite back on their feet yet; we need to make sure that we do not take this assistance away too soon, since companies need predictability. Last week, I received more calls from companies that have held on so far, but they are telling me that they may not be able to hold on for much longer. This is not the time to cut them off.

The creation of a hiring program is a good idea. Disallowing bonuses for senior executives of companies that received the wage subsidy is an excellent idea. I hope the rule will be applied to the letter.

Speaking of wage subsidies, I cannot help but make a brief interjection. It is a shame that I cannot refer to the presence of members in the House, because I would have definitely named someone. My Conservative colleague who spoke previously referred to the wage subsidy several times, bemoaning the fact that the government gave wage subsidies to companies that give bonuses, and yet the Conservatives, the Liberals and the NDP all received the wage subsidy. They have the gall to make accusations and feign outrage. It is crazy.

Sometimes I think I am dreaming. I hear a member say something and I wonder whether he really dared repeat it. Members ought to have a little decency. I am launching an appeal to the three political parties that misappropriated public funds. That is the polite way of saying what I think. I am asking them to give the money back, because it is Quebec and Canadian taxpayer money. They should not use public funds for campaign purposes, especially if they refuse to amend the laws governing the public financing of political parties. It is doubly sickening.

They announced measures in the budget to tackle tax avoidance. That is fine, but they seem pretty minor to me. More needs to be done. I know that they are sick and tired of hearing us talk about this because it is a really sore spot for them, but when are they going to do something about tax havens? If they had the courage to take action in this matter, we would have a budget surplus rather than a deficit. Let us get moving on this.

The argument that government members cannot vote in favour of Bill C-208, which aims to facilitate the transfer of SMEs, including farms, because this constitutes tax avoidance really raises my hackles. It is mind-boggling.

There are a few small positive measures on zero-emission vehicles. It is also an excellent idea to extend the tax deferral on patronage dividends for cooperatives. The industry has been asking for this for ages. However, I wonder why they have not made this measure permanent rather than extending it for another five years.

Would members like to know the real reason? The government wants to keep these people dependent and in line. In three and a half years, or four years, they will have to start begging their generous government to extend the measures again. People are more compliant in those situations. The government wants to keep us dependent, and so do the Canadian securities regulators.

The Bloc Québécois will be there to fight this.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

I will begin by responding to Mr. Dreeshen's comment by simply drawing a parallel with Bill C-208, which the Conservatives themselves introduced. They were able to prioritize that bill, which was then able to pass third reading last month. That is what happened. It was not a priority bill. Yet, it moved from 17th to 2nd in the order of priority, if memory serves. It was even prioritized again for the second hour of debate at third reading. The Conservatives changed the order of their bills so that some of them were given priority consideration during the debate time they had. These sorts of steps are taken to ensure quick passage.

I would also like to respond to Mr. Généreux's comment. If we don't fast-track Bill C-253 back to the House without delay and an election is called, the bill will be a complete failure.

Remember that a bill was passed under a gag order two weeks ago to enact rules for how elections work during a pandemic. In my view, if the government is passing reforms to the Canada Elections Act under a gag order, that sends a very alarming message to me that it wants to call an election.

This is the context in which we must operate. Based on the indicators we have, we could see a lot of bankruptcies this fall, because right now companies are being kept alive on life support. If we don't get Bill C-253 back to the House quickly, we will not be protecting workers from these bankruptcies. We are exposing them to the consequences.

That's why this motion needs to pass quickly. We need to get Bill C-253 back to the House as soon as possible, to at least give ourselves a chance to get it passed on behalf of the people we represent.

Of course, we can't know in advance who we will save from bankruptcy, which constituencies will be affected, and the circumstances in which it will happen. However, the examples we have seen, like White Birch Papers, really scare me.

Income Tax Act

[The Speaker, Liberal, Anthony Rota]

It being 3:12 p.m., pursuant to an order made on Monday, January 25, the House will now proceed to the taking of the deferred recorded division on the motion at third reading stage of Bill C-208 under Private Members' Business.

Call in the members.