Finance Committee on Oct. 18th, 2006

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Just the best one. We've got three minutes here.

[Everett Colby]

—but I'll give you two.

One, create a system of filing joint returns for families. That reduces the compliance burden and gets rid of a lot of other tax problems, such as attribution.

Two, make mortgage interest tax deductible. You're already taxing the interest in the bank's hands. Promote home ownership, which will help, in turn, promote productivity in building and construction and make us competitive with our neighbours to the south, who can buy homes a lot easier than we can.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I have a similar follow-up question. You talked about dealing with corporations and so forth in your brief, reducing subsidies, particularly ineffective special programs for businesses. I'm looking for examples again. Pick your best one.

[Everett Colby]

Of what to get rid of?

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

That's what it said in here. It talked about ineffective subsidies, ineffective programs to corporations. That's part of what it said here. It said the option you'd prefer would be corporate tax cuts. I'm looking for specifics, again, of what you would specifically like to get rid of that are ineffective subsidies.

[Everett Colby]

I'm not certain that our report says get rid of it. What we're suggesting is that they're not as effective at providing the results of a competitive economy as tax cuts would be, because tax cuts could be spread over a much broader base.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Could you give an example, then, of one that may not be quite as effective, even if you're not saying eliminate it? If you're going to make that broad generalization, there have to be at least some specifics to back it up.

[Everett Colby]

For example, research and development--governments spend a lot of time and a lot of money in developing these programs. Many of them are industry-specific and not necessarily in tune with the way technology is being developed in the marketplace. It's over-burdensome.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

So instead of industry-specific, more generalization, because we can't pick which industry will be successful?

[Everett Colby]

No, you sometimes preclude businesses from being able to participate in it, because the regulatory burden to participate costs more than the benefit they're going to get out of participating in the program. It's supposed to be there to help business, not hinder.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Trost, and welcome to the committee.

Mr. McKay, over to you.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Field, if I buy a share in corporation X through broker Y versus buying a unit in trust Q through broker Y, what is the difference in protection for you?

[Art Field]

There isn't really any protection, because there's no regulator. They're regulating themselves, the same as the police department does.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So you, as an investor, are vulnerable whether you buy a share or buy a trust unit?

[Art Field]

Right.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Your issue isn't so much the concern about trust; your issue is the vulnerability of investors who get ripped by brokers.

[Art Field]

Yes. The broker tells you all the nice stories of how much you should be worth in two or three years, and if it doesn't turn out that way, you are the loser. Now the new regulations are that after two years you can't do anything to that broker, and there's no regulation for the industry.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I think you're right in terms of this being a developing story. A lot of investors were initially attracted by the returns on trusts, and they're now finding that the trusts were not backed up with adequate assets to support the returns.

My second question also has to do with trusts. You made the point that if there's tax leakage or revenue reduction by virtue of a trust structure, the government won't be able to fund necessary things like health care, etc. Does your organizations take the position that trusts should be taxed?

[Art Field]

We haven't looked at it that far, but I think it could be a possibility. It's over and above my capabilities right now to answer on that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In principle, would your organization be of the view that, from a taxation standpoint, there should be rough equivalency between trust forms of business enterprise and corporate forms of business enterprise?

[Art Field]

I'm not following that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

The government generates revenue in a variety of ways. Trusts compete with corporations and corporations compete with trusts in attracting investors. Would it be your view that the tax treatment of trusts should be roughly equivalent to the tax treatment of corporations?

[Art Field]

Are you saying that if an investor had an investment, he should pay more tax? Is that what you're saying? Or is it that the company should pay the tax?

[John McKay, Liberal, Scarborough—Guildwood, ON]

The issue is that you can't have it both ways, and that's what I'm pressing you on. You either have rough equivalency and generate the revenue, or you have an inequity between the trusts and the corporations, which means the money flows to the trusts.

[The Chair, Conservative, Brian Pallister]

For your interest, Mr. Field, there are a couple of suggestions in the case you raised that you could pursue. The office of David Agnew, the ombudsman for banking services and investments, exists for dealing with complaints and concerns. The Financial Consumer Agency of Canada is also an office to which you could express concerns or complaints. There are a couple of agencies available.

We'll conclude with Madam Ablonczy for a couple of minutes.