Finance Committee on Feb. 1st, 2007

[Mitchell Murphy]

Perhaps I'll use the example of Aliant, which has become an income trust. They're a major corporate taxpayer in Atlantic Canada and a major corporate taxpayer in Prince Edward Island, but because so many unit holders of that trust reside outside the region, in my opinion we get penalized twice under that structure. On the one hand we lose corporate tax. On the other hand, we do not gain any equivalency of personal income tax back because most of that personal income tax is paid outside the jurisdictions.

For the most part, on income trusts, in our case Aliant was a large corporate taxpayer, and some of what were coming down the line looked to be large companies and large corporations. Our fear was what might happen if two or three more large corporate taxpayers in our jurisdiction or in Atlantic Canada in general decided to move to income trusts. We felt we had a double penalty because of them moving in that direction.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Elitzur and Mr. Murphy.

We'll conclude with a very short intervention from Mr. McKay.

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

The major issue here again is tax leakage. There seems to be a significant discrepancy between Mr. Bruce's testimony and Mr. Normand's testimony.

You seem to be using exactly the same model as the one the department is using. You seem to be working on exactly the same information that the department is using. Something has to give here. You're working on the basis of information that is in the public realm, but it seems you can't reconcile the two ways in which these numbers seem to have been arrived at.

I can understand the political imperative to up the numbers to show tax leakage. I can understand how the provincial folks basically have to go along with the federal folks. But there is a significant discrepancy between your numbers and the department's numbers.

On all four items that you've itemized as the differences, where do you see the numbers? What is the discrepancy as you see it?

[Dennis Bruce]

I'll be filing further exhibits that describe that, but from—

[Dean Del Mastro, Conservative, Peterborough, ON]

On a point of order, Mr. Chair, can I have some clarification if Mr. McKay is asking the witness whether or not he believes the bureaucrats would lie for political reasons--i.e., they're all Conservatives? Is that what he's getting at with his question? I'd like a little clarity on it.

[The Chair, Conservative, Brian Pallister]

Order.

Mr. Del Mastro, you don't have a point of order, as you know.

We'll conclude with a very brief answer, Mr. Bruce.

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

That is totally out of order. I've known them for years, and I regard them to be of the highest character.

[The Chair, Conservative, Brian Pallister]

Mr. Bruce, proceed in spite of the interruptions from our less disciplined members.

[Dennis Bruce]

I have great respect for these gentlemen as well.

The major thing is that our interpretation on the materials provided on Tuesday was that the future legislated tax changes, as corporate tax reductions, were not factored in. That's our interpretation based on the information we have at our fingertips and what we know going forward about tax changes that have been legislated, so that's one of the major things we've highlighted.

As well, I mentioned that we have perhaps a philosophical disagreement on whether or not deferred taxes should be included, and those are worth $80 million. The previous adjustment with respect to legislated tax changes is $232 million, and deferred taxes we estimate at $80 million. We believe, as do many others, including Jack Mintz, who I know has presented evidence on this case, that they should be included.

And the other two really relate to two assumptions with respect to the average effective tax rate and how many of these accounts are held in tax exempt accounts. There are two real divides, but a good chunk of the issue relates to the legislated tax changes and whether they're included or not. That should be knowable just based on data, assumptions, and how the number was calculated ultimately.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. McKay.

Thank you, Mr. Bruce.

On behalf of the committee, we thank all of you for your presentations. We appreciate them very much.

We will recess for three minutes and then reconvene to deal with the motion that Mr. McCallum is bringing forth.

Thank you all.

[The Chair, Conservative, Brian Pallister]

Order.

Committee members, allow me to review quickly the work schedule for committee members and their staff.

First of all, in terms of orders of business for the coming week, next Tuesday, February 6, we will be dealing with a draft report on income trusts. I'm going to endeavour to get the room fifteen minutes earlier so that you can come in and read the draft prior to beginning discussion, just to expedite the process of dealing with the draft report.

Next Thursday, February 8, we have private members' bills. We have Bill C-294, Bill C-253, and Bill C-305 to deal with at that point in time.

Following that, very likely beginning on Tuesday, February 13, we will be dealing with Bill C-37, the Bank Act review, which should encompass a fair bit of the committee's time over the next while. I would suggest to you, committee members, that you forward names of witnesses to the clerk's office. Begin that process now and we'll give you some deadlines later on, but give some thought to Bill C-37, the Bank Act review, as soon as you wish.

At this juncture, Mr. McCallum, I believe you have a motion that you'd like to bring forward. I'd like for us to deal with it now if we could.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

You have the motion before you if you have the agenda, except that it has to be amended because it was to have been presented earlier. The motion as amended should read:

That the Department of Finance provide the Standing Committee on Finance, no later than 11:00 a.m. on Tuesday, February 6, 2007, all documents and information used to justify the government's decision to tax income trusts, as announced on October 31, 2006.

This was referring specifically to the document that we received in blacked out, censored form, plus any other information relevant, but particularly that document. In view of this disagreement over facts that we've just witnessed, I would suggest that this further underlines the importance of it.

That's the motion.

[The Chair, Conservative, Brian Pallister]

The motion is pretty straightforward, committee. Can we go to a vote?

(Motion agreed to)

[The Chair, Conservative, Brian Pallister]

Thank you.

[John McCallum, Liberal, Markham—Unionville, ON]

We are going to have a notice of motion to have additional witnesses.

My point is, so as not to waste the time of the committee in the event that our motion passes, you may want to do the private members' business on Tuesday instead of Thursday.

It's up to you, but I just don't want to waste the committee's time, because we wouldn't do a report if our motion for additional witnesses passed.

[The Chair, Conservative, Brian Pallister]

We must go through the process.

The meeting is adjourned.