Finance Committee on Feb. 8th, 2007

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you.

[The Chair, Conservative, Brian Pallister]

Mr. McKay, continue.

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

Mr. Williams, I have to declare a conflict of interest here. I have three kids in university. I'm telling you, this looks good to me. If I'm a rational taxpayer and I have a choice between an RRSP contribution and RESP, if I contribute to Mr. McTeague's plan I get a deduction, a grant, and an income split. If I contribute to my RRSP I get a deduction. Is that a fair analysis?

[Baxter Williams]

That's a fair analysis.

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

Okay. So the reasonable taxpayer is going to wonder why he or she is contributing to an RRSP, unless they have an excessive amount of money, in which case they're going to not only use up the deduction limit on their RRSP; they're also going to load up on their RESP, I should think. For those who can afford it, that's a rational economic choice.

[Baxter Williams]

That's correct.

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

On the tax leakage side of the equation, are you doing the same analysis as the minister was doing on tax leakage, and using the same assumptions that this will be tax deferred in the order of $560 million? Are you using the same methodology?

[Baxter Williams]

I'm not familiar with my minister's statements on the tax costs of the RESP or this specific proposal, so it's difficult for me to comment specifically on that.

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

I'm assuming the department uses consistent methodology in calculation of whatever proposals—

[Baxter Williams]

There would be a standard practice dictated by analytics. That's correct.

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

So the minister says that on tax defers—he calls them tax exempts but they're actually tax defers—the loss is about 40% of the $500 million, or about $200 million on income trusts. You're saying that on Mr. McTeague's proposal it's about $560 million. Are we comparing apples to apples?

[The Chair, Conservative, Brian Pallister]

We'll continue with Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. McTeague, for us to be able to support your bill, you'll have to give us quick answers. I need a number of points clarified.

On page 3 of the French text, where it refers to what can be claimed, it states "l'excédent éventuel du total des montants". It seems to me the concept of "excédent" is not present in the English and that it is not supposed to appear there.

Would it change the meaning if we deleted this phrase in committee?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I don't think that would change the meaning.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Good. That's what we'll do.

Next, with regard to the definitions, in clause 2, the calculation parameter B, which reads as follows, appears twice:the amount that is the lesser of the RESP dollar limit for the year and 18% of the taxpayer's earned income for the preceding taxation year;

That means that people who are better off could contribute up to the limit, but that the less well off would be forced to limit themselves to 18% of their income. Is that in fact what I am to understand?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Precisely.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

All right.

What was the underlying idea?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

The idea was to complete the registered education savings plan. We simply took the information on the RESP and we put it in the system here so that both would agree.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Where is the education savings plan limit defined? Does the definition already appear in another act?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

The limit is already integrated into the RESP.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

What is it?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

A maximum of $18,000 a year per taxpayer.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

It's already $18,000?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

It's already $18,000. I can turn the floor over to the representative from the Department of Finance.

The maximum contribution to an RRSP is $18,000 a year.

[Baxter Williams]

That's correct.