Finance Committee on Feb. 8th, 2007

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

All right.

Now let's go to subclause 2(4), which amends section 146.1 of the Act by adding subsection (2.01). Here we're talking about the lesser of the amounts described in paragraphs (a) and (b). In the case of the amount described in paragraph (b), it may be understood that, in many cases, it may reach $18,000. In paragraph (a), in the French at least, where it refers to "l'excédent éventuel du total des montants", does that represent the surplus amount contributed to the plan? If so, that would then be zero in most cases, and there would never be any possible deduction.

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

No, we're talking about what's currently the case in the context of the RESP. You have an annual maximum and maximum for the total amount that you can potentially contribute for a future student.

[Pierre Paquette, Bloc, Joliette, QC]

If there's no surplus amount, then that would be zero? You're saying a person has to contribute the smaller of the two amounts. So, in order to contribute, there have to be surplus amounts.

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

There's a contradiction in the text, at least in French. The bill reads:(2.01) Un contribuable peut déduire dans le calcul de son revenu pour une année d'imposition le montant qu'il demande, à concurrence du moins élevé des montants suivants:

I understand from this that you can't exceed the amount in question. The first of the amounts, which raises a problem, is what's described as "l'excédent éventuel du total des montants représentant chacun une cotisation...".

That implies that, if he has never exceeded the limit, the taxpayer is not entitled to deduct anything whatever. That makes no sense.

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

I don't see where it refers to subtracting "C".

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

We're talking about the lesser of the amounts. That should appear on the last line of page 2.

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

There's obviously something missing from the wording. It's a drafting problem. I apologize for that.

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

There is indeed a problem. In the French version, the system doesn't work.

[The Chair, Conservative, Brian Pallister]

We appreciate your raising that, Mr. St-Cyr. We'll look for those corrections to be dealt with.

We'll conclude now with Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Shocking! And they're not very difficult questions. I just want to be sure. I have this chart from the registered education savings plan. In 1998, it looked as if there were about $4 billion in assets. It has gone to about $18 billion in 2005.

From your industry partners, is that accurate? So there has been major growth in the RESP area over the last number of years. Is that correct?

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

That is correct, in representing only 32% of students.

[Mike Wallace, Conservative, Burlington, ON]

I understand that.

I have two other quick questions for you. My understanding, and I might be wrong about this, is that the bill is based on the income level of the contributor in terms of the tax deduction. Does that not penalize my parents, who are pensioners and not earning income, in terms of contributing to my child's RESP?

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

What it is trying to do, Mr. Wallace, is provide anyone who wishes to contribute, up to the limits and with the safeguards in place, to ensure that students, more than being physically fit, have access to an education that gives them a job for the future. And as a result, the economy works better.

[The Chair, Conservative, Brian Pallister]

What Mr. Wallace is asking you is this. Because obviously it is a write-off, it is going to give higher tax relief to the higher-income earner than to the lower-income earner. That is all he is asking.

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

It is based on your income and on the applicable tax you have.

[Mike Wallace, Conservative, Burlington, ON]

Okay. What if, God forbid, somebody.... If I understand correctly, when the withdrawal is made, it's charged against a contributor. Is that correct?

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

The beneficiary in this case would be the student. If the student dies or--whatever the case may be--does not take it, then it is taxed at the relative rate as well as a penalty of 20%, which I indicated at the outset would be part X.5 of the Income Tax Act.

[Mike Wallace, Conservative, Burlington, ON]

Okay. Another piece of confusion for me is this. In one area of the bill it looks as if you repudiate the definition of the annual registration limits or the amount you can donate. I think it is somewhere in section 146. Does your bill actually eliminate the $4,000 a year?

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

No, it does not. It's up to a maximum of $18,000.

[Mike Wallace, Conservative, Burlington, ON]

So up to $18,000 a year.

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

The way it works, sir, is that you can make a maximum contribution--not that many people can probably do this--of $18,000 per year, similar, identical, to what you can do with an RRSP maximum. It follows exactly the same program.

[The Chair, Conservative, Brian Pallister]

To a maximum total, then, of $42,000.

[Mike Wallace, Conservative, Burlington, ON]

I thought there was a limit to how much you could contribute to it anyway and I didn't think it was as high as $18,000. Is that an accurate statement then? You can do up to $18,000 a year under this proposal. What is the law now? That's my question.

[Baxter Williams]

The current maximum annual contribution limit is $4,000.

[Mike Wallace, Conservative, Burlington, ON]

But based on this bill, it goes to $18,000. Is that what you're telling me?