Finance Committee on Feb. 8th, 2007

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

With regard to the description of activities, the bill states that this credit would apply where allowances are paid to an individual taking part in a sports program. It states, and I quote:...not-for-profit organization in connection with its operation of a sports team or a sports or recreation program...

Are these definitions already in existence at the Department of Finance and the Canada Revenue Agency? Based on this bill, do you know exactly to whom this applies? What athletes would be eligible and which ones wouldn't? Is this definition entirely clear for you?

[Edward Short]

If I understand the question, you were asking if we know which sports would be included. As the bill is drafted, it is not necessarily limited to the sporting activity. It could conceivably include remuneration paid to salaried employees. We would not expect that would likely be the case, because it is limited to people who are members of the organization. Generally speaking, people who are employees are not also members who are under the age of 19. But there is not any limit as to the type of activity within the bill.

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

If I understand this bill corectly, the credit applies only to those who are reimbursed for these expenses. In the case of those who pay out of their own pocket, this amount would be deducted from their taxable income and they would not be entitled to a credit for this. Is that correct?

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

I should clarify something here. We have a friendly amendment that's going to be proposed on the bill that will tighten it up to ensure that people like coaches and people who are drawing real salaries in the organization will not be eligible for the benefit of this feature.

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

Let's suppose that I'm a member of some sports association and that I rent a hotel room as part of a sports event. From what I understand of this bill, if I'm reimbursed, that won't be taxable. If I'm not reimbursed, could I deduct that expense from my income under the bill?

[Edward Short]

If a player is travelling and is reimbursed for travel expenses, that is already not included as a taxable benefit. If they are boarding with a family, for instance, in the location where they are playing, in their home location, then that would be a taxable benefit. It is a taxable benefit on the one hand; however, in respect of the employment insurance premiums that are required to be paid by the team, those are only required to be paid in respect of cash allowances paid to the players.

Insofar as the Income Tax Act is concerned and whether or not it is taxable income, if the player incurs an expense, under this bill he would not be required to keep receipts for the expense as long as it is for board or lodging. And that applies when he would normally reside in the town that would be the hometown for the team. But the travel expenses are already excluded.

[The Chair, Conservative, Brian Pallister]

Thank you. I'll have to cut you off right there.

We'll move to Mr. Dykstra now.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Mr. Chair.

I did want to ask the folks from the finance department who are good enough to be here today along with you, Mr. Fitzpatrick--thank you very much--since you obviously reviewed this and looked at it from a financial perspective, what do you believe to be the merits of the bill, and are there some difficulties within the bill we should be paying attention to?

[Edward Short]

As Mr. Fitzpatrick suggested, it appears to us that the real purpose of this bill is to reduce the amount of source deductions that are required by the teams--i.e., it is recognized that these players will not be taxable on this income in any event, because they don't make enough money. They don't make more than, for instance, the basic personal amount, and this is really only in respect of cash allowances that they receive, for which they are not required to keep any receipts. The amounts are not substantial, but under the employment insurance legislation, the teams, if it is a cash allowance, are required to withhold, starting from the first dollar that they pay. Because this bill will make those allowances non-taxable, there is a consequential effect as a result of the Employment Insurance Act, which says that the amount, since it is not taxable under the Income Tax Act, will not be subject to withholding. This is all really so that the teams can get a de facto exemption from the employment insurance legislation.

It may be more appropriate for the government to consider this initiative in the context of the employment insurance legislation and not in the context of the income tax legislation.

Mr. Fitzpatrick is going to speak about Canada Pension. I will just mention that with Canada Pension there is a tolerance level; I think the first $3,500 is exempt.

[Rick Dykstra, Conservative, St. Catharines, ON]

Okay.

Mr. Fitzpatrick, I'm sure there are a lot of folks in Saskatchewan who are watching intently to see how the bill carries through, and you are certainly to be complimented for coming forward and doing this on behalf of your community.

One of the things I noted within the description in the background is that you talk about this to a maximum value of $350 per month. I thought you might want to comment on the timeframe. Hockey season isn't generally 12 months out of the year. Perhaps you could just comment on that.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Mr. Doyle might correct me, but basically you're looking at September through to the end of April for most teams. It might be a yearly amount for some of the players who have been around for a while, because they do stay in the communities, but for most players it would probably be a September-to-April allowance.

I should mention that there is no profit in this allowance. If you ask any of the families who bring these kids into their homes, these young men will eat far more than $350 in food. If anybody thinks there is any profit angle on this, it's a mystery to me. Maybe the grocery store might make a profit out of it, but it's not a money-maker.

[Rick Dykstra, Conservative, St. Catharines, ON]

One of the things Mr. McKay mentioned that piqued my interest was the width or breadth of who would be included within this. Obviously your focus is on the young hockey players in Saskatchewan, but the bill obviously goes a little bit further than that. Perhaps either Mr. Fitzpatrick or one of the Finance officials could comment on how far it actually goes in terms of who it would apply to.

[Edward Short]

As I said, because it applies only to employees of organizations in which the membership is limited to participants under the age of 19, this would not apply to a very large number of organizations. The wording otherwise is broad, but in fact there is not a large group that would be affected by this.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

I could comment on that again. An MP is limited in how far he can go with technical amendments to the Income Tax Act, but we have a good friendly amendment that will tighten up these features and provide really strong certainty, so that the unintended consequences and so on are greatly eliminated from the ambit of what I'm trying to do here.

[Rick Dykstra, Conservative, St. Catharines, ON]

One of the comments in the report from the Library of Parliament was that when CRA did the audit in 2002-03, they found the existence of an employer-employee relationship. I wonder if the finance department might be able to comment on that. Is it a way for teams to finance their operations? What is the reason for that decision?

[Edward Short]

On the determination of whether or not there is an employee-employer relationship, employee-employer relationship is a question of jurisprudence. It's reasonably well settled, but the facts are always different in every case. So every case requires a separate analysis.

Generally speaking, you would not expect a player who is in a relationship, say, with a team or a coach to be in an employer-employee relationship. They are in a player-coach relationship. That said, once the team begins to pay non-accountable cash allowances, even if it is for something like room and board, there is really nothing more basic in terms of remuneration than that, and that is very suggestive that there is in fact an employer-employee relationship. So this is one of the factors that would have been looked at by the Canada Revenue Agency.

I am also aware, or at least I have been told, that there was a case several years ago of a junior hockey player who ceased to play for the team—I don't remember what the reasons were—who sought employment insurance benefits, and as a result of a review by the Canada Revenue Agency, it was decided that the former player was entitled to those benefits as a result of that employer-employee relationship.

[The Chair, Conservative, Brian Pallister]

We'll continue with Madam Wasylycia-Leis now.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you, Mr. Chairperson.

Thank you to Brian for introducing this bill, which, as he knows, we have given general support to in the House. We haven't changed our mind at all, except that I want to register our usual concern, which is that while tax changes and tax credits help some people and do make a difference to some extent, I think we keep missing the boat in terms of finding a way to arrive at what is a proper investment in the area of sport and recreation and fitness by the federal government. It's an area that often gets dismissed as either a provincial or a local responsibility. We know from the budget that in fact the federal government's investment in this area is a pittance. It's about one-tenth of 1%. That's one-tenth of 1% of the total GDP for the federal investments in sport in this country. So I think that in fact is an issue that has to be dealt with.

We've just had the fitness tax credit, which will help some families, but it's not going to put gyms or recreation centres in place in those communities that have nothing. It's not going to help people in my community, which is a fairly low-income older neighbourhood in the north of Winnipeg that saw the Y close there 15 years ago and nothing put in its place. We're struggling with that right now. There was a little bit of support through the western diversification fund for helping us get started.

So these kids who are from lower-income families, who aren't going to benefit from tax credits of any size, shape, or form, are turning to gangs. They're looking for other ways to fill their lives. There's no recreation. There's no place to go and work out, no weight machines, no wrestling groups. It's a real dearth, a real vacuum, that is at the root of many of our problems with juvenile delinquency and youth gangs.

While I applaud your effort to recognize the need to do something—and I think this does something in that, as you said, especially in Saskatchewan and Manitoba, it would be the same around helping amateur hockey teams and helping account for the expenses—it's just a drop in the bucket. So I just want to register that concern and ask you or Finance officials whether there are any plans to address this matter and what we might expect to see in the future.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Those are excellent points.

I think we have a real problem with young people in our society running astray, and we have problems with type 2 diabetes. There are lots of young people who are going to be 40 years of age and they're going to have a body of a person 75 years of age. We should be encouraging participation in things.

We support the elite programs, the Olympic programs, but that's the tail end. The grassroots is what produces that. The last Olympic team that won a gold medal for Canada had two players on the team who were graduates of our league. In the coaching system, our North American system, we've cut a lot of coaches through that league who have done very well and have contributed to hockey. So it seems to me you have to encourage the grassroots if you want things to happen. This is an attempt to get at that.

Mr. Ryan is a graduate of Notre Dame college in Saskatchewan, Père Murray's college. Père Murray--I knew him very well--brought in a lot of troubled kids from gangs and so on, took them to that little college on the prairie and turned them into leaders through good sports programs and athletics. I think it's a terrific model. It's something that may be disappearing in our society, but he got results.

I think government should be stepping up to the plate to encourage as much as they can getting our young people into good programs where there's real leadership and direction and so on. I think this is a small step in that direction, but I think it's an important one.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Does anybody else want to comment on this broad area?

[Laury Ryan, President, Saskatchewan Junior Hockey League]

Yes, I'm sitting here and I'm very new to this process, so I'd just like to give a definition that has not been heard in this room about junior A hockey. I am also the president of the Canadian Junior 'A' Hockey League, which represents 140 teams across our nation, and 10 leagues. I also have support from Hockey Canada in trying to promote the concept that we are trying to take care of our athletes.

There was a lot of talk here about employer-employee relationships, pro hockey. We're not really talking about that when we're talking about paying billet amounts for athletes in our care. In Saskatchewan, in 95% of the cases in junior A hockey, these are not-for-profit organizations. They are there solely to provide opportunities for kids and provide outlets for the community. They are an entertainment factor in that community.

Again, I get frustrated by the term “employee-employer relationship”. The money that is passed to these kids simply pays their expenses, whether it be for skates or for minimal living expenses. These are not players who are gaining a wage, and that should be very clear.

It was such a skewed definition, when I heard our Finance people talk about the relationship. This was not junior A hockey that he was talking about.

[The Chair, Conservative, Brian Pallister]

I'm sorry, Madam Wasylycia-Leis, time's up and we have to move on. But I thank you for your comments.

Just as a quick point of clarification, then, this wouldn't apply to the Brandon Wheat Kings, but it would apply to the Portage Terriers or the Winkler Flyers in tier two. Is that how you see this thing, Brian?

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Well, major junior hockey has a whole different paradigm from the junior A teams. The western major and the Ontario major hockey leagues really are in essence business operations, probably quite profitable. The owners have deep pockets. Junior A hockey in this country is a long way away from that.

As a point on that too, Mr. Pallister, the National Collegiate Athletic Association in the United States--a lot of our players get athletic scholarships--has the toughest rules in existence on who's an amateur. For example, there's a player with Ohio State in the big bowl game this year, and his parents are dead. He brought his six-year-old brother to Ohio State with him, and he couldn't accept any contribution from anyone for the care of that little six-year-old boy or he'd lose his eligibility as an athlete down there.

The national athletic association in the United States has looked at junior A hockey in Canada and has said, “This is amateur hockey. The players from those programs are eligible for our scholarships.” Anybody who plays a game in major junior hockey loses his eligibility. They have a common sense approach to what is amateur here, and this is an amateur grassroots organization; it's not a business operation.

This also applies to junior B teams in the country and midget hockey as well--triple A midget hockey. I'm concerned about the application of these kinds of rules. The parents entrust their kids to these teams to put them in homes and take care of them.

[The Chair, Conservative, Brian Pallister]

Thanks, Brian.

We'll move to Mr. Pacetti now.

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

Thank you, Mr. Chairman.

Thank you, Brian.

Please take me through the steps again. We went through this at the last Parliament, and we had a few issues with the previous bill. One of the major issues--and I see it's still here--was the non-profit organization, where we determined that teams like the Winnipeg Blue Bombers were a non-profit organization. I think there's another CFL team that's also non-profit.