Finance Committee on March 1st, 2007

[The Chair, Conservative, Brian Pallister]

We will commence.

Welcome to our new members to committee. It's nice to see you again.

It's a very great pleasure for me to be back here.

Pursuant to the Order of Reference of Tuesday, January 30, 2007, we have before us Bill C-40.

An Act to amend the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act and to make related amendments to other Acts.

We have appearing before us today, no stranger to this committee, Madame Diane Ablonczy, Parliamentary Secretary to the Minister of Finance.

I understand that you have some comments to make, Diane, so please proceed.

[Diane Ablonczy, Conservative, Parliamentary Secretary to the Minister of Finance]

Thank you, Mr. Chairman.

This is my second time representing the minister in front of this committee. It's always a pleasure to wear another hat, so to speak.

The purpose of this meeting is to discuss Bill C-40, the Sales Tax Amendments Act, 2006. The intent of this bill, I'm sure you all know, is to implement measures aimed at increasing the fairness, efficiency, and ease of compliance in administration of the sales tax system. The Minister of Finance spoke in the House when he tabled this bill. He said:

Canada's New Government is committed to reducing taxes and eliminating red tape. We believe this will make our economy stronger and that it will give a competitive advantage for Canada.

The bill we're discussing today reflects that commitment. We want to make sure that our tax system is fair for all taxpayers, and with Bill C-40 we are moving in that direction. I will outline how we are doing that in a moment, but first I'd like to take a moment to make a few remarks about Canada's new government improving the fairness of Canada's tax system in general.

We believe that like charity, tax fairness begins at home. That's the approach we took in Budget 2006, a budget that delivers real results to individuals and families. It did so in a focused and fiscally responsible way. We started by lowering the GST to 6%. We also delivered broad-based personal income tax relief combined with targeted tax cuts, cuts that over two years will provide almost $2 billion in tax relief for individual Canadians. That, of course, is more than the last four Canadian budgets combined.

These cuts, Mr. Chairman, will remove about 655,000 low-income Canadians from the tax rolls altogether. That is good news for over half a million Canadians and their families. As a result, Canadians will have even greater opportunity to keep more of their hard-earned dollars so they can invest in the things that matter most to them and their families.

In recognition of the Canadian entrepreneurial spirit, and the fact that it helps drive our economy, Budget 2006 also delivered on the government's promise to reduce business income taxes. This action will create an environment for jobs and growth, which in turn will make Canada's tax system more internationally competitive. But this new government has not and will not rest on those laurels. We recognize there is more work to be done.

In October, the finance minister announced a tax fairness plan for Canadians. The plan will restore balance and fairness to the federal tax system. It will protect Canada's long-term economic future and ensure that the tax burden is not unfairly shifted onto the backs of hard-working individuals and their families.

The plan increases the age credit amount, and for the first time ever in Canada, seniors will be able to split their pension income.

We didn't stop there, Mr. Chairman. Along with this fall's economic and fiscal update, the Minister of Finance, before this committee, released Advantage Canada: Building a Strong Economy for Canadians. This is a long-term, national economic plan designed to make Canada a true world economic leader.

Among other initiatives, this comprehensive plan will further improve tax fairness by featuring a reduction in taxes for all Canadians.

Getting to the substance of Bill C-40 before us, the bill complements the initiatives I've just outlined.

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

Mr. Chair, a point of order.

I appreciate that the parliamentary secretary has a speech. When I was parliamentary secretary I too had speeches.

[The Chair, Conservative, Brian Pallister]

I recall that.

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

You will recollect as well, Mr. Chairman, that I generally didn't inflict my colleagues with the canned speech from the minister, and we went directly to business. I'm inviting all members to ask the honourable member to simply skip the speech and get to business.

[The Chair, Conservative, Brian Pallister]

Actually, Mr. McKay, you don't have a point of order.

Madam Ablonczy, I would appreciate it if you would continue your remarks now, please.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chairman, Bill C-40 complements the measures I've just outlined by increasing the fairness of the sales tax system. It increases fairness for many individuals with special needs, it increases fairness for charitable organizations, and it eases compliance for a wide range of businesses and other organizations.

Let me illustrate for the committee how Bill C-40 will help meet the government's goals of ensuring fairness in Canada's tax system.

The GST/HST measures contained in the first part of this bill are principally aimed at improving the operation of the GST/HST. These proposed measures will also ensure that the sales tax legislation is in accordance with the policy intent when the law pertaining to these measures was first introduced.

In some cases, adjustments have been made to the legislation as originally proposed in response to representation from tax and business communities. This illustrates the importance this new government attaches to the consultation process. Time, I'm sure the honourable member who just spoke will be glad to hear, does not permit me today to outline everything in this comprehensive bill.

[Some hon. members]

Hear, hear!

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

So what I would like to do now is touch on the key measures in this bill and then open the floor, of course, to questions and discussion.

First, there is little doubt that Canadians want to have an affordable health care system that is there for them when they need it. To this end, Bill C-40 proposes to continue GST/HST exemption for speech language pathology services indefinitely. It also exempts health-related services rendered in the practice of the profession of social work.

Mr. Chairman, this new government is also sensitive to the special needs of persons with disabilities. As you may know, the existing GST/HST rebate for specially equipped vehicles applies only to purchases and importations of new vehicles. The proposed amendment in Bill C-40 will allow purchasers and importers of used motor vehicles that are specially equipped for persons with disabilities to receive a rebate of the GST/HST paid on the portion of the purchase that is attributable to the special equipment.

Canada's new government recognizes the important contribution made by small businesses to our economy, and we want to provide them with an environment that will allow them to grow and prosper. Bill C-40 responds to these needs, introducing measures that will ease their compliance with the sales tax legislation. For example, the scope of certain rules has been expanded to remove unintended impediments to the use of provisions that could exempt businesses from the GST/HST. This bill also proposes amendments to the legislation to better accommodate special import arrangements between businesses in certain situations where goods and services are supplied outside Canada to a Canadian customer. These amendments and others contained in Bill C-40 reflect policy initiatives to improve the application of the GST/HST. This will ease compliance requirements for Canadian businesses and allow them to flourish, Mr. Chairman.

Turning now to excise measures, the second part of Bill C-40 contains measures to implement minor refinements to the Excise Act, 2001, related to tobacco and alcohol. These proposals will improve the operation of the act and more accurately reflect current industry and administrative practices.

One such example is a proposed modification of the exemption of excise duty for small wine producers to take into account that smaller wine licensees may not have their own packaging facilities or equipment. The proposed amendments also permit wine that is packaged on behalf of a wine licensee to be covered by the duty exemption. This proposed amendment will simplify administration and compliance for small wine producers and allow them to concentrate their efforts on producing and promoting their excellent Canadian products.

As I mentioned, this bill also proposes amendments related to the taxation of tobacco products. Bill C-40 proposes to extend the requirements so that the origin of all tobacco products be identified, including those for sale at duty-free shops or for export. This ensures consistency with the Framework Convention on Tobacco Control, an international treaty on tobacco control sponsored by the World Health Organization.

Of course, committee members probably do not need to be reminded that this bill comes about as a result of extensive consultation with the alcohol and tobacco industries. The proposals in this bill are therefore expected to be received favourably by industry.

Part 3 of the bill contains measures pertaining to the air travellers security charge. The charge, as members know, was implemented following the events of September 11, 2001. Among other technical measures, Bill C-40 proposes that the charge not apply to air travel that is donated by an air carrier to a registered charity that arranges free flights for individuals as part of carrying out its charitable purposes. This would include, for example, flights made for medical purposes.

In closing, Mr. Chairman, the amendments proposed in Bill C-40 are intended to maintain a fair and efficient sales tax system. For businesses, this bill also promotes ease of compliance and administration. Moreover, the business community supports the introduction of this bill as it represents improvements to the administration and efficiency of the tax system.

I now welcome the questions that are burning in the minds of my colleagues on this committee and welcome the officials from the Department of Finance who have joined us here today to clarify any technical questions you may have about the bill.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Thank you, Madam Ablonczy, for your presentation, a fine one at that.

We move now to questions, and we'll begin with Mr. Pacetti for six minutes.

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

Thank you. “A fine one at that”--I'm not sure where you get that from, but anyway, I have just a quick question.

In January 2007, we had “Legislative Proposal”, “Draft Regulation” and “Explanatory Notes” relating to the excise tax. I'm wondering, what is this compared to Bill C-40? What is this document here versus Bill C-40?

[Pierre Mercille, Chief, GST Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance]

The proposals of January 2007 are proposals that were announced after the bill was tabled. The proposals in January are aimed mainly at financial institutions--

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

Sorry?

[Pierre Mercille]

They are mainly aimed at the financial sector industry, so these amendments are not included in this bill because they were finalized at a later time than this bill was put together.

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

Okay, so the January proposed amendments will come forward in a couple of months. Is that it? Through another bill?

[Pierre Mercille]

Usually, the process for announcing GST amendments is to have a news release, like the one you have, and to announce a proposed amendment, and usually we let some time--

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

No, I understand. How much time are we looking at? Is it six months or...?

[Pierre Mercille]

I'm not in a position to answer that.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I think, Mr. Pacetti, the consultation process is usually at least six months. These are posted on the website. Stakeholders can give input, and then the legislation is drafted pursuant to the consultation.

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

Okay. It's just to find out the timeline. Thank you.

Thank you, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Mr. Paquette, you may continue for six minutes.

[Pierre Paquette, Bloc, Joliette, QC]

Mention was made of social workers. I would image that psychologists are exempted from having to pay the GST. I have to admit that I'm not very familiar with one-on-one consultations with social workers. In Quebec, social workers usually work with groups, not individuals. It must be rare for a person to seek treatment from a social worker. I'm curious to know more about this situation.

[Pierre Mercille]

The amendment was sought by the Canadian Association of Social Workers. More and more social workers are in private practice. It's a matter of dealing with this new reality. In many instances, social workers dispense services that are very similar to those dispensed by psychologists.

[Pierre Paquette, Bloc, Joliette, QC]

The members of the College of Psychologists will be none too pleased. Have they been consulted?

[Pierre Mercille]

No. They are already GST exempt.