Finance Committee on March 1st, 2007

[Pierre Paquette, Bloc, Joliette, QC]

Elsewhere, I'm very interested in the subject of industrial hemp. Until very recently, tobacco was grown in the Lanaudière region. Tobacco fields could be turned over to industrial hemp crops. Pilot projects are currently under way. As mentioned in the briefing materials, industrial hemp has many uses. In fact, 99.99% of the plant can be used.

The use of industrial hemp for agricultural purposes is discussed at length in the briefing materials that we received, notably its use as pet food or feed for wild birds. I'd like to know if the proposed amendments will apply to all forms of tax relief on supplies and importations of grain, seeds or mature hemp stalks, even ones intended for industrial use. For example, door mouldings can now be manufactured from industrial hemp.

Under the circumstances, will seeds, mature stalks and importations of grain qualify for the proposed tax relief?

[Pierre Mercille]

Changes were announced primarily in light of the high number of zero-rated agricultural inputs. Thus, farmers won't have to pay GST immediately and then recover the tax later through the input tax credit mechanism.

Farmers consider certain products to be inputs and we were asked if these products could be zero rated much like other agricultural inputs are exempt.

[Pierre Paquette, Bloc, Joliette, QC]

Will these amendments apply to industrial hemp that could be used to make paper, for example? Since the forestry industry in Quebec is in the midst of a serious crisis, this product could be used to manufacture papermaking pulp.

[Pierre Mercille]

The grain in this instance is clearly for growing hemp. To my knowledge, no conditions have been placed either on the buyer or on how the product will ultimately be used. Often, the person selling the product has no idea of how the product will be used.

[Pierre Paquette, Bloc, Joliette, QC]

That's what I wanted to know. Thank you.

The Air Travellers Security Charge is being lowered. Exactly what change is being proposed here? Wouldn't it simply have been better to eliminate the charge, as we have been requesting since it was first introduced?

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

As a matter of policy, of course, both the former government and the present government recognize that increased security is a sad reality of modern life. I don't think there is any intention that it would be a good move to totally eliminate the air security charge.

[Pierre Paquette, Bloc, Joliette, QC]

I have nothing further.

[The Chair, Conservative, Brian Pallister]

Merci, Monsieur.

We continue now with Mr. Dykstra.

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

Thank you, Mr. Chair.

I certainly want to compliment Ms. Ablonczy on her presentation. Although some in the room wanted to cut it short, I certainly enjoyed all of it, and I appreciate the double duty that you're doing on behalf of the committee this morning.

One of the things you mentioned was the aspect of how this addresses persons with disabilities and the benefits it brings. Could you expand on that a little bit in terms of how it's important to make sure that's in the bill this time?

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

As the committee heard in our pre-budget consultations, families with children with disabilities and individuals with disabilities face a number of economic challenges as a result. What this bill does is move towards addressing some of those economic challenges, so that people who need special equipment, for example, have a broader range of tax relief available to them. These are measures that have been asked for, for some time. I think most people applaud their being in the bill. On the purchase of equipment, especially vans and other specially equipped vehicles, the portion that is made necessary because of disability will now be exempted. These and other moves I think will help those kinds of individuals.

I don't know whether the officials have more specifics to comment on, but those are the main measures.

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

That's good.

I did have a little bit more of a specific question. This bill will actually allow the revenue minister the authority to accept late-filed new housing rebate applications. Could you just expand on that, in terms of what that means?

[Pierre Mercille]

The new measure that is in there is to give discretion to the minister to accept late-filed new housing rebates for owner-built homes. Basically, in the case of owner-built homes, while the deadline is two years to file your claim, since the person is building their own, sometimes they occupy the house and they continue to improve the house, and at some point later in the period there could be sickness in the family or all sorts of things that could prevent them from meeting the two-year deadline. In the past there have been some remission orders that have been provided under the Financial Administration Act for situations of this type, and it was thought that it would be more appropriate if the Minister of National Revenue could use a discretion instead of going through the regulatory process of the remission orders.

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

Good. Thank you.

My other question relates to the permit regarding wine licences and providing samples without payment of duty. Of course, I'm from down in the Niagara region, where we have probably the best of what we have in the country in terms of making wine and producing. This obviously hits home for me, and I'd love to hear how this is going to benefit the wine industry, for sure in Niagara but also across the country.

[Carlos Achadinha, Chief, Alcohol, Tobacco and Excise Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance]

Under the previous excise framework, there was an administrative practice whereby samples were allowed to be provided to customers on a duty-free basis. The intent of this provision here is simply to carry that forward and provide an explicit legislative basis in the new excise framework.

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

So really this is addressing the reduction in the excise tax on wine, which we passed in the 2006-07 budget.

[Carlos Achadinha]

It's more so just a matter of continuing a practice from previously. Part of what happened with the excise framework was that a new framework was announced for the application of excise duties to alcohol products, including wine. Under the old framework, it was an administrative practice that their samples were not subject to duty. This is a matter of just putting it in the legislation, making it explicitly clear legislatively that those samples will not be subject to duty.

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

Thank you.

Any time you guys want to come down to wine country, you're more than welcome.

[The Chair, Conservative, Brian Pallister]

We move now to Mr. Christopherson.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

Good morning, and thank you for your presentation.

It's our understanding that, for the most part, we don't have too controversial a bill here, that mostly it's housekeeping. It's introducing quite a number of changes, but they're small and hopefully positive, for the most part. At this point, we're not seeing this as anything to get ourselves all twisted up about. In fact, if everything holds up, this should be a fairly smooth process.

However, I do have a couple of questions. Obviously there's the concern we've raised around ATMs and the fees being charged to citizens. Any time we see something here, as we're noting, that gives to a bank a benefit that doesn't exist right now in some fashion, then we'd at least like a clarification.

Now, I think I understand exactly what's happening, but let me just briefly read what we have and then you can comment. I would quote to you, from the summary of the bill, the following:

Business Arrangements: provides transitional GST/HST relief on the initial asset transfer by a foreign bank that restructures its Canadian subsidiary into a Canadian branch;

Can somebody give that to me in ordinary language, please, so that I know exactly what's happening there?

[Pierre Mercille]

Sure.

There was a change to the Bank Act. Before, a foreign bank that wanted to operate in Canada had to incorporate a company, incorporate the bank, to operate as a full person, basically. Since the change to the Bank Act, foreign banks have been entitled to operate as a branch.

Basically, the legal person is still the foreign bank; they have only a branch in Canada. Before, they were not allowed to operate as a branch in Canada. Now they're allowed to. Maybe when they came to Canada the first time the bank could have chosen to operate as a branch and not necessarily as a subsidiary of the foreign bank. To do that now, what could have happened is that when transferring assets from....

Let's say they want to close the subsidiary and just operate as a branch. There would be a sale of assets. Usually when there's a sale of assets, there's GST applying. Under the GST we have rules that basically allow for a rollover of transactions when there's the sale of a business. But in this situation, where you receive representation, the existing rule would not apply in every case.

So basically we put in place a transitional measure. For a certain period of time, the foreign bank can use the new rollover provision to avoid payment of tax on the restructuring of their operations.

[David Christopherson, NDP, Hamilton Centre, ON]

I think I got that.

Is there any resulting impact at all on the domestic banks as a result of this? Are there any consequential changes that affect how they're governed as a result of this change?

[Pierre Mercille]

Not with this amendment. The rule is that the recipient has to be an authorized foreign bank under the Bank Act.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay.

To the parliamentary secretary, I would assume that the Canadian domestics aren't raising any major concerns about this in terms of any unfair competitive advantage being given to foreign banks?

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

No, they're not. This is very simple. If a foreign bank wants to operate as a branch instead of a subsidiary, which they were forced to do before, it just doesn't trigger any tax consequences. So it's simply a fairness measure; it's not a competition measure.

[David Christopherson, NDP, Hamilton Centre, ON]

Right, and that was our sense, but I wanted to make sure of that.

But I do want to ask one question of the parliamentary secretary, and this is very much policy-related. We're going to all this trouble to make sure the banks are treated fairly, and yet we're still putting GST on books and other literacy things and a whole host of other issues. Can you give us a reason why, if you've taken the time to make sure that foreign banks are being treated fairly, you didn't take a little more time to make sure that other Canadians are being treated fairly?