Finance Committee on March 20th, 2007

[The Chair, Conservative, Brian Pallister]

Monsieur Gingras.

[Yves Gingras]

I can answer that question. We have briefed our minister based on a scenario where contributions will increase. The figures have been circulated and made public to Parliament.

Mr. McTeague, you calculate that a 20% increase in contributions would translate into an overall cost of $765 million, as compared to the projected cost of $565 million if contributions patterns remain the same. We're talking about a difference of $200 million per year.

[The Chair, Conservative, Brian Pallister]

Monsieur McTeague.

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

People will tend to take advantage of these measures. They already pay tax. There's no question about that. However, the minister might feel that it is not necessary to apply this 20% in all cases.

I don't know if that's the case here. That's not really the issue. I must also add, Mr. Chairman—

[The Chair, Conservative, Brian Pallister]

Order, please.

Mr. McTeague, proceed.

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

Mr. Chair, thank you.

I'm having some difficulty understanding if the maximum amount—which would be $18,000 as proposed by this bill, or $50,000 as proposed by the government as a lifetime limit down the road that could be contributed annually—would not have an impact in the take-up. Certainly this would be a bit of a stretch, and I think it's something the Department of Finance would want to give some thought to.

[The Chair, Conservative, Brian Pallister]

What we have before us is a dichotomy. Of course, on the one hand, there's likely an increase in contributions expected as result of deductibility. On the other hand, there's the argument about the class warfare issue here. The additional benefit to be derived by the families that can take advantage of this deductibility is also indisputable.

So you have a revenue loss on the one hand, which is natural as a result of a higher savings rate toward post-secondary education. There's a benefit and an advantage to be derived from the additional contributions. There's a revenue loss as a consequence of the over-contributions. This is a natural consequence of increasing the contribution.

What is at issue here, however, is Mr. St-Cyr's amendment. Mr. St-Cyr's amendment proposes to limit said contributions to $4,000 or $5,000 a year. Madame Savoie has made comments addressing this issue. It will limit the additional advantages that some families might derive under Mr. McTeague's proposal, but not eliminate them entirely. That's what Mr. St-Cyr is after.

We'll continue with the discussion. Mr. McKay.

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

Thank you, Mr. Chair.

The discussion about how much this is going to cost is somewhat irrelevant to me. The way billions were thrown around yesterday, I don't know why I should feel overly constrained about the half-billion.

[The Chair, Conservative, Brian Pallister]

Mr. McKay, would you like to address the amendment now?

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

I appreciate that your fearless leader appears to be not overly fussed about the multiple billions of dollars that were doled out yesterday. So Mr. McTeague's proposal at one level is quite modest.

Having said that, it is a very attractive proposal for those who can afford it. It is a deductible scheme, it is also a deductible scheme with a grant, and then it's a deductible scheme with a grant and an income split. So all of those things add up to a very attractive package for those who can afford the package.

Mr. St-Cyr proposes to limit the deductibility to $4,000 and $5,000. But my question is to Mr. Gingras, with regard to the BQ-1 amendment's proposed paragraph 2(1)(e), which says:

for 2007 and subsequent years, the total of the RESP annual limit for the preceding taxation year and the product obtained when the RESP annual limit is multiplied by the average percentage change in the Consumer Price Index for the year

I'm not clear about what that means. Are we basically taking the $5,000 amount for 2006 and then adding a consumer price index multiple that will determine the amount you can deduct?

If that's correct, then my second question would be, is there any limit to the additional contributions, assuming you didn't want to take advantage of the deduction? In other words, for argument's sake, if you contribute $7,000 in 2010 but you really want to contribute $10,000, can you then deduct $7,000 and still contribute the other $3,000? That's my question.

[Yves Gingras]

Regarding the first question, my understanding is that after 2006, any increase in the contribution limit will be based on the consumer price index. Taking into account inflation, the new limit would be set at $5,000 beginning in 2006. As I understand it, contributions would be limited to $5,000 per child. Any additional contributions would have to wait until the following year.

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

All right. Okay, thank you.

[The Chair, Conservative, Brian Pallister]

I'm in the committee's hands. We are approaching the time we've allocated for discussion on this private member's bill. We also have witnesses for the subsequent private member's bill who are here to testify to the committee. I am reluctant to suspend the discussion, but I see no choice, given the other private member's bill.

Mr. McKay.

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

Before we get to the actual discussion of the amendment, I wonder whether the mover would entertain a friendly amendment of $8,000 as his base limit.

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

We know the cost associated with the current contribution limit, Mr. Gingras has shared that information with us. We also know that no one will be able to exceed the limit. That was already the case.

In my opinion, a $5,000 limit is adequate and allows people the set aside some money, even after tax. The limit will be indexed to the cost of living and will increase over time. It's a good start.

[The Chair, Conservative, Brian Pallister]

Monsieur St-Cyr, je suis désolé, mais it's a no.

I'm going to allow one more comment from Mr. Pacetti, and then I have to suspend discussion on this.

Welcome, Mr. Merasty.

[Mike Wallace, Conservative, Burlington, ON]

On a point of order, does that suspend this item or do we move to line-by-line after that?

[The Chair, Conservative, Brian Pallister]

No, we'll move to the time we've allocated for another private member's bill.

[Mike Wallace, Conservative, Burlington, ON]

Okay, so we'll pick it up on another agenda. Okay, thank you.

[The Chair, Conservative, Brian Pallister]

Exactly.

Mr. Pacetti.

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

Thank you, Mr. Chairman.

In the spirit of your motion to suspend, Mr. Chairman, I just want to ask Mr. McTeague how long this private member's motion has been in the works. I have here that the first reading was May 2006. Is it the first time? I think you have tabled this type of motion more than once.

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

Yes, this is my second appearance before the committee.

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

When did we have you testify—about a month ago?

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

It was a month and a half ago, six weeks ago.

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

What I'm getting to is whether you have had any discussions with Finance regarding this bill and how you can make it better.