Evidence of meeting #87 for Finance in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was vehicles.
A recording is available from Parliament.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Thank you, Mr. Chair.
Mrs. Urquhart, I just want to make something clear. Mr. McCallum made the point that you and he are of a common mind on income trusts, but I think you are quite diametrically opposed.
Would you comment briefly on the Liberal income trust proposal?
Independent Consulting Analyst, As an Individual
The 10% refundable income trust tax proposal is basically the status quo, except as it applies to Americans. It requires that new business taxes be collected from the American owners. All current deferred tax accounts and taxable accounts will pay 10% but will get it refunded, so essentially they're not going to be paying taxes. In my opinion, the consequence is that it will reinvigorate the income trust market of Canada.
As well, he has indicated there is a process for getting exemptions. Any time there is an authority given to a government to enable exemptions, they're almost always granted, so there will not be a binding termination of new conversions in what is proposed.
Because I feel that the Canadian government should not have a tax advantage to invest...for our seniors, our most precious seniors, who can't make up for losses to go into an investment product that is ill-conceived and unsuitable for their purposes, then I do not support the 10% refundable tax plan. It retains a very substantial tax advantage for seniors to invest in income trusts within their tax deferred accounts.
Conservative
Dean Del Mastro Conservative Peterborough, ON
Thank you.
Just briefly, I know they work very closely with an organization called CAITI. Have you received any threats or acts of intimidation for your stand?
Independent Consulting Analyst, As an Individual
I get a lot of e-mail, just as I think many people around this room get e-mail. I find it offensive to be called names. I don't think people in political life, or people such as me, who are experts and work pro bono for a serious cause in the community, deserve to get that kind of treatment. I suspect it is not endorsed by the association, but there has been a very aggressive and very personal campaign.
Conservative
The Chair Conservative Brian Pallister
Welcome to the world of politics, Dianne.
Before we conclude with Mr. Pacetti, I want to congratulate the members of this committee for their conduct in dealing with this particular bill, in contrast to some of our colleagues who have unfortunately been part of less efficiently conducted committees. Each of you deserves to be congratulated for the way in which you've handled this very contentious and very important piece of legislation. I offer my sincere and favourable comments for the way you've handled yourselves.
We'll conclude with Mr. Pacetti now, for three minutes.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you again. You saved the best for last.
I have two quick questions, and one is for Mr. Jock.
If the present government had respected the Kelowna Accord, would that have solved some of the issues you've raised today?
Chief Executive Officer, Assembly of First Nations
I think it would have dealt with the issue of hope, which is one of the fundamental elements that is needed at this time.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Then it was a missed opportunity by the present government. Okay.
Mr. Morand, just quickly, I have a couple of technical questions. If you have U.S. corporations buying up some of these trust funds and turning them into private income trusts, would they still be exempt from the present rules?
Partner, McCarthy Tétrault, As an Individual
They would not be subject to the present rules unless the U.S. corporation had publicly traded debt. Based on the very first point I raised in my introductory comments, the rules as crafted would apply to a private trust if its parent had public debt.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So if a foreign or even a pension plan kept the income trust in the same form it is today, except they privatize it, why would they load it up with debt?
Partner, McCarthy Tétrault, As an Individual
A pension plan would not.... But it's not a matter of loading up the trust with debt; it is whether the shareholder has debt. It's not debt at the trust level that's the--
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So the money from the trust would flow tax free.
Partner, McCarthy Tétrault, As an Individual
The trust is a flow-through vehicle regardless of whether it's public—
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
But under the new formula it would have to pay tax.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Wouldn't it be subject to the new rules? The money would continue—
Partner, McCarthy Tétrault, As an Individual
It would not be subject to the new rules if its equity is no longer publicly traded, subject to the few exceptions I described at the outset.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So the real reason most of these income trusts are being taken private is because there's a benefit. They continue to survive in their present form, and that's what we're seeing.
Partner, McCarthy Tétrault, As an Individual
I won't speculate as to the motivation for why they're being taken private, but the flow-through nature of any trust would—
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
There's also the fact that they're undervalued, of course.
Thank you.
Conservative
The Chair Conservative Brian Pallister
Let the record show that Mr. Pacetti doesn't determine the value of anything on the market.
Conservative
The Chair Conservative Brian Pallister
Thank you very much to our witnesses. We have benefited as a committee, and this has been a most interesting panel. We appreciate your being here.
I have two quick points for my colleagues. Although it is not required, if you have amendments, I would very much recommend you have them in to the clerk's office by the end of the business day.
Conservative
The Chair Conservative Brian Pallister
It isn't a requirement, but it would really facilitate the operation of our meeting tomorrow.
Second, we will move to clause-by-clause tomorrow, and you will receive a notice that the meeting will be from 3:30 to 5:30. However, we have by previous agreement said that we could take until 11:59 tomorrow night. If it is your wish, we will do that.
We have a notice of motion from Mr. McCallum that he wants dealt with. I will try to accommodate him, unless, by some strange coincidence, some of you wish to--and this would be most unfortunate--filibuster the operations of the committee tomorrow until midnight, in which case there will not be time to deal with Mr. McCallum's resolution.
Again, thank you all very much for being here.
The meeting is adjourned.