Evidence of meeting #90 for Finance in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was brown.
A recording is available from Parliament.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you, Chair.
I must admit, as a point of cooperation with members, I find it somewhat offensive to have a whole whack of amendments dropped on us at the last second. This bill has been in the making since 1999, and here we are, going clause-by-clause in committee.
I want to ask the officials, because there are five or six--I think G-1 through G-5 or G-6, starting, if I'm reading this correctly, with “subsection (1) applies to taxation”--
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Just before we begin looking at the technical amendments, could we have the Finance officials answer the question that Mr. McKay raised? Why are we faced with all these amendments when we heard from the Finance officials on Tuesday, and it looked as though everything was fine? We've been at it for seven years on this bill. If they're not ready, there doesn't seem to be any rush. I just--
Conservative
The Chair Conservative Brian Pallister
Mr. Pacetti, you don't have a point of order. I'll let Mr. McKay continue with his questions. It seems to me your point of order was simply duplicating the direction he was asking.
I'll let Mr. McKay continue.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you.
If I'm reading this correctly, Mr. Lalonde, subsection (1) applies to a taxation year
that begins after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.
I can't figure out what begins after 2006 that doesn't begin before 2007. It begins after 2006, but it applies to a taxation year of a taxpayer that begins before 2007. How can you be after 2006, but you're before 2007?
Conservative
The Chair Conservative Brian Pallister
Before you respond, Mr. Lalonde--and Mr. McKay, we'll revert to your question and the response to it in a second--I allowed you to enter the fray of the discussion because I understood you were making general comments. You're now moving to a specific discussion and a specific clause and amendment therein. Before I would permit discussion to continue, I would like a mover of that particular clause to allow discussion to proceed.
Does someone want to move that?
Conservative
The Chair Conservative Brian Pallister
Thank you, Madam Ablonczy.
Madam Ablonczy, did you have a point of order?
Conservative
Diane Ablonczy Conservative Calgary Nose Hill, AB
Yes, please.
I wonder if the committee might be open to changing the order slightly to allow the officials to address the question that I think is on all our minds. That is, why are we getting this big whack of amendments right now, and what do they mean? Then I think our questions will be more meaningful if the committee is willing to do that. I think it would be helpful.
Conservative
The Chair Conservative Brian Pallister
Thank you for that very positive suggestion, Madam Ablonczy. You don't have a point of order, though.
I'll let Mr. Lalonde respond to Mr. McKay's question.
Gérard Lalonde Acting Director, Tax Policy Branch, Department of Finance
A good two-thirds or better of the amendments proposed in here all say the same thing. Effectively, what it's about is allowing taxpayers to elect to apply the amendments that deal with foreign investment entities, FIEs, and non-resident trusts, or NRTs, to taxation years before the coming into force originally stipulated in this bill. Coming into force stipulated in this bill, when it was tabled, taxation years that begin after 2006--effectively, your 2007 taxation year.
After the bill was tabled, there were some representations made to the department that some taxpayers would actually prefer to have those provisions apply to earlier taxation years--in essence, to apply from 2003 onward. These provisions all allow for an election, for taxpayers to elect to have those provisions apply starting in 2003. Of course, the income tax amendments to implement these proposals are like a patchwork so there are amendments showing up all over the bill, not just in one clause, to deal with that. As a result, if you've elected to have the FIE and NRT provisions apply as of 2003, under one of these motions, then all of these other provisions would fall in lockstep to make the system work.
Conservative
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Can you give me an example of the election or the benefit of this particular amendment for a taxpayer?
Acting Director, Tax Policy Branch, Department of Finance
You might have a situation, for example, in which, relying on the foreign investment entity rules and the market provisions, a taxpayer generated a capital loss in an earlier year--in 2003, 2004, 2005, or 2006--or the taxpayer generated a capital gain that was offset by a capital loss carried forward on something else, and the taxpayer is quite happy to retain that capital loss or that capital gain and doesn't want to re-file to reverse those tax effects back to 2003.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Does any of this have anything to do with what the minister has been talking about recently? It does apply to amendments to the Income Tax Act (foreign investment entities and non-resident trusts) and another act as a consequence.
The minister has been talking about a variety of issues. What I'm obviously concerned about is going through the back door when the front door might have been--how shall I say it?--temporarily closed.
Do any of these amendments or does any part of the bill have anything to do with what he's been talking about?
Acting Director, Tax Policy Branch, Department of Finance
In terms of the foreign affiliates....
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I mean double-dipping, debt dumping, and all that sort of stuff.
Acting Director, Tax Policy Branch, Department of Finance
No. All this does is allow taxpayers to elect to have an earlier coming into force for a large part of this package of amendments.
Conservative
Liberal
Robert Thibault Liberal West Nova, NS
I'd like to tag my question to Madame Ablonczy's. The only question I have is this. There are 39 amendments. I haven't had a chance to study them. It's already a bill of technical amendments. So my only question would be whether any of these amendments materially changes the bill that was presented by Madame Ablonczy at the last meeting of the finance committee.
Acting Director, Tax Policy Branch, Department of Finance
They don't materially change the content of the bill. Of course, if the bill doesn't fit for you, if the FIE and NRT provisions don't apply, say, for 2004 and you want them to apply for 2004, well, then it's material to you. But in terms of what this bill does and how it works, no, there are no material changes.
Paul Crête Bloc Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Have you assessed the impact of this amendment? Will it result in higher or lower revenues or significant tax costs for the government? Do you know if it will be impact-neutral or if there will be a loss or a return for the government?
Acting Director, Tax Policy Branch, Department of Finance
In the long run, it should be neutral. By making an election under this, it may happen that you recognize some income in earlier years that wouldn't be recognized if you left the provisions to apply as they were as of 2007. That would imply a revenue increase to the government. But there's an offsetting deduction. So you wind up in the same place as if the bill had applied only as of 2007, but you do away with the administrative difficulties of having to re-file for all those years.
