Finance Committee on April 16th, 2008

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

Let's talk about the changes to the Bank of Canada Act. Can you sum up for us what the added powers of the Bank of Canada are going to be, particularly in the context of the current commercial paper crisis? Will this give the Bank of Canada added powers to make liquidities available in the context of this crisis?

[Jeremy Rudin]

The proposed amendments...

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

All of you could have spoken French earlier. I think Mr. Mulcair would have been very happy.

[Jeremy Rudin]

The proposed amendments give the governor the discretion to make additions to the list of assets the bank can buy or sell, as needed. Of course, that could be helpful in a situation of financial instability.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Is there a maximum amount? Is the discretion unfettered? Are there maximum amounts or limits?

[Jeremy Rudin]

There are limits in terms of the purpose of the transactions. Subsection 18(g) of the proposed act says, quote:

18. The Bank may [...] (g) for the purposes of conducting monetary policy or promoting the stability of the Canadian financial system,

So there are limits in terms of the purposes, but not necessarily in terms of the amount. Of course, if it's a purchase, the bank has to be able to afford it.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Were these legislative measures drawn up based on what happens at the U.S. Federal Reserve?

[Jeremy Rudin]

The situation of the U.S. Federal Reserve is a bit different. I'm not an expert, but I think it's more based on the example of the Bank of England or the European Central Bank. Those banks have a lot of flexibility.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Wallace, you have five minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chairman.

I want to ask the kinds of questions I get from constituents, and I'm going to stick to the tax-free savings account.

We are very happy with this program. You would put the regulations in place, and that would be ready by the end of this calendar year. Is that a correct statement? And what happens then is that financial institutions would actually offer the accounts or financial services of, say, a bank or a life insurance company. I don't know who would do it, but the Government of Canada wouldn't offer the account. It's similar to an RRSP, which is offered by a third party, but based on the rules set out by the Government of Canada.

Is that an accurate statement?

[Gérard Lalonde, Director, Tax legislation Division, Department of Finance]

That's absolutely correct. One of the reasons the TFSA is in this bill is in order to ensure that we get early passage of the bill, so we can get the infrastructure put in place so the banks can start offering the TFSAs, if not immediately in the new year, as soon as possible in the new year.

[Mike Wallace, Conservative, Burlington, ON]

So this is the exact same process then for the registered disability savings plan that was in a previous budget. The regulations get in place, and then it's up to the financial industry to offer that as a product. Is that correct?

[Gérard Lalonde]

That's correct.

[Mike Wallace, Conservative, Burlington, ON]

In my view, with the system that we have now, we have an understanding of where we stand from an RRSP point of view, how much room we have. At least, I find out once a year when I get my tax return sheet back saying I filled it out correctly. People in the riding ask me how they are going to know how much room they have left. Are you expecting the institutions to do that, or do you think government should do that? Do you have any concept on that at this present time?

[Gérard Lalonde]

We wouldn't expect the government to be watching your balance in a TFSA during the course of the year, to see whether you've exceeded the balance during the course of the year.

We're currently having discussions with both the Canada Revenue Agency and the Canadian Bankers Association to ensure that we can put in place the required information requirements in a way that minimizes the degree of effort that needs to be put in by both of those organizations and also gives the best information to taxpayers. Whether it will be exactly the same as the RRSP remains to be seen, but as I say, we're currently in discussions with both organizations.

[Mike Wallace, Conservative, Burlington, ON]

So it's an issue you're working on.

I'm certainly clear that whatever I put in there is not deductible, but the growth in there is not taxable, so it's a great savings program.

Again, people in the riding are asking such questions as, “Can my wife and I both have one?” and “Can I contribute to hers and can she contribute to mine?” Are those issues worked out? Do you have the answers to those questions?

[Gérard Lalonde]

Yes, absolutely.

As indicated in the budget document, we've gone out of our way to ensure that the attribution rules that might otherwise attribute income from one spouse who has made contribution into another plan in excess of their own TFSA room have been turned off, ensuring that each household member who is of age to have a TFSA can contribute the maximum or can have other family members contribute for them.

[Mike Wallace, Conservative, Burlington, ON]

Right. Then the maximum changes with...is it the consumer price index? Is that maximum indexed?

[Gérard Lalonde]

The maximum is indexed, but it will be indexed in $500 increments.

[Mike Wallace, Conservative, Burlington, ON]

So if you don't go up the $500 amount, you wouldn't get data?

[Gérard Lalonde]

That's right. We won't be indexing to $5,002.35. It will go in $500 increments.

[Mike Wallace, Conservative, Burlington, ON]

Okay. So that could take time.

[Gérard Lalonde]

It could take a few years, yes.

[Mike Wallace, Conservative, Burlington, ON]

Was that my time?

[The Chair, Conservative, Rob Merrifield]

It's very close to your time, yes.