Finance Committee on June 2nd, 2009

[The Chair, Conservative, James Rajotte]

I now call the 33rd meeting of the Standing Committee on Finance to order.

We have business today, colleagues. We have an hour and a half; we should be able to complete everything. We have two motions by Mr. Mulcair in public, and then we have some in camera business to discuss.

We'll start with your motion, Mr. Mulcair, which deals with undue financial hardship.

Can you introduce your motion and explain the rationale?

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

The motion provides as follows:

That the federal government urgently address the undue financial hardship of employees who have acquired stock from their employer through either a stock option plan (ESO) or a stock purchase plan (ESPP), have been assessed a tax benefit based on unrealized gain at the time of acquisition where that tax liability greatly exceeds any eventual realized gain, their means to pay and, in some cases, their personal net worth, [...]

I'll now summarize the elements of the motion: studying the financial impact, reporting to the minister and to Parliament and changing the provisions of the Income Tax Act to address the situation.

In an informal discussion earlier with Mr. Wallace, of the Conservative Party, and with Mr. McCallum, of the Liberal Party, I was informed that I would be receiving friendly suggestions to improve the text. I am entirely prepared to consider them because the goal here is to analyze and correct this situation.

As you will no doubt remember, Mr. Chairman, when we recently received the head of the Canada Customs and Revenue Agency, we discussed the matter with him. Mr. MacKay, of the Liberal Party, and myself were confused when he explained to us that the remission order granted to certain employees of JDS Uniphase was not available for other persons in an identical situation. That situation was unique in the annals of the past 90 years at Revenue Canada. This is a concern to us, and we're trying to get to the bottom of this matter. I am very much open to Mr. McCallum's and Mr. Wallace's suggestions.

[The Chair, Conservative, James Rajotte]

Thank you.

I have Mr. McCallum and then Mr. Wallace.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you. I would like to move a friendly amendment. The third element of the motion provides, and I quote: “Changing the provisions of the Income Tax Act to address the situation by: [...]”

That presupposes that points one and two are necessarily the right way to go. My amendment is to replace those words in English with this: that the Department of Finance immediately study the effectiveness of the following amendments to the Income Tax Act and report those findings back to the House.

The only effect is to say that we want them to study these proposals but we're not preconceiving that this is necessarily the way to go before we hear back from them.

[The Chair, Conservative, James Rajotte]

The amendment would be after the word “by”, or would it be after the part that begins with, “Changing to the provisions of the Income Tax”?

[John McCallum, Liberal, Markham—Unionville, ON]

No, it would follow “not offsetting the employment benefit”.

Where it now says, at the third point, “Changing to the provisions of the Income Tax Act”, instead of saying that, it would say that the Department of Finance immediately study—

[An hon. member]

Don't you mean the finance committee?

[John McCallum, Liberal, Markham—Unionville, ON]

No: that the Department of Finance immediately study the effectiveness of the following amendments and report those findings back to the House.

I'm not amending Mr. Mulcair's motion. He wants the finance committee to report back to the House, and I'm not changing that at all. I'm just removing a presupposition from the wording.

[The Chair, Conservative, James Rajotte]

The amendment is to replace “Changing to the provisions of the Income Tax Act to address a situation by” with this statement: that the Department of Finance immediately study the effectiveness of the following amendments to the Income Tax Act and report those findings back to the House.

Well, the committee can only request, so the committee can “request” that the Department of Finance study the effectiveness.

[John McCallum, Liberal, Markham—Unionville, ON]

What are you suggesting?

[The Chair, Conservative, James Rajotte]

You would have to say that the finance committee “requests” that the Department of Finance immediately study.

[John McCallum, Liberal, Markham—Unionville, ON]

Sure.

[The Chair, Conservative, James Rajotte]

Okay.

On this amendment, I have Mr. Wallace and then Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

I suggest that we hear Mr. Wallace first, and then I will react to the two suggestions, if that is fine with you.

[The Chair, Conservative, James Rajotte]

Yes. The debate is on Mr. McCallum's amendment.

[Mike Wallace, Conservative, Burlington, ON]

I'm going to debate it and say, if his fails, this is what I would do. Is that okay?

[The Chair, Conservative, James Rajotte]

As an experienced parliamentarian...and you're very experienced.

[Mike Wallace, Conservative, Burlington, ON]

Well, I'm learning from the best, Mr. Chair.

First of all, on the amendment, what the Liberal amendment would do is give it to the Department of Finance. It would never come to this committee. He wants to go directly to the House.

Let's face it; I don't think that was the purpose of Mr. Mulcair's motion. I'd like to hear the witnesses come and talk to us about the issues. Whether I agree or disagree with their ability to resolve that issue and with some of their solutions, doing it in a committee format would be better.

So I would not recommend, as the motion says, that the Department of Finance look at it. I would rather see the first two paragraphs and then go to the next paragraph. So paragraphs one and two would basically stay the same. We're studying it. The third paragraph--and just leave everything else off--would be about examining “the number of taxpayers placed in undue hardship through the treatment of the unrealized gain at time of acquisition as an employment benefit while the losses on the eventual disposition as a capital loss, not offsetting the employment benefit”.

We're going to get right to the issue of employees who take the stock option at a discounted rate, then the stock goes in the tank, and they're stuck with a tax bill. What do we do for them? I'd like to see them here. These motions don't see them here. And I think the committee should study it, not the Department of Finance.

So I will not be supporting this under Mr. McCallum's current wording, because it doesn't affect this committee.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

We'll go to Mr. Mulcair and then to Mr. McKay.

[Thomas Mulcair, NDP, Outremont, QC]

I'm going to speak in English, just to make it easier.

I think we can do both. I think if Mr. Wallace's suggestion becomes a third bullet, and we make the amendment Mr. McCallum is suggesting, we get the best of both worlds. We will have the people in, as Mr. Wallace is suggesting. We're going to have something studied that's a concrete proposal that might or might not be the solution, in light of everything else we've said.

So if we put in Mr. Wallace's suggestion as a third bullet, and we still send it off to study, one doesn't stop the other. They might come back and say, well, there are other things that have to be looked at.

I think we've managed to.... It's all implicit. Mr. McCallum's was implicit in what we were saying. We have no trouble with it. But I think Mr. Wallace has a good idea. Let's add it as a third bullet.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mulcair.

We'll go to Mr. McKay.

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

Studies take a long time. They can take a long, long time. I would be interested to know whether Mr. Mulcair, Mr. McCallum, and Mr. Wallace would be interested in attaching a timeline to the study so that this is not punted off into the middle of absolutely nowhere for a long, long time--into the 48th Parliament.

There is some urgency here. Nortel is either in bankruptcy or is about to go into bankruptcy. These people are facing serious tax bills.

So I'd be open to some particular timeline, and I wonder whether colleagues would be open to a timeline.

[An hon. member]

Do you have a suggestion?

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

I suggest ninety days.

[The Chair, Conservative, James Rajotte]

Do you mean ninety sitting days or ninety days?