Evidence of meeting #57 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was year.
A recording is available from Parliament.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
So you're similar to other Canadians in that respect.
Mr. McKay, I understand you have a question or two.
4:55 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I have a couple of questions on the CBC and the pensions. You're increasing the borrowing ability of CBC from $25 million to $220 million. Does the CBC borrow at crown rates?
4:55 p.m.
Senior Chief, Financial Markets Division, Department of Finance
The current limit is $25 million. The CBC has not actually borrowed to this date; the increase will allow them to borrow a larger amount, up to $220 million. The proposed structure of the borrowing is by way of monetizing certain receivables, so it'll be a market borrowing. It won't be at the government's rate; it'll likely be higher than the government's rate.
4:55 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Are you saying the CBC has to monetize whatever accounts receivable it has, bundle them up, go to the bank, and borrow money just like anyone else does?
4:55 p.m.
Senior Chief, Financial Markets Division, Department of Finance
That is the proposed and approved structure of the transaction that the CBC could--
4:55 p.m.
Liberal
5 p.m.
Senior Chief, Financial Markets Division, Department of Finance
I don't have the details as to what the specific rate of interest might be on the proposed transactions. They're engaged with various financial advisors, and for those details you'd have to go to CBC. Probably the CBC would have to give you those details.
5 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Well, $220 million at 5% is a lot of money. It's an extra $11 million on their cost structure.
5 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Well, I'm just curious.
The second question is with respect to the pensions. I'm just not clear on the intention. You're going to remove the work cessation test so that a person can take retirement as early as 60 without a requirement of work interruption or earnings reduction. I'm not quite sure I understand the public policy thought behind that.
5 p.m.
General Director, Federal-Provincial Relations and Social Policy, Department of Finance
Right now there is a test in place if you want to take your CPP early, a work cessation test: as you read, you either have to stop work for a couple of months or sharply reduce your earnings.
I think it's a bit of a holdover from a time going way back to when we clawed back CPP from those who had continued to have work earnings. The concept, which was coming from the ministers of finance at the federal and provincial-territorial level, was that we wanted to give flexibility to people to continue working and collect the CPP. We wanted to make sure that we were flexible in the arrangements people wanted to have, so this takes away a somewhat arbitrary rule that was forcing decisions upon people. They'd have to stop work for two months in order to collect CPP early. There was no good justification for that.
5 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
If I want to work and collect a reduced-rate CPP, with this amendment I'll be able to do so.
5 p.m.
General Director, Federal-Provincial Relations and Social Policy, Department of Finance
Yes, and you'll be able to do it without having this work cessation before taking it.
5 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I won't have to prove that I was fired or something like that.
5 p.m.
General Director, Federal-Provincial Relations and Social Policy, Department of Finance
Yes, exactly.
5 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Then from ages 65 to 70 you're giving a type of opt-in, opt-out position with respect to contributions. If I maxed out at 65, why would I want to contribute further to my pension?
5 p.m.
General Director, Federal-Provincial Relations and Social Policy, Department of Finance
You may have reasons. You may just to want to accrue more benefits. You want to continue working and you decide, for whatever reasons, that you want to accrue more benefits. Again, it's all in the context of making sure it's actuarially fair to the CPP and to the plan member, but if you would like the flexibility of continuing to contribute to accrue more benefits, that's a possibility for you.
5 p.m.
Conservative
5 p.m.
Conservative
Daryl Kramp Conservative Prince Edward—Hastings, ON
With regard to livestock and income deferrals, I'd like a little clarification. I know some of the producers obviously.... When their herds are impacted by drought or moisture or whatever, is there a particular portion of the herd that must be affected? Is it a partial cull, or does the herd have to be liquidated?
I'd like some more details with regard to the income deferrals, please.
5 p.m.
Director, Tax Legislation Division, Tax Policy Branch, Department of Finance
Sure, I can respond to that.
There were some questions posed earlier I think when the minister was here as well, and they may have referred to the measure as a tax credit, which was not completely accurate. This particular measure relates obviously to farmers. It talks about situations in which a farmer is required to dispose of their breeding herd because of drought conditions in the past and, with the new measure, the excess moisture or flood conditions.
Many farmers operate using the cash method of accounting, which means they will deduct the cost of purchasing their inventory, including animals, and when they sell the animals they will include the whole proceeds in income. This differs from many other types of businesses that use accrual accounting, such that you would not deduct the cost of acquiring your income, and hence when you sold the property the cost of the property that you sold would be excluded from your income. It's the profit element that you would take into account. Using the cash method, it's different. When you buy the inventory the whole thing is a deduction; when you sell the property the whole thing is an income inclusion.
For those farmers who have to sell breeding cattle, part of their breeding herd, because of drought, or now because of excess moisture and flood conditions, they're selling at a time when even though they may not be making a profit on the sale because it's being made at a time when the market is distressed because of the drought or the flood conditions, they will have to include the whole proceeds of disposition into income.
The next year, if they are going to want to replenish their herd, they won't have the money because they will have paid the tax in the previous year. What this measure does is allow farmers to withhold or defer a portion of the tax on the sale of the breeding herd to the next year. At such time they will have the deduction from buying the new replacement cattle, and as such they continue going and they don't have a cashflow problem.
The tax law provides that for dispositions of breeding herds between zero and 15%, there's no deferral; between 15% and 30%, there's a deferral of 30% of the proceeds; and for dispositions of more than 30% of your breeding herd, there's a 90% deferral until the next year. If the next year also happens to be a drought or flood year, then it shifts to the year following, etc.
5:05 p.m.
Conservative
Daryl Kramp Conservative Prince Edward—Hastings, ON
Might there be any other conditions other than weather where this could potentially be utilized, i.e., trade--either sanctions or country of origin--that could dramatically affect the capacity of a particular producer or regional producers all of a sudden to market their product?
5:05 p.m.
Director, Tax Legislation Division, Tax Policy Branch, Department of Finance
There's a similar measure in respect of forced destruction of livestock due to disease, for example, but not so much market elements. These are natural disaster types of measures. As I say, this one in particular used to be in place for drought. It had been in place for drought for a number of years and it was recently extended to apply to flood situations.
5:05 p.m.
Conservative
Daryl Kramp Conservative Prince Edward—Hastings, ON
Okay, thank you.
I was looking at the first-time homebuyers' tax credit. You don't buy a home too many times in your life really--at least most people don't. Some of them are one-time buyers, period. Of course, this is an area that a lot of people don't have a lot of experience in. Right off the bat, all of a sudden those unseen costs just seem to mount up. Can you give us some of the items that would be eligible for a refundable tax credit here? Obviously, if they didn't like the plumbing that was in place and they're going to have to replace some of that, that would probably not be the type of thing.... Are we talking about professional fees only? What other fees would be acceptable for the non-refundable tax credit?
5:05 p.m.
Director, Tax Legislation Division, Tax Policy Branch, Department of Finance
Is this for the new home purchase tax credit?