Thank you, Mr. Chairman.
My name is John Butler. I'm general counsel with the CPP Investment Board. I'm here with my colleague Ian Dale, who is SVP, head of communications and government relations.
I'm here this morning to discuss the provisions in part 2 of Bill C-51 that will amend our governing statute, the Canada Pension Plan Investment Board Act. We do not intend to, and in fact we are not able to, comment on any other aspects of Bill C-51, as we're not familiar with them.
In order to assist the committee, and in anticipation of your legislative work this afternoon, I thought it would be helpful to provide some context by briefly outlining the background as to why these amendments to our governing statute are being proposed.
The first amendment, clause 44 of Bill C-51, proposes to repeal section 37 of our statute. As you recall, the Income Tax Act formerly contained rules restricting the amount of investments that certain taxpayers can make in foreign property to essentially 30% of the cost of all property held by the taxpayer. If the 30% threshold were exceeded, a monthly penalty tax would be charged.
The Canada Pension Plan Investment Board is not itself taxable under the Income Tax Act. Nonetheless, section 37 was originally included in our statute to require the CPP Investment Board to comply with the foreign property rules in the Income Tax Act. As you all know, the foreign property rules were repealed in their entirety in June 2005. Accordingly, since that time section 37 has been a meaningless provision in our statute.
Bill C-51 proposes to repeal that section. It's a matter of housekeeping, simply to remove a redundant and possibly misleading section. The Canada Pension Plan Investment Board endorses this amendment.
The second change to our statute, found in clauses 45 and 46 of Bill C-51, is an amendment to section 53 of our statute. This too is not a substantive change to our legislation, and the CPP Investment Board endorses it as well. Section 53 deals with the manner in which the federal cabinet makes regulations under our governing statute. It provides that regulations made by cabinet have no force or effect until they are approved by the appropriate provincial minister of at least two thirds of the participating provinces—which for this purpose does not include Quebec—having not less than two thirds of the population in those provinces.
The reason for this rule, and another rule I'll refer to briefly at the end of my remarks, is that the CPP, formed in 1966, and the CPP Investment Board, established in 1997, both resulted from cooperation between the federal government and the provinces; therefore, the provinces have an equal voice in any change to both the terms of the CPP and the powers of the CPP Investment Board.
The history of the proposed amendment to section 53 is that in the course of the review of the change made to one of our regulations in 2007, the Standing Joint Committee for the Scrutiny of Regulations noticed that the required provincial approval to the change was obtained before the change was proposed to the federal cabinet, as was the established practice. Legal counsel for the standing joint committee was of the view that this method of enacting regulations did not comply with section 53.
In order to resolve this issue as effectively and efficiently as possible, we agreed with the Department of Finance that section 53 would be amended to expressly allow for prior approval of changes to our regulation by participating provinces, provided that the approved version of the regulations was the same, or substantially the same, as the version ultimately put to cabinet. We also agreed that for the purposes of complete certainty, it would be confirmed that all regulations enacted under our statute to date were in full force and effect. That is therefore the purpose of the amendments to section 53 of our act. As I've already mentioned, the CPP Investment Board fully supports these amendments.
With respect to my final point, while Bill C-51 does not say so expressly, these changes to our statute need to be approved by the provinces by reason of subsection 114(4) of the Canada Pension Plan. That section provides that any changes to the CPP Investment Board Act must be approved by the provincial cabinet of at least two thirds of the provinces—which in this case does include Quebec—having not less than two thirds of the total population.
As mentioned, this approval requirement stems from the fact that the CPP and the CPP Investment Board are the result of a cooperative effort among the provinces and the federal government. As a result, these provisions of Bill C-51 will not come into force, even after they have been approved by Parliament, until the required provincial approvals have been obtained.
As my co-presenter, Ms Conradi, has just pointed out, this same requirement exists in relation to the changes to the Canada Pension Plan included in Bill C-51.
We thank you for the chance to address you today.