Finance Committee on June 3rd, 2010

[Sahir Khan]

Yes, it can go up to $53 million.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Then we are not talking about $10 billion any more. So you have done some analysis apart from costing the bill.

[Sahir Khan]

This is correct.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

You are the Parliamentary Budget Officer. This means you are not simply a tax or financial expert. You are also familiar with all parliamentary rules. In your analysis of the bill, did you take into account provincial legislation protecting pension plan funding? This issue was mentioned last Tuesday by those who introduced the bill. Indeed, in Quebec, for instance, Bill 30 requires companies to fund their pension plans at 115%, I think. Ontario and possibly other provinces have similar legislation.

This really changes the whole picture. Obviously, the bill we are considering is important for two specific firms employing 1,400 workers whose representatives testified here. This is still problematic but the problem should lessen and even disappear in the long term with the implementation of this legislation. I wish your study could confirm that the cost of the bill will be limited now that the provinces protect pension plans. I do not know if Conservatives are listening but I would like them to hear this comment.

[Kevin Page]

Well, we didn't progress as far as we would have liked to in terms of our estimations because we thought we were dealing with a lack of clarity in terms of some of those key issues that I've outlined. But if we were to get some clarity on eligibility and transferability, the benefits refundability, if there's a policy intent to protect certain income that's provided through other sorts of plans and that was written into legislation, we could look at that as well and come back to you with a refined estimate.

But it's because what we saw, which I think reflects the wide range, we just...underneath it, we saw that there's just a lack of specificity in terms of proposed legislation. It was hard for us to do these estimates.

Jason, did you want to respond to some of the provincial variabilities in terms of offsetting costs?

[The Chair, Conservative, James Rajotte]

There's about a minute and a half left.

[Jason Jacques]

The only thing I would add is that with respect to the Bloc Québécois estimate we focused on the key cost drivers. Those were the frequency and the number of occasions, the number of plans, that would fall under and be captured by this proposed legislation.

The Bloc Québécois methodology identified two case studies over a period of three years. That's why we focused on looking across the country to see if in fact those two, over a three-year period of time, are actually representative of the entire country.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I am sorry to interrupt but we have to go on.

We know that the government is not the only one with the capacity to make legislation and govern in this country. Provincial governments can also influence pension plans. This is an important aspect of the assessment of the cost of this bill.

It should not be rejected on the assumption that the federal government will alone be held responsible for pension plan future losses. Provincial governments now have legislation protecting pension plans.

[Le président, Conservative, James Rajotte]

Are there any questions?

[Robert Carrier, Bloc, Alfred-Pellan, QC]

This is an important aspect. I am disappointed to find out that you did not mention it. This is a very limited study.

[Sahir Khan]

When we began our study, we initiated discussions with several provinces. At that time, only a few data from two provinces were available.

If members of the committee still want additional information while examining the bill, we can continue our work and analyze data from other provinces and the federal government in order to better estimate the number of plans that may be eligible under the bill.

[The Chair, Conservative, James Rajotte]

Okay. Merci.

I'm going to take the next Conservative round.

We had a witness here on Tuesday, Mr. Fréchette, who I thought gave us a very good presentation. His presentation outlined how, in his case, the company pension plan did well at one point--well enough that it was eligible for a contribution holiday, which it took--but then the plan did not do well. It encountered some challenges and was underfunded, and this caused the situation that the company and thus the retirees found themselves in.

Obviously, the question that then pops into someone's mind is whether this applies to all unfunded registered pension plans that are distressed. That's the reason for the difference in the estimate. The Nortel example obviously pops into one's mind; the answer given is that it does not apply to Nortel because it's registered provincially in Ontario, and there's a provincial program in place in Ontario, the pension sustainability fund, which Mr. Wallace referred to.

But I just want to clarify the answer. Because one province, such as Ontario, has a program like that in place, does it mean that this bill, if it were in place with the changes it's asking for, would not have effect in the province that has this pension sustainability fund?

[Jason Jacques]

I think the safe answer is “not necessarily”. The specific answer to your question is that in the case of Ontario, it insures approximately the first $1,000 of lost pension income, so if you lose more than $1,000, you could assume, if it were narrowly drafted and drafted in such a way as to incorporate any provincial benefits, that you would not receive a tax credit for that first $1,000 that Ontario covers; for any additional amounts that you lose that were not covered by the Province of Ontario, you could imagine that you would receive a tax credit.

Again, owing to legislative ambiguities with respect to the drafting, we didn't necessarily take that into account.

[The Chair, Conservative, James Rajotte]

I appreciate that clarification.

Mr. Page, I have your letter to me of May 14, which I forwarded to all members of the committee.

In response to Mr. McKay, you listed four questions. They were good questions, but I don't see them in the letter. Are they in the letter somewhere? Am I missing them? Can you repeat the four questions, just for my reference, or if they're in document form...?

[Kevin Page]

Yes, sir. We can provide them to you in a document form. I'd be happy to repeat them, if you like.

[The Chair, Conservative, James Rajotte]

Can you go over them now?

[Kevin Page]

Certainly.

There are four issues: eligibility, transferability, benefit, and refundability.

On the first issue, eligibility, the question is whether the tax benefit applies only to retirees currently receiving pension income or whether it extends to include members who will have their future retirement benefits reduced as a result of RPP impairment.

The second issue is transferability: if the RPP benefits can be transferred to a surviving spouse, can the tax credit be similarly transferred or not?

The third question is with respect to benefit: does the tax credit apply to all beneficiaries of pension income from registered pension plans, or only to those who have had their pension incomes reduced?

The final issue is refundability: is a tax credit refundable or not?

[The Chair, Conservative, James Rajotte]

On the last question, my understanding--the mover can correct me--is that the tax credit is refundable. As to the other three questions, I have to admit that I'm not certain what the answers are, but I appreciate that.

In essence, you're saying that the answers to these four questions account for the difference between the large $10 billion or $11 billion figure and the Bloc Québécois figure.

[Kevin Page]

Correct.

[The Chair, Conservative, James Rajotte]

You need these clarified before you can answer.

[Kevin Page]

Correct.

[The Chair, Conservative, James Rajotte]

I appreciate that very much.

Colleagues, it is 4:20. We will proceed to the House and come back immediately after the vote to begin clause-by-clause consideration of this bill. We will suspend the meeting until then.

Thank you very much, Mr. Page and colleagues.

[The Chair, Conservative, James Rajotte]

I call this meeting to order, colleagues.

We'll go right to clause-by-clause consideration of Bill C-290. I will call the clauses in order and ask if there's any debate.

(On clause 1)

[The Chair, Conservative, James Rajotte]

With respect to clause 1, shall clause 1 carry? Do we have debate, Mr. McKay?

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

I'll speak to the general principle here.

I don't know which number causes me greater difficulty, the $5 million from our friends in the Bloc or the $11 billion from the government. If in fact it's the $11 billion from the government, on a revenue base of personal income tax of $116 billion on an annual basis, that's pretty incredible when you think about it. You're taking $11 billion out of the government's revenue stream. That doesn't make a lot of sense to me.

On the other hand, the Bloc's number doesn't make much sense either. It does seem to me that the government has larded up its number to the point that it's almost at a level of impossibility.

Taking $11 billion from a personal income tax revenue base of $116 billion means that seniors are paying a grossly disproportionate share of income tax on an annual basis, and I don't even think that's true; yet, to my friends in the Bloc, I have to say that to think this is only $5 million equally doesn't make sense.

Mr. Page says I need the answers to four issues. That was his last statement to us. The issues are refundability, transferability of benefits, eligibility, whether it's current or applies to the past, and things of that nature. Those are all pretty darn legitimate questions.

I don't know how to vote--how one can support this under the circumstances. That's my gut reaction.