Finance Committee on Oct. 27th, 2010

[Katie Walmsley]

The taxation of financial services is complicated. In the Excise Tax Act there are certain financial services that are exempt. The interpretation of that has actually changed in the last year and a half. There was a court case in April of 2009 that reversed the treatment of taxation of investment management services.

To go back to your example, yes, if you go to a bank to a purchase a GIC, just as an example, there is no tax in the purchase of a GIC. If you go to a broker, direct them to purchase the sale of five securities, by the details of the definition of “financial service” in that transaction, that is not subject to GST or HST. If you hire a portfolio manager to set up a personal portfolio for you that has those securities, that is subject to tax, the fee charged for that is subject to GST or HST in the harmonized provinces.

There is not a level playing field today, and it is causing some confusion to investors.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Some would say that the management that's provided in a fund--the purchase of the five securities and then perhaps the adjustment of the weight in those securities or other securities--is what constitutes the service attracting the tax.

How would you respond to that argument?

[Katie Walmsley]

Barb, do you want to talk to that?

[Barb Lockhart]

Certainly.

You're talking about buying a mutual fund specifically.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

That's correct.

[Barb Lockhart]

So the management fee on a mutual fund is subject to HST.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Yes, I understand that, but some would say that the reason it is subject to that additional tax is there's a service provided by the fund manager that's not provided by the brokerage firm or the bank.

[Barb Lockhart]

There is a service that is provided by the manager in the investment of the fund, that is true. But that same service could be provided by a broker if you were to go to a brokerage firm and ask for their advice on how to invest or manage your account with them.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

So you're simply asking for equality.

[Barb Lockhart]

Yes.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Monsieur Mulcair, s'il vous plaît.

[Thomas Mulcair, NDP, Outremont, QC]

I in turn want to thank Mr. Saillant and Ms. Laflamme who has accompanied him here today. Both are doing an outstanding job and have shown an enormous amount of dedication over the years and therefore deserve our congratulations and thanks for the very objective analysis they have submitted to this committee.

Mr. Chairman, I believe they very accurately sum up the situation when they talk about priorities. In Parliament, this committee is preparing the next budget, and we have to wonder what our priority is as a society. I very much appreciated the fact that Mr. Saillant took us back to 1976, when we declared that our priority as a society was the ongoing improvement of citizens' living conditions.

You mentioned a bill in your document. I wanted to know whether you had the time to look at the private member's bill of my colleague Libby Davies. If so, what is your analysis?

[François Saillant]

We came here to Ottawa last week to speak on that subject. We gave our views on that bill, of which we are in favour, and hoped that Quebec's jurisdiction with respect to housing would be recognized.

However, in our view, recognition of the right to housing is, I would say, a long-term challenge. There are steps that have to be followed and bills that can help us. We have an urgent matter in the immediate future, the next budget and the upcoming cuts to funding that had been increased in the past two years as a result of the economic recovery. That is having extremely dramatic consequences for people, for social housing tenants, for people who live in low-cost housing. In some cases, they have been asked to leave the buildings because renovation work urgently had to be done there. Currently, with the cuts to federal funding, they are being told that they will have to wait another year before returning to their units. That has very practical consequences for people. When we say that there are subsidies for the equivalent of only 413 social housing units when the needs are so great, when we talk about 203,000 renting households in Quebec that spend more than half of their incomes on housing, that's also a dramatic situation.

[Thomas Mulcair, NDP, Outremont, QC]

A clear thought can be clearly stated, and you have a very clear way of saying things. You said that would force people back into misery. We made investments over the years, and we started to build something that could remove people from misery, and we're going to plunge them right back in because this isn't a priority.

Thank you very much for being here today, Mr. Saillant and Ms. Laflamme.

Even though I have nothing but confidence in the extraordinary qualities of our simultaneous translators, I don't want anything to be lost in translation on this one. I want to make sure I understand, and in fact that's the goal of my question: are there two “Enbridge Inc.”s?

We have before us Mr. Teichroeb, whose title is “Clean Technology”. In his document, he says that Enbridge developed a hybrid fuel cell for pipeline pressure control that is “more efficient and less polluting”.

Is this the same Enbridge that told the Environmental Protection Agency in the United States that everything was fine with its pipeline, and then five days later blew three million litres of crude into the Kalamazoo River? Or has something been lost in the translation?

Tell me that you're a different Enbridge and not the same one.

[David Teichroeb]

The company is one and the same. We've made a mess in people's backyards in Michigan, and we are in the process of correcting that while we continue to advance energy infrastructure development throughout North America.

[Thomas Mulcair, NDP, Outremont, QC]

So you're the same Enbridge. You're not here as part of an association. You're here as an individual corporation to make your pitch on the next budget. Your most recent track record is spewing millions of dollars of crude into a river after having given assurance to the Government of the United States that everything was fine. And you really expect to be taken seriously about clean technologies?

That's your track record. That's who you are.

[David Teichroeb]

Our CEO has presented to the U.S. government. That's on record. I'm here today to represent our interests on clean technology and the investment opportunities for Canadian companies, including Enbridge, by investing in these systems.

[Thomas Mulcair, NDP, Outremont, QC]

Now, the mess that you made in Michigan--that wasn't the only accident that Enbridge had last year, was it.

[David Teichroeb]

There was an incident in Illinois, yes.

[Thomas Mulcair, NDP, Outremont, QC]

You've soiled more than one backyard in the past.

[David Teichroeb]

That is still under investigation, yes.

[Thomas Mulcair, NDP, Outremont, QC]

Okay....

What's under investigation?

[David Teichroeb]

The cause of the leak.

[Thomas Mulcair, NDP, Outremont, QC]

But it was Enbridge?

[David Teichroeb]

It was our pipeline.