Finance Committee on Feb. 28th, 2013

[The Chair, Conservative, James Rajotte]

I call this meeting to order.

This is meeting 107 of the Standing Committee on Finance.

Our orders of the day, pursuant to Standing Order 108(2), are the subject matter of Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation.

Colleagues, this bill is still before the House as we speak, so this is considered a pre-study of this bill and of the subject matter.

We have with us here today officials from the Department of Finance. We want to welcome you all to the committee.

Colleagues, as you know, it's a fairly large, substantive piece of legislation we're dealing with, so I did ask members to indicate which sections or which parts of the bill they wanted to focus on.

My understanding is that members want to focus on two parts in particular: part 3, dealing with foreign affiliates, upstream loans, and consequent definitions; and part 5, on restrictive covenants, charitable donations, gift and contributions, reporting of tax avoidance transactions, specified leasing property rules, shares issued for consideration for property or services, and real estate investment trusts.

The way I'm proposing that we proceed is we use our normal question rounds. Therefore, I will start with the official opposition, back to the government, to the Liberal Party, and back to the government for the first round.

The officials are prepared for a question and answer session.

We will start with Ms. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

Welcome to the officials. It's great to see you here at the finance committee again.

My first question is a process question.

The last time a technical tax bill was passed was back in 2001, and the Auditor General raised concerns about the slow pace of making these technical changes.

[The Chair, Conservative, James Rajotte]

A point of order, Mr. Brison?

[Scott Brison, Liberal, Kings—Hants, NS]

I'm sorry to interrupt, Peggy, but I just thought it would be helpful for a public who may be observing or listening to this or, ultimately, potentially reading it, if there were an overview of sections prior to us launching into questions. It might make it more user-friendly, from a citizen engagement perspective and their capacity to understand this. It is frequently the case that we would hear from public servants a little bit of an overview, in terms of intentions of the legislation.

[The Chair, Conservative, James Rajotte]

Okay.

On this point of order, Ms. Glover.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I appreciate what Mr. Brison is saying, and I understand he'd like to facilitate this for people who might be viewing. But, really, the function of today is to try to get through the sections that we, as parliamentarians, need to vote on. We had discussed how important it was to try to get through this, which is why the binders were available ahead of time.

There is information for the public available. Consultations on these have been released multiple times, and in the interest of time, I believe committee had agreed this was the best way to proceed because we want to get to the questions that will help us to make our decision, as parliamentarians, when it come time to vote.

Being that it is a bill that's 1,000 pages, being that there has been enormous consultation back more than 10 years, it's imperative that we allow those who have questions to ask those questions, and we thought this was the best way to proceed.

I'd love to hear from my NDP colleagues, but I would hate to see us not have enough time, and we do have other studies to get to. I really want to get to an income inequality study and I'd hate to see us have to add some more meetings because we didn't get through the questions we have.

Thanks.

[The Chair, Conservative, James Rajotte]

Okay.

On this, I have Mr. Jean and Ms. Nash. If we could briefly make our points, then I'll move on.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair.

I just don't think it's fair to ask the officials to come up with a speech in 10 seconds. If Mr. Brison wanted that to happen, he should have anticipated wanting that before the meeting, because we knew the format of it, and they could have prepared appropriately. I just don't think it's fair to them.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Ms. Nash, on this point.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I appreciate we have a lot of work to get through. I'd like to propose a compromise, which is we just ask one of the officials to spend two minutes explaining what it is we're reviewing in this committee so that anyone who is tuning in today to the finance committee can understand the nature of our discussions.

Is that acceptable to everyone?

[The Chair, Conservative, James Rajotte]

The challenge is that the committee instructed me that we will have two hours with officials to cover this bill. That is what the committee instructed me, as the chair, to do.

Looking at this bill, if you have officials speak to each section of the bill we will not get to members' questions within those two hours.

Order.

In the interest of time, I ask members to focus, and I don't want to have a situation where we don't get to members' questions. I'm looking at the officials, but my sense is if we start doing introductions for sections of the bill we will not get through members' questions and then we will have to either not get to our questions or add meetings.

I operated under how the subcommittee and the committee instructed me to organize this, so if they wished to organize it a different way, they should have told me that prior to the beginning of this meeting.

Ms. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Why don't I just use my first question to ask the officials to make sure of this?

[The Chair, Conservative, James Rajotte]

That would be extremely helpful.

[Peggy Nash, NDP, Parkdale—High Park, ON]

In the interest of moving things along, perhaps one of the officials can just describe for us, in as brief a way as possible, the nature of this overall technical tax bill and then specifically part 3 that we are examining first of all, very briefly, please.

[Ted Cook, Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance]

Certainly. With respect to the bill, probably the best way to provide an overview is to just briefly go through the parts.

Part 1 of the bill relates to non-resident trusts and foreign investment entities, or offshore investment funds. This is, in some sense, a carry-over of measures that were first introduced in the House back in 2006 and 2007, as part of prior Bill C-10. They have been significantly revised as a result of an announcement in budget 2010 and subject to further consultation after budget 2010.

If there are particular questions, perhaps we can deal with them separately.

Parts 2 and 3 deal with amendments to the foreign affiliate and foreign accrual property income regime of Canada. It's a regime dealing with income earned by subsidiaries, loosely speaking, of corporations and other taxpayers resident in Canada. My colleague, Mr. Porter will speak to part 3. I think he can give a bit of an overview of Canada's foreign affiliate system and how the hybrid surplus rules, which are encapsulated in part 3, function. These measures were not part of Bill C-10 so this would be the first time they have been before the House.

Part 4 contains bijuralism measures, which are measures that make amendments to the Income Tax Act to make sure that it properly reflects both common law and civil code concepts mostly with respect to property and property rights. These are amendments that were included in Bill C-10. They are the result of a Department of Justice study.

Part 5 is the major portion of the bill. It contains the remaining portions of Bill C-10, which were introduced in Parliament, as I mentioned, in 2006 and 2007 and died on the order paper both times.

As well, I would note that part 5 includes a number of additional measures—and we may get a chance to speak to them if I can anticipate another question from Ms. Nash—that relate to technical packages that the Department of Finance has released post-2007-08, partly in response to the Auditor General's report. Obviously the decision to release technical packages and include them in the bill is the Minister of Finance's, but the Department of Finance has been working on preparing technical packages.

It also includes a number of previously announced measures, both measures that were included in budget 2010, such as foreign tax credit generator measures, rules with respect to specified leasing properties, SIFT loss conversions and trading—and again, maybe we can speak to those more directly—and a number of miscellaneous previously announced measures.

Part 5 also contains three unannounced measures, very small, relating to income allocation for airlines, short-term residents in Canada and departure tax, and also a measure related to labour-sponsored venture capital corporations.

Parts 6 and 7 relate to GST and federal-provincial arrangements with respect to taxes.

Finally, part 8 just provides coordinating amendments that were necessary because the bill was tabled at the same time that there was a budget implementation act before the House.

That's just a very brief overview of the contents of the bill.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

I understand my five minutes are up.

[The Chair, Conservative, James Rajotte]

Your five minutes are up. We will have plenty of time to return to you though.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I want to thank our witnesses for the hard work that's been put into this very thorough bill.

We heard, through pre-budget consultations and through other meetings, several times from certified general accountants associations, etc., about the grey pages. I'm just wondering does anyone here have a copy of the code that actually illustrates the grey pages?

[Ted Cook]

We did bring a copy of the act.

[Shelly Glover, Conservative, Saint Boniface, MB]

For purposes of clarity—

[Ted Cook]

So that's the Income Tax Act.

[Shelly Glover, Conservative, Saint Boniface, MB]

—tell us how this technical tax bill affects that code and how it clears up those grey pages. And in addition, could you tell us how frustrating it has been for those who have to use that book and whether this technical tax bill will alleviate the challenges that they've had dealing with this? Just describe for us what the challenges would have been.

[Ted Cook]

I guess there are two parts to your question. One is about the extent to which the bill will clean up the grey pages in the act. I think the answer is substantially or all, or almost all, of the grey pages in the act with this bill will be cleaned up.

[Shelly Glover, Conservative, Saint Boniface, MB]

How many grey pages are there?

[Ted Cook]

I would have no idea as to the number, but if you flip randomly through the act—