Finance Committee on March 5th, 2013

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

It's certainly a large portion of the Canadian population.

[Ted Menzies, Conservative, Macleod, AB]

A fairly large portion.

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

Thank you, Minister.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

Mr. Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I would like to come back to the fact that we need bills on this topic to be tabled regularly so that we can avoid having to deal with bills on technical elements that are 1,000 pages long.

Like Mr. McCallum, I do not believe that a minority government is the only excuse here. You effectively admitted that that was not the only reason. If I am not mistaken, a bill was tabled in 2007. It was aimed at providing a fiscal update. As being a minority government was not the only excuse, I would like to know why the government did not table this bill after the 2008 election. There were, after all, three years before the next elections.

This is a very extensive bill that does not contain particularly controversial issues, apart from a few. Why could it not be tabled during the last parliament?

[Ted Menzies, Conservative, Macleod, AB]

Mr. Chair, it's important that we recognize that there are many reasons for it not happening, not the least of which is the fact that we were challenged with a recession. That certainly was the focus of our government, to make sure that our 2009 budget was reflective of what we needed to do to make sure that we could get as many people back to work as possible. That was the main thrust of that budget. Many of the changes that we put in there implicated the Income Tax Act, and it's very important that we move those forward. To keep focused on that, we've had successive budgets that have focused on the same thing. The fact is that going forward we will have regular updates to these, and hopefully we won't be looking at a 1,000-page.... I would have to ask why debate in the House of Commons is continuing on and on and on and on when it actually—

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I understand; but my time is limited and I would like to ask Mr. Cook another question. We can come back to that later.

[Ted Cook]

There's a little bit more of a story than a brief answer. I would note that when Bill C-10 was before the Senate, the Senate did actually have concerns with Bill C-10 with respect to the non-resident trust and foreign investment entities in particular. There were three or four fairly significant issues that were raised. In terms of the bill that was before the Senate, this bill is not simply a retabling of that. There was a consultation that was taken at that point, and then revised NRT and FIE proposals, if you will, were included in Budget 2010. They also provided a subsequent consultation period, including review of draft legislation by a panel of senior tax practitioners.

I guess I would just note that there were elements of that bill that are different in this bill.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I understand; however, on the other hand, we could have removed those four or five problematic elements and adopted a large portion of the bill with the agreement of senators and of the members.

I would like to turn back to you, Minister.

You said that one of the reasons why the bill was not tabled in 2008 was that we were faced with a recession and we had to concentrate on economic growth and on recovering from the recession. On the other hand, there is not necessarily a big focus on that. In the end, it is an issue of implementing elements that were already largely approved by the Department of Finance through the letter of intent.

You could have fought the recession and implemented the various economic action plans but also tabled this bill, which is not a big attention-getter and would not necessarily have required that the government spend a lot of resources on it.

[The Chair, Conservative, James Rajotte]

Would you give a brief response, Minister, please?

[Ted Menzies, Conservative, Macleod, AB]

I would argue the point that this does require a lot of resources, and our resources were taxed in developing budgets, in developing policies that were actually designed to help people get back to work, to help grow the economy, to look forward, as to how the government needed to react to a recession. We weren't faced with the recession that other countries were, but we asked a lot of our officials at the Department of Finance...and I will defend them as doing a wonderful job for us. We thought it was most important that they focus on the matter at hand, and that was the recession.

We have this before us now, and I would encourage everyone to get it passed as quickly as possible so that people do have more than just a comfort letter; they actually have a comfort level.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you all for appearing.

Minister, it's good to see you again. It should be noted—and it's important that we note this—that this bill is now being debated in the House. One speaker is being thrown up after another, and the speeches are prepared. If we were really serious about passing this bill, it would be very simple to just have this thing passed right now.

The other thing relates to Mr. McCallum's statement. Prior to 2008, when the majority of the Senate was Liberal, it was delayed again. So there seems to be this constant delay. I know that I'm pleased that we're doing it.

I want to give you a little personal experience. I have a business, and this was a provincial matter, but when the province was switching to the HST, they sent out a number of people on the tax file and they visited our business, a dealership, and they targeted a certain area. It was obviously targeted to a certain area. It was an area that caught us in left field. They asked for papers—they did this to all the dealers—and the result was that after two days they just handed us a bill for something like $218,000.

Somebody said death and taxes are the two certainties in life. We all know that we have to pay taxes, and most businesses have good people to make sure that we don't get hit by these surprises. But is this the sort of thing this bill will guard against? The NDP, God bless them, seem to think it's all one side. That's why we need a good balance here.

It isn't just that people aren't paying their taxes. I firmly believe that most industries, most individuals, are prepared to pay their fair share. But the other side of the coin is that it seems as though, when there is no clarity in the law, government really has the upper hand. Am I not right by saying that? They can come in and cause firms that didn't expect it, who have paid taxes, to suddenly get charged with another tax, which will really disrupt their business and cause some hardship. It could even cause failure. Am I right when I say that?

[Ted Menzies, Conservative, Macleod, AB]

Through you, Mr. Chair, I think we all know that Mr. Van Kesteren is an upstanding citizen who always pays his fair share of his taxes, so I'm surprised that there was a shortfall in his contribution to the taxes of the Ontario government. I'm sure it was an oversight.

But you make a very good point. It is certainty that people need. It is certainty that businesses require. They need certainty in the amount of taxes they have to pay.

What we've done, I would suggest, has played a very positive role in reducing taxes for businesses, but by doing that we also expect them to pay their fair share of taxes. If they don't know what the legal ramifications are, or if they don't know what the tax act actually specifies, whether it was....

When it's tabled in the House of Commons, it's basically assumed by CRA that they can collect the taxes. Businesses, and the accounting firms that you employ, are not quite so certain.

So to your point, it is about certainty and about businesses being able to count on those decisions being made. That's why it's necessary to get a technical bill like this passed, so that there is certainty for those businesses and they know what they can plan on.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

We learned at the last meeting just how complex this is. I forget who mentioned it, but they talked about air miles. When you're travelling a certain period or distance, suddenly the air miles kick in.

You know, it's this sort of stuff that the average individual wouldn't dream of.

[Ted Menzies, Conservative, Macleod, AB]

I don't think you're referring to Aeroplan miles.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Or whatever it was.

[Ted Menzies, Conservative, Macleod, AB]

You're referring to the taxes based on an airline's travel over top of a specific province. There are different rates for different provinces, with different deductions for different provinces.

So it's not Aeroplan miles, just so everyone is clear.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That's right, but the point is that it's a complexity that the average Canadian wouldn't even begin to think about.

[Ted Menzies, Conservative, Macleod, AB]

It's very complex.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm thankful for our bureaucrats and the work they do, but I would suspect, then, that when they're administering the budget act, these things would keep cropping up.

So this is on an ongoing basis. This act represents those sorts of things that have to be addressed, and this is what we expect, as Canadians, to have clarified.

[Ted Menzies, Conservative, Macleod, AB]

Just very quickly, when I had the privilege of introducing the pooled registered pension plan legislation, I thought it would be a very simple process to bring that into compliance with the Income Tax Act. We had to open up the entire act, and in every place where it was written “Registered Retirement Savings Plan”, we had to add “PRPP”.

So it is far more complex than one would think on the surface.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Van Kesteren.

Mr. Côté, you have the floor.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I would like to thank the Minister of State for being with us.

Minister, my first question is on part 3 of Bill C-48 which is on amendments in respect of foreign affiliates. You could say that this is a philosophical question because, in this part of the bill, the rules on loans between different components of a same multinational company are tightened and a framework is provided for the provisions on non-competition.

As part of the committee's study on tax havens, on which we are cooperating very well, we are looking at elements that are in part related to Bill C-48, such as transfer pricing and other similar issues. When you have some knowledge of economics, you really understand—whether you are an entrepreneur or a multinational company—that it is difficult to deal with the uncertainty and insecurity related to free markets. That is why everyone tends to want to reduce the level of insecurity.

However, multinationals that are oligopolies or even monopolies may start behaving in ways that are morally questionable. This is where my question becomes philosophical. You get the impression that the objective of part 3 is simply to limit the damage instead of dealing with the real problems, particularly the fact that these businesses have perfectly legal loopholes.

Do you believe Bill C-48 goes far enough to fight this kind of practice?

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

You obviously understand this in-depth. That's part of the reason that I applaud your efforts here at the committee. There probably is a lot more we can do, but at this point, these amendments with respect to foreign affiliates and the revisions of the affiliate reorganization and distribution rules, we think, are certainly a step in the right direction. The officials can probably expand on that. We're suspending certain gains from the sale of shares.

It's a grey area, there's no doubt about it, but I don't know if I would go so far as to suggest that our companies operating outside Canada do not keep their moral standards high. I would suggest that they do. I think we've got some great Canadian companies working abroad, but we need to make sure that our rules are in place so there is no tax avoidance or aggressive tax behaviour.

Perhaps our officials....