Finance Committee on March 7th, 2013

[Paul Hickey]

Yes, we do, and there's a huge consultation process on many parts of this legislation that has had the Department of Finance consulting with taxpayers and tax lawyers and tax accountants to try to get it right.

To your constituents, I'd say yes. It is your job to get the thing passed. It's housekeeping; it may not be sexy, but it's important to have a good, clean house, so it'll operate smoothly.

It's been around for 10 years. It's nobody's fault that this has happened. It's kind of like a perfect storm: of change of governments, of other political urgencies, of minority governments—the government struggled in a minority situation, wanting to get its budget passed. I can understand all that, but my point now is, enough is enough. Let's get it done.

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

Let's get it done.

Thanks.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Rankin, go ahead, please.

[Murray Rankin, NDP, Victoria, BC]

Thank you, Chair.

Thank you, witnesses.

I'd like to start my questioning with Mr. Vineberg.

Sir, you're a well-known expert on non-resident trusts, family trusts, and the like, and it would be very helpful if you might tell us a little bit—and I realize the difficulty with having only a couple of minutes is that the question may be too vast.

You did talk about non-resident beneficiaries and the reforms to clause 274 and section 94. I want to know to what extent you think Canadian taxpayers are using non-resident trusts for tax avoidance purposes. There are also the foreign investment entities, of course.

I'm asking you a couple of questions. Given the amazingly complex amendments to section 94 that are proposed in this bill, are you surprised that they are contained in a technical tax bill rather than in a stand-alone bill? Did they make it more confusing or less confusing?

There are a couple of questions embedded in there: on tax avoidance and on the complexity of the way in which these changes were made in this particular technical bill.

[Michael Vineberg]

Let me try to answer your second question first. The changes made to section 94 and subsection 94(1) are perhaps not technical measures or remedial measures per se; however, they have been brought before the House of Commons and the Senate on a number of occasions in the past.

With respect to tax avoidance—perhaps this is because I'm on this side of the table—I would suggest that subsection 94(1) goes very far, and, as you see in my submission, it perhaps goes too far in taxing some trusts that have a very ephemeral relationship to Canada. If a wealthy Canadian leaves $1 million—$100,000 to each of his 10 grandchildren, nine of whom live in the United Kingdom and one who lives in Canada—then Canada gets tax on the Canadian's portion. If, however, he leaves it in a single trust for them, the full $1 million is taxable in Canada.

[Murray Rankin, NDP, Victoria, BC]

If that trust is offshore, though—

[Michael Vineberg]

It's offshore, but there is only one of the ten owning a 10% interest who is in Canada, and yet the entire trust is taxable in Canada. As I mentioned, I've had to write letters to some clients saying if any of the grandchildren or great-grandchildren—everyone is now out of Canada—ever think of coming back to Canada, please tell me in advance and we'll have to try to do something, because the entire trust is going to be subject to Canadian tax. It's too late to deal with this in the present iteration, but perhaps it could be dealt with in a future technical amendment.

[Murray Rankin, NDP, Victoria, BC]

All right. Now I'd like to turn to Ms. Presseault, if I could.

When we had the benefit of the Canadian Institute of Chartered Accountants' presentation by Mr. Gabe Hayos, he suggested a two-part approach to this issue of simplification, which many of our colleagues have asked about as well. He first suggested creating an office of tax simplification, as was done in the U.K. in 2010, and he also suggested an expert panel or even a royal commission on tax reform to conduct a full-scale examination and make recommendations.

I wonder what your thoughts are on those recommendations.

[Carole Presseault]

Those are two great ideas. Those are ideas we've discussed with the Canadian Institute of Chartered Accountants, with Mr. Hayos and others, for a number of years. They are ideas that we brought forward to the committee, and we noted that the committee, in its report on the last pre-budget consultations, recommended having a royal commission on these, but I think it's a two-step process.

Where I would differ with their presentation this week is that I think we first have to have a public consultation process. We very much support the idea of a royal commission or an expert panel. Then, as a follow-up to that, there would be this idea of an office of tax simplification. I don't think the time is right now to be setting up a whole bureaucracy. It's an interesting example. It's an interesting process, but we also have benefited here in Canada from the paper burden reduction initiative and the red tape reduction reports. I think some of the more administrative compliance-related matters are being dealt with through that process. So first let's do a consultation process through a royal commission or an expert panel to define what we mean by tax simplification in Canada and start setting up the steps toward that.

[Murray Rankin, NDP, Victoria, BC]

I have only 30 seconds, so I have to pass.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Rankin.

Mr. Jean, go ahead, please.

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

Thank you, Mr. Chair.

Thank you to all the witnesses who have come here today. I know that your time is very precious, since you are professionals and you get to charge out by the hour, and obviously at the level of your expertise now, you must be able to charge out quite a bit per hour. That's because technical tax bills and bills such as this are very difficult to understand often. I can't imagine how difficult it would be to have a macro view, let alone a micro view of them.

I've heard quite a few things so far. I've heard that there has been a huge amount of consultation, that there has been adequate consultation, that we've been waiting for over 10 years for some of these enactments to come into play. I've heard “Get it done; it's been studied three times before.”

Has anybody come forward with any objections to anything contained within this technical tax amendment bill? Have you heard anything from anyone saying, “Listen, slow down. Stop this. Don't let this pass?” Have you heard that?

[Paul Hickey]

No.

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

Have any of you heard any reason to delay this?

[Witnesses]

No.

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

Now I'd like to talk about some numbers. You've been talking about numbers: sections 94 and 94.1, clause 56.4, clause 274, and section 86.1, and there are some other numbers you've mentioned. I'd like to talk about the most important numbers: the numbers of taxpayers, Canadians and others, who have trusted the tax laws and who are waiting for this to come into play.

I'd like to talk about those numbers because I think those are the most important numbers that we can talk about here, and obviously I think most people recognize now that, in the House at least, this bill is being held up by the opposition NDP, and for no practical reason, which is what I've heard from you today.

How many Canadians right now are not receiving tax fairness as a result of the delays? How many would be affected? You mentioned 18,000 taxpayers on one particular section alone. How many Canadians would be prejudiced and not receive tax fairness as a result of this delay by the NDP?

[Michael Vineberg]

If you take a look at all of the measures—and I won't characterize it as fairness or not—there must be tens of thousands of Canadians who will be impacted by this bill.

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

Positively impacted.

[Michael Vineberg]

I would say generally yes, because many of them are remedial measures, and at least taking them out of their uncertainty, and clarification.... There are many highly remedial measures.

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

So it's fair to say that tens of thousands of Canadians are going to receive tax fairness once this legislation is passed.

[Michael Vineberg]

To the extent to which Canadians would ever think they're getting tax fairness—

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

Well, it's an oxymoron—

[Voices]

Oh, oh!

[Michael Vineberg]

But yes, it would be regarded favourably, sir.

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

Mr. Hickey?