Mr. Boehmer.
Evidence of meeting #110 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was c-48.
A video is available from Parliament.
Evidence of meeting #110 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was c-48.
A video is available from Parliament.
9:25 a.m.
Partner, Canadian Tax Practice, Ernst & Young
I think that taxpayers do very much rely on both draft legislation and comfort letters. Most of the changes that we're talking about here are very technical in nature. They don't seem to typically deal with policy. We've lived with the system. Some of the amendments in this bill go back to as far as 1996, and taxpayers, while they regret having to follow so many versions of draft legislation, do try to do that. But it would be a lot simpler if the technical amendments could be passed, let's say, on a regular basis—yearly, once every two years at most.
9:25 a.m.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Thank you.
Mr. Moody, do you have any comments?
9:25 a.m.
Moodys LLP Tax Advisors, As an Individual
I would agree. I've read some of the transcripts and discussion about sunset clauses and I don't agree at all; there are very good reasons for not having them.
A quick example is the restrictive covenant proposals. They were specifically introduced as technical amendments to counteract a decision of the Federal Court of Appeal called Manrell, wherein ultimately restrictive covenant receipts were found not to be taxable—a decision that was very surprising to a person like me. There are very good tax policy reasons for introducing such legislation.
This draft legislation goes back to 2004. If we had a sunset clause, you would have a whole bunch of people continuing to plan to make restrictive covenant proposals tax free, which in my view is ridiculous and ultimately introduces complications that would be further unintended.
So I don't agree with that idea whatsoever.
9:25 a.m.
Conservative
March 19th, 2013 / 9:25 a.m.
Chartered Accountant, Tax Expert, Tax Policy Specialist, Author, As an Individual
I support the comments made up till now and during previous meetings with regard to the complexity of the taxation system for Canadian taxpayers. The fact is that taxpayers have trouble understanding the substance of the tax legislation. I would add also that as Mr. Moody just said, there are tax rules that go back to 1999, 2000 and 2004.
Currently, in 2013, we feel that they must be adopted since we have in practice being living with those rules for almost 15 years. In reality, several government rules should be rethought, in light of the fiscal crisis of 2008, which not only affected Canada, but many other countries as well.
We are in fact lagging behind where certain tax laws are concerned, which apply in practice. Not only is this system very complex for taxpayers, but also for parliamentarians who are trying to put in place effective rules in 2013 and are grappling with a history they are almost obliged to implement now.
9:25 a.m.
Conservative
9:25 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
Thank you, Mr. Chair.
Mr. Moody, you seem to be damning this bill with faint praise. After invoking Adam Smith and his principle of clarity, you say that the provisions in this bill are incomprehensible. If they're incomprehensible to you, an expert, they must be truly incomprehensible to the rest of us.
We support this bill for reasons that others have given. But how can you support a bill that is incomprehensible? How can such a bill actually be enacted if nobody can understand what it is?
9:30 a.m.
Voices
Oh, oh!
9:30 a.m.
Moodys LLP Tax Advisors, As an Individual
I would suggest that it's much more than faint praise. As I said in my opening remarks, I commend the Department of Finance for getting this legislation on the table; however, with such a huge piece of draft legislation, it's not unusual that there will be some technical deficiencies.
In particular, there is some draft legislation contained in this bill that is clearly incomprehensible—I mean the non-resident trust rules in section 94. I don't know about any of my fellow panel members, but I could probably count on my left hand how many people there are in Canada who know this stuff inside and out.
9:30 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
But if it's truly incomprehensible, shouldn't it be amended?
9:30 a.m.
Moodys LLP Tax Advisors, As an Individual
Ideally, it would be, as I said in my notes.
If I had to place Adam Smith's principles, certainty and fairness are above, in my view; they are the more important. As I mention in my notes, how do we give proper advice to clients if we don't know what we're dealing with?
9:30 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
I still don't understand how certainty can be consistent with incomprehensibility.
I'll go to another issue. In an earlier blog, I think, you said:
Revisions to the personal services business rules...will have a dramatically negative impact for persons who carry on a personal services business through a corporation.
Can you describe what this dramatically negative impact is and give an example or two of such an impact?
9:30 a.m.
Voices
Oh, oh!
9:30 a.m.
Moodys LLP Tax Advisors, As an Individual
The impact is going to be significant, in the sense that we now have an increased 13% lift on the tax rate, whereas it used to be somewhat neutral to carry on through a personal services business corporation, and to a certain extent advantageous. The hammer prior to the reduction in tax rates was not as dramatic as it is today.
9:30 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
But again, this is sort of damning with faint praise. It's a dramatically negative impact, but you still support the bill.
9:30 a.m.
Moodys LLP Tax Advisors, As an Individual
Absolutely. Do I support personal services business corporations? Not at all. The point in what I was writing was that if you're going to carry on this dangerous game of carrying on your business through a personal services business corporation, then you'd better beware. I, by no means, support carrying on personal services business corporations.
9:30 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
Okay.
The last question is to you. This is another thing you wrote—
9:30 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
—and I quote:
While many of the [other] proposed amendments are controversial, it will be welcome to obtain certainty on the passing of the proposed amendments so that we can give sound tax advice....
Which of these measures do you regard as particularly controversial?
9:30 a.m.
Moodys LLP Tax Advisors, As an Individual
The non-resident trust rules are quite controversial—they're the ones I mentioned—and the restrictive covenants. I support the restrictive covenant proposals. I think it's offensive that people should be receiving such amounts tax free. But the legislation itself is so broad—it's the same thing with the non-resident trust rules: they're so broad—that there are, I believe, significant unintended catches.
9:30 a.m.
Liberal
