Finance Committee on Nov. 2nd, 2011

[Dale Koeller]

Yes. The income is in dividends to the shareholders without being taxed corporately. It's taxed in the hands of the shareholders.

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

That's the issue the government has with this. Explain to this committee why that isn't fair--why the government, in your estimation, has this wrong.

[Dale Koeller]

I think that MICs are a very good thing in the economy, and there's a lot of money already invested in them.

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

I agree with that. I've had consultations with those who are involved with them. You do good stuff with them; we don't doubt that. But are those holding MICs or generating MICs doing something differently than the average taxpayers?

[Dale Koeller]

I'm not really sure I understand the question.

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

Are you getting a tax benefit that the rest of us aren't? I'm allowed to put $22,000 into a RRIF, and that's my maximum. Are you exceeding that maximum?

[Dale Koeller]

We're not exceeding that maximum, if I understand your question correctly. Any Canadian can invest in a MIC. It's not a closed system. It's very much like a REIT, a real estate investment trust. It's a pass-through corporate.... It's not taxed corporately.

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

Do your members act as corporations?

[Dale Koeller]

Yes.

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

That's the problem.

[Dale Koeller]

The corporation is the MIC. It was instituted in the Income Tax Act in 1972, so it has a longstanding history in the country.

It's very difficult to understand the issue tax-wise. The real issue is that what I understand to be abuses in the MIC structure are being attacked by way of lots of other loopholes as well. This legislation includes people who are following the current legislation, although the current legislation is working.

MICs are widely held. MICs are investing in the economy really well. Technically, I think the problem is that some people are using them abusively, and there are ways to close the loophole without affecting healthy, legitimate enterprises.

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

I don't know if you even have member organizations, but are they administered by someone who doesn't charge a fee but allots that fee into the MIC? Is that correct?

[Dale Koeller]

A MIC can operate in a few different ways. Some are operated by a manager outside the MIC, and some are operated by the MIC itself. Management fees can be made inside the MIC or charged to the MIC, or the income can just be left in the MIC, and employees paid by the MIC.

Either way, there's no tax leaving the system. An outside manager could pay corporate taxes, but it's solidly within the current legislation for a MIC to be its own manager as well.

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

You've laid out a solution to this. In a nutshell, what's that solution?

[Dale Koeller]

The solution is to not allow MICs to hold shares of an entity that is arm's length to the other shareholders. That would prevent people from stuffing their RRSPs with tax-free money, and I think that's what the Department of Finance is concerned about. We're suggesting a one-line amendment that could fix that problem.

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

To Ms. McLeod's question, you're not being blindsided by this, you did have indication of this in budget 2010?

[Dale Koeller]

No, we didn't have any indication in 2010; we had an indication in 2011. I personally learned about the rules after the election in June.

[The Chair, Conservative, James Rajotte]

You have 20 seconds.

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

The legislation as it's being advanced is going to give you a period of ten years to move out of these, but what you're saying is that it will take away this whole industry?

[Dale Koeller]

It won't take away the whole industry, but it will take away a significant portion of it. For instance, my RRSP will get taxed this year and I'll have to get it liquidated completely before that ten years is gone. Otherwise, it will be decimated, really; my retirement savings is decimated by this rule.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

We'll go to Mr. Mai, s'il vous plaît.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much, Mr. Chair.

Thank you very much for being here on such short notice.

Mr. Koeller, could you submit the one-liner change? We're actually voting on it tomorrow, and it's really important for us to have that and then we can actually move forward. Also, I'd ask the same thing of CALU: if you have one thing that's specific, can we have a look at it? Maybe you could submit it and then we can maybe propose it or at least ask questions about it. We'll see if the other sides agree.

I also have a question for Ms. Eng, and Mr. deHooge too, a very large question regarding making the tax credit refundable. How would it benefit your members, and how many people will it affect?

Maybe we'll start with Ms. Eng,

[Susan Eng]

The key point there is that a person who has no taxes to pay will not benefit at all from the non-refundable tax credit in the amount of $300. The people we're concerned with of course are the lower-income people who are providing care, and more importantly the people who have to quit their jobs in order to provide around-the-clock care, for those individuals will not get any support out of the current proposal. Since the category has been opened and there is a value for this category, we should make sure there is a substantive support.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much.

Mr. deHooge.

[John deHooge]

Thank you.

I think the CAFC has been advocating for tax relief for volunteer fire service for the past decade. The proposal that we put forward during the pre-budget submissions was developed so as to positively impact Canadian volunteer firefighters while remaining realistic within the government's fiscal situation. So this is a cost-effective solution to the recruitment and retention challenges facing the volunteer fire service, and we're pleased with how the situation has come out with this budget. In short, we based our submission on the past and certainly leave it at that.