Finance Committee on May 15th, 2012

[Ted Cook]

Currently under the Income Tax Act, where a person has not yet attained the age of majority the plan holder can be the parent of that individual. Then, when an individual attains majority.... In the normal course when they have contractual competences, it would be the individual who holds the RDSP themselves. In cases where the person may lack the contractual competence and there is a legal representative, such as a tutor, curator, or some other form of legal representative, they would enter into the RDSP for the individual.

As the minister pointed out, this leaves a sort of lacuna, if you will, in the legislation. It's unclear to the RDSP issuer that the person who would be the beneficiary under the RDSP has contractual competence to enter into the RDSP. Short of going through the process of having someone appointed to act for that individual, there really was no individual who could open up an RDSP for them.

What this measure does in that sort of grey area, where there is some question as to the competence of the individual to enter into the RDSP, is to allow what we're calling a qualifying family member, who is either a legal parent, spouse, or common-law partner, to enter into an RDSP. It's only in that grey area, and it's only parents, common-law partners, or spouses.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you. I'm good.

[The Chair, Conservative, James Rajotte]

Okay.

Mr. Brison, please.

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

There have been some changes to the medical expense tax credit. Is the medical expense tax credit refundable or non-refundable?

[Sean Keenan]

It's a non-refundable credit.

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

It's non-refundable. So as a non-refundable credit it wouldn't benefit the lowest income Canadians—people who don't make enough to pay federal taxes.

[Sean Keenan]

The medical expense tax credit does provide tax relief to individuals, but if they don't have an income tax burden then it only takes it down to zero.

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

Just to confirm, as a non-refundable tax credit, low-income Canadians, people who don't make enough to pay taxes, don't benefit from it. If it were a refundable tax credit, it would benefit those people.

[Sean Keenan]

It does. You're right that a refundable tax credit provides an amount equal to the value of the credit, which is independent of the individual's tax burden.

The medical expense tax credit is a credit that actually can be shared among family members. With regard to an individual who pays for the medical expenses of their spouse or minor children or another dependant relative, those amounts can be shared between spouses, for example. There's a certain amount of sharing that's done under the medical expense tax credit that's not available for other credits.

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

There are some provisions in Bill C-38 that would clamp down on charities, or penalize charities that transfer moneys to other charities, or that use more than 10% of their money for what is deemed political activities.

The United Way is an umbrella charity that raises a lot of money that's transferred internally within a city for instance, or a community, to a number of other charities. Are you considering the unintended consequences on a group like the United Way, which does transfer money within charities within other communities?

[Sean Keenan]

In terms of the changes that are being proposed in Bill C-38, essentially the law currently says that a charity must have charitable purposes. So they must be engaged in charitable purposes and they must use the resources they have to achieve those charitable purposes, and to the extent that they engage in political activities that are related to their charitable purposes, they can spend up to 10% of their resources. When a charity makes a gift to another charity, that is considered to be part of its charitable activities. What Bill C-38 is proposing is that when a gift is made to another charity, and a purpose of that gift was to allow the other charity to engage in political activities, then the gift would be included by the charity that makes the gift in its own political activities.

In your example of the United Way making a gift to another qualified donee or charity to engage in activities, to the extent that there's no suggestion that a purpose of the gift is political activities then there's no impact on them.

[The Chair, Conservative, James Rajotte]

You have one minute.

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

If the United Way were to give money to a food bank within a community and the food bank from time to time expresses opinions on poverty issues—it would strike me that people who work and run food banks perhaps know a fair bit about poverty issues and have opinions to express. Are you going to be monitoring those? Will there be some sort of monitoring of the United Way or other charities, and how granular is this assessment process going to get?

[The Chair, Conservative, James Rajotte]

Who is going to answer that?

[Brian McCauley, Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency]

Part of the provision would ask charities to self-report. So there is already an existing obligation and the form that they report on that would be adjusted. In fact, the plans are to sit down with umbrella organizations and charities over the next couple of months and talk about just exactly how we do that. That information would be available both publicly on our website, and it would be available to ourselves, the CRA, to monitor and to take action, if necessary. But as Sean was describing, in a lot of those circumstances it goes to the intent and purpose of the gift. It would be surprising to find circumstances where the intent or purpose of the United Way was to ask for political activities.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm going to take the next round here. I wanted to start off with the mineral exploration tax credit. The summary of part 1 says, “extends, for one year, the temporary Mineral Exploration Tax Credit for flow-through share investors”. This measure was introduced in the 2000 budget, I believe. It's presented to us each year at the finance committee during pre-budget hearings. It was presented in Whitehorse this year. I strongly support this measure. I think it's a very good idea. The junior sector makes the point that if this measure were not in place it would severely affect their activities in their industry, which is very important to Canada's economic health.

My question though is why is it done on an annual basis? What's the rationale for doing it by extending it each year, rather than making it a permanent or perhaps a two- or five-year measure?

[Ted Cook]

Certainly, I think you're correct that some proponents, and there are strong proponents of the mineral exploration tax credit, favour extending it for further years.

I think it has always been analyzed in a particular context. While the proponents are certainly in favour of the extension and of making it permanent or for multiple years, generally it is one of several factors that go into the exploration decision. Exploration may be driven by the prices for metals as well as by tax incentives. If prices for metals increase a great deal, then there's an argument that the particular incentive is not strictly necessary. There's an assessment each year as to whether its continuation is appropriate.

[The Chair, Conservative, James Rajotte]

Primarily it would be your junior companies that do exploration, and not the larger ones, that rely on this. Their argument is that if they had a longer planning period, it would obviously be beneficial for them. Companies don't like to plan annually. They like to plan over, say, three-, five-, or ten-year periods.

They make that argument. Can you respond to the argument the industry makes?

[Ted Cook]

I think the response is essentially the one I've already indicated. There's some question as to how the benefit of the mineral exploration tax credit and the flow-through is divided up between the corporations that actually engage in the exploration and the shareholders who invest in those corporations. To the extent that it is just one of several factors, it's not clear that it should become a permanent part of the system.

[The Chair, Conservative, James Rajotte]

I appreciate that.

I have a couple of minutes left.

I want to move on to the medical expense tax credit. I'm often approached by constituents with respect to expanding what's eligible or expanding the credit. Obviously, I support the expansion in terms of what's eligible under this tax credit.

Just for my own information as a parliamentarian, can you enlighten me as to the process the department goes through to decide that now, this year, this expense will now be eligible under this credit?

[Sean Keenan]

The department receives lots of correspondence. The Minister of Finance receives lots of correspondence from individuals and meets with groups. He tries to keep on top of changes in medical technology. Essentially, he looks at a couple of criteria in determining whether an expense should be eligible for the medical expense tax credit.

Is the purpose of the item to help with a medical condition? That's one of the factors that goes into the decision. There are lots of things that are closely related to helping with a medical condition that may have other applications as well. The second part is whether other applications may apply such that the primary benefit of extending the medical expense tax credit to this item would essentially fall outside of individuals who are the most in need of it.

[The Chair, Conservative, James Rajotte]

I appreciate that. I just have a few seconds left.

Can you indicate to us how many other products are currently being considered or reviewed?

[Sean Keenan]

I don't have that information with me right now. We hear representations from groups all the time.

[The Chair, Conservative, James Rajotte]

It's on an ongoing basis.

[Sean Keenan]

Yes.