This week, I changed much of the tech behind this site. If you see anything that looks like a bug, please let me know!

Evidence of meeting #59 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was change.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ted Cook  Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
Sean Keenan  Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Brian McCauley  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Pierre Mercille  Senior Legislative Chief, Sales Tax Division, GST Legislation, Tax Policy Branch, Department of Finance
Lucia Di Primio  Chief, Excise Policy, Sales Tax Division, Excise Act, Tax Policy Branch, Department of Finance
Gordon Boissonneault  Senior Advisor, Economic Analysis and Forecasting Division, Demand and Labour Analysis, Economic and Fiscal Policy Branch, Department of Finance
Jane Pearse  Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Annie Hardy  Chief, Financial Institutions Division, Structural Issues, Financial Sector Policy Branch, Department of Finance
Ling Wang  Chief, Financial Institutions Division, Housing Finance Review, Financial Sector Policy Branch, Department of Finance

5:15 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

Great. Thank you.

5:15 p.m.

Conservative

The Chair Conservative James Rajotte

We'll suspend, and we'll come back after the votes.

I want to thank officials for being here and for their patience. We should be back in about 45 minutes, hopefully.

6:35 p.m.

Conservative

The Chair Conservative James Rajotte

I call this meeting back to order, the 59th meeting of the Standing Committee on Finance. We are continuing our discussion of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.

We have with us here witnesses from both CRA and Finance. We want to thank them for staying with us tonight. We're on part 1; I believe we're just finishing it up.

I do have a note from Mr. McKay that he has a question.

Are there any other members at this point who want to be on the question list?

Okay, we'll start with Mr. McKay with part 1, please.

May 16th, 2012 / 6:35 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Thank you, Chair. Thank you for your generosity.

I apologize for not being here earlier, but I'm not a regular member of this committee.

The issue is with respect to political activities and those that are partisan. I can imagine that this leads to some interesting conversations as to what is or is not and whether one breached or did not breach.

Can you explain how this is going to be different from what currently exists?

6:35 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

With respect to political activities, the measure in part 1 essentially provides a look-through rule to the Income Tax Act. So as a general matter, what constitutes a political activity for a registered charity or a registered Canadian amateur athletic association? What is a political activity at its base level will not be changing as a result of this bill. What is changing is that we put in a definition of political activities. It's not a definition that defines political activities in the normal sense; it's just a definition that says political activities include the making of a gift where a purpose of the gift can reasonably be considered to support the political activities of a qualified donee who receives the gift.

Essentially it does not change, from an overall perspective, what constitutes a political activity, but rather where funds are given from one registered charity or a registered Canadian amateur athletic association to another qualified donee. Currently, under the act, where these kinds of gifts are made, it's automatically considered to be for charitable purposes for the charity giving the gift. What the provision does is simply provide a look-through rule that says to look at the purpose of the gift, and if a purpose of the gift is to support political activities of the recipient and the qualified donee, then that will be considered a political activity for the registered charity or RCAAA.

6:35 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Your argument is that you're not actually changing what constitutes political or partisan activity. Your argument is that this section says that in the donation from one entity to another you're going to, in effect, lift the corporate veil.

6:35 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

That's essentially correct.

6:35 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Is that a good way of putting it?

6:35 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

That's a fair analogy.

6:35 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Okay.

We're all partisans sitting around this table—well, maybe there are some exceptions, but I don't know who they are. If we go to a church and advocate for a particular activity, whatever the activity might be, and that church, for whatever reason, decides that we're going to donate to what might be considered an entity, where is it that the church gets itself in trouble?

6:40 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

It's just in terms of where it applies. It applies to registered charities or RCAAAs. That's where it applies. It doesn't apply to individuals or corporations making gifts in the first instance to a charity.

What the rule does is it provides that you look at a purpose in the making of the gift. As we've talked about with the committee a bit earlier, it's not meant to impose a specific tracking obligation, but rather to look in an objective way at all the circumstances around the gift—

6:40 p.m.

Conservative

The Chair Conservative James Rajotte

You have one minute.

6:40 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

—from the charity to the qualified donee.

6:40 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Thanks very much. I'm done.

6:40 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you.

I'll go to Mrs. McLeod, please.

6:40 p.m.

Conservative

Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC

Thank you, Mr. Chairman.

I hope I can round this out and pull it all together. There seems to be incredible interest in who and what, as far as rules that have been around for many years on charities. I think that tells me the measures we put in the budget on increased opportunity for education...and perhaps some day down the road the finance committee might want to look at how the actual technical details work.

Mr. McCauley, how many registered charities are there?

6:40 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

Brian McCauley

I think there are 85,462, but it varies from day to day.

6:40 p.m.

Conservative

Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC

I think it's very reasonable, prudent, and appropriate that the rules be clear and some money is expended, in terms of what we're doing and where we're going.

Having said that, I really hope we can move on to part 2.

6:40 p.m.

Conservative

The Chair Conservative James Rajotte

I don't have any other speakers for part 1, so I will move on to part 2.

Are the same officials staying for part 2?

6:40 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

6:40 p.m.

Voices

Oh, oh!

6:40 p.m.

Conservative

The Chair Conservative James Rajotte

Okay.

Mr. Cook and Mr. Keenan, thank you so much for being with us tonight.

We'll bring the officials forward for part 2.

Welcome to the committee. We had an overview of part 1, which I think was helpful. Perhaps one of you can do an overview of part 2. Then we'll have questions from members.

6:40 p.m.

Pierre Mercille Senior Legislative Chief, Sales Tax Division, GST Legislation, Tax Policy Branch, Department of Finance

Part 2 of the bill includes an amendment to the Excise Tax Act that deals both with the GST/HST and excise taxation. I'm going to cover the GST/HST measures, and Ms. Di Primio will be covering the excise taxation measure.

First, in respect to the GST/HST, I would like to say as a background that the GST/HST generally applies on all supplies of property or services made in the course of a business of any sort, unless there's a specific exclusion in the legislation for it. This bill adds a few more exceptions in the health care sector.

Part 2 of the bill amends the Excise Tax Act to exempt pharmacists' professional services from the GST/HST. These services, for example, can include ordering and interpreting lab tests, administering medication and vaccination, and changing drug dosage.

In addition, currently in the Excise Tax Act, a prescribed list of diagnostic health care services, such as blood tests, are exempt from the GST/HST when ordered by certain health care professionals. These health care professionals can be doctors, dentists, registered nurses. Part 2 of the bill amends the Excise Tax Act to expand the exemption for those diagnostic services to include those ordered by pharmacists, when the pharmacists are authorized to issue such orders under provincial law.

Part 2 of the bill further amends the Excise Tax Act by expanding the list of GST/HST zero-rated medical and assistive devices that are specially designed to assist individuals in coping with a chronic disease or illness, or a physical disability, including the circumstances in which certain devices can be zero-rated.

For those who are not familiar with that kind of language, zero-rated under the GST legislation essentially means taxable at a rate of zero, fully released from GST/HST.

In terms of circumstances in which a medical device can be zero-rated, the list is expanded to include certain devices supplied on the written order of a registered nurse, an occupational therapist, or a physiotherapist, as part of their professional practice. In the past, those medical devices had to be issued on the order of a medical doctor. The list of zero-rated medical devices is also expanded to include blood coagulation monitoring or metering devices and associated test strips and reagents.

This amendment parallels the amendment that was explained earlier in respect of income tax.

The list of zero-rated medical devices is also expanded to include corrective eyeglasses or contact lenses supplied under the authority of an assessment record produced by a person who is entitled under the law of the province in which a person practises to produce the record authorizing the dispensing of corrective eyewear. Essentially, this follows recent provincial law changes where opticians have been authorized in certain circumstances to conduct vision assessment and to produce records of the assessment that authorizes the dispensing of corrective eyewear. Before, it had to be a prescription on the order of an eye care professional.

Part 2 also amends the Excise Tax Act to add the drug isosorbide-5-mononitrate to the list of GST/HST zero-rated non-prescription drugs that are used to treat life-threatening diseases. In this case this drug is used to treat congestive heart failure.

Part 2 also amends the Excise Tax Act to allow charity and qualifying non-profit literacy organizations prescribed by regulation to claim a rebate of the GST and the federal component of the HST they pay to acquire printed books to be given away for free.

Another amendment in part 2 implements a legislative requirement relating to the Government of British Columbia's decision to exit the HST framework. Essentially, the amendment removes references to British Columbia in the Excise Tax Act.

The last GST amendment is basically an amendment to the Excise Tax Act and related regulation, to change the treatment of rental vehicles temporarily imported by Canadian residents. The effect of the amendment is to fully relieve the GST on those vehicles imported by Canadian residents if the Canadian resident has been outside the country for at least 48 hours. If the Canadian resident has not been outside Canada for at least 48 hours, the GST will be levied on a partial basis. The way this works is that under the legislation there'll be a fixed amount per week associated with a type of vehicle. For example, a car is $200. So when the Canadian resident, bringing that foreign-based rental vehicle into Canada, says he's going to be in Canada for two weeks, the tax will apply at the applicable rate of two times $200.

These are the amendments related to GST and HST in part 2.

Lucia will now talk about the excise taxation measures.

6:45 p.m.

Lucia Di Primio Chief, Excise Policy, Sales Tax Division, Excise Act, Tax Policy Branch, Department of Finance

In the area of excise taxation, part 2 of the bill also includes proposed amendments relating to the green levy on fuel-inefficient vehicles as well as the excise tax on automobile air conditioners. The first measure is very similar to the proposed GST relief that Mr. Mercille described, relating to foreign-based rental vehicles. Essentially, the green levy as well as the automobile air conditioner excise tax would be fully relieved on foreign-based rental vehicles that are temporarily imported by Canadian residents into Canada for non-commercial purposes and for no more than 30 days.

Part 2 of the bill also includes proposed amendments to ensure that the application of the green levy will not change, even though the Minister of Natural Resources recently announced that vehicle fuel consumption testing requirements will be changing. These proposed amendments ensure that the green levy will continue to be determined by reference to the current test method that's used to measure fuel efficiency ratings so that there will be no change.

There is one last measure in part 2 of the bill. It's similar to a measure discussed yesterday and earlier in relation to the Income Tax Act. Essentially, the Minister of National Revenue, and by virtue of that the Canada Revenue Agency, is relieved of the requirement to issue demands to file a return by registered or certified mail. Instead the demand can be issued by regular mail. This applies not only to the Income Tax Act, but to ensure consistency across all federal taxation statutes, it applies to the GST legislation, the non-GST portion, and the excise taxes and duties as well.

These are all of the measures in part 2 of the bill.

6:50 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you both for your presentations.

We'll begin members' questions with Ms. Nash, please.