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

6:55 p.m.

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

Pierre Mercille

Why do pharmacists lobby the government? Basically you will have to ask the Pharmacists Association that. But as a general benefit, it provides a benefit for the patient because they will not pay tax on the value of their service.

6:55 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

That I understand. I understand that it's a benefit to the patient, but I'm curious about how this becomes a benefit to the pharmacist.

6:55 p.m.

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

Pierre Mercille

Just as an economic principle, their services will not be subjected to tax. That's usually an advantage.

6:55 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Even though a lot of their inputs are...they therefore get no credit. They lose the benefit of credit.

6:55 p.m.

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

Pierre Mercille

The inputs related to the supply of those newly exempted services can be viewed mainly as the salary of the pharmacist or the pharmacist's employee.

7 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

But there's rental and there's all kinds of other stuff as well.

7 p.m.

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

7 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

It just struck me as curious.

The second question has to do with this importing of vehicles. The way I read this is that there is relief from the green levy on fuel-inefficient vehicles. So if somebody brings in a clunker, why are we giving them exemptions?

7 p.m.

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

Lucia Di Primio

It would have to be a foreign-based rental vehicle and it would have to be temporarily imported. When you say a clunker, I assume you mean a vehicle that would already be subject to the green levy, assuming that the rental establishment in the United States is renting out clunkers.

7 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

They're renting out fuel-inefficient vehicles that otherwise would attract a tax. I don't understand the point of giving an imported vehicle an exemption, whereas if you are using the same vehicle in Canada, you don't get the exemption. How does that make sense?

7 p.m.

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

Lucia Di Primio

In Canada, the green levy excise tax applies at the manufacturers' level or at the time of importation. At the manufacturers' level, it applies when it is delivered to the purchaser, which is usually a dealer. So the underlying policy rationale for the green levy is not only to raise revenues but also to discourage the production of fuel-inefficient vehicles.

Presumably, the rental vehicle from, for example, the United States has already been manufactured outside Canada, so it would not be subject to the green levy. Then, when it's being imported for less than 30 days, it wouldn't be consumed in Canada, so the relief is applied on that basis. It would also probably be administratively more costly to administer at the border than to allow this relief for these very short temporary importations.

7 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

That's fine, thanks.

7 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. McKay.

I'm going to go to Monsieur Caron.

7 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

I would like to come back to a point that I found interesting. How did you decide to consider eliminating the GST on rental vehicles that are being imported temporarily. Who made this request? What was the rationale for this decision?

7 p.m.

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

Pierre Mercille

It is important to understand that, before the recent change was made to the Motor Vehicle Safety Act, vehicles rented abroad could not enter Canada. In budget no. 2 of last year, we included an amendment to let foreign cars enter the country.

When these vehicles were not allowed to enter Canada, there was no tax relief on the importation of such vehicles. That meant that import taxes were charged on the full value of the vehicle when it arrived at the border. The purpose of the new measure is to promote tourism, because this amendment is part of the tourism strategy. We wanted to make it easier for tourists who rented a vehicle abroad to travel.

I will give you an example. Some people were going on an Alaskan cruise, leaving from Vancouver. They took the boat and arrived in Alaska, where they decided to rent a vehicle to visit more of the state. They figured that, while they were there, they should also take advantage of the opportunity to visit the Yukon. When they arrived in the Yukon, the vehicle could not enter Canada. If this change had not been proposed, the vehicle would be taxed on its full value and people would not come to Canada to visit the Yukon.

7 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

This is to correct an oversight that occurred when another tax rule was adopted the previous year.

7 p.m.

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

Pierre Mercille

It was not a tax rule.

7 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Was it an amendment?

7:05 p.m.

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

Pierre Mercille

Yes, it was an amendment.

7:05 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

My second question is on the issue of charging GST on books and abolishing the GST on books that have been loaned out. I am talking about libraries. Many libraries get a bit of money from selling their used books. Would GST be applied in those cases? Generally speaking, the libraries do not sell those books for profit, but to help finance themselves.

7:05 p.m.

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

Pierre Mercille

The proposed amendment seeks to resolve a technical problem. Libraries and schools currently get a rebate. The GST is the federal component of the HST. Until now, the rebate did not apply when books were acquired for resale because, technically speaking, a donation was considered a sale under the legislation because there was a transfer of property. In your example, goods are not acquired by the library for resale. They are acquired in order to be loaned out and to allow people to read the books. If, later on, the library happens to decide to sell the books, they will not be affected. They will be entitled to the rebate because the main purpose was to loan the books.

7:05 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

I just wanted to make sure that no one was going to go after the libraries that sell books. I am satisfied. That is all for me.

7:05 p.m.

Conservative

The Chair Conservative James Rajotte

Good, thank you.

Mr. Mai, you have the floor.

7:05 p.m.

NDP

Hoang Mai NDP Brossard—La Prairie, QC

Thank you, Mr. Chair.

I would like to come back to the green levy. Could you explain it to us? I understand that essentially the same thing would apply to these cars for tourism purposes. Is that why the green levy was eliminated?

7:05 p.m.

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

Lucia Di Primio

Perhaps an example would help to address your question. A Canadian resident visits, for example, the United States, whether Alaska or Seattle, as described earlier by my colleague, and wants to then, for tourism purposes, visit a different area of Canada. Without these amendments, if they were visiting with a rental vehicle—a foreign-based rental vehicle that was fuel-inefficient—and drove from Alaska to the Yukon Territory, they would be stopped at the border and asked to pay the green levy.

As a result of these amendments, the green levy would not be applied as long as the importation is for tourism or non-commercial purposes, and they would then be leaving Canada within 30 days or the vehicle would be going back within 30 days.