Finance Committee on Oct. 31st, 2012

[Ted Cook]

I'm afraid that I would have to check to see whether there was some sort of summary that was public. I don't know whether that was the case. Certainly the initial consultation documents soliciting the submissions are available on the Department of Finance website.

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

To the best of your knowledge, were the requests for submissions sent to the general public or just to those with specific expertise, such as actuaries or people from insurance companies? Did you go looking for help from experts or for general comments from users?

[Ted Cook]

I believe that it was a mix of both.

When the RDSP was set up in 2008, it was indicated that there would be a three-year review. That consultation was an open process. Rather than picking particular parties to consult with, there was simply a consultation document posted on the Department of Finance website. My recollection is that there were many submissions and results. They ran the gamut from advocacy groups for people with disabilities to individuals. There was a mix of submissions.

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

I am not sure I understood. Does the answer you are giving me at the moment apply to the amendments in Parts B and C?

[The Chair, Conservative, James Rajotte]

We're doing part 1(a) first.

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

I'm just trying to save time. This is the same question. I just want to know if the answer applies to both parts.

[The Chair, Conservative, James Rajotte]

Okay.

[Ted Cook]

I'll deal with it quickly.

There wasn't the same consultation process with respect to part 1(b) and part 1(c).

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

Mr. Cook, can we deal with part 1(b) very quickly then, using the summary?

[Ted Cook]

Yes.

Part 1(b) deals with group sickness or accident insurance plans. It simply provides that contributions made by employers in respect of insurance plans for the employees will be included in an employee's income, except when the insurance benefits would be wage replacement payments on a periodic basis, because they're already being taxed under the Income Tax Act.

[The Chair, Conservative, James Rajotte]

Thank you.

I have Mr. Mai and then Ms. McLeod.

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

Good afternoon, and thank you for being here today.

Could you tell us about the number and the percentage of Canadians who will be affected by this measure?

[Ted Cook]

Our estimates indicate that approximately 6.8 million employed Canadians would be affected by this measure.

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

My colleague raised the following question.

Who would be the stakeholders for the part 1(b) section?

[Ted Cook]

This was a measure for which there was no specific public consultation process. This is a result, largely, of our analysis of changes in usage of different types of insurance over a particular time period and a recognition of....

If I could go a little bit into the policy of this, these types of insurance are non-neutral in the sense that these kinds of lump sum payments.... For example, on a group accidental death and dismemberment plan, a lump sum payment rather than a wage replacement is not taxable either when the contribution is made or when the benefits are received by the individual. In comparison, for example, is an insurance plan that pays out wage replacement on a periodic basis. There's an incentive to be moving to this type of insurance, and we've seen that. This is largely to address what we perceive is non-neutrality in the tax system.

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

How much will be received in taxes? Have you calculated or estimated that?

[Ted Cook]

The overall calculation, when fully phased in, is approximately $100 million per year. On an average employee basis, that would be about $13 per employee per year.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Merci, Monsieur Mai.

We'll go to Mr. Brison, please.

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

So 6.8 million Canadians will be affected by this. Have you not calculated the average effect of this change on their tax bill?

[Ted Cook]

It will add approximately $13 federally, or approximately $20 combined federally and provincially.

I would note, in terms of looking at the impact, that this measure is already in place in Quebec. In Quebec, employer contributions are already included in the employee's income.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll move, then, to part 1(c), which is retirement compensation arrangements.

[Ted Cook]

Retirement compensation arrangements are a form of savings. They're employer-sponsored savings other than registered pension plans, RRSPs, and those types of savings vehicles.

Certainly this is something that, in particular, the CRA has brought to our attention. Over the last number of years, they've noted approximately 120 to 180 new RCAs each year. Most are what we would call closely held RCAs—RCAs that are for the benefit of owner-managers of corporations, that type of thing.

CRA has found that they've been engaged in aggressive tax planning, and this measure is largely to address that. The changes being proposed are similar to the rules that were added with respect to RRSPs in budget 2011.

[The Chair, Conservative, James Rajotte]

Thank you.

Go ahead, Monsieur Mai.

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

I would like to understand that better. Could you give us examples or describe the strategies used in that case? How frequently do you get to see those strategies?