Finance Committee on Nov. 1st, 2012

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Do we have an indication what this is going to cost those it impacts?

[Ted Cook]

As I indicated, there's approximately 7,500, and in fiscal costs once it's fully phased in, it's $95 million.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Has there been any thought or study done regarding its impact on border towns, on people who work cross-border?

[Ted Cook]

There's been no specific analysis with respect to that. At the time this was originally introduced, other jurisdictions had the same type of incentive for their businesses. Over time, those incentives, to the extent we can track them, seemed to have gone away in other countries as well. For example, when this measure was first introduced, the U.K. had a similar measure. Over the years, that measure has been pared back in the U.K. to the point where it now just applies with respect to seamen.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Would mining and oil be the largest constituency it would impact?

[Ted Cook]

It's certainly targeted to particular types of activities: engineering, oil and gas, agriculture, and that kind of thing. The other thing to note about the credit, and why we feel it's appropriate to phase it out, is there has been a judicial expansion of the credit beyond what we consider its appropriate policy bounds. There have been recent cases where, for example, you've got teachers who are teaching at colleges outside Canada, and they now have been found by the courts to be eligible for the credit, which is beyond where we originally thought the credit was going to apply. There's another case where, by virtue of the fact that a recruiting service was the nominal employer, the individual was eligible for it. Certainly, we've noticed an expansion of the credit and whom it's available to without any change in the legislation as to who claims it.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Cuzner.

Mr. Harris, please.

[Dan Harris, NDP, Scarborough Southwest, ON]

This should be quick. You mentioned that when it was initially created, it provided a bit of a competitive advantage, and if other jurisdictions had themselves moved away from this, would that not have enhanced the competitive advantage of those tax credits?

[Ted Cook]

As I indicated, certainly from our own analysis and that of the CRA, the way the credit works and the way it's been used in the last several years has been creating problems in terms of its going beyond the intended scope, even if it does have a policy purpose. In terms of the competitiveness of Canadian business, the reduction in rates, certainly since the credit was originally introduced in 1979, has more than made up for the incentive that the credit originally provided.

[Dan Harris, NDP, Scarborough Southwest, ON]

You mentioned that the expansion of eligibility for the credit has happened in ways that weren't anticipated or that weren't initially supposed to be part of it. Did those changes happen because of a shift in some market forces where suddenly different types of Canadian companies were doing more work overseas, as opposed to those it was originally intended for?

[Ted Cook]

I think it's more a case of Canadian taxpayers seeing that the legislation has been drafted in a particular way and trying to see what works and finding judicial support over time. Once one or two cases show that a provision has been interpreted by the courts in a particular way, then other taxpayers will look at the same decisions and extrapolate from them.

[Dan Harris, NDP, Scarborough Southwest, ON]

Certainly I think people see judicial decisions being made and would make use of them.

That, I think, is going to be it for me.

However, $95 million does seem to be a lot of money to be getting out of such a small group of Canadians. When averaged, how much does the government expect to get back from those 7,500 Canadians?

[Ted Cook]

It would be the calculated number of that by the number of taxpayers, perhaps with some factor for increase over the—

[Dan Harris, NDP, Scarborough Southwest, ON]

Sorry. Is the amount of $95 million after it's all been completely phased in, or is that the number it would be in 2013?

[Ted Cook]

That's after it's completely phased in, at the end of the—

[Dan Harris, NDP, Scarborough Southwest, ON]

That's after 2015.

[Ted Cook]

That's after the complete removal of the credit.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Are there any questions regarding income tax measures dealing with pooled registered pension plans and income received from retirement compensation arrangements?

Monsieur Mai.

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

With respect to the impact of income splitting, have you evaluated the loss of revenue?

[Ian Pomroy, Senior Tax Policy Officer, Social Tax Policy, Personal Income Tax Division, Department of Finance]

Yes. It would be a relatively small cost. It would be less than $5 million.

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

How many people could participate in that?

[Ian Pomroy]

I don't have that number available. I'm sorry.

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

How did you come up with $5 million?

[Ian Pomroy]

I don't have it with me today. I would have to see if we could provide it.