Finance Committee on Nov. 21st, 2012

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

Thank you, Mr. Chair.

This amendment delays provisions related to amalgamations and windups. It's important, Mr. Chair, that we recognize as well that in partnerships....

I'll draw your attention to Introduction to Federal Income Taxation in Canada, 31st edition.

First of all, it's important that we understand specifically the nature of a partnership. The term “partnership” is actually not defined in the act; the act merely outlines the tax consequences if a partnership exists. In order to determine whether a particular relationship is a partnership, reference must be made to the definitions contained in the various provincial partnership acts. Generally these statutes define a partnership as a legal relationship existing between two persons who carry on a business in common for the purpose of a profit.

Partnerships, Mr. Chair, can be formed by individuals, corporations, or a combination of individuals and corporations. In addition, two other factors generally suggest the existence of a partnership: first, joint and several liability with respect to debts incurred by the partnership, and second, an agreement indicating the method by which profits and losses are to be shared.

Mr. Chair, it's important to recognize the difference between a partnership and a joint venture, because there are distinguishing features that apply to this clause specifically.

A partnership is to be distinguished from a joint venture because the tax consequences of being a partner or co-venturer—a member of a joint venture—are actually quite different. A partnership is a separate entity, and therefore unless a rollover provision applies, transfers of property by the partner to the partnership take place at fair market value.

On the other hand, a co-venturer generally retains title to any property used in the joint venture, so if a co-venturer should contribute property to the joint venture, this is not a taxable transaction, as the contribution to a joint venture is not a disposition; there has been no change in ownership.

Also, in a partnership net income is computed at the partnership level; therefore, for instance, capital cost allowance is deducted at the partnership level. Each partner has the discretion to deduct capital cost allowance independently of the other partners. However, in a joint venture, each co-venturer computes net income separately; therefore each co-venturer is able to deduct capital cost allowance independently of the other co-venturers.

It's important, Mr. Chair, to recognize as well that some of the....

Actually, I want to draw from a specific tax article by Vern Krishna in The Fundamentals of Canadian Income Tax, ninth edition: “A partnership is the relationship that subsists between persons carrying on business in common with a view to profit” and “A Canadian partnership is a partnership in which all the members are resident in Canada”.

Furthermore, Mr. Krishna defines that

It's a fundamental principle of Anglo-Canadian tax law that a taxpayer is entitled to arrange his or her affairs to minimize tax. Parliament has endorsed this principle, generally known as the Westminster principle, as a legitimate and accepted part of Canadian tax law. Tax avoidance implies the reduction of tax payable by lawful means

which is obviously different from tax evasion. This raises the issue—we've all talked about it—of clamping down on foreign tax havens. As we're talking about tax fairness, this issue that we're talking about leads us to issues of tax avoidance and tax fairness. This committee has studied the issue of foreign tax havens; Mr. Mai has done quite a bit of work on this, and Senator Percy Downe, in the other place, has done a lot of work on it.

The reality, Mr. Chair, is that we need to do more on this. Back in 2005, the Liberal government gave CRA an additional $30 million, I think it was, which I believe yielded more than $2 billion in increased revenues as a result of identifying and bringing in what would have been lost revenue from people utilizing offshore tax havens.

Spending $30 million to bring in more than $2 billion strikes me as a good investment for any government to make in CRA's capacity, which is why I'm concerned, Mr. Chair, about the government's cuts to CRA. I think that is something we all ought to be concerned about, because ultimately it's not just about tax fairness—which it is about—but also about meeting the significant expenditures required to run the country, and at a time when we see significant pressures on the government and taxpayers and see significant deficits.

Therefore, Mr. Chair, I would urge committee members to consider this in the broader context of tax fairness and of addressing some of these other tax loopholes and offshore tax havens as we consider what Mr. Krishna has defined as the difference between legitimate tax avoidance and illegitimate tax evasion.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Brison.

Go ahead, Madame Glover, s'il vous plaît.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

Here we go again. The committee has been here since 3:30. The committee was delayed by the Liberal Party. We didn't even get started on this because the Liberal Party put forward 3,000 amendments that they chose, for whatever reason, to try to force the committee not to hear. Now we're discussing what is I think their tenth anti-avoidance....

They're against these anti-avoidance measures. This measure, which we would like to see go forward, will in fact help Canadians. The member from the Liberal Party talks about tax fairness. Well, Canadians expect all parliamentarians, when they're aware of tax loopholes, to close those tax loopholes. The NDP believes in it; Mr. Mai clearly believes in it—he was just commended by Mr. Brison over it. Unfortunately he wasn't here for the tax haven study, but we know that he is committed to it.

Here we have another measure put forward by this government to close tax loopholes, and the member from the Liberals and the Liberal Party choose to defend the tax loophole. It's unbelievable. I would suggest to Canadians watching tonight that they clearly see this for what it is: this is a delay tactic. It is simply to delay.

This is an important anti-avoidance measure, and it is important to Canadians. The Liberal Party is making an absolute mockery of what's happening here tonight. Frankly, I'm very disappointed in what's going on.

We are going to support closing every tax loophole because we believe in fairness. We don't just say we believe in fairness: we put forward bills that include measures to close those tax loopholes; we vote to support measures to close tax loopholes. Canadians ought to see this for what it is. This is a game being played here by the Liberals, and it's unfortunate.

We're going to vote to support what we have put forward to close tax loopholes. I would urge the Liberals to stop playing games and start telling Canadians exactly what it is they're doing, which is delay to delay. They must start to think about the long-term implications of these anti-avoidance measures and choose to start supporting them. That is what the prudent parliamentarian ought to be doing. I don't think there's a Canadian in this country who would side with the Liberals in trying to keep tax loopholes open.

If he really believes in closing them, he will vote down his amendment and will vote in support of the government's bill.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Madame Glover.

Go ahead, Ms. Nash, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

I want to say first of all that there is so much in this omnibus budget bill that we disagree with. We've called it a monster budget bill because it has crammed so many changes into one bill. There are over 60 bills that are being changed, many of which—I think over 20—that were never identified initially in the budget earlier this year. We've been highly critical of this bill, and that's why we have been voting against it.

There are changes in here that would kill jobs and investment through changes to the SR and ED tax credit, changes that will harm research and development in this country. There are serious changes to the Navigable Waters Act that will seriously impact our environment, and we'll get to those changes. There are changes here to the Fisheries Act, some of which are attempting to correct changes that this government made this spring that were hastily done, and in fact they have to go back now and correct them before they've even begun implementing them.

My colleague from the Liberal Party has proposed a number of amendments. We've proposed some amendments. We've tried to propose substantive amendments on the issues that we are concerned about. We've had consultations with Canadians across the country, and we've tried to reflect in our amendments the issues we've heard about.

However, I have to say there are some amendments that my colleague has made that we have trouble supporting. Some we have supported, but we have been fighting on this committee to finish a study of tax havens because we believe, in an era when Canadians are counting every dollar, that it is the obligation of this government to try to close tax loopholes, and if wealthy individuals or companies are putting money away in tax havens that really ought to be taxed fairly here in Canada, that is something this committee should address and study, and the committee should recommend when these are changes that the government should seriously consider.

It is in this spirit that I have to say that although we disagree strongly with the whole omnibus budget bill process that this government has put forward and many of the specific measures in this bill, where there are specific tax loopholes that the government is attempting to close, we fail to understand why the Liberal Party would introduce amendments to block those changes. We really don't understand that.

As I said, we've taken a position against the whole omnibus bill process and we will be voting accordingly. We don't understand why there are—and it's not just this amendment we're voting on, but a whole serious of amendments that would basically leave wide-open tax loopholes. I don't think Canadians find that fair. They have to pay their taxes—why should some who are able to exploit these loopholes be able to not pay their fair share in taxes?

I just had to go on the record. There are many amendments that deal with this, and where we feel they're trying to pry open tax loopholes, we will vote against them.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Nash.

I will move to the vote on Liberal amendment 31. It will be a recorded vote.

(Amendment negatived: nays 10; yeas 1 [See Minutes of Proceedings])

(Clause 17 agreed to: yeas 6; nays 5 [See Minutes of Proceedings])

(On clause 18)

We'll move to clause 18. I have two amendments for clause 18. I have LIB-32 and LIB-33.

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

Mr. Chair, I'd like to speak on this. I'd like to explain the broader issue, as Ms. Glover and Ms. Nash have explained their parties' position.

I understand Ms. Glover's position. I don't agree with the position, but the reality is this government's approach to omnibus legislation and respect for Parliament has been a direct attack on the ability of individual members of Parliament to vote on legislative changes as individual pieces of legislation that affect over 60 rules and laws across departments and agencies.

Prime Minister Harper has said in the past that these kinds of approaches are inappropriate, yet his government has taken it to a different level.

The opposition members are following the rules. The Conservatives are changing the rules as they go, but I think they consider themselves a little bit omnibusted, if you will.

I find curious Ms. Nash's response that she will not support amendments that would delay the implementation of a particular clause, but she will vote against the clause being implemented at all. Theoretically you would think that if you supported the delay of a particular clause or the effects of it, if you supported killing the thing, you would also support a delay to it, so I don't necessarily understand. In the same way I don't understand her decision to vote against the chair earlier tonight. I have great faith in the chair—I guess I'm alone in that, Mr. Chair—but at the end of the day we all have to live with those decisions, and I look forward to your Christmas card as well, Mr. Chair.

This issue of tax avoidance is a broader issue than simply that which is reached through partisanship. It really is a question of resources and taking a look at foreign tax loopholes more broadly. Again, Mr. Chair, when we have proven a $30 million investment in the resources of CRA back in 2005 under a Liberal government has yielded, I believe, over $2 billion, which is a pretty good return on investment, I can't understand for the life of me, if the Conservative are serious in cutting the use of foreign tax havens, why we would be reducing the investment in the resources of CRA at this point. That is our broader concern.

Frankly, Mr. Chair, this is one of the reasons. If the finance committee were considering provisions that applied purely to the fiscal framework and we weren't forced to consider everything from changes to navigable waterways to some of these other provisions that have nothing to do with the fiscal situation or the fiscal framework of the country, it would enable us to do a better job on these types of provisions.

The fact is that we have heard from witnesses and we have talked to people in these sessions who have some concerns in simply providing a delay to these provisions for a period, which would enable us to conduct a more thorough study. Again I would say to Ms. Nash that if she is opposed to this clause, she ought not to have a problem with at least delaying it, which I think makes absolute sense, and perhaps that will be reflected in her party's decision on the next vote in terms of this amendment.

I do think that when you ultimately are planning on voting against a provision, simply delaying it ought not to represent a problem to you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Brison.

Are there any further interventions?

I will move to the vote on LIB-32.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

We will have a recorded vote.

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

I will now take the vote on LIB-33.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

We will have a recorded vote.

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

Shall clause 18 carry?

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

We will have a recorded vote.

(Clause 18 agreed to: yeas 6; nays 5) [See Minutes of Proceedings]

(On clause 19)

Colleagues, in the interest of perhaps somewhat moving things along, I'm going to ask Mr. Brison, with his goodwill and his strong faith in me, to perhaps speak to clauses 19 to 25 inclusively.

Would you be willing, Mr. Brison, put these clauses together? Would that be a possibility?

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

He always succumbs to your wisdom.

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

No, I think I'm fine. I appreciate your assistance, Mr. Chair, but I'm fine with this.

[The Chair, Conservative, James Rajotte]

We will then continue on with clause 19. I have one amendment, LIB-34.

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

Thank you, Mr. Chair.

I'm really trying to help all members of the committee with this, because I've heard the Conservatives and I believe their hearts are in the right place when it comes to wanting to help the extractive sectors and the oil and gas sectors in Canada. The fact is that we have heard representations from the TMX, from people within the financial community at large and people who are responsible for the financing of the extractive sectors in Canada. We've also heard from the prospectors and miners of the country that these changes are going to have a very negative effect. We heard that from the Prospectors and Developers Association of Canada.

I really urge the Conservatives to reconsider their position on this, because we have had very well-considered representations before this committee and in writing to individual members of this committee. I have a letter here from the TMX and another one from the PDAC, the Prospectors and Developers Association of Canada, and from people such as John McCoach, who's president of TSX Venture Exchange, as examples. These are people who have spent their lives in financing the exploration and development of extractive sector opportunities in Canada and around the world, but they are based here in Canada. They are telling us in no uncertain terms, Mr. Chair, that these changes have the capacity to significantly damage our extractive sectors and our financial community in raising money for our extractive sectors at a time when it is not easy raising money for mining companies. It is a real challenge. We know what's happening around commodity prices right now.

The fact is that it costs Canadian jobs. It costs Canadian investors. I'm concerned particularly, given the precarious nature of mining finance in Canada right now, about a public policy measure that makes it tougher. We all know that commodities, the mining sector, and these things are cyclical. My concern is that if, through this type of change, we make it tougher for our mining sector during a period that is already difficult, we may see a real loss of activity in the future as things turn around.

I'll remind the committee that 80% of the mining deals transacted globally in the last five years were transacted in Toronto. I'll remind you of the jobs and the spinoff jobs from this.

As a country, we are very good at mining. It's something we have a tremendous efficacy in, and an exportable efficacy. We can take what we are good at here in Canada and we can actually help other countries develop their mining sectors. The good news from that—again, I appeal to the NDP on this as well—is that we can also export our corporate social responsibility in some ways.

Mr. Chair, I've spent some time in Latin America in places such as Colombia. The reality is that in a lot of places in Latin America, they have some of the same realities in developing their extractive sectors as we face in Canada. One of those realities is the existence of indigenous peoples. In Canada, our aboriginal and first nations peoples are an important part of our Canadian society and can represent a greater part of our Canadian economy. Twenty years ago, frankly, in our aboriginal and first nations communities there was a lot of opposition to mining and oil and gas activities. Today some of that has changed. We see aboriginal and first nations leaders as partners in the development of some of these sectors.

My concern is, Mr. Chair, that we could actually be helping countries like Colombia and countries throughout Latin America develop their mining sectors and at the same time develop wealth that is shared with their indigenous peoples. This is something that is being—

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

Is there any further discussion?

I will call the vote on LIB-34.

[An hon. member]

I request a recorded vote.

[The Chair, Conservative, James Rajotte]

We'll have a recorded vote on LIB-34.

(Amendment negatived: nays 10; yeas 1 [See Minutes of Proceedings])

That is defeated.

Shall clause 19 carry?

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

I request a recorded vote, Mr. Chair.

[The Chair, Conservative, James Rajotte]

We will have a recorded vote.

(Clause 19 agreed to: yeas 10; nays 1 [See Minutes of Proceedings])

(On Clause 20)

I'll move to clause 20. I have one amendment, LIB-35.

Will you speak to this, Mr. Brison?

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

Yes, please.

Mr. Chair, I want to continue on this discussion around the importance of our extractive sectors in Canada and also on their capacity to augment our reach in the world.

First of all, within Canada one of the biggest challenges facing our country is the reality, the sad reality, that our fastest-growing and youngest population, aboriginal and first nation Canadians, is also our most economically disadvantaged and socially disenfranchised. One of the industries that has had, and has in the future, the greatest capacity to strengthen and improve the standard of living for aboriginal and first nation Canadians is our mining sector, our extractive sectors, and I would add to that our oil and gas sectors, because exploration and development of these natural resources frequently take place in communities that are contiguous with or part of aboriginal and first nation communities.

I was in Mr. Jean's riding over the weekend, as I mentioned. We met with aboriginal and first nations Canadians and heard from them directly on the benefit of natural resource development in creating jobs and opportunities for their young people. My fear is that these changes....

If we are to believe the representatives of the TMX, which is not just a stock exchange in Canada but the stock exchange wherein 80% of the mining deals in the world are transacted, these changes are going to harm Canada's leadership in the extractive sector.

Now, just think for one moment of what that is going to mean for the future jobs and opportunities in the extractive sectors for Canada's first nations. I think it's going to have a negative effect.

It's not just from the stock exchange and the financial communities. We're hearing from the prospectors and developers of the country. We are hearing from the junior miners. The reality is that we have a lot of big mining companies, but do you know what, Mr. Chair? There's a lot of wealth and opportunity created by some of the smaller ones, and in some cases some of the bigger ones started pretty small as well. If you look—and this is not in the mining sector—at a company like Suncor, and you go back long enough and look at the roots of Suncor and some of these companies, you will see that they started off pretty small.

My concern again is whether, at a time when it is tough to finance mining deals, it makes sense to pile it on and do something that we're being told absolutely and unequivocally is going to be damaging.

Furthermore, Mr. Chair, if you look at Canada's role in the world.... I mentioned Latin America on this. I want to talk a little bit about Africa and the opportunities we have in the extractive sectors in places like Mozambique and sub-Saharan Africa in mining, and places like Gabon. Canada has had historically a strong relationship with Africa. This goes back across governments, including the Liberal governments and the Progressive Conservative government of Brian Mulroney.You can go back to the leadership role that Joe Clark played as a foreign minister in fighting apartheid, and Canada's role at that time in ending apartheid. The incredible amount of goodwill we have in Africa is important when you're considering the amount of wealth that's going to be generated in Africa in the extractive sectors over the next decades.

Now China's there. China's there in a big way, and they're successfully investing in and building infrastructure in Africa, but I can tell you, Mr. Chair, that I believe Canada's influence could benefit Africa and help influence Chinese investment in terms of corporate social responsibility. It's not enough to send in three boats—one with the workers, one with the steel, and one with the concrete—ready to build the infrastructure.

I think Canadian CSR can help guide not only activities of Canadian companies but the activities of massive foreign investors from places like China as well. I think we can play a partnership role in that, and I'm worried we're going to diminish our opportunity to do that—

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Brison. I appreciate that.

Is there any further discussion on LIB-35 for clause 20?