Finance Committee on May 1st, 2014

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

Our government introduced the volunteer firefighters tax credit a few years ago. This was to recognize those Canadians who put their lives at risk on a regular basis to help save the lives of other Canadians. We've also now expanded that to include the volunteer search and rescue Canadians as well.

How is it going to work? In my riding of North Vancouver we have a unit called the North Shore Rescue, whose members put their lives at risk every day to help save the lives of other Canadians. How is this new tax credit going to work to the benefit of those volunteer Canadians who put their lives at risk?

[Ted Cook]

With respect to the search and rescue volunteer tax credit, if an individual provides 200 hours or more of eligible search and rescue volunteer services and the services are provided to an eligible search and rescue organization, then that individual will be able to claim a non-refundable tax credit that is based on the amount of $3,000. So the credit would be 15% of that, or approximately $450.

There are two things I would highlight for the committee. If an individual is performing both volunteer firefighting services and volunteer search and rescue services, those hours can be aggregated for the purposes of either credit. So if an individual has 100 hours of search and rescue volunteer activities and 100 hours of volunteer firefighting activities, then an individual would be eligible for the credit.

But I would also note that any particular taxpayer will be eligible for only one of the credits. If someone performed 400 hours of service they would choose whether they wanted to claim the volunteer firefighters tax credit or the search and rescue volunteers tax credit.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair. I have no further questions.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Saxton.

We'll go to Mr. Brison, please.

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

Thank you, Mr. Chair.

I'd like to follow on Mr. Saxton's questions on the volunteer tax credits. These credits exclude many deserving volunteers who put their lives at risk and incur costs as volunteers, because they're non-refundable tax credits. There are a lot of volunteers in both search and rescue and in volunteer fire departments who do not make enough money to actually benefit from these as a non-refundable tax credit.

I would like you to confirm another issue. Someone who is both a search and rescue volunteer and is also a volunteer firefighter must choose between these two tax credits. They can't claim both credits in the same year. Is that accurate?

[Ted Cook]

I'll just answer your second question first. My colleague can respond to your first question.

That is exactly right. Even if they do have 200 hours of search and rescue volunteer hours of service, plus 200 hours of volunteer firefighting, they would only claim one credit.

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

On the non-refundable nature of this tax credit, have you examined how much it would cost to extend this benefit to low-income volunteers by making it refundable?

[Ted Cook]

With respect to refundability, I would first note that refundable tax credits are used in very limited circumstances in our income tax system, when there is a clear policy rationale to do so. The working income tax benefit, for instance, is refundable because it is directed at low-income individuals.

The intention is to create an incentive for these people to enter or stay in the labour force, so it makes sense that this credit be refundable. Otherwise, when credits are there to recognize specific expenses or a reduced ability to pay tax, or specific circumstances of taxpayers' situations, then these credits are generally non-refundable. That's the general policy.

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

You're saying that WITB is refundable because it's aimed at low-income, so the volunteer tax credits described are not aimed at low-income.

[Miodrag Jovanovic, Director, Personal Income Tax, Department of Finance]

The policy objective is different.

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

It's to exclude—

[Miodrag Jovanovic]

It's not targeted to low-income individuals. The intention is not to provide income support, or in the case of the working income tax—

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

But it does provide income support to people who make enough money to qualify.

[Miodrag Jovanovic]

The objective is to recognize these individuals by providing a tax relief, so a reduction in a tax liability basically.

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

Do low-income volunteer firefighters not deserve the same recognition as volunteer firefighters who make enough to qualify? Is that the public policy rationale?

[Miodrag Jovanovic]

To the extent that the objective is to reduce tax liability. If these individuals already have a tax liability that is nil, then—

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

Has the department done any analysis on how this plethora of non-refundable tax credits actually may be contributing to greater inequality by excluding low-income Canadians?

[Miodrag Jovanovic]

I'm not aware of any specific study done on that.

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

On minerals, to follow on Mr. Saxton's question on the flow-through share tax credit, what is the rationale for extending this tax credit? It's been around for a long time. What's the rationale for extending this on a one-year basis over and over again? It doesn't seem to make a lot of sense.

The fact that 80% of mining financing in the last 10 years was transacted in Toronto, not that there has been a lot of mining financing in the last couple of years, but wouldn't it make more sense just to put it in place for a longer period of time as opposed to every year? What's the public policy rationale for doing it every single year?

[Miodrag Jovanovic]

Certainly, the decision to invest or not by investors and by mining companies is based on a whole host of factors, some of which are not connected to the tax system. I can only respond to this year's extension to it. You're quite right. It has been annually extended since, I believe, 2007.

With respect to the extension of this year, the overall sector has been fairly strong, but there have been recent drops in certain commodity prices with respect to base and precious metals that supported the continuation of this particular credit.

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

For the pension transfer limits, can you provide us with some examples of situations where the new rule might kick in?

[Ted Cook]

With regard to the pension transfer limits, under the current rule it requires two main things of importance. One is that the employer is insolvent and also that the pension plan is being wound up. That will no longer be required if the reduction in the pension benefits is allowed under the relevant pension standards legislation.

An example would actually be where the pension plan is not being wound up, where they're trying to save the pension plan and if people are transferring out, then the non-reduction, if you will, of the transferable amount is potentially applicable.

[The Chair, Conservative, James Rajotte]

You're right up against your seven-minute time.

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

Okay, so we'll come back.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Allison, please.