Evidence of meeting #51 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was capital.
A video is available from Parliament.
NDP
The Vice-Chair NDP Nathan Cullen
There are just a few seconds left if you wanted to answer as well, Mr. Dancey.
President and Chief Executive Officer, Executive Office, Chartered Professional Accountants of Canada
The whole issue of simplicity in tax policy and tax administration is always a journey. You never reach the goal.
President and Chief Executive Officer, Executive Office, Chartered Professional Accountants of Canada
That's just the reality.
President and Chief Executive Officer, Executive Office, Chartered Professional Accountants of Canada
That's the pragmatic reality, but that doesn't mean you shouldn't keep working at it.
NDP
The Vice-Chair NDP Nathan Cullen
Thank you, Mr. Dancey and Mr. Allen.
We'll go to Mr. Rankin for up to seven minutes, please.
NDP
Murray Rankin NDP Victoria, BC
Thank you, Chair, and thank you to all the witnesses today. Excellent presentations.
I'd like to start with Mr. Kirkby if I could. Thank you very much for your excellent research. It's very thorough reporting, 75 pages of dense reasoning, and I really appreciate what you've done in elucidating this problem that we've heard so much about in this committee.
I'm just trying to figure out what the solutions are. If there are problems, what are they? You talk about a lack of clear definitions in the regulations. You talk about the CRA website being naive and unhelpful, according to some of the people you talked about.
Are those the key suggestions you're making, aside from not even having this program because there's nothing to really warrant this kind of $13-million expenditure? Is that the thrust of what you're saying?
As an Individual
On that first one, the pre-2012 program had a dimension of auditing for political activities, but it was mainly random. When an issue came forward, they addressed it.
I think another one is the purposes. There's a need to look at purposes. Canada has three charitable purposes. We followed the U.K. in our legislation and now they have 13. They also spun off the charity directorate there from the tax authority. We're falling behind the whole Commonwealth on this. I would point that out and note that it's just coughing up the evaluation grid CRA uses. Charities could use something really practical that they could evaluate themselves with. What's more practical than the grid that is used by the auditor to understand what it is that is expected of you?
NDP
Murray Rankin NDP Victoria, BC
Good. Thank you.
My next question is for Mr. Baker of Deloitte.
It sounds like you said, about the BEPS work under way at OECD, that we shouldn't proceed in efforts to protect our tax base unless and until we're doing so in conjunction with our other trading partners. I assume that if we were to do so in conjunction, you would support the OECD's BEPS initiative, or not?
Global Tax Policy Leader, Deloitte
We were supportive of the initiative. What we're suggesting is that people need to act at the same time. We wouldn't want to see Canada taking steps sooner—
NDP
Murray Rankin NDP Victoria, BC
I understand that, but assuming that we did then you would be in favour of proceeding along the lines of the recommendations—
NDP
Murray Rankin NDP Victoria, BC
—subject to what those recommendations finally look like? Generally, if we do so in conjunction, would you support going ahead?
NDP
Murray Rankin NDP Victoria, BC
The other question you alluded to was the tax treaty shopping. You were concerned that the initiative might actually hurt us with respect to inbound investments. Maybe it already is hurting us. Could you speak a little bit more about that?
Global Tax Policy Leader, Deloitte
In terms of treaty shopping, there was a proposal put forward in the last budget. In our view, in terms of the way that it was described in the budget documents, it was going to create a lot of uncertainty as to whether or not a Canadian company could access the treaty with the other country. Where that treaty cannot be accessed, there's a 25% withholding tax that applies on interest, dividends, and royalty payments coming out of Canada.
Today there is far less certainty. A company coming into Canada, or a pooled investment coming into Canada, can rely on the treaty that's there and the Canadian laws that are there. Our concern is that having this overlay that was proposed, in the manner that it was proposed, is going to create undue uncertainty.
NDP
Murray Rankin NDP Victoria, BC
Yes, all right.
Mr. Parker, your presentation was excellent on behalf of Acumen Capital Partners. Basically, you left us hanging. You said we've got this real problem with small-cap investors not finding the capital. So $100 million seemed to be the threshold of market cap and then under that there is a real problem. You talked about how there had been a consolidation in the investment industries of Canada. These are very disturbing comments.
If you have any recommendations, I'd love to hear them.
President and Chief Executive Officer, Institutional Sales, Acumen Capital Partners, Member, Investment Industry Association of Canada
Yes, there are a number of them.
In general, we're in favour of supporting investment in these companies. One of the proposals is a capital gains rollover, which would allow you to take investment dollars out of a sold investment, as long as you put it to work within six months. That would enhance the investment capital that's available.
We talk to a lot of investors, both retail and institutional, and I think if you talk to most institutional investors, they would say...they're indifferent to taxation. They just want to make the rational decision. If you talk to retail investors, there are many with pregnant capital gains in large positions where they're unwilling to sell because of the capital gains that will be triggered. If you encourage them to sell and reallocate the capital to growth businesses, in my view that would encourage more jobs.
NDP
Murray Rankin NDP Victoria, BC
Okay, thank you for that.
I'd like to go now to Mr. Dancey of the CPA Canada.
In your written material, you talk about the fact we haven't had a royal commission since Carter to address the improvements to the Canadian tax and regulatory system. You talk about the need for tax reform. Is your organization taking the position that we need a Carter II?
President and Chief Executive Officer, Executive Office, Chartered Professional Accountants of Canada
We need tax reform. And whether it's called Carter II or not, we can debate that issue. I think it is time to have a good step back to look at the whole tax system—the consumption tax system, the corporate system, the personal tax system—and see if we got the balance right and see, frankly, if the tax system is fit for its purpose in today's economy, because the world has changed a lot, as I said. Income is a lot more mobile.
NDP
Murray Rankin NDP Victoria, BC
Again, to specifics, you talk about maintaining competitive corporate tax rates by continuing to benchmark Canada's rates against the OECD average. I'm not sure what you mean by benchmarking. I believe we have the lowest corporate capital tax among OECD countries. Are you saying we benchmark to the average? What do you mean?
President and Chief Executive Officer, Executive Office, Chartered Professional Accountants of Canada
No, we don't have the lowest corporate tax rate among all the OECD countries. On the marginally effective tax rate in terms of capital investment, we actually have become very competitive with our move to the GST, etc. In terms of just our overall corporate rates, we are still middle of the pack when it comes to OECD rates.
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
We'll go to Mr. Adler please, for seven minutes.