Thank you.
My name is Scott Mahaffy. I am the Chair of the Industry, Regulation & Tax Committee of the Portfolio Management Association of Canada. Katie Walmsley, the President of PMAC, is here with me today.
PMAC represents almost 200 investment management firms across Canada that manage total assets in excess of $900 billion, not including mutual fund assets, and $1.3 trillion when mutual funds are taken into account. PMAC members manage investment portfolios for, among others, private individuals, foundations, and pension plans. Our recommendations focus on how to improve Canada's taxation and regulatory regime, with the overriding principle that there should be fairness for Canadian investors.
PMAC is focused on various advocacy initiatives that are critical to improving Canada's taxation policy on investments and retirement savings. I'd like to highlight two tax policy areas where we believe better taxation fairness can be achieved for Canadian investors.
One of PMAC's recent advocacy priorities has been with regard to the negative impact of the trust loss restriction rules on investment funds that were contained in the federal 2013 budget, and the impact of these rules on Canadian unit holders. In simple terms, these rules extend the application of the acquisition of control rules as they currently apply to corporations, to apply to trusts, including investment funds formed as trusts. The objective of the trust loss restriction rules is to prevent the use of arm's-length loss trading transactions that have been developed and that purport to enable one taxpayer to access the unused losses of another. These rules unfairly capture legitimate commercial trust activities in an industry that represents, collectively, $1.3 trillion in assets under management.
Through various submissions to the Department of Finance, the minister's office, industry associations such as ours were able to work collaboratively on a solution to meet the policy objectives of the Department of Finance as well as eliminate the punitive and unfair impact of these rules on Canadian investors invested in these types of funds.
We applaud the federal government for its recent announcement that it will provide relief to investment funds from the application of the rules. We do, however, believe there may still be some gaps to the proposed relief that will continue to be unfair for certain investors in certain types of funds, and we will work with Finance staff going forward for further revisions to the proposed relief.
Another example where we believe more taxation fairness for Canadian investors can be achieved is the application of GST and HST on investment management services for retirement savings. Canadian investors should not be taxed for actively planning for their retirement. GST and HST are consumption taxes. In our view, building retirement savings is the opposite of consumption, and accordingly we fundamentally disagree with the idea that Canadians should pay taxes on services designed to help them build their retirement savings.
We recommend that the federal government work with the provinces to adopt policy positions taken elsewhere in the world and exempt consumption taxes on investment management services, or in the alternative, work with provincial governments to remove or mitigate the additional and uneven provincial portion of HST immediately.
In the area of regulatory harmonization, PMAC is a strong supporter of a robust, efficient, and globally competitive regulatory regime. We have long supported a national securities regulator, and commend the government and its provincial partners on its progress and commitments toward creating the cooperative capital markets regulatory system. The creation of the CCMR is a major improvement to the securities regulatory regime in Canada. It addresses the interests of Canadian investors and capital market participants and benefits all Canadians.
PMAC has long argued that the existing framework of a fragmented securities regulatory system is out of step with global standards and does not serve Canadians well. We urge the government to continue working toward participation by all provinces.
I would like to commend the government for its commitment to ensuring secure retirement for Canadians in moving toward various pension savings options that allow alternatives to current plans. Thank you. We believe harmonization of pension options should be a policy priority. We also urge the government to consider funding flexibility as a necessary priority, given Canada's longer mortality rates.
Finally, we applaud the federal government's recent announcement to move forward with the modernization of the pension investment rules that were contained in the federal pension benefits standards regulations first proposed in 2009.
PMAC thanks the committee for the opportunity to make these submissions. On vous remercie.