Finance Committee on Nov. 5th, 2014

[Kevin Shoom, Senior Chief, International Taxation and Special Projects, Department of Finance]

The changes in budget 2014 expand the types of equipment that are eligible for this tax incentive to include water current energy equipment, essentially equipment that can be used to generate electricity through a turbine being placed in moving water, such as a river, without the use of a dam. The other addition to the list of equipment is for gasification equipment. This is equipment that takes waste material and converts it into producer gas or synthetic gas, which can then be used to generate electricity.

This measure expands the ability to make use of this provision to situations where the equipment generates synthetic gas for sale to other users of that gas.

[The Chair, Conservative, James Rajotte]

I had noticed Mr. Brison. Sorry.

Mr. Caron, go ahead.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Let me go back to the issue of international shipping.

Subsection 74(3) reads as follows: “Subsections (1) and (2) apply to taxation years that begin after July 12, 2013.”

Why July 12, 2013?

[Alexandra MacLean]

July 12, 2013 is the date that the proposals were first released for consultation, so in order for taxpayers to be aware of the new rules, that's the basic explanation for that proposed coming-into-force date.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Okay.

My last question is on trusts and estates.

I asked about the higher tax rate and you said that a general rule applied.

How did we determine whether taxes had to be paid before? What was the tax rate before this bill? What is the difference now?

[Alexandra MacLean]

If I understand correctly, your question is: who pays the tax?

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Prior to these changes.

[Alexandra MacLean]

Prior to these changes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

And how was the rate of taxation determined?

[Alexandra MacLean]

There are many categories of trusts in the tax rules, but fundamentally two large categories, testamentary trusts and and inter vivos trusts, so trusts created by will or estate, and all other types of trusts.

Under the existing regime, essentially any trust created by a will qualified as a testamentary trust, so the tax planning that was being observed was taxpayers creating many testamentary trusts for one estate under the same will. In effect, who pays the tax under those circumstances are the trustees of the estate on behalf of, really, the beneficiaries of the estate. Under the pre-existing regime, all those testamentary trusts qualified for the graduated rate structure representing quite a large tax saving for a more sophisticated estate plan.

The other aspect of the tax planning was to leave those trusts in place for many years, much longer than required for the purposes of winding up the estate or resolving the affairs. Under the new rules, the only graduated rate estate, so one estate per deceased individual, for up to 36 months will qualify for graduated rates. Under these rules, essentially, still the trustees of that graduated rate estate are responsible for the payment of the tax, but the major change is the time limit and the imposition of one estate per deceased individual.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I would have several other questions, but since our time is limited, I will leave it at that.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Brison, I understand you have one further question on this part.

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

Yes, on the child fitness tax credit. The Conservatives' 2011 platform said this measure would cost $130 million a year. Can you confirm the cost of this tax measure?

[Miodrag Jovanovic]

The costs associated with the increase to the $1,000 limit in 2014 for the 2014-15 year is $25 million. Starting with the 2015-16 year, with the refundable fee, it will increase to $35 million annually.

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

How much of that is for the doubling of the tax credit and how much of the increase is for making the credit refundable?

[Miodrag Jovanovic]

It's roughly two-thirds and one-third. Actually, the $25 million is mainly attributed to bringing the limit to $1,000.

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

Okay, two-thirds for doubling, and one-third for making it refundable.

[Miodrag Jovanovic]

Very roughly, yes.

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

Thank you.

[The Chair, Conservative, James Rajotte]

I think that's all for part 1 for now. Obviously, we expect you back for clause-by-clause consideration. On behalf of the committee, thank you so much for being here to answer our questions.

Colleagues, we will now move to part 2, amendments to the Excise Tax Act, GST/HST measures and a related text.

We will welcome back Mr. Pierre Mercille.

We'll go right to members' questions. I believe we have one question from Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Mr. Chairman, I have a very quick question on part 2(c). There have been some claims regarding the rebate for health care facilities, that this would somehow affect seniors residences, for example. Could you clarify for the record here? Health care services have always received a rebate and will continue to do so. To my knowledge, these facilities will qualify for the GST/HST rebate, so long as they're providing a health service.

[Pierre Mercille, Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance]

Yes, for their activities that are linked to the operation of the health care facility, those NPOs which normally don't qualify for a rebate will continue to qualify for the GST/HST charity PSB rebate to the extent to which their expenses are incurred in the course of operating the health care facility. What the amendment does is it clarifies that the rebate is not available for activities other than operating the health care facilities.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Would one example of that be a rental property that wasn't for health care?

[Pierre Mercille]

This is an issue that was brought to us by the CRA, and I believe in that circumstance that's what it is.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Okay. Thank you.