Evidence of meeting #56 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site.) The winning word was measure.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Alexandra MacLean  Director, Tax Legislation, Tax Policy Branch, Department of Finance
Miodrag Jovanovic  Director, Personal Income Tax, Tax Policy Branch, Department of Finance
Trevor McGowan  Senior Chief, International Inbound Investments, Department of Finance
Kevin Shoom  Senior Chief, International Taxation and Special Projects, Department of Finance
Pierre Mercille  Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Adam Martin  Tax Policy Officer, Sales Tax Division, Tax Policy Branch, Department of Finance
Shari Currie  Acting Director General, Civil Aviation, Department of Transport
Stephen Van Dine  Director General, Northern Strategic Policy Branch, Department of Indian Affairs and Northern Development
Martin Raillard  Chief Scientist, Canadian High Arctic Research Station, Arctic Science Policy Integration, Northern Strategic Policy Branch, Department of Indian Affairs and Northern Development
Elisha Ram  Director, Financial Markets Division, Financial Sector Policy Branch, Department of Finance
François Masse  Chief, Labour, Market Employment Learning, Department of Finance
Joyce Henry  Director General, Marine Policy, Department of Transport
Corrie Van Walraven  Manager, Ports Policy, Department of Transport
Sylvain Segard  Acting Assistant Deputy Minister, Strategic Policy, Planning and International Affairs Branch, Public Health Agency of Canada
Rob Stewart  Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Margaret Tepczynska  Senior Economist, Financial Sector Policy Branch, Department of Finance
Erin O'Brien  Chief, Financial Sector Policy Branch, Department of Finance
Dominique Laporte  Executive Director, Pensions and Benefits Sector, Treasury Board Secretariat
Deborah Elder  Acting Director, Pensions and Benefits Sector, Treasury Board Secretariat

4:15 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. Keddy.

We'll go to Mr. Brison.

4:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

I have a question on the same issue.

Are you saying the government has had recent disputes with non-profit health care facilities regarding the application of the GST or HST? Are there some specific examples of where the CRA has had some disputes?

4:15 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

The CRA usually brings issues to our attention because representations are made to them that the rebate should apply in certain circumstances. There are all the steps at CRA where they decide whether they agree or not with the interpretation. In this case, basically they said this interpretation is not how the provision has been applied and interpreted since the GST has existed, but they flag the potential risk.

That's why we're making a clarifying amendment, to make sure the legislation will operate the way it was intended to.

4:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

If a health care facility operated a residence for families visiting sick loved ones, this would potentially apply to them.

4:15 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

Maybe, maybe not. It's always a question of facts in those situations. But the way you described it, it sounds more like a hotel than actually—

4:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Ronald McDonald House, perhaps?

4:15 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

It's always a function of how long they are going to stay there. If they go there for two weeks, it's treated like a hotel. It's taxable.

4:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Really? So you're saying that someone visiting a relative who has cancer, and is there for...is it two weeks—

4:15 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

I believe it's less than 30 days, but I would have to check on that. I believe that essentially, if you provide housing that is like a hotel room for two days, then you're in competition with the hotels in the city, so there should be the same tax treatment.

Those rules try to provide equity between various situations. That's why in this case the special rebate for NPOs, which usually don't qualify for a rebate, is available to put them on the same footing as a charity that operates a health care facility. But when those NPOs operate something that is not a health care facility, the intention was never that the rebate be available. When you operate an apartment building, whether it's seniors who occupy the apartment building or it's a regular apartment building, the treatment should be the same. Under the GST legislation, rental housing is exempt. So, basically, the landlord doesn't charge tax to the renters, but they're not allowed to claim ITCs for the tax they incur in the course of operating their residential rental housing.

4:15 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

If a health care facility owns a residence for seniors where some care is provided, does the applicability of the GST depend on the level of care that's being provided? Is there a line drawn, depending on how much—

November 5th, 2014 / 4:15 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

It's always a case-by-case analysis. There are all sorts of possible situations.

My understanding is that one of the criteria CRA looks for is why a person is going in that particular facility that may be a health care facility. Usually one criteria that is used is the need for health care and supervision of the person. Usually, the person accessing those kinds of health care facilities has to demonstrate that he or she requires a level of care that is more than just something that is closer to an apartment building. Of course, there's a whole spectrum of situations. You can have situations of various levels of care, and at some point it's a case-by-case analysis.

4:20 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

I think it would be helpful if you could come back to us with a few examples of where the application of GST would apply and where it would not apply in terms of definitions of residential apartment buildings. In the course of this discussion you mentioned people visiting sick relatives and staying at a Ronald McDonald house, and that such a facility would potentially be subject to GST. I guess there is some ambiguity in terms of—

4:20 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

I don't know the particular situation of Ronald McDonald, whether they are a charity, so I'm not commenting on that. I'm just commenting on the fact that if it's similar to a hotel room, normally it's taxable.

4:20 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

There are hospitals that provide space for people to visit sick relatives, and these apartments or rooms are associated with the hospital. I think having some clarity on that would be helpful, as would some clarity in terms of whether the level of care someone is receiving in that facility would determine whether GST would apply.

4:20 p.m.

Conservative

The Chair Conservative James Rajotte

Colleagues, if we proceed at this pace, we won't get through what we need to get through today.

Monsieur Mercille, could we have that provided to the committee in terms of examples, please?

4:20 p.m.

Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

Pierre Mercille

Yes, I will make the request to the department.

4:20 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much. I appreciate that.

Colleagues, we'll move to part 3, the Excise Tax Act, 2001, with Mr. Adam Martin.

Welcome, Mr. Martin. Thank you for being here today.

I also have notice of a question from Mr. Adler.

Is there anyone else? Just indicate to the chair if you have any questions.

Mr. Adler, please pose your question.

4:20 p.m.

Conservative

Mark Adler Conservative York Centre, ON

Thank you, Mr. Martin, for being here today.

As you know, economic action plan 2014 provided the next step on the road to balancing the budget with a positive revision of the duty on tobacco products. Could you please explain this measure and how it will ensure there is fairness for excessive inventory, to build on the measure we implemented earlier this year?

4:20 p.m.

Adam Martin Tax Policy Officer, Sales Tax Division, Tax Policy Branch, Department of Finance

Yes, budget 2014 restored the excise duty on tobacco products to account for inflation since 2002. As part of that measure, the budget also imposed an inventory tax for tobacco products, specifically cigarettes, held at the end of the day on budget day to ensure that the rate increase was also imposed on those products that were held at various steps along the supply chain.

4:20 p.m.

Conservative

Mark Adler Conservative York Centre, ON

Okay, thank you.

Thank you, Chair.

4:20 p.m.

Conservative

The Chair Conservative James Rajotte

Mr. Cullen, please, for a brief question.

4:20 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

I have a question in consideration of how tobacco products are administered by the government.

Is there any difference between tobacco that is used in cigarettes versus that used in cigars or pipe-smoked tobacco when it comes to taxation?

4:20 p.m.

Tax Policy Officer, Sales Tax Division, Tax Policy Branch, Department of Finance

Adam Martin

We do have various rates for tobacco. We have a rate on cigarettes, and we also have a rate on fine-cut tobacco. Within that would be examples of smokeless tobacco. Chewing tobacco is treated the same way as fine-cut tobacco that you would use in roll-your-own cigarettes. We have a separate rate of taxation for cigars. All of these rates were adjusted for inflation in budget 2014.

4:25 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Was any consultation done with the industry with regard to how those adjustments were made from the 2002 rates?

4:25 p.m.

Tax Policy Officer, Sales Tax Division, Tax Policy Branch, Department of Finance

Adam Martin

Budget 2014 actually just accounts for inflation, so it was more linked to the consumer price index to account for real decrease in those rates over time.