Evidence of meeting #57 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was knowledge.
A video is available from Parliament.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Thank you.
Ms. Tedds, you've made a critique of the children's fitness credit here. First, specifically on the compliance cost, from any of the research that you've done, is there a general impact on compliance costs for Canadian families and businesses with regard to what you call these “boutique tax credits”?
Assistant Professor, University of Victoria, As an Individual
As far as I know, there has not been a specific magnitude developed, but what we do know, for example, with the children's fitness tax credit, is that most of the low and middle-income households don't even know that the credit exists, and where it is known that it does exist, a lot of the costs are actually falling onto the programs that administer sport for children, which are having to provide information and determine whether or not their program in fact complies with the tax credit so that they can administer receipts to families.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Help me out here. You're suggesting that the burden, with regard to getting the education component out so that families, particularly you're talking about middle and low-income families, are aware of the program is on the various sports associations. To whom is this falling to actually gain access in a more equitable way to this particular tax measure?
Assistant Professor, University of Victoria, As an Individual
In terms of being informed, what we have seen through the various surveys that have been administered to families about the fitness tax credit is that low-income families, single-parent families, and families at risk are not aware of the tax credit. A lot of this has to do with the fact that the ability to tax plan is not first and foremost on their minds, so not even being aware of the tax credit causes problems with the efficiency and equity of this credit. But in terms of being able to inform families as to whether or not the program they're involving their children in qualifies for the tax credit, a lot of that is falling onto the programs themselves to comply with the rules in order to be able to release the receipt to the family so that they can then claim through CRA, and hopefully not go through an audit, thereby increasing their compliance costs as well.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
I may have missed this. I didn't quite catch the number just in terms of what is sometimes commonly referred to the “free rider effect”, the real impact that government claims versus the actual difference that is made through expenditure of moneys like this. Did you say there is 50% or 15% of Canadian families picking this up? I thought I heard 50%, but I'm not sure. Later on you made a quote about 85% in your testimony.
Assistant Professor, University of Victoria, As an Individual
Of the families that claim the tax credit, only 15% of those families say that it actually changed their decision to enrol their child in sport participation. Therefore, 85% of the families participating and receiving that money would have enrolled their child in the sport program anyway, with or without the tax credit.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Right, so your suggestion, based on the surveys that have been done, is that if only 15% are saying they changed their behaviour based on this government measure, it's not efficient for the money being spent. This is a question of efficiency then. That would be your criticism.
Assistant Professor, University of Victoria, As an Individual
It's poorly targeted. If we're trying to encourage more families to enrol their children in sport, the child fitness tax credit does not do that predominantly because for a lot of low-income families waiting 15 months to get up to $75 back off a $500 expenditure is challenging for them to do.
Alternative ways to be able to do this would be to eliminate tariffs and excise taxes on sports equipment, sports programs, but even better would be to provide more money through the CCTB, which is a monthly payment that goes to low-income families and is clawed back for high-income families to ensure that it goes to the people who need it most.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Right, because this is a very specific program and it's small in comparison to the general outlay of the government every year.
I'm starting to pick up some themes here, just in terms of the low impact on low-income families and on single-parent families. The theme starts to make sense in terms of the income splitting that the government has now gone out on, which has a similarly low and very targeted impact toward the higher-earning families.
This is my last question. With respect to the progressivity of our tax code, is this not just too small a program to affect whether our tax code is progressive or regressive in helping or hurting low-income families?
Assistant Professor, University of Victoria, As an Individual
Certainly the $115 million could be spent more progressively than on a fitness tax credit.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Cullen.
We'll go to Mr. Saxton, please.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you, Chair.
Thanks to our witnesses for being here today.
My first questions will be for Mr. Hennessy of the Canadian Media Production Association.
These amendments were first released for comment in April of this year. Did your organization comment or raise any concerns at that time?
November 17th, 2014 / 4:10 p.m.
President and Chief Executive Officer, Canadian Media Production Association
No, I don't believe we did.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Okay.
These amendments will improve the film and video production tax credit regime. How do you feel this will affect your members?
President and Chief Executive Officer, Canadian Media Production Association
Positively.
Conservative
Andrew Saxton Conservative North Vancouver, BC
I appreciate the short answers, but would you like to elaborate on that?
President and Chief Executive Officer, Canadian Media Production Association
One of the key changes within the tax credit is around labour costs, including in the labour cost a lot of the development work that goes into launching a production in the first place.
You can have a period of time now of up to two years before the production begins when work is done trying to develop the project, write scripts, and sell it. If you look at the business, for every successful show—and that is measured by the ability to sell to a network or launch a film in the theatres—you can have anywhere from 15 tries before you get something. This is the same in Hollywood as well.
A lot of production money has been spent on the front end in development costs, and this allows more opportunity to hire the writers who are really critical in designing the idea in the first place.
Conservative
Andrew Saxton Conservative North Vancouver, BC
So it will offer the opportunity to increase the number of jobs that are created by your industry.
President and Chief Executive Officer, Canadian Media Production Association
Absolutely.
Conservative
President and Chief Executive Officer, Canadian Media Production Association
No, I don't really. We could try to figure that out and inform the committee, but off the top of my head I wouldn't have an answer.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Thank you very much for those answers.
My next questions are for Mr. Carman from the Investment Funds Institute of Canada.
Mr. Carman, can you comment on the changes to the trust loss restriction rules, and do these measures help to address the majority of the concerns of your members?
Senior Policy Advisor, Taxation, Investment Funds Institute of Canada
Thank you for the question.
Yes, I think they do.
We had real concerns about the red tape; the fact that minority investors could lose losses they were entitled to, through no fault of their own; and the fact that fund-on-funds, which is a significant part of our industry, would be quite impacted by the requirements. The amendments take care of all of that.
As I said earlier, we have only one remaining concern. It is around the SIFT rules, because in the SIFT rules there is a 10% of the issuer rule that has to be constantly monitored, as opposed to under 81-102, where it's just 10% at the purchase of the security.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Can you elaborate on this measure, and how it helps to provide relief for investment trusts and meets certain specific conditions?