Evidence of meeting #6 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was account.
A video is available from Parliament.
3:40 p.m.
Conservative
Gerald Keddy Conservative South Shore—St. Margaret's, NS
Thank you.
My other question—and I think we're still working on part 1 here—was on the closing of tax loopholes. We're going to extend the reassessment period for a reportable tax avoidance transaction by, I think, three years.
3:40 p.m.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
That's correct. It's three years from the time the missing information is provided to the CRA, and it's in respect of those particular transactions, be they tax shelter or reportable transactions.
3:40 p.m.
Conservative
Gerald Keddy Conservative South Shore—St. Margaret's, NS
Regarding tax shelters, you mean when the returns are not filed on time. I guess that's the plan here.
Are we going to be able to track down more people who are not entirely forthcoming with tax returns by doing this? How do we find those individuals?
3:40 p.m.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
In terms of how we do it, individuals have their own reporting obligations for the income tax return. As well as the actual income tax return obligations, there are these additional reporting requirements, which are for tax shelter promoters and people involved in these reportable transactions. There's a second layer of reporting. As well, in prior budgets we introduced additional penalties with respect to tax shelter reporting in particular if reporting isn't done as required.
This measure just layers on another aspect, because the purpose of the reportable transaction reporting and the tax shelter reporting is to assist the CRA in conducting a thorough review of the tax affairs of participants. If the participants haven't been forthcoming with respect to their reporting, then their files are going to remain open from an audit perspective for a greater length of time until the correct returns have been filed.
3:45 p.m.
Conservative
Gerald Keddy Conservative South Shore—St. Margaret's, NS
If they fail to correctly report foreign income, let's say from a specified foreign property, on their annual income tax return, we know that's illegal, but in all honesty how many Canadians are generating an income from foreign properties and not reporting it?
3:45 p.m.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
Well, that's always a difficult question, because how do you know—
3:45 p.m.
Conservative
Gerald Keddy Conservative South Shore—St. Margaret's, NS
But we've made a law here and I want to know how many people we're going to encompass under it.
3:45 p.m.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
We don't have any particular figures on how many additional reports we're expecting.
I would just point out that you've kind of shifted. There are actually two measures contained in part 1. One relates to reportable transactions and tax shelters. That gives an additional three years to CRA in respect of those particular types of transactions. The second measure relates to what we call the foreign income verification statement, the T1135, and that is a separate measure. If information is missing from that and there's foreign income that's not correctly reported, that will open up a taxpayer's entire year for an additional three years. That has to do with the complexity and the difficulties in tracking down foreign income.
3:45 p.m.
Conservative
Gerald Keddy Conservative South Shore—St. Margaret's, NS
In layman's terms, if it's flagged, then the additional three-year assessment comes in.
3:45 p.m.
Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
That's right, and that's consistent with some existing provisions in the act where corporations are engaged in international transactions. Obviously, international transactions are more difficult for the CRA to audit, and this ensures they have the additional time necessary.
3:45 p.m.
Conservative
November 18th, 2013 / 3:45 p.m.
Liberal
Ted Hsu Liberal Kingston and the Islands, ON
Thank you, Mr. Chair.
With respect to the labour-sponsored venture capital corporations tax credit that is being phased out, according to Finance Canada's tax expenditure report, the tax credit provided $145 million in tax relief in 2012. I was wondering if you could, first of all, confirm the number of Canadians who received this tax credit. Is it something like 300,000?
3:45 p.m.
Director, Sales Tax Division, Department of Finance
Yes, it is. According to the latest information that's available on the CRA website, it's in that range.
3:45 p.m.
Liberal
Ted Hsu Liberal Kingston and the Islands, ON
Okay, and how long do individuals have to hold an LSVCC share in order to benefit from the tax credit? Is it eight years? Does Bill C-4 change that time period?
3:45 p.m.
Director, Sales Tax Division, Department of Finance
The tax credit is provided up front at the time the individual purchases the shares. They can claim the LSVCC credit on their tax return for that taxation year. The credit is received up front. One of the conditions is that the shares must be held for an eight-year period. If they are sold within that period, then the tax credit goes back. The rules are slightly different in Quebec, in that they have to be held until the person reaches the age of 65.
3:45 p.m.
Liberal
Ted Hsu Liberal Kingston and the Islands, ON
Thank you.
Have you done any analysis on how the phase-out of this federal tax credit will affect or impact venture capital funds which currently are eligible for the tax credit?
3:45 p.m.
Director, Sales Tax Division, Department of Finance
As I said previously, in provinces where there is a provincial credit there is a financial incentive for individuals to invest in LSVCCs. The purchase of the shares also continues to be an eligible investment under registered retirement savings plans, so they're still an attractive investment opportunity. The government has introduced a new approach to supporting venture capital in Canada, through the venture capital action plan. The idea is that the venture capital industry in Canada will be better off as a result of this new approach.
3:45 p.m.
Liberal
Ted Hsu Liberal Kingston and the Islands, ON
Switching now to mining expenses, how many mining companies in Canada are expected to be affected by the measures in Bill C-4 to increase tax revenues from the mining sector? This is with regard to the accelerated capital cost allowance. How many mining companies?
3:45 p.m.
Geoff Trueman General Director (Analysis), Tax Policy Branch, Department of Finance
I couldn't give you a specific number of mining companies in any particular taxation year; their attributes may change from taxable to non-taxable. The measures with respect to accelerated capital cost allowance, though, and the change to the classification of pre-production would primarily affect intermediate or senior companies that are in the process of opening a mine or have an operating mine, as opposed to junior companies, which would not be affected.
3:50 p.m.
Liberal
Ted Hsu Liberal Kingston and the Islands, ON
Was there an examination of how these changes will affect rural and remote communities where mining activities are a significant part of the economy?
3:50 p.m.
General Director (Analysis), Tax Policy Branch, Department of Finance
I think it's fair to say that when you look at these provisions, they have both grandfathering and transition, the grandfathering so that projects already under way continue to receive the tax treatment, and then the transition over a fairly lengthy period so that the effect is phased in over time. Those were the same provisions that were paralleled in the oil sands industry when those were enacted in budgets 2007 and 2011.
Certainly the idea is to give the mining industry ample opportunity and time to plan for those changes and to not affect projects that are already under way, and in the recognition that, yes, mining is an activity that occurs in most provinces and territories across Canada, and often in those rural areas.
3:50 p.m.
Liberal
Ted Hsu Liberal Kingston and the Islands, ON
The Conservative Party has certainly argued that higher corporate taxes lead to fewer jobs. As part of the research done in preparing Bill C-4, did the department do any analysis on how the tax measures referred to in paragraph (k) of part 1 in the summary of Bill C-4 might impact employment in the mining sector?
