Evidence of meeting #87 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was chair.
A recording is available from Parliament.
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
As I said, I think this loophole has been in existence since it has been possible to delay the reception of CPP.
Conservative
The Chair Conservative James Rajotte
We're on a broader policy. Let's keep it germane to clause 19. This may be a public policy issue, but I think we should keep it to clause 19, TFSA dollar limits.
Liberal
Scott Brison Liberal Kings—Hants, NS
It is germane to that, Mr. Chair, because increasing the TFSA limits exacerbates this problem in that there will be a greater capacity for wealthier people to shelter income in such a way that they qualify for the GIS.
Conservative
The Chair Conservative James Rajotte
The question was asked and the question was answered by Mr. Jovanovic who said that members of the public can use various ways to shelter.
Liberal
Scott Brison Liberal Kings—Hants, NS
Have you studied the impact of the increase to TFSAs on this possibility of people to effectively shelter income and qualify for GIS? You're aware. You've read the same articles I've read, whereby financial advisers are saying this is something wealthier people ought to do.
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
I don't have the exact number, but we know a very small fraction of individuals seem to be using that, based on the number of individuals asking to delay their reception of CPP.
Conservative
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you, Mr. Chair.
We support the principle behind TFSAs. We've made that clear numerous times in the past.
But raising the limit to nearly double is a problem because it does not adequately address a number of issues. Mr. Brison just described one of them. Mr. Jovanovic, you've read the Parliamentary Budget Officer's report on the matter.
Something else in the report was also raised in other studies. The purpose of a TFSA is to encourage people to save, a bit like an RRSP. But the TFSA isn't really leading to any new savings. Small investors are using the vehicle a bit like they would an RRSP. But, by and large, those who are maxing out their contributions aren't putting away additional savings. They are merely moving their savings. The TFSA actually provides a more favourable tax environment in terms of protecting savings in the future and ensuring growth.
Have you considered the points raised by the Parliamentary Budget Officer, among others, and looked at how the TFSA has affected people's saving habits? Similarly, have you considered the impact of raising the limit from $5,500 to $10,000?
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
As I have already told the committee, the department did not study the impact of TFSAs on Canadians' savings rate.
That said, a vehicle like the TFSA offers a variety of potential economic benefits. For instance, it reduces a number of imbalances by allowing for a better economic distribution in terms of the decision to consume now versus later.
The TFSA was designed to give people more choice in the existing financial environment, which included the RRSP. For example, low-income individuals who may have had less incentive to invest in an RRSP now have much more reason to put their savings in a TFSA. The same is true of seniors. So the TFSA's ability to complement existing savings vehicles is a key factor. The TFSA doesn't add to what was already available, but neither is it redundant. Instead, it complements what already exists.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
The benefits you just listed are the very reasons why we don't oppose the principle behind TFSAs. You talked about optimal conditions, but the issue is where should the limit be to ensure that optimal performance.
At what point does the TFSA stop being an instrument that allows for maximum benefit and the optimal use of resources? At what point does it become an appealing tax shelter vehicle? And when I say tax shelter, I'm not referring to savings but, rather, the transfer of savings. That's what we are concerned about.
Director, Personal Income Tax, Tax Policy Branch, Department of Finance
That's an excellent question that would likely be very difficult to answer. That said, most economists agree that decreasing taxes imposed on savings is generally a positive measure.
Conservative
The Chair Conservative James Rajotte
I assume members want a recorded vote on clause 19.
(Clause 19 agreed to: [See Minutes of Proceedings])
(On clauses 20 to 24)
On clauses 20 to 24, do members want to speak to each one?
Mr. Rankin.
NDP
Murray Rankin NDP Victoria, BC
I don't think we do. We're going to be voting in favour of these, Chair, but I should say—just as my colleague, Mr. Caron, said about part 1—that we're always pleased in the NDP when the government follows our advice and accepts our recommendations, our plan for small business. This is the second part that they've adopted. The idea of rapid writeoff, as it's called, or extending the accelerated capital cost allowance for manufacturers is a good thing.
It needs to be said that the Conservatives have stood by as 400,000 Canadians have lost their jobs in manufacturing. Small business is struggling to get by in this economy. As you may remember, Chair, we had an NDP motion to implement these very changes, which the government voted against a few weeks ago. Frankly, we like the idea, but it's very hard for us to take the government seriously when it does what it has done.
Having said all of that, we will, of course, support our ideas found in the budget today.
Liberal
Scott Brison Liberal Kings—Hants, NS
Mr. Chair, in terms of an accelerated capital cost allowance on the longer-term horizon, I'd like to thank the NDP for having decided to support what was a Liberal position, and of course, indirectly thank the Conservatives for having decided to support an NDP and originally Liberal position.
In the spirit of cooperation exemplified by Mr. Rankin's intervention, I want to thank the NDP as well for having supported the Liberal position.
Thank you.
Conservative
Andrew Saxton Conservative North Vancouver, BC
I want to say it's surprising to hear the Liberals supporting this when their leader actually said that manufacturers should look for other work in this country. It's quite surprising that Mr. Brison has now changed his party's position on this matter.
Conservative
The Chair Conservative James Rajotte
Thank you.
As the chair, I want to thank you also for endorsing the recommendation of the 2007 industry committee report, which recommended changing the accelerated capital cost allowance for manufacturing. I appreciate your recent conversion to that position.
Can we group clauses 20 to 24 together for voting?
NDP
Murray Rankin NDP Victoria, BC
I request a recorded vote.
(Clauses 20 to 24 inclusive agreed to: yeas 9; nays 0)
Conservative
Conservative
The Chair Conservative James Rajotte
(Clauses 25 to 28 inclusive agreed to: yeas 9; nays 0)
Thank you.
We'll now move to part 2, “Support for Families”, division 1, Income Tax Act, and perhaps we'll get the officials for division 2 to make their way to the table as well.
I do not have any amendments for clauses 29 to 34, so I will group clauses 29 to 34 together, and I'll go to Mr. Caron.
(On clauses 29 to 34)
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you, Mr. Chair.
We are coming to the oft-discussed matter of income splitting, which the Conservatives have renamed the family tax cut credit, as a marketing ploy.
The measure has been widely documented as a tax benefit that will help very few people, just 15% of Canadian households. The other 85% will get nothing out of it. Of the multitude of measures the government is introducing, it's obviously important to distinguish between income splitting and the enhanced universal child care benefit.
They are two separate benefits and the government should have treated them as such. For its own vote-getting reasons, in my opinion, the government opted to group them together and to try to convince Canadians that we were against the whole set of measures, which is not at all the case.
I'm not quite sure what else we can possibly ask you about income splitting, as this division has probably been the most studied. Be that as it may, there is no doubt that we will stick to our previously held position and vote against this measure.
Conservative
The Chair Conservative James Rajotte
Merci, monsieur Caron.
I'll go to the vote on clauses 29 to 34.