Evidence of meeting #109 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was system.
A video is available from Parliament.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much, Professor Goulet.
Mr. Lovell, do you have something to add?
As an Individual
I guess I look at it in maybe a little bit of a different perspective. I mean I'm looking down the barrel of a gun this year at a crop that is awful because of weather. That wasn't a management issue. To me, if I pay less tax because I'm taking huge risks and I'm employing people and I'm contributing to the Canadian economy, I don't really see that as an advantage, not to me. I see that as an advantage to Canada and to the employees whom I'm providing jobs to.
I'm the one who has everything to lose, so to me it's not an advantage. It's a necessary tool that we have to have so that we can keep our economy growing and moving, hopefully, because as soon as things start to go the other way, we're done.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
I'd also like to emphasize that I'm very sympathetic to the farmers' predicament.
I don't know if I have any time left, but I'd like to hear Mr. Macdonald's and Mr. Poitras' answers.
Liberal
The Chair Liberal Wayne Easter
Maybe Mr. Macdonald and Mr. Poitras could come in on another question, if they have something further to add on that.
Mr. Poilievre, you have five minutes.
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you.
To Mr. Merrigan, the government proposes to eliminate the RDTOH—refundable dividend tax on hand. Do you believe this will have the effect of imposing double taxation on the passive income earned within a small business?
Partner, Poole Althouse, As an Individual
Yes, and I've met with an accountant and a very good tax specialist regarding that. The impact was between 73% and potentially 93%, and I have one client who's currently, potentially in that 73% to 93% who is simply aghast at losing a life's work.
Conservative
Pierre Poilievre Conservative Carleton, ON
On this side we've been very cautious to use the more conservative estimate of 73%. Can you explain how these numbers may reach as high as 90%?
Partner, Poole Althouse, As an Individual
I actually couldn't follow the argument all the way up to 90%. I met with the accountant. The 73% made perfect sense to me. The 93% seemed to be a bit of a unicorn, but it's very easy when you're the lawyer.
Partner, Poole Althouse, As an Individual
It's very hard when you're the client.
Conservative
Pierre Poilievre Conservative Carleton, ON
We won't talk about unicorns. We'll talk instead about the reality that this will mean double taxation to a level as high as 73%, a number confirmed by the most respected economists and financial experts in the country.
Will you, then, advise your clients who are small businesses to come up with a different vehicle in which to save for their retirement?
Partner, Poole Althouse, As an Individual
The client in question is in his seventies. If this goes through, he's pretty well toast.
Conservative
Pierre Poilievre Conservative Carleton, ON
He's toast. Let's say you had 35-year-old clients who are saving within their private corporations for their eventual retirement. They're now facing double taxation at a rate as high as 73%. Would that cause you to advise those young clients to save in a different vehicle?
Partner, Poole Althouse, As an Individual
It's all very well and good to say, “Save in a different vehicle”, but the money that you keep in a corporation has three purposes.
The first purpose is to capitalize the company. The second is hopefully retirement. The third is for educational purposes for your children. If you only have a small pot of money at the outset of your company, you have to put it all in.
Conservative
Pierre Poilievre Conservative Carleton, ON
I totally agree. It's the same argument I've made.
I'm curious now. If this does go ahead, you're going to be faced with this double taxation on your clients' savings.
What vehicle will you be forced to advise that he or she save in?
Partner, Poole Althouse, As an Individual
I'm a tax lawyer, but I don't advise on the tax outcome. I implement the structure.
The advice being given now is to crystallize any capital gains that you have, so we're doing capital gains dividends. I practised in the area for five years, and I never did a capital dividend until this year. I've done five in the last 14 days.
Conservative
Partner, Poole Althouse, As an Individual
There doesn't seem to be a strategy arrived at yet by the accountants that I've discussed this with. It seems to be, take your money out now and do something with it. The inclination is to not keep it within Canada. The consensus among my small pool of clients seems to be to pay what taxes are owing on it and then remove it from the jurisdiction.
Conservative
Partner, Poole Althouse, As an Individual
Individual pension plans will be an option going forward for young persons....
I'm trying to remember. It's PRPP and VRSP. That is certainly a strategy that will be adopted going forward. There will be a lot of money pouring into that area.
Conservative
Pierre Poilievre Conservative Carleton, ON
A lot more money will pour into that area. Who offers those plans?
Partner, Poole Althouse, As an Individual
I'd say that would include Sun Life. I looked at a Desjardins product. There's also a fairly good write-up on the Morneau Shepell website.
Conservative
Pierre Poilievre Conservative Carleton, ON
Okay.
The government says there's $28 billion in passive income within companies. If money were forced out by high levels of taxation, are we talking about large amounts of money that would then move into these individual pension plans?