Finance Committee on Sept. 28th, 2017

[Pierre Poilievre, Conservative, Carleton, ON]

Right, and so—

[The Chair, Liberal, Wayne Easter]

I'm not taking away from your time, Pierre, but keep in mind this is not even draft legislation and this is a proposal the consultations are on.

I don't want anybody to think that this is the law.

Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

But it is a very well-defined proposal as written down in the consultation document.

Will you have to advise your clients to look for other savings vehicles if this tax does go in place?

[Jennifer Kim Drever]

We would. We would have to look at other options for the clients if it's now cost-prohibitive to invest in their company to save for their rainy days or to help fund their economic fluctuations. We will have to look at other ways we can do that, and some of those would be, say, IPPs or RCAs or things like that, so some kinds of pensions.

Whenever we do that, though, the funds are now moved outside the company and they're not accessible to that business again to be able to survive an economic downturn.

[Pierre Poilievre, Conservative, Carleton, ON]

The IPPs, though, which companies provide those IPPs right now as a service?

[Jennifer Kim Drever]

There are many companies in Canada that provide that.

[Pierre Poilievre, Conservative, Carleton, ON]

Can you name any of the big players?

[Jennifer Kim Drever]

I am choosing not to.

[Pierre Poilievre, Conservative, Carleton, ON]

I understand, but the IPP will be splittable on retirement, right? If someone has an individual pension plan, they'll be able to sprinkle their income with their spouse?

[Jennifer Kim Drever]

That is one of the tenets of the Canadian tax system, that income splitting is mandated. Currently, we can do income splitting with pensions. We can do income splitting with RRSPs. The only opportunity for a lot of business owners for income splitting is with multiple shareholders.

[Pierre Poilievre, Conservative, Carleton, ON]

Finally, you represent 150,000 family businesses and your firm specializes heavily in farming. Is it true that family farmers will pay a higher rate of taxation to sell to their children under these proposals than they would to sell to an unrelated third party like, say, a multinational corporation that aggregates land?

[Jennifer Kim Drever]

That is absolutely correct. These rules, these new changes coming to 84.1 and 246.1, what they're effectively doing is making it so you pay double tax when you're transitioning a family business. The parent will have to pay tax first on the disposition and the kid will have to pay tax again, and not only that, the capital gain exemption is not on the table.

I also want to be clear that this is not just about corporations. Every single private business in Canada, whether it's a corporation or partnership, is going to be impacted by these rules one way or the other. There are the income splitting rules, there are the passive investment rules, and there is the inability to do a transaction with your family member. All of these put together impact every private business.

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Wolfson, do you think the family farm is the most viable form of agricultural production?

[Prof. Michael Wolfson]

The short answer is I don't know.

[Pierre Poilievre, Conservative, Carleton, ON]

You don't know. Do you think it's fair that under these proposals there would be a higher rate of taxation for a farmer to sell his or her farm to their son or daughter than to sell it to an unrelated stranger?

[Prof. Michael Wolfson]

As the chairman has indicated, these are proposals, and I heard a fair amount of discussion Monday of this week at the Canadian Tax Foundation conference about these proposals and my sense is it's not a foregone conclusion that what you've described is what will emerge.

[The Chair, Liberal, Wayne Easter]

We will have to—

[Pierre Poilievre, Conservative, Carleton, ON]

It is draft legislation though.

[The Chair, Liberal, Wayne Easter]

We'll have to stop you there.

Mr. Boulerice.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

I would like to thank all the witnesses who are here this morning for discussing this crucial matter for many people and many businesses.

Please allow me to raise two points briefly before I get to my questions.

We've heard a lot about family farms and the challenges of intergenerational transfer. My NDP colleague Guy Caron had tabled a proposal to improve this, but it was rejected by Parliament, unfortunately. We already had this concern prior to the proposed changes that we are currently considering.

We agree with those of you who are proposing an extension of the consultation period. They began on July 18, but for many small businesses and farmers, the date was problematic. We hope to hold consultations until December 16.

As long as we're talking about tax fairness, as Mr. Roberts of the CLC said, we should discuss tax loopholes for CEOs, rules on tax evasion and international agreements we have with tax havens, who are not at all affected at this time.

Dr. Marcoux, I would just like to verify something. The doctors who are members of your association are able to buy RRSPs or put money in a tax-free savings account, right?

[Dr. Laurent Marcoux]

Absolutely, like everyone else.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

I just wanted to make sure because you said earlier that incorporation was a way for your members to save for retirement. Having said that, it isn't the only way.

[Dr. Laurent Marcoux]

It's not the only way. However, I will tell you that doctors usually enter practice around the age of 33, 35 or 36. They have a lot of student debt then, often amounting to a few hundred thousand dollars. They have to set up their practice and start a family. So they can't start thinking about investing for retirement until they are about 40 years old, when all this is reasonably accomplished.

If they invest in an RRSP, for example, at a maximum of $20,000 per year, how can they save enough capital in the next 20 years to provide them with a return and to ensure a decent retirement? They're a little stuck. They would be among the only citizens who had contributed much to society but did not have access to a suitable retirement once they reached that age. This is a problem for most of our doctors.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Do you find it normal that the tax system is being used to provide doctors with the opportunity to incorporate in order to compensate for the fact that the provinces don't have the resources they would like to give your members a salary increase?

[Dr. Laurent Marcoux]

It's a legitimate question, but I can't provide an answer on the consequences of a federation made up of different levels of government. I will refrain from answering that question.