Absolutely correct.
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.
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.
9:55 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Okay, so then in the example of a husband and wife who operate a small family business, where the wife works part time, that would be still okay under the new rules.
9:55 a.m.
Partner, Poole Althouse, As an Individual
It would, but where it gets complicated is a very typical—
9:55 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Everything in tax policy is complicated. There's no doubt about that.
9:55 a.m.
Partner, Poole Althouse, As an Individual
A very typical situation, and one to respond to your colleague's concerns, is that there are more female graduates from medical school now than men. Women are asking their spouses to stay home, and they're using this income-splitting device to enable them to have a family and to continue to practise medicine.
9:55 a.m.
Liberal
9:55 a.m.
Partner, Poole Althouse, As an Individual
Without a direct contribution, except that—and this is quite common—one spouse attends medical school while the other one works. During the medical school years the husband is supporting the wife. When she graduates and establishes her practice, they decide they're going to have a family. She has to take some time off. Money up in the company will support that leave. Then—and this is very common now—he will stay home with the children but be drawing a dividend from the company. He has unquestionably contributed to her ability to earn income by supporting her through medical school and by taking on child care duties. That contribution will be treated differently from a capital investment.
The other thing I would point out—
9:55 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
We're about to hear from the Canadian Medical Association, so I'll let them get into it.
9:55 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Sorry, I don't mean to cut you off, but you made a comment that I respectfully disagree with, namely, that our rules are going to encourage people to split their families.
9:55 a.m.
Liberal
Raj Grewal Liberal Brampton East, ON
But you did say that, right? I want to say that, as Mr. Macdonald said today, this notion is very far from the truth. That is pushing an element of fearmongering on these tax proposals, and it's un-Canadian, in my humble opinion.
As a fellow lawyer and member of the bar, I think we owe a duty of care to the Canadian public to judge the proposals on their merits. When you speak to people, I would caution you not to make irrational assumptions about the proposed tax changes.
9:55 a.m.
Liberal
9:55 a.m.
Partner, Poole Althouse, As an Individual
My statement was that there is an economic incentive here. In other words, the family unit could be financially better off in the case of a separation. I've done divorce law. I've sat with couples, with wives and with husbands, and when they get down to making this difficult decision, they consider the economics.
Do I think that a family will say they're not interested in a divorce, but they're going to separate for the economic advantage? No, I do not. Do I think there is an economic incentive? Yes, I do. Will that be weighed in the analysis in borderline cases by families considering their options? Yes, it will. Is that the same as saying that you're trying to break couples up? No, it is not.
One of the unintended consequences, however, is that you create this economic incentive.
10 a.m.
Liberal
The Chair Liberal Wayne Easter
Mr. Grewal stated that this is a proposal, and I think we all know that we're in consultations until October 2.
I heard you, Mr. Merrigan, and some others have said we should simply define it as a “flight of capital”. That's worrisome. We are dealing with proposals on the table and we are in consultations. How critical is it for the government, fairly rapidly after October 2, to bring clarity to where it's going to stand going forward?
I've heard people say to extend the consultations. I'm personally not in favour of that, even though I know farmers need more time. I do think, though, that the government has to bring clarity to the issue. What are your thoughts?
10 a.m.
Partner, Poole Althouse, As an Individual
I think that the question of unintended consequences should have been dealt with up front. I think that detailed provisions to deal with the unintended consequences, which have been amply identified, need to be brought forward. There needs to be consultation on those. As we've seen in this kind of fractal approach to tax law, one consequence begets another consequence. It's a very old and complex tax system, and incremental changes with unexpected consequences will require more consideration rather than less.
10 a.m.
Prof. Guy Goulet
I simply want to say, as to the first and last measures, that that could be done quite quickly. However, as to the passive investments, I think that we have more time since there are no defined rules as such. There could perhaps be another step, either a consultation or a more defined project.
Thank you.
10 a.m.
Liberal
The Chair Liberal Wayne Easter
That's helpful. My thanks again to the witnesses for their presentations, and for responding to members' questions.
The meeting is suspended.