Evidence of meeting #121 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was year.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Trevor McGowan  Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance
Pierre Leblanc  Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Randy Freda  Senior Tax Policy Officer, Business Income Tax Division, Tax Policy Branch, Department of Finance
Pierre Mercille  Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Carlos Achadinha  Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

On my list I have Mr. McKay, Mr. Poilievre, and Mr. Dusseault.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Thank you, Chair.

It's a great pleasure to be at the second-best committee on the Hill.

4:20 p.m.

A voice

What's the first one?

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

I'll let you work that one out.

The notes here say, “introduce new rules to ensure that the taxable income of federal credit unions will be allocated among provinces and territories using the same allocation formula as applicable to the taxable income of banks”. What does that mean?

4:20 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

Currently, if a bank operates in more than one province, they have to allocate their income according to which province they earn it in. With recent rules affecting federal credit unions, this would essentially provide the exact same set of rules for credit unions to allocate their income as between—

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Is this something the credit union has been asking for?

4:20 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

I believe so. I don't want to misrepresent things, but of course they need certainty. I think they had asked for that. I think it's in regulation 404(1), separate from 404, which is for banks, because there was a desire to not be treated as a bank. It provides certainty and clear rules for credit unions in determining what income is allocated between provinces.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

It provides certainty and clear rules for credit unions. It's another thing to provide clear rules and certainty to credit unions as a bad thing. The question really is, if the credit unions are not asking for this, then why are we here? I kind of agree with the general principle of financial institutions being treated equally; however, credit unions have unique capital challenges, as you well know, and I don't know whether this works for or against them.

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

We may need to have one of the credit unions as a witness.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

I think that would be a noble thing.

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

We will have to try to do that.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

I'll move on.

4:20 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

I can't say with certainty that they came to the department and asked for it, but it's not something that we've heard concerns about. In September 2016 we released these proposals for public consultation, and I don't believe we heard any criticism of the proposed allocation. I know that we had put credit unions separate from banks in order to accommodate their requests.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Does this apply to just federal credit unions or all credit unions?

4:20 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

It would need to have income allocated between the provinces.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Sorry, it looks like it is federal. I'll move on, because I don't want to use my colleagues' time.

Is the clean energy accelerated CCA similar for energy sources other than geothermal?

4:20 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

Yes, that type of treatment, the accelerated capital cost allowance, is basically tax depreciation. In class 43.2 it's a 50% rate. That can be available not just as proposed for geothermal but also for wind, solar, small-scale hydro, and a few others.

4:20 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Are these accelerated capital cost allowances then for that class of energy producer?

4:20 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

That's correct.

4:25 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Is that class different than, say, carbon-based energy producers?

4:25 p.m.

Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

The accelerated capital cost allowance rates in class 43.2, which itself builds on class 43.1, are only available in respect of the specific types of projects listed in that class. They're all, I think it's fair to say, what you would consider green energy projects, and they are separate from the general rules that might apply to other companies.

4:25 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Again, I see treating all energy sources in similar CCAs, but there may be an argument to be made for non-carbon-based energy products to have an accelerated capital cost. If that could be answered, I'm sure that would be useful to the committee.

November 2nd, 2017 / 4:25 p.m.

Randy Freda Senior Tax Policy Officer, Business Income Tax Division, Tax Policy Branch, Department of Finance

There is no question that, in terms of class 43.2 items, the idea is to provide a fast rate of acceleration for those products with the idea that they're aiming to....

4:25 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Stimulate an industry....

4:25 p.m.

Senior Tax Policy Officer, Business Income Tax Division, Tax Policy Branch, Department of Finance

Randy Freda

Yes. Also, it's for a cleaner environment and so forth on that front.