Evidence of meeting #145 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rate.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kathy Norrie  Acting Senior Director, Policy Directorate, Strategic Policy and Commemoration, Department of Veterans Affairs
Trevor McGowan  Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
Gervais Coulombe  Director, Sales Tax Division, Tax Policy Branch, Department of Finance
Maude Lavoie  Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
Pierre Leblanc  Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

It will be in the next.

5:15 p.m.

Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Pierre Leblanc

It would be fair to say that we can expect it in the next budget implementation act. We'd still like, in a lot of cases, people to fill out schedule 6. It could just mean they'll get the money sooner rather than later. In those cases where they don't right now under the current system, they're not receiving anything, and the proposal is for them to receive the benefit that they've earned and for CRA to do the calculations for them.

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Thank you for that. That leaves me one last question.

I think it's an important innovation for CRA to make that calculation, which will come out in the second budget implementation act in the fall. It reminds me of the importance of other basic benefits that Canadians can profit from. Perhaps CRA should start taking on a little bit more actively helping people along so that they don't lose that opportunity to take full advantage of all the benefits they are eligible to receive.

5:15 p.m.

Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Pierre Leblanc

I think that's an important point. I'll just touch on them briefly, because others are better placed to discuss them than me. There are important initiatives in budget 2018 to provide more people support with tax filing, which is often an important gateway to receiving benefits, so there's more funding for the community volunteer income tax program that basically organizes volunteers across the country.

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

It's a huge success in my riding.

5:15 p.m.

Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Pierre Leblanc

You have more targeted funding, in particular to go on reserves to reach out to indigenous communities to encourage them to file, but also to make sure their children are registered for the Canada child benefit. Maybe I'll just leave it there, but that work is important, too.

5:15 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

We have to move to Mr. Sorbara.

5:15 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Understood. Thank you, Mr. Chair.

5:15 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, Mr. Chair.

With the BIA legislation, what will the small business tax rate be effective January 1, 2019?

5:15 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

Maude Lavoie

It will be 9%.

5:15 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

What is it currently today?

5:15 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

Maude Lavoie

Today, under the proposed legislation, it is 10%, but it was 10.5% last year.

5:15 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you. So that's about up to that $500,000 mark by January 1, 2019, and I understand there's about $7,500 of tax savings for small businesses.

How does our small business tax rate compare internationally?

5:15 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

Maude Lavoie

The small business tax rate compares very well. We are the lowest in the G7 and among the lowest in the OECD.

5:15 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

With the legislation contained in the BIA part I here with regards to passive investments, is there any change, or is there a change on the tax rate with regard to passive investments?

5:15 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

5:15 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

In my estimation, an entrepreneur or professional using his normal rate of return of, say, 5% to get to that $50,000 mark would have to accumulate a few million dollars, if I'm not mistaken, or over $1 million of passive investments to achieve, say, $50,000 in passive income to then be brought up from the small business tax rate of 9% to the general corporate tax rate of about 15% on their active income.

5:15 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

Maude Lavoie

If you are assuming that the rate of return is 5%, then $50,000 would be consistent with $1 million of passive assets. Before then, your measure starts to gradually reduce a small business deduction, and it would be fully phased out at $3 million.

5:15 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Exactly, so someone who would have approximately $3 million in passive investments would be asked to pay the general corporate tax rate of 15% on their active income versus 9% on their small business tax rate.

5:20 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

Maude Lavoie

That's correct.

5:20 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

That would affect approximately 3% of 1.8 million or 1.6 million of CCPCs that exist in Canada.

5:20 p.m.

Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance

Maude Lavoie

That's correct.

5:20 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

The Conservatives are worrying about the richest of the richest, the wealthiest of the wealthiest, those 3%—and I'm going to make a political statement—while we are worrying for all Canadians, and ensuring that all Canadians benefit from low tax rates, and also ensuring that corporations continue to invest. Most corporations are at the general tax rate, so anybody out there.... Think about entities in my riding. I met this morning with the Canadian Franchise Association, and they're very happy that we're cutting the small business tax rate from 10.5% to 9%, and about a number of the measures we put in place, including skills training.

One element that you brought up, and my colleague Ms. Dzerowicz mentioned, was the automatic enrolment for the CWB. Is that contained in this BIA?

5:20 p.m.

Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Pierre Leblanc

It's coming soon.

5:20 p.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

I want to clarify.

Will the CCB be indexed this year?