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

3:35 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

I call to order the meeting. We're dealing with Bill C-74, the budget implementation bill. It was referred yesterday to committee.

We have with us today a number of Finance Canada officials and an official from the Department of Veterans Affairs. They will be making short presentations on parts 1, 2, and 4 of the bill, and then we'll go to questioning. If time allows, we may move on to parts 3 and 5 of the bill. If not, we'll be dealing with those, plus part 6, at our meeting tomorrow.

I trust the committee is satisfied with that approach.

Hearing no objections, we'll start with part 4. We have Madam Norrie, Acting Senior Director at the Policy Directorate of the Department of Veterans Affairs.

Ms. Norrie, the floor is yours, on part 4, “Canadian Forces Members and Veterans”.

3:35 p.m.

Kathy Norrie Acting Senior Director, Policy Directorate, Strategic Policy and Commemoration, Department of Veterans Affairs

Thank you for having me today.

This bill contains updates to the Veterans Well-being Act, and other associated acts, and delivers on a pension for life option with benefits and services designed to help veterans live a full and productive life after service.

The proposed pension for life option addresses the concerns that military and veterans communities and families have raised with the department. It's expected to come into effect on April 1, 2019. Pension for life is a combination of benefits that provide recognition, income support, and better overall stability. It will provide a holistic package that reintroduces lifelong monthly pain and suffering payments, implements a new recognition benefit, and consolidates six of seven existing income-related financial benefits.

These benefits will give Canadian Armed Forces members and veterans a choice about the form of compensation that works best for them and their families.

The pension for life plan has three key pillars: recognizing service-related pain and suffering, delivering further recognition for those with severe and permanent impairments, and delivering income support when veterans need it.

Every veteran is different. With these changes, the Veterans Well-being Act is even more flexible so that support can be tailored to each veteran's situation and service history. The pension for life benefits in this bill include three new benefits.

The pain and suffering compensation is a monthly, lifelong, tax-free payment that recognizes pain and suffering experienced by veterans and Canadian Armed Forces members with a disability due to a service-related illness and/or injury.

The additional pain and suffering compensation is a new monthly tax-free payment for veterans experiencing barriers to re-establishment after service because of their severe and permanent illness and/or injury.

The monthly income replacement benefit is designed to provide income support to veterans who are experiencing barriers to re-establishment primarily resulting from service, and the benefit is available to survivors and orphans, for life, should they need it.

I am happy to take any questions.

3:40 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Thank you very much.

We'll now move on to part 1, “Amendments to the Income Tax Act and to Related Legislation”.

Trevor McGowan.

3:40 p.m.

Trevor McGowan Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

As mentioned, part 1 of the bill relates to the income tax. I'll go through each of the measures in the order in which they appear in the bill, although some of the measures can affect a number of clauses and do not appear sequentially.

The first measure relates to the pension for life program, as was previously announced. As noted, the benefits for pain and suffering and additional pain and suffering would be tax free. This ensures the appropriate tax treatment. It also ensures the appropriate tax treatment of the income replacement benefit. It also ensures that the memorial grant program for first responders is tax free. This grant starts in 2018-19 and will support families of first responders such as police officers, firefighters, and paramedics who have fallen in the line of duty.

It also implements measures reducing the small business tax rate: first from 10.5% to 10%, effective January 1, 2018; then to 9% effective January 1, 2019.

It also contains amendments to the holding of passive investments within a private corporation. The first of these limits the ability of Canadian-controlled private corporations to access the small business deduction, where they have significant amounts of passive income within the corporation.

The second measure provides that corporations will no longer be able to obtain refunds of taxes paid on investment income while paying dividends eligible for the enhanced dividend tax credit, which are presumed to have come out of active business income.

It also contains a measure relating to income sprinkling, which prevents the ability of higher-income individuals to lower their personal taxes by diverting income to lower-income family members.

Another measure provides additional tax relief for members of the Canadian Armed Forces. Currently an exemption is available based upon the risk score for certain designated international operational missions. This would extend it so the benefit is available regardless of the particular risk score assigned to a mission. It would increase the level of exempt pay up to the level of lieutenant colonel.

The bill would introduce the Canada workers benefit, a refundable tax credit that supplements the earnings of lower-income workers to replace the former working income tax benefit.

It would also expand the list of eligible expenses in the medical expense tax credit to include costs associated with service animals for persons with severe mental impairments. A good example of that would be service dogs for individuals with post-traumatic stress disorder.

It accelerates the indexation of the Canada child benefit by two years, so the indexation begins in July 2018.

It extends by one year the mineral exploration tax credit, which is a 15% tax credit designed to promote the exploration for mineral resources in Canada and to help companies engaged in that activity to raise money.

It also extends to the end of 2023 a temporary measure that permits a qualifying family member—a parent, spouse, or a common-law partner—to become a plan-holder of a registered disability savings plan for an adult beneficiary whose capacity to enter into a contract is in doubt.

It has a couple of measures relating to charities. The first relates to the qualification of municipalities as eligible donees for the purpose of reducing a charity whose registration has been revoked. This has to do with exposure to the 100% revocation tax. In qualifying circumstances, if the donation has been approved, the charity that's had its charitable status revoked would be able to make a donation to a municipality and avoid the 100% revocation tax.

It also eliminates duplication in the procedure for a university outside Canada to become a qualified donee for charitable tax donation purposes. Currently it's required that a university outside Canada become a prescribed university and also be registered with the Canada Revenue Agency. This would eliminate the requirement that it be prescribed. It would just be required to be registered with the CRA.

It would provide legislative authority for the government to share data relating to the Canada child benefit with provinces solely for the purpose of administering their social assistance payment regimes. It would retroactively change the previous system of child benefits— the Canada child tax benefit, the national child benefit supplement, and the universal child care benefit— so that individuals who are “Indians” under the Indian Act and who legally reside in Canada and have Canadian-born children are eligible for those benefits as of 2005, to bring it in line with their eligibility for the new Canada child benefit.

Last, it would extend eligibility for class 43.2. That's a class of assets that's eligible for capital cost allowance or tax depreciation and provides an accelerated 50% capital cost allowance rate for certain clean energy generation and conservation equipment. That would be extended to be available in respect of property acquired before 2025.

That's it. Those are the measures contained in part 1 of the bill.

3:45 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Thank you very much, Mr. McGowan.

I now invite Gervais Coulombe and Pierre Mercille to pronounce upon part 2, amendments to the Excise Act, 2001, related to tobacco taxation and related legislation.

3:45 p.m.

Gervais Coulombe Director, Sales Tax Division, Tax Policy Branch, Department of Finance

Thank you, Mr. Chair.

The Government of Canada applies an excise duty to all tobacco products sold in the Canadian market. The tobacco excise duty rates are currently set to automatically increase every five years to account for inflation. Under this approach, tobacco excise duty rates would be adjusted on December 1, 2019. Budget 2018 proposed to advance the existing inflationary adjustments for tobacco excise duty rates to occur on an annual basis rather than every five years. To ensure consistency in the excise framework, inflationary adjustments will take effect on April 1 of every year, starting in 2019.

Effective February 28, 2018, the day after the budget, tobacco excise duty rates were adjusted to account for inflation since the last inflationary adjustment that was made in 2014. That first adjustment was equivalent to an increase of about $1.29 per carton of 200 cigarettes.

The budget also proposed to increase excise duty rate by an additional $1 per carton of 200 cigarettes, along with corresponding increases to the excise duty rates on other tobacco products like chewing tobacco or cigars.

Overall, as of February 28, 2018, the excise duty rate on 200 cigarettes increased by $2.29, rising from $21.56 per carton to $23.85 per carton. That translates into an increase of about 29 cents per pack of 25 cigarettes.

An inventory tax was also applied to inventories of more than 30,000 cigarettes, which is equivalent to 150 cartons of 200 cigarettes, held by manufacturers, importers, wholesalers, and retailers as of the end of February 27, 2018. This measure generally applies as of the day after the budget, and details of the measure are found on pages 39 and 40 of the budget supplementary information booklet. The clauses implementing these measures are all under part 2, covering clauses 47 to 67 of Bill C-74.

This completes the introductory remarks for part 2.

Thank you.

April 24th, 2018 / 3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Thank you very much to all the witnesses for their presentations.

We're now going to move into questioning.

Mr. Fergus has requested that we make it open season for the chair to take down the names of members who raised their hands.

What do you suggest? Two or three minutes per member?

3:50 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

I think so. That would be great. Very good, Mr. Chair, at your discretion.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Is that okay?

3:50 p.m.

A voice

Agreed.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Go ahead, Mr. Julian.

3:50 p.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

Mr. Chair, I just want to make sure I understand properly.

We all have a number of questions to ask. Do you want to time our interventions for up to two or three minutes or would you rather have us continue until we are satisfied?

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

If you continue until you are satisfied, the discussion may never end. There must be a limit to speaking time.

If there is no consent, we can use the usual practice.

3:50 p.m.

Conservative

Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC

I just noticed, Mr. Chair, that in previous times we've had this, the free-for-all approach worked quite well. If other people want to get in and you feel that we're running low on time, you could just ask the member to wrap up and then let someone else in, but usually we're a pretty good bunch.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Is the government side happy with this approach?

3:50 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Yes, indeed.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

We'll make sure you have a chance to ask your questions.

3:50 p.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

We sometimes talk about some quite technical topics, so we want to be sure we can get to the bottom of things.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

How long would it take for you to...?

3:50 p.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

That depends on the answers.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Give me an approximate time. I can increase the time limit to accommodate you.

3:50 p.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

In some cases it could take less than two or three minutes; in others, it could take four, five or six minutes. We do not know in advance.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

Six minutes then.

3:50 p.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

We can be flexible. Once the person asking the questions is satisfied, we can move on to the next person on the list.

3:50 p.m.

Conservative

The Vice-Chair Conservative Pierre Poilievre

I'll start with a member on the government side.