Finance Committee on April 29th, 2019

[Maude Lavoie]

Yes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

By eliminating the second test and just keeping in the first test, can you just repeat what the first test numerically is?

[Maude Lavoie]

When firms have between $10 million and $50 million of taxable capital, the access to enhanced SR and ED credit is slowly reduced. Above $50 million, they no longer have access to it. Below $10 million, they have access to it.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Is the expenditure change in the book?

[Maude Lavoie]

Yes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

—or not?

What page is it on?

Or if you have that, you can provide that afterward. It's probably in one of the appendices.

[Maude Lavoie]

On page 380 of the budget plan document, you have the longer explanation of the change. It's also found in the main text on page 110.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair.

[The Chair, Liberal, Wayne Easter]

Okay.

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

As you mentioned, in the current legislation, the limit is from $500,000 to $800,000 of taxable income. What was the intention in imposing such a limit, which you are now proposing to remove? At the time the legislation came into force, the measure was surely well-intended. Why does it need to be removed now?

[Maude Lavoie]

The current limits have been in place for a number of years. I couldn't tell you the exact year, but it's still been a long time.

I can only assume that the intention was to have another criterion to determine the size of the business, that is, to use taxable capital and taxable income. Taxpayers told us that the taxable income test caused some problems and that is what the government wanted to fix.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

At the beginning, the intent was to provide this benefit to the companies that needed it most, those whose revenue allowed them to receive the tax assistance from the government.

[Maude Lavoie]

Yes, the intent was to limit the measure to small businesses.

[The Chair, Liberal, Wayne Easter]

Mr. Fragiskatos.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair, and thank you to the officials for appearing again.

With respect to the changes that have been put forward, do we know which sectors of the economy stand to benefit particularly? Has an analysis of that been done?

[Maude Lavoie]

There was an analysis. I'm just looking at whether or not I have specific numbers for you. I don't have them with me, but for the SR and ED program, the change reflects the general composition of the SR and ED program. The manufacturing sector is a sector that uses the program a lot, and there's a sector called scientific research that benefits from it a lot.

It reflects the general composition of the economy. We could provide more information to the committee on that. I don't have the numbers.

[Peter Fragiskatos, Liberal, London North Centre, ON]

When we measure economic benefits, what exactly goes into that analysis by the department when we're trying to understand the ripple effects of something like this sort of incentive?

[Maude Lavoie]

Well, the SR and ED program's objectives are to support innovation and productivity, not only the employment that goes with actual research, but generally speaking, all the spillover that comes from generating new knowledge in the economy. There's a lot of academic literature on this type of topic. These types of incentives are in place quite often and have been really studied as contributing to reducing the price of these activities and adding a positive effect on innovation activity.

[Peter Fragiskatos, Liberal, London North Centre, ON]

In making the change that you did, what sort of consultation was there, or if not consultation, what sort of analysis? You mentioned academic papers. Was that integrated into the process?

[Maude Lavoie]

There were a number of submissions that our department had received over the last few years. This has been a problem that has been noted by stakeholders over time and that generated the analysis that was done.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Very good. I just wanted clarity, because on that specific point you just mentioned at the end there, it's something that I've heard from stakeholders back home in London in terms of changes that needed to come about. I think a lot of the concerns that I've heard over the past three and a half years have been taken into account and we see some positive changes.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Are there any further questions?

Okay, thank you.

We'll go to section 1.1.6, tax measures related to Canadian journalism.

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

My understanding is that this part of the bill is mainly intended to support print media. Am I mistaken? Is that what the definition is designed to do?

[Maude Lavoie]

Yes.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Why was it decided to target print media instead of the media in general?