Finance Committee on April 29th, 2019

[The Chair, Liberal, Wayne Easter]

Any more discussion on this point?

Mr. Sorbara.

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

I would like a recorded vote.

(Motion negatived: nays 5; yeas 3)

[The Chair, Liberal, Wayne Easter]

We now go back to the section dealing with the expansion of tax measures for electrical vehicle charging stations and electrical energy storage equipment. Are there any questions on that section?

Turning to section 1.1.16 dealing with the eligibility of joint projects with Belgian producers for the Canadian film or video production tax credit, are there any questions on that?

The next section, 1.1.17 deals with the rules for pension adjustment calculations for registered pension plans that reference the enhanced Canada pension plan.

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I'd have a brief question.

I would just like to know if these changes will have an effect on the amounts predetermined by the Quebec or Canada pensions plans.

[Trevor McGowan]

This amendment is largely technical in nature. Where you have a defined benefit or a pension with a registered pension plan that contains a defined benefit formula that's integrated with the Canada pension plan benefits, it allows for the proper pension adjustment to be reflected on an employee's T4. It would not have negative effects that way. It is to ensure that the appropriate pension adjustment can be provided on an employee's T4 as a result of the new enhanced Canada pension plan.

Where you have registered pension plans with defined benefit formulas, they would be integrated with the Canada pension plan. Once they decide to be integrated with the enhanced Canada pension plan, then their pension adjustment would be lower as a result of the Canada pension plan, which would result in the employee receiving the T4 slip and having more RRSP room.

The end effect is that there's an appropriate pension adjustment on an employee's T4 in these circumstances. As a consequence, they would have more RRSP room.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

So this would not change contribution ceilings. It would only change the amounts people will be receiving, correct?

[Trevor McGowan]

It changes the pension adjustments that are reflected on your—

[Greg Fergus, Liberal, Hull—Aylmer, QC]

However, the upper limits will not change. Is that correct?

[Trevor McGowan]

It doesn't change the enhanced Canada pension plan contributions, no.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

It doesn't change the ceiling.

[Pierre Leblanc]

Actually, no decision has been made on integration of the pension plan that we as public servants participate in.

Here's an example of what could happen. Say a pension plan is currently integrated with the Canada pension plan. What does that mean? It just means that on your first tranche of earnings, basically up to the year's maximum pensionable earnings, you're paying CPP, so you pay less to your own pension plan, and then the retirement benefits are adjusted accordingly as well.

Let's say that we as public servants receive about 1.3% to 1.4% of earnings per year up to the YMPE, and then 2% above the YMPE. Basically that allows for that CPP portion to go up, or that QPP portion to go up, so potentially—and again, this is a decision for individual pension plans—the amount contributed by both employers and employees and the consequential benefits received from the employer-based pension plan could go down.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I get that. I'm just trying to figure out the potential....

There's a ceiling for the contributions you can make per year, right?

[Pierre Leblanc]

The thing is that for defined benefit plans, it's on the benefits you can accrue; it's not on the contributions. You can accrue basically per year of service up to—what's the number now?—close to $2,500. That won't change.

[The Chair, Liberal, Wayne Easter]

Okay, that is it on that section and all sections of part 1.

Thank you, Ms. Lavoie, Mr. McGowan, Mr. Leblanc and Mr. Maxson.

We'll see if we can get into the next section, part 2.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

There are only two minutes left.

[The Chair, Liberal, Wayne Easter]

That's right, but we might get through it though.

On part 2, amendments to the Excise Tax Act, GST/HST measures and related legislation, we have Mr. King and Carlos Achadinha.

Who's leading off?

[Carlos Achadinha, Senior Director, Sales Tax Division, Tax Policy Branch, Department of Finance]

I will lead off with an explanation of part 2. My name is Carlos Achadinha. I'm the senior director responsible for GST policy matters—goods and services tax and harmonized sales tax matters. This particular section, part 2, covers a couple of modest and minor enhancement amendments that are included in the budget with respect to the application of the GST.

Basically, there are four measures in this bill with respect to the GST. Three are related to health measures. They are basically expanding the existing health measures currently under the GST. There's relief for basic health care services, so you don't pay tax on basic health care services. There are basically three additions to that type of relief.

The very first one is at clauses 76, 78 and 79. GST relief is provided to supplies and importation of human ova and on importations of in vitro embryos. This is intended to assist people who are increasingly turning to assisted human reproduction to help build their families; so for people who are suffering from certain infertility issues, this is a means to help them deal with that sort of issue. This provides relief for acquisitions of those particular materials.

The second measure deals with various foot care products. There is currently an exemption for various foot care products—for example, controlled ankle movement walkers, heel braces and compression anti-embolic stockings. These materials are currently exempt when they are basically purchased on the order of a physician. What we're doing now is expanding that to allow them also to be purchased on the order of a licensed chiropodist or a podiatrist. These are other health practitioners who are really very much whom people see when they have to deal with these foot issues. This is just an expansion of what is an existing relief.

The third measure in the health area is providing explicit relief for what we refer to now as multi-disciplinary health care services. Basically this is a measure intended to deal with rehabilitation programs where you may have different health care practitioners come together to provide you with one service, a rehabilitation service. If these were all provided separately, there would be an exemption, but it's not clear that when they are provided together as a single service there is explicit relief for this particular measure in the act. This provides explicit relief for those multi-disciplinary health care services.

The fourth measure is just a consequential measure. There has been discussion here with respect to the income tax expanded threshold for business deductions for the zero-emission vehicles. Under the GST, businesses are entitled to recover their tax paid on inputs they use for business purposes. Consequential to the changes in the deduction threshold in the Income Tax Act going from $30,000 to $55,000 for zero-emission vehicles, there will be an increase in what you can claim for input tax credits to that same threshold.

That covers very quickly the GST modifications.

[The Chair, Liberal, Wayne Easter]

Are there any questions on this section? Hearing none, do I see agreement to deal with part 3 so these folks don't have to come again? Okay.

On part 3, we'll go to Mr. King.

[Phil King, Director General, Sales Tax Division, Tax Policy Branch, Department of Finance]

Thank you, Mr. Chair.

I'm the director general of the sales and excise tax division at the Department of Finance. I'm going to talk briefly about clauses 81 to 86. These propose to implement the new THC-based duty rate on certain cannabis products. This proposal builds on the current excise duty regime that came into effect when cannabis for non-medical purposes became legal in October of last year.

Currently, the legal classes of cannabis products permitted for sale are fresh and dried cannabis, cannabis oils, seeds and seedlings. However, new classes of products namely edibles, extracts and cannabis topicals will be permitted for legal sale later this year under the Cannabis Act. The government is proposing that the excise duty framework for cannabis products be amended to more effectively apply the excise duty to these new classes of products as well as to cannabis oils, which are already legally for sale.

In particular, part 3 implements amendments so these products are subject to excise tax based on the total quantity of tetrahydrocannabinol, THC, which is the primary psychoactive component of cannabis. The introduction of this new THC-based rate has been informed by the feedback that we received at the department from the CRA and from the cannabis industry.

The current excise duty framework for cannabis products imposes the higher of one of two rates. One, either a flat duty rate based on the total weight of cannabis plant inputs to a product, or two, an ad valorem duty based on the producer's price. However, cannabis producers have expressed some concerns regarding the potentially complex calculation of excise duties on oils when basing them on the quantity of cannabis material inputs.

Having one flat rate based on total THC content for certain cannabis products would simplify compliance. It would allow these producers, as well as the CRA and other administrators, to more easily calculate and verify excise duties for cannabis edibles, extracts and topicals.

At the same time, this proposal better aligns the excise duty regime with recommendations from the health care community because it bases the duty on the intoxicating component of cannabis that is THC. In that respect, it's similar to how excise duty is applied to alcohol products like spirits. This measure would come into force on May 1, 2019.

[The Chair, Liberal, Wayne Easter]

That's not far away.

Okay. Are there any questions on this section?

Boy, you guys get off easy.

Thank you very much, and that way you don't have to come back the next day we start on tax measures, etc.

With that, we have the Bank of Canada and the parliamentary budget officer tomorrow at 11. Then at 3:30 we have Bill S-6.

With that, thank you all.

The meeting is adjourned.