Finance Committee on April 29th, 2019

[The Chair, Liberal, Wayne Easter]

There's some confusion, I think, over some of the statements that were made here.

Would I be correct in saying that the various bodies, as yet to be named, would advise on who is eligible for the tax—this is a tax measure—and not on who is eligible to be considered a journalist? There is wide-ranging discussion here, and some of it seems to lead to saying that the government—or whoever—might have the right to say who is a journalist.

This is related strictly to tax measures, correct?

[Trevor McGowan]

Thank you, Chair. That is correct.

[The Chair, Liberal, Wayne Easter]

Thank you.

Then, starting on the next point, if we could move on to section 1.1.6.1, personal income tax credit for digital subscriptions, are there any questions?

Then we go to section 1.1.6.2, a refundable labour tax credit for journalism organizations. We have covered a lot of journalism here. I guess we're okay on that one as well.

Then, section 1.1.6.3, access to charitable tax incentives for not-for-profit journalism, is done as well.

Then we have 1.1.7, introduction of the Canada training credit. There is another individual coming to the table. Are there any questions on the Canada training credit tax measures?

Mr. Dusseault.

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

Could you remind us of the figures? I think we spoke about a maximum of $250 per year, up to a maximum amount of $5,000 for life.

[Pierre Leblanc]

That is correct. For earnings of at least $10,000 per tax year, an amount of $250 can be accumulated.

I'll give you an example. Let's say that four years from now, I intend to take a course to improve my skills that will cost $2,000. While I am working, I accumulate $250 per year. After four years, I would have accumulated $1,000. I could receive a refund of up to 50% of my course fees.

For a $2,000 course, I could receive a reimbursement of $1,000. If I decided that the time was not right to take the course, I would continue working. For every year, I would accumulate a certain amount for training fees until I took the course.

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

This is not an education savings account. The Canada Revenue Agency will be keeping track of the amount, correct?

[Pierre Leblanc]

Yes. Every year, I could check the amount in my tax assessment or in my file on the Internet. I could check my account. It is a notional amount.

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

Will people claim their refund for these costs in their tax return, or when they receive the invoice?

[Pierre Leblanc]

They can claim a refund of up to 50% of their tuition on their income tax return, up to the amount they have accumulated.

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

I think the establishments whose tuition fees are eligible are already defined in the law. Not all establishments are eligible. Is that the case?

[Pierre Leblanc]

Yes. By and large, those are the eligible establishments, as there is now a tuition tax credit. There are two lists.

Mark, I don't know if you want to add something?

[Mark Maxson, Acting Director, Personal IncomeTax Division, Tax Policy Branch, Department of Finance]

The establishments concerned are about the same as those for the tuition tax credit, but they must be located in Canada.

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

So it is quite broad. It could be post-secondary institutions, or vocational schools.

[Pierre Leblanc]

Yes. There are at this time two lists for the tuition tax credit. Every province or territory has its list of post-secondary institutions, be they universities, colleges or CEGEPs, and the tuition fees charged by these establishments are eligible.

The Department of Employment and Social Development also has its own list. It certifies institutions that provide skills training. It can be for shorter courses. These two lists contain all the establishments whose tuition fees are eligible.

[The Chair, Liberal, Wayne Easter]

Thank you.

Ms. Rudd.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Thank you.

Thank you for being here today. On the Canada training credit, there are a couple of things. You've explained it well in terms of the accumulation, if you will, in someone's account, which can be used more than once. People can do something, not do something for a few more years, and then do something again if that's what works in their professional life.

The other thing is the complementary program of EI that supports this, and I'm getting some great questions and great feedback on this. For small business owners, particularly, it was always the case that they would let someone go to take a course and would have to replace them. It was expensive.

For someone who's transitioning between jobs, the EI is available for this. I believe it's up to four weeks of EI that is on top of this training fund and complementary to it. Is that correct?

[Mark Maxson]

Yes. They're starting consultations on the details of this EI training support benefit over the summer.

It's not in this act, but the Department of Employment and Social Development Canada is going to be talking to employers, workers and training institutions, working out all of the details of that. Certainly the intent is that they would be very much complementary. People could benefit from this EI training support benefit to replace their income while they're on training, and then they could receive some assistance with the fees through this credit.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Just so we're clear on the age spread that is eligible for this, there is a recognition that this is important for younger workers as well as for more mature workers who are still looking to contribute right up to, I think, age 64. Is that correct?

[Mark Maxson]

That's right.

I should clarify that the credit has that age limitation. The EI training benefit, which I'm not an expert on, is based on your EI eligibility, your eligible hours preceding the training.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Are there any other questions on the Canada training credit?

Okay, thank you. Turning to the next section, 1.1.8, tax treatment of assessing cannabis for medical purposes, are there any questions on that section?

Hearing none, are there any questions on 1.1.9, extension of the exception granted to agriculture or fishing co-operatives for the calculation of income eligible for the small business deduction.

Mr. Dusseault.

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

Has anyone assessed the number of enterprises that would be affected by this measure?

[Trevor McGowan]

I don't have any information on the number of businesses in total, although the change was put forward in response to a number of stakeholder communications that have come into the department. It's of importance to a number of stakeholders who sent in submissions that this change ought to be made, and not of largely academic impact. I don't have specific numbers on the number of farming or fishing businesses that would be affected, no.

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

This measure is available to co-ops, but agricultural or fisheries enterprises could use it, even if they are not set up as cooperatives.

Why does this only affect agriculture and fishery? Are there tax reasons? Were enterprises other than farming or fishery excluded previously?

[Trevor McGowan]

I think I would say there are two reasons. One is historical and the other more policy focused. Some time ago, rules were introduced to prevent inappropriate multiplication of the small business deduction. A classic example of that is a law firm with 100 partners, say, and under the basic scheme of the small business deduction rules where you have one business, you share your $500,000 small business deduction limit.

Tax planning had arisen in which each of the members of the partnership in my example might set up a side corporation that would provide services to the partnership, thus multiplying access to the small business deduction from the intended $500,000 to, in my example, say, up to $50 million. That's sort of the paradigm example of the types of transactions these were trying to address.

In response to that measure, the department heard from a number of farming and fishing businesses that legally were in a structure that was very similar to the one I described, where they were members of a co-operative and because of the requirements to be a member of the co-operative, they had to have membership interests in the co-operative that were treated as shareholdings for the purposes of these small business deduction rules.

They were providing their farming products and fishing catches to this co-operative and found themselves within the ambit of the rules despite not being within their policy intent because they weren't participating in the profits of the co-operative. It was a different type of business structure from the one that was envisioned by the anti-multiplication rules. That's why, in a previous budget, the rules were amended to create an exception for agricultural and fishing sales to a co-operative organization.

The issue that this measure responds to is as a result of further communications and responses from stakeholders in the farming and fishing industries. A number of business structures are in place that are economically and structurally very similar to the co-operative structure that the government provided an exception for but that do not, for technical reasons, qualify as co-operatives. In the farming and fishing industries, the same types of concerns that apply in other industries are not as acute.

The decision was taken to extend the relief provided in the co-operative context to all farming and fishing businesses, again, recognizing that economically they're very similar and it was considered to be an inappropriate tax consequence that they be treated differently for tax purposes when the main difference is that one technically qualifies as a co-operative and the other doesn't.

In other industries—I'm going back to my law firm example—those same considerations would not apply.