Evidence of meeting #203 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was body.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
Okay, that's it under number 1.1.1.
Now we'll turn to number 1.1.2, expansion of tax incentives for donations of cultural property. Are there any questions?
Hearing none, we'll go on to number 1.1.3, expansion of first-year capital cost allowance rates for certain depreciable capital property.
Mr. Sorbara.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Welcome, everyone.
I just want to reference that this is with regard to the measures announced in 2018. Is that correct?
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
That is correct.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
This would allow for a 100% capital cost allowance for manufacturers and businesses to do a full write-off in year one.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
Yes, that is a component of it.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Earlier, you mentioned that the capital cost allowance could be fully applied to green energy equipment.
Can you be a little more specific about what this means? Is there a definition in the bill?
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
This is equipment and property that are contained currently in class 43.1, which provides a 30% capital cost allowance rate, and class 43.2, which provides a base 50% capital cost allowance rate. These properties are things like wind projects, solar, certain biofuels, high-efficiency generation equipment and properties like that. They are specifically the properties contained in classes 43.1 and 43.2 of the income tax regulations.
Liberal
The Chair Liberal Wayne Easter
Okay, if there are no further questions, then we'll go on to number 1.1.4, non-taxability and other treatment of certain social assistance payments.
Mr. Fergus.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much for being here today and for the briefing you and your colleagues have provided, Mr. McGowan.
I have three questions. Here's the first one.
How many people will benefit from the amendments proposed in clauses 9 and 20?
Pierre Leblanc Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Thank you very much for the question.
It is not clear how many people, children and parents will benefit from the measure.
The measure is intended only to ensure that, in the case of a single-parent family, workers are eligible for the higher amounts of the Canada workers benefit and that those amounts are not taxable. We are proposing this measure simply to provide that assurance.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
In terms of the retroactive part of those measures, how would people be informed that they are eligible for the benefits?
Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Thank you for that question.
Many of those parent support programs related to parental rights are relatively recent.
However, there will be no real change for individuals who have previously benefited from these sorts of measures, such as the working income tax benefit. The goal is only to ensure that the legislation is consistent and reflects how we would like to see these people being treated. In other words, it must be consistent in terms of how the Canada Revenue Agency administers the measures.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Yes, but more and more notices are being sent to eligible individuals. For some measures in the past two budgets, it was decided that people did not even have to fill out the form. It will be done for them, if it is seen that they are eligible to receive those benefits.
Like many members of Parliament, I have organized tax return services for those in need who have simple tax returns. We have all done all that work. I would just like to make sure that the people who are entitled are aware that they are eligible for those programs from which they can truly benefit. They don't usually know about it. I would like to know that they will benefit from it.
Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Yes. The initiatives you are talking about will be part of our efforts to ensure that as many people as possible have access to the credits and benefits for which they are eligible.
Liberal
The Chair Liberal Wayne Easter
Are there any other questions? Okay.
We'll turn now to number 1.1.5, which deals with the removal of taxable income in the determination of the expenditure limit for the enhanced scientific research and experimental development tax credit.
Mr. Sorbara.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Mr. Chair.
The SR and ED program is a pretty wildly.... Not “wildly”; it's utilized quite a bit.
Sorry. I got tongue-tied there.
Liberal
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
It's used quite a bit across Canada.
Can you explain the change, and whether there's been any scenario analysis on the impact from the change on the ability of firms to utilize the SR and ED credit?
Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
The SR and ED program has two main components. The one that is available for small and medium-sized businesses is a 35% refundable tax credit. The second component available to all other businesses is a 15% non-refundable tax credit. Currently, to have access to the enhanced tax credit, which is the 35% refundable credit, there are two tests in the Income Tax Act. One is based on the taxable capital of the firm and the other is based on its taxable income.
With the change proposed in the budget, the government would repeal the taxable income threshold that determines the access to the enhanced SR and ED credit so that only the taxable capital of the firm determines whether or not it's a small firm. That's similar to what is done for other incentives available for small businesses. For instance, with the small business tax rate, it's only determined based on the taxable capital of the firm. It would mimic this approach.
The concern that has been expressed is that currently the threshold that determines whether or not you have access to the enhanced SR and ED credit is based on whether a firm has between $500,000 and $800,000 of taxable income. Above that amount of income, they no longer have access to the enhanced incentive. For firms that are in that range, sometimes earnings can be cyclical. There was a lot of uncertainty associated with the rise in income and the loss of potential SR and ED benefits.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
So the 35% refundable portion of the SR and ED usually applies to your small and medium-sized businesses.