Finance Committee on April 29th, 2019

[The Chair, Liberal, Wayne Easter]

I could explain this in how I see it as it relates to fishermen. We all know how co-ops operate. You have 30 fishermen who are members of a co-op. What was happening under the previous tax regime is that fishermen delivering their catch to that co-op were taxed at a higher rate when they delivered to their own co-op versus if they sold it to somebody else. That's really what was happening.

They sell their catch to the co-op, which is a business they're a part of, and what they're being forced to do because of an anomaly in the tax system was to sell it to another buyer on the wharf rather than their own co-op because they were affected substantially on a tax basis. That's why the changes were made on the co-op side, and I think what you're talking about here is that some businesses find themselves in a similar situation. That's how it affects, in layman's term.

Are there any other questions on this section, 1.1.9?

Okay, we'll turn to section 1.1.10, extension of the mineral exploration tax credit.

Ms. Rudd.

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

Thank you. I have a couple of questions for a bit of history on this.

For over a decade it was a program that was renewed annually. We certainly heard that over the last decade this was very difficult for the junior miners, if you will. Exploration is very expensive, and raising capital is an even bigger challenge.

I would ask you to speak to a couple of things, first the stability that this five-year provision provides. As part of the work done around this, do you see this as helping the mining sector leverage capital and secure financing for longer terms?

[Maude Lavoie]

That the renewal be for a longer period than the one-year time frame, which as you were alluding to has been the practice for the past decade or even longer, was a frequent, recurring request from industry. In response to those concerns the government announced a five-year extension.

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

Is there a rationale behind not making it permanent, for providing it for just five years? I get the rationale for changing from one year to five years, in terms of stability and the ability to plan and, as I said, leverage capital. Is there, though, a rationale for not making it permanent?

[Maude Lavoie]

This gets into the policy choices made by the government, so it's difficult for us to comment. Typically measures are introduced on a temporary basis. It's done so that they can be reviewed after a certain time period. In this case, reflecting difficulty accessing capital, this will allow the government five years to reassess whether there's still an ongoing need for it.

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

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Is there anything else on the mineral tax credit?

Next is section 1.1.11, tax treatment of communal organization business income allocated to its members. Are there any questions on this?

Mr. Sorbara.

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

What is the definition of a communal organization, please?

[Pierre Leblanc]

Generally what we're talking about here is communities whose members can't hold property on their own. That's really where the tax issue arises. If you think of it, usually individuals receive their own salary, their own income, and we tax accordingly. Here, given the tenets of a communal organization, property can't be held that way; it needs to be held in common. You need to approach tax a bit differently in those cases.

[The Chair, Liberal, Wayne Easter]

Are there any other questions?

Next is section 1.1.12, increase of the homebuyers’ plan withdrawal limit and changes to its application on the breakdown of a marriage.

Mr. Dusseault.

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

The question that needs asking is why was an amount of $35,000 chosen?

[Pierre Leblanc]

I think it has to do with the last increase to the ceiling, which was in 2009. That was 10 years ago. It amounts to a reasonable increase. It also takes the current market situation into account. The idea was to introduce a reasonable increase for first-time buyers.

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

In many other previously described cases, even involving this bill, people spoke of stakeholders who shared situations with us, and we were told that the changes being discussed were intended to respond to those concerns. Is that the case here? Honestly, young people have not mentioned this to me very often.

The budget document said that this measure would help young people, because it is presumed that first buyers are young people. Did a lot of young people come to you to say that withdrawing $25,000 from an RRSP to take part in an HBP, a Home Buyer's Plan, was insufficient, and that they needed to withdraw $35,000? Were there any consultations about this?

[Pierre Leblanc]

Thank you for the question.

We received several requests, especially from real estate sector groups. It is in the public domain. If you look at the figures broken down by age, you can see that almost half of those who withdraw the maximum amount, $25,000, are less than 40 years of age. This is not a measure that is addressed to everyone. Nevertheless, many young Canadian men and women will benefit from this increase.

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

I have heard it said that people could use the HBP several times, for instance in the case of a separation. I've never heard of it with regard to the other measure. Back home, in Sherbrooke, a few people have raised this with me. I want to know if there will be a limit.

Will people be allowed to use the plan as often as they like, or only two or three times? I did not see those details in the bill. Can you enlighten us on that?

[Trevor McGowan]

There is a requirement that it be for a first-time homebuyer. The second measure provides that if you meet conditions, individuals who experience a breakdown of a marriage are able to participate in the homebuyers' plan even if they don't meet this first-time homebuyer plan requirement.

Is your question if you can keep utilizing it on the breakdown of a second or third marriage?

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

In the case of a couple, is it the first-time buyer who will be entitled to make the withdrawal, or will both people be able to do so?

Let's take the example of someone who made a withdrawal in the past, then separated from their spouse, and then remarried with a partner who never made a withdrawal. The latter could make a withdrawal, but could the former as well?

[Pierre Leblanc]

In that case, I think both would have the right to withdraw. If you've already used the plan, you are eligible again after a marriage or common-law union breakdown, but there is, however, a condition that applies: you must reimburse the full amount before you can use the plan again.

It will depend on the specific situation.

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

So there is no limit, but it is conditional on reimbursing the full amount.

[Pierre Leblanc]

There are limits, really, because you have to replace the full amount, and generally, that takes time.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

According to Canada Revenue Agency numbers in 2017—which is the last one I could find on the homebuyers' plan—only 20,250 people maxed out their HBP allowance.

How many extra people do you think will max it out or take advantage of it to get to $35,000?

Do you have a breakdown of those numbers and what the expectation is? Was any modelling done?

[Pierre Leblanc]

I think the costing is based on roughly the same.... The idea is that if you look on an annual basis at those roughly 20,000 individuals who are taking out the $25,000, typically those individuals would take out more given the chance to do so. Basically, there's sort of a distribution. Some will take out just a little bit more. Some might take out $30,000. Some will go up to $35,000. It depends on the financing, what they have in their RRSP, what they are looking to buy and what sort of down payment they need.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Did the department previously do any age-based analysis of distribution?

[Pierre Leblanc]

Yes, and that's what I was referring to in my response to Mr. Dusseault. I just saw those. Again, there were roughly 20,000 “maximizers”, if we can call them that—people who now withdraw $25,000 when they use the homebuyers' plan. Roughly half are under the age of 40. It adds up to just about half.