Finance Committee on June 18th, 2019

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

Then when we talk about deductibility—going back to accounting days—the deductibilities would therefore change from the employee to the employer, because we would anticipate that the compensation would then just be made in terms of salary, or else the tax treatment of those stock options would be treated as regular income.

[Andrew Marsland]

I think if you look at the effect of this measure and model it out, if the corporation wished to have the same after-tax cost of compensation and adjusted the number of stock options it granted to the employee, then there would be an impact on the employee's after-tax compensation. It depends very much on the circumstances in the province, etc., but it probably would be in the order of 10%, I believe, or somewhere in that region. Again, it depends on which province it is.

If, on the other hand, they wanted to keep the employee whole, the after-tax costs to the corporation would go up. That equalizes the cost. It would be the equivalent of paying a cash bonus, essentially, so it removes that advantage. To the earlier question, that represents essentially the difference in cost.

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

Right now, you're being taxed on stock options, and by removing the idea of strike and effective prices and all that kind of stuff when it's granted, you just be enjoying the capital gains rate.

[Andrew Marsland]

Well, yes, but the corporation—

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

That's from the employee side.

[Andrew Marsland]

From the corporation's perspective, the corporation isn't getting a tax reduction—

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

Exactly.

[Andrew Marsland]

—so it's not simply that the employee's stock option benefit is getting a stock option deduction; there's also an impact on the corporation.

Overall, it's tax preference now, and the effect of the provision will be to move that tax preference for those affected corporations in the way I described. The corporation would be indifferent as to whether or not it paid in cash compensation or as a stock option.

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

That's effectively.... Please, Pierre, correct me if I'm wrong on this. In terms of the tax expenditures associated with this ways and means motion, it's effectively why you don't recapture.... I don't know if that's the word, but because of the way the tax code works, you don't actually see a large bump in government revenues.

[Pierre Leblanc]

That's an important consideration. The other important consideration is that the one number I could give for the end of this fiscal planning period for 2023-24 is not a mature cost estimate, because it will basically take time. This is only for options granted on or after January 1, 2020.

[The Chair, Liberal, Wayne Easter]

Mr. Kmiec, you get to wrap it up. You have about four minutes to do it.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

That's super. I think I can do it in four minutes.

On something that was mentioned before, that TD report is the same TD report that the CEO of CMHC criticized. It did call for “tweaking” and making the stress test flexible. It's in the report. You can search for the word “flexible”, and it's in there.

One thing that caught my eye on OSFI was that the Office of the Chief Actuary provides “actuarial valuation and advisory services” to a bunch of listed organizations. I was wondering about the advisory services you provide on the CPP. What are those advisory services?

[Michele Bridges]

It's with regard to funding levels in order to maintain the viability of the CPP and its long-term horizon. It's actuarial advice to the board that oversees the CPP program.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Okay, but actuarial valuation would be different from advisory services. I understand the actuarial component, but what advisory services do you provide?

The CPPIB came here before the committee. They're moving towards a more active investment model and they've hired over a thousand people over the past however many years. I'm wondering what other advisory services outside of actuarial advice you are giving them.

[Michele Bridges]

It would only be actuarial advisory services.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Okay. The way this is written, then, is not entirely clear.

My only other question was about the capital internal services. There's $2 million for new capital spending. I wanted to know what that was for.

[Michele Bridges]

OSFI invests in a variety of information management and information technology systems in order to support the work we do. We also invest in leasehold improvements, for example, in any of our space accommodations. Other capital expenditures would include furniture and fixtures. There are a variety of investments, but the majority are in the information management and information technology area.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

What's the breakdown of the $2 million?

[Michele Bridges]

In terms of the...?

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Those three categories you just mentioned.

[Michele Bridges]

I do not have that information with me.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Would you be able to provide it to the committee through the clerk?

[Michele Bridges]

Yes.

[The Chair, Liberal, Wayne Easter]

There is some information that is going to be forwarded back to the clerk for further clarification on a couple of points.

With that, I'm not sure whether we will be meeting on Thursday. If Parliament is still sitting, we will be. If Parliament is not, we won't. We don't know whether or not Parliament is going to be sitting for sure on Thursday and Friday.

Go ahead, Mr. Dusseault.

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

On a point of information, Mr. Chair, we adopted a motion last week to invite the Minister of National Revenue. I'm wondering if you have an update for us on a date.