Evidence of meeting #62 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was clause.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Trevor McGowan  Acting Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
Glenn Campbell  Director, Financial Institutions, Financial Sector Policy Branch, Department of Finance
Jean-François Girard  Senior Project Leader, Financial Sector Policy Branch, Department of Finance
Eleanor Ryan  Senior Chief, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Clerk of the Committee  Ms. Suzie Cadieux

4:30 p.m.

Liberal

Bill Morneau Liberal Toronto Centre, ON

Thank you very much.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

On the supplementary estimates votes, I assume you have them in front of you.

DEPARTMENT OF FINANCE Vote 1b—Program expenditures..........$5,820,073 Vote 7b—Authority to increase the limit..........$1

(Votes 1b and 7b agreed to on division)

FINANCIAL TRANSACTIONS AND REPORTS ANALYSIS CENTRE OF CANADA Vote 1b—Program expenditures..........$473,938

(Vote 1b agreed to on division)

Shall I report the supplementary estimates (B) 2016-17 under the Department of Finance and FINTRAC to the House?

4:30 p.m.

Some hon. members

Agreed.

4:30 p.m.

An hon. member

On division.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

All right, we'll start on Bill C-29.

I think we were going to start on it versus committee business, weren't we?

4:30 p.m.

Liberal

Steven MacKinnon Liberal Gatineau, QC

Yes.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Okay.

Do you want to suspend for five minutes for people to have a break before we get into Bill C-29?

There are quite a number of witnesses here for the part 1 of the bill, “Amendments to the Income Tax Act and to Related Legislation”. From the Department of Finance, we have Mr. McGowan, Mr. Greene, and Mr. LeBlanc. I believe they will come to the table in case there are questions on that part.

We'll suspend for five minutes.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

We'll reconvene. We're dealing with part 1 amendments. We'll go through them first, and then we'll eventually come back to clause-by-clause consideration.

Part 1 goes from clauses 2 to 88. There are no amendments from clauses 2 to 30.

We have a Bloc Québécois amendment on clause 31 by Mr. Ste-Marie.

(On clauses 2 to 30)

On clauses 2 to 30, do you want to raise questions with the witnesses first, or do you have a point to make, Mr. Albas?

4:30 p.m.

Conservative

Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC

I was hoping to make a quick intervention, Mr. Chair.

In terms of having a clean and efficient process, I want to state my objections to the common reporting standards. We heard from many different credit unions both in the pre-budget consultations but also on the review of this bill. It is a big mistake for the government to introduce legislation without having some sort of provision à la FATCA where it allows small credit unions to be exempted if they have less than 2% of their assets being held by foreign nationals. It will cause a lot of angst for credit unions.

I am thinking particularly of not just the smallest credit unions, where obviously the staff will have to spend more time doing paperwork to submit at the federal government's new behest on these common reporting standards, but also other credit unions which are not structured in the same way as the banks where in Quebec, Desjardins, will have to submit hundreds of applications because they have hundreds of locations.

Does one of my other colleagues from the Conservative side want to speak about the doctors? No.

We will be opposing those measures particularly the common reporting standards. Again, the so-called clarification is going to put a lot of good doctors who are doing research across the country in a position where they might just decide to leave for other jurisdictions, or at least it will cause a lot of angst for many of them who will have to restructure their practices in a way that is tax efficient for them.

On those two points, and I'm sure many other things in the budget bill, we're going to abstain or oppose, but we can do many of these on division.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Are there any other points on clauses 2 to 30, or any questions anybody wants to raise with officials who are here at this time?

(Clauses 2 to 30 agreed to on division)

(On clause 31)

On BQ-1, Mr. Ste-Marie.

4:30 p.m.

Bloc

Gabriel Ste-Marie Bloc Joliette, QC

Thank you, Mr. Chair.

In Bill C-29, the government is eliminating a series of small tax loopholes. For instance, SMEs were recording one deduction twice, and small savers reported the income from stripped coupons as capital gains. However, Bill C-29 has failed to eliminate the biggest tax loophole, which is the use of tax havens. I suppose that was just forgotten, hence this amendment.

Those who followed the debate concerning motion M-42 on tax havens, which I introduced, know this: the use of tax havens is due to the regulations that exceed the scope of the law and of treaties. Amendment BQ-1 does not really change the laws, and scrupulously respects fiscal treaties. It only repeats what is in the Income Tax Act, but does it in a direct way that makes it very clear that certain tax regulations are illegal.

Subparagraph (ii) reiterates that in order to be tax exempt, income derived from a foreign branch must be covered by a tax treaty. Through this clause, Parliament will invalidate paragraph 5907(11) of the Income Tax Regulations. In those regulations, the government discreetly exempted from taxation income generated in 22 tax havens with whom we had not even concluded tax treaties.

As for the third paragraph of amendment BQ-1, it repeats word for word what clause XXX of the tax treaty with Barbados says. If businesses open branches in Barbados to avoid paying tax, they will simply not be covered by the treaty.

However, unfortunately, the government again discreetly adopted a regulation to exempt them from paying tax, despite what the law and the treaty said. I am referring to paragraph 5907(11.2) of the regulations. These two provisions may well be illegal. By adopting this amendment we will say so clearly, and this will invalidate them. For the five big banks alone, we are talking about $6 billion a year that will stop going up in smoke.

Thank you, Mr. Chair.

4:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Ste-Marie.

I will have to do a ruling on this.

The amendment seeks to amend the Income Tax Act by including in the definition “taxable Canadian business” for any business that is entitled to a special tax benefit conferred by Barbados under the Canada-Barbados Income Tax Agreement Act, 1980. As House of Commons Procedure and Practice, Second Edition, states, on page 768:

An amendment is also inadmissible if it exceeds the scope of the ways and means motion on which a bill is based, or if it imposes a new charge on the people that is not preceded by the adoption of a ways and means motion....

It is the opinion of the chair that the amendment, by eliminating an exemption, would oblige certain entities to bear an additional charge. Therefore, I would rule the amendment is inadmissible.

(Clause 31 agreed to on division)

4:45 p.m.

Liberal

The Chair Liberal Wayne Easter

There are no amendments from clauses 32 to 42.

Are there any questions on those sections for the Department of Finance staff, or is there anything anybody wants to raise?

Shall clauses 32 to 42 carry?

(Clauses 32 to 42 inclusive agreed to on division)

(On clause 43)

We have NDP amendment 1. Mr. Caron.

4:45 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

The amendment, as you know, seeks to index the Canada child benefit to inflation starting now. The government wants the indexing to start in 2020, but as I already mentioned, the loss in purchasing power between now and 2020 will be significant.

I don't think any further explanation is needed.

4:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Caron. This would require a royal recommendation. I will quote House of Commons Procedure and Practice:

Since an amendment may not infringe upon the financial initiative of the Crown, it is inadmissible if it imposes a charge on the public treasury, or if it extends the objects or purposes or relaxes the conditions and qualifications specified in the royal recommendation.

I would suggest this amendment does impose an additional charge on the public treasury, and therefore, it's inadmissible as it requires a royal recommendation.

Shall clause 43 carry?

(Clause 43 agreed to on division)

4:50 p.m.

Liberal

The Chair Liberal Wayne Easter

There are no amendments from clauses 44 to 60.

(On clause 44)

Mr. Liepert.

4:50 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I'm not going to put forward an amendment. We didn't put forward an amendment, because it would be ruled out of order.

I just want to ask a question. Is clause 44 the same as section 44, where we talked about the small business deduction?

4:50 p.m.

Liberal

The Chair Liberal Wayne Easter

Officials? It's better to answer on the record because head shakes don't get on the record.

4:50 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I believe he said yes.

4:50 p.m.

Trevor McGowan Acting Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Yes, it is.

4:50 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I'd like to make a few comments, if I could. Then I would like to ask for a recorded vote on this clause.

4:50 p.m.

Liberal

The Chair Liberal Wayne Easter

Go ahead. The floor is yours.

4:50 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I think we have witnessed, both at the stage of consultation and confirmed here again by the minister today, that this is clearly the first step where this government, the minister, and the department are going to start to whittle away at the small businesses. We know that in the election campaign, the Liberals campaigned on a reduction in the small business tax and joined with the other two parties, and then they reneged on that commitment when it came time to present a budget.

We also know that when the current Prime Minister was campaigning, he used a phrase along the lines that small businesses were nothing but a tax dodge, and I think we are seeing here the first evidence of that thought. I would put all small businesses on notice to watch out for budget 2017, because today it's the group medical structures, and tomorrow, who knows what it's going to be? Our witnesses before the committee last week said that they believed it was an unintended consequence. It is clearly not an unintended consequence. This is clearly designed to take away a small business deduction from a group of practitioners who are simply organized in this fashion so that they can deliver better health care to Canadians.

I think it is absolutely ludicrous that the government would carry through with this kind of initiative. In my view, this is the first of what we will see consistently going forward over the next three years: an attack on small businesses, an attempt to bring in more revenue by hitting small businesses. I want to go on record, as part of this discussion, to say that the Liberal members of Parliament will pay the price for this in the next election.

I would like to ask, Mr. Chairman, that we have a recorded vote on this particular clause.

4:50 p.m.

Liberal

The Chair Liberal Wayne Easter

We will when we get to the vote.

Is there anybody else who has anything to add or are there any further questions for the officials?

Mr. Caron, go ahead.

4:50 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Thank you, Mr. Chair.

I'd like to ask the officials a question.

You've heard what the Canadian Association of Radiologists and the Canadian Medical Association had to say.

How do you respond to their arguments?