Evidence of meeting #25 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was businesses.
A video is available from Parliament.
6:05 p.m.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
My understanding is that this is the kind of bogeyman the Trudeau government used at the time.
What do you think, Mr. Mansfield?
6:05 p.m.
Chartered Professional Accountant, BDO Canada
I think in terms of coming to the pure cost of any measure, I probably don't have the ability to do that and I don't have the experience in that area. I've heard from a lot of members today, as well as in previous sessions, and they all seem to be in line with the spirit of what this is trying to accomplish. In my mind, in dealing with anything, you always focus on the spirit and work out those small details that are needed to push it past the finish line. That's what I'm hearing most of today.
6:05 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Thanks, Mr. Chair.
I'd like to go to Ms. Young, because I had asked the question in the last round and she didn't get a chance to respond. That was the question of looking in the crystal ball over the next 15 years, with the bill and without the bill.
6:05 p.m.
President-Elect, Insurance Brokers Association of Canada
I think we're already seeing it happen, particularly in the last couple of years. We're seeing a lot of large consolidations of small brokerages that are selling to large corporations, as I mentioned in my comments, either backed by private equity firms or by insurance carriers or whatnot. We're already seeing it.
We have a large number of brokers—3,400 brokerages in Canada—that primarily have fewer than 15 employees, and they have to make a choice to sell to a large corporation with deep pockets or to pass it along to their family that is working alongside them in the business. If the playing field isn't equal, then they're going to make the best decision for their retirement.
6:10 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Thank you.
I'd like to go back to Mr. Kelly.
There are two things. First off, the estimated cost of this is a fraction of the amount of money that the Parliamentary Budget Officer tells us we lose to overseas tax havens. Every year we lose $25 billion, at least, in tax revenues to overseas tax havens. So, the amount that is estimated by the Parliamentary Budget Officer, around $275 million annually, is a pittance. Of course, the benefits far outweigh the small level of cost, but if anybody is concerned about tax leakage, overseas tax havens should be the first priority. That would be my first question to you.
My second question is this. Are you familiar, because you have international links, with any other country that actually penalizes, in the tax system, people for transferring their family business or their family farms to their children?
6:10 p.m.
President and Chief Executive Officer, Canadian Federation of Independent Business
Thank you for those questions. I agree with you that there are better spots for us to pursue additional government revenue if that were the objective here.
The lens with which we would encourage you to look at it, first and foremost, is to do what's fair. If groups like mine were coming to you and saying, “Okay, let's put an advantage in place to sell to an international company or to an arm's-length party”, I think you would rightly laugh us out of the room. If we were saying, “Let's create a huge advantage to sell to our kids”, you might question whether that's fair. Governments should be neutral here and ensure that the tax treatment of the sale of a business, whether it's to one's family or to a third party, is the same.
My understanding is that this is how it works in the rest of the world. Tax policy should not speak to whom we should advantage in the sale of a business. We should make it a level playing field regardless, and then let the market, business owners, sort out who is the best party to take over the businesses.
Honestly, if we were to incent something, I think it's in the national interest to incent the transfer of the business to the kids for all the reasons we've talked about, including keeping those businesses as going concerns in the communities that depend on them for jobs and employment.
6:10 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, all.
We'll go to Mr. Kelly, and then Mr. McLeod will have to wrap up this panel, because we need five minutes at the end and we have a hard stop at 6:29.
6:10 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Thanks, Mr. Chair.
Perhaps again I'll go to Mr. Janzen on this. He mentioned this before, but I really want to make sure that it is clearly understood by the critics of this bill, or those who seem to have the greatest concern about its consequences: This bill does not convey a tax advantage to businesses that operate through a limited company transferring between the generations; this bill removes a disadvantage to those businesses.
Is that about as fine a point as we can put on it?
6:10 p.m.
Senior Tax Manager, Deloitte
Absolutely. Just getting back to Daniel's comments as well, all this is doing is levelling the playing field—and not even fully yet, but it's a great start.
You're right. If this bill passes as is, there's still no advantage. Someone selling their business to their kid will not be at an advantage over somebody selling their business to a third party.
6:10 p.m.
Conservative
6:10 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
—one of many disadvantages that a person has when they choose a life of self-employment. It's a very difficult thing to run your own business, and the risks to one's family's financial security are enormous. They're unlimited, really.
6:15 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
I know the time is short, so maybe I'll keep this going and switch to Ms. David, or both Ms. David and the insurance brokers.
We've heard a lot in testimony about the impact on farms, a bit on fishers, and a bit about others. I've listed restaurants, small manufacturers and things like that, but professional service providers, thousands of them, have limited companies too and have built up a business that they would want to transfer to the next generation.
Could you maybe comment on how common limited companies are among financial service providers?
6:15 p.m.
Chair of the Board, Conference for Advanced Life Underwriting
We're actually a great industry to reflect that, because aside from other diversity issues, we have an aging demographic problem in financial services, particularly insurance. We see many of our retiring advisers selling their practices to their children; it's probably overweight to the family side.
You don't have to look very far to find small businesses in multiple jurisdictions, different labour markets, that are affected by this.
6:15 p.m.
Conservative
6:15 p.m.
Chief Executive Officer, Insurance Brokers Association of Canada
Thank you very much, Mr. Chair.
It's a great question. The demographics of the broker channel are very similar to the demographics across the small business community. We have a number of businesses and a number of business owners who are, or will soon be, at the stage of considering a business transfer.
This bill provides a wonderful opportunity to level the playing field and to ensure that the significant number of insurance brokerages that are family owned across the country can consider the sale within the context of their family. We think this is absolutely critical.
I know Robyn may have some of her own personal experience to share as well.
6:15 p.m.
President-Elect, Insurance Brokers Association of Canada
As a second-generation broker, it was tough to convince my parents to even want to sell to us, for a multitude of reasons. It was primarily because they could sell to a third party for significantly more money.
Ultimately, as I said in my opening remarks, they wanted to continue to add to and support the community that they built their business in.
6:15 p.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
It goes without saying that this would be the same for real estate practices, mortgage brokers—which is my background—medical professionals, law, accounting and any variety of these types of businesses.
With that, Wayne, I'll turn it back over.
6:15 p.m.
Liberal
6:15 p.m.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you, Mr. Chair. I'll be quick.
Bill C-208 was brought in by Larry Maguire, who is a Conservative member. He made a lot of good arguments in his presentation. We hear a lot of people supporting this. It seems like a logical thing to have families being able to transfer their businesses to their children.
The last time it was raised, in 2017, lots of issues hadn't been resolved. I hear from a lot of people who have been working on this for quite some time. It looks like it's been a thorn in the side of many people on this panel.
Why didn't it happen when the Conservatives were in power? They're now bringing it forward. What stopped it before?
Maybe that's for Dan or Brian.
6:15 p.m.
Liberal
6:15 p.m.
President and Chief Executive Officer, Canadian Federation of Independent Business
The same finance officials who hate this idea now hated this idea then and advised government not to go down this road. The Tories at least reviewed the legislation—to their credit—but didn't pass it when the Liberal MP Emmanuel Dubourg proposed this years ago.
I'll remind you that Emmanuel, prior to becoming a parliamentarian, was a CRA auditor, so he knows what he is talking about.
I think inaction and prioritization were the enemy of this. This is a confusing area, and nobody—no minister—wants to be the one who presides over something that is going to create some giant new loophole that costs the treasury a bunch of cash.
This isn't that bill. This is a bill that I think has put in place reasonable guardrails. Emmanuel Dubourg tried to do that; Guy Caron tried to do that. I think Larry Maguireis doing the same thing, which is trying to make sure we find that balance to ensure that we can provide legislation to level the playing field, without necessarily leaving a giant new way for creative people to try to get out of their tax obligations.
I think this bill does that. I really urge the committee to give this your strong endorsement, so we can get this issue behind us. If tweaks are needed, call us all back. I guarantee you that the accounting community and business associations like mine and others will be there to find ways to shore up any gaps that we may encounter along the way. You have my word to do that.
6:20 p.m.
Chief Executive Officer, Insurance Brokers Association of Canada
I can perhaps jump in on that one as well.
Historically, private members' bills will fail or succeed for a whole range of reasons, but parliamentarians have a unique opportunity to seize the moment today. I think there is a greater element of political will around this particular bill, Bill C-208.
The backdrop of our circumstances is different. As you all well know and can appreciate, we've been through a year of a global pandemic and the demographics of the small business community have also changed. The time is now.