Evidence of meeting #42 for Finance in the 43rd Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was measure.
A video is available from Parliament.
Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
Perhaps I can start.
There are no restrictions on foreign ownership, but in order to access the wage subsidy, the employees need to be located in Canada. It would really just be for their Canadian employees and to support the people who work here.
In terms of data, that would be a question for the Canada Revenue Agency, which has all this data. To my knowledge, this is not on their website, but we can follow up.
Conservative
Ted Falk Conservative Provencher, MB
Okay. You don't have information on how much of the CEWS money went to companies that were foreign-owned or foreign-controlled.
Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
As I said, that would be more of a question for the Canada Revenue Agency, but we can follow up.
Liberal
The Chair Liberal Wayne Easter
There are no further questions on that one, but to clarify, Maude, the wage subsidy has to go to people employed within Canada. Is that correct?
Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
Yes, that's correct.
Liberal
The Chair Liberal Wayne Easter
Okay.
We'll go to part 1(s), “preventing the use by mutual fund trusts of a method of allocating capital gains or income to their redeeming unitholders where the use of that method inappropriately defers tax or converts ordinary income into capital gains”.
Does anyone from finance want to add anything to that, or are there any questions?
Ed Fast.
Conservative
Ed Fast Conservative Abbotsford, BC
I just wanted to know if this is an issue of evasion or simply avoidance. Is it a matter of tax planning or something beyond that?
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
It's a question of tax avoidance. This isn't a case of tax evasion. It is the misuse of a system that had developed in order to help prevent double taxation, in order to achieve unintended tax benefits. These are legal tax avoidance techniques and not criminal tax evasion.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
That's correct.
Liberal
The Chair Liberal Wayne Easter
Thank you all.
We'll move on to part 1(t), “extending the income tax deferral available for certain patronage dividends paid in shares by an agricultural cooperative corporation to payments made before 2026”.
On that one, I forget the explanation from the other night. Can somebody give me a little bit of an explanation? What's the intent here?
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
Agricultural co-operatives can pay patronage dividends to their members. This would extend an income tax deferral on the amount of any patronage dividends received until the time that the shares are exercised.
The specific issue is that when these agricultural co-operatives pay patronage dividends to their members, that can carry with it certain immediate tax consequences, absent this deferral in the act. These co-operatives were having to pay amounts out to their members so that they could satisfy the tax liability that came along with the patronage dividends, which were causing cash-flow issues for these co-operatives.
What this measure would do is extend, in respect to eligible shares issued before 2026, an existing temporary deferral that allows those immediate tax consequences—taxation, basically—to be deferred until the disposition of the shares. It helps co-operatives with their cash flow.
Liberal
The Chair Liberal Wayne Easter
Thank you. Yes, I've heard of that as a concern. I hear from many egg co-ops.
The summary of part 1(u) reads, “limiting transfers of pensionable service into individual pension plans”. Are there any questions?
Seeing none, we'll move on to part 1(v), “establishing rules for variable payment life annuities”. Are there any questions?
Seeing none, we'll go to part 1(w), “preventing listed terrorist entities under the Criminal Code from qualifying as registered charities and providing for the suspension or revocation of a charity’s registration where it makes false statements for the purpose of maintaining registration”.
I actually think that one came out of the money-laundering study we did a number of years ago.
Mrs. Jansen, I see your hand.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
There's a great question in there. How many of these sorts of groups are actually registered as charities?
Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Thank you for the question.
We don't have a global count of such activities. The rules are meant to prevent this to the fullest extent possible. What I can say is that you've seen, in the past, where the Canada Revenue Agency has revoked charitable organizations for these sorts of reasons.
That's something that's always posted on its website, as well as in the Canada Gazette. This is basically improving the rules to make sure they are comprehensive and to streamline the revocation process for the CRA.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
I'm not sure I quite understand. Do we not actually have any idea of how many of these groups are registered as charities in Canada?
Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance
The thing is that it's where illegal activity is found. If an organization is listed as a terrorist entity, it's revoked so it's no longer a.... We could talk to the CRA and then try to provide the committee with some historical statistics on such revocations, if that would be helpful.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you, Mr. Chair.
What is the current process for revoking the registered charity status of a listed terrorist entity under the Criminal Code, and how would the proposed changes modify the process?
Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Thank you for the question.
Basically, there are several steps within the CRA that need to be taken. As soon as an organization becomes a listed terrorist entity, the CRA would be able to immediately revoke, given the importance of addressing the issues as expeditiously as possible.
There would be other means of recourse, but in terms of moving to the revocation stage, the CRA would be able to do that more quickly.
Liberal
The Chair Liberal Wayne Easter
Thank you, Ms. Koutrakis.
We'll move on to part 1(x), “ensuring the appropriate interaction of transfer pricing rules and other rules in the Income Tax Act”.
Mr. Ste-Marie, go ahead.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Good afternoon.
I would like the figures for part 1(x) and part 1(y), meaning the estimates of the additional revenue that the government expects to obtain and the number of companies affected, based on previous years.