Do you have a supplementary, Ted?
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.
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.
4:45 p.m.
Conservative
Ted Falk Conservative Provencher, MB
Yes. I'm wondering if this is quite a prevalent problem that you're addressing.
4:45 p.m.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
It can be prevalent in terms of the size of the investments, but not in respect of the number of affected taxpayers. There aren't tens of thousands of them using this type of structure, but it is something that has been seen.
4:45 p.m.
Conservative
Ted Falk Conservative Provencher, MB
I imagine this would be something that more sophisticated corporations would be trying to achieve and more international-based corporations?
4:45 p.m.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
That's correct. It applies only in the multinational context.
4:45 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
I want to ask for a clarification again.
Could you tell me how many companies will be affected by this amendment and how much revenue the government expects to generate through this amendment?
Also, I gather that Canada was the only G7 country that didn't implement this measure. Is that right?
4:50 p.m.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
I would ask my colleague, Maude, if she knows. This was a measure that was announced in the 2019 budget, so it would have an expected revenue impact associated with it.
In terms of the specific number of affected taxpayers, we don't have that number at our fingertips. We can endeavour to ask the Canada Revenue Agency precisely how many they've seen, although my understanding is that the number is not significant, although the dollars involved with each transaction can be significant.
4:50 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
I would like you to provide that figure once you have checked with the CRA.
4:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you on that one.
Did anybody else want in from the Department of Finance? I don't have everybody on my screen. I'm split between two. Just yell if you want in.
4:50 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Excuse me, Mr. Chair, but I would just like confirmation that the six other G7 countries have already implemented this measure.
Mr. McGowan is confirming that this is the case.
May 13th, 2021 / 4:50 p.m.
Dave Beaulne Senior Director, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance
I would say that it's an atypical measure. It wasn't implemented by other countries. It's really a unique measure. I think that France has a similar measure, but I don't think that other countries have adopted a measure of this nature. There are certainly other measures.
Does that answer your question?
4:50 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
I think this might be in the same vein, but you'll have to forgive me if it's not.
Foreign-owned companies employ two million Canadians and are responsible for about half of Canada's exports. Attracting foreign investors is a high priority, yet our tax system makes it difficult for multinationals to transfer funds among its subsidiaries, making our country less attractive for investment.
In 2016, the Conference Board of Canada estimated that the withholding tax costs Canada up to $2.6 billion in foreign investments per year. Shouldn't we be tackling that issue head-on when we're desperately trying to grow our economy?
4:50 p.m.
Liberal
4:50 p.m.
Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
I don't know whether my colleague Maude Lavoie could speak to the economic side of it. I can speak to the legal and technical impacts of this measure.
What it does is it affects an existing rule in subsection 212(3) of the Income Tax Act that is aimed at addressing these foreign affiliate dumping transactions.
As I said earlier, it extends the application of these rules to situations where a non-resident individual or trust is investing into Canada. It does not in and of itself introduce a new obligation for corporations resident in Canada that are controlled by foreign corporations; rather it extends the application of an existing set of rules. It's not imposing it; it's extending it.
Also, it ensures more of a level playing field. We have a withholding tax, as was mentioned, on dividends coming out of Canada, and it ensures that, where withholding tax is intended to apply, that it actually does apply.
4:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Trevor.
We might have lost Maude. I see her name up there, but I don't see her.
4:50 p.m.
Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
I'm here.
4:50 p.m.
Director General, Business Income Tax Division, Tax Policy Branch, Department of Finance
No. I think Trevor's answer is complete. Thank you.
4:50 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Yes. I'm just wondering if they feel that this makes Canada more attractive to investors.
4:50 p.m.
Liberal