Finance Committee on July 20th, 2021

[The Chair, Liberal, Wayne Easter]

The meeting is suspended.

[The Chair, Liberal, Wayne Easter]

Okay, folks, we'll reconvene.

Welcome, panellists.

I'll just quickly go through this. Pursuant to Standing Order 108(2), we're dealing with panel two. The committee is meeting to study the coming into force of Bill C-208, an act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), and in this panel, the supremacy of Parliament as well.

With us this morning we have, as individuals, the Honourable Peter Milliken, former Speaker of the House of Commons, and the Honourable Don Boudria, a former House leader. From the Canadian Federation of Agriculture we have Mary Robinson, president, and Scott Ross, assistant executive director. From the Fédération de la relève agricole du Québec we have Julie Bissonnette, president, and Véronique Simard Brochu, public affairs coordinator.

We'll ask all of you to keep your opening remarks fairly short so that we get time for questions.

We'll start with Mr. Milliken. Peter, you're on.

[Peter Milliken, Former Speaker of the House of Commons, As an Individual]

Thank you for inviting me to appear. I haven't done this for a long time. I'm sorry we're not meeting in person on Parliament Hill or in the other building that you now meet in, but I hope all goes well.

I was interested to read in the media about the problems with this bill and to hear that the government was putting in this thing where it would not allow the bill to take action until some time next year—January 1, I think it was. I was somewhat surprised by this. It's interesting that the committee is going to [Technical difficulty—Editor]. I understand that the minister has already announced some changes this morning to possibly solve the situation, but we'll see how that goes.

I wish all of you well in your continued good work in parliamentary matters.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Milliken.

Mr. Boudria, we'll turn to you for your thoughts. You've read lots about Parliament in your time, and did a lot of it. Go ahead.

[Don Boudria, As an Individual]

Thank you, Mr. Chairman.

Indeed, I was interviewed by The Globe and Mail at some point a few weeks back. The reporter questioned me as to the activities of the finance department in this regard. At first I didn't believe it. I said, “Well, surely you must be misreading what they're doing.” Then he gave me the details. Obviously, I came to the conclusion that it was improper.

Contrary to what was said today, this is not the first time the finance department has done this. Both Speaker Milliken and I were members in 1989, when the finance department did the opposite of what it's doing now. In fact, it had pretended that the GST was the law. It was sending out circulars. If my memory serves me right, it had bought TV time and was advertising a tax that Parliament had not passed. It was severely admonished by then Speaker John Fraser at the time. I recall the incident. I believe I spoke about it. Peter Milliken probably did as well, as we were both very interested in parliamentary procedure. We're probably the last two non-parliamentarians who still are. In any event, this is not something that's unprecedented.

I would gladly answer all questions later.

There is the issue of the Interpretation Act. There is the Royal Assent Act, as well, to take into consideration here. Finally, if and when the government moves ahead with a bill, it must be preceded by a ways and means motion. What the government would be doing, should it change this to revoke the provisions for a certain group that it thinks the bill possibly could be too wide for, this would constitute what is called in parliamentary jargon the “revocation of tax alleviation”. Revocation of tax alleviation requires a ways and means motion before a new bill can be presented to the House.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you, Mr. Boudria.

We'll turn to Mary Robinson, a Prince Edward Islander, like me. Go ahead, Mary, the floor is yours.

[Mary Robinson, President, Canadian Federation of Agriculture]

Thank you, Mr. Easter. It's wonderful to be here.

Thank you, Mr. Chair and committee members, for the opportunity to speak to you today. As Wayne said, my name is Mary Robinson. I farm on a sixth-generation family potato, soybean, barley and hay farm in Prince Edward Island. I'm also president of the Canadian Federation of Agriculture, which is Canada's largest general farm organization, representing nearly 200,000 Canadian farm families from coast to coast to coast.

I will start by thanking the committee for convening so quickly and by expressing my appreciation for yesterday's announcement from Minister Freeland, ensuring that the uncertainty around the coming into force of Bill C-208 has, for the time being, been put to rest.

Modern agriculture is capital intensive, with millions of dollars in capital assets involved in the transfer of most farm businesses these days. The passage of Bill C-208 ensures that each family that owns one of the 50,000 incorporated family farms in Canada can finally access the lifetime capital gains and capital gains treatment, avoiding what would potentially cost hundreds of thousands of dollars were this inequity to persist.

While it's commonplace for a farm transfer to involve millions of dollars in capital, nearly all of this is tied up in productive assets that are essential to the maintenance of the farming operation into the next generation. Meanwhile, the retiring farmer needs to fund their retirement from the proceeds of a sale, and the next generation almost assuredly lacks the capital to buy the assets outright. Every dollar matters, and a smooth intergenerational transfer is critical to the financial health of both parties.

For a sector that is almost wholly family owned, the impending transfer of tens of billions of dollars in assets across thousands of family farm transfers has a bearing on the outlook for an entire industry that is key to Canada's short-term economic recovery as well as Canada's long-term growth. Family farming is recognized internationally for sustainable growth, environmental stewardship and a connection to one's community, seen through increased spending in one's local community. It also contributes directly to the vibrancy and social fabric of rural communities across this country.

The long-standing unfairness that Bill C-208 has addressed had been a disincentive to passing these operations on to the next generation and maintaining this way of life for thousands of incorporated family farms across Canada. Those who still wish to do so face undue additional tax liabilities that could very well be in the hundreds of thousands of dollars. Following the bill's royal assent, we were disappointed to hear that farmers and financial advisers were left uncertain as to the status of the bill's implementation, and we were pleased to see yesterday's announcement provide some additional clarity, both for the immediate future and for the government's longer-term plans in this regard.

I would like to take this opportunity to applaud Parliament for passing Bill C-208 and resolving this long-standing inequity facing Canadian farms. I welcome this committee's efforts to ensure there is clarity moving forward. If further measures are needed to address undue tax avoidance, as outlined in yesterday's announcement, we would implore Parliament to ensure that the intent of this bill is maintained, grandfathering family farms' access to capital gains treatment for the transfer of incorporated family farms. Such access can easily be limited if undue administrative burden or significant costs are reintroduced into the system. Given the extensive consultations with farm advisers since 2012, when CFA first called for a resolution of this inequity, we believe the targets for future amendments can be addressed while this access for Canadian farm families is maintained. However, we believe this can be assured only through dialogue with farmers and farm advisers.

The potential for unintended barriers is significant unless there is consultation with those who have direct experience in managing farm succession and financial planning. In 2018, CFA actually convened round tables of farmers and farm advisers across Canada to discuss this subject with Finance Canada officials and to inform their work on this very topic. We would be pleased to facilitate similar engagements again to ensure that any future legislative amendments respect the realities of modern family farm transfers.

In conclusion, we call on the government and Parliament to ensure that the inequity that Bill C-208 resolves is not reintroduced and that Canadian family farmers are never again disincentivized from selling to the next generation by the Canadian tax system.

I thank the committee for its time, expediency and commitment in seeking to provide clarity around the coming into force of Bill C-208.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mary.

We turn now to Ms. Bissonnette, president.

Go ahead. The floor is yours.

[Julie Bissonnette, President, Fédération de la relève agricole du Québec]

Thank you, Mr. Chair.

Good morning everyone, members of Parliament and Mr. Chair.

Thank you for inviting us to share our observations with your committee on the issue of business transfers.

My name is Julie Bissonnette, and I'm a dairy farmer in L'Avenir and the president of the Fédération de la relève agricole du Québec, or FRAQ. With me today is our public affairs coordinator, Véronique Simard Brochu.

We already introduced ourselves at our last appearance, but here is a reminder. The FRAQ is an organization that brings together 16‑ to 39‑year‑olds who share an interest in farming. We represent more than 1,700 members from across Quebec. We are here today to talk about the implementation of the tax measures contained in Bill C‑208.

Let me begin by quoting what I said during our previous appearance before the Standing Committee on Finance, which certainly sets the stage for today's discussion:

The next generation of business owners has been speaking out about the problem for more than 15 years. Hopefully, this time, it will be fixed once and for all.

As we have mentioned before, with the average age of farmers now over 55, there was indeed an urgency for the farming community to act. In fact, 70% of these future transferors would prefer to keep their businesses in the family. It is therefore the preferred method of transfer, especially since it is six times more likely to succeed than an external transfer.

With the bill passing in both Houses and receiving royal assent on June 29, 2021, we were finally able to celebrate this major victory. However, there was a lot of confusion following the Department of Finance's announcement on June 30, suggesting that implementing the legislation would be delayed.

We are very pleased to see that, last night, the department put an end to almost a month of confusion by finally clarifying farmers' questions. As the department states, “the changes contained in this legislation now apply in law.” This answers our biggest question, namely whether related farm transfers are now entitled to the same exemption as third‑party transfers.

However, we would like the department to make it clear that, if a genuine family transfer occurs between now and the passage of this potential bill, it will include those exemptions and will not be penalized by any measures to come. The government should clarify this issue so that tax experts and accountants can feel free to advise their clients on the transfer of their business without fear of misleading them. Members of Parliament may actually want to ask them this question this afternoon.

It is important to clarify this for the agricultural community. Given the importance of such legislation, the department did the right thing yesterday by providing answers to clear up the confusion that was rife. At the FRAQ, we believe that changing our tax system is a serious job that should not be done with a news release. That is why the right way of going about this is to let the current legislation do its job and then propose changes in a future bill, as was explained yesterday.

In terms of the next steps, it is clear that the government's intention is to facilitate farm transfers while protecting the integrity of the tax system. According to the news release, “forthcoming amendments are intended to make sure that it facilitates genuine intergenerational transfers and is not used for artificial tax planning purposes.”

We have no problem with that, as long as it does not interfere with genuine family farm transfers between family members. We therefore encourage the Department of Finance and members of Parliament to follow the example of the Quebec legislation, which has put in place several criteria to ensure the authenticity of family transfers. However, it is essential that the intentions of Bill C‑208 be maintained so that no parents are dissuaded from selling the family business to their children because of the tax system.

We must not forget that transferring a business is a very big step. Many factors need to be considered, and it is not simple. At the end of the day, all transfers are different and unique. Therefore, there cannot be a one‑size‑fits‑all definition for farm transfers. This must be kept in mind when setting future conditions. The inequity that has just been addressed should not be replaced by another barrier.

In conclusion, we wish to reiterate that we are grateful for the department's clarifications and look forward to future proposals. In the meantime, after the confusion over the past few weeks, it is good to know that the legislation is actually in force.

Our thanks to the members of the committee for seeking answers and for inviting us to share our first‑hand experiences.

Thank you for listening.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Bissonnette and all the panellists.

The first round of questions will go to Mr. Fast, Ms. Bendayan, Mr. Ste-Marie and Ms. Mathyssen. We'll start with five-minute rounds to try to pick up a little time.

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

Thank you to all the witnesses.

My questions will be directed to Messieurs Boudria and Milliken.

Both of you gentlemen have had very many years of understanding of parliamentary process and procedure. I think all of us around this table respect that, but there is a bigger issue here at play. As I said earlier, this is a very serious matter. I think the two of you recognize that.

I'll start with a very big question. Overall, what do these events—in other words, the initial government defiance of a duly passed law of Parliament—say about the state of Canadian democracy and the role that our executive branch plays vis-à-vis the legislative branch? I'd be interested in comments from both of you.

[The Chair, Liberal, Wayne Easter]

Mr. Milliken, do you want to start?

[Peter Milliken]

I'm not sure how this all began. I assume it was not a cabinet decision to suspend the bill's immediate application. I assume it was something that was recommended to them or dealt with by public servants, who said, “We don't want to do this right away. We can delay this for a while.” I just don't think they thought about the legal implications of it. I think they thought they had done it before with government bills. Often a bill will have words in it that will allow them to do such a thing.

This was passed and became law. I think it should have been automatic. That's the impression I have, but I haven't followed this closely or anything. I'm delighted they've changed their position and are now going to allow it to go into effect immediately, which is what I think you have to do with an act of Parliament.

[The Chair, Liberal, Wayne Easter]

Mr. Boudria.

[Don Boudria]

First of all, I don't believe there was ever an order in council passed in order to change that effective date. I don't see that it could have been a cabinet decision or anything like that.

[Peter Milliken]

No. Right.

[Don Boudria]

What seems to have happened here—and I'm only going to give you my impression—is that inside several government departments there has been a lack of knowledge regarding how Parliament works. Do the people who made that decision know that there's such a thing as the Royal Assent Act? Do they know there is such a thing as the Interpretation Act? Do they even know that bills come into force automatically on royal assent if there is not a proclamation or a coming-into-force clause in the bill? Finally, when the official from Finance Canada was interviewed by the Globe and Mail reporter, they seemed to make a distinction between the commencement date and the implementation date. In their view there was a difference. To me, that's like saying your birthday is different from the day you were born. I mean, this is ridiculous. They're euphemisms, and everyone knows that.

Finally, what was the intention of Parliament? If Parliament had wanted this bill to come into force later, it would have said so in the bill. Similarly, if Parliament had wanted to have a specific date that was not the date of royal assent, that too could have been in the bill. In other words, there were two occasions on which that could have been put in the bill by the drafter of the private member's bill in question. I don't even think we should call it a bill anymore. It's not a bill now. It's an act. It's actually part of the statute law.

Anyway, the law as amended, which is now what it is, reads the way it does because that was the intention of the “Legislator”, capital L. If the legislator had wanted it otherwise, the legislator could have done so, but it did not. If Finance says the legislator made a mistake, well, it's the legislator's entitlement to make such a mistake. If it wants to correct it, it can. As I said, though, because it's revoking tax alleviation, it will first have to present to the House a motion of ways and means. Subsequently, by the way, that motion of ways and means will have to be concurred in by the House. Only then will you be able to introduce the bill, because you'll be revoking tax alleviation that was provided for in this bill. Not implementing it was never in the cards.

[The Chair, Liberal, Wayne Easter]

Thank you, Don.

We'll have to go to one more question from Mr. Fast and then move ahead.

Go ahead, Ed.

[Ed Fast, Conservative, Abbotsford, BC]

I've already said my fear is that this may happen again. Either the Prime Minister's Office, cabinet, or maybe Finance officials on their own.... We don't know who directed whom in this case. My fear is this will happen again.

My question to both of you is, if this happens again, what are the remedies that parliamentarians have to ensure compliance with the rule of law?

[The Chair, Liberal, Wayne Easter]

Who wants to start?

Mr. Boudria, we have you on screen, if you can be fairly quick. We're going to rapidly run out of time. We'll hear from Mr. Boudria and then Mr. Milliken.

[Don Boudria]

Well, very quickly, I think that, notwithstanding what happened yesterday, this should still be raised in the House. By having it raised in the House, the Speaker will be able to rule on it and assert Parliament's authority. Essentially, that is what is required. Whether the Speaker will choose to do that or not, or whether he'll say that now it's become a hypothetical question because the press release in question was replaced with a different one that seems to respect the authority of Parliament, well, the Speaker will have to make that decision on his own.

[The Chair, Liberal, Wayne Easter]

Mr. Milliken, do you have anything to add?

[Peter Milliken]

I think Don's comments are absolutely correct. The Speaker can make a decision on this matter if it's raised there, but whether it would be raised is another issue. Matters do come that way, occasionally, before the Chair. The Chair can decide whether Parliament's privileges have been breached by this kind of action. I think it probably would have been decided that way—that's my guess, anyway.

[The Chair, Liberal, Wayne Easter]

Ms. Bendayan, you have five minutes.

[Rachel Bendayan, Liberal, Outremont, QC]

Thank you very much, Mr. Chair.

Let me begin by thanking you as well, both as chair and as a member of our government's caucus, for your leadership on all things related to finance, and in that vein, also for calling this meeting of the finance committee at the end of July, when the House isn't sitting, in order to clarify matters in relation to the coming into force of Bill C-208. As others have said, I believe you are a giant in the House of Commons, sir, and a mentor to so many of us. I would like to thank you.