Finance Committee on July 20th, 2021

[The Chair, Liberal, Wayne Easter]

We will call the meeting to order.

Welcome, everyone, to meeting number 59 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 108(2), 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).

Given the ongoing pandemic situation, and in light of the recommendations from health authorities to remain healthy and safe, all of us attending the meeting—it's the first time all of us have been in a committee room for 16 months—are to maintain the two-metre physical distancing. We must wear a mask when circulating in the room. It's highly recommended that a mask be worn at all times—though I don't think members can be expected to—and we must maintain proper hand hygiene by using the hand sanitizer at the room entrance.

I will try to enforce those measures, but I don't think enforcement will be necessary. I know there's only one staff per party allowed in the room. I thank members for their co-operation.

In our first hour of this session, by video we have with us Mr. Philippe Dufresne, the law clerk and parliamentary counsel, who has been before the committee a number of times, and Michel Bédard, deputy law clerk and parliamentary counsel, from the Office of the Law Clerk and Parliamentary Counsel.

Welcome to both of you. I imagine you have an opening statement. There was considerable controversy. A number of us said that.... I think MPs believe Parliament is supreme. There was a little difference of opinion, I think, between us and the Department of Finance and maybe others.

We'll turn to you for an opening statement. Then we'll go to questions.

[Philippe Dufresne, Law Clerk and Parliamentary Counsel, House of Commons]

Thank you, Mr. Chair, members of the committee, for your invitation to appear today following the Department of Finance Canada's June 30 news release respecting Private Member's Bill C‑208, and the clarification issued by the government yesterday which replaced that June 30 news release.

As the Law Clerk and Parliamentary Counsel for the House of Commons, I am pleased to be here today to address any questions that the committee may have on this matter. My office provides comprehensive legal and legislative services to the Speaker, the Board of Internal Economy, the House and its committees, members of Parliament and the House Administration.

As counsel to the House, its committees and members, we serve the interests of the legislative branch of government, and provide similar types of legal and legislative services to the House as the Department of Justice provides to the government.

I am accompanied by Michel Bédard, Deputy Law Clerk and Parliamentary Counsel, Legal Services, and I hope that our answers will assist the committee.

Before turning to Bill C-208, I want to take a few moments to highlight the rules applicable to the coming into force of legislation. These same rules apply equally to legislation implementing tax measures.

Enacting new laws and amending existing ones is a process that culminates in a legislative text receiving royal assent. However, a distinction must be made between the date on which a legislative measure is enacted by Parliament and the date on which it comes into force. A bill becomes law after it has been passed by both Houses in the same form and has received royal assent, but its provisions will produce their effect and become enforceable only when they are brought into force.

The Interpretation Act, which applies to all federal legislation, contains the provisions governing the coming into force of statutes, including the timing of that coming into force. Generally, a statute will come into force either on the day of assent or on another date as provided by the legislation itself. The other date could be a specific day set out in the act, or the act could leave it to the government to determine the date of the coming into force by an order in council.

If no coming-into-force provision is included in an act, the default rule found in subsection 5(2) of the Interpretation Act applies, and the entire act comes into force on the day on which it receives royal assent.

I will now say a few specific words about the implementation of tax measures.

Governments will, from time to time, implement proposed legislative changes respecting taxation, for example for new capital gain inclusion rates or new GST rates, before their formal legislative enactment. The actions of taxpayers will then be influenced by the proposed measures—that are oftentimes already implemented administratively by the Canada Revenue Agency—in anticipation to the subsequent legislative enactment that would have retroactive effect to the date the proposed legislative changes were announced.

House of Commons Procedure and Practice summarizes this practice as follows:

It is the long‑standing practice of Canadian governments to put tax measures into effect as soon as the notices of the ways and means motions on which they are based are tabled in the House of Commons, with the result that taxes are collected as of the date of this notice, even though it may be months, if not years, before the implementing legislation is actually passed by Parliament.

Implementation of the tax measures often starts when their announcement is made, including by the tabling of a ways and means motion, but is always contingent on the tax measures being ultimately enacted by Parliament.

Bill C-208, an act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), received royal assent on June 29, 2021.

The bill does not contain a coming-into-force or a commencement provision, so, in accordance with subsection 5(2) of the Interpretation Act, the date of coming into force is the date of royal assent. This means that the new provisions apply as of that date, in this case, June 29, 2021.

There is nothing unusual about this. On June 30 the government proposed legislation to clarify that the Bill C-208 amendments to the Income Tax Act would apply at the beginning of the next taxation year, starting on January 1, 2022.

Yesterday, the government issued a new statement replacing the June 30 news release and affirming that as Bill C-208 has been passed by Parliament and has received royal assent, it has become a part of the Income Tax Act and that the changes contained in Bill C-208 now apply in law.

The government also clarified that it intends to bring forward amendments to the Income Tax Act that honour the spirit of Bill C-208 while safeguarding against any unintended tax-avoidance loopholes that may have been created by the bill.

Because the bill is now law, making any changes to it would require new legislation. Such new legislation could provide for any amendments to the Income Tax Act to apply retroactively, including applying to events that take place before the day on which the new legislation comes into force.

I would now be pleased to answer any questions you may have.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Dufresne.

For the first round, we'll start with Mr. Kelly followed by Mr. Fragiskatos, Mr. Ste-Marie and Ms. Mathyssen.

Mr. Kelly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you so much, Mr. Dufresne, for appearing today and for the clarity you've brought to this issue. Let's just get right to it.

Bill C-208 became law on June 29. Is that correct?

[Philippe Dufresne]

Yes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

All right. Can you imagine any possible explanation for why this government would say otherwise in its June 30 press announcement?

[Philippe Dufresne]

I can't speculate as to intentions. I've mentioned the two communiqués. There was the one on June 30, which has now been replaced by the communiqué that was issued yesterday.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

On the eve of a really embarrassing meeting that the department would have to go through, they backpedalled the June 30 announcement. Do you know of any precedent of a government refusing to implement a law upon its receiving royal assent, such as has been the case with this bill?

[Philippe Dufresne]

This was an unusual situation in the sense of having a statement following coming into force that involved a different coming-into-force date. There have been situations in which the government has announced legislative tax measures and has implemented them pending legislative parliamentary approval, but this current situation [Technical difficulty—Editor] was not one we have seen before.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

No government has ever done this—just put out an announcement to say it is not going to implement a law passed by Parliament.

[Philippe Dufresne]

As I say, this communiqué was issued. It announced the government's intention to introduce new legislation to change the coming-into-force date. That's not something we have seen before.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Right.

Your office has been very busy over this last year and a half or so. We have seen this government defy Parliament and defy orders of committee. You've been present at this committee with regard to this issue. Are you concerned by the pattern of government, of any government, ignoring the will of Parliament?

[Philippe Dufresne]

What I've stated to this committee is that Parliament is supreme. Parliament has privileges and has fundamental authority. I've taken that position. That's an authority that Parliament has to exercise responsibly, and that continues to be my position.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Again, I thank you for your vigorous defence of Parliament. In a parliamentary democracy, Parliament has to have the last word on public policy. We have a government that has ignored Parliament by refusing to implement this bill when it received royal assent and that has been on the heels of actually suing the House of Commons and naming the Speaker of the House in seeking court approval to defy Parliament. This is all within the last few weeks. Can you comment on a pattern emerging with this government? This is also on the heels of the defiance of orders at this committee.

[Philippe Dufresne]

I provide views and advice to committees on issues as they arise [Technical difficulty—Editor] litigation. The Speaker has informed members that he has instructed my office to respond to that litigation, and we are doing so. As indicated, I've appeared before this committee to advise it on the powers of the House and the supremacy of Parliament and parliamentary privilege as a constitutional matter, and I will continue to do so.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Responsible government was achieved in Canada before Confederation. Really, since 1858 has any Canadian government besides this one openly and blatantly refused to implement laws passed by Parliament?

[Philippe Dufresne]

I will comment on the authorities of the House. Those authorities are fundamental and the House has exercised them, and I will support the exercise of those authorities going forward.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Yes, and we thank you for that and for your defence of Parliament.

Mr. Chair, do I have any more time?

[The Chair, Liberal, Wayne Easter]

You have time for one more question.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Despite the backpedal that we saw yesterday, I would suggest there are still questions that remain and still an intention by this government to not implement the bill as passed by Parliament. What further steps do you think the government needs to take to assure Canadians that it will actually follow through and implement this bill and respect the will of Parliament as expressed through its democratically elected members and senators?

[Philippe Dufresne]

The government issued a statement yesterday. The committee, as I understand, will be hearing from further witnesses and can determine if it's satisfied with the clarification it has received. The government has issued a statement indicating that it recognizes that the bill is in force and that it proposes to introduce amendments down the road.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

We'll have Mr. Fragiskatos for six minutes, followed by Mr. Ste-Marie.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair.

It's good to be here in Ottawa after a lot of time. It's nice to see colleagues in person once again, and I hope everybody has kept healthy and safe and that everyone's loved ones are okay too.

Many thanks to you, Chair, along the way. I know this is the final set of meetings the finance committee will have with you at the helm, and it's been absolutely great and a wonderful experience working with you, as I've told you over the years.

To the staff behind the scenes, too, here at Parliament, and our own staff, thank you very much. This committee has been very active over the past year and a half, without any stops, and that continues.

Mr. Dufresne, you've answered this, I think, but I want to be crystal clear here. Is the press release that we saw yesterday consistent with the view that Parliament is indeed supreme and that Bill C-208 is in force? The press release recognizes that, I think, but could you elaborate?

[Philippe Dufresne]

The July 19 press release does clarify the government's view, certainly, as consistent with the fact that the bill is in force. We see this recognition: The bill is in force as of royal assent in this case. There was nothing unusual with there not being a specified coming-into-force date in the bill. That's now been clarified—that the law applies—and the government is indicating its intention to introduce future legislation to address certain matters. That is something we've see before in past practices, namely, the announcement of future measures and confirmation that they're conditional on parliamentary approval.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

My friend and colleague Mr. Kelly did not expand on it—I do not think he had time—but put a forward a claim that yesterday's press release, in his view, indicates that the government is not looking at or serious about moving forward with C-208.

I'm not sure where that observation comes from. I looked at the press release closely, and it says—and you put this is your testimony, sir—that unintended consequences that could come about with C-208 will be addressed. That is not inconsistent with the recognition that this is law and that Parliament is supreme. Would you say that's accurate?