Evidence of meeting #60 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was amendments.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Trevor McGowan  Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance
Jenifer Aitken  Executive Director and Senior General Counsel, Legal Services, Law Branch, Department of Finance
Miodrag Jovanovic  Associate Assistant Deputy Minister, Tax Policy Branch, Department of Finance

3:20 p.m.

Associate Assistant Deputy Minister, Tax Policy Branch, Department of Finance

Miodrag Jovanovic

Obviously, the Department of Finance could not have made a decision without the government's approval. Accordingly, it was a decision made by the government.

3:20 p.m.

Conservative

Luc Berthold Conservative Mégantic—L'Érable, QC

Why can't you tell us the name of the minister?

Tell me the name of the act that prevents you from revealing the name of the minister who approved the news release, or at least tell me why you can't. Your colleague mentioned her name a while ago.

I used to be a chief of staff, so I know major press releases like that don't go out without the prior approval of the most senior ministerial staff. What is stopping you from telling us the name? Why are you so reluctant to confirm that the Minister of Finance approved the news release that went out on June 30?

That is why we are here today.

3:20 p.m.

Associate Assistant Deputy Minister, Tax Policy Branch, Department of Finance

Miodrag Jovanovic

Mr. Chair, it seems the member is trying to put words in our mouths.

What we want to explain is that a process is in place for any government decision. It is not for us to reveal which member of Parliament made the decision. It was a decision made by the government. We provide advice to the Minister of Finance, which is probably why Mr. McGowan gave the answer he did.

The fact remains that it was a government decision. It is not within our authority. In any case, we probably don't have the information the member is looking for. We are not necessarily involved in political debates or discussions.

3:20 p.m.

Conservative

Luc Berthold Conservative Mégantic—L'Érable, QC

Mr. Jovanovic, I understand—

3:20 p.m.

Liberal

The Chair Liberal Wayne Easter

We are considerably over time.

I will go to Mr. Gerretsen, but I remind the committee that the government also made a decision on July 19, and that's another press release.

Go ahead, Mr. Gerretsen.

3:20 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

Thank you, Mr. Chair.

Mr. McGowan, my questions would be for you, I guess. I want to start at a slightly higher level for a second. Basically, the job of the finance department is to implement the Income Tax Act as it happens to be at that particular time. Is that correct?

3:20 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

No. Actually, the administration of the Income Tax Act is the responsibility of the Canada Revenue Agency.

3:20 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

Fair enough. In terms of any changes that might happen to that act, though, no implementation of those changes would occur before any such time as they would come into effect. If a law is passed on changes, as is the case with this one, there would be no work done on that prior to that taking place. Is that correct?

3:20 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

I'm not certain I understand the question.

3:20 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

The Income Tax Act as it currently stands, in its current form, is implemented in that way. The rules are followed. Until such time as that is amended, you wouldn't start new laws that could potentially be coming down the pipe. Is that correct?

The reason I ask.... It's a very straightforward question. I think the answer is “yes”. It's supposed to be a rhetorical question. The reason I ask is that Monsieur Ste-Marie and others have been asking why you didn't prepare in advance for the inevitable that you saw coming. Quite frankly, your job is to implement what is before you. Am I correct?

3:25 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

Okay. I thought the question related to measures that have received royal assent in the Income Tax Act but that do not have effect until a delayed date. There are certainly provisions in the Income Tax Act that do not get applied to certain taxpayers. For example—

3:25 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

Sure. So when you're asked a question by Monsieur Ste-Marie, for example, where he says, well, you knew this was going to happen—it was coming down; it had been passed by the House; it was on its way to the Senate—as far as you were concerned, on June 28 the bill had not received royal assent, and therefore it was not something that you needed to start dealing with.

Is that correct, or am I wrong? Do you actually start to work on that stuff before it becomes law?

3:25 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

As department officials, as my colleague Miodrag noted, we continually work on providing the best and most frank advice we can to the government. That relates to the Income Tax Act and bills.

July 20th, 2021 / 3:25 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

Mr. McGowan, I'm not talking about advice; I'm talking about what the law is. You're going to implement the law that is currently in place. On June 29, when a new law comes into place, if you're not ready to start implementing that because it's brand new to you, you might not have the tools and resources you need to do it immediately in terms of educating and informing those who are implementing it, making sure that the system treats people equally, and making sure that tax avoidance isn't occurring where it shouldn't be. Those are all things that you need to consider in implementing this legislation.

If you weren't aware that it was going to become law on June 28, and presumably you weren't, because you didn't know how the Senate would vote on it, then you wouldn't be able to actually properly plan for it on that date—right?

3:25 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

Thank you. I think I understand the question now. I had been focusing on the date on which it received royal assent and amended the Income Tax Act.

In terms of the administration of the rules in Bill C-208 and whether or not the Canada Revenue Agency was ready to go on that on June 28, as it is the administrator of the Income Tax Act, I think that would be a question better put to the CRA. Certainly it monitors developments, but really it's the CRA that is tasked with the administration and enforcement of the provisions of the act.

3:25 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

I know.

Just for clarification, has there ever been a situation before with a private member's bill, or has there been one that you're aware of that has come into effect and then the intent was to immediately change the way the Income Tax Act was enforced, effective immediately?

I'm trying to understand what the need was for putting this buffer of time between when the law became law, as passed by the Senate and after royal assent, and when the projected future date would have to be.

3:25 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

I'm not aware of a private member's bill that has received royal assent and then shortly thereafter.... Private members' bills amending the tax act and receiving royal assent are not terribly common. This is the first one I can think of that has amended the Income Tax Act.

My colleague Miodrag, I think, might have a better recollection of one with slightly different facts. A government bill was passed that provided that a private member's bill would not come into force, but that's a slightly different situation.

3:30 p.m.

Liberal

Mark Gerretsen Liberal Kingston and the Islands, ON

Thank you. That's all I need.

3:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Nobody else wants to further answer that question.

Now we know that Larry Maguire has done a rare thing, that's for sure.

We'll go to Mr. Fast, split the time of Ms. Dzerowicz and Ms. Bendayan, and then go to Mr. Kelly.

Mr. Fast.

3:30 p.m.

Conservative

Ed Fast Conservative Abbotsford, BC

Mr. McGowan, I have a couple more questions for you. Let me say again that I have great respect for those of you in your position who serve the public. I've been in that seat, you know. I've been asked questions the way you have. It's not a pleasant feeling at times, especially when the great inquisitor is Mr. Easter, who used to do that to me.

3:30 p.m.

Voices

Oh, oh!

3:30 p.m.

Conservative

Ed Fast Conservative Abbotsford, BC

That said, you have said that it's the intention of the elected government that any intergenerational transfers that take place between June 30 and November 1 will not be subject to any further amendments that the elected government might bring forward on November 1 with respect to such transfers. Ms. Aitken has, however, confirmed that the government can in fact make such legislation—the November 1 legislation that is signalled in the press release of July 19—retroactive.

I'm assuming that you yourself cannot bind the government to compel it to follow through on its intention not to apply any further amendments to such intergenerational transfers. Am I correct?

3:30 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

I would say that the government, an elected government, can't make changes; of course, any change would have to be included in a bill, and only Parliament could enact that to change the existing law. I don't know that it is something that the government could do, absent going to Parliament through the legislative process to make changes to the Income Tax Act.

3:30 p.m.

Conservative

Ed Fast Conservative Abbotsford, BC

Let me dig a little deeper. You mentioned that surplus stripping is a significant concern and that this needs to be addressed in the amendments that the government intends to bring forward. If between now and November 1 such tax avoidance activity does in fact take place, how will the government effectively address that avoidance?

3:30 p.m.

Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance

Trevor McGowan

In its July 19 news release, the government said it would be releasing conditions for defining what is a genuine transfer and would entitle a transfer or making use of the exception for the anti-avoidance rule in section 84.1. It said that it would allow the benefit or that it would provide conditions that would need to be met in order to be considered to be a genuine intergenerational transfer, which would apply no earlier than November 1, 2021. Right now, the law as enacted by Bill C-208 stands, and those conditions would not be implemented until after October at the earliest.