Finance Committee on May 3rd, 2022

[The Chair, Liberal, Peter Fonseca]

You've gone well over, MP Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It's just a short one.

[The Chair, Liberal, Peter Fonseca]

Maybe you can ask them to provide the information to the committee.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It's just a yes or no question.

If a female right now is living by themselves, on lower means, they will not be able to benefit from the extended...even though they may need more than $10,000. Is that correct?

[Lesley Taylor]

To the extent that they have a tax liability, this is a tax relief measure. They can reduce their tax liability using the measure.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we're moving to the Liberals and MP Chatel for four minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Chair.

I know these are very complex measures and that explains why we need more time to put them into legislation, but I am particularly interested in the tax measures in the supplementary information, and in particular, the international tax measures.

I would like to have an update from the Department of Finance on the stage of the negotiation of the multilateral convention to implement pillar one. Could somebody quickly give me an update? These are very complex rules being developed by the OECD, but I understand that, in parallel, the multilateral convention is being negotiated. I wonder if we have ensured that these measures will be very well thought through, because a multilateral convention will last for a very long period of time.

Could I have a quick update on this, please?

[Lindsay Gwyer]

Thanks for the question.

Yes, I can confirm that the government is continuing to work with other countries on pillar one negotiations, and the department itself is very busy continually working with other countries to advance that. In the budget, the government confirmed that the government remains optimistic that there will be an agreement reached on pillar one and that there will eventually be legislation reflecting that agreement, which would in due course be implemented in Canadian law.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

Moving to pillar two, I do acknowledge the budget announced a consultation and I have some specific questions.

One of the questions is about the interaction between the pillar two model legislation and existing Canadian law. I was wondering whether the Department of Finance has considered the general interaction between the existing legislation and the new model rules—not just the specific one, because we are adding a layer of complexity over an already very complex international tax system. I'm referring to the FAPI rules.

[Lindsay Gwyer]

Those are questions the department is working on, on an ongoing basis. The pillar two rules would result in a significant change in our tax system. We also, obviously, already have existing rules dealing with foreign companies that are owned by Canadian companies in dealing with multinationals, so the pillar two rules are something that would need to be layered on top of that. That is something the department is very focused on. As the process moves forward, that's something that would be considered as the rules are drafted.

A number of the consultation questions that were put to the public relate to those kinds of questions. We are looking for stakeholder information and do want to get the best feedback in order to try to implement the rules in a way that will be most effective, while at the same time trying to reduce complexity and create a system that works best for Canadians.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chatel.

Now we'll move to the Bloc and MP Ste-Marie for four minutes, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

I would like to once more sincerely thank all the officials here with us today. We have once again learned so much thanks to their answers.

My next questions will deal with the part of the bill that gives the Canada Revenue Agency the discretion to accept late claims for the Canadian emergency wage subsidy and the Canada emergency rent subsidy, as well as the Canada recovery hiring program.

I understand that the measure gives the Canada Revenue Agency the authority to push back the deadline by which beneficiaries of these programs must send in their supporting documents, but I would like to know more. Would companies who have not yet made a claim be able to do so after the deadline? Is the measure intended for certain exceptional cases or sectors of the economy in particular?

Can you please give us more details on the measure?

[Lindsay Gwyer]

Since the subsidies were introduced at the beginning of COVID-19, there has always been a relatively short timeline during which entities had to apply for the subsidy. Under the current law, it's 180 days from the end of the qualifying period. This is relevant to the wage subsidy, rent subsidy and the Canada recovery hiring benefit.

Over the course of the past couple of years, it has been the case that the CRA, at times, has received applications that are filed late. The CRA, under the Income Tax Act, has a general discretion to accept certain things on a late basis. They publish a detailed fairness guide setting out the circumstances in which they generally accept certain things on a late-file basis. Consistent with that, they have been accepting some late-filed applications in situations where it would be unfair not to do so. It's a very small number of applications in total in terms of the number of applications they have received.

The subsidy programs are unique relative to other things in the Income Tax Act. This legislative change is really meant to confirm that the CRA does have that discretion, consistent with the broader discretion it has in the Income Tax Act, to accept those late-filed subsidy claims. It's not expected to change their policy or their practice. It's really a retroactive change that is intended to confirm their existing practice.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you for that clear answer.

Lastly, I would like to talk about the inclusion of income from postdoctoral fellowships in the definition of earned income for RRSP purposes.

What is the objective of the measure and why has it been included in the bill?

[Lindsay Gwyer]

Right now, when someone receives post-doctoral fellowship income, it's included in their income for purposes of calculating their taxes, so it's effectively taxed like employment income. However, there's a historical anomaly where it was not included in earned income for the purposes of calculating RRSP room, so the measure is really intended to provide fairness in giving someone RRSP room in a situation where they're paying tax on that income.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

That's perfectly clear, thank you very much.

That's all, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

We are now moving to the NDP and MP Blaikie.

In our final few minutes, you have the floor for your questions.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I wanted to come back on the question of Bill S-216. Is it fair to say that the crux of the government's modification of Bill S-216 is in the definition of a “qualifying disbursement”, specifically, proposed paragraph (b), subparagraphs (ii) and (iii), where it says, first of all, that “the charity ensures that the disbursement is exclusively applied to charitable activities in furtherance of a charitable purpose of the charity,” and that “the disbursement meets prescribed conditions”.

I guess my question is where those conditions will be prescribed and, to the extent that part of the goal of S-216 is to try to reduce the administrative burden of charities that have to work with other organizations in order to accomplish their purposes, how does the department envision enforcing this? How do you anticipate the administrative burden of these provisions comparing to the administrative burden under the existing system?

[Blaine Langdon]

I would say, in terms of the proposal and what you see in Bill S-216, the aim is by and large the same, but we get there differently mechanically. You can find the prescribed conditions beginning on page 41 of the BIA in proposed section 3703.

In terms of the enforcement of those provisions, what I can say is that the legislation is obviously proposed by the Department of Finance. It's up to the Canada Revenue Agency to propose administrative guidance and look to how they would administer those. It's a bit difficult for me to speak to them.

What I can say is that what's been proposed here in terms of accountability measures and how they would compare to the existing system is that there are similarities, obviously. The proposal to require reporting back from the grantee organization and to have a written agreement are things that you will find in the existing regulations. What we have attempted to do here is to strip out the requirement for direction and control.

Two key things that I would point to would be that registered charities have expressed concerns that having to take over the activity of an organization to take ownership of the activity smacks of paternalism and colonialism, and it's inappropriate in many scenarios, so that would not be required here. Charities would be supporting the activity of the grantee, and it would remain the activity of the grantee.

As well, the direction and control that largely required the charity to be an active and controlling participant in the program has been eliminated under this proposal. Instead, we are emphasizing upfront agreements, upfront due diligence and regular reporting, but the charity wouldn't, on a day-to-day basis, be required to be involved in the activity or direct the grantee as to how these activities would be carried out.

We've tried to encapsulate the spirit of S-216, but as I said, we've approached it slightly differently and we've tried to emphasize concrete accountability measures.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much to our witnesses.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

Thank you to our witnesses on behalf of the finance committee, all the members and the staff. We will be seeing many of you on Thursday again.

Members, just before we adjourn, I will allocate some time to committee business on Thursday.

I see MP Chambers' hand up.

[Adam Chambers, Conservative, Simcoe North, ON]

I have a quick point of order.

We had our officials from Stats Canada a number of weeks ago. We did ask for some follow-up, so maybe we could see the status of those. That would be fantastic.

I would prefer not to set the precedent that other committees have where they've adopted a strict timeline under which officials can respond, but if someone could look into that, that would be super-helpful. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers. We will check with Stats Canada on that information.

Members, we shall adjourn.