Finance Committee on Nov. 21st, 2022

[Yves Poirier]

That's right. In addition, the person will be able to transfer the funds they have in their RRSP to the FHSA. Both accounts are subject to annual and lifetime limits.

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

So, if the FHSA limit is x dollars per year, each year, the person will be able to take x amount from their RRSP and transfer it to the FHSA, based on that annual limit. So, in a few years, they can reach the maximum of $40,000, if I'm not mistaken. Is that correct?

[Yves Poirier]

That's right.

The annual limit would be $8,000. So each year, a person could take that amount from their RRSP and transfer it to the FHSA without any tax consequences. In the case of a potential first-time homebuyer, this will remain tax-free.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

Now we're going to hear from the NDP.

MP Blaikie, you have six minutes.

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

Thank you very much, Mr. Chair.

My initial question is probably properly addressed to Ms. Gwyer, but if I'm wrong about that, I'm happy to have her redirect it.

With respect to (q) in part 1 in the legislation, “strengthening the rules on avoidance of tax debts”, I'm wondering if she could give a bit of an explanation of what those changes are specifically, how they're meant to operate and how much money the government expects to recover from these changes.

[Lindsay Gwyer]

Sure. I can respond to that.

To clarify, you're talking about the rules that are in part 1 that relate to the avoidance of tax.

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

Yes.

[Lindsay Gwyer]

There's a rule right now in the Income Tax Act that applies to prevent someone who has a tax liability from transferring their assets to a related person for less than fair market value in order to prevent that person from being able to pay their tax liability. For example, a corporation—if it were to transfer, if this rule didn't exist—could potentially destroy the tax liability and make it unrecoverable by transferring assets to a related shareholder or a company, or someone else. This exists to prevent that planning.

There is some very complicated tax planning that has been promoted by some advisors to people who are entering into transactions that are triggering tax liabilities as a way to try to avoid that obligation. As part of these schemes, they take assets out of companies and trigger tax liabilities, and try to strand that liability so that the CRA can never collect it. This change is intended to make certain technical changes that they try to rely on in that planning in order to cause this rule to not apply. There are also changes that are being made to some other statutes, as well as the Income Tax Act, because tax statutes and statutes that are similar to tax statutes all have this rule in them.

In terms of the amount of money, there's no revenue forecast for this measure specifically, because it's a measure that is intended to ensure that the revenue that's associated with other measures is able to be collected by the government. I don't have a specific revenue number to give you, but like other integrity measures, it's there to make sure that the revenue projections on other tax measures are satisfied.

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

There's no projection with respect to those tax measures, like what's been lost up to now or what's typically lost in a tax year as a result of these technical issues existing in the legislation.

[Lindsay Gwyer]

I don't have that in front of me, unless one of my colleagues who's on has that. We can go back and check if there's anything that we can provide to you.

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

I would appreciate that. Thank you.

Is there a sense, then, of the cost of implementation? What would it mean for the CRA, from a cost perspective, once this passes—provided it does? Are there any costs associated, or is this part of the ongoing work of officials at the CRA?

I know, for instance, in the case of the CERB debt, there was a specific allocation to recover that debt. Is there a comparable estimate for what is entailed in going out and recovering these tax debts, once the legislation provides the CRA with the tools?

[Lindsay Gwyer]

Again, I can double-check for you, but I don't believe there's anything associated with this measure as a cost. As I said, it's a rule that already exists in the Income Tax Act. It's something the CRA is already auditing and enforcing. There was a case the CRA lost that caused these amendments to be made, in order to address the planning done in that particular case. I don't think the changes have any particular costs, as it's something the CRA would already be auditing, looking for and assessing. It's just improving their ability to apply this rule. However, we'll check.

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

Thank you. I appreciate that.

Is there any kind of general guidance given by either the Ministry of Finance or the CRA itself with respect to what percentage of debt is acceptable as bad debt? Is the CRA always going for 100% recovery of tax debts, or do they have an internal target that's a bit lower than 100%, which they would see as constituting an effective recovery program?

[Lindsay Gwyer]

I don't know the answer offhand. We can check whether we have that information and provide it.

Again, this measure is targeted at specific planning, where people have the assets, then move those assets, in order to not pay their debt. That's obviously a bit different from a situation where, for whatever reason, business or otherwise, there just isn't the money to pay the tax liability. We can see whether there is additional information on that for us to provide.

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

I guess what I'm ultimately getting at is whether or not the CRA, in general, has a certain amount of tax debt that's unpaid. They have people who go and chase that money, as part of their good work. Presumably, those don't always equal out. The debt is more than what's recovered. It's hard to imagine they'd have 100% recovery. I'm just wondering whether, internally, they have a number—a percentage.

If they're tracking their total liabilities and revenues, what do they consider to be a fair rate of success, as it were? If it's 100%, that's fine. That would be good to know. If it's not.... I think, in the private sector, they usually have an allowance for a certain amount of that debt, so I'm just curious to know what the government's position on that happens to be.

I'm mindful of the time, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

We're getting close to 6:20, although I have members who, because of the transition between a question and getting the right witness to answer.... I've allocated a bit of extra time.

If you would like to answer that, we'll then move on to our next questioner.

[Lindsay Gwyer]

We'll see what information we have that we can provide.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Gwyer.

Members, we are moving into the second round. In this round, we're starting with the Conservatives and MP Lawrence for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you. I'm glad the Christmas spirit has moved the chair with his generosity.

My questions will be directed towards Ms. Gwyer, but, as Mr. Blaikie said, I'm more than open if someone else has a response and wants to jump in with it.

As you also said in your statement, I thought of the number of areas where we desperately need new legislation. This is non-partisan; I think many parties would agree with it. We need to see additional legislation with respect to fintech, the Great Lakes, open banking, SR and ED, fuel tax relief, artificial intelligence, human rights legislation, the charitable sector, income tax reform, and everything, yet what we got was legislation with respect to marijuana—which seems a bit odd—and the moon. While our priority, obviously, is making life more affordable for Canadians, we can see this government's priorities are the moon and marijuana.

On that very note, Ms. Gwyer, my first question is, can you point to any provision in the fall economic statement that will have a meaningful impact on the gross domestic product of Canada, increasing it by more than, let's say, half a percent?

[Lindsay Gwyer]

Mr. Chair, my expertise is really on tax legislation. I'm a tax lawyer, so I'm not really in a position to speak to fiscal or economic impacts.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I would assume that before any of these tax legislation changes were done there would have been a look at their impact on the economy—or it would seem to have made sense. Was there no look at what the impact to the economy would be of any of these income tax provision changes?

[Lindsay Gwyer]

Pierre, do you want to answer that?

[Pierre Leblanc]

I think what I'd note, Mr. Chair, is that yes, while we can't discuss the analysis itself, we can say that economic analysis is a key part of the assessment of any measure.

What's really difficult in all these cases is putting a very specific number on what the potential impact might be. I might note that a 0.5% impact on GDP is a very big number, so you would need a very big measure to come close to achieving that.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

What would be the net impact on GDP of these tax provisions? If you don't have it, would you provide it to the committee.