Finance Committee on Nov. 21st, 2022

[Lindsay Gwyer]

That's correct.

There are certain exceptions for life circumstances. If the sale occurs as a result, for example, of a death or disability, birth of a child, a new job, divorce, or certain other exceptions tied to personal safety, or destruction of the property, then those are situations where this rule would not apply.

But, yes, the general rule is that if somebody acquires ownership of a residential property and sells it within less than one year they will be subject to this rule.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

What if there's a loss? Can they deduct the amount of the loss from their income?

[Lindsay Gwyer]

No, they can't. The legislation provides that the rule only applies if there's a gain. There's a specific rule that says that no loss can be deducted as a result of this rule.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

What was the policy reason for that?

[Lindsay Gwyer]

If someone is in a position where they are carrying on a business, if they are already flipping properties, then, under general principles, they would be able to deduct their loss. This rule is really intended to address the concern that when people realized a gain they would take the position that they were not flipping properties and would not pay tax on their gain. This rule is really sort of an anti-avoidance rule in some ways to address that situation. It's not intended to allow someone to benefit by claiming a loss.

[The Chair, Liberal, Peter Fonseca]

You can ask for the answer in writing.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I'd like that answer in writing because it wasn't clear to me in your response and I'm out of time. If you could provide the reason why the loss is not deductible in writing, that would be great.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Morantz.

We'll move to the Liberals now with MP Chatel, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I also thank everyone who worked very hard on the fall economic statement and the measures that are in Bill C‑32. I know what an extraordinary job this is and that it is done every year, both in terms of budgets and economic statements. I take my hat off to you for all your good work.

My question will be directed primarily to officials in the Department of Finance and will focus on measures regarding the general anti-avoidance rule.

I congratulate you on making a very important change. However, there are other measures that have not been taken into account.

You will remember that at this committee we invited Professor Brian Arnold. He advised us and we transmitted these recommendations through our committee.

There are a lot of proposals there that are not in this bill.

I'm also aware that you did a consultation between August 9 and September 30, which is good. I think it was the right thing to do to talk to stakeholders about that. We wanted to achieve the right balance between having a fair tax system and a tax system that gives certainty and allows taxpayers to arrange their affairs to minimize their tax burden. At the same time we want integrity and we cannot have aggressive tax planning that has no economic substance continue to erode our tax base, especially at a time when Canadians are making so many efforts to weather the inflation phenomenon.

Where are you in the consultation and will you provide amendments to the tax benefit avoidance transaction? I know the consultation paper stated that the government intends to add an explicit economic substance rule, but also, the GAAR has no penalty, which, in itself, doesn't really incentivize taxpayers to be respectful of the integrity of the tax system.

My question is for the Department of Finance. What is the status of the consultation? Hopefully, we can see progress and further enhance the GAAR.

[Lindsay Gwyer]

I can answer that, Mr. Chair.

As noted, there was a consultation on the general anti-avoidance rule that launched on August 9 and ended on September 30. It was a general consultation that was designed to look at all aspects of the GAAR and how it could be strengthened and modernized.

As noted, one of the aspects of the consideration is looking at either how to implement an economic substance test through the GAAR or to better ensure that the GAAR captures transactions that are lacking in economic substance. That is one of the points on which we received a number of submissions.

In total, we received around 13 or so comprehensive submissions on the GAAR consultation. We have been having follow-up discussions with some of those organizations that provided consultations. We received a range from academics, tax lawyers, accountants and civil society groups, so we got a full range of perspectives.

In the course of that consultation, we are looking at all aspects of the GAAR. There were a number of questions in the consultation paper. One of them, as noted, is whether the GAAR would be a more effective tool if it would be appropriate to add penalties to the GAAR as a way of disincentivizing people from engaging in aggressive tax planning or aggressive tax avoidance planning.

We're still considering all the submissions. At this point, we have not made decisions as to what changes we will make. The next step in the process will be to release draft legislation for consultation that will reflect our assessment and the decisions the government makes as a result of the consultation.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you. I strongly encourage you in this work.

My next question is about the measure that has been announced regarding credit card fees for small and medium-sized businesses. This will be very important, especially in my constituency, where there are many small and medium-sized businesses. The government has released a bill and indicated in the fall economic statement that it would introduce it if the industry does not come to a solution in the next few months.

Where are the negotiations on this issue?

[Pierre Mercille]

I'm not sure if anyone on this panel can answer that question, because that's not what Bill C‑32 is about.

[Sophie Chatel, Liberal, Pontiac, QC]

That's fine, thank you.

[The Chair, Liberal, Peter Fonseca]

That is the time.

We are moving into our third round, members and witnesses, and we have the Conservatives up first.

MP Hallan, you have five minutes, please.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you, Mr. Chair.

I'd like to take my time to put forward my motion, which was tabled in both official languages. Would you like me to read it or can we just go straight into debate on it?

[The Chair, Liberal, Peter Fonseca]

Have all members received the motion? Yes?

Okay.

MP Hallan, do you want to speak to it or do you want members to—

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

I think it's pretty straightforward. Given how inflation is affecting every Canadian's life today in a negative way, I thought it would be a good time to put forward the motion. I'm hoping we can vote on it and get right to it.

[The Chair, Liberal, Peter Fonseca]

MP Hallan, I do see one hand up.

Go ahead, Parliamentary Secretary Beech.

[Terry Beech, Liberal, Burnaby North—Seymour, BC]

First of all, thank you for drafting this motion. We currently have officials here to discuss the fall economic statement, a study that was delayed somewhat because of our previous conversations. I don't want to get into those, and I certainly don't want to delay our study of this any further either.

We do have some amendments to your motion that we've prepared or are in the process of preparing. We also have some additional business that we need to discuss, and we have some other things that are scheduled. We have the Governor of the Bank of Canada coming on Wednesday. With regard to hitting clause-by-clause consideration of the bill, which we put forward in this motion for this study of the FES, we are also expecting a visit from the finance minister very soon.

I have a proposed solution for us, which I think all members could appreciate, that will get us back to studying the fall economic statement and make sure that your very important motion is dealt with in a very timely way.

My suggestion would be that we unanimously agree that we table the motion for now and not deal with it at this meeting today. We will provide all of our amendments to you proactively, say in the next 24 hours. We will agree that this motion must be the next piece of business for this committee to look at, and, as I'm sure you know, we have informal discussions that are happening later this week. That might be an opportunity for us to look at other things that are important to all of us here such as private members' business and the appearance that is required by Adam Chambers' previous motion, etc.

If we can agree on that, I think that would give you the certainty you need that this is not a ploy to distract, take away or delay your motion and that we will deal with it in a timely fashion. It will also give us an ability to get you the amendments without taking away from the study of the fall economic statement.

I think there are some amendments there that you will like and will benefit the Conservatives as well. If we could agree to that, I think it's a pretty reasonable solution.

[The Chair, Liberal, Peter Fonseca]

Go ahead, MP Hallan.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Chair, would it be okay to suspend for two minutes?

[The Chair, Liberal, Peter Fonseca]

Yes, we'll suspend for a few minutes.

[The Chair, Liberal, Peter Fonseca]

Go ahead, MP Hallan.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you, Mr. Chair.

Note well taken by Mr. Beech.... I think that, given the time today and that the Liberals had to look over the motion and provide amendments by today, we also don't want to take up any more time from the officials, and we definitely don't want to cut into time with the Bank of Canada governor on Wednesday.

I would ask that we go to a vote on the motion.

[The Chair, Liberal, Peter Fonseca]

I think Parliamentary Secretary Beech has something to say.