Finance Committee on April 25th, 2023

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I would first like to congratulate you on all the work that you and your teams are doing to produce these budget implementation bills and the budget itself. I know that this work takes the entire year.

I'm going to ask my question and I think we will come back to it in the next round. I primarily want to congratulate you for the courage you show in tackling a subject that is of extreme importance for all Canadians. Even if people have a salary and are part of the middle class and pay their taxes, a lot of people take advantage of tax loopholes and the freedom that, unfortunately, the courts have permitted by not halting those loopholes.

You have proposed some extremely important measures in the budget that aim to restore integrity to the Income Tax Act, particularly with the general anti-avoidance provision and the consultation that it involves.

I have just introduced the subject I will address in the next round. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chatel. That is the time.

Members and witnesses, we are moving into our third round.

I have MP Chambers up for five minutes, please.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

I have a couple of questions about the air travellers security charge.

Where do the proceeds or the revenues from that charge go?

[Gervais Coulombe]

Thank you for the question.

All revenues from the air travellers security charge flow into the CRF, the consolidated revenue fund. There is, though, a notional commitment to balance over time the revenues from the ATSC and expenses for the air travel security systems. That includes the expenses from CATSA, which is the federal agency responsible for screening passengers and their luggage at airports.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

On the commitment to balance, is there any documentation that you're aware of that shows what the balance is today?

[Gervais Coulombe]

There has not been, in recent years, a public statement about that particular balance. What I can tell you, though, is that the expenses for travel security have been higher than revenues generated from the ATSC in recent years.

The federal government collected only $419 million of ATSC revenue in 2021-22. Now that the sector is recovering from the pandemic, we expect to collect about $780 million in fiscal year 2022-23.

Budget 2023 committed $1.8 billion in new funding for CATSA. In that sense, the increases that are included in part 3 of the bill will help fund those additional expenses. That is what has been presented in this budget.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

If the government is not recovering the cost of expenses, I'm curious because other countries seem to have lower charges than Canada does. Why are we looking to increase revenues instead of the expense side of the equation? Why is it that CATSA has the expenses so much higher on a per traveller charge than our comparable jurisdictions, as I understand?

[Gervais Coulombe]

Thank you for the question.

That goes beyond my level of expertise. I'm not responsible for challenging CATSA's expenditures.

What I can tell you, though, is that the government decided to provide that extra funding for CATSA as part of budget 2023.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

It is maybe not for you to challenge CATSA's expenditures but somebody should. Maybe the transport committee wants to undertake a study.

How much time do I have, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

You have about a minute and a half, MP Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

I appreciate Ms. Riddell's answer to my colleague Mr. Ste-Marie. If it's okay with the committee, if he would like to follow up on that very thorough answer, there may be some things to unpack there. I'll yield my time to Mr. Ste-Marie if he'd like to pursue that line of questioning when it gets to him.

[The Chair, Liberal, Peter Fonseca]

[Inaudible—Editor], MP Ste-Marie? No?

Okay. We're moving to the Liberals now and MP Chatel for five minutes, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

I will pick up where I left off. In the budget, important amendments have been proposed to restore a lot more integrity in our tax system and make sure that people pay their fair share of tax. There are going to be major changes.

I have an initial question concerning your consultation. You announced that you were going to hold a consultation until May 31 before releasing the revised legislative proposals. Do you think the period announced in the budget is going to allow for the committee to see the legislative proposals in the Budget Implementation Act, 2023, No. 2?

[Lindsay Gwyer]

I can respond to that question.

Going back, last summer we released a consultation paper on the GAAR. In this past budget, we released proposed amendments to the GAAR, including draft legislation that included those proposed amendments. Those are out for public consultation until May 31.

In terms of the next steps, I can't commit to specific dates. It would be a decision for the government. However, I expect that further draft legislative proposals that take into account comments we get during that consultation period would be released. That could potentially happen in the summer when we release—as we typically release—legislation related to the budget measures that were not in the BIA 1, the first budget implementation act. Measures that are released in the summer do often get included in the budget implementation act in the fall.

Again, it would be a decision for the government, but yes, based on what we have released to date, that would be a potential timeline.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

As a last point, I note that there is going to be a penalty for misuse of the tax law. This is a much anticipated change. Will there also be a penalty for third parties? A lot of accounting and legal firms, for example, suggest loopholes to people who are not very familiar with the Income Tax Act. Are those firms going to receive a penalty?

[Lindsay Gwyer]

All the amendments that were proposed don't contemplate a penalty on promoters or advisers, so there would just be a penalty on the person who has engaged in the tax planning.

[Sophie Chatel, Liberal, Pontiac, QC]

Okay. Thank you.

Can you make a connection between the proposed mandatory disclosure rules and the proposed measures to restore integrity?

[Lindsay Gwyer]

Sure.

This bill does include changes to create new rules that would require taxpayers, and their advisers and promoters, in certain situations, to report certain aggressive tax planning to the CRA.

There are existing rules that exist in the Income Tax Act to address reportable transactions. Those are transactions that are identified through generic hallmarks related to fees that are tied to a tax benefit, contractual protection to guarantee a tax benefit, and confidential protection to protect an adviser or promoter from having the details of their plan divulged. Those rules are being amended to make them apply more broadly.

As well, there is a second set of transactions called “notifiable transactions”, which are specific types of tax planning, and those types of transactions would need to be reported to the CRA.

Then finally there are also changes related to uncertain tax treatments that are reported on a company's financial statement if they're required. Generally it's large public companies if they're required to maintain their statements in accordance with accounting principles. Then, if they report an uncertain tax treatment it would need to be reported to the CRA.

Those rules would allow the CRA to better identify aggressive tax planning, including potential situations that are subject to GAAR. The GAAR proposals that were announced in the budget—which are not in this bill but which we're consulting on—do contemplate that in order to avoid the penalty under the GAAR rules, reporting could be done to the CRA of the fact that this transaction has occurred. That reporting is proposed to occur under these mandatory reporting rules that I just discussed, so in that way the measures are linked.

[Sophie Chatel, Liberal, Pontiac, QC]

Unfortunately, my speaking time is up.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chatel.

Now we are going to MP Ste-Marie for two-and-a half-plus minutes.

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

Thank you, Mr. Chair.

I thank Mr. Chambers for leaving me some of his speaking time. My speaking time is therefore three minutes and 15 seconds.

Regarding the subject raised by Mr. Chambers, would you like to complete your answer, Ms. Riddell?

[Amanda Riddell]

Do you mean that I complete the answer to the question that was originally asked by Mr. Chambers?

[Adam Chambers, Conservative, Simcoe North, ON]

I want to hear your explanation to Mr. Ste-Marie last time, or were you finished?

[Amanda Riddell]

Oh, I thought I was done.

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

Do you want to add something, Ms. Riddell, or was your answer complete?