Evidence of meeting #4 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was measure.
A recording is available from Parliament.
Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance
As a general statement, yes. We agree that, under the law—
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
Offshore tax filers have had enormous advantages in the tax system. There was a damning Auditor General report almost six years ago that pointed out that the department often gave months or even years for offshore filers to comply with requests for information, when a Canadian tax filer would automatically be assessed the full amount owed whenever there was a request for information that wasn't complied with in 30 days.
Is that still the practice at the CRA?
Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance
I'm at the Department of Finance, so I can't really speak to the CRA's practice—
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
Perhaps the CRA officials who are here could comment on that.
Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance
Maybe the question is how our information requests are treated for non-residents versus Canadian residents. Under the law, there's no different law for someone who is offshore versus—
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
The Auditor General identified that the practice of the CRA was to give additional time for compliance, months or years, and, in fact, often write off or rescind a request for information when dealing with a complex offshore filer, whereas for a domestic filer with a simple return, if they don't give the information that's requested by the CRA, the CRA would just assess the tax amount in question.
Is that still the current practice of the CRA?
Director General, Legislative Policy Directorate, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Although the question does not relate to Bill C-4 or its provisions, I can confirm that the CRA has addressed the recommendations of the Auditor General, and we have clarified the timelines for information requests for non-residents.
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
I'd like it if you could get back to the committee if you have any way that we can show or document how the timelines have changed since that Auditor General's report.
Bill C-4 is an affordability measure. Tax fairness is important to Canadians. Individual Canadians pay a lot of income tax and expect tax fairness.
We have seen the use of tax havens by businesses, including Brookfield, the company the Prime Minister chaired until recently, which set up funds in offshore tax havens—Bermuda and the Cayman Islands.
Will the tax collection measures of this government capture these offshore filers and ensure that businesses are not able to avoid paying Canadian taxes?
Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance
There's nothing in this bill that speaks to offshore taxes or collections. That is something the Department of Finance is continually working on. There have been measures announced in recent years to implement rules that deal with offshore tax, but we're here to speak about the measures in C-4, so we don't have the people here who would be best positioned to speak to those other things that have been proposed over recent years.
Conservative
The Vice-Chair (Jasraj Hallan) Conservative Jasraj Singh Hallan
Thank you. That's time.
If the witnesses don't have answers for things today, they can always submit them afterwards.
We are moving into the next round. We have Jake Sawatzky for six minutes.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you, Chair.
Thank you to all the witnesses for coming in today. We appreciate your time.
Young Canadians often have difficulty getting into the housing market. Who exactly is eligible for the tax relief when it comes to houses? Is this legislation mainly targeted towards young people?
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
It's not targeted to young people per se, but it is targeted to first-time homebuyers who, on average, tend to be younger Canadians. The people who would qualify as a first-time homebuyer have to be Canadian citizens or permanent residents. They have to be at least 18, and they have to, when they take possession of the home, not have owned a home in that year or any of the previous four years. Their spouse or common-law partner also could not have owned a home in that year or the previous four years.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you.
Could you elaborate on why it is for some homebuyers who haven't owned a home in the last four years. Could this possibly exclude younger families, who might have had to sell due to financial hardship but still face affordability pressures?
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
The four-plus year marker was chosen because it's consistent with other programs under the Income Tax Act that deal with new housing. The first home savings account, for example, and the homebuyers' plan have a similar time test. This also limits the amount of time the CRA has to look back, in terms of how long it is since somebody's owned a home.
To your question as to whether it ought to be shorter, again, we're striving for consistency with the other definitions.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you.
The GST stops at $1.5 million. In high-cost markets like Vancouver or Toronto, some starter homes are actually above this threshold. Is it possible that this policy might unfairly leave young Canadians in certain regions with higher prices behind?
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
The $1-million threshold actually covers over 97% of homes purchased by first-time homebuyers. There are only about less than 3% that are above the $1-million mark. That extra buffer from $1 million to $1.5 million, where you get partial relief, was introduced in recognition of the fact that there are those markets like Vancouver and Toronto where prices are higher.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you.
Coming back to affordability in a broader sense, to ensure affordability, is it possible that this might just be absorbed into higher developer profits? How can we make sure that this is passed through into affordability rather than inflating prices?
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
One of the key advantages of doing a first-time homebuyer rebate, which is only available to a certain portion of the market, is that, if first-time homebuyers prefer, they could always not say they're a first-time homebuyer, negotiate a price on their home and claim the rebate directly with the CRA. However, if they're comfortable assigning the rebate to the builder, they can do so, perhaps after negotiating a price on the home.
We're fairly confident, given the design of the measure and the fact that first-time homebuyers don't have to discuss the availability of the rebate with the builder, that most, if not all, of the relief should go to the first-time homebuyer. There are other designs that can be considered where that would be a bit more of a risk, but in this instance we're fairly confident that the relief will go where it's intended.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you.
I'm wondering if you might be able to give any projections as to how many additional young Canadians will be able to buy a home as a result of this rebate.
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
We've estimated that the first-time homebuyer rebate will apply to 47,000 new homes. We estimate that first-time homebuyers represent about 30% of the market.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thanks.
Given that this also applies to newbuilds, what does the government expect its effect will be on supply for when we're building homes young people can afford?
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
I'm sorry, can you say your question again?
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
This measure only applies to newbuilds. Is that correct?
Director, Real Property and Financial Institutions, Sales Tax Division, Department of Finance
Yes, the GST only applies to newbuilds.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
What effect will that have on the supply of houses?