Mr. Speaker, it is nice to be back here in this wonderful House of Commons, where I am pleased to kick-off debate on this important piece of legislation, both for taxpayers and tax professionals, because it represents a major advancement in the simplification of Canada's tax system.
While admittedly it is technical, I should remind members of the many Canadians who helped craft its development over the years through numerous open and public consultations. In fact, the technical tax amendments act represents over a decade of miscellaneous tax announcements that have already been made public but have yet to be formally enacted, causing a significant backlog in our tax system. This backlog can be traced back to the fact that Parliament has not passed technical tax legislation in over a decade, something the Auditor General identified as a matter of legitimate concern.
I will read directly from the Auditor General's fall 2009 report, to provide members with further background on this issue. It states:
The last technical bill on income tax law received royal assent in 2001. Each year, more deficiencies are identified, contributing to an ever-growing backlog of needed technical amendments.
—The Department of Finance Canada alone cannot correct this situation, but it can do more to bring the urgency of the problem to the attention of the government and Parliament....
The Auditor General also articulated some powerful reasons to explain why clearing this backlog should be a priority for Parliament. Again, the report states:
Canada’s tax system relies on taxpayers to self-assess and pay the income taxes they owe.... [M]ost taxpayers will meet their tax obligations if given the proper tools and information.
Taxpayers’ ability to comply with tax legislation depends on their understanding of how the rules apply to their own circumstances. When the intent of the legislation is not clearly conveyed by the words, taxpayers may find it difficult to assess the income taxes they owe and this could foster tax avoidance. Uncertainty about how the law should be applied can also add to the time taken and costs incurred by tax audits and tax administration.
I strongly encourage all parliamentarians and Canadians watching at home who want to learn more about this issue to read the very comprehensive work of the Auditor General, available online at www.oag-bvg.gc.ca. Specifically, I suggest they look at chapter 3 of the fall 2009 report, which shows that the government agreed wholeheartedly with its findings and recommendations. Indeed, we indicated in a formal response included in the report that we recognized these concerns and would once again introduce technical tax legislation in Parliament.
To facilitate passage of the bill, we have consulted extensively with Canadians over the past few years in order to get as much feedback as possible before introducing it and so that we could proactively address any concerns that were raised.
We are now at the most important stage of the legislative process: the careful review of the bill in Parliament.
For many years now, as Parliament has tried to pass tax bills under other governments, Parliament has never managed to complete its examinations.
I think all members will agree that it is time to address this backlog of over 10 years, and that taxpayers should not have to live with the uncertainty of additional backlogs.
Even the all-party Standing Committee on Public Accounts agreed. In its 2010 study of the Auditor General's report, the committee issued the following statement:
The Public Accounts Committee believes that the integrity of Canada’s income tax system depends upon taxpayers and tax auditors having a clear understanding of the requirements of the Income Tax Act and its associated regulations. A lack of clarity can lead to increased costs for taxpayers who may need to seek out professional advice. As a result, it is of particular concern to the Committee that no income tax technical amendment bill has been passed since 2001.
I would also note that the all-party finance committee, of which I am honoured to be a member, has heard from diverse witnesses about the importance of addressing the technical tax backlog. These groups include the Real Property Association of Canada, the Canadian Institute of Chartered Accountants, the Tax Executives Institute, the Canadian Tax Foundation, and many more. However, perhaps the most vocal of these groups has been the Certified General Accountants Association of Canada, sometimes known as CGA Canada.
While I know that all members would likely support the general principles of tax simplification, as well as ending uncertainty for taxpayers, we must nevertheless conduct a thorough study of this legislation, especially at the finance committee. In fact I have already consulted with my committee colleagues about holding multiple meetings on this legislation, and I am pleased to report that members are in broad agreement.
As some of the amendments included in today's act date as far back as the late 1990s, pre-dating both our government and the majority of sitting MPs, I think we can all appreciate the need to examine them closely in a non-partisan manner.
I will briefly go over the content of this legislation for those who are not familiar with this substantial bill.
As I already mentioned, this bill is about further simplifying Canada's tax system by making various changes to the Income Tax Act and other related legislation.
The CGA represents over 75,000 tax professionals and has appeared before various committees over the years to stress the need for Parliament to act to clear this backlog. As such, I would like to read at length part of the statement made by CGA Canada following the release of this legislation in November:
By tabling this legislation, the government is taking concrete action to deal with the backlog of unlegislated tax proposals....The new bill will provide more certainty to Canadian taxpayers and lessen the burden of compliance.
Some of the measures contained in today’s bill were initially proposed as early as 1999.... What’s more, since 1999 these draft rules have been re-released a number of times and revised by the government, making taxpayers uncertain.... With unlegislated tax measures, taxpayers and professional accountants must maintain their records and forms–sometimes for years–to be in a position to comply, even without knowing when and if these measures will be approved by Parliament and enacted. This uncertainty and unpredictability places an enormous compliance burden on taxpayers, businesses, professionals and their clients.
I will now walk through this legislation, piece by piece, to highlight key measures and their intended purpose. Although the legislation is highly technical, I will be brief in my remarks.
Let us start with part 1 of the bill. Our government is proposing enhancements to the Income Tax Act to better target and simplify the rules relating to non-resident trusts, taking into account comments received during extensive public consultations.
Parts 2 and 3 relate to the taxation of Canadian multinational corporations with foreign affiliates. Again, our government consulted extensively with stakeholders and the public on these proposals, some of which date all the way back to 2004. The result will be a simplified, fair and equitable tax system that will be easier to comply with and more straightforward to administer.
Part 4 of the bill will help ensure that its amendments will function under both common and civil laws. More specifically, these amendments will ensure that provisions that rely on certain private law concepts are bijural, such as right and interest; real and personal property; life estate and remainder interest; tangible and intangible property; and joint and several liability. In other words, the bill will ensure that they reflect both the common law and the civil law in both linguistic versions.
Part 5 of the bill will close certain tax loopholes and ensure greater fairness for taxpayers, measures on which we consulted extensively. These measures include closing tax loopholes related to a specified leasing property; ensuring that conversion of specified investment flow-through trusts and partnerships into corporations are subject to the same rules as transactions between corporations; preventing schemes designed to shelter tax by artificially increasing foreign tax credits; and finally, implementing a regime for reporting tax avoidance.
Taken all together, these measures will help crack down on the problem of tax avoidance and ensure that everyone pays his or her fair share.
Tax fairness is a basic principle that we have worked hard to respect ever since we took office. We are proud of our commitment to strengthening the integrity and fairness of the tax system and of our continued efforts to eliminate tax loopholes.
In fact, since 2006, we have introduced over 50 measures to eliminate these loopholes in order to guarantee that taxes are collected in a manner that is fair and consistent with their intended policy objectives.
Our efforts have therefore allowed us to collect nearly $2 billion on behalf of taxpayers. Canadians can be assured that in the future, our government will continue to take the necessary measures to ensure the integrity of the tax system, because eliminating tax loopholes helps to keep taxes low for everyone.
Before moving to part 6, I should also note that part 5 includes a number of technical changes designed to ensure that the income tax system functions in the way it was intended. Many of these changes are relieving measures and will address issues previously identified by taxpayers.
Part 5 also implements an amendment relating to the enactment of the Fairness for the Self-Employed Act. It extends the personal income tax credit in respect of employment insurance premiums to apply to premiums paid by self-employed individuals.
Part 6 of the bill implements technical improvements to the GST and HST, including relieving GST or HST on the administrative service of collecting and distributing the levy on blank media imposed by the Copyright Act.
Part 7, the final portion of the bill, makes administrative changes to the Federal-Provincial Fiscal Arrangements Act.
As all of these parts will be examined in greater detail by the finance committee, I will simply say that the underlying intent of each of these measures is to simplify the tax system and thereby ensure fairness and equity for all Canadian taxpayers.
In closing, I will quote from an op-ed originally published in The Globe and Mail by Tim Wach, a respected tax professional with the firm Gowling Lafleur Henderson, which speaks again to the importance of passing today's legislation. It states:
—there are only two certainties in life: death and taxes. While one cannot take issue with the first part of that statement, the second is increasingly coming into question. The fact that we have to pay tax is no less certain, but certainty in the detail of Canada’s tax laws arguably has been decreasing. This results from the increasing “legislative backlog”–the gap between the announcement of changes to the tax system and the legislative enactment of those changes.
This gap is making it increasingly difficult for Canadians to plan their affairs with confidence and certainty and to comply with their tax obligations. When taxpayers are uncertain about their obligations, their trust and faith in the system diminishes.
It continues:
—parliamentarians can bring a higher degree of certainty to our tax laws by moving forward swiftly, in a non-partisan, non-politicized manner, to enact outstanding changes. Let’s hope they do just that.
In closing, I encourage all members to listen to the advice of the Governor General and the appeals of the tax experts represented by CGA-Canada, as well as taxpayers, who have told us repeatedly that they want to know where they stand with the tax system.
Let us take this historic opportunity to move forward in a non-partisan manner to give this legislation the careful consideration and passage it deserves.
I look forward to any questions.