Mr. Speaker, I thank the Bloc member for raising that point of order.
Bill C-208 also proposes amendments to section 55 of the act, which generally applies to corporations that seek to inappropriately reduce capital gains by paying excessive tax-free dividends between corporations, which the act considers to be a capital gain.
Two exemptions to these anti-avoidance rules authorize businesses that are restructuring to allow company shareholders to split company shares between them while deferring taxes. The first exemption applies to the restructuring of related corporations, and the second applies to all corporate restructurings. Bill C-208 would broaden the first exemption so that it applies to brothers and sisters, despite a standing long-term tax policy that considers brothers and sisters to have separate and independent economic interests for these purposes. Any changes to this exemption could risk eroding the tax base.
Spouses, as well as parents and their children, are already eligible for this exemption because it is presumed they have shared economic interests. Although brothers and sisters cannot restructure their participation in a corporation on a tax-deferred basis under the related corporation's exemption, they can do it under the second exemption of section 55, which applies to all corporate restructurings. This is called the butterfly exemption, and there are fewer tax avoidance opportunities under it.
If the proposed amendments of section 55 included in Bill C-208 were passed, siblings could undertake business restructurings in which otherwise taxable capital gains realized between corporations would be converted into tax-free intercorporate dividends. This would create new opportunities for tax avoidance.
In conclusion, these are important considerations to take into account when reviewing the merits of Bill C-208. Our government remains committed to working with family businesses, including farming and fishing businesses, to make it more efficient, or less difficult, to hand down their businesses to the next generation. However, we must exercise caution to not create loopholes and opportunities for the wealthy to use private corporations for tax avoidance purposes. This would dilute our base protection of anti-avoidance tax rules. Moreover, this would create a tax system that caters to the wealthy at the expense of the middle class.