Mr. Speaker, I am pleased to participate in the debate on Bill C-47, which is not a short bill. The printed version is 143 pages long. The bill includes about nine different sections and 199 clauses. I hope all hon. members will appreciate that when we get a bill this size, it is difficult for any speech to touch on the substantive matters.
The House will often deal with the issue of relevance in debate. I have heard people say that we are debating the budget from last March and they start talking about virtually every item in the budget. However, subsequent to that we have had one implementation bill and this is the second. These implementation bills are intended to put the technical mechanics in place so the representations in the budget are operable. I want to get into a few of those.
I want to advise those who are interested that this bill deals substantively with amendments to the Income Tax Act and related acts in part 1. Part 2 deals with amendments to the Air Travellers Security Charge Act. Part 3 deals with amendments to the Federal-Provincial Fiscal Arrangements Act, which is extremely important in terms of funding of provincially delivered programs and services. Part 4 deals with amendments to the Bank Act and the Financial Consumer Agency of Canada Act. Part 5 deals with amendments to the Canada Disability Savings Act, which we discussed substantively at committee. Part 6 deals with amendments to the Customs Act. Part 7 deals with amendments to the Federal-Provincial Fiscal Arrangements Act. Part 8 deals with amendments to the Office of the Superintendent of Financial Institutions Act. Bill C-47 is a very broad-based bill.
When we are dealing with a budget implementation bill, we are often not talking about anything in the bill in terms of specific amendments to legislation. We tend to drift back to the budget itself and some of its consequences.
The parliamentary secretary, on behalf of the government, led off the debate on the bill. He did not talk much about the budget implementation bill but rather he talked about the budget. This opened up the debate to virtually everything to do with the budget. That is why some people who are interested in the proposed changes to some of these acts have been somewhat ignored in the debate. To rectify that, I want to deal with the proposed amendments to the Income Tax Act and related acts. It is an area in which I have some experience.
The first important area has to do with benefits entitlement and shared custody. Under the Universal Child Care Benefit Act, an eligible individual is defined in subdivision a.1 of division E of part I of the Income Tax Act. If I repeat a lot of these references, people will not understand, so let me just say it is defined in the act. The act currently provides for only one eligible person for a given period.
Under the current provisions, the Canada Revenue Agency has rotated benefits for the universal child care benefit, the Canada child tax benefit and the GST-HST credit for families with shared parenting arrangements on a six month payment basis. The budget proposed to allow two eligible parents in a shared custody arrangement to receive child benefits, including the UCCB. I support that change. It makes sense. A lot of people are at a disadvantage by having just one eligible recipient where shared custody would be a more equitable situation.
The second item under the income tax amendments has to do with the rollover of RRSP proceeds to an RDSP, or registered disability savings plan.
The existing registered retirement savings plan rollover rules are extended under the bill to allow a rollover of a deceased individual's RRSP proceeds to a registered disability savings plan of a financially dependent, infirm child or grandchild. The reason that is important, and why I support it, is that on death of the holder of a registered retirement savings plan, if there is not a spouse for which the act already provides a tax-free rollover, it would then collapse and be taxable fully in the year of death.
If an RRSP collapses all in one year and has a tax liability, in many cases most of that would be taxed at the highest possible rate. It means the estate of the person involved would pay much more tax now than it would have paid had he or she not bought the RRSP in the first place. This would allow that investment in the RRSPs to rollover to a disabled person, financially dependent infirm child or grandchild. It would in fact help families. Members will know that anything that helps families will have my support.
The third area under the Income Tax Act has to do with charities and the disbursement quota form. The finance committee presently is looking at Bill C-470, which tries to put transparency through the expenditures, particularly the human resources costs and salaries of executives of charities. Concerns have been raised that some charities pay exorbitant amounts of compensation to people with the amount of the moneys actually go for charitable purposes being substantially reduced, and that is a problem.
Interestingly enough the changes made in Bill C-47, and I do not know enough about individual cases, I suspect will help some and hurt others because it deals with a disbursement quota.
First, the disbursement quota reform for registered charities, specifically the charitable expenditure rule, would be repealed. Second, the capital accumulation rule would also be modified to increase the threshold from $25,000 to $100,000 for charitable organizations. Third, the anti-avoidance rules would be extended to situations where it could be reasonably considered that the purpose of the transaction was to delay unduly or avoid the application of the disbursement quota. Finally, measures would be implemented to ensure that transferred amounts between non-arm's-length charities would be used to satisfy the disbursement quota for only one charity.
The problem I have with that section is it goes in a different direction than Bill C-470 in terms of the transparency and the concern that there be moneys. In fact, it would allow the charity to have a higher threshold of making disbursements. It would also allow certain charities to accumulate money for capital investments, for instance, if they wanted permanent facilities or core funding for certain programs.
I can understand that in terms of, for instance, hospitals, hospital foundations. I am not sure if the same rules would not have maybe unintended consequences with regard to other charities that are not in some of those key areas of universities or hospitals or organizations like the Cancer Society or the Heart & Stroke, et cetera. There are 85,000 registered charities in Canada. When we start to play around with the disbursement quota rule, somebody will fall through the cracks and there may be some unintended consequences. It will be up to us to monitor the situation.
The next area under part 1 has to do with the employee stock options. There are various methods in the Income Tax Act to deal with the treatment of employee stock options.
First, there is an amendment that would preclude double deductions of both the employee and the employer in respect of the same stock option benefit, which would make sense. The stock option agreement to a non-arm's-length person results in an employment benefit at the time of disposition, and, again, that makes some sense.
A further measure would repeal the tax deferral election. As well, the existing tax withholding requirements would be clarified to ensure that the amount in respect of tax on the value of the employment benefit associated with the issuance of the security would be required to be remitted to the Canada Revenue Agency by the employer. Again, administrative and substantively I agree with that.
Finally, the last measure introduced is a special elective and relieving tax treatment for taxpayers who elected under the tax deferral election introduced in budget 2000 to defer taxation of their stock option benefits until the disposition of the options securities. That appears to be a sound approach.
Section (e) under part 1 deals with accelerated capital cost allowance for clean energy generation. At the finance committee's prebudget hearings, which we have recently concluded, the issue of accelerated capital cost allowance came up frequently. It is an opportunity for businesses to write off, for tax purposes, desirable investments on an accelerated or quicker basis so they pay less tax, which allows them more cash flow to meet their obligations or, more important, to reinvest and continue to roll over their assets to ensure they have the assets, the machinery, the equipment and the like to be more efficient in their work.
Accelerated capital cost allowances is with us to stay. It has been used as a tool rather than a tax cut or something like that. This is effectively a tax deferral scheme. If the businesses keep doing it, it effectively represents a permanent reduction in taxes that could carry forward as long as they continue to invest in the capital, equipment and machinery. I agree with it as a tool and it is very much supported by those who are involved in equipment.
In this one, the section deals specifically with clean energy generation. With regard to our environment and addressing greenhouse gas emissions, et cetera, this is a positive development, which I support.
Section (f) is capital cost allowance for television set-top boxes. I do not know if anybody will understand that, but the capital cost rate for satellite and cable set-top boxes that are acquired after March 4 and that have neither been used nor acquired or used before March 5 will be increased to 40% to better reflect the useful life of the assets. This is effectively a correction of a rate, which is already available in the tax act. As it indicates, it is simply to reflect the fact that these assets have a very short lifespan or utility before substitutes become available and desirable by consumers. It allows them to write them off over a short period of time.
Section (g) under part 1 deals with the Canadian renewable and conservation expenses to do with principle business corporations. The definition of that will be amended to clarify that flow-through share eligibility extends to corporations the principle business of which is one or any combination of producing fuel, generating energy or distributing energy. I agree with that. It is a constructive move to make that change.
Section (h) deals with international financial reporting standards. It gets a little too technical, so I will not go to go there. Having looked at it, there is a five-year transition rule, and I think it works.
There is a sub-item on that. Amendments to the Canada pension plan and the Employment Insurance Act and the Income Tax Act will be made to provide legislative authority for Revenue Canada to issue online notices where authorized by a taxpayer. Again, this is an efficiency in terms of the process.
In addition, part 1 of the bill implements a number of other income tax measures. Employee life and health trust is new. The working income tax benefit will be amended for 2009 to $925 for single individuals with no eligible dependents and to $1,680 for individuals with at least one eligible dependent.
The amendments in this bill will ensure that the working income tax benefit amounts will continue to be indexed to inflation on an annual basis. Thank you, Mr. Minister. I think it is an important change.
There are some technical amendments to the tax-free savings account. I want to comment more fully on that, but I will move on.
Finally, there are the labour-sponsored venture capital corporation rules. Very few people will understand very much about that, but there are consequential amendments related to the tax-free savings account, which I want to address now.
First of all, I certainly support the tax-free savings account instrument, which allows Canadian residents who are 18 years of age or older to be eligible to contribute up to $5,000 annually in a tax-free savings account. The contributions are not tax deductible, but the investment income earned in a tax-free savings account will not be taxed. Since the contributions were not deductible when deposited, there will be no tax when withdrawn.
It is a good instrument to save money if one has money. This is of benefit certainly to middle and higher income Canadians who have cash that they are presently investing and paying income tax on the investment income. Now there is an instrument where they, their spouses and kids can have tax-free savings accounts. All of a sudden, formerly taxable investment income is going to be growing up in non-taxable instruments.
Eventually, I suppose, the taxes will ultimately come when that money is taken out and disbursed for consumption purposes and it works its way through the system. However, it is a leakage of tax revenue to the government, no question about it.
I raised my concern on this with the finance minister and officials last Tuesday. It has to do with the number of amendments they have to make. This is a simple program. One can put up to $5,000 a year in there, and on any income earned on eligible investments, one will not have to pay any tax ever.
We have amendments to make the income attributed to deliberate overcontributions and prohibited investments subject to existing anti-avoidance rules. We also want to make any income attributable to non-qualified investments taxable at regular tax rates. As well, we want to ensure that withdrawals of deliberate overcontributions, prohibited investments, non-qualified investments or amounts attributable to swap transactions or related investment income from a tax-free savings account would not create additional tax-free savings account contribution room. Finally, we want to effectively prohibit asset transfer transactions between tax-free savings accounts and other accounts.
It is a simple program, but the amendments that are being made say to me that the crafters of this and all the levels of care and due diligence that took place in the process somehow did not consider what would happen if people made overcontributions. The government did not consider that if people made an overcontribution, a penalty of 1% was actually a lower amount than what they could earn on those investments, so 1% was not a deterrent. People realized that they could invest at 3%, and if it cost 1% in penalties, they would still make 2% on something that is not going to be taxable anyway. It is getting around the rules.
How is it that the government could not deal with the issues of non-qualified investments? Obviously there are some. It could not deal with deliberate overcontributions, prohibited investments, non-qualified investments, or amounts attributable to swap transactions and what happens if this is done and what are the consequences.
The point I made there and I will make again today in the House is that I did not get a strong comfort level that there was rigorous due diligence and careful thought given to this particular program. With all the things that the government missed in a very simple program, in my view, if the little things are not done well, there is not a great confidence level with regard to the larger items.
