Finance committee  One thing my colleague reminded me that I may have glossed over in terms of numbers is that the current small business tax rate is 10.5% on active business income and the general rate is 15%. What we're talking about here in terms of the impact of qualifying or not for the small business deduction is that 4.5% point spread.

Finance committee  No. It's in the bill. We often have consultations with stakeholders on many of our measures. I think there are two or three measures in the bill—I'll point to the spousal trusts, the loss restriction events dealing with investment funds, and the graduated rate estates, and I think we talked about two of these earlier—for which those changes came in in 2013, and because of ongoing consultations with stakeholders, as we constantly do, we made refinements to those rules to achieve the appropriate tax results.

Finance committee  The department has also heard from a number of stakeholders, including the medical community. I can't speak to any specific discussions, but I can make a few points. First, it applies to partnerships and corporations. As you said, in these joint medical arrangements one question is whether it has to be a partnership or if it is in fact a cost-sharing arrangement to which the rules would not apply.

Finance committee  Yes, of course. A graduated rate estate is a trust that is entitled to use the graduated rates. Trusts are generally taxed at the top marginal rate, but these trusts, the graduated rate estate trusts, arise on the death of an individual, and they're entitled to use the marginal tax brackets.

Finance committee  I don't think we have the specific costing of it. I think it's fairly small. I should say that it's not necessarily the case that the estates that take the longest are the biggest-dollar ones. You can have complicated estates and contested estates, I'm sure, without big dollars at play.

Finance committee  My colleague Pierre can fill this in. It's always difficult to talk about behavioural responses to a tax change, and particularly one in which, as here, we're introducing more flexibility so that these donations, when they're made, can be applied against previous years, the last two years of the individual, or any of the years when it was a graduated estate.

Finance committee  Yes. I think what we heard is that it takes a fair bit of time sometimes to wind up the estates, and sometimes for the remainder of the estate—what's left after each interested party gets their share—there might be a provision saying “and donate the remainder to charity”. That might be the last thing to be settled, and that provision might push it to the end of the process, which might be past the end of the 36 months.

Finance committee  I would say, in answer to that question, that were we to put these changes in the regulations.... First, I should actually give a little bit of background on what they do. For taxpayers who have derivatives, they're held as inventory. These rules set how they can be treated for tax purposes.

Finance committee  That's correct. It really applies to the holding of them as inventory and this one specific lower of cost and market method.

Finance committee  We know that the rules apply regardless of sector. They apply to all taxpayers in this situation, and it's not targeted at one industry or another. We have heard comments from lawyers and accountants, and I'm assuming the commentary from the Canadian Medical Association is related to this because we've heard from doctors as well, but there's nothing in this restricting it to a particular segment of the economy or type of business.

Finance committee  It essentially addresses two issues relating to the use of life insurance products to extract profits from a corporation free of tax. I'll discuss them separately. The first—I'll call it a loophole—involves the fact that when a corporation receives proceeds from life insurance, the amount of the proceeds is added to what's called their capital dividend account, but it's not the whole amount of the proceeds.

Finance committee  I would be happy to. Cross-border surplus-stripping is unfortunately a bit of technical jargon. “Surplus” in this case refers to the retained earnings in a corporation. Normally when they are paid out, they are paid out as dividends. Dividends, when they cross a border, are generally subject to a 25% withholding tax, which can be reduced under tax treaties.

Finance committee  The big loophole would be surplus-stripping. Then there's an important exception to that rule when you have—I'll provide a bit more background—a Canadian entity buying a foreign company that happens to own another Canadian entity. You could say that the foreign target in that purchase is sandwiched between the two Canadians.

Finance committee  It is, and I apologize for getting a little bit into the weeds, but I think that's important to understand it. There are a lot of techniques used in cross-border mergers and acquisitions planning. This doesn't affect the most common of them. For example, I think probably tax planning 101 is to establish a Canadian acquisition corporation, fully funded with the purchase price by a non-resident, who would use it to buy the Canadian target.

Finance committee  Sir, are you asking about the coming into force for the provisions relating to emissions allowances?