Finance committee  It's a tricky issue. This issue has been around since 1985. This is not a new issue. When they introduced the capital gains deduction in 1985, this issue existed. I commend the current government for at least looking at it and, frankly, wanting to solve this decades-old problem.

Finance committee  Thank you, Mr. Chair. Good afternoon, committee members. Thank you for the opportunity to appear before this committee. My name is Kim Moody. I'm a chartered professional accountant and director of Canadian tax advisory services at Moodys Gartner Tax Law in Calgary. I have a very long history of serving the Canadian tax profession, with a variety of leadership positions.

Industry committee  Are you alleging that I said that?

Industry committee  I would hope you would be, but I never said that. Of course, there should be safety and rules in place to protect employees. That to me is common sense, but to suggest that you're going to build a rule every time there's a bad actor is something that I don't subscribe to, and I would suggest that a good chunk of small businesses don't subscribe to that, either.

Industry committee  So let's create a rule for that, then.

Industry committee  On the tax community, that's a cheap shot, but the short answer is no.

Industry committee  Sorry, Mr. Masse. In what respect?

Industry committee  Yes, I do. To my knowledge, at least—I'm certainly no expert in this and I'm happy to be corrected—there are a number of non-profit organizations that do try to keep businesses up to speed on this. In terms of tax, there is no formal body that does this. In terms of trade, I'm aware of certain western Canadian organizations that exist, but outside of that, it's beyond my area of expertise.

Industry committee  I can't really add much to that, but I do hear your point.

Industry committee  I can start. I'm not familiar with the Canadian Bank Act, but with respect to the Income Tax Act, there are very specific rules under section 146 and in the companion provisions thereof that require the definition of what's called a “qualified investment” to be met before RRSP funds can be deployed into, say, start-ups, as in your example.

Industry committee  I haven't seen that exact example, but we are seeing the impacts in terms of rather ridiculous behavioural changes as a result of the private corporation tax rules that were implemented, the biggest of which was the so-called income splitting rules. There are good policy reasons why that rule should apply, but it could have been done a lot more simply than what's there.

Industry committee  As I said, I've certainly seen behavioural changes in how investment funds are being held. I'm a big believer that the tax tail shouldn't wag the dog. If you follow that simple analogy, what we're now seeing, of course, is that because of the very punitive results of these passive investment rules, which ultimately can result in a marginal tax rate of about 135% in Ontario and about 130% in Alberta, with those very negative....

Industry committee  Yes.

Industry committee  In general, I think, sure.

Industry committee  A fair amount.