Finance committee  Chair and members of the committee, I would like to thank you for inviting us to speak with you today. MNP believes that we need comprehensive tax reform. Without it, we will have an increasingly complex and costly tax system. We need simplification and modernization of the curr

Finance committee  I would agree that it's a fair assessment. Overall, we were pleasantly surprised when we saw the budget. There are three aspects of the passive income that I think we should look at. First, because the budget was announced on February 27, there were transactions that may have h

Finance committee  We're not so much on that issue, but embedded right in the legislation is the ability to restructure to meet the requirements by December 31, 2018, which does allow for restructuring to happen so that shares would not have TOSI apply in certain circumstances. These complexities a

Finance committee  That's actually a very good question. It will be difficult to determine whether this pooling is coming from dividends from eligible corporations, eligible dividends that are creating the part for tax that is refundable, or whether it is coming from other sources like capital gain

Finance committee  I think there are some reasonability issues elsewhere, but in this, for the most part, it's a purely mathematical question. There are formulas. It's just a matter of complying with the calculations and administering it and tracking it on a go-forward basis. I would be hard-presse

Finance committee  In the budget documents, they are using a 5% rate of return, which means $1 million of passive assets earning that $50,000 of passive income. I would agree that it probably is too low, the reason being that there are a lot of businesses that need passive assets in order to weathe

Finance committee  In the reasonability test, we have to look right now at the relative value of each of the spouses' work. It does make it difficult at times to put a value on what one spouse does versus another. If there was an exemption, it would remove that. We wouldn't have this concept of som

Finance committee  We do not think a royal commission is necessary, but we do think we should have a committee created—of stakeholders, of finance, of experts, and of parliamentarians—where they all work together to get a desired result. What we are looking for is predictability, certainty, and fai

Finance committee  That would be a great idea, or as part of comprehensive tax reform, we could deal with those kinds of issues. There is a lot of ambiguity in those TOSI rules as they are written around excluded shares, and there's also the question of why the service company is exempted. Why is t

Finance committee  With the test on excluded shares, you have to hold more than 10% of the votes and value directly, so shares held through a family trust would not meet the TOSI exceptions. Yes, it would impact more businesses than just services, and then just PCs, but those businesses impacted

Finance committee  The way this has been drafted does impact your small business deduction. One reason we did like this better than what we had discussed last fall and last summer was that we're not looking at a 73%-plus permanent tax rate on passive income anymore. That is a good thing that we're

Finance committee  I would agree with that. The one-size-fits-all is less of a one-size-fits-all today than what we saw last October when we were discussing how these changes were going to be. The reason I say it is less than one-size-fits-all is that the small business deduction is a per-year dedu

Finance committee  We're not asking to get rid of the reasonability test. I want to be clear that we believe that reasonability tests exist to help complement the bright-line tests that are in the legislation. You do need it. We would like the CRA and Finance to work together on what they would con

Finance committee  One thing you could look at is what percentage of that is on the overall value of the business, or the overall income of the business. If $50,000 is a small number in terms of that business, in theory maybe they don't get a small business deduction anyway, but it's something that

Finance committee  Those businesses all survived, the ones that had money to stay afloat. Therefore, it comes down to whether it helps the public good. There are people who didn't lose their jobs because their employers kept them on. It comes down to issues with respect to whether $50,000 is the ri