[Recorded by Electronic Apparatus]
Wednesday, June 5, 1996
.1537 
[English]
The Vice-Chair (Ms Whelan): I'll call the meeting to order.
Mr. Campbell, would you like to start?
[Translation]
Mr. Loubier (Saint-Hyacinthe - Bagot): On a point of order, Madam Chair.
[English]
The Vice-Chair (Ms Whelan): There's a point of order.
[Translation]
Mr. Loubier: I would like to table a motion and I want the committee to debate it immediately until the subject-matter has been exhausted, as the regulations and procedures allow. I would like the clerk to distribute to members a version of a motion which was submitted to the office of the Clerk of the House for approval and for consistency with the motion tabled yesterday.
The office of the Clerk of the House advised me that the motion was admissible as compared to the one presented yesterday.
Therefore, I will read you the motion that I would like us to debate fully. Only once we have done so do I want the committee to proceed with a vote.
I move, seconded by my colleague from Anjou - Rivière-des-Prairies that the Finance Committee, through a report to the House, recommend that the government launch a genuine inquiry into the transfer of $2 billion in tax-exempt assets held in family trusts to the United States in 1985 and in 1991 and that this inquiry be carried out by the Public Accounts Committee.
I would now like to explain to you the gist of my motion. Since the Auditor General tabled his report over a month ago, some light has been shed on rather questionable events and decisions taken in 1985 and in December 1991 which resulted in the tax-free transfer to the United States of$2 billion in assets held in family trusts to the United States.
The Public Accounts Committee has held several preliminary meetings on the subject. The questions and inquiries made at this time did not shed any light on these two decisions reached in 1985 and in 1991.
.1540
Therefore, no new evidence came to light as to what led to these decisions or to the questionable act of overturning in the space of one and a half weeks the initial ruling by Revenue Canada to the effect that taxable Canadian assets could not be assigned to residents. This meant that it was impossible to transfer these $2 billion in tax-exempt assets to the United States.
In the meantime, after numerous meetings between senior Finance Department and Revenue Canada officials, the decision was overturned.
[English]
The Vice-Chair (Ms Whelan): Excuse me, Mr. Loubier. We have an agenda for this afternoon's meeting.
Is it the wish of the committee to debate this motion at this time?
[Translation]
Mr. Loubier: No, Madam Chair. I am entitled to table a motion at this time and I have often done so in the past. I have the right to table a motion and to ask that it be debated immediately until the subject-matter is exhausted and that a vote be taken only after the motion has been fully debated and discussed by committee members. Despite the agenda, I have the right today to ask that we debate this motion which is critically important, not only to the Opposition, but also to all Canadian taxpayers. Let me continue.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, it's up to the committee to decide whether or not we're going to debate the motion at this time.
[Translation]
Mr. Loubier: No, Madam Chair. I have the right to request that a motion that I have tabled be debated. I have made similar requests several times in the past two and a half years and you can verify this. Moreover, Madam was clerk at that time. I, as well as my colleagues, are entitled to ask that the motion be thoroughly debated. That is my most basic right as a parliamentarian.
Let me continue to explain my motion.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, it's up to the committee to decide whether or not we're going to debate the motion at this time. Even if you have asked that it be allowed to pass, it's up to the committee -
[Translation]
Mr. Loubier: Madam Chair, I repeat that I have tabled a motion. I have asked that it be debated. It is before the committee and I have asked that it be debated fully. This is my most basic right. It is not the first time that this is happened. Similar requests have often been made in the past and there is no hard and fast rule. I'm sorry, but we are tabling this motion and we will debate it fully, that is until we on this side have exhausted the subject and the other members of the committee have done the same.
[English]
The Vice-Chair (Ms Whelan): Excuse me, Mr. Loubier. I've been advised by the clerk and I'm going to ask for a vote by the committee.
Do we wish to debate this motion right now?
[Translation]
Mr. Loubier: No, Madam Chair. As soon as a motion has been tabled, I am entitled to explain its content and to demand that it be debated. It is a most basic right of mine.
[English]
The Vice-Chair (Ms Whelan): Excuse me, Mr. Loubier. There is another point of order from Mr. Campbell.
Mr. Barry Campbell (Parliamentary Secretary to Minister of Finance): I have a suggestion to make that might alleviate the problem.
I don't speak for my colleagues, but personally I have no problem if Mr. Loubier wants to debate this for a short period of time. We've heard it all before and I don't think we're going to hear anything new, but if he feels we have to do this once a day, I have no problem with that.
We have witnesses here prepared to talk about last year's budget bill, which incidentally happens to deal with family trusts. I assumed members were interested in dealing with last year's budget bill because it does address that among other issues. If everyone is agreeable to some reasonable time limit - I would suggest a short one - on debating this issue yet again, maybe that's a way of resolving it so that we don't lose the whole afternoon and the opportunity to discuss last year's budget measures with the witnesses here.
That's just a suggestion, Madam Chair.
[Translation]
Mr. Loubier: I totally disagree. I have tabled a motion. I want to explain it and to have it thoroughly debated. There is no way that I will agree to a time limit. We will debate this motion as long as we have to. It is my most basic right, just as it is the right of all members of this committee.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, I don't believe it is your fundamental right to do that at this time. It's up to the committee as a whole to decide what the work of the committee is going to be. If the committee would like to debate this motion at this time, we'll vote on it. If the committee would like to hear the witnesses at this time, we'll hear the witnesses at this time. It's up to the committee to decide.
[Translation]
Mr. Loubier: No, Madam Chair. On a point of order. I have the right, just as you have the right and your colleagues have the right, to table any motion before this committee, if I and my colleagues feel that this issue is critically important. I've tabled a motion and I've asked that it be debated until the subject matter is exhausted, and that is what we are going to do, Madam Chair, whether you agree or not.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, Mr. Peterson has a point of order.
.1545
Mr. Peterson (Willowdale): I have always understood, Madam Chair, that what we were doing as a finance committee in looking at all aspects of the income tax ruling referred to by the Auditor General was in full accordance with what the Bloc wanted, because one week agoMr. Loubier asked me personally to ensure that the finance committee looks at all issues concerning the issuing of the ruling and at what the future legal changes should be in order to deal with immigration tax problems.
I guess this means Mr. Loubier has changed his mind. I don't know how many times I have felt like we had an agreement. It's obvious that this agreement has been broken.
I have done what he suggested, and I don't know what's made him change his mind, but we are prepared to pursue this full tilt, with all sorts of witnesses, and we've asked them today to give us the names of witnesses they want to deal with in terms of the family trust taxable Canadian property issue.
The Vice-Chair (Ms Whelan): Mr. Loubier, on a point of order.
[Translation]
Mr. Loubier: I've just about had it with the Chair imputing all kinds of motives.
The Minister of Finance gave the Finance Committee the mandate to analyze solutions so that incidents like the ones that occurred in 1985 and 1991 will not happen again. I would point out that the committee's mandate has been restricted to considering changes in the government's fiscal policy.
No light whatsoever has been shed on the 1985 and 1991 incidents and many questions went unanswered when senior officials from Revenue Canada, Finance and the Auditor General's Office appeared before the Finance Committee.
Canadian taxpayers are fundamentally entitled to know where their money has gone and how such a questionable decision was made in December 1991, a decision which resulted in the tax-free transfer of capital gains.
I also have the right to debate this motion and I will now proceed with my explanation.
[English]
The Vice-Chair (Ms Whelan): Mr. Fewchuck has a point of order, Mr. Loubier.
Mr. Fewchuck (Selkirk - Red River): I just want to know if any of us could walk in here at any time and throw a piece of paper on the table and say to everybody that it's a motion. Is that the law? That's basically what he did.
The Vice-Chair (Ms Whelan): Mr. Fewchuck, I've been advised by the clerk that it is not the law and that it's up to the committee to decide what the work of the committee is going to be.
Mr. Fewchuck: If that's the case, I'll put a motion that -
[Translation]
Mr. Loubier: No, no. On a point of order.
It is my most fundamental right to table a motion and to ask that it be debated fully. We must debate this motion until the subject matter has been exhausted.
[English]
The Vice-Chair (Ms Whelan): No, it does not have to be debated at this time.
Mr. Fewchuck: Madam Chairman, it's your ruling, and I think your ruling has stated that we're not going to accept the motion at this time. I don't think we should hear one more beep out of the opposition. We should continue with our people who have been brought forward, with our regular schedule, with why the meeting is supposed to be held. I don't think we should stall any more. If we can't come to any conclusion, the meeting should be postponed until next week.
[Translation]
Mr. Loubier: On a point of order, Madam Chair.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, just a minute. I'm going to accept the motion, and it'll be tabled and debated at a later time. We're going to hear from the witnesses who are here today.
We'll vote on that right now. All those in favour?
[Translation]
Mr. Loubier: I don't accept that, Madam Chair.
I object to your disregarding the Standing Orders. I've tabled a motion and I've asked that it be debated immediately until the subject matter is exhausted and that is what we must do.
It is not a matter of seeking the committee's consent. The motion is on the table. Each and every parliamentarian has the right to table a motion and to have it thoroughly debated.
Why is it that my request is being denied when others have been allowed? We have debated similar motions on five separate occasions. No one is going to prevent us from doing so today because it is our most basic right. As parliamentarians, the right to debate is virtually the only remaining right that we have.
We are going to debate this motion!
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, we've been advised by the clerk that such is not the case. Do you have something that says it is the case?
[Translation]
Mr. Loubier: By virtue of what Standing Order are you prepared to prevent us from immediately debating this motion that I have tabled?
Tell me which Standing Order prevents us from debating this motion immediately.
.1550
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, we have an agenda. It's not in the order of the agenda at this time and I've offered to -
[Translation]
Mr. Loubier: No. Give me the number of the Standing Order which prevents us from thoroughly debating the motion in question. Tell me which existing Finance Committee rule prevents me from doing this.
[English]
The Vice-Chair (Ms Whelan): I have a point of order from the floor.
Mrs. Chamberlain (Guelph - Wellington): Madam Chairman, in the good spirit and the good faith of why we're all gathered here today, I think we should uphold the chair's decision to carry on with the agenda today. There will be another point at which the opposition member will have his recommendation tabled and debated, but today we are here on a different order of business -
Mr. Loubier: J'invoque le Règlement.
Mrs. Chamberlain: I think, with respect to the chair, that we should uphold her ruling and carry on with the meeting. It is my recommendation to carry on with the agenda as printed.
[Translation]
Mr. Loubier: On a point of order, Madam Chair.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, I have called the meeting to order. I've already called witnesses to begin their testimony. We'll deal with your motion after the testimony today and after the witnesses have -
[Translation]
Mr. Loubier: No, Madam Chair. The motion has been tabled. I have asked that it be fully debated and it will be debated. There is no internal or external committee rule that can prevent this. Give me the number of a Standing Order, Madam Clerk. I'm not asking you for a logical explanation, but for the number of the Standing Order. Yesterday, you prevented me from tabling a second motion, but today, I'm asking you to cite a Standing Order.
The Clerk of the Committee: I prevented you from tabling a motion?
Mr. Loubier: I'm asking you to tell me which particular Standing Order precludes me from asking that my motion be debated immediately. Give me the number!
The Clerk: The committee sets...
Mr. Loubier: No, give me the Standing Order!
The Clerk: ...its own agenda, sir.
Mr. Loubier: No, I want to know which Standing Order prevents me as a parliamentarian from tabling a motion and for asking that it be thoroughly debated. Give me the Standing Order number please.
[English]
The Vice-Chair (Ms Whelan): Okay, Mr. Loubier, I've made a decision, and the decision is that we're going to proceed with the witnesses.
Mr. Loubier: No.
The Vice-Chair (Ms Whelan): We will deal with your motion after the testimony today, after the witnesses have spoken.
[Translation]
Mr. Loubier: No, Madam Chair. There is a motion on the table and it must be fully debated.
[English]
A voice: There's no point in having a chair.
[Translation]
Mr. Loubier: No, absolutely not. I refuse, Madam Chair. I have not been told which internal or external committee rule prevents me from having this motion debated. Can someone give me a number? Can someone tell me why I would not be entitled to ask that this motion be fully debated? Otherwise, suspend the committee's proceedings, Madam Chair, until someone proves to me that I'm not entitled to demand that this motion be immediately debated, here, this afternoon! Suspend the proceedings for a few minutes and go check the Standing Orders!
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, I've made a decision. We're going to proceed with the witnesses. We'll hear your motion after the witnesses. We'll have the debate on it.
Mr. Loubier: No.
The Vice-Chair (Ms Whelan): I'm sorry, Mr. Loubier, I'm chairing the meeting -
Mr. Campbell, please.
Mr. Loubier: No.
The Vice-Chair (Ms Whelan): Barry, I think you can start.
[Translation]
Mr. Loubier: On a point of order! Suspend the proceedings for a few minutes until I have an answer to my question and until I can give you the opinion of our experts.
[English]
A voice: Well, it's one or the other. Either you proceed over top of him or you adjourn. It's either one.
A voice: Madam Chair, let's just have a motion for acceptance, to be dealt... And then just proceed.
[Translation]
Mr. Loubier: On a point of order.
[English]
Mr. Campbell: Madam Chair, just while there's a lull in the proceedings... What's regrettable here is that for whatever reason - it could be politics - Mr. Loubier wants to bring up this issue again and again and again, and perhaps he wants bring it up every day until we adjourn for the summer. I suppose you can't stop him from being preoccupied with this issue.
It's just a shame. We have officials here and Bill C-36 before us, and not only does it contain provisions concerning family trust that reflect the work of this committee and of Mr. Loubier as well, we are also anxious to get on with it because it contains film tax credit changes that are extremely important to the film business, particularly in Quebec and Ontario.
Madam Chair, I'm anxious that we proceed to hear our witnesses today on this bill. There are many positive changes from the 1995 budget reflected in this bill. And it would be unfortunate indeed, and I think we'd all be subject to criticism, if... Mr. Loubier's quick to warn us about how our constituents will react. We have to -
[Translation]
Mr. Loubier: On a point of order, Madam Chair. I have just heard Mr. Campbell say that I want to delay the proceedings, but he is mistaken! That is not my intent. Quite the contrary, I want the proceedings to continue. I want us to shed light on a financial scandal that has taken place and on the attempt being made to cover up the matter by refusing to let the Public Accounts Committee examine certain questions.
This isn't normal. As elected representatives, we are expected to be accountable to the people. I'm not trying to delay the committee's proceedings. Quite the contrary. Quite often, you have enjoyed my complete cooperation. However, I find it strange that you insist on avoiding this issue. Do you have something to hide? Are you trying to protect someone? I have to wonder. If you're not, then let's debate my motion or else give us the real reasons why you don't want to pass along this matter to the Public Accounts Committee so that it can get to the bottom of things.
.1555
This isn't normal! Two billion in assets have been transferred and you're not asking any questions!
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier.
Mr. Loubier: No more question about that.
The Vice-Chair (Ms Whelan): Mr. Loubier, I've been advised -
A voice: As an MP you should ask questions.
The Vice-Chair (Ms Whelan): I have been advised that under section 820 of Beauchesne's I am responsible as a chair for order and decorum.
Under section 318(2) of Beauchesne's, a member cannot rise on a point of order to move a motion except for a motion that a member be now heard. I had already called the meeting to order before you moved the motion. I have agreed to accept it to be tabled for later debate. I already called the witnesses to testify.
Mr. Loubier: No, no.
The Vice-Chair (Ms Whelan): That's Beauchesne's. If you have a different ruling, you're welcome to give it. We're going to proceed with the testimony.
Mr. Loubier: No, no, no.
The Vice-Chair (Ms Whelan): That's my ruling. I'm chairing the meeting. I'm sorry if you don't like it, but you don't have the floor.
Mr. Campbell.
Mr. Loubier: No, Madam -
Mr. Campbell: Thank you, Madam Chairman, for the opportunity to present Bill C-36 -
[Translation]
Mr. Loubier: Madam Chair, on a point of order please.
[English]
Mr. Campbell: - the 1995 budget tax measures bill, to this committee. This bill implements the tax measures that originated in the 1995 budget. This implements -
[Translation]
Mr. Loubier: Madam Chair, give me the number of the Standing Order that prevents me from tabling a motion.
[English]
Mr. Campbell: - the principle of fairness and equity in the tax system, to which our government subscribes 100%.
[Translation]
Mr. Loubier: Excuse me, please.
[English]
Mr. Campbell: You will recall that the fundamental objective of the 1995 budget was sustained growth and job creation.
The Vice-Chair (Ms Whelan): Excuse me just one moment, Mr. Campbell. There appears to be too much noise.
Mr. Loubier, I have explained the rules that I have in front of me -
[Translation]
Mr. Loubier: Madam Chair, give me the number of the Standing Order. The Standing Orders permit me to table a motion and to ask that it be debated until the subject matter is exhausted. A motion has been tabled before the committee and I and my colleagues would like it to be fully debated.
[English]
A voice: This is very embarrassing.
A voice: I think so. So have every session televised. That's what we need.
A voice: That's exactly what we need.
A voice: I agree.
A voice: I agree too.
[Translation]
Mr. Loubier: Suspend the proceedings, Madam Chair, until the Standing Orders have been clarified. We will put the question to outside experts.
[English]
Mrs. Chamberlain: Madam Chairman, may we proceed?
The Vice-Chair (Ms Whelan): We'll proceed with Mr. Campbell.
Mr. Campbell: Perhaps I'll start over again. We welcome the opportunity to presentBill C-36 -
Mr. Loubier: No, Madam -
Mr. Campbell: - the 1995 budget tax measures bill, to this committee.
The Vice-Chair (Ms Whelan): Excuse me, Mr. Campbell.
[Translation]
Mr. Loubier: Madam Chair, Standing Order 116 allows me to table a motion and to have it debated. We have tabled several motions in the past two and a half years and never before has a chairman prevented us from doing so or from debating these motion thoroughly. So that we can clarify this matter further, I would ask that you suspend the proceedings for a few minutes to allow us to double check, because this is the first time that we have been refused permission to debate a motion fully in the Finance Committee. This isn't normal. Therefore, I humbly request, Madam Chair, that you suspend the proceedings for several minutes so that we can shed some light on this matter.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, this is what I would ask you to respect: that you allow the witnesses to begin their testimony while we have the clerk find out what the proper answer is. Then we will continue.
[Translation]
Mr. Loubier: No, Madam Chair, a motion has been tabled.
[English]
The Vice-Chair (Ms Whelan): Why waste time? We have witnesses before us.
[Translation]
Mr. Loubier: A motion has been tabled and Standing Order 116 states the following:
116. In a standing, special or legislative committee, the Standing Orders shall apply as may be applicable, except the Standing Orders as to the election of a speaker, seconding of motions, limiting the number of times of speaking and the length of speeches.
In other words, Madam Chair, I have the right to ask that the motion be debated immediately and until such time as the subject matter has been exhausted.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, I have been advised by the clerk, and it's based on what I've been advised on.
Mr. Loubier: No.
The Vice-Chair (Ms Whelan): I'm sorry. That's what's in front of me.
Mr. Loubier: No. No way.
The Vice-Chair (Ms Whelan): I have Beauchesne's in front of me.
Mr. Loubier: No.
The Vice-Chair (Ms Whelan): I'm sorry.
[Translation]
Mr. Loubier: It is my most basic right to table a motion and to demand that it be fully debated, and there is no rule, Madam Chair, that prevents either me or my colleagues from debating the motion before you today.
I continue.
[English]
A voice: Madam Chair, point of order.
The Vice-Chair (Ms Whelan): We will take a five-minute recess and get this resolved.
.1600
.1620
The Vice-Chair (Ms Whelan): I call the meeting back to order.
Mr. Loubier, under 318(2) a member cannot rise on a point of order to move a motion. The motion is out of order. I had already called Mr. Campbell as a witness. Mr. Campbell will continue. That is the ruling of the head clerk.
Mr. Campbell: I welcome the opportunity to present Bill C-36, the 1995 budget tax measures bill, to this committee. This bill implements the tax measures -
Mr. Loubier: I point out Beauchesne, page 230.
The Vice-Chair (Ms Whelan): Just a minute please, Mr. Campbell. On a point of order,Mr. Loubier.
[Translation]
Mr. Loubier: On a point of order.
You're all quite familiar with Beauchesne and citation 760 on page 222 under the heading "General" states the following:
760. (1) Committees are regarded as creatures of the House. The Standing Orders of the House apply to committees, so far as they may be applicable, with certain exceptions. These are contained in Standing Order 116. Motions need not be seconded, there is no limit to either the number of times a members may speak in committee, nor do the House time limits on speeches apply, nor does the election of the chairman of a committee mirror the process used for the election of the Speaker.
Therefore, I have tabled a motion and I have asked that it be fully debated.
[English]
The Vice-Chair (Ms Whelan): No, Mr. Loubier.
[Translation]
Mr. Loubier: It is my most basic right and I ask that it be respected, Madam Chair.
[English]
The Vice-Chair (Ms Whelan): Excuse me, Mr. Loubier. If you had had the floor to table the motion, I would agree. Unfortunately, you rose on a point of order. Mr. Campbell already had the floor. Under section 318(2) you cannot rise on a point of order to table a motion. It's very clear in Beauchesne's.
[Translation]
Mr. Loubier: Madam Chair, I've asked to be recognized.
[English]
The Vice-Chair (Ms Whelan): That's my ruling. We're continuing with this witness.
[Translation]
Mr. Loubier: I've asked to be recognized, as is my right.
.1625
[English]
The Vice-Chair (Ms Whelan): I did not give you the floor, Mr. Loubier.
[Translation]
Mr. Loubier: I've asked to be recognized so that the motion can be distributed...
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, you rose on a point of order.
[Translation]
Mr. Loubier: ...and that it be debated immediately. I will not allow you, Madam Chair, to disregard Standing Order 116 and Beauchesne's citation 760 because it is my most basic right to demand that this motion be debated today.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, you rose on a point of order when Mr. Campbell already had the floor. Under 318(2) you cannot rise on a point of order to introduce a motion, and I'm sure your assistant would tell you the same thing.
Mr. Campbell has the floor and he will continue.
[Translation]
Mr. Loubier: Madam Chair, on a point of order.
[English]
The Vice-Chair (Ms Whelan): On a point of order, Mr. Loubier.
[Translation]
Mr. Loubier: Madam Chair, I am confident that I am well within my rights to table this motion and to request that it be fully debated.
Given your rather convoluted interpretation of the rules of procedure of the Finance Committee, I refuse to abide by your ruling because it is not consistent with the precedent that has been set here within the Finance Committee. Nor is it consistent with Beauchesne's citation 760 or with Standing Order 116.
[English]
The Vice-Chair (Ms Whelan): Mr. Loubier, I'm sorry -
[Translation]
Mr. Loubier: I do not accept your ruling.
This being the case, Madam Chair, we will gather up our papers and withdraw, as the committee is not following procedure. That's what we are going to do, Madam Chair, and we will seek a truly serious opinion on the actions that you have taken.
I can assure you that this matter is not closed. Not by a long shot! The motion stands! I feel that my basic rights as a member have been violated. Canadian taxpayers will read into this that you have something to hide, because it isn't normal for you not to want to shed some light on the 1985 and 1991 incidents.
We will withdraw from this committee, Madam Chair, and I hope that you will change your mind on this question.
[English]
The Vice-Chair (Ms Whelan): Thank you, Mr. Loubier.
[Translation]
Mr. Loubier: Thank you, Madam Chair. But this isn't over! Not by a long shot!
[English]
The Vice-Chair (Ms Whelan): Thank you. I understand.
Mr. Campbell.
Mr. Campbell: Thank you, Madam Chair. I welcome the opportunity to present Bill C-36, the 1995 budget tax measures bill, to this committee. This bill implements the tax measures that originated with the 1995 budget. These are based on the principle of fairness and equity in the tax system.
You will recall that the fundamental objective of the 1995 budget was sustained growth and job creation. It took far-reaching action to reduce spending and reshape the role of the federal government. The 1996 budget extends and consolidates these thrusts.
We are dealing today with the 1995 budget measures, which tighten the administration of the tax system, remove or reduce the number of tax preferences and increase fairness in the system. Some measures have been changed since they were announced last year, changed because Canadians were consulted and the government listened to their input and made some important improvements.
I'd like now to address the specific measures in the legislation. When I've finished with my introductory remarks, Madam Chair, I want to turn to officials. Mr. Len Farber, director of the tax legislation division, is with me. He will introduce other officials who are available to answer questions. First, I have some brief opening comments.
Many of you will recall that before the 1995 budget professionals and other business persons could defer taxation of business income by simply choosing an off-calendar-year fiscal period. Under the previous rules, up to one year of income could be effectively deferred for a whole career. Indeed, through the use of stacked partnerships, many individuals were able to defer tax on more than a year's income. The tax expenditure associated with this deferral was estimated to be approximately $2 billion.
This system was unfair and is being corrected in this bill, but with some transitional relief. For example, if a business's fiscal period formally ended on January 31, moving to a calendar year fiscal period would require 23 months of income to be reported in the year the new system began. Obviously, this could create hardship for businesses affected by the measure.
Accordingly, Bill C-36 provides that the additional 11 months of income will be recognized over a period of up to ten years. Further, a special alternative method of calculating income in lieu of moving to a calendar year fiscal period has been developed as an elective measure for those businesses that prefer off-calendar-year fiscal periods.
This alternative measure was not included in the original budget proposals but was developed by the government in direct response to recommendations made by Canadian small businesses as well as by members of Parliament.
[Translation]
Furthermore, this bill focuses on an issue of a commercial nature, one tied to our cultural identity and to the film industry. Bill C-36 replaces the existing capital cost allowance tax incentive for Canadian certified productions, an outdated mechanism which benefitted primarily passive investors and intermediaries, with a Canadian film or video production tax credit which would directly support Canadian film production companies.
.1630
Canadian certified productions have been critical of the complexity and inefficiency of the current tax shelter. Moreover, the government was concerned that the existing tax shelter was not only an inefficient way to spend tax dollars but also a mechanism that threatened the fairness of the tax system.
Film production companies benefitted from barely one third of the cost of this incentive. With the introduction of the Canadian film or video production tax credit, producers will now benefit from the full amount of the credit.
[English]
This benefit is not insignificant. The credit is 25% of qualifying labour expenditures up to48% of the cost of film, for a net credit of up to 12% of the cost of production. In most cases this exceeds the benefit to producers under the old system, but at a lower cost to the government. As well, by restricting eligibility for the credit to companies that have as their principal business the production in Canada of Canadian film or video, the benefit of the credit is better constrained to tax on income from that sector. This will minimize the ability to use the credit to shelter tax and other sources of income.
Let me now turn to other measures that impact on family trusts - an issue we've been most concerned about as a committee - an area of continued public concern. The general scheme for the taxation of family trusts and their beneficiaries is simple. Trust income is taxed at the trust level except when the income is made payable to beneficiaries, where it is taxed in their hands. In addition, in order to ensure the capital property cannot be held for the benefit of successive generations of beneficiaries without tax consequences arising on death, there's a deemed disposition of a trust's capital property every 21 years. Members of the committee will be familiar as we studied this issue.
The previous government had introduced a rule which allowed the first 21-year deemed disposition date to be deferred until the death of beneficiaries who were no more than one generation away from the trust's settlor. In the 1994 budget, however, the Minister of Finance referred the taxation of such trusts to the finance committee. This was in response to concerns about tax advantages enjoyed by family trusts, particularly the concern that the election to defer the 21-year rule was unduly generous. This committee concluded that there were many legitimate uses for trusts, and that by and large, the rules for the taxation of such trusts were reasonable. However, some evidence did highlight concerns about the potential deferral of capital gains in some cases.
One of this committee's recommendations was to repeal the preferred beneficiary election. This election allows trust income for income tax purposes to be allocated to preferred beneficiaries, without any requirement that the beneficiaries actually receive the amount allocated. Bill C-36 proposes two measures aimed at ensuring that the tax regime for family trusts cannot result in the undue deferral of capital gains where trust income is split because of the preferred beneficiary election.
First, the election to defer the 21-year rule is eliminated. For trusts that have already elected to defer the 21-year rule, there will be a deemed disposition of trust assets at fair market value on January 1, 1999. This measure will eliminate the possibility that the election to defer the 21-year rule causes the undue deferral of capital gains and addresses the perception that family trusts are some sort of tax shelter.
Second, the preferred beneficiary election will be limited to disabled beneficiaries. This will ensure that trust income cannot be arbitrarily allocated to a beneficiary instead of being taxed at the trust level, just because the beneficiary is at a low marginal income tax rate.
The 1995 budget took action to ensure that the fiscal cost of the tax assistance for retirement savings is shared fairly. Bill C-36 implements these changes. The 1995 budget announced that the contribution limit for RRSPs is being reduced to $13,500 for this year and next, and will rise incrementally to $15,500 in 1999. After that it will be increased to reflect increases in the average wage in Canada.
The 1995 budget also announced that the limit for contributions to money purchase registered plans is also being reduced to $13,500 for this year, and will rise incrementally to $15,500 in 1998. Again, the money purchase limit will be increased in subsequent years to reflect increases in the average wage.
I must add, however, that the 1996 budget subsequently announced that the money purchase and RRSP limits will be frozen at $13,500 for another six years - that is, until 2002 for money purchase plans and 2003 for RRSPs. These will then increase to $15,500 in 2004 and 2005 respectively, after which they will reflect increases in the average wage. This further freeze in the limits will be dealt with in the 1996 budget bill.
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The 1995 budget changes were designed to bring the limits closer to the original pension reform target, providing tax assistance on earnings up to 2.5 times the average wage. They were beginning to exceed that target because of increases in wages being lower than anticipated when the limits were established. The 1996 changes will lower the target to two times the average wage. This is to allow the government to better target retirement savings and tax assistance to modest- and middle-income Canadians, while limiting the revenue cost of providing such assistance and thus the cost to taxpayers in general. Only individuals earning over $75,000 a year will be affected by these changes.
Bill C-36 also addresses the issues of overcontributions to RRSPs. To control unintended tax deferrals, a penalty tax of 1% per month is imposed on excess RRSP contributions, up to a limit of $8,000. Bill C-36 reduces this overcontribution allowance to $2,000. The $8,000 allowance was intended to provide a margin of error for overcontributions arising through inadvertence or through the operation of group RRSP arrangements. It became apparent, though, that taxpayers were using the allowance to make deliberate overcontributions.
There are a number of relieving measures in this legislation, however. One provides transitional relief for overcontributions made before budget day that were protected from the penalty tax by the $8,000 allowance. While these overcontributions would continue to be protected from the penalty tax, no additional RRSP contributions could be made without being subject to the penalty tax until enough new RRSP room had been earned to support the pre-budget excess.
The remaining measures provide limited protection for certain non-discretionary group contributions. They ensure that taxpayers have sufficient time to withdraw RRSP overcontributions that would otherwise become subject to the penalty tax because of benefits provided on a past service basis under an employer sponsored plan.
In addition, Bill C-36 gradually eliminates the tax-free transfer of retiring allowances to RRSPs. The recent increase in RRSP limits for those who do not belong to plans, the introduction of a carry forward provision for unused RRSP room, and the increasingly relevant role of employer sponsored pension plans have eliminated the rationale for the roll-over. The limit on how much of their retiring allowance an individual can roll to an RRSP is frozen at what it would have been at the end of 1995.
I want to move now to discuss some corporate tax rate changes, which were quite important in last year's budget.
Over the past number of years, many provinces' personal rates have been increased by widening the gap between the tax rate payable by an individual and the rate payable by a private corporation. The tax deferral available to individuals who hold their investments through private holding companies has been enhanced. There will now be an additional 6 2/3% tax on the investment income of Canadian controlled private corporations. This will bring the corporate tax rate applying to investment income closer in line with the top personal tax rate, and thus reduce the tax deferral opportunity.
Bill C-36 also raises the corporate surtax from 3% to 4% of basic federal corporate income tax, which will generate an annual revenue of $115 million to $120 million from that sector. In addition, the large corporation tax is increased from 0.2% to 0.225%, generating further corporate revenues of approximately $150 million per year. The large corporation tax, or LCT, that was introduced in 1989 applies to all corporations having capital in excess of $10 million.
Also, under part VI of the Income Tax Act, a 12% temporary surcharge is being levied on the capital tax paid by banks and other large deposit-taking institutions between February 26, 1995 and October 31, 1996. This additional tax will help ensure that large deposit-taking institutions, such as banks, contribute a fair share each year towards reducing the federal deficit. The 1996 budget extends this surcharge for one more year.
[Translation]
Let's now take a look at another provision in the bill. We know that the tax system provides substantial assistance for donations to charities and government bodies. Individuals receive a federal tax credit of 17% on the first $200 donated and 29% on any remaining portion of donations made in a year. Corporations claim a deduction from net income.
Since the donation credit also affects surtaxes and provincial taxes, it can generate total tax savings of about 50 cents per dollar donated.
To further encourage the conservation and protection of Canada's environmental heritage, Bill C-36 proposes to exempt qualified donations of ecologically sensitive land from the limit.
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These measures reflect the fact that the value of the donated lands is often higher in proportion to the donor's income and that, in such cases, the provisions in effect limiting the amount that may be claimed for gifts to 20% of the donor's income are perhaps restrictive.
Consequently, pursuant to Bill C-36, the limit on the donor's annual income will not apply to donations of ecologically sensitive land to charities and appropriate municipal agencies.
[English]
Research and development is a key foundation for Canada's continued economic development, and Bill C-36 takes steps to ensure that government support for this vital activity is effective and targeted.
Briefly, Bill C-36 eliminates inflation of scientific research and experimental development measures tax credits through non-arm's-length contracts, and introduces other measures that improve the administration of the SR and ED tax incentives. Contract payments - that is, SR and ED contracted out to be performed on behalf of a taxpayer by another party - have generally been eligible for SR and ED tax treatment. However, two problems exist. First, the contract payment may reflect expenses that are not eligible for SR and ED treatment, where the SR and ED is performed in-house. Second, where the performer and the taxpayer are not at arm's length, it is difficult to determine whether the contract payment is reasonable or inflated. Bill C-36 contains amendments to the provisions that will restrict qualified expenditures on which ITCs can be earned.
To improve administration and compliance for the system, non-profit SR and ED corporations exempt from tax will now be required to report their SR and ED work and expenditures. In addition, third-party payments, payments that entitle the payer to exploit the results of SR and ED to corporations resident in Canada, will be eligible for SR and ED tax incentives only in the year in which the SR and ED is performed, rather than when payment is made. Also, current expenditures for ITCs must be made within 180 days of the end of the taxation year.
I should point out that concerns arose in 1995 about the use of these incentives by financial institutions with respect to information technology. The 1995 budget temporarily excluded information technology R and D performed by these financial institutions from the definitions of SR and ED, pending an evaluation by the departments of Finance and National Revenue. The evaluation concluded that enhanced audit coverage and revised administrative guidelines would resolve any remaining difficulties. The 1996 budget announced that differential treatment for information technology R and D performed by financial institutions was not necessary. As a result, this type ofR and D is no longer excluded from the definition of SR and ED.
Another element in this legislation protects the collection of source deductions and similar withholdings made for income tax, Canada pension plan contributions and UI premiums. Occasionally taxpayers may be encouraged or forced by third parties in a position of influence not to remit source deductions and similar withholdings. For instance, a secured creditor of a taxpayer who controls the disbursements of the taxpayer's business may be in financial trouble, and in an attempt to recoup his own losses, authorizes the payment of wages but refuses the payment of source deductions and similar withholdings. To protect these deductions in these and similar circumstances, Bill C-36 proposes amendments that would make such secured creditors liable to pay unremitted source deductions along with any interest and penalty charges, just as the taxpayer is liable.
I will touch briefly on a couple of last issues, including the recovery of old age security benefits. At present, full OAS benefits are paid out to individuals regardless of income and then recovered at tax time from individuals with incomes of more than $53,215. Beginning July 1996, tax will be withheld when OAS benefits are paid out. This measure will facilitate the recovery of benefits for higher-income seniors by eliminating the situation of having to repay them at tax filing time. As well, recipients who are no longer resident in Canada will not escape the recovery.
Madam Chairman, businesses have told us they want to be able to use a single business identifier with all levels of government. They also want more efficient administration and less duplication. The government responded in the 1994 budget by announcing its intention to have one registration number, the business number, and single-window services for businesses dealing with government. Revenue Canada will be extending the use of the number to other government departments and levels of government, including non-Revenue programs, that have a legal right to this information.
Sharing this basic information will help government reduce overlap and duplication and will help keep business identification information accurate and up to date. Exchanging this identification information will also enable single-window service at both federal and provincial levels of government, thereby increasing efficiency for both business and government.
In conclusion, I would like to have been able to put the measures in this bill in the context of today's and last year's economic climate, but time does not permit this today.
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There's really nothing controversial in Bill C-36. A few measures created some difficulty. On those measures the government has responded to interventions by Canadians and by members of Parliament. I would say in that regard the system works.
In closing, let me repeat what the Minister of Finance said at the time of the budget. The issue of taxes is more than a matter of rates; it's a question of equity. The measures in this bill reflect this statement and I believe deserve your support.
I regret that our meeting in making this presentation on Bill C-36 and hearing from officials was delayed due to some political posturing before the committee. I can say that as a member of the committee.
I'm delighted to have had the opportunity to introduce Bill C-36 to the committee. I only regret that I had to race through some of the rather technical information.
As I said earlier, Mr. Len Farber, a senior official from the department, is here. He has other officials with him at the table who he will introduce. I know he's prepared to take questions, should members have them, on any of the issues I've raised or any items in Bill C-36.
You do each have a briefing book. I'm sure members will be looking at that book as we proceed with our study of Bill C-36.
Thank you, Madam Chair.
The Vice-Chair (Ms Whelan): Thank you, Mr. Campbell. I want to thank you and the officials for your patience this afternoon.
Do we have any questions at this time? The briefing book I have is very informative.
Did you have a question, Mr. Peterson?
Mr. Peterson: I would like to propose a motion that all matters before the finance committee be referred on a permanent basis to the committee on public accounts. Do I have a seconder for that motion?
The Vice-Chair (Ms Whelan): No.
Mr. Peterson: If this is not passed, I want you to know I'm going to boycott this committee.
Some hon. members: Oh, oh!
The Vice-Chair (Ms Whelan): I see no seconder.
Mr. Campbell: I'm not sure the committee had proper notice of the motion, Madam Chair, but I'm only the witness.
The Vice-Chair (Ms Whelan): I see no seconder, so the motion is out of order.
Mr. St. Denis.
Mr. St. Denis (Algoma): Thank you, Madam Chair.
Thank you for your presentation, Mr. Campbell. As usual it was concise, forthright, to the point and not too long.
With respect to the new RRSP limits, I've had numerous interventions, as no doubt my colleagues have had, from constituents in the medical profession who say any erosion in the ability of professionals in particular - those who depend on RRSP investments for their pensions - to invest in RRSPs will hamper or make it more difficult for them to prepare for their retirement.
I see that the changes we have made as announced in the budget, which we are implementing in this bill, are not in the least bit draconian. I wonder if you would offer any comments I could relate to my own constituents that would provide them with the reassurance that in fact we are concerning ourselves with people like doctors and dentists, who need to plan for their retirement, unlike those who have salaries to depend upon.
Mr. Len Farber (Director, Tax Legislation Division, Tax Policy Branch, Department of Finance): The comfort you can give constituents is the fact that while the ramp going up to $15,500 has been somewhat delayed, certainly the actual amounts that will be available for RRSP contributions leading up to 2005 have been put into the legislation. That's an indication of the intention of the government to move forward with those contribution limits.
Couple that with the fact that this budget also removes the seven-year carry-forward and open-ends it. So to the extent that there are fluctuations in income over periods of time, there will be no time limit in the context of being able to utilize whatever room is available.
I would submit that should give taxpayers far more comfort in terms of planning when their contributions can be made, based on cashflow and other considerations that would come into account on an annual basis.
Mr. St. Denis: Thank you for that.
May I continue?
The Vice-Chair (Ms Whelan): Yes, go ahead, Mr. St. Denis.
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Mr. St. Denis: I'm going to pick on areas where constituents have specifically raised valid points and I think it's appropriate to provide reassurance where we can.
The other area has to do with the banks. I noted in Mr. Campbell's remarks that with the large corporations tax, an attempt has been made to make sure that the banks are paying their fair share. I think it's important to note, though, for the record, that Canada does have a very stable and solid banking system and that in fact it is good that our banks are profitable. If there was a choice between being unprofitable or profitable, certainly Canadians would want the banks to be profitable; therefore their own investments are secure and shareholders' interests are secure.
I'm wondering if you would offer any elaboration on what this government has done to make sure the banks are paying their fair share with respect to that issue.
Mr. Farber: Madam Chair, I should just as a point of order introduce my two colleagues,Mr. Dan McIntosh, who is assistant director of the tax legislation division, Department of Finance, and Mr. Gerry Lalonde, who is chief of the business and property tax policy section of the legislation division.
Mr. St. Denis, the only comment I would make is that the Income Tax Act has been amended over the last number of years to continually increase the level of capital tax and ensure that banks do pay their fair share of tax. In that context, while I don't have statistics with me at the present time, that level of tax has been increasing annually. And to that extent, while they continue to record record-high profits, they are paying their fair share of tax. On an historical basis, there's no question that the level of their taxability and the payments of tax have been far more substantial over the last number of years than they were historically.
I think there's a comfort level that the fair share issue is certainly being taken care of. The rate of LCT, which is the large corporations tax, acts as a minimum type of tax. Notwithstanding taxable income, taking into consideration low loss reserves and other mechanisms to get taxable income down to lower amounts, the LCT certainly provides a minimum tax to the financial sector and in that regard does get them into a position where a fair share is being paid.
Mr. Dan McIntosh (Assistant Director, Tax Legislation Division, Department of Finance): Perhaps I could just add on the point concerning the tax liability of the banks that this bill in particular has tax increases that apply to them, namely the LCT that Mr. Farber referred to as being increased in rate from 0.2% to 0.25%. There's a special capital tax on banks, large trust companies and other financial institutions. That's being increased by 12% in this budget, and of course, like all corporations, they'll be subject to the increased corporate surtax from 3% to 4%.
The Vice-Chair (Ms Whelan): Thank you, Mr. St. Denis.
Mr. St. Denis: Thank you.
The Vice-Chair (Ms Whelan): I understand Mr. Pillitteri has one brief question.
Mr. Pillitteri (Niagara Falls): Yes, I do have a question.
The Vice-Chair (Ms Whelan): Briefly.
Mr. Pillitteri: Since Mr. Loubier is not here, I would probably ask him a question on behalf of his constituency, especially some of his business people who for the last few years might have had some hard times. He did state it takes in effect the availability to use unused RRSPs to be put in forward. How far back can one go within the Income Tax Act? Can we go back more than seven years? And is there a limit to how much in unused RRSPs you could put in there?
Mr. Farber: Madam Chair, the rules were changed with respect to the carry-forward so that previously there was a seven-year carry-forward. To that extent, whatever was available at that point in time that hadn't fallen off the table, that room is available to be carried forward indefinitely. So to the extent that there is room available, including annual amounts that always operate on a look-back basis, it's the previous year. That total amount is available to be used at any point in time.
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The Vice-Chair (Ms Whelan): Thank you, Mr. Pillitteri.
Mr. Peterson: Madam Chair, I move that the two motions we've circulated dealing with the striking of subcommittees - one to deal with SIMA and the other to deal with the international financial institutions - be approved and passed.
Motion agreed to
Mr. Peterson: Mr. Campbell, did you want to proceed with clause-by-clause on this bill at this particular time?
Mr. Campbell: I'd require the guidance of the chair. I'd be delighted to, but I'm not sure we can in light of the notice for this meeting. I need guidance from the clerk.
Mr. Peterson: With a majority motion we could set any agenda we wanted, of course.
Mr. Campbell: Then I'd certainly be -
The Vice-Chair (Ms Whelan): It's my understanding that there was not proper notice to go to clause-by-clause at this time.
Mr. Peterson: Okay. I would like to put people on notice that if they intend to boycott this meeting, we will have to act as a majority and get on with the business of the government. We will afford them every opportunity to introduce amendments and do what the role of an official opposition is and should be, which is to be constructive and propose changes that are to the benefit of all Canadians, but if they intend to ignore that responsibility, we will have to assume that responsibility ourselves.
The Vice-Chair (Ms Whelan): I agree with you wholeheartedly, Mr. Peterson.
Mr. Campbell: Madame Chair, I would add one comment, and I know we are close to adjourning. I too want to express my apologies to the witnesses who sat through the episode we witnessed before this committee earlier this afternoon. I apologize personally to them for that. I'd also like to thank the translators who are working behind me, because I had to race through my speech and I know that makes it extremely difficult for them. So I'd like to thank them for their efforts and apologize for any inconvenience I've caused.
The Vice-Chair (Ms Whelan): Thank you, Mr. Campbell.
This meeting is adjourned.