Therefore, honourable senators, in amendment, I move:
That Bill C-208 be not now read a third time, but that it be amended, in clause 2,
(a) on page 1, by replacing lines 26 to 30 with the following:
(i) the purchaser corporation is controlled by one or more children or grandchildren of the taxpayer who are 18 years of age or older,
(ii) the purchaser corporation does not dispose of the subject shares within 60 months of their purchase, and
(iii) prescribed conditions are met.”;
(b) on page 3, by adding the following after line 19:
“(3) Subsections (1) and (2) apply in respect of dispositions that occur after January 1, 2022.
(4) The Minister of Finance must prepare a report on the tax integrity implications of this Act.
(5) The Minister of Finance must cause the report to be tabled in each House of Parliament no later than one year after the date on which this Act receives royal assent, or, if either House is not then sitting, on any of the first 15 days on which that House is subsequently sitting.”.
Honourable senators, I’ve listened with interest to the debate on Bill C-208, and I thank senators for their attention to this bill. Regarding the amendment by Senator Harder, there are some things I would like to note. There has been discussion on whether the Standing Senate Committee on Agriculture and Forestry, or AGFO, was the right committee for this bill to have been sent.
Senators, I suggest that if Banking and Finance are the only committees that could consider legislation, we would have a big problem on our hands since those committees are fully tasked with legislation already and can scarcely consider taking on any more. Are we really suggesting that committees like AGFO, the Standing Senate Committee on Fisheries and Oceans, or POFO, and the Standing Senate Committee on Energy, the Environment and Natural Resources, or ENEV, are not well enough equipped to handle important bills, including those pertaining to financial matters? I should hope not. There are competent senators throughout this chamber who can study bills, listen to expert witnesses, ask questions and make rational recommendations.
Agriculture has been identified by the government as a key area for economic growth in the years to come, so it’s only fair that the concerns of farmers should be considered when examining legislation that will affect them. Furthermore, the motion for this bill to go through the Standing Senate Committee on Agriculture and Forestry was debatable and amendable, and it was agreed to by the Senate.
I note that the bill was actually studied by the Standing Committee on Finance in the other place. I think examination in one chamber through a finance lens and examination in another chamber through a more natural resources lens should be considered a good thing.
I’ve heard some colleagues say that we should have heard more witnesses who were opposed to the legislation. I even conferred with the Chair of the House of Commons Finance Committee about this. As Senator Deacon emphasized to me several times that he wanted to hear all sides of the issue, especially from those who were opposed, we tried. We could not find them. As you know, concerned parties can contact the committee clerk and ask to appear or submit briefs. None did; nor did any potential witnesses who were opposed to the legislation ask to appear before the House of Commons committee.
We’ve also heard that government officials should have had more time to present their arguments. Let me assure you that the committee went to great lengths to accommodate our government witnesses. Finance officials were invited to earlier meeting dates, but the department made no one available until June 10. At that meeting, we went overtime during the panel of officials to be sure senators’ questions were answered.
By the way, you will have heard the refrain about this committee being rushed, but it’s not the only time a committee was said to be rushed this month. It is June. Everyone is acting in good faith in dealing with legislation with the limited time and resources available, whether it is AGFO or other committees.
I reject the notion that the Department of Finance Canada hasn’t had time to prepare for this legislation. Emmanuel Dubourg introduced a version of this bill on June 11, 2015. There have been several other similar bills since, resulting in multiple opportunities for Finance Canada to provide suggested amendments in the years since, but it chose not to.
Senators, this is one of the first times since the implementation of the new independent senator appointment process that we’ve received a bill from the House of Commons in this kind of circumstance. As you know, there is a tension between what the government wants versus what the elected House of Commons wants.
Consider for a moment that this was a whipped vote for government members in the other place. Nevertheless, 19 Liberals defied the whip and voted in favour of the bill, including Wayne Easter, Chair of the House of Commons Finance Committee.
To address another, more personal, issue raised today, I had planned to step aside as chair of the committee until I was informed by the most senior member of the committee that I did not need to do so, as he was aware of other circumstances. For instance, former Senator Oliver chaired the Legal and Constitutional Affairs Committee and was the sponsor of Bill C-2, The Federal Accountability Act, in 2006.
As you know, if we accept this amendment, it is a de facto killing of the bill, as it would die on the Order Paper. Please join me in voting against this amendment and letting the original bill go forth for the final vote. Thank you.
Honourable senators, I am rising to speak in opposition to this amendment and in strong support for an unamended Bill C-208. This important bill finally addresses an anti-avoidance rule in our Income Tax Act that next to everyone agrees places a deep unjust tax burden on those wishing to complete a genuine intergenerational transfer of a family-owned small business, farm or fishing operation. Bill C-208 provides us with the opportunity to address that long-standing, painful reality.
Before I address the concerns raised by Senator Harder and other speakers in this chamber, I’ll begin by providing you with some personal insights as to why I think this bill is so important.
As you can imagine, I come at this issue from the perspective of a small-business person. When I was given the responsibility of being a senator, it was the first time since I began my business career 40 years ago that I wasn’t fully responsible for bringing in every single dollar that paid my income. It’s the first time I had a benefits plan or access to a pension plan. Additionally, for a 20‑year period, I was CEO of a small start-up company fully responsible not just for myself but for making the payroll for the employees who were helping me build those businesses. If we were short on payroll, my wife and children felt it because I wouldn’t get paid.
During these times in my career, I had countless 3 a.m. panic attacks, worrying about whether or not I would be able to make payroll or overcome yet another bump in the road. Every family member lived these ups and downs.
For the first time in my life, I now have a secure job and income. Still, I find I cannot relax. The sense of urgency and fear of failure simply do not abate.
Unlike corporate, academic or government employees, farmers, fishers and entrepreneurs have no job security, no income security, no benefits and no pension. When they make a mistake, don’t make a key sale or don’t win a key contract, they own it. There is absolutely no safety net. Too often there’s no elasticity in either the business or your personal financial life. Your business is your livelihood and your pension plan.
Let’s imagine the agonizing choice that Finance Canada currently forces when your offspring have the passion and talents to carry on the family business and you want to pass it on to them. Either you pay up to 27% more in extra taxes, dramatically diminishing the value of your lifetime of work and savings, or you sell it to a stranger so you can better fund your hard-earned retirement. It’s a heartbreaking choice.
Now, to address the criticisms of this bill. I disagree with the assertion made by speakers today and last week by Senator Woo that Bill C-208 is too expansive because it goes beyond fishing and farming operations to include small businesses. Canada needs more entrepreneurs, and one of the best ways to get them is to grow them, and intergenerational transfers can help.
I’m firmly of the opinion that diverse and vibrant small businesses are the essence of a community. They bring energy and personality to our cities, neighbourhoods and small towns. Without them, we only have structures — no life.
When we studied the bill in the Agriculture and Forestry Committee, we benefited from insightful perspectives offered by an official from the Canadian Federation of Independent Business, or CFIB, among many others. Based on personal experience, one of the hardest things for the owner of a unique small business to do is to find a buyer for their business. The more unique a business, the tougher it is. It’s likely a reason why a recent CFIB survey found that 25% of owners hope to pass their small business on to a family member.
Additionally, an argument was made that Bill C-208 introduces an intellectual inconsistency that undermines the integrity of the tax code. Personally, I’m not entirely sure that a whole lot of Canadians find our tax code to be very intellectually consistent as it stands. Personally, I find the perception of an arbitrary discrimination to be much more problematic.
Importantly, the senior Tax Policy Branch official at Finance Canada did not find this inconsistency to be a problem. In response to one of my questions in the AGFO committee meeting, he stated that, from a policy perspective, the essence of Bill C-208 is justified on neutrality grounds and that the situation warrants an exception to the application of surplus stripping rules. This says that Finance Canada understands that the estimated fiscal revenue reduction that may result from this bill only exists due to a current inequity in our tax code.
Senator Woo and others have told us that, if passed, Bill C-208 will unleash a flurry of tax avoidance via surplus stripping. The purpose of this bill is to stop disadvantaging genuine intergenerational business sales in an incredibly detrimental way. It is not to open up loopholes or create tax avoidance opportunities. I’m willing to bet that no one in this chamber, and certainly not me, would want to do anything to increase tax avoidance in Canada.
Concerns about possible abuse is one of the reasons why the AGFO committee sought to find expert voices beyond the same two Finance Canada officials who testified at the House Finance Committee. We wanted to understand whether the bill’s current protections of requiring arm’s-length valuations and the purchaser to own the business for a minimum of five years were sufficient. Neither the steering committee nor our clerk, and, in fact, not even the chair of the House Finance Committee could find additional witnesses to testify against the merits of Bill C-208.
In response to very direct questions from the House Finance Committee members, the Finance officials simply repeated their concern that the bill could possibly allow for intergenerational transfers in name only in order to avoid taxes. They stated that they believed the issue can be addressed but provided no specifics as to how and proposed no changes to the bill. They did not even recommend delaying its coming into force or adding the ability to create special regulatory powers.
If this bill is so flawed and fears of potential abuse are so real, why then did our country’s top tax policy experts not help the chair and members of the House Finance Committee identify and debate specific amendments? I found this strange because every tax expert I’ve ever met thrives on offering meticulous specifics. Not one amendment was introduced in committee or in third reading in the other place.
We asked these same tax policy officials about additional tax avoidance safeguards in the Senate committee. This time, they cited the 2016 regulations in Quebec and suggested that the bill could now, in the Senate, in June, be amended to include the ability for Finance Canada to add specific regulations.
Given that they were asked the same question repeatedly in the House Finance Committee and offered nothing, we asked how long they had known about the Quebec regulations. After a long silence, they replied that they had known since the department’s small business consultations in 2017. Incidentally, 2017 is the same year that our own Senate National Finance Committee tabled a report entitled Fair, Simple and Competitive Taxation: The Way Forward for Canada.
In their report, they noted that:
The government said it would work with family businesses, including farming and fishing businesses, to make it more efficient, or less difficult, to hand down their businesses to the next generation.
Further, the 2017 report went on to suggest that the rules already being used by the Government of Quebec should be adopted in order to make intergenerational transfers easier.
Colleagues, neither this solution nor the problem are new to Finance Canada, and the problem goes back several decades. Both Conservative and Liberal governments have failed to fix it. Until now and until today, no one has done anything to fix this unfair tax penalty, again leaving owners who want to pass their business on to their capable offspring with a completely unfair, completely unnecessary and agonizing choice.
Contrary to the assertion that, by passing this bill, the Senate will somehow arbitrarily make intergenerational family ownership a public policy priority, it does not. Bill C-208 only levels the playing field as it relates to an unjustifiable imbalance in our current tax system.
Now, if tax avoidance problems actually materialize following the passage of this bill, there are multiple recourses available to the government. Finance officials told AGFO that additional protections could soon be added by the government through a regulatory power. Finance Canada and the government could put forward corrections quickly and through a ways and means motion. This point was also made by the long-respected chair of the House of Commons Standing Committee on Finance Wayne Easter, a former Liberal cabinet minister with 28 years and 8 elections worth of parliamentary experience. He said this during his third reading speech. He reminded his colleagues that farmers, fishers and small business owners have been waiting on the sidelines for years.
In terms of additional options available to prevent potential abuse, several tax experts advised me that the Canada Revenue Agency has access to extraordinary powers through section 245 of the Income Tax Act, called GAAR, the General Anti-Avoidance Rule. It allows CRA to impose adverse tax consequences and to deny any tax benefit resulting directly or indirectly from a tax-avoidance transaction. It was also noted that future tax changes put forward to address oversights could be applied retroactively, something that is not problematic if done in the same fiscal year.
We also heard the assertion that the changes to Bill C-208 are somehow regressive. CFIB data make it clear that the vast majority of small business owners are not wealthy. Two thirds of Canadian small businesses earn less than $73,000 a year and have four employees or less, and almost one third of those business owners earn about $15 an hour less — and these are pre‑COVID numbers. I would offer that including all small business is not about the rich getting richer, as is being asserted. The provisions in Bill C-208 provide a very affordable alternative to the vast majority of small business owners, especially when compared to the huge cost of the status quo.
As I conclude, let me summarize why I’m asking you to pass this bill unamended.
First, Finance Canada and successive Liberal and Conservative governments have failed to act. They committed to solving this inequity in 2017 when they already had full knowledge of the Quebec regulations. They have not come up with a comprehensive solution following three different budget cycles.
Second, Bill C-208 addresses a deeply unfair, problematic and long-standing inequity in the Income Tax Act that has long been ignored. Bill C-208 is a product of a private member’s bill going back to early 2015. It did not suddenly appear as a populist bill immediately prior to an election, as has been asserted.
Four different elected parliamentarians from three different parties — Liberal, NDP and finally Conservative — in three different parliaments have attempted to correct this inequity. This bill arrived in the Senate with the support of elected parliamentarians in all five parties, including 19 Liberal MPs, only two of whom had voted in favour of the bill at the second reading.
Finally, if this chamber passes the bill and abuse materializes, there are multiple ways in which to address those issues. These include legislative amendments — for instance through a ways and means motion allowing for additional regulatory powers, by applying the General Anti-Avoidance Rule that exists in section 245 and finally by making whatever necessary changes retroactive.
Colleagues, immediately prior to my accepting the enormous honour and responsibility of this appointment, Prime Minister Trudeau made one crucial request of me. He asked that I “challenge the government during my time in the Senate.” I know others have said that they had the same conversation. In response, I said, “Absolutely, Prime Minister. That is why I applied.” I have worked to do so collegially and constructively as much as I can ever since.
The backbone of countless communities is small businesses, farms and fishing operations. Those who can pass a business down from generation to generation create the history and the character of countless communities across our country. We need to give every opportunity to those families to make that transfer. Solving this problem once and for all is up to us now. If you do not support this bill — and I absolutely accept that you may not — then I ask you to please not kill it by voting for the amendment. Instead, vote directly against the bill itself. We all know that amending this bill now in the Senate in this Parliament will kill this bill.
My sincere hope is that you will join me in voting against the amendment and finally voting in favour of an unamended Bill C-208. There are a lot of families counting on us. Let’s do it for them. Thank you, colleagues.
Senator Deacon, thank you for the speech. Very insightful. How much discussion was there in committee around how difficult it is currently for family members to purchase the business if they want to purchase from their parents? They’re taxed at after-tax money, at salaries at 53.31%, as opposed to a corporation where you can do it through future earnings.
Thank you, Senator Loffreda, for the question. I’d offer that one of the biggest challenges is that many businesses cannot take advantage of the 10 years currently allowed. The parents have to get the resources early on, so they are left with this horrible choice. The current situation is deeply unfair. At the part of the committee when we heard all the different stories —
Honourable senators, I just listened to the comments and speeches of my colleagues and I will get right to my conclusion. I won’t go over all the tax rules that we’ve presented and gone over here. However, I’d like to make one thing very clear to my colleagues, and I’ll start with a comment made by Senator Dalphond. We’ve gone over the history of the work done in this file. Bills have been introduced in the House of Commons on three occasions and none of them made it to committee.
In 2020, so quite recently, Bill C-208 was introduced in the House of Commons and was studied there for the first time. Even tough we’ve been discussing this bill for 10 years, it’s only been under consideration for a few months.
The bill was referred to the Senate on May 25, and, on June 3, it was referred to committee for consideration. It pertains to important tax laws. The Agriculture Committee only had two meetings. Still, we’re being told that the issue has been dragging on for years.
We didn’t examine this bill properly. As a senator, I’m disappointed and frustrated to hear those sorts of comments. Attempts are being made to go over my head to ask me to vote on a bill that wasn’t studied properly. Are we going to agree to vote on a bill that wasn’t presented properly? I find it rather disturbing that we would do that, particularly on a matter of taxation.
Everyone presented excellent arguments. The Senate is the chamber of sober second thought, and you will not convince me that we studied this bill objectively. I’m sorry, but I can’t go that far, even though I tried.
Before Senator Woo told us last week that there are real problems with this bill, everyone was ready to move ahead as though this were a done deal. That is the sort of attitude that frustrates me as a senator. We shouldn’t agree to spend two meetings studying legislation only to refuse to vote on a certain aspect or agree to vote on an amendment. That’s not fair to farmers, fishers or SMEs. It’s not fair to Canadians.
I’m sorry, honourable senators, but I won’t be voting in favour of this bill. I’m extremely disappointed to be debating this subject. I find it utterly absurd. I seems to me that the government is trying to quickly get something past us, and I think that’s a real problem.
The Honourable Senator Salter Hayden was a member of this chamber in the late 1960s and early 1970s.
Senator Hayden spearheaded the Senate committee that studied major changes to the tax system. The complete tax overhaul done at the time was a success story for the Senate. Maybe it’s time for the Senate to do this again and to fix the problem instead of having a boutique tax code of piecemeal fixes, we could have a more up-to-date tax code that would be geared to the needs of our time.
I think it’s very important that we look at this in this session. I’ll stop here. I have a lot of other arguments, but I think I’ve said enough, and I hope that you will vote against the amendment and that you will vote against this bill because this should not be going anywhere else. Thank you, colleagues.
I’ll give you some time to calm down. Indeed, this has been dragging on for quite a while now, but we didn’t say that it’s been dragging on in the Senate. There have been three previous attempts.
When you talk about a tax response, it is very important to assess that. The main characteristic that a tax should have is fairness, that is, to be fair in the tax efforts of all taxpayers. Whether it is property tax, provincial tax or federal tax, fairness in tax effort is essential. We all fundamentally recognize that this bill, with respect to related business transfers, is unfair. There could be a fiscal cost of up to $279 million, because the money would be taken from the pockets of Canadians in a related transaction that is unfair. That would be even more worrisome than the fear of creating an imbalance in the federal tax system if this bill were to pass, because my main concern is fairness in our tax system, and yet in this case, the system is unfair. Would you agree?
As I said in my speech, I’m unable to come to the same conclusion, Senator Forest, because this bill is complex and we haven’t been given enough time to study it. I believe that there are loopholes and all kinds of inequities in the code. We haven’t looked into any of that. We’re being asked to vote on a bill that we haven’t had enough time to study properly.
I’ve worked with people from all sectors, except the fisheries. One company I worked at started estimating the number of intergenerational transfers that were taking place, starting in 2010. These problems have been around a long time. My problem here today has to do with the complexity of all of these rules and with the fact that this bill was studied over a mere two meetings.
The government is asking us to make decisions on a single, simple bill, Bill C-208. I’m just as frustrated about Bill C-208 as I am about Bill C-218. It’s exactly the same thing. Things are being slipped in because we’re at the end of the session. We’re being asked to vote, to make decisions and to adopt bills so they can get Royal Assent. This approach doesn’t work, Senator Forest. I’m not calling into question the bill itself. I’d like the opportunity to study it in its entirety and to come up with real solutions for SMEs, for the fishery and agricultural sectors, after hearing from witnesses and understanding the real issues these businesses are dealing with, whether it’s about transferring a business, obtaining loans or going through the planning process.
That is not what I’m saying, Senator Forest. If we want to be fair, we need to do the work properly, and to do that, we need to hold more than two meetings and hear from more witnesses, in addition to accountants or people who are good with numbers who only have good things to say about the bill. That way, we can study the bill thoroughly instead of doing a piecemeal job to correct just one small problem that may result in five or six others.
First of all, I want to commend you for the passion with which you addressed this issue. As I was recently saying to someone who was following the work of the Senate, we’re currently dealing with an excessive number of bills that we need to fast-track.
I also have a big problem with this approach. When we’re called upon to pass public interest bills from the Senate or the House of Commons, we know that these bills haven’t been examined as thoroughly.
Senator Moncion, do you agree that we should implement an approach that would allow us to do a thorough job at every stage of the legislative process? In that regard, I agree with you that perhaps proper procedure wasn’t carefully followed. Do you agree with me on that?
Now that you’ve calmed down somewhat, I’d like to take the opportunity to ask you a question. Many studies have already been done by accounting firms and chambers of commerce. Many of them support this bill. As senators, what’s stopping us from reading these bills, from reading and carrying out studies? I’ve been reading up on this bill for several days. I didn’t make a speech because Senator Deacon gave an exceptional one and I wanted to contribute in another way.
What’s stopping us from doing the reading and looking at the studies without necessarily always doing it in committee? With your experience, perhaps you could answer my question. Thank you.
I thank you for this question, senator. Senators have very diverse areas of expertise. Some study tax issues whereas others study financial issues. Some, like Senator Galvez, are authorities in their fields or experts on the Constitution Act. When we consider the work that a senator must do, it is not the work of one, two or three senators, it is a collective effort. The beauty of being in the Senate is having access to our colleagues’ expertise when we need it. We saw that in recent weeks.
I read up on the bill, but I’m working on another one. I was unable to spend as much time as I wanted to on this one. I’ve even told myself that, ultimately, we may not have enough time to arrive at these conclusions. If we were to do a more in-depth study, perhaps we too would come up with the same solutions or others that would be better tailored to the needs of our fishers, farmers and SMEs.
We must try. Someone asked me what this bill would do. I told them that when I looked at the Income Tax Act, I saw an old boat with holes that are being plugged in a piecemeal manner, and that we’ve been trying to repair this boat that’s taking on water for a very long time. We need to start from the ground up if we want an adequate and much more flexible tax code than the one we have now.
If I understand correctly, Senator Moncion, it’s not that you disagree with the accounting firms, the experts, the studies and the research or that you don’t trust them. You want more time. Many studies and considerable research support the bill’s measures and many experts believe that this inequality must be addressed. Do I have that right?
That’s exactly right. I’m not questioning the accountants’ expertise. However, I expect the Senate to be able to carry out objective studies, given its role of sober second thought and responsibility for studying every bill that comes before it, whether from the Senate or the House of Commons.
Colleagues, it was my intention to ask Senator C. Deacon a question on his excellent speech, but time was too short so I want to make a few comments on the legislation.
The major problem with this legislation is that the government is opposed to it, and that’s it. It’s been studied for years. There are simply no concerns about tax avoidance or tax allocation or tax cheating with this bill. As Senator C. Deacon correctly pointed out in his speech, these issues can all be addressed by the CRA with directives or accounting rules and interpretation. They have all the tools they need.
Colleagues, to think that this government is suddenly concerned about tax evasion is laughable. We have seen over the years what they have done and not done on tax evasion. I point today to a story in the National Newswatch where they talk about once again having no success for prosecuting or convicting the very rich.
This bill is about farmers and fishers. They desperately need our assistance and they need it now. I appreciate the comment made that we should do an overview of the tax system. I’ll be gone from the Senate by the time that’s completed. Help is needed now, it’s needed today.
I thought Senator Griffin made a key point. The government was so opposed to this bill that they had a whipped vote. I know most colleagues understand what that means, but for those who do not, let me tell the price you pay when you go against the whip. Scott Simms is an MP from Newfoundland and Labrador. He voted against the government on a whipped vote a couple of years ago and he lost the chair of the Fisheries Committee right away. There is punishment for going against the whip. These people are forced to vote that way. So the significance of 19 Liberals voting against what the whip and the leader of the party told them is very telling. They know this legislation is needed, they know this legislation is required and that’s why they went against the whip.
Senator C. Deacon also referred to the chair of the Finance Committee, a long-time chair, former cabinet minister Wayne Easter, who not only voted for this, but supports the bill and through every avenue has been trying to get it passed for years.
Colleagues, there are all kinds of reasons to support this bill, but let’s take the tax avoidance and the tax argument off the table because there has been no indication whatsoever from the government that wealthy Canadians are being punished for tax avoidance if suddenly they are going after farmers and fishers. That would certainly be the first interest we saw from this government in collecting taxes owed by Canadians. This bill is important for a host of reasons and I intend to support it.
And I say this — I’m a long-time supporter of, financial contributor to, and voter for the Liberal Party of Canada, but that does not mean the Liberal government is always correct. We are not talking about North Korea here where you have to bow down to the dear leader. The government makes mistakes. This is one of them. They should have supported this bill.
I intend to support this bill and support farmers and fishers. I’m not supporting officials from Finance Canada who are opposed to this, who have spoken about this, who suddenly woke up to what is going on and are opposed to this legislation. If the choice is between Finance officials and farmers, fishers and their families — who are trying to struggle for all the reasons that Senator C. Deacon gave about the amount of money they make and how little it is, and they are trying to survive to keep us all in food and to help a rural economy — there is no question what we should all do. I hope you would join me in supporting this bill. Thank you, colleagues.
Senator Downe, I have listened to you in the past, and I value your expertise regarding tax avoidance — and the government’s ability or inability, depending on your point of view — to wrestle with this problem.
I’m not an expert on this bill. One issue that I have not heard mentioned in the debate is that, intergenerationally, businesses are taxed at 48%. To transfer a business to a Canadian corporation it is 26%, and to a foreigner it is 13%.
Placer mining in the Yukon is often referred to as the family farm of the Yukon. If I understand this correctly, if a placer mine in the Yukon was to be sold to a foreign entity, it would be taxed at far less than if it was sold or passed on to the family. I’m wondering if during all of the discussions on this bill anyone has measured the number of transfers to foreign versus Canadian or intergenerational transfers?
That’s an excellent question, Senator Duncan, because you hit the nail right on the head by highlighting the disadvantage farmers and fishers currently have in the tax system. I cannot answer the question in specific detail, but I think you have highlighted once again the various tax rates paid by Canadians and non-residents, and the disadvantage that rural farmers and fishers and their families face at the current time.
I would like to thank Senator Downe for his frankness in response. I invite other senators who might have that information to send it to me. Senator Downe, are you supportive of a national finance review of the tax system? I would like to sincerely applaud Senator Moncion for her passionate defence of this idea.
I think it’s an excellent proposal. My only concern or hesitation would be it could take this bill completely off the rails and our farmers and fishers would wait years.
As Senator C. Deacon correctly pointed out, any errors or flaws in this legislation can be quickly picked up by the Canada Revenue Agency and the Finance Department, and they can be corrected very quickly through different measures.
For an overview of the tax system, that’s exactly the type of work the Senate should be doing on an ongoing basis; the big picture issues. We should not be trying to compete with what the MPs are doing. On big policy issues, that’s where the Senate should shine.
I want to say how much I agree with what you just said, Senator Duncan’s thoughts and also the proposals put forward by Senator Moncion.
How many years have you been working in the Senate to deal with the issue of offshore tax avoidance and evasion? When did you start that work, because my sense is that it is not an issue that is at the feet of any one particular government — it is at the feet of all governments in how we’ve been dealing with that. I would like your thoughts on that, please.
You are right, it has been an ongoing issue for at least the last 10 years. As I said in the Senate recently, because of the personal intervention of the Minister of Finance, we finally had the first significant development in the fight against tax evasion, which is the beneficial ownership registry. However, that will take four years.
Senator Gold is finding out why it is taking so long and how they are spending the money. He told the Senate he would get back to us in response to my question, but that’s four years from today. That is a good beginning, and I give full credit to the Minister of Finance. I understand from various people around Ottawa that it was her personal intervention — in fact, there was a story in La Presse within the last two weeks where the reporter interviewed the current revenue minister, who basically blamed the former Minister of Finance for not doing anything on tax evasion, which I thought was rather interesting. That aside, Minister of Finance Freeland deserves full marks.
Honourable senators, I’m sure Senator Plett is happy to see me rising to make another speech. I had a long speech of 15 minutes. I won’t deliver it. Instead, I will go to a shorter version, but I think some comments deserve to be made about the comments I heard during that interesting debate.
If we accept that the flaws in the bill will later be addressed by the government, why should we accept passing a bill with flaws when we know the government won’t be sitting before the fall? Well, the government can fix it.
Flaws have been indicated and three options have been considered. Some senators suggest the bill could be amended by the government, but let’s be realistic. This bill has no coming-into-force provision. That means, unless the amendment proposed by Senator Harder is adopted, the bill will come into force the day it receives Royal Assent. That could be tomorrow or Friday. If that is the case, as of that day, people will be able to exercise the new tax option that will be made available. We’ve heard that many people are considering retirement, so I guess that will be a good invitation to retire and do their tax planning accordingly. Even if the government is opposed, you know you will have a window of opportunity you could use. That is the first thing that needs to be understood.
The bill will come into effect the day it receives Royal Assent, and if the way to fix it is by amending it, this will not happen before the end of this week. We all know it will happen in a few months if we resume sitting in the fall, or it will happen after an election, if there is one. There will be a few months where the tax loophole will be fully open, to be used by whomever wants to use it with the proper accounting and advice to take advantage of it.
Second, some people are saying it could be fixed by regulation. Again, this is if the law provides the government the opportunity to adopt regulations to complete the legislation. We have seen this happen with the special bills that were adopted during the pandemic. One of them gave the government power to change the Income Tax Act, and we all opposed it. The other house did not agree either. You need authority to complete the law through a provision of the law that says the Governor-in-Council can adopt regulations to define this, to have restrictions and to provide the appropriate period of time to hold shares before you can transfer them to a third party.
Another option to address the flaws has been suggested. Many senators seem to acknowledge that there are flaws. They say the Canada Revenue Agency can resolve these flaws; they can adopt directives or an interpretation bulletin. Again, this is not what the law provides. If the law says you can do it in the following ways, the Canada Revenue Agency cannot then adopt internal methods or an interpretation bulletin that will contradict what Parliament has decided.
If it can be done that way and you don’t have to run the operation, you can buy it. You can be a student studying in Vancouver who buys shares of his father’s farm corporation in Quebec and pretend he is not using it and not exploiting the farm. Well, that cannot be fixed by the CRA. They have no authority to change that. The law speaks and the law must be read as it is written. Tax Court judges will come down on the CRA if they dare change the law we have passed.
Quite frankly, if you consider there are flaws in the bill, there is no way to pass it without the amendment proposed by Senator Harder. That is really important. That’s all I wanted to say.
Honourable senators, it is now after six o’clock, and pursuant to rule 3-3(1) and the orders adopted on October 27, 2020, and December 17, 2020, I am obliged to leave the chair until seven o’clock unless there is leave that the sitting continue. If you wish the sitting to be suspended, please say, “suspend.”