CANADA VOLUME 137 S NUMBER 060 S 1st SESSION S 37th PARLIAMENT OFFICIAL REPORT (HANSARD) Friday, May 11, 2001 Speaker: The Honourable Peter Milliken CONTENTS (Table of Contents appears at back of this issue.) All parliamentary publications are available on the ``Parliamentary Internet Parlementaire'' at the following address: http://www.parl.gc.ca 3915 HOUSE OF COMMONS Friday, May 11, 2001 The House met at 10 a.m. Hon. Lawrence MacAulay (for the Minister of Finance) moved that the bill be read the third time and passed. _______________ Mr. Roy Cullen (Parliamentary Secretary to Minister of Prayers Finance, Lib.): Mr. Speaker, I appreciate the opportunity to address the House at third reading of Bill C-22, the income tax _______________ amendments act, 2000. D (1000) The bill would implement key elements of the government’s five year tax reduction plan, the largest tax relief package in Canada’s [English] history, and would legislate the technical amendments in Bill C-43 which died on the order paper last fall. Each measure in the bill is MESSAGE FROM THE SENATE based on the principles of fairness and equity in the federal tax The Speaker: I have the honour to inform the House that a system to which we have been committed since 1993. message has been received from the Senate informing this House The most important component of the bill delivers measures that the Senate has passed certain bills, to which the concurrence of announced in the 2000 budget and last October’s economic state- this House is desired. ment to set out a multiyear plan for further tax reductions. _____________________________________________ [Translation] This plan, which provides $100 billion in tax relief by 2004-05, GOVERNMENT ORDERS will reduce by an average of 21% the federal personal income tax paid by Canadians. [English] Families with children will receive an even larger tax cut of INCOME TAX AMENDMENTS ACT, 2000 about 27% on average. The House proceeded to the consideration of Bill C-22, an act to [English] amend the Income Tax Act, the Income Tax Application Rules, As of January 2001, tax rates on all income levels were reduced certain acts related to the Income Tax Act, the Canada Pension and the 5% deficit reduction surtax was eliminated. The low and Plan, the Customs Act, the Excise Tax Act, the Modernization of middle income tax rates fell to 16% and 22% respectively. The top Benefits and Obligations Act and another act related to the Excise 29% rate was reduced to 26% on incomes between $61,000 and Tax Act, as reported (with amendment) from the committee. $100,000, which means the 29% rate applies only to income over Hon. Lawrence MacAulay (for the Minister of Finance) $100,000. As all the economists and analysts have noted, the moved that the bill, as amended, be concurred in. timing could not have been more perfect to bring in these tax cuts. The Speaker: Is it the pleasure of the House to adopt the Increased support for families with children would be provided motion? through the Canada child tax benefit. The maximum Canada child tax benefit for the first child would rise to $2,372 in July, well on Some hon. members: Agreed. the way to the five year goal of $2,500 by the year 2004. (Motion agreed to) For the second child the maximum Canada child tax benefit D (1005 ) would increase to $2,308 in July 2004. The Speaker: When shall the bill be read a third time? By leave, [Translation] now? These amendments must be in effect by July 1, so that families Some hon. members: Agreed. can get this benefit within the set timeframe. 3916 COMMONS DEBATES May 11, 2001 Government Orders Other amendments to personal income tax are specifically [English] designed to help those who need them most. Increasing the employee stock option deduction from one-third [English] to one-half means employees in Canada would be taxed more favourably on stock option benefits than employees in the United The bill would increase the amount on which the disability tax States. In addition, the bill would allow the deferral of tax on credit is based. It would expand the list of relatives to whom the certain stock option benefits and an additional deduction for certain disability tax credit can be transferred to make it consistent with stock option shares donated to charity. medical expense tax credit rules and it would allow speech language pathologists to determine eligibility for the disability tax Bill C-22 would ensure a comparable tax system for Canadian credit with respect to speech impairments. banks and foreign bank branches operating here. It would strength- en the thin capitalization rules, phase out the special tax regime for In addition, the bill would increase the maximum child care non-resident owned investment corporations and introduce a tem- expense deduction for children for whom the disability tax credit porary 15% investment tax credit for grassroots mineral explora- can be claimed and the amounts on which the caregiver and infirm tion. dependant credits are based. Technical amendments include extending the additional capital It would also include certain incremental costs under the medical tax on life insurance corporations until the end of 2000 and expenses tax credit when a principal residence is built for people clarifying the tax treatment of resource expenditures and the rules with mobility impairments. governing gifts of ecologically sensitive land. [Translation] There are three remaining measures I will touch on briefly before closing. Moreover, an amount of up to $3,000 in scholarships, fellow- ships and bursaries will be tax exempt, provided the student is The first would introduce changes to the taxation of trusts and eligible for the education tax credit. Self-employed workers can their beneficiaries, in particular property distributed from a Cana- deduct from their income the share of the contributions to the dian trust to a non-resident beneficiary, mutual fund trusts, health Canada pension plan or to the Quebec pension plan paid by the and welfare trusts and those governed by RRSPs and RRIFs. employer for their own benefit. [Translation] [English] New antiavoidance measures will ensure that transfers to trusts Other personal income tax changes clarify the rules under which cannot be used to unfairly reduce taxes. clergy can claim a deduction for their residence, allow Revenue [English] Canada to release information about former registered charities under certain conditions and exempt municipalities from filing T4s The next measure would ensure that Canada retains the right to for volunteers to whom they paid not more than $1,000. tax immigrants on gains that accrue during their stay in Canada. It D would also clarify the effects of new taxpayer migration rules on (1010 ) rights to future income and allow returning former residents to unwind the tax effects of their departure regardless of how long Another element of the tax reduction plan would help make they were non-resident. Canada’s business income tax more internationally competitive. Corporate tax rates would drop to 21% from 28% for businesses in To avoid international double taxation, former residents would the highest tax sectors to make them more internationally competi- be able to reduce Canadian tax payable on their pre-departure gains tive, beginning with a one point tax cut effective January 1, 2001. by certain foreign taxes paid on the same gains. By the year 2005 the combined federal-provincial tax rate would Another measure would make advertising expenses in periodi- drop from the current average of 47% to 35%, five percentage cals with at least 80% original editorial content fully deductible points lower than the U.S. This would put our businesses on a more and those in other periodicals 50% deductible regardless of owner- competitive level with other G-7 countries and serve to attract ship. investment and create jobs. After July 1996 Canadian pension funds and other entities that [Translation] own Canadian newspapers qualify as Canadian citizens under the ownership requirements of the Income Tax Act. The plan also provides a tax deferred capital gains rollover for investments in shares of certain small and medium size businesses, [Translation] and a 50% reduction of the capital gains inclusion rate. Thus, the highest federal-provincial tax rate on capital gains will be lower Before closing, I wish to mention that a number of amendments than the same combined rate in the United States. were made to this bill in committee. On behalf of the government, May 11, 2001 COMMONS DEBATES 3917 Government Orders I wish to thank members of the Standing Committee on Finance for necessary to lift the cap. It was done because there was an election their detailed examination of this bill. coming. Believe it or not, the voters bought into it. A whole bunch of them in Atlantic Canada replaced sitting members with Liberal [English] members because the Prime Minister said that the cap would be lifted. Improvements have been made to several provisions, including those affecting back to back loans, weak currency debts, foreign accrual property income, partnerships, mortgage investment corpo- When the legislation came in we dealt with it in the House. We rations and segregated fund trusts, just to name a few. did indeed lift the cap but for one year. We had some questions about the whole equalization process. We thought it should be Each of these amendments contributes to fairness in the tax revisited in order to look at it rationally because it was a very system. convoluted system. The opposition parties suggested that if it was good for an election year to lift the cap, it should be good policy to D (1015 ) lift the cap in the long term.