FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, May 15, 2000

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here.

As you know, the order of the day is Bill C-24 and its clause-by-clause consideration. Pursuant to Standing Order 75(1), consideration of the preamble and clause 1 is postponed.

I'd like to see if I can get unanimous consent to deal with, in a block, in one vote, clauses 2 to 52.

Some hon. members: Agreed.

[Translation]

Ms. Pauline Picard (Drummond, BQ): On division.

[English]

(Clauses 2 to 52 inclusive agreed to on division)

The Chair: Now we have clause 53.

Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): With that we have actually carried those clauses...? Or was that just a motion that we deal with them in one?

The Chair: No, we actually voted on them, but—

Mr. Ken Epp: Are you serious?

The Chair: Yes.

[Translation]

Ms. Pauline Picard: I want the record to show that I opposed this measure.

[English]

The Chair: Well, that's why I asked if we could deal with them in one block, but if you want to go one by one, I'll go one by one.

Mr. Ken Epp: Mr. Chairman, my question was simply whether we had just voted on dealing with them as a block or whether we had actually already voted on the clauses themselves.

The Chair: Yes.

Mr. Ken Epp: I would like to simply urge you not to try to go too cotton-pickin' fast, because then we're going to slow it down. Give us time to think of what we're doing.

The Chair: Yes—

Mr. Ken Epp: Okay.

The Chair: —and I am going to give you time.

The only thing I asked, whenever we.... Let me put it this way. When we don't have amendments, right.... I mean, the first amendment that anybody has filed with me is for clause 53. So obviously if there are no amendments forwarded to the chair, I would say that people would agree with clauses 2 to 52.

But if you want to go one by one, I—

Mr. Ken Epp: No, I don't.

The Chair: Okay.

Mr. Ken Epp: I just want you to make sure that you don't.... The west was built with the railroad, developed with the railroad, but I'm not ready to let the railroad extend into this committee.

The Chair: Yes, and as a person of Italian origin, I know that Rome wasn't built in a day, either.

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Mr. Ken Epp: Okay. Good.

The Chair: So we'll go one by one.

Mr. Ken Epp: Just as a small formality, could we ask the clerk to confirm, in fact, that all of the members who are present here and voting, particularly on the part of the government, and who are not regular members of the committee, are properly signed in?

The Chair: That's correct, according to the sheet I see in front of me for committee membership substitution or changes.

Mr. Ken Epp: Okay. So that's confirmed, just so that it's on—

The Chair: I will wait for the clerk to say—

Mr. Ken Epp: I want the record to show that it has been confirmed.

The Chair: Absolutely. I'm just reading from the sheet here, but I'll let the clerk confirm that.

Mr. Roy Cullen (Etobicoke North, Lib.): Mr. Chairman, while we're doing that, I wonder, rather than going to each individual clause when there are amendments starting only at clause 53.... I'm wondering if we're misinterpreting what Mr. Epp was saying.

Is it that you want to go through each clause one by one? Or do you just want to make sure we're not going too fast? Is it okay to deal with clauses 1 to—

The Chair: No, it's between clauses 2 and 52.

Mr. Roy Cullen: Is it okay to deal with clauses 2 to 52 as a group—

Mr. Ken Epp: Yes.

Mr. Roy Cullen: —or did you object to that?

Mr. Ken Epp: No.

Mr. Roy Cullen: No...?

The Chair: Okay.

Mr. Ken Epp: I'm fine with it—

Mr. Roy Cullen: Okay.

Mr. Ken Epp: —so long as we know what we're doing and we don't go too fast. That's all.

The Chair: Okay.

[Translation]

Ms. Pauline Picard: Mr. Chairman, I want the record to show that I dissented on each vote. That way, I won't have to interrupt you every single time.

[English]

The Chair: So basically the record will be that clauses 2 to 52 carry on division.

Is that okay?

Some hon. members: Agreed.

The Chair: Okay.

Mr. Epp, you will tell me if I'm going too fast.

(On clause 53)

The Chair: Mr. Cullen.

Mr. Roy Cullen: Thanks, Mr. Chairman.

I move that clause 53 be amended by replacing line 13 on page 72 with the following: “226.1(1) in determining the net tax for”. This motion is subsequent to a motion to amend clause 55 on pages 74 and 75 of Bill C-24. That motion renumbers certain provisions that are proposed to be added to the Excise Tax Act, so it corrects a cross-reference—it's housekeeping in nature.

(Amendment G-1 agreed to)

(Clause 53 as amended agreed to on division)

(Clause 54 agreed to on division)

The Chair: Shall clause 55 carry? Now, a vote on G-1 is consequential to your second amendment, so it's approved automatically.

Mr. Roy Cullen: It's approved automatically...?

The Chair: Yes.

(Amendment G-2 agreed to)

(Clause 55 as amended agreed to on division)

(Clauses 56 to 64 inclusive agreed to on division)

The Chair: Is everybody okay with dealing from clauses 56 to 64 in a block?

Some hon. members: Yes.

(On clause 65)

The Chair: Clause 65 has an amendment.

Mr. Roy Cullen: Mr. Chairman, I move that clause 65 be amended by replacing lines 33 and 34 on page 86 with the following: “includes the earliest day on which tax”. This amendment amends proposed new section 236.1 of the Excise Tax Act, introduced by clause 65 of Bill C-24. It removes the superfluous words “calculated at the rate set out in subsection 165(1)”. It doesn't affect the substance of the proposed section. It's housekeeping in nature.

The Chair: Okay.

(Amendment G-3 agreed to)

(Clause 65 as amended agreed to on division)

The Chair: Now we have a block from clause 66 to clause 130.

Are there any amendments?

(Clauses 66 to 130 inclusive agreed to on division)

(On clause 131)

The Chair: On clause 131 we have government amendment number four.

Mr. Roy Cullen: Yes, Mr. Chairman. I move that clause 131 be amended by.... I don't know, we all have it in front of us.... Do you want me to read or to dispense with G-4?

Mr. Paul Szabo (Mississauga South, Lib.): Maybe with an explanation.

The Chair: Sure.

Mr. Roy Cullen: Okay. Do you want me to read it with an explanation or just give an explanation?

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The Chair: I'd like you to read it and give an explanation.

Mr. Roy Cullen: Okay.

I propose that clause 131 be amended by, (a) replacing lines 25 to 30 on page 152 with the following:

15.1 A supply of

(a) a continuous transmission commodity made by a supplier (in this section referred to as the “first seller”) to a person (in this section referred to as the “first buyer”) who is not registered under Subdivision d of Division V of Part IX of the Act,

(b) replacing lines 8 and 9 on page 154 with the following:

supply would have become

(c) replacing lines 28 and 29 on page 154 with the following:

supply would have

(d) replacing lines 1 to 3 on page 156 with the following:

(a) paragraph 15.1(a) of Part V of Schedule VI to the Act, as enacted by subsection (1), shall be

and (e) replacing line 7 on page 156 with the following:

(b) paragraph 15.1(b) of Part V of that Schedule, as enacted by subsection (1), shall be

Now, Mr. Chairman, this motion corrects a drafting error and removes two superfluous references in the amendments under clause 131 of Bill C-24. These changes to the bill do not affect the substance of the provisions they amend.

Under the goods and services tax and harmonized sales tax, sales in Canada of goods for export are tax free. Clause 131 of the bill adds proposed new section 15.1 of Part V of Schedule VI to the Excise Tax Act to extend tax-free treatment to sales of oil, gas or electricity if the purchaser, rather than physically exporting that product, exchanges it for an equivalent amount of the same product that is situated outside of Canada.

As currently drafted, the preamble to this section refers to a particular supplier and recipient. This reference, however, should apply only to paragraph 15.1(a) and not to paragraph 15.1(b). The motion moves the reference to the supplier and recipient to paragraph 15.1(a) so that it only applies to that paragraph. Corresponding corrections are also made in paragraphs (d) and (e) of the motion to the coming into force provision for this amendment.

Paragraphs (b) and (c) of the motion also correct drafting errors in new sections 15.2 and 15.3 of Part V of Schedule VI to the Excise Tax Act. These paragraphs remove the superfluous words, “calculated at the rate set out in subsection 165(1) of the Act” in these proposed new sections.

The Chair: Thank you, Mr. Cullen.

Mr. Ken Epp: I have a question.

The Chair: Yes, Mr. Epp.

Mr. Ken Epp: I would like either the parliamentary secretary or the officials who are here to give us an explanation of this that's understandable to an ordinary person.

Mr. Roy Cullen: I think I'll turn to the officials.

The Chair: Ms. Legare.

Ms. Marlene Legare (Senior Chief, Legislation Policy, Sales Tax Division, Tax Policy Branch, Department of Finance): I'd be happy to do that.

These amendments that are contained in the act deal with export provisions that are being modified. The particular motions change those amendments in that they correct two drafting errors.

One, in the preamble to the new sections, there's a reference to two parties, referred to as a supplier and a recipient; being in the preamble, that reference modifies all of the paragraphs that follow it, but it should only modify one of the paragraphs, so those words are moved into the paragraph they're pertinent to.

The second drafting error that is corrected is that there are superfluous words now contained within the section that are, by this motion, being removed. The section refers to tax imposed under the section of the Excise Tax Act that imposes the tax at the rate of 7%, the GST rate, and the words that are being removed, as Mr. Cullen said, are, “calculated at the rate set out in subsection 165(1) of the Act”. Those words are not necessary in that particular context. They're being removed basically to avoid confusion. If you have words there that aren't necessary, it causes potential confusion as to whether they mean something that they're not intended to mean.

Mr. Ken Epp: So are these rates, then, tied to the GST, so that if the GST rate were to change, this would also change?

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Ms. Marlene Legare: Yes, without having to make this reference to the rate set out in subsection 165(1). Removing these words would have no impact on the effect of that section.

Mr. Ken Epp: Okay.

Just going away from the amendment for a second to the original bill as it amends the Income Tax Act, is this a new tax or is it a revision of a tax already in place?

Ms. Marlene Legare: What these particular amendments are speaking to.... These sections of the Excise Tax Act are actually relieving provisions which result in no tax applying to certain transactions that are entered into with non-residents. These are essentially export transactions. Under the GST system, exports are referred to as zero-rated; they're charged with a zero rate of tax.

Now that's very clear, and the law is clear when a product is physically transported out of the country and there's evidence of exportation and so forth, but a type of transaction that's very common with commodities such as oil and gas, which are transported by pipeline, is that rather than affect and follow the physical flow of the product being exported, a resident company might enter into a transaction with a non-resident company to essentially exchange product.

So if one company is in Canada and has a certain amount of natural gas that it wants to sell to a non-resident company, the non-resident company in turn has an amount of gas that it already has located in country. Rather than having the physical flow of gas going out of the country and another flow coming in—being imported—they would enter into what we call an exchange agreement.

What this provision would do is recognize that there has in effect been an export transaction that has taken place, so it ensures that there is the same zero rate or no application of the tax to the sales transaction in respect of the product that's being sold to the non-resident, even though it has physically been transported out of the country.

Mr. Ken Epp: Thank you.

The Chair: Are there any further questions?

(Amendment G-4 agreed to)

(Clause 131 as amended agreed to on division)

The Chair: Shall clauses 132 to 144 carry?

Just as a point of clarification here, clause 132 should also carry as amended, because amendment G-4 applies to clause 132 as well.

(Clause 132 as amended agreed to on division)

(Clauses 133 to 144 inclusive agreed to on division)

The Chair: All the clauses so far have carried on division.

Now we have an amendment on clause 145.

Mr. Cullen.

Mr. Roy Cullen: Yes, thank you, Mr. Chairman.

I propose that clause 145 be amended by replacing line 22 on page 164 with the following: “insolvent person is a tax debtor under that” .

Mr. Chairman, this is just a drafting oversight. The more precise term is “tax debtor” as opposed to “debtor”.

The Chair: Is further clarification required?

(Amendment G-5 agreed to)

(Clause 145 as amended agreed to on division)

The Chair: Now, on clause 146, amendment G-6 is consequential to amendment G-5, so shall clause 146 carry as amended?

Mr. Ken Epp: I have questions here.

The Chair: Mr. Epp.

Mr. Ken Epp: I think this has to do with insolvency of Canadians: is that Canadian businesses, Canadian corporations? This is the part that gives the Government of Canada additional clout to go after money that is owed to the government, right?

Ms. Marlene Legare: These amendments deal with the ability for the federal government to use a mechanism in administering the collection of employment insurance and Canada pension plan.... The related amendments all deal with the issue of this mechanism to collect unremitted contributions by employers of employment insurance and Canada pension plan contributions.

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The mechanism is by way of an enhanced garnishment mechanism. It's not something new that's being added in terms of the amendments that are substantive, that this motion relates to. These are provisions that have been in place for many years.

The amendments are consequential to a recent court decision that called into question, I guess, the effectiveness, the wording, of a particular aspect that is consistent throughout the various acts being amended, as to whether or not they were precise enough and consistent with the government's policy objectives when those provisions were first put in place.

So the purpose of the amendment is to clarify the wording in a way that is entirely consistent with the way it was understood, with the policy objectives, and with the way it has been applied and administered since the provisions were first put in place, in order to avoid any uncertainty that this rather surprising court decision might have otherwise caused.

Mr. Ken Epp: So in the event, then, that a company goes bankrupt and has not remitted the last month or two of these deductions from employees, does this clause put the government ahead of everybody else? I think that's the case, isn't it?

Ms. Marlene Legare: There is a priority with respect to the government's amounts that relate to contributions that employers have deducted or withheld and that are owing by them as employers, as their share.

As I said, these are provisions that were established years ago to establish that priority with respect to the Crown's claims. That's right.

Mr. Ken Epp: Okay, and my question was, this puts the government ahead of everyone else...? I think that's correct, isn't it?

Ms. Marlene Legare: That's right insofar as the government can take collection options; it puts it ahead in terms of the creditors that have security claims in this respect.

If you want any more detail on this, I might ask a colleague of mine from the justice department to provide further detail on this measure—if you'd like.

Mr. Ken Epp: I guess the big question I have is this: how large an amendment is this from prior to Bill C-24?

Ms. Marlene Legare: Oh, okay.

Mr. Ken Epp: That's my question.

Ms. Marlene Legare: What's the net effect of the change relative to prior to the change?

Mr. Ken Epp: Yes.

Mr. Roy Cullen: Isn't the short answer that this is just amending the term “debtor”; “tax debtor” doesn't really change the substance—

Mr. Ken Epp: That's what your amendment does.

Mr. Roy Cullen: Yes.

Mr. Ken Epp: I'm already looking ahead, because I know that as soon as the chairman says, “Will G-5 pass?”, he will not stop to breathe before he says, “Will this clause pass?” So I'm ahead of that game.

Ms. Marlene Legare: Just to clarify, it's true that the motion is just correcting the reference to debtor, but I think your question relates to the purpose and effect of the provision that it's amending, so I'm going to ask my colleague from the justice department, Mr. Marc Cuerrier, to respond to your question.

Mr. Marc Cuerrier (Senior Counsel, General Counsel, Civil Code Section, Department of Justice): This provision merely clarifies that with respect to the so-called enhanced garnishment power, the ability of a federal government to intercept moneys going to a tax debtor, it continues for purposes of paying off an employee debt or an employer debt. That's the only thing this does.

It merely clarifies the law as it had been interpreted by the courts up to the point where there was this adverse decision. It does not create new law. It merely clarifies that the power of garnishment applies both in respect of an employee debt for these contributions as well as an employer debt for these contributions.

Mr. Ken Epp: I think I understand that. Thanks.

The Chair: Now, amendment G-6 is consequential to amendment G-5.

(Amendment G-6 agreed to)

The Chair: So shall clause 146 carry as amended, on division?

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): On division.

(Clause 146 as amended agreed to on division)

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(Clauses 147 to 155 inclusive agreed to on division)

Mr. Ken Epp: Did you ask about clause 146?

The Chair: Yes, I did.

Now, amendment G-7 is consequential to amendment G-5.

(Amendment G-7 agreed to)

The Chair: Therefore, shall clause 156 carry as amended?

(Clause 156 as amended agreed to on division)

(Clauses 157 to 179 inclusive agreed to on division)

The Chair: Shall the preamble pass?

Some hon. members: Agreed.

Some hon. members: On division.

The Chair: Shall the title pass?

Some hon. members: Agreed.

Some hon. members: On division.

The Chair: Shall the bill carry as amended?

Some hon. members: Agreed.

Some hon. members: On division.

The Chair: Shall I report the bill, with amendments, to the House?

Some hon. members: Agreed.

Some hon. members: On division.

The Chair: Thank you very much.

Once again, to the officials, thank you so much for the input you've given us. I really appreciate it.

To the members, thank you.

And remember, there is supper at the back of the room if you're feeling weak.

The meeting is adjourned.