September 17, 1996
Minority Report by the Finance Committee's Report on Taxable Canadian Property
submitted by the Reform Party of Canada
The Reform Party files this Minority Report because we have some disagreement with two of the Report's recommendations.
On the one hand we accept as reasonable that emigrants (and trusts moving abroad) should be allowed to defer the payment of capital gains taxes on assets for which a market value cannot be established until they are sold. For example, we believe it to be fair that Canadians returning to their native countries for retirement should be able to defer capital gains taxation on an apartment building or privately held business they own in Canada until it is sold.
However, during the Committee's hearings it became clear that Revenue Canada does not have in place a system which assures that the sale of all Taxable Canadian Property, like of such an apartment building, is properly brought to the attention of Revenue Canada and made subject to the payment of taxes.
The Report deals with this problem by recommending That all individual emigrants from Canada be required to report all property holdings to Revenue Canada at the time of emigration and that the government compute an emigrating individual's tax liability on all gains that have accrued up to the time of departure,...with actual payment due only on realization (provided the emigrant has given adequate security).
We agree with the recommendation that inidividual emigrants provide a list of all Taxable Canadian Property to Revenue Canada when they take up residency abroad. However, we believe that the provision of adequate security imposes on all emigrants an unnecessary financial hardship just because some may fail to report the realization of Taxable Canadian Property.
We believe that it would be fairer for emigrants and equally effective for Revenue Canada if it imposed reporting rules on existing government agencies involved in, or informed about the sale of such property as part of their routine operations.
In the case of apartment buildings and land, Revenue Canada might require land registry offices to report the relevant transactions simply by attaching a contingent lien on the property. In the case of privately held companies, Revenue Canada could instruct its own operational divisions to report changes in ownership as they appear on income tax returns filed by companies and their owners, specifically flagged for such purposes.
Finally, we believe that the Report has gone beyond its mandate given by the Minister of Finance in criticizing the work of the Auditor General of Canada. We hope that this criticism will not discourage the Auditor General and make him reluctant to investigate and publicize wasteful and inconsistent behaviour by government departments. This may, on occasion, require the second-guessing of judgements made by highly qualified professionals in these departments. We believe that under certain conditions the Auditor General would not do his job if he did not engage in such second-guessing, especially so when judgements by experts produce results that are inconsistent with fundamental principles of good government.
It is better for all Canadians if the Auditor General errs on overstating rather than understating problems with the efficient and equitable operation of departments.
Herb Grubel, MP
Finance Critic
Reform Party