Third reading of Bill C-208, An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation)—Amendment by Senator Harder

By: The Hon. Pierre Dalphond

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Hon. Pierre J. Dalphond: 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.

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