Barbara Jean McDougall (Minister of State (Finance))
Hon. Barbara McDougall (Minister of State (Finance)) moved
that Bill C-7, an Act to amend the Income Tax Act and related statutes, be read the second time and referred to the Committee of the Whole.
She said: Mr. Speaker, I am very pleased to introduce amendments to the Income Tax Act. The Government recognizes the importance of these amendments to the small business community. Therefore, the Bill has been brought forward early in the session to allow Canadians to benefit from the changes. As the House will know, most of the measures contained in the Bill were first proposed in the February 15 Budget of the former Government. A number of provisions which facilitate the implementation of the tax laws were contained in a draft version of the Bill, together with technical explanatory notes, published in August.
The present Bill is virtually the same as the Bill which was drafted in August except for some minor improvements. The changes to the Income Tax Act contained in the February Budget included important measures to simplify tax computations for small business. This Government is fully aware that small business is the lifeblood of the economy and employs two-thirds of Canadians. The new measures will significantly alleviate the paper burden which has fallen unduly on small business. The following changes are now being introduced to help small business to continue productively.
The small business tax simplification package will be effective for the 1985 and subsequent taxation years. It will provide certainty to taxpayers. The test to determine the eligibility of small corporations for the 35 per cent rate of credit on research and development, and the eligibility for a 40 per cent rate of refundability of investment tax credit, as well as an extra month to pay the balance of tax, will be based on a taxable income for the preceding instead of the current taxation year. This measure will provide more certainty in planning.
A special rule to prevent corporations from obtaining the low rate when they are controlled by means of options by
public corporations or non-residents is being deferred and will start to apply in 1986 rather than 1985. This measure will provide taxpayers with adequate time to rearrange their affairs. These legislative changes will simplify and shorten the corporate income tax form. In addition, the cost of tax compliance for small business will be reduced. That is why this Government is proceeding quickly to introduce these changes in the first session of the Thirty-third Parliament.
Also included in the Bill are a number of changes to the income tax provisions which affect registered charities, primarily charitable foundations. These changes are the result of very extensive and successful consultations with the voluntary sector. The charities are most anxious for these amendments to be passed into law. This Government recognizes the tremendous contribution of the voluntary and charitable sectors to the prosperity of Canada. In fiscal year 1979, 2.7 million people, or 15.2 per cent of the working age population of Canada, were involved in unpaid voluntary work. Canadians volunteered 373 million hours of labour in 1979. A calculation of the value added to the Canadian economy by the 40,000 charities which are registered in Canada suggests that this sector contributed $4.5 billion to the Gross National Product in 1980, which represents roughly 2 per cent of the total Gross National Product. The contribution and the dedication of the voluntary sector to the well-being of all Canadians should be commended and encouraged. That is why I am pleased to announce these changes to the income tax provisions affecting registered charities.
The Bill further contains a broad range of other important tax measures which will promote the growth and economic renewal of Canada. Changes to the provisions relating to employee stock option plans are designed to promote greater employee participation and increased productivity in the workforce. Another measure allows farmers a deduction of up to $120,000 of taxable capital gains on the sale of qualifying property where the money is invested in a registered retirement savings plan. This change will better enable farmers to plan for their retirement.
In addition, amendments are provided to further facilitate the transfer of family farms and shares of small business corporations from one generation to another.
The decision to proceed with these changes reflects the Government's commitment to the preservation and development of family farms and small business. The Government will establish a parliamentary committee to examine a number of agricultural tax issues. If changes are to be made to the treatment of farm losses in the next Budget, farmers will have the option of applying the 1985 tax regime to their 1984 tax returns.
November 26, 1984
Income Tax Act
I will not take the time to enumerate all the measures included in this Bill. They have been announced previously and have benefited from substantial public consultation. However, I would like to mention some of the important provisions relating to the administration of the tax system.
The Bill provides increased exemptions from the requirements to make tax instalment payments. The new thresholds will benefit some 480,000 individuals, most of whom are senior citizens, from tax instalment requirements. The four-year limit on reassessments is being reduced to three years. The Tax Court of Canada will be allowed to establish guidelines for the award of costs to appellants. The Bill allows a taxpayer who files a waiver of the usual time limit on reassessments to revoke that waiver.
A number of other administrative improvements are introduced in the Bill. These measures deal with a range of matters including three refund mechanisms for certain taxes in dispute and measures allowing for the revision and late filing of various taxpayer elections.
The Government is pleased to proceed with these important measures because they are in keeping with our efforts toward improving the administration of our tax law. I would like to add that the economic statement and the accompanying agenda paper entitled "A New Direction for Canada" are documents of substantial importance to all Canadians. They are evidence of the determination of our Government to change the approach of' government in the formulation of public policy. Such a change is critical, not only to my income tax amendments but to other legislation, because we believe the key to successfully managing change lies in building greater understanding of our problems and casting a broad net in our search for solutions, at all times being fair and open.
Further amendments to the Income Tax Act will be brought forward as the need for revision is identified and after close consultation with Canadians during the consultative process following our economic statement.
The provisions of this Bill, Mr. Speaker, have had a lengthy period of public review. Most of the amendments were published in draft form in April for public comment and those draft amendments were reviewed in the last Parliament by the Standing Committee on Finance, Trade and Economic Affairs. The response to the draft amendments was very positive.
Prompt passage of this Bill will enable taxpayers to benefit from its many simplifying and relieving amendments. I urge all Hon. Members to support the Bill and to encourage its speedy passage.
Subtopic: INCOME TAX ACT
Sub-subtopic: MEASURE TO AMEND