Maguire’s bill topic of emergency meeting

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The federal government has partially backtracked its plans for the implementation of a Westman MP’s intergenerational tax bill.

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Hey there, time traveller!
This article was published 21/07/2021 (434 days ago), so information in it may no longer be current.

The federal government has partially backtracked its plans for the implementation of a Westman MP’s intergenerational tax bill.

Brandon-Souris Conservative MP Larry Maguire’s Bill C-208 received royal assent last month after passing through both the Senate and House of Commons.

It changes tax rules to make it so that intergenerational transfers of small businesses, farms and fisheries are treated as capital gains by the seller instead of dividends, which are taxed at a lower rate.

Larry Maguire

However, a release from the Department of Finance stated that since Maguire’s bill didn’t have an implementation date, it wouldn’t come into effect until the end of this year. This drew the ire of opposition parties, firstly because they accused the federal Liberals of ignoring the will of Parliament and secondly because under Canadian law, a bill without an implementation date becomes law as soon as it receives royal assent.

The issue became heated enough to warrant an emergency session of the Commons finance committee on Tuesday to clear up the confusion.

To head some of the anger off at the pass, Finance Minister Chrystia Freeland issued a statement on Monday affirming that Bill C-208 is now law.

Despite that, Freeland announced her government’s intentions to amend the bill to close what it sees as loopholes.

“One loophole that Bill C-208 may inadvertently permit is the opportunity for ‘surplus stripping,’ in which dividends are converted to capital gains to take advantage of the lower tax rate, without any genuine transfer of the business actually taking place, thereby compromising the integrity of the tax system,” the statement reads.

To fix this particular loophole, the government will introduce amendments that will introduce the requirement a parent must transfer legal and factual control of the corporation to a child or grandchild, outline the level of ownership in the business that a parent can maintain after the business is transferred, introduce a timeline for the parent to transition the business to the next generation and outline the level of involvement a child or grandchild must have after the transfer.

Despite this change in course, Tuesday’s finance committee meeting featured opposition MPs taking their Liberal colleagues to task over their original intentions to seemingly ignore a passed bill.

Representatives from various other groups such as the Canadian Federation of Agriculture and the Canadian Federation of Independent Business as well as former legislators such as former Speaker of the House Peter Milliken were also on hand to discuss the importance and timeliness of Maguire’s bill as well as whether the treatment of the bill had any precedence in recent history.

Speaking to the Sun on Tuesday afternoon, Maguire said he has concerns the federal government might retroactively change the rules and penalize those who made transactions since the bill came into effect. As for the change of heart regarding the implementation date, he said it was only the Liberals who doubted that it became law as soon as it received royal assent.

“It’s like they’re trying to convince themselves that it was law,” he said. “There’s no other purpose putting that (press release) out because everybody else knew that it was law across Canada already. That’s why there’s still a lack of clarity.”

Regarding the government’s stated desire to close loopholes, Maguire said they are essentially calling small business owners tax cheats.

“Are you saying that the small business transactions that take place between June 29 and on into the future are not genuine?” he asked of the government’s stance. “The government has the right though the (Canada Revenue Agency) to do tax audits on anyone at any time. Nothing has ever changed that and there are safeguards in the bill despite what they’re saying.”

One of those safeguards is that an independent third party must assess a fair market price for a parent or grandparent selling a business to their descendant.

Maguire and his party are now hoping that Freeland will appear before the committee to discuss the issue, but the MP said he wasn’t sure if it would happen before or after the federal election he believes will be called soon.

» cslark@brandonsun.com

» Twitter: @ColinSlark

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