OTTAWA – The Senate national finance committee is going to study the federal government's contentious tax reforms, and senators say it's a chance to cut through the rhetoric and get to the bottom of the potential impacts of the Liberals' proposal.
On Tuesday evening, the Senate passed a motion referring a study of Finance Minister Bill Morneau’s proposed changes to the Senate national finance committee.
The committee, according to the motion, will be studying the changes to income sprinkling, passive investments, and converting income into capital gains. As well, the motion asks the committee to make note of the potential impact of the proposed changes on incorporated small businesses and professionals, economic growth and government finances, and the fairness of taxation of different types of income.
The committee has been given a Nov. 30 deadline to complete the study and report back to the Senate.
The first meeting is scheduled for Wednesday evening in Ottawa. The committee will discuss its draft agenda and budget for the study.
In July, Morneau announced the plan to close three loopholes which the government says have allowed high-earning business owners to avoid higher tax rates.
The changes will target so-called "income sprinkling," which allows a business owner to split his or her income among family members, whether they are involved in the business or not. The government also wants to change methods of converting income into dividends and capital gains, and limit passive business income taxation.
The Liberals are soliciting feedback from Canadians on their tax proposal until Oct. 2, when the consultation window closes. Farmers, doctors, and the Conservative caucus have come out in strong opposition to what the government has put on the table.
The government has already drafted legislation on the income sprinkling and capital gains changes, but it has said it’s open to changes to avoid potential unintended consequences of the reforms.
Senators divided
During debate on the motion, the Senators were divided on whether having the committee study the changes ahead of legislation being presented to Parliament was the way to go.
"If we’re going to go down this road of whatever the issue of the day is on the editorial pages and in the news and in coffee shops, then we’re a duplicate of the House of Commons," said Liberal Sen. Percy Downe.
"It’s not the right time to do this. I don’t think the time is very far away, maybe a week or two, until we hear what the government is doing. At that point, we should proceed," Downe said.
Others argued the time is right to do the study now if the Senate wants to get a thorough understanding of what the potential impacts of the changes could be.
Independent Sen. Andre Pratte said the Senate might have a better chance to make changes if needed, before the tax reform comes through in legislation.
"Why would we like to hear Canadians before there is legislation before us in a couple of months? Because it’s useful to hear ordinary Canadians, to go beyond statistics, go beyond numbers. Not to go on a road show to score political points," he said.
Pratte also highlighted that the House finance committee is holding just three meetings on the changes, two where they’ll hear from witnesses, and one where Morneau is set to testify.
"So people are reaching out to the Senate because they’re looking for a forum to be heard on this," said Pratte.
Conservative Sen. Carolyn Stewart Olsen said this isn’t about making "political hay." Rather, the Senate is doing its job by providing people a venue to speak to the changes, both those for and against the proposal, she said.
Independent Sen. Douglas Black, who had previously called for the Senate to examine the changes, said he’s pleased the committee, which he is a member of, will be taking this on. In a statement he said he’s determined to make sure the committee "leaves no stone unturned" in its work.
Liberal Sen. Joan Fraser said on Tuesday that the Senate is planning to have Morneau in the Upper Chamber next week for Senate question period, where he’ll take senators’ questions on behalf of the government.
