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Proceedings of the Standing Senate Committee on
National Finance

Issue 19 - Evidence

OTTAWA, Wednesday, April 20, 2005

The Standing Senate Committee on National Finance, to which was referred Bill C-30, to amend the Parliament of Canada Act and the Salaries Act and to make consequential amendments to other acts, met this day at 6:18 p.m. to give clause-by-clause consideration to the bill.

Senator Donald H. Oliver ( Chairman ) in the chair.

[ English ]

The Chairman: Honourable senators, the first item of business on our agenda is Bill C-30. Does any honourable senator want to hear from any other witnesses or are you prepared to proceed to clause-by-clause consideration of Bill C-30?

Senator Murray: Mr. Chairman, I want to place on the record my strong objection as to what has been done in the last couple of hours with regard to this meeting and raise a point of order or two thereon.

We were told this afternoon by no less than the Leader of the Government in the Senate that Senate committees are masters of their own affairs. I suppose that is true, but there was not much evidence of it this afternoon. A notice went out for this meeting that we all received stating that the matter on the agenda would be clause-by-clause consideration of Bill C-30. That was the notice that senators received and that was the notice that the public received.

I will not take you through the procedural discussion that we had in the chamber this afternoon, except to point to the fact that the Deputy Leader of the Opposition, Senator Stratton — I am sorry he is not here at the moment, he told me he was coming — intervened when I was speaking and objecting to adding an item to the agenda at this stage. He intervened to say that the committee had already decided to meet and had already decided to hear Minister Goodale. Mr. Chairman, we all know that that is not true. I am a member of the committee. I was not consulted. There was no meeting to decide that we would add to the agenda of this meeting, nor was there a meeting of the Steering Committee to make that decision. Therefore, Senator Stratton was simply stating a non-truth.

More serious than that, it seems to me, is the fact that what he was really telling us, and he can confirm this later, is that, contrary to Senator Austin's assertion that the committee is master of its own rules, the fact is that he and the leadership on the government side had cooked up a deal at some point with no reference to the committee at all. They had decided what was going to happen this evening, and you did not know, if I understood your position correctly when I spoke to you after wards.

I have had my say at second reading on Bill C-33 and I will have it again in committee and in the Senate. However, this, to me, is an abuse. What we are doing with this procedure is piling abuse upon abuse. It has been an abuse of authority and their position as the leadership to take decisions on behalf of the committee without even consulting the committee. I take very strong objection to that. I also take objection to the irregularity of adding an important item like this to the agenda at the last minute. That is highly irregular and should be out of order. I was reminded today that it has happened before. I believe it happened with consent. However, be that as it may, adding a matter of this importance to the agenda at the last minute is highly irregular.

In respect of that, I will raise this point of order for your consideration. There is a requirement in rule 92(1) that there be public notice of meetings. Surely, that means public notice of the meeting and the agenda. The only public notice that has been put out, as distinct from a communication with members of the committee, was the one put out indicating that there was one agenda item, namely, clause-by-clause consideration of Bill C-30. A half hour ago, the parliamentary website where public notices appear did not have the revised notice.

This leads me to ask for an explanation of a number of things. First, why and how does Senator Stratton make a statement as to what the committee has decided on a matter even before second reading had been given to the bill? Second, how was the revised notice decided upon? The committee did not meet on it. Was there a meeting of the steering committee? Who attended it? Finally, have we complied with the requirements of rule 92(1) in not giving, at least as of 30 minutes ago, public notice of the revised agenda?

Senator Austin: Honourable senators, I would like to address the issues that Senator Murray has raised. As a former government leader, he is familiar with the practices and conventions of managing government business in the chamber and in committees.

With respect to the way in which committees deal with business, we have steering committees that act to govern the business of a committee and to recommend agendas. It is always the case that steering committees are composed of senators from both the government and the official opposition. When the representatives on those steering committees conclude an arrangement with respect to the management of the committees, then the supporters of those two parties on the committee are usually willing to support the decision of the steering committee.

That is the way this system works and there is nothing irregular or contrary to the rules about it.

With respect to the second objection, this item was added at the last minute. There was an understanding between the government and opposition sides that the committee would be willing to accommodate the appearance of the Minister of Finance and the evidence he would wish to give tonight. That is based again on the underlying reality that both the government and the opposition together, if not separately, represent a majority of the senators in the chamber. No rights of individual senators are abused thereby.

With respect to rule 92(1), I received a revised agenda of the meeting about an hour ago. I do not know what is on the website, but the official notice of a revised agenda dealing with the evidence — and we have the agenda before us now in that same form — on Bill C-33, with the Minister of Finance appearing, along with the Parliamentary Secretary to the Minister of Finance, was issued. Obviously, it is short notice, but it is public notice and meets the requirements of rule 92(1).

I do not know why Senator Murray is arguing these procedural steps, both in the chamber and in this committee, unless it is to try to delay the appearance of the Minister of Finance. He certainly demonstrated in his intervention at second reading a grasp of the issues and knowledge of the questions relating to Bill C-33. I would have thought — and this is my personal opinion — that he would want to challenge the Minister of Finance and not delay this bill unduly.

We have to take into account the reality of the government situation in the other place, and the statements made by the Leader of the Opposition with respect to the possible life of the government headed by Prime Minister Martin. This bill contains a number of provisions that affect a number of Canadians across this country. It is a budget bill, and a budget bill is a special document in parliamentary procedure. I want to point that out while people are acting under the normal assumption that the bill will be passed. If it is not passed, there will be a considerable reversal in the circumstances of a number of people.

I believe that this Parliament and this chamber owe it to the Canadian people to deal with this quickly but thoroughly. I am not suggesting that witnesses be denied who are, as I said in the chamber, professional and are not personally affected by the provisions of the bill. However, I am saying that it is our responsibility to deal with the bill; and when the Minister of Finance has offered to come and address the bill, which he has done, it is our responsibility to listen to the Minister of Finance.

The Chairman: Are there any other honourable senators who wish to speak to the point of order?

Senator Cools: I have been listening with some care to the questions that have been raised, and I listened again with some care to Senator Austin. It seems to me that Senator Austin is dealing more with the substantive issues than the question of the point of order. I understand his position. I understand the horns of the dilemma in which he find himself, and I have some sympathy for that. However, on this particular point of order, I think Senator Austin misses the mark, and that it is very problematic.

I speak as a lowly member of this committee. I have raised this particular matter of the business of the organization of this committee with the chairman on another occasion, saying that, as a member, I am concerned that the committee is not being consulted on the questions concerning the organization of committee meetings, lists of witnesses, the order of proceeding and so on. My concerns are not new.

The issue here is not whether or not the minister should appear before us. The issue before us in this point of order is whether or not a proper process was followed in asking the minister to come, and whether or not that decision to bring the minister was a decision of this committee. I submit to honourable senators and to the chairman that the decision to bring the minister tonight and to hold hearings on Bill C-33 tonight was not a decision of this committee.

I would like to claim my right as a member of this committee to have participated in this decision. I am not speaking on the substance of the issue. I regret deeply what is happening because, had I known that the minister was coming tonight, I would have liked some time to prepare to do the quality of work that I think the meeting would deserve.

Senator Murray — and his opinion is his opinion — raised the business of rule 92(1) and public notice. That is his issue. That is his question. My concern is notice to senators.

The Chairman: Senator Cools, the minister has just arrived and Senator Stratton wanted to speak to this point. I wonder if Senator Stratton can speak and then perhaps we can take a decision regarding the minister.

Senator Cools: My understanding is that you just cannot interrupt a point of order to do something else. If you want to continue to act irregularly, that is fine with me. However, I would like to register the fact that I do not think we are proceeding, yet again, in a proper way.

Senator Stratton: To give a bit of history, when I was chair of the Finance Committee and Senator Cools was deputy chair, we did much the same thing. The steering committee essentially decided which witnesses we would hear. I would move that we proceed to hear from the Minister of Finance now.

Senator Cools: There is a point of order before us, and it cannot be intervened by a motion.

Senator Stratton: There is no point of order.

Senator Cools: There is a point of order before us. It has to be ruled on.

Senator Stratton: I would argue if I may, because I have not had the floor, that there is no point of order. A committee, through its steering committee, has historically decided on the agenda of what that committee will do. I am just simply saying that the committee has decided that we will hear from the minister tonight, and therefore there is no point of order. Thank you.

Senator Cools: I am —

Senator Austin: Mr. Chairman, we should make a ruling.

Senator Cools: Mr. Chairman, I have not spoken to the point of order. I feel no need to listen to the sound of my own voice, but I do take strong objection to the fact that you, as Chairman, interrupted a point of order that was moving ahead to allow this senator to move a motion. That is highly irregular and improper. He just moved a motion.

The Chairman: I interrupted you to let the Deputy Leader of the Opposition speak to the motion. That is why I interrupted.

Senator Cools: What motion? There is no motion before us. Senator Murray raised a point of order. There is no motion before us.

Senator Stratton: I have made myself clear. I said, in my view, there is no point of order. Let us proceed, please.

Senator Cools: But you moved a motion; you cannot do that.

Senator Stratton: I withdraw the motion and put forward the argument that there is no point of order, based on the arguments I have been given.

Senator Cools: I was not finished, Mr. Chairman.

I would like, under the aegis of this point of order, to refute what was just said about how this committee has operated in the past. I was deputy chairman at the time, and I was in charge of getting the estimates and questions related to those on behalf of the government. I was assiduous in making sure that the business at hand always proceeded with committee support.

Senator Stratton should remember that I moved motions against him quite a few times in the business of doing that. You may disagree on this fact, but do not say that this committee was not assiduous about getting the support of members. It was then, and is still now.

The Rules of the Senate and the rules of the system support the position that I am taking. I have said before that, when the steering committee meets and makes a decision, the proper route for the committee to proceed by is to make a report. It may be an oral report, but the committee has no power to act on its own. The steering committee must always solicit and find the support of the larger committee.

I would like to read a rule on which I will be asking the chairman to adjudicate. I would read from Beauchesne's paragraph 789. It deals with the Sub-Committee on Agenda and Procedure. I will read the whole paragraph.

789. At its organization meeting a committee may establish a Sub-Committee on Agenda and Procedure (commonly referred to as the Steering Committee). This sub-committee meets as directed by the committee or at the call of its Chairman, who is also the Chairman of the standing committee. It recommends, by way of a report, how the committee should proceed to study its order of reference; advising on such topics as witnesses, times of sittings and various subject matters for each sitting.

This could not be clearer. The Subcommittee on Agenda is subject to the decisions of the larger committee. It is a creature of the entire committee, just as this committee is the creature of the Senate. We must remember at all times that a committee is a body with delegated powers and it cannot act independently of its own originating authority. The steering committee, called the subcommittee, should always be seeking the support, if only for political reasons, of the wider committee.

This brings me now to my second point. My second point is in respect of the questions of what this committee can do and cannot do on its own initiative. I would submit that the steering committee, in even attempting to make such a decision, was acting beyond and exceeding its own scope and jurisdiction, because the committee was operating in the absence of an order of reference. In point of fact, the committee clerk has no authority to begin to implement decisions when an order of reference has not been implemented by the house to the committee. That is why it is called a committee. I have explained that earlier. The bill is committed to the committee, and to my mind it is extremely improper. I could understand if there were an emergency. You can rise to meet the challenge if there is an emergency, if there is an urgency of some identifiable nature. We have done that many times in the past. In this instance there was no emergency. There was no urgency whatsoever. In point of fact, the committee had a duty to abide by the fact that it had to await an order of reference. What happened today was prior to the order of reference being made in the committee, and that is improper. Senator Austin may slight it if he wants, but prior to a decision of the chamber it was announced on the floor of the chamber that this decision was in position and that everything was just moving ahead.

I would submit that this sort of thing is improper. I would also go further and say that it is unbecoming. Had the situation been put differently, you would have found that the same result could have been achieved. I always say it is quite easy to do things properly and I wish that we would.

In any event, this is a matter of great importance and I eagerly await the ruling of the chairman on this.

I would go a little further and add that, when speakers are cut off, we go beyond points of order and into a whole other realm.

Honourable senators, I have a few more references, but those can wait.

Senator Ringuette: I will speak to this point of order, and my comments are irrelevant to the substance of Bill C-33. Last week, when the deputy chair of this committee was chairing the committee I recall some remark that I would call a pre-notice that the proposed agenda for this week would be to look at Bill C-30 and that possibly Bill C-33 would be referred to committee and that we would have Minister Goodale speak to this bill. I believe that is what I heard. Therefore there has been some kind of notice that this would be the committee's agenda for this week. I think that is important to the point of order that has been raised.

Senator Murray: I will conclude on this, Mr. Chairman, I do not want and do not intend to further delay the appearance of the minister before this committee. It is not his fault that matters were done in such an improper and irregular fashion. He is here and we will hear him, of course. I just wanted to put on the record, however, my strong objections to the way things were done. I may say, since I was the one who raised the point of order, I raised it before Senator Stratton's arrival. You called the meeting to order before Senator Stratton got here.

One of my strong objections is to the fact that Senator Stratton announced, even before second reading had been given to the bill, that the ``committee'' had decided to meet and had decided to hear the minister. Not only had the committee not met, no steering committee had met. I find it galling of Senator Stratton to march in here tonight and tell us what the steering committee had decided. The steering committee had decided no such thing. You stated something that was baldly untrue in the Senate this afternoon.

Quite apart from that, senator, governments always want to push as far as they can, as fast as they can, and pass their legislation. We understand all that, but I find it a bit surprising and disappointing that Her Majesty's Loyal Opposition would be so pliant indeed connive, as it appears, in a stratagem such as we have seen this afternoon and this evening.

The Chairman: Honourable senators, I have heard from a number of senators on the point of order. The minister is here. This committee, in the past, has had a practice of trying to accommodate ministers, deputy ministers and other senior officials who come before the committee.

Several different issues are raised in the point of order. One is about notice. There are in fact no specific rules as to the amount of notice that must be given, pursuant to rule 92(1). The rule says:

...all meetings of Senate standing and special committees shall be held in public and only after public notice.

Notice was given respecting Bill C-30, which we have already started; and at 4:24 this afternoon a revised notice was sent out to honourable senators' offices that the National Finance Committee would meet this evening in room 505 at 6:15 to hear clause-by-clause consideration of Bill C-30, and to deal with Bill C-33, a second act to implement certain provisions of the budget tabled in Parliament on March 23, 2004. Insofar as the notice is concerned, it is my opinion that the notice is in accordance with the Rules of the Senate .

With respect to the proceedings in the chamber this afternoon, Senator Murray has made his point. Senator Cools has added to his point of order concerning procedure. The Deputy Leader of the Opposition has given his position with respect to the role that he plays in these matters.

My position is that, notwithstanding what has gone on, the committee is here, it has received notice, the minister is here and I think that we should move to hear the minister.

The only technical problem I have with that is that we have already started Bill C-30, clause-by-clause and, with your leave senators, I would ask that we complete that process because this committee is seized with that. I would like to conclude that and then hear from the minister.

Senator Day, do you agree?

Senator Day: I did not recall that we had in fact started clause-by-clause consideration of Bill C-30.

The Chairman: We had.

Senator Austin: You never actually called Bill C-30.

Senator Stratton: I suggest that we hear the minister.

The Chairman: What is the will of honourable senators? Are you now ready to hear the minister?

Hon. Senators: Agreed.

The Chairman: Minister, this afternoon our committee was referred Bill C-33, a second act to implement certain provisions of the budget tabled in Parliament on March 23, 2004. We know that you only have a short period of time and, without saying anything else other than to welcome you, we would be pleased to to hear your views on Bill C-33. If you have time, I know that honourable senators will have some questions.

Hon. Ralph Goodale, P.C., M.P., Minister of Finance: Mr. Chairman and honourable senators, I have with me my Parliamentary Secretary, the Honourable John McKay whom all of you know from previous legislative business, as well as two senior officials from the Department of Finance Canda, Len Farber and Brian Ernewein, who are expert in all of the matters you will be considering tonight in the context of Bill C-33.

Mr. McKay is in a position to stay with you longer this evening. He is well versed in the parliamentary dimensions of this proposed legislation. I understand that there has been particular interest in one provision of the bill especially, which has to do with the general anti-avoidance rule. If you allow me, I will focus my comments tonight on that aspect, leaving the discussion of the remainder of the bill to Mr. McKay and our officials.

The general anti-avoidance rule, commonly known to most people as GAAR, was enacted by Parliament in 1988 to provide general protection for the tax system against abusive tax avoidance behaviour which would undermine the fairness and the integrity of the tax system. In support of the provisions in Bill C-33, I would like to make eight quick points for your consideration.

First, the intention to move forward with this provision in budget 2004 was an intention that was clearly signalled in the budget documents at the time. I understand that there has been some question as to whether or not the government's intention with respect to GAAR was appropriately brought to the attention of parliamentarians and the public at the time of the 2004 budget. I have reviewed the documents, and I am quite satisfied that the notice was appropriate. In particular, with reference to the budget plan for that year, I would refer you to pages 153, 230, 323 and 345. They clearly signal the government's plan and intent with respect to this provision regarding GAAR.

Second, there is an issue of logic involved here that I would ask you to consider. There is no doubt that the general anti-avoidance rule applies to the Income Tax Act. The issue here is whether it also applies to the regulations promulgated under the Income Tax Act and to tax treaties into which Canada has entered. It would seem to me fundamentally illogical to say that avoidance behaviour is not permitted under the Income Tax Act, but that it is perfectly all right under regulations or a tax treaty. It seems to me there is a flaw in that logic to say that the rule applies only to the act, but that regulations and tax treaties are somehow exempt.

My third argument is that the government's intention with respect to the general anti-avoidance rule since 1988 has been absolutely clear. Since the inception of this rule some 17 years ago, there have been numerous public pronouncements by the Canada Revenue Agency or its predecessor organization, and many references by experts in the Department of Finance. Whenever the issue has been in the public domain, the intent of the government has been completely clear with not a shadow of ambiguity that in fact the rule applies to the act, to the regulations and to the treaties. A record of those public statements is certainly in the public domain and available for everyone to review.

My third point is there can be no argument that somehow the government's intention from 1988 was vague or ambiguous. It has been clear and consistent over those 17 years.

Fourth, the litigation on this subject has been sparse but, to the extent there has been legislation, there has been one case decided in 1997 that discussed GAAR in relation to tax treaties. It was not necessary in that case for the judge to make a deliberate ruling on the point, but in the obiter dicta in the case he speaks clearly about what he thought the government's intention would be. I will read the quotation from Judge Bowman in 1997:

It would be a surprising conclusion that Canada, or indeed, any of the countries with which it has tax treaties...had intentionally or inadvertently bargained away its right to deal with tax avoidance or tax evasion by residents of treaty countries in its own domestic tax law. It would be equally surprising if tax avoidance schemes that are susceptible of attack under either general anti-avoidance provisions or specific anti-avoidance rules, if carried out by Canadian residents, could be perpetrated with impunity by non-residents under the protection of a treaty. That is not what treaties are for.

The point being that, while that was in obiter in that particular judgment in 1997, it is clear from the views of Judge Bowman that, in his opinion, GAAR applies to tax treaties.

With respect to GAAR and its impact upon income tax regulations, and this is my fifth point, two lower court decisions have taken the view that GAAR did not apply to the regulations.

When those opinions were expressed by the lower court judges, this came as a complete surprise to the professional tax community as well as to policymakers and tax administrators. Again, it is important to note that these particular cases did not necessarily turn on the question of GAAR's application to the regulations. There were many other arguments in favour of the taxpayer in those particular cases. As I noted earlier, the only decision involving GAAR and treaties has been favourable to the Crown.

However, in order to protect the integrity and the fairness of the tax system and to eliminate any doubt regarding these various issues, the 2004 budget proposed legislative action not to change the law but, in our view, to clarify the long-standing, well-understood position that GAAR applies to abusive tax avoidance whether under the Income Tax Act, the income tax regulations or Canada's tax treaties. In any event, it is a clarifying provision in relation to these matters.

My sixth point has to do with the advice of the Auditor General. A number of the tax avoidance cases that are presently being challenged under the GAAR by the Canada Revenue Agency involve schemes, as identified by the Auditor General, in which Canadian residents utilized trusts constituted in treaty countries to shelter income and gains from Canadian taxation.

The Auditor General's report in 2001 identified 55 such cases involving some $800 million in capital gains. Since that report, the Canada Revenue Agency has identified approximately 150 additional cases. You can see that a significant amount of tax revenue is at stake here. It is not a light or frivolous matter.

I would also note that in the 2001 report by the Auditor General, she recommended that the appropriate legislative action should be taken.

Next is my seventh point, Mr. Chairman. Again, it goes to our fundamental argument that the law has been clear and has been consistently interpreted from the beginning, and this provision that is now before you is intended to clarify the situation and not to fundamentally change it ab initio .

I would make the point — and I know this goes to the issue that I know some senators are concerned with respect to retroactivity — a clarification of something that has existed from the beginning is not a change and, therefore, one can argue that we are not proposing here retroactivity, but merely greater clarity.

On the point about retroactivity, however, in 1995, the Standing Committee on Public Accounts recommended that the government introduce retroactive tax legislation in certain appropriate cases. It also recommended that the Department of Finance should develop explicit criteria to be followed in exercising the government's prerogative to introduce retroactive provisions.

In response to the Public Accounts Committee, the Department of Finance did deposit with the Clerk of the Senate a response to that committee report listing relevant criteria to be considered in making these difficult judgments about retroactivity.

Here are those criteria: The first is that the amendments reflect the long standing and well-known interpretation of the law by the Canada Revenue Agency. That is in fact the case in this particular matter. The second is that the amendments reflect a clear and well-known policy intent. That also is the case. The third is that the amendments prevent a windfall benefit to certain taxpayers. Again, that is the case and the facts we have before us. The fourth is that the amendments are necessary to preserve the stability of the government's revenue base. The fifth is to correct ambiguous or deficient provisions that are not in accordance with the object of the legislation.

I would submit that on the basis of those criteria, which are the established criteria for determining whether or not retroactivity is appropriate, they apply right down the list to the provisions that are before you tonight.

I would reinforce that, however, by saying that this is not an explicit case of retroactivity. This is clarification of something that has existed from the beginning, since 1988.

The final point, Mr. Chairman, is my eighth argument. There is a basic saving grace here for taxpayers. If there is no abusive avoidance behaviour, then the taxpayer has nothing to worry about. It is only where there is that behaviour that the action is proposed to be taken. If there is no abuse, there is no problem.

The Chairman: Thank you very much, minister. The chair will entertain questions from senators. I have no names on my list. Do honourable senators wish to pose questions to the minister?

Senator Cools: I would thank the minister for coming here today and for sitting through the inconvenience of a point of order. I belong to that group of people who happens to believe that in a Westminster system — and it is questionable now what this system really is — where real freedom and real liberty exist in the rules and in the use of the rules, not the outcome of votes.

The clause that you seem to be speaking to in most of your defence, obviously, is at page 73. I must apologize, minister. I did not know you were coming tonight. I am not properly prepared. It is at page 72 and 73, clause 60 of the bill, which amends the Income Tax Conventions Interpretation Act.

If you were to look at the top of page 73 you would see subsection (2) of clause 60. It is important to note how the bill itself is numbered. Clause 60 amends section 4.1 of the act. Clause 60(2) clearly states subsection (1) applies with respect to transactions entered into after September 12, 1988.

On the face of the drafting and scripting of the clause, it can be nothing else other than retroactive, which is the word that you were using. On its bare face, it says that subsection (1) applies with respect to transactions entered into years ago. That is clearly retroactive.

Perhaps I misunderstand you when you insist that this is a clarification. Perhaps you can explain to us here how that clause clarifies anything, and how it is not retrospective. I am saying ``retrospective'' because that is the language of the old literature.

Mr. Goodale: Senator, I appreciate your question. Our view is that, since September 12, 1988, the interpretation of that section has, in fact, been the interpretation applied consistently all through that period of time, that it is not new. It is simply clarifying the point in case there is any doubt.

One case would be relevant to this clause 60, and that one case is consistent with the government's interpretation. I mean one legal case that actually went to court, the outcome of which would be completely consistent with the government's interpretation. Therefore, it is fair to say that, in all of that period of time, the challenges have been few and far between and, to the extent that they have been adjudicated, the decisions have been consistent with our view that tax treaties are covered by the GAAR, and that that has been the case since September 12, 1988.

Senator Cools: I am speaking about the plain language of the bill as it is before us, because I have some serious problems with this. Perhaps I could turn to the most eminent authority for definition of ``retrospective'' or ``retroactivity.'' I would to turn to none other than — and I have Mr. Blackstone as well — an American, Theodore Sedgwick. He is one of the great American authorities on this.

In his book entitled A Treatise on the Rules which Govern the Interpretation and Construction of Statutory and Constitutional Law , on page 160 of a section of a chapter entitled, ``Retrospective or Retroactive Statutes,'' he says the following:

A statute which takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect to transactions or considerations already past, is to be deemed retrospective or retroactive. The power of a Legislature to pass laws having such an effect, has often been denied by philosophical writers.

Sedgwick's point refers to the making of a statute that is extinguishing rights and creating obligations and disabilities for matters already completed and concluded.

Would you care to comment on that, minister? I am not trying to put you into a difficult position. Parliament is not free.

Mr. Goodale: You are not, senator, and I appreciate your point.

I did not get the entire quote down, but as I understand it you are referring to Sedgwick's interpretation that something is retroactive or retrospective if it takes something new away under existing law.

Senator Cools: Not that it takes something away completely.

Mr. Goodale: Or imposes an obligation. It does something new.

Senator Cools: After something is already completed. You can take something away for the future. You can say, ``From now, there can be no more brown glasses,'' but this is going backwards.

Mr. Goodale: Senator, there are two difficulties with your argument. First, this is not new. This has been the interpretation of this section since 1988, since the day it came into effect. Second, it has only been challenged once to our knowledge in a case in 1997. In that case, the court ruled in favour of the government, although the case turned on other issues, the court's decision was consistent with ours, that this in fact has been the law since 1988, and therefore, no new obligation is being imposed and nothing is being taken away retroactively. This has always been the case since 1988.

The Chairman: Minister, I understand that you have another meeting at seven o'clock, and it is now 7:15. Could you please tell us how much time you have left for the committee so we do not impose on you?

Mr. Goodale: Mr. Chairman, I appreciate your other pressures today. If it would be convenient, I can stay until 7:30, but then I really do need to be off to that other obligation, if you would not mind.

The Chairman: I know that Senator Murray had a question that he wanted to ask. Do other honourable senators wish to put a question?

We will start with Senator Ferretti Barth.

[ Translation ]

Senator Ferretti Barth: Mr. Minister, there are three parts to Bill C-33. It really is an encyclopedic work. Is it really a good idea to further encumber the bill by making all of these changes? This is a bill that touches on many different areas. Is it customary to proceed in this manner?

[ English ]

Mr. Goodale: Senator, as a lawyer and as a representative of the Department of Finance, I would never call our work cluttered. I would call it multi-dimensional and complex. The tradition with respect to budget legislation — and let me be very clear, I am confining myself to 2004, not the budget of 2005, because the legislation before us is 2004 — is that the main policy oriented provisions announced in the budget are included in the first budget implementation bill following the budget speech. That bill includes the major policy initiatives. That bill usually stimulates a second mini- budget debate when it is going through Parliament.

Following that first budget bill, later on in the parliamentary calendar, usually two or three other technical bills are introduced that implement a lot of the nitty-gritty details that are required in legislation. They do include a broad cross-section of individual items, and as you say, sometimes they do not all seem to relate to the same subject matter.

This one primarily relates to the Income Tax Act, but income tax in very broad scope.

Instead of presenting one bill for each individual item, we have grouped them together in an omnibus bill because that is just the most efficient way to bring matters before Parliament. However, it does mean that a broad spectrum of items is encompassed in one bill.

Senator Murray: Minister, I will put forward two or three matters because you only have a few minutes. You can deal with all of them in one reply.

First, let me tell you what I know you already know. Some may not appreciate it at the moment, but there are others, such as the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants who take a radically different view of this provision than the view that you and your officials put forward at the House of Commons committee.

On the question of whether the GAAR applies to regulations under the Income Tax Act, I hear you saying that it sounds illogical to say that it does not. This layman has some sympathy with that point of view. However, you suggest that the court found, in those two cases, that it did not apply to the regulations. However, I would suggest that the court did not really say that. There were other considerations. It seems to me that you should have appealed. Instead of appealing those two decisions, you are proposing retroactive legislation.

Second, with regards to the question of whether the GAAR applies to tax treaties, as you yourself said, there was one obiter reference by a judge. I am informed, and it is somewhere in the notes that have been sent to us, that, fairly recently, two other cases were in the legal system on the question whether the GAAR applied to tax treaties. They were settled on the courthouse steps. They did not come to a litigated conclusion. On that basis, this suspicious layman tends to think that you were afraid of losing.

Mr. Goodale: No.

Senator Murray: Therefore, you have propose a provision which, if passed, will be retroactive 17 years.

Third, on the question of your own guidelines, the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants has done an analysis, guideline by guideline, and states quite categorically that this retroactive legislation does not even respect your own guidelines. They are not here to argue that, and I am not in a position to argue all the details; but I simply want to place on the record that that is their position on the guidelines on the treaties and on the regulations.

Why did you not appeal on the regulations? Why did you not litigate on the treaties? Why are you making the provision retroactive 17 years?

With some study, I, for one, would be perhaps prepared to support a provision that was effective from this day forward, or even from the date of the 2004 budget forward. Seventeen years retroactive, minister, is quite a stretch. I find the argument that it is not retroactive, merely a clarification, to be a stretch.

The Canada Revenue Agency can say what they may have said — and I do not know what they have said. Perhaps I should make it clear that I am not a taxpayer who may be affected by these provisions. I am not in that league at all.

Senator Stratton: I am glad you made that clear.

Senator Murray: The CRA can say what it likes. Taxpayers have a right to go to court on these matters. I think it is an abuse for Parliament to cut them off at the pass, as it were, and legislate back to 1988. That is the essence of my objection, and I think it is a principled objection, to this provision.

Mr. Goodale: Senator Murray, thank you for your comments. First, I would argue strenuously, for all of the reasons that I mentioned earlier tonight, that what we are dealing with here is not retroactivity per se but the clarification of something that already exists.

Second, I would make the argument, as I have done, that if you are of the view that this is retroactive, then flowing from the advice of the Public Accounts Committee in 1995 and the criteria tabled with the Clerk of the Senate in response to the Public Accounts Committee, the criteria that are in the public domain are perfectly suited to the circumstances with which we are dealing, and this proposal fits squarely within those criteria.

Third, I will explain why we did not appeal those two cases. The reason was, as I said in my remarks but perhaps not clearly enough, that those cases turned on several arguments in favour of the taxpayer. The issue of whether or not the GAAR applies was one of the things that the judges talked about; but there were several other arguments in favour of the taxpayer that made an appeal on the one narrow point about the GAAR rather irrelevant. The court decided, with regard to the GAAR and, say, three or four other reasons, to find in favour of the taxpayer. Therefore, even on appeal, if the court had agreed with us on GAAR, they still would have ruled in favour of the taxpayer for those other three, four or five reasons.

Perhaps out of an abundance of caution, we should have appealed narrowly the GAAR point. That would not have affected the outcome of those cases for those taxpayers because they won on all the other counts.

With respect to the cases that were settled, I would point out that they were settled only after the court had ruled in our favour, granted, in obiter, in 1997, and after this budget provision was in the public domain. As you say, they were quite recent cases.

There were many public signals about what the courts were saying and what the government was saying by way of draft legislation that obviously contributed to the issue of settlement.

You said that, as a layman — and I think you do yourself a disservice, Senator Murray — you might instinctively be inclined to agree with my logic, the logic being that, if the anti-avoidance rules apply to the tax act, then surely they must also apply to the regulations and to tax treaties, because it would be illogical to say you cannot engage in abusive behaviour under the act, but you can under the regulations and you can under a tax treaty. That logic commends itself to me, and you say that, as a layman, it commends itself to you.

I am reminded of an old standard in the common law about how you decide what is a rational judgment. As I believe the courts have said, you put yourself in the position of the ordinary man on the Clapham omnibus and look at how he would assess a situation. I think that man would say, ``If it applies to the act, then it must also, by logic, apply to the regulations and the treaty. Anything else would be illogical.''

I would also note that we do have the Auditor General's advice, where she expresses concern about what she sees as a significant avoidance problem. Her recommendation was that this be fixed by legislation. I think that advice in 2001 is not given lightly, and it is a matter that I believe does require the attention of Parliament to avoid a potentially abusive situation.

Finally, on your last point where you argue persuasively and correctly that taxpayers have the right to go to court and challenge the rulings or the opinions of the CRA, indeed, they have that right. Nothing in this proposed legislation would take that right away. The saving grace for the taxpayer is, if the court says there is no abuse here, this is not an abusive avoidance situation, as was the case in those other legal matters that we referred to earlier, then there is no problem. If there has been no attempt on the part of the taxpayer to engage in some kind of abusive conduct, then there is nothing that the taxpayer need worry about because he or she is then perfectly within the law.

Senator Murray: All those arguments apply with equal force to bringing in your redefinition, because that is what it is, as of the passage of this bill or as of the date of the 2004 budget. Why, then, if it is not retroactive, are you deeming it in both cases to have been effective as of September 12, 1988, 17 years ago?

Mr. Goodale: For the simple reason, Senator Murray, that to take the position that you describe might lead others, including lawyers and the courts, to conclude that we are implying a change here. Our point is that this is not a change. This is the way the law has been since 1988. If we were to say that this is a change going forward, then, by implication, you leave the impression that there was something different in place from 1988 until now, which is not our position. Our position is that this has always been the state of the law.

The Chairman: Since it is now after 7:30, and there are no further questions, on behalf of the committee, Mr. Minister, I would thank you for your input.

Mr. Goodale: Thank you very much Mr. Chairman, and might I say that those mukluks are occupying a place of great distinction in my office. I thank you for your courtesy.

The Chairman: Do honourable senators have questions for Mr. McKay and the departmental officials respecting Bill C-33?

Senator Ringuette: The minister mentioned that the Auditor General's of 2001 stated that 55 such cases have been identified and added that Revenue Canada has uncovered another 150 or more cases. Are those cases of abuse or of avoidance?

Hon. John McKay, P.C., M.P., Parliamentary Secretary to the Minister of Finance: These would all be identified as avoidance cases, yes.

Mr. Brian Ernewein, Director, Tax Legislation Division, Tax Policy Branch, Department of Finance Canada: If I may, the cases in question, as I understand it, involve the use of offshore trusts or what are asserted to be offshore trusts. I believe Revenue Canada is challenging these transactions on the basis that they do not work technically, that is, one does not need to get to consideration of the general anti-avoidance rule, but, if they are found to work technically, they would be challenging or are challenging them also on the ground that they represent an abuse of the act or of the treaties read together with the act.

Senator Ringuette: Could you identify for this committee the dates on which these offshore trusts were put in place? I do not want any names.

Mr. McKay: I do not think we can do that.

Senator Ringuette: There is an issue here. You have told this committee that the department has identified 150 offshore cases that may be technical, or may be abusive situations since 1988. It is not a question of privacy to give the dates of these cases. I do not want the names of the trusts. I do not want to know where they are. I merely want to see the agenda, because if there is a relationship between when these offshore trusts were put in place in 1988 and the current legislation, I want to know about it.

Mr. McKay: Is what you are looking for the identified number of cases in, say, the year 1989, the year 1990, and so on?

Senator Ringuette: I am not asking for the date the department identified them, but, rather, the date the trusts were initiated.

Mr. McKay: The trusts themselves?

Senator Ringuette: If the department has identified 150 cases, they have full and complete knowledge of those cases. You cannot come in front of a parliamentary committee and say that you have identified X number of cases without backing. I do not want private information. I want dates, statistics. That is all I want.

Senator Cools: Chairman, if I may interject on a point of order that may be of assistance to Mr. McKay.

Senator Ringuette: It is not a privacy issue. I do not want anything except dates.

Mr. Len Farber, General Director, Assistant Deputy Minister's Office, Tax Policy Branch, Department of Finance Canada : We do not have specific dates for each one of the cases that would have been set up, but in the Auditor General's Report of 2001, it was claimed that they had uncovered 55 cases. One can only presume they were preceding 2001 and would only be relevant within the period of reassessment, which would be, in most cases, four years. One can reasonably assume that those cases are from 1996, 1997 on.

The other 155 cases referred to were cases that were discovered by the CRA in their normal course of audits. We can only assume that succeeds 2001, because it is after the AG's report. The Auditor General identifies the issue in 2001 with 55 cases, which could span back up to five years. The agency discovered another 155 cases which could go back that far, but more likely would be prospective to 2001.

I do not know if that adds meaning to your consideration. I do not believe there are cases within those that date back to 1988, unless a case was opened and was subject to waivers and was just waiting for something to happen to it. That is a possibility, I would not say it is not, but by and large with regard to the question you have asked, I think that would be the time frame.

Senator Ringuette: The Department of Finance put this bill together with the help of the Department of Justice. What was the Department of Justice's position in regards to the position regarding retroactivity of 17 years?

Mr. McKay: We could not proceed without the Department of Justice signoff on this bill. This is in part put forward indirectly by the Department of Justice as well.

Senator Ringuette: The Department of Justice concurred with the Department of Finance to proceed with this bill, is that correct?

Mr. McKay: Yes.

Senator Day: Senator Murray, during his presentation earlier, referred to the position of the Canadian Bar Association. He mentioned the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants. I have checked to see what comments were made in the House of Commons during its review and I found nothing. I understand the joint committee's position was made clear to the minister a year or more ago. Has anything been generated by way of reply to their position by either the Department of Justice or Revenue Canada that would be helpful to us?

Mr. Ernewein: Yes, I believe Senator Murray said something to the effect that the Joint Committee on Taxation of the Canadian Bar Association and Canadian Institute of Chartered Accountants take a radically different view of the government proposal.

It is not true in the sense that they do not dispute that it has been the government's position that the GAAR has application to tax treaties. There are many articles we could cite in which they identify that as being the government's position. Some practitioners go further and challenge that position. They would argue that there is a question as to the application of the GAAR to tax treaties absent these amendments. I want to be clear on that point.

With respect to the submission that the joint committee has made to the Minister of Finance, there has been no any formal response to that of which I am aware. However, I was personally involved in discussions with the joint committee on this before the introduction of the bill last December. I think it is fair to say that we agree to disagree on the application of the retroactive guidelines, if they were considered applicable. We have reviewed that with them and made the arguments that the minister made today. Our view is that the change satisfies or would satisfy the criteria.

Senator Day: You indicated that this joint committee did not dispute the fact that the government's position has been clear from the beginning on this. Is that what you said?

Mr. Ernewein: The discussions we had were mostly about the application of the guidelines to the rules. I do not recall specifically if there was much discussion of whether they thought we did or did not hold this view. I operate on the view that they would assume that to be clear, but if there were any debate about that, we could review some of the literature. It think that would show that the practitioners acknowledge that it was the position of Revenue Canada, now the Canada Revenue Agency, and the Department of Finance that the GAAR should apply to treaties.

Mr. McKay: Perhaps it would be of assistance to reference a 2001 Canadian Tax Journal article entitled ``Tax Sparring: Good Intentions, Unintended Results.'' It goes through a number of points, which I will not elaborate on, but the second point is: ...the CCRA could attempt to apply the general anti-avoidance rule (GAAR) in section 245 of the Act. The third point is: ...CCRA could seek to attack abusive schemes on some other basis, such as interpretation of the treaty provisions.

Mr. Ernewein said it well when he said that there may be some discussion in the tax community about this issue, but the position of the government has always been abundantly clear.

Senator Day: You indicate you could do research. Do you have anything you could share with us other than this quotation that Mr. McKay has just referred to us? Do you have any other material that would help us understand what the industry has said? When I say ``industry,'' I mean advisers, lawyers or accountants. Have any statements been made by the agency over the years so we would know what notice was given to the public on this and what their understanding was?

Mr. McKay: I have in my hand two pages of practitioners' comments going back to 1988, 1991, 1993, 1997, 2000, 2001 and 2003. It is not as if this has not been in the domain, if you will. I would not describe a conference of tax lawyers as the public domain, but certainly it has been in the domain of those who are seized with this particular issue. I am happy to make those available to honourable senators if they think they would be useful.

Senator Day: Perhaps you could give a copy to the clerk and she could distribute them.

Mr. McKay: We will add to that our government statements over the parallel period of time.

The Chairman: Senator Day, do you object if Senator Murray poses a supplementary on the questions you are raising?

Senator Day: No.

Senator Murray: This is perhaps not quite a supplementary, but I will be brief. I presume we will be hearing from the Joint Committee on Taxation of the Canadian Bar Association and the Canadian Institute of Chartered Accountants.

The Chairman: Senator Austin had indicated in the chamber that he hoped the committee would hear from them.

Senator Murray: They can speak for themselves, but on the issue of how much they agree with whether this has been the government's position from time immemorial or at least since 1988, they say in their brief:

The issue addressed by the Proposal is in no way hidden or unexpected, and has been widely discussed in public essentially since the introduction of GAAR. It is manifestly unfair to leave taxpayers to rely on the original language for many years, even though Finance was aware of the issue, and then to introduce a retroactive amendment.

Earlier in their brief, they state:

Court decisions make it clear that the Proposal is not a ``clarification'' of the law, contrary to the statements in the Budget materials. Rather, the Proposal materially expands the scope of one of the most important and far- reaching provisions of the Act.

There is more. As I say, they can speak for themselves when they get here.

Mr. McKay: Obviously the issue identified by the senator turns on the presumption of a retroactive amendment, and that is not of course our position. This has been applied since 1988. Whether the tax practitioner community agrees with that is another issue, but this is not a retroactive amendment.

Senator Day: During second reading of this bill in the Senate there was reference to a term that I did not fully understand. Perhaps you could assist. Since we are dealing with the act and international treaties and regulations, there was some reference to a treaty paramountcy clause. Can you help with that or should I ask someone else to explain that term?

Mr. McKay: Senator, you and I went to the same law school, and I certainly would not want to comment on paramountcy generally in the concept of law. Do either of you feel that we should respond to the senator?

Senator Day: Speculation would not help us, but if you have some specific information to share, that would be helpful.

Mr. McKay: That is a little bit beyond us.

Senator Day: It is certainly beyond me.

Senator Ringuette: The Auditor General identified 55 cases and Revenue Canada 150, making at total of 205 identified cases. The minister has talked about one case where the judgment was favourable to the Crown. Senator Murray has flagged two other cases that were settled out of court. That is three out of a of 205. There are 202 potential cases out there.

Mr. McKay: On your numbers that sounds like a logical conclusion. I am not in any position to comment on the stage of litigation of any one of those cases.

Senator Ringuette: Is the department aware of any litigation in addition to the case mentioned by the minister and the two flagged by Senator Murray?

Mr. McKay: The only information we can put on the public record relates to those cases which have gone to court.

The Chairman: A case went to the Supreme Court of Canada in March, just last month.

Senator Ringuette: That is a fourth one. Is it the case that you are aware that some are in process and that you cannot discuss those publicly, or is it that there is none to the department's knowledge?

Mr. Farber: Of the 155 cases that you are referring to, those cases are not before the courts yet. To the extent that there are issues involved, the application of GAAR is only one of the issues that may or may not end up in the courts. As my colleague indicated earlier, some of these cases may fail on technical grounds. As the minister indicated as well, if there is no abuse in these cases, what we are talking about here is not at issue either. They are not before the courts yet, so we do not know anything about them. We cannot give you any information other than information that is on the public record. Once the details of a case are on the public record, we will know more about the case, and we will see how it develops.

Senator Downe: If this contentious clause of the bill that we discussed in detail does not pass, is there a projection of how much revenue will be lost to the government?

Mr. McKay: My recollection is that about $800 million is in play.

Senator Downe: That is $800 million if the GAAR section of the bill does not pass.

Mr. McKay: To my knowledge, that is the case.

Senator Downe: If it is already the law and not retroactive, why can we not collect that money now?

Mr. McKay: We can still take the procedures that are available to us now, but this is a point of clarification.

Senator Downe: When this went to cabinet committee before it was approved for government legislation, I assume that a financial projection was in the proposal. Therefore, I am assuming — not knowing — that the cabinet was advised, but we have just been told if this is not passed, the government could lose $800 million.

Mr. McKay: I assume that, in a memorandum to cabinet, that material would be before cabinet.

Senator Downe: On another issue in the same bill, and you may or may not be able to answer this, regarding the air traveler security charge, it is indicated that it has been already reduced by 40 per cent. I am referring to the minister's statement this evening that, based on updated revenue and expenditure projection, the 2004 budget proposed a further reduction.

Could you table with this committee the projected revenue and expenditures? I am particularly interested in the expenditures. As you know, the airline industry makes the argument that this tax has been a tremendous burden and that the government has spent nowhere near the revenue raised since it was implemented. Since it was implemented, how much has been spent on security, and where was it spent? If no one has that information now, you can send it to me.

Mr. McKay: You ask a legitimate question. Revenues have exceeded expenditures to date. The expenditures have not rolled out as quickly as the government anticipated, hence the rather dramatic reductions in the fees themselves. However, I have someone here who can be more specific.

Mr. Geoff Truman, Senior Tax Policy Officer, Sales Tax Division, Tax Policy Branch, Department of Finance Canada: I can point you to a couple of sources of information that can help sort out some of these numbers.

When the initiative was announced in Budget 2001, the government clearly set out that the commitment to balance revenues and expenditures would be undertaken over a five-year planning period or time frame.

Senator Downe: There was no planning done at the time, though. The number was picked out of thin air, basically, on an assumption of what would be required.

Mr. Truman: There was the framework funding of $2.2 billion set out in Budget 2001, developed in agreement with Transport Canada as to what their estimate would be for installing the security systems at the 89 designated airports across Canada.

Senator Downe: My understanding was Transport Canada did not agree at the time and that it was the Department of Finance that came up with the figure. However, we can check that out.

Mr. Truman: Since that time there have been three reviews of the charge presented in successive budgets, 2003, 2004 and 2005. Each of those sets out an updated revenue projection for the charge and takes into account revised expenditure information based on the amounts reported to date.

As well, you will find that the Canadian Air Transport Security Authority, CATSA, publishes an annual report. Their second report was published last fall. The Auditor General was requested to undertake an audit of revenues and expenses, and that first audit report was published in November of last year.

Certainly, we anticipated the surplus of revenue over expenditures in the early years while CATSA was ramping up its operating and capital capacity and that to be balanced out over the years as the situation grew to maturity.

Senator Cools: I may be a little dense, because I do not understand. Could you explain to me again why you believe this matter can be resolved simply by the department or the minister asserting a position that in this bill before us the material clauses are for clarification and not retrospective? I do not see what is being clarified at all. I fail to follow just the plain use of the English language. I am having difficulty. Maybe this is the era. Marriage is only a name. It is all in a name, so if you name it something else, you can ignore hundreds of years of constitutional law and practice.

Senator Murray: Mr. McKay supports your view on that.

Senator Cools: It is all in the name. It is legal and proper because we say so. Your position is not supported by any constitutional authority, only by what you say.

Mr. McKay: Which position is that, though?

Senator Cools: I want you to know that I go through this in a lot of committees. You ask the Department of Justice, ``What is the authority for this measure?'' They may say, ``It is so because we say it is. It is legal and proper. It is parliamentary. We say so. Take our word for it. You need not worry because, if you not take our word for it, we have a whole host of members who will vote you down. It matters not whether they know the issues. They will vote you down.''

You can comment on any of those issues, Mr. McKay. Just remember: Marriage is all in a name. Remember, it is all in a name. It is all human rights now. There is a new name. A few months ago we had one set of names. Now we have a new set of names. The most recent name is ``human rights.'' It is all in a name. It is a human right now. Language changes too fast for me. I am not young as I used to be. I cannot run as fast.

Mr. McKay: Here is a new word for you. It is ``retroGAAR.'' That is what we are dealing with here.

Senator Cools: I do not know that word.

Mr. McKay: Let us move to the point of whether this is a point of clarification on retroGAAR.

Senator Cools: If you can convince me, you will be a lucky man. I wish you could, because my nose is a little bit out of joint because I had wanted more time to prepare for this meeting tonight. I was unable to get into the concrete issues in the cases and so on, but I did read up on the parliamentary history and the constitutional history of retrospection or retroactivity. I do not understand how you can just say, ``If we call it this, then we can stick to that argument. It will be this. It does not matter if it is that. We will stick to this argument, and the mere fact we say it is this, then it is this and it does not matter if it is that.'' If you say ``It is a sunrise,'' maybe it will be. If you repeat it often enough, it may become true, too.

Mr. McKay: I was rather hoping to get to an answer some time. I do not want to get into the general theory of relativity of language. We have a point of clarification. The point of clarification is usually needed when reasonably straightforward, honest people have, if you will, disagreements about a point or a word, if you will. What we have here is a dispute as to whether the general anti-avoidance rules apply to when they were intended to apply back in 1988.

There is a kind of a process by which you go about clarifying that for the purposes of law, and it was set out by the Standing Committee on Public Accounts in 1995. When they set that forward, because they knew these points of ambiguity or these points of dispute might come up, they said that this is the way you go about clarifying a point.

One, the amendment has to reflect a long-standing and well-known interpretation of the law by the Canada Revenue Agency. Therefore, we have tabled our interpretations going back to 1988 and flagged each and every year. I think point one is made.

Two, the amendment reflects a clear and well-known policy intent. I think the minister made a pretty clear and cogent argument as to the illogicality of the opposite view.

Three, the amendment prevents a windfall benefit to certain taxpayers, and we are dealing with a certain micro set of taxpayers who would potentially benefit quite substantially.

Four, the amendment is necessary to preserve the stability of the government's revenue base. Part of preserving the government's revenue base has to be that you treat all taxpayers equally and fairly.

Five, the amendment will correct ambiguous or deficient provisions that were not in accordance of the object of the act. Again, I go back to the minister's position: It is completely illogical to think that you would have an Income Tax Act, which is about three times as thick as my budget here, and not anticipate that the GAAR would not apply to the regulations and would not apply to treaties and would not apply to conventions. It just does not make sense.

I think that we are, on all five points, clarifying a point. We are not making up words. That is, in fact, the way you have to go about areas of ambiguity which require clarification.

Senator Cools: Mr. McKay, you can say a lot of things, but what I have heard you say is, because these sections apply to a very privileged group of people —

Mr. McKay: I did not say privileged. I said a ``micro set.''

Senator Cools: I am hearing you say that it is all right to do it because nobody is going to complain.

Mr. McKay: I think that is a point of interpretation.

Senator Cools: No one can say it is interpretation. Maybe it is clarification. Who knows? We could go on forever.

I just think, Mr. McKay, that how we are proceeding with this bill, and this manner of presenting legislation, is a ghastly precedent to set. The business of reaching back into the past like this in a statute is not something that Parliament should entertain lightly. It frightens me because this government has such a history of introducing bad legislation and ramming it through. They do not have to worry, because next year they can change their minds, right?

Three or four years ago, a bill was pushed down our throats — I know because I voted against it — linking parliamentarians' salary to that of judges. I said at the time it was unconstitutional.

The Chairman: We are dealing with Bill C-33.

Senator Cools: I know the difference. I can count. I know the difference between 30 and 33.

Senator Stratton: Do you have a question?

Senator Cools: It is not your business.

Senator Stratton: Yes, it is.

Senator Cools: No, I have got news for you. I can have an exchange with the witness that does not have to be in the form of a question. You make this up as you go along.

I can ask him for comment. It is a debate. It is not a question-and-answer session. It is a debate.

I am asking you, minister, if you could help me understand whether or not this is a proper way for any government to ask a Parliament to vote in the affirmative on proposed legislation.

The Chairman: Mr. McKay, you have the floor, before I introduce the next senator, the newest senator to this committee.

Mr. McKay: I would just point out to the honourable senator and senators in the committee that this is a fairly rare procedure, but it has to exist in the context of legislative initiatives. I went through the five criteria by which you proceed in this kind of an environment where clarification is required. I think that the government has proceeded quite diligently in proceeding in this fashion.

Senator Cools: I am impressed; but if you would describe this as diligent, then it would have to be one of the few things that this government has been diligent about recently.

Mr. McKay: Better diligent some time than never at all.

Senator Cools: I know this government very well.

The Chairman: Thank you for that, Mr. McKay.

Senator Cools: I was in that caucus before any of you guys. You are all newcomers.

The Chairman: I would now, honourable senators, introduce the newest member of the Standing Senate Committee on National Finance, Senator Grant Mitchell, and I would welcome him to the committee. This will be his first opportunity to pose a question. Senator Mitchell, you have the floor.

Senator Mitchell: Thank you very much. I waited a long time to become a senator, and it seems like I have waited almost as long to get to my first question. Thank you, Mr. Chairman.

What I know about politics, Mr. Farber, is that it involves interests, and it usually involves competing interests. This bill addresses many interests in addition to just the interests that are affected by this particular GAAR provision. It seems to me that the interests affected by this provision would be large corporations, corporate interests, people with a great deal of money.

When I look through the bill, I see that it also addresses a variety of other interests. One is to help people who care for people with disabilities; another one would be to help small business by increasing the deduction limit to $300,000 by an accelerated rate. It also, and this is profound to me because I had a father who was in the military, contains proposals that will assist or be of great advantage tax-wise to members of the Armed Forces who have been posted abroad.

It seems to me that, if we delay this bill through protracted discussion, ultimately we will send it back to the House. Not only will it be delayed for that period of time, but in the event that an election is called, it may be delayed for a long period of time. As well, the timing of this bill is such that the advantage to these other interests, which I have just mentioned, among others, will certainly be impinged upon by the advantage that would be gained by these larger interests in the event that this bill fails or is delayed. Is that the case? Is that what this is about?

Mr. McKay: I think that is a fair comment.

Senator Mitchell: Thank you. My point is: At what point do we get to the nitty gritty of this, which is, whose interests are we supporting on the one hand, and whose interests are we denying or disadvantaging on the other hand? I would like to help the Armed Forces; I would really like to help people who help people who are disabled; and I would really like to help small business. If I were a Conservative, I would think small business would be particularly important to me.

Senator Cools: I do not understand, Mr. Chairman, where is the delay? The bill just got to the committee five minutes ago. I do not understand what delay is being mentioned.

The Chairman: Mr. McKay, did you want to make a further comment?

Mr. McKay: No. I think the senator has hit the nail on the head. The significance of further delay and possible amendments and things of that nature, I do not think in the current political environment can be understated.

Senator Mitchell: The tax time for 2004 is just about up.

Mr. McKay: That is an issue as well, and certainly for my friends on either side of me, that is of great significance. However, other provisions that you have identified will be lost if things do not move forward as we hope they will tonight.

The Chairman: Mr. McKay, you are certainly no stranger to this committee, and we thank you very much for coming today. I would also thank our other witnesses for being here.

There being no other names on our list, I wish to adjourn our discussions on Bill C-33.

Senator Cools: You cannot adjourn; you can move on.

The Chairman: Is it agreed, honourable senators, to move to clause-by-clause consideration of Bill C-30, to amend the Parliament of Canada Act and the Salaries Act and to make consequential amendments to other acts?

Hon. Senators: Agreed.

The Chairman: Carried.

Shall the title stand postponed?

Hon. Senators: Agreed.

The Chairman: Shall clause 1 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 2 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 3 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 4 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 5 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 6 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 7 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 8 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 9 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 10 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 11 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 12 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 13 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 14 carry?

Hon. Senators: Agreed.

The Chairman: Shall clause 15 carry?

Senator Cools: On a point of order. Mr. Chairman, it is in order to ask for the yeas and nays, rather than to ask if it is carried. It is rather difficult to follow.

Senator Stratton: There are no nays so far. Please continue, Mr. Chairman.

The Chairman: Shall clause 16 carry?

Senator Cools: Nay.