Liberal MP recalls MPs to save tax cut, Finance Department claims 'tax loophole' for big business

Liberal MP Wayne Easter, chair of the Commons finance committee, recalled the panel into a rare emergency session to defend a small business tax cut Friday. The Department of Finance questioned the validity of a tax bill already passed into law.

"I am one who believes Parliament is supreme," said Easter, according to Blackblock's. "Parliament is above cabinet, it's above the Department of Finance. We can't allow that to be undermined," Easter added.

The Senate on June 22 passed into law Bill C-208, an act to amend the income tax act, promising an estimated $178 million-a-year tax cut for farmers, fishing corporations and small businesses.

The bill allows net profits on the sale of the property to family members to be taxed at a 25 percent capital gains rate instead of the current 45 percent taxable dividend rate. The bill became law on June 29 with Royal Assent. The Finance Department on June 30 issued a news release questioning whether it was valid since "it does not include an application date" and said cabinet would try to amend it.

"Parliament is supreme," said Easter. "The debate on Bill C-208 is done. When a bill receives Royal Assent as this bill did, it comes into effect on that date."

Easter added: "Accountants have told us this is fairly airtight. I have a lot of respect for the officials in the finance department, but when we said, okay if you want amendments to the bill, give us some amendments if you want Parliament to close what you perceive as some loophole, they didn’t submit any."

"I have never seen this," he said. "It is quite unusual for a finance committee chair to call a meeting like this, but I think it is necessary to do so."

Hearings are scheduled for Tuesday, and the committee will summon Department of Finance managers to explain themselves. Now-retired Liberal MP Peter Milliken, former four-term Commons Speaker, will also testify on Parliament's right to overrule departments in amending laws.

Conservative MP Larry Maguire, the sponsor of the bill, earlier called the Finance Department news release a "ruse" to reopen a bill staff opposed in the first place. "They don't need to reopen the bill," said Maguire. "The idea that the bill is going to destroy the tax system is just ludicrous. I didn’t know the government hated small business that much."

"It has been passed by the House and Senate," he said. "Parliament has spoken and it is the law. The only one to oppose it was the Department of Finance."

Department officials in March 11 testimony at the Commons finance committee claimed the bill could be manipulated for tax avoidance by large corporations. "One would want to be careful," said Shawn Porter, associate assistant deputy finance minister.