Chrystia Freeland to testify on cabinet opposition to tax bill, Blanchet calls out ‘ploy’ to ‘circumvent’ Parliament

"Bill C-208 was voted on by Parliament and received Royal Assent," Freeland said in a statement, according to Blacklock's. "The law is the law." The bill was signed into law on June 29.

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. Freeland said Monday her department would still attempt "technical amendments" at a future date but did not question the validity of the tax cut. "It has become part of Canada's Income Tax Act," she said: "The changes contained in this legislation now apply in law."

"We've heard already from stakeholders with suggestions," said Trevor McGowan, director general of tax policy at the finance department. McGowan said the department will "shortly detail proposed amendments."

"It's difficult to provide a timeline," he added.

Freeland was called to testify Tuesday to explain cabinet's opposition to the tax bill. "We'd like to know who made the decision on that press announcement," said Conservative MP Pat Kelly. Kelly sponsored a motion adopted by the finance committee to summon Minister Freeland for testimony within fourteen days.

Conservative MP Ed Fast said cabinet attempts to contradict the tax bill were unprecedented. "I've been a member of the House for close to sixteen years now," said Fast. "I've never seen a government defy the will of Parliament before. There is no precedent for this kind of action being taken."

The Senate on June 22 passed Bill C-208 An Act To Amend The Income Tax Act promising a tax cut on the sale of family-owned 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, a measure worth $178 million a year by Budget Office estimate.

The difference represents six-figure savings to family-run businesses, the Canadian Federation of Agriculture yesterday told the Commons finance committee.

"Bill C-208's passage ensures that each of the families that owns one of the 50,000 incorporated family farms in Canada can finally access the lifetime capital gains treatment, avoiding potentially hundreds of thousands of dollars for this inequity to persist," testified Mary Robinson, president of the Federation.

The reversal came ahead of hearings today by the Commons finance committee at the call of Liberal MP Wayne Easter, chair of the committee. Easter in an earlier interview said the Department of Finance could not contradict a bill passed by Parliament. "Parliament is supreme," said Easter: "The debate on Bill C-208 is done. When a bill received Royal Assent as this bill did, it comes into effect on that date."

"Accountants have told us this is fairly airtight," he continued, "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."

The bill passed the Commons and Senate over cabinet protests it would permit tax avoidance by large corporations, not family-run farms and small businesses. 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.

However, Bloc Quebecois leader Yves-Francois Blanchet said Monday the measure plainly corrected an anomaly in the Tax Act. "A minority government cannot use a twisted ploy to circumvent the will of Parliament," said Blanchet. "This is unheard of. The law is deemed to come into force upon Royal Assent."

Conservative MP Larry Maguire, a sponsor of Bill C-208, said the measure could save family businesses hundreds of thousands in federal taxes. "It is completely unfair that it is more financially advantageous for a parent to sell their farm or small business to an absolute stranger than it is to their own children," Maguire earlier told the Commons. "I think we can all agree that it is completely unfair."