Quebec takes issue with Bank Act changes in Morneau's Bill C-29

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Finance Minister Bill Morneau's latest budget bill is coming under heavy fire in the Senate, and a movement is afoot to amend the legislation against the government's wishes.

Bill C-29 is facing opposition on two fronts: First, doctors – and now a leading tax expert – are strongly opposed to a small-business deduction change that would raise $70-million in new tax revenue from professionals who work in group structures.

And now Quebec is weighing in on another section that would change the Bank Act to assert that Ottawa has the exclusive jurisdiction over Canada's banking sector. Quebec claims this violates provincial constitutional powers over consumer protection in areas such as the regulation of credit card fees. The province is urging Senators to remove the entire section from the bill. Premier Philippe Couillard is expected to raise the issue Friday when he meets with Prime Minister Justin Trudeau as part of a first ministers meeting.

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Senior Quebec ministers wrote to Mr. Morneau last week outlining their objections.

Jean-Marc Fournier, Quebec's Minister of Canadian Affairs, said in an interview that the province is prepared to take legal action.

"It's the banks who will have more rights than the consumer," Mr. Fournier said in explaining Quebec's concerns. "We cannot accept that the federal government decides to change the constitution just by making a law. We will not accept it."

The federal Finance Minister rejected those concerns this week when he appeared before the Senate's National Finance committee.

"We view the consumer protections we're putting in as an enhancement of consumer protections across this country," he said. "By asserting the federal supremacy in this regard, we're ensuring that those consumer protections stay appropriate and do protect consumers in the way we're trying to do across the country consistently over time."

Many Senators appear ready to take up Quebec's concerns, as efforts are under way to amend the bill against Mr. Morneau's wishes.

Independent Senator André Pratte said he shares Quebec's objections and is actively lobbying his fellow Senators across party lines in an effort to secure enough votes to amend the bill. He thinks he's getting close.

"I'm getting quite a lot of support I think from Conservatives, Liberals and independents," he said in an interview. He said the Bank Act provisions should be studied separately as a stand-alone bill.

Peter Harder, the government's representative in the Senate, urged senators Thursday to respect the will of the elected House of Commons. He argued that amending a budget bill would go beyond the Senate's traditional role and recommended a special committee study of the banking issue as an alternative. No final decision was made by the Senate on the issue.

Meanwhile, another tax change in the bill related to the small-business deduction continues to attract attention in the Senate.

The government has said it is changing the tax rules to prevent professionals such as lawyers or accountants who work together in one corporate structure from claiming to each be small businesses for the purposes of a tax break. Doctors have argued this puts medical specialists working in group facilities – often at hospitals – at a disadvantage over doctors who work in stand-alone practices.

Kim Moody, a leading tax expert who co-chairs the joint committee on taxation for the Chartered Professional Accountants of Canada and the Canadian Bar Association, said he disagreed with calls from doctors claiming that they should be treated differently from other professionals. However, Mr. Moody told the same Senate committee this week that the changes fail to meet the goals the government is trying to achieve and amount to an unworkable "mess" that should be withdrawn.

"The existing small-business deduction rules are complex, currently. However, the amendments make such rules horrifically complex," he said Wednesday evening. "There is no doubt in my mind that the average business owner will not be able to even attempt to determine their eligibility for the small-business deduction without very specialized tax advice."