Thank you for your invitation.

My name is Brigitte Alepin. I am a tax expert and fiscal policy specialist and have previously appeared before some 15 committees of this kind in Quebec, Canada and France.

My presentation today will focus specifically on the alternative minimum tax and specific related issues.

My first question is as follows: Under the proposed amendments to the alternative minimum tax, will it be possible to tax the richest Canadians, the top 0.01% of taxpayers, so that they pay their fair share of tax?

It's important to ask this question because, in the past 30 years, the top 0.01% have enjoyed a 450% increase in their average total income, which reached $12 million a year in 2021, and a 27.5% reduction in their effective federal and provincial tax rates.

These figures appear in table 1, which I submitted to you.

These numbers come from a Statistics Canada table entitled, “High income tax filers in Canada”, which doesn't show the federal tax burden separately. However, a related Statistics Canada table entitled, “Federal and provincial effective tax rates of census families”, specifically shows federal effective tax rates. Since the tax rate for the richest 1% of taxpayers is 17.5%, there's every reason to believe that the rate would be similar for those in the top 0.01% group. We may therefore assume that the top 0.01% would actually be taxed at a rate of 17.5% at the federal level.

To determine whether the richest 0.01% of taxpayers could be taxed under the proposed amendments to the alternative minimum tax so that they pay their fair share of tax, you have to understand that, according to the 2023 and 2024 budgets, the amendments to the alternative minimum tax would generate additional revenues of approximately $500 million a year, 80% of which would be paid by taxpayers earning more than $1 million annually. However, that taxpayer group, which obviously includes the richest 0.01%, already pays approximately $25 billion in federal tax and consequently would bear an additional tax burden of $400 million, that is 80% of the $500 million, as a result of the amendments made to the alternative minimum tax. Little change would therefore be made to their effective tax rate. The amendments that would be made to the alternative minimum tax might have little or no impact on the effective tax rate of the richest 0.01% of Canadians.

My second question is this: Would the amendments to the alternative minimum tax ensure that the tax arrangement proposed by charities benefits Canadians?

It's important to ask this question as well because the tax savings granted to donors and charitable foundations under the present tax system exceed the donations that the foundations receive over time.

I also distributed table 3 to you and invite you to look at it.

As this table shows, under current tax rules, assuming a 5% rate of return and a 5% charitable obligation, as the act provides, an initial donation of $100 million would result in a $36.5 million public finance deficit after 20 years of activity.

Under this scenario, one would have to wait approximately 40 years for the services provided by the foundations, assuming a 5% charitable obligation, to begin to exceed the tax gifts granted to the founders and the foundations. In many instances, it actually takes much longer, particularly since the organizations' operating costs are factored into the 5% calculation.

Lastly, to correct this situation, either the foundations' charitable obligations must be increased or the tax gifts afforded to donors and foundations decreased. The alternative minimum tax could prove to be an effective tool in reducing the tax gifts made to donors.

The initial amendments to the alternative minimum tax presented in the 2023 budget were a good start, but considering the 80% rate as proposed in the 2024 budget, the tax gifts to donors remain too high to balance the public finances within a reasonable period of time.

Thank you for your attention.