Feds face parliamentary grilling over tax changes

Parliament's legal expert says the Liberal government waded into uncharted territory when it decided to delay enacting tax rule changes on the sale of small businesses between family members.

A Conservative private member's bill passed in late June rewrote part of the Income Tax Act so business owners could pass on companies to their children or relatives at the same tax rate as if they were selling to a stranger.

Parliamentary law clerk Philippe Dufresne tells the House of Commons finance committee today that the bill officially became law when it received royal assent.

At the time, the Finance Department said the government would bring forward legislation to clarity that the changes would apply starting Jan. 1, 2022, because there was no coming-into-force date written into the bill.

Dufresne says that was a surprising move and one unseen in modern history.

Hours before today's committee meeting, Finance Minister Chrystia Freeland reversed position, but added the government planned its own amendments to close loopholes that could help people avoid paying taxes.