Finance Committee on Sept. 25th, 2006

[John McKay, Liberal, Scarborough—Guildwood, ON]

So it's just a matter of tax treatment, not location of raw materials and so on.

Okay, thank you.

My next question is for the Canadian Labour Congress. I think you have every right to be worried and to have concerns about this commitment to finding $2 billion in savings. I think “without consultation” seems to be a favourite way to do things around here.

I agree with your issue of no more tax cuts. In the previous government, we went from 28% to 21%. We had a commitment to go down to 19%, and a number of surtaxes removed, a number of CCA accelerations, and yet we have no productivity bang for the buck. In fact, our productivity numbers appear to be worse than they were in years gone by.

Can you give me the Coles notes answer, if you will, on why it appears our productivity is not being enhanced by the corporate tax treatment we've been giving corporations?

[Andrew Jackson]

I guess the short answer would be that what is crucially important to productivity growth is real business investment in new machinery and equipment, as well as in skills. The link from a general corporate tax cut to higher levels of real corporate investment is fairly tenuous.

If you take the energy sector, for example, parts of the resource sector are doing very well, and are very profitable. They are investing. Just a cut in the corporate tax rate makes no real difference to their investment rate. When companies are struggling, often the corporate tax rate is irrelevant to the real investment decisions.

A lot of the manufacturers that are now going out of business because they're not earning profits or are very close to losing money just don't benefit from that measure. I think a much more effective way to spend money that would go on a general corporate tax cut would be to take much more targeted measures.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You seem to like grants but you don't seem to like the capital cost allowance.

[Andrew Jackson]

Certainly there's a case for aligning the capital cost allowance with real rates of depreciation.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So is there an argument to be made that it would be a useful--

[Andrew Jackson]

As I mentioned in the brief, I'd be open at the moment to the notion of some investment tax credit.

I think the key point is that right now we're at a window where a lot of companies in the manufacturing sector really are contemplating shutting their doors, closing down. We really need something that will kick in right now.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm running out of time, but I'd appreciate exploring that.

The irony of the last two presenters is that one wants to be self-employed for the purposes of a certain deduction, and the other wants to be employed for the purposes of pension.

My fundamental question to the artists is this: why should you be treated any differently from farmers or construction workers or small-business owners or used car salesmen--

[The Chair, Conservative, Brian Pallister]

Fortunately, you're going to have the chance to reflect on how you might answer that question, in the hope that someone else asks it, because the time has elapsed for Mr. McKay. If no one does ask the question, I'll make sure to ask it at the end.

I will now give the floor to Mr. Paquette.

You have seven minutes.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

I would like to thank our witnesses for their presentations.

I'm always surprised to find that particularly in the area of social affairs, which comes under provincial jurisdiction, Ottawa groups such as the Canadian Labour Congress and the National Anti-Poverty Organization have undue confidence in the federal government.

From your brief, I must of course conclude that we will not agree about the fiscal imbalance. I doubt that the FTQ agrees with the CLC's brief on this issue either.

At the end of your brief, for example, you say this:

“The fiscal imbalance” issue should not be addressed through a withdrawal of the federal government from its major areas of direct and indirect social responsibility nor by a transfer of “tax room” to the provinces.

You also say on page 16:

The reality of reduced fiscal capacity due to tax competition between the provinces could be countered by the provinces ceding to the federal government sole responsibility for corporate income and capital taxes, in return for a proportionate increase in federal transfers. ”

That flies in the face of the consensus that exists in Quebec. We want to have more revenues of our own so that we are not subject to fluctuations in the federal government's willingness to invest in social programs.

My question is to these two gentlemen.

You talk about a disability grant, an income support program for people with significant disabilities, a pharma-care program and a dental care program. All of this comes under provincial jurisdiction.

Of course, we do agree on other matters. However, I would ask you the following question, Mr. Jackson. What makes you think that the federal government will be more inclined to assume its responsibilities? We need only think of what happened in the case of employment insurance. As you know, probably better than I, the coverage has been reduced considerably. Now only one person in four who pays into the plan is entitled to benefits.

During the 90s, Mr. Martin slashed health care transfers unilaterally, despite the Canada Health Act. We have often heard that there must be federal standards, an education act, an so on. There are in fact even some new laws that I was not even familiar with. How can we be sure that the federal government will maintain its investments?

For example, the federal government had announced a child care program. Two years later, it was abolished because a new government came to power. Let us suppose that the program had been in force for six or seven years, that child care centres had been built, that child care providers had been hired, that the children had already been attending school and that the government would withdraw from the program. In such a case the responsibility reverts to the provinces, including Quebec.

For this reason, contrary to your proposal, we think that the only way of ensuring the sustainability of social programs is to ensure that Quebec and the other provinces can afford to take them over. In this way, the provinces are not the hostages of the federal government's decisions.

In closing, you talk about fiscal competition. Reducing the GST by one point is not a response by the federal government to North American tax competition. I would like you to explain for me, since this is implicit in your presentation, how the federal government is a better guarantee of sustainable social programs than is the Government of Quebec, for example.

[Andrew Jackson]

First of all, just to be clear, the CLC has always taken the position that the FTQ speaks for Quebec workers on constitutional issues.

Second, in the paper on the fiscal imbalance it says very explicitly that a national framework for programs must recognize the need of Quebec, in particular, to control the levers of social development within its own jurisdiction. So we accept that Quebec has a particular need to develop programs within its own jurisdiction.

I'm not sure if I understood correctly that you want a transfer of tax room as a way of resolving the fiscal imbalance. At present, Quebec benefits quite significantly from having equal per capita transfers, as opposed to a transfer of tax room, just because the fiscal capacity of Quebec is below average. From a fiscal point of view, Quebec is much better off getting equal per capita transfers through the Canada social transfer, the health transfer, than through a transfer of tax room.

I absolutely agree with you that the provinces should know that federal transfers to the provinces for social programs are insecure. In the submission we call for at least a ten-year planning horizon so that provinces can count on their planning for that.

The other point I would make is that in many ways Quebec is different from other provinces. Through the 1990s, even when the federal government cut back its own social transfers quite significantly, Quebec was really the only province that maintained and increased social expenditures over that period, notably on the child care program and others. But while the federal government was cutting transfers, the Government of Ontario and the Government of Alberta were cutting provincial taxes, as opposed to making up for that room. So the experience of other provinces has been that there's a lot of political pressure to cut taxes rather than maintain social programs. The dynamic in Quebec has been different for that.

We are prepared to recognize that Quebec is different on many dimensions. But I think you're unwise to push for a transfer of tax room as a way of addressing the fiscal imbalance issue.

[Pierre Paquette, Bloc, Joliette, QC]

I simply want to say on that, that the consensus in Quebec, wether one is a federalist or a souvereignist, is as follows: the GST must be returned along with a certain number of tax points to replace the transfers. As long as we are a part of Canada, equalization is something that is provided for in the Constitution. Its purpose is specifically to make up for the lack of tax in Quebec. No one can't tamper with that.

Ms. Frost, I ask you essentially the same question. Do you have any comments?

[The Chair, Conservative, Brian Pallister]

I am sorry, madam, but time is up.

We will now go to Dean Del Mastro.

You have seven minutes, sir.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Mr. Miller, thank you very much for your presentation. I support a lot of what you're saying. I do believe that prosperity is built from a sense of security, and safe streets and communities are certainly something I'm working toward for my community.

I noticed a couple of statistics in your report that are really quite interesting. One was that we're now down to about 189 police officers per 100,000 population. You've compared that with a number of other countries, such as the United States, Australia, and England, where it gets as high as 262 officers per 100,000.

Wasn't there a number the Police Association of Ontario felt we should be at? Do you have a number you think is correct, with respect to number of officers per 100,000 people?

[Bruce Miller]

It's difficult for me to give you an answer right across Canada and also in Ontario, with such a diverse population, but we think that 1,000 new officers coming into Ontario through the 2,500 new officer program would make a huge difference in terms of community safety. Certainly, as I mentioned earlier, with two successive governments in Ontario, we've been very fortunate to have all-party support in Ontario on community safety issues, and it really has made a big impact.

Policing has changed so much over the last 20, 25, or 30 years, when I started. It is a labour-intensive job, and 90% of police budgets go toward personnel. The amount of work for such things as search warrants and preparing crown briefs takes up a great deal of time.

We think that, certainly, if Ontario can get its share based on a population base, it is going to help in allowing Ontario to continue to be a safe province.

[Dean Del Mastro, Conservative, Peterborough, ON]

That's great.

I was disturbed by your survey. I hope that in three or four years' time we can do the same survey and see that people feel much more secure. I also feel that we're moving in the right direction.

Mr. Sharpe, I'd like to pose Mr. McKay's question to you again, because I feel it's a good one. I'd like to hear your response on that.

[Paul Sharpe]

Do you want to pose that question, or should I just...?

[Dean Del Mastro, Conservative, Peterborough, ON]

I'd be happy to.

What would make self-employed musicians any different from, say, small-business owners, farmers, or other self-employed groups? Why do you think you should qualify for that program?

[Paul Sharpe]

First of all, on behalf of the American Federation of Musicians of the United States and Canada, we're here to advocate specifically for artist musicians. We see no reason self-employed people in all sectors, regardless.... We're not asking for different treatment; we're just here advocating for musicians in particular.

We think that the growth in the self-employed sector is going to have to be addressed in all kinds of different things, and we're here trying to take a positive and active role in servicing the members we advocate for.

One other thing I think I should bring to your attention is that the American Federation of Musicians of the United States and Canada, as I mentioned earlier, has the AFM-EPW Fund (Canada). It is an employer pension fund, of course, a registered RRP. It has current assets of more than $550 million. We have many members in our association who are actively invested in that program, but the vast majority of the 13,000 members we represent in Canada are self-employed and are not eligible. It's not really trying to get different treatment. We're doing the same work under the same types of conditions in our self-employment as those who are in employee-employer relationships.

[Dean Del Mastro, Conservative, Peterborough, ON]

I just don't hear this from a lot of other small-business owners, specifically.

Mr. McKenzie, I think you've made a very insightful recommendation, actually, in providing opportunity for mobility of labour, particularly to areas where labour is needed, and also in providing opportunity for families where income can be expanded.

Perhaps you could underscore this again. You've actually pointed out that this is a no-cost opportunity for the government, and in fact a gain to the treasury. Am I understanding your numbers correctly?

[Brett McKenzie]

Yes. Running through the numbers that should be in the brief we put together, it would be a net benefit, based on soft numbers of $95 million to the public purse.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

Mr. Hindle, just incidentally, I was running over some numbers on the weekend. About 1.3% of our health care spending goes into health care research. Maybe you might give us an opinion. Obviously, I feel it should be more. I think we should be a little bit more forward-thinking in health care. I think we should move away a little bit from illness care and move towards illness prevention. Maybe you could give us some ideas as to what you think a better ratio might be for health care spending, in terms of illness care and innovation.

[Robert Hindle]

That is probably difficult for me to address as an answer to your question. We are strictly focused on research. We know the health care costs and we're making the correlation of an investment into research in order to prevent the complications that run up the cost. Only with respect to our cause of diabetes can we look at a number like $13 billion, because of the survey commissioned about two and a half years ago by CTV; our discussions with Health Canada people and various members of the government lead us to believe that's a fairly well-accepted number.

[Dean Del Mastro, Conservative, Peterborough, ON]

Investment into research would in fact lead to savings in the overall health care portfolio over time.

[Robert Hindle]

There is a very direct line there, yes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

Mr. Jackson, I just reviewed some of your numbers there. I actually agree with you with respect to Quebec and transfer payments. I do, however, take a little bit of issue with the GST deduction that was made. I do think the GST deduction actually does directly affect the fiscal imbalance. Are you aware of that?