Finance Committee on April 14th, 2008

[The Chair, Conservative, Rob Merrifield]

Mr. Heady.

[Christopher Heady]

I wouldn't think it was the EU subsidies; I would think it's partly the tax. The other big thing, as Professor Brooks said, was the fact that Ireland joined the European Union, and thus it was a location in which firms could establish themselves and have access to the whole of the EU market. That happened at very much the same time, so it's very difficult to disentangle the two.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Del Mastro and, I believe, Mr. Wallace are going to share a quick segment, and then we'll call this meeting over.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Mr. Heady, very quickly, I wanted to go back to one of your graphs, which was entitled “Top statutory personal income tax rates”. These would be the taxes paid by the highest-income earners in the economy. I note, for example, that Canada is considerably higher than the United States. It is always—we talk a lot of politics here obviously—politically extremely unpopular to ever talk about reducing the top marginal tax rate, the top effective tax rate on high-income earners.

That being said, we do have 13,000 Canadian-trained medical doctors working in the United States. Most left at a time when our dollar was low and our taxes were high. There is a need to be somewhat competitive with jurisdictions, is there not? Is that not a broad-based theory that we should be trying to follow in Canada if we want to avoid brain drain?

[Christopher Heady]

I think it's difficult, because when people are deciding where they want to live, they're not only thinking about how much tax they get but also about what the cost of living is. One thing that can happen in countries where people pay somewhat more tax is that they also get somewhat more benefits. For example, European countries pay higher taxes, but they all have free medical care. They all have almost free higher education. So you have to look at both the taxes that are paid and also the state services that they receive in exchange.

[Dean Del Mastro, Conservative, Peterborough, ON]

Right. I don't disagree with you. We have those things in Canada as well. Obviously we have taxpayer-funded health care, and we have lower tuition fees on average. But we did lose an awful lot of our best minds to the United States at a period when we had a low dollar and a high tax rate. So it's a real danger.

Mr. Gorman, I wanted to give you a very quick second on east-west trade. I'm really concerned about the patchwork system of regulations and taxes we have in Canada. Would harmonized sales tax be of advantage to east-west domestic trade in Canada?

[Barry Gorman]

Harmonized sales tax definitely would, because you would eliminate the distortion that was referred to earlier in which one province has higher sales tax than another so that trade moves one way.

If every province had the exact same sales tax rate, if you could ever get to that point, you would have the most beautiful tax system in the world, because taxes would then be eliminated from the business person's decision, and that's the key issue.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you. I appreciate that.

[The Chair, Conservative, Rob Merrifield]

Mr. Wallace, go ahead, please, very quickly.

[Mike Wallace, Conservative, Burlington, ON]

Very quickly, Professor Brooks, I think there are four marginal rates and four income thresholds they apply. Based on your work and your opinion on how things should work, would you change any of that from a tax perspective, in terms of the number of personal marginal rates we have in the tax system and the thresholds at which they apply?

[Prof. Neil Brooks]

Well, we do apply, for example, our top threshold. Indeed, Chris would know this, but I think we're a little out of line with the OECD. I've heard people say that our tax threshold is quite low—and it is low compared with the Americans, but not low compared with the other industrialized countries.

Again, you can play with those rates, but I think there's a good case to be made that you should have a relatively high threshold, and then just have one rate that goes through most of those income ranges, and then a couple of rates at the top. I would certainly impose an additional rate on people earning over, say, $250,000—and that number is just arbitrary—and maybe have another rate for people earning over $1 million.

But I think there's something—

[Mike Wallace, Conservative, Burlington, ON]

So you would add rates?

[Prof. Neil Brooks]

Yes, I would add a couple of rates at the very top end. Exactly.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

[Prof. Neil Brooks]

There's lots of revenue to be made up there, and our rates—

[Mike Wallace, Conservative, Burlington, ON]

You love revenues. You love taxes, don't you, sir? You love them.

[Prof. Neil Brooks]

I like the services they buy for us; we benefit enormously from them.

[Mike Wallace, Conservative, Burlington, ON]

Okay, thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

With that, we're going to call the best part of the meeting over.

I want to thank the witnesses for coming forward, particularly Mr. Heady. I understand that you're a little bit ahead of us, about six hours, so that would make it about 11:30 in Paris. You did such a great job at committee, why don't you just take the rest of the day off?

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Rob Merrifield]

That would be really great.

We certainly appreciate your taking the time to be here.

[Christopher Heady]

You're very welcome.

[The Chair, Conservative, Rob Merrifield]

Thank you.

For the committee's information, we had a steering committee meeting prior to this. We will be starting on Bill C-50 on Wednesday, hearing from the minister again, and from another minister the following Monday. Mark Carney is going to be here on the April 30.

I don't want to presume anything, but Bill C-50 should take our attention for the foreseeable future on our calendar. So I'll just give you that information for now.

Thank you.

With that, the meeting is adjourned.