Finance Committee on Nov. 23rd, 2010

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

Regarding the economic stimulus plan, the Parliamentary Budget Officer has suggested that a lot of these projects are not going to get done by the March 31 deadline. There are a number of those projects--because of inclement weather, because of delays in third-party approvals, etc. Can you tell the committee what is your intent with regard to dealing with projects that are not complete by March 31 due to no reasons beyond their control, or will you leave the burden on the backs of the provinces and municipalities to pick up the slack?

[The Chair, Conservative, James Rajotte]

Minister.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The minister of infrastructure will make sure that we are fair and reasonable in the approach we take. Obviously, if a project is well near completion, there would be no reason not to continue the funding. But there may be, in fact we expect there are, some situations in Canada where projects have barely started or are nowhere near completion, and that would be, as the Irish say, “A horse of a different kettle of fish.”

[Voices]

Oh, oh!

[Paul Szabo, Liberal, Mississauga South, ON]

It will be good faith.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

It will be fair and reasonable.

[Paul Szabo, Liberal, Mississauga South, ON]

Finally, the Parliamentary Budget Officer is an officer of Parliament under the Parliament of Canada Act, plus he has the legislative authority to have access to all information necessary for him to discharge his responsibility, primarily being to report to Parliament on the state of finances of the nation. The Parliamentary Budget Officer has projected that in 2016 there will still be a deficit of $11 billion.

Minister, your department has projected that there will in fact be a surplus for 2016 of $2.6 billion. The differential, $13.6 billion, is a fairly significant differential. Have you looked into the reasons for that differential, and can you tell us what they are?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The Parliamentary Budget Officer changed his assumptions with respect to economic growth. In August 2010, just a few months ago, he said I was being too pessimistic with respect to when we could balance the budget. He said we could probably do it earlier than 2015-16. More recently, he put out another estimate in which he changed all his economic assumptions. Of course, if you assume lower economic growth, then you push out balancing the budget longer. I think our assumptions with respect to economic growth, based as they are on the advice of 15 private sector economists in Canada who do not agree with the Parliamentary Budget Officer--and which we have discounted down for a risk adjustment--are much more realistic. I rely on those assessments and not his.

[Paul Szabo, Liberal, Mississauga South, ON]

You're saying you're satisfied.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'm satisfied that we're on the right track, yes.

[Paul Szabo, Liberal, Mississauga South, ON]

And he uses the same forecast as you do.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

No, he doesn't actually. He uses his own.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Szabo.

We'll go to Monsieur Carrier, s'il vous plaît, pour cinq minutes.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chair.

Good afternoon, Minister. Restoring a balanced budget is certainly a tall order. The Parliamentary Budget Officer doesn't believe that a balance can be achieved by 2015. We talked about this earlier.

I have been an MP since 2004. That's when I first introduced myself. At that time, the Liberals were in power. Plenty of people were blowing the whistle on the Barbados tax haven, which had been sanctioned by that Liberal government and by Paul Martin, whose shipping company was registered in Barbados. According to my information, in 2004, 27 billion Canadian dollars were invested in Barbados by people wishing to avoid paying taxes in Canada. This was seen as unfair. My information states that, in 2009, Canadian investments in Barbados totalled $41 billion.

Could you tell me how much tax money the government loses because of these investments? Why is your government, which is not Liberal, maintaining the tax exemption Paul Martin agreed to out of what could be seen as personal interest?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you for the question. You have put your finger on a very important issue. It is an issue with respect to which we've been very concerned—so has the OECD—and we made substantial progress here. I'll speak specifically about Barbados in a moment.

The OECD publish a list, and one can call it a grey list or a black list—we supported this—of countries that are not prepared to exchange tax information. This is the essence of the problem: it's countries taking deposits and not being prepared to exchange that information with the country of the originator of the deposits. So these are tax information exchange agreements that we are requiring from other countries in the world, including Barbados, and we've made substantial progress on that. We'll be able to speak more about it soon, not only Barbados, but a number of other countries, where it's been suggested that they were not freely exchanging information.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

You are limiting your answer to tax information exchange. We agree when it comes to that issue.

In June of this year, Bahamas, Bermuda, Dominica, the Cayman Islands, the Turks and Caicos Islands and St. Lucia were added to the list. These are countries with which, in addition to Barbados, we have an agreement for exchanging tax information. However, we then learned that companies that invest through their branches in those countries are exempt from tax in Canada.That's another disadvantage for our country. It's hard to justify to Canadians why we ask them to pay their taxes, to make an additional effort, while the government ensures that a number of companies with a branch in those countries are exempt from tax.

I would like to hear what you think about this.

[The Chair, Conservative, James Rajotte]

You have a minute left.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you, Chair.

The issue is not an issue of corporate taxation, because global corporations structure themselves in various ways and pay taxes in various jurisdictions, and we certainly obtain our share of that. We have many Canadian corporations that are global in scope and we have large banks and other large financial institutions that are global in scope and pay a lot of tax in Canada.

The issue really is tax evasion, that is, our citizens or corporations are able to hide money in other countries and thereby avoid paying tax. By entering into tax information exchange agreements, we take away the possibility that people can feel that they can go hide their money somewhere and the Government of Canada, in particular the Canada Revenue Agency, won't know about it. We will know about it.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Hiebert now, please.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

Minister, we hear from constituents in small businesses in our communities about the burden they face with filing tax returns, the red tape associated with that. This is especially true of the small and medium-sized businesses in our communities that are the largest job providers, as you know. The Canadian Federation of Independent Business estimates that businesses currently spend over $30 billion a year in complying with regulations.

Our government has done a lot to reduce the number of regulations that businesses have to comply with and the paperwork burden associated with that, but Bill C-47 goes further and it includes two important measures. I was wondering if you could elaborate for this committee the steps this bill takes to reduce that paperwork burden even further.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you.

As you know, we did reduce the paperwork burden on business in Canada by 20%. That got rid of about 80,000 redundant regulatory requirements.

There are two specific red tape provisions in Bill C-47. First of all, there's providing Canada Revenue Agency with the authority to issue notices online, if the taxpayer requests, for those notices that can currently only be sent by ordinary mail. That will decrease the amount and volume of paper. Secondly, it will allow certain small businesses to file and remit semi-annually rather than monthly. Many small businesses would prefer to do that, and it reduces their paperwork burden as well.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

I'll pass the balance of my time to my colleague.

[The Chair, Conservative, James Rajotte]

Ms. Block, please.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much. I'm going to focus on a similar subject to red tape, but in a different area.

Supporting the good work of charities across Canada is obviously a shared goal among all parliamentarians. During the finance committee pre-budget consultations, we heard many ways that government could assist charities, either through tax changes or reducing red tape. I know we have heard from many charities throughout the years about the need to cut their red tape so they can devote more of their time and energy, their resources, to actually helping others and not dealing with needless administrative paperwork.

One measure being legislated through Bill C-47 helps to cut red tape facing charities. I'm wondering if you'd be willing to describe how this measure will help the charity sector. Also, what has been the reaction to date among the charities to that important measure?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you for the question.

It was charities, especially smaller charities, that asked for a change about what is called the disbursement quota. The disbursement quota came in 1976. Basically, it is designed to ensure that charities don't hold on to too many resources, that they actually distribute and disburse the funds. The limit was $25,000. This bill proposes to take that to $100,000 for charitable organizations.

As I say, this is particularly important for small and rural charities.