Finance Committee on Nov. 23rd, 2010

[The Chair, Conservative, James Rajotte]

Thank you.

Merci.

Monsieur Mulcair, s'il vous plait.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

As we've just witnessed, I am up against a seasoned parliamentarian who can suck up all the oxygen in the room along with our seven minutes, but I will nonetheless begin with a comment reflecting one of his English remarks.

The minister says that Canada is the only industrialized country without a national securities regulator. I would point out to my colleague, the finance minister, that Canada also is the only industrialized country without a national education minister, and there's a good reason for that. It goes back way before 1935, which is the date he cites. It goes right back to the picture showing the Fathers of Confederation. We have a confederal deal in this country, and it's galling to hear the minister say it's in the spirit of cooperative federalism that he's seeking to occupy a sphere that will empty out an important part of the Quebec economy, will move a lot of experts out of the province, and won't produce any results.

All we have to do is look at what happened to the people whose money was invested with Earl Jones. He was on nobody's radar screen; he was a fraudster and was not regulated. You know where he was being spotted and tracked? It was at the Royal Bank of Canada, the Beaconsfield branch in Quebec. You know what happened? People were defrauded to the tune of tens of millions of dollars and all these lovely federal structures—because the federal government is in charge of chartered banks—did nothing. There are official documents in the court record of the Earl Jones case, written by the people at the Royal Bank, the Beaconsfield branch, showing that they knew exactly what was going on. They wrote to him about it. And do you know what those people got? Zero. Do you know what the federal government did? Zero.

So instead of getting into a mode where he decides he knows how to do what the confederal deal left with the provinces since the beginning and what they know how to do, why doesn't he start taking care of the stuff that Confederation left to him, which is to take care of the chartered banks and people like Earl Jones?

Mr. Chairman, the minister is fond of across-the-board tax cuts.

The approach used by the Conservatives aims to reduce taxes for all businesses in the same way. There is, however, an obvious problem that the Minister knows well. I'm talking about the fact that, since the forest or the manufacturing industry made no profits and had not, consequently, paid taxes, they could not benefit from the tens of billions of dollars in across-the-board tax cuts that the government granted.

I would like the Minister to share his thoughts with us and to tell us whether he has changed his mind. I want to know if he is beginning to realize that building a diverse and balanced economy, something we have been working on diligently since the Second World War, has required a visionary government that appreciates the sheer size of the country and the need to focus on sectors that are more productive, create more jobs and are more future-oriented, such as the environment? Or will he keep limiting his across-the-board tax reduction strategy to the biggest, most profitable companies.

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

Thank you, Mr. Chair.

I thank you, Mr. Mulcair, for your questions. The first set of questions you raise relate to effective regulation of securities. You raised the case of Earl Jones. I agree entirely: the regulator failed to do its job with respect to Earl Jones and failed to protect consumers in Quebec. That regulator is the Quebec securities commission. It's responsible for that.

[Thomas Mulcair, NDP, Outremont, QC]

That's completely false.

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

Then we have—and I lived through this—the non-asset-backed commercial paper situation, which largely affected the Caisse de dépôt in Quebec. It was fortunate that the Government of Canada intervened and led with appointing a chair, making sure we came up with a resolution process. In the end, we made sure that governments came together and funded it.

This is what happens when there is a crisis in securities: the provinces, the people, come to the Government of Canada to fix it. We do fix it.

The second question you asked me about is—

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Chair, that's a non sequitur. The Dominion Bond Rating Service rated that non-asset-backed commercial paper “triple-A”.

You're saying that's Quebec's fault? That's nonsense. No one made them buy it. It's a total non sequitur.

[The Chair, Conservative, James Rajotte]

Minister, do you want to respond?

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

I just want to deal with the facts, Mr. Chair.

The other party mentioned the forestry sector. An important part of the economic action plan is the money for retraining and work-sharing. Huge sums have been expended. We've run a substantial deficit in that regard. This was to make sure we had tens of thousands of Canadians involved in work-sharing to save their jobs and to retrain them, particularly in industries that are going through substantial change, like the forestry industry.

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Chair, I would like the Minister to take a few moments to give us an update on the progress of the negotiations on sales tax harmonization in Quebec. He's told the House that negotiations were taking place. I would like to see a progress report.

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

Negotiations are actively under way; the Quebec finance minister and I have had recent discussions on the subject. It's fair to say that we have made some progress. We have not resolved the issue, but we have made some progress toward harmonization of our respective sales taxes.

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Chair, since time is slipping by rather quickly, I will get back to the issue of banks and respective responsibility.

It is entirely false to claim that responsibility for the Earl Jones affair lies with the Autorité des marchés financiers in Quebec. Jones was a fraudster. He was on nobody's books. He was not licensed, and the same thing could happen irrespective of the authority that would be licensing legitimate people.

The minister is an attorney, as am I, and I'm sure his staff would be able to consult the court documents and show them to him. They will show that what I'm saying is the case. In Earl Jones, the Beaconsfield branch of the Royal Bank of Canada on St. Charles Boulevard had all the information required to show that Earl Jones was carrying out an elaborate fraud with trust accounts that were not real trust accounts. You know how I know that? Because that's word for word what the Royal Bank put in. You know what the federal government, which is in charge of the chartered banks, did about this? Zero. Nothing. Zip. Nada.

[The Chair, Conservative, James Rajotte]

Minister Flaherty.

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

The responsibility for securities regulations in Quebec has been assumed by Quebec so far. Mr. Paillé shows me in his book that this is a good idea.

You can't have it both ways. You can't say you want to regulate but it's not your fault when you fail to regulate.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Chair.

I'm sure that you're going to be shocked to actually hear a question that's relevant to what we're supposed to be discussing here today, and that's Bill C-47.

Thank you, Minister, for coming. I appreciate your taking time to come here today.

Reflecting on Bill C-47, there are a number of issues and measures in C-47 that follow on the path this government has taken, which has been to help job creators, and to help job seekers, which is the one I would like to ask a question about. That's the working income tax benefit that was in Budget 2007 originally. It was very forward thinking. It was doubled in 2009 and was applauded by many, such as the Caledon Institute, which suggested that it was a welcome addition to Canadian social policy and filled the long-recognized gap in Canada's income security system, and the United Way, which reflected that it's a positive change that will help to improve the situation of low-income families.

Personally, I don't think enough people, specifically those people who don't fit into that income bracket, actually understand what this has done. We have taken nearly a million people completely off the tax rolls with tax reductions, but WITB allows them to take part in the economy.

Perhaps you could explain what in Bill C-47 we've done to continue that and extend that?

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

Thank you for the question.

WITB, which is a lovely acronym, given that I represent Whitby—Oshawa in the House of Commons, is an important program. It is a program that was looked at over the years by others, but it wasn't implemented. What it's designed to do is help people who are relying on social benefits, social assistance, to get back into the workforce, because we had a system that discouraged people from doing that.

It was true to say that there was very little and sometimes no advantage to getting off social assistance and getting a job. That is self-defeating, particularly given the demographic challenge we are facing in Canada going forward.

These are a lot of people. About 1.5 million individuals and families benefit from WITB annually. We brought it in for Budget 2007. We doubled the tax relief in Budget 2009. In this bill, which comes out of this year's budget of 2010, we want to index certain personal income tax and benefits amounts to inflation under the Consumer Price Index. That would be done on an annual basis.

Assuming that this legislation gets royal assent, WITB amounts payable in 2010 and subsequent years will be indexed to inflation on an annual basis, which will provide some extra dollars to Canadian families that need it most and will further encourage able-bodied people and others, who perhaps have some disabilities, if they are able to join the workforce, to do that.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

I'll turn the rest of my time over to my colleague, Mike Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair, and thank you, Minister, for joining us today.

I left the industry meeting to come here. We're talking about pensions at industry. We've talked about pensions around this table at finance. I know that you've worked very hard with your counterparts at the provincial level on pensions.

The Conservative government has put together proposals and changes to the pension plan, the federally regulated pension plan, over the last year. Could you highlight for me, Minister, what's in Bill C-47 that continues our progress in improving the pension system for Canadians?

It's a nice question, isn't it?

Thank you.

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

That's a very nice question, yes. I thank the member from Burlington for that very helpful question.

I should say, generally, to members of the committee that we're having, as you know, ongoing pension discussions with the provinces and territories. The federal government is responsible for only about 10% of the pension plans in Canada. This is an area in which we obviously need to work together, and I look forward to further discussions when we meet together as finance ministers around December 20 in Alberta.

In this particular bill, as a result of the extensive consultations led by my parliamentary secretary, Mr. Menzies, several things are being done. They include authorizing the Minister of Finance to designate an entity for the purpose of receiving, holding, and disbursing the pension benefit credits of people who cannot be located by their pension plan; permitting information to be provided in electronic form; and requiring spousal consent before the transfer of pension benefit credits to a retirement savings plan. Those are some of the specifics.

[Mike Wallace, Conservative, Burlington, ON]

We're good.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

We'll go to Mr. Szabo, please, for a five-minute round.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

Minister, tax-free savings accounts: good idea, poorly executed. This act, Bill C-47, has to now deal with deliberate over-contributions, prohibited investments, income attributed to non-qualified investments, withdrawals of deliberate over-contributions, prohibited investments, non-qualified investments, swap transactions, related investment income, and effective prohibited asset transfer from TFSA accounts to other accounts.

Considering it was such a simple plan—a good plan—but so badly executed and having so many amendments, what have we done to make sure this never happens again, so that our tax act doesn't become even more complex than it already is?

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

Thank you, Mr. Szabo.

I appreciate your comments about the importance of the tax-free savings account. This is a huge reform. Over time, this will result in most capital gains taxes not happening, because people will be able to shelter money from taxes in their tax-free savings accounts.

I wish I could say that every time we bring forward a tax proposal it's perfect. I wish I could say the human condition was such that people don't try to get around and take advantage of tax laws. They do. And they do it virtually every time we bring in something new. Most Canadians, in fact 4.8—

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you, Minister. I only have five minutes.

I have two more questions for you.

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

Well, 4.8 million Canadians have TFSAs. We had a very small minority that tried to cheat, and we're going to stop them from cheating if you pass this bill.