Finance Committee on Dec. 1st, 2011

[Doug Nevison]

Growth is very important. Obviously, debt-to-GDP has a denominator and numerator, and growth is affecting the denominator. So it's very important.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

Ms. Bennett, you have a five-minute round, please.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Thanks very much.

Under vote 1b, the Department of Finance is seeking approval for $4.9 million for a variety of things: federal advertising programs, implementation of HST, the HST credit, the Nova Scotia affordable tax credit, the task force for the payment system review, and the funding for the 90 Elgin crown site redevelopment. I would like to know what are the specific federal programs that would be advertised by the Department of Finance?

[Sherry Harrison]

The funding in the estimates is for an advertising campaign following the federal budget to ensure awareness of key budget initiatives, programs, and benefits for Canadians, and how to access them.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Is there a process for determining what is actually a government message and what's a partisan message?

[Jean-Michel Catta, Assistant Deputy Minister, Consultations and Communications Branch, Department of Finance]

If I may, essentially from a departmental perspective, we work closely with the minister's office and the Privy Council Office to determine the content of the advertising campaign, as well as the messaging. From a Department of Finance perspective, we very much emphasize the information that we provide to Canadians, specifically, for example, on the budget, because the budget, as you know, contains a number of measures and initiatives that Canadians can benefit from. It's important that Canadians are made aware of the content of the budget, and advertising is one tool among many to get this information out and make it accessible to Canadians.

[Carolyn Bennett, Liberal, St. Paul's, ON]

I understand recruiting posters and buy Canada savings bonds messaging but I think there was some concern during the economic action plan that TV ads that said “including tax cuts” may well have been more of a partisan message than a government information message. Some legislatures have put in place a third-party tribunal to vet ads to see if they're actually a government message or a more partisan message. Is there any third-party, objective view of what actually is government information and what is more of a partisan nature?

[Jean-Michel Catta]

Specifically, the answer to your question is no, in the sense that there is no outside, third party—outside meaning, for example, outside government. Again, I go back to the process that I outlined earlier, that in designing and deciding on the messaging and the content of the advertising campaigns, it's very much a close and intense discussion that the minister's office, the department, and the Privy Council Office have. Again, the focus is on providing information to Canadians and, more specifically, on the contents of the budget.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Where would we find something like GPS tracking of economic action plan signs?

[Jean-Michel Catta]

In fact, specifically on the advertising campaign, there are very strict rules by Public Works requiring that post-campaign, you have to evaluate the success or the reach of the campaign. The results of these evaluations, and specifically on the budget-related advertising campaign, have shown, for instance, what they call the recall rates—it's a bit of a technical term—or people's recollection of a particular ad or, for example, of the economic action plan is relatively high compared to other campaigns. It could be a measure, it could be a combination of the campaign itself, but also the fact that over the past two or three years the state of—

[The Chair, Conservative, James Rajotte]

Okay. Just wrap up, please.

[Jean-Michel Catta]

Sorry.

—has called for the economic action plan and some very specific government actions to deal with the economic crisis.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Bennett.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I'm glad to see that Ms. Bennett has joined us for this portion.

In the first portion with CRA officials, just to help her understand, there is an advertising campaign they had spoken about, Mr. Chair. They're probably going to be encouraging the uptake of tax measures during the 2011 tax filing season. They indicated very clearly that it was to inform Canadians about the advantages of the tax credits that have been put in place.

Of course, things like pension income splitting, the children's fitness tax credit, the first-time home buyers' tax credit, the public transit tax credit, the deduction for tools for tradespersons and, of course, the hiring credit for small business that has come into play, are all important measures Canadians will want to know about so they can take advantage of them. Those tax cuts, in fact, are important so that Canadians can take advantage of them. I'm hopeful that most of the members of the House will in fact agree that an advertising campaign, so that Canadians can take advantage of these, is important.

In any event, I'm going to ask you about capital taxation, if you wouldn't mind. The supplementary estimates make reference to a somewhat technical aspect of the incentive, launched by our government in 2007, to support and encourage provinces to eliminate or accelerate the elimination of their capital taxes. These were taxes paid regardless of whether a company was profitable, adding directly to the cost of doing business here in Canada. Capital taxes have been called by some the most destructive form of taxation.

Can you speak to how this incentive worked and what specific provinces took it up? I'm from Manitoba. I'd like to know, specifically, whether Manitoba was one of those provinces.

[The Chair, Conservative, James Rajotte]

Perhaps you can introduce yourself, for the benefit of the committee.

[Geoff Trueman, Director, Business Income Tax Division, Tax Policy Branch, Department of Finance]

I'm Geoff Trueman, the director of the business income tax division in the tax policy branch of the Department of Finance. I am responsible for the capital tax incentive.

This was a measure introduced in the 2007 budget to encourage provinces to eliminate or speed up the elimination of their capital taxes. These are taxes that are levied on the capital assets of a business, and they would be payable whether or not the business were profitable. From that point of view, they're seen as relatively damaging, from an economic perspective.

To return to your question, four provinces took up that offer: Quebec, Ontario, B.C., and Manitoba.

The way the incentive works is that provinces provide the government with a preliminary estimate of the amount of capital tax revenue foregone, based on their preliminary data for a given fiscal year. Then at a later date, when the provinces have final data for that year, consistent with the public accounts of that province, we adjust and make a final payment to the province.

[Shelly Glover, Conservative, Saint Boniface, MB]

Only four provinces took advantage of this?

[Geoff Trueman]

Only four provinces took advantage of it, but all provincial general capital taxes will be phased out by the end of the year.

[Shelly Glover, Conservative, Saint Boniface, MB]

Could you just speak to what degree the elimination of Canada's business tax is an advantage, basically in terms of lowering the overall tax burden on new business investments?

[Geoff Trueman]

Absolutely. The capital tax elimination contributes to a lower meter, a lower marginal effective tax rate, for Canada. The documentation provided with Budget 2007 indicated a decline of, I believe, 1.3% on Canada's meter.

Again, that's a tool that helps to assess the competitiveness of Canada's economy vis-à-vis its international competitors. Canada leads the G-7 with the lowest METR.

[Shelly Glover, Conservative, Saint Boniface, MB]

Would you put that in layman's terms for me, sir? Canadians who are listening may not understand what you mean by “meter” and this reduction of 1.3%. Could you try to explain that in layman's terms?

[Geoff Trueman]

The marginal effective tax rate, as best I can explain it, is the tax rate that applies to the last dollar of investment, the marginal dollar of investment. It's shorthand way economists look at this. If you have that dollar to invest, what country will you invest it in? Certainly, among the G-7 countries, Canada has the lowest meter, by a significant amount.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

That' s likely why Forbes magazine, the IMF, and the OECD have all said that Canada is the place to do business, and likely will be for the next five years, according to Forbes.

[Geoff Trueman]

That's correct. Canada leads the G-7 with the lowest meter, and we have a very competitive statutory corporate income tax rate, as well.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

The IMF and the OECD said that over the next two years, we'd have the biggest growth. It's Forbes that said that we are, in fact, the best place to do business over the next five years. We're very proud of our government for making sure that the environment supports businesses that create jobs to protect our Canadian families.

Thank you.