Evidence of meeting #43 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was federal.
A video is available from Parliament.
6:20 p.m.
Conservative
Mark Adler Conservative York Centre, ON
Now with a government that has less revenues than expenditures, what happens to that government ultimately?
6:20 p.m.
Senior Vice-President and Chief Economist, Conference Board of Canada
They end up like Greece.
6:20 p.m.
Conservative
Mark Adler Conservative York Centre, ON
Okay. That would limit its fiscal ability to act on the best interests of its citizens, right?
6:20 p.m.
Senior Vice-President and Chief Economist, Conference Board of Canada
Yes, and that's why most good fiscal economists would counsel the governments to maintain public debt under control and balance budgets in good time.
6:20 p.m.
Conservative
Mark Adler Conservative York Centre, ON
So you would counsel our government, which has been exercising very strong fiscal spending discipline, that notwithstanding the fact we are going to be, from all indications, in a budgetary surplus in the next budget to continue to exercise fiscal discipline and not engage in any reckless spending schemes? Would that be fair to say?
6:20 p.m.
Senior Vice-President and Chief Economist, Conference Board of Canada
Governments should live within their means. When the economy is functioning at a high capacity, governments should live within their means.
6:20 p.m.
Conservative
Mark Adler Conservative York Centre, ON
I'll follow up with Mr. Kingston.
Economies are very complex ecosystems. They are not simple, and the presence of good public policy and sound governance really creates an environment that attracts private investment and would enable business to grow and to create jobs, like what has happened here in Canada.
There can be countries, however, that have a lot of resources and good human resources yet their governance models are awful and, therefore, their economies are in pretty disastrous shape. Argentina is one example.
I'll pose the same question to you as I did to Mr. Hodgson. How important is it that our government continue on the same track it has been on in keeping taxes low and thereby increasing revenues for the government and keeping a strong fiscal restraint on spending? How important is that for business to grow and to create jobs in our economy?
6:20 p.m.
Senior Associate, Canadian Council of Chief Executives
It's absolutely critical. As you know, good public policy is key to attracting investment into a country, so maintaining spending discipline and a competitive tax rate is critical to that.
6:20 p.m.
Conservative
Mark Adler Conservative York Centre, ON
It would be fair to say then, and I think the empirical evidence proves this out, that a lower tax environment, like we have at a corporate tax rate at 15% federally, has actually been proven to be very attractive for business to invest in Canada. Is that fair to say?
6:20 p.m.
Senior Associate, Canadian Council of Chief Executives
Yes, that's exactly right. A low corporate tax rate attracts companies to Canada.
The one thing I'll add, though, is you have to look at it beyond the federal tax rate. We surveyed our members to see the taxes they pay at all levels of government. They're actually taxed at 50 different points.
When you look at taxes overall, we would recommend that you take into account the whole picture, not just the federal rate.
6:20 p.m.
Conservative
Mark Adler Conservative York Centre, ON
Would you say that what we saw recently with Burger King buying Tim Hortons is a sign that we're doing something right in this country? Is that correct?
6:20 p.m.
Senior Associate, Canadian Council of Chief Executives
I don't know the specifics of the Burger King deal. I know there has been a lot of attention given to it as a tax inversion. There could be multiple reasons for why they did that. But yes, in general, having an attractive corporate tax environment is good for attracting companies to—
6:25 p.m.
Conservative
Mark Adler Conservative York Centre, ON
Certainly the Americans don't see it as a good thing, because their treasury department just passed a regulation against tax inversion.
6:25 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you.
Colleagues, we have about six and a half minutes left.
I have a couple of questions. I'm going to put them on the record.
The first is on infrastructure. Is there a way to accomplish the infrastructure goals without perhaps adding more federal debt? That's a big question. Maybe a couple of you could answer me directly, and I will share that with committee members.
I want to play the devil's advocate. Mr. Kingston, I agree strongly with your recommendation one. I agree with recommendation three. I agree with recommendation four.
On recommendation two, about a direct support program, if it's true, as has been mentioned, that Canadian companies are not investing as much as they should, and over the last year or so they have been sitting on cash, for lack of a better phrase, as a result partly, some would argue, of corporate tax reductions by the federal government, then why should the government or this committee look further at enhancing direct support programs for various industries?
That's a big question. You can answer it partly here and answer further to me later.
6:25 p.m.
Senior Associate, Canadian Council of Chief Executives
Mr. Chair, I'll just say, to begin with, that growing cash balances in corporations over the past few years have basically been driven by the fact that there's a huge amount of uncertainty in the global economy. I'm confident that once the U.S. recovery takes hold, and demand in Canada is sustained and companies are confident in that, you will see investments made by these corporations. A corporation acts just like a person would in an uncertain environment: they're hesitant to spend.
In terms of a direct support program, Canada has traditionally focused on indirect spending in the past. Nearly 90% of our R and D support was in indirect spending, whereas in the U.S. 80% was direct.
What we've just argued is that there should be a better balance between indirect and direct spending if you want to encourage innovation and R and D.
6:25 p.m.
Conservative
The Chair Conservative James Rajotte
I appreciate that. I'd like to follow up further, but we should go to vote.
Mr. Kingston, or anyone else, in terms of companies' cash on hand, if we could get a more fulsome description of what form it's in and how many companies are sitting on how much cash, that would be helpful for the committee. Could you follow up on that?
6:25 p.m.
Senior Associate, Canadian Council of Chief Executives
I'd be happy to forward a report to you by TD that is quite good and shows exactly what the balances look like.
6:25 p.m.
Conservative
The Chair Conservative James Rajotte
I would appreciate that.
I want to thank our witnesses very much for being here and contributing to our discussions on the pre-budget consultations.