Evidence of meeting #3 for Government Operations and Estimates in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was infrastructure.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Karen Wilson  Assistant Chief Statistician, National Accounts and Analytical Studies Field, Statistics Canada
  • Marilyn MacPherson  Assistant Deputy Minister, Corporate Services Branch, Privy Council Office
  • Stephen Richardson  Associate Deputy Minister, Department of Finance
  • Michel Girard  Director, Industry Accounts Division, Statistics Canada
  • Paul Rochon  Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
  • Simon Kennedy  Deputy Secretary to the Cabinet, Plans and Consultation, Privy Council Office

11:35 a.m.

Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance

Paul Rochon

Essentially, cash accounting shows the real amounts spent in a year. Let us suppose that the government spends $100 million to build a building and construction takes two years. Using cash accounting, the $100 million would be shown as a cost in those two years. In accrual accounting, you have to show the amortized amount. For a building, amortization is normally somewhere between 25 and 40 years, so a twenty-fifth of the cost.

11:35 a.m.

Bloc

Diane Bourgeois Terrebonne—Blainville, QC

Right. I understand.

Do you not find that this can mislead people who are not familiar with the two kinds of accounting? How is it that Canadians are given the figures on a cash accounting basis in the main budget but you operate on an accrual accounting basis that people do not understand. Why are you not consistent?

11:35 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

Madame, if I may respond to that question, the accrual accounting system is mandated by accounting standards for the Government of Canada and other governments in Canada. It's necessary that the accounts of Canada, and therefore the budget of Canada, be prepared indicating the accrual numbers. That's the starting point.

As you note, there is a difference in explaining from the accrual numbers how one gets to the actual expenditures of cash in a period. We have come to the conclusion that we should give both sets of numbers, particularly in these kinds of circumstances where it's important to explain to the population and to members of Parliament what cash is being expended, because that's where the effects of stimulus come into play.

11:35 a.m.

Bloc

Diane Bourgeois Terrebonne—Blainville, QC

You will agree that, when the government sets aside $323 million over two years, it can seem like a lot for the person in the street, whereas really, the amount is $120 million. I think that is not really being honest with ordinary people.

11:40 a.m.

Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance

Paul Rochon

We have to understand what is really spent, those are the most important amounts in the two years. For example, the money the workers receive is based on cash accounting, not on accrual accounting.

11:40 a.m.

Bloc

Diane Bourgeois Terrebonne—Blainville, QC

My next question is about section 18.2 of the Income Tax Act. The section deals with tax havens, and it has disappeared from the budget documents.

Why has this section disappeared? Why has this control mechanism for tax havens been abolished?

11:40 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

The provision you refer to, section 18 of the Income Tax Act, is a provision that restricts the deductibility of interest in certain cases for Canadian businesses borrowing to make investments outside of Canada. The provision was put into the law coming out of the 2007 budget, but has not yet had effect. It was, by its terms, set up only to come into effect in 2012.

The Minister of Finance established an expert panel to review the international tax system of Canada to make comparisons between that system and other systems and to obtain information from various parties and persons who were knowledgeable in the area of taxation. The recommendation of the panel was that this provision was onerous for Canadian businesses making investments, and that it was more onerous than similar provisions in many countries where Canadian businesses have to compete. A decision was taken to remove the provision.

11:40 a.m.

Liberal

The Chair Derek Lee

Thank you, Madame Bourgeois.

Mr. Gourde, you have eight minutes.

February 10th, 2009 / 11:40 a.m.

Conservative

Jacques Gourde Lotbinière—Chutes-de-la-Chaudière, QC

Thank you very much, Mr. Chair. I would like to thank the witnesses present.

My first question goes to Mrs. Wilson of Statistics Canada.

Statistics Canada uses input-output models in order to calculate the relative effects that injections of public funds in different sectors of the economy and in different regions of the country have on the Gross Domestic Product.

In general terms, what will be the short-term impact of infrastructure expenses on economic activity?

11:40 a.m.

Director, Industry Accounts Division, Statistics Canada

Michel Girard

If I understand correctly, you are asking us if we have already conducted impact studies. We have not because we have not yet been asked to.

I go back to what was said a little earlier. We have a model that can give us an idea of what the impact will be. So, in construction, we can say that investing in roads rather than telecommunications would create a few more jobs. That is due in part to the fact that the telecommunications sector requires us to import a large number of goods. So the indirect effects in Canada are less significant.

That is what the model would suggest. But I only used two industries as examples, whereas our model contains 303 industries for each province. So we have much more data than I provided.

11:40 a.m.

Conservative

Jacques Gourde Lotbinière—Chutes-de-la-Chaudière, QC

If I understand correctly, you are saying that, from an economic perspective, investments in infrastructure, rather than in other areas...

11:40 a.m.

Director, Industry Accounts Division, Statistics Canada

Michel Girard

No, that is not what I am saying. When a type of investment has been chosen, we can calculate its effects. We are not trying to say where investments should be made. We are merely describing the impact of any investment on such and such an industry or such and such a part of the economy.

11:40 a.m.

Conservative

Jacques Gourde Lotbinière—Chutes-de-la-Chaudière, QC

Understood.

According to Statistics Canada, should we trust data for last month or for the last quarter? Today, on February 8, can we trust data from January 31?

11:45 a.m.

Director, Industry Accounts Division, Statistics Canada

Michel Girard

Much less data is available on a quarterly basis. By industry, we have limited details on goods and services—and the investment counts as a good. What we can give you is based on historical data. So our model is based on inputs and outputs for 2005. We assume that the structure of the economy has not changed since. That is the model we use for our simulations.

If we are told how much money has been invested in a given sector, we can tell you what the impact would be in 2005 terms.

11:45 a.m.

Conservative

Jacques Gourde Lotbinière—Chutes-de-la-Chaudière, QC

Thank you, Mr. Girard.

My next question goes to the Privy Council Office.

The figures announced in the budget for infrastructure projects assume that provinces and territories will contribute to these various stimulus programs.

Were the provinces and territories consulted to see if they have the wherewithal to participate in these infrastructure projects?