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

12:30 p.m.

Liberal

The Chair Liberal Derek Lee

Thank you.

Mr. Anders, for five minutes.

12:30 p.m.

Conservative

Rob Anders Conservative Calgary West, AB

All right.

There's been a good deal of talk about lower taxes for middle-income workers, and tariff relief and what not. I'll just kind of give an opportunity to our witnesses today to talk about what they think would be the best stimulus—personal tax cuts or reductions in, for example, the GST, the goods and services tax.

I personally would probably be in favour of the goods and services tax, just on first blush, because I think that would stimulate people to spend, whereas an income tax cut is something they don't really get or see the effects of until later, after they've completed their own tax returns, etc. An announcement on a GST cut, or something like that, is something more immediate.

I wanted to open it up to our panel today to see if there are any opinions on that.

12:30 p.m.

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

Paul Rochon

In fact, in annex 1 of the budget, which is, admittedly, 240 pages in, we report what are referred to in the field as “multipliers”; that is, how much economic activity one gets for each dollar spent, either through infrastructure, for example, or a tax cut. The standard analysis would tell you that your most immediate bang for the buck comes from infrastructure spending. The issue, I suppose, with infrastructure spending, as we have discussed today, is that it sometimes takes some time to get going. In comparison, a cut to personal income taxes in the first year tends to have a somewhat smaller stimulative impact, but it builds over time as people adjust their savings and consumption patterns to lower taxes.

In response to your question, I think our best advice would be that a balanced package, a package that uses the full range of programs and instruments available to the government, is probably the best way to go if one's goal is to stimulate economic activity.

12:30 p.m.

Conservative

Rob Anders Conservative Calgary West, AB

Are there any other opinions from our panellists today? Everybody is mum.

12:30 p.m.

Deputy Secretary to the Cabinet, Plans and Consultation, Privy Council Office

Simon Kennedy

I would certainly defer to the Department of Finance on tax measures.

12:30 p.m.

Conservative

Rob Anders Conservative Calgary West, AB

Earlier, Madam Bourgeois asked some questions about the relative merits of cash versus accrual accounting. Mr. Calandra and I talked about this briefly, and I'm sure he would be interested in your response. Do any of you have strong opinions on cash versus accrual accounting, and why?

12:30 p.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

Accrual accounting is the standard for governments in Canada. It is also the standard for businesses in Canada. While we don't set those standards—they are set independently by the Accounting Standards Board or the Public Sector Accounting Board—I think there are fairly well accepted reasons why accrual accounting gives a more accurate picture, over time, of the financial results of either an enterprise or a government. Measuring cash is important for a number of reasons, not the least of which is appropriate control. We have spent much of the time here focusing on cash because we're looking at economic stimulus. But generally, for showing a proper picture of revenue and expense, or assets and liabilities, accrual is thought to be more accurate. Cash can be very lumpy and can distort the picture in a particular period. Up until 2003, the governments in Canada, the Government of Canada particularly, used a modified cash approach. But we have now moved to accrual because the theory is that it provides a more accurate picture over time.

12:30 p.m.

Conservative

Rob Anders Conservative Calgary West, AB

If I have any time left, I'd like to pass it over to Mr. Warkentin with the Conservative Party, if he so chooses.

12:30 p.m.

Conservative

Chris Warkentin Conservative Peace River, AB

Thank you.

I wonder if I might be able to speak to the folks from Statistics Canada. In your statement, Ms. Wilson, you said you'd done a current analysis of the infrastructure in Canada. Was that only government-owned infrastructure? I'm wondering if you did anything on the railroads, which are in most cases in private hands, or on privately owned power generation and transmission.

12:35 p.m.

Assistant Chief Statistician, National Accounts and Analytical Studies Field, Statistics Canada

Karen Wilson

Our study used a broad definition of infrastructure, irrespective of who the owners of the infrastructure might be. It covered all sectors.

12:35 p.m.

Conservative

Chris Warkentin Conservative Peace River, AB

I guess I'm hearing that there was an analysis done on railroads. Was it broken down by region, or was it simply infrastructure across the country?

12:35 p.m.

Assistant Chief Statistician, National Accounts and Analytical Studies Field, Statistics Canada

Karen Wilson

I haven't memorized the results of those studies.

12:35 p.m.

Conservative

Chris Warkentin Conservative Peace River, AB

I appreciate that.

12:35 p.m.

Assistant Chief Statistician, National Accounts and Analytical Studies Field, Statistics Canada

Karen Wilson

But I certainly can make the study available to you, and you can have a look at it.

12:35 p.m.

Conservative

Chris Warkentin Conservative Peace River, AB

That would be fantastic. I've been working towards an understanding of that for some time. So that may help me, and I'm sure other committee members would be interested in that particular report as well.

12:35 p.m.

Liberal

The Chair Liberal Derek Lee

Mr. Warkentin, you have extended the round of Mr. Anders, but I'd be delighted to put you down for an additional one.

12:35 p.m.

Conservative

Chris Warkentin Conservative Peace River, AB

That would be fantastic. I'd appreciate that.

12:35 p.m.

Liberal

The Chair Liberal Derek Lee

Madame Bourgeois, for five minutes.

12:35 p.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

Thank you, Mr. Chair.

My question goes to the Department of Finance, possibly to Mr. Richardson.

We find out in this budget that section 18.2 of the Income Tax Act is going to be repealed. The use of tax havens has been denounced as a strategy for a long time. The Auditor General of Canada has mentioned it a number of times. She even made a point of saying that Canada had lost hundreds of millions of dollars in the last 10 years. In 1994, she found that there was a tax shortfall of $3.5 billion. Even Minister Flaherty wanted to keep the section in 2007.

You are saying that the budget contains stimulus measures, but can you tell me how this approach, by which I mean repealing section 18.2, constitutes an economic stimulus? Is this not going to harm small to medium-size enterprises that want to do business too?

12:35 p.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

I think the repeal of section 18.2 is not a measure that directly affects stimulus very much one way or the other. So I wouldn't want to suggest it is a stimulus measure.

I think, though, there are some economic consequences that may be related to the provision, or the absence of that provision. Many Canadian businesses were concerned about the effect of section 18.2, because what it did, as I noted before, was to deny interest deductibility on certain debt taken out to make investments in other countries, or outside of Canada.

I think for many Canadian businesses, it's important for their health, and therefore for the health of the Canadian economy, that they be able to operate on a basis that is fair vis-à-vis their competitors in other jurisdictions. The concern that had been expressed, as was reflected in the report of the expert panel on international taxation, was that Canadian businesses were operating at a disadvantage compared with their competitors, if they were going to be subject to a provision like section 18.2.

Those are some of the reasons and considerations behind the decision to eliminate that section. Again, while I don't think it relates to stimulus directly—

12:40 p.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

You said that, according to the experts, our Canadian businesses were being disadvantaged. But the experts were talking about Canadian multinationals, were they not, not small to medium-size businesses?

12:40 p.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

I think they were talking generally about any business that was investing abroad, and I would agree those would be larger businesses generally, rather than smaller businesses.

12:40 p.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

So we are talking about multinationals.

12:40 p.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

But I don't think there is anything negative in the removal of section 18.2 for small and medium-sized businesses.

12:40 p.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

That is fine. My next question goes to Statistics Canada.

in their document, Mr. Richardson and Mr. Rochon say:

...and take measures to strengthen Canada's financial system, including moving forward with willing provinces on a Canadian Securities Regulator.

Has Statistics Canada done any research on provincial Securities Commissions to find out who would be disadvantaged by this measure or what advantage it could have?