Debates of May 28th, 2008

Finance—Main Estimates 2008-09

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

Mr. Chair, the member for Markham—Unionville has obviously been out of touch. If he is following the indices, he will know that last week the income trust indexes were up to where they were at the end of October 2006. If he is talking about some notional losses, they are not there in the market.

I realize that his party had planned to do what we eventually did. I realize that the Liberals did not have the courage to do it and they did not do it. However, our government, seeing the danger to the solidity of the Canadian tax system, took the action that needed to be taken to protect Canada.

[The Chair, NDP, Bill Blaikie]

I would just say to the hon. member for Markham—Unionville and others, the rules are that the answers have to be approximately the same length as the questions. I cannot be cutting people off at the exact second or we are not going to have a very good exchange, but I will now recognize the member for Markham—Unionville again.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Chair, the income trust index remains very substantially below the overall index. There is no way in which it can be said that loss has been recovered, and the minister refuses to apologize to a million Canadians for his broken promise.

If he will not apologize for that, will he apologize to Newfoundland and Labrador and Nova Scotia for breaking his promise on the Atlantic accord?

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

Mr. Chair, I am pleased to report something that is not really news, because most of us on this side of the House are aware of it but apparently the member for Markham—Unionville is unaware of it. That is that Nova Scotia is quite comfortable with the steps we took to achieve fiscal balance in Canada, and Newfoundland and Labrador has proceeded to work with the agreement as well.

In fact, this has been a tremendous success in Canada, to move from fiscal imbalance to fiscal balance. Again, it is something that the previous government looked at, went into some one-time deals here and there with certain jurisdictions in Canada, but did not get the job done.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Chair, the minister never apologizes for anything. One wonders how heinous an act it would have to be before he would deem it required to produce an apology.

I come now to the subject of the quality of his economic forecasts. The forecast for 2008 a year ago was 2.5%; six months ago, it was 2.4%; and in February it was 1.7%. Now the Bank of Canada is forecasting a 1.4% growth rate.

Has the minister revised his forecast again relative to his budget forecast, given the Bank of Canada's forecast and if so, could he share this new forecast with the House?

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

Mr. Chair, we are comfortable with the forecasts that we have been using. We are comfortable with the fact that we are on track in this fiscal year.

[The Chair, NDP, Bill Blaikie]

The hon. member for Scarborough—Guildwood.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, I wonder whether the minister could inform the House as to what is the economic stimulus effect of a cut in the personal income tax.

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

Mr. Chair, certainly we have seen very positive effects from the stimulus that we provided to the economy of Canada. This is a cumulative stimulus.

Since we took office in February 2006, we have reduced taxes of all kinds in Canada: personal income taxes; excise taxes; the consumption tax, the GST, by two full percentage points, one point of that occurring in January of this year--

[The Chair, NDP, Bill Blaikie]

The hon. member for Scarborough—Guildwood.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, the question is rather simple. Do you actually know the economic multiplier for a cut in personal income tax, yes or no? Do you know the number?

[The Chair, NDP, Bill Blaikie]

I would remind the hon. member that this is committee of the whole, but questions still need to be directed through the Chair.

I do not know the answer, but perhaps the Minister of Finance does. The hon. Minister of Finance.

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

Mr. Chair, the cumulative effect of the stimuli provided since 2006, including the dramatic business tax reductions in the fall economic statement, is 1.4% of GDP.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, does the minister know the economic stimulus effect of a cut in the consumption tax?

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

Mr. Chair, as I said, 1.4% of GDP is the stimuli, the total effect of the stimuli which we have provided by tax reductions since taking office.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, the answers to the questions are that on a personal income tax cut, the economic stimulus is about 1.3%, so for every dollar, there is $1.30 of economic stimulus. On a GST cut or a consumption tax cut, for every dollar of cut, there is $1.10 in stimulus.

So, I ask the hon. member, why would he weight his tax relief to the least stimulative aspect of tax relief?

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

Mr. Chair, as I say, we have been balanced in our approach. We have reduced taxes of all kinds in Canada, and particularly coming up to what we knew was going to be slower economic times this year and going into next year, we took the dramatic actions at the end of October 2007 to dramatically and historically reduce business taxes in this country. This provides a direct stimulus to the manufacturing sector in Canada which needs the help, as we know.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, it is clear that the minister does not quite understand what he has done. He has in fact got it backward. In fact, he has allocated the largest portion of his tax relief to the least stimulative aspect. He has made that immediate, and the most stimulative aspect to the tax relief, he has made that over the longer term.

So I ask the hon. minister, how in heaven's name did he get it backward?

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

Mr. Chair, I will tell the member who had it backward. In 2004-05 the previous government increased spending by 14.8%. I will tell the member who has it backward: the party opposite us in the House that thinks it is a good economic stimulus to bring in a carbon tax on poor people with fixed incomes in Canada, on seniors, on the manufacturing sector to drive up its costs. That is who got it backward.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, this is a little rich coming from the biggest spending finance minister in the history of Canada.

What is Canada's corporate tax rate for the year 2008? What is the rate? It is a simple question that begs a simple answer.

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

Mr. Chair, we are moving to 15% by 2012, but on January 1 there was a change, so we are checking on that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, to assist the minister, the rate is 13% on the first $400,000 of profit and 22% on the balance.

What is Ontario's corporate tax rate in similar sort of numbers?

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

Mr. Chair, the general federal corporate income tax rate is: 2007, 22.1%; 2008, 19.5%; 2009, 19%; 2010, 18%; 2011, 16.5%; 2012, 15%.

It is regrettable that the previous government did not move in this direction. It would have been a good stimulus for Canadian business.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, he has answered the question with respect to corporate tax rates for Canada and he has not answered the question regarding the corporate tax rate for Ontario. In order to help him out, I will tell him. The Ontario corporate tax rate is 8.9% on the first $500,000 and 14% on the balance.

I ask the minister, why would he be lecturing the treasurer of Ontario on lowering corporate tax rates when his is five to seven points higher than the Government of Ontario's?

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

Mr. Chair, I know a bit about this, having been the treasurer of Ontario. We reduced corporate taxes in the province of Ontario, but then the Liberals were elected in the province of Ontario and do you know the first thing they did, Mr. Chair? They got rid of that corporate tax reduction and increased corporate taxes in the province of Ontario, such that they are now approaching 15%. It is typical. It is what Liberals do. They spend and they raise taxes and they run deficits.