House of Commons Hansard #126 of the 40th Parliament, 3rd Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

12:50 p.m.

Conservative

Mike Wallace Burlington, ON

Madam Speaker, the fact is that the opposition likes to say that these corporate business tax cuts will go into some fat cat's pocket, but that is just not the case.

What will happen is that those companies and those businesses will reinvest in their companies. They will grow. There is not one company in this country that does not want to increase its sales and produce a better bottom line. That will produce jobs . The money that is saved in taxes will go directly back into the re-investment--

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

12:50 p.m.

NDP

The Acting Speaker Denise Savoie

Order, please. Resuming debate. The hon. member for Edmonton--Leduc.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

February 8th, 2011 / 12:50 p.m.

Conservative

James Rajotte Edmonton—Leduc, AB

Madam Speaker, I hesitate to follow the member for Burlington who is such a passionate defender of lowering taxes in this country.

It is my pleasure today to address the motion put forward by the Liberal Party of Canada. I stand today in support of Canada's job creators and against this very irresponsible tax hike proposal by the Liberal Party that would threaten our economic recovery and harm hard-working Canadian families.

Unlike the Liberal Party that wants higher taxes to fuel bigger bureaucracies, our government believes in keeping taxes low for both families and job creators.

Since we took office in 2006, we have aggressively pursued a low tax plan to help create jobs right across this country. It is a plan with over 100 tax cuts to date and it is reducing taxes in every single way the government collects them: personal, consumption, business, excise taxes and more. Our low tax plan has reduced the overall tax burden on Canadians to its lowest level in nearly 50 years. It is a low tax plan that has already removed over one million low income Canadians completely from the tax rolls. It is a low tax plan that has reduced the GST, a tax on every Canadian, from 7% to 5%, that introduced the landmark tax free savings account to help Canadians save and much more. It is a low tax plan that has left nearly $3,000 in the pockets of a typical Canadian family, where it belongs, to save or spend as that family sees fit.

We have also lowered taxes for businesses so they can keep more of their hard-earned money, allowing them to grow and create more jobs for Canadians.

Our plan has included everything from broad-based business tax relief; support to the provinces in their elimination of job-killing capital taxes; lowering the tax rate for small businesses from 12% to 11%; increasing the bracket for the small business tax rate from $300,000 to $500,000; eliminating tariffs on productivity-improving machinery and equipment, which was done in last year's Budget Implementation Act; introducing a temporary accelerated capital cost allowance, which was begun back in budget 2007 on manufacturing or processing machinery and equipment; and much more. This broad-based tax relief has served as the centrepiece of our low tax plan for businesses and has proven successful in spurring investment in Canada and helping to create jobs for Canadians.

In 2007, our government introduced and Parliament passed these broad-based tax reductions that will lower Canada's business tax rate to 15% in 2012.

Since 2007, Canadian businesses have been making their investment decisions and hiring Canadian workers based on this low tax plan for businesses. Over 110,000 businesses in Canada are currently benefiting from our low tax plan to grow and create more and better paying jobs for Canadians.

The economic benefits of our government's low tax plan have been verified by numerous independent observers. A well-respected University of Calgary economist, Jack Mintz, recently released a report showing that the final three point reduction in the business tax rate alone would lead to nearly $50 billion in greater capital investment and over 200,000 new jobs over time.

Similarly, the Canadian Manufacturers & Exporters recently released another report praising our low tax plan as “critical drivers of the Canadian economy” that will, among other things, help to create hundreds of thousands of new jobs, increase the personal incomes of Canadians by over $30 billion, increase per capita personal income by $880, and contribute between $2.6 billion and $3.7 billion in additional net revenues for all levels of government.

I encourage all parliamentarians to read these objective reports to see the facts on this issue.

It has to be noted that the Liberals claimed to support this broad-based tax relief but let us remember that on April 2, 2008, they stood in this chamber to oppose a very similar motion from the NDP. Canadians should review the debate in that Hansard.

I would like to remind the Liberals of that debate and what the Liberal finance critic at the time, my friend, the member for Markham—Unionville, said. He said:

...we need to create a new Canadian advantage to attract capital and jobs to this country and that new Canadian advantage...is to create a low corporate tax rate....

That we believe will replace the weak currency as a new Canadian advantage and will serve this country well to improve productivity, competitiveness and attract jobs....

The federal NDP members are in the class war mentality where any corporate tax cut is just seen as a sop to the rich. They do not understand, as their Swedish, Danish, Norwegian, British fellow social democrats learned long ago, that we have to create wealth before we can redistribute it, and that in order to compete in this world and get jobs it makes sense to have lower corporate tax rates.

Why are the federal NDP members almost alone in the world in being the Neanderthal version of the global social democratic movement.

Those are harsh words, not from me but from the Liberal finance critic at the time. It is just shocking to hear the kind of language they would use. However, his argument was exactly right and his argument is the argument that our government is putting forward in pursuing the path that we are on. It is interesting that the argument used by the Liberal finance critic at the time is something that the Liberal Party and the Liberal leader fail to understand today.

As chair of the finance committee, I have the privilege every year of travelling across the country and hearing from many communities across this great country. We heard from many of the over 110,000 businesses and their representatives, groups like the Mining Association of British Columbia, Canadian Manufacturers & Exporters, the Canadian Automobile Dealers Association, the Conseil du patronat du Québec, the Edmonton Chamber of Commerce and the Canadian institute of Chartered Accountants. All of those groups were unanimous in their support for our low tax plan.

A witness from the Canadian Chamber of Commerce, in his testimony before the committee, said:

The single most important or most damaging thing the government could do at this point to stall the recovery would be to cancel the planned tax reductions. Business has been planning on them. The private sector has been hiring based on them. The private sector has been investing based on them. If suddenly those were repealed at this point, the impact would be to get business to shelve its plans for expansion and getting people back to work.

We in this party are committed to helping create more and more jobs by making Canada the best place to do business with our low tax plan.

Canada's continued job growth shows it is getting positive results. Indeed, we have created over 460,000 jobs since July 2009, a very good statement for the economy, and the strongest job growth in the G7 with nearly 70,000 jobs created in January alone according to Statistics Canada.

However, too many Canadians are still looking for work and the global economic recovery remains fragile. We must stay the course with our low tax plan to protect and create jobs to allow companies to invest across this country.

I encourage all members of this House to reject the Liberal plan to raise taxes and, frankly, embrace the position that it held only a few months ago to continue with this path to allow Canada to remain an economic leader in the world today.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

12:55 p.m.

Liberal

John Cannis Scarborough Centre, ON

Madam Speaker, the member from Edmonton—Leduc and the member from Burlington earlier both said that the Conservative government had lowered the lowest personal tax bracket to 15%.

I want to clarify for the record, and if it is challenged we can go back and see it, but the lowest bracket was in our last budget, a Liberal budget, at 15%. The Conservatives then came in with their first budget and raised it to 15.5%. Now the Conservatives stand up and say that they lowered it. If I am wrong, they can stand and say so. If I am right, we should look at the record for clarification for Canadians.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

12:55 p.m.

Conservative

James Rajotte Edmonton—Leduc, AB

Madam Speaker, we did lower the rate to 15% and we have taken about one million people off the tax rolls in this country. We have raised the marginal tax rate so that lower income people are paying less tax. We have lowered the consumption tax in this country from 7% to 5%. We have lowered every type of tax, whether it is personal, business or family tax. We have put $3,000 more in every Canadian families' pockets so that they can save or spend as they best see fit.

This is the tax plan that must go forward and I encourage the member opposite to reject his own motion.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1 p.m.

NDP

Peter Stoffer Sackville—Eastern Shore, NS

Madam Speaker, it was interesting to listen to my colleague from Edmonton talk about what the Conservatives have lowered. However, what he did not say was what they had raised.

The people of Ontario and B.C. are not very happy with the HST. Billions of dollars came from the Government of Canada to help bribe Ontario and B.C. into implementing the HST, which the citizens of those provinces were not very happy with.

Being from Alberta, I keep hearing that my hon. colleague is called a “pistol” Conservative, although I have never truly met one yet. However, I would like him to stand in this place and say very clearly that since his party has been in power it has added $100 billion to the national debt. We have the largest deficit of all time facing us. Even the Parliamentary Budget Officer, someone the Conservatives employed, said that we now have a structural deficit. Does the member agree? Do we have a structural deficit?

Could the member outline how the government plans to lower the debt and deficit without using the backs of the provinces or ordinary Canadians to do it?

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1 p.m.

Conservative

James Rajotte Edmonton—Leduc, AB

Madam Speaker, in terms of the national debt, obviously in the last couple of years we have added to it, but it is important to point out that between 2006 and 2008 our government paid $40 billion on our national debt and every single payment was opposed by parties opposite in terms of putting money toward our savings and actually reducing the debt between 2006 and 2008.

I would also point out that I have encouraged members of the opposition to put on the table any of the spending that it has opposed over the last two years and say that we should not be doing it in terms of infrastructure or any other stimulus spending.

In terms of reducing the deficit going forward, we have a five-year plan to do that by 2015. We will be ending the stimulus program in 2011. We have also frozen the operational budgets of departments. We have frozen the salaries of the Prime Minister, cabinet ministers, all members of Parliament and their budgets.

We will be restraining spending, but we will not, as my colleague from Burlington said, be cutting transfers for health care, education and transfers to the municipalities. Those transfers will continue going forward.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1 p.m.

Edmonton Centre
Alberta

Conservative

Laurie Hawn Parliamentary Secretary to the Minister of National Defence

Madam Speaker, Liberals like to use weasel words to say that they are not talking about raising taxes. The corporate tax rate today is 16.5%. Liberals want the corporate tax rate to be 18%. Could my hon. colleague please comment on how that could possibly be seen as anything other than an increase in taxes and what effect that would have jobs for Canadians?

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1 p.m.

Conservative

James Rajotte Edmonton—Leduc, AB

Madam Speaker, the parliamentary secretary is exactly correct. The rate dropped from 18% to 16.5% on January 1. If Liberals get into office, they will increase taxes in this country by 1.5% on any business making over $500,000. That is not just large corporations. That is medium and small corporations as well.

The plan is to go to 15%. As the chambers of commerce across this country have said, they have booked on that, they are investing on that and they are hiring people on that. That will be a tax cut as well. That will be a 3% tax cut on every small, medium and large corporation in this country.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1 p.m.

Liberal

Bonnie Crombie Mississauga—Streetsville, ON

Madam Speaker, I rise to join the debate on corporate tax cuts. I will be sharing my time with my hon. colleague from Humber—St. Barbe—Baie Verte.

Today we are discussing the decision of whether to proceed with tax cuts for large corporations rather than investments in Canadian families, pensions, learning, health care and family care.

Rather than the Conservatives' misguided priorities of spending billions of dollars of borrowed taxpayer dollars on untendered fighter jets, building U.S. style prisons, G20 summits and tax cuts for the largest corporations, this House and the Liberal Party will argue and ask the government to reverse this irresponsible decision of the tax cuts in the upcoming budget.

The government believes that cutting taxes is a panacea to all else and warn that doom and gloom awaits us if we do not continue to cut corporate taxes. The Liberals agree that it is important to tax corporate profits at a competitive rate because we want companies to invest more of their profits here and foreign firms to see Canada as a great place to do business because more investment means a stronger economy and of course more jobs.

As a Toronto Star editorial stated:

But there’s a difference between staying competitive and making a fetish out of one benchmark — ever-lower corporate tax rates.

Canada already has one of the most competitive business tax environments in the world. The federal Liberals started the trend last decade when the deficit had been eliminated and the economy was booming and we were in surplus. We slashed corporate taxes from 28% to 21% in 2004. The Conservatives went further, cutting them to 18% in 2010. That put Canada in third place in the G7, behind only Italy and the U.K.

The Conservatives now want to drop our rate further to 16.5% and then further again to 15% in 2012, costing the treasury $6 billion this fiscal year alone and over $10 billion by 2012. Let us think of what $10 billion could do for our economy.

Every year since 2000, corporations in Canada have received a generous tax cut. When times were good and everyone was getting tax cuts Canadians accepted that Ottawa was giving up billions of dollars of revenue. However, times are no longer good and the government is running a deficit of $56 billion and Canadians have not had a personal income tax cut in over four years.

As other countries continue lowering their corporate taxes, must we continue to do so? Do we really risk the flight of capital, of corporations and of investments to other countries if we do not continue to lower our corporate taxes?

The Conservatives would have us believe so. In fact, they quote Jack Mintz of the University of Calgary who claims we will be left behind other countries with more aggressive tax-cutting regimes if we stop cutting our tax rates.

This is false. Corporations lay down roots for many reasons other than the lowest tax rates. Most of those reasons have little to do with tax levels. Companies locate in Canada because of our highly trained workforce, access to major markets, our lower dollar, sophisticated communications, our lack of corruption, quality social services and social programs, education, an excellent quality of life, and much more. If corporate taxes were all that mattered, Ireland, with its rate of 12.5% would still be booming. No one would do business in Scandinavia where taxes remain high. In the U.S. where corporate taxes vary from state to state, companies would flock to zero tax havens like Nevada and Wyoming, but they are not.

It is also not clear that corporate taxes necessarily lead to more jobs. The evidence is mixed. Other measures, such as spending on infrastructure or cuts to personal income taxes may help foster growth and create even more jobs.

Jim Stanford of the Canadian Auto Workers argues that cutting corporate taxes would actually destroy jobs. Business would hoard not hire, leaving less money in the federal treasury for EI benefits, retraining and infrastructure.

Next year, Ontario businesses will pay a combined federal and provincial rate of 25%, which compares to a rate of 35% in the U.S.

One would think that the growing gap is a big incentive for U.S.-based multinationals to invest in Canada, perhaps even offsetting the higher cost of the Canadian dollar. That is wrong. Tax cuts are of little attraction.

In fact, U.S.-based companies, unlike most foreign multinationals, are taxed by the IRS on their global income. Therefore, profits that are not reinvested but are repatriated are hit with a higher rate back home, not the Canadian rate.

The lower tax rate makes profits looks better in Canada, but that just means Americans are taxed more in the U.S. Therefore, the Conservative tax cut is not a huge draw.

In fact, Scott Clark, a former deputy finance minister, points out that after the recent recession, many companies are reporting losses or depressed profits, making tax breaks a lot less attractive than when the economy was booming. Many large corporations would not be paying taxes on their profits because of many recorded losses during the recession and will be able to record those losses against their profits for many years to come.

Two sectors which weathered the recession well in Canada were the oil and financial services industries, so the tax cuts the Conservatives are willing to provide to their friends in Calgary are in the oil sector and, of course, the big banks, unlike forestry and manufacturing, which did not turn a profit and may have benefited from a cut.

Making a country that is good for business is a lot more complicated than shifting the tax rate a few percentage points. Timing is key. Cutting business taxes when we are in a surplus or when the budget is balanced is one thing, but continuing to cut when the deficit is $56 billion effectively means borrowing more to cover the lost tax revenue.

We need to hit the pause button and get our fiscal house in order. Tax cuts are not the magic bullet for what ails our economy, nor are they the elixir for investment, growth and jobs, as the Conservatives claim. They are a drain on the fiscal purse at a time when there are better ways to create jobs.

According to Philip Cross, Statistics Canada's top economic analyst, Canada's natural resources, the price of oil, currency fluctuations and the state of the country's financial markets have been far more influential on corporate investment decisions than the recent tax cuts. A broad look at how corporate tax rates have changed Canada suggests the impact of small cuts is marginal for most companies. The larger impact is on the government's bottom line.

Other analysts argue that as a result of the tax cuts, corporations sat on their savings, hoarded the cash, bought back shares or sent profits out of the country to their foreign headquarters instead of investing, expanding and hiring in Canada. In fact, the tax cuts do not apply to small businesses, which are the job creators in our economy since they have their own tax rate.

According to Carol Goar, a writer for the Toronto Star, five questions need to be asked of promoters of corporate tax cuts.

First, what evidence does the government have that reducing corporate taxes stimulates job creation?

Second, how does the finance minister know corporations will use their tax cuts to hire workers rather than invest in labour-saving equipment, give executive bonuses, increase their shareholder dividends, facilitate mergers and acquisitions or simply sock the money away?

Third, if the finance minister is eager to encourage hiring, why did he jack up the employment insurance premiums on January 1 by $13 billion? Nothing kills jobs faster than a payroll tax.

Fourth, what proof exists that corporate tax cuts make Canadian companies more competitive? They could have the opposite effect. Instead of investing in research or innovations, firms could use tax cuts to undercut their rivals, buy back shares or give executive bonuses.

Fifth, why is it good economic policy to shift an ever-growing portion of the tax burden from businesses, many of which are highly profitable, to individuals, many of whom are struggling to get back on their feet after the recession?

After five years of the Conservative government, Canadians are worse off and the corporate tax cuts are only borrowing against our children's future. The government's real priorities are fighter jets, U.S.-style mega-prisons and more tax cuts for the largest corporations.

In the five years since the Conservative government was elected, Canada has become less equal. The rich are getting richer and middle-class Canadian families' incomes are stagnating. The pressure on families is increasing and the elastic is stretched really tight.

Liberals would make different choices and defend the priorities of Canadian families. We would cancel the $16 billion jet fighter deal and save billions by replacing the CF-18s in an open competition. We would cancel the government's corporate tax breaks and freeze tax rates at 2010 levels.

Canada's corporate tax rates are already among the lowest of the G7. Liberals would reinvest the savings in reducing the deficit and the priorities of middle-class Canadian families. Pensions, learning, health and family care are the real issues affecting working families and these are the priorities that the Liberal Party will fight for.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1:10 p.m.

Conservative

Phil McColeman Brant, ON

Madam Speaker, I would like the member for Mississauga—Streetsville to respond to the quote from the Mississauga Board of Trade, with which she would be familiar. On January 13, it said:

With Canada still slowly emerging from the recent recession, any potential of eliminating these tax reductions will severely affect Canada's business community, the economy, jobs and investments. Many businesses have already factored in these tax reductions in their long-term financial strategies. Thus, eliminating these reductions would be adding back $4.5 billion of taxes...that business has not accounted for nor are prepared to pay. Business will not only struggle to pay these taxes, but will also be forced to sacrifice in investments of new employees or technologies, which often are key pillars to business growth and success.

Would the member for Mississauga—Streetsville please respond to that?

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1:15 p.m.

Liberal

Bonnie Crombie Mississauga—Streetsville, ON

Madam Speaker, my argument today is that these tax cuts are reckless and unaffordable.

It was one thing when the Liberals reduced corporate taxes during an economic boom. We were in a surplus of $14 billion and we kept a reserve of $13 billion. However, circumstances are different today. Because of the government's policies, today we have a $56 billion deficit and we have just added $200 billion more in new debt under the government, which will have to be paid back by borrowed money.

These tax cuts are unnecessary as well because we already have some of the lowest corporate tax rates of the G7. They do not include tax rates for small businesses. We know that corporate tax cuts are not the most efficient way to create jobs and drive growth in the economy. For example, infrastructure, housing and family care would help foster growth and jobs.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1:15 p.m.

NDP

Jim Maloway Elmwood—Transcona, MB

Madam Speaker, most of the people I talk to, both citizens and people in companies, believe corporation taxes are low enough already. In fact, there is a belief that good corporate citizenship comes with added responsibility to want to pay taxes to help the country. Corporations just do not arbitrarily move to the lowest tax jurisdiction. One of the previous speakers already pointed out that tax rates in Las Vegas were extremely low and we do not have an exodus of corporations heading toward Las Vegas.

The fact is corporations have to look at the total package. Canada provides a lot of social benefits like health care, which are not provided in the United States, and other things. There is a whole number of inputs in to making corporate decisions. If the government thinks for one minute that corporations will just pack up and leave, that will not happen.

We already have low corporate tax rates. There is no reason to reduce them, whether we are in a surplus position or a deficit position. We are in a deficit position right now and this is totally irresponsible on the part of the government.

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1:15 p.m.

Liberal

Bonnie Crombie Mississauga—Streetsville, ON

Madam Speaker, I do not think I heard a question, but I certainly concur with the hon. member's comments. We already know that Ireland has the most favourable tax rate of 12.5% and not all companies are flocking to Ireland to do business. In fact, no one would do business in Scandinavia as a result of the high tax rate.

As I have said earlier, tax rates vary from state to state. Some of the most highest taxed states are not the least popular and neither are Nevada and Wyoming, which have the lowest tax trade.

I want to read to few quotes from some citizens who wrote in on the topic of corporate tax breaks. The first one is from Mahmood in Ottawa who says:

With a debt of $500 billion and a massive deficit of $45 billion, this is clearly not the time for tax cuts. All tax cuts must await return of the budget surplus and a substantial reduction in the national debt. Any corporate tax cut at this juncture will only add to the budget deficit and debt.

Jeff from Toronto says:

The Conservatives are not prudent fiscal managers. They spent $1.2 billion on G8/G20 summit security to stop fewer than 100 anarchists, but they cut $22 million [which is actually $43 million] in settlement programs in Toronto...resulting in a loss of 1,000 jobs in the GTA. The security spending was a pork barrel for the Conservative—

Opposition Motion--Tax Rate for Large Corporations
Business of Supply
Government Orders

1:15 p.m.

NDP

The Acting Speaker Denise Savoie

Order, please. I must interrupt. The hon. member's time has run out.

The hon. member for Humber—St. Barbe—Baie Verte.