Finance committee  In effect, I'm suggesting that we know there's a big discussion going on in terms of the fiscal balance or the fiscal imbalance, depending on your preferred term. We've tried to say it's important to respect provincial jurisdiction, and this speaks to the question from Ms. Wasylycia-Leis as well.

Finance committee  Yes. I want to recognize the action that has been taken on capital taxes. The most serious problem is the fact that four provinces still have provincial sales taxes that apply on business input and essentially act as a huge tax on new capital investment, which comes back to the issue of why companies aren't investing more and why we aren't getting more growth on that front.

Finance committee  Surely one agreement is enough for one day.

Finance committee  Yes, it's a fair question. Of course, I think part of the answer is that we don't operate in isolation. What we do within the Canadian economy has an impact internally, but we're not a closed economy. Therefore, the fact is that we've done some things right--and we've done a lot of things right--on the other hand, when you look at the economies that have flown past us, maybe they're doing more things right.

Finance committee  Again, some of it is structural. Any amount of academic energy has gone into these questions. Obviously there are structural differences. They're a bigger market. They're a market that has proportionately more larger companies. They're an economy that structurally has a lot more companies in the business of information communication technology, which in turn has been a big driver of productivity.

Finance committee  I think that's one of the really important policy questions. I don't have an answer for you on that. Why aren't the R and D tax credits, as generous as they are, not having more of an impact? I think there are a number of suggestions being put on the table, one of them being, of course, the fact that they're not refundable to companies that are in the early stages and not making any profits.

Finance committee  Frankly, on that front, I would not pretend to have any expertise. My instinctive reaction is that it may be very difficult to design something that works. My comment is to suggest that anything that encourages people to save more, to invest more, is a positive thing. Obviously allowing people to roll things over from one investment into another and defer tax along the way, in principle, sounds like a good idea.

Finance committee  Well, it's interesting. We had a very detailed discussion amongst our members a year ago when this issue was explicitly on the table, and we asked our members a number of questions in terms of their perception of whether converting to an income trust leads to a more conservative management approach.

Finance committee  I think there's been a pretty thorough analysis on all of this. I think it's important to ensure that companies choose the form of organization that works in terms of growing the business and in terms of whether it's appropriate for the business they're in, as opposed to getting involved in this kind of thing because of imbalances and tax policy.

Finance committee  I think the question is whether in fact there's a choice to be made. When we look at whether we spend or cut taxes, that question tends to be asked in a static way.

Finance committee  I think I tried to make known--

Finance committee  As I said, I think there are a lot of things that would help move this country in the direction of a more competitive economy. If I had to pick, my bias would be towards cutting taxes. What is my reason? Just look at the impact. It comes back to the question that Mr. St-Cyr raised: what is it that's going to create more revenue for governments?

Finance committee  I would say that anything that reduces the overall tax burden is helpful. I think the economic evidence is pretty clear. If the central goal of a tax cut is to accelerate economic growth and accelerate investment, you get the most bang for the buck out of income tax cuts rather than out of consumption tax cuts.

Finance committee  Canada traditionally has focused on the multilateral process in terms of trade liberalization and investment rules. For a relatively small power, it's obviously easier for us to work within a multilateral framework, or at least within a regional one. Given what's happened to the Doha Round in the WTO, I think it has given us a new need to focus more intensely on potential bilateral relationships.

Finance committee  Thank you, Mr. Chairman. It's a pleasure to appear before this committee once again to talk about priorities for the next budget. On the surface I guess Canada's economy looks pretty good these days. We're now in our fifteenth consecutive year of economic growth; unemployment is at three-decade lows; income is rising; inflation and interest rates remain modest; and governments, federal and provincial, are raking in surpluses.