Finance Committee on Sept. 25th, 2006

[Sally Brown]

It's a health charity, so we raise donor dollars. We fund research and, by and large, health promotion and health public awareness programs. Our website is our big knowledge translation tool, so people go there for health information.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Do you have a research arm?

[Sally Brown]

We do indeed. We fund ourselves about $55 million worth of research a year.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Ms. Brown.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Pacetti.

We're continuing with Mr. Paquette.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman. I apologize for missing your presentations, but I had to give a speech in the House on the softwood lumber treaty bill.

I will begin with the Canadian Institute of Chartered Accountants. I did look at your publication. A number of your proposals are very interesting. I want to ask you some questions. I simply want to emphasize that your presentation is biased to some extent. Take, for example, government revenues as a percentage of GDP. If we look at the various G7 countries, Canada is in the middle. Japan is at the top, followed by the United States, then Canada and Great-Britain at the same level, followed by Germany, etc. Look at G7 averages makes no sense from an economic standpoint, since no one is average. I find that argument a bit weak and unconvincing. Government revenues are used for programs spending. What we need to look at — and this is what an accountant normally does — what are the liabilities and the assets. That money is used for spending, which can be questioned, of course. However, the fact that our government revenues are low does not necessarily guarantee that productivity will increase.

To make the situation clearer, you should have indicated the various countries debt levels. The United States and Japan have lower revenues, but their debts are growing up exponentially. Down the line, that will cause problems.

As I said, I agree in part with the measures that you are proposing, in particular your suggestion that the government bring the capital cost allowance, the CCA more in line with the economic useful life of assets. I would like to hear what you have to say about that. We hear various opinions. Some people have told us that the current level is actually based on the useful life, but it should actually goes faster. I would like you to explain a bit more about what you mean when you say that the capital cost allowance should be increased.

[Kevin Dancey]

There are a lot of questions there. Let me deal with a couple of them.

You talked about the fact that Canada's rate was about the average of the G-7. That's a fair comment on where we are right now. Look at a lot of the emerging economies around the world--where India is, and where China is--in terms of where the world's going to be five to ten years down the road. Look at what Ireland has done. That's why I talked about Ireland today. Its tax rate is 12.5%. It's markedly lower than the rates of these other countries, and it has had exponential growth. It's been a Celtic tiger, and there's no reason why we shouldn't be a northern tiger in our hemisphere right now. So that deals with the particular issue around the corporate rate.

I go back to the point that federal spending is around $200 billion, so there's a lot of money on the table. It's really just about living within your means, as I talked about earlier. Families have to live within their means. Companies have to live within their means. So it's about looking at that big expenditure. I don't disagree with the comment made earlier that what those priorities are and where that money is spent are key.

On the question about the CCA, I used to be the ADM of tax policy at the Department of Finance, so it's something that just needs updating on a regular basis. It needs to be looked at to make sure that the write-offs companies get for the assets they buy reflect the economic life of those assets. It could be around technology assets; it could be around in various degrees in various areas. It's just something that needs a regular focus to make sure that the CCA they can claim is in line with the economic life of the asset.

[Pierre Paquette, Bloc, Joliette, QC]

I would like to make a comment. I am just curious. Ms. Brown, you are calling for the GST to be abolished on healthy food purchases from retail stores and restaurants.

Is wine considered a healthy food? If so, I would agree with your proposal.

[Sally Brown]

We're not suggesting that, although it is helpful.

[Pierre Paquette, Bloc, Joliette, QC]

Generally speaking, how do you feel that it should be decided whether a given food is healthy or not?

[Sally Brown]

Oh, there are very many ways. In particular, Health Canada has....

For instance, anything with trans fat in it is unhealthy these days, particularly with regard to manufactured trans fat, not naturally produced. We know what constitutes junk food in terms of what proportion of the fat in the food is saturated.

So there are all sorts of measures. We know what they are. We know what the calorie counts are per serving. It's not from a lack of information that we can't define it.

[The Chair, Conservative, Brian Pallister]

Thank you.

[Pierre Paquette, Bloc, Joliette, QC]

I did not get an answer, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

It was a good question.

[Pierre Paquette, Bloc, Joliette, QC]

I do not agree if wine is not included.

[The Chair, Conservative, Brian Pallister]

Mr. Dancey, you mentioned that you were an ADM of tax policy at the Department of Finance. How long have you been in the real world?

[Kevin Dancey]

I was ADM of tax policy here from 1993 to 1995.

[The Chair, Conservative, Brian Pallister]

Very good, very interesting. Thank you, sir.

Madam Ablonczy, for five minutes.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman.

Thank you to the presenters. We know that you went to a lot of work to put this material in front of us, and we do appreciate it very much.

Ms. Brown, one of your recommendations was for transportation infrastructure funds to be allocated to promote the active use of transportation. I just want to tell you a little story. I have a friend from Holland, and of course people in Holland bicycle almost everywhere. When she came here, she and her husband bicycled everywhere. But they ran into some snags. Our terrain is quite hilly, so there they were in the thick of traffic, labouring up hills. They also found that at certain times of the year—about eight months of the year—it was pretty damn cold on their bicycles.

So I'm just curious to know, given our topography and given our climate, what you would expect to achieve by this allocation of funds.

[Sally Brown]

What would we expect to achieve? We think if more of the funds from the transportation infrastructure were put into transport like buses, like better bicycle routes, like the equipment on buses where you could bring your bike and, if there was freezing rain when you wanted to go home, you could take the bus and not be penalized.... There are a number of measures.

The United States puts 10% of their infrastructure funds into what we call “healthy” infrastructure. There's no reason why we couldn't put in a lesser percentage that would allow us to encourage people—and that's all you're doing, you're encouraging people—with an incentive to take other modes of transportation, including walking.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

That's interesting. Thank you for that response.

I wanted to ask Mr. Dancey something. It's not often we have a former official here who can answer some questions.

As you know, today the government, which had forecast that the surplus in this budget would be less than $1 billion--it in fact turned out to be quite a bit more than that--has been able to put $13.2 billion into debt reduction, to pay down the national debt. I wonder if you can give me and the committee some idea of what this is really going to mean in terms of funds that are freed up that currently have to go to debt reduction, and whether you think there will be other benefits from this in the long term, benefits other than just a fiscal dividend from paying down the debt.

[Kevin Dancey]

I think there is the benefit of the fiscal dividend in terms of paying down the debt. There's also the actual benefit that it kind of sets the tone in the sense that debt reduction is still important, and reducing that debt-to-GDP ratio as fast as possible is very important.

I think that's a very important tone to set for the long-term benefit in terms of where this country goes in the next 10, 20, to 30 years as the baby boom moves through and as the demographics mean that we're going to have an older population going forward. It's just a very important statement to make in terms of getting the fiscal framework in order.

The other statement it certainly says to me is that federal spending in and of itself today is relatively high, and this government is going to live within its priorities, or is going to live within its means and set its priorities within that amount. I think that's an important statement to make as well in terms of fiscal health in the long run.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

One of the federal taxes that's paid by low-income people is commodity tax. It makes sense to look at ways of reducing commodity taxes, because they fall disproportionately on low-income people. The National Anti-Poverty Organization put out a study in 2004 and said the easiest route to reducing taxes on low-income people would be to simply cut the rate of the GST.

Would you agree with that study by the anti-poverty association?

[Kevin Dancey]

I haven't seen the actual study, so it's hard for me to comment on it. What I would say is that yes, I do agree that commodity taxes generally fall on low-income people. There are various ways of dealing with that. One is cutting the tax. One is increasing the actual GST credit that goes to low-income people.

Also, reducing the GST may be one way of helping to facilitate harmonization with the provinces on the GST, which would be a very important fiscal step going forward in terms of simplifying our system.

[The Chair, Conservative, Brian Pallister]

Sorry, Madam Ablonczy, but your time has elapsed.

We have two minutes available for Madam Wasylycia-Leis before we wind it up. My advice would be don't waste it on a preamble.