Finance Committee on May 10th, 2006

[The Chair, Conservative, Brian Pallister]

Good afternoon, ladies and gentlemen and members of the committee. It's nice to see you.

Our guests from the Department of Finance are here pursuant to Standing Order 81(4), main estimates, 2006-07, votes 1, 5, 10, and L15 under Finance, referred to the committee on Tuesday, April 25, 2006. I call votes 1, 5, 10, L15 under Finance.

We'll have a brief presentation and follow with questions.

Welcome to our guests.

Madam Volk, would you like to proceed?

[Coleen Volk, Assistant Deputy Minister, Corporate Services Branch, Department of Finance]

Thank you.

Good afternoon, Mr. Chair. My name is Colleen Volk, the assistant deputy minister of the corporate services branch at the Department of Finance. With me today are Barbara Anderson, assistant deputy minister of the federal-provincial relations and social policy branch; Paul-Henri Lapointe, assistant deputy minister of the economic and fiscal policy branch; and Serge Dupont, acting assistant deputy minister of the financial sector policy branch, and many members of our department in the seats behind us.

We understand that the Committee will be meeting with other members of the Finance Portfolio – the Canadian International Trade Tribunal, the Financial Transactions and Reports Analysis Centre of Canada, the Office of the Superintendent of Financial Institutions, and the Office of the Auditor General – on separate occasions, so today’s discussion focuses solely on the Main Estimates of the Department of Finance.

As you are likely aware, the Department’s responsibilities include preparing the federal budget, developing tax and tariff policy and legislation, managing federal borrowing on financial markets, administering major transfers of funds to provinces and territories, developing regulatory policy for the country’s financial sector and representing Canada in international financial institutions and fora.

The estimates that have been tabled in the House identify total budgetary requirements for the Department of Finance of $73.6 billion. It is important to know that $73.2 billion, or over 99%, of this amount relates to statutory votes for items that have already been approved by Parliament through enabling legislation. These include items like the payment of public debt charges, Canada health and social transfers, and equalization payments. These statutory votes are displayed in the estimates document for information purposes and will not be included in the appropriation bill.

Within the statutory votes there is a net increase of $4.1 billion over last year, with the major contributing factors being a $5.6 billion increase in transfer payments to provinces and territories and a $1.5 billion decrease in public debt costs.

The non-statutory votes of the Department of Finance show a decrease over last year. This consists of a $540 million reduction in grants and contributions related to payments made by Canada under multilateral debt relief initiatives, slightly offset by a $9 million increase to the operating vote, primarily related to increased salaries resulting from new collective agreements.

I would ask the committee to note that these Estimates were tabled before the Federal Budget and as such do not reflect any potential impacts. We are currently working with our colleagues at the Treasury Board Secretariat to determine what impact, if any, the budget will have on the Department’s finances and, should there be adjustments, these will be reflected in a Supplementary Estimate.

We will be pleased to address any questions the committee may have on these estimates.

[The Chair, Conservative, Brian Pallister]

Thank you for your presentation.

We'll begin with Mr. McCallum, for seven minutes, sir.

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

Thank you.

Knowing a bit about functions in Finance, I suspect this first question would be for Mr. Lapointe. My first question is that given that page 218 of the budget plan says that the 2005 tax rate is 15% and the 2006 tax rate will be 15.25%, would he agree that that represents an increase?

[Coleen Volk]

Chair, could we ask Serge Nadeau to answer that question?

[Serge Nadeau, General Director, Analysis, Tax Policy Branch, Department of Finance]

This is a tax reduction compared to the budget 2005 track, which has been legislated.

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

That wasn't my question. On page 218 of the budget it says that the tax rate is 15% in 2005 and 15.25% in 2006. That's the statement. My first question is, do you agree that that's an increase?

[Serge Nadeau]

Well, it's an increase compared with what is being administered currently; however, as I said, it's a tax reduction compared with the legislative fiscal tax reduction.

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

But is it an increase relative to what all Canadians paid this year? It says very clearly on the tax form—

[Garth Turner, Conservative, Halton, ON]

It was never passed, John.

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

—that the tax rate is 15%. So clearly Canadians, in filling out their tax form for the year 2005, paid 15% in 2005, as stated in the budget document. Is that correct?

[Serge Nadeau]

Do you mean compared with what is being administered?

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

No, not compared with anything. Is it 15%?

[Serge Nadeau]

That's right.

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

That's right.

[Serge Nadeau]

So compared with the 15%, yes, it's a tax increase; however, it's a tax reduction compared with the legislated tax—

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

No, but I'm just asking one question at a time, if I may.

It is true that Canadians, according to the tax form—and they've sent the money in, and filled it out—paid 15% for the year 2005. Is that correct?

[Serge Nadeau]

That's correct. It's a fact.

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

And it's true that Canadians in 2006 will pay 15.25%. Is that correct?

[Serge Nadeau]

That's correct.

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

Then how can you deny that's an increase in what Canadians are actually paying?

[Garth Turner, Conservative, Halton, ON]

Because the intention with the one-quarter—

[The Chair, Conservative, Brian Pallister]

Order.

You each have time for questions, so we'll just let Mr. McCallum finish his round.

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

Would you agree that in terms of the tax rate Canadians are actually paying, as stated directly in the budget, it's going from 15% in 2005 to 15.25% in 2006?

[Serge Nadeau]

That's correct.