Finance Committee on Oct. 25th, 2006

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

Are you in favour of transferring... Is there a better solution to the fiscal imbalance? Would it be to transfer personal income tax points or consumer tax points, such as the GST?

[Prof. Luc Godbout]

I prefer the GST. Let me tell you why. First, in terms of wealth, the gap between the provinces is not as big with regard to consumer taxes, as opposed to income taxes. Provincial consumer tax rates are therefore not as far apart.

Second, in light of the tax cuts announced by the Conservative government, if they totalled five points, it would be possible to transfer that entire tax jurisdiction to the provinces, rather than trying to agree on a few income tax points. Therefore, the federal government—

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

We could discuss this matter at length.

My next question is for Mr. Denis Patry, President of the Chambre de Commerce de Québec.

You raised several issues. As President of the Chambre de Commerce de Quebec, what would your first recommendation be?

[Denis Patry]

If I had to list one priority, it would be succession planning for family businesses. In agriculture, intergenerational transfers of the business is a problem throughout the province and Canada-wide.

The number of businesses that survive through the second generation is very low. The number of businesses that survive through the third generation is even lower. The taxes collected at the time of the intergenerational transfer of the business have a huge impact on operating funds, as well as its survival. In agriculture, there can be rollovers between members of the same family, to defer paying the taxes until later.

We sincerely believe that if this measure were applied to all SMEs, there would be more intergenerational transfers. In the years to come, many companies will change hands. In our opinion, this measure is a priority that we must look at.

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

My next question is for Mr. Langlois.

The real estate market in Quebec is different from the one in Canada. The Canadian Real Estate Association has already explained that to us. Personally, I am more interested in the issues in Quebec. What role does the association play in terms of affordable or low-cost housing?

We have just returned from Halifax, where there is a shortage of affordable housing. I am the member for Saint-Léonard—Saint-Michel, in Montreal. There is an agreement, here in Quebec, between the provincial government and the municipal governments; as a result, we will have fewer problems within two or three years.

What is your role in this area?

[Pierre Langlois]

You must understand the links that exist between rental property and ownership.

We believe that some of the people who have rental accommodations do have the means to become owners. We want to be in a position to help them trade their status as a tenant for status as an owner, thereby freeing up accessible housing. We are still talking about accessing housing, in other words, accommodations that do not exceed 30% of the household income. If all of these people could become owners more quickly, housing units would be freed up, thus increasing the vacancy rate. Moreover, that would create internal pressure on rental costs.

[The Chair, Conservative, Brian Pallister]

Our second speaker will be Mr. Pierre Paquette.

You have seven minutes, sir.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

Thank you all for your presentations. They are paradoxical. In fact, when we hear witnesses in Ottawa, they rarely talk about fiscal imbalance. Yesterday, I was pleasantly surprised to hear the topic mentioned in Nova Scotia. It was interesting to see that those who need to see their public finances rebalanced are concerned about the issue. Perhaps the matter is less urgent in Ottawa.

My question is for Mr. Pierre Patry and Mr. Godbout.

On December 19, here in Quebec, Mr. Harper made a commitment to deal with the fiscal imbalance in his government's first budget in February or March.

In your opinion, is that an attainable goal? Is the government prepared to announce measures, a timeframe, and an overall settlement?

[Pierre Patry]

That is what we wanted to show in our comments to the standing committee.

First of all, if we reminded you of the commitments made by Prime Minister Harper during his speech in Quebec, and as you mentioned, during the budget and the throne speech, it is because they raised expectations in Quebec.

For several years, we have seen a rather centralizing federalism. If the Conservative Party gave Quebec some hope, it was the hope of seeing the issue of fiscal imbalance resolved. Fiscal imbalance is a reality. Resolving it will mean that the provinces will have more money to invest in higher education, health and social programs. We know that huge cuts were required in those areas to meet the budget objectives set in the mid-1990s.

Knowing the state of the surplus for 2005-06 and the state of the Canadian economy, the CSN is convinced that the Harper government can take action in the 2007-08 budget, in other words in the next budget.

So Quebec is eagerly awaiting the budget. Moreover, there is a consensus among the left, the right, federalists and sovereigntists, to resolve the issue of fiscal imbalance in Quebec in the next budget.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Godbout, do you want to comment on that?

[Prof. Luc Godbout]

Mr. Harper committed to taking steps to resolve the fiscal imbalance within the next year. We are already in the next year.

Even if there is no consensus among the provinces, the federal government must nevertheless show its cards and say what it is proposing. Following that, the provinces will determine whether they will accept the offers or not, whether the offers are reasonable or not. Then we will be in a position to debate their scope. However, proposals must be made within the year.

I worked on the committee dealing with fiscal imbalance in 2001; it is now 2007. I am eager to wrap up this file and move on to something else.

[Pierre Paquette, Bloc, Joliette, QC]

There was a topic in your presentation that you did not have time to discuss at length. I think it is important for all committee members to have a few more details.

Can you explain why you say that we must not exclude certain provinces or certain sources of revenue when calculating equalization payments?

[Prof. Luc Godbout]

Equalization lost all meaning when the envelope was closed. If the gaps in wealth were to decrease in Canada, there would be no problem for equalization to be reduced. But the gaps in wealth are increasing, while equalization is not. This occurs because when calculating equalization—I know that we discussed the complexity of this calculation earlier on, but I will not get into the complexity of it—the 10-province standard must be used for comparison purposes.

[Pierre Paquette, Bloc, Joliette, QC]

At present, I think that the richest and the poorest provinces are excluded.

[Prof. Luc Godbout]

Five provinces are excluded: Alberta and the Maritimes. All 10 provinces and their revenues must be taken into account. So in the proposals, there are some provinces that do not want non-renewable natural resources to be included. However if we do that, we are not taking into account the capacities of certain provinces. Therefore, we must use a 10-province standard and consider all sources of revenue.

[Pierre Paquette, Bloc, Joliette, QC]

Still on the topic of fiscal imbalance, Mr. Patry—Denis, this time—I was pleasantly surprised to read in your presentation that you want to see federal transfers for post-secondary education to be brought back up to 1990 levels, a request made by the education community in Quebec and throughout Canada.

First of all, why is the Chambre de Commerce concerned with this issue of under-funding?

Second, Mr. Juneau, could you tell us what your needs are?

There are two minutes left, so I would ask you to reply briefly.

[Denis Patry]

Absolutely.

The Chambre de Commerce de Québec is concerned because Laval University has come to it, and because Laval University does considerable research. The university centre at Laval is at the heart of it all. That is where people do research and where entrepreneurs do research and development. Many future projects for corporations are born in universities. So the sector generates job and economic wealth. The university must resume its position as a generator of economic development.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Juneau, you may add some remarks.

[Denis Juneau]

The amount required for all CEGEPs in Quebec is $300 million. That is a recurring amount, which comes back each year. The money will be distributed to each college, and that will bring us back to 1992-93 funding levels.

I would like to add that in the funding for 1992-93, like today, no money allocated by the federal government for post-secondary education in Quebec was used to fund CEGEPs. Colleges face urgent funding needs in order to meet the needs of society.

So not only do we need transfers for the post-secondary education sector, but part of this funding must be used to help CEGEPs operate.

[The Chair, Conservative, Brian Pallister]

You have one minute left.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Langlois, I must tell you that I did not receive your notes. I would appreciate receiving them. The brief we received appears to be more Canada-wide. You have raised some very specific issues.

Ms. Carbonneau was quoted by Mr. Harper on the Prerogative Initiative for Older Workers.

What do you expect from such a program?

[Pierre Patry]

Last week's program, as described, is not an income replacement program. It focuses more on retraining. We agree with retraining individuals who lose their jobs. But the problem is that people are being left out. So we must ensure that there are measures for workers over age 55, for example, so that they receive a decent income. Above all—and this is one of the major shortcomings of the program—it must be universally accessible. The program presented last week excludes entire communities.

[Pierre Paquette, Bloc, Joliette, QC]

And it must include an "income replacement" component.

[Pierre Patry]

Yes, income replacement—

[The Chair, Conservative, Brian Pallister]

I apologize for interrupting you, sir.

We are going on to our next speaker, Mr. Luc Harvey. You have seven minutes, sir.