Evidence of meeting #42 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was provinces.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
Mr. Godbout, the current government reduced the tax base by reducing the GST by one percentage point. How much does that represent in Quebec?
Professor, University of Sherbrooke
It represents between $1.1 and $1.2 billion and some odd cents per year. For discussion purposes, let's say $1.2 billion per year.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
If I understand correctly, the fiscal imbalance is the ability to tax in keeping with responsibilities.
Professor, University of Sherbrooke
Yes. Are you trying to get me to say that it should have taken it?
Conservative
Luc Harvey Conservative Louis-Hébert, QC
No, not at all, but since Ottawa has reduced the GST by one percentage point in Quebec, can we say that the fiscal imbalance has been corrected automatically, without transfer payments to the province? Given that the federal is collecting less tax, there would be a $1.2 billion-correction to the fiscal imbalance.
Professor, University of Sherbrooke
You could say that if Quebec had taken up this one percentage in tax. To try and resolve the fiscal imbalance, the federal government must make proposals to the provinces. A hand must be extended and the government must specify that points are being transferred. If not, it must at least add a little phrase saying that whoever wants to take the points can do so. The government must open the door for the provinces so that they can take up the percentage point of tax. If nothing is done, it will be up to the provinces to join forces and say that if the GST goes down, they will increase their sales taxes.
In July, it was technically feasible. Quebec could have taken the point. If I had been Minister of Finance in Quebec, I would have taken it, and I would have told the federal government that I would be returning the amount to the population by reducing taxes once we had received a comprehensive solution to the fiscal imbalance. Obviously, I am not an elected official; so it is easy for me to say what I would have done.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
Despite that, the fiscal imbalance is assessed at 3.9 billion dollars.
Professor, University of Sherbrooke
...but that is indeed the number which has been mentioned.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
Given the reduction in the GST, an agreement with First Nations was reached with all of Canada, including Quebec. In fact, this weekend there will be a summit on the subject. Additional investment was made for post-secondary education.
As we speak, can it be said that part of the fiscal imbalance has already been rectified?
Professor, University of Sherbrooke
Since 2001, a part has been rectified and another has been worsening. At a certain point, we will have to...
Professor, University of Sherbrooke
Certain measures were taken to correct fiscal imbalance. In 2004, the money injected into health care partly addressed the fiscal imbalance, but three weeks later, the equalization formula was weakened. It was caped so that it could not be increased anymore if cuts were made. So that made it worse. We have to restore equalization and find the right way to fund transfers to the provinces. As for me, I believe that this should be done through tax points. The current government seems to want to withdraw from the GST; it will reduce it by 2 percentage points. The government could choose to reduce it by a further point which it would give to taxpayers. The four remaining points could be given to the provinces. As a counter measure, the provinces could wave federal transfers for social programs and make other concessions. It's a political negotiation.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
The provincial government said that what it did not like in this type of transfer of points is that a province such as Alberta, which does not need a sales tax, would also not have a consumer tax, which would make Alberta more competitive compared to all of the other provinces. This might cause problems in several quarters, because a province without GST would certainly have a advantage.
Professor, University of Sherbrooke
It would work for one tax point. To give you a simple example, suppose one tax point would give each province 1$ billion. Alberta, which does not need the money, would not take the tax point and would not impose a sales tax. This would give Alberta a $1billion tax advantage. However, if the federal government sent $1 billion in the form of transfers to the provinces, Alberta would not need the money in that situation either. What would it do with that $1billion? It would put it in its Heritage Fund or would lower personal income taxes. If Alberta does not need $1 billion, it does'nt need it. It will not put the money in the bank.
Professor, University of Sherbrooke
The problem is that Alberta is far wealthier than all the other provinces. We can't give money to everyone except Alberta, unless we improve equalization. It's the only way to give money to some provinces and not to others.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
Mr. Patry, the founder of the Bloc québécois and the former leader of the Parti québécois said that Quebeckers work less than other Canadians.
Do you think that this should be taken into account in the equalization formula?
Treasurer, Confédération des syndicats nationaux
I don't see how we could take that into account when calculating equalization payments.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
You still have to take into account the fact that they have a lower income.
Treasurer, Confédération des syndicats nationaux
On this issue, I will be very clear. He also linked this to productivity. Productivity in Canada and Quebec is lower than that in United States, but that is relatively recent. However, it can bear comparison very favourably to many European countries.
Productivity is a far more complex question then just the number of hours worked. Almost anyone here has broached the subject of company investments and the need to invest in education, be it through transfers or otherwise. There are many issues that help improve productivity. When we compare ourselves to the United States, there is another question that deserves our attention.
When considered sector by sector, productivity in Quebec or Canada is not all that much lower then that of the United States. The industrial structure of each of the two countries is fundamentally different, and that creates gaps. I think that Mr. Bouchard erred in trying to relate the issue of productivity strictly to the number of hours worked.
October 25th, 2006 / 11:20 a.m.
Conservative
Luc Harvey Conservative Louis-Hébert, QC
However, he even raised the fact that Quebeckers work about 100 hours less than other Canadians. That what he said. Let me ask you this. I am taking this opportunity, because when I am in Ottawa, I can only read the newspaper; we do not have your point of view.
Treasurer, Confédération des syndicats nationaux
First of all, these are social choices. For example, in Quebec, in the past 10 or 15 years, many people have been concerned with balancing work and family life. Many factors combine to...
Conservative
