Finance Committee on Nov. 9th, 2006

[Mike Wallace, Conservative, Burlington, ON]

But is it accurate? Thank you, Mr. Minister

[Brian Ernewein, General Director, Tax Legislation Division, Tax Policy Branch, Department of Finance]

My verification of your accuracy depends only on my arithmetical skills. To get to the right answer I'd have to multiply $3,000--I've taken that number and not the precise number you used--by 15.5%. That gives me something in the order of $475, I believe.

[Mike Wallace, Conservative, Burlington, ON]

You're telling me I can tell my constituents that if they choose to take public transit into Toronto, which is very busy in my area and growing, they will save on their taxes almost $500 a year? Is that an accurate statement?

[Brian Ernewein]

On the numbers you provided and assuming they buy these through monthly passes, that would be right.

[Mike Wallace, Conservative, Burlington, ON]

There is another interesting thing. I was fortunate enough to be on the western tour with the finance committee, and the gentleman from the Greater Vancouver Transportation Authority thanked the government for the tax credit. He's claiming that month over month it's gone up--10% in June, 10% in July, 13% in August. Is this what you were you hoping to achieve with a tax credit, to get more people to use the transit system?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Of course, and there's the environmental benefit of that. As was raised earlier, at the same time we have to invest in transit infrastructure, particularly in the large urban areas in Canada, including the Lower Mainland in British Columbia and of course the greater Toronto area, the greater Montreal area, Halifax, Edmonton, and Calgary as well. There are lots of good ideas there in terms of transit infrastructure. We did do substantial funding through the trust that was established in March. We have to move forward on all fronts with respect to making public transit more attractive to Canadians.

[Mike Wallace, Conservative, Burlington, ON]

Are you seeing any other organizations, Greyhound or anybody else, going to a monthly pass to try to attract people to use their services, to actually use a more public system to be able to take advantage of the transit credit? Do you know if that's happening? Have you heard of that?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

As I recall, you told me.

[Mike Wallace, Conservative, Burlington, ON]

You're not supposed to say that.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Oh, sorry. I'm kidding, of course.

There is a proposal that I've seen involving some of that private sector, relating to some communities in southern Ontario--I know of that--and probably elsewhere in Canada. We are keenly interested as a government in environmental issues and making sure that we are, for the first time, attacking air pollution smog in Canada through the clean air bill. An important part of that is encouraging people and making it reasonable for people to be able to get out of their automobiles and use public transit.

[The Chair, Conservative, Brian Pallister]

Before we conclude with Mr. Pacetti, committee members and staff, on Tuesday, November 21, there will be a lock-up in Room 307 West Block, from 10 o'clock until noon, to deal with the draft pre-budget report, which the minister will, of course, want to see. From 3:30 that afternoon until finished, in Room 237-C Centre Block, we will deal with the preparation of that report.

As well, on Thursday, November 23, in Room 253-D, we will have the fiscal forecasters panel, as agreed by a previous motion, from 3:30 until 4:30. At 4:30, we will again be honoured with the presence of the Minister of Finance for his fall fiscal update.

We'll conclude now with Mr. Pacetti.

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

Thank you, Mr. Chairman.

Good afternoon, Mr. Minister. We didn't have you here the last time we discussed the budget, so it's good to have you here now. I have just two quick questions here, if you can help us out.

We had your Finance officials before the committee on Tuesday. They were supposed to provide us with some estimates. I understand that you're looking forward to our pre-budget consultations, so I'm wondering if you could at least instruct your officials to release some of the estimates that they have on some of our requests, or to confirm or help us out on some of the items that we requested from them. I would really appreciate it. They had indicated that they would be releasing some of that information based on what your instructions were, so it would help if you could help us with that.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'll review that. I'm not sure of the particulars. I knew there were some requests that were not matters with respect to which—

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

We're going to be deliberating the report on Tuesday. I'm not sure when your officials were going to speak to you, but we'd like to have the information before Tuesday, if possible.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'm sure I can deal with it today and get you an answer.

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

My comments are in general. In your brief, you start out by saying that Canadians pay too much tax, and then you state that it's important for the debt to be reduced and that you want to help Canadians. But I'm not sure I understand all these little trinkets that we put into the budget. There are a lot of things like $20 here for students, $40 there for transit passes. In Montreal, they just increased the monthly transit passes, so it's not going to go far toward really helping Canadians. We're not sure where the fitness credit is going to go. But from our pre-budget consultations, we had people requesting all kinds of things. So it just seems to be a little bit of a band-aid approach.

I don't want to talk to your party, but it doesn't seem like it's a conservative approach. Where are we going with this? It's going to cost more money to administer. It's going to cost more money to inform Canadians. Why not just reduce taxes instead of increasing them?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I take it the concern is that I'm not being conservative enough.

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

You can make whatever assumption you'd like, but you start by saying that the taxes are too high, yet you don't reduce taxes. If I may, I could say the same thing for trusts and the way the trust funds were handled. We went about it the proper way last year. We consulted with Canadians, and Canadians told us what we were to do. We took the advice of what external people told us.

There is a reason for trust funds. There are a lot of smart people in your department. You can't tell me that just cutting trust funds is the way to go. There are ways to handle tax leakage. That is the problem, if I'm not mistaken, but you can't just disrupt the stock market and have people panic. A $25 billion reduction in one day just doesn't make any sense. How much money did the tax department give up in capital gains just in that day?

If Bell Canada and TELUS do decide to go into trust funds, there are capital gains there. There are capital gains that the Finance officials forfeited but could have received. There are other—

[The Chair, Conservative, Brian Pallister]

Mr. Pacetti, your time has been used in preamble. I'll allow the minister to make a response, if he wishes to.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'll reply just on two points. About overall tax cuts, there is $20 billion—not million, but billion—in tax reductions in budget 2006 over two years. That's more than the last four budgets combined by the previous Government of Canada. Those are very substantial tax reductions, and I would not minimize them.

Secondly, with respect to income trusts, I say respectfully to the member that the consensus in Canada was that the previous government bungled its handling of that issue last year. We made every effort, when we were confronted with the issue and the changes this year, to avoid that kind of market activity, the kind of investigations that were occasioned by the conduct of the previous government, and I'm pleased to say we were successful.

[The Chair, Conservative, Brian Pallister]

Thank you, Minister.

We will suspend only briefly. I will recommence in ten minutes.

[The Chair, Conservative, Brian Pallister]

We will recommence.

Pursuant to Standing Order 81(5), supplementary estimates (A) for the fiscal year ending March 31, 2007, we are dealing with vote 1a under Canada Revenue Agency and votes 1a, 25a, and 30a under Finance, referred to the committee on Monday, October 30, 2006.

By unanimous consent, the chair calls vote 1a under Canada Revenue Agency and votes 1a, 25a, and 30a under Finance.

Minister, I'll invite you to make some opening remarks. We'll move immediately to questions. Please excuse our committee members for the food that is before them, but we want to take advantage of your presence here today, of course.

The minister has agreed to stay until 1:15, and I thank him for doing this. That should allow us time for some questions.

Minister, over to you.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you, Chair.

This is the about Supplementary Estimates (A).

These supplementary estimates call for a spending increase of $945 million for the Department of Finance.

Of this amount, $3.1 million is for the Office of the Auditor General, $0.3 million for the Canadian International Trade Tribunal, and $9 million for the Financial Transactions and Reports Analysis Centre of Canada, commonly known as FINTRAC. The remaining $933 million relates to the Department of Finance itself.

Approximately half these funds are being carried forward from the last fiscal year, when the department's expenditures were less than the allocated budget, and this is in keeping with long-standing Treasury Board policy. The other half of the increase relates to initiatives undertaken to increase public awareness of budget 2006 initiatives and changes in tax policy, including the reduction in the goods and services tax.

You will also note that the remaining $931 million refers to increases to the projections for statutory authorities. These increases are built into approved legislation and are identified here for information purposes. They flow mostly from formulae for federal and territorial financing and the cost of servicing the public debt. This amounts to a 1.2% increase in projected statutory payments.

I'll stop there, Chair, so we have more time for questions.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

We'll use four-minute rounds and begin with Mr. Savage.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you, Chair.

Thank you, Minister.

I'd like to chat a bit about post-secondary education and research, if I could. You had budget documents from the spring that correctly indicate that since the deficit was tamed Canada has invested in research. In fact, it has reversed the brain drain, which is a quote from the book, and gone to the top of the G7 in terms of publicly funded research.

There's a commonly held view, which was certainly expressed to us as we travelled Canada, that the next frontier in university is access and the issue of ensuring that Canadians who have not been able to get to university for reasons of income, or others, receive some assistance in doing so, and that it's good for the country and it's good for them.

Do you have any views on the federal government having a role in ensuring access for Canadian students?