Finance Committee on May 30th, 2006

[The Chair, Conservative, Brian Pallister]

Thanks, Mr. Dykstra, for your cooperation.

Madam Wasylycia-Leis, for just a couple of minutes, please.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Sure.

I have two questions. First, I just want to go back on mortgage insurance for a moment, and this may come as a surprise to you, Jim, but in fact I do also support competition in the area of banking generally, and our problem today is that we don't have much competition. Banks have left communities high and dry. So I'm asking you, as you pursue this new initiative under Bill C-13, whether or not you would put in place some guidelines to ensure that competition allows for mortgage insurance to be delivered irrespective of region or income strata.

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

On the mortgage insurance issue?

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Yes, just some guidelines to protect the fundamentals here.

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

We may not agree on this. CMHC will continue to serve the market comprehensively, as you know, and there will be more competition. We've even had one potential new participant demonstrate an interest and we think that's the fundamental safeguard.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

All right. I think I've exhausted everything on that one.

Let me end on the GST for a moment. I know people can change their minds, but back in 2001 you actually said you agreed with Paul Martin with respect to reducing the GST. You said that:

All you get is a short-term hit, quite frankly. You accelerate spending. You pull it ahead by a month or two. It has no long-term positive gain for the economy.

What has caused you to change your mind?

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

Nothing actually, because what I was talking about there was a proposed temporary reduction in the Ontario sales tax to try to sell some more cars at a time when the car companies weren't doing too well, and it would have been a temporary reduction in PST. I'm against that because all it does is pull forward sales, and then you don't get the sales later on.

This is a permanent reduction in GST. I'm all for permanent tax reductions, not temporary ones.

[The Chair, Conservative, Brian Pallister]

To conclude, Mr. Loubier, two minutes, please.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chairman. You are very kind to give me an opportunity to ask one final question.

Minister, I think that it is futile to ask you to provide us with the ball-park figure that it will take to resolve the fiscal imbalance in a comprehensive fashion. We have our own order of magnitude. If you would like, we would be happy to provide you with some advice on the matter.

My question pertains to the program for older worker adjustment. We discussed the matter before the budget was tabled. Right up until the time that the budget went to press, I was telling you about an analysis that we were doing — and we are not the only one to have done so — showing that workers aged 55 and older, and in particular those in the manufacturing sector are not eligible for retraining programs. As for the softwood lumber sector, everyone is aware of the difficulties it is going through. These people often live in a region where there is only one industry or where there are but a few. However, even when they exist, employers do not rehire people who have hit the age of 55 or 60 for a few years of employment. They prefer to invest in people who are a bit younger and who will remain with the company longer.

Since the end of POWA the Program for Older Worker Adjustment, tragedies have occurred because when companies do poorly and massive layoffs occur, often husbands and wives both lose their jobs.

You made a commitment to undertake a feasibility study, that is all well and good. You want to know what you are getting into. Nevertheless, I would like to point out two things to you. We have estimated that it may cost $100 million per year...

[The Chair, Conservative, Brian Pallister]

Oui. Move to a question, please.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

It cost $17 million when the program was abolished, in 1997, and this was for all of Canada. Accordingly, I do not think that the feasibility study will be difficult or time consuming.

When will you implement such a program? It is urgent. Primarily because of the industrial restructuring caused by globalization, many couples of older workers are suffering now.

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

As soon as we can do a feasibility review, the funding will be available and we can go ahead with that project. So I think it's probably important now to get the relevant minister to move forward with the feasibility review quickly.

Dealing with the federal-provincial issues just for a moment, sometimes there's an assumption that this is a one-way street, that the federal government just transfers moneys to provinces. I'd remind you also of our commitment to our core responsibilities federally, and our commitment that goes along with that to not meddle in provincial affairs, so that there will be, I would expect, some reallocation of federal resources to core federal responsibilities.

[The Chair, Conservative, Brian Pallister]

Mr. Minister, I thank you, on behalf of the committee, for your time today.

Given the fact that you have, I understand, triplet boys, and we've acknowledged John so much today, on behalf of the committee I will say belated birthday greetings to Galen and Quinn as well.

Would you like to make a brief concluding comment, Minister?

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

No, other than to thank you, Mr. Chair and all members of the committee, for your courtesy here today and for your hard work on finance issues. I know there are a lot of issues that we'll be dealing with in the next while, and I thank you for your advice in that work.

Thank you.

[The Chair, Conservative, Brian Pallister]

That's much appreciated.

I understand the officials will be remaining. I would invite Monsieur Lalonde to make some brief comments to begin our second round of questioning.

I'll invite the second panel to come forward now, please. Would the second panel please make their way to the table?

Committee members, the Finance officials who will be joining us are: Jim Daman, director of the sales tax division; Gérard Lalonde, senior chief from the tax policy branch; Carlos Achadinha, who is the chief of the alcohol, tobacco, and excise legislation tax policy branch; and Pierre Mercille, who is the chief of the sales tax division of the tax policy branch. Doug Murphy's name is on this sheet as well. I understand Mr. Murphy will be joining us also.

Monsieur Lalonde, whenever you are ready, sir, I welcome your comments. The committee will be interested in what you and your fellow panellists have to offer today.

[Gérard Lalonde, Senior Chief, Tax Legislation, Department of Finance]

Thank you very much. It's a pleasure to be back here at the committee. I looked forward to a chance to come up to the table because I'm dying for a glass of water, so this is a great opportunity for me. Thank you.

I and my colleagues who are joining me here at the table have been working very closely in the preparation of this budget, either in my case with the text of the bill, or in the case of some of my colleagues in developing the policy. As a result, we hope to be in some position to answer your questions. I can't promise we'll have all the information at our fingertips, it being impossible to anticipate every question that will come up, but why don't we just open it to the floor and see what comes up.

[The Chair, Conservative, Brian Pallister]

Thank you, Monsieur Lalonde.

We'll commence with Monsieur Pacetti, pour sept minutes, monsieur.

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

Okay. I was hoping to hear a presentation, but we can start.

The first question is, we keep hearing about the $20 billion in tax relief. Does anybody have a breakdown of it? I've been trying to crunch numbers, but is it anywhere in the budget? Did I miss it?

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

Could you repeat your question, please?

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

The $20 billion in tax relief we keep hearing about from the minister....

[Serge Nadeau]

I believe you have a list of them on page 202 of the English version. You also have on page 65 a breakdown between the GST and the personal tax.

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

So if I add up all the items in columns 206 and 207, I'll get $20 billion?

[Serge Nadeau]

That's right; it's $19 billion-and-something, or something like that.

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

And what do I see on page 65?

[Serge Nadeau]

On page 65 it's basically the breakdown between the GST and the personal tax.