Finance Committee on June 1st, 2006

[The Chair, Conservative, Brian Pallister]

We will commence. Good morning and welcome.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, and the long title of the bill is postponed. The chair calls clause 2.

There is a point of order. Mr. Pacetti.

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

Yes, Mr. Chair, just before we begin I'd like to put on record that we had witnesses here yesterday, and I had to leave at 5:30, but I think the last witness probably testified about 5:45. Some of the witnesses suggested that we make some amendments, but the deadline for submitting amendments was six o'clock, so I don't see how that would have been possible.

I don't want to delay this, but I'm saying in future we should probably think about the steps and the procedures before we continue with clause-by-clause when we have witnesses beforehand, because it's almost impossible to put in amendments after a hearing.

On the record, I'm not too pleased with what happened between calling in the witnesses, the end of hearing witnesses, and then the clause-by-clause.

[The Chair, Conservative, Brian Pallister]

Okay, thank you, Mr. Pacetti.

I want to give clarification to all members that they can draft amendments right now if they wish. I mentioned last night as an administrative encouragement, not as a deadline, and if members have amendments they wish to bring forward even at this moment they're certainly welcome to do so. The member knows, as a past chair, the advantages to the committee and to the staff of having amendments in earlier if possible, but there is no restriction on bringing amendments forward at this point in time.

We'll proceed. I understand we could proceed to.... There are no amendments up to clause 57, so we could, if the committee would like, proceed by asking if clauses 2 to 57 inclusive carry. We could proceed to simply adopt clauses 2 to 57 and then proceed to deal with amendments, rather than have discussion on each of the clauses as we go. It's entirely up to the committee members. If you would accommodate that, as there are no amendments, I might be led to assume we could proceed to clause 58 and begin discussion at that point.

Are all committee members in acceptance of that approach?

[Some hon. members]

Agreed.

[The Chair, Conservative, Brian Pallister]

(Clauses 2 to 57 inclusive agreed to on division)

(On clause 58)

[The Chair, Conservative, Brian Pallister]

We will move then to the first amendment, which is on clause 58, from Mr. Pacetti. All members have copies of the amendment.

Mr. Pacetti, would you like to speak to that amendment?

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

Yes. It's quite simple. This is also to make sure we're all in conformity with what the finance minister said and that we're all in agreement with what the budget book says on page 218. I think there was an error in drafting the budget bill, so.....

To make sure everybody is on the same page, let us look on page 64. Subclause 58(1) says 15% in proposed subsection 117(2). But then, when we go to subclause 58(2), proposed paragraph 117(2)(a) says 15.25%, which means there was an increase in the tax rate.

All I'm requesting here is that the committee consent to the idea of changing the amount of 15.25% to 15%. I think it's clear. It's in conformity with page 218 of the budget bill. We're not trying to increase taxes, so if we leave the rate at 15% we're not going to have an increase in tax rates.

[The Chair, Conservative, Brian Pallister]

Do any other members wish to speak to this amendment?

Yes, Madam Ablonczy.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

What my colleague is doing is looking at one aspect of the budget in isolation, and I think he's aware that if this amendment were passed it would throw the whole budget out of whack, because it would add a tax measure into the budget that would cost several billion dollars. Of course, this is not allowed for in the budget. The government has a budget plan; it has a tax relief plan, which is substantial but is not tied to this one measure—it includes a number of measures.

I would simply point out to the committee that were this amendment to pass, the whole budget would be completely undermined, because its coherence depends on the measures staying as they are. It would be somewhat irresponsible for this committee to add an additional tax liability to the budget plan of several billion dollars, for which obviously there are not the funds, and Canadians would be ill-served by such a substantial amendment at this stage of the game.

[The Chair, Conservative, Brian Pallister]

I just want to make sure Mr. Turner has a copy of the amendments as proposed. We're dealing with the first one, Garth.

Are there any other comments on this amendment?

Mr. Pacetti.

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

We're not asking for any additional tax burden; we're just asking for the status quo.

For the 2005 taxation year, which would be covered in proposed paragraph 117(2)(a) in subclause 58(1), it says 15%. It's just that for the year 2006 we decided to go to 15.25% for no reason. So we're increasing the personal tax rate.

I'll speak to the next amendment as well, where in subclause 58(3) again we're increasing it in proposed paragraph 117(2)(a) from 15% to 15.5%.

All I'm asking is that we put it back to 15%. It's not any change; we're just trying to be consistent with what the finance minister has been saying and what the budget books say. We're trying to put back the tax rate as taxpayers paid for the fiscal year 2005 on their personal tax return. It specifically says 15%.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Pacetti.

I'll just also point out to committee members that we have finance department officials here at the end of the table for their consultation during the process, if they so desire.

Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

No, that's okay.

[The Chair, Conservative, Brian Pallister]

Madam Ablonczy.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman.

My friend is being a little disingenuous in referring to this measure as the status quo. As he knows, this was a proposal by the former government of which he was a member, but this proposal was never passed into law.

Today we are actually dealing with what tax and budget measures will be passed into law. The measure that he is bringing forward in these amendments was a proposal by his government. I certainly applaud him for continuing to support it, and I think it's obviously consistent on his part, but it's not the status quo in the sense that the proposal was never passed into law.

Here we are deciding what tax measures will actually be put into legislation and will become the law of the land. As I said before, our government has put a very coherent and very substantial tax reduction package into place, but it contains measures other than personal income tax rate reductions. By changing those numbers, as this amendment proposes, the whole budgeting process would be thrown completely out of whack.

We certainly wouldn't be supportive of that. I think Canadians would find it very difficult to accept that this committee would somehow put billions of extra tax liability into the budget at this stage of the game.

[The Chair, Conservative, Brian Pallister]

Mr. McCallum.

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

I think Canadians would applaud this committee for refusing to raise income tax, and this has been the position of our party from the beginning. We are opposed to raising income tax rates for hard-working Canadians. The effect of this amendment is that the budget does not raise income tax. In that sense, it would validate the claims of the finance minister to the effect that he's not raising income tax.

As I have said before, Canadians don't really care whether the lower income tax they're paying is because of legislation or because of a ways and mean motion. They care about what they actually pay. The effect of this budget is to raise that rate, as we all know, and the effect of this amendment is to refrain from raising that rate.

I don't expect the government side to agree, but it has been our long-held position that hard-working Canadians don't deserve the increase in the income tax rate that this budget is imposing.

[The Chair, Conservative, Brian Pallister]

Mr. Dykstra.

[Rick Dykstra, Conservative, St. Catharines, ON]

I can certainly understand my good friend's position on this issue. I would suggest that it's about a year late, though, because this was actually never in, if it was an issue that was important enough to be put on the table.

I don't think it's a correction in terms of what needs to be said in the budget because there was an error. I think this goes back to what was or what wasn't in the 2005 budget. Had it been in the 2005 budget and had it been passed through legislation, we wouldn't be having this discussion today.

What's happening, what we're doing, and why this legislation is moving forward, in terms of the 16% and 15%, have to do with it never being passed into legislation. That's what we're trying to accomplish here today.

[The Chair, Conservative, Brian Pallister]

Mr. Del Mastro.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair. I only wanted to add an additional point to what Mr. Dykstra indicated.

We are in fact talking about a reduction in law for the lowest basic tax rate from 16% to 15.5%. Isn't that what we're really talking about? We're not talking about increasing taxes in law. We're talking about decreasing taxes in law.

John, you know that very well, and this amendment is very misleading in its intent.

[The Chair, Conservative, Brian Pallister]

Mr. Pacetti.

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

Okay. Let me take you through it again.

If we are now on subclause 58(2), it means we're going to be expected to have accepted subclause 58(1), where the tax rate is now being accepted at 15%. As my colleague, John McCallum, said in the House, 15.25% is larger than 15%. It's in black and white; it's on page 63 of the budget bill. It's 15.25% and later on, in the next subclause, you will see 15.5%. Both those amounts are greater than 15%.

If the government chose to put together a tax package of tax incentives that are smoke and mirrors and that are made up of all kinds of mixes and matches, it's your prerogative. We're not disputing the other items. We're mixing one with the other. We're talking about a tax increase from 15% to 15.25%, and later on, to 15.5%

It's in black and white. I'm not the one who wrote this. It's on page 63. When you then go on and turn the page to page 64, it's there.

Thank you, Mr. Chair.

[The Chair, Conservative, Brian Pallister]

You're welcome, Mr. Pacetti.

Are there any other comments?

Mr. Turner.

[Garth Turner, Conservative, Halton, ON]

I think we're being obviously disingenuous here. The Liberal tax cuts were contained in budget three in 2005, and Mr. McCallum, you know that. You guys had two budgets and an economic statement in 2005, and the last economic statement that came in November 2005 was certainly a deathbed repentance on the part of the Liberal government. As my colleague says, the proposals that were put in that budget were never passed into law. Although they were accepted--because it is the de facto practice of governments to accept proposals that are made in a budget as if they had been passed in law--in fact it was never done.

What we're doing right now is actually taking an existing legislated tax rate and reducing it. If you want to argue semantics, that's what's happening.

But what you also said is extremely true, and it's one thing I want all committee members to remember. It's exactly what you said: at the end of the day, all taxpayers care about is their overall tax burden. Under this budget, as you quite rightly pointed out, the Canadian tax burden is less. That's exactly what the minister had to say to us. When he sat here as a Minister of Finance of the Government of Canada, he said categorically, without hesitation, without qualification, that every taxpayer in this country is going to pay less because of this budget. You either question the minister, or you accept what the minister had to say.

At this point, obviously you are ignoring what the whole budget says. With the Canada employment credit, with the personal exemption, with the GST cut, with everything, every Canadian is going to pay less. You are absolutely right, Mr. McCallum, and therefore we're going to do what's right on this side of the table and give those hard-working Canadians the decrease they deserve. Get used to it.