Finance Committee on June 1st, 2006

[An hon. member]

Hear, hear!

[The Chair, Conservative, Brian Pallister]

Mr. McCallum.

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

This is a bit strange for the Conservatives, who would like to talk about real Canadians living outside the Ottawa beltway, that they're now talking about this arcane distinction--important in Ottawa, but not to real Canadians--between legislated tax rates and things passed by a ways and means motion. Anybody who filled out their tax form in this last year would have noticed a 15% rate. Anybody who gets their paycheque after this bill passes, if our amendment is accepted, will notice higher taxes on that first income tax rate.

To say that the minister said that taxes for all Canadians will be lower is false. Unless you're living in this--

[Garth Turner, Conservative, Halton, ON]

Why didn't you challenge him?

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

I have challenged him many times.

The notion that all Canadians are paying less tax is pure fiction, unless you go with the fiction of legislated rates as opposed to rates that Canadians actually pay. I could cite Dale Orr, an economist--a reputable one who more often than not was anti-Liberal when we were in government--who said explicitly that many Canadians will end up paying more taxes.

That is the fact.

[The Chair, Conservative, Brian Pallister]

I'd urge members to wait their turn in making their comments, please.

Mr. Dykstra.

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

It's certainly true, and I know that I did ask this question very early on in one of our first committee meetings when were dealing with this very specific issue. Perhaps I could ask the ministry officials again to clarify this.

What would happen if the ways and means motion that was carried last year but didn't end up in legislation with specific respect to this issue were not to pass? What would happen to the returns of so many millions of Canadians in 2005? Because that 16% to 15% would actually not exist.

[Gérard Lalonde, Senior Chief, Tax Policy Branch, Department of Finance]

If it became clear that Parliament was not going to pass those amendments then the returns that had been filed would have to be reassessed.

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

So while Mr. McCallum makes a reasonable point with respect to whether Canadians care about ways and means motions or about legislation that's passed, I know a lot of Canadians—certainly ones who live in my community—who don't want to fill out their 2005 tax returns all over again because we decided not to move forward.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Dykstra.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Lalonde, if in fact this budget didn't pass, the November update would prevail. Is that correct?

[Gérard Lalonde]

If this budget did not pass?

[John McKay, Liberal, Scarborough—Guildwood, ON]

If this budget does not pass.

[Gérard Lalonde]

You would then be left with the state of the law as it was before this budget.

[John McKay, Liberal, Scarborough—Guildwood, ON]

The rate would be 15%.

[Gérard Lalonde]

No. The notice of ways and means motion has been tabled with the economic statement. As I said, if it became clear to the government of the day that it was not going to pass, you'd be in a situation where neither the October statement nor the 2006 budget would pass, in which case you'd default to the existing state of the Income Tax Act.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What steps would the government have to take to raise the rate, or would it automatically default to the rate going up?

[Gérard Lalonde]

It would automatically default to the state of the law as it was, which was 16%.

[John McKay, Liberal, Scarborough—Guildwood, ON]

If this amendment doesn't pass, Canadians will be paying more tax at this particular rate.

[Gérard Lalonde]

If the amendments that are in this bill don't pass, it will default to 16%.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Exactly. The Conservative Party is effectively raising the rate.

[Gérard Lalonde]

It will default to 16%, not 15%.

[John McKay, Liberal, Scarborough—Guildwood, ON]

It will effectively raise the rate.

[Gérard Lalonde]

I'm sorry. It will effectively default to the state of the law as it was before at 16%, and 15.5% is less than that.

[John McKay, Liberal, Scarborough—Guildwood, ON]

We're now paying 15%. If this budget doesn't pass, it will go back up to 16%.