Finance Committee on Dec. 6th, 2007

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

My next question is to Gretchen Fitzgerald.

I appreciate what you were saying about the challenges of cleaning up the environment, and the previous government and our government have been struggling with that. The entire world is struggling with that, quite frankly. We may have slightly different opinions on where we go, but one great thing worries me about the Kyoto challenge, and that is the fact that we're not bringing the entire world under the same blanket.

Quite frankly, under the aegis of Kyoto, if we followed the Kyoto mandate to the letter and we allowed India and China, those big third world economies, to continue to build just at the rate they're building today, not to be increased, we would double our greenhouse gas emissions by 2050.

So beyond Kyoto, what else has to happen?

[Gretchen Fitzgerald]

As most of the committee probably will know, we are in the phase now of entering into the new negotiations for a new agreement beyond Kyoto, and the Sierra Club of Canada is looking for a breakthrough from Canada to commit to absolute cuts, not intensity-based cuts, to emissions. We feel that as global citizens, you're right, we are under a blanket, as in a cloud of carbon, and we need, as we have in the past, to take responsibility as global citizens for that.

I do take your point about India and China, and I'm glad, in some senses, as long as on the other side we are lobbying those countries heavily and trying to get them where they need to be. We need to also be acting in good faith and getting where we need to be as global citizens.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll move on to Ms. McDonough.

[Alexa McDonough, NDP, Halifax, NS]

Thanks very much.

I appreciate all of your presentations. It's always difficult to figure out how to get at each one, but I want to try to do a little bit of an overview from the presentations we've heard so far today.

Nineteen out of 21 groups have made very convincing and compelling and, I think in most cases, pretty passionate pleas for the need to see a reinvestment of our very massive surpluses year after year, nine a row, into all the various things that people have identified: health, education, grassroots sports, culture, environmental initiatives, health, and so on. Yet—and I'm going to put this question very directly to you, Valerie—the chamber of commerce in the city is consistent in its position again this year, for the ninth year in a row, that despite the fact that we're in the ninth year of surpluses, the argument has been for faster debt reductions and deeper and faster tax cuts.

Since you yourself acknowledged that there have been massive cuts that were very punishing to us here in Atlantic Canada between 1993 and 1997, and never made up—never was there any rebalancing, which means that the gap is growing between Atlantic Canada and the rest of Canada in terms of federal infrastructure and investment—how do you reconcile the position you are taking, with the almost universal clamour from every segment of the community that you and I live in, for investment?

[Valerie Payn]

For more spending.

[Alexa McDonough, NDP, Halifax, NS]

You don't call it spending, you call it investment in the business community. How is it you cannot bring yourself to understand that this is about investment in communities?

[Valerie Payn]

I don't disagree that there are investments required. We're obviously, as a chamber of commerce, advocating for where we think the best investment would be, and sometimes the investment may not be in additional spending, new spending, but rather in turning that back to the consumers and the businesses in terms of tax cuts.

By way of an example of what's happening--and to my colleague here, Mr. Glauser, who was, of course, advocating that as well--I smiled thinking of our chairman and the challenge he has in keeping us all on time and listening to completely opposite points of what we should be doing with our money. My congratulations to you on that. But the fact is that businesses today, whether it's business in Halifax or in Hamilton or in Burnaby, are not competing among themselves. They are competing with business in India, Ireland, and the Caribbean. It's worth keeping in mind that if we get it right, lower tax rates can actually lead to increased revenues, and we have to look no further than places like Iceland, Ireland, and other countries to witness that.

For example, Iceland now collects more revenues as a percentage of gross domestic product from a lower corporate tax rate of 18% than it used to collect when the corporate rate was 50%. In Iceland it's been remarkable. In 1998 the country's 40% rate on investment income produced 2% of government revenue, yet in 2006 its 10% rate, down from 40%, produced 14% of its government's revenue.

What we're advocating is to look at it a little differently, and we obviously have other people who say, look at it my way. The chamber of commerce says let's look at it this way as well. And if we do bring in new spending in addition, with the existing spending we have, we just can't bring things in and let it sit there. We have to have a way to examine it to find out whether it's still relevant. Is it contributing to our competitiveness to allow our business to grow? At the end of the day, without a strong economy, there is no money for the social programs that we all love and hold dear, whether it's education, sports, the symphony, or whatever.

I rest my case.

[Alexa McDonough, NDP, Halifax, NS]

Unfortunately, we never have time to debate this at length. You've cited Ireland. It's my understanding that it was the major investment in education and in culture and in targeted tax cuts that resulted in the Celtic tiger.

You are advocating broad-based tax cuts, and even from a business analysis point of view, we know that's the least efficient thing to do. It's very difficult to square the advocacies of the chamber of commerce with the results that you see in Ireland if we pursue your remedies.

[Valerie Payn]

That's why--and you would know the difference, Alexa--I would never want the other groups to think that this chamber of commerce hasn't worked and put a lot of effort into health, wellness, and education. In fact, we have a five-year strategic commitment to education, so absolutely, we see the value of that.

I can't comment specifically on Ireland and the phenomenon that happened there, today, but I'll simply say that when we say “broad-based”, what we mean, what we're trying to say there, is do not put the government in the position of picking winners and losers in industries or business. If you bring about a tax environment that is sustainable, predictable, and fair, that's a far better way for the federal government to encourage all businesses at all levels--be the tide that raises all ships.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Mr. Pacetti.

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

Thank you, Mr. Chairman.

Thank you to the witnesses for coming before our committee. It's always interesting, especially when we have people from different backgrounds.

Ms. Payn, you're the one on the right, so I want to continue with what Ms. McDonough was getting at. I think we're past the stage where you can continuously advocate for tax cuts. We were in Victoria, and it was funny because we had a presentation by the Victoria Chamber of Commerce, and at the end of the presentation they said we have to invest in affordable housing because there's a big crisis in Victoria. I think the vacancy rate is 0.6% or 0.8%. It's the lowest in Canada, and there's a big, big demand for housing.

We have to get past the point where the business groups are advocating for cuts and the housing groups are advocating for affordable housing. We're not working together.

We see the same thing with the environmentalists. I'm a little bit disappointed that we're still talking about a carbon tax. That was a suggestion from two years ago. We're way past that. Our leader has been advocating it. He's putting the whole package together--social justice with a prosperous economy and sustainable environment--and this is what we're working towards. We have to blend the three together.

I understand that everybody on the panel is representing their own interests, but it has to come together and I'm not seeing that, especially in Halifax, where you have your own regional needs and requirements. I can see the presentation coming from the Canadian Chamber of Commerce, but there has to be something for the businesses to need. If you're not going to invest in housing, then you're going to want to invest in your people, in your human resources. There has to be a little more, and I'm not seeing that. Maybe I'm missing a piece of the puzzle.

Mr. Glauser, as well, you can help me out.

Mr. Johnson, your brief was in detail. It had a lot of points in there, but there has to be one or two items in there about which you can say, okay, this is a priority and we can go to the chamber and say, listen, let's focus on that and let's work together. That's what we're doing as a caucus. We're trying to prioritize and come up with a platform with which everybody's going to be happy.

We can't be compared to Ireland. Ireland had a different situation. They got lucky. They reduced their taxes, they have tons of money, and now they're investing in infrastructure. Now they're investing in programs. But they're way behind. We can't compare ourselves to countries like that.

I'm not sure who I'm going to address the question to, but I guess, Ms. Payn, you'd like to go first.

[Valerie Payn]

I'm not quite sure what your question is, but I would like to state that I don't think lucky is a good business strategy. I think there's a lot more to Ireland's success than luck. I think there were some strategic investments there.

The other thing I think we need to keep in mind is that ours is still the sixth highest effective tax rate among 36 leading countries in the world. Is that where we want to be? And now that we have the fiscal capacity--

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

I agree with that--and it's just because my time is limited; I don't mean to interrupt. I understand your point, but the fact that we have a higher tax rate and we're still able to attract people is because we do offer social services in return, and some of those services are services that you mentioned as being benefits, being the health system and the educational system. But there have to be additional benefits to businesses. We were talking about national child care programs, things like that.

Mr. Glauser, I don't know how it is in New Brunswick. Is there a movement with the chamber of commerce to try to develop a more comprehensive strategy, or is this--

[Gary Glauser]

I have a good example for you. In the city of Fredericton over the last year we developed what's called an ad hoc affordable housing committee, where we have all levels of government--the federal, the provincial, the municipal--and we have the business community, the home builders, and the non-profit groups there. We are trying to work together, and the basic concept is that everybody benefits if there's a good supply of housing in the community for all people of all income ranges.

So that's one model that we're going to try to transport around New Brunswick. It's working in Fredericton.

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

Thank you.

Ms. Fitzgerald, again, I don't mean to attack you, but the carbon tax does not seem to be the way to go. I mean, we made changes to some of the proposals that the Conservatives had put forward, and I think the Liberals got it right with the carbon budget, where people who are polluting the air are going to make proper investments, and they will reduce emissions. By just imposing a carbon tax, all that's going to happen is that the consumer's going to pay in the end. I just don't see how that's going to help at all. That would have been the solution, I think, three or four years ago, but there's technology out there that can encourage polluters to reduce their emissions.

[Gretchen Fitzgerald]

Thanks for allowing me to expand on that a little bit. I'm not advocating one or the other, but probably a combination of the two. The reason my brief focused on the tax is that I had a good example of a levy having worked really well in the United Kingdom without having exactly those kinds of costs going back to the consumer. Those taxes or levies were actually financially neutral, because it was reinvested.

The other point is that I completely endorse any idea of reducing our emissions by investing in technology. But again, we have to get around the idea of intensity-based cuts; we need absolute cuts in carbon. I just want to correct that: any combination, as long as we really value the carbon at $30 a tonne.

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

I want to get a quick question in for Mr. Bird.

Are you comfortable with the amount of $30 million? Is that going to put Canada at the top of the medal heap for the next Olympics?

[Ian Bird]

It's an investment to leverage corporate support as well, and the role of our national and provincial sport organizations. It will complete the development phase for Podium Canada. Then we can start looking at other fiscal measures.

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

Thank you.

Mr. Johnson, if Mr. Chair will allow you.... I know you had your hand up, but I wanted to get into that conversation with....

[Ian Johnson]

Sure. Thank you. You raised a question that I thought was in part directed to me in terms, the way I heard it anyway, of whether there are areas where labour, business, and other groups could work together. I'd like to identify two that I think are important.

One is in the area of public health care. It's clearly been shown, and many businesses have actually come forward to show, the important competitive advantage they have in having a publicly funded and delivered health care system. If you look at the auto industry, for example—GM in the U.S. and in Canada—there's quite a difference.

Ms. Payn, I think, is familiar with the other area. Our president has spoken to the chamber about the importance of joint action on violence in the workplace and the cost of it to workers across the board, whether in small business or in a unionized or non-unionized sector. That's an important area. There's a real cost. We've been part of a campaign trying to encourage business to work with us.

Thank you for the time.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to Mr. Dykstra to finish off this round.

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

Thank you, Chair.

I want to pursue the issue with you, Mr. Oram, of what we've been able to accomplish, in the short order we've been in government, with respect to training.

In the 2006 budget we incorporated a $400 million payment to provinces and territories that were linked into the agreements that were going to be working on adding investments in public transit. We also included $900 million in further investment. That was put in a third-party trust for provinces and territories that were working toward a more structured and solid infrastructure for transit systems. Then, of course, we included the tax credit for purchase of monthly passes. I certainly appreciate Mr. Savage's support for that endeavour. It didn't come on budget day, necessarily, but certainly his question is leading and shows that perhaps we could expand that as a positive thing for the country.

I think part of the reason you're here today is that we have moved in this direction and that you see a potential for the country, from an environmental and a user perspective, to expand it.

I want to get your thoughts on the fact that it has been implemented over the last couple of decades in the United States and maybe get a little more detail about how the policy actually works on the ground.

[Richard Oram]

Thank you.

To your first point, surely the investments that you made in public transport are valuable; I'm sure they are. In distinction to that, the transit benefit is actually one of these magic potions that doesn't cost anything. It focuses a small amount of resources, a minimal tax break, at the work site and it does change things. I would emphasize that the tax cost of this in the early years, perhaps the first five to seven or eight years, is negligible, because companies do not adapt employee benefits immediately.

[Valerie Payn]

May I also just add—

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

Be really quick, please.