Finance Committee on Nov. 15th, 2007

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

Thank you for the question.

The honourable member mentioned that the question had come up before and that we'd provided an answer before. I think that's the correct recollection, and therefore my answer will very much track what I said before when we were here.

We don't have a breakdown of the numbers that will be deducted....

Sorry, let me start again. With respect to the rules that exempt business income earned offshore by foreign subsidiaries of Canadian companies, they are a deliberate policy decision by Parliament.

The comment I made the last time, and abide by still, is that you can't measure the revenue loss by applying the Canadian tax rate to that foreign income and contend that is the amount of Canadian tax that is lost. In fact, one of the arguments that commentators would make quite strongly, I believe, is that it's as a result of the exemption for the foreign business earnings of foreign affiliates of Canadian companies that we do have the business conducted offshore. It's not appropriate to measures losses by, as I say, applying a tax rate to that foreign income.

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

Could you at least tell us what amount of foreign revenues are patriated to Canada, and in what form? Of course, we cannot assume that if they were taxed, the amount would be the same, but do we know what amount is involved?

[Brian Ernewein]

Yes, I think we can. Statistics Canada has some numbers that we can obtain and forward to you, which talk about the amount of dividends, if my recollection is correct

I take it you're speaking of dividends paid to Canada.

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

I would appreciate it if you could send that information along to committee members.

I would also like to talk about the transfers that appear under the item entitled “Fiscal Equalization”. I guess this has to do with resolving the fiscal imbalance.

It talks about fiscal transfers but, in my opinion, we are really talking about cash transfers. When the Minister came to meet with us, he did, in fact, confirm that this represented a cash transfer from the federal government to provincial governments, and that there were never any real fiscal transfers.

Could you tell me whether the Minister was correct in saying that this settlement represented a cash transfer to the provinces or, as the name seems to suggest, are we instead talking about a transfer of tax room to a specific province?

[Barbara Anderson]

These amounts are the cash transfers that represent the budget bill—the appropriations from the budget bill—and they are all cash amounts.

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

You cannot be political, and I understand that, but we obviously have to try to obtain clarification with respect to the points we raise. The problem is that the government says that it resolved the fiscal imbalance in the last budget, whereas we, in the Bloc Québécois, claim that the government has not resolved the fiscal imbalance, since there has been no tax transfer.

I am not asking you to tell me whether the fiscal imbalance has been resolved or not; I understand that you cannot answer that question. But from the perspective of the Department of Finance, did the last budget actually provide for a tax transfer—because we are talking here about fiscal equalization—or was it, instead, a cash transfer?

[Barbara Anderson]

These represent the cash transfer, the $39 billion, the annual portion of that $39 billion that was part of the fiscal balance package.

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

Fine.

I have a quick question for you. Under the current cash transfer settlement, there is provision for 50% of non-renewable resources to be included in the equalization calculation. Has there been any assessment of what it would represent in monetary terms if 0% had been excluded or if 100% of non-renewable resources had been excluded? Do we have that data, per province?

[Barbara Anderson]

Yes, we do, and I believe you asked me that question the last time I was here. I believe we sent those numbers, but I will follow up.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Wallace, you have seven minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to thank everybody for coming. I have a number of questions. I actually enjoy looking at these things.

This is mostly for clarification, just so I understand. Right now, we're looking at supps (A), as I like to call them. There is another supplementary period that comes, at least one more. Is that not correct? When would that be expected? When would we see those numbers?

[Paul Rochon, Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance]

No date has been set, but normally, it's towards the very end of the fiscal year.

[Mike Wallace, Conservative, Burlington, ON]

It is almost at the end of March.

[Paul Rochon]

It is in March, yes.

[Mike Wallace, Conservative, Burlington, ON]

It is sometime in March. Okay.

Can we turn to page 149, if that's okay, in the supps? So I have an understanding, could you explain some things to me? When you say a transfer, when I'm looking at a transfer...where is that coming from, and what triggered that? It is not the adjustment column but the transfer column. I'm trying to learn the process here.

[Coleen Volk]

These are transfers between departments. They aren't in that impact to the fiscal framework; they're just transfers from one department's estimates to another department's estimates.

[Mike Wallace, Conservative, Burlington, ON]

Okay. And they're budgetary transfers, so they're not real cash moving from place to place. Is that...?

[Coleen Volk]

That's right. Well, they're....

[Mike Wallace, Conservative, Burlington, ON]

It's their ability to spend, of course.

[Coleen Volk]

It's our ability to spend, yes. It's that $63,000 you're looking at. Is that right?

[Mike Wallace, Conservative, Burlington, ON]

Well, the one that is on top there. It's an easy page to deal with.

Then I'm looking at adjustments and appropriations. If I look down here at the bottom, at the payment to Ontario for $250 million—is that right? Child care spaces, the $250 million, the patient wait-time guarantee—all that is generated out of budgetary changes made since you presented this book to us with the original budget in it. Is that correct?

[Paul Rochon]

Yes.

[Mike Wallace, Conservative, Burlington, ON]

I understand. The reason we have supplementaries is because the decisions made and the strategic outcomes you wanted to accomplish when you produced this book may have changed, based on budgetary changes that have been passed in the House, and they're all represented in this supplementary book.

If there were no other changes in financing, from a budgetary point of view, between now and the end of March, what would we need supps (B) for? When do we say to a department—I'm being a little bit of a devil's advocate here—look, you put in your money, you get to spend it, but quit asking for more? When does that happen?

[Paul Rochon]

Let me answer the first question, why would you need supplementary estimates at this point in the fiscal year. The answer is, a number of departments still have planned spending but are not ready to implement it.

[Mike Wallace, Conservative, Burlington, ON]

They are not covered in their first estimates in March?