Finance Committee on April 14th, 2008

[The Chair, Conservative, Rob Merrifield]

We'd like to call the meeting to order. We want to thank our witnesses for coming forward. This is pursuant to Standing Order 108(2), a continuation of a study on the structure of Canada's federal revenue-raising system.

We have with us, from Financial Executives International Canada, Barry Gorman, chair, as well as Michael Conway, chief executive and national president.

We want to thank you, and we're going to yield you the floor, but before we do that I'll introduce the others.

Neil Brooks is here from York University.

From the OECD, by video conference, we have Christopher Heady.

With that, we want to welcome you again to the committee.

We'll yield the floor to Mr. Conway first. We're very interested in what you have to present to the committee. The floor is yours, sir.

[Michael Conway, Chief Executive and National President, Financial Executives International Canada]

Thank you, and good afternoon, Mr. Chairman and committee members.

My name is Michael Conway, and I'm pleased to present, on behalf of Financial Executives International Canada, our views on your study of the structure of Canada's federal revenue-raising system.

FEI Canada is a voluntary professional membership association comprising more than 2,100 of Canada's senior-most financial executives, organized into 11 chapters across the country.

The recommendations presented to you are the result of the collective effort of our tax committee, which comprises senior financial executives representing a broad cross-section of the Canadian economy and is chaired by Barry Gorman, who is with me today.

Our submission focuses on three key components necessary for a sustainable economic environment: competitiveness, efficiency, and accountability of federal spending.

Competitiveness is critical to the long-term prosperity, and in certain cases the very survival, of Canadian business. Competitiveness implies production with the most efficient use of resources, notably capital and labour, consistent with the desired degree of product quality, access to capital required to invest in modern machinery and equipment, increased rates of productivity, and enhanced training and education.

As demographics change, Canada faces a severe labour shortage. We must attract and retain the best and brightest talent with the know-how required to increase productivity and competitiveness. Therefore, we urge the government to implement mechanisms that support Canadian economic value creators, that encourage global development, and improve Canada's business climate.

A supportive tax system is critical to enhancing Canadian economic competitiveness. With this in mind, we submit recommendations related to three topics: corporate taxes, human resources training and development, and free flow of capital.

Let me begin with corporate taxes. We have three specific recommendations in this area.

First, accelerate corporate income tax reductions. FEI Canada congratulates the government for introducing rate reductions, but it is worthy to note that Canada's effective tax rate is still too high. FEI Canada submits that Canadian corporate taxation must be internationally competitive to make domestic business more productive and to facilitate direct foreign investment. We need only to look to numerous foreign countries, such as Ireland, that have significantly reduced their corporate taxes since 1980 as a successful means of attracting increasingly mobile capital.

Second, reduce the proliferation of non-neutral tax preferences. Some corporations claim various tax incentives as a means of reducing their statutory tax burden, resulting in significant effective tax rate differentials across industries. This disparity is heightened by the different provincial corporate tax rates and credits.

Third, encourage provinces to normalize their corporate income tax rate structures and repeal remaining provincial capital taxes.

Next, let's look at human resources training and development. FEI Canada urges the government to actively aid Canadian businesses in supporting the enhancement of employee skills and qualifications in two specific ways: first, by broadening deductible qualifying education and training expenses; and second, by introducing a refundable tax credit for qualified education and training.

Business responds to incentives that benefit operations. An employee education and training credit will spur business to increase spending in this vitally necessary area.

FEI Canada further recommends that the government establish a centre for continuing workplace education and training to stimulate development of world-class champions of continuing education, further details of which are included in our brief. This kind of program would be particularly beneficial to small and medium-sized enterprises.

Our final recommendation in the competitiveness category is the need for a free flow of capital. We urge the government to continue reducing dividend withholding taxes for non-residents, at a minimum, to the 5% and 15% model found in most new treaty negotiations. This reduction would result in minimal revenue losses, as this primarily relates to emerging economies, such as India and China, that still have higher withholding rates.

On the other hand, complete elimination of withholding taxes would provide Canadian businesses better access to global capital markets at the lowest possible cost. Thus, we would like to expand our submission by suggesting government study the feasibility of eliminating all withholding taxes.

I would now like to move to our second category of recommendations, which concern efficiency. A tax measure is efficient when it achieves its goals in a cost-efficient manner. It is FEI Canada's position that several aspects of the Canadian tax system do not support efficiency, do not blend with overall fiscal policy, and do not minimize interference with system equity.

Canada's tax system is an overly complex patchwork quilt of overlapping tax measures, regulations, and administrative practices. Consequently, compliance costs are excessive. Non-resident investors have noted that Canada has a bewildering proliferation of tax rules and multiple tax jurisdictions. Taxpayers need more stability and consistency in the tax-policy-making process and in the administration of tax rules.

To facilitate a transition to a more streamlined tax system, FEI Canada would like to highlight two recommendations. First, we recommend that the government work with the provinces to adopt a national harmonized sales tax. Many Canadian corporations transact business in multiple provinces, and there are variances in both sales tax rates and between the GST and PST tax bases. Sales tax registrants must submit sales tax returns to multiple taxing authorities and dedicate resources to multiple tax reviews, queries, and audits. In harmonized provinces, businesses receive the provincial portion of the HST paid on purchases, which is currently 8%. In non-harmonized provinces, businesses are refunded only the GST they pay, not the PST they pay on their purchases. By moving to a harmonized sales tax, businesses in the now non-harmonized provinces would be refunded all the sales tax they pay.

Greater harmonization of provincial sales taxes with the GST would enhance competition and reduce compliance costs, as taxpayers and the government would only have to deal with one tax authority. A harmonized sales tax makes for an efficient tax system. Harmonization in the Atlantic provinces appears not to have led to a decline in provincial tax revenues or to an increase in consumer prices.

FEI Canada is advocating that the GST not be reduced below its current level. If these consumption taxes were cut further, alternative forms of revenue would have to be found, and spending would have to be reduced to cover the shortfall.

Our second efficiency recommendation is to call upon the government to implement either group tax consolidation or a loss transfer system. Canada is the only G7 country that does not permit group tax reporting, either in the form of tax consolidation or loss transfer. Our research reveals that some corporations devote more than 1,000 person hours, or over half a million dollars annually, in specialist costs, devising complicated tax strategies to effectively achieve the same end result as group reporting. Implementation of this proposal will reduce the compliance costs of corporate groups. This will be especially beneficial to small and medium-sized enterprises, as they can less afford elaborate tax planning.

Our third and final category of recommendations concerns accountability on federal spending. Spending by the federal government certainly affects the revenue system, since the government must raise revenues required to pay for its program expenses and national debt charges. While we commend the government on some recent spending restraint initiatives, we note that 2006-07 program spending has increased back to its 1997-98 level of 13% of GDP, and the 2006-07 budgetary expenses are at their highest level ever. These trends are not conducive to responsible management of federal fiscal resources. Aggressive debt reduction will result in lower interest charges in future years, resulting in more resources available for either tax reductions or necessary increases in program spending.

Consider one thing: one-third of our current program expenditures are for old age security and health care, two areas we know will continue to cost more as our population ages. To meet these growing obligations, we urge spending restraint and the maintenance of the current debt reduction structure.

We encourage the government to reallocate funds in areas that lead to economic growth, notably for infrastructure funding for research and development, transportation, and post-secondary education.

Finally, FEI Canada encourages the government to implement a regular review of the tax system, which is needed to be in keeping with the principle of transparency and which will provide the opportunity to modernize Canada's tax legislation at regular intervals so as to support and preserve Canada's competitiveness domestically and internationally.

Ladies and gentlemen, FEI Canada thanks you for your time and for the opportunity to present our ideas to you. Dr. Gorman and I would be pleased to answer any questions you might have.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Before we get to the questions and answers, we'll let the other two presenters go, after which we'll start our round of questioning.

We'll now hear from York University. We have Neil Brooks, the director of the graduate program in taxation at Osgoode Hall Law School.

Thank you for coming, and we look forward to what you have to tell the committee.

[Professor Neil Brooks, Director, Graduate Program in Taxation, Osgoode Hall Law School, York University]

Thank you very much. It's a great pleasure to be here, and I thank the committee for inviting me. I wish you good luck in the important task you've undertaken of examining the federal tax system.

Let me begin by speaking very briefly about the purposes of the tax system. The tax system is, of course, simply a policy instrument that the government has at its disposal in achieving its broad social and economic objectives. Therefore, in any kind of review of the tax system, it seems to me to make sense to begin by thinking about what purposes the tax system can and should serve. So I'm quite prepared to make some specific comments, but these comments will be kind of general.

It's commonly said that the tax system has three purposes: to raise revenue for government expenditures; to assist in mitigating the unequal distribution of wealth and income in society; and third, it can be used to attempt to influence social and economic choices that individuals make in their private activities.

I suppose the broad point that I would try to impress upon the committee is that the tax system should be better designed to serve the first two purposes, namely, raising revenue and achieving more equitable distribution of income; and the tax system should be used very sparingly, certainly more sparingly than it has been, for the third purpose, namely, trying to engage in various forms of social or economic engineering.

The most important purpose of the tax system is, of course, to raise revenue to finance government expenditures. In modern societies, governments have many important and irreplaceable functions to perform. Therefore, it's absolutely vital that the government have a tax system that's capable of raising a good deal of revenue in ways that are equitable and efficient.

I might just make three subsidiary points about that. One, I might note that by international standards, as I'm sure you're all aware, Canada is and always has been a relatively low-tax country. For example, in 2005, the last year for which you have comparable statistics, taxes in the average OECD country were about 36.2% of GDP. In Canada, taxes were only 33.4% of GDP, almost three percentage points less than the average industrialized country and about five percentage points less than the average European country. Total taxes collected in Canada have always been substantially below the international average calculated as a percentage of GDP; that is, we've always been a relatively low-tax country. Therefore, it seems to me just incidentally that if someone were looking for a cause for any malaise in Canada's economy or society, there's certainly no international evidence to support a claim that it might be blamed on high taxes.

Also, I might note that if you look across countries with high and low taxes, what you discover is that those countries with high taxes tend to have much better social outcomes than those countries with low taxes—that is, much better quality of life for their typical citizen.

Just by way of illustration, in the United States, for example, which is a relatively low-tax country, 22% of children live in families below the poverty line, whereas in the Nordic countries, which have relatively high taxes, the percentage of children living below the poverty line is 3% or 4%—trivial. In Canada, of course, which is a relatively low-tax country, but closer to the average than the U.S., about 13% of children live in families that are below the poverty line. There is a very close correlation between, in effect, children living in poverty and the amount of taxes collected in a country. That is to say, one thing that our taxes buy, or that higher taxes buy, is lower levels of poverty.

But in fact the same could be said about almost any social indicator. It's hard to think of a social indicator, whether it relates to environmental sustainability, gender equity, or equitable distribution of income, in which there's not a fairly strong correlation between taxes and better social outcomes. Indeed, those countries with high taxes that achieve these relatively good social outcomes in fact are countries that are at the same time achieving relatively high levels of economic growth and material well-being for their citizens. That is to say, when you look around the world at the international evidence, there appears to be no trade-off between having an equitable society and having high rates of economic growth. Generally, the international evidence is that those policies that are financed with higher taxes not only contribute to better social outcomes and a more flourishing democracy, but they also appear to contribute to a highly educated, healthy, and productive workforce.

A second subsidiary point about this purpose of the tax system is that this means that in order to raise a sufficient amount of revenue to finance functions of modern government, it's important that the government be able to rely upon a broad mix of taxes. Consumption taxes, income taxes, wage taxes, corporate taxes--all of those are important sources of revenue, and each tax should be designed so that it's collecting revenue in the most equitable and efficient manner possible.

Thirdly, I would make the obvious point that the recent tax measures would seem to needlessly impair the revenue-raising abilities of the Canadian tax system--for example, the cuts to the GST, which took about $13 billion out of the federal tax system; the introduction of a plethora of additional income tax loopholes, including tax-prepaid savings plans, which in future years are going to cost the government billions in lost revenue.

Indeed, if you look for this last fiscal year, all of the taxes collected by the federal government were made up of about 13.7% of GDP, which was lower than the level of taxes collected by the federal government as a percentage of GDP back in 1960, in spite of the many additional needs that our society would appear to have.

So that's my first point. The most important objective of the tax system is to raise revenue, and the committee ought to be examining the system to ensure that it's capable and it will in the future achieve relatively high levels of revenue.

Secondly, in addition to raising revenue, most people agree that the tax system is a useful policy instrument for achieving a more socially and morally appropriate distribution of income than that which results solely from market forces.

Two things suggest that this committee, in reviewing the Canadian tax system, should in particular be concerned about this important function of the tax system.

First, income in this country is becoming much more unequally distributed. Every measure of the distribution of income and wealth shows the real income of the typical family has essentially stagnated over the last three decades, while the rich have been getting much richer. Just by way of example, in 1980 the top 1% of income earners received about 7.5% of national income; by 2000, they were receiving 13.5%. The increasing concentration of income and wealth is staggering, and it will have severe social and economic consequences for the country. It will eventually threaten our economic prosperity, erode social cohesion, increase economic insecurity, reduce public health, distort the allocation of resources and talents, lead to the withdrawal of the “haves” from public life, erode democratic values, and ultimately diminish the flourishing and richness of Canadian society.

At the same time as the distribution of income has become more unequal, the effective tax rates paid by high-income individuals have been going down. Again, let me just cite one figure. In 1990 the top 1% of Canadians paid a much larger percentage of their income than the bottom 10%, considering all taxes. By 2005 the top 1% were paying less in taxes as a percentage of their income than the bottom 10%. That, it seems to me, is just shocking, and I would urge this committee, in their deliberations, to consider ways to make the tax system more progressive.

Finally, the income tax now contains a bewildering variety of implicit spending programs, measures by which the government tries to influence the social and economic choices that individuals make. Indeed, there are over 150 of them in the income tax alone, by any reasonable count. Of course, over the past two years the government has added greatly to that number: enriched the registered educational savings plans, exempted scholarships and bursaries, provided a tax credit for public transportation, implemented the children's fitness tax credit, eliminated the capital gains on publicly traded shares donated to private foundations. Those measures--and as I say, there are over 150 in the Income Tax Act--have absolutely nothing to do with the tax system. They're spending measures, even though the government keeps calling them tax cuts. They're not tax cuts; they're spending measures.

For example, with respect to the tax credit for fees paid for children's fitness programs, what the government is essentially saying is, for families that, let's say, spend $500 in fees for sending their kid to hockey school, what we will do is pick up one-quarter of the cost. So you send us your receipts for $500 for sending your children to a fitness school, and we'll write you a cheque for $125. It's a spending program. But instead of writing the cheque, what the government says is, “Well, instead of our writing you a cheque, just offset it against your tax liability”, and that's what people do. It has nothing to do with the tax system, other than the fact that it's being offset against their tax liability as a way of delivering the subsidy. That doesn't make it a tax measure. It's a spending measure that happens to be delivered in the tax system by allowing it to be offset against people's tax liability.

Most of those implicit spending programs in the tax system, to the extent that they serve any legitimate government function, are inequitable. They lead to inefficiencies. They lead to abuses. They're not transparent. The government has no control over the spending. They complicate the tax system. They make it unfair.

The real pathway to efficient and equitable tax reform would be for this committee to review all of those tax expenditures in the act and repeal those that serve no useful government function, or the ones that are so badly designed that they're just a waste of government money.

The ones that remain, the ones you want to keep, if you still want to keep those spending programs and matching people's receipts or spending, take all those programs out of the tax system and put them in a separate act. In effect, say to individuals that if they qualify for one of these spending programs, if they want to continue to deliver them in this way, they can offset the amount that they qualify for against their tax liability. Put them in a separate act and embed them in the budgetary process, like every other government spending program, so that Canadians can see their true cost, and Canadians can see who is benefiting from them. I think if you did that, most Canadians would be appalled at the cost of those programs and at how much the benefits largely go to well-to-do families.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you.

I can see we're going to have an interesting debate when we get to questions and answers.

We'll now move on to Christopher Heady. He's from the Organisation for Economic Co-operation and Development. Christopher Heady is the head of the tax policy and statistics division, centre for tax policy and administration.

The floor is yours, sir.

[Christopher Heady, Head of Division, Tax Policy and Statistics Division, Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development]

Thank you, and thank you very much for inviting me to speak to you today.

I'm going to talk about how the Canadian tax system compares to tax systems across the OECD. In my presentation I will refer to some of the charts that I believe have been provided to you.

First of all, there is a chart that reports tax revenues as a percentage of GDP. As Professor Brooks just indicated, this shows that in Canada the tax revenue as a percentage of GDP is somewhat below the OECD average. And I should say that these are tax revenues for all levels of government: federal, provincial, and local taxes.

If I move on to the tax mix, Canada is a country that, compared to most OECD countries, raises a rather high proportion of revenue from personal income tax, a rather small proportion of revenue from social security contributions, and a slightly lower than average—but not much—share from taxes on goods and services.

I think the main interest you have is in the actual tax rates, and so I'll move on and talk about trends in the main or top corporate tax rate that there have been over the past 25 years or so.

What we can see is that there have been very dramatic reductions in corporate tax rates across the OECD over the last 25 years, and in fact I must say that these cuts are continuing. For example, this chart shows, as the latest figure, the corporate tax rates for 2007, but at the beginning of 2008 Germany reduced its corporate tax rate from about 38% or 39% to just below 30%. So in fact, if we take that change into account, Canada now has the third highest corporate tax rate within the OECD.

On the next page, there is a comparison of corporate tax rates in the form of a table. The point this table makes is that large-sized OECD countries seem to be able to sustain a higher corporate tax rate than small-sized OECD countries, and that not only do small-sized OECD countries have lower corporate tax rates, but they've been cutting them faster. We would regard Canada as a medium-sized OECD country, and you can see that in 2007 the average for those medium-sized OECD countries was around 30%, considerably lower than the current Canadian corporate tax rate.

Another issue that is of concern to most countries is the tax rate on dividend income. So the next chart shows, for the years 2000 and 2007, the overall tax rate on dividend income, taking account of both the tax paid at the corporate level in corporate tax and the personal income tax that's levied on dividends. You can see here that once again almost all countries, or all countries in the chart—almost all—have shown a considerable reduction in the taxation of dividend income. Canada has certainly taken part in that cut, but you can see that Canada is above the OECD average; it was in 2000 and it still was in 2007. Again, here, Canada has a comparatively high tax rate.

One other aspect of the corporate tax system is the incentives that are given to research and development, and the next chart shows how Canada compares to other OECD countries. What you can see from the solid black bars is that Canada offers fairly generous, but not extremely generous, incentives towards R and D for large firms. But the little diamond shape above that shows that Canada has an unusually high R and D tax incentive for small and medium-sized enterprises, about the third largest in the OECD.

Moving on to looking at the taxation of labour income, we see that Canada, like other OECD countries, has cut its top personal income tax rate quite significantly over the past 25 years or so. Canada lies more or less in the middle of OECD countries in its current top statutory personal income tax rate. However, a measure that we use more often to look at the taxation of labour income is something that we call the tax wedge. That's something that measures the difference between the cost to employers of employing a worker and the amount that the worker actually takes home to spend.

What you can see in the chart is that Canada is substantially below the OECD average. We've split this bar up into personal income tax, employee social security contributions, and employer social security contributions, and the chart shows that it is not because Canada has a particularly low rate of personal income tax that accounts for its low overall tax burden on labour, but because its social security contributions are substantially lower than average in the OECD.

This chart looks at the situation for a single worker who's earning the average wage. The next chart shows that for that same worker, almost all OECD countries have reduced the tax wedge between 2000 and 2006, and Canada has been part of that trend.

The next chart shows the tax wedge for lone parents. Typically, lone parents don't earn as much as the average worker, so we've looked a lone parent earning about two-thirds of the average wage. You can see that Canada applies a very low level of overall taxation to the wage income of lone parents, about the same amount as the United States, and significantly less than almost all other OECD countries. Only New Zealand and Ireland have substantially greater preferences for lone parents at that income level. They in fact have a negative tax.

The final chart on labour income shows a very simple measure of the progressivity of the tax burden on labour income. You can see that the Canadian tax system has somewhat below average progressivity, and that progressivity fell between 2000 and 2006. However, I should say that I believe the figures would show an increase in progressivity if we looked at 2007, because of the changes in your personal income tax system that were introduced in 2007.

Let me finally move to the comparison of taxes on consumption.

Canada, like all but one of the OECD countries, has a value-added tax that you call a general sales tax. The exception is the United States, of course. The black bar shows the standard rate of your general sales tax in 2007. I should clarify here that the federal rate is shown, not the federal-plus-provincial rate, but the revenue we show is both the federal and provincial revenues from value-added tax or general sales tax in Canada. You can see here that Canada raises a relatively small proportion of its income from GST.

The final chart shows a comparison of environmentally related taxes. In most countries these are primarily taxes on motor vehicles and motor fuels, but there are a number of other more minor taxes as well. You can see that Canada falls very much in the group of countries that do not use environmentally related taxes very much; it's much more on a North American model, with rates similar to those of Mexico, somewhat higher than those in the United States, and substantially lower than those of most European countries.

That's the end of my presentation. Thank you very much for your attention. I'll be very happy to answer questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to our question and answer period. Mr. McCallum will start us off with a seven-minute round.

Mr. McCallum, the floor is yours.

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

Thank you, Mr. Chair, and thank you to all the witnesses for being with us today.

I'd like to try to ask each of you a few questions. Since I don't have much time, I would appreciate it if you could try to be fairly concise in your answers.

Professor Brooks, you used the words “social engineering”, which would perhaps be a bit pejorative if I used it, although I have. I have said on a number of occasions that rather than government discriminating, shall we say, by providing tax credits for young hockey-playing Canadians but not for young violin-playing Canadians, we would prefer to see general income tax reductions rather than what one might call boutique tax cuts.

I will ask each of you whether you think that general income tax cuts would be preferable to narrowly directed tax credits as a matter of general tax policy.

Mr. Brooks, would you comment?

[Prof. Neil Brooks]

I certainly agree with that. There's a long list of problems that you create when you try to deliver these subsidies through the tax system. They're hidden subsidies; they're not transparent. Government's not accountable for them--

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

I've got your answer. I want to go through--

[Prof. Neil Brooks]

Exactly. I can't think of hardly one I would retain, frankly.

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

Mr. Conway, would you comment, please?

[Michael Conway]

In our brief we talked about simplicity and the reduction of the non-proliferation of credits. We would prefer to get back to basics, simplify it, and then direct the incentives more specifically. So the answer would be--

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

Thank you very much.

Mr. Heady, could you comment?

[Christopher Heady]

I also would very much agree. In the OECD we think it is better to have a simple tax system and a low general rate, rather than a high general rate with a large number of special exceptions.

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

Thank you.

On the question of consumption tax--which we call the GST--versus income tax, given the choice between reducing consumption tax in Canada versus reducing income tax in Canada, which would you prefer?

Maybe I'll start with Mr. Heady. I do note that Canada's already relatively high on income tax and relatively low on consumption tax, so which would you prefer as a matter of tax policy?

[Christopher Heady]

I think it depends on what your priorities are.

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

I'm trying to be non-political. It's a matter of sane tax policy.

[The Chair, Conservative, Rob Merrifield]

That's okay, John.

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

Sorry.

[Christopher Heady]

I think that if the purpose of the tax reduction was to promote economic growth, there is a considerable amount of evidence that a shift from personal income tax toward consumption tax would promote the rate of economic growth, keeping the overall tax burden constant. However, there is a concern that a move of that sort could increase income inequality.

So to a large extent, the answer to the question depends on the relative weight you put on reducing income inequality compared to increasing the rate of growth. I think that is a question for politicians to decide in the countries concerned, rather than the OECD.

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

Right. What if you focused the income tax cut on relatively low-income earners?

[Christopher Heady]

If you did that, you might well get the best of both worlds, yes.

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

Thank you.

Mr. Brooks.

[Prof. Neil Brooks]

I agree with Chris. It is a dilemma. Consumption taxes are important revenue-raising taxes and they tend to be quite efficient. On the other hand, the income taxes are more progressive, so there is a kind of conflict between these two objectives that I talked about. But it does seem to me it was a terrible mistake to reduce the GST in Canada, because it collects a substantial amount of revenue in a relatively efficient way, and if the government wanted to have tax cuts, it seems to me the place to cut taxes would be at the low end of the income scale, on the income tax.