Finance Committee on May 28th, 2008

[Serge Dupont]

When the minister met his counterparts in June 2007, he proposed working together to come up with the expert panel. Their response was that they did not really want to be involved. That being the case, he said that he would form the panel, but would make sure that it sent its recommendations to all...

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Perhaps I misunderstood, but it seemed to me that, from the outset, when the minister met the provincial ministers, he chose not to establish a common body, but to set up common funding for the study.

[Serge Dupont]

No.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Was it always clear that the federal government would look after all the funding?

[The Chair, Conservative, Rob Merrifield]

A quick answer on that, and then we'll move on.

[Serge Dupont]

Even when the federal government suggested working in cooperation with the provinces, it offered to provide all the funding. There was really never a question of shared funding.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to Mr. Wallace.

You have seven minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair. I have a few questions I'd like to ask.

I'll start with the international taxation panel. Based on this supplementary estimates (A) and getting approval, has their work plan actually been finalized? Do they know where they're going in terms of the number of meetings and all those issues? Has that been resolved yet, or are they waiting for budget approval before that happens?

[Brian Ernewein]

Their work is well under way, but I don't think they've mapped out all of their plans for meetings and research at this stage. They're going to be spending at least the next few months engaged in that, to come to views on the contents of their report. It's also not for us to determine for them what they're to do. They already--

[Mike Wallace, Conservative, Burlington, ON]

I didn't ask you to determine. I didn't know if they'd provided you a plan as to where they're going.

[Brian Ernewein]

In terms of the work they're undertaking to do, they issued a consultation paper in April, which is intended to be the prompt for discussions with the--

[Mike Wallace, Conservative, Burlington, ON]

And in that consultation process they are to be back to the government by the end of this calendar year. Is that correct?

[Brian Ernewein]

Their mandate is to submit their report to the minister by December 1 of this year.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

My next questions mostly deal with the securities regulatory body that the other panel will look at. If I read this correctly, Treasury Board approved something in 2003 with a five-year plan to start that process. Am I reading that correctly? This isn't something that happened relatively recently; you've been working on it for a number of years. And part of the money is for a renewal of that five-year funding you started in 2003.

[Serge Dupont]

That is correct, Mr. Chairman.

In 2003, at the time of the establishment of the Wise Persons’ Committee, some funds were allocated to the committee itself, but also to the Department of Finance to support its own work of regulatory reform in the domain of securities. Of the $2.8 million you see in the estimates for 2008-09, $1.8 million is allocated to the panel and $1 million is allocated to the Department of Finance for its own work on securities regulation, supporting the minister in his own work, doing analysis for the minister, advising on consultations with provinces, and so forth.

[Mike Wallace, Conservative, Burlington, ON]

Assuming we approve this today, what is the role of the Department of Finance in connection with the panel? Is it a supporting role, providing information? Are you in on every meeting they have? I'd like to know what the finance department's role is.

[Serge Dupont]

Sure. There is no strict ongoing role with regard to the panel. What we have done is allocate resources to the panel from departmental finance staff; it's usually an executive director. These people now report to the panel. The executive director also reports to me because he's still an employee of the Department of Finance, but in a day-to-day kind of world, they are dealing with the panel, and, as indicated by Mr. Ernewein for his panel, at a separate location and working at arm's length from the department in terms of supporting an independent exercise.

[Mike Wallace, Conservative, Burlington, ON]

This has been going on for a little while. I have a quote here from the former finance critic, Judy Wasylycia-Leis from the New Democrats. She was quoted in The Toronto Star, convinced of the need for a national securities regulator rather than a piecemeal provincial approach: “Canada does not seem to have the tool box necessary to deal with corporate fraud.”

Corporate fraud is one of the issues the panel will be dealing with. Would you agree with the former NDP finance critic's position on this?

[Serge Dupont]

The government has held that a common securities regulator would assist in strengthening the enforcement effort on securities laws in Canada.

[Mike Wallace, Conservative, Burlington, ON]

Can I ask another question from supplementary estimates (A) that is not necessarily with these two panels?

Brian, maybe you could answer--or maybe not.

[Brian Ernewein]

Probably not.

[Mike Wallace, Conservative, Burlington, ON]

I'll ask the question and you can tell me if you can answer or not.

We have put aside $180 million as an incentive for provinces to eliminate taxes on capital. Can you answer how that is calculated? How is that distributed to provinces if they do that? Does anybody on this panel know? I could ask at another time.

[Brian Ernewein]

I can't speak to the number itself, but the 2007 budget included an incentive for provinces to reduce their capital taxes by providing a limited period of time during which essentially the tax value or the value of the elimination of the provincial capital tax to the federal government, that is through the elimination of an otherwise deductible cost, would be made up to the provinces. The requirement was that they had to eliminate their capital tax before January 1, 2012, and the incentive, this amount, or the tax savings to the federal government for the period, would be paid over to them.

[Mike Wallace, Conservative, Burlington, ON]

This flows from the 2007 government budget. Is that correct?

[Nancy Horsman, Director, Business Income Tax Divison, Tax Policy Branch, Department of Finance]

Right, and that's in relation to provincial actions that have been taken since that announcement.