Finance Committee on Oct. 26th, 2009

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much, Mr. Chair.

Thank you very much, everybody, for being here.

First, this is not actually a question but a congratulations to the two of you from ParticipAction. I have a competitive sports background, and am hugely supportive of ParticipAction--not because of that background but because from a financial and an economic perspective, the most persuasive thing in preventing health care costs is actually preventing illness and encouraging health.

So my congratulations. I'm a very big supporter of what you're doing.

I will point out that we're in the middle of a challenge--a media battle but also a challenge on a number of fronts--with government advertising. Although we haven't been able to get exact numbers, we believe we're now looking at perhaps over $100 million having been spent by this government promoting the economic action plan, the so-called economic action plan.

I would just like to make a contrast: you are here asking, very politely and nicely, for $5 million a year.

I remember how effective those ParticipAction advertisements were. I just wanted to put out there the fact that you are not asking for a very large sum of money in contrast to the extraordinary amounts this government has been using to spend on advertising, in effect, itself.

Don't feel bad that I'm not asking you a question. I just wanted to thank you.

[An hon. member]

That was more than ten seconds.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Yes, I know it was more than 10 seconds, but he's the sprinter, not me.

To the Home Builders' Association, I'm looking at page 3 of the submission, at the statistics on the number of purchasers of the new single-family homes who qualified for the GST housing rebate. The argument here is how few people actually benefited from this.

It begs this question for me: why do we need a further reduction? I don't know why we need to have an even smaller rate when apparently new home sales have not exactly suffered from that.

I will also just add in terms of context that making new homes affordable to a large number of people who probably shouldn't have been able to afford homes has caused significant problems, particularly in the United States.

I throw that open for you to address this issue of.... Affordability might be one thing, but maybe from a public policy perspective, if it hasn't been holding back purchases of new homes, why do we actually need to have lower GST?

[Gary Friend]

With respect to the mortgage qualification in Canada, we are far more strict in other areas, which is why we have a sound market. People must qualify for their homes.

When you look at the GST rebates available, in a suburb of Vancouver and Abbotsford, 97% of the homes don't qualify for a rebate. What you're not seeing is the people who are left out of the market.

If I could, I will ask Mr. Kenward to add some more information.

[John Kenward]

Just to pick up on that point, Mr. Chairman, over time, because the GST rebate thresholds have not been adjusted or, as we would phrase it, indexed to rising house prices, we see less and less new home purchases across the country, particularly in our larger urban markets, able to receive a full rebate. Certainly less and less are even able to get a partial rebate.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I don't mean to interrupt, but that is rather my point, that not being able to benefit from a GST rebate doesn't seem to be slowing down people from buying homes. From a policy perspective, I would argue that there may perhaps have been a slightly different incentive in 1991 than now.

Again, I would repeat that too great an access to home buying, particularly in the United States, became a real problem in terms of their economic situation.

[The Chair, Conservative, James Rajotte]

A brief response, please, sir.

[John Kenward]

I think your last point is a very important one.

I would suggest, respectfully, that there isn't a connection between the GST rebate and the conditions that prevailed in the housing market in the U.S.

[Martha Hall Findlay, Liberal, Willowdale, ON]

So it's all affordability if—

[John Kenward]

I say that in the sense that we haven't had, fortunately, loose mortgage lending requirements in Canada.

With respect to what's happening to new home buyers, if we go back to 1991, say in a city like Vancouver, a reasonable percentage of new home buyers in that market were able to afford a new home much more easily than today. Today, I believe that--correct me, Gary--well over 90% of new home buyers would not be able to get a rebate.

[Martha Hall Findlay, Liberal, Willowdale, ON]

But it hasn't stopped them from buying new homes. That would be my premise.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Hall Findlay.

Monsieur Gaudet, pour cinq minutes, s'il vous plaît.

[Roger Gaudet, Bloc, Montcalm, QC]

Thank you, Mr. Chair.

My question is for the Canadian Institute of Chartered Accountants. I did not read your entire document, because I am a new member of this committee. I see, however, that you do not talk about ways of eliminating or defeating tax havens.

[Bruce Flexman]

As part of our recommendations, we encourage the adoption of the panel report on international taxation. That is something on which we did not get into the details, but there are a lot of recommendations dealing with issues with respect to the whole international taxation system within Canada.

[Roger Gaudet, Bloc, Montcalm, QC]

Among those measures, you talk about reducing corporate taxes. If you let businesses access foreign tax havens, it will be difficult for government to build wealth and share this wealth with others.

[Bruce Flexman]

It's actually an interesting phenomenon that Canada has become more competitive internationally with its corporate tax system. One of the themes of the international taxation report is that Canada should be developing its international tax policies around the fact there's not the same opportunity for leakage, or not the same motive for leakage. I think that's a shift in dealing with international taxation within Canada.

[Roger Gaudet, Bloc, Montcalm, QC]

I'd now like to hear Mr. Campbell's reaction, who is, in all likelihood, expecting me to ask him this question.

As a representative of the Canadian Bankers Association, what do you think about tax havens?

[Terry Campbell]

I'll turn to my colleague in just a moment.

I agree--quite a bit, actually--with what Mr. Flexman says. I think that's entirely in the right direction in terms of the answer to your question.

I would also say that internationally there is a growing consensus and standard through the Organisation for Economic Co-operation and Development about rules on transparency and standards on tax. Of course, Canada is a member in good standing of the OECD. We think that the existence of these standards, which marginalizes and tries to identify and squeeze out tax havens, is entirely the right way to go.

Now, of course there's nothing wrong--Canada is doing this as well--with having competitive tax rates, because it is more attractive for investment into the country. As Mr. Flexman was saying, it makes Canada a very competitive environment.

So we have tax rates that are in many ways competitive or more so than in other jurisdictions. That places Canada in a good environment. I think other jurisdictions legitimately and fairly and in accordance with the OECD rules do try to have the most flexible competitive environment. It does attract investment and uses the rules of the international game according to well-known standards. We think that's appropriate.

Now, tax havens are being squeezed out by these standards, and that's entirely the right way to go as well.

[The Chair, Conservative, James Rajotte]

You have a minute left, Mr. Gaudet.

[Roger Gaudet, Bloc, Montcalm, QC]

I'd like Mr. Hannah to respond. He was supposed to do so.

[Darren Hannah]

The main thing I would say is that a recent G-20 communiqué made some very clear points--that the best way to deal with the issue of tax havens, which are uncooperative tax regimes, is through transparency and through the conclusion of tax information exchange agreements.

We are happy the Government of Canada has taken the bull by the horns and is trying to conclude tax information exchange agreements to add on to its already extensive list of tax treaties to try to improve that transparency and deal with the very issues you're talking about.

[The Chair, Conservative, James Rajotte]

Merci, Monsieur Gaudet.

We'll go to Mr. Dechert.

You have about four minutes.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

I'll be quick, ladies and gentlemen. Thanks for your presentations.

First to the Canadian Bankers Association about the consolidated tax reporting suggestion--I'd also like to hear the CICA's comment on that as well--in your view, how does the fact that Canadian companies are not allowed to consolidate for tax purposes hurt our country's competitiveness versus the United States and other countries?

[Darren Hannah]

The challenge is we view it first and foremost as an administrative and reporting burden issue. Canada is the only G-7 country that does not allow some form of consolidated reporting or equivalent measures. As a consequence, if I am a multi-line company with multiple operating subsidiaries operating on an integrated basis, I need to file separate returns annually for each of these operating subsidiaries, notwithstanding the fact I am a single contiguous entity.

That's not efficient. Within the company, that creates artificial barriers to operation. It adds to the paper burden we have to deal with. It's simply not an efficient way to go and it really doesn't mirror the way the corporation is supposed to work. It puts Canada at a competitive disadvantage.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

I appreciate that answer given that multiple tax returns are probably good work for tax accountants.