Finance Committee on April 27th, 2010

[Daniel Paillé, Bloc, Hochelaga, QC]

I want to understand. With regard to the previous question, I was told that no one behind Mr. McGirr could answer that question.

Mr. McKay also asked an excellent question on the impact and we were told there was no answer. That very much surprises me. Thirty-five years ago, when people left Quebec universities with degrees in taxation, the Department of Finance Canada was one of the best places to work because it represented a challenge. It appears that has changed a lot.

You also seem to be telling us that there are no negotiations between the Government of Canada and the Government of Quebec over Hydro-Quebec, but that there are discussions. As a representative of the Department of Finance, can you explain to me the difference between discussions and negotiations?

[Tom McGirr]

Quebec is raising their concerns with the Minister of Finance. The Minister of Finance is responding to Quebec's concerns. To date we've said that we're taking part in multilateral discussions with the other provinces on the treatment of hydroelectricity with an equalization, and those multilateral discussions are ongoing.

[Daniel Paillé, Bloc, Hochelaga, QC]

If I understand correctly, there is a negotiation when the two parties are open and a discussion when one is talking and the other is politely listening.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Like now.

[Daniel Paillé, Bloc, Hochelaga, QC]

Like now.

At last, I understand.

I'd also like to go back to clauses 1646, 1647 and 1648, since the purpose of the point of order was to indicate the clause referred to. The equalization arrangements are generally highly complex and very specific, very differentiated and very precise. With the current econometric and computer techniques, we can now have quite complex formulas.

In view of the ability of the very high levels of the public service of the Government of Canada to handle enormous programs and arrive at amounts and interesting formulas, I find it curious that, regarding Hydro-Quebec and equalization revenue from natural resources, you're saying we can't differentiate profits because it would be too complicated. That seems a little much to me.

If, out of abnegation, Hydro-Quebec adopted the same corporate structure as Ontario Power Generation and Hydro One and at the same time, instead of presenting one type of sheet, presented another type, would you send it a cheque?

[Tom McGirr]

If there were a corporate restructure in the province of Quebec, we would have to look at it in terms of how the equalization program was currently functioning.

[Daniel Paillé, Bloc, Hochelaga, QC]

Conversely, for the Ontario government, again in the equalization calculations under clause 1647, with Hydro One and Ontario Power Generation, if Hydro Ontario adopted Hydro-Quebec's structure, there again I suppose the Government of Canada would have to look at and analyze the changes.

[Tom McGirr]

Certainly given the policy we have right now, if you merged Ontario Power Generation and Hydro One you would have to look at how that would fit into the program. The policy is that you take the entire remitted profits of any crown corporation engaged in hydro generation.

[Daniel Paillé, Bloc, Hochelaga, QC]

With regard to the Government of Canada's other tax policies concerning private businesses, so we're not talking about Crown corporations, the Department of Finance, in its group of tax experts on corporations and companies—I'm thinking of immense holding companies, without naming any; there are some very large holding companies in Canada—has a fairly specific tax policy that enables the Government of Canada and its senior officials to ask the Revenue Department to apply a specific type of segregation regarding profit levels. Whereas, in the case of private businesses, they are able to differentiate profits quite accurately, almost surgically—having been a private sector CFO, I'm asking you to believe that, when the Revenue Department knocks on your door, it's quite something—I wonder why, on the Crown corporations, they don't conduct that surgical operation that would of course enable Quebec to obtain its due.

[Tom McGirr]

I'm certainly not an expert in corporate tax law, so I'm not going to touch that side of the question. All I can say is that the information we have makes it difficult to be able to isolate just those profits from the exploitation of natural resources for all of the crown corporations in Canada that are engaged in that type of activity.

[Daniel Paillé, Bloc, Hochelaga, QC]

My last question is as follows. Could one of the 40 officials behind you answer the question that you can't answer?

[Tom McGirr]

I'm not aware if there's anybody from the tax policy branch who would be able to answer the first part of your question.

[The Chair, Conservative, James Rajotte]

All right. Thank you.

Mr. Mulcair, please.

[Thomas Mulcair, NDP, Outremont, QC]

I'm going to start with an admission. I was so familiar with Quebec's arguments regarding the differential treatment in Quebec for Hydro-Quebec and the treatment in Ontario. I wear my name well. I tend to doubt until the point has been proven.

If I had the slightest doubt in coming here today that the difference in treatment between Hydro-Quebec and Hydro One in Ontario was an argument and not a fact, I no longer have that doubt. You just convinced me that it's an intentional choice by the Government of Canada to treat Hydro-Quebec differently from the way it treats Hydro One in Ontario. I followed all your arguments throughout your explanation. About half an hour ago, you said

that in both cases--Hydro One and Hydro-Québec--we're looking at all the profits remitted to the government.

A moment ago you corrected yourself, saying:

profits remitted to the government by any crown corporation involved in hydro generation...

Which is different from what you said about half an hour ago, and the transcripts will show that very clearly. You moreover say that we constantly ask you

political questions, not technical questions.

And yet, fundamentally, every time we ask you the question, you hide behind a technical argument. You always say

that it's very difficult to isolate just those profits.

It seems to me the burden of proof is on your shoulders. Moreover you said this:

If there was a corporate restructuring in Hydro-Québec...

But which one?

What would it take for Hydro-Quebec to receive the same treatment?

There was a corporate restructuring at Hydro-Quebec, precisely to create different so-called “corporate” entities. Accordingly, the burden of proving whether Hydro-Quebec's figures are fictitious, when you separate production, generation, distribution and so on, is on your shoulders.

There is a prejudice at the very basis of your reasoning. Every time you talk about Quebec, Mr. McGirr, you say that the $250 million

is a figure advanced by Quebec.

That even makes the government members smile. That's rubbish and we won't even consider it. That's their argument.

Here's what I'm asking you. What information do you have concerning the $250 million, since this is a technical question?

Every time, you say

it's complicated. Isn't that why you have that job, because you want to take care of these complicated questions for us?

The question remains unresolved,

the information we have is that it is difficult to isolate.

That's why I'm asking you a technical question, not a question

of policy. What is the information that you have?

That's what you're telling me.

The information we have is that it is difficult to isolate.

I respectfully submit to you that Hydro-Quebec has done the work for you. You're telling us that you reject that out of hand, that you don't believe Hydro-Quebec's figures. You don't believe in the Government of Quebec's $250 million. What do you believe? What is

the information we have?

Is that technical enough for you? It isn't a policy question. It's a technical question. So answer it.

[The Chair, Conservative, James Rajotte]

Show some respect, Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

This is respectful. I said it with a lot of respect. That doesn't mean it's an easy question.

[The Chair, Conservative, James Rajotte]

Mr. McGirr, please.

[Tom McGirr]

This story is becoming a little more complex with each and every moment.

What I talked about was that the equalization program takes into account the remitted profits of any corporation that's involved in hydroelectricity generation in the natural resource base. The profits of all other crown corporations are taken into account in the business income tax base. So they're not omitted, if you will. Hopefully that's what the transcript will say.

But that is the policy. Any firm that said the profits--and this dates back to the recommendation that was made by the expert panel on equalization--that come from crown corporations that are engaged in hydroelectricity are akin to any type of royalty that Alberta raises from oil, or that Nova Scotia raises from natural gas, etc.... It should all be part of the natural resource base.

The question is how much of the profit of a given crown corporation relates just to the exploitation of a natural resource? That's the tricky part.

I'm certainly not questioning the numbers that Hydro-Québec has. Please don't infer that I've made that commentary. I'm aware of the numbers that Hydro-Québec produces, but the equalization program--and people have already mentioned this today--should be applied equally across the country. It's not just a Hydro-Québec issue, if you will, in terms of narrowing down the profits to just the exploitation of a natural resource.

Hydro-Québec's data is probably better than others. I'm not going to comment on that. I certainly don't want to classify one versus another. I'm saying that at this point in time we do not have the information available to us to be able to fairly go across the country to each and every crown corporation that's engaged in hydroelectricity generation and isolate those profits that relate just to the exploitation of a natural resource.

[Thomas Mulcair, NDP, Outremont, QC]

May I take the liberty of summarizing what you've just said? Tell me if I'm mistaken.

Hydro-Quebec has created three distinct corporate entities and reports the profits of each one. You acknowledge that difference and you don't discuss the validity of their figures. You're telling me that, because a counterpart in another province does everything under the same corporate hat, because a single Crown corporation carries on three activities in a particular province, you find it too complicated to separate the various activities. In the case of Quebec, which separates them, you say you have nothing to say about the figures.

You refuse to grant the same treatment to Hydro-Quebec, whose activities are identical to those of Hydro One, because the other provinces haven't separated activities within their Crown corporation responsible for hydroelectric power production.

I think that's a constitutional aberration, not a policy question, as you just said it.

[The Chair, Conservative, James Rajotte]

Do you want to comment, Mr. McGirr?

We have about five minutes. We will have to be very quick, because we want to get the answer to Mr. McKay on the record and we have to go to committee business at 12:30.

Go ahead, Monsieur Paillé.

[Daniel Paillé, Bloc, Hochelaga, QC]

Yes, but at $250 million, that's quite a lot per minute.

My question stems from the exchange we've just witnessed. How many companies are there in Canada that produce hydroelectric power? I'm asking the question, and you see it very clearly because it seems so complicated to separate the activities. The number of businesses that produce electric power in Canada from hydraulic energy must be monstrous. That's what I understand.

[Tom McGirr]

I don't have the exact number of companies. I don't have that information with me, and I'm not going to try to speculate. We're talking about no more than twenty, but I think it's fewer than that.

As part of the multilateral discussions we're having with provinces, we're asking for the provinces' help in getting the data that would be required to better answer this question. We're still working on trying to get that data.

[Daniel Paillé, Bloc, Hochelaga, QC]

I have one final question for Mr. McGirr. I sense you are impatient, Mr. Chairman. Is there anyone behind you, among the 40 officials accompanying you, who could give you an answer to the question how many hydroelectric companies there are in Canada?

[Tom McGirr]

No, but I certainly would be able to provide it if I had the right piece of paper with me. I just don't have that right piece of paper with me. I'm sorry.

[The Chair, Conservative, James Rajotte]

You can provide that to the clerk.