Finance Committee on April 27th, 2010

[Mike Wallace, Conservative, Burlington, ON]

That was actually done? You met with everyone who wanted to speak with you?

[Carol Nelder-Corvari]

That's right.

[Mike Wallace, Conservative, Burlington, ON]

Okay, thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Mulcair, s'il vous plaît.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you.

I always try to make the distinction, somewhat as Mr. McKay was saying, and to respect the fact that you are here to explain the orientations and their effects to us, not necessarily to construct them. Having previously sat on that side of the debates, I always try to respect that difference and I'm going to try not to transgress it this time.

My question concerns a favourite topic of the New Democratic Party. It is a subject that they've previously discussed publicly on numerous occasions. In our view, widespread income tax cuts granted to the most profitable corporations are granted at the expense of the equilibrium of our economy. My question is how do you go about reconciling these concerns with others, that is to say cutting customs tariffs, lowering the income tax of large corporations, even cutting by sector, and how do you make your recommendations in that regard?

Allow me to provide a bit of a backdrop to this subject by saying this. We're talking about the most profitable businesses. In our opinion, however, by definition, a tax cut does not afford any benefits to a forest or manufacturing company that hasn't made any profits since it hasn't paid any taxes. We understand the measure in that way, that is to say that we're seeking a balance by giving the manufacturing sector a little air by allowing it to secure the equipment it may need free of customs tariffs. This is an attempt at rebalancing. We understand that, and in that respect the attempt is welcome.

However, my question concerns the internal process, not the political process. How do you formulate your orientations within your respective departments when those balances have to be developed? How do you come up with a suggestion such as that in light of what we've experienced?

In other words, before the current crisis hit, Canada, particularly Ontario and Quebec, had already lost 400,000 jobs in the manufacturing and forest sectors as a result of the high dollar. I don't want to go into another area. We'll be having Mark Carney here this afternoon, with whom we'll be able to talk about monetary policy.

Within—if you'll allow me the expression—your respective machines, how do you strike this balance in order to try to maintain what we believe was a quite balanced economy that we had managed to build since World War II and that, from our standpoint, is being destabilized as a result of the fact that we are, in particular, putting all our economic eggs in the oil sands basket?

[Patrick Halley, Chief, Tariffs and Market Acess, International Trade and Finance, Department of Finance]

I'll try to answer as best I can. I'm not in a position to discuss how the budget is formulated internally, but I can talk to you about internal formulation as regards customs tariffs.

With respect to tariff relief to assist corporate competitiveness, that is a longstanding policy. It's in the customs tariff. There is a mechanism to assist businesses and that has been done for some decades.

On the other hand, what Ms. Nelder-Corvari mentioned was that the process was more specific, more ad hoc, more reactive. Given the economic circumstances and the number of submissions that had been made, we started, with the 2009 budget, to get a more proactive approach and to adopt slightly broader tariff relief measures to assist Canadian businesses. However, the policy as such is a longstanding policy. It's the scope of that policy that has been altered with recent budgets.

[Thomas Mulcair, NDP, Outremont, QC]

Do you conduct an objective internal analysis to determine the long-term effects of each? How do those who deal with customs tariffs as part of their everyday duties communicate with people who are responsible for tax cuts for large corporations? How is that physically done?

Earlier your colleague explained to us that a notice was published in the Canada Gazette stating that there were going to be consultations and so on. That's the external part. However, internally, how do you coordinate your actions? How are topics put on the table? For example, is it acknowledged that certain measures produce certain results and that something else should be done to provide assistance to the manufacturing sector? How is that done in concrete terms?

[Carol Nelder-Corvari]

On this measure, some economic modelling was done concerning the proposal. That's the reference you heard the minister give to the positive impact on GDP and employment. So in broad-based budget consultations and under the government's Advantage Canada plan, everything was done to respond to the need to improve the competitiveness of Canadian manufacturers, particularly given the economic crisis. This was one component of that broader effort that was extensively discussed both within the department and with stakeholders.

I'd like to make one other point on your earlier comment about corporations. This measure is strongly supported by small and medium-sized enterprises, which stand to benefit. Very often they can't access tariff preferences, partly because of the customs burden. So this responds to the fact that more and more of these small and medium-sized enterprises are plugging into global supply chains, and they need to be competitive and get the most high-quality inputs at the best price.

[Thomas Mulcair, NDP, Outremont, QC]

That's good. Thank you.

[The Chair, Conservative, James Rajotte]

Merci.

We'll now go to Mr. McCallum, please.

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

On this $300-million entire savings to the manufacturing sector, do you have any idea of the quantitative impact? I remember Jayson Myers comparing $300 million of tariff savings with the shipments in manufacturing. It was $100 billion or $200 billion--I'm not sure of the exact number, but it was several hundred or a thousand times bigger than these savings. I remember him saying that the overall impact would be pretty trivial.

Do you have any quantitative estimate of how important this is?

[Carol Nelder-Corvari]

I have other quotes from Jayson Myers that are very supportive of this measure.

On the impact, it's supposed to have a 0.1% positive impact on GDP, increase jobs by 12,000, and increase exports by 3.6% to all regions. The Canadian Manufacturers and Exporters worked very closely with us on this measure in consulting and making sure we reached all interested stakeholders. They said that eliminating tariffs on manufacturing was a bold move by the government. It will cost little in terms of lost revenue, but it is vital to the competitiveness of Canadian manufacturing.

I have various quotes here from the CME and I'd be happy to table them.

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

I could also dig mine up if I needed to, but I don't think we need to have a war of quotes. He did say something to the effect of what I just said, so $300 million compared to an industry of $100-plus billion-. You say it is 0.1% of GDP. Okay, that's an answer.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McCallum.

We'll now go to part 6. I have Mr. Mulcair first.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

My question is for Mr. McGirr. I see he has understood because he is approaching his microphone.

Mr. McGirr, I would like you to help us follow the process. As you know, files related to equalization are making the headlines and are of considerable concern to us.

I'm going to read clause 3.12 of the bill, which concerns section 1646 regarding the additional equalization payment. It states that the clause “establishes the amounts of one-time protection”, and continues, stating that they cannot be reduced “under the Equalization, Canada Health Transfer and Canada Social Transfer programs.”

Are you following me?

[Tom McGirr, Chief, Equalization and Policy Development, Department of Finance]

I'm not sure about the deduction part.

[Thomas Mulcair, NDP, Outremont, QC]

Let's look at the clause in question. I'm going to read it in full:

This clause establishes one-time protection of transfer amounts that will be paid in 2010 and 2011 to the provinces receiving equalization. This protection payment, which takes the form of an additional equalization payment in the case of provinces receiving equalization, is a one-time protection designed to ensure that no province receives less in 2010-11 than in 2009-10 through the combined Equalization, Canada Health Transfer and Canada Social Transfer programs.

It then states the amounts granted to four provinces: Nova Scotia, New Brunswick, Manitoba and Prince Edward Island. Do we agree on that?

[Tom McGirr]

Yes.

[Thomas Mulcair, NDP, Outremont, QC]

First, I would like you to explain to us in concrete terms what the facts are. We're talking about a health transfer program that is subject to an agreement between the federal government and the provinces and which, unless I'm mistaken, expires in 2013.

Is that in fact the date?

[An hon. member]

Yes.

[Thomas Mulcair, NDP, Outremont, QC]

This is indeed the agreement that was signed. It terminates in 2013-2014?

[Tom McGirr]

The last year the Canada health transfer will be legislated is 2013-14.

[Thomas Mulcair, NDP, Outremont, QC]

That's it. All right.

I'm going to ask you a question, trying once again to respect the line between your administrative function and ours, which concerns the political orientation.

In fact, if a province decides to impose charges on users—for example, $25 for every medical visit—will there be a direct deduction from its transfer because it is not consistent with the health agreement? How would that be handled at the federal level?

[Tom McGirr]

I presume you're talking about a recent measure that was announced in the Quebec budget.

[Thomas Mulcair, NDP, Outremont, QC]

In fact, I'm going to be careful. Yes, there were two. And to be honest, I would say that that has been the cause of some confusion for the public.

First, the budget imposed a tax. It is the provinces' right to impose a tax. You can be in favour of a regressive tax or not, but a tax is a tax, and the provinces are free to tax in their areas of jurisdiction.

So that doesn't concern the tax, which is indeed included in the budget. It concerns the idea that is currently the focus of particular government attention: the idea is ultimately to charge a deductible of $250. And based on the number of medical visits, the deductible would be deducted from that.

My mother, who saw this on TV, asked me whether it was true that she would be required to pay $25 per medical visit. I told her that that was not yet the case.

Let's say it is the case. People sometimes look at the provinces' jurisdiction over health. Here, however, we're talking about an agreement. There's a signature at the bottom of the page: the provinces do this and the federal government does that, including equalization payments.

What would be the effect on equalization payments of a province that decided—and this isn't yet the case—to charge $25 or $50? What is confusing in the examples is that it was $25 in the first year of the tax. So there were two different $25 figures being bandied about, which confused a lot of people. So there's a part entitled “user fees”, that is to say an amount that appears directly on the income tax return—not in the doctor's office—based on the number of medical visits.

Let's say we collect—I'm making up a figure—$600 in one year. Would it be taken into account in calculating the Canada Health Transfer payment?