Finance Committee on Nov. 2nd, 2010

[Perrin Beatty]

Sorry, I'm just trying to answer your question.

The Liberal government was correct in taking that action. It was an action that was advocated by the Canadian Chamber of Commerce indeed at the time that you were there. We pressed for a better tax treatment for business to enhance competitiveness in the global system. This was followed on by the Conservatives as well. But other countries have not stood still. Other countries continue to improve their tax competitiveness.

What is critical for us, if we want to move away from the recession that we've been in to have private-sector-led growth, is that we have the investment at the private sector level, which will create new jobs and ensure the competitiveness of our business.

Parliament has spoken on this. Parliament has written into law those tax reductions that have been promised. Business has made commitments based on the commitment that was made by Parliament itself.

Some people argue now that Parliament should renege on those commitments. To do that would damage business confidence very substantially and would undercut growth in Canada.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I'd like to reiterate my earlier comment that the Canadian Chamber of Commerce is advocating going into debt in order to do that. The Canadian Chamber worked very hard to ensure that the Government of Canada addressed its serious deficit and debt situation. Now we have a debt-to-GDP ratio that's growing and going to continue to grow if we allow these tax decreases to continue. What the Liberal Party is advocating is just simply stalling them.

Just let me ask you another question. It goes to the EI rate. As you know, this particular government is going to increase the EI rate as of January to 5%. Now that is a job-killing tax. We all know that payroll taxes are very, very detrimental to both small and large businesses. The Canadian Chamber of Commerce represents, by and far, small businesses in this country. I think you represent around 60% or 70% of small business owners. Is that correct?

[Perrin Beatty]

Considerably higher than that.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Exactly. So considerably higher than 70% of your clientele, your businesses, are small business owners. The tax increase in January is actually going to hurt their bottom line, substantively. We're going to have a 5% increase in EI tax.

I understood that you supported the 5% when Minister Flaherty said that instead of increasing it by 15%, it was going to be increased by 5%, and you were supportive of that. The CFIB says that's going to take about 70,000 jobs out of our economy, and that's a pretty significant amount. What you're asking this government to do is not only to go into deficit to fund a large business tax decrease, but you're also, at the same time, going to have an increase in the EI payroll tax rate.

I find it quite ironic that the Canadian Chamber of Commerce would advocate for small businesses to have an increase and large businesses to have a decrease at the same time as--

[The Chair, Conservative, James Rajotte]

There's about 45 seconds remaining.

[Perrin Beatty]

I'm glad you voiced it, if you're uncertain about it, because I'm glad to have the opportunity to respond to it.

You've raised two issues. The first is the question of should we be lowering taxes at this point and will this have a damaging impact on Canada's fiscal position. We've called upon the government to establish a program to bring us back into balance within five years and to restore this position where we can start to pay down debt again. To do that, we need to encourage growth in the economy and constrain new expenditures.

If we're going to encourage growth in the economy, we have to restore business confidence. We have to encourage business to hire, to invest in new technology, and to invest in R and D.

We don't do that if we break our word, if having made the commitment that business has been planning on, based on Parliament's decision, we suddenly reverse course and say we're going to whack business with $5 billion or $6 billion in more taxes.

You then asked about employment insurance.

[The Chair, Conservative, James Rajotte]

Very briefly, Mr. Beatty.

[Perrin Beatty]

The Canadian Chamber of Commerce was very active in the fight against the employment insurance increases, and that's why we were very pleased with our success.

Mr. Chairman, as you're well aware, what was recommended was an increase three times the size of what was approved by the government. We have taken the position that it's important for the government to recognize that payroll taxes are job killers. By getting that increase reduced by two-thirds, we got a significant--

[The Chair, Conservative, James Rajotte]

Thank you.

[Perrin Beatty]

--win for small business across the country.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you very much, Ms. Coady.

Monsieur Paillé, for seven minutes.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you, Mr. Chair.

It is actually entertaining to see the former President of the Canadian Chamber of Commerce talking with the new President, who was himself a minister here for a long time.

You were the Minister of State responsible for Treasury Board, and then Minister of National Revenue, all before 1993. So you are very familiar with how it works. I was asking myself more or less the same questions, but from another standpoint. In the first three or four paragraphs of your brief, you cautioned us. You note that there could be headwinds, and, according to the Conference Board, consumer confidence dropped for the second straight month.

You seem to be recommending vigilance and thinking that the economic recovery has not necessarily arrived yet. At least, it is has certainly not arrived at the same time everywhere in Canada. However, immediately after that, you talk about what is going to reduce the debt and the deficit. Then there is a kind of space. I don't know how many pages are missing between the fourth and fifth paragraphs, but it's as if it was a done deal. I am always impressed by the fact that you represent 175,000 businesses and 325 chambers of commerce. That amounts to a lot of people and SMEs, in Quebec. In another life, I too did the round of Quebec chambers of commerce.

What recommendation should we make to the government, to avoid the gales, the headwinds? For example, if we decide to cut business taxes, everyone is going to slam on the brakes and sooner or later we'll find ourselves with our head in the dashboard. I have the impression you are leaving out the coming year, in terms of the economic situation.

I'll give you a minute to comment on what I've said.

[Perrin Beatty]

Thank you for the question, Mr. Paillé. Please interrupt me if I don't fully understand your question. I'm trying to respond to it as accurately as I can.

[Daniel Paillé, Bloc, Hochelaga, QC]

I will.

[Perrin Beatty]

If I understand you correctly, your concern is that lowering taxes may put a brake on the economy?

[Daniel Paillé, Bloc, Hochelaga, QC]

You seem to be saying that the government should reduce its debt, reduce the deficit, but you are forgetting the effect the government has on the economy. You are hoping for government spending to be cut. The government is going to arrange it to suddenly stop the impact it has on the economy. There is no growth.

Are you not afraid that by putting too quick an end to these macroeconomic incentives, the government is going to be helping to slow Canada down?

[Perrin Beatty]

I see where you're coming from. Your concern is the stimulus as opposed to the tax cut.

What's important for the economy at this point is that we move away from a government-led or stimulus-led recovery to one that's private sector driven. We need to create the jobs in the private sector. We need to see permanent growth that isn't dependent upon government spending year after year.

We did support the stimulus program during the recession, and we believe it should be allowed to run its course. The real issue for Parliament to decide at this point is whether it should continue the stimulus program beyond its expected expiry date. Our feeling is that it should not be extended because it's important for us to focus instead on a private-sector-led recovery. What is important with that, one of the key elements, is the tax reduction that we've just been talking about.

[Daniel Paillé, Bloc, Hochelaga, QC]

I apologize for interrupting you, but we have already taken four minutes.

Does putting a sudden stop to the activities by this hypothetical March 31 deadline, which suggests we can pave the roads in Canada during winter, not mean we are going to have a pile-up at the beginning of 2011? The government has forgotten to take the situation into account. This is a danger.

I would also like to ask the representatives of the Canadian Institute of Chartered Accountants. At page 3, you say...

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Daniel Paillé, Bloc, Hochelaga, QC]

I'll give you 30 seconds.

[Perrin Beatty]

The single most important or most damaging thing the government could do at this point to stall the recovery would be to cancel the planned tax reductions. Business has been planning on them. The private sector has been hiring based on them. The private sector has been investing based on them. If suddenly those were repealed at this point, the impact would be to get business to shelve its plans for expansion and getting people back to work.

[Daniel Paillé, Bloc, Hochelaga, QC]

We disagree on this. Your businesses know very well that you can't have your cake and eat it.

I want to come back to the Canadian Institute of Chartered Accountants. At page 3, you talk about harmonizing sales taxes. You talk about British Columbia and Ontario. You say at one point that three provinces have not yet harmonized their sales tax: Prince Edward Island, Manitoba and Saskatchewan. So you are saying that Quebec has harmonized its sales tax with the Government of Canada's tax.

[Bruce Flexman]

Yes, Quebec has a sales tax system that is harmonized with the federal GST. Although these systems are operated independently and administered independently, they are harmonized, in the sense that they have a common base and are calculated in much the same way.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you, sir.

I will let Mr. Mulcair ask that question, when it's his turn to ask questions.

Ms. MacQuarrie, at page 3 of your brief, you say you need precise census data. What is your impression of a government that is doing the opposite and that even wants to abolish the long form census questionnaire?

[The Chair, Conservative, James Rajotte]

What is the question?