Finance Committee on Feb. 15th, 2011

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you for that. That's why I'm going to ask the question of Mr. Lee.

It's nice that you have research, but in the end we have to make choices. It's nice to say that corporate taxes provide jobs. Mr. Bridault just said 95% of businesses out there are small businesses that are not going to be affected by these corporate tax increases or decreases, depending on your viewpoint. But we have decisions to make. So are you going tell me that corporate taxes should be at zero and we should just let these big corporations get a free ride?

[The Chair, Conservative, James Rajotte]

You have about 30 seconds, Mr. Lee.

[Prof. Ian Lee]

Well, they don't get a free ride, as I've already said, because corporations are intermediaries that pass on all of their costs, including wages, plant and equipment, transportation, distribution, and marketing. They are all passed on through either price of goods and services or lower wages. There's no free lunch.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

What do you mean there's no free lunch? We can see with the corporate responsibility they've had in the last few years.... We just talked about it at the beginning—productivity. What have they done for productivity? We've reduced accelerated capital costs that they've asked us for. We've reduced corporate taxes. Meanwhile, productivity is not going anywhere.

[Prof. Ian Lee]

I'm glad you asked that question because I did not address that in my opening comments. Why I brought up protectionism and CIT was this. The dark and dirty secret about private firms is that they must be forced to compete. Because we have protectionism, pro OECD--I have a quote from OECD saying that we're one of the most protected economies in the west. We've embedded protectionism, which allows our corporations not to compete as aggressively. If we opened up our borders and made them more competitive and forced them to compete, that would drive up our productivity.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Pacetti. We'll have to leave that for another round.

Mr. Carrier, go ahead.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Good morning, everyone.

I will start with Mr. Hodgson. You represent the Conference Board, which, to my mind, is an important economic organization. Earlier, you said that your mission is to provide economic forecasts. I am disappointed that you have not submitted any documents to us. Words often slip away and are hard to hold on to.

Earlier, we heard the commitment made by the Parliamentary Budget Officer. I think that he has a responsibility. He provided us with a document we can refer to even after our meetings. I expected you to submit documents based on information you receive, you already have or you interpret yourself.

I will ask you a question about the document presented to us earlier by Mr. Kevin Page. He came to the conclusion that we have a structural deficit. I think that this is an important element when it comes to the budget. I wanted to hear what you think about that specific element. Do you agree with not controlling expenditures and not conducting any analyses on the long-term sustainability of political decisions? I would like to hear your opinion on this. Do you consider long-term projections more than you do annual forecasts that may be based on political uncertainty?

[Glen Hodgson]

Thank you very much for that.

It's a two-part answer.

First of all, before the Parliamentary Budget Officer position was created, we actually were doing a forecast for this committee. At one point, about three or four years ago, there were four independent forecasters engaged by this committee to give you a view on the fiscal outcomes. We were one of the four. If you would like to engage us, I'd be very happy to provide that service again. But as a not-for-profit organization, I don't have the internal resources to do things for free, to be quite frank, because then I'd be out of business. I think the comments from all four of us reflect that.

Secondly, in our forecast, though, which is available to subscribers, we see stronger nominal income growth in the early years. So we see stronger nominal income growth, which is basically the sum of inflation plus real economic growth, last year and this year, putting us ahead of the kind of track that Mr. Page has set out. And of course once you build that into your forecast, you have that as a permanent fixture going forward. So we see stronger nominal income growth.

Nominal GDP, by year 2015, will be higher in our forecast, and therefore government revenue will be higher, and therefore we have a smaller fiscal deficit, everything else being the same. That's basically the track we're setting out.

I would actually agree with Kevin, with his concerns on productivity and the demographic challenge we're going to face as a country. I think his analysis is very solid there, and it reflects all of our work.

A lot of our material is for free on our website, and I can provide that, but there are products that we have to do on a subscription basis because otherwise I can't pay salaries.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

This is an important opportunity for us to meet with you and to get detailed and specific comments, which I think are lacking today.

I want to use what little time I have left to ask Mr. Lee a question.

When you talk about protectionism, you say that we must reframe the debate from who owns the company to who is investing in Canada and creating jobs. You say that we should open up and not close our economy. That is all very well, but I want to hear what you think about tax havens and tax evasion that can take place in those havens when insufficient information is exchanged. I think that this is a key element in terms of the income Canada is losing. There are many agreements signed by the government that do not include this information.

Do you not think that this is a constraint we should impose on the government when it comes to freeing up revenues, which is supposedly productive?

[The Chair, Conservative, James Rajotte]

Professor Lee.

[Prof. Ian Lee]

Thank you for the question.

Yes, I agree that tax evasion should always be forcefully and vigorously prosecuted. The Government of Canada set up FINTRAC, which my university business school has placed some people at. I haven't studied FINTRAC, but I understand from all accounts that it's doing an excellent job at ferreting out and tracking down laundered money and money that's being illegally transferred.

I can't speak authoritatively on the degree of corruption that you're suggesting.... I can quote Transparency International, which is a non-profit NGO in Berlin, funded by the United Nations, and which last year--2010--ranked Canada sixth out of I think 219 countries, which means we're the sixth most ethical, least corrupt, and most transparent country in the world. We are at the top.

By the way, this organization has been reporting for 10 to 15 years. We're always in the top ten. The Scandinavian countries are always just ahead of us: Sweden, Denmark, Finland, and so forth.

[The Chair, Conservative, James Rajotte]

Merci.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I'm going to try to make this quick. I'm very disappointed that Mr. Mulcair isn't here. It's unfortunate that he would treat witnesses the way he did. I want to suggest to the analysts and the clerk that perhaps they can educate Mr. Mulcair with regard to the Federal Reserve and the fact that the government in the United States actually appoints them, much like we do here. I certainly heard something different than what Mr. Mulcair heard, and it would be nice if he'd let the witnesses finish when he's speaking with them.

I'd also like to bring to the attention of the clerks that there are examples of when Kevin Page has in fact released information to reporters prior to releasing it publicly. Although Mr. Mulcair wanted to dispute that fact and name-call--

[Daniel Paillé, Bloc, Hochelaga, QC]

Monsieur le président--

[Shelly Glover, Conservative, Saint Boniface, MB]

--I'd like for you to prepare perhaps some information that can go to Mr. Mulcair so he's better educated and perhaps not as quick to judge others.

[The Chair, Conservative, James Rajotte]

Order.

We have a point of order.

Monsieur Paillé.

[Daniel Paillé, Bloc, Hochelaga, QC]

Mr. Chair, I would like to believe that, in Mr. Mulcair's absence, we're not at liberty to say anything we want. I also don't think that people from across the table should be lecturing us about document leaks. Ms. Block knows a lot about this. I just wanted to bring everyone back to order, please.

[The Chair, Conservative, James Rajotte]

Okay. That's not a point of order, but I would encourage members to address their questions and comments to the witnesses, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

If I might continue, it's Thomas Mulcair's choice not to be here, as it is Scott Brison's--

[The Chair, Conservative, James Rajotte]

Order, order.

[Shelly Glover, Conservative, Saint Boniface, MB]

--who refused to listen to these witnesses.

In any event, I have some questions. I found what you said very interesting, Mr. Lee, about the fact that when corporate taxes are actually in place, corporations look to recoup those taxes, either by doing what you've already indicated--raising consumer prices--or by affecting workers' wages. So although the Liberal Party wants to raise the corporate tax from the 16.5% that it's at right now, and they want to raise it immediately to 18%.... That's what they've indicated, and if they don't see it in the budget, they're going to vote against our budget and launch us into an unnecessary election. I want you to tell me how that affects our families, because they're claiming they need to raise corporate taxes by $6 billion to help families.

Well, if consumers and workers are the ones affected, as you say, by the increase of corporate taxes, tell me how that is going to hurt our families, our moms who are shopping for their kids, and the workers who are trying to make ends meet for their families? How is that going to hurt our families?

[Prof. Ian Lee]

Thank you.

I should disclose, in full disclosure, that I'm in the middle of writing an op-ed right now--although I'm not sure who is going to publish it, but I hope the Globe or the National Post will--on this very issue, wherein I lay out the evidence from the scholarship, from the OECD and other organizations, such as the Federal Reserve, that have published on this. As I said, the record is crystal clear. There's no ambiguity in the scholarship, and I encourage every member of the committee to go and read the scholarship. I'm going to provide it to the clerk of the committee--on a stick if you wish it, as they're all PDF files.

The scholarship is unambiguous. An increase in taxes is merely a disguised tax on workers or consumers. That's all it is. There is no—

[Shelly Glover, Conservative, Saint Boniface, MB]

So what's it going to do to our families?

[Prof. Ian Lee]

It's going to raise prices or cause wages to go down--

[Shelly Glover, Conservative, Saint Boniface, MB]

Is it going to hurt our families?