Finance Committee on Nov. 1st, 2011

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The budget, as you know, is in the area of $265 billion, so you can do the arithmetic on $30 million.

The point is this, though: if people in Canada want to give money to a political party of their choice or political candidate of their choice, they're free to do so without any compulsion, and they get a significant tax benefit from doing that. That system works well.

I agree with you that it's a good thing that we do not let corporations, including unions, determine disproportionately what happens in our political lives, because they are not permitted to donate. I think that's a healthy part of our democracy.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Marston.

Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

Thank you for being here, minister. It is always a pleasure to have you with us.

I'm going to ask you about the volunteer firefighters tax credit, just because Ms. Murray did comment about it from the Liberal Party.

Before I do so, I want to take a moment to thank you, Minister. I know my colleague mentioned education. We have three teachers here in the room today from Manitoba. One is from Flin Flon. I know you have a whole bunch of measures in the budget about education, including investing in education in the north. I just wanted to thank you for that and acknowledge that these teachers work very hard. I'm sure this will enable them to help educate the future generation of politicians who come here.

Nevertheless, let's go back to the volunteer firefighters credit. The reason I'm bringing it up is that I work very closely with firefighters as a police officer; as you know, I'm on leave.

I remember when Rick Casson, who used to be a member of Parliament from Lethbridge, brought this forward back in 2002. Many of the firefighters I knew had approached the Liberal government of the day numerous times to say, “Please, help us. We're doing this job.” They put their lives on the line, and really are committed to the protection of families and communities. Yet there was nothing done back then. Then Rick Casson came along, and he put forward a private member's bill to actually address this.

I know you have had a personal commitment to this, sir. I remember reading the Canadian Association of Fire Chiefs press release that said you were the first finance minister in their hundred-year history to meet with fire chiefs and examine their issues and concerns. They thanked you for that. And here we have a Liberal member come to committee today and ask for improvements on this very valuable tax credit, but during 13 years they did nothing to address it.

So I want you to share with us today, sir, how this is going to help our communities, how this is going to help us to preserve the good work of these firefighters, volunteer firefighters for the most part.

Even though they refused to do it--and I'm appalled that they would ask for improvements now, after refusing to do it--please address for us how this is going to help our communities.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you. I must say, Chair, that it's to my great benefit that we have a police officer as parliamentary secretary to Finance. It brings a certain focus and discipline to the work of the finance department.

I enjoyed the meeting with the fire chiefs. They gave me a really cool hat, which I did not wear last night, but it would have been appropriate for Halloween.

We have a lot of volunteer firefighters across the country. The number is really quite remarkable. They tell me there are about 85,000 volunteer firefighters who keep our communities safe across the country. I heard from many members of Parliament, and some are around this table, including members of the opposition parties when we were preparing the budget last year, encouraging the government, through Finance, to bring forward in the budget a tax credit for volunteer firefighters. There has been some pressure on many communities trying to recruit volunteer firefighters. One of the realities now is that a lot of people who would be volunteer firefighters work in larger centres and travel there to work and aren't available during the day to respond to emergencies.

So we hope and expect that this tax credit will help volunteer firefighters by providing them with a 15% non-refundable tax credit on an amount of $3,000, which was the recommendation made to us by the volunteer firefighters associations, and we accepted their proposal.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you.

I have one minute?

In that one minute, sir, I want to share with the committee, just in case they missed it. The New Brunswick Association of Fire Chiefs also endorsed this, and I'm going to quote them. They said:

The tax credit is also an important tool when it comes to recruitment and retention. We feel that retaining volunteers that are already in place is even more important...because you've already invested money into those volunteers. So you want to keep them on and keep them as long as you can. Retention with some of the smaller volunteer fire departments is a big deal.

I end the quote there, sir, and I thank you once again on behalf of the volunteer firefighters and on behalf of other firefighters who support them. We police officers also work with them very closely. I want to thank you for paying such close attention to their needs, and regardless of what others think, I think this is a fantastic measure.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

Mr. Giguère, you have five minutes.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair.

Minister, thank you for coming to see us today.

During the last economic recession, Canada lost 300,000 jobs in the manufacturing sector. Those jobs have not been recovered since. Many stakeholders have stated that the Canadian dollar exchange rate against the U.S. dollar is one of the major factors that have hurt them and forced many small manufacturers into bankruptcy.

Currently, we are at par with the American dollar. Unfortunately, that does not really help our manufacturers. In addition, it doesn't help consumers, as they have not benefited from the rise in the Canadian dollar. The reason is that American and other exporters have decided to keep their higher flexibility and profit margin.

This morning, Mr. Carney told us that interventions to deal with the rise in the Canadian dollar and the floating dollar are in line with decisions made as a result of your own guidelines. We would like to know when the Canadian dollar will return to a lower rate so that our manufacturing industry can breathe a little.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I'm expressing my own view on this, but I've never thought that Canadians could only be successful if their dollar was worth significantly less than the American dollar. When I was young it was not, and Canada was doing very well back then. I've never accepted that thesis, that a devalued currency will make our country stronger. I think Canadians are capable of competing on a level playing field with Americans or anybody else in the world.

Our manufacturing sector went through a very difficult time during the recession. That's why we encouraged the acquisition of more productive machinery and equipment through the accelerated capital cost allowance, which again is continued in this budget, which I hope you will support.

This is a two-year extension of the 50% straight line accelerated capital cost allowance rate. This will provide a total of $620 million over the 2012-13, 2015-16 period.

With respect to the dollar, I hear from businesspeople--and you've probably heard it too in your travels across Canada with your consultations--that for many Canadian businesses, having a stronger Canadian dollar permits them to acquire machinery and equipment priced in American dollars that help them be more productive and more efficient and have a better future and employ more people in Canada.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Minister, I am sure that the 300,000 people who lost their jobs would be very happy to hear that!

Canada's economic situation is not as rosy as you think. We are faced with a major trade balance deficit. We have a problem with our rate of productivity. The prices of machines we import from abroad are not dropping despite the rise in the Canadian dollar. Our unemployment rate has increased, and it's is emphasized by a drop in the labour force participation rate. In addition, consumer debt has reached a historic level. In its monetary policy report published in October 2011, the Bank of Canada stated that the Canadian economy was operating at about 1 1/4% below its production capacity, which is a much greater margin of unused capacity than what was predicted in July.

There are 2.7 million Canadians looking for full-time work. Twenty-seven per cent of part-time employees would like to work full time. Companies have accumulated $500 billion that has not been reinvested at high production rates.

We would like to know what you will do to ensure that the $500 billion is invested.

Thank you.

[The Chair, Conservative, James Rajotte]

Okay.

Could we have just a brief response, please, Minister?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Right.

The honourable member is absolutely right that Canadian corporations are in strong balance sheet positions, strong cash positions. Now, this is true also in the United States. And it's a challenge, because the view of many is that we're going through a difficult economic time; there's a large degree of uncertainty and a certain lack of confidence.

I must say that in our own country, in Canada, there's good reason to have confidence, for all the reasons I expressed earlier. The world looks at Canada as being in relatively good shape and as being solid, stable, and reliable.

I encourage Canadian businesses to invest. I'm sure they will, over time, as confidence mounts and we're able to see further employment in Canada.

Our unemployment rate is 7.1% now. It's two full percentage points better than the rate in the United States. We haven't been in that situation for a generation.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

We have time for a very brief round, Mr. Hoback. Unfortunately, we are running out of time.

Mr. Hoback, please go ahead quickly.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you.

Thank you, Minister.

Again, there are lots of things I'd like to say and ask, and we can do that. I know you're a very approachable minister, and I thank you for that.

One thing I think you need to clarify here for our opposition members who don't believe in trade, who are against trade for, it seems, every reason, is just the importance of trade. Maybe you could just clarify for them, to help them understand how important trade is, especially for provinces like Saskatchewan, where I come from.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

For a country the size of Canada, we're a relatively small trading nation. If you look at the history of our country, we would not have the high standard of living and quality of life that we have were we not open to trade and were we not free traders. It's amazing to think that we had an election in this country in which free trade with the United States was the issue, not that many years ago. Thank goodness we got over that.

As you know, our government is negotiating free trade agreements around the world. A lot have been successfully negotiated. This is vitally important.

In the forestry sector, for example, we had some real losses during the course of the recession, along with the collapse of the housing market in the United States. And now--and you've probably heard the same thing--British Columbia is exporting, I think, something like 50% of the product to China. We're being flexible and going to where the markets are and where the demand is. That is one of the reasons our country is as great as it is.

[The Chair, Conservative, James Rajotte]

Thank you

I apologize. I know not all members got a chance, but we had the minister here for a short time. We have officials up next.

Minister, I want to thank you very much for being with us. You're certainly welcome back at any time. We thank you for responding to our questions.

Colleagues, we will suspend for a couple of minutes, and we'll bring the Finance officials forward.

Thank you.

[The Chair, Conservative, James Rajotte]

Colleagues, please take your seat.

I apologize to the officials and colleagues. We are going to be interrupted by a vote, but we should get started on this.

It's been indicated that part 1, which is obviously a very large part of Bill C-13, is of interest to many members. I think, in the interest of time, we'll do question rounds, and I'll try to follow the same format we typically follow.

We have two officials here who are able to answer questions on part 1, so I'll begin with questions.

Perhaps I'll just have the officials introduce themselves and tell us their role with the Department of Finance.

Welcome to the committee.

[Gérard Lalonde, Director, Tax Legislation Division, Department of Finance]

Good afternoon. My name is Gérard Lalonde. I'm the director of the tax legislation division at the Department of Finance. Some of you will recognize me as having been to this committee many times before, and I welcome the opportunity to come back.

I have with me Mr. Ted Cook, who is our recently appointed chair of the legislation review committee here at the Department of Finance. Ted will be a familiar face to this committee in the future, and certainly much more familiar than I will be. So I would like to introduce you all to Ted. He will be taking over the presentation today, and I'll be here more or less for moral support.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you and welcome.

We'll start the first round with the official opposition.

Mr. Mai, go ahead.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I want to thank our witnesses for joining us today.

I have a few questions about part 1, especially the family caregiver tax credit. Why has the additional $2,000 amount not been indexed for inflation like other tax credits?

[Ted Cook, Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance]

The amount of $2,000 is set for the 2012 taxation year, but the amounts that are actually in section 118 of the act--the $2,000 family caregiver credit that I believe you're referring to--will be indexed for inflation in future years.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Okay.

What would be the costs for the federal taxation authorities if they were to make the suggested tax credits for informal caregivers refundable? We have received many questions about people who really need the money and who cannot take advantage of the tax credits because they are not refundable. That has to do with the tax credits proposed for family caregivers, children's arts and volunteer firefighters.

[Gérard Lalonde]

As we explained at the all-party briefing on this measure, these tax credits are intended to ensure that the tax burden on amounts spent for the various activities is reduced. If you have no tax burden, then you don't need the tax reduction.

On the cost of changing the proposals and introducing them instead as refundable tax credits, I would have to defer to one of the economists from our department.

[The Chair, Conservative, James Rajotte]

Is there someone in the crowd who can answer that?

[Gérard Lalonde]

There is not somebody in the crowd right now who can answer that. The upshot is that we haven't calculated those numbers because the proposals, as put forth in the budget, were intended to be non-refundable tax credits.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

I'm sorry, I didn't get that. So you did not look at the options, or you didn't...?