Evidence of meeting #52 for Finance in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was infrastructure.
A video is available from Parliament.
President, C.S. Clark Consulting, As an Individual
No. I think there's a broader public good decision here, a public policy decision about taxation and the role of government and the nature of government and how governments operate in society.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
We might disagree on that and you're the economist. I'm not suggesting that I've got all the answers.
President, C.S. Clark Consulting, As an Individual
I don't think economists have all the answers either.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
No, I know. You know what Truman said about economists.
Is the U.S. going to end their QE3 in the next few days?
President, C.S. Clark Consulting, As an Individual
That's what the chairman essentially intends to do. I think once that ends, the question becomes, how long will it be before they raise interest rates?
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Often times we point to the U.S. and say, ”Look how great these guys are doing“, but really in all fairness they have increased their debt—and this is where we maybe disagree—doubling it in six years. Is that correct?
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I want to ask you another question. The price of oil concerns me too. Why is the price of oil dropping so much?
President, C.S. Clark Consulting, As an Individual
That's a good question. I think there are three reasons. First is the huge increase in supply from shale oil in the United States, which basically makes the U.S. the biggest producer of oil these days. Second is the much slower growth in demand for oil because the global economy is slowing. Third is the politics of the OPEC countries where Saudi Arabia is refusing to reduce its production of oil.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Saudi Arabia dropped the price, so the Americans are not going to find it too lucrative or even profitable to do the shale oil.
President, C.S. Clark Consulting, As an Individual
I think everyone is guessing, but I suspect the Saudis are seeing how low the oil prices can go before the marginal cost of shale oil.... You have to remember that Saudi Arabia produces a barrel of oil at $10.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
I know, but there is a real possibility that there's going to be some other pressures that are going to be exerted. The Russians aren't going to take this laying down. It does create a global political situation that's quite tense.
President, C.S. Clark Consulting, As an Individual
I think the IMF was concerned about the geopolitical tensions that are rapidly growing everywhere, whether it's in Europe, Russia, or anywhere else.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
We could see something happening in the Middle East which could shoot the price of oil right back up.
President, C.S. Clark Consulting, As an Individual
I'm an economist and I don't predict political events in the Middle East.
Conservative
Conservative
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Van Kesteren.
Mr. Caron, you may go ahead. You have five minutes.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you, Mr. Chair.
I would also like to thank all of the witnesses for being with us today.
Ms. Kozhaya, I don't want to put you in the hot seat, but our previous panel of witnesses included business groups as well. And some of the requests we have heard are quite similar. Generally, business associations such as the Quebec Employers' Council ask for a tax reduction. You are asking for a reduction in payroll tax. At the same time, you want more investment in areas such as infrastructure, which is entirely commendable. Your organization, like the Canadian Chamber of Commerce, whose representative I questioned earlier today, would like the government to balance the budget and repay the debt.
I am trying to wrap my head around how we can lower revenues by eliminating or reducing payroll taxes, or corporate taxes, and significantly increase investments, while working towards a balanced budget and paying down the debt.
Vice-President of Research and Chief Economist, Quebec Employers' Council
The reduction of corporate income tax to the current rate of 15% was extremely important, being one of the measures that made it possible for Canada to maintain its level of economic activity. Certainly, the ability of businesses to make investments and hire employees does not depend solely on the tax rate, but it does play a significant role. The global context likely played a role as well. Global demand was lacking. Lower corporate tax rates are clearly conducive to investment and job creation. To put it in economists' terms, these tax reductions tend to be self-financing.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
That is where I was trying to steer the discussion. That is something we often hear.
Unless we're on the wrong side of the Laffer curve, they would not be fully self-financing. On the contrary, it would be very partial. It would result in a loss of revenue for the federal government at a time when it wants to invest in infrastructure. I don't think you can actually say they would be fully self-financing.
Tax cuts don't pay for themselves entirely.
Only a portion would be offset by the economic growth generated by the reduction.
Vice-President of Research and Chief Economist, Quebec Employers' Council
Yes.
Obviously, even economists don't agree on the percentage at which tax reductions become self-financing. Is it at 100% or partially? Fortunately, taxes such as the capital tax no longer exist. The impact of that tax was greater than 100%. Its elimination more than offset the loss because it was such a bad tax.
We have to be competitive. A number of countries, including social democratic ones like Sweden, recognize that low corporate tax rates are important for economic growth. They have rates that are comparable to Canada's, if not more competitive than ours.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
However, those same countries have higher payroll and sales taxes.