Finance Committee on April 28th, 2015

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

How long did you go back on this arithmetic analysis that you did? We only just created the TFSA in 2009.

[Mostafa Askari]

That's right, and that's where the study starts, yes, in 2009.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Anyway, I would like to suggest that you include the access to capital, clearly the elasticity. Perhaps with the doubling, there will be a greater impact. I really think it is important that your next analysis on this includes the impacts to the treasury and to the tax dollars that our opposition values so greatly, because there is an immediate impact to the government treasury on that.

[The Chair, Conservative, James Rajotte]

Very briefly, if you want to comment.

[Jean-Denis Fréchette]

Just to clarify, is that an official request? I mean, it is your privilege to ask these kinds of questions to the PBO.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

I'd love that information, but through the chair.

I think that's very important. I think you have half of the coin showing right now, and I'd like to see the full one.

[Jean-Denis Fréchette]

We'll clarify with the chair the real question, the exact question, that you're asking. We can check the blues, but—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

I think I've made my real question very clear, sir, with all due respect, and I would love an answer to it. I think you've done half of the analysis, and I would like to see the full analysis.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Caron, s'il vous plaît.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Mr. Fréchette, for the benefit of Ms. Bateman and the committee members, it would be helpful if you could send us the TFSA studies that have been done here and around the world. A number of studies have been done on the subject, and I've had an opportunity to read them. The government would benefit from having access to them, as well. That would be appreciated.

Mr. Saxton said that income splitting levels the playing field for families. Conversely, I would say that when one spouse—usually the man—makes $80,000 a year and the couple has two or three children, the other spouse can choose whether or not to work. But for a couple that has three or four children, with one parent earning $40,000 a year, the other spouse almost has to work just so the family can make ends meet.

As for whether the policy levels the playing field or not, you didn't want to comment, and I won't ask you to. My example contradicts the government's claim that the measure eliminates an unfair element in the tax system. What's more, couples benefit from economies of scale, as compared with individuals who don't have access to income splitting, even if they are single parents. The Carter commission raised that point at the time.

I'd like to pick up on something Mr. Cullen said about the Auditor General's report, something I find quite interesting. According to the report, the government doesn't provide Parliament with appropriate information on tax-based expenditures. That leaves Parliament unable to ascertain how much tax-based expenditures will end up costing the government in lost revenue. The report also mentions the fact that it's impossible to obtain a description or proper follow-up from the Department of Finance.

My first question is this. In a speech to the UN, Mr. Harper had previously said that it was impossible to manage effectively without the ability to measure data. And according to the Auditor General's report, we can't adequately assess tax-based expenditures.

Would you draw a parallel between the situation identified by the Auditor General and the fact that the government is ramping up its estimates-based management approach, making it extremely difficult for committees to study departments' estimates and make a final determination on budget-related issues?

[Jean-Denis Fréchette]

I think we've already mentioned that we have the same problem in terms of estimates oversight. A parliamentary budget officer position exists. In our quarterly reports, we monitor the government's budgetary expenditures.

I'm going to repeat what I said earlier. We, too, have trouble obtaining the necessary data to accurately assess all of the government's measures. We indicate that every three months when we review direct program spending in the absence of all the necessary data. Those issues date back to 2012. Nevertheless, committees do take their jobs seriously, and I hope they are using our data.

I hope that the Auditor General at least mentioned in his report that the parliamentary budget officer is also making those efforts to help parliamentarians, albeit without ideal results, so they can do their jobs as lawmakers and overseers of public money.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I hate to disappoint you, but so far, I haven't seen any mention of the parliamentary budget officer's work in the report.

In response to the Auditor General's report, one of the things the government intends to do is extend its fiscal spending forecasts by two years. Do you think that is sufficient?

[Jean-Denis Fréchette]

Having not seen the Auditor General's report, I can't comment on that.

I'm not sure whether Mostafa would like to add anything.

[Mostafa Askari]

I'm not really in a position to comment. But I can say that medium-term or five-year forecasts are usually more useful for everyone.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Did you say five years? So that's your recommendation.

I'd like to come back to your assessment of income splitting. I'm going to switch to English because this is how CTV News summed up your comments:

that income-splitting will have a “near-zero” impact on families in the bottom 20% of income, and that about 7,000 full-time jobs and $90 million in income will be shed by the Canadian labour force due to the policy.

To what do you attribute the loss of jobs and income?

[Mostafa Askari]

Normally when you have this kind of change in the marginal tax rate for individuals in a family, there could be an impact on the behaviour of the individual in terms of how much labour they supply.

In our estimate in our report, we showed that, if there is a family that benefits from this, normally the higher-income person in the family will actually effectively have a lower marginal effective wage rate because of the lower taxes, and the person with the lower income will have a higher marginal effective tax rate. There are negative impacts on the lower-income individual in the family and a positive impact...and the net impact is a small negative.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

In a nutshell, then, what you just said ties into what I was saying earlier. At the end of the day, those who leave the labour force will be the ones who can choose to do so. When one spouse makes $80,000, $90,000 or $100,000 a year, the other spouse has the flexibility of choice. If both people in the couple make $30,000 each or if one earns $40,000 and the other earns $30,000, they won't necessarily have any choice, especially if they have a family and mouths to feed.

[Mostafa Askari]

That's absolutely true.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have one last question for you.

Where are you right now in your cost assessment of Canada's involvement in Syria and Iraq? Are you still looking into that? Are you following up on those costs?

[Jean-Denis Fréchette]

We are in the process of doing that follow-up. Without letting the cat out of the bag, I will say that that will probably be the focus of our first discussions with the committee.

Our relationship with the Department of National Defence seems to be improving gradually. You may know that we produced our last report with virtually no information provided by the department. We received more information from the United States Air Force and the United Nations than we did from the department.

This time around, we've contacted the new minister and new deputy minister, and both appeared to be very open. We are following up on the subject, given that we did receive a request to that end in connection with the report.

I'd just like to come back to your other point, the net reduction of 7,000 jobs resulting from the family tax cut. It's equivalent to 0.04% of the total hours of labour supplied, so it's still fairly marginal.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Caron.

Mr. Cannan, please, it is your turn.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thanks to our witnesses for being here today.

I just want to clarify one question. With regard to the Parliamentary Budget Office, you said you use your own estimates, or do you...? The finance minister uses the average of 12 private sector economists when forecasting GDP. Do you use those private sector forecasts or just your own?

[Chris Matier]

We use our own macro-econometric model to do these projections. The model is similar to that used by the Department of Finance and some at the Bank of Canada, but it's an independent projection. This is our view of where we think the economy will go.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

It's just an independent view, then.