Evidence of meeting #13 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rate.
A recording is available from Parliament.
Liberal
Raj Grewal Liberal Brampton East, ON
Okay. In your estimation, how many Canadians will benefit from the middle-income tax cut and the Canada child benefit?
General Director, Tax Policy Branch, Department of Finance
There are about nine million individuals benefiting from the middle-class tax cut. There are roughly 3.6 million families that will benefit from the CCB. On one hand it's individuals, and on the other hand it's families.
Liberal
Raj Grewal Liberal Brampton East, ON
Are there calculations on the overlap, so people are going to get...?
General Director, Tax Policy Branch, Department of Finance
I don't have the numbers with me. I can certainly get back to you on this.
Liberal
Raj Grewal Liberal Brampton East, ON
That would be great. That would be an interesting number to delve into.
There's been a lot of discussion around north of $217,000, people assume that there's less of an incentive to work hard and earn more money because you're spending so much in taxation. Only 1% of Canada's population will be affected by the policy change at the top. Are there any studies anywhere in the world that suggest at what number people are deterred to make more money?
General Director, Tax Policy Branch, Department of Finance
It's a tough question. It's a question that has been looked at somewhat in literature.
What we know for sure is that as your income goes up, you are more sensitive to a tax rate change. Clearly that's what studies are telling you.
The second thing is that we know the reaction is coming from two channels. The first one is you may work less, so that's the real economic effect of it. The second channel is that you may be a bit more aggressive in your tax planning. The key question is how do you distinguish between less work effort and tax planning? There are a number of studies out there that use techniques such as comparing elasticities using gross income, so not your taxable income, but before deductions and everything. It's suggested it's less of a planning versus the elasticity of the taxable income. The suggestion is that there is less elasticity when you use gross income as opposed to taxable income. We suggest that potentially the tax planning channel is more important than the less work effort channel.
Liberal
Raj Grewal Liberal Brampton East, ON
How does Canada's top marginal rate—again, for people who make more than $217,000—compare to other countries around the world?
General Director, Tax Policy Branch, Department of Finance
I know of about 20 out of 34 OECD countries that raised their top tax rates in 2009, so there is a bit of a global movement. I have a list of countries. They are well-known countries.
General Director, Tax Policy Branch, Department of Finance
We are roughly in the middle. I don't think we are exactly in the middle.
Sorry, I don't have the average OECD rate. That's something else we can provide.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
When you answered my previous questions, you mentioned that those who earn less than $45,000—which represents the threshold where the tax reduction begins to apply—enjoy a series of tax measures like tax credits or GST credits, for instance.
Do you have some idea of the credits people who earn, let us say, between $30,000 and $40,000 a year get? This is under the threshold that entitles you to the reduction.
The lack of tax cut could perhaps be compensated by the totality of the credits. For instance, what is the maximum GST credit?
General Director, Tax Policy Branch, Department of Finance
I do not have the thresholds for the GST in detail. It also depends on the family situation, of course.
General Director, Tax Policy Branch, Department of Finance
We can also provide that information.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I would very much like to have those figures.
You have seen the Parliamentary Budget Officer's report on the fiscal impact of the tax reduction and the comparison with a reduction in the first bracket. You read the document on this.
Generally speaking, do you agree with the document? We can always talk about differences in the models used, but generally speaking, do you agree with the conclusions of the Parliamentary Budget Officer? Are there points in it you do not agree with?
General Director, Tax Policy Branch, Department of Finance
You would have to ask me a more specific question on one of the aspects of the report.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Is the methodology adequate? Do you agree with the methodology used by the Parliamentary Budget Officer?
General Director, Tax Policy Branch, Department of Finance
The methodology to arrive at which—
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I am talking about the methodology used to arrive at his conclusions as a whole. Let me rephrase my question. Are there parts of the report you do not accept?
General Director, Tax Policy Branch, Department of Finance
Are you talking about the report the Parliamentary Budget Officer produced concerning the cost of the tax reduction for the middle class?
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Exactly. In fact, I can even specify that it is the one I had asked for, which was published on January 21.
General Director, Tax Policy Branch, Department of Finance
The figures of the Parliamentary Budget Officer differ from ours by about 10%. If I am not mistaken, he uses the Social Policy Simulation Database and Model. It is a model that is available at Statistics Canada and which is probably not as precise as the administrative base used at the Department of Finance. There are a few differences that are among other things probably caused by the sources of the data. However, in general, his results were not very far from ours.
