Evidence of meeting #48 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was impact.
A video is available from Parliament.
Conservative
Gérard Deltell Conservative Louis-Saint-Laurent, QC
Earlier we were discussing businesses that, according to the Governor of the Bank of Canada, create jobs and wealth. These businesses are sensitive and vulnerable to global imperatives, particularly to exportation.
Do you think maintaining the small business tax rate at 11% tax instead of lowering it to 9% stimulates the economy?
Parliamentary Budget Officer, Library of Parliament
I'll ask Mr. Scholz to answer your question, since it's also his chosen field.
Economic Advisor, Analyst, Office of the Parliamentary Budget Officer, Library of Parliament
At the request of an hon. member last spring, we calculated the fiscal and economic impact of the decision to maintain the small business tax rate at 10.5% instead of its legislated decline to 9%. We found that over five years, at the end of 2021, there would be a negative impact on real GDP of $300 million, and it would reduce the level of employment by about 1,240 jobs created or maintained.
Conservative
Gérard Deltell Conservative Louis-Saint-Laurent, QC
Thank you.
Did you conduct the same study on the implementation of the Liberal carbon tax?
Parliamentary Budget Officer, Library of Parliament
No, we haven't done calculations on the carbon tax. As I said before, we prepared a report a few months ago on how the carbon tax may affect the GDP per capita, but we didn't calculate the revenue as such.
Conservative
Parliamentary Budget Officer, Library of Parliament
We took a rate of $100. This would lower the GDP by $1,400 per capita.
Conservative
Gérard Deltell Conservative Louis-Saint-Laurent, QC
Regarding the Canada Pension Plan, we're currently debating Bill C-26 in the House of Commons. We estimate that it could cost about $2,000 per employee, meaning $1,000 for the employer and $1,000 for the employee.
Do you think the measure will generate economic growth?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
We have estimated the amount of revenue that will be collected as a result of this tax, and by 2021, that will be about $6 billion, which is almost a quarter of a percentage point of GDP.
Certainly that has an impact on households that are paying that tax and the businesses that are paying that tax, but the amount is very small. Overall, in terms of the impact on GDP, it would be very small. We haven't really done that study, but it would be very small because the amount of revenue generated would be very small.
Conservative
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
We are talking about increasing the revenues that the government will collect and the reduction in the disposable income of households.
Liberal
The Chair Liberal Wayne Easter
Thank you. The time is up on that.
I would question, Mr. Askari, whether you should call this payroll deduction a tax or not.
Mr. MacKinnon.
Liberal
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
Yes, of course, it's a payroll deduction. Whether you call it a tax or something else, that's an issue that has been debated for a long time. Different people have different views on that.
Liberal
Steven MacKinnon Liberal Gatineau, QC
Sorry for the abrupt start. I also want to welcome Mr. Fréchette and his team.
Thank you for your work. It doesn't surprise me that Mr. Deltell acknowledged your courtesy, Mr. Fréchette. You're from Gatineau, where everyone is very courteous.
I want to take a quick look at the decisions we'll need to make, that the government will need to make and that this committee will need to make for the 2017-18 budget. We'll be meeting with Mr. Barton, who chairs the Advisory Council on Economic Growth and who advises the Minister of Finance. Based on his recent reports, I think he'll tell us that Canada should first increase its immigration levels.
How would an increase in Canada's immigration levels affect us? How would you deal with an increase in immigration levels in your economic models?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
When we do a fiscal sustainability report, that is driven to a great extent by demographic factors. Certainly an increase in immigration would increase the labour force over time and would help in that sense. It would help in terms of the overall economic growth.
We have done simulations. I don't have those in front of me right now, but we have done simulations for our fiscal sustainability report in terms of how big that impact is. From what I remember, the impact of raising immigration by a reasonable amount on the overall fiscal sustainability is not going to be very significant.
Whether or not you increase immigration, there are many other reasons for doing that, which we are not really taking into account and we can't really comment on.
Liberal
Steven MacKinnon Liberal Gatineau, QC
We often hear about natural caps on growth imposed by our demographics, both in Quebec and across Canada. You referred to short-term effects. Obviously, in the short term, there are integration expenses and so on. However, with a higher cap on growth, we could have a better financial situation in the long term.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
As I said, there will be some positive impacts in terms of overall potential growth for the country as you increase the labour force and the labour input into the economy. However, as to the size of that impact, as I said, I don't have those numbers in front of me, but from what I recall, they weren't that big. It is certainly positive.
Parliamentary Budget Officer, Library of Parliament
I'll make a quick comment. Mr. Askari is basically saying that we don't know the policy at this time. It's one thing to increase immigration to compensate for the aging population. You know very well that some provinces speak of immigrant investors more than others, and so on. All these factors can marginally affect the economic growth rate. For now, since only one number has been put forward, we don't really know whether it will be targeted. We don't have any idea, so it's more difficult to comment on the matter.
Parliamentary Budget Officer, Library of Parliament
Exactly.
Liberal
Steven MacKinnon Liberal Gatineau, QC
Based on his recent work, I think Mr. Barton will recommend to the government that private money from investors of pension funds, either foreign or Canadian, be added to the federal infrastructure spending. Private investments in infrastructure would help increase the country's strategic infrastructure investments.
For the purposes of assessing future growth, do you think it's a good idea, knowing that we're still thinking in abstract terms? Do you think it could add or eliminate another obstacle to our growth?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
I think, in general, in principle, any kind of investment, especially investment in infrastructure, will increase potential growth. In that sense, if you are looking for growth, that's a good thing. Whether it's a good decision or not, we cannot obviously comment on that. That's a policy question.
Liberal
Steven MacKinnon Liberal Gatineau, QC
I was speaking in abstract terms about increasing spending beyond the government's fiscal capacity and adding significant infrastructure investment amounts. If a dollar invested in infrastructure by the federal government amounts to a certain percentage of GDP growth, would increasing the amounts and investing in strategically economic infrastructure ensure a higher potential growth cap?
Parliamentary Budget Officer, Library of Parliament
I'll make a brief comment and I'll ask Mr. Matier to also make a very brief comment.
You referred to the infrastructure bank. The goal is to align infrastructure spending with the private sector so that pension funds can get money because they desperately need returns. I think the Governor of the Bank of Canada mentioned that a great deal of time is needed to generate economic benefits. That's the case for infrastructure spending. It's extremely difficulty to say whether the multiplier effect will be two, three or four over an eight-year period.
Do you want to comment on this?