Finance Committee on Feb. 3rd, 2020

[Suzy McDonald]

The risk to...?

[Sean Fraser, Liberal, Central Nova, NS]

You mentioned our ability to respond to a potential downturn by having social safety nets in place. That's what triggered the question.

[Suzy McDonald]

I think the thought behind the CPP enhancement was that we really needed to change the way we did the CPP program moving forward, ensuring that we're not using a pay-as-you-go program anymore and that we have a fully funded model that ensures that Canadians will have more money in their pockets as they move forward.

[Sean Fraser, Liberal, Central Nova, NS]

In the 20 seconds I have left, I would love to squeeze in one more question.

[Suzy McDonald]

Sure. I'll stop there.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Sean Fraser, Liberal, Central Nova, NS]

One witness mentioned that with the accelerated capital cost allowance changes that were made in 2018, we have a marginal tax advantage of a few percentage points over the United States. With the mandate letter commitment of a 50% cut for zero-emissions technologies, I'm curious to know where we think that would position Canada in the global marketplace in terms of anyone trying to get into the business of manufacturing zero-emissions technology.

[Andrew Marsland]

I'm not sure I have a numerical answer. Clearly, as I mentioned earlier, we're working on the issues laid out in the minister's mandate letter and analyzing them. Whenever you change the tax parameters, you affect the marginal effective tax rates. Logic would tell you that if you were reducing the statutory rate, then that would go further down. As to just how much, I don't have that, but of course it would have a positive impact.

[Sean Fraser, Liberal, Central Nova, NS]

We don't have a comparator relative to other manufacturing countries that may be—

[Andrew Marsland]

Clearly, as we work through the approach, we will look at other countries that are in that business. Countries like Sweden and others are leaders in that industry. I think that's one area we'll analyze as we work through the proposal.

[Sean Fraser, Liberal, Central Nova, NS]

Okay. I'm significantly past my time.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you to all.

We will go to Mr. Cumming first, then to Ms. Dzerowicz, Mr. Ste-Marie, Mr. Julian and Mr. Fragiskatos.

Mr. Cumming, you have five minutes.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

Mr. Leswick, you suggested that we're in relatively good shape by the percentage of GDP and overall debt levels. Those anchors have always been important, whether it be retiring debt or following some kind of metric. Has the department studied, or are you concerned with, the rising debt levels not just within the federal government but outside it, Canada-wide, particularly the provinces and municipalities? The federal government has a role with infrastructure programs. There are always matching funds. What kind of shape are we in as a country when it comes to rising debt levels?

[Nicholas Leswick]

From a public sector perspective, I think indeed we are concerned about rising debt levels in the provinces. They have exceeded their previous historical peaks. That is in the context of facing, as I said, acute pressures in their social and health systems over the next generation. For sure there is some concern there. We encourage provinces to continue on their fiscal consolidation tracks to make sure those debt levels don't accelerate.

I think you also suggested overall economy-wide debt, the household sector and the corporate sector.

[James Cumming, Conservative, Edmonton Centre, AB]

Correct.

[Nicholas Leswick]

I wouldn't say there are any alarm bells, although it is a key risk to the economy, especially in the household sector. It's more, I think, from the perspective of, yes, household vulnerabilities, but our ability to smooth consumption in the face of what could be the next economic shock. Obviously, households have more debt. They're probably a little bit more interest rate sensitive and less willing to take on debt. An instrument like the Bank of Canada's policy rate is probably a little bit less effective when you look forward to what could be the next economic shock.

Likewise from the corporate sector, we have a non-financial corporate sector and a financial corporate sector that are increasingly indebted. I don't know that there's necessarily the optimal steady-state level of debt. It seems that it's being redefined every year as we go forward in the global economy. That said, these corporations are also very interest rate sensitive. We're very mindful, in any sort of backup in rates or some sort of increase in the corporate debt spread, of our ability, Canadian corporations' ability, to take on more debt or to smooth out their consumption and investment patterns. It's something we're mindful of, and it's always on our roster of risks, but we try to manage those in balance.

[The Chair, Liberal, Wayne Easter]

Mr. Morantz, do you want to take the rest of the time?

Go ahead.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I want to ask a couple of other questions.

Getting back to the basic personal amount, I'm looking at the Parliamentary Budget Officer's report, which gives a breakdown. You've seen this report, I presume.

[Andrew Marsland]

Yes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

On page 3, it gives a breakdown of what the benefit will be to individual taxpayers in 2023. In the range of $0 to $15,000, it says $1, and with $227,000 and above, it's $11. The report says that “21.0 million individuals will pay less federal income tax as a result of this policy change.”

Out of curiosity—and if you don't have this number here, you could get it to me—how many million Canadians will receive a tax break of between $1 and $11 by 2023?

[Andrew Marsland]

Well, you anticipated that I wouldn't have that, but I can see if we can find that.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

That's assuming these numbers are right. Your numbers might differ, because this isn't your report card.

[Andrew Marsland]

To give a bit of context, the design of this is that it essentially increases the tax threshold. Now the tax threshold is noted at $15,000. That is the basic personal amount.

However, in reality, the non-tax threshold for many taxpayers—in fact I would say most taxpayers—is higher than that. For example, there's an employment credit, which I think adds $1,200 to $1,300 onto that. If you have pension income, you get another $2,000, which is essentially a non-refundable credit. If you're over 65, you may well get an age credit. There are those thresholds.

With regard to the increase in that basic personal amount, given that many people in the $15,000 to $51,000 range are non-taxable anyway, they would go below the threshold and get the benefit—

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Sure. Would it be possible to get some sort of analysis of that as it relates to my question?

[Andrew Marsland]

I can see what we can do, yes.