I don't believe so.
I think that, when you look at the assumptions around the CPI.... The basic personal amount prior to the change and in the future will be indexed for inflation.
Evidence of meeting #2 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was billion.
A video is available from Parliament.
3:40 p.m.
Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
I don't believe so.
I think that, when you look at the assumptions around the CPI.... The basic personal amount prior to the change and in the future will be indexed for inflation.
3:40 p.m.
Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
I believe there's a slight difference there, but it's not material.
3:40 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
On what date are intergovernmental transfers generally made; that is to say, from the federal government to provincial governments, for things such as the Canada social transfer, the equalization, the Canada health transfer? Is there a date in the fiscal year or a series of dates in which these transfers occur, where money actually transacts from one account to another?
3:40 p.m.
Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
I'm sure there is, but I don't have that information.
3:40 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Mr. Chair, perhaps I could invite another official from the department.
3:40 p.m.
Suzy McDonald Associate Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Generally the numbers are made public in December of every year—what the estimates are for the payments for the next fiscal year—and then payments are made on a monthly basis. We transfer dollars monthly into the accounts of the provinces and territories based on the payments that are set out in the December forecasts.
3:40 p.m.
Conservative
February 3rd, 2020 / 3:40 p.m.
Associate Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance
That's a detail that I would need to check.
3:40 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
Okay, if you don't mind, would you get back to me on that?
Finally, I have a question regarding the deficit. It is going to increase the debt-to-GDP ratio slightly this year. Is it the continued commitment of this government to reduce the debt-to-GDP ratio in every year thereafter?
3:40 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
As a fact check on the first thing, you're right: it's to rise slightly between the 2018-19 fiscal year and the 2019-20 fiscal year. I can only restate what was in the government's platform, which is their commitment to reduce that debt-to-GDP ratio in each and every year. I think it's what they said, but I—
3:40 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
I'm not asking now about the platform, but about the government's commitment. Is it the commitment of the Government of Canada to reduce the debt-to-GDP ratio every year from now until the end of the planning period?
3:40 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
You'd have to pose that to the associate minister. I think they are scheduled to appear before the committee on Wednesday, if I'm not mistaken. As published in the fall outlook, the update that was printed in December, that trajectory does decline in each and every year.
3:40 p.m.
Liberal
3:40 p.m.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you all for being here this afternoon to discuss a very important topic with the committee.
Could you give us a quick economic update, including the figures for employment?
3:40 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Yes, I'd be happy to give you a general narrative on the economy.
More broadly speaking, I think, starting with the global economic perspective, 2019 was a bit of a rough year. It was the slowest growth clip in the global economy in the last 10 years, since the end of the great financial crisis, and it was coming off some highs in 2017 and 2018. There was a deceleration in the global economy. Some of that was just cyclical. There was a lot of stimulus in the global economy in 2017 and 2018 from things that we know, like the Trump tax cuts and a lot of monetary easing that took place over that time. That faded, so 2019 was a slowing year. Obviously, some of that weakness spilled over into the Canadian economy. Growth in Canada for 2019 is expected to come in at probably just below 2%. Compared with 2017 and 2018, there was a deceleration in growth.
That said, employment held up quite tremendously. Job creation in 2019 was very strong, averaging in and around 40,000 jobs per month. Wage growth did pick up to north of 3%, which was a good and encouraging sign. The composition of job growth was pretty good: it was concentrated in the private sector and pretty broadly based across various sectors.
That said, looking forward into 2019 and more specifically into the fourth quarter of 2019, for which we expect results at the end of February, there was some choppiness at the end of 2019. I think some of that weakness will probably spill over into 2020. Again, some of it was cyclical—things like CN Rail strikes, GM strikes and some intermittent shutdowns along the energy production cycle. Overall, the labour market is pretty strong, with low levels of unemployment and, as I said, wage growth picking up, and that's encouraging.
Looking forward to 2020, I think that growth in and around Canada's potential, which is dictated by productivity and labour supply, will probably be in and around that 2% mark, which is kind of the consensus view among most economists around the country.
Obviously, some risks include things like what we are experiencing now: the coronavirus and the containment of that shock and how it's expected to spill over into the global economy and into Canada. Geopolitical risks seem to be fading a bit. We're very encouraged, obviously, with the signing of the most recent trade deal between the U.S. and China and the dissipating effects from the uncertainty surrounding Brexit and some of the EU uncertainties.
Overall, I think it's steady as she goes, and we'll see how it plays out over the next couple of months.
3:45 p.m.
Liberal
Annie Koutrakis Liberal Vimy, QC
Thank you for your answer.
Could you give us details about the tax cuts for the middle class? Specifically, how many people are benefiting, and how much is each household saving?
3:45 p.m.
Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
Yes, I'd be pleased to do that.
In December the government announced a phased-in increase of the basic personal amount, as we mentioned earlier, and the equivalent amounts for spouses and eligible dependants. That will increase steadily to $15,000, up from about $12,000, I believe. By 2023, about 20 million Canadians will see a reduction in tax. Those who won't are.... Essentially, the design of the increase in the credit is effectively reduced between the fourth and fifth tax brackets, which means that once you get to the threshold of the fifth bracket, there is no increase. That would result in about 1.1 million Canadians no longer paying tax.
3:45 p.m.
Liberal
Annie Koutrakis Liberal Vimy, QC
I have only one more question, Mr. Chair.
How does our middle-class tax cut stand up to other G7 countries? How does Canada rank with regard to the tax burden, and what trends do we see?
3:45 p.m.
Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
It's somewhat challenging to compare. There are a number of ways to compare the tax burden overall. For example, you can look at the percentage of GDP that the tax revenues represent. Canada is at about 32.6% of GDP. That's total taxes, federal and provincial. France is at 46%. The U.S. is somewhat lower, at 25%. You can look at the overall burden there.
The OECD has a measure based on the average industrial worker. That's another measure you can look at, or at multiples of that and so on, such as families with children. I think when you look at, for example, families with children, it's really quite low, given that one should add in refundable credits, such as the Canada child benefit. I don't have the actual statistics, but I'd happily provide those to the committee.
3:45 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you.
We'll turn to Mr. Ste-Marie for six minutes, and then Mr. Julian.
3:45 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Good afternoon everyone. Thank you for being here.
First, I have questions about elements in the Minister of Finance’s mandate letter and the way that the department is addressing them.
My first questions are about tax avoidance schemes used by corporations to divert a portion of their profits to tax havens, a perfectly legal practice.
I'd like to read two of the priorities that the Prime Minister assigned to the Minister of Finance:
Modernize anti-avoidance rules to stop large multinational companies from being able to shop for lower tax rates by constructing complex schemes between countries.
Close corporate tax loopholes that allow companies to excessively deduct debt to artificially reduce the tax that they pay.
What does the department know about these schemes? How prevalent are they? Approximately how many companies are using these schemes right now? How much is being dodged in payable taxes every year?
3:50 p.m.
Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance
Thank you for your question.
Perhaps I'll begin by underlining the work we do multilaterally with the OECD. For a number of years now, the OECD has been engaged in an exercise about base erosion and profit shifting. That exercise laid out certain mandatory approaches, certain common approaches, and so on. We have been working very closely with the OECD. Successive budgets have introduced measures aimed at implementing those recommendations. The common remote reporting standard is one that's now in place. It allows countries to get a common view, a full view, of the operations of multinationals and how they're reporting revenues and allocating income from jurisdiction to jurisdiction. The multilateral instrument, which I believe was passed last year, is a way of automatically updating the network of tax treaties. We have over 90 tax treaties, I believe, around the world. Those update each of those tax treaties to deal with such issues as treaty shopping, which is an approach that corporations could use to obtain inappropriately the benefits of tax treaties to which they're not entitled.
That being said, it's work that continues. There are other areas that were dealt with in the BEPS approach. There are issues like how to deal with hybrid mismatches, or strategies to leverage differences in the tax systems, and so on. I think those are the kinds of areas that are referred to in the minister's mandate letter.
3:50 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
I see. Thank you.
Specifically, I'd like an estimate. Do you have one?
For instance, the mandate letter clearly states that companies “excessively deduct debt to artificially reduce the tax that they pay.”
Have you estimated the number of companies using that type of scheme in Canada? Shell Canada, for instance, uses it to artificially divert profits to Shell Bahamas, if I'm not mistaken.
How many companies are doing this, and how much would you say they’re diverting?