Thank you, Mr. Chair.
Good afternoon, committee members. Happy St. Patrick's Day. I see some of you are wearing green, so I hope it's a great day.
Thank you for the opportunity to appear to discuss to Bill C-14.
My name is Kim Moody. I'm a chartered professional accountant and the CEO and director of Moodys Tax Law and Moodys Private Client in Calgary, Edmonton and Toronto. I have a long history of serving the Canadian tax profession in a variety of leadership positions, including chair of the Canadian Tax Foundation, co-chair of the Joint Committee on Taxation of the Canadian Bar Association and CPA Canada, and chair of the Society of Trust and Estate Practitioners, to name a few.
Given the limited time we have this afternoon, I'm going to keep my comments rather short and comment on only two matters: the proposed amendments to the debt ceiling in the Borrowing Authority Act contained in Bill C-14 and the fact that Canadians are now approaching the second anniversary, in two days, of the federal budget.
I will start with the proposed amendments to the BAA, the Borrowing Authority Act. While I am a tax specialist and certainly not a BAA expert, currently section 4 provides that the total amount of debt must not exceed $1.168 trillion at any given time. This limit is subject to certain exceptions, provided for in section 4, in conjunction with section 6 of the BAA. Bill C-14 proposes to amend both section 4 and section 6 with a highlight amendment, as Mr. Wudrick said, to increase the current upper limit to $1.831 trillion, an increase of $663 billion, or 56.7%, from its current ceiling. That is a material increase by any measurable standard.
With the exceptions provided for in section 6, I guess the question is why there is a need today to increase the ceiling so substantially. Where is the plan? Is the government intending to utilize that increased borrowing capacity? If so, again, where is the plan? Shouldn't that be accompanied by a financial budget? I'll say more on that later.
Further, what will such increased borrowing do to inflation and interest costs? Is that part of the plan too? What about the plan to repay this debt? Does it include a reasonable repayment period that will not saddle our children's future with high borrowing costs that compromise central government services?
How will this increased borrowing capacity affect our country's taxation policies? Will we see an across-the-board tax increase, or will the wealthy be asked to pay just a little bit more, thus causing even more capital flight to greener pastures?
What's being asked to be passed in Bill C-14 can be depicted in an overly simplistic example of how I disagree with the witness Mr. Cochrane when he says that you can't compare government debt to household debt. Frankly, I think you can, and yes, there are differences, but debt is debt by any measurable standard.
Let's consider the case of Mr. Apple. He lost his job as a result of his employer being forced to shut down because of strict public health restrictions. His savings are rather modest. He does not have the ability to pay his ongoing bills, so he applies for and receives various government support programs. However, the support he receives is not enough to maintain the lifestyle that he is accustomed to, and, being the rational person that Mr. Apple is, he develops a plan and makes necessary adjustments to his lifestyle, cuts back on non-necessities and ultimately tries hard to survive on the reduced income that he has. Eventually Mr. Apple is able to secure new employment and slowly get back to the lifestyle that he is accustomed to.
Now, let's consider the situation of Mr. Apple's friend, Mr. Orange. He's in exactly the same situation as Mr. Apple. He lost his job. He doesn't have enough savings to maintain his normal lifestyle. However, instead of cutting back on non-essential expenditures as Mr. Apple does, he applies to get his credit card limit increased by 56.7% and some crazy credit card company decides to grant him that limit.
He now has the ability to borrow a lot more money. He does that so he can maintain his existing lifestyle. Mr. Orange has no plan to repay. He simply wants to maintain his lifestyle, and he eventually reaches the maximum of his limit and has a large debt to repay. The credit card company is charging interest, which is adding to the debt. Eventually he returns to normal employment, but his earnings are not sufficient to materially reduce the debt. He has a problem and he falls behind on making his normal payments. The credit card company demands that he repay, but he cannot. His options are limited, and ultimately all the options are ugly.
In the above scenario, who's in a better spot? Obviously, it is Mr. Apple. For Canada, for whom do we want to be comparable? Obviously, it is Mr. Apple, with a plan and a path forward.
Do we have a plan with respect to the increased ceiling amount under section 4 of the BAA? If so, it is not obvious to me, and Canadians need that plan, let's say, at this point. I'll share Mr. Wudrick's comments about the fall economic statement. The information in it was lacking, in my view.
This leads me to my second and final comment. March 19, 2019: Does that date mean anything to anyone? Well, it should. That was 730 days ago. That was the last time the federal government released a budget. That's a record.
Our government continues to use COVID as the excuse for not releasing a plan. This is what former parliamentary budget officer Kevin Page said in October of 2020: “Budgets are fiscal plans, and to say that 'because there’s too much uncertainty, we’re going to manage without a plan' is kind of bizarre. The reason we have plans is because there is uncertainty.”
I absolutely agree. In this day and age of uncertainty, a fiscal budget and plan are needed. The recent November 30 fall economic statement is not that plan.
Esteemed economist Dr. Jack Mintz stated the following in the National Post on December 3, 2020:
I was hoping our new minister of finance, once a fine journalist, might produce a fall fiscal statement written clearly and to the point. Instead, we are treated to 237 pages of repetitive back-slapping and cliché-laden phrases that few will bother to read.
I agree.
Kevin Page stated the following in a CBC News article on December 6, 2020, after the release of the fall economic statement:
We don't really have a good view—almost no view—of the government spending today. We have estimates of what the government thinks it will spend for 2020, 2021. But those are not the actual monies that are going out the door.
Accordingly, it is critical for our country's fiscal future to develop a well-thought-out budget, and to do it quickly. Transparency and accountability are not luxuries. They are requirements for Canadians.
Thank you. I'd be happy to take questions.