Finance Committee on March 18th, 2021

[Annie Koutrakis, Liberal, Vimy, QC]

I'm sure the Department of Finance will hear that. Perhaps we could put that in place once again until the budget is in place.

The fall economic statement provides a fiscal outlook for the course of five years, as well as alternative economic scenarios should a more extreme resurgence of COVID-19 arise. Can you comment on the value of providing these five-year projections to parliamentarians?

[Yves Giroux]

Of course.

A five-year planning horizon is very welcome. It provides an idea also as to what the future would look like. The fall economic statement did not include all of the policy initiatives the government plans on implementing—by definition, a fall economic statement is a partial picture. We saw it as a welcome addition to have a scenario where the pandemic would evolve differently from the central scenario. Again, that provided—not clarity, because it's providing alternative scenarios—a welcome addition regarding transparency with respect to the potential future path of government finances and the economy. In that sense, it's a development that I personally welcome and that the office also looks upon favourably.

[The Chair, Liberal, Wayne Easter]

We will have to move on. I'm sorry, Annie.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Mr. Giroux, I want to make sure that I fully understood the discussion you just had with Ms. Koutrakis. You were actually talking about the bi-weekly updates on expenditure programs that the Department of Finance used to provide, correct?

I heard you correctly. So, after your testimony, about noon, I will introduce a motion that the committee make that request to the Department of Finance, in the hope that that will work.

You said that some details about the employment insurance operating account are missing. What details are those?

What should the government provide us in order to give us a complete picture?

[Yves Giroux]

Thank you, Mr. Ste-Marie.

The Fall Economic Statement 2020 mentioned the employment insurance operating account, but it did not give a very clear picture of the way it has evolved in the current economic situation, given that benefits have been expanded and extended. Clearly, we are expecting the employment insurance operating account to incur huge deficits, which is to be expected in the current economic situation.

The government also committed to freeze the employment insurance premium rates at $1.58 per $100 of insurable earnings, at least until the end of 2022. However, the government makes no mention, either in the update or in general, of what will happen afterwards. It does not actually say how the very significant deficit of $52 billion in the employment insurance operating account will be eliminated over the five-year period.

Current legislation limits the annual increases in the premium rates. However, even if the premiums were increased to the maximum allowed by the legislation, the deficit in the employment insurance operating account would probably be about $52 billion. There is a lack of clarity over what will happen with this very significant deficit. We hope that the budget will provide more details about it, because it's clearly a colossal deficit for the employment insurance operating account.

If we maintain the status quo, that is, if we apply the legislation as it presently stands, the employment insurance premium rate will increase by $0.30, going to $1.80 per $100 of insurable earnings in the next three or four years.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Let's hope that the next budget will—

[The Chair, Liberal, Wayne Easter]

Thank you.

We have Mr. Julian and then Ms. Jansen.

Peter, you have two and a half minutes.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thanks, Mr. Chair and Mr. Giroux.

In the same vein as talking about the alternatives, the borrowing authority and looking to potentially increase income revenues to the federal government, it's important to cite, as per your previous studies, that there is a lot of money that already should be paid in taxation that goes to overseas tax havens. I cite your landmark study of June 2019, where the estimate was over $25 billion in federal tax revenues that go to overseas tax havens.

You provided a legislative costing note on strengthening tax compliance on February 18. I would like to ask you two questions. You've indicated some difficulties in terms of the investments by the federal government actually leading to the kinds of revenues that Canadians would expect. We also have testimony before this committee from Ted Gallivan of the Canada Revenue Agency, back on June 16, reacting to the failure of the federal government to prosecute, basically, anybody who's been involved in overseas tax havens. He said at that time, to this finance committee, that we'd come as far as we could with the tools we had.

My question is twofold. First, where do you see the federal government as lacking, in terms of initiatives to strengthen that tax compliance?

Second, do you have any recommendations for the federal government that would curb the massive leak of federal tax revenues to overseas tax havens among the wealthy and very profitable corporations?

[Yves Giroux]

That's a very broad question, Mr. Julian. I don't know if I should thank you for that or not.

With respect to the capacity or what the CRA could do, or where it is lacking, it's probably a question that would be best answered in a much longer study. I would say, generally speaking, the CRA does not take as aggressive a stance towards tax evasion as, for example, Revenu Québec does. Anybody who lives in Quebec and owns or operates a business, or has been subject to an audit by Revenu Québec, will probably know that there usually is a difference.

In that sense, the CRA takes, generally speaking, a more educational approach and a less aggressive approach. It also shows in its prosecution of tax planning. That being said, it may be bound by different legislation. I haven't done a comparative study of the legislation that applies to both jurisdictions. Generally speaking, that's what I would say; it's an approach that's less aggressive when it comes to prosecuting egregious cases of tax evasion.

[The Chair, Liberal, Wayne Easter]

Thank you all. We're out of time.

Ms. Jansen is next, followed by Mr. Fragiskatos, for a five-minute round.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Thank you very much.

We know that Canada has had subpar results compared to our G7 partners in terms of income loss, job loss and debt increases, as well as, of course, the largest increase in housing prices, due to low interest. Our COVID-19 supports do not appear to have been particularly efficient.

With all that said, would you say that the current path of another $100 billion in stimulus appears wise? I believe Einstein said that the definition of insanity is doing the same thing over and over but expecting different results. Shouldn't we be focusing the government support on growth and innovation?

[Yves Giroux]

That's an interesting question and a question that could be a minefield, too. I'll answer in the following way. When the government indicated that it would spend $70 billion to $100 billion, it indicated it would spend that with a goal or a target of enhancing economic growth and economic stimulus. However, when we released our own economic and fiscal outlook in September, we indicated that it would probably not be necessary to have that big of an economic stimulus over a three-year period. That was in September. I qualified that, on a few occasions, as potentially being too much and too late if the objective is to stimulate the economy and return to the pre-pandemic levels of employment according to various indicators.

If the government wants, on the other hand, to make structural changes to the economy, that's a different issue. That was in September. Since then, we have seen job numbers that are slightly better than we had expected back then, and we have also seen the U.S. launch a massive stimulus campaign, from which Canada will benefit.

All that being said, $70 billion to $100 billion in economic stimulus might be more than is necessary to return to pre-pandemic levels, but again, if the plan is to make structural changes to the economy, that's a totally different discussion.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

In your opinion, why is this government the only government in the G7 that hasn't managed to produce a budget? Is there something special about Canada that makes it impossible to produce one?

[Yves Giroux]

There are many things special about Canada but not when it comes to justifying the absence of a budget.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

You mentioned that it's good to have a borrowing buffer. However, you also said that the size of the buffer needed is up for debate. In your opinion, is the current debt ceiling increase in Bill C-14 of over $650 billion, in the absence of a budget and any idea of what the government's planning to spend on, a reasonable sum?

[Yves Giroux]

It certainly provides lots of flexibility to the government to have that level of borrowing authority. It's probably more than what is absolutely strictly necessary, from what we have seen so far, but it provides a very good buffer. Is it reasonable or not? Again, I leave that in the very capable hands of members of this committee.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Thank you.

I will pass my time on to my colleague Mr. Kelly.

[The Chair, Liberal, Wayne Easter]

Mr. Kelly, go ahead.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you for debunking, I think in your earlier testimony, the notion that Canada is at any risk of seeing American-style brinkmanship over borrowing authority. In a Westminster system, those kinds of impasses are solved through the concept of confidence in the government. It's a nonsense argument in defence of having extraordinary or enormous debt ceilings.

I do want to ask a question about this and about the debt ceiling. Having a buffer that is so far beyond any current or contemplated future need for borrowing really makes something of a mockery of the idea of having a debt ceiling. Why have a debt ceiling at all if the idea is that the ceiling should be so high that no such spending is contemplated? One has to conclude either that there is a plan to actually borrow the $600 billion or that there's really no excuse or reason to have it.

I ask, with the limited time that is left, for a comment on the scope and scale of the debt ceiling increase.

[Yves Giroux]

I understand the question clearly, and I also understand that it's probably a matter of judgment much more than of facts. I have provided you with my views on the ceiling and on the buffer. Whether it's an unnecessary buffer or not.... Different stakeholders will tell you different things. That's why these decisions are better left in the hands of elected officials like you than for mere servants like me, to be perfectly honest.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Fragiskatos, the last five minutes will go to you.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair.

Thank you, Mr. Giroux, for being here.

Thank you, Ms. Yan, as well for all your work.

Mr. Giroux, what is the current federal debt-to-GDP ratio?

[Yves Giroux]

At last count it was about 48% to 50%, based on the projected spending and the size of the economy. More accurate numbers will probably be available after the end of the fiscal year, when we have a clearer picture of the financial situation of the government.