Evidence of meeting #138 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was products.
A video is available from Parliament.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Let me ask you this question: If you were advising the government on economic policy—and I know that's part of your mandate—and they came to you and asked, “Do you think that increasing the capital gains inclusion rate would make our economy more productive?”, what would you tell them?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Increasing the inclusion rate for capital gains is something that acts as a disincentive, generally speaking, on capital investment.
However, what the government did was increase the inclusion rate for capital gains above a certain threshold and increase the lifetime capital gains exemption for shares in small businesses. In that case, it's not clear what the overall impact will be for productivity. It may well be that it increases the incentives for small businesses, but decreases them for much larger capital gains, such as those of the most successful businesses that generate the most capital gains.
It's not as clear-cut, because of the inclusion rate increase at the same time as the exemption of $250,000 per year.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
To be clear, the exemption is not available to Canadian-controlled private corporations, many of which are small businesses.
If I were a small incorporated business, I would be treated differently under this new law than if I were a sole proprietorship running exactly the same business. Isn't that unfair from a tax fairness perspective?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That seems to be differential treatment for two businesses that are roughly the same size.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Yes.
It's very unusual to say, “Well, we're going to increase the inclusion rate, but it doesn't take effect immediately. It's going to take effect on June 25.” My colleague was asking you about this. I hate to speculate about the reason for these kinds of things, but it's hard to think of a reason to do it, other than that the government wanted to incentivize people to sell their capital assets now to generate additional tax revenue. Would that be a reasonable assumption?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
If that's not the reason, that certainly will be the effect, because usually you have budget secrecy exactly to avoid these situations. That's usually the reason why budgets are tabled at or after four o'clock: to avoid having impacts on stock markets, for example.
It was a bit surprising to see that the budget was still a secret thing. There was a lockup. It was tabled at or after four o'clock, but still, there was a measure—an important measure—that takes effect only two months after, so there's plenty of time for stock owners, business owners and all of these categories of individuals who will be captured by that tax change.
Conservative
Liberal
The Chair Liberal Peter Fonseca
Thank you.
Thank you, MP Morantz.
Now we'll go to MP Thompson, please.
Liberal
Joanne Thompson Liberal St. John's East, NL
Thank you.
Thank you to the witnesses.
I would like to clarify that the Bank of Canada confirmed to our committee in February that the annual increases in carbon pricing raise the average economy-wide price level by 0.1 percentage points.
Mr. Giroux, it's lovely to see you here. I know that I've seen you in other committees. I tend to focus on climate, because it is so incredibly important and certainly continues to add pressure to government budgets. Wherever we sit in terms of our action, there is no doubt that climate is impacting all of government. It's health care, it's infrastructure, it's disaster relief and on it goes.
Would you agree that climate change—and its impacts, which we're certainly experiencing in Canada—is a risk to the fiscal health of our country?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Well, it's certain that when you have impacts from the climate on infrastructure that gets damaged or even destroyed, wildfires that disrupt livelihoods or destroy homes, flooding and all these natural disasters, that does have a fiscal impact, because somebody has to pay to repair the roads or the infrastructure more generally, and it can also have negative impacts on the agricultural sector, for example, to name just one. It does pose a risk to the fiscal framework. You are right.
Liberal
Joanne Thompson Liberal St. John's East, NL
Thank you.
My colleague, in the beginning round, asked you if your office would be able to prepare a study on the impacts of climate change. The answer is very difficult, because obviously cost-benefit analysis is not part of what you do, but I want to ask if it would be helpful.... I believe that we need to begin to quantify the cost of even just climate disasters to our economy. If we began to capture disaster relief as a line item across all of government and have a number as a reference point, would that be helpful in terms of beginning to quantify the actual cost of climate crises to government?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Costing disaster relief is certainly something that would be possible. One would need to look at various government departments and, in fact, at various levels of government.
The difficulty would probably lie in determining which part of that disaster relief is due to climate change and which part is due to naturally occurring events—events that would have occurred anyway, without climate change—and also the part that is due to people choosing to live in certain more risk-prone areas, which is also a factor with cities expanding and people choosing to live in certain areas. That's where most of the difficulties would be, but it certainly is something that is possible. It wouldn't be a perfect exercise, but it's possible to do that.
Liberal
Joanne Thompson Liberal St. John's East, NL
Thank you.
I'm trying to drill down a little bit more on that. In another committee a year ago, we spoke about hurricane Fiona, for example, which certainly affected my province. When we look at the wildfires, the floods and the data that shows the correlation between rising sea waters and the effect of wave action—certainly as I'm seeing on the east coast—we have the ability to start to follow a thread in terms of weather events that are unprecedented but are now becoming common occurrences as a way to capture the cost of inaction. That's my next question, which also links to an earlier question. You referenced that there's a cost regardless of what happens. I certainly worry about the cost of inaction.
We spend a lot of time on carbon taxes in this committee. “Tax” is not a word that I use, because it actually is money that doesn't go into government coffers. It goes in and it goes out, so it's a rebate.
Could you speak to the cost of inaction, again, as we're seeing an increasing number of devastating events across the country and the fiscal cost of governments having to deal with those?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The cost of inaction is something that is real and tangible, but what we've been saying is that the cost of inaction would be minimized if everybody else did something and Canada didn't play a part. It's something that needs to be addressed at the global level if it is to have a meaningful impact on reducing greenhouse gas emissions.
I could go on and on, but the chair would probably reprimand me for going over time. I'm sorry.
Liberal
The Chair Liberal Peter Fonseca
Never.
MP Thompson, thank you very much.
We're going to MP Savard-Tremblay now.
Go ahead, please, for two and a half minutes.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Mr. Giroux, to continue on the topic of the environment and with regard to the budget tabled on Tuesday, the day before yesterday, you are no doubt aware that the government intends to adopt an implementation plan that will progressively eliminate public funding for the fossil fuel sector, including funding from Crown corporations, by the fall of 2024. At the same time, the government is offering tax credits for the transition that will mainly help oil and gas companies. Those include tax credits for carbon capture and sequestration, and various other similar credits.
Has your office calculated the value of the fossil fuel subsidies provided by Ottawa and Crown corporations, in dollars and as a percentage of federal support for the economy?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We have looked into that since a number of parliamentarians were interested in it. I do not have the numbers with me, unfortunately, because we have produced a number of reports over the years, but Ms. Sourang might recall.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Ms. Sourang usually has a better memory that I do. Unfortunately, neither of us remembers the numbers. We did nonetheless estimate the cost of tax measures for the oil and gas sector to be several billions of dollars. We can forward that information to you.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Yes, you can certainly forward it to the committee. That's great.
You do remember that it is a huge amount, several billion dollars. In relation to the economy, do you have an idea or would you rather wait until you have the figures in front of you?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I would rather not say so as not to mislead you in case the numbers I remember are incorrect.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Very well, that is wise. It is best to be careful because we saw this week what can happen if incorrect information is provided to a committee.
Do you have any other general comments about the latest budget?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We will be doing a more thorough analysis of the issues we think might be of interest to parliamentarians. We will publish that report in the coming weeks. For the time being, I would rather not comment any further on the budget.