Evidence of meeting #15 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bia.
A recording is available from Parliament.
Liberal
Ryan Turnbull Liberal Whitby, ON
It defines it. You may disagree with it, and I'm getting to that in a second, but I'm just checking. It actually goes to length to define what a capital investment is in this budget for this government, does it not?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It does.
Liberal
Ryan Turnbull Liberal Whitby, ON
Okay, good.
It sounds to me like the heart of the issue is you're taking issue with the definition of capital investment, saying that perhaps tax exemptions or deductions that are used by many governments, including ours, to spur investment or to attract capital expenditure in certain categories should not be included as capital investment. Is that your position?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think the position on that issue is, again, with respect to what is included and what is not included. We're not offering recommendations. Where we're offering recommendations is around the definition itself. There is currently a process established by the Government of Canada around their new fiscal anchor where they set the definitions around operating and capital, which are distinct from clear, independent definitions that are already set for operating and capital.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Our recommendation is similar to those other definitions, and I should say similar to what the Department of Finance and the government have done for about the past 30 years around their economic forecast, where they don't produce their own forecast. It's based upon an independent, arm's-length survey. Our recommendation is that the government, or parliamentarians, may wish to consider going in a similar direction. That's the only recommendation—
Liberal
Ryan Turnbull Liberal Whitby, ON
I hear that recommendation. You've mentioned it multiple times. I'm not trying to cut you off, but I want to ask more questions.
Is it your position that those tax exemptions or deductions do not contribute to capital formation? I don't think that's exactly what you're saying, but I want to clarify that if you are saying that, then tell me. If you're not saying that, I just want a simple yes or no.
Are you saying that tax exemptions and deductions do not contribute to capital formation in the economy?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No.
Liberal
Ryan Turnbull Liberal Whitby, ON
Okay, great. Thank you.
Are there other countries in the world that include R and D, tax incentives and other forms of clean economy tax incentives and deductions for immediate expensing, etc., as part of their capital budgeting frameworks?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
There might be.
In the case of what we're most familiar with and what the government has pushed on is the case of the U.K. In the case of the U.K., they would not be included.
Liberal
Ryan Turnbull Liberal Whitby, ON
Okay.
Let me read a list of ones that I researched ahead of this meeting.
I asked what countries include tax incentives in their capital budgeting framework. I had Brazil, Chile, Colombia, Mexico, United States, Belgium, Finland, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Portugal, Spain, Switzerland, United Kingdom, China, Hong Kong, India, Israel, Japan, Singapore, South Korea, United Arab Emirates, Australia, New Zealand, Ivory Coast, Nigeria and South Africa.
I don't have the time to research that at length, but I did a quick search and found that there are many jurisdictions around the world that include tax incentives and deductions for things that we heard from the deputy Bank of Canada governor, which would actually boost investment in our economy and hopefully help with our productivity challenges. I'm sure you would agree that's a good thing.
We're including those as part of the capital budgeting framework, which is not that unheard of. You seem to have made some of these definitions almost sound as if the government is taking this broad latitude, which I don't think it's taking.
Liberal
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you, Madam Chair.
I would like my colleague to cite his sources, because I get the same answer on ChatGPT.
In order to meet its deficit targets, the government says it will have to cut spending by $60 billion over five years, including $10 billion in the first year.
Fitch Ratings reminds us that, historically, Canada has not met its reduction targets. From what I understand, you still lack information on the specific amount that will need to be cut in order to meet the deficit target.
Given the information you have today, are you concerned that Canada will not meet its target of a $78.5 billion deficit for next year?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Our reports indicate that it is unlikely that the Government of Canada will achieve its deficit-to-GDP reduction target for the next five years.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
If I am not mistaken, according to your simulations, the probability that the government will achieve its target is 7%.
What information do you need to know what the government’s plan is?
When the budget was tabled, we asked officials where they would find these billions of dollars. They replied that the budget only includes examples, and that in reality, they have no idea what the reduction plan is. This gives the impression that the government does not yet know where it will make cuts. Starting today, it must find $800 million per month in order to reach its target.
What information are you missing?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We have requested some details regarding the programs that will be abolished and the reduction in staff for each of them. In addition, we have requested an impact assessment regarding services and funding cuts.
This information is essential for us to assess the likelihood of successfully implementing this reduction.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I only have 20 seconds of speaking time left.
Can you name another developed country that is a member of the Organisation for Economic Co-operation and Development, or OECD, that no longer uses the fiscal angle of the debt-to-gross domestic product, or GDP, ratio, and only uses the deficit-to-GDP ratio? Is there such a country within the OECD?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Right now I couldn’t—
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Give me ten minutes or a few hours, and I can provide you with some details.
Liberal
The Chair Liberal Karina Gould
All right.
Thank you. That concludes Mr. Garon’s speaking time.
We will now continue with Mr. Lefebvre for five minutes.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Thank you, Madam Chair.
Mr. Jacques, I would like to thank you and your colleagues for being here today.
I would like you to take the time to answer the last question from my colleague, Mr. Turnbull.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
As we have had several discussions with experts working for the United Kingdom, we have complete confidence in our figures, our recommendation and our analysis.
I am surprised to learn that different supplementary data contradicts our findings. In all humility, I am open to new data held by the committee that contradicts the data provided to us by people working for the U.K. Office for Budget Responsibility, or OBR. There are also people who manage the U.K.’s public accounts.
I think it would be really interesting if the committee could send us this data.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Thank you very much.
We will make that request.
You also said that the government’s definition of capital investment is far too broad. You emphasize that certain expenditures should not be classified as capital expenditures.
Do you believe that expenditures related to corporate income tax should be classified as investments?