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Evidence of meeting #3 for Government Operations and Estimates in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was infrastructure.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Karen Wilson  Assistant Chief Statistician, National Accounts and Analytical Studies Field, Statistics Canada
Marilyn MacPherson  Assistant Deputy Minister, Corporate Services Branch, Privy Council Office
Stephen Richardson  Associate Deputy Minister, Department of Finance
Michel Girard  Director, Industry Accounts Division, Statistics Canada
Paul Rochon  Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Simon Kennedy  Deputy Secretary to the Cabinet, Plans and Consultation, Privy Council Office

11:40 a.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

My next question is about section 18.2 of the Income Tax Act. The section deals with tax havens, and it has disappeared from the budget documents.

Why has this section disappeared? Why has this control mechanism for tax havens been abolished?

11:40 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

The provision you refer to, section 18 of the Income Tax Act, is a provision that restricts the deductibility of interest in certain cases for Canadian businesses borrowing to make investments outside of Canada. The provision was put into the law coming out of the 2007 budget, but has not yet had effect. It was, by its terms, set up only to come into effect in 2012.

The Minister of Finance established an expert panel to review the international tax system of Canada to make comparisons between that system and other systems and to obtain information from various parties and persons who were knowledgeable in the area of taxation. The recommendation of the panel was that this provision was onerous for Canadian businesses making investments, and that it was more onerous than similar provisions in many countries where Canadian businesses have to compete. A decision was taken to remove the provision.

11:40 a.m.

Liberal

The Chair Liberal Derek Lee

Thank you, Madame Bourgeois.

Mr. Gourde, you have eight minutes.

February 10th, 2009 / 11:40 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Thank you very much, Mr. Chair. I would like to thank the witnesses present.

My first question goes to Mrs. Wilson of Statistics Canada.

Statistics Canada uses input-output models in order to calculate the relative effects that injections of public funds in different sectors of the economy and in different regions of the country have on the Gross Domestic Product.

In general terms, what will be the short-term impact of infrastructure expenses on economic activity?

11:40 a.m.

Director, Industry Accounts Division, Statistics Canada

Michel Girard

If I understand correctly, you are asking us if we have already conducted impact studies. We have not because we have not yet been asked to.

I go back to what was said a little earlier. We have a model that can give us an idea of what the impact will be. So, in construction, we can say that investing in roads rather than telecommunications would create a few more jobs. That is due in part to the fact that the telecommunications sector requires us to import a large number of goods. So the indirect effects in Canada are less significant.

That is what the model would suggest. But I only used two industries as examples, whereas our model contains 303 industries for each province. So we have much more data than I provided.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

If I understand correctly, you are saying that, from an economic perspective, investments in infrastructure, rather than in other areas...

11:40 a.m.

Director, Industry Accounts Division, Statistics Canada

Michel Girard

No, that is not what I am saying. When a type of investment has been chosen, we can calculate its effects. We are not trying to say where investments should be made. We are merely describing the impact of any investment on such and such an industry or such and such a part of the economy.

11:40 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Understood.

According to Statistics Canada, should we trust data for last month or for the last quarter? Today, on February 8, can we trust data from January 31?

11:45 a.m.

Director, Industry Accounts Division, Statistics Canada

Michel Girard

Much less data is available on a quarterly basis. By industry, we have limited details on goods and services—and the investment counts as a good. What we can give you is based on historical data. So our model is based on inputs and outputs for 2005. We assume that the structure of the economy has not changed since. That is the model we use for our simulations.

If we are told how much money has been invested in a given sector, we can tell you what the impact would be in 2005 terms.

11:45 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Thank you, Mr. Girard.

My next question goes to the Privy Council Office.

The figures announced in the budget for infrastructure projects assume that provinces and territories will contribute to these various stimulus programs.

Were the provinces and territories consulted to see if they have the wherewithal to participate in these infrastructure projects?

11:45 a.m.

Simon Kennedy Deputy Secretary to the Cabinet, Plans and Consultation, Privy Council Office

Yes, there was an extensive pre-budget consultation process.

I might wish to turn to my colleagues at the Department of Finance, because the Minister of Finance led the pre-budget consultation, and there was a great deal of discussion with provinces, businesses, and others in the lead-up to the budget.

11:45 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

Yes, there was a great deal of consultation prior to the preparation of the budget. It included consultations with provinces, and some of those consultations occurred at the finance ministers meeting, which was held ahead of the budget. Many of the provinces indicated they were interested in seeing further funds made available in this way and indicated then, or subsequently, they were prepared to provide the matching funding.

11:45 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Given that the provinces seem favourably disposed to this plan, have any agreements been signed with any of them? Are all agreements signed? Will they be signed soon so that the stimulus plan can be implemented as quickly as possible?

11:45 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

There are a number of different aspects of the stimulus package, and although they have somewhat different delivery mechanisms, several of the large stimulus items in the budget will involve cooperation between the federal government and the provinces.

In fact, I can note in this regard that there are appropriations for some of these funds in Bill C-10. This is a method that is not always used, but Bill C-10 contains specific appropriations--for example, for the infrastructure stimulus fund, which will allow it to be put in place more rapidly. We expect that those at Infrastructure Canada who are responsible for this fund will be in discussions, or they already are in discussions, with representatives of provinces in order to identify projects.

11:45 a.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

I have no doubt that there will be quick action at federal level. But are the provinces ready to become involved in Canada's Economic Action Plan as quickly as we would like? Is there a timeline, is it possible, for example, for the provinces to have shorter administrative procedures so that they can get the money sooner, meaning that they can get as many shovels in the ground as possible this spring?

11:45 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

We can't directly speak for the provinces in terms of what their intentions or capacities are, but we are structuring the availability of these funds from the federal government to occur in as rapid and as efficient a manner as possible to make them available to those provinces who are prepared to participate and use it.

We have indications from some provinces, some in public.... I believe one example would be the comments by Mr. Duncan, Ontario's Minister of Finance, that he's ready to match all of the funding involved.

So we will make sure that this funding is available at the earliest possible date, using whatever methods we can, to appropriately speed up the availability of funds such as appropriations through Bill C-10. The sooner that bill becomes law, the sooner those funds will be appropriated and available. Then we fully expect to have a strong take-up from the provinces.

11:50 a.m.

Liberal

The Chair Liberal Derek Lee

Merci, Monsieur Gourde.

Mr. Martin, for eight minutes.

11:50 a.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Thank you, Mr. Chair.

It seems to me, from our research, that some of the best economic stimulus will come from the energy retrofitting of homes. There's short-term and long-term stimulus. There's the initial spending on jobs to do the renovation, and then homeowners should have more money in their pockets, out of energy costs saved, to further spend elsewhere.

We see the reference in Bill C-10 to the renovation and retrofit of social housing at a sum of $500 million, and northern housing at a sum of $100 million, but I don't see in Bill C-10 a general program for the average homeowner. We have homeowners calling our offices already, asking us, “Can we start spending? Can we start buying windows and doors and renovations with the guarantee that this is going through?”

I ask the witnesses from the Department of Finance, do we need the enabling legislation to follow through with this promise that was in the budget and that in fact is up on your website? Is it in Bill C-10, or are we supposed to wait for some further legislation?

11:50 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

You are correct, it's not in Bill C-10. But I would point out that it's common with tax changes to have them effective for a taxation year after a certain date. The home renovation tax credit, as stated in a notice of ways and means motion that has been tabled in the House, is to be effective for expenditures beginning the day after the budget, for a period of one year.

The credit that's earned by the taxpayers on those expenditures, which they can now make, and could have made commencing the day after the budget, will allow them, within the limits of the design of the tax credit, to reduce their taxes for the 2009 taxation year.

So I think the general answer to the question is yes, there is a requirement for legislation, obviously, to make this effective, but as is not uncommon with tax measures, it can be acted upon now, on the understanding that legislation will follow to put this into effect.

11:50 a.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

That's a little bit of a leap of faith in a minority government. Let's face it, if the government falls prior to that enabling legislation getting royal assent, that particular measure falls with the government. Is that not true?

11:50 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

That is correct, just as the measures in Bill C-10 would not have effect if the government fell before that bill is passed.

11:50 a.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

That's right, but in all likelihood Bill C-10 is going to pass within the lifespan of this government and this Parliament.

We don't know. This worries me. We're being sold a pig in a poke here. Canadian homeowners are being asked to take this great leap of faith that they can go out and spend the money, do their duty and stimulate the economy, and reduce greenhouse gas emissions and all those good things.

What reasoning was there for leaving it out of Bill C-10? Wouldn't it have been simple to add a third paragraph under renovation of social housing and renovation of northern housing, and then have the home renovation tax credit all in Bill C-10?

11:50 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

The provisions you're referring to are appropriated spending items. The tax credit is a fairly complex legislative change to the Income Tax Act. It was not available on the quick timing involved with this bill.

I would add, in terms of the general situatin, that even if for some reason there were not a legislative follow-up in the current Parliament for the home renovation tax credit, it would still be open to a subsequent Parliament, a subsequent government, to ratify the effect of the provision by passing the legislation.

11:55 a.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Yes, in a subsequent Parliament.

11:55 a.m.

Associate Deputy Minister, Department of Finance

Stephen Richardson

We do have precedents for that. It has happened a number of times with income tax changes that have been announced by the government.