Evidence of meeting #130 for Government Operations and Estimates in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was subcommittee.
A video is available from Parliament.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
If you're asking about the marginal tax rate on somebody who has a higher income, at the federal and provincial level it would be 53%, but on capital gains, it would be 66% of that if they each already benefited from the $250,000 exemption.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
You missed my point. The husband and wife are making a half a million. They're each making $250,000. It's not 66%. Is it not 50% taxable at that rate?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It would be half of 53%, if their only income is capital gains. It depends on each person's situation.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
Absolutely. However, on average, that's probably a marginal tax rate of around 25%. Is that correct?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Roughly speaking, yes it is.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
On anything above the half a million dollars per family, their effective marginal tax rate would be around 32% now. Is that correct?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, roughly speaking, on capital gains, that is correct.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
What is it in the United States? What are they proposing to do? Do you know?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't know off the top of my head, no. I'm not super familiar with the intricacies of the U.S. tax system.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
We're being advised that they may be raising their marginal tax rate up to 44% on capital gains, which is well above what Canada is proposing here while still allowing us to be competitive. However, we do know that there's are some lifetime exemptions, as you mentioned earlier: about $1.25 million, and about $6 million or so for other institutions and innovations.
What was, in essence, the 75% inclusion rate? When was that lowered? Do you recall?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think it was in the late 1990s or early 2000s, but I don't have the schedule in front of me.
Liberal
Charles Sousa Liberal Mississauga—Lakeshore, ON
I think a Conservative government had it at the 75% inclusion rate, and then it was the Liberals that reduced it to 50%.
Conservative
Conservative
The Chair Conservative Kelly McCauley
Mr. Savard-Tremblay, welcome back.
The floor is yours for six minutes.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you for welcoming me to your committee. I hope to live up to my colleague whom I'm replacing today.
Good morning, Mr. Giroux.
I'd like to talk to you about a case that made the headlines in La Presse just last Saturday. More than just a case, it seems to me to be widespread and part of the dynamic of a lack of verification as to where funds are subsequently channelled. This is an article by Isabelle Hachey entitled “Quand les belles annonces d'Ottawa se dégonflent”. The number of registrations in the Indigenous Business Directory has increased by 40% in the past year, and the value of contracts had reached $862 million by 2022-23. So far, this sounds like good news. However, no one has verified whether the contractors or the people working on the contracts are truly indigenous.
Already at the outset of the Procurement Strategy for Indigenous Business, a federal report was warning us about the lack of verification of the work being done. The ArriveCAN case confirmed that schemes were being used to allow all sorts of small businesses to get their hands on contracts that really should have been reserved for indigenous people. What's more, last year more than 50 financial institutions raised their hands to say that the strategy was encouraging the use of shell companies.
There's something I don't understand, and perhaps you'll be able to clarify it for me.
Personally, I have indigenous status and I have my card to prove it. I may not dress up as an indigenous person like some non-indigenous entrepreneurs do, including this man featured in Saturday's article. Yet, every time I deal with a government department for matters related to my status, I have to prove that I have indigenous status.
How is it that Ottawa, a bureaucratic behemoth that is fond of paperwork, suddenly turns a blind eye before pulling out the chequebook in this kind of situation?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a good question. It's something we haven't considered. We don't do ex post facto verification like the Auditor General does. She would probably be better able to answer that question than me.
On the other hand, federal programs, and this is in fact the case with our tax system, often rely on people's honour and good faith, and sometimes random, sometimes targeted audits are done. In the case of the article in La Presse, we can assume that checks to certify people's eligibility for this program are most likely rare and infrequent.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
I fully understand that it's not your job to do the verification after the sums have been paid out, or the ex post facto verification, as you put it. However, there were warnings right from the start of the strategy. Insofar as what happens upstream is more your responsibility, can you tell us if there have been any changes or if you've had any instructions from Ottawa subsequently? I know your work is essentially enforcement, but have you been told about any changes after the 50 indigenous financial institutions raised their hands to point out problems?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I have not been made aware of any changes with respect to the administration and management of this procurement program.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Are we seeing cases like this in many other programs that could create scandals? In this case, we'll see how far it goes and whether, as you say, the Auditor General will have to intervene in the process to conduct more audits.
To your knowledge, how often are such warnings issued, truly upstream, to ensure that we go beyond good faith alone? As I said, I'm very surprised that a program to support indigenous entrepreneurship doesn't require the business to be truly indigenous. In my opinion, we're just being symbolic, once again. It's like making speeches that start with recognition of unceded land, but then don't change a thing about the regime indigenous people are subjected to. This is typical of the regime found in this beautiful country of Canada.
That said, do you feel that in many places there is a lack of upstream verification?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I won't comment on the management of specific programs, but I will make a general comment.
As an example, the government is committed to reducing the use of professional and special services, but the spending authorizations in these supplementary estimates are already approaching last year's level, even though this is only Supplementary Estimates (A) and there are likely to be further spending authorizations in Supplementary Estimates (B) and probably in Supplementary Estimates (C) too. In the end, spending authorizations for external consultants may well resemble those of last year, when the government committed itself to reducing the use of external consultants. It's possible that the amounts that will actually be spent will be a little lower, but so far there's no indication that the government wants to significantly reduce the use of external consultants. That's one of the examples I can give you.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
I read another article in La Presse last week about the Canada Border Services Agency's assessment and revenue management system, known as CARM. Not only did I read the article, but I participated by giving an interview in this context. There is already talk of cost overruns for this system.
Are you able to explain the reasons for this, in 25 seconds?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Unfortunately, I can't answer that, as it's not a question my office has looked into specifically.
Conservative
The Chair Conservative Kelly McCauley
Thank you, gentlemen.
Mr. Green, welcome back. The floor is yours for six minutes, please.
Matthew Green NDP Hamilton Centre, ON
Thank you very much, Mr. Chair.
It's a pleasure to be back with so many members whom I had the privilege of serving with in the last session here at the OGGO committee, and it's always a pleasure to have the opportunity to be able to explore the work that you do, sir, as the Parliamentary Budget Officer.
I want to follow up on the very, I think, legitimate questions of my friend from the Bloc. Budget 2024 made significant cuts to Indigenous Services, including sunsetting for Jordan's principle.
Last time when you were at committee, MP Bachrach asked you what impact these cuts would have to Indigenous Services, and you said that it was too early to tell, but taking the information from the ISC and Crown-Indigenous Relations, you said, “there is no reason not to believe that information—it seems that there won't be a meaningful impact on Indigenous Services.” However, since then we've now had multiple organizations that were supposed to be supported by Jordan's principle now going without funding. They're owed hundreds of thousands of dollars, and staff are going without pay.
On reflection of that, what impact will the cuts in budget 2024 have on the ability of these programs to get the funding they are owed and that they need to continue to deliver these valuable services?