Public Accounts Committee on Nov. 20th, 2013

[Jim Ralston]

To our knowledge—

[Benoît Robidoux]

There's no problem there.

[The Chair, NDP, David Christopherson]

Sorry?

[Benoît Robidoux]

There's no mistake. It just adds up.

Starting with the figure in the line at the top, you see $620 billion. Further down, you see $621 billion because we added $620 billion and $1.341 billion.

In the second line, you see $621.586 billion. Is that clear?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes, but the problem is still the same.

[Benoît Robidoux]

I'll continue, if I may.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I understand what you're saying, but the problem is that you're carrying forward a $616-billion debt and increasing it to $620 billion. There're still no explanation for the $4-billion discrepancy. The $616 billion just becomes $620 billion. What I want to know is where that $4.678-billion discrepancy comes from.

Mr. Chair, I think we should give them time so they can come back to us with a more detailed explanation.

[The Chair, NDP, David Christopherson]

Before you leave that, if I might, Alex seemed to have a bit of a handle on it. I'm going to ask him to give his thought as he sees it.

Please, Alex, just say what you mentioned to me.

[Alex Smith]

I was just pointing out to you, Mr. Chair, that it seems the member is pointing to the difference between net debt at the end of 2011 and the opening debt at the beginning of 2012. The member seems to be saying that the note provided doesn't explain the difference between the net debt one year and the opening debt the following year.

[The Chair, NDP, David Christopherson]

Okay, thank you.

Is that accurate, monsieur?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes.

[The Chair, NDP, David Christopherson]

Do we understand the question now? Can we get a clear answer?

[Jim Ralston]

We're working on it. At the moment, it goes back to a previous year. I'm afraid we don't have that one at our fingertips, but we'll be happy to track it down.

[Benoît Robidoux]

We could get back with the right answer. I think the right answer is the note 1 to the table. The restatement may be seen as balanced for both internal and external, and the answer is different because of the restatement. I'm quite sure it's that. We'll double-check and get back with an answer.

[The Chair, NDP, David Christopherson]

All right.

Time has expired. I have been shutting down your time when they've been huddling, so this is a fair representation of your time, sir. I'm sorry. You have two choices: you can either get in the next round and continue to ask, or you can follow up with them. They did make a commitment they would get you an answer. If you're not getting satisfactory answers, you have the right to come back to this committee and say you're not getting the answers they committed to give you. That's your procedure. Is that okay, sir?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

May I ask another question?

[The Chair, NDP, David Christopherson]

No, Mr. Giguère.

If you're in a subsequent round, you'll have the floor.

Okay. With that then, we'll move along.

Mr. Shipley, you now have the floor, sir.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair, and thank you witnesses all for coming out.

Mr. Robidoux, at the end of March of this year, 2013, it is my understanding that our deficit had hit a figure of something less than $19 billion—I think about $18.9 billion. In the budgetary information in the report, there was a deficit projection of $26.3 billion set in 2012. There were earlier comments that we're “in a time”. There's no surprise in that. We're coming out of the recession. Or we're out of it. We know that global growth is still fairly weak. We need to continue to work on exports. We look for diversification in our agreements to export into countries besides our closest partner and neighbour to the south.

Revenues increased by an amount of about $7.5 billion. I think that's about 3% up from 2011 to 2012. I'm just trying to grasp this. Our deficit has come down. Our revenues have increased at a time when global problems still strongly exist. These higher tax revenue come at a time when taxes in Canada are at a 50-year low. I'm speaking of individuals and, particularly in my riding, small businesses, which make up about 98% of the economy in our country.

I'm just trying to understand what that means to a family, what it means to a small business. How does it work? It seems counterintuitive that in a time of economic growth we've had increases in revenue, lower taxes, and we've been able to pay down the deficit ahead of what we were projecting. I'm just wondering, do you have any comments as to how that actually works, a kind of Economics 101 that most of us can understand?

[Benoît Robidoux]

Chair, I will do my best.

Total revenues, which include tax revenues and non-tax revenues, went up by $7.5 billion in fiscal year 2012-13. This reflects an increase in GDP, the base of taxation. The tax rates have been kept stable. What happened is that the pie has been growing and this brings higher revenues. This is the explanation, more or less. In that same year, we had a growth in total revenue of 3% which was more or less aligned with the growth in the base. Spending was fairly flat last year, and this led to an improvement in the reduction of the deficit. I hope this is helping you. It's not an increase in the tax rate, for sure. It was just an increase in the pie that is taxable.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair, and Mr. Robidoux.

I think it also helps that in Canada business is working. Even with a lower tax rate, we were able to increase the amount of revenues, which takes me to the comments of the comptroller general.

I just want to understand a little bit, Mr. Ralston. You mentioned in your opening statement that the government retroactively adopted new standards for public sector accounting regarding the presentation of certain tax expenditures. Why was this done? Just help us to understand why it was done. What would be the impact of this reclassification?

[Jim Ralston]

Mr. Chair, the change was made pursuant to a change or a new accounting standard issued by the Public Sector Accounting Board. The Public Sector Accounting Board is an independent standard-setter for governments in Canada. The stated accounting policies of the federal government are based on those standards.

What that standard was trying to reflect or does reflect is that not all so-called tax expenditures have similar characteristics and purposes. As I said in my opening statement, some are effectively almost like a substitute for a cheque. They are a transfer that happens to be administered through the tax system. Others are effectively rate reductions; the term I used earlier was tax concession.

What the standard did was start to differentiate between those two kinds of tax expenditures. So for the former one, where the characteristics were very similar to a cash transfer, we now show them as if they were a cash transfer. For the ones that are more reflective of a rate reduction, we show them as we always have, as an offset to tax revenue.

The impact of that change is to....because things that were formerly deducted from revenue are now shown gross—so you see an increase in tax revenue with a corresponding increase in the expenditure—the net effect is zero. That's why I mentioned that there is no impact on the bottom line, but it shows more faithfully the nature of the underlying activity.

[The Chair, NDP, David Christopherson]

Thank you.

Moving along now, we go back to Ms. Duncan.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Thank you.

I'm concerned that there's little follow-up. For example, there's an audit and a few years later there's another audit and we learn the recommendations weren't implemented. Would it be possible to table with the committee what's done to ensure the recommendations are followed? Is that possible?

[Nancy Cheng]

For me?

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Is that possible to table with the committee?