Public Accounts Committee on Nov. 20th, 2013

[John Carmichael, Conservative, Don Valley West, ON]

I'm on page 1.5—my apologies. Were you on page 1.7?

[Benoît Robidoux]

Yes, I was on page 1.7.

[John Carmichael, Conservative, Don Valley West, ON]

We're on page 1.5. I'm looking at the income from the income tax revenues, etc., general revenues that are coming in over the past year. I'm looking at the revenue ratio to GDP. Your reference is that it's reduced to 14.1%, with significantly more income. Why is that revenue-to-GDP ratio declining or dropping?

[Benoît Robidoux]

The revenue ratio has been declining essentially because of a reduction in tax rates, both for personal income and for corporate income, through that period. Plus there's the impact of the recession in that year, which played some role. But tax reduction has been a significant factor in that. They have not been increasing since then because the government has not increased tax rates in any way through that period. So it remains stable as a share of GDP.

[John Carmichael, Conservative, Don Valley West, ON]

So then—

[Benoît Robidoux]

Basically, taxation is growing more or less in line with GDP.

[John Carmichael, Conservative, Don Valley West, ON]

I hear you. So revenues have been increasing. Tax revenues are increasing. In particular, personal and corporate income taxes are all up.

[Benoît Robidoux]

Yes.

[John Carmichael, Conservative, Don Valley West, ON]

It's all happening without an increase in tax rates. Is that correct?

[Benoît Robidoux]

Absolutely.

[John Carmichael, Conservative, Don Valley West, ON]

So that would indicate a fairly strong economy?

[Benoît Robidoux]

A bigger economy.

[John Carmichael, Conservative, Don Valley West, ON]

A bigger economy—things are working. Thank you.

You're saying that the public accounts, by showing increased tax revenues—I just want to be real clear—are indicating economic growth. Basically, people and businesses are making more money, and they're paying higher taxes just through the sheer generation of more income.

[Benoît Robidoux]

Effectively.

[John Carmichael, Conservative, Don Valley West, ON]

Good. Thank you.

Mr. Ralston, in your statement, you talked about the two areas in which you've adopted new standards in accounting with regard to transfer payments. I wonder if you could explain that.

In particular, the second one caught my eye. You said, “The main impact for the government was to stop recognizing advance payments as non-financial assets and to recognize them instead as expenses. The impact of these changes on the financial results was an increase in expense of $500 million.”

I wonder if you could just explain that accounting change for me. As a non-accountant but a business person, for me $500 million is a lot of money, and it transitions into greater expense for the government in the past year. Is it significant or not?

[Jim Ralston]

In this case, essentially the way this type of expenditure would have been shown in the past was as an asset, essentially a prepaid expense. Now, under the Canadian public sector accounting standards, they have certain characteristics of what they would like to classify as an asset. It's very definitional.

I think it boils down to a rethinking of whether this particular kind of expenditure really had the underlying characteristics of an asset, or whether it was really an expense of the year in which it was.... In other words, if it's an asset, it has some continuing value to the federal government. It would be appearing on our balance sheet.

I think what the standard effectively says is no, that this isn't an asset in the sense that the federal government has any access to it. It can't liquidate it. It can't use it. It's really just recognizing that it's parked there until a future time and then will be transferred to the recipient.

I think that, again, it's just a question of the board re-examining the underlying reality and saying no, that the federal government really has no substantive access to this and can't make use of this asset; therefore, we should show it as an expense.

[The Chair, NDP, David Christopherson]

Thank you.

Your time has expired. I'm sorry.

Colleagues, we have exhausted the usual rotation for questions and comments. However, there are about 31 minutes remaining on the clock. I'm in the hands of the committee as to whether you would like to continue with another round or two, or give every person a shot, or whether you wish to adjourn. I am in your hands. The floor is open to a motion.

Mr. Albas.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

I'd like to continue, Mr. Chair.

[The Chair, NDP, David Christopherson]

By that, are you suggesting that we just continue in the rotation for the time available?

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Well, I do know that some members have indicated an interest in continuing, so do you mind if I just put the next...I believe—

[The Chair, NDP, David Christopherson]

I was just suggesting for purposes of what we'd follow that we go back to the beginning of the rotation and then go down until 5:30 comes.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

That works.

[The Chair, NDP, David Christopherson]

Does that work? Does everybody agree with that? Do we need a motion? I think there's agreement in the room.

[Some hon. members]

Yes.

[The Chair, NDP, David Christopherson]

Okay. We have unanimous consent. With that, we will continue.

Mr. Hayes, you're ready to begin that second round?