Madam Speaker, to be clear, I believe that it can act as a disincentive.
Furthermore, I do not believe that provincial governments necessarily respond by electing policies which slow growth or revenue. However, it is unfortunate that it can have the unintended consequence of penalizing provinces that see significant growth. It is an unfortunate outcome of this kind of system.
With respect to the member's point on an individual tax in an individual province, yes, the five province average which takes into account 33 different criteria is the average against which each individual province's fiscal load is measured in the determination of whether it qualifies for equalization transfers. In the instance I raised, the level of revenues that the province of Quebec generates from corporate taxes is a factor in its overall fiscal load as compared to the five province average. This system does create a situation where provinces can maintain artificially low levels of taxation, levels of taxation which would definitely be higher if there were no equalization payments. That is the whole point.
In some cases the provinces are able to maintain much lower levels of taxation in order to create de facto subsidies. I raised the case of New Brunswick which provides all sorts of corporate tax holidays for people who locate their businesses there.
Again, I am in favour of tax competition, but I am not in favour of a system where the federal government gives a financial advantage to those provinces which use those kinds of tax levers in their competition to attract business.