Debates of May 28th, 2008

Finance—Main Estimates 2008-09

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, that would be the current Prime Minister.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Mr. Chair, it is actually helpful to have a bit of history.

Before the current Prime Minister inherited large Liberal surpluses, the last Conservative prime minister to actually balance the books, even in one year, was not Kim Campbell, not Brian Mulroney, not Joe Clark, nor John Diefenbaker. It was not even R. B. Bennett or Arthur Meighen. We have to go all the way back to Sir Robert Borden in 1912 to find a Conservative government that actually balanced the books.

I will now remind the Minister of Finance of his earlier statement about Liberal governments raising taxes and running deficits. I would ask the minister to repeat that statement while looking me in the eye.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I have no doubt that the Liberals opposite will run a deficit if they ever return to power in this country given their intention to spend some $70 billion. That will clearly put this country into deficit. It is the kind of reckless spending that they did in their three budgets in 2004, 2005, and their third budget with the NDP where they put up spending in one year alone for this country by 14.8%.

We now have taxes down to where they were in 1963-64 on the basis of revenue to GDP. That will be the tax burden in 2009-10, the lowest taxes in 50 years.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Mr. Chair, I would like to have it on the record that despite my request to have that statement repeated while the minister looked me in the eye, the finance minister was, in fact, unable to do so.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I did look the member in the eye, Mr. Chair. She may not like me looking her in the eye, but I did look her in the eye. She may not like the answer, but I did what she asked.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, the minister likes to talk about his advantage plan. What is the advantage in cutting $107 million from the Economic Development Agency of Canada for the Regions of Quebec?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, in fact, there has been substantial economic growth in Quebec. The employment numbers have been strong in Quebec. I am thrilled to see in today's papers things like Bombardier launching a hiring blitz in Montreal. It is looking for people to fill 700 new jobs. On May 1, Morgan Stanley was talking about 500 jobs for its new Montreal technology centre. This is great job creation in Quebec.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

I just want to make a point. Some members may have a very brief question of just a few seconds and I do not think it is reasonable to expect the answer to be correspondingly brief. If it is a four second question, it might take a few moments for the minister to answer. I would ask members for a little understanding.

The hon. member for Notre-Dame-de-Grâce—Lachine.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, I am going to address the point that you just made and I hope it does not come off of my time.

If I ask a four second question and the minister takes six or seven seconds, I do not have a problem, but when the minister is taking three and four times the time, then I do have a problem. If he is unable to give a fulsome response in a reasonable time in comparison to the time I took to ask the question, then I suggest that his Prime Minister, when he does his shuffle, might want to remove him.

[Gary Goodyear, Conservative, Cambridge, ON]

On a point of order, Mr. Chair, I am going to request that the member does lose her time since the member stood and gave a partisan political speech that did nothing but disrespect the Chair. It is funny that Liberals cannot handle the rules.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

Order. There is a little more than two hours left in this debate and it would be helpful if all members understood that there needs to be a bit of cooperation. The more civil people are, the smoother this can go.

I understand the point made by the hon. member for Notre-Dame-de-Grâce—Lachine, but I think she would understand that a very short question can evoke a long response if it is a complicated question. There are a lot of clocks on my screen and I will do my best to ensure that the length of time of the answers relate to the length of time of the questions.

The hon. member for Notre-Dame-de-Grâce—Lachine.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, where is the advantage in Advantage Canada if it cuts funding for non-profit organizations, such as Montreal International and Pôle Québec Chaudière-Appalaches?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, the advantage of Advantage Canada for Quebec has been very substantial. The transfers have increased dramatically. In fact, there has been an increase of $4.5 billion since the Liberal government of 2005-06. Quebec will receive over $16.7 billion in major federal transfers this year.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, that may be the case, but the minister still cut $107 million from the Economic Development Agency of Canada for the Regions of Quebec.

When does the minister and his government intend to carry out their promise to eliminate the GST entirely, 100%, on gas if the price of gas went over 85¢ a litre?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, we know that the Liberals want to bring in a massive new punitive tax, a carbon tax on gasoline.

I am glad the member for Notre-Dame-de-Grâce—Lachine has also now mentioned the GST issue. We know that Liberals intend to increase the GST as well to finance some of their wild spending schemes. Canadians can look forward to a massive new carbon tax on gasoline and home heating fuel and also an increase in the GST under the Liberals.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, I love the way the Conservatives cannot tell the truth.

Out of 245 income trusts that existed before the announcement, there are now 197 left. Forty of those were due to takeover bids. Did the minister foresee this happening when he decided to tax income trusts?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I gather the question is about income trusts; I only heard part of it, Mr. Chair.

The issue with respect to income trusts has been dealt with many times in this House. It was supported by some members of the House. Of course, it became law because it had majority support in this place. Some people want to revisit it.

I find it difficult to listen to a Liberal complain about it since you know you were going to do exactly the same thing.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

Order. The minister is out of time on that. I will remind the minister to address colleagues in the third person, not directly. The hon. member for Notre-Dame-de-Grâce—Lachine.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, the question was about takeover of income trusts. Does the minister expect to collect more taxes or less taxes in revenues due to the takeover of many of these income trusts by pension funds and foreign private equity interests?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I would not expect a Liberal to understand that one can actually increase tax revenue by lowering taxes, which we have shown time and time again, by increasing economic activity. What we want to see from the corporate sector, including the income trust sector, is the same level playing field of taxation. That is what we want.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

Mr. Chair, an independent analysis by Deloitte indicates that in the case of these takeovers 70% of the purchasers are tax exempt pension and private equity funds or foreign buyers who pay little, if any, tax in this country. Does the minister dispute this number that comes from Deloitte?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, the member for Markham—Unionville is chirping again over there, I think, and the member for Notre-Dame-de-Grâce—Lachine can handle it.

The purpose was to level the playing field for different forms of corporate entities in Canada. That is being accomplished. I think that is in the best interests of our country going forward.

[Lynne Yelich, Conservative, Parliamentary Secretary to the Minister of Human Resources and Social Development]

Mr. Chair, it is a great pleasure tonight to rise and speak to the main estimates and about what this Conservative government is doing to effectively manage Canada's economy. Under the leadership of our Prime Minister and finance minister, we have taken many important steps to improve the quality of life for Canadians over the last two years.

My remarks and my eventual questions to the finance minister will deal specifically with the tax-free savings account.

It is clear to Canadians that this government is taking a very different approach than the Liberals. Their Liberal vision for the economy simply repeats the same broken tax-and-spend and tax again mantra of the 1970s, along with a dangerous addiction to uncontrolled spending and reckless deficit spending.

It is a tax-and-spend philosophy that is leading the Liberals to call not only for a huge hike in the GST but also for what many have stated could be the single largest tax increase in Canada's history. The Liberal leader's new regressive carbon tax represents a huge tax increase for all Canadians. It is a tax increase that each and every Canadian will feel at the pumps, at the grocery store and each and every time they heat their home.

What is worse is that these tax hikes will have the most negative impact on low income Canadians, such as seniors living on fixed incomes.

With the potential Liberal GST hike and the new carbon tax, Canadians are being threatened by a Liberal government that will reach deeper and deeper into their pockets with a regressive, punitive tax that will directly cause the price of everyday items to increase.

For instance, as farmers see their costs escalate, the result will be higher food prices. Large purchases such as a new home or a new car would skyrocket to such new heights that they would fall out of reach for some. Indeed, the prices of everything we make or buy would jump.

Both the manufacturing and the shipping of products are tied to gas prices, making the cost of the products that we export more expensive and thus less attractive in many markets. This would create a huge disadvantage for Canada's manufacturing sector, a disadvantage that it simply cannot afford at this time.

Our Conservative government disagrees with the Liberals. We believe that Canadians should be allowed to keep more of their hard-earned dollars and to spend those dollars on what is important to them and their families.

That is why we have provided historic tax relief and cut the federal tax bill for families and individuals by $140 billion. This includes lowering personal income taxes and chopping the GST by two points.

We also believe that the federal government should undertake measures to assist Canadians to save, helping to make it easier for them to invest in their retirement or make those larger purchases of life, such as a new home.

In pursuit of this objective, budget 2008 unveiled the creation of the landmark tax-free savings account.

It was a little over 50 years ago on March 14, 1957, that then finance minister Walter Harris, a lawyer from southern Ontario with a record of balanced budgets and who ran for the leadership of a major political party in Ontario, stood up in the House of Commons to announce a new tax plan to help Canadians save.

At that time, the initiative was greeted with polite applause and passing interest as a measure mainly aimed at assisting those without workplace old age benefits to retire comfortably. From its humble beginnings, the registered retirement savings plan would go on to become an indispensable part of fiscal planning for every Canadian.

And for that, along with his military service in World War II, we thank and we pay tribute to Walter Harris. In the city of Oshawa today, the Walter E. Harris Public Elementary School bears its name in his honour.

Now let us fast forward to the present day and another lawyer from southern Ontario, another finance minister with a record of balanced budgets and another politician who has run for the leadership of a major political party in Ontario.

On February 26, 2008, our current finance minister, the member for Whitby—Oshawa, would stand in the same chamber Walter Harris did over half a century ago to announce the single most important personal savings vehicle since the RRSP of 1957.

Described by the C.D. Howe Institute as a “tax policy gem” and by the Canadian Federation of Independent Business as an “inspired measure”, the tax-free savings account will allow Canadians to set aside money in eligible investment vehicles and watch those savings grow tax free for a lifetime.

The tax-free savings account can be used to purchase a new car, to renovate a house, to start a small business or for retirement. In other words, this is tax-free money for what matters to individual Canadians.

An important feature of the tax-free savings account is that Canadians from all income levels and all walks of life can benefit. Starting on January 1, 2009, Canadians aged 18 and older can save up to $5,000 every year in a tax-free savings account.

While contributions will not be deductible for income tax purposes, investment income, including capital gains, earned in the tax-free savings account will not be taxed, even when withdrawn. Funds can be withdrawn from the savings account at any time for any purpose, tax free.

Naturally, not everyone is able to save each and every year. The new savings account is flexible, allowing for a lifetime of savings. Those who cannot contribute $5,000 in a given year will be able to carry forward their unused contribution room to future years. In addition, Canadians may want to use their savings and the full amount of withdrawals, to be put back into the tax-free savings account in the future.

The Liberals across the floor must like it because this is the quietest they have been all evening.

We believe that within the next 15 to 20 years over 90% of Canadians will hold all of their financial assets in tax-efficient savings vehicles, either through existing tax-deferred plans or this new savings account. This is a significant achievement as our population grows older, and it will provide a lasting legacy for the generations that follow.

Couples often save and plan together, so Canadians can contribute to their spouse's or common-law partner's tax-free savings account depending on the spouse's or partner's available room.

Some people ask how the tax-free savings account is different from the RRSP. The basic difference is that an RRSP is intended primarily for retirement. We might say that the tax-free savings account is like an RRSP, but for everything else in our life.

The benefits of saving in a tax-free savings account are evident. Because capital gains and other investment income earned in the tax-free savings account will not be taxed, the person contributing $200 a month, for example, to a tax-free savings account for 20 years will enjoy additional savings of $11,045 compared to saving in an unregistered account.

And the tax-free savings account provides benefits for seniors. It will provide seniors with a tax-free savings vehicle and meet ongoing savings needs, something seniors have only limited access to once they reach age 71 and are required to begin drawing down their registered retirement savings. Seniors are expected to receive one-half of the total benefits provided by this savings account.

One of the best features of the tax-free savings account is that there is no impact on income tested benefits. As our government did with the GST cuts, we have taken the interests of low income Canadians into account.

There will be no federal clawbacks resulting from the tax-free savings account. This means that neither income earned in a tax-free saving account nor withdrawals will affect eligibility for federal income tested benefits and credits such as the guaranteed income supplement and the Canada child tax benefit.

For people with low and modest incomes, this will improve incentives to save. In fact, it is estimated that in the first five years over 75% of the benefits of this savings account will go to individuals in the two lowest income tax brackets.

In closing, Canadians will benefit from this in many ways, but perhaps more importantly, it provides Canadians with the ability to start saving early for future needs. It is not a surprise that Canadians are excited. In my remaining time, I would like the finance minister to speak to the reaction that he has heard on this fine initiative.

[Ted Menzies, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Chair, the finance minister has been doing a superb job of answering and we do not want to wear his voice out in one evening. Therefore, I will answer the member for Blackstrap, who I thank for her representation of her constituents. She has been a tremendous asset to that part of Saskatchewan. We know that she has great support in that region. She does a great job backing up her minister. She is here tonight to help support one of the landmark pieces of our 2008 budget, the tax-free savings account, described by many, not just us, for its landmark savings opportunities for Canadians.

January 1, 2009, will bring this into effect. Canadians over the age of 18 will be permitted to deposit up to $5,000 each year. TFSA will provide greater savings incentives for low and modest income individuals. In the first five years, over three-quarters of the benefits will go to the lowest two tax brackets. That is one of the most important features to this. It provides an opportunity for all Canadians to save.

Additionally, we have ensured TFSA income and withdrawals will not affect eligibility for federal income tested benefits and credits. To see how much we can save, I encourage all Canadians, and I will repeat this website, again, to go to www.budget.gc.ca. Our finance minister has been very clear about reminding Canadians how they can save, and they can go to this website.

It is no wonder we are getting such positive reactions. The C.D. Howe Institute said, “This tax policy gem is very good news for Canadians, and [the finance minister] and his government deserve credit for a novel program”.

The Winnipeg Free Press said, “To at once encourage investment and savings is a good idea in a country like Canada where individual debt is high and investment low”.

BMO economist Doug Porter said, “The tax-free savings account is a very positive development—I think it’s a step in the right direction”.

The Canadian Chamber of Commerce as well said, “the creation of a Tax-free Savings Account will encourage savings, a measure which the Chamber has sought for many years”.

The Canadian Taxpayers Federation said, “This is an excellent policy proposal. Canada needs to reward people that save because their investments fuel economic growth and job creation”.

As well, the Canadian Federation of Independent Business said that the TFSA account was “an inspired measure.

Not to be forgotten are the comments of the hon. member of for Halton about TFSA being a good idea, “It's something I have long advicated for”.

[Garth Turner, Liberal, Halton, ON]

Mr. Chair, I rise on a point of order. The finance minister and now the parliamentary secretary quoted from a report that I gave the Minister of Finance in April of 2006. I am flattered that they would now finally read the report, but if they are going to quote a part of it, could you please instruct them to at least quote an entire sentence.