Jim Flaherty

[Federal-Provincial Relations, March 31st, 2008]

The concern, Mr. Speaker, is, of course, with the people of Ontario, the workers of Ontario and the businesses of Ontario because the Government of Ontario's business tax policies are hurting business growth in the province of Ontario.

On October 30, in the economic statement, we challenged the provinces and territories to join us in reducing the business tax burden by 2012. British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick are all moving in that direction. This is for the sake of businesses, business growth and the people, the workers of the province of Ontario.

[Business of Supply, March 31st, 2008]

Mr. Speaker, I hear the hon. member's statements. I note also that this is the same hon. member who has voted against every bill in favour of veterans and every bill in favour of defence on which he has had the opportunity to vote on as a member of this place.

I gather now that he will be voting against any allocations for ACOA to provide help for the needs and certainly the infrastructure needs of Atlantic Canada as an important part of Canada's economic future.

[Business of Supply, March 31st, 2008]

Mr. Speaker, it is true that there have been some fairly sharp exchanges between the premier of Ontario and myself in the past several weeks concerning fiscal and business policy, but I have restrained from calling the premier of Ontario a donkey, unlike the member for York South—Weston.

In terms of fiscal planning and equalization in Canada, it is important that Ontario, as Canada's primary manufacturing economic engine, maintains a GDP per capita that reflects the underlying strength of the Ontario economy.

However, fiscal planning makes a difference, and this is certainly one of the points that we have been trying to advance with the current government of the province of Ontario, which after all is at the beginning of a mandate. High business taxes deter investment. They discourage investment. This is particularly so when provinces that are in competition with Ontario have gone ahead and moved toward lower taxes.

Again, we are encouraging Ontario to strive to remain an economic engine in Canada.

[Business of Supply, March 31st, 2008]

Mr. Speaker, the poet Robert Louis Stevenson once wrote that, “We are all travelers in the wilderness of the world, and the best that we can find in our travels is an honest friend”.

An honest friend does not tell us what we want to hear, but what we need to hear. The truth is that Ontario is facing some major challenges.

The combined forces of global economic volatility, a U.S. economy showing ever-increasing strains, a weakening U.S. dollar, a dramatically higher Canadian dollar, along with fierce competition from emerging markets like China and India, and high energy prices are hurting important sectors of Ontario's economy.

Even as Canada's overall economic fundamentals remain solid, our national economic engine is in danger of stalling.

While Canada experiences the second longest period of economic expansion in our history, Ontario's share of the national nominal GDP has actually fallen from 41.4% in 2002 to 38.6% in 2006.

While Canadian business investment has expanded for 12 consecutive years, Ontario's economic growth has fallen below the national average recently due to weaker growth in exports and business investment.

While Canada's national unemployment rate is at its lowest level in 33 years with more Canadians working than ever before, for the first time ever Ontario's unemployment rate was above the national average in 2007.

While Canada is on the best fiscal footing of the major western industrialized countries and is the only member of the G-7 with both ongoing budget surpluses and a falling debt burden, Ontario struggles ranking 15th out of 16 in GDP per capita growth when compared to the most populous provinces and U.S. states in North America.

The facts are clear. Ontario's economy is losing ground to the rest of Canada. As Ontario's economy loses ground, the province moves closer and closer to falling below the equalization standard that determines have and have not provinces in Confederation.

This trend is troubling. In 2005-06, Ontario was around $400 above the standard. In 2006-07, $300 above. In 2007-08, $250 above. In 2008-09, only $85 above the standard. If this decline continues, Ontario will, for the first time in the history of the program, receive equalization payments.

Economists such as Don Drummond of TD Bank Financial and Dale Orr of Global Insight are now suggesting this is a distinct possibility. Should that occur it would have serious ramifications for all of Canada and its equalization framework. But the real concerns are the faces behind all of these facts and figures, the people who own Ontario's businesses, and the workers and families that they employ.

We know what prolonged economic weakness may mean to them. It may mean that businesses will not need as many employees, cutting a shift or laying off some employees, or even worse, it may mean businesses closing altogether. Ensuring the province's long term prosperity is what has motivated our concern about Ontario's economic vitality.

As Canada's finance minister, when Ontario's economy lags, I am compelled to react, not simply because of the possible ramifications on the federal equalization system but because the province is simply too important to Canada's economy.

While we cannot do anything about the rising price of oil or the weak U.S. dollar, action can be taken to create a business climate where innovators, entrepreneurs and risk takers can flourish. Ontario can no longer rely on a low Canadian dollar to give our industry a discount over international markets.

More than ever, we need to upgrade our manufacturing plants, equipment and public infrastructure as we work to close our productivity gap with the United States.

Our Conservative government is taking action in response through our long term economic plan “Advantage Canada”. We are making a historic $33 billion investment in infrastructure along with significant investments in education and research.

We are supporting communities affected by major economic downturns through a $1 billion community development trust, a $250 million automotive innovation fund, and an accelerated capital cost allowance for the manufacturing and processing sector.

We are providing historic tax relief. We are cutting taxes in every way the federal government collects them: personal, consumption, business and excise taxes. We have reduced the overall tax burden to its lowest level in nearly 50 years. Since coming to office we have reduced the overall tax burden by nearly $200 billion.

In anticipation of increased economic volatility, we took decisive and aggressive action in our fall 2007 economic statement by providing $60 billion in broad-based tax relief to stimulate the Canadian economy.

Indeed, the actions this Conservative government has taken since 2006 will provide $21 billion in incremental tax relief, which is equivalent to 1.4% of Canada's economy, to Canadians and Canadian businesses this year.

Our low business taxes will be a powerful brand for Canada globally. That is why our government has cut business taxes deeper and faster than ever contemplated before, including reducing corporate taxes to 15% by 2012, eliminating the federal capital tax, eliminating the corporate surtax in 2008, providing tax relief to our manufacturing sector, and providing incentives to the provinces to eliminate their capital taxes.

As a result of our actions Canada's corporate taxes will become among the lowest in major industrialized economies.

As an international KPMG study release last week indicated, these business tax reductions have been instrumental in helping Canadian industry adjust to the rise in the Canadian dollar. But we cannot do it alone. We need the provincial governments to step up to the plate and follow suit.

As the Canadian Council of Chief Executives has recently stated:

The federal government clearly has done everything it can to reduce tax rates within the boundaries of prudent fiscal management. The next major steps in forging a more competitive corporate tax system must come at the provincial level.

This is especially true of Ontario. A growing chorus of voices have been calling for the province to lower its excessively high business taxes. Business taxes in Ontario are currently the highest in Canada. If no action is taken, Ontario's marginal effective tax rate, the overall tax rate on new business investment, will be 30.7% in 2012 compared to only 18.8% in Quebec.

We are not the only ones saying this. This is being echoed by leading economists in Canada. In fact, it is echoed by the Ontario government's own task force on competitiveness which said:

Ontario’s tax regime is one of the least conducive to business investment in the developed world.

We are asking all provinces, not only Ontario, to recognize the long term benefits of tax relief. We cut taxes to attract investment, to create jobs, and to help sharpens Canada's competitive edge internationally.

Even the federal leader of the Liberal Party understands that saying, “A lower corporate tax rate is a powerful weapon...to generate more investment, higher living standards and better jobs”.

We applaud the governments of Manitoba, British Columbia, Quebec, Saskatchewan and New Brunswick for their recent efforts to lower taxes.

We set out three requests to the Government of Ontario: lower the business taxes overall, move toward harmonization of PST and GST, and eliminate the capital taxes with respect to which we provided an incentive.

I applaud Ontario for taking advantage of the incentive with respect to capital taxes which is a step forward that will fully eliminate the provincial capital taxes in Ontario in 2010, but there is much more to be done on the overall business tax rate in Ontario and particularly with respect to the harmonization issue for the benefit of businesses, small, medium and large, in Ontario.

Again, we stand ready and willing, in the spirit of open federalism, to work with Ontario and all provinces and territories to build a more efficient, more prosperous and wealthier economic union for all Canadians.

[Ways and Means, March 13th, 2008]

moved that a ways and means motion to implement certain provisions of the budget tabled in Parliament on February 26, 2008, and to enact provisions to preserve the fiscal plan set out in that budget, be concurred in.

[Ontario Economy, March 13th, 2008]

Mr. Speaker, the member has asked a brilliant question.

Ontario has so much potential, but there is a golden opportunity now for Premier McGuinty in his budget on March 25. I am hopeful that he will go ahead with long term, broad-based business tax reductions, reducing the provincial corporate income tax rate, finally eliminating capital taxes in the province of Ontario and moving toward harmonizing of retail sales taxes and the GST.

I will be the first to stand up and applaud Premier McGuinty when he moves toward reducing these taxes in Ontario.

[Ways and Means, March 11th, 2008]

Mr. Speaker, pursuant to Standing Order 83(1) l wish to table a notice of ways and means motion to implement certain provisions of the budget tabled in Parliament on February 26, 2008, and to enact provisions to preserve the fiscal plan set out in that budget.

I am also providing notice today of our intention to include with this ways and means motion language to protect Canada's fiscal framework from the effects of Bill C-253 which would risk sending the federal government back into deficit.

I ask that an order of the day be designated for consideration of the motion.

[Business of Supply, March 11th, 2008]

Mr. Speaker, I see that the hon. member once again fails to argue from principle. Her point seems to be that if we are going to have a common securities regulator, the headquarters should be in Montreal. That means the member is in favour, I guess, of a common securities regulator. What we are down to now is where will we locate the headquarters.

Mr. Crawford's panel recommended that the board of directors of the new common securities regulator should decide an appropriate place for the location of the securities regulator. The board is composed of 14 members: 10 from the provinces, 3 from the territories and 1 representative from the Government of Canada. But I thank the hon. member for her support in principle of the idea.

I also thank her for her support in principle of the budget which, as we know, passed through this House a week ago Tuesday.

I regret her American-style rider that the Liberals tried to add to the budget the next day, on the Wednesday, this congressional-type tactic, this Homer kind of tactic. It is kind of like arguing that the securities commission headquarters is the most important thing. It is what I have grown to expect from the hon. member, this kind of lack of vision for our country and looking at small items rather than looking at the big picture.

But in the budget there is a big picture; that is, a balanced budget by a Conservative government in Canada. And we will maintain a balanced budget.

The member for Notre-Dame-de-Grâce—Lachine may not be interested in a balanced budget. She may want to have deficits. She probably wants to go back to the good old days of March madness where the Liberals just loved that they had surpluses and they blew the money every March all over. They did not give it back to taxpayers. No. They spent it on their pet projects all over the country, many without parliamentary approval.

I know the member is chattering on because she is very concerned about her idea. Maybe she wants to put the headquarters of the common securities regulator in Montreal. Maybe she wants to put it somewhere else. But she does not speak to the principle; that is, the national interest of Canada in global capital markets.

If she listens, maybe she will want to consult a former finance minister, the member for Wascana, who said:

I don't believe that the passport system is an adequate response. It still leaves us with a system that is largely fragmented and certainly less sophisticated than that in virtually every other country in the world.

That was the view of the member for Wascana, the former minister of finance in the Liberal government, and obviously a view not shared in respect to where the headquarters should be by the member for Notre-Dame-de-Grâce—Lachine.

[Business of Supply, March 11th, 2008]

Mr. Speaker, may I ask the hon. member how it serves the people of the province of Quebec when 80% to 85% of the power of the regulation of securities in Canada is through the Ontario Securities Commission which is a creature of the legislative assembly of the province of Ontario?

How does that serve the people of Quebec, to have the legislative assembly of the province of Ontario determining the rules and regulations of securities regulations in Canada? If this is something desirable for the people of Quebec, that is news to me. But that is in effect what the hon. member is arguing.

It is also in effect what the minister of finance, my colleague in Quebec, is arguing as well, that Quebec does not want to be subservient to the legislative assembly of the province of Ontario because, de facto, that is the reality in Canada today.

I fail to understand how at the same time the hon. member and his party can advocate for a common carbon exchange, a national carbon exchange in Quebec, and at the same time they argue against a national securities regulator in Canada. This is inconsistent to say the least.

At one time they say, on the carbon exchange, “Oh, we want to govern all of Canada in Montreal”, and at the same time they say, “Oh no, but we don't want any part of a common securities regulator for our country”. This is incomprehensible.

[Business of Supply, March 11th, 2008]

Mr. Speaker, I can assure the member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup that my career aspirations are here as Minister of Finance of Canada.

I am pleased to have this opportunity to comment on this important issue dealing with the best way forward in terms of securities regulation in Canada.

This motion brought forward by the Bloc does not meet the real challenge facing Canada today, which is a great challenge with respect to securities regulation in Canada. This issue needs to be addressed to protect our capital markets and to protect Canadian citizens. This issue is all the more urgent, given the turbulence that we have in capital markets globally today.

Our government believes that we must modernize our securities regulatory framework. This is a priority and an important component of strengthening our economic union in Canada.

That is why the government recently announced the creation of an expert panel to provide advice and make suggestions and recommendations concerning securities regulation in Canada.

This expert panel, chaired by the hon. Tom Hockin, will provide independent advice and recommendations to federal, provincial and territorial ministers on the best way forward to improve securities regulation in Canada. We look forward to a collaborative effort with the provinces and territories to build an even stronger Canadian economic union.

Our government has a good reason for taking action on this front. Canada has a strong financial services sector, one that spans the country from coast to coast to coast providing good, high-paying jobs for Canadians. There is no doubt that Canada has a great story to tell, one of economic success, visionary entrepreneurs, growing competitiveness and unlimited potential, and yet we have a capital markets regulatory system that is out of step with the western world.

We are the only industrialized country that does not have a common securities regulator. Our system of 13 regulators is cumbersome, fragmented and it lacks the proper tools of enforcement. To maximize our potential, the government's goal is to work in collaboration with the provinces and territories to develop a competitive advantage in global capital markets. That includes reforming Canada's securities regulatory system.

This goal flows from our long term economic plan for Canada called Advantage Canada which was published in October 2006. In that plan, we committed to focus on creating five key advantages for Canada. First is a tax advantage, which means reducing taxes for all Canadians and establishing the lowest tax rate on new business investment in the G-7. We have taken significant action on that front, most recently in budget 2008 with the tax free savings account.

Second is the creation of a fiscal advantage. This means eliminating Canada's total government net debt in less than a generation. We are well on our way to meeting that commitment.

Third is the creation of an infrastructure advantage, which means building modern, world-class infrastructure that promotes economic growth, a clean environment and international competitiveness. We are investing $33 billion over the next seven years, as well as $500 million in public transit, to ensure that Canada has a modern, high quality infrastructure to take us into the future.

Fourth is creating a knowledge advantage. We need to have the best educated, most skilled and most flexible workforce in the world. The government has invested significantly in knowledge, science and innovation.

Finally, Advantage Canada commits to creating an entrepreneurial advantage. This means reducing unnecessary regulation, red tape and increasing competition in the Canadian marketplace.

Specifically, we committed to securing a competitive advantage in global capital markets. In budget 2007, we followed through on that commitment with the capital markets plan. To put the plan in context, in 2004 all provinces and territories, with the exception of Ontario, agreed to a process to create a passport-style system to regulate securities.

Those initiatives narrowed regulatory differences, harmonized and streamlined securities laws, initiatives that are important to achieving a more efficient and effective regulatory system in Canada. Through their actions, the provinces and territories have demonstrated a clear commitment to improving our securities regulatory system.

Those actions, although commendable, do not go far enough or fast enough. With the passport system, Canada still has 13 securities regulators, 13 sets of laws, however harmonized, and 13 sets of fees. Moreover, the passport system lacks national coordination of enforcement activities making it difficult to maximize results in this critical part of the securities system.

Furthermore, the passport system does not address our need to improve policy making. It is still necessary to obtain agreement from 13 regulators to make changes to rules. This is just too cumbersome. In short, the passport system is not where Canada needs to be in today's global economy.

Where do we go from here? The vast majority of capital market participants and observers agree that we could no longer afford to sit back and watch our competitors pass us by. We have great advantages to offer here in Canada: an educated labour force, social benefits and a strong economy. Now is the time for a more efficient capital market system. The benefits of a common securities regulator are well known.

Furthermore, unlike what the Bloc Québécois across the floor would have us believe, the creation of a single securities regulator would allow all regions of Canada to have a say.

In fact, such a solution would make the regulation of our markets more responsive and accountable by creating a decision making body that would coordinate the views of all jurisdictions promptly and fairly.

I say again, as I have said before, we are not talking about a federal securities regulator. We are talking about a common securities regulator for Canada.

Recent developments in global capital markets underscore the need for a mechanism that will provide Canada with the policy and regulatory capacity we need to react quickly and effectively to address new and emerging issues. Let us look at the advantages of a common securities regulator. There are numerous advantages for Canada.

First, a common securities regulator would improve market efficiency and ensure the best use of money and resources, and make the system more efficient to operate. This, in turn, would lower costs and make it more affordable for all who benefit from it, both those with capital to invest and those with businesses to build.

Another advantage is that a common securities regulator would improve enforcement and better protect investors with a common set of sanctions and remedies, as well as better enforcement across the country. Indeed, by serving as a single point of contact for law enforcement agencies, both at home and abroad, Canada would be better placed to share information and detect market fraud.

Moreover, we would be able to set clear enforcement priorities across the country while making sure investigation and enforcement resources are deployed efficiently. As I mentioned earlier, a common securities regulator would give all regions of Canada a real say.

In fact, the creation of a common regulator would better serve our common interest by establishing a structure that would allow all regions of the country to participate in market regulation in a more meaningful and constructive way.

Having such a structure would ensure meaningful participation by all provinces and territories, with a strong presence in all regions and local expertise that would respond to regional needs, for example, the oil and gas industry in the west or the futures market in Montreal.

Canada is a respected voice on the international stage. A common securities regulator would also allow Canada to speak with one voice. Speaking with one voice can only serve to enhance the protection and promotion of the interests of Canadian market investors and businesses. I have been pursuing the concept of free trade and securities with my counterparts in the United States, the G-7 and international partners that share high standards of investor protection.

Under a mutual recognition of each other's regimes, our investors would have better access to global opportunities and businesses listed on our exchanges would have better access to global investors. It is a win-win proposition.

The bottom line is simplicity and effectiveness. A common securities regulator represents an opportunity to move toward simpler, more principles-based regulation. Let us face it, Canada needs a regulatory framework that is world class and this is the way to do it.

We need a framework adapted to the make-up of our capital markets, with both Canada-based global corporations and a large number of small and medium-sized businesses. Too many complex rules get in the way of both efficient financing and effective investor protection.

Exerting further leadership and developing a single code for Canada with the right balance of rules and principles would help establish a clear competitive advantage for Canada in global markets. Clearly, this is an advantage to a common securities regulator.

Our securities regulators are engaged constructively, but our capacity to implement a strategy and secure an agreement for all of Canada would be greatly enhanced with one regulator clearly accountable to negotiate on Canada's behalf.

I have made the case to all ministers responsible in the provinces and territories that we must look beyond the passport system. To that end, as I mentioned at the outset, that is why we have established an expert panel to provide advice on how to best move forward on developing a model common securities act to create a Canadian advantage in global capital markets.

In closing, let me be clear. Establishing a common securities regulator, breaking down interprovincial trade barriers, and strengthening Canada's economic union are all priorities of our government.