Jim Flaherty

[Questions on the Order Paper, September 14th, 2009]

Mr. Speaker, the June 2009 second report to Canadians on Canada’s economic action plan provided an update to the fiscal forecast for 2008-09 and 2009-10. The report is available online at http://www.fin.gc.ca/pub/report-rapport/2009-2/index-eng.asp. Canadians can follow progress on the government’s website for the economic action plan at www.actionplan.gc.ca. As outlined on page 218 of that document, based on economic and fiscal developments since budget 2009, the deficit has been revised up by $2.9 billion for 2008–09 and $8.1 billion for 2009–10. This deterioration reflects, in part, the impact of automatic stabilizers, such as EI, which provide support to the economy by automatically raising spending and lowering tax collections as the economy slows. In addition, loans to the auto industry and the Canada health transfer top-up increased the deficit projection by $8.5 billion in 2009-10, so that the total projected deficit is $3.9 billion for 2008-09 and $50.2 billion for 2009-10.

The Fiscal Monitor, the most recent of which was released July 24, 2009, provides monthly highlights and details of the government’s fiscal performance. For the first two months of the fiscal year, there was a budgetary deficit of $7.5 billion.

[Questions on the Order Paper, September 14th, 2009]

Mr. Speaker, trusts are financial vehicles used by the Government of Canada to transfer funds to provinces and territories in order to meet urgent, short-term pressures in areas of shared national priority. The trust mechanism gives provincial and territorial governments the flexibility to withdraw funding in support of the identified objectives, according to their respective needs and priorities, over the lifespan of each trust.

In response to (i) and( ii), trusts established pursuant to Bill C-48, five trusts were established pursuant to Bill C-48, An act to authorize the Minister of Finance to make certain payments, which received Royal Assent in July 2005. These trusts were highlighted in the budget presented to the House of Commons on May 2, 2006:

$1 billion for the post-secondary education infrastructure trust, to support investments to promote innovation and accessibility, including investments in university and college infrastructure and equipment. The funding is notionally allocated over two years on an equal per capita basis among provinces and territories;

$900 million for the public transit capital trust, in support of capital investments in public transit infrastructure both as a means to reduce traffic congestion and to reduce carbon dioxide and other emissions. The funding is notionally allocated over three years on an equal per capita basis among provinces and territories;

$800 million for the affordable housing trust to help address short-term pressures with regard to the supply of affordable housing. The funding is notionally allocated over three years on an equal per capita basis among provinces and territories;

$300 million for the off-reserve aboriginal housing trust to help provinces address short-term housing needs for aboriginal Canadians living off-reserve. The funding is notionally allocated over three years among provinces based on the provincial share of the aboriginal population living off-reserve; and

$300 million for the northern housing trust to help meet short-term pressures with regard to the supply of affordable housing in the North. The funding is notionally allocated over three years among the three territories as follows: $50 million each for the Yukon, the Northwest Territories and Nunavut, plus an additional $150 million for urgent needs in Nunavut.

Payments to the trusts were made on September 27, 2006, after the Government was able to confirm that sufficient funds were available from surpluses in the two fiscal years 2005-06 and 2006-07.

In response to (iii), Projects receiving funding, allocation, and amounts involved, operating principles were established for each trust. Once the funds have been transferred to the trustee, the trustee, and subsequently the provinces and territories, are accountable for the distribution and use of those funds.

[Questions on the Order Paper, September 14th, 2009]

Mr. Speaker, in response to part (a), the lowest personal income tax rate remained at the legislated level of 16 per cent until following the budget tabled in the House of Commons on May 2, 2006.

Budget 2006 announced a permanent reduction in the lowest personal income tax rate from 16 per cent to 15.5 per cent effective July 1, 2006. Subsequently, this reduction was legislated in C-13: an act to implement certain provisions of the budget tabled in Parliament on May 2, 2006, Royal Assent given on June 22, 2006.

More information on budget 2006 is available at www.fin.gc.ca/budget06/bp/bptoc-eng.asp.

In response to part (b), as explained in part (a), only following the budget tabled in the House of Commons on May 2, 2006 was a reduction in the lowest personal income tax rate legislated. No revenue was generated by the measure. Indeed, as detailed in the budget 2006 document (see Table 3.6), reducing the lowest rate provided total tax relief of about $6.3 billion over the 2005-06 to 2007-08 period.

In response to part (c), the lowest personal income tax rate was reduced further to 15 per cent in the economic statement tabled in the House of Commons on October 30, 200, available at http://www.fin.gc.ca/budtoc/2007/ec07_-eng.asp.

The motivation for this reduction was clearly stated in that document (please see page 7), “Canada’s economic and fiscal fundamentals are rock solid, yet the world economy is experiencing turbulence and increased uncertainty. Given this global economic uncertainty, now is the time to act. Our strong fiscal position provides Canada with an opportunity that few other countries have—to make broad-based tax reductions that will strengthen our economy, stimulate investment and create more and better jobs”.

Subsequently, this reduction was legislated in C-28: an act to implement certain provisions of the budget tabled in Parliament on March 19, 2007 and to implement certain provisions of the economic statement tabled in Parliament on October 30, 2007, Royal Assent given on December 14, 2007.

A vast array of public-interest groups heralded this important reduction. For instance, the Canadian Taxpayers Federation cheered that “all taxpayers are benefitting today on the personal income tax side. This is certainly a very good announcement today, and it is an amount that is going to be felt and noticed by Canadian taxpayers." The Greater Charlottetown Area Chamber of Commerce also proclaimed, “Canadians are overtaxed and (the economic statement 2007) announcements take concrete measures to address the situation in an immediate and bold fashion. These measures are particularly welcome as global competitive pressures intensify and underscore the need for international tax competitiveness… the reduction in the lowest marginal personal income tax rate to 15 per cent will help stimulate work effort, saving and investment, all of which have a direct bearing on productivity, competitiveness and prosperity”.

[Questions on the Order Paper, September 14th, 2009]

Mr. Speaker, in response to (a), this application for duty remission on the two tankers imported by Algoma Tankers Limited is currently under review by the Department of Finance. Once the review is completed, the department will make its recommendation to the Minister of Finance for his consideration.

In response to (b), in any remission request, the applicant is asked to provide the department with evidence supporting its request, including, inter alia, the effect the payment of the duties would have on its operations. As part of the process, the department also consults with all relevant stakeholders to seek their views on the remission request. Each application is reviewed on its own merits to determine whether duty remission is in the overall economic interest of Canada. A number of factors are taken into consideration in this review, including, inter alia, the results of consultations with all relevant stakeholders. Once the review is completed, the department makes a recommendation to the Minister of Finance for his consideration.

In response to (c), as part of broad consultations undertaken by the Department of Finance on this remission request, views were received from the following stakeholders: Shipbuilding Association of Canada, Canadian Shipowners Association, Chamber of Marine Commerce, Algoma Central Corporation, Imperial Oil, the St. Lawrence Seaway Management Corporation and the Ontario Marine Transportation Forum. The department also consulted officials at Industry Canada and Transport Canada. The views of all stakeholders will be fully considered as the department prepares its recommendation to the Minister of Finance.

[Questions on the Order Paper, September 14th, 2009]

Mr. Speaker, in response to (a) and (b), in the 2009 Ontario budget, “Confronting the Challenge: Building Our Economic Future”, which is available online at http://www.fin.gov.on.ca/english/budget/ontariobudgets/2009/papers_all.pdf, the Government of Ontario announced its decision that, starting July 1, 2010, Ontario’s retail sales tax, RST, would be converted to a value-added tax structure and combined with the federal goods and services tax, GST, to create a federally administered single sales tax, subject to the approval of the Legislative Assembly of Ontario.

The Memorandum of Agreement, MOA, Concerning a Canada-Ontario Comprehensive Integrated Tax Co-ordination Agreement, signed by the governments of Canada and Ontario specifies that Ontario agrees to adopt the goods and services tax, GST, tax base for the Ontario portion of the harmonized sales tax. However, the MOA allows the province to designate a limited number of point-of-sale rebates for the provincial portion of the harmonized sales tax, not exceeding 5%, in aggregate, of the value of the GST base in the province. The MOA commits both governments to a comprehensive integrated tax coordination agreement, CITCA, that will elaborate on the provisions of the MOA, such as those relating to provincial tax policy flexibility, e.g., point-of-sale rebates.

In response to (c) and (d), under the MOA the federal portion of the harmonized sales tax in Ontario is 5% , and, therefore, equivalent to the current GST rate. As a result, it is not anticipated that the Government of Canada will see any change to the revenues it currently collects with the GST.

[Questions on the Order Paper, September 14th, 2009]

Mr. Speaker, in advance of the budget presented to the House of Commons on January 27, 2009, the earliest in modern history, the government launched unprecedented consultation across Canada. These steps were taken to ensure as many Canadians as possible from members of Parliament, business leaders, economists, industry associations non-profit organizations, public interest groups, community groups, provincial, territorial and municipal governments, and most important, everyday citizens were consulted, such as:

an online consultation open to all Canadians was launched at www.fin.gc.ca;

a series of roundtable discussions was held with business leaders, economists, academics, industry leaders, community and labour organizations in cities across Canada from Saint John to Victoria;

the Minister of Finance held town hall meetings in locations across Canada to hear from Canadians personally;

meetings with finance ministers and first ministers from all provinces and territories;

the establishment of a non-partisan Economic Advisory Council of prominent Canadians from across the political spectrum for advice on the budget and on the economy in the months ahead;

meetings with leading representatives of other political parties, including the official opposition Liberal Party of Canada, to ask for their ideas; and

the Minister of Finance wrote every member of Parliament asking them to consult with the people in their communities and report what they heard back to him.

As members are likely aware, the Minister of Finance released the aforementioned proposed Credit Business Practices Regulations this past May for comment. The relevant news release and backgrounders are available online at http://www.fin.gc.ca/n08/09-048-eng.asp. To summarize, the proposed regulations would:

mandate an effective minimum 21 day, interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full;

lower interest costs by mandating allocations of payments in favour of the consumer;

allow consumers to keep better track of their personal finances by requiring express consent for credit limit increases;

limit debt collection practices that financial institutions use in contacting a consumer to collect on a debt;

prohibit over-the-limit fees solely arising from holds placed by merchants;

provide clear information in credit contracts and application forms through a summary box that will set out key features, such as interest rates and fees;

assist consumers to manage their credit card obligations by providing information on the time it would take to fully repay the balance, if only the minimum payment is made every month; and

mandate advance disclosure of interest rate increases prior to their taking effect, even if this information had been included in the credit contract.

With respect to the reaction to the proposed regulations, following is a small sampling of analysis by public interest groups or commentators:

Bruce Cran, president of Consumers' Association of Canada, said “All of the things that [the finance minister has] done in there are actually just what we asked for …overall, I’ve got to congratulate [the finance minister]”.

Mel Fruitman, vice president of Consumers' Association of Canada, said, “[They] will solve some of the most egregious practices of the credit card companies … it's a big step in the right direction towards helping us control the amounts we pay on our credit cards. We think it will greatly improve the situation”. A Toronto Star editorial stated, “[the] finance minister … has introduced some welcome regulatory changes that will both introduce more transparency to the [credit card] system and save consumers some money”. A Burnaby Now editorial stated. “[the finance minister’s] new regulations … aim to give consumers more rights when it comes to the credit card industry. One of those regulations … involves forbidding card issuers from increasing credit limits without the written consent of cardholders. We hope this and the other proposed regulations - which include a 21-day interest-free grace period on all new transactions when consumers pay their balance in full by the due date - gain approval in Ottawa”.

Additionally, please note, the aforementioned regulations were published in the Canada Gazette on May 23, 2009 and interested persons were invited to make representations to the Financial Institutions Division of the Department of Finance concerning the proposed regulations within 21 days. The deadline for submissions was June 13, 2009.

Regarding the development of the important budget 2009 measures to help consumers of financial products and the subsequent detailed proposed credit business practices regulations, officials from the Department of Finance, the Department of Justice, and the Financial Consumer Agency of Canada were involved in the development and drafting of these measures.

[Ways and Means, September 14th, 2009]

Mr. Speaker, pursuant to Standing Order 83(1) I wish to table a notice of ways and means motion to implement certain provisions of the budget tabled in Parliament on January 27, 2009 and to implement other measures.

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

[Taxation, September 14th, 2009]

As I said, Mr. Speaker, the same proposal is there for all of the provinces that have not yet harmonized and that is their decision.

I say to the member opposite it is passing strange that she is arguing about tax reductions. Her party is the party that voted against reducing the GST, which we have reduced twice since we took office.

This is a party that reduces taxes. That is the party that raises taxes.

[Taxation, September 14th, 2009]

Mr. Speaker, the decision by any particular province of whether or not to harmonize is a decision for that provincial government to make. It is not a decision made by the federal government.

The proposal with respect to harmonization has been in the budgets repeatedly. Years ago, under the Liberal government, New Brunswick, Nova Scotia and other provinces chose to harmonize. Some additional provinces are now making that decision. It is a decision for them to make.

[The Economy, September 14th, 2009]

Mr. Speaker, we are going to continue to implement budget measures. Yes, the home renovation tax credit is a very important part of the economic action plan for Canada. It is very well known around the country and many people want to use it, so I hope the House will support this budget measure when it is presented to the House by way of a notice of ways and means.