FINA Committee Report
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SUPPLEMENTARY OPINION OF THE CONSERVATIVE PARTY OF CANADA
For the most part, the preceding pages of this report accurately reflect the culmination of an exhaustive study conducted by the House of Commons Standing Committee on Finance. Traveling across the country, the Committee heard from hundreds of individual Canadians organizations and gave careful consideration to each submission.
Although the Conservative Party is largely supportive of the report, we are unable to endorse certain recommendations we believe to be unfeasible, harmful to the economy in the long-term, and not in keeping with this Government’s intent of building a stronger Canada. Consequently, we consider it important to outline our concerns in a supplementary opinion. Fundamentally, we are of the opinion that to ensure our economic fundamentals remain strong, the Government should continue to pursue a fiscally prudent course of action that is cautious with public finances and addresses Canada’s debt burden, while fostering productivity and innovation in the private sector.
Uncertainty in the US economy along with large structural alterations to the global marketplace will present challenges for Canada, among them: the recent, rapid increase of the Canadian dollar against the US dollar; the increasing competition from emerging economies such as China, Brazil and India; and the pressing need to increase productivity and become more competitive – especially in the manufacturing, agriculture, tourism and forestry sectors.
While we recognize these challenges are significant, we also acknowledge the Government has acted proactively with aggressive action to address such challenges. For instance, the $60 billion in broad-based tax relief announced in October 2007’s Fall Economic Update will stimulate and bolster the economy. Combined with previous measures, the Government has provided nearly $190 billion in tax relief to Canadian businesses and families over this and the next 5 years. We are particularly pleased the Government’s plan to reduce corporate taxes to 15% by 2012. Many witnesses echoed that sentiment:
“I think the federal government has made tremendous strides on the corporate income tax side, to its credit. We're heading to a very competitive structure. A couple of years ago it got rid of the capital tax, which was really the silliest tax … As we head towards a federal level of 15% tax, that will be one of the lowest in the world.”
Don Drummond, TD Bank Financial Group Chief Economist
November 20, 2007
We encourage the Government to continue with such action in implementing its long-term economic plan – Advantage Canada. We applaud the achievements to date in building infrastructure, knowledge, entrepreneurial, fiscal, and tax advantages for Canada and we call on the Government to remain steadfast in working towards these goals.
What We agreed with
In the face of recent economic volatility, Canada’s economic fundamentals remain strong: we are experiencing the second-longest period of economic expansion in Canadian history; business investment is expanding for the 12th consecutive year; our unemployment rate is the lowest in 33 years – with employment increasing by over 600,000 since the Government took office; our public pension plans are on sound footing; we are the sole G7 member with an ongoing budget surpluses and a falling debt burden; and we are on the best fiscal footing of the major western industrialized countries. We believe these strong economic fundamentals, along with the aforementioned measures taken by the Government to date, position Canada well to manage future economic turbulence.
We believe a number of the report’s recommendations complement the Government’s agenda, and whose pursuit will help to ensure Canada remains in a position of strength. In particular, we wish to highlight the following: continued tax reductions; greater emphasis on removing internal barriers to trade within Canada – including the establishment of a common securities regulator; support for manufacturing and forestry sector workers; and encouraging provinces and territories to harmonize their sales taxes with the GST.
We believe that high taxes are not good for families, business or for Canada’s long-term interest. As witness after witness noted, reducing taxes leaves more money in individuals’ pockets to stimulate the economy and in businesses hands to make investments in productivity-improving equipment to better enable Canadian companies to focus on competitiveness:
“There is much support among economists that those tax cuts with the greatest potential for our country to stimulate our economy and increase productivity and competitiveness are cuts to corporate taxes and personal income taxes. While the 2007 budget and the proposed economic statement in October of this year go some way towards a more competitive system, we are fiscally well positioned as a country even more to do things to make our country a more attractive place to do business.”
Valerie Payn, Halifax Chamber of Commerce President
December 6, 2007
We strongly concur with the recommendations for the Government to work towards the removal of internal barriers to trade within Canada, and in particular continue its push for the establishment of a common securities regulator in Canada, which many witnesses strongly advocated for:
“I'm a director of the Canadian Coalition for Good Governance, which comprises about $1 trillion of Canadian institutional money. I haven't talked, of course, to all the members, but there isn't anybody on our board who wouldn't want to see one coordinator for (securities regulations) … the passport system, whereby the things that are decided by two people in the Yukon are going to be binding on all of Canada, I just can't see as a solution.”
Stephen Jarislowsky, Jarislowsky Fraser Limited Chairman
November 22, 2007
We also support recommendations calling for assistance to Canada’s manufacturing and forestry sector workers. As a result, we applaud the Government for already having acted in this respect in announcing the $1 billion Community Development Trust to assist one-industry towns facing major economic downturns in January 2008.
We are encouraged by the committee’s support for the recommendation to institute a tax credit to assist producers in their efforts to maintain food safety in Canada by ensuring that our food supply remains E. coli free. In Budgets 2006 and 2007, this Government has made significant investments in our farmers and has developed programs that will provide meaningful and timely assistance to a sector that contributes so much to our communities.
We also repeatedly heard the critical importance of the Government to work with the provinces and territories to encourage them to harmonize their sales taxes with the GST, and believe such a recommendation worthy of support:
“(T)he single, most important tax measure the government could take to improve productivity in this country is to convince those provinces that have not done so already to harmonize their provincial sales taxes. No other measure would add more to the productive capacity of this country.”
Mark Yakabuski, Insurance Bureau of Canada President
December 27, 2007
What we did not agree with
While we are generally supportive of the report, we oppose recommendations that, in our estimation, are either excessively costly to implement or whose costs have not been accurately calculated. We are disappointed that the other parties did not deem fiscal management a priority when endorsing such costly recommendations and potentially sending Canada back into deficit.
We are also disappointed that none of the other parties recommended calling on the Government to continue debt repayment. We strongly approve of the Government’s aggressive debt reduction since taking office. The near $27 billion in debt reduction already made, combined with the $10 billion reduction this fiscal year, is bringing debt to its lowest level in 25 years and is helping to unburden future generations of a large national mortgage. We call on the Government to continue along this track. The opposition not only abandoned one of the fundamental tenets of fiscal responsibility by rejecting debt reduction, but also ignored the testimony of numerous witnesses who underlined its importance.:
“Canada's chartered accountants applauded the news that the national debt was reduced by $14.2 billion in the 2006-07 fiscal year and that an additional $10 billion has been committed for debt reduction this year. Despite significant reductions in recent years, the level of federal debt equates to approximately $14,000 for each Canadian.”
Kevin Dancey, Canadian Institute of Chartered Accountants President
November 28, 2007
Our committee members also cannot support recommendations calling on the Government to provide direct financial subsidies to firms in specific sectors. We believe the Government’s current approach of leaving more resources in the hands of businesses to invest in new technology to become more productive and competitive, represents a superior alternative. We also acknowledge the Government has already taken such measures in that respect. For instance, we have provided $8 billion in tax relief for manufacturing and forestry sectors over the period 2006-7 to 2012-13, including: an accelerated write off for new equipment, general corporate tax reductions and permanent faster write-offs for computers and buildings used in manufacturing. We believe the Government should build on these measures, with a continued focus on creating a more inviting businesses climate – a common refrain we heard from a range of witnesses:
“The best thing you can do for communities is to create a business climate where people want to invest in Canada … I want to be very clear, though, and this is something where I think there has been misunderstanding: we don't want subsidies. We don't want you to come in and save a mill that's uneconomic. What we want to do is make this a place where mills are economic.”
Avrim Lazar, Forest Products Association of Canada President
November 22, 2007
“I think it's important for the government to think very long and hard about how it might effectively and efficiently address those problems, because subsidies are not generally seen as a good long-term strategy. In addition, we have seen artificial support for industry—again, not a good long-term strategy.”
Paul Darby, Conference Board of Canada Chief Economist
November 22, 2007
conclusion
2008 will bring new and important challenges to consider as the Government prepares its third Budget. While difficult choices will have to be made, we are confident that the Government will demonstrate its strong leadership and fiscal responsibility in uncertain and changing times. We encourage the Government to continue work on fulfilling the Advantage Canada economic plan; work towards further broad-based, long-term tax reductions; further reduce debt; and continually review and control spending. Such action, we believe, will ensure Canada remains in a position of strength in 2008 and beyond amid the challenges and opportunities ahead.
Ted Menzies, Parliamentary Secretary to the Minister of Finance
Dean Del Mastro, M.P.
Rick Dykstra, M.P.
Mike Wallace, M.P.