Ottawa - Tuesday, November 12, 2002 - by: Walter Robinson, Federal Director, Canadian Taxpayers Federation
Below you will find my summary remarks before the House of Commons Standing Committee on Finance last Friday morning, November 8, 2002, in Montreal.


Thank you Mr. Chairman, it is once again a pleasure to appear before you to forward the 2003 budget priorities on behalf of the 61,000-member Canadian Taxpayers Federation (CTF).




(In French): As usual, my presentation this morning will be in English only but I am willing to respond to your questions in the official language of your choice.




(In English): The CTF was founded in 1990 and has grown to become Canada's largest and most effective taxpayer advocacy organization. We are non-partisan, not-for-profit and do not receive financial assistance from any level of government. During their employ with the CTF, all directors and staff are forbidden to hold political memberships.


When I appeared before you last year - in this very city - security concerns were foremost in all of our minds. While the threat of terrorism is still real and economic uncertainty - especially south of the border - persists, the immediate fiscal threat to Canadians is evident in our unprecedented political environment.


The government - via the Throne Speech - has signaled its activist intentions to push forward with a minimum of sixteen major initiatives. Combine this zeal with the fact that the Prime Minister will never again have to face the electorate and the fact that Cabinet Ministers will be allowed to remain in their posts while pursuing the Liberal leadership ... then it becomes clear that the potential for billions of public dollars - taxpayer dollars - to be abused is very real.




Therefore I urge the members of this committee - whose work is appreciated and influential - to remind the Finance Minister that the government's fiscal strategy must be built on three pillars:


  • Legislated debt reduction;
  • Continuing tax relief buttressed by fair and competitive taxation; and · Controlling the growth of spending by constantly redefining the role of government to ensure program initiatives are warranted and that they achieve positive outcomes.


  While the CTF commends the government for embarking on a five-year tax reduction program, we urge government members to avoid the rhetoric birthed by Paul Martin and now nurtured by Minister Manley with respect to the magnitude of the "so-called" $100 billion tax cut plan.




To start, $20.7 billion of foregone tax revenue due to the elimination of bracket creep is not a tax cut; rather it is revenue that the federal government will not collect. As well, we must factor in the extra $28 billion Canadians will pay in CPP premiums through to 2004. Finally, increases in the Canada Child Tax Benefit to the tune of $6 billion should properly be classified as an expenditure as opposed to a tax relief measure.




Therefore, the government's five-year personal, business and EI tax reduction plan is closer to $47 billion. Is this welcome? Absolutely. Is this $100 billion? Absolutely not.


While the CTF differed with the government over the approach taken to achieve five surplus budgets - an approach, I should add, which continues to overtax workers and employers through excessive EI premiums to the tune of $42 billion and counting and an approach which savaged transfers to the provinces - nonetheless, in fairness, we acknowledge the modest fiscal progress made over the past decade.


However, much work remains to be done.


While the Canadian economy has fared better than most G-7 and OECD nations and Canada is poised to outpace all other industrial economies this year and next, destructive taxes still retard our competitive prospects.


  None more so than the Corporate Capital Tax: a complex, inefficient and unfair measure which drains $1.4 billion annually from Canadian enterprises. This tax - a rarity in the industrialized world - punishes capital intensive industries such as software development, the biotechnology sector, telecommunications firms, the health care sector and financial services.


These key sectors lie at the heart of our collective efforts to build a knowledge-based, innovative, 21st century economy ... yet poor tax policy punishes them. To truly foster sustained innovation, the Corporate Capital Tax should be eliminated.


Turning to individuals - according to OECD figures - Canadians still languish under the highest personal income tax burden in the OECD and third highest total tax burden in the G-7. And Statistics Canada reports that our single largest household expenditure - 22 cents out of each dollar - goes to personal income taxes ... which is more than we pay for shelter (19 cents), transportation (14 cents) or food (11 cents).
  Re-indexing the tax system to inflation - thereby eliminating bracket creep - represented the ideal marriage of fiscal and social policy. Raising the Basic Personal Exemption to $10,000 in the next two years and to $15,000 within the next five years would replicate this successful union. It's tax relief that would benefit all Canadians.
  Next, we reiterate our call for the government to end all of its corporate welfare and regional development schemes and instead focus on extending business tax reductions past 2004 to lower the corporate tax rate of 21% by a further 3% through to 2007.
  Likewise, we call on the federal government to institute a legislated annual schedule of debt reduction, equivalent to 5% of annual forecast total revenue collections. This approach would be a more effective and consistent way to retire the national debt as opposed to the "hey look what we found in the piggy bank at year end" approach which is presently employed.
  Other recommendations in this year's submission include:
  • the elimination EI and CPP employer overpayments - a $750 million annual ripoff;

  • adoption of the 1966 Carter Commission recommendation to make the family the base unit of taxation; and

  • implementation of the CTF's Municipal Roadway Trust model to plow $2.2 billion annually back into roadway improvements in Canadian cities.
  Of course other dominant national issues such as health care reform and Kyoto are also worthy of discussion and I look forward to sharing our thoughts on these critical files during our roundtable discussion this morning.
  Mr Chairman, a great man once said:
"We contend that for a nation to try and tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
  That great man was Sir Winston Churchill, circa 1903. I hope these words of wisdom from a century ago will collectively guide us today as we discuss fiscal policy choices for ourselves and for our children in what are still the opening days of this century.
  (In French) Thank you for your attention this morning and I look forward to your questions and our discussion.
  Walter Robinson
Federal Director
  CTF delivers "Back to Basics" Pre-budget message to Finance Committee
  Pre-Budget submission (424Kb) PDF A fourteen page document outlining recommendations with support data, charts and graphs.



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