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July 2007 Archives

July 14, 2007

A Midterm Report Card (Part 2 of 2)

A Midterm Report Card (Part 2 of 2) Grading the Conservative Government - Taxpayers' Top 20 Policy Priorities
Part II

Shortly after the 2005/06 winter election campaign, the Canadian Taxpayers Federation (CTF) issued its Top 20 Policy Priorities for the new Conservative government. The agenda items united longstanding CTF policy prescriptions with Conservative Party campaign promises. Earlier this week the first 10 policies were ranked. The part one ranking is available by Clicking here.

11. Abolish Corporate Welfare
During the 2004 federal election, then-Opposition leader Stephen Harper criticized the general practice of corporate welfare saying it did not serve taxpayers. In a speech to the Toronto Board of Trade, Mr. Harper vowed to cut business subsidies and use the savings to lower business taxes. "I won't lower one without lowering the other. This is what I mean by low-tax solutions rather than high-spending solutions," he said.

Once in government, however, the Conservatives breathed new life into Technology Partnerships Canada (TPC) -- Ottawa's flagship corporate welfare program -- and continued to provide handouts to businesses, particularly in Quebec and Ontario. Recently, Industry Minister Maxime Bernier replaced TPC with the Strategic Aerospace & Defence Initiative (SADI). While this new program has a reduced budget (40 per cent less than TPC), and comes with stricter repayment and accountability conditions, it is still corporate welfare, which the CTF has continuously pointed out is failed 19th century industrial policy and a colossal waste of taxpayers' money.

Grade: D

12. Gas Tax Reform
Again in Opposition, Mr. Harper had plenty to say about high and unfair gas taxes. In August, 2005, he blasted the Liberal government for refusing to reduce gas taxes as prices soared. "There's no reason for the federal government to profiteer when consumers are hurting," he said, urging the former government to give motorists a break. Mr. Harper went further, suggesting the government "could knock the GST off of the excise tax. They could knock the GST off of gas above a certain price level."

In government only six month later, the Conservatives went into full retreat from pledges to cut gas taxes. The Prime Minister now says that high gas prices are here to stay and that paying them is something motorists will just have to "get used to."

Motorists have faired better on the Conservative commitment to spend gas tax revenues on roads and highway infrastructure. The government has dedicated 36 per cent of fuel tax revenue on roads bridges and highways, up from 7 per cent under the Liberals. This is a positive step and one the CTF welcomes.

Grade: C

13. Voting Reform - Establish a Citizens' Assembly on Voting Reform
This is not a Conservative government promise and there is no movement on the file. However, the electoral system chosen in the Conservative government's Senate reform bill is province-wide single transferable vote, which is a form of proportional representation.

Grade: C

14. End Party Subsidies
Repeal the federal government subsidy that pays political parties $1.75 per vote received in the last general election. Bring charitable tax credits for political parties in line with what is offered for other charitable organizations

On April 4, Elections Canada -- the agency responsible for overseeing federal elections -- released the 2007 first quarter subsidy payments made to Canadian political parties. Every political party that obtains 2 per cent of the national vote or at least 5 per cent of the vote in each riding it ran a candidate gets $1.75 per vote, each year. This amount is linked to inflation so the amount jumped to $1.8725 per vote for the most recent payment. It will be $2.00 this fiscal year, $2.14 in fiscal 2008 and rise again to $2.29 in 2009.

Meanwhile the political parties continue their independent fundraising activities. During the first three months of 2007, the governing Conservatives collected $5.2-million from its supporters. Do the Tories -- and opposition parties -- really need to be digging into the pockets of taxpayers?

Grade: F

15. Reform Foreign Aid
Whereas the Chr├ętien Liberals were prepared to engage in quiet diplomacy when dealing with China's abysmal human rights record, Prime Minister Harper has taken a different approach. "I think Canadians want us to promote our trade relations worldwide. We do that, but I don't think Canadians want us to sell out important Canadian values, our belief in democracy, freedom, human rights," he said last year. As such, the federal government has committed $1-billion to Afghanistan over 10 years.

Yet, according to the Canadian Coalition for Democracies, the government has not always directed Canada's foreign aid budget to promote democracy, the rule of law, press freedom, and responsible government. Indeed, China receives $54-million a year from Canadian taxpayers in aid. Other repressive governments also collect foreign aid dollars from Ottawa. Canada's total foreign aid budget is $4.1-billion this year.

Grade: C

16. Cut Employment Insurance Premiums
Ottawa's employment insurance program has amassed a $51-billion surplus thanks to ongoing over-taxation of workers and employers. Auditor-General Shelia Fraser noted in her 2004 annual report the federal government "has not observed the intent of the Employment Insurance Act." The auditor-general also criticized the fact that the EI surplus is automatically transferred to the government's general revenue because employee and employer premiums are supposed to cover benefits for the unemployed, not pay for other programs.

Conservative opposition MPs called the over-taxation "highway robbery" and a "raid" on the wallets of working Canadians. Their hypocrisy knows no bounds: the governing Conservatives are using the fund just like the Liberals, to pad the federal budget.

The government reduced the EI tax rate on January 1 for both employees and employers but it also raised the income threshold the tax is applied to. (It was the first increase in a decade.) In other words, the Conservatives gave tax relief with one hand and took most of it back with the other. The seesaw tax changes means the tax bite is only 1.3 per cent lower from 2006 levels.

Grade: D

17. Institute Recall and Referenda Initiatives
Not a Conservative government campaign priority.

Grade: F

18. Lower Taxes
Some progress in the 2006 Budget with the one-point GST cut and implementation of a new employment tax credit. The government also enacted an assortment of targeted tax relief measures that benefit some, but not all taxpayers. Disappointingly, the Conservatives also raised the bottom personal income tax rate by half a percentage point.

On March 19, 2007, Minister Flaherty stated during his second budget speech the taxes Canadians pay is excessive. "I hear it at the hockey arena, I hear it at the coffee shop, I hear it from people on the street, taxes in Canada are way too high," Mr. Flaherty told the House of Commons. Yet tax rates will not be reduced by the Conservative government.

The 2007 Budget failed to deliver the relief Mr. Flaherty had talked about, specifically tax relief for all Canadians. Instead, boutique tax relief was aimed primarily at senior couples, low-income earners, and families with kids. Missing was broad-based income tax relief and the next GST reduction will not happen until January 2011. Moreover, Canada's tax code is more complex and cumbersome thanks to the various targeted tax measures.

Grade: C

19. Control Spending
The Conservatives are quickly becoming "the Party of Big Spenders." The government's spending restraint melted away as the federal surplus ballooned. Last year, for example, Mr. Flaherty missed his original 2006 budget target of a 5.3 per cent spending increase. Instead it was 7.9 per cent, which is 50 per cent more! Had the Conservative government not embarked on its end of year spending, it is estimated the $9.2-billion surplus would have exceeded $14-billion. As excess money poured into Ottawa, the surplus was "spent down" instead of returned to taxpayers.

Federal government expenditures are rising dramatically. In the 2006 fiscal year -- the first year of Mr. Flaherty's watch -- spending ballooned by $13.8-billion, rising from $175.2-billion to $189.0-billion. This is the second biggest jump since the budget was balanced a decade ago. In other words, several Liberal budgets were more prudent than Mr. Flaherty's work. The outlook is not better this fiscal year with spending set to jump another $10.6-billion, levelling off at $199.6-billion.

The government's two-year binge will total $24.4-billion. That is a 14 per cent increase in the size of government!

Grade: D

20. Accountability and Transparency
The Harper government's biggest legislative accomplishment was enacting the Federal Accountability Act. The anti-corruption bill was signed into law in December 2006. The rules surrounding political party donations, lobbying, appointments, government contracts and advertising are now subject to clear rules and greater transparency. It represents a step forward although some elements are missing.

After the last election, the CTF detailed a "60 Point Accountability Report Card." It combined the 54 pledges from the Conservative Party's platform on accountability with 6 points from Judge John Gomery's recommendations stemming from the sponsorship scandal. Of the 60 points, the government included two thirds of them in its accountability law. The biggest disappointment was stripping the bill of access to information reforms. Access to information -- also called freedom of information -- is the taxpayers' best defence against abuse of tax dollars and secretive government. Other measures were truncated, for example the promise of a procurement officer is at the discretion of cabinet.

Overall the Federal Accountability Act is a step forward. It enforces new transparency laws, meets much of what the Conservatives campaigned on, and provides an accountability framework on which to build and improve.

Grade: B-

The CTF midterm is a snapshot evaluation and will be updated to reflect the Conservative government's improvements or regression. Improved grades might be achieved by limiting the federal spending power in areas of provincial jurisdiction, reducing corporate welfare or cutting gas and EI taxes. On the other hand, failure to reduce the national debt, cut taxes or enact reforms to make reserves more accountable to taxpayers and native band members will reduce the ranking.

Prime Minister Harper has made some progress, but he has also fallen short of his own stated objectives -- particularly on tax and spending policies. The Liberals are not ready for a return to government, but if the Conservatives opt to be "Liberal lite" voters will not be to blame for choosing the real thing. The CTF hopes Mr. Harper will instead return to Parliament in September with an invigorated taxpayer-friendly agenda.

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

July 11, 2007

A Midterm Report Card: Grading the Conservative Government - Part I

Taxpayers' Top 20 Policy Priorities
Part I

Shortly after the 2005/06 winter election campaign, the Canadian Taxpayers Federation (CTF) issued its Top 20 Policy Priorities for the new Conservative government. The agenda items culled longstanding CTF policy prescriptions with taxpayer-friendly promises made by the Conservative Party. Together, they represent a bold wish list to strengthen the Canadian economy, ensure tax dollars are spent more wisely, restore government accountability, and give Canadians a louder voice in Ottawa.

Taxpayers recognize Stephen Harper did not win a majority of seats in the House of Commons. Nonetheless, that does not mean the Conservative Party should abandon its agenda or reject good ideas not included in its election manifesto, such as reducing personal income taxes. As Opposition leader, Mr. Harper said he was a friend to taxpayers. But opposition parties do not write budgets or pass legislation. In office, Canadians expect Prime Minister Harper and his caucus to deliver much-needed reform to the federal government. So how are the Conservatives progressing so far? Here is the CTF evaluation of its first 10 policies priorities. (The next 10 will be released later this week.)

1. Limit Cabinet Size and Reform MP Benefits
Prime Minister Harper was applauded for limiting the size of his inaugural cabinet in February 2006 to 26 members. The Conservative's streamlined executive was down significantly from 37 under former Prime Minister Paul Martin and taxpayers were told the smaller cabinet would save $48-million over two years. However, on January 4, 2007, six secretaries of state were added to various ministries. Even though these junior ministers do not attend cabinet meetings, each is entitled to political staff and an office budget. Despite this setback, Mr. Harper has maintained a smaller cabinet and not overloaded the executive.

There has been no reform of parliamentary pay and pension benefits.

Grade: B-

2. Reform Appointment Process of Supreme Court Judges
Implement a multi-partisan Supreme Court nomination process and secure multi-party support when naming the heads of Crown corporations, agencies and other top government jobs

On February 27, 2006, the door of judicial accountability in Canada opened -- but just a crack. For the first time in history, a nominee for the country's Supreme Court had to face cameras and questions from an all-party Parliamentary committee. However, MPs were told the nominee, Justice Marshall Rothstein, could not be quizzed on any matter on which he might potentially render judgment. This ruled out questions of substance. The Prime Minister should allow greater latitude, and allow MPs to vote on the choice of nominee -- as members of his caucus requested.

Creating a new public appointments commission to provide more transparency in federal appointments was sidetracked after opposition MPs rejected Gwyn Morgan, the government's nominee. The former EnCana Corp. executive was not rebuffed because of his qualifications, but due to partisan mudslinging. The PM responded by shelving the commission, vowing to reintroduce it should he win a majority government.

The Conservative government made "substantially fewer patronage appointments" during their first year in office compared to the previous 12 months under Liberal rule, the Ottawa Citizen reported. The newspaper found between Feb. 2006 and Feb. 2007, the Conservatives appointed 410 people whereas the Liberals made 686 appointments in the same period the year before.

Grade: B

3. Enact a Legislated Debt Retirement Schedule
The Conservative government reduced the federal debt by $13.2-billion in the 2005/06 fiscal year. It anticipates an additional debt reduction payment of $9.2-billion in fiscal 2006. So far so good. Looking ahead, the 2007 Budget establishes an annual debt repayment of $3-billion in 2007 and 2008. Yet this is part of the budget framework and not set in legislation to guarantee debt repayment in future years.

Of particular interest to taxpayers is the budget's tax-back guarantee, which promises to reduce taxes using interest savings that occur naturally when government debt is reduced. Ottawa's debt stands at $472.3-billion and annual debt interest payments are more than $34.1-billion or $93-million each day. Should Ottawa make debt reduction a priority, the tax-back guarantee will be a boon to taxpayers.

Grade: C

4. Reform Fiscal Federalism
Ottawa is involved in too many areas of provincial responsibilities and the result is jurisdictional overlap that does not permit taxpayers to hold politicians accountable for how tax dollars are spent on health care and education. Who should voters hold responsible when medical patients sit in waiting lines rather than receive immediate care -- the provincial or federal government?

The Conservative government has opted to administer Canada's spaghetti federalism rather than untangle it. The 2007 Budget announced Ottawa will spend an additional $39-billion over the next seven years -- some of this amount will go to areas of federal responsibility and some to provincial areas. The payments to the provinces will be made through an enriched equalization and per capita education transfers. Ottawa will keep taxes high and continue to interfere in provincial affairs with the federal spending power.

Grade: F

5. Reform Federal Child Care
The Conservatives cancelled the daycare scheme that required parents to put their children in an institutional program. That program, developed by the Liberal government, provided no help to parents who raise their kids at home. It was replaced by a universal $1,200 child care allowance to permit parents -- not bureaucrats -- to choose what daycare option is best for their family.

Yet, the 2007 Budget revealed Ottawa will send $250-million per year to provinces and territories for government daycare spaces. In other words, the Conservatives revived the Liberal daycare program they had just cancelled! No wonder program spending has exploded under the Conservative government. Ottawa is funding two priorities -- the Conservative child care plan and the old Liberal daycare plan.

Grade: B-

6. Medicare Choice
Respect the Supreme Court of Canada's Chaoulli v. Quebec decision. Allow provinces to experiment with medicare delivery reform, including the use of private health care

Although the Conservatives are rhetorically committed to single-tier delivery, they earn marks for not ordering provinces, like Quebec and British Columbia, to close private health care facilities. (In contrast, the Liberal government routinely turned a blind eye to private medicine in Quebec but pounced on any other province that mixed private and public medicine.) This is an important development for reforming Canada's ailing government-run health system as well as treating provinces equally.

Grade: B

7. Aboriginal Policy Reform
One casualty of the government's Federal Accountability Act was the provision to permit the auditor-general to oversee tax dollars after they are transferred to native bands. Taxpayers currently provide $8-billion a year to reserves across Canada, yet there is no way to scrutinize how that money is spent. It was, however, opposition members who voted to remove this important reform from the bill.

Where the Conservative government can act independently it has, by scuttling the Liberal's Kelowna Accord -- the flawed deal to hand native groups an additional $5.1-billion over five years. It committed Ottawa to pour more money into a failed system, fund a growing bureaucracy and do little to improve the lives of ordinary natives.

The federal government's announcement to guarantee mortgages for aboriginals living on reserves is another positive step. Under the Indian Act, financial institutions cannot collect on default loans on reserves, therefore it is difficult for natives to join the Canadian mainstream by becoming homeowners.

Federal Indian Affairs Minister Jim Prentice has signaled he will introduce matrimonial property rights on Canada's native reserves. And a bill in the Senate to expand human rights laws to native reserves has also won support from Minister Prentice.

Grade: B

8. The Senate - Elect or Abolish the Upper Chamber
Prime Minister Harper announced in April he will appoint Bert Brown to the upper chamber of Parliament. Mr. Brown was re-elected as an Alberta "senate nominee" in province-wide voting in November, 2004. He was the first choice of a majority of voters in that province.

Mr. Harper has made Senate reform a priority. Government legislation before the Senate will set eight-year term limits on new senators. A second bill before the House of Commons will allow for the indirect election of senators. Rather than pursue a constitutional amendment to permit direct elections, the Prime Minister will allow provinces to elect candidates for the Upper Chamber. The Conservative government will accept these submissions and appoint the candidates to the Senate thereby ensuring the will of voters is respected -- as was done with Senator-elect Brown. It is hoped this process will overtime become convention and be respected by future governments.

Grade: A

9. Scrap Kyoto
The good news is Mr. Harper has said he will not sacrifice jobs or endanger the Canadian economy in a vain attempt to fulfill the Kyoto Protocol. As such, the Liberal's $10-billion Kyoto scheme will not be implemented. The international accord committed Canada to cutting emissions of greenhouse gases by 6 per cent from 1990 levels by 2012. Yet emissions are 27 per cent above 1990 levels and 35 per cent above the Kyoto target.

In April, Environment Minister John Baird unveiled a plan to curb emissions by heavy emitters. The plan will require most industries to become 18 per cent more energy efficient by 2010, and cut greenhouse gases by 20 per cent by 2020. It will cost the Canadian economy between $7-billion and $8-billion a year. Consumers will pay more for some energy intensive products. But rather than adopt government command-and-control solutions, Mr. Baird is leaving it to businesses to find market driven solutions. Industry leaders grumble that the plan will be costly but is achievable.

Grade: C+

10. End Long-Gun Registry
The Conservatives have tabled a bill to repeal the long-gun registry, although its passage in the House of Commons is unlikely.

Although the government has not cut off the registry's funding it has been reduced. Public Safety Minister Stockwell Day last year announced a package of fee waivers and amnesties to take the teeth out of the registry and free rifle and shotgun owners from complying with the rules. This amnesty was recently extended for a second year.

Grade: B

The next installment will grade the Conservative government on 10 additional agenda items, measuring progress -- or lack thereof -- to abolish corporate welfare, reform foreign aid, cut taxes and control spending.

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

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