Departmental Performance Report
 for the period ending March 31, 2000: 2
- Table of Contents - Previous - Next -

Section III: Departmental Performance

This section of the report consists of three subsections: Context, Performance Results Expected and Chart of Key Results Commitments, and Performance Accomplishments. The subsection on Performance Results Expected presents department-wide key outcomes, since they apply uniformly to all three departmental programs. Performance Accomplishments – being somewhat more specific – are reported on a program/business line basis.

1. Context

Strategic Priorities/Social and Economic Factors

The key strategic priority for the Department is to help the government make the decisions that will contribute the most to strong and sustainable economic growth. Such growth will allow both individuals to enjoy sustained increases in living standards and governments to have the resources required to provide high-quality public services.

The recent economic performance of the country has been very strong, reflecting the enormous progress made in recent years in rebuilding the foundations of our economy. Looking ahead, we need to address the following key factors to maintain that momentum. These notably include the need for governments to remain fiscally prudent as they reinvest in public programs and the need for the country to seize the opportunities presented by the global technological revolution.

2. Performance Results Expected and Chart of Key Results Commitments

The 1999–2000 Report on Plans and Priorities (RPP) presented results expected for the 1999–2000 fiscal year according to four key outcomes identified in its Chart of Key Results Commitments (see page 9 of the RPP). The department's Chart of Key Results Commitments was subsequently refined in the 2000–2001 Report on Plans and Priorities to ensure that the department conveyed in a more meaningful way what it intended to accomplish on behalf of Canadians. The four key outcomes were recast as six more sharply focused outcomes. Hence the 1999–2000 results expectations described in this performance report have been linked to one of these six restated Key Results Commitments, which can be found in the Chart below.

The Chart of Key Results Commitments is immediately followed by the Performance Accomplishments subsection. This subsection reports the Performance Measures and Accomplishments achieved against the Results Expectations of the Key Plans specified in the 1999–2000 Report on Plans and Priorities, on a program/business line basis.

Chart of Key Results Commitments*

* The six Key Results Commitments found in the banner headings of this chart encompass all areas of the department's work and thus transcend program/business line boundaries. The Results Expectations in the right-hand column are reported in the following Performance Accomplishments subsections according to the program/business line structure, and not in the order of their appearance in this chart. Page numbers are therefore included here to make it easier to find details of specific Results Expectations.

3. Performance Accomplishments

As noted on previous page, expected results are reported below on a program/business line basis. Each result expectation is linked to one of the six key results found in the Chart of Key Results Commitments: Sound Financial Management, Reduced Tax Burden, Secure Social Programs, A Secure Global Financial Future, A Competitive and Secure Financial Services Sector, or Contributions to "Getting Government Right."

A. Economic, Social and Financial Policies Program

A.1 Policies and Advice Business Line

Sound Financial Management
Balanced Budgets/Reducing the Debt Burden

Performance Measures

• Size of the annual surplus

• Amount of debt outstanding

• Ratio of debt to GDP

Accomplishments

• The government has exceeded its target of a balanced budget or better in 1999–2000. Final financial results for 1999–2000, which are available on our web site, indicate that the government recorded a $12.3 billion surplus that year.

• The surplus for 1999–2000 follows surpluses of $3.5 and $2.9 billion in 1997–1998 and 1998–1999. These results have allowed for a $18.7 billion reduction in the amount of net outstanding public debt since 1997–98.

• Combined with strong economic growth, these surpluses have also permitted a significant reduction in the ratio of net public debt to Gross Domestic Product (GDP) from a peak of 71.2 per cent in 1995–1996 to 58.9 per cent at the end of 1999–2000.

Financial results so far for 2000–2001 can be found on our web site.

Such sustained reduction in the debt burden is having immediate benefits for all Canadians in freeing more resources so that they can be invested in key programs and in allowing sustainable reductions to the tax burden. A lower debt burden will also give future generations more flexibility to deal with the impact of an aging population. This good fiscal record reflects Canada's strong economic performance, which is translating into more jobs and rising disposable incomes for Canadians.

Reduced Tax Burden
Personal Income Tax

Performance Measures

• A fair and efficient reduction in personal income taxes to achieve stated economic goals, based on sound analysis of statistical, financial and administrative data

Accomplishments

The federal government's priority in tax policy is to provide general relief in personal income taxation at a rate that is affordable and sustainable. Lower marginal tax rates will encourage savings, investment, work effort and entrepreneurship which, in turn, will boost economic growth, thus increasing personal incomes and living standards.

• Proposed by means of the 2000 budget a five-year tax reduction plan that includes the most important structural changes to the Canadian federal tax system in more than a decade.

As a result of the measures in this plan, personal income taxes will be reduced by an average of 15 per cent annually by 2004–2005.

• Proposed tax relief initiatives that were announced in the February 2000 budget, including:

• restoring full indexation of the personal income tax system to benefit every Canadian;
• reducing the middle income tax rate to 23 per cent from 26 per cent, starting with a two-point reduction to 24 per cent in July 2000, to cut taxes for nine million Canadians;
• eliminating the surtax for all Canadians over a five-year period to benefit two million Canadians;
• over five years, increasing the amount that Canadians can earn tax-free to at least $8,000, and the amounts at which the middle and top tax rates apply to at least $35,000 and $70,000 respectively, to benefit all taxpayers;
• enriching the Canada Child Tax Benefit program by $2.5 billion a year by 2004 to more than $9 billion annually (see additional details of this tax relief measure under Secure Social Programs – Canada Child Tax Benefit, on next page;
• increasing the partial exemption for scholarship, bursary and fellowship income to $3,000, so that needy students can keep more of the financial assistance they receive to allow them to pursue their education; and
• lowering capital gains taxes by reducing the amount included in income for tax purposes from three quarters to two thirds to encourage investment and risk-taking.

Visit our Budget 2000 Web site for further details on tax relief initiatives.

Reduced Tax Burden
Business Income Tax

Performance Measures

• Efficient, internationally competitive business income tax system, based on sound analysis of statistical, financial and administrative data

• A level domestic playing field promoted by reducing the differences in tax rates borne by different sectors of the economy

Accomplishments

The focus has been on reducing the tax burden on the most highly taxed sectors of the economy, addressing deficiencies in the existing tax structures, and ensuring that businesses bear their fair share of the tax burden while promoting growth in the economy. Initiatives proposed in the 2000 budget included:

• Providing tax relief to the most highly taxed sectors of the Canadian economy.

The statutory income tax rate will drop one percentage point from 28 to 27 per cent on January 1, 2001, and a further six percentage points to 21 per cent by 2004.

• Reducing the corporate tax rate on income between $200,000 and $300,000 earned by a small business from 28 to 21 per cent on January 1, 2001.

• Improving the capital cost allowance (CCA) regime to bring CCA rates more in line with the useful life of the assets in question, ensuring that the tax system does not send signals that distort the marketplace.

• Extending, on a phased-in basis, the manufacturing and processing tax credit to corporations that produce steam for sale to ensures that district energy activities are taxed equitably.

• Clarifying foreign tax credit rules applicable to income derived from oil and gas production-sharing agreements in foreign countries and decreasing the write-off rate for foreign exploration and development expenses.

• Tightening the business tax system to limit tax-planning opportunities by amending rules with respect to thin capitalization, weak currency borrowings and non-resident owned corporations.

Reduced Tax Burden
Income Tax Legislation

Performance Measures

• Legislation for income tax measures that accurately reflects the government's tax policy

Accomplishments

• Prepared the main legislative projects, that is, the bills to enact the income tax measures announced in the 1999 budget, as well as income tax treaties with Algeria, Bulgaria, Jordan, Kyryzstan, Lebanon, Luxembourg, Portugal and Uzbekistan, and the protocol to the income tax treaty with Japan.

(For more information, visit our Budget 1999 Web site.)

• Prepared for major policy initiatives during the period, including work on income tax rules related to:

• demutualizations of insurance corporations
• foreign bank branching
• foreign investment entities and non-resident trusts
• income-splitting tax
• taxpayer migration
• third-party civil penalty rules
• trusts

There was also a package of technical amendments.

• Negotiated or renegotiated tax treaties with the following countries during the period: Armenia, Barbados, Belgium, Colombia, the Czech Republic, Ecuador, Gabon, Greece, Ireland, Italy, Romania, Senegal, the Slovak Republic, Turkey, the United Kingdom, the United States and Venezuela.

The Tax Policy Branch continues to work with Canada Customs and Revenue Agency and taxpayers in monitoring the operation of the income tax system, and with the Department of Justice Canada in reviewing legislative changes to the Income Tax Act.

Reduced Tax Burden
Sales Taxes

Performance Measures

• Fair, efficient and impartial sales tax system, based on sound analysis of statistical, financial and administrative data

• Improved operation of the tax system in specific sectors

Accomplishments

• Improved the fairness and efficiency of the sales tax system by proposing a GST rebate, equal to 2.5 percentage points of tax, for newly constructed, substantially renovated or converted residential rental accommodation not eligible for an existing rebate.

• Improved the operation of the tax system in specific sectors, including easing compliance and streamlining administration by proposing changes to the treatment of export distribution centres to relieve the GST/HST cash-flow burden.

• Undertook major policy initiatives during the period, including work on GST/HST rules and regulations related to:

• non-residents, cross-border transactions and transportation
• promotional allowances and patronage dividends
• real property
• games of chance
• health and medical devices
• charities and public service bodies

The federal government continues to work with the business community, other levels of government and the OECD to approach the application of sales taxes to cross-border transactions in a way that is coherent internationally.

Secure Social Programs
Employment Insurance

Performance Measures

• Financially prudent operation of the Employment Insurance (EI) program in a manner that safeguards the interests of all stakeholders

Accomplishments

The Minister of Finance is jointly responsible with the Minister of Human Resources Development for recommending the annual EI premium rate, as set by the Employment Insurance Commission, to the Governor in Council and for fixing the annual Employment Benefits budget under Part II of the Employment Insurance Act.

• The Employment Insurance program continues to play a strong insurance role for the unemployed; facilitates re-integration into the labour market; promotes sustainable economic growth; and safeguards the interests of stakeholders while continuing to operate in a financially prudent manner.

• The Employment Insurance premium rate was set unanimously by the Employment Insurance Commission, and accepted by the government, at $2.40 for each $100 of insurable earnings – a reduction of 15 cents relative to the 1999 rate of $2.55. This was the sixth consecutive premium reduction since 1994, when the rate was $3.07, resulting in a total reduction of 67 cents. The savings for the average worker in 2000 will be $260 compared to what he or she would have paid under the 1994 rate. Employers and employees together will save about $5.2 billion over what they would have paid under the 1994 rate.

Secure Social Programs
Health Care, Post-secondary Education, Social Assistance and Services

Performance Measures

• Additional resources provided for health care, post-secondary education, social assistance and services

• Stable, predictable funding allocated fairly

Accomplishments

• Following the investment in the 1999 budget of $11.5 billion over five years through the Canada Health and Social Transfer (CHST), increased CHST payments by an additional $2.5 billion over four years in the 2000 budget to help the provinces and territories fund post-secondary education and health care. This recent increase is the fourth consecutive annual federal enhancement of the CHST.

• For the first time, placed the major transfers to provinces and territories on common five-year tracks, as set out in the 1999 budget and enacted in Bill C-71, thus providing provinces and territories with greatly improved predictability needed for long-term planning.

• Gave effect by means of Bill C-71 to the 1999 budget commitment to provide identical per capita CHST entitlements to all provinces by 2001–2002.

This measure ensures equal support for health, post-secondary education, social assistance and services to all Canadians, eliminating disparities that had existed since the introduction of the CHST in 1995. The $2.5 billion CHST supplement announced in the 2000 budget has been allocated to the provinces and territories on an equal per capita basis.

Note: Subsequent to the 1999–2000 fiscal year, Canada's first ministers concluded agreements on health care renewal and early childhood development. In support of these agreements, the federal government will extend CHST legislation by a further two years to provide a stable, predictable funding framework, and will increase funding by $23.4 billion over the next five years.

Secure Social Programs
Canada Pension Plan

Performance Measures

• Triennial review of the Canada Pension Plan (CPP) and assessment of those issues identified in the 1997 federal-provincial agreement which require further examination

• Annual report on the operation of the Canada Pension Plan

• Establishment of the CPP Investment Board

Accomplishments

• Assisted the Minister of Finance in the first formal review by federal and provincial/territorial finance ministers of the financial state of the CPP since reforms were implemented in 1998, a review that was concluded in December 1999.

Taking into consideration the results of the 17^th actuarial report on the CPP by the Chief Actuary, and a report from a panel of independent actuaries, ministers decided not to change the schedule of contribution rates. Both reports confirmed that the scheduled steady-state contribution rate of 9.9 per cent should be sufficient to sustain the CPP over future decades.

• Completed an assessment of a number of issues which had been identified in the 1997 federal-provincial agreement as requiring further examination.

Reports were prepared for consideration by federal and provincial ministers. Further work on some issues will be required in the context of the next triennial review.

• Prepared the CPP Annual Report for 1998–99, tabled in Parliament, jointly with Human Resources Development Canada.

• Put in place the Canada Pension Plan Investment Board (CPPIB) Regulations in April 1999. The Regulations:

• enable the Board to manage and invest in the best interests of CPP plan members the CPP funds that are transferred to it;
• subject the Board broadly to the same rules as other pension funds in Canada;
• require the Board to replicate substantially broad market indices in Canada when investing in domestic equities;
• provide for provincial access to a portion of the funds that the Board invests in bonds;
• establish requirements for the disclosure of information (for example, the contents of the Board's annual report).

• The Board started receiving CPP funds in 1999 for investment and had received about $1.9 billion during the year ending March 31, 2000.

The Board invested these assets in Canadian and foreign stock index funds. The Canadian fund mirrored the TSE300 stock exchange index. For the year ended March 31, 2000, the CPPIB reported a return on investment of 40.1 percent.

• Commenced work during 1999–2000 on amending the Regulations to implement the federal and provincial finance ministers' decision emanating from the CPP triennial review to relax the domestic equities restriction.

This would allow the CPPIB full discretion on its investment policy for up to 50 per cent of the funds that it allocates to domestic equities.

Secure Social Programs
Canada Child Tax Benefit

Performance Measures

• Integrated system of federal/provincial/territorial assistance to families with children

Accomplishments

• Announced a tax relief initiative in the February 2000 budget to increase funding to the Canada Child Tax Benefit program (CCTB) by $2.5 billion a year by 2004, bringing the total allocated to more than $9 billion annually.

This will maximize benefits for low-income families, providing benefits of up to $2,400 for a first child and $2,200 for a second child. This initiative will also reduce the financial disincentives to participating in the labour force.

A Secure Global Financial Future
International Trade Negotiations

Performance Measures

• The extent to which Canada advances its trade interests and objectives, which are established in close consultation with all stakeholders, and effectively implements consequent trade measures

Accomplishments

• Worked closely with the Department of Foreign Affairs and International Trade (DFAIT), Industry Canada, Agriculture and Agri-Food Canada (AAFC) and other interested departments and agencies in seeking the views of Canadians on the scope, content and process for the negotiations to establish the Free Trade Area of the Americas (FTAA) and for the anticipated launch, at the December 1999 World Trade Organization (WTO) Ministerial Meeting in Seattle, of a new round of multilateral trade negotiations.

The papers that served as the basis for the consultation can be found on our Web site.

The department played a key role in developing Canadian priorities and positions for multilateral trade negotiation initiatives (WTO), as well as regional (FTAA) and bilateral ones (Costa Rica). The department was particularly involved in the areas of import policy (tariffs and trade remedies) and trade in services (notably financial services), for which it bears lead responsibility, and worked closely with other departments and agencies and participated directly in the negotiations themselves.

• Continued to work closely with DFAIT, AAFC and other concerned departments and stakeholders (following the failure of the WTO Ministerial Meeting to undertake a multi-faceted round of global trade negotiations) in preparing for the initiation of previously mandated WTO negotiations on agricultural trade reform and further liberalization of international trade in services.

As well, the department participated in consultations and interdepartmental discussions with respect both to Canada's "post-Seattle" trade agenda – including the nature of possible confidence-building measures to facilitate the eventual initiation of a WTO round of global trade negotiations and to the management of an increasing number of sensitive international trade and investment disputes, including the WTO cases concerning the Canada-U.S. Auto Pact and Canadian and Brazilian aircraft subsidies.

With respect to specific trade actions

• Sought requests in May 1999 from the private sector for the accelerated elimination of tariffs under the NAFTA on products imported from Mexico, and under the Canada-Chile Free Trade Agreement (CCFTA) on products imported from Chile.

In January 2000, Canada and Chile implemented measures to accelerate the elimination of tariffs under the Canada-Chile Free Trade Agreement on over two hundred tariff lines.

• Implemented measures in July 1999 to remove tariffs on an additional 640 pharmaceutical products as a result of the third stage of the WTO negotiations to end the customs duties on pharmaceutical products and their components.

• Implemented in conjunction with DFAIT in August 1999 an Order in Council to levy a 100 per cent tariff on imports of certain meat and agricultural products from the European Union (EU) in response to the EU prohibition of imports of beef containing growth hormones. This action was taken after broad-based consultations to enforce Canada's rights under the WTO.

A Secure Global Financial Future
Climate Change/Emissions Trading

Performance Measures

• Progress in assessing options for a potential trading system for greenhouse gas emissions through the Tradeable Permits Working Group of the National Climate Change Process (NCCP)

• Progress in assessing the economic impacts of alternative approaches to emissions reductions in Canada through the Analysis and Modeling Group (AMG) of the NCCP

Accomplishments

• Contributed to the final reports of the Issue Tables at which the department participated as part of the NCCP. In particular, the department made a senior officer available to chair the Tradeable Permits Working Group (TPWG), whose mandate was to explore the potential contribution of a mandatory domestic emissions trading system towards a substantial reduction in greenhouse gas (GHG) emissions in Canada.

• Completed work in the TPWG in March 2000 and contributed to a summary report at the end of March 2000 and to a final and complete report over the following four months.

• Contributed to the fall 2000 report of the Analysis and Modeling Group (AMG) and to the work of the Group by carrying out simulation analyses using one of the economic models it maintains.

- Table of Contents - Previous - Next -