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Departmental Performance Report
for the period ending March 31, 2001: 2
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B.2 Outcomes Achieved

Lower capital gains taxes, investments in the Canada Foundation for Innovation and Genome Canada, and funding for the Canada Research Chairs Program

Performance Measures

• More entrepreneurial activity and risk-taking

• Improved access to capital for small business

• Increased research capacity in universities and other research communities

Accomplishments in Detail

• Tax initiatives were introduced in the 2000 budget and the October 2000 Economic Statement and Budget Update specifically designed to promote entrepreneurship, economic growth and job creation in ways that create a Canadian advantage in the new economy. Two examples are:

• The tax on capital gains was reduced (the average top tax rate on capital gains is now 2 percentage points lower than the typical capital gains tax rate in the United States).

• Tax-free rollovers were made available to more businesses. The size of eligible investments was increased to $2 million and the size of businesses eligible for the rollover increased to $50 million.

Further details about the 2000 budget and the October 2000 Economic Statement and Budget Update, can be found on our Web site.

• Initiatives were introduced in the 2000 budget and the October 2000 Economic Statement and Budget Update to support innovation by making investments to promote research and development. For example, there was

• investment totalling $900 million over five years in the Canadian Research Chairs Program to promote research excellence in Canadian universities by attracting and retaining world-class researchers; and

• investment of $3.15 billion in the Canada Foundation for Innovation to enable Canadian universities, colleges, research hospitals, and other not-for-profit institutions to carry out world-class research and technology development.

Legislation to implement a new policy framework for the financial services sector received Royal Assent

Performance Measures

• Passage of Bill C-8 to implement a new policy framework for the financial services sector

• Legislation is widely supported by all stakeholders

• Financial Consumer Agency of Canada commences operations as soon as possible after Bill C-8 comes into force

Accomplishments in Detail

• The Department of Finance Canada prepared Bill C-8, An Act to establish the Financial Consumer Agency of Canada and to amend certain Acts in relation to financial institutions, for consideration by Parliament. Bill C-8 received Royal Assent on June 14, 2001. The legislation was widely supported by all stakeholders. Information about the legislation can be found on our Web site.

• The measures contained in the legislation will promote the efficiency and growth of the financial services sector; foster greater domestic competition; empower and protect consumers; and improve the regulatory framework.

• The Department also set up a transition team to prepare for the new Financial Consumer Agency of Canada. The Department expects that the new Agency will be ready to be launched shortly after the coming into force of the legislation, expected in the fall of 2001.

New anti-money laundering legislation enacted, the Financial Transactions and Reports Analysis Centre of Canada established, and contribution to the advancement of international initiatives

Performance Measures

• Anti-money laundering legislation in place

• Canada's participation in international anti-money laundering discussions

Accomplishments in Detail

• The Department prepared proposals to amend the Proceeds of Crime (Money Laundering) Act (Bill S-16) at the request of the Senate. These proposals were introduced on February 20, 2001, and received Royal Assent on June 14, 2001.

• Regulations to implement the mandatory reporting of suspicious transactions will come into force on November 8, 2001. Regulations regarding the reporting of certain prescribed transactions, and to enhance current client identification and record-keeping requirements, are expected to follow shortly thereafter, following further consultations with stakeholders and other departments.

• Canada's anti-money laundering legislation also provides for record-keeping and customer identification requirements that help prevent other abuses of the financial system, including terrorist financing. Further, regulations were implemented, most recently on October 2, 2001, under the United Nations Act to freeze the assets of terrorists and terrorist groups. Legislative proposals to broaden the scope of Canada's anti-money laundering regime to address terrorist financing more directly were introduced in Parliament in October 2001.

• Canada participated in international initiatives to promote the application of international anti-money laundering standards. The Department worked to encourage regional initiatives through the provision of Canadian technical assistance and support directed at enhancing anti-money laundering regimes in other countries.

C. SOCIAL ADVANTAGE FOR CANADA

C.1 Context and Background

• Creating a social advantage – strong communities, a highly skilled labour force, first-rate health care, quality education, an effective social safety net and equality of opportunity – is key to creating a country's economic advantage.

• Furthermore, in the knowledge-based economy, there are rapid shifts in employability skills in all sectors. The challenge for Canada is not only to increase its pool of knowledge workers, but also to focus on the skills, retention and lifelong learning of those workers.

• This means that it will be important to continue making progress on several social policy fronts: support for the implementation of the First Ministers' agreement on health and early childhood development between the federal and provincial and territorial governments; a sustainable system of transfers to provinces and territories; assistance in the development of skills; and sustainable social programs.

Significant enrichments to the Canada Child Tax Benefit (CCTB)

Performance Measures

• Increased tax assistance for families with children

• More families with children receiving the CCTB

Accomplishments in Detail

• As part of the 2000 budget, the National Child Benefit (NCB) supplement was increased in July 2001 by $200. As of July 2001, the maximum annual benefit for the first child will increase to $2,372 from $2,081, mainly due to an increase in the NCB supplement.

• The NCB supplement portion of the CCTB benefits approximately 2.6 million children. All told, CCTB benefits for 2001 will reach 5.9 million children – more than 80 per cent of children in Canada.

• By 2004, the CCTB will be available to 90 per cent of Canadian children, and the maximum annual total benefit will rise to more than $2,500.

Implementation of the First Ministers' agreement, resulting in increased financial support in the amount of $23.4 billion over five years for health, early childhood development and other social services

Performance Measures

• Passage of Bill C-45 to support the agreement by First Ministers on health renewal and early childhood development

• Establishment of a Medical Equipment Trust Fund

• Tabling of Bill C-18 to support the First Ministers' agreement on the removal of the 1999–2000 Equalization ceiling

Accomplishments in Detail

• At their meeting of September 11, 2000, First Ministers reached agreement on health renewal and early childhood development. The federal government committed $23.4 billion of new federal investments over five years to support the First Ministers' agreement.

• The Department prepared Bill C-45, Canada Health Care, Early Childhood Development and Other Social Services Funding Act, which received Royal Assent on October 20, 2000.

• This legislation provides $21.1 billion over five years through the existing Canada Health and Social Transfer (CHST) program, $1 billion for medical equipment and $500 million for health information technology. The $800 million provided through the Health Transition Fund managed by Health Canada brings the total to $23.4 billion, as provided for in the First Ministers' agreement.

• With respect to the $1 billion for medical equipment, the Department created a third-party Medical Equipment Trust Fund. This fund was established following consultations with the provinces and territories.

• Also, First Ministers agreed at the September meeting to the removal of the $10 billion ceiling on 1999–2000 Equalization payments.

• Following consultations by the Minister of Finance with provincial and territorial ministers of finance, the Department prepared Bill C-18, An Act to Amend the Federal-Provincial Fiscal Arrangements Act, for consideration by Parliament. Bill C-18 was tabled on March 15, 2001. Bill C-18 received Royal Assent on June 14, 2001, and will provide the seven receiving provinces with an estimated additional $792 million of funding for social and other programs.

Provided $42 billion through the major federal transfer programs to support provinces and territories in providing health, social and other programs (including the value of tax point transfers and prior years' adjustments)

Performance Measures

• Transfer payments made to provinces and territories in accordance with legislation and regulations

• Development and implementation of an "evergreen" work plan leading up to the renewal of the major federal transfer programs in 2004 (Equalization, CHST and Territorial Formula Financing)

Accomplishments in Detail

• The administration of the transfer programs (CHST, Equalization and Territorial Formula Financing) was undertaken in accordance with the legislation and regulations, and met with the approval of the Auditor General. These transfer programs provided provinces and territories with a total of $42 billion, including the value of tax point transfers and prior years' adjustments, in 2000–01 to support the provision of health, social and other programs.

• Ongoing work and research were reviewed periodically with the provinces and territories to consider options leading to the renewal of the Equalization Program in 2004. A work plan has been developed with provincial officials, which outlines research requirements and timelines.

• Meetings were also held with territorial officials to consider changes and new approaches to Territorial Formula Financing leading to the next agreement in 2004. The research objectives set out in the established work plan were met in 2001.

Canada Pension Plan Investment Board regulations amended to provide greater discretion and federal-provincial review of remaining investment requirements undertaken

Performance Measures

• Annual report of the Canada Pension Plan (CPP)

• Work on the second triennial review of the CPP is on schedule

• Canadians have a better understanding of the CPP and the retirement income system

• Canada Pension Plan Investment Board (CPPIB) is subject to investment rules similar to those faced by other pension funds

Accomplishments in Detail

• The Department completed an assessment, with Human Resources Development Canada, of a number of issues identified by provincial ministers. Reports were prepared for consideration by federal and provincial officials, with additional work on a number of specific issues being undertaken in the context of the second triennial review of the CPP (2001–03).

• The 1999–2000 CPP annual report was prepared jointly with Human Resources Development Canada.

• The first annual CPP statement of contributions was sent to contributors as announced by the Minister of Finance in the 2000 budget. The statement will help Canadians make the best possible decisions regarding their retirement.

• New directors with extensive business and financial experience were appointed to the CPPIB, ensuring that the board of directors continues its key oversight role in the management of CPPIB assets.

• The CPPIB regulations were amended to give the Board full discretion on its investment policy for up to 50 per cent of the funds that it allocates to domestic equities.

• Agreement was reached with the provinces to remove the CPPIB's remaining passive investment requirement. The proposed amendment to the CPPIB's Regulations has been published in the Canada Gazette.

Consolidated legislation enabling First Nations to levy a tax on sales of certain commodities

Performance Measures

• Adoption of legislation enabling First Nations to levy a tax on sales of fuel, tobacco products and alcoholic beverages

Accomplishments in Detail

• The Department worked to consolidate into a single Act various legislative provisions enabling certain First Nations to levy a tax on sales of fuel, tobacco products and alcoholic beverages within their reserves. In addition, the new legislation increased the number of bands with the power to levy such a sales tax.

• The exercise of taxation powers by First Nation governments makes them more self-reliant and less dependent on government transfers. The fact that the First Nations' sales taxes apply to First Nation members enhances the accountability of First Nation governments to their members.

Increased tobacco taxes to reduce smoking and promote the health of Canadians

Performance Measures

• Increased tobacco tax rates to reduce smoking

• Reduced levels of tobacco contraband activity

Accomplishments in Detail

• Tobacco consumption is a leading cause of preventable premature death and disability in Canada. On April 5, 2001, the government announced a comprehensive strategy to discourage smoking in Canada. The strategy includes the following three elements:

• increased tobacco taxes;

• initiatives to combat smuggling; and,

• improved health awareness.

• Further information on this initiative can be found on our Web site.

D. GLOBAL ADVANTAGE FOR CANADA

D.1 Context and Background

• Canada must promote and protect its interests and values in a rapidly changing global environment. That is why it must pursue its efforts to help forge international consensus on reforms that will lead to increased global economic growth, greater financial stability and a better sharing of the benefits of globalization.

• It must also work to strengthen the rules-based international trading system, while pursuing its trade and investment interests through international negotiations, notably in the World Trade Organization (WTO) and the proposed Free Trade Area of the Americas (FTAA), as well as through the appropriate use of dispute settlement mechanisms.

• Canada's ability to reap the benefits of truly global markets is also directly affected by the awareness and understanding of our country's advantages among global investors and in foreign markets. Further efforts will be required to improve that awareness and understanding.

D.2 Outcomes Achieved

Through G-7, G-20 and other international fora, promoted greater transparency, improved financial sector regulation and supervision, prudent debt management and appropriate exchange rate arrangements to help reduce global vulnerability to financial crises

Performance Measures

• Adoption of multilateral initiatives to strengthen the ability of the International Monetary Fund (IMF) to create a more secure international financial system

• International consensus in the G-20 and other fora on ways to promote a stronger and more stable international financial system

Accomplishments in Detail

• As Chair of the G-20 and as a member of the G-7 and other international groupings, Canada has worked to develop an international consensus on appropriate ways to promote a stronger and more stable international financial system. Canada has also led progress toward this objective through its chairmanship of the Western Hemisphere Finance Ministers' process in the run-up to the ministerial meeting of the group in April 2001.

• This includes working with our international partners to encourage countries to implement international standards and codes for the transparency of economic and financial data, for fiscal and monetary policies and for financial sector regulation and supervision, and to improve the efficiency of international capital markets.

• The Department's work has contributed to

• Canada's successful chairing, in Montreal in November 2000, of the G-20 Ministerial Meeting that endorsed the "Montreal Consensus" on policy responses to globalization, stability-oriented macroeconomic policies and strong social policies; additional information on the G-20 can be found on our Web site.

• the successful outcome of the Western Hemisphere Finance Ministers' meeting in April 2001; and,

• the preparation, with Canada's G-7 partners, of the report on the reform of the International Financial Architecture, released in July 2000.

Developed Canada's positions on tariffs and on trade remedy and financial services issues for trade agreement negotiations, and helped manage trade and investment disputes

Performance Measures

• Pursuit of international agreements to further Canada's trade and investment interests

• Appropriate use of trade dispute settlement mechanisms

• Improved services to Canadian exporters

Accomplishments in Detail

• The Department developed Canada's positions on import policy (tariff and trade remedy issues) and trade-in-services issues, notably financial services, for multilateral trade negotiations under the WTO. (Papers used as the basis for these consultations are on our Web site.)

• The Department also developed Canada's priorities and positions on these issues for regional initiatives (e.g., FTAA) and bilateral initiatives.

• The Department participated in preliminary discussions with Singapore and four Central American countries (Nicaragua, El Salvador, Guatemala and Honduras) on the possible scope of free trade negotiations with these countries.

• The Department of Finance also participated in developing the Canadian position on several significant international trade and investment disputes. These included the WTO cases concerning Brazilian aircraft subsidies, Canadian dairy product exports and softwood lumber, and continued to monitor import pressures facing Canadian steel producers.

• The Department worked closely with the Department of Foreign Affairs and International Trade in reviewing the mandates of the Export Development Corporation and the Canadian Commercial Corporation. Legislative amendments will be tabled in 2001 to improve support to Canadian exporters.

Lowered tariffs on a range of products and improved the transparency and fairness of Canada's trade remedy procedures

Performance Measures

• Import policy measures (e.g., tariffs and anti-dumping and countervailing duties) that sustain or enhance the competitiveness of Canadian industry

Accomplishments in Detail

• Lower tariffs were introduced on a number of inputs for domestic manufacturing and on additional goods imported from least-developed countries. As well, the elimination of tariffs on certain products imported from Mexico was accelerated under the North American Free Trade Agreement.

• In April 2000, amendments were effected to the Special Import Measures Act that clarify the "public interest" provisions and strengthen procedural transparency and fairness in Canada's anti-dumping and countervailing duties system.

• As well, certain provisions of the Special Import Measures Act were suspended to ensure that Canada accords other countries no more favourable treatment in countervailing duty investigations than they accord Canada.

• The one-hundred-per-cent ad valorem tariff on imports of certain meat and agricultural products from the European Union (EU) was maintained in response to the EU prohibition of imports of beef containing growth hormones. This action was adopted in August 1999 to enforce Canada's rights under the WTO.

Contributed to the development of targeted environmental and climate change measures

Performance Measures

• Funding towards a national strategy on climate change

Accomplishments in Detail

• The Department contributed to the development of the $500-million Government of Canada Action Plan 2000 on Climate Change for domestic emissions reduction.

• In the 2000 budget, the government announced an additional $700 million to preserve and improve Canada's natural environment, harness new technology and respond effectively to the challenges of climate change.

Debt reductions through the Heavily Indebted Poor Countries Initiative and the Canadian Debt Moratorium

Performance Measures

• Advancement of the Heavily Indebted Poor Countries (HIPC) Initiative and the Poverty Reduction Strategy Paper Process

• Increased orientation of the work of the World Bank and International Monetary Fund (IMF) to broadening and deepening development in the world's poorest countries

Accomplishments in Detail

• The Department continued to mobilize financial resources to help alleviate the debt burden for heavily indebted poor countries within the context of the multilateral HIPC Initiative. Nineteen countries reached their "HIPC decision points," bringing the total to 22. As well, through the offices of the Executive Directors representing Canada at the IMF and the World Bank, the Department provided advice on the poverty reduction strategy papers (PRSPs) being developed by the world's poorest countries. Four countries completed full PRSPs and 32 countries prepared interim PRSPs.

• Canada proposed in September 2000 that developed countries implement a debt moratorium for poor countries committed to poverty reduction and peaceful development. In December 2000, Canada implemented the Canadian Debt Moratorium, providing immediate benefits to 11 countries.

• The Department also provided advice to both the IMF and the World Bank on programmes these institutions are implementing in support of developing countries' poverty reduction programmes and to promote greater financial stability.

• Working with like-minded government shareholders, Canada has been able to increase the focus of both the World Bank and the IMF on the world's poorest countries, including how they address the creation of an enabling environment for trade and investment.

Annex A: Legislative and Regulatory Initiatives

The Department's performance on the legislative and regulatory initiatives listed below is indicated by successful passage of the legislation or regulation, and through feedback and consultations with interested private and public sector parties.

Annex B: Sustainable Development

In accordance with the Auditor General Act, the Department tabled its first Sustainable Development Strategy (SDS) in Parliament in December 1997. The Auditor General Act defines sustainable development as "development that meets the needs of today without compromising the ability of future generations to meet their own needs." The Department's 1997 strategy translated this definition into two broad objectives that fit well with the Department's overall mandate:

1. closer integration of economic, social and environmental objectives; and

2. intergenerational equity.

In seeking to make progress on these two objectives, the 1997 SDS identifies four key issues that follow from the various core activities of the Department. These key issues and highlights of the Department's progress are provided below. Further information is available on our Web site.

Key Issue: Integrating the Economy and the Environment

Objectives

To examine further ways of improving the tax system to make it more responsive to environmental considerations; to reduce subsidies; to study and evaluate the potential uses of economic instruments; and to continue to encourage effective regulatory frameworks

Highlights of Progress

• Continued evaluation of existing tax measures that encourage energy efficiency and the use of renewable energy

• Development and release of a catalogue of existing taxes on energy consumption and the transportation sector

• Contribution to the development of the report of the Tradeable Permits Working Group of the National Climate Change Process 

Key Issue: Building the Future

Objectives

To build on progress in maintaining a healthy fiscal climate; to foster a knowledge-based economy; to support health and social transfers and the retirement income system; and to foster a strong economy through the tax system

Highlights of Progress

• Increase in the National Child Benefit

• Introduction of significant tax reductions for all Canadians

• Bill C–45 was passed, legislating $21.1 billion in increased funding through the Canada Health and Social Transfer (CHST) for health care and early childhood development through 2005–06; commitment made to announce CHST funding for 2006–07 and 2007–08 by the end of 2003–04.

Key Issue: Participating in the Global Economy

Objectives

To work toward the government's objectives in negotiating international environmental agreements and future trade and investment agreements; to develop environmental assessment guidelines for export credit agencies; and to press the issue of sustainable development in the institutions for which the Minister of Finance has primary responsibility

Highlights of Progress

• In the 2000 Economic Statement and Budget Update, the federal government announced the $500-million, five-year Government of Canada Action Plan 2000 on Climate Change as its contribution to the First Business Plan of the National Implementation Strategy on Climate Change. The 2000 budget also included an additional $700 million for climate change and other environmental initiatives, including a $100-million Sustainable Development Technology Fund to support new environmental and climate change technologies.

• Input provided in the instructions for meetings of the Organization for Economic Co-Operation and Development (OECD), the WTO and the United Nations Environment Program (UNEP) on environmental assessment for export credit agencies and on trade and the environment

• Participation in the development of Canada's position regarding trade and the environment in preparation for a possible new round of multilateral trade negotiations

Key Issue: Greening Operations

Objectives

To improve the environmental management of the Department's operations, including improved procurement information and practices; to reduce solid waste; to increase energy efficiency; and to improve fleet management and communication

Highlights of Progress

• Research and development of a procurement guide

• Expansion of multi-material recycling programs to include plastics and styrofoam

• Implementation of a successful pilot project on reducing waste at the desk

• Collection of statistical information on the daily use of energy, and on paper and waste disposal practices

Also, in accordance with the Auditor General Act, the Department has prepared its 2001–03 Sustainable Development Strategy. The new SDS clarifies the Department's policy role in promoting sustainable development, sets out a renewed action plan for sustainable development and enhances the management of the SDS within the Department. The 2001–03 SDS can be found on our Web site.

Annex C: Financial Performance

Overview

This section provides a summary of the Department of Finance Canada's financial performance, which is reported against three separate programs and eight business lines in accordance with the approved Planning, Reporting and Accountability Structure.

The tables included in this section show a comparison of three amounts: Planned Spending, Total Authorities and Actual. "Planned Spending" is the amount included in the Department's Report on Plans and Priorities for 2000–01 and indicates amounts planned at the beginning of the year. "Total Authorities" includes Main, Supplementary and other Estimate amounts approved by Parliament to reflect changing priorities and unforeseen events. "Actual" shows what was actually spent or revenues actually received.

The following financial tables present data for the Department of Finance Canada:

1. Summary of Voted Appropriations

2. Comparison of Total Planned Spending to Actual Spending

3. Historical Comparison of Total Planned Spending to Actual Spending

4. Revenues

5. Statutory Payments

6. Transfer Payments

7. Loans, Investments and Advances

8. Contingent Liabilities

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