Mulcair insists NDP's promises are affordable, despite revenue loss

OTTAWA -- Tom Mulcair is insisting that the NDP's expensive campaign promises are still affordable, even though a precipitous plunge in the price of oil has blown a huge hole in federal revenues.

However, the NDP leader won't yet say precisely where he'd get the billions necessary to pay for his promised national daycare program, or his vow to restore the annual six per cent increase in health care transfer payments to the provinces.

In an interview Friday, Mulcair made it clear he has no confidence in the Harper government's promise to balance the 2015-16 budget in the face of plummeting oil prices.

There will be no way to tell if that's true before the next federal election, scheduled for October, he noted.

"They'll be able to put up the numbers that they want to put up and it will never have to be measured against the real world," Mulcair told The Canadian Press.

Nevertheless, should the NDP win the election, Mulcair said he's not worried he might have to renege on some campaign pledges if the books turn out to be in worse shape than expected -- a scenario that has caused grief for some incoming governments in the past.

"That's a hypothetical that, quite frankly, I'm not that concerned about," he said. "Our priorities will allow us to do all of the things that we're promising to do."

Mulcair promised that the NDP's eventual platform will be fully costed by the time the election campaign gets under way.

In the meantime, he pointed to two measures an NDP government would implement to generate money to pay for its platform: reversing corporate tax cuts to some unspecified higher rate and scrapping the government's income-splitting scheme.

Other than that, Mulcair said an NDP government would not raise taxes.

"Absolutely not," he said. "Categorical on that."

Scrapping income splitting would save the government more than $2 billion a year.

How much revenue the NDP hopes to reap by hiking corporate taxes is not clear, since Mulcair has not said how big a hike he's contemplating. Moreover, some economists argue that raising corporate taxes would not actually generate much revenue and would impede economic growth.

"We're not setting the amount (of the increase) now but we know that Canadian corporations have to start paying their fair share," Mulcair said.

The NDP leader used to say the NDP would increase the 15 per cent federal corporate tax rate to bring Canada closer to the average of OECD countries. However, Canada's corporate tax rate is already higher than the OECD average.

More recently, Mulcair has said the NDP would bring the rate closer to the average of G7 countries, which would mean a potential hike of up to 4.5 percentage points.

Erin Weir, a labour economist running for the NDP in Saskatchewan, estimates that each percentage point increase would generate about $1.5 billion in revenue each year.

However, Laval University economist Stephen Gordon argues that such estimates don't take into account the proven behavioural consequence of hiking corporate taxes: corporations simply find ways to shift income to other countries to avoid paying the tax.

As far as Gordon is concerned, the argument that Canada's corporate tax rate should be more comparable to the G7 average is nonsense. The G7 includes the United States and Japan, which charge sky-high corporate tax rates almost with impunity, simply because their economies are so massive, he said.

A punitive tax regime in Canada's much smaller economy would have negative repercussions, Gordon maintains, discouraging corporate investment and, thereby, economic growth.

If the objective is to raise revenue, Gordon said hiking corporate taxes is "pretty much the worst choice you can make."

However, Mulcair said an NDP government would add resources for the Canada Revenue Agency to crack down on tax avoidance by corporations.

"We're just going to become as smart as the people who set up those (tax avoidance) schemes for them," he said.

In its fiscal update last November, when oil was selling at about US$80 per barrel, the Harper government estimated the price plunge would drain some $2.5 billion every year between 2015 to 2019. Since then, the price of oil has dropped below US$46.

The precipitous slide prompted Finance Minister Joe Oliver to announce Thursday that he will delay bringing down the next budget until at least April.