CONTENTS
Friday, April 18, 1997
Mr. White (North Vancouver) 9919
Bill C-92. Report stage 9920
Motion for concurrence and second reading 9920
Mr. Martin (LaSalle-Émard) 9920
(Motion agreed to and bill read the second time.) 9920
Motion for third reading 9920
Mr. LeBlanc (Cape Breton Highlands-Canso) 9928
Mr. Tremblay (Lac-Saint-Jean) 9929
Mr. White (North Vancouver) 9930
Mrs. Tremblay (Rimouski-Témiscouata) 9931
Mrs. Tremblay (Rimouski-Témiscouata) 9931
Mrs. Tremblay (Rimouski-Témiscouata) 9931
Mr. Hill (Prince George-Peace River) 9934
Mr. Hill (Prince George-Peace River) 9934
Mr. Martin (LaSalle-Émard) 9935
Mr. Martin (LaSalle-Émard) 9935
Mr. Axworthy (Winnipeg South Centre) 9937
Mr. Axworthy (Winnipeg South Centre) 9937
Mr. Martin (LaSalle-Émard) 9937
Mr. Martin (LaSalle-Émard) 9938
Mr. Axworthy (Winnipeg South Centre) 9938
Mr. White (North Vancouver) 9938
Bill C-92. Third reading 9940
Mr. Hill (Prince George-Peace River) 9951
Division on motion deferred 9955
Bill C-95. Consideration resumed of motion for secondreading 9955
Mr. Hill (Prince George-Peace River) 9958
9919
HOUSE OF COMMONS
Friday, April 18, 1997
The House met at 10 a.m.
_______________
Prayers
_______________
[
English]
The Speaker: Order. I have notice of a question of privilege
from the hon. member for Sarnia-Lambton and I propose to hear
that before we proceed with any other business.
* * *
Mr. Roger Gallaway (SarniaLambton, Lib.): Mr. Speaker, I
rise this morning on a question of privilege concerning the
cancellation of private members' hour today.
I learned yesterday afternoon that the member for Vancouver
North, whose motion appeared at position number one for today,
had notified the office of Private Members' Business that he would
not be appearing. I spoke with the hon. member this morning and in
fact he had notified that office at the opening hour, 9 a.m. yesterday
morning.
Prior to that I had a bill put on the order of precedence, as
published yesterday in the Order Paper at No. 28. It was submitted
to the private members' office at 5.55 p.m. Wednesday evening. I
advised the clerk that if a substitution was to be made that I was
looking for one. The next morning at 9 a.m. the clerk was advised.
Standing Order 94(1) states that ``the Speaker shall make all
arrangements necessary to ensure the orderly conduct of Private
Members' Business, including ensuring that all members have not
less than 24 hours' notice of items to be considered during private
members' hour''.
(1005 )
As of yesterday morning at 9 a.m., notice had been given. In fact
on the evening prior, at approximately 5.55 p.m., notice had been
given of a bill on the Order Paper that was published yesterday. At
no time did I receive from that office an opportunity to be
substituted or to be placed on the Order Paper for today. I
appreciate that the rules also say that a member will give 48 hours'
written notice.
I want to suggest to you, Mr. Speaker, that is one test. However,
there are other tests. Certainly the office had more than 24 hours to
contact other people and to ensure that the orderly conduct of
private member's hour would continue.
Although 48 hours is one point, 24 hours is another point.
Somewhere in that 24 hour interval there was opportunity. The
office did know I was looking for a substitution. Had I been offered
that place, it would have meant the rules requiring that 24 hours'
notice be given and would have been published yesterday at 6 p.m.
I would suggest that as a result of this that my rights and my
privileges have been usurped. In fact it is within your authority, Mr.
Speaker, to do one of two things. Either to cancel the continuation
of government business at 1.30 p.m. today, or to add a private
member's hour following that one hour that has been apparently
removed at this point.
I should point out that the bill to which I am referring has passed
through the House, has passed through the Senate and only needs to
come back on the Order Paper here. Notwithstanding the fact that
the 48 hour notice has not been complied with in the sense of
Standing Order 94(2)(a), that the orderly conduct of business could
have continued. The 24 hour notice provision would have been
complied with.
The 48 hour notice is not a precedent in the sense that a member
must give written notice. I am advised that often members will call
from distant places and say: ``By the way I am not going to be
there''. Someone may call on a Monday from some remote place in
the world and say he or she is not going to be here and not be able to
provide written notice to the clerk, who on many occasions has
acted. They have I understand also acted in terms of this window of
opportunity being the point between 24 and 48 hours.
It is on that basis that I suggest to you, Mr. Speaker, that my
privileges have been usurped and I ask for this extension or
substitution of government business from 1.30 p.m. to 2.30 p.m.
Mr. Ted White (North Vancouver, Ref.): Mr. Speaker, I think
the hon. member for Sarnia-Lambton has raised a very important
point in his question of privilege. Private Members' Business is a
when we bring material to this House which we take very seriously.
9920
The fact that I cancelled my appearance today on a private
member's bill was actually done as a form of protest because my
bill is non-votable.
The member for Sarnia-Lambton has a votable piece of
material, and notwithstanding the Standing Orders and a ruling that
you might make in connection with that, I would also like to
suggest that perhaps in the process that is going on here we may be
able to get unanimous consent of the House to do a substitution and
to meet the needs of the hon. member.
The Speaker: I take it as part of my duties as your Speaker to
ensure that there is a reasonable continuation of business in the
House.
(1010 )
The hon. member for Sarnia-Lambton has quoted the passages
in the rules which are germane to this point of privilege. The hon.
member puts forward in his argument that he was not contacted24 hours prior to the period or surely he would have agreed to have
his bill brought forward. I believe this is in Standing Order 94(1). If
I am off on the number the clerks will correct me.
In Standing Order 94(2) of the rules of the House, which were
established by us together in concert, it is quite clear that the
Speaker should have notice some 48 hours prior to making any
move. The reason the Speaker is given the 48 hours is so that he
will be able to contact the member at least in the next 24 hours to
have this member bring forward his bill.
The hon. member argues that sometimes written notice is not
given. In my short experience here and because of the faxes that we
now have, when a member calls to say he or she cannot bring
forward a bill, we usually ask that a fax be sent and usually that is
done.
Be that as it may, the rules are quite explicit. They state that
notification should be given to the table officers, who will then
inform the Speaker, so that there can be an orderly procedure in
Private Members' Business.
I would rule that the Speaker did not get the 48 hours' notice and
therefore I did not order the clerks to give the hon. member 24
hours' notice.
The hon. member for North Vancouver is here. He also confirms
that he did not give the Chair 48 hours' notice.
What I find interesting in this whole matter is that you and the
hon. member for North Vancouver are both here and you both seem
to agree that this would be acceptable to the two of you. The
suggestion put by the hon. member for North Vancouver might be
the way to get around it. I will not take it upon myself to rule that
your particular bill be ordered, but if you would care to put forward
a request for unanimous consent that your bill be debated today, I
would be interested in receiving such a request.
Mr. Gallaway: Mr. Speaker, I ask the House for unanimous
consent to have a private members' hour today from 1.30 p.m. to
2.30 p.m.
The Speaker: Does the hon. member have the permission of the
House to put forth the motion?
Some hon. members: Agreed.
Some hon. members: No.
The Speaker: There is no agreement. Therefore, we will not
proceed with this point.
_____________________________________________
9920
GOVERNMENT ORDERS
[
English]
The House proceeded to the consideration of Bill C-92, an act to
amend the Income Tax Act, the Income Tax Application Rules and
another act related to the Income Tax Act, as reported (with
amendments) from the committee.
Mr. Zed: Madam Speaker, I understand there is unanimous
agreement that the third reading stage of Bill C-92 may be
considered as soon as the second reading stage is completed.
The Acting Speaker (Mrs. Ringuette-Maltais): Is there
unanimous consent?
Some hon. members: Agreed.
(1015)
Hon. Paul Martin (Minister of Finance, Lib.) moved that the
bill, as amended, be concurred in and read the second time.
The Acting Speaker (Mrs. Ringuette-Maltais): Is it the
pleasure of the House to adopt the motion?
Some hon. members: Agreed.
Some hon. members: On division.
(Motion agreed to and bill read the second time.)
The Acting Speaker (Mrs. Ringuette-Maltais): When shall the
bill be read the third time? By leave, now?
Some hon. members: Agreed.
Mr. Martin (LaSalle-Emard) moved that the bill be read the
third time and passed.
Mr. Barry Campbell (Parliamentary Secretary to Minister of
Finance, Lib.): Madam Speaker, I welcome the opportunity to
debate Bill C-92, the Income Tax Budget Amendments Act, 1996.
When I last addressed the House on Bill C-92 it was to
recommend that it be sent to committee prior to second reading. It
is important to note, therefore, that the House finance committee
9921
recommended 13 amendments when it reported on the bill. All of
them were technical in nature and were the result either of
consultations or improvements in the wording of the relevant
provisions. For example, there were some wording changes
relating to labour sponsored venture capital corporations and
resource properties.
There were also two amendments in the area of child support to
help ensure that payments made after April 1997 were subject to
the new system in accordance with the policy.
[Translation]
I would now like to make some observations about the context in
which the proposed tax measures are situated.
In the present era of global changes, which have left many
Canadians feeling insecure, the 1996 budget introduced measures
in a number of areas that were designed to safeguard the future of
Canada.
First were measures to safeguard our financial future, with
guarantees that we would reach and even exceed our goals for
public finances; in the same breath, we defined a role for
government that meets the needs of the modern economy and of the
federation.
We also took action to ensure the preservation of our social
programs, including the old age security system and the offer of
stable federal funding for programs administered by the provinces.
[English]
We invested in the future by reallocating money to priority areas
for future jobs and growth, priorities like youth, technology and
international trade. In the area of taxation perhaps the most
noteworthy point is what we did not do. Despite the enormity of the
fiscal challenge that faced us, a challenge we have continually
handled with credibility and success, we did not increase tax rates
in the budget, not personal, not corporate, not excise.
The government recognizes that taxes in Canada are higher than
any of us would like. Fiscal turnaround is vital so that we can free
up resources to ease the tax burden when it is responsible to do so.
In the interim the government has made it a key priority to meet or
better its fiscal targets without increasing personal income tax rates
in any of the four budgets it has brought before the House.
Taxation is not only about generating revenues. It is also a matter
of economic efficiency and fairness. That is why the 1996 budget
undertook a number of important tax initiatives to enhance the
fairness of the system and to ensure that it operates as effectively as
possible.
Let me briefly outline a number of measures we are proposing in
the bill before us today. In the area of personal income taxation
several important changes concern the system for providing tax
assistance to retirement savings. Specifically the budget proposed
three measures affecting registered pension plans, RPPs, and
registered retirement savings plans, RRSPs.
As the finance minister said at the time of the budget, Canada's
retirement assistance program is effective and the government is
firmly committed to its preservation.
(1020 )
The proposed changes will help to ensure the sustainability of
the program by limiting its costs while at the same time better
targeting assistance to modest and middle income Canadians.
First, RRSP limits are to be frozen at $13,500 through the year
2003 and then increased to $14,500 in 2004 and $15,500 in 2005.
To provide comparable treatment to define benefit pension plans,
the maximum pension limit for these plans will be frozen at the
current level of $1,722 per year of service until the year 2005.
This change will keep the cost of the tax deferral for retirement
savings in line and more fairly targeted. The federal revenue cost of
this assistance is significant, amounting to nearly $16 billion in
1993.
Even with the changes the system will remain a generous one
extending to twice the average wage. This means that only
individuals with incomes over $75,000 a year will be affected in
any way.
The second measure relating to retirement savings is the
reduction in the age limit for maturing RPPs and RRSPs from age
71 to 69. In other words, individuals will not be able to contribute
to RRSPs or accrue pension benefits after age 69 and will have to
start drawing income out of these plans by the end of the year in
which they turn 69. This change will help move the maturation age
for retirement savings and pension plans closer in line to the ages at
which most Canadians are retiring.
I pause here to say that contrary to the assertion that some have
made about this change, it does not remove incentives to save in
RRSPs, private pension plans or other retirement income vehicles.
Canadians will always be better off saving for their retirement and
using these vehicles as one way to do so.
Third, the bill proposes the elimination of the seven-year limit
on carrying forward any unused portion of maximum allowable
RRSP contribution. I am sure most of us can relate to the fact many
younger Canadians have difficulty making significant RRSP
contributions, especially during the years when they are raising
families. This proposed change will improve the opportunity for all
Canadians to benefit from the RRSP system. People will now have
an unlimited time, within age limits of course, to make up for years
of lower contributions. That is an important change.
The bill addresses another vital area for saving for the future,
registered education savings plans or RESPs. Canadians know that
a better education means a better job and the Government of
Canada knows that to prepare Canadians for the 21st century we
must support their efforts to secure a good education. Hence in both
the 1996 and 1997 budgets the federal government increased tax
assistance to students and their families. RESPs are an important
mechanism that assists parents or grandparents to save for
children's education. They do so by exempting the growth of assets
9922
within the RESP from taxation. Eventually this growth is
distributed to students who are typically taxed at a low marginal
rate.
The bill before us proposes to increase the annual contribution
limit from $1,500 to $2,000 per beneficiary. It will increase the
lifetime limit from $31,500 to $42,000.
As most hon. members will recall, the 1997 budget proposed to
enhance tax assistance delivered through RESPs further still,
notably by doubling the annual contribution limit to $4,000 per
beneficiary and by improving the potential flexibility of these
plans.
Two further elements of today's legislation recognize the
increasing importance in the cost of education. First, the bill
proposes to increase the amount on which the education tax credit
is calculated from $80 to $100, an amount that the 1997 budget has
proposed to increase still further.
Second, the bill will increase from $4,000 to $5,000 per year the
limit on the unused tuition fees and education amounts that
students may transfer to spouses or parents. Once again this
measure would be enhanced by the proposals of the 1997 budget
which would allow students to carry forward those unused
amounts.
Many of the individuals who need training or retraining to make
the most of the opportunities in today's economy already have
young families to care for. For many of them, especially single
parents, school is not an option without day care for their children.
That is why today's bill proposes to broaden eligibility for the child
care expense deduction by allowing parents who are full time
students to claim the deduction against all types of income.
I should mention that the bill would also raise the age limit for
children for whom child care expenses may be claimed from age 14
years up to age 16 years, thereby providing increased tax savings
for families with older children.
(1025 )
A further measure in the bill that will benefit taxpayers with
children is the change to the rules governing child support.
Specifically the bill provides that child support paid under a court
order or written agreement after April 1997 not be deductible by
the payor or included in the recipient's income. This change
reflects the widely held view that the old system of deduction and
inclusion was not working to benefit children.
I remind my hon. colleagues this tax measure is one element in
the larger child support package which recently received
parliamentary approval. In addition to the tax changes in the bill,
the package includes guidelines to set fair and consistent support
awards, new measures to enforce child support orders and, as
announced in the 1997 budget, an enrichment of the child tax
benefit. Education and child care are important components of the
economic and social infrastructure for tomorrow.
I will now turn to to another keystone of Canadian society, the
charitable sector. That sector is playing an increasingly important
role in meeting the needs of Canadians. The government
recognizes the importance of giving charities the tools they need to
accomplish their important work. For that reason the 1996 budget
increased from 20 per cent to 50 per cent the annual limit on the
amount of taxpayer net income eligible for tax assisted charitable
savings. Once again I remind hon. members that the 1997 budget
has gone further, substantially increasing tax incentives for
charitable giving.
I will skim over some of the other major measures included in
the bill beginning with labour sponsored venture capital
corporations. These funds sponsored by labour organizations help
improve access to capital for small and medium size businesses
and thereby contribute to job creation. Generous federal and
provincial tax credits have helped LSVCCs attract large amounts of
venture capital, so large in fact that by the time of the 1996 budget
they had a more than three-year supply of capital. Given this level
of capital accumulation, measures were warranted to keep the level
of special tax assistance in these funds in line with current fiscal
realities.
Consequently today's bill proposes reducing the federal LSVCC
tax credit from 20 per cent to 15 per cent, reducing the maximum
purchase eligible for the credit from $5,000 to $3,500 and not
permitting a taxpayer to claim the federal LSVCC credit for three
years after he or she has redeemed an LSVCC share.
The bill also includes important measures for the energy and
resource sectors, for the oil, gas and mining industries. The bill
modifies rules relating to the resource allowance thereby resulting
in a more stable and consistent tax structure. For the oil, gas and
mining industries the bill proposes significant improvements to the
flow through share regime.
Flow through shares are an important mechanism for financing
exploration and development programs in these resource
industries, as they can be used to accelerate deductions for such
expenses. Companies issuing flow through share which incur
exploration and development expenses within the first 60 days of a
calendar year can renounce those expenses which are then treated
as having been incurred by the flow through share investor in the
previous calendar year.
Consultations with the industry have indicated that the 60-day
limit was too restrictive and encouraged corporations to make
economically inefficient decisions. Accordingly the bill would
allow the issuing company a full calendar year to incur and
renounce the exploration expenses. In return for this accelerated
9923
deduction, however, the issue will be required to pay a monthly
financing charge to the government.
Among the other provisions of the bill is a change to the
accelerated cost allowance rules for new mines including oil sands
which will ensure that all types of oil sands recovery projects are
treated more consistently. The bill also includes measures to
designed to promote sustainable development of energy resources
by providing an essentially level playing field between certain
renewable and non-renewable energy investments.
One measure is to create a Canadian renewable energy and
conservation expenses category in the tax system. The second
measure is to extend the use of flow through share financing
currently available for non-renewable energy and mining and
similar costs for certain renewable energy and energy conservation
projects.
[Translation]
With this, I will conclude my overview of the measures
addressed in the bill under consideration today. These measures are
equitable and will make it possible to improve the effectiveness of
the tax system. Several of these measures, by their very nature,
eliminate constraints, and many Canadians have already benefited
from the provisions of this bill.
These measures will help Canadians prepare for the future in a
world that is constantly evolving, by stimulating job creation,
education and charitable donations, among other important sectors
of activity.
(1030)
The measures in the bill under study reflect the values and
expectations of the Canadian people. As their elected
representatives, it is our responsibility to respect these values and
expectations.
Accordingly, I have no hesitation in urging my colleagues to
support this bill in its entirety and to give it speedy passage.
Mr. Roger Pomerleau (Anjou-Rivière-des-Prairies, BQ):
Madam Speaker, essentially, Bill C-92, which is aimed at
amending the Income Tax Act and the Income Tax Application
Rules, is intended to bring the Income Tax Act into line with the
decisions in the 1996 budget.
In both the 1996 and the 1997 budgets, there is, essentially,
nothing new. In fact, just recently, we learned that the anticipated
$19 billion deficit will actually be far lower than that, after 11
months of operation. The deficit is, in fact, less than $8 billion,
which means that the Minister of Finance will have an enormous
amount of money to work with in the coming months.
Where does this come from, one might wonder. The announced
objective of the cuts in government spending, in operating
expenditures, not having been met, where does this enormous sum
we are speaking of today come from?
We know that there are, essentially, two sources: the $4.5 billion
in cuts in transfers to the provinces, or in other words $4,500
million, and the $5,000 million they garnisheed from collective
wages via the unemployment insurance account. We know that
these two, the cuts to provincial transfer payments and the lifting of
wages from the unemployment insurance fund, essentially account
for 84 per cent of the deficit reduction. So it is the unemployed, the
sick, the welfare recipients and the students who will bear the brunt
of this deficit reduction.
With reference to the cuts in transfers to the provinces, we will
remember the commitments made by the Prime Minister on
Canada AM on October 20, 1993. I am translating what he said in
English, which we can presume means the same in French. Here is
what he said on October 20, 1993: ``We said in our platform we do
not intend to reduce the transfer payments. What I said in the
program, and I intend to keep my word, is we do not intend to cut
further''. That was said less than a week before the last election.
A few months after the election, on April 19, 1994, the Minister
of Finance told the Toronto Star that the next federal budget would
include drastic cuts to assistance to the provinces for such things as
health, welfare and education. This is exactly the opposite of what
the Prime Minister had said.
There will be an election shortly. I hope people will remember
that, when this government makes promises, even just a week
before an election, it has no intention whatsoever of keeping them.
The cuts to the transfer payments to the provinces mean, for
Ontario as well as for Quebec, that drastic cuts are now being made
in health care, payments to welfare recipients, and education.
It must be clearly understood that these cuts are inevitable, and
are the result of cuts to transfer payments from the federal to the
provincial governments. I know that some of my fellow Quebecers
are still saying: ``Yes, but the federal government gives us money''.
There have been no cuts in federal funding, for what the federal
government is doing with its transfer payments, in actual fact, is
returning to us part of what we send to the government in Ottawa,
$30 billion annually.
As well, the government dips into the unemployment insurance
fund to the tune of $5 billion, when it contributed not one red cent
of that.
(1035)
As you know, the money in the unemployment insurance fund is
basically the money put into the fund by workers and their
employers. There is not one cent of the government's money in the
fund. However, $5 billion was taken out of the unemployment
insurance fund to balance the books, and that is why the Minister
of Finance now has this extraordinary flexibility. That flexibility
exists at the expense of the little guy, the sick, people on welfare
and the unemployed, the unemployed whom the Prime Minister not
9924
so long ago described as useless beer drinkers sprawling in front of
the TV. And the result has been to create massive poverty in
Canada and Quebec.
They know perfectly well that thousands of people will no longer
be eligible for unemployment insurance and will have to go on
welfare. But before they go on welfare, they have to exhaust all
their resources, everything they have, until they have nothing left.
This is now happening to thousands of people in Canada and
Quebec. This wage grab and cuts in transfers to the provinces have
caused poverty levels to rise dramatically.
Meanwhile, the government is doing nothing to reduce tax
expenditures. Nothing was done in 1996 and nothing has been done
in 1997. Perhaps I may explain, as I did recently, what a tax
expenditure is.
Obviously, if tomorrow the government decided to send a
cheque for $100 million each to 10 different companies, people
would hit the roof. There would be headlines in the newspapers,
and the public would know the government is doing something that
makes no sense at all.
A tax expenditure occurs when instead of sending a cheque for
$100 million, $50,000 or whatever to a company, the government
tells the company it owes so much in taxes but does not have to pay
them. It amounts to the same thing for the company, which will
save $50,000. And it amounts to the same thing for the
government, which instead of receiving a cheque for $50,000, will
have a shortfall of $50,000. However, there will not be the same
public outcry.
Sure, if the government wrote cheques to companies every day,
it would be in the headlines. But if it is a tax deduction on a
company's more or less confidential tax return, the public does not
see that. In other words, tax expenditures represent money that is
not collected, although it should be, from companies or the public.
The Auditor General of Canada gave a good example of a tax
expenditure not long ago when he revealed that a family trust went
to the United States with the blessing of Revenue Canada under
very dubious circumstances. The Auditor General said at the time,
very diplomatically, that the company and those who made the
decision to let the trust go, had, as it were, frustrated the intent of
the legislator. In other words, they were breaking the law. That was
the opinion of the Auditor General of Canada.
So a family trust left the country with $2 billion on which no
income tax was paid. It is estimated that between $400 million and
$500 million in taxes should have been paid. Of course, if the
government had written a cheque for $400 million or $500 million
in this country and sent it to this family trust or to the two trusts
which, in fact, belong to the same person, the public would have
been outraged. The Auditor General explained how this happened,
the details were published, it was in the headlines for one day, but
no one talked about it again. Why? Because tax expenditures are so
complex.
You may recall certain tax commitments in the red book. On
page 19, we read:
A number of government programs and tax expenditures-some of which have
been identified by the Auditor General-are inefficient, poorly managed, or driven
for purely political reasons. Just as we are proposing new measures to grow the
economy, we will examine such programs with the objective of reducing waste and
inefficiency and promoting economic growth.
That was the commitment.
(1040)
And then there was the report of the auditor general on family
trusts and the Liberals' reaction in the finance committee. Each of
them took a turn sniping at the auditor general for having criticized
the fact that the trusts had hot footed it out of the country without
paying taxes.
That is precisely the role of the auditor general. He is the public
watchdog. When we criticize the government, we are partisan,
clearly. When the auditor general does so, we can assume generally
that he is non partisan. The Liberals took pot shots at the auditor
general for criticizing the family trusts I referred to earlier.
So, as we realize, there is no deficit problem in Canada. We are
reducing the deficit far faster than we had anticipated in our
objectives. The Minister of Finance has a lot of manoeuvring room.
We therefore have no deficit problems in the short term. We even
expect to bring the deficit to zero by the year 2000. However, there
is a question of fairness, since it is the middle class that is paying
off the deficit. It is becoming increasingly poor. The government is
creating huge poverty in Canada, leaving untouched those who are
in a position to benefit from the tax laws. It is the middle class that
is getting it.
That is why the Bloc Quebecois decided in November 1996 and
February 1997 to table two studies on taxation: corporate taxes,
first, and personal taxes, second. This sort of study has never
before been prepared by the official opposition.
The Minister of Finance reacted to our first study by saying:
``The Bloc Quebecois tabled a sober report yesterday. I consider it
a very professional one. I thank the Leader of the Opposition and
the members here for their work. There are many things in the
report we agree with'', and I quote him exactly. Yet, it was shelved
and will probably gather dust there for a number of years. It is
some one hundred pages long and was prepared with the means
available to us, because the official opposition has far fewer means
9925
available to it than the government. This is the first time such a
thing has been done, up to now.
The last time the tax system was totally revamped was in 1962,
as a result of the Carter Commission. According to the Carter
report, tax criteria had to be followed. The system had to be fair
and different incomes taxed the same way, regardless of source or
recipient. That, basically, was the philosophy of the Carter report.
Many of the report's recommendations were never implemented
in the Income Tax Act, which was to be expected, but we used the
report as a reference work in terms of both principles and approach.
It covered the whole Income Tax Act and was 2,575 pages long. It
was six years in the preparation, and its recommendations were
never fully implemented.
In 1966, the Liberal government, which had been given the
report, decided not to use it. It asked the Minister of Finance to
produce a white paper on taxation-this government's usual
solution is to produce white papers or red books as appropriate-
and a watered down version of the Carter report led to the 1971
amendments to the Income Tax Act.
We had to wait until 1981 for the next changes. However, the
Minister of Finance at the time, Allan MacEachen, underestimated
the resistance of the financial community and had to back off on a
number of amendments he had wanted to make to the Income Tax
Act. The final tax reform was Michael Wilson's in 1987. He too
had to retreat on some of the reforms, because of major pressure
from lobby groups to limit the extent of reforms.
The principles underlying the Bloc's two reports on taxation are
those found in the report of the Carter commission, principles
everyone can understand, principles of fairness, efficiency,
neutrality and stability.
(1045)
Under the principle of fairness, the tax system must ensure a fair
distribution of the tax burden among taxpayers. We appreciate that
everyone should pay taxes. The taxation system must not only be
fair but also be perceived as such, that is to say, people should feel
that everyone is paying their fair share.
We can assess how equitable a tax is by one of two yardsticks: it
must either reflect the ability to pay of those who are subject to
it-that is what we call vertical equity-or match the benefits to
the taxpayers, a principle called horizontal equity. The
implementation of a progressive tax system is consistent with the
principle of vertical equity.
In a vertical equity analysis, one has to use the concept of
diminishing returns John Stuart Mill described in his book, clearly
defining it in terms of a single taxpayer's equivalent sacrifice. This
is taken, of course, from Principles of Political Economy with
Some of Their Applications to Social Philosophy. I think it is not
widely known, but the majority of leading economists in the early
days were in fact philosophers preoccupied with ethical concerns
or wondering why, and the question is still valid today, there was
such a huge gap between the rich and the poor.
This means that each taxpayer does not pay the same amount of
taxes proportionally to make an equal marginal sacrifice. It would
clearly not be as much of a sacrifice to pay $2,000 in taxes for
someone earning $500,000 per year as for someone earning
$12,000. That is why, in the interest of equity, there is a so-called
tax progression.
But the facts tell quite a different story. Just think of family
trusts that were transferred to the U.S. tax free. Clearly, the public
realizes there is nothing fair about that.
Think of the Liberal member for Gander-Grand Falls, who,
every 12 or 18 months-he must spend most of his time at Revenue
Canada-issues the list, withholding names of course, of dozens of
millionaires who not only never pay tax but actually receive money
from the Government of Canada in the form of additional tax
deductions. They actually receive money from the Government of
Canada. In fact, I think the hon. member for Gander-Grand Falls
does a fine job. What I find extremely distressing in all this is that,
the next day, it is all but forgotten.
Think also of the strong public belief that the current system is
not fair, that the poor keep paying while the rich manage to get out
of it.
The second principle on which these reports on the tax system
were based is the principle of efficiency. To be efficient, any
taxation system must be kept as simple as possible. It makes it
easier to enforce, and the taxpayers waste less time making sure
they have complied with the various tax regulations.
In addition, a simpler taxation system results in lower
government management costs. When income tax time is upon us,
we realize that, for most of us, it is no simple task to fill out a
personal income tax return. As for corporations, we know they do
not just file a regular income tax return. They have tax experts who
dig into piles, three or four feet high, of tax documents. They go to
great lengths to avoid paying tax.
All this to say that this is a very complex system. When we meet
tax experts, whether at the Standing Committee on Finance or
elsewhere, that is the first thing they tell us: the tax legislation is
extremely complex and we lay people need their help to understand
it. It is a fact that one needs very complex training to sort it all out.
In a nutshell, the current taxation system lacks efficiency.
9926
The third principle is that of neutrality. The taxation system
must be neutral. This means that companies should make
investments based on economic and financial considerations and
not on tax considerations.
(1050)
Yet, we are well aware that many companies make major
decisions which are not based on economic or financial interests,
but on the impact that these decisions will have on the amount of
taxes they will have to pay. So, the system is not neutral.
The fourth principle is the principle of stability. A tax system
must produce stable revenues over the years for the government, so
that it can make consistent economic forecasts. Stability provides
for a certain continuity in the level of revenues and expenditures.
Such stability currently does not exist, given that the government
was forced to cut $4.5 billion in transfers to the provinces-which
is not a source of revenue-and to garnish workers' wages by
taking $5 billion out of the unemployment insurance fund, so it
could reduce its deficit. This shows that the tax system is not
stable.
All these principles, developed by the Carter commission and
reiterated by Bloc Quebecois members with the very limited means
available to them, show that a tax reform is in order. This is one of
the reasons why such a reform is necessary, but there are many
more.
As regards corporate taxation, our first document was essentially
tabled because we realized that, over the years, corporations have
been paying less and less taxes. I will show you figures which I
already mentioned in the House, but which bear repeating every
day. Let us take a look at the gap between taxes paid by
corporations and individuals since 1951. I will show that gap for
every 10-year period, that is for 1952, 1962, 1972, 1982 and 1992.
Here are the figures.
In 1952, corporations contributed 51 per cent of the taxes paid to
the government, compared to 45 per cent for individuals. In 1962,
10 years later, corporate taxes amounted to 36 per cent of the total;
in 1972, it was 20 per cent; in 1982, it was down to 18 per cent, and,
in 1992, it was a mere 7.6 per cent. We can see that, over the past 40
years, corporate taxes have steadily gone down, while personal
taxes have increased.
So, over the past 40 years-and this is the second reason why we
are asking for a comprehensive tax reform-the tax burden in
Canada, has been supported less and less by corporations and more
and more by the middle class and the poor, through cuts affecting
services provided to them. This is the second good reason for a tax
reform.
The taxation principles stated by the Carter commission are no
longer being complied with. Moreover, for the past 40 years,
corporations have been paying less and less taxes, while
individuals have been paying more and more. Under the
circumstances, it would be in order to go back to the conclusions of
the Carter commission.
The third principle is a bit of a myth. It has always been said that
corporate taxes should not be substantially increased, because
corporations in Canada may already be paying too much tax,
compared to companies in other countries. According to statements
made by succeeding governments, both Liberal and Conservative,
corporations pay too much tax in Canada. However, the figures
show just the opposite.
I am referring to the figures from the OECD, which compared
the corporate tax rates in various countries. We are talking here
about corporate tax revenues, that is the taxes paid by corporations
in relation to the country's gross domestic product. Let us look at
the years 1965, 1975, 1985 and 1993, since the data for 1995 is not
available. Let us see how Canada fares.
According to these figures, in the United States, for the year
1965, 6.48 per cent of tax revenues came from corporations,
compared to 4.7 per cent for Canada, 12 per cent for France,7.23 per cent for Germany, and 5.81 per cent for Japan. In 1965,
Canada, along with Spain and the United Kingdom, was the
country with the smallest proportion of tax revenues being paid by
corporations.
(1055)
In 1975, ten years later, the percentage for Canada was 6.38, and
for the United States, 7.16. On might expect lower taxes in the
United States, but the opposite is true. Corporate taxes are higher in
the United States. The same is true in France, Germany and Japan,
all of which have corporate taxes several points higher than
Canada's.
In 1985, it is even worse, and in the final year, 1993, Canada
looked to corporations for less than 6 per cent of its revenue, the
United States, 7.25 per cent, and Japan, almost 10 per cent. Japan is
not a third world country. It looked to corporations for almost 10
per cent. Internationally, therefore, Canada is not facing impossible
competition. It is even one of the countries-and we are talking
about industrialized countries-with the lowest corporate taxes.
The same analysis can be done for tax revenue, but this time
compared to overall revenue. Here again, Canada ranks lowest
among all other industrialized countries, including the United
States. We therefore see that Canada is one of the OECD countries
with the lowest corporate taxes compared to individual taxes.
Do I have one minute remaining, Mr. Speaker?
The Speaker: Dear colleague, there are 14 minutes remaining,
but we are coming up to the time for statements by members, and
that is why I was motioning to you. That is all.
9927
Mr. Pomerleau: Mr. Speaker, how kind of you. In fact, I still
have quite a bit to say. But since there is a logical break in my
text at this point, I will therefore stop for now and continue after
oral question period for the time I have remaining.
The Speaker: I am in agreement, dear colleague. It being now
almost 11 o'clock, the House will now proceed to statements by
members.
_____________________________________________
9927
STATEMENTS BY MEMBERS
[
English]
Mrs. Marlene Cowling (Dauphin-Swan River, Lib.): Mr.
Speaker, small business is one of the fastest growing sectors of the
Canadian economy and wome