Bill C-22 (Historical)

Income Tax Amendments Act, 2000

An Act to amend the Income Tax Act, the Income Tax Application Rules, certain Acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another Act related to the Excise Tax Act

Budget Implementation Act, 1997

[John Williams, Canadian Alliance, St. Albert, AB]

Mr. Speaker, as my hon. colleague from Calgary Southeast indicated, I will be speaking to certain aspects of the bill. One aspect on which I will focus is the Canada Pension Plan Investment Board and the fact that it is retroactively being exempted from large sections of the Financial Administration Act.

The Financial Administration Act is a very thick document that governs and dictates how the government manages its internal finances. A large number of agencies, boards and so on must conform to the Financial Administration Act to ensure their finances are handled appropriately. Why would they not be? However this clause would exempt the Canada Pension Plan Investment Board from the FAA.

Also it is backdated to December 31, 1998. I understand from the government it is the old housekeeping rule that somewhere along the line it was originally exempt from the Financial Administration Act. When somebody was doing some drafting of another piece of legislation they inadvertently omitted to keep the exemption there, but it slipped back in, that they were subject to it.

We know there is a fundamental principle that legislation cannot be backdated. It is never retroactive. Why is it in this case? If we go to some particular piece of legislation and read some fine arcane little rule, it says that where the government makes a mistake it can backdate it if it so desires. Do we live in a real democratic country or do we not? That is what it is coming to.

As I mentioned earlier, when we were discussing Bill C-22 and the $125 grant to all Canadians who qualified for the GST tax credit, I questioned the legality of the information being taken from the Income Tax Act. The act guarantees the confidentiality of income tax returns. The government dipped into it just so it could send out cheques for $125. The Income Tax Act does not give the government the legal authority to get the information.

Here again we are having legislation backdated a couple or three years just because somebody did not do their homework properly or inadvertently made a mistake. The net result is that the Liberals are imposing it in the House. They will use their majority. They will bring out the whip. They will lash people into submission, to say this is good stuff. In a democratic country it is not good stuff when they have to backdate legislation. It cannot be.

What is the government actually doing with the backdating of legislation? It is exempting the board from being examined by the Auditor General of Canada, the watchdog of Canadians. What is the AG being prevented from examining? He is being prevented from looking at the $40 billion or more of money Canadians have set aside for their retirement. It is being held in trust by the government and being managed by the particular board. The auditor general cannot, by virtue of the legislation, go in there to take a look and assure Canadians that all is well. The government does not want that. It does not want these kind of questions to be asked.

I say as a Canadian that the people in my riding of St. Albert, and I am sure I speak for all Canadians, would like to know that the pension plan is being managed properly, securely, safely, prudently and so on. They will never know that. They will never be allowed to ask that question because the auditor general will never be allowed to ask that question by virtue of clause 6 in Bill C-17. It is absolutely despicable. Therefore I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following therefor:

“Bill C-17, an act to amend the Budget Implementation Act, 1997 and the Financial Administration Act, be not now read a third time, but be referred back to the Standing Committee on Finance for the purpose of reconsidering clause 6 and to consider the desirability of hearing from the Auditor General relating to his concern about the Canada Pension Plan Investment Board”.

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise at third reading of Bill C-17, an act to amend the Budget Implementation Act, 1997 and the Financial Administration Act.

There are two parts to the bill. I will emphasize the aspects related to the Budget Implementation Act, 1997. My colleague, the chair of the public accounts committee and chief critic for the treasury board, will address the amendments to the Financial Administration Act.

The bill seeks to increase funding for research and development through the Canada foundation for innovation by some $750 million over an undefined period of 10 years. This follows quite logically the remarks I just delivered on Bill C-22 when I discussed at length the irresponsible approach the government was taking to program spending.

I spoke about how in the fiscal year just ended program spending had grown by 7.1%, how the government had overspent its budgeted amount every fiscal year, and how for the next four years the government was estimated to average spending increases of about 5%. I expect it would be substantially more than that.

I also talked about the phenomenon known as March madness where ministers make spending announcements without proper authorization. I talked about how in April 2001, the last month of the fiscal year, we spent some $16 billion or 70% more than the average monthly amount.

This is of relevance to the bill before us. The government is proposing that we authorize an additional $750 million for the Canada foundation for innovation. Let me say at the outset that the official opposition, the Canadian Alliance, supports in principle an appropriate and responsible level of funding for research, development and innovation in academia which can be of economic value to the country. We believe government can play an appropriate role in that respect.

However such funding must be limited by the available resources. We are concerned that the $750 million funding envelope has no defined time period or parameters. It is not limited. The government says it may be spent over the next 10 years or so, or perhaps not. That is not a responsible approach. For a spending program like this the government has an obligation to come before us and detail where it expects to come up with the money and in which years and to book the money as spent in each of those fiscal years.

The auditor general has not only criticized the ongoing practice of March madness as inherently inefficient. He has repeatedly criticized the practice of booking future expenditures in one year as the government did with the famous millennium scholarship program and as it is doing now with the Canada foundation for innovation.

This accounting practice would not be accepted in the private sector. The government is ignoring its own rules and the recommendations of the auditor general in the way it is managing the moneys it seeks to authorize through the bill.

Another concern is that the government does not have a clear framework for financing science or research and development. We are dealing with major scientific and R and D projects on a case by case, piecemeal basis. My colleague from Calgary Southwest, our science and technology critic, has made and will continue to make important remarks on the subject. We need very clear criteria for the allocation of money for science, technology, research and development. Throwing the money into a big envelope and saying it will somehow be distributed on an equitable and meaningful basis is not good enough.

How do we adjudicate the relative economic and social value of a cyclotron project in British Columbia versus a nuclear research facility in Ontario versus a research program for astronomy? All these things come before us. Each has merits in and of itself but parliamentarians have no overall objective criteria by which to judge the value of competing R and D demands.

For that reason our party platform proposes that parliament appoint a chief scientist, a position which exists in many other national governments. Such a person would be the principal adviser to both the government and the legislature on scientific questions. He or she could help develop a clear framework to priorize the many competing demands related to R and D, science and technology. This would not require a large or expensive bureaucracy and it would be helpful to have such objective, external advice.

Those are our concerns regarding the first part of the bill. I will briefly outline our concerns regarding the amendments to the Financial Administration Act, concerns my colleague for St. Albert will elaborate further.

The clause seeks to clarify that parliament must provide explicit authority to departments, agencies, boards and commissions of the government in order to incur debt. That is very interesting.

I was briefed on the bill by officials from the Department of Finance who explained that the clause came about because of one of the government's innumerable legislative drafting errors. The error allows the Financial Administration Act to be interpreted in a way that permits departments and agencies to incur debt on their own authority without explicit authorization from parliament delegated to the Minister of Finance.

Over the past couple of years the Department of National Defence has been in a pitched quasi-legal battle with the Department of Finance over this question. The DND has sought independent borrowing authority not delegated by parliament which of course has the power of the purse.

We therefore support the aspect of the amendment regarding borrowing authority. However it begs the question: How can the government consistently bring forth legislation with such significant drafting errors which parliament must then spend valuable legislative time rectifying? That is a serious concern.

In bill after bill, as finance critic, I deal with all sorts of tax amendments which seek to amend errors in bills originally presented by the government. We must accept to a certain extent the bona fides of departmental officials and the government, the ministers who bring these bills to parliament, that they are technically correct. However too often they are not, as in this instance.

The amendment also deals with certain regulations surrounding the Canada Pension Plan Investment Board because of another drafting error. When the government made amendments to the Canadian Wheat Board Act it forgot to include the Canada Pension Plan Investment Board. The CPP investment board is therefore subject to intervention by the finance minister. He can go into the CPP investment fund and strip cash out of it, contrary to assurances given at the time of passage of Bill C-2 in the last parliament which created the CPP investment board.

However because of a drafting error the finance minister, contrary to every assurance granted us, can go into the Canada Pension Plan Investment Board and fire personnel, trash or write his own business plan, and strip cash out of the fund. This loophole needs to be plugged. It should never have occurred in the first place.

We will therefore be opposing the legislation. We will urge the government to take a much closer look at bills of this nature to ensure they do not create future problems which we must then go back and solve.

Income Tax Amendments Act, 2000

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise in debate on Bill C-22. I spoke at the initial reading before the House. I would like to reiterate in closing the debate the opposition of the official opposition to the bill.

Often we are criticized of opposing for the sake of opposition. In fact I think we have a record of supporting about half of the government bills which are introduced, those which we think are sensible and lend incremental improvements to public policy. Bill C-22 falls far short of that standard in many respects.

It purports to legislate tax changes announced in the economic statement of last October. The economic statement, which was hurriedly put together by the finance minister on the behest of the Prime Minister immediately before an election, did not take into account the new economic circumstances in which we now find ourselves. At that time the finance minister was projecting a nominal GDP growth rate or real growth of 3.5%. It is now evident that given the downturn in which we now find ourselves, that economic growth for the current calendar year will be more like 2.5% or perhaps lower. It undoubtedly will have a substantial affect on the government's fiscal situation and the revenues available to it. It will also place an upward pressure on spending.

In the face of this new economic uncertainty in which we now find ourselves, the government has not responded at all. It has acted irresponsibly. The last full budget we had was in February, 2000. It now appears likely that there will not be a full budget presented to the House until February 2002. This would constitute the longest stretch of a budget not having been presented to parliament in the history of the Dominion.

At a time of economic uncertainty, when we see the United States continuing to go into possibly a technical recession, we see our third largest trading partner, Japan, in the midst of an economic and fiscal crisis. We see the possibility of Latin America veering off its economic course. Let us be objective and realistic about this, not pessimistic. Objectively there is the very real potential for more troubled economic times within the foreseeable future, yet we have no budget to take that into account.

The finance minister will apparently make one of his smoke and mirrors presentations with video charts and focused group language tested by his friends at Earnscliffe consulting at considerable taxpayer expense. He will that on Thursday. However it will not be a serious economic budget. It will not take into account the new circumstances. It certainly will not deal with the very serious corrosive problem of runaway Liberal spending which is now setting into the fiscal status of the federal government.

In the fiscal year just ended, 2000-01, it appears that the total program spending will have grown by about 7.1%. This is a huge increase at a time when inflation plus population is growing at a rate of just under 3%. In other words, spending under the government is growing more than twice as fast as the population and inflation. It is doubling the need for growth set by our economy, our inflation and our growth of the population. The projection for the foreseeable future is that spending growth will continue at a rate of at least 5%. We think it will likely be substantially higher than that given the track record of the government to date. This is simply not sustainable.

We had in the last fiscal year $11.1 billion in supplementary estimates above and beyond what was originally projected by the government a year ago in its main estimates. We had money which was been announced and not properly authorized or put through the estimates process in advance. We had the phenomenon known as March madness where the government spent as much as 70% more in the last month of the fiscal year than it did in any other month of the year. There was much as $16 billion in spending this past March.

The warning bells are ringing that spending is growing out of control. I can understand the political dynamic within which the Finance Minister must operate. I suspect he has tried his best to maintain the big spending old style Liberal habits of his colleagues and is simply losing that debate around the cabinet table in the caucus room now. The special interests in his caucus, the Minister of Canadian Heritage and the Minister of Industry and their big spending friends, continue to grapple for millions more taxpayer dollars. We see this in the fiscal bottom line.

The point is that every additional dollar in discretionary, unnecessary and wasteful spending that is committed by the government is a dollar taken away from perspective tax relief for working families to create new and better jobs. It is a dollar taken away from debt reduction to secure our long term economic future and pay down our still enormous national mortgage.

My colleagues opposite will say that the bill before us gives effect to tax changes and therefore there is still room for new spending. This ignores the economic reality in which we find ourselves. The reality is the bill purports to authorize $100 billion in tax reductions which is just complete nonsense.

When we clear away the smoke, the mirrors and the fudge it budgeting, when we take out the spending increase in the child tax benefit which is an entitlement program, it is a spending program not a tax cut, when we net out the $29 billion Canada pension plan premium increase, the largest single tax increase in Canadian history, an increase which has caused most Canadians so far in this calendar year to see their tax level go up after advertised tax cut and when the impact is taken out of de-indexing the tax system which is not a tax cut it is just a non-increase, we find that the real net tax cut over the ensuing five years is less than $50 billion.

Liberals do not increase taxes but all of a sudden they want to take credit for that as a tax cut. I am afraid it simply does not wash. If we tried that kind of accounting as a CFO at a company, we would end up making licence plates in a provincial institution. The net tax relief is half of what is advertised in the bill. That does very little to correct the significant disadvantage we continue to face vis-à-vis our major competitors and trading partners.

Canada continues today to have the highest personal income tax to GDP ratio in the G-7. In laymen terms that means we have the highest income taxes of any major country in the world; 14.1% of GDP. Even if we take the Finance Minister's bogus $100 billion figure and subtract that from our current tax burden, we still end up with Canada at a PIT to GDP ratio of 12.4%, the highest in the G-7.

It is substantially higher than that of the United States even today. Our major trading partner will be cutting taxes by at least $1.35 trillion U.S., not Canadian dollarettes, over the next 11 years, thus rendering the Canadian tax system even less competitive.

This would not be a problem if it did not have an effect on our standard of living, but it does and very substantially. Canada continues to see its rate of growth in labour productivity, an absolute key indicator of growth in our standard of living, at one-third the level of the United States.

I have raised this issue in the House during question period. The finance minister says our productivity is growing. Yes, it is, barely, by roughly 1.5% a year, while we see productivity gains in the United States of 4%. That means the U.S. is producing more and doing it more efficiently. It is creating more wealth which is shared by more people.

Why? It is not because Canadians are not hard working. They are hard working and well educated. It is because we penalize too many Canadians for working hard, taking risks and investing and saving. The very economic behaviours which create wealth and raise our standard of living are penalized by our punishing tax regime.

The government's bill would raise the basic personal exemption level to $8,000 under which a taxpayer would not pay taxes. The government claims this is a great act of progressivity. However it falls far short of what it ought to be doing to rescue low income Canadians forced on to the tax rolls by bracket creep. The government has benefited from this tax on inflation during the last eight years of its mandate. The government has put an additional 1.9 million low income people on to the tax rolls by way of bracket creep.

The Canadian Alliance proposes to raise the basic personal exemption to $10,000 and match it with a $10,000 spousal equivalent. We would no longer have second class citizens when it comes to the tax code. Stay at home parents would no longer be regarded as having less economic value than their income earning spouses. We would also have a $3,000 per child tax credit, which would mean that a family of four under our system would face zero taxes on their first $26,000 of income. That would remove at least 1.4 million low income Canadians from the tax rolls.

I find it galling to see Liberals pat themselves on the back about how progressive they are and how they favour the poor when in fact they oppose measures like this one, measures which would give real relief to the working poor and people on fixed incomes. That is another reason we oppose the bill.

We are not just penalizing people at the low end of the scale. Through the bill and in its economic statement of October the government would raise income thresholds at which people are taxed at higher levels at marginal rates. That is a baby step in the right direction but we are still miles from the threshold levels for marginal rates as set in the United States.

People do not enter the highest tax bracket in the United States until they earn over $250,000 U.S., or well over $350,000 Canadian, whereas one enters that bracket in Canada upon earning $100,000 Canadian. Bright young entrepreneurs who work hard, succeed and get ahead are penalized by the government the moment they break into six figures, but people in the United States earn three to four times that before being hit by the highest marginal rate.

I can feel my Liberal colleagues' soak the rich, politics of envy gene kicking in. They want to stand and say that the rich should pay their share. Successful Canadians do pay their share. The top 10% of income earners earn about one-third of the income in the country and pay about half the income taxes. The top 1% of income earners earn about 9% of the income and pay about 20% of taxes.

Those who create the most wealth and are successful pay a hugely disproportionate share of taxes. I am not necessarily arguing with that. However they would create more wealth, invest more, take more risks and ultimately create more jobs if we raised the income thresholds for the marginal rates substantially higher as is the case for many of our competitors.

The Canadian Alliance Party thinks the optimum tax policy is not to penalize people for working hard. We would adopt the generous exemptions I have outlined plus eventually a single rate which is progressive. We propose a rate of 17%. That would mean a family of four with $26,000 in income, given the generous credits we have proposed, would pay zero taxes. A family of four with $52,000 of income would pay 17% on only the taxable half of its income. It would pay an effective rate of 8.5%. A family of four with a multimillion dollar income would effectively pay 17%. My colleague from Toronto—Danforth who is the principal advocate of this idea knows full well that it is progressive.

We have serious concerns about the inability of the government to get tax policy right. Not only are we falling behind in terms of productivity growth. We are doing so in terms of competitiveness. We are not keeping up.

We are not keeping up on corporate taxes. According to a major study done by KPMG that appeared in the Economist last month, we have the highest corporate income taxes in the OECD at 42.1%. Our personal income tax burden, relatively speaking, is at least 21% higher than in the United States. In terms of competitiveness we are now ranked seventh by the World Economic Forum compared to the first place United States. Ireland, which is now in fifth place, has leap frogged over us. We have fallen behind in standard of living.

This is reflected in the value of our currency which is hovering at an all time low. Our currency has lost 25% of its value during the tenure of the Liberal government. It has a value of 65, 64 and sometimes 63 U.S. cents. That is an embarrassment and a reflection of the impoverishment of this nation under the policies of the Liberal government.

We oppose the bill and call upon the government to control spending. It must stop these crazy 7% annual increases in spending and allow it to remain constant. Spending must grow in relation to population and inflation growth so that we do not have net cuts in spending. We could let it grow at a gentle curve commensurate with the size of the country and the level of inflation.

Doing that during the five year period outlined in the finance minister's statement would mean an additional $58 billion for tax relief for working families, for job creation and for debt reduction to secure our long term future. That was the $58 billion missed opportunity of the finance minister's statement of last fall which he will reiterate on Thursday. It was a missed opportunity to create more wealth and pay down the huge national mortgage.

Often when we talk about the debt the finance minister jumps up and says we have reduced it. That is not true. The debt is about $60 billion higher today than when the finance minister took office in 1993. He has increased the debt. He has not paid it down. Public sector financial liabilities total about 106% of our gross domestic product. That is the third highest in the G-7 and the OECD.

The government says we can afford to increase spending by 5%, 6% or 7% a year and ignore the debt. However private sector economists have projected that we will be in a planning deficit by fiscal year 2004-05.

What does that mean? It means that in order to finance these reckless increases we will need to eat into the government's emergency reserves, the so-called prudence and contingency reserves. Those moneys are not supposed to be spent by reckless members of the Liberal cabinet. They are supposed to be set aside in case the economy shrinks.

The Liberals are already eating into the contingency reserve of 2004 based on very optimistic economic growth projections. If the economy turns down, the surplus that taxpayers have worked so hard to obtain will disappear and the promised tax relief will go down the sinkhole with it.

We are here today ringing alarm bells about the government's return to fiscal irresponsibility. We plead with it to look not just at the next two years but at four or five years down the road and what will happen if spending continues on its current trajectory. Therefore I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following therefor:

Bill C-22, an Act to amend the Income Tax Act, the Income Tax Application Rules, certain Acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another Act related to the Excise Tax Act, be not now read a third time but that it be read a third time this day six months hence.

[Roy H. Bailey, Canadian Alliance, Souris—Moose Mountain, SK]

Mr. Speaker, I welcome the opportunity to speak to Bill C-22. It is certainly a complex bill. Thousands of people in Canada, and a good many in my constituency, fall into the situation that I am about to describe in terms of exemptions and qualifications.

I refer to what happens to a young father who finds himself in a divorce situation. I draw the attention of the House to two such cases as they relate directly to the exemptions in the Income Tax Act. Dan and Valerie were married for 12 years. I do not know what led up to the divorce but they went through a divorce. The responsibility, and rightly so, is for Dan to support the children.

I will not accept for a moment, as is generally thought across Canada, that all these men are deadbeat dads. Dan agreed to pay his wife $1,000 a month for the upkeep of his children. At the end of the year that upkeep costs him $1,200 a month. Aside from the cost of the divorce and the loss of his house, he does not get to claim that $1,200 as an exemption. His wife does not have to claim it as income and receives a tax credit. That is wrong. No matter which way the cake is cut, it is wrong.

I have other examples on file. We do not know why suicides come about, but all these dads are not deadbeats. Many of them work overtime to make ends meet, only to have to pay more money. They are finding it more difficult to pay up each month. They want to carry on their responsibilities, but the situation is getting worse.

The last example I have on file is a shocker. John married a girl by the name of Janet and she had one child from her previous marriage. He accepted that child and together they had two more children. That union divorced and, believe it or not, Janet married her former husband. The oldest child from the former husband then went back to the original parents. John was ordered by the court to pay support for three children, even though the one child he assumed from the previous marriage was back with the original parents.

I could go on and on. All kinds of people have written to me from across Canada. In many cases there is no fight between the former wife and husband, but in many cases these young men simply cannot make it. What I am saying is that the monthly support payment should be an absolute deduction.

We seem to say at the present time that all divorces are the fault of the men. There is no question about that. One only has to look at the tax laws and the exemption entitlements. Hundreds of young men under 40 escape by running away, by taking on new names, and some by committing suicide. We sit here and allow it go on year in and year out. No one has the stamina and the courage to say that it is wrong. If members ever talk to some of these young people, they should talk to a man of 38 years of age who lost his professional job through no fault of his own. Watch the tears roll down his face because he cannot meet those obligations, and he was never credited for it as a tax deduction in all those years.

I say to the House and I say to all Canadians, it is time we faced up to this. It is time that we said no, that not everyone is a deadbeat dad. If we look at the statistics most of them are not.

I have dealt with many cases individually where men have had to suffer extreme hardships in order to meet the requirements of the courts. Then the income tax comes, they make a huge payment and have no deductions whatsoever. Their income tax is deducted at source because they are once again a single parent.

I wish that somehow the finance committee could sit down with the other departments involved in this to bring this atrocity to an end, to bring some fairness to the situation and to bring some fairness to what happens with a court ruling. Maybe they will. However if they do not, there will be more and more young men who will mysteriously disappear from the landscape and we will not know the reason for their deaths.

[Werner Schmidt, Canadian Alliance, Kelowna, BC]

Mr. Speaker, you are not only a fairminded person but you have demonstrated a tremendous sense of humour. I respect and appreciate both qualities very much.

For the hon. member's benefit, I have marked the section in the act dealing with capital gains. It begins on page 263 and ends approximately at page 372. The section deals specifically with capital gains. Later on, when the act refers to taxes on inheritance, capital gains come up again. The capital gains section of the act is over 100 pages long and there is additional reference to capital gains later in the act. That is the Income Tax Act as we know it currently. Another 514 pages of amendments to the act have now been brought to our attention.

I refer to the parliamentary secretary's statement that there have been tremendous tax reductions over the last while. The Minister of Finance has indicated several times how significant and large the cuts have been. He says that they amount to around $100 billion.

However, when he makes that statement he does not tell us how many increases there were. We need to look at that, particularly in terms of payroll taxes. There has been a tremendous increase in the amount paid to CPP. That must be considered an increase in taxes. The $100 billion the minister refers to is not really the total amount. The net cut is considerably less than that.

The child benefit program is administered through tax benefits but it is really a spending program so it cannot be considered a tax cut. It is important that we recognize exactly what is going on.

I will make another point regarding the proposed statement the Minister of Finance will deliver on Thursday of this week, if the reports we have heard are correct. It will be very significant. The mini budget last fall indicated some of the things we have talked about here this morning. It looks like the new projection will tell us what to expect in terms of expenditures, revenues and the general state of the economy in Canada. The projection, at least at the moment, is that it will be for two years.

I refer the House to a statement made last week by the chief economist of the Toronto Dominion Bank, supported by a number of other economists, which suggested that two years is a misleading time period. Why? It is pretty clear to everyone that within the next two years we will still have a surplus and revenues will exceed expenditures. However, in the third year, because of programs that have been promised and programs that have begun, demands on the budget will create a deficit.

I would encourage the Minister of Finance not to fall into the trap of dealing only with the next two years, but rather that he give us a balanced position and say to Canadians that for the next two years we will have a surplus but in the third year, because of the things he plans to do, there will be a deficit. That would be an honest statement to make and I would encourage him to do that.

I will now come back to some of the specific provisions within the amendments of Bill C-22. I want to refer primarily to one section regarding capital gains tax, which I have referred to already. I will read one paragraph for the benefit of listeners. It is an amendment to the existing provisions for capital gains. I would like people to listen very carefully and see if they understand the paragraph. It reads:

(o) where an amount is designated under subsection 104(21) of the Act in respect of a beneficiary by a trust in respect of the net taxable capital gains of the trust for a taxation year of the trust and the trust does not elect under paragraph 104(21.4)(d) of the Act, as enacted by subsection 78(23), for the year, the deemed gains of the beneficiary referred to in subsection 104(21.4) of the Act, as enacted by subsection 78(23), are deemed to have been realized in each period in the year in a proportion that is equal to the same proportion that the net capital gains of the trust realized by the trust in that period is of all the net capital gains realized by the trust in the year,

(p) where in the course of administering the estate of a deceased taxpayer, a capital loss from a disposition of property by the legal representative of a deceased taxpayer is deemed under paragraph 164(6)(c) of the Act to be a capital loss of the deceased taxpayer from the disposition of property by the taxpayer in the taxpayer's last taxation year and not to be a capital loss of the estate, the capital loss is deemed to be from the disposition of a property by the taxpayer immediately before the taxpayer's death—

I would challenge all of our listeners to understand exactly what has happened here. It is very significant that we understand it.

Regarding the whole issue of capital gains, I would like to refer again to the Income Tax Act that exists at present. There is complex set of formulae in the act, not only the formula I have just read but a whole host of other ones.

Much of the amendment I just referred to in Bill C-22 has to do with the reduction of the capital gains tax from two-thirds to 50%. I do not think that is great. I think we should reduce capital gains tax considerably. I would like to see it reduced considerably below the present one, and the ideal, from my point of view, would be to eliminate capital gains tax entirely.

Why do I think that? First, it is critical that we have risk capital involved when providing capital for the establishment of enterprises to develop innovations, to apply new technology, new science and new understandings. People who risk their capital ought to be able to benefit from the profits that arise. In many instances these highly innovative projects, while they have the potential for tremendous gain, also have the potential for loss of a major part or all of the capital. We need to reward people who are prepared to risk their assets, their talents and their abilities so that they can be rewarded when they apply them.

[John Williams, Canadian Alliance, St. Albert, AB]

Mr. Speaker, as we know, the Minister of Finance has reduced income taxes by a few hundred pages and a few hundred million dollars. Perhaps it will help the hon. member with his private member's bill. By reducing the tax and burden on businesses, hopefully they will not go bankrupt so fast. That is the spinoff. All things considered there are benefits here and there are benefits there. However not everything is good in Bill C-22.

The Minister of Finance stood up last fall, a couple of days before the election, and brought down a budget to tell us the good news about all the tax breaks. We could not understand why he wanted to do that in October. When he first came to power he said he would send the finance committee right across the country for prebudget consultations.

It costs the House of Commons and taxpayers of Canada approximately $400,000 to send the finance committee across the country to hear from about 500 different people and institutions and so on to find out what they want in the budget. It is a great big process the Minister of Finance put in place so that every year in February he can stand in this place and say he has listened to Canadians and this is what the government will do.

However with the election in the offing, he decided not to worry about consulting Canadians and came out with a bunch of goodies to buy the votes of Canadians to win the election.

Members may recall that he introduced in that budget a payment of $125 to everyone who qualified for the GST tax rebate to reduce the cost of their heating fuel. There was no analysis. This was strictly an election goodie. Tens of thousands of payments at $125, the bulk of the money for a total cost of $1.3 billion, went to people who did not have a heating fuel bill to pay. A large percentage of the lower income people lived in rented accommodation. They lived in apartments. Did they pay heating fuel? No, the landlord did. Did he get a cheque for $125? No, but all his tenants did. There was no real benefit other than it was a great election goodie.

The Liberal Party went around the countryside. It gave all low income people a chance to reduce the cost of their heating fuel but it never said how. Money went to people in prison, in graveyards and to people who did not qualify for a variety of reasons. Many had never seen a heating fuel bill in their lives. Kids living with their parents got the heating fuel rebate but the parents who paid the bills did not get a penny. Then to top it all off, there was some questionable legality to it.

The $125 payment was a grant and fell under the definition of a grant. Grants had to be published. The name and address of everybody who received a grant from the Government of Canada was public knowledge and therefore should have been published. The information was derived from the Income Tax Act. Everybody who filled out a tax return and qualified for the GST tax rebate was on the list, and as we know tax returns are confidential. So the government was in a quandary. It came to the public accounts committee and asked for an exemption from publishing the names of people because the Income Tax Act said it should be private and rules covering grants said it should be public.

In my opinion, section 241 of the Income Tax Act, which guarantees and protects the privacy of income tax returns by Canadians, did not give the Minister of Finance the authority to get these names in order to pay the $125 to these people who qualified by virtue of being a recipient of the GST rebate. I did not think they qualified.

The issue came up at the public accounts committee. One Liberal member suggested a legal opinion was needed prior to giving them the authority. Another Liberal member did not think a legal opinion was needed, that they could hold their noses and pass it.

I have serious questions about the legality of paying $125 to those people just so the Liberal government could run around the countryside last October and say that it was giving people money to reduce their heating bills regardless of whether it was money wasted, which it was. It was perhaps illegal but no one seems to care. The Liberals won the election, so who cares?

We play by certain rules in Canada, and one is that the rule of law is sacrosanct. I am not a lawyer and we never got a legal opinion, but I have serious questions about the legality of that payment. By its own admission, the government was in a quandary. The Income Tax Act says that we must keep everything confidential but grants and contributions rules say that we must make things public. The fact that the government was in a quandary should tell us there was a serious problem.

There are other issues. We in the Canadian Alliance have long pointed out the disparity between two income families and one income families. One income families pay more tax than two income families that earn the same amount of money. The family that decides a spouse will stay home to raise the kids rather than pass them along to a babysitter does not get a tax deduction. Who better in the world to raise children than mothers?

We celebrated Mother's Day yesterday. Unfortunately, far too many parents must put their kids in daycare rather than stay at home because the tax act discriminates. It discriminates against families that want to keep a parent at home to raise kids. How can that be? Our most precious resource is children. We discriminate against parents who love their kids and want to raise them.

I am splitting my time with the member for Kelowna. I forgot to mention that.

The point is that we discriminate against families. Why do we tolerate that? I hope Canadians recognize this in the next election and are not dazzled by payments, tax breaks and so on, some of which are of questionable legality. Canadians should vote for a party which says that it will stop discriminating against parents who want to raise their own children. That must be a fundamental right.

It was a big day yesterday for millions of Canadians across the country who took time to recognize their mothers and the great contribution they have made to their well-being, their nurturing and their growing up. They took time to recognize the wiping of tears, the hugs and the commitment that mothers and parents have for their children. However, the government discriminates against families. We collectively in this place are being asked to vote on a tax bill that would continue the discrimination. Surely that must be addressed and redressed.

[Deepak Obhrai, Canadian Alliance, Calgary East, AB]

Madam Speaker, it is my pleasure to speak to Bill C-22. I take the opportunity to speak to the bill because I have a concern. I will not dwell on the logistics of the bill. I will leave it to my colleagues to talk about its other technical aspects.

I rise to speak to the bill because the government claims it has helped Canadians by reducing taxes and listening to Canadians. I see the former revenue minister sitting there. He created the big super agency and decided how it would work.

I will point out a direct example from my constituency of how the government and the minister's former agency have been picking the pockets of ordinary Canadians. A gentleman in my riding wrote me a letter and gave me permission to talk about it.

Eric is a senior citizen on the Canada pension plan. He is upset because the government is withdrawing money from his account without notifying him. The gentleman lives on CPP and the government is taking more than 10% off his pension. How does the government expect him to live if it takes more than 10% off his CPP?

Eric admits he owes the government money. However the government should have better mechanisms for collecting money from seniors and others who cannot afford to have their meagre benefits taken away by Revenue Canada. How does the government expect the gentleman to live after that?

This morning I rose in the House on an S. O. 31 to talk about a senior citizen who had taken $3,000 out of his retirement savings plan to buy a computer. It triggered penalties and an increase in his income tax. The poor senior citizen ended up losing interest. The gentleman took out $3,000 and ended up paying the government $168.

Is that how we treat senior citizens? Is that how we treat Canadians who work hard and save their money? When they try to reap the fruits of their labour the government, with policies that go from left to right and top to bottom, takes money away from them. It takes only a little here and there but cumulatively the individual loses. The gentleman ended up paying the government. Is that justice? It shows that the left hand of the government does not know what the right hand is doing. All Liberal members care about is how to take money from Canadians.

I have permission from another senior citizen to speak about his income tax return. This gentleman was mad.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, it is with pleasure that I rise to speak on Bill C-22.

The amendments to the Income Tax Act come as a result of the February 2000 budget and also as a result of the October mini budget, or economic statement or whatever semantics one would utilize to describe that pre-election document of the Liberal Party of Canada.

The amendments to the Income Tax Act represent a collection of baby steps. Some are in the right direction. Some simply represent a further complication of an already far too complicated tax code. Most represent the triumph of politics over public policy.

If we look at the general direction of these tax measures, we will find there is no general direction. In fact most of them have resulted from a flimsily put together pre-election document. The document is referred to as the mini budget and reflects a mini vision of Canada.

These baby steps and tinkerings do not reflect what Canadians truly need in an overall and significant broad based tax reform. Tax reform can be used as a vehicle to create greater levels of economic growth and opportunity. Instead of making tax tinkering part of a pre-election policy, we should seize the tremendous opportunity we have now with the budget surpluses to bring taxes down, but use tax reform and tax reduction in lockstep.

Typically with tax reform we always create winners and losers. However, if we implement tax reform and tax reduction simultaneously in lockstep, we can ensure that there are no losers created by significant tax reform. All Canadians then would be winners as we create a more competitive and less distortionary Canadian economy which is poised and positioned for significant growth and opportunity, particularly in new economic endeavours.

We have seen in recent years our competitiveness with our trading partners suffer. We have seen other countries like Ireland leapfrog over Canada and seize opportunities to grow and prosper while Canada languishes. Ireland had a 92% growth in GDP per capita over a 10 year period. During the same 10 year period Canada had a 5% growth in its GDP per capita. This is pretty anemic when we consider the extraordinary growth in Ireland, a country once referred to as an economic basket case. Now it is referred to as an economic lion. Ireland did that by utilizing significant tax reform, particularly focused on a reduction of capital and corporate income taxes.

One of my hon. colleagues opposite constructively offered her views on this. I appreciate her views, as someone with a profound understanding from her family perspective of Ireland, and I agree with her. Ireland's commitment to education over the last 20 years to 30 years has strongly helped position Ireland. That being the case, Canada has by and large with its provincial and federal governments over time made significant commitments to education, so I would argue that that part of the equation has been done quite well.

We could improve our commitment to education, as could any country. It could be argued that Ireland could improve its commitment. The greatest difference between the two environments at this point is not in their commitment to education, it is their commitment to tax reform as a lever to create greater levels of economic growth and opportunity. That is the part we have to address, and I am certain she would agree with me on that front as well.

If we look at the government's record on economic issues since 1993 and how international confidence has been demonstrated in the government's record since 1993, there is no better gauge by which to judge the government than the performance of the Canadian dollar. We have seen under this government a loss in the Canadian dollar relative to the U.S. dollar of about 11 cents. The dollar reflects the shareholder value of Canada has seen a significant decline under the government. Under the previous government there was a one cent decline over a period of nine years. This government has achieved an 11 cent decline in a period of about eight years.

Every time our dollar goes down it is effectively a pay cut for every Canadian. We depend on the U.S. to such a significant amount as our trading partners. From a consumer perspective, given the degree to which Canadian consumers buy from U.S. companies, it significantly reduces over a period of time their disposable income.

It also has a very negative impact on productivity. Canadian companies in the short term do not necessarily see the need to make productivity enhancement a priority if they can hide under this low dollar policy of the government.

The low dollar also damages productivity in the long term. Companies that purchase productivity enhancing equipment or technological advancement software, et cetera from the U.S. are less inclined to do so if the dollar is low. As a result it becomes a self-perpetuating prophecy that in fact the low dollar creates in the long term lower levels of productivity by actually reducing incentives for companies to do the right thing and build their productive capacity in Canada.

In general, what is particularly disturbing about the state of the Canadian dollar is that the Bank of Canada has in recent years pursued a high dollar policy, yet Canadians are suffering as under this low dollar result. The Bank of Canada under its policies has targeted inflation rates in Canada of about a point lower than those which are considered acceptable by the federal reserve in the U.S. Despite this high dollar policy, we are getting this low dollar result. We have to carefully analyze and respond to the fiscal inadequacies of the fiscal framework in Canada.

The government describes having a balanced approach. The fact is a balanced approach is not the appropriate approach if we have significant inherent imbalances in the economic framework, and we do have some significant imbalances. Some are with taxation, not only in terms of overall levels of taxation but particular types of taxation which in and of themselves have the most negative impact on economic growth. Unfortunately, some of the taxes which are most politically palatable to reduce are ones that will probably have some of the smaller impacts on economic growth and opportunity. Some of the tax reductions which would spur the greatest level of economic growth are those that sometimes are less popular politically.

In the short term, and particularly after an election, the government should take some risks and tackle some of the major issues and addressing tax reform and the reduction of some of Canada's most productivity damaging taxes. I will speak about a couple of them.

One is our dependence on capital taxes in Canada. Capital taxes reduce investments and the incentives for Canadians and people outside of Canada to invest in the country. If we look at any study on productivity, there is a strong correlation between productivity and investment. If we tax capital and investment to the degree we do in Canada, that will have a significant negative impact on productivity enhancement.

The government has made some reduction in capital gains taxes. The government says that the effective rates of capital gains taxes are lower than in the U.S. That is not the case. We are still higher in Canada than in the U.S. However, the most important thing to recognize is the missed opportunity of the government to eliminate personal capital gains taxes. In this one instance we would be ahead of the U.S. in a very critical area of the economy, that of taxing capital gains and encouraging investment as opposed to discouraging investment innovation.

The government is losing this opportunity because of political reasons, the same reasons why the Liberal opposition fought vociferously against the GST. It was a case of politics then and it is a case of politics now. That is why it is not moving more aggressively to address capital taxes in Canada, specifically capital gains taxes.

I am focusing my comments today on tax reform, but we also need to see a greater commitment to debt reduction which in time would strengthen the Canadian dollar through fiscal policy.

In short, we are asking the Bank of Canada with one blunt instrument, the interest rate, to try to strengthen the Canadian dollar. We are ignoring in many cases the fiscal policy issues that could be addressed by the government, but it refuses to talk about the dollar. It also refuses to talk about some of the concrete measures it could take through fiscal policy to address the dollar.

We could also utilize tax reform in lockstep with equalization and other policies as part of our economic development strategy. I mentioned earlier the tremendous success that Ireland has enjoyed over the last 12 years. Some would say that comparing Ireland to Canada is not the best possible comparison because of the degree to which Ireland received EU transfers in order to allow it to invest so significantly in tax reduction. That argument is not necessarily a bad one. However if we want to look at the best possible comparison, we could compare Atlantic Canada today to Ireland 10 years ago.

Today we have a hodgepodge of economic development policies and agencies such as ACOA for Atlantic Canada. We also have our equalization policy which is the only constitutionally enshrined spending program of the government. I would suggest we should develop a tax policy in consideration of some of our economic development strategies.

In Atlantic Canada for example, the total budget for ACOA is a little more than the total amount of federal corporate taxes paid in Atlantic Canada. If we were to try to think in a more imaginative and visionary way about this, we could see the possibility exists with some assistance to eliminate federal corporate taxes in that region of the country to spur economic growth and opportunity. Quite possibly this could have a greater level of impact on economic growth than would result from the activities of ACOA.

I am not saying that ACOA has not had a positive impact in some areas. My personal belief is that in many ways it was probably a more appropriate instrument in the old economy than it is in the new economy. In the new economy tax measures have demonstrated far greater traction in achieving results in targeted areas than have direct investments by agencies such as ACOA.

We need to invest in infrastructure. If the Atlantic innovation fund focused on infrastructure, universities, technology transfer strategies and commercialization, those sort of initiatives could be very beneficial. I have great concerns about government agencies making direct investments in individual companies.

Another potential role for ACOA would be for it to take part, through the Atlantic innovation fund, in syndicated investment. Effectively the participation of ACOA would not be as an individual investor in a company, it would be part of a syndication of investors, the majority of which would be private sector investors.

That could help by reducing overall risk and encouraging private sector investment in particular geographic and sectoral areas, so that is a potential role. However, we need to get far more creative about how we encourage tax reform as a vehicle for economic growth. We must also consider other public policy priorities, such as economic development, and work more creatively in that regard.

On a technical issue, Bill C-22 would allow tax deferred rollover treatment for Canadians who hold shares of foreign corporations that have been subsidiaries to the parent shareholders. Some companies do not qualify because the bill would require distributing corporations to have their shares listed and actively traded on a stock exchange. That is inherently unfair. It is my understanding from the Parliamentary Secretary to the Minister of Finance that the issue will be addressed in future amendments and legislation. I would be supportive of that and would encourage the anomaly to be addressed.

In terms of general tax reform, the government would do well to dust off the Mintz report on corporate taxation and implement its recommendations without significant amendment. That would go a long way to improving competitiveness and reducing the distortionary nature of our tax code.

We must move aggressively not just to reduce taxes in totality but to reduce those which have the most negative impact on economic growth and opportunity. Jack Mintz, in his report to the Minister of Finance, went a long way toward doing that. However the report has collected a lot of dust and has not garnered the respect it deserves. The significant changes that should have followed the report never occurred.

To compare the way the current Liberal government deals with the erudite reports of great Canadians like Jack Mintz to the way the Mulroney government dealt with such reports, we need only look at the great report of Donald MacDonald on free trade.

Donald MacDonald had been a Liberal cabinet minister yet the Mulroney government recognized the inherent benefits of following the recommendations of the MacDonald commission. The Mulroney government pursued a controversial free trade policy, fought an election on it and did what was at the time relatively unpopular. In the 1988 election over half of Canadians voted against free trade yet the Mulroney government had the courage, vision, foresight and wisdom to pursue innovative policies and do what was right.

That is what I hope to see from the current government. I hope it has the courage, vision and foresight to pursue an aggressive policy of innovative tax reform and thereby create greater economic growth and opportunity for all Canadians.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I am pleased to address this important legislation, but I want to say from the outset that my party will oppose Bill C-22.

Why? Because of the lack of concrete measures that would serve the public interest, particularly low and middle income earners.

I want to discuss the tax cuts that were mentioned in the last federal budget and that will now become reality with Bill C-22. These tax cuts by the Minister of Finance are great for very high income earners.

If we look at measures such as lower tax rates or the new tax rate on capital gains, we realize that those who will benefit the most from the Minister of Finance's budget and tax cuts are the people who earn at least $250,000. The Minister of Finance targeted these people first and foremost. As of this year, this group will save about $19,000 in taxes.

Instead, we are shocked to see how minimal the tax cuts and savings for low and middle income families are.

Taking the example of a single parent with one dependent child and an income of $30,000, this person will have a tax saving of $750 and will continue to pay taxes. Is it normal for a single parent family, with a single wage-earner and one child to earn $30,000 and still pay some $1,545 in income tax, even after a tax cut? Is this normal for a family that has to live on $30,000? That is the cut-off figure for the poverty line, according to Statistics Canada.

Is it normal for the federal government to continue to impoverish this family still further, even with the tax cuts, by making it pay an average of $1,500 in federal income tax? No, it is not. A single parent with one child and an income of $30,000 ought not to be paying any federal income tax.

That is the way it is in Quebec. For some time now the Government of Quebec has been revising its tax categories. It has revised the marginal tax rates with the following result: a family of two adults and two children with an annual income of $47,000 will pay hardly any tax. How is it that a family with one child and one wage earner is still in the situation of having to pay more than $1,500 in tax?

I can already hear the Parliamentary Secretary to the Minister of Finance replying “That is wrong, it makes no sense”. I have news for him. It is wrong to say that it makes no sense. He should save his breath. People have just finished filing their income tax and they have it fresh in their memories that, once again this year, they have paid federal tax even though they are in the low income category.

When we look at the tax cuts for low and middle income families, we see that the tax savings this year, for example, will be no more than $300 or $350. That is for this year, because these tax cuts are being phased in between now and 2004; that is about the average.

But the high income earners get great breaks. As I mentioned earlier, on average, those earning $250,000 and up will save $19,000 this year. There is a double standard here. The government has also forgotten that it is low and middle income earners who have brought down the deficit since 1993, who have contributed to the huge surpluses, and we will come back to this later.

Middle income families are the federal government's cash cow. They are the source of most of the money collected in income taxes. The government should have been a bit more sensitive when it came to this category of revenue. These families should have been given a few more credits for having played such a major role in helping put the fiscal house in order.

It can never be said often enough that all the cuts made by this government since 1994, such as in the Canada social transfer for funding health, education and social assistance, have taken their toll on these families. These are the people really responsible for putting the fiscal house in order and generating surpluses. They are still doing it today. It must never be forgotten that every year the Liberals greedily help themselves to the surpluses accumulating in the EI fund because of the premiums paid by workers and employers.

It is not right that barely 40% of unemployed workers qualify for EI benefits. It is not right. The system is too restrictive. It excludes too many people who should normally have been entitled to EI benefits, since everyone pays into the plan now.

There is something wrong when these people are being hung to dry by the last budget, actually the last two budgets, and asked to help with fiscal consolidation through their contributions. The government does not have to worry any more.

Everything left in the employment insurance fund, once it has paid benefits to only 40% of the unemployed, the rest, that is 60%, goes into the consolidated revenue fund. It is added to general revenues, therefore contributing to fiscal consolidation and general surplus.

Why is it that these people could not benefit from true employment insurance reform; a real reform, not a “reformette”, a true reform of the employment insurance plan using most of the accumulated surplus to really help the unemployed instead of excluding 60% of them?

What we have instead is tax relief especially for millionaires, probably those who contribute the most to the Liberal Party coffers. We have unemployed workers who are excluded from the employment insurance plan. Low income single parent families with one child, making $30,000, are still paying $1,500 in federal income tax. It is despicable.

Is there a justice in this country? Are we eventually going to do something for these people or are we going to shamelessly forge ahead with the same budgetary policy we have being following so far?

As for social housing, why was there nothing in the past two budgets, that is, those of February and October 2000, the October mini budget geared to the election, of the Prime Minister in waiting. He has long been in waiting, but he is still hoping.

How is it they failed to consider social housing? It is an important issue that probably affects the single parent family, with one dependant and an income of $30,000 or less, which I cited as an example earlier.

How is it that this family is being put off once again? Why is not one cent provided for social housing? Is this a matter of no importance?

And yet, when we look at the statistics, the number of people spending over 50% of their income on housing has increased alarmingly, especially since the start of the 1990s.

At the moment, if we look at the statistics, there are 833,000 households—nearly a million households—that should be offered social housing, because they spend over 50% of their income on housing. That means that the other 50% is left for all the rest: food, electricity, telephone, clothing the children, child care and heating in winter.

When we think of the scandalous profits of the oil companies, which have raised prices significantly in the past two years, we could say there is collusion—let us not beat about the bush—in the oil industry.

They get together and raise prices at the same time. This is what the major oil companies do, and the government does nothing about it. Who is hit by the oil crisis, a crisis created by the big oil companies through collusion? Again, it is the poor, it is those who, after spending 50% of their income on rent, must spend part of the other 50% on heating.

Given such glaring needs, why did the federal government not think for one second of including new money for social housing in its budget?

If the government had continued to spend proportionally the same amount on social housing that it did before 1994, if it had maintained these expenditures since 1994, there would be 30,000 additional social housing units in Quebec alone. The government should have invested $3.5 billion in social housing since 1994, but it did not.

I cannot believe that, with surpluses coming out of his ears—even with the downturn—the Minister of Finance is not ashamed when he gets up in the morning and looks at himself in the mirror, because he did not show any consideration for the poor, who are not the main beneficiaries of his tax cuts and of all the measures implemented by the government since 1993.

I can hardly believe that. Why did he not also consider—after talking about it for so long—the possibility of transferring $500 million from the employment insurance fund to Quebec, to set up a true parental leave program?

Instead, they are putting the $6 billion surplus in their pockets to increase the surplus and to promote the image of the Prime Minister in waiting, that is the current Minister of Finance. Why have these people, who claim to be civilized, who claim to support social justice, not think of transferring, as provided under section 69 of the Employment Insurance Act, the $500 million that is required to set up a parental leave program in Quebec?

Because of this and because of them—and they are not in the least ashamed—the introduction of this plan has been put off until 2003. How is it that they are making young couples postpone having children? Are children not important to this government? Why will it not agree to transfer to Quebec the amount allowed under the Employment Insurance Act? Is it because Quebec is asking? Do they have it in for young families in Quebec?

It is sometimes hard to understand, to keep one's cool, in the face of such deceit, such an obstinate refusal, such incredible closed-mindedness, when by rights we should have had a parental leave plan in Quebec in 2001 or 2002, thus helping not just young parents working for businesses or the government, but also those who are self-employed.

Unlike the federal plan, the Quebec parental leave plan pays benefits to self-employed workers and takes the reality of the labour market into account. Not only are we still dealing with dinosaurs when it comes to a single currency, but also when it comes to parental leave. They are incapable of adapting to the labour market and keeping the public interest in mind.

Let us not forget that not only does federal parental leave not cover self-employed workers, but the eligibility criteria for this leave are the same as for employment insurance. This means that most people are excluded right off the bat. That is the situation right now. A little over 40% of unemployed workers qualify for EI benefits; if these are the same criteria used for the federal parental leave policy, quite a few people besides self-employed workers will not qualify.

In Quebec no one is excluded, not the self-employed, not the parents who wish to take advantage of our parental leave program. It is a far superior program. Because of the obstinate refusal of this government, however, young parents cannot take advantage of such a program.

How can it be that there has been no thought given, with billions of dollars in surplus again this year, to indexing the social transfers to the provinces, for health and education in particular? How can it be that, seeing what is going on in the hospitals, with the lack of funds and increasing demand, no thought is being given to putting more into transfer payments for health and education?

They say “But we must be prudent. The surplus is not all that big”. This is false. Contrary to the Minister of Finance's forecast in last year's budget, the surplus will not be $4 billion—insignificant, even taking into account the tax cuts in the October mini budget—but rather in excess of $17 billion, or four times his predicted figure. When it comes down to it, the Minister of Finance's sole plan was to use figures that have nothing in common with reality for petty political gain.

That is what he has done ever since he has been Minister of Finance. When there was a federal government deficit, he inflated the deficit figure, telling people “Look out, we need to be careful, because we do not have all the manoeuvrability we need, and the battle is far from over”.

He even told the members of his own party “We need to be careful”. But there is always a limit to prudence. We are all in favour of being careful, of having a contingency fund, but we are not in favour of lying to the population by not giving the real figures and by avoiding any debate on how to use the surplus.

When he forecasts a $4 billion surplus and that in reality the surplus is $17 billion, the $13 billion that was not forecast is used directly to pay down the debt. He avoids any debate and puts everything on the debt. There is no democratic debate, no transparency. This is hypocrisy, big time, and he wants us to swallow it.

I made a bet with a reporter. Did he know what the Finance Minister will say next week in his economic statement? He will say “There is no unanimity among economists; some say that things may go well, others that they may go wrong”. One of his former assistants, Mr. Drummond, who has been Assistant Deputy Minister of Finance and who is now the chief economist at the Toronto Dominion Bank, said “We have to be careful. We could come back to deficits in three years”, and he knows what he is talking about. Having been an assistant to the Minister of Finance for several years, Mr. Drummond cannot go wrong that easily and talk nonsense.

The Minister of Finance is setting the stage for next week by saying “Surpluses will not be as high next year. The economy is slowing down, we could go into a recession, find ourselves in the red. We may not necessarily be headed toward a deficit, but we still have to be careful. Since there is no unanimity among economists, I prefer to draw a line down the middle and say that surpluses will not be as high”. In other words, he is still going to tell us nonsense.

He is setting the stage. Some economists are optimistic. Yesterday, Thomas Wilson, a well known forecaster, forecast a surplus of $14 billion for the fiscal year ending March 31, 2001. He is a bit closer to reality. Our own figure is $17 billion. Even with last October's tax cuts and the new spending for Genome Canada, we still come up with $17 billion.

Next week, the Minister of Finance will tell us we have to be careful. That is a lie. It is hard to believe how much the public has been fooled since this man has become the Minister of Finance.

It is so much so that the economic statement exercise is losing its credibility, according to several analysts, particularly Mr. Piché, of La Presse , because the figures we are given are false. They are just not the right figures. We cannot rely on them to tell whether government management is good or bad. Does it follow certain priorities in its management, or does it take into account the interest of the population? There is no way for us to know, because we do not have the right figures. We have to find them for ourselves.

For the last fiscal year ending on March 31, we have a surplus of at least $17 billion. For each of the last five years, I have tried to lower the figures because of an economic downturn, but I cannot see the day when we will have a deficit.

The government could have done a lot of things with this money. It chose to side with the millionaires and not with the population. For all these reasons, we are going to vote against the bill.

[Ken Epp, Canadian Alliance, Elk Island, AB]

I am honoured to stand in the House today to speak to Bill C-22, an act to amend the Income Tax Act. Actually it was the Liberal Party election act. Members will recall that the finance minister announced most of the provisions that we are dealing with today just days before the election was called. Of course he had no idea that the election would be called four days later. After he did his economic update and announced these things in the House in October 2000, it came as a total surprise to him that lo and behold the Prime Minister announced an election.

I would like to begin by asking a simple rhetorical question. If there are policies that are necessary just before an election, how come those policies are not necessary between elections? Therein lies a very important question.

We have dealt with it over and over. We dealt with it not long ago when we were dealing with the equalization act. Suddenly it was necessary to lift the cap. It was done because there was an election coming. Believe it or not, the voters bought into it. A whole bunch of them in Atlantic Canada replaced sitting members with Liberal members because the Prime Minister said that the cap would be lifted.

When the legislation came in we dealt with it in the House. We did indeed lift the cap but for one year. We had some questions about the whole equalization process. We thought it should be revisited in order to look at it rationally because it was a very convoluted system. The opposition parties suggested that if it was good for an election year to lift the cap, it should be good policy to lift the cap in the long term. The government said no to that amendment.

All the Liberal members stood on command and voted against the amendment. That is a curiosity to me. If it is good economic policy we should be doing it, whether or not there is an election. If it is not good economic policy then we should be able to communicate to Canadian taxpayers why it cannot be done, and hopefully they would then trust that we would be fiscally responsible in managing their money properly. That is how we would gain their support.

Now we have Bill C-22, an act to amend the Income Tax Act. It goes on from there, but really it is a bill to enact the provisions of the Liberal fall election campaign in 2000. Our party is leaning toward supporting the direction the Liberals are going in. After many years, being a grassroots party and representing the wishes and sometimes the demands of Canadian voters and taxpayers, we brought to the House the wishes of Canadians on fiscal matters.

The Liberal government loves to tax and spend. It loves to take money out of the pockets of taxpayers and then roll it out during an election campaign so that hopefully it can stay in power, which is its overarching principle. Four days before the election was called the Liberals said that what the Canadian Alliance was saying was right on. The polls told them that. If they wanted to win the election, they had to do these things during the election period so that they could get re-elected.

The government introduced a number of measures, some of which are included in the bill. We are now debating what the government promised, just by coincidence, four days before the election was called.

I would like to say a little about those things. First I want to give very low marks to the Liberals but high marks to their communication department. They have spin doctors who work very well. They are able to communicate with straight faces to the Canadian people that there is a $100 billion tax cut. One billion dollars is an awful lot of money and $100 billion is massive. It boggles the mind.

I have sometimes used this example when I talk to students and we talk about the way in which governments spend money, and the way they tax and so on. Sometimes we also talk about the debt. When the Liberals came into power they inherited a debt of around $520 billion. They allowed it to grow to almost $580 billion.

We will be very fortunate if by the end of the government's mandate, say in the year 2004, although the Prime Minister will probably call an election in 2003, but certainly by the end of 2004, we will be back down to the debt level that we were in 1993 when it took power. However, the spin doctors are able to convince Canadians that the Liberals are excellent stewards of the public money. They are telling Canadians to trust them because they will manage our money properly, notwithstanding that the debt is much higher than it was when they took over.

I said that the magnitude is in the billions of dollars. I do not have the exact numbers before me because I was not planning on using this example. However, when I talk to students about $1 billion I ask them how long it would take them if they had to spend $1 million at a rate of $1 per second? Some of them guess a bit and then I tell them the answer. As I recall, if they started at midnight on January 1 it would take them until January 11 or 12 before the money would be gone, approximately 11.5 days to get rid of $1 million at $1 a second.

Then I ask them how long it would take them to spend $1 billion? Again, they guess and then I tell them the answer. I tell them that to spend $1 billion at the rate of $1 per second would take until September, 31 years later. That is how long it would take to get rid of $1 billion.

Here we have a government claiming through its spin doctors a tax cut of $100 billion. That is spin doctoring at its finest. The $100 billion includes a lot of money that it just decided not to take.

I will give another example. Let us say I decided to give my wife some money to spend on a house, which I know she would love, and told her that I was going to give her $20,000 more than I planned to give her. Under my breath I would mutter that I was planning on taking $18,000 away from her. She could say that $20,000 was great but the fact is it would only be $2,000 because it would include the $18,000 that I was going to take out of the housing fund.

This is what the government has done. It is claiming $100 billion in tax relief, but included in that is a whole lot of money that is represented by money that it could have taken but which it has now decided not to take.

For example, a couple of years ago the government announced that it was restoring indexation. There was no mention made of it being retroactive, so perpetually taxpayers were still suffering the removal of indexation on the tax rates over the last number of years because the government flattened the thing out. We were paying a whole lot more taxes because of bracket creep. When the government reintroduced it, it started from the present position and did not go back. Therefore, the errors of the previous years continue to be perpetuated.

One of the things the government is claiming is that due to indexation this is a tax cut. It is not a tax cut at all. The government said that it would take $10,000 from each taxpayer and now it is saying that it will only take $8,000. In that case, the government is calling this a $2,000 tax cut but it is still taking the $8,000. To call that a tax cut is inaccurate.

Furthermore, we have the child tax benefit. It is true that in the legislation the child tax benefit would be increased but that is not a tax cut. It is an expenditure. It is a case of the government thinking of a way to spend some money on behalf of families. In a way, I have some sympathy for that position but it cannot properly or legitimately call it a tax cut. That is spin doctoring and it is not acceptable in terms of the actual message that is being put out there.

The bottom line is that the actual tax cut is not $100 billion. It is actually closer to $50 billion and that is spread over five years.

We have a whole bunch of questions with respect to the bill but the government has decided to go ahead with it. We know its members will vote for it and it will happen. I will concede that families with children would get more money from the spending program and so for them it is an advantage. For families without children, such as in the case of my wife and I whose children are grown up and have left home, there would be no tax cut. It is a spin doctoring myth.

The bill also has implications in the area of tax rates. We talk about the single tax rate. The opposition and some of the other parties, and when I talk of opposition I mean the Liberals who are in opposition to us, totally misrepresented what a single tax rate does.

Our plan was to have one rate of tax at 17% and then subsequently we revised it so that it would apply only to $100,000 of taxable income. That still included all of the present deductions. None of them were to be taken away. However, instead of talking with Canadians and honestly debating its plan versus ours, the government has totally distorted what it said about our plan and then proceeded to knock it.

It is really an unfair thing. It is as if we have two car dealers and one dealer, trying to promote his product, says that the wheels fall off his competitor's cars as soon as they are driven 10,000 kilometres. It is not true but that is what he says would happen. He repeats it over and over again and then asks, with great passion, whether the customer wants to buy a car with wheels that fall off after being driven 10,000 kilometres. The customer says, no, and the car dealer suggests that the customer buy his car.

That is what those Liberals did. I almost used a bad adjective, but thankfully I caught myself. They took our plan, totally distorted what it did, developed animosity against that caricature of what we were proposing and asked Canadians to vote for them.

There are still thousands of Canadians who want to trust their governments. They want to trust their politicians. During an election campaign when these things are said Canadians think that if their trusted government leaders are saying something it must be right so they therefore believe them.

I will take a ten second diversion to say that the same distortions happened when the Minister of Citizenship and Immigration said what she said. That was a hurtful and total distortion for a person like myself whose family members have worked all around the world with people of all kinds of different backgrounds, helping them. To be labelled the way the immigration minister labelled us and then have Canadians say they would not vote for us because we were scary is hurtful and wrong.

If we want Canadians to trust us we have to start dealing openly and honestly with them. We have to tell them the truth and start debating the Liberal proposal versus ours. That unfortunately has not happened. I resent this.

I taught mathematics and computing for 31 years in my life prior to becoming a parliamentarian and when people misuse math I get just about as upset as I do when they describe me in pejorative terms. The government had Canadians persuaded, and this is one thing in the bill, that it would reduce the lower tax rate from 17% to 16%. It had the gall to go to Canadians, say it was reducing the rate to 16% and claim that was even better than the Canadian Alliance proposal.

However, it was worse than that. In every category, including that first category at the low rate, our tax plan would have given Canadian taxpayers a greater tax break. The reason was simple. Even though our rate was 17%, it was on less of taxpayers' income. We proposed, for example, that a two parent family with two kids would not pay any income tax on the first $26,000 of their earnings. The Liberals ignored that. They ignored the fact that we would increase the exemption. All they did was talk about the fact that they would reduce the lower rate to 16% from 17%.

I resent it when people trade on a misrepresentation of mathematical facts. This is what the government has done and this is what we would be passing with Bill C-22. If we pass the bill later today we would be approving the reduction of that rate to 16%. Canadians would get a smaller tax break than they would have had they voted for us because of the fact that the Liberals have a great deal of expertise in messaging, in telling people “this is what is” when in fact it is just the opposite.

In passing Bill C-22 the Liberals ought to send out a press release to say that while they would be reducing the income tax rates and going from three levels to four, while they would be decreasing the 17% rate to 16%, the 25% rate to 22%, the 29% rate to 26%, and retaining the 29% rate for everything over $100,000, there is something else. I would like that press release from the Liberal government to also say in bold letters at the bottom of the page “Please note that Canadians were hoodwinked into voting for a party that proposed this bill and got it pushed through the House and that it gives taxpayers a smaller tax break than, first, they deserve, and second, what the Canadian Alliance would have given them”. That is what the press release should say. I am expecting the Minister of Finance to put that on the bottom of the press release later today or next week when this bill is finally passed.

I am sure that will happen. I see the parliamentary secretary over there grinning from ear to ear, which of course shows compliance with my present request.

The fact of the matter is that a $100 billion tax cut is a $50 billion tax cut or even a little less if we look at how much the taxes are actually being cut. The rest is spin doctoring. The fact of the matter is that this would produce a tax cut smaller than the tax cut we would have provided.

There are some other provisions in the bill with which I happen to agree. There is a disability tax credit. There is also the issue of children. Families have big expenses when raising children. The government is going in the right direction here by making it slightly easier for families, but it does not come anywhere near recognizing the actual costs of raising children. We would have substantially increased the deduction for children. The government has not done that. The taxpayers would still pay taxes on the money and if they qualify they get a tax credit. Most people in the middle income bracket with two earners have the promise of a child benefit for which they are not eligible. Their taxes would stay the same. The government is not reducing the taxes yet is announcing with this bill that taxes would be reduced.

I regret that my time is up, Madam Speaker, but thank you for giving me the time to express my views on the bill. I will vote against the bill for the reasons I have articulated.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I appreciate the opportunity to address the House at third reading of Bill C-22, the income tax amendments act, 2000.

The bill would implement key elements of the government's five year tax reduction plan, the largest tax relief package in Canada's history, and would legislate the technical amendments in Bill C-43 which died on the order paper last fall. Each measure in the bill is based on the principles of fairness and equity in the federal tax system to which we have been committed since 1993.

The most important component of the bill delivers measures announced in the 2000 budget and last October's economic statement to set out a multiyear plan for further tax reductions.

This plan, which provides $100 billion in tax relief by 2004-05, will reduce by an average of 21% the federal personal income tax paid by Canadians.

Families with children will receive an even larger tax cut of about 27% on average.

As of January 2001, tax rates on all income levels were reduced and the 5% deficit reduction surtax was eliminated. The low and middle income tax rates fell to 16% and 22% respectively. The top 29% rate was reduced to 26% on incomes between $61,000 and $100,000, which means the 29% rate applies only to income over $100,000. As all the economists and analysts have noted, the timing could not have been more perfect to bring in these tax cuts.

Increased support for families with children would be provided through the Canada child tax benefit. The maximum Canada child tax benefit for the first child would rise to $2,372 in July, well on the way to the five year goal of $2,500 by the year 2004.

For the second child the maximum Canada child tax benefit would increase to $2,308 in July 2004.

These amendments must be in effect by July 1, so that families can get this benefit within the set timeframe.

Other amendments to personal income tax are specifically designed to help those who need them most.

The bill would increase the amount on which the disability tax credit is based. It would expand the list of relatives to whom the disability tax credit can be transferred to make it consistent with medical expense tax credit rules and it would allow speech language pathologists to determine eligibility for the disability tax credit with respect to speech impairments.

In addition, the bill would increase the maximum child care expense deduction for children for whom the disability tax credit can be claimed and the amounts on which the caregiver and infirm dependant credits are based.

It would also include certain incremental costs under the medical expenses tax credit when a principal residence is built for people with mobility impairments.

Moreover, an amount of up to $3,000 in scholarships, fellowships and bursaries will be tax exempt, provided the student is eligible for the education tax credit. Self-employed workers can deduct from their income the share of the contributions to the Canada pension plan or to the Quebec pension plan paid by the employer for their own benefit.

Other personal income tax changes clarify the rules under which clergy can claim a deduction for their residence, allow Revenue Canada to release information about former registered charities under certain conditions and exempt municipalities from filing T4s for volunteers to whom they paid not more than $1,000.

Another element of the tax reduction plan would help make Canada's business income tax more internationally competitive. Corporate tax rates would drop to 21% from 28% for businesses in the highest tax sectors to make them more internationally competitive, beginning with a one point tax cut effective January 1, 2001.

By the year 2005 the combined federal-provincial tax rate would drop from the current average of 47% to 35%, five percentage points lower than the U.S. This would put our businesses on a more competitive level with other G-7 countries and serve to attract investment and create jobs.

The plan also provides a tax deferred capital gains rollover for investments in shares of certain small and medium size businesses, and a 50% reduction of the capital gains inclusion rate. Thus, the highest federal-provincial tax rate on capital gains will be lower than the same combined rate in the United States.

Increasing the employee stock option deduction from one-third to one-half means employees in Canada would be taxed more favourably on stock option benefits than employees in the United States. In addition, the bill would allow the deferral of tax on certain stock option benefits and an additional deduction for certain stock option shares donated to charity.

Bill C-22 would ensure a comparable tax system for Canadian banks and foreign bank branches operating here. It would strengthen the thin capitalization rules, phase out the special tax regime for non-resident owned investment corporations and introduce a temporary 15% investment tax credit for grassroots mineral exploration.

Technical amendments include extending the additional capital tax on life insurance corporations until the end of 2000 and clarifying the tax treatment of resource expenditures and the rules governing gifts of ecologically sensitive land.

There are three remaining measures I will touch on briefly before closing.

The first would introduce changes to the taxation of trusts and their beneficiaries, in particular property distributed from a Canadian trust to a non-resident beneficiary, mutual fund trusts, health and welfare trusts and those governed by RRSPs and RRIFs.

New antiavoidance measures will ensure that transfers to trusts cannot be used to unfairly reduce taxes.

The next measure would ensure that Canada retains the right to tax immigrants on gains that accrue during their stay in Canada. It would also clarify the effects of new taxpayer migration rules on rights to future income and allow returning former residents to unwind the tax effects of their departure regardless of how long they were non-resident.

To avoid international double taxation, former residents would be able to reduce Canadian tax payable on their pre-departure gains by certain foreign taxes paid on the same gains.

Another measure would make advertising expenses in periodicals with at least 80% original editorial content fully deductible and those in other periodicals 50% deductible regardless of ownership.

After July 1996 Canadian pension funds and other entities that own Canadian newspapers qualify as Canadian citizens under the ownership requirements of the Income Tax Act.

Before closing, I wish to mention that a number of amendments were made to this bill in committee. On behalf of the government, I wish to thank members of the Standing Committee on Finance for their detailed examination of this bill.

Improvements have been made to several provisions, including those affecting back to back loans, weak currency debts, foreign accrual property income, partnerships, mortgage investment corporations and segregated fund trusts, just to name a few.

Each of these amendments contributes to fairness in the tax system.

I remind the House that fiscal responsibility for government is fundamental and tax cuts are essential. At the same time we are committed to maintaining an effective, fair and technically valid tax system. Without a doubt this is the thrust of Bill C-22.

This bill will implement the key features of the five year tax reduction plan, which will lighten the tax burden on all taxpayers, strengthen support for families with children, and increase the competitiveness of the Canadian corporate tax system internationally.

I urge all my hon. colleagues to keep in mind that Canadian children need the Canada child tax benefit increases on July 1, a fact that makes speedy passage of the bill essential.

Proceeds Of Crime (Money Laundering) Act

[Peter MacKay, Progressive Conservative, Pictou—Antigonish—Guysborough, NS]

Mr. Speaker, I appreciate the opportunity to speak to the bill. This is a very important piece of legislation and I commend the previous speakers, including my colleague from the New Democratic Party. It is interesting to note that many members have picked up on the fact that those in the other place have served a very useful purpose in reviewing the legislation and improving upon the legislation, as is often their wont.

I should indicate at the outset that I will be splitting my time with the hon. member for Kings—Hants.

Bill S-16 essentially deals with a response to concerns that were raised by the Senate banking committee. Bill S-16 amends the Proceeds of Crime (Money Laundering) Act and particularly focuses on areas of solicitor-client privilege, the disclosure of information and records retention. This is, of course, information that is critical in tracing the origins and whereabouts of potential assets linked to criminal activity. The money laundering that takes place in Canada is of great concern to our citizenry and certainly to our law enforcement community.

Money laundering, as the Speaker would know, is a process by which criminals attempt to conceal profits earned from crime so that the money appears as if it comes from legitimate sources. When all traces of the money's criminal origins are erased, the money can safely be used to buy goods and services.

It is shocking to think that between $5 billion and $17 billion is laundered in Canada. Of course it is difficult to accurately assess just how much because the proper authorities are not able to determine this amount, but it is estimated to be in that range.

There were shortcomings in the original legislation which Bill S-16 attempts to correct. Money that is laundered is often shifted among countries, financial institutions and investments without a paper trail so that it cannot be traced back to its origins. With the advancing sophistication of technology, competent and sophisticated criminals are able to access and utilize these now boundless abilities to transfer money through cyberspace, leaving no tangible evidence as to its origins.

Obviously much of this money is obtained by very nefarious means such as fraud or intimidation. This is the type of money that is very often directly linked to criminal organizations in Canada and has been the focus of a number of pieces of legislation and the focus of considerable debate in recent months and years. Canada has come under heavy criticism in recent years for being a nation where criminal organizations are able quite easily to launder their proceeds of crime. For that reason and that reason alone, it is incumbent upon us as elected officials and as part of the federal legislative branch to respond. That is what this legislation is intended to do, to enhance the existing proceeds of crime legislation.

The response last spring came in the form of government Bill C-22, the Proceeds of Crime (Money Laundering) Act, which was passed. Bill C-22 imposed new reporting and record keeping requirements and created the Financial Transactions and Reports Analysis Centre of Canada to receive and analyze information so there would be a focal point, a centre in Canada where those working in this location would be specifically tasked to assist law enforcement communities in locating and tracing proceeds of crime.

Concerns were expressed at that time about the bill by the privacy commissioner, the Canadian Bar Association and other groups that appeared before a parliamentary committee. The Senate banking committee looked into the bill in June 2000 and, to be quite blunt, was not impressed. The committee felt that the legislation was considerably flawed and had a number of shortcomings which it had hoped to remedy. The government indicated at that time that it was unwilling to entertain amendments to the legislation because it was too late in June and the House of Commons had to deal with other bills and indicated that therefore the Senate might make changes in the future.

Coming forward from that point in June 2000, we know that the Secretary of State for International Financial Institutions did give a written undertaking to the committee that certain changes would be contemplated and would occur in a new bill to be introduced in the fall. Those changes formed the substance of Bill S-30 which was introduced in October. Bill S-30 is identical to Bill S-16 which is currently before us.

As the Speaker and Canadians well know, the entire process in October was pre-empted by the legacy lust of the Prime Minister in his decision to put this piece of legislation and other very useful pieces of legislation aside and toss them in the dustbin in order to seize his political advantage and call an election.

Beyond the changes that were agreed to in the letter from the secretary of state to the Senate banking committee, the bill was then reported with the observation that the government should consider other amendments. Those amendments would include, first, further insurance that solicitor-client privilege would be protected by adding the phrase law office in any place in clause 63 where the term dwelling house appears. This simply expanded the physical premises that would attach under the legislation.

Second, the government would hold the first review of the act after three years, not five years, with a five year review to be held after that. This is essentially an opportunity in the first instance to look at the fallout from this legislation at an earlier date and assess the implications after three years.

Finally, the government would require regulations under the act to be tabled before the committee in the House each year. The Progressive Conservative Party is very supportive of all attempts to bring about transparency, both for the public and for parliament, and to access information that is rightfully to be placed before Canadians.

This is important in the broader context of trying to rebuild lost confidence in the process and in this institution. It is clear that the bill does not include all the changes recommended by the committee, but it goes a long way to improving the legislation.

The bill will focus on the following legal issues. The first is solicitor-client privilege, which is an attempt by individuals to prevent private information they share with a solicitor from being made public or in any way disclosed. Bill C-22 only dealt with instances of solicitor-client privilege involving legal counsel.

Bill S-16 clarifies that officials of the Financial Transactions and Reports Analysis Centre of Canada may not examine or copy documents subject to solicitor-client privilege where the documents are, and this is the important part, in the hands of someone else until a reasonable opportunity has been made for the person to contact legal counsel. The bill would put in place a safeguard to allow an individual to speak to a lawyer before documents are seized.

This responds to concerns raised by the Certified General Accountants Association of Canada. Privacy is something we can never take lightly. We must always strive to ensure individuals are protected in their privacy rights and in their business transactions. However all that must be balanced with the recognition that there are those who rely upon nefarious means and complicated schemes to steal from others, rip people off and engage in blatant activities to take away a person's wealth.

To that end a balance is struck in the legislation. It contains safeguards and methods for review that allow for a weighing of evidence to determine whose interests are best being served.

Bill S-16 would allow individuals or the privacy commissioner to take the Financial Transactions and Reports Analysis Centre of Canada to court if they are denied access to their files. There is therefore a chance for judicial review if there is denial of access.

Next is disclosure of information. Bill S-16 narrows the range of information that may be disclosed by the Financial Transactions and Reports Analysis Centre of Canada to the Canada Customs and Revenue Agency, the police, and citizenship and immigration officials.

After listing the types of documents that could be disclosed Bill C-22 gave the centre broad power to disclose any information so designated. The amendment would replace that power with the power to disclose similar information relating to identification.

Finally, there is record retention. Records not disclosed by the centre are to be destroyed five years after they are received or collected. Those which have been disclosed are to be destroyed eight years after they are received or collected. These are further safeguards. It may be called fine tuning but it is important fine tuning nonetheless. The sober second thought of the Senate has been usefully exercised here.

[Libby Davies, NDP, Vancouver East, BC]

Mr. Speaker, I am pleased to rise today to contribute to the debate on Bill S-16. The New Democratic Party supported Bill C-22 in the previous parliament, which was approved and received royal assent. We voiced a number of concerns as it went through committee stage and amendments. We are glad to see that some of those concerns are being addressed in Bill S-16.

Members of the NDP like other members of the House are extremely concerned about the impact of organized crime on our local communities and across the country. There is no question that it is something that is very sophisticated. It is very pervasive and has a huge impact on many people's lives.

Personally, as well as in terms of financial institutions and various businesses, we are all very familiar with cases that do come to public light. They give us a glimpse of the kind of operation that exists outside the law in terms of money laundering, the profits from organized crime and how they are dealt with.

For most people it is a fairly frightening glimpse when we look at a system that is so complex. As in previous legislation the attempts in this legislation to deal with that sophistication and to find the appropriate mechanisms to track where money is flowing, where the proceeds of organized crime are coming from, is very important.

The NDP put forward some concerns about the original bill. In any legislation there has to be a balance between a reasonable right and invasion of privacy. There must be an understanding that the power of the state is not absolute. When a new agency is created with far reaching powers we have to be very careful about how it is set up.

For example, before Bill C-22 was approved we and a number of witnesses who came forward to debate the bill expressed concerns about whether or not there was potential for charter of rights violations, that the guarantees of reasonable search and seizure appeared to be at risk.

We were also very concerned about the possible pressures there would be on consumers. Needless to say, there would probably be a significant cost in setting up any sort of regime to track and communicate suspicious transactions. I do not know if that has been spelled out, but it seems to me that it would be enormous in terms of what the responsibilities would be for financial institutions and how that would get passed on to law abiding consumers.

Members of the NDP were also very concerned about the fact that the bill did not address what is often referred to as white collar crimes or technology based crimes. Unfortunately this is a huge area that is booming. We are all very familiar that the growth of the Internet and computers in general, credit card fraud, telephone fraud, stock market manipulation and computer break-ins are all things that can be characterized as technology based crimes or white collar crimes. There is no question that there is a very serious element within that which is perpetrated by organized crime. It seems to us that the original bill did not and the legislation before us today does not adequately address the concerns that surely must be addressed in terms of technology based crimes.

In the debate today I heard a number of members talk about different elements of organized crime and the impact they have. The member for Esquimalt—Juan de Fuca spoke about the drug trade and its human impact. I will spend a couple of minutes speaking about that as well because it strikes me that there is a contradiction.

On the one hand, as we should, we go to great lengths to deal with a legal apparatus and the setting up of a new agency, FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada, as it is called, and what a mouthful that is. We go to great lengths to set up a very elaborate system for tracking suspicious transactions, trying to trace what has happened and making sure that there is adequate reporting.

On the other side of that coin in terms of organized crime and the billions of dollars that are generated illegally through drug trafficking and drug use and the profits that are made, we do not pay enough attention to the human costs that are very clearly evident on our streets, in urban centres and even in smaller communities across Canada. I have only to look at my own riding of Vancouver East to see the devastation that happens in an environment where illegal drug activity is a huge underground economy.

I believe, and I certainly would echo the comments from the member for Esquimalt—Juan de Fuca, that we have to pay attention to that human side. We have to recognize that in some respects it is the illegality of those substances, heroin or crack cocaine or other substances, that drives this underground market and in effect criminalizes addicts when they are on the street with very few resources. We end up with a community where people are literally dying on the streets from overdoses.

It strikes me as a horrible irony that while on the one hand we can somehow relate to this issue from a legislative point of view by setting up this centre, on the other we cannot relate to this issue from a human point of view and take the actions that are necessary to actually reduce the harm of what is happening on our streets because of these illegal substances.

I would also add that we need a saner, more humane approach to drug use in Canada and we need to be seriously willing to reform Canada's drug laws, which have not been reformed for decades. We have had Senate hearings. We have had debates in the past where some of these issues have been debated very seriously, but not in recent times. If we took the time to do that I believe we would go a long way toward dealing with some of the causes of the devastation we see on our streets. We could in fact look at the issue of how organized crime is being driven by this very lucrative business of drug use.

We could look to the experience of what is happening in Europe, where the approach has been to medicalize drug use and addiction instead of criminalizing people. The approach has been to try to remove the harm from buying drugs on the street. Not only has there been a huge financial saving in health care costs and judicial costs, but lives have been saved as well.

I wanted to make that point because it seems to me that we are missing the boat unless we look at the total picture. We cannot just say that all this money is coming from organized crime and a lot of it is coming from drugs unless we are willing to examine Canada's drug policies and recognize that they need to be seriously reformed.

For example, even with marijuana we see the stories about grow operations in the papers all the time. In east Vancouver there are media reports of various grow busts taking place. We are talking about multimillion dollar operations. It seems to me that if we had the courage to examine our drug policy laws and to seriously look at reform of those laws we would be going a long way in terms of removing the incentive and the huge opening that exists for organized crime to become a part of the underground economy. That is a very important aspect of the debate.

In regard to the bill before us today, I did want to say that the NDP certainly supports the amendments that are contained in the bill as a result of the previous bill, Bill C-22. We support them in principle. Important questions were raised as a result of Bill C-22. It is notable that there has been a sort of second look based on the issues raised previously, for example, knowing how long this new centre would be able to retain the information it collects and whether there are issues in terms of the balance between the right to retain information or dispose of it.

Another question was about when and how that information would be disposed of. If an agency is created, for how long does it have a right to have that information and in which manner can it be disposed of? If information is to be disclosed to law enforcement authorities, how should that be done? Those issues needed to be more clearly spelled out and we certainly feel that the present legislation goes some distance to addressing those concerns put forward by witnesses and by different parties in the House.

In conclusion, at this time we in the NDP are pleased to continue our support in principle. We think it is an important bill. It has obviously had strong support within the House. It is always good to have a second look based on evidence from witnesses to make sure that the bill is fine tuned to address concerns put forward.

I hope as the debate continues that the government will pay attention to the concerns that are still being expressed. It seems to me that there is strong general support but some areas still need to be looked at.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I welcome the opportunity to speak today at second reading of Bill S-16, an act to amend the Proceeds of Crime (Money Laundering) Act. This bill would improve upon its predecessor, Bill C-22, which received royal assent last June. That bill was needed for several reasons.

Allow me to take a moment to review some of the background to that bill.

As hon. members know, money laundering in recent years has become more and more of a problem in Canada. By definition, money laundering is the process by which dirty money from criminal activities is converted into assets that cannot be easily traced back to their illegal origins.

Today's open borders provide criminals with a daily opportunity to launder millions of dollars in illegal profits with the intention of making the profits look legitimate. These activities can undermine the reputation and integrity of financial institutions and distort the operation of financial markets if adequate measures are not in place to deter money laundering.

To illustrate the magnitude of the problem, it is estimated that between $5 billion and $17 billion in criminal proceeds are laundered through Canada each year. A significant portion of this laundered money is linked to profits from drug trafficking.

Money laundering became a crime in Canada back in 1989. Prior to Bill C-22 Canada had many of the building blocks of an anti money laundering program in place within the criminal code and the previous Proceeds of Crime (money laundering) Act. However the government realized that much more needed to be done to combat the problem.

On one hand, the government was being pressured by law enforcement agencies for better enforcement tools. At the same time, on the international front, Canada was subject to scrutiny because of perceived gaps in our anti money laundering arrangements.

In 1997 the 26 member financial action task force on money laundering, the FATF of which Canada is a founding member, found Canada to be lacking in certain key areas and strongly encouraged us to bring our anti money laundering regime in line with international standards.

As a result of pressure here and internationally, the government brought in Bill C-22 in the last parliament. That legislation strengthened the previous statute by adding measures to improve the detection, prevention and deterrence of money laundering in Canada. Bill C-22 contained three distinct components which enabled Canada to live up to its international commitments.

First, the bill provided for the mandatory reporting of suspicious financial transactions.

Second, the legislation required that large cross-border movements of cash or monetary instruments like travellers' cheques be reported to the Canada Customs and Revenue Agency.

Third, Bill C-22 provided for the establishment of the Financial Transactions and Reports Analysis Centre of Canada, FINTRAC, which came into being on July 5, 2000. An independent agency, FINTRAC is set out to receive and analyze reports and to pass on information to law enforcement authorities if it has reasonable grounds to suspect that information would be relevant to a money laundering investigation or prosecution.

I should also mention that there are safeguards in place to ensure that the collection, use and disclosure of information by FINTRAC are strictly controlled. These safeguards are supported by criminal penalties for any unauthorized use or disclosure of personal information under FINTRAC's control.

FINTRAC is also subject to the federal Privacy Act and its protections.

Bill C-22 was welcomed last year by members on all sides of the House for several reasons.

First, it responded to domestic law enforcement communities needs for additional means of fighting organized crime by more effectively targeting the proceeds of crime.

Second, it responded to Canada's need to meet its international responsibilities in the fight against money laundering. It did so while providing safeguards to protect individual privacy.

In spite of these accomplishments, several of our hon. colleagues in the other place believed the act could be strengthened even further and could benefit from additional amendments. The government agreed and the result is Bill S-16, the legislation before us today.

Let me take a moment and provide some background.

When Bill C-22 was studied by the standing Senate committee on banking, trade and commerce last spring, members of the committee indicated that while they supported the bill the legislation would benefit from amendments to certain provisions.

The Secretary of State for International Financial Institutions made a commitment at that time to clarify the act by including several of the changes requested by the committee. The result was Bill S-30 which was introduced last fall and subsequently died on the order paper when the election was called. It was reintroduced in this parliament as Bill S-16.

The amendments in this bill relate to four specific issues. The first deals with the process for claiming solicitor-client privilege during an audit by FINTRAC. The agency is authorized to conduct audits to ensure compliance with the act.

The current legislation contains provisions that apply when FINTRAC conducts a compliance audit of a law office. FINTRAC must provide a reasonable opportunity for a legal counsel to claim solicitor-client privilege on any document it possesses at the time of the audit.

The proposed measure in Bill S-16 pertains to documents in the possession of someone other than a lawyer. It requires that that person be given a reasonable opportunity to contact a lawyer so that the lawyer could make a claim of solicitor-client privilege.

Another measure would ensure that nothing in the act would prevent the federal court from ordering the director of FINTRAC to disclose certain information as required under the Access to Information Act or the Privacy Act.

The amendment would ensure that the recourse of individuals to the federal court would be fully respected. Indeed this was the intent of the original bill, Bill C-22.

The third amendment more precisely would define the kinds of information that could be disclosed to police and other authorities specified in the legislation. It would clarify that the regulations setting out this information could only cover similar identifying information regarding the client, the institution and the transactions involved.

Finally, Bill S-16 would ensure that all reports and information in FINTRAC's possession would be destroyed after specific periods. Information that has not been disclosed to police or other authorities must be destroyed by FINTRAC after five years. Information that has been disclosed must be destroyed after eight years.

Bill C-22 introduced sweeping changes to Canada's anti money laundering regime. First, it introduced new reporting requirements which would result in more reliable, timely and consistent reporting. Second, it introduced centralized reporting through FINTRAC which allowed much needed and much more sophisticated analysis.

Third, successful prosecutions that benefit from analysis by FINTRAC can lead to court ordered forfeiture of the proceeds of criminal activities.

Above all, these benefits would be achieved in a way that respects the privacy of individuals. The additional amendments contained in Bill S-16 would only serve to further strengthen and improve this statute.

Irrespective of party affiliation, I am confident that all hon. members will fully support the bill. I urge members to give the legislation quick and speedy passage so that we may proceed to other items on the government's legislative agenda.

Business Of The House

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I believe it is the first opportunity I have had to respond to the hon. member in that capacity. Let me begin by congratulating her on the position she holds.

This afternoon we will continue consideration of Bill S-11, followed by Bill S-16 respecting money laundering. As a matter of fact the debate on Bill S-11 may have collapsed just before question period. That means we will start with Bill S-16 respecting money laundering, followed by Bill C-14, the shipping legislation. Afterward, if there is any time left, we will resume debate on Bill C-10 regarding marine parks.

On Friday we will begin consideration of Bill C-22 respecting income tax amendments at report stage and third reading. We will then return to the list I have just described should we not have completed Bill C-14, Bill C-10 or Bill S-16, for that matter.

On Monday next, if necessary, we will resume consideration of Bill C-22, followed by Bill C-17, the innovation foundation bill, at third reading. We will then return to the list that I described a while ago.

On Tuesday it is my hope that we will be able to commence and hopefully complete the third reading of Bill C-26, the tobacco taxation bill, as well as the second reading of Bill C-15, the criminal code.

Next Wednesday it is my intention to call Bill C-7, the youth justice bill at report stage. We also hope to deal next week with Bill S-3 respecting motor vehicles, Bill C-11, the immigration legislation, if reported, and Bill C-24, organized crime. As well there has been some discussion among political parties and hopefully we can deal with Bill S-24 respecting the aboriginal community of Kanesatake at all stages in the House of Commons, provided that it has been reported to the House from the other place.