House of Commons Hansard #153 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was income.

Topics

Income Tax Budget Amendments Act, 1996Routine Proceedings

10:50 a.m.

Liberal

Derek Lee Liberal Scarborough—Rouge River, ON

Mr. Speaker, I am pleased to engage in the debate on this motion which would advance the government's bill to implement elements of the 1996 budget.

I could not help but reach a conclusion earlier this morning that some of the opposition comments are bordering on the hysterical. I refer to some remarks of colleagues in the Reform Party. Some of the remarks are less than accurate.

I want to attempt to put some balance into the record. For example, there was a suggestion that there was a 40 per cent reduction in the transfer payments from the federal government to the provinces which impacted on education, social programs and health care.

What the Reform Party fails to acknowledge, and I stand corrected if I am wrong, is that at the time those transfers were renegotiated with the provinces there were tax points transferred as well. Tax points are the equivalent of cash.

This is a process whereby the federal government actually turns over to the province the equivalent of a tax point, 1 per cent or a portion of a point of taxes. That is worth money, just as a transfer of cash is.

For someone to stand in the House and not include that in their remarks in discussing transfers to the provinces, whether equalization or the old CAP or whether it is under the current Canada health and social transfer, is less than accurate.

There was also a remark that the federal government has closed more hospitals than the premiers. This could not possibly be a fact. Most Canadians know that the federal government does not administer hospitals.

Hospitals are administered locally and by provinces. To my knowledge, the federal government has not closed a single hospital unless there is some reference to the national defence medical centre which is not closed but which continues.

I think that is less than accurate, if I can continue to use that euphemism, in suggesting it. It is utter nonsense for the Reform Party of Canada to say, and I am quoting what the hon. member said, that the federal government has closed more hospitals than the premiers. Please set me right if I am wrong on this.

Income Tax Budget Amendments Act, 1996Routine Proceedings

10:55 a.m.

An hon. member

You are wrong.

Income Tax Budget Amendments Act, 1996Routine Proceedings

10:55 a.m.

Liberal

Derek Lee Liberal Scarborough—Rouge River, ON

The member will have an opportunity to speak later.

I am also struck by the degree and amount of what I will call the retropromise. It seems that anything that has moved within the last three or four years is now being characterized by the almost hysterical Reform Party and sometimes members of the Bloc Quebecois as a promise. If I per chance two or three years ago had told someone I intend to be in Ottawa on Thursday, hon. members opposite seem to have a penchant now for characterizing those words as a promise.

Day in and day out now in this debate we have constant reference by members opposite to what I call the retropromise. If it moved it was a promise and in the event that I did not happen to show up in Ottawa on Thursday, I broke my promise. That is not fair. I think Canadians see through that.

Aside from these deliberate acts, misleading revisionism involving the retropromise, there are a couple of other areas I could not help but note and I think Canadians noted as well. They are references to tax increases. I have heard members opposite talk about increases in taxes. What they are really talking about is that there has been growth in the economy, there has been population growth, there have been increases in business revenues. Everyone knows that when that happens there is an increase in tax revenues.

If hon. members opposite want to call that tax increases, they can do it but I do not think that is fair. I think that is misleading. When this government says that it has not increased taxes in a certain area, that is the truth. When members here say that, it is the truth and they mean it. When members opposite say there has been a tax increase, they seem incapable of speaking straight on the issue and what they really mean is the economy has grown, business revenues have increased, the population has increased and therefore tax revenues have increased.

I hope members opposite will forgive the growth in the economy and forgive the increasing prosperity of this country for generating more tax revenues.

I do not have any illusions that my remarks today will make much of a difference in the rhetoric around this place, but I thought I should put that on the record.

I want to address as well one of the items in this important bill dealing with the budget. I want to talk about the proposal to reduce the age limit for maturing registered pension plans, RRSPs, the reduction in the age for contributing to those plans from 71 to 69. What that means is simply that individuals will not be able to contribute to RRSPs or accrue pension benefits after age 69. They will also have to start drawing income out of those plans by the end of the year in which they turn 69.

This change is being made for a number of important reasons. The first reason is that it will help to move the maturation age for retirement savings and pension plans closer in line with the ages at which most Canadians will start retiring. The simple fact is that very few Canadians are saving for future retirement when they are in their seventies.

A second and closely related consideration is that the proposed measure will limit the use of RRSPs for estate planning purposes, that is, what will happen to a person's cash and assets after they are no longer with us. The use of the RRSP for that purpose is outside of scope of what was originally intended. The RRSP is for the living. It is for the person who is retiring, and the type of generous tax assistance provided to the RRSP mechanism was never intended for estate planning purposes.

There is the broader question of cost. The federal revenue cost of tax assistance for retirement savings is now quite significant. Technically, inside government it is called tax expenditure. It is really a question of tax revenues forgone in assistance of the retirement savings mechanism. In 1993 that tax expenditure totalled nearly $16 billion. As the finance minister has made very clear, the government is firmly committed to preserving Canada's retirement assistance program which serves a vital function. It does so in a very effective way, measured in both Canadian and world standards.

However, steps had to be taken to ensure that this program remained financially sustainable. The cost of the program was limited while assistance was targeted where needed. Even with the changes announced in the 1996 budget, the system will remain a generous one.

As this is an important debate on important legislation, I return to my opening theme which is to encourage colleagues in the House to try to stick a little closer to the straight line of accuracy when they use terms like those I have mentioned. I respect the need of the opposition parties to hit hard at things. They do not think our policies are the way they should be but it would help us all if we would use a standard of rhetoric and a standard of language. We should use terminology that keeps us straighter to the line and that allows Canadians to better understand the public policy issues that we debate here.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11 a.m.

Reform

Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I rise to add my two cents worth to this debate and to talk about the 1997 budget. I will discuss five or six points.

First, the budget projects a deficit of $19 billion. That is an awful lot of money. Yet the government is bragging that this figure means that the back of the deficit has been broken. It spends $19 billion more than it brings in and it claims that it has broken the back of the deficit. It came in with a deficit around $42 billion. It boosted it to $42 billion from $38 billion. It has reduced it to $19 billion

which is a little over half. It has taken the government four years to cut the deficit by $23 billion. In my estimation that is just half a job. It is only half good which means it is also half bad.

It is a shame this finance minister brags to the nation that our finances are in good order. We are spending more than we bring in. He is giving the Canadian public a false sense of security. It is one thing to hold out hope-which is important-but it is another thing to claim victory before you have won the battle.

There is another thing I do not like about this budget and the finance minister. The finance minister plays games. He cooks the books. He does what the previous member just talked about. He borderlines on representation and sometimes comes close to misrepresentation. He reduced the social transfer by $7.5 billion, which I believe is an accurate number. I believe it covers health care, welfare and education. I believe it affects all the provinces. I believe it means they have less money to put into health care, education and welfare, which means they in turn have to do something and the problem has been transferred to them. It is called downloading, I believe. I believe all those statements are accurate and true and not a misrepresentation.

To justify this painful decision, which I also agree had to be done, the government said it would cut $9.5 billion or $9.8 billion from departmental program spending. That is the amount of money that is spent, excluding these transfer payments to provinces. After four years only $4.6 billion has been cut. There are $5.2 billion missing.

The President of the Treasury Board tried to explain it to our finance critic and our deputy critics. He almost had them hoodwinked. Talk about misrepresentation. Talk about cooking the books. Talk about keeping on the straight and narrow and being honest with the people and telling them the way it really is.

I am not going to distort this, I am going to be very accurate. What really happened in this case is that the government, in order to come up with an explanation on why it is $5.2 billion short of its projected $9.8 billion promise after four years said, "wait a second, there is another year". Plus the government has changed the definition of departmental spending between what it was in 1995 and today. That is accurate because it came right from the Treasury Board officials when we met with them.

That is how the government can claim that it kept to 18.8 per cent and how $4.6 billion now represents 18.8 per cent in program spending reductions versus the $9.6 billion, the definition in 1995. This is how the government plays games, and I am tired of it. I hope that the Canadian public is tired of it as well.

The finance minister has gone against generally accepted accounting principles. The auditor general slapped his wrist for it in the last budget.

The public accounts committee will be meeting in two weeks. I have asked for finance minister's presence but he cannot make it because he is busy. However, the deputy minister will be there. I want to know how they can get away writing off $961 million on the harmonization of the sales tax in the budget two years ago when the money just went out last October.

There are $800 million for the foundation for innovation that will be spent over the next five years which is written off in this budget. That is not right. There had better be a darned good agreement with that foundation. There had better be a darned good signed agreement with all the provinces on where the money is going and who is going to get the money for innovation. If not, the books are being cooked. Public sector companies get fined by Revenue Canada for doing things like this.

Money cannot be written and charged off to a year's expenses unless that money has been spent or there is an agreement in writing in which the money is committed to be spent in a short term, meaning one year, not five. We will see. The meeting is coming up in two weeks.

I have already heard government members say twice now that the government has not raised personal taxes. I agree. It is a true statement. Then the finance minister and even the Prime Minister in question period say, "We have not raised taxes," which is a much different statement. Is that not misrepresentation? Is that not borderline with what the member just talked about and that he wishes members would not do? I wish he would talk to his finance minister and to his Prime Minister and tell them not to do it because they are giving Canadians a false sense of reality.

Finally, after being pushed by our finance critics they agreed: "Yes, if you mean that we have eliminated loopholes for wealthy companies, yes, we have increased taxes. If you mean that we have done insurance things, yes, we have increased taxes". We finally got it out of them. Then a day later they said: "We have not raised taxes".

There are two ways to raise taxes. If it is the personal tax rate, they have not done it. I agree. But they have raised taxes through the elimination and reduction of the sizes of exemptions and what can be deducted. Therefore, they have raised taxes 35 times.

Let me give another example of the games they play. My colleague from British Columbia submitted a petition prior to the 1995 budget about not raising taxes on gasoline. We are afraid of it, and were saying, do not do it. They claim they have not raised excise taxes. We know they have. We know that two years ago they

raised the excise tax on gasoline by 1.5 cents. Is that true or not true?

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

An hon. member

That's true.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

Reform

Jim Silye Reform Calgary Centre, AB

A Liberal said: "That's true". They raised excise taxes on gasoline by 1.5 cents per litre, which amounts to an increase in government revenue of $1.2 billion to $1.4 billion. That is a tax increase, is it not? It is a tax increase. I got that concession as well.

In response to the petition, here is what the Department of Finance, perhaps under the influence of the finance minister, claims: "-that the past two budgets presented to the House of Commons in March 1996 and February 1997 contained no tax increases in any area. In particular, these budgets did not propose any increases in the excise tax on gasoline".

It went on to say: "Since taking office the government's budget savings have been secured principally from expenditure reductions rather than tax increases. Ninety-one per cent of the $28 billion reduction in the 1998-99 deficit is due to expenditure reductions. These budget initiatives will enable the government to keep moving toward budget balance".

Let us see how close that is to the truth. Let us see how close that is to borderline misrepresentation.

These are bureaucrats that work for the Canadian people. Are they not supposed to be honour bound? What they said in the first sentence is true. They did not increase the excise tax on gasoline in this budget or in last year's budget. The increase was contained in the budget previous to that.

That is playing mind games. That is playing word games. We all know that. This kind of stuff makes me sick. It is one of the reasons I am getting out of politics. We do not have enough people who are prepared to tell the truth and hold the course. That is why politicians are held in such low esteem in the country. They do not keep their election promises.

Provincially it is slowly changing. Alberta especially has done an excellent job of holding the line. Ontario appears to be following, although it might be wavering on a few promises because of the pressure of the 98 federal Liberals in Ontario who want the Ontario government to start spending money.

There have been 35 tax increases. The department says there have not been revenue increases, but that there have been expenditure cuts. That is not true. Tax revenues have increased by $30 billion. Yes, a lot of it is due to growth in the economy.

Let us talk about that wonderful growth. It is 2.5 per cent. Boy, that is a booming economy. Darn, that is almost the rate of

inflation. It has been just a bit higher in the last couple of years. Boy, they have done a great job. Two per cent per year for four years. That is wonderful. We should all clap and be happy.

Yes, that has increased tax revenues. However, the 35 tax increases, which represent $30 billion in revenue, amount to about $12 billion in extra tax revenue due to tax increases. It is not all attributable to growth in the economy. If any member opposite says it is all due to growth in the economy they are misrepresenting the issue. He knows that.

Do I have time to wrap up my comments, Mr. Speaker?

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

The Deputy Speaker

The hon. member may not wrap up his comments as his time has expired.

The hon. member for Portneuf.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

Bloc

Pierre De Savoye Bloc Portneuf, QC

Mr. Speaker, I am pleased-

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

The Deputy Speaker

Excuse me. With the rotation principle, the hon. member for Mississauga South has the floor.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

Bloc

Pierre De Savoye Bloc Portneuf, QC

On a point of order, Mr. Speaker. The member who spoke before the hon. member from the Reform Party was a Liberal member. If there is to be rotation, it should be-

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

The Deputy Speaker

Unfortunately, the rotation is from one side of the House to the other. It is a matter of numbers-

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

Bloc

Pierre De Savoye Bloc Portneuf, QC

It is your call, Mr. Speaker.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I am pleased to rise in support of Bill C-92, an act to amend the Income Tax Act, the Income Tax Application Rules and other acts related to the Income Tax Act at second reading.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

The Deputy Speaker

I am sorry to interrupt the hon. member for Mississauga South. Rotation in this type of debate is not back and forth across the floor, it is the parties going round and round.

I will recognize the hon. member for Portneuf. He was right.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:10 a.m.

Bloc

Pierre De Savoye Bloc Portneuf, QC

Mr. Speaker, once again, I am pleased-it is not everyday that we get to start over the same speech-to speak to Bill C-92 to amend the Income Tax Act.

The subject of income tax raises the spectre of government digging into the pockets of individual and corporate taxpayers in order to cover its expenditures.

I cannot help but notice that our finance minister's insatiable appetite is caused by the fact that, for many years, government spending has exceeded government revenues. The Minister of Finance spends more than he earns. In fact, he is like the captain of a boat that is taking on water. Because the Minister of Finance has failed to plug the holes, the ship is sinking.

The finance minister did reduce the deficit. He did slow down the rate at which the water is flowing in. But do you know how he did it? Not by plugging the holes, but by throwing bucketfuls of water onto the provinces' ships. His financial needs and appetite remain unsatisfied. He needs more and more money, which, of course, comes out of the pockets of taxpayers.

It must be realized that the overall situation as regards taxation and public spending, both at the federal and at the provincial level, including in Quebec, is not good, and the basic problem that gave rise to all these difficulties originated in this House, right where the finance minister sits.

We saw how the Harris government, in Ontario, and the Quebec government headed by Mr. Bouchard were forced to take drastic measures and to make deep cuts to the health and education sectors, and even to their own human resources, the provincial public service. Indeed, we witnessed very sad situations experienced by people in Quebec, in Ontario and in other provinces. The public must realize that these problems are not created by the provincial governments, but that they have their roots in this House, right where the finance minister sits.

The minister simply dumped his problem on the provinces, by cutting the funds that were supposed to go to the provinces. He did so in two ways. First, by reducing transfer payments. What is a transfer payment? Under this process, the federal government essentially gives back to a provincial government the money paid by the taxpayers of that province. However, in this case, the federal government simply decided not to do so, with the result that the provinces are no longer getting the money to which they are entitled. We are talking about $2 billion, which was earmarked for health services and higher education.

It comes as no surprise that the provinces, including Quebec, were forced to cut services and budgets relating to health and education, given that the $2 billion paid to the federal Minister of Finance by Quebec taxpayers was never given back to the province.

But there is something else which, in a way, is even worse. The minister has developed the bad habit of taking $5 billion a year out of the employment insurance fund, which used to be called the unemployment insurance fund. Five billion dollars is an awful lot of money. In fact, what the Minister of Finance has done is to artificially create a tax on the backs of workers and their employers.

If we look at it in terms of proportions, we could say that each time a worker or an employer pays a dollar in premiums to the EI fund, 30 cents of this dollar will be skimmed off; not borrowed, not put into a separate fund for the eventual benefit of workers and employers but, when it boils right down to it, diverted from its initial purpose, which was to provide for the future needs of the unemployed, and used to reduce the finance minister's deficit.

Of course the Minister of Finance can then say he has reduced the deficit. Let us be clear. He has not eliminated the deficit, he has not prevented the ship from taking on water, he has not pumped out the water that is already slowing us down. No. He has just reduced the amount of water in the hold. How did he accomplish that? By passing on the problem to employers and employees throughout the country, using 30 cents of every dollar to mop up the consequences of the deficit. It is a tax in disguise that the Minister of Finance will not admit to publicly.

Fortunately the official opposition is here to denounce it, to explain it and to see that people understand clearly that what is happening provincially is not the cause, that the provinces are not to blame, but rather the method of operating imposed by the Minister of Finance, here in the House.

Something must be done about what is going on and, as my colleague mentioned earlier, the Bloc Quebecois has proposed in this House appropriate, detailed and carefully thought out measures to rectify the discrepancies that now exist in tax measures. In fact, with respect to individual taxpayers, the Bloc Quebecois has produced a well researched document in which it proposes to the finance minister ways of eliminating unfairness and introducing new measures that would help families and others.

With respect to corporations, old tax loopholes that are to all intents and purposes no longer used, except by corporations rich enough to do so, should be eliminated and replaced by measures more likely to encourage businesses to create jobs.

One of the things I should perhaps point out in closing is that it is unfortunate that the Minister of Finance has not at least implemented one of these measures, which was intended to prevent corporations from deferring taxes indefinitely. As things stand now, corporations are in a position to avoid paying taxes today, next year

and for years to come, because of certain provisions in the Income Tax Act.

The Bloc Quebecois has asked, and will continue to ask the finance minister to take action to eliminate these measures and replace them with new measures that are effective and productive and that, above all, show respect for the citizens of Quebec and of Canada.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:25 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I am pleased to debate Bill C-92 at second reading. The parliamentary secretary well laid out the principal features in Bill C-92. I do not propose to repeat them. He has done an excellent job.

I take this opportunity to put on record my views on an issue that has been raised in my constituency by a number of my constituents, particularly seniors. It is modifications to the RRSP rules, particularly with regard to the lowering of the age at which contributions can be made down from 71 to 69.

There has been much written in seniors publications about this. One need only look at who is offering these publications and these articles. One has to assess what their motivation might be.

An article has been circulating by a former member of this place, Garth Turner. He is suggesting this change is awful, that it will cost anywhere from a $36,000 reduction in the value of an RRSP account for a Canadian.

I want to attempt to explain how one might account for this apparently significant number and why it is very misleading. The maximum contribution under RRSPs is currently $13,500. To the extent that a taxpayer would not be making contributions in either their 70th or 71st year, it means that $27,000 will not be contributed to the plan. Therefore naturally the planned value will not be as high if those capital contributions have not been made.

Second, there would be an additional two years of interest accumulation on all contributions that have been made throughout the contribution lifetime of the taxpayer which would not be accumulating and compounding during those two years.

Of the $30,000-odd that the accounts would be lower, this represents some $27,000 of capital which Mr. Turner, if entirely honest with Canadians and with seniors, would say that although their RRSP account will be lower by $27,000, their bank account would be higher by $27,000 because that contribution was not made.

It is absolutely intellectually dishonest for anyone to suggest that there is this loss of principle simply because it is not in one pocket but in another. We have to look at value of the wealth of an individual in all its forms.

I want Canadians to reflect on what is happening when RRSP time comes around. There is a feeding frenzy of people trying to sell RRSPs. One has to wonder why it is important for them that we buy from this one or that one. There is one very simple reason why they are trying to alarm the public about this. This is when they earn their living. This is when they make these massive commissions on selling.

These commissions are charged through to the funds that we are investing in and passed on to us through management fees and general expenses of the fund management. They have a vested interest in selling more and more simply because it means money in their pockets.

I want the ordinary taxpayer and those seniors watching the proceedings or will read Hansard to know there is another part of the story they have to look at. It is not in the best interest of any taxpayer to see how much money they can put into an RRSP. The real issue is how much can they put in and what plan do they need to get it out with the lowest possible tax consequences.

Many Canadians are fortunate to earn substantial amounts of money which allow them to buy $13,500 of RRSPs and effectively obtain a 50 per cent tax savings as a result of that contribution. If they turn around and purchase an RRSP for a spouse who is not working and come retirement time take their corporate pension and the spouses who are working in the home take out the RRSP moneys, they have effectively split the income and are both paying at a lower rate.

The tax rate at which the contribution was put in was high. The tax rate at which the contribution is paid out is low. There is an automatic windfall in rate. Never mind the savings by the virtue of the fact that they have government money on which they are able to earn investment income. Everybody is entitled to that. High income earners are entitled and have an opportunity to income split or by set up their income averaging annuities in a way that allows them to stream the income out at the lowest possible rates.

The best advice in my view for Canadian taxpayers is not how to get the total amount of money into the RRSP. When it is one's time to go and there is no surviving spouse, the full amount collapses and is taxed in the year in which a taxpayer is deceased at the highest possible rate.

Canadians have to look at their spousal situation. They have to look at their personal health situation and they have to anticipate.

Although I am a chartered accountant I do not propose to give advice to anybody on how to manage their affairs, but I raise these issues for them to ask the questions of people who would suggest that somehow not being able to put money in an RRSP is bad. My own personal view it is best to wonder how to get it in and how to get it out at the lowest possible rate.

On top of that taxpayers should know that once the moneys come out of an RRSP and are taxed in taxpayers' hands at a lower rate they have an opportunity to do something with the cash. One of the best recommendations I had for some family members I have talked to was to help out their family members who do not have the cash flow they need to invest in their own RRSPs so they can start building up and preparing for their retirement income.

When gifts of cash given to family members who are 19 years of age or over there is no income attribution back to the person who gave the money to them. It is important for taxpayers to look at the long term plan of not only building up an RRSP fund and getting a good return but also finding out a strategy on how to stream that money out for the best tax advantage for the family as a whole.

I hope Canadian taxpayers and certainly seniors in my riding will be cognizant of the other questions to ask experts in RRSPs whose only interest is that they want to sell more. They have to ask them: "What is my plan to get that money out? How can I make it work the best for me, for my spouse, for my children and for other family members?" Families do care about the financial health and the physical health of all family members. That is the way it should be.

Mr. Garth Turner and others tend to bring forward rash generalizations about what a terrible thing it is. They have been intellectually dishonest with taxpayers if they suggested the change in years from 71 to 69 took cash from RRSP accounts without saying that it increased cash in their personal bank accounts. That is telling half the story.

Canadians have to know where they are coming from. Canadians have to know why they are trying to push RRSP investments on them. It is because it is in their best interest with the high commission rates they are getting.

I know some would think those are strong words, but every now and then Canadians have to be alerted to the fact that they need the whole story from the beginning to the end to ensure the decisions they make are in the best interest of not only their own financial planning but of the rest of their family members.

I hope this insight into one aspect of the bill will help Canadians to ask questions that are important for them when looking at retirement planning.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:35 a.m.

Reform

Ian McClelland Reform Edmonton Southwest, AB

Mr. Speaker, as I stand to speak to the budget debate it would be fair to say that I speak for millions of Canadians from coast to coast to coast. If things are so good why do I feel so bad? If things in our economy are so good why do I not have any money?

All Canadians appreciate that for all levels of government, municipal, provincial and federal-and the federal government especially has by far been the most devious-taxation no longer has much to do with income or resources. It has more to do with licensing. If the tax stream coming in from people is based on profit or income it is variable. Governments do not like variable income. They like income that they can depend on. Therefore far less of our taxes have anything to do with how much money we have, how much money we have made or our profit. It has more to do with the privilege of being either in business or having the privilege of earning income.

I use as an example the recent changes to the Canada pension plan, perhaps the most nefarious of the worst investments any individual could make, particularly a young Canadian, with rates going up to 9.9 per cent. The finance minister and the Prime Minister are now the only two Canadians who say they are not taxes. They call them investments. It is a pretty rotten investment that takes 9.9 per cent of the working income of Canadians for their lives and gives them a return on investment of about $9,000 after 40 years.

Canadians have this ever increasing tax burden that is represented to them not as taxes but as licence fees, mandatory investments or whatever it is. It is almost impossible for a politician not to spend other people's money if it means there is a potential for the politician to be re-elected. That is the way it works.

In my lifetime one did not get elected by telling people they had to live within our means or that we did not have any more money. One did not get elected by saying it is unfair to tax future generations of Canadians so that we can live beyond our means today.

What government has ever been elected by looking people in the eye and telling them the truth? Certainly not this government and certainly none of the governments that got our country into this mess.

The reason our country is in the mess it is in today is that politicians have had a free hand to spend other people's money, taxpayers' money, to get re-elected.

How can we get ourselves out of this mess? We must say the only way to possibly reduce taxation levels is to reduce the size, the scope and the intervention of government in our daily lives. If we are not prepared as individuals to assume responsibility for our own lives, if we as individuals pass off responsibility for our lives to other people through governance, then it will take more and more and more resources of the nation to fund it.

The first step is for Canadians to say they have had enough government; they want less government; they are sick and tired of it; and they are not going to take it any more. The only way we will

achieve that is to elect people who will look us in the eye and tell us they must be responsible for lives. We cannot ask others to be responsible for our lives.

Collectively we will be responsible for each other. If we cannot first look after ourselves, how can we look after others? The interdependence we cherish is based on personal independence. If we cannot first be independent, how can we be interdependent?

This brings me to the second item I would like to speak about, which also refers to the taxation by stealth the country has been living under for the last couple of budgets. It has to do with the changes to the support payments for parents who divorce or are separated.

It used to be that when families unfortunately split up the custodial parent, the parent with the children, received money from the non-custodial parent. The paying parent earned a higher income and the taxes were paid by the receiving spouse, usually the female. She had the children. Her income was usually lower than that of the male and therefore she paid less tax.

This situation has been changed in the budget. The taxes will now be paid by the spouse who makes the payments. The money will be received by the custodial parent. There are benefits to that, one of which is that at the end of the year the custodial spouse will not be nailed with an unexpected tax bill. In all cases they should expect it, but the reality is that most of us as human beings do not make provision for it and it comes as a surprise.

That tax windfall, the changes in that tax ruling, will mean the federal government will take in an additional $200 million. The question is whether that $200 million will be turned back directly to the care and maintenance of children and whose children will be maintained by that.

It should be the parents who make the decision on how the $200 million is spent. There is no reason in the world why in the absence of an agreement on separation the taxes could not be split 50:50. There is no reason in the world the default position could not be 50:50. With agreement by both parents in the court either parent could pay the tax. The taxes should be paid in the interests of the children so the majority of the money would stay with the children. Instead we have gone from all in one direction to all in another direction, which does not make sense.

In the debate on the bill that spoke to the issue the point was made that there was no connection between access, custody and support payments. The only people who would make that assertion are people who do not know anything about it. If there is a problem in maintenance payments, in the regularity of the payments being made, obviously there will be a problem with custody. That is usually where the problems arise when there are problems. I do not know if it is possible for legislatures to legislate common sense. In times when people's emotions are running on high it is difficult for the government to say: "Wait a minute. You have to put the interests of your children first".

We can ensure the laws, the rules and the regulations we enact enure to the benefit of the children and make it less likely that there would be an explosive situation to be dealt with. It seems that maintenance payments are a tinderbox in relationships that have gone bad and that there is a continuing acrimony between the two parents. There might be a better way to handle the matter. I do not know what we have arrived at will achieve what it is hoped to achieve.

Earlier the member opposite spoke about RRSPs and the changes in the budget which affect the collapsing of RRSPs. He did not say that it is the compounding of the money in the RRSP in a tax protected state that brings additional benefit to the people who own the RRSPs. RRSPs are the vehicle of savings for the vast majority of Canadians.

The vast majority of Canadians really do not have any savings outside of their RRSPs because there just is not that money. The increase in taxation by all levels of government, particularly by the federal government over the last few years, has sapped the total growth in the economy. When governments through taxation suck every bit of growth and money out of the economy then what is left to reinvest to create the new jobs?

It is only through the decrease in taxation by all levels of government, particularly the federal government, that there will be money left in the hands of taxpayers that will be used as investments and purchases in a consumer economy.

The changes through the seniors benefit were not mentioned at all. We are talking now about taxation by stealth. For the information of members opposite, there is a change to the old age security and the guaranteed income supplement. The seniors benefit which combines both ensures on a universal basis that all Canadians will receive $11,420 a year without tax but then the tax provisions that used to be on the guaranteed income supplement will be on the whole kit and caboodle. Old age security will be taxed by this government, which has said time and time again "don't worry, seniors, we are your protectors, nothing is going to happen". It combined the two, changed the name and it is taxing it all back.

That means that all pension income, including RRSPs, will be taxed back at 50 per cent on the first $12,500 after the new seniors benefit.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:45 a.m.

Reform

John Williams Reform St. Albert, AB

Mr. Speaker, I rise on a point of order with regard to the terms of reference for Bill C-92 and Bill C-93.

Notice has been given to refer these bills to committee before second reading. The minister has already moved to refer Bill C-92 to committee before second reading pursuant to Standing Order 73(1). Bill C-93 is the next item on the government's list today and we have already received notice that this bill will also be subject to Standing Order 73(1).

I bring this to your attention today because this is a new standing order and it is under test. We as parliamentarians have a responsibility to ensure that the intent of a new standing order is not distorted and we must ensure that any rights and traditions are not intentionally thwarted by any distortion of the use of a new standing order.

On Monday, April 7, 1997 the House passed a ways an means motion which adopted the budgetary policy of the government. On Tuesday, April 8, 1997 the House adopted two ways and means motions upon which Bill C-92 and Bill C-93 are based. The procedure to send a bill to committee before seconding reading allows a committee to bring forward amendments that can alter the principle of the bill and go beyond the scope of the bill. That is its purpose. There should be no other reason for the government to send a bill to committee before second reading.

I would argue that if the House adopts the budgetary policy of the government and then adopts a ways and means motion which leads to a bill, that bill cannot and should not be subject to a process that could alter the bill in such a way that it would be different from the ways and means motion. I will argue that the only process for a bill that is based on a ways and means motion is the traditional process where the bill is adopted in principle before being subject to committee study.

I Refer to Beauchesne's sixth edition, citation 983:

(1) A bill, related to a Ways and Means resolution, must be based on-the resolution.

(2) The most desirable practice is for the bill to adhere strictly to the provisions of the resolution, and departures, if any, ought to be subject to the strictest interpretation.

Citation 984 deals specifically with the committee consideration:

If any of the provisions of the bill should be found to go beyond the Ways and Means resolutions as agreed to by the House:

(a) a further motion must be passed by the House before those provisions in the bill are considered by committee; or,

(b) the bill must be amended so as to conform to the motions to which the House has agreed.

Citations 988:

Amendments must not exceed the scope, increase the amount or extend the incidence of any charge upon the public, defined by the terms of the Ways and Means resolutions, by which the provisions proposed to be amended are authorized.

Citation 989:

The motion by which a tax is proposed in the House is now treated as an effective expression of the financial initiative of the Crown, and therefore, as the standard in relation to which the admissibility of amendments is determined. Accordingly, an amendment is debarred, not only from increasing the rate of a tax but also from extending its incidence to new classes.

We cannot have a process that recognizes the clear precedence that the bill must stay within the narrow confines of the ways and means motion, yet subject the bill to a process whereby the government is inviting amendments that may vary the principle of the bill and by inference go beyond the scope of the ways and means motion.

If this is the case, then how can these bills be referred to committee before second reading? It does not make procedural sense to do so. It should not be allowed under our rules to do this because it is a departure from our tradition of dealing with bills based on ways and means motions and in particular a bill to implement certain provisions of the budget which is based on two ways and means motions adopted by the House.

If we consider that the general principles of these measures have been adopted by the budgetary process and the details of the principles of these measures have been adopted by a ways and means motion, then how can we proceed to consider these bills in committee before second reading when the principle of the bill has already been fixed and determined?

It is clear that these restrictions on the way bills are based on ways and means motions are dealt with disqualifies them from being considered by a committee before second reading.

The committee cannot deviate from the ways and means motions that were passed by the House, so the proper procedure is to consider these bills in a traditional manner.

It is clear to me that what the government is trying to achieve is to abuse the rules of the House in order to fast track its budget implementation bills.

Not today, Mr. Speaker. I ask you to rule that these bills and any future bills based on ways and means motions cannot be referred to committee before second reading and that the motion we are currently debating is out of order.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:50 a.m.

The Deputy Speaker

I thank the hon. member for St. Albert for his representation which he has obviously thought out carefully and has presented very precisely.

Income Tax Budget Amendments Act, 1996Routine Proceedings

11:50 a.m.

Liberal

Marlene Catterall Liberal Ottawa West, ON

Mr. Speaker, the member for St. Albert is arguing that Standing Order 73 should not

be applied to this bill. I think it might be helpful to recall why Standing Order 73 was adopted unanimously by the House.

It was in response to a concern among the public and parliamentarians that members of Parliament needed to have more ability to play a real role in the development of legislation and not to be constrained unduly by the government's intentions with respect to legislation. For that reason, the government did introduce into the House an amendment to the standing order allowing any bill to be referred to a committee before second reading so that the committee of ordinary members of Parliament would not be constrained by the intentions of the government in examining the issue of the bill and making the appropriate recommendations back to the House.

As the member for St. Albert said, by referring a bill to committee before second reading, the standing order allows a parliamentary committee to look at the principle of the bill and to not be constrained in proposing amendments which are consistent with the principle. It allows those members of Parliament to examine the entire issue that the bill addresses and to go beyond the scope of the bill.

My colleague quoted Beauchesne. I would like to point out that the citations he referred to predate the adoption of Standing Order 73 and therefore are superseded by Standing Order 73.

Both the government in introducing the change to the standing orders and the House in adopting it unanimously did not in any way limit which bills could or could not be referred to a committee before second reading. That was left to the discretion of the government in proposing that a bill be referred before second reading and, more important, to the members of the House to vote on the proposal to send a bill to committee before second reading.

I do not think that citations and interpretations which were made before the House expressed its will to give members of Parliament more latitude and scope to influence legislation without restriction should supersede the views expressed by Parliament.

This whole issue of members of Parliament having more influence, particularly on matters of expenditure and taxation, was studied for over a year by the subcommittee of the Standing Committee on Procedure and House Affairs, of which I and the member for St. Albert are members. Throughout the study our discussions on Standing Order 73 concerned how to give members of Parliament more influence, in line with the wishes which we heard from Canadians. Hopefully the report of that subcommittee will be tabled before Parliament in the near future.

Frankly I am astonished that the member for St. Albert is proposing that members of Parliament and the standing committees should not have the expanded scope that Standing Order 73 intended to give them.

Finally, the committee is constrained by the will of the House, as expressed in the ways and means motion. The member should be aware of that. The committee has to act within the authority it has been given by Parliament.

What the member seems to be suggesting is that a committee, in exercising this new responsibility under Standing Order 73, should not be constrained by the directions of the House. I find his argument somewhat confusing. He says that because it is a decision of the House, the House does not have the authority to act in accordance with Standing Order 73, but if it does then the committee should not be constrained by other decisions of the House. There is a contradiction there.

However, the fundamental principle is that Standing Order 73 was adopted by the House to allow committees to have the scope to examine the principles of a bill, the scope of a bill, and to bring back its best recommendations to Parliament. Parliament will ultimately decide.

The committee of course will exercise its new responsibilities in accordance with the directions it has received from the House, including the ways and means motion.

Income Tax Budget Amendments Act, 1996Routine Proceedings

Noon

Reform

Jim Silye Reform Calgary Centre, AB

Mr. Speaker, I rise on the same point of order. When the hon. member who just spoke quoted Standing Order 73, she was thoroughly accurate.

The purpose of sending bills to committee prior to second reading is to give the committee an opportunity to look into a bill thoroughly and to improve it before it comes back to the House for second reading. In that way, a lot of valuable time of the House is not tied up. There is no question that that is the intent, the scope and the purpose of that standing order.

However, when you look at this bill and the other one we will be debating later today, what has to be pointed out is that the general principle of the measures contained in the budget have been adopted by the budgetary process.

The details of the principles of these measures were adopted when the ways and means motion was passed. Why is the bill being sent to committee prior to second reading when, in principle, in scope, in containment, in its content it is a fait accompli?

Puis parce que nous avons-I do not have very good French-to send it. Not to make light of this, how can we proceed to consider these bills in committee before second reading when the principle of the bill has already been fixed and determined? What is the Standing Committee on Finance going to do? What is it going to amend? What principle is it going to change? What scope is it

going to go back to? Will it spend less somewhere? Will it recommend cuts elsewhere? Will it change the amount of money, the $800 million, that is given to the foundation of innovation for science?

This is a misuse of the standing order, plain and simple. The argument that we are trying to put forward is that neither this bill nor the other bill we will be debating today, Bill C-93, should be sent to committee prior to second reading.

The very same point that the member from the Liberal Party, the former whip like myself, made about the purpose of Standing Order 73 is accurate and true. I support her when she makes that claim.

When the rules of Standing Order 73 are applied, any good lawyer-I see one sitting beside her now-will say that this is just smoke and mirrors and that the purpose of the government is to get it out of the House so that debate is limited. When it comes back the rule states that debate is limited. We do not have the number of hours to debate the bill after it comes back from committee if we send it to committee prior to second reading.

They are using a double whammy on the opposition members. It is another example of limiting the democratic rights and principles of the opposition parties. Our job here is to go through legislation, to go through ways and means motions, to decide whether it is in the best interests of the Canadian public to either support them or, if not to give them our full endorsement, then to make recommendations through amendments either here in the House, in committee or at report stage, then come back and work on them.

There was an agreement at the start of the 35th Parliament. A lot of bills come here at second reading, prior to going to committee and we make a lot of amendments. It ends up being a big waste of time. For certain legislation, for complicated bills, there are advantages in sending them to committee where the job of the committee is then to thoroughly go through the bill. Sometimes the committee has done it but sometimes it has not.

Agricultural bills have been sent to committee prior to second reading and the members in the committee just ram through clause by clause. They limit debate. We know all about the complaints we have had. They have misused their majority in committee. That is one thing.

However on this one, there will not be any debate on scope. There will not be any debate on principle. It has already been adopted. It is the law of the land. It is a done deal.

I submit very humbly that this point of order be considered, Mr. Speaker, and that you rule that this bill not be sent to committee prior to second reading for the very reasons that I have outlined. To summarize, it is unnecessary. It is just a way that the government has figured out to once again stifle and limit freedom of speech and the time that is supposed to be allocated in the giving of opinions on bills.

This legislation will pass. We all know that. We all know how important the budget is to the nation. We all know it is necessary for the budget implementation act to pass, so money can be borrowed and that kind of thing. But what we object to is limiting the time that we can discuss the bills.

I believe this bill should not be sent to committee prior to second reading because the principle and the scope are clearly established. Nothing will be changed. It should just remain in the House for second reading.

Income Tax Budget Amendments Act, 1996Routine Proceedings

12:05 p.m.

Reform

John Williams Reform St. Albert, AB

Mr. Speaker, I would like to rebut some of the points brought forward by the government whip. She stated that Parliament should not be constrained unduly. However, because the House voted on the ways and means motion, in essence we put a circle around that bill, a very definite circle.

I would like to refer you, Mr. Speaker, to Commons Debates , page 962, dated February 7, 1994. It is about three paragraphs. It states regarding the adoption of the standing order change:

There is, however, an important additional benefit to be gained. The broad role of standing committees with regard to a bill dealt with in either of these two new processes could substantially reduce the quasi-proprietary attitude of ministers and their officials toward their legislation. By the time such a bill is ready for second or third reading, it could be as much a committee's bill as it is that of the sponsoring minister. It has been suggested that a vote on second or third reading of such a bill could as a consequence of this be more difficult to describe as standing by itself, a confidence issue. Members on all sides of the House could find themselves freed more often of constitutional implications in voting and would be able to depart from the party position without concern about defeating the government.

In other words, the suggestion has been made to me that these two new legislative routes could be one way of increasing the number of so-called free votes.

The new procedures can also help avoid situations that all governments face from time to time. They result from bills being developed within departments without sufficiently broad and open public consultation. As a consequence, things could be overlooked and governments as a result are embarrassed, to say the least, when the bill must be dramatically changed or even withdrawn in the face of a strong expression of negative public opinion after the bill has been introduced.

This all points to the fact that a bill going to committee before second reading allows a process whereby major fundamental changes can be made, the principle of the bill can be changed and before the House has expressed its opinion in a vote.

In this case we have had two votes, one on the budget and one on the ways and means motion. Those in essence are first reading of this bill. The House voted and said that is it. We cannot allow this

to go to committee before second reading. This motion is out of order.

Income Tax Budget Amendments Act, 1996Routine Proceedings

12:05 p.m.

Liberal

Marlene Catterall Liberal Ottawa West, ON

Mr. Speaker, I do not want to belabour the point. However, since there has been a response to my comments I would like to reinforce some of them and perhaps just point out to the member from Calgary Centre that unlike him I am not a former anything.

Standing Order 73 is very clear. It is unlimited. It says "any government bill". I trust that Parliament knew what it was doing when it adopted Standing Order 73. It does not suggest any limitations to the principle, the scope of the bill. It makes no such references. Those are ways in which we have interpreted it in some of our debate on how Standing Order 73 might apply. But the standing order itself simply says "any government bill may be referred before second reading".

Income Tax Budget Amendments Act, 1996Routine Proceedings

12:10 p.m.

The Deputy Speaker

I think I have heard enough. I thank all three members who spoke on this matter. Rather than reserve on it, I think it is important to give reasons now rather than later in the day.

I note that Standing Order 73(1) states very clearly: "-a Minister of the Crown may, after notifying representatives of the opposition parties-" for any government bill, as was indicated. This is pretty all inclusive. The hon. member for St. Albert has a point in that this appears to be the first time that Standing Order 73 has been used for a ways and means bill.

Standing Order 73, however, does not alter directly the practice of the limits imposed by the ways and means motion. The ways and means motion was adopted by the House and the committee, as members will appreciate, is bound by it. Anything in the bill not directly related to the ways and means motion, however, would be open to the larger scope of amendments envisioned by Standing Order 73.

I might add that it is not unusual for ways and means bills to contain matters which are outside the ways and means motion. This apparently has happened dozens of times. Those matters can be amended without reference to the terms of the ways and means motion. In that case, Standing Order 73 seems to be an applicable use and not necessarily an abuse, as was argued by the hon. member for St. Albert.

Accordingly, the Chair finds, despite a most eloquent and carefully thought out argument by the hon. member for St. Albert, that Standing Order 73 would appear to govern in this situation.

Income Tax Budget Amendments Act, 1996Routine Proceedings

12:10 p.m.

Bloc

Osvaldo Nunez Bloc Bourassa, QC

Mr. Speaker, after that half-hour procedural debate on the scope of Standing Order 73, I am going to enter the discussion on Bill C-92 to amend the Income Tax Act. The purpose of this bill is to implement certain measures announced in the 1996 budget. I wonder why the government tabled this bill only yesterday, more than one year later.

To begin with, the purpose of the 1996 budget, like its predecessors, was to battle the deficit. But the losers in the battle were the provinces, the workers, the unemployed and the most marginalized members of our society. This budget pretends to reduce the deficit by taking the $5 billion surplus from the unemployment insurance fund. We can see the consequences today: the bulk of the budget problems of the Government of Quebec today are, in fact, due to the 1996 budget, as well as the 1995 and 1997 budgets.

Many of the difficult choices the Government of Quebec has to make are the consequences of the cuts in social transfers to the provinces that have been decreed by Ottawa. I must state that it is immoral for the government to use the unemployment insurance fund surplus to solve its deficit problem. These funds do not belong to the state, to the government, in any way; they belong exclusively to the workers and to the employers.

When Bill C-12 reformed the unemployment insurance system in Canada, it drastically reduced benefits, their duration, and the number of unemployed people eligible for benefits. Workers and especially the unemployed will not forget Bill C-12 when they vote in the next election.

Neither Bill C-92 nor the budgets brought down in 1996 and 1997 contain any provisions for the kind of tax reform in this country that the Bloc Quebecois has been demanding repeatedly. The 1996 budget only went so far as to create a technical committee on business taxation, a committee whose appointees had a conflict of interest and whose members advise large corporations on how to save on their income tax. Moreover the committee's mandate, which was for a set term, has already been extended until the end of 1997.

In the next election, taxation will be a central issue. The Bloc Quebecois will talk about Canada's unfair tax system. The tax burden must be shared equitably between private citizens and corporations. There should also be a greater measure of fairness in the tax system's approach to large corporations and small businesses, because small businesses are the sector that creates jobs.

Our current tax system does not promote job creation, although unemployment is our number one problem today in Canada, Quebec, the maritimes and everywhere else. Again, we have to mention all those promises that were not kept by a government that was elected under the slogan: jobs, jobs, jobs. Today, unemployment has reached 12 per cent in Quebec and 10 per cent in Canada. The main victims are women, young people and workers around 45

or 50 years old who can no longer find work when they are laid off. Immigrants are also hit by unemployment.

Last week in Montreal, I met several leaders of the Spanish speaking community who told me that 40 per cent of the members of this community are now unemployed in Montreal, more than half of the black population in Quebec, especially Montreal, is unemployed. These people want to work. They are even prepared to take on difficult jobs, to work the night shift, to work for the minimum wage, even without employment insurance. They want to work, but the government is doing nothing to create jobs.

In my riding in Montréal-Nord, almost one third of the labour force is unemployed. People come to see me at my office and ask me to help them find a job. This is very sad, because there is almost nothing I can do to help them. Zellers, which is doing very well, announced it was closing its warehouse in Montréal-Nord, so 378 employees will lose their jobs as of July 1.

Last week, we attended a meeting called to create a committee to salvage these facilities. The meeting was attended by federal members, of course, and provincial members, representatives of the municipality of Montréal-Nord and the unions. I want to take this opportunity to ask Zellers not to close its warehouse in Montréal-Nord, an area that has a very well trained and highly skilled workforce with considerable experience in this field.

I also take this opportunity to appeal to business to develop social responsibility. Banks, for example, which made more than $6 billion in profits last year, more than any other business sector in Canada, also lay off the largest number of employees. That is unacceptable.

Again, I think the government should introduce a bill imposing a minimum tax on corporations, and banks in particular.

The situation in Montreal, and Montreal North in particular, is extremely difficult. More and more women, children and immigrants are living in poverty. A very large share of the responsibility for this most acute problem lies with the federal government. There are 1.5 million poor children in Canada. More than 5 million Canadians and Quebecers are living under the poverty line. In Montreal North alone, about 9,000 households, or 20 per cent of the total population, rely exclusively on social assistance.

Efforts have been made these past five years to establish a CDEC. I made this a priority when I ran for office. The CDEC has been in operation since February and is doing a great job. However, the federal government will not contribute $170,000 to the Montreal North CDEC, but at the same time, older workers are no longer covered by the POWA, the Program for Older Worker Adjustment, since it was abolished on April 1.

For all these reasons, I can only find fault with this government, and all this will come out during the next election campaign.