House of Commons Hansard #162 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Committee Of The House
Routine Proceedings

5 p.m.

Bloc

Michel Guimond Beauport—Montmorency—Orléans, QC

Madam Speaker, I want to briefly point out four things to the Parliamentary Secretary to the Minister of National Revenue.

First of all, I would like to know if it is normal, or usual, for the employees of the revenue department to process in such a way the request of an ordinary taxpayer, an ordinary citizen, who wants to get some tax benefits. If a resident of mine, in the riding of Saint-Jean, Île d'Orléans, were to ask for an advance tax ruling,

would an army of civil servants be asked to work on next December 22? Is that normal? Is that acceptable? Is it what the people who are listening to us can usually expect? This is what I want to find out. I would like the parliamentary secretary, who has some contacts in the revenue department, to tell me if it is possible, normal and usual.

Second, I would like to know why the parliamentary secretary thought it appropriate to give us a lecture on ethics and transparency. I almost took out my handkerchief. She nearly made me cry. We are given lectures on transparency. I would like to know why, at the public accounts committee, the parliamentary secretary herself voted against the Bloc Quebecois proposal calling for an independent inquiry into the family trust scandal. Why did she, and not her neighbour, her grandfather or her grandmother, vote against this?

I want to remind Quebecers that it is a good thing the Bloc Quebecois was there to ask for this independent inquiry. Had Quebec been represented by 75 Liberal members, as it used to be in the Trudeau years, instead of 54 Bloc members, there would never have been a request for an impartial, independent inquiry not controlled by the government. Thank goodness the Bloc Quebecois was there. That was my second point.

The third point I want to make is a little more technical. The auditor general tells us that it is unusual for Revenue Canada to issue advance rulings on past transactions. Once again, if it is unusual, why was it done in this case? Why?

Are there two kinds of justice or two sets of rules? If you want to transfer $2 billion in family trusts, either you can do it as a private citizen and Revenue Canada will harass you afterwards or you cannot do it. Why did Revenue Canada make an exception and issue advance rulings on past transactions?

Finally, I would like the parliamentary secretary to comment on the attitude of the Deputy Minister of Finance, David Dodge, who, after that meeting, chewed out the auditor general. It is another form of psychological torture. It is a way of criticizing him for unearthing this, for rocking the boat. What kind of attitude is that coming from one of the highest ranked government officials, Deputy Minister of Finance David Dodge, who literally lashed out at the auditor general in public, in front of private citizens and journalists.

Unfortunately, good manners prevent me from repeating in this House the exact words that were used on that occasion. I would like the parliamentary secretary to tell us if she finds such behaviour normal and acceptable.

Committee Of The House
Routine Proceedings

5:05 p.m.

Liberal

Sue Barnes London West, ON

Madam Speaker, I would like to thank the hon. member for his question.

It gives me an opportunity to say what a wonderful job he did chairing the public accounts committee during these debates. This is the gentleman, not the government, that controlled the committee. The questioner himself was the person who chaired the public accounts committee during the debate.

I thank him because that is the only committee chaired by the official opposition. I agree with the fact the official opposition chairs the committee.

The questioner is now saying his committee is not good enough and that there should be a public inquiry. He wants us to spend some more money and to forget we have had two public and transparent committees, one in the control of the hon. member asking the question. Again I thank him for the job he did chairing the committee.

I want to answer him directly. He raised by innuendo some speculation that there is perhaps something funny about giving rulings in December or just before Christmas. The hon. member was in the room when the testimony was given at committee. He knows Revenue Canada statistics show that issuing a great number of rulings in December is the norm because it is the year end and the last date for cutoff.

In past years we had floating years for corporations, but most business people in Canada understand that a great many corporations have January 31 as their cutoff for the year. It is changing in some respects, but it was the norm at the time these rulings were issued.

I will deal specifically with the member's question. I will give an example. Nineteen rulings were issued in the last week of December 1991. In 1992, 33 rulings were issued in the same period. In 1993, 42 rulings. In each of 1994 and 1995, 28 rulings were issued in that week.

In actual fact the bulk of of the rulings of Revenue Canada occur in the last quarter of the year. That is not unusual. To get to that point some work has to be done in advance.

The Canadian public needs to know that Revenue Canada is in a service business. We have clients who pay us taxes so we can do the work of good government as the Government of Canada. We require the funds but we also have committed to advance rulings which are not very useful if they are given after the fact.

When somebody comes to us with a problem and says "here is what we need to do by this date so please give us an advanced ruling", we work toward making sure we meet that deadline. That is common sense, that is good government and that is service.

Committee Of The House
Routine Proceedings

5:05 p.m.

Liberal

George Baker Gander—Grand Falls, NL

Madam Speaker, I congratulate the hon. member on the excellent speech she gave and want to ask her a question. Quel est le problème avec le Bloc?

Why would the Bloc totally confuse the situation? Why would the Bloc talk about 1971? The Liberals brought in the 21-year rule which stated that at the end of 21 years the rich would pay. The Tories extended the 21-year rule indefinitely when they came to power. When the Liberals came back into power they closed it off completely. To add further to the confusion, could it be that Bloc members are just as interested as the Tories were in giving tax breaks to the rich?

Why would the Bloc on October 18, 1996 in the House of Commons refer to the tax agreement the Tories negotiated to change the estate tax and say that it supported a Senate bill? It supported entering into an agreement with the United States on estate taxes. It realized that some Americans were penalized by differences in legislation. It indicated that the bill did not specify how many millions or billions of dollars were at stake. It did not know which country, Canada or the U.S., would benefit the most from tax liberalization.

Why would the Bloc be supporting tax breaks that the Tories negotiated for the rich?

Why does the Bloc want to protect the rich? What is the problem with the Bloc?

Committee Of The House
Routine Proceedings

5:10 p.m.

The Acting Speaker (Mrs. Ringuette-Maltais)

The hon. parliamentary secretary has 30 seconds to answer.

Committee Of The House
Routine Proceedings

5:10 p.m.

Liberal

Sue Barnes London West, ON

Madam Speaker, with 30 seconds to answer I can only say I have no idea what is in the minds of Bloc members. I know what the government does and I can make that choice.

Committee Of The House
Routine Proceedings

5:10 p.m.

Reform

Jim Silye Calgary Centre, AB

Madam Speaker, I am hearing some interesting comments being thrown back and forth. The last Liberal questioner just does not understand the objective of the Bloc. The Bloc is not out to give tax breaks to the rich. The Bloc is out to tax the rich. It is exactly the opposite. It is complaining that billions of dollars are disappearing because they are hidden in family trusts. It wants to tax those people. It wants its share of the revenues.

How can a Liberal member who is listening to the debate say the Bloc wants to give tax breaks to the rich? This is what is wrong with the Liberal government. It is the spin it wants to give the thing. It is the perception it wants to create. Liberals are interested in perception, not reality. They are not listening to what the debate is all about.

It is a shame that a gentleman who is as good at communication and can express himself so eloquently would waste those God given talents on distorting the truth and the facts.

Nevertheless I am a member of the Standing Committee of Public Accounts. I was also present when the issue was debated there. As Reformers my colleague from the riding of St. Albert and I were very concerned about the issue. The Liberal spokesperson from public accounts who addressed the issue refuted what the Bloc members had to say. She did a reasonably good job of explaining the circumstances.

I find interesting now that it is relatively over, so to speak, her recollection of the facts: the events are now wonderful. She praises the auditor general when the chairman of the Standing Committee of Finance, who was present in the House today, openly criticized the auditor general for having the audacity to question the transfer of these trusts to the United States. That is the reality. He criticized the auditor general and now the Liberal spokesperson is praising the auditor general.

Another fact conveniently distorted or interpreted different from the way I saw things happen was when this hit the newspapers and it was out there, the Bloc Quebecois did make a big issue out of this and raised family trusts. It was on family trusts from the very first meeting we had on the GST the first year it came here. It is an issue that it is very concerned about and very much interested in.

This issue comes to the forefront and lo and behold, the finance minister tried to pre-empt the responsibilities of the public accounts committee and take away its right to review the situation. He shoved it off to the Standing Committee on Finance where it wanted to review all of this and not have it under public accounts.

We know the public accounts committee is the one that is supposed to be looking at the comments of the auditor general and from that ask for witnesses and testimony. We felt that the Standing Committee on Finance could do what it wanted and we also looked into it.

In pursuing the issue I have some other facts I would like to present. Looking into it, trying to get to the bottom of it, trying to find out whether there were some tax dollars that should have stayed in Canada that ended up not being collected, those are honourable and good questions.

Imagine a system once they form the government in the new country of Quebec. They are going to publish names of taxpayers they are investigating. That is not right. That is not the kind of tax system I would like to have or a country I would like to be in. That is a private matter and is very confidential. On that issue I definitely disagree.

The chairman of the Standing Committee on Public Accounts in one of his questions earlier today was concerned about what kind of system we have where somebody asks for an advance ruling. I think that is good system. An advance tax ruling on a complicated

issue is a service that Revenue Canada should provide. It is a service that is very valuable and is used very often.

When some people are into very complicated financial transactions and the implications of moving funds around in trust to find out how the tax department would treat it, whether it would be taxed right away, deferred or not taxed at all, these are important elements to consider. Advance tax rulings are a process we in Canada, a lot of individuals and businesses, appreciate.

The actions of Revenue Canada on this issue are suspect for the reason, as I recollect the facts, that on the second ruling the department in all its documentation, in everything that was in the files prior to the last meeting, indicated it was not going to give a favourable ruling. It was to rule against this movement of assets, taxable properties, within a family trust

All of sudden it is reversed. Why? The purpose of the public accounts committee was to find out and ask witnesses. We still do not have a clear answer on that. We do not know why there was a reversal. Certainly it is its right to reverse it but when all the documentation, all the arguments and all the evidence as it builds a file and review a case are leading it in one direction, why all of a sudden is it changed?

The Bloc is asking good questions. Why is there special treatment here? Was there special treatment? Was there favouritism? Was this an order by a cabinet minister who said reverse it? Was it politically motivated? We tried to get to the bottom and we could not. The Standing Committee on Finance then made some recommendations and it theoretically closed the loopholes.

What was happening that was wrong while the committee was doing this? While the Standing Committee on Finance was reviewing the issue, the Minister of National Revenue froze all other transactions of this nature, denying for six to seven months the rights of other Canadians to obtain advance tax rulings and to make transactions within trusts. It was done at the expense of other taxpayers.

It was something the Minister of National Revenue should not have done. She should have allowed the process to continue because if the decision was a good decision and if the decision had the facts to support the action from a tax point of view, it should have been a precedent which would have been available for other Canadians. It seemed to us in committee that the government was trying to hide it, push it under the rug and not let us get to the bottom of it. It was frozen.

Then the loophole was closed and we were told it is finished. However, like I say, there was a price to pay in doing that.

I would like it to be known that this transaction had with it a tax liability. The trust went to the United States. It went to New York state. We found out that the way the deal was made, the way the ruling came down, this could be allowed to happen but only if during the next ten years, from 1991 to the year 2001, if any of those assets were cashed in, if any of it was liquidated, the tax liability would be owing to Canada and Canadians would receive that money. Theoretically, as we are debating this issue today, if those individuals were to do anything to liquidate certain assets within the trust, the moneys would be taxed and the tax would be owing to Canada.

After the ten years the tax would be owing and payable in the United States, in New York state. However, these individuals did not do this to avoid paying tax. The tax liability is there. It is a question of whether it is payable to Canada or to the United States. Ten years from the date of the agreement the tax is owing to Canada.

As well, the tax rate in New York state on this trust would have been higher than it is in Canada. Therefore to argue that these individuals were trying to avoid taxes or trying to pay lower taxes is not true. I would like to let it be known that these people were just looking for ways to get their trust moved around.

Did this happen in such a way that there should have been an immediate tax liability on the assets payable to Canada? I do not know. I do not know the technicalities. I cannot say whether there should or should not have been. However, other Canadians should not have been denied the same rights while this was being looked at.

The public accounts committee went as far as it could, with good intentions. We were not quite satisfied with all the answers. There were minority reports filed.

With respect to the matters of tax liability, tax avoidance and tax concurrence there is an honour system in Canada. I am starting to get the sense that the government is becoming tougher and is not willing to trust Canadians. The government amended the Income Tax Act in the last budget, which is to come into force this year. Now we are going to be requested on our income tax forms to not only report our income, tax liability, how much was deducted at source and how much is still owing, but a year from now the government is going to ask all individuals to list their foreign assets. We will not only have to report our income and the liability on that income, we will have to report our foreign assets. Why? The government does not trust Canadians. It feels that some Canadians are hiding assets offshore and not paying tax on them when they are sold, not declaring their gain on the assets.

Our system in Canada hires a lot of people. Revenue Canada has a budget of $2.2 billion, 44,000 employees. There are some darned

good auditors. Those auditors are the ones who should be looking at who is and who is not paying taxes on offshore assets. Why not do that?

If there is a problem with the business immigration plan and some immigrants are not following the system, audit more of them. We know that when a tax avoidance scheme or a tax shelter develops and the business community takes undue advantage of it, the auditors audit research and development grants until we find out what is legitimate and what is not and we find out that some people were cheating. That is how to solve it, not putting in the Income Tax that one must under penalty of imprisonment or under penalty of something else. That drawing and quartering is ridiculous. That is not the way we should be going.

Today something happened in public accounts that is all related to what we do as a committee. A very important issue was raised about generally accepted accounting principles and how government commitments are booked; the $961 million transition payment to the three Atlantic provinces; the $800 million commitment for the foundation for innovation.

Bloc members were ready to debate this. Reform was ready. The auditor general was at the committee along with the deputy minister. These people were kind enough to show up to discuss the issue so that I would either stop criticizing or continue to criticize the finance minister. There are seven Liberal members on that committee. Not one of them showed up and the chairman had to cancel the meeting. That is a shame and I do not think it is in order.

I feel I have contributed as much as I can to shed light on what happened on this issue.

Committee Of The House
Routine Proceedings

5:25 p.m.

Liberal

Jim Peterson Willowdale, ON

Madam Speaker, I would like to put a question to the hon. member. The Bloc Quebecois has decried throughout Canada what they call the family trust scandal.

Committee Of The House
Routine Proceedings

April 23rd, 1997 / 5:25 p.m.

Bloc

Osvaldo Nunez Bourassa, QC

But it is true.

Committee Of The House
Routine Proceedings

5:25 p.m.

Liberal

Jim Peterson Willowdale, ON

It is not true. Both the Standing Committee on Public Accounts and the Standing Committee on Finance have held public hearings on this issue. Tax experts who had conducted an extensive review of this case told us that our public officials were fair and had the right to give what is called an advanced tax ruling. According to these experts, who hail from the private sector and work in this complicated and difficult area, our employees had the right to act as they did.

But despite all of this, I want to point out that, after being made aware of the situation, the government reacted very quickly. It agreed with the proposals made by the Standing Committee on Finance to create in Canada one of the toughest tax systems where immigration is concerned.

We have heard a lot of lies in this House and everywhere else about family trusts. Let my give you an example of a lie I heard today. Someone said that it was the Liberal government under Pierre Elliott Trudeau, in 1970, that came up with the idea of family trusts. That is not true. Family trusts have existed since the 17th century. They have always existed to help families, farmers, people-

Committee Of The House
Routine Proceedings

5:25 p.m.

The Acting Speaker (Mrs. Ringuette-Maltais)

It being 5.30 p.m., the House will now proceed to the consideration of Private Members' Business as listed on today's Order Paper.

On the Order: Private Members' Business:

October 30, 1996-Mr. Preston Manning (Calgary Southwest)-Second reading and reference to the Standing Committee on Justice and Legal Affairs of Bill C-341, an act to establish the terms and conditions that must apply to a referendum relating to the separation of Quebec from Canada before it may be recognized as a proper expression of the will of the people of Quebec.

Quebec Contingency Act (Referendum Conditions)
Private Members' Business

5:25 p.m.

The Acting Speaker (Mrs. Ringuette-Maltais)

The hon. member for Calgary Southwest is not present to move the order as announced in today's notice paper. Accordingly the motion will be dropped to the bottom of the orders of precedence on the Order Paper.

The sitting is suspended until 6.30 p.m., unless the hon. members agree to call it 6.30 p.m.

Quebec Contingency Act (Referendum Conditions)
Private Members' Business

5:25 p.m.

Some hon. members

Agreed.

Quebec Contingency Act (Referendum Conditions)
Private Members' Business

5:25 p.m.

Liberal

Barry Campbell St. Paul's, ON

Madam Speaker, I rise on a point of order. May I call it 6.30 p.m?

Quebec Contingency Act (Referendum Conditions)
Private Members' Business

5:25 p.m.

The Acting Speaker (Mrs. Ringuette-Maltais)

Is that agreed?

Quebec Contingency Act (Referendum Conditions)
Private Members' Business

5:25 p.m.

Some hon. members

Agreed.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.