House of Commons Hansard #157 of the 37th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Business of the House

10 a.m.

The Speaker

It is my duty pursuant to Standing Order 81(14) to inform the House that the motion to be considered on Monday during consideration of supply is as follows:

That this House acknowledge the existence of a fiscal imbalance jeopardizing the quality of social programs, such as health care and education, in Quebec and in the other provinces.

This motion, standing in the name of the hon. member for Saint-Hyacinthe--Bagot, is votable. Copies of the motion are available at the Table.

The House resumed from March 13 consideration of the motion that Bill C-49, an act to implement certain provisions of the budget tabled in Parliament on December 10, 2001, be read the third time and passed.

Budget Implementation Act, 2001
Government Orders

March 15th, 2002 / 10:05 a.m.

Progressive Conservative

Scott Brison Kings—Hants, NS

Mr. Speaker, I will continue the speech that I commenced two days ago in this place.

We were terribly disappointed by the way the government handled the air security issue with the budget. Clearly all Canadians are concerned about the issue of air security. No one in the House and no Canadian would argue with the importance of that issue.

The government is putting a $2.2 billion tax on Canada's most vulnerable industry, the airline industry. This is an industry that has seen a remarkable level of consolidation in the last couple of years, the disappearance of almost all competition to Air Canada, a reduction in the level of services and a commensurate increase in the price that Canadians must pay for those reduced services.

We have seen what has happened to the CanJets, the Canada 3000s and Royal Airlines. At a time when some of these entities are trying to finance a return to air spaces the government is putting a $2.2 billion tax on this industry and forcing airlines and airline passengers to bear the complete responsibility in terms of paying for the air security tax. As many members have articulated on the floor of the House and in committee the benefit of secure air travel is received by society in general. There is a collective benefit to secure air travel. That is why in the U.S. there is only a $2.50 charge per flight as opposed to the $12 charge per flight that the government is putting on air travel.

It is a competitive disadvantage from a tax perspective for Canadian businesses and individuals compared with the U.S. The long term trend of the government relative to its management of the Canadian dollar may mean that at some point in the future $2.50 U.S. would be approximately equivalent to $12 Canadian, but we ought not to wait for that form of equalization to occur.

The fact is the U.S. recognized there was a collective benefit and while user charges and fees would cover some of the cost, there was a recognition that these fees should not be used to cover all of the costs, particularly at a time of economic tumult that impacted the airline industry more so than perhaps any other industry right now.

It would be bad enough if the government was simply charging Canadian air travellers and passengers to cover the complete cost of air security, but the government is going one worse. The government is charging $1 billion more over the next five years than that which would be required to cover the basic cost of security.

Finance officials have provided their methodology for having come to the $24 round trip fee and it is based on highly specious data. It is based on data that reflects a passenger count that is considered far lower than what would be the case over the next several years. This was based on an almost immediate post-September 11 passenger count and some extrapolation of that reduction which occurred after September 11, but certainly does not reflect what most observers and analysts of the travel industry feel to be a more realistic assessment of air travel in Canada over the next several years.

The government seems to be exploiting fears around September 11 to create a $1 billion tax grab in order to pad the books to improve general revenues in other areas. Not only is this bad public policy, it is morally reprehensible that the government would take such a terrible tragedy and use it as another way or means by which to wring an increased surplus out of Canadians. It is clearly wrong.

This is like EI surplus two which was an income security package or program designed to improve labour market flexibility and help unemployed Canadians by providing a cushion during bad times. The government used that program to pad the books of general revenue. Now it is taking an air security situation that emerged out of a tremendous tragedy and is using this situation to extract more tax revenues out of Canadians for general revenue and Liberal spending in other areas.

When we think of that Liberal spending in other areas, nobody in the House would argue with increased levels of health care spending or transfers to the provinces for health care and education. Under the government we have seen a dramatic reduction in health care transfers and transfers to the provinces. In fact fiscal restraint for the government means tightening the belts of the provinces by cutting back on transfer payments. It rarely means tightening its own belt and its own program spending.

Those cutbacks to transfers have resulted in a health care and education crisis in every province in Canada and a growing gap between have and have not provinces. Certainly some wealthier provinces, Alberta for instance, have the tax base to, in some cases, pick up the slack when the federal government makes such draconian cuts.

In a province like mine, Nova Scotia or, for instance, the province of British Columbia with the difficulties that province is undergoing from a budgetary perspective, we simply do not have the tax base to pick up the slack when the federal government makes such draconian and unilateral cuts.

That is why the whole issue of fiscal imbalance between the provinces and the federal government is gaining such importance and why there is so much agreement across Canada by the premiers that this has to be addressed.

There has been a growing fiscal imbalance in Canada. The provincial governments have as their ultimate responsibility the providing of health care and education. The federal government has reduced its role in terms of the funding in those areas so the provincial governments in some ways have what Mark Twain would refer to as a bad job. They have all the responsibilities but no authority. The provinces increasingly lack the ability to have tax levers to raise the type of revenue necessary to cover growing costs in education and health care.

The federal government, by pulling back, has created a situation whereby it can then re-enter national programs like the millennium scholarship program or the Canadian foundation for innovation and some of these other programs and appear like a hero. It provides the cheques with the maple leaves on them and takes credit for returning with a teaspoon some of the money it previous took out with a backhoe.

It is offensive to see this type of destructive federalism, this brinksmanship of provinces by the jurisdictional power grab of the federal government. There has been a trend by the government to again take over a lot of the traditional jurisdictional areas of the provinces by starving the provinces of the revenue necessary to deliver the services and then reappearing like some sort of fiscal super hero with giant federal cheques.

This is bad politically for a country that depends on maintaining constructive federalism on an ongoing basis. It is also bad public policy, because ultimately the provinces and municipalities, as the government levels closest to the people being served, are in many cases better able to assess the needs of those individuals and of those constituents to ultimately deliver services.

Medicare evolved out of a provincial experiment in Saskatchewan. A visionary premier saw a way to approach health care in a more egalitarian and thorough way and in a way that has come to define us as Canadians. Over a period of time and working with the federal government and with the support of parliament, medicare evolved to a national program. In some ways the provinces represent the best laboratories to experiment with and to develop social policies which ultimately will make better policies in other provinces as well as nationally.

When a province experiments with health care and is faced with significant federal cuts and is put in a position where it has to do something to maintain some reasonable level of service delivery and tries to be creative about it, the federal government brings in politics by doing public polling. Instead of working with the province to ensure that the principles and values we treasure as Canadians are met in potentially new, creative and cost effective ways, the government fights the province.This is constitutional brinkmanship at its absolute worst.

There are so many areas the government ought to have focused on in its budget. In recent days we have read statements by the Deputy Prime Minister blaming Canadian businesses for not being competitive enough. He is the same individual who as industry minister said that high taxes were good for business because they make businesses work a little harder. The only other person I can think of in the House who exemplifies economic buffoonery as much as the Deputy Prime Minister is the Prime Minister. Perhaps that is why they are getting along so well these days.

Instead of the government blaming the private sector for not doing enough, it should acknowledge its role in helping the private sector do more. May I suggest a couple of modest initiatives the government could undertake to help the private sector do more.

One initiative might be the elimination of capital taxes in Canada. We are one of the few industrialized nations that taxes companies simply for having capital, not for profit, but for capital. When capital is taxed, it pummels investment. When investment is pummeled, initiative is pummeled and this defeats and destroys productivity. That is one modest example of what the government ought to do and something I am offering constructively to members opposite.

Another initiative would be the elimination of the capital gains tax. Canada did not have a capital gains tax before 1971. There is no other tax that has a more pernicious impact on the growth of individual and family capital in order to ensure savings and growth of investment required for individuals and families, but also entrepreneurs, many of whom have their entire net worth tied up in a business. Reducing further capital gains tax with the ultimate goal of eliminating it would make a great deal of sense.

I have heard the government claim that our capital gains tax is lower than that of the U.S. This is a patently false statement. The fact is the inclusion rate and the ultimate effective capital gains tax is still significantly higher than that of the U.S. It would be an affordable area of taxation. We could not only equalize our level of taxation with the U.S., but for once we could be ahead of the U.S. if the government chose to eliminate personal capital gains tax in Canada.

I suspect that very little in the way of revenue is collected from personal capital gains tax given the tumult in the capital markets over the last year. Even during the bull markets the year before last, only about $3 billion was collected in capital gains tax.

The government can send $500 million worth of cheques to dead people, rich people, prisoners and students who do not heat homes with heating oil. If it can blow $500 million in a pre-election spending spree designed not at heating homes of Canadians but at trying to heat up Liberal prospects in ridings across Canada, I would suggest it could go a little further. It could give Canadian investors, Canadian families, Canadian individuals and Canadian entrepreneurs an advantage over the U.S. by eliminating the capital gains tax.

There is one other statistic with which I suspect most members may not be familiar. Over 60% of personal capital gains tax in Canada are paid by individuals who make less than $50,000 per year. The degree to which individuals in Canada from a wide range of income levels and socioeconomic areas now participate in the capital markets has never been as great. Part of this is mutual funds as a vehicle through which to ensure diversification with fairly small levels of investment, but the long term trend is that more Canadians than ever before from a wider range of income levels than ever before are investing. Canadians are making these types of investments. It would make a great deal of sense to assist Canadians a little more. A further capital gains tax reduction would make a great deal of sense.

When we hear the discussion of productivity, clearly it is not just tax levers and tax reform that are required. It is not just tax reduction that is required. I would argue that we need significant broad based tax reform in Canada focused on productivity. We also need regulatory reform. We need to work with the provinces across Canada on a national agenda addressing productivity issues in our tax system and in our regulatory system.

Beyond that we need to address issues of government spending. Clearly when taxpayers' money is spent on items that do not necessarily reflect the values of Canadians, the needs of Canadians or the long term best interests of Canadians, that money being wasted as such can actually have the perverse impact of reducing productivity. It encourages individuals to pursue activities that may not only not be in their best interests, but also may actually foster worse productivity.

I mentioned earlier the issue of fiscal imbalance. We have to readdress the issue of equalization in Canada. Equalization is an extraordinarily important social program. It is the only constitutionally enshrined social program in Canada. As it is now, our equalization system is broken.

The original goals of equalization in 1958 were to provide approximately equal levels of taxation and services across Canada. Clearly with the growing disparity between provinces both in services and in tax levels, that needs to be addressed. We should address it by reconsidering our economic development strategy as well. We should develop more effective tax based levers as other countries have utilized to develop more effective economic development strategies which would ultimately address some of the fiscal imbalance issues.

I have tried to cover a fairly wide range of issues, those which the government covered in the wrong way, but also those that the government ought to have covered but failed to cover. I hope that during questions and comments members of parliament will ask questions that will allow us to discuss some of the other issues we may share an interest in but which are difficult to cover in such a short period of time.

Budget Implementation Act, 2001
Government Orders

10:20 a.m.

Canadian Alliance

Ken Epp Elk Island, AB

Mr. Speaker, probably my colleague and I share the concern about the effectiveness of the committee on Bill C-49. I would like to have the member state his position on this issue.

The committee at some expense had a number of witnesses come before it, both in the prebudget consultations and also on Bill C-49 specifically.

During the prebudget consultations there were numerous witnesses who said that the donations to private charities should receive the same tax treatment as those to public charities. The witnesses were unanimous in their statements on that. The committee recommended it to the finance minister, but it is nowhere to be seen in the budget implementation act.

During the discussion on Bill C-49 witnesses unanimously said that the structure of the security tax would be devastating to the small carriers. Again, the committee in this case chose to ignore it with highhandedness from the Prime Minister's Office. Other coercive tactics were used as well.

I would like the hon. member to comment on that. I hope he is as angry about that as I am.

Budget Implementation Act, 2001
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10:25 a.m.

Progressive Conservative

Scott Brison Kings—Hants, NS

Mr. Speaker, I thank the hon. angry young man from Elk Island for his intervention. We all have effective ways of dealing with anger and I would be willing to sit down with him for counselling any time.

The member is an extremely effective member of the House of Commons finance committee. He shares with me a concern that the committee process is becoming less and less functional as we see the executive branch of the government and the Prime Minister's Office exercise control. I would add the cabinet as well but I do not think even the cabinet has much to say about how things are going on that side of the House any more. I think the Prime Minister's Office increasingly is exercising control over members of parliament on that side. It is also trying to exercise control over committees which by their nature are more effective and functional when they operate in a more co-operative non-partisan way.

I was very disappointed that the concerns about the air security tax which were raised by every single witness who appeared before the committee were ignored. They were not really ignored by the committee. There were Liberal members of parliament, including the member for HIllsborough, who expressed concerns.

In fact the hon. member for Hillsborough had said at committee that he was not going to vote for the air security tax without amending it. He supported an opposition motion to reduce the air security tax by 50%. Of course the chairperson recognized that if a vote occurred at that particular moment, the air security tax would have been reduced by 50% by the committee. As such she recessed the committee briefly and miraculously 30 minutes later when the committee reconvened the member for Hillsborough was not there. He had disappeared. I moved at the committee that we send him a get well card.

The member came back about 20 minutes later looking like he had just lost his puppy, with a florid face after having been taken into the whip's torture chamber. He expressed that he had changed his mind, that he saw the ways of the government on this one now. He said that he had received reassurances from the Minister of Finance that this issue would be revisited in the fall and the minister would reduce the tax if it was taking in more revenue than what was required.

I did not just fall off a turnip truck. The Minister of Finance committed to scrap the GST and did not. The Minister of Finance has benefited from building a surplus on the backs of workers and small businesses with the EI fund. Are we supposed to take him seriously when he says he is going to reduce the air security tax if it takes in too much revenue? The Minister of Finance is a taxaholic. We do not expect the government or the Minister of Finance to make good on that commitment.

It is unfortunate that we are seeing an increased level of control of committees by the Liberal whip as an extension of the Prime Minister's Office and the dysfunctionality which is inherent in that. Committees need to work effectively for parliament to work effectively.

I know the hon. member for Elk Island and I will continue to go to those meetings and do our best to make the committee functional and effective but it sure does get frustrating sometimes. I know some of the Liberal members opposite are just as frustrated with it as we are.

Budget Implementation Act, 2001
Government Orders

10:30 a.m.

Oak Ridges
Ontario

Liberal

Bryon Wilfert Parliamentary Secretary to the Minister of Finance

Mr. Speaker, while the hon. member across the way outlined all sorts of issues, he failed to mention a few.

I would like to point out that we are the only G-7 state that is balancing its books. This year we are paying down the national debt. We have paid $36 billion over the last four years on the national debt. We have had five consecutive budgets in a row in terms of balancing the books. We have a stimulus package and a tax package that will be greater than that in the United States given the size of our economy, and it is front end loaded. We have ended 28 years of deficit. Those are the things the member did not point out.

I would also point out that under the strategic funding initiatives, $9 billion this year, $11 billion next year and $7.7 billion over five years will go toward enhancing personal economic security for Canadians. We will spend $2 billion on strategic infrastructure projects and $1.1 billion over three years to support skills and learning.

I would also point out that personal income taxes are down. I am sure my colleague did not deliberately neglect these facts but that he simply overlooked them.

It would seem that the member on the other side is not the best in terms of listening sometimes even though we were attentive to our colleague across the way.

The member might want to comment on the fact that in terms of our party's record on the economy, it is much better than when his party was in power. Maybe he would like to comment on the fiscal situation that we inherited and how we have built upon that since 1993.

Budget Implementation Act, 2001
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10:30 a.m.

Progressive Conservative

Scott Brison Kings—Hants, NS

Mr. Speaker, this will be like shooting fish in a barrel. First, I thank the hon. member for his softball question.

In terms of the deficit, according to German, U.S. and U.K. accounting standards, Canada is in a deficit right now. By Canadian accounting standards, we are cruise controlling to deficit. The only way the government narrowly averted that was by deferring some corporate taxes to next year. It was not a tax break but a deferral to try to avoid that. Don Drummond, the chief economist of TD Bank, referred to it as fancy bookkeeping.

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10:30 a.m.

Progressive Conservative

Rick Borotsik Brandon—Souris, MB

Arthur Andersen and the Canadian government.

Budget Implementation Act, 2001
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10:30 a.m.

Progressive Conservative

Scott Brison Kings—Hants, NS

Yes, it is the Enron government accounting practices.

In terms of the U.S. tax package, the hon. member is simply wrong. The fact is we have and, after the full implementation of our Canadian tax reduction, will still have significantly higher personal income taxes, corporate taxes and capital taxes than in the U.S. That is one of the reasons the U.S. continues to be a magnet for capital and this country under his government continues to be a repellant.

Canada has among the highest income taxes in the G-7 and the second highest corporate taxes in the OECD. This is hardly a record to boast about.

I am glad the member mentioned the previous government's record. The government in 1984 inherited a $39 billion deficit, which, as a percentage of GDP, was 9%. Over a nine year period that government reduced the deficit as a percentage of GDP from 9% to almost half of that, to around 4%. At the same time it had the courage to introduce a free trade policy and used political collateral to leap ahead of the Canadian public and actually take a political risk in the 1988 election to introduce a free trade policy. It actually took the political risk of getting rid of a manufacturers' sales tax, which was pummeling investment and hurting productivity, and replaced it with the GST which was a more rational tax. It made more sense economically. Politically, it was about as popular as a skunk at a picnic, but it was the right thing to do.

Where was his party on all those issues? His party was vociferously fighting against every single initiative of that government, not just to reduce the deficit as a percentage of GDP but also to implement the types of policies required to guide Canada through the nineties as those policies have to a period of greater prosperity and success for all Canadians. That government planted the seeds and this government picked the flowers.

Budget Implementation Act, 2001
Government Orders

10:35 a.m.

Oak Ridges
Ontario

Liberal

Bryon Wilfert Parliamentary Secretary to the Minister of Finance

Mr. Speaker, I think some of the flowers they picked were obviously dead. In any event, it is my pleasure to speak to Bill C-49, the budget implementation bill.

The bill would implement several measures of the 2001 budget. As hon. members will recall, the 2001 budget was introduced after the aftermath of the tragic events of September 11 in the United States.

While the budget builds on the government's long term plan for a stronger economy and a more secure society, it also addresses the immediate economic and security concerns of Canadians as a result of those events.

The government initially responded, and swiftly I might add, to the events of September 11 with legislation that takes aim at terrorism and enhances Canada's ability to identify, prosecute and punish terrorists, and measures to cut off sources of financing for terrorists.

The 2001 budget builds on these initiatives through a comprehensive set of security measures designed to keep Canadians safe, terrorists out and our borders open. It provides $7.7 billion over the next five years to enhance security for Canadians and make Canadian borders more secure, open and efficient.

Included in this amount is $2.2 billion in funding for air security and the creation of the Canadian air transport security authority which will deliver enhanced security services at airports and on board flights according to rigorous new national standards set up by Transport Canada.

Established under Bill C-49, the new authority is to be responsible for the certification of screening personnel and for providing pre-board screening of passengers and baggage, armed police on board aircraft and the acquisition and operation of screening equipment, including that used in searching for explosives.

An air travellers security charge that comes into effect April 1, 2002, will fund these new security expenditures. The charge will be paid by air travellers, the primary beneficiaries of these enhanced security measures, and will be collected by air carriers or their agents when airline tickets are purchased.

For travel in Canada, the charge will apply to flights connecting airports where the air transport security authority will be responsible for passenger screening. The charge on domestic travel will be $12 for a one way trip and $24 for a round trip.

The charge on a ticket to the continental U.S. will also be $12 and $24 for travel outside Canada in the continental U.S.

All proceeds from the charge will be used to fund the enhanced air travel security system and, if revenues exceed costs over time, the charge will be reduced. The government, as the minister has indicated repeatedly in the House, will review the charge in the fall.

This enhanced security system will assure air travellers that Canada's air transportation system remains one of the safest and most secure in the world.

Along with addressing the immediate security concerns of Canadians, the 2001 budget also addresses immediate needs through targeted investments designed to boost the confidence in the economy in a fiscally affordable way.

By investing in strategic infrastructure, skills, learning, research, health, aboriginal children, the environment and international assistance, the 2001 budget reflects the government's long term plan while providing important support now for the economy

One way in which the budget achieves this is through the Canada strategic infrastructure fund which would be implemented through Bill C-49.

The modern economy of the 21st century requires a backbone of sound fiscal infrastructure to sustain the nation's growth and our quality of life.

Previous budgets allocated funding to improve provincial and municipal infrastructure. The 2000 budget, for example, introduced both the infrastructure Canada program and the strategic highway infrastructure program.

The government recognizes the need for additional support for large strategic infrastructure projects which can bring lasting economic and social benefits while providing both stimulus and long term productivity benefits. To address this need and to implement other federal infrastructure initiatives, the government is creating the Canada strategic infrastructure fund with a minimum federal contribution of $2 billion in funding.

Working with provincial and municipal governments and the private sector, the fund will provide assistance for large infrastructure projects in areas like highways and rail, local transportation, tourism, urban development, and water and sewage treatment.

A moment ago I mentioned international assistance as one of the strategic investments in the 2001 budget. Canadians have not lost sight of their obligations to help less fortunate peoples of the world. At the G-8 summit in Genoa last July, African leaders presented their proposal for a new partnership for Africa's development and the G-8 leaders pledged to support this initiative.

Since then the Prime Minister has restated his commitment that the development in Africa will be one of the main themes in the G-8 summit that Canada will host in June in Kananaskis. In recognition of this commitment, the 2001 budget announced $500 million over three years for African development to help implement these objectives.

The new Canada fund for Africa, which would be created through Bill C-49, will establish a government program to provide funding for activities that will help reduce poverty, provide primary education and set Africa on a sustainable path to a brighter future.

The government is committed to providing every opportunity for Canadians to upgrade their skills. Whether through the education system, through on job training or through universities and other centres of advanced research, the government has long recognized the value of investing in people.

That is why we introduced the Canadian opportunities strategy in the 1998 budget. The 2001 budget further encourages the acquisition of skills and learning by Canadians.

For example, Bill C-49 provides tax assistance to help apprentice vehicle mechanics registered in a provincial program cope with extraordinary tool costs. Beginning in 2002, they would be able to deduct for income tax purposes the cost of buying new tools to the extent that these costs in a year exceed the greater of $1,000 and 5% of their apprenticeship income.

Another measure provides tax relief for adult students who receive government assistance for basic education at the primary or secondary school level. Bill C-49 exempts from income tax any tuition assistance for adult basic education provided under certain government programs, including employment insurance.

The bill also helps more students undertake lifelong learning by extending the education tax credit for people who receive taxable assistance for post-secondary education under certain government programs, including EI.

As hon. members know, the quality of life of Canadians is closely tied to preserving and improving our natural environment. The 2001 budget includes new spending and tax measures intended to ensure continued progress toward a cleaner and healthier environment.

One of these measures is included in Bill C-49 and concerns commercial woodlot owners who can currently be subject to income tax when transferring woodlots to their children. As a result, woodlots may have to be harvested prematurely to generate the revenues required to pay the tax on the transfer, which can be detrimental to the sound management of this resource.

Bill C-49 extends the existing intergenerational tax deferred rollover for farm property to intergenerational transfers of woodlot operations that are farming businesses managed in accordance with the prescribed forest management plan.

I should mention too that the budget initiatives with respect to renewable energy and energy efficiency are being implemented through the amendments to the income tax regulations which have already been released in draft form.

The 2001 budget also contained a number of other tax measures, all of which are designed to improve fairness in the tax system. The bill makes permanent the 1997 budget measure that provides special tax assistance for donations of certain securities to public charities, and the 2000 budget measure that reduces the tax on employment benefits for donations of eligible securities acquired through stock option plans.

Another measure improves the system for providing GST credits. Beginning in July 2002, GST credit entitlements for a quarter will be based on the individual's family circumstances at the end of the preceding quarter not at the end of the previous calendar year.

To provide a cash flow benefit for small businesses the federal corporate tax installment payments for January, February and March, 2002 would be deferred for at least six months without penalty. To make it easier for foreign investors to use limited partnerships in structuring venture capital investments, Bill C-49 would ensure their non-resident partners were not considered to be carrying on business in Canada solely because investment management or administrative services were provided by Canadian residents. The final tax measure would allow full deductibility for the cost of meals provided to employees at construction work camps where the employees could be expected to return home each day.

A remaining measure relates to improved parental benefits under the Employment Insurance program. The current 50 week cap on the combined amount of sickness, maternity and parental benefits an individual can receive under EI means women who become ill may not have full access to extended benefits. To enable a mother to receive her full entitlement to special benefits, effective March 3, 2002 the cap would increase by one week for each week of sickness benefits she took while pregnant or while receiving parental benefits. A second EI measure would improve on the parental benefits that could be claimed following the birth or adoption of a child. It would provide parents a window of up to two years within which they could claim.

I have given members a brief overview of some of the key measures of Bill C-49. I remind the House that the events of September 11 have not changed the government's fiscal resolve.

As I mentioned at the beginning of my remarks, the 2001 budget builds on the government's long term plan for a stronger economy and more secure society. It also responds to the short term concerns of Canadians. We will continue to invest in people, cut taxes, reduce debt and build a stronger economy. Above all, we will continue to pursue our long term plan to invest in the future without going back into deficit.

I will conclude by paraphrasing the Minister of Finance who said the 2001 budget was about dealing with the present so we could seize the future. The measures of Bill C-49 would help us achieve that. I urge hon. members to pass Bill C-49.

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10:45 a.m.

Canadian Alliance

Ken Epp Elk Island, AB

Mr. Speaker, I pretty well knew everything the hon. member would say in advance because I have heard it from the other side over and over. I will ask a question about one of the items. If no other members rise I will come back with a second question.

The Liberals seem to be experts at maximizing the political spin from the announcement of things which have little effect or in many cases no effect. One of these is the tool tax exemption for mechanics. As long as I have been here, which is more than eight years, we have had representations from mechanics who in some cases are required to invest up to $40,000 or $50,000 in tools to do their work. Other individuals who need to make investments to earn a living are able to claim exemptions. Doctors, lawyers and dentists can do this.

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10:45 a.m.

An hon. member

Liberals can do it.

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10:45 a.m.

Canadian Alliance

Ken Epp Elk Island, AB

Liberals can do it. However mechanics have not been able to. The government says it is responding to this with a new exemption that would allow deductions for tools used by mechanics. Yet when we read the fine print we find it would only apply while they were in their apprentice year. That is unrealistic. First, in their early training and apprentice years mechanics have very low incomes and do not have enough money to fully fund the cache of tools they need.

Second, if we look at it we realize the exemption would only cover up to $1,000 worth of tools. If their income was greater than $20,000 that would be the cap. If it was less than $20,000 they could only claim 5% of their income.

The amount of tools required by new mechanics is not related to how much money they make. They need the money. Why the government would not give them at least a $1,000 deduction irrespective of their income is a mystery to me. It wants to milk the maximum out of an announcement that does very little for the people involved.

Can the hon. member stand and defend the government's answer as to why the exemption is so mediocre, inadequate and inept? I would like the answer on the record because I will make sure it is duplicated and sent to the people who have made representations to me.

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10:50 a.m.

Liberal

Bryon Wilfert Oak Ridges, ON

Mr. Speaker, my hon. colleague across the way knows the Canadian Automobile Manufacturers Association has sent a letter of support with regard to the announcement.

I do not disagree that mechanical tools are expensive. I hope I do not have a conflict of interest but my nephew happens to be a mechanic. I can tell members firsthand that mechanics' tools are extremely expensive. There is no question.

As the hon. member knows, this is the step the government has taken on the issue. It is a positive step. I think the majority of members in the House would support it. This does not preclude future initiatives in this regard. Other trades have been indicated as well. However there is an interest in this issue.

There is no question a mechanic's tools can cost $30,000 or $40,000. The reason, as many in the profession say, is that tools go walking. The onus has been put on mechanics to buy their tools. They do not get them all at once, as I am sure my hon. colleague knows. They buy them over time because they are extremely expensive. One piece can be extremely expensive. I therefore think this is a good beginning.

To put the issue in context, we want to ensure we do things responsibly and can balance our books. We and I am sure everyone in the House acknowledges that the measure was designed to deal with apprentices. We have representations in support of that. We have representations suggesting we should look at the issue further. With the support of my hon. colleague on the finance committee I am sure this will be an issue we can look at in the coming year.

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10:50 a.m.

Canadian Alliance

Ken Epp Elk Island, AB

Mr. Speaker, I sincerely hope people watching us on television do not get the impression I am the only opposition member here. There are many others but I guess they are not ready to engage the hon. member.

I have a second question about the topic. If we look at making rules that follow certain principles, which is a good idea, it seems the Liberal government drafts so much hodgepodge legislation. When an issue comes along they make up a rule. They have no principles to guide them. The principle should be that a deduction, capital cost allowance or something like that should be available.

If the principle for mechanics is that we give them a deduction while they are in training, why do we not do it for dentists? Why do we not say dentists can deduct all the expenses they incur while buying equipment for their offices when they are in training but when the training is over we will end the deduction?

One principle should drive how we arrange deductions and capital cost allowances: they should apply equally to all Canadians irrespective of how they earn their living. The hon. member presumably created hope for the future by saying the government would go forward with the measure and possibly expand it. I must admit my expectations are not all that high. However we will continue to push the measure and work on it.

My next question has to do with the air travel tax. The hon. member did not dwell on it a great deal but he said the security tax for air travellers would fill an important need. I will pose a situation to him. I used to do a lot of my own mechanical work. I often worried while working on the transmission or something that it would fall on me and I would not be able to breathe unless it were quickly taken off my chest. I was always careful to use props and things that would prevent that from happening while I was under the vehicle. I was a Saturday mechanic and did not have all the fancy tools people have.

The government is looking at the airline industry and saying “We will drop a transmission on this guy's chest. We will come back tomorrow and if he is not breathing we will take it off.” That is not the proper way to look at the issue.

We have economists in the finance department who are supposed to be able to look to the future and estimate the effects of different measures. We were told in the finance committee that in this case it was not done. No study was done on the effects of the air travel tax.

I am concerned that by the time the finance minister looked at the issue in the fall to see if the government was getting too much revenue the answer would be no because many small businesses which attracted air travellers and paid the tax would have gone belly up or stopped their services. Revenues would go down on that account. The tax would not be reduced because there would be fewer people paying it. In the meantime we would have lost many valuable services.

Why is the government not doing a study prior to implementing such a devastating tax?