Debates of April 19th, 2002

Payment Clearing and Settlement Act

[The Acting Speaker (Ms. Bakopanos)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Ms. Bakopanos)]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[The Acting Speaker (Ms. Bakopanos)]

Accordingly the bill stands referred to the Standing Committee on Finance.

(Motion agreed to, bill read the second time and referred to a committee)

[Paul Devillers, Liberal, Simcoe North, ON]

Madam Speaker, I rise on a point of order. I think if you seek it you will find unanimous consent to see the clock at 1.30 p.m.

[The Acting Speaker (Ms. Bakopanos)]

Is it agreed?

[Some hon. members]

Agreed

[The Acting Speaker (Ms. Bakopanos)]

The House will now proceed to the consideration of private members' business as listed on today's order paper.

Pension Savings

[John Duncan, Canadian Alliance, Vancouver Island North, BC]

moved:

That, in the opinion of this House, the government should create a personal retirement account whereby Canadians may be given an after-tax option for pension savings.

Madam Speaker, I started working on this motion back in 1998 and it has been a long dusty road to get it here. I am delighted to speak to my private member's Motion No. 357.

What I am recommending is that another vehicle for retirement income be added to the array currently in existence in the Canada retirement income system. I call this the personal retirement account. It is not unlike the Roth IRA, which was recently introduced into the U.S. tax system for Americans wishing to save for their retirement by contributing after tax money into an individual registered account in which any growth is sheltered from all future taxation. Americans have had this popular new alternative at their disposal since 1998.

This savings vehicle offers no immediate tax benefit. Instead, interest dividends or capital gains income earned in the retirement account accumulate free of tax. The intention would be that withdrawals of principal and earnings after a specified age, for example age 60, are free of tax as long as the plan has been in existence for five years.

Most Canadians understand the basic concept of our current retirement income system which consists of public and private components. The public component consists of old age security and guaranteed income supplement for Canadians with lower incomes and the Canada and Quebec pension plans.

The private savings component is in the category of registered retirement savings plans, otherwise known as RRSPs, or registered pension plans, RPPs. I am proposing is a Canadian alternative for private savings under a personal retirement account which will utilize after tax money as opposed to the RRSP which defers current taxes until withdrawals are made from the RRSP and treated as income later. This income is then taxed.

Since the Roth IRA was offered to Americans in 1998, it has proven to be very popular. I believe the option I am presenting to put after tax money into a personal retirement account where all future growth in income would be sheltered from taxation, would be popular with Canadians and would offer them an alternative which would encourage them to save for their retirement.

A simple analysis clearly indicates that both an RRSP and an after tax personal retirement account are preferable to saving in an ordinary bank account. It is important for the government to encourage private savings for retirement. The federal government must plan for its tax revenues based on projections of changes to revenue based on people's retirement savings behaviour. RRSPs tend to defer taxes more than reduce taxes so what the government loses in revenues upfront, it tends to gain later.

If Canadians were offered a choice of an after tax personal retirement account, as I am recommending, and if it became as popular as it apparently is in the U.S., federal tax revenues would easily increase by several billion dollars in the next few years. Furthermore, if, as the Americans have done, Canadians were given the option of converting funds in existing RRSPs into these after tax personal retirement accounts, the federal government would enjoy a further tax windfall. The government would want to offer both RRSPs and personal retirement accounts and would have to take into account the impact of when taxation of revenues would be received.

The current demographics indicate that between 1995 and 2030, seniors, as a percentage of the working age population, will increase from 20% to 39%. This makes it essential that private savings be encouraged to enhance the public portion of retirement income which will obviously be seriously under strong pressure with current projections indicating a shortfall.

The aging of the population will have a profound impact on the ability of the government to provide programs to allow retirees to maintain a reasonable standard of living. Some of the characteristics that I would suggest as being appropriate for an after tax personal retirement account might look like the following description although the details are obviously flexible and specific details should not be used as ammunition to support or criticize the concept since they are not part of my motion and would be subject to the design of the government. I am merely offering suggestions to allow for clarity of understanding as to how an after tax personal retirement account might work.

First, the after tax personal retirement account should be created regardless of other recognized retirement schemes then in effect. Contributions allowed to the after tax personal retirement account should not be linked in any way to the contributions allowed for other retirement plans or schemes.

Second, the money contributed to the personal retirement account should consist of after tax dollars. Any contributions made to the account should not be tax deductible. However, any income earned and any withdrawals made from the personal retirement account should not be taxable.

Third, an individual may contribute a maximum of $5,000 in after tax dollars in each taxation year to personal retirement accounts.

Fourth, the individual contributor may use the unused portion of each year's allotted $5,000 in subsequent years.

Fifth, individual contributors may contribute their money to an after tax personal retirement account that belongs to their spouse or child as defined in the Income Tax Act.

Sixth, an individual may contribute to any after tax personal retirement account regardless of whether or not that individual is an income earner.

Seventh, there should be no age restrictions whatsoever on the after tax personal retirement account. Any individual may contribute after tax dollars to any personal retirement account at any time. Any individual who owns or is the beneficiary of an after tax personal retirement account may withdraw funds from his or her account at any time.

Eighth, the individual owner or beneficiary of an after tax personal retirement account should be able to invest in any investment vehicle provided that a record is kept of the invested funds of the income earned on the said investment.

Ninth, all after tax personal retirement accounts should be fully transferable on death with no tax implications for the funds retained within the account, including any income earned within the personal retirement account. Personal retirement account owners should be able to transfer their account to any other individual they choose. An individual transferee in this context should only include natural persons.

Tenth, withdrawals of principal or interest from an after tax personal retirement account should not be treated as income for any purpose.

There are obviously a host of other details and administration that would be required, but certainly the PRA would prove to be no more cumbersome to administer than a registered retirement savings plan account. For many people the certainty that all income generated would not be subject to future taxation at some uncertain rate of tax would be a huge incentive. It is my belief that it would encourage a substantial number of people who do not currently save through RRSPs for retirement because they do not see any certainty of advantage to saving subject to future taxation with the uncertainty of future rates of taxation.

Just as with the Canadian system of registered retirement savings plan modifications over time, there would be modifications in design of the after tax personal retirement account. For example, the Roth individual retirement account in the U.S. allows contributions to be used, up to $10,000 if it has been in the plan for five years, to purchase a first home. The U.S. has also built in an education savings component.

Many Canadians who put money into an RRSP during the 1970s, 1980s and 1990s would have been better off with an after tax personal retirement account because in many respects they are facing tax rates upon retirement that are higher than when they were making the contributions.

My proposal for an after tax personal retirement account would be a private retirement savings vehicle in addition to RRSPs and registered pension plans and not designed to replace any of the current retirement income vehicles.

Most RRSP contributors would, in all likelihood, choose to contribute to an RRSP and also contribute to the new after tax PRA. Many people are looking for as much certainty as possible for their retirement planning and the after tax PRA would certainly be appealing from the standpoint that revenue would not be taxed after taken out after a certain age.

In the U.S., 59 and a half years of age has been designated as the age after which non-penalty of withdrawals occurs. It is my belief that any negative long term revenue impacts to the government would be offset by the fact that retired persons would be more self-supporting. The principle that the after tax PRA and earnings within it would belong to the taxpayer and could be withdrawn without the huge penalty normally associated with the early withdrawal from an RRSP would be a real advantage.

The U.S. applies a 10% early withdrawal penalty for any withdrawals of earnings before reaching the age of 59 and a half when withdrawing from a Roth IRA. Contributions however, not earnings, may be withdrawn from a Roth IRA without penalty at any age. This kind of flexibility would be very attractive to a great number of people.

The government has not had a significant reform to the retirement income system for Canadians for many years. The after tax personal retirement account that this motion is advocating would be a positive and exciting addition and alternative for Canadians who are increasingly concerned about how to structure their financial affairs for their senior years. For example, in 1998 fewer Canadians contributed to an RRSP than in 1997. This trend is worrisome. In 1998 only a minority of tax filers under age 65 contributed to their RRSP account. This worked out to 40% for men and 30% for women.

I offer this motion as advocating what could be an exciting addition to the retirement income vehicles available to Canadians.

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, the motion proposes the introduction of what are commonly referred to as tax prepaid savings plans, TPSPs.

Hon. members may be aware TPSPs have been proposed by the C.D. Howe Institute and others as a new retirement savings vehicle to complement the existing system of registered pension plans, RPPs, and registered retirement savings plans, RRSPs.

I welcome the initiative of the hon. member for Vancouver Island North in putting forward the motion to the House. Tax prepaid savings plans are an interesting idea and worth exploring. While TPSPs may offer certain benefits they also raise a number of important issues.

I would like to review the current retirement income system and the system of tax assistance for retirement savings and touch on some of the issues surrounding TPSPs.

Hon. members may be aware Canada's retirement income system is composed of three pillars. These three pillars help achieve two basic objectives. First, to ensure a basic minimum income guarantee for all seniors. Second, to enable Canadians to avoid serious disruptions in their living standards upon retirement.

The first pillar compromises the old age security and guaranteed income supplement programs, which provide a basic minimum income guarantee for seniors.

The second pillar is the Canada and Quebec pension plans, which provide a basic level of earning replacement in retirement.

The third pillar is the current system of tax assistance for retirement savings. As hon. members are well aware this system provides Canadians with opportunities to save on a tax-assisted basis. Individuals may contribute 18% of earnings per year to an RRSP, a registered pension plan, or a combination of both, up to a maximum dollar limit of $13,500. For defined pension plans benefits are limited to 2% of earnings per year of service up to a dollar maximum of $1,722, which corresponds to 2% of $86,100. These limits allow a pension equal to 70% of covered pre-retirement earnings after a 35 year career.

The pension and RRSP maximum contribution limits are legislated to increase from $13,500 to $15,500 by 2004 and 2005 respectively, and be indexed to average wage growth thereafter. The $1,722 maximum pension limit for defined benefit pension plans is legislated to be indexed to an average wage growth starting in 2005.

The government's commitment to the pension and RRSP system is significant. According to estimates published last year the federal government will provide tax assistance of more than $14 billion this year alone on savings in RPPs and RRSPs. It is clear that the government's investment is significant.

Statistics Canada data indicates that Canadians had accumulated assets of more than $1 trillion in RPPs and RRSPs in 1999, accounting for 34% of all assets owned by Canadian households. Seventy-one per cent of all family units had assets in registered plans in 1999.

Most members would agree with me when I say that the current system of tax assistance for retirement savings has been a success, given the statistics that I just mentioned. Indeed Canada's retirement income system is regarded as an excellent system internationally and has been cited as such by the OECD, the World Bank and the IMF.

Nevertheless, this would not prevent the government from considering further measures to encourage and assist retirement savings in Canada and to make the tax-assisted savings system as fair and effective as possible, given competing needs and available fiscal resources. In this context tax prepaid savings plans are an idea worth examining.

I would like to raise some of the questions that need to be examined with respect to TPSPs but before that, allow me to explain exactly what TPSPs are, how they would work and the sense in which the tax is prepaid.

It is easier to see how TPSPs would work by comparing them to RRSPs which everyone is familiar with. An RRSP is an example of a tax deferred savings plan. Contributions to RRSPs are tax deductible. Investment income earned within RRSPs accrues free of tax. Withdrawals from RRSPs are taxable. In this sense the tax owing on contributions and investment income is deferred until the funds are withdrawn from the RRSP.

In contrast, contributions to a TPSP would not be tax deductible but investment income and withdrawals from the plan would not be subject to tax. The tax would be prepaid because contributions would be made from after tax dollars. Under certain conditions the tax assistance benefits to savers and the net costs to the government under a TPSP would be identical to those associated with an RRSP.

As some hon. members may be aware, tax prepaid plans exist in other countries notably the United States and United Kingdom. In the United States they are known as Roth IRAs. In the U.K. they are called individual savings accounts or ISAs. Since tax prepaid plans are being used in other countries hon. members may wonder why we cannot adopt them here. The U.S. and the U.K. have different systems for retirement income and tax assistance for savings than we have in Canada.

It is not clear that TPSPs should be adopted in Canada simply because they exist in other countries. We should first study fully their implications. Many questions need to be examined in assessing the appropriateness of TPSPs for Canada. First, how would a TPSP program fit in with the tax assisted retirement savings programs currently in place?

Second, what would be the impact on government revenues of introducing TPSPs?

Third, should income earned within a TPSP be taken into account in determining income tested tax and social benefits such as old age security and guaranteed income supplement benefits?

Fourth, would a tax prepaid option for retirement savings be attractive to savers given that the Liberal government has introduced the largest tax cut in Canadian history and future tax rates are declining?

The question of introducing TPSPs would have to be considered in the context of the many competing tax and investment needs for available fiscal resources. These and other issues need to be examined.

Before concluding I will take the opportunity to remind hon. members of the recent tax reductions made by the Liberal government. In the October 2000 economic statement and budget update the federal government announced the largest tax cut in our history. Canadians are already benefiting from the tax reduction plan. The tax cuts are providing significant stimulus to the economy and contributing to building a strong economy in the future.

The tax reductions will lower the personal income tax burden by 21% on average and by 27% for families with children by 2004-05. In addition, the reductions are promoting jobs, growth, entrepreneurship and innovation by creating a Canadian advantage in the taxation of businesses and capital gains relative to the United States. The tax reduction plan provided tax relief of about $17 billion in 2001 and will provide about $20 billion in tax relief this year.

Among the personal income tax reductions announced in the 2000 budget and the October 2000 economic statement and budget update were the restoration of full indexation of the tax system, the lowering of tax rates for all taxpayers, legislated increases in the tax bracket thresholds by 2004, and a reduction in the capital gains inclusion rate. These measures are putting more money in the pockets of Canadians, money they can choose to save and invest.

To conclude, it is not appropriate to support the motion when many important issues regarding TPSPs still need to be carefully examined and assessed. Furthermore, as I mentioned in my remarks, pension and RRSP limits are scheduled to increase beginning next year with limits being indexed to an average wage growth beginning in 2005 for RPPs and in 2006 for RRSPs.

Again, I thank the hon. member for putting the motion forward and giving us a chance to address it today.

[Wendy Lill, NDP, Dartmouth, NS]

Madam Speaker, I am pleased to speak to Motion No. 357 which was placed on the floor of the House by the hon. member for Vancouver Island North. It reads:

That, in the opinion of this House, the government should create a personal retirement account whereby Canadians may be given an after-tax option for pension savings.

I do not support the motion because it would be a way for Canadians with middle to high incomes to escape paying taxes. Let us face it, the motion is calling for a situation whereby people who had money to put into private investment accounts would not need to pay taxes on those accounts. The motion would create a government sponsored personalized tax haven for every Canadian who could afford it.

That is a bad idea. Unlike RRSPs and pension plans which are tax holidays these accounts would be tax exemptions, pure and simple. Most people I know who play the stock market are not the ones in society who need tax breaks.

Besides the general unfairness of creating another tax loophole for people with money to play the stock market while the government still forces single mothers on welfare to pay the GST, the motion would create an overall policy problem by depriving the government of revenue. The sad consequence of people being allowed to escape paying their fair share of taxes is the continued deterioration of public services like medicare or the pension system. I would prefer the House to look at ways of increasing public support for institutions like our pension system, public education system and health care system.

Let us look at the values of Canadians in this regard. Canadians do not mind paying taxes as long as they know the taxes will be used for the benefit of the community. They do not mind paying if the result will be more public transit, better public housing, support for their neighbours with disabilities and generous support for seniors.

My constituents get angry when they pay unfair levels of taxes. They get angry when they pay 40% or 50% marginal tax rates on modest incomes while the wealthiest families are able to shuffle billions of dollars out of the country in family trusts without paying tax and with the permission of the government.

My constituents lose confidence in the system when they pay 40% tax rates but see their health care system underfunded; transfers cut to the provinces for education; people paying into the employment insurance scheme who are unable to collect; and families of our Canadian forces who have to visit food banks to make it through the month. Canadians lose confidence when at the same time corporations get huge tax cuts, private companies make huge profits doing the work of recently privatized public services, and companies that should be contributing to local communities are instead lining up to the government with lists of social and economic demands in the name of globalization.

If hon. members do not believe we can rebuild our public services with higher taxes they should check this week's budget in Great Britain. The British government raised taxes and ran a temporary deficit so it could pay for a 41% increase in funding for the national health service and substantial increases in essential public services like education and transportation. That is the kind of economic direction I can wholeheartedly support.

The system proposed by Motion No. 357 would fundamentally undermine that. A personal retirement account that is never taxed would ultimately undermine the Canada Pension Plan and our RRSP system.

Under the present system people can put a portion of their income into an RRSP. The amount put into the RRSP does not count as income for the tax year in which the contribution is made. Upon retirement when people's incomes are usually lower and their tax rates are less they can take money from their RRSP accounts and the withdrawals are taxed at the lower rate. RRSPs are a tax holiday but the government gets the revenue eventually. Under Motion No. 357 there would be no tax deferral or holiday but a total loss of income for the government.

I am wondering if the member actually believes that we do not need revenue to pay for our social programs, such as pensions. Does he not see that the consequences of gutting income for government is the gutting of programs which help people?

I believe it is morally backward that wealthy families should receive retirement benefits in the form of a tax exempt retirement allowance at the cost of the existence of public pension plans for the poor. It is wrongheaded to say the least.

In conclusion I hope the member for Vancouver Island North will abandon this notion of tax exemptions for families who can afford large savings and work with New Democrats to develop policies that will put a fair tax system in place which will support reliable and sustainable public services like pensions and health care.

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

Madam Speaker, on behalf of the Progressive Conservative Party I am pleased to speak to the initiative found in Motion No. 357.

The Progressive Conservative Party certainly supports any initiative that offers flexibility to the Canadian public in preparing for retirement. However there are many alternatives to Motion No. 357 that should be considered in this context.

Tax reform as always warrants serious consideration. For example, eliminating the capital gains tax, which is something the Progressive Conservative Party strongly advocates, in addition to alleviating the tax burden on those saving for retirement, will also stem the flow of skilled workers to the United States. We see capital gains as a very regressive and punishing tax for Canadians.

Canada is losing too much of its knowledge and too many of its workers to our southern neighbour. This has serious implications for our long term economic health. Government policy should be geared toward ending brain drain as quickly as possible. Canada's brain drain is a problem of quality, not quantity. Those leaving for the United States surely represent a valuable section of Canada's human resources pool.

The current Prime Minister has suggested that Canadians should leave the country if they are unhappy with Canada's tax. This surely is a further sign of arrogance and disconnect on the part of the Prime Minister with respect to Canada's youth. When Canada loses it brightest and best young people, it loses the capital and the talent essential to generate a higher level of productivity. We know we need to be more productive in this country.

The elimination of the capital gains tax is also the most direct way to unlock and speed the flow of private equity financing. A study in the United States demonstrates that eliminating the capital gains tax completely in that country would lead to a $300 billion increase in national output. That amounts to nearly one million new jobs and an additional $46 billion in tax revenues due to the economic growth.

The United Kingdom, Germany, Norway and Sweden have adopted a more aggressive tax cutting strategy than Canada. Germany reduced its capital gains by 50%, Great Britain by 75%. Norway has eliminated completely all forms of double taxation on capital income. We should look to those countries for inspiration.

President John F. Kennedy spoke disparagingly about the capital gains tax as early as 1963. He stated:

The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital, and the ease or difficulty experienced by the new ventures in obtaining capital.

Allan Greenspan, the chairman of the federal reserve, stated in 1997 shortly after the United States capital gains rate was cut:

If the capital gains were eliminated, we would presumably, over time, see increased economic growth which would raise revenues for the personal and corporate taxes. Its major impact is to impede entrepreneurial activity and capital formation.

The Progressive Conservative Party also strongly supports the Standing Committee on Finance's recommendations to eliminate the remaining capital gains tax for gifts of listed securities. This is the single most important step the government can take to improve funding for the charitable sector and in so doing strengthen Canada's social support network.

Time and time again we are seeing charitable organizations doing the work that used to be assumed by government. We certainly should be, at the very least, getting out of the way of their ability to raise capital for worthy causes in this country.

Numerous presentations have been made to the House of Commons finance committee by the non-profit sector urging the permanent elimination of the capital gains tax on gifts of publicly listed securities. The government has made permanent a reduction to capital gains tax on publicly listed securities, but that was simply a baby step in the right direction.

The Canadian philanthropic sector, Canadian charities whether a university foundation, the United Way or a hospital foundation, is at a competitive disadvantage when competing with funds currently being drawn in places in the United States and the United Kingdom and those outside Canada.

The government has not worked with the non-profit sector to make it easier for Canadian institutions, the non-profit sector, universities, hospitals, foundations and charities to raise money that is necessary, particularly during the period of decreased federal and provincial funding.

The elimination of personal capital gains tax would also dramatically strengthen Canada's venture capital community.

A look at reducing income tax among others is also needed. In the old economy the purpose of taxes was to redistribute income. In the new economy high taxes redistribute people. When Canada's tax policy dictates that workers earning just $100,000, which sounds like an exorbitant amount, pay half their income in taxes, those highly valued workers will certainly look elsewhere. By comparison, in the United States we would almost have to go to an income range approaching $400,000 to reach that same income tax bracket.

This is particularly risky for Canada in the digital economy where valuable intellectual property, assets, expertise and energy depart with every professional who crosses the border.

In the United States the highest rate of taxation does not apply until income reaches the range of $400,000. An American earning $100,000 will pay only one-quarter of that amount. It takes a considerable degree of patriotism and choosing Canada's quality of life over that of sheer return to make the choice to stay home. Although many Canadians continue to stay home, they do so at a competitive disadvantage. We should do everything we can to get out of the way of disincentives that drive our best and brightest outside of Canada for them to achieve their potential.

The people who are tempted to leave are those with fewer roots in our country and less attachment to some of the lifestyle advantages. They are often young people who the country needs to grow and prosper. They are young people like our pages who are here working very hard to further their careers while studying, who work every day to help members of parliament with their daily duties.

[Norman E. Doyle, Progressive Conservative, St. John's East, NL]

And student loans.

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

And student loans. My friend from St. John's quite rightly mentions the issue of student loans.

Many students graduating from an undergraduate degree today are leaving their studies with the equivalent of a mortgage to pay back with no house in which to live. For future generations and for the current generation, this is a huge and often insurmountable hurdle to get over. Many declare personal bankruptcy as they start out in life. As they start on their new careers, they face that very daunting prospect of forfeiting their credit rating by declaring personal bankruptcy for investing in their own future by furthering their education and pursuing a degree.

The people who are tempting to leave do so with very heavy hearts. We in the maritimes in particular have faced this for 100 years or more. The very best, the talented young people who have educated themselves and have a great sense of tradition and attachment to their communities and towns and villages face this very gut-wrenching decision of having to leave to work. Contrary to the opinions of many, the people of the Atlantic provinces are not unlike any other region in the country. They simply want to have an opportunity to work, live and contribute in their communities.

Taxing income discourages people from earning, saving and investing, all of which are crucial to economic growth in Canada. If we continue down this path and this philosophy of punishing those who are more productive then we will see that the productivity continue to wane.

According to Jack Mintz, a professional on taxation at the University of Toronto's J.L. Rotman School of Management , the costs in terms of lost output are $15 billion to $140 billion a year or from $500 to $4,500 per person annually.

We should also target capital taxes, high sales taxes on business outputs and high personal taxes on business owners. A more progressive step would be for the government to shift from investment and savings taxes to consumption based taxes. Dare I say it, the GST, the much hated tax, was introduced with that very much in mind, a consumption tax that was fair and that was meant to be attached to the deficit. Canada could adopt a personal expenditure tax and more taxes on the user pay principle.

[The Acting Speaker (Ms. Bakopanos)]

I am sorry, the hon. member is out of time. The hon. member for Elk Island.

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

Madam Speaker, some members will remember that for me the cause of retirement incomes is a cause célèbre, maybe not a very positive one during the last election campaign, because I made the error of giving a very ill-advised interview to a hostile newspaper person not recognizing that I was not speaking to someone with whom I should enter into a debate on how we can improve things.

I find the various viewpoints very interesting, particularly those of my NDP friends. I am absolutely amazed that they could so totally miss the point of what we are talking about today. This is a pre-tax paid plan. In other words, we pay the tax upfront and the government gets revenue now instead of having to wait for it, but the NDP says that it is not fair. I do not know why they make that conclusion because this is giving people a further option.

When it comes to retirement incomes, we must as a government address this issue with a view to improving the purchasing capacity of our seniors when they retire. In the fall of 2000, when this reporter phoned me to ask how things were going in my riding, I told him that one thing I was hearing from seniors was that they were having trouble making ends meet, and we need to fix that.

Seniors across this country have month by month incomes that are barely sufficient to pay their property taxes or rent, utilities, food and clothing. Many of them cannot afford to do a number of things they would like to do because of this.

One lady called me. She said that when she and her husband were working they skimped and saved to provide for their retirement but, unfortunately, her husband passed away. Her roof was leaking and she needed $3,000 for repairs. Lo and behold, when she withdrew $3,000 from her RRSP account, the government took 40% of it. Therefore, she had to make another $3,000 withdrawal. She told me she was worried that she would run out of money before she died.

That is a real concern to me. It is so important for us to think about this issue. I really appreciate my colleague bringing this motion to the House today so we can begin to address this issue. What can we do to improve it? What can we do to provide for our seniors on retirement an income which is adequate to meet their needs after all taxes have been paid, regardless of this scheme, whether the taxes are paid in advance, as is in the scheme proposed by my colleague today, or whether those taxes are paid in retrospect?

The parliamentary secretary says that the Canada pension plan is the answer; it is one of the pillars. If one does the mathematics on it, it is pretty well the worst retirement investment a person can make. My calculations showed that instead of getting an annual income of about $9,000 a year, as one does with the Canada pension plan, one could actually get an income of up to $10,000 a month if that money were adequately invested over a person's lifetime. That is a huge difference. We need to look at that. We always are considering the taxes on this and when they are collected.

The NDP is totally wrong in thinking that increasing tax rates also increases tax revenue. There is a very well known economic theory, by a Professor Laffer so it is called the Laffer curve, which states that somewhere between an income tax rate of 0% and 100% is a maximum rate.

It is easy to think about this. I want members to think about someone selling something. For example, a hockey team owner is thinking of selling tickets to hockey games. We are thinking of hockey in Canada these days. He decides to charge zero dollars for the tickets. The place will be packed and the fans will be cheering and his income will be zero, because zero dollars per ticket times 40,000 tickets equals zero. Let us say on the other hand that he decides to charge $10,000 per ticket. I suppose there would be a few really rich people who would like to show off their money who would bring their two or three kids or relatives and pay $40,000 to go to a hockey game at night. At that price I think there would probably only be four people in the stands and the rest of the seats would be empty. For all practical purposes, we could say that if the rate per seat is high then the number of seats purchased will be zero, and again we have zero times the number which is zero. With zero dollars per ticket, the income is zero. With $10,000 per ticket the income is as good as zero. However, in between there is a number.

Let us take it up $1 at a time. Let me use a 40,000 seat stadium as an example, where it costs $1 per ticket. Now the income is $40,000. If ticket prices were increased to $2, I would venture to say that the stadium would still be full. Then there would be an income of $80,000. Ticket prices could be increased to $3 with still no change in the number of people buying them, and the individual would be making $120,000. At those low rates, increasing the amount per seat will not do anything other than double or triple income every time, but there comes a place somewhere between zero dollars per ticket and $10,000 per ticket where income reaches a maximum. After that, a further increase in price reduces income because people stop going.

The same thing is true with tax rates. If we had a 0% tax rate, government revenue would be zero, our economy would be doing great and maybe we would not need any taxes because we could look after ourselves and our neighbours. Everybody would have jobs. For those who were disabled and did not have any jobs, we would look after them, because we are good charitable people in this country. Maybe we have too much government, but I still believe we need to have a government that functions in certain areas.

On the other hand, if we had a tax rate of 100% government tax revenue would be zero because nobody would get up in the morning and go to work. There might be a few workaholics who would go out and earn $100 and then send it to the government. Interestingly, somebody e-mailed me a new simplified tax form consisting of two lines. I presume he did this because it is tax season. Line number one asked how much money was earned. Line number two said to send it in. However, if the 100% rate scheme were adopted government revenue would be zero. It must be somewhere in between.

I would like to inform members of the NDP that sometimes reducing tax rates by 4% or 5% can actually increase government revenue. This has been proven. Why would we not do it? Why would we not reduce tax rates, leave more money in the hands of the people and let them look after themselves in a better way? Meanwhile this would increase tax revenues so the government could do more. It is just an oversimplification to think this stuff is linear, as we say in mathematics. Indeed, it is not linear at all.

As a parliament, we need to commit to looking at retirement incomes, at the different plans that are available, at the different ways of taxing them, and we certainly are as a party, but the objective is and always must be this: How can we set things up so that on retirement our seniors have a maximum amount of income after all of those taxes so they can meet their needs and live in comfort? I do not think we want to say they should live in luxury. They should live in comfort with their needs being met and without having to worry where the next meal is coming from or whether they can afford a new shirt.

[John Duncan, Canadian Alliance, Vancouver Island North, BC]

Madam Speaker, I welcome the interventions from colleagues in the House on my motion.

The message and signal that I heard from the parliamentary secretary was that the finance department welcomes this initiative. Obviously I am pleased to hear that. I am pleased to hear the Parliamentary Secretary to the Minister of Finance say this concept of an after tax personal retirement account is worth investigating.

It is my belief that many Canadians would endorse this initiative if and when they become aware of the concept. I welcome the parliamentary secretary's statements as they probably represent the view of the department.

The parliamentary secretary was correct that there are many questions and much research that needs to be done in order to determine the appropriate design of an after tax personal retirement account. I also said that in my speech. All the points I made were only examples in order to lead the discussion in the right direction.

I urge the department to get on with it. I thank the parliamentary secretary for his supportive comments but there was no sense of urgency. If it were a worthy initiative then we should simply get on with it.

I share the concern of my colleague from Elk Island. Canadians are feeling poorer, especially our seniors. They do need other options available to them to look at when they reach retirement.

The hon. member for Dartmouth missed my point. The government gets the taxes sooner rather than later. The hon. member for Dartmouth talked about this retirement savings vehicle and described it as a tax loophole. It is hardly a loophole. As a matter of fact many governments would view this as a tax grab, a tax windfall. That is exactly my point. It is not a tax loophole. Taxes are paid up front rather than deferred until later.

Many low income earners would choose this after tax way of saving for retirement because of the certainty of what their later income would be, or could be, and also because withdrawals in a flexible way would have no impact on income for taxation purposes when people are more vulnerable to government tax grabs. That is the point the hon. member for Elk Island made with the senior with the leaky roof. Those kind of rainy day withdrawals would be much more enabled through an after tax personal retirement account than under the RRSP program.

I am not arguing against an RRSP program. I am saying a judicious mix of the two would be appropriate. The hon. member for Pictou--Antigonish--Guysborough spoke on the motion and I too advocate other tax relief measures.

The motion is not votable. It was deemed not votable by a small all party committee requiring unanimous consent. This drives private members' business into mundane business at times rather than substantive issues. It is time and it is overdue for all private members' business to be votable in the House.

[The Acting Speaker (Ms. Bakopanos)]

The period provided for consideration of private members' business has now expired. Since the motion has not been selected as a votable item, the item is dropped from the order paper.

It being 2.16 p.m., this House stands adjourned until Monday next at 11 a.m. pursuant to Standing Order 24(1).

(The House adjourned at 2.16 p.m.)