House of Commons Hansard #115 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Canada Transportation Act
Government Orders

4 p.m.

An hon. member

On division.

Canada Transportation Act
Government Orders

4 p.m.

NDP

The Deputy Speaker Bill Blaikie

I declare the motion carried.

(Motion No. 12 agreed to)

Canada Transportation Act
Government Orders

4 p.m.

NDP

The Deputy Speaker Bill Blaikie

The House will now proceed to the taking of the deferred recorded division at the report stage of the bill.

Call in the members.

And the bells having rung:

The vote on the motions stands deferred until today after government orders.

Income Tax Amendments Act, 2006
Government Orders

February 21st, 2007 / 4 p.m.

Conservative

Income Tax Amendments Act, 2006
Government Orders

4 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I appreciate the opportunity to introduce Bill C-33 at second reading.

The bill proposes measures regarding the taxation of non-resident trusts and foreign investment entities, as well as implementing certain technical amendments to the Income Tax Act.

The bill before the House today is indeed complex. Rather than focusing on its technicalities, I will illustrate for hon. members just how Bill C-33 fits into the commitment of how Canada's new government is working to improve our tax system and make it more competitive.

First , how can we have a competitive tax system when Canadians have been paying more taxes than is necessary? This new government believes that Canadians have been overtaxed for too long and we need to move that burden of excess taxation so we can encourage the qualities that are at the very core of what drives and enriches Canadian lives. That is what makes Canada competitive, especially in the global marketplace.

Why should Canadians keep handing over so much of their hard-earned money to government? Canadians need to keep more of their money. They need it to invest in their own families, in their own priorities and in their own futures. They also need it to invest in our economy and help businesses thrive. That helps all of us as Canadians.

The time is now to take less from Canadians in terms of taxes. That is what Canada's new government started doing in budget 2006 and will continue to do.

Members need only look at our record. We delivered almost $20 billion in tax relief to individual Canadians and families over two years. That is more tax relief in one budget than the previous government's last four budgets combined.

As members know, we reduced the GST from 7% to 6% effective July 1, 2006, and there is more to come. We made a further commitment with respect to another percentage point reduction. Cutting the GST cuts taxes for everybody, including those who do not earn enough to pay income tax. Is that not fair?

We did more for individual Canadians by providing personal income tax relief. We increased the basic personal amount and reduced the lowest personal income tax rate. These two measures will provide personal income tax relief of $4.6 billion in 2006-07 and 2007-08.

Last fall, the Minister of Finance announced the new tax fairness plan for Canadians. The plan will restore the balance and fairness to our tax system and create a level playing field between income trusts and corporations. This plan will also deliver over $1 billion of new tax relief annually to Canadians.

The measures in this plan are significant steps forward in the strengthening of our social security system for pensioners and seniors.

Canada's new government also recognizes the importance of Canadian businesses to a strong economy and we want to create a supportive economic environment that helps businesses compete and grow, and that rewards success.

In budget 2006, we started by eliminating the federal capital tax as of January 2006. We will be eliminating the corporate surtax in 2008 and we will be reducing the general corporate income tax rate to 19% from 21% by 2010.

These cuts will allow Canada to regain the solid statutory tax rate advantage that we had prior to the 2004 tax changes in the United States. We also helped small businesses.

An important way that Canada's federal income tax system supports the growth of small businesses is through a lower tax rate on the first $300,000 of qualifying income earned by a Canadian controlled private corporation. This measure helps these small businesses to retain more of their earnings for reinvestment and expansion, thereby helping to create jobs and promote economic growth in Canada.

To further encourage small business growth in Canada, in last year's budget we increased the amount of small business income eligible for the reduced federal tax rate to $400,000 from the current limit of $300,000 as of January 1, 2007. We also reduced the current 12% income tax rate applying to qualifying small businesses to 11.5% in 2008 and 11% in 2009.

I have spoken thus far about how Canada's new government has reduced taxes, both on a personal level as well as a corporate level. This reflects how this new government is dealing with the excessive taxation that Canadians have endured for far too long.

Canada's new government is committed to cutting taxes. In his speech for the recent economic and fiscal update, the Minister of Finance introduced advantage Canada, an economic plan designed to make Canada a world leader for today and future generations. It will help build a strong Canadian economy and make our quality of life second to none through competitive economic advantages.

One of the key advantages in this plan is a commitment to reduce taxes for all Canadians and establish the lowest tax rate on new business investment in the G-7. The tax back guarantee announced in the plan will ensure that Canadians benefit directly from debt reduction by dedicating interest savings from debt reduction each year to permanent personal income tax reductions. Any unanticipated surpluses will be used to accelerate that reduction and, hence, tax reduction.

Lower debt means less interest, which means lower taxes for Canadians. In short, this plan will create the right conditions and opportunities for families and businesses to succeed. As to the taxation of non-resident trusts and foreign investment entities, part of the equation in keeping taxes low is that everyone needs to keep their fair share and that is where the measures in Bill C-33 come in.

Bill C-33 moves forward in this government's goal in promoting fairness and equity in our tax system. Specifically, the bill amends provisions of the Income Tax Act to prevent tax deferral and avoidance though the use of foreign investment funds and trusts. In other words, if someone tries to avoid taxes by using these investment vehicles, any income earned on that investment will be taxed as if it were earned in Canada.

It is important to point out that most of these changes concerning non-resident trusts and foreign investment entities proposed in this bill are the result of extensive consultations with taxpayers, professional tax advisors and the taxation authorities.

It is also important to emphasize that the measure in the bill to prevent tax deferral and avoidance through the use of foreign investment funds and trusts is intended to protect the tax base as opposed to raising additional revenues. In fact, activity of this nature has moderated substantially in years. Bill C-33 would ensure that if that activity does occur, the income earned will be taxed as if earned in Canada.

Canada generally imposes income tax on the income of taxpayers resident in Canada from all sources. On the other hand, Canada generally taxes just the Canadian source of income of taxpayers that are not resident in Canada. An income tax incentive therefore exists for Canadian residents to earn investment income using non-resident trusts and foreign investment entitles based in a country other than Canada that imposes no tax or a low tax.

What this means is that without effective countermeasures, such as those proposed in Bill C-33, residents of Canada who use non-resident trusts and foreign investment entities to earn investment income would inappropriately avoid or defer the payment of Canadian taxes. That creates unfairness.

Avoiding taxes in that manner not only erodes the Canadian tax base, it creates inequities which, in turn, undermine the integrity of our tax system. The effect of these rules is that investment income earned by non-resident trusts and foreign investment entities on behalf of Canadian residents will be taxed in Canada. That income would have been taxed in Canada if the income were earned by resident trusts and resident investment entities on behalf of those Canadians. Therefore, the tax advantages of using non-resident trusts and foreign investment entities will be eliminated.

Not only that, the measures in Bill C-33 would have the effect of eliminating erosion of the tax base, promoting the integrity of Canada's tax system and levelling the playing field for all investment vehicles, whether Canadian or foreign based. These are important considerations.

The measures I just outlined constitute the major portion of Bill C-33. However, the bill also includes a number of technical amendments to the Income Tax Act that would accomplish a number of housekeeping objectives.

The amendments are too numerous to mention. Suffice it to say that the proposed amendments correct or clarify the application of existing income tax provisions or provide legislative authority for measures that have already been announced. Moreover, the bill proposes measures to deal with other income tax situations that require a legislative response.

In conclusion, when considering the bill today, I remind hon. members of the two important objectives of the proposed legislation.

First, Bill C-33 promotes fairness in our tax system. The measures proposed in the bill will help reduce inappropriate tax avoidance by ensuring that income from foreign investments is properly reported. The second objective, which goes hand in hand with the first, is to protect the integrity of Canada's tax system and deter the erosion of the tax base. Bill C-33 would address both of these objectives in such a way that will improve our tax system for the benefit all Canadians.

Since its election, Canada's new government has taken important steps in building a more successful Canada. Bill C-33 would help us continue down that road of prosperity by transforming the tax system into a competitive edge, not an impediment.

Income Tax Amendments Act, 2006
Government Orders

4:10 p.m.

Liberal

Roger Valley Kenora, ON

Mr. Speaker, my colleague mentioned Canada's new government. I point out that the present Conservative government is the first government to raise income tax. It raised income tax on the lowest common denominator and did it at a time when it could least afford it.

I will go back to one of the first speeches I heard the finance minister make. He talked about how much Canadians would save with the GST cut. He spoke about homes in eastern Ontario. He spoke about $50,000 vehicles. People in my riding do not have the opportunity for those kinds of purchases. They will be unable to save the grand amount of money about which the Conservatives speak.

How much money can people save with a GST cut when they do not have any disposable income? How much money can people save with a GST cut when they do not have a job? How much money can people save with a GST cut when first nations people are marginal people in Canada? Could the member tell us how much they can save when they have no money to spend?

Income Tax Amendments Act, 2006
Government Orders

4:10 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, the member mentioned an increase in personal income taxes, and we know that is not true. Budget 2006 set in law a reduction of personal income tax, which included the lowest personal level. He may want to check his facts. That is, in fact, factually correct.

He touched on the GST reduction of which I am very proud. He asked me how much people could save if they were in the lower income bracket. I believe in reducing the taxes on our lower income brackets, and that includes Canadians who do not pay income tax whatsoever. I suggest the member consider those people who do not pay income tax and the fact that we need to give tax reductions to those people who need it more than any of us.

Income Tax Amendments Act, 2006
Government Orders

4:15 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, my colleague spoke about tax fairness. If anything, it should be tax complicated. The bill is 542 pages, which further compounds the absurdity of our taxation system.

The government has failed to address two issues of tax fairness, on which I would like the member to comment.

One is what the government calls tax motivated expatriation, in polite terms. We call it sleazy, tax cheating loopholes in the form of offshore tax havens. This does not plug offshore tax havens. It talks about earnings offshore et cetera, but it does not talk about sheltering money offshore to avoid paying taxes altogether. We expected the Conservative government to act on that issue of tax fairness because it was certainly critical when the Liberal government failed to act on it.

The second thing is the government did raise the basic lowest tax rate from 15%, as proposed by the Liberals, to 15.5%. It may seem small, but at the low income level it is serious. The other thing it did was reduce the basic personal exemption, the amount on which no taxes are paid, which means we pay taxes on more of our income. Hardly anybody seemed to notice this.

How can those members possibly say that they lowered the lowest level of taxes when they raised it? Have they considered the impact this had on low income Canadians, when the basic personal exemption went from $9,039 to $8,639 as of July 1, 2006, a $400 lower basic personal exemption?

Income Tax Amendments Act, 2006
Government Orders

4:15 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I will address the hon. member's first question on the use of offshore tax havens, which is a concern of mine.

The hon. member might be interested to know that, in the prebudget consultation document, I specifically championed a recommendation that the government should look into the use of offshore tax havens and eliminate them. I know the finance minister is interested in this and he is working on it. I appreciated that the Bloc members also supported the motion and had it put into the finance committee's recommendations.

On the hon. member's second question, my point is quite simple. The government, in law, reduced the basic lowest tax rate to 15.5% from 16%. I am aware there were three budgets in 2005 from the former Government of Canada, the third of which made amendments to the tax act that were never passed in law.

Budget 2006 reduced the lowest personal income tax rate and increased the basic personal exemption in law from their previous levels. That is my point.

Income Tax Amendments Act, 2006
Government Orders

4:15 p.m.

Liberal

Larry Bagnell Yukon, YT

Mr. Speaker, the hon. member has now heard three times that the government, on July 1, 2006, increased taxes from 15% to 15.5%. It also reduced the basic personal income, as the member from the NDP said. This is despicable because people with high incomes, who did not ask for a tax break at the expense of low income people, received a tax break. It would not have hurt nor would it have cost very much to give people with low income the same tax break as people with high income. It was totally unfair.

Is the hon. member proud that his government deceived Canadians and told them it would never again tax income trusts? It was a blanket statement during the campaign. The Prime Minister said, “Never again”.

A single mother in my riding wrote to me. She said that all her money had been put into a registered education savings plan for her son. She had done so on the promise of the Prime Minister. That day it went down 25%. Is the hon. member proud of that deceit?

Income Tax Amendments Act, 2006
Government Orders

4:20 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, the hon. member may want to check his facts. Budget 2006 removed 655,000 low income Canadians off the tax bracket permanently, plus it reduced the GST for all Canadians. That was tax fairness.

On the hon. member's question relating to income trusts, I am very happy to take that. Does the hon. member believe that all Canadians should pay more taxes so corporations pay no taxes? Is that his point? Would he like to see the Government of Canada pursue that? I do not think that is tax fairness whatsoever.

The government did the right thing for standing up for Canadians. The hon. member should support it.

Income Tax Amendments Act, 2006
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4:20 p.m.

NDP

Peter Stoffer Sackville—Eastern Shore, NS

Mr. Speaker, it is not a question of whether the government taxed the income trusts. The hon. member for Yukon is correct. The government made a promise that it would not do so.

We in the NDP are intellectually honest about it. We said that we never should have had income trusts in the first place. Without notification, the Conservative government reversed itself. Thus, thousands of pensioners and individuals, who trusted the words of Conservative government, that it would not tax income trusts, lost thousands of dollars.

The hon. member can stand up and at least apologize to the constituents of the member for Yukon and to other Canadians. If he cannot blush and admit he was wrong, then at least say he is sorry, that eventually the government had to do the right thing. At least apologize for screwing these people out of so many thousands of dollars.

Income Tax Amendments Act, 2006
Government Orders

4:20 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I enjoyed listening to the hon. member's question. Quite frankly, I am amused the way he comes around to making his point. When something is clearly the right thing to do, one does it, that is leadership.

Clearly, as the finance minister has outlined, the situation pertaining to income trusts changed. That meant we had to take a different position on it, and it was the right thing to do. It has been backed up by credible sources, including the Governor of the Bank of Canada and every finance minister in Canada.

I know Liberal members are trying to make hay on this, and the actions they have taken are deplorable. We have taken a position of leadership for Canadians, one of which I am very proud. I am very proud of this government and the leadership it is demonstrating in protecting the tax base. We will be able to provide the services on which Canadians rely and a system of tax fairness by the decisions the government has made. I stand behind those decisions.

Income Tax Amendments Act, 2006
Government Orders

4:20 p.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I am very pleased to rise in debate on the bill. As my colleague opposite said, it is a technical bill. I do not think it is very controversial and it does useful things. In fact, it was produced under the Liberal government. Therefore, I do not think my party will have trouble supporting it.

However, I did notice a few of the comments of my colleague across the way and I would like to comment on some of them.

His comment about the allegation that the Conservatives cut income tax is a very good illustration of why politicians in our country are in such disrepute in public opinion. While he uses a technical argument about legalities, that our tax cut was not in legislation, the fact is it happened. Every Canadian who filled out his or her tax form paid that lower tax. The basic personal exemption actually went up under the Liberals. Yes, it was passed by a ways and means motion, but it happened, it was reflected on the tax forms and in the taxes paid by every Canadian. Then the Conservatives came along and raised the tax and put more Canadians on the tax rolls by reducing the basic personal exemption.

What I have just said is true. Every Canadian who has filled out his or her tax form knows it. The Conservatives raised income tax. Now they are saying they cut it, which is patently false, except if we use this legality subterfuge, which matters not a whit to Canadians who pay their income tax.

The point is the Conservatives raised income taxes and added people to the tax rolls in order to finance their GST cut. That is bad enough in itself, but when they do not have the basic honesty and decency to admit it, then I believe they have put all politicians into disrepute.

Income Tax Amendments Act, 2006
Government Orders

4:25 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I rise on a point of order. Quite frankly, we are debating Bill C-33 and his comments have nothing to do with it.

The member is basically suggesting that I have misled the House. I have not misled the House, and I ask that the point be—