House of Commons Hansard #155 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was chair.

Topics

Olympic and Paralympic Marks Act
Government Orders

5:30 p.m.

Conservative

The Acting Speaker Royal Galipeau

It being 5:30 p.m., the House will now proceed to the consideration of private members' business as listed on today's order paper.

Income Trusts
Private Members' Business

May 16th, 2007 / 5:30 p.m.

Liberal

John Cannis Scarborough Centre, ON

moved:

That, in the opinion of the House, in relation to the proposed tax on distributions from publicly traded income trusts or publicly traded partnerships, other than those that only hold passive real estate investments, the government should repeal its planned 31.5 per cent tax regime and replace it with an immediate 10 per cent tax to be paid by such entities with the revenue to be shared equitably with provincial governments provided that the tax would be refundable to investors who are Canadian residents in order to: (a) minimize the loss of savings to Canadians who invested in income trusts; (b) preserve the strengths of the income trust sector; (c) create tax fairness by eliminating any tax leakage caused by the income trust sector; and (d) create neutrality by eliminating any incentive to convert from a corporation to an income trust purely for tax purposes.

Mr. Speaker, as each one of us in this hon. chamber stands to debate this motion, I hope that we do not try to distort what the motion is really saying.

As the leader of the Liberal Party, the member for Saint-Laurent—Cartierville, indicated in his presentation last week, there are two segments to this initiative on behalf of the Liberal Party. When the idiotic and not thought out initiative was suggested by the Minister of Finance, the member for Markham—Unionville immediately commented. As has been said by many people who are not politicians, the member for Markham--Unionville is a recognized economist, a person who in his private life worked in the financial sector, and he could best understand this issue.

All of us have made every effort to understand it. As it is unravelling, not only we as parliamentarians recognize the faults in the finance minister's initiative and the new Conservative government, but average Canadians from coast to coast to coast have picked up on it. I thank the media, because the media have done an admirable job in bringing the facts forward.

People within the industry, representatives of various organizations that I will refer to in a moment, not just within Canada but outside Canada as well, are saying that we are often described as a member of the global community. We are international partners in our responsibility to create a safe society for people to live in both here and abroad. One example is the important mission in Afghanistan which our men and women in the Canadian Forces are undertaking. We have to ensure that the finances of nations are stabilized in order to create the level playing field that we have been encouraging.

Just last week when the Minister of Finance was asked a question he replied that the government wants to create fairness and a level playing field. On the interest deductibility issue, it seemed really odd to us how he was going to create a level playing field when other countries had the same provision for their corporate sectors, and yet it was being taken away from Canadians thus creating an unbalanced playing field for us to work on.

It is not just in this Parliament that this issue has come before us. There was a discussion and an inquiry on this issue in the last Parliament when there was also a minority government. There was talk about looking at what we could do, whether we should change it or leave it alone, et cetera. The member for Scarborough—Guildwood, who formerly was the parliamentary secretary to the minister of finance, provided his input. I also applaud the member for Halton who has been on top of this issue right from day one. He has been very forthcoming with respect to his comments and his information gathering.

I will talk about the last Parliament for a moment. In all fairness, Canadians who are watching us today should be reminded of what happened so they can appreciate what is happening here today.

When this initiative was undertaken in the last Parliament, the Liberal government of the day was looking at it, there is no question. Inevitably it was decided that we would not do anything with the income trust file. That was publicly known. Canadians were concerned at that time, and I do not blame them. They said, “They said they were going to do it and now they are saying they are not going to do it”. Canadians felt a bit uncomfortable and rightfully so.

The leader of the opposition at that time, the right hon. Prime Minister today, made a commitment that should the Conservatives be successful in securing government, they would not do anything. They would leave it as it is. In the Prime Minister's own words which I quoted last week, he said, “We guarantee you we will not touch this file”, to the seniors especially, whom I talked about last week, and to corporate Canada, which I do not like to refer to as such because it is not what I believe it is; I would refer to it as working Canada, to employed Canada, because it affects people's jobs as well. Based on that commitment during the campaign, Canadians felt comfortable that they had a firm commitment. That is campaigning.

We fast forward a little and the Conservatives assume the role of the new Conservative minority government and lo and behold, to our surprise the Minister of Finance, the former minister of finance for Ontario, and we all know the devastation of Ontario under the finance minister, came up with this bright idea out of the blue. The important thing for me, on behalf of my constituents and the seniors with whom I have been speaking, that the Conservatives in essence reneged on a firm campaign commitment.

I am pleased today, after the initiatives of the Liberal Party, that the interest deductibility issue has been addressed, bringing us back again to a level playing field. Finally the finance minister, the Prime Minister, the new Conservative Party as a whole saw the light that it was indeed wrong, that it would hurt Canadian companies and that it would not permit them to compete fairly as other countries and their organizations would have been able to do. I am pleased that they saw the light. It just goes to show that the will of the people and their message does get through in this Parliament.

I would like to quote some distinguished people on how they felt about the government's initiatives on income trusts. Allan Lanthier, a retired senior partner of Ernst and Young and the immediate past chairman of the Canadian Tax Foundation said it is “the single most misguided proposal I have out of Ottawa in 35 years”.

We have stood in the House many times applauding and congratulating various organizations, our firefighters, our military, our police and the teaching profession as well. Today, as young as we get, we always remember our teachers. I recently had the opportunity to celebrate the 100th anniversary of the high school I attended, Riverdale Collegiate Institute in Toronto. The first thing I did was to thank all those teachers for the years they taught us well.

Claude Lamoureux of the Ontario Teachers' Pension Plan board, said the following:

This is unbelievable. I do not know who in finance looked at this. I cannot believe any sensible person would do this.

Another individual who always comments post-budget is Mr. Thomas d'Aquino, president and chief executive of the Canadian Council of Chief Executives. Somebody like him is getting input from corporate Canada, or business Canada, whatever one calls it. This is what he had to say:

--we are worried that the change announced in the budget may seriously undermine the competitiveness of Canada's homegrown champions--the companies that are most active and most successful in building global businesses from head offices in Canadian communities. It may also damage Canada's standing as an international centre for financial services.

We can imagine the kind of effects that this policy would have had not just on Canada's competitiveness but right down to the families, to the households, to people's inability to educate their children, to pay their mortgages, to seniors.

Income Trusts
Private Members' Business

5:45 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Shameful.

Income Trusts
Private Members' Business

5:45 p.m.

Liberal

John Cannis Scarborough Centre, ON

Mr. Speaker, the member is right. It is shameful. Even members of the Conservative Party are saying it is shameful. It just goes to show that they finally saw the light.

Nancy Hughes Anthony, the president of the Canadian Chamber of Commerce, whom that party supports and we support as well, had this to say:

The proposal appears to be driven by revenue enhancement rather than a desire to build a competitive advantage.

Let me explain that. When she says revenue enhancement, the Conservatives promised they were going to give a one per cent reduction in the GST. They knew right away almost $6 billion would be eliminated from the revenue.

I have said before and I will say again there is a price for civility and it is called tax. A friend of mine said, “I do not want to pay taxes anymore. I am tired of it”. I said, “Great, do not pay taxes, but do not ask for the services that the nation provides. Do not ask for military support. Do not ask for security. Do not ask for moneys toward health. Do not ask for money for infrastructure”.

Last week the member for Peterborough, he too finally saw the light. He read from page 23 of our red book and finally he completed the sentence about our promise to eliminate the GST. He was right, but what those members failed to say was that in the last 13 years we had promised to eliminate the GST and replace it with an equally revenue generating tax. The member was not there at that time. I was, when we offered to the provinces to harmonize it. The Maritimes did. If Mr. Harris and Mr. Klein at that time had wished, it would have been a done deal.

There is so much to say on this file and it just goes on and on.

I was just asked how to build Canada's economy. Let me answer the member from the Conservative Party. When we inherited the mess they left, the Conservatives' blunders, a $43 billion deficit and a debt that was going out of whack, our country was being described as a third world, bankrupt banana republic. We did not complain. We just went to work. We did not raise taxes. We lowered taxes. We created the longest uninterrupted period of growth in the history of our country. More employment was created under the Liberal government than at any other time in the history of our country.

The Conservative Party has finally heard that 91% of the people do not wish to see these types of policies implemented. I would just remind those members that two out of three Canadians did not vote for that party.

I am glad they are changing their minds. I am glad they did on the interest deductibility and hopefully, they will see that our proposal is the right way to go.

Income Trusts
Private Members' Business

5:45 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, once again we see debate in this House brought down to levels to which it should never go. The member quite frankly brought up so many points that were false, I do not know where to begin, but let me begin by making a few points of fact on the motion that the member brought to the House.

First of all, the member is probably aware that every single provincial finance treasurer came forward and said there was tax leakage, that it was substantial, that we could not afford to have it and we could not afford to let it keep on going. The governor of the Bank of Canada came forward and said there was tax leakage, and what is more, that corporations switching to income trusts was a bad structure.

I see the member for Mississauga South is counselling the member. That is good. The member for Mississauga South also knows nothing about this topic, but I will tell members something else.

Finn Poschmann from the C.D. Howe Institute said something had to be done, and better now than later. Kevin Dancey from the Canadian Institute of Chartered Accountants said that there was leakage and there was also severe reporting problems with income trusts.

That member stands in this House and says he stands for families. He should stand for them now. He should stand for tax fairness while he has a chance. The member for Markham—Unionville has no idea. His friends on Bay Street are the ones who influence him. The thugs with CAITI are the ones who influence him.

Regular Canadians, people who pay taxes and rely on the people in this House to do their jobs and stand up for them, are the ones who need tax fairness. The member should stand up for them. I would like to know why he does not.

Income Trusts
Private Members' Business

5:45 p.m.

Liberal

John Cannis Scarborough Centre, ON

Mr. Speaker, as for all the huffing and puffing that was going on over there, if the member had read the motion he would have seen how we are asking this initiative to indeed become revenue neutral so that nobody is penalized. Those members are just used to taxing. For example, we are just saying to move it from the 31.5% that they are proposing to 10%. Who is being fair here?

Second, I want to remind the member that we are trying to protect the country first of all. He will have to answer to the seniors in his riding.

I also want to point out for the hon. member that 15 income trusts were taken over just recently, costing a tax base for our country of $6 billion.

Let me close with this. The Gartner Letter, a United Kingdom daily commentary on the markets, described it this way: the Canadian finance minister's “idiotic 'trust' taxation decision rendered last October 31st, which we still believe ranks as one of the worst decisions ever rendered by a person in a position of monetary authority”.

That says it all.

Income Trusts
Private Members' Business

5:45 p.m.

Bloc

Paul Crête Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

Mr. Speaker, I will speak quickly, since we do not have much time. Does the hon. member admit that, on the essence of the issue, that was the right decision to make? Unfortunately, the Conservatives changed their mind after they had promised they would not modify the rules. Many small investors were swindled by that decision. However, on the essence of the issue, the situation could no longer continue.

Income Trusts
Private Members' Business

5:45 p.m.

Liberal

John Cannis Scarborough Centre, ON

Mr. Speaker, I thank the hon. member because he is adding a human element to this. I very much appreciate that.

When the potential leader of a nation, as he becomes the leader of the nation, sends a signal, people take certain steps. They may invest savings and they may invest for their future, et cetera. Today, a year and a half later, these people have been misled. Their lives have been affected negatively. That is what this is all about.

I am simply telling them to let us add a human element to this. They have betrayed seniors and it has to stop.

Income Trusts
Private Members' Business

5:50 p.m.

Conservative

The Acting Speaker Royal Galipeau

The hon. member for Simcoe North for a very short question.

Income Trusts
Private Members' Business

5:50 p.m.

Conservative

Bruce Stanton Simcoe North, ON

Mr. Speaker, as I listened to this hon. member I wondered what he would have to say about prominent members from his own party like, for example, Sheila Copps, who said that reversing the income trust decision “would...run afoul of espoused Liberal principles, by promoting a tax loophole for a select few financed by the rest of us”.

What does he have to say about these prominent Liberals like Ms. Copps?

Income Trusts
Private Members' Business

5:50 p.m.

Conservative

The Acting Speaker Royal Galipeau

Equal time for the hon. member for Scarborough Centre, but no more.

Income Trusts
Private Members' Business

5:50 p.m.

Liberal

John Cannis Scarborough Centre, ON

Thank you kindly, Mr. Speaker. Every member, after they have moved on and are outside this House, has every right to say something. The members who may have more information on this are the committee members, who participate on a daily basis, or experts such as the people I have just outlined, including the former finance minister, the president of the teachers' pension fund, the president of the Canadian Council of Chief Executives, the president of the Canadian Council of the--

Income Trusts
Private Members' Business

5:50 p.m.

An hon. member

Oh, oh!

Income Trusts
Private Members' Business

5:50 p.m.

Conservative

The Acting Speaker Royal Galipeau

Resuming debate.

The hon. member for St. Catharines.

Income Trusts
Private Members' Business

5:50 p.m.

Conservative

Rick Dykstra St. Catharines, ON

Mr. Speaker, I appreciate the opportunity to speak to the bill.

I am a little surprised to see the member here. He and I had a good debate on Thursday of last week and he indicated that if I showed him where in the Liberal red book it said that the GST was going to be cancelled, scrapped and changed, he would resign, but he is here today to speak to his private member's motion. I took him up on his challenge, mano-a-mano, and, like the Liberal Party, he did not keep his commitment.

I take this opportunity to contribute to the debate on Motion No. 321, a proposal that represents another sorry chapter in the tale of Liberal mismanagement on the issue of income trusts. It is a book that is never going to become a best seller, and I would like to think, as probably all Canadians would, that the conclusion of the Liberal Party is actually being written as we speak.

The Liberal Party now has had at least three policies on income trusts: one with the tax, one without a tax, and now we are back with a tax in another Liberal plan.

The proposal in this motion fails in every respect. First, there is no tax neutrality between trusts and corporations. Second, it does not address significant federal and provincial revenue losses if existing trusts continue to grow. Third, there is no level playing field. It maintains a tax advantage for income trusts over corporations, which we have seen is bad for this country.

It would open the door for corporate taxpayers like Hibernia and EnCana to convert to trusts. No wonder, as the member for Peterborough so aptly put it, that Finn Poschmann of the C.D. Howe Institute called it “a politically funky stew”. I have seen Finn at our finance committee meetings and I am not saying that he always agrees with us, but I will say that he and the government are 100% on side in terms of what we needed to do with income trusts.

Our government is committed to tax fairness, as we announced on October 31, 2006. Prior to that, Canadian companies were announcing intentions to convert to the income trusts and it was happening at a frenetic pace. Such decisions offered short term tax benefits but created significant economic distortions. It threatened Canada's long term economic growth and it shifted future tax burdens onto taxpaying Canadians, both families and individuals.

It would have meant unchecked growth that would have resulted in billions in lost revenue, which would not have been invested in the priorities of Canadians. This has been confirmed by a number of experts. Economist Andrew Teasdale noted that “exploitation was set to expand to a level which could have significantly impacted the ability of the government's right to make tax policy”.

Bank of Canada Governor David Dodge said:

By giving incentives that led to the inappropriate use of the income trust form of organization, the tax system was actually creating inefficiencies in capital markets, inefficiencies that, over time, would lead to lower levels of investment, output and productivity.

The introduction of the tax fairness plan restores balance and fairness to the federal tax system.

The decision was not an easy one. It was a tough one, but it was the right one. The provision of doing the right thing and addressing tax relief means that we could reduce the general corporate income tax rate; we could increase the age credit amount for seniors; and in regard to a recommendation, after 40 years we actually could introduce pension income splitting for seniors.

This is the right plan. It will not indefinitely maintain a tax imbalance between income trusts and corporations, and it will not maintain the economic distortions which that imbalance entailed, an imbalance that over the next number of years would have forced personal income tax rate increases that would have shocked Canadians.

Dominic D'Alessandro of Manulife Financial said it was “the right thing” and that “continuing on this path [of income trusts] would not be in the long-term interest of this country”.

In April 2007 the Financial Post had a poll that showed that a majority of Canada's business leaders supported our action and saw income trusts “as an increasing threat to economic growth because income trusts, unlike normal companies, were obliged to distribute their earnings and couldn't readily reinvest”.

They couldn't talk about the reinvestment of capital equipment, of machinery. That is something we put right in the budget with the accelerated capital cost allowance that allows companies and corporations across this country to accelerate the investment they make into their companies. Instead of doing it over 10 or 15 years, they can now do it in two years. We are starting to see companies and corporations move in that direction.

Even the Liberal member for Halton said that “reforming the [income] trust business and stemming the tide of conversions is necessary for the long-term health of the economy”.

Motion No. 321 offers dangerous false hope to Canadians who suffered losses, regrettably, and it suggests that going back to an imbalance is actually the right thing to do. It would reintroduce unnecessary uncertainty into financial markets. We have seen, as I outlined, that the movement of the Liberal Party on income trusts has shown that the financial markets were imbalanced when they tried to and did not move on this.

I am not the only one saying that. Jack Mintz of the Rotman School of Management said that the Liberals are “creating market uncertainty by extending false hope to investors”. The National Post said, “The issue is settled”. It said, “In other words, it's time to move on“.

Everyone in the House got the message except the Liberals. Why not? Why are the Liberals proposing a plan that will exacerbate revenue loss? Let us imagine the revenue loss if Hibernia or EnCana and other large energy companies were to convert to income trusts. The Liberal plan would create a burden on Canadian taxpayers and would cost the federal and provincial treasuries billions.

Every single province supported our tax fairness plan. From across this country finance ministers from every province and territory wrote letters to every member of the finance committee to tell them that this was the right thing to do.

P.E.I. finance minister Mitch Murphy said that without our plan the province could find itself “facing a severe tax base decline...[that] would be very damaging to [Prince Edward Island's] efforts to build a strong, self reliant corporate tax base...as well as in the Atlantic region in general”.

Canada's Conservative government has said it repeatedly: Canadians pay far too much tax.

Budgets 2006 and 2007 introduced a total of over $40 billion of tax relief benefiting Canadian individuals and businesses.

Ignoring the issue of income trusts would have resulted in ordinary Canadians paying more tax today and for years to come.

Corporate tax avoidance left us with us with a choice. We either balance our budget on the backs of ordinary Canadians or we take firm action to implement tax fairness. It was not an easy decision. When leadership is required and when tough decisions are made, leadership is never easy and those decisions are never easy, but those decisions have to be made.

The tax fairness plan provides certainty and security. Proceeding with the plan means acting in the national interest and enhancing incentives to save and invest for family retirement and security.

Unlike previous governments, we did not base our decisions on political calculation but on principles of tax fairness, balancing the needs of the individual investors versus the interests of taxpayers.

Decisions are all about fairness: fairness for Canadian taxpayers and their families who would otherwise be asked to pay more and more; fairness for the corporate sector, by removing the tax distortion in favour of income trusts relative to corporations; and fairness for all Canadian governments, federal, provincial and territorial, by preventing a significant loss of tax revenue, by setting right a significant wrong.

Where once there was speculation, today there is certainty. Where once there was posturing, today there are principled decisions. Where once there was dithering, today we have decisiveness. Where once we had confusion, today we have confidence.

Businesses are making their own choices and they are moving on. It is time we all moved on. The result of our decision is clear: a tax system that is fairer for Canadians and that will help our economy to become more productive, efficient and dynamic today and for years to come.