House of Commons Hansard #163 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was tax.

Topics

Questions on the Order Paper
Routine Proceedings

3:40 p.m.

Conservative

The Acting Speaker Royal Galipeau

Is that agreed?

Questions on the Order Paper
Routine Proceedings

3:40 p.m.

Some hon. members

Agreed.

The House resumed consideration of Bill C-52, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007, as reported (with amendment) from the committee, and of the motions in Group No. 1.

Budget Implementation Act, 2007
Government Orders

3:40 p.m.

Liberal

Robert Thibault West Nova, NS

Mr. Speaker, it is my pleasure to speak to the report stage of the budget bill.

We are looking at the question of the treatment of the tourism industry and our competitiveness in the tourism industry. That is one element.

A very good program was brought in forward by the Liberal government, the GST rebate for tourists from other nations. This program encouraged them to visit Canada. It also helped us compete with other jurisdictions around the world, particularly important for the convention and tour business. However, it was also important to purveyors, to people who would come here to hunt and fish and to people who would come with their families.

We were able to get the Conservatives to move on some elements of that, but they could go forward and reinstate the full program. It was not very expensive, nationally, when we look at the total value of the tourism industry. It was very important to the operators and to our country. I will go back to that later.

If I look at the context of the budget generally, I see two things. One is we evaluate the intention of a government and its competence through a budget. The other thing is we see what opportunity we have and how a government wants to grasp it.

Now we have the most buoyant economy in the history of our country. When the government came into power, it inherited surpluses, the lowest unemployment rate ever, very stable and low interest rates, an economy growing faster than almost every other nation in the world and a very stable one. It has a surplus of $13.2 billion this year from last year's operation.

Let us see what the Conservatives did in their budget.

First, because the economy is so buoyant, this is the highest spending budget in the history of the country. However, when we look at where these investments are made, it leaves a lot to be desired. Rather than building a country, looking at the nation and asking where are its weak elements, where should we be making investments to bring the potential up so we can achieve the national dream and individual can achieve their dreams, the government does not do that.

This is a purely political budget, looking at a very quick election. I think when the budget was drafted, the intention was to go to an election before we would get to this stage, before we would talk about budget implementation.

We see promises to Ontario, Quebec and Alberta of huge transfers of funds. We talk about fiscal imbalance, but we see that these funds were promised before we even voted on them in the House.There were tax cuts within Quebec for political advantage, something we learned had been negotiated, which is distressing when we look at everything else that was left out and not done and everything that was cut.

The same day a $13.5 billion surplus announced, a million dollars was cut in social programs. I have spoken to those at large. We talked about the CAP sites across our nation. We talked about summer employment. For summer employment this year, $11 million have been cut, and we saw the ramifications of that across the nation. We saw students all across the nation, volunteer groups, not for profit sector losing their ability to carry out their work and the students getting revenue and that experience.

Now the Conservatives are backing down part way, another one of those famous flip-flops that we have seen from the finance minister, but again not enough. Imagine if the government had been in a majority situation.

We saw it in the income trust sector, and we raise this often. I think it is symbolic of the problems with the government. It makes a promise and then flat out breaks that promise. By making the promise not to tax income trusts, the Prime Minister encouraged people to put more of their investments in that sector. Then he broke that promise and taxed them heavily.

We had very good committee hearings on this, and we invited him to have a look at it. Admittedly there were problems in the sector. If we can only look at the testimony of one individual, I encourage people to look at the testimony of the Governor of the Bank of Canada, which was quite well balanced. He indicated there were problems within the sector and that action was warranted. He pointed out that there were problems in governance in certain elements within the sector. He also said that it was an excellent vehicle for the capital markets in certain parts of the sector.

The Minister of Finance has a lot of people investing in real estate in his riding and in his communities. He agreed with that. His friends all in real estate trusts, REITs, were not touched. He left it in that sector, but he did not look at other sectors, such as energy where it was an excellent vehicle. Rather than having a surgical strike, repairing the problems within the sector, there was a nuclear blast that destroyed the whole sector. We know the results: $25 billion in capital losses to the people in that sector.

We have the Atlantic accord. If members remember, I was on the government side of the House. The Conservatives were so in favour of the Atlantic accord. When we went through the budget at the end of the last Liberal government, they asked that we divide it. They wanted to vote on the Atlantic accord separate from the budget, because they wanted to vote in favour it only. What did they do in their budget? They reneged on the Atlantic accord.

Now the Conservatives have negotiations on the background. We know Premier MacDonald in Nova Scotia is in trouble. We watched Nova Scotia lose $1 billion, and not a word from this guy in the last little while. He did not come to finance committee last week. I thought that was regrettable. While Nova Scotia's economy is at risk and burning, he fiddles.

Danny Williams is being a little bit more vocal. I am pleased to hear that somebody from the Atlantic is speaking.

However, the promise made through the Atlantic accord was that independent of any other program of government, if there were changes in equalization, changes in transfers, Nova Scotia and Newfoundland and Labrador would not be affected. The Atlantic accord was above and beyond all the programs.

Then what does the Prime Ministerdo? He said that either they kept the accord or they took the new equalization formula. He has said that it is not capped. We heard that in the House today, but it is capped. On equalization, Nova Scotia is capped as soon as the economy reaches the amount of the least of the non-receiving provinces. We know it is capped. That is the ultimate level at which it can receive money. If it chooses to go to the new equalization, which is better on the short term, it gives us $1 billion in the long term through the Canada-Nova Scotia agreement, which I think is not at all reasonable.

We saw the CAP sites being closed down. Giving Internet access to rural communities, small communities, disadvantaged people in urban areas, we saw that being closed down. The Conservatives refused to make the announcement. We kept the pressure on and now they are talking about making it, another flip-flop that I am very happy to see.

We saw an increase in taxes to the most vulnerable Canadians. The lowest paid Canadians who are paying taxes are seeing their taxes go up from 15% at the start to 15.25% and 15.5% next year.

Reducing consumption taxes by reducing 1¢ on the GST, which the Conservatives did last year, helps those who are at the upper end of a lot of discretionary spending. At the lower end, most people's spending goes on items that do not attract GST, so those people do not benefit.

We heard promises by the Minister of Fisheries and Oceans when he was on the fisheries committees. He supported the report on the fisheries committee that we needed more investments in wharves. Not a cent was invested. There was a reduction when we should have been investing more.

We know the problems of the harbour in Digby. One of the members in opposition was always speaking about that harbour. When the Conservatives came into power, they got the report of the arbitrator, the perfect thing they needed to make that investment and take over the wharf. There was complete and utter inaction.

We get signals every now and then that they will be doing it, but they are not doing it. They are probably waiting for an election. It is the responsibility of the government to give service to the people of Canada between elections, not only during elections.

We saw the problems within the lobster industry. To be a hero, the Minister of Fisheries and Oceans announced a huge change in the licensing procedures and the way that licences were held. He reduced the value of these licences by half. About $600 million of capital value in these licences, retirement funds of these families, was lost overnight with one announcement.

Again, the Conservatives say that are willing to reconsider. I wrote the minister about six weeks ago, but I have had no answer yet. I have brought it up in the House, but I get no answer. Then they give us the same promises on the bill. The bill has many of those same elements. If the ministerial order can be modified, how can we be confident that they will act accordingly and responsibility if we pass a bill that gives the minister and his appointed tribunal so much power?

There are many things that we would like to see. There were huge announcements made by the government in the area of defence spending. They were huge. Where have we seen them? Where are the contracts? Very few--

Budget Implementation Act, 2007
Government Orders

3:50 p.m.

Conservative

The Acting Speaker Royal Galipeau

It is with regret that I must interrupt the member, but he will know that I gave him the two minute and then the one minute notice.

On questions and comments, the hon. member for Peterborough.

Budget Implementation Act, 2007
Government Orders

3:50 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I appreciate the opportunity to address the member's speech. He certainly has been very crafty in talking about issues that he wants to talk about but not talking about the benefits of the budget, certainly the benefits for the people of Nova Scotia and in fact for people in all parts of Canada. These benefits are significant. I know that ultimately the member supports them, but for partisan reasons he cannot.

I want to address one issue with the member. He talked about equalization. I want to ask him whether equalization inherently means equal, or whether equalization inherently means that some regions should be better off than others and supported in such a manner by the federal government.

Ultimately, here is what the Liberal Party is missing. When the Liberal Party was in government it always spoke about less being more. In fact, it would give less to the provinces but talk about how much more it was doing, which was impossible. In this budget this government is providing more money. It is providing more money to Nova Scotia and to every single province and territory, which means more capacity for all provinces and more money for health care and infrastructure. More is more.

Why is the member not supporting this? It is more money for Nova Scotia and Nova Scotians. It is more money for every Canadian, distributed in a fair fashion. The member should support it. Fair is fair.

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3:50 p.m.

Liberal

Robert Thibault West Nova, NS

Mr. Speaker, the question here is about the Atlantic accord. The Atlantic accord was of great advantage to Nova Scotia. It said that the revenues from Nova Scotia's non-renewable resources will not be calculated against its money in equalization. Therefore, it would get that money to invest in the future of the province, because those are non-renewable resources.

Maybe that was better than fair. Maybe it was a disproportionate fair share. Maybe it was not completely equal with other provinces, but when the Conservatives were in opposition they supported it. As well, during the election campaign, the Prime Minister made the promise that he would not go back on the Atlantic accord.

That is what the question is here. It is a question of integrity. It is a question of how much people can trust the Prime Minister, and to that I say zero, zero on the Atlantic accord, zero on income trusts, and zero on ethics when we look at the way he dealt with Senator Fortier, to whom he gave the department with the biggest spending. Senator Fortier is not here to answer questions in question period, but the Prime Minister said during the election that he would not appoint cabinet ministers who were not elected.

These are the fundamental questions. Can we believe this person? Can Canadians believe the Conservative Prime Minister?

The Conservatives like to call themselves the new government, Mr. Speaker, but I show you the next opposition.

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3:50 p.m.

NDP

Olivia Chow Trinity—Spadina, ON

Mr. Speaker, the hon. member talked about the need for investment in tourism. One of the ways that cities can benefit is through investment in the arts.

We know that a lot of artists earn very little. Their earnings are below minimum wage and they live in poverty, yet they produce amazing and creative work that enlivens our cities and communities. It brings in tourists from all over the world. Yet there is very little investment in this budget for the Canada Arts Council, or to help filmmakers and documentary makers, or to help people involved in the arts, the playwrights and actors. They have to leave the country in order to find jobs. It is a very desperate situation.

Does the member think there should be more investment in the Canada Arts Council, in our film industry and in our artists so they can continue to create their very dynamic and vibrant materials for our country?

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3:55 p.m.

Liberal

Robert Thibault West Nova, NS

Mr. Speaker, that is an excellent question. I do not know that we can have a socialized or state arts system, but what we can do, and what the government is refusing to do, is support the infrastructure that artists depend on, like Canadian television production within the rules, in drama, and we can fund festivals, which is where artists have a chance to sell their wares and be seen.

We can support the Canada Arts Council, regional economic development and summer students. Many summer students in my riding work in small, private or community galleries, which give artists a chance to show us their wares and skills.

Budget Implementation Act, 2007
Government Orders

3:55 p.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, I am pleased to participate in the debate on the report stage of Bill C-52.

Earlier today the Speaker ruled on the admissibility of the report stage motions proposed by members. Motion No. 2 was not chosen for debate as it requires a royal recommendation. Motions Nos. 1, 3 and 4 were also not chosen because they had been dealt with and defeated at committee.

That left us with Motions Nos. 5 through 9. Those motions actually have to do with a subject matter that only the previous speaker spoke about. We are here debating changes to the bill that have been proposed on matters which have not been dealt with at committee or which have been brought forward by the government. In this case, they in fact are brought forward by the government so I would at least like to put on the record with regard to the five report stage motions that these all relate to the visitor rebate program.

Most of them are technical amendments. They have to do with a matter that came from and was suggested by the industry. There were some questions. The committee was not able to deal with it or was not aware of the matter. What they relate to in amendments Nos. 5 through 9 is that they actually make certain deletions to some of the clauses. Members will see it in the Order Paper and Notice Paper today. As well, they make some technical corrections to references to other pieces of legislation.

The effect of those changes is that non-resident persons and unregulated non-residential tour operators may apply for a rebate of the GST and the federal component of the HST paid on the supply of a tour package that includes short term accommodation or camping accommodations that will be used by the non-resident. The amendments also ensure that the rebate also applies to the provincial component of the HST.

Having taken the time this morning to review the amendments, I believe that these amendments are appropriate and reflect the fairness and intent of the House with regard to the visitors rebate program, so I am pleased that the necessary amendments to the bill have been proposed. I will take the opportunity to look at them in more detail as soon as I can get the legislation to which they relate to ensure that the language is in order, but subject to technically checking them, I believe that the report stage amendments should be supported.

That is a pretty short speech on the report stage motions, but I would like to comment further on the point of order raised by the finance critic for the Liberal Party with regard to amendments members attempted to raise at the committee stage of Bill C-52. They had to do with changes to the bill that would reflect what the Liberal Party believes to be a preferable approach to the so-called disparity or gap between the taxation of income trusts and dividend-paying corporations.

In the point of order that was raised, it was noted that a question raised in committee was ruled out of order by the chair. Certain reasons were given. Those are now being challenged. Hopefully the Speaker will have an opportunity to look at them.

I took the opportunity to review the basis of the proposed amendments that were submitted by Liberals at committee. They had to do with a commitment that the leader of the official opposition made.

The gist of it was that in relation to the proposed tax on distributions from publicly traded income trusts or publicly traded partnerships, other than those that hold passive real estate investments, the government should repeal the 31.5% tax regime and replace it with a 10% tax to be paid by such entities, with the revenue to be shared equitably with provincial governments. That is the first part.

Interestingly enough, the point raised in the point of order and the discussion about the propriety of the punitive tax on income trusts was whether or not a change from 31.5% to 10% was a matter which would require a royal recommendation or was out of order. Clearly, I think the argument showed with reference to precedent that the amount of a tax being imposed is certainly not beyond the scope of the committee's work to change.

The second part has to do with the revenue being shared equitably with the provincial governments provided that the tax would be refunded to investors who are Canadian residents in order to, first, minimize the loss of tax savings to Canadians who invested in income trusts; second, to preserve the strengths of the income trust sector; third, to create fairness by eliminating the tax leakage caused by the income trust sector; and fourth, to create neutrality or approach neutrality by eliminating any incentive to convert from a corporation to an income trust purely for income tax reasons.

Let us look at the elements. One is the amount of the tax and whether it is 31.5% or 10%. The second item has to do with a refundable tax credit, which basically means that should the Liberal proposal be adopted, the tax would be substantially less but would be applied immediately, rather than deferred for the five year period proposed by the government. As a result of it being refundable to Canadians, the burden of that tax would be paid only by non-residents, where the majority of the so-called tax leakage occurs. Timing, of course, is always a question.

I am sure that after a review of the transcript or the proceedings of the committee, the Speaker may very well find that the decision of the chair was based on incorrect information and that indeed the amendments proposed at committee maybe should have been in order. As a consequence, other amendments may also be in order.

It will be very interesting to see how this plays out, because clearly the idea is that we want to make sure we get it right. That is why we have a rigorous legislative process. That is why committee does its work. When the chair has to rule a matter out of order, we would hope that the understanding and the determination of fact brings a good decision. In this case, I am sure that it warrants review.

Finally, while most members seek to talk about the budget in general, I can tell members that with regard to the broken promise of the government on income trusts, the Prime Minister said that the greatest fraud “is a promise not kept”. He also said that he would never tax income trusts, but on October 31 of last year he turned around and did exactly that.

The consequences were that over two million Canadians lost about $25 billion of their hard-earned retirement nest eggs. That is very harmful. In fact, I have been told by some that four to five million Canadians have been directly or indirectly adversely affected by that broken promise.

Also, there were other consequences. We have been talking about tax leakage. Members well know that so far, because of the depressed value of income trusts, the taxes to be paid by these corporations are actually going to be less because of the significant takeovers. I believe there have been at least a dozen takeovers of these energy trusts, which means that their structures have been set up so that they are not going to pay any taxes.

The consequences of imposing that tax are far worse than the government ever dreamed.

Budget Implementation Act, 2007
Government Orders

4:05 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, this is interesting. The Liberal government used to talk about things that mattered to Canadians, such as health care, infrastructure, post-secondary education and transfers to the provinces. Those are things that matter to Canadians, but the Liberals do not talk about them any more because this Conservative government has dealt with them and is doing a much better job than the previous Liberal government.

So what do those members talk about now? They talk about trying to win tax loopholes for their wealthy friends. They do not believe that corporations should pay tax. That is what those members are standing up and saying in the House today.

Our government believes in tax fairness. It is unfortunate that the member does not.

However, having said that, I would just love to hear him respond to what the governor of the Bank of Canada said, although I know he is going to dodge the question. Certainly he will bridge it and speak about something else, because he does not have the courage to answer the question.

The Governor of the Bank of Canada specifically said that the Liberal motion on income trusts would lead to less investment, less productivity and, indeed, less wealth for Canadians.

Why does this member want to stand for those things? Why does he not believe in prosperity for all Canadians?

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4:05 p.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, you may want to seek some guidance on this, but I think it has always been the case that to question a member's courage is inappropriate in Parliament. It really has no place here.

The member has often spoken on this subject. If we check the record, clearly, he always says that he does not want corporations to pay their fair share of taxes. But what he does not say, and shows that he really is ignorant about the facts, is that when we look at the tax implications to the Government of Canada, we have to look at the taxes paid by a corporation and the taxes paid by the taxpayer.

In the event that we have a dividend paying corporation, that corporation pays income tax on its corporate income and the person receiving the dividend also pays income tax on the dividends subject to a dividend tax credit.

With regard to the income trusts, they are established and have been established under the laws of Canada to provide that the income trust itself, the business entity, does not pay the taxes at the business level but in fact transfers it all to the shareholders. The shareholders are then responsible for paying the taxes on all of the amount, certainly a much greater amount than they would pay if the amounts were paid in dividends.

So, if the member is going to participate in debate on income trusts, he should inform himself on the taxation and the full loop, and the full impact on the Government of Canada's revenue, not just the corporate impact.

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4:05 p.m.

Conservative

Laurie Hawn Edmonton Centre, AB

Mr. Speaker, I will give my hon. colleague credit for being courageously wrong. However, I would like to ask him a question.

Does the member disagree with every province that supported the move of this government on income trusts? Does he disagree with the Governor of the Bank of Canada who supported what this government did on income trusts? Will he agree, I suspect not, that those people who did not panic, who took good advice, who waited it out, are just as well off or better off today than they would have been had they not panicked? Or will he continue to be courageously disingenuous and misleading?

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4:05 p.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, he member for Peterborough also misled the House on other cases where he said the income trust sector is all recovered and is all there.

He should understand that the pricing of a security is based on the discounted value of its future yields and if people are going to be taxed at 31.5% on their future earnings starting five years hence, that is why the $25 billion was lost. That is not going to be recovered. It is a permanent impairment of the investment.

If the member wants to look at indices, he better be careful not to include the total indices. He has to back out a bit the impact of REITs, real estate investment trusts, which in fact are not taxed and have a significant impact on that.

He also has to take into account that there have been a very large number of income trusts that have in fact been bought out, are owned by foreigners, and are no longer reflected in the indices.

This member in his question made reference to people panicking. The fact of the matter is that people did panic--

Budget Implementation Act, 2007
Government Orders

4:10 p.m.

Conservative

The Acting Speaker Royal Galipeau

The hon. member for Trinity—Spadina.