House of Commons Hansard #212 of the 41st Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was citizenship.

Topics

The House resumed from January 28 consideration of the motion that Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation, be read the second time and referred to a committee.

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Government Orders

10:05 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I am pleased to rise on the subject of Bill C-48, which is now before the House. The bill could be termed a housecleaning bill, which does not mean that it is unimportant because it is important to keep one's house clean and in this case we are talking about the cleanliness of our tax system. The bill enacts into law previous comfort letters and other statements by the Department of Finance, which have already been enacted by CRA but which are not yet enshrined in the law.

As I will indicate, the Liberal Party will support the bill. Our only complaint is that it is far too long in coming. There have been massive delays to the point where the bill is almost 1,000 pages long with, I believe, 40-something amendments. This has caused great cost and great uncertainty to the tax system. We believe that it is simply bad public administration that the government should have delayed so long in bringing the legislation forward.

The last housecleaning tax bill passed by Parliament was in 2001, almost 12 years ago. We believe as a matter of course such bills should come before the House every year, so that the complexity of the tax system would be alleviated and taxpayers would have a clearer idea of what their rights and obligations are.

Let me begin by going through a little bit of the sad, lengthy history, which has led us from 12 years ago when the last bill was passed to where we are today. As I said, in 2001, a tax housecleaning bill was passed, 12 years ago. The Liberal government prepared another one but then was defeated. The Conservatives made two attempts but both failed. Because of an election or because of prorogation, those bills simply did not get through the House and were dropped.

The next event that is of some importance is the Auditor General's report of 2009. The Auditor General made it crystal clear that there were major costs imposed by not acting more expeditiously in this area. I would like to read a few of the key recommendations that were made by the Auditor General in 2009.

She said:

For taxpayers, the negative effects of uncertainty may include

• higher costs of obtaining professional advice to comply with tax law;

• less efficiency in doing business transactions;

• inability of publicly traded corporations to use proposed tax changes in their financial reporting, because they have not been “substantively enacted”;

• greater cynicism about the fairness of the tax system; and

• increased willingness to use aggressive tax plans.

She continued:

For the tax administrator, the negative effects may include

• higher costs for providing additional guidance and interpretations to taxpayers and tax auditors; and

• higher administrative costs for reprocessing the tax returns after an outstanding legislative amendment is enacted and for obtaining waivers to extend the limitation period for reassessment.

These points are extremely clear. The Auditor General makes it very clear that the absence of housecleaning legislation presented promptly imposes major costs on taxpayers in terms of their ability to understand the law, their need for professional advice and also imposes greater delays on rulings by CRA, which further reduce the efficiency of the system.

Following the Auditor General's report, the parliamentary committee on public accounts met and I would like to read its recommendations, which were published in the year 2010:

RECOMMENDATION 1

That the Department of Finance Canada facilitate the elimination of the backlog by ensuring that bills making technical amendments to the Income Tax Act only relate to technical tax matters.

RECOMMENDATION 2

That the Department of Finance Canada not wait until technical amendments bills are passed by Parliament before releasing further proposed amendments to the Income Tax Act for comment.

RECOMMENDATION 3

That once the current backlog of technical amendments is passed, the Department of Finance Canada should prepare annual technical amendments bills for consideration by Parliament.

RECOMMENDATION 4

That the Canada Revenue Agency provide by 31 March 2011 a progress report to the Public Accounts Committee on actions taken to address the recommendations contained in Chapter 3 of the Auditor General’s November 2009 Report.

It is clear as we stand now, in 2013, that these recommendations of the public accounts committee were not followed. It called for this housekeeping legislation to be presented on an annual basis. It called for a reduction in the time that CRA took to give its tax opinions or directions. This has not happened. The time has gotten longer, not shorter. Again, I would argue that this is a case of really bad public administration in an area that is not particularly exciting to the public but is, nevertheless, critical to the good functioning of our economy.

Now, one would think that accountants, of all people, would love tax complexity because they are paid for helping people to complete their taxes. If the system is more complex, they are needed even more and they would make more money. However, quite to the contrary, both the chartered accountants and the certified general accountants have recently been arguing very strongly in favour of expeditious passing of the legislation as well as a more general reform of the tax system.

I would like to read from both the recommendations of the chartered accountants and the certified general accountants on these issues. In 2010, the Canadian Institute of Chartered Accountants said:

Reducing complexity in Canada’s domestic tax regime is crucial to easing the regulatory burden placed on Canadian businesses and attracting investment. Simplifying our tax system would make the country more competitive and allow both individuals and business to prosper. According to The Global Competitiveness Report 2010 – 2011 issued by the World Economic Forum, tax regulations are among the top four most problematic factors cited by business executives for doing business in Canada. Many aspects of Canada’s tax system have become much too complex. We recommend that the government establish a national consultation process to examine tax simplification measures.

This is a government that talks all the time about caring only about the economy, about being competitive, about attracting foreign investment, and yet tax complexity is number four on the list of negative factors, according to companies, investors. The government has done nothing since these recommendations of 2009-10 until three years later, today, notwithstanding the pleas from the accountants, the Auditor General and the public accounts committee, to act expeditiously.

Let me now read what the certified general accountants said:

Modernize Canada’s tax system – make it simple, transparent and more efficient

Introduce and pass a technical tax bill to deal with unlegislated tax proposals

Implement a “sunset provision” to prevent future legislative backlogs

Appoint an independent panel of experts to recommend steps to reform Canada’s tax system

That statement about a sunset provision is interesting because it would say that when Finance issues a declaration or a comfort letter that effectively changes the system, unless it is placed in law within a certain time, such as a year or two years, it sunsets. It disappears. This would be a good change to the system because it would be an incentive for the Department of Finance or the government to implement these housecleaning bills annually or expeditiously so as to reduce this growing complication of Canada's tax system.

However, as members will have heard from these quotes, the issue goes further than simply these housecleaning bills. It has been 12 years since our last housecleaning bill and close to 50 years since our last full-scale examination of Canada's tax system. The last time that was done, I believe, the report was issued in 1966 and it was done by the Carter commission. The accountants and I say that it is high time we have another overall study of Canada's tax system with a view to simplifying it and making it more competitive, less complex and more fair. This would be a major undertaking, and since it has not been done in almost 50 years, it is high time that we do it.

One obvious unfairness, which would become apparent if such a study were done, is the operation of our tax credits. The government offers tax credits for young soccer players or young violinists. Some economists would prefer that such measures be put into overall cuts in income tax, but that is another issue. My point is that these tax credits are grossly unfair because they deliberately exclude those people whose income is not high enough to pay significant tax. Therefore, low-income Canadians' sons and daughters might want to play soccer or the violin just as much as a child of a higher-income Canadian, but because their income is low and they do not pay tax or much tax, they are excluded from the benefit. That is a gross unfairness. Item number one in reforming our tax system would be to make those tax credits refundable so that they are available for all Canadians and not just for well-heeled Canadians.

That is just one tiny item in the overall scheme of things. We need an overall review of our tax system, which has not happened for nearly 50 years, and it is high time that this was done. We do support the bill. Our complaint is that it is far too late in coming.

I will go over a few of the provisions of the bill. I obviously cannot cover in detail the nearly 1,000 pages of changed legislation. One of the problems with it is that it is just too much to absorb correctly all in one bite and to analyze appropriately. However, I will mention some of the things that would be changed.

There would be changes to the foreign affiliate rules, which would probably be the most important changes for business. These changes would generally be considered to be relieving for business, although they also would increase the complexity of meeting those tax obligations.

On income trusts, the bill would affect how debt would be treated when an income tax trust is taken over by a corporation after the infamous 2006 income trust tax announcement.

There would be a change for employment insurance. Now that self-employed individuals can contribute to EI, Bill C-48 would ensure those contributions would be deducted from annual income for taxation purposes in the same manner that an employee's contributions are deducted.

On GST, first nations would be able to choose to levy a sales tax on reserve by allowing the Canada Revenue Agency to collect and administer the tax. All money collected would be returned to the band council. Bill C-48 would allow Revenu Québec to fulfill that same function.

On labour-sponsored venture funds, in 2010 the Province of Ontario announced it was phasing out its tax credit for labour-sponsored venture funds by 2014. Many of those funds are no longer attracting the capital they need to continue as labour-sponsored funds, and the fund administrators have asked that they become mutual funds. However, the Income Tax Act imposes some severe federal penalties for making that switch. Bill C-48 would waive those penalties in recognition of the Ontario government's change. It would also allow shareholders to sell their shares to other investors instead of back to the fund.

Finally, on airlines, provinces and taxes, this clarifies the allocation of miles flown over certain territorial waters for the purpose of provincial taxation.

As we will see from that list, none of those items is likely to make a headline, but cumulatively, when added together, the absence of such provisions in our income tax law adds complexity and costs and reduces the competitiveness of the Canadian economy. That is why the Liberal Party, while supporting this bill, would also make a plea to the government that the next such housecleaning bill be introduced in the House approximately one year from today.

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10:15 a.m.

Oshawa
Ontario

Conservative

Colin Carrie Parliamentary Secretary to the Minister of Health

Mr. Speaker, from my colleague's speech, I take it that it is a certainty that he will be supporting the Conservatives in moving forward with these amendments to close loopholes. However, I am wondering if he could clarify the position of the Liberal Party.

His colleague from Kings—Hants, I believe, put through 3,000 amendments. Some of the amendments would actually stop us from closing some of these loopholes. In the best interests of Canadians, would he clarify what the Liberal position is? Would he and the Liberal Party be working with us to make sure that this is expedited and moved through as quickly as possible?

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10:20 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I guess the hon. member would have to consult the member for Kings—Hants to get clarification on that point.

My own view is that these measures are far too late, perhaps 11 years too late. My view is that if they can be passed, they should be passed as quickly as possible. As I also said, I hope we have another much smaller set of technical amendments, perhaps a year from now.

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10:20 a.m.

NDP

Randall Garrison Esquimalt—Juan de Fuca, BC

Mr. Speaker, New Democrats are certainly interested in closing tax loopholes. I was very interested in the parliamentary secretary's comments on amendments introduced by the Liberals that might prevent us from closing tax loopholes.

The hon. member talks about this being 11 years late. However, during the first five and a half years of that 11 years, his party was in government, and I believe that he was a minister. If he believes that these should be introduced every year, what happened during those five years when the Liberals were in government?

It is important that we update our tax code and that businesses have a clear idea of what is expected.

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10:20 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I am not saying that the Liberal governments of the past were in every respect 100% perfect. However, I think we were certainly much better on this issue than the current government, because we introduced changes that took effect in 2001 and other changes that would have taken effect under a Liberal government in 2005. When we were defeated, the Conservatives took over those changes, and they dropped the ball until today.

I think there is scope for improvement on the part of all Canadian governments. I do not think any of them have brought in changes as frequently as once per year. In the intervening time, since the Auditor General's report of 2009 and the accountants' reports I quoted earlier, it has become clearer to all that once per year would be the ideal frequency of these housekeeping bills.

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10:20 a.m.

NDP

Hoang Mai Brossard—La Prairie, QC

Mr. Speaker, I will continue in the same vein as the hon. member opposite.

In committee, the Liberals moved amendments to try to delay the application of the rules to close the loopholes.

My Liberal colleague said that the Liberal governments of the past were not perfect—clearly not. However, it is strange to listen to them talk out of both sides of their mouths. Today, they are saying that they want to close the loopholes, but they are not doing so. What is more, when they were in power, they did nothing to stop tax evasion or simplify taxes.

The Liberals often say that taxes need to be simplified and that nothing has been done since the Carter commission. Why did they not do anything about tax simplification and tax evasion when they were in power?

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10:20 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, as I said before, we passed a tax housecleaning bill in 2001, and we drafted a second bill in 2005.

We tried, but then the Conservatives took power. The Conservatives have now been in office for seven or eight years, and it took them that long to introduce a bill in the House. That is far too long.

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10:20 a.m.

NDP

Hélène LeBlanc LaSalle—Émard, QC

Mr. Speaker, since we are all wondering about it, I would like to ask my colleague how it is that he is proposing an annual review.

Could he explain why? Could he explain the background on this? How is it that this was not done between 2001 and 2007-08? Are there really problems? Is it realistic for him to request annual reviews? Can he explain why this was not done under the Liberal government?

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10:20 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I do not think that the idea of annual bills even existed before 2009, and we were not in power at that time. Accountants had the idea.

As far as I know, no one made that suggestion when we were in office. It is a much more recent thing. Given the problems that this 12-year delay is causing for us today, this would be a feasible and practical reform, even though no one did things this way in the past. This is a relatively new idea that we can examine in the future.

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10:25 a.m.

NDP

Robert Chisholm Dartmouth—Cole Harbour, NS

Mr. Speaker, I do not want to belabour the point about what the Liberals did when they were in power. That was a while ago, and it will be a lot longer before they have the opportunity to not do things. I think we will all be better off for that.

I want to ask the member, who spoke quite eloquently about what the Conservatives have not done, a question. I do not disagree with the member and will make some of the same points myself later on this morning when I have the opportunity to speak to this bill.

In response to an earlier question, I noted that he said that the Conservatives had not moved on the need for annual updates and annual legislation to update the tax regime since 2001. In fact, we have had Auditor General reports. We have had submissions from tax experts, certified general accountants, before the finance committee for many years. They have advocated just that thing.

I wonder if the member could perhaps explain why it is that his government failed when it had the opportunity. I know that it will be the last opportunity for many years. Perhaps the member could try to give us a better explanation of why the Liberals were not able to move forward. That will help us in weighing the veracity of their complaints against this government.

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10:25 a.m.

Liberal

John McCallum Markham—Unionville, ON

Mr. Speaker, I certainly agree with the hon. member's first statement that it has been some years since the Liberals were in government. I think his second statement that it will be many years before that happens again reflects a certain arrogance in the assumption made by some members of the NDP that they have God's will to become the next government. On that point, I disagree.

It is my understanding, and I might be wrong, that this proposal for annual housecleaning bills began after we ceased to be the government, which was from 2006 onwards. I know that the quotes I read were from 2009, 2010 and 2012. It is possible that such recommendations were made before 2006. I do not deny it, if that is true. I am simply not aware that this was the case.

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10:25 a.m.

NDP

Rosane Doré Lefebvre Alfred-Pellan, QC

Mr. Speaker, before I begin, I want to say that I will be sharing my time with the hon. member for Montmorency—Charlevoix—Haute-Côte-Nord.

I am rising in this House today to speak to Bill C-48, An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation. This bill affects many pieces of legislation.

We in the NDP believe that this bill will have a positive impact on revenues and will generally discourage tax avoidance. Frankly, a technical tax bill was overdue. I am pleased to see that Parts 2 and 3 of Bill C-48 deal with the taxation of Canadian multinational corporations with foreign affiliates. These changes reflect the proposals made in the budgets of 2007, December 2009, February 2010, August 2010 and August 2011, and I am pleased to see that they seek to ensure the integrity of the tax system and discourage tax avoidance.

The NDP is in favour of cracking down on tax evasion and tax avoidance. That is why my colleagues at the Standing Committee on Finance have been pushing the committee to complete its study on this.

As an aside, I want to thank our official opposition finance critics: the senior critic, the hon. member for Parkdale—High Park, and the deputy critic, the hon. member for Rimouski-Neigette—Témiscouata—Les Basques. Over the past few months, they have done tremendous work on finance bills, including the omnibus budget bills and the current omnibus tax bill. I thank them. Their work is much appreciated, and it helps us to better understand the bills that are being introduced.

I am also pleased to see that this bill makes changes in order to reduce tax evasion. What is more, it seems that the committee will continue its study on the matter this year.

It is quite something to think that it has been 11 years since a bill like this has been passed. Tax practitioners have said time and again that Canada is very far behind because this government has taken too long to legislate these technical changes.

In a report released in 2009, Auditor General Sheila Fraser noted that:

If proposed technical changes are not tabled regularly, the volume of amendments becomes difficult for taxpayers, tax practitioners, and parliamentarians to absorb when they are grouped into a large package.

We could also see that the Department of Finance Canada had at least 400 technical amendments that, unfortunately, had not been enacted. I believe it is crucial that this type of delay does not happen again.

I also agree with the Certified General Accountants Association of Canada, which, during prebudget consultations, proposed to the Standing Committee on Finance that Canada's tax system be modernized to make it simpler, more transparent and more efficient. The association also proposed that a technical tax bill be introduced and passed to deal with unlegislated tax proposals. Finally it suggested that a sunset provision be implemented to prevent further legislative backlogs.

It is also true that the complexity of tax legislation makes this task extremely difficult. Our seniors, our youth and those who do not consider French or English as their first language would obviously prefer a simpler system that is easier to understand. Being a responsible, honest Canadian should not be so complicated.

This huge bill makes things even more complex. We know that this government is a great believer in omnibus bills, as it has demonstrated over the past year with Bills C-38 and C-45. Luckily, this time, I can see that the bill proposes technical amendments to a small number of closely related laws and not laws in other areas. The other two bills, on the other hand, amended laws related to environmental protection, government accountability, immigration, employment insurance and so on.

I still find it ironic that this government is introducing a bill that is so long when it did not hesitate to denounce such a practice before.

During the debate on Bill C-22, Income Tax Amendments Act, 2000, in the 37th Parliament in 2001, my colleague from Calgary Southeast, who is now the Minister of Citizenship, Immigration and Multiculturalism, had this to say:

Let me say at the outset that the bill before us is a classic example of what has gone wrong with parliamentary oversight of legislation, particularly with respect to taxation. The bill before us has some 513 pages of technical amendments. I can say with a fair degree certainty that not a single member of this place, let alone the parliamentary secretary who just spoke or the minister he represents, has read or will read. It is a bill that exercises enormous power over the lives of Canadians through the Income Tax Act which in itself has coercive powers delegated to it by this parliament. The some 500 pages of amendments in the bill are amendments to a tax act which runs over 1,300 pages long.

I think the same observations apply to Bill C-48, especially since it is twice as long as Bill C-22.

I believe that Canadians deserve to be represented by parliamentarians who make sensible decisions when it comes to taxes and spending. Canadians want accountability, and rightly so.

When we see things like the Parliamentary Budget Officer having to take the government to court to get information about how tax dollars are being spent and what cuts are being made to the services Canadians need, I think the public is entitled to ask some questions and to admit that they have lost confidence in this government.

Out of respect for Canadians, a government should be accountable and transparent. Frankly, that should be the very least they can expect.

Since I was first elected, not a day goes by without someone from my riding of Alfred-Pellan contacting me to share their concerns about this government. They are worried about how transparent it is, and if you ask me, they are right to be worried.

In closing, I am thrilled that this bill has been introduced, even though it took a while, because it implements over a decade's worth of highly technical changes to Canada's tax system.

Before I finish, I want to reiterate that the people of Alfred-Pellan contact me often about the omnibus bills. I recently received letters from some of them that I would like to share in the House so that everyone can understand that the public does follow what is going on in Parliament and that it is important to listen to them.

I will quote some of my constituents from Alfred-Pellan. First, Mr. Nadeau said that the Conservative Party is running the country with its own members in mind, and Mr. Nadeau is against the massive bills introduced by the Conservatives. According to him, they are using these bills to try to push through all of their ideas en masse, and it is very sad to see these bills being introduced.

Mr. Prejent said that it is impossible, or at least very difficult, to meaningfully challenge a particular issue. It is becoming clear that this approach allows the government to pull a fast one on the opposition, and by extension the Canadian public.

To Mr. Prejent, I would say that the Canadian public is not affected by extension. This affects the Canadian public directly and the opposition by extension. We see these kinds of things every day.

One of my other constituents, Mr. Jetté, is not happy about these omnibus bills. He said that the Conservatives should talk with the opposition before bringing in such bills, and that it is arrogant and a bit too self-serving not to. He apologized for saying such things, but it is what it is.

I also heard from Mr. Bergeron, who said it was unbelievable that in 2012, the government forgets and fails to listen to the Canadian people.

People are not happy that such bills are being introduced, and I understand. I know how important these amendments can be, especially when things have dragged on and on with this government and also with the Liberals in the past. So it is important to deal with these issues, but we must be cautious. We must also ensure that these laws are useful to the public, because it is extremely complicated to make so many changes in one fell swoop. We must be cautious about the complexity of the law, especially when it comes to taxes.

I think that everyone, in all ridings, just wants to be able to properly fill out their tax returns. We need to give them the right tools. We must make their lives easier and make things as simple as possible.

As parliamentarians, we have a duty to ensure that Canadians trust their government and trust that it is transparent when it manages taxpayer money. Unfortunately that is not always the case with the current government. But I am happy to be part of a team that, in 2015, will show that it is possible to have a government that works fairly, efficiently and transparently.

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10:35 a.m.

NDP

Hoang Mai Brossard—La Prairie, QC

Mr. Speaker, I would like to congratulate my colleague on her speech and also on the baby she is expecting.

My colleague has raised some very good points about the fact that the current government is introducing omnibus bills.

In this case, these are important technical amendments relating to taxation.

Nevertheless, we are wondering why this has taken so long and why the government waited so long before introducing a technical bill. This kind of bill should actually be drafted on a regular basis. Furthermore, the fact that they waited so long has an impact on the government’s transparency and the public’s understanding of the bill.

Does my colleague believe that this government is transparent with regard to its bills?

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10:35 a.m.

NDP

Rosane Doré Lefebvre Alfred-Pellan, QC

Mr. Speaker, I thank my colleague from Brossard—La Prairie for his very accurate comments about the transparency of the Conservative government.

There is more to the story. The government often talks about how very responsible it is with regard to the economy and prosperity. So I find it sad that the Conservatives have taken so long to bring in tax measures, all the while claiming to be champions of the economy. However, I am pleased it is being done.

Regarding transparency, we could go over it again. This is precisely what angers my constituents in Alfred-Pellan. I assume that my colleague from Brossard—La Prairie has also noticed that his constituents feel the same way.

People are angry about the lack of transparency. They get in touch with us every day to tell us about the government’s lack of transparency, primarily with regard to the omnibus bills that it brings in for the various budgets.

Unfortunately, there is a double standard here. It is a good thing that these measures are being introduced, but I still have many questions about the fact that the bill is omnibus in nature.

It is sad to see that the Conservatives have to pass this kind of bill in order to get their message across.