Bill C-22 (Historical)

Income Tax Amendments Act, 2000

An Act to amend the Income Tax Act, the Income Tax Application Rules, certain Acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another Act related to the Excise Tax Act

Income Tax Amendments Act, 2000

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, since the very beginning of time it has been a practice for citizens to pay tax to support the services they receive.

The Book of Genesis tells us that both Abraham and Jacob paid a tax of 10% on what they owned and this tax was called a tithe. Later the Council of Vienne which sat from 1311 to 1312 approved giving the money from the tithe collected over a six year period to the King of France to finance the crusades. The concept of a simple tax on revenue has been with us for a very long time, as has been the concept of directing tax money to fund the costs of a war.

It came as no great surprise when the federal government in 1917 introduced the Income War Tax Act as a temporary measure. The act was 10 pages long and used relatively simple language. The basic obligation to pay income tax was clearly stated in subsection 4(1) where it said:

There shall be assessed, levied and paid, upon the income during the preceding year of every person residing or ordinarily resident in Canada...the following taxes:

(a) four per centum upon all income exceeding fifteen hundred dollars in the case of unmarried persons and widows or widowers without dependent children, and exceeding three thousand dollars in the case of all other persons.

At that time university educations were a rarity and one certainly did not need a degree to figure out whether or not one owed taxes and, if so, exactly how much.

Today the tax act is a case study in bafflegab. It stands in violation of one of the most basic rights of Canadians: the right to know and understand the laws that affect them.

Canada, like most other Commonwealth countries, has specific legislation requiring the publication of our laws. The Publication of Statutes Act requires that our laws be printed and distributed to the public so that the public may know the law.

Just as our legal system has long held that ignorance of the law cannot be a defence, it requires that citizens be able to access the laws and therefore know exactly what they are. This includes the Income Tax Act.

When we think about it, every citizen should know their rights and obligations. That is a basic tenet of a proper running democracy. The Canadian Charter of Rights and Freedoms meets this standard.

On the Department of Justice website the charter prints on to seven neat pages and can be downloaded in seconds. It has clear, concise wording. For example, subsection 6(1) says:

Every citizen of Canada has the right to enter, remain in and leave Canada.

Canadians who have completed a grade three education will understand this sentence and, more important, will understand their rights and obligations.

By stark contrast the Income Tax Act is there as well. The Income Tax Act is also on the Department of Justice website. A warning lets would-be downloading taxpayers know that the act is a whopping 5.3 megabytes in size, relative to the seconds it takes to download the charter. One can only assume that this warning is so users can make room on their hard drive and/or prepare themselves for a lengthy wait by reading War and Peace or building a ship in a bottle.

When one finally receives the completed file one is also in for a very nasty surprise. Actually one is in for two surprises. The first surprise is that the act is not really written in either of our official languages. Turning to subsection 2(2), I will read the first paragraph which is written in both English and French:

In English it reads as follows: “The taxable income of a taxpayer for a taxation year is the taxpayer's income for the year plus the additions and minus the deductions permitted by Division C”.

I have chosen one of the more straightforward paragraphs. In order for taxpayers to answer the basic question “How much do I owe” or “combien dois-je au gouvernement”, Canadians who own mutual funds or who have invested in an RRSP need not only a profound knowledge of arcane English but a mind which is sufficiently powerful to follow the logistical gymnastics of the basic calculations. It is amazing how far we have regressed since 1917.

The version of the Income Tax Act which is on the Department of Justice website was last updated on August 31, 2000. That means that the web version does not reflect the changes to the act made by the October 18 pre-election mini budget. Even after wading through thousands of pages of linguistic fog, the taxpayer would still not have a clear answer to the question “How much do I owe?”

Fortunately the private sector is willing to help. The problem is that the tax act is so complicated that the books which try to explain it are nearly as thick as the act itself. Arthur Andersen's Preparing Your Tax Return is 1,264 pages with a 40 page index. Let us think about that. The index to the guide is four times the length of the original temporary Income War Tax Act. It is, however, the authoritative guide, the one that the Canada Customs and Revenue Agency uses to understand the act that it must administer.

The authors of this book accurately summarize the problems with the Income Tax Act in the book's foreword. They write:

Because of the complex nature of the Canadian Income Tax Act, the fact that relatively few of its provisions have been interpreted by the tax courts, and that some of its provisions have not even been interpreted by the CCRA, it has not been possible to provide answers to all of the questions which may arise.

The complexity of the tax act is such that an entire industry now exists to help Canadians navigate the minefield the act has become. Accountants, tax guides and online tax filing services multiply like yeast in a warm oven in an effort to help the average person answer that simple five word question: “How much do I owe?”

With the complexities of the tax code that Bill C-22 adds, just imagine if other government obligations were crafted with the same complications. For example, how many traffic deaths would result if the rules of the road were as complicated as the tax act?

How many Canadians would never travel abroad if a passport application form were nearly as difficult as a tax return? How many Canadians would watch Peter Mansbridge if he used taxspeak in his newscasts? How many Canadians would drink water from a public drinking fountain if the state could not affirm the cleanliness of that water in fewer than 120,000 words?

On top of the lunacy and the complexity of our tax code, I suspect that the fog the Canadians face in understanding their tax code is deliberate on the part of the Government of Canada. I think there is an agenda here, a hidden agenda.

The fact is the relief that average Canadians feel upon successfully filing their jungle gym tax returns probably acts to dull the rage taxpayers feel working eight weeks longer than their American friends to pay their federal taxes. Let us not forget that even as the finance minister postures and smiles in the House, American workers pay their tax bill on May 3 while it takes Canadians until June 30. Perhaps it is the relief of actually working for themselves on July 1 that puts so much of the glee into Canada Day celebrations.

The result of those taxes has driven the Canadian dollar into a downward spiral. It is now hovering between 63 cents and 64 cents. The tax cuts that President Bush is considering in the United States will both affect the value of our dollar and further widen the income gap between working class Canadians and their neighbours south of the border.

Government members continue to posture and smile around their mini budget's tax relief but it hardly gives them bragging rights. It is like the Trabant claiming to be the best built east German sedan. It may be true, but it is of little comfort in a world where other countries are doing much better.

It is of even less comfort when we realize that we are paying far more federal taxes today proportionately than our grandparents paid in 1917. In 1917, a family of two with a single income of $3,000 paid $120 in taxes. In today's money that is roughly $1,349 in taxes on income of $33,373.

In 1917 Canadians started paying taxes when they earned in today's dollars almost $16,800. Today individuals under the Liberal government start paying taxes when they earn less than $8,000. In other words the tax code has become more regressive: more Liberals, more regressive.

This year a Canadian family of two earning that same $33,000 will pay $3,422 in personal income tax after the finance minister's biggest tax cut in history. That means for every $3 in taxes in 1917 today's taxpayer will pay $7.61.

If we think back, in 1917 Canada was deeply involved in the great war. Hundreds of thousands of Canadian men were fighting in Europe. Canadians supported and subsidized 100% of their patriotic effort. Their existence was 100% subsidized through tax dollars. The government introduced the Income War Tax Act to finance the war and help those brave Canadians.

Today in times of unprecedented peace and stability the government needs more than twice as much tax revenue from the average person just to run the status quo, and it does not even run that very well or outside debt.

That is a scary thought and really demonstrates the need for genuine tax relief. Other countries have figured it out. The government has not but other countries have. Places such as Ireland have learned that cutting taxes means job growth, increased competitiveness and a higher standard of living. The Celtic tiger has outpaced Canada in both standard of living and competitiveness since 1989.

The government needs to do two things to convince my generation to stay in Canada and to lure other workers here. It needs to simplify the tax system and it needs to cut taxes overall.

Simplifying our tax system is needed because it lets people know directly how much they owe and because it focuses the debate not on the language of the act but on the amount paid in tax. In other words, how big is the government and how much do we have to ante up for it? That is a healthy debate for the country.

Once people get a clear avenue of calculating their real tax burden they will demand tax cuts with the same zeal they now demand for balanced budgets. When that day comes the government will have no choice but to limit its voracious appetite for tax dollars and offer meaningful tax relief. On the same day Canada's standard of living will rise and our international competitiveness will be boosted if the government shows this kind of leadership.

As a member of the most overtaxed and debt saddled generation in Canadian history, I will celebrate that day when it comes. In the meantime I will continue voting against and speaking against Liberal halfsteps and increased tax code complications such as we see embedded in the bill we are debating today.

[Deepak Obhrai, Canadian Alliance, Calgary East, AB]

Mr. Speaker, I am sure people will be surprised to see me get up for the third time within two hours. This is a unique happening in the House. I would like to remind people that this is happening because the governing party is refusing to debate these issues and is refusing to defend its bills. As such, the bills are going through more rapidly because only the opposition is pointing out what is wrong with the legislation. The government is refusing to defend itself.

It is a pleasure to rise on behalf of the constituents of Calgary East to speak today to Bill C-22, an act to amend the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act and the Modernization of Benefits and Obligations Act. This bill, like many dealing with the tax code, is an omnibus bill, meaning that it deals with a number of issues at once.

As mentioned in the title of this bill, acts included are the Income Tax Act, the Canada Pension Plan and the Excise Tax Act. While each of these acts deserves attention and has important consequences for Canadians, I would like to address my thoughts to how this act impacts on Canada's competitiveness.

I have been appointed chair of the advisory committee on globalization and competitiveness by the Leader of the Opposition. The mandate of this advisory committee is to advise and to get input from business leaders, academics, non-governmental organizations and Canadians from all across the country on the possibilities and pitfalls of globalization for Canada.

There are countless ideas about how to make Canada more competitive in a more interconnected world. These ideas need a voice in parliament and the public sector. It is hoped that the Canadian Alliance will be that voice.

For years the Liberal government has ignored the reality that Canada is losing valuable ground to our neighbours to the south and to our major international competitors. We know that the new U.S. administration won a mandate based on the promise of substantial tax relief and a targeted plan of debt reduction.

We know that income taxes are not the sole indicator of the tax divide between Canada and the U.S. Canadians face other taxes that push the total tax burden higher. The total tax burden includes sales taxes, payroll taxes and other levies by all levels of government, which create a Canadian tax burden that is up to one-third higher than that of the U.S. It is clear that if Canada does not follow U.S. tax reductions, the country will fall further behind.

Mexico, our NAFTA partner, also has vigorous plans to become a major centre for North American investment. Canada will face increasingly tough competition from Mexico in our plans to attract foreign investment. Mexico enjoys a unique position as a member of NAFTA. It is the only North American country that has a free trade agreement with the European Union as well as with Mercosur, the free trade bloc with Brazil, Argentina, Uruguay and Chile.

The challenges presented by Mexico and the U.S. are just two examples of why Canada cannot afford to continue making negative public policy decisions that impact our competitiveness.

When the current foreign affairs minister was the Minister of Industry, while he was curtailed because he was representing the government, he did at times manage to raise warning signs about our country's tax bracket and competitiveness.

A survey of the world's most competitive economies by the Swiss-based International Institute for Management Development has placed Canada at number 11, a drop of one place from last year. The institute praised Canada for its infrastructure, legal framework and human resources, but gave poor marks for its record in science and technology and for uncompetitive taxes. Just before speaking on this bill, I spoke on another bill in reference to welcoming the government's initiative in helping science and technology.

For years many of Canada's most successful companies and business people have argued that high taxation impacts Canada's ability to be competitive in a more interconnected world. High taxation discourages investment and innovation and it is a major cause of the brain drain. These issues have been pointed out time after time to the government.

John Cleghorn, former chairman and CEO of the Royal Bank, said that higher taxation has diverted savings into the government sector that would earn higher productivity returns for companies and societies at large in free markets. He went on to say that higher taxation also hits living standards more immediately by cutting off what is left in our pockets at the end of the day to spend on our families and ourselves.

Canadian business leaders and academics will agree that for Canada the challenge is to build a more innovative economy that is well positioned for competitive success in the new global market. To succeed, Canadian firms must take full advantage of the opportunities created by greater economic integration and increased cross border flows of goods, services, technology, ideas and knowledge.

The responsibility for building a more innovative and competitive economy falls primarily on Canadian managers and entrepreneurs. However, government has a role to play as well. Government can reduce taxes. It can ensure that Canadian students are some of the most highly educated in the world. It can provide the conditions necessary to make Canada the final destination of foreign direct investment from all regions of the world. The government can and must do all those things, but sadly the government does not.

The government claims in the bill that it has cut taxes by $100.5 billion over five years. This is what it is saying based on its list.

However, let us look at reality. The reality is that we must subtract $3.2 billion over five years for social spending. The child benefit is a spending program delivered through the tax system and it is an increase. It is not a tax decrease, it is a spending increase. However, the government says it is a tax decrease. It does not recognize that it is a tax increase. As well, indexation is accounted for separately.

Next we must subtract $29.5 billion over the five years for increased CPP premium hikes. We all know that CPP premiums have been increased, yet the government refuses to say that is part of its tax cuts and puts it separately. In reality, when we look at the competitiveness for everything, it is a burden. The burden comes out of the government's mismanagement of the CPP. I was part of the debate on CPP premiums. What is interesting is that when CPP was first introduced the government was saying the same thing that it is now saying after 20 years of CPP premium increases. Nothing has changed over that time.

As well, indexing personal income taxes is meant to hold the tax burden constant over time, so it should not be counted as a tax reduction.

Therefore, when we take out all these things, there is only $47.1 billion in net tax reduction provided over five years. Let me repeat that: it is only $47.1 billion over five years, not the $100.5 billion that the government is claiming. We can see innovative accounting here, with the government giving the illusion to Canadians that they are facing major tax relief over the next five years when in reality that is not happening.

I received a call from one constituent who was a little puzzled because he had heard about the government reducing taxes and he could not understand why his net take home pay had suddenly decreased. I asked him to take a closer look to see if his CPP premiums had increased. Sure enough, CPP had increased. That is why he is taking home a smaller cheque.

The government's current policy does not create the competitive environment that we need to position ourselves for taking advantage of the global economy. The Canadian Alliance has proposed further reductions in taxes, which would create an environment that businesses are looking for on behalf of Canadians in order to poise themselves to take advantage of the 21st century.

Budget Implementation Act, 1997

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise on behalf of the official opposition in the debate on Bill C-17. I thank the parliamentary secretary for mercifully abbreviating his remarks.

I will say at the outset that the bill, as the parliamentary secretary has indicated, deals with amendments to two statutes. One deals with funding for the Canada foundation for innovation and the other deals with amendments to the Financial Administration Act, the FAA. Neither are related, but the government has decided to parcel them together in the one bill. Both elements of the bill are evidence of how the government approaches legislation in an inappropriate fashion.

Let me address the bill as it concerns the Canada foundation for innovation. It proposes to give statutory authority to an announcement already made by the Minister of Industry to increase funding to the CFI by some $750 million.

I think many of my colleagues will share this sentiment: I find it troublesome, to say the least, that parliament is constantly putting forth legislation to authorize spending that has already been announced as a fait accompli by the government, in this case by the Minister of Industry.

Rather than coming before the House of Commons to seek the authority of parliament before making public and political commitments, the government ignores the ancient prerogatives of parliament and abuses its executive authority. It makes announcements outside this place and then later comes along to say it needs parliament's approval. After 900 years of parliamentary struggle to give representatives of the House of Commons the power to scrutinize, reject or authorize the spending plans of the crown, this is what we are facing. This is just part of an endless pattern of the centralization of power, the abuse of power and the contempt of parliament, not just by this Liberal government, but its predecessor governments, that increasingly diminishes the prerogatives of this place to authorize spending.

The government might say that it knows for sure that it will get these things passed anyway. How does it know that? The last vote which I was at in this place the government lost. We cannot be certain that announcements made by the Minister of Industry will end up as authorized appropriations by this parliament. There is no certainty in that. To assume otherwise is to exercise a great degree of arrogance.

Also I found it troublesome that the Minister of Industry, that very thoughtful, reflective gentleman and that great contributor to public policy debate in this country, announced this. The Minister of Industry, that great friend of industry, through the Voisey's Bay debacle acted like the dictator of a banana republic by telling a private company that it could not, after having received all regulatory authorization, benefit from its private investment in a major capital investment in his own province. It is an embarrassment that he is the Minister of Industry.

When the minister stood up about a month ago and made this announcement of $750 million for the Canada foundation for innovation, he did so in a context that was completely without any reference in the federal so-called mini budget, the finance minister's political statement of last October and in lieu of a conventional spring budget. He announced nearly $1 billion in new public spending without any broader fiscal context.

We find this troublesome. The fact that he did so at the very end of the fiscal year, which ended this past week, is part of the pattern of spend it or lose budgeting, or March madness, of which this government is a brilliant practitioner. Departments know if they do not fully exhaust money which is on the table or which is available in a given fiscal year, it will be returned and will not be available to them to spend in future years.

The government tells us that this $750 million, and I look forward to questioning representatives of the ministry at committee on this point, will be spent over the duration of something like 10 years. I asked officials in a briefing whether the $750 million would be spent in 10 years. They said “No, something like 10 years”. What does that mean? It is nearly a billion dollars of tax money and the government is not even sure over what duration this will be rolled out.

One thing is for sure. The government wants to book it all in this current fiscal year as part of the well established practice, which has been much criticized by the auditor general, of trying to diminish the size of the surplus in any given fiscal year for political reasons. Then the government can turn around and tell taxpayers that it is sorry it cannot afford to give more real, meaningful tax relief because the surpluses are just not big enough. Year after year we hear this sad story, precisely because the surpluses have been overwhelmingly consumed by huge spending projects and the March madness represented by the announcement which found its way into the bill.

Major spending commitments ought to come before this place in a budget speech in parliament before they are announced by a hyperpolitical minister, like the minister responsible for industry. They ought to be authorized by this place in the context of an overall, long term fiscal plan.

Many private sector economists are agreeing with the official opposition in its assessment that the government's spending program is out of control. Its spending this year will be $35 billion higher than it was projected to be the year before last. That is discretionary spending. That does not include things like the increases for CHST. Spending is out of control.

We see that Canada is headed into choppy economic waters. Growth projections for the current calendar year have been on average cut in half from where they were when the minister's political statement came out in October. At that time he projected a 3.5% growth. We are now looking at an estimated growth of something like 1.5% to 2% this year. That will clearly have an impact on government revenues.

Many economists suggest that in the second quarter of the year, which we are now entering, there will actually be a flat, if not negative growth in Canada. We have a dollar which is teetering on the brink of a near record historic low, having lost 25% of its value under the tenure of the government. Our dollar is now declining against that famed currency, the Mexican peso. The government's reaction is “don't worry, be happy” and that it does not need to bring forward a budget, as is the convention in the House, this spring or even next fall. When the Prime Minister decides by fiat that he is going to deign to come before parliament with a budget he will do so and not before then, notwithstanding that the entire economic landscape has changed dramatically since this government's political statement in October.

Instead of coming before us with a framework to control spending in light of these new realities what does the government do? It presents piecemeal major new spending programs which have not been accounted for in the overall fiscal framework and which have no recognition of the new economic circumstances in which we find ourselves, through the nearly $750 million proposed in the budget.

While we have great consternation about the manner in which this is handled, the amount of spending and the lack of a budgetary authority for it, the official opposition does in principle support the policy objectives of the Canada foundation for innovation. We believe that Canada needs to greater investment in both the public and private sectors in research and development, particularly with respect to hard applied sciences. We have long been an advocate of this kind of policy.

It has been widely remarked that Canada's expenditures and investments in research and development are significantly lower than the average in the OECD and the G-7. This is something we need to correct. Toward that end the Canadian Alliance policy states:

We will appoint a Senior Advisor on Technology with private sector technology experience to report directly to the Prime Minister. We will bring the best ideas in business, government, and universities together to facilitate the transition to the new economy and position Canada as a global leader. We will increase support to Canada's research granting councils and appoint a chief scientist of Canada to co-ordinate science activities in all government departments and ensure that science, not politics, prevails.

We also committed further to that in our election platform an increase in funding for research and development to the various granting councils of some $500 million, an amount far exceeded by the bill before us today. While we believe it is important that both the public and private sectors invest more in R and D, we think that must happen within the context of fiscal responsibility. That means every dollar must be watched with great care.

Another concern that my colleague, the member for Calgary Southwest and critic for science and technology for the Alliance, raised was the manner in which these public moneys were allocated through granting councils, such as the CFI. He interrogated the Minister of Industry on this point at the industry committee, that the government had no clear and impartial framework for granting moneys out of foundations such as the CFI. Also, there was no clear certainty that grants would be done in a completely non-political way and strictly on their merits, as pointed out by the auditor general.

There is no proper reporting on the administration of the grants at research institutes and universities, nor does parliament get proper feed back on the results so we can see what bang taxpayers are getting for their buck.

These are all things that need to be changed. The government constantly comes before parliament or its committees with new ideas about spending on science, technology, research or development. There is a proposal now for major new funding for astronomy. There are various other projects on the table, all which have been dealt with in a piecemeal fashion.

We in the official opposition, and I think my colleague from Calgary Southwest will later speak to in this bill, believe there is a need for a broader framework for funding of science, technology, research and development rather than the kind of political piecemeal approach which we have before us in this bill.

Let me turn my attention to the second section of the bill with respect to the legislation affecting the Canada pension plan investment board and its adherence to the Financial Administration Act.

I find it quite humorous because there are two things that happen in the bill. First, clauses 4 and 5 of the bill clarify the borrowing authority that departments, crown corporations and agencies have. They clarify what we all know ought to be the case, and thought was the case, that parliament delegates to the Minister of Finance the authority to borrow certain sums and he has the delegated authority to authorize or reject borrowing requests from various departments, agencies, boards and commissions.

It turns out that due to typical legislative errors on the part of the government, there are a couple of departments that are not covered by this convention, or legal tradition, of delegated borrowing authority. The Department of National Defence, apparently, had obtained a legal opinion indicating that it had the power to borrow money on its own without any authorization from the Minister of Finance or authorization by parliament. The legal officials in the defence department and the justice and finance departments had a great brouhaha over the past year about whether or not defence department bureaucrats could borrow money without proper legal authorization by this parliament and the minister.

How could we have let that situation get out of control? It is quite conceivable that they could have gone out, done so and contravened a long standing convention of parliament, which is a restriction on the borrowing authority. Because of the government's incompetence and oversights it has taken years to finally come forward with this amendment to tighten up and clarify the delegation of the borrowing authority saying that bureaucrats cannot charge money on the public credit card and tell taxpayers to “pick up the bill, see you later”.

Today it could happen. After this bill it will not be able to but this has stood for far too long without correction on the part of the government.

Then we get to my favourite section of the bill, clause 6. It is really quite marvellous. The government House leader is so proud of his legislative prowess. The problem is that he so often brings bills before this place that are riddled with drafting errors. I spoke about this in debate on Bill C-22. We were making all sorts of corrections to legislation to correct mistakes made in drafting errors in bills brought before parliament by the government.

Income Tax Amendments Act, 2000

[Pauline Picard, Bloc, Drummond, QC]

Mr. Speaker, I wanted to point out that I raised this issue in the House during the 36th parliament, in our reply to the economic statement or mini-budget. Bill C-22 is the exact copy of this mini budget.

I am surprised that nothing has been changed. The government could have addressed certain problems or weaknesses in the economic statement that was made just before the election. Throughout the election campaign, the Liberal government boasted a lot, through its members and candidates, about the upcoming tax reductions. There would be something for everybody, they said, because they had put the nation's finances in good shape, and were making a surplus. They said they would help all those that had been affected by drastic cuts. The finance minister had room to manoeuvre with $147.9 billion, including the agreement on health signed with the provinces on September 11. We can safely guess that right now his room to manoeuvre is much bigger, but today our discussions centre on the $147.9 billion.

Tax cuts can be expected for 2004. I think that this is the time of year when everybody in Canada and in Quebec is checking their tax returns before submitting them to the Department of National Revenue. Few are lucky enough to be able to say “I have benefited this year of a real tax cut that has allowed me to put my finances in order”.

Here are some examples of what tax cuts will probably look like in 2004. A single parent family with an income of $30,000 and one dependent child would have a $550 tax cut and would still pay $1,545 a year. That is for a family with a $30,000 income.

With a $50,000 income, the same family would have a tax cut of $1,200 or twice that of the single parent family with a $30,000 income. With a $80,000 income, the same family would have a $2,300 tax cut or four times more than that of the family with a $30,000 income. With a $100,000 income, the tax cut would be $3,200, or 5.8 times more than that of the family with a $30,000 income. The tax reduction for Canadians earning $250,000 would be $6,500, 11 times higher than the tax reduction for a family earning $30,000.

For the more than four million women, that is 60% of women, earning less than $30,000, this statement is a slap in the face. A family with an income of $30,000 and one child should not pay any taxes.

The reduction of the capital gains inclusion rate means average gains of $11,600 for taxpayers earning $250,000 or more, compared to average gains of $320 for those earning between $80,000 and $150,000, 36 times less than the average gains for those earning $250,000. As members can see, these tax reductions are for the rich.

There is nothing in this bill for women, for young persons, and for single senior citizens, most of whom are women.

In your riding, Mr. Speaker, there are probably many single senior citizens. Unfortunately these are mostly women who are poor. Their pension income comes to about $12,000 a year. What can one do with $12,000 a year? It is a shame that the government did not think about these people.

Since our population is aging, there will be more and more single older women. These are women who have lost their husbands. We tend to forget widows. With huge surpluses and $147.9 billion to play around with, it is unacceptable that the government did not think about those single women.

There are no provisions for the basic financing of women groups working within organizations. They were completely forgotten. These women are often volunteers. They earn unacceptable salaries in those organizations. Their work is aimed at keeping the centres open in order to help and support single women, older women, women going through difficult times or facing problems of domestic violence. These women groups do their best to keep the centres open, and there is nothing in the budget to help them carry on their work.

There is nothing either for old workers, men and women, who lost their jobs. We had been vocal in the House, trying to convince the Minister of Finance to take into account people hit by plant closures. There will be others, because it is a given with globalization. There will be plant closures. New plants are opening, but there is also rationalization. Big companies are rationalizing.

In my riding, Celanese was the backbone of the economy in Drummondville. Some 50, 40 or 30 years ago, everyone in my riding knew someone who worked at Celanese. That company once had 6,000, 7,000 and 8,000 employees. It was really the cornerstone of the region's economic development. As the years went by, transformations took place, and the plant moved to Mexico last year.

There was a good proportion of middle-aged workers, between 50 and 60 years old, who were nearing retirement and who received early retirement benefits. These people were not eligible for employment insurance. They had to use money they received as separation pay. After a year, they had to rely on employment insurance and, later, on social assistance.

In the past, we had measures aimed at helping older former workers. Perhaps they were not the best measures, perhaps they had shortcomings, but at least these people could keep their pride because they did not have to rely on social assistance while waiting to receive their pension.

They were totally abandoned. These people who worked hard for 30 or 40 years in the same factory, for the same employer, were forced to retire because of globalization and the closing of factories. They were told “Go home now; you must rely on social assistance”. It is totally scandalous.

There is nothing for social housing either. There is nothing for international assistance. There is nothing for transfers for health and education. Now, I want to say a few words about indexation, because we know that even if funds were injected into health, costs were not taken into consideration. As the population ages, the cost of equipment, new technologies and drugs is skyrocketing, and we have to take this into account.

There is nothing for shipbuilding. The government has earmarked $1 billion to cover the increase in heating costs, but is sending each person a small cheque. We talked about it in the House. I met with single elderly people with incomes of $13,000 or $14,000 a year, who heat their home with oil, and have seen their heating bills double and nearly triple.

Someone who used to pay $400 for heating oil will have paid by the end of this winter between $800 and $1,000. This is outrageous when their yearly income is $13,000. The government issued cheques for $125 instead of keeping the money to target people who really needed it. The government took this initiative and sent cheques to help with heating expenses to everybody, including those who do not use heating oil. It does not make sense.

I have nothing against giving money to people who qualify for the GST rebate; I am happy for the people who received a $125 cheque. It was certainly welcome, especially during the holiday season. However, what did the government do for people such as single women who have only $13,000 a year to live on, whose heating expenses went up? It could have tried a bit harder.

It is similar to distributing goodies before an election is called, to make everybody happy; this creates a lot of visibility but solves nothing. People will get even deeper into poverty to avoid freezing this winter, as their heating bill doubles and nearly triples.

What does one do when one is poor and does not want to freeze? One goes without food or without heat and one literally freezes in order to be able to eat a little bit. This is unconscionable on the part of a government with a $147.9 billion surplus.

It has done a lot to pay down the debt. This is called fancy accounting. The finance minister has been very cautious. With the surplus he did not announce, he was able to reduce the debt. I have nothing against reducing the debt, but people who were put through the wringer and literally bled to death should come first.

A lot has been done for debt reduction and for millionaires. As a matter of fact, a family with one child and a $250,000 income will benefit from a tax reduction. However, a family with one child and a $30,000 income will not get much of a break. I would call that exploitation.

With these huge surpluses that made the Minister of Finance burst with pride, we were expecting him to give a break to those who were really instrumental in getting our fiscal house in order, those to whom we owe the fact that we have not had a deficit for four years, those who continue to be bled white by federal taxes, those thanks to whom the finance minister can be thrilled about having these surpluses right now.

We thought the main beneficiaries of these tax cuts would be low and middle income families, not very high income families that can benefit greatly from tax loopholes. With the help of a good tax expert, people earning $250,000 can save a lot of money.

The government has the audacity to say that surpluses will not exceed $6 billion this year, whereas close to $12 billion has already been accumulated in the coffers of the federal government. I know my figures are not correct because it is actually more than that.

The Minister of Finance could have done more for the disadvantaged, and for low and middle income taxpayers. I am talking about the workers who contribute to the EI fund as well as small and medium size businesses. They are the ones that end up paying for tax cuts for the rich.

I am also talking about the unemployed men and women who are not receiving any EI benefits because of the drastic cuts made and because of the tightening up of the eligibility criteria. The ones who are paying now for the tax cuts to the rich are rural families, and I think my colleague from Jonquière, who has responsibility for this issue, knows this well and will no doubt inform the House at some point about what is going on in the regions, young people, women and seniors.

We know why the government has presented this statement that has now evolved into Bill C-22. It was because the election was about to be called and they wanted to thumb their noses at the Canadian Alliance. What the Alliance was proposing at that time was a uniform rate, and the government wanted to win over the electorate. So, it adopted as its own the Alliance's uniform rate, which was universally denounced as favouring millionaires. It now has included it in its bill.

The $100 billion in surplus has come from the pockets of low and middle income taxpayers and, let me say again, from the unemployed, women, young people, sick people and the most disadvantaged members of our society. This is absolutely indecent.

We must not be too hasty with our rejoicing. Tax cuts are always welcome. Certainly, no one can be opposed to a tax cut. We must not be too quick to rejoice, however, because, as I have said, it will not show up in our tax returns this year. It will probably be in 2004.

The Minister of Finance could have had a budget this year, not a year and a half down the road, and let us have the benefit of these tax cuts this year. I mentioned earlier that, according to the information available, a single parent family with an income of $250,000 and over will benefit from a far greater relief to its tax burden, 40 times greater, than a family with one dependant and an income of $30,000.

Families with an income of $250,000 get a $20,000 net tax reduction, while those with an income of $35,000 and one dependent get a mere $500. These families should not pay any taxes. They do not in Quebec.

With all the money it has, the government still manages to go after these families. There are 1.5 million children living in poverty in Canada. Does that make any sense? Children are poor because women and families who are poor.

A family with a $35,000 income and one dependent is poor, but still must pay taxes. It will pay $1,425 in taxes. It will benefit from a $500 tax reduction, but not this year, only in 2004.

The minister kept saying, even in this House, that people with an income of $35,000 do not pay any taxes. He said it several times in the House. It is strange to hear him say that they do not pay any taxes and then announce that they will get $500 in tax reduction. Very strange indeed.

I would rather rely on the figures from our own research. People cannot be fooled that easily. The minister said repeatedly that those families do not pay any taxes and then announced that they would bet getting a $500 tax reduction. I truly believe those families are paying taxes.

We can also see in the budget that the government shamelessly keeps on accumulating surpluses, because, as was mentioned earlier, the tax reductions will take effect in only a year and a half. Meanwhile, the government keeps fiddling with the figures.

I can say that we were opposed to the statement and to the mini budget, and that we will not support this bill because it does not meet the needs of the Canadian and the Quebec society.

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

Mr. Speaker, there is no doubt that cleaning up the complexity of the tax act goes far beyond just going to a single rate or even to two rates.

It is interesting that under Bill C-22 the government proposes to go from three categories to four beginning next year. That is because it loves high taxes.

We must look at the complexities of the issue. Some formulas in the bill are illustrated very well, but others are really quite convoluted. The Income Tax Act is full of that. The question of what applies must also be addressed. The categorization of which tax bracket a person falls into is one question but it is a minor one. I will concede that.

With respect to the tax itself, we must recognize that when taxes are reduced there is a tremendous spinoff in the economy because the money is not destroyed. When taxes are reduced taxpayers do not throw that money into the fireplace. They use it to provide for their families and give the local economy a kick. I would much rather hire a guy to fix my leaky roof, which would give him a job and get my roof fixed, than send the money to Ottawa where it is spun in circles and nothing really happens with it.

I appreciate the question from the parliamentary secretary, although I did not have time to give him a full answer. He is certainly on the right track by asking if we should simplify the code. My answer is a resounding yes.

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

Mr. Speaker, I am very pleased to speak in the debate. The Liberal government is getting slack. This morning we debated a bill which was over 900 pages in length. This little itty-bitty bill of 500 pages now seems like child's play in comparison. My party will have a look at it. We are debating it for the first time today, so the debate is on general principles. After this it will go to the finance committee where some of the details will be dealt with.

The whole study of taxation is intriguing in the academic sense. We have come to accept a level of taxation that is on the verge of being obscene.

I have told this story in the House before, and if any members recall it, my apologies, but it is very important. About three or four years ago I gave one of those one minute members' statements. I told the Speaker about a tragedy we had in our home. A guy came to the house. He backed his truck up to the door and proceeded to move everything out that we had accumulated over the years. He took half of our sofa set. He looked upstairs and saw four beds and he took two. He cut my beautiful old grandfather clock in half and took half of it and put it in the truck. I phoned the police before they took all the phones and asked them to get over to my place. I told them that we were being robbed. The police said that I should give them more details. I did and they said that they could not come and that they could not help. As a matter of fact the police did show up a little later and they insisted that I help the guy load.

This is an absurd story, but this is what happens every year to average Canadians. One half of our earnings are taken from us through the various levels of taxation from the federal, provincial and municipal governments. Tax freedom day in most provinces is around July 1, which says that half of our income is confiscated every year. If we do not help the guy who is owed and if we do not deliver the money that we have earned, we are held in contempt and can go to jail.

I do not want to characterize the levels of government as though they are crooks, yet I know I am right on the verge. I do not want to say that, so I will not. They are not really stealing our money because it is taxation. However it is still money I have earned that I cannot use for my family. I have very few needs. We can see that all I need is a square meal a day, or two, some basic clothing and basic shelter. Give me a bicycle to ride or preferably a motorcycle. My needs are simple and I simply want the best. I do not have many needs.

However I do have a great need to provide for my family. Fortunately my children are now grown up and on their own so things are a little easier. Now I only have a very expensive wife to provide for. When the children were younger I was teaching at a technical institute. All hon. members probably know this. I worked there for 27 years. We also made the decision that mother would be a full time mom. The children needed to have someone there when they came home from school to care for them and to show them that they were important.

In order to supplement our income, which even back then was not quite adequate to meet all our needs, including paying the mortgage, the utilities and everything, the decision was made that I would teach part time in the evenings. I taught a night class almost always two nights a week. This was way back and it dates me. Hon. members can tell by my grey hair that I am an old guy. I used to say that I worked Tuesday nights for Trudeau and Thursday nights for my family. It was a 50:50 deal.

Even though we are dealing with Bill C-22 to amend the Income Tax Act, the question that is not being addressed is the overall huge load of taxation which burdens our families and burdens individuals.

I have also indicated recently, and I will repeat this because I feel it is important, that my family and I not only pay our taxes but we also believe in charity. Due to the fact that we needed to look after our future, and as we have always felt insecure about the inadequate provisions of the government, namely the Canada pension plan, we have tried to put a bit of money into RRSPs. We ended up living on about 30% of my income as 70% of it was gone: 50% to taxation; 10% to charity, plus or minus a bit; and 10% to future savings, usually a little less because I could not afford that much. It was a struggle.

That is one of the reasons I became a member of parliament. In 1988, when the Reform Party was just starting, I picked up one of its brochures and all these things attracted me: the elected Senate, true democratic responsibility, and a justice system that would work on behalf of law-abiding citizens. However the one that really struck me was the belief that governments should live within their means so that we could reduce and not increase the debt. That was during the Conservative years when the debt was going up by $25 billion, $30 billion and peaking at $40 billion a year, just before they were finally turfed. That was one of the reasons they were turfed.

I was attracted to the principle that said we should have a balanced budget so that we would no longer increase the debt, the principle that we should start paying the debt down so that we could relieve ourselves of the necessity of interest payments and thereby have more money available to governments for programs that citizens value.

I guess the rest is history. We came here in huge numbers in 1993. When I first joined the Reform Party I did not anticipate that I would be transposed from my career at NAIT's teaching mathematics, computing and interesting things like that into trying to persuade a Liberal government to reduce taxes, balance the budget, hopefully pay down the debt and reduce interest payments.

However I stand here proudly this afternoon when I see what has happened in the last seven years. We have been the beneficiaries of a very robust economy in the United States which has a huge influence on our economy. That is undeniable. At the same time I believe it was our presence here which made it respectable to talk about fiscal prudence and to reduce the amount we were spending. The government was also able to exercise, with our help, a little discipline in not spending all the additional revenue that came rolling in that was beyond its expectations and certainly beyond its planning.

I like what happened in the year 2000. I am a little disappointed in the election. I wish we would have the Liberals in opposition. That would have been a lot more fun. One of the things which did happen just four days before the election was we had a mini-budget, the primary election document for the Liberals. That is what the bill is about.

I must give the Liberals a grudging commendation here. They sure do know how to run elections. I saw a cartoon of the Prime Minister right after the election. It showed the increase in the number of seats. He was reading a paper that said “Liberals re-elected with a resounding majority”. The Prime Minister, speaking to Canadian taxpayers, was saying that was the best $200 million of taxpayer money he ever spent.

We know that an election costs around $200 million. It is quite an expensive project. That is what it took to put the Liberals back into power. I am giving the Liberals a weak commendation in that their pre-election document showed they were ready to go the way we were saying Canadians were asking parliament to go, namely to exercise some fiscal responsibility and implement tax cuts.

If we look at the polling data right now and if we ask Canadians what they think is important, the number one issue is health care, and rightly so. Whenever we are ill and we need some help from the medical profession, we live in a country where we have come to accept that it will be available. It ought to be that way. I believe very solidly in our principle, which is also a principle of the Canada Health Act, that no one should be denied needed health care because of financial situation. I concur with that.

Canadians are saying that is the number one issue. The number two issue is either crime, punishment or the justice system. Down the line a bit comes tax cuts, as the member from the CCF said just a moment ago. He usually calls my party by the wrong name, so why can I not?

He said that tax cuts were actually quite low. That is because when Canadians are asked to priorize something they put these things in rank order. We make the mistake of drawing the conclusion, because tax cuts are maybe third, fourth or fifth on the list, that they are not important to Canadians.

If we look at the importance that Canadians place on those issues they would probably all be close to equal. If we asked how important health care was on a scale of one to ten, a person might say ten. When asked how important tax cuts are, they might say that is a nine. It is not as important so it ranks out that way, but it is still important to them. I hear that from many people who ask why they work like slaves from early morning until late at night and do not seem to get ahead.

Very frankly, even with these timid tax cuts that the Minister of Finance introduced in budget 2000—and of course most of the things in the mini budget from last fall have not yet been implemented—the actual reduction in the total deductions in the average person's paycheque is not huge, if it is there at all. As a matter of fact, with the new payments for Canada pension the bottom line for most families is about the same or sometimes even a little worse.

In broad generalities as I am leading up to my talk on Bill C-22 today, I really think we need to address very carefully the level of taxation in the country.

Second, I want to talk a little about the complexity of it. I talked a bit this morning on Bill C-8, the banking bill, but we have had other bills in the House that have to do with changing the taxation system or the revenue system, and sometimes we deal with government expenditures. I find it frankly astounding, and I hope I never lose my astonishment, that a week ago in one evening we sat here as members and in a matter of about 20 minutes approved the expenditure of some $15 billion or $16 billion. Those were the supplementary estimates just to get the government to the end of this fiscal year. The amount of money we approve here is amazing. I believe the responsibility we have as proper stewards of the money entrusted to us is of the utmost importance.

One of the things I want to see happen is a reduction in the complexity of our tax system. My goodness, I remember not long ago reading an interpretation bulletin on the GST which differentiated between buying cooked shrimp and cold, frozen shrimp. There is a different rate of GST applied to the two of them. In one case it was considered that because they were cooked they were a meal and therefore the GST applied. In the other case they were frozen, therefore they were groceries. GST is not charged on groceries. That is only one minute example.

Bill C-22 discusses proposals for amending the Income Tax Act as well as the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another act related to the Excise Tax Act. All of this is included and does not increase the simplicity of it. It increases the complexity of it.

Already I am led to believe that there are very few Canadians, even among our best tax lawyers, who know that code. As a matter of fact, any of our citizens who have had the occasion to go to one of the tribunals to get a ruling on a tax dispute are hoping for some reasonable hearing there because, depending on who one gets, one gets different interpretations.

One person in my riding told me that he phoned Revenue Canada to ask about a certain issue. He got an answer that he did not think was right, so he phoned again, got a different person and got a different answer. Then he thought, just a minute, there are two different answers here, so he went for two out of three because he still did not really know. He phoned again, hoping that he would get one of the other two answers, and lo and behold, there was a third answer. The complexity of it is a great frustration. The bill, among other things, increases that complexity.

During the election campaign the Alliance Party was proposing that we go to a single rate tax. That is not a flat tax. That is a misnomer we are often accused of. A single rate tax is simply the same kind of a tax system we have now with basic exemptions and other deductions, but instead of three rates as we had at that time, we said we would reduce them all to the same rate of 17%. I suppose we could have achieved the same result by simply saying that the amounts where these rates kick in are some high number and it would have probably been more saleable than the way it was presented.

The fact is that we are proposing deductions. We are proposing huge tax breaks for middle income and lower income families. The Liberals are crowing about the fact that people who are now making a family income of $20,000 a year are going to get a tax break of maybe 16% or 20% or whatever number it is that they use. Under our plan that reduction would be 100%. They would be removed from the tax roll completely.

Under our plan, a family of four, a mum, a dad and two kids, would pay zero tax on the first $26,000 of income and then a straight 17% on the remaining, whereas the Liberal government goes on and on with exemptions of maybe $15,000 or $16,000 and then 17% on everything after that, although they are proposing to reduce that to 16%. That, by the way, is also a bit of sleight of hand. If we just talk about the rate but apply it on more of the income the total tax bill is higher than if there were a 1% higher rate but a great deal more of the income exempt from tax.

In wrapping up, I would simply like to say that some of the measures in the bill go in the right direction. I am rather concerned about some of them. They go in the right direction but not far enough. In any case, there are some things in the bill that are woefully inadequate. I am looking forward very much to hearing about the bill in committee, not only from officials but also from witnesses who will come to our committee and give us their read on it. I am sure that in the finance committee we will have a great time analyzing the bill and reporting back to the House in due time.

[Guy St-Julien, Liberal, Abitibi—Baie-James—Nunavik, QC]

Mr. Speaker, I would not want to pass up this opportunity to speak to Bill C-22, the Income Tax Amendments Act, 2000, which was recently tabled.

We have examples from families in resource regions. I have here letters written in September and addressed to the Minister of Finance of Canada. Other letters were addressed to the Minister of Finance of Quebec.

I do not want to pit provinces against provinces, but as a result of the changes made by the Quebec government to its family policy in 1998, the amount of the Canada child tax benefit has been lowered.

Today I received a letter from Clémence Côté. Her husband, Louis Germain, works in the mining industry in Val-d'Or. She said “Today, my children are being penalized”. One must understand what it means when someone writes that her children are being penalized. She wrote “Today, my children are being penalized by the Canadian tax system. I have a large family; I have 10 children. Dear Minister, I would like to ask you for an exemption so that I may receive the full amount of the Canada child tax benefit regardless of our family income”.

The Canadian tax system does not make allowances for families with 10 children or some have 11 or 12.

Her husband, who makes a good living working in the mines, earns in excess of $60,000, $62,000 or $63,000, and does overtime in order to help finance his children's education. With 10 children, a mother has a lot of work at home.

This mine worker, Mr. Germain, does a lot of overtime because several of his children are in school and have been allowed to take up only one sport either at school or at the community level. Even if a child wanted to take up two or three sports, his parents could not afford to pay for it. The same is true of transportation for children who go to school in Val-d'Or. She pays the school board for their transportation and she still has to pay back her benefits.

What I found bizarre in all this is that several years ago, as a result of a 1999 letter from the Minister of National Revenue, they asked why the Canada child tax benefit had been changed in Quebec.

Provincial governments may enter into agreements with the Government of Canada to change the amount of the Canada child tax benefit that their residents will receive depending on the number or the age of children, or both.

Before July 1998, the method used to calculate the benefit was different for Alberta and Quebec compared to the other provinces and territories. These two provinces had chosen a calculation method based on the age of the child and his or her rank in the family.

This means that, before July 1998, Quebec residents were entitled to a base benefit of $869 for the first child, $1,000 for the second child, and $1,597 for the third child and each subsequent child. After making changes to its family policy, the government of Quebec advised the Minister of Finance of Canada that, starting in July 1998, the benefit paid to Quebec residents would no longer be based on the rank and age of the child.

Now the Canada child tax benefit is calculated the same way for Quebec residents as for residents of other provinces and territories, except Alberta. The base benefit is now $1,020 per child, regardless of his or her rank in the family, since the amount of the Canada child tax benefit to which a family is entitled has been reduced following a decision made by the government of Quebec.

Regardless of the two jurisdictions, we must realize that several families in Quebec have seven, eight, nine, ten, eleven, twelve or thirteen children. They have to repay the tax benefits when the husband's income is too high, because of overtime work especially.

That is the message I want to send. We have to find a way to help large families. Nowadays, families with five or six children are considered large families. For families with ten children, the Government of Canada should find way, through some kind of exemption, to help them out, especially in resource regions, but also in urban areas.

We all know how much it costs to look after children's education or to enrol them in a sport program. That is the message I want to send. We should take into account the number of children in all Canadian families. We count one, two, three, and then it seems that senior officials tell their ministers “We stop at three. Passed the third or fourth kid, it does not make any difference”.

On the contrary, it is important, which is why I want to send a message to the finance minister. We need to find a way to help out these large families.

I do not think members will find it surprising that I want to address another issue here today. A poll published on March 9, 2001, and I mention the year because some people might think it was carried out a number of years ago, show that four out of five Quebecers are in favour of a salary being paid to the stay at home parent. At least 82% of those surveyed said they strongly or somewhat agreed that a salary should be paid to the parent who stays at home to take care of the kids.

Why? There is another way about it. I have made several speeches on this issue in the House. I have tabled motions and petitions to have a salary paid to the parent, mother or father, who stays at home to raise children. This would actually help reduce poverty.

I saw an article written by a woman who lives in Montreal, which said “The important thing is to be at home with the children during their first three years of life”. Parents are given a one year parental leave. What should we pay a person who stays at home? Maybe we could, like Germany or other countries, provide a supplement of $250 a week in order to help the family or the person who stays at home with the children.

I would like to raise one final point. It is the issue of pensions, those paid to seniors living below the poverty line. Steps should be taken to increase their income upon reaching retirement age, especially after retiring. Members will recall that a few years ago, we had interest rates of 16%, 17% and 20%, and things were going pretty well. Today, retired seniors are relying on assets deposited in banks or invested mutual funds with a 2% or 3% rate of return.

This is why a majority of Canadians are in favour of pension reform.

The important thing is to raise pensions, to reform the pension system so that people, and particularly seniors, have a decent income. Some single seniors always receive the same amount. Sometimes, their cheque is increased by $1.04 for a three month period, as a cost of living adjustment. The pension system should be reformed and people should have a decent income.

That is why I mentioned these three cases. We often hear about them in my community. Long term solutions must be found.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, it is with pleasure that I rise today to speak on Bill C-22.

These amendments to the Income Tax Act represent a collection of baby steps, some of which are in the right direction. Some represent a significant further complication of an already far too complicated tax code. Most represent politics and the triumph of politics over public policy.

If we look at the general direction of these tax measures, we will find that there is no general direction to the these measures. In fact, they resulted from a flimsily put together pre-election document, sometimes referred to as a mini budget. It is referred to as a mini budget but I suggest it reflects the government's mini vision of Canada.

The fact is these baby steps, these tinkerings, these policies do not reflect what Canadians need and are particularly not what the tax code needs. We need a significant level of tax reform in Canada. Tax reform can be used as a vehicle for economic growth. Instead of making tax tinkering part of its pre-election policy, Canadians would be better served if the government was to utilize tax reform as a vehicle for long term economic growth. That would benefit all Canadians and improve our competitiveness globally. These tax measures do not do much to provide for greater long term competitiveness for the Canadian economy.

If we look at the government's record since the election in 1993 relative to international confidence in Canada's economy, the most damning reflection or gauge by which to judge the government is our falling dollar and the fact that under this government our dollar has lost over 11 cents of value. That is the dollar reflects the share value of Canada Inc. Under this government we have seen an 11 cent decline in our country's dollar.

Every time there is a loss in the value of the Canadian dollar in comparison to the U.S. that leads to a pay cut for every Canadian. We depend greatly on the goods and services we consume from our neighbours to the south. A loss in the dollar represents a direct loss in our standard of living and ultimately in our quality of life in Canada.

The tax policy and fiscal policy provide a very important key to providing long term strengthening of the dollar. The government refuses to discuss the falling Canadian dollar under the guise of deferring to the Governor of the Bank of Canada and his responsibility over monitoring policy. Fiscal policy levers in the long term are as important as monetary policy levers in providing long term strength to the Canadian dollar. The importance of fiscal policy, that is tax and debt policies and strategic spending policies to the long term strengthening of the Canadian economy, is where the government's record has been a less than impressive one.

Some of the types of tax reform measures that we would like to see and that would make a great deal of sense are those that address some of the most pernicious and uncompetitive natures of our Canadian tax burden. One is our capital gains tax.

Even after there was some tinkering in this economic statement and some reduction of capital gains taxes, we still have a higher tax burden in capital gains than the U.S. For the government to eliminate personal capital gains tax would cost the federal treasury about $4 billion a year. This would put us ahead of the U.S. in a very important area of taxation, particularly in areas of new economy, biotechnology and in some of these other areas that are emerging.

In terms of encouraging new economy venture investments, particularly during a time when market conditions are so turbulent and we need to try to provide whatever incentives we can to maintain early investors' interest in these areas, the elimination of personal capital gains tax would provide a great incentive for Canadians to invest and help continue to grow the economy.

It would be even more important now than it was a few months ago as we see the economic downturn that we are experiencing in Canada, in the U.S. and indeed globally at this point. It becomes even more important in some areas. I have referred in a specific sense to capital gains taxation. It is even more important now that we try, for once, to be ahead of the U.S. as opposed to constantly trying to keep up and in fact always being a couple of steps behind. That is one area where we would have liked to have seen a more dramatic and visionary step as opposed to the tinkering the government has done.

The fact is that most of these tax measures occur over a five year period. If hon. members look at the degree to which these tax reductions will impact Canadians in the short term, it is actually much less than what the government would like Canadians to believe, particularly when combined with the payroll tax hikes that became effective recently with the CPP payroll tax hikes. It is clear that the net tax benefit or the net benefit to Canadians in a take home pay context is minimal or in fact none if members again take into account payroll taxes.

Whatever way the government would like Canadians to view these measures, it will become painfully obvious to Canadian taxpayers when they are receiving their cheques and with their tax deductions that these measures have been half measures and have not really addressed the fundamental issues of high taxes in Canada. Canadians have the highest income taxes in the G-7 and the second highest corporate taxes in the OECD. Even after full implementation of these tax measures over a five year period, we would still end up having about the third highest corporate taxes in the OECD. That is assuming that none of the other countries reduce their tax burdens, and we already are aware that at least seven of them are entertaining and moving toward lower taxes.

Even as we see a slight narrowing of the gap between Canada and the U.S. in terms of tax burden in the short term, we see the U.S. now introducing the largest tax cut in its history. The tax cut is being negotiated currently and is making progress through congress. We are still behind. The mini budget introduced prior to the last election did not do much to get us caught up to the U.S. economy in the current context and yet we are now going to see, under President Bush, a leapfrogging further ahead. Again, Canada will be further behind.

A recent report from the Fraser Institute drew, in a convincing way, a direct linkage between Canada's low dollar and Canada's systemically high levels of taxation on all fronts. We have yet to see a firm commitment from the government, not just on tax reform as a vehicle for long term strengthening of the Canadian economy, but also for debt reduction. Debt reduction, when we have approximately four times the per capita debt of the U.S., should be a much higher priority than the government has made it.

In fact, many of these tax reduction measures are simply spending measures in the form of targeted tax cuts. Rewarding a particular kind of behaviour is nothing more than spending. It is another way to encourage people to do something that they may not do otherwise. People end up making decisions based on tax policy as opposed to what makes sense from a business policy, from an investment policy or from a personal perspective.

The fact is, this mini budget, this pre-election document, was far from what Canadians needed in the most turbulent February we have seen in the last seven years. In the last seven years there has not been a worse February for the government to avoid having a budget in than this last February, when the government ducked the issue and decided arbitrarily not to have a budget.

The fact is, Canadians, particularly with the difference in the economic conditions between the time when the mini budget was introduced and today, need a budget more than ever. Whether it is the decline in the global capital markets or the dramatic declines in the TSE, the NASDAQ and the New York stock exchange, Canadian investors and individual Canadians have seen their retirement savings diminish sharply in recent weeks. At the same time, they are seeing their standard of living decline because of a weakening dollar. There is a significant and reasonable concern among Canadians which should be addressed, not through an economic statement in the spring and not through a state of the union address which the finance minister has talked about providing, but through a full budget.

It is also offensive from a democratic accountability perspective, because this parliament, with its new members in some cases, has not actually been asked to approve a budget introduced after the last election. There are a number of new members of parliament in the House and government spending and government estimates ultimately should be accountable to this place, to parliament. For the government to determine that it is not important to engage parliamentarians in the approval of government spending and tax policy through the support of a ratification of a budget in the House is really and truly offensive.

There are a number of reasons why we have concerns with the government's policies, with its tax policies and general fiscal policies. However, these concerns are not just our concerns. These are concerns shared by many Canadians, particularly by some of Canada's top economists. We are seeing a unified front from Canada's economists relative to the lackadaisical approach of the government on specific tax policies. In the words of Terence Corcoran, a journalist, “If weak currency created growth, Canada would be a world leader”.

The Prime Minister once said that a weak dollar is actually good for tourism. I think this indicates his economic naiveté but also his genuine belief that a country can devalue its way to prosperity. The fact is, a weak dollar is no way to guarantee long term growth and an increase in the standard of living of a people. In fact, it is quite the contrary. If the Prime Minister's argument is correct, that somehow reducing the dollar can improve tourism, let us think about this. The logical corollary of his argument is that if we would reduce the dollar to zero ultimately we could become the largest exporting nation and the most successful exporting nation in the world. Of course we would be giving away our products.

The finance minister said in 1990, I believe at the time when he was running for the Liberal leadership the first time, that he would, if given the opportunity, manage the dollar's decline down to its natural level of about 78 cents to 80 cents. He has done so well that he has managed the dollar's decline down to the 63 cent range.

Canadians are asking a legitimate question. They want to know why the finance minister is not doing more to strengthen the intrinsic value of the Canadian dollar as opposed to accepting its decline. Is it that the Liberal government has accepted that currencies such as Canada's will in the long term be marginalized and that the best way to get rid of the independent Canadian dollar is to simply euthanize it, to let it wither on the vine and let it decline to such a level that Canadians will say, as they have already started to say, they would be better off with a common North American currency?

I do not believe we would be better off with a common North American currency. To give up our monetary policy levers would be a mistake. If we give up our floating currency with the U.S., there needs to be another operative mechanism to reflect things. For instance, the commodity crisis that occurred about two years ago in Asia would have manifested itself not in a reduced Canadian dollar at that point, but in higher levels of unemployment. Without the floating Canadian dollar, I would argue that the operative mechanism that would reflect differing levels of productivity or commodity price valuations would be unemployment rates. I am concerned about the notion of losing that very important tenet of economic sovereignty that is the independent monetary policy and the Canadian dollar.

Why would the government watch over the decline of the Canadian dollar and not defend it? If we in this place do not take steps to strengthen the Canadian dollar in the long term through more aggressive and innovative tax and debt reduction policies and more innovative tax reform packages, and if we do not deal with this in a more forward thinking and visionary way, we and certainly the government will have to accept the blame for the Canadian dollar withering on the vine.

At some point, and I am not sure when it will be, if we continue to see the cyclical decline of the Canadian dollar, Canadians are going to ask why we have an independent currency. I do not want to see us get to that stage and I am concerned that we are precariously close to that position right now.

With a government that has seen the Canadian dollar drop by over 11 cents under its seven year term, it is important to remind the government that under the previous Mulroney government the dollar lost only one cent during the same period of time. If the value of a country's currency reflects global investor confidence in that country, I would suggest that investors do not have a great deal of long term confidence in the government.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, there are days when no amount of effort moves things forward. This is only the third time I have tried to finish my speech. I hope that no other prerogatives of the House will prevent me from making it all the way to the end. I hope, Mr. Speaker, that you will show some understanding.

Before I was interrupted I was saying that when one puts 30% of one's income into accommodation one is viewed as needing assistance.

In view of such outrageous figures, which reveal that an additional almost 60% of homes in Canada spend over 50% of their income on accommodation, how is it the Minister of Finance did not give a moment's thought to spending a cent on social housing? It would have been easy to allocate $2 billion or $3 billion of the $135 billion expected surplus over the next five years. Why did he not think of that?

Why, on the other hand, did he think to turn to the millionaires, people who are not having a hard time, people who do not need $9,000 or $11,000 in savings this year? However, people earning less than $15,000 a year would certainly like to have had better housing for their family. No, this is not one of the Minister of Finance's priorities, not at all.

With the billions he has, how did he end up taking money out of the pockets of the unemployed, the disadvantaged and the sick, those who cannot benefit from proper transfers corresponding to the needs of the people in the health care sector? How did he end up picking the pockets of students, too, who could have used some of the manna going into the government coffers? Why did the Minister of Finance not think of putting money into these sectors? Why did he not give a moment's thought either to increasing Canada's contribution to international aid, which has shrunk since this heartless minister has been Minister of Finance?

How can this man continue to believe that the best way to fight poverty and unemployment is to continue to make off with the surplus in the employment insurance fund every year? How can he not have given a minute's thought to doing something for the 57% of people who are excluded, the people out of work who are not eligible for employment insurance? It is because he needs the dough, because he needs to make use of the surplus to offer tax cuts to those with annual incomes of $250,000 and up.

How can this man not have thought that it would be a good idea to raise the old age pension, particularly for older women living alone?

Barely 16 months ago, a National Council on Welfare report informed us that the situation of seniors who are on their own, particularly the women, is getting worse, and that additional funding was needed to help them and keep us from returning to the vicious circle we were in prior to 1960s. Back then, there was no safety net for these people. How can this man still want to make women and children the first ones that have to pay?

The Minister of Finance's reaction to that, when I said it the other day, was to laugh. I would love it if, at some point, the camera would catch his smile when we confront him with such evidence, when we tell him that women and children are paying for his negligence, when we tell him that his grabbing billions of dollars from the employment insurance surpluses, $38 billion since 1994, directly hits women and children first, and further marginalizes young people. He is still smiling. I would love it if the camera would catch him.

He also smiles when we tell him about elderly women living alone. There is nothing funny about the plight of elderly women living alone and getting increasingly poor.

Why did this man think of reducing taxes for millionaires before using money to help the poor and the homeless?

Recently, an alderman from Hull, whom I salute and congratulate for his work, told us that in the Outaouais region there are not only more and more homeless people who lose their jobs, who lose everything, but that entire families are also homeless. There are no shelters for these people.

Why did the Minister of Finance, who must know the Outaouais since he has been living here for several years, not to mention the fact that he is a member from Quebec, not think about using part of the billions that he is taking from the poor to build facilities to house these homeless families?

One sometimes wonders if the minister and his government have a heart. Mr. Speaker, you know what a heart is. You do. I am sure that you have one, but I sometimes have doubts about whether the Minister of Finance and the Prime Minister do.

When we see how priorities are set with regard to budget allocation and when we see the savage cuts in social programs, particularly income support programs, over the last few years, we cannot help but wonder if he has a heart. If he has one, he must have one since he appears to be alive and well, it is not in the right place, as my grandfather would have said.

If his heart were in the right place, with the means available to him today to really meet the needs of those in difficulty, of middle income families that have been bled white by taxes for almost two decades, he could have made the right decisions.

I urge him to go back to the drawing board and to make sure that these billions of dollars that will be coming are allocated in a way that will benefit the right people, low and middle income people, particularly families, as well as the unemployed. These people would benefit from a true reform of the EI plan, which now excludes 57% of the clientele it is supposed to serve. These funds should also be put toward full indexing of federal transfers for health, education and income security.

In the area of social housing, there are crying needs. Will our shouts be loud enough to make the finance minister understand that there are people in the street who are cold and hungry? Will we have to shout louder and louder to express the pain of those helpless people who cannot speak for themselves here, who cannot speak directly to this heartless government? How loud will we have to shout to express their pain?

There comes a time when we do not know anymore what data we should bring here, because we have the impression that the people opposite do not care. We can mention facts that speak for themselves, talk about the 25% increase in child poverty since they took office, the 60% increase in people who must spend more than 50% of their income for housing, we can tell them that 57% of the unemployed, mostly women, are excluded from EI benefits, the people across the way just do not care. What will it take to make them understand?

It should not be so difficult for the Minister of Finance to re-examine his forecasts. Incidentally, he will be making an economic statement in May. I hope he will have the decency to stop taking us for morons and come up with concrete numbers. Even if these numbers are a bit pessimistic due to the U.S. economic downturn, I hope he will not have the outrageous idea to try to pull the wool over our eyes once again. I hope he will not take us for what we are not and take Canadians for fools. At one point, one has to stop laughing at people.

Last week, he said that it was a good thing he made conservative forecasts in spite of the fact that the opposition blamed him for being cautious. However there is a difference between being cautious and hiding the facts. There is a difference between being cautious and accurately stating the facts. There is a difference between being cautious and being cynical when people say they need information.

The Minister of Finance has shown cynicism these past few years by forecasting surpluses that were half the real surpluses. I even remember one time when, within a six month period, the finance minister, who claims to be competent, open and transparent, was off by 130% in his surplus forecast for a four or four and a half month period. Who was he trying to kid? He said he was happy he erred on the side of caution. What caution? He was not the least bit cautious.

He has spent the surplus he has creamed off the EI fund, to the tune of $38 billion since 1994. He has put it towards debt reduction. He has used it to lower taxes to millionaires. Where is this so-called caution? Where is the EI cushion?

Suppose there is a downturn in the economy resulting in an increase in the number of unemployed, then we will need more money to help them. Where is the cushion to do that? It is gone. Where is the finance minister's caution? It has gone by the wayside.

I will give you the real numbers. Before the downturn in the U.S. economy, we were expecting a surplus of roughly $148 billion over the next five years. For once we were in agreement with the finance minister, and we will not start arguing about a few comas or decimal points. With this year's downturn, and we have also taken into account next year's downturn and a normal real growth of the GDP, the gross domestic product, we came up with a projected surplus of $136 billion at worst. This would mean a shortfall of about $12 billion over five years. A little over two billion a year is not that bad.

If the finance minister would only stop lowering the taxes for the rich and use the bulk of the surplus to lower the taxes for middle and low income earners, invest in social housing, correct the inequities and injustices of the employment insurance system, and index the health, education and income security transfers, there would be no problem. Every year he could even pay back some of the federal accumulated debt. He would be able to do that. He better not come up with numbers lower than this projected surplus.

If he does, we will travel across Quebec, and Canada if necessary, to let everybody know that the finance minister is taking everybody for a ride. People are not stupid. He should take his responsibilities.

Consequently, we will be voting against Bill C-22 because it does not serve the interests of the majority of taxpayers. When they talk about tax reductions, we must know to whom they are addressed. They are for the finance minister's friends. It is not you and me, it is not middle income families, it is not low income families. They will get almost nothing this year. It is the people who earn $250,000 and more who are benefiting from these cuts.

With regard to his tax reduction plan, the finance minister should go back, take a good look in the mirror and ask himself if he is proud of what he did. I am sure the mirror would tell him that he is not proud of himself. He will have a second thing to do: sit down at his desk, do his homework again and rethink the tax cuts, give them to low and middle income people and consider the unemployed. For once, he should have the heart to look at what he has done since the beginning of his mandate.

It would be a good idea if he started having more feelings, if he behaved a little more like a human being, if he developed a little of what is called social partnership. I do not know if he is aware of this concept. He talks about compassion, a more liberal and bourgeois value. However social partnership means partnering with people who live in poverty to try to bring them some relief. He is in a major position and he could bring some relief to these people.

I simply ask him to reconsider his past decisions, to do his homework over and to reflect on what I have told him: to help people, to bring them some relief, to demonstrate some social partnership and to show some heart. It seems to me that this is easy, that one does not need magic to do it.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I am pleased to rise to speak to Bill C-22 implementing certain provisions of the latest budget of the Minister of Finance.

I can say right away that we will oppose this bill, because we have repeatedly criticized, not only during the course of the regular budget of March 2000, but also when the Minister of Finance tabled his mini budget in the fall, the fact that the huge tax resources at his disposal over the next five years were being badly used.

When we speak of huge tax resources, the situation has not changed, even with the prospect of a downturn in the States. We will return to this later. In the next five years, even taking into account a downturn in the economy in fiscal 2001-02 linked to that of the States, the Minister of Finance will have some $135 billion in surplus.

That is a lot of money, $135 billion. It is slightly down from what he anticipated last year in fact because of the American situation. Last year, the talk was of $147 billion or thereabouts. Now the figure cited is $135 billion. However, the possibility of making choices around these huge surpluses remains essentially the same.

The Minister of Finance is faced with a situation in which, through various unfair measures he created, on the backs of just about everyone, annual surpluses that will reach record levels in the next five years.

He has accumulated these surpluses and will continue to do so on the backs of the unemployed. He will take from the employment insurance fund between $5 billion and $6 billion annually to create his budget surplus. Five to six billion dollars a year will be taken from the contributions by employers and employees, contributions which have nothing to do with those of the federal government. The government has not contributed to this fund for a number of years, but still takes $5 billion to $6 billion annually from it. It is shameful.

In recent years, the Minister of Finance has taken $38 billion from the EI fund surplus. This money came from the pockets of employers, workers and mainly the unemployed. What must be kept in mind is that, if the surplus in the EI fund is accumulating as rapidly as it is, it is because of two things: first, employer and employee contributions are too high, and second, the majority of people who are out of work are excluded from the plan.

I remind hon. members that only 43% of people who end up unemployed are in fact eligible for employment insurance. Corrective measures by the government will remedy some of this, but only a tiny portion, not all of it. Despite the improvements made by the bill on employment insurance, most of those who are left out will continue to be.

Year in, year out, the Minister of Finance is going to continue to pocket at least $5 billion of the $6 billion EI fund surplus to add to his budget surplus and to look good, as well as to be able to give tax cuts to the richest members of Canadian society.

As well, we must not lose sight of the fact that the Minister of Finance created this surplus, and will continue to add to it, at the expense of the provinces.

For six years now, the Minister of Finance has cut transfer payments to the provinces for the funding of education, health and income security. This was money that the provinces did not have, year after year, to meet their citizens' needs.

The surplus is in Ottawa, while the needs are in the provinces. The health sector needs money, and the Minister of Finance had plenty. Last year the Minister of Finance did restore some funding, but year after year they are still some $2 billion short of what is required to cope with changing health costs, caused in large part by the aging of the population. Over the next five years, the shortfall in transfers will total $10 billion.

Given the greying of the population, we know there will be a natural increase of 3% in health requirements, in Quebec and elsewhere in Canada. This increase is solely because of the fact that the population is aging. The Minister of Finance has not taken this phenomenon into account and the surplus continues to accumulate in his coffers.

This year again, in spite of the downturn in the U.S. economy, the Minister of Finance will have a surplus of about $18 billion to $20 billion. It is easy to have such surpluses when one does nothing and makes the provinces do the work by cutting transfers, by not indexing in view of the urgent needs in health and education, and by shamelessly dipping into the employment insurance fund. It is easy to accumulate surpluses under these circumstances.

We believe that with the surpluses for this year and the four previous years, the Minister of Finance could do a lot more than what he intends to do under his five year plan. He is in a position to target groups that need help. The Minister of Finance intends to give major tax cut to those who earn $250,000 and up.

From this year on, those, and there are not too many of them, who earn in excess of $250,000 and others such as millionaires and billionaires will enjoy significant tax cuts. They will get about 70% of all the tax cuts planned by the Minister of Finance. If a person is earning $250,000 this year, he is lucky because he will get the largest tax cuts, because of the changes related to the partial inclusion of capital gains, because of tax cuts as such, or because of indexation. These people will get at least $9,000 to $11,000 in tax cuts.

However, a single parent with dependent children is not so lucky, because he or she will only get about $250 in tax cuts this year. Talk about equity and social justice.

Under our proposals, with the same tax resources the Minister of Finance has estimated for the next five years, we in the Bloc Quebecois would have taken measures to ensure that starting this year families earning $35,000 or less would not pay any taxes. Everyone else would have benefited from a 50% tax break. That is what I call being progressive. That is what I call dealing with the needs of the people, the real needs of the people.

The Minister of Finance could have diverted his resources to the majority of taxpayers, as we have done. Nine out of ten taxpayers would have benefited from a tax break under our proposals, not just 1% of all taxpayers, the richest taxpayers in Canada and partisans of the Liberal Party and our millionaire friend, the finance minister, but nine out of ten, that is 90% of taxpayers.

If we can come up with these proposals using the same basic figures as the Minister of Finance did, why has he not redirected his policies?

With the estimated tax resources for the next five years and despite the downturn in the U.S. economy, because we adjusted our estimates accordingly, the Minister of Finance could have used $5 billion of the $6 billion EI surplus every year to improve the system, raise the benefits and expand the system to include the 57% of the unemployed who do not currently qualify.

Seasonal workers, women and especially young workers who are particularly hard hit by the vicious employment insurance system could have benefited this year from decent EI benefits.

Why are we able to come up with a scenario whereby each year $5 billion stays in the EI fund to help young people, women and also families? We are talking about a good parental leave plan in Quebec City, not the useless kind of plan being proposed to us. With our forecasts with regard to surpluses, why are we able to do all these things? It is because we in the Bloc Quebecois believe that our first duty is to serve the most disadvantaged, those who belong to the middle income category, those into whose pockets the federal government has been dipping since it came into office in 1993.

Let is not forget that these nine taxpayers out of ten, to whom we wanted to give tax cuts considering the huge surpluses that will accumulate in the federal government's coffers, are the ones who pay the biggest share of taxes. Indeed, the federal government gets most of its tax revenues from families in the $25,000 to $80,000 a year income range.

With all these surpluses, the federal government is not thinking about those families. It is not thinking about those who have been taxed to death these last few years. It does not want to ensure that they benefit from these surpluses, but it wants to ensure that millionaires do. That is the kind of social justice practised by this government.

Let us not even talk about social housing any more. It is not a priority for this government, as evidenced by the fact that it has not invested a cent in this area since 1993. Yet, the needs are enormous. Since that year, the number of families spending more than 50% of their income on housing has almost doubled. If one spends 50% of one's income on housing, it means that there is only 50% left to buy food and clothing for one's self and one's children.

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, not only was it not a point of order. It was completely inaccurate. Our platform included a policy for a single rate of tax.

I will make clear what I was saying. People are confused by competing claims about whether taxes have been cut. They can be the arbiters. They have very simple documentary evidence to adjudicate the test. It is called their paystub.

I invite everyone listening to or watching the debate to look at their paystubs and compare them to the paystubs for the same week or month last year. They will see that the supposed Liberal tax cut for this year was actually a tax increase. It is bogus.

When we combine the impact of Bill C-2 regarding Canada pension plan payroll taxes, which was passed during this fiscal year by the previous parliament and is the largest tax increase in Canadian history, with the myriad of other tax increases imposed by the government and the snail's pace at which its modest tax cuts will apply, Canadians at most income levels will find they are paying more than they did the year before.

If they are not, it is because of the foresight of provincial governments. Provincial taxes in Ontario and Alberta have gone down, thanks to the leadership of people like Mike Harris and Ralph Klein, but federal taxes have stayed the same or gone up.

The finance minister and his parliamentary secretary claim the bill includes $100 billion of tax relief. A nice round figure like that is like pricing something at $9.99 in a department store. The finance minister was told by campaign officials to get the number up because he needed a nice, big round number to talk about in the election. They decided it would be $100 billion. It is nothing of the sort.

The government claims $100.5 billion of gross tax relief in the bill and $3.2 billion of that is an increase in spending. The government has taken the Canada child tax benefit, which is an entitlement program and a spending program, and booked it as a tax cut. Once again the paragons of clean accounting in the government opposite are misleading Canadians.

Then there is the $29.5 billion by which the government increased the Canada pension plan payroll tax. The government, after enormous pressure from this party, from the Canadian Taxpayers Federation and from the Canadian people, finally decided to stop the insidious back door tax grab on inflation known as deindexation. Under deindexation people were bumped into higher tax brackets and paid more taxes. They did so because they were getting cost of living adjustments and not because of any real increase in income.

The Canadian Alliance objected to deindexation. Finally the government responded to our objection and stole our policy by agreeing to reindex the tax system, but not retroactively to 1986 when the Mulroney government deindexed the system.

Let me say parenthetically that the Liberal Party in the 1988 and 1993 elections ran against the Tory Party, and rightfully so, for having deindexed the tax system in 1986. However when it finally came to setting things right, did the Liberals give back the money that had been stripped out of people's wallets by taxes and inflation since 1986? No, sir. They reindexed. They did not give back the some $9 billion that people had lost to deindexation.

The Liberals say they will adjust tax brackets, exemptions and credits upward to account for the consumer price index so that they no longer impose a tax on inflation. That is good. However they count that as a tax cut. In other words, the government counts a non-increase as a cut. They tell Canadians they will not tax them on inflation and that Canadians should be grateful it will be counted as a tax cut. There are accountants in this place who would find that pretty specious. The government has declared $21 billion worth of specious, non-existent tax cuts which are merely non-increases.

When we add all that up, the real total net tax cut in the government's bill is $47 billion over five years. That is about half the tax relief proposed by the Canadian Alliance over five years based on comparable accounting. It is a fraction of the tax relief proposed by U.S. President Bush of $1.6 trillion to $2.3 trillion, depending on how we count it, over 10 years for a country with taxes that are already lower.

That would not be such a problem if Canada had its tax burden under control. However it does not. Revenues to the federal government last year were at their highest level in history. The government is bigger in terms of the money it hoovers out of people's wallets, purses and small business tills than any government in the history of the dominion. Personal income taxes in Canada consume a higher percentage of gross domestic product than in any other nation in the G-8. At 17.6% of GDP we have the highest personal income taxes.

According to a recent study by Price Waterhouse that was published in The Economist , Canada has the highest corporate income tax rates in the OECD, the Organization for Economic Co-operation and Development, the 23 principal industrialized countries in the world. Of those 23 countries, yes, we are number one when it comes to business tax rates.

When we look down the line, we see that none of this will change under the bill. When the tax cuts here have been fully implemented, and after the Bush tax changes have been implemented in the U.S., Canada will still have income taxes far higher than those of the United States and our other principal competitors. That is having an impact on our competitiveness and our standard of living. We know that.

We know that Canadians are working harder now than they ever have and are falling behind. We know we have an increase in the brain drain: the loss of talent and human capital to the United States and other jurisdictions, in large part because of the tax burden.

We know that Canada has fallen from second to 16th place in the OECD in terms of our standard of living over the past 15 years. We went from the second highest per capita GDP to the 16th, to the middle of the pack. Over the past 10 years, by comparison, Ireland leapfrogged over Canada in terms of its growth in per capita GDP, which is the best measure of increases in the standard of living, in large part because it provided huge tax incentives.

A member opposite said that it was because of something other than tax relief. My brother moved a company with 30 very well paying jobs to Dublin because of the tax cuts offered in Ireland and the huge advantage it offers over Canada.

This is not an agenda that would restore the competitiveness of the nation. It would continue to impose on Canadians an enormous burden of taxation into the future.

The bill would do a number of other things to which we object. First, there are a couple of elements which do step in the right direction. Reducing the inclusion rate on capital gains to 15% is something that should have happened a long time ago. We would like to see that inclusion rate go down to 33 1/3% so that we stop penalizing people who invest their whole lives in a business or in a property. This is a form of a death tax. We work hard our entire life, we invest in a business or property and we look forward to passing that on to the next generation. We, as individuals, may not take any benefit from it, but guess what? The moment we die, the Government of Canada comes in with deemed capital gains, which is really a form of estate tax or death tax, and grabs one-third of our lifetime earnings that were in that investment. That is wrong. We should not penalize people's lifetime investments. We should not diminish their abilities to pass on to the next generation their life's savings as we do through deemed capital gains.

There are a number of technical changes in the bill. One of the technical changes with which we have a great deal of trouble is the fact that the bill would continue the unfairness with which single income families with children are treated under the tax code.

The House will recall that this was a very hot issue at one point in the last parliament. The Secretary of State for International Financial Institutions, in response to a question I put to him about why the government discriminated against single income families with kids and why there was as much as an 80% tax penalty for those families versus their dual income counterparts, stood in his place and said that the government discriminated against single income families because they did not work as hard or have as many expenses as the double income families. That was pitting one kind of family against another.

As we said then and I say now, let me inform the secretary of state that moms and dads who stay home to raise small kids, to care for the elderly and the infirm, and to build families and homes, work just as hard, if not harder, as those of us in the paid workforce. They deserve and demand our respect and fairness in the tax code.

The current tax code's discrimination against those families must be eliminated and fairness must be brought in. The Canadian Alliance has proposed, among other things, equalizing the spousal or equivalent to spouse basic exemption with the basic personal exemption.

Under the bill we would have two classes of citizens: those who are primary income earners and their spouses. They have equal worth and that worth should be reflected in the tax code by a spousal exemption equal to the basic personal exemption. That would not done here. We would continue to penalize the stay at home parents.

We would raise that exemption from $8,000, which it will eventually get to pursuant to this bill after several years, to $10,000. That would lift hundreds of thousands of working families off the tax rolls so that instead of giving money to be misspent by the government they could invest it in their own priorities, their own children and their own homes.

We would bring in a child tax deduction. We would provide a deduction of $3,000 per child so that families with children would be able to keep more of what they earn to reflect the costs of raising kids.

What does the government do? Absolutely nothing of the sort. To the contrary, the bill before us raises the so-called child care expense deduction from $7,000 to $10,000. This is another piece of discrimination because only certain families would get to claim the child care expense deduction. Only those dual income families with receipted child care expenses could make use of it. Only 17% of tax filers could claim this deduction, and even a smaller fraction could claim it to the full amount.

If a mother with three children is the main income earner and the father decides to stay home until the kids are in school, the tax code says that the dad's work at home cannot be deducted. The tax code says that it has no value to society and therefore will not be recognized. However, if a parent decides instead to earn a second income and drops the kids off at a day care on the way to the second job, the federal government will give recognition for the third party costs of child care. The at home costs, the opportunity costs, the forgone income and the real financial costs of raising children at home are recognized nowhere.

It is intolerable that we should be increasing discrimination against single income parents. We will oppose the bill on that ground alone.

The bill includes an element which further erodes parliament's recognition of the unique and important role and status of the institution of marriage in our society and culture. It does so by bringing forward further amendments to change any reference from spouse to common law partner.

This is a change which was begun in a bill amending the Income Tax Act in the previous parliament, but in one of the many drafting errors to which I referred earlier the officials neglected to amend certain sections of the bill, saying that in various sections reference to spouse as part of the institution of marriage has been abolished for all intents and purposes from the Income Tax Act. It is an institution which in this and every other society I know of has been given certain privileges because it is the basis of the family, the basic institution of society.

We have said from time immemorial that the institution of marriage should be given certain preferences and privileges to protect the family. The bill would further erode the distinctiveness of that institution by saying common law partners, not spouses.

We as a parliament or as a country should not be ashamed of declaring that the spousal commitment in the covenant of marriage is a fundamental contractual relationship in the development of strong and healthy families and that they are necessary to having a strong and healthy society.

That is another reason we oppose the bill. It further undermines and weakens marriage as an institution.

There are a number of other provisions in the bill which the Alliance finds objectionable. It does include certain technical changes to which we do not object. Here is an interesting one: the foreign actors' tax credit. Most people may ask what that is all about. It turns out that we currently withhold 15% of the income of Hollywood actors who come to Canada to act in Hollywood movies. We then reserve the right to force them to file a tax return and tax them even more.

The Hollywood movie actors have been shedding crocodile tears about this unfair tax treatment by Canada. The same government which cannot find the fiscal room to help out single income families, has decided to give millionaire Hollywood movie actors a tax break in the bill. Lo and behold, Sylvester Stallone and Bruce Willis will be at the front of the line when it comes to tax relief from the government. Single income moms and dads can stay at home without fairness.

The government would do this by raising the withholding tax from 15% to 23%, a very modest increase, but then it says that the actors would not have to file returns beyond that. These are people making millions of dollars at the highest possible marginal rates.

My office staff called the movie producers, the Hollywood actors, the actors' guilds and so on to hear what they thought of this move by the government. They were in favour of this because it would be a big tax cut for the millionaire Hollywood movie stars. They said that if we did not make this change, they might not keep coming back to work in Canada. I find it very odd when I look at the priorities that the government has for tax relief.

We in the Alliance have talked about raising the basic exemption for individuals and spouses, or equivalent to spouses, to $10,000. We talked about introducing a $3,000 deduction per child. Let us just figure out what that means. If we had a Canadian Alliance government, it would mean that a family with two parents and three kids would pay no taxes on their first $29,000 of income. It would mean that a single mom could give her first child the equivalent to spouse deduction of $10,000, so that a single mom with two kids would have $23,000 tax free.

These measures would lift 1.4 million low income Canadians off the tax roles altogether, giving them a hand up so they could get ahead. It would stop penalizing them for earning that small incremental income to try to get ahead economically. The government does nothing in the bill to lift Canadians off the tax roles.

When our party came out with its bold and powerful proposal to eventually get to a 17% single income tax rate and lift 1.4 million low income people off the tax roles and to restore and create family tax fairness, the government said that it looked popular. It said that it was testing well in the polls so it had better try to outflank the opposition. What did it do? It came up with a new basic rate of 16% in the bill and thought that Canadians would be fooled by that because, after all, 16% is lower than 17%.

Yes, it is. However, for the people, for whom it matters, those at the lowest income levels, there are no increases in the basic exemptions and deductions. Those are far more generous. What the Liberals want is for a single mom working as a waitress to pay 16% of her paltry income. Our plan would say that a low income individual would pay no taxes at all because we want that individual to get ahead through higher deductions and exemptions at the bottom end of the tax system.

In closing, I encourage the government to think about the enormous complexity of the Income Tax Act and the destructive effect it has on our economy and our society. It should think of the tens of thousands of bright, young Canadians, whose educations we subsidize, who leave the country every year to pursue their economic opportunities elsewhere in large part because of diminished opportunities and our tax system.

I want them to think about the low income working families, the single moms and the seniors on fixed incomes who are forced to pay taxes today. I want them to join us in dreaming about creating a tax system which is simple, fair and low, which rewards risk taking, investment and productivity and which rewards the virtues upon which a prosperous society is built.

I want to invite them to join us in the opposition in proposing a tax system that lifts the low income people off the tax rolls, that puts the family first and restores fairness to the tax system and that stops the beggar thy neighbour, class warfare politics of envy approach, which informs the so-called progressive tax system that penalizes people who succeed, work hard and get ahead.

I invite them to do all of those things by opposing Bill C-22, a bill that once more adds yet another destructive layer on to the tax act which was first passed in this place in 1917. I hope they will join us in doing that and working together to create an economic environment of opportunity which rewards risk taking, saving, investment and hard work. That is what Canadians are asking for and that is what we are fighting for by opposing the bill.

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, congratulations on your elevation to the Chair. I am pleased to rise to debate Bill C-22 which is, as the hon. Parliamentary Secretary to the Minister of Finance has indicated, a very substantive tax bill which appeared before this place in the form of a ways and means motion several days ago in the session. It seeks to give effect in part to tax changes proposed by the hon. Minister of Finance in his economic political statement here before the dissolution of parliament at the call of the election.

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.

Let me remind my hon. colleagues that in the House in 1917, before it burned down, this same parliament passed what was called the temporary Income War Tax Act. It ran all of seven pages. The government of the day of then Prime Minister Borden said that the bill was only necessary for a short period of time to finance the war effort during the great war and that we would be able to repeal it shortly thereafter. This was an income tax which applied only to very wealthy Canadians at the time, people who were in the top fraction of income earners. The vast majority of Canadians were unaffected by it. The politicians said that it was temporary and that would be repealed.

This does not look like a repeal bill to me. This looks like another 500 pages of amendments on top a 1,300 page statute of which I doubt a single person in this country understands the totality. There might be a tiny handful of tax experts in academia or in the Department of Finance who have even a vague grasp of the myriad complexity of the Income Tax Act which we are seeking to amend today. This is a testament to the enormous complexity of the tax code with which Canadians must grapple every day.

That act in 1917 was passed in good faith by parliamentarians and committed to the Canadians, who they were taking money from to finance the war effort, that it would be repealed. It was not. Not only was it not repealed, it was added to, broadened and expanded to bring more and eventually every single working Canadian into its ambit.

Today we end up with an enormous, complex web of tax laws which inhibit the wealth creating potential of this nation which diminishes our productivity. It drives down our competitiveness and undermines the standard of living of Canadian families who are working harder to get ahead but who are falling behind because of the tax act which the bill seeks to amend.

Let me say as a matter of principle on behalf of the official opposition, the Canadian Alliance, that we stand four-square against this huge complex and destructive system of penalizing work, investment, risk taking and wealth creation. These are the very virtues and habits upon which a prosperous and free nation is built. All of those things are undermined by taxation in general and this extraordinarily complex tax system that we have in this country.

A political philosopher once remarked that the power to tax is in fact the power to destroy. It is the power of government to use its monopoly on coercive force to reach out the hand of the state and to take from individuals, businesses and corporations the fruits of their labours. We can never underestimate just how destructive that power can be. We can never know how many small businesses or how many dreams have been vanquished because people were unable to realize their potential and dreams of starting up and operating a successful business because they were unable to keep enough of the fruits of their labours to keep their heads above water. That is what the bill represents.

I am sure the parliamentary secretary who just spoke perhaps does not reflect often on the first principles of taxation. It is important for us every now and then in this place to remember the enormous power that we wield through this taxing power. We do so somewhat recklessly. As I suggested, I am certain that not a single member of the House has now or will read the entire bill.

I tried to make my way through as much of it as I can. I consulted the experts in the finance department. I received the bill a couple of days ago and I am supposed to stand here on behalf of the official opposition, which has a quasi constitutional obligation to be the watchdog of the government particularly with respect to issues like this, and provide a thorough, detailed, thoughtful analysis and assessment of the bill, when these 500 pages of technical amendments were just delivered to us.

I know for certain that the finance minister not only has not read the bill, he is likely at best vaguely familiar with the impact of the amendments contained herein.

Even though the official opposition will vote against it for a number of reasons, this will undoubtedly go on to the finance committee which, I predict, will have fairly brief hearings because none of the members will be able to penetrate the impenetrable complexity of the Income Tax Act.

Well meaning and very bright officials from the Department of Finance will appear before the committee to explain and analyze, as best they can, the impact of the bill. The committee members, who were elected to represent the best interests of their constituents and to uphold any parliamentary oversight and scrutiny, will have to take the bureaucrats at their word and then the bill will come back to this place and be passed.

Members will not understand what they have passed because of the complexity of the act. That is a very serious concern, but it does not need to be that way. In a more functional democratic institution, the American congress for instance, both the upper and lower houses have ways and means committees with independent legislators and adequate staff resources. The staff of those committees have become experts on the complexities of tax legislation and are able to frame and craft bills of this nature with a real understanding of what they are doing. The U.S. congress has specific committees to deal with taxing power and taxing legislation.

As a result, congress and the people it represents have the benefit of real, serious, substantive democratic oversight and input into tax legislation. We only pretend to have such input in this place because of the dysfunctional nature of parliament and the complexity of the Income Tax Act.

How do I know that is the case? How can I prove that the consideration of tax legislation does not work in this parliament? It is very simple. This bill, and at least three other bills before the House right now, include amendments to tax legislation that seek to undo the drafting mistakes of previous bills passed by parliament. It is unacceptable that we waste the valuable time of parliament time after time by undoing mistakes made in the drafting of legislation. Those mistakes were not identified by members of parliament because they do not have the expertise, the time or the resources. What is the point of digging down into the depths of a bill if it will be passed anyway?

We do not have time to ensure at a meaningful level that the bureaucrats have it right. The minister does not do that. He receives draft legislation from bureaucrats, rubber stamps it and sends it to parliament. We ought not spend time correcting the errors that drafting officials and bureaucrats have made. If we had more serious parliamentary scrutiny, oversight and involvement in the development of tax legislation, and a tax code which made sense to ordinary taxpayers, we would not need to constantly revisit bills such as the one before us.

For those reasons my party stands four square for the reform and simplification of the tax code. I will quote from the Canadian Alliance policy declaration. It was not dreamed up by any one person. It was the result of a grassroots, bottom up democratic process. Our members agreed that:

We will restore public confidence in the fairness of the Canadian tax system by reducing its complexity. We will restore indexation and move towards a simpler tax system, built around—

This is a novel concept for a government which likes to play the politics of envy and class warfare. It continues:

—a single rate of taxation to ensure lower taxes for all Canadians. We believe that all Canadians above a minimum income level should share in the cost of the services provided by government, which benefit us all.

That is what we seek to do.

The hon. parliamentary secretary suggested the bill would give effect to what he called, disingenuously, the largest tax cut in Canadian history. That is absolutely bogus. He argues the bill would give effect to the political statement made by the finance minister in October.

Let me give credit where it is due. After seven years of advocacy in this place by the Reform caucus and then the Canadian Alliance that tax relief be our nation's highest economic priority, and after millions of Canadians demanded to see a little more of what they earn and said they were fed up with Liberal tax increases, the finance minister, days before an election, finally came forward with some modest tax cuts.

However they are not real tax cuts for real people. I challenge people to take the paystub test. People who watch the debate in this place see me and my colleagues stand to demand the finance minister cut taxes and they see him stand to say he has already done so. How are people to know which of us is telling the truth? I have a very simple test.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I welcome the opportunity to present Bill C-22, the Income Tax Amendments Act, 2000 for second reading today.

While the bill amends several sections of the Income Tax Act, more important, it implements key elements of the government's five year tax reduction plan which was introduced last year.

Briefly, this plan will provide $100 billion in tax relief by 2004-05, thereby reducing the federal personal income tax paid by Canadians by 21% on average.

Families with children will receive an even larger tax cut—about 27% on average.

The bill also includes many additional measures, including technical amendments that were introduced in Bill C-43 last fall but which died on the order paper when the election was called.

Many of these amendments are relieving in nature. Some correct technical deficiencies in the act while others lighten the administration of the tax system. Whatever the changes, one thing is certain, each is based on the principles of fairness and equity in the federal tax system to which our government has been committed since coming to office in 1993.

Once we eliminated the deficit in 1997-98, we began to cut taxes for all Canadians. The bill before us today is the biggest step forward in our tax cutting efforts to date and is based on four key principles.

First, our approach to tax reduction must be fair starting with those who need relief most, middle and low income earners, and especially families with children.

Second, we will focus initially on personal income taxes since that is where we are most out of line.

Third, we will ensure that Canada has an internationally competitive business tax system.

Fourth, we will not finance tax relief with borrowed money because that means an inevitable return to higher taxes in the future.

For the government, fiscal responsibility is fundamental and tax cuts are essential. At the same time, it is essential that an effective, fair and technically valid tax system be maintained, which is the thrust of the legislation before us today.

I will now discuss the main measures in the bill beginning with some of the personal income tax changes.

In 1999 the government promised Canadians that it would set out a multi-year plan for further tax reductions. The 2000 budget delivered on that commitment by making the most important structural changes to the Canadian tax system in more than a decade with a special emphasis on the needs of families with children. The bill provides for tax rate reductions at all income levels as of January 1, 2001.

The low and middle income tax rates fall to 16% and 22% respectively. The top 29% rate is reduced to 26% on incomes between about $61,000 and $100,000, which means that the 29% rate applies only to income over $100,000.

While tax burdens will fall for all Canadians, the decline will be felt substantially by middle income earners. In addition, the bill would eliminate the 5% deficit reduction surtax as of January 1, 2001.

One component of the five year tax reduction plan must be in place by July 1 of this year because it benefits Canadian children. I am referring to the increased support for families with children through the Canada child tax benefit.

As hon. members know, the Canada child tax benefit is a key element of federal assistance to families. It is an income based benefit with two components: the Canada child tax benefit base benefit for low and middle income families and the national child benefit supplement for low income families.

The maximum Canada child tax benefit for the first child will rise to $2,372 in July 2001, well on the way to the five year goal of $2,500 by the year 2004.

For the second child, the maximum Canada child tax benefit will increase to $2,308 in July 2004. Together with increases announced in previous budgets, annual Canada child tax benefits will exceed $9 billion a year in the year 2004, of which low income families will receive about $6 billion and middle income families about $3 billion.

The bill contains other personal income tax changes that are specifically designed to help those who need it most.

For example, the amount on which the disability tax credit, the DTC, is based is increasing from $4,293 to $6,000 effective 2001. This tax relief will increase over time, as the DTC is fully indexed to inflation.

The list of relatives to whom the disability tax credit can be transferred has expanded to make it consistent with the medical expense tax credit rules. In addition, speech language pathologists will now be able to certify eligibility for the disability tax credit with respect to speech impairments.

Another measure increases the maximum annual amount that can be deducted for child care expenses to $10,000 from $7,000 for each eligible child for whom the disability tax credit can be claimed.

The amounts on which the caregiver tax credit and the infirm dependant credit are calculated are both going up to $3,500. With full indexation, this tax relief will continue to increase over time.

At present, individuals with certain mobility impairments may qualify under the medical expense tax credit for renovation costs that enable them to gain access to, or be mobile or functional within, their home. Bill C-22 includes reasonable incremental costs relating to the construction of a principal residence to help these individuals.

To provide additional assistance to students, the annual exemption for scholarships, fellowships and bursaries received in conjunction with programs for which the education tax credit may be claimed increases to $3,000, up from $500.

I also want to mention that self-employed individuals will now be able to deduct one-half of their Canada pension plan or Quebec pension plan contributions on self-employment income. The remaining one-half will continue to be eligible for a personal tax credit at the lowest tax rate. Without the bill they would be entitled only to the credit on both the employer and employee contributions, which would put them at a disadvantage vis-à-vis owner-operators who can deduct the employer share.

The technical amendments in this bill are too numerous to mention in the short time allotted to me in this debate. However, I would like to highlight a few of them before moving on to the business tax changes implemented in this bill.

On the personal tax side, some of the changes ensure that the rules under which clergy can claim a deduction for their residence are clarified. They also ensure that Revenue Canada can release information about a former registered charity as long as it relates to when the organization was a registered charity.

They ensure that municipalities do not have to file T4s for volunteers to whom they paid not more than $1,000. They also ensure that the exemption applicable to reasonable travel allowances to part time teachers be extended to teachers who do not have other jobs.

The five year tax reduction plan also goes a long way toward making Canada's business income tax system more internationally competitive. This is important because business tax rates have a significant impact on the level of business investment, employment, productivity, wages and incomes.

With this in mind, Bill C-22 includes significant corporate tax rate reductions. Corporate tax rates will drop to 21% from 28% for businesses in the highest taxed sectors, such as high technology services, to make them more internationally competitive. These reductions begin with a one-point cut effective January 1, 2001.

By 2005 the combined federal provincial tax rate, including both income and capital taxes, will drop from the current average of 47% to 35%. This would put our businesses on a more competitive level with other G-7 countries.

Two measures in the tax reduction plan involve capital gains. The first provides a tax deferred capital gains rollover for investments in shares of certain small and medium sized active business corporations. It includes increasing the $500,000 investment limit, originally announced in the 2000 budget, to $2 million as announced in the economic statement and increasing the size of small businesses eligible for the rollover from $10 million to include corporations with no more than $50 million in assets immediately after the investment.

The second measure reduces the capital gains inclusion rate to one-half. This would reduce the tough federal provincial tax rate on capital gains in Canada from an average of about 31% to about 23%, lower than the typical U.S. combined federal state top rate of about 25%. Both measures would improve access to capital for small businesses with high growth potential. High technology industries would particularly benefit.

Consistent with this change to the capital gains inclusion rate, the deduction for employee stock options would increase from one-third to one-half. As a result, employees in Canada would be taxed more favourably on their stock option benefits than employees in the U.S. The bill defers the taxation for certain stock option benefits and allows an additional deduction for certain stock option shares donated to charity.

Another measure that I want to discuss relates to branches of foreign banks operating in Canada.

These new rules stem from the 1999 amendments to the Bank Act, which allow foreign banks to establish specialized, commercially focused branches here. Previously, foreign banks could operate in Canada only through Canadian incorporated subsidiaries.

The tax system for the new foreign bank branches would now be comparable to that for Canadian banks. These new rules would give foreign banks a time limit window to move their operations from a Canadian subsidiary into a Canadian branch without undue tax consequences.

As with the personal tax measures, the business tax changes are too numerous to discuss individually during today's debate. I would like to summarize a few of them.

The bill, for example, provides a tax deferred rollover for shares received on certain foreign spinoffs. It strengthens thin capitalization rules. It phases out over a three year period the special income tax regime for non-resident owned investment corporations. It treats provincial deductions for scientific research that exceed the amount of the SR & ED expenditures as government assistance. It ensures appropriate treatment of foreign exploration and development expenses in computing foreign tax credits. It introduces a temporary 15% investment tax credit for grassroots mineral exploration and it amends the corporate divisive reorganization rules.

Other technical amendments ensure that Canadian corporations that hold shares of non-resident corporations through partnerships are not subject to double taxation. The additional capital tax on life insurance corporations is extended until the end of 2000. Shares of one foreign corporation can be exchanged on a tax deferred rollover basis for shares of another foreign corporation. The tax treatment of resource expenditures and the rules governing gifts of ecologically sensitive land are clarified. In a chain of corporations, a corporation is controlled by its immediate parent, even where the parent is itself controlled by a third corporation. Replacement property rules do not apply to shares of the capital stock of corporations, and a member of a limited liability partnership under provincial law is not automatically a limited partner under the Income Tax Act.

Those are some of the more technical changes incorporated into the bill. There are three remaining measures that I wish to discuss briefly before closing. The first involves changes to the rules governing the taxation of trusts and their beneficiaries.

Bill C-22 addresses the tax treatment of property distributed from a Canadian trust to a non-resident beneficiary. It also introduces measures dealing with the tax treatment of bare, protective and similar trusts, as well as mutual fund trusts, health and welfare trusts and trusts governed by RRSPs and RRIFs.

For example, the existing rules whereby an individual can roll over property to a trust for the exclusive benefit of a spouse or common law partner would be extended to alter ego trusts and joint spousal or common law partner trusts.

Several new anti-avoidance measures designed to ensure that transfers to trusts cannot be used to inappropriately reduce tax are also included in the bill. For example, there would be limits on the use of rollovers where trusts were used to avoid tax when a beneficiary emigrates. Also, income allocations to beneficiaries could not be used by trusts to circumvent the rules ensuring that spousal or common law partner trusts, alter ego trusts and joint spousal or common law partner trusts would not allocate income to others before the beneficiary, spouse or common law partner dies.

In addition, rollovers to a trust would be denied if the transfer was part of a series of transactions designed to defer capital gains through the use of a trust as an intermediary between a vendor and purchaser of property.

A final anti-avoidance measure would prevent certain pre-1972 trusts from using graduated income tax rates if they received property from a trust not subject to these rates, and the beneficial ownership of the property had not changed.

The second measure I wish to highlight involves the new taxpayer migration rules, which are also part of the government's ongoing commitment to greater fairness in the tax system.

Since 1972 Canada has had special tax rules that apply when people give up Canadian residence. The basic entitlement of those rules is a deemed disposition that treats the immigrant as having disposed of property immediately before leaving.

For many years, questions have persisted as to the exact scope of this deemed disposition on departure from Canada and its interaction with Canada's international tax treaties. Under Bill C-22, Canada retains the right to tax emigrants on gains that accrue during their stay in Canada.

The bill would also clarify the effect of the new rules on various kinds of rights to future income and would allow returning former residents to reverse the tax effects of their departure, regardless of how long they were a non-resident.

In addition, former residents would be able to reduce the Canadian tax payable on their pre-departure and distribution gains by certain foreign taxes paid on the same gains. This is part of Canada's commitment to avoiding international double taxation, a commitment that is reflected in our network of tax treaties as well.

Since 1999, in anticipation of these rules coming into effect, Canada has been negotiating its tax treaties to reinforce protection against double taxation when immigrants' pre-departure gains are taxed.

A final measure, deals with amendments to the Income Tax Act that relate to the June 3rd, 1999 agreement between Canada and the United States concerning foreign periodicals.

Since the 1960s the Income Tax Act has precluded the deduction of advertising expenses unless a newspaper or a periodical is at least 75% Canadian owned and has at least 60% original Canadian content.

As a result of the Canada-U.S. agreement, this rule no longer applies to advertisements and periodicals. Instead, advertising expenses and periodicals with at least 80% original editorial content would be fully deductible and advertising expenses and other periodicals would be 50% deductible regardless of ownership.

In addition, after July 1996, the meaning of Canadian citizen will include Canadian pension funds and other entities that own Canadian newspapers to ensure that they qualify as citizens under the ownership requirements of the Income Tax Act. For periodicals, this amendment applies from July 1996 to May 2000, after which time nationality of ownership is irrelevant.

In conclusion, while the bill is lengthy, very detailed and technical in nature, its components are all very important and deserve to be passed without delay. Most are relieving or clarifying measures and a few are housekeeping measures.

As I indicated earlier, each measure is designed with the principle of tax fairness in mind and there are many taxpayers out there who will benefit from these changes. The measure with the highest profile of course implements the key components of our government's five year tax reduction plan. In summary, that plan reduces the tax burden at the middle income level, increases support for families with children and makes Canada's business income tax system more internationally competitive. As I stated earlier, the five year tax reduction plan will provide $100 billion in cumulative tax relief by 2004-05.

I urge all hon. members of the House to give the bill quick and speedy passage and, most importantly, to keep in mind all the Canadian children who will benefit from the increases to the Canada Child Tax Benefit on July 1.

[Robert Thibault, Liberal, for the Minister of Finance]

moved that Bill C-22, an act to amend the Income Tax Act, the Income Tax Application Rules, certain acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another act related to the Excise Tax Act, be read the second time and referred to a committee.

Business Of The House

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I am pleased to make the weekly business statement and to indicate to the House that I intend to do my utmost to have order paper questions answered as rapidly as possible.

This afternoon we will resume debate on Bill C-12 respecting compensation for judges. We will then continue with Bill C-18, the equalization bill, which we started this morning. That will be followed, if there is time, with Bill C-17 respecting the innovation foundation.

On Friday we will consider report stage of Bill C-4 respecting the sustainable development foundation, and any time left will be used on second reading of Bill C-7, the youth justice bill.

In an effort to complete consideration of the youth justice bill, we will continue discussing that bill on Monday next.

Next Tuesday we will commence report stage of Bill C-8 respecting the financial institutions legislation. Should that be completed, we would then continue with Bill C-22, the income tax amendment. As previously announced and as adopted by the House, in the evening there will be a special take note debate on the summit of the Americas.

Next Wednesday, March 28, we will debate Bill C-2, the employment insurance amendments, at report stage and hopefully have third reading on next Thursday, March 29.

That is the agenda of the House for next week.