Bill C-33 (Historical)

Income Tax Amendments Act, 2006

An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act

Part 1 of the enactment enacts, in accordance with proposals announced in the 1999 budget, amendments to the provisions of the Income Tax Act governing the taxation of non-resident trusts and their beneficiaries and of Canadian taxpayers who hold interests in foreign investment entities.
Part 2 enacts various technical amendments that were included in Part 1 of a discussion draft entitled Legislative Proposals and Draft Regulations Relating to Income Tax released for consultation by the Minister of Finance on February 27, 2004. Most of these amendments are relieving in nature, and others correct technical deficiencies in the Act. For example, Part 2 enacts amendments
–       to implement various technical amendments to qualified investments for deferred income plans,
–       to clarify that certain government payments received in lieu of employment insurance are treated the same as employment insurance for income tax purposes,
–       to extend the existing non-resident withholding tax exemption for aircraft to certain air navigation equipment and related computer software,
–       to allow public corporations to return paid-up-capital arising from transactions outside the ordinary course of business, without generating a deemed dividend,
–       to confirm an income tax exemption for corporations owned by a municipal or public body performing a function of government in Canada, and
–       to provide that input tax credits received under the Quebec Sales Tax system are treated for income tax purposes in the same way as input tax credits received under the GST.
Further, Part 2 enacts provisions to implement announcements made by the Minister of Finance
–       on September 18, 2001, limiting the tax shelter benefits to a taxpayer who acquires the future business income of another person,
–       on October 7, 2003, to ensure that payments received for agreeing not to compete are taxable,
–       on November 14, 2003, to simplify and better target the tax incentives for certified Canadian films,
–       on December 5, 2003, to limit the tax benefits of charitable donations made under certain tax shelter and other gifting arrangements, and
–       on November 17, 2005, relating to the cost of property acquired in certain option and similar transactions.
Part 3 deals with provisions of the Act that are not opened up in Parts 1 and 2 in which the following private law concepts are used: right and interest, real and personal property, life estate and remainder interest, tangible and intangible property and joint and several liability. It enacts amendments to ensure that those provisions are bijural, that is that they reflect both the common law and the civil law in both linguistic versions. Similar amendments are made in Parts 1 and 2 to ensure that any provision of the Act enacted by those Parts are also bijural.

Sales Tax Amendments Act, 2006

[Claude Bachand, Bloc, Saint-Jean, QC]

Mr. Speaker, it gives me pleasure to rise today to speak to Bill C-40 on behalf of the Bloc Québécois. With our research staff and those responsible for this issue, we conducted a review of this bill and, all in all, we have found very little to criticize. A lot of people, in Quebec among other places, will be pleased with many of the measures being introduced. I would like to address the first one, which is to make some medical services exempt from tax, thereby facilitating access to such services.

I remember that physiotherapists came to me a few years ago. They told me that it was important to allow these types of services to be exempt from tax. Out of need or because of their insurance, many people who could not afford to wait for public health care wanted to go see a physiotherapist after a car accident or an occupational accident. Systematically, these people had to pay tax on those services.

Then, under a ways and means motion, the previous government considered the possibility of looking at which types of medical services could be made exempt from tax from year to year.

This assessment had to be done every year. So, every year, the government determined whether it had properly identified those services that should be taxed and those that should be exempt from tax. It would ask itself, for example, if it was appropriate not to tax physiotherapy. The following year, around budget time, the word would often go around that physiotherapy would be taxed.

Physiotherapists visited MPs at their offices. I remember fighting with them for their services not to be taxed. Eventually, the government of the day decided not to tax them. It will be much better, however, to have legislation on that. This will avoid having this annual debate about what to tax, what to exempt from tax and what should be kept on the list of health products that should be exempt from tax.

This will take us closer to a standard of services that all recipients can find relatively interesting. It is not an easy thing to do when your health or physical well-being is affected to go see a health professional in an emergency or because you are required to under your insurance plan. In such cases, one has to pay not only the fee for services, but also the GST on that fee. It think it is completely worthwhile to have a list.

This is something we see quite often with speech-language pathology. Bill C-40 refers specifically to speech-language pathology. I would point out that problems with hearing and pronunciation are becoming increasingly common in our society.

I know parents whose children have speech problems, for example. They are having a very hard time accepting the fact that they have to wait two years to consult someone in the public sector. They often have insurance that allows them to turn to private clinics. When these parents go to consult a speech-language pathologist, it is much the same as with physiotherapy, which I mentioned earlier. These people have to pay for the professional services and then pay tax on top of that.

Since speech problems are on the increase, it is important, when people have no choice but to consult the private sector, that they not pay an additional tax.

It is somewhat similar to access to surgery. The taxes can be deducted. There are situations in which waiting is not an option. It should be recognized that waiting may not be an option in the case of physiotherapy and speech-language pathology services, and people should not have to pay taxes on top of the cost of professional services.

Social services are another part of medical services.

Many people these days want to consult social workers to help resolve children's behavioural problems or attention deficit problems.

As the father of a daughter myself, if she had required such services at age six or seven, I would not have wanted her to have to wait two years before meeting with a specialist in the field of social work, while she was having integration problems or any other such problems at school. Thus, I feel it is important to recognize parents' financial efforts and not make them pay additional taxes. I think that would be the right approach.

Furthermore, there is also a tax burden for charities. As a former unionist, I worked closely with charitable organizations. People in these organizations were close to the union movement. We defended a shared cause, that is, a more social approach within our society, a more equitable and fair approach. These people work year round for excellent causes. These causes might involve church groups or any type of organization that is a registered charity. In my view, the bill's new provision will be advantageous for them.

For example, a business owner who rents a shop in downtown Saint-Jean or elsewhere in Canada can deduct both the tax and the rent from his income taxes. If an owner gives space worth $10,000 in one of his buildings to a charity group, he can forego the rent and deduct it from his taxes. I think that really helps people who are supporting an important social cause.

I mentioned churches, but that might not exactly apply because they often own the premises they need to carry out their activities. This would apply more to the many registered charitable organizations that should have the opportunity to use premises for a minimal cost, that is, rent-free with no obligation to pay the rent at the end of the year. Often, the cost of rent can force an organization to cut services.

For example, if charitable organizations are allowed to use space for free, they can provide services to the public. These services are very important; nowadays, many people cannot get by without them.

We also really like the measure that supports small vintners. In fact, this affects me personally. As the member for Saint-Jean, I have to say that in Quebec, wine producers have been having a lot of problems lately. There have been some issues with the Société des alcools du Québec. It made no sense that liquor stores in Quebec were stocked with wines from all over the world, but not wines from Quebec. When I shop at the LCBO, Ontario wines are on every shelf, as are British Columbia wines. In Quebec, there were problems with that. People had to get their wine directly from the producers. Then they were hit with an excise tax, which made them less competitive. Wine production is becoming more and more competitive. Now, even the French acknowledge that they are in a very competitive environment. Wines come from all over. Stores now carry wines from South Africa, all over Europe and around the world.

Since this is a very competitive market, we should give a helping hand to the vintners. We should tell them that they no longer have to pay the excise tax. This would give them the latitude to probably offer more affordable prices. I do not think that the producers would put the entire savings from the excise tax in their pockets. I think they would pass on the savings to consumers, thus making these wines more competitive.

We like some other provisions, such as the ones on tobacco.

There are some clarifications on the provisions of the excise tax to better fight against contraband tobacco products. It is about time. We are not the first to think of this, since even the Romans thought to tax luxury goods. In today's society, we consider taxing unhealthy products, such as cigarettes. This is nothing new. Rome thought of it before us. Given all the harmful effects of tobacco, I think it is important to maintain the level of taxation. Smuggling must also be avoided, and I think that the current provisions will ensure that the origin of the tobacco product must be known.

We will have to deal with the fact that on aboriginal reserves, there are many of these little smoke shacks that sell tobacco products without tax, products whose origins are unclear as well. I regularly drive through part of the reserve at the exit of the Mercier bridge. It goes from one side of the border to the other. Some measures in Bill C-40 will make it possible to better control cigarette smuggling. It is not acceptable that some people can get away with this, while the corner store in downtown Saint-Jean must pay the total price. Conditions are not tough enough; all the corner stores must sell cigarettes with prices and taxes indicated, while elsewhere, such as on the reserve, for example, things are different.

Thus, I believe that this measure will not only get a handle on the problem, but will also allow the government to generate some revenue. This is what I mentioned this morning about Bill C-33. When an illegal trade develops and is almost entirely untaxed, it is the government that loses revenues, because some people will buy their tobacco products there instead of at the corner store.

Therefore, we encourage this measure, because it will try to finally put an end to cigarette smuggling and, if we really succeed, it will put more revenues in the coffers of the government, which will be able to spend some on all kinds of services and will be able to improve health or education services, as I mentioned this morning.

The same goes for alcohol. In the bill, some overtures have been made about the objectives. First, it allows provincial liquor boards and vintners to possess a still . This was previous illegal. Personally, I know someone—I will not tell his name—who would give me a bottle of grappa once in a while. He did not sell it to me; this was totally legal, I tell you right now. However, to produce grappa, you must have a still and a licence.

Before, one had to go through many people and many steps, and there were costs associated with these steps. The bill will save the provincial boards all these steps and costs inherent in the purchase of this equipment used to produce and sell alcohol. This legislation will allow people, whether they be wine producers or not, who wish to make grappa or any other type of wine, to do so legally. They will be able to buy these stills.

Moreover, another type of illegal trade will be eliminated. I was personally happy to be given a bottle of wine by this person, but maybe other producers were illegally selling their production and the government was losing out on these revenues. This will allow such companies to operate legally, to obey the law and to provide the government with some revenue.

I would also like to talk about the security surcharge at some airports.

After the events of 9/11, I remember sitting on the legislative committee where senators and MPs discussed a considerable surcharge—based on the number of passengers—to provide all airports with the necessary equipment to fight terrorism.

Now we learn that this charge will be eliminated at certain airports. In my opinion, this will allow airports to avoid being crushed by the weight of this surtax. We note that the La Grande 3 and La Grande 4 airports will no longer be subject to the charge

However, this is offset by the fact that certain airports that were not on the list—the Mont-Tremblant airport in particular—will now be added. There has been a significant increase in passengers at this airport because this part of Quebec is experiencing tremendous growth. Thus, they will be taxed and the charge will be added.

In other words, applying a charge to an airport that is already very popular and that is already making a bit of money, is preferable to applying a charge to all airports. Small airports would have trouble because each time a plane lands, a surtax is charged. Thus, this is significant for the budgets of small airports and we truly approve of this measure.

There are a number of provisions in this bill that we truly like.

Given that I have the time, I would like to go back a bit. Earlier I spoke of speech language pathology, but only with regard to young children who have hearing or speaking impairments. However, this measure will also help individuals who are slightly older.

I believe that many seniors may be receiving treatment for speech-language pathology. For instance, I am thinking of my father who suffered a series of strokes. Rehabilitation is a difficult and often lengthy process because of the long wait times for health care.

People with insurance could afford treatment for speech-language pathology. If they can afford it and decide to pay for it themselves, then why tax them? The situation is a little like that of the young children I was talking about earlier, who have problems speaking or hearing. The same is true of seniors who have the same sort of problem. And these clients are not wealthy. We know the statistics about seniors. Any measures that could help them further would be welcome.

We are still waiting for the federal government to look at seniors' tax returns and pay them the guaranteed income supplement immediately if they qualify. We are still calling for that. However, if they need a speech-language pathologist, we agree that this service should be tax exempt, as the bill provides.

The bill contains only good measures. There may be some things we would like to see taken further, but we believe this is a very good start. There are some measures in the bill that we have wanted to see for a long time, such as the duty on wine. Vintners would talk to me about this regularly. They will be very happy to learn that the Bloc Québécois is supporting this bill.

As I mentioned earlier, on the whole, this bill contains attractive measures not only for airports and vintners, but also for people who need health care services.

We can please all these people, and these measures are along the lines of what we want to see happen. That is why the Bloc Québécois will be very happy to support this bill.

Income Tax Amendments Act, 2006

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

Mr. Speaker, I would like to expand on the comments of my colleague from Joliette, who is very familiar with financial matters. He gave examples of situations where the current minister, with the best intentions, proposed a policy that was in need of some fine-tuning. The picture I am getting could be added to the one he was talking about. I am thinking about the program for GST rebates for tourists.

In this case, the Bloc Québécois, the industry and other political parties had to make strong and repeated arguments to achieve a few partial corrections to an unacceptable situation, in which organizers of conventions for outfitters or other similar events were losing a considerable international competitive advantage. It is the same type of situation with interest deductibility.

As for GST rebates for tourists, an extra effort should be made to come up with a reasonable solution for duty-free shops.

But my question is more general. I would like my colleague from Joliette to tell me, since pre-budget consultations on next year's budget will be starting soon—it is already the time to be working on these things—should tax avoidance not be an important issue? Should it not be important to make increasing transparency in Canada's tax situation a priority, or to ensure that there is a significant improvement beyond Bill C-33, which we are studying right now?

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I thank the member for his question. Indeed, Bill C-33 contains interesting aspects regarding the reduction of tax evasion. However, it is still just a band-aid on a cancer. We think there are other priorities. I spoke about the tax treaty with Barbados. If the Minister of Finance and the Conservative government really want to reduce tax evasion, they will have to amend that treaty and the law in order to turn off the tap. Until now, we have not seen the minister show any such commitment.

There has been a lot of talk about interest deductibility for Canadian companies investing abroad. The minister backed off and said that he was doing this to prevent tax evasion in tax havens. This is also a measure which could be interesting in some regards, but it is throwing the baby out with the bath water. So, it is good to see the minister backing off from his initial plan, but even if he maintains the non-deductibility of interest charges for Canadian companies investing abroad, this is still a small measure in the big picture. It is somewhat the same for income trusts.

During the proceedings of the Standing Committee on Finance, I was very surprised to see that the Minister of Finance was not able to demonstrate to us that existing income trusts were generating a tax loss that is extremely harmful to the Government of Canada's financial position.

Minister Audet told me that, in the case of Quebec, these trusts were responsible for a shortfall of about $40 million. That is significant, particularly since the Prime Minister made a promise regarding this issue during the election campaign. It seems to me that the government could have found a solution that is more respectful of the two and a half million Canadians who contributed to income trusts and who, among other things, probably believed the Prime Minister during the election campaign, when he promised that he would not touch these trusts.

That said, my greatest concern with income trusts was their effect, in the longer term, on Canada's economic development. For example, BCE, a corporation, was to become an income trust, because of the pressure exerted by one competitor, TELUS, and not because of its own corporate interests. In my opinion, this was more important than the issue of revenue losses for the federal or the Quebec government.

The hon. member is right when he says that this is creating a perverse effect, particularly regarding the value of the Canadian dollar. Many of these businesses represent a minor investment for foreigners, particularly Americans. So, we found out that there was a very real risk.

I have learned one lesson from all this. As with interest deductibility, as with income trusts, and as with many other issues, the Minister of Finance has good intentions, but he takes measures that seem improvised and whose consequences have not, in my opinion, been properly examined.

In conclusion, this will not prevent the Bloc Québécois from supporting Bill C-52. However, it could mean that, in the coming years, all parliamentarians, and the members of the Standing Committee on Finance, may have to look at this issue again, in order to suggest to the government, regardless of which party may be in office at that time, ways that are more effective on an economic, fiscal and financial level.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, to begin with, I would like to congratulate my colleague from Montmagny—L'Islet—Kamouraska—Rivière-du-Loup. His presentation was extremely clear. I will probably have the opportunity, in my own presentation, to substantiate even more what he just said. As he pointed out, the Bloc Québécois is in favour of Bill C-33, An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act. It corrects a number of things.

Again, this is somewhat like when I spoke to the changes to the excise tax. Sometimes, we debate in the House of rather casual subjects. This is far from Tintin in the Congo or Tintin in Tibet and even farther from The Crab with the Golden Claws or, for example, The Castafiore Emerald . This is not very sexy for a debate, but it is a necessary debate, just as the one on the excise tax. Bill C-33 corrects various provisions of the Income Tax Act which made it easy to circumvent tax rules and allowed tax evasion.

The bill responds to the shortcomings identified by the Auditor General in her November 2005 report. This bill will require disclosure of additional information about non-resident trusts, which will allow a more rigorous analysis of the figures submitted to the Canada Revenue Agency, in accordance with the recommendations of the Auditor General.

As my colleague has mentioned, tax evasion goes against the basic principles of horizontal and vertical fairness in the way we treat individuals. We must never forget that fairness is of paramount importance if we want people to have any trust in the tax system. This means fairness not only between individuals, but also between the different categories of individuals.

When the tax system is viewed as being unfair, there is also, unfortunately, a certain nonchalance in the public opinion about everything that relates to tax evasion. Working for pay under the table is a case in point. We absolutely need a tax system that not only is extremely fair, but that also has the appearance of being fair. Every time we can close a loophole and prevent people from believing that there is a double standard that benefits those who can afford those mechanisms, we have to do so. We were talking earlier about tax havens and about specialists and experts who can teach people how to avoid their collective responsibility.

It seems to me that we have to try and close those loopholes, and that is what this bill is doing. As I mentioned before, the Bloc Québécois will support Bill C-33.

Both the absence of fairness and the perceived absence thereof create a sense of laxity within the affected society. They also cause taxpayers to feel that they are being treated unfairly. As I said, practices that do not quite comply with the legislation are becoming more and more accepted and commonplace. Moreover, the government is losing revenue that, as my colleague said, must be made up for by higher taxes elsewhere, especially for the middle class, or by cuts to necessary public services.

As I said, we will support this bill even though it lacks that something special. It is definitely relevant, and as such, I think it deserves our attention even though it is not exactly a fun read.

I will provide a little background. In Canada, taxable revenue on trusts is calculated for individuals, not families. Here, income can be split among family members, resulting in major tax advantages. In fact, this is a common financial planning tactic among higher-income taxpayers.

They use family trusts to split income among as many family members as possible to take advantage of those family members' tax brackets. Obviously, when the income is split among many, some members of the family may have lower tax rates than if just one or two family members declare the income.

Canada's income tax system is based on a progressive tax rate structure. As such, individuals who have low or medium income pay less tax than high-income earners. As I just said, splitting income is one way to save taxes within a family or household.

To take advantage of this method, one must have a family trust. In addition to allowing income splitting, the trust can protect assets against the beneficiaries' creditors or ensure the use of an asset by a spouse until death before transferring the property rights to the children. The trust can also ensure that children have sufficient capital to cover the cost of tuition or living expenses while studying.

Even though trusts may seem to be an attractive way of avoiding tax, annual management fees can run to several thousand dollars. Once again, often it is the wealthy who are able to invest and who have enough money so that the advantages and disadvantages balance out and these trusts become attractive investment vehicles. Therefore, trusts are clearly investment vehicles that are available primarily to wealthy taxpayers.

In my opinion, on the whole, taxpayers do not appreciate income splitting, because it goes against one of the main principles of taxation policy: fairness. I mentioned this earlier. To comply with the principle of tax fairness, government gradually regulated the use of trusts and tried in various ways to reduce the benefits of income splitting.

The use of offshore trusts as investment vehicles has many advantages in terms of tax avoidance. Offshore trusts enable Canadian taxpayers to shelter assets from the tax system. Since Canadian tax authorities can have a very hard time obtaining information on investments in such vehicles, this opens the door to tax avoidance.

I remember that in a report—I think it was on the show Enjeux—journalists went to Barbados to locate companies such as the ones owned by the sons of the former Prime Minister, the member for LaSalle—Émard. The journalists were astonished to find that the headquarters of CSL International was not only a law office with four employees, but also the headquarters of about 100 other companies. Unfortunately, this information was not known previously, because it is not always easy to travel to conduct the necessary investigations. That is why it is important to have an easier way to obtain the necessary information.

In January 2000, the federal finance department introduced legislation to prohibit splitting with minors. People may not use children under 18 years of age, who are usually not yet working and therefore have no income of their own.

Under the attribution rules, capital gains on shares in the trust can be split, enabling the trustees to save on tax. Contrary to the attribution rules, this provision taxes the recipient of the split income at the top marginal rate, instead of reattributing the income to the transferor or lender.

However, the lack of clear legislation pertaining to foreign trusts created loopholes allowing the use of trusts established in foreign countries in order to continue to profit from the various advantages of income splitting. Moreover, the problems with information gathering—and I gave an example of that earlier—to establish the market value of assets of offshore trusts has facilitated tax evasion. In my opinion, it is important to remember that.

We also need to remember what the market value of assets is, that is, the highest price that would be agreed upon in a completely open and unrestricted market between fully-informed, knowledgeable and willing parties dealing at arm's length without constraint. This is the definition of fair market value. As I said earlier, it is a provision that was put in in that regard.

It was hard to establish the fair market value of offshore trusts. This value could be underestimated or the owners could find ways to ensure that the people at the Canada Revenue Agency had the impression that the value was lower.

Consequently, in a section of her 2005 report the Auditor General looked at the various loopholes found in the application of the Income Tax Act. She made a number of recommendations to close these loopholes with respect to the treatment of foreign investment trusts.

Of course, a ways and means motion was introduced on November 9, 2006. The Minister of Finance included this motion in Bill C-37 and its purpose is indeed to amend various rules concerning income tax. This ways and means motion had three main components.

First, the bill amends the Income Tax Act in order to clarify and specify the tax rules for non-resident trusts and foreign investment entities. Those provisions will allow the government to better regulate the use of those offshore investment vehicles by clearly establishing the foreign investment entities that may be exempt from taxation, the rules for ensuring that the foreign trust will be deemed to be resident in Canada and the investment vehicles to be taxed. The provisions will also specify how the attribution rules will apply when a foreign trust is deemed to be resident.

On that subject, I would remind the House that California, for instance, amended its legislation two or three years ago to ensure that, in the case of a company established in California and whose head office is in California, but that does business all over the world, revenue generated by that company must be included in the revenue of the head office. People saw this as strong action against tax avoidance and against tax havens. In fact, this has existed in Canada for a number of years. As a rule, a company whose head office is in Canada must pay taxes on all its revenue, regardless of whether it is generated in Canada or abroad, as long as there is no tax treaty, of course. If a tax treaty exists—we have such treaties with several countries—it is a matter of not taxing the same entity twice for the same revenue. This is completely understandable.

The problem I want to underline, and maybe I will be able to come back to it, is that when we have a tax convention like the one we have with Barbados, where the tax rate varies between 2.5% and 1%, this is a regressive tax instead of a progressive tax. The tax rate goes down as revenues go up. Of course these are only symbolic tax rates. Canada considers that revenues have been taxed a first time in Barbados and does not tax them a second time in Canada. When the tax rate of the foreign country is reasonable and comparable to the rates we have in Canada, tax conventions are totally acceptable. Unfortunately, when we deal with a country that does not have a real and transparent tax system but a system that is used only to allow taxpayers to avoid paying income tax in Canada, we do have a serious problem.

The second aspect relates to a number of general provisions in the Income Tax Act. I am still referring to the ways and means motion of November 9, 2006. First, it changes some general provisions of the act to ensure an efficient enforcement of the measures contained in the first part. The bill proposes a few changes to the Income Tax Act to include different measures in Bill C-28, A second Act to implement certain provisions of the budget tabled in Parliament on May 2, 2006. That is to say that the bill is modifying a previous bill that had already been introduced in this House. Some of the changes were suggested by the Canada Revenue Agency to clarify or facilitate the enforcement of measures included in the Income Tax Act.

The third and final component deals with the bijural aspect of the proposed amendments.

In other words, this last part adds or modifies expressions in the English and French versions in order to respect the semantics of civil law and common law. As we know, both apply in Quebec. This is inherent to the unique nature of the Quebec nation.

Let us now examine the individual parts of the bill resulting from the means and ways motion. The first part refers to changes to the rules that apply to non-resident trusts and foreign investment entities. A certain number of amendments and clarifications to section 94 establish the rules for taxation of non-resident trusts.

This part of the bill establishes and clarifies the rules regarding taxation of non-resident trusts. These clarifications and changes are made by amending article 94 of the Income Tax Act, as I already mentioned, which sets the tax rates for non-resident trusts.

As a general rule, a trust is subject to the Income Tax Act if it has received the transfer or loan of assets from an association, a joint venture, a trust, a fund, an organization, a natural person, a partnership or a financial syndicate resident in Canada. The non-resident trust must pay tax on income to the Government of Canada. If it does not, the beneficiaries are held responsible and must pay the amounts due. However, beneficiaries only pay their share of the tax on the trust. Additional relief is provided for beneficiaries who make a minimal contribution compared to other contributions to the trust.

The various changes proposed in this section of the bill amend the rules that apply to repatriation of moneys to Canada. More specifically, these rules define additional criteria for calculating the fair market value of assets. I have already mentioned the definition of fair market value for assets held by a non-resident trust.

Second, again in part 1, there are definitions of foreign trusts exempt from the Income Tax Act. This part of the bill specifies which type of trusts are eligible for tax exemption under the Income Tax Act. These measures will ensure that only trusts truly eligible for tax extensions could use this tax benefit. This will result in fairer tax treatment for everyone. Without going into too much detail, the following list indicates which trusts can be exempt and which trusts must pay tax.

Among the trusts eligible for exemption under the Income Tax Act, the exempt non-resident trusts, are trusts for beneficiaries with a mental infirmity who are not residents of Canada, and whose contributions to the trust are made to provide for the beneficiary's needs. This goes without saying.

Also exempt are trusts established after the breakdown of a marriage to provide for the children from the marriage who are under 21 years of age or under 31 years of age if they are enrolled full time at an educational institute, as well as charitable trusts, of course.

As far as the first exemption is concerned, I believe it is entirely consistent with what the Minister of Finance announced in his budget in February on the possibility of parents amassing, through a specific plan, money to provide for the needs of their severely handicapped children.

Resident trusts eligible for tax exemption are trusts for administering or providing pension benefits to employees, as well as charitable trusts.

Finally, the changes made to the Income Tax Act essentially mean that we have to ensure, quite simply, that the legislation as a whole is consistent.

In closing, Bill C-33 will ensure better application of the Income Tax Act.

The Bloc supports this bill to restrict the use of non-resident trusts as tax loopholes. This will allow us to maintain tax fairness—or improve it since it is not fair enough yet—and also show taxpayers in general that parliamentarians are interested in this and are concerned about their perception of fairness in the system. This will bring in a little more money for the good government.

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

Mr. Speaker, this is a complex issue which deserves much attention and probably more than 45 seconds. Obviously, at each step, it must be determined if a given tax measure is adequate. Its fairness, its efficiency in generating revenues and its relevance must be taken into account.

I hope that the government will display the same maturity we are finding today in Bill C-33, which we support, but many aspects of this issue have not been addressed.

The House resumed consideration of the motion that Bill C-33, An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act, be read the second time and referred to a committee.

Income Tax Act

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

Mr. Speaker, I would like to remind this House and those who are listening that we are debating Bill C-33, Income Tax Amendments Act. The objective of this bill is to amend certain rules concerning trusts, to ensure tax fairness.

The Bloc Québécois agrees with this bill, and this amendment should have been made a long time ago. The first part of the bill deals with an amendment to the rules concerning non-resident trusts and foreign investment entities. It is an amendment or clarification of section 94. This part of the bill sets and clarifies the taxation rules for non-resident trusts. These clarifications and amendments are made through the amendment of section 94 of the Income Tax Act, which sets the taxation rules for non-resident trusts.

In general, a trust is subject to the Income Tax Act if it has received a transfer or loan from an association, joint venture, trust, fund, organization, individual, company, general partnership or syndicate residing in Canada.

Non-resident trusts must pay income tax to the Government of Canada. If they do not, the beneficiaries are held responsible and must pay the amounts owing themselves. However, beneficiaries will be taxed in proportion to their holdings in the trust. Additional tax relief will be in place for beneficiaries whose revenue is minimal compared to other revenues from the fund. The purpose is to make this balanced and sensible. The changes proposed in this part of the bill amend the rules that apply when money is brought back into Canada.

More specifically, these measures define additional criteria to be used in calculating the fair market value of assets in a non-resident trust. Fair market value is the highest price, in terms of money, that can be obtained for an asset on a completely free, unrestricted market during a transaction between a buyer who wishes to buy and a seller who wishes to sell who are prudent, informed and competent and who are acting independently of one another. Naturally, there is always some leeway in determining fair market value, but the bill nevertheless sets out the concepts in such a way as to control the tax implications of this type of activity.

The second part of the bill addresses the Income Tax Act's definition of an exempt foreign trust. This part of the bill specifies the kinds of trusts that are eligible for tax exemption under the Income Tax Act. These measures ensure that only those trusts that are truly eligible for tax exemption can benefit from this tax advantage. We know that trusts are created for all kinds of reasons. We must therefore ensure that only trusts that are eligible according to the act can benefit. This will result in fairer tax treatment of all citizens.

A list allows to distinguish between the trusts that can be exempted and the ones that must pay income tax. For example, trusts that are eligible to be exempted from the Income Tax Act are as follows: exempt non-resident trusts, trusts for beneficiaries with mental infirmities who are non-Canadian residents and whose contributions to the trust were required to support the needs of the beneficiaries. In other words, it makes quite a lot of sense that trusts whose purpose is exclusively humanitarian should not be taxed. There are also trusts that are created as a consequence of the breakdown of a marriage and whose beneficiaries are children under 21 years of age, or under 31 years of age if enrolled full time at an educational institution, resident trusts that are eligible for the tax exemption, trusts operated for the purpose of administering or providing retirement pensions to employees and charitable trusts.

Thus, the first part deals with changes to the rules applying to non-resident trusts or foreign investment entities, the second one provides the definition of foreign trusts that are exempted from the Income Tax Act and the third one contains general changes to the Income Tax Act.

The main measure provides more general amendments to this act. First, elements have been added to the employment income. This includes any amount receivable at the end of the taxation year in respect of covenants agreed to by an employee, and a change to the calculation of the amount reported through stock option plans for employees.

Then, various other items that will become deductible from employment income are added. For instance, employees will be allowed to deduct from their income legal expenses incurred in legal proceedings to collect amounts owed by the employer, and the premium under the Quebec parental insurance plan. These changes are designed to bring the Income Tax Act in line with the new realities.

For example, the parental leave scheme is very popular in Quebec. It was established when the federal government finally agreed to give back the EI amounts intended for this type of provincial initiative. It took a long time, but now the scheme is in place. It provides parents with sufficient income for flexible amounts of time, which they like better. It has already started to have a significant impact on birth. In this respect, it meets two important objectives at once. Now, we are amending the federal Income Tax Act accordingly. I think it is appropriate to support this measure and, indeed, the bill as a whole.

The last part of the bill contains amendments in relation to terms or expressions that could have a different meaning in French and in English. This may sound like a detail, but in reality, it can often cause legal problems when it comes to interpreting the law. The Bloc Québécois believes that Bill C-33 will improve the application of the Income Tax Act. The Bloc Québécois supports this bill, which will restrict the use of non-resident trusts as tax loopholes.

With fewer loopholes, the government will be able to increase its revenue by collecting from people who should be doing their part.

As an aside, this bill will fill a number of holes in the legislation in terms of tax fairness. But one glaring hole remains. I am referring to the one left open with tax treaties and tax heavens, and more specifically the one between Canada and Barbados.

Like any other tax treaty, the Barbados tax treaty initially provided that profits generated by Canadian companies should normally become taxable when the money was repatriated to Canada.

One section, section 5907, was added, which eliminated all taxation. Thus, while money invested in Barbados by Canadian companies is hardly taxed—it is almost ridiculous—thus leading to huge profits, that money can be brought back to Canada and is still not taxed. As a result, this becomes a tax incentive. At the end of the day, this is tax avoidance and has absurd repercussions. For example, over the course of 2007-08, a total of $4 billion will be brought back from Barbados in the form of dividends and recovered by Canadian companies, which will pay no taxes on that money.

We find this decision somewhat absurd, an abnormal situation that should be handled differently. Today, the Minister of Finance made a announcement regarding tax fairness and interest deductibility when companies borrow money to invest abroad. We would have liked to see part of his announcement address the tax treaty with Barbados. Surprisingly, it did not even touch on it.

During question period today, the minister was very careful not to respond to this question and to reiterate the action taken concerning interest deductibility. His announcement today more or less drove the nails into the coffin. He announced that interest deductibility will prevent double taxation. However, in five years, he is establishing a panel to examine the issue. I think it is a rather well organized retreat, but it reflects this government's lack of preparation in the related texts.

As regards the budget, we were expecting some details to be provided, and we were hoping that this tax avoidance hole would be plugged, but that is not going to happen. It is rather strange to give a warning that this is going to be done in five years from now. At the same time, a committee is being set up to look at all these issues. Usually, when it comes to finance, the government brings forward ways and means notices that immediately come into effect and that send a clear message. Let us hope that the minister's decision will not add to the negative message that was sent when the budget was tabled. At the time, the government did not explain how it was going to ensure that tax avoidance is eliminated. The specifics that were provided today can certainly, in a way, make companies feel more secure, but they are also a threat hanging over all the industries. In the industrial and financial sectors, investments are often made 5, 10 or 15 years in advance.

The message being sent today is still not good enough. And worse still—as I pointed out during the first part of my speech, in reference to the statement made today by the minister—the minister was totally silent on how the tax treaty between Canada and Barbados should be amended.

Let us not forget that we are talking about tax havens, about states where the rate of taxation is nil or very low. Their lax tax system encourages many wealthy taxpayers to discreetly transfer a portion of their fortune there, and many businesses to set up subsidiaries. They are then able to avoid paying taxes on part of their revenues.

People complain that they pay too much taxes and they wonder why that is, given the level of services that they get in return. There is one aspect that must be taken into consideration: if there are groups in our society that do not pay their share, then other groups must make up for the shortfall. What happens in reality is that either some people pay more taxes than they should, or else some services are not provided, all this because we did not manage to put a stop to the tax avoidance situation caused by this tax treaty.

It is very surprising that the government did not go forward on that issue since the problem is the result of changes made by the former Liberal government. We have been counting on the new Conservative government to address the situation. However, even today, we still do not have any indication that it intends to do that. Even though the Standing Committee on Finance is making a study on the subject, after the Bloc made a proposal to that effect with the support of the Conservative members, the minister does not seem ready to do anything and is not indicating that he would take action even if there were recommendations going in that direction.

The House can be assured that in the report that will be produced at the end of the current review by the finance committee, the Bloc will undoubtedly make concrete recommendations. Indeed, on tax issues it has often been said that the questions regarding trusts are very complicated. However, with regard to the issue of the tax convention with Barbados, there is a very simple solution. There is one subsection in the very long section 5907 that we could simply abolish. After that, all profits coming from Barbados could be taxed at the time they are brought into Canada.

We would find that quite acceptable. If we had a tax agreement whereby, when money was invested abroad, the profits would be adequately taxed once they were brought home, an appropriate deduction could then be allowed. This is roughly the model developed by the United States and Japan. This is a theory, a practice that should be examined by Canada. Rather than continuing with the current practice—the very discriminatory regulation 5907—we could quite simply allow the money to be invested in Barbados, and when it is comes back to Canada, subtract the amount the company has already paid in income tax to Barbados from the amount due to Canada. There would still be a significant contribution within Canada to correct the situation.

As I am being signalled that I only have two minutes left, I will end with these comments. I urge the government to examine this issue over the course of the next few weeks. We hope that the study by the Standing Committee on Finance will result in concrete measures being introduced in the fall economic statement or next year's budget. However, a solution absolutely must be found because, at present, all political parties agree that we are not getting our money's worth, despite the contribution of taxpayers. Such measures could be key to lessening the burden on taxpayers, on those who benefit from various government programs. It is important that we move in that direction.

The Bloc Québécois continues to take a constructive approach. We are voting in favour of the bill but we hope that the Conservative government will move forward as quickly as possible to find real and concrete solutions to the significant problem of tax evasion presented by the Canada-Barbados Income Tax Agreement.

The House resumed consideration of the motion that Bill C-33, An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act, be read the second time and referred to a committee.

Income Tax Amendments Act, 2006

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

Mr. Speaker, it is my pleasure to rise to speak on this bill. I know that my remarks will be interrupted because there is only five minutes left before members' statements and oral question period after. In the first part of my remarks and from the outset, I want to say that the Bloc Québécois will be supporting this bill with respect to changing the rules for foreign investment entities and non-resident trusts. It was high time that this kind of action be taken to bring about changes in the major areas in this bill, on which I will elaborate a little later.

On this day when the Minister of Finance announced what he called a tax fairness debate, we can see that the government has overlooked two things. This bill should also have included something about the whole issue of the tax treaty with Barbados. If there is a loophole for tax avoidance in Canada right now, that is the one. In addition, on the face of the government's proposal this morning, it would seem that it simply voids what the budget said. Very rarely is a decision that is not to be implemented for another five years, and that will be submitted to an advisory panel in the meantime, announced in a statement by the finance minister.

The government realized somehow that what was announced in the budget was not specific enough. It was having a major negative impact on the economy while at the same time not addressing all potential abuse in that area. It is therefore right to vote for Bill C-33 to ensure that this legislation can come into force. Indeed, tax fairness issues had been identified by the Auditor General, and even by predecessors of hers, but had not yet been addressed.

However, today, we would have liked—particularly the Bloc Québécois—the government to take advantage of the great opportunity provided by this bill to correct a problem, to address a major flaw in Canada's whole international tax structure, namely the infamous tax treaty with Barbados. We expected the minister to deal with this issue. Unfortunately, he merely dealt with the deductibility of interest costs, by coming up with a solution that looks like an attempt to muddy the waters. Moreover, there is no indication at all that the issue of the tax treaty with Barbados will be settled.

When we talk to people about this issue, they find it a bit complicated. It is simply a matter of understanding that, under the existing system—which is the result of the government's action, not something that happened by accident—each and every year, we lose $800 million in taxes that should be paid by businesses on the profits that come back from Barbados without being taxed. Indeed, we would have expected the government to do something about this situation in today's legislation, but it did not.

The bill amends the rules that apply to non-resident trusts and to foreign investment entities. These changes were necessary in order to amend the Income Tax Act, which sets the tax rules for these non-resident trusts. Normally, a trust falls under Canada's Income Tax Act if it has received a transfer or the proceeds of property from a partnership, joint venture, trust, fund, organization, etc. The trust is required to pay taxes on its revenues to the Government of Canada. If it does not do so, beneficiaries are held responsible and they must pay those taxes themselves. However, the amounts imposed on beneficiaries will reflect their contribution to the trust. An additional relief will be provided to those beneficiaries whose contribution is minimal, compared to the other contributions made to the trust.

So, this bill includes various measures and amendments that change the rules that apply when this money is brought back to Canada. More specifically, these measures define the additional criteria used to determine the fair market value of the assets held by a non-resident trust. In addition to correcting this situation, we would have liked the government to also deal with the issue created by the tax treaty with Barbados.

I will let the House reflect on this issue that is not dealt with in the bill, on this major lack of fairness that has a huge impact on Canada's tax system.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, I rise to continue my remarks.

This is a technical bill. It is designed is to prevent a circumvention of tax rules and to prevent tax evasion, particularly through the use of tax havens. This bill results from a consultation process initiated in 1999 by the previous Liberal government. We saw its fruition in 2005. Bill C-33 is basically the photocopy of the Liberal initiative commenced over those years. As a consequence, the Liberal members of Parliament will be supporting the bill, as I hope all members of the House will.

I will start with a little background. As we know, Canada has a fairly complicated tax system. It has been negotiated over 14 years of consultation. It is fairly complex in that many considerations have to go into in writing an income tax act. We also have something in the order of 81 bilateral treaties with other countries, so any amendments on one side have to be balanced with amendments on the other.

The essential goal is to make sure that Canadian companies are not taxed twice, once in the jurisdiction in which the money is earned, and then once again in the jurisdiction of residence. Generally this system works quite well.

Occasionally, however, some residents go to zero tax jurisdictions and the result is that there is no tax at all, which I think all members will agree is an unfair proposition. Bill C-33 will help to ensure that when this happens all that income will be taxed in Canada.

We as legislators need to ensure that the Canada Revenue Agency has the proper tools in order to be able to make sure that everyone pays his or her fair share. In the previous Liberal government, we worked very hard to ensure that all Canadians paid their fair share.

In the 2005 budget, we provided the Canada Revenue Agency with an additional $30 million annually to strengthen its capacity to administer the tax system in areas where aggressive tax planning and compliance risks have the potential to erode the tax base.

Our government used that money to create 11 aggressive international tax planning centres of expertise whose main focus is to develop new ways to track and combat aggressive tax planning and the use of international tax shelters. These are centres in which we gather together the best and the brightest Revenue Canada has to offer in order to be able to deal with a series of complicated schemes to see whether they are designed merely to avoid income tax in this country. Specifically, the centres were designed to deal with tax havens and any illegal activities that were going on in those tax havens.

In order to effectively combat this problem, we must work with international partners, because there is no sense in being the boy scouts of the world. Thus, part of our responsibility is to work with the OECD, the Pacific Association of Tax Administrators and the Joint International Tax Shelter Information Centre.

All of these centres of excellence were created by the previous Liberal government.

We want to weed out the good taxpayers from the bad taxpayers. That is not always an easy job.

It is regrettable that the government seems to be engaged in some exercise in overkill. Let us take, for instance, the minister's latest blunder in a whole series of blunders coming out of the budget and in what looks like an endless series of fiscal missteps. He said at page 241 of the budget that he wants to “eliminate the deductibility of interest incurred to invest in business operations abroad”.

In short, the budget proposed to put an end to all interest deductibility for loans used to invest abroad. This would have ended a longstanding principle that when we invest money abroad the interest is considered a cost of earning it and is therefore deductible.

Since just about every other major developed country continues to allow these homegrown operations to do this, eliminating Canada's advantage in this respect would put our companies at a serious disadvantage in the competitive global marketplace.

The policy received virtually universal scorn from pretty well everyone from the Chamber of Commerce to any other business entity. Allan Lanthier, former chairman of the Canadian Tax Foundation, had this to say:

This measure would put Canadian companies at a significant competitive disadvantage and I think the economic fallout to the Canadian economy is potentially disastrous...I don't think the finance minister understands that, I don't think he was properly advised by his Finance officials.

I've been practising [tax] law for 35 years--this is the single most misguided proposal I've seen out of Ottawa in 35 years.

Let me quote Len Farber, formerly a senior official with the Department of Finance, who said:

This goes beyond tax havens, this impacts good, complying, taxpaying corporations in many ways. The Canadian economy is a fairly small economy and if a company has reached its capacity here, if it doesn't continue expanding, it becomes a target for a takeover.

We have certainly seen that. Mr. Farber continued, saying:

Now they're making the cost of borrowing higher, so it's a pretty hard blow.

The budget did not distinguish if a company wants to borrow money to invest in the Cayman Islands or the United States or Germany. In one broad stroke, the finance minister lumped every single country in the world together and in the same breath told us that this measure was to fight the abuse of tax havens.

Shortly after the budget, the minister went to Toronto but had to beat a hasty retreat. He had to admit that he had made a colossal blunder. He now says that he will only go after Canadian companies that abuse the system by using tax havens for their investments.

The minister then got into a series of clarifications. Beware of clarifications, I say to everyone, because that is political-speak. What it means is: “I really goofed and what I am trying to do is redeem myself”. When questions got raised after the budget, he was quoted as saying:

We are satisfied with what we proposed in the budget, but I will certainly listen [to stakeholders]...

It would have been nice if he had listened before he put it in the budget. He continued, saying:

We have to have budget confidentiality before we bring issues forward.

However, one can have consultations. I know that idea is novel for his government, but it can be done. The minister continued:

But I will listen and we will design [the measure] in the most advantageous way possible.

People then legitimately asked, “So what does that mean?” Finance official and director of communications Dan Miles said:

No, he's not backing down. The policy is the policy.

Really, though, it is the policy but not necessarily the policy.

On May 8, the minister went to Toronto again to issue another clarification. Today, he was in Toronto again, to issue another clarification, so we are clarifying on the clarifications on the previous clarifications.

First of all, he said he was against all interest deductibility. Then he was only against interest deductibility through tax havens. Then it was only for two years, which meant, okay, I have tax deductibility for two years, so I will not really be upset for two years. Then he said no, it would now be 10 years, so I will be upset in 10 years. He then clarified again to say that it was not all interest deductibility and it was not two years and it was not 10 years and it was not just against tax havens: it was against double-dipping.

What the minister knows about double-dipping could probably be learned at a Dairy Queen, but now today he is against towering, which is a sort of subset of double-dipping. It is sort of like sprinkles on the double-dip. Now he is against the sprinkles on the double-dip.

He had changed this from two years to 10 years but now he is against it for five years. In five years he will be upset about it, but maybe not even then, at least until the tax experts and the panel get back to him. If we then read the rest of his press release, it is all blah-blah and Conservative propaganda.

If would be really interesting to find out, at one point or another, what it is the minister actually means as distinct from what he actually said in the budget. Also, as I and others have asked, if he is going to change the budget, could he at least table a precise ways and means motion so that we know exactly what it is he is upset about?

I do not know much about towering, but from what I do understand, it is a series of corporations and tax-flowing entities, that is, entities through which people can flow their profits, the objective of which is to eliminate withholding tax. It is not clear to me at this stage whether we are merely closing a loophole for a foreign jurisdiction, which will benefit the foreign treasury of another country but will have no impact on ours.

We may have gone through this whole entire exercise of corporation, non-corporate entity, another corporation, another non-corporate entity, through to the operating company and back up and down that whole tower, as they describe it, and all we will have achieved is a tax point for a foreign jurisdiction.

I hope that is not what he means, because then he certainly has a lot of people upset about absolutely nothing. If that is the case, then he will reduce the after-tax revenue to Canadian companies. That makes a lot of sense, does it not? Thus, we put money into somebody else's treasury, take money out of Canadian companies, and do nothing for our own treasury.

It will not benefit our treasury at all, so I do not know what the fuss is all about. Hopefully, we will find out if the minister actually tables something that has some precision and some meaning. As I said, the press release is just a glorified bunch of propaganda and rhetoric, but is very short on specifics.

What is obvious today is the minister has backed down from his position of all interest deductibility all the time to a microdot of interest deductibility. In two months from the budget, he has gone from two years, to ten years, to five years. He is so enamoured with this spinning exercise that he has spun himself into the ground. He is so excited about tax havens and so-called tax fairness that now he appears to be in favour of tax havens and is not fussed about tax unfairness.

I sincerely hope the minister is choosing not to throw the baby out with the bathwater and that he will arrive at some level of precision to which we are all entitled.

The House resumed from March 29 consideration of the motion that Bill C-33, An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act, be read the second time and referred to a committee.

Opposition Motion—Finance

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, I am very happy to speak to this motion because what we are addressing concerns an issue that is of crucial importance in my riding of Newton—North Delta. It is the issue of income trusts. There is no other issue on which I have received more phone calls, letters and e-mails from my constituents. I do not know how many times I have heard from them. Many voted Conservative and not Liberal in the last election and said that the government they voted for is not the one that would have reversed its position on this. If it did, my constituents would never have given it their conditional trust, never mind the responsibility to handle income trusts.

Because of the volume of complaints I received, I decided to hold a town hall meeting for those who had lost so much of their hard-earned savings. I listened and could not believe all I was hearing. These are ordinary Canadians who do not speak from positions of great wealth. Many are not in their peak earning years any more. Many cannot even dream of making up half of what they lost because of this decision.

I sat down with them in the town hall meeting and we talked about the real costs of this decision. We know the numbers: an estimated $25 billion, an average of $25,000 for each Canadian. However, the numbers are just the facts. They do not tell the story. They are too abstract. One cannot understand these losses until one actually sits down with some of the people who have suffered from this decision, but talking and consulting with the Canadian public does not seem to be a core strength of the government to begin with.

One gentleman, Mr. Maurice Bouchard, was one of the Canadians who based his retirement plans on an investment portfolio that included income trusts. He is 60 years old. He has a mortgage and four children, one who has lost his chance to own a home because of this meanspirited decision by the government. Mr. Bouchard did not expect to be in this position. He has worked hard all his life. He has paid his taxes. He has been an active member of the community in Newton—North Delta.

Here in Ottawa where it is all about numbers on the books, we could use some of his clarity. For him it is very simple. He stated, “How can I tell anyone, my kids or grandchildren, that the high morality of one's word as a promise is still the foundation of our society...when our political leader of the day breaks his own word for no good reason?” That is a very good question. It is the one I cannot see the government answering any time soon.

It is not just those who are planning their retirement who were hit hard by this decision. I also received an e-mail from Mr. Bouchard's son. He is 23 years old, just starting out in life. He has worked hard doing overtime in labour jobs, rarely making more than $13 per hour. This young man, Mr. Mark Bouchard, does not want to be a millionaire. He just wants what so many other Canadians want. He wants to own a home.

Of course, the government might not pay much attention to the property prices in my riding of Newton—North Delta, but let me make it simple. This young man put his savings for a home into income trusts. Those savings are gone now.

All I can say is that I wish the Conservatives had the wisdom to speak to ordinary Canadians like the Bouchards before they made their decision. We on this side of the House know that there were better ways to manage the file. That is what this motion is all about.

We all know that the government had the opportunity with the committee process to truly listen to Canadians before it broke its promise to them.

I know many of the measures in Bill C-33 are about tax fairness, avoiding tax havens, ensuring no Canadian has a tax advantage over another and for the principle of fairness, which is why I support the bill.

However, there is no fairness involved with this aspect of income trusts. My colleague, the hon. member for Markham—Unionville, the finance critic who worked so hard on tax reform in his role as a minister, put it very well. He said that this was a “nuclear bomb” approach to solving this problem. There were alternatives and he clearly outlined them in his speeches here in the House.

As for consultations, we heard about advisers on taxation but there are no better advisers on taxation than hard-working Canadian families, like the families in Newton—North Delta that were affected; families like those who spoke with me at my town hall meetings; and families like those who have written to me or phoned my office in numbers the House could not imagine. I have received more phone calls, e-mails and letters on this one issue than on any other issue.

If the government had consulted with the business sector it would have heard the same things too. It would have heard what many people wisely predicted but has now become a reality. The income trust tax has resulted in at least 15 takeover attempts in the last five months. Interest deductibility will just make this situation worse.

Again, the government has broken its promise to ordinary Canadians. It has mismanaged this file and it cost hard-working Canadian families over $25 million in losses in one day. We could be waiting a long time for sound fiscal management from the government, as we had strong fiscal management from the previous government.

Time is money. Many Canadians are now wondering what happened to the sound fiscal management that 13 years of Liberal government brought in with 8 years of balanced budgets and the best economic performance in the G-8 countries.

It is not me who is saying this. In fact, if we go back to the Economist magazine, it says that Canada was one of the best countries, the second best country to Denmark, in which to invest. If we look at between 1990 and the time we left the government, Canadians were taking 11% more in their take-home pay after paying taxes. Many Canadians, like my constituents, want the old Canada back now.

Business of the House

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, as you are aware, this week is strengthening accountability through democratic reform week. It has been a busy week for the democratic reform family of bills.

We sent out invitations for the first birthday of Bill S-4, the Senate tenure bill, which Liberal senators have been delaying for almost a year now.

While we are disappointed with the behaviour of Bill S-4's caregivers, we did have some good news this week with the successful delivery of two new members of the family: Bill C-54, a bill to bring accountability with respect to loans; and Bill C-55, a bill to expand voting opportunities.

There is more good news. We are expecting.

Tomorrow, I will be introducing an act to amend the Constitution Act, 1867, on democratic representation, which is on today's notice paper.

Bill C-16, fixed dates for elections, was finally allowed by the clingy Liberal-dominated Senate to leave the nest when it was given royal assent last week.

With respect to the schedule of debate, we will continue today with the opposition motion.

Friday, we conclude strengthening accountability through democratic reform week with debate on the loans bill, possibly the Senate consultation bill and, hopefully, Bill C-52, the budget implementation bill.

Next week will be strengthening the economy week, when we will focus on helping individuals, families and businesses get ahead.

Beginning Monday, and continuing through the week, the House will consider: Bill C-52, the budget implementation bill; Bill C-33 to improve our income tax system; Bill C-40, to improve the sales tax system; Bill C-53, relating to investment disputes; and Bill C-47, the Olympics bill, which help us have a successful Olympics. Hopefully, we can get to Bill C-41, the Competition Act.

If time permits, we will also call for third and final reading Bill C-10, the minimum mandatory sentencing bill.

Thursday, May 17 shall be an allotted day.

Wednesday, May 16, shall be the day appointed, pursuant to Standing Order 81(4)(a), for the purpose of consideration in committee of the whole of all votes under Canadian Heritage of the main estimates for the fiscal year ending March 31, 2008.

Thursday, May 17, shall be the day appointed for the purpose of consideration in committee of the whole of all votes under National Defence of the main estimates for the fiscal year ending March 31, 2008.

Finally, there is an agreement with respect to the debate tomorrow on the 13th report of the Standing Committee on Public Accounts. I believe you would find unanimous consent for the following motion.

I move:

That, notwithstanding any Standing Order or usual practice of the House, the debate pursuant to Standing Order 66 scheduled for tomorrow be deemed to have taken place and all questions necessary to dispose of the motion to concur in the 13th Report of the Standing Committee on Public Accounts be deemed put and a recorded division be deemed requested and deferred to Wednesday, May 16, 2007, at the expiry of the time provided for Government Orders.

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, today and tomorrow we will continue our focus on making our streets and communities safer by cracking down on crime.

This morning we completed the debate at report stage on Bill C-10. That is a bill to introduce mandatory penalties for gun related crimes and other violent acts. Our government proposed amendments at report stage to restore what the Liberals had gutted from the bill at committee, mainly those aspects that will ensure violent criminals actually serve time in jail. We will be voting on these amendments next week.

We will continue this afternoon with Bill C-22, which is the age of protection legislation, followed by Bill C-27, the dangerous offenders legislation that would require criminals who are convicted on two separate occasions of a violent crime to prove to the court why they are not a danger to the community.

Next week will be strengthening accountability through democratic reform week. It effectively kicked off today when Bill C-16, the fixed dates for elections act, received royal assent.

On Monday we will resume debate on Bill C-43. That is the bill that proposes to give Canadians a say in who they want representing them in the Senate.

Our government will be introducing a number of new measures in the House of Commons next week, which I will address at the appropriate time.

Of course, we still have Bill S-4, the bill to establish Senate term limits, which has been languishing in the Senate for almost a year now. It would be nice if the Senate passed that. It would be nice if the Liberal senators could get on with it, so that we could actually have that bill here in the House of Commons as part of our focus on democratic reform next week.

Tuesday, May 8 and Thursday, May 10 will be allotted days.

Pursuant to Standing Order 66 I would like to conclude debate tomorrow on the 11th report of the Standing Committee on Justice and Human Rights, and I would like to conclude debate on May 11, 2007 on the 13th report of the Standing Committee on Public Accounts.

Subject to an agreement with other parties, there may be interest in concluding debate at second reading of Bill C-33, the income tax bill, as early as tomorrow.

On the question of Bill C-30, we see elements of that legislation that we brought forward that are very valuable relating to biodiesel, alternative fuels and so on, and we will seek ways of introducing that in the House of Commons. However, we have absolutely no intention of bringing forward the Liberal carbon tax plan, which is now at the fore of that bill, which would establish an unlimited right to pollute for polluters. All they would have to do is pay and they would have an unlimited right to pollute. That is not our approach. We are bringing in regulations to achieve real reductions in greenhouse gases. That is our approach.

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, today we will continue with the debate on the opposition motion.

Tomorrow we will begin debate, as I said earlier, on one of the government's bills to modernize the Senate of Canada, Bill C-43. This is an act to provide for consultations with the electors on their preferences for appointments to the Senate.

In fact, yesterday the Prime Minister announced that Bert Brown would finally take his seat in the Senate after being elected twice by the people of Alberta. For those who say it cannot be done, we are getting it done. We will continue to get the job done for the other provinces, with the bill, so they too can elect senators. The Senate elections bill, along with the bill to limit terms of senators to eight years will achieve meaningful Senate reform. Meanwhile, we have talked about constitutional reform. We do not think it is necessary. It can be done without it.

However, in response to the other question raised by the opposition House leader on Bill C-16, we will be bringing it forward. We have indicated that we will bring forward a motion to ask that the amendments by the Senate be removed and to communicate that to the Senate. We will bring that motion forward on Monday. We believe we have the support in the House to have that secured so we can have fixed date elections that cannot be tampered with. That will be on the agenda for Monday, followed by Bill C-52, the budget implementation bill. BillC-43 will be the backup bill on that day. That is the Senate consultations.

Tuesday, April 24 and Thursday, April 26 shall be allotted days.

On Wednesday, we will resume debate on BillC-52, the budget implementation bill, if it has not been completed Monday. It will be followed by Bill C-40 on sales tax and Bill C-33 on income tax.

Friday, April 27, we will continue with those same finance bills.