Bill C-28 (Historical)

Budget and Economic Statement Implementation Act, 2007

An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007 and to implement certain provisions of the economic statement tabled in Parliament on October 30, 2007

Part 1 implements goods and services tax and harmonized sales tax (GST/HST) measures proposed in the March 19, 2007 Budget but not included in the Budget Implementation Act, 2007, which received Royal Assent on June 22, 2007. Specifically, the Excise Tax Act is amended to
(a) increase the percentage of available input tax credits for GST/HST paid on meal expenses of truck drivers from 50% to 80% over five years beginning with expenses incurred on or after March 19, 2007;
(b) increase the GST/HST annual filing threshold from $500,000 in taxable supplies to $1,500,000 and the annual remittance threshold from $1,500 to $3,000, both effective for fiscal years that begin after 2007;
(c) increase the GST/HST 48-hour travellers’ exemption from $200 to $400 effective in respect of travellers returning to Canada on or after March 20, 2007; and
(d) implement changes to the rules governing self-assessment under Division IV of Part IX of the Excise Tax Act to ensure that GST/HST applies appropriately in respect of intangible personal property acquired on a zero-rated basis and consumed in furthering domestic activities, applicable to supplies made after March 19, 2007.
Part 2 amends the non-GST portion of the Excise Tax Act to implement measures announced in the March 19, 2007 Budget. Specifically, the excise tax exemptions for renewable fuels, including ethanol and bio-diesel, are repealed, effective April 1, 2008.
Part 3 implements income tax measures proposed in the March 19, 2007 Budget but not included in the Budget Implementation Act, 2007, which received Royal Assent on June 22, 2007. In particular, it
(a) introduces a new Working Income Tax Benefit;
(b) eliminates income tax on elementary and secondary school scholarships;
(c) eliminates capital gains tax on donations of publicly-listed securities to private foundations;
(d) enhances the child fitness tax credit;
(e) expands the scope of the public transit tax credit;
(f) increases the lifetime capital gains exemption to $750,000;
(g) increases the deductible percentage of meal expenses for long-haul truck drivers;
(h) provides tax relief in respect of the 2010 Winter Olympic and Paralympic Games;
(i) allows for phased-retirement options for pension plans;
(j) extends the mineral exploration tax credit;
(k) enhances tax benefits for donations of medicine to the developing world;
(l) streamlines the process for prescribed stock exchanges;
(m) introduces an investment tax credit for child care spaces;
(n) introduces a new withholding tax exemption with respect to certain cross-border interest payments;
(o) prevents double deductions of interest expense on borrowed money used to finance foreign affiliates (the Anti-Tax-Haven Initiative);
(p) eases tax remittance and filing requirements for small business;
(q) introduces a mechanism to accommodate functional currency reporting;
(r) provides certain tobacco processors that do not manufacture tobacco products with relief from the Tobacco Manufacturers’ Surtax; and
(s) provides authority for regulations requiring the disclosure by publicly traded trusts and partnerships of information enabling investment managers to prepare the tax information slips that they are required to issue to investors on a timely basis.
Part 4 implements the disability savings measures proposed in the March 19, 2007 Budget. The measures are intended to support long-term savings through registered disability savings plans to provide for the financial security of persons with severe and prolonged impairments in physical or mental functions. Part 4 contains amendments to the Income Tax Act to allow for the creation of registered disability savings plans. It also enacts the Canada Disability Savings Act. That Act provides for the payment of Canada Disability Savings Grants in relation to contributions made to those plans. The amount of grant is increased for persons of lower and middle income. It also provides for the payment of Canada Disability Savings Bonds in respect of persons of low income.
Part 5 implements measures that provide for payments to be made to provinces as a financial incentive for them to eliminate taxes on capital under certain circumstances.
Part 6 enacts the Bank for International Settlements (Immunity) Act.
Part 7 amends the Pension Benefits Standards Act, 1985 to permit phased retirement arrangements in federally regulated pension plans by allowing an employer to simultaneously pay a partial pension to an employee and provide further pension benefit accruals to the employee. These amendments are consistent with amendments to the Income Tax Regulations to permit phased retirement.
Part 8 authorizes payments to be made out of the Consolidated Revenue Fund for the purpose of Canada’s contribution to the Advance Market Commitment.
Part 9 amends the Canada Oil and Gas Operations Act to authorize the National Energy Board to regulate traffic, tolls and tariffs in relation to oil and gas pipelines regulated under that Act.
Part 10 amends the Farm Income Protection Act to allow financial institutions to hold contributions under a net income stabilization account program.
Part 11 amends the Federal-Provincial Fiscal Arrangements Act to provide for an additional fiscal equalization payment that may be paid to Nova Scotia and Newfoundland and Labrador. This Part also specifies the time and manner in which the calculation of fiscal equalization payments will be made and it amends that Act’s regulation-making authority. In addition, this Part makes consequential amendments to other Acts.
Part 12 amends the Canada Education Savings Act to clarify the authority of the Minister of Human Resources and Social Development to collect, on behalf of the Canada Revenue Agency, any information that the Canada Revenue Agency requires for purposes of administering the registered education savings plan tax provisions.
Part 13 authorizes payments to be made out of the Consolidated Revenue Fund to an entity, designated by the Minister of Finance, to facilitate public-private partnership projects.
Part 14 implements tax measures proposed in the October 30, 2007 Economic Statement. With respect to income tax measures, it
(a) reduces the general corporate income tax rate;
(b) accelerates the tax reduction for small businesses;
(c) reduces the lowest personal income tax rate, which automatically reduces the rate used to calculate non-refundable tax credits and the alternative minimum tax; and
(d) increases the basic personal amount and the amount upon which the spouse or common-law partner and wholly dependent relative credits are calculated.
Part 14 also amends the Excise Tax Act to implement, effective January 1, 2008, the reduction in the goods and services tax (GST) and the federal component of the harmonized sales tax (HST) from 6% to 5%. That Act is amended to provide transitional rules for determining the GST/HST rate applicable to transactions that straddle the January 1, 2008, implementation date, including transitional rebates in respect of the sale of residential complexes where transfer of ownership and possession both take place on or after January 1, 2008, pursuant to a written agreement entered into on or before October 30, 2007. The Excise Act, 2001 is also amended to increase excise duties on tobacco products to offset the impact of the GST/HST rate reduction. The Air Travellers Security Charge Act is also amended to ensure that rates for domestic and transborder air travel reflect the impact of the GST/HST rate reduction. Those amendments generally apply as of January 1, 2008.

Budget and Economic Statement Implementation Act, 2007

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, when talking about budget bills, a ways and means motion is something I think all of us have a real interest in. When we have an opportunity, whether it is a last minute opportunity or not, to stand and speak in the House on things that matter to us, I am glad to have that opportunity.

Bill C-28, which we are talking about today, is not something with which we are 100% happy but, at the same time, do Canadians want an election? No. We have had plenty of them. The next election will be my fifth in eight years and I am not anxious to go on the hustings again. In fact, the $500 million that an election costs, which is the last number that I heard, I would much rather see it being invested in our children, our seniors or helping to lower the tax rates, a variety of things.

A far better idea for us is to keep the government going and move it forward for all of us.

As my colleague said, we are supportive of a variety of things in the bill but there are other issues that we are not. The economic policies of the current Conservative government are different in some ways from the policies of the Liberals. They are much more designed to be focused on the next election, which the Conservatives have been most anxious to have. I am not sure they are as anxious today to have it as they were previously, but they were quite anxious to have one. Our party and our leader were quite clear in not taking the bait and falling into that trap of going back into an election that, at this particular time, is unwarranted and could quite possibly bring us back into the same situation, except we could be on the other side of the House rather than on the opposition side.

However, I for one am not interested in going down that road at this particularly moment. I want to go down that road when we have clear, decisive issues on which the public can make a decision.

Even though we support some of the measures in Bill C-28, the idea of reinstating our Liberal personal income tax cuts was quite interesting. We had reduced it to 15% but in the Conservatives' very first budget, which, to me, indicates who they really care about, they increased the very lowest rate up to 15.5%. That rate is not one that the corporations or the rich worry about but it is certainly one that affects thousands of low income Canadians.

Again, that, as with many other issues, has indicated to me where the Conservatives' priorities lie and they do not lie with many people in Canada who need that helping hand up, which many of us support.

We also oppose the Conservatives' economic vision. I do not think they have one. I think they have a vision strictly on the next election and on how to get there and how to get a majority government, which is not why Canadians sent us here. They sent us here to effect a positive Parliament and to work on behalf of all Canadians, not to have an eye on how soon we can have an election campaign so we can get a majority. Our job is to come here every day and to work in the best interest of Canadians, period, for those who are rich and well off and for those who are not as wealthy as they might like to be.

The GST cut is ridiculous. I know it was a political move by the government but I look at all of the things in which we could be investing that $5 billion GST cut, whether we are talking about investing it in our seniors, in child care or in learning opportunities. We could be doing so much with that $5 billion.

I am sure the Canadian public could think of what we should do with the $5 billion rather than cutting the GST. We only need to look at our cities and the campaign in Toronto, which is the city I represent, for the 1¢ now out of the GST. We could take that $5 billion and reinvest it in our communities or even target it to our major cities.

This week, campaign 2000 released a huge report about how much poverty there is in Canada. A lot of people like to think that the poverty level is quite low. It has been a very difficult issue to deal with and as much as we try to move forward and reduce it, we are reducing it very slowly.

Far more investment needs to be made in education so we can ensure people get an education because, as far as I am concerned, education is the key to ending poverty. A good education reduces poverty because education opens the door to many opportunities. However, education for some people is way beyond their means. Refocusing some of the $5 billion on those opportunities would have been a good thing to do.

Early learning and child care would probably have been this century's newest and best social program. It would have provided help for a lot of struggling single parents. One area in my riding is quite affluent but I also have areas that are very high need areas. Many women in my riding who are single moms went back to school to get a job but now they cannot afford to put their children into child care where it is safe for their children or the waiting list for subsidies is huge.

As much as we say that we want to get people into a healthy economic stream, if we do not provide learning opportunities for them and safe environments for their children, then we are wasting our time. We can spin our wheels as much as we want talking about how we will end poverty, but if we are not providing the opportunities for those people who are at the minimal level, then we will never succeed.

The Liberal Party made a commitment to early learning and child care, although it did take us a while to get it because when we came into government in 1993 we had a $43 billion deficit. Canada was almost at the point of bankruptcy. It took six or seven years for us to deal with that issue and to get the country's finances in order. From that point, we were able to start reinvesting and working on achieving the goals that we all wanted to see go forward.

Unfortunately, that did not happen. We did not end up with the support of the NDP and the government was defeated. I expect that it will be a very long time before there will be a desire to have that new social program here in Canada again.

It took a long time to get the provinces on board and to do all of the work that is required for these kinds of agreements. They do not happen overnight. A lot of great work was done by my colleague and it is unfortunate that we were not able to see that program come to fruition. It was just one more casualty, but I do not think the people who voted thought that would happen.

Politics being what it is, governments come and governments go, as the Conservative government will. We will continue to ensure we move rapidly forward so that when an election does come, we will have plenty of opportunity to lay out our platform showing where we will go to ensure we have a richer, fairer, greener Canada.

If we want to have enough money to invest in our children, in low income seniors and so on and so forth, we need to ensure we also have a strong economy. Our manufacturing sector and our auto industry are suffering tremendously as a result of the rising loonie and we need to deal with that issue. We need to find a way to protect jobs.

When we talk about jobs we are not talking about $7 an hour jobs. For people to feed their family and pay the mortgage, they need to earn more than $7 an hour. The comment about how the number of jobs has increased is not a valid comment. As a result of various issues, we are losing the good quality jobs that Canadians had but we do not hear the Conservative government telling us how it will offset this problem.

An important issue for all of us is to ensure that Canadians are employed. We do not want our country to go into a recession. Many of us remember how difficult that was for many people. We want to have a strong Canada and we need to ensure we are moving forward in a positive way.

[Alexa McDonough, NDP, Halifax, NS]

Mr. Speaker, I know the Liberal member who has just spoken is not from Atlantic Canada, but hopefully we are all here in this place continuing ongoing nation-building.

The member will be very aware of the fact that what was originally labelled the Atlantic accord has become a major source of Atlantic discord. I am sure that the member will be aware that her members, together with all other opposition members, were represented in a briefing that finally came about. It was like a Keystone Cops routine, three times scheduled, three times cancelled.

It finally took place and what became most clear of all is that there is enormous discord between the federal government's interpretation of what the new provisions contained in the bill that is before us mean and what the Nova Scotia government interprets it to mean, and in fact was set out in a householder that went out to every single Nova Scotian.

I wonder if the member could comment on whether she thinks it is not really a cop-out for the Liberal opposition members to sit in their seats rather than take a stand against the budget for a number of reasons. Among them, there is the fact that the Atlantic accord, in its original form, a signed, sealed, legal document, no longer exists, and actually it exists in a form that is so wide open to interpretation that it actually is the same thing as shredding the Atlantic accord.

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, I recognize that the hon. member is from Nova Scotia but I would like to remind her, in case she forgot, that I was born in the Maritimes, in Moncton, New Brunswick. There is a piece of one's heart, I believe, that is always where one is born, so the issues in and around the Maritimes are always things I am pretty sensitive to and am always concerned about, as I am for all of Canada, but I think all of us carry that little special part in our hearts about where we were born.

I would like to remind the hon. member, referring to Tom Flanagan's book on our current Prime Minister, that on page 230 there is a quote in regard to our last election. It says, “No matter how well-designed our campaign had been, it would have been hard for us to win if the NDP had not held up its end.”

Therefore regrettably, when the accord was dismantled and put together again in what the Conservatives think is an acceptable way, which clearly is unacceptable to me or to the member, we would not be dealing with this issue had the NDP not supported the bringing down of the government.

However, in addition to dealing with the accord, there is the issue of $39 million being cut from the regional economic development agencies. That is just one of the many cuts that the Conservatives made in the last budget.

I am sure that $39 million would have been very helpful in the Maritimes in dealing with many of those challenges. They have to make sure that jobs are created, that money is reinvested in manufacturing and all of the other issues and the pressure areas that they deal with in the Maritimes, as they deal with other issues in the west and in central Canada.

There was an $18 million cut from the literacy skills program. Again, there are areas of our country that use these programs intensely and welcome them. That was cut again. We have also called for that to be reinstated. Those continue to be just a variety of some of the many cuts that have been the Conservatives' priorities, rather than reinvesting in Canadians.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, I am pleased to speak to the budget implementation bill that is currently before us.

The Bloc Québécois will not support this bill to implement, among other things, the economic statement and the Atlantic equalization accord. The major sticking point is the fall economic statement that we opposed both because of what it contained and because of what it did not.

Throughout Canada, in Quebec and in our communities, people are experiencing a range of serious socio-economic problems. Even though the government has recorded significant surpluses despite tax cuts and all kinds of breaks for oil companies, it has refused to act. For a government that prides itself on taking action and keeping its promises, the mini-budget, the economic statement, was pretty pathetic.

I want to start by talking about the crisis in the manufacturing and forestry sectors. We keep hearing about more and more forestry and manufacturing businesses closing their doors and going through tough times. These are not just numbers we are talking about; these are lives and this is reality. These workers, their families and everyone around them are going through very difficult times. This kind of economic upheaval affects communities in cities where factories can improve quality of life, boost prosperity and keep them from becoming ghost towns.

The Bloc Québécois proposed a number of solutions to help the manufacturing industry, but the government has refused to take action and always hands us the same line. The optimist party of Canada's Minister of Finance says that everything is just fine. The optimist party of Canada says that employment has never been as low as it is now, that the growth rate is good, that profits in Canada are high and that companies are making lots of money. But the optimist party of Canada's minister is out of touch with reality. In both Quebec and Ontario, where manufacturing and forestry industries are major parts of the economy, things are not looking so good.

The figures from the optimist party of Canada do not take into account that reality is being obscured by the oil boom in Alberta. Here is a simple example. If you go to a bar in a small town where people have just lost their jobs, and twenty or so unemployed people are there when Bill Gates, the president of Microsoft, walks in, statistically everyone in the bar is a millionaire. Obviously, it is just statistics. Once Bill Gates leaves, everyone is still unemployed and facing the same problems.

The same thing is happening in Canada. While statistically there is an economic boom in Alberta, the situations are extremely difficult in Quebec and Ontario and economists are predicting a downturn because of the high dollar. Such is the economic reality and the effects and after-effects will not be felt until one, two, even three years down the road. If we do nothing about it right now, we will end up with even bigger problems in a few years. We need to take action right now.

Everyone who has come to see us in the Standing Committee on Finance lately, from employers, to unions, to representatives from society in general, has told us it is imperative to take immediate action in light of the high Canadian dollar and other problems the manufacturing and forestry sectors are experiencing.

In this context, it is rather sad to see that the government has preferred to push ahead with measures that have so little, if any, value added in terms of economic development. One need only think, for example, of the reduction of the GST. We will agree that it is certainly a popular measure. Of course, everyone is happy to pay less tax. In reality, however, all the economists who have spoken on this issue have said that reducing the GST will produce very little in economic terms.

The same goes for lowering corporate taxes for the big oil companies. They are already making exorbitant profits. The fact that they will now make even bigger profits will not help the manufacturing and forest industries because those companies are in trouble and are not making any profits. If they do not make a profit; they do not pay taxes. A drop in the tax rate is no help and does not improve their position.

However, they are starting to talk about it. The Bloc Québécois has been talking about this for a long time. Recently, we heard the minister say he recognizes that the manufacturing industry is having difficulties and that, perhaps, it may be necessary to act. Let us hope this change of heart will continue. The Bloc Québécois will continue to apply pressure.

That gets me thinking about the fiscal imbalance. At first, the Bloc Québécois was the only party talking about it. The other parties said there was no fiscal imbalance, it did not exist and we were inventing it. Finally, we succeeded in obtaining a significant amount in the 2007 budget for the fiscal imbalance, although the situation is not completely sorted out yet. There has been a transfer of money but still no transfers of tax fields. Yet, this was a situation that people thought was a fabrication by the Bloc Québécois. Now, we are getting some solid results.

We are in the process of doing the same work on behalf of the manufacturing industry. Only a few months ago, in fact, only a few weeks ago, the government was still saying here in this House that everything was fine, that there was no problem and the economy was doing very well. Now, we see that they are starting to change their position a little. We will continue to apply pressure to obtain measures for the manufacturing industry as quickly as possible.

One important measure that could have positive results, despite its rather technical nature, is refundable tax credits to companies for research and development. To offset the strength of our dollar, which makes our companies less competitive in the United States and elsewhere in the world, we need to encourage companies to invest in research and development, as well as new equipment to increase productivity.

Traditionally, in most advanced countries with strong economies, companies receive tax credits to encourage this. This is currently the case in Canada, except that these tax credits are non-refundable. So, companies that do not turn a profit cannot claim them. They bank them and when they do turn a profit, they can claim the tax credits. For the government, that is a future tax expense. In a few years, when a company turns a profit, it can claim those tax credits.

The Bloc Québécois wants these tax credits to be immediately refundable for a company that does not turn a profit, but that decides to invest in order to increase productivity, become economically viable and then make a profit. In fact, when a company is not turning a profit and is experiencing difficulties is when it needs that money, that cash, to compete and to invest in equipment and research and development. Later, when it turns a profit, it will pay the taxes.

The government argued that this measure would be too costly. Obviously, if tomorrow morning companies started claiming all these tax credits, even if they are not generating a profit, there would be an increase in claims. They say it would cost billions of dollars. However, the government's calculations are incorrect, because they were done on an annual basis. But if they are managing a country and claim to be running it, they need a more long-term vision.

If we look over time, what is going to happen? In terms of the tax credits and refunds that the companies are calling for now, even if they are incurring losses, they would claimed those tax credits in the future. So it is a measure that has virtually no effect. I will come back to this. There are costs, certainly. However, we have to take into account costs that will have to be covered in any event, in terms of tax revenue and tax spending in future.

Perhaps the example that is best known among the public and even members here is RRSPs. RRSPs are not income tax exemptions. They are deferred taxes. The money is deducted from the tax payable during our working years. When we reach retirement and withdraw the money from our RRSP, then we pay taxes.

That means the tax is simply moved to a later time. It is the same thing for converting these research and development tax credits into a refundable tax credit. You are doing the same thing, but you could really say it is the opposite. The principle is the same, however: giving an immediate tax refund that might have to be paid back later.

If we take a model over 10 years, or over a longer period of time, and exclude cases where companies go bankrupt, and compare the two systems, non-refundable tax credits versus refundable tax credits, the cost should be zero, because over time, for the taxes we are refunding now, they would have to be paid back later in any event. Obviously, the cost is not zero, because inflation is going to eat up some of the difference. That is because a 2007 dollar is worth a little more in 2008, a little more in 2009, and a little more in 2010. But it is a cost that is ultimately marginal, in terms of the measure as a whole.

The second case where there would be a cost is obviously if a company that did not make a profit went bankrupt. In the existing system, a company that does not make a profit accumulates non-refundable tax credits, never claims them, builds them up, but when it goes bankrupt, it loses that bank of tax credits, and that represents a tax savings for the government.

If we had a system of refundable tax credits, as the Bloc Québécois is proposing, obviously, the government would have to pay back the refundable portion to the companies, as they incurred research and development expenses, and that would mean that this system would cost slightly more.

We are not saying there is no cost involved in this measure. Obviously there is a cost, but it has to be assessed in comparison with the benefits to society. When the manufacturing industry representatives and research and development people appeared before the Standing Committee on Finance, I was struck by the testimony of one person in particular.

We were told that manufacturing industries can be divided into three broad categories based on their position in this crisis. The first involves companies that are doing well, that are strong and that will get through the crisis no matter what, regardless of whether we help them or not. At the other extreme, obviously, there are companies that are in serious difficulty, that have major structural problems. Whether we help them or not, those companies are not going to get through the crisis. In the middle, obviously, is a category of companies that are promising, that are having problems at this point in time, and that could get through the crisis if the government took the trouble to give them the hand they need.

Let us take a closer look at the effects of the measure proposed by the Bloc Québécois, namely, to make the research and development tax credit a refundable credit for these three categories of businesses.

As for the companies that are doing well, that are making huge profits and getting through the crisis, our measure would have absolutely no effect, no impact, and would change nothing. It would be business as usual. In other words, they are already making a profit and claiming their tax credits. Whether they are refundable or not, this would not change anything; they would get them immediately.

This is an interesting point. Indeed, a general tax cut, like the one brought in by the Conservatives, helps businesses that are making a lot of money, but does not help those that are not turning a profit. Our measure does the opposite: it does not help those that have lots of money—it is status quo for them—but it helps those that need a hand to make it through this crisis.

Consider the second category of businesses, those that are having difficulty, but can make it through the crisis. It is precisely this kind of measure that can give them the boost they need to get through this crisis, because, among other things, this would give them cash assets by making the tax credits refundable. This would then give them the money they need to get through the crisis, while, under the current system, they will not get the money they need until later, although they need it now. How ridiculous.

In this case, as I mentioned earlier, this would not cost the government very much. It would basically mean the cost of inflation, since the tax credit would be postponed. If we take into account the fact that the boost will allow businesses to remain open, to pay taxes, to pay their employees who will also pay taxes, one can see how this measure would be beneficial for the entire Canadian tax system.

Take finally the last category of businesses, those that will probably not survive the crisis. If these tax credits are immediately refunded to them and they end up going bankrupt, the costs will be greater than what we have under the current system. If a company goes bankrupt now, these accumulated unused tax credits are just lost, which means more income for the Canadian tax system.

We certainly hope that this category of businesses that do not make it through the crisis in manufacturing will be as small as possible. In the view of the Minister of Finance from the optimist party of Canada, which has a very positive view of our economy, not many businesses are likely to fall into this category. As a matter of fact, the more we help them, the fewer there actually will be.

All this is to say that the proposed measure to make research and development tax credits refundable is much less costly than the government claims. It would simply move up in time tax credits that in most cases would otherwise constitute an expense for the tax system if the companies earned a profit.

I have not mentioned accelerated depreciation yet for structuring investments, such as investments in machinery and equipment. The principle is the same. When accelerated depreciation is allowed at some point in time, there is a tax saving. However, as soon as the company has finished amortizing the equipment, it starts paying taxes. Once again, therefore, tax that is payable now is simply postponed until later. There is a cost to the government because inflation has to be taken into account, but the cost does not match the actual expense. The expense has to be spread out over a number of years and its total impact calculated.

As I said, we are opposed to this mini-budget because there is not much in it for our manufacturing industries. Other things are missing as well, but I did not have time to talk about them. I wanted instead to go into detail to explain our proposal on the refunding of research and development credits. There was no money to make the guaranteed income supplement fully retroactive, a promise that the Conservatives broke. There was no money for a program to help older workers. The government promised this in its first Speech from the Throne, but we have not seen the money yet. I also could have told the House about equalization, which is turning to Quebec’s disadvantage. I will certainly have other opportunities, though, to talk about these things.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Speaker, I would like to point out to the member that the Standing Committee on Industry, Science and Technology submitted recommendations that received unanimous approval. Clearly, the government has failed to incorporate those recommendations. Now that the Minister of Finance is supporting just one of the recommendations that were adopted, we are having a hard time seeing how all 22 can be implemented.

Would the member elaborate on these issues, specifically as they relate to the manufacturing sector crisis in his province, Quebec, and in Ontario? Would he also discuss the impact of energy costs, the value of the Canadian dollar, and emerging problems in the service sector that we have to take into account?

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, over a year ago, the Standing Committee on Industry, Science and Technology unanimously adopted a report in which all parties, including the Conservatives, made 22 recommendations. In the last economic statement, just one of those recommendations was implemented, and only halfway at that.

Yesterday, the Standing Committee on Finance passed a motion asking the Minister of Finance to implement those of the industry committee's 22 recommendations that relate to fiscal measures. Once again, I do not know whether this is unanimous or not because the Conservatives did not vote. It is strange that the Conservatives are hesitating to implement recommendations that were unanimous.

The crisis is a major concern in Quebec and Ontario. The finance committee was impressed to see such rare unanimity among unions, management, industry and cities. Everyone is saying that something must be done right now.

This is especially important because we heard repeatedly about the problem of the time lag between the rise in the Canadian dollar and energy costs and the economic consequences in terms of plant closures and job losses. People said that one, two or even three years can go by between the two. For example, the plant closures that are happening at present are due to the strength of the dollar perhaps a year ago, when it was worth $.80 American. In one, two or three years, when we see the impacts on our economy because the dollar is at $1, $1.01, $1.02, $1.03, $1.04, $1.05 and so on compared to the U.S. dollar, it will be too late. The situation will already have deteriorated.

It was unanimous. Everyone said that action was urgently needed. No allies of the Conservative government came to tell the Standing Committee on Finance that the situation was not that pressing, that manufacturers could wait until the next budget and that the minister had been right not to include any measures in his economic statement. Everyone said that the government needed to take action right away. That is why we could not support this economic statement. These measures absolutely must be included in the next budget. They should even be implemented as soon as possible.

I can guarantee the Minister of Finance that if he wants to put forward measures to help the manufacturing and forest industries in Quebec earlier than planned and he needs our cooperation in this House, we will give it to him so that we can take care of this quickly, if that is what he wants, of course.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Mr. Speaker, when talking about the budget and the economic statement, the important thing to do is to start with context and how we came to be where we are today.

I can recall the year 1993. It is a good place to start. I had just graduated high school at the beginning of that year. I had the idea that I would get involved in my first federal election. I decided I would get very involved. I recall the state of the economy at that point in time. I recall the then prime minister was Brian Mulroney. I think he is currently being spoken of in another room at this particular moment. One of the things I remember is what a bad place Canada was in.

At that point in time we were going into debt some $40 billion a year. That was our annual deficit. Our inflation rate was 14%. The unemployment rate was 12%. In fact, our situation was so dire that the Wall Street Journal at that time said Canada was an honorary member of the third world. Our position within the G-7 was hardly strong. In fact, it could be argued by many that we were losing any sort of relevance within the G-7. We were losing our way as an economic middle power.

In that environment, everyone can imagine, for those who were like me, who were getting ready to enter university or college, to begin a trade or to start off their careers, they were bleak times. They were times without a lot of hope or opportunity for the future of the nation.

We move forward to 2006. What a different story it was at that time. Canada had gone from having the worst debt to GDP ratio in the G-7 to having the best, from having the worst record on job creation in the G-7 to having the best, and from having record inflation that was crippling the economy to having record lows in both inflation and interest rates, allowing Canadians to buy their homes more cheaply and be able to afford their lives more easily.

We know that the economy was on fire. Instead of running huge deficits, we were running surpluses. Instead of running up more debt, we were paying our debt down. It was through sound economic policies and decisions between the period of 1993 to 2006 that were employed by the Liberal government which allowed our economy to get on its feet, to move from the bottom of the pack of the G-7 on almost every single economic indicator to the top of the pack.

With all of that prosperity, the decision is how to continue it. How do we make sure that we continue with the advances that we have made? Now that we were at the head of the G-7 how would we continue that position? We could continue the prosperity. We could ensure that Canadians continued to see an augmentation in their quality of life and we could address many of the issues that we could not address when we did not have the financial resources to do so.

Naturally, one would assume when we are in a position of such strength, when we are able to turn in the kind of revenues that we are turning in, when our economy continues to move forward in the way it does, that it is time to take action on things like poverty, on access to post-secondary education, on the climate change crisis that grips most of our attention, and on things like infrastructure. Instead what we have gotten through two consecutive budgets, mini-budgets and economic statements is gimmicks. Probably the best example of this is the cut to the GST.

Probably the best way to assess the impact of the cut to the GST is to look at a single mother struggling to get by, struggling to pay her rent and struggling to afford groceries. Conversely, we can look at a Canadian who has been blessed with a lot of wealth, somebody who is maybe fortunate enough to buy a luxury car, a luxury yacht and take luxury vacations in luxury hotels. How are those two individuals impacted by the GST cut?

The first 1% cut cost us over $5 billion and now there is another 1% cut that will cost us over another $5 billion. The single mother who is buying her groceries will not see any benefit. For the rent that she pays, there is nothing. In point of fact, the GST cut did nearly nothing to improve her lot or give her the opportunity to make a difference for her children. Conversely, the individual who is fortunate enough to afford items of luxury is enjoying a massive windfall, incredible amounts of money coming back from luxury items that he or she would have purchased with that reduction now in the GST.

Instead of getting Canadians targeted relief to those who need it the most, making a difference for people who are struggling to get by and working so hard, there is a disproportionate tax cut that most advantages those who need it the least.

I will read two quotes on this decision. One was made by Marc Lee, senior economist for the Canadian Centre of Policy Alternatives, who said, “I think”--this tax cut--“also shows they're really out of touch with the reality that most Canadians are facing”. I could not agree more. Don Drummond, chief economist at TD Bank, said, “The federal surpluses have offered a golden opportunity to move forward in a very decisive manner. The GST cuts don't move that agenda forward at all”.

Let us delve deeper into the government's approach to tax cuts. Virtually all economists, perhaps with the exception of those who are under the employ of the Prime Minister or the Conservative Party, are united against the GST cut. Even a report by the Department of Finance agreed that cutting the GST was the worst strategy for Canada in reducing income taxes or reducing taxes generally. It does nothing to improve the fairness of our tax system and the money that goes back into the pockets of Canadians is for the most part marginal, unless they are earning very large sums of money.

In point of fact, the finance minister once called cutting the GST a “relatively useless measure”, because it only advances spending “that would happen in any event”. The finance minister said he preferred cutting personal income taxes because it provides a “direct stimulus”. It seems that the finance minister once had the wisdom of trying to apply the Liberal vision of how tax cuts should be implemented. When he was the finance minister of Ontario, in fact, he was quoted as saying that he agrees with the member for LaSalle—Émard. He went on to say, “With respect to reducing the GST federally and the RST provincially, I also agree with the federal minister, and we've talked about this. All you get is a short-term hit, quite frankly”. And this is my favourite part, “It has no long-term gain for the economy”. That is from the Ontario legislature Hansard of November 5, 2001.

The finance minister himself felt that a cut to the GST had no long term gain for the Canadian economy, but he chose to cut this tax, which has cost the government billions and yet gives Canadians nothing.

It would seem to me that this money should have, logically, gone to a couple of different areas. To continue on tax cuts, it should have gone where it would have made a real difference, such as helping Canadians who are struggling to get by and those who are in the middle class to reduce their burden, but instead of reducing income taxes in the last budget, the government increased them from 15% to 15.5%. To go back to the example of a single mother or someone earning a marginal income, that individual actually saw, on a net basis, his or her income tax burden rise. It is an utterly shameful thing, but it is the truth.

Now the government has said that it has reduced income taxes. The reality is it has simply brought them back to where they were in the beginning. We have seen the government raise the income tax rate from 15% to 15.5% and now, in a much heralded fashion, the government has reduced it back to 15% again. The bottom line is the government has not done anything in that area that would make the biggest difference to Canadians, the biggest difference on a real basis of allowing people to have more money in their pockets to improve their quality of life.

We in the Liberal Party believe that income tax cuts need to be targeted, that they need to focus first on those who need the help the most. We also believe firmly that a plan to reduce income taxes must include a reduction in the corporate income tax rate. When the Liberal government came to power, corporate income taxes were at 28%. There was legislation passed that took that down to 19% and would be implemented for the year 2010. The Conservatives, again in a much heralded way and with a lot of spin, announced that they were taking it down to 18.5% for the year 2011, a difference of .5%. That is it.

I know some in the NDP caucus would fight and rail against a reduction in income taxes saying that it is part of a right-wing agenda. The reality is it is part of an intelligent, middle of the road approach that has worked very successfully for other nations.

We can take a look, for example, at Ireland or Sweden which have made large reductions in their corporate income tax rates and at the same time have seen much progress on social issues and on social programs. They recognized that as smaller nations they could have lower corporate tax rates, attract businesses to their jurisdictions, create more economic activity and that larger jurisdictions like the United States or other large European countries could not match those reductions simply because their scale was so much larger. The net result of it was more money and more resources to be able to move forward on progressive programs on social issues. Clearly, our position is that the .5% reduction, which is hardly a very visionary or meaningful reduction, is something that needs to be looked at further, and that further cuts are still desired.

When we take a look at some of the gimmicks that have been put in place and the rather backward strategy that is nearly impossible to find any economist to agree with, it will not be very hard to understand why or where this came from. I also happened to be a municipal councillor during the period of time that Ontario had a Conservative government provincially and the provincial finance minister then is the federal finance minister today.

What we do know is that Ontario was left with a deficit of $5 billion. There were decisions like the selling off of highway 407, an impact that has had major ramifications in my own riding where the 407 ends at Brock Road. We look at that decision which in the very short term may have rounded the figures and made it look as though the deficit was not as bad as it was. What it has done in the long term is given a foreign company a massive amount of annual revenue and left taxpayers with an extremely expensive route when almost no options are available to get in and out of the city. People are forced to pay extremely high prices, the profit of which is not going back to improving infrastructure or making lives better or more accessible, but instead it is leaving Canada in profits to a foreign company.

Then too we saw tax cuts that most benefited those who needed it the least. When we talk to the average Ontarian about the difference those tax cuts made, it was marginal at best. At the same time, if we ask them how they noticed reductions in service levels, how they noticed the difference when they walked into a hospital or when their son or daughter went to school, those differences were big. They saw massive reductions in services. They saw big increases in property taxes because there was a downloading from the province onto the municipalities, but in terms of money in their pockets and increased quality of life, at the end of the day it simply was not there.

I am going to continue on the theme of municipalities. As I mentioned, I was fortunate enough to serve for nearly seven years as a councillor for the city of Pickering in the region of Durham before I came to this place. I witnessed how some of these strategies that are employed by the now finance minister impacted our municipality at that point in time.

I can recall vividly things like housing stock, where we were downloaded all kinds of housing responsibilities from the province. We were told that we had to bring those up to code, that we had to do all kinds of work to make sure that the housing stock was up to speed and yet we were given no resources to do it. We were left with no recourse but to either increase taxes or cut services to handle the downloading that had been given to us.

Ambulance services were handed down to us and again we were given no resources, no money. Yet we were told that we had to increase service, that we had to decrease response time. Again we were left with no choice but to either pass tax increases or to cut services. This is part of the shell game that is played. Announcements are made, proclamations, big cheques, a lot of spin but underneath it all, it is just things being moved around, no substance, just gimmicks.

What we are left with in the municipalities is a government that is showing nothing but contempt. Municipalities and mayors are saying that they need money to fight critical issues like infrastructure, to deal with things like housing within their boundaries. What the Conservatives are saying to them is, “Be quiet. Stop whining. Go back and figure it out yourselves. It is not our problem”.

In terms of the amount Canada gives to municipalities, in terms of the relationship of the federal government to the municipalities, it is one of the most backward anywhere in the modern world. The problems that are being faced by municipalities only started to be dealt with under the last government in a new deal for cities and communities in a recognition that municipalities needed to be treated as equals, in recognition of the fact that often municipalities are the engines of our economy.

They are the places that make the biggest difference in things like quality of life and often can make a huge difference in terms of the quality of our economy by making sure that they have the conditions right to hold, retain and allow businesses to grow.

Today, in a riding like mine, we face massive infrastructure challenges. Individuals who want to go to work in the morning, and I have a large population of people who commute, are faced with incredible gridlock. Options on transit are nearly non-existent.

Some of the measures brought in by the government, like this tax measure where people would get a bit of money back at tax time if they bought a transit pass, are utterly meaningless. Why would people buy a transit pass that does not take them anywhere?

If I were to leave from my house in Pickering and try to get to the GO station, that unto itself would be about a 30-minute or a 40-minute exercise. By the time I do get to the GO train, it is then another 40 minutes or 45 minutes to get into the city. It would take people almost an hour and a half when by car that same ride would only take perhaps 30 or 40 minutes, and that is if they are lucky enough to be working in downtown Toronto.

If people work in Scarborough or in Markham, transit can take two or three hours to get there. So, who is going to buy a bus pass that does not really take them anywhere? It does not make any sense. What we should be doing is investing in the infrastructure required to make transit meaningful and real as an option for individuals who want it.

Municipalities today are struggling under the crippling responsibility of aging infrastructure, but they are also fighting a real battle that we need to be seized with here; that is, sustainable development.

We can talk about the environment, but how communities are structured, how they are built, what resources they have available to them, things like transit, how dense a core they have and what kind of cultural and recreational infrastructure they have within their boundaries so people can actually spend a day or an afternoon within their own municipality, becomes very relevant as well.

However, in the fight against climate change, municipalities have to be partners, not somebody we scold and boss around and pretend is not there but partners, people we invest in, people we work with on things like sustainable development. That is why the money that was flowed through, through the new deal, said that those projects had to go to improve sustainable development.

So, too, should money that flows to the municipalities as we assist them, whether it is in addressing the payment in lieu of property tax problem that leaves so many municipalities shortchanged or whether or it is as an additional revenue. This should go to say that that money that flows to the municipalities should result in meaningful changes, such as reducing the consumption of carbon-based fuels and reducing greenhouse gases, so that municipalities are making a contribution to reducing greenhouse gases and climate change emitting products.

On the environment, more broadly, what we have seen from this government is complete contempt for the issue of the environment and climate change. In fact, last January, almost a year ago, the Prime Minister was calling greenhouse gases “so-called greenhouse gases”. The government websites systematically, after the last election, eradicated any reference to climate change. It deleted them. It got rid of them.

We were getting calls from teachers who were using government websites to help teach their students how they could reduce their emissions and how they could make a difference to the planet. They were asking what happened to these aids on the Internet that they were using to help teach students how to create reductions. They were completely deleted.

We saw more than $5 billion in cuts to climate change programs and instead replaced with only $2 billion later with much fanfare when the Conservatives were pretending to do something.

We are the only member of the Commonwealth standing in the way of ensuring that we are a major partner in fighting climate change. We are blocking the rest of our Commonwealth partners, as example, at the conference that just happened, from joining together as a unit, setting mandatory targets and leading the world.

In short, what we are seeing in this and in so many other areas is a government that is focused on spin and gimmicks, and nothing on substance, that is so focused and preoccupied with trying to get to 41% or 42% that it is doing nothing on the real issues.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Mr. Speaker, I listened to my colleague across the way discussing Bill C-28 and some other issues surrounding that and how it does not help some of the less privileged Canadians, I think were some of his words, or lower income people, especially those who may be single and raising a family.

I think the member forgot that Bill C-28 has the working income tax benefit. This is concrete action to help low income Canadians with various measures, not the least of which is WITB, as the finance minister calls it. I suppose we could say that it would be our spin that it is a good idea because it is a good idea and we are saying it is. However, there are other folks who are saying it is a good idea.

The United Way of greater Toronto has said that it is a positive change that will help improve the situation of low income families. The Rotman School of Management sings its praises. The Ontario Liberal finance minister said, “It's a positive move. I think it will help those at the lower end of the income ladder and I think the federal government has taken a good step”.

Indeed, the NDP member for Winnipeg North has said that WITB is an important program that goes in the right direction.

When the hon. member says that there is no help for lower income families, he is exaggerating profoundly the great benefits of Bill C-28. He says it is full of gimmicks. I see no gimmick when it does not take out of the pockets of the Canadian people some $190 billion over the next five years and brings taxes to their lowest levels in about 50 years. There is some great amount of exaggeration going on here.

If I could enlighten those folks who might be listening, the member said the GST reduction to a family of limited income does not do anything. When this family goes to the grocery store, or the young mother who has young children, they are buying products that have a tax on them. The young mother may not even be paying any income tax. People who do not pay any income tax at all are receiving a tax break through the GST rebate.

I ask the hon. member: Has he really read Bill C-28? Has he really thought through all the comments he has made?

[Mark Holland, Liberal, Ajax—Pickering, ON]

Mr. Speaker, I would begin by saying, and it may come as a surprise to the member, that most groceries are in fact actually not taxed. Things such as everyday grocery items do not have the GST applied to them. If we take rent as an example, it does not have the GST applied either.

Someone of limited means and with most of their income going toward groceries and rent is deriving no benefit, or extremely little benefit. Maybe when they buy some Hubba Bubba gum or something, then they are going to get a cent off.

The member has mentioned one program and that is well and good. The reality is that the GST cut represents more than $10 billion in the 2% that is being removed. Imagine what the government could do to help a single mother with something like early childhood development by having a national early childhood development strategy that places creating nurturing advanced environments for those children to make sure that they get an edge on life, particularly when we know that those three years are so critical.

Imagine what some of that $10 billion could have done for students. In many cases, students do not find post-secondary education something that they can access. Imagine what could have done with accessibility.

Imagine what could have been done with that $10 billion to help in a targeted way those who are in the middle income bracket, those who really need the break, and those who really need the change. Instead, what we got was a gimmick. The problem was that it cost us $10 billion of other opportunities.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Mr. Speaker, Canada's productivity has dropped to 16th place, the U.S. dropped to 6th and Ireland has gone down to 21st in ranking, whereas the high taxing countries, Switzerland, Finland, Sweden and Denmark have gone up. They are always at the top in their productivity. They put a lot of money into innovation and research and development.

The hon. member talked a lot about investing in municipalities and investing in the social good, yet he would not say how much the investment would be, where would the money come from? Is it coming from an increase in income tax? Is it hiking the GST?

The Liberal Party talked about reducing the corporate tax rate of 18.5%. After the speech by the Leader of the Liberal Party, the Conservatives did reduce it. It announced the corporate tax rate would go from 18.5% to 15%. I cannot tell the difference between the two parties because they say to bring it down further.

Where would the money come from and what is in this mini-budget? Is the corporate tax rate 18.5% or is it 15%?

[Mark Holland, Liberal, Ajax—Pickering, ON]

Mr. Speaker, I am not in a place today to launch the Liberal Party platform for the next election and to speak about the specifics of exactly how we will implement all the things that we are talking about. I thank the hon. member for her enthusiasm to see the Liberal platform. I just ask her to hold on a little bit. Depending on how things roll out here, she will get ample opportunity to see just how we are going to implement this ambition for Canada.

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, I actually want to agree although I have a question. For single moms, particularly working single moms, like the one who I saw at our food bank who was there with her little girl, who was about seven, and she tugged on her mother's sleeve and said, “Don't worry mommy, I will try not to eat so much”, this budget makes absolutely no difference.

For the parent who has to pay $1,400 a month for licensed infant care, this budget has made no difference whatsoever. There is no support, there is no education, there is no child care, and it makes no difference for the single mom.

I am wondering, for that single mom who the member describes in his riding and who I see in mine, what does that mean when the Liberal caucus refused to stand up, take a position, and say that it cares about those single mothers who are not able to make ends meet without the food bank, who are not able to get child care? When they see the entire Liberal caucus sitting there, and abstention is really a yes, what is the message that goes to that parent?

Let me tell you, the parents who have talked to me have said that means they will talk about it, but they will not stand up for it.

[The Acting Speaker, Conservative, Andrew Scheer]

I remind the hon. member for Surrey North to address her questions and comments through the Chair and not directly at members. The hon. member for Ajax—Pickering.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Mr. Speaker, we will do precisely that. The difference is we are not going to do it when the NDP tells us to do it.

We have a responsibility as the official opposition to choose when we are going to go into an election, to choose what issues we are going to go on, how we are going to fight that, and what is the best way to ensure that Canadians have all of the choices presented for them so that they can choose the best direction for this country.

When the time is right, we will stand up, and we will fight against what is a regressive, backward budget that puts the priorities of Canadians way down and instead focuses on gimmicks and tricks.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Mr. Speaker, just a short period ago the member said that $10 billion could go a long way to helping people meet their family needs. That is precisely why the government reduced the GST and intends to reduce the GST further. It is because it is $10 billion that stays in the pockets of Canadians and specifically those Canadians who do not pay any taxes.

The member might be shocked to learn that I in my previous occupation happened to do the shopping for my family for about 30 years. Therefore, I am very much aware of what is taxed and what is not.

What is taxed are a lot of the necessities, like keeping our clothes clean, like keeping ourselves clean, and like those personal products that everyone buys. That is $10 billion that are in the pockets of Canadians and allows them to meet additional needs of their families. Perhaps the member needs to rethink that amount.