Mr. Speaker, today we are discussing Bill C-48. As you can see, it is rather thick. It is more than 950 pages long.
As my colleague from Parkdale—High Park mentioned, we will support this bill because it eliminates a number of tax loopholes and resolves several problems. Decisions about these issues have been made over time by agencies such as the Canada Revenue Agency, so this bill is needed. However, as I have mentioned in other speeches, this bill will amend the Income Tax Act as well as other acts: the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and other related legislation. It will make an already complicated system even more complicated.
I will give some background on this bill. In October 2012, we received a notice of ways and means from the Minister of Finance, which was more than 950 pages long and consolidated almost all of the outstanding tax measures. These measures date back to 2002 and even earlier. More than 400 decisions have been made by different agencies, including the Canada Revenue Agency, which receives inquiries from businesses and tax advisors asking whether they can interpret a specific condition in the Income Tax Act in a particular way. The Agency then sees that this was not foreseen by the legislator and proposes an amendment.
Over time, the Canada Revenue Agency has collected its interpretations of more than 400 issues. Now, over 10 years after the last tax bill was passed, we are discussing another bill.
Obviously, the department drafted this bill after consulting the private sector. The Standing Committee on Finance, on which I sit, has heard from private sector representatives. They spoke about several tax issues, including the technical issues we are discussing, as well as the complexity of the current legislation. I will get back to this a little later in my speech.
The impressive Bill C-48 has been before us since November 21, 2012. I doubt that more than a dozen of the 308 members of Parliament will read the whole thing before they have to vote on it. This is understandable, because these are of course extremely technical issues. It really is a shame, though, because it undermines our role as MPs, as representatives of our constituents. We cannot realistically vote with a full knowledge of all the elements in the bill. They just throw this at us in Parliament, at first reading. Yes, we will discuss it at Standing Committee on Finance meetings. It will eventually be passed at second and at third reading. However, for a matter as important as taxation, the Conservatives are being pretty casual by tabling this bill in the House of Commons and asking us to pass all of its recommendations, which will probably not be studied very carefully by the House. It is not that we are unwilling to do study the bill, but it will be really difficult to understand the scope of the measures being put forward because they are so complex and so highly technical. The Standing Committee on Finance will do the best it can, but still, the way the bill was introduced is a real concern.
Bill C-48 is an omnibus bill. We agree on this. However, unlike Bill C-38 and Bill C-45, otherwise known as mammoth bills or monster bills, this is a real omnibus bill. Bill C-38 and Bill C-45 contained a patchwork of measures and legislation. In those two bills, which are now law, more than 130 items were added, deleted or amended in two votes. Bill C-48 has a single basic principle that aims at amending the tax system consistently and making it fairer.
I would just like to quickly go back to the definition of an omnibus bill to confirm what I am saying. According to the Library of Parliament, an omnibus bill per se is a bill that, while it aims at creating or amending several different acts, has “one basic principle or purpose which ties together all the proposed enactments and thereby renders the Bill intelligible for parliamentary purposes”.
Bill C-48 is an omnibus bill. Bill C-38 and Bill C-45 were not really omnibus bills.
As I mentioned earlier, this bill is nearly 1,000 pages long. It updates the rules relating to many different tax measures that are still outstanding and brings them into harmony with the current system.
Regarding the tax changes, the implementation of the measures in this bill is unique. We have a majority government, and the rules in the bill will be adopted. As my colleague, the official opposition's finance critic, said in her speech, we are going to support this bill at second reading. In fact, the rules are practically in effect already, according to the International Financial Reporting Standards, as they have been ever since first reading when the bill was tabled on November 21, 2012.
They are also valid and in force according to the Canadian accounting standards for private businesses. Since November 21, our businesses have had a little more security and stability under Canadian and international standards, something that will be welcomed by these firms. The Standing Committee on Finance has heard this on a number of occasions.
For a number of years, in fact, there has been an effort to achieve some harmonization of accounting standards and tax rules at the international level. This is another set of issues that the government should at least look into. The reason is very simple: we see it as a way of facilitating the containment of tax evasion. Thanks to my colleague from Brossard—La Prairie, this is something that the Standing Committee on Finance will be addressing.
We are also facilitating trade and investment in a world that is increasingly integrated in economic terms, but in which standards still differ from country to country. Tax evasion is a major problem. It exists because of loopholes in the Income Tax Act and other tax legislation, including legislation on corporations.
With consistent rules and cohesive tax regulations, we can help companies to be much more competitive and to know what to expect. Regulatory predictability is a key factor in minimizing the risks our industries face. The OECD, in particular, has demonstrated leadership in arranging the coordination of rules internationally.
In Canada, it is the Accounting Standards Board that has handled the incorporation of international rules into the Canadian legal system and Canadian standards. According to the Canada Revenue Agency, the rules in this bill are currently in force for publicly accountable enterprises.
With the tabling of this bill today, we have an opportunity to discuss issues relating to Canada’s tax structure, given that action is already being taken by the various accounting bodies. Needless to say, most of the changes in Bill C-48 are in fact not only familiar to the main parties concerned, but more importantly, are already being applied in their operations. Hence, there should be no great surprises in the debate, or in the eventual passage of this bill.
There are no special innovations in Bill C-48, apart from two minor technical amendments that are included in the bill.
As I noted in my earlier questions to the parliamentary secretary and our official opposition finance critic, the Income Tax Act currently runs to 3,000 pages. The original act passed in 1917 had 10 or so pages. Now, it has 3,000. A bill like this one will add many more, in order once again to eliminate specific tax loopholes.
As the system grows in complexity, however, there are more and more opportunities to find loopholes in the legislation that companies and individuals, who in many cases have the resources to work with tax consultants, can use to try to introduce personal arrangements that will ultimately reduce the fairness of our tax system.
A well-known Quebec tax specialist, Brigitte Alepin, who testified last year before the Standing Committee on Finance, has written a book explaining that Canada’s tax system is headed for a brick wall and that the government should do something before it is too late. In her book, she explains that in order to be sustainable, taxation systems should generally follow three major principles: they should be simple, effective and equitable.
The Canadian system, unfortunately, is trying to distance itself to a dangerous degree from those principles, hence the urgency of reviewing the foundation on which it is built.
In her book, Ms. Alepin also points out that an ideal tax system should be cost-neutral; in other words, it should not be too expensive to administer.
She refers to a study conducted by the Fraser Institute, which I do not often quote here in the House. It is worth mentioning here today, however. The 2007 study evaluated the cost of administering the Canadian tax system.
In 2007, the Fraser Institute estimated the cost of the system to be between $19 billion and $31 billion, that is, about $950 per Canadian. Thus, the cost of administering the system is incredible. It is a huge and complex system, but we should not have to pay nearly $1,000 a year for every Canadian in order to administer it.
We need to debate the complexity of the tax system. Indeed, Bill C-48 allows us to do just that. We need to have this debate because the issue of simplifying the system, much like the issue of simplifying the Canadian justice system, is important for every Canadian, including the people we represent here in the House.
I would remind the House that the Supreme Court of Canada stated that tax laws should be certain, predictable and fair so that taxpayers can order their affairs intelligently. It also described some consequences of complex tax laws, and these were reiterated in 2009 in the Auditor General's fall report. She stated:
Taxpayers’ ability to comply with tax legislation depends on their understanding of how the rules apply to their own circumstances. When the intent of the legislation is not clearly conveyed by the words, taxpayers may find it difficult to assess the income taxes they owe and this could foster tax avoidance. Uncertainty about how the law should be applied can also add to the time taken and costs incurred by tax audits and tax administration.
This issue is so fundamental and so important that it was one of the central topics of all the recent prebudget consultations that the finance committee was pleased to have the opportunity to hold regarding previous budgets. During the consultations, several witnesses talked about the problems and difficulties that Canada will encounter if we do not begin to recognize the situation we are in and do something about it.
One of the people I would like to quote is Denis Saint-Pierre, chair of the Tax and Fiscal Policy Advisory Group of the Certified General Accountants Association of Canada. The Government of Canada quoted this organization to support what it was saying about the benefits of Bill C-38, but the organization said something else that the government failed to mention. Mr. Saint-Pierre said that, when the Standing Committee on Finance invited Canadians to share their priorities for the 2013 federal budget, the committee asked him five questions to which he could provide only one answer again this year and that is that the simplification of the tax system is vital. He said:
Canada's tax system is unduly complex. Entrepreneurs will tell you that. My clients tell me that. There is a growing consensus that the complexity of Canada's tax system must be addressed if Canada is to remain competitive, able to attract business and investment, and create jobs and economic growth.
For example, the Canadian Chamber of Commerce identifies Canada' s complex tax system as one of the top 10 barriers to competitiveness. Tax simplification is the number one public policy priority for CGA-Canada.
Robin Bobocel, vice-president of public affairs for the Edmonton Chamber of Commerce, said exactly the same thing:
One of the significant costs that business bears with such a complex tax code is compliance with it. There's a significant cost borne on simply filing tax returns and trying to ensure that you're taking full advantage of the tax code as it sits.
This was mentioned in the study conducted by the Fraser Institute. Quite frankly, Canada's global competitiveness will suffer the consequences if we do not conduct a comprehensive review of the tax code.
Here is one last quote from someone who testified before the Standing Committee on Finance on the very important issue of the complexity of the tax system. Michael Conway, chief executive and national president of Financial Executives International Canada, had this to say before the committee:
We again recommend that the Minister of Finance establish a task force to undertake a comprehensive review of the federal Income Tax Act, with the objective of reducing complexities, because—to be clear—compliance has become unmanageable, and the costs are killing everyone.
That act is too cumbersome for the government to administer and it creates an excessive burden on business, especially small business, which is one of the engines that drive our economy.
In its final report on the pre-budget consultations, the committee unanimously recommended that the federal government undertake a comprehensive review of the tax system and ensure its fairness as well as neutrality by continuing to close tax loopholes that allow select taxpayers to avoid paying their fair share of tax.
The tax system's complex and cumbersome nature, in addition to being costly for the taxpayers, undermines the concept of fairness that would allow taxpayers to see it as legitimate.
The Standing Committee on Finance has already done some work on this. For some people the tax system is an exciting issue, while for others it seems more technical. It affects one of the essential elements for Canadians, that is, to contribute fairly to this society and this country in which we live.
Since 2011, when we became the official opposition, and even since the current government took office in 2006, the government has shrugged off all taxation issues in a most disingenuous way. During debates, the government regularly mentions the phantom carbon tax the NDP wants to impose, although there is no such thing. Moreover, in all their speeches, the Conservatives say that the NDP wants to tax and spend, which is also not the case.
If we look at the records of all the NDP governments in the country—provincial ones, since we have not governed the whole country—we find that NDP governments have achieved more balanced budgets than the other parties that have governed the provinces, territories and the country since 1987, or even 1982, if we want to go back that far.
Now we need to debate tax policy like grown-ups. The NDP is ready to do that and the other opposition parties are probably ready as well. We must stop treating the taxation system as a purely political issue and listen to the voters who are stuck in a system so complex that they cannot tell the true facts from the illusions the government has created.
When people talk about the complexity of the taxation system, the tax brackets are not the problem. The tax brackets are very simple for the individuals or businesses filing their tax returns.
We must consider three key elements, two of which are easy to analyze.
First, there are loopholes. Bill C-48 is supposed to deal with this problem. We certainly hope that some of these loopholes can be eliminated.
Then there are tax expenditures, and especially boutique tax credits, that is, a choose-your-own list of tax credits for various parts of Canadian society. They include tax credits to assist volunteer firefighters and those for families that want their children to have more training in the arts or sports activities. These are non-refundable tax credits. The people who use them are paying taxes. Thus, the people who need them most are not able to use these tax credits.
Finally, there is a lack of concerted effort and coordination internationally. This has to be addressed at the most basic level. It is necessary for Parliament as a whole and every member of Parliament to participate in seeking more fairness and exploring ways our tax system can adapt to the new reality, because the Income Tax Act has been around since 1917, and making sure than Canada remains competitive.
Adding the complexity of Bill C-48 to the already complex Income Tax Act is not the way to resolve this fundamental issue that will soon have to be addressed.
We will support Bill C-48 at second reading.
We hope to have a good debate on it in the Standing Committee on Finance. I will be pleased to take questions from the hon. members.
