Mr. Speaker, I am pleased to launch second reading of Bill C-59, an act to amend the Income Tax Act, which legislates measures contained in last February's budget.
Members will recall that the budget was based on widespread consultations with groups across Canada and these consulta-
tions revealed certain concerns among Canadians regarding Canada's personal and corporate tax systems.
As members know, Canadians wanted tax incentives to be better targeted. They wanted tax loopholes to be closed and complexity to be reduced. Overall they wanted a more equitable tax system.
The government shares these concerns and accordingly in the 1994 budget the Minister of Finance proposed measures to make the tax system more supportive of economic growth and more reflective of fiscal realities, simpler to comply with and more respectful of Canadians' ability to pay taxes. Bill C-59 will amend the Income Tax Act to implement several of the budget's tax measures. On behalf of the government, I would like to summarize these amendments.
First, I would like to review these amendments as a reminder to colleagues in the House and to Canadians. The capital gains exemption eliminates the $100,000 lifetime capital gains exemption and provides an election with respect to the gains accrued before the date of the budget.
The second amendment in the bill relates to employee benefits, extending the taxation of employer provided benefits to include the first $25,000 of life insurance.
The third is the age tax credit, which provides a reduction in the amount of the credit based on an individual's income level.
The fourth amendment is the homebuyers plan, which modifies the provisions of the homebuyers plan, extending it indefinitely for first time home buyers.
The fifth amendment is the charitable donations tax credit which lowers the threshold at which the tax credit is calculated at the highest individual marginal tax rate.
The sixth amendment is the business meals and entertainment expenses, which reduces the percentage of such expenses that may be recognized for tax purposes from 80 per cent to 50 per cent.
The seventh amendment is the tax shelter partnership interests. This amendment requires that limited and other passive partners report any negative adjusted cost base in their partnership interest as a capital gain.
The eighth amendment is the divisive corporate reorganizations, which curtails the tax avoidance technique that allowed capital gains on the disposition of corporate assets to be avoided in certain circumstances.
The ninth amendment is the investment tax credits. This reduces the rate at which the credit is calculated in respect of certain regions. It eliminates the regional component of the credit in respect of scientific research and experimental development and it discontinues the special investment tax credit.
The tenth amendment is the expenditure limit for scientific research and experimental development, which prorates the expenditure limit for a Canadian controlled private corporation based on the corporation's business limit for the year.
The eleventh amendment is the small business deduction which progressively reduces the small business deduction available to Canadian controlled private corporations having a taxable capital over $10 million employed in Canada, so the deduction is eliminated at the $15 million level.
Finally, the twelfth amendment is the mine reclamation fund, which permits a tax deduction for contributions into these funds in the year in which the contributions are made.
This represents a major list of amendments to the Income Tax Act. It will add approximately another 106 pages of rules and regulations to the act.
I support all of these amendments to Bill C-59, but I have to say this is yet another reminder that the the Income Tax Act continues to be complex. In spite of our best efforts I really do not believe we are heading in the right direction when it comes to income tax reform.
I hope all members of Parliament will support us as we put this series of amendments through the House of Commons because the basic principle behind these amendments is to increase economic activity.
We have targeted enhanced support for our small business community, which I know all members of the House support. We have made sure that the homebuyers plan is given added rejuvenation. We have been extremely sensitive to senior citizens at the lower part of the income threshold. These are all efforts to make sure there is fairness and equity, but I believe passionately it is not enough.
We are not going far enough in our income tax reform. In order to get our Income Tax Act on track we have to go back to 1948. Last week I asked one of the pages to get me a copy of the 1948 Income Tax Act of Canada from the Library of Parliament. This document worked very well in those days and is approximately 100 pages for the whole tax act of Canada. This was tax paradise.
Over the years the tax act of Canada has been used to run every sector of the economy, just as these 10 amendments we are talking about today are affecting certain sectors of the economy. They are put in to move and stimulate positively those sectors of the economy.
Over the years there have been so many amendments to the tax act, so many exceptions and exceptions to the exceptions that the tax act is now almost 1,500 pages. As this act has evolved the situation is that even Canada's best tax lawyers and best tax accountants are saying the act is no longer comprehensible. The exceptions to a particular amendment which lead to another
exception create so much confusion that an inefficient system is being created.
Did you know that right now before the courts of Canada there are 37,200-odd cases challenging the tax act of Canada? Just think of the cost to the judicial system. Talk about a make work program. This is a make work program in tax challenges alone for the lawyers, most of whom are subcontracted to the Department of Justice. A company which is assessed by the Department of National Revenue and wants to challenge it hires its own lawyer, but the Department of National Revenue calls up the Department of Justice. Justice in turn hires a lawyer to defend the crown.
Right now the taxpayers of Canada are funding 37,000 cases before the courts. Just think of what that does to our judicial system, all because of the lack of clarity and the lack of efficiency in our tax act.
Bill C-59 is a good bill. The specific amendments in it are designed to stimulate the economy and create jobs.
I would like to take this opportunity to say to my colleagues in the House of Commons that perhaps now is the time to look at comprehensive reform of our tax system. Perhaps now is the time to take up the challenge. We have taken up some great challenges in social security reform during the last few months and we will be doing so over the next two months. We have taken up incredible reform of our UI system and our retraining system. Why not take up the challenge of comprehensive tax reform?
Quite frankly when I was re-elected last year I hoped that the notion of comprehensive tax reform would hit the floor of the House of Commons quickly. I was hopeful for a couple of reasons.
The government in its red book said it would look at tax reform. Of course, the finance committee is in the process of listening to all kinds of ideas which are being brought forward. As we prepare for the budget this is a perfect time to look at some alternatives to the tax regime we have right now. That was the number one reason I was optimistic for a shot at real comprehensive tax reform.
The second reason I was optimistic was that I thought I would have some company in this whole notion of tax reform. That is because lo and behold over 50 members of Parliament were elected under the Reform Party flag and I can remember that one of its cornerstones of public policy during the campaign was comprehensive tax reform.
I can remember campaigning in my riding in downtown Toronto against the Reform Party candidate, a terrific candidate. It is awful when someone forgets a person's name. Where is my friend Nick Lamacchia when I need him? He would always help me remember someone's name.