Who is going to pay for all this? Who will pay? Again, as always, the taxpayers. The same people pay for it all. We do not have different groups of taxpayers for federal income tax, provincial income tax or municipal property tax. The same people pay at all three levels. Whether we increase taxes directly at the federal level or pass the buck to the provinces, in the end, the taxpayers are paying and the middle-income taxpayers in particular have been overburdened with taxes since 1984. Yet, they have just been struck another blow and are seeing their tax burden become even heavier.
From this perspective, the Official Opposition can only condemn the fiscal stance of the Minister of Finance, which does not solve the huge problem of the federal deficit, quite the contrary!
There is no action in the budget for job creation and no hope for the 1.5 million unemployed in Canada. The infrastructure program is supposed to create 45,000 jobs, only 3 per cent of the needs of the Canadian labour market.
The finance minister expects the most spectacular deficit in Canada's history, the highest ever calculated. We know by tradition, especially the treaty of tradition, that the deficit will go over $40 billion. It will probably go over the $45 billion mark this year.
The Minister of Finance does not have to be proud of it.
There are no reductions in federal spending, but taxes will increase for middle income earners. There is nothing in the fiscal loopholes under family trusts but promises to study them in the finance committee. There is nothing concerning the recommendation of the Auditor General on the possibility of saving more than $5 billion a year by removing inefficiencies in public services. There is no provision for social housing in the budget. Instead, the minister decided to cut social welfare by $7.5 billion for the next three years including a cut of $2 billion in provincial transfer payments.
Madam Speaker, there is really no need to remind this House that the inability of the government to control the deficit is merely the continuation of the fiscal laxness of Liberal governments in the seventies and the early eighties, and I did say Liberal, not Conservative. As you know, the current Prime Minister was even the Minister of Finance for a while during those years. This laxness on the part of all those Liberal governments is directly responsible for the huge increase in the public debt, which is now over $507 billion.
From 1970 to 1985, during 15 years of almost uninterrupted Liberal regime, the ratio between the budget and the GDP went from a surplus of 0.3 per cent to a deficit of 8.5 per cent, a high which remains unequalled. This disastrous state of our public finances is the legacy of successive Liberal governments.
If the past is any indication of what the future holds, and I believe it is, we are in for quite a ride with the budget tabled yesterday by the Minister of Finance, especially because it maintains social injustice, fiscal laxness and tax unfairness. Rich people and major corporations will not pay any more taxes, while the poor and the middle class will continue to pay for the Liberal government's attitude. This is unacceptable!
The Minister of Finance has no reason to be proud to announce a deficit of some $40 billion for the fiscal year 1994-95. Especially since he knowingly-and I do mean knowingly-and wilfully increased the amount of the deficit for the last fiscal year, so as to look more efficient with the cuts announced in his budget of yesterday.
According to several economists, some of whom he consulted during the pre-budget exercise which took place recently, the actual national deficit for the current year is not $45 billion but somewhere around $42 billion. In fact, the Conference Board, which can certainly not be accused of promoting sovereignty, wrote this in its note on the Canadian economy for the winter of 1994: A large part of the $3 billion cost overruns for 1993-94 results from changing the implementation date of certain measures announced in policies and, as such, is due to one-time discretionary accounting decisions. What that means is that, based on the deficit forecasts from the Department of Finance and on the budget tabled yesterday, the Minister of Finance moved only $2 billion towards his expense-cutting objective. The minister speaks of cutting the deficit by $7 or $8 billion, but it is a fraud, a sham. I will not say that they are lying, because that is unparliamentary, but I will say that they are not telling the truth.
Since the deficit for 1994-95 will be reduced by only $2 billion, where is the effort to restore fiscal sanity to government? They must be joking, they are not credible! Do you think, do we all think, that the Minister of Finance and this government are waiting for a third warning from the International Monetary Fund before doing something? Are they also waiting for a further deterioration of Canada's fiscal situation as a result of a lower credit rating from the major rating agencies? Madam Speaker, this government and especially the Minister of Finance are grossly irresponsible.
I believe that compared to other industrialized countries, the economic situation in Canada called for aggressive budgetary measures. If you allow me, Madam Speaker, I will give a few examples of Canada's bad performance to show that we needed more than budgetary cosmetics from the Minister of Finance.
The facts that I will now present are known, and I hope they are known to the Minister of Finance. I hope he knows his ABC's. First of all, the relative size of the Canadian deficit is greater than in the other G-7 countries. In 1993, according to the Organization for Economic Co-operation and Development and according to the definition given in the national accounts, Canada's deficit-GDP ratio was 63 per cent higher than the G-7 average. It is spectacular in the bad sense of the word.
The second fact that the Minister of Finance should know, that his government should know and that all ministers should know but instead pretend not to know in order to hide the fact that our present system is a national catastrophe, is that our debt is growing much more rapidly than in that of the G-7 countries as a whole. From 1985 to 1993, the debt-GDP ratio of OECD countries grew by only 21 per cent, whereas Canada's debt-GDP ratio grew by 82 per cent. That is 82 per cent versus 21 per cent.
In less technical terms, this means that Canada's debt is growing much more rapidly than the revenue that could be used to reduce it some day. When a country gets to the point where it cannot generate enough revenue to be able some day to pay the interest and part of the principal on its debt, it means that things are bad, really bad.
As if that was not enough, between 1983 and 1992, the proportion of the federal debt held by non-residents more than doubled. This is unacceptable. It makes us lose control over the Canadian economy, so that future generations, our youth, are crippled more than other taxpayers. They are the ones who will have to pay off the debt, including our enormous foreign debt.
I can tell you that the present government, as did the previous ones, is leaving quite a legacy to our youth, seing that the unemployment rate is at 17.5 per cent in the under 25 age group. Such are the figures for the last quarter of 1993. It is quite a legacy, which does not allow them much hope.
Again, according to the OECD data, due to structural factors the Canadian public sector's spending is increasing faster than that of most countries of the OECD, and faster than in all G-7 countries. Simply put, it means the system is no longer working.
This system is rotten to the core, as we say in Quebec. The system does not work and things only get worse because of the fact that tax revenues do not flow in the federal coffers as they should, given the economic growth. Why? Because of overtaxation, and to put it bluntly, because Quebecers and Canadians are fed up. A new underground economy has emerged and is becoming larger and larger.
I believe the Minister of Finance, with the budget he tabled yesterday, is contributing to the growth of the underground economy both in Quebec and in Canada. That is unforgivable. He is contributing to the collapse of our country and of our system which he pretends to be protecting.
According to the technical data from OECD, government expenditures are now out of control and changes are needed, not only some patching here and there, but major changes the Minister of Finance does not have the guts to make. Tabling a budget like the one the Minister of Finance put forward yesterday is an act of cowardice.
Even if the members opposite laughed at us before their first budget was tabled, we did not take any pleasure in constantly urging the government to set up without any delay a special parliamentary committee not only to consider, but to analyse carefully and in detail all of the expenditure items of the Canadian government, not only the budgetary expenditures but also tax expenditures. We wanted to make major changes that would help us to control somewhat the degradation of public finances in Canada, since we cannot totally control the situation, with the system on the brink of collapse.
Of course, we will not go over the history of the past three months, but already, even without the committee, even without the government's response to the establishment of a special parliamentary committee, the Minister of Finance yesterday, if he had the courage of his convictions which he showed when he was in the Official Opposition, could have applied the Auditor General's recommendations of the past three years and thus taken a considerable amount, not just $40 million, from the government's spending on operations. According to many tax experts, he would get at least $5 billion a year in wasted public spending and inefficiency and bureaucracy of all kinds, but the Minister of Finance and his government did not have the courage to take that medicine.
As for revenue, when we look at the forecasts-and these forecasts are absolutely ridiculous; they have no credibility in economic and financial circles-we must admit that the Minister of Finance is making exactly the same mistakes as his predecessor in this House. He still thinks he is in the period from the mid-1970s to the mid-1980s, when tax revenue rose in step with economic growth, as measured by the gross domestic product, that is growth in the nation's wealth.
The Minister of Finance wrongly predicts that any 1 per cent increase in national wealth as measured by the gross domestic product will result in an increase of over 1 per cent in tax revenue. Since the mid-1980s, that is no longer the case, as a Conference Board study done in January confirms. When the nation's wealth as measured by the gross domestic product grows 1 per cent, tax revenue grows by only 0.4 per cent. Why? For a very simple reason, as I just said: the emergence and growth of a large underground economy in Quebec and Canada, because taxpayers are fed up with taxes and have had enough of being overtaxed, while seeing that the present government, like the previous one, does not have the courage to act to eliminate waste and inefficiency.
I would remind you, Madam Speaker, that revenue forecasts are unrealistic, even in comparison with the estimates done in the last three years. For example, the February 1991 budget overestimated revenues for the 1991-92 fiscal year by $6.5 billion. The following year, the budget again overestimated revenues for the 1992-93 fiscal year not by $6.5 billion but by $10.6 billion. Finally, according to the Department of Finance's estimates, the April 1993 budget overestimated revenues by nearly $10 billion. So how much credibility can one expect with such revenue estimates in the finance minister's budget when, on one hand, the assumptions underlying economic growth-re-
lated tax revenues are false and, on the other hand, the team responsible for the previous government's economic and financial forecasts is still giving the finance minister the same kind of estimates?
According to the analysts I heard yesterday, the finance minister's estimates are totally unrealistic and he will not meet his target to reduce the deficit to 3 per cent of GDP in the next few years. It is technically impossible.
Not only does the finance minister lack finesse and credibility in this respect but, like his predecessors, he also shows a lack of vision because he goes even beyond using data that is not credible. He said in his speech yesterday that government revenues would not only follow economic trends but grow faster that the economy. Imagine, he goes even further than the previous government by using totally unrealistic assumptions. He says that tax revenues will increase faster than the collective wealth.
I do not know how this bill of goods was sold to the finance minister. I do not know whether he believed in it from the start but I can assure you that it is impossible. It is impossible and if it ever happened, the government's friends or the Chamber of Commerce representatives would be deeply concerned about this kind of forecast.
I do not know if the finance minister remembers how indignant he acted and how he condemned the Conservative government's surrealistic forecasts when he was on this side of the House. Like his predecessor, is he wearing rose-coloured glasses which encourage finance ministers to overestimate government revenues or is he trying to live up to its reputation as a stand-up comic, as the prestigious Toronto daily The Globe and Mail recently called him.
With regard to revenues, the government and the Minister of Finance are broadening the tax base as they promised to do, but they do it again on the back of the middle-class which is already overtaxed.
Madam Speaker, let me give you a few examples to flesh out my argumentation. In the next three years, the Minister of Finance will unduly burden middle-income workers with taxes, first by taxing the employer contribution to various group insurance plans. In the next three years, the Minister of Finance will hit middle-income workers for at least another $520 million, that is half a billion dollars.
Furthermore, last week, while looking at ways to eliminate abuses and loopholes for the rich, maybe the Minister of Finance had a stroke of genius, who knows. However, in seeking to end abuses and close loopholes, he has thrown the baby out with the bath water by reducing the tax credit for meal and entertainment expenses. While it may be true that some of the people who benefit from this deduction fall into the high-income category, it is also true that nearly 80 per cent of those claiming these kinds of deductions fall into the middle- or lower-income categories. This provision will primarily affect self-employed workers. They are not the ones with hefty incomes who shelter their money safely away in family trusts. They are the people who work tirelessly to create their own jobs because they must contend with a government that is incapable of supporting their job creation efforts.
Obviously, the minister, even though he continues to wave his red book and to chant "jobs, jobs, jobs", did not give a moment's thought to the impact, largely negative, that this measure would have. He did not give any thought either to the effects of this measure on jobs in the restaurant industry. He did not think about this. He did not think about how this provision would discourage self-employed individuals who, day after day, work doggedly and struggle against the tax burden and the federal bureaucracy to earn a living.
My feeling-and we have an illustrious representative of the former administration-is that the Liberal government, and its Minister of Finance, is simply following without question the advice of federal apparatchiks. We see before us a pale reflection of these mandarins. To spend $170,000 to deliver a speech in New-York City, great! He travelled in a Challenger at public expense, at the expense of the very same people on whom the Minister of Finance is now imposing a tax hike, an irresponsible tax increase, as irresponsible as a $170,000 expenditure to travel in a Challenger to go and deliver a speech.
By eliminating the age credit for seniors, the Minister of Finance is widening the tax base at the expense of 800,000 older people. That is social justice! That is how we reward seniors who worked hard all their lives to start a family and build this country that this government claims to stand for.
They will actually be squeezing out of seniors another half billion or so over the next three years. How can the minister think seriously that a senior with an annual income of $25,000 is affluent and use that as an excuse to cut the age credit for seniors? How can he justify such an action when, at the same time, very profitable large corporations are allowed to pay not a cent in taxes? That is inadmissible.
I gather from this that, like his Conservative predecessors-because this is basically a Conservative budget tabled by Liberals-the Minister of Finance is relentlessly targeting the middle-class. Must the minister and his government be reminded that, from 1971 to 1991, the actual tax rate for families with an average annual income of about $46,000 increased by
32.3 per cent on average, as compared to only 26.7 per cent for families with an average annual income over $110,000?
This blatant injustice, when it was uncovered not too long ago, prompted the editorial page editor of Le Devoir , Mr. Jean-Robert Sansfaçon, to point out to his readers the unfair situation the middle-class was being put in. This is what he said: Since 1980, middle-class Canadians have had to hand all their additional income over to their governments''. They had to give all their extra income since 1980, everything they have earned since 1980, to the government. It goes on to say:The tax burden climbed faster than the combined inflation and growth rates. Last January, the Liberals, newly arrived in the federal capital, raised unemployment insurance premiums by 7 per cent, a direct tax on job creation''.
The finance minister behaved in an odious fashion, worse in some respects than the Conservatives, whom he criticized for taxing middle-income Canadians. It is a rather silly situation when part of the budget denounces the payroll tax to finance unemployment insurance, which was increased from $3 to $3.07 in January, and accuses it of slowing down job creation. But it is the Liberals who, last January, increased employers' and employees' premiums, thus taking some $800 million from workers' and entrepreneurs' pockets and compromising their promise of creating long-term jobs in Quebec and Canada.
I do not understand, Madam Speaker. I get the impression that the Liberals are laughing at Quebec and Canadian taxpayers, as no other government has dared to do in the political history of Canada.
They recognize that this increase has slowed down job creation, but they still agree to keep it at $3.07 throughout 1994 and say they will create jobs this way. They agree it is an obstacle but they still want to keep it. How ridiculous, Madam Speaker! Jobs, jobs, jobs, cut, cut, cut. How utterly ridiculous!
Does the Minister of Finance know that taxpayers from all income groups pay proportionally seven times more taxes than businesses in Canada? This is another aspect of the budget which I would like to discuss.
The federal tax base is split like this: roughly 73 per cent of the money is paid by individual taxpayers, compared to 27 per cent by Quebec and Canadian businesses. Maybe it is time to create a better balance, because contributions made to the federal tax base by businesses are getting smaller year after year.
I would like to mention some figures, again from the OECD, to those who, like the minister, his colleagues, and the friends of and contributors to the Liberal Party of Canada-and I will get back to this later, Madam Speaker-believe that businesses, and particularly very big money-making corporations, are doing their share.
The Canadian corporate tax burden represents approximately 6.6 per cent of our gross domestic production, whereas for all the G-7 members, that is for the seven most industrialized countries, this proportion is 9.9 per cent. I think there is still some margin for manoeuvre without jeopardizing the competitiveness of major money-making corporations, and I think we could tax those big companies which have made $27 billion in profits in 1987-88 and still did not pay any taxes. It seems to me that we should look at this possibility.
Some say "it is not industrialized countries we have to look at but our main trading partner". Indeed, Madam Speaker, if you look at the corporate tax burden in the United States, you will see that it represents 7.2 per cent of their GDP, compared to 6.6 per cent here in Canada.
So considering this difference between Canada and the United States, there is room for an entirely legitimate tax grab from large corporations that take advantage of tax loopholes.
I think this is clear proof that we need a minimum corporate tax. There is no minimum tax for large companies that are very successful and manage to transfer their profits elsewhere and patriate losses from other countries to deduct them in this country. This proves that a minimum tax would be most welcome. I think it is high time to get rid of the inequities and unfairness in our tax system.
In the same vein, we have repeatedly asked the federal Minister of Finance to put a stop to the outrageous family trust scheme which was actually introduced by a Liberal government.
