House of Commons Hansard #18 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was provinces.


Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:15 p.m.

Bonaventure—Îles-De-La-Madeleine Québec


Patrick Gagnon LiberalParliamentary Secretary to Solicitor General

Madam Speaker, I would also like to make a few comments on the speech made by the hon. member representing Matapédia-Matane, which is the riding next to mine.

The hon. member more or less wanted to make a case when he squarely put the blame on federalism for the hardships and problems encountered in remote regions.

However, I would ask him to take a look at policies implemented by recent provincial governments in Quebec, not only the Liberal one in office since 1985, but especially the Parti Québécois before that. I do not think that the federal government is necessarily the one to blame; the province is also responsible for the situation in rural areas.

In any case, more and more young people and business people return to the regions to get the local economy going again. I believe that to get regional and local economies going again, we must invest more in individuals, and not necessarily in states. Whether it is the state of Quebec or Canada, I think we should do more for small business people.

Over the years, especially under the Conservative government but also under the Parti Québécois before, not enough was done to help small businesses, for example with loans. It is mainly because of government agencies, or because of the lack of co-operation of financial institutions, that we were not able to improve the situation of small businesses and, consequently, the quality of life in rural Quebec. But it is wrong to say that the federal government is the only one to blame.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:15 p.m.

An hon. member

Yes, indeed it is wrong.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:15 p.m.


Patrick Gagnon Liberal Bonaventure—Îles-De-La-Madeleine, QC

It is absolutely wrong, because some positive attempts were made by the federal government to get regional economies going again, for example with the Federal Office of Regional Development. Quebec has been talking about the one-stop concept for years, but I would like to hear the Bloc Quebecois tell us exactly why federalism was so bad for rural economic development.

I think that by talking about sovereignty and by making it an obsession in the eastern part of Quebec, we jeopardize the future of our young people and our remote regions. I do care for my region; I am first a Gaspésien, but I object to this claim that federalism is to be blamed for our high unemployment rate.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:15 p.m.


René Canuel Bloc Matapédia—Matane, QC

Madam Speaker, how can federalism not be at fault since, over the last few years, our ridings have been represented by federalists at the provincial level? Indeed, whether at the provincial or federal level, there are only federalists. Also, the unemployment rate in our region is at 21 per cent and is constantly increasing. If that is not a failure, what is it?

Our young people are all leaving. If provincial or national federalists are not to blame, after all the Parti Québécois is not in office, then whose fault is it? It is not the Parti Québécois, nor the Bloc because we just got here. We will improve things, but we need time to do that.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:15 p.m.


John Solomon NDP Regina—Lumsden, SK

Madam Speaker, it is my pleasure to participate in the debate on Bill C-3. My sense of the bill is that it has assisted the provinces of Canada in stabilizing their budgetary plans over the next five years. I have an attraction toward supporting the bill, in particular as it applies not to just to all of our country but as it applies to Saskatchewan where I come from.

What has happened in Saskatchewan over the past 10 or 12 years is nothing short of a disaster. I will go back a bit to describe what Saskatchewan was like between 1971 and 1982. At that time Saskatchewan was governed by a New Democratic Party government led by Premier Allan Blakeney. The NDP was the only government of the day in Canada that had 11 consecutive balanced budgets. These balanced budgets were not done for the sake of balancing the budget, but they were the result of good planning on behalf of the premier, the cabinet and the

government and ensuring that the priorities of the people came first.

In spite of the balanced budget the province of Saskatchewan had the lowest overall tax rate in the country. Saskatchewan had hundreds of millions of dollars in revenues from the resource industries. We had the only children's dental program for children 18 years of age and under in the entire world. We had a prescription drug plan for all of our citizens.

We had a very significant initiative not only in health care but in the economic sector as well. People were working. The farm economy was well attracted to the government in terms of the type of agricultural programs we undertook. We pioneered agricultural programs such as land bank and farm start which encouraged young people to stay on the farm and get into the farming sector.

After 11 years we basically came out of the 1970s to 1982 not only with 11 balanced budgets, our people working and good social programs for the population, but also with a heritage fund of about a billion dollars. Our final budget in 1981-82 provided a surplus of $139 million on the operations side.

In 1982 an event took place in Saskatchewan which to this day and for probably a generation or two will be remembered. That is the date of the election, April 26, 1982, when Grant Devine and the Conservative government came to power. They had won the election on the basis that they were a Conservative government, that they were fiscally responsible and that they were going to do all these great things for the province of Saskatchewan.

They had 10 consecutive deficit budgets in their nine years of power. They went from a $139 million surplus on the operations side to $8 billion in debt. We went from a $3 billion crown corporation capital debt in 1982, which was a self-liquidating debt like a mortgage on a house, to after nine years of Grant Devine and the Conservative government ruling the province, to a crown corporation capital debt of not $3 billion but over $8 billion coupled with the significant problem of having all of our profitable crown corporations privatized. There were no revenues to pay off this $8 billion capital debt.

In 1991 the people of Saskatchewan had enough. They defeated the Conservative government and elected another NDP government. We are not just faced with this massive $16 billion debt for less than a million population. We are also faced with a savage attack by the national government in terms of reduction in equalization payments. As a result of Mr. Mulroney and the former Conservative government we have lost on average about $252 million a year in equalization payments. That was the punishment Saskatchewan received even though we had a like-minded Conservative government at the provincial level. That was the reward. It was more of a punishment than a reward.

This shows very clearly that Saskatchewan had the ability to run its own finances, to introduce progressive social programs, to produce jobs for its people. When it had a plan in place under the NDP we progressed from that to where we became basically almost a bankrupt province in 1991. Part of that was because of the established programs financing and other equalization programs that were cut back. The majority of it obviously was because of the Grant Devine government.

The point I want to make with respect to Bill C-3 this evening is that this bill addresses some of the hardship under the former government in the sense that it re-establishes some of that lost revenue on an annual basis. It does not make up all of it, but establishes an upward trend to providing us with more of our fair share in more ways than one.

The other reason we had big deficits in terms of losing our equalization payments in the 1980s was because the equalization formula that was negotiated with the former governments, two Tory governments provincial-federal negotiating in the 1980s, took away the ability of the province to raise revenue through resource taxation. The way it punished Saskatchewan was that for every dollar we raised in terms of additional resource revenue we would have the equalization payments reduced dollar for dollar.

In the event where prices for potash and oil increased as a result of world prices, our price sensitive royalties would gather more revenues to the province, but we would lose for every dollar we gained on the equalization payments from the federal government. It was really a catch 22. We were handcuffed as a province in terms of managing our own finances.

I am pleased to see in the bill some progress toward taking the handcuffs off. It has not resolved all of the things we would like to see in Saskatchewan, but what has been resolved is this very distressing problem with respect to resource taxation. It has provided a change in the equalization formula which will address the problem known as a tax back in determining equalization entitlements for Saskatchewan and I understand for Newfoundland and Nova Scotia as well. Saskatchewan will receive some long-term benefits.

There will still be a very light handcuff on the Government of Saskatchewan to increase its revenues with respect to resources and not be affected with respect to equalization, but the good news is there is an about face in terms of the total disregard for provincial autonomy when it comes to resources and this bill is a positive move in that step. That is one of the reasons I support it.

As important I believe is that governments must have a plan. It is not good enough to come to this Parliament on a daily basis and have an agenda for today. What is important is that we as the Government of Canada and the provincial governments have a long-term plan-a medium term plan, a daily plan, a weekly plan-some idea as to where they are going in the next five years.

Under the Romanow government since 1991 they have put together a five-year plan which will provide a balanced budget for the first time since 1982 in the 1995-96 fiscal year. We are very proud of that in Saskatchewan. It has been very difficult. It has not come without a great deal of sacrifice, an increase in taxes and reducing some of the benefits. Our options were very limited.

Bill C-3 in my view is a good move. I do not think it is going far enough for the province of Saskatchewan, but I am satisfied that it is a step in the right direction. As a result in principle I do support the bill.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

The Acting Speaker (Mrs. Maheu)

Is the House ready for the question?

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

Some hon. members


Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

The Acting Speaker (Mrs. Maheu)

Is it the pleasure of the House to adopt the motion?

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

Some hon. members


Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

Some hon. members


Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

The Acting Speaker (Mrs. Maheu)

All those in favour of the motion will please say yea.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

Some hon. members


Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

The Acting Speaker (Mrs. Maheu)

All those opposed will please say nay.

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

Some hon. members


Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions ActGovernment Orders

6:25 p.m.

The Acting Speaker (Mrs. Maheu)

In my opinion the yeas have it.

I declare the motion carried.

(Bill read the second time and referred to a committee.)

Income Tax ActGovernment Orders

6:30 p.m.

Scarborough East Ontario


Doug Peters Liberalfor the Minister of Finance

moved that Bill C-9, an act to amend the Income Tax Act, be read the second time and referred to a committee.

Madam Speaker, I would like to take this opportunity to lead off the debate on the second reading of Bill C-9. This bill proposes to implement a number of amendments to the Income Tax Act that were announced by the previous government in December 1992 and April 1993.

The previous government introduced legislation, Bill C-136, last June to provide statutory authorization for these measures, but the bill died when Parliament was dissolved and election writs issued. For these measures to have legal effect new legislation must now be passed by this Parliament. The measures in Bill C-9 address a number of areas.

Allow me to list them: first, the unemployment insurance premium relief for additional jobs created by small business in 1993; second, the extension of the home buyers plan through March 1, 1994 which allows individuals to withdraw funds from their RRSPs to purchase homes; third, changes in the rules for instalment tax payments that will require more high income filers to make quarterly payments while allowing other low income filers to pay only once a year; fourth, certain tax measures to support small business, scientific research and development, oil and gas exploration and labour sponsored venture capital investments.

Let me be clear at the start in explaining why we are going ahead with this legislation. We have no obligation to the previous government, a government that was resoundingly defeated by the Canadian electorate last October. Our mandate from the electorate is based on a different vision. It is a vision that offers hope to Canadians that we can work together and deal with the difficult legacy that we inherit. Our mandate rests on a clear commitment to create a different and a better future, a prosperous Canada in which everyone has a chance to participate in building the country and a chance to share in the rewards.

That being said, it is essential that the government always reflect the sense of fairness and common sense of Canadians. This is the test we have applied to the unfinished legislative business before us today. Simply put, these tax measures were introduced some time ago. Many were announced more than a year ago and some have fully run their course and are now expired. Many were said to be effective immediately when announced by the previous government and many thousands of Canadians took it at its word.

These individuals have relied on these announcements when making important decisions. Many have, for example, used their RRSPs to buy and build homes and I am sure everyone in the House agrees that buying a home certainly represents a major commitment to those involved. Other Canadians have relied on these announcements when making significant investments or hiring new employees.

The commitment these taxpayers have made is for the most part irreversible. The actions that have been taken are concrete and represent real investments of hard earned savings. We are not dealing simply with plans that some people have for future actions. Consequently, if we were to walk away from this situation many people would be put in a very difficult situation,

an unfair situation. The trust that Canadians have in their government, a trust that we must always strive to keep and enhance, would be dealt a powerful blow.

However, we do not approach this question as prisoners of the previous government's actions or inactions, to put it more precisely.

We have carefully reviewed the measures in this legislation and believe we can support them in their own right.

One of the measures in the old legislation has been dropped. The previous government had proposed paying the GST credit only twice a year to low income Canadians. For our part we choose to continue paying this credit every quarter to those who qualify during the period the GST remains in force, which will hopefully not be too long. The government is committed to replacing the GST with a fairer and more efficient tax. The House of Commons finance committee will be examining options over the next few months on the matter.

As for the other measures, our primary criticism generally is that they represent only a small piecemeal effort by the previous government to deal with a large and pressing need in this country to strengthen the economy and to create jobs. The approach to economic management by the previous government, a combination that might be called slash and burn on the one hand and ineffective tinkering on the other, needlessly prolonged a painful economic downturn and spread intolerable levels of distress and suffering over this whole country.

For our part we believe we need a long-term process of reform to government policies and programs that is, to quote my colleague the Minister of Finance, creative, compassionate and constructive.

I am confident the upcoming budget will set in motion a process of re-evaluation and reform that will result in meaningful, significant steps to bring this country back onto a path of job creation and economic growth shared by all.

I ask my colleagues and my hon. friends opposite to consider this legislation not as an indication of the approach this government takes to economic management. Rather, this is simply a question of parliamentary housekeeping and the discharge of a trust we in this House owe to all Canadians.

With this in mind, let me outline briefly the measures of the bill. First of all there are measures that affect individual taxpayers. One is an extension of the home buyers plan by one year through March 1, 1994. As I mentioned before, to renege on this program would cause undue and unfair difficulties to many thousands of Canadians.

As well the legislation provides that starting next September certain higher income Canadians will have to make quarterly instalment payments on their taxes. This measure will affect those people whose tax payable is $2,000 or more than the total tax withheld at source. In Quebec where we collect only the federal tax, the figure is $1,200. At the same time some 300,000 low income filers will be excused from quarterly payments and required to pay only once a year.

Some member may argue that these measures are yet to take effect and thus could be allowed to die without undue hardship to taxpayers. I would counter by pointing out that these changes represent a small but real improvement in the income tax regime.

Most Canadians pay their taxes either every time they receive a pay cheque or quarterly. Therefore it is only fair to set the same requirement for those Canadians who have substantial income which is not taxed at source and effectively receive a special benefit. At the same time we support the premise that low income filers, many of them elderly, should have their tax payments simplified.

Another area addressed by this legislation is one of the few attempts by the previous government to foster job creation. The December 1992 economic statement announced a one-year program of relief for unemployment insurance premiums for increased employment by small business. This program has come and gone unnoticed by the 1.5 million unemployed in this country. Nevertheless a number of small businesses have taken the government of the day at its word and we shall honour that bargain as a matter of public trust.

The same considerations also apply to the other measures targeted at small business. These include first of all the temporary small business investment tax credit for the purchase of eligible machinery and equipment from December 2, 1992 to December 31, 1993.

Second, the extension of the small business financing program to the end of this year, allowing small businesses in financial difficulty to refinance up to $500,000 of debt at low interest rates.

Third, the removal of any limits on holdings of small business shares in RRSPs and RRIFs.

Fourth, the extension of the 35 per cent investment tax credit available to small Canadian controlled, private corporations for eligible research and development expenses.

In addition, this legislation will give effect to some general improvements in the tax credit incentives offered to encourage Canadian research and development. As well, it removes the annual limits on the investment tax credits. This limit, introduced by the previous government in 1987, reduced the effectiveness of the ITC incentives for rapidly growing firms, one of the engines of job growth in this country.

The bill also assists resource companies by allowing 100 per cent of the first $2 million of oil and gas development expenditures to flow through directly to shareholders and be deducted by them. As well, it gives these companies more flexibility in managing their affairs by removing the mandatory reduction of the Canadian exploration expenses.

Finally, this bill will put in place new, more flexible rules for investments in labour sponsored venture capital corporations.

In conclusion, let me reiterate the position I put forward earlier. The government has no quarrel with the underlying goal of our predecessors in announcing these measures. No party in this House or in the previous Parliament is against job creation in principle. The issue however is which parties are for job creation in practice. That issue was put to the voters and the voters provided a clear answer. We do not hold out the measures in this bill as any solution to the challenge of job creation, but we do recognize the attempt. Of equal importance, we recognize the commitments made by small business people, by new home buyers and by others who have relied on these proposed measures.

It is with these thoughts in mind I urge members of the House to support the bill.

Income Tax ActGovernment Orders

6:40 p.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, I am happy to have this opportunity to speak to Bill C-9.

As our colleague just mentioned, Bill C-9 gives concrete expression to measures announced by the previous government in the Economic and Fiscal Statement of December 1992 as well as in the last budget it tabled before being litterally swept out of office in the last federal election.

This bill will be considered in the Standing Committee on Finance, at which time the Bloc Quebecois plans to examine each provision, even though the government considers certain provisions as mere formalities. With regard to those measures that we see as very positive, such as the extension of the plan allowing individuals to withdraw funds from their RRSPs to buy a first home and those relating to labour sponsored venture capital corporations, an item by item examination of Bill C-9 will give us an opportunity to make recommendations to the government, if applicable, to extend further this kind of programs. I think that this is one of the functions of the Standing Committee on Finance.

Having said that, no great revelation emerged from my review of this bill because I was familiar with the actions of the previous government. Like my hon. colleague though, I have realized that the last budget tabled by the Conservative government was full of short-term measures, measures to mitigate a catastrophic economic situation they were largely responsible for. Think for instance of the recession which took unprecedented proportions after the first quarter of 1990, making the rate of unemployment in Canada climb from a little over 9 per cent to 12 per cent. Think of youth unemployment also. Released just recently, the latest statistics on the last quarter of 1993 indicate that unemployment is affecting 17.5 per cent of young Canadians under the age of 25.

Take the inactivity rate in Quebec, for example, because we know that situation better. This is the unemployment rate plus the people who are no longer looking for work because they are so discouraged by the economic measures of the previous government that they have given up. In five years the inactivity rate has gone from about 19 per cent to nearly 25 per cent in Quebec.

These are the devastating effects of Conservative policy. In Bill C-9, in the last budget, we find some piecemeal, partial, weak measures to lessen the blow and bandage the wound which they themselves created.

That said, I would like to give an overview in the next few minutes-I will not take too much of your time-but in the next few minutes, I would like to give the reasons for this mess, the causes of the catastrophic state the economy is in, so that the present government will not repeat the same mistakes.

The economic situation which we have been in since the first quarter of 1990 is the combined result of three main factors. The first of these is very bad management of the government's finances. The second is the Conservatives' monetary policy and the third, the international economic climate which has worsened the disastrous economic situation and the sorry state of Canada's finances due to the Conservative government.

I do not think that we have to review the first of these factors, the government's finances. Canada's public finances have become a cause for great concern since about 1986, even extreme concern.

I would remind the government that it was when the Liberals were in power before that we started to have problems with the government's financial management. I will just give you a few figures in the hope that the new Liberal government will not repeat the same mistakes that it made when it was in power from 1970 to 1984. I would remind you that the present Prime Minister of Canada was Minister of Finance during that time. I would remind you that from 1970 to 1984, the annual federal deficit as a percentage of gross domestic product rose from 0.3 per cent to 8.7 per cent, a record since unmatched. The Liberals set the record when they were in office before.

We are hoping and taking the opportunity of this debate on Bill C-9 to warn you against reverting to this mismanagement of public funds.

The second cause of our disastrous economic situation, the second legacy left us by the Conservatives, is the anti-inflation policy.

When you say that in less than a year and a half the gap between Canadian and American short-term interest rates went from about 1.5 to over five points at times, it is obvious that, sooner or later, it would impact on investments and, in turn, on economic growth and job creation.

The dogmatic anti-inflation policy followed by the former Governor of the Bank of Canada was a major factor in the ailing economy that led, in Bill C-9, to a few fragmented stopgap measures.

We therefore warn this government against making the same mistake by adopting a dogmatic anti-inflation policy that goes too far to bring inflation under control without trying to maintain a balance between long-term price control and short-term job creation.

We also hope, after thoroughly reviewing Bill C-9 to learn from it as you can see, that this government will subject all programs, expenditures and tax measures such as those in Bill C-9 to extensive scrutiny. Because, after studying this bill and consulting senior officials from the finance department, we found out, that no cost-benefit analysis has been done, that no serious, objective review is done every time new tax measures are planned like those the Conservatives left us in June 1993.

The Auditor General is very clear on that. He said that out of 16 federal programs accounting for $124.5 billion, only two have been seriously evaluated. Therefore, I urge the government not to make the same mistake in the next budget. It is important that every measure proposed in a budget be fully analyzed, that they be subjected to a thorough cost-benefit analysis.

Fourth, I hope the government will propose something other than palliative measures-similar to those inherited from the previous government-like the ones in Bill C-9. I am hoping for real programs of job creation, not Mickey Mouse programs. I would like to see real measures to create long-term jobs, measures which would raise the quality of manpower and improve its capacity to face the globalization challenges. I hope the government will fulfil the expectations concerning training, the expectations of the Quebec Government, and that it will put an end to overlappings and inefficiencies in this area.

This is another piece of friendly advice to the government from the Bloc Quebecois. I hope the government will not repeat the mistake of the Conservatives and try to attack social programs. That too seemed clear in the red book that is being waved at us virtually every day on the other side of the House. By the way, I believe it is improper to produce exhibits in the House. I would have to check, but I think I read that somewhere.

It was clear in that red book-I remind you that Mao also had one -that social programs would be protected and that future budgets would also allow for the creation of social housing. It seems that the Minister of Finance has forgotten those commitments.

Let us hope that the government will not repeat the mistakes of the Conservatives who tried several times-and they were taught a costly lesson-to reduce social programs, to reduce senior citizens' pensions, and to practically eliminate-as they did in their second last budget-social housing.

It is hoped-and that was shown to me by Bill C-9-that the government, when tabling its next budget, will try to really reduce its extravagant spending. There are also real measures that can be taken to fill the taxation gaps, and I will give you some, because I have the feeling that people here tend to forget these things, even from one day to the next.

There are major gaps in the Canadian tax system. It has been said repeatedly since the morning of October 26 and even before, during the election campaign. I will give you two or three more examples in order to refresh your memory and that of the minister of Finance, who is preparing his next budget which, according to rumour, is to be tabled on February 22.

Here are some examples of these scandalous situations. Taxpayers in Canada who get their income mainly from capital-so, they are not workers, but people who are able to invest in stocks, bonds and elsewhere-are taxed at an average rate of 9.9 per cent. The basic rate for workers, for those who toil to earn a living and who cannot afford to speculate, is at 29 per cent. Why are there such inequities?

Here is a second example. In 1987-because since then the Department of Finance has stopped conducting these analyses and, all above, publishing them; people in the federal system are hiding them because they are ashamed-in the middle of an economic growth, there were 90,000 Canadian companies that made $27 billion worth of profits without paying any income tax.

The Bloc Quebecois has often mentionned the scandal of family trusts during question period. The Minister of Finance, as the Prime Minister and all the members of the Liberal Party, decided to laugh at the whole issue of these tax loopholes and to discard, with language well known to this House, the family

trust problem even though it costs the federal government between $350 million and one billion dollars a year in tax revenues.

Last weekend, I read an article by Yves Séguin, who is certainly not uninformed about taxation whether in Quebec or in Canada, and he estimated that in Canada, tax loopholes alone-I am talking here about grand-scale tax evasion by Canadian corporations-represent a loss of revenue of approximately 2.5 billion dollars.

When the government presents its budget, when it evaluates all tax measures and when it modifies or reviews the whole Canadian taxation system, we hope that the Minister of Finance will keep in mind that there are blatant tax inequities in our system and, most of all, that he will not touch middle-class income, social programs or those people who have been carrying an ever-increasing tax burden since 1984, that he will not copy the previous government which, need I remind you, was erased from the federal map.

Contrary to what the Tory government did in its last budget, I hope this government will present true tax incentives in order to promote economic recovery in Quebec and in Canada and to reinforce corporate and individual competitiveness because globalization is something everyone speaks about in this House, something everyone has been talking about since 1984 under Tory management, but it is more than a mere concept.

Globalization means we have to face the best in the world, the best industries, the best workers, in a world that is getting smaller by the minute. My former boss at the Union des producteurs agricoles used to say that globalization would transform our planet into a global village. Therefore, the United States are not our competitors any longer; our competitors are now the most efficient workers in the world. They are the Pacific Rim countries and the developing countries because in the area of mass production, their competitive effectiveness is superior to ours.

So we hope this government will not repeat the errors by applying stop-gap measures instead of real ones which would reinforce corporate competitiveness and worker productivity in Canada.

We hope that this government will change its mind and restore the full meaning of the Canadian equalization program, which we had the opportunity to debate yesterday and today, with respect to Bill C-3, by eliminating the ceiling it imposed on payments to the provinces. My message is the same one we delivered yesterday and are still sending today: this ceiling completely changes the nature of the equalization objectives.

For the benefit of my friends in the Reform Party, I will digress for a moment. I have the feeling that they cannot read, although I hope they can write; but I do know for a fact that they cannot read; how else could they refuse to understand the basic principles of equalization? Since yesterday, they have been saying things about Quebec and the Canadian equalization system that are totally biased, harmful, and even vicious.

May I just remind all the members, before I make my point, that this system is here for a good reason and that it originates in the Rowell-Sirois report, which I urge all the members of the Reform Party to read and study; there are close to two dozen copies of the report in the Library of Parliament. It provided the basis for the Canadian equalization system, together with a nice Canadian dream neither my colleagues nor I believe in any longer. It said that the redistribution of wealth among all Canadian provinces was the cornerstone of federalism.

The aim of equalization is to make sure that even the poorest provinces, the have-not provinces-these are the principles of fiscal federalism, I did not invent them, they stem from the Rowell-Sirois report and subsequent ones-are in a position to have sufficient revenues, including equalization payments from the federal government, to deliver approximately the same level of quality public services as the other provinces.

Equalization payments are calculated according to two factors. The first one is the ability of provinces to raise tax revenues on the municipal and provincial levels. This taxation capacity is then compared to a national average calculated using five Canadian provinces. If the taxation capacity of a province is inferior to $4,800 per person, if I remember the latest calculations, equalization will provide the rest.

Since the total amount of equalization payments is calculated on a per capita basis, it is obvious that Quebec, with seven million people, receives more. Quebec is a have-not province with regard to its capacity to raise tax revenues. When you multiply the per capita rate by the population of the province, it is obvious that Quebec receives more money than Manitoba, Saskatchewan and most of the provinces which "benefit" from equalization. This is not a hand-out. This is the principle of federalism in action. And if the members of the Reform Party are federalists-unless they have had a change of heart and have become sovereigntists in their respective provinces, but I will assume they are federalists until further notice-then they are out of line when they point a finger at Quebec for receiving more than its fair, equitable share, or so they say, a share based on the federal system.

A second point before getting back to the main subject. I would suggest that my colleagues from the Reform Party as well as some of my Liberal colleagues ask the Library of Parliament-they have economists, tax experts and other specialists working there; I can even send a memo on their behalf if they do not know how to go about making such a request-to dig out for them all the expenditures and types of expenditures the federal government has made in each province as well as the per capita share. They will realize one thing: Quebec may, on the one

hand, be receiving 3.6 or 3.7 billion in equalization payments but, on the other hand, it has been losing support for the past ten years in areas such as research and development, transportation, agriculture, federal department investments in Quebec- I would appreciate that they wipe that smile off their faces and just check the figures. At any rate, we will keep bringing them up in this House throughout our mandate, over the course of the four years we will be spending here together.

A third point on equalization. My colleagues from the Reform Party come mainly from the Prairies, from Western Canada. Let me remind them -and I know this for a fact-that each and every year since 1984-85, the three Prairie Provinces have been receiving between $2.5 and $5 billion from the federal government mainly in support of the grain sector.

Back in the days when I sat on foreign trade and stabilization committees of the Canadian Federation of Agriculture as a representative of the Union des producteurs agricoles, the UPA was saying that Prairie grain growers were hard hit by the global economic situation. They have also been hit by several droughts since 1984. We understood their situation and never criticized the federal government for making ad hoc payments to help them out.

We have never blamed them for the fiscal federalism that Quebec is being blamed for through equalization. So I would ask them to show a little more respect for Quebec when we are talking about it and not to make harmful analyses on equalization and what Quebec gets from it. This is all I wanted to say on equalization.

To go back to my advice to the government, I would suggest to the Liberal government, in the light of the disastrous economic situation the Conservatives have imposed on us since 1990, not to revert to the dogmatic anti-inflation fight advocated by the previous government, as it seems determined to do.

I was very surprised and shocked to hear, before the holidays, that the finance minister was holding a press conference with Mr. Thiessen, John Crow's right-hand man and principal advisor at the Bank of Canada. I was very disappointed because it indicated to me, barring evidence to the contrary, that the current finance minister and even the current Prime Minister of Canada have long advocated a monetary, inflation-fighting policy maintaining a better balance between long-term price stability needs and short-term consistent job creation needs. I believed in them at one time.

I was very disappointed to see that the finance minister, in a pre-holiday press conference with the new Governor of the Bank of Canada, announced that, like his predecessor, he would wage a relentless fight against inflation. We do not have anything against fighting inflation per se but we are totally opposed to a relentless fight because, since 1990, we have lived through the outcome of such a relentless, dogmatic fight against inflation.

If the Liberal government is telling the truth about long-term job creation and economic recovery, and if the Liberals were telling the truth when they were in opposition and challenging John Crow's policy, this government should not renew this obsessive anti-inflation policy. Things are going rather well at the moment, in the sense that there has not been a surge in interest rates such as that caused by the Conservatives' anti-inflation policy in the early 1990s. But-this piece of advice is also directed at the hon. members opposite-as soon as the economy picks up, and I hope there will be strong economic growth in the next few months, there will certainly be upward pressure on prices. There is no doubt that if the Bank of Canada pursues its policy of controlling inflation at all costs and tries to keep it at two per cent, the chances of having a truly sustained recovery are reduced.

A mere review of Bill C-9 showed Bloc Quebecois members the carelessness and the incompetence displayed by the previous government. We do hope that you will not make the same mistakes. We also hope that this review of Bill C-9 will help you find a better solution.

Madam Speaker, we would like to see the Finance Committee do a clause-by-clause review of Bill C-9. As I said earlier, we would like to do an in-depth analysis, as the government did according to the hon. member, but in this case it would be a non-partisan exercise done by the Finance Committee. If we have the opportunity to do so, there are already two measures contained in Bill C-9 which we would like to see in the budget to be tabled soon. First, the clause on venture capital corporations for workers. Second, the extension of the Home Buyers' Plan, which enables taxpayers to use their RRSPs to buy a property for the first time.

Madam Speaker, this concludes my comments. I thank you for your kind attention.

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7:10 p.m.


Randy White Reform Fraser Valley West, BC

Madam Speaker, I am quite happy to be able to speak to Bill C-9 because it has some significant issues in it that should be addressed.

The bill has some nine amendments in it but they affect 21 additional sections within the act. This tells us that the complexity of the Income Tax Act today makes all of those things necessary.

I would make one note. It is unfortunate that changes to one's income tax may be implemented by many things today. Even a press release can effect changes to one's income. Unfortunately without the proper legislative steps prior to implementing changes, the tax system becomes quite volatile and can be manipulated very easily.

I must start out by confessing to the House that I have mixed feelings about rising to address this bill. It enacts measures introduced by the previous Conservative government in its December 2, 1992 economic statement and its April 26, 1993 budget. These are obviously not new to Canadians.

On the one hand it would seem to be only prudent that we support what is generally referred to as a housekeeping bill. Much of what this bill enacts has already been policy for the past year or more and we are now just getting around to proclaiming it law. I would not pretend for a minute that it would be anything but irresponsible of us to oppose these measures merely on principle. On the other hand, I wish to make it clear that there are some principles here to which I am strongly opposed, as is my party.

The Income Tax Act has become an unwieldy monster symbolizing I suggest what many Canadians see is the problem with government in general: there is just too much of it.

As an accountant, Madam Speaker, I can assure you I am familiar with the act. I have studied it, worked with it and, yes, like everybody else, have had my problems with it in my day. I have burnt a lot of midnight oil in April trying to figure it out.

I want to assure my fellow accountants across this country that I am not advocating putting them out of work, but the act must be changed. It is time the average Canadian had a chance to understand not just the principle behind taxation but the mechanics of it as well.

The last attempt by the Conservative government to introduce tax reform led to an income surtax, an alternate minimum tax, tax deductions, tax credits and the complicated GST, all of which have further confused matters. It does not have to be this complicated.

Let me illustrate my point with a personal experience I had that I believe shows how this entire process has become symptomatic of a larger disease that is big government today. When I first began to look at Bill C-9 I was in my constituency office in Matsqui, British Columbia. My assistant had a copy of the bill here in Ottawa and I asked him how large it was. The answer was 68 pages. I thought 68 pages of amendments, how do I go through this in a week and try to figure all of it out. I asked him if he could find some kind of explanatory summary. He told me he had asked the Department of Finance for the summary and had received one very quickly. There was only one problem, the so-called summary of a 68-page document was 78 pages long.

These are the kinds of little stories to which even those of us who are new to Ottawa have become immune. The people who have sent us here, the people who have to struggle through the tax forms every single year, the people who pay our salaries, are not immune to these little stories. They are sick and tired of them quite frankly. I believe that was one of the strongest messages sent to this House last October.

We could help our deficit problems by addressing the vast amounts of money this country wastes on sustaining an army of tax accountants and tax lawyers which is what one needs to interpret the Income Tax Act.

We could dramatically reduce costs for individuals' businesses and governments by simplifying the system. We should make it a priority. I would encourage the Liberal government to make it a priority. The Reform Party has it as a very high priority.

I would like to make it clear that there are some good aspects to this bill that we would like to see the government continue or improve on in its up and coming budget. For instance, section 146.01, the home buyers' plan, is a good example of that. I think members heard that from the previous speaker as well.

Young people today cannot afford to buy homes because they are paying too much tax. While total incomes per capita have increased 170 per cent in the last decade, total direct personal taxes have risen by 235 per cent.

How are we doing with respect to other countries? Canadian government revenues as a percentage of gross domestic product increased from 24 per cent in 1950 to almost 43 per cent in 1990.

Six years ago, the tax burden in Canada was approximately 20 per cent higher than that of the United States. In 1992 it had risen to 25 per cent and it is projected to increase to 30 per cent by 1997. It is not just young people who are feeling the tax burden. It is all Canadians today.

The home buyers' plan which allows those savings for a home withdrawn from an RRSP to make a good down payment is a good idea. It not only puts the dream of home ownership within the grasp of more people but it provides economic spinoffs all the way down the line.

Sue Bennett, one of my constituents from Langley, British Columbia, has sent me some information on the plan. I would like to go through it briefly. A poll released in September 1993 by the Canadian Real Estate Association confirms that the homeowner buyers' plan has been a big success.

The poll done by Angus Reid was conducted in five major Canadian cities. It found that four of five buyers who used the plan said it was an important factor in their decision. It was especially important for 86 per cent of the first time buyers. Accountants usually take it. If it is very close, we have to say it does not average. However, nearly half the people said it would have been unlikely they would have been able to buy their home

without the plan. The plan helped a significant number of home buyers surveyed, 22 per cent of all first time buyers and 17 per cent of buyers generally.

Repaying their RRSPs is a high priority in this country. Eighty-one per cent of the respondents said that it is important to repay. Fully 88 per cent said that they would repay at least at the rate required by the plan and only 4 per cent said that they would not repay and would declare their withdrawals as income.

Therefore the impact of the plan is there. It is a positive plan. Home ownership was seen by 84 per cent of those surveyed as being at least somewhat important to retirement planning. Fifty-four per cent said that it was very important. Owning a home was rated by far as the most important source of income for retirement.

The Department of Finance has already reported that the numbers have been impressive. There were nearly 200,000 participants to the end of July 1993. It is significant.

Housing starts, as any economist will tell you, are a reliable indicator of the overall health of our economy. The housing industry directly employs as we know general contractors, carpenters, electricians, plumbers, dry wallers and real estate people among many others. Indirectly it benefits many other segments of society including, yes, even accountants. We are encouraged by such measures as the home buyers plan and, as I said, we are hopeful the new budget will include an extension of this popular program. Let us put more Canadian carpenters and plumbers back to work.

We in the Reform Party support a taxation policy that has as its principle objective the raising of funds to pay for government programs. If we look at the history of the act that is what it was originally intended to do, collect taxes ideally, and that would be done in an orderly, simple fashion.

Somewhere along the line we have lost the original intent of the tax system and we have allowed it to become a tool to influence people's behaviour. I am speaking now of social reform creeping into a piece of the financial legislation. That is not only inappropriate, it does not work. We propose working toward a simple, visible and proportional system of taxation.

The Minister of Finance announced in a December 20 press release that a proposal by the Conservatives to pay the GST rebates twice a year instead of quarterly has been dropped from Bill C-9.

At a briefing earlier this week the minister's department informed me the reason the proposal was dropped is because it was found to be more economic sleight of hand on the part of the previous government and that it would have made the deficit look a little better to the Canadian public. To reject that type of sleight of hand is a sound decision and I am encouraged by it.

I have mixed emotions. I am extremely concerned by the new government's lack of commitment to change the way it handles its economic affairs; no concentration on the debt or the deficit.

We sit here today perhaps to give assent to an amendment proposed by the last government. I therefore cannot help but be cautious in my optimism. All of us in this House should not need reminding of the resounding message sent to the last government on October 25. We cannot allow ourselves to slip into those ways even in the slightest way.

I call on the government today to assure us it will give reform of the Income Tax Act the priority it deserves. This will show the opposition parties that the government is making good on its promise of the new way of doing business. It will send a strong message to the provinces that they should follow the federal government's lead. Most important of all, it will show the Canadian people there really is hope for a new way of running government. We cannot let fear of media or any other kind of pressure inhibit our effort to reform. We have to try.

In closing, I would like to take a moment to remind my colleagues in the House that there is a big, fast moving, exciting world out there beyond these walls. Even with my brief experience in this House, I am often amazed at how this simple fact gets lost in the daily shuffle of papers that this institution sometimes seems to be.

I would like to leave you, Madam Speaker, and my colleagues with a final thought. Failure is not fatal but in these times failure to change may be. Let us simplify. Let us be fiscally prudent and responsible.

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7:20 p.m.


Pierre De Savoye Bloc Portneuf, QC

Madam Speaker, I listened with great interest the remarks of our colleague of the Reform Party. It is obvious that Quebecers and Canadians as a whole have to deal with a level of taxation which is definitely very hard to support for the population, those who have a job and even those who do not have a job, given all the consumption taxes.

I remember preparing my first income tax returns years and years ago. It was a plain sheet printed on both sides and very easy to fill out. You would arrive in no time at a result that was not too frightening. But ever since, with all those schedules you have to deal with in order to be allowed various deductions, the whole process has become very complicated. There are so many

calculations to be done and, in the end, the amount you have to pay is often horrifying. Which goes to show that more is not always better.

There is a saying in English: No taxation without representation.

With that level of taxation, people have been represented to death. I think they gave their verdict about that in the last election.

The fact is that the government is still facing a deficit and has been for many years. It tried several solutions, but also systematically raised taxes. We could very easily draw the curve of tax raises and realize that as taxes were increased, the deficit went up. So, if there was a new tax hike coming, we could almost predict by how much the deficit would go up even further.

Perhaps we should find another way of using tax solutions to avoid increasing the deficit. You see, Madam Speaker, every time someone is paying taxes, they have less money left in their wallet. And if there is less money in their wallet, they are less able to buy things. However, some say that in order to have a recovery, the consumer must buy things. I hope the government will not take any more money from consumers, because they will be even less able to buy things.

Of course, we can also talk about expanding the tax base. And if we tax new fields, we will be in a situation where goods and services will become more expensive because, ultimately, businesses or individuals who will be taxed will try to compensate by raising prices. And we will perpetuate the situation that we have experienced for many years, here in Canada and in Quebec, that is an inflation one of the main components of which was our short-sighted vision on taxation. If the government tried to make money now by raising taxes, it would very quickly bring Quebec and Canada back into a situation where they would have an even greater deficit.

I would like the hon. member to respond and would be curious to hear his comments.

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7:25 p.m.


Randy White Reform Fraser Valley West, BC

Madam Speaker, much of what the hon. member said is so close to my philosophy I am wondering if maybe he would like to move over and talk about it.

It is very true about the complexity of this system. The system has become so complex that I do not think this government, nor did the Conservative government, knows the effect of a transaction when it changes the Income Tax Act. When we stand in the House and ask the questions: "Just how much does that cost" or "How much revenue will you receive", they are estimates. They are estimates that can be out anywhere from $100 million to a billion dollars. The system is so complex today that there is no logic, rhyme or reason as to exactly how much money one gets from changes in this act.

Just one other comment on the long-term effects. I think that is one of the real symptoms of the problem in the Income Tax Act. Today it is typically used as a quick knee-jerk reaction to try to try to resolve a problem. You are going to see that in the excise tax with the cigarette smuggling situation.

What we have to do is to get governments to start looking longer term. We do have to simplify the system. That is how to make it effective.

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7:30 p.m.

St. Boniface Manitoba


Ronald J. Duhamel LiberalParliamentary Secretary to Minister of Public Works and Government Services

Madam Speaker, I want to ask my colleague a couple of questions very quickly.

I am not sure whether or not members of the Reform Party oppose the broadening of the tax base. I stand to be corrected, but I understand they would prefer not to have any more taxes added to those which exist.

Do Reform members oppose the broadening of the tax base? Do they oppose blocking the loopholes certain groups enjoy by transferring money to other countries where there are certain advantages? Apparently some wealthy families are able to shield income. There are corporations making money and not paying taxes and wealthy Canadians who have paid no taxes. There is the black market economy where people avoid paying taxes. Are they suggesting to the Minister of Finance and this government that they should not move in that direction, that they should ignore those particular measures? I am very much interested in the response.

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7:30 p.m.


Randy White Reform Fraser Valley West, BC

Madam Speaker, the major concern of Reformers is that broadening of the tax base to the government means more taxes. If the member is asking whether Reform thinks there should be more taxes on the individual, the answer is no, no, no. That will be heard more than once in this House.

I do not think the member's definition of broadening the tax base necessarily means equity in the tax system. My opinion is that once again it is going to come out of the pockets of the hard working, middle income earners and we will be watching for it.

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February 9th, 1994 / 7:30 p.m.


Morris Bodnar Liberal Saskatoon—Dundurn, SK

Madam Speaker, the hon. member in his speech talked about tax and the most recent question was with respect to the broadening of the tax base. I would still like to know from the hon. member whether the privileged people in this country who have avoided tax for many years and accumulated not just some moneys but fortunes should continue to be exempt under the guise of no increased taxation.

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7:30 p.m.


Randy White Reform Fraser Valley West, BC

Madam Speaker, I am having difficulty understanding who the privileged few are in this country.

This party is for a fair tax system, a simple tax system. The definition of privilege to the government is something similar to that of broadening the tax base. When I see its definition of privilege and broadening the tax base the member will get the answer.

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7:30 p.m.


John Bryden Liberal Hamilton—Wentworth, ON

Madam Speaker, I have been following this debate and I do not quite understand what the reply was. Perhaps I can define the question again or take a third try at it.

I would like the hon. member to tell me whether the Reform Party is for or against closing tax loopholes. Does he feel that the closing of tax loopholes is a broadening or an addition to the taxes?