Madam Speaker, I am particularly pleased to rise today to speak to the motion. It is near and dear to all our hearts, particularly at this time of the year when we have just gone to the well to pay our taxes.
The underlying consideration that must be part of a tax structure is the element of fairness. Members will know that all of us as Canadians do not mind doing our share, but we want to know with absolute certainty that we are doing our fair share and that there are no privileged persons and corporations in our society doing nothing and living off the sweat of others who contribute.
I will spend a few moments speaking to the issue of the corporate tax structure in Canada, particularly with a view to small and medium sized businesses. The question is: Does it do the job? Does our tax structure do what we want it to do or does it not?
Members will know many different types of taxes affect business in Canada. There are income tax, payroll tax, capital tax, sales tax and property taxes. Each of these affects business differently according to the firm's sector of activities and its size. The elemental question is: Is it fair and does it work? Does it do the job?
We know the tax structure is different for small and large firms. Why is it different? It is different because payroll and property taxes account for a larger part of the small business tax burden than they do for large firms. These taxes that small business bears are independent of profit. It does not matter how much profit a company makes. It has to pay payroll taxes, the municipal taxes, the taxes on water and sewer and all those sorts of things. These taxes weigh more heavily on a small business than they do on a large business.
Over the years governments have shifted the tax burden from corporate income tax to payroll and property taxes. All governments favour these forms of taxation because they provide a more stable revenue stream than income taxes which rely on profit.
The negative impact on the development of the economy, the fairness of the tax system and the structure of the tax system should be a cause for concern as we go away from corporate taxes which are a result of profit and payroll and other taxes which are not profit oriented.
For example, taxes related to profits account for a significant portion of the overall tax burden: about $36.5 billion in 1992 representing 73 per cent of the $50 billion of direct corporate taxes paid in 1992. Therefore 73 per cent of the corporate taxes paid in 1992 had nothing to do with income.
At this point I wish to acknowledge the source of much of my comments today. It is "Growing Small Business", a budget document presented by the Minister of Industry. Most of what I will speak to today is in the government's budget documents. I thank the Canadian Federation of Independent Business for also providing me with some information.
There is also indirect taxation of business inputs that are not related to profits. These taxes are levied by federal and provincial governments and are paid by businesses when they purchase goods and services. Examples of this type of tax are the excise tax on fuel and provincial retail sales taxes. About one-third of
provincial retail sales taxes is collected on business input. Input tax credits under the GST reduces this on a federal level.
The current tax scheme in Canada is a burden on existing small and medium sized business. Just as important, it is a disincentive for those who wish to start their own businesses. Therefore if the government is to realize its goal of creating more and more jobs, it makes sense that the government would also reduce the tax burden and subsequently reduce the tax disincentive for people to be entrepreneurs, to get into business and create their own jobs.
Although the government realizes that unfair taxation is a problem for business and this realization is acknowledged in the budget documents, it is reluctant to do anything to rectify the situation.
The government as a matter of fact went so far as to announce in the February budget that it is unable at this time to offer any tax assistance to small and medium sized business. Instead it has put the pressure on banks to allow easier access to loans.
I submit that the problem is not exclusively access to loans. The problem is to be able to retain cash in a small or medium sized business to employ more people, to expand the business, to get involved in other businesses. The government must realize that all the start-up capital in the world will not assist small business unless businesses are profitable and are able to retain cash in the business.
The problems facing businesses go deeper than just taxes. It is the result of a flawed philosophical approach to business. It is proven that small business creates up to 80 per cent of the jobs in Canada. Yet all governments continually put impediments in place that take away from business the ability to grow and prosper.
Government after government has used small and medium sized business as a cash cow to balance the books. The current Liberal government must become the exception to the rule if it is to realize on its promise to create jobs. Claiming to want to create jobs yet not making changes in the tax environment for small and medium sized business just will not wash.
Small and medium sized business must be allowed to retain capital for reinvestment in the business to create the jobs that are so desperately required in our economy. Capital from small businesses should not be taxed until it is taken out of the business.
I would like to spend just a few moments if I may to speak to the equity position of taxation in business, small business versus large business or multinational business.
I have a list of many businesses in Canada that have from $26 million to $111 million in pre-tax profits which in the year 1992 paid no taxes whatsoever. A member of this very House some years ago coined the phrase "corporate welfare bums". Ladies and gentlemen, that phrase was apropos then and it is apropos now.
Canadians would be absolutely horrified to know of the tentacles large business has in this very House in Ottawa which is nothing but a siphon for business to get money from the government to promote whatever business has the tentacles and the ability to get into the House. I submit that individual Canadian taxpayers earning $7, $8, $10 an hour should not be subsidizing any corporations. If a business does not have the ability to compete on its own, it should not be in business.
As this debate unfolds and as we move along we have to understand that the basic element of fairness has to be part of our tax system. As the day progresses we will be speaking to the notion of a single tax or a flat tax. The premise behind this is so that everyone understands that the system is fair, that nobody gets away with anything, that we all contribute equally according to our means.