Mr. Speaker, members of the Reform will be sharing their time.
At election time there are always promises from politicians that they will change the tax system to make it fair and equitable.
Election after election they make these promises. Despite these promises being made election after election, it seems that a large group of taxpayers have decided in the last couple of years to take things into their own hands.
What I am talking about here is that most taxpayers have now reached the tax saturation point. They have started acting in ways both legal and illegal to avoid the amount of tax they have been paying. For example, Department of Finance figures list tax revenues for September 1992 at $11.07 billion and a year later in September 1993 at $10.17 billion. That is down 8.13 per cent.
Total revenue for April to October 1992 was $64.94 billion and a year later April to October 1993 $61.22 billion, a reduction of almost 5.75 per cent.
While these direct tax revenues were dropping and making it impossible for the government to meet its deficit targets the major indirect tax, the GST, was also down slightly year over year from about $15.2 billion to $15 billion. These drops in revenue seems to point toward the possibility that the tax saturation point has indeed been reached. It could well be that any further attempts by this government to increase the tax burden will result in further reductions in revenues.
Taxpayers have decided as I mentioned earlier that the system is unfair and that they will not pay any more of their earnings into the black hole of federal government spending. As I also said earlier reductions in the amount of taxes paid is being achieved through both legal and illegal means. Legally, by leaving a job where taxes are deducted at source and starting a little home-based business, a lot of taxpayers are discovering that they can deduct many expenses that they could not before.
We know also that there is an underground economy that avoids the GST by negotiating cash deals for services. This in turn leads to lower income declarations by the people providing those services. The end result is that income tax revenues are lower as well.
Of course there is much argument about the size of the underground economy. Most people if they were honest would say that they do know somebody who has paid cash for the GST discount on jobs around their home. People are not afraid to
admit this because they know that it is widespread. The feeling in the community is that the government already gets too much money and they are not giving it any more to waste.
We often hear in the emotional rhetoric of groups like the National Labour Congress that corporations are not paying their fair share of the taxes. The proof is in the fact that the percentage of total tax revenues being paid by corporations has dropped.
Anyone who does even a little bit of research can see that this is a silly argument. Corporations on average have been making less money. Many of them have had large losses over the last few years. Clearly, if they do not make any money or have a loss they will not pay any taxes. Of course their percentage of contribution to the tax take has dropped. This does not mean that corporations are not paying their fair share. In fact the tax rate for corporations has increased over the last five years.
I have heard from time to time members on the government side advocating higher corporate taxes and even implying that if we could just get these evil corporations to pay more taxes the deficit would be solved.
To those who would try to increase taxes on corporations, I would like to say the following. Corporations are no different to people in the way that they react to overtaxation and the reason that they are no different to people is that they are people.
A corporation no more pays taxes than a tractor pays taxes or a lap top computer pays taxes. It is the people who own the shares in the company who pay the taxes.
I never sat behind a corporation in school or rode on a bus with a corporation or spoke on the phone to a corporation. Yet corporations are faced with income taxes, payroll taxes, property taxes, T-1s, T-4s, T-5s, AMTs, T-778s, TCTBs and in fact they are tee'd off, as my colleague from Calgary Centre mentioned yesterday.
The owners of small corporations are usually a few members of the same family or partnership of friends. The ownership of large corporations is their shareholders, often the pension funds of these very same unions that complain that the corporations are not paying enough taxes.
The number one cost to business these days is taxes and those costs have to be passed on to the consumer just like any other cost the business faces. Those same groups who demand that property taxes should be higher for those greedy landlords then complain when the tax increases are passed on in the form of increased rents.
I repeat again that anyone who thinks that a corporation is going to act any differently to an individual is dreaming. A corporation is formed in the first place by an individual or group of individuals who get together and use their tax paid money to form that corporation.
The corporation will then cross-border shop. It will use all the available tax deductions and it will even move to another country if it perceives that the conditions in Canada are unfair. The excessive government taxation levels of today have led to corporate tax saturation as well as personal tax saturation. The loss of thousands of jobs as companies move to locations where the tax burden is lower is a disgrace.
I have mentioned in this House before that my New Zealand background has made me very familiar with the debt crisis experienced in New Zealand in 1984. As a result of that crisis, the New Zealand government learned that New Zealanders had reached tax saturation point and that the government would have to spend less and tax less.
Ten years later according to an analysis released by the Toronto-Dominion Bank on April 25, 1994, just this last week, there are some dramatic comparisons that can be made between the Canadian and New Zealand economies. Two years ago, for instance, it cost New Zealand 90 basis points more to issue 10-year money than it did for Canada.
Now it costs New Zealand 150 basis points less than it costs Canada. In that same time New Zealand's unemployment rate has dropped from above 13 per cent down to 9 per cent and the real GDP has risen to 5 per cent. There is a budget surplus expected this year of almost $1 billion. This massive improvement is a direct result of the New Zealand government's decision to spend less and tax less. The Canadian government could do well to learn from that lesson.
The Toronto-Dominion Bank's outlook for the Canadian dollar continues to be bearish because of the failure of this government to recognize the seriousness of its taxation and spending problems.
In closing, I would urge the government to recognize that we have indeed reached tax saturation point and that it should first develop a plan to get control of federal spending and second, to work toward a simplified, single tax system in keeping with the spirit of the motion before us.