Debates of June 22nd, 1994

Committees Of The House

[David Walker, Liberal, Winnipeg North Centre, MB]

Mr. Speaker, I congratulate the hon. member on summarizing so many misconceptions into a very short question.

To start with, as he knows there were 40 meetings. Just to reiterate, in the structure of the House of Commons committees any member of the House of Commons may join in the proceedings. Many of these issues were raised. When the member gets a chance to read through the hearings over the summer holidays I am sure he will know that members of the other three parties asked some excellent questions of people who wished us to change the tax structure more broadly.

Dealing with some of the specific misconceptions, the government has addressed the family trust issue. A paper was released earlier this month by the Department of Finance. It was presented to the House of Commons Standing Committee on Finance last week. The chair was asked to arrange with the opposition parties to set out hearings or to suggest ways of proceeding.

I am sure the critic of the Bloc Quebecois would be interested in family trusts. He will know the committee report is now available. We will seek our direction from the other members of the committee and the steering committee on how to proceed with an analysis of it.

On the question of corporate taxes and the contributions of corporations to the Canadian tax base, the member knows that in the February 22 budget presented by the Minister of Finance we made more progress in closing tax loopholes for corporations than any other government has done. We are very proud of what we have done.

Lastly, we anticipate an increase in profits from the corporate sector this year. I do not want to get ahead of statistics to be released by the government over the course of the year, but the hon. member will be happy to know that corporations will be pulling their fair share as the profits from their businesses go up in the current calendar year.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I intend to share my allotted time with the hon. member for Témiscamingue.

I welcome this opportunity to discuss the alternative to the existing Goods and Services Tax proposed by the Liberal Party of Canada. After spending $750,000 to find an alternative to the Goods and Services Tax, especially to get rid of the tax, as the Prime Minister has promised repeatedly, it is now clear that the Liberal government has failed miserably in the attempt. There are a number of reasons for this, but I will give you one fundamental reason and five more specific reasons.

First of all, for the price of $750,000, they took four quarters and gave us a loonie. It is disgraceful to use public funds to propose merely cosmetic changes. These changes will not abolish the GST, as the present Prime Minister promised to do and as all members of the Liberal Party promised to do as well, and they were very convincing as they rent a van full of garments. No, these proposals were just for a new GST which, according to the best scenario, will be similar to the old one and in the worst scenario will be more complex than the Goods and Services Tax.

In the end, and this is a monumental farce, after spending $750,000, Quebec and Canadian consumers will still be paying the Goods and Services Tax every time they make a purchase.

We object to this monumental farce for five basic reasons. First, in addition to the general argument I just made, the Liberal majority report proposes a GST alternative which is not an alternative. It is a hidden tax, and the report suggests the possibility of hypocritically and craftily making the new goods and services tax invisible as part of the price.

When they say we will be able to see the amount of the tax on the cash receipt, that is not quite true. The Liberal majority does not say so. It was explained during many discussions in committee that one could indicate at the bottom of the receipt that the total price paid by Quebec and Canadian consumers includes a goods and services tax, a despicable tax imposed by the Liberal government, a tax which may be 7, 10 or 12 per cent or whatever.

The Liberal majority's report opens the door to all kinds of insidious increases without the knowledge of Quebec and Canadian consumers.

The second basic reason why the Bloc Quebecois vehemently and strenuously objects to this Liberal majority report is that it could lead to a broadening of the tax base with a proposal to tax food, health care and drugs. When I heard the secretary of state say earlier that this was out of the question, and that this would have to be negotiated with the provinces, the Liberal government has always been planning to tax these three basic items, ever since the Finance Committee started work, and members on the committee would agree with that.

Subsequently, it was the Liberal majority that referred to taxing food, health care and drugs as a very realistic proposal. As my colleague from Témiscamingue indicated in his question, with the first level of taxation referred to earlier, that is to say the business transfer tax imposed on small business, it is practically impossible to exclude such items from the new taxation system laid out in the Liberal majority report.

I was listening to the secretary of state express earlier a great deal of compassion for the most disadvantaged members of our society. But this is the same man who fought to maintain the proposed cuts to the unemployment insurance program contained in the last Liberal budget. He fought to maintain this budget measure, using arguments that were fallacious and often demagogic.

I will tell him that there is no mention in this Liberal majority report of indexing the tax credit, the refund low income families receive. There is nothing about such an indexation while the Conservatives-whom the people across the way roundly criticized-at least planned to index the tax credit refund on the old GST. These people have no sensitivity, no compassion for the

disadvantaged and you can be sure that their proposal is not intended to help them.

Third, the alternative to the GST proposed in the report from the Liberal majority at the finance committee is an unprecedented centralizing attack on provincial areas of responsibility. This idea of negotiating with the provinces a uniform tax base for goods and services from coast to coast and of bringing this broader tax base to include food, drugs and health care within the scope of an act of Parliament would prevent provincial governments, and the Quebec government in particular, from adjusting tax rates and base to meet their economic objectives as well as their priorities respecting development, economic growth and assistance to any industry that may need it.

Let me recall certain measures the Quebec government has taken in the past to exempt the furniture industry and the clothing industry, child clothing in particular. With this Liberal majority proposal, if the government of Quebec or of any other province for that matter wanted to support these industries and help them pick up or help the less fortunate consumers go through hard times, it could not make the necessary adjustments to help the most disadvantaged members of our society. And that is totally unacceptable!

The fourth reason why the Bloc Quebecois disagrees with the insidious and pernicious report of the Liberal majority is that not only do they give us four quarters for a dollar, as I mentioned, but they make the consumption tax system incredibly complex by adding a small business transfer tax to a GST like the one we now have.

The Bloc Quebecois thinks that this new business transfer tax or BTT for short will be a real nightmare for businesses to administer-I will let my colleague from Témiscamingue who studied business administration explain these complexities to you-as a result of this second level of taxation introduced in the Liberal proposal.

We are told that when they started, the Liberals wanted to abolish the GST and replace it with a simpler system. In fact, they have just made the consumption tax system more complicated by introducing this second level of taxation called the business transfer tax.

The fifth fundamental reason why we are strongly opposed to this proposal, this systematic attempt to disguise the current GST, is that they cannot see the forest for the trees. Since the Standing Committee on Finance started its hearings on the GST, the Bloc Quebecois has been raising the need to review the whole Canadian tax system. We were told, as I heard the Prime Minister and the Minister of Finance say last week, that in the past they tried to carry out such a review and failed.

But in the past Canada was not facing the severe difficulties it is now encountering. There was no $511 billion debt or record deficit either. I would tell you that it is the Liberals' second record because the first Liberal administration also set an annual deficit record for the federal government. The then Minister of Finance, who is now the Prime Minister, can claim credit for that record.

I would tell you that they tried without success to change the current GST, to abolish it and to replace it with a simpler system.

Not only have they failed in their attempt but they have made things even more difficult, not only for small and medium-sized businesses but also for consumers, who will not understand this system.

As soon as it was published, the report was destined to be shelved or else to be thrown out. Even the Prime Minister said yesterday that he did not feel bound by this report. He even said that he was dissociating himself from this report and I understand why. Several premiers of the larger provinces have spoken against this Liberal proposal.

So I look at all this and I also look at the Bloc Quebecois's proposal, if you will allow me to state it. The Bloc Quebecois has proposed a viable option, one that has a future and will not force us to negotiate with the provinces for two years and fail, as the Conservatives failed before the Liberals. We cannot harmonize in the way presented here, with unprecedented centralization of a consumption tax system. So the Bloc Quebecois's proposal is first to abolish the GST and keep the Prime Minister's promise and to give this field of taxation to the provinces, with an adjustment in federal spending, of course.

Thank you, Mr. Speaker, and I look forward to receiving questions.

[Barry Campbell, Liberal, St. Paul's, ON]

Mr. Speaker, I wish to make a very short comment.

I guess the hon. member opposite does not much like the report. That is a shame because he spent tremendous time and enormous effort listening to Canadians across the country express their views about the current GST and recommend alternatives.

All of those views are expressed in the report and reflected. It is a shame that the hon. member and the loyal opposition did not have the courage to present alternatives in a written form. At least the Reform members had the courage to express in writing what they agreed with and what they did not agree with.

While the Bloc agreed to the mandate to look at alternatives to the current GST and supported that mandate of the committee

and put in all the work, at the end of the day what does it do? It says: "Well, it is not good enough. Why not give it to the provinces and let us have a provincial tax grab?"

There has been a complete flip flop. During the election campaign the Bloc members liked the GST. Now they do not like the GST and they want more provincial taxes. Indeed, they have engaged in what I would express as the big lie, that the report recommends a tax on food and pharmaceuticals. There is no such recommendation on any one of the over 100 pages in the report, no such recommendation at all.

I make them an offer that one of our colleagues south of the border once made to the Republican Party: "If they will stop telling lies about us we will stop telling the truth about them".

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I will very briefly answer the hon. member; what he said borders on the unparliamentary.

I would ask my colleague, one of the vice-chairmen of the finance committee, to read our minority report. We tabled a minority report, with our own resources. We had it translated into English at our own expense and we tabled it. We tabled our minority report in both official languages for the press conference two days ago. You were not able to provide us with this translation on time to analyse the preliminary copy of the report.

So I think that our colleague should not boast that he has not read our minority report, when it was in both official languages and translated by the Bloc Quebecois, because the government party did not deign to accommodate us, except if we appended our minority report to the committee's report. We exercised our free choice and chose to table it separately. I think that we made a good decision.

I would say, Mr. Speaker, that our alternative, if the hon. member would read our report, if he would be so gracious as to read our report as we have read the report of the Liberal majority several times, in English and in French, if he would read the minority report, he would see that the Bloc Quebecois is keeping the Prime Minister's promise to abolish the GST and transfer this field of taxation to the provinces.

We thus avoid two things: We avoid a sixth failure in constitutional negotiations between the federal government and the provinces. After the health forum, interprovincial trade and so on, we can add another failure because the Conservatives tried for two years to negotiate harmonization with the provinces, as the majority report proposes. So we avoid those frictions. We avoid three things. The second thing we avoid is continued duplication and overlap.

We give the government an opportunity to withdraw from certain spending fields in order to compensate for the transfer of the GST to the provinces. Thirdly, we are helping to clean up the mess that the government's finances are in. The Liberal members should thank us for the work we did, seriously, because it is the only alternative left at this time, after the many statements from provincial premiers and especially from great experts, and I am thinking of Yvon Cyrenne of Martin, Chabot, Paré & Associates, for example-

[The Acting Speaker (Mr. Kilger)]

Order! I am sorry to have to interrupt the hon. member. Resuming debate, the hon. member for Témiscamingue.

[Pierre Brien, Bloc, Témiscamingue, QC]

Mr. Speaker, it is now my turn to speak on this infamous report of the Liberal finance committee on the GST. I have worked very hard on this matter from the very beginning, along with my colleagues from Saint-Hyacinthe and Charlevoix.

When we first saw the draft report, we were extremely disappointed to see the direction in which the Liberals were heading after all the public hearings, because no one had suggested as an alternative that an integrated tax be introduced. Just try to explain to people now contending with two different taxation systems that the existing GST is going to be replaced by a relatively similar mechanism!

Government members roundly criticized this tax when it was first introduced and continued to do so during the election campaign. The Prime Minister said it was a bad tax, and so did the Deputy Prime Minister who even said she would resign if the GST was not abolished. The Minister of Foreign Affairs and all the Liberal members said it was a bad tax, and now they are asking the provinces to do away with their own tax and replace it with the GST. This is scandalous, Mr. Speaker. After criticizing this as a bad measure, now the government wants to extend it to everything. This makes no sense.

Furthermore, the government wants to broaden the tax base so that the tax will now apply to food, pharmaceutical products and health care. In addition to using strong-arm tactics where the provinces are concerned, the government boasts of wanting to simplify the system for small businesses. I want to touch on this point a little further because up until now, this issue has gone relatively unnoticed. Once again, the government is merely throwing up a smokescreen and I will explain why.

The report says that businesses with earnings of $200,000 or less will be able to use the business transfer tax system. However, the government does not want to call this tax by its real name, preferring instead to call it a VAT. This tax is nothing but a GST hybrid, an added value tax, if you will. This must be clearly understood. Businesses with earnings of $200,000 or less are being told: Now all you have to do is take the sales total, subtract from it your purchases and file an annual report". What they are not being told, however, what the report does not have the courage to say, is that throughout the year, until they file their report, businesses will have to use an accounting method which takes into consideration taxable and tax-free purchases,

as well as taxable and tax-free sales. This is exactly what they must now do with the current GST.

What will happen? Until now, small businesses could use the so-called quick method to calculate the amount of GST. So how will the new system be different? Most likely, it will be worse than the quick method which was not used very much. The government probably should have pushed the quick method more and not changed anything in this regard. But it did not, Mr. Speaker.

The report contends that the new system will be simpler for 80 to 90 per cent of small and medium-sized businesses. Lest we forget, businesses with earnings of $500,000 and over account for 94 per cent of all sales in Canada. What does this represent for Conservatives, in terms of change? Ninety-four per cent of sales will still be subject to the same GST. However, small businesses which account for the remaining 6 per cent of sales will have to contend with a more complicated system.

When they get wind of this proposal, they are going to react very strongly. Let me give you four cases where the new system will prove to be more complicated. To digress, the report is rather non-committal when it says that maybe the door should be left open even for businesses with earnings of between $200,000 and $500,000. On this point, they changed their minds in mid course. The final version says that this could perhaps be an option for businesses with earnings of between $220,000 and $500,000.

Think of it, Mr. Speaker. A firm could sell some products that are taxed and others that are not. But whether the report tells us that they do or do not want to tax food, there will still be exceptions.

If there are any exceptions, how will firms with sales of $200,000 or less be able to have a simplified system if they sell different types of products? What happens if these firms expand? What will happen to a firm with sales of $400,000 that hopes to achieve growth, which is a universal goal in business? When that firm's sales top the $500,000 mark, it will be forced to change its accounting and taxation systems. This is a terrible outrage!

Companies will have to decide which system is most profitable for them. They will spend their time trying to decide between the business transfer tax and the goods and services tax. And they will see that these are relatively similar systems, so they will probably prefer to keep the GST. Many firms will prefer to stick with the GST. If the threshold is set at $200,000, it is even worse. What change? Most firms with projected growth will not change to another system. Firms engaged in interprovincial trade-the provinces will still have differing rates, and it should not be assumed that there will be a uniform rate across Canada-will have to take sales and purchases made in other provinces into consideration in their accounting.

This translates into still more new accounting for these firms. The claim is that now these small firms could, in their annual income tax returns, manage to provide the desired statements. But they will not be able to; they will have to continue keeping daily accounting records. Furthermore, they cannot claim the tax credit for purchases from non-registrants-that is, people or businesses with sales of $30,000 or less who are not obliged to register for the GST. So special accounting records will have to be kept for that purpose as well.

And this is the simplified system for small businesses? Is this it? It is a dog's breakfast. There is no way in the world that this will be simpler. People are being taken for something they are not when they are told things like this.

There are a number of things I want to say in the few minutes left to me. Easier to manage says the report in one of its objectives. Easier for whom? For the government? Do you think that the present staff at Revenue Canada will be able to handle the introduction of this new business transfer tax, a tax of which many small businesses will probably never avail themselves. They will nonetheless investigate the possibility. They will need information. People will have to be hired to provide this information. And after that, the tax will have to be administered.

Since the GST will still be widely used, people will continue to be needed to run that system. Administration costs, which are already high -at least $600 million-are likely to increase. What a mess! What a waste! That is what the Liberal GST is about. Is this the kind of improvement the Liberals have in mind? The public will never go for that, never!

It will not be easier or simpler for businesses either. Someone mentioned the tax credit for low-income individuals earlier. This aspect has been debated vigorously here as well as elsewhere. Huge petitions were brought in, petitions that said the tax credit had to be indexed, that it was wrong to impose a regressive tax. Now, in this report, they do not even have the courage to state that, if a value added tax must be maintained, tax credits for low-income individuals will have to be indexed yearly.

The rate of inflation will not remain as low as it is forever. There will be years when it will be higher. If the economy grows, so will inflation. But the credits will remain the same. In time, the gap will grow. Also, this tax is a hidden tax. We are told that it will not be, that the amount will be shown on bills. That is not true, not at all, because bills could simply mention that the total amount includes a tax of such and such a percentage.

Can you imagine small businesses figuring out their purchase price and the tax paid? They are going to have to take the total amount, take out their calculators, divide all those figures, reprogram their computers-What a nightmare! It is a real nightmare. That is the Liberal GST? That is the improvement the Liberals had promised? Are they true to their commitment? The public will not be fooled. That is not what they had promised. They are in breach of an election promise, and this is a major breach too!

We are proposing an alternative. We are offering them an alternative. The world must have gone crazy, when the opposition offers ways to fulfil a government commitment. We told them, "If you want to abolish the GST, there is only one solution: to abolish it and leave this area of taxation to the provinces. Of course, there will be less revenue, but you can then tinker with the transfers to the provinces, especially in areas where there is a lot of duplication". Reducing overlap is also one of the goals stated in the red book. You could achieve several goals at the same time.

You are signalling to me that I do not have much time left, Mr. Speaker, so I will conclude by quoting from an article by Michel Vastel, a renowned Parliament Hill journalist, that appeared in this morning's newspaper: "Another solution mentioned by the committee"- which did not look at it because it was apparently not its mandate-"and recommended by the Bloc is to abolish the GST and make up for the shortfall by abolishing transfers to the provinces".

He goes on to say, "They would then eliminate at once a lot of duplication and a bunch of public servants. All this is obviously too simple and dangerous for a federal government that wants to raise its profile". He could have added, "that craves absolute power and control and constantly tries to confront the provinces". That is why the Premier of Ontario compares them to a gorilla. I would be ashamed to be compared to a gorilla, and by a Premier no less! But he is right. The people of Ontario should listen to their Premier because he is handling this very well.

I will conclude by saying that they are reneging on their election commitment and that the people of Quebec and Canada will never let them get away with it.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

After his eloquent speech in which he criticized the Liberal majority report, a disgraceful report that sets out to mislead Quebecers and Canadians, I want to stress the outstanding work done by the hon. member for Témiscamingue, and also by the hon. member for Charlevoix, on the finance committee and in developing our own position, which is the only valid one at the present time, the only possible basis for negotiating with the provinces, since the biggest provinces have rejected the Liberal majority report out of hand.

Although the hon. member for Témiscamingue mentioned this briefly, it made me wonder when the parliamentary secretary said earlier that we were the only country in the world with ten different tax systems, perhaps I may remind him that the Liberal majority's proposal would introduce not only a GST but also a business transfer tax. We already have two tax systems, which, multiplied by ten different rates, ten rates that are different from one province to the next, will make us the only country in the world with a Liberal majority that proposes having twenty different tax systems instead of ten. So much for improvements.

Again, I wish to commend my colleagues on their excellent work in developing the position taken by the Bloc Quebecois.

[Pierre Brien, Bloc, Témiscamingue, QC]

Mr. Speaker, I want to thank the hon. member for Saint-Hyacinthe-Bagot for his comments. I would also like to stress the excellent spirit of co-operation we had here in the Bloc Quebecois when we were working on this question and also with a number of members on the committee who belong to the Liberal Party and who disagree with their party's position but cannot do so openly because of the party line system, because they are gagged. I am also aware that my Reform Party colleagues co-operated splendidly during the entire process, and I want to thank them for doing so.

Where my colleague referred to complex systems, he drew comparisons with the situation at the international level. In fact, there is not a single country in the world that has this kind of hybrid tax, with one system for one kind of business and another system for another business. I attended all the hearings and many meetings and I travelled all through the provinces, but not a single person suggested alternatives.

Why bother holding public hearings that cost a fortune and waste a lot of taxpayers' money, if in the end, we do not listen to what is said. After only a few days, the committee was doing such a poor job that the Prime Minister had to tell officials at the Department of Finance who had spent a lot of time on the report that it was going to be put on the backburner. That is the kind of thing that is so discouraging to the public and makes people so sceptical. I am sure that the way the Liberals handled this question will not do them any good.

[Elwin Hermanson, Reform, Kindersley—Lloydminster, SK]

On a point of order, Mr. Speaker. On behalf of the caucus co-ordinator I would like to inform the House that according to Standing Order 43(2) we will be dividing our time.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Mr. Speaker, it gives me great pleasure to share with this House the reasons why the Reform Party opposed the majority report on the GST.

Before I go into the substance I would like to go on record as congratulating the chairman of that committee, the hon. member for Willowdale, for his excellent stewardship and the great learning experience that he allowed all of us to have. I think he treated the proceedings most fairly and really was a master at dealing with the many witnesses we saw.

I started off this hearing process fully supporting the GST. I had lectured about it in classes and thought I fully understood the principles. Well, I understood the principles but what I had failed to understand were the difficulties.

At the beginning we had many witnesses who said: "Let us keep the tax. We spent several billion dollars installing it. It would be very silly now to throw away this investment and start the learning process, the investment in cash registers and so on all over again".

We also heard the very eloquent and polished representatives of the large industry groups located here in Ottawa, all of whom suggested: "Keep the GST. There is no alternative", but they said "broaden the base, harmonize the tax with the provinces and do a few other things that will make it cheaper to run".

I thought for a long time that this was the alternative, the only sensible thing for the committee and for the country. However, I had an experience which I was very sceptical about. I travelled with the committee to as many of the capitals that I could here in our great country. There I found that the information conveyed to me by the people who one might say are on the firing line with respect to the administration and use of the tax were telling us stories that somehow were omitted in the more formal hearings that were dominated by the polished representatives of the big industrial organizations.

I changed my mind and came out with the belief that the tax cannot be rescued, that the tax is a bad tax. It is a nightmare and even with all the changes that have been proposed it will remain a nightmare.

I would like to discuss and put on record what I consider to be the unavoidable consequences of a value added tax, even under the assumption which is of course of very, very questionable validity that we will get total harmonization with the provinces. Even if we do this the administrative costs of the value added tax are extraordinarily high. Firms have to keep track of their input, the sales they have. There are all kinds of extra accounting procedures that have to be undertaken.

We know that the government is spending about $300 million to $400 million a year administering this tax. We know that there are over 1.5 million registrants, people who are entered into the computer with numbers and addresses who have to file regularly. They have to supervised. They have to be caught up with if they do not file. Businesses are going bankrupt periodically and other businesses are created. Just to keep track of all those 1.5 million registrants is a very, very high cost.

In trying to keep track of those people the government already had to make exemption by the definition of a business. The representatives selling Tupperware or Avon products are all in principle required to file GST returns. As it happens and as I learned these people have entered into a special contract where a one step higher distributor pays the GST.

There is a system that was introduced in order to reduce the regressive effect of this sales tax, in order to reduce the impact of this sales tax on those people with lower incomes.

This system is extremely expensive and awkward to administer. We have to find all of those tax filers who qualify. We have to send them cheques. As we know, many of them cannot be found. The cheques do not reach them. There are some who are receiving cheques who should not be, for example people in prison. It is a very expensive and awkward system for making this tax applicable.

The hon. member from the Bloc mentioned other disadvantages for large families and so on. In a country in which there is a very big neighbour which does not have the GST, we are finding that some Canadians, the snow birds, are taking holidays in the United States, staying there for months on end and not paying taxes yet they have the right to services that are provided while they are here.

This was a report filed by several of the witnesses who considered that to be a tax inequity. I am reporting what some representatives of the people of Canada are saying.

One of the most traumatic experiences I have had was listening to a businessman who was located in a border town whose commerce has been devastated by the existing GST. Where there once were 10 supermarkets, there now are two. Where there were 15 gas stations, three are left. There is no way in which the new value added tax will take care of this problem.

I would suggest that if we put on top of the value added tax through harmonization the provincial sales taxes equivalent, we will increase the incentives for border shopping with all the problems that this causes to a wide strip where Canadians are living along the U.S. border.

We heard many stories about tax evasion encouraged by the value added tax. This is something that will also be increased by the possible harmonization of the increase in differences. The tax was designed originally to make international trade neutral.

We know that in this country tourism is a very important export service. We heard representatives telling us that it is not possible to remove the distorting effects of the GST on that important international trade dimension. We also heard that it is impossible to ever tax the consumers of the financial sector. A

comparative international study has shown that none of the European countries have done so because technically it simply is not possible.

These problems exist because the value added tax is basically flawed in a world in which we live, next to a country that does not have a value added tax, and because we live in a country in which we like to take care of those who are at the lower income scale and who would otherwise have been hurt.

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I listened with interest to my hon. friend's dissertation on the son of GST, called the VAT. We will be referring to the Minister of Finance as Vatman or something of that nature.

Can the hon. member respond to this observation? When we go into book stores these days, the books we notice front and centre are books on how to avoid tax, how to reduce taxable income and so on. For many, tax evasion has become a blood sport. Being in a situation where one can avoid paying tax and participate in the underground economy now is something that Canadians increasingly are part of unfortunately.

Would the hon. member say that the reason for these activities is because Canadians generally have lost faith in our tax system? Do they see it as a fair system, an equitable system, a just system where all people are paying a fair share? If the perception is that it is unjust, unfair, then people are saying: "I might as well try to do whatever I can to avoid paying what taxes I am because I am probably paying too much".

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Mr. Speaker, I attended a conference on the underground economy which was held in Vancouver a couple of months ago and very soon the conference proceedings on this topic should be published by the Fraser Institute. This was a great subject for discussion. The surveys made of Canadians suggested they have become extremely cynical about these issues. The hon. member summarized the argument very well.

At the same time however the evidence presented by those people who have studied it a great deal suggests that the underground economy is not as large as is popularly believed. There are certain industries, such as home repair, shoe repair, home care services and on and on that when one looks at these industries in detail it turns out that they do not represent a very large proportion of national income.

The largest proportion of national income is produced by large industries such as automobiles, banks and so on that do not have an opportunity to evade taxes in the way it was suggested. Nevertheless it is quite clear there is a very great temptation at the moment as a result of the existence of the GST for people who wish to have their houses repaired, who have all kinds of services that are consumed in the home, are finding that producers come to them and say: "Will it be with or without the tax?" For them there is no penalty for suggesting this.

Why not save a buck, especially once the ethical standards about this have been eliminated or have been depreciated as a result of the discontent with overall levels of government spending and deficits.

It may very well be that it will be very difficult in the future to restore this. We may have used up an amount of social capital in trust and in confidence in our government and in our taxation program. There was a lot of worry expressed about that at the conference.

We hope to do that once we get our spending under control and taxes can be lowered, as is the program of some parties, but it will be a long haul.

[Ray Speaker, Reform, Lethbridge]

Mr. Speaker, I would like to say first of all that the committee experience with regard to this issue was certainly a very productive and rewarding one.

I want to pay tribute, as my colleague did a few moments ago, to the chairman, the hon. member for Willowdale, and also the departmental officials that were so willing to provide us information and direction.

I must say though that one of the things I noted as our hearings started was that it seemed like we were having a rerun of 1990.

Many of the people said very clearly: "I said this at the GST presentation in 1990, but it bears repeating in 1994". We heard that a number of times. It is interesting to see that certain recommendations which were made at that time but were unacceptable were more acceptable during the spring session of this Parliament.

One of the questions raised earlier was with regard to whether we could concur in this report without jeopardizing some of the negotiations with the provinces. There is no question that is a misconception. The report sets up a framework by which negotiations can take place with the provinces. It establishes a variety of options which can be used to negotiate or look at in terms of the responsibility of this government to replace the GST. There is no reason that this House cannot vote on this matter and concur in it at this point in time. There is no reason that cannot be done even though we may disagree with a number of things in that report.

What did we really hear in those hearings? What is it that Canadians said to us? That is the most important thing. They said very clearly that the GST had a lot of shortcomings and a lot of pitfalls. It was unacceptable in a number of ways.

They also said that they had spent a lot of money in 1991 in implementing it, putting it in place and complying with it as the government requested. They had spent a lot of money and did

not intend to do that again. This was said very clearly to the government. I hope the government remembers that when it starts to implement the GST.

Harmonization was also a top priority. Over and over again this ideal target was presented to the committee. They said we must harmonize with the provinces. That statement was easily said but after listening to the provinces I think there is going to be some difficulty.

Consider for example the province of Alberta. In my conversations with some of the ministers they clearly said that at this point they do not want the government to interfere in the direct taxation area, the sales tax area. Therefore a province and the federal government are in somewhat of an adversarial position.

Other provinces are asking what is in it for them, how they will benefit. If the federal government is not able to satisfy those questions in trade-offs and in application then certainly there will not be much of an improvement to the current circumstances. Harmonization was a top priority in at least 70 per cent of the presentations made to us.

In terms of simplification, the point was made that we must remove the work and the headaches at the local level. Many of the owner operated retail businesses are working many hours, spending many of their dollars directly and indirectly and using their energy in filling out GST forms. After the business closes, husbands and wives are having to return at night to determine the amount of GST that must be forwarded to Ottawa. That has to be simplified.

If we changed that compliance procedure whereby people could determine the GST amount and forward it to Ottawa once a year, that would be much better. There is a recommendation in the report that leads to that and I consider it as an interim measure by the government.

One of the other questions was the matter of whether it should be visible or hidden. I would say it was a 50:50 split. Canadians looked at it and there is merit for both ways. The Reform Party has said that any taxation should be visible so that people know what they pay and what it costs them to run the Government of Canada.

One of the other things that was most significant and I think is a message that the government should hear which came through the GST hearings is to get its spending under control, that there should be deficit reduction. That was the message, loud and clear.

They also raised the question as to the commitment that this government made with regard to the GST. It is clear to Canadians that the Liberal government said it will replace the GST. There was a perception out there when that was said in the election and has been quoted a number of times and said even during the proceedings in this House that people in Canada expected the tax would cost them less, compliance would be much simpler, and that they would not incur additional administrative costs through a replacement tax.

They also thought that it would be a tax that would have a new form or a new application. I am not sure what they thought it was going to be or how they reached that conclusion, because there were certain options available and those were the only options.

I asked my constituents how they felt about changing the GST and what they thought should be done. In mid-April I sent out my householder to my constituents; 5,300 of my constituents responded to the questionnaire and one of the issues listed was the GST and how they felt about it. How they felt is an indication and should be a notice taken by the government as to how they should respond to changes that are brought about in this next two year period.

First of all, they said that 61 per cent wanted the tax included in the price of goods and services. That is very interesting because many of the people who made presentations said the very same thing, but 61 per cent of them said they wanted it included in the price.

Second, 65 per cent wanted to eliminate the GST altogether but only after the deficit is eliminated.

It is worthy to pause at this moment because what they are really saying is that the GST or its replacement should be an interim tax measure that would bring in a revenue replacement or a consistent revenue of about $14 billion to $15 billion, but that once the deficit is looked after then that tax form should be eliminated. This is what they recommend.

One major shortcoming of the report that is presented to this House is that question is not being addressed. The government has not made a commitment to the term of the tax. It is most likely going to end up something like our income tax. Back in the war years the income tax concept was implemented only as an interim measure and it was supposedly going to be eliminated after a period of time. We know the history of that. Today we are still paying income tax and a huge amount of income tax out of our daily pay cheque.

It is really unfortunate that Canadians pay 30 per cent, 40 per cent of their income to income tax as wage earners in this country. It is very high.

What else did my constituents have to say? Eighty-nine per cent of my respondents want to apply the GST to the accumulated debt once the government obliterates the deficit. They also want it to deal with the accumulated debt, meanwhile, 54 per cent would rather see income tax rates decline after the tax is eradicated.

The message from that is very clear. They are saying it is time in this country that we focus on deficit reduction, that we cut the cost of government and in turn reduce taxation so that we have more income for ourselves that is available to meet our own personal or family or community needs. It is time we changed.

Those are the shortcomings of this report. One, it talks about putting a tax in place but not what it is. Second, it does not deal with the question of deficit reduction.

[Peter Milliken, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, I move, seconded by the Secretary of State for Parliamentary Affairs:

That the House do now proceed to Orders of the Day.

[The Acting Speaker (Mr. Kilger)]

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

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Mr. Kilger)]

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

[Some hon. members]

Yea.

[The Acting Speaker (Mr. Kilger)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. Kilger)]

In my opinion the yeas have it.

[Some hon. members]

On division.

(Motion agreed to.)

The House resumed from June 21 consideration of the motion that Bill C-32, an act to amend the Excise Tax Act, the Excise Act and the Income Tax Act, be read the third time and passed.

Excise Tax Act

[The Acting Speaker (Mr. Kilger)]

When Bill C-32 was last before the House, the hon. member for St. Albert had 15 minutes remaining for debate.