Debates of Oct. 17th, 1995

Canada-United States Tax Convention Act, 1984

[Jim Silye, Reform, Calgary Centre, AB]

It won't bring it down.

[Dennis Mills, Liberal, Broadview—Greenwood, ON]

Yes, it will. It is a principle. It is a money bill and on anything to do with confidence in the government I would resign from the party. That is what the opposition does not understand.

I suspect, and this is not partisan, members of Her Majesty's Loyal Opposition are feeling a bit guilty as part of their responsibility is to challenge us from time to time and they were totally asleep at the switch and could not generate a debate in the House on a bill which essentially in my judgment caters to the elite.

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I am very happy today to rise in support of the motions of the member for Gander-Grand Falls. I have always been impressed by him. He is one of those rare individuals who inevitably speaks his mind. He does his homework, analyses legislation and makes up his own mind about whether it is good or bad. For some members that seems to be a rare piece of behaviour.

What is the bill all about? What are the motions all about? I have to go back to Kamloops at the end of this week. Whenever I do that I go to Main Street and have coffee with a few of the folks who ask what has been going on in Ottawa. What has the government been up to? What legislation is before the House? What is the government dealing with? What are the priorities of Parliament and so on and so forth? Part of my responsibility is to reflect as accurately as I can what the priority is. They will be perplexed when I tell them about all of the challenges that confront us as a great nation.

Here we are almost on the eve of a major referendum about the future of the country and there are horrendous economic, social, cultural and environmental problems confronting us from coast to coast. I have to tell my constituents the government's priority at this time is to bring forth a piece of legislation that will benefit only the very wealthiest families in the country in terms of their tax returns.

Just the other day a major report in newspapers across Canada indicated that 75 per cent of Canadians willfully carry out their business transactions in cash to avoid paying income tax or sales tax or whatever. In other words, 75 per cent of Canadians are participating knowingly and up front in the underground economy. Are they doing that because they are tax cheats and because they participate in illegal and unethical activities? No. They have lost faith in the integrity of the tax system of the country. They see all kinds of people who do not pay their fair share.

There are small business investors and small business entrepreneurs who are struggling and who see all kinds of tax breaks going to large corporations but none to them. They are working 60 and 70 hours a week and are struggling to get by, and they see tax breaks going to certain firms, not to small firms, and to certain Canadians but not to the ordinary Canadian.

What does this tax provision do? Let anybody in the House stand up and argue after I sit down, but this is designed for the wealthiest families in the country.

I wish my friend for Broadview-Greenwood were going to vote differently, but at least he is speaking up for what he believes in, which is more than most people in the House are doing on this particular occasion. Why are Canadian taxpayers being now asked to subsidize those families that want to educate their sons and daughters and family members in the United States? That is what this does. That is what the member for Gander-Grand Falls is saying. That is what the provision is.

Those people who are sending their sons, daughters and other family members to American universities will not even have to be on the short list any more. For any college or any university in the United States, tax credits are available for any donations made to the foreign university or college.

Why should struggling Canadian taxpayers and small business operators in the country be subsidizing American colleges and universities? Why should hard working men and women be subsidizing American colleges and universities? It does not even matter what their credentials are. They could be colleges that simply hand out PhDs or masters degrees for the price of a few dollars. Any American college or university is eligible to receive donations from Canadians and they will receive a tax credit for that.

How can my friends in the Reform Party support this kind of provision, which is so unbalanced in terms of fairness? This will cost us money. It will cost the taxpayers of Canada hundreds of millions of dollars every year from now on. If we were a wealthy nation and had all kinds of extra coinage, perhaps we could consider this. I ask my friends in the Reform Party, who remind us regularly about their concern for the deficit and debt of the country, why they are supporting a piece of legislation that will drain hundreds of millions of dollars out of the treasury every single year.

I have been listening carefully to the debate. I could not listen too carefully when the bill was in the Senate because it went so quickly. Quite frankly, it is going awfully fast in the House. It is a tax provision, tax reform for the wealthiest people in the country, for the elite of Canada. Is this our priority? Yes, it is. Is comprehensive tax reform taking place at this time? No, it is not. Is it called for by every single Canadian man, woman, and child in the country? Yes, it is. What are we doing? What is the government doing? The government brings forward a piece of tax reform via the Senate that will harmonize certain corporate tax structures with the United States and bring in provisions that are absolutely astounding.

I would like to hear from my friends opposite before the debate ends why we are subsidizing American colleges. Why are Canadian taxpayers subsidizing American universities? Why do we consider it a priority at this time to give tax breaks of hundreds of millions of dollars to the wealthiest families in Canada?

My friend from Broadview-Greenwood, an individual for whom I have much respect, asks whether it is really a priority at this time to be passing tax legislation that will benefit people who have investments in the United States in excess of $600,000. I

suppose we could feel sorry for these folks. If you have investments over $600,000, the tax system could be more to your advantage. How many Canadians do we know with investments in the United States in excess of $600,000? A lot of people might have a cottage, an apartment in Florida or in California or someplace. How many people are worried today in terms of their financial realities who own $600,000 worth of real estate in the United States or have $600,000 worth of investments in the United States?

I say to my friends opposite in the Liberal Party, is this your priority? Are these the Canadians you want to go to bat for today? What about the people at the food banks who are lining up this afternoon? What about the single parents who are struggling simply to make ends meet? What about the small business operators in this country struggling daily to simply put food on the table for their families? Why are you not bringing in legislation for them?

I am referring to the second amendment which tries to bring at least a shred of credibility to this debate. As my hon. friend from Newfoundland has indicated, it is not perfect; it is sort of half a loaf because it says we are to limit this tax break to the year 2000. I see this as a bit odd, but I think it is at least going to end this particular tax buffoonery that is going to benefit a handful of very wealthy Canadians, at least to the year 2000.

When I go back to Kamloops later this week and I have to explain to the people on Main Street in Kamloops, struggling business people, people who are struggling simply to put food on the table and unfortunately an increasing number who find themselves out of work, jobless, that this somehow is a priority of this Parliament and this government, they will shake their heads in disbelief and say that this place has lost touch with reality, that this place somehow deals in some Walt Disney version of the real world.

I look forward to hearing other participants in the debate explain why on earth this is a priority.

I say in conclusion to my hon. friend from Gander-Grand Falls, thank you for standing up and putting forward two amendments today that will bring at least some sanity to this legislation and indicate on your behalf and a handful of your colleagues your disgust with this legislation as well.

[The Deputy Speaker]

I would ask members again to please put their remarks to the Chair. The Chair gets lonely and feels not a part of the debate and so on.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I want to take a few moments and clarify what I believe to be some misconceptions or possibly attempts by particularly the person who just spoke to put things that are not in the bill before Canadians. I feel that is extremely unfair.

What we are talking about here is a bill whose purpose is to put into place a protocol to amend the 1980 income tax treaty between Canada and the United States that was signed on March 17, 1995. The purpose of this is to put these measures into force. It has nothing to do with the member for Kamloops' statement of us wanting to give rich people more money or some such nonsense.

One of the provisions of this bill will be, for instance, the elimination of withholdings that are there now. For instance, some people have estates in the United States. The example was given of a Florida winter home. I have a case a constituent brought to my attention of a mobile home in Florida owned by senior citizens and one of them died. I would not exactly call those rich people. Rich people do not own $10,000 mobile homes when they are 70 years old.

I know the amounts. I know very well the amounts that are in the bill. The limits that are there now in terms of estates would barely cover a mobile home, its furniture, and a car.

[An hon. member]

That is not true.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

The member across says that is not true. That could be his opinion. I am looking forward to his speech, which he seems to be wanting to make simultaneously with other hon. members. Perhaps he is in a hurry and cannot wait the extra 10 minutes to speak. Perhaps then he had nothing substantial to say to start with. Either way, we will find out in 10 minutes what the hon. member wants to say.

The point I am making here is that we are trying to amend the tax treaty between two countries. Under the terms of this treaty, gifts by Canadians to American colleges and universities will qualify for charitable donation tax credits, as has been said. However, half of the sentence was not said. That is the fact that gifts made by Americans to Canadian post-secondary education institutions will also qualify as charitable donations for the purpose of computing the donor's U.S. tax liability. In other words, it will permit people to donate money to a university-which we all recognize, I would hope, as being something legitimate and worth doing. It will enable us to continue doing that, and for a Canadian to donate to a U.S. institution should there be such people, and I am sure there are. Given that the U.S. population is at least 10 times the size of ours, I would say there is at least a fair chance that the reverse will also be true.

That was not said by the hon. member for Kamloops. Why? Because the member for Kamloops did not feel it injected part of the partisan debate he was trying to portray in the House. We should remember what the bill does. Perhaps we should go beyond the rhetoric of the hon. member for Kamloops.

I ask the hon. member from the New Democratic Party, who a minute ago could not wait for 10 minutes to make his contribution, to speak to us about that and to admit to this House that in fact Americans will be able to donate to Canadian universities. Inject that into the debate so that all of us can understand. Maybe he can tell us if he is against that, particularly at a time when we are seeking assistance for our post-secondary education institutions.

I believe these tax protocols are for the benefit of residents of both countries. The protocol has to be ratified by both countries before it takes effect. Some people have withholdings right now that have been there for years, and they cannot get their money back because this ratification process is not yet complete.

Let us get on with it and pass this bill. Let these people have their funds and allow for the kind of investment that I brought to the attention of the House a moment ago.

Let us look at other changes that are included in this treaty: bilateral reduction of withholding taxes on dividends, interest, royalties, reflecting the rates now accepted in force between most industrialized countries-is that so terrible; complete withholding tax exemptions for payment for the use of technology-I hope we are not against that; relief for Canadian residents from the application of U.S. estate taxes-that is the issue I raised earlier; and expansion of the exemption from U.S. tax for income earned by RRSPs, RRIFs, and Canadian pension plan-are we against that too? I would hope not. That is in the bill. Should we not be supporting that? I suspect we should.

The bill also provides for authority to impose withholding on CPP and OAS payments made to American residents. Is the NDP against that too? I am still awaiting the speech from the hon. member across the way, the speech he could not wait to give us 10 minutes ago.

In addition, the bill provides for mutual assistance in the collection of taxes owed. Are we not in favour of collecting taxes that have not been paid? That is part of the protocol as well. That is what we are trying to do today. Are the NDP members against that too? Presumably they are, otherwise they would be supporting this bill. I cannot wait to see how they vote on the final outcome. I cannot wait for the third reading debate.

Finally, the bill provides for authority to enter into arbitration to resolve disputes where the two countries' revenue authorities cannot agree. In other words, there is even a mechanism in here for dispute resolution in the whole process. In my book that makes this a good bill, notwithstanding the rhetoric. It makes it a bill that we should be supporting and passing. I cannot wait to see what the NDP will do particularly after the remarks of the hon. member for Kamloops.

[John Solomon, NDP, Regina—Lumsden, SK]

Mr. Speaker, I rise in opposition to Bill S-9 and in support of the amendments put forward by the hon. member opposite, the member for Gander-Grand Falls.

Since 1988 the Americans have required all non-residents to pay a 55 per cent estate tax on all U.S. property worth more than $60,000. However, the agreement before our House which is not yet ratified means that Canadians with less than $600,000 in U.S. assets will now be exempt from American estate taxes. That also means that Canadians with more than $600,000 in assets will pay the American tax and then will be allowed to claim a portion of it in foreign tax credits here in Canada. This means a $600,000 U.S. exemption which is a $900,000 Canadian exemption in real dollars. This is a tax bill which is helping the very rich.

I want to say a couple of things about this bill. Members of the Liberal Party opposite, including the member for Glengarry-Prescott-Russell, talk about how important this bill is to education. It is very peculiar that medicare, the health care system and the education system in Canada are being squeezed by these very Liberals through the drastic cuts in this time bomb budget which is before our country now.

We are hurting the education system in Canada as a result of it, yet we are going to give the very wealthy an opportunity to make contributions to the education system in the United States and we are going to subsidize it through our tax dollars. My colleague, the member for Kamloops, clearly delineated and outlined the outrage of Canadians with respect to the approach of this government cutting back on education in Canada but providing an opportunity for wealthy Canadians to get tax credits for making contributions to the American education system.

Now we see whose interests this government is working on behalf of in this House of Commons. It is not for ordinary Canadians, not for unemployed Canadians who require unemployment insurance or who require some assistance with respect to health care and education. They are not the interests of the Liberal federal government. The interests are those who feed the Liberal government, those who make substantial financial contributions to the Liberal Party. The very wealthy in this country, the large corporations, the wealthy families are getting their interests high on the agenda of the House of Commons because they own the Liberal Party, they contribute millions of dollars to it every year.

As a result, their agenda is what is on the agenda of Canada. Their agenda is to accumulate more wealth. That is the agenda of the wealthy, the individuals, families and corporations in this country who bought and paid for the Liberal Party. This is a bill the Liberal Party is putting forward in the House of Commons which will thank them in spades for their generosity over the last couple

of years. The Canadian population is going to be paying for this generosity by the Liberal Party to their wealthy friends.

Bill S-9 is an absolute disgrace for the Liberal Party. The Liberals should be embarrassed out of their shorts with respect to this bill. I hope they are feeling as bad as some of the members opposite look like they are feeling because this bill is a wrong priority for Canada. It is a wrong priority for the House of Commons.

What about the farmers? This bill gives the wealthy families a break with retroactive tax breaks back to 1988, but what about the farmers in the prairies? What has the government done for the farmers? It eliminated the Crow benefit, which is a transportation subsidy. In effect 25 per cent of Canada's farming population will be eliminated from earning a living using their farming skills, yet the government is going to give the very wealthy additional hundreds of millions of dollars. This is tax reform of the very worst kind.

What about a fair taxation system where Canadians who are earning a living feel confident that their load is being shared by the very wealthy? The Liberal government is not providing that sense of confidence to the ordinary Canadians, to those who are working and to those who are looking for jobs.

This is an issue on which typically, Liberal members have mastered speaking out of both sides of their mouths. The hon. member for Gander-Grand Falls did an exceptional job of articulating the pitfalls of the legislation and the lack of priority it has with the Liberal government. That is common practice in the Liberal Party. Whenever it has a bill which is embarrassing, which will hurt the majority of Canadians at the expense of the very few wealthy, it always tries to have a few members of Parliament say: "What we are doing is not the right thing, but we are not going to vote against it. We are not going to make any public contention that it is a bad bill. However, we are going to put it on the record that we are not happy with what is going on".

It is time for Canadians to recognize the fact that members of the Liberal Party of Canada speak out of both sides of their mouths. They do it effectively. I want them to understand that Canadians will not accept that very much longer.

This is not the first piece of legislation to help wealthy Canadians. In the budget last February the government dealt with family trusts. Family trusts are costing Canadian taxpayers millions and millions of dollars each year in terms of lost revenue, hundreds of millions of dollars over the course of the last four or five years. A family trust allows very wealthy families to shelter their income and their assets from Revenue Canada. Therefore, they do not contribute in a fair way to the revenues of our country.

In the last budget the Liberals said they would do away with the family trust situation to obtain more money for the population of Canada. When? In 1995? No. 1996? No. 1997? Well no, it takes a bit of time to unwind these things. Maybe in 1999, a year or two after the next federal election is when the Liberal Party will address the issue. It is helping the very wealthiest families and corporations in Canada.

The New Democrats are four square against this sort of priority when there are a large number of people who are unemployed, when the unemployment insurance program is under attack, when education is being cut back and when there is a vicious, unrelenting attack on medicare. The New Democrats will continue to stand up for ordinary Canadians on these issues, including fair taxation. We are asking the government to reconsider the bill, to make amends and to return it to the Senate, telling the Senate that we will not pass the bill.

[Jim Abbott, Reform, Kootenay East, BC]

Mr. Speaker, I wanted to rise today to say that I consider this entire debate to be pathetically irrelevant. I reflect on the words of the hon. member for Kamloops that it is a frosty Friday when we have a member of the Reform Party agreeing with a member of the New Democrats.

We should be bringing forward issues like true tax reform, such as the hon. member for Broadview-Greenwood and our member for Calgary Centre have suggested. We should be bringing forward legislation for proper protection, particularly under the CPP and protection for seniors. We should be bringing forward realistic reform to health care and returning room to tax and powers to the provinces. I look at the Order Paper and I see that in addition to this totally irrelevant and pathetic Bill S-9, the next orders of government are: Bill C-90, the Minister of Finance, an act to amend the Excise Tax Act and the Excise Act; Bill C-106, the Minister of Justice, an act respecting the Law Commission of Canada; and Bill C-105, the Minister of Finance, Income Tax Conventions Implementation Act. We should be doing some real legislation in this House.

It is a very unusual day but I underscore the fact that I stand very strongly behind the member for Kamloops when I say that this bill along with the rest of the legislation that is being brought forward by this government is pathetically irrelevant. Why not bring something to this House that has some meaning to the people of Canada?

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, I rise to speak on Bill S-9 to draw out some of the points that are in the bill. First I want to congratulate my colleague, the member for Gander-Grand Falls, for bringing this important issue forward in a number of ways.

There are a number of good points in this bill and there are a couple of points I have very grave and serious concerns about. It is important to try to put on the record what some of those changes are so that we can distinguish between the areas of concern and the areas that may be positive.

The agreement makes a number of important changes to the earlier treaty, including bilateral reductions in withholding tax rates and dividends, interest and royalties reflecting the rates now accepted and enforced between most industrialized countries. That is an area I have some concern with.

A complete withholding tax exemption for payments for the use of technology, I think is a good point.

There is significant relief for Canadian residents from the application of United States estate taxes, increasing the maximum estate tax exemption from $60,000 to between $600,000 and $1.2 million U.S.

The expansion to the exemption from United States tax for income earned by RRSPs, RRIFs and Canadian pension plans I believe is a good point.

There is the authority to impose withholding on CPP and old age security payments made to American residents. The 1980 treaty by contrast allowed only the state of residence to tax such payments.

There are two other points I should mention. There is the provision for mutual assistance in the collection of taxes owed by a citizen of one country who resides in the other, thus assisting in the prevention of tax fraud and evasion. Finally, there is authority to enter into arbitration to resolve disputes where the two countries' revenue authorities cannot agree.

My point is that there are good points in the bill but also some areas which I think we should be concerned about. I want to draw attention to my major area of concern. I agree fully with the member for Gander-Grand Falls on this point. The member raised it in his point of order with the Speaker. He referred to a letter dated July 17 from the Minister of Finance. That letter makes these points. I quote from that letter:

I am not aware of the basis for your suggestion that the cost associated with the reductions in withholding tax rates and certain dividends will total $250 million annually. The only estimates that have been made post that figure at $125 million for 1995-96 and $145 million for 1996-97. It is important to note that these figures do not attempt to account for the effects of increased investment and the consequential growth of income tax revenues that may be anticipated because of the steps we are taking to bring our withholding tax rates in line with our major trading partners.

That is the nub of the issue. To me the statements indicate there is certainly a benefit to the wealthy in that part of the bill which I have to be concerned about. To be up front about it, one of the concerns I have about this Parliament is that I firmly believe for a Parliament to operate effectively, one has to have good government and good opposition.

I am amazed. I am extremely angry at what I hear from the opposition parties in terms of the issues sometimes. They have failed in previous debates to draw out these points so that they can be looked at early enough to try to address them.

The Reform Party is always willing and able to criticize some of the social programs in Atlantic Canada, to criticize the unemployment insurance program. Here is a case where there are benefits to the wealthy and its members have kept mum and been highly supportive. As members of a good opposition party, they did not even draw out these points in debate.

I am confident as a member of the government that there will be a counterbalance found in future legislation to reinstate some of the money back into the tax system, either by looking at RRSPs, corporate taxes or other taxation. As the government whip said in his speech, there are certainly some areas where we will gain finances as a result of this bill in terms of what is happening to the American residents.

In the future we have to find a counterbalance to the mesh, to the finances, that have been lost as a result of the tax dividends being forgiven here.

I would hope and encourage the government to look at that in the future.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

The question is on Motion No. 1. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

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

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker]

In my opinion the nays have it.

And more than five members having risen:

[The Deputy Speaker]

Pursuant to Standing Order 76(8), a recorded division on the proposed motion stands deferred. The next question is on Motion No. 2.

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

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour will please say yea.

[Some hon. members]

Yea.