The hon. member from the Reform Party says it is supported by the government.
The Bloc as well stood up in the chamber on second reading and in the committee of the House when this bill was being dealt with and said "We love this bill. Give us more bills like this that give huge tax breaks to American companies operating in Canada".
However, that is not all the bill does. The bill gives a tax credit to anybody who has property is the United States valued at over $600,000 and who happens to die and is subjected to the estate tax in the United States. Now the Canadian public will have to make the payment on behalf of that person to the U.S. government.
Mr. Speaker, as you know, if you die in the United States, in come the people from the Internal Revenue Service and they assess the value of the paintings on the wall, the value of your car, your garage, your backyard, your orange trees and your grapefruit trees-they look at everything. If it comes to over $600,000, they sock it to you with what is called the estate tax. We had it in Canada prior to 1971, but not on the scale it is in the United States. The normal grab is about 54 per cent of everything you have over $600,000, which includes stocks and bonds, even if they have been obtained through a Canadian broker, if you have that property in the United States.
In Canada we have unrealized gains upon death, capital gains, but that is a different story from the estate tax. Nobody comes in and looks at your home. If it is valued at $20 million it is not taken into account because that is your residence. Nobody looks to see if you have a $100,000 Rolls Royce in the driveway. That is not counted in Canada because that is your personal property for personal use. It is a different form of taxation. This Senate bill
gives you a tax credit, which is paid for not just by the Canadian treasury; this is out of the pockets of Canadian citizens. That is a tax expenditure. That is what is wrong today.
People wonder where the money has gone over the years. Why could we afford health care and education transfers to the provinces and a big public service 20 years ago and we cannot today? Auditors general since 1985 have identified the main culprit as being tax expenditures. This tax expenditure will mean the Canadian people will pay for your estate tax in the United States of America. The Canadian people will pay for a 50 per cent reduction on the tax on profits to American multinationals operating in this country, on dividends. The Canadian people will pay for the 33.33 per cent tax decrease on interest that travels over the border into the United States. The Canadian people will pay for the elimination of royalties on practically everything, down to trademarks, which have been bifurcated. It will be divided. They will be examined each part separately.
Let me give the House some idea of how much this will cost the federal treasury.
The person in charge, the chief of corporate and international tax in the Department of Finance, testified before the Senate committee. He was asked: "Why do you need to have a 5 per cent tax? Under this bill we are reducing it by 50 per cent. Why not reduce it by 100 per cent on the withholding tax? Why not give the American corporations their entire profit tax free?" The person in charge of corporate taxes in Canada stated: "The principal reason is money. I have not looked recently, but I believe that our annual withholding tax take is approximately $1.5 billion. Certainly it would be difficult to sustain completely walking away from that".
What are we doing? We are cutting by 50 per cent the withholding tax on dividends from American corporations operating in Canada and sending their profits back across the border to the United States. What does that do to a Canadian business that is trying to compete? It is fine to give Wal-Mart a 50 per cent tax break, but what about the Canadian company that is competing against the American company?
It is interesting to look at the flow. I have the evidence given before the committee on foreign relations in the United States Senate. It is the Jesse Helms committee. It talked about the treaty with Canada. It did not like it last year. After the Minister of Finance signed it in Washington the American Senate changed it. The Minister of Finance had to return in March of this year to re-sign the amended protocol.
I will read a couple of things into the record. Here is the Secretary of the Treasury for tax policy for the Government of the United States: "The protocol reduces the rate of withholding on cross-border flows of interest from 15 per cent to 10 per cent. This reduction will provide a substantial benefit to many U.S. recipients of Canadian source interest payments. It will have a lesser effect on U.S. outflows of interest to Canada because much of this flow is already exempt from U.S. tax under the portfolio interest provisions of the code". In other words, we are giving the Americans a 33.3 per cent tax cut when Canadians will not benefit from that interest provision because the Secretary of the Treasury in the United States says that it is already exempt under the code.
The other provision is on royalties. Here is the assistant treasurer for tax policy, the Hon. Cynthia Beerbower: "Being freed of tax on royalties is cash in hand. Now we pay royalties to Canada. With a zero rate in effect in this protocol, I cannot imagine that anyone would sit on this".
Then we go to the big one, the $1.5 billion the treasury is getting today in this Senate bill, which is supported by the Reform Party and by the Bloc.
The vice-president of tax policy, Robert Green, for the National Foreign Trade Council Inc., 1914, which represents 500 American multinationals doing business in Canada, said in his evidence: "The investment flow between the two countries is substantial and favours the United States. We have substantially more investment there than they do here. The dividend withholding rate reductions, which are phased into five per cent over three years, are a tremendous benefit to the United States, to U.S. multinational companies doing business there. And because of the reduced withholding rates the amount of net repatriated earnings to the United States for investment will be substantially increased".
Then he goes on to talk about the reductions in the withholding rates on royalties: "The additional amount of repatriated earnings will substantially benefit the United States".
Let there be no guessing about this. The United States business community says it will take that from Canada and repatriate it right back to the United States of America.
It is funny, Mr. Speaker, you stand here in the House and hear some Liberal backbenchers objecting to this, and you have the Reform Party and the Bloc in total agreement. How did it start? In 1988 the U.S. made a tax change. It was a change to the estate tax rules for foreigners. It stated that any foreigner with property in the United States would have to pay estate tax on everything above $60,000, not $600,000. That was in 1988.
The record shows that the Canadian government in 1988 took a week to respond. It sent people down to Washington. It said: "We
want to relieve Canadians of this tax that is being imposed on them in the United States". That is where it started.
The United States said: "In order for us to give you a break for wealthy Canadians, you will have to give us something in return". It went back and forth. The negotiations started in 1988. It has gone on since then. It has gone on to include huge tax expenditures that nobody has an estimate on. Revenue Canada and the Department of Finance say they do not know-