Mr. Speaker, the hon. member is quite right that the corporate tax is complicated in Canada with all the provincial and federal taxes. However, I believe that in a reform of the taxation system, businesses and individuals should be taxed at the same rate, that the income generated by individuals or businesses should only be taxed once and that the rate would be based on federal expenditures. However, we have to move expenditures under direct spending, not under tax expenditures, so we will know exactly what these programs are costing us.
When it comes to business directly, there are deductions which we can explore when looking at tax reform. Decisions have to be made. Currently we treat active and investment income the same way. The Hall-Rabushka model for a flat tax makes interest payments that are received by individuals non-taxable and non-deductible and all of the capital gains and dividends are paid at the corporate level. The corporations actually end up paying more taxes in that model.
When we explored that we found that the pure flat tax system for corporations would allow wages, benefits and salaries to be deducted, as well as input costs and the cost of sales. If they were allowed a 100 per cent write off in the year of acquisition for taxation purposes, for balance sheets purposes, they could still amortize it out or depreciate it. However, no interest deductibility on the cost of borrowing money would lower interest rates. Effectively there could be a rate of 20 per cent which would be revenue neutral.
We could probably get rid of the GST with another 4.5 per cent on that. With a rate of 24 per cent or 25 per cent it would be gone. There is a whole department gone and a half billion dollars in collection costs gone. There would then be $5 billion to $6 billion more in revenue from the corporate sector than there is now.
The trade off is that there will be CFIBs, but all businesses will be treated the same, whether they are manufacturing or high tech. Manufacturing could be 21 per cent, instead of the 38 he is talking about.
The small tax on business is a concern. The member for Broadview-Greenwood found a lot of lobby groups came to him and complained that we would lose that 12 per cent tax on the first $200,000. If we had this kind of a tax reform, where we put it out there to everyone and said: "We are looking for equity and everybody has to share in this equity", we could then have a system that is simple enough so more people could understand it. The rate could be low enough that people would work in the surface economy instead of the underground economy. It could high enough that it would generate close to the revenues that we want and need now. I do not accept the conclusions of economists who say that we have to be revenue neutral right now. I argue that if I am a little bit short the money will come through the effect of the growth in the economy. If it is combined with more spending cuts, if we spend the money on behalf of businesses, if we give people the money to start a business, we are-