House of Commons Hansard #241 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was taxes.
Deborah Grey Reform Beaver River, AB
Mr. Speaker, I ask for clarification on the last tabling of a document. If documents are to be tabled a minister is allowed to do that during Routine Proceedings.
A government backbencher from Ottawa-Vanier asked for a document to be tabled. When I tried to table something last week Your Honour asked for unanimous consent. What is the problem here?
Points Of OrderOral Question Period
The Speaker
There is no problem really. What has happened is that when a minister quotes from a document in the House the minister can be asked to table the document.
When an ordinary member like you or me, again forgive my words, quotes from a document in the House, we need unanimous consent of the House. The rules are quite clear on that.
Do you want another clarification?
Deborah Grey Reform Beaver River, AB
Mr. Speaker, if any minister is quoting from a document we may ask for it and demand that it be tabled. Does he have the option of yes or no, that he might or might not?
Points Of OrderOral Question Period
The Speaker
Citation 495(1) at page 151 of Beauchesne's Parliamentary Rules and Forms , Sixth Edition, entitled ``Documents Cited'' reads:
A Minister is not at liberty to read or quote from a dispatch or other state paper not before the House without being prepared to lay it on the table.
Therefore the minister quoted directly from a document. He was asked to lay it on the table. The House has accepted it. That is the rule.
The House resumed consideration of the motion that Bill C-90, an act to amend the Excise Tax Act and the Excise Act, be read the third time and passed.
Excise Tax ActGovernment Orders
The Speaker
Before our interesting question period the hon. member for Prince George-Bulkley Valley had the floor. He has approximately 30 minutes remaining.
Excise Tax ActGovernment Orders
The Speaker
That is what I was talking about the heckling.
Dick Harris Reform Prince George—Bulkley Valley, BC
Mr. Speaker, thank you for the extra time. I am sure my colleagues will be pleased to hear that.
Before question period I was talking about some of the free spending habits of the Liberals. I pointed to the U.S. department of energy receiving $35,000 from the Liberal government. It really needed the money. The United Steelworkers of America received $116,000 from the Liberal government; Prison Art Foundation, $51,000 from the federal government; and Feminist Literacy Workers Network, $57,000 from the government.
This is where the taxpayer's money is going. This is what is contributing to overspending by $30 billion every year. Why are the Liberals continuing to do this, continuing in the same habits as the prior Tory government? Because all of these special interest groups that are receiving these funds year after year are constantly in Ottawa lobbying the government, talking to the government, yapping away at the government for more money, being obnoxious almost to the point the hon. member for Burnaby-Kingsway was earlier in question period. All these special interest groups are standing in line for this free-wheeling, free-spending handout from the Liberal government.
In order to continue these free-wheeling, free-spending ways, what does the Liberal government do? It simply raises taxes, as it did in the February budget. It seeks approval in Bill C-90 to increase the taxation on gasoline by a cent and a half per litre to raise another billion or two billion dollars or so. This goes on and on and on. Canadians are tired of the deficit spending of this Liberal government and they want it to stop.
Study after study after study has shown that deficit spending will not create a buoyant economy. Study after study by economist after economist has said that we cannot spend our way out of a recession. The only way we can get out of a recession is to get the economy going again, and we are not going to get the economy going if we keep increasing the taxation levels on the Canadian workers and Canadian companies. This is not rocket scientist stuff. Why can they not understand this?
One of the reasons most of the economists around the world agree with the Reform Party's method of getting this economy back in shape and getting Canada out of its fiscal crisis is because when the Reform Party stands up to talk about fiscal responsibility and curing the fiscal ills we are prepared to put it on paper, in writing, very clearly and very distinctly showing exactly how we would get the economy going again, how we would reduce taxation and reduce overspending without seriously harming the Canadian people.
This Liberal government stands up every day and calls us hackers and slashers, saying that we want to cut off all these programs for the Canadian people, the programs that we never could afford in the first place and that this group over here have used year after year-and the Tories before them-to get elected.
I would like to suggest something that is not only my own opinion but also the opinion of many economists. The biggest threat to the social programs in this country is the out of control spending by the Liberal government. The biggest threat to the social programs in this country, to medicare, to education, and to things Canadians have come to depend on is not the fiscally responsible Reform Party on this side of the House but the out of control Liberal spenders on the other side of the House, and the Tories before them.
It is time this government got serious about getting the economy going again. It is time this government got serious about addressing the concerns the Canadian people have about the high taxation levels in this country. It is time this government got serious about what it takes to create real and long-lasting jobs in this country. It is time this government got serious about its out of control deficit spending.
I guess I am sad to say that I cannot believe for a minute that this party and this government ever will get serious. Let me make a suggestion to this government. If they are not prepared to get serious about addressing the concerns the Canadian people have about the economy, jobs, and taxation, maybe they should just move over and let someone else move in who will get serious about it. That of course is the Reform Party of Canada.
Unfortunately, the Canadian people are going to have to bear the pain for another couple of years. I wish it were over sooner, but it looks like another couple of years of out of control deficit spending.
I am sorry, I forgot to mention something in my speech. The hon. member for Beaver River reminded me that I should never stand up and talk about out of control spending by the Liberal government without talking about the pensions. I thank the hon. member for Beaver River for walking by at the right time.
The Reform Party did the responsible thing in this Parliament when 98 per cent of the Reform MPs in the House opted out of the pension, giving our personal commitment to the Canadian people that we are serious about cutting spending. We intend to save the Canadian taxpayers some $35 million by our simple act of opting out of the MP pension plan.
It is interesting to note that while 98 per cent of Reform MPs chose to opt out, chose to do the right thing, unfortunately 98 per cent of the Liberal MPs chose to stay in, chose to do the wrong thing. What kind of a message does that send to the Canadian taxpayers, who are watching their disposable income shrink more and more on a daily basis? What kind of message does that send to the Canadian middle income taxpayer who is suffering under a 63 per cent tax burden on their gross income? Does that send the message to them that this government is prepared to get serious about the financial crisis we are in?
I just hope that before this Parliament ends we will see the Liberal government make some distinctive, specific plan to reduce the spending habits they have, which they acquired from the Tories and which they taught to the Tories.
We have heard the Minister of Finance talk about targets, but he will never let a target stand still. He uses the phrase of "rolling targets". Rolling targets are a good way to set them, because if you miss them you can always blame the fact that they were not standing still.
The IMF, the C.D. Howe Institute, and almost every economic think tank in Canada and many in the U.S. have sent a clear message to the Canadian government, this Liberal government: "Get your spending in control and get your level of taxation down or you guys are going to be in a whole bunch of trouble". I hope they got the message.
Alex Shepherd Liberal Durham, ON
Mr. Speaker, I am pleased to enter the debate on Bill C-90.
Some members have suggested that Bill C-90 is part of the other side of our budgetary commitments. Our budget in 1995 stated it would reduce spending by $7 for every $1 of revenue increase. Unfortunately, this bill deals with the revenue increase side of that. Needless to say, most people do not like the idea of tax increases. I do not think anybody does.
One aspect of the bill reports a 1.5 cent per litre tax on the cost of gasoline. I think we are mature enough to admit that it will hurt people, small and medium-sized businesses that use gasoline in their business, commissioned salesmen and so on. We also realize that Canada has one of the lowest retail prices for fuel in the world. We are still very much the recipients of a very cheap fuel program in Canada.
I would like to address other aspects and areas that some of my Reform colleagues talked about today when they asked when we are going to get our spending under control. I do not know where the Reform Party has been for the last two years, but I have seen some tremendous changes in cost reductions of the federal government in the area of the civil service in particular, with 45,000 civil servants being cut from expenditure programs. I have watched the Department of Natural Resources be cut in half. There have been the bills to privatize CN Railway. There have been bills that deal with the government's commitment to its shareholding of Petro--
Canada. It goes on and on. There has been all kinds of evidence of cutting.
The trick about cutting, of course, is that it has to be done equitably and fairly. The whole object of program review has been to go to each department of government to try to find those areas where it is possible to cut while at the same time maintaining the very important aspect of our social fabric, the underpinning of our social network in Canada.
I am very proud to be a part of a government that took that kind of approach to deficit and debt reduction. I look at some of my colleagues, especially those in the province of Ontario, and often wonder whether they have gone through that kind of thought process and whether in fact we have properly dealt with some of the people who can least protect themselves in society.
It is interesting to note that the Auditor General of Canada two weeks ago tabled his report, in which he questioned whether Canada's level of debt was sustainable. What does that mean? Quite frankly, if you were running a corporation, there is a level at which the debt structure compared to the income structure is so onerous that you can no longer continue and you become insolvent. Indeed, some people have suggested that if we apply that test to the country we may well discover that Canada may be an insolvent nation, unable to pay off our debt. Our debt is increasing due to interest rates. As long as interest rates exceed the level of growth in the economy, we will continue to have an accumulation of debt and we will have to cut even deeper into the expenditure side of government.
Some people think we are in an endless situation. However, the government, particularly the Minister of Finance, has taken a specific course of action to reduce the debt to three per cent of the gross domestic product. That is not an end in itself. I have heard the minister say over and over again that with the concept of two-year rolling targets in fact we will continue to focus on reducing the debt on a year-by-year basis and go beyond the three per cent of GDP target.
There are a number of tax bills before the House. There was some interesting debate on Bill S-9, which is the Canada-U.S. tax treaty. I do not want to speak on that bill, as we are debating Bill C-90, but some of the aspects that came out of that debate were interesting. The hon. member for Kamloops was surprised that the Reform Party had accepted some of the negative aspects of the Canada-U.S. tax treaty, those things that specifically appear to assist people in the higher income groups. I wondered why the hon. member felt that way, because he also seems to be interested in the concept of tax reform and some of the Reform Party's discussions about a flat tax. I notice that the hon. member is taking part in a conference to be held later this month that deals with that area.
I would like to talk generally about the concept of a flat tax. In my mind, it also represents a form of tax change and a shift of the tax burden within the Canadian taxation system.
A lot of things the Reform Party has come out with sound simple. Why do we not have a simple system? The income tax system to many people in Canada is complex. There is no question about that. I do know, however, that less than half of the population actually requires professional help in filing their tax returns. The average person can still file a tax return without the need of an accountant or a tax lawyer. The people who require tax assistance are usually those who are in the higher income brackets. They usually are trying to take advantage of certain tax credits and tax advantages which exist in the system.
The whole concept of taxation is also an element in fiscal policy. The government attempts to get aspects of the economy energized by using certain tax legislation which gives advantages to certain sectors as opposed to others. I would think members of the Reform Party would be quite aware of the oil and gas sector out west. It has been greatly assisted by a number of concepts, flow through shares and other kinds of tax driven investments which have encouraged exploration.
If we look at the history of a flat tax aspect, it is interesting to note that its actual birth occurred in England. At the time it was originally brought in, it was thought of as more of an income redistribution process. It actually entertained the concept of moneys flowing from the government back into the taxpayers' hands. It was used as a method of negative income tax. It was used as a method of doing away with the multitude of social programs that existed. It used the tax system to allocate these resources to people. People in the lower income bracket would actually be net receivers from the government, looking at a guaranteed annual income or whatever that means is. Of course people over a certain means would be the net payers.
Surprisingly enough that has changed appreciably. In presentations I have heard it is especially becoming very popular in the United States. It does not talk about redistribution at all. As a matter of fact it talks about flattening the existing tax rates.
In Canada we have three basic classifications of tax rates. A flat tax essentially would eliminate that and would create one rate of tax. At the same time, as I understand the proposal, it would also eliminate certain members from the lower income stream. In a sense it is like a two rate system. Some people would not pay tax and everybody else would pay a flat tax. It does not take a lot of arithmetic if we actually sit down and start figuring it out to know who is going to pay this tax.
Some people like to say that if we took away all the benefits, all the bells and whistles from the existing system there would be so much efficiency that we would not have to change the quantum of tax. The quantum of tax would be reduced and when the smoke cleared nobody would be paying any more taxes than they were before. Some people would be paying a little bit less and everyone would understand the system better. Therefore it would be an efficient system.
These are all great ways to sell something but the reality is it is not true. It is just not true. Right now, 63 per cent of all income taxes paid in this country are being paid by the top 30 per cent of income earners. That tells us right away that the system is progressive. That is to say, as one makes more money one pays more tax.
People in this House will say they can point to somebody who is a millionaire and did not pay any tax last year. There are situations like that but the reality is they are very rare. I will repeat it because it bears witness and deserves to be repeated, the reality is that on an ongoing basis 63 per cent of all income taxes in this country are paid by the top 30 per cent of the income earners.
What happens if we do tax flattening? There is only one assumption which is that we are going to allocate tax liability away from that top 30 per cent, not to the bottom 20 per cent who do not pay any taxes at all, but we are going to shift it to the middle class. I do not have to tell anyone that the middle class are fed up with the taxes they are already paying. They think they are paying too much. It is those people, the two income earner families that are going to be paying the expense of a flat tax situation.
The hon. member for Kamloops was amazed that the Reform Party would be supportive of the Canada-U.S. tax convention and some of the good things it was doing for the very wealthy in that treaty. At the same time I suggest it is the same element and the same people that this party is representing that also want the flat tax.
The benefactors of this tax will be the very, very wealthy. It is not just me who is saying that. The U.S. Business News states that those people who earn in excess of $200,000 in the United States will be substantially better off with a 19 per cent flat tax. David Bond, an economist with the Hongkong Bank of Canada, says there will be significant income allocations of taxes with a flat tax. Most economists all over the world who have studied this will say that the flat tax is not viable mainly because it creates increased taxes for the people who can least afford them.
What is wrong with the tax system? Quite often people come along giving us solutions for the wrong problems. Yes, the existing taxation system in Canada is very complex. Does it need to be as complex as it is? No, it does not. We can get simplification in the system. Some of the simplifications are to stop fiddling and changing it every week. Every week we change some aspect of the income tax system. This constant change creates a situation where nobody understands it. If we just had a moratorium on tax changes perhaps we would understand it.
What is the main frustration people have with the taxation system? It is not so much the filling out of the forms as it is the rate of tax. People in this country are constantly referring to the fact that we have an underground economy. People will take their money to the Turks and Caicos Islands or wherever their favourite tax haven is to avoid taxes. That has nothing to do with the taxation system but it has to do with the rate and quantity of taxes we pay.
There have been countless international studies of every regime which has increased its taxes. There constantly was a correlation between an underground economy and tax evasion. The GST is another symptom of people avoiding taxes. The problem is the rate of tax. Canada's rate of taxation is the second highest in the OECD, just slightly less than that of France. When tax rates are as high as they are today we are also going to have tax evasion and tax avoidance.
Changing the system is not going to change the fact that we are bringing in about $123 billion in taxation. Our deficit and debt relationship do not allow us to change those numbers today. What we want to do of course is get on to a program of deficit and debt reduction so that somewhere after the year 2000 we can actually see a rationing down of tax rates. With that rationing down of tax rates it will create a greater confidence in our taxation system and hopefully domicile some of our lost tax revenues.
As a matter of fact I have often been a great supporter of asking the Turks and Caicos Islands to become one of our provinces. This was the subject of a debate in this House some years ago. I have been to the Turks and Caicos and have talked to some of those people. I think it would be a great thing. We could re-domicile all of those tax revenues that are now hiding down there.
The whole area of fiscal and monetary policy is very complex but the taxation system is still very much an important aspect of our fiscal tools to stimulate various aspects of the economy. The flat tax of course would eliminate that kind of manipulative approach to the economy and force the government to treat everybody much the same.
Is the forestry sector the same as the car manufacturer? Is the Saskatchewan wheat farmer the same as the Ontario beef farmer? I suspect they are not. I suspect the industries in this country, for example the oil and gas industry or the mining sector which rely heavily on capital intensive aspects of their businesses look at
rapid depreciation within their businesses which are all different and all unique.
We can say we do not want the mining sector and indeed that is what is happening in this country. The mining sector is going south. The mining sector says there are too many inhibitions to set up here in Canada and that it is cheaper to set up down in Chile. That is because of the tax regime. We have to remember how they got going. There were also tremendous tax incentives to get those businesses started. There is not any country in the world that does not use the concept of some kind of form of favouritism of various sectors it wants to promote.
Today we want to promote our science and technology sector. Our government is now giving something like $1 billion away in scientific tax credits. These scientific tax credits are to provide an underpinning that Canada will get into the science and technology revolution which we see creating jobs in the small and medium size business sector in Canada. Personally, I feel that those science and technology tax credits are misguided. They are not going to the small and medium size companies that really need them. A lot of that expenditure is being focused at the multinational level and larger corporations. It is not actually doing what we want it to do.
That is the kind of debate we need in this House. That is the kind of change to our tax system we need in order to fine tune it, so that it is working in the best interests of all Canadians and creating jobs. Simple solutions for complex problems are not going to do that.
This bill, of course which I support, is a money bill of the government and it is one necessary aspect of the 1995 budget. I am happy to be part of a government that continues on its commitment to meet its objectives which were laid out in that budget.
Jim Silye Reform Calgary Centre, AB
Mr. Speaker, I would like to address some of the comments made by the member for Durham, specifically his attack on a flat tax. Based on the way he was making his comments I do not believe he understands what the flat tax is. The flat tax is a simple equitable system for all taxpayers. It will greatly increase the incentives to work, invest and save.
He talks about the problem in this country. The problem is the debt and the high taxation levels. It is not the deficit. We can change the deficit: just raise taxes, lower spending and it is gone any time we want to. This government is saying that the deficit is the problem and it is going to reduce the deficit to 3 per cent of GDP. The government is adding to the problem. It is digging the hole deeper by adding to the debt.
We need to look at our spending. We need to look at a way of stimulating the economy, developing a taxation system that is pro growth, something that will get the government off our backs, out of our pockets and leave us alone with more disposable income.
In the name of deficit reduction, I am getting sick and tired of government after government not addressing change in the taxation system. We need fundamental tax reform. Every other country is looking at their high rates of taxation. Every other country is doing something about it and this gentleman from Durham on the government side says it is a simplistic solution.
In the months and the year ahead, he will see that it is not a simplistic solution; it is a very complicated solution. The simple flat tax is harder than it looks. The simple flat tax is not as easy to implement as he claims the Reform Party suggests. There are a lot of items in this area that need discussion and debate. We cannot argue with the fact that if there is a broad tax base and the tax base is redistributed we could have a lower rate. A flat tax would get rid of all the tax loopholes, incentives and shelters the hon. member was talking about.
It is not income from the forestry business or the oil and gas business or wealthy people, middle income people, lower income people. A dollar is a dollar. We want to tax that dollar as little as possible. We want to broaden the base as wide as possible, so we can have the lowest maximum rate. That is what equity is. That is what fairness is.
A flat tax, whatever form it is, whether it is a pure flat tax, a proportional flat tax, a Mills flat tax, a Hall-Rabushka flat tax, whatever kind of flat tax it is, the key is that we want to protect the lower income people, people who are making minimum wage or close to minimum wage. We do not want them paying taxes. That will reduce the pressure and the strain on the social programs. Middle income earners will not be affected. They will remain relatively the same. However they are going to be happy knowing that when the tax loopholes and incentives and shelters are taken away from the wealthier people they will pay more in tax dollars even though their rate is low. That is what makes it interesting to look at a flat tax and why we should be doing so. It may sound like a simple solution but it is not.
A flat tax is not as simple as it looks. It is very complicated. In fact, it is harder to bring in something simple than it is to bring in something complicated.
The Minister of Justice brought in the gun control bill. It was a very complicated bill. It was a very elaborate bill, but he got it through, no problem. Is that not right, Mr. Speaker?
The flat tax is going to be a very difficult tax reform to get people to look into and to look at. I would like, in my section of comments, to point out that it is not simple. I am not saying on behalf of the Reform Party that a flat tax is simple. It is just simplifying the system. That is where the merit lies. Simplification
of the taxation system will save us billions of dollars in compliance costs.
Does the member want to know what else it does, Mr. Speaker? It would also get the government out of the business of trying to micromanage the economy. It would reward initiative by leaving 75 to 80 per cent of every dollar earned in the pockets of the earner which is a better place than in the pockets of the government.
Excise Tax ActGovernment Orders
The Speaker
I would imagine the hon. member for Durham would like a counter commentary.
Alex Shepherd Liberal Durham, ON
Mr. Speaker, I noticed the member reading from a piece of paper. I guess it is the hymn book of the Reform Party. I suggest that Reform members start going back and actually looking at the whole structure of taxation in Canada.
I could not believe my ears when he said it is a difficult tax, it is not simple. Then he turned around and made the statement that is so simple it is hard to get in here. I cannot quite understand his philosophy.
I am going to repeat one more key statistic. It comes from their favourite Fraser Institute. Sixty-three per cent of all income taxes in Canada are paid by the top 30 per cent of taxpayers.
It does not matter what the Reform Party members want to argue, they are not going to change that statistic. Realistically, when you start saying you are going to let the lower bottom people off, fine, I understand that.
There are some problems with that because you create a wall of taxation. It keeps poor people in debt. It keeps people down because they have no the way to make progress. As soon as they earn an extra dollar, they are hitting the 23 per cent tax rates. That is the philosophy of the Reform Party. Keep the poor people poor and while we are at it, let us shift the tax burden from the very wealthy, which that party represents, to middle income earners.
That is not going to fly. It is not going to fly out west and it is not going to fly down here either.
Excise Tax ActGovernment Orders
The Acting Speaker (Mr. Kilger)
I know the member for Durham was telling you through me.
Dave Chatters Reform Athabasca, AB
Mr. Speaker, I am pleased to join in the debate on Bill C-90 which specifically enables the government to increase the already high levels of taxation imposed on Canadians.
It never ceases to amaze me the disregard the government seems to have for the intelligence of Canadians. This bill is an outright betrayal of the commitment in the red book or the election platform of the Liberal Party. In addition to the betrayal, the Liberals promised not to increase taxes to Canadians. There is the dishonesty, the deceit and the rhetoric surrounding the cuts that have to come and inevitably will come whoever is the government some day if we are to reach a balanced budget.
We just heard the best example of this rhetoric that we hear all the time. The member for Durham rises to join the debate on Bill C-90, a bill to increase tax levels. In his speech he says there is nothing wrong with the tax system. All that is wrong is the rates are too high, the second highest in the OECD. Yet he is speaking in support of a bill that raises the level of taxes higher. That is rhetoric and double talk and we hear so much of it.
I would like to discuss a couple of other examples of the betrayal of red book promises. The Liberals said during the election campaign they could solve the problems of the country simply by economic stimulation and job creation. They did not need to cut programs. They did not need to raise taxes. They could solve the problems of the nation by job creation and economic stimulation.
It is now two years into the mandate. We have seen lots of cuts in programs and services but we have not seen problems solved through economic stimulation and job creation. We consistently remind the government day after day of the GST fraud which it has imposed on people. The Deputy Prime Minister told us she would resign within a year if the GST was not gone. She is still here. I saw her in the House today.
The government tells Canadians these things during an election campaign because it knows those topics are popular and that it will get votes. The Liberals tell Canadians what they want to hear. After they get elected they abandon their promises and hope Canadians will forget them before the next election.
Another bit of dishonesty is the story the government told the federal civil service that it would not be cut, that it would protect their jobs and honour the job security clauses in their contract. We are only two years into the government's mandate and it is talking about cutting 50,000 civil servants. What happened to the commitment to the civil service? It seems to have been abandoned.
There was the promise to maintain funding for social programs. The government said that it would never slash and burn like the Reform Party proposals would do. It would protect the precious social programs, the fabric of the social safety net system. Only two years into its mandate, the government has cut and cut far worse than what would have happened under what it called our slash and burn policies. The government's measures have been even more draconian than the Reform Party ever suggested they should be. If the $7 billion cut to provincial transfers in support of social spending is not slash and burn I do not know what we could refer to it as.
I do not think Canadians are so naive or so easily deceived that they are prepared to forgive all this before the next election. The Reform Party is here to do everything it can to see the government is not forgiven. I am sure that come next election time it will have some real answering to do to the Canadian taxpayers.
I hear all the time from the other side of the House about how caring the members are, that they are not hard hearted and without compassion like the Reform Party, that they care about the human deficit. I have never heard such arrogant hypocrisy in all my life. They do not have the market cornered on compassion or caring. The very reason I became involved in the profession with the lowest regard in this country-at least outside of this place-was simply because I care and I am compassionate. I care very deeply about the things the Liberal and Conservative governments have done to the future of my children and my grandchildren in the last 30 years. That is not caring and compassion. It is selfishness. It is the me generation saying that not only will the next generation, my kids and my grandkids, have to look after themselves but the next three or four generations will be paying for the greed of this generation. That is not caring and compassion. It is the me generation.
Today we are debating Bill C-90 which is about tax increases. The area I wanted to talk about specifically is the 1.5 cent a litre increase in tax on gasoline. For the last 30 years every time there is a cash crunch, a squeeze, governments have turned to the cash cow, the sin taxes on alcohol, cigarettes and gasoline. It turned in a big way to gasoline in the last budget to make up the shortfall.
The finance minister made a commitment to have a ratio of tax increases to expenditure cuts that was not in the red book. As I mentioned earlier, the red book said no increase in taxation. Now we have moved to a commitment to keep it in balance, so many dollars of cuts to so many dollars of tax increase. That is a serious betrayal of an election promise.
We still have the GST that applies on top of the 1.5 cent per litre tax increase. That is the GST that was supposed to be gone. Therefore, we have a double tax increase on gasoline.
It is important for members of the House to remember where the excise tax on gasoline started. It was back in 1975 when a Liberal government placed the excise tax on gasoline. It was a special tax. It was the first time an excise tax was applied to gasoline and was to be a one-time tax. How many times have we heard that before?
This one-time tax was to cover the gap between oil import compensation payments and the oil export charge revenues. In turn, this compensation system was as a result of the 1974 decision to maintain domestic oil prices at levels below world prices.
In essence, the federal government of the day had adopted a made in Canada oil pricing policy which saw the proceeds from an export tax used to protect consumers of imported oil from the full impact of the international price. A noble intent I am sure. As we so often experience with taxation, we are shown that taxes which are meant to be one time or special or temporary, quickly have a habit of becoming permanent.
One must only refer back to the imposition in 1917 of a temporary income tax and see where that has gone, how temporary it was and how complex and expensive it has become.
The same is true in every sense about the excise tax on transportation fuels. The excise tax has remained in place and its revenue objectives certainly have changed. The tax is no longer used for what it was originally intended but the tax remains and continues to be increased by 2 cents, 1 cent, 1.5 cents every budget that is presented in the last number of years. Obviously it has changed from a special tax for a specific purpose to a general tax for a source of general revenue.
In the last session of Parliament, in the natural resources committee of which I am a member, the members of the NDP introduced a proposal for the committee to study gasoline pricing in Canada. They thought there was some bogeyman causing the price of gasoline to be so high when we were facing a surplus of oil on the international market and low prices for crude oil.
It does not take a genius to look at this. There have been numerous studies over the last number of years that the bogeyman in this scenario is the government. If we look at the price of gasoline in Vancouver at 59.6 cents per litre, 28.9 cents goes directly to provincial and federal taxes. That is not oil royalties or corporate income tax, that is simply gasoline taxes hidden at the pump. The 28.9 cents leaves the remaining cost of that litre of gasoline to cover the cost of exploration, production, marketing and refining and only another 3 cents to the dealer for his costs and overhead.
We can example after example of a gasoline price. The figures provided by the government's statistics for Calgary shows the price of gasoline is 52.3 per litre; 22.4 cents of that goes directly to governments in taxes, leaving only 3.5 cents for the dealer to cover his costs, with the remaining going for exploration, refining and marketing. I have example after example of almost 50 per cent of the cost of a litre of gasoline everywhere across the country being the tax on gasoline by government.
We continue to have these kinds of tax increases rammed down our throats with no choice. Because they are hidden they are often put in and the consumer does not realize the taxes have risen. The cost increases which we have seen so dramatically in the last number of years are not the result of the oil companies' getting together to fix the price of gasoline. It is the result of governments starved for cash continually coming back to that cash cow.
Members can ask their constituents if they realize what percentage of the cost of a litre of gasoline is government taxation. I will wager very few consumers realize the level of taxation. If we are to continue to tax Canadians in this way it is time we were up front and open and let Canadians see where their dollars are going.
When we look at these increases in taxation levels and what they are doing to us internationally there is an important implication of these tax increases as well. Gasoline is one of the things that gives our natural advantage which allows us to be competitive in the global marketplace to compensate for the huge distances and the expensive transportation costs we face in getting our products to market.
It is very important that we are able to take advantage of that natural advantage to compensate for other disadvantages. Our natural advantage is being seriously eroded when the Americans can come to Canada with a $1.30 dollar, buy our crude oil, take it home, refine it and sell it at almost half the price we have to pay. I do not think that is what Canadians want. I do not think that is what the government wants, to simply become and exporter of raw natural resources.
This is not the way to create jobs, to create wealth, to stimulate the economy. It is time we support Canadians industries and manufacturers and allow them to take advantage of the natural advantage we have in our abundance of natural resources.
Instead, the government seems to stick to its historical way of raising revenue, that cash cow. I suggest this poor cash cow is milking at capacity and is in danger of dying from mastitis from forced overproduction.
I can go on about the unfairness of this endless taxation. The government should seriously look at what it is doing to the economy through high taxation and what the debt and deficit are doing to the country.
I ask the Prime Minister and the finance minister to heed the words of F.J. Clarke that a politician thinks only of the next election; a statesman thinks of the next generation.
Jim Silye Reform Calgary Centre, AB
Mr. Speaker, I want to make a few comments on Bill C-90 as it emanates from the Department of Finance and the finance minister. I will review for a few minutes what he said when he was in opposition during the last budget he criticized.
I have direct quotes from Hansard dated April 27, 1993: ``Canadians are demanding an end to the volleys of taxation that issue from the nation's capital every spring. They are demanding that governments cease their political fiddling while our prosperity burns''.
Bill C-90 is nothing more than a tax grab. It raises taxes through excise taxes. It raises taxes on gasoline. It raises taxes on air transportation from $50 to $55. It raises taxes on cigarettes. Pure and simple, it is hitting Canadians in their pockets, at the pumps and in the air.
This flies in the face of what he said. As critic to the finance department he said Canadians are demanding an end to the volleys of taxation that issue every spring. He has been in charge for the last two springs and we have sprung taxes higher, albeit he never touched our personal pocketbooks which is why we can thank him a little, but he is taxing everywhere else. Revenue Canada is even squeezing businesses and individuals on audits in every way, shape and form it can.
I have a second quote: "Canadians are demanding nothing less than an end to the political economy of governments that can neither follow the wishes of their citizens today nor bring before them the questions that must be decided tomorrow". Does the minister think Canadians want gasoline taxes to increase at the pumps? Does he think Canadians want to pay more taxes on products and goods and services? Does he think Canadians want to pay more taxes at the airport? They do not want to do that.
Does the minister think the people of Canada want the government to add to the problem of the debt? He has committed the country to bankruptcy by committing it to a 3 per cent of GDP. That is all he will reduce the deficit to? He will keep digging the hole deeper, slower than the Conservatives, but he will keep digging the hole. Is that the kind of Canada he thought Canadians were demanding, to keep adding to the problem?
Here is his chance as the finance minister to correct and follow his points of view to the letter. He has an opportunity to be in control and do the things that are required to stimulate and help the economy. He says it is through jobs. Governments do not create jobs. The private sector creates the majority of jobs, 85 per cent. Nobody disputes that. It takes consumer and investor confidence to create those jobs.
When the government keeps increasing taxes through excise taxes, personal taxes, corporation taxes, payroll taxes or property taxes, it is hurting and impeding confidence. By just talking about it, like the finance minister does, he is using smoke and mirrors to fool the Canadian public. He is doing a great disservice by making Canadians believe he is solving the problem when in fact he is adding to the problem.
I have already shown two examples of where the finance minister can do something about the very things he criticized, but he has done nothing. He keeps doing it the same way. He is defending the status quo. It is as if the Department of Finance regardless of who becomes finance minister will do it its way or no way and it is the only way. That should change.
I have a third quote from the finance minister: "Irregular taxation among jurisdictions has produced economic distortions, inefficient and wasteful collection costs and a perverse sense that the tax system is irrational and unfair. Canadians are prepared to pay their fair share of taxes. What they object to is when they see discrimination against them in favour of others. What they object to is when they see that the services that they have come to expect cut back and their taxes going up. There is a deep feeling that the system is warped against Canadians".
If that opinion was really believed then by the finance minister, I would like to refresh his memory. If he still believes it today what that really means is that we need to review the entire taxation system, the way we collect taxes, why we collect taxes, what those taxes are for, what the program costs are in the government.
We need to diffuse and separate tax expenditures from direct spending. Very few MPs know the total we spend on child care through the four or five various programs that exist. We do not know because we use the Income Tax Act to do it.
If we would simply use income tax as a method of raising taxes other than a personal exemption and nothing else, then decided we wanted to subsidize or support various groups, people who cannot work, who cannot help themselves, whether we want to help education or health care, all the programs we want to fund, that would be fine. We should put that under direct spending.
Then we can set the rate to raise the money we need to pay for those programs. Simplification will lower compliance costs. Simplification will satisfy the concerns he had in opposition about the tax system, the very one he is defending now, to which in his two years of tenure as finance minister he has added over 1,000 pages of clarifications, rulings and justifications so that people can understand it better.
He said it was irrational and unfair. In two years he has done nothing about it except tinker around by raising an excise tax here, trying to do that over there. He has not addressed the problem the way he could and should.
I would like to see him match his rhetoric, his belief, his ideas and deep felt conviction that the current system is unfair and allow the Standing Committee on Finance to explore fundamental tax reform for Canadians.
The time has come for that. If he really believed in what he said I challenge him to allow that kind of debate, to allow that kind of exploration to begin so that it is outside the realm of bureaucracy, so that it is outside the realm of deputy ministers who want to have it their way and only their way.
Put it back into the purview of members of Parliament who can come to the finance committee and represent their constituents' wishes and their constituents' point of view.
I am sure if he lets that happen he will find there are a lot of Canadians who would like to see tax reform. They would like to see some form of system they can understand, a system in which everybody can do their own return, in which fairness is reintroduced whereby everybody pays their proportionate share of taxes after a certain level of exemption. If I make 10 times more money than another, I pay 10 times more taxes.
Eliminate all those tax shelters and incentives that distort the economy and allow the government to manipulate and direct our social and economic lives. We have to separate the income tax system away from social and economic engineering.
I look at the comments the finance minister made in opposition because I am on the finance committee and a critic of finance. Therefore I have to go back to find out what this gentleman believed in, what he fought for, his values, where his goals and objectives lie. Now that he is finance minister he is not following his own beliefs. I do not understand that.
Year after year MPs say one thing to get elected and when they get elected they do another thing. I am very disappointed the Liberals have already broken about 15 promises in their read book. They said one thing to get elected and did exactly the opposite.
We commend and compliment them for some of the promises they have broken, because we know they are heading in the right direction. We know spending has to be cut and social programs have to be looked at because they represents 67 per cent of the budget. We understand that. We were hoping the government would listen to us and make those kinds of tough decisions.
However, there is room for more spending cuts. The spending cuts that could really help are those direct subsidies for business and individuals, the billions we do not need to spend.
The compliance cost of the taxation system is $12 billion in a country of 27 million people. This includes accountants hired, the audits that must be done and the cost of departments such as National Revenue and taxation: customs is at $2.2 billion; the GST group, $500 million; all the tax lawyers and services. Twelve billion dollars changing hands just to collect this money, to interpret our tax rules.
Members of the House should spend three months on tax simplification, trying to improve the system to make it more simple, more equitable and fulfil the concerns the finance minister had when he was in opposition that the tax system is irrational and unfair.
If we want to bring reason and fairness back into the system, why does he not empower the Standing Committee on Finance to do something about it? Why does he not empower all the members of the House to do something about it? It could be fixed so fast to the benefit of all Canadians. It would make so much more sense than some of the weak-kneed insignificant bills we are debating and issues we are discussing in the House right now.
I know why that is being done and why the government feels it has to do that, so I will not dwell on it. Instead of debating employment equity and legislating in the board rooms of businesses, in the offices of the private sector who must be hired and policing them to ensure it happens, a waste of time, why not introduce a system in which more people would gain confidence? More people would have a hope for the future of the country and feel the leaders, the politicians, are looking after their interests for the long term, not the short term.
We have a deficit and a debt problem but the solution is not just spending cuts and cuts and cuts. If all we ever look at is the solution we will never solve the problem.
In the name of deficit reduction too many governments are afraid to look at other means of helping businesses and creating jobs. The government cannot keep spending and stimulating the economy through direct subsidies. That has to stop. We must look at a system and a method whereby the government will get out of the business of looking after a lot of people, companies and the creation of job stimulations and helping the development of hockey rinks. Leave more money in the hands of business. I know that is a sensitive spot, Mr. Speaker. I did not mean that as a personal remark. I believe in hockey players. I enjoy watching the game.
Let us look at a way of empowering the people who know how to create jobs. Let those people and those institutions do what they do best. I think the private sector can create jobs better than the government.
It has taken about 15 years for everybody to learn this. I believe everybody in the House is beginning to recognize there is some merit in that. I am asking the finance minister to look at what he said when he was in opposition two years ago and the last budget he criticized. I am criticizing his budget and Bill C-90. I know almost everything has already been implemented. I am criticizing his role as finance minister the same way he criticized Mr. Wilson and Mr. Mazankowski.
The finance minister has an opportunity to do something about it but he is not doing anything about it. He is letting the status quo live. He is letting the Income Tax Act survive. The Income Tax Act should be explored and reviewed. We need fundamental tax reforms with the idea of lowering those marginal rates. I do not care how we make it fair, I do not care whether it is a flat tax or not. We need tax reform in a way that we can then give instant tax relief to Canadian individuals and Canadian businesses.
This is where we get stimulative effect on the economy. This is where we create optimism. This is where people get security. When they go to work in the morning they now know they will have a job at the end of next month. Right now that is what is lacking.
I do not care how much money the government throws at job creation, it will not work. It drives up the spending. It will actually put more pressure on increasing taxes. It works in the exact opposite way the government and the finance minister believe.
Bill C-90 is a tax grab. It is the very thing the finance minister in opposition spoke against. He wants fairness. Fairness is lowering taxes. Fairness is lowering spending. Fairness is smaller government and less intrusion. Fairness is making it more equitable for all walks and classes of life and giving hope to people, not false hope saying "come hell or high water", as he said, "we will reach our goals and objectives of 3 per cent of GDP". That is like highjumping six inches. That is not a very difficult target to reach from the high levels of spending the government has.
Another disadvantage of high taxation and spending is we are not competitive globally. We are already worse off than the States. Look at the hockey players there compared with what the hockey players get here. They all want to get paid in U.S. dollars. Why? Their tax rates are lower than ours and they even want to lower them to 17 per cent. The Americans are competitive and their free market system has worked better than ours. We have too much government involvement in our economy and we need less government intrusion, less direct government involvement and that way we would eliminate this high tax burden. The uncompetitive tax systems lead to choices by consumers which adversely affect government revenues.
I challenge the finance minister to fulfil those three promises, the concerns he had when he was opposition critic to the Department of Finance. There are three items he said he would fight for and that he believed. He felt they should be looked at. I wish the finance minister would practice what he preached.
Ron MacDonald Liberal Dartmouth, NS
Mr. Speaker, I have listened with a great deal of interest and sympathy to the comments by the member from Calgary Centre. I believe the tax system is so broken that it cannot probably be fixed and that a new and innovative approach to the whole area of taxation has to be undertaken.
The member mentioned two very interesting points. One, a partial conversion I hope on behalf of the member of the Reform Party, was with respect to cuts. Throughout the election campaign and shortly after this Parliament was convened all we heard from the other side was to cut, cut, cut. What the member has said today, however, and it probably comes from having been in this place, understanding the complexity of some issues that we do not quite
get to understand on the campaign trail, is that cutting is not the answer.
Governments must do everything to ensure that each dollar spent is spent in a manner that is prudent, focused and that maximizes our wish to attain certain goals as a government and as a Parliament and as a people.
On the revenue side I agree with him. I am one of those individuals on this side of the House who believes the taxation system, albeit attempting to be fair, is inherently unfair to many. Each time we try to fix this monster created by dozens of amendments in this place by this and previous governments, it makes it even harder to attain our goal.
He mentioned single taxes and flat taxes. I agree that is a direction we have to go in. My colleague from Broadview-Greenwood in the last Parliament and this Parliament continues, and sometimes I know he must feel he is alone, to promote a different system of taxation. It is a system I supported in opposition. It is a system I supported during my campaign and it is a system I will continue to support on this side of the House.
The member wishes the Standing Committee on Finance would be specifically asked to review this. I do not usually wait for somebody to tell me what I can do. If there is an opportunity for me to work with other members to build a consensus across party lines, across this aisle which is only a few feet but many times feels like miles, I will rise to the challenge.
I ask the member not to wait for the mandarins at finance or for the government or for officials of his own party to say the time has come for parliamentarians to work together in a non-partisan fashion to come up with solutions. We all know what the problems are. We all try in our respective roles in opposition or government to put the best solutions forward we think can be implemented.
I throw a challenge out to him to work with me and other members on this side. I will work with him and other members on that side to look at what can be done, real tax reform, single tax, flat tax, to work together to put a challenge not just to the government but to all parliamentarians. I am prepared to put the time in. I ask the member if he would be prepared to put the time in. Canadians are looking for those types of solutions from Parliament and I think they are looking for them now.
Jim Silye Reform Calgary Centre, AB
Mr. Speaker, I thank the member opposite for his remarks. I accept his offer. I openly say in the House I will work with any member toward a simplification of the tax system, to share any of the points of view I have and to also get input from any other member as to what direction they think we should go in. The current system is not good and needs some fixing.
I know the biggest concern of Department of Finance is that in the name of simplicity we will give up fairness. The test is any new system has to be as fair as the current system.
I had discussed a single tax, a flat tax, quite a bit with the member for Broadview-Greenwood. It was reading his book four years ago that got me interested in this subject. I believe many of the problems he pointed out were true. They were true then and they are more true now.
I am not waiting for the Standing Committee on Finance. I use my opportunity to speak in the House freely to challenge the finance minister to get every committee we can on board. Even the Department of Industry should be looking at this. IT controls business. The minister knows what businesses are concerned about. What can we do to attract more businesses? It is not higher taxation levels but lower taxation levels.
We are presenting various alternatives to tax proposals. The member for Capilano-Howe Sound is presenting one on October 31 at the Fraser Institute symposium in Toronto. The member for Broadview-Greenwood will be there presenting his as well. I believe there will be officials from the government there although they will be listening and not presenting anything. I believe the Conservative Party is also looking at a proposal for a flat tax. It is important that we get this movement and momentum going. In the end, in the final analysis, if we can simplify the taxation system all Canadians will benefit, which is the important target here.
In terms of my conversion, I ask the hon. member not to hold out too much hope because I am not being converted. I am just getting tired of hearing everything about cuts, cuts, cuts. If the member does not believe cuts are important why has his government made $7 billion in cuts already?
When we campaigned on cuts our point was that when we make them we should make them wisely, judiciously and quickly because they will hurt. Whether we cut $1 billion, $7 billion or $10 billion, we will end up with a lot of special interest groups riled up and upset and we will hear all the barrage just like what is happening in Ontario now in response to the 22 per cent cutback in welfare payments. All it sufficed to do was reduce the welfare payments in Ontario to the same level as everywhere else in the country. Look at some of the extremists voicing their concerns.
Cutting is important. We feel the Liberal government has not cut enough. There is still too much fat in areas where there is subsidizing failure. Those are the areas the government is not looking at. The other program cuts it has done are excellent.
The government is cutting and then spending money on infrastructure programs, building hockey rinks on direct subsidies to regional development grants to businesses. Not all but many are wasted. That money does not need to be spent by government. Cut that out. Give the equivalent tax cut to the businesses and individuals and I will guarantee that they will do more with those billions of dollars than the government will. That is the point which I am trying to make. Therefore, we need both spending cuts and a review of the taxation system. We can have tax relief at the same time. That is my argument.
If we really want to solve the deficit, we can. Just lower spending, raise the tax rate and the deficit is gone. However, we cannot do that. We have to ignore the deficit. It is not the 3 per cent of GDP that matters. We have to look at a way to stimulate the economy and have a pro-growth taxation system so we can apply those extra revenues to the debt. That is what is important.
I thank the member for his kind intervention.
George Baker Liberal Gander—Grand Falls, NL
Mr. Speaker, I enjoyed listening to the hon. member. However, I am not too certain that the solution is as simple as he purports.
The corporate tax rate in Canada is 38 per cent. When provincial corporate taxes are added the average is 43.4 per cent. In the United States the tax rate is 35 per cent nationally. When state taxes are added the average is 40.3 per cent. In Japan the corporate tax rate has never been below 50 per cent. In fact, the corporate tax rate today in Japan is 52.5 per cent. The corporate tax rates in France and Germany, which are major trading partners of the largest nations in the world, in Germany range from 56 to 44 per cent, with France at 33 per cent.
The hon. member is suggesting a substantial decrease in corporate taxes, with a single rate of tax. In fact he has expanded that to personal income taxes. He suggests that there should be a simple direct rate which would be the same for everybody regardless of income. I would ask him what deductions, if any, he would allow for corporations if that were the case.
Jim Silye Reform Calgary Centre, AB
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-
Excise Tax ActGovernment Orders
The Acting Speaker (Mr. Kilger)
Order. It is with great hesitation that I interrupt the question and comment period. The full time has elapsed. I must ask for a resumption of debate.
Is the House ready for the question?
Excise Tax ActGovernment Orders
The Acting Speaker (Mr. Kilger)
Is it the pleasure of the House to adopt the motion?