Debates of Oct. 17th, 1995

Employment Equity Act

[Diane Ablonczy, Reform, Calgary North, AB]

Mr. Speaker, I should like to add something to the debate. I had not intended to do so but I cannot believe the government is rushing through the legislation in a self-serving and smug manner. It is pretending that it is only concerned about fairness and giving everyone a fair chance when the legislation is so incredibly flawed that no intelligent, sensible person could possibly support it.

Anyone who does not support the bill, however, is branded racist, sexist or lacking in compassion and fairness. It is a sad commentary of the debates of the House of Commons when people cannot attack bad, flawed, unworkable legislation. Instead of being met with logic, reason and persuasion, they are met with labels, brands, sneers and distortions of their motives.

I appeal to members of the House to serve Canadians better by looking at the issues, at logic and at what is good for the country instead of hurling epithets and questioning motives. We know that is not the way to get good legislation for the country.

There are seven reasons why the legislation should not be supported. I will go through them quickly because I think Canadians watching the debate need to know about this piece of legislation. Not only their elected members should not be supporting it, but the public should not be supporting it and should be extremely concerned that the legislation will be foisted upon them by a Liberal government looking at doctrinaire and running ahead to say that it has done something rather than doing what is right and best and proper for the country.

The first reason, which should be enough of a reason in itself, is that it institutionalizes discrimination. How can anyone possibly support a piece of legislation that discriminates against people in the marketplace on the basis of race, sex or skin colour?

We have built Canada by being open and fair minded to everyone. Why on earth would we institutionalize a terrible process whereby we would not be Canadians or people with skills, abilities, knowledge and services to offer other people? We would be hired because of the pigment of our skin. Surely we can do better than that.

We should not encourage or institutionalize discrimination in any way, shape or form, and that is exactly what we are being asked to vote for. I cannot believe members opposite would do such a thing to our country.

The second reason out of the seven is that the legislation demeans designated groups as not having equal ability. Why would we put into place legislation that says since certain people cannot cut it on their own employers will be forced to give them extra breaks? It is an insult to tell people in certain groups that they do not have the guts, the brains, the ability, the competence and the merit to make a life on their own without other people being forced to give them special and extra consideration. That is not what we should be doing. It will not be any kind of help to people in the designated groups.

The third reason is this kind of legislation divides rather than unifies the country. A number of other speakers have mentioned this point with great eloquence, but Canadians need to think about it. Instead of being a Canadian, being someone who has particular skills, being a good employee, being someone with initiative, drive and ability, we will now be in little groups. We will be women in the workplace. We will be persons of colour in the workplace. We will be aboriginals in the workplace instead of employees who are damn good. This is not the way to build strong businesses and it is not the way to build a strong country.

The fourth reason is the legislation places unfair and unwise restrictions on job creation. What does it say to employees who know they do not have to show a lot of merit in the job because the employer needs them to fulfil the quotas under the legislation? The businesses cannot do without them; they need them. They need these token people in the workplace so it does not matter if they do not strive to do the best job possible. They have to be there anyway.

It will mean all kinds of bureaucracy, legislation and regulations on businesses already completely overburdened by the economic tinkering of governments that think they know better than anybody else how to run an economy. Instead they are just burdening them with the weight of unreasonable demands and economic and social tinkering.

It is time to stop that. It is time to let businesses create jobs for our young people. It is time to let businesses get on with running efficient and effective service oriented businesses. It is time to quit letting governments that pretend they are helping everybody do it on the backs of business. That is one of the reasons we are in trouble.

[An hon. member]

Oh, oh.

[Diane Ablonczy, Reform, Calgary North, AB]

The member opposite is making a lot of noise. He knows that very well. He has been talking about how to get businesses economically viable again. He might give some thought to how we can do that. It certainly is not by another big, fat, thick layer of red tape for businesses.

The fifth reason is the legislation places undesirable coercion on businesses to be good co-operators with bureaucrats. Surely we have seen enough in other countries where bureaucrats make life miserable for people who are working and running businesses.

Here we have another instance in which if you are not a good little business person you will be punished, harassed, hassled. You will be given all kinds of requirements and restrictions and will have to fill out more forms and have some pointy headed bureaucrat breathing down your neck before you can even do your job of running your business. Why would we have this kind of coercion and interference to the people of our country?

The sixth reason is it violates the principles of natural justice. To me this is a huge area. It says we are not all equal before the law, that some of us are more equal than others. It contravenes the basic democratic principle that everyone is entitled to a fair trial. Instead we have an employment equity tribunal, which is like a kangaroo court from which there is no appeal at all and which does not even have fixed rules of law under which to operate. Incredibly enough, it also entitles search and seizure of business records and business premises in order to ensure compliance.

Last, I point to the undue haste with which this legislation has been put in place. Other speakers have mentioned this but even in committee it was not properly looked at. It was not properly debated. This is not the way to put good legislation in place for our country.

I am afraid it is a futile effort because we know the top echelons of the Liberal Party have told their backbenchers that everyone has to vote for this legislation. I urge us to look at what is best for the country for a change instead of having a knee-jerk vote, putting in bad legislation and having all the problems I have just mentioned down on the heads of a country that is already struggling.

[The Deputy Speaker]

There being no further members rising on this bill, pursuant to the order made earlier today the question is deemed put, the division deemed demanded, and the recorded division deferred until 5 p.m. today.

The House proceeded to the consideration of Bill S-9, an act to amend the Canada-United States Tax Convention Act, 1984, as reported (with amendments) from the committee.

Canada-United States Tax Convention Act, 1984

[The Deputy Speaker]

Colleagues, a ruling with respect to this bill.

There are two motions in amendment in the Notice Paper at the report stage of Bill S-9, an act to amend the Canada-United States Tax Convention Act, 1984.

Motions Nos. 1 and 2 will be grouped for debate and voted on separately. I pose Motions Nos. 1 and 2 to the House.

[George Baker, Liberal, Gander—Grand Falls, NL]

Moved:

Motion No. 1

That Bill S-9, in Clause 3, be amended: a ) by replacing line 21, on page 1, with the following

"3.(1) The Act is amended by adding, after"; and b ) by adding after line 23, on page 1, the following:

"(2) The amendment to the Convention in paragraph 1 of Article 5 of Schedule IV, as set out in the schedule to this Act, shall not apply after 2000."

Motion No. 2

That Bill S-9, in Clause 3, be amended: a ) by replacing line 21, on page 1, with the following:

"3.(1) The Act is amended by adding, after"; and b ) by adding after line 23, on page 1, the following:

"(2) Benefits otherwise payable under paragraph 4 of Article 21 of Schedule IV, as set out in the schedule to this Act, are not payable where no tax is payable in Canada in respect of the property or income that is taxed in the United States."

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, I rise on a point of order. Does this mean each member gets only 10 minutes on both amendments before the House?

[The Deputy Speaker]

That is the ruling of the Chair.

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, I will have to cram into 10 minutes the substance of two things, an enormous tax break of 50 per cent for American companies operating in Canada on their profits, a 50 per cent tax cut-

[The Deputy Speaker]

In light of what the member has just said, is there unanimous consent to give the member 20 minutes to speak to this?

[Some hon. members]

Agreed.

[George Baker, Liberal, Gander—Grand Falls, NL]

I thank the hon. members of the House. That relieves me somewhat. I will calm down and try to explain to members and the Canadian people and members of the Liberal caucus why I make such strong objection.

This Senate bill is supported by the Reform Party and it is supported by the Bloc in the House. They are the official opposition and they are the back-up for the official opposition.

[Jim Silye, Reform, Calgary Centre, AB]

It is supported by the government.

[George Baker, Liberal, Gander—Grand Falls, NL]

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-

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, a point of order. We have now been listening to the hon. member for the last 10 minutes and so far I do not see the relevance to the two motions he has before him. We gave him 20 minutes to speak on them. I do not see where there is a tie-in to either one of the motions and why he represents and recommends these motion be adopted.

[The Deputy Speaker]

I am sure the hon. member will bring it around to those motions very quickly.

[George Baker, Liberal, Gander—Grand Falls, NL]

Mr. Speaker, this is what I was building up to. Under our laws in the Chamber we are not allowed to amend a tax treaty. It states that clearly in our standing orders. We can amend the legislation that brings in the tax treaty. However in introducing an amendment to that legislation we cannot negate the principle of a clause in the tax treaty.

Just imagine the power of the U.S. committees. They actual change treaties. The Minister of Finance had to go back to Washington twice. He signed one, they changed it and he had to go back again.

According to our standing orders our House of Commons is not allowed to change anything in a treaty. The amendments I put forward are amendments that do not negate a clause. The first amendment is that all of these huge tax decreases to American multinationals operating in Canada come to an end in the year 2000. That is amendment number one. We cannot afford giveaways any more.

We are cutting public servants. We have got to. We are cutting back on UI. We are cutting back on this and cutting back on that and at the same time we are introducing this whole new set of tax expenditures, gifts.

That leads me to the second amendment, the gift part. Motion No. 2 relates to the dating back of the tax credit on the estate tax to people who had died since November 10, 1988. Do you get the significance of the date, Mr. Speaker? Perhaps somebody of great wealth did die on November 11, 1988, I do not know. The very date is the date the protocol came into effect in the United States that decreased the maximum from $600,000 to $60,000.

Under this bill there are estates today in Canada verified by Revenue Canada to me and to the committee that are just waiting to put in their bill. Now the Canadian government has to pay for the amount of estate tax that they pay in the United States that was taxed as U.S. source revenue.

The Canadian people have to cough up the money now out of the treasury. I am told that one chap who died had $20 million in the United States. He really got hit with the estate tax, almost $8 million of it had to be paid to the U.S. treasury. He has a nice rebate coming to him from the U.S. government but he has a much bigger rebate coming to him from the Government of Canada. Only $12 million went to the family. Now the people concerned who received the benefits from the estate will be able to bill the Canadian government for an additional $5 million or $6 million in that one year.

The second amendment, seconded by the hon. member for Broadview-Greenwood, is that since the Canadian delegation and the U.S. delegation said this is reciprocity, this is to eliminate double taxation, that if there is not double taxation then there will be no money granted. That does not negate the clause at all. It just says if no taxes were paid no rebate will be given as far as the Canadian government is concerned.

The auditor general in 1985 said the Canadian Parliament reminded him of a group of automobile engineers trying to build an automobile that was more efficient, that burned less gas but had the same energy. He said that Parliament is like that because we are trying to find ways of cutting while still maintaining our services to the Canadian people. He said the problem is this.

When the engineers changed the engine of the automobile from eight cylinders to six cylinders to four cylinders and brought in all those modifications to save energy, at the end of the day they discovered they were burning just as much gas as they were before. They did not know what the problem was until they looked under the car and saw all these little holes in the gas tank. Those, the auditor general said, are the tax expenditures of the Government of Canada.

The government cuts and slices and chucks. It lays people off who have children going to school and to university who do not know where their next dollar is going to come from. It changes the system of unemployment insurance. When a primary producer working in this country has as a part of his income unemployment insurance, it says: "Oh no, we are going to take that away because that was not intended for that". That person is worried to death today.

While we do all of that, we turn around and take a Senate bill that will give enormous returns to very wealthy people, very rich people, and we say to the multinationals we are going to cut your taxes by 50 per cent.

We are not going to do anything for the very poor. We are not going to do anything for Canadian corporations operating in Canada. That is why I think, after looking at the bills we are

discussing, what is really happening in real terms of tax expenditure is that we take from the poor and give to the rich.

It is Robin Hood in reverse. He is now working for the great companies that represent those very multinationals in the United States that are working so well in this country, a country that according to the World Bank is the second wealthiest country in the world because we have resources.

The House of Commons today, with the Bloc and the Reform Party supporting this legislation wholeheartedly, is not working. The Canadian people are saying that we need a change in the rules of procedure or we need to get rid of the two opposition parties.

[Pierre Brien, Bloc, Témiscamingue, QC]

Mr. Speaker, I found the Liberal member's grandstanding amusing. His closing reasoning was obviously somewhat illogical. He was more critical of the opposition parties than of the government. I would gently remind him that, if he does not agree, he need only settle his differences with his own colleagues. This bill comes from the government, which is made up of people from his own party. So they will have to talk among themselves and try to reach an agreement. It was even a bit sad to see them in such disagreement this morning. However, I agree with my colleague on some points, on others, I do not, but I will get to that.

Obviously, we share his concern for society's disadvantaged. We agree on this, and I hope, when the time comes to adopt the unemployment insurance reform and other such things, he will again rise, as he did today. It seems to me that only one member was opposed last time. I am not sure I heard him. I am not sure he was present. Next time, we will watch to see where he stands in the upcoming debate on cuts to the transfer payments, in particular, and on social programs. We will see where he stands and whether his concern is real or whether he is just giving a political performance here, once in awhile, to please his constituents and ensure his re-election.

I want to point out that we have have to consider both the substance and the form of this bill. We agree with what the auditor general said about tax conventions, which is that there is going to have to be a code of conduct for signing such conventions with other countries. There can be major differences in taxation levels between Canada and the other country signing the convention. In such cases, there is clearly a problem, and we must ensure that we are not threatening economic transactions and running the risk of losing revenues here in signing such agreements.

Before us we have a tax convention with the United States. Obviously, a person can oppose it if they like, but they have to say so directly. They cannot, in our view anyway, oppose something that aims to maximize economic exchange between Canada and the United States.

For a long time it was believed that our markets in Canada were east-west and now increasingly we see that they are north-south. There is a great deal of potential for development there. I can understand that there are still some pockets of resistance among those who are opposed to free trade and everything that goes with it, but we must think of where we are headed in the next century. And this is where we are headed. Consistency and logic is required. When one agrees to get involved in something like free trade, one has to live with what that implies. One has to live with reciprocity as well. Now, I want to get on to the content of these amendments, which strike me as suffering either from bad drafting, technically speaking, or from a fundamental problem.

Of course, there is the first amendment. I have heard what the Liberal member has had to say, waxing so eloquent in his attack on the tax rate cut from 10 per cent down to 5 per cent. Yet his amendment is aimed at ensuring that this will not apply after the year 2000. Why before that date? Why not after that date? Why 2000? Why not 2001? Why not 2002? It is very hard to grasp the reasoning behind his first amendment and I have not found anyone able to explain the real meaning and scope of his first amendment to me.

Obviously, one cannot agree with something that is poorly written. You have to be for something or against it. You cannot be against something for a few years and then in favour of it after that. There comes a time for logic.

The second amendment reminds me of those who are in favour of free trade but only one way free trade, with others opening up their borders to us, but our borders being closed to them. But this is in the area of taxation. We are told that we must not allow this retroactive refund, as one might call it, not allow it if there has been income taxable in Canada during that period. There is another side to that coin also. What reasoning applies to the reverse situation, American residents whose assets were in Canada or Quebec?

But the amendment does not address the opposite situation. Accepting the second amendment means asking the Americans to follow suit and to reopen the tax convention. This is, I suppose, what they had in mind, because consistency is required with what is proposed. I shall be surprised if they do so, because these are the same people who tell us sovereignists in the speeches they make here: "It will be just dreadful if you vote yes. Perhaps NAFTA would have to be reopened". Yet they want to reopen tax conventions. And they spoke of their desire to reopen NAFTA during the election campaign.

I sense a strong desire on their part to reopen the whole discussion about relations between Canada and the United States. Of course, that is their right, but I do not think this desire is shared by the majority of the House or by the majority of the public.

Of course we are concerned about the most vulnerable in our society. And as far as the future of our social programs is concerned, I think we can all agree that some serious debate is in order regarding the approach suggested by this government.

However, we must not exaggerate, and the figures quoted by the hon. member to indicate the economic impact of these amendments or these motions are clearly exaggerated. There was a reference to hundreds of millions of dollars. I read what happened in committee, I followed the proceedings, and no one could extrapolate the same figures as the hon. member and say that hundreds of millions of dollars were involved in this particular case.

It is easy to quote figures out of the blue, but you have to support those figures, justify them and provide documentation. We cannot afford to keep throwing figures at the public and say: Yes, that is the way it is, without further ado. We have to be more serious, more credible than that.

And that is why we cannot support these amendments, and this applies both to Motion No. 1 and Motion No. 2. Motion No. 1 is poorly drafted, complicated and not consistent with what the hon. member said, in my opinion. The second amendment makes no provision for compensation or reciprocity. After all, this is a two-way street. When we sign tax treaties, there must be reciprocity. We cannot get away from that. However, there is nothing in the second motion that refers to this.

If they want to renegotiate the whole tax treaty, that is their problem. What we would prefer and what we always suggested is to go along with what was said by the auditor general. We now have a certain number of tax treaties that cause problems because of the differences in tax rates. In such cases we will need certain guidelines for adopting tax treaties, because this is going to escalate in the next few years, considering current economic trends.

So we will have to get much stricter guidelines when we send people to sign this kind of tax treaty, to avoid being faced with a situation that will be difficult to change subsequently.

In concluding, and I do not intend to speak at greater length on this matter, we agree with the tax convention. I must admit, however, that the retroactive aspect bothers us too. It bothers us that compensation is given retroactively.

That being said, these two amendments will not correct that, neither the first nor the second motion-they will not correct that because, as I said earlier, the amendments make no provision for compensation or reciprocity. When the time comes to vote on the tax convention on third reading, we will have to evaluate Bill S-9 as such. On the whole, we think it is important to pursue this approach.

I repeat, the retroactive aspect bothers us. But in any case, what the hon. member suggested does nothing to correct this particular aspect. We will vote against both amendments and we will vote in favour of Bill S-9 on third reading. I am sure the hon. member will listen to his colleague, the parliamentary secretary, who will explain what amounts are involved with this bill and tell him they are nowhere near what he suggested.

I find it amusing to hear him attack the Bloc Quebecois in this debate. He should be more concerned about ensuring that his party, the government party, has certain guidelines for adopting tax conventions. He should get that message across to his supporters and eventually to the government, and then we will get somewhere. We cannot backtrack and change things that have been signed and that arise from the whole North American free trade context. Any action that is taken should be logical and consistent, and that is why the Bloc Quebecois will support this bill and will reject, as the government and also the Reform Party have done on many occasions, the two motions proposed by the hon. member.

[David Walker, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, it gives me pleasure to speak on the amendments being presented by the member for Gander-Grand Falls. I would like to make a few comments on the specifics of the amendments. These questions were addressed not only in the Senate but also in the House of Commons finance committee by witnesses who appeared from the department, including myself, to go through each of these points.

For people trying to follow the logic of the bill, the protocol was required as a result of changes in American tax law in 1988. Once those were put into place it became incumbent upon the Canadian government to revise the tax arrangements between the two countries.

The member for Gander-Grand Falls was quite keen to point out there were witnesses in the American Senate and the House of Representatives who found this bill to be very helpful. It does not surprise me that a bill should come out to be win-win and that there should be supporters in the United States who think this is of benefit to them. That is why the country adopted it. Also on the public record, our department has been very strong and this is also of benefit to Canadians.

It does not only help the wealthy Canadians who certainly are helped by this, but it also helps a number of ordinary Canadians who have second properties in the United States under relatively moderate circumstances. It also helps a number of corporations operating in the United States.

The United States is the largest trading partner we have, not only in the corporate sense but in the personal sense. It is the largest travelling relationship we have. It is the largest second investment for a lot of families. We have to be very careful not to develop a tax regime in isolation while totally not thinking of what happens to people in other regimes. What happens to many Canadians in the United States is a major tax consideration. It is incumbent upon this government to make sure those conditions are matched and that we do the best for Canadians.

As with any treaty and protocol, there are conditions that are more satisfactory to the opposite side. Either we do things to accommodate them or we have no agreement. To think that none of the American interests were reached in this protocol would be a silly assumption. It would also be equally silly to think that none of the objectives of the Canadian government were reached in this bill.

Dealing with the first motion, the 5 per cent withholding rate on direct dividends has been adopted by many of our major trading partners. Zero withholding is the standard among EEC countries. We are perfectly within our legal rights to insist upon higher rates as is suggested in the amendment, but we must recognize in doing so that our ability to attract additional investment and to retain existing investment would weaken with adverse revenue effects.

If we are concerned about the cash flow of the federal government, we must be cognizant of what we do in tax policy which aggravates taxpayers and causes them to engage in tax avoidance. Canadian firms attempting to enter or expand in foreign markets would be at a competitive disadvantage.

A second point on this is that a temporary reduction in the withholding tax rate, as proposed in this amendment by the member for Gander-Grand Falls, would be the least favourable option. First, it would allow corporations to withdraw past earnings from Canadian operations at the reduced rate. The guarantee of higher future rates would create a positive incentive to do so. Second, it would eliminate the value of the rate reduction encouraging U.S. corporations to make any long term investments in their Canadian operations. In other words, it would be better not to go to 5 per cent at all rather than apply the reduced rate for only a few years.

Finally, on the first motion and concerning a point already made by the mover, any change to the protocol will necessarily endanger if not scuttle it inasmuch as it represents an agreement between two parties that can only be changed with the agreement of both parties. If we make changes on our side we have to understand that part of our obligation is to allow parties on the other side who may be dissatisfied with one part or another to make additional changes they would like. We cannot pick and choose among the pieces.

The second motion presented by the member is also opposed by the government. By way of background, most of the benefits of the article dealing with taxes on debt are required to be provided by the United States. Specifically, the U.S. must grant to Canadian residents an estate tax exemption based on the same $600,000 exemption that U.S. citizens receive, rather than the $60,000 exemption currently provided. The U.S. must credit capital gains tax paid by U.S. citizens on properties situated in Canada against the U.S. tax payable by those citizens in respect of that Canadian property.

The only real obligation imposed on Canada by this article is to provide a reciprocal credit for its own residence. That is, Canadians who die owning U.S. property will be entitled to credit any U.S. estate tax owing on that property against their Canadian income tax payable on U.S. properties and income from U.S. sources.

Accordingly, if there is no Canadian tax payable at the outset, there does not seem to be any sort of benefit that Canada would be required to provide under this article. If that reasoning holds, and I do allow for the possibility that what the motion literally provides may not be what the member was looking to accomplish, then the motion makes no substantive change and should be voted down on that basis. If on the other hand members believe the motion does have substantive effect, I would refer to the argument set out in the third point concerning this first motion.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I would like to address the amendments put forward by the member for Gander-Grand Falls. Before I comment on them, he took a heck of a long time during his 20-minute oration to point out in a very partisan and grandstanding fashion how the Reform Party and the Bloc Quebecois support this bill. However, he conveniently ignored the fact that his very own government supports this bill. In every comment the member made about the opposition parties supporting this bill, he conveniently and purposely left out mentioning that his government is in favour of this bill.

I respect the member's right to disagree with his own party. We believe in that on this side of the House. We believe it is an advantage to allow members of a party to speak out on the negatives of a bill, especially if members so passionately feel there is something wrong with it. However, to carry the game to the degree the hon. member has in terms of giving the general impression that his party was not a part of it disappoints me. I respect the hon. member, but I must put on the record that in this

case the way he presented his comments is taking political partisanship one dramatic step too far.

Let us get to the crux of the matter which are two amendments to the bill. I agree with the member for Témiscamingue. He is right. These two amendments are poorly written and poorly thought out. They have been served up to circumvent the bill itself so that this gentleman could have one more opportunity, one more platform to give his speech and to hear himself talk.

What the member accomplished in the process was to show us the typical Liberal attitude that where there are tax breaks available for Canadians, where there are advantages for Canadian citizens in the form of reduced taxes or where it eliminates double taxation to help solve a problem in our tax system, the Liberal government is against it. The Liberal government and this member are against it.

The hon. member wants to generate as much revenue for the government as possible on the backs of what he calls the so-called rich. The mythology that the rich somehow or other get a disproportionate share of the advantages and benefits of infrastructure is crap. That kind of philosophy and attitude has to stop, which is why Liberalism is slowly coming to an end as well.

For the member to give a speech one way and to ignore the benefits of the bill, never once addressing the advantages and the good aspects of the bill, is terribly one sided. It is the Liberal way of arguing. I believe the only way government members can defend themselves is by presenting a biased and prejudicial point of view without looking at it from both sides.

The reality and the weaknesses of these two amendments to Bill S-9 are that by trying to strike the bill down, the member is not accepting the realities of today's economic climate. The global economy requires that everybody, as closely and as much as possible, deals under the same rules and rates of taxation so that there is no unfair competition and the flow of capital is not more advantageous in one country or another. If Canada does not keep in step with globalization and with the same rates of taxation by convention with all other countries, we are at a great and serious disadvantage.

In light of the personal crusade of the member for Gander-Grand Falls to strike down Bill S-9 on technical grounds, that it did not originate in the House, he is ignoring the wonderful advantages and benefits of the bill.

I was being taunted by the other side to say what those advantages were. It offers relief for Canadians residents from the application of U.S. estate taxes. It has tremendous advantages for all people in eastern Canada who have residences in Florida. If they happened to sell them they would have to pay estate taxes on anything over $60,000. It raises the limit to $600,000. Is that not an advantage to Canadian residents?

Yet when we listened to this member's speech he made it sound like it is a tax expenditure we are giving up that will cost Canadian taxpayers. It is not costing Canadian taxpayers. It is costing U.S. taxpayers. That is the other side of the story the member failed to point out.

That is what I mean by balanced and representative argument and presentation when we are discussing bills. We will be discussing complete fundamental tax reform in the country very shortly. It is a burning issue; it is an issue that will come up. It includes issues like taxation and rates across borders nation to nation. We will have debate on various forms of flat tax. The member for Broadview-Greenwood has a proposal for a flat tax that his party members conveniently choose to ignore, which is typically Liberal. It offers a wonderful solution to our complicated system but they ignore the member. I do not know why but they do.

When the debate takes place we will have people speaking for it and against it. No tax reform and no taxation system, no matter how much it is simplified, has all the answers and has all the solutions. It requires debate; it requires looking at both sides of the story. That is what I would like to see happen when we discuss taxation bills especially and bills that affect our pocketbooks as this bill does.

As critic of this topic and this bill on behalf of our party I will be making a recommendation to our caucus. We on this side of the House have the right to accept my recommendation or not. We will see what happens on that side of the House when the amendments are voted on. I will recommend to our party that we oppose the two amendments because they are strictly for grandstanding purpose. They are very poorly written. They are extremely hard to understand except for Motion No. 1 which I can understand.

As the Bloc member said, how can they be for it for a few years and then against it after? As the Parliamentary Secretary to the Minister of Finance pointed out very well, the member probably does not understand the implications of his motion. As soon as I heard that, it verified the fact even the Liberal government felt it was very poorly written.

Therefore on those two grounds I will be recommending that we oppose them. However, when it comes to Bill S-9 itself, I will be recommending to our party that we support the bill. That is where my comments end on the matter.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, it is my responsibility to speak on these amendments because for seven years in the House I have been trying to generate debate on behalf of my constituents and

others across Canada who believe the current tax system is not fair, not efficient and complex.

For years we have been amending the tax act of Canada. We have made amendments to amendments that have generated a complexity. Most tax lawyers and most tax accountants when speaking privately say that the current tax act is an unmitigated disaster.

After the last election when the Reform Party came to the House I was hopeful we could generate real solid debate on comprehensive tax reform. Granted it takes a couple of years to get our feet wet in this place. Most Reform Party members would admit that governance of a country like ours is complex. We cannot come here on day one and expect our ideas to be totally understood. There are all kinds of variables and difficulties that make implementing legislation difficult in comparison with the view we had in the private sector. I have certainly learned the hard way that it is difficult. I respect the fact that the Reform Party took a couple of years before it began the debate on total tax reform.

I will support my government on the bill. I would never vote against a money bill because it is a confidence bill. The hon. member for Gander-Grand Falls and I are not saying that we want an election over the bill. However we are trying to illustrate what I have been saying in the House for seven years. The bill is another example of how amendments to amendments of the tax act can be brought forward.

I do not mean to be disrespectful but probably 85 per cent to 90 per cent of the members of the House do not know the full ramifications of the bill. We expect the opposition to challenge bills like this one. If I were in opposition right now, quite frankly as I forced debate on the bill, I probably would have put a lot more heat on the government and asked when we would move the debate forward on total tax reform. But no, they wanted to let it go through.

The difficulty I have with the bill is that we are giving tax reform. We are harmonizing with the United States. The bill harmonizes Canada with certain aspects of U.S. tax law. The one great feature about the bill is that when the United States of America wants to amend its tax act we move quickly to be in harmony with it.

We can reflect on the ongoing debate in the United States in terms of single tax, flat tax and all the various democrats, republicans and independents who are talking about total tax reform. If it gets to the front burner of their agenda hopefully Canada will not be far behind. Obviously we will move in a micro second. Part of the reason we are moving in the bill is that the Americans want it to be done quickly.

One positive feature is that we move quickly to harmonize, but the difficulty is that it only gives tax reform to the elite in Canada. I have immense respect for my colleague from Winnipeg, the Parliamentary Secretary to the Minister of Finance, and I will support him in the bill. However I would not call people who have residences in Florida ordinary Canadians. They are wealthy. I consider someone who has $600,000 worth of property in Florida or in some other place in the United States to be fairly wealthy.

I also have great concerns about article XI. Essentially once the bill is passed, and it will be passed, it will affect Canadians who want to send their children to an ivy league school such as Harvard, Yale, Cornell or Rice. I have nothing against ivy league schools in the United States. I am proud of Canadian universities but I would have liked to have gone to UCLA or one of those big ivy league universities. It costs $25,000 or $30,000 a year for four or five years. Under the bill Canadians who can afford to send their children to the ivy league schools will get a tax credit. I have great difficulty when essentially the bill will create a market for wealthy Canadians.

If I were the president of Notre Dame or one of those places I would take out an ad in all Canadian universities. I would go to Upper Canada College in my community in Toronto, go to Bishop Strachan or take out a flyer telling parents about the tax credit they would get for all the money they spend sending their son or daughter there.

We listened to the member for Yukon last night give her closing remarks. I have had immense respect for the member for Yukon since I came here seven years ago. She said that we were here for people who cannot always speak for themselves. It is obvious the people who can afford to speak for themselves certainly have the ability to get the bill through the agenda in the first two years of our mandate. Quite frankly I think it is a question of priorities, but in this bill we are forgetting a bit of our Liberal tradition.

[Lee Morrison, Reform, Swift Current—Maple Creek—Assiniboia, SK]

So stand up and be counted.

[Jim Silye, Reform, Calgary Centre, AB]

You are voting for it.

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

I will not vote against the government on a bill that could bring the government down.