Debates of Oct. 18th, 1995

Points Of Order

[The Speaker]

I thank my hon. colleague for reminding me of my decision. I always keep those decisions in mind.

[Peter Milliken, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

I want to come to Your Honour's assistance in this regard. I think your decision in June was quite correct, as I am sure all hon. members do.

Wearing pins and ribbons in the House is a longstanding tradition as far as I can understand, certainly since I have been here. I do not consider that a long time ago by standards of others. With great respect, there is a difference between pins and large buttons with highly visible insignia constituting a demonstration.

Difficulties occur when members hold up papers, documents or things that constitute a demonstration in the House or when they wear substantial buttons, placards or other symbols that carry with them words or letters transmitted by television as a message.

Your Honour's ruling last June indicated that buttons which carry a message and were visible to the public were contrary to the standards of dress in the House. With great respect, I think Your Honour drew a distinction between those items and small buttons or pins that members wear not readily visible on television and which may convey a message but are very small and discreet.

The trick to me in dressing for the Chamber is to dress in a decorous way that may involve wearing small pins, possibly unusual ties from time time. I consider myself guilty sometimes on that score. Those are the things members are allowed to do. As long as it is tasteful I submit it is right. I think that was Your Honour's intention. I know members opposite, in making their points, are really supporting Your Honour's view in that regard.

[Diane Ablonczy, Reform, Calgary North, AB]

Mr. Speaker, I appreciate the intervention by the hon. deputy House leader for the government. It seems to me he is really saying buttons are okay but if something embarrasses the government it is okay for the Speaker to jump on it with both feet.

[The Speaker]

I thank all members for supporting my decision last June and for their comments which I will forever keep at the forefront of my mind when making my decisions.

Pursuant to Standing Order 33(2), because of the ministerial statement, Government Orders will be extended by 10 minutes.

Canada-United States Tax Convention Act, 1984

[Marcel Massé, Liberal, for the Minister of Finance and Minister responsible for the Federal Office of Regional Development-Quebec]

moved that Bill S-9, an act to amend the Canada-United States Tax Convention Act, 1984, be read the third time and passed.

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

Mr Speaker, I appreciate the opportunity to begin the third reading debate on Bill S-9.

Hon. members will recall that this legislation ratifies the recently signed revised protocol to the Canada-United States Tax Convention.

Tax conventions are routinely modified, and this is essentially routine legislation. It has emerged from committee without amendments, and with good reason. By improving the operation of the Canadian and U.S. tax systems as they apply in tandem, it will result in fairer taxation and a better environment for cross-border investment and trade.

A number of the amendments provided for in the bill are of a technical or procedural nature, an arbitration mechanism, improved exchange of tax information, and provisions for assistance in collecting the taxes of the other country.

But there are also some substantive changes that will benefit Canadians and enhance the fairness of the two systems for non residents.

Let me begin with a provision that has been the subject of some misunderstanding, the application of U.S. estate taxes to Canadians with property there. Our achievement with respect to estate taxes is twofold. First, we are ensuring Canadians with property in the United States do not get a harsher deal at the hands of the American government than do Americans. Second, we are doing what tax conventions are all about, eliminating double taxation.

With respect to the first point it should be borne in mind that U.S. estate taxes do not kick in for American citizens until the value of their estate exceeds $600,000. Under our law enacted in 1988 the threshold for Canadians with property in the United States is only $60,000. In our opinion that is simply not fair. This protocol changes that, ensuring that Canadians are entitled to the same treatment as our American neighbours.

There is the matter of double taxation. For half a century tax treaties have been combating the unfairness and financial disincentives of double taxation. Typically each jurisdiction provides a credit against its own taxes on revenue from the other jurisdiction that has already been taxed in that jurisdiction. The complicating factor in this case is that while both Canada and the United States impose taxes upon death these taxes take two different forms. The U.S. applies an estate tax whereas in Canada the levy takes the form of an income tax on any appreciation of a deceased's property over his or her lifetime.

Bill S-9 simply recognizes the situation and addresses the anomaly that would otherwise result. Without the proposed change combined Canada and U.S. tax on the estate of a Canadian with U.S. property could actually exceed the property value. I do not think anyone in the House would deny that would be patently unfair to the taxpayers.

In other words, any suggestion this provision represents a tax break for the wealthy rests on the confusion about tax treaties in general and this protocol in particular. Wealthy Canadians will continue to pay substantial taxes on property owned at death.

Another important change is the reduction or elimination of the rate of withholding tax that each country will apply to certain types of revenue. The rate on interest payments will be reduced to 10 per cent from 15 per cent. The rate on direct dividends will go down to 5 per cent from 10 per cent and the rate on royalties on computer software and on patent and technological information will be eliminated entirely.

These changes bring the rates under the Canada-U.S. convention into line with those provided in the OECD model tax convention accepted by most of the OECD's 25 countries. More to the point, the reduced rates will facilitate trade and investments between our two countries.

For example, the elimination of the withholding tax on certain types of information technology will make it cheaper for Canadian companies to access technology from the United States and easier for our high tech firms to sell to the United States.

I will mention one further beneficial change provided for in this protocol. It concerns the treatment of social security payments such as old age security and the Canada pension plan. Under the existing convention these payments are not taxable in the source country and only half the benefit it taxable in the other country. Once the protocol is ratified, however, benefits paid from one country will be taxable exclusively in that country.

To sum up, double taxation conventions are a vital part of the legal infrastructure underpinning trade and investment relationships between modern economies. The protocol the bill will ratify will result in fair taxation while enhancing the international environment for trade and investment.

Once again I remind hon. members the bill came out of committee unchanged. I suggest we pass it without further delay.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, we have seen that the purpose of Bill S-9 is to ratify a protocol to the Canada-United States Tax Convention.

This convention regulates most tax provisions, as the hon. member explained earlier. This means it regulates most tax provisions between Canada and the United States. Canada has similar conventions with many other countries throughout the world. The purpose of these conventions is primarily to avoid double taxation. It would be unfair for a Canadian or a Quebecer who works a few months in the United States to be taxed first in the United States and again in Canada or Quebec when he files his income tax return at the end of the year.

So considering the extent of our trade relations and the proximity of the United States, the Canada-United States Tax Convention should be as harmonized as possible, although it is still detailed and very complex.

The bill before the House today will make it possible for both governments to help each other collect taxes from their taxpayers. It is often said that one good deed deserves another. The United States will help Canada collect taxes owed by Canadian taxpayers abroad and in turn, Canada will help the United States collect taxes from Americans when they are on foreign soil.

Following the free trade agreement with the United States, both countries decided to operate even more closely to simplify fiscal exchanges between the two countries. This enhanced co-operation and harmonization are all part of the trend towards free trade that is now sweeping the international community and is forcing governments to become more efficient in the way they tax companies and citizens of the two countries that are signatories to this convention.

The Bloc Quebecois fully supports the trend towards free trade, as we have done since the negotiations began and as Quebec did as soon as the issue of international free trade was broached, since the Province of Quebec, unlike the federal Liberal government at the time, had come out in favour of free trade. Since we support the free exchange of goods in the greatest possible harmony and on the most equitable terms for Canadians and Americans, we have not

changed the position we took at the time and today, we want the government to know that we will support this bill.

We know that without the firm support of Quebec and all major players in the province, the free trade agreement with the United States would probably never have materialized.

As I said earlier, Jean Chrétien's Liberals and even the Province of Ontario were strongly opposed to the agreement. Quebec was not only in favour of this agreement between the United States and Canada but also supported expanding the agreement to include Mexico and still supports this grand design for a free trade zone. With President Clinton of the United States, we would like to see this free trade zone extend from Alaska to Tierra del Fuego.

We could draw a parallel between this situation and the situation we see now in the political context involving Canada and Quebec. I must say that our support for the bill before the House today is entirely consistent with the position we would take on agreements with the rest of Canada.

Millions of dollars are at stake in Bill S-9. Millions and even billions of dollars will be at stake tomorrow morning before a partnership between Quebec and Canada.

For instance, some businesspeople told me that they could not decide on the matter because they needed both supporters and opponents of the bill to earn a living.

Both before and after October 30, we will need clients from both sides in order to ensure a climate of harmony, of beneficial exchanges between the two parties. If we have no need for both, as we are doing in this bill, why would businesspeople want to stop dealing with those clients who voted with the other side after October 30?

Businesspeople and companies who need both Yes and No clients before October 30 will continue to need them after October 30. That is why we say that they can only hope for a partnership between both countries, just as the Bloc Quebecois is now supporting the partnership advocated by Bill S-9 to harmonize taxes, estate tax rates.

Yet, with this bill, if Canada refused to sign a protocol with the U.S., it would not claim to be weakened, that this would be an obvious way to avoid co-operating with the U.S., or that the U.S. would be the only one at a disadvantage. Canada understands that it is in both parties' interest.

In the same way, when people from the no side tell us that tomorrow morning, we will have Canada and a separated Quebec, I think that what we have here is a new definition of separation. Where I come from, when a couple separates, it is not just one party who is separated; both the woman and the man say they are separated.

After October 30, once Quebec has proclaimed its sovereignty, we will not have a separated Quebec and a complete Canada. We will have a separated Quebec and a separated Canada. Both parties will likely be weakened in their positions if people in Quebec and the rest of Canada refuse to conclude harmonious free trade agreements between them so that their economic and trade positions would be strengthened by new links. There can be accommodations. An economic and trade partnership could therefore be arranged not only for taxation but also for international trade and the free flow of goods and services in general, in the interest of this country's two founding nations.

The bill does not specify how many millions and billions of dollars are at stake in this protocol. We do not know which country-Canada or the U.S.-will benefit the most from this tax liberalization protocol. We do not know, and the bill does not say. Perhaps the party in power has done studies on this? We simply do not know.

But we nonetheless agree because this is a principle of justice that can only benefit Canadians and Quebecers. It would not be normal for a Quebecer working in Florida for three or four months a year, for example, to pay more taxes for these three or four months than he would pay in Quebec if he had worked only in Quebec.

Bill S-9 will ensure that Quebec or Canada, as the case may be, will be able to claim from the U.S. the share of withholding tax on this person's compensation, under conditions that will be similar or identical in both countries. Hence the advisability of supporting this agreement.

Especially if trade and trade opportunities between two countries are involved, considering that $1.3 billion is invested every year in manufacturing in Ontario cars, trucks and automotive parts for sale in Quebec, it would be sheer folly for the Ontario automotive industry to miss out on this market. Is Ontario going to refuse to come to an agreement with Quebec, claiming that it can no longer sell cars and trucks in Quebec because we have decided to achieve autonomy? That would be silly.

Also, Alberta sells us oil and natural gas worth more than $850 million. Would our Albertan suppliers decide overnight to stop selling us oil and natural gas worth $850 million because we have chosen to make our own decisions from now on?

For Bay Street, the heart of Toronto's financial district, Quebec represents a $2.8 billion market for financial and insurance services. How can one believe that these people would not find it in their best interest to maintain harmonious business relations with us?

Integration of businesses in Quebec and Canada as well as the need to integrate businesses in Quebec and Canada with American businesses make it imperative that we maintain harmonious relations among ourselves. In turn, maintaining harmonious relations forces us to maintain the existing economic union, but under new terms, whereby each partner has a say in problem solving.

Where the shoe pinches right now is that one country is divided, with one partner claiming to have all the answers and be in a better position to manage the other one's taxes and imposes its will by force of numbers. That is why we were never able to find a solution: we realize that we are so terribly different.

When I was in college, we had a professor who used to say: "My friends, always remember that, when confronted with a problem, unless you hold the solution or are part of the solution, you are part of the problem".

That is the kind of situation we are in at present in Canada and Quebec. Over the past few decades, we have come to realize that we were facing certain problems. We told Canada: "Here is a possible solution: If you agree to a redistribution of powers between our two peoples, so as to allow greater fairness, greater autonomy and greater respect for our two peoples, we could find a solution for this great united Canada".

Unfortunately, Quebec, particularly over the last 30 years, has constantly clashed with the federal government and the rest of Canada, which want to keep control over the province's tax system, over its decisions and, in fact, over any major decision that a nation has to make regarding its future.

We feel that Canada was more part of the problem than part of the solution. This is why we initiated a referendum process, a democratic process which will allow Quebecers to freely express themselves and tell Canadians: "Ladies and gentlemen, tomorrow morning we wish to offer you a new sharing of responsibilities; we wish to offer you a new partnership whereby we will decide together, on an equal footing, what should be done to ensure the best possible future for us".

Let us not forget that soon, when Quebec becomes sovereign, the rest of Canada will no longer be in as strong a position, relative to other foreign countries. It is wrong and it is misleading to suggest that the rest of Canada will still be a strong country, while Quebec will have become a weak nation. A Canada without Quebec is a weaker Canada and a Quebec without Canada also takes on a different dimension. This is why we will have to find a way to pool our skills and strengths to maintain as best as we can our trade relations with other countries.

Should this not happen, Canada will not immediately go bankrupt, nor will Quebec: our two new countries will have to face international conditions different from those which currently prevail, something which might be harder to do. Clearly, it is easier to enter into a partnership to solve issues, rather than try to find solutions to the same problems separately. This is obvious. But we cannot do it right now. We are told: you are already in a partnership, why do you want to leave? This is an illusion. We want out because we feel that we are not in a true partnership arrangement. We are in a minority position in a country where our province accounts for about 25 per cent of the population, and where half of the taxes paid by Quebecers are controlled by the majority.

We want more than that for Quebecers. We mentioned commercial reasons regarding free trade agreements. We could also provide reasons related to the number of jobs. We are not talking about the loss of one million jobs. We are not even talking about a loss, because we know that our partners of tomorrow will not let 250,000 jobs in Ontario disappear. Indeed, there are 250,000 jobs in that province that are directly related to goods sold in Quebec, particularly in the automotive industry.

In western Canada, 75,000 jobs are directly related to trade between those provinces and Quebec. We buy 50 per cent of the beef produced in the west. Tomorrow, Quebecers will not want to stop eating western beef, nor will western producers want to stop selling us their beef, because 75,000 jobs are at stake. In Atlantic Canada, we are talking about 26,000 jobs. Maritime provinces will not risk losing 26,000 jobs by eliminating economic and trade activity with Quebec.

In Canada, a total of 352,000 jobs depend directly on the trade between the rest of Canada and Quebec. I imagine that on October 31, businessmen will start calling their Premiers and ministers to tell them: Gentlemen, let us be serious. Let us get down to business. Let us get back to basics and sound business practices. Keep protecting our markets and our jobs. Sit down and talk to each other and stop being so obsessed with your own policies.

I did not make up these examples. They exist today. This is the reality of trade, whether we like it or not.

The same goes for NAFTA. They want to scare us. They say that the next day we could no longer enter into an agreement, be part of NAFTA. However, tomorrow morning, for instance, we can enter into an agreement with the United States on estate taxes.

Americans who own securities or property or factories in Quebec or who come and work here a few months every year, tomorrow morning, these Americans will want to adopt the same bill, either with Quebec or a united Canada. Why is this bill before the House today? Because we realize that some Americans are penalized by differences in legislation, just as some Canadians and Quebecers are penalized by the law as we know it today.

If Canada is prepared to acknowledge that harmonization of the legislation of our two countries is mutually beneficial, why should we be more reasonable with the Americans than with a sovereign Quebec, if it benefits our citizens? Personally, I think that the day after a declaration of sovereignty, the United States and the rest of Canada will sit down at the same table and will want to negotiate.

Quebec's production figures are four times those of Chile, which is expected to be the next country to sign NAFTA. Four times. Quebec's trade with the United States is eight times what it is with Brazil, Argentina and Chile combined. Canada tells us: "We are willing to let Chile become a member tomorrow morning", but they are not prepared to do the same for Quebec. Yet Quebec has eight times the trade exchanges with these three countries combined.

The American president has already stated, as I have already said, that he wanted to create a free trade zone from Alaska to Tierra del Fuego, which I imagine includes Quebec. He did not say "a free trade zone from Alaska to Tierra del Fuego excluding Quebec". That is not what he said. What he did say is that it is to everyone's advantage in this great economic space in which we live to liberalize trade. Some governors of northeastern states have already announced their firm intention to continue trade relations with a sovereign Quebec. Laurent Beaudoin is not the only one who has made a statement.

The government of Canada strongly supports Chile's application, as I have said already, and yet Chile has 148 times less trade with English Canada than Quebec has with English Canada. This is a key point. Another country like Chile would be accepted yet Quebec, with 148 times more trade links than Chile, would be rejected. That makes absolutely no sense. Nothing but bogey man scare tactics. We will not stand for such a thing.

During a trade visit to South America, the Prime Minister of Canada made a strong and convincing plea in favour of broadening NAFTA to include all of the Americas. There is, however, a lack of logic in the no side which they are not prepared to acknowledge. Again this week, Mr. Martin has made himself the spokesman for the no side with respect to NAFTA. Yesterday in a speech to the Association professionnelle en développement économique du Québec he raised three key points preventing Quebec from joining NAFTA quickly.

First, membership in the World Trade Association. With respect to this point, I must tell Mr. Martin that he is wrong, although I cannot tell whether or not his error is deliberate. I do not believe so, I think he might be acting in good faith, but it is obvious that he is in error. True, it could take several years for a country to conform to the World Trade Organization's rules before being accepted for membership. But he must acknowledge at the same time that Quebec already meets all of the World Trade Organization's membership requirements. WTO rules contain provisions for accelerating the process for countries that are already in compliance with the rules.

Quebec would certainly have access to this fast track, which takes about two to three months. In the past five years, the latest countries to declare sovereignty or independence were all recognized immediately by the WTO. Perhaps one or two countries have still not yet been accepted, because they do not meet the basic requirements, because they were not part of a free market economy. That is why the delay. However, a sovereign Quebec, which already satisfies all the conditions, could join the organization quickly-within two or three months, and not two or three years, as Mr. Martin suggests. Even the Czechs and the Slovaks have had the advantage-

[The Deputy Speaker]

I would ask the member to use the minister's title and not his surname.

[René Laurin, Bloc, Joliette, QC]

You are right, Mr. Speaker. I should have said "the Minister of Finance".

Even the Czech and the Slovak republics, which have just achieved sovereignty, have had the advantage of this accelerated process, the process of joining the World Trade Organization, despite the fact that their economies were far less developed that Quebec's.

The Minister of Finance also contended that Quebec will not be able to sign NAFTA before achieving sovereignty, which, according to him, would take time. However, Quebec retains its legal status, so long as it remains a province of Canada, in my opinion and according to all the experts. As a province and so long as it has not declared its sovereignty, Quebec remains a party to NAFTA.

When we come to declare our sovereignty, we will have had time to talk with people. We will continue to be a party to NAFTA as a Canadian province, and the day after sovereignty, negotiations will be complete, and we will become another member of NAFTA, this time, not as a province, but as a sovereign country. His reasoning falls short here again.

The Minister of Finance raised a third point. He ignored an aspect of the international reality and existing practice, in stating that the American Congress was not keen at the prospect of new negotiations. The Americans have never behaved this way, because state successions promote the continuity and stability of international treaties.

If the United States ever did ignore this rule, it would be to Canada's full advantage to sign a partnership with Quebec, without altering the economic reality of Canada and Quebec, but permitting

continued membership by Canada and Quebec in NAFTA, as provided in article 22.04 of the treaty.

It would be advantageous to both Canada and Quebec, because we must not forget that, if the United States wants to renegotiate with Quebec, it will surely want to renegotiate with Canada, which will have seven million consumers fewer than when it signed the treaty.

A Canada with seven million fewer inhabitants is not the same Canada. It is not the same NAFTA partner. And if Canada wants to maintain its economic weight in NAFTA, it should sign a partnership agreement with Quebec, because it would be to its advantage and to Quebec's to do so.

According to another of Mr. Martin's arguments, the United States will no longer want to allow new members to have a dispute settlement board. This is a half baked argument and should be quickly rejected because it is based solely on a letter written by a candidate for the Republican Party nomination. Just a letter from a candidate making this claim.

Furthermore, Mr. Martin has conceded that the negotiations with Chile include the dispute settlement board. They are currently negotiating, they have recognized the existence, the possibility of extending the jurisdiction of a dispute settlement board, yet they are telling us that the Americans are no longer interested. How can the Americans want this mechanism for Chile but not for Canada? They are consistent.

This makes it difficult to take seriously the finance minister's statement that Quebec will lose a million jobs and endanger 90 per cent of its exports. Just imagine. This is no laughing matter.

This just goes to show once again that ridicule never killed anyone, because the Minister of Finance would have died a long time ago. We can see how exaggeration often leads to absurdities.

We are proud and happy to participate in Canada's development by supporting Bill S-9, because it goes in the direction that we have always advocated. We do not want to destroy Canada, we want to build a country in Quebec, and we want Canada to remain prosperous as well. We want to live in renewed harmony, no longer from coast to coast but side by side. And the only way to live side by side is to support legislation that will make for more harmonious relations between the two countries.

Witch hunts must be stopped. They must stop telling Quebecers that Quebec is too small, that they cannot administer themselves without help, that they will not succeed in their endeavour. Quite the contrary.

Quebec's history has shown that every time Quebecers have really taken their destiny into their own hands, their endeavours were successful. They succeeded. And when Quebecers will decide, as they will on October 30, to become autonomous and to make their own decisions, they will be able to collect their own taxes and to sign their own treaties. It will enable them to make decisions on their own and to invest in projects that better serve the interests of Quebecers the $30 billion in tax money they will no longer have to pay the federal government.

The Laurent Beaudoins who come and tell us that Quebec would be too small to meet the needs of large businesses like their should be reminded that countries smaller than Quebec have about 20 and sometimes as many as 30 companies that are twice, three times and even four times as large as Bombardier. Businesses larger than the one run by Mr. Beaudoin manage to prosper in countries like Switzerland, Norway and Denmark. The strength and vitality of a nation is not dependent on its size, but rather on the resourcefulness of its people, their commitment and their self-respect.

Naturally, Quebecers will want to invest mainly in research and development because this creates jobs. The Chinese have known this for a long time. An old Chinese proverb says: "Instead of handing out fish that will feed the hungry only for one day, teach them to fish". Teach people to fish and they will be able to feed themselves for the rest of their lives.

That is what Canada did with Quebec. Only with respect to unemployment insurance were we favoured. Quebecers did get more in UI benefits than they paid into the plan. That is the fish we were fed. Meanwhile, Ontarians were taught to fish, and teaching fishing requires research and development grants, which we did not get. And they thought we would go for that.

[The Speaker]

I recognize the hon. parliamentary secretary to the Minister of Industry on a point of order.

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

Mr. Speaker, I rise on a point of order.

I have been listening patiently to the member for the last 33 minutes. We are all very sensitive when the separatists speak in the House these days. We do not want to upset them in any way, shape or form. However, Mr. Speaker, at what point in time do you think the member will speak about the bill that is on the floor of the House?

[The Deputy Speaker]

I am sure that the hon. member will not be long in coming to the point of his speech.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, I thought that what I was saying was very relevant to Bill S-9, since it addresses partnership with another country, the United States. I was therefore attempting to demonstrate that the proposals made concerning other bills before the House deal with exactly the same problem. There was a

problem between the United States and Canada. Tax collection was not harmonized, estate taxes were not harmonized.

A way has been found by two sovereign countries to discuss and to reach agreement on changing our laws in order to harmonize them and ensure that Bill C-9 benefits the citizens of both countries equally.

What I have attempted to demonstrate to this hon. house, with examples, is that this would be equally possible in other areas. I am well aware that my colleagues opposite do not like to hear anyone telling them that it is possible for the partnership to be a success. They cannot be hearing that word much these days. They only wish to hear it used in connection with other countries, but when Quebec becomes a country they will hear it more often. We think that at that point they will be prepared to come to the table.

At any rate, whether they like to hear us talk about it or not, this is a decision for Quebecers alone. And just as Quebecers, via their elected representatives here in the House today, agree to support Bill S-9, tomorrow morning Quebecers will also agree to support their representatives in the Quebec government and ask them to offer a partnership that is respectful of our neighbours in the rest of Canada, a partnership that will be advantageous to both parties, a partnership that will become the sole solution to our common problems.

[The Deputy Speaker]

It is my duty to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Davenport-Climate change.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, in two years in the House I have never seen a bill that all three parties support take so long to get through. Here we are debating the bill when all parties agree to it.

There are a couple of things I would like to say at third reading which I believe are worth clearing up. As everyone in the House has been informed, and for those taxpayers who have been watching the debate and seeing how a Senate bill gets through the House of Commons, there are some items in here that have caused some confusion.

The NDP member for Kamloops and the Liberal member for Gander-Grand Falls have raised some issues on specific items in the bill that have now confused the Canadian public. Now we have to participate in explaining why we support the bill or why some members are against it. There are only one or two people who are against it and it seems a shame that we have to talk about it.

The bill was done through negotiators on behalf of both countries. It was signed on August 31, 1994, so it is already a done deal. What we are doing is giving birth to it, endorsing it or whatever through the House of Commons.

As the Parliamentary Secretary to the Minister of Finance indicated, it eliminates double taxation, creates a level playing field, reduces the withholding taxes on interest and dividends, royalties and technologies, et cetera. It keeps up with the global need to remain and to become competitive. It is for those sound fiscal and economic reasons that the Reform Party supports the bill.

The bill has a lot of upside to it and will generate a lot of investment opportunities for Canadians in the United States and vice versa with the amount of investment Americans make in Canada. It is a reciprocity agreement. Whatever we have negotiated is a two-way street; what happens in the United States can also happen up here. I remind everyone that in a reciprocity agreement sometimes we have to give to get and sometimes we get to give. It works both ways.

I would like to try to clear up some of the confusion on behalf of the member for Kamloops. My office received a lot of phone calls about the bill based on the tirade over the treatment of universities in the United States and Canadians being allowed to make charitable donations to American universities. If they send their children to those schools, it is an allowable deduction. In typical NDP fashion it is a tax for the so-called rich and the rich should not be able to do anything except look after those people who the NDP deem need to be looked after, rather than having a system that is fair for all at both ends of the scale.

Based on the fact that the member for Kamloops has raised the issue and is getting a bit of play out of it in B.C., I would like to answer some of the questions people have been calling our offices about. I will also address the specifics of the bill. Maybe some of the confusion can be cleared up.

I must admit I am a bit frustrated personally that we in the House of Commons have to enter into a debate over something we were not a part of because. It was in the Senate where all the specifics, details and all the justifications-

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

Do you like taking your direction from the Senate?

[Jim Silye, Reform, Calgary Centre, AB]

No, it is just that the details were brought out in the Senate. The negotiations were done by representatives of both countries. They were not done by senators from both countries, but that is where it was approved.

My point is that it is frustrating that we now have to dig in and get all the details of a done deal. Nevertheless, I will make my best

stab at it and if there are some areas where I am a bit off the mark hopefully I will not be too far off. I will say so if I am not clear.

One question we are getting from B.C. constituents is: Why do we favour reductions in the rate of withholding tax on interest and dividends? I covered that in my opening remarks. This works both ways and will attract investment in Canada as well as investment in the United States. It is seen as another step in the reduction of barriers as we shift to a global marketplace. All OECD member countries, including Canada, the 25 member states have agreed to try to get their tax rates in line with one another to facilitate this.

It may so happen at this time because of the immediate nature of the deal being put into effect that the flow of capital into Canada may be reduced. That could be a temporary measure. In the years to come we could get it back on bigger and better deals we make with the United States.

The second question was: How can we endorse a bill that gives individuals with children in U.S. schools the ability to write off a portion of their expenses? While there are those who argue that we should not be subsidizing those who are well enough off to go to schools in the U.S., this benefit works both ways. Americans are allowed to make donations to Canadian universities as well. It is not only the privileged Americans or Canadians who are crossing the borders in pursuit of an education.

As members know, with legislation like this the good must be weighed with the bad. The potential benefits from freer flowing commerce between Canada and the U.S. far exceed the potential cost of a few individuals who send their children to American schools.

This is a reciprocity treaty and you win some and you lose some. If the principle of encouraging donations both ways was brought up in the House today as a separate measure from the principle of making a deal with the United States and encouraging a two-way deal, I would suggest that the principle of encouraging donations both ways would probably be supported in the House by the majority of members.

The third question which arose thanks to the member for Kamloops was: Are American contributions to Canadian charities given the same treatment? Yes, this is a treaty that ensures that Canadians and Americans are treated the same. It is a reciprocity treaty.

The fourth question was: What about the estate tax provision? Is that not just a tax break for the rich? No, it is not a tax break just for the rich. It tries to rectify an inequity in the current system.

In Canada we do not have an estate tax. The United States did and Americans did not have to pay any estate taxes unless there was an amount over $600,000. Canadians had to pay on amounts over $60,000. This reintroduces some equity into the system and now if a Canadian with property in the United States died and left an estate, it would only be taxed if the value is in excess of $600,000. The bill levels the playing field on this issue. It signifies the intent of the bill as trying to make sure Canadians are treated the same in Canada as they are in the United States.

If owning property in the United States is only the purview of the rich, then so be it. However, I do not believe that everyone who owns property in the States all along the eastern seaboard happens to be rich. I happen to know the NDP made a lot of mileage on taxing the rich until suddenly everybody in Canada realized that rich meant anybody making over $40,000 and they were hit as well. That took care of the NDP philosophy of taxing the rich, because they are not rich.

Regarding this attack on the rich by the NDP, even Abraham Lincoln addressed that in his day. He said that we cannot make the poor wealthy by making the wealthy poor. If we want to protect the disadvantaged-we need to protect the disadvantaged-if we care about those people who truly need the help then we make our laws and our polices and go about doing that. At the same time there are people throughout the economic scale who make $50,000 or more who also deserve to have any inequities in the system addressed. They deserve to be looked after as well.

For instance, 62 per cent of those who made up to $25,000 generated 27 per cent of total income, while their share of the total tax paid in 1991 was 11 per cent. My source for this is the Department of Finance. There were 19 million tax filers in 1991 and 13.7 million paid income tax and 5.3 million were not taxable.

I want to discuss the breakdown of how much tax was paid by the various groups. People who earned $25,000 to $50,000 represented 28 per cent of the tax filers and their share of both total income and total tax was 40 per cent. Ninety per cent of the tax filers in 1991 made $50,000 or less and they paid 51 per cent of the income taxes that year. People in the $50,000 to $100,000 category represented 9 per cent of the tax filers, with a share of 23 per cent of the income. They paid 31 per cent of the total tax. People who made over $100,000 were 1 per cent of tax filers, with 10 per cent of income and paying 18 per cent of the total tax. This means that 10 per cent of the tax filers in 1991 paid a total of 49 per cent of the taxes.

I point this out to the member for Kamloops so he can realize that the wealthy people in this country, the top 10 per cent, pay their darn share of the taxes. They pay darn well, they pay high, and they pay a lot, like 49 per cent of the total tax take. This business about going after the rich all the time is not going to work and it does not hold water with me, because they contribute a lot to the economy and keep the economy going. Every now and then

someone should speak out on their behalf as well. They are suddenly becoming a small and select group as well in this country.

This brings me to another issue I would like to talk about from this Bill S-9, which is directly related to the concerns of the Liberal member for Gander-Grand Falls, who very eloquently raised his objections to this bill at the Standing Committee on Finance. As I understand, having done a little more homework, this member has been watching this issue and this bill for a very long time. I found out that when in opposition he basically criticized the Conservative government for moving in this direction and moving toward this kind of a deal. In fact he questioned the government of the day on this quite a bit.

The history of Bill S-9 goes back prior to us getting it on our desks and saying we should pass the bill. The bill goes back to the Mulroney government. The member for Gander-Grand Falls had the job and unique duty to critique this item, as he did. Based on that and based on being in opposition to it at that time, he feels obligated to continue that opposition to it at this time.

I bring this point out to show there is at least one Liberal who sticks to his Liberal convictions. There is one Liberal who keeps his promise. There is one Liberal who does not break the promises in the red book.

[Leon Benoit, Reform, Vegreville, AB]

He did not vote against this though.

[Jim Silye, Reform, Calgary Centre, AB]

I believe when it comes to the vote he will have to be very careful how he handles himself. Perhaps he might have a cold or something. We certainly would not want the member to be in trouble with his party, since that whip is cracking pretty hard over there, as evidenced by the last sitting.

Some of the issues the member for Gander-Grand Falls pointed out are based on his personal crusade against the bill. He has taken a lot of effort and looked into it. He does believe that because it means less revenue for Canada it is wrong. He does believe it is a tax system for the rich. He does point out that the Reform Party and the Bloc Quebecois support it, as we do. Yet he never says openly, aggressively, that the Liberal government now supports it as well.

Perhaps when he has his intervention on the bill, because I am sure he wants to speak to it and address it as well, he would maybe tell us on this side of the House why it is that when they were in opposition and the Prime Minister and his group were over here this member was attacking the bill at the time, with their blessing obviously, with the finance minister's encouragement, with the leader of the party's encouragement. Why when they are on the other side of the House all of a sudden did they flip? Do they become puppets of the bureaucracy? Do they become puppets of the bureaucrats? Do they have to say yes to what those people tell them to do? When they were over here they criticized it. They are over there and now they are endorsing it.

It now takes one lone voice, one lonely voice in that huge pack of 177 members over there to remind them that when they were over here they were not for this thing, they were not for the bill. They did not want to do reciprocity with the States like this. They were against stuff like that. They were against NAFTA. They were against all these things. Now they are for all this.

I do not understand. I do not mean to be taking the member for Gander-Grand Falls to task. In a way I am giving him a compliment, but in another way-

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

You are dangerous. You are not fooling anybody.

[Jim Silye, Reform, Calgary Centre, AB]

I also point out that there are inconsistencies here. I will compliment the member for being consistent. However I will criticize his party for being inconsistent.

The rest of the items on the bill I have covered. We do support it. I did have some time to talk about it, and I did feel it was important that as the representative for our party on the bill and as a supporter of the bill for our party I should set some of the record straight. I have to sort of pre-empt the member for Gander-Grand Falls, because I am sure he is going to say a few other words.

The intent of the bill and what it does accomplish is what the future of the country holds. We have to negotiate with other countries. We have to be creating a level playing field. We have to have taxation levels that are similar. We have to have reciprocity agreements that make the deals both ways. As the flow of capital and human resources goes back and forth, all around the world, as we push buttons on a computer and transfer large sums of money, just as an entry item on a ledger sheet, we have to be able to be competitive. First and foremost, that is what Bill S-9 does, it keeps us competitive. It is only the small minded, the narrow minded people in the House who want to protect themselves who would argue that this is not a fair and good reciprocity agreement.

There is nothing for me to add to this. I know there was a lot of confusion. I hope I have cleared up some of that confusion, why our party supports it. I hope I have addressed those constituents of the member for Kamloops. Also I hope I have put to rest this business about picking on the rich all the time, because the rich do pay their fair share. I do not believe this is a bill that satisfies the rich, because I believe people who make between $50,000 and $100,000 and own property down in the States are not really wealthy in this day and age, to make $60,000 or $70,000. In that case, with $64,000, plus the perks we get, everybody in this place would be rich. I would say that a lot of people in the House would not say they are rich.

That is another debate. That is another issue. I bring it up only because of the confusion introduced into the bill by the member for Kamloops and by the member for Gander-Grand Falls. It is worthy of support. The sooner we get it over with, the sooner we can get back to real issues and real bills and get on with our economic lives.

[Barry Campbell, Liberal, St. Paul's, ON]

Mr. Speaker, it is an unusual day in the House when all parties support a bill. The member for Calgary Centre pointed that out at the beginning and then spoke for almost 16 minutes even though he felt it was a waste of time to talk about the bill, since we all agreed. What is more interesting is that he spent most of that time complimenting a member for the governing party, the member for Gander-Grand Falls. It is indeed an unusual day in the House.

I also want to speak to Bill S-9 and some of the concerns raised with respect to the bill, an act to amend the Canada-U.S. Tax Convention Act.

First I want to say to my colleagues that there is nothing sinister in the bill and no surprises for those who follow these issues. This was pointed out earlier. This matter was the subject of publicity earlier. There was a press release in April 1994 that announced that the protocol had been signed. A copy of the protocol was available. The fact that negotiations were taking place has been known for several years. It has certainly been known among people who practise taxation law and those who are concerned about cross border investment. There are no surprises and nothing particularly sinister. The bill follows the OECD model tax convention treaty. Provisions of that tax convention model have been followed by as many as 25 countries.

There has been some suggestion that the bill amounts to a huge tax cut for corporations. I want to speak to that misconception. What the bill really does is facilitate cross border investment. As has been said by others, tax conventions are all about reciprocity. What we are gaining through this tax convention and other tax conventions is enhanced investment in our country. We have to reciprocate for countries that are interested in that kind of relationship with us.

What we have here in the changes in withholding tax is a great incentive for Canadians to invest in the United States and likewise for Americans to invest in this country. Certainly at a time when we are concerned about jobs and growth, that is a very good outcome and a worthwhile goal.

There has been talk, again another confusion, about impact on the treasury, cost to Canadians. We should also focus on offsetting investment in tax revenues that come to Canada from that investment. That is what this treaty will accomplish.

There has also been comment about estate taxes and some sort of opportunity that is being provided to the rich of this country. What is being addressed in the estate tax provisions of the convention is the matter of fair treatment. Canadians will be out from under the burden of double taxation and unfair treatment that has existed to date in the United States for those who have owned property there. That will be cleared up.

There has also been much discussion about the provisions of the convention dealing with the tax treatment of contributions to universities outside Canada. Some have been so confused as to think that this is something that has appeared in our law and is a function of this convention suddenly. It has been a matter of legislation in this country since the 1960s and has been in this convention since the 1980s. What is the result? Certainly the result is that Canadians may make contributions to U.S. universities, but I want to come back to the reciprocity issue and make the following point.

Looking into my own former university, McGill, we discover that over the years countless Americans have attended McGill University. Approximately 1,000 are there right now if we add full time and part time students together.

Here is what is most interesting of all. Let us look at the amount of contributions from McGill graduates in the U.S. and Americans to McGill University over the last five years. In 1990, $2,452,000. In 1991, over $3.7 million. In 1992, almost $2 million. These are U.S. figures. In 1993, $3 million Canadian. In 1994, the astronomical amount of $7 million Canadian. In 1995 it is $3,440,000 to date from American contributors to a great Canadian university. Those who question the wisdom of encouraging Canadians to make contributions to U.S. schools should ask themselves what the impact might be on contributions to Canadian schools.

I am pleased to support the bill and pleased that it has the support of all parties of the House. It is a sensible convention. It is updated from time to time, as it has been most recently by these changes. I look forward to having it passed by the House.

I would like to add a word on another point. The hon. member for Joliette used the debate on Bill S-9 to discuss the effects of separation. In response, I would like to say something very clearly.

First, if Quebec needs such a convention, it already has one as a province of Canada. Second, it seems to me that the hon. member does not have a strong grasp of international law, but this is always the way with the separatists. When they get up in the morning, they say: I want something, therefore I shall have it. But the world does not work this way, and he knows it.

International law is well written and very clear: if Quebec separates from Canada, Canada will remain the contracting state, not Quebec.

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

Mr. Speaker, in response to the questions raised by the Reform Party and by the Bloc yesterday, the accountability of the Government of Canada to the people of Canada is made here in the House of Commons by the official opposition.

There are only two functions which Parliament serves: One is a legislative function and the other is an accountability function. The actions of the executive of government are held accountable to the people through Parliament. If the official opposition party does not do its job, then Parliament is not doing its job.

We have before us today a bill which came in through the back door. It was not the servant's entrance because the back door was the Senate. It came in through the Senate, but it involves an incredibly large expenditure of money in the final analysis. It is a large expenditure not in direct allocation, but in what the auditors general call tax expenditures.

The bill also includes provisions which Bloc members keep repeating as being wonderful. It cuts dividends by 50 per cent to American corporations which have subsidiaries in Canada. It cuts by one-third the taxation on interest on the money that flows back across to the United States. It eliminates every single royalty tax in this country which is held by Americans, except for trademarks. Trademarks are being bifurcated. It is a very difficult accounting procedure, but that is what is happening under the bill. There are those three big tax cuts.

I just cannot understand it. I do not believe there is one constituent of the official opposition-I keep referring to it as the official opposition because it is supposed to be the group that controls question period and debate in this Chamber. That is why we have a group of MPs like myself and others on the government side who are wondering where the accountability and debate is here.

What I am referring to is this philosophy of the official opposition that working Canadians should compensate people who have property worth over $600,000 in the United States of America. With the passage of the bill, the estate tax in the United States only applies to property worth over $600,000.

The Bloc is saying it is going to end double taxation. It is demanding this on behalf of Quebec. How? It says that the Canadian government taxes in a different way. Yes, it does tax differently on property over $600,000 because there is no double taxation below $600,000. The estate tax in the United States will not kick in until there is property over $600,000 in the United States. The Bloc tells us it wants to end double taxation for people who pay a tax on things that are valued at over $600,000 in the United States of America.

The estate tax in the United States of America has been in existence since the turn of the century. It was brought in at the same time it was brought into Canada when income tax came in. Income tax was demanded by the people of western Canada in 1916 when they marched with their signs. They demanded that income tax be brought in. Their cry was the same cry as that of the people in the United States of America when they wanted income tax brought in at the turn of the century, about 1897, because they said the rich were not paying their fair share of taxes.

The governments of the day responded by bringing in taxes on wealth of varying amounts. Estate taxes came in. All of a sudden, here we are in 1995 and we are going to try to end double taxation which has been there since 1904. Worse than that, we are going to try to end double taxation for people who have property in the United States worth over $600,000. I just do not understand the Bloc's position on this as the official opposition in the Canadian Parliament because that is where the objection should come from.

Let me repeat this again. There is no double taxation after the passage of this bill unless one has property of over $600,000 in the United States. The double taxation is not really double taxation because we do not have an estate tax. Our death tax is on income. The estate tax is on property. Everybody in this Chamber knows that.

In the United States they take the value of one's automobile, house and everything else, the paintings on the wall and the dishes, the stocks and bonds, everything. In Canada we exempt the primary residence and the things one uses. Canada does not tax the car in the driveway; we only tax what the estate of the dead person says was actually an increase in value of the property that is not exempt. It is two completely different things, so how can we have reciprocity when we do not have the same thing in effect in both the nations?

When the bill was introduced into the United States Senate the Government of the United States said: "Each country agrees to allow an appropriate credit for the death taxes imposed in the other country". It is convenient for the United States because it takes about three years to settle an estate owned by a Canadian in the United States. A long time. You normally do not want to pay estate taxes in the United States. This will sort of hurry it up, will it not?

If we are now going to give a tax credit, where does that tax credit come from? It comes from the pockets of working Canadians. It comes from the person working on a construction job. It

comes from the person who works in a store. It comes from the person making the beds in the hotels. It comes from every working Canadian. Until the official opposition in Parliament understands that the government must be held accountable on tax expenditures we will never get the finances of this country under control.

Apart from that, the other major thing in this bill is that it reduces by 50 per cent the taxes paid by American multinationals operating in Canada on their profits. Every single member of this House knows that we have a special division in Revenue Canada called the transfer pricing division. Every member in this Chamber knows there are nine or 10 people there and there are another 17 or 18 in the field looking at all these multinationals. Everyone knows that over 70 per cent of them do not pay any tax at all. Transfer pricing is the major problem but there are other problems as well.

You charge $50 for a clothespin when you pass it from your parent company to your subsidiary. The trick is that if you have a company working in Canada at rates which are higher than in the United States, you want to make sure there is no profit showing on the books, so you bring down the profits by transfer pricing.

The only place we know they can pay taxes on their profits and operations in Canada is at the border. What is the Senate doing in this bill? The Senate is reducing that to half. How much money is that? Let me quote the chief of corporate and international tax of the finance department before the Senate standing committee April 25, 1995. He was asked the question: Why not reduce it to zero? Instead of 10 per cent why not bring it down to zero? His answer is on page 19 of the transcript: "The principal reason is money". Do not forget we are reducing it by half down to five. He said: "I have not looked recently but I believe that our annual withholding tax take is approximately $1.5 billion. Currently it would be difficult to sustain completely walking away from that". I repeat, 1.5 billion bucks.

Do you know, Mr. Speaker, that the agreement we are passing here today not only reduces the withholding tax by 50 per cent but it also commits us in writing that in three years time we will go back to Washington and negotiate it down?

[An hon. member]

No.

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

Yes, in this agreement, down to zero. That is only one of the tax cuts in this agreement.

Let me get to the whole purpose. What is behind this? What is behind this kind of rush? The International Business and Finance Daily is printing news stories. I will read a portion. I can table it for hon. members to see. It is marked: ``Washington, September 12, 1995''.

They are interested in getting the bill passed before the end of the month. Why? This is why. "The protocol to the tax treaty between the United States and Canada is expected to be ratified by the Canadian Parliament before the end of October". It then goes on to talk about the other protocols that were signed and quoted a Canadian official: "We will try as quickly as we can for the second reading, and the third reading will take place in the Canadian House of Commons". That is nice to know.

He then goes on to say: "Although the leading party, the Bloc, has the power to hold up the vote", he does not expect that it will. Then he goes on to say that one of the key features of the protocol is this: "The proposed treaty will be effective with respect to amounts paid or credited on or after the first day of the second month after the protocol enters into force". Just imagine. Let me repeat that: "the first day of the second month that the protocol" is finished in this Chamber. This is October.

The next sentence is key. "Companies in the United States are looking to apply the rate to their 1995 income tax. However, if the third reading vote is delayed in the House of Commons they may have to pay the higher rate on dividends".

The largest multinationals in the world will be getting an enormous tax decrease. However, if this bill does not pass third reading before the end of October, they will not be able to claim their reduction of 3 per cent because the protocol lowers the existing treaty's 10 per cent tax rate to 7 per cent in 1995, 6 per cent in 1996 and 5 per cent in 1997. Does anyone want to save the Government of Canada a few hundred million dollars? Pass this bill the first week in November.

Those are just a few of the reasons why I am opposed to the bill. The big one is this. Every single business organization in the United States that appeared before the Congress of the United States made one point clear. Of the seven treaties that were being passed in the U.S. Senate, only the Canadian treaty was truly a one-sided affair with the majority of the benefits going to the United States.

Let me quote from probably the biggest business organization, the National Foreign Trade Council, Inc., 1914 representing 500 U.S. multinationals, Mr. Robert H. Green, vice-president, tax policy. "Turning to the treaties before you"-this is the testimony-"the one that clearly is of the greatest interest to the largest number of companies in my membership is the U.S.-Canada protocol. The investment that flows between the two countries is substantial and favours the United States. We have substantially more investment there than they do here. The dividend withholding rates which are phased into 5 per cent over three years are of

tremendous benefit to the United States because of the reduced"-this, that and the other thing. He goes on to say: "Here are all the cuts".

This is from the administration of the United States. Mr. Samuels, who appeared before the committee, stated at page 42: "If you look at the treaties that are before the committee, with the exception of Canada, we think that it is probably about a zero, that it is probably a wash as far as benefits are concerned. With respect to Canada, when you look at the relative flows, there is a greater flow of income into the United States from Canada than there is going from the United States to Canada and we will benefit".

Then comes an interesting quote. This is from the assistant secretary for tax policy of the United States. He says that in one of these cuts it is only a one-way street because according to him and the U.S. treasury: "It will have a lesser effect on U.S. outgoing flows of interest to Canada because much of the flow is already exempt from U.S. tax under the portfolio interest provisions of the code".

What do we have here? We have an agreement that was negotiated in 1988 by the Mulroney administration. The Reform Party is absolutely correct. Agreements are signed between governments sometimes and they must be honoured. However, that is no reason to stand up in this Chamber and support them when you are taking money out of the pockets of ordinary Canadians who are being laid off by the government. We are cutting back programs and here we are giving what is in effect a tax break to the very rich in this country.

Much more could be said about this agreement. It is very complex but it all boils down to three enormous tax cuts. It boils down to giving a tax credit to somebody who has property worth over $600,000 in the United States. Those poor people, my heart goes out to them. If you have property in the United States worth more than $600,000 you are subjected to the estate tax. If you are under that you are not subjected to it. These political parties in the opposition, the Bloc that is supposed to be doing its job, are saying: "Atta boy, this is the best thing that ever happened".

We all respect the function of the House of Commons. In order for it to function properly that accountability must be there in the opposition parties. That is why I take such strong exception to the procedure and the content of the legislation.

This is the House of Commons. This is the house of commoners. That is where that phrase comes from. This is not the house of millionaires or the house of multimillionaires. This is the House of Commons. In these difficult times we should not be increasing tax cuts, tax expenditures for wealthy people and big American corporations. If we keep doing this, Canadian corporations will not be able to compete. Where is the cut for the Canadian corporations here? Where is it? It is absent.