House of Commons Hansard #238 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was witnesses.
Employment Equity ActGovernment Orders
The Acting Speaker (Mr. Kilger)
It being 5.46 p.m., the House will now proceed to the consideration of Private Members' Business as listed on today's Order Paper.
The House resumed from September 27 consideration of the motion.
Susan Whelan LiberalParliamentary Secretary to Minister of National Revenue
Mr. Speaker, it is a pleasure to speak today on Motion No. M-382 introduced by the hon. member for Mississauga South.
The issue of the underground economy is of concern to me and should be of concern to all Canadians. Most Canadians have been faced with an offer to pay cash for a lower price. When someone offers a lower price for cash and does not provide an invoice, at least two things happen: one, the consumer has no protection or recourse against poor workmanship; and two, governments lose revenue.
The greater the activity in the underground economy, the less revenue there is available to governments. Underground economic activity creates unfair competition for honest businesses. Jobs are lost and honest taxpayers are forced to pay more than their fair share of taxes.
I have spoken with the people of my constituency about the underground economy. Those who follow the law and pay their share of taxes do not like having to pay higher taxes because others are trying to cheat the system. Entrepreneurs who are trying to make an honest living say they do not like being at a competitive disadvantage to businesses and tradespeople who ask for cash payments to avoid paying taxes.
My constituents worry over how lost revenue is affecting the government's ability to maintain the social and economic programs so important to our well-being. When we accept the terms of a cash deal, what we end up doing is condoning a crime and promoting tax evasion.
As consumers, Canadians have to say no to offers of work for cash. It is in their interest to do so. First, work performed under the table means consumers are at risk if the work is poorly performed or the result is not of the quality expected. Second, as I said, it means taxes higher than they should be. Third, it means essential social services we all benefit from are being put at risk.
Businesses must recognize that in the end conducting business in the underground economy will do more harm than good. Honest businesses are put at a competitive disadvantage because they cannot offer a customer the same deal as that offered by someone who will do the work but not collect the taxes. Furthermore the reputation of an entire business sector can be damaged by just a handful of under the table entrepreneurs whose work is of poor quality.
I hear stories in my riding of Essex-Windsor about businesses that operate out of basements or backyard garages and only work for cash getting their referrals for jobs by word of mouth. These businesses usually give two quotes: a quote for doing work for cash and a second higher quote which includes the proper taxes. Many individuals and businesses engage in these illegal transactions as a way to avoid paying taxes. They think all they are doing is cheating the tax department but as I said a moment ago, their actions make victims of us all.
The negative effects of activity in the underground economy show up in the form of reduced essential savings and services, taxes higher than they would otherwise be, unfair competition and a reduced standard of living for the honest taxpayer. Governments cannot afford to allow this practice to go unchallenged. People have to know that there is fairness in the tax system, that honest businesses have a level playing field and that people who try to cheat the system will be dealt with appropriately.
The government has introduced measures for addressing the underground economy to ensure there is fairness in the way in which the tax system is being administered. The Minister of National Revenue's action plan calls on Revenue Canada:
First, to encourage voluntary compliance by making clear why compliance is important and explaining the consequences.
Second, to work closely with the provinces by setting up exchanges of information to better target and improve enforcement actions.
Third, to strengthen the department's program to identify non-filers and non-registrants.
Fourth, to establish special audit teams to focus on areas of high non-compliance: construction, home renovations, jewellery, hospitality, car repairs, and other service sectors.
Fifth, to work closely with other federal departments, key industry groups and professional organizations.
Last, to explore ways including legislative changes to improve reporting, to enhance the effectiveness of penalties and to improve audit and investigation techniques.
The results of the action taken to date are significant. As of last March 31 over $860 million, over three-quarters of a billion dollars, in additional taxes have been assessed as a result of the government's underground economy initiative. I should point out that the underground economy initiative is only one part of Revenue Canada's overall enforcement efforts, efforts which generated $3.7 billion in additional taxes assessed in the 1994-95 fiscal year.
The government has also established close working relationships with a large number of associations whose members know often from firsthand experience how the underground economy can hurt Canadian business. Revenue Canada has consulted with more than 240 groups, such as the Certified General Accountants Association, the Canadian Institute of Chartered Accountants, the Canadian Home Builders Association and the Direct Sellers Association.
These groups have described how revenues and jobs are being lost. They know how businesses face unfair competition from those who do not play by the rules. Consumers lose out when they get goods and services through the underground economy since they forfeit any guarantees of quality backed by reputable firms. With their assistance, Revenue Canada is refining its strategies identifying areas of non-compliance and exploring measures for improving compliance.
In my riding the department has been in touch with the Home Builders Association and is getting information that might be useful in identifying non-compliance.
Revenue Canada also has close ties with the provinces. Co-operation arrangements are in place with all the provinces. Revenue Canada has moved beyond the simple exchange of information and the department is doing joint audits with the provinces. It is sharing audit strategies, training materials and expertise. The provinces have supplied Revenue Canada with databases containing such information as PST registrants, liquor licences, building permits and vehicle registration information as well as the names and addresses of new and used car dealers.
There is also federal and provincial co-operation in terms of ensuring that taxpayers have information to help them voluntarily comply with the law as well as information on the consequences associated with non-compliance.
For example, Revenue Canada has carried out community visits with representatives of provincial tax administrations. During these visits, businesses are given information on the underground economy and information and assistance to help them comply with the tax laws. Departmental officials also ensure that businesses are properly registered for tax purposes and when necessary, encourage businesses to comply with the law where they are not.
Across the country more than 40 community visits have been conducted involving more than 10,000 businesses. The department has increased and targeted its audits to focus on areas of high non-compliance and strengthened its ability to identify non-filers and non-registrants.
In 1994-95 an additional $245 million was assessed through the non-filer program and an equal amount through the non-registrant program. Nearly 11,000 audits were completed in the high risk sectors which resulted in a further $90 million in taxes being assessed.
Revenue Canada has increased its publicity of convictions for tax evasion. During 1994-95 there were more than 170 convictions for evasion of income tax and GST. There has been a doubling in the number of voluntary disclosures as a result and the department now receives about 19,000 referrals a year from Canadians who are tired of their neighbours and friends not paying their fair share of taxes.
Revenue Canada's preferred approach is to encourage voluntary compliance. It works. Ninety-five per cent of all revenues are collected without the need for enforcement action. A great deal has been accomplished since the Minister of National Revenue launched his action plan for addressing the underground economy in November 1993.
While the government has introduced concrete measures for addressing the underground economy, it is not exclusively the government's responsibility. All Canadians must do their part, individuals and businesses alike.
Canadians need to talk about the negative consequences of the underground economy. They must resist the temptation and simply say no. I urge members of the House to carry this message back to their constituents. I urge members of the House to work diligently with their constituents to come up with the answers.
I would like to thank the member for Mississauga South for putting forward the motion allowing us to debate an issue of extreme importance to all Canadians. The motion has forced members on both sides of the House to talk about a serious problem. I am hopeful it will eventually result in those now in the underground economy returning to the legitimate economy. I am confident that we are making the right progress in dealing with the problem.
Rose-Marie Ur Liberal Lambton—Middlesex, ON
Mr. Speaker, I am pleased to have this opportunity to make a few comments on Motion No. 382 sponsored by the member for Mississauga South.
Let me say from the outset that I have spoken with a number of people who run businesses in my riding of Lambton-Middlesex about the underground economy. Those who respect the law and pay their taxes do not appreciate having to pay higher taxes simply because others are trying to cheat the system.
Entrepreneurs and small business people who are trying very hard to make a living do not like being at a competitive disadvantage of businesses and tradespeople who ask for cash payment to avoid paying taxes. My constituents also worry over how lost revenue is affecting the government's ability to maintain Canada's social and economic programs which are so important to our well-being.
The issue that is the focus of this motion is of major importance to all Canadians right across the country. The greater the activity in the underground economy, the less revenue there is available to government. Underground economic activity creates unfair competition for honest businesses. Jobs are lost and honest taxpayers are forced to pay more than their fair share of taxes.
There has been a great deal written about the size, extent, nature and causes of the underground economy. As members are probably aware, estimates on the size of the underground economy vary widely depending upon the methodology used, anywhere from 2.5 per cent to 3 per cent of GDP to over 20 per cent, or from $20 billion to $140 billion a year. Regardless of its size, there is no disputing the fact that the underground economy exists and its corrosive efforts are exacting a huge toll on Canadian society.
Why then do people make the decision to go underground? There are many reasons. However, I would submit that none of these reasons is legitimate. There is the myth that everyone is doing it, so I may as well. There is the perception of the GST as an unfair tax which enables someone to rationalize their behaviour as acceptable. Others perceive the tax system as too complex and cumbersome to even bother with it. Then there are those who feel that it is easy to get away with it, so why not take the chance?
We have to also acknowledge a widespread disrespect for government and politicians and the accompanying perception that government is wasting the money it takes in from Canadians and that they are getting poor value for their tax dollars.
While none of these reasons can justify not paying one's fair share of taxes, the fact remains that an unfortunate snowballing effect is created once the decision is made to go underground. There is the fear that once one has gone underground, it is too difficult to come out.
There is the perception that if people have gone underground long enough, they might not be able to come out even if they wanted to because there would be no possibility to pay the taxes, let alone the interest and penalties, simply because there would be no paper trail made up of bills, invoices and so on. Faced with this set of circumstances, those who would like to reform their bad habits perceive it cannot be done. They are somehow stuck.
One of the most attractive aspects of Motion No. 382 is the provision for a limited amnesty on interest and penalties otherwise payable when a taxpayer voluntarily declares income previously undeclared. The inducement to go straight would allow the previously delinquent taxpayers to voluntarily come forward without penalty for a limited time and start paying his or her fair share of taxes once again.
Another component of the motion is a proposed tax credit to taxpayers on home improvements and renovations. This would provide an inducement to create an essential paper trail and to serve as one of the primary vehicles for a country wide information campaign.
The motion before the House demonstrates a desire on the part of the member for Mississauga South to get Canadians talking about the negative consequences of the underground economy and to hopefully find ways to encourage as many people as possible to return to the legitimate economy.
There must be a public campaign which emphasizes that tax evasion is a crime and that it is certainly not a victimless crime as is often argued. All Canadians are victims, because tax evasion leads to job loss, increase in the deficit, honest taxpayers carrying more of the burden, and legitimate businesses operating in an environment of unfair competition, sometimes leading to their bankruptcy.
I believe the co-existence of the amnesty program and the tax credit for home renovations with more traditional public awareness campaigns would serve to educate Canadians on the facts of the seriousness of the existence of the underground economy and how they can help to eliminate it. I also believe there will be a change in the attitude of Canadians toward paying their fair share of taxes if they can be convinced that government is upholding its responsibility in enforcing the law in a tough but fair fashion.
To his credit, the Minister of National Revenue, through a series of thoughtful initiatives over the past year and a half, has been successful in recovering over $800 million in unpaid taxes. But the department has done more than just collect unpaid taxes. Through
consultation with over 240 groups and associations, the department has learned how to refine its strategies, identify areas of non-compliance, and explore measures for improving compliance. For example, the government's recent budget announcement of a measure to address the problem of the underground economy in the construction industry is a direct result of its consultation efforts.
The department has increased its publicity of convictions for tax evasion. As a result, there has been a doubling of the number of voluntary disclosures. The department now receives about 19,000 referrals a year from Canadians who are tired of some of their neighbours and friends not paying their fair share of taxes.
The motion before the House demonstrates a desire on the part of members to get Canadians talking about the negative consequences of the underground economy and hopefully find ways of encouraging as many people as possible to return to the legitimate workplace within the mainstream economy.
I would like to take this opportunity to fully endorse the motion brought forward by the member for Mississauga South and I would encourage all members of the House to do likewise.
Keith Martin Reform Esquimalt—Juan de Fuca, BC
Mr. Speaker, I appreciate the opportunity to speak on this private member's bill by the member for Mississauga South. I hope his constituents will appreciate the hard work he has put into this. I know of his deep concern. Members of Parliament have all heard this concern from our constituents. Perhaps there is no concern that hits as close to the heart of every citizen in the country as what is taking place in the underground economy. I applaud the hon. member for trying to address the problem.
The underground economy is costing the Canadian economy upwards of $90 billion every year. The underground economy is a clear response from the taxpayers that they are angry and fearful. They are angry because they see more and more of their pay cheques being eroded and they receive less and less money to provide for their needs. It is becoming increasingly difficult to survive in this country. Perhaps the single most important reason for this is because of our tax structure. I will look at the reasons a little later.
The high taxes have also damaged our ability to compete internationally. For a country such as ours, which relies on our export potential to maintain our standard of living, there is perhaps no other factor within our economy that is so damaging to the ability for us to do that. We worked so hard to get agreements on the NAFTA and the free trade agreement, but we have unfortunately hamstrung the ability of businesses in the country to compete internationally. The single most important reason we cannot do it is because of the tax structure. We have seen many business go under. When I go back to my home in Toronto, I see many businesses that have been passed down from generation to generation that have gone bankrupt. The reason is partly because of the tax structure.
We see many businesses that flock south. People hold up the free trade agreement as a reason that is so, our inability to compete. The real reason most companies have actually fled south is because of the high tax structure, which strangles the ability of Canadian companies to compete internationally. We have one of the highest tax structures in the world.
Yesterday we saw that the IMF has actually downgraded our ability to get money from the IMF. The reason is because our ability to get our debt and deficit down is not good enough. The high taxes that we have are the result of the high debt and deficit that we have in this country, nothing else. It has been a consequence of course of the high spending that Canadians have endured for years and years, overspending by successive governments. This has combined with an extremely complex tax structure and high administration costs to create the terrible tax structure we have today. The result of that has been the underground economy, which is costing us $90 billion or more a year. That is why the hon. member for Mississauga South has put forth these endeavours.
I will just talk for a moment on what I agree with and what I disagree with. Part C of the hon. member's bill, which would provide a tax credit for individuals who wish to hire other individuals in their homes to do work, is a very good one. It will provide transparency in a system that is currently opaque. A good member from my community in Esquimalt-Juan de Fuca, Mrs. Shirley Wilde, put forth a similar idea. We have presented this to the Minister of National Revenue. I look forward to a response from him in the near future. I hope this is something we can work together on in this House.
I disagree with part A of his bill, the information campaign, for the simple reason that it will entail costs and expenses for the government and in fact will add to the tax burden of Canadians.
I would suggest that the government look at new ways to get our spending under control, to get the deficit down to zero, and to attack the true ogre in this equation, which is the debt. We presented our zero in three deficit reduction plan, which I hope the government will look at, because there are very sensitive but very concrete ways in which we can get our spending down so that it will not hurt the people in our country, in particular those who are most dispossessed, which is something we share a common interest in.
Second, we have to get the GST down and simplify it. When we go out to the business community, no other single complaint so irks them as the GST, a system that is unfathomable, entirely complex,
and whose administration costs chew up over one-third of the moneys that are generated.
Third, we have to decrease taxes overall. Back in 1992 the government of the day did decrease taxes. Interestingly enough, it found that its revenues increased. What did it do? It began taxing wildly. This wild taxing spree, instead of increasing government revenues, actually decreased them. There is a lesson in there for any government: decrease the taxes and the public will become more honest in their representations and will spend more. In fact, there will be a stimulation to the economy.
Fourth, I would ask the government and the Minister of Finance and Minister of National Revenue to look at the flat tax that has been proposed by our party. The flat tax will provide equanimity to all Canadians.
One of the things that make Canadians extremely furious is they feel that the more they work the less they have to take home; the harder they work, the more they give to the government. Little erodes the soil of the Canadian economy or any economy more than if a worker feels that if they work harder they are going to take home less. We have to institute the incentive factor back into the soul of the Canadian economy. Right now it is dead. Canadian workers wonder why they should work harder when they are giving more and more tax money to the government and less and less money is left for them to spend.
I would ask that we provide the Canadian people with increased earning power, with an increased ability to keep more money at home. The only we way can decrease the extent of the underground economy is to get spending by the Canadian government under control. Canadians are fed up with the overspending. We must do this not only for the future of the people in this House and our families but for future generations.
I appreciate the hon. member's introduction of this private member's bill. I hope we can look at part C of that bill to discover new ways to increase transparency in the economy we have now so we can decrease the extent of the present underground economy so there will be more money in the public coffers and fairness and greater equanimity among the tax structures we have.
We are working on this together. I hope we can come together to develop a tax structure that is fairer to all Canadians, a tax structure that provides the government with the ability to get its spending under control while providing more money for Canadians to spend.
Shaughnessy Cohen Liberal Windsor—St. Clair, ON
Mr. Speaker, I want to first congratulate the member for Mississauga South on Motion No. 382, which addresses the ongoing problem of the underground economy. The motion demonstrates his interest in the problem. It encourages debate on something that really has bedevilled the government in our attack on both the deficit and our desire to pursue and maintain our social programs, because the collection of revenues is impeded.
I hope this debate allows Canadians to focus as well on the problem and to reflect on the difficulties created by the underground economy. In my constituency of Windsor-St. Clair I hear regularly from constituents who understand the problem and who resent their neighbours who operate within the underground economy.
Cash business transactions, cheap smuggled beverage alcohol, under the table employment, and other practices of this type shortchange all of us. When we do this we do not remit taxes. The taxes themselves would help to maintain our health plans, our roads, our universities, our social programs. When we do this we help to create unfair competition for honest businesses who do remit taxes. When our neighbours do it, they help ratchet up our own tax bills.
This motion calls on the government to consider establishing initiatives to address the underground economy that exists in Canada today. A great deal has been written about this phenomenon: its size, the social and economic costs, the reasons people abandon the legitimate economy in favour of under the table transactions, and suggestions for dealing with the problem.
The issue is of concern to me and it should be of concern to all Canadians because the underground economy has significant implications for all of us. The greater the activity in the underground economy, as I said earlier, the less revenue available to governments. The creation of unfair competition for honest businesses has driven some small new businesses, marginal businesses, out of operation. This results in lost jobs and in us paying more taxes.
I agree with the hon. member for Mississauga South that Canadians must act on the problem of the underground economy. I say all Canadians because the responsibility for dealing with the issue does not rest entirely on the shoulders of the government. We all have a responsibility and a role to play. Public confidence in Canada's tax system depends on all of us paying our fair share and having the confidence that our neighbours are doing so as well.
Individuals and businesses involved in underground economic activity are not playing by the rules. Governments cannot afford to allow the practice to go unchallenged. People have to know there is fairness in the tax system. They have to know that honest businesses have a level playing field and that people who try to cheat are going to be dealt with appropriately.
Public confidence depends on effective government measures as well. It is for this reason that our government has introduced measures to address the underground economy and other forms of non-compliance. Revenue Canada has put in place a compliance strategy that supports self-assessment and voluntary compliance through assistance, education, services, and responsible enforce-
ment. It seeks to ensure that revenues legitimately owed to the government are collected. The strategy is comprehensive, covering the entire portfolio of Revenue Canada and all dimensions of revenue administration. It is also dynamic because it is sensitive to modern business practices and the changing forces at play in both the national and local economies.
It is a targeted program which makes use of modern technologies, compliance research and a cross-matching of information from Revenue Canada's extensive databases, other federal departments and provincial revenue administrations.
The department's approach also recognizes there are many different kinds of taxpayers, individuals, corporations, salaried employees and others.
The department has launched special projects as well to address areas of systemic concern, as in the case with its underground economy initiative announced by the minister of revenue in November of 1993. The department has established special audit teams to focus on construction, home renovation, jewellery, hospitality, auto sales, repairs and other service sectors which are areas of high non-compliance. Under this initiative we have put agreements into place with all of the provinces to co-ordinate actions and to ensure progress.
The government's underground economy initiative also involves working closely with business, unions, industry and professional groups to identify ways to further strengthen Revenue Canada's enforcement efforts and to encourage voluntary compliance. During the last year departmental officials consulted extensively with more than 240 groups. They know that tax evasion cheats honest workers out of steady, secure employment and compromises the ability of governments to provide service. They want to help.
Specifically I will address that part of the motion which suggests some relief or limited forgiveness on interest and other penalties which would be payable when a taxpayer voluntarily declares previously undeclared income. This section of the motion calls for an amnesty. The suggestion is an interesting one in terms of how it might facilitate the return of individuals and businesses from the underground economy to the legitimate economy. In no way, however, should it be possible for taxpayers to get away with not paying the taxes they owe. There is merit to the thrust behind the suggestion but I think there are some problems with it as it is framed here.
Opportunities already exist for Canadians who may have deficiencies in their tax reporting to come forward and get a clean bill of health from Revenue Canada. The preferred approach to non-compliance is voluntary disclosure. The department has a voluntary disclosure policy which I as a lawyer in my previous life was able to use to assist clients who had been following business and personal tax practices which did not comply with the law.
This policy allows individuals, partnerships, corporations, trusts, non-profit organizations, charitable and other organizations to come forward to correct deficiencies in their reporting to the department. When a disclosure is made voluntarily before the department has started its audit or other enforcement action, then no penalties or other sanctions such as prosecution for tax evasion will be imposed. The taxpayer will have to pay the amount of taxes or duty owing plus interest. This is a fair policy. It is a form of amnesty which has been available for some time.
I do not agree, however, that interest should be set aside. The interest owed reflects the true value of the money. It also recognizes the fact that those who have not paid their taxes on time have had the use of these funds, which essentially they were holding in trust for the government.
Revenue Canada under its voluntary disclosure policy takes a responsible approach to collections. Arrangements can be worked out so that the taxes owing to the government are paid in a manner which does not cause undue hardship for the taxpayers. This aspect is particularly important to those individuals or businesses operating in the underground economy for some time that feel they would face onerous penalties if they were to come clean and operate honestly.
A person can make a voluntary disclosure by contacting a Revenue Canada office directly or by having someone do it on their behalf, such as an accountant, a lawyer or a friend who wants to assist. A disclosure will be considered voluntary so long as it is made before Revenue Canada has basically started its audit or any other enforcement action.
As a result of co-operative agreements Revenue Canada has with the provinces, we are working toward developing a co-ordinated voluntary disclosure policy with all of the provinces. It is our view that a consistent policy among the federal and provincial governments with respect to disclosure will make it easier for taxpayers who have decided to rejoin the legitimate economy.
I believe we need to be careful about tax amnesties. When tried in the past, more extensive tax amnesties than what are available under the voluntary disclosure program, they have had only limited effect. They may actually create more non-compliance. This happens because people believe that once an amnesty is in place others will follow and so they can wait and delay co-operation. The result is less compliance, not more.
People also believe that when there is an amnesty policy in place that will forgive interest it becomes their right to avoid paying interest on taxes.
A great deal has been accomplished since the Minister of National Revenue introduced his action plan for addressing the underground economy. The initiative has resulted in more than $860 million in additional taxes assessed. Revenue Canada's ability to identify non-filers and non-registrants has been strengthened. The department has put co-operation agreements in place with all of the provinces and is working in partnership with private sector groups.
It is clear Canadians are concerned about the underground economy and that Canadians are willing to work together to find solutions. I thank the member again for this motion. I congratulate him on it because it demonstrates a desire on his part and on the part of his constituents to get Canadians talking about the negative consequences of the underground economy and to find ways of encouraging as many people as possible to return to the legitimate economy.
Gurbax Malhi Liberal Bramalea—Gore—Malton, ON
Mr. Speaker, I will make a few comments in support of Motion No. 382, sponsored by the member for Mississauga South.
We as as government are asking people to make significant sacrifices in the name of deficit reduction. I believe most Canadians understand the seriousness of the situation and are prepared to make these sacrifices.
While they may grumble about taxation, Canadians in general are quite prepared to contribute a fair portion of their income in return for the services they want. They have made it very clear the services they want include medical care, solid infrastructure and transportation systems, safe communities and income security for all Canadians.
However, I also believe they are fed up with seeing their hard earned money wasted over the years in ways they never counted on. They want us to spend their money the same way they spend it, carefully, thoughtfully, with due consideration of what it took to earn the money in the first place. That expectation is fair because after all it is their money.
The public is watching us very closely. When it hears of lavish spending or wasted funds at any level of government, federal, provincial or municipal, its confidence in all governments is eroded.
We as a government recognized this right from the start and have taken many steps to ensure that taxpayers get their money's worth. This is extremely important and I urge all members to keep up their vigilance in this area.
When people see government as a black hole, sucking their money in and giving nothing back, they tend to wonder why they should pay tax on that kitchen renovation or that load of gravel.
For many individuals and businesses participating in the underground economy it has become a convenient way not only to avoid paying taxes but to take some small action against what they see as governments they do not trust placing unfair burdens on them.
They may feel their financial situation justifies their actions. It may be several years since their last pay raise or even their last regular pay cheque. They may have lost their previous job because of government cutbacks or downsizing. They may feel the tax system is too complex or unfair.
Whatever the reason, it is of paramount importance they come to understand the damage they are doing to the economy of the country and ultimately to themselves. Estimates on the size of the underground economy vary widely depending on the methodology used from $20 billion to $140 billion a year.
Even if one were to assume the lower figure is more correct, that is still $20 billion not available to governments to provide necessary services for their taxpayers.
Underground economic activity creates unfair competition for honest businesses, jobs are lost and honest taxpayers are forced to pay more than their fair share of taxes, and once again they feel cheated. It is a vicious cycle and people must understand the underground economy makes victims of us all.
We in the House as well as all Canadians must consider the real cost of underground economic activity. This cost is huge. It shows up in reduced essential services, taxes that are higher than they would otherwise be, unfair competition and a reduced standard of living for the honest taxpayer.
How does the underground economy affect the legitimate business person trying to be competitive? Right from the start honest business people are at a competitive disadvantage because they cannot offer a customer the same deal offered by someone who will do the work but not collect the taxes. The end result is that the legitimate business person faces unfair competition and jobs are lost.
The consumer who takes the lower price and pays cash must understand that he or she is cheating the system and becoming party to the evasion of taxes. They must come to understand they are benefiting from the full range of government services but that by engaging in the underground economy they are no longer paying their fair share. They are taking part in a transaction that
jeopardizes our health, education and other essential economic and social services.
The motion before the House suggests the government educate the public and encourage its participation in addressing the problem. I support the suggestion wholeheartedly. Canadians need to know the facts about the seriousness of the underground economy and what can be done to reduce it.
The government has recognized this essential truth and has made education a fundamental element of its action plan to address the underground economy.
During the past year officials of Revenue Canada have been actively consulting with individuals and associations across Canada.
With the Canadian Institute of Chartered Accountants, for example, the department established a working committee to investigate the causes of the underground economy, examine audit techniques and identify training that would assist in tracking down unreported or under reported income and identify opportunities for reducing the cost and administrative burden of compliance for businesses and individuals.
These groups are taking the message of the risks of dealing in the underground economy back to their membership. The message is simple: Every citizen and every business has a role to play in eliminating the underground economy. Individuals can start by refusing to deal with businesses and tradespeople who ask for cash payments. Businesses can do their part by turning down demands to do work off the books.
The increased publicity given this problem by the minister of National Revenue is having an effect. The number of voluntary disclosures where people come forward to voluntarily correct their tax affairs has doubled in the past year. The member's suggestion that a limited amnesty on interest and penalties be offered to taxpayers who voluntarily declare income previously undeclared is a good one and will result in even more honest Canadians coming forward.
I am confident that we are making progress in dealing with the underground economy and other forms of tax evasion. I applaud the member for Mississauga South for his efforts to stimulate discussion on the issue. I urge members of the House to carry the message back to their constituents.
We in government have recognized that we must take positive action to restore respect, trust and confidence in government and we are doing our part. I urge members to talk to their constituents about the underground economy, its seriousness and how it can be reduced. I urge Canadians to do their part to discourage this harmful activity.
Underground EconomyPrivate Members' Business
The Acting Speaker (Mr. Kilger)
This brings to a conclusion the debate on Private Members' Motion No. M-382.
Is the House ready for the question?
Underground EconomyPrivate Members' Business
The Acting Speaker (Mr. Kilger)
Is it the pleasure of the House to adopt the motion?
Underground EconomyPrivate Members' Business
The Acting Speaker (Mr. Kilger)
Motion carried on division.
Motion agreed to.
A motion to adjourn the House under Standing Order 38 deemed to have been moved.
Antoine Dubé Bloc Lévis, QC
Mr. Speaker, I wish to go back to an answer I deem unsatisfactory which the Minister of Human Resources Development gave to a two-part question on unemployment insurance and training I put to him during question period on September 28.
In his reply, the Minister of Human Resources Development made a comment which I would describe as somewhat improper in that he responded, not accepting my position with respect to training, that:
-there is something the matter with the hon. member. I have a letter he wrote me asking for my support in a youth project sponsored by the federal government in his riding. I am very pleased to say I would certainly like to give him the assurance of supporting that project if he can give me the assurance of supporting the no vote on October 30.
Antoine Dubé Bloc Lévis, QC
As my colleague for Kamouraska-Rivière-du-Loup suggests, totally unacceptable because this shows a contempt for democracy.
Yet the Minister of Human Resources Development is an experienced parliamentarian. A parliamentarian who has been in opposition for at least nine years. For nine years, and I have read and reread many of his speeches, he has been severely critical of the accomplishments of the Conservative government, as it was his role to do. I find no fault with that. When he was in the opposition, it was his role to criticize government programs.
In this case, he refers to one letter, yet the next day the parliamentary secretary indicated to me that there was a second letter on two projects. As for the projects in question, there was a project sponsored by Ateliers Jeunesse in my riding, a project
called JET created to set up a part time job bank for high school students. It had nothing whatsoever to do with training.
The next day, the parliamentary secretary, substituting for the minister, mentioned another project connected with Youth Service Canada. Sure, I criticized Youth Service Canada, but this was for an incubator program. My complaints about Youth Service Canada were about the fact that the training components contradicted of Quebec's policy on manpower training.
I was consistent in supporting the project submitted under this program because there was no manpower training component. The emphasis was more on an incubator program to help young people create their own business.
I would have a lot more to say about this, but since there is so little time, I would say it is a matter of principle. As I see it, this is blackmail, an attack on our democratic system.
I was elected by the people of my riding to represent them. That was my purpose when I sent projects to the minister for his approval. Now he asks me to support the No side, and if I do, he will approve this project. That is unacceptable.
If it were an isolated incident, I would say it was just a slip of the tongue. In that case, the minister should have said: "Listen, I spoke without thinking. That is not what I meant". But the next day he was not in the House, and he let his parliamentary secretary answer instead, who proceeded to criticize my criticism of this program.
I think that is unacceptable, especially in the present circumstances when comments of this kind keep cropping up. For instance, in a secret document prepared by Industry Canada, companies were listed according to their political allegiance, to see whether the project should be funded.
I think that is unacceptable. I am making this speech today within the precincts of the House of Commons, where we meet as democratically elected representatives. I invoke the right we have in this House to demand that this be rectified, that members opposite on the government side stop their blackmail, because we will not tolerate this.
Thank you, Mr. Speaker, for giving me this opportunity. It seems no one will bother to respond. Very democratic indeed.
Ronald J. Duhamel LiberalParliamentary Secretary to President of the Treasury Board
Mr. Speaker, first of all I would like to point out that the Minister of Human Resources Development was rather surprised at the support shown by the hon. member for Lévis for a Youth Service Canada project in his riding.
This was the same member who had previously said Youth Service Canada was an invasion of provincial jurisdiction. It is therefore difficult to account for the enthusiastic support shown by the hon. member, considering his opinion of federal initiatives.
Nevertheless, as the Secretary of State for Training and Youth pointed out to the hon. member in a letter dated September 5, 1995, the proposal is still quite interesting, but we need a few details.
The promoter, Alliance-Jeunesse, was asked to revise its proposal, and the Youth Service Canada secretariat offered to send one of its representatives to provide assistance. As soon as we receive the proposal, I can assure the hon. member it will be processed immediately.
Meanwhile, I think the hon. member will be pleased to hear that the minister has already provided a great deal in the way of employment assistance in his riding. In fact, according to the latest figures, those available for 1994-95, assistance for residents in the riding of Lévis totalled $7.7 million. That is a very substantial amount.
This would seem to argue against the assumption of the hon. member that the minister allocates funding on the basis of the way the member for the riding voted or intends to vote.
Clearly the hon. member's allegation has no basis in fact.
Geoff Regan Liberal Halifax West, NS
Mr. Speaker, today in question period I asked a question about the share of spinoffs from Canadian international development aid that goes to Quebec. From what I have heard over the past few weeks in question period from Bloc Quebecois members, it seems they cannot decide whether or not they want the federal government to spend money in Quebec.
The Bloc claims that Quebec would be better off outside Canada in a separate country. However the facts and even the reports put out by the Parti Quebecois government in Quebec show that is not true. They show that Quebec is much better off inside Canada than it would be as a separate country.
One example of those kinds of facts is the case of international development aid.
For the year 1992-93, the last year for which provincial comparisons were made, nearly 30 per cent of IDA supplies came from Quebec. One third-which means 33.4 per cent-of registered consultants are from Quebec. More than one third-which means 36.3 per cent-of the contracts go to Quebec. The value of these
contracts-a little less than $100 million-represents about one third or 33.1 per cent of the national total.
It is very clear that with approximately 25 per cent or a little less of the population of Canada or about one-third of these contracts in relation to international aid, Quebec does very well under the CIDA programs and under programs relating to international aid.
On the other hand, in the past at least, Atlantic Canada has done so well. Atlantic Canada in recent years has received less than its share of international development aid spinoffs. We are seeking improvements in that regard.
I had the pleasure of serving on the foreign affairs committee until recently when I was moved to the justice committee. Last spring we had the president of the Canadian International Development Agency before our committee on the estimates. I had the opportunity to question her about a number of things. One of the matters I asked her about was the share of development aid contracts and spinoffs going to the Atlantic region. She agreed that there needed to be work done to improve that number. She recognizes or should recognize that Atlantic Canadian companies can perform as well as anyone else. I think we showed during the Halifax G-7 meeting that Atlantic Canadians can do things as well as anyone in the rest of the country and in fact the rest of the world.
I am looking forward to seeing the results of this year. I am hoping to see considerable improvements in regard to the level of the share of CIDA contracts going to Atlantic Canada.
Atlantic Canada has other complaints in other areas where we feel we do not necessarily always get our share. However we believe very strongly in the country. I think the majority of Quebecers believe strongly in the country; they believe strongly in Canada. Like the majority of Quebecers, we believe we can continue to work together to work out our problems. We can continue to improve and build Canada, the best country in the world.
Ronald J. Duhamel LiberalParliamentary Secretary to President of the Treasury Board
Mr. Speaker, all of Canada's regions, without exception, benefit from the spinoffs of the official development assistance budget. The Government of Canada is not shy about drawing on the know-how of Canadians, who have both the necessary skills and the desire to contribute to the growth of a developing country.
Quebec has a wealth of such skills. It has always been committed to helping the most disadvantaged peoples. The Government of Canada is fully aware of this and regularly draws on this knowledge and goodwill in carrying out its assistance program.
This is how a number of Quebec companies have obtained contracts from the Canadian government enabling them to export their know-how. Permit me to name a few whose contribution is well known. They include the Société Vitronov of Montreal, which this year won the award of excellence from the Canadian Exporters' Association for an innovative project in biotechnology in Morocco. Other companies include SR Télécom, ADS Associés, Tecsult, to mention but a few.
The fact is that Quebec receives much of the spinoffs of Canadian ODA. Nearly 30 per cent of ODA procurement is done in Quebec. More than a third, 36.3 per cent, of contracts are concluded in Quebec.
Of the 45,000 jobs created in Canada by official development assistance, over 12,000 are in "la belle province".
Like other Canadians, Quebecers are opening up more and more to the world. They understand, as the century draws to a close, that the planetary stakes are so high we must pool our resources and strengthen existing partnerships.
The ODA program tries to resolve problems that present a real threat to security, both in Canada and in the rest of the world. The Government of Canada intends to continue to draw on Quebec know-how in helping to make the world a richer and a fairer place.
Underground EconomyAdjournment Proceedings
The Acting Speaker (Mr. Kilger)
Pursuant to Standing Order 38, the motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 10 a.m., pursuant to Standing Order 24.
(The House adjourned at 6.47 p.m.)
