Mr. Speaker, I welcome this opportunity to speak on behalf of the Bloc Quebecois to the income tax bill before the House today. This legislation implements measures announced by the minister in his budget on February 22, 1994, almost a year ago.
The Bloc Quebecois was opposed to the bill on second reading and in committee, and its position has not changed. Granted, we did find a number of positive measures in the bill. These include, for instance, the decision to extend provisions allowing first-time homebuyers to use their RRSP funds; measures to increase the value of the charitable donations tax credit; and incentives for mining companies to engage in mine reclamation, although at this level, the government is not exactly applying the principle "the polluter pays".
The Bloc also welcomed the proposal to reduce the percentage of meal expenses recognized for tax purposes from 80 per cent to 50 per cent. As you know, companies may deduct meals as part of the cost of doing business, and reducing the percentage of such expenses from 80 per cent to 50 per cent is at least a first step. These are some of the positive aspects we see in the bill, but there are negative aspects the Bloc cannot accept.
This morning, I will focus on three specific points. The first one is the reduction in value of the age tax credit; the second concerns the reduction or elimination of tax credits for regional investment; and the third concerns the inadequacy of measures aimed at curtailing certain tax avoidance techniques.
As far as the age tax credit is concerned, the Bloc Quebecois presented an amendment that was defeated in the House, an amendment rejecting a provision in the bill that reduces the value of the age tax credit for persons 65 and over. The reduction concerns people with net incomes between $25,000 and $50,000. The age tax credit for these people will be reduced. For some people these amounts mean a lot, since it works out to a federal tax reduction of $610, while at the provincial level, it adds up to $950. That is a substantial reduction.
Of course, our friends across the way told us this would not affect seniors in need, those with an income of $25,000 or less. In fact, this hits the middle class. Once again, the government is hitting the middle class, and that is why the Bloc Quebecois objects to this provision.
So who is affected? People who worked all their lives and accumulated a pension fund and did everything they could to provide for decent incomes for their retirement. These people had a deduction. It was a form of recognition. It was like saying: You are people who helped to build Canada or Quebec, people who worked all their lives to enjoy decent incomes for their retirement. They were entitled to a tax credit of $3,482, and 17 per cent of that worked out to the amounts I mentioned earlier. As a result of the bill before the House today, this tax credit will be eliminated.
Certainly, in the case of people with incomes of perhaps $60,000, $70,000 or $80,000, we could understand abolishing the tax credit. However, in the case of people earning $28,000, $30,000, or $35,000, we do not believe it is right to reduce the benefits they enjoyed under the old legislation. Certainly the government is saving money with this measure. It is expected to save $170 million in 1995-96, but this is $170 million once again saved on the backs of the middle class. At some point, the Canadian middle class will have had enough of always paying taxes and not always getting the necessary benefit or the necessary recognition from society.
As we have already spoken at length on this matter, I am going now to deal primarily, in the second part of my remarks, with the disappearance of the regional investment tax credit. You know that Canada used to offer benefits in the form of tax credits to people who invested in certain parts of the country, primarily the Atlantic provinces, the Gaspé Peninsula, and certain northern regions.
There was a special investment tax credit. It was a 30 per cent tax credit for eligible investments in machinery, buildings, and new equipment for manufacturing and production purposes. This tax credit has been eliminated. Another tax credit is also affected. It is the Atlantic/Gaspé tax credit. It was a tax credit of 15 per cent, again for buildings, machinery, and equipment to be used in resource development. This tax credit has been reduced from 15 per cent to 10 per cent. The third tax credit affected is the scientific research and experimental development investment tax credit. It is a 30 per cent tax credit, again in the Atlantic region and the Gaspé, and has been reduced to 20 per cent, the level for all the other regions. This means that the Atlantic region and the Gaspé have lost the benefits they enjoyed under the last budget.
These measures affecting tax credits will mean a saving of $90 million for the government in 1995-96 and of $95 million in 1996-97. The most ironic part of all of this is the reason given by the finance minister in his budget plan of last February and in the budget document entitled "Tax measures: Supplementary Information". His budget plan indicates, and I quote, "These credits have not been effective in attracting new investments to designated regions or reducing economic disparity". The document entitled "Supplementary Information" states in regard to the budget: "Regional investment tax credits have not generally been considered to be cost effective".
Basically, it says that these tax credits did not have a very high level of effectiveness and are not an effective means of attracting investments. So we would have expected the minister to completely eliminate these tax credits because they are not effective, but this has not happened. One tax credit has been eliminated, the tax credit for investment in the Atlantic region, and the tax credit for investment in scientific research has simply been reduced. In other words, the minister admits that he will still offer tax credits in certain regions of Canada. The minister is aware of their lack of effectiveness, but goes ahead all the same.
The Bloc Quebecois has denounced this measure and has asked that moneys earmarked for regional investment be redistributed to the provinces instead as a tax percentage. Why? It is because in Quebec, we think that decision making and regional investments should be decentralized so that local decision makers and people in the regions can identify their needs and take measures suited to their regions.
The Canadian government does not do this. It refused to redistribute these amounts among the provinces and maintained national standards, giving the credit to everyone while admitting that all this is inefficient. This is yet another illustration of the Canadian problem, that is, putting everyone, every citizen and every province on the same footing and ensuring uniform distribution everywhere before realizing that this is very costly and inefficient but continuing to do so anyway. One does not have to look very far to see that this is the reason why Canada does not work.
The third reason why we oppose this bill is the measures designed to counteract some tax avoidance strategies. This bill proposes measures to ensure that some individuals and corporations can no longer avoid taxes. These measures are quite timid. There are measures intended to eliminate preferential tax rates for large corporations, to make corporate taxes more equitable, to provide special rules for taxing foreign corporation shareholders.
Looking at all this, we ask ourselves are they trying to catch those who do not pay taxes in Canada, who establish phoney companies abroad and who, through various tax schemes, manage to avoid taxes. Reading this, we might think that such is the case, but we would be mistaken. These measures do not affect family trusts or the use of tax havens and are not designed in any way to institute a minimum corporate tax.
A lot has been said about family trusts. What are they exactly? A family trust is a tax measure allowing great wealthy families to avoid paying taxes on capital gains on assets.
It is money on which no taxes are collected because it was put in a trust. And this remains the case for a long time. An amendment to that provision was proposed in 1992 by the Conservative government. Under that legislation, the money in a trust was exempt from taxes until the death of the last beneficiary of that trust. In some cases, that could take up to 80 years.
The Bloc Quebecois pledged to fight for the elimination of that provision, which allows tax avoidance. We discussed the issue at length in this House. We do not see, in the current budget, any step to abolish that tax loophole.
We are talking about hundreds of millions every year. We do not know exactly how much money is involved. To find that out, we would need a special bill to allow Revenue Canada officials to tell us exactly how much money is involved. What is the government waiting for to pass such legislation and to abolish that provision in the Income Tax Act?
Let us now look at tax havens. We have an idea of what goes on. The auditor general raised that issue in 1992. This is not a figment of the imagination of a demagogic opposition party. The auditor general himself told us that several major Canadian corporations somehow manage to avoid paying taxes in Canada. The losses in tax revenues are said to be in the hundreds of millions.
We know the process. Some companies establish or use subsidiaries in countries where tax rates are much lower than in Canada. They can do so because Canada signed tax conventions to avoid double taxation for corporations and individuals conducting business in those countries.
The auditor general is strongly opposed to such tax treaties. Currently, 16 such conventions are said to be in effect. There is nothing wrong with these countries, but we wonder why Canada signed such treaties, if not to promote the self-interests of people who want to avoid the payment of taxes. These countries include Cyprus, Malta and Papua New Guinea. It is not a foregone conclusion that Canada's trade with these countries justifies the signing of such conventions, but these treaties were concluded.
The auditor general also denounced another more subtle process. Some companies can deduct, from their payable taxes, the interest on loans contracted in Canada for foreign investment purposes. In other words, Revenue Canada is financing investments abroad. This is unbelievable.
Another provision regarding tax havens that must be revisited is tax avoidance. In 1992 the auditor general again asked the government to amend the act to prevent Canadian companies with subsidiaries abroad from using these subsidiaries' annual losses to reduce their taxable income in Canada. They lose money outside of Canada and can deduct these losses in Canada.
How could a Canadian company or a multinational that is in the slightest way on the ball not be tempted to create bogus companies outside of the country? How can these companies resist the temptation to reduce their Canadian taxes, to make foreign investments and to claim a deduction for the interest on those investments? It is an open invitation that the Bloc Quebecois decries. The Bloc denounces such things and would like to see all countries treated equally.
The Bloc Quebecois calls for an end to flags of convenience, to freebies for big business that allow them to avoid paying tax. Many large businesses pay no taxes. Indeed, a Liberal member, the member for Gander-Grand Falls, told us last October that according to his research, 77 companies with over $25 million in profits did not pay any tax in Canada.
They do not pay any tax because they can make deductions, they can make money out of the country, they can search for deductions. What do you think people over 65 years of age who earn $30,000 and are seeing their age credit taken from them have to say when they see big multinationals and prosperous companies that turn a profit get away without paying any tax?
They say that honest taxpayers are being picked on again, and that those with means, who are rich, who can make representations and can lobby have access to provisions in income tax laws which allow them to avoid paying their fair share. The Bloc will not stand for this.
I would like to add, before closing, not to take advantage of your kindness, that the budget and perhaps this bill should have contained other measures regarding the whole issue of business subsidies.
Everybody tells us that their economic effectiveness is debateable. The Bloc Quebecois has demanded that a good part of these business subsidies, which amount to approximately $3.3 billion in Canada, be cut. We asked for a reduction in defence spending totalling $3.2 billion over two years. We asked the government to stop investing in the Hibernia group in Newfoundland. We asked for a real minimum tax on the profits of large corporations, because the strategy of these corporations is to reduce their profits for the current fiscal year by subtracting any losses they may have incurred in previous years, so they do not have to pay taxes on those profits.
In fact, we asked Revenue Canada to do what it has to do to get the $6.6 billion owed to the federal treasury. The auditor general said in his report that a large percentage of this money could be recovered. In other words, before reducing the incomes of senior citizens and cutting social programs, the government should go out and get the money owed to the treasury. To put it bluntly, that is part of the mandate of the Minister of National Revenue.
For all these reasons, the Bloc Quebecois will vote against Bill C-59, because it contains measures that are inadequate and do not deal with the real problems of tax collection in Canada.