House of Commons Hansard #155 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was budget.

Topics

Points Of OrderRoutine Proceedings

12:15 p.m.

Some hon. members

Agreed.

Points Of OrderRoutine Proceedings

12:15 p.m.

The Deputy Speaker

I understand the hon. member for Kamloops has a petition. I do not think anyone will object if we revert to petitions.

PetitionsRoutine Proceedings

12:15 p.m.

NDP

Nelson Riis NDP Kamloops, BC

Mr. Speaker, I am pleased to present a petition on behalf of the residents of Logan Lake, Kamloops and Ashcroft, all in British Columbia, who draw to the attention of the House the importance of Canada's mining industry.

They make a number of very forceful points which I will not repeat here. They are simply calling upon Parliament to take action that will increase employment in the mining sector, promote exploration for the mining sector, rebuild Canada's mineral reserves, sustain our mining communities, and essentially keep mining in Canada.

The House resumed consideration of the motion that Bill C-59, an act to amend the Income Tax Act and the Income Tax Application Rules, be read the third time and passed.

Income Tax ActGovernment Orders

12:15 p.m.

NDP

Nelson Riis NDP Kamloops, BC

Mr. Speaker, I appreciate having an opportunity to speak on the tax legislation at third reading. Essentially it is tax reform.

As my hon. friend from Vancouver South indicated in his presentation, there is an effort here at tax simplification as well, but we have a long way to go. This multi-volume treatise is an effort at simplifying the tax system. Imagine the size of the Tax Act of Canada and the appropriate regulations and interpretations that would go with it. It would stand two or three feet on the desk.

I am going to simply read a small portion to raise the question: Does this actually simplify our tax system or not? I am reading from page 46, number 7:

Subsections (1), (3) and (4) apply to dividends received after February 21, 1994 other than dividends received before 1995 in the course of a reorganization that was required on February 22, 1994 to be carried out pursuant to a written agreement entered into before February 22, 1994, except that, in applying the act to dividends received before June 23, 1994 to which subsections (1), (3) and (4) apply,

(a) Paragraph 55(3.1)(b) of the act, as enacted by subsection (4), shall be read as follows:

It goes on:

(b) The act shall be read without reference to paragraphs 55(3.1)(c) and (d) and (3.2)(c) and (e) as enacted by subsection 4.

Page 48, number 8:

Subsections (2), (5) and (6) apply to dividends received after February 21, 1994, other than dividends received as part of a transaction or event or a series of transactions or events that was required on before February 22, 1994 to be carried out pursuant to a written agreement entered into before February 22, 1994.

17.(1) Subsection 67.1(1) of the act is amended by replacing the reference to 80 per cent with a reference to 50 per cent.

(2) Subsection 1 applies to expenses incurred after February 21, 1994 in respect of food and beverages consumed and entertainment enjoyed after February 1994.

18.(1) Subparagraph 70(5.1)(d)(ii) 2 of the act is replaced-

I could go on. And this is an effort at simplification. I cannot imagine anybody without some superhuman mind, with multiple degrees in logic being able to even pretend that they follow this.

Is it any wonder our tax system is so abused? By abused I refer to the many people who have lost complete faith in the tax system as being any kind of a fair system, a just system, an equitable system. They simply interpret every one of these sections to their advantage in the hopes there will not be an audit. Because of the cutbacks in Revenue Canada obviously there are very few auditors auditing out there, and if you are audited, you can challenge the interpretation.

When my friend from Vancouver South says the government has taken major steps in clarifying and simplifying the tax system, I am not certain what section he is reading because it is certainly nothing I have ever read in this area.

The hon. member goes on today as a result of this legislation to comment on the reduction of the business entertainment deduction from 80 to 50 per cent. The Minister of National Revenue confirmed today that escort services have traditionally been included as a legitimate business expense under the act, which raises a few questions just on its own terms. However, that deductibility will be reduced from 80 per cent of the escort service cost down to 50 per cent.

Because of the public furore the tax department has said it is going to redefine that. The escort services that you see listed in a telephone book will be disallowed. However if the escort service is considered to be a bodyguard, a tour guide, or an interpreter as the Minister of National Revenue confirmed today, of course they would be legitimate deductions.

I can see accountants becoming quite creative in the use of those terms to allow that business expense to continue. I could go on and on with all sorts of illegitimate uses. They would not be illegal because again, as long as an escort service is considered to be an interpreter or a bodyguard, it is a legitimate expense.

In the spirit of fairness, surely there must be some distinction when it comes to business entertainment deductions. There is a difference between a number of individuals getting together over lunch or dinner to discuss a business transaction or some aspect of carrying out their business, and some lavish entertainment where folks are visiting a number of posh clubs and wining and dining at extravagant prices. Again a certain amount of that tab is being picked up by the general taxpayers of the country. I simply point that out as one of the problems with a section of this bill.

The member for Vancouver South gives us the impression that major steps have been taken to bring fairness back into the system. However, I do not think any step at all has been taken but to put some difficulty on those individuals who are carrying out a legitimate business transaction over a business lunch.

Other than that in Bill C-59, I want to also mention the reference made by a number of speakers about the tax revolt which is taking place and the fact that people are calling for, predicting or suggesting there is bound to be a tax revolt if the minister raises taxes. There already is a tax revolt under way.

That tax revolt has been in place for many years. It is called the underground economy. People have simply said that they have have lost faith in the tax system. They are going to conduct as much business as possible underground, under the table where it is then obviously unreported and by definition, untaxed.

To what extent does this underground economy exist? Obviously there is no accurate figure, but from my study of this issue, the lowest amount I have ever come across is about $40 billion in annual business transactions and the highest has been $120 billion. I am not here to say that either one of these extremes is accurate. Regardless, it is a substantial amount of money and my guess is that it is probably even higher than these estimates would suggest.

Is there anyone in the country these days who in some form is not participating in the underground economy? I say that not suggesting anybody here or anywhere is willfully breaking the law. I refer to our neighbours to the south. Whenever President Clinton is trying to appoint someone to some official capacity under the scrutiny of Congress eventually or inevitably it is pointed out that they have participated in the underground economy by paying a nanny cash or buying wood for cash from somebody for their fireplace or participating in some barter aspect. It has become almost a Canadian way of life.

I notice that now when you walk into almost any book store in Canada right, front and centre some of the best sellers are on how to avoid tax. I noticed one the other day in which the person said forget it, leave Canada and live in the Cayman Islands and transfer everything right offshore. He has given up totally on even trying to come to any realistic approach to the tax system.

In the press today I thought were some very interesting comments. Neville Nankivell, writing under the title of nation's business for the Financial Post , reports that presently there are about $6.6 billion owed in unpaid taxes. These are simply individuals or companies that have agreed that they owe these taxes and will pay them in due time and are presently paying a penalty. There is another $2.7 billion tied up in tax appeals before the courts.

There we have $9.3 billion sort of sitting there that probably will end up one day in the treasury but this does not include all those who are simply tax evaders. Unfortunately there are increasing numbers of those folks.

For the under reporters, that is the underground economy, we might be talking here if this were to be taxed at some nominal rate at between $10 billion and $30 billion.

In other words, what this tells me, and perhaps I am naive in this interpretation, is that if we had a decent, fair and just tax system, and the economy were brought from underneath the table on to the top of the table and taxed at some realistic level, that would be the entire deficit paid down just from the additional revenues from a fair and honest system of doing business in the country.

That is a bit of a wish list but it does point out the incredible extent of the underground economy and what that is doing in terms of the future of the country regarding our debt and deficit pay down.

In the last moment or two remaining I do want to mention one aspect that I think is causing a great deal of concern to the public generally and that is the possibility of taxing dental and health plans that employers contribute to and so on.

I know this would generate a lot of money in terms of the government. So many people now have access to decent health care, I am thinking particularly of the preventative kind, certainly decent dental care and the only way that is available to them is as a result of these company plans. To tax those plans, as so many people have indicated, would obviously mean that a number of people, and unfortunately large numbers of people, would simply have inappropriate dental and health care.

I cannot imagine any member standing up and suggesting that a tax be levied on these kinds of health care plans and dental plans.

I also want to draw the attention of the House to an article in the paper the other day mentioning the whole matter of those folks who are selling property in the United States and are going to have a tax credit here in Canada. I raised this in the House with the Minister of Finance. I said that if a person is selling property in the United States over $600,000 in U.S. assets, should we be providing tax credits for that here in Canada? In other words, should we be encouraging people to buy and sell property in the United States?

I know the Minister of Finance had an explanation for this. I suppose he could have an explanation for even deducting escort services on our tax and so on. The point is as we struggle to come up with a reasonable tax system I notice in the press yesterday a whole number of what I would call tax experts are saying that this provision is simply wrong.

I am not referring to members of Parliament from most political parties who have been critical of this. People who are knowledgeable about the tax system are now saying that this whole aspect of a tax arrangement between Canada and the United States that allows Canadians selling their assets in the United States over $600,000 to receive tax credits here in Canada is simply wrong.

I would support that notion and raise this today to flag the incident for the Minister of Finance as something to consider when he introduces his budget in a few days.

While these changes in the bill before us do make the tax system somewhat more equitable, we have a long way to go. In terms of making it more simple so people have some hope of understanding it, I would ask any member to sit down for five minutes and pick any page out of this attempted simplification to see if they can understand that page. If they can, I would have to admit they are a better person than I when it comes to understanding detailed tax matters.

In closing, a lot of work has yet to be done. I appreciate that this is a small step toward improving the tax system but I would emphasize that it is only a very small step. For that reason my party will be voting against the bill at third reading.

Income Tax ActGovernment Orders

12:25 p.m.

The Deputy Speaker

Is the House ready for the question?

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12:25 p.m.

Some hon. members

Question.

Income Tax ActGovernment Orders

12:25 p.m.

The Deputy Speaker

Is it the pleasure of the House to adopt the motion?

Income Tax ActGovernment Orders

12:25 p.m.

Some hon. members

Agreed.

Income Tax ActGovernment Orders

12:25 p.m.

Some hon. members

No.

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12:25 p.m.

The Deputy Speaker

All those in favour will please say yea.

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12:25 p.m.

Some hon. members

Yea.

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12:25 p.m.

The Deputy Speaker

All those opposed will please say nay.

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12:25 p.m.

Some hon. members

Nay.

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12:25 p.m.

The Deputy Speaker

In my opinion, the yeas have it.

And more than five members having risen:

Income Tax ActGovernment Orders

12:25 p.m.

The Deputy Speaker

Pursuant to Standing Order 45(6), the recorded division stands deferred until 6.30 p.m. on Monday, February 20, 1995.

Income Tax ActGovernment Orders

12:25 p.m.

Liberal

Don Boudria Liberal Glengarry—Prescott—Russell, ON

Mr. Speaker, I think you would find unanimous consent to further defer the vote until Tuesday at 5.30 p.m.

Income Tax ActGovernment Orders

12:25 p.m.

The Deputy Speaker

Is there unanimous consent?

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12:25 p.m.

Some hon. members

Agreed.

Income Tax ActGovernment Orders

12:25 p.m.

Liberal

Don Boudria Liberal Glengarry—Prescott—Russell, ON

Mr. Speaker, I think you would find unanimous consent to call it the time of adjournment.

Income Tax ActGovernment Orders

12:25 p.m.

The Deputy Speaker

Is there unanimous consent?

Income Tax ActGovernment Orders

12:25 p.m.

Some hon. members

Agreed.

Income Tax ActGovernment Orders

12:25 p.m.

The Deputy Speaker

It being 12.33 p.m., the House stands adjourned until Monday at 11 a.m.

(The House adjourned at 12.33 p.m.)