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

Income Tax ActGovernment Orders

10 a.m.

Etobicoke North Ontario

Liberal

Roy MacLaren Liberalfor the Minister of Finance

moved 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

10 a.m.

Vancouver South B.C.

Liberal

Herb Dhaliwal LiberalParliamentary Secretary to Minister of Fisheries and Oceans

Mr. Speaker, I appreciate the opportunity to begin the third reading debate on Bill C-59, an act to amend the Income Tax Act. Hon. members will recall that C-59 will put into law several measures announced in the 1994 budget.

That budget was a first step in a historic two stage process to bring government finances under control. This is essential if we are to sustain the conditions for continued economic growth, especially easing an important source of pressure on interest rates. The budget set out a concrete interim budget to cut the deficit to 3 per cent of our GNP in three years. It made clear our ultimate goal to eliminate the deficit completely.

But last February's budget did more than establish a target. The previous government had deficit targets galore. Instead, this budget took hard fiscal action to set a real deficit cutting process in motion by reducing spending more than any other budget in a decade.

However, given the dimensions of our deficit and debt dilemma, spending cuts alone would not have been enough to meet our target and restore confidence in the fiscal commitment of government. That is why revenue increases were also necessary.

I should also remind my hon. colleagues that for every $1 in revenue gains, we took $5 in action to reduce government spending. We did not take the decision to increase revenues lightly. There is no member of this government who does not recognize the tax fatigue and resentment felt by so many Canadians. That is why our government refused to hike tax rates.

Instead, we felt the better way to raise the necessary revenue was to broaden the tax base and increase fairness within the tax system. This is what Bill C-59 does. In particular, it also makes the corporate tax system fairer and better targets the tax assistance available to certain businesses.

Because C-59 increases the fairness of Canada's tax system in a number of areas, I believe the bill deserves the non-partisan support of all sides of the House. Let me deal briefly with some of the measures in this bill.

Bill C-59 eliminates the $100,000 lifetime capital gains exemption. This action addresses a growing body of criticism concerning the exemption that it distorts the tax system by totally exempting certain gains while taxing others, that it is essentially of benefit to high income Canadians, and that it makes the tax system more complex.

In 1992 thanks to a wide range of allowable tax deductions and credits, some 12,000 Canadians who earned $50,000 or more paid no income tax. Of this group, over 4,700 people used their lifetime capital gains deduction to help eliminate their tax payable. These people did nothing wrong, but at a time when most Canadians feel overtaxed there is little tolerance for measures that help well off individuals avoid taxes completely.

Eliminating the exemption will mean a system of taxing capital gains which will be fairer, simpler and more sustainable. I should point out that the exemptions will be withdrawn only for a gains occurring after February 22, 1994, the last budget day.

Another fairer measure in C-59 is the provision to tax the full value of employer paid life insurance premiums. This will improve tax equity. There is simply no justification why employees with employer paid life insurance should receive a tax benefit while self-employed Canadians who have to buy their own life insurance must pay with after tax dollars.

Currently only the portion of coverage over $25,000 is a taxable benefit. By basing the benefit on the full amount the tax system will be fairer, treating all Canadians equitably. The impact on group plan members will not be harsh. On average, employees under such plans receive about $125 of benefits a

year as a result of employers paying insurance premiums for the first $25,000 of coverage. Under this proposal the combined federal and provincial taxes will increase by some $30 to $50 a year and the increase for 1994 will be half of this amount.

In another personal income tax measure, Bill C-59 will subject the age credit to an income test. Canada's debt and the burden of high taxes and interest rates it imposes on all Canadians, including seniors, demands that government spending be both fair and effective. This measure meets that test by ensuring that assistance goes to seniors who need it, but not to those who have annual incomes hitting $50,000.

Under the current tax system all Canadians 65 and over are eligible for the age credit. It delivers a combined federal-provincial tax credit of about $950 per year. Under this proposed legislation, individuals with net incomes below $25,921 will retain their full credit. For people with net incomes above the threshold, the credit will be reduced at a rate of 15 per cent of their net incomes exceeding $25,921 and the threshold will be indexed.

Let me make clear that fully 75 per cent of seniors, which is 2.6 million individuals, will not be affected. Moreover, most of those who will be affected will continue to receive partial benefits. Only 6 per cent of seniors will no longer receive benefits because their income exceeds $49,134, the threshold at which benefits are exhausted.

I should also point out that the reduction will be phased in over two years. For 1994 the reduction will be one-half of the amount otherwise determined. As well, the age credit will remain transferable to a spouse.

A further measure in C-59 extends on an ongoing basis a program that has become an important part of our social infrastructure, the RRSP based homebuyers plan. First time homebuyers can withdraw up to $20,000 tax free from their own RRSPs and repay the money over 15 years. By last February about 234,000 people had already participated in the plan with an additional 30,000 participants expected each year.

Moving on, Canadians will be encouraged to give more to charities because Bill C-59 enhances the charitable tax credit. It used to be that taxpayers gained 17 per cent on the first $250 of their total charitable donations and 29 per cent on the remaining donations. Now the threshold for the higher credit rate will be $200, not $250. The fact that individuals will now receive a greater benefit when they give more than $200 in a year will further encourage charitable giving.

I would now like to remind the House of the measures in C-59 relating to the corporate sector. There is a perception among many Canadians that businesses receive preferential tax treatment compared to individual taxpayers.

The fact is often overlooked that businesses, while paying corporate income tax, must also pay many other taxes such as provincial corporate income taxes, capital and insurance premium taxes, payroll levies and municipal property taxes. In fact, the total corporate tax bill last year was about $44 billion. However, Bill C-59 does take steps to reduce deductions and eliminate some existing loopholes.

For example, the tax deduction for eligible business meals and entertainment expenses is reduced from 80 per cent to 50 per cent. All businesses large and small will now pay an appropriate share of tax, making the tax system fair.

The element of personal consumption will also be better reflected in these expenses. This measure is consistent with business meals and entertainment expense deductions in Ontario, Quebec and the United States. It will apply to expenses incurred after February 21, 1994.

Another measure in C-59 restricts the use of certain tax shelters where investors in partnership could claim tax deductible losses and/or receive cash contributions which actually exceed the cost of their investment. The amount of losses that may be flowed out to an investor will now be restricted. This will help to limit the erosion of the tax base, ensuring that business pays a fair share in the national deficit battle. As well, to prevent further erosion of the tax base, the use of the purchase butterfly tax avoidance technique will be curtailed.

The Income Tax Act allows for corporate property to be divided pro rata among its shareholders on a tax deferred basis. This helps in dividing up a corporation so that shareholders can carry on separately the corporation's business.

Unfortunately the rules have been used to avoid or defer tax on the sale of corporate assets. As a result the government introduced rules in May 1993 restricting cross-border purchase butterfly transactions. Bill C-59 extends these rules to all purchase butterflies. The tax advantage of structuring a corporate asset sale for this purchase will no longer exist.

The next measure I want to discuss is the elimination or reduction of the regional investment tax credit, known as ITC. It has become evident that regional ITCs are not a cost effective means of attracting incremental investments, nor do they help to reduce economic disparity. Bill C-59 eliminates a special investment tax credit and the regional component of the scientific research and experimental development tax credit. The Atlantic investment tax credit rate will be reduced from 15 per cent to 10 per cent.

While these changes will come into effect after 1994 they will not apply to property acquired after 1994 that relates to a project which was under construction before the last budget date, nor will they apply to property acquired at any time under a written agreement entered into before the budget date.

Another fair tax measure in Bill C-59 makes large private corporations ineligible for the small business deduction. Relief will be targeted where it is intended, just to small business. The small business deduction lowers the tax rate, thereby providing small corporations with more after tax income for reinvestment and expansion.

However, under the current rules some very large corporations are obtaining this benefit. Large corporations with taxable capital of $15 million or more will no longer be eligible for the small business deduction. As well, the rule changes will reduce the deduction for corporations having taxable capital of between $10 million and $15 million.

The last measure in Bill C-59 that I want to discuss allows for a deduction for contributions into government mandated mine reclamation trust funds in the year in which they are made. Under the current income tax rules mine reclamation expenses are deductible only in the year in which they are incurred. This addresses the concerns of Canada's mining industry.

In conclusion, Bill C-59 takes progressive measures to broaden the tax base for fiscal renewal and to improve the fairness and efficiency of the tax system. Those are goals that we can all accept and this legislation deserves the full support of the House.

Income Tax ActGovernment Orders

10:15 a.m.

Bloc

André Caron Bloc Jonquière, QC

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.

Income Tax ActGovernment Orders

10:35 a.m.

Lethbridge Alberta

Reform

Ray Speaker ReformLethbridge

Mr. Speaker, thank you for this opportunity to speak on Bill C-59.

Bill C-59 is sort of a remnant, a leftover or a bad memory about the last budget that was brought into this House, the 1994-95 budget, a most disgusting type of document that was ever presented to Canadians. It was a document that was not prepared, not thought through and had nothing to do with the real economy of this country. That is one of the disgusting things that I think about this morning.

The other disgusting thing that I think about is the fact that the Liberal members, many of them who sit in the front row today, sat for eight years on this side of the House and never prepared themselves for government. The reason that a party is in the official opposition is that it prepares itself to be the government. They did not do that. For eight years the Liberals played politics, surface politics. They tried to think about how they could go on a power trip or manipulate the government to get back into power and sit on the front benches on that side.

By accident the Liberals did. By accident they became the government. When they became government they did not have any plans. They did not know why they were government. They

were like a dog that caught a car and did not know what to do with it, that traditional, proverbial story.

The Liberals talk about the fact that they put out a red book. The fact of the matter is that red book has so many generalities and political statements that are out of date and meaningless today that it is like the ostrich that has his head in the sand and does not look around at the true reality of life at a point in time. They stand up over and over again and say to us as Canadians that the red book states they are going to do this. They cannot bring themselves beyond the red book to try to create another idea or to recognize that the economy of Canada is something different than it was four or five years ago when the red book was written.

The minister of defence should certainly think about some of these things and take his responsibility when these kinds of things are before the House.

Here before us we have Bill C-59 which talks about tax increases. Most likely these were designed in the red book as well. Three or four years before they were introduced nobody looked at whether they were contemporary in nature or not or fit the circumstances. They do not.

Today in the 1994-95 budget there should not have been any increases in taxes or a greater imposition on the business community of this country which Bill C-59 does. It is the most disgusting thing that I have ever seen.

Here today we hear this ghost of the 1994-95 budget being brought into this House, the ghost that is going to haunt us as Canadians.

What has been the result of that kind of planning and that kind of responsibility that this Liberal Party has taken? What is the response? Yesterday we had the response to Canadians by Moody's from New York. It made a political interception into the economy of Canada and said very clearly to Canadians, said very clearly to the Minister of Finance, said very clearly to the Prime Minister they are going to bring forward a budget in 1995-96 that is absolutely inadequate and that Moody's is going to lower the credit rating of this country from an AAA to an AA.

This government is thinking five years ago about things it did five years ago. This government does not recognize that you cannot tax people more in this country. This government does not recognize that this target of 3 per cent that was set out in the red book is not a realistic figure in terms of the economy today. It is a political target that was set up by this government three or four years ago to move into an election. It cannot understand the stupidity of that projection at that time is only more stupid today. It is unrealistic in terms of this economy and the needs of this economy.

The government does not understand. The Liberal Party does not understand. The Prime Minister and Minister of Finance, who are key to where we go in Canada, key to our economic stability, key to job growth, key to economic growth, are blind to the facts of the current circumstances. They do not realize that they have to sit down with their colleagues in caucus and say that this liberal approach to government, this kind of soft, fuzzy decision making has to stop. They have to recognize that they have to eliminate the deficit in the next three or four years. They must do it within the term of this Parliament. They must say it in the 1995-96 budget that is going to come before us in about a month.

They have to say that to Canadians. They have to say that to the investment community. If they do not, what is going to happen? Yesterday was the best signal this government could ever have. The government has time to revise its plans. It was given a signal loud and clear. It has to come up with a plan to balance its budget, to bring the deficit to zero within the term of this Parliament. The dollar lowered yesterday some 47 points. We saw it lower again this morning. We saw the bonds affected significantly. We are going to see interest rates going up. They have already. We know what interests rates do to the cost of government.

Many of us have said this in this House and I feel it is a very reliable figure. Every 1 per cent increase in interest rates over a period of a year costs $7 billion to this government and to us as Canadians. If we compound the interest into the second year it is something like $2.3 billion with that 1 per cent interest rate. In the third year that 1 per cent interest rate means something like $3.5 billion. Government members do not understand that. They were given a shock treatment yesterday that should have provided them with the best advice or the best favour ever. However what did they do? They do not listen.

As the Minister of Finance and the Prime Minister stand in question period today they will say they are going to hit their target in two years. Who cares? The target is stupid. The target is out of gear. The target is not even realistic. It is the most unrealistic thing I have ever heard in terms of today's economies.

Moody's is telling the government that its target is out of gear and inadequate. It is reported in the press. If all these people who read the paper in the morning to get their political advice read the Financial Post or the Globe and Mail this morning, they would have received some good advice on the implications of what the Liberals are doing or how they are acting.

I hope the government takes some time to listen. I hope it will revise some of these fuzzy liberal expenditure reductions that we will hear about at the end of the month. I hope it will reconsider some of the taxes to be imposed.

As I listen to members, not only in the House but in interviews through the various media, I hear that the Liberals are going to put a tax on lotteries. They are going to tax greater the corporate sector. I am sure they will put a surtax on all Canadians to pay for their bad management and the fact that they cannot reduce expenditures in the country quickly.

They are setting up Canadians in the sense that they are misinforming Canadians. They are telling Canadians that if they reduce the size of government, lay off employees, pay them severances and so on, they will not be able to bring the budget down quickly. They are creating this image. They are saying that they cannot bring it down quickly in the first two years so they will put a surtax on us. It just does not work that way.

If expenditure reduction is done in the right way and some grant programs and the overhead in some departments are cut and employees are released as quickly as possible, there will be an expenditure reduction.

All we have to do is look at what happened in Alberta. There was a direct relationship between the reduction in the size of government and the reduction in expenditures. The fallacy that is being created that we will need a surtax on an interim basis is a bunch of hogwash and I hope Canadians do not accept it. They will react to that kind of thing.

The Liberals talk about other taxes such as an inheritance tax. There are a few people in Canada who worked hard and saved money, and they want to take from their pockets as well. They also talk about the RRSPs. People know that the Canada pension plan will not be sustainable under current circumstances. What are they going to do there? I am sure it is part of the upcoming budget. They will reduce the level and the amount of RRSPs middle income people can put away for their future retirement.

The Liberal government is still living with its head in the sand. It is living a the period of time about five years ago when the red book was written. It has not adjusted to today. It is still living this old traditional approach to politics, that is to tax the people and not cut the money spent on inefficient and ineffective social programs that have failed.

I have had the fortunate opportunity to have been in politics for about 30 years. I observed in my early days that people were more self-reliant. I recognize that this liberal attitude has caused us to spend billions of dollars on what we thought were social problems. Everybody in Canada were to be perfect individuals. It has failed. Unemployment is greater. There are more people on social programs, unemployment insurance and public assistance today. There are three million Canadians on public assistance. If that is a success story then we should spend more money and improve it some way or another. However that is not the way it is done. Those social programs have failed but members of the government want to carry on because they think that is the approach to making Canadians perfect.

It is like their support for the CBC. I hear from some of them that the CBC has to continue its rate of expenditure because it creates the culture of Canada. That is the dumbest thing I have ever heard.

Bill C-59 is a glimpse of the inadequacy of the government. It is a glimpse of what is to come: more taxation in the 1995-96 budget because they want to take from the rich and supposedly give to the poor. That is the philosophy but I do not know who is on either end today.

It also indicates a soft fuzzy approach to expenditure reduction to eliminate the deficit. Many of my colleagues have asked over and over again in the House what will happen after two years when we still have a $25 billion deficit. There most likely will be a downturn in the economy that could immediately put pressure on government borrowing and push our deficit again up to $40 billion or $50 billion. It will be out of control. We have a window at this time and the government does not recognize that it is there.

Government members blame the debt on the Conservatives. They say that the Conservatives did it. They have to remember that Mr. Chrétien, Mr. Trudeau and others left $170 billion of debt. Certainly the Conservatives boosted that up to $500 billion. Now it is at $550 billion. In two years it will be $600 billion with a $50 billion interest payment being made. Where are social programs then?

We do not support Bill C-59 and the government has to wake up and be realistic about its responsibility. It is unfortunate that we have to sit here for another three years with a majority government. It is going to be an unfortunate circumstance for Canadians.

I urge everybody in the House to vote against Bill C-59.

Income Tax ActGovernment Orders

10:50 a.m.

The Deputy Speaker

The Chair would ask the hon. member for Lethbridge not to refer to sitting members of the House or ministers by their proper names. As he knows we are expected to refer to their ministries and so on.

Income Tax ActGovernment Orders

10:50 a.m.

NDP

Nelson Riis NDP Kamloops, BC

Mr. Speaker, I listened to my hon. friend, the member who spoke on behalf of the Reform Party on Bill C-59. I must say I always appreciate his comments. I agree with hardly any of them but I nevertheless appreciate them. He always presents them in a thoughtful and articulate way.

One point perplexed me about his comments. Canada is one of the very few countries of the OECD that does not have an inheritance tax; people inheriting $10 million or $20 million are not required to pay any tax.

Income Tax ActGovernment Orders

10:50 a.m.

An hon. member

That is good.

Income Tax ActGovernment Orders

10:50 a.m.

NDP

Nelson Riis NDP Kamloops, BC

I hear my friend in the Reform Party saying that is good. They say that it is good, that people should inherit vast amounts of money and pay no tax.

They support the notion that on income received from capital gains tax is paid on only 75 per cent. They say that is good. They say that certain people, particularly the wealthy people of the country, should get as much as possible. They say that is good because they work hard for it. That implies that other people do not work hard for their money.

Why is it that Reformers feel average working people produce the most if their are wages are low and they are hungry? Why do they feel if we pay them very poorly they will be out there working hard? Why do they feel the way to get working people to work is to pay them as little as possible? However, they feel that the way to get wealthy people working is to pay them the most possible.

Is there not some inconsistency in the logic of rewarding the wealthy so they will work but keep the wages of the poor and average working person as low as possible to encourage them to work? To me there is a bit of inconsistency in the argument of my friends in the Reform Party.

Today we are talking about Bill C-59. The speaker for the government went on at some length about how it was an effort to make the tax system fairer. It might be a slight baby step in that direction.

Let us take the whole issue of escort services. No one here knows anything about escort services, but if we look in the telephone book there are a number of pages listing escort services. It is interesting that our tax system says that escort services are tax deductible. I guess with some people it is a cost of doing business. I am not sure what escorts cost, but whatever the bill is it can be submitted as part of a tax return. It is called a cost of conducting business.

When the question was recently put to national revenue officials, they said they have to change it, it is getting a little questionable in terms of a legitimate tax deduction. However if the escort service is called a bodyguard or a tour guide it is acceptable. We have some interesting concepts here in terms of what a bodyguard or a tour guide might imply.

Nevertheless the reality is that simply by using a little creative commenting on an income tax return, escort services and entertainment of that type will be tax deductions. Is this reasonable? Is this acceptable to the people of Canada? My suspicion is that it is not.

My hon. friend talked about the business tax deduction moving from 80 per cent to 50 per cent. Should we not distinguish between various kinds of business costs? I do not think anybody here would argue that business people getting together over a dinner, lunch or breakfast to discuss a transaction or a business arrangement is a legitimate cost of doing business.

However, as I said earlier, is an escort service deduction a legitimate cost? Is the annual fee for a box in a sports stadium a legitimate cost of doing business? Is purchasing a yacht to entertain clients a legitimate cost of doing business? Is choosing the Bali Hilton or the Waikiki Hilton as the place for an annual meeting a legitimate cost of conducting a business?

I know a number of people who own large boats, sailboats, launches and racing boats. They are business tax deductions and are used for entertaining clients.

Is a hunting lodge or a fishing camp a legitimate business deduction? I suppose we could say in some cases it is, but enough is enough. My hon. friend stands and tries to say that part of the changes to the Income Tax Act will be to bring fairness back into the system by removing the deduction-

Income Tax ActGovernment Orders

10:55 a.m.

The Acting Speaker (Mr. Kilger)

It being 11 a.m., pursuant to Standing Order 30 (5), the House will now proceed to Statements by Members pursuant to Standing Order 31.

Canadian FederalismStatements By Members

10:55 a.m.

Liberal

Ted McWhinney Liberal Vancouver Quadra, BC

Mr. Speaker, Monday's three by-elections confirmed Canadians' continued faith in our federal system of government and in its ability to adjust to new problems in Canadian society, problems hardly dreamed of or imagined by those who established Canada's constitution.

Canadian federalism has never been an abstract and inflexible charter carved in stone in 1867. It is a dynamic process of constitutional creation. It involves balancing differing social interests in a spirit of pragmatism and cooperation. It is a new federalism, a living, highly efficient and cooperative one.

Referendum On Quebec SovereigntyStatements By Members

10:55 a.m.

Bloc

Maurice Godin Bloc Châteauguay, QC

Mr. Speaker, on March 13, 1865, a majority in the Parliament of the Province of Canada voted against holding a referendum on confederation. The proposed referendum was defeated by a vote of 83 to 35.

Canada was therefore born out of a bill adopted by a simple majority.

The people of Canada had no say in this process, because a simple vote in the House was deemed sufficient to legitimize the process.

Unlike the act establishing Canada, the draft bill declaring Quebec's sovereignty will not come into effect without the support of the people of Quebec expressed in a referendum.

To all those Canadians with lofty democratic ideals, who consider a vote of 50 per cent plus one insufficient to legitimize the choice of Quebecers, I would suggest another look at their Canadian history books.

Gun ControlStatements By Members

February 17th, 1995 / 10:55 a.m.

Reform

Philip Mayfield Reform Cariboo—Chilcotin, BC

Mr. Speaker, since January 1 of this year I have received over 700 letters and 60 petitions from my constituents in Cariboo-Chilcotin rightly protesting the government's intention to introduce new firearms legislation. I would like to quote from one letter:

Ignorance is the cause of fear and the fear of firearms now is caused by a general lack of understanding of what a gun is, how it functions and how extensive our existing gun laws currently are. If the public understood what an honest citizen must currently go through to legally acquire a firearm, they would realize that the new gun control legislation is nothing more than an expensive publicity campaign designed to appear as if the government is fighting crime. We, the people, need education about firearms, not gun laws that attack honest gun owners and leave the criminals at the status quo.

I agree with my constituents. We do not need any more firearms legislation.

Member For LongueuilStatements By Members

10:55 a.m.

Liberal

Paul Devillers Liberal Simcoe North, ON

Mr. Speaker, on Tuesday the hon. member for Longueuil asserted in the House that it is ridiculous to think that Canada ranks among the best countries in the world in respect of standard of living because, according to him, Canada is considered to be like a Third World country because of the size of its debt. He even claimed that we were trying to deceive people.

The comparison made by the Bloc Quebecois member is crude and his reasoning very unsound. Here are the facts. The UN world report on human development for 1992 and 1994 ranks Canada as the best country in which to live.

The only ones trying to deceive people, and in particular the population of Quebec, are the Bloc Quebecois members. It is very easy to be a separatist if the effect of the worst scenario they can imagine, that is losing the referendum, would be for them to continue living in the best country in the world.

TradeStatements By Members

10:55 a.m.

Liberal

Wayne Easter Liberal Malpeque, PE

Mr. Speaker, on February 2 the United States formally notified the federal government that it considers our move toward tariffication of supply managed commodities to be a violation of the NAFTA.

Let me state clearly that our tariffication is what was agreed to at the GATT, including by the Americans. In reality our good neighbour to the south is playing big bully games against the very principles agreed to at the GATT.

On February 14 the Minister of International Trade made it clear he will not make any concessions to the Americans on this issue. I support that position. This government cannot make any concessions on the supply managed commodities. Our legal position is sound and the GATT takes precedence over the NAFTA.

I would expect, therefore, that consultations with the Americans will be short and the message will be clear: no concessions on the tariff issue.

Project ReadStatements By Members

10:55 a.m.

Liberal

Jesse Flis Liberal Parkdale—High Park, ON

Mr. Speaker, it has already been five years since the United Nations designated 1990 as the international year of literacy. It is the UN's goal to liberate nearly a quarter of the world's population from the bonds of illiteracy by the year 2000 and much of this work starts at home.

It is estimated that 1.2 million adults in Ontario are functionally illiterate. In my own riding of Parkdale-High Park, librarian Rita Cox and the Parkdale Project Read are beating the odds. Just ask two of Project Read's recent graduates, Jerry Lee Miller and Ed Anable. They are individual success stories and are shining examples that together we can break the cycle of illiteracy.

I congratulate the minister responsible for literacy for doing an excellent job in this field.

Francophones Outside QuebecStatements By Members

11:05 a.m.

Bloc

Jean H. Leroux Bloc Shefford, QC

Mr. Speaker, in a study made public yesterday, the Commissioner of Official Languages said that francophone and Acadian communities in Canada have good cause to complain.

Bilingualism in federal institutions has been a dismal failure, in spite of the Official Languages Act which was passed 25 years ago.

How can one explain that, in spite of the already very limited number of federal offices outside of Quebec which are designated bilingual, 28 per cent of them still do not provide services in French? In all other offices, even though they are designated bilingual, francophones have to kick up a fuss to be served in their language.

In view of the worrisome rate of assimilation of francophones outside Quebec, what precisely is the government waiting for to assume its responsibilities and to respect the most fundamental rights of the francophone minority?

Canada CouncilStatements By Members

11:05 a.m.

Reform

Ed Harper Reform Simcoe Centre, ON

Mr. Speaker, I received a card from the Canada Council last week, as did all MPs. It asked me to imagine Canada without musicians, painters, writers and other artists. The card implies that without the council Canada will lack culture and imagination.

Well I have news for the Canada Council. Canadians have culture and imagination in spite of the Canada Council. Works like those of the Group of Seven that are now hanging in our National Gallery were examples of Canadian culture and imagination long before the Canada Council was ever conceived. No grants were needed to create these masterpieces and many of today's artists work grant free.

Why not imagine a country with a balanced budget, a healthy economy, a workplace free from government interference? Speaking of balanced budgets, the debt clock this week passed $550 billion. Shame, shame.

Random Acts Of KindnessStatements By Members

11:05 a.m.

Liberal

Hedy Fry Liberal Vancouver Centre, BC

Mr. Speaker, did you know that today is the last day for random acts of kindness week?

Ten years ago author Anne Herbert scribbled a phrase on her paper placemat: "Practise random kindness and acts of senseless beauty". Since then her message has become the slogan for people who believe in their ability to make the world a better place.

This week then is an opportunity for Canadians to surprise their fellow citizens with unselfish resplendent acts.

In these times of economic disparity it is important to bring to the attention of this House and to all Canadians that a kindness movement is sweeping through North America. As the movement's organizers state, this week provides a common focus for all Canadians who believe that a little kindness goes a long way and that the greatest gift we can share with one another is our spirit of hope and optimism.

Although the week is coming to a close, I would like to wish all of my colleagues a day, a session and a year filled with random kindness and acts of senseless beauty.

Canadian Centre For Global SecurityStatements By Members

11:05 a.m.

Liberal

Warren Allmand Liberal Notre-Dame-De-Grâce, QC

Mr. Speaker, in January the Canadian Centre for Global Security announced that it would be shutting down as a result of the federal government's decision to terminate its funding.

For 12 years this centre provided independent and non-partisan policy advice on a wide range of strategic issues. Among them was the centre's work on the nuclear non-proliferation treaty and peacekeeping reform.

By terminating its funding, the government has closed one of the last independent centres of this type in Canada. This is of further concern given that we are now celebrating the 50th anniversary of the United Nations and the world is still plagued by war, instability and injustice.

In opposition we were outraged when the previous government shut down the Canadian Centre for International Peace and Security in 1992.

I am extremely concerned that this decision will send a negative message with respect to Canada's commitment to peacemaking, peacekeeping and arms control. I ask the government to reconsider.

Guelph Storm Hockey TeamStatements By Members

11:05 a.m.

Liberal

Brenda Chamberlain Liberal Guelph—Wellington, ON

Mr. Speaker, on February 2 the Guelph Storm became the first Ontario Hockey League team to secure a play-off berth.

The Storm has enjoyed a very successful year and is currently fighting Sudbury for first place in the central division. It is in a tight race with six other teams for first place overall.

Coach Craig Hartsburg deserves much of the credit for the team's success, along with every Storm player. Coach Hartsburg stresses the philosophy of team work both on and off the ice.

Guelph-Wellington fans look forward to the remaining games in the chase for the Memorial Cup. Like everything else we do, our hockey team has proven that Guelph-Wellington takes its opponents by storm.

1980 ReferendumStatements By Members

11:10 a.m.

Bloc

Roger Pomerleau Bloc Anjou—Rivière-Des-Prairies, QC

Mr. Speaker, the Prime Minister's peculiar sense of humour reached unexpected cynical heights when he said yesterday in the House that Quebecers liked Mr. Trudeau's speech so much that they voted no in the 1980 referendum.

How could the Prime Minister say such a thing and really believe it? Between you and me, the Prime Minister certainly could not have been serious. He has undoubtedly forgotten the famous promise: "We are putting our seats on the line to bring about change; a no in the referendum will mean a yes to renewed federalism".

Quebecers remember that this promise was broken, and, for this reason, have elected few Liberal members of Parliament since 1984. The Prime Minister has once again demonstrated in the House that he has absolutely no understanding of the hopes and motivations of Quebecers.

Government BackbenchersStatements By Members

11:10 a.m.

Reform

Chuck Strahl Reform Fraser Valley East, BC

Mr. Speaker, every day in the House of Commons we are forced to witness a humiliating spectacle as government backbenchers rise to ask their own ministers the easy questions.

My heart goes out to these members as they perform their odious duty. I wonder what fears must cross their minds. What if they refuse? What if they make a mistake? What if the minister eager for the planted question misplaces his briefing notes?

It is refreshing that one backbencher, the member for York South-Weston, refuses to advise the front bench of his questions in advance. It is unfortunate that more Liberal backbenchers fail to place the interest of their constituents ahead of the party line.

Have pity for the lowly backbenchers today as they rise to lob beachballs at their political bosses. Pardon the ministers who make a sham out of question period by delivering speeches dressed up as answers. But most of all, pity the listening public which graciously endures the public daily humiliation of members who wish they could just say no.

LiteracyStatements By Members

11:10 a.m.

Liberal

Bill Graham Liberal Rosedale, ON

Mr. Speaker, this is literacy week in Canada.

The ability to read and write empowers people. It enables them to improve their position in an increasingly complex economy, to avail themselves of their rights and fulfil their duties in our country with its democratic privileges and responsibilities and to better understand themselves and the world around them.

Literacy is an essential element of every modern society and we can be proud of the fact that this government has named a minister responsible for literacy and has established a secretariat with the mandate of eliminating illiteracy nationwide.

Personally, I am very proud of Frontier College located in my Toronto riding and the leadership it provides in this field. It and other institutions like it and thousands of volunteers work on literacy programs that make an important contribution to our society.

If not addressed, illiteracy has heavy costs for Canada and for those individuals who struggle with the problem every day of their lives.

The EconomyStatements By Members

11:10 a.m.

Liberal

Murray Calder Liberal Wellington—Grey—Dufferin—Simcoe, ON

Mr. Speaker, I rise in the House today to indicate my outrage that Moody's bond rating agency would place Canada's credit rating under review only two weeks before the federal budget comes down. Why did it not just place a horse's head in the Minister of Finance's bed?

We recognize that strong fiscal action is required. We are determined to meet our financial targets stated in the red book. Our deficit reduction target of 3 per cent of GDP is only an interim target while our long term goal is to eliminate the deficit in its entirety.

Canada's inflation is the lowest in the G-7. Our export growth is strong. StatsCanada's composite leading indicator grew by .6 per cent in January and wage settlements only grew by .3 per cent in 1994.

I think it is Moody's that should be watched.

Child PovertyStatements By Members

11:10 a.m.

Liberal

Eugène Bellemare Liberal Carleton—Gloucester, ON

Mr. Speaker, the third annual gala for child poverty will take place in the capital tomorrow.

This successful event benefits needy children in the Ottawa-Carleton region. It is sponsored by the Fund for the New Generation, a group of active young people who represent all parties in the House as well as the public, private and university sectors. These young people strongly believe in grassroots community support.

I would like to take this opportunity to thank local merchants, retailers and national sponsors, such as Sun Life, Ryder Travel and Merck Frosst. Additional support is also provided by the Museum of Nature, the Ottawa Sun, KOOL-FM and the Hill Times .

Honorary chairs are Mayor Holtzman and the Speaker of the House of Commons. They have made the event possible, but they cannot do it alone. I call on members and citizens in the Ottawa-Hull area to go to the Museum of Nature tomorrow night at eight o'clock.