The solution is quite obvious: get our fiscal house in order so that we can manage our own cash flow and let business and other Canadians manage their cash flow and let them pay their taxes when they have earned the money. Remember, I said a dollar earned is a dollar taxable, but I did not say that a dollar unearned is a dollar taxable. That is a major quantum leap by this government into a new area of taxation, which we cannot condone under any circumstances whatsoever.
Not only that, but there is a semblance of offsetting. They are saying that if your shares go down they will allow you to do it at market value. If you have a loss and a couple of gains, one up and one down, you can net them off and pay tax on the difference.
That is okay in an inflationary environment. It is okay during a period of economic growth because by and large things tend to go up. This government will be the beneficiary of enhanced taxation during the good times. We are in an economic growth
period at this time and no doubt that is why the Minister of Finance introduced this particular piece of legislation.
Think about it this way. We go into an economic downturn, and we surely will as it has never failed before. I think the economists would agree that one will come along perhaps sooner rather than later, much to our misfortune. At that time after all the securities have been taxed at market value we do know that the preponderance may be that they will drop in value. At that time all of them will be asking for tax refunds which will further erode the government's fiscal position at a time when it needs the money most.
The government should keep its hands off the taxation of unearned income. That is the solution. This government should not get involved in a situation that increases the volatility of tax collection.
Any business and any government should know that the most important thing is a steady flow of income. This measure is going to try to generate additional revenues for the government in the short term while the economy is good. I can assure you that on the other side of the coin the chickens will come home to roost during the economic downturn. That is when this government will need the money most.
Other little arrangements in the bill are things like funeral expenses. Most of us do not pay too much attention to funeral arrangements. Tucked away in Bill C-70 is the opportunity to put $15,000 cash into a trust fund to pay for funeral expenses on one's death.
I am sure that the rank and file Canadians have $15,000 in their pockets and are just running out to put $15,000 into a trust fund now in order to ensure that they get properly buried when the time arrives. Not only that, they are going to be able to defer the taxes on the income.
Unfortunately the average Canadian cannot afford to run out today and put $15,000 in a trust fund to ensure a proper burial, but the rich people can. Here is another little giveaway to rich Canadians by telling them how they can shelter their income. Just stick $15,000 in a trust fund to ensure that they get a proper and adequate burial. If we think about that amount and the interest that is quite a funeral the yuppies are going have on their demise.
Perhaps I should buy some shares in these funeral home groups. They have been doing not too badly. I missed out on it before but maybe it would be a good idea to jump back in. Maybe they are going to make more money. Maybe $15,000 funerals are going to be the order of the day rather than something more appropriate for those who have less money. You never know.
Why in this time of difficulty when the Minister of Finance says that we need all the money we can get is he allowing rich people to tuck aside $15,000 plus interest, plus the income so that they never have to worry about it again? This nice little tax loophole has popped up from a government that promised to get rid of them.
The solutions are that we be fair to all Canadians. Surely the rule has to be that we are fair, that we ensure a small group of people who have ready access to government members, cabinet ministers and so on, should not be entitled to some special privilege which other Canadians do not have.
We should be fair to all Canadians. If the average Canadian cannot afford to put $15,000 into a trust fund for his funeral arrangements, then I do not think rich people should either. If they are that rich they can afford a few dollars to get themselves buried.
There are also the real estate investment trusts. Quite recently the real estate market in office buildings has not been doing so well. Too many Canadians were talked into these trust funds. We ran up the price of office and other buildings in large cities like Montreal and Toronto with the expectation that these small time investors were going to make big dollars.
Lo and behold what did we find? Down it went because the market was oversubscribed. The rich people took the money. They ran off home and the poor little investor was left with an empty building. He lost his shirt so they have now made some changes to the real estate investment trust taxation to allow these things to be rolled into an RRSP.
Here we are again giving an artificial incentive to Canadians to buy into real estate. In five or ten years from now when the market goes down again they will be left holding the bag while some people will walk home with the cash and I do not think they will be the small time investors.
During the Easter break, a mortgage free, nine storey office building in Edmonton was transferred for $1. There were not enough tenants to pay the taxes. It was losing $250,000 a year. Read it in the Edmonton Journal . It changed hands for $1. It was mortgage free. The city tax assessor said it was worth over $2.5 million. For one dollar. If that had been in a real estate investment trust how much of that dollar would the investors have received? Nothing.
We must be careful when we provide these tax incentives to the small and average investors. If we give these artificial incentives, we create a demand that should not be there. People jump in, the value goes up. We have heard this story so often. It is most unfortunate because it is always the small investor who loses.
There are many rules on the mutual fund reorganization again to try to help small investors. However, we must be very careful that we do not provide artificial incentives to these people. If these investments are lost, we know who they will be pointing their fingers at. They will want their taxes back. That will be a
further drain on the revenues of this government. That whole thing leads to volatility.
These are a few concerns I have about the bill. I certainly hope this government can see the light of day. The job has to be done as far as balancing the budget, and not these small changes, not an overhaul the Bloc Quebecois was talking about.
We are talking about a real concerted effort by the government to recognize that a fiscal crisis requires serious measures to get the budget balanced. Once that has been done, we do not have to worry about the pressure of increasing more taxes. We do not have to worry about the pressure of casting the net wider and wider to take in more and more people. We can start to live within our means. When the government feels it can dip into somebody else's pocket to help its cash flow problem, it makes the cash flow problem worse for the person who has to pay more taxes. The government does not seem to think about that.
If we are to create jobs we have to create the capital pools in the hands of the entrepreneurs who feel the money will not be taken away from them arbitrarily and prematurely with too much tax. We have to give them the opportunity to make a profit so they can feel confident to go out and build the factories, sell the products, hire the people and create the jobs which then create a whole new number of taxpayers. It is so much better, easier and fiscally prudent to have taxpayers than tax consumers.
I know the Liberal government is proposing this but it hired them in the first place. We should have fewer civil servants because it reduces the tax consumers. If we can help them to get into the private sector, perhaps even to start up their own business, surely that has to be beneficial because now they are tax producers rather than tax consumers.
This past weekend in my riding I was at a trade fair. I was talking to a young lady who had been employed in the health care services and now has her own little business. She is doing quite well and is quite happy. She is now a tax producer rather than a tax consumer.
I was also talking to a young entrepreneur, not yet 30, on his own without any government grant or assistance in any way, shape or form. He has created a computer program that he is now selling right across the country to large retailers and so on. If anyone wants to know about it, it is called "The Estimator". It does a wonderful job of helping companies estimate large projects. He wants to go international with it as soon as he can generate the cash flow.
Here is a young entrepreneur with no subsidy, no grant, on his own, who has developed a product with which he will now be generating some export revenues. These are the types of people we must encourage rather than drowning them in another 200 pages of tax rules so incomprehensible that they cannot get their minds around them. He now has to employ professionals, lawyers, accountants and so on to figure out how he should be doing his taxes.
Another item in the bill is the amendment to the way people may file notices of objections. Large companies now have to state specifically the areas in which they are objecting concerning their income tax if it is being reassessed.
On the public accounts committee we were dealing with what became known as the resource allowance boondoggle; $2 billion of tax money went down the drain because of this simple little loophole and an inefficient civil service. To recap, in 1980 the government and an oil company agreed to disagree on the assessment of income tax. It said: "See you in court". This is a typical situation. It was nine years later, in 1989, before it went to court and the government lost, much to its chagrin and much to its surprise because it thought it had a watertight case. It wrote the rules and the law and felt it understood them but it lost. That was okay because it would appeal.
In 1991 the government appealed and lost. It then asked how much money was involved. Believe it or not, it had never once figured out how much money was involved. By 1991 it realized that it was $1 billion. It was astounded. The government had no idea of the amount of money.
However, that was okay because it was to take it to the Supreme Court and show everyone who could win. The Supreme Court said it did not even want to hear about it. That was the end of the situation but it had one little twist. The last appeal court which pronounced a judgment on the situation ruled so much in favour of the oil company that when we asked Revenue Canada officials: "How much more money have we lost?", they said that it could be another $800 million plus interest. We lost $2 billion because nobody in 1980 asked how much money was at risk. Not only that, this situation remained wide open for 10 years and 40 other oil companies found out about it and adjusted their taxes back to 1980 as well.
It cost the Canadian taxpayers $2 billion because the civil service was not up to speed on the situation. With this measure that loophole has been closed by the Minister of Finance. It was closed largely because of the work done by the public accounts committee last year. We do not want to see this happen again. I do not want to stand up as a parliamentarian who is accountable to the public to say: "There goes another billion", but I have had to do just that.
The Canada pension plan loses $1 billion every five years. The people who are responsible for the CPP went to Treasury Board and asked for a new computer system. They said: "For every dollar we spend on a new computer system we will save $3". It sounded like a good investment to me, but Treasury Board said that it did not have the money. Therefore we will lose $3 and save one.
That is how the government is being run. That is the type of thing that is going on today. When I tell Canadians about these fiascos they shake their heads in disbelief that their taxes are being spent in that fashion. What senior bureaucrat, who is being paid a large salary, can justify refraining from spending one dollar if the evidence is there that he is going to save three?
One billion dollars will be lost through overpayments that are non-recoverable over a five-year period because they do not have a comprehensive and efficient computer system. That computer system would originally have cost $250 million. Now it is up to $340 million. Maybe by the time it is delivered it will be up to a billion and nothing will be saved. However, the point is that we are paying these intelligent, knowledgeable and educated people whose job it is to manage taxpayers' money to the benefit of Canadians. We are so tied up in rules and regulations that we cannot make an intelligent decision any more. We cannot say to the taxpayer that we are running the country efficiently.
However, we can produce, after a whole year, another 200 pages of incomprehensible law by which Canadians must abide. That is the problem not only with Bill C-70 but in the way the government is not attacking the problem. We need responsible government that is going to balance the budget and get the job done.