Debates of May 5th, 1995

Lobbyists Registration Act

[The Deputy Speaker]

In my opinion the yeas have it.

And more than five members having risen:

[The Deputy Speaker]

Pursuant to Standing Order 45(6), a recorded division on the proposed motion stands deferred until Monday, May 8 at the ordinary hour of daily adjournment.

The House resumed from April 25, 1995, consideration of the motion that Bill C-70, an act to amend the Income Tax Act, the income tax application rules and related acts, be read the second time and referred to a committee.

Income Tax Act

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, in chapter one of the Liberal red ink book it clearly states: "Fairness, simplicity and harmonization should be key objectives of tax policies". Unfortunately, after a year in Ottawa this promise of fairness and simplicity is nothing more than empty campaign rhetoric.

Bill C-70 is yet another in a series of omnibus bills introduced by the Liberal Party which further complicates, convolutes and confuses the income tax system in Canada.

Most Canadians who pay income tax are unable to file their tax returns without the assistance of an accountant or tax lawyer. How has this happened? To give an idea, let me take members on a journey through Liberal income tax amendment bills which were introduced in the first year of the government's mandate.

Bill C-9, an act to amend the Income Tax Act, was first read on February 4, 1994 and consisted of 70 pages. Bill C-15, an act to revise certain income tax law amendments in terms of the revised Income Tax Act and the income tax application rules, was first read on February 23, 1994 and consisted of 670 pages. Bill C-32, an act to amend the Excise Tax Act, the Excise Act and the Income Tax Act, was first read on May 27, 1994 and

consisted of 62 pages. Bill C-27, an act to amend the Income Tax Act, the income tax application rules, the Canada pension plan, the Canada Business Corporations Act, the Excise Tax Act, the Unemployment Insurance Act and certain related acts, was first read on May 5, 1994 and consisted of 176 pages. Bill C-59, an act to amend the Income Tax Act and the income tax application rules, was first read on November 24, 1994 and consisted of 110 pages.

Finally, we have the bill before us today, Bill C-70, an act to amend the Income Tax Act, the income tax application rules and Related acts, which was first read on February 16 and consists of 200 pages.

The total is 1,288 pages of new amendments to the Income Tax Act.

The Reform Party believes the time has come for us to question every aspect of our system of taxation. The urgent pressures of a spiralling debt and the ever growing complexity of an out of control Income Tax Act forced us to look seriously at fundamental reform of the tax system.

A flat rated system of income tax is an important example of such a reform. The idea has been the subject of much discussion in both Canada and the United States. It is relevant and has a great deal of merit.

There have been a number of flat tax models outlined in past years. When debating Bill C-70, the hon. member for Broadview-Greenwood outlined his single tax proposal. Now I will outline ours; note the difference. His model is his model, not the Liberal model, whereas ours is a party model, not my model. The primary areas of variation between the two centre around the definition of taxable income and the application of tax rates.

Canadians are among the highest taxed citizens in the industrialized world with about 45 per cent of a family's income going to government taxes. Our deficits and debts are so high that they are squeezing money out of program spending and we are transferring it over to interest payments instead.

Increasing revenues by adding to the heavy tax burden already carried on the shoulders of Canadian citizens and businesses alike is not the solution. Raising individual taxes would increase hardships for many families.

Leaving more money in the hands of the people who earn it makes it possible for more people to provide themselves with the basic necessities of life. Forcing people to send more taxes to Ottawa and returning it to them through social assistance is a waste of time, effort and money.

Continued increases in taxation rates encourage governments to keep spending at current levels and avoid the difficult problems of dealing with the kinds of significant spending cuts that are needed.

The first stage of tax reform should be a commitment on the part of the federal government to produce balanced budgets. This could be done through a Canadian taxpayers protection act that requires deficit control and reduction by eliminating expenditures according to deficit targets, inflation, and population growth.

This legislation would not be designed to say how money is to be spent but rather to regulate how much can be spent. Its purpose would be to protect the Canadian taxpayer from being dragged into the kinds of serious debt situation we have now by irresponsible governments.

The second stage of tax reform should be a commitment to the reform of the Income Tax Act. Our overall tax burden is the second highest in the G-7 countries in recent years. High taxes stifle economic growth in every sector of society. They decrease the productivity of the private sector, leading to more unemployment. They tempt governments to keep spending at current levels instead of coming to grips with the real problems.

As I demonstrated earlier, the current system of amending the Income Tax Act is ridiculous. The Income Tax Act is already 2,091 pages. Now in this past year we have added another 1,288 pages. It is a struggle to administer, a puzzle to interpret, a nightmare for the majority of Canadians who have the courage to try to do their own tax returns. A complete overhaul of the system is required.

Furthermore, in view of our current economic dilemma, tax reform must also mean tax relief. However, we cannot give tax relief until we come to realize that we must look at spending and what levels of government should be spending money where.

The following outline for a proportional flat tax is a serious proposal that would go a long way toward solving some of our economic problems, an attempt to bring our system of taxation into the 21st century. The system must be simple, visible and fair: Simple so that everybody understands it; visible with no hidden taxes; and fair to both individuals and corporations with no loopholes, no exceptions.

As it stands, the incentives should be to reward production and leave more dollars in the hands of taxpayers and wage earners than in the pockets of government, thereby reducing the need for many governmental assistance programs. In other

words, the cost of government assistance would decrease because fewer people would need it.

As it stands now, Canada's Income Tax Act is based on three graduated rates of taxation and an extensive network of exemptions, deductions, reductions, deterrents and incentives.

The proportional flat tax proposal incorporates a flat tax and establishes a single rate for everyone, both individuals and corporations, with no loopholes. With a proportional element, the basic flat tax model is improved further by proportioning an individual's tax liability according to income, family size and therefore the ability to pay.

A basic level of income is tax free for all wage earners. Individuals and corporations would pay the same rate on income with a minimum of exemptions and deductions. Taxes would be used exclusively for the purposes of raising revenues to fund approved government programs, not as an instrument of economic, industrial or social policy.

The rate of taxation would therefore be determined solely on the basis of how much the government needs to provide the services that Canadians want. The rate may be in the range of 20 to 25 per cent.

The key principle of our flat tax model is that a buck is a buck. Income is defined as productive income from employment, business and investments including interest income, capital gains, pensions and dividends. Some of the areas under the definition may be debatable, whether they should be treated that way, but that is for the Canadian public to decide.

All personal income generated in any form would be taxed with no special treatment for various forms of income. The only capital gain that would not be taxed would be the one primary personal residence because this could represent a lifetime of effort over years of inflation.

The fundamental approach to corporate income would be to ensure that income is only taxed once. Depreciation is eliminated and purchases are 100 per cent deductible in the year of purchase, even if it creates a loss.

There would be one personal exemption per individual, perhaps $12,000. Lower income individuals would therefore be basically exempted from paying tax and families are granted a generous deduction.

Deductions are at levels the middle class can afford. This will result in more tax being paid by the wealthy than is now the case and leaves more disposable income in the hands of taxpayers.

A child care deduction will leave money in the hands of families to use to care for their children as they wish, whether it is at home or in day care centres. This deduction could be in the area of $5,000 for children up to age 7 and $3,000 for each child between the ages of 8 and 14.

Spousal deductions are also included, perhaps up to $6,000. A charitable deduction would be included, perhaps up to 5 per cent. The amount of RRSPs would be reduced to $6,000 annually so that higher income earners do not gain an unfair advantage and provisions would include a deduction of about $2,000 for seniors.

For businesses, we could look at what they could deduct as cost of operations or goods, services and materials, wages and benefits, interest payments and pension contributions plus dividends paid out. This is the big difference. Dividends paid out to individuals for investing in that company would be deductible to the corporation and taxable in the hands of the recipient which would end the current problem of double taxation on dividends.

GST or other forms of federal sales tax would not continue. Sales tax would be left to provincial governments to raise money for their own needs. This is one of the advantages of tax reform, looking at various levels of government and raising the money that they need at their level that could be shared.

The federal government does not have to grab all, end all and waste all. The initial objective would be to establish a tax rate that is revenue neutral to begin and is redistributed equally between individuals and corporations.

From that starting point, as we eliminate the waste in government spending, as we determine which levels of government should be responsible for which programs, as we privatize crown corporations and government gets out of the business of being in business, this rate would go down and down and down.

I acknowledge we must start at a revenue neutral base and let that work through the system over a three-year period. Some of the advantages of this system would be an even distribution of the tax load by eliminating exemptions and reductions, a lower tax rate over the current three tier graduated system, more disposable income, a broader base spread out over corporations and individuals more equally.

It might increase government revenue because corporations and higher income individuals would pay tax on everything with no exemptions, no tax shelters, thereby restoring tax expenditure costs to the government.

More government revenue could be generated because perhaps the underground economy would start to disappear. Some economists say it presently ranges from a low of $15 billion to a high of $100 billion. Nobody knows what level the transactions take on there. If we had a system of taxation where people were more willing to pay their taxes, the underground economy would

disappear and taxes would then flow into government coffers at all levels.

The fourth advantage would be equity in the system. The Liberal red book dangles that idea but it does not deliver. People with the same level of income would pay relatively the same amount of tax.

Another major benefit of a proportional flat tax system would be simplified tax forms. Everybody could fill out his or her own income tax form at taxation time. As politicians and parliamentarians, is that not what we are here for, to try and improve the system, try to make laws easier for people to understand and for governments to administer?

Where is the tax fairness and simplicity that the Liberals promised in their red ink book? We have bills like C-70, C-9, C-50, C-27, C-32, C-59. Next week the government is going to introduce another excise tax amendment to the Income Tax Act. All these bills put together add up to thousands and thousands of pages. The government has fallen into the same trap as previous governments. It has made the same mistake.

In the name of simplicity and fairness it continues to make the system more complicated and more inequitable. It says that by passing all these bills, it improves the system and makes it more fair and more understandable. Give me a break. Who could read all this in six months or less and understand it?

To members of the Liberal caucus here is an opportunity to stop the madness, to end the bureaucratic nightmare known as the income tax system and start moving the country toward a simple, visible, flat rate taxation system. Show some leadership. Follow the member for Broadview-Greenwood. Follow his advice. Follow our vision of a simple, visible flat taxation system. Show Canadians that omnibus bills like Bill C-70 will no longer be necessary.

The Liberals can only spin the public for so long. They can only use sophistry so long in the budgets they present every year. They can only use sophistry so long in presenting all their wonderful amendments and changes to bills before the Canadian public will realize that their clever use of words has a false and misleading conclusion and will not be accepted at election time.

Canadians will realize that if the Liberals do not do anything about it, that it is business as usual at plant Ottawa, they could be booted out just as fast as the Tories were. When the public does boot them out, the Reform Party will be waiting in the wings with a bill called Bill C-1 or C-2 or C-3. It will be a bill with a very high priority. It will be entitled an act to repeal the Income Tax Act and institute in an orderly fashion a proportional flat tax system in Canada over a three-year period.

A flat tax has further advantages in that visually it makes you feel good. I have with me a personal income tax return under the proportional flat tax system. It has three categories for gross income. It has seven elements of deductions which I defined in my speech. When the total deductions are added up and subtracted from total income, the tax is paid at whatever percentage we need initially to be revenue neutral.

As we improve government and eliminate waste in spending, we can continue to lower the rate to really give tax relief to the Canadian public. We can show them the more they look after themselves, and this gives them that opportunity because more money will be left in their pockets, then the better the system will be for everybody.

The corporate income tax return is also a simple one-page document that scares tax lawyers and tax accountants. They should not be scared. In this system rather than working for corporations that are in receivership and trying to determine whether it is 10 cents, 20 cents or 50 cents on the dollar and wasting fruitless hours trying to do personal income tax forms for $50 or $100, these people will be advising the public and corporations where to invest, where the best rate of return will be. They will be helping them build profitable companies.

I acknowledge that some tax lawyers and tax accountants will have to get out of the profession. Perhaps they will become entrepreneurs. Perhaps they will be contributors to the income stream rather that being on the receiving end of the expense stream. They do good work and they are necessary now. However it would open the field for a lot more opportunities. I do not think these people need to worry.

On this tax form under income we have everything the corporation makes. There are five deductions. Any losses are carried forward, for a total of six items of deductions for corporations. Subtract those deductions from income and send in the tax at the same rate as individuals.

This principle of fairness would make every Canadian and all corporations happy. Corporations would be proud of no longer being accused of manipulating the system, of not paying their fair share. We hear all the time that corporations do not pay their fair share of taxes. We hear all the time that the wealthy do not pay their share of taxes.

Under this system individuals would have a certain level of tax free income. A married couple with two children would have the basic $12,000 deduction, $6,000 for a spouse is $18,000, and $5,000 each for two children under seven equals $28,000 of income that would not be taxed.

Currently somebody making $12,000 has to send in $1,200. They then have to line up for some kind of subsidy program for education, job retraining, unemployment and welfare. By the time that $1,200 comes back to that individual it has shrunk to

about $400. That is what gets used up sending it to Ottawa and then sending it back to the people in the field who need it.

Let us stop this nonsense. It is one of the best ways we have to reduce the pressure and save social programs. Leave the money in the hands of the people who need it for their own subsistence, for food, shelter and clothing. We are supposed to be here to find solutions and that is a very concrete solution.

Without the loopholes, exemptions and deductions that the wealthy use now to manipulate the system and receive tax breaks, they will pay their share on all income. This will enable wealthy people not to worry about whether or not they are paying their share. I already know for a fact that 50 per cent of the tax revenues generated in this country on an individual basis come from 10 per cent or less of Canada's taxpaying population. The wealthy are paying their share. Now the Liberal government is saying the corporations are not paying their share. The corporations under this system would pay their share.

As we discuss the simple, visible, flat system of taxation perhaps the debate could lead to a system where corporations would only pay 5 per cent, allowing them to hire more people, to reinvest their profits.

Why would I invest in a company and how would I get my money back? I am using 80 cent dollars. I make an investment and it is not deductible. However, I have invested in an area where I feel and see that the economy is going to grow. It is not driven by the government. It is driven by speculators, risk takers and investors.

The company may be making a profit digging out gold or they have a manufacturing company and make bicycles better than the other bicycle. If I invest in that company and it makes profit it will pay me out of the profits. It gets to deduct those dividends and I pay tax on them. It is an equitable and fair system.

The government will no longer be able to accuse one sector of the economy of abusing the system. The flat tax cleans up the entire system of taxation and reallocates the purpose of government, what the government should be doing, whether it is regulation or social programs. It raises the money required to do it and delivers it.

I believe a flat tax system is going to become a reality in the United States. Therefore, why delay in making the proportional flat tax a reality in Canada? Let us start today.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member spent quite a bit of time talking about the flat tax approach. In my experience as a chartered accountant, if it sounds too good to be true, it probably is.

The member's approach and what he has been proposing to the House time and time again is overly simplistic and unfair. He seems to think that if one takes a tax return and shrinks it down to one piece of paper that somehow helps the situation. The method of reporting is only bookkeeping and paperwork. It does not impact the amount of taxes collected.

The member will know that if Canadians have medical expenses they have to provide an itemization of the expenses for deductibility. If they have charitable donations, and many Canadians have a lot of charitable donations, they have to be itemized. Nowhere on his proposed form is their room for detailing eligible expenses.

The member will know that unincorporated businesses with sole proprietors must have a set of books and must report the detail from those books as to various sources of revenue and legitimate deductions against business income on their personal tax return.

Similarly rental properties, which many Canadians have as investments for the future, must also have a set of books and must report in some detail so that revenue is properly accounted for and eligible rental property expenses are claimed.

I heard a contradiction in the member's speech. In the first part he insinuated that the rich were not paying their fair share. In the conclusion of his statement he argued that the wealthy and the rich were paying their fair share.

The member is quite right in the latter case. The top 10 per cent of taxpayers in Canada make $50,000 a year or more. They pay 37 per cent of all taxes in Canada. What is more important is that they also pay 42 per cent of all charitable donations. If the tax burden on Canadians who are fortunate enough to earn higher incomes is increased, the first thing to suffer will be their level of contributions to charitable donations, which will definitely hurt all Canadians.

The flat tax notion has to be dealt with here and now. If the member thinks that the U.S. has the answers to all Canadian problems, he is absolutely wrong. Let us give one very important example considering that last night in the House the member stood and said that members of Parliament should be paid a salary of $12,000 a month or $144,000 a year, an $80,000 salary increase. He is saying in the House that they will make things better. That is not the way to do it.

Under his flat tax system a member of Parliament who makes $64,400 a year pays income tax at 37 per cent on his average marginal rate. That equates to some $24,000 a year. Under his system of a flat tax with no deductions of 30 per cent, a member of Parliament would only pay $18,000 of taxes or a reduction in taxes of $6,000.

Persons making $25,000 a year pay $6,000 today. Under his system they would pay $7,500 a year, a $1,500 increase to a low income Canadian. Could the member explain why his flat tax actually hurts poor Canadians?

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, it is obvious the member does not believe in a single flat tax. I appreciate the difficulty the hon. member for Broadview-Greenwood has in his caucus.

Let me clear up the comment I made last night. The hon. member is an accountant. He knows that MPs currently make $64,000, have a $6,000 tax free travel allowance and a $22,000 living allowance. Those are taxable. Let him dispute right now that we are getting the equivalent of $10,000 a month. He can take that number, put it in his little calculator and figure it all out.

I am suggesting that we get rid of different levels of remuneration for MPs and quit using a low salary of $64,000 as an excuse for a gold plated, three tiered, extravagant, double standard pension plan. That is what the government is trying to justify to Canadian taxpayers. It is not legitimate.

What I suggested last night was in context. The gentleman likes to interrupt speeches, take things out of context, do a little twist, stick the knife in and do a little turn. I am trying to offer a balanced approach to and a balanced solution for MPs' compensation, a salary level where MPs look after their own pensions. They can contribute 5 per cent matched one to one by the government, not three and a half times one as the government is doing now.

Getting back to the specifics of the proportional flat tax or a flat tax, in the current system the tax form is one-quarter inch thick. In our flat tax system it will be one page. There is one line for charitable donations. Whether it is 5 per cent of gross income, 17 per cent of net income or whatever, it can be debated. When a person has a lot of donations and deductions the backup to this one page might be one inch thick.

Perhaps that accountant can get it through his head that I am not talking about everything on one page. There are receipts. It is justified. It is all sent in. That is all people have to worry about to figure out their income tax. He is out of the accounting profession because he is now a politician. He is a wannabe millionaire.

The other point he talked about was the supposed contradiction about the wealthy. The top 10 per cent is not earning $50,000 or over. He does not have his numbers straight. The top 10 per cent is earning $80,000 and over. They are the ones who contribute.

Is that the right number? What is the number? Help me.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

The number is $52,000 and they contribute 50 per cent.

[Jim Silye, Reform, Calgary Centre, AB]

I want to get this right because the gentleman likes the facts. He likes to be specific and I do not want to make comments out of context as the member does. I like to keep things in context. When I make a mistake and I am wrong, I admit it. I do not go on pretending I have all the answers like some members of the government.

I have vented my frustration with the member eloquently enough.

[Francis Leblanc, Liberal, Cape Breton Highlands—Canso, NS]

Mr. Speaker, I appreciate the opportunity to participate in debate on the legislation.

Bill C-70, an act to amend the Income Tax Act, seeks to implement a number of measures introduced in the 1994 budget, along with certain measures announced by the government at other times over the last year.

In asking for the support of colleagues in the House I would be remiss if I did not remind them of the context of the legislation.

The fiscal challenge facing the country has been a topic of considerable debate both in the House and across the country. Few dispute the scope of the challenge. Few dispute the difficult choices that must be made. Few dispute that we must act decisively. Few dispute that fairness and effectiveness must be essential guiding principles of any and all steps taken to overcome our deficit challenge. These principles have guided the government as it has worked to restrain spending. They guided the minister in crafting the budget presented in February.

For the moment and for the discussion of the legislation let me take hon. members back to the budget last year. Spending cuts alone could not deliver the deficit reductions set out at that time. Spending constraint had to be complemented with some measures on the tax side. Doing so was simply a question of fairness. Our vision of fairness guided us as we looked at the tax system addressing unsustainable tax preferences instead of imposing general tax hikes on Canadian taxpayers.

In looking at the corporate tax regime we sought to ensure that corporations paid their fair share of the tax revenues needed to fund government programs and to prevent certain businesses or sectors from taking undue advantage of certain tax provisions.

With this in mind, the budget last year proposed a number of measures for the rules governing the taxation of business income. Let me stress that our goal was not to penalize the business sector or to impede the competitiveness of Canadian corporations. We believe it is essential to maintain a competi-

tive tax system in today's global economy. We cannot disregard the role of business in creating and sustaining employment. Nor can we ignore the pressures faced by Canadian companies as they operate in fiercely competitive markets both at home and around the world.

One fairness issue the budget addressed was the tax rules dealing with debt forgiveness and foreclosures. Under the old provisions of the Income Tax Act many transactions involving the settlement of debt were not recognized in any meaningful way for income tax purposes.

The new rules provide a comprehensive basis to deal with debt settlement. In general they provide that forgiven debt amounts will be applied to losses carried forward and expenses, or partially included in the debtor's income. I should point out, however, that there are special relieving rules to minimize undue hardship from these new rules.

Let me turn now to the tax treatment of securities held by financial institutions. Until now the Income Tax Act was not providing specific rules regarding the tax treatment of such securities.

The measures proposed in the bill seek to reduce uncertainty in this regard and to ensure the income derived from such securities is measured appropriately. The amendments provide that certain securities will be marked to market, meaning that the appreciation or depreciation in their value each year must be recognized in that year.

In keeping with our goal of fairness the amendments include a transitional rule that allows increases in income resulting from the new rules to be spread over five years. These new measures are generally effective after February 21, 1994.

In addition, new rules are provided for debt securities that are not required to be marked to market. These rules deal with the measurement of income while the securities are held and the treatment of gains and losses on disposition.

Bill C-70 also amends the rules for the taxation of resident shareholders of foreign affiliates. This action is being taken as a result of the government's ongoing monitoring of developments in the area. The changes expand the categories of income of foreign affiliates that must be reported as income of the Canadian affiliates.

Another modification prevents the use of an affiliate's foreign active business losses to reduce Canadian shareholders' income. This change also protects the Canadian tax base. The amendments are generally effective for taxation years commencing after 1994.

Finally let me turn to six tax measures announced during the months after the 1994 budget. The bill addresses the issue of eligible prepaid funeral and cemetery arrangements. Under the legislation individuals making such arrangements would not have to declare interest on deposits up to a $15,000 maximum contribution as income, provided the deposit is not withdrawn for other purposes. The provider of eligible funeral and cemetery arrangements is however required to include in income the total amount received from an eligible arrangement.

Turning to the next measure, the bill proposes that real estate trusts with publicly traded units be allowed to qualify as mutual fund trusts. The measure responds to representations from the real estate sector which is interested in expanding the available methods of financing real estate. We believe the proposed change will facilitate the restructuring and refinancing of the sector.

The third of the post-budget measures is a measure that will help mutual funds reduce overhead costs and improve services to investors. The amendments allow mutual fund corporations to convert to mutual fund trusts on a tax free basis and allow tax free mergers of mutual fund trusts.

The bill proposes new rules to speed the resolution of objections and appeals particularly by large corporations. Large corporations will now have to specify the issues under dispute, the amount of relief sought, and the facts and reasons for objecting.

The rules also limit the ability of large corporations to raise new issues in a notice of objection where the objection relates to the reconsideration of an assessment. However new issues raised by Revenue Canada on such reconsiderations may still give rise to notices of objection.

In addition, the legislation will ensure that the new requirements relating to notices of objection will not apply to assessments which were repealed through court before the legislation received royal assent.

The final measure I want to highlight deals with the tax treatment of dividend compensation payments and other incomes connected with securities lending. The Income Tax Act currently provides that the lender of securities not be treated as having disposed of the security under these arrangements. As well, payments to the lender as compensation for dividends are treated as dividends in the lender's hands. While these dividend compensation payments are generally not tax deductible, a special rule established in 1989 allows securities dealers to deduct two thirds of such payments.

This legislation extends the use of the two-thirds rule, thus ensuring our security industries remain competitive.

[The Deputy Speaker]

The time has expired.

[Francis Leblanc, Liberal, Cape Breton Highlands—Canso, NS]

Can I go to my motion?

[The Deputy Speaker]

No. The time has expired. We will now proceed to Private Members' Business.

The House resumed from March 24 consideration of the motion.

Agriculture

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

Mr. Speaker, this debate is on Motion No. 314 by the hon. member for Moose Jaw-Lake Centre. It gives the government an opportunity to point out that it is working with the provinces and industry to deliver effective, cost efficient programming for the benefit of the primary agriculture and agri-food industry and the consumer.

The fundamental proposal in the motion has considerable merit. Who could not agree with the notion of reducing the duplication of programs and services? I cannot. It does not make sense for two levels of government to do the same thing. It does not make sense to spend $1 more than what is necessary.

If the government were to adopt the hon. member's motion to immediately pursue negotiations with the provinces and the agri-food industry to eliminate overlap and duplication, we would be reinventing the wheel.

We do not want a new set of constitutional negotiations. I remember what happened during the last set. We want agreements with the provinces to make a real difference in the lives of the people actively farming in Canada today.

I can think of no better example than agriculture, a shared responsibility between provincial and federal levels of government, to illustrate the enormous effort made by the federal government, provinces, the industry and municipal governments to work together to resolve issues and deliver effective programming and reduce spending.

There are many examples such as safety nets, where both levels of government and industry have come up with a national whole farm program that will provide $1 billion of income support for producers this year; $600 million from the federal government and the rest from provincial governments.

The federal government has been working with the provinces, with industry and even with municipal governments to put in place a national food inspection system that will harmonize standards across the country, get rid of duplication of effort where it does exist and at the same time maintain Canada's high standards of food safety and quality which are respected worldwide.

In financial services the Farm Credit Corporation and interested provinces are discussing ways to reduce duplication of government services. The FCC has acquired the New Brunswick agricultural development board portfolio. It has been working with the Alberta Financial Services Corporation since last June to combine the two lending services into a single delivery point.

In research, a valuable tool for Canadian agriculture and agri-food, the federal government is working closely with the private sector and universities to continue a long tradition of scientific excellence. The Canadian agriculture food research council, which has representatives from provincial governments, universities and industry, helps ensure there is a co-ordinated approach and that we avoid duplication.

The list is almost endless and I will not tire the House with much more, just a few more points: trade and market development, environmental initiatives, a new range of adaptation measures following the February 27 budget to support industry as it adjusts to a market driven economy.

There is no area where federal and provincial governments do not collaborate effectively. After all, what have we been doing in agriculture since 1867? That is what we will continue to do in the integrated world of agriculture and agri-food where co-operation among all the players is more important than it ever was in the past.

For these reasons I urge members to vote against the motion.

[Jake Hoeppner, Reform, Lisgar—Marquette, MB]

Mr. Speaker, it is a pleasure to address the motion of my hon. colleague from Moose Jaw-Lake Centre.

The motion states:

That, in the opinion of this House, the government should immediately pursue negotiations with the provinces and the agri-food industry in order to reassign jurisdictional responsibilities in agriculture and eliminate overlap and duplication.

The hon. member refers to this process as reconfederating agriculture. This is an appropriate term because it alludes to a new way off looking at how levels of government should treat agriculture.

The motion undertakes to prod government to adopt a more efficient and effective agriculture industry by reducing the amount of overlap between the federal and provincial governments. It is important to note the suggested changes and jurisdictions could be made without any constitutional amendments.

There are major changes afoot in the area of agriculture. In the west we are seeing the subsidy for grain transportation eliminated after an existence of close to 100 years. Global change in agriculture is at an unprecedented pace. We must change the way

we treat our industry to keep up with it. This is combined with an ever increasing realization that governments at almost all levels are in serious debt.

We do not have the money to fund everything. It is time to cut back significantly. Agriculture departments are no exception. The Department of Agriculture and Agri-Food has had its budget cut considerably in the recent federal budget.

It is now time to take a hard look at how we can eliminate overlap between levels of government so we can get the most results from our scarce tax dollars. In 1994-95 the 10 Canadian provinces will spend a total of almost $2.2 billion on the agriculture industry. The federal government will also spend an additional $2.2 billion on this industry. That is a total of $4.4 billion all coming from the same taxpayers.

Where are the provincial or federal funds? The 10 provinces had 10,000 civil servants employed in their agriculture departments this year. The federal government had about the same number for a total of approximately 20,000 full time people on the public payroll in support of private sector agriculture. That equals one person on the public payroll for every seven farms. Clearly with these statistics we must examine what kind of effectiveness we are getting for our expenditures.

As members of Parliament we must strive to ensure we have an industry more marketed oriented, can respond faster to external demands and is more productive and efficient.

With regard to government involvement in agriculture it is really time to get out the microscope and closely examine what government does in its dealings with agriculture.

By looking at the various components that make up the agriculture industry we can clearly label the tasks that should be performed by government and the tasks that should be left in the hands of the industry. As has been stated by my colleagues, reconfederating agriculture means we will develop a system of agriculture in which more decisions are made at the local level and at the farm gate.

Reform members have always said farmers, given the opportunity, will always make the decisions in the best interests of the industry. The motion really asks for the federal government to initiate a process where government at all levels works to give farmers this opportunity.

There are some important themes in the motion. The basic idea is that the decisions in the industry should be made at the closest possible level to the farm gate. The higher levels should be programmed where the federal government and provincial governments have some input.

We should ask the following six questions from this type of service. Does the program continue to serve the public? Is there a legitimate role for government in the program? Is the current role of the federal appropriate or could it be realigned with the provinces? What program related activities could be transferred to the private sector? How can overall efficiency be improved? Is the program affordable?

Government responsibilities would be clearly divided between the federal government and provincial or territorial governments. The provinces would be responsible for natural and human resources. This makes sense because these resources are specific to each province and they vary from province to province.

The federal government would have responsibility for trade policy, whole farm income, stabilization, import, safety and health standards and fiscal and monetary policy. This would reinforce the goals of the federal government which are to assist lower levels of government in areas that span provincial boundaries and managing issues common to farmers and processors regardless of what area of the country they come from.

Among the functions of government should be research and development to ensure among other things we are investing money primarily in sound ventures that guarantee return on our investment.

Another necessary role of government is establishing a necessary level of regulatory policy in the private sector. Although I think most people in the industry would agree that overall there should be a decrease in regulations and that governments should get off the backs of farmers and processors, there is still a need to provide a basic level to ensure the integrity of Canada's industry.

Another government responsibility is to create the lowest level of taxation possible for the most efficient environment for agriculture to operate in. The tax burden in Canada is simply too high. It has been fueled by indiscriminate overspending and it stifles investment and jobs.

A clean break is needed from the cycle of tax and spend. If we are ever to realize the full potential of our industry there are a few other responsibilities to be studied. I know my colleague and others have discussed these at greater length.

The responsibilities of the agri-food industry would be to provide the supplies to meet the demand. That is to say, by providing goods to the public the industry should have the responsibility and the input at all stages in the life cycle of goods including research and development, production, processing including storage, inspection, grading and labelling, and transportation. Producers must be directly involved in the marketing of their products. Financing and insurance should be available to processors in a competitive atmosphere.

I think the motion of my hon. colleague addresses these issues and gives some very important input into regulating or deregulating the agriculture industry so that it will become productive, efficient, and compatible in today's world standards.

[John Murphy, Liberal, Annapolis Valley—Hants, NS]

Mr. Speaker, I am pleased to rise today to speak on the motion before the House. I want to thank the member for Moose Jaw-Lake Centre for bringing this motion forward.

My riding of Annapolis Valley-Hants is the home of a large and diverse agricultural and agri-food sector. I am always pleased, therefore, to have the opportunity to discuss what our government is doing to support this important sector.

I believe all members of the House would agree that the hon. member's commitment to eliminating overlap and duplication in the agricultural sector is a good thing. While I believe this motion is well intentioned, I also believe it is unnecessary.

The hon. member wants to launch negotiations to reassign jurisdictional responsibilities. Canada's Constitution makes agriculture a joint responsibility of the federal and provincial governments. I believe this is one of the areas where flexible federalism is working.

Since 1867 the federal government and the provinces have developed a culture of co-operation. While the Constitution does not specify certain areas as federal and others as provincial, governments have learned, however, to work together without treading on each other's toes.

One area where this has worked well is in trade and market development. While international trade is strictly a federal responsibility and would remain so under the proposed motion, this government recognizes the value of working with the provinces to promote exports of agriculture and agri-food products.

In my riding of Annapolis Valley-Hants, I am pleased to say there is a strong and ever growing value added sector. The processing of hogs, chickens, fruits, and vegetables can be found in a number of my communities. Our government has an important role to play in helping them uncover new market opportunities.

The best way to expand our markets and reach our potential is through co-operation, both with the provinces and the respective industries.

We believe that there is no need to open the Constitution to address these issues of jurisdictional responsibilities. Instead, we must work with our provincial colleagues and focus on innovation and market development. This co-operation takes many forms.

When the Minister of Agriculture and Agri-Food travelled to Chile, Argentina, and Brazil in March, high level representatives of three provincial governments travelled with him. These joint missions allow the federal government to promote the entire Canadian agricultural and agri-food sector. At the same time, the provinces pursue specific opportunities for their own industries.

We saw another example of two levels of government working together in the final days of the GATT negotiations. Provincial representatives were in Geneva helping reach the draft agreement. Immediately afterwards the Minister of Agriculture and Agri-Food convened a meeting with our provincial colleagues to plan how we could meet our obligations.

Federal and provincial representatives worked very closely in the following months on the task force on orderly marketing led by the parliamentary secretary. Thanks to their willingness to work together for the common good, our supply managed sectors are moving forward to meet the challenges of the new trade regime.

Another example of this co-operation can be seen in the export targets established for this sector. The industry set for itself a target of $20 billion in agri-food exports by the year 2000. Federal and provincial ministers of agriculture accepted that target and agreed to help each other reach it. They added a further target of regaining Canada's traditional 3.5 per cent share of the global agri-food trade. Reaching this goal would boost our exports to $23 billion annually.

However, setting the goal was the easy part. For our next steps the federal government will continue to work with industry and with the provinces. We must work to provide the programs and initiatives that industry has told us it needs to take advantage of so as to develop new market opportunities. To this end, the department's priorities in the area of trade for the next three years will include a number of initiatives.

We will negotiate further trade access with countries such as Israel and Chile through the NAFTA. As well, we will work with countries such as China through the GATT expansion.

Our government is committed to creating the Canada agri-food marketing council. This will allow the industry to effectively advise government on how best to support exports in achieving their targets.

We will create an agri-food trade service to provide single-window access and market development services. Our government is also committed to consolidating existing market and trade development programs into a single streamlined Agri-food 2000 program. I believe this program will greatly assist industry in its export efforts.

We are working to provide producers and processors with timely information about international markets through a new

agri-food trade network. In doing so, we want to help businesses make better and more informed decisions.

A key priority will be the setting up of the agri-food credit facility. This facility will provide credits worth up to $1 billion for exporters of grain and other agri-food products to offshore private sector buyers. This in turn will help Canadian producers continue to compete effectively and efficiently in the export markets.

By working in tandem with the provinces to achieve these initiatives, our government is committed to helping the agri-food sector reach its export targets. Now is not the time to work at cross purposes with the provinces and debate jurisdictional issues. Now, however, is the time to foster even greater federal and provincial relations. In doing so, our agricultural and agri-food sector will only get stronger.

I again thank the hon. member for bringing this motion forward for debate. I certainly do not question the hon. member's commitment to eliminating inefficiencies and overlap in this important sector. However, I believe we can achieve our goals through federal-provincial co-operation rather than reassigning jurisdictional responsibilities.

[Philip Mayfield, Reform, Cariboo—Chilcotin, BC]

Mr. Speaker, it is a pleasure for me to speak today on motion M-314 put forward by my colleague from Moose Jaw-Lake Centre.

I find it interesting that my Liberal colleagues speak of the lack of necessity for this bill. Both the hon. member for Lisgar-Marquette, who just spoke, and the hon. member for Moose Jaw-Lake Centre, who proposed this motion, are active farmers who are struggling under the inefficiencies and the problems of the system as it is now and are seeking to put solutions forward.

The agricultural industry is intricately tied into the whole social fabric of Canada. Over one million Canadians today are involved in agriculture. Many of our peers in this Chamber, as I have mentioned, have left their farms to represent their friends and neighbours in the House of Commons. Millions of other Canadians only need to look back a generation or two to find a parent or a grandparent who worked the land. My own father ranched at the Springhouse ranch and my grandfather at the 141 mile ranch in the Cariboo district of British Columbia.

The product of the hard work of our Canadian farmers and ranchers sustained our troops during two great wars, saved the lives of millions of the world's poorest nations, and feeds the needy and destitute of today. They fed the world for decades and will continue to do so for decades to come. We are blessed with an amazing basket that feeds the hungry of the world. The question remaining, though, is how to continue feeding the world in the most efficient way possible.

The agriculture industry of today is vastly different from that of 50 years ago. Today, agriculture is controlled and managed through a number of government departments and private sector organizations. We have bureaucrats in downtown Ottawa studying regional farming policies, and at the same time their counterparts in the ten provincial capitals are duplicating many of the same services the federal government is offering. On top of these bureaucracies are a variety of government agencies and private corporations that work in the industry.

Combine all these agencies and government departments together and you have a tangle of rules, restrictions, and regulations that hamper initiative and change. What is needed is a new vision, a new and better approach to the management of agriculture.

There are three starting points the government must first realize before a positive change can take place. The three points I refer to are that each region of our country has unique and diverse needs; that each government has a responsibility to respond to these needs, using its respective strengths; and that each person within the agriculture community has a strong desire to go about their business in the most efficient and profitable way possible. Let me take a moment to expand on these three points.

First, on the uniqueness of each region, I have had the privilege of travelling through and working in many of the agriculture regions of our country. I have worked in the cattle ranches in the British Columbia interior. I have walked through prairie wheat fields. I have driven by the corn and tobacco fields of southern Ontario. I hope some day to visit some of the farms in Quebec, as I have had the opportunity to do in the Maritimes, particularly in Hants County, where the member for Annapolis Valley-Hants comes from.

What has always struck me is how distinctive each region is and how unique each region's needs are. Do these regions have common concerns? Of course they do. These concerns should be pursued in a united manner. Yet the regions do not share common ground on every issue, and we as parliamentarians must keep this in mind.

Second, on responding to those needs, this year the federal government will spend over $2.2 billion to support our agriculture industry, and the provinces will contribute a similar amount, meaning that almost $4.5 billion will be spent on agriculture programs this year. This works out to over $157 per Canadian or over $332 per taxpayer. That is enough to feed one person for ten weeks, and perhaps longer with careful shopping. Are Canadians getting value for that money? According to the farmers and the taxpayers, the answer is no. Is there room for improvement? Of course there is room for improvement.

For that $4.5 billion the various levels of government manage to keep over 20,000 civil servants on the payroll, 10,000 at the provincial level and another 10,000 at the federal level. According to my colleague from Moose Jaw-Lake Centre, this works out to one agricultural civil servant for every 14 farms.

The limited money remaining after paying these government employees goes into numerous support programs. These federal and provincial programs often end up overlapping each other, resulting in farmers wasting valuable time and paperwork, not to mention the tax dollars lost through duplication.

To respond to the needs of farmers, governments must play to their inherent strengths. That is, the federal government directing its resources to such areas as international trade, monetary policy, whole farm income stabilization, and safety hazards, and the provinces more locally investing their money in such areas as resource management and human resources.

There is the desire for each stakeholder to go about his or her business in the most efficient way possible. We must begin talking more about empowerment, giving individuals more autonomy in their everyday lives.

It is amazing how bureaucratic control has crept into so much of our Canadian way of life, stifling the very initiative it set out to reinforce. Extending autonomy can involve encouraging the private sector to become more involved so the market system can work to the advantage of the farmer, not just to satisfy regulations that are increasingly failing to meet the needs they were designed for.

We in Parliament must be constantly asking ourselves how we as law makers and the civil servants who enforce the laws and implement the regulations are interfering with the private sector. Are we in its way? If so, how can we move out of the way?

I urge the minister of agriculture and his provincial counterparts to be constantly asking the same questions asked during the federal program review for each and every subsidy and program in the department.

Does the program continue to serve the public interest? Is there a legitimate and necessary role for the government in this area? Is the current role of the federal government appropriate, or can the programs be turned over to the provinces or even eliminated in the name of efficiency and well-being for the individual farmer and the agriculture industry? What activities could be transferred to the private or volunteer sectors? If the government program continues, how can its efficiency be improved? Is the final package of programs affordable and if not which of these programs could and should be abandoned?

My colleague from Moose Jaw-Lake Centre has taken an important first step by proposing a new dialogue between the players involved in the agriculture industry. I hope this debate on Motion No. M-314 will be an important first step in bringing about substantial change in the agriculture policy of Canada.

I ask and encourage all members of the House to support this motion.

[Chuck Strahl, Reform, Fraser Valley East, BC]

Mr. Speaker, I am pleased to participate today in this third and final hour of debate on the motion by my hon. colleague from Moose Jaw-Lake Centre. The motion reads:

That, in the opinion of this House, the government should immediately pursue negotiations with the provinces and agri-food industry in order to re-assign jurisdictional responsibilities in agriculture and eliminate overlap and duplication.

My colleagues who have addressed this motion have focused on how we can get the agricultural business in Canada done smarter, better and cheaper. We have said that we must focus on how the private and public sectors can work together more efficiently and effectively.

We have reached a time in our history when good economics and good politics can converge. Canadians want their political leaders to make the absolute best use of public moneys. They want all mismanagement and waste done away with. They want the political turf wars between the federal government and the provinces to cease.

They want politicians to go back to square one and ask: If we had to start all over again, how would we structure our collective affairs? That is not just in agriculture, but may be especially so today. How would we organize government departments at the federal and provincial levels? How would we create co-operation, not competition, between the public and private sectors? These are conceptual questions that my colleagues have tried to present answers to as applied to agriculture within Canada.

We have said that if we could take agriculture, which is probably the most basic industry, and develop a clear division of responsibilities between levels of government and the industry, we could save hundreds of millions of public dollars and we could unleash the private sector to grow to its complete potential. By taking one department of government such as agriculture and working through this redesigning or reconfederating process, we could learn lessons that could be applied broadly across all the economic and social portfolios within government.

A discussion of this nature deals not only with a clearer division of jurisdictions between governments, but also with a clearer understanding of the functions and the roles of both the government and the private sector.

My colleague from Moose Jaw-Lake Centre has suggested government has six roles most appropriate for it. First, there is basic precommercial research and development. Second, is a commercial role limited to providing only those goods and services that are non-rival, non-excludable and thus not captur-

able exclusively by the private sector. Third is a minimum level of regulation that ensures safety and health. Fourth is a role in educating and training our children, youth and adults. Fifth is a role in serving the private sector with suitable public programs. Sixth is a mediation role in helping to resolve conflicting and sometimes competing interests.

On the other hand, we suggested that the private sector is most suited to make the vast majority of decisions and have ultimate responsibility for organizing the production of private goods and services. The industry must supply the demand and provide goods and services that can be competitive and from which profit can be gained. For the most part, government should stay out of these business related functions. There may be niche roles, but they will be very few in number. These business functions include commercial research and development, production, processing, transporting, marketing, financing and insuring.

Without question, this kind of business led free market system is the best way we have found to distribute resources and wealth throughout an economy and a society. This is because a business-led free market system is an open social order where individuals or parties have the right to contract with others on legal and mutually agreeable terms based on free choice. This open social order must promote personal responsibility for choices instead of state protection, individual innovation instead of bureaucratic control, and the encouragement of voluntary contracting exchange between free participants.

We must also recognize that we want a free market system to provide protection for weaker partners so that they are not victims of unfair commercial practices. In other words, we want a free and a just market system. This issue is without doubt one of the most important things that we as politicians can discuss at this level. It has occupied the attention of legislators and economists around the world since the free markets began.

At the end of this millennium we are also finding new resolve to ask how we best ensure a free market system is both free and just. I suggest there is both a moral and a democratic answer to the question.

Because the tools of wealth and freedom are available in a free market system, participants in that system have a moral obligation to ensure that the creation of wealth and freedom are spread as far afield as possible. To whom much is given, much is expected. Our cultural values will determine how moral a free market system really is. Then a market system that is free and just will be based upon a genuinely democratic process of decision making in public and private policy, work and capital. In a free market economy, justice for all is best realized by ensuring that bottom up democracy characterizes all economic and political institutions.

The power and authority must be spread out as widely as possible. Organizations must be flat rather than hierarchical. People must be empowered to fully participate in the privileges and responsibilities of a productive economy. In a multitude of counsellors there is safety.

This is why my colleagues and I insist on the importance of direct farmer and business involvement in developing agricultural policy. We must work from the bottom to the top, not the other way around. We must get the maximum number of people involved in the decision making process. Business and governments around the world are realizing that the more democratic these institutions are, the more economically and socially successful they will be.

A parliamentary democracy must submit political party discipline to representation of the people if it is to maintain the loyalty of those people.

The private sector has other roles to perform in organizing for the supply of private goods and services within a free and just market economy. Industry stakeholders must have freedom of association. They should be able to democratically organize, carry out their activities and advocate their causes to other stakeholders and the public in whatever self-supporting and legal manner that best serves their interests.

The private sector also has a self-regulation function. A clear set of regulatory policies that is established internally by industry or externally by government should be binding on all. This system nurtures the natural expressions of differences and openly rewards success within that regulatory policy.

Obviously the private sector should also have some ability to mediate its affairs and reconcile its own differences. Where this is not possible, outside private or public mediators could be called on to help. The real need however is for all the stakeholders in a given industry to develop a collaborative approach to allow each player to do what it does best in order to realize the best possible good for all.

Finally the private sector has an information sharing function, which is to say that it should research, compile, analyse, interpret and distribute data helpful to its cause.

These basic ideas about the most appropriate roles for government and the most appropriate roles for the private sectors are crucial. We began this debate by saying that it is time to re-confederate agriculture in Canada. The time is right and the need is now. We cannot just tinker with policies here and there. We must think into the future and drive, not drift, into it.

There must be a whole new way of doing agriculture based on more distinct and more co-operative roles for both levels of government, as much as possible separate from each other and separate from private sector industry. These suggestions are based on sound economic, organizational and democratic principles.

The first act that our Fathers of Confederation passed 125 years ago was the Agriculture Act of 1868. At the end of the 1990s perhaps we as parliamentarians could have the foresight and vision for the needs of today. I have sketched out the modest skeleton of a proposal. I ask the House now to vote in favour of this motion.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

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

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.