According to one colleague, it will be drab. I have the feeling that the next book will be the Liberal Party's drab book.
There are, I must say, some avenues which are worth exploring. Individuals. They are always telling us that we have to be careful with personal income taxes because, if we tax the rich, they will have less money, less money to invest. We have to be very careful. But I think that we still have to look into these possibilities. A dollar is a dollar. But, we have noticed that a dollar earned through employment is taxed more heavily than a dollar earned through capital gains. In Canada, people with money and who invest it, pay less tax on the money they earn on their investments than people who are salaried and on fixed incomes. Go figure. Is a dollar worth a dollar or are some dollars worth less than others under the current tax system?
Canadians have the impression that the tax scale is progressive, that everyone pays taxes. That if you earn $50,000, you pay a certain amount and if you earn $100,000, you pay twice that. This is not how it works. In 1992, based on figures I have seen, 2,000 Canadian taxpayers who had earned over $100,000 did not pay any income tax. How can these people not have paid tax? It could not be that they hid income from the tax people. I am sure that all citizens in that tax bracket are honest citizens who would promptly pay any amount owed to Revenue Canada. The fact remains that they did not pay any tax. This was made possible by all the tax credits, the many credits they could take advantage of. There were people investing in real estate, and others investing in movies or research. Anyone who had money started investing, with the result that a number of them ended up not paying any tax.
We could say good for them, if they were clever enough not to pay tax and were not doing anything illegal, all the better for them. I guess we could say that. However, there is a downside to that. I had noticed it in my region and I have friends who have looked into this whole thing. They are middle class people, earning between $40,000 and $50,000 a year, and they were wondering why the system was benefiting the rich and not them. Lawyers and accountants set up all kinds of limited partnerships from which people could borrow in order to invest, get a tax deduction on part of this investment and then repay their loans. In the end, they managed to divert money from taxation like the rich.
The downside of this is that, in many cases, the investors found that the properties selected by the limited partnership were not worth as much as they had been told. So, they lost money. They lost money in order to save on income tax. In fact, they took money owed the government to pay for services, and the only ones who benefited from all this seem to be those who set up some limited partnerships or made certain arrangements allowing some people to divert money from the taxman.
Finally, here in this House, the opposition questioned the Minister of Finance about people who had invested in research and development for that purpose. In Canada, the motto in tax matters is "save on taxes". These people, who usually came from the middle class, borrowed money to receive tax credits.
With these tax credits, it is always the same system. People take money from the government and manage to get tax credits, but the ultimate winner is the initiator of the financial scheme, the company that put forward phoney research projects. The bottom line is that these people end up with nothing.
The Department of Finance straightened some of this out. It realized that some of these companies were not seriously into research, and the credit was denied. You may say, "People knew that the government could go back three years for all these things", but the fact remains that these people got hooked because there is a belief among Canadian people that those with money can save on taxes.
I think that this is a prime example of a tainted system in which people who cannot afford to invest in sectors eligible for tax credits are urged to do so through all kinds of scams and end up being taken for a ride. I think that the Minister of Finance should look at tax shelters and tax credits for an explanation of why so many people in Canada do not pay taxes.
If this is legitimate and normal, the minister should tell us so and, if not, he should take the measures needed to correct the situation. I have some figures here. From 1984 to 1992, taxes paid in Canada by middle income households increased 6.7 per cent, compared to only 3 per cent for households with incomes
of $150,000 and over. Again, it is the middle class which is really paying the tax increases, while those with a higher income are taxed less. Some might say: But listen, 6 per cent of $50,000 is $3,000, while 3 per cent of $150,000 is $4,500; consequently, the rich are paying more. However, this is not the way things work.
With this system, the rich get richer, while middle class people see their taxes go up every year. This is not normal, and I think that the Minister of Finance, or a Liberal caucus committee, should take a close look at these issues.
And now, on to another topic. Recently, during the French presidential campaign, I read something about taxes on personal wealth. Candidates in France and elsewhere, and this may become the case here some day, have to make a statement of their financial position. In France, there is a tax on personal wealth.
It seems that such a tax existed in Canada in 1972, but it is no longer the case. We are apparently the only OECD country which does not tax personal wealth. Consequently, very wealthy families and individuals continue to get richer; yet, the Canadian government is not even considering taxing such wealth.
There are other things too. I will not go back to the issue of family trusts. We talked about it during the election campaign, and we raised it many times here, during question period. The Minister of Finance finally did something about it in this year's budget, not last year's budget, which is currently in effect.
So, this year's budget includes a provision on family trusts in which the minister made some changes to the rules. However, these changes will only come into effect in three or four years, thus giving time to the tax experts to find another way to exempt rich families, not to mention the possibility that a successor to the current finance minister could provide another tax shelter so that these rich people would avoid having to pay taxes.
Consequently, you see rich taxpayers who do not seem to be paying taxes when they should. There are people with large personal fortunes who never pay taxes on that wealth.
Some people can set up family trusts for the benefit of their descendants, maybe not for ten generations but just the same, this raises questions.
So something can be done in Canada about personal income tax. I disagree with what the former president of the United States, Mr. Reagan, used to say, that if they stopped taxing the rich, the rich would invest. Mr. Reagan tried it, but the rich did not invest. The rich went on accumulating their wealth, because that is what they do. They do not necessarily invest. And when they do, they usually invest with borrowed money, with other people's money.
As far as corporations are concerned, I think it is obvious that the corporate tax system in Canada must be changed, because corporations receive extremely preferential treatment. They will tell us-and I heard it said this morning by the Parliamentary Secretary to the Minister of Finance-that you have to be careful, that corporations must remain competitive. So their taxes should not be too high. Their tax burden should not be too heavy.
Mr. Speaker, do you know which G-7 country has the highest tax rate? Japan, apparently. Would anyone in this House claim Japan is not competitive? Competitiveness is not just a matter of taxation, it is something else. And people who use being competitive as an excuse not to pay taxes are definitely misleading the public.
We saw a very obvious example of this recently in Quebec, where the Quebec government wanted, in fact it still wants, to introduce a 1 per cent payroll tax for businesses with a certain number of employees, to oblige them to provide vocational training. Ghislain Dufour, the Quebec equivalent of the Fraser Institute, perhaps not the equivalent because Mr. Dufour does not qualify as an institute, and I do not think he is eligible for a tax credit, Mr. Dufour said: "Quebec corporations will be less competitive. It will be harder to compete. It does not make sense". A corporation with a payroll of let us say $500,000 would pay 1 per cent, which works out to $5,000. So the corporation is supposed to go bankrupt because it has to pay an additional $5,000 for vocational training for its employees?
In Canada, corporate taxes are too low. In 1987, 90,000 corporations did not pay income tax in Canada. Not bad. In 1991, it was 77,000. Incredible. Granted, some corporations may not be doing that well and so they do not pay income tax, but I would say that one-third of corporate profits in Canada are made by corporations that did not pay taxes. So these are not companies with two or three employees that are leading a hand-to-mouth existence, these are companies that made a profit and thanks to certain measures in the Income Tax Act, manage to avoid paying income tax. So this raises a lot of questions.
It raises a lot of questions for people who have no access to tax shelters and who pay income tax on their weekly pay cheques. How disgusting. There is also the whole issue of deferred taxes. Businesses, billion dollar multinationals established in Canada, are able to put off paying taxes from one year to the next through tax deferral. There will always be a point where their profits are lower, therefore, they will be able to pay less tax, etc. These are all things that make us wonder, and that give us the right to question the Minister of Finance regarding the legitimacy of this system.
The Bloc has also talked about tax havens. The Bloc finance critic has raised this issue with the Minister of Finance many times. He has asked him questions as Minister of Finance and perhaps as a first-hand tax haven expert. It is well known that Canada's Minister of Finance stopped managing his own affairs when he came to office, got in to politics.
The Minister of Finance used to be notorious for letting his financial affairs be conducted under a different flag than the maple leaf. Some companies open up in reputable countries, often very old countries, like Cyprus, Malta, Barbados, or even in countries quite far south, close to Australia, like Papua New Guinea, Panama. There are even Canadian companies which have set up shop in these areas. They have offshore subsidiaries in places like Cyprus, Malta, etc.
There are certainly people in these areas who can afford to buy the goods produced by the Canadian factories with subsidiaries there. However, I cannot believe, for instance, that all the 20,000 or 30,000 companies registered in Panama are there for the climate, for the location half way between the Atlantic and Pacific Oceans, and because this is good for business.
We have only to think back to the scandal following the death of Mr. Irving, so well known in New Brunswick, who moved most of his businesses and who specified in his will that his children in Canada would be cut off if they did not set up in tax havens.
When you are the Minister of Finance and you see Canadian companies setting up ghost subsidiaries abroad and you know all about tax havens and you do nothing, I think you are shirking in your duty.
This proves that it is time for a good clean-up, a thorough tidying-up of the Canadian tax system. I think we have to review the agreements we have with 16 countries on tax rates and other tax matters. The official opposition has often called for such a review. The minister's reply is that the matter is under consideration and, given Canada's competitiveness and the current situation, we are in the best of all tax worlds. I do not think this is the case.
The Bloc will obviously vote against this bill, not because the measures are so awful in themselves, they are Canadian measures for the Canadian tax system, that is to say they cloud the situation a little more, and the system will be muddier and muddier.
Finally, I think the Income Tax Act is a little like the country. I do not want to get into a demagogic diatribe on how Canada's situation compares with the Income Tax Act. What is the Income Tax Act. It is a heap of tax measures with more measures piled on every year. No one has gone through it; no has organized it.
People have called for change, and the answer has always been no. So now we have a jungle of an Income Tax Act where the strongest manage to inch their way through and impose their rule and where, often, the people who earn their living and do their best are unfairly taxed. I think the government has to propose a tax reform. Canadian taxpayers deserve it.