Mr. Speaker, I rise today to support Bill S-9 amending the Canada-United States Tax Convention Act of 1984 for a third time, as mentioned by the two previous speakers.
For all intents and purposes the act is already a done deal as its contents were agreed on in a protocol signed by trade representatives from both countries on March 17, 1995. The protocol bill became Bill S-9 and the Senate subsequently approved it on May 3, 1995. That leaves it up to members of the House of Commons and specifically members of the Standing Committee on Finance to give it one last good look.
Basically tax treaties and their amending protocols have two main objectives, the avoidance of double taxation and the prevention of fiscal evasion. Since they contain taxation rules different from the provisions of the Income Tax Act they become effective only if we give them precedence over domestic legislation by passing bills like Bill S-9 through Parliament.
I want to make sure Liberal members opposite understand what that means. For Canada to simplify its tax rules with regard to trade with the U.S. its politicians pass bills like Bill S-9 that bypass the convoluted, complex and complicated Income Tax Act. With all due respect, what a treat that must be. Canadians sit at home trying to figure out their T4s and their T4As and phrases such as discernible loss while a few trade representatives sign a tax protocol not subject to any aspect of the Income Tax Act.
The primary objective of most tax treaties is the avoidance of double taxation. Bill S-9 makes a number of important changes in this area, including bilateral reductions and withholding tax rates on dividends, interest and royalties reflecting the rates now accepted in most countries, a complete withholding tax exemption for payments for the use of U.S. technology, relief for Canadian residents from the application of U.S. estate taxes, increasing the maximum estate tax exemption from $60,000 to between $600,000 and $1.2 million U.S.
I wonder if the Minister of Finance will be bringing in estate taxes in Canada in his next budget, making this section of the bill an exercise in futility.
With regard to double taxation, Bill S-9 expands the exemption from U.S. tax for the income earned by RRSPs, RRIFs and the Canada pension plan.
In the area of fiscal evasion the bill gives authority to impose withholding on CPP and OAS payments made to American residents. The 1984 treaty only allowed the American state these former Canadian residents lived in to tax such payments. Now we can withhold the money at source if it is being collected illegally.
There is also a provision in Bill S-9 for a mutual assistance in the collection of taxes owed by a citizen of one country who resides in the other.
These are very positive measures which our party fully supports. However, what disturbs me is that we can accomplish these changes internationally but not internally, not domestically. For example, we can agree to chase tax evaders north and south of the Canada-U.S. border yet nothing has been done by the government to chase those who evade things like child support across our provincial borders. It is a double standard.
Another example of this can be seen in reductions and withholding tax rates on the dividends, interest and royalties held in Canada and the United States. What about the continuing double taxation of domestic dividends in Canada? This is a double standard. Our trade representatives seem to be able to negotiate what our domestic politicians and representatives cannot.
The question that begs to be asked is why. The answer is because bills like Bill S-9 take precedence over the Income Tax Act. They are not governed by it. Maybe it is time Canadians did not have to be governed by the Income Tax Act either. Maybe it should be repealed. Maybe it is time to get rid of it altogether, start from scratch and build up a whole new base to create a simple, visible and fair system of taxation such as the flat tax.
Philosophically, certainly it is in tune with the times. Practically, it would be keeping in step with what is going on in the United States. A protocol bill like this one seems to solve all our problems. Many Republican representatives in the United States are looking at a flat tax. They are looking to simplify their system. They are looking to make it more fair, where people who make the same level of income pay relatively the same amount of tax. They are looking to reduce the high compliance costs of tax collection.
What is frustrating to me is that the majority of Canadians have to hire accountants to do their personal income tax returns. Our corporations have to hire accountants to do their tax returns. Businesses have to figure out their GST calculations and submit them to the government. In other words, the private citizens and businesses are paying to keep track of taxation for the government, and it still costs Revenue Canada $1.2 billion to collect our taxes. It still costs $400 million to $500 million for the GST revenues to add it all up. That is almost a cost of $2 billion when the people in the businesses are doing the work. Implementing a simplified taxation system would reduce that cost. It would be in line with what we are doing with protocol agreements such as we have in Bill S-9.
It is so obvious and so clear that I do not know what the government has to fear. The Liberal member for Broadview-Greenwood is proposing a flat tax. He has been ignored for 10 years. I do not know why. What is it that makes politicians when they form government afraid to look at a new, clear and fair system of taxation? Why not send the trade representatives who negotiated the deal into the House and let them negotiate in the standing committees a new system of taxation? Businesses would be better off and individuals would be better off.
We have to get rid of the intertwining of our social and economic programs through the Income Tax Act, separate them and have a system of taxation that collects the amount of money we need to pay for the programs Canadians want, be it child care, be it health care, be it education, or whatever it is they want. It could be a megaproject that we would cut but the government would probably continue. Then we would know what the rate should be. Then we would know whom to tax. Then we would know how much to tax. It would be there for us. It would be within our grasp. It is a system of taxation whose time has come; there is no question.
If we can agree on issues between two nations such as how to avoid double taxation, why do we not look at an internal system that would avoid double taxation within our own country? Why are we being so foolish in keeping the burden and the cost of calculating income tax and in keeping the burden and cost of high taxes?
More bills will be coming up later today and tomorrow that concern excise taxes. Some will be decreased; some will be increased. Bill C-90 will increase taxes all over the place. We do not need that. We need tax reduction, not tax increase. I will be talking more about the flat tax in future speeches, so I will drop the analogy of the good things in Bill S-9.
I see the parliamentary secretary to the finance minister. I am encouraged he is somewhat willing to look at what the flat tax has to offer. He has made no commitments, but it is a start in the right direction because it will benefit all Canadians.
In conclusion, once again I repeat that we are in favour of Bill S-9. However we are opposed to the fact that the government will not negotiate the same type of deals at home as it does abroad. Our government cannot continue to smile at the neighbours, make good deals with them and not make the same good deals at home. It is engaging us in fights at home. The separation fight is all about power. It is all about taxation, who should be taxing and at what levels, and getting rid of the double taxation system and the duplication of services. Why not tell the province of Quebec that it can handle x, y and z , that the federal government will get out of that business and that it can collect the taxes for it? That is something which shows that federalism works, but no, the government would not do that.
People in Canada need change in a big way. As we have seen today, positive change can only come about through bypassing, ignoring or disregarding the Income Tax Act altogether. If we had to continue to abide by the rules of the Income Tax Act to negotiate with other countries, we would not get anywhere because no one would understand it.
We have tax lawyers and accountants in this country who are intelligent and highly educated. They give advice to individuals and corporations and at the end of the day sign a disclaimer: "Notwithstanding all the advice I have given you, everything in here might be true or might not be true. My interpretation should be accepted by Revenue Canada, but if it is not it is not my fault". They do our tax returns. If it is in a grey area, Revenue Canada says: "No, you cannot have that". Then the department charges us and we have to pay. If we do not pay we end up having to pay double interest. A person has more rights as a criminal-and I do not want to go back to Bill C-45-than one who misses the filing date of the income tax return.
The government goes after us. It is arbitrary. It leads to conflict between citizens and the bureaucrats. We do not need that. We do not need the department to be frowned on, to be cursed at, to be sworn at. We can simplify the matter and make it better by having a simple system of taxation that everyone understands. Then we would not have taxpayers fighting the department over appeals, over treatment or over rulings. We do not need that.
In conclusion it is time that we start giving Canadians in Canada the same types of rules and rates governing Canadians outside Canada.