Debates of Sept. 21st, 1995

Corrections And Conditional Release Act

[The Deputy Speaker]

A request has been made by the deputy whip of the governing party. Divisions on the matters before the House stand deferred until Monday, September 25 at 6 p.m.

Canada-United States Tax Convention Act, 1984

[Sergio Marchi, Liberal, on behalf of the Minister of Finance]

moved that Bill S-9, an act to amend the Canada-United States Tax Convention Act, be read the second time and referred to committee.

[David Walker, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I welcome the opportunity to speak in support of Bill S-9 to ratify the recently-signed revised Protocol to the Canada-United States Tax Convention.

This is work-a-day legislation that addresses the dual issues of fair taxation and good international relations. In fact, Canada currently has double-taxation conventions in force with 55 countries, including the U.S.

This particular agreement was originally signed in 1980. The protocol being ratified under S-9 will be the third formal modification enacted over a 15-year period.

A substantial amount of the protocol deals with technical issues of definition and clarification of existing rules regarding taxes on income and capital. But there are also a number of important changes which should deliver real benefits to Canada and Canadians, or that enhance the fairness of the two tax systems as they apply to non-residents.

One of these important elements is that the protocol reduces or eliminates the rate of witholding tax that each country will apply to interest payments, direct dividends and certain royalties.

Canada and the U.S. already enjoy the most extensive trade relationship of any two industrial nations in the world.

And our exports to the U.S. are a critical component of Canada's 1994 economic growth, which was the best in the G-7.

By reducing tax withholding rates this protocol should ease and encourage the continuing growth of this trade and investment between our two nations. I should mention that it brings these rates into line with those provided in the OECD model tax convention, rates accepted by a majority of the 25 member countries of that organization.

Let me outline the specifics of these changes. Under the protocol the general rate of holding tax on direct dividends will be reduced to 5 per cent by 1997 from the current 10 per cent. In consequence, the protocol also drops the rate of the branch tax to 5 per cent again by 1997.

Regarding the withholding tax on interest payments, the protocol will see the rate reduced to 10 per cent from the 15 per cent rate that applied under the previous 1984 protocol. As well, the new agreement ensures that interest paid between a buyer and an unrelated seller will continue to be exempt from the withholding tax in the source country, even if the indebtedness has been transferred to a third person.

Finally, this agreement will eliminate completely the withholding tax on royalties on computer software and on patent and technological information. Let me remind this House that this bilateral relief will have very beneficial effects: first, by reducing the cost to Canadian companies of accessing technology and know-how from the U.S.; and second, by enhancing the ability of Canadian high tech firms to sell their products and services in the U.S.

Let me move to another area where Bill S-9 will have a beneficial impact: it will restore fairness regarding the impact of U.S. estate taxes on Canadians holding property there. I should acknowledge right off that there have been some concerns raised about this aspect of Bill S-9. Let me be blunt. Anyone who thinks that this is an unwarranted tax gift to the wealthy is mistaken and clearly does not understand the legislation and the changes in U.S. law it addresses.

Under current U.S. law enacted in 1988, Canadians who die holding U.S. property valued at over $60,000 U.S. may be subject to U.S. estate taxes. This is a much lower threshold than American citizens face. Once the protocol is ratified by our two nations however, Canadian residents will be entitled to treatment that is not less favourable than that available to our American neighbours. In other words, this means Canadians will generally not be subjected to estate taxes unless the value of the individual's worldwide gross estate exceeds $600,000. In addition, a special marital credit will be available with respect to property transferred to the spouse of the deceased.

There is a further change, again to enhance fairness in the way our two tax systems operate, involving U.S. estate taxes and their Canadian equivalent. Under the protocol our government has agreed to provide a credit against Canadian taxes on U.S. source income to the estate of a Canadian citizen in those cases where U.S. estate taxes are also levied. The United States will grant a reciprocal credit for Canadian income taxes levied on a deceased American.

Incidentally, it is also important to note that this provision is effective retroactively for death occurring after November 10, 1988 when the major changes to the U.S. estate taxes affecting Canadian residents were introduced.

Let me reiterate that these changes do not represent a gift of any sort to any Canadian. Given the fiscal challenges facing our government, we have no interest in helping the affluent escape paying their fair share of taxes. But fairness equally demands that no Canadian, whatever their means, should be cavalierly subject to the bane of double taxation. This is what this tax treaty protocol works to do, eliminate double taxation.

The changes agreed to by our nations recognize that while both Canada and the United States impose taxes regarding death, these take two separate forms. The U.S. applies an estate tax, but in Canada the levy takes the form of an income tax on any appreciation of a deceased's property over his or her lifetime. It is these different forms of death tax that have created a problem.

Canada, like most countries, has rules to prevent double taxation. However, these rules do not cover a situation like this where the taxes are imposed in different forms. As a result, unless the dilemma is corrected cases could arise where the estate of a Canadian with U.S. property would face combined Canadian and

American taxes conceivably exceeding the property's value. Obviously, that is absurd.

Our revised Canada-U.S. tax treaty corrects the problem. It does so by allowing Canadians to credit U.S. estate taxes against Canadian income taxes on U.S. income. In parallel, it allows Americans to credit Canadian income taxes against the U.S. estate tax liability.

I have covered the two most important areas of the tax treaty change that this legislation will ratify. There is another aspect to the protocol that I would like to review briefly. This deals with social security payments made by one country to someone who is now a resident of another country. Under the existing convention, such payments are not taxable in the source country. In other words, an old age security or Canada pension plan payment to someone who now lives in the United States is not subject to Canadian tax and only one-half of the benefit is taxable in the other country. Once the protocol is ratified however, social security benefits paid from one country will be taxable exclusively in that country. They will no longer be subject to tax in the other country.

I should point out that once the protocol is ratified our government will be proposing amendments in the Income Tax Act to apply the non-resident withholding tax to these payments. These should take effect next year.

The issues I have highlighted represent the most important and substantive changes to the existing tax convention between Canada and the United States. Now let me flag some of the more technical amendments the protocol also addresses.

There is a provision allowing for a better working of the rules concerning charitable contributions to tax exempt organizations of the other state.

Another provision covers an arbitration mechanism for the settlement of difficulties over the interpretation or application of this convention.

The protocol also introduces an article providing for assistance in the collection of taxes of the other state and to improve the exchange of tax information between our two countries.

These are small but useful steps for improving our country's ability to collect taxes owing, something the Minister of Finance pledged loud and clear in the February budget.

In conclusion, Bill S-9 is the result of carefully considered negotiations between Canada and the United States and I ask the House for its support as soon as possible.

[Pierre Brien, Bloc, Témiscamingue, QC]

Mr. Speaker, as far as Bill S-9, whose purpose is to amend the August 31, 1994 tax convention between Canada and the United States, is concerned, we do not see any major problems with these amendments to a tax convention that was first signed with the U.S. in 1980, if I am not mistaken, and then amended in 1983 and again in 1984. So this is the third time we are amending this tax convention to make it better with time and facilitate trade between Canada and the U.S. to the maximum extent possible. I will get back to these trade relations between Canada and the U.S. and between Canada and its other trading partners toward the end of my speech.

Of course, since this is my first speech in this House since Parliament reconvened, I cannot help but point out that our legislative agenda is extremely modest. The bills we are reviewing are anything but controversial or would have very little impact in the short term. In other words, we are trying to dispose of our leftovers.

While we might have expected, upon returning to the House, to be able to debate the reforms announced by the government that are late in coming with respect to unemployment, the old age pension plan, the human resources investment fund as well as the long-awaited GST reform that the Liberal Party promised in the election to carry out within two years. Time is running out; we are almost there. We now realize that this will not happen. There is absolutely nothing on the table indicating this can be done within the next two years.

Since these matters are not on the table, we are debating those bills that were tabled. However, we can deplore the fact that a government which claims to be concerned with job creation and the real problems has put so little on the table for the people of Quebec and Canada to enable us to discuss the economic and social future of this country as seen by this government. Instead, we are debating other important issues. There is no denying that tax conventions are important, but we would have liked to be able to discuss other topics as well.

Coming back to this convention and the subject of tax conventions in general, the purpose of tax conventions is to avoid double taxation, that is to say the levying of taxes in two different countries on foreign investments. This fosters the free movement of capital without putting tax barriers in the way of investing in other regions. And this fits in with the strong world-wide trend towards free capital flow. This is a good thing in that it allows resources to be directed where they will be the most useful to make better use of often scarce resources. In time, this will enable us to improve our economic system, provided of course that we manage to incorporate the other factors.

So, avoiding double taxation and ensuring that fiscal constraints are not created fosters trade between countries. Bilateral trade between Canada and the United States is constantly growing. As well, trade between Quebec and the U.S. is also on the rise, particularly since the free trade agreement, which received strong support from Quebecers, came into effect. In fact, Quebecers were

the instigators of this agreement. Therefore, we are dealing with a strong tendency.

We know that a north-south pattern, that is commercial trade between the U.S. and Canada or Quebec, is often much more natural than an east-west movement.

We often overlook the fact that it is very appealing to trade with several northern U.S. states, given their huge potential market, both for Quebec and for Canada. The same is true for western provinces in particular, but also for Ontario. There is a huge market out there and this is why we must ensure the best possible movement of capital, goods and services between the two countries.

I am pleased to see that the Liberal Party finally changed its tune regarding international trade. As you remember, the Liberals were strongly opposed to the free trade agreement. Even during the election campaign, they still had some reservations. However, once they came to office and saw the benefits of that treaty, common sense prevailed. I am glad to see that when the government is confronted with economic reality, common sense prevails. And this will always be the case in the future.

I am also pleased to see that the Prime Minister's views on international trade, which seemed so irresponsible to me during the election campaign, have now been adjusted in light of reality.

Sure, we can criticize someone who says one thing during the election campaign only to act differently once in office. However, that irresponsibility is not related to what is said or done once in office: rather, it has to do with the promises made to Canadians during the campaign and the resulting expectations.

The government's attitude is now much more responsible. And that is true in the case of international trade. We are pleased to see that Canada is prepared to accept Chile as a party to the North American Free Trade Agreement. Indeed, we are glad to see that when there are real opportunities to promote economic trade, the government leaves politics aside and strives to promote the development of new markets.

All this leads me to believe that, if Quebecers decide, as they will be asked to do very shortly, to opt for political sovereignty and be in charge of their own political agenda, their tax system and their economy, logic and common sense will prevail. I think Quebecers realize that. My riding is right on the border with Ontario, and I think people are well aware of the day-to-day reality of this when they go and buy or sell goods outside the province. So the economy is one thing and, in many cases, the interests of partisan politics are something else altogether.

As far as tax treaties are concerned, I must say that although it is not the first time we have discussed tax treaties since the beginning of this session-there were a number of other occasions-we never really tackled a problem mentioned by the auditor general, when he said that tax treaties were a very good way to avoid double taxation but that in some cases, when tax rates differed substantially in each country, they could lead to a tax haven. It could be very attractive for some people to put their profits on the books of a foreign branch instead of letting them be realized by parent corporations which are often located in countries with higher tax rates.

This is quite a problem. The auditor general gave 16 examples which could be considered tax havens, to varying degrees. Some very slight changes were made in one of the finance minister's two budgets, but they were not more than that. There have been no further discussions on the subject since that time, but we will have to do it sooner or later.

Trade is expanding between countries throughout the world. The free trade movement is spreading and covers all of North America. If you go to South America, each country has its own tax system. Increasingly, multinationals are using the so-called butterfly system, in which certain components are manufactured by one company and other components by another company. They are all connected to the same corporation which, in the process, manages to pay the lowest possible tax rate.

Companies do that, they hire tax experts to check the various tax rates and best locations for booking losses and profits. These companies sell goods to each other, to their various branches, and they can often artificially change their prices so as to channel their profits to the country with the most attractive tax rate and their losses to another country. Furthermore, in Canada, interest payments on loans are tax deductible.

So a company can decide it is attractive to borrow money here, to use our tax system to deduct interest costs, and then try to channel profits to another location. We must not forget that capital losses are also deductible in this country, which is normal, so they can declare their losses here, take advantage of the deduction on interest payments and channel their profits abroad. This is quite a problem.

It is less of a problem with our biggest trading partner, the United States. But that does not mean it is not a problem in the 16 cases listed by the auditor general. As I said, we must not necessarily assume that the same degree is involved in all 16 cases, but an extremely thorough analysis would need to be done, looking at each situation closely.

The government has undertaken no action in this connection. The finance minister has even been questioned on this matter on several occasions and has never even admitted that it was a

problem for him. Under such circumstances, we have a long way to go. It is like denying reality. As you know, in solving problems the first step is admitting there is a problem. I therefore hope that my colleagues in the government who are present will be able to make the minister aware that there is a major problem he will have to address. It is certain that our Parliament can pass tax conventions piecemeal, one at a time, as they are modified and adopted. Others will need to be adopted in future with other countries with which we might create economic ties.

There is much talk of Canada's turning its eyes to Asian markets. One day there will also be talk of agreements with them, and that will have to be looked into. It would therefore be rather appropriate for somebody, somewhere, who is concerned with real problems and admits to being concerned with real problems to say that this is something that needs further examination.

There is no denying it could become a financial problem, at a time when we are continuing to tighten the screws on society's most disadvantaged, claiming rightly that public finances are in a sorry state. Socially, however, it is becoming hard to accept, because the same people are always being hit.

I understand that these things are complex and not easy to explain to the public, but it is our job to follow them.

According to a newspaper article I was reading, there is even a Liberal member challenging this and other tax conventions and other government actions, on sometimes legitimate and sometimes debatable issues. So, as we can see, even within their ranks, things are not unanimous. It would be worthwhile discussing this seriously.

The Standing Committee on Finance would be an appropriate venue, but this must not become simply a matter of passing a hot potato on to the committee so the minister does not have to deal with it. We have to give some quick thought to the situation.

This bill is at second reading and will go to the Standing Committee on Finance between second and third reading. There is one aspect of this convention, which the parliamentary secretary talked about earlier and which we will be wanting clarification on. It has to do with the fact that an amendment in 1988 in the United States reduced the non taxable amount of estates for foreigners from $600,000 to $60,000. This tax convention re-establishes the non taxable amount of foreigners' estates at $600,000.

As, today, we are correcting matters and returning to the 1988 figure, it appears that the amendment is retroactive. In a number of cases, therefore, it will mean expenditures, because at the same time a deduction will be allowed for amounts paid as taxes on estates.

This point requires some technical clarification. I am not sure I have hit on the effects of the provision, but we would be happy to clarify this in committee and to have a better look at what it is about. I noted that the parliamentary secretary indicated this was a good thing to do. I know that the matter was discussed in the Senate as well. We in the finance committee can seek clarification from department officials and make sure that, if it is done retroactively, there is some logic behind it and that the government does not lose a lot of money to people who might be able to afford these taxes.

It is a sensitive issue. I have some problems with it. It is difficult to accept such changes on a retroactive basis. This is something governments are increasingly resorting to and it is a rather dangerous trend. It would be better if retroactive amendments were to the people's advantage, but that is not always the case. We have been through this before. I remember in particular the cool reception given the rather important retroactive amendment made by the former government of the current leader of the No side in Quebec.

It is difficult because individuals are being asked to act more responsibly, to plan for their retirement, and so on, while the government can decide to change the rules of the game from year to year. The retroactive effect of one provision of the amendments to the convention is something that should be clarified in committee.

In conclusion, may I remind you that this tax convention is nothing new. These are simply amendments to a convention that was signed with the U.S. 15 years ago. This is the third time it is being amended. That is quite normal. Things evolve with time, allowing us to improve economic relations, especially since the 1988 free trade agreement with the U.S., which is an important instrument of future trade for both Quebec and Canada.

I am happy to see that when the government side does something concrete for the economy, common sense prevails over last year's electoral stand on the U.S. They must be pragmatic enough to make sure that businesspeople in both Quebec and Canada can do business and be as profitable and efficient as possible so they can contribute to the country's economic growth.

I hope they will take the same attitude during the Quebec referendum campaign, although I doubt they will because of their partisan politics. But common sense will prevail again the day after. The economy is one thing, but politics is something else.

[Jim Silye, Reform, Calgary Centre, AB]

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.

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I was going to let the matter go to a vote but I was encouraged by the previous speaker to say a few words.

It is clear that Bill S-9 is a result of a complex process flowing from a tax treaty signed between Canada and the United States in March 1995. The Senate quickly got on to this important matter in its judgment and decided to give it top priority over a number of other pieces of legislation. As far as the Senate is concerned it requires top priority. The bill passed in May before the summer recess. Now, in the first few hours of this session of Parliament, the government also says that this is a priority. This tax measure has taken priority in Parliament over all kinds of other initiatives.

I can talk about the high levels of unemployment that are not being addressed. I can talk about all sorts of social, economic and cultural issues that are simply being ignored. The government is saying that this is a priority, that we must bring in a tax provision changing the Income Tax Act to benefit basically a handful of the wealthiest families of Canada.

That is what we are talking about. Let us be perfectly clear. This tax measure will not benefit many people in the constituency of Kamloops or the constituency of Okanagan-Shuswap. I could go through the entire country.

The legislation has been written, drafted or designed to assist the financial concerns of a handful of very wealthy Canadian families.

As the Parliamentary Secretary to the Minister of Finance has argued, it is a matter of equity. I suspect that is true in the

government's eyes. Changes are required in the Income Tax Act so that they are not double taxed on U.S. investments and the fact they live in Canada. The whole matter of tax protocols, tax treaties and the resultant changes in the tax act is something anyone would support.

It is the process that troubles us. We are talking now about the principle of the bill. This is second reading. We are talking about the principle of the bill, that the government and the Senate feel that the matter is of top priority and that we have to do something to facilitate the financial concerns of a handful of very wealthy Canadian families. I doubt it. I doubt if Canadians would recognize it as a top priority.

I find it surprising that my friends opposite, including the Parliamentary Secretary to the Minister of Finance, would have the courage to stand in the House of Commons to say that we have to spend hours today, if necessary, to help a handful of wealthy Canadian families get a better financial deal on their tax bills. There is something cynical about that.

No wonder Canadians are cynical about the government. It is the same members who said to all Canadians not many months ago that if they elected the Liberals they would abolish the GST. That was said from coast to coast to coast, constituency to constituency throughout the lower mainland of British Columbia, throughout southern Ontario, throughout the province of Quebec, et cetera. Liberal contenders in the election said: "If you elect us we will abolish the GST".

The Deputy Prime Minister said that if the GST were not abolished within the first year she would resign her seat. To be fair, I wish we could believe these folks. Canadians are saying that they believe they are actually telling the truth. When my friends from Toronto said to their constituents: "You elect me and I will abolish the GST", they believed them; they said yes.

Bringing some financial tax pain relief to every Canadian is not a priority. As my friend says-and I believe what he says-we will eventually get to it. I suspect that rather than abolish the GST they will abolish the name GST and keep the tax. They might do a bit of harmonizing and so on to broaden it even more so that more items would come under taxation. We could refer to the province of Alberta. Albertans will now have all goods and services taxed as opposed to none.

Changing the GST is not a priority but Bill S-9 is. I wonder how many of my Liberal friends across the way actually know what is in the bill or how many Canadians will benefit from it. Those people that have $600,000 or $1 million in investments coming from the United States will benefit. How many Canadians does that account for?

[Jim Silye, Reform, Calgary Centre, AB]

One per cent.

[Nelson Riis, NDP, Kamloops, BC]

My friend from Calgary says 1 per cent. I doubt it is one per cent. We should not be giving priority to tax policy that addresses the concerns of less than 1 per cent of the Canadian population.

My hon. friend from Calgary Centre made a point that was well taken. He said that most times when we are trying to change the Income Tax Act we use the normal process through the finance committee and various other subcommittees to look at tax exemptions and ask whether they are of benefit to Canada. My friend from Toronto will know about this; he has been working on them for many years. Do they result in some benefit? Often when we have done a cost benefit analysis we have found that they have not. From time to time the government has eliminated tax exemptions or what some of us call tax loopholes. Even the Minister of Finance is using the term tax loophole more frequently.

We ask ourselves how we got into this debt problem. I know it seems to be a jump from Bill S-9 to the debt problem. Let us recognize that Statistics Canada did us a great favour back in 1991 when it identified that 44 per cent of our accumulated federal debt was the result of tax exemptions over the years, the drainage of billions and billions of dollars through tax loopholes.

We might say that some of the tax breaks, tax loopholes or tax exemptions are beneficial. Some are absolute boondoggles and some are debatable. Do Parliament and government give priority to a process that would see the elimination of some tax exemptions and as a result take a major step toward reducing the accumulated debt and deficit? Is that where we devote our attention, energy and time? No. Time is given to Bill S-9 that will benefit a handful of the wealthiest families of Canada. We will send this off to the finance committee now for thorough study where its advantages and problems will be identified.

In summary let us acknowledge what we are doing today. We are taking up valuable House of Commons time at a crucial time in our economic history, when we have 1.4 million Canadians who are jobless, another two million Canadians who are underemployed, probably many more than that who are working in low paying jobs and are barely getting by. We are seeing that a priority for this government is to assist a handful of wealthy families with their tax problems.

What about the tax problems of every other Canadian? What about the tax problems that every small business person in this country is struggling with today? My friend from Calgary Centre indicated that people are struggling through their tax returns and so on and need a tax accountant, a tax adviser, a tax lawyer for the simplest type of taxation situation.

It is with regret that we have this debate today, because of all the priorities facing this country this has to be almost at the bottom of

the bloody list. However, the government says this is a priority, so to them it is and we have to deal with it.

Let me say that on the principle of this bill we in the New Democratic Party will be voting against it.

[Dennis Mills, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, I commend the member for Kamloops for his commitment to total comprehensive personal and corporate tax reform. I too share with the member and also the member from Calgary Centre the view-and there are many other Liberals on this side of the House who share their view-that this is an issue the people of Canada want us to address. Canadians are hoping we address this issue of personal and corporate income tax reform in the next little while.

The Minister of Finance over the next 90 days will be preparing a budget statement and preparing for a budget obviously early next spring. This will be our window. This will be the time for all of us in this House to deal with this very important issue.

I am not going to get into a long debate on this. I do not think that is where I am coming from today, but I would like to ask the member from Kamloops a very specific question. Over the next 60 days, could we count on the support of the member and the New Democratic Party to roll up their sleeves and work with us to see if we could, as a bipartisan effort in this House, come up with a package that deals with the whole notion of comprehensive tax reform, both on the personal and the corporate side?

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, this could be one of the happiest days of my life, responding to this question.

If there is an issue facing this country right now, one of the top issues that is frustrating Canadians is the matter of our unfair, unjust, biased tax system at both the corporate and personal levels. A major overhaul is required. For us to go into the details of why that is the case, they are all well known. I suspect we have all had constituents lined up 50 or 60 deep some days explaining their problems with the tax system.

I can commit to my hon. friend from Broadview-Greenwood that there is nothing I would enjoy more than to sit down with him and others in a non-partisan effort to examine every tax provision that presently exists on a cost benefit basis to the people of Canada and come up with a comprehensive system of tax reform that would bring fairness back into the system. People would see the tax system as being fair to both them and others, where there would be nobody who would obviously benefit from that system.

I know some of my friends are very keen about the flat tax system. I am not sure what they mean by the flat tax because there are all kinds of definitions of that, as my friend from Broadview-Greenwood has explained in his publication and others beyond what he said. However, it is something we need to look at among a whole set of alternatives and various proposals to have a fairer tax system so that the most popular book come the new year is not on how to avoid tax.

When we go into bookstores across Canada, no matter what bookstore it is the front counter now has issues and issues and various publications on how to beat the tax man. The reason they are popular is because every single person and business person knows that the tax system is unfair.

I will use one example to measure the unfairness in how the tax system is being used. The audit division of Revenue Canada tells us that for every $1 it invests in an audit procedure it collects $6 back. It is not necessarily that people are all breaking the law, but they are certainly hedging on that. In other words, they are saying that this does not seem to be clear so I am going to make my tax decision in this grey area. As a result, the treasury of our country is losing billions of dollars that would normally be collected. However, because of a tax system that is so vague, so grey, so biased, so unjust and so unfair, people are revolting against it in a number of ways.

Let us not forget that the obvious way the people are revolting is to participate in the underground economy. What are the losses there? The experts will tell us that anywhere from $40 billion and $160 billion are lost each year because of transactions that are not registered and not taxed as a result of the underground economy.

Therefore, I say with enthusiasm, in response to my friend, yes, I will be willing, with my party very strongly behind me, to participate in any measure that will result in a fairer tax system than we have today.

[Jim Silye, Reform, Calgary Centre, AB]

Mr. Speaker, I would like to ask the hon. member for Kamloops a question. If he believes that the current system of taxation is unfair, that the current taxation system is too high, what does he think about the current level of government spending?

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I want to respond to my friend. He might be playing a little bit of politics here, but I think it is a question that deserves a serious answer on my part.

How has our accumulated debt occurred? Fifty per cent of our accumulated debt comes from the result of compound interest because of our high interest rate policy. Forty-four per cent of our compound debt is as a result of tax exemptions. Six per cent of our compound debt is as a result of government expenditures.

Let us recognize that in some areas we have overspent, but in my judgment in some areas we have underspent. There are some areas where we should be spending now to encourage people to find ways and means of getting back to productive work. Let us

recognize that the best social program in this country is for someone to have a decent paying job.

[The Deputy Speaker]

The member's time has expired. 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.

(Motion agreed to, bill read the second time and referred to a committee.)

[The Speaker]

My colleagues, it being almost 2 p.m., pursuant to Standing Order 30(5), the House will now proceed to statements by members.

Alternative Fuels

[Andrew Telegdi, Liberal, Waterloo, ON]

Mr. Speaker, GFI Control Systems Inc., located in the riding of Waterloo, is the world's leading designer, manufacturer, and supplier of technologically advanced natural gas and propane automotive fuel systems. GFI holds the coveted ISO 9001 quality certification for its entire facility.

GFI products are now being exported to the U.S. and to over 10 other countries and to dozens of original equipment manufacturers that are moving to alternative fuels.

As a result of legislation in the U.S. and Bill S-7 in Canada, GFI is looking forward to additional sales and employment. In order to accommodate this growth, GFI is enlarging its facility. This expansion will produce several advantages. The new and improved facility will accelerate the development of leading edge technology for markets worldwide. It will allow GFI to operate an inhouse emissions control laboratory. It will also offer opportunities for more extensive training of dealers and technicians. The centre will create 50 new jobs.

The success of GFI is good news for the consumer, the environment, and Canada. To all the people involved with GFI we send our congratulations and thanks.

Simple Majority Rule For Referendums

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

Mr. Speaker, in July 1948, barely 52 per cent of Newfoundland voters taking part in a referendum agreed to join the Canadian federation. In November 1994, 52 per cent of Swedish voters supported their country's entry into the European Union. Two weeks later, 52 per cent of Norwegians voted against joining the EU. And in France, the Maastricht Agreement was approved by 50.9 per cent of voters.

In fact, the simple majority rule as applied to referendums is universal because it is the only democratic rule. The official opposition did the right thing by reminding the Prime Minister of this fact this week, as Robert Bourassa did in Washington yesterday. The only one who does not admit that Quebecers have this right is the Prime Minister of Canada, who should know this basic democratic rule.

Government Agenda

[Ray Speaker, Reform, Lethbridge]

Mr. Speaker, I rise today to draw attention to the weakness of this government's agenda, an agenda so thin the government House leader's closest relatives would have trouble getting excited about it.

This thin soup agenda is creating a tremendous leadership vacuum. The provinces are losing faith in Ottawa as a force for social change. Individuals are losing faith in Ottawa as a catalyst for jobs and economic growth. The country is losing faith in Ottawa as a source of fresh innovative ideas.

Reformers are not going to wait for this government any longer. It is time to put some meat in the soup. Earlier today the Reform Party took the first step by outlining the national Reform agenda for Canadians.

From the day we arrived in Ottawa, Reform has acted as the de facto official opposition, but the Liberals' continued silence on important national issues has convinced us we have to act as the de facto government as well. As Canadians will see, that is the role we are prepared to play.

Canadian National Railways

[Bill Blaikie, NDP, Winnipeg—Transcona, MB]

Mr. Speaker, yesterday CN laid off 266 people at the CN shops in my riding. How hollow the 1993 promises of the Liberals now ring about jobs and preserving Winnipeg as a rail centre.

Workers are being let go to improve the books for privatization purposes. The government now says it will not be trying to sell CN until after the referendum. Where I come from, we still say there is no need to sell it at all.

I can tell you what else is being said, Mr. Speaker. People wonder why Montreal is being guaranteed the headquarters of a privatized CN when all we seem to be guaranteed in Winnipeg is

more and more layoffs. In their view, CN headquarters should be in western Canada, where most of the traffic is.

At the very least, the government should indicate that it will reconsider the way it has bound privatized crown corporations like Air Canada and soon CN to keep their headquarters in Montreal, especially if the vote goes the wrong way on October 30. I am sure that Canadians want privatized Canadian crown corporations to be headquartered in Canada.

Terry Puhl

[John Richardson, Liberal, Perth—Wellington—Waterloo, ON]

Mr. Speaker, I rise today to pay tribute to an outstanding Canadian athlete and the community that honoured him.

On September 14 the town of St. Mary's, the future home of the Canadian Baseball Hall of Fame, hosted 15-year major league veteran Terry Puhl.

Terry, a native of Melville, Saskatchewan, spent 14 of his 15 seasons with the Houston Astros and holds a .280 career batting average. Also known as a superb defensive player, Terry holds the major league record for the best fielding percentage in baseball, .993.

In six of his seasons he did not make a single error and he had only 19 in his entire career. Terry Puhl is the first player to be inducted into the new St. Mary's home of the Baseball Hall of Fame and Museum.

This visionary and enthusiastic community of only 5,000 people is undertaking to build an $8.7 million complex to showcase Canadian baseball history and heroes.

I congratulate the people of St. Mary's for their hard work and dedication toward this goal. I wish them success.

Human Rights

[Rey D. Pagtakhan, Liberal, Winnipeg North, MB]

Mr. Speaker, 16-year old Sarah Balabagan faces the death penalty in the United Arab Emirates for the stabbing death of her employer.

Last June she was given a prison term but was awarded compensation for the rape she endured at her employer's hands.

It was shocking that last Saturday her sentence was changed to death. This is reminiscent of the hasty execution six months ago in Singapore of another Filipino nanny, an execution deemed unjust on subsequent inquiry, but too late.

I therefore urge the House to intervene on Sarah's behalf, to allow a full and impartial judicial review of her case.

Canada has long prized human life and championed women's rights worldwide, the theme of the U.N. conference on women held in Beijing. Canada's support may well be the saving voice for this young woman's life.

Canada's timely stand on this matter goes beyond the life of this one young woman to the lives of all women of the world.

Indian Affairs

[Elijah Harper, Liberal, Churchill, MB]

Mr. Speaker, last week I proposed the concept of a sacred assembly to consider aboriginal issues from a spiritual perspective. This assembly will bring together native and non-native spiritual leaders in the spirit of healing and reconciliation.

I am pleased to report to the House I have received positive responses from churches, spiritual leaders, communities, national groups and also my colleague, the hon. minister of Indian affairs. We are now in the process of assembling a working group.

I envision this assembly as a forum for sharing spiritual wisdom on aboriginal issues and also as a forum for promoting reconciliation between native and non-native communities in Canada.

This must happen if Canada is to heal and grow strong. I know many here have drawn on faith in our creator to guide and sustain us in our work in the House. In the spirit of this faith I call on all my colleagues in the House to offer their support on this initiative.

Quebec Referendum

[Maud Debien, Bloc, Laval East, QC]

Mr. Speaker, the tour organized by women for the Yes side in Quebec allowed thousands of women to find out about the choices in the upcoming referendum: on the one hand, a federal system in which unemployed workers and welfare recipients are seen as lazy and higher education is reserved for the rich; and on the other, a sovereign Quebec where women can help meet the challenges of a modern society attuned to their needs and priorities.

For the increasingly numerous sovereignist women in Quebec, history has clearly shown how federalism has become a barrier to collective growth. And this government's policies are not likely to make them change their minds.

What Quebec women want above all is a blueprint for society that will finally meet their aspirations. The side in favour of change is proposing such a blueprint. Women see sovereignty as an

instrument of social change that will make it possible to fulfil all their hopes.