Mr. Speaker, I am happy to share my time with the member for Ottawa Centre.
I rise in debate today on the Bloc motion which is basically concerned about the government's hiring a technical advisory group to advise on the issue of business taxation.
It is an odd thing. From time to time we discuss business taxation here in some very strange formats. The reality is corporations are fictitious creatures of the legal system. There is no such thing as a corporation. We cannot touch it. We cannot feel it. The reality is when we tax corporations they simply use that taxation to turn around and treat it as a cost of production and allocate it to consumers. The only true taxation is taxation of individuals.
The underpinning of this motion is a concern that people who are experts in the field of taxation somehow should not be advising the government. Of course, nothing could be further from the truth. As I look over the roster of the people who are in this technical advisory group, I see Mr. Brown, chief executive officer of Price Waterhouse, and Nancy Olewiler, a professor and chair of economics at Simon Fraser University. These are people who are eminently involved with economics and business taxation from across Canada.
This is not the end of the process. These people are basically advising the government in the areas of business taxation.
The concern of a lot of people is with two things, tax simplicity and fairness. There is a great feeling that our system is not fair. There is a great feeling also that it is far from being simple.
We have to continue to keep our corporate structure attractive for Canada to be a place to do business in. Clearly if our corporate tax structure was such that we inhibited businesses, new businesses would not start in Canada. Consequently we would not reap the benefit of employment caused by that.
The whole issue of fairness talks about how people are taxed under the existing system. I will deal with one aspect of fairness which concerns me. It concerns me so much so that I presented a
private member's bill, Bill C-215, now before the House. I do not think people realize we have had spiralling rates of taxation in Canada. As we have had spiralling rates of taxation we have asked our collection agency, Revenue Canada, to be ever more judicious in extracting that money from the general public.
As a consequence, some of the things we ask Revenue Canada to do, for instance the seizure of bank accounts, even the sale of a spouse's residence on the demise of her husband, are really questions of whether government should have those kinds of power and whether we should temper them.
My private member's bill addresses this matter. There is a taxpayer's bill of rights in the United States. In the United Kingdom there is a taxpayer's ombudsman. Basically that is what my bill proposes to give to the people of Canada, some kind of an intermediary between taxing collection authorities and people in general.
Many members have seen in their ridings situations of seizures of bank accounts. Sometimes Revenue Canada makes a mistake. We are all human and we sometimes make mistakes. When Revenue Canada makes a mistake the credit rating of the company or individual is blemished and there is no real recourse in the system other than a very expensive litigation process.
I refer to a single woman in my riding who because of the taxation of child benefits incurred something like a $1,500 tax liability to Revenue Canada. She is paying that back over a two-year period. She dealt with two or three collection officers and the third one decided to be very aggressive and seize her bank account, getting a total of $94. The woman had been paying as agreed. Through the process she had a heart attack and lost two weeks of work. She is out $800 and there is no real prospect of getting that back from the system.
My bill tries to deal with some of those inequities. In some ways the motion of the Bloc is concerned with the fairness of the system.
There is much talk that our tax system is not simple. Well over 50 per cent of individuals who file tax returns do so on their own. They do not require professionals to give them assistance. That is good news.
One thing that unites this country, if nothing else, is that at this time of year we are all sitting down with blue forms trying to figure out our taxes. That holds true from Newfoundland to British Columbia to the Northwest Territories. I do not know if that is a good or positive thing, but it is something we all do and I am sure we all agree we dislike the process.
The system is complex. As I said before, the reason is that we asked the system to ratchet up the amount and quantum of tax it extracts from the general public. When that is done it is very much like a water pressure system where the pipes are designed to sustain approximately 50 pounds per square inch. Now we are asking to put pressure in that system of something like 1,000 pounds per square inch and we get leaks from time to time and we are required to patch the leaks. It works the same with the income tax system. When we patch the leaks the income tax gets higher and higher.
When I was in practice every week we got a two or three-inch stack of amendments to the Income Tax Act. The reason it is complex is the amount of money we want to extract from the system.
This is not new. Economics books can take us back to the time of the Romans and even before and will show that every regime that tried to increase taxes exponentially eventually ran into a wall of complexity and evasion. There is a point at which people will evade the system because of the amount of money being extracted from the system.
My hypothesis today is that the system is complex not specifically due to bureaucratic wrangling but with the amount of taxes we want to extract from the system. My argument is we could put simplicity in the income tax system but it would have to be done by reducing the quantum of taxes we pay. This is certainly an objective of the government. We realize Canada's taxation system on a personal basis is the second highest of all OECD countries, France being the first.
To get simplicity back into the system it is obvious we have to reduce income taxes to individuals. How can this be done? The government has taken on a concerted program to reduce the deficit and debt. Obviously it has to do one thing at a time, get the deficit and debt situation under control before we can look down the road to actually reducing taxes on individuals. That is part of the process. The reality is both things cannot be done at the same time.
One provincial government wants to do both things at the same time, the Government of Ontario. It thinks it can cut spending while at the same time reducing taxation. This is not impossible but quite frankly unfair. What happens in that situation is it starts cutting back the basic social services people have come to expect and appreciate from the government. When it cuts back taxation, because our system is progressive, that is to say as you make more money you pay more taxes, eventually what it is doing is transferring the reductions in social programs to the people who are the most wealthy. It is sort of a reverse Robin Hoodism, if you will, of economics.
The federal government is not committed to that kind of concept. It realizes we have to cutback and make governments smaller, but clearly it cannot turn around and give the benefits to those who are most wealthy and who do not need the protection of that.
Why are rates progressive? Most of us in this country and indeed most of the western world have realized it is very important to have a redistribution of income. That is to say, as people make more, proportionately they pay more in income tax.
I can point out countries that do not do that for a variety of reasons, some which have systems that look like they are doing that but the result is actually the reverse. I look at countries in South America, particularly Peru, which I have visited. I talked to the people about their economy. I realize what happens when you do not have a progressive system. Basically you end up with a small group of people with a lot of money and you end up with a lot of people with no money. That is the kind of system we do not want to promote.
No one is better off in that situation because even those who are wealthy can longer find a market or trade for any business goods they have because there is no market. Nobody can afford to buy their products. That is why our system is progressive.
This leads me to the discussion of some of my Reform colleagues embracing the flat tax. The Hall-Rabuska study of 1985 originally put forward the concept of a flat tax. Ironically that flat tax was based on the concept of not only a redistribution of income but also a negative income tax that purported to be able to transfer money back out to people as a social welfare system. This is not so with the right wing movement both in the United States and apparently in our country as well. The flat tax system has been turned on its head.
What is a flat tax system all about? A flat tax system is doing away with progressiveness. That means as you make more money you pay the same amount as somebody behind you. In other words, we do away with the whole object that the wealthy will pay proportionately more as opposed to those who are less wealthy. Clearly that is not saleable. Politically that does not make a lot of sense.
The way we sell the flat tax is by linking it with something we can sell, and we can sell simplicity. In a sense what we try to do is link the flat tax with basic simplicity because everyone can understand it and they like simplicity in the taxation system.
What does simplicity have to do with a flat tax? They have very little in common. The proponents of the flat tax would like us to believe they can reduce the cost of tax collection. The reality is they cannot do that.
There are very few economic studies that will indicate the evolution of a flat tax actually reduces the cost of the collection system. Most people who support a flat tax system are basically attempting to sell their product by putting a little good in with the bad.
Sixty-six per cent of the total quantum of taxes in Canada are collected from the top 30 per cent of taxpayers. It does not take very long to understand-