Debates of March 19th, 1996

Business Of The House

[The Deputy Speaker]

Is there unanimous consent to move the motion?

[Some hon. members]

Agreed.

(Motion agreed to.)

The House resumed consideration of the motion.

Supply

[Doug Peters, Liberal, Secretary of State (International Financial Institutions)]

Mr. Speaker, I join my hon. colleagues on the government side in condemning this tiresome and trivial supply motion today.

Perhaps we and the technical committee on business taxation can take some small comfort in the words of the great philosopher Immanuel Kant: "Slanders are not long lived; truth is the child of time". It has not taken much time at all to reveal the absurd and unwarranted attack on this committee advanced by the hon. member of the Bloc.

I find it hard to believe. As a graduate economist has little excuse for not appreciating the impeccable stature of the academics on this committee. As an economist and former business executive I do know many of these people personally or by reputation. The government is lucky they have agreed to serve their country in reviewing the business tax system. Their work will certainly be first rate and undertaken without fear or favour or bias. I worked with one of the heads of the committee on a task force some years back on taxation.

Let me remind the hon. member of the clear and public mandate the committee has been given. Its job is to consider ways of improving the tax system to promote job creation and economic growth, simplifying the taxation of business to facilitate compliance and administration, and enhancing fairness to ensure that all businesses share the cost of providing government services.

Where is the hon. member's beef? Where's the beef? Why does he feel these committee members are unable to fulfil this mandate honestly and expertly? Is it because they are not knowledgeable, experienced, because they represent all regions of Canada? Is it because they are successful people? Those are attributes the hon. member and his party may worry that they do not possess in great abundance but that is no excuse for attempting to impugn the committee and to blockade this important review.

I do not think there is much more that can be said directly about this motion at hand. There are some thoughts I would like to offer relating to the motion that might add some value to this afternoon's proceedings.

Let me address the broader topic of business taxation in Canada. It sometimes concerns individual taxpayers because they hear certain groups claim that business is getting an easy ride at a time when all of us feel somewhat overtaxed.

Fueling this concern is the fact that corporate income taxes today do provide a much smaller share of federal revenues than they did some decades ago. There is no conspiracy, no favouritism at work. Let me explain why.

Corporate income taxes are tied to income and so corporate tax revenues have been lower in recent years mainly because corporate profits have been hit sharply by the recessions first in the early eighties and more recently in the 1990s.

That situation is turning around. Since profits began to rebound in 1992 corporate income tax revenues as a share of federal revenues have been increasing steadily.

Let us also understand, which the proposer of this motion may not, that the increase is not a lock step process. Even if some sectors are recording significant renewed profitability, that does not immediately translate into equal revenues gains for government. The reason is the tax system recognizes the fairest approach to business taxation is to view earnings over a period of time. That is why firms can apply loss carry forwards which reduce potential taxation even when profits begin to grow again. The logic is proper and fair.

If a company loses money over a number of years and then records a profit, is it equitable to tax it as a fully healthy operation? This could jeopardize its ability to repay loans it has incurred to keep going, its capability to invest and to further strengthen the firm. The point is taxation applied without consideration of the broader success of a firm is no boon to anybody. If the company cannot achieve appropriate profitability it cannot preserve jobs, let alone create new jobs. The people who ultimately suffer are the employees and their families.

This does not mean the government must bend over backwards on corporate taxation, and it has not. The evidence is clear. All three of our budgets have included concrete measures to make the corporate tax system fairer, to guarantee to Canadians that businesses are an active part of our fiscal discipline.

We have introduced higher rates for the large corporation tax, which applies to all corporations with Canadian capital in excess of $10 million. There is a special capital tax designed to act as a minimum tax on financial institutions. In the 1995 budget we imposed a special levy on deposit taking institutions which will generate an additional $100 million in revenue. Earlier this month in the 1996 budget we extended the levy for another year.

The bottom line is clear. Corporations do pay substantial taxes. In 1993 they paid almost $51 billion in taxes to all levels of government. The banks are not excluded from this discipline. Over the last three years the largest banks have paid close to $1 billion annually in income and taxes to the federal government alone.

Let me underscore that federal taxation represents only a portion of the taxes businesses pay. When all taxes are taken into account, income taxes, capital taxes, payroll taxes and property taxes, corporations paid about two-thirds of their before tax profit in taxes in the last year we have numbers for, 1993.

Let me confess that this government has some biases when it comes to business taxation, as have previous governments. It is a bias in favour of research and development and a bias in favour of small business. These are vital sectors for Canada's long term economic growth which will create new jobs.

That is why the Canadian tax system provides special advantages to certain activities and certain sectors. For example, Canada's federal tax system for medium and small enterprise is among the most attractive in the world. Special deductions and other tax provisions deliver about $3 billion in federal tax assistance to small and medium size enterprises. It is likely no coincidence that this is the sector which has been the major job creator over the last decade.

Do the hon. member and his party object that the small business deduction cuts the basic corporate tax rate from 28 per cent to 12 per cent on the first $200,000 of business income? By contrast, the

similar deduction in the United States applies only to the first $50,000 U.S.

This is the type of bias of which Canadians should be proud. It aims at using the tax system to deliver the jobs and the growth we need and which our children deserve.

That is not to say the system is working as well as it should or that there may not be better ways which can contribute to achieving our economic goals. That is why we have established the technical committee. It is the first step in a substantial process of review of business taxation. By doing so the government is honouring its obligation to Canadians to obtain the best and fairest tax system possible.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, on the subject of business taxation, I would like to resume the debate where I left off when I responded to the budget speech of the Minister of Finance. At that time I was talking about the debt that Canadians have accumulated over the last 20 years.

I think it would not be a bad idea to repeat the image I was using when I demonstrated to Canadians, and Quebecers in particular, where we are when we talk about the national debt.

We are in a huge black hole, the vastness of which we can barely imagine. It is not unlike the black holes astronomers are looking at in the sky. They try to measure their size, but in order to do so they need very sophisticated instruments, like telescopes. Yet, even with these instruments they can barely gauge the size of these holes.

To visualize the Canadian debt, this huge black hole, to allow the individual not familiar with large figures to grasp its size, we have to use instruments which talk to people. We can use figures. As I said at the end of my speech, last week, between 1993-94 and 1997-98, the debt will go from $508 billion to $619 billion, which means an increase of $111 billion. It does not look very big, it sounds like a small number, but when you think about it and when you compare it with other figures you are familiar with, you realize that it is really enormous.

I used the example of a person playing Loto-Québec and winning a million dollars. One million dollars is enough to make you a millionaire, to reach the dream of anyone, becoming a millionaire.

But, one billion dollars is $1,000 million. This means that, over the last four years, if the federal government had distributed that money to Canadians, it would have created 111,000 millionaires, but it did exactly the opposite.

Since 1993-94, Canada has deprived itself of 111,000 new millionaires because it increased its debt. A thousand millions is a one followed by nine zeros. This means that any new Canadian born this morning already has a $20,000 debt. If he had any trouble breathing, such a knowledge would be enough to choke him. You know, when an infant is born, a small slap on the buttocks is usually enough to give it life, to force it to breathe for the first time. But, if an infant could understand what is going on and if we showed him the debt, it would refuse to breathe and say: I would rather not be alive in this country. However, each week in this House our Prime Minister praises the merits of this vast and beautiful country, the best in the world with its $619 billion debt.

Last week, I said: "If this is the best country in the world, we can stop travelling, we will never see any better". It is true. It is impossible to find beauty in figures such as these. However, this is what our Prime Minister does. He finds it beautiful. He boasts about it and tries to have people believe that we are reaching our goals.

Of course success can mean different things to different people. The Prime Minister says that the deficit was reduced from $42 billion when they formed the government to $24 billion this year. It is true there has been a improvement in the sense that every year people are getting a little bit less in debt than they used to do. They still pay groceries with money they have accumulated or that they did not have. They still buy groceries on credit, they borrow money from abroad, from the United States, from Japan, from England, all around the world, from Germany. They are borrowing to buy groceries.

As my grandfather or my father would have said: "We are living too high off the hog". Perhaps this is not parliamentary language, Mr. Speaker, but it allows those who usually use colorful imagery to better understand what we mean. It means having a lifestyle that we cannot afford. It means that if we wanted to pay off this debt, because we are not paying it off right now, we are only slowing its growth. Instead of increasing by $42 million a year, it is increasing by $24 billion a year.

But we will have to pay that debt one day, and to be able to do so, there must come a time, somewhere in the history of Canada, when the government takes in more than it is spending. Only then will it be able to reimburse a part of the debt. And how can we expect this to happen quickly? I will give you an example: with a $619 billion debt, assuming that we managed to save $1 billion a year on that $619 billion without increasing the debt-we would not increase the debt each year, but on the contrary, we would put aside $1 billion a year to pay it off. Well, the way things are going now, it would take 619 years.

This week, we celebrated the 109th birthday of the oldest woman in Canada. Poor lady, she will not have lived long enough to see the end of the debt, even if she holds a longevity record.

But let us go further than that. Let us try even harder to save, to cut spending and let us assume that in the next few years, in four or five years, we can manage to have a zero deficit, and even better than that, to put aside $5 billion a year that we would use to reduce the $619 billion accumulated debt. Well, even at $5 billion a year, it will take us about 120 years to pay off all the federal government's debt. Of course, this does not take into account the fact that we as taxpayers have to pay off provincial, municipal, school board, personal debts, etc.

There again, it would take 120 years. I could be long gone and Canada's debt would still not be paid off, which comforts me in a way, because it reminds me that, considering the amount, I could not pay it off by myself no matter how long I live. This is small comfort to me, but it is far from being one to my children.

Such is the situation in Canada now. In fact, what is being proposed to change this situation? We heard the budget speech and we realized that it contained nothing. It did not propose any measure to eliminate the deficit and the debt. On the contrary, we are just coasting along. Two years ago we adopted measures that were supposed to be implemented one, two, or three years down the road, others five years later. For now, taxpayers are not hurt because these measures are not being implemented right away. That makes them easier to swallow.

That does not hurt taxpayers for the moment. They are told that it will not be implemented right away, which is a little easier to take.

The only new measures that have been adopted will not be implemented now either, but at the end of the Liberals' mandate. They only have one or two more years to go, because the Prime Minister is already starting to lay down the background.

So, there is no action here. We were expecting the Prime Minister to assume his responsibilities and take strong measures, particularly with regard to business taxation. However, what do we see under the guise of measures about business taxation? The finance minister has told us that there will be a review of business taxation. That will hurt. When the government sets out to study something, it usually means that it does not know what to do. That is exactly what we are being told. There will be a review, not some kind of a review, but a thorough review. That means, first, that it will be a lengthy process, and, second, that once the review is over, the government will be aware of all the problems because they will have been thoroughly reviewed. So an in-depth review of business taxation is to be conducted, not by just anybody, Mr. Speaker, but by a technical committee with a view to three general objectives. First, to promote job creation and economic growth; second, to simplify the taxation system; and third, to enhance its fairness.

First of all, let us have a look at the membership of this committee. Since this is meant to be a serious committee that will make in-depth studies, the Minister of Finance preferred not to take any chances. He appointed the most eminent experts. Who are the greatest experts to advise the government on tax havens and tax avoidance? We know the measures under consideration are legal for the time being, but the tax loss runs into the hundreds of millions of dollars annually.

So, the government decided to appoint responsible, experienced and highly qualified people to this committee. Let me give an example: someone from Price Waterhouse, a company that has expertise in this area. Why is it so? Because it has many clients who use tax havens that it had recommended. I will not go through the whole list of companies that sit on this committee, because the minister did it on budget day. There are about ten members, not taking academics into account. A few more experts have been appointed on the basis of their knowledge, because they are experienced managers or advisers in companies that already use tax havens. You can be sure no mistake will be made.

When these companies advise the government, I would be very surprised if they recommended ways to go after their main clients. And if they do so, they will first warn their clients that they should beware because the government is about to strike.

This is not a very good way of examining this issue, because these experts are in conflict of interest.

Of course, we asked the minister of Finance why he was appointing these people who are obviously caught in the middle of a conflict of interest? The minister told us that, in order to get good advice, he needed to hire the best experts around. It is a bit like the police chief who would set up a committee made up of Hell's Angels to fight crime, because no one else knows the crime scene better than these bikers, who deserve then to sit on the committee.

I do not want to make any comparison between these accountants and the Hell's Angels. This is not what I want to do. I just want to show how ridiculous the whole situation is and how these people, in both cases, are in a conflict of interest.

In how many months will the committee table its recommendations? No one knows. But one of its goal is to promote employment. I would imagine that these same people also advise banks. We can see how deeply the banks are committed to solving the unemployment situation and how they perceive the growth problem.

This year, Canada's four or five major banks made billions of dollars in profits, one billion and some hundreds of millions of dollars in profits, which, of course, had some impact first and foremost on the income of the presidents of these banks. As for the second consequence, one would have expected that the increase in profits-which is growth-would have translated into the creation of new jobs but we realized that, on the contrary, the number of jobs in these five banks either remained stable or decreased. This is how these companies conceive employment and growth. I certainly hope that the committee of experts will examine at length this philosophy of the banks and that it will be able to recommend other ways to revive the economy.

The system must be simplified. Sure, suggestions to that end were often made to the government. Each year, at the time of the budget speech, suggestions are made to the government on ways to reinvent business taxation in order not only to put an end to loopholes but also to find longer term solutions. The present policy is only aimed at putting an end to loopholes. We put an end to loopholes and we think that the whole system is fixed.

This way, new loopholes soon appear and experts are usually quick to detect them and take advantage of them.

The only solution is to simplify the system so that we know once and for all where taxation is headed. Businesses need stability. We are told year in and year out that businesses cannot prosper without a stable economic and political situation. They need a stable climate.

I imagine that such a stable climate also starts with fiscal goals. We must tell businesses what lies ahead for them. We must tell them, we must tell the thousands of businesses that have made profits for 15 years and do not pay one cent in taxes that, starting tomorrow, they will have to pay a minimum tax. This is what we must tell them and we must ensure that these measures will not apply only for one year or until the next elections. We must tell them that they will pay taxes as long as they will be in business. It is a matter of distributive justice.

It is a matter of having each citizen pay, whether it is an individual or a corporation. It is a matter of ensuring that each Canadian, each citizen pays his fair share of tax. Therein lies stability. When corporations know that, they make plans and they anticipate. In any case, with the benefits they already have and they will keep, you can be sure that corporations, even if their net profits decrease, will use their expenses to pay less taxes. Corporations can buy themselves many things.

Business executives include in their expenses many things that we, as individuals, cannot. Once they have charged all that, they can afford to have lower revenues; they do not have any more expenses to pay; everthing else has been paid by the corporation. Under these circumstances, leftover profits could be taxed at a higher rate and there would still be some left.

Lastly, the taxation system which, hopefully, will be implemented would take into account the fact that at present, if we look at taxation-and I will conclude with this-in 1993-94, personal income tax represented 44 per cent of all the government's tax revenues, while corporate tax accounted for only 8.1 per cent. In 1997-98, and notice the change, individual taxpayers will pay a little more, that is 47.6 per cent of all taxes in Canada, while the corporations will pay only 12 per cent. It was the same in 1961, corporations paid 15 per cent, and individuals 27 per cent. Look at that increase. Who absorbed that increase since then? The individual taxpayers, not the corporations.

The analysis that the technical committee will make will have to focus especially on that. The problem no longer lies in the pockets of individual taxpayers, but in the pockets of other taxpayers, namely, of course, the big corporations.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, as one of the two chartered accountants in the House of Commons today, I cannot resist responding to the member.

The member talked quite a bit about corporate taxation. At the end of his speech he indicated that the percentage of the government revenues contributed by the corporate sector has continued to go down. He painted a picture that somehow there has been some change in the laws, some change in something which has meant corporations are paying less than they were before.

Quite the contrary, there has been no change. The corporate tax rates are still the same. The member should know the difference is there are some rules in the corporate income tax system which account for the reduction or elimination of taxes otherwise payable by corporations. I will give him a lesson later on if he wishes.

There are three ways. The first one has to do with dividend flowthrough. It means that when one company pays a dividend to another and the second company pays it out to its shareholders, the company in the middle has a dividend income but pays no tax because there is an equal and offsetting part IV tax. The income statement shows taxable income, or income from operations or from the business, but no tax is payable because it flowed through.

The second way in which corporations do not pay tax has to do with loss carry forwards and loss carry backs: seven years forward, two years back. It means in bad times corporations can incur substantial losses. While in following years they may have substantial high profits, the taxes payable on those profits will be zero. The reason is that under our current tax act income taxes or losses from

prior years can be carried forward seven years and back three years. There should be a change here.

The third way relates to deferred income taxes. They are not legally owing but they are virtually certain to be owing to the government. It also has to do with the difference in the write offs of capital assets, whether it is capital cost allowance or depreciation.

I am not going to go any further into the tax thing, but I do want to defend the integrity of the CA profession. The member criticized certain of the appointees, one of whom was Mr. Bob Brown of Price Waterhouse. I am proud to say that I worked with Mr. Brown when I articled at Price Waterhouse. I know of no finer professional in Canada, particularly in relation to taxes and with regard to personal integrity. Mr. Brown is a gentleman who has worked and advised this government over many years. Despite the fact that his firm has clients who do certain things, he is a man of integrity. He is a man who will be able to assist in dealing with the questions raised by the finance minister.

It is really presumptuous and possibly inappropriate to personally attack someone who is in a profession that prides itself on integrity in providing service honestly and with professionalism to Canadians as investors, as shareholders and as people looking for professional advice on their financial affairs. That is what is true. I will simply say to the member, let us be careful about being critical of those who are trained to help all Canadians.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague opposite for listening to what I said. However, it is unfortunate that he did not listen a bit more carefully because he would have understood a whole lot better.

I never meant to question the integrity of the advisers that were chosen by the government. What I am saying is that you cannot serve two masters at the same time. Would the member accept that, for the next election campaign, the same strategic advisers work for both the Liberal Party and the Bloc Quebecois? Can he imagine that? Does he think that a perfectly honest person can advise both parties at the same time on the strategy they must follow to win the next election? If he understands that, he will certainly understand that an accounting firm, as honest as it may be, is in a conflict of interest position when it must advise both the government and those who take advantage of tax havens on the means to avoid one another. That is what it means to be in a conflict of interest position.

I just want to add a few words concerning other tax havens. There are things that are difficult to verify, but when you realize that 57 of the 119 subsidiaries of our six major Canadian banks are located in the West Indies, an area where tax havens abound, you have to wonder. There are 28,000 businesses for a population of 30,000 in the Cayman Islands. Unemployment must surely not be a problem in that area: 28,000 businesses for 30,000 people. If these corporations are not there because it is a tax haven, then we must ask ourselves some serious questions.

[Rey D. Pagtakhan, Liberal, Parliamentary Secretary to Prime Minister]

Mr. Speaker, the member for Joliette made two points: concern for the national debt and the appointment of the technical committee. However, when we pause and reflect, the member did not offer any solution at all.

To truly encourage investment in business in this country we need to have the climate of certainty, real confidence and unity. Would the hon. member not agree to work toward that?

Would the member not also agree that having reduced the level of foreign borrowing and the deficit to GDP ratio, we are indeed the best country in the world as declared by the United Nations and we are only asserting our pride in the declaration? Would he not agree those are achievements of the Government of Canada?

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, there is one thing on which I can agree with the government member. We have been saying it to the government for three years now. Even before the first budget was brought down by the Minister of Finance, and before every budget since, we suggested that the government create a special working committee including not only experts chosen by the government, but also some hon. members from every party in the House. That would be the right way to have a problem studied not only by experts, but also by members of Parliament who, because they have been elected by their fellow citizens, are responsible for ensuring openness and for making sure that the government's recommendations will not favour a social class over the others. That is what we want. That is what we have been recommending for years to Parliament and to the government. But the Minister of Finance, the Prime Minister and the Liberal Party as a whole rejected our proposal.

Our proposal is still on the table. Tomorrow morning, if the Minister of Finance wants to strike such a committee, he will find us ready. We will be the first to bring a positive contribution, to offer suggestions, and to sell them to the people affected by the measures.

[The Deputy Speaker]

There are two minutes left. One for the hon. member for Longueuil and one for the hon. member for Joliette.

[Nic Leblanc, Bloc, Longueuil, QC]

Mr. Speaker, I would first like to thank the member for Joliette for his excellent speech.

I would also like to mention the excellent speech we enjoyed yesterday by the Premier of Quebec, Lucien Bouchard, who has really decided to slash spending and resolve Quebec's deficit problems. Mr. Bouchard said as well that the deficit and the accumulated debt in Quebec represented roughly 18 per cent of Quebecers' costs. Federally, the figure will be 50 per cent next year.

We should perhaps explain more clearly what this means. I would ask the member for Joliette to do so in his response. Federally, it means that only 50 per cent of the money we give to the federal government will come back to us in services.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague for giving me the opportunity to acknowledge the Quebec government's initiative in economic reform.

When we talked earlier of setting up a committee to provide help, which we would be part of, this is what we were thinking of. What is the Government of Quebec doing at the moment? It is turning to experts, obviously. Dozens of experts will be there, along with union presidents and business leaders who know about creating jobs or not creating them, about making profits and avoiding taxes. It means bringing these people together around a table, forming a consensus, assessing the situation and then dealing with solutions together and this is the only way we will pay off our debt.

[Raymond Chan, Liberal, Secretary of State (Asia-Pacific)]

Mr. Speaker, before discussing today's motion I would like to take this opportunity to briefly point out to members of the House the reaction of my constituents in Richmond to the finance minister's 1996 budget.

The budget is further proof that the voices of my Richmond constituents are being heard in Ottawa. In my town hall meetings, in discussions with community groups and in my regular meetings with the non-partisan community liaison committee in Richmond the message has been very consistent: maintain vital social programs but reduce the deficit with spending cuts, not tax increases. That is the message I brought to Ottawa.

This budget delivers. After a lower than projected deficit last year, the government is on track to meet or better its target for 1996-97, reducing the deficit from 6 per cent of gross domestic product to 3 per cent within three years of taking office. As a Liberal candidate I made a promise to the people of Richmond that we would meet this target. We are on track to deliver on that commitment, but our work does not stop there. Our ultimate goal has to be deficit elimination and paying down the debt.

Also in the budget the government reallocated funds to new initiatives to support youth, technology and international trade, which are areas critical to future jobs and growth. If our future is to be brighter and more prosperous, we have to invest in it. We have to apply our successful Team Canada approach right here at home to establish partnerships with the private sector that will create opportunities for young people.

The budget also announced a system of secure, stable and growing federal support for medicare, post-secondary education and social assistance which will see Canada health and social transfer payments increase within a few years.

The deficit is on a permanent downward track. The finance minister's firm but steady approach to deficit reduction is working. It is improving the economic environment for jobs and economic growth. Let us look at the evidence.

Short term interest rates have declined by about three percentage points since March 1995. Canada's cost competitiveness is the best it has been in 45 years. Our merchandise trade surplus has reached record levels and the current account deficit as a share of GDP is at its lowest level in 10 years. Canadian dependence on new foreign loans has fallen from $29 billion in 1993 to $13 billion in 1995. Every year that dependency will decline more and more.

At the same time we are restoring growth to provincial transfer payments and we have guaranteed that the cash component of the CHST will not go below $11 billion per year for the next five years.

Jobs and economic growth remain our government's priority. We are investing in three priority areas: youth, technology and trade, areas critical to future growth and jobs.

People I have talked with in Richmond are worried about the sustainability of the public pension system. They want us to act now. The new seniors benefit targets help to seniors with low and modest incomes, ensuring the system is fair and sustainable for the future.

I believe Canada is on the right track. The federal deficit will continue to decrease. Our dependency on foreign lending markets is going down. Personal income tax rates have not gone up and we are restoring growth to provincial transfers for social programs. In my continuing discussions with constituents, they support the measures this budget takes to secure Canada's social and financial future.

The budget reflects our government's commitment to put in place the strongest possible economic framework for sustained growth and jobs. We are also providing funding to encourage development in key fields such as the aerospace sector and biotechnology, important industries for Richmond and British Columbia.

Securing our financial future is not just about cutting spending. It is also about creating an environment where business can grow

and create jobs. The federal government plays an important role in creating that environment. We have to ensure the tax system is as fair and as simple as possible.

Canadians want a system that encourages economic growth and job creation. To that end the finance minister announced in his 1996 budget the establishment of a technical committee to consider ways in which Canada's business taxation system could contribute to the creation of jobs. Given the complexity of this task the government has decided to undertake a review of those aspects of tax law that most affect the creation of jobs.

The technical committee will consider ways to: improve the tax system to promote job creation and economic growth; simplify the taxation of businesses to facilitate compliance and administration; and enhance fairness to ensure that all businesses share the cost of providing government services. The committee will also consider the interaction between taxes paid by business, including corporate income tax, capital and payroll taxes, and taxes paid by individuals on income derived from investments.

The motion put forward by the member for Saint-Hyacinthe-Bagot clearly questions the integrity of the members of the technical committee on business taxation. The finance minister has brought together a distinguished and capable group of professionals who will meet the challenging mandate that has been set before them. The technical committee will be composed of a panel with legal, accounting and economic expertise in the tax field.

It is also important to remember the technical committee will report to the Minister of Finance later this year and that public consultations will follow the release of this report. This government has consulted Canadians on all three of its budgets. We are consulting Canadians on changes to public pensions. Canadians will also have a say on the technical committee's report.

An effective business tax system should be designed to create jobs. It is time for a comprehensive look at these issues. The technical committee's first objective should be to identify any obstacles to job creation in the tax system and to suggest reforms. All of our efforts to cut costs, reduce the deficit, redefine government and reform the tax system have a common goal: the creation of secure, meaningful jobs for Canadians. Every effort of government, including the technical committee on business taxation, should be directed toward that end.

[The Deputy Speaker]

There being no opposition members rising, the hon. Parliamentary Secretary to Prime Minister.

[Rey D. Pagtakhan, Liberal, Parliamentary Secretary to Prime Minister]

Mr. Speaker, I thought there was one question from the opposition and I would have deferred to the opposition.

I have to seize the opportunity to congratulate the member for Richmond, the Secretary of State for Asia-Pacific. He has clearly identified for the Canadian public the commitment of the government to good governance along the lines of increased efficiency, increased effectiveness, defining priorities for Canadians and the initiatives that will result in the creation of jobs. Again, I would like to compliment the hon. member.

The hon. member indicated there is a guarantee by the government that there will be a level of no less than $11 billion a year for medical programs. Perhaps the member could elaborate further on the impact of this cash flow floor to ensure the survival of the five principles of medicare-

[The Deputy Speaker]

The hon. Secretary of State for Asia-Pacific.

[Raymond Chan, Liberal, Richmond, BC]

Mr. Speaker, it is important to note that social transfer payments to the provinces are composed of two components: first is the tax points which were transferred to the provinces in previous years and second is the cash transfer.

As we cap the total transfers to the provinces and as the tax points which were transferred earlier continue to increase, the cash component of the transfer will continue to decrease. According to the experts the cash transfer would be reduced to zero in 10 or 15 years time if we did nothing about it.

It is important for the government to recognize if the cash transfer becomes zero, then it is impossible for us to influence the provinces to uphold the Canada Health Act. This is why it is so important for us to establish a cash floor to be transferred to the provinces. It will maintain our influence on the provincial governments for the delivery of medicare.

[The Deputy Speaker]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for The Battlefords-Meadow Lake, Employment; the hon. member for Chicoutimi, Government buildings.

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Mr. Speaker, I am pleased to have the opportunity to speak to the motion.

I was quite surprised last night to see the motion in which the official opposition criticized the establishment of the committee. The committee is being established to do something I believe all members of the House would like to see happen. It will review the present corporate tax structure and make suggestions on how it can be improved, made more efficient and operate to the benefit of all Canadians far beyond what it does now.

Our corporate taxation system has to be more than just a means of collecting revenue. An effective taxation system must be

designed so that it will encourage the expansion of the economy, encourage the creation of employment and encourage economic activity.

The committee is being charged to look at the corporate taxation system and to ensure it is designed in a way that will not curb employment. When the Minister of Finance announced the establishment of this technical committee in his most recent budget he made it very very clear that its job was to find out what the facts were, to investigate the existing system, to change things that are presently there, making them far more effective.

It is high time this was done. The last time this was looked at was nine years ago. That has been far too long. I think there is a consensus among most Canadians and in the House that what the government does needs to be done in the most efficient way possible.

I will leave aside the issue of whether the appropriate level of taxation is there or whether corporations are paying their fair share. It is generally agreed there is a desire to make sure the administration of tax collection in this country is efficient, that it is done in the least expensive way possible and that the least number of public dollars are used in operating government to do those things.

That is what this technical committee is all about. It is all about making sure that things are done more efficiently and that resources are not being wasted unnecessarily on administration.

I was very surprised to see the contents of the motion that was put forward by the official opposition. It seems to suggest that it is inappropriate to have people look at a problem who are best able and most knowledgeable in that area. It is common sense that if a technical area of concern such as the corporate tax structure is being studied, the initial investigation should be done by people who have a good academic background, who have a good practical background, who have a good understanding of the tax system.

It makes little sense to seek out individuals who do not understand the system and who are not able to address some of the problems. It makes perfect sense to seek out experts in the field. I almost get the impression that the concern across the way is that their experts, their people were not picked. They are complaining about that. It is like "if you don't play the ball game my way I am going to take the ball and go home". It does not work that way.

The people who have been selected to sit on this committee are very knowledgeable. I have a list of the individuals who have been selected. As you go down that list you will see the names of individuals with very strong credentials. These are people who understand the tax system. They understand how the system works and can provide some very solid recommendations on how it can be improved.

It should also be made clear that the individuals on this technical committee will not provide the final word. They are not going to create policy. They are not going to come back and tell us this is the way it is going to be. That is not the intent.

This is the beginning of a process that I hope will lead to some very concrete changes that will make the system cheaper to run administratively, that will make it simple and fair. Most important, the process will lead to making economic fundamentals right and will lead to increased job creation.

It is important to understand this is the beginning of the process. It is simply an opportunity to have some people who are experts in their field take a look at the problem and come up with some possible alternatives.

At that point, the government will have some sound, in depth public input and public debate on it. That is when we, as parliamentarians and Canadians, either as individuals or as groups, will have an opportunity to look at the study and some of the recommendations and come back to have a public debate.

We can and will discuss things such as whether the corporate sector is paying its share of taxation as opposed to the personal sector. Are there appropriate trade-offs in the tax system where certain things are done in order to enhance investment and help job creation? Are those appropriate?

Members will have an opportunity for public debate about those things. Before beginning that debate, the minister is absolutely correct in having a technical committee take a look at the present system, study it in depth, look at some of the ways in which it can be made fair and simple. From looking at the list of individuals the minister has appointed to this committee, there are some very eminent individuals with a lot of knowledge and expertise who are going to be able to do this job in a very confident way.

The idea of having this committee and the selection of individuals sitting on this committee is really indicative of the approach the Minister of Finance has taken to the budget. He has taken a balanced approach and has tried, quite successfully, not to fixate on any one part of his responsibilities toward the budget but has taken a widespread and comprehensive approach.

In the budget, work is being done on deficit reduction. The deficit needs to be reduced. Work is being done on job creation. Job creation should be encouraged. There is a desire and a need for government to target specific areas, to help with job creation such as with youth unemployment. The government is working toward helping the least advantaged in society.

The minister has taken a very constructive, broad based approach, as can be seen with the technical committee. He under-

stands the issue which is the reform of corporate taxation. Rather than simply jumping into it willy-nilly, he starts at the beginning.

He starts by gathering the facts and determining the issues. That is what this technical committee is going to do. I am pleased it has been appointed. I have confidence in the people he has appointed. I know they will do an excellent job. I look forward to reviewing and debating their report.

[Nic Leblanc, Bloc, Longueuil, QC]

Mr. Speaker, I would like to point out that what we really want is tax reform. Bloc members have been asking for this since they were elected to the House of Commons. We know that an in-depth tax reform is urgently needed.

What we disagree on is how the Minister of Finance proposes to reform the tax system, by appointing friends of the Liberal government whose final report will probably suit the government in place just fine.

This is not tax reform, which should be a much more open process. This committee must include members of the opposition, of the two and even three parties in opposition, to ensure that tax reform is fair to everyone.

To give you a few examples, how come people making around $6,500 still have to pay taxes? These people can barely make ends meet on $6,500 and they must still pay taxes. It is high time that we revised the income tax calculation tables instead of taxing those poor people and then mailing them tax refund cheques to show that people need us. We should have a quick look at this to make things more equitable.

Should we raise the GST? Perhaps. Should we increase GST refund cheques to the poor? Maybe we should do that, too. I do not know but that is the kind of thing requiring an in-depth review.

There are, of course, tax shelters that need to be reviewed seriously without affecting the competitiveness of our businesses. We must, however, ensure that our businesses pay their fair share with respect to tax shelters. We have been demanding for years an in-depth tax reform.

Now that they are in power, the Liberals have started setting up a kind of private club, a private club including friends of the government, whose report will no doubt suit the government just fine. That is not what we want. I think the hon. member should tell people the truth and explain his real intentions. Does he really intend to carry out an in-depth tax reform or to set up a private club of friends of the government, whose report will suit the government in office?

[Andy Mitchell, Liberal, Parry Sound—Muskoka, ON]

Mr. Speaker, I will respond to two of the points made by the hon. member.

If one honestly and without political rhetoric or without trying to score political points takes a look at the membership of the committee, one will see a group of eminent individuals who have proven track records in the field they are being asked to review. To suggest for a second that these individuals are lackeys of the government is to do them a disservice. I have a lot of respect for the individuals I see on this list. I have confidence that they are going to do their job well and properly.

On the point that they want to reform the tax system, I do not believe anyone in the House would not agree with that. Probably most Canadians agree with that. However, there is a process that needs to be followed.

When I was in the private sector and had to make important decisions, I did not off the top of my head figure out what I was going to do. What I did and what the government is doing is gathering the facts, the information and getting an opinion. That is what this committee is going to do.

The committee is the beginning of a process of gathering information so that just as in the private sector where decisions are made based on the information, so too can we as parliamentarians have a good, sound and knowledgeable debate and make good decisions because we will have gone out and gathered the facts, had the information and had been able to do our jobs properly. That is what this is all about. That is why I applaud the Minister of Finance for this initiative.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup, QC]

Mr. Speaker, I am very pleased to rise in this House today to speak to the opposition motion condemning the establishment of a technical committee by the Minister of Finance to examine business taxation. We are deploring the fact that this committee is comprised of members who are both judge and judged with regard to business tax reform, and we feel that the minister should set up a joint committee of experts and parliamentarians instead.

Why put such a motion forward? We are obviously not against tax reform. The Bloc Quebecois has been advocating reform for a long time and we think it is essential, especially since it is being requested from all parts. In our ridings, people ask us: "Are businesses paying their share of taxes at present? Could adjustments not be made to increase their efficiency as far as job creation is concerned?" The problem with the government's action in this regard is that it is putting the cart before the horse. Taxation is a tool, not a goal in itself. In my opinion, any tax measure should reflect political will. It is not simply a juggling game.

Let me give you an example: the scientific research and experimental development tax credit. This is an interesting example in that it has a positive impact on productivity. But at the same time, as it is being implemented and becoming operational, it is becoming obvious that it can also have negative impacts in terms of a decline in employment for unskilled workers.

Choices need to be made that are not technical but rather political in nature, and I think that, by having only legal, accounting and tax experts sit on this committee, the minister is limiting the scope of the debate, thereby denying the people of Quebec and Canada the real debate they may have wanted to have on this issue.

Political consideration should be given to this beforehand and, to do this, I think that two other groups of people should be represented on this committee. I am referring to parliamentarians, individuals who can rightly claim to represent the people, who can convey to the committee suggestions made by citizens from all walks of life.

Someone in my riding came up with this idea: Would it not be possible to tax robots-advanced technology if you will-in such way that productivity gains thus achieved could benefit the workers who may have been displaced when advanced technology was introduced? Parliamentarians are the ones who can raise such arguments. It is certainly not tax experts who know about fiscal issues, who have past experience, who are often there to defend the way things were done, and who are often responsible for the complexity of the current system. Above all, people want transparency in the tax reform process.

Even if we end up with the best tax system in the world, we will have missed the boat if people do not feel that it is a fair system. To some extent, this is what will happen with the committee that is being set up by the minister. Even with the best possible recommendations, the minister will have a hard time preserving his credibility since no parliamentarians and no experts from other fields will sit on that committee.

Indeed, when reviewing a tax related issue, why not also have experts from the employment sector? These people could offer a different perspective than that provided by tax experts and accountants. As well, we could have legal experts whose experience is totally different. In Quebec, such an exercise is currently taking place in the social assistance sector. This process allows us to get different ideas, different visions on how to deal with the issues.

The federal government's way of doing things is certainly very different from that of the Quebec government. In Quebec, all the stakeholders in the social and economic sectors are sitting together to decide what should be done. Technical committees could eventually be set up following that round table, and that would be a good thing. But the federal government has it all backwards: it creates a technical committee first, and then it will set up a consultation process. This does not seem appropriate, given the mandate that the committee gave itself.

Let us not forget that this committee is there to examine how the tax system could help promote job creation and economic growth, and how the system could be made simpler and more equitable. Should the committee be made up of tax experts who helped develop the current system? Are these people the ones most able to look at the issues from the perspective of ordinary citizens? I feel we could use their expertise, but after the first stage, we ought to consult to find out what people really have in mind in connection with these various elements.

I also think that this technical stage ought to follow on a political debate on what the government's priorities are. What its objectives are with respect to the employment of workers, or in other words, what levels of unemployment the government would be prepared to set as a target to be attained in order to decrease unemployment and make better use of human resources. Is the government prepared to make choices on criteria for assessing the efficacy of its government, or of Canadian society, that are based on something other than gross domestic product or export figures? Is the government prepared to say that one of the criteria it will assess its efficiency against is the use made of the work force?

Is there a vision of development which goes beyond mere market forces to ensure that people and places are being properly utilized? There is a direct link between this and taxation.

If we want to see Canada develop, to see each region develop independently, there must be taxation measures relating to this. There must be political choices behind it. A technical committee is not the way to go to meet that objective. In fact, it will tend to duplicate what has been done before.

In conclusion, having taken the step of finding what Quebecers and Canadians want through political debate, we can then make a technical examination of how to arrange things so as to do away with the famous problem of tax havens. Might there not be a way to revise taxation agreements to accomplish this? As far as trusts and foreign assets are concerned, could not the underlying principle be adopted, promptly, that the income of Canadian citizens earned anywhere in the world would be the figure considered for taxation purposes, in order to be sure that taxes are paid on all earnings?

As for tax expenditure accounts, for example investment credits, the $500,000 capital gains exemption, the preferential rate for small business, deferred taxes, all of these must be looked at from the employment aspect. That is what the young people of Quebec

have told us, pointing out that the entire taxation issue must be looked at to ensure that it guarantees their future.

This requires us to go beyond the confines of the technical committee. There must be a political debate. I feel that the government needs to reverse its present position and to ensure that those on the committee will be joined by parliamentarians, by other experts, so that the task can get finished as expeditiously as possible, and so that a subsequent budget may really contain tax measures with more bite than this last insipid budget did.

[Dan McTeague, Liberal, Ontario, ON]

Mr. Speaker, I listened carefully to the remarks of the member opposite. I would simply like to make a few comments, before asking a question. I do not know whether the member realizes that what the government is proposing is really the starting point for the process leading to another budget within the next year?

Although I found some of the member's comments interesting, I would like to find out from the hon. member whether he does not agree with me that the place to perhaps put his words into action is the House of Commons committee? Therefore, would he not agree that his comments, interesting though they may be, have an option, which is the parliamentary finance committee?

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup, QC]

Mr. Speaker, I am surprised to hear the hon. member say that, two and a half years into this government's mandate, this is a start as far as taxation is concerned. Frankly, this a very late start.

The Bloc Quebecois, the other parties, the people of Quebec and Canada have all been asking for taxation reform for a quite some time already. We would have expected the thinking process to be over by now and a real tax reform to be included in this budget, following consultations with parliamentarians, but that has not been done. That is why setting up a technical committee at this stage sounds like not much compared to the real effort that could have been expected.

As for having the committee work done in here, there is no doubt that suggestions can be made in committee but, in terms of efficiency, would it not be better to have a joint committee, where parliamentarians and experts can share and exchange ideas immediately, so that it can lead somewhere?

Instead, a few months will go by before this committee makes any recommendations; in the meantime, conflicting proposals will be made by the parliamentary committee. All this work will have been done for nothing by both committees. I think that a more serious approach that could be taken by the government would be to accept the opposition's proposal and say: "Fine, a joint committee it will be, a great deal of thought will be given to the issue and we will make sure that what comes out of this reflection is promptly brought up for discussion and included in next year's budget choices made by the government." Thus, we would be certain to act on this tax reform request that has been on the table for the longest time, a request made by the people and which reflects very unfairly on the federal government.

Everywhere, the public keeps hearing: "Is everyone really doing his share at present?" A technical committee like this one will not make it possible for the public to determine if indeed everyone is made to do his share, whether everybody helps promote job creation. At present, do companies take into account, when making decisions, the impact their decisions will have on employment? Creating this kind of committee does not resolve any of these things, and I hope that the government will take note of this fact.

[Réal Ménard, Bloc, Hochelaga—Maisonneuve, QC]

Mr. Speaker, I am very happy to take part in this opposition day, which we have set aside to consider an issue that, in my opinion, is extremely important and should concern all parliamentarians who still believe in social justice and reject the status quo.

May I remind you that what we are discussing is an in-depth review of the tax system. We will not be satisfied with half-measures in light of three basic facts.

The first basic fact-which I would like to dedicate to my good friend, the hon. member for Longueuil-is that, as we speak, only 11.8 per cent of federal taxes, not the GDP but the government's tax revenue, comes from businesses. On the other hand, 60 per cent of federal tax revenue comes from individual Canadians like you and me.

So it is fair to say that corporate Canada does not contribute to the public purse as much as it could.

The second and probably most important fact is that-as strange as this may seem, as this would not be tolerated at the individual level although it is possible at the corporate level-there are now 40,000 profitable businesses that do not pay any taxes. I am not talking about the little convenience store where you go buy a candy bar before going to bed, but about profitable businesses. There are 40,000 companies that do not pay taxes and we know them.

If a member really wants to raise a point of order later on to ask me to table these figures, I am prepared to do so, because it is professor Lauzon, from the Université du Québec, in Montreal, who examined this whole issue.

We now get to the third variable-and I sense that some members are getting a little worked up-which is just as important. We are discussing taxation in a context where some individuals and some corporations make excessive profits. When we rise in this

House, we should never forget that some businesses are making excessive profits. I will, of course, use the example of the major banks.

Would you believe that, in the 1994-95 fiscal year alone, the six major chartered banks in Canada made profits of $5.8 billion? These unprecedented profits were made by very important corporate citizens that are getting richer. However, that does not stop them from laying off large numbers of employees.

These are the three premises that have convinced the opposition that we raised a real issue by asking Parliament to look into this matter.

Let me be clear: I do believe that it is legitimate to make profits. I do not agree, for instance, with the philosophy of the British Labour Party after the second world war, which wanted banks to be nationalized.

I admit that in our system it is desirable and legitimate for individuals to invest and make profits. But I believe we have reached the point of no return, where the people of Canada and Quebec are truly convinced that something illegitimate is taking root. There is a feeling that some people are not doing their part, that they are not contributing their fair share to the public coffers.

I would like to throw out a challenge to the government. I am strongly tempted to throw it to the hon. member for Outremont. Just imagine, the member for Outremont, a lawyer, is shamelessly courting the business community. To the member for Outremont, who at this period in his life is discovering the business community through the responsibilities entrusted to him by the Prime Minister-and I take this opportunity to congratulate him-I would throw the following challenge: Just imagine, the United States, a rather fertile ground for business, has a law, passed by Congress in 1977, called the Community Reinvestment Act. This law is really quite extraordinary and should inspire us as parliamentarians, because it lets regulatory bodies evaluate banks.

There are four bodies, which I will enumerate for the edification of the hon. member for Outremont. There is the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the director of the Office of Thrift Supervision and the Comptroller of the Currency.

In the United States, there is a law under which the four supervisory agencies I have just mentioned evaluate banks contemplating interstate expansions or mergers. An evaluation is made of the degree to which these banks have made credit available in their immediate community.

I represent a relatively disadvantaged community. There are people in my community without enough money to open a bank account. Could we not, as parliamentarians in Canada, give some thought to the effort that banks must make in the communities of which they are a part?

The effort that could be required of them would be to review the availability of credit. Not only could the availability of credit be reviewed-I do not hear the hon. member for Outremont, but I know he is anxious to ask me a question and I am already dying to answer him-but partnerships could be established between the banks and disadvantaged sectors. This is something that is within our reach.

Occasionally, the hon. member for Outremont attends the committee on industry, although not with his past attendance record, and from time to time he has been known to make contributions that are always noteworthy. The paradox lies in the fact that, for two years in committee, we studied the connections between banks and small business, without every questioning the concept of profit, and without ever looking at how the six major chartered banks in Canada could manage to take a more active role in the communities in which they are located. By so doing, they would contribute to a more equitable taxation system.

I truly believe that, if we want to address this seriously, there is something very, very important that must be examined. I could even give the hon. member for Outremont a piece of news by saying that, if the opportunity permits, it is very tempting to introduce a private bill, one which he might very well support in his capacity as a member, and even as a minister.

Allow me to give you an example of what happened with the Community Reinvestment Act in the U.S. In 1985, an agreement was signed between the Boatmen's National Bank of St. Louis and the Association of Community Organizations for Reform Now, in which the bank in question agreed to provide mechanisms for mortgages and home improvement loans.

Mr. Speaker, that meant lower administration fees for disadvantaged communities. When I think of taxation, this is the type of approach that interests me. You will never see me here attacking those who make profits, but I can always be counted on to speak out in debate to encourage them not to forget that they are part of a community and that it is very important for them to make an effort to plough as much as possible back into that community.