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.