Mr. Speaker, I listened with great interest to the remarks made by the hon. member for La Prairie, who says that the technical committee was established by the minister to review Canada's business taxation system and to ensure that this system is competitive world-wide. He said that the committee would not be valid since no parliamentarians will sit on it. But he forgets that, normally, in our system, any bill stemming from such reviews goes before Parliament first, then to the finance committee and then back again before Parliament. There will be ample opportunity for us, as parliamentarians, to discuss, to assess the bill and to question witnesses and the bill's sponsors. Our task, as parliamentarians, consists in dealing with the findings of reviews.
By asking some of Canada's leading experts to examine our business taxation system, we will not only get to know our system but also those of other countries with which we are currently competing for investments.
We must make sure that our taxation system is competitive, because in today's economy it is imperative to attract investments. We must retain in Canada those investments we have at present and, as we know, there are other countries where incentives and tax preferences are offered to attract investment, and thereby jobs.
The official opposition is trying to give the impression that the government has favoured the rich, has favoured corporations and has done nothing to deal with the taxation of them. Let me spend a few moments going over some of the measures we have taken in the three budgets which have been brought down by our government since taking office.
In 1994 we eliminated the $100,000 capital gains exemption. We reduced to 50 per cent the deduction for business meals and entertainment. We dealt with certain tax shelter schemes using convertible debt. We required that financial institutions recognize accrued gains. We eliminated the special 30 per cent investment tax credit. We modified the basis on which insurance companies could claim reserves. We tightened the rules applicable to foreign affiliates and increased the reporting requirements. We have tightened the rules on the forgiveness of debt. We have increased the refundable tax on dividends received from a private corporation. We have cleaned up some of the abuses dealing with research and development. We have increased the tax on large corporations by 12.5 per cent. We have increased the corporate surtax by 33 per cent.
We have introduced a 12 per cent capital tax surcharge on banks and other deposit taking institutions. We have dealt with family trusts. We have announced reporting requirements for all foreign investments made by Canadian residents that are $100,000 or over.
We have announced rules getting rid of tax deferrals which use private corporations as the vehicle. We have extended the taxation of non-residents on their gains with respect to Canadian capital property. We have dealt with premature recognition of tax losses.
We have dealt with some of the overly generous provisions related to labour sponsored venture capital funds. We have extended the temporary capital tax on deposit taking institutions. We are clarifying and tightening the rules on the resource allowance but we have made sure the accelerated capital cost allowance can now go to other projects, including the tar sands. We have also announced many new measures to deal with the underground economy.
This is not the record of a government that is stand pat, that is in the backpocket of any group of Canadian taxpayers or that is not prepared at any moment to examine the tax system in terms of its fairness and its equity.
I want to deal very briefly with some of the ideas put forward by the official opposition in terms of what it is suggesting we should do from a fiscal point of view.
The Bloc Quebecois said on page 90 of its dissenting report to the prebudget report handed down by the finance committee on January 17: "The finance committee ought to have put forward many more specific recommendations for fighting the deficit. The Liberal MPs on the finance committee have chosen instead budgetary imprudence".
This is the opposition party which said: "You cannot cut payments to the provinces. You cannot cut spending on social programs. You cannot cut spending on payments to seniors". How was it recommending that we exercise even greater budgetary prudence? How was it recommending that we cut the deficit even further?
Let me use that party's exact words. It said: "We must eliminate those fiscal inequities that favour large corporations and high income taxpayers". The official opposition wants to impose more taxes on large corporations and high income tax payers. Well, I just went through a list of about 25 changes we have made in the past three budgets which affect those very groups.
What do Bloc members want in addition to those we have suggested? Let us look at their precise words. They suggested two ways it could be done. One, we must deal with all tax agreements signed with countries viewed as tax havens. They are ignoring the fact that the government has already undertaken measures dealing with the taxation of foreign affiliates and dealing with reporting requirements. What does the Bloc view as a tax haven? Any jurisdiction which does not impose taxes higher than Canada.
The hon. member for La Prairie commented that many of the countries we have signed tax treaties with levy much lower taxes than Canada does. It is obvious.
They do recognize that our rate of taxation in Canada is much higher than in many other parts of the world, including European countries and the United States, and not just in known tax havens, such as Barbados, the Turks and Caicos islands, Bermuda.
They do not recognize that we already have a system which does impose taxes on the income from these various countries.
If a Canadian invests through an offshore company in passive investments, all the income under the foreign accrual property income rules, FAPI, is taxed every year to the Canadian whether it is brought back to Canada or not. Full Canadian rates apply.
Do they oppose that system? They will say no, which is good. They want the income that comes from a tax haven even while it accrues to be taxed at full Canadian rates. Since they do not disagree with the rule that applies to individuals and corporations with passive investments in these countries, they must be suggesting the active business income earned in a tax haven must be taxed as it is earned and not as it is remitted to Canada.
We have a system with a global aspect of multi corporations. Some of those taxes are not paid because the income is deemed by the rules of Canada, the United States, Europe and every other major taxing jurisdiction as having actually arisen in that foreign tax jurisdiction, be it Bermuda, Switzerland, the Netherlands or the United States.
Are they saying that if the active business income earned by a foreign affiliate, by a foreign subsidiary of a Canadian company in the United States, is not taxed at rates up to the Canadian rate that it should be taxed at the Canadian rate? Suppose a foreign affiliate in Tennessee is taxed at only 30 per cent while the Canadian tax rate is 50 per cent. Are they saying the tax rate there should be brought up to the full 50 per cent Canadian rate on all of those profits even if they are not remitted to Canada? Obviously they are because to them-
-a tax haven is a country where the rate of taxation is lower than ours, in Canada.
Certainly they would say if it is earned in Bermuda we should be taxing it at the full Canadian rate of 50 per cent, even if there is an active business operation, actual employees and actual business transactions carried on there.
No other country in the world imposes taxation on that basis. They are saying that no matter what happens any Canadian company on its profits earned anywhere in the world must pay taxes at the full Canadian rate even if the profits are not remitted here.
We happen to have a totally different system at work in the world. It is a system where the host country, the country where the work is actually carried out, where the people are employed, where the business activities take place, is given the primary responsibility for international taxation, and this is right. If an American subsidiary carries on business in Canada its profits are taxed at the full Canadian rates, not at the American rates. This is the system we have chosen to enter into.
Why do we have tax treaties with most of these countries? There are two reasons. The first is to eliminate double taxation. In other words, if it is taxed abroad, in the country where the business activity is carried out, it will not be taxed in Canada. The second is to ensure that taxes are paid.
A major part of these treaties is to enforce the taxes that are justifiably owing by any of the two treaty partners. It is for the enforcement of taxation and the exchange of information among the taxing authorities in those two jurisdictions to see that this takes place.
I have a challenge for the Bloc Quebecois. A provincial budget should be brought down in Quebec in the next few months. Will their provincial colleagues tax every multinational corporation based in Canada at the Canadian rate of taxation instead of those rates imposed by the applicable foreign countries with which Canada does business?
Will the Parti Quebecois members in their next budget respect their colleagues here in the House of Commons and adopt the exact international tax provisions they are proposing to us? Will they impose that same type of tax regime on multinational drug companies in Quebec? Is that their intention?
Let us get real. I wish they understood the type of regime they are dealing with rather than only partially understanding it and saying: "Liberals, you cannot cut any transfers to the provinces. You cannot cut spending on any social programs but you have to be even more fiscally prudent than you are. In other words, you have to get the tax revenue up and you get it first of all from ending these so-called relationships that involve corporations doing business in other countries in the world that have a lower tax rate than Canada imposes".
Are they not more interested in the jobs and the investments that come from having a tax system which is internationally competitive because we are in a global economy?
I will bet their colleagues in the next budget in Quebec are more concerned about jobs, international competitiveness and having a fair tax system so that corporations pay their fair share but in a way that is multinationally, internationally competitive.
That is what this committee of experts established by the Minister of Finance is setting out to do. It is to look at whether there are impediments in a corporate tax system that preclude foreigners from establishing in Canada, creating more jobs in Canada, or that preclude us from having our fair share of international tax revenue. Dealing with these tax treaty systems was the one way, the one pot of gold to be tapped by the Bloc Quebecois members.
The second was they said there are certain corporations in Canada which pay no taxes but we will impose some type of minimum tax. If you have suffered tax losses in previous years you should not be able to carry them back in order to eliminate the taxes that might otherwise be payable by a corporation. They said: "There must be a true minimum tax on corporate profits. This minimum tax is not aimed at increasing the fiscal burden on business; it is aimed solely at those profitable businesses which manage to pay not a single cent in taxes".
A study was done by the NDP government in Ontario, carried out by the fair tax commission. It looked at the tax returns of corporations in 1989. It found that 23,000 Ontario corporations reported profits but paid no income tax. The commission tried to look into the reasons for this. Fifty per cent of the untaxed profits came from intercorporate dividends, i.e. one Canadian company owned by another Canadian company. The one company may be taxed on it but it then pays the dividends to another company. Are those profits to be taxed again?
Do we want double taxation of corporate profits? I put that to the official opposition and to the Parti Quebecois for its next budget. Is that what is intended, intercorporate profits by way of dividends taxed twice?
Eleven per cent of these untaxed profits came from loss carry overs. Are Bloc members suggesting that if a corporation makes a million dollars this year but loses a million dollars next year it should not be able to average those out?
In Canada we can carry corporation tax losses over for about 10 years. Maybe it is too generous. In the United States they can do it for 15 years. This is one of the provisions that should be looked at by this technical committee being established by the minister.
Thirteen per cent of the untaxed profits were due to capital cost allowances. Does this mean we should not allow businesses to write off the costs of acquiring new robots, new computers, new equipment, new machinery and new buildings? Is this what they are saying? Are they saying capital cost allowances are too generous?