Mr. Speaker, on March 6 the finance minister delivered his budget for 1996-97. Part of that budget included a very important aspect, one which was not incorporated in the detail to make changes, but rather a proposal. That proposal was to establish a technical committee on business taxation.
There has been a great deal of discussion within this House, across the country, and particularly in the United States presidential primaries on issues such as a flat tax on corporations and individuals. This is a much broader technical consultation.
With regard to the terms of reference, the finance minister said that Canadians want their tax system to generate a revenue in a fair and simple manner and that they also wanted to encourage growth and job creation. Given the complexity of combining these objectives, the Government of Canada has decided to undertake a review of those aspects of the tax law which most affect the creation of jobs.
In dealing with the terms of reference, the finance minister appointed a technical committee made up of I believe 10 professionals. Today we are debating a Bloc Quebecois opposition motion that deals with this technical committee. The motion states:
That this House deplores the fact that the technical committee set up by the Minister of Finance to analyse business taxation is comprised of members who are both judge and judged with regard to business tax reform; and that, this being so, the Minister of Finance should set up a joint committee of experts and parliamentarians to examine business taxation in an impartial manner and according to an open and transparent process.
The Bloc Quebecois motion includes a couple of elements I want to deal with. It was very clear in the debate the first thing it wanted to deal with was the conflict of interest or compromise with regard to some of the participants.
One of the Bloc members who participated in the debate went so far as to name a particular member of this committee set up by the finance minister, Mr. Robert Brown of Price Waterhouse. First I want to deal specifically with that because I know Mr. Brown. As one of the two chartered accountants in this House of Commons, in this 35th Parliament, I have to take the opportunity to defend my profession whenever possible.
When I was an articling student at Price Waterhouse, I met Mr. Brown for the first time. I worked with him over a number of years and came to know him as one of the most outstanding and revered professionals in the taxation field in all of Canada. Everybody knew who Bob Brown was.
If members would only appreciate that in a large multinational CA firm with international affiliations there are competitors even within the firm's own client base. How is it that a CA firm could opine on financial statements, could provide consulting advice and represent not only one oil company but also represent another? Is there a conflict of interest? Clearly if there were no rules of the game, if there were no professional rules of conduct, that could not happen. Within a CA firm there are rules. There are rules of confidentiality and conflict of interest. Members who work on certain files do not work on others.
The firm as a whole has a professional responsibility to the entire profession because it is the CA profession that has developed a set of standards and a code of conduct. The Canadian Institute of Chartered Accountants has a handbook which guides all accountants on not only their conduct but also on the rules of opining on various and sundry matters, particularly financial statements.
Canadians and people around the world look to the chartered accounting profession to provide a professional standard. The standard is set so high that only 37 per cent of CA students who wrote their final exam this past year were successful in meeting that standard. The profession is extremely proud of its high standards. It basically means we are there to protect the professionalism and integrity of the profession and to ensure that nothing that happens will bring disrepute to the profession.
Under the CA rules of professional conduct, if you are a member of the institute, as I am, and you become aware that something may be happening with regard to another member which may bring disrepute or which may reflect badly on the profession, you have a professional duty to bring it to the attention of a committee of the Canadian Institute of Chartered Accountants and let it investigate. If you do not and it is subsequently determined there was a problem and that you failed to bring it forward with full knowledge you could be equally culpable for the wrongdoing.
On the point of the integrity of the individuals and whether they can opine or participate in a technical committee even though their firm, an international firm, deals with clients who are taking advantage of certain tax measures today, they still can as professionals deal honestly, fairly and with credibility with issues they have been asked about with regard to the taxation of corporations by the Minister of Finance.
The second issue has to do with whether on this technical committee we need to somehow consider this as subverting the process and parliamentarians should be here, which is the insinuation of the motion. It basically states we cannot second this responsibility to these outsiders. We need to have hands on. There is no question we do, and we will.
However, as in all things, unless there is a motion on the floor and a focus to what is being discussed there is clear chaos. In this case the finance minister has basically said: "Let us have a technical committee. I want the people best qualified to analyse objectively the present situation. I want the expertise not only from the professional accounting side but from the economic side and the academic side. I want to establish that there are implications and detriments as well as those things that act positively in terms of job creation".
Now we are talking about giving it some focus. I compliment the finance minister on making the decision that we must have a review of business taxation. I would have gone a little further and said I want to extend it to personal taxation as well, but that will come. This is a starting point.
All of the members of the House have had communications from their constituents from time to time suggesting corporations are no longer paying their fair share of taxes. Individuals are paying a higher proportion of the total government revenue than corporations. The proportion that corporations have been paying has been going down. This is wrong and we have to do something.
In terms of raw data that is absolutely true. Corporations are paying less of a proportion of government revenues in terms of taxes than they used, but there is a reason. It is because of the character of corporate income taxation. The tax rate a corporation pays on its profitability has not changed.
A large corporation continues to pay a tax rate of about 50 per cent on its income. A small business pays approximately 25 per cent, under certain criteria. The rate has not changed. What has changed is that in determining the amount of taxable income a corporation has there are certain adjustments made.
When we look at an annual report it shows the revenue, the expenses and the net income from the business before taxes. When we do our tax return we take our net income before taxes, adjust it for certain things and then calculate the taxes owing.
There are three important items which would reduce or eliminate corporate taxes.
Number one is the existence of loss carry forwards or loss carry backs, seven years forward, three years back. If a corporation were in a bad situation because of an economic downturn or bad business decisions and lost a substantial amount of money, the taxation rules for business say it can carry the amount forward up to seven years and apply it against future income. That means that even though in a subsequent year a financial statement could show the corporation made $100,000, it would show it paid zero taxes, the reason being it had $100,000 in losses the previous year.
That is not to say this is right. I have recommended to the finance minister that the generous provisions of loss carry forwards and carry backs be scaled back. I am suggesting that if a business makes a bad business decision, maybe the taxpayers should not be subsidizing-