Debates of March 20th, 1996

Supply

[Barry Campbell, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, I am really baffled. It used to be said about communists that the hardest thing about being a communist was predicting the past because of revisionist history. I see this going on in the Reform Party. It is incredible.

In 1990 the hon. leader of the Reform Party said that his party would repeal the GST. In 1991 he reversed and said that it could not be repealed immediately because that would increase the deficit. In 1992 his party changed its position again, that it would reduce the GST but in stages and after the budget was balanced.

In 1994 in a minority report appended to the finance committee's report on the GST, the hon. member for Capilano-Howe Sound said: "We commend the government on its attempt to harmonize the tax with the provinces. While we support the much needed harmonization, this would be a very difficult political objective to achieve". I recall he offered his help to achieve that.

Now there is a motion that states we should scrap it, end it, abolish it. We had a Reform Party alternate budget last year but

there is no Reform alternate budget this year. There is no provision for replacing the revenue from the GST that would not come after scrapping it.

I ask the hon. member for Capilano-Howe Sound, what is the position of the Reform Party today on the GST? What will it be tomorrow, the day after and the day after that? We have been through five different versions.

Further, would the member explain what was meant in last year's minority report when he and his party said: "We believe that a broadening of the tax base would address many concerns placed before the committee. That would also require an increase of the current GST rebate". He was clearly willing to talk about a broadening of the base to get a lower rate, including food, drugs, all manner of things.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, at stake today is not the Reform position on the GST. At stake today are promises made during the election campaign which were very influential. When knocking on doors I heard all the time: "Why are you not promising to eliminate the GST? Why are you not doing this?" I said that we could not do so responsibly. People said that nevertheless they would vote for the people who would get rid of it. I won in my riding but I wonder in how many ridings the Liberals squeaked by, especially in Ontario, because they made this promise which they knew they could not keep. That is the issue. It is not an issue of how we m

Co-operative as we are with the finance committee, we are trying to understand what is best for Canada given what we have known all along but what the Liberals had denied during the election campaign: We cannot get rid of the GST but how can we make it better? Harmonization will be better but it will not solve the fundamental problems which are documented in the examples I have given. That is the issue.

The Liberals continue to claim that they did not say they would get rid of it. They have twisted it and said they would harmonize it and do something else, as if that would solve the problem. After studying the GST more than I ever wanted to, I can say that harmonization will not solve the problems that have made Canadians unhappy enough to tell me they would vote for the Liberals because I would not promise to get rid of it.

[Ron MacDonald, Liberal, Parliamentary Secretary to Minister for International Trade]

Madam Speaker, perhaps I will be better able to get a straight answer from the hon. member opposite.

My colleague indicated quite clearly that it is extremely unclear what the current position of the third party is with respect to the GST. We heard the previous speaker from the Reform Party indicate that his party's platform during the election campaign was to eliminate the GST after the federal deficit was eliminated.

If the motion before us were adopted it would have the GST eliminated before the elimination of the federal deficit. Is the hon. member trying to tell us that his party would eliminate the GST, as was the case in its campaign platform, after the deficit has been eliminated? Or, in spite of the deficit, which is going down the right way but is not quite there yet, would he still eliminate the GST and add $17 billion a year to the deficit?

[The Acting Speaker (Mrs. Ringuette-Maltais)]

Debate. The hon. Minister of National Revenue.

[Jane Stewart, Liberal, Minister of National Revenue]

Madam Speaker, I was fascinated by this motion which has been presented for us to debate here in the House by the hon. member for Medicine Hat. It states: "That, in the opinion of this House, the GST should be "killed, scrapped, abolished". Period. End. Full stop. Nothing more.

There is no indication here about how the third party would replace the GST; if it would replace the GST; how it would deal with the $17 billion in net revenues the goods and services tax brings in to the federal government. There is nothing that talks about that in this motion, this current, the fourth or perhaps the fifth iteration of the Reform Party platform on the GST.

I can only conclude that what Reformers must be saying is they do not care about those funds. They are taking the position that we can walk away from $17 billion and they are prepared to face the critics who say that this approach is foolhardy and irresponsible.

I said I was fascinated that Reformers would propose such a motion for debate today. However, I am really not surprised. Here again we have members of the Reform Party using political grandstanding to make some kind of point. I am not sure what it is. I am sure the last laugh is going to be on them. When we look at this, here again they are providing simple answers to very complex problems. Their political naivete is showing through yet again.

Also, the motion is intellectually dishonest. I sat on the finance committee with those members opposite. I listened as they did to Canadians right across the country about their concern for this tax, their hate for this tax.

We heard from large businesses which said: "If you do not harmonize this tax with the 10 provincial sales taxes, we will never have interprovincial trade that is free and open". We listened to small and medium size businesses which said: "If you do not harmonize this tax, the administrative nightmare we face daily is never going to go away". They said to us: "If you do not change this tax and make it more flexible so that we do not have to go through the same process as large companies do when we do not have accounting departments to do that, it is going to kill us".

We listened to individual Canadians who said: "This tax is driving us crazy". Yes, I remember that very individual, the retailer who came to our committee with his bags of tax receipts, showing the number of customers that had walked out of his store and not completed their transactions because they were not prepared to pay the final price. He said to us: "When you change the tax, make sure that the tax is included in the pricing on the floor".

We heard from advocates of social groups, social organizations, poverty organizations who said: "We understand that the government needs the $17 billion. We understand that you want to have a mix of tax regimes: corporate, personal income tax, and yes, a consumption tax. But for goodness sake, make sure that the notion of progressivity, that the rebate continues on".

I would point out at this time, Madam Speaker, that I am sharing my time with the hon. member for Willowdale and will look to you for a cue as my time runs out.

Let me continue by saying that as a committee we responded to these concerns. We made recommendations. As my colleague from St. Paul's pointed out, the third party said in its minority report: "We commend the government on its attempt to harmonize the tax with the provinces. While we support the much needed harmonization of the tax, this will be a very difficult political objective to achieve". We agreed that harmonization was important, that including the tax in the pricing was important, that changing the tax so it was more responsive to individual companies depending on their size was important.

I bring out the red book and quote directly from our platform, the platform we took to Canadians in 1993. It states: "A Liberal government will replace the GST with a system that generates equivalent revenues, is fairer to consumers and small business, minimizes disruption to small business and promotes federal-provincial fiscal co-operation and harmonization". We went beyond that. We presented a complete package to the people of Canada. We told them that we recognized this was a poor tax. It was poorly strategized, poorly conceived, poorly implemented. It is hard to administer.

We recognized, as I read from the red book, the answers. We said that in the first 12 months of our mandate we would talk to Canadians and confirm this with them, which we did as a finance committee. Lo and behold, the answer that came back was reflective of the position we took in our platform.

We know we have to replace the GST. We are committed to replacing it. We know that Canadians across the country support the strategy the finance committee put forward and which the Minister of Finance is working at achieving.

We are taking a responsible position here. We need to work with the provinces in order to make them understand that their constituents are the ones we talked to. The answers the provinces would get from the people in Ontario, British Columbia and Prince Edward Island are the answers we got as we crossed the country.

The answer is to come together, to have a single tax, to respond to the needs of the country, to improve our interprovincial trade, to respond to small and medium size businesses, which we know are the engines to our economic future, and to respond to individual Canadians. They do not want a tax but are prepared to pay taxes to support our social programs and our seniors benefits, those things that make this country unique and which are so important to us.

I admire the Minister of Finance for the work he is doing in his discussions with the provincial finance ministers. I will work as closely with him as I can to ensure that we have success in this regard.

In the Ministry of National Revenue we have come to the very clear conclusion that there is but one taxpayer and we want one tax administration. Therefore, in the budget and in the speech from the throne we have identified the importance of moving toward a single Canada revenue commission. We will consolidate the work of the department even more so than we have.

I would like to recognize the work of those members of my department who have consolidated very disparate branches of endeavour and brought them under one administration. We will continue to work with other federal departments such as agriculture, immigration and transportation to consolidate our work, reduce duplication, save money and reduce overlap.

We will then, with this agency, go forward and ask the provinces to work with us and consolidate the administrations that are dotting our country in each province and territory.

I am hopeful as we proceed along that agenda that we can clear the path and assist the Minister of Finance and draw to the attention of the finance ministers in all of the provinces how important the harmonization of this tax is, how important including the tax in the pricing is and how important it is to ensure that the tax regimes we have in effect in Canada are responsive to Canadians and to Canadian business.

That is the commitment we made as a Liberal Party. That is the commitment we continue to maintain and work toward as a Liberal government. I would ask members of the third party to remember the comments they made in their minority report, the support they gave to this position. I ask them to begin to work with us instead of continuing with this political grandstanding and flip-flopping to position themselves in whatever they view to be in the best view of the Canadian public at a certain point in time.

[Jim Silye, Reform, Calgary Centre, AB]

Madam Speaker, I would like to tell the revenue minister that I will be addressing the minority report when I give my speech.

Concerning her comments and speech, the issue is twofold: what politicians or candidates say when they run for election versus what they do once they get into government. That is what is at issue here. When the Deputy Prime Minister ran as a Liberal candidate she said that if elected, the Liberal government would abolish the GST or she would quit. She believed it was time politicians kept their promise. She said words to that effect. Now, as Deputy Prime Minister the difference is: "If we do not replace the GST I will resign" and there is nothing about politicians keeping their promise.

At issue here with the GST is the language and rhetoric used is stronger at the door and implies or suggests so that people who are listening infer a different concept than what is in the red book. I will acknowledge that what is in the red book and always has been there is replace, replace, replace.

Now let us go to the next promise. In 1993 the current Prime Minister said: "We will replace it by 1995". What year is it now?

[Myron Thompson, Reform, Wild Rose, AB]

It is a lot later than that.

[Jim Silye, Reform, Calgary Centre, AB]

I think 1995 has come and gone. The government has had two years. There are 170 members in the government. When the Prime Minister was in opposition he said he would get rid of the GST in a day. Well he has been Prime Minister for two years and he cannot even keep the promise to replace the GST. He cannot keep the promise of the deadline. He has had two years. He said he could do it in a day. That is the issue.

With that short, short, very factual preamble, my question is: When will the Liberal government keep its red book promise and replace the GST?

[Jane Stewart, Liberal, Brant, ON]

Madam Speaker, I assume there is time to answer after that very short preamble. I would just point out that we on this side know it is 1996 and not 1950 like members opposite.

The member is talking about what people said at their doors. I remind the hon. member that in 1990 it was the Reform Party leader who said while his party was trying to get a new senator and its first member of Parliament elected, that the Reform Party would rip out the GST if it has been imposed against the will of the people. That was in the Reform Party's election campaign.

As I said in my comments this tax was conceived of and implemented poorly. It is now very difficult to administer as a result of the work of the previous government. The last thing I want to do is to inflict another ill-conceived replacement on the Canadian public. We will take the time needed to get this tax right because we are a responsible government. We have listened to what the people of Canada have said.

[Jim Peterson, Liberal, Willowdale, ON]

Madam Speaker, first of all, I wish to thank the hon. members for Capilano-Howe Sound and Calgary Centre, who worked very hard with the finance committee in preparing the report on the future of the GST.

We worked very closely together. We travelled across Canada and they really supported our position that the amendments suggested by the committee were valid.

In part of the process we went through we looked at 20 different alternatives to the GST. It would do us well to recall very briefly those tax alternatives we looked at. At the time everybody on the committee, Reform, Bloc and Liberals said that we had to replace that tax. We could not just abolish it because we needed the revenue. So what tax alternatives did we look at? There were probably five different categories.

The first category of tax replacement was that maybe the tax could be abolished without replacing it and three scenarios under that category were looked at.

The first was that maybe the stimulus to the economy from getting rid of the tax would be so enormous that the economy would prosper simply by eliminating the tax. If that worked, why not eliminate more? It was the old supply side, trickle down Reaganomics that does not work. It was rejected unanimously by the committee.

The second alternative was to reduce government expenditures. However, to reduce expenditures by $17 billion in one year would have been too much for even this economy to swallow. We have made tough cuts and have been able to reduce program spending over a four year period by about $14 billion. That would have been even more dramatic and it would have had a terrible effect on the growth of the economy at that time.

The third alternative was to cut transfer payments to the provinces. At that time the transfers in cash were about equal to the net take on the GST. However, look at the implications that would have had on spending programs in the provinces. Look at the implications that it would have had for the programs that members on all sides of the House have asked us to support as a federal national government.

The next category of replacement was income tax alternatives to the GST. We had five of those: a personal income surtax, an exchanging of tax bases with the provinces, a flat tax, an additional flat tax add-on to the personal income tax, and a corporate income tax increase.

In essence, abolishing the GST and putting it all into personal income tax would have meant a 21 per cent increase in federal

personal income tax, which would be unthinkable when the top marginal rate in Ontario is 54 per cent.

There are many who said it could be done with corporate taxes. That would have meant an increase of more than 150 per cent in corporate taxes in that year.

Those are eight of the alternatives at which we looked.

The third category of replacement was revenue taxes. The first of these was a turnover tax. A tax of 1 per cent to 2 per cent could be imposed on every financial transaction, every business transaction, every sale which took place. The trouble is that it had been tried for many years in Europe. Although the rate is low, it cascades. Every time a transfer of goods or services takes place within a corporation it would be added on. It would not take account of efficiencies. That is why every European country which has used it rejected the turnover tax.

Then there was the payroll tax. It would take about a 3.5 per cent payroll tax to replace the GST. Some people advocated it. It would have been simple but who would have been paying it? Only the workers. Only the people who are already taxed by way of payroll levies and income tax. It would not have hit those who were retired. It would not have hit those who were living off enormous incomes which were not earned. It would not have been fair. It would have been a killer of jobs. We had to reject it.

The fourth category involved miscellaneous proposals for replacing the GST. We looked at a wealth transfer tax. We looked at green taxes. We looked at taxing gambling and lottery winnings. However, even if we could get the maximum out of those three different taxes, in their total they would not have accounted for more than about one-fifth of the GST. A lot of these were taxes which had been rejected in the past for very valid reasons.

The fifth category of replacement taxes which was looked at were the consumption based taxes. Six alternatives to the GST were looked at.

The first was the manufacturers' sales tax. Parliaments had unanimously rejected that in the past. It only applied to about 70,000 taxpayers. There were hundreds of thousands of exceptions to it. It was a very narrow base and it hurt manufacturing. It made manufacturers non-competitive.

A wholesale tax was looked at. It would have had somewhat the same impact, although not as bad as the manufacturers' sales tax. However it still had many anti-competitive aspects to it.

Next we looked at going to a straight federal retail tax, a single stage tax. But when we examined all of the provincial retail sales taxes which are single stage, a lot of testimony was given about how unfair these taxes were and how non-competitive they made businesses. Businesses ended up paying all sorts of retail sales taxes when they should not have.

Also there were certificates of exemption so that if a farmer wanted to buy a hammer to fix his barn he did not have to pay the sales tax on it. Many of these sales slipped through the net and businesses were being unfairly penalized. No one suggested that we go to the retail sales tax.

The next one was an addition method value added tax. This is where we started to look at the value added tax concept.

The 18th alternative that we looked at was a theoretical proposition, but only the academics have ever supported it, no one ever said it could work in practice and we rejected it.

The nineteenth alternative was one that had considerable merit potential. It was the business transfer tax. This would have been a value added tax that could have possibly worked in an ideal world where you did not have a federal state but a unitary state, only one level of government, where all governments could come on board at the same time, where you tax all the same base but you had a real problem accounting for imports and exports which are fundamental to our economy.

Universally tax experts, the business groups, the small business groups, the big business groups, the chambers rejected the business transfer tax which had previously looked as if it could have been the panacea.

The next alternative was to keep the GST the way it is. We could not because it imposes such a burden on small business and all Canadian taxpayers because they are supporting 10 different taxes at the retail level which is totally unfair. We could not support it even in terms of big business.

The system in Canada is the only system in the world where there is more than one tax at the retail level. Canada has 10 different taxes. Any party that stands in this House and argues that this is good for consumers, good for business, good for jobs, good for our competitiveness is absolutely insane.

We concluded that this system would not work. The only thing that could work was a national value added tax where the federal GST is eliminated, the nine provincial retail sales taxes are eliminated and they are replaced with one national value added tax under one administration.

This has such benefits for consumers, for ease of compliance by small businesses, for doing business across this country, for making every business, small and large, competitive. This is why we have supported this proposition. This is why we look forward to seeing it come in.

It is why I wish to move an amendment to the amendment put forward by the Reform Party. The motion reads: "That in the opinion of this House the GST be killed, scrapped, abolished".

I ask that the period be removed out after that and include the following words "and be replaced with a system that generates equivalent revenues, is fairer to consumers and small business, minimizes disruption to small business and promotes federal-provincial fiscal co-operation and harmonization".

[Monte Solberg, Reform, Medicine Hat, AB]

Madam Speaker, it is my understanding that any amendment has to be addressed to our amendment which was to remove the word "should" from the original motion.

[The Acting Speaker (Mrs. Ringuette-Maltais)]

I accept the point of order of the hon. member and move that this amendment is not receivable.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, I wish to ask the hon. member who is a well known, famous, most competent tax lawyer whether during the deliberations of the Liberal Party of which he is an influential member, he ever advised his colleagues that it would not be possible to get rid of the GST.

Was he totally unaware of the difficulties which exist in harmonizing and doing all the other things that we had proposed? Did he warn his colleagues about this? Was he ignorant about it? Did he just say it to himself and not tell them? Was he simply rejected? How could a distinguished tax lawyer, with as much influence as he has, get his party to accept a resolution which any informed tax lawyer would have known could not be kept?

[Jim Peterson, Liberal, Willowdale, ON]

Madam Speaker, it is quite evident that the member for Capilano-Howe Sound is quite right. We realized as did he when he was working with us on the committee that the essence of getting a streamlined tax system for all Canadians is co-operation at the federal and provincial levels.

All of us knew this. We do not have the authority to dictate what the provinces do. However that does not mean we should not endeavour in all parties to try to make our country work better. All of us agree. I know the member who just asked this question agrees with us that it would be a significant improvement to the system if we could get rid of the 10 different existing tax systems and replace them with one tax system under one administration.

The saving in cost of compliance to small and big businesses would probably be in the neighbourhood of $400 million a year. The cost to all taxpayers by getting rid of 10 different systems and replacing them with one would probably be in the neighbourhood of $400 or $500 million each year.

The cost in aggravation to consumers of not having tax included pricing when they go into the store about which he spoke most eloquently would be enormous. Of course it requires the agreement of the provinces, as many things in this country does, in order to make it the type of country we want it to be. He knew that and we knew that when we spoke of it in the red book.

We said that we wanted the tax to be harmonized with the provinces, that is, we needed their compliance. We needed their co-operation. We needed their agreement. That has always been part of the understanding and he knows it.

While I still have the floor-

[Jim Silye, Reform, Calgary Centre, AB]

Madam Speaker, I rise on a point of order. I thought I saw you rise after the member sat down. I saw you rise and begin to recognize someone, and now he is getting up to move a motion. I would think he is out of order.

[The Acting Speaker (Mrs. Ringuette-Maltais)]

That is not a point of order. We were on the five minutes allowed for questions and comments.

[Jim Peterson, Liberal, Willowdale, ON]

Madam Speaker, because the hon. members opposite objected to the way I had worded my amendment earlier-

[Mary Clancy, Liberal, Halifax, NS]

What?

[Jim Peterson, Liberal, Willowdale, ON]

What I wish therefore is to do it in such a way that it does respect the amendment they made, which is what they have asked that I do. I will comply with their wishes and yours, Madam Speaker.

I move:

That the motion be amended by inserting after the word "should" a comma and inserting thereafter "be replaced with a system that generates equivalent revenues, is fairer to consumers and to small businesses, minimizes disruption to small business and promotes federal-provincial fiscal co-operation and harmonization and be killed, scrapped and abolished".

[Jim Silye, Reform, Calgary Centre, AB]

On a point of order, Madam Speaker. I believe that to move an amendment at this stage is out of order.

[The Acting Speaker (Mrs. Ringuette-Maltais)]

On the point of order raised by the hon. member for Calgary Centre, he is absolutely right. The amendment proposed by the hon. member for Willowdale is out of order, as he had finished his speech and we were in the midst of question and comment period. Therefore, I cannot recognize this amendment.

[Richard Bélisle, Bloc, La Prairie, QC]

Madam Speaker, the motion put forward by the Reform Party reads, and I quote: "The GST should be killed, scrapped, abolished". The Bloc Quebecois will support this Reform Party motion, because the GST should

purely and simply be abolished, although our reasons are different from those set forth by the Reformers.

How much money does the federal government make with this goods and services tax? When it was first established in 1991, it brought in $2.5 billion; the following year, in 1992, $15.2 billion; in 1993, $14.9 billion; in 1994, $15.7 billion; and last year, 1995, $16.8 billion. This is a tax that puts $15 or $16 billion in the federal coffers year after year.

Our position on the GST is not new. It was elaborated upon in the minority report presented by the Bloc Quebecois members of the Standing Committee on finance in June 1994. As far as we are concerned, this position is still valid, and I welcome this opportunity to outline it for the hon. members.

Madam Speaker, would you please ask the hon. members to let me speak in peace? I notice that certain members are in deep conversation in the back.

[The Acting Speaker (Mrs. Ringuette-Maltais)]

Will the hon. members who need to discuss matters in this House, thereby interfering with our listening to the member who has the floor, please withdraw behind the curtains to have their conversations.

[Richard Bélisle, Bloc, La Prairie, QC]

Thank you, Madam Speaker. The liberal government is still reneging on its promise to abolish the GST. Let me quote a few lines from the March 11, 1996, issue of the Globe and Mail , which are very enlightening in that regard. First: ``I have already said personally and very directly that if the GST is not abolished, I will resign''. That statement was made to the CBC by the current Deputy Prime Minister on October 18, 1993, one week before the federal election.

As for the current Prime Minister, he is quoted as saying, also in 1993: "We will scrap the GST". The red book, published in 1993, states as well, and I quote: "A Liberal government will replace the GST". Again, in March 1996, the Deputy Prime Minister stated: "If we do not replace it, I will resign. I really do not have much choice. It will be replaced".

You probably remember that the GST and its abolition where big issues during the election campaign in 1993.

It was a major issue and it greatly helped the Liberals get elected. Since then, the Liberal strategy has been to downplay the importance of that issue, so as to make it easier to renege on their election promises.

During the election campaign, the Liberals made no bones about the fact that they were going to abolish the GST. Now, they talk instead of replacing it, of harmonizing it with provincial taxes. The Liberals are doing that because they are quietly paving the way for a national sales tax. Instead of abolishing the GST, they will make it even more pervasive.

The Liberal government, with its commitment to harmonize, now stands exactly where the Conservatives were. Indeed, before disappearing from the political map in 1993, the Conservatives were thinking of the same thing, harmonizing the federal and provincial sales taxes.

You have to admit that the Liberals and the Conservatives are pretty much one and the same. In addition to proposing a hybrid GST which in no way solves the management problems created by the GST, the Liberals want to impose this rigid tax to the provinces.

In view of this all-out attack against the provinces' authority, the Bloc Quebecois totally distances itself from the Liberal position and proposes instead to abolish the GST and to transfer to the provinces the tax field currently occupied by the GST. We feel this is the only way to implement a single tax system that would benefit the provinces.

As for Quebec, such a transfer would reflect its specificity and its fiscal autonomy. Quebec and other interested provinces could thus define the parameters of the new tax field, such as the goods and services that are taxable and not taxable, as well as the type of tax to be applied. This single tax would be administered and collected by each provincial government. Finally, this single tax should not take more out of taxpayers' pockets than do the current provincial sales tax, the QST in Quebec, and the GST together.

The Bloc Quebecois understands that the transfer of this tax field to Quebec could result in a significant loss of revenue for the federal government and that the latter should be compensated for that loss. Without touching transfers of tax points and special abatements-a tax field already occupied by the Government of Quebec-the federal government could reduce the transfer payments it makes under the various provincial transfer programs by an amount equivalent to the current GST revenues collected in Quebec.

This would also reduce federal interference in certain sectors of exclusively provincial jurisdiction, thus helping to cut back on duplication. In addition, as long as Quebecers pay their income taxes to the federal government, an equalization program should be maintained, without additional cuts, in order to offset the differences in the provinces' fiscal capacities.

In practical terms, our proposal would eliminate the duplication resulting from the existence of two parallel taxes and would reduce administrative costs for businesses, which would have only one tax to keep track of.

What is the context in which alternatives to the GST have been analysed?

It is a difficult context financially and economically. Middle and low income taxpayers have reached their threshold of tolerance. Unemployment rates are high and public finances are in such a

poor state that they are resulting in a risk premium on interest rates that is detrimental to investments.

The labour market is in a sorry state. Remember that with the increase in the population, we need several hundreds of thousands of jobs more in Canada, just to return to the level of employment at the beginning of the recession in the second quarter of 1990.

If we look at the tax statistics by income brackets published by Statistics Canada, we see that the increase in the tax burden of middle and lower income citizens is indeed real. Between 1972 and 1992, taxpayers saw a jump in real tax rates of 22.7 per cent. During the same period, taxpayers in lower income brackets saw their real tax rates go up by 42 per cent.

The increased tax burden has triggered the emergence of a flourishing underground economy. As the Liberal majority report states, analysts estimate the underground economy to represent somewhere between 2 and 20 per cent of the GDP. Only a total revision of the taxation system could make it possible to contain and reduce the size of the underground economy, because it is linked to the overall tax burden or, in other words, is dependent on all taxes paid by the taxpaying public.

The question of abolishing the GST and transferring it to the provinces arises in this context. All the commotion focussing on replacing the GST illustrates, more clearly than anything else could, the necessity of a total review of the federal taxation system. An examination of that system shows that high income individuals and major corporations have the financial means and the legal expertise to take advantage of a number of tax loopholes which save them considerable amounts of tax.

Think, for example, of the family trust scheme by which rich families can put off, virtually forever, having to pay capital gains tax on the assets held in trust. It is hard to estimate what the tax losses are on such tax deferments, because the Department of Finance keeps the figures hidden. According to a study commissioned by the Canadian Association of Family Enterprise in 1990, however, tax losses can be estimated at several hundred million dollars.

In 1993, when the Liberals were the opposition, they-the present Minister of Finance included-voted against reinstatement of the tax breaks associated with family trusts. Now the Liberals are refusing to abolish those same breaks, but they show no hesitancy in the least to dump on the unemployed, couples with child support agreements, and the pensioners of the future.

In fact the Liberals, just like the Conservatives in 1993, have given in to the lobby of rich influential families who want to keep their assets safe from taxes, while the tax burden on low income families continues to spiral endlessly upward.

Another example of unfairness are the tax havens. In the Auditor General's report in 1992, it was pointed out that the Income Tax Act and the tax agreements made it possible for foreign affiliates of Canadian companies to avoid paying tax in Canada and to take advantage of the lower rates of taxation available in a number of countries considered tax havens.

In fact, the auditor general estimates that more than $16 billion were invested by Canadian companies in tax havens, thus avoiding paying millions of dollars in taxes to the federal government every year. This means that, in a roundabout way, several Canadian companies are declaring abroad revenue earned in Canada.

Taking advantage of tax loopholes, many high income earners as well as big profitable firms do not pay a cent in taxes. It is to put an end to this kind of inequity that the Bloc Quebecois is demanding a comprehensive review of the Canadian tax system, not this business taxation committee comprised mostly of advisors working for firms using tax havens and contributors to the Liberal election fund.

The Bloc Quebecois is of the opinion that, in order to prevent big profitable firms from using complicated schemes to pay ridiculously low taxes, the government should impose a real minimum tax on the business profits made by large corporations instead of an easily avoidable capital tax.

The GST is not the only component of public revenue that needs to be reviewed and changed. In the minority report on the GST tabled by the Liberals in 1989 while they were in opposition, it is recommended that the Conservative government abandon its plans to introduce a goods and services tax and immediately initiate consultations with Canadians and the provincial governments on a fair and integrated reform of the tax system as a whole.

Now that they are in power, the same Liberals are content with trying to harmonize the GST and bring down three consecutive budgets that do nothing to eliminate unfairness. It is wrong to believe that all federal tax problems can be resolved by merely reforming our sales tax.

Several examples show that the Liberals are victims of their own policy of analyzing the GST separately from the other sources of federal revenue. Chapter 2 of the report of the Liberal majority on the finance committee, tabled in June 1994, states that wealth transfer tax cannot be considered as a replacement for the GST as it would not generate as much revenue.

This kind of reasoning rules out alternatives like a real minimum tax on large corporations making profits, the taxation of family trusts, the elimination of tax shelters, and so on. They rule out all partial solutions that, together, could do the job.

Finally, the Liberals are making exactly the same mistake as their predecessors by changing their minds about reviewing all sources of government revenue. By tackling only one aspect of the problem, the Liberals will never arrive at a lasting decision, because the tax system is a complex and delicate equation in which fair taxation and a balanced budget cannot be achieved by imposing a new tax in isolation.

The Bloc Quebecois' proposal would allow the Quebec government to put in place a tax that really meets Quebec's needs and avoid the mess that would inevitably be created by 11 parties trying to negotiate the base, administrative details and characteristics of the tax.

Our proposal would also make the Quebec government less vulnerable to the federal government's unilateral cuts in transfers to the provinces. At the operating level, it would eliminate the duplication resulting from two parallel taxes, improve control and reduce administration costs for businesses, which would have only one tax to manage.

Some may argue that our position would encourage consumers to take advantage of provincial rate differences. In this regard, we would like to repeat what the Liberal majority on the finance committee wrote in its report, namely that the committee recognized that the national VAT might encourage consumers to take advantage of rate differences, but no more so than today's provincial sales taxes.

It must be understood that the Bloc Quebecois' proposal derives from the basic principle guiding our policies: Quebec sovereignty. Indeed, sovereignty means, among other things, that the Quebec government would have full control over all these budgetary and economic instruments. It would then be free to use these tools based on Quebec's specific needs and Quebecers' aspirations.

The Bloc Quebecois makes this proposal from a Quebec perspective. However, it could also apply to any other province wishing to take control of the tax field currently occupied by the GST.

For these reasons, we will support the Reform motion to abolish the GST. The Minister of Finance wants to harmonize the GST with provincial sales taxes. This is a new centralizing attempt by the federal government. Why not harmonize that tax with the support of every province? As for Quebec, our proposal seeks, as I said, to abolish the GST and to transfer to the province the tax field currently occupied by that tax. Abolishing the GST does not mean merely changing its name, as the government might think.

[Dick Harris, Reform, Prince George—Bulkley Valley, BC]

Mr. Speaker, I listened with interest to the member from the separatist Bloc party. His speech contained many interesting comments.

However, we have to get the debate back to the original intent of the motion put forward by the member for Medicine Hat to force the Liberal government to live up to the promises it made during the campaign prior to the writ period.

We want to address the very deceptive campaigning promises the government made prior to the election. Its members went around door to door, meeting to meeting, rally to rally and unabashedly told Canadians that if they were elected they would abolish, kill, remove, place six feet under, get rid of the much hated GST which they railed against in the House when the Tory government brought it in. I do not know how those members can sit here with such righteous indignation at our request that they simply live up to the promises they made.

There is one thing about Liberals that we all must know by now. If they say something verbally, we had better get them to write it down. They never used the words "replace", "harmonize" or "change" during their campaign, the verbal part of their campaign.

We have a couple of extremists in the Liberal Party, particularly the hon. member for York South-Weston. He remembers the campaign promise the Liberals verbally made to the people of Canada that if the Liberal government did not live up to its promise to abolish, kill, get rid of the GST he would vote against the budget. We support that member. It is too bad the government will not support its members who heard the promises with the true intent they were made.

The motion of the hon. member for Medicine Hat calls on the government to live up to the promise it made to the Canadian people before the red book was written and the words magically changed. We are asking the Liberals to live up to their promise, do the honourable thing and scrap, kill, abolish, get rid of, bury the GST like the Canadian people were led to believe they would do before the infamous red book came out and magically changed it.