Mr. Speaker, I am very pleased today to speak to Bill C-36, a sort of omnibus bill amending several aspects of the Income Tax Act, the Excise Act and various similar pieces of legislation.
What particularly attracts my attention, and what I would like to address in my speech, is the whole question of measures related to family trusts. I think it is very important that the public be very well informed of where things stand on this issue. I would like to give a brief run through of the background. In the 1993 election campaign, the Bloc Quebecois raised many questions about the amounts of money held in these family trusts. At the time, the deficit was growing, as it continues to do, and we were also wondering how we could ensure that we really received all the tax revenues that we thought appropriate.
Thanks to information it had gleaned from one source and another, the Bloc Quebecois knew that family trusts could contain money that the government was missing. Following the election, we kept telling the government: "Before pronouncing on the effectiveness of family trusts, let us at least find out the amounts of money involved, what information we could obtain".
As a young newly elected MP, I came here in all good faith, thinking that, during our work in committee, we could actually examine the figures, see what was possible and take appropriate action accordingly.
But that was my first disappointment with the work of an MP, because examining these matters in committee brought us up against a wall of indifference, and even a wall of missing information from senior public servants. Time after time, they told us: "The figures are not available. That would require giving personal information. Most trusts involve families in which there is a mentally or physically disabled person who cannot look after his own needs. That is how it operates, so there is no reason to go poking about in it".
But our representations did get the government to decide to make some modifications. For example, allowing families to free up the assets they held in family trusts until 1999. We are, of course, against that measure. It is like finding a burglar in your house and telling him: "You have an hour and half and then I am going to start running after you". He would have time to empty the house before you would have been able to find out just what he had taken.
There have been examples of this situation in recent weeks, reference to trusts containing more than $2 billion which have been able to send their assets, their investments, out of the country without having to pay any tax on them.
This is a really negative side of the government's action. The fact of voluntarily acting slower than it should have a year or two ago leads to situations like this. At a time when we need all the tax revenues we can get, the message sent to workers in particular, low or middle income earners, is that there are 500 rich families, from what it says there, that may have family trusts.
There is talk of a tax shortfall of possibly $400 million. Four hundred million dollars will not settle Canada's deficit problems, but at least in terms of tax equity, Canadians and Quebecers will get the message that the government is going after the rich as much as it is going after the poor.
When unemployment insurance reforms like we have seen recently occur in the same days and weeks as we learn that some $2 billion invested in family trusts has left Canada without being duly taxed, people consider this situation clearly unacceptable.
Finally, we consider what is in Bill C-36 to be too little, too late. It is too little, because the people who have invested in family trusts will have had all the time they need to diversify their assets and transfer them to other tax evasion possibilities. The Canadian government thus does not collect as much tax as it could have. It is too little and too late because of the time allowed for recovery.
I would like to remind the House of the recommendations made by the Bloc Quebecois in December 1994, about one year after the election, as part of a committee study. If these recommendations had been carried out at the time, we would not have to deal with trusts taking their assets out of the country and trying to find legal ways to evade as much tax as possible; whether these tactics are legitimate is a different matter, but they are still legal according to the legislation put forward by the government.
The first recommendation made by the Bloc Quebecois is that investigations be carried out to determine the exact value of assets managed by family trusts, the value of capital gains from assets under family trust management, the value of tax revenues whose collection was postponed by deferring capital gains taxes until the last trust beneficiary dies.
These studies could give us actual figures on the impact of the legislative measures taken with respect to family trusts. We must recall that family trusts were instituted in 1972 to help families facing special and rather unusual circumstances, such as caring for a child with a handicap, or even small business by allowing them to tax-shelter certain assets. But like in many other such instances, this measure is benefiting those who can afford the services of tax specialists who found in this measure a tax loophole for avoiding to pay taxes.
Since then, amendments made to the legislation have actually made the family trust loophole wider. Now, efforts are made to try to plug the hole, but the measures contained in Bill C-36 certainly do not ensure tax equity for families in these circumstances.
I would also like to remind you of another recommendation making it mandatory to pay taxes on capital gains on a trust paid out in favour of the beneficiary. This issue has been close to our hearts from day one, as it reflects the whole battle going on in Quebec and Canada around the share of tax revenue that every segment of society must pay to restore Canada's economy to health. This issue has become a symbol; it is an issue where, as a
result of yesterday's measures and carelessness, we find ourselves today having to do without desperately needed resources.
On the one hand, they claim that the unemployment insurance reform will save $2 billion through cuts to unemployment insurance recipients and those who make contributions to the unemployment insurance plan, employees and employers alike, but on the other hand, they are leaving the door open for those who should be paying up to $400 million in taxes.
Imagine how much less pressure there would be on the unemployment insurance system if the government's financial statements showed additional revenues of $400 million from family trusts. This would have taken pressure off of the unemployment insurance reform. This is significant when we are talking about fiscal balance. Sometimes, in debates like this one, we hear that the opposition is there to criticize, to find flaws in the legislation.
In this case, opposition parties are not the only ones making recommendations. The Auditor General of Canada also raised the issue of family trusts and asked the government to ensure that all the information be available, so that future legislative measures allow Revenue Canada to recover all the amounts that can be recovered. The auditor general is only fulfilling his mandate, which is to ensure that the amounts owed are collected and that the moneys are spent in the best possible way to meet the objectives set.
For a long time now family trusts have been used for purposes other than to help small and medium size businesses. It is said that someone with an annual income of $100,000 or $150,000 is unlikely to have any use for a family trust. Who benefits from family trusts? It is people whose income is very high. It is a fact that these trusts benefit the very rich and that they deprive the government of considerable revenues.
Family trusts are not the cure-all. Canada's fiscal problems would not all be solved if trusts paid their fair share of taxes. However, it would allow the government to tell taxpayers: "We made high income people pay their fair share. We asked them to contribute and we made sure they all did. We did not provide them with any means to avoid paying taxes. We kept a close watch on them. Now, we are asking you to also do your share".
That would make all the difference in the world in the situation we are facing now, where those receiving unemployment insurance, those with low incomes, are being asked to pay $100, $150 or $200 in additional taxes on incomes of $20,000, $25,000 or $30,000. In family trusts, we are talking about millions of dollars, $400 million in unpaid taxes.
That would be seen as a gesture of fairness on the part of the government, a gesture not found in Bill C-36. This bill does not contain measures that would have made it possible to truly stem the flow. The government tells us that it is washing its hands of decisions concerning family trusts and capital shifted to the United States when the Conservatives were in power, that it is not responsible for what went on then.
But now, with the deadlines given, with the provisions in Bill C-36, with the fact that people will have until 1999 to transfer their money into other sectors, is the government not shirking its responsibility? It cannot blame the Conservative government for not doing its work. Now it is the Liberals who have decided to let matters take their own course and to allow people to continue to avoid paying taxes that they should be paying.
We must ask ourselves why they are doing this. Why, in these times when we are so in need of money, are they closing their eyes, not listening to reason and allowing wealthy families to continue not paying their taxes?
I think that one thing that needs to be looked at very closely is the question of party funding. Would there not be a link to be made-indeed, almost a bank reconciliation-between the contributions from these important families to parties which will accept money from anyone, whether a physical entity or a corporate entity?
In Quebec, for some years, nearly 20 in fact, only physical entities can donate to political parties. This has led to a complete change in political mores. The federal government has not yet reached this stage. Significant sums, $50,000 or $100,000, can still be received from companies, unions or other organizations.
You can well imagine, afterward, when the government is being lobbied, that the company or family which donated $50,000 or $100,000 to the coffers of the party in power is certainly going to be listened to because of that contribution.
All of the key points in this current situation are in place: a tax system that has not been revised, a government that is very timid about tax review. It talks about a technical committee. It is because the opposition has repeated the same arguments and attacks almost ad nauseam that it has managed to get some small changes of the type found in Bill C-36, to at least close the loophole in the medium term. But the government's measures are very timid, too timid, and do not make the restrictions that ought to have been on the family trusts.
In conclusion, I would say that the present government does not appear to be aware of the urgency of acting in this area. First of all, we have been aware for two years of the necessity of having all
available information on family trusts. We have asked for it repeatedly in committee, and senior officials have told us it was not available, often in a rather condescending way. Today we find out the reason for that reaction. It is because the transactions have already been made and some are perhaps being made so that certain taxpayers will avoid paying tax and, moreover, will take their investments abroad.
I think this is unacceptable even to federalist Canadians. So the government should have moved, legislated quickly on this. Today, moreover, it must turn off the taps in a hurry, because it is clear that there are many things that even Bill C-36 will not correct. There is no way with this bill to ensure that each of the great families pays the taxes it ought with respect to the funds it invests in family trusts.
This is an important point. There is nothing in this bill to force the legislator to act. This is why the Bloc Quebecois will vote against the bill. So long as we obtain no assurance that family trusts will no longer be a way to avoid paying taxes for people with the means to do so, we will continue to press for satisfactory amendments from the government. On this point, I hope the Standing Committee on Finance will act quickly, now that we have proof money is flowing out of Canada and being invested abroad without taxes being paid on it.
I think that the government should follow the auditor general's recommendations as quickly as possible and take appropriate action so that, in the next federal budget, the revenue side of the sheet will show the amounts that belong there, including taxes payable by wealthy families and by those who invest in family trusts, so that they pull their weight, and we do not see inadequate cuts that crack down harder in the wrong places, for example, through very stringent unemployment insurance legislation, on the one hand, and a laissez faire approach on the other.
This sort of situation must be corrected. I hope that, after hearing our arguments, the government will take corrective action and bring in tougher legislation, so that people can no longer evade taxes that they should be paying.