House of Commons Hansard #63 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was cyprus.

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The House resumed consideration of the motion that Bill C-45, an act to amend the Criminal Code (judicial review of parole ineligibility) and another act, be read the second time and referred to a committee.

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June 17th, 1996 / 3:40 p.m.

The Acting Speaker (Mr. Kilger)

Is the House ready for the question?

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3:40 p.m.

Some hon. members

Question.

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3:40 p.m.

The Acting Speaker (Mr. Kilger)

Is it the pleasure of the House to adopt the motion?

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3:40 p.m.

Some hon. members

Agreed.

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3:40 p.m.

Some hon. members

No.

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3:40 p.m.

The Acting Speaker (Mr. Kilger)

All those in favour of the motion will please say yea.

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3:40 p.m.

Some hon. members

Yea.

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3:40 p.m.

The Acting Speaker (Mr. Kilger)

All those opposed will please say nay.

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3:40 p.m.

Some hon. members

Nay.

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3:45 p.m.

The Acting Speaker (Mr. Kilger)

In my opinion the yeas have it.

And more than five members having risen:

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3:45 p.m.

The Acting Speaker (Mr. Kilger)

Call in the members.

And the bells having rung:

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3:45 p.m.

The Acting Speaker (Mr. Kilger)

The government whip has instructed that the vote will take place tomorrow, Tuesday, June 18 at 5.30 p.m.

The House proceeded to the consideration of Bill C-36, an act to amend the Income Tax Act, the Excise Act, the Excise Tax Act, the Office of the Superintendent of Financial Institutions Act, the Old Age Security Act and the Canada Shipping Act, as reported (with amendment) from the committee.

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3:45 p.m.

Victoria B.C.

Liberal

David Anderson Liberalfor Minister of Finance

moved that Bill C-36, an act to amend the Income Tax Act, the Excise Act, the Excise Tax Act, the Office of the Superintendent of Financial Institutions Act, the Old Age Security Act and the Canada Shipping Act, as amended, be concurred in.

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3:45 p.m.

The Acting Speaker (Mr. Kilger)

Is it the pleasure of the House to adopt the motion?

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3:45 p.m.

Some hon. members

Agreed.

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3:45 p.m.

An hon. member

On division.

(Motion agreed to.)

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3:45 p.m.

The Acting Speaker (Mr. Kilger)

When shall the bill be read a third time? By leave, now?

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3:45 p.m.

Some hon. members

Agreed.

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3:45 p.m.

Victoria B.C.

Liberal

David Anderson Liberalfor Minister of Finance

moved that the bill be read a third time and passed.

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3:45 p.m.

St. Paul's Ontario

Liberal

Barry Campbell LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, I am pleased to speak today on third reading of Bill C-36, the 1995 budget tax measures bill.

As hon. members will recall, that budget focused not only on cutting program spending, it also focused on tax fairness which remains a priority of the government.

On the spending reduction side, for the three year period on which last year's budget focused, 1995-96 to 1997-98, there were almost $7 in spending cuts for every $1 in new taxes. Spending reductions for this three year period totalled $25.3 billion with the burden being shared.

On the tax fairness side, in the 1995 budget we introduced several tax measures which are all based on the principle of fairness and equity in the tax system. These measures accomplish a tightening of the administration of the tax system, a removal or reduction in a number of tax preferences, and an increase in fairness in the system.

Since the time of the 1995 budget announcement the government has responded to the concerns of Canadians and members of the House about the impact of some of these measures, and changes have been made. The government believes in consulting with Canadians and taking action in response where it is warranted. I want to briefly highlight now some of the main measures of this bill reflecting that input.

The government believes tax assistance should be provided to Canadians to encourage them to save for retirement and that the fiscal cost of this tax assistance should be shared fairly. Changes in Bill C-36 help to achieve this. Under this bill the contribution limits for registered retirement savings plans and money purchase registered pension plans are being reduced to $13,500 this year. They will rise incrementally to $15,500 in 1999 and 1998 respectively. The 1996 budget subsequently froze these limits at $13,500 for another six years. These additional limits will be dealt with in legislation to be introduced at a later time.

Bill C-36 also reduces the over contribution allowance to RRSPs from $8,000 to $2,000. Originally intended to help taxpayers who inadvertently make an over contribution error, this measure will now restrict those taxpayers who took advantage and made deliberate over contributions. However, over contributions made before budget day are excluded from this penalty.

In addition, Bill C-36 gradually eliminates the tax free transfer of retiring allowances to RRSPs. Given other changes in the retirement savings system, this measure has outlived its usefulness.

Another area affected by the bill is family trusts. As hon. members know, this has been an area of concern to many Canadians. In the 1994 budget the Minister of Finance referred the taxation of family trusts to the finance committee to review, among other things, the election to defer the 21 year deemed disposition rule allowed by the previous government. To ensure that capital property cannot be held for the benefit of successive generations of trust beneficiaries without tax consequences arising on death, there is a deemed disposition of a trust's capital property every 21 years. The previous government had changed this to allow for the first 21 year deemed disposition date to be deferred until the death of beneficiaries who are no more than one generation away from the settlor.

Bill C-36 contains two measures that affect the tax regimes of these family trusts. One deals with the undue deferral of capital gains. The other affects the splitting of trust income because of the preferred beneficiary election.

The preferred beneficiary election allows trust income for income tax purposes to be allocated to preferred beneficiaries without any requirement that the beneficiaries actually receive the amount allocated. Bill C-36 limits the preferred beneficiary election to disabled beneficiaries. This will ensure trust income cannot be arbitrarily allocated to a beneficiary instead of being taxed at the trust level just because the beneficiary is at a low marginal tax rate.

Bill C-36 also eliminates the election to defer the 21 year rule. This measure removes the possibility of this election causing the undue deferral of capital gains. It also addresses the perception that family trusts are some sort of tax shelter.

Trusts for which an election to defer the 21 year rule has already been made will be subject to a deemed disposition of trust assets at fair market value on January 1, 1999.

The 1995 budget increased the corporate surtax from 3 per cent to 4 per cent of basic federal income tax. As a result, additional corporate revenues of $115 million to $120 million annually should be generated.

In addition, the large corporations tax, which applies to all corporations with over $10 million in capital, is being raised from 0.2 per cent to 0.225 per cent. An extra $150 million a year in corporate revenues is anticipated from this measure.

Further, this bill includes a temporary surcharge of 12 per cent, levied under part VI of the Income Tax Act, on the capital tax paid by banks and other large deposit taking institutions between February 26, 1995 and October 31, 1996. These measures ensure these institutions contribute to deficit reduction.

As hon. members will know, the surcharge was extended for another year in the 1996 budget. Again, this will be dealt with in legislation to be discussed in the House at some time in the future.

Finally, an additional six and two-thirds per cent tax on the investment income of Canadian controlled private corporations will reduce their tax deferral opportunity.

In that regard, allow me to stress that Bill C-36 ends the tax deferral on business income.

While businesses could previously choose the date on which their fiscal year ended, December 31 will now be the date set as the end of the fiscal year for all businesses.

However, the government received a number of comments on this provision, and some amendments were made in order to address the concerns expressed by some businesses regarding, among other things, seasonal activities.

A special "alternative" method of calculating income will now be available to some businesses that prefer an off-calendar fiscal period.

These taxpayers will have to review their income to consider the money earned between the end of their fiscal period and the end of the calendar year.

Bill C-36 also introduces the Canadian film and video tax credit, which will directly benefit Canadian film production companies. It replaces the outdated capital cost allowance tax shelter, which concerned producers of Canadian certified films.

The film producer will now receive all the benefits from the new Canadian film and video tax credit. In addition, the credit will be available only to businesses whose main activity is the production of Canadian films or videos in Canada. This very specific clause should restrict credit applications aimed at avoiding taxes on income from other sources.

Let me move on now to some of the other highlights of the bill. Bill C-36 provides special enhanced tax assistance for donations of ecologically sensitive land. When certified ecologically sensitive land is donated to a charity or municipal body, there will be no annual income restrictions on the donor. Currently the limit is 20 per cent of donor's income.

Bill C-36 eliminates the inflation of certain scientific research and experimental development measures, SR and ED tax credits, and improves that administration of these tax incentives.

There will be restrictions on the expenditures on which SR and ED investment tax credits can be earned, and non-profit SR and ED corporations exempt from tax will now have to report their SR and ED work and expenditures.

Another measure in the bill protects the collection of source deductions by making secured creditors who interfere with the remittance of source deductions liable for remittance along with any interest and penalty charges, just as the taxpayer is liable.

As a result of Bill C-36, seniors with incomes over $53,215 who have to pay back some of their old age security benefits at tax filing time will now have tax withheld when benefits are being paid out.

Finally, Revenue Canada will be extending the use of the business number, that is the one registration number for business dealings with government, to other departments and levels of government that have a legal right to this information. This will reduce overlap and duplication and increase efficiency for both business and government.

I have summarized the highlights of Bill C-36. It contains straightforward tax measures that exemplify the government's commitment to fairness and equity in the tax system. I am also pleased the bill as it has now emerged reflects the input of Canadians and hon. members to which we have responded.

I thank hon. members for their assistance through all stages of the bill. I strongly urge my colleagues to pass Bill C-36.

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3:55 p.m.

Bloc

Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, I am pleased to take part in the debate at third reading of Bill C-36, which primarily seeks to implement measures proposed in the 1995 budget, along with some from the 1996 budget.

As is its habit with the majority of bills, the government included a series of scattered and ill-assorted measures in the same bill. Of course, there are some positive things in Bill C-36, including the provisions on tax deferral, gifts of ecologically sensitive land, business number and, in particular, the film tax credit, which we strongly supported during the proceedings of the finance committee, since it will benefit the whole industry.

The problem with Bill C-36 is that, in spite of these positive measures, the government, true to form, introduces a few measures that are particularly harmful or not very meaningful, but all tied up in pink ribbon.

Remember when the Minister of Finance delivered his budget speech and told us that, yes, the government had heard the plea made by the official opposition and that it would reform family trusts. The official opposition went through three different states of mind. First, we were pleased because, at last, the government was listening to us and would reform a totally unfair program. Second, we were disappointed, because the reform would only be implemented as of 1999.

So, although some positive action was to be taken to correct the unfairness resulting from family trusts, the government was giving until 1999 to those who benefit from this program to transfer their assets into other tax planning vehicles which will be just as effective in terms of avoiding the payment of taxes.

I would like to take a look at two measures in the bill, the one involving family trusts, of course, with a recent example to illustrate my point, the one brought up by the auditor general, and I will conclude with the positive measure in Bill C-36 regarding film tax credits.

First, I will look at family trusts. As I mentioned, we had been waiting a long time for this measure and the government disappointed us. Why were we disappointed? As early as the 1993 election campaign, the official opposition, the Bloc Quebecois, pointed out the problem with the family trust system. We had two goals in mind: the first was to show, using this example, that there was a problem with the Canadian tax system, that it was in need of reform, not tinkering, but heavy duty reform.

Our second goal was to show that there were people in Canada who were not paying their share, and that these people were not the poorest, nor are they today, but the richest. The people who have been able to use this family trust provision are not in the average income bracket, they are not people earning under $200,000 a year, or people earning $35,000. For the most part, those using family trusts as a tax planning tool are the rich and the ultra rich.

What was the government's response? First it said: "We will reinstate the 21 year rule". What is the 21 year rule? The answer is very simple. The Conservatives, preceding the present government, had changed this rule, which had existed previously and which provided that, at the end of the 21st year of a family trust, the trustees had to realize their assets, in other words, estimate their assets and pay the capital gains accumulated over the 21 years.

The Conservatives changed this rule so that the capital gains tax payable could be carried forward until the death of the last beneficiary. Therefore, if the trust beneficiary lived to age 80, no capital gains tax was paid for 80 years.

This was really unfair, unfair to everyone. What we wanted was not just a return to the 21 year rule, as Bill C-36 proposes, but a review of all family trusts and not just the 21 year rule, because, with spreading tax over 21 years, let me tell you a tax dollar in the first year will not be worth the same as a tax dollar in the 21st year. We are already questioning the rule underlying this 21 year rule, never mind the 80 year rule.

Second, not only during the 1993 election campaign, but at every opportunity in the deliberations of the Standing Committee on Finance, the official opposition called for an in-depth review of the Canadian tax system so that family trusts, in combination with other provisions of the Income Tax Act, foreign tax conventions and so on, could not provide an excuse for rich Canadian families to avoid paying their due to Revenue Canada.

The government did not listen to us. Instead, it introduced Bill C-36, which sets out slightly better realization of assets rules for family trusts by reducing the time period from about 80 years to 21 years. But what we need is a comprehensive review, not only of family trusts, but also of the Income Tax Act, of some general tax provisions and of international conventions.

We must ensure that each of these scattered provisions no longer allow the wealthiest Canadian families to avoid paying taxes to the federal government.

To illustrate what the official opposition has been contending for almost two and a half years about family trusts and the need for a comprehensive review of the tax system, in his recent report, tabled on May 7, the Auditor General of Canada brought to light something we had been suspecting for a long time, a problem we had been raising almost every day in this House, at the Standing Committee on Finance and at the Standing Committee on Public Accounts presided by my hon. colleague from Beauport-Montmorency-Orléans.

In his report, the auditor general reveals that, in December 1991, a family trust holder had transferred to the United States $2 billion in assets without paying a cent in taxes. This transaction took place in 1991, the whole process, all the regulations and the analysis that made it possible to transfer billions of dollars to the U.S. tax free only came to light in March and in May of this year, when the auditor general blew the whistle on this.

How could the transfer of $2 billion be pulled off? Exactly the way we said it could be done every time we stood in this House to question the Minister of Finance on family trusts. By using the family trust provisions. By using the capital gains provisions of the Income Tax Act. By using the lack of clarity of the non-resident provisions of the Income Tax Act. And fifth, by using the tax convention between Canada and the United States.

It was a mix of all that and, to be able to afford mixing all that, you have to be a millionaire. Do you know why? Because you would have to hire the top tax experts in Canada to know how to use all these tax rules, how to use the family trust scheme, and to be on top of the latest decisions or the latest analyses made by Revenue Canada. What the auditor general tells us clearly illustrates what we have been saying ever since we were elected to this House. A Canadian resident was able to transfer $2 billion in assets to the U.S. without having to pay a penny in taxes now or in the future.

This case did so much to illustrate the shortcomings of the tax system, as well as the relationship between the system and the great tax experts representing the families of Canadian millionaires and billionaires, that, after the auditor general published his report, the federal government felt it had to try to suppress this affair.

This shows two things. First, that there is no political will on the other side to really correct the deficiencies of the tax system, in particular the links between family trusts, tax agreements and the tax system in general; and second, that the government has things to hide.

Why do I say this? Because, if they wanted to correct the situation, I feel they should go beyond the little provision on family trusts in Bill C-36, which provides for two minor measures, by first getting to the bottom of these family trusts that were transferred to the U.S. A $2 billion trust means that someone got to keep a lot of money without paying any taxes on it. They should first get to the bottom of this and then quickly review the whole tax system openly and publicly, instead of behind closed doors.

There has been a slight improvement compared to what the Minister of Finance announced in his last budget. Although the group still consists of eight experts behind closed doors, it has to report to the Standing Committee on Finance at every step in the review of business taxes in particular. This is already a slight improvement but, as I will show you a little later, we must be vigilant, as there is no political will to review any part of a system that benefits those close to power, not to mention those in power.

Why do I deplore the government's record in this regard? Let me explain. In the days that followed the release, on May 7, of the auditor general's report on family trusts, the Standing Committee on Public Accounts received, as usual, that report. I should point out that the committee is chaired by the hon. member for Beauport-Montmorency-Orléans and that another eminent member is the hon. member for Trois-Rivières. Normally, the committee analyses the report from A to Z.

When the time came to look at chapter I, in which was mentioned the $2 billion scandal involving family trusts to which I just referred, the Liberal member for Brome-Missisquoi, the brother of the other one, said: "We must analyze this case urgently. This is one of the worst scandals". The member even conducted two major communication operations. He came out and made a statement before radio and television reporters, saying there was a scandal and that we had to shed light on the issue, because the whole thing was very mysterious.

The member even wrote a press release from his office that said exactly the same thing. There was scandal behind this. Family trusts and the whole tax policy had to be reviewed and, in particular, we had to shed light on the tax free transfer of $2 billion in trust to the United States, thanks to existing loopholes.

The member's determination to go to the bottom of things did not last two days. As soon as we heard a rumour to the effect that a very rich Canadian family might be involved and that, if we went back to before the 1991 decision made by the Conservatives, we might discover some Liberal involvement, there was a complete change of attitude. We did not see the member Brome-Missisquoi for over a week. He was very busy with the committee, we were told.

During this time, the government launched into a rather impressive cover-up. The mandate, which would normally lie with the public accounts committee, which can act as a true commission of inquiry, was transferred. This committee has all the powers to act as a commission of inquiry, and it has the mandate to do so based on the auditor general's report. Only chapter I was transferred, not the entire report of the auditor general in which he puts his finger on the scandal of the billions of dollars that are being moved tax free out of the country to the United States.

The mandate of the finance committee can pretty much be summed up as analysing fiscal policy in a general manner, with a particular emphasis on policy with respect to residents and non-residents, so that things which took place in the past will not happen again in the future. That is the mandate of the finance committee.

If we listen to the government, we will never get to the bottom of the 1991 scandal. And the reason is because the system in place-we saw it last week-is being perpetuated by eminent tax experts-because only experts can understand the ins and outs of the tax system-who work hand in hand with Revenue Canada, and its senior officials, deputy ministers, assistant deputy ministers and senior analysts, in order to benefit a handful of privileged people, a handful of insiders.

In the United States, it is a serious crime to be an insider; almost as serious as first degree murder. Today, as we are seeing, the auditor general is casting light on some things.

He speaks of a process in which most of the deck is missing, nearly 95 per cent of the information is lacking. He tells us that, from one week to the next, there has been a total change of direction in the interpretation of taxation laws, which resulted in the transfer of two billion dollars to the US tax free. It started as a refusal by Revenue Canada, followed by pressures on the Department of Finance from who knows what quarter, and moved on to a final decision allowing this transfer of a trust to the U.S. without paying any tax.

A situation like this is worrisome, and the reason why a bill like C-36, which does contain some good measures, but clouds the issue of family trusts, as they are attempting to do with chapter 1 of the auditor general's report, is no longer workable.

Despite my tender years, I have followed the debates in the House, particularly on public finances, the auditor general, public accounts, even the business of the House. I must admit that I have never seen a situation like the one that has existed for the past month or so, in which government members, members of the finance committee, are attempting to run down the auditor general, to attack his attitude.

The auditor general is the most respected and respectable man in the senior public service. Why is that? Because he is answerable to Parliament. He comes and reports to Parliament on behalf of the departments on the good or poor management of public funds. He also forces public servants to be accountable. Now, we have just been told-I heard it from the very mouth of the Chair of the finance committee-that the auditor general may have erred slightly. The Liberal members of the finance committee questioned the auditor general very closely, not to cast some light on the situation or on certain particularly complex points of taxation law relating to family trusts, but to trip up the auditor general.

For those who are still interested in this matter, and I believe growing numbers are, because people have had enough of this business of golfing buddies going off to Florida together-last week, the committee heard six taxation specialists on the matter of family trusts, which ought to be our primary concern in Bill C-36. Of the six, one expert was invited by the official opposition, and another by the second opposition party.

Believe it or not, the four tax experts invited by the government went round the table sometime in the middle of the evening to explain their analysis of the case criticized by the auditor general and of the whole system known as the advance rulings system at Revenue Canada, which provides analyses of certain tax provisions for taxpayers. The game continued. The tax experts had questions about the auditor general's analysis, tax experts who revolve around power, the department of revenue, the deputy minister of the department of revenue, his principal advisers and the advance rulings division, which, in December 1991, made a ruling on the transfer of a $2 billion family trust to the United States tax free. These are people who also revolve around the deputy minister of finance, Mr. Dodge, and Mr. Farber, a special adviser, who does more policy making than his minister.

Last week we had laid out for us what we have always suspected as ordinary taxpayers. There are people who benefit roundly and they are not the low, middle or high income folks, but the richest Canadians, the millionaires and billionaires represented by these tax experts. We saw that the power lies here. The four tax experts criticized the man most respected by the federal public service and Parliament. These experts, who normally look at us with a certain haughtiness and say: "Look, we understand a very complex tax system that you know nothing about. So, please do not ask any questions", were itching to take on the auditor general, so much so that we are obliged to provide a clarification.

We asked tax experts whether we were right in our analysis of the tax provisions that made it possible to transfer $2 billion abroad tax free. We did not ask them to express a political opinion and to say: "You should not ask questions about this. The auditor general should not have said this".

Mr. Goodman, a renowned tax expert, told us during committee proceedings, which were televised: "These things are too complex. The auditor general should never have condemned this. He brought discredit on the process leading to Revenue Canada's advance rulings, which allows billionaires to transfer their money to the U.S. without paying taxes. You are generating-these are his words-a siege mentality against Revenue Canada, whose senior officials will no longer be willing to make such decisions".

That may turn out to be a good thing, because the $2 billion that was transferred to the U.S. represents hundreds of millions of dollars in taxes that were not collected here and that the people of Quebec and Canada will have to pay for.

As I was saying, we have a case that was condemned by Martin Leclerc, a well-known journalist with the Journal de Montréal . On June 10, Mr. Leclerc wrote: They want the auditor general's head because he condemned the family trust scandal''. He even said:A Liberal member-I will not mention him by name, but he chairs the finance committee-is trying to discredit him''.

He is trying to discredit the auditor general. It was obvious to everyone. At the same time, the sub-heading read something like: "Gravelle, Dodge and Farber, three Revenue Canada mandarins who are not accountable to anyone, let a billionaire transfer $2 billion to the U.S. tax free". We are no longer the only ones to notice that tax inequity has been raised to the status of a system and may have been for decades.

As I said earlier, some of the tax experts who testified before the committee last week on the subject of family trusts and who were supposed to give us tips on how to plug the loopholes in the tax system limited their remarks to putting down the work done by the auditor general and criticizing the poor parliamentarians that we are for trying to get to the bottom of the process which led to the decision made in 1991 to transfer $2 billion, possibly setting a precedent allowing hundreds of millions more to be transferred to the U.S since. They basically told us: "Do not ask us any questions".

There is a big problem there. Just to give you an idea of how big the problem is, when we asked the tax experts before us: "Were you in any way involved with officials or former senior officials who may have worked at Revenue Canada or at the Department of Finance at one time or another, who may have taken part in the analysis that led to the 1991 decision to transfer $2 billion to the U.S. tax free or may have known about the ruling made by Revenue Canada at the time but not made public until March 1996, this year, and could therefore have acted as insiders, making other persons benefit from a precedent set in 1991 but that only a handful of people knew about?", these witnesses had nothing to say. And this was just one case that was uncovered.

There was a tax expert representing Stikeman Elliott, a well known firm of tax consultants which provides advice to millionaires, billionaires and other very rich people. A Mr. Tilack worked until very recently for Revenue Canada's advance income tax ruling division, and may have been aware of the decision made in 1991 and may have made Stikeman Elliott benefit from it. When we asked Mr. Wilkie, who was Stikeman Elliott's representative, if he had had contacts with these people, he jokingly said yes, a former minister.

However, when we mentioned Mr. Tilack's name, Mr. Wilkie was no longer laughing. The same thing happened to their financial special advisor, Mr. Farber, who was sitting behind and whose face looked quite drawn when he left the room.

As we figure out the existing links between some well known tax firms and senior public officials, including deputy ministers,

assistant deputy ministers and others from Revenue Canada and the finance department, we hurt them a little bit.

If we succeeded in breaking this system of privileged contacts and anticipated decisions for millionaires and billionaires, these firms might make less money than they do now by providing precious advice to help rich people avoid paying taxes.

They might make less money than they do by giving complex advice, such as that which lead to the tax free transfer of $2 billion, based on five provisions in the tax conventions signed by Canada and the United States. These firms would make less money than they currently do if these provisions were understood. They would make less money if, as recommended by the auditor general in his 1992 report, all advance rulings were made public.

It is not right that, in the case of the 1991 family trusts, about five tax provisions were used; that Parliament was not informed of this possibility of transferring funds; that, according to the deputy ministers and the assistant deputy ministers, neither Revenue Canada nor the Department of Finance deemed worthwhile to inform in any way the elected representatives of the day of the tax loopholes that allowed for the tax free transfer of $2 billion. There is something wrong. We are in trouble if we allow this state of affairs to continue.

When attention focusses on the system that has been in place for several years now between Revenue Canada and tax experts, things start to heat up and the government begins to panic. They do not know what to do next, so they gag the public accounts committee, which should normally have looked at this case, and transfer responsibility to the finance committee with as broad a mandate as possible, so that nothing will ever come to light.

I have never seen such a case, nor have I ever seen the government so intent on hiding the truth, on keeping from Quebecers and Canadians all the inside information on this affair, which has been described by the auditor general, and by many others, since he brought it to light, as nebulous.

I would say to you that this does not augur very well for the general review of taxation recently announced by the minister. You may recall that in the 1996 budget the Minister of Finance announced that he was forming a group of eight experts to review taxation, behind closed doors, and that this group would submit its report in the fall.

When the family trust scandal hit, the finance minister had a slight change of heart and put us in the picture, as they say. The members of the Standing Committee on Finance will be able to follow the work being done by the eight experts and to have progress reports on all their discussions until the publication of the final report.

Judging by the government's attitude in the family trust affair condemned by the auditor general, I wonder to what extent there will be a will to ensure that taxation in Canada is equitable for everyone and not just for a handful of people who can benefit from the same information, the same monetary support when dealing with tax experts who understand full well the complexity of taxation and who know how to turn it not just to the great advantage of wealthy families but also to their own advantage.

That is what I wanted to say about family trusts. The provisions in Bill C-36 will not change in any way the scandal condemned by the auditor general, or the other scandals that are not known to us, but which probably followed in the wake of the precedent set by this case of $2 billion in assets transferred tax free.

I will, if I may, conclude with a provision of Bill C-36, the wording of which we accept and support. I am referring to the film tax credit. I have the honour of informing you that the official opposition worked very hard to have this provision included.

I am thinking in particular of my colleague from Richmond-Wolfe, who is the opposition critic on heritage and who insisted that this provision, amended during consideration by the finance committee, be passed before the summer recess.

We insisted because this provision will be of considerable benefit to the film industry and to others representing the world of culture, such as ADISQ or Mr. Rozon's Spectra. We are proud to have contributed to having the debate on this particular clause move forward.

Unfortunately, as I said earlier, the government has the bad habit of bundling everything together-good and very positive measures with measures I consider particularly twisted like those involving the family trusts-and asking Parliament to vote on them. As I have been saying, there are good measures such as tax credits for film productions, but because of the bad measures, I must ask my colleagues to vote against the bill.

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4:30 p.m.

Reform

Leon Benoit Reform Vegreville, AB

Mr. Speaker, I am here today to speak on Bill C-36, an act to amend the Income Tax Act, the Excise Act, the Excise Tax Act, the Office of the Superintendent of Financial Institutions Act, the Old Age Security Act and the Canada Shipping Act.

First I will talk about the Liberal government and what it proposes in budgetary measures which this bill will enact. Second I will talk about what Reform has proposed in the area of taxation and what its members will do when they become the government.

Three months ago I remember the finance minister saying to loud applause in his budget speech: "We are not raising personal taxes. We are not raising corporate taxes. We are not raising excise taxes. In fact, we are not raising taxes". I do not think many

Canadians really believed what they were being told in that speech. A little later today I will go through a list of tax increases.

The Minister of Finance seems to expect Canadians to thank him for appearing to hold the line on tax increases. I find it appalling that he should think it is good enough to be able to say what he said in the House, even if it were accurate, which it is not. It is appalling that he would think it would appease and please Canadians just to say, even if it were accurate, that there would be no tax increases.

Canadians are looking for more than no tax increases. They are looking for fewer taxes. Canadians have been faced with tax increase after tax increase for the past 30 years. There has been an over 1,000 per cent increase in taxes in the past 30 years of Liberal and Conservative governments. Now Canadians are looking for fewer taxes. Their personal income tax rate is the second highest of any country in the G-7, second only to Germany. That is appalling.

Between 1985 and 1993, the federal income tax bill of the average Canadian family has increased dramatically. Canadians simply did not have the stomach before this budget for tax increases.

The finance minister chose to have no explicit increases but instead to try to sneak them in through the back door. In just a minute, I will go through the list of tax increases that occurred in spite of the finance minister saying that there were none.

First I would like to summarize the list I have before me. This is a list of tax increases for the 1994-95 tax year through to the 1998-99 tax year. These are lists, year by year, of tax increases that have been presented by the government and the finance minister.

In 1994-95 the list adds up to $575 million. In 1995-96 it gets worse. The total tax increase was $2.3 billion. The finance minister boasted that year that there were really no substantial tax increases and how many times more the cuts were than the tax increases.

In 1996-97 the tax increases add up to $3.1 billion. In 1997-98, just through the budgets that this finance minister has put in place, the tax increases will be $3.2 billion. This will be more taken out of the pockets of Canadians. That is unacceptable.

The budgets of the finance minister even go as far ahead as 1998-99 and beyond. Already in 1998-99, just from past budgets, the finance minister has announced over $400 million in new taxes. We have a couple of budgets to go until we actually get to 1998-99.

The finance minister preaches that he is against tax increases and yet the list of tax increases is too lengthy for me to go through in the time I have to present my speech today. It is unacceptable.

I will go through the tax increases that have been put in place by this year's budget, a budget which was kicked off by the finance minister saying to loud applause: "We are not raising personal taxes. We are not raising corporate taxes. We are not raising the excise taxes. In fact, we are not raising taxes".

I am going to talk about how the finance minister did not raise taxes in this year's budget. First, since the Liberals came to power they have squeezed an extra $9 billion to $11 billion or more out of the pockets of taxpayers. In the 1996 budget no explicit taxes were put in place, at least none that Canadians could see easily. There are none certainly along the line of the gas tax increase that we all saw at the pump last year. As far as that goes, the finance minister was accurate. However, I believe that Canadians expect more openness and accuracy from a finance minister than that.

With the tax increases that have been put in place, the government will raise $145 million in the next three years by reducing the credit given for investment in labour sponsored, venture capital corporations by reducing the contribution limit to $3,500. This was in a year when the finance minister said no tax increases.

A number of changes to the RRSP rules took place that will also yield revenue for the treasury by reducing the age of mandatory withdrawal to 69 from 71. The government will raise close to $100 million by the year 2000. No tax increases? Figure that one out.

Further, the government announced it would henceforth deny deductibility of the RRSP fees which would save another $10 million. It also froze the RRSP contribution limit at $13,500 per year until 2003. The government is sending conflicting messages. On the one hand, it expects Canadians to take more responsibility for their retirement, but the government and the finance minister have said again and again that the Canada pension plan is not on sound footing.

The finance minister in the budget this year ended universality of old age security, something that he criticized Reform for proposing during the last election campaign by saying his government would never do that. However, this government has ended universality. And it ended universality at a much lower income level than Reform ever proposed.

Holding the line on the limit of RRSP contributions makes it very difficult for Canadians who are trying to look after their retirement because they know they really cannot count on old age security and the Canada pension plan the way this government has been operating. They know that the government does not have the resolve to hold the line on spending, eliminate the deficit and then start reducing taxes.

The government will begin taxing non-residents on the income they receive from outside the country. This will yield $30 million in taxes in a year where there are no tax increases.

The government plans to spend $50 million to step up the battle against the underground economy. Ottawa expects to gain $185 million over the next three years by this move. Perhaps the government should take a good look at what causes the underground economy, the ever growing tax grab of the government, the ever increasing amount of money the government takes from the pay cheques of Canadians.

I was in Hamilton East on Thursday and Friday of last week. The biggest complaint of the people of that constituency is that while in many cases they earn quite an attractive salary, their take home salary is quite another matter. There are simply too many deductions from their pay cheques for taxes and other payroll deductions which are getting larger and larger. There is really no end in sight as long as this government is in power.

The Minister of Finance also announced the striking of a technical committee designed to study the business income taxation act and suggests measures that could be used to encourage job creation and investment. It is expected that this is simply window dressing, designed to offer the appearance that the government is actually doing something on the job creation front.

How much will this committee cost? Looking at what has happened in the past, the committee will cost between $500,000 and $5 million. That is a lot of money for a committee that is a sham. The record of the government of heeding the advice of committees that have travelled across the country is very poor. Often the government announces the changes that are going to take place even before the committee has reported. Then why is it wasting the time and spending this kind of money on the committee?

The tax grabs in the area of business taxation are fairly innocuous when we look at the past history but they are still substantial. As was expected, the government extended the profitability tax on banks yielding about $65 million over the next two years. Although banks already pay about $4 billion annually in taxes, looking at 1993, the profit tax is another measure to force the most profitable in society to pay more and more.

Most Canadians will not be too upset by the banks having to pay more tax. They are not going to be upset by a tax on high profits in the banking industry. But the precedent has been set. Will this tax next show up on convenience stores that earn a high profit? The precedents for an extra tax on high profits has been set. Where will it come down next? Will the corner store owner be next? This is a question Canadians must ask. The government is determined to grab money any way it can.

I will continue through the list of grabs that have come about as a result of the last budget. The GST was essentially a non-issue in the budget. But the government has still not kept its promise to scrap the GST, although most Canadians would be happy if it simply did what was promised in the red book, to replace it with something else.

Sheila Copps, the member who resigned her seat because the government had not kept its promise to get rid of the GST, is now fighting for her political career in a byelection. Canadians have not forgotten that the GST was not replaced, was not scrapped and will not be scrapped. I am not sure they will be satisfied with having it replaced. We will wait to see whether Canadians are willing to tolerate that.

Something I heard in Hamilton during the byelection campaign was that Canadians expect politicians to keep the promises they make. The GST promise could well come back to haunt the government in the next election and beyond.

The government has nothing to brag about on the tax front in the budget. Not only did it not offer tax relief. It raised taxes even though Canadians made it known they were sick and tired of tax increases.

The budget affects taxation in an indirect way as well. By backing off from fiscal restraint the government has signed a death warrant for tax relief over at least the next three years. The finance minister and the government did not show the strength it would take to balance the budget very quickly. The finance minister still has no plan to balance the budget. Canadians can say with certainty that there will not be any meaningful tax decrease for some time down the road.

I will talk in a while about what would have happened had Reform been elected in 1993 and had our zero in three plan been put in place at that time.

To conclude my remarks with respect to what the government has done in the budget, in short the government has offered no tax relief. It has buried the hope of any tax relief in the foreseeable future. It has slapped Canadian taxpayers in the face by expecting gratitude for not openly raising taxation, even though it is clear that it has increased taxes by hundreds of millions of dollars in the budget. That is what the Liberals have done.

What would the Reform Party have done had it gained power in 1993? Reform campaigned on a zero in three plan. It was a detailed and sound plan to balance the budget in three years. What would that have meant? We would have been in the third year of the plan right now. Not only would Canadians have known the budget would be balanced by the end of this fiscal year. We would have put in place at least a token tax decrease, which Canadians are so desperately asking for.

Canadians need to have more take home pay. They are tired of an ever increasing rate of deduction on their paycheques. They are tired of salaries which sound good ending up being too little for their families to live on comfortably. If our zero in three plan had been put in place by the finance minister they would have been happy. They could have been offered tax relief this year, something which Canadians desperately want.

What have Reformers done recently in terms of tax decreases? I will explain four resolutions which were passed at our assembly in Vancouver by Reform members from across Canada. The finance minister should be listening to these resolutions because they reflect not only what Reform delegates at the assembly want but what Canadians across the country want.

The first resolution states:

Resolved that the Reform Party reaffirm its commitment for the introduction of a simple, visible and flat rate of taxation.

Canadians want not only a lower tax rate but a simpler tax system. This resolution was ratified by 92 per cent of the delegates.

The second one states:

Resolved that the Reform Party remove the GST when a simple, visible and flat rate system of taxation is introduced.

We made the pledge that at the time our flat tax system was in place the GST would be removed.

The third one states:

Resolved that the Reform Party supports a reduction of the total burden of taxation, while recognizing that tax cuts must be done within our existing deficit reduction plan.

We are saying we can offer tax relief but we have to do it knowing we still have to balance the budget very quickly, now, within two years. This resolution was passed by 95 per cent of the delegates.

The fourth resolution talks directly about taxation and states:

Resolved that the Reform Party supports tax relief for families and married couples with one income earner.

This is a matter of making the system fairer. The finance minister talked quite a bit in this year's budget about making the system fairer. Yet in important areas like that one he did not do the job. Canadians really expect fairness, particularly when it comes to families being treated fairly in the system, and they are not being treated so now. That is what Reform has proposed for some time and that is what Reform will do.

I will end with those comments although I would like to propose an amendment. I move:

That all the words after the word "that" be deleted and the following substituted therefor:

This House declines to give third reading to Bill C-36, an act to amend the Income Tax Act, the Excise Act, the Excise Tax Act, the Office of the Superintendent of Financial Institutions Act, the Old Age Security Act and the Canadian Shipping Act, since it does not seek to address the issue known as flying flags of convenience which allows Canadian ship owners to avoid paying Canadian taxes.

After the question and answer session I would like to rise on a point of order to explain why I believe the amendment is in order.

Income Tax Budget Amendment ActGovernment Orders

4:50 p.m.

The Acting Speaker (Mr. Kilger)

The hon. member for Vegreville has moved an amendment. I seek the counsel of the Table for a moment. I begin by apprising the member for Vegreville that at this stage of debate the first three interventions have 40-minute maximums. The hon. member on behalf of the Reform Party was entitled to the maximum, and there is no question or comment period.

I will ask for debate. There being no further debate I will take a moment to make ruling on the amendment and then put question.