Debates of Sept. 23rd, 1996

Income Taxes

[Doug Peters, Liberal, Secretary of State (International Financial Institutions)]

Mr. Speaker, that is an important question. There are a number of claims that the government has increased revenues by dint of tax increases alone. That is entirely false.

We have seen revenues grow, as most governments have. The vast majority of those increases have come from economic growth alone. In fact, the government has not raised personal income tax rates in any of the last three budgets, and that is the fact.

Privilege

[The Speaker]

I am now ready to rule on the question of privilege raised by the hon. member for Crowfoot on September 16, 1996 concerning the proceedings of the Standing Committee on Justice and Legal Affairs on Bill C-234, an act to amend the Criminal Code.

I would like to thank the chief government whip, the hon. members for St. Albert, Mission-Coquitlam, Fraser Valley East, Lethbridge, Prince George-Bulkley Valley, Calgary North, Okanagan-Shuswap, Wild Rose, and Yorkton-Melville, and the sponsor of the bill, the hon. member for York South-Weston, for their contributions in this matter.

In their comments, members informed the House that the standing committee had dealt with the bill, defeating every clause, and had decided not to report the bill back to the House. In his submission, the hon. member for Crowfoot stated that the committee had breached his privileges as a member of the House by having voted in its meeting of June 18, 1996 not to report Bill C-234 back to the House. He also contended that members of the justice committee were in contempt of Parliament for their actions.

Any matter concerning the privileges of members, particularly any matter which may constitute a contempt of the House, is always taken very seriously by the Speaker.

It should be made clear at the outset-and this is a longstanding principle-that it is not for the Chair to get involved in matters within a committee unless there is something so extreme and so blatant that it goes beyond accepted limits and constitutes a contempt of the House or, in some inordinate way, a breach of privilege on an hon. member.

As noted in Beauchesne's sixth edition, Citation 24, which was quoted in part by the hon. member for Crowfoot, "the privileges of Parliament are rights which are absolutely necessary for the due execution of its powers". As hon. members know, these privileges are precious. They exist in order to ensure that members individu-

ally and the House as a whole can properly discharge their functions as the elected representatives of Canadians.

But at the same time, parliamentary privilege is limited. It ensures freedom of speech and, by extension, the right of every member to vote freely on matters before the House. It also ensures that the House has the unimpeded service of its members. Finally, privilege exists to maintain the authority and the dignity of the House. While the matter before us is serious, I am more inclined to view it as a substantive grievance rather than as a question of privilege.

That being said, this grievance is serious enough that it warrants further comments.

As all members know, committees are the creatures of the House. When a bill is referred to a committee, that committee is empowered to examine that bill, amend it if in the opinion of the committee it is in need of amendment, and to report the bill to the House with or without amendment. These powers are explicitly stated in citation 831(2) of Beachesne's sixth edition, which was quoted by several members. While it is often said that committees are masters of their own destiny, they do remain subsidiary to the House and cannot substitute themselves for the main body. Bourinot's commentary in his fourth edition, at pages 520 and 521 makes this quite clear. It states:

Every committee on a public bill is bound to report thereon. The House alone has power to prevent its passage or to order its withdrawal.

This comment is based on a Canadian precedent dated May 14, 1886, and is found in the Senate Debates at pages 516 and 517.

On the other hand, unless the House specifically sets a date for a committee to report a bill back to the House, the bill remains in the possession of the committee until such time as it is reported to the House. While a committee should always endeavour to report a bill to the House in a timely fashion, having decided not to report the bill does not preclude the committee revisiting the bill and reporting it to the House at a later date. Therefore, the justice committee's decision not to report Bill C-234 to the House at this time is not an offence against the authority or dignity of the House.

Hon. members should keep in mind that the House always has the power to modify the terms of the committal of a bill to any committee. Should a member or a minister be of the opinion that a committee charged with the review of a bill is defying the authority of the House, he or she may choose to bring it to the attention of the House by placing on notice a motion to require the committee to report by a certain date. As hon. members know, this can indeed be done under Government Orders or Private Members' Business, but such a notice of motion could also be placed under the rubric "Motions" and be dealt with under Routine Proceedings. As Speaker Fraser ruled on July 13, 1988, at page 17506 of the Debates , referring to the then Standing Order 56(1)(p), which is our current Standing Order 67(1)(p):

This Standing Order lists as debatable items usually raised under Routine Proceedings "motions-[concerning] the management of the [House] business [and] the arrangement of its proceedings."

The rubric "Motions" usually encompasses matters related to the management of the business of the House and its committees, but it is not the exclusive purview of the government, despite the government's unquestioned prerogative to determine the agenda of business before the House.

Under our current practices, the Chair may well accept, after due notice, such a motion, on the condition that it is strictly limited to the terms of the committal of a bill to a committee and that it is not an attempt to interfere with the committee's proceedings thereon. In so doing, the House would have an opportunity to determine whether the bill should remain in committee or be reported back.

In our procedures, the House must always retain control over business it refers to committee. In different circumstances, a situation could arise whereby a majority of members, regardless of party, might, for whatever reason, decide to remove or not remove a bill, even a government bill, from committee.

Bill C-234 is the property of the House which it has delegated to the justice committee to examine. As with any bill referred to committee, the House would usually wait for the justice committee to report. However, should the House be of the opinion that the bill has remained with the committee too long it can look into the matter.

Speaker Fraser noted in ruling on a similar matter on February 26, 1992 at page 7624 of the debates:

If the House wishes to take cognizance of this, if the House wishes to exercise its authority, then of course it may do so. But in my view, it would not be correct or proper at the present time for the Speaker to intervene.

I concur with Speaker Fraser's view.

Since hon. members and the House have a remedy to their grievance I cannot find that the decision taken by the committee has prevented members from expressing their opinions or attending to their parliamentary functions. Therefore there was no breach of

privilege because the capacity of honourable members to carry on their duties as members of the House has not been impaired.

Again, I thank the hon. members for raising this important matter.

Canadian Centre For Occupational Health And Safety

[Alfonso Gagliano, Liberal, Minister of Labour and Deputy Leader of the Government in the House of Commons]

Mr. Speaker, pursuant to Standing Order 32(2) and to Subsection 21(1) of the Canadian Centre for Occupational Health and Safety Act, I have the honour to table, in both official languages, copies of the annual report of the Canadian Centre for Occupational Health and Safety for 1995-96, which was submitted by the council.

Pursuant to Standing Order 32(5), this report is deemed referred to the Standing Committee on Human Resources Development.

Government Response To Petitions

[Paul Zed, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, pursuant to Standing Order 36(8), I have the honour to table, in both official languages, the government's response to two petitions.

Committees Of The House

[Paul Zed, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, I have the honour to present the 27th report of the Standing Committee on Procedure and House Affairs regarding the associate membership of various committees. I intend to move concurrence in the report later this day.

Act To Change The Name Of The Electoral District Of Bourassa

[Osvaldo Nunez, Bloc, Bourassa, QC]

asked for leave to introduce Bill C-326, an act to change the name of the electoral district of Bourassa.

Mr. Speaker, I am pleased to introduce this bill aimed at changing the name of my riding of Bourassa to Montréal-Nord.

My riding now includes and intersects the boundaries of the municipality of Montreal North. The residents identify very much with their city.

It must be pointed out that the provincial riding is also called Bourassa, which creates confusion among voters. The people I consulted expressed their support for this change.

(Motion agreed to, bill read the first time and printed.)

Committees Of The House

[Paul Zed, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, if the House gives its consent, I move that the 27th report of the Standing Committee on Procedure and House Affairs, presented to the House earlier this day, be concurred in.

(Motion agreed to.)

[Paul Zed, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, I move:

That the following member be added to the list of associated members of the Standing Committee on Procedure and House Affairs: Mauril Bélanger.

(Motion agreed to.)

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

Mr. Speaker, I move that the third report of the Standing Committee on Finance presented on Wednesday, September 18, be concurred in.

I would like to split my time with the hon. member for St. Albert. I was disappointed when I read in the report of the finance committee on the issue of Canadian tax property some harsh criticism of the auditor general's report.

While the report accepts as proper the auditor general's criticism of government policies, institutions and practices which lead to waste and inefficiency, it considers inappropriate any criticism which involves waste or inefficiencies due to the actions of bureaucrats.

The latter type of criticism-

[The Acting Speaker (Mr. Kilger)]

On a point of order, the hon. member for Mississauga South.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I would ask the Chair to clarify whether it is necessary for the House to give unanimous consent for the concurrence of that motion.

[The Acting Speaker (Mr. Kilger)]

The answer to the question raised by the hon. member for Mississauga South is no. This business is on the Order Paper and Notice Paper as item No. 2, and so we will proceed with the business of the House.

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

Mr. Speaker, I will continue with my debate. The latter type of criticism is seen to involve allegedly inappropriate second guessing of decisions reached by bureaucrats carrying out their assigned functions in good faith.

I believe this distinction between these two types of criticism made by the auditor general is inappropriate. Waste and inefficiency occur both because the government sets the wrong policies and because bureaucrats err in the interpretation of what might be ambiguous directions flowing from the laws that guide their actions.

For example, consider that the auditor general discovers that government policies have seriously damaged coastal fishing in Canada. In my view, it does not matter whether this damage has occurred as a result of a faulty regulation passed by Parliament or whether it is due to the judgment of bureaucrats in the field who have erred in the interpretation of empirical evidence.

Let me now turn to my personal interpretation of the validity of the points raised by the auditor general. He noted that the intent of the Canadian law on the taxation of all capital gains may not have been carried out as a result of faulty decisions made by bureaucrats in the Department of Finance.

I listened with great interest to the presentation of a number of complex issues by representatives of the finance department as well as a group of distinguished lawyers specializing in foreign taxation. In brief, here is what I have learned.

Whenever Canadians decide to move abroad permanently they have to pay taxes on accrued capital gains. This can be done easily and fairly for capital gains associated with stocks, bonds and other assets for which objectively determined prices exist. However, some assets, in particular real estate and privately held companies, can be evaluated reliably only when they are traded. In addition, the market for such assets may be depressed, and forcing a sale would not be in the interests of either the emigrant or the Canadian taxpayer.

It therefore seems to be fair and reasonable that the Parliament of Canada has permitted emigrants to declare such assets to be treated as so-called taxable Canadian property, which means that capital gains are taxable in Canada only when such property is sold. However, there is a complication. If the sale takes place 10 or more years after emigration, according to bilateral international agreements the sale of the property results in capital gains taxes payable to the country of the emigrant's new residence. Since Canada is a country of large net immigration, this provision appears to work in our country's favour though, to the best of my knowledge, this has not been verified empirically.

Family trusts in law are treated much like people. When the trust is shifted abroad, readily valued capital gains are taxed immediately and others are registered as taxable Canadian property. The trust at the heart of the controversy owns very large claims on privately held business in Canada which therefore escape the payment of capital gains taxes upon moving abroad.

The auditor general argued that the transactions surrounding the movement abroad of this trust violates the spirit of the law that capital gains taxes have to be paid on all accrued capital gains. However, this argument involves a narrow interpretation of domestic law and neglects the existence of international taxation agreements which always take precedence over domestic law.

I think Revenue Canada treated the trust in question appropriately. If it had acted differently, it would have violated the right of equal treatment under the law for all.

The Finance committee hearings brought up some other issues like the use and timing of some advance rulings and the shift of assets from publicly traded firms to privately held companies. I did get the impression that some of these actions were motivated by the desire to minimize tax applications of the trust upon emigration. This is disturbing in a sense. But given the complexity of taxation laws, I cannot blame owners of large assets for hiring the best lawyers available to help them minimize their tax liabilities.

I heard no evidence that the letter of the Canadian law had been broken by these transactions. The entire episode reinforced my conviction that Canada needs a simplified, flatter system of taxation.

Let me now turn to what I found wrong with the administration of the law pertaining to taxable Canadian property. Officials have acknowledged that they have less than complete information about the disposal of such property after the emigrants move abroad and that therefore some capital escapes untaxed.

To deal with this problem the committee report recommended that the immigrants be required to register their Canadian taxable property and to pay a security which would be applied to tax application whenever the property was sold.

I agree with the registration requirement recommended and frankly I am surprised that it did not exist in the past. If the imposition of this regulation is the only result of the inquiry, the auditor general can be proud.

However, to keep costs down and laws fair, I recommend that the government does not impose the requirement for security on emigrants. I suggest that instead the government use existing information and resources by putting a conditional lien on real estate held as taxable Canadian property.

Revenue Canada's operational division can be required to report when relevant assets change ownership in the case of privately held companies. These provisions would be very cheap since they involve existing knowledge and institutions. This recommendation is at the core of the Reform Party's minority report.

Let me note in closing that during the finance committee hearings I repeatedly listened to some people advancing propositions about deliberate tax evasion, collusion of the Revenue Canada officials and their political bosses with wealthy Canadians to avoid taxes, and biases in the technical testimony given by tax lawyers. In spite of serious efforts on my part, in no case could I discover any evidence of wrongdoing.

I may have a mental block on this issue or my intellectual capacity is inadequate to capture the intricacies of taxation laws and alleged conspiracies. I have similar problems with conspiracy theories about the assassination of President Kennedy, the current fiscal crisis of government and the death of Elvis Presley. Rationally I cannot rule out that these conspiracies exist, but I have accepted that I may have to die without ever knowing for sure whether or not they are true.

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, last May the auditor general tabled his report in this House. In that report he included a chapter regarding the family trusts which he believed should be brought to the attention of this House. With hindsight, I think he was absolutely correct in doing so.

Just today for example, the Minister of National Revenue in this House not even an hour ago said that the report by the finance committee on the issue would "ameliorate the deficiencies in her department".

The report by the finance committee was based on the referral of the family trust issue to the committee. The mandate given by the Minister of Finance was not to pass judgment on the work of the auditor general but to look into the matter regarding the taxation of family trusts.

I find it disconcerting that the finance committee would take the mandate that was given to it and go beyond that mandate and pass judgment and comment on the work of the auditor general who is an officer of this House, not an officer of the committee.

If I may quote from the finance committee report, on page 6 it states: "Revenue Canada and the Department of Finance could have more fully documented the decision making process that led to the rulings". That has to be one of the great understatements of this Parliament.

Let me give a quick synopsis of the documentation as the auditor general found it. On December 3, 1991, Revenue Canada advised the Department of Finance of the proposed transactions and that it intended to refuse to grant a favourable ruling.

On December 12 Revenue Canada's rulings review committee decided that a favourable ruling should not be provided. On the same day, Revenue Canada advised finance that it would not rule and requested finance to leave the interpretation of the act to it.

On December 16 the taxpayers' representatives were advised that a favourable ruling would not be provided.

On December 18 Revenue Canada informed the taxpayers' representatives that it could not accept their offer of December 16, 1991.

On December 18, a memorandum was prepared for the assistant deputy minister of Revenue Canada advising the deputy minister that the department was unable to rule favourably.

On December 23 a revised memorandum is prepared for the deputy minister advising that the taxpayers' proposal is not acceptable.

That is a document of the transactions in this case.

On December 23, the very same day the memorandum was prepared saying that it was not acceptable, all records of all meetings ceased. Somehow later that day there was a complete and absolute turnaround in the decision making by the Department of National Revenue admittedly at the urging of the Department of Finance. The ruling was completely and absolutely reversed.

The point the auditor general brought to the attention of this House was that an issue of this magnitude affecting hundreds of millions of dollars of tax revenue, whether the ruling was right or wrong, the process by which they arrived at the decision that was ultimately communicated was absolutely and totally unjustified. There was no documentation whatsoever that the auditor general could find to support the favourable ruling. Every meeting that was documented from the time it was first received until the day a turnaround was done said they could not justify granting a favourable ruling.

It was not whether or not the issue was correct. It was the method by which it was done. As the auditor general has stated, as an officer of this House, as an auditor, when he finds this type of

decision making, what else is he to do but to bring it to the attention of the House?

That he did and that he was absolutely correct in doing. For that, he has been chastized by the finance committee. If I may quote from page 3 of the report: "It would be asking too much however to expect the auditor general also to scrutinize the day to day work of each of the many technical professionals in the public service". Going on: "In short, the auditor general cannot be asked to intervene in the public servants' reasonable exercise of their professional judgment".

Is this reasonable exercise of their professional judgment? Absolutely not. The whole paper trail says that they were going to rule adversely and somehow, somebody in one day turned that absolutely and completely around.

Continuing on, the report says: "Public servants, like other workers cannot be held to an impossible standard of perfection. Provided their actions are reasonable, professionally competent and carried out in good faith, they should be allowed to do their work without fear of being pilloried many years later for those actions". There is no way the actions by Revenue Canada can be considered reasonable, professionally competent and carried out in good faith when there is no documentation to support their decision making.

Another issue I would like to bring up is the report by the finance committee criticizing the auditor general for allowing the breach of the confidentiality rule as far as Revenue Canada is concerned. That is a hypocrisy, if I may say so.

We have before us at this time Bill C-41 and page 16 says: "The information banks that may be searched under this part are the information banks designated by the regulations from among the information banks controlled by the Department of National Health and Welfare, the Department of National Revenue and the Canada Employment and Immigration Commission".

The Divorce Act is being amended to allow the information bank of the Department of National Revenue to be available to be searched. Therefore, this idea that the auditor general has breached the confidentiality of the Income Tax Act is a hypocrisy on behalf of the government.

The finance committee should respect the mandate given to it by the Minister of Finance: to investigate the circumstances surrounding this family trust. Therefore, I would like to move an amendment. I move:

That the motion be amended by deleting all the words after the words "September 18, 1996" and substituting the following:

"be not now concurred in but that it be recommitted to the Standing Committee on Finance with instruction to amend the same to remove all references to the mandate of the auditor general."

[The Acting Speaker (Mr. Kilger)]

The amendment proposed by the hon. member for St. Albert is in order.

We still have a period of questions or comments to the hon. member for St. Albert.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I listened with interest to the member for St. Albert. He talked about the issue of confidentiality in the income tax system. This is a very important issue. It was touched on by virtue of the auditor general's investigation in this matter.

For those people who do not know, our system is based on a certain integrity of the system. Information that is given to Revenue Canada is basically confidential. In other words, if any one of us here submitted our income tax return to Revenue Canada, we would not anticipate that another person could get that information and use it for whatever purpose.

I would be interested to know the comments of the member because I know he has some experience in the area of accounting and possibly auditing.

When we choose an audit sample, the idea is to get a sampling of what is going on in a department or a typical population base, but we must be certain when we direct this at something as sensitive as Revenue Canada that the population base is basically large. In other words, we want to know as a general rule how certain procedures of Revenue Canada are undertaken. It is incumbent on the auditor general to respect the confidentiality of the system in choosing that audit sample.

In reading the report of the auditor general, I was somewhat chagrined to discover that the audit sample represented only one or two cases. The problem with that is that when there are only one or two cases, after a while when we start describing what the cases are like, it becomes very easy for somebody in the general public to identify the taxpayer.

The finance committee was really addressing the issue of whether the bases of the audit sample were such that the auditor general contravened the intent of Revenue Canada to have confidentiality. For instance, if he did the same thing with one of us, if he said it was a member of Parliament who comes from St. Albert, by the time he was through defining a sample, we would all know who it was.

Could the member address the very important issue of confidentiality in taxpayer information?

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, I understand where the member is coming from. The confidentiality of the Income Tax Act is sacrosanct and our concept that taxpayers voluntarily assess the amount of taxes owed by them is on the understanding that the information is confidential and will not be held against them at a later date.

The auditor general, as far as I am aware, did everything he could to try to maintain that confidentiality. It certainly was not the auditor general that breached the confidentiality rule.

This was the point I made in my speech. The member pointed out that perhaps we could identify this particular tax cut. I am looking at Bill C-41 and I quoted that the Department of National Revenue information banks are now going to be opened up for searches.

Obviously the Divorce Act and Bill C-41 will allow a particular person to search the data banks at Revenue Canada for information on a particular person, for example, an ex-spouse. What happens to confidentiality under Bill C-41? It is right out the window, absolutely and completely. Name, social insurance numbers, taxable income and everything else will be on the table for people who have a specific interest in that particular taxpayer. That is why I find this whole comment from the government side to be absolutely and completely hypocritical. Right now we are debating Bill C-41 which guarantees that the confidentiality of Revenue Canada will be breached.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I am very pleased to have the opportunity, through this motion, to discuss one the greatest scandals in the history of federal politics. The saga began last May 7, when the auditor general, Canada's watchdog over public finances, the one who makes federal public servants and politicians accountable, shed light on this scandal.

What happened is that the government allowed a Canadian resident, a billionaire, to transfer to the United States assets of $2 billion that were held in a family trust, without paying any tax on the capital gains realized on these assets.

How was the person able to transfer these $2 billion? After all, Quebec and Canadians taxpayers get sued if they owe one dollar in taxes to Revenue Canada. So, how did this billionaire manage to transfer his billions to the United States? He did two things.

First, he benefited from the complicity of officials from Revenue Canada and the Department of Finance and, second, he obtained an interpretation of a section of the Income Tax Act that normally only applies to non-resident holders of capital in Canada, such as Americans, Europeans and others from other continents. However, in the case of this scandal uncovered by the auditor general and involving the billionaire, a distorted interpretation of the section was made.

On December 12, 1991, Revenue Canada issued a ruling to the effect that this billionaire and trustee did not have the right to transfer billions of dollars tax free. However, on December 23, when everyone had left for the Christmas holiday and had turned their attention to their families, to the festivities and to what was in store for 1992, some officials from the revenue and finance departments in Ottawa somehow found a way to reverse Revenue Canada's ruling, so that the billionaire could transfer his billions to the United States without paying his due to the taxman.

This process is all the more shocking because there is no record of any meeting. There are no minutes from these meetings of December 12 and 23, the outcome of which was that, initially, the billionaire was told no, and later on was told yes, with the blessing of Revenue Canada and the Minister of Finance, and billions were transferred tax free. No paper trail. And that is one of the main discrepancies raised by the auditor general in his last report.

When this scandal came to light, it was quite something to see the Liberal members on the public accounts committee, the committee that receives the auditor general's report for study and that calls witnesses to appear before it to shed more light on the scandals uncovered by the auditor general. It was a sight to behold to see the Liberal members rising solemnly before the cameras and saying that the Liberal government would get to the bottom of this scandal.

The member for Brome-Missisquoi stood before the cameras and said: "This is ridiculous, this took place in 1991, under the Conservatives; we will get to the bottom of this". And he worked himself into quite a lather.

Two days later, he was nowhere to be seen. Two days later, the member for Brome-Missisquoi had disappeared. The story was that he was in his riding attending to urgent matters. He stayed there nearly two weeks. Lip zipped, he hid, because he knew very well that he had perhaps said a bit too much, that perhaps his government, the Liberal government, lacked the political will to get to the bottom of this billionaire scandal.

And indeed, since then, we have found out from the government side that it was perhaps not just the Conservatives who were behind this scandal, that if we scratched the blue a little, there would also be a little red underneath. The attempts to bury this scandal are quite astonishing.

First, the question of this two billion dollar trust was referred to the finance committee for study. I have nothing against the finance committee, and do not wish to run down what it is doing, but it is not that committee's place to cast light on this sort of financial scandal. Moreover, the government has seen fit to give the finance committee a very clear mandate, which was necessary in order to avoid coming up against this type of ambiguity in the Income Tax Act in future.

The mandate was not to bring in experts, or public servants, or even politicians, who were behind that shameful decision in 1991, in order to ask questions and really get to the bottom of the matter. Not in the least. That is the mandate of the public accounts committee. Passing the scandal over to the finance committee for analysis was the first way of clouding the issue.

Second, in early June my Bloc Quebecois colleagues and myself-my colleagues in the opposition-were witnesses to a session in which the auditor general's mandate, reputation, integrity, and competence were smeared during his appearance before the finance committee.

It was shameful, really a cheap shot, as they say, to have the chairman of the finance committee, the Liberal chairman of the finance committee, lecturing the auditor general because he had, on behalf of the people, and on behalf of the Parliament of Canada, brought up one of the worst financial scandals to have occurred in the federal administration for decades. It was embarrassing to see the chairman of the finance committee depriving all of the MPs sitting on that committee of the right to speak, while he alone grilled the auditor general, trying in every way possible to back him into a corner and undermine his credibility. Committee chairmen have resigned for less in the past.

We must understand who the auditor general is. It is important to understand this because if he is being denigrated by the Liberal majority, there must be a reason. He must have found out something. He must have found out about a scandal that might affect the senior levels of this government. The auditor general is the one who, on behalf of Quebecers and Canadians, scrutinizes government accounts, departmental accounts and the attitude of public servants.

It is his task to oblige these senior executives and government ministers to give an account of themselves. That is his duty. If the auditor general finds out that money is being wasted in the departments, as he has pointed out in successive reports since this venerable institution first came into being, and as he will surely do next Thursday when he tables his report in the House, the government is then forced to act to clean up public finances, to restore integrity to the administration of public funds and also to plug tax loopholes as he recommends.

The auditor general is not the government's auditor. He is the auditor of Parliament. He is the people's auditor. He is the one who says when public moneys are well managed, when taxpayers' money, money they worked so hard to earn, is well spent or misspent or the Income Tax Act is properly enforced. Since early June, the Liberals have done nothing but tarnish the reputation of the auditor general. That is a very sad commentary on this government.

This scenario went on throughout June and July, when the finance committee sat and the chairman of the committee unilaterally decided to invite his expert friends. Six of the eight experts invited to the finance committee were people who, without wishing to undermine their credibility, certainly had no credibility in this particular case. And why not? Not only because they were invited by the Liberals, but because these experts are the very people who help wealthy Canadian families find all kinds of tricks to avoid paying their share of income tax, to avoid paying taxes to Revenue Canada.

Backed by government officials and perhaps also by politicians, as we may find out some day, these same experts helped transfer $2 billion to the U.S. without a penny being paid in taxes.

How can you ask these experts who help wealthy Canadian families evade tax, which means that these families do not do their share to put our fiscal house in order, to take a stand against a tax provision that enabled these families to transfer billions of dollars to the U.S.? That makes no sense. They cannot be both judge and judged.

Just last week, the Liberal majority on the finance committee decided to submit their recommendations to the government, so that such "ambiguity" would not be a problem in the future. What did the Liberal majority say in its report? It said three things.

First, listen to this, the same scenario was continuing. They pursued their smear campaign against the auditor general, saying that he was unable to understand these matters, did not understand how the Income Tax applies to billionaires who want to transfer billions of dollars tax free.

They even said he may have been remiss in his duties since the information he gave made it possible to guess which family was behind this scandal, when in fact the information was leaked from Revenue Canada to the Globe and Mail . It was probably a public servant who was also outraged by his colleagues' actions in this matter who revealed the owner of this trust fund to the Globe and Mail . It was not the auditor general. Again, in polite terms, the Liberals presented this fact as though it was the auditor general's doing. It is a disgrace.

They added that the Income Tax Act had to be implemented properly, that it had to be fair and unambiguous. The government's second recommendation was to say: "Now that the scandal has been uncovered, now that we have put our finger on the so-called taxable Canadian property tax provision"-which originally was to apply only to non-residents and which allowed the $2 billion to be transferred out of the country in one of Canada's worst financial scandals-"instead of maintaining this ambiguity, we will open the gates so everyone can use this taxable Canadian property clause to do just about anything, like transfer hundreds of millions or billions of dollars to the U.S. or to other places around the world

without paying a penny in tax on the capital gains from these trust funds".

Just try dong that as the average taxpayer. Just try to get out of paying $10 in federal tax, and they will be after you. Even when we get notices telling us we made a calculation error, when there is a difference of 50 cents between what we calculated as tax owing and what Revenue Canada has calculated, we have to make out a cheque for 50 cents. And now they are letting two billion in assets go to the U.S., which represents hundreds of millions of tax dollars in lost government income. And, by the way, that lost income of hundreds of millions of dollars will be made up for by you and me, and all the taxpayers in Quebec and in Canada, while they are just allowed to slip out of the country with no problem.

The senior officials had an advance ruling; they can do as they please. What is more, the Liberal majority report, which has become the official government position since last week, becomes the law. This is anarchy, this is a free for all for millionaires and billionaires. They can do what they please in future, while the average taxpaying wage earner will be crushed by the Canadian taxation system.

In the last three years, and even during the time of the previous government, so much in the way of sacrifices was called for, the taxpayer has been bled dry, the law has been so tightened up. To take unemployment insurance as an example, workers have become so marginalized, workers and entire families in Quebec have become marginalized they experience a great deal of difficulty in getting back into the work force. Yet the millionaires and billionaires are fine, no more problems for them, they can do as they please.

This government, this Prime Minister, this Minister of Finance, despite their high calling, serve only millionaires and billionaires, not the average taxpayer; it is not true, not with their scheming, not with such an attitude and certainly not with recommendations that, in a matter of hours, managed both to tarnish the reputation of the auditor general, the watchdog for the government's finances, and to open up the gates for millionaires. Mr. Speaker, this is not right.

If we look at the process alone, they did everything they could to obscure matters. They went so far as to tarnish the auditor general's reputation, to question his competence, and then opened the gates by saying that henceforth, this exception, cooked up on December 23, and approved with millionaires and billionaires in mind, will now become the law in Canada.

[An hon. member]

Hard to believe.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Yes. One tax law for the poor and middle income taxpayers. When your income is modest, you pay: you pay the taxes. You pay them all, not more or less. When you are poor, you are stomped on by this government, but when you are a millionaire or a billionaire, Revenue Canada and the Finance Department open their doors wide to rush through an advance ruling so that you can do as you please.

This is what things have come to. It is not right. But if it is not right, if it is really not right, what is behind it? That is what we are trying to find out. First of all, we are trying to get the Liberal government to put the report of the Standing Committee on Finance where it belongs, in the garbage, and then to shut the gates, rather than throwing them wide open. That is what we are trying to do.

My second point is that the government should finally agree to what we have been asking for since the auditor general's report was published, and that was to refer this issue, which was quite fittingly raised by the auditor general, to the public accounts committee, which is in a position to shed all the necessary light on this financial scandal. Public servants and politicians made this decision at a time when everybody was partying, while everybody thought the government and their public servants were taking care of them, and these people allowed this financial scandal to occur. Let us bring them before the public accounts committee and question them and oblige them to give an account of themselves, and that applies to this government as well.

As I said earlier, if we rub a little bit, underneath the blue we will find a bit of red. Maybe if we scratch some of the blue, we will find some tories behind all this. We may find them at very senior levels in government, perhaps in the entourage of the Prime Minister and the Minister of Finance.

Maybe we will find some worthy Liberal millionaires and billionaires gravitating around the government in power, who were able to take advantage of a decision made in 1991, which served as a precedent for opening the flood gates, and which from now on, in any case, with the Liberal majority report, will ensure that everyone can get millions and billions out of the country. Not poor people, not the middle class. They have no money. The government comes down hard on them, but millionaires and billionaires, the friends of the party, those who give $50,000 or more to the Liberal Party, will have no problem. They get the red carpet treatment and can do whatever they like.

They will pay for this mess. They will pay the political price for it. You may be sure the opposition will not let them get away with it. From now on, the official opposition is on the war path, to serve taxpayers in Quebec and Canada as well. We will call on the people to tell this government to behave like a responsible government, not like a government for millionaires and billionaires.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup, QC]

Mr. Speaker, while I listened to the speech made by the hon. member for Saint-Hyacinthe-Bagot the same question kept coming to my mind and I would like him to elaborate on this: Why this diversion? In politics, when one wants to turn attention away from something, one looks for something that will do precisely that. But this is going a bit far.

Why go so far as to call into question an institution such as the Auditor General of Canada? The auditor general is not appointed by the opposition or by lobbyists, but by Parliament as a whole to audit the work of the government. Consequently, he has the support of both the opposition and the government. The auditor general was appointed by this Parliament and this gives him an authority that usually puts him above partisan opinions. But in this particular case, the Liberals sitting on the committee decided to attack that institution.

There must be a reason for that. I think it is basically because the government was just confronted with the fact that it does not comply with the principles of equity and fairness when it comes to tax expenditures. For three years now, the official opposition has been telling the government that an in-depth review is in order. A technical committee was set up. We recommended that the exercise be of a public nature and that a democratic debate take place on the issue, but this was not done.

Now, the government has just been caught with its pants down. To get out of having to explain how someone can send $2 billion out of the country tax-free at a time when the government tells us it needs all the money it can get its hands on, it tried to create a diversion.

I have two questions to put to the hon. member for Saint-Hyacinthe-Bagot. First, is this diversion justified and, second, has the loophole created by this interpretation been plugged? The government has known about this situation for a few months. Canadian citizens who owe $50, $100 or $200 often have to write the government to defend themselves at a cost that is higher than the amount claimed. Can these people be assured today that the loophole that was created has been closed and that the current government has resolved the ineffectiveness of its predecessor?

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I wish to thank my dear colleague from Kamouraska-Rivière-du-Loup for his eloquence and his excellent question.

Yes, the government has things to hide. If the government had nothing to hide, when the auditor general published his report on the scandal of the $2 billion transferred out of the country tax-free, if this annual report had been dealt with in the usual way, that is to say, if it had been referred to the public accounts committee, my colleague, the hon. member for Beauport-Montmorency-Orléans, who chairs this committee, would have shed light on the reasons behind this decision with the help of his colleagues from Trois-Rivières and Portneuf. Such is not the case.

As I said earlier, this matter was referred to the finance committee, which was asked to make recommendations on future policy but not on the 1991 case. So the government has things to hide and there are sources close to the Liberal Party of Canada, close to the Prime Minister's office or the finance minister's office who have everything to gain by sidetracking this case.

Let us not forget that this 1991 advance ruling by public servants, which was only made public in March 1996, created a precedent. Since then, anyone could have transferred millions or billions of dollars to other countries around the world. Of course, the government has things to hide.

To answer your second question concerning the loophole, no it was not plugged, it was actually enlarged by the Liberal majority proposals, since the twisted interpretation of what constitutes taxable Canadian property obtained from Revenue Canada and the Department of Finance on the basis of the transfer of these $2 billion to the U.S. was allowed by senior officials, this twisted interpretation has become official government policy, an equally twisted policy serving millionaires and billionaires at the expense of taxpayers in Quebec and Canada.

[Ian McClelland, Reform, Edmonton Southwest, AB]

Mr. Speaker, as I understand it, the debate takes place in this context. The auditor general brought down a report which had something to say about family trusts. The Liberals opposite felt that the auditor general was overstepping his mandate and should not be investigating family trusts.

In my business experience it is often the things that we do not know that hurt us more than what we do know.

My question for my hon. colleague is this. Is it not the appropriate function of the auditor general, acting in his capacity as auditor, to investigate and bring to the attention of the government that which it does not know? Is the auditor general not doing exactly what he should be doing by bringing this to the attention of the government?

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, in its report, the Liberal majority did question the mandate of the auditor general, claiming that he had overstepped his mandate.

In fact, he was well within the scope of his mandate. In the recent past, between 1982 and 1994, there have been no less than seven or eight cases of interpretation regarding taxation, taxation law, the

Canadian Income Tax Act by the auditor general. That is his job too. He does not only look at expenditures and waste. He also looks at how public funds are administered, how the money taxpayers in Quebec and Canada entrust with the federal government is administered. That is his job. He is directly mandated to do that.

This is rather surprising, because, while the auditor general's reputation was being tarnished, in a carefully crafted passage covering about ten pages, with the Liberals using the six experts who testified before the finance committee last summer as their authority-the six experts working for wealthy Canadian families and helping them find ways to dodge tax-these six experts could have been confronted to at least 15 academic tax experts, researchers, real experts with no connection with wealthy Canadian families or interests in firms like Stikeman Elliott, for example, that may in the past have helped put away hundreds of millions of dollars in tax havens or elsewhere thanks to a twisted interpretation of certain provisions of the Income Tax Act.

It is rather strange that these six experts are the ones who help the millionaires, that the Liberals quote them as authorities, while about fifteen others are saying that the government misinterpreted the Income Tax Act, that the public servants did something wrong in 1991 and that, with the agreement of the politicians of the time and the ones currently in office, they did not act in the interest of the true taxpayers. Things are not going well. We are in a system of institutionalized scandals. We are in a system-

[Some hon. members]

Ha, Ha.