Debates of Sept. 26th, 1996

Taxation

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

Mr. Speaker, the auditor general's report, which was tabled today, demonstrates the government's incompetence in tax collection that is causing Canadian taxpayers to lose faith in the system.

Once again this government is focusing on the little taxpayer and squeezing him until he hurts, but we find that not one tobacco company has been audited in the last five years.

Revenue Canada knows that auditing large tobacco companies is an easy and efficient way to collect millions of dollars, yet it turns a blind eye to them while collecting every penny from ordinary Canadians.

My question for the Minister of National Revenue is why?

[Jane Stewart, Liberal, Minister of National Revenue]

Mr. Speaker, Revenue Canada performs its audits based on risk management. In the five years which the auditor general questions we redirected our initiative to the area of the underground economy and the anti-smuggling initiative. The auditor general applauded us for those initiatives and identified real returns to the fisk.

I would say that when we are talking about these companiesthey do represent about 85 per cent of the excise taxes and Ihave directed the department to include them in our large corporate audit. They will be reviewed every two years for the twoyears previous and everything will be managed effectively and efficiently.

Agriculture

[Vic Althouse, NDP, Mackenzie, SK]

Mr. Speaker, my question is for the minister of agriculture, who said yesterday that he is relying on New Zealand, Argentina and Australia to be his Cairns group allies in defending our wheat board and our dairy commission and some other boards in the 1999 trade talks.

Since Argentina has already abandoned its marketing system and New Zealand and Australia are changing theirs to take the state out of them, is he planning similar changes here or what is it exactly that holds this alliance together?

[Ralph Goodale, Liberal, Minister of Agriculture and Agri-Food]

Mr. Speaker, at the Cairns group meeting in Cartagena earlier this summer, the 14 nations that make up that group had an extensive opportunity to discuss their various trade strategies heading toward the next round of GATT negotiations at the turn of the century.

The topic of state trading enterprises was one of the subjects under discussion. There was very significant support all around the table not just from Canada, not just from New Zealand, not just from Australia; the general consensus of the group was to take a position in defence of the rights of countries to have and to maintain state trading enterprises that suit their respective circumstances.

On this topic I would invite the hon. gentleman from his privileged position in the House to help explain to his neighbours over there in the Reform Party that when it comes to the policy of the Government of Canada that is set in Ottawa and not in Washington.

National Energy Board

[John Finlay, Liberal, Oxford, ON]

Mr. Speaker, my question is for the Minister of Natural Resources.

My private member's bill passed this House in November 1995 and called on the minister to improve access to government boards and agencies in the public interest so that better decisions will be made.

What action has the minister taken to ensure that Canadians have fair and equal access to hearings before the National Energy Board?

[Anne McLellan, Liberal, Minister of Natural Resources]

Mr. Speaker, the hon. member raises a very important issue and that is in relation to funding for intervenor landowners before the National Energy Board at pipeline facility hearings.

As the hon. member knows, I instructed the National Energy Board to look at non-legislative means by which financial assistance could be provided to landowner intervenors. The NEB undertook that report. It reported to me earlier this year. I asked it to make the report public and seek comments. It is in the process of doing that.

The interest has been so great in this issue that the NEB has had to extend the period for public comment twice. However, I hope to receive the report later this year.

In addition, I should tell the hon. member that I have been working with the pipeline association and I have asked it to consider a voluntary pilot project in which it might provide funding for intervenors.

Presence In The Gallery

[The Speaker]

I draw to the attention of hon. members the presence in the gallery of a delegation of members of the Federation Council of the Federal Assembly of the Russian Federation, led by Mr. Yegor Stroyev, Chairman of the Federation Council.

[Some hon. members]

Hear, hear.

Business Of The House

[Gilles Duceppe, Bloc, Laurier—Sainte-Marie, QC]

Mr. Speaker, here is the question of the week. I would like to know what the government has on the agenda for the days to come.

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

Mr. Speaker, on Friday the House will consider the legislation on marine transport, that is Bill C-44. If we have time, we will go back to the list of bills for the week and we will carry on our usual discussions with members from the opposition parties.

Monday shall be an allotted day. On Tuesday we shall return to our list: Bill C-45, Bill C-53, Bill C-49, Bill C-26 and Bill C-41. Bill C-60, the food inspection legislation, and Bill C-55, the high risk offender bill, will be added to the list for next week.

We shall discuss the precise order with our friends opposite with a view to moving this legislation along, which is something the House has not been accomplishing since its return from the summer adjournment.

The House resumed consideration of the motion

Supply

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, it is an honour to enter into debate on the motion of the day by the Bloc Party.

It is interesting that it should use its day for this particular topic. It is illustrative of one of the things which is wrong with the country. The very fact that we have in the House a large number of members whose set goal is to remove themselves and their part of the country from the rest of us shows that there are some problems and that we as legislators ought to be paying attention to them.

There is no doubt in my mind that if this federation were to work properly, we would not be here debating these kinds of questions.

Bloc Members have raised an issue which is on the minds of many people in Canada, fair taxation. They have done it in a very specific case and with respect to an auditor general's observations. The issue they are drawing attention to is a very important one, that there is unfair taxation.

During my short time as member of Parliament, this being my first term, I have listened to a large number of people from across the country, but primarily in my own riding of Elk Island. One thing I hear often is that people are no longer content to allow half of their earnings or more to be spent on their behalf by people who do not listen to how that money should be spent. Over and over we hear individuals and small business people talk about the taxation system and how it is a great detriment to their personal welfare or the well-being of their business. It is onerous. It is too heavy a burden for the people of this country. It is based on a false supposition that there is someone in far away, distant Ottawa, a politician or bureaucrat who knows better how to allocate those funds that they have earned than the people do.

That is the large assumption which has been made by successive Liberal and Conservative governments, and we are shackled by it. We have come to the point where too many of us are struggling to make ends meet. Meanwhile our taxes must be paid. We will end up working into the middle of July for this thing called tax freedom day, the day when finally we can begin to earn for ourselves and our families.

I admit that some of the tax money is used for good purposes. I would not deny that. I am very happy to be in this country. I am very grateful that we have a good infrastructure system in this country. Our highways are very good by international standards. We have excellent communication facilities and our taxes go to pay for all of that.

That is not the question. The problem is the large amount of waste, the large amount of money which is spent on programs which do not carry the support of the majority of citizens but are foisted on us by a bureaucrat or politician in a distant city. Consequently, I hear more and more disgruntlement and discour-

agement with the way the government is managing its affairs. People are overtaxed and they are getting tired of it.

How should we react to this? According to members of the official opposition party today taxation should be fair. I agree with that component. There should should be no large amount of earnings which would go untaxed while other earnings are taxed at excessive rates.

Not very long ago someone told me that he is now in some financial and employment difficulty. He said that if had been able to pay less in taxes over the last number of years he would have had a nest egg put away which would have helped him through a difficult time. Instead, because of high taxation over the years his personal nest egg is much less than he would like it to be, and so he is thrown on to government programs. Unfortunately the government, with its continued policy of overspending and borrowing, adds to the load of taxpayers and our taxes keep rising and at the same time we experience the downsizing of the very government programs which were supposed to be provided by the taxes that we are being asked to pay, I should say coerced to pay.

The bottom line is that in areas like the Canada pension plan, UI which is now called employment insurance, premiums over the years have gone up a lot. I know in the last year or so there has been a small turn downward in the UI premiums and that is a very commendable step but it is too tiny a step.

In other areas we are asked to pay a great deal and there is a decreasing assurance that the government programs we have paid into will actually deliver for our needs. I do not believe that this is at all the real nub of the issue for the members of the Bloc in terms of their wanting to separate, but I believe it adds to it.

I believe that if we in Ottawa were to run our fiscal affairs in such a way that government overspending was eliminated so that this government like all other governments in Canada would have a defined goal of living within its means, then there would be much less of a cry by provinces like Quebec that say: "We do not want to swim with you guys anymore, we want to go it on our own". It would be just too expensive for them. Whereas the way it is right now, being part of this confederation is an increasing burden for many of us.

I appreciate the members of the Bloc. I do not know if that will be misunderstood so I need to explain. I am actually very grateful they are here. It is a reflection of the fact that we have a free democracy. I wish they were not here for the reasons they are here, but each one of them as far as we know was properly and democratically elected. They have as much right to be here as any one of the rest of us.

What we really need to do is to get to the root of the problem. Why did the people in Quebec elect them? Why were they sent here? It is inescapable that they were sent here because of the fact that Quebecers increasingly perceive that Ottawa is not doing for them the job they want done.

When we come to this whole question of taxation and government spending, certainly one of the areas is that taxation should be fair. The government has the right to tax us and by common consent to provide programs that Canadians want and the taxation load should be made as equal as possible for all of the members of the taxpaying public. I believe there are some 13.5 million taxpayers in this country. Each one of them has a vested interest. They are shareholders in this country so to speak, in this company called Canada. They deserve and have a right to demand that the money be spent carefully.

In saying something else about the tax system, whether we recognize it or not, taxes and taxation are a very inefficient way of looking after people's needs. Generally when people spend other people's money, the amount of accountability goes down. I have observed that around here since the time of my election. I have certainly seen it by observing the way even senators and members of Parliament spend money. It is easy to spend money which is not your own. It is more difficult to spend your own.

This is one of the reasons I am a firm advocate of a free enterprise system and a system which permits us to meet each other's needs through private enterprise and private initiative. I remember way back when I was just a youngster there was not this proliferation of government programs. In fact the generation in which I grew up was one in which most people would deny the help that was offered to them by government because of a large amount of personal pride and self-sufficiency, at least in the part of the country in which I grew up, out in the west.

In those days when someone had a problem we who had the ability to help would help in the way in which we could. I remember as a youngster one of our neighbours was unfortunately killed in a farm accident. My dad was one who helped organize the neighbours. They immediately went to help this newly widowed lady do her harvest. They did her harvest first and then they did their own. They could afford to do that because at that time there was enough money left over despite the taxes. Sure, times were not easy on the farm but they had the financial ability to help someone in need.

I have experienced this personally. Acquaintances of mine have fallen into hard times and I wished that I could have helped them more than I did. Unfortunately, what with the municipal taxes, the provincial taxes, the federal taxes and GST, by the time all these taxes are removed from my earnings and after I meet the basic

necessities of life for my own family, the amount of money I have left to give charitably to people who are in need is greatly diminished.

Now my way of helping people is to say: "Let us go down to the government office and see what kind of assistance is there for you". That is wrong. I am very distressed about it. We have allowed governments at all levels to take over from us as individuals the expression of compassion which we as Canadians value.

I hear expressions especially from the Liberal side that they do not want to cut these social programs because they are compassionate. If that is really true, if the government were to reduce its involvement in those compulsory programs which we have no choice but to support, then each one of us individually could do so much more. We could help people in a much more genuine way than a government department somewhere trying to help people in a wholesale way with reduced budgets.

The last issue I want to talk about in my little time here is the question of debt. I am always reluctant to give the Liberals great accolades when they have not done the job adequately. Usually what I say is when we were elected in 1993 and when all this present batch of Liberal MPs were elected, we understood that the deficit, the amount of government overspending, was around $35 billion or $40 billion a year. It was in that range.

It is interesting how whenever there is a change of government the last year of the previous government is always tremendously bad and then it gets better. I have often wondered how that happens mathematically under accounting rules.

We had a large deficit. Now we have a deficit which has been reduced and everybody is cheering: "We have reduced it to $27 billion". Unfortunately, I do not believe this is being properly communicated to Canadians. There are a lot of people who think that our debt and deficit problems are solved with this Liberal government. Unfortunately, that is not true.

What has happened is that the government has reduced the rate at which we are going into debt. We are still adding $100 billion to the debt during the term of office of this government. We have added approximately $10 billion a year to mandatory interest payments. Those payments are not going down because the debt is still increasing. That means that next year our interest payments are going to be even higher than they were last year. Even though the debt is increasing at a slower rate, it is still increasing. The amount we owe is going up, up, up.

It is becoming urgent that through proper and fair taxation techniques and through the reduction of government involvement in programs which Canadians do not support that we downsize government. It is urgent that we return to the people of Canada the autonomy that comes when they can spend their own money for purposes they themselves choose rather than for purposes that are chosen by someone else.

I encourage the Liberal majority government on the other side, all those individual backbenchers to really exercise the authority they have as elected members of Parliament. I would like to see them throw off the shackles of party discipline and really hold their own government accountable in areas of deficit reduction. It is shameful that after four years we still do not have a definite date on which it is planning to say: "We will not be borrowing next year. No more borrowing". Would that not be a wonderful day?

I should not mention my son, so I will not, but it is as if when he got a speeding ticket for going 80 in a 60 zone he said to the officer that from now on he would only go 75. It would not wash. If the speed limit is 60, he should be going 60. It is not sufficient to reduce it just by a little bit. It is the same thing with the borrowing. It is not acceptable until our borrowing has stopped, until our budget is balanced and our deficit is zero. That is the only acceptable goal.

I do not know why this government has been so unwilling to state a definite target date to aim for on that and to actually reach a goal that it has set instead of these wishy-washy, floating, moving targets that the government may reach if everything goes well and if it does not go well it will happen more slowly. I am distressed with that and the politicking that goes on while Canadians in general are going into debt and are being asked to pay $500 a month per taxpayer just for interest. That is not acceptable.

In conclusion, I am someone who is committed to doing my part in government. It is incumbent on all of us to spend the taxpayers' money as though it were held in trust, to spend it as though it were our own, to be careful and frugal. It is incumbent on all of us to do everything we can in order to eliminate the deficit, to stop the borrowing, to start reducing the amount we owe, reducing the amount of interest that is payable, reducing taxes and giving that boost to the economy that would provide jobs and dignity to people who are currently unemployed. Our country would be in so much better shape.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I would like to ask some questions and make some comments on the speech by the hon. member for Elk Island.

There is this concept, which is also part of the motion we are debating today, that somehow the Canadian taxation system is not fair. In fact I heard the hon. member start off with that in the first part of his speech.

I would just like to comment on the fact that recent statistics, if we study them, show that the top 30 per cent of Canadian taxpayers are paying 66 per cent of the total of all taxes in this country. We have a system in Canada which is called progressive taxation so that the more one makes the more one pays. The reality is that our system has been regarded as fair and progressive from years back. It is also part of the Bloc motion that we are somehow taxing the

poor and letting the rich off. This just is not borne out by the statistics of reality.

I would like to address some of the issues that have been brought forward by the Bloc motion and which have also been mentioned by the hon. member.

Our system of taxation is based on voluntary compliance. What voluntary compliance means is that 13 million taxpayers agree to file their tax returns every year and have them assessed by Revenue Canada.

This is a process which is accepted in western democracies. It is a very efficient system. In a sense it is based on the honour system. There are some internal controls and some checks and balances but basically it is run on the good wishes and goodwill of taxpayers.

There is one big feature about that. When people file their tax returns they believe they are confidential. I would like to take the opportunity to read the section of the Income Tax Act which addresses this matter. I would be interested in the member's comments on it.

It states concerning the provision of information in section 241: "Except as authorized by this section, no official shall knowingly provide or knowingly allow to be provided, to any person any taxpayer information, knowingly allow any person to have access to any taxpayer information or knowingly use any taxpayer information otherwise than in the course of the administration of the enforcement of this act, the Canada Pension Plan Act and the Unemployment Insurance Act".

The purpose of this is to give people assurance that when they send their information to Revenue Canada that it is confidential.

This matter that has been brought forward by the Bloc today, and I would be interesting in the member's comments-

[The Speaker]

I wonder if the hon. member would perhaps let the hon. member for Elk Island answer some of the questions that have been raised. I would not want it to be all questions and no answers. I will go to the hon. member for Elk Island and if we have time I will come back.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I guess in principle we have a reasonable tax system in this country. I would agree with that.

It is not working the way it ought to work. As the hon. member mentioned, and I hope I heard him correctly, there are a lot of people, at least our perception is so, who earn an awful lot of money who pay little or no tax. Then of course there are those people who make very little money who pay little or no tax, but the bulk of the tax burden is on the middle wage earner and we pay dearly.

Every one of us, even without being able to go into the tax records of others, can think of examples of people who are very well off. I remember when my wife and I were first married, which is now over 35 years ago, we had a reasonable mid-sized car, some borrowed furniture when we were first married, and I had to pay my taxes. In fact, it was deducted from my earnings every month. I was making a little over $400 a month and $35 a month, as I recall, went to the tax man.

We developed a friendship in the new town in which we lived where there was a couple who were very well off. He drove a large luxury car. They had a beautiful home with all the newest furnishings. He told me that he did not pay any tax ever because he was a successful businessman. He was able to write all of this off. I objected to it at the time. I said I did not think that was fair. He said: "I'm only using the tax rules. I am not doing anything illegal". There is one example.

A much more recent example has to do with the MP pension plan. When Reformers came here, we said and we were directed by our voters, that the members' pension plan is too rich. It costs the taxpayer too much relative to how much we personally put in. On principle we said we wanted out.

The day I went to do my payroll stuff when I was first elected I asked: "Can I opt out of that plan?" I was told that I could not. Two years later the government tinkered with the legislation and included in it a small window of opportunity for those who felt strongly about it to be able to opt out. The unfairness was that for two years we were cut out of RRSP room because we were forced to be in this plan, but when we got the money back we had to pay income tax on the whole amount and were not allowed to roll it into an RRSP equivalent to that same amount. That is an unfairness in the tax system. I think it is a very serious unfairness to me personally. There are many others who would not share that great concern.

There are those inequities. They need to be fixed up. I really believe that the motion before us is an indicator of an unfairness in the system where some individuals can earn large amounts of money and through one method or another can avoid paying their fair share of tax on it. That needs to be corrected.

[The Speaker]

We have about a minute left, perhaps about 30 seconds, for a very brief question.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I do not think he really addressed one of the questions I posed to him. The Bloc Quebecois is talking in its motion about revealing taxpayers. How does the member feel about the Bloc's attitude about revealing the identity of taxpayers as they also proposed in their motion before the finance commit-

tee? In other words, expose taxpayers to possibly a witch hunt much like Nixon did in the United States when he chased after political enemies. Does he agree that is an acceptable process?

[Ken Epp, Reform, Elk Island, AB]

I certainly agree with the hon. member that confidentiality in the tax reporting system is valuable, particularly for businesses.

It guards commercial security and information which I think is right. But I still believe it would be quite fair for us as ordinary Canadians-I still consider myself to be one-to know exactly what we need to do in order to earn large amounts and not to have to pay tax on it.

The only group I know of that can really get away with it right now-I hate to repeat this-are members of the MP pension plan. I have made some calculations. The amount one would have to put away in order to provide that is several thousand dollars a month. In all practicality it is a deferred income scheme. It allows MPs to take part of their earnings now and receive them later at which time they would be taxable. That is not available to other Canadians.

The question the Bloc has raised today is an issue based on the same principle. Here is something that is available to one group of Canadians. Why is it not available to another group of Canadians? That is the part that we would like to see clarified.

[Jane Stewart, Liberal, Minister of National Revenue]

Mr. Speaker, let me say how much I welcome the opportunity to discuss this motion as it has been presented to the House and to shed light on the real and substantive issues that the case before us demands.

The members of the opposition have really gone out of their way to distort the issues, to confuse the Canadian public. What they forget to say time and again is that this decision was a decision made by the former government, the Tory government in 1991. It was brought to our attention by the auditor general and now we have to deal with it and ensure that the integrity of the tax system is maintained and improved. That is what the opposition forgets to talk about.

The other thing it forgets to talk about is that we did take action. When the auditor general brought this to our attention we responded immediately to the issues and presented them to the finance committee for review. It is a very public body with members from all the elected parties in this House that represent this country from coast to coast to coast.

The opposition members forget to talk about the fact that we have actually acted on the results of that committee report, that we are making changes, that we are committed to having a fair and equitable tax system.

The thing they continue to talk about, the myths they continue to perpetuate are these. They think that if they keep repeating the words family trust and scandal over and over again they can make something out of nothing. But in fact this topic has nothing to do with family trusts, nothing at all.

I sat on the finance committee with the member who proposed this motion, the member for Saint-Hyacinthe-Bagot. When we focused specifically on the issue of family trusts, we heard witnesses, we talked to experts, we listened to testimony, reviewed the implications and made recommendations to the Minister of Finance how we should change family trusts in this country. The Minister of Finance read that report, as he reads all the reports of the finance committee, and in fact went further than our recommendations to deal with that particular tax strategy.

In fact, the government, in response to the issue of family trusts, has eliminated the election to defer the 21 year deemed disposition rule which was introduced by the Tory government. It is gone. It is not part of the legislation any more. We did that. It is gone.

In addition, the government eliminated the preferred beneficiary election for trusts. This ensures that 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 income tax bracket. That has all been changed. Family trusts have been dealt with.

I was part of the committee. The Bloc member who has proposed the motion to the House and who keeps talking about family trusts was there as well. He knows that these changes have been made. I want to assure Canadians that they can have confidence in the system and that that tax loophole does not exist for the advantage of the wealthy any more.

In addition to making the changes to family trusts, the government has gone even further in terms of increasing the fairness of the tax regime. In fact, we have tightened the rules on tax shelters. We have improved our large business audits. We have eliminated the $100,000 capital gains exemption. We have introduced draft legislation to strengthen the reporting of world income in order to prevent the use of offshore tax havens and the evasion of taxes.

The Minister of Finance mentioned last week that he has implemented to date 30 different improvements to the Income Tax Act to make it more fair and equitable. That is the kind of government we are. We are improving fairness to ensure that all Canadians have appropriate opportunities to make their contributions and to benefit from the taxes which they pay.

This is not about family trusts. I cannot say that more emphatically. What this issue is about is how we tax the property of Canadians who emigrate and how we tax the property of people

who are not Canadians but who hold Canadian property. It is about the thing we call taxable Canadian property, that is, and let us be clear, property that remains taxable in Canada even though the owner may not live here and may not reside in the country. Taxable Canadian property is an extremely complicated notion. It is an extremely complicated aspect of the Income Tax Act.

As the Minister of National Revenue, I received the report from the auditor general on this topic. As I read the chapter I took it very seriously. I met with the auditor general for three hours to go through, line by line, his concerns as written in the report. We began by talking about his concern of how the department ruled on the issue of taxable Canadian property. He talked to me about the fact that he understood the complexity of the legislation. He understood that, in fact, it is very unlikely that any law had been broken. He was asking whether or not the ruling was reflective of the intent of Parliament when it drafted the legislation.

He was not suggesting anything inappropriate. He was not suggesting anything illegal. He was suggesting that in the ruling we may have highlighted something which needed to be drawn to the attention of the House for its consideration.

That is particularly an issue for the Minister of Finance. It is an issue of policy, not of administration. I met with the Minister of Finance and suggested that an appropriate response to the auditor general in this regard would be to send this part of the Income Tax Act to the finance committee for a full and open review. That is what we did.

I would like hon. members to understand that this was the first time in 25 years that this part of the act had been reviewed. It was timely. It was appropriate. The finance committee reviewed it in its fullest context. They had expert witnesses who are credible internationally look at the circumstances, to review the decisions. Six out of the eight said there was nothing inappropriate in the decision, that the ruling was correct as the law is written.

The finance committee looked at it and asked: "Is this really the way we want things to work in Canada or should we make changes? Is it time to make changes? Should we clarify our intentions?" Members of the committee made some very clear suggestions to the Minister of Finance that he is now reviewing and considering and will act on in due course.

There was a second concern which was raised in the auditor general's report relating to this topic. The concern spoke directly to my responsibility as the minister of revenue. He talked about the way in which the ruling proceeded. He gave the dates, the timeline. He indicated that he was confused about where and when and by whom the decisions were made. As I read the report I was extremely concerned.

In the course of the three hour discussion I had with the auditor general I asked him if he was suggesting that there was political interference in this case and was he asking me to investigate political interference. He responded: "I have no reason to doubt the integrity of your department".

We went on and discussed the issues he was concerned about. He was concerned that there was no documentation which directed my attention to how the decision was made. It was not clear, not full in its nature. We must have that kind of documentation if we are going to have a fair, open and transparent system. I immediately agreed with the auditor general and I immediately directed my officials to ensure and build a new plan of action to be implemented immediately to ensure that documentation of all our decisions was clear, full and made available when requested. That was an area of real concern.

The auditor general expressed his concern about consistency, highlighting the particular example of the matter where an opinion, not a ruling, was given in another part of the country on a similar topic at a different time which was different than the ruling in 1991. He indicated some concern about the consistency of decisions within my department. Again I agreed and said that we must have consistency. Canadians must be able to rely on the rulings. No matter where they are they must get the same answer from the department when a similar question is asked.

As a result and subsequent to 1991 the department has made very credible changes to the way we operate, primarily using technology so that all the rulings and opinions are listed in a data base which can be accessed. Now any department officials who are making rulings can refer to the data base, see what decisions had been made in the past and ensure that there is consistency and integrity in the responses given to Canadians.

Third, he was concerned about the transparency of our decisions. He was concerned that we made decisions and then did not publicize them for the broad benefit of all Canadians. We changed that some time ago. Our concern originally was with the integrity of confidentiality which we must maintain for all Canadian taxpayers. We must ensure that every individual's details and circumstances remain with us and are not exposed to broad public review. When we get these rulings we have to sever them and present them publicly in a way so that there is no connection between the individual tax filer and the decision. We have found ways of doing that and we have implemented that strategy in our day to day process.

When we look at the issue there are really two sides to it, one of policy which was dealt with very effectively by the Finance committee. It has made recommendations to the minister and he is considering them.

The second area was administration. The finance committee decided on its own to look at those issues, to hear from witnesses, to talk to the auditor general, his assistant, the deputy in my department and the deputy of finance to talk to them about that system of decision making. Their conclusions were the same as those of the auditor general. In fact, the auditor general when questioned in the public accounts committee said: "I have never had the occasion or the need to ever question the integrity of senior officials at Revenue Canada", a reiteration of what he told me. In the finance committee the assistant auditor general said: "We have seen no evidence of bad faith and we have seen no evidence of wrong doing".

Committee members heard that testimony and reported to me as the minister that they saw no evidence of scandal. The only people talking about scandal reside in the opposition. All they talk about are these two things, family trust and scandal. They are not part at all of the discussions presented to me by the auditor general.

I would like to take the opportunity as we are discussing the integrity of the tax system to tell members a little more about what we are doing in Revenue Canada to respond to the needs and the wants of Canadians. Most recently, my department is undertaking the largest re-engineering project in Canadian history. There are 40,000 employees in 800 offices across this country engaged in a structural change that will bring together two very separate organizations.

Traditionally in my department the tax side was distinct, the customs side was distinct. They had their own deputy ministers, their own policies and procedures, their own penalties and interest, their own publications, all quite separate. As a result of changes made by my colleague, the former minister of revenue and now the Minister of Transport, we have redesigned our whole department. We have brought the sections together under one administration and that is contributing to a savings of $300 million to the Government of Canada and the taxpayers. Together we are providing a system that is going to give the Canadian public a real competitive advantage.

I was in the United States in March and met with 500 exporters and importers. I said to them that they had to understand that in Revenue Canada I have responsibility for what is effectively their IRS, their customs administration and their trade administration. They sucked in their breath. They could not believe it. I said yes, and you could not do that in the United States but because of the way we have organized ourselves, because of our size we could bring and house these separate entities together so that our citizens can contact the government more effectively and efficiently.

This whole issue of horizontal management becomes real and alive. Canadians no longer have to call and someone says "I am sorry, that is someone else's business". In my department everybody can respond to those issues: a single window. That is what

Canadians want. They want effective government, a government to respond to them as citizens, to provide that service, and that is what we are doing. It is a tremendous challenge but the employees of Revenue Canada are rising to that challenge.

Today the auditor general in his report completed a whole chapter talking about our administrative consolidation. He praised us for the approach we have taken. He praised us for the contribution that change is going to make to the fairness and effectiveness of the system, for the return to the taxpayer. He indicated that our activities should be a model for other departments and agencies.

It is a pleasure for me to receive that report and to say to the employees who are in the service of the Canadian public in my department, thank you. You are making a difference to the way this government responds to Canadians, to the way we are serving the Canadian public. It is real and it is tangible.

More specifically, there are other things that we are doing on the revenue administration side.

Members will know that different tax regimes were developed individually in their own silos, the personal tax structure, the corporate tax structure, the consumption tax structure; all separate, all with their own penalties and interests, all with their own management teams.

We are breaking that down as well so that we can now look at a Canadian citizen, a Canadian business as an entity. They do not have to deal with Revenue Canada with four business numbers. We can look at them in total. Their tax positions can be understood completely by us.

That is a real competitive advantage. It is a responsive, positive change in the way of doing business. On the customs side, the same thing is happening. Very effectively, we are now moving to understand that we have to facilitate effective trade to let the good things pass through our border quickly and efficiently. But by golly, to keep the bad things out, firearms, drugs, people we do not want in our country, we have to have a smart border.

Our strategy is to maximize the potential of our employees, to use new technologies, to build partnerships with the private sector and yes, with other levels of government and other governments to provide Canadians with the most competitive revenue and customs administration they can possibly have.

I am very proud of the work of my department. I am very proud of the response that my department took to these issues directed to us by the auditor general. I want to make clear to the Canadian public that the opposition is full of political huffery and puffery on this item.

Again, it is not about family trust. We have dealt with that effectively. It is not about scandal. There is no indication of scandal. What this is about is our government's taking efficient, effective, immediate action when concerns are drawn to our attention. It is about a government that believes in the fairness and equity in the tax system.

It is a government that believes it can make a difference and will make a difference. It will provide Canadians with the tax regimes they deserve.

[Philip Mayfield, Reform, Cariboo—Chilcotin, BC]

Mr. Speaker, I very much appreciate the comments of the minister. There is another side to this. She mentions there are two sides to the argument. I intend to follow that for just a moment.

We have listened to the minister and other members of the government side speak of the due diligence they have paid to this problem in the revenue department. We have heard the chairman of the finance committee mention how they have called witnesses. They have invited the opposition parties to call more witnesses. They have looked at it as thoroughly as they could in depth.

There has been a lot of talk, talk, talk about this issue. I am pleased they are coming to some resolution. The issue is not entirely family trusts. In my mind the issue related to that which is perhaps more important is government accountability. To whom is it accountable?

There is a disturbing trend. For example, as legislation is being amended I hear members of the legal community saying that one of the concerns that they have is that the government is seeking less and less accountability in rather small and obtrusive ways.

For example, little words like "shall" are being modified to "may" where there is less accountability, and phrases like "in the opinion of the minister", which is not challengeable in any court because how does one challenge someone's opinion?

Relating to the issue of revenue generation and family trusts, and going one step beyond that, I have seen how the government has looked carefully over a long period of time at this issue, but there are other instances also.

For example, when a farmer took a truckload of grain across the border, he was taken to court. There is nothing wrong with that. When the judge said there is nothing wrong, the regulations were changed in a flash. It did not take weeks and months and years. The government acted immediately.

Another example: Shortly after this Parliament convened after the election, we were confronted by a crisis of smuggling tobacco products. What happened? The government acted very quickly by lowering the duties collected on tobacco products and dealt with the smuggling problem in this manner. It acted very quickly. The consequence of that however is there are thousands of young people now involved in smoking. They have taken up this highly addictive habit and face years of suffering trying to get away from it. The medical costs of caring for them later on have not been calculated but they will be high.

The difficulty is not simply family trusts, it is government accountability and to whom it is accountable. Is it willing to be accountable to the law as all citizens are, or is it seeking to be less and less accountable? It is my contention that this is the case.

In this instance the Liberal government has spent a long time talking about the issue. I will be interested to see exactly what the outcome is. Hopefully it will be that large family trusts will not be able to leave the country without paying due taxes as the rest of us do.

The government is quite properly looking to claim all legitimate revenues. Forms are being sent out to people to tell stories about other people who may not be paying their taxes, who may be escaping their taxes through the underground economy. Are we asking our citizens to be stool-pigeons while other people are quite legally removing their money from the country? There is a matter of fairness that Canadians really object to.

These are the concerns which I have as I talk about government accountability. I ask the minister if she would please respond. Is the government prepared to be accountable in all areas, or simply in the areas where it is most convenient for it?

[Jane Stewart, Liberal, Brant, ON]

Madam Speaker, let me say that yes indeed the government is prepared to be accountable in all aspects of its responsibilities. When we talk about accountability I would like to share with the House something else we have done in the department which responds directly to the member's concerns.

It is only fair when we ask Canadians to open their books to us as we collect their taxes and look at their position, that we do the same. As a result of that I have asked my department to take the time to prepare on the basis of an internal audit, reports for this House, for members opposite and for their constituents on the different programs we take responsibility for.

Most recently we did a full report on the tax filing year that indicated the positives, the fact that people are getting their refunds much faster now as a result of E-mail and other changes to our system, that we have implemented new strategies like E-filings, telephone filings which make sense to Canadians and respond to them. At the same time this report identified areas of weakness where we have to make improvements and respond more directly to Canadians.

Most recently we have issued our second report, a report on the child tax benefit. The hon. member may be interested to know that the newest line of business in Revenue Canada is providing benefits to Canadians, returning revenues back to Canadians as appropriate: the issue of the child tax benefit and the GST credit for example. We have done a review of our child tax benefit program and strategy. We have found aspects that are very positive about it, but aspects that yes indeed we have to improve.

These are the kinds of measures this government is taking to respond to the concern of the hon. member in the area of accountability.

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, we are privileged to have the minister here responding to the motion and answering questions. I thank her for her very lucid communication. I commend her for her style of speaking.

She indicated that this particular issue which has been brought up by members of the Bloc has been solved by her department, that the loophole has now been closed and that it is no longer permitted. I presume if the same attempt were to be made now, the tax revenue would not be forgone by the Government of Canada.

Was there an attempt made to reassess the tax payable on the amount that was taken out of the country?

[Jane Stewart, Liberal, Brant, ON]

Madam Speaker, I should clarify a couple of things.

The concerns of the auditor general were really two. One dealt with policy: the issue of taxable Canadian property; how we apply it; how we should not apply it. The other was the issue of deemed disposition and when taxes should be paid on Canadian property.

Those issues were reviewed by the finance committee and recommendations were given to the Minister of Finance, whose purview it is to deal with the policy of the Income Tax Act. He is currently reviewing them. As he does, I have in my department maintained a moratorium on rulings of taxable Canadian property. It is only appropriate and prudent that we give the minister time to make those considerations and ensure that the issues do not come before my department simultaneously. We want to ensure that the intentions of the members of the House and their concerns about this particular aspect are reviewed, given a full airing by the minister and then, when he makes his decisions, we will again return to the normal process of rulings, given the changes to any legislation.

Beyond that I would say we have taken further action on the administrative side. Very clearly the auditor general and the committee were concerned about three things: the transparency of our decisions; the consistency of our decisions; and the documentation which we have in our files around all the decisions we make. I am glad to confirm to the House and to all Canadians that we have taken action in all three of those areas, as I indicated in my speech. I believe that should add comfort and assure the integrity of our taxation system.

[Pierre De Savoye, Bloc, Portneuf, QC]

Madam Speaker, it is a pleasure to address the House this afternoon on the controversial topic of family trusts, and, more particularly, of the auditor general's report.

There is no getting around the fact that it was very ill-considered of the finance committee, which is obviously controlled by the Liberal majority, to have criticized the auditor general and his report, because the auditor general is an institution that must, at all times, be above criticism.

I appreciate the fact that the minister recognizes that the auditor general is doing a good job. Beyond the fact that I know that the minister is the soul of honesty, I must say that the scheming that has come to light in her department and that she says she is trying to rectify, is not going to encourage the public to have great confidence in the federal revenue department.

Beyond the technical considerations the minister laid out earlier, the fact still remains that the average citizen does not necessarily have great confidence in the federal tax system. If you met a businessman anywhere in this great land and you asked him whether he was treated fairly by the tax system, I am not sure you would find him very enthusiastic. On the contrary, he would point out a number of situations that he finds disgraceful, a number of measures that he finds unfair.

And even if we were to give him a technical explanation for certain situations, he would be no more convinced.

When average citizens, the men or women who work five days a week, who have families to raise, file their tax returns at year's end, do they think they are being asked to pay their fair share of taxes, or do they think they are being asked to pay more than the more fortunate members of society?

So you can understand that when the auditor general tells us that a rich family, with the help of what is known as a family trust and by means of tax provisions permitting money to be moved out of the country, has used these tax rules to shelter a sum of two billion dollars from taxes, average citizens do not understand. They do not understand why the act allows something like this to go on while they must pay every last cent of taxes they owe.

You will agree with me that they have reason to worry. The legislative tax measures that are in place and that are administered by Revenue Canada cannot be justified solely from a technical

point of view, but must also demonstrate respect for this country's citizens, whatever their income.

Basically, the problem is that people who have money are able to get the technical expertise they need to find legal ways to save on their income tax. Technically speaking there may be nothing wrong, but the fact remains there is something distinctly immoral about this.

The average person is not in a position to say, with a big smile, that everything is okay because it is legal, because all the rules and regulations have been observed and the experts said it was all right. How can you make it morally acceptable to someone who earns a modest weekly wage and pays provincial and federal income tax of up to 20, 25, 30, 35 or 40 per cent and more, that someone can take two billion dollars, transfer it to the United States and not pay a cent of income tax? That is hard to swallow.

For the benefit of the minister, I will tell you about a letter I received a few days ago. It was from a woman in Saint-Raymond, in the riding of Portneuf, a woman with a family, who last year had a job under a program managed by Human Resources Development, commonly referred to as DEPS and section 25s.

I hope the minister will listen for a few moments, because I think the situation will interest her and help her understand why some people feel the family trust issue is particular shocking.

This woman, who worked under a job readiness program of Human Resources Development for many months, hired a babysitter so her children would be looked after at home. Instead of paying this person under the table, thus making her work illegally, she paid her a reasonable amount so she agreed to give her name and this woman from Saint-Raymond could claim child care expenses as a tax deduction. In other words, she acted like a law abiding citizen so she could claim this deduction.

But there is a problem because the money to pay for her salary comes out of the Unemployment Insurance Fund. So she is not entitled to this deduction. So, imagine, this woman who spent more to avoid hiring someone illegally was denied the deduction to which all other workers who have a job are entitled.

There are numerous technical reasons, and the minister will agree, for which this woman is not entitled to that deduction but fundamentally, morally, and I hope the minister is listening carefully, that woman feels very angry and frustrated and is disappointed by a tax system she finds unfair.

That is what is outrageous. On one hand, the auditor general tells us that a wealthy family was able, through a family trust and with rules on taking money out of the country, to shelter $2 billion. This is three times the cost of the disaster in the Saguenay. That is a lot of money. Three times the cost of the disaster in the Saguenay: $2 billion.

On the other hand, this woman I just talked about is losing the equivalent of $1,000. I realize my time is running out but I believe I have demonstrated that what is outrageous is not that some things are legal but that the law has more consideration for the rich than for the poor.

I hope the minister will be able to address this situation as soon as possible.

[Michel Guimond, Bloc, Beauport—Montmorency—Orléans, QC]

Madam Speaker, I am pleased to speak to the Bloc Quebecois' motion on this allotted day, particularly as I am Chairman of the Standing Committee on Public Accounts.

I believe it is our duty, when we have the floor, to put things in perspective, so that our listeners can understand what we are talking about.

On May 7, 1996, the Auditor General of Canada, Denis Desautels, tabled a report. Under an Act of this Parliament, the auditor general is expected to submit three reports each year. In this report, one chapter in particular caught our attention, not only the attention of the official opposition but also that of all the members of the Standing Committee on Public Accounts.

Let me explain. I am talking about Chapter I, entitled "Other Audit Observations". This is a kind of catchall, not so much in terms of its content but because it contains a variety of observations.

This chapter described two particular cases. The auditor general had examined two particular cases relating to the transfer of assets from one family trust to another family trust in the United States. The figure was astronomical. The principle would also have been unacceptable had the figure been smaller, but the very fact that it was a tax-free transfer of $2 billion made it even more so.

The Standing Committee on Public Accounts met, as it does each time the auditor general tables a report, and as it did today, in fact. In committee, we try to determine which priorities we should look at, study and call witnesses about.

You will understand that the official opposition wanted to study these two family trusts quickly, I must stress this fact, right from the beginning, as the Chairman of the Standing Committee on Public Accounts, the only committee to be chaired by a member of the opposition. The rules of our democracy entitle the official opposition to chair that committee which acts together with the auditor general. This committee monitors the government and the

different departments to ensure, for Canadian taxpayers, that their taxes are being spent efficiently. In fact, such is the role of a state where taxes are collected. We pay the taxes and we make sure that we get our money's worth.

We wanted to examine this issue on a priority basis and that is why we, in the official opposition, decided it warranted further debate in the House, because we were unable to find out in detail what really happened in these events we now call a scandal. This term was not necessarily chosen by the official opposition. The Parliamentary Secretary to the Minister of National Revenue said that the government members do not like to hear us using the word "scandal", but we are not the ones who first used this term. It was first used by neutral and independent reporters who happened to examine the case. We could quote Martin Leclerc, from the Journal de Montréal and the Journal de Québec ; we could quote Gilles Gauthier, from La Presse. They are not in the pay of a specific party. They were the ones who said this situation was outrageous, that it did not make sense.

We can tell you that, again today, as a result of delaying tactics, the official opposition is not in a position to do its job properly because, as we speak, we cannot find out what really happened.

As my colleague, the member for Portneuf, was saying earlier, we have a few questions of our own. Why, when it is time for two rich families to transfer, tax free, $2 billion, are all the officials, all the senior officials at Revenue Canada available to meet with them, help them win their case and proceed with the transfer?

This is what worries us about the 1991 decision. It was handed down on December 23, 1991. If there are questions or comments later on, I already know that Liberal members will say: "This did not happen while we were in power, it happened under the Conservatives". Quite true. Nice try. Indeed, the Liberals were not in power in 1991, but they will not be able to get away with what was made public today by the auditor general in his report. Revenue Canada is going to have to account for $630 million worth of tax evasion. The auditor general mentioned that this is due to a lack of auditing of major oil companies and the tobacco industry; $630 million in 1994-95 alone.

This means that the Liberals' argument that they were not here in 1991 still holds. However, what practical steps have they taken to close the door?

The Liberals want us to stop reviewing chapter 1 of the auditor general's report, claiming that the Standing Committee on Finance has already done so. They want the Standing Committee on Public Accounts to work on something else. I know some members here in this House could say: "Yes, but the committee agreed to hold only one meeting on family trusts". Maybe the Liberal majority members are smarter than I, but, as I said to the Standing Committee on Public Accounts, I do not feel that one single sitting is enough to shed light on what really happened on December 23, 1991.

Because we, the members of the official opposition, have always believed in the institution personified by the Auditor General of Canada, we also find it unfortunate and deplorable that the Chairman of the Standing Committee on Finance and member for Willowdale tried twice to discredit, to corner, to trip up the auditor general and his colleagues. He never assumed such an attitude towards the Deputy Minister of Finance, Mr. Dodge, or the Deputy Minister of National Revenue, Mr. Gravelle. This is what we call double standard. Instead of showing some respect for the Office of the Auditor General of Canada,an independent and democratic institution that has no political ties, he chose to play party politics.

The member for Willowdale is well-known for the way he conducts the proceedings of the Standing Committee on Finance. As Chairman of the Standing Committee on Public Accounts, I do not need the member for Willowdale and Chairman of the Standing Committee on Finance, telling me what to do.

The fundamental issue is the issue of the accountability of senior officials. This is regrettable, but I must tell you that the question of accountability of senior civil servants will not be studied by any parliamentary committee. The Standing Committee on Public Accounts, of which I am a member, will not be able to do it in one single sitting any more than the Standing Committee on Finance did. In a democratic society, it is of considerable concern when people are not accountable for their actions and their decisions.

We will never know neither the circumstances which led to the transfer out of Canada of $2 billion, tax free, nor all the reasons surrounding these improprieties. I am not the one mentioning improprieties in this context, it is the auditor general.

To conclude, if we go beyond this case, it is the whole process of external audit of the government which has to be reviewed. Maybe Liberals are longing for the time when they were in opposition. They were more aggressive then, more lively, perhaps, and they will probably be there again after the next elections. The only committee chaired by an opposition member is being side-tracked despite its formal mandate to study the auditor general's report. The auditor general is under attack and will not have any forum to defend his indictment of this government, if the Standing Committee of Public Accounts is not able to shed light on this question.

I will conclude by saying that this is a frontal attack on the principle of government accountability to Parliament.