House of Commons Hansard #75 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was finance.


SupplyGovernment Orders

September 26th, 1996 / 12:40 p.m.


Richard Bélisle Bloc La Prairie, QC

Mr. Speaker, I agree with what the Reform member is implying. We should immediately change the Canadian legislation, the Income Tax Act, to prevent, from now on, amounts of money as huge as those transferred in 1991 being moved out of the country a few hours before the end of the fiscal year.

I think that instead of trying to put the auditor general on the spot and to prevent him from carrying out his mandate, from acting like a real ombudsman for Canadian taxpayers, the finance committee should immediately review this aspect of the act and prevent, in future, anyone from transferring out of Canada and tax free such amounts of money.

SupplyGovernment Orders

12:40 p.m.


Jim Peterson Liberal Willowdale, ON

Mr. Speaker, the auditor general reported a short while ago to Parliament on some prior tax rulings given by Revenue Canada, one in 1985 and another in 1991. This report comes six years after the last ruling was given. The essence of his report was: "The rulings may have circumvented the intent of the law".

The auditor general was good enough to send me in a letter a copy of his report to Parliament. As chairman of the finance committee I took this very seriously, just as the government took this issue very seriously. Here we had one of the most respected and important institutions and individuals in the parliamentary process saying there might have been a misinterpretation or misapplication of the law as it existed. This is a very serious charge.

Very quickly members of the finance committee called before us the auditor general and his officials and asked him to explain further what had happened. That was not the end of our discussions. We called as well public servants from the office of the Departments of Revenue Canada, Justice and Finance to assist us in dealing with this issue.

In listening to the auditor general here is basically what he said: "We have absolutely no evidence of impropriety on behalf of Canada's officials. We have absolutely no evidence of political interference, but we still think they misapplied the law". This is an extremely complex area of the law and as the auditor general said, it is an area of the law which is very ambiguous.

There are provisions in the Income Tax Act which pointed in one direction and there were other provisions which pointed in an opposite direction. I wish it were not so, but our Income Tax Act is very thick and there is not one practitioner in Canada today who can in all honesty say they understand all aspects of that code. The profession has had to break itself down into people who are experts on particular areas of the Income Tax Act. To further complicate the issue, it is not just the Income Tax Act, but on top of that was the overlay of the Canada-U.S. tax treaty which involved a further set of complications.

What did we do as a committee? We decided that since the auditor general and his officials had charged that there may have been a misapplication of the law, and since we are not the experts, or could ever hope to be the final arbiters of a dispute of this nature we asked a group of tax experts, not just tax experts in general but international tax experts to come before the committee. The auditor general suggested certain experts. Professor Neil Brooks from Osgoode Hall appeared before us at the request of the auditor general. All opposition parties had an opportunity to suggest who those experts should be.

We asked those experts if the prior ruling given by Revenue Canada officials was a misapplication of the law? Out of the eight experts there, one said it may have been. Professor Brooks said it definitely was. The six others said in no way was this a misapplication of the law. That is what we reported to Parliament.

Overlaying this question of whether this difficult judgment taken by Revenue Canada officials was correct or not was that when the facts were released saying that the prior tax ruling involved some $2 billion having been transferred out of Canada by family trusts to the United States, almost immediately on release of that report, speculation occurred regarding the precise identity of the taxpayer. This raised tremendous concerns throughout Canada's tax community. The essence of our voluntary system of tax compliance and reporting is that the confidentiality of the taxpayer must always be respected. It is a criminal offence to breach taxpayer confidentiality.

Obviously, the auditor general was concerned about this. He presented to us an opinion saying that what he had released had not been a breach of the law. That was never a concern on the committee. The concern expressed to us by Canada's tax community was that, if you cannot go for a prior ruling without fear of having your name disclosed in the press, then why go for a tax ruling? If someone can contest publicly a tax ruling with the possibility that the taxpayer's name can be revealed, what will this do to the ruling process?

The auditor general, in his report to Parliament a couple of years ago, said: "It is so critical where there are complex and ambiguous laws, the taxpayers need the certainty of prior rulings". We certainly agree with him.

Something we commented on in our report was that it is critical that any of us as members of Parliament, members of the finance committee, members of the government, members of the public departments, be it revenue, justice or finance or be it the auditor general, that we respect the confidentiality of taxpayers. It behoves us in our actions in the House of Commons and elsewhere to make sure that we respect that confidentiality in order to preserve the integrity of a system of income taxation based on voluntary compliance.

Members of the Bloc Quebecois have tried to make a great deal out of this particular issue. They said that this breach of confidentiality was not because of the release of all of this detailed information to the public by the auditor general but that it was "because of a source inside the federal government itself that the names were divulged". Never once did the Bloc Quebecois call that person before us or say who it was. They are alleging that an official in the government breached this confidentiality.

This is casting an aspersion on the entire revenue and finance departments. If they are going to make this charge, then they have the obligation to bring the name of that individual forward other than to dwell on issues of allegation.

Bloc members have said as well that the government muzzled the public accounts committee by transferring the family trust issue to the finance committee. The critic for the Bloc Quebecois approached me and said: "We want to make sure that the finance committee deals with this issue". Why would he change his mind? After all it was dealing with provisions of the Income Tax Act. Are they not the purview of the finance committee? Had not the auditor general asked us to look at it? Had not the government asked us to look at it? These are the things that we are supposed to do.

Let us not pretend that we in the finance committee have been trying to block discussion of this issue. We made the offer to all opposition parties to hold any other sessions, to call any other witnesses they wanted. They said that they had heard enough.

What did we do in the finance committee as a result of these hearings? We reported what the vast majority of Canada's tax experts, some of the leading names in the country, such as Davies, Ward & Beck, Goodman & Carr, Ernst & Young, Coopers & Lybrand, the people who deal with these issues on a specialized basis, Davies, Warden & Beck, Stikeman Elliott, people who deal with these issues on a daily basis, told us. They told us that the ruling given by revenue was not wrong.

What did we also find out in our hearings? We found out that before revenue ruled in this particular case it did a couple of things. It called on justice for an interpretation of this complex and ambiguous area in the Income Tax Act. Justice serves as the lawyer to the Revenue Canada officials. Justice said: "We believe that the way the Income Tax Act reads, taxable Canadian property can be owned by a resident of Canada". That was the technical issue involved. However, Revenue Canada did not stop with the opinion of the lawyer of the justice department. It went to the finance officials. It asked: "What do you think is the intent of the law? Can residents of Canada own taxable Canadian property?" The finance officials said, yes.

I ask members in the House to consider this situation. You are working in the Department of National Revenue and are asked to give a ruling. You realize that it is complex. There are ambiguities. You consult the department's lawyers. Not only that, you go further and find out from finance what it thinks the law was intended to do. Should there be a higher duty imposed on you as a public servant than to consult your lawyers and finance? Should it be the obligation of anybody in any department of this government who has doubts about anything to go and consult the auditor general in advance?

What standard of care are we attempting to impose on our public officials who are not here in Ottawa to get rich? We know they cannot. Public servants have had a freeze on their salaries for five years. If someone wants to get rich he or she goes into the private sector. What standard of care are we as politicians attempting to impose on them? I submit that no higher standard of care could have been exercised by revenue officials when they consulted their lawyers and finance, knowing that the law was not certain.

What did we recommend as a finance committee? We said: "Auditor general, in spite of the fact that we have some misgivings about the way your disclosures resulted in speculation in the name of the taxpayer and despite the fact that the experts we called before us do not agree with your interpretation of the law, i.e. that it should not have been ruled on such except for Professor Neil Brooks who is a frequent witness before our committee, always at the behest of the Bloc but this time at the behest of the auditor general, while we do not agree that this ruling may have misinterpreted the intent of the law, nevertheless, we think the point you have made before us is critical. We think you have discovered a loophole in the law. We think you have discovered an area where we must act to change the law".

That is why in our report we have suggested many changes in the law, changes which go far beyond those proposed in the minority report of the Bloc. Our suggestions for plugging the loopholes and for tightening up the Canadian tax net go far beyond what the opposition parties have suggested they would do. Therefore, before they criticize us let them look to their own decisions and maybe reconsider them.

Let us be very clear. Apart from having a very complex and ambiguous tax law in this area, the testimony before us indicated that Canada already has probably the tightest tax net when it comes to taxpayers leaving our country, perhaps along with Australia and Denmark. In spite of that, we recommended that the government act quickly to make that tax net even tighter.

We said that we should look at deemed realizations for all property when a taxpayer leaves this country. We might not collect it immediately because that would be stupid. Sometimes people leave this country and take up residence elsewhere but have shares in a small business which is ongoing or they may own an apartment building or a house. Is it right to charge them the tax the moment they leave the country as opposed to when they actually sell that property?

We are not prepared to be stupid. We have to recognize that in our tax systems different individuals and different circumstances have different needs.

We came down fully and squarely against the type of thing that happened, in terms of trusts being able to take large sums out of this country. We have recommended that in the future that type of provision not be allowed.

We have recommended that there be increased reporting requirements for Canadians leaving the country so that in circumstances where the tax system might not otherwise pick up what those assets may be that are subject to future disposition and which we may not be able to track in a coherent way, Revenue Canada has a way of doing that. These recommendations were not pulled out of the blue, they were based on expert testimony we heard.

In conclusion, the majority report thanks the auditor general for having brought these matters to our attention. The greatest compliment, apart from thanking him, we could have paid to him was that we said: "We do not like the result. We are, therefore, henceforth going to recommend to Parliament that the law be changed". We, as well as the auditor general I am sure, hope that in the future there will be continuing access to the ruling process and the speculation as to the identity of the taxpayer, the breach in confidentiality, will not have a chilling impact on the need to have these rulings.

I am pleased to report that the auditor general vindicated the integrity of the process and the bona fides of our officials. I believe we have all benefited from having this matter brought to light.

SupplyGovernment Orders

1 p.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, basically, I have four points to make. I think that with time and with the wearing effect of politics, the hon. member for Willowdale, who is chairman of the finance committee, became a misinformation expert.

He said that they took the issue seriously and that the auditor general is one of the most respected institutions, but he does not believe his own words. I say that because when the auditor general appeared before the committee, the member for Willowdale, with the complicity of senior civil servants who took part in the 1991 advanced ruling allowing the transfer of $2 billion outside of Canada tax free, tried for an hour and a half to give him hell, catch him off guard and undermine his credibility.

That continued when the liberal majority report produced under the direction of the chairman of the finance committee was made public. What do we find in that report? Two things. A major part of it continued the attack on the reputation of the auditor general. He was accused of violating confidentiality rules when the leak, mentioned in the Globe and Mail a few days after the auditor general made the scandal public, was traced back to Revenue Canada. Maybe there are civil servants who have had enough of the establishment and the complicity between the decision-makers responsible for those advanced rulings and the wealthy Canadian families. I think that is the truth of the matter. The report denigrated the auditor general.

One other example of misinformation is the statement by the chairman of the finance committee, the hon. member for Willowdale, that the Liberal proposals go farther than those of the Bloc. Sure they go farther in the sense that they open wide the doors to massive capital transfers for Canadian millionaires and billionaires. They certainly do go farther.

We are saying that this loophole must be closed. We must put an end to twisted interpretations, such as the ones we got from the senior officials who made this shameful decision in 1991 without doing a technical analysis of the Income Tax Act and without taking the time to write the minutes of the numerous meetings they had for one week until December 23, 1991.

As for the experts, here is another thing that goes against the credibility of the chairman of the finance committee. He is the one who invited these experts. Six of the experts that were at that table were invited by him.

These experts have no credibility whatsoever, as far as I am concerned. Do you know why? Because they come from the very tax consulting firms which help rich Canadian families transfer their money out of the country. On the word of these six experts chosen by the chairman, chosen by the establishment of the Liberal Party of Canada, the Liberal majority report says there is no problem, there are no capital transfers.

Finally, when the member for Willowdale and chairman of the finance committee says that the financial community is worried, I can understand why because, for the first time in a very long time, the auditor general and the official opposition have uncovered a scandal, a conspiracy that has been going on for decades between the deputy ministers, the assistant deputy ministers and the senior officials responsible for advance rulings and the rich Canadian families who want to take money out of the country. That was the concern of the financial community.

I will never forget a certain Mr. Goodman, a tax expert invited by the Liberal Party of Canada, by the chairman of the finance committee, who said: "The auditor general should have never informed Canadians of these kinds of things. They are far too complex".

What that expert was saying really is that, when dealing with complex issues, it is better that the public be kept in the dark. When these kinds of scandals occur, they have to be hidden. Even the auditor general, who is accountable to Parliament, to the people, and who is the watchdog of our public finances, should have kept his mouth shut because it was outside his mandate. That is the reality of the situation.

It bothers me when I hear remarks like the ones made by the chairman of the finance committee, which I think are misleading and are the reason why this man is losing even more credibility not only with his own committee members, but also with Canadians. The picture painted by the chairman of the finance committee is totally contrary to the facts.

SupplyGovernment Orders

1:05 p.m.


Jim Peterson Liberal Willowdale, ON

Mr. Speaker, there are a number of points which have been brought up by the hon. member.

First, he said we are saying there was no flight of capital, that through the committee process we were involved in a flight of capital. What took place was under a former government. The majority side on the committee said there was a flight of capital but we must stop it. We are the ones who are saying this is not right and we have recommended the changes to the law.

I find it passing strange that the hon. member, the chief financial critic for the Bloc, would say the experts who were called before our committee have no credibility whatsoever. In the same breath he said the Liberal majority attacked the message bearer, the auditor general.

Let me be very clear. It was not an attack. It was a mild rebuke. We criticized the way the auditor general released the information which led to speculation as to who the taxpayer was and according to the experts before us could put a chill on the entire ruling process.

We accepted the rulings. All the experts said that the ruling given by Revenue Canada had been proper in the circumstances. A fundamental aspect of our report was that we accepted his criticism of a system that allowed that money to escape and we recommended the loopholes be plugged.

I find it passing strange that his only attack on our report was that we attacked the auditor general. We said exactly what I have just said.

The member, as did all members, had the opportunity to bring other experts before our committee to deal with the precise complex and ambiguous tax provisions in question. Why does he attack them? If he did not like them he could have brought others. He had that opportunity. So for him to say we were attacking the messenger is fundamentally how he is attacking our report. He said he did not like the message and that these experts who came before us were not able to give us proper advice.

To say that, he is attacking the basis on which some of the biggest and finest auditing companies and legal firms in this country act. Their opinions have to be right. Their opinions are relied upon by shareholders, taxpayers, by others, by the people who buy shares in public companies. Their integrity and their wisdom are critical to this process.

For him to attack the messengers the way he said we were, which is a total mistake, a misinterpretation of the situation, is to me totally inconsistent. I wish he would stick to the issues and I wish he would join us in urging the government to plug these loopholes as quickly as possible.

SupplyGovernment Orders

1:10 p.m.


Yves Rocheleau Bloc Trois-Rivières, QC

Mr. Speaker, our Liberal colleague, the chairman of the Standing Committee on Finance, continues to insist that the present government is not

touched by the December 1991 ruling, because the ruling was made under the former government.

If that is true, why is the present government refusing to shed light on everything that preceded this meeting? Why does it approve of the fact that there were no minutes? Are we to understand that this shows better than anything that they could say that Canadian Conservatives and Liberals are as alike as peas in a pod, that they owe their existence to the same slush fund, that they are both in cahoots with financial circles, as was clear one evening when I took part-as I will tell you shortly-in the farce at which leading Canadian lights that advise wealthy families came to tell elected representatives and the public that they should mind their own business, that we were attacking the integrity of the Canadian tax regime?

I would like our honourable colleague, whose arrogance occasionally creeps through, to comment on this.

SupplyGovernment Orders

1:10 p.m.


Jim Peterson Liberal Willowdale, ON

Mr. Speaker, the hon. member is alleging that we were trying to cover things up. The official opposition, the Bloc Quebecois, was asked whether it had any witnesses to bring forward. We said we will deal with any of these issues. We wanted it fully dealt with in the finance committee, just as the Bloc had asked us to deal with it fully in the finance committee. We contacted it a number of times and it said "no, we have no more witnesses".

How could we be the ones who are trying to cover up things when we opened it up to discussion of any sort? We called the witnesses asked for by the Bloc, the Reform and the auditor general. We asked them: "Do you want to have any more hearings or can we get to the report stage on this issue?" That is not a cover-up. Would they please quit making innuendoes and allegations which have no foundation whatsoever.

SupplyGovernment Orders

1:10 p.m.


Maurice Bernier Bloc Mégantic—Compton—Stanstead, QC

Mr. Speaker, before addressing the motion before us today, I would like to begin by informing you that, henceforth, the Bloc Mps will be dividing their time into two periods of ten minutes, and that my colleague from Trois-Rivières will be speaking immediately after me.

When the matter of the family trusts resurfaced to become a source of concern to all Canadians and all Quebecers, thanks to the efforts of the members of the Bloc Quebecois-I shall come back to this point-and when the official opposition suggested that this opposition day be devoted to the matter of family trusts, I made it known to my colleague from Ste-Hyacinthe-Bagot that I wanted to intervene in this debate. I am far from claiming to be a tax expert, which is why I will let others explain the matter in detail-as my colleague for Saint-Hyacinthe-Bagot has already done on several occasions, moreover-but I would like to draw the attention of this House to the context surrounding this whole affair.

This matter of family trusts is one that has been of concern to the Bloc Quebecois almost since its inception. In the last campaign, the Bloc raised the issue on numerous occasions. After the Bloc obtained 54 seats and gained recognition as the official opposition in this House, the Leader of the Opposition at that time, Mr. Bouchard, raised the question of family trusts on a number of occasions during his interventions in this House.

The auditor general's report fully justifies our concerns, proving that we were right to raise the issue in recent years, while the Liberals on the other side of this House have clearly sought to stifle this shameful scandal by every means possible.

I just heard the hon. member for Willowdale. I suggest that he audition for the festival "Juste pour rire" next year in Montreal, or "Just for laughs" if he prefers, since there is an English version, because his comments outside this House, in committee and here in the House today should be good for laughs. We cannot afford to take them seriously.

The auditor general put his finger on a major problem in the tax system. The government may argue that the loophole pointed out by the auditor general goes back to the previous government. As the hon. member for Trois-Rivières just said, if the Conservative government was responsible, why is this government reluctant to shed every possible light on the problem?

It is pretty obvious, and this has been said time and time again, that there is only one reason why the government does not want to shed light on the matter. It wants to protect its own interests and the interests of those who support it. It is a big joke to hear the hon. member for Willowdale describe these experts as people whose credibility is undisputed, although it is public knowledge that they belong to companies that finance the Liberal Party and the Conservative Party. That is public knowledge. It is not gossip or libel. It is a fact that representatives of these companies finance the Liberal Party.

For the government to invite experts like these, competent though they may be, is like inviting some foxes and asking them for tips on protecting the chicken coop. That is what happened. They invited experts who consistently provide funding for the Liberal Party and told them: "Could you tell us whether it is right to take money out of Canada and invest it elsewhere, to avoid paying

income tax?" It would have been astonishing indeed if the experts had not answered the way they did.

Take the Minister of Finance. A week ago on Radio-Canada, a journalist asked him whether he had a family trust. He answer is on the record-and I took the trouble of listening to the news bulletin again to be sure I did not misquote him-and it was as follows, and I will quote him verbatim: "There are many family trusts. When you have young children, you do that. In case I die, I would want someone to take care of my children". But that has no connection with income tax.

When he said this, the Minister of Finance admitted that he himself had a family trust, and that the reason was to protect his children. But who in this House will protect the children of the unemployed, victims of cuts that have been made for the past two or three years? The same finance minister says, admits in each budget he brings down that, with the unemployment insurance fund, he makes $5 billion in profits every year at the expense of the unemployed and of single mothers who do not have even enough to support their children. Who is the Minister of Finance trying to protect? The answer is obvious. Now who will protect these families living on unemployment insurance which, contrary to what the Minister of National Revenue said, cannot escape the Income Tax Act because they cannot afford to have family trusts?

It takes some nerve to state, as the Minister of National Revenue did in this House, that anyone can have a family trust. It may be true of seniors who decide to move to Florida. What seniors in Canada and Quebec can afford a family trust when their pensions are being cut back? Who, among the unemployed, I repeat, can afford a family trust?

They are mocking people. Mocking people and undermining the credibility of our institutions. And because of that, the people have lost faith not only in our tax system, but also in governments and their elected officers.

I will conclude by reminding the House that the Bloc Quebecois has given itself a mandate to promote sovereignty, and we will keep promoting sovereignty. We have also given ourselves a mandate to represent the interests of Quebec in this House. Our work on the family trust issue is a perfect example of the kind of work we have done here over the past three years. And the auditor general agrees with the Bloc Quebecois. His message is that someone in this House has to be free to stand up and condemn these unacceptable actions on the part of this government.

SupplyGovernment Orders

1:20 p.m.


Dan McTeague Liberal Ontario, ON

Mr. Speaker, of course, I listened carefully. It was difficult not to hear the passionate comments made by the hon. member who spoke before me about an issue that undoubtedly affects him and which he feels passionately about.

But I think it is rather interesting that this same member, pointed first at the government benches instead of using the opportunity to talk with his seven colleagues who were in the Tory government in the last Parliament.

It seems to me to be rather inconsistent for this member to be pointing a finger at this side of the House when he has not taken the first step, a logical step, a rational step, to ask members of his own caucus who were part and parcel of that problem in the early 1990s when several of those members, including the former leader of his party, were at the front bench of the government that made that decision.

When will the hon. member start to talk to some of his Conservative cronies in his own party and maybe ask them where this process began, why they are not here asking the same questions he is now asking rather hypocritically?

SupplyGovernment Orders

1:25 p.m.


Maurice Bernier Bloc Mégantic—Compton—Stanstead, QC

Mr. Speaker, again, we will have another representative at the Just for Laughs Festival. I cannot believe the comments made by the hon. member from Ontario, who, usually, takes positions that show he is capable of thinking and also of being critical.

I understand that, when we are dealing with money, finances or election funds, money talks. So, like all his colleagues, the hon. member from Ontario must rise in this House to defend the foxes lurking around the henhouse.

In response to the hon. member, who asked me why I do not look at my colleagues and ask them what they are doing about family trusts, I can tell him that I am quite happy to turn to my colleagues, especially the former leader of the Bloc Quebecois who is now the premier of Quebec. He himself raised this matter in this House several times during the 1993 election campaign-we could show you the many speeches he gave on this and the questions that were asked about family trusts. No, I am not ashamed to turn to my colleagues who used to be in the Conservative Party, because they have done an extraordinary job as Bloc representatives in this House. Those who are still among us continue to do so.

I wish I could say the same about our Liberal colleagues. Again, I hope they will change their minds and shift directions. The credibility of our institutions is at stake. Your credibility and that of the finance and revenue departments is at stake.

When we ask people to pay taxes and to do their share to correct the current situation, everyone must pull his or her weight, including the rich.

SupplyGovernment Orders

1:25 p.m.


Yves Rocheleau Bloc Trois-Rivières, QC

Mr. Speaker, I am pleased to take part in this very important debate.

As the hon. member for Mégantic-Compton-Stanstead just pointed out, the Bloc Quebecois has long been concerned with this issue. Our founding president, Lucien Bouchard, now the premier of Quebec, had made it one of his primary concerns, as has our finance critic-this is part of Canadian Parliamentary tradition. Given the rule of secrecy and the lack of transparency, the Bloc Quebecois lacked a source. Therefore, we must congratulate and thank the auditor general for having had the courage to tell parliamentarians and Canadians about this scandal, back in May.

We are not among those who seek to discredit, to condemn and to attack institutions because we are not pleased with them, as did former Liberal Prime Minister Trudeau-the Liberal party has a long tradition in this regard-when he lambasted the auditor general of the time for questioning the transaction whereby Petrofina was to become Petro-Canada.

The auditor general had to go to the Supreme Court to find out what his real powers were, given Mr. Trudeau's arrogant and contemptuous attitude. The chairman of the finance committee, who used strong arm tactics with the auditor general as an institution and as an individual, also displayed a similar attitude.

We will not get into this; we leave it to others in this House. We feel that, by raising the issue of transfer, otherwise known as tax evasion and the flight of capital, the auditor general should be highly commended for bringing the public debate back on the issue of family trusts. This is the point I want to focus on.

Family trusts promote a concentration of wealth in the hands of some very rich Canadian families. Given the solid arguments made against family trusts by ordinary people, it is time we led the debate and the fight against secret investments. After all, our tax system is supposedly based on a fundamental rule of fairness, whereby everyone must pay his due to the taxman. Since the month of May, this has given us an opportunity to learn a bit, not much mind you, but a bit about family trusts and their very existence.

We learned from the public accounts committee and the finance committee that, according to the revenue minister, and contrary to what a deputy minister seems to have said in committee, family trusts exist for those who want to be sure they can pay for a retirement in some southern clime.

The finance minister sees them as a way of protecting his children. Very original. As for the deputy minister, he said a number of months ago that he did not understand the Bloc Quebecois' obsession with family trusts, because they exist to protect families with handicapped children.

We therefore learned, since the revelations of the auditor general who asked the deputy minister of revenue how many family trusts there were in Canada, that there were 100,000. A few weeks later, at a meeting of the finance committee, this 100,000 became 140,000. When we know that two of them represent one billion each and that their transfer to the United States has apparently deprived the tax man of $400 to $600 million, we are not talking peanuts. These are large amounts of money.

On the topic of family trusts of one billion dollars each, we asked a deputy minister how many there were of $500 million and up. He replied that he could not say, that he did not have that kind of information. It is a scandal. It is a scandal because, according to the spirit of the Income Tax Act, there is a fundamental rule, which is perhaps tacit, that everyone must contribute according to their means.

When they come up with strategies like these, with the backing of the financial advisers whom we know, who advise wealthy families in order to help them move their money out of Canada and Quebec and to protect them even when they keep it inside the country, that is what is going on right now, it is in order to help people who have the means not to contribute their share. And everyone else must therefore contribute that much more.

In the times we live in, as my colleague was saying earlier, with public finances in the state they are in, the most rudimentary sense of morality would require that everyone contribute according to their means and that, in so far as possible, this type of strategy be prohibited.

We know about the cuts now being made throughout Canada in the fields of health, education, social assistance, unemployment insurance, culture, and public housing. We know about the cuts being made to community groups that provide assistance to the most disadvantaged. We know about the alarming increase in the number of food banks across Canada. We know about the increase in unemployment. We are aware of the whole ideological trend to dismantling the state, to limiting the role of government, one of whose main roles is precisely to better distribute the wealth, but this is contradicted by the discourse, attitude and language of the chairman of the Standing Committee on Finance, who criticizes one of the taxation ombudsmen who exists in our system, which works reasonably well when the rules are followed, furthermore, which makes Canada a developed country, a great democracy. When you make the claims that are made here, in this country, you must be consistent all the way.

In these times when money is lacking-for what Canada has is not a problem of spending but a problem of revenue-that problem is highlighted in a most extraordinary way by the question raised by the family trusts and the way they are reducing tax revenues. It is therefore necessary to have a precise idea of family trusts, to

know exactly how many have been set up following their creation under the Trudeau government in 1972. The figures will have to be broken down into categories, because not all family trusts may be billion dollar ones. We would have to know how many involved $100,000 or more, how many between $100,000 and $250,000, how many between $250,000 and $500,000, and so on. How many between $1 million and $5 million, how many between $5 million and $100 million, how many $500 million and up, as well as details on all the billion dollar ones. We would have to have precise information on their impact on the Canadian tax system and on each of the provinces of origin. It seems likely, for instance, that there would be some such family trusts in the Maritimes, New Brunswick, in particular. Without naming names, one might well think that the government of New Brunswick may have been deprived of some very considerable tax revenue by this sort of subterfuge.

Ontario and Quebec, which have prominent families, also come to mind. We are entitled at least to exact figures on the effort required of other taxpayers, who have no choice about, for they cannot afford to hire the top tax guns, those same people invited by the chairman of the finance committee, who, despite all of their unarguable qualifications, are clearly in conflict of interest.

We must know exactly what the situation is. We must know, for each province, what the impact is of a measure that was introduced by Pierre Eliott Trudeau, the man of the just society. We see the dishonesty of these people who are prepared to sign documents, as they did, to protect and reinforce the government's position.

I am nearing the end of my speech. Instead of trying to confuse the issue, the government must examine not only the Revenue Canada ruling of December 23, 1991, but the whole issue of the existence of family trusts and their impact on the tax system, and this in order to really protect the credibility and integrity of our tax system, which, as I said earlier, was a big issue with one of the experts. As a member of Parliament I attended this incredible evening, this masquerade, when one of the Bay Street experts told the chairman that he was shocked by the attitude and behaviour of the auditor general, who should never have revealed to the public and the Canadian people that such practices existed because it would undermine the integrity of our Canadian tax system.

This means that they go along with it. There are mechanisms to ensure that those who can pay their taxes, who should pay their taxes, who have the means to pay taxes-We know that in Canada today, there are people who do not have sufficient income to pay their taxes. Those who do, those who are lucky and those who have worked for their money, but must realize that others are not that lucky and that we live in a civilized society. Wealth must be spread around, and this has to happen through the government, because we live in a society, and the government apparatus is a symbol of the well-organized, civilized and developed society we have. It means we have elections, elected representatives and mechanisms to redistribute wealth. We must protect those institutions, but the government's present attitude is very disturbing. We should not be

surprised when citizens become increasingly cynical and critical of institutions like ours, when these institutions no longer appear to be doing their job.

SupplyGovernment Orders

1:40 p.m.


Roy Cullen Liberal Etobicoke North, ON

Mr. Speaker, I listened with interest as the member of the Bloc argued this point about the tax ruling and the situation surrounding it. I am quite puzzled.

This is a highly complex area of tax law, despite the best intentions of the members of the Bloc and members like me. As the member for Willowdale pointed out, members of the Bloc had the opportunity to bring in their own experts but instead chose not to.

When the members of the Bloc stand up in this House it is usually to criticize members on our side for not answering their questions, but they have not really dealt with the question of why they did not bring in their own experts.

If they are saying the experts who were there were in the hands of the members of this party, that is a serious affront to the integrity of those professionals who did appear and it does not deal with the question of why they did not bring in their own experts.

When the members of the Bloc get up in the House it is really not to debate public policy. That has been my experience notwithstanding my short period in this House. When they get up it is to argue a parochial interest of the province of Quebec.

I wonder if their interest in this issue is not driven by fiduciary policy or interests of the Government of Canada and the people of Canada. Rather, they may be concerned about the flight of capital from Quebec not necessarily to the United States but perhaps to Ontario. It is known that this is happening which I think is tragic.

Perhaps the Bloc is positioning itself on this issue in terms of flight of capital. I cannot understand why it would have any other interest in this topic.

SupplyGovernment Orders

1:40 p.m.


Yves Rocheleau Bloc Trois-Rivières, QC

Mr. Speaker, first of all, on the subject of experts, I would like to reassure my hon. colleague from Etobicoke North by telling him that, if ever the government stops covering things up, as it just managed to do in the finance committee and is trying to do in the public accounts committee, if the government will take its responsibility and accept to shed light on the matter, you will see that experts can be found, perhaps mainly in Quebec but also in Canada, whose hands are not tied. They are not legion,

but they are distinguished. The Bloc had identified a few; we found some and I am told that they will testify.

But we must realize, and I have on good authority, that the auditor general is having huge problems with high finance officials, high finance advisors, because these people are not at all pleased with the auditor general passing this kind of judgment on their work, which goes against public opinion.

Perhaps my hon. colleague from Etobicoke North should bear in mind that the auditor general is having a very hard time because free-thinking advisors are hard to find. They are all related parties because this is their livelihood.

As for the Quebec fact, I hope that my hon. colleague simply misheard. When we talk about the Canadian tax system, about the flight of $2 billion from Canada, about $400 or $500 million in uncollected taxes, I do not think that we are talking only for Quebec. I think that we are doing our job as the Canadian official opposition, representing the interests of small taxpayers and middle-class taxpayers, who are being bled dry and are paying for those who should be paying more.

SupplyGovernment Orders

1:40 p.m.

London West Ontario


Sue Barnes LiberalParliamentary Secretary to Minister of National Revenue

Mr. Speaker, I rise to speak on the motion brought forward today by the official opposition. This motion asks the House to denounce the government for refusing to shed light on certain transactions. However, I would like to suggest that it is actually the opposition members themselves who are refusing to see the light in this matter.

The motion also contends that the government has attacked the credibility of the auditor general while allowing millions of dollars to leave the country.

It would appear once again that the opposition is more content with promoting unfounded allegations and wild accusations than it is with a substantive review of the real issue and the true facts.

The issues to which the motion vaguely refers were first raised by the auditor general in his May 7 report that focused on legislative policies and advance ruling procedures governing taxable Canadian property, not family trusts.

Members will recall that immediately following the release of the auditor general's report, the government acted quickly by referring the issues raised in the report to the House of Commons Standing Committee on Finance for review. That is where tax policy is made and then followed up by the decisions of government through its cabinet.

That review has now been completed and the finance committee on September 18 issued a report and it is now tabled in the House. It is a public document. The finance committee's report represents a well documented and very thorough review of the important issues identified by the auditor general. We thank him for pointing out those policy areas. Its findings and recommendations directly contradict the exaggerations and confused contents of the motion before us today. However, it is a Bloc official opposition motion today and we are obliged to debate the motion put before us.

The finance committee began its review on May 28. In the course of the examination it heard from the auditor general and members of his staff. It heard from senior officials of Revenue Canada, the Department of Justice and the Department of Finance. The committee also consulted eight of Canada's leading private sector and academic tax experts whose views, the committee noted in its report, greatly facilitated the committee's understanding of some of the technicalities of the tax law in the area.

The finance committee is to be commended for acting quickly, consulting broadly and producing a thorough and, I must say, long report, including recommendations on so complex a topic in such a short time. We realize this is an important issue to be dealt with. Not surprisingly perhaps the committee determined that the law regarding taxable Canadian property is complex. It noted that the government has not reviewed the policy on taxpayer migration in any substantial way for at least 25 years. Now we have done this.

However, rather than make cheap political points by trying to confuse the issue even further, like today from the opposition member, the committee has sought to clarify the issues by recommending changes to the law. The report's five recommendations for changes in the law aim at clarifying policy regarding Canada's taxation of individuals who become or cease to be residents of Canada. The report provides substantive advice to the government on strengthening tax law.

While the policy and legislative recommendations are welcomed and will be closely examined by the Ministers of Finance and National Revenue, I want to focus my remarks today to the report's procedural findings and recommendations.

I am very pleased to say that based on its expert assisted, independent review of the facts, the finance committee has found that Revenue Canada applied the law correctly and was justified in issuing its 1985 and 1991 advance tax rulings. The committee's report firmly supports the department's decisions in those cases.

I believe the findings of the committee clearly confirm the fairness and the integrity of the Canadian tax system and the department's decisions in the cases and the administration by Revenue Canada. I am especially pleased to note that the independent experts consulted by the committee were almost unanimous in stating that the rulings then correctly applied existing law without evidence of any revenue loss resulting from the rulings.

Of the eight prominent tax experts, six testified that Revenue Canada's interpretation was a correct reading of the law. The report quotes Mr. Wolfe Goodman, an expert in the field of international tax law, as an example of the majority opinion. Mr. Goodman states: "The auditor general considers that this ruling circumvented the intent of the law and, with respect, Mr. Chairman and members, I think the ruling properly applied the policy of the legislation".

Based on this and similar testimony, the finance committee saw no reason to prefer the auditor general's view on this question to the views of both its government tax experts and a strong majority of tax professionals from the private sector. Also, contrary to the auditor general's suggestion in his May 7 report, the committee concluded that under its existing policies, Revenue Canada had no basis for refusing to issue the 1985 and 1991 rulings and was justified in doing so.

It is evident that in these cases the process worked as it should have. Any other decision or action would have circumvented the law and infringed on the legitimate rights of the taxpayer involved to fair and equitable treatment under our laws.

Further, the committee found no indication of political or other interference with respect to the rulings. I must underline this. While it should be noted that the auditor general never questioned the integrity and professionalism of Revenue Canada officials, the report confirmed there was no impropriety on the part of any official. On this point the Minister of National Revenue has already stated that she has met with the auditor general and asked him directly if he thought there had been any political interference in this file and he assured her there was none.

The finance committee heard a range of witnesses from all departments concerned on this issue and they found no evidence of impropriety. Therefore, we must be satisfied that there was no impropriety involved here.

Also, importantly, the report concluded that the rulings did not or are not likely to cost Canada any significant tax revenue. The committee noted that the auditor general and his officials were unable to identify any significant new tax avoidance opportunity created for other taxpayers by these rulings. That is what the auditor general tells us.

The issues raised by the auditor general have to be kept in perspective. The auditor general said that Revenue Canada's 1991 ruling may have cost significant tax revenue, not that it did, but that it might have. This was obviously a concern. The finance committee looked at it carefully and concluded that there was no evidence that the ruling cost Canada anything. Nor was there evidence-and we are talking evidence, not speculation-that the ruling opened up any new avoidance opportunities. There has been no flight of capital, as opposition members seem to think. This should not be surprising. Canada's tax rules for people who leave the country are stricter than the rules of almost every other country in the world.

In addition to this, the Minister of National Revenue placed a moratorium on any further rulings on taxable Canadian property while the finance committee was doing its very important review of this area of the Income Tax Act. The minister has extended this moratorium until the Minister of Finance has the opportunity to consider the policy recommendations of the committee and to make decisions concerning appropriate changes if they are necessary. We heard earlier today that many people think we can make improvements and I would agree with that. Is this not assurance enough for the opposition that the door is not wide open to the transfer of capital without paying appropriate taxes?

With respect to the question of the decision making process, the finance committee observed in its findings that immediately on publication of the auditor general's report the minister directed Revenue Canada to take immediate steps to improve documentation of its tax policy interpretations. In this context, the department has revised its procedures to ensure that a proper record is prepared of the considerations that play an important part of the decision making process to issue an advanced income tax ruling or an opinion.

When Revenue Canada issues a written request to the departments of finance or justice it will continue to provide a level of background information, explanation and analysis appropriate to conveying a full appreciation of the issue and its potential impact. Revenue Canada will also retain in the permanent advanced rulings file the complete documentation and analysis required in support of any interpretations.

It is evidence that through these steps the Minister of National Revenue has acted quickly to improve the openness and the transparency of the process. The finance committee also expressed its full support for the decision of the minister to publicize all advanced tax rulings as of January 1996 with appropriate editing to ensure taxpayer confidentiality. I wish to point out once again that decision was made even before this documentation, this report of the auditor general, came out.

Revenue Canada electronically publishes and distributes all advance tax rulings to various tax publishing houses in Canada and provides them to the public at Revenue Canada's tax services offices within 90 days of their issuance.

As for the report's second administrative recommendation, Revenue Canada has already taken steps to ensure consistency between its rulings and opinions dealing with similar areas of the law. Since the 1985 ruling, the department has implemented an electronic research database. This provides easy access to all previous opinions and rulings for research and comparison purposes. I think that is an important improvement.

I would like to emphasize that Revenue Canada is a world class organization that enjoys an enviable international reputation and record of success. It has worked very hard to establish this record through its successful administration of over 185 acts and regulations, incentives, credits and international agreements and treaties.

The department employees over 40,000 professional and dedicated public servants. In order to support their dealings with their millions of clients, each employee requires the confidence and deserves the respect of Canadians to do their job well. Fairness, equity and integrity are the basic principles on which they must earn the confidence and respect of Canadians.

The credibility of the department depends on its adherence to these principles in everything it does and in every decision it makes. That is why concerns raised in the auditor general's May 7 report have been fully addressed by the finance committee in order to prevent any undermining of public confidence that is so crucial to the successful operation of any tax system.

Since this system relies heavily on self-assessment and voluntary compliance for its efficient operation, anything that erodes confidence in the revenue administration weakens the system as a whole. Therefore it is important to everyone in Canada and to the day to day working of the department that there is both actual and perceived fairness and integrity in the administration of the Canadian tax system.

In conclusion, I would like to state that in my view Canadians have been well served by the finance committee report on taxable Canadian property. We have five practical recommendations for change and improvement. We will be waiting to see the new policy that those recommendations come up with.

SupplyGovernment Orders

1:55 p.m.

The Speaker

Our colleague still has a few minutes left. She may continue her speech after Oral Question Period.

The Auditor General's ReportGovernment Orders

1:55 p.m.

The Speaker

Since it is almost time for members' statements, I have the honour to table the Auditor General of Canada's report to the House of Commons, Volume II, dated September 1996.

Pursuant to Standing Order 108(3)(d), this document is deemed to have been permanently referred to the Standing Committee on Public Accounts.

As it is almost 2 p.m., we will proceed to Statements by Members.

Parliamentary Pages And InternsStatements By Members

1:55 p.m.


Ronald J. Duhamel Liberal St. Boniface, MB

Mr. Speaker, on behalf of all my parliamentary colleagues, I wish to welcome the pages and interns working on Parliament Hill this year.

We do not always realize the importance of our pages. They play an integral part in this operation and many of us would be lost without them. I congratulate them on their new positions and hope that they enjoy their time here at the House of Commons.

I would also like to congratulate the parliamentary interns and wish them an excellent year here with us.

I am sure that they will have much to contribute with their energy, their creativity, their commitment to the parliamentarians who they choose to serve.

On behalf of everyone, welcome to this House. We wish you a wonderful year.

Parliamentary Pages And InternsStatements By Members

1:55 p.m.

Some hon. members

Hear, hear.

The Granby International Song FestivalStatements By Members

2 p.m.


Jean H. Leroux Bloc Shefford, QC

Mr. Speaker, like its predecessors, the 28th annual Granby International Song Festival was a success. During the finals on September 20 and 21, a number of singers and singer-songwriters dazzled the audience with their talent.

For fledgling francophone performers, the Granby International Song Festival has become a popular springboard to a professional career.

While millions of dollars are being wasted on flags, the Minister of Canadian Heritage did not hesitate to cut her department's subsidy to this international event by 20 per cent.

The minister should reconsider her decision and continue to provide financial support for the festival at the same level as before. In closing, I wish to congratulate all the organizers and participants who made this cultural event possible.

Jake And The Kid Go To AlbertaStatements By Members

2 p.m.


Dale Johnston Reform Wetaskiwin, AB

Mr. Speaker, I am sure that you and many members of this House will remember the popular 1950s radio broadcasts of W.O. Mitchell's award winning short stories "Jake and the Kid". The stories chronicled the adventures of the Kid, 11-year old Ben Osborne, in the fictitious prairie town of Crocus, Saskatchewan.

The story has been brought to life again in a 13-week television series filmed in my constituency of Wetaskiwin. Now in its second season, "Jake and the Kid" is wholesome family entertainment and a tribute to Alberta's growing film industry.

Albertans figure prominently in the cast, crew and writers. In fact, 90 per cent of the cast and all the extras are Albertans, including Ben's best friend and mentor, the hired hand Jake, played by hometown boy Shaun Johnston.

Sets depicting the Osborne family farm and mainstreet Crocus have been constructed on 160 acres of land in the district of Glenpark, Leduc County.

This exceptional Canadian production with its warmth, humour, intriguing plots and off-beat characters is proof that Alberta can soon lay claim to the title of Hollywood North.

EmploymentStatements By Members

2 p.m.


Simon de Jong NDP Regina—Qu'Appelle, SK

Mr. Speaker, the Liberal government never tires of telling the Canadian public that it has been working to get the economic fundamentals right.

Low inflation and drastic cutbacks to social spending were supposed to have set the stage for future jobs. We have had very low inflation for years and the government is ahead of schedule on deficit reduction.

But Canadians are facing the highest rate of unemployment during an economic recovery since the last depression. Where are the jobs? When can we expect that bountiful harvest of jobs that the Liberals have promised?

I commend the distinguished economist Pierre Fortin for so convincingly showing Canadians in the past few days that the harvest of jobs will never occur under the Liberal policies because they have their fundamentals wrong.

While the American policy makers have tolerated 3 per cent inflation in order to achieve near full employment, the Liberals have inflicted the strait-jacket of 1 per cent inflation and high real interest rates which have killed, according to Fortin, 850,000 jobs.

The Liberals cannot expect Canadians to believe the talk of jobs when their actions of inflation are calculated to kill jobs.

Paralympic GamesStatements By Members

2 p.m.


Pat O'Brien Liberal London—Middlesex, ON

Mr. Speaker, this past summer, Canadians were very proud observers of an outstanding performance by our Canadian Paralympic Team at the 1996 games in Atlanta. With a total of 69 medals, these games proved to be most successful for Canada.

As the member of Parliament for London-Middlesex and on behalf of all Londoners, I would like to extend our congratulations and thanks to the following Londoners who represented Canada so well in Atlanta.

Marie-Claire Ross who brought home two gold, one silver and three bronze medals in swimming; Jeff Christy, silver medalist in goalball; Lisa Stevens, gold medalist in basketball; Adam Purdy, swimming; Paul Bowes, the men's basketball coach Dr. Douglas Dittmer, the team physician.

To all of these men and women and to every member of our Paralympic Team from every region of Canada, we say congratulations to all. You have made us as Canadians very proud.

Paralympic GamesStatements By Members

2 p.m.

Some hon. members

Hear, hear.

Small BusinessStatements By Members

2 p.m.


Gurbax Malhi Liberal Bramalea—Gore—Malton, ON

Mr. Speaker, small and medium size businesses in my riding and across Canada are the engine behind this country's economic growth and job creation.

A recent Industry Canada report noted that Canada's vibrant small business sector created more than 80 per cent of the nation's new jobs. Clearly the banks must do a better job in serving the small business sector and contributing to its success.

Unfortunately, the banks have failed to adapt to the changing needs of small business and the economy. It is not easy for business people to raise capital in today's economy, even when the need is great and the purpose justified.

Meanwhile the banks continue to record billion dollar profits. When they insist on only the most risk free loans, the banks are downsizing their role in financing small firms, whose owners are clearly feeling badly treated. This has to be changed.

The Death Of Franklin PickardStatements By Members

2:05 p.m.


Ben Serré Liberal Timiskaming—French-River, ON

Mr. Speaker, I was sorry to hear about the untimely death of Franklin Pickard, President and Chief Executive Officer of Falconbridge Limited.

On behalf of the Minister of Natural Resources, the Hon. Anne McLellan and the Government of Canada, I wish to convey our sincere condolences to Mr. Pickard's family and to the employees of Falconbridge.

Mr. Pickard had been head of Falconbridge since 1991. He was well known and respected within Canada's mining industry and everywhere else. Born in Sudbury, Mr. Pickard started out at Falconbridge in 1957 as a metallurgical engineer. He performed various duties in the company, gradually climbing the corporate ladder. As a result of his excellent work, his leadership and his great qualities, he became the head of this flourishing company.

Mr. Pickard developed a sense of family among Falconbridge employees. He will be sorely missed by all those who had the pleasure to know this great member of Canada's mining industry.

Quebec EconomyStatements By Members

2:05 p.m.


Maurice Godin Bloc Châteauguay, QC

Mr. Speaker, last week, Saturne Solutions, which has plants in Canada, the United States and Ireland, announced that it would invest $20 million in Montreal's west end.

Mr. Campbell, the company's executive vice-president, spoke highly of Montreal and the province of Quebec, saying that a qualified manpower is available, that salaries are reasonable, that rental and power costs are low, and that free trade is good for Quebec.

At the same time, Montreal's major hotels were full, thanks to the large number of tourists, participants at various conferences and businesspeople from the United States, Europe, Canada and Asia.

In spite of the Canadian government's plan B and the statements made by the Minister of Intergovernmental Affairs to the effect that Quebec's economy must be weakened in order to weaken the nationalist movement, reality shows that investors recognize Quebecers' skills and competitiveness, which are the primary tools of economic success.