Mr. Speaker, I was only afraid that the hon. member for Calgary Centre wanted yet another five minutes. The spirit of co-operation only goes so far.
I would like to comment on Bill C-324, which we have been debating for the last few moments. It concerns the income tax system and specifically taxes on corporations.
I understand the intent of the bill is that certain company expenses on entertainment should not be deductible. In addition to the procedural irregularity of the receipt of the bill before the House which you, Mr. Speaker, have taken under advisement and on which I am not commenting further, there is a different problem.
I note, with all respect to my colleague the hon. member for Scarborough-Agincourt, the bill suffers from a drafting error, which I am sure was not the intent of the member. The bill would raise the current deduction for business entertainment expenses which is subject to several limits under the current Income Tax Act to 100 per cent of eligible expenses on entertainment.
I know that the intent of the bill and the tenor of his comments are quite different. The question before us is, to what degree should entertainment expenses be deductible in the computation of income for businesses.
As indicated earlier, the current deduction for business entertainment expenses is limited in several ways. First, businesses are not allowed to deduct certain types of business expenses. Specifically, expenses paid for the use of a yacht, camp, lodge or golf course facility are not deductible unless the taxpayer made or incurred the outlay or expense in the ordinary course of his business from providing the property for hire or reward.
Second, the Income Tax Act requires that any business or entertainment expense must be reasonable in the circumstances and incurred for the purpose of earning income from a business or property.
Third, since 1994, qualifying business meals and entertainment expenses have been deductible at a rate of 50 per cent. Prior to 1994, 80 per cent of qualifying meals and entertainment expenses were deductible.
The current income tax rules are based on the presumption that business meals and entertainment expenses contain a portion which is incurred to earn income and, therefore, would normally be regarded as legitimate business expense. They also contain an element of personal consumption which should not be deductible. However, it would be very difficult to identify the precise proportion of business meals and entertainment expenses which represent the business component.
For this reason, the Income Tax Act permits businesses to deduct 50 per cent of eligible expenses on business meals and entertainment expenses in the calculation of taxable income.
I should also note that Canada's treatment of business meals and entertainment expenses is in line with the level of tax deductions in all provinces, including Quebec. I was startled to hear the hon. member say that he thought it should be changed. I wonder if he has told his provincial friends in Quebec City that. The federal deduction level currently is in accord with the level in all provinces and in the United States.
In conclusion, I would first say that the government cannot support Bill C-324. Indeed, I doubt that the hon. member for Scarborough-Agincourt would support it because of the drafting error which, in effect, causes the opposite result from that which he has asserted he intended.
However, even if the bill was redrafted in a way which would carry out its stated intent, I would recommend to the House on behalf of the government that it not be approved because it does not recognize that a portion of these expenses do have a legitimate business person. The complete denial of these expenses would not constitute an improvement in the system we now have.