House of Commons Hansard #159 of the 35th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was taxes.
The Speaker
Order. I have notice of a question of privilege from the hon. member for Sarnia-Lambton and I propose to hear that before we proceed with any other business.
Roger Gallaway Liberal Sarnia—Lambton, ON
Mr. Speaker, I rise this morning on a question of privilege concerning the cancellation of private members' hour today.
I learned yesterday afternoon that the member for Vancouver North, whose motion appeared at position number one for today, had notified the office of Private Members' Business that he would not be appearing. I spoke with the hon. member this morning and in fact he had notified that office at the opening hour, 9 a.m. yesterday morning.
Prior to that I had a bill put on the order of precedence, as published yesterday in the Order Paper at No. 28. It was submitted to the private members' office at 5.55 p.m. Wednesday evening. I advised the clerk that if a substitution was to be made that I was looking for one. The next morning at 9 a.m. the clerk was advised.
Standing Order 94(1) states that "the Speaker shall make all arrangements necessary to ensure the orderly conduct of Private Members' Business, including ensuring that all members have not less than 24 hours' notice of items to be considered during private members' hour".
As of yesterday morning at 9 a.m., notice had been given. In fact on the evening prior, at approximately 5.55 p.m., notice had been given of a bill on the Order Paper that was published yesterday. At no time did I receive from that office an opportunity to be substituted or to be placed on the Order Paper for today. I appreciate that the rules also say that a member will give 48 hours' written notice.
I want to suggest to you, Mr. Speaker, that is one test. However, there are other tests. Certainly the office had more than 24 hours to contact other people and to ensure that the orderly conduct of private member's hour would continue.
Although 48 hours is one point, 24 hours is another point. Somewhere in that 24 hour interval there was opportunity. The office did know I was looking for a substitution. Had I been offered that place, it would have meant the rules requiring that 24 hours' notice be given and would have been published yesterday at 6 p.m.
I would suggest that as a result of this that my rights and my privileges have been usurped. In fact it is within your authority, Mr. Speaker, to do one of two things. Either to cancel the continuation of government business at 1.30 p.m. today, or to add a private member's hour following that one hour that has been apparently removed at this point.
I should point out that the bill to which I am referring has passed through the House, has passed through the Senate and only needs to come back on the Order Paper here. Notwithstanding the fact that the 48 hour notice has not been complied with in the sense of Standing Order 94(2)(a), that the orderly conduct of business could have continued. The 24 hour notice provision would have been complied with.
The 48 hour notice is not a precedent in the sense that a member must give written notice. I am advised that often members will call from distant places and say: "By the way I am not going to be there". Someone may call on a Monday from some remote place in the world and say he or she is not going to be here and not be able to provide written notice to the clerk, who on many occasions has acted. They have I understand also acted in terms of this window of opportunity being the point between 24 and 48 hours.
It is on that basis that I suggest to you, Mr. Speaker, that my privileges have been usurped and I ask for this extension or substitution of government business from 1.30 p.m. to 2.30 p.m.
Ted White Reform North Vancouver, BC
Mr. Speaker, I think the hon. member for Sarnia-Lambton has raised a very important point in his question of privilege. Private Members' Business is a when we bring material to this House which we take very seriously.
The fact that I cancelled my appearance today on a private member's bill was actually done as a form of protest because my bill is non-votable.
The member for Sarnia-Lambton has a votable piece of material, and notwithstanding the Standing Orders and a ruling that you might make in connection with that, I would also like to suggest that perhaps in the process that is going on here we may be able to get unanimous consent of the House to do a substitution and to meet the needs of the hon. member.
Privilege
The Speaker
I take it as part of my duties as your Speaker to ensure that there is a reasonable continuation of business in the House.
The hon. member for Sarnia-Lambton has quoted the passages in the rules which are germane to this point of privilege. The hon. member puts forward in his argument that he was not contacted24 hours prior to the period or surely he would have agreed to have his bill brought forward. I believe this is in Standing Order 94(1). If I am off on the number the clerks will correct me.
In Standing Order 94(2) of the rules of the House, which were established by us together in concert, it is quite clear that the Speaker should have notice some 48 hours prior to making any move. The reason the Speaker is given the 48 hours is so that he will be able to contact the member at least in the next 24 hours to have this member bring forward his bill.
The hon. member argues that sometimes written notice is not given. In my short experience here and because of the faxes that we now have, when a member calls to say he or she cannot bring forward a bill, we usually ask that a fax be sent and usually that is done.
Be that as it may, the rules are quite explicit. They state that notification should be given to the table officers, who will then inform the Speaker, so that there can be an orderly procedure in Private Members' Business.
I would rule that the Speaker did not get the 48 hours' notice and therefore I did not order the clerks to give the hon. member 24 hours' notice.
The hon. member for North Vancouver is here. He also confirms that he did not give the Chair 48 hours' notice.
What I find interesting in this whole matter is that you and the hon. member for North Vancouver are both here and you both seem to agree that this would be acceptable to the two of you. The suggestion put by the hon. member for North Vancouver might be the way to get around it. I will not take it upon myself to rule that your particular bill be ordered, but if you would care to put forward a request for unanimous consent that your bill be debated today, I would be interested in receiving such a request.
Roger Gallaway Liberal Sarnia—Lambton, ON
Mr. Speaker, I ask the House for unanimous consent to have a private members' hour today from 1.30 p.m. to 2.30 p.m.
Privilege
The Speaker
Does the hon. member have the permission of the House to put forth the motion?
Privilege
The Speaker
There is no agreement. Therefore, we will not proceed with this point.
The House proceeded to the consideration of Bill C-92, an act to amend the Income Tax Act, the Income Tax Application Rules and another act related to the Income Tax Act, as reported (with amendments) from the committee.
Paul Zed Liberal Fundy Royal, NB
Madam Speaker, I understand there is unanimous agreement that the third reading stage of Bill C-92 may be considered as soon as the second reading stage is completed.
Income Tax Budget Amendments Act, 1996Government Orders
The Acting Speaker (Mrs. Ringuette-Maltais)
Is there unanimous consent?
Paul Martin LiberalMinister of Finance
moved that the bill, as amended, be concurred in and read the second time.
Income Tax Budget Amendments Act, 1996Government Orders
The Acting Speaker (Mrs. Ringuette-Maltais)
Is it the pleasure of the House to adopt the motion?
Income Tax Budget Amendments Act, 1996Government Orders
Some hon. members
On division.
(Motion agreed to and bill read the second time.)
Income Tax Budget Amendments Act, 1996Government Orders
The Acting Speaker (Mrs. Ringuette-Maltais)
When shall the bill be read the third time? By leave, now?
Barry Campbell LiberalParliamentary Secretary to Minister of Finance
Madam Speaker, I welcome the opportunity to debate Bill C-92, the Income Tax Budget Amendments Act, 1996.
When I last addressed the House on Bill C-92 it was to recommend that it be sent to committee prior to second reading. It is important to note, therefore, that the House finance committee
recommended 13 amendments when it reported on the bill. All of them were technical in nature and were the result either of consultations or improvements in the wording of the relevant provisions. For example, there were some wording changes relating to labour sponsored venture capital corporations and resource properties.
There were also two amendments in the area of child support to help ensure that payments made after April 1997 were subject to the new system in accordance with the policy.
I would now like to make some observations about the context in which the proposed tax measures are situated.
In the present era of global changes, which have left many Canadians feeling insecure, the 1996 budget introduced measures in a number of areas that were designed to safeguard the future of Canada.
First were measures to safeguard our financial future, with guarantees that we would reach and even exceed our goals for public finances; in the same breath, we defined a role for government that meets the needs of the modern economy and of the federation.
We also took action to ensure the preservation of our social programs, including the old age security system and the offer of stable federal funding for programs administered by the provinces.
We invested in the future by reallocating money to priority areas for future jobs and growth, priorities like youth, technology and international trade. In the area of taxation perhaps the most noteworthy point is what we did not do. Despite the enormity of the fiscal challenge that faced us, a challenge we have continually handled with credibility and success, we did not increase tax rates in the budget, not personal, not corporate, not excise.
The government recognizes that taxes in Canada are higher than any of us would like. Fiscal turnaround is vital so that we can free up resources to ease the tax burden when it is responsible to do so. In the interim the government has made it a key priority to meet or better its fiscal targets without increasing personal income tax rates in any of the four budgets it has brought before the House.
Taxation is not only about generating revenues. It is also a matter of economic efficiency and fairness. That is why the 1996 budget undertook a number of important tax initiatives to enhance the fairness of the system and to ensure that it operates as effectively as possible.
Let me briefly outline a number of measures we are proposing in the bill before us today. In the area of personal income taxation several important changes concern the system for providing tax assistance to retirement savings. Specifically the budget proposed three measures affecting registered pension plans, RPPs, and registered retirement savings plans, RRSPs.
As the finance minister said at the time of the budget, Canada's retirement assistance program is effective and the government is firmly committed to its preservation.
The proposed changes will help to ensure the sustainability of the program by limiting its costs while at the same time better targeting assistance to modest and middle income Canadians.
First, RRSP limits are to be frozen at $13,500 through the year 2003 and then increased to $14,500 in 2004 and $15,500 in 2005. To provide comparable treatment to define benefit pension plans, the maximum pension limit for these plans will be frozen at the current level of $1,722 per year of service until the year 2005.
This change will keep the cost of the tax deferral for retirement savings in line and more fairly targeted. The federal revenue cost of this assistance is significant, amounting to nearly $16 billion in 1993.
Even with the changes the system will remain a generous one extending to twice the average wage. This means that only individuals with incomes over $75,000 a year will be affected in any way.
The second measure relating to retirement savings is the reduction in the age limit for maturing RPPs and RRSPs from age 71 to 69. In other words, individuals will not be able to contribute to RRSPs or accrue pension benefits after age 69 and will have to start drawing income out of these plans by the end of the year in which they turn 69. This change will help move the maturation age for retirement savings and pension plans closer in line to the ages at which most Canadians are retiring.
I pause here to say that contrary to the assertion that some have made about this change, it does not remove incentives to save in RRSPs, private pension plans or other retirement income vehicles. Canadians will always be better off saving for their retirement and using these vehicles as one way to do so.
Third, the bill proposes the elimination of the seven-year limit on carrying forward any unused portion of maximum allowable RRSP contribution. I am sure most of us can relate to the fact many younger Canadians have difficulty making significant RRSP contributions, especially during the years when they are raising families. This proposed change will improve the opportunity for all Canadians to benefit from the RRSP system. People will now have an unlimited time, within age limits of course, to make up for years of lower contributions. That is an important change.
The bill addresses another vital area for saving for the future, registered education savings plans or RESPs. Canadians know that a better education means a better job and the Government of Canada knows that to prepare Canadians for the 21st century we must support their efforts to secure a good education. Hence in both the 1996 and 1997 budgets the federal government increased tax assistance to students and their families. RESPs are an important mechanism that assists parents or grandparents to save for children's education. They do so by exempting the growth of assets
within the RESP from taxation. Eventually this growth is distributed to students who are typically taxed at a low marginal rate.
The bill before us proposes to increase the annual contribution limit from $1,500 to $2,000 per beneficiary. It will increase the lifetime limit from $31,500 to $42,000.
As most hon. members will recall, the 1997 budget proposed to enhance tax assistance delivered through RESPs further still, notably by doubling the annual contribution limit to $4,000 per beneficiary and by improving the potential flexibility of these plans.
Two further elements of today's legislation recognize the increasing importance in the cost of education. First, the bill proposes to increase the amount on which the education tax credit is calculated from $80 to $100, an amount that the 1997 budget has proposed to increase still further.
Second, the bill will increase from $4,000 to $5,000 per year the limit on the unused tuition fees and education amounts that students may transfer to spouses or parents. Once again this measure would be enhanced by the proposals of the 1997 budget which would allow students to carry forward those unused amounts.
Many of the individuals who need training or retraining to make the most of the opportunities in today's economy already have young families to care for. For many of them, especially single parents, school is not an option without day care for their children. That is why today's bill proposes to broaden eligibility for the child care expense deduction by allowing parents who are full time students to claim the deduction against all types of income.
I should mention that the bill would also raise the age limit for children for whom child care expenses may be claimed from age 14 years up to age 16 years, thereby providing increased tax savings for families with older children.
A further measure in the bill that will benefit taxpayers with children is the change to the rules governing child support. Specifically the bill provides that child support paid under a court order or written agreement after April 1997 not be deductible by the payor or included in the recipient's income. This change reflects the widely held view that the old system of deduction and inclusion was not working to benefit children.
I remind my hon. colleagues this tax measure is one element in the larger child support package which recently received parliamentary approval. In addition to the tax changes in the bill, the package includes guidelines to set fair and consistent support awards, new measures to enforce child support orders and, as announced in the 1997 budget, an enrichment of the child tax benefit. Education and child care are important components of the economic and social infrastructure for tomorrow.
I will now turn to to another keystone of Canadian society, the charitable sector. That sector is playing an increasingly important role in meeting the needs of Canadians. The government recognizes the importance of giving charities the tools they need to accomplish their important work. For that reason the 1996 budget increased from 20 per cent to 50 per cent the annual limit on the amount of taxpayer net income eligible for tax assisted charitable savings. Once again I remind hon. members that the 1997 budget has gone further, substantially increasing tax incentives for charitable giving.
I will skim over some of the other major measures included in the bill beginning with labour sponsored venture capital corporations. These funds sponsored by labour organizations help improve access to capital for small and medium size businesses and thereby contribute to job creation. Generous federal and provincial tax credits have helped LSVCCs attract large amounts of venture capital, so large in fact that by the time of the 1996 budget they had a more than three-year supply of capital. Given this level of capital accumulation, measures were warranted to keep the level of special tax assistance in these funds in line with current fiscal realities.
Consequently today's bill proposes reducing the federal LSVCC tax credit from 20 per cent to 15 per cent, reducing the maximum purchase eligible for the credit from $5,000 to $3,500 and not permitting a taxpayer to claim the federal LSVCC credit for three years after he or she has redeemed an LSVCC share.
The bill also includes important measures for the energy and resource sectors, for the oil, gas and mining industries. The bill modifies rules relating to the resource allowance thereby resulting in a more stable and consistent tax structure. For the oil, gas and mining industries the bill proposes significant improvements to the flow through share regime.
Flow through shares are an important mechanism for financing exploration and development programs in these resource industries, as they can be used to accelerate deductions for such expenses. Companies issuing flow through share which incur exploration and development expenses within the first 60 days of a calendar year can renounce those expenses which are then treated as having been incurred by the flow through share investor in the previous calendar year.
Consultations with the industry have indicated that the 60-day limit was too restrictive and encouraged corporations to make economically inefficient decisions. Accordingly the bill would allow the issuing company a full calendar year to incur and renounce the exploration expenses. In return for this accelerated
deduction, however, the issue will be required to pay a monthly financing charge to the government.
Among the other provisions of the bill is a change to the accelerated cost allowance rules for new mines including oil sands which will ensure that all types of oil sands recovery projects are treated more consistently. The bill also includes measures to designed to promote sustainable development of energy resources by providing an essentially level playing field between certain renewable and non-renewable energy investments.
One measure is to create a Canadian renewable energy and conservation expenses category in the tax system. The second measure is to extend the use of flow through share financing currently available for non-renewable energy and mining and similar costs for certain renewable energy and energy conservation projects.
With this, I will conclude my overview of the measures addressed in the bill under consideration today. These measures are equitable and will make it possible to improve the effectiveness of the tax system. Several of these measures, by their very nature, eliminate constraints, and many Canadians have already benefited from the provisions of this bill.
These measures will help Canadians prepare for the future in a world that is constantly evolving, by stimulating job creation, education and charitable donations, among other important sectors of activity.
The measures in the bill under study reflect the values and expectations of the Canadian people. As their elected representatives, it is our responsibility to respect these values and expectations.
Accordingly, I have no hesitation in urging my colleagues to support this bill in its entirety and to give it speedy passage.
Roger Pomerleau Bloc Anjou—Rivière-Des-Prairies, QC
Madam Speaker, essentially, Bill C-92, which is aimed at amending the Income Tax Act and the Income Tax Application Rules, is intended to bring the Income Tax Act into line with the decisions in the 1996 budget.
In both the 1996 and the 1997 budgets, there is, essentially, nothing new. In fact, just recently, we learned that the anticipated $19 billion deficit will actually be far lower than that, after 11 months of operation. The deficit is, in fact, less than $8 billion, which means that the Minister of Finance will have an enormous amount of money to work with in the coming months.
Where does this come from, one might wonder. The announced objective of the cuts in government spending, in operating expenditures, not having been met, where does this enormous sum we are speaking of today come from?
We know that there are, essentially, two sources: the $4.5 billion in cuts in transfers to the provinces, or in other words $4,500 million, and the $5,000 million they garnisheed from collective wages via the unemployment insurance account. We know that these two, the cuts to provincial transfer payments and the lifting of wages from the unemployment insurance fund, essentially account for 84 per cent of the deficit reduction. So it is the unemployed, the sick, the welfare recipients and the students who will bear the brunt of this deficit reduction.
With reference to the cuts in transfers to the provinces, we will remember the commitments made by the Prime Minister on Canada AM on October 20, 1993. I am translating what he said in English, which we can presume means the same in French. Here is what he said on October 20, 1993: ``We said in our platform we do not intend to reduce the transfer payments. What I said in the program, and I intend to keep my word, is we do not intend to cut further''. That was said less than a week before the last election.
A few months after the election, on April 19, 1994, the Minister of Finance told the Toronto Star that the next federal budget would include drastic cuts to assistance to the provinces for such things as health, welfare and education. This is exactly the opposite of what the Prime Minister had said.
There will be an election shortly. I hope people will remember that, when this government makes promises, even just a week before an election, it has no intention whatsoever of keeping them. The cuts to the transfer payments to the provinces mean, for Ontario as well as for Quebec, that drastic cuts are now being made in health care, payments to welfare recipients, and education.
It must be clearly understood that these cuts are inevitable, and are the result of cuts to transfer payments from the federal to the provincial governments. I know that some of my fellow Quebecers are still saying: "Yes, but the federal government gives us money". There have been no cuts in federal funding, for what the federal government is doing with its transfer payments, in actual fact, is returning to us part of what we send to the government in Ottawa, $30 billion annually.
As well, the government dips into the unemployment insurance fund to the tune of $5 billion, when it contributed not one red cent of that.
As you know, the money in the unemployment insurance fund is basically the money put into the fund by workers and their employers. There is not one cent of the government's money in the fund. However, $5 billion was taken out of the unemployment insurance fund to balance the books, and that is why the Minister of Finance now has this extraordinary flexibility. That flexibility exists at the expense of the little guy, the sick, people on welfare and the unemployed, the unemployed whom the Prime Minister not
so long ago described as useless beer drinkers sprawling in front of the TV. And the result has been to create massive poverty in Canada and Quebec.
They know perfectly well that thousands of people will no longer be eligible for unemployment insurance and will have to go on welfare. But before they go on welfare, they have to exhaust all their resources, everything they have, until they have nothing left. This is now happening to thousands of people in Canada and Quebec. This wage grab and cuts in transfers to the provinces have caused poverty levels to rise dramatically.
Meanwhile, the government is doing nothing to reduce tax expenditures. Nothing was done in 1996 and nothing has been done in 1997. Perhaps I may explain, as I did recently, what a tax expenditure is.
Obviously, if tomorrow the government decided to send a cheque for $100 million each to 10 different companies, people would hit the roof. There would be headlines in the newspapers, and the public would know the government is doing something that makes no sense at all.
A tax expenditure occurs when instead of sending a cheque for $100 million, $50,000 or whatever to a company, the government tells the company it owes so much in taxes but does not have to pay them. It amounts to the same thing for the company, which will save $50,000. And it amounts to the same thing for the government, which instead of receiving a cheque for $50,000, will have a shortfall of $50,000. However, there will not be the same public outcry.
Sure, if the government wrote cheques to companies every day, it would be in the headlines. But if it is a tax deduction on a company's more or less confidential tax return, the public does not see that. In other words, tax expenditures represent money that is not collected, although it should be, from companies or the public.
The Auditor General of Canada gave a good example of a tax expenditure not long ago when he revealed that a family trust went to the United States with the blessing of Revenue Canada under very dubious circumstances. The Auditor General said at the time, very diplomatically, that the company and those who made the decision to let the trust go, had, as it were, frustrated the intent of the legislator. In other words, they were breaking the law. That was the opinion of the Auditor General of Canada.
So a family trust left the country with $2 billion on which no income tax was paid. It is estimated that between $400 million and $500 million in taxes should have been paid. Of course, if the government had written a cheque for $400 million or $500 million in this country and sent it to this family trust or to the two trusts which, in fact, belong to the same person, the public would have been outraged. The Auditor General explained how this happened, the details were published, it was in the headlines for one day, but no one talked about it again. Why? Because tax expenditures are so complex.
You may recall certain tax commitments in the red book. On page 19, we read:
A number of government programs and tax expenditures-some of which have been identified by the Auditor General-are inefficient, poorly managed, or driven for purely political reasons. Just as we are proposing new measures to grow the economy, we will examine such programs with the objective of reducing waste and inefficiency and promoting economic growth.
That was the commitment.
And then there was the report of the auditor general on family trusts and the Liberals' reaction in the finance committee. Each of them took a turn sniping at the auditor general for having criticized the fact that the trusts had hot footed it out of the country without paying taxes.
That is precisely the role of the auditor general. He is the public watchdog. When we criticize the government, we are partisan, clearly. When the auditor general does so, we can assume generally that he is non partisan. The Liberals took pot shots at the auditor general for criticizing the family trusts I referred to earlier.
So, as we realize, there is no deficit problem in Canada. We are reducing the deficit far faster than we had anticipated in our objectives. The Minister of Finance has a lot of manoeuvring room. We therefore have no deficit problems in the short term. We even expect to bring the deficit to zero by the year 2000. However, there is a question of fairness, since it is the middle class that is paying off the deficit. It is becoming increasingly poor. The government is creating huge poverty in Canada, leaving untouched those who are in a position to benefit from the tax laws. It is the middle class that is getting it.
That is why the Bloc Quebecois decided in November 1996 and February 1997 to table two studies on taxation: corporate taxes, first, and personal taxes, second. This sort of study has never before been prepared by the official opposition.
The Minister of Finance reacted to our first study by saying: "The Bloc Quebecois tabled a sober report yesterday. I consider it a very professional one. I thank the Leader of the Opposition and the members here for their work. There are many things in the report we agree with", and I quote him exactly. Yet, it was shelved and will probably gather dust there for a number of years. It is some one hundred pages long and was prepared with the means available to us, because the official opposition has far fewer means
available to it than the government. This is the first time such a thing has been done, up to now.
The last time the tax system was totally revamped was in 1962, as a result of the Carter Commission. According to the Carter report, tax criteria had to be followed. The system had to be fair and different incomes taxed the same way, regardless of source or recipient. That, basically, was the philosophy of the Carter report.
Many of the report's recommendations were never implemented in the Income Tax Act, which was to be expected, but we used the report as a reference work in terms of both principles and approach. It covered the whole Income Tax Act and was 2,575 pages long. It was six years in the preparation, and its recommendations were never fully implemented.
In 1966, the Liberal government, which had been given the report, decided not to use it. It asked the Minister of Finance to produce a white paper on taxation-this government's usual solution is to produce white papers or red books as appropriate- and a watered down version of the Carter report led to the 1971 amendments to the Income Tax Act.
We had to wait until 1981 for the next changes. However, the Minister of Finance at the time, Allan MacEachen, underestimated the resistance of the financial community and had to back off on a number of amendments he had wanted to make to the Income Tax Act. The final tax reform was Michael Wilson's in 1987. He too had to retreat on some of the reforms, because of major pressure from lobby groups to limit the extent of reforms.
The principles underlying the Bloc's two reports on taxation are those found in the report of the Carter commission, principles everyone can understand, principles of fairness, efficiency, neutrality and stability.
Under the principle of fairness, the tax system must ensure a fair distribution of the tax burden among taxpayers. We appreciate that everyone should pay taxes. The taxation system must not only be fair but also be perceived as such, that is to say, people should feel that everyone is paying their fair share.
We can assess how equitable a tax is by one of two yardsticks: it must either reflect the ability to pay of those who are subject to it-that is what we call vertical equity-or match the benefits to the taxpayers, a principle called horizontal equity. The implementation of a progressive tax system is consistent with the principle of vertical equity.
In a vertical equity analysis, one has to use the concept of diminishing returns John Stuart Mill described in his book, clearly defining it in terms of a single taxpayer's equivalent sacrifice. This is taken, of course, from Principles of Political Economy with Some of Their Applications to Social Philosophy . I think it is not widely known, but the majority of leading economists in the early days were in fact philosophers preoccupied with ethical concerns or wondering why, and the question is still valid today, there was such a huge gap between the rich and the poor.
This means that each taxpayer does not pay the same amount of taxes proportionally to make an equal marginal sacrifice. It would clearly not be as much of a sacrifice to pay $2,000 in taxes for someone earning $500,000 per year as for someone earning $12,000. That is why, in the interest of equity, there is a so-called tax progression.
But the facts tell quite a different story. Just think of family trusts that were transferred to the U.S. tax free. Clearly, the public realizes there is nothing fair about that.
Think of the Liberal member for Gander-Grand Falls, who, every 12 or 18 months-he must spend most of his time at Revenue Canada-issues the list, withholding names of course, of dozens of millionaires who not only never pay tax but actually receive money from the Government of Canada in the form of additional tax deductions. They actually receive money from the Government of Canada. In fact, I think the hon. member for Gander-Grand Falls does a fine job. What I find extremely distressing in all this is that, the next day, it is all but forgotten.
Think also of the strong public belief that the current system is not fair, that the poor keep paying while the rich manage to get out of it.
The second principle on which these reports on the tax system were based is the principle of efficiency. To be efficient, any taxation system must be kept as simple as possible. It makes it easier to enforce, and the taxpayers waste less time making sure they have complied with the various tax regulations.
In addition, a simpler taxation system results in lower government management costs. When income tax time is upon us, we realize that, for most of us, it is no simple task to fill out a personal income tax return. As for corporations, we know they do not just file a regular income tax return. They have tax experts who dig into piles, three or four feet high, of tax documents. They go to great lengths to avoid paying tax.
All this to say that this is a very complex system. When we meet tax experts, whether at the Standing Committee on Finance or elsewhere, that is the first thing they tell us: the tax legislation is extremely complex and we lay people need their help to understand it. It is a fact that one needs very complex training to sort it all out. In a nutshell, the current taxation system lacks efficiency.
The third principle is that of neutrality. The taxation system must be neutral. This means that companies should make investments based on economic and financial considerations and not on tax considerations.
Yet, we are well aware that many companies make major decisions which are not based on economic or financial interests, but on the impact that these decisions will have on the amount of taxes they will have to pay. So, the system is not neutral.
The fourth principle is the principle of stability. A tax system must produce stable revenues over the years for the government, so that it can make consistent economic forecasts. Stability provides for a certain continuity in the level of revenues and expenditures.
Such stability currently does not exist, given that the government was forced to cut $4.5 billion in transfers to the provinces-which is not a source of revenue-and to garnish workers' wages by taking $5 billion out of the unemployment insurance fund, so it could reduce its deficit. This shows that the tax system is not stable.
All these principles, developed by the Carter commission and reiterated by Bloc Quebecois members with the very limited means available to them, show that a tax reform is in order. This is one of the reasons why such a reform is necessary, but there are many more.
As regards corporate taxation, our first document was essentially tabled because we realized that, over the years, corporations have been paying less and less taxes. I will show you figures which I already mentioned in the House, but which bear repeating every day. Let us take a look at the gap between taxes paid by corporations and individuals since 1951. I will show that gap for every 10-year period, that is for 1952, 1962, 1972, 1982 and 1992. Here are the figures.
In 1952, corporations contributed 51 per cent of the taxes paid to the government, compared to 45 per cent for individuals. In 1962, 10 years later, corporate taxes amounted to 36 per cent of the total; in 1972, it was 20 per cent; in 1982, it was down to 18 per cent, and, in 1992, it was a mere 7.6 per cent. We can see that, over the past 40 years, corporate taxes have steadily gone down, while personal taxes have increased.
So, over the past 40 years-and this is the second reason why we are asking for a comprehensive tax reform-the tax burden in Canada, has been supported less and less by corporations and more and more by the middle class and the poor, through cuts affecting services provided to them. This is the second good reason for a tax reform.
The taxation principles stated by the Carter commission are no longer being complied with. Moreover, for the past 40 years, corporations have been paying less and less taxes, while individuals have been paying more and more. Under the circumstances, it would be in order to go back to the conclusions of the Carter commission.
The third principle is a bit of a myth. It has always been said that corporate taxes should not be substantially increased, because corporations in Canada may already be paying too much tax, compared to companies in other countries. According to statements made by succeeding governments, both Liberal and Conservative, corporations pay too much tax in Canada. However, the figures show just the opposite.
I am referring to the figures from the OECD, which compared the corporate tax rates in various countries. We are talking here about corporate tax revenues, that is the taxes paid by corporations in relation to the country's gross domestic product. Let us look at the years 1965, 1975, 1985 and 1993, since the data for 1995 is not available. Let us see how Canada fares.
According to these figures, in the United States, for the year 1965, 6.48 per cent of tax revenues came from corporations, compared to 4.7 per cent for Canada, 12 per cent for France,7.23 per cent for Germany, and 5.81 per cent for Japan. In 1965, Canada, along with Spain and the United Kingdom, was the country with the smallest proportion of tax revenues being paid by corporations.
In 1975, ten years later, the percentage for Canada was 6.38, and for the United States, 7.16. On might expect lower taxes in the United States, but the opposite is true. Corporate taxes are higher in the United States. The same is true in France, Germany and Japan, all of which have corporate taxes several points higher than Canada's.
In 1985, it is even worse, and in the final year, 1993, Canada looked to corporations for less than 6 per cent of its revenue, the United States, 7.25 per cent, and Japan, almost 10 per cent. Japan is not a third world country. It looked to corporations for almost 10 per cent. Internationally, therefore, Canada is not facing impossible competition. It is even one of the countries-and we are talking about industrialized countries-with the lowest corporate taxes.
The same analysis can be done for tax revenue, but this time compared to overall revenue. Here again, Canada ranks lowest among all other industrialized countries, including the United States. We therefore see that Canada is one of the OECD countries with the lowest corporate taxes compared to individual taxes.
Do I have one minute remaining, Mr. Speaker?
Income Tax Budget Amendments Act, 1996Government Orders
The Speaker
Dear colleague, there are 14 minutes remaining, but we are coming up to the time for statements by members, and that is why I was motioning to you. That is all.
Roger Pomerleau Bloc Anjou—Rivière-Des-Prairies, QC
Mr. Speaker, how kind of you. In fact, I still have quite a bit to say. But since there is a logical break in my text at this point, I will therefore stop for now and continue after oral question period for the time I have remaining.
Income Tax Budget Amendments Act, 1996Government Orders
The Speaker
I am in agreement, dear colleague. It being now almost 11 o'clock, the House will now proceed to statements by members.