House of Commons Hansard #51 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was police.


Income Tax Amendments Act, 1997Government Orders

10:30 a.m.

Progressive Conservative

Mark Muise Progressive Conservative West Nova, NS

Mr. Speaker, the hon. member is totally incorrect. Cuts were needed. The hon. member from across the way just said that when the previous government was there spending was rampant. I think there is disagreement between both parties here and I am not sure where they are coming from. But I would like to ask the hon. member what the NDP stand would be. Excess spending seems to be the order of the day for the NDP.

Income Tax Amendments Act, 1997Government Orders

10:30 a.m.


John Bryden Liberal Wentworth—Burlington, ON

Mr. Speaker, I would like to comment on the transfer of tax points that was undertaken in massive form by the previous Conservative government. That is a singular erosion of national unity because when you give federal tax points to the provinces, you lose control. I think that the Conservatives played right into the hands of the separatist Bloc Quebecois and the Parti Quebecois when they transferred tax points to the provinces, and this is something this government stands firmly against.

Income Tax Amendments Act, 1997Government Orders

10:30 a.m.

Progressive Conservative

Mark Muise Progressive Conservative West Nova, NS

Mr. Speaker, we are just debating bill C-28 and health care, not the national unity issue. I will leave it at that.

Income Tax Amendments Act, 1997Government Orders

10:30 a.m.


Nelson Riis NDP Kamloops, BC

Mr. Speaker, perhaps I will try another tack with my hon. friends. The Parliamentary Secretary to the Minister of Finance yesterday in his presentation went on at some length about the value of the transfer of tax points, which seems to be quite contradictory to the previous speaker's question. The parliamentary secretary went on to say this was good for enabling the provinces to fund health care.

Does my hon. friend acknowledge that when you look for funding health care through a transfer of tax points it benefits have provinces, those which obviously have a much better opportunity to generate wealth through their economies, and really penalizes have not provinces?

Income Tax Amendments Act, 1997Government Orders

10:30 a.m.

Progressive Conservative

Mark Muise Progressive Conservative West Nova, NS

Mr. Speaker, it is my belief that the hon. member does not fully understand the tax point system. It does not give the advantage to the provinces that have more. It gives the appropriate amount to the provinces and it gives them the control where, at the present time, basically they do not have that control.

Income Tax Amendments Act, 1997Government Orders

10:35 a.m.

Kent—Essex Ontario


Jerry Pickard LiberalParliamentary Secretary to Minister of Public Works and Government Services

Mr. Speaker, it really is a pleasure to speak on Bill C-28. I can recall not very long ago that we were debating what we had to cut, how we had to cut these programs, where we were going in the future, and everything looked dim and abysmal.

We are in a very different position financially in this country today than we were eight years ago, seven years ago, six years ago. It has been a very difficult struggle for all Canadians, for everyone in this House and for the government. By putting the information that we had to work for Canadians and by working with our finances we have been able to change the direction of this country.

There is absolutely no question when we look at financial institutions around the world and we hear other countries comment on Canada's move forward, we know that we as Canadians have done a tremendous task. We have brought the fiscal order of this country into a much better condition.

Granted, we have a very large debt. That debt is the next major struggle that this government is going to have to handle. There is no question that we have to look at business operations in this country. We have to look at all social programs and social transfers as we are doing in this bill. We have to look at the whole operation of this country and monitor it on a very regular and steady basis.

It is very good though that we can stand here today and not argue about what is to be cut and what we have to do to alter the development of our programs. We can say yes, we are moving in the right direction and now we need adjustments to those directions. That is what this debate today is about.

We are talking about Canada social transfers, transfers for health payments and moneys that we are going to move from the federal coffers to support provincial programs which are most important for all Canadians.

I do not believe there is one person in this House who opposes that the federal government must do what it can to help provinces carry out their plans for social assistance and health. I believe every member of the House is consistent on that, but I guess we all have differences on how it should be done. The outline that has been placed here is clearly the government's position on how these transfers should occur.

We have set a floor for the cash transfers to the provinces by the federal government this year and for the next five years of $12.5 billion. We have also suggested that there are going to be other transfers to the provinces of tax points. Those tax point transfers will be in the neighbourhood of $12.7 billion. The total transfers from the federal government to provincial governments will be over $25 billion.

People have to understand what tax point transfers are before they can understand how that money is sent to the provinces. When we talk about social programs we realize that those programs are supported by provincial and federal coffers. Provincial governments and the federal government have worked together on personal and corporate income taxes since this country was founded.

If the federal government decides that it will lower its tax revenue and allow the provinces to increase their tax revenue, at a percentage point, the provinces actually get more of our income tax, with the federal government getting less. A balance occurs to the taxpayer, but the number of dollars going to the provincial governments is higher and the number of dollars going to the federal government is lower.

We have always maintained that we will support the provincial governments through tax point transfers, allowing an adjustment at income tax time for the provinces to get more dollars and the federal government to get a few less.

At the same time, we have looked on the cash transfers as an additional balance. We have suggested to the province that they are going to be guaranteed over the next few years $25 billion in health and social transfers.

In the campaign we heard time after time from the Reform Party and from the Conservative Party that we have cut the cash transfers to the provinces. They never once talked about the tax point credits that were maintained, the tax point credits that the provincial government got.

They took one side of the story and one side only and did not deal with it in a fair and reasonable way, which I find has been the case by both those parties over the years. They take one part and dwell on it. They are very adamant about one part of the whole equation without dealing with the whole issue, the total number of dollars available to the provinces from the federal government.

Quite frankly, that total number of dollars is there to make sure that our health programs and our social transfers are there for Canadian citizens.

There is no question that in the last while one of the major issues in Ontario as well as in all the provinces of Canada has been what is happening to our health care system, where are we going with that health care system and where will we end up in the future.

What we need to do and what we have done with this legislation is make certain the provinces know what the funding will be for the future. The provinces can plan and look exactly at where they are going with that funding. They know the programs they can carry out and they know the dollars that will be flowing in for that program.

I have no question, when I start looking at making dollar amounts, base levels there, that we are following the recommendations that were brought forth by the national forum on health. We are following the recommendation of health care specialists across this country. We are following the recommendations brought forward to the federal government and the finance minister to make certain that the health care system stands well in this country and will stand well in the next several years.

We must also realize that when we come to looking at what we are doing with setting a balance of floor value of $12.5 billion on the base, that does not mean those transfer payments may not increase.

Quite different from that, it is saying that there will be a base level. There may well be increases to those programs as required. There may well be increased funding. We are projecting at this point in time a 2.5% per annum increase from present day until the year 2002.

When we look at transfer payments to the provinces, I think it is important to understand what I am talking about with regard to these tax points. I have an estimate of the transfers that would go to the provinces. The province of Ontario would receive tax credits under this legislation of $5 billion. They would also receive cash transfers of $4 billion which, to the province of Ontario, gives a total of just over $9 billion for health and social programs.

That is quite a sum of money. It is there to make sure that those programs are maintained at the highest level. All Canadians can be assured we will have programs today and in the future that will meet the needs of each and every Canadian.

Our health care system, as it is administered today, does not make differences in Canadians. It does not act in the same way that we might find the system doing in the United States or in other countries where those with a lot of money are able to access the services and those who are less fortunate, less wealthy, are unable to access the services.

Our system is blind to wealth. It is blind to other factors outside the risk of the patient. The more the need of the patient for an operation, the more the need of the patient for service, those are the patients who are treated first. It is a priority list of the health needs of Canadians.

We certainly feel as a federal government that it is the only way to go about making certain that Canadians have services available to them.

There are other issues with regard to the bill which may have been neglected. Charitable donations is one area that has been included. There are amendments in the legislation to help with gifts and donations that will help more charitable organizations and other groups which need cash.

We can think about what just happened in this region of Canada when tremendous problems were caused by the ice storm of recent weeks. There are people who contributed gifts to those areas. The increase in support for those who make charitable donations is very important to the operation not only of disaster funds but of the heart association and all other groups that go to the public on a regular basis to support the people who need extra support in our communities. There is thought given to helping those individuals.

As well, proposals have been made in the area of registered educational savings plans to help the families who wish to send their children to school. They know the costs of education will be going up astronomically over the years. There is an opportunity for families to put more money into educational savings plans which will over time help society to better educate young people. It certainly will help families to send their children to school. It will help to finance education.

I have heard young people complain a great deal about the costs of education today and the future costs of education. In a small way the bill will help young people to cope.

There are key important points in the bill that will help the underprivileged and people requiring health care and that will improve our social programs. I would like to make certain that each and every Canadian understands that the bill is doing a great deal to bolster our funding to the provinces and to make certain the provinces are able to handle those most important costs, those most important programs of the future.

Income Tax Amendments Act, 1997Government Orders

10:45 a.m.


Charlie Penson Reform Peace River, AB

Mr. Speaker, the parliamentary secretary talked about how the government inherited such a problem and did such a good job at managing to bring down the deficit. I remind the parliamentary secretary that a good deal of the so-called good management was as a result of the growth in the economy.

He will recognize that over $25 billion of new revenue came into the government per year over the last several years, largely due to exports and a very rapidly expanding economy in the United States, our major trading partner. When that is coupled with the $6 billion in cuts to transfer payments to the provinces it goes a long way toward contributing to the difference between the current position we have financially and the deficit the Liberals inherited.

The parliamentary secretary talks about how they will restore funding in the areas of health care, advanced education and welfare, the so-called capped block funding to the provinces. They will restore funding from $11.5 billion to $12.5 billion. I remind him that it was his government that cut those transfers to the provinces from $18.5 billion down to $11.5 billion, a cut of some 35%. Now the Liberals will restore funding by $1 billion, bringing the level up to $12.5 billion. There is still a $6 billion difference.

Many people blame the provinces for the difficulties they have had during the last few years with programs such as health care, in particular the cost of health care. They could not deliver services as adequately as they would have liked. Those problems have mostly been associated with the provinces balancing their own budgets. I remind people watching the debate today that a good portion of the pain suffered was due to cuts made by the federal government to transfer payments.

Does the parliamentary secretary recognize there is still only one taxpayer in the country? Provinces have the job of administering health care but the federal government has been steadily reducing its commitment from the time the Canada Health Act came into effect some 30 years ago. The federal government commitment has gone from about 67% down to a low of 18%. The provinces administer the health care system largely on the basis of raising revenue themselves for funding. Several provinces like my home province of Alberta still have premiums.

How are the provinces to handle this problem if the federal government commitment continues to be less and less every year?

Income Tax Amendments Act, 1997Government Orders

10:50 a.m.


Jerry Pickard Liberal Kent—Essex, ON

Mr. Speaker, I appreciate the question. Many facets of it have been brought forward and need some response. I said we were getting our fiscal house in order. I talked about the direction we have taken as a Canadian government. Those remarks were well reflected in my colleague's comments. He suggested that the growth of the economy has been very good.

How did growth of the economy occur? We have to stop and think about the trade missions the prime minister put in place. He has involved the provincial premiers and the business community of Canada. He did whatever he could to make sure Canadian companies could expand, become stronger, make more profit and pay higher taxes. All these things were actual accomplishments of the direction of the government. For someone to complain about the growth of the economy bringing in more funding to the federal government seems a little ludicrous to me. It seems a little off base.

However, we all know we have not increased personal income tax. We have not made the increases that these folks thrived on year after year.

I sat here in 1988 and I watched taxes go up and up. We stopped that. I watched how they went about with programs they were putting in place. Now they are complaining that we have made the economy grow, that we have held interest rates down, and that we have done things that have principally put Canadian business in a very competitive position worldwide. We have increased our trade dramatically. There has been a one-third total increase in trade over the last few years, thanks to good government.

How does that affect taxes? Without increases we have increased the dollar flow coming in. Most Canadians would respect that is the best way to go about this issue.

He also mentioned that there were some cuts in dollar transfer payments to the provinces. Yes, that is true, but he did not mention the fact that the tax points the provincial governments were getting were increasing because of the increase in the economy. We cut some of the tax dollar transfers but we also increased our economic value which meant that more dollars were coming in to the provinces through tax points.

As a result I think everyone in this room has to fundamentally agree that we have taken a tremendous direction. It is a very positive step for Canadians. It is a positive step for Canadian businesses. It has been a positive step for governments and it will definitely be a positive step for the programs we are carrying out.

Had we followed the right wing agenda over there, the difficulty we would be in today would be further slash and burn policies and further increases in taxes.

I remember Michael Wilson saying year after year after year “We missed the target by $10 billion this year. We missed it by $8 billion last year”.

The Reform Party is trying to say “Now that you guys have straightened out a lot of the economy in the country we are going to tell you how to spend your profits”. All I have heard the leader of that party say in the last six months is how he would manage the new situation. That is pretty ludicrous.

I listened to where the Reform Party is going now and how it is going to give tax cuts. It is going to give this and it is going to give that. Giveaways do not work. Getting the basics right is the important thing to do. The Reform Party has missed the basis of getting the fundamentals right. It would love to take credit for it all. As a matter of fact its members say that because they have pushed us hard we have done a good job. That is kind of a sidestep.

Income Tax Amendments Act, 1997Government Orders

10:55 a.m.


Charlie Penson Reform Peace River, AB

Mr. Speaker, I rise on a point of order. I specifically asked the parliamentary secretary a question about transfers to provinces and what is their intent—

Income Tax Amendments Act, 1997Government Orders

10:55 a.m.

The Deputy Speaker

Order, please. The hon. member knows that is not a point of order.

If by asking a question he has set off a minefield, those are the breaks we take under questions and comments. It is clear that in this case he has stirred the parliamentary secretary to his depths. He is in the midst of an answer. Perhaps he is finished now and we can move on to another question. Or, does the parliamentary secretary still have something to say in answer to the question?

Income Tax Amendments Act, 1997Government Orders

10:55 a.m.


Jerry Pickard Liberal Kent—Essex, ON

Mr. Speaker, I will quickly wrap up. It was not a specific question. He went through the growth of the economy as a problem that we are putting more dollars into. He laid that whole agenda open to be questioned. Quite frankly this is a pretty bad approach to take.

The government has done a great job. I believe that is the basis under which my response came.

Income Tax Amendments Act, 1997Government Orders

10:55 a.m.

The Deputy Speaker

There is time for one more brief question. I caution that the answer as well as the question will have to be brief.

Income Tax Amendments Act, 1997Government Orders

10:55 a.m.


Gordon Earle NDP Halifax West, NS

Mr. Speaker, the hon. member in his remarks spoke about assistance to families to help with education through the changes to the RESPs. While this may be a laudable move, I remind the hon. member that many families cannot afford to have RESPs. There are many families in Canada who are living at a subsistence level, yet their children are worthy of education as well.

Has the government considered anything very substantial in terms of transfer payments to assist many young people who are in need of help with their education?

We heard earlier and it is well known that many young people are coming out of university with a debtload of $25,000 or more before they even have the opportunity of obtaining a job. We are very concerned about this and we feel that the recent cuts in the transfer payments have seriously affected education and have caused a lot of problems for young people.

Is there anything more substantial that the government plans to assist with education other than helping those who are already able to help themselves?

Income Tax Amendments Act, 1997Government Orders

11 a.m.


Jerry Pickard Liberal Kent—Essex, ON

Mr. Speaker, that is a very serious question which has been raised by my colleague. It requires a proper response in light of the fact that he is correct.

When we talk about people putting money away, there are folks in this country who really do not have that extra capital to put away for educational funding. How do we deal with that?

We do have millennium funding that is being put in place to help those low income families pay for educational programs on the basis of need. I will have either the parliamentary secretary or someone from the department comment on that. That would be an important area for the member to raise.

When we look at student loans, there is no question that student loans are in place to help students. Some students are graduating with astronomical debts. I believe that we do have to look carefully at what we can do to help students in the best possible way to overcome the tremendous debt load they have.

One of the key issues is getting the fundamentals in place and keeping interest rates as low as we possibly can. Remember that interest on student loans does not start until a minimum of six months after the student graduates and if the student does not get a job, that time period can be extended. But with the large debt students have, it is important we make certain that we fundamentally handle this correctly. When people are young that is the time when they need a relatively good amount of income to purchase the basics they have not been able to have as students. In the workforce they have to see those benefits come about.

I agree that the issues the member has raised are important. They are ones this government is looking at.

Income Tax Amendments Act, 1997Government Orders

11 a.m.


John Williams Reform St. Albert, AB

Mr. Speaker, it is a pleasure for me to rise to speak on Bill C-28, amendments to the Income Tax Act.

As I have said many times before, we have here a very complex income tax bill which is 464 pages in length. It deals with nine particular subjects according to the preamble. Is it any wonder that Canadians are losing faith with their tax system and the complexity of the Income Tax Act when it takes 464 pages of amendments to deal with some changes the Minister of Finance has announced to nine particular areas of the act.

These are the types of things that Canadians throw up their hands about and say “We have no idea how the Income Tax Act is administered, we do not understand it, all we know is we are getting taxed to death”. This type of bill and the complexity of it add credence to their argument.

I have also quoted before some of the paragraphs in these amendments. Let me quote paragraph 196(1) which deals with subparagraph 181.3(3)(d)(i) of the act. This is how it reads:

Subparagraph 181.3(3)(d)(i) of the Act is replaced by the following:

(i) the amount that is the greater of

(A) the amount, if any, by which

(I) the corporation's surplus funds derived from operations (as defined in subsection 138(12)) as of the end of the year, computed as if no tax were payable under this part or part VI for the year.

It goes on and on. That kind of gobbledegook loses the taxpayer completely.

If we are ever to regain the confidence of the Canadian public when it comes to income tax and their faith in the system and that they are being treated fairly and properly, we have to realize that a complete rewrite of the Income Tax Act is long overdue. Its simplification and understanding by the ordinary person has to take precedence over this type of complexity that even challenges the best minds in the accounting and legal professions. This is why of course we have tax cases and tax courts wrangling over issues ad infinitum.

I remember too the famous case about two years ago where $2 billion left this country without taxes. The Department of Finance and the Department of National Revenue flip-flopped on advance tax rulings. They gave out misleading information to one person and gave a favourable tax ruling to somebody else. Hundreds of millions of dollars escaped taxation. As a result, people again lost confidence in the system.

The Minister of Finance should seriously think about simplification rather than adding more and more complexity.

I was listening to the speech of the parliamentary secretary, the previous speaker. Not all of it was really focused on the the details of the Income Tax Act. He got more on to the government's record and I would like to respond to the issues he raised.

He was taking great pride in the Team Canada approach whereby the federal government took trade missions around the world at great expense to the Canadian taxpayer. And sunscreen too. The premier of Alberta left his at home at great pain to himself. At great expense to the taxpayer, the trade missions went to different parts of the world to drum up business.

The Parliamentary Secretary to the Minister of Finance would have us believe that these trade missions added significantly to the economic growth of this country, to the well-being and to the fact that we have dug ourselves out of the fiscal mess by balancing the budget. He failed to tell us that the countries they visited with Team Canada, the total exports to those countries, not the ones that Team Canada generated, but the total exports to those countries represented only 5% of the exports of our country.

If we say that our exports represent only 40% of our gross domestic product, then the total exports to those countries would represent at best 2% of our gross domestic product. Team Canada may have increased that 2% to 2.1% or maybe 2.05%. However, for the parliamentary secretary to stand up here and claim that these trade missions were the formula for success and have caused this country to be able to dig itself out of the debt hole it was in and to balance the budget is absolutely false and misleading. The $42 billion deficit which was number one in this country when the government took over in 1993 is significantly in excess of the exports we generated by these Team Canada junkets abroad.

I do hope that the government will evaluate the benefits of these Team Canada junkets, even if they do not take the sunscreen along with them. They will find that many of these junkets are not worth the effort when it comes to a return on taxpayers' dollars and investment. I do hope that the parliamentary secretary will refrain from the hype that carried him away to make these extraordinary claims about the benefits of the Team Canada junkets abroad.

I would also like to talk about health care. He talked about health care. He talked about how the Liberal government said that it was protecting health care with the cash transfers. He said the fact was that they were putting more money back into Health Canada and into health for Canadians by putting in a floor of $12.5 billion in cash investments.

This floor, as my hon. colleague from Peace River pointed out, is 30% less than the cash that was going to the provinces when this government took over in 1993. They had intended to reduce it to $11.5 billion. In the last election in order to counter the lack of faith Canadians had in what the government was saying, I remember not just the Minister of Health but the Prime Minister saying there was going to be an absolute guarantee that the government would put $12.5 billion cash into health care. Unfortunately the Canadian public bought that line.

Late in the fall of 1997 the Liberal government tabled the supplementary estimates (A). On page 48 under “Statutory—Canada Health and Social Transfer” it states that it has been reduced from $12.5 billion to $12.328 billion. That is a reduction of $172 million below the fundamental floor.

This Prime Minister and this government committed to Canadians that they would not under any circumstances transfer less than $12.5 billion to the provinces to pay for health care. Within a few months in the supplementary estimates, where the government normally asks for more money, we find out it is taking money away from Health Canada, from the transfers to the provinces, and is using that money in other areas.

The Canadian public have been misled. The Canadian public have been sold down the drain. Obviously a commitment by the Prime Minister and the Liberal government to Canadians at election time is meaningless and worthless. We have the proof here. The $12.5 billion was a commitment that Canadians could take to the bank. A very short few months later it was reduced by $171 million as per the supplementary estimates (A) which were tabled in the fall. It is an absolute disgrace that this government should deceive the Canadian public in this way.

The Minister of Health and the Prime Minister should be standing in the House to explain to Canadians how their unconditional guarantee of $12.5 billion has already been eroded. And we can expect to see it being eroded even more.

Health care is an important issue. As my colleague from Peace River has said, while Canadians have talked about the erosion of health care and blamed the provinces because they are in charge of delivering health care, it is a fact that the federal government has cut and cut and continues to cut the amount of money that is put into health care. That is the major cause of the crisis in health care today. It has to change.

That is what the Reform Party has said it would change. We said during the election campaign that we would put money back into health care and would not surreptitiously cut beyond the floor which we committed ourselves to.

Let Canadians be warned that what they hear from this government is not necessarily what they get. There is proof in the pudding.

Bill C-28 in part deals with education by the fact that it allows for contributions to registered education savings plans to be increased from $2,000 to $4,000 per beneficiary. This is an acknowledgement that education is becoming more and more expensive.

Yes, education is expensive. Demonstrations were held across the country last week by students who told us they are being buried under a mountain of debt. By the time they get their degree and find a job they are mortgaged to the hilt. Their capacity to start building a life of their own by starting families, acquiring houses, cars and so on is seriously compromised by virtue of the fact that they have a mountain of debt. Some of them are $20,000, $30,000 and even $40,000 in debt by the time they graduate from university.

The answer is not necessarily to just give another $2,000 to those who can put money into an education fund for their children. Many families cannot afford to save that money in advance or in anticipation of their children going to university.

This government has to take a serious look at the cost of education in this country and the way money is being spent in this country. It needs to ensure we are getting some kind of value for the education dollars we spend. Surely when we spend money on education the concept is that an educated child will be produced, that when a child goes to school for grades one through twelve, by the end of twelve years we will have an educated child who meets a minimum standard. When that child goes on to university he should be capable of meeting the challenges of the university because the prior school education has provided him with the tools necessary to survive and to thrive at university rather than the opposite.

This past weekend I read an article in the Globe and Mail about the fact that one university in Ontario was having severe financial problems in paying its bills. Therefore it reduced the minimum standard for eligibility into the university. It accepted a large number of students who were guaranteed to fail, and they were failing. We were giving these people a false hope, we were wasting a year of their time, we were spending money on education they could not absorb because they had not acquired the skills from school. This was all because the university needed the bodies on the student roll in order to generate the finds to flow from the province and the federal government so it could pay its bills.

That is a funny methodology for ensuring you can balance your books. It guarantees waste of millions of dollars of university education because it accomplishes nothing except that it turns people away and shows they cannot be a success in this world. This government can rethink the way education is done in this country. It is time we started to put the onus on the educational industry.

Surely the objective is to produce an educated child. If we start with that premise, then the focus for where the money should flow will surely improve. In the private sector it is only businesses that provide good quality products that will prosper and thrive. This is because they know they have a market that is prepared to buy their products. If they do not provide quality products they will not continue to be around. Yet we have universities and other schools that are not providing anything close to a quality product and we keep them afloat and continue to give them raises, increases, more money and bigger budgets while we get nothing in return. Much can be done to rethink how we spend education dollars in this country and universities are a good place to start.

Take a look at Bill C-28 in its complexity and the way we are trying to nickel and dime the Canadian taxpayer into paying more taxes. The thrust of most of Bill C-28 is to close little loopholes so we can get more tax from this person and more tax from that corporation and so on.

However, now we have a balanced budget. The November Fiscal Monitor showed that we have a fairly significant surplus so far this year. I know the Minister of Finance will add on his $800 million extra accounting charge, which really is not an accounting charge but he will want to stick it on anyway as he did it last year. The auditor general pointed that out. He did that the year before with $960 million while the auditor general said he could not. But the Minister of Finance said that he wanted to do it anyway. After this kind of smoke and mirrors I think the Minister of Finance will tell us that we have a balanced budget.

The question now before Canadians is what to do with this balanced budget or with any excess cash that is available.

We already know that our hon. friends on the other side of the House are just itching to get their hands on that money to spend it on their own little pet projects.

Surely after 30 years of deficit financing, where we have run our credit card up to $600 billion, $20,000 per Canadian, which includes newborns, we should try to resist the concept of saying my goodness, now it is my chance to buy some more goodies.

We have four simple choices for what to do with a balanced budget and any excess. First, we can pay down the debt. Many Canadians want to pay down the debt. Second, we can reduce taxation. We are grossly overtaxed in this country and we can reduce taxation. Third, there is a need for strategic reinvestment in some areas. I can think of health care as being one. Regardless of what the Minister of Health thinks about taking more money out of health care, we in the Reform Party think that health care needs some reinvestment. The fourth is to invest in more goodies. Unfortunately this government feels that buying more goodies, more things it can woo the voters with, is more important than tax relief, debt reduction and strategic reinvestment.

I do hope that in the next short little while this government will come to its senses and not flagrantly waste the wonderful opportunity that this country has to once and for all put ourselves in a sound fiscal situation where we can get our finances in order and ensure that this country continues to grow to become one of the great countries in the world. Unfortunately it will not be with this government at the helm.

Income Tax Amendments Act, 1997Government Orders

11:20 a.m.

Stoney Creek Ontario


Tony Valeri LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, I have a brief comment and then a couple of questions.

With respect to the point made by the hon. member pertaining to the supplementary estimates, the $12.328 billion, that is what the transfers would be in 1997-98 if the floor were not established. With this floor and this bill going forward it will be $12.5 billion. According to law we certainly must publish what the entitlements will be. Now the law is changing with Bill C-28 and the provinces know the amount will be topped up once the law is in place. Therefore the rhetoric we heard on the other side is nothing more than just that.

With respect to the comment about student debt and the importance of dealing with the plight of students and that RESPs are not good enough and that the cost of education is rising and that governments need to look at education and the cost of education, I find it somewhat ironic that the Reform Party, in particular this member, is now saying the federal government should be responsible for education and that we should control curriculum. That is the only way we would be able to control the outcome which is what the hon. member is talking about.

This is a party that puts forward the concept that we need to weaken the federation, that the federal government does not need to be in the face of Canadians or the provinces. Now we have the comment that we should be responsible for education. I find that somewhat ironic.

The member then talks about the tax aspect of this bill, that this is nothing more than a tax grab. Is this hon. member then saying he would support the practice going on out there by some corporations with respect to transfer pricing? Is he saying the legislation in front of us today would not allow corporations to manipulate the tax system by setting prices within their multinationals?

We are saying that the transfer price cannot be artificial or arbitrary with this bill and he calls that a tax grab. He calls a tax grab the fact that individuals will not be able to transfer losses between unaffiliated companies. Companies are not in the business of transferring losses. Companies should be in the business of earning a profit and creating wealth, not manipulating the tax system.

The bill is merely reflecting what professionals have said in this country. Accounting professionals who have looked at these things have said this is what is going on and it should be tightened up, rules to apply when a corporation becomes or ceases to become exempt from income tax.

I am sure the hon. member would support this. A tax exempt crown corporation is not able to store up tax deductions or credits it does not need. When it does become commercialized, if that be the case, it cannot use those tax credits and cannot store up those tax credits so it could circumvent the tax system. That is what this bill is all about. That is I think a reflection of what Canadians talk about when they say they want a fair tax system.

I find the comments that are made somewhat ironic, but I certainly hope the hon. member will answer the question with respect to education and those particular changes to the tax system.

Income Tax Amendments Act, 1997Government Orders

11:25 a.m.


John Williams Reform St. Albert, AB

Mr. Speaker, the hon. member covered a lot of ground in those few minutes, just as the government has covered in 464 pages of this bill with complex wording that very few Canadians can understand.

Let us look at the issues. The complexity of the Income Tax Act makes it unintelligible to all but a few people. If the government feels that is what Canadians want in the tax act, I suggest that is not the case. Canadians cannot understand the Income Tax Act. If people cannot understand the basis on which they are being asked to pay taxes they lose confidence in the system and that is what has happening. Not only are they losing confidence in the system because they cannot understand it, they are losing confidence in the system because every time they turn around they are absolutely aghast at the amount of taxes they have to pay. That is the centre core of the issue.

The hon. member may talk about tax losses and transfer pricing and so on. He may have a legitimate point. But the fact that Canadians cannot understand their own Income Tax Act is a greater point and that is the point I am trying to make.

With regard to education yes, I said it is the responsibility of the educational institutions and the educational industry to produce educated people. That surely is not much to ask for. The private sector produces goods and services. We provide minimum regulations that say automobiles must meet safety requirements, otherwise a company cannot produce these automobiles. If it does not meet the safety requirements we shut the place down or we ask it to recall its product.

We do not ask the educational industry to recall the defective products it produces, students who cannot do math and who cannot even read the certificate they are given in grade 12. The point is we can ask for accountability. We do not have to set the curriculum and so on, but surely we can ask for accountability.

That a university would bump up its student intake with people it knows right off the bat have no hope of graduating or even passing the exams just so it can fill its coffers with extra money because it is paid on the number of students it accepts surely is a false premise and false hope for the students and a total and absolute waste of taxpayer dollars. It knows and we know that many of these students who are accepted with less than minimum requirements will not graduate.

If the hon. member cannot understand that, he has a serious problem.

Income Tax Amendments Act, 1997Government Orders

11:25 a.m.


Gordon Earle NDP Halifax West, NS

Mr. Speaker, the hon. member mentioned hundreds of millions of dollars leaving our country, escaping taxes and not being available to our economy. I agree with him that it is happening. I think that points to the need for tax reform.

This bill is really only scratching the surface when we talk about tax reform. Although there are some good things in this bill, in reality this bill is an attempt to cover over the massive cuts that have been made affecting our social programs, our educational programs and our health programs.

We need tax reform to meet the education and training needs of our youth. When I say that I mean not just the youth in our affluent societies but I am talking about rural youth and youth in our small fishing villages. I am talking aboriginal youth who through historical wrongs have not been able to obtain the education required to compete in today's society.

Would the hon. member be in favour of tax reform that would incorporate for example an excess profit tax that would get at some of the astronomical profits that are being reaped by the huge bank mergers that we see today and by the large corporations, whereby some of that profit could be reinvested in our communities in a way that would help our young people obtain their education?

Would the member be in support of a true tax reform which would lessen the disparity that we see in society so that some of those tax dollars he talked about that are leaving the country could be reinvested in our youth?

Income Tax Amendments Act, 1997Government Orders

11:30 a.m.


John Williams Reform St. Albert, AB

Mr. Speaker, in response to the hon. member's question, the NDP always seem to be envious of the successful. That envy tends to cloud its judgment.

He talked about the banks. I am not sure if the member is aware that banks actually earn money abroad. Over 50% of the profits of some large Canadian banks are earned abroad and come to Canada. Therefore they pay Canadian tax. That money is distributed to Canadian shareholders. That money also reduces the cost of banking in Canada.

I am not arguing for the banks; I am just setting out the facts. To talk about an excess profits tax is a standard line of the NDP, which is envious of the successful. It feels that by taking from them and giving to the poor somehow we would resolve the problem. In thousands of years we have yet to resolve the problem and I do not think the NDP has the answer.

That does not absolve the education industry from its obligation to produce an educated child. Surely that is what it is in business to accomplish. If the industry cannot do it we should ask serious questions about why. Why is it still in business if it continues to produce children who cannot read or operate in a complex world, as the member has so readily admitted?

Income Tax Amendments Act, 1997Government Orders

11:30 a.m.

The Deputy Speaker

I regret to advise hon. members that the time for questions and comments has now expired. Also the time for 20 minute speeches has now expired. We are now into 10 minute speeches without questions or comments.

Income Tax Amendments Act, 1997Government Orders

11:30 a.m.


Brent St. Denis Liberal Algoma—Manitoulin, ON

Mr. Speaker, inasmuch as this is my first opportunity to speak to the Chamber in 1998 I wish you and my colleagues in the House the very best for 1998. I look forward to a very productive year in parliament.

Bill C-28 is another example of a caring Liberal government. In the measures included we see numerous initiatives to make our tax system fairer. We agree we have a way to go, but it is under the leadership of the prime minister and the government that we are able to bring forward effective changes which little by little will bring us to a point where Canadians will feel their tax system is fair. All participants in the economy will be giving what they can and receiving what they need.

The bigger message in the legislation is that the government is prepared to show leadership despite some very mixed messages that we hear from the opposition.

I could not help but notice, in listening to the previous speaker, that on the one hand the Reform Party might want the federal government to get out of many areas of jurisdiction in which it has traditionally been involved.

For example, the social system, the health system and the post-secondary education system as Canadians know are funded partially by federal transfers to the provinces. The Reform Party would begrudge any involvement by the federal government in any of those areas.

It says that sometimes but I also hear that the federal government should be involved. I happen to be one who believes the federal government has a rightful place in the three great pillars which constitute the social aspect and the social democracy in which we live: education, the social welfare system and health. I would in fact rather see us more involved than less involved.

Bill C-28, in exhibiting our desire to be fairer with all Canadians, is an indication that we would like to be fairer in our relationship with the provinces and ideally with municipalities in delivering very important social programs.

Let us consider the announcement late last fall wherein the federal government offered to the provinces an increase in what is called the Canadian health and social transfer. The amount of funds to be transferred under the cash transfer to the provinces was to be increased to $12.5 billion. In combination with the tax points the provinces have it would certainly give the provinces the flexibility and the funds they need to deliver effective health, education and social services.

I travel quite a bit across my large riding of Algoma—Manitoulin. I know, speaking for a moment about the health system, that great change is taking place in Ontario which is being felt very graphically in rural Ontario. Small rural hospitals of varying sizes in places like Elliot Lake, Thessalon, Wawa, Hornepayne and elsewhere certainly need the province of Ontario to come forward with a vision.

Without wanting to criticize any province, it is important that the vision at the provincial level be guided by a national vision so that Canadians from coast to coast can feel that they are indeed Canadian regardless of where they live. The services to which they have access should be the same regardless of income level or the region in which they live.

Recently I had a chance to travel in central and northern British Columbia. Some of the rural health issues there are almost identical to the health issues faced by smaller communities in rural northern Ontario.

Many of my colleagues and I believe the federal government should have a stronger place in the areas of education, health and social services.

I am not suggesting that we should take away any authority from the provinces, but initiatives such as the prime minister's millennium scholarship fund are examples of how the federal government can show leadership in partnership with students in this case and with the provinces.

Too many challenges are facing the country for us not to have a national vision in such important areas as health, education and social services. Citizens around the world look at Canada and wish their countries were like Canada. First they see how we have traditionally cared for each other.

We cannot stay still. We have to keep improving our nation. We have to keep improving the place that each of our citizens has in this great nation.

When any federal government in Canada looks to the future—and in this case it is the Liberal government—it has to be a future where the national vision is reflected appropriately throughout the regions and the provinces.

In some cases there must be special recognition of particular circumstances in a region. However no citizen, be they of Nova Scotia or British Columbia, should feel they do not have adequate and full access to the values and benefits of being Canadian.

When we talk about health we must first talk about the health of the economy. If it were not for the fact the government was capable of dealing with a massive deficit that it inherited when it was first elected in 1993, there would be no opportunity or reason today to be debating what we can do with our health, educational and social services systems.

We need to ground all these programs, all these values, in a strong and healthy economy. The federal government at all times must show leadership. In showing that leadership we have been able, in partnership with Canadians who have joined in the sacrifice, to turn an important corner in the history of our economy.

When interest rates remain at historic lows it is a benefit to citizens, to consumers. It is also a benefit to the provinces which in their own right are dealing with their deficits. As my colleague suggested, and rightly so, the best tax break we can provide to Canadians is low interest rates. Those who need it the most will benefit the most.

I emphasize the government has exhibited month in and month out that it is a caring government. It displayed that throughout the last parliament and will continue to do so throughout this parliament as we approach the next millennium. A caring government attempts to balance the needs of all citizens regardless of their station in life.

I encourage my colleagues on all sides of the House as we enter the first months of this new parliament to consider that Canadians want a strong central government. My constituents have told me that time and again. They do not want an overbearing federal government which dictates to the provinces and to others what it thinks is right. They want a strong central government which is willing to lead, willing to listen, and willing to act on a consensus when a consensus is reached. They do not want a government which sits around, dithers, hems and haws, and waits for something to happen.

Canada is the best country in the world because past governments, mostly Liberal governments, have responded to the best of what is Canada and to the very best of what it is to be Canadian. We will continue to do that. Certainly there will be a few bumps along the road. From time to time we will make mistakes. I am sure we would all agree with that. By and large the greatest thrust of our progress will be for the benefit of all Canadians.

I certainly support the prime minister in his initiative on the millennium scholarship fund. I believe we need to be directly involved more and more with Canadians when it comes to health, education and social services. I do not want to take anything away from the provinces, but I believe the provinces need a strong federal government that is willing to guide, lead and preserve from coast to coast to coast the best of what is Canada.

Income Tax Amendments Act, 1997Government Orders

11:40 a.m.

The Deputy Speaker

Resuming debate with the hon. member for Témiscouata et cetera.

Income Tax Amendments Act, 1997Government Orders

11:40 a.m.


Paul Crête Bloc Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC

Mr. Speaker, the name of my riding is indeed quite long. It is Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques. It is the name of an area in the lower St. Lawrence region.

I am pleased to speak on Bill C-28. Since it deals with measures announced in last year's budget, we are already in a position to assess how effective this budget has been. In Canada and Quebec today, I think that what matters most to taxpayers in assessing their governments' effectiveness is whether the government measures put in place to fight the pervasive spread of poverty in every province are working.

Because of some kind of arbitrary division, the gap is growing between the higher income earners and the people left on the scrap heap at the bottom of the income ladder, those who are affected by the measures contained in this budget, those who must face the so-called spring gap when EI benefits run out. Having decided that seasonal workers become unemployed by choice, this good government figured that cutting their benefits and benefit periods would automatically make them find work and increase their availability for work.

But that has nothing to do with real life. In Quebec and Canada, there are seasonal industries that will remain seasonal, and workers whose expertise is in these industries are not necessarily prepared to switch overnight.

In our society, if there is a way to fight poverty, it is through employment. To say that this is the key does not mean much. Everyone knows that it is the key. But to make things happen today, in our society where a rather significant number of jobs are created for people with the right education and training, who even take the jobs of their less educated fellow citizens, we must admit that this creates a shortfall of jobs for individuals with much less formal education.

On this point, we can say that clearly the current government and its budgetary measures fail to meet people's needs. We have all seen in our riding offices an increase in the number of people coming to see us who have reached a point of desperation because of the federal government's restraint programs. People are not always aware that cuts to provincial programs are caused by provincial transfer payments. However, we members of Parliament all know that the fight against the deficit took place primarily on the backs of the unemployed, low income earners and people who need the services provided, such as health care.

The member preceding me cited the importance of respecting the five criteria in the Canada Health Act, but there is no need to be hypocritical about it. One cannot ask that certain criteria be respected while systematically cutting the funding available for such things.

The federal government had planned to cut over $48 billion in all forms of transfer payments, from the early 1990s. Last year, they decided to make a big deal of the fact that they would be cutting only $42 billion. However, $42 billion in cuts is $42 billion in cuts. It means that the people who benefit from the various forms of transfer payments will do so no longer. It means that provincial governments are forced to make do with less money and to make financial choices.

In judging the actions of the federal government, therefore, one can say that, yes, the deficit must be attacked. Perhaps it ought to have been done differently. Perhaps there are places cuts could have been made in a far more worthwhile way. Looking at decisions like the one on the helicopters, we how to wonder why, a few years down the road, we have come back to solutions very similar to the ones the Conservatives opted for. The taxpayers of Quebec and of Canada end up footing the bill.

Again, looking at what it cost to buy silence in the Pearson airport affair, we have expenses that could have been avoided if more effective policy decisions had been made. When money is spent like that to buy peace, for compensation, it means that less is available to put into the marketplace, less of the government's wealth is available to share around.

That function of our system is, unfortunately, very complicated. If there is one shortcoming in the Canadian federal system, this is it. Despite what may be said in Canada, the federal government has always been a kind of distributor of wealth. It has, particularly, been the one behind the deal giving Ontario most of the industrial and manufacturing sector, while the Atlantic provinces and Quebec had far more of the transfer payments. A few years ago, this sort of tacit agreement that had been maintained by the federal government for a number of years was no longer able to stand up to financial pressures, and a solution to the problem was found.

Rather than deciding to boost regional economies by means of transfer payments, they opted to simply pull the plug, leaving people in the regions with the most primary industries in a crisis situation.

Today, in the maritimes, people are wondering if they will have enough money to get through the fall. We have had to make representations, to the fisheries committee in particular, to extend the TAGS, because what had been set up by the federal government as a means to diversify the regional economy had become nothing more than a subsistence program. Nobody is saying that people do not need money to survive, but the federal government has not yet looked into the solution of diversifying the economy. The best way of doing so is for it to get out of areas of jurisdiction that do not concern it and allow the governments with responsibility in these sectors to take action.

I have one piece of advice to give the federal government for the next budget, as a result of the prebudget consultation I did in my riding. All told, 500 people responded to the survey I had conducted. A number of community groups representing various sectors came to see us. A spokesperson for the KRTB community development corporation said: “The danger after a period of economic restraint is that the government will start spending again to please the electorate”.

In other words, we do not want the federal government to add new programs to those already in place, merely to raise its profile, to get exposure, or to look good. What we want is the money to be given back through transfer payments, so that the provinces, which have jurisdiction over education and health, can act efficiently.

We also heard the following comment from someone representing the unemployed: “We ask that the EI benefit period and amount no longer depend on the financial needs of the government but rather on those of the workers, who pay for insurance in case they lose their jobs”.

People in our region clearly understood that the employment insurance program has become the federal government's most effective tool to collect money in order to reduce the deficit. This has nothing to do with the program's objective. It is merely a way to collect money through regular source deductions, which are great for raising funds. The government has not yet taken measures to set up a separate account, as asked by the Auditor General of Canada.

People who have to draw on employment insurance, who make contributions to entitle them to do so, are asking that the plan serve as it was intended. In this regard, the Bloc Quebecois made a major contribution in the fall. It was very well received all round and even received the support of the NDP, especially the NDP members from the Atlantic region, where people are affected by this problem.

We hope the Minister of Human Resources Development will consider the six bills we introduced so that the reform may be changed. It may have been appropriate to go from weeks to hours, under the reform, but there are a lot of negative elements to the reform, things that must be changed, including monitoring of the fund in order to ensure that the money is really being used as intended.

We are on the eve of a new budget, which will be presented at the end of February. The message from the people was clear during consultations. I asked my constituents the following question in the survey: What should the federal government do with the expected budget surplus? Here is how they responded: 12% wanted lower employment insurance premiums; 20% wanted improvement to the situation of seasonal workers and those starting to work; 28% wanted funds transferred to Quebec and the other provinces in Canada for health and education and 18% wanted reduced taxes.

My constituents recommend, and I will conclude on this point, that the budget surplus go primarily to those who contributed most to the fight against the deficit for their efforts and that we return as quickly and as best we can to fairness in the way government distributes wealth within Canada.

Income Tax Amendments Act, 1997Government Orders

11:55 a.m.


Reg Alcock Liberal Winnipeg South, MB

Mr. Speaker, I was surprised by the comments of the previous speaker, my friend from Riviere-du-Loup. I know the member quite well. We served on several committees together and I know him to be very thoughtful on policy. But he may have been mistaken when he came into the House. The bill we are debating today is Bill C-28, an act to amend the Income Tax Act, not legislation referring to employment insurance.

I would like to reflect a bit on the all of the debate I have heard here. I was not necessarily going to speak on this bill when it first came forward because I assumed that it would slip through this House very quickly because of what it contains. I am surprised by the speeches that have been made by the Reform Party and the Bloc and the New Democrats when they look at this piece of legislation.

The member for Riviere-du-Loup has just taken some time to tell us about a series of other very important issues of concern to him and his constituents. But I would ask him and I would ask other members, when it comes to the substance of this piece of legislation, exactly what part of it they are against. Are they opposed to the increase in funding for health care and education and social programs? Are they opposed to the improvements in the registered education savings plan that allow people who can contribute to registered education savings plans to have greater ability and greater flexibility in the management of those plans?

It is not the only answer for education savings. There need to be other strategies and other supports brought to bear, because people in Canada have differing levels of ability or differing levels of economic capacity. But for those who can save, the registered education savings plan is a very legitimate strategy. To make that more reflective of today's costs and to make that a more efficient instrument strikes me as a very positive change.

Perhaps they are opposed to the changes in transfer pricing. This has been an argument that as the economy has globalized I have certainly heard raised by the New Democrats and others in this House, the concern about companies being able to shift their profits across borders by the way in which they price internal services within their corporation. We have changed that. Is that not an improvement? Is that not something that if the member for Riviere-du-Loup went back to his 500 constituents and asked them what they thought about it that they would support?

We have increased the tax credits for film and video production services. We have introduced a new refundable 11% tax credit to provide economic development assistance to film and video productions produced in Canada. For those of us who are concerned about our cultural industries in this country and for those of us who see those industries as extremely important in terms of job creation and skill development and in terms of the economic strength they bring to this country and our ability to celebrate our own culture, is that not a good thing? If the Reform Party were doing what it claims to do, representing its constituents, would the constituents who have asked about that not feel that was a pretty positive move? Certainly the strength of the film industry in British Columbia and Alberta is well known.

If we go down to the other major changes, they are all changes designed to do something I have heard people on the other side of the House talk about repeatedly: make the tax system more fair, take out some of the inequities, prevent people from manipulating the system to gain additional benefit they would not normally be entitled to. That is what this bill talks about.

I wanted to stand up today in the end to thank and to congratulate the Minister of Finance. I was part of the SSR committee that first looked at changes in social service, as was the member for Riviere-du-Loup. When the question of the CHST was first raised, a lot of us were extremely concerned.

We were concerned both about the cut and the reduction in support for important and necessary social programs in Canada. We were also concerned about the loss of control, the loss of position, the loss of authority on the part of the Government of Canada to set a framework for social services across the country.

At that time it was pointed out to us by others, including the Minister of Finance, that we were in danger certainly in my province and the province of Quebec and some others of seeing the cash portions of our payments go to zero in health care and losing all of our ability to enforce the principles of health care. It was felt that by bringing all of these programs together under one legislative umbrella it would give us more strength to maintain a national presence and national standards in these important services.

After a long argument in our caucus the Minister of Finance agreed to set a floor of $11 billion. I am delighted to be able to stand here today after four years of very, very tough decisions by this government, courageous decisions. It is easy to make the spending decisions but it is tough to make the decisions to cut and this government has done that. It has taken the tough decisions and tough action to get its spending under control. Finally we are beginning to see some modest benefit from that.

Income Tax Amendments Act, 1997Government Orders



Ken Epp Reform Elk Island, AB

You have got to be kidding.