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



Reg Alcock Liberal Winnipeg South, MB

The member across the floor says “you have to be kidding”. Well of course he is not well known for his ability to do math.

The fact is we had a $42 billion deficit. We are on the verge of no deficit. We are on the verge of a balanced budget. For the first time in more than two decades we are going to benefit from that. For the first time we are going to see an increase, an ability to put some strength back into our health care system and put it on a firmer foundation. That is a direct result of the actions of this government which was prepared to make the tough decisions.

The government will have to be very careful, very cautious and very judicious in the decisions that need to be made in this coming budget. Everybody in this House has a list of the things they would like to see the government spend on. My personal advice to the minister is to be cautious. We have not seen that surplus yet. We have not seen a balanced budget yet. We do not know how long it is going to be balanced for. We want to make sure that we have made that change absolutely solid. Then let us make some judicious investments in our collective future.

The member for Rivière-du-Loup and I worked on a committee that produced a report for the Minister of Finance on education financing, particularly on the support for students. We have a problem in this country that faces every student who attends university now. It has reached the point that the costs and the debt load students are having to take on in order to attend university have simply become so large that many of them have to contemplate postponing or not going ahead with post-secondary education. That situation certainly is not in our best interests. There are a number of programs like that.

I have concerns about research and development and the need to strengthen the councils that fund the essential research that builds the quality of life 20 years out. It is the core research that is done today which our quality of life is built on, as we reach the age of retirement in my case, or my children reach the age of majority. I would like to see some more investment in that. However they all have to be done in the context of fiscal responsibility, something that this government knows about better than any other party in this House.

I would simply like to close by thanking the Prime Minister and the finance minister after four years of very hard work for this first reinvestment in health and social programs.

Income Tax Amendments Act, 1997Government Orders



Ken Epp Reform Elk Island, AB

Madam Speaker, it is really tough to follow that stand up comedy act by the member for Winnipeg South but I will try to do my best.

It is absolutely incredible. The Liberals have it down to an art how to communicate that they are wonderful when in fact they are doing exactly the opposite. They say “We are the defenders of health care”, and at the same time they cut and burn and slash the transfers to provinces.

It is a simple strategy. I have to congratulate them. If we were fighting a war, they would be on my team because they know how to win a war by making everybody else take the hits. Their own soldiers stand up and don't get touched at all because they are somehow able to communicate that misinformation by saying “We are not responsible, it was not us. We cut $7 billion out of health care and transfers to the provinces for education and welfare. We cut that but no, it was not us”.

The provincial governments landed up taking the heat for it. Then the Liberals have the gall to stand up in this House and criticize governments like the Harris government in Ontario because of the cuts to health care and education that government has found it necessary to make as a result of the fact that the funds from the federal government have been drastically cut. Now gingerly a little bit is being put back in.

Somehow the Liberals have the ability to spin it in such a way that the Canadian people do not look to the real depth of the message. They buy into it and say “Let us send those Liberals back to Ottawa. They really know how to manage the economy”.

Let us look at the facts. This government claims to be so wonderful and talks about having brought the deficit under control. That is only one part. I will put it this way, it is one leg of a four-legged stool. The stool is tottering but they finally got that one leg and I will gingerly applaud them for that.

I am glad the Liberals are borrowing less than the Conservatives were borrowing. Had we still been borrowing at $42 billion per year, our fiscal picture would be much more bleak than it is now. Yes, they have slowed down the rate of borrowing to the pace where they are now borrowing only about $9 billion a year instead of $40 billion a year. While these Liberals have been in power since 1993 our debt has gone up.

I started this political thing. I was one of those people who was not involved in politics at all. I never belonged to a political party until I joined Reform. But I got so cotton-picking upset about the mismanagement of the Government of Canada since Trudeau took power way back, spending more money than we were taking in, adding to the debt and transferring the taxpayers' hard earned dollars not into programs that were needed by Canadians but to lending institutions because of the debt and the interest payments on them.

I got involved. I remember when I first started. It was in the fall of 1991. When I was first thinking of running as a candidate I gave a speech and said that it was deplorable that our debt was $420 billion. The Conservatives took it from the $320 billion which the previous Liberals had left them to $420 billion. In nine years they added $100 billion to the debt.

The fact is that this government since 1993, in four and a half years, has added almost $100 billion to the debt. The Liberals are twice as good as the Conservatives. While they stand up and say that they are wonderful, that they are not borrowing so much, the fact of the matter is that still, because of the accumulated debt and the large interest payments, the Government of Canada, on behalf of the hard working taxpayer of this country, has driven us into debt $100 billion in round figures more than when the Liberals took office in 1993. And like I said, they have the gall to stand up in front of Canadians and say “Vote for us again because we are wonderful, we are really solving this problem”. I find that unconscionable.

I am going to say something else about this whole system. We are talking today about a tax bill. What are taxes? In the olden days as we used to say, it was a king or a lord who had power over the subjects in his little kingdom. He could say “For me to have my castle, my gold and to run my armies and so on, you will each pay a certain portion of what you earned, a certain part of your crops, or whatever”. They gave it as a law.

It was a bit of a symbiotic relationship. Those subjects benefited from the protection of the king or the lord. The armies were really there to protect the king's or the lord's investment in those people since they were the source of his wealth.

In a democracy taxes are really a contribution made by hard working, risk-taking workers and entrepreneurs. They are saying that they will pay into a public purse the amount required to run their governments. The taxes in this country are killing families and poor people. It is incredible. The Liberal government says over and over that it is wonderful and cares for the poor people. There are people who make $18,000 or $20,000 a year, some of whom are single moms, and they still have a tax bill to pay.

During the last Parliament there was a big controversy over who should pay the taxes on the child support paid by a supporting spouse to a custodial parent. This government had the gall again to increase the taxes when it said that the person paying the money will pay the taxes instead of transferring the taxes to the spouse.

The government could have had the person pay a deduction in advance which the lower paying taxpayer could get back in the case of an overpayment. Instead the government said no, that it would just do it. The government ended up taking millions of dollars away from the poorest in our society. Yet they stand up and say “We are the Liberals who look after the needs of the needy in this country”. Pardon me for being sarcastic but the truth and what the message is are on opposite sides of the spectrum.

I will be so bold as to suggest that taxation in this country has become a form of legalized theft. If someone came into my house and took half of everything I had in my house, including the left speaker of my stereo system which is worth $20 and my old black and white television, I would phone the RCMP and ask them to get there tout de suite to arrest the guy who was taking half of my stuff. Yet I allow the federal, provincial and municipal governments to take from me by the coercion of taxation, which I call a form of theft, 50% of my earnings every year. If I do not co-operate with the system I am told by government bigwigs that I am not a good citizen. Why should I?

I am certainly willing to help those in need, absolutely. I do it voluntarily. On a number of occasions I have come across people with needs. Whenever I am able to with my after tax dollars I love to help people. But for me to send it to Ottawa, have this government twirl it around in its centrifuge, have 70% of the money I have contributed spill over in government waste and inefficiency, have some of it doled out to its political friends, and if there is some left over it may go to the poor, I am not content with that. That is theft and it is wrong.

This is what I would like to see in a taxation system. We should fix the tax system so Canadians get to keep some of their hard earned money and use it the way they see fit, which includes helping their neighbours and others who need help.

It is absolutely absurd the way this and other governments impose tax upon tax upon tax. We get taxed with income tax and we pay our municipal taxes with the money left over. My municipal tax bill is around $2,500 a year and I have to earn $4,000 to pay it because the federal and provincial governments first take 35% or 40%. With the money I have left I write a cheque to my municipality and my $4,000 is gone. It goes on and on and on.

This government can tinker with taxes, like it is doing with this bill, for decades. We will never rest until it starts lowering taxes, making the tax system fair and making it less onerous.

Income Tax Amendments Act, 1997Government Orders

12:15 p.m.


John McKay Liberal Scarborough East, ON

Madam Speaker, I rise in support of Bill C-28. It is an axiom in government that what you do right you do not sell to get credit for, yet when we are giving $1.5 billion back to the system the opposition still criticizes us.

We are receiving this fiscal dividend today because of good fiscal management.

In the years 1993-94 the choice was to raise taxes or cut programs and transfers. It was apparent then, as it is now, that Canadians wanted a mature and balanced approach to government finances. Balance addresses program spending, provincial transfers, tax cuts and debt reduction.

In the fiscal year 1997-98 the Government of Canada reduced market debt by approximately $16 billion. It also passed on a tax cut of $1.4 billion with the reduction of EI payments, approximately 1% of government revenues.

In addition, it added $850 million to a tax credit, which is about a half-point in government revenues. For the first time in 30 years it actually reduced the GDP to debt ratio.

There was a tax cut, a tax credit and a paydown on the debt all within one fiscal year. That is pretty good government which the people of this country saw fit to re-elect.

The bill addresses the issue of continuing devolution of authority under the CHST. It is clear that Canadians do not want their bureaucrats falling all over each other to administer programs. Surely we can agree that it is simply silly for a food processing plant to have a federal meat inspector, a federal health inspector and a federal fish inspector, not to mention the provincial health inspector, the provincial food inspector, et cetera, et cetera. Sometimes they even arrive on the same day.

What small business has not had the experience of the federal income tax auditor, followed by the federal sales tax auditor, followed by the retail sales tax auditor, et cetera, et cetera, all asking for the same material, only organized in a different way?

Canadians spoke about this sort of duplication and their message was loud and clear. By withdrawing from a number of these services in these overlapping jurisdictions the government put an end to this kind of waste. It was a clear message from Canadians to which this government responded.

In order to properly fund the devolution of authority and yet still see that government services are provided, the government entered into the CHST. Cash and tax points will approximate $25 billion this year. They are roughly equal. All the provinces budgeted this year on the basis of $11 billion in cash. However, with the passage of this legislation the provinces will anticipate an additional $1.5 billion in cash. For the province of Ontario, the impact of raising the cash floor will be approximately $2.5 billion over the course of the next five years.

In the fiscal year 1997-98 Ontario will receive about $9.1 billion, or 19% of its operating budget. For each man, woman and child the federal government will send to the province of Ontario $800.

However, the more sanguine question is can Canadians from Ontario truly trust that the Government of Ontario will apply this increased money to the needs of the vulnerable people in the province of Ontario? Will the CHST go to the 7,000 homeless people in the GTA? Will the money help those who need help and those who are being removed from their beds in mental institutions in the province?

Can refugees expect that the settlement moneys will arrive while they settle in our country? Or will we be surprised when the money goes to fund the $5 billion deficit primarily created by the ill advised tax cut of the province?

Ontario will have a greater fiscal deficit this year than the entire federal government. Does this make sense? A tax cut for someone earning $250,000 results in a $15,000 cheque coming back from the province of Ontario. A tax cut for the average or medium taxpayer in the province, that is $33,000, means $250 in his or her pocket. In some respects this is a tail about how to govern and how not to govern.

Ontario's government under Premier Mike Harris and its hand maiden, the Reform Party in this House, would urge us to do a tax cut in priority to all else. Mr. Harris has increased Ontario's debt each year and I, if I were a member of the Reform Party, would not be too enthusiastic about claiming credit while the debt of Ontario goes up from $88 billion to $108 billion and is expected to increase by $30 billion over the course of Mr. Harris' mandate. If this is common sense, I for one would prefer that we absent ourselves from a common sense revolution.

Two-thirds of the $30 billion debt increase will be attributed to this ill advised tax cut. Mr. Harris has turned homelessness into a growth industry in our province. Mayor Lastman has seen fit to create a task force on homelessness but the premier, feeling the political pressure no doubt, has also created his task force on homelessness, which will be funded by and created by parliamentary assistance. I will not be overly sanguine as to the report itself as those lapdogs report to the premier.

In my own riding of Scarborough East homelessness is such an exaggerated and exacerbated problem that we are now shipping people off to St. Catharines and Peterborough.

As I was saying, the tax cut for a person in the province of Ontario who earns $250,000 is $15,000. So Mr. Harris receives an A+ for that tax credit from that individual. Mr. Harris' perverse policies are putting Canada's largest province in the debt hole faster than the Canadian government can get the rest of the country out of it. Canada cuts debt and Ontario increases debt. Canada restores necessary program financing and Ontario turns program cutting into a fiscal mantra. Canada targets tax cuts and Ontario targets tax cuts for the wealthy. Ontario is trashing the best of times while this government struggles to include everyone in the rising prosperity of the country.

Canadians have given a very clear message: apply this money to health care and education. They are not asking for a tax cut. They want their health care systems and education systems restored to being the best in the world. They want to be confident that when they go to a doctor they will receive the service in a timely fashion, accessible, publicly administered and of the highest quality. They do not want to do a wallet biopsy every time they need a medical service. They want to know that their children will be the best educated children in the world.

Even when this government reduces transfers those reductions only represent 2% to 3% of provincial revenues. Even with these reductions a number of provinces have been able to balance their budgets. Sadly Ontario too would have had a balanced budget except for this ill advised and foolish tax cut.

Ontario does not have to be running a deficit. I am not at all confident that this $1.5 billion increase, of which Ontario will receive a substantial proportion, will be directed to the most vulnerable in our society. Regrettably I believe this extra money will go directly to fund this tax cut.

Mr. Harris, Canada just wrote you a cheque for—

Income Tax Amendments Act, 1997Government Orders

12:25 p.m.


Ken Epp Reform Elk Island, AB

Madam Speaker, on a point of order, I regret to do this but I would like to plead the rule of relevancy. We are talking about the federal government and federal taxes. This member has spoken about nothing but provincial systems to this point. I would like to ask you to have him brought back on topic.

Income Tax Amendments Act, 1997Government Orders

12:25 p.m.

The Acting Speaker (Ms. Thibeault)

I must remind the members that there is a rule of relevancy in our debate today, as always.

The hon. member's time has expired.

Income Tax Amendments Act, 1997Government Orders

12:25 p.m.


Jason Kenney Reform Calgary Southeast, AB

Madam Speaker, given the rule of relevance I will address the bill, but I would like to begin by commenting some of the remarks of the hon. member for Scarborough—Rouge River.

He and other members of his party seem to have taken the occasion of this debate on a technical tax bill to comment at length on the fiscal policies of the Government of Ontario. And well they should. The fiscal policies of the Government of Ontario have been deeply affected by the fiscal policies of the Government of Canada.

Many of the hon. members of the government have spoken about how the government is now offering a cash floor for transfers under the Canada health and social transfer to the provinces and what a wonderful commitment this is to our social programs, to health care, higher education, welfare and so forth. Rarely have I heard such duplicity in this place from a government which has just proceeded from four years of hacking and slashing those very same transfer payments.

The government ran in 1993 on a commitment to increase those transfers and proceeded to cut them from over $18 billion to under $12 billion in cumulative annual cash transfers to the provinces. These cuts had to be absorbed by the provinces without forewarning and without adequate consultation. It was the worst kind of downloading. For these Liberals to stand up in this debate in this place and proceed to criticize the very governments that had to absorb their cuts, the cuts they lied about in the 1993 election, I find really quite offensive.

Of course I would not suggest that any particular member mislead anybody. I am simply saying the Liberal party mislead Canadians in the 1993 election. It is a matter of record.

The Ontario government had to absorb those cuts, as did my province of Alberta. It is very interesting because this government is going to have to see the chiropractor, it has been slapping itself on the back so much about its fiscal policy, a fiscal policy which saw the government cut transfers to the provinces by nearly 35%, while cutting its Ottawa federal government program spending by only 9.3% .

The government did not balance the budget, taxpayers balanced the budget by working harder and paying more taxes while seeing federal revenues grow by $26 billion in the last three fiscal years. At least $8 billion or $9 billion of those new dollars came about through tax increase imposed by this government in this Parliament.

That does not include the huge hidden tax burden of deindexation of the tax brackets which was imposed by the Mulroney government in 1986 and which has been a destructive economic policy continued by this government. The tax deindexation has sucked a cumulative $13.4 billion out of taxpayers since 1993. It has pushed tens of thousands of low income people on to the tax rolls because we have not indexed the basic personal exemptions and the marginal rates. People who should not be paying any taxes are paying them today because of the callous tax policy of the Mulroney Tories and the Chrétien Liberals.

I want to directly address the hon. member's assertions regarding the fiscal policy of the Government of Ontario. He criticized the Ontario government by saying that Canada was cutting debt while Ontario was increasing its debt.

I do not know if the hon. member has ever seen the public accounts of Canada or if he has read any of the budgets of his Minister of Finance. I have and what I see is that since the Liberal Party came to power in 1993 it has added nearly $100 billion to the stock of the national debt. The scandalous $500 billion left to us by the Tories is now nearly $600 billion. That is not a subtraction but an addition.

Most Liberals should be assigned to a mandatory remedial math course because they think adding to the debt means subtracting from the debt. They added $100 billion to it, taking our debt servicing cost up to $47 billion a year. They pontificate about their commitment to social programs but they are spending more on the interest on the debt, the equivalent in tax revenues of $6,000 per family of four. That is how much they spend on debt interest. That is the amount of money spent altogether in the government on health care, education and old age security combined. Just what the government is spending in interest on the national debt, which it has increased by $100 billion, is almost equivalent to the entire annual budget of the Government of Ontario.

The greatest fraud in what we have heard in terms of the fiscal policy of Ontario is that it has made cruel, hard hearted cuts to social services for Ontarians to fund its tax giveaways to the rich. The tax cuts supported by Ontarians and laid out in the 1995 election in Ontario are steeply progressive. People at the bottom end of the tax brackets will feel the biggest proportional impact of the tax relief.

I hope members will listen to me because this is the most important fiscal lesson of the Harris miracle. The revenues in the Government of Ontario have increased since 1995 faster than they were projected to. Yes, it is true, the Ontario government cut the tax rates but the revenues went up because more people are working and paying taxes. The government has not had to cut a dime from any program to finance the tax cuts because the tax cuts have financed themselves through increased economic growth.

It is a Tory government in Ontario but it is unfortunate that the Tory Party here, the red Tory Party here, has publicly criticized Mike Harris' fiscal policy. The hon. member for Markham has publicly said that if the Harris government continues with its hard hearted policies it could affect the federal Tory Party. Imagine a member whose party is at 12% in Ontario saying that the Mike Harris' party at 35% might negatively affect their electoral outcome.

The point is that Ontario government's revenues have gone up as the taxes have gone down. That is why the fiscal policy of the government is not working. As it pushes tax rates up it continues to stagnate economic growth. We continue to see nearly 9% unemployment, 16% youth unemployment and shrinking family incomes. Now we see that our GDP for the last quarter is down for each of the last three months. We now see that our standard of living has declined faster than that of any other country in the OECD over the past 20 years. The government may call that a fiscal record to be proud of but I call it a fiscal record to be ashamed of.

If the government wants to emulate a fiscal record it should look to the Government of Alberta which cut its own program spending not by 9% but by 20% and did not complain one whit about the transfer cuts, the hundreds of millions of dollars in transfer cuts imposed on it by the Liberal government.

It just absorbed those cuts and maintained what are by far the lowest tax rates in Canada, allowing it to create the lowest level of unemployment, the highest level of growth, a shrinking level of poverty and a growing level of family income.

The moral of the story is that lower taxes mean more growth, more revenues and better fiscal balances. That is a lesson that I do not think this government will learn any time soon.

Income Tax Amendments Act, 1997Government Orders

12:35 p.m.


Judi Longfield Liberal Whitby—Ajax, ON

Mr. Speaker, I am pleased to rise to speak in favour of Bill C-28 today because the bill is about the basic values of all Canadians. It is about people helping other people. It is about Canadians helping Canadians. It is about encouraging donations to registered charities. It is about encouraging and facilitating further investment in higher education. It is about the government's commitment to move forward together as a society without leaving anyone behind.

As Bill C-28 is a very lengthy and detailed bill touching many aspects of the Canadian economy, I will briefly summarize each of the major clauses of the bill before I focus my remarks on what I consider to be the more notable components of the legislation.

Touching most Canadians are the provisions of the bill to increase the cash floor for the Canada health and social transfer to the province from $11 billion to $12.5 billion. This would put close to $7 billion more over five years into the hands of provincial governments that are tasked with administering key social programs.

Bill C-28 also provides greater incentives to contribute to registered charities, providing their donors with the same level of tax relief as those who contribute to federal organizations and crown corporations.

We are encouraging investment in education by increasing the annual RESP contribution limit from $2,000 to $4,000 per beneficiary. We are changing the rules to allow parents whose children do not eventually pursue higher education to transfer the money into RRSPs.

Also included in the bill is the introduction of a new 11% tax credit for Canadian film and video production services. This provision is designed to provide much needed assistance to the Canadian film makers with labour costs associated with producing a film or a video.

In the legislation the government is also providing a guarantee that there will be no change in the income tax treatment of recipients of disability benefits when the insurance company paying the benefits becomes insolvent and employers take responsibility for continuing the level of benefits.

Bill C-28 changes the rules regarding loss trading. It eliminates the double deduction of personal tax credits for bankrupt individuals in the year of bankruptcy. It provides rules that apply when a corporation ceases to be exempt from income tax. It implements earlier announced measures concerning inventory held as an adventure of trade and how they must be valued for income tax purposes.

I said at the beginning of my remarks that I was truly pleased to stand here in support of the bill today. The years of deficit cutting were not easy for Canadians and they were not easy for government.

We knew that we could not continue borrowing on the future of our younger generations by spending beyond our means. Canadians knew this well and supported our efforts to bring the deficit under control. They knew there would be sacrifices but they also knew that the deficit was destroying the future of the country and that it had to be eliminated.

The NDP will argue that we gave up on the most vulnerable in our society, that we broke the deficit on the backs of the poor and the unemployed. The reality is that the deficit was destroying our ability and our capacity to care for the very people about whom the NDP says it is so concerned.

Today is a good day. Canadians are now beginning to see the rewards of making that commitment, which brings me to what I first considered to be the most important part of the bill.

As I noted earlier, Bill C-28 provides for an increase in the cash floor to Canada health and social transfer to the province to $12.5 billion from the $11 billion. The rise in the Canada health and social transfer cash floor will put close to $7 billion in additional funding into the hands of the provinces over the next five years to support key programs. The CHST consists of a combination of cash and tax points. Tax points are simply a reduction of federal tax rates, allowing provinces to raise additional revenues without increasing the overall tax burden. The value of tax points increases as the economy grows. CHST transfers, a combination of cash transfers and tax points, will total more than $25 billion in 1997-98. They will grow by at least 2.5% a year to reach more than $28 billion in 2002-03.

The Canada health and social transfer was introduced in the 1995 budget to reform the system of federal transfers to the provinces and territories as part of the Liberal government's efforts to improve the effectiveness of the Canadian federation. The CHST replaced federal transfers for social assistance and social services under the Canada assistance plan and for health and post-secondary education under established programs financing.

The CHST provides provinces with greater flexibility to develop and administer programs of provincial responsibility. The end of cost sharing rules has opened the door for provincial innovation in service delivery. Provinces have the flexibility to tailor services to their populations, allowing for more innovation such as community health centres in Quebec, for extramural hospitals or hospital services provided in homes in New Brunswick, and for quick response medical teams in British Columbia.

Key protections remain. The federal government continues to uphold the principles of the Canada Health Act with the power to deduct from cash transfers if provinces fail to meet federal criteria. Social assistance must continue to be accessible without provincial residency requirements to ensure Canadians are free to move unrestricted within the country.

Another advantage for the provinces of the CHST over its predecessors is its stability and predictability. CHST levels have been legislated over a five year period so that provincial governments may plan their budgets accordingly. Cash transfers are guaranteed not to fall below the $12.5 billion per year level.

The CHST is also fair. In the first year CHST levels are calculated based on provincial shares of former transfers. They are gradually being adjusted to more accurately reflect the population distribution among the provinces. By 2002-03 per capita disparities will be reduced by about half. Equalization transfers continue to be paid to provinces with greater need, to ensure that comparable services are available to Canadians no matter where they live.

In his last budget the Minister of Finance reminded us that a government relieved of the deficit burden is not a government relieved of its obligations. It is a government able to exercise its obligations. We have an obligation to encourage post-secondary education. Most business leaders will say that the key to success is to identify what we do best and then do it better than anyone else.

Canada has the capacity to turn out the world's most highly trained workforce. We are already doing so in the area of computer animation. Canada produces the best computer animators in the world. In particular the program at Sheridan College in Mississauga has been so successful that Walt Disney Studios has decided to build an animation studio in the greater Toronto area.

We can realize similar successes in other areas such as the high tech and telecommunications sectors, but we have to stress and continue to encourage post-secondary education with a focus on high technology areas.

The government recognizes this and I am pleased to see the increase in the registered education savings plan contributions contained in the bill. This is the second concrete move by the government toward securing a world class education system, with the creation of the millennium scholarship fund recently announced in the Speech from the Throne.

I have listened to Reform Party members criticize the bill over the course of the debate. It has been difficult to determine exactly where the Reform Party stands. One member criticizes the government for high taxes and high spending. Another Reform member will tell us that we have to spend more on health and education.

Because I wanted to know exactly where Her Majesty's Loyal Opposition stood on what I consider to be the general direction of the government, I paid a visit to the official Reform Party of Canada web site. I did not find anything there to help. In fact it became more confusing.

In one press release the member for Yellowhead criticized the government for not spending enough on education. In another the Leader of the Opposition called for 100% of any surplus to be spent on tax and debt reduction.

Finally, in the Reform Party's “Beyond a Balanced Budget” the party across the way says it will reduce government spending to $94 billion. That is a $6 billion cut. The reality is the Reform Party has no clear vision for Canada.

The provision in the bill encouraging contributions to registered charities is further evidence of this government's commitment to the core values of Canadians. Canadians want to help others in times of need. It is, in fact, the sentiment which unites us as a country, which results in the moving scenes we witnessed when the Saguenay and Red River Valley were ravaged by flooding or when so many communities were devastated in the recent ice storms.

I know that the thousands of dollars and the many volunteers from the riding of Whitby—Ajax helped and continue to help the relief efforts in eastern Ontario and Quebec. I know that every member can say the same about his or her constituency.

I urge all members to join me in supporting this piece of legislation and in helping to continue to build a nation which is the envy of the world.

Income Tax Amendments Act, 1997Government Orders

12:45 p.m.


Pauline Picard Bloc Drummond, QC

Mr. Speaker, Bill C-28 is a rather large bill containing more than 300 clauses. It is a real grab bag of provisions dealing with a variety of topics from employment insurance to transfer payments to the Income Tax Act.

Regardless of what my government colleagues might think or say, it is obvious that the Minister of Finance is trying to pull a fast one on us.

During the 10 minutes allotted to me, I will focus on two main points: the measures relating to federal transfer payments and certain provisions regarding the Income Tax Act. Hon. members will see for themselves how bad Bill C-28 is.

First of all, let us look at transfer payments to the provinces. These past few years, the federal government saved huge amounts of money at the expense of the provinces and the workers, both employed and unemployed. Bill C-28 could have been an opportunity for the Liberals to alleviate the sacrifices it has asked of them so far and for the coming years.

By the end of its second mandate, the Liberal government will have cut $42 billion in social transfers to the provinces. These transfers would normally be used to fund hospitals, postsecondary education and social assistance. These savings enable the federal government to play the knight in shining armour, while the provinces have to do the dirty job of implementing cutbacks.

The President of the Treasury Board spoke eloquently when he stated in the March 8, 1996, edition of Le Soleil : “When Bouchard will have to cut, we in Ottawa will be able to show that we can afford to preserve social programs for the future”.

In 1993, cash transfers for social programs totalled $18.8 billion a year. This year, even after including the changes proposed in Bill C-28, they will amount to a mere $12.5 billion. This is small consolation because the same calculation for Quebec alone shows a total cut of approximately $13 billion instead of $15 billion between 1993 and 2003.

Now, let us take a look at how the Liberals have been dipping into the EI fund. Besides making cuts, the federal government literally steals from workers and employers who make contributions to the employment insurance fund, claiming that the surpluses are used to absorb the deficit, while the unemployed must contend with reduced benefits.

In 1993, the unemployment insurance fund had a $1.2 billion annual deficit, and a cumulative deficit of $5.9 billion. In 1997, following the Liberal reforms, the fund posted a $7 billion annual surplus and a cumulative surplus of close to $13 billion. Let us keep in mind that there is not one cent of the government's money in this program.

Meanwhile, the unemployed have less and less access to the meagre benefits, even in a crisis situation, as was the case for thousands of people in recent weeks.

The Minister of Finance has also presented us with highly inflated deficit targets in order to dodge around the debates on the necessity for cuts in transfers for health, education and unemployment insurance.

Last March, the hon. member for Roberval asked the following question: “Today, after ten months, the cumulative deficit is reported to be $7.3 billion, which could mean a real deficit of $10 billion to $12 billion in 1996-97 instead of the $19 billion he announced—Is the Minister of Finance sneaky or incompetent?” The Minister of Finance's response to this: “But where does this $12 billion figure come from? I do not know. I think it is a figure pulled out of the air”.

Whether sneaky or incompetent, the question is a legitimate one and, in all honesty, both answers may be right. One thing is certain, he does not deserve any of the credit. The provincial finance ministers were the ones who had to do the dirty work for him. With Bill C-28, the minister is missing a great opportunity to show a bit of gratitude toward those who have really been the ones to make the sacrifices.

Let us speak of the taxation system. Honest citizens who pay their taxes to Ottawa are asking, demanding, of the government that everyone at least pay his fair share. That is the least that can be asked, but it seems to me that it is already too much for this government.

In his May 1996 report, the Auditor General indicated his “serious concerns about the administration of the Income Tax Act involving the movement out of Canada of at least $2 billion of assets held in family trusts”.

On October 2, 1996, the Minister of Finance tabled a ways and means motion intended, he said, to plug this loophole. Over a year later, even with Bill C-28, we are still waiting.

If he is going to amend the tax rules with Bill C-28, the Minister of Finance should have followed the lead of the Bloc Quebecois, which, in the fall of 1996, introduced concrete proposals with respect to corporate taxation, two of them concerning the use of tax havens.

With respect to the deductibility of interest expenses—this is the first measure we suggested to the government—when a Canadian company has a subsidiary in a tax haven, first of all it benefits from very low tax rates on profits realized outside the country, but in addition it can deduct from its Canadian revenues the interest on loans used to invest in its subsidiary. We think that, in this particular case, the tax expenditure is too generous.

As for the deduction of intercorporate dividends, when a Canadian company has a subsidiary in a country with which Canada has a tax convention, the dividends paid by the subsidiary to head office are not taxed in Canada, under certain conditions. This Canadian rule is more generous than the practice in the United States. We are asking the federal government to amend the Income Tax Act so as to tax dividends from foreign subsidiaries in Canada and to grant a credit for tax already paid by a foreign subsidiary. These are proposals the government would do very well to bear in mind for its next budget.

But, although they say they want to put a stop to tax havens, the Liberals are in no hurry. Each year, the government loses billions of dollars because of loopholes in the present tax system. These shameless tax avoidance schemes deprive the government of huge amounts that could indirectly benefit Quebec and Canadian taxpayers. Bill C-28 raises once again, but in a negative way, the infamous issue of tax havens, particularly as regards the taxation of capital goods in the context of the foreign accrual property income, or FAPI.

We are talking here about subsidiaries or companies whose primary activity is to generate revenues from the ownership of goods or stocks. These non-active ventures must pay taxes to Canada on the revenues generated through their goods or stocks, unlike the companies that are actually involved in and making profits from shipping operations.

Clause 241 of Bill C-28 would amend subsection 250(6) of the Income Tax Act to allow a Canadian corporation that owns but does not operate shipping subsidiaries to have these treated as the equivalent of an actual shipping company.

So, instead of telling companies involved in shipping activities abroad that they will now have to pay taxes to Canada like any other corporation, the government is saying to those currently paying taxes that they will no longer have to do so. The minister has a rather strange notion of fairness.

One has to wonder what is in it for ordinary taxpayers. The federal government keeps asking them to tighten their belts and put up with the savage cuts in transfers for health, education and social assistance, but it makes it even easier to move capital abroad.

For these reasons, and for many others that will be raised by my colleagues, I cannot support Bill C-28.

Income Tax Amendments Act, 1997Government Orders

12:55 p.m.


Lynn Myers Liberal Waterloo—Wellington, ON

Mr. Speaker, I am pleased to rise to speak on behalf of the government in support of Bill C-28. This legislation has many components, but they are all tied together in a way which is consistent with a strong and dynamic economy and, by extension, a strong and dynamic society.

As a government we committed ourselves to a historic turnaround in Canada's federal finances because we understood that sustained deficit reduction was a key to lower interest rates and higher economic growth. We also understood and made it perfectly clear that lower rates and higher growth are not ends in themselves. Instead they are the best way to achieve the real bottom line benefits which Canadians deserve, more jobs and the national resources to make strategic social investments where and when needed.

As we move into 1998 Canadians are close to the threshold of a major change in our economic history, the day when the federal government is deficit free. This progress, coming much faster than we originally dared hope, is indeed delivering the benefits we always expected and always wanted. It has created the conditions for lower interest rates and sustained economic growth, growth unheard of since the 1950s and 1960s.

In 1997, 363,000 new jobs were created. That is the best record since 1994. In December the unemployment rate of 8.6% was the lowest in seven years.

The government is now in a position to make key social investments, investments which respond directly and concretely to the concerns of Canadians. Just as important, we can make these investments without jeopardizing our continued advance to a balanced budget. That is an important consideration in Bill C-28.

The most important and significant part of this legislation clearly is the measure to increase the cash floor of funding to the provinces under the Canada health and social transfer. Bill C-28 increases this guaranteed amount of federal cash funding for health care, post-secondary education and social assistance and services from $11 billion to $12.5 billion a year through to the year 2002-2003. It starts applying this higher cash floor one year earlier than was originally slated and planned.

This means the provinces will receive close to an extra $7 billion over six years. That is by far the largest new spending commitment we have made since first coming to office.

The Canada health and social transfer measure represents by far the most financially substantive measure in Bill C-28 and the one ultimately which affects a great many, indeed most, Canadians.

The cash floor of $12.5 billion is the precise amount recommended by the national forum on health and it is important to note that.

There is another aspect to the Canada health and social transfer which demonstrates our commitment to fairness and to positive partnership with the provinces. In response to the provinces' request for flexibility, we restructured the previous system with its separate targeted components into a single Canada health and social transfer. This addressed longstanding provincial concerns that the inflexible conditions associated with the previous transfer system did not allow them to meet specific regional needs and opportunities. We instituted the Canada health and social transfer to deliver greater flexibility, while still firmly upholding the principles of the Canada Health Act.

This is legislation which guarantees that the future growth in the tax point component of the Canada health and social transfer will not see the cash portion decline below $12.5 billion over the next five years.

In other words at least $12.5 billion in federal funds will be there each year every year. It will be there to help provinces provide the national health care systems that Canadians cherish. It will be there to support the post-secondary education that gives young Canadians new opportunities in the future. It will also be there to support social assistance so that Canadians in need are not abandoned or betrayed.

There are two tax expenditure measures that reflect our government's commitment to strengthening Canadian society.

First, C-28 follows through on our 1997 budget pledge to help and encourage Canadians to save for the post-secondary education of their children. Under this legislation we are increasing the amount that Canadians can invest in a registered educational savings plan from $2,000 to $4,000 a year for each student beneficiary.

This is an important change because this government wants to continue the task of improving access to post-secondary education for our youth. Our youth need this access and they deserve this access. This will help young Canadians to compete in a fast paced economy as we move into the 21st century.

As well, C-28 will allow someone who has contributed to an RESP but who then sees the intended student not go on to post-secondary education to transfer the income from that plan into an RRSP. This will reduce the risk and the disincentive that parents may face that in fact the benefits of their RESP investment could be completely forfeited if their child chooses not to pursue higher education.

Using the resources of a strong economy to ensure a secure and compassionate society is a key obligation of government. However, we must not put aside our work to maintain and expand that economic strength. We need to work harder all the time in that area.

One of the foundations of a well-functioning economy is an effective, fair and transparent tax system, a system that allows companies and individuals to focus on the work of building and growing their companies or personal endeavours through real value added and not through the manipulation of tax rules. That is why C-28 includes a range of technical tax measures to reflect that reality.

The government did what it had to do and it did this when it had to be done. We have now been able to help achieve the federal fiscal success that is beginning to pay real dividends, dividends of solid benefit to each province and to all Canadian citizens. This seems to be something that the Reform Party either does not understand or chooses to ignore.

Remember that it was a strong majority of Canadians who demanded that the deficit problem had to be solved. They have supported our action plan indeed in many, many numbers and it is gratifying to see that. In fact without their support our success would not have been possible.

Canada's solid fiscal and economic progress has been won by the hard work and shared commitment of all Canadians. This progress makes possible a renewed investment and commitment in key social areas. It is necessary therefore to support Bill C-28. It deserves the support of all members.

Income Tax Amendments Act, 1997Government Orders

1 p.m.


Angela Vautour NDP Beauséjour—Petitcodiac, NB

Mr. Speaker, I will explain today why I am opposed to Bill C-28.

This bill is an insult to the Canadian people. It consists of nothing but rhetoric and serves only as a band-aid solution for the mess that the Liberal government has created in this country. It is so complex that even Canada's most respected taxation experts have difficulty in understanding what it is the government is trying to do. How insulting to Canadians.

This bill allocates $1.5 billion extra to the Canada health and social transfer. The CHST goes from $11 billion to $12.5 billion when in fact since September 1993 the Liberals have done nothing but cut. There is a lot more needed in order to restore funding to post-1993 levels.

What the Liberals have actually done, if I look at the rural riding which I represent, they have created a mess. The unemployment rate is extremely high and there have been no job creation targets. We have hard working farmers who put in long hours to make ends meet and fishing communities that once thrived off their traditional trade. We also have a forestry industry in this riding. Nothing has been created to help these regions. My riding is full of tiny communities that are homes to many small businesses. All of the cuts over the past several years have directly affected mostly the rural communities.

Liberals seem to think this is a gift. They are trying to portray themselves as the saviours of all Canadians when in actuality they are the bandits who took the money out of the hands of the people who needed it the most. This little increase in spending proposed by the Liberals will do little to offset the hardship faced each and every day by the people in my riding.

I call upon the government to increase funding in health care and education, to put an end to poverty, to reinvest in social programs and to carry through with the recommendations regarding pay equity and the seasonal workers exemption.

What about the gentleman in St-Louis-de-Kent who had to undergo a second triple bypass surgery because he could not afford his medicine? What was the cost to keep that person four weeks in hospital? What about the two students who are reported to have student debts of $32,000 and $51,000? How can the Liberals be proud of that? I am ashamed and so should they be. That is not what Canada is all about. How will Bill C-28 help out those individuals?

The federal government has been preoccupied with economic development in foreign countries and with bailing out southeast Asian markets with billions of Canadian tax dollars. Yet the Liberals continue to neglect their own people, the very same people who sent them a very clear message in June 1997 in case they have forgotten. I am living proof.

What about economic development in Atlantic Canada? People are not looking for handouts from the federal government. They are looking for jobs, real jobs with results in real paycheques so the people of Atlantic Canada can live real lives.

Let me say a few words about the reality in Atlantic Canada. There were the cuts to employment insurance. Now we have people who no longer qualify for employment insurance benefits. Only 37% of the unemployed are eligible. Was the program really designed to help the unemployed? I think not. Job creation is a major challenge and we must start setting goals in this area.

The small and medium size businesses in our communities are in trouble. That is the reality.

Creating opportunities for youth and preventing the brain drain that is on the rise in Atlantic Canada. Sixteen thousand people left Newfoundland in 1996. Let us think about it. I do not think we can all move to the western part of the country.

It is also important to remember what the Reform Party wants in terms of taxation. Reformers talk about how low income families will pay less tax. It is very important for the low income family to realize that, God forbid, if we did have a Reform government not only would the low income family maybe pay a little bit of tax but it would also pay for its children's primary education and for health care.

Reformers do not talk about the tax breaks they would be giving to their wealthy friends. Under a Reform government you would not have a pension unless you were very wealthy. If you could not work enough to save in the form of RRSPs, you would not have a pension. It is very important to remember that.

Atlantic Canadians are very hard workers. They are not lazy.

My constituents are not lazy. They are proud people who work very hard. However, in recent years, the Liberals have only taken advantage of them, and this is not fair.

Until this government makes jobs its number one priority and tackles the crisis in Atlantic Canada, the federal government will not get my vote. I would not be representing my people if I supported this bill.

Income Tax Amendments Act, 1997Government Orders

1:05 p.m.


Alex Shepherd Liberal Durham, ON

Mr. Speaker, I have to agree with the comments of the previous speaker certainly as they apply to the Reform Party. We have been listening to a lot of innuendo about tax reform and how the Reform members are the defenders of the poor and the downtrodden. However most of their tax policies are to cover up the real issue which is trying to give tax breaks to their buddies and friends, the wealthy people of this country.

This bill is very complex. It involves many sections of the Income Tax Act, charitable donations, along with registered education savings plans which I will touch on a little later, transfer pricing and so on. It is a very large bill and affects many aspects of the Income Tax Act.

I would like to talk about one aspect the member for Saint-Hyacinthe—Bagot mentioned yesterday. He talked about how this bill changes the Canada Shipping Act. He then alluded that somehow the Minister of Finance would have some kind of conflict of interest. I would just like to refer to a number of issues showing the history of these sections of the Canada Shipping Act through the income tax system.

Since at least 1927 Canada has had special tax rules for non-resident companies that earn income from international shipping. The rule is that Canada will not tax that income provided their home country does the same for Canadian companies. Each country taxes its own residents, a fair application of international trade and agreements I would think.

To apply this rule, it has to be known whether the company is a non-resident or not. That was sometimes a problem because under Canadian tax rule, residence is not always easy to decide in advance. Canada was losing business because of this uncertainty.

In 1991 the previous government added a rule to clarify the residency rules for foreign shippers. Basically a foreign company that earns its income from international shipping is not a resident in Canada.

The amendment in today's bill responds to the suggestion from the non-profit International Marine Centre in Vancouver. It simply improved the 1991 clarification rule. It says that it does not matter whether a foreign company carries on its shipping business directly or through subsidiaries.

Another amendment brings the 1927 exemption up to date, including capital gains which were not taxable when the exemption was introduced and so may not have been covered.

Again these are technical amendments. They are not new. They were released in 1995 and were again released with some modifications in 1996.

Through the office of the ethics commissioner, the government has been informed by Canada Steamship Lines that it does not use section 250 of the Income Tax Act for the purposes of offshore operations. Consequently, the proposed amendment does not benefit Canada Steamship Lines and the company has no intention of utilizing this provision.

I would like to carry on with a very specific aspect of these amendments which talk about the registered education savings plan.

The Conference Board of Canada has stated so many times that Canada's education system has somewhat fallen behind in the world. Even though we invest many, many dollars in our education system, it would seem that some of our proficiencies, certainly in science and technology skills, have somewhat fallen behind the norm. That is why this government set up a millennium fund. It is also why we made this amendment to the income tax system.

The registered education savings plan is much like a registered retirement savings plan. The difference is that it allows parents to put money in a separate fund to get a tax deduction to save for their children's future education.

The registered education savings plan has been around for a good number of years but it has never been very effective. The reason it has not been effective is that what happened in these plans is that if your child did not attend a post-secondary education institution, you forfeited your deposit. In other words, you always ran the risk that if Johnny does not go on to university or to college, the money is lost. Of course, most people thought this was not a particularly good investment. This government realized that it was important for families to save for the education of their children and also to get young people access to our educational institutions.

We talk a lot in this House about the importance of access to post-secondary education. This is a place where the government is positively trying to accomplish that with partnerships and with private families.

In addition it eliminates to a large extent the liability that they are going to lose those deposits if Johnny or Mary does not go on to post-secondary education. More important, it raises the limits from $2,000 a year to $4,000 a year. It allows a tax deduction so we can save for the education of children. As a parent who has three children in post-secondary education, it is an expensive proposition. I wish this program had been in place 20 or 30 years ago. I would be utilizing it.

Many families live in the fear that they will not be able to provide for their children when it is time to go to school. This is an excellent opportunity for them. It is a positive way that governments can, together with the private sector, ensure there is education for our young people.

I just came back from the National Research Institute. We talk about brain drain. The member talked about people leaving her province. Memorial University in Newfoundland is one of the premier educators in Canada. These are the roots and the avenues to the future for us. We talk in Canada about having tremendous resources. We usually talk in terms of natural resources. We talk about our petroleum industries. We talk about our metallurgical industries and our forests and aluminium products, but in reality the biggest resource we have in Canada is between our own two ears. We have to do more to ensure that young people have an adequate education and that they are going to engage in those industries that will evolve and be the industries of the future.

I am happy to support this bill and this specific aspect of it. A very important aspect of it is what we are doing to make a positive contribution for those children who may find it difficult to get to school. It gives their parents planning horizons to do that.

I have sat through this debate and I have listened to members of the Reform Party get up and defend the province of Ontario. I guess they are all part of the same material. It seems strange to me that the province of Ontario came in with a program of reducing taxes. At the same time it was going to cut expenditures and do all kinds of wonderful things. Some of the members of the Reform Party keep saying this government did this and that government did that. The reality is most people know their is only one taxpayer. Everybody in Canada has to try to get their books to balance, whether it is the federal government or the provinces.

One of the big things we do is transfer money to the provinces in support of health care. We have created a base level of funding there. Some of it had to be cut and the provinces had to adjust to that.

It is amazing to me that at the same time that cuts to health care and other aspects of our social structure in Ontario were going on, the province of Ontario cut indirectly or reduced taxes by $5 billion. When it made the announcement of the $5 billion, it was running something like $8 billion deficits per year. In other words, the province continued to run deficits on annual rated basis, even though it was also in a program of tax reductions. I heard the minister of finance of the province of Ontario saying they cannot make their budget reductions by the year 2000. They were to balance the books but now they cannot do it. The difference or shortfall was $5 billion.

I ask whether this is in the best interests of Canadians. My constituents are telling me to continue with our deficit and debt reduction targets, enhance our health care system but they do not need tax cuts today because they think there are more important things to do. I think most of the people in Ontario have come to realize that.

Income Tax Amendments Act, 1997Government Orders

1:20 p.m.


Dick Harris Reform Prince George—Bulkley Valley, BC

Mr. Speaker, I am pleased to speak to this bill today. It is nice to be back in the House and fighting Liberals once again.

After listening to the previous Liberal speaker all of a sudden we have had some good ammunition given to us. It was indicative of the Liberal short term vision that the member just talked about the tax cuts, the economy and the budget shortfall in Ontario.

Statistics will show that the economy, because of the tax cuts put in by the provincial government in Ontario, is undergoing tremendous growth. On a long term basis that will be of immense benefit to the province of Ontario, as it was for the province of Alberta which is now leading all the provinces in economic growth and it certainly has some lessons for the federal Liberals.

This tax bill, Bill C-28, is all about a tax system that is patently unfair to the Canadian people. The Liberals instead of wanting to fix it are simply making changes that will make it more confusing for Canadians to figure out this Canadian tax system and how the Liberal government is able to wrench billions of dollars out of their pockets, decreasing dramatically their disposable income for their families, increasing dramatically the tax levels on Canadian small businesses, the backbone of our economy which are providing more jobs in this country than any other sector, including the government sector.

This Liberal government likes to say it is creating all the jobs. That is absolutely false. It is the private sector and primarily the small business sector, but the Liberals do not recognize that. In their tax system they seek only to penalize small business.

Bill C-28 can best be described as a smoke and mirrors bill designed to cover up the fiscal mismanagement of the Liberal government. Some people have compared the Parliament of Canada to a circus at times. Trickery, smoke and mirrors and sleight of hand do belong in a circus. We are getting a good example of it in Bill C-28. It does nothing but confuse Canadians about how the tax system is working.

We are talking about the lack of substance in Bill C-28. The government has managed to put together some 500 pages talking about changing 20 different acts and regulations in the income tax system. The Liberals certainly do not know how to make anything simple. I think their motto is make it complicated, convoluted and confusing and no one will see what they are actually doing.

Income Tax Amendments Act, 1997Government Orders

1:20 p.m.


Jake Hoeppner Reform Portage—Lisgar, MB

On a point of order, Mr. Speaker, I think we are short of a quorum, so I would appreciate if some of the Liberals would come back and listen to this good debate.

Income Tax Amendments Act, 1997Government Orders

1:20 p.m.

The Deputy Speaker

Perhaps the bells could be rung. I do not see a quorum.

And the bells having rung:

Income Tax Amendments Act, 1997Government Orders

1:25 p.m.

The Deputy Speaker

I see a quorum. The hon. member for Prince George—Bulkley Valley may resume his remarks.

Income Tax Amendments Act, 1997Government Orders

1:25 p.m.


Dick Harris Reform Prince George—Bulkley Valley, BC

Mr. Speaker, I appreciate seeing so many Liberals rush back into the House so they can take part in the debate today. It will be a refreshing experience to hear some real facts and substance coming from the official opposition party rather than listening to the spin doctors and the backroom boys who came up with Bill C-28. I thank the Liberals for returning to the House.

One thing missing from the bill is any kind of tax relief for Canadians. As we know, Canadians are the most overtaxed people in the entire world. Mr. Speaker, every year when you fill out your income tax form I am sure you must shed a few crocodile tears over what this Liberal government has done to people just like you.

There is nothing in the bill—zip, as my son would say—about tax relief. There is no mention of the 73% CPP tax hike, the payroll tax which will be applied to Canadian businesses and individuals. There is no mention of the more than $5 billion in extra EI premiums Canadians are paying and that is considered a tax.

Every think tank in the country has concluded that high taxes kill jobs. It is as simple as that, but the government just does not get it. It refuses to look at the high tax regime of this country and it continues its reckless spending.

We have in our party, Her Majesty's Loyal Opposition, the hon. member for St. Albert. On a regular basis he puts out the waste report. We have sent $2 million off to Brazil to promote electrical energy. I believe they have had electricity down there for quite some time and they realize the benefit of it, but we sent them $2 million.

We have sent $450,000 to Lebanon for the Lebanese Parliamentary Institute. I hope that $450,000 is not to teach it how to spend money in a Liberal fashion. I do not think the people of Lebanon would appreciate that.

Bill C-28 does not even consider the $600 billion debt hole that this country is in, which this government and the Tories and Liberals before it helped to create. It does not even mention the $45 billion in service charges and interest payments every year. Those service charges could pay the entire health care bill in Canada for one year, plus educate every student in the country for one or two years. This bill does not even talk about that crisis.

Do the Liberals have a plan for this crushing debt? Not in this housekeeping bill. They wanted to start off slow and maybe work up to something.

Do the Liberals have a plan for tax relief to put more money in the pockets of Canadians to give them the option of spending or saving it? Not in this bill.

The minuscule changes to the bill are designed to make us forget for a little while just how high the taxes are in this country.

Things could be so much simpler if the Liberals would just listen to the Reform Party, the official opposition, which has brought to this House a plan called “Securing Your Future”, a plan which economists all across the country have said is right on the mark. It is on the right track. But no, it clouds the vision, the philosophy and the legacy of these tax and spend Liberals. They have scales over their eyes. They cannot see the truth.

While the Reformers are calling for less taxes, less debt and less interest charges on our $600 billion debt, the Liberals are calling for more program spending in areas of little need, forgetting the areas of great need that they gutted like health care and education payments to the tune of $7 billion since they came to power. They are now throwing back a paltry $1 billion and saying they have fixed it. No, the arithmetic tells me that they are $6 billion short.

We want the government for once to consider the average working Canadian, to consider the students who are struggling to get through university and college and ending up with huge student loans, to consider the people who are living below the poverty line, and to consider the people who are trying to raise families and are having their pockets picked by the Liberal government through high taxes.

If the government would for once consider all those people instead of its own political tax and spend philosophy, maybe some day we would get a bill in the House that our party could support.

Income Tax Amendments Act, 1997Government Orders

1:30 p.m.


Roy Cullen Liberal Etobicoke North, ON

Mr. Speaker, I am pleased to speak on Bill C-28, an act which will allow our government to implement the tax policies and provisions introduced in the 1997 budget.

I cannot help but be continually amazed by the Reform Party's flavour of the month. It was some time ago that it argued that what the government should be doing was tackling the deficit. When we tackled the deficit and started to win the fight and have won the fight against the deficit, it switched to tax reductions. Very recently it moved from tax reductions to eliminating the federal debt. We will have to stay tuned to see what the next flavour of the month will be.

As I said, Bill C-28 allows the government to implement the tax changes that we brought in, in the 1997 budget. There are a number of important provisions in the bill which facilitate a number of detailed changes to the Income Tax Act. I will not go into them today but I would like to address a few key areas. The first area is the Canada health and social transfer, a critical part of the bill.

We as a government have said that we will limit or put a floor on the cash transfers to the provinces at $12.5 billion. This responds directly to the recommendations of the National Forum on Health which stated that we should increase the cash floor from $11 billion to $12.5 billion. It would have triggered in, in 1997-98. It responds to the concerns expressed by Canadians about the delicate nature of our health care system.

It is important for Canadians to understand the amount of funding we are providing through the CHST. In addition to cash payments there are tax points. In total in 1997-98 it will amount to some $25 billion that we will be transferring to the provinces to deal with health care, education and welfare.

Under the old system the funds and the tax points were transferred under established programs financing or EPF and through CAP which was the Canada assistance plan. Established programs financing was meant to cover health care and education and CAP was a cost shared program with the provinces to cover welfare.

CAP was not a very efficient program at either the provincial or federal level. For the provinces it was really using 50 cent dollars. For every dollar the provinces spent they recovered 50 cents from the federal government. As a federal government we did not have the kinds of controls that we desired in a program where we were spending Canadian taxpayers' money. At the provincial level CAP was sometimes not managed in a fiscally prudent way, so moving away from CAP is a wise decision.

As far as established programs financing is concerned, it has always been a challenge in Canada to ascertain where the funding is going directly, whether it is going to health or education. Essentially it goes into the consolidated revenues of the provinces and it is very difficult to establish that trail.

What we as a government are doing and will be doing more of is ensuring that we set standards and guidelines in terms of the delivery of health care, education and welfare. Some of those are already enshrined in the Canada Health Act in terms of accessibility of programs, the affordability of programs and implicitly the quality of programs.

We need to do a better job of establishing those criteria notwithstanding how difficult the task is. To measure outputs in a health care system, an education system or a welfare system is a challenge at the best of times because these systems are changing constantly.

First we have health care, from acute care to community based care. How is wellness measured? How do we measure whether people are getting quality care? How do we measure whether people have access to an affordable system?

It is these areas we need to focus on because the block funding is transferring en bloc to the provinces not much differently what than we did under EPF. We need to do a better job as provinces begin to grapple with their fiscal positions.

Many of my colleagues and I are concerned that we do not erode these very important programs within Canada. That is a very important part of the bill. I am sure that most members will support it.

I would like to touch on another key area of the bill, that is the registered education savings plan where we increased the limits from $2,000 to $4,000. This begins to make education more affordable, more approachable for middle income or low income Canadians. Money can be put away for the future education of their children and they will be able to afford quality education when they get to either school age, university age, or both. That is a very progressive part of this undertaking. I am sure it will be supported by members of the House.

There is another area I would like to touch on briefly. I will come back to comments made yesterday in the House by the Bloc finance critic, the member for Saint-Hyacinthe—Bagot. He made some assertions to which I am sure the finance minister will be responding in much more detail as the days and hours ensue.

I would like to comment on them briefly because I think the member has his facts in error. Before doing that I would like to talk about another provision in the bill that is very important, the provision to deal with transfer pricing.

As organizations become multinational and have companies and subsidiaries around the world, they start to move products and services within their own subsidiaries across national boundaries. Corporations have the ability to transfer the profits from high tax jurisdictions to low tax jurisdictions. This happens all the time.

If a company, for example, is incorporated in the United Kingdom and is selling products worldwide, it might set up a wholly owned subsidiary and tax haven and move product through that tax haven to companies around the world. It will essentially change and adjust its pricing to ensure that most of the profit margin is transferred to the low tax jurisdiction.

We have always had rules. Canada has had rules about transfer pricing and fair market value pricing so that if a Canadian company sets up a similar subsidiary in a place like Bermuda it has to sell that product to the Bermudian subsidiary at a price that approximates fair market value. We do not want the profit margin sitting in a tax free jurisdiction based on some transfer pricing decisions that are made at head office.

The difficulty has been that quite a range determines fair market value. Tax authorities worldwide have been struggling with this. It needs co-ordinated effort so that if companies in the United Kingdom, Germany or in South America are selling products through intermediaries in low tax jurisdictions they are selling them at fair market value. This is a very positive aspect of Bill C-28.

I turn very briefly to comments made yesterday in the House by the Bloc member for Saint-Hyacinthe—Bagot about international shipping because I think he misrepresented the facts.

The changes reflected in Bill C-28 are not creating any new situation. They are basically reinforcing the fact that if a company is shipping 90% internationally and 10% in Canada the same rules would apply that have been agreed to countries around the world.

Shipping really knows no boundaries. It is not like a mine in Chile or an oil and gas pipeline in Russia. There is really no national boundary for airlines and shipping. The rules have always been that if a company is conducting 90% of it business outside the country it is not considered to be a resident of the country in which the head office might be. That facilitates the fair taxation of shipping companies around the world.

Over the past few years companies have set up individual corporations for individual ships not driven necessarily by tax but by liability issues. The holding company would fail to qualify for these agreed to international rules if it held 100% of these subsidiary corporations. It would be perceived as an investment company and would not qualify under the rules as being an international shipping company in the primary business of international shipping.

These rules had to be changed to maintain that level playing field. Otherwise we could create a competitive disadvantage for shipping companies that happen to be located in Canada.

Income Tax Amendments Act, 1997Government Orders

1:40 p.m.


Grant McNally Reform Dewdney—Alouette, BC

Mr. Speaker, I have been listening with great interest to the debate on the tax amendments contained in Bill C-28. I have listened to government members heap praise upon themselves for all their great accomplishments. I will focus my comments on the reality and the truth of the matter regarding the government's direction.

A member from the other side earlier mentioned three great pillars of Canada: health, education and social services. There is no disagreement from members on this side, but the truth of the matter and the facts are that the government cut funding to all three of these areas. It cut transfers from $18 billion to $11.5 billion per year and is now about to raise it and pat itself on the back.

Members opposite keep talking about a stable floor of funding. It is obviously doublespeak. They have cut drastically and now they are adding a bit more funding which is significantly lower than the amount of funding in existence before they took power. The reality and the truth is that the government continues to extract more money from hardworking Canadians. Its guiding principle seems to be take a dollar and give a nickel.

Another member from the other side seemed to lack the understanding that taxes can be reduced by making government smaller and reinvesting money back into the priority areas of health, education and social programs. She thinks the two are mutually exclusive. Liberals cannot envision ever decreasing their hold on Canadian tax dollars without taking from some other area.

Let us talk about the $47 billion interest payment that Canadians pay to service the $600 billion debt. That is eating the heart out of social programs. The Liberals are directly responsible for this situation. Let us make no mistake about that.

The fact is that we have high debt and high taxes. Interest rates are also on the increase. Foreign investors are concerned about our economic climate. The Liberals fail to mention the number of businesses and young professionals who are being driven south by high taxes. The fact is all is not well with the economy. The Liberals continue to spend more than they take in, which is in many ways unbelievable given the amount of taxes paid by hardworking Canadians.

We hear about numbers and statistics. The reality for Canadians is that they are working harder and harder to see less and less take home pay to care for their own families. There is less money for mortgage payments and rent, less money for clothes for their kids, less money to put food on the table, less money for them to spend wisely in the areas they deem most important for themselves and the well-being of their families.

I would like to focus on the situation of one family in particular, on one individual who decided to go public with her struggles. Kim Hicks' life became a bit of a case study of Reform's tax reduction plan. Her case was first mentioned in a speech delivered by the Leader of the Opposition in this House in the prebudget debate. I will take a brief moment to summarize his story.

Kim Hicks is a mother from New Brunswick who wrote to the leaders of all parties seeking a bright light of encouragement regarding her life, her situation. She and her husband worked extremely hard to make ends meet and to provide for their children. There was always more month left at the end of the money. This letter struck a chord with the Leader of the Opposition. He undertook a project and hired Mrs. Hicks and her family to be a case study to implement Reform's economic plan.

Mrs. Hicks was paid the same amount of money she would save in taxes under the Reform plan. She was to report what she would do with the money for her family. Did she squander the money? No. She paid off debts, first priority. She paid for medical procedures her children needed. She put a portion of the money in a savings account. The remainder was used on a modest outing for some family entertainment.

There are thousands of families across Canada suffering under this Liberal government. This exercise is one of the most valuable case studies on Canadian taxation because it was run by real Canadians making real life decisions. StatsCanada and the finance department can run all the scenarios they want. However, they cannot recreate the real human story that Kim Hicks provided.

One would think that the finance minister would have taken a keen interest in such a study. Then again, what does the finance minister know about paying taxes? Instead of emphasizing with the plight of average Canadians, the finance minister dismissed this exercise as a publicity stunt. I would like to tell the Hicks family, whose lives were made that much more bearable, that their happiness is not a media stunt.

What we are opposed to, the underlying principles of this bill, is that there are more and more complicated, convoluted and confusing tax amendments being made which fly in the face of commitment to a fair, simple and visible form of taxation, something we have long called for on behalf of Canadians across this country. It is high time that the Prime Minister, the Minister of Finance and the rest of the Liberal caucus leave cloud nine and take a hard look at the financial state of Canadian families. Our we the best country in the world in which to live because of this government or in spite of it? It is definitely the later.

Canadian families want to see a reduction in their taxes. That is what they are calling on from this government.

Income Tax Amendments Act, 1997Government Orders

1:45 p.m.


Gilles-A. Perron Bloc Saint-Eustache—Sainte-Thérèse, QC

Mr. Speaker, I welcome this opportunity to participate in the debate on Bill C-28.

This is a bill to amend multiple acts. One really has to be a tax expert or have a great deal of common sense to speak on such a complex piece of legislation. Since I consider myself to have common sense, I will make my remarks on that basis.

Last Monday, on the television program Salut, bonjour , Claude Picher from La Presse had these wise words: “The Minister of Finance should use the projected budget surplus as much as possible to reduce” the debt and personal income tax, not to fund new or existing programs. That is a statement that makes a great deal of sense. It is also good advice for the Minister of Finance.

Like me, he could have raised the issue of the GST and said that the GST was originally introduced to dip in the pockets of taxpayers to reduce the huge deficit the central government had at the time. The deficit having been eliminated, common sense would dictate that the government lower if not completely eliminate this tax, thereby making good on an election promise made in their famous red book of 1993. Like me, he could also have raised the issue of transfer payments.

Everyone knows that, in an attempt to achieve zero deficit and even surpluses, the government shamelessly cut billions of dollars in transfer payments to the provinces. These cuts hurt the provinces, which, in turn, had to manage crises in education, health and social programs.

So, common sense would dictate that this government restore transfer payments to their original level instead of talking about implementing new programs that would allow them once again to interfere in provincial jurisdictions. What is the logic in this government implementing new post-secondary education programs when, as we know, the cream of our young achievers trained at public expense in our universities leave Canada for the United States or another country because the tax system is better than in Canada? What would common sense dictate, given that in this exodus of scientists, computer specialists and other professionals, we are losing a large part of our capacity to innovate and, ultimately, the capacity to create jobs in the future?

This is a worrisome situation on which no one, not even the Minister of National Revenue, the Minister of Finance or the Prime Minister of Canada, can put an exact figure. In economic terms, the loss of the most dynamic, the most talented future members of our society is a disaster, an impoverishment of our society. Where is the sense in that?

This brain drain is what has led to the need for taxation reform. It is high time our governments seriously addressed an in-depth reform of personal and small business income tax. If we are to believe Canada's taxation statistics for the 1950s, individuals and corporations accounted for the same percentage of federal income tax revenues. In the decades since, fiscal policy has changed increasingly in favour of big business, so much so that in recent years individuals' contributions have increased eight fold. Where is the sense in that?

It is worthwhile pointing out that the corporate share of federal tax revenues dropped from about 43% in 1961 to a meagre 10% in 1995. The main explanation for this is the proliferation of tax expenditures available to business, the major corporations in particular. Where is the sense in that?

Is the Minister of National Revenue in agreement with the Minister of Finance, his colleague, who claims to be able to solve the deficit without increasing corporate income tax? Why do the corporations manage to shelter income from tax by influencing taxation legislation? Why are they allowed this legal strategy, while the strategy of individuals who decide to do work under the table without paying tax is deemed illegal? This situation represents a serious threat to social equilibrium, Where is the sense in that?

It is easy to understand why the disadvantaged, the people with little or no income, try to get out of paying taxes by every imaginable means. The Bloc Quebecois has long been calling for a job-oriented Canadian corporate tax reform. The Bloc Quebecois is keeping a close eye on the government and will continue to do so in the area of taxation, particularly as concerns the GST, tax shelters, and so on, to be sure that the tax system becomes just and fair for all.

Let us talk about family trusts. There is a flaw in federal legislation in this regard. The report of the auditor general and pressure from the Bloc Quebecois have only partly succeeded in eliciting a reaction from the Minister of Finance on the subject. It is still possible to leave the country without paying taxes owing to Revenue Canada, since an acceptable financial guarantee need only be left. Furthermore, no deferral limit nor method of interest collection is provided for this guarantee.

Since the October 2 amendment to the Income Tax Act, the minister has been unable to report the tax plans this change has occasioned. Where is the sense in that?

The Liberal government should use Bill C-28, an omnibus bill, to make the necessary changes to employment insurance contributions. It is vital the government reform the current employment insurance system in order to put an end to the inequities it gives rise to and to better protect workers, including the seasonally employed.

The Bloc Quebecois also wants the Minister of Finance to substantially reduce the levels of contribution to the employment insurance plan, conditional on the job creation performance of business. The reduction in contributions could be 40 cents per $100 of insurable payroll.

The Minister of Finance must also create an employment insurance fund separate from the federal government's consolidated fund, as the Auditor General of Canada proposed, to prevent money belonging to workers and employers being used as a discretionary fund of the federal government. That makes sense.

It would be a good idea for the government to move quickly to pass anti-deficit legislation as did the Quebec National Assembly. That makes good sense.

Instead of reaching into people's pockets, the government should cut unnecessary expenditures and useless programs within its own departments. One example is the $30 million to change the Canada Post logo.

As my time is running out, I will move on a bit faster to other examples.

It should also cut unnecessary expenditures, the tens of millions of dollars spent by the Department of Canadian Heritage to brainwash Canadians. We are entitled to ask whether this government is acting wisely, whether the way it manages makes sense. No, it does not make sense, because this government's policies are widening the gap between the rich and the poor, and adding to the tax burden of the middle class and our small businesses.

A tax system that drives a nation to poverty definitely makes no sense. For this reason, and in solidarity with members of the Bloc Quebecois, I will energetically oppose passage of this bill. My common sense tells me that it is urgent that the people of Quebec stick together as they move towards sovereignty.

Income Tax Amendments Act, 1997Government Orders

1:55 p.m.

The Speaker

My dear colleagues, our time is up. We will now proceed to statements by members. The hon. member for Timiskaming—Cochrane.

Member For LabradorStatements By Members

1:55 p.m.


Ben Serré Liberal Timiskaming—Cochrane, ON

Mr. Speaker, I rise today to speak about my wonderful friend and colleague, the member for Labrador.

It was with great sadness that I learned he was diagnosed with a serious illness. I know that his determination, stamina and tremendous Labrador spirit will lead him to a speedy recovery.

His friends and colleagues miss him in the House. Rest assured that our thoughts and prayers remain with him during this most difficult time for him and his family.

On behalf of all of us in Ottawa, I wish to extend to him our heartfelt and sincere wishes. We hope to see him among us very soon. Good luck, Lawrence.

Dairy IndustryStatements By Members

February 3rd, 1998 / 1:55 p.m.


Reed Elley Reform Nanaimo—Cowichan, BC

Mr. Speaker, on behalf of dairy farmers in my riding of Nanaimo—Cowichan and indeed dairy farmers all across Canada, I call on the ministers of revenue, agriculture and international trade to get their act together.

They have the power to put a halt to the importing of butteroil-sugar blends which are replacing the use of domestic ingredients in the production of Canadian dairy products.

Since 1995 the import of butteroil-sugar blends into Canada from the United States, Europe and Mexico has doubled every year, resulting in the loss of tens of millions of dollars to Canadian farmers.

The ministers of international trade and revenue will know that the butteroil-sugar blend is created in a manner intended to circumvent tariff agreements covering the importing of most dairy products, yet this $50 million a year assault on the pockets of Canadian dairy farmers is allowed to continue because the ministers in question will not reclassify the butteroil-sugar blend.

It is time the government ended its foot dragging and stepped forward to protect the interests of Canadian dairy farmers.

NunavutStatements By Members

2 p.m.


Nancy Karetak-Lindell Liberal Nunavut, NU

Mr. Speaker, I rise to inform the House that on January 12, 13 and 14, I participated in the Nunavut leaders summit with the Minister of Indian Affairs and Northern Development. This meeting was held in Iqaluit, the future capital of Nunavut.

All parties involved in the Nunavut political accord left the meeting confident that a great deal of work was accomplished.

Tough decisions were made, including the number of seats in the legislative assembly, the number of education and health boards, the creation of a single trial court and staffing of headquarter positions for the new Nunavut government.

I congratulate the participants of that summit, particularly the interim commissioner and his staff and the Nunavut implementation commission for a productive and positive meeting.

Ice StormStatements By Members

2 p.m.


Bernard Patry Liberal Pierrefonds—Dollard, QC

Mr. Speaker, during the ice storm that hit the provinces of Ontario, New Brunswick and primarily Quebec, Canadians the country over again demonstrated their generosity and solidarity with their unfortunate fellow citizens.

In addition to the untiring efforts of volunteers responsible for emergency measures in my riding of Pierrefonds-Dollard, I would also like to mention the invaluable contribution of our neighbours to the south, particularly those of Connecticut Light and Power. These people temporarily left their families, their state and their country to come to our assistance.

John. D. Siclari, an engineer with the company, came to my riding office in search of Canadian flags to put on their vehicles, in order to demonstrate their pride in helping us, and in particular to reaffirm the ties between our two countries. Having gone through this ordeal, I can state that these ties are all the stronger.

I would like, once again, to thank these linesmen, all these workers whom we do not know by name but who are dear to our hearts.

Ice StormStatements By Members

2 p.m.


Mac Harb Liberal Ottawa Centre, ON

Mr. Speaker, the ice storm brought out the best in people.

On Monday, January 12, just a few minutes after hearing an announcement on the radio, a woman stopped by my constituency office to donate some extra blankets she was carrying in the trunk of her car.

After watching on television the damage caused by the storm, a Quebec City grandmother decided to do something. She sent her granddaughter, who lives in Ottawa, a cheque to buy baby food and items for a shelter in eastern Ontario.

These are but two examples of the generosity displayed by Canadians. In this difficult period, Canadians showed total and absolute dedication toward one another. This is why Canada is said to be the best country in the world.

On behalf of my colleagues, I would like to thank the residents of Ottawa-Carleton for supporting their neighbours, and I congratulate people from all over the country for demonstrating what it really means to be Canadian.