Mr. Speaker, I am pleased to resume debate and to complete my remaining time of about 17 minutes.
The Municipal Grants Act is only necessary because the federal government feels that it needs special treatment in the payment of its taxes to the municipalities.
Previous to adjournment for the Remembrance Day break I had indicated to the House that municipal governments were the backbone of the Canadian economy and that their source of revenue was derived from taxation at the local level. Current high cost items such as the construction of water treatment plants and the upgrading and rebuilding of sewage infrastructure have created a lot of pressure on the revenue side for municipalities.
There are over 4,000 municipal governments in Canada, from the largest city to the most remote rural and northern community. Municipal governments in Canada have a pervasive influence on the economy, culture and quality of life. Municipal governments are major players in the Canadian economy, influencing technology and innovation diffusion and productivity.
Statistics Canada defines productivity as the technical efficiency of production. Municipal governments through investment in public services like transportation have a vital impact on productivity. In other words it costs money to provide services, and federal governments that have infrastructure in municipal jurisdictions certainly should be expected to pay for those services.
In 1996 municipal governments spent $39.2 billion providing community services and employed over 400,000 Canadians. Municipal government expenditures constitute about 5% of Canada's gross domestic product. In addition to the sizeable share of public sector spending on goods and services, municipal government capital spending totals about $9 billion a year, equal to a third of all public advancement and about 6.5% of all capital investment in Canada.
Municipal government asset portfolios include roads, water supply and distribution systems, sewage treatment facilities, street lighting, some public housing, recreation facilities, parks, community centres, and a wide variety of vehicles, buildings, machinery and equipment. Members can see that the needs and the services provided by the municipal governments are much like those of the federal government.
The question is how the municipalities pay for them. As I indicated earlier, it is by collecting taxes, specifically collecting property taxes. Federal buildings require as I indicated the same services as other property owners so, in essence, why should federal buildings not pay the full rate? Canadian municipalities do not have the luxury of either receiving the majority of their funds from the federal government or the option of collecting income tax.
I will read a short excerpt from a background paper prepared by the Parliament of Canada on local municipal government jurisdictions in Europe just to illustrate that there are other ways of dealing with the tax collection side.
In general there are at least two striking differences between the administration of local and regional municipalities in Europe and in Canada. First, almost all European states and local levels of government are formally recognized often constitutionally, and that is not the case in this country.
Second, the bulk of the financing for local governments is provided by the national level of government in most states primarily through grants and other transfers. By contrast the concept of property tax, the mainstay of Canadian municipal finances, is less significant and less well accepted. These two phenomena are common in both federal and unitary states in Europe although there are naturally a number of significant differences among them.
With respect to financing, the German case is particularly revealing. As political scientists Don Stevenson and Richard Gilbert have outlined in some detail, municipalities in the country of Germany receive a negotiated share of national taxes. This income represents more than 50% of the total revenues of most municipalities.
Certain major cities such as Frankfurt receive a lesser share, but only because of their ability to raise significant sums through their own means. However, as the case of Frankfurt demonstrates, this independent revenue capacity is due to its legal ability to levy business taxes, especially on banks. Property taxes on the other hand constitute only 5% of Frankfurt's revenue, unlike in this country where property taxes make up the majority of the funds raised.
The constitution of Germany, a federal state, is equally instructive. It specifically recognizes municipalities and their responsibilities for local affairs. In addition, it anticipates their input in decision making at the national level, which is missing in this country, largely through negotiation. Local governments are miniature legislatures with council members elected on the basis of party lists and forming government and opposition parties or coalitions of parties in each local council.
A similar situation exists in The Netherlands, a unitary state with 12 administrative regions or provinces, but it is a more radical case. Not only are municipalities recognized in the constitution, unlike Canada, but there is a ministry of urban affairs. Its 1986 municipal act actually gave municipalities more independence, lessened the supervision of provincial authorities, and deregulated the processes of municipal councils which operate along partisan lines as well.
With more than half of the entire population located in the adjoining urban areas of Rotterdam, Amsterdam and The Hague, it is perhaps not surprising that some 90% of municipal revenues come from the central government, roughly two-thirds of which are in the form of conditional grants. Like Frankfurt, Rotterdam is an exception to this rule as it raises nearly half of its revenues through business taxes. Once again, property taxes are insignificant, as in Canada, accounting for only 2.5% of the city's total revenues. We can certainly take a lesson from some of these European countries.
Sweden is perhaps the most extreme example of municipal importance and autonomy in Europe. This is all the more significant as it too is a unitary state. Swedish local governments, in addition to the standard Canadian responsibilities of the municipal level, are in charge of education, regional planning and the administration of most health and social services. They receive only one-quarter of their funding from central government grants but unlike most other European examples, they are able to levy their own income tax. That is really different from this country. Roughly half of their total revenues come from this income tax with almost all of the remainder of their funding being provided by fees and charges, not by property tax as we see it in this country.
At the other end of the spectrum are two unusual European cases, those of France and Great Britain. The former is long known for its massive centralization of government programs and a seemingly infinite number of government layers. It is currently in the midst of a considerable decentralization exercise. The outcome is still far from certain with various factions urging the elimination of layers known as departments and prefectures.
One apparently inevitable result of the reform exercise will be the continued existence of the local or commune level to which citizens are fiercely attached and which is viewed as the essential building block of French democracy. At the end of the day its decentralization may well come to resemble the situation already prevalent in most other European states. Certainly the direction of its reform is the same as it is elsewhere, if not the pace.
We can see that this country lags far behind in the reform of European governments. We can see how we differ in terms of taxation. That is why our position is basically that this federal government should not ask for special treatment when it comes to paying its fair share of taxes.
Another issue that has been illustrated is that European jurisdictions tend to recognize municipalities as legitimate entities, something that is totally missing in this country. There have been many occasions where the federal government has been asked by the municipalities for this recognition. The usual answer is that they are the creation of the provinces but I believe it goes further than that.
I remember clearly in 1996 at a Federation of Canadian Municipalities convention in Calgary, the Prime Minister acknowledged the importance of municipal governments as the first level of government, that which is closest to the people, yet at the same time our own Prime Minister will not recognize the municipalities in a legitimate fashion in this very House.
Since that time I have stood in the House on several occasions to ask the Prime Minister to acknowledge the legitimacy of the first level of government in Canada. Unfortunately we are still waiting. That has not happened.
Prior to the November recess I indicated that it was unfortunate the government had not informed Canadian municipalities about the tabling of Bill C-10 for debate at second reading. My understanding is that it has taken many years of negotiation with the Federation of Canadian Municipalities and the federal government to make these amendments. I am informed that the FCM was very disappointed not to have been informed that the bill had been tabled for debate at second reading.
Our position is that all laws pertaining to both the individual and private sector should apply equally to the Government of Canada, its personnel, its agencies and parliament. We believe in the principle of equality and fair treatment.
Bill C-10 is not supportable. It gives the Liberal government too much discretionary power. The remuneration of the dispute advisory panel is non-binding. It merely maintains the status quo and entrenches into legislation common practices that were put into place 16 years ago.
When we see what is happening in other countries, we need major changes in Canada. We need to repeal the Municipal Grants Act. It is really unnecessary. Repealing the Municipal Grants Act will certainly force the federal government to pay all of its taxes responsibly like all Canadian citizens. We need to recognize the legitimacy of the municipalities and invite them to the table on issues that affect them.
It is time we took a new approach to governance for the people of our country. As we head toward the new millennium we need to find new ways for all three levels of government to work together in a co-operative manner. Co-operative federalism means having all three levels of government at the table at the same time and treating each other with respect.