Debates of March 18th, 1999

Business Of The House

[The Speaker]

That is my understanding.

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, perhaps to assist, I think there is an understanding in the House now. I will write a draft order to that effect, bring it back to the House in a few minutes and it will have all of that in it. I think the House has understood and we all know what we want to do. In a few minutes we will come back with all of this in a special order. Perhaps that is the best way.

[The Speaker]

Then we will not deal with this motion at this point and will now proceed to orders of the day. We will come back to that if necessary.

The House resumed consideration of the motion that Bill C-72, an act to amend the Income Tax Act, to implement measures that are consequential on changes to the Canada-U.S. Tax Convention (1980) and to amend the Income Tax Conventions Interpretation Act, the Old Age Security Act, the War Veterans Allowance Act and certain acts related to the Income Tax Act, be read the second time and referred to a committee; and of the amendment.

Income Tax Amendments Act, 1998

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise on debate at second reading of Bill C-72, an act to amend the Income Tax Act. This bill follows on several policy and technical changes made by the government in last year's budget, the 1998 budget, and which are now being fully implemented in this bill.

The bill covers many different areas, including registered education savings plans, provisions with respect to RRSPs, the personal tax credit, the child care expense deduction, as well as the caregiver tax credit.

The official opposition will be opposing this bill on several grounds. Whenever the government brings before us a tax bill of this nature, which adds greater complexity to the tax code, we must ask why. Why is it that this parliament and this government cannot understand the fundamental need for root and branch tax reform and tax simplification?

Today we have a tax code that is over 1,300 pages long. It has thousands of associated pages of regulations, rulings and interpretation bulletins issued by the Department of Finance and the Department of National Revenue. This tax code which we are proposing to amend constitutes an enormous, destructive and wasteful burden on the productive capacity potential of our economy.

The Department of National Revenue employs over 43,000 full time personnel just to interpret, apply and enforce this Byzantine, out of control, costly and burdensome tax code. Untold tens of thousands of other Canadians are occupied full time in the interpretation and compliance with the Income Tax Act. That is to say that an enormous proportion of our national wealth is misdirected into complying with a tax code which no single individual can understand and which has grown beyond any reasonable level for a tax code in a free and democratic country.

The power to tax is the power to destroy. It is an enormous power with which we are entrusted in this parliament, the power to confiscate legally the fruits of the labour of people who work hard day in and day out to do better by themselves and their families. We use this enormous power, this Income Tax Act, to tell those families that they must give 10%, 20% or 30% of their family or individual incomes to this government to spend on its priorities rather than their own priorities.

Fundamentally, I want to make it clear that the official opposition opposes the continuing growth in complexity and cost of this destructive tax system.

This bill does precisely nothing to alleviate the enormous complexity and burden of the Income Tax Act but rather adds to it. I will refer to each of the provisions here that simply add additional regulations and legislative language which will make the code even more burdensome and more difficult to interpret and even more difficult to comply with.

I refer in particular to the proposed increase in the personal tax credit of $500 announced in the 1998 budget. The first half of that $500 increase in the basic personal amount for some low income taxpayers was implemented in legislation last year. The bill before us today would complete that increase to $500.

Let me point to an example of how ridiculously complicated this bill and the tax code are. This bill does not increase the basic exemption for all Canadians, treating them equally across the income spectrum; rather it will only be increased for incomes under a certain amount based on a certain complicated formula, all of which unnecessarily complicates what should be the simplest part of the tax system, the basic personal exemption. Based on any rational principle of taxation, the basic personal exemption should be clear, straightforward, and ought not to become a complex exemption, as has been done in this bill.

Let me also say with respect to the provisions for RRSPs, this bill permits Canadian residents to make tax free withdrawals to pay for full time training, as they can for instance under the status quo ante to pay for their mortgage on a principal residence.

With respect to RRSPs, this bill does not address the fundamental problem. This parliament has decided to allow Canadians to direct a relatively small portion of their annual income into a registered retirement savings plan, if they do not qualify for a registered pension plan. That is a sensible policy. We recognize that millions of Canadians do not and cannot rely on government or their private sector employers to provide them with retirement security.

The problem is that with the provision for RRSPs, we impose unreasonable regulations, restrictions and limitations on how much Canadians can save for the future in a tax sheltered vehicle such as an RRSP. How do we do that?

First, we limit the amount of Canadian taxpayers' taxable income which can be deferred through the RRSPs to 18% or $13,500, whichever is less. This is to say that a self-employed young Canadian, with no company pension plan and no real prospect of a Canada pension plan benefit because of the actuarial instability of the CPP, has to almost exclusively rely on the RRSP as his or her source of future retirement income. Yet the government says that it will limit quite severely the portion of the person's income which he or she can direct into that RRSP. That is a disincentive for self-employed Canadians to take full responsibility for their financial future and for their retirement.

This cap of $13,500 or 18%, whichever is less, has not increased over the past several years. This is a reflection of the government's pernicious policy of taxing people on inflation.

We have seen this government continue the Mulroney Conservative government policy of partial deindexation of the tax code. We have seen taxpayers having to pay about $12 billion in additional taxes than they otherwise would have paid were it not for partial deindexation and the consequent bracket creep.

So too we see the limit of $13,500 for maximum allowable RRSP contributions not keeping pace with inflation. In other words, had the RRSP maximum amount been held constant with inflation, and if the maximum amount for RRSP contributions were equivalent to the maximum amount that people can contribute to a registered pension plan, then it would be about $15,000 that they could put into their RRSP and not $13,500.

We should have seen an increase in the amount that people could save and defer taxes on through the RRSP for each of the last three or four years. However the government, through its nickel and diming of people and its tax policies, decided to freeze the maximum allowable contributions several years ago. Therefore, many hundreds of thousands of Canadians have not been able to defer taxation on their one and only source of future retirement income, namely their private retirement savings plans. For that reason we oppose the bill because it does not include the kind of increase in the RRSP allowable contribution amount which all people who are serious about their financial future would like to see.

I can say that I have not in my time as a member of parliament received a single letter, phone call, fax, e-mail, comment at a town hall or on an open line show suggesting that Canadians would like to see their taxes increased, but I have received dozens upon dozens asking that the maximum amount for RRSPs be increased, which the bill does not do.

I have also received dozens of messages from constituents asking that we allow Canadians to invest a larger portion of their RRSPs into foreign held equities and investments. Under the current law, which the bill fails to change, Canadian investors can only contribute 20% of their tax deferred RRSP savings in foreign investments. That means that at least 80% of their investments are stuck in domestic Canadian equities and bonds. We are again forcing Canadians to be irresponsible when it comes to their own financial future. One of the basic fundamental principles of sound investment is to diversify, which we do not allow Canadians to do because of the restrictive 20% foreign content limit on RRSPs.

Yet another one of the inadequacies in the Bill C-72 is its failure to respond to the outcry among Canadians to allow them to protect the value of their retirement savings and to generate better returns, which would consequently benefit the Canadian economy by raising the maximum allowable foreign content limit in the RRSP.

Let me address an aspect of the bill which I really find the most objectionable, that is the increase which it proposes in the child care expense deduction. The bill completes a change begun in legislation from last year's budget which increased the child care expense deduction from $5,000 for children under seven to $7,000, an increase of $2,000.

Let me explain what the child care tax deduction—

Business Of The House

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I rise on a point of order. Let me apologize first to the hon. member for interrupting his discourse.

I believe there is unanimous consent for the motion that I am about to propose pursuant to the consultations that have been held, maybe somewhat unusually, including those in the Chamber. A copy of the motion has been given to all parties in the House. The motion reads as follows:

That, in the present sitting, proceedings pursuant to Standing Order 38 shall be taken up immediately following the completion of Private Members' Business and, when such proceedings are completed, the House shall proceed immediately to proceedings pursuant to Standing Order 52, provided that during the aforementioned proceedings the Chair shall not receive any quorum calls or dilatory motions or requests for unanimous consent.

[The Deputy Speaker]

Could I ask for clarification from the government House leader. The aforementioned proceedings refer to which, all the proceedings mentioned in the motion, that is the present sitting, or does it refer to the proceedings under Standing Order 52?

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, it does not really change much for us but, for greater clarity, if they apply to Standing Order 52 that would suit us.

[The Deputy Speaker]

I just seek that clarification in case there is a request for unanimous consent between now and the commencement of Private Members' Business or during Private Members' Business. You can understand the Chair's reluctance to leave the matter quite so open. The understanding is that the motion means that.

[Charlie Penson, Reform, Peace River, AB]

Mr. Speaker, just to be perfectly clear, that would only apply under Standing Order 52.

[The Deputy Speaker]

The request for consent, quorum calls or dilatory motions.

[Charlie Penson, Reform, Peace River, AB]

Yes, Mr. Speaker.

[The Deputy Speaker]

That is the way the Chair will now interpret it, if that is what is agreed by the House.

[René Laurin, Bloc, Joliette, QC]

Mr. Speaker, when you refer to Standing Order 52, does this mean that unanimous consent could be called for for reasons other than the two that have been given?

You have said that, during the emergency debate, there could be no dilatory motion requesting consent, quorum call or—

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

We will be on automatic pilot.

[René Laurin, Bloc, Joliette, QC]

So it is not just on the two matters that there can be no call for consent. No request for consent will be authorized during the emergency debate. Is that what we are to understand?

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

That is how a debate under Standing Order 52 works.

[René Laurin, Bloc, Joliette, QC]

Fine.

[The Deputy Speaker]

Is there unanimous consent to propose this motion?

[Some hon. members]

Agreed.

[The Deputy Speaker]

Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

(Motion agreed to)

The House resumed consideration of the motion that Bill C-72, an act to amend the Income Tax Act, to implement measures that are consequential on changes to the Canada-U.S. Tax Convention (1980) and to amend the Income Tax Conventions Interpretation Act, the Old Age Security Act, the War Veterans Allowance Act and certain acts related to the Income Tax Act; and of the amendment.

Income Tax Amendments Act, 1998

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, I was just beginning to address the issue of the proposed increase in the bill for the child care tax deduction.

Let me explain what it is. We have had much debate in this place over the past two or three weeks about the lack of fairness toward single income families with children. One of the issues I wanted to bring to attention of this place was the unfair, unjustifiable discrimination against single income families that decided to do what they believed was best by their kids and raise them at home.

The child care tax deduction says to parents who have two incomes that if they pay someone else, a third party, whether a day care operator, a babysitter, a hockey summer camp or music summer camp, to take care of their kids for a period of time and are issued a receipt for the expenses incurred, the government will allow the spouse with the lower of the two incomes in those double income families to deduct the value of the child care receipt from their taxes.

This says that families that give up the second income and have the father or the mother stay at home full time to raise the children and give up tens of thousands of dollars in potential income are out of luck. They assume an enormous opportunity cost and in so doing voluntarily reduce their standard of living. In many instances they give up the second car, the larger house or the three week vacation. Those families do not qualify for the child care tax deduction, the value of which is increased in Bill C-72. It says to those families that they will be forced through the tax system to subsidize the day care choices of one kind of family, that is to say the double income family that pays for outside child care.

This deduction is absolutely, fundamentally unfair. We in the official opposition attempted to bring the issue to a head in the supply day motion on which we voted Tuesday last. Unfortunately, because apparently government members who agreed with us were whipped to vote against it, that motion did not pass.

However, at least we succeeded in having the government admit there might be some kind of problem. Virtually every economist and social scientist who has studied the matter agrees that there is discrimination against single income families with children in part due to the child care tax deduction in the bill.

The problem with the bill is that it raises the inequity. It increases the unfairness. It moves the deduction from $5,000 to $7,000. While we are trying to bring single income families in line with or in parity with their double income counterparts, the government is actually increasing the unfairness.

The government's own budget documents demonstrate this quite clearly. The budget documents tabled by the hon. Minister of Finance last month indicate that the tax inequity between single and double income families ranges between 60% and 115%. That is to say, single income families pay between 60% and 115% more. In some cases they pay twice as much in federal income taxes as do their double income counterparts.

This is for families that are generally on the lower end of the income scale. This is for the single income families that according to the Vanier Institute of the Family are 3.8 times more likely to be poor. This is simply inexcusable. I will vigorously oppose the bill because of the increase in the child care tax deduction.

One provision in the bill allows for a deduction for children between the ages of seven and sixteen. What does this mean? It means that a double income family, theoretically a wealthy double income family, could pay for a 15 or 16 year old child to go to an expensive hockey school or music summer camp and claim a full $4,000 tax deduction. At the same time the low income family, the single income family on the other side of town that is bringing in only $30,000 in income but has dad or mom full time at home with the kids, gets no commensurate deduction.

We do not propose, by objecting to this issue, to remove the deduction for child expenses completely. We propose to convert it into a refundable credit that would be available to all families regardless of their child care choice. Single income families would have the full advantage of a refundable credit equivalent to the maximum amount of the $7,000 deduction. This would amount to $1,200. Every child under seven, under the credit we are proposing, would benefit through their parents to the amount of $1,200 a year. This would be an important step to reducing the tax discrimination which was only increased in the last budget.

In closing, we are disappointed that notwithstanding the debate of the last couple of weeks the government is going precisely in the wrong direction. Instead of levelling the playing field, it is in fact increasing the inequity between these different kinds of families. That is very disappointing indeed.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I find it passing strange that the member for Calgary Southeast finds a whole range of issues with the 1998 budget but fails to take into account that it was the first balanced budget since 1969-70, the first time the government had balanced the budget in many years.

It was the beginning of tax relief for Canadians. It was $7 billion of tax relief for Canadians which was also extended in the 1999 budget, amounting to a total of $16.5 billion in tax relief for Canadians.

The member for Calgary Southeast spoke about simplifying the Income Tax Act. I am sure all Canadians want to simplify the Income Tax Act, but the hon. member failed to indicate how he would simplify the Income Tax Act. I have a suspicion that the way to simplify the act in his mind is the Alberta Reform solution, the flat tax solution. A flat tax does not really comply with the progressivity of the Canadian Income Tax Act.

Yes, it simplify things. It simplifies things very much, but it means that the tax is not progressive. Higher income Canadians now pay more income tax in percentage terms than lower income Canadians. This seems to be an equitable way to arrange things. A person who makes more income pays more income tax, not only in absolute terms but in percentage terms. That is called a progressive tax system.

When we go to this simplified tax, yes, it would clean up a lot of messy details in the Income Tax Act, but I am wondering what it does to equity. How fair is it when we move to a tax system like that?

Another feature of the 1998 budget which the member conveniently forgot to mention was the Canadian opportunities strategy. It provides a number of initiatives that give Canadians greater access to the knowledge and skills needed as we move into the next century.

We also began the process of paying down the debt which had not been done for many years.

The member opposite gets into a lot of the details of the Income Tax Act but he fails to acknowledge the very positive aspects of the 1998 budget.

There is one aspect I would like to raise, and perhaps the member could comment on it. He talks about the 20% foreign limit for RRSPs. I think he is implying that it should be 25% or 30%. I am wondering why the Canadian taxpaying public should be subsidizing Canadians who want to invest more outside Canada. Should we not be saying that if Canadians want to diversify their portfolio and have 30% of their portfolio outside Canada, that is fine, but why should the tax system subsidize that?