Mr. Speaker, I wanted to ask a question of the member for Kings—Hants. Since the time has expired, I want to put on the record a couple of points which he may wish to consider.
With regard to this debate, one of the important areas that has not been discussed as much as it probably should have been is the whole issue of consumer protection. Members and Canadians should know that the government is working on a consumer protection package, particularly with regard to issues such as coercive tied selling and other business practices of the banks. Canadians need to understand better what their rights are and what the situation is with regard to their options within the financial services sector. I wanted to make that point.
The member for Kings—Hants also spoke, as many members did, about the access to capital issue for small business. There is no question that this is an important area. Canadians want to know that the accessibility issue is going to be addressed, and that foreign competition is going to provide some additional competition and access to capital.
The member for Kings—Hants gave a speech with regard to the small business sector, which was very much reminiscent of what Brian Mulroney spoke about in this place when he introduced a $100,000 lifetime capital gains exemption. The whole discussion was with regard to how we could put some incentives for Canadians where they could start to invest in small business and get a tax break by doing that.
The flaw and the big flaw of the Conservative government of the day, and I recall raising it with the then leader of the Liberal Party, John Turner, was that there was no grandfathering of the provisions. In other words, the capital gains exemption was applicable not just to gains that would be earned on investments made from today forward, but they were eligible even for holding gains, gains that people had made on investments and other assets that they had held from wherever.
When capital gains taxes did come in, there was a V-day, a valuation day on which any gains or appreciation in the value of investments and assets were not going to be captured under a capital gains provision. There was prospective legislation so that capital gains tax would only be applied on gains from the point at which the tax was brought in to the time of disposition or deemed disposition.
If members are very serious about access to capital issues, they also have to be very realistic about the risks that face lenders when they are dealing with small businesses. When there is a smaller capital base, when there is less ability to take that financial hit, there is a risk premium associated with it. That is one of the contributing factors to small business.
Certainly the other is that most small businesses are not having difficulty getting capital for capital expansion purposes where there would be collateral assets for the loan. One of the biggest problems they are having is with regard to getting working capital loans. This is where businesses need the cash flow to finance their receivables, their inventories and their general float of cash requirements.
Capital gains taxes and the lifetime exemption have gone away now. They have been basically eliminated except for those who have made declarations that were permitted when it was phased out. Maybe it is time we reconsidered some sort of a tax benefit or a capital gains exemption for small businesses, where equity investments made in small business would get the kind of support from the taxpayers of Canada who pay for all tax expenditures, to the extent that we could stimulate the investment in small business equity financing. Canadians would have an opportunity to support the biggest job generator sector in the country, that being small business.
I wanted to raise those issues because as we deal with legislation, whether it be opening up the foreign banking and amending the Bank Act et cetera, there will be many complex issues and collateral issues to deal with.
For instance, Wells Fargo is in the business of electronic banking over the Internet. It does not pay tax to Canada on profits because it is not resident here. It has no physical building that it is a resident in Canada and has to register that company. In fact, it has an arrangement with Revenue Canada whereby when it pays interest to the depositors of Wells Fargo for instance, a withholding tax on payments made to non-residents would have to be remitted.
There are some significant anomalies or challenges to be addressed in terms of the banking sector.
The MacKay task force report obviously has raised a number of important issues. I think the member from Kings—Hants well knows that the finance committee has not finished its job. In fact, we have just started our job with regard to assessing how we can continue to promote consumer protection and consumer confidence in the banking sector, regardless of whether it is provided domestically or through foreign bank facilities.