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House of Commons Hansard #208 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was crime.

Topics

Questions Passed As Orders For ReturnsRoutine Proceedings

10:15 a.m.

Some hon. members

Agreed.

The House resumed from March 18 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 other 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, 1998Government Orders

April 15th, 1999 / 10:15 a.m.

Reform

Roy H. Bailey Reform Souris—Moose Mountain, SK

Mr. Speaker, I am very pleased to have this opportunity to talk about this bill and about this subject. If there is one branch of the department Canadians have learned to hate it is this branch.

We have some definite objections about Bill C-72. It does not address that two-income families qualify for child care and so on.

I will go to a specific example I have had in the past few years, particularly one this spring. I am sure every member of parliament deals with the Department of National Revenue in an attempt to help their constituents. I would suggest to that department, as it brings in new legislation, that it follow some examples of the treatment of its clients, the citizens of Canada, with a touch more humanity.

Let me give members a striking example of a case I am working on which I think is a disgrace. I know a young woman who is presently raising two children. She works at a full time job but because she has been deserted by her husband she also works part time on the weekends. I bring this case to the attention of all members because I am talking about the treatment of people. We can do all we like in legislation to write something down, but to practice it is a different thing.

This young lady has not seen her husband for three years. Revenue Canada finally—and I give it credit—caught up with her husband and was able get her the child support that she should have received for three years. It then sent her a cheque for $11,500. At the same time, she is being assessed by the Department of National Revenue as owing $5,500 in income tax. Not only is that dehumanizing, but this mother is struggling to raise a 16 year old and a 12 year old and does not have $5,500.

There is something wrong with a system that employs some 40,000 to 45,000 people, who can be rigid and efficient in tax collection, but surely they could be a little more humanistic when it comes to dealing with people. The people who are calling Revenue Canada and signing these letters are human beings and deserve to be treated as such.

I realize that the Department of National Revenue does deal with money and it is going to have agitations. However, I beg that when we get into this bill that we should play fair with people. I am sure each one of us in our history have had some grips with income tax. I am sure everybody has. I can pick out a dozen examples over the last two years where people have been treated as numbers. Quite frankly, even when the department is aware of the individual's circumstances it ignores them. This is not right for the Government of Canada.

I wrote a letter this morning to this young lady stating that I would do my very best to see that she does not have to borrow money to pay the federal government this additional $5,500. This support money was to have been spread over three years so this $5,500 should have been considerably less. This is not the only case I have to deal with. I have 12 other cases on file. I am not just citing one example.

I could stand here until midnight tonight citing examples that sometimes take a year before national revenue realizes it has erred. I have never seen a letter of apology from Revenue Canada but I have from other departments. There is never a thank you. Many of these people, out of sheer determination, go after the Department of National Revenue and pay their own legal costs. These costs, however, should be borne by the government as it was national revenue that fumbled around on these issues.

I have advice for dealing with Bill C-72. If there was ever a department that needed to become familiar with how to deal with people in a professional way it is this one. We can be strict or severe. We can be almost anything if we do it professionally, but there are too many people out there who do not deal with the constituents of Canada in a professional manner. The department says it cannot do this because it deals with money. Well I say it can.

For this young lady, this mother of two, and no doubt hundreds of others in Canada, let us humanize this department. Let us try to understand and ensure that the department has the staff to do it.

I am very delighted to speak to this bill because nothing churns me and makes me more irate than to have to counsel and try to help a constituent when I cannot get a response from this particular department.

I really hope all of Canada is listening to this. I want them to get after their MP, not just on this side of the House but on that side of the House, to humanize this department.

Income Tax Amendments Act, 1998Government Orders

10:25 a.m.

NDP

Nelson Riis NDP Kamloops, BC

Mr. Speaker, I certainly agree with the point my hon. friend makes. I suspect we have all had similar experiences, too many of them.

He referred regularly to the department and to the officials as not being prepared to bend or to be more humanistic and so on. Would he not agree that the responsibility for this law that he refers to, regarding the payment of moneys destined to assist children, is not a bureaucrat's decision or the department's decision but a political decision taken by the political leaders in government? If people have concerns about the Income Tax Act they ought not take them out on an official. They are just carrying out the law that has been introduced by the Liberal government, by the cabinet and by the Prime Minister.

Could he clarify this? He seems to be antagonistic about somebody, but surely it is not the bureaucrat. It must be the people who actually make the laws not the ones who carry them out.

Income Tax Amendments Act, 1998Government Orders

10:25 a.m.

Reform

Roy H. Bailey Reform Souris—Moose Mountain, SK

Mr. Speaker, the member is quite right. The Income Tax Act is part of the government. However, the carrying out of the act belongs to the officials. Sometimes it does not get back to the department. I was referring to the fact that sometimes the officials make their pronouncements and judgments incorrectly.

In response to the hon. member's question, if the government was really concerned about these low income people, to which I referred, it would take a look now at the exemptions and raise them so that the people who are struggling could get by without having to pay nearly as much income tax. That is part of our problem.

I read in the paper this morning and heard on the radio that actual income has dropped. The actual income for the people who I mentioned in my speech has dropped even more because they are at the low end of the scale.

Yes, my colleague from the NDP, this is the government's legislation, but those who work in that department should become a little more familiar with each case and deal with it accordingly.

Income Tax Amendments Act, 1998Government Orders

10:25 a.m.

Reform

Howard Hilstrom Reform Selkirk—Interlake, MB

Mr. Speaker, I would like to hear the member's comments in regard to the responsibility of the government members and cabinet for the Income Tax Act and for the enforcement of it. We had the unfortunate case where Susan Theissen and her husband had their income tax returns taken out without lawful release by Revenue Canada, which made a terrible mess in their personal lives.

Would the member comment on whether or not it is actually elected government members that are responsible for everything that goes on in that department? It is their overall policies that actually filter down to the bureaucrats. Would he comment on whether or not it is the elected officials as opposed to bureaucrats that are the biggest problem in Revenue Canada?

Income Tax Amendments Act, 1998Government Orders

10:30 a.m.

Reform

Roy H. Bailey Reform Souris—Moose Mountain, SK

Mr. Speaker, when income tax moves in a matter of this gravity the officials make sure that it is indeed covered by the act some place.

I am glad the member asked that question. When an error has been committed by the bureaucracy, the officials all the way down the line, that error should be compensated in the same way as if I were in business and I did my hon. colleague wrong. I would be the first one to phone him, write him, make amends, and any penalties I caused him should be paid.

That is what should be happening with income tax. They do make errors occasionally. I have never seen one. I understand they have written letters to say they are sorry. I have never seen one. Occasionally the clients, who are citizens of Canada, get something in return. I have not seen that either.

The attitude in Canada in relation to collecting taxes is completely outdated. We need to follow what the IRS did in the United States and humanize the department a bit.

Income Tax Amendments Act, 1998Government Orders

10:30 a.m.

Reform

Gerry Ritz Reform Battlefords—Lloydminster, SK

Mr. Speaker, my hon. colleague spoke about complexity and our convoluted tax code. We started out with a tax code in a little book about a half an inch thick. Now we are up to volumes that stand taller than I do. We never seem to get rid of some of the old stuff that has not worked. We have dehumanized the system. The fairness is missing, as he has alluded to.

Could he give me some comments on the unfairness to tradespeople: mechanics, auto body technicians, tradespeople in other walks of life, electricians, plumbers, carpenters and so on? They are unable to write off the cost of the tools and equipment they bring to their jobs. In a lot of cases it is a $15,000 to $20,000 investment of after tax dollars. It is a prerequisite of their employment that they have to come up with that kind of cash in after tax dollars. It is just an unfair burden on a lot of tradespeople, some of whom are young.

It seems to fly in the face of the youth training program initiative the government loves to talk about. That fairness initiative is not being implemented in the tax system. Would he care to comment on that, please?

Income Tax Amendments Act, 1998Government Orders

10:30 a.m.

Reform

Roy H. Bailey Reform Souris—Moose Mountain, SK

Mr. Speaker, if I were to answer that question we would be here all day. My hon. colleague raises a very valid point. The other night in the House we approved a private member's motion of the member from Kamloops related to transit fares and taxation.

The member is quite right. Very few people in Canada today file their own income tax. It has become so complicated that everybody has to have it done. The member mentioned tradespeople. They really take a beating in this regard.

Let me explain. A young fellow is hired for the first time as a journeyman mechanic. In order to go to work the rules of that association says he must have his own tools, not the major tools like presses but his own tools. In order to work he must equip himself with tools; he cannot work without them. They are very expensive and he cannot claim them as a deduction. That is absolutely insane. I could talk about carpenters, electricians and so on. They have expenses that should be claimable. It is wrong. We have slapped the faces of our tradespeople far too long.

Let me explain. If this person were working for a corporation and the corporation supplied the equipment it is a tax deduction, but when the individual buys it in order to work for a firm it is not a tax deduction.

It is time we looked at fairness. It is time we looked at the individual. It is time we had a total overhaul of the tax system. It is becoming more complex. Every time the tax system moves on we isolate more and more Canadians in their attempt to even pay their taxes.

Income Tax Amendments Act, 1998Government Orders

10:35 a.m.

Stoney Creek Ontario

Liberal

Tony Valeri LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, I want to make sure the hon. member is aware that Bill C-72 provides some substantial tax reduction. In fact it took 400,000 Canadians off the tax rolls and provided $16.5 billion over three years in tax relief. They voted against it.

He talked about not helping young Canadians. The registered education savings plan went from $2 billion to over $4 billion since the announcement was made. It is helping Canadians save for their children to obtain a future education.

As much as I understand the role of the opposition parties is to criticize, I would hope the hon. member would at least point to one or two measures with which he would agree. I know his constituents have. I would ask him to stand and agree.

Income Tax Amendments Act, 1998Government Orders

10:35 a.m.

Reform

Roy H. Bailey Reform Souris—Moose Mountain, SK

Mr. Speaker, I know what the hon. member expects me to say and I will say it. Bracket creep probably looked after everything.

Just very quickly on education, I say to members opposite that I understand. I have a case on file right now of a young fellow who received a scholarship in September 1998. He is asking me, and I am trying to work on it, whether it is right that he has to pay income tax on the full amount of the scholarship in the year in which he got it. That is not right. It might be correct, according to the books, but this young man will use that scholarship over a period of four years and Revenue Canada says that it wants it all claimed this year. That is wrong.

Income Tax Amendments Act, 1998Government Orders

10:35 a.m.

Reform

Jim Abbott Reform Kootenay—Columbia, BC

Mr. Speaker, this is yet another bill to add to the great pile my friend was talking about. I happen to be six foot five inches tall and indeed the documents go over my head. The Income Tax Act and all the reports and documents to interpret it are totally convoluted. Bill C-72 just adds to that convolution.

I believe it was the parliamentary secretary to the finance minister who was trying to say earlier that we should look at what they have done in terms of clarifying things and reducing taxes. Why does he and his department not take a look at how convoluted the Income Tax Act is? The officials who enforce the Income Tax Act have the ability to make virtually any interpretation they want of many sections. It creates all sorts of confusion.

Before I speak specifically about Bill C-72, I offer by way of example something that occurred not once but twice in my own constituency which relates to what I am speaking about. I have previously addressed this situation in the House. I hope the parliamentary secretary will listen with great concern and interest and take notes. We are not getting anywhere in this situation. I know he will be able to help me break through on behalf of my constituents.

A few years ago, as a result of some rather lopsided logic by the NDP government in Victoria, there was a lack of wood fibre or feedstock to the local lumber mills in my constituency. As a consequence, a number of ranchers who were not normally in the business of tree farming or logging on their property were approached by lumber mills and asked if they would be interested in selling logs on a selective harvest to the mills. Many of them did. As a matter of fact, I think the caseload in my office right now is approaching 25 or 30 of these ranchers who took advantage of the situation.

All these people, as my colleague who spoke previously mentioned, had to go to tax accountants to get the issue straightened out. What was interesting was that in most cases the accountants had prior experience with this kind of situation. In some instances some of the CGAs and CAs approached Revenue Canada in Penticton and asked what was the best way to account for that income.

None of my constituents, whose cases are in my office right now, had any intention of walking away from their responsibility of paying taxes. They are good, responsible Canadian citizens who recognize that they have that responsibility and are prepared to pay their taxes.

Their accountants advised them that the way it was handled as far as Revenue Canada was concerned was to declare the income as a capital gain. This was to get around the problem that obviously there were some expenses incurred, but because they were not in the business of normally growing the trees to be harvested for lumber production there were not any easily identifiable expenses that could be written off against that income.

If this had just been one public accountancy firm, if this had just been one CGA firm, we would have a situation where someone obviously was mistaken in his or her interpretation. However, it was 100% consistent on the part of all 10 firms that were involved. As I indicated earlier, some of them actually took advice from Revenue Canada about the issue.

What happened? Now I am getting into some interpretation, but we had a situation where in my judgment some officials in Revenue Canada were sitting around one day and realized that a tremendous amount of income had been declared but if they had declared the income as income and not as income from capital gain which gave them a 25% advantage, they would have collected an extra $1 million in taxes.

All of a sudden these constituents were reassessed. I would counsel my NDP colleague from Kamloops that he will have people in his constituency who will be hit the same way. I would counsel anyone in British Columbia and, once this has spread, anyone involved in this kind of situation. This has been turned back already by one appeal to one level of the tax system. Now the government is taking it forward to a higher court of appeal.

I can think of a situation of some people who are now into their 70s. They have a very large piece of property and a residence on the property. They received this income. They went through the procedure as specified as good Canadian citizens. They paid their taxes as required by Revenue Canada under the interpretation at that time. They then paid off all their encumbrances and disbursed funds to their families who in turn will have used that income to pay off perhaps their mortgages or some other debts.

In other words, what I am saying is that the money is gone. All of a sudden, with a reassessment out of the clear blue sky this older couple is now faced with a $72,000 tax bill. It is absolutely bizarre that because the Income Tax Act is so convoluted the officials in Revenue Canada were able to go after this couple, times 25 or 30 more in my constituency.

I said that there were two cases. The second case deals with debate that has happened in the House today. The member for Kamloops asked whether my Reform colleague thought there is the issue here that it is the responsibility that the direction comes from the political side. The answer to that question is partly yes and partly no.

The yes part is that a couple of years ago the finance minister finally woke up to what the Reform Party had been saying all through the 1993 election, that the deficit was killing us and that we had to cut back. The finance minister all of a sudden woke up in 1996 and said that the government would be going after all these so-called tax loopholes. He said there were going to be ways to take the so-called tax loopholes, tax credits and things of that nature away from people in middle and higher income brackets. That was in 1996.

I have received advice that fundamentally the income tax department has three years to go back and reassess. The income tax department knew on the basis of what the finance minister said that it would be rolling this back. Why did it not reassess immediately for the 1996 year? If it was too busy, why did it not get around to it in the 1997 year? If it was still too busy, which I find difficult to believe due to the amount of tax that was outstanding because it was closing this loophole, why did it not get around to it?

The department is now getting around to it. It is filing this at the very last minute, at the end of the approaching third year when the statute would prevent it from going after this money.

The situation is that the finance minister says “We are closing loopholes” and Revenue Canada says “We are going to wait”. Why would it wait? Because of the penalties and the interest that will be charged on the money that the department is now reassessing as a result of the direction from the finance minister.

I say to my friend from Kamloops, that is why he is partially correct. Revenue Canada and the Income Tax Act are creations of the incumbent Liberal government. On the other side of the coin, the department itself in many cases can be legitimately accused of being unfair and unbalanced when dealing with with law-abiding Canadian citizens.

Unfortunately, the result is that we end up with decent law-abiding Canadian citizens who want to pay their taxes, who want to comply with the law and end up feeling as though they have been shafted. What do they do with their income tax the next year? They do everything they possibly can and sometimes they slip into very grey areas of trying to avoid tax. They say “I am going to hide whatever I can from those people”.

As a responsible member of parliament, I would never, ever countenance or counsel that and I mean that in all seriousness. But I must say as a human being I understand that kind of reaction and emotion when people feel that it is simply unfair and say “I am being treated unfairly so I will treat the tax department unfairly”. It is an ever growing and an ever encroaching problem.

Let us deal specifically with Bill C-72. I would like to read something on page 34 of this 155 page document. It is a bit long, but it indicates how the act is so completely twisted, convoluted, mixed up and creates so many pockets which the tax people in Revenue Canada have the ability to work in so many different areas of interpretation.

Clause 18(3) states:

Paragraph 63(2)(b) of the Act is replaced by the following:

(b) the amount determined by the formula

(A + B) X C

where

A is the product obtained when $175 is multiplied by the number of eligible children of the taxpayer for the year each of whom

(i) is under 7 years of age at the end of the year, or

(ii) is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer's tax payable under this Part for the year,

B is the product obtained when $100 is multiplied by the number of the taxpayer's eligible children for the year (other than children referred to in the description of A), and

C is the total of

(i) the number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person was

(A) a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school of not less than 3 consecutive weeks duration that provides that each student in the program spend not less than 10 hours per week on courses or work in the program,

(B) a person certified by a medical doctor to be a person who

(I) was incapable of caring for children because of the person's mental or physical infirmity and confinement throughout a period of not less than 2 weeks in the year to bed, to a wheelchair or as a patient in a hospital, an asylum or other similar institution, or

(II) was in the year, and is likely to be for a long, continuous and indefinite period, incapable of caring for children, because of the person's mental or physical infirmity,

(C) a person confined to a prison or similar institution throughout a period of not less than 2 weeks in the year, or

(D) a person who, because of a breakdown of the person's marriage, was living separate and apart from the taxpayer at the end of the year and for a period of at least 90 days that began in the year, and—

This is just one very infinitesimal part of what we are dealing with. It has to do with what I know the parliamentary secretary is going to wax eloquent about, how the Liberals have been cutting back on increasing allowances and taking, how many was it, 400,000 people off the income tax rolls and all the rest of it.

He and the Minister of Finance, instead of all these layers of convolution on convolution, should simply do that which needs to be done. Index the basic exemptions going back to the time when the Progressive Conservative government in its wisdom decided to deindex. Give people proper basic exemptions. They would be able to take more than 400,000 people off the tax rolls and those people would be the people who would be needing it the most.

The kind of gobbledegook contained in this act is the reason people even in low income brackets make the people at H&R Block rich. People have to go to some kind of a tax accountant even to fill in the most basic form and it is because of this.

Why not simply do what is right? Allow people to keep income in their pockets, particularly people at the low end of the scale. It has always been and will always be the position of the Reform Party that money in the hands of the taxpayers is far more productive than it will ever be in the hands of the Minister of Finance or the bureaucracy this government represents.

The Liberals often accuse us of coming up with simple answers. In this case this is precisely what we are coming up with. Leave money in the hands of Canadians. It is they who buy the running shoes for their kids. It is they who make the decisions about what kind of food the children will eat. It is they who make all sorts of purchasing decisions. Leave the money in the hands of the people, particularly the people at the low end of the income scale. Those people of necessity circulate the money back into the economy. Instead, the government continues to grab and grab. It basically rips off money from the pockets of the poor.

This act is simply a layering on of convolution. This bill makes the onion that much bigger. Even if we were to peel this bill off the income tax onion, we would come into what was passed in the House just last month. And if we peeled that layer off we would be back a little farther. We would have to take a big carving knife to this onion to get to a point where ordinary citizens could feel confident that when they pay their taxes it is in a fair, just and equitable way.

It is the plea of the Reform Party and of myself on behalf of my constituents to simplify the Income Tax Act, to make it workable and above all to make it fair.

Income Tax Amendments Act, 1998Government Orders

10:55 a.m.

NDP

Nelson Riis NDP Kamloops, BC

Mr. Speaker, I listened with interest to my hon. friend and neighbour. I agree with about 96% of what he had to say.

He read from the Income Tax Act, which is always a useful thing to do to point out how convoluted the act is and why people have to hire tax accountants and tax lawyers to do the most simple tax form transaction.

I know my friend is concerned about the growth of the underground economy. Many people have decided not to carry on business transactions above the table but to do it below the table. This results in a significant loss of revenue to the national treasury.

Is the reason so many people have decided to go into the underground economy a reflection of people's loss of faith in the fairness of our present tax system?

Income Tax Amendments Act, 1998Government Orders

10:55 a.m.

Reform

Jim Abbott Reform Kootenay—Columbia, BC

Mr. Speaker, it is an unusual time when we have Reformers and NDPers agreeing on things. It is like the lion and the lamb running side by side from a fire. I am the lamb.

I could not agree with the member more. The people of Canada clearly have lost confidence in the income tax system from the perspective of fairness.

There is the hated GST, goods and services tax, which the Prime Minister pledged in the 1993 campaign he would overturn. Of course he did not keep that promise. The hated GST is probably one of the greatest reasons for the submersion of much of Canada's economy. The way the federal government chose to administer the GST is convoluted.

Even if we were to have a debate about the efficacy of the GST, that would be one thing. But surely to goodness even Liberal members in the House would have to agree that the simple way the provincial sales taxes are administered versus the convoluted way the GST is administered is one of the main reasons people are going underground.

In comparison to the Prime Minister, it is to the present finance minister's credit that he had the graciousness to admit he had not kept his promise on the GST. Then when he turned around and brought in what was called the harmonized sales tax for three out of the four provinces in Atlantic Canada, it exacerbated the problem.

Our system of taxation is grossly convoluted. I know I am getting a little repetitious with the word convoluted. I will have to go to a thesaurus to find a better word.

Income Tax Amendments Act, 1998Government Orders

11 a.m.

An hon. member

Complex.

Income Tax Amendments Act, 1998Government Orders

11 a.m.

Reform

Jim Abbott Reform Kootenay—Columbia, BC

No, convoluted is bigger than complex. This government is doing absolutely nothing to resolve the issue.

I concur totally with the member from Kamloops that the people of Canada need something better. However, I do not think we will get it from this government.

Income Tax Amendments Act, 1998Government Orders

11 a.m.

Liberal

Peter Adams Liberal Peterborough, ON

Mr. Speaker, first I want to congratulate the member for winning the Masters golf tournament last weekend.

It seems to me that there will always be scope for improvement in and debate about a tax system. That is the nature of the beast.

I have sympathy for the member with respect to the convoluted nature of our system. However, in the examples which he cited some of the convolutions arise out of a concern to deal with every possible case.

For example, if it has to with child care, we think of all the possibilities or the unusual circumstances that might exist so that people can get some tax benefit for child care. When we start thinking about all the possibilities in Canada and all the needs, then it gets more and more complicated.

I agree with the member about the sections he quoted. However, at some point when we consider all of these possibilities someone should stand back, simplify it and explain it for what it is because the purpose is to help people get child care.

Inevitably there will be debate and complexities. However, there are all sorts of mechanisms built in whereby taxpayers can become involved in the process, have their case heard and debated. Also there is great opportunity for members of parliament to intercede. We can intercede on behalf of our constituents. I understand that the member has been doing so. We can speak in the House. We can speak in committee. Gradually we can improve it.

My question to the member is a bit more general than that. I know the tax system is designed to collect money. I know we need that money for health programs, for transportation systems or whatever the program. I understand that and the example which he quoted is as good a case as I can think of. However, I also see the tax system as a way of improving social justice and effecting change.

For example, the child care tax credit may make the tax system more complicated, but it is there to help the children of the poorest families in the land. Then we have the registered educational savings program whereby not only can families get tax credits so their children can go on to college or university, they can also get grants. The money they put aside is not taxed so it can be eventually used for educational expenses. In addition they can get a grant. That is very complicated and it has to be put into writing.

What are the member's views on the tax system in its role as improving Canada, as distinct from its role of simply collecting money?

Income Tax Amendments Act, 1998Government Orders

11 a.m.

Reform

Jim Abbott Reform Kootenay—Columbia, BC

Mr. Speaker, that is a very valid question and I appreciate it.

I believe what the Liberal government and Liberals in general want to do is effect change and mould society into their concept, their higher vision, of the way Canada should be and that they become involved in this quite consciously. I am very pleased to respond to that question because we do not see it that way at all.

What the Reform Party wants to do with respect to child tax credits and things of that nature, particularly in the area of child care, is to give true choice to people. As opposed to the social engineering that the Liberals have quite openly become involved in, we see the ability of Canadians to make these choices instead of the government imposing those values through the tax system.

On the issue of child care we would open the opportunity for those parents who choose to have one parent at home to be able to make that choice without being directed, as they are presently being directed by this Liberal government, out of their homes. Because of the tax system and the way in which the Liberals have designed the child tax credit, the choice for many Canadians has been made for them by these people who have this higher purpose which they wish to impose on Canadian society. The Reform Party sees that as being dead wrong.

The Reform Party wants to create a situation with a tax system that will be totally neutral so that couples may choose to have both parents out of the home working or one at home, or whatever combination or permutation they want.

I think of one couple who are good friends of my wife and I. He was very unhappy as a schoolteacher. She had a very responsible position and was earning approximately the same salary. They made the decision that he was going to become a home husband, which was a fine choice on behalf of their family, but they made that choice at the peril of their income because of the convolution of this government. I think that is wrong. The Reform Party stands for freedom of choice.

Income Tax Amendments Act, 1998Government Orders

11:05 a.m.

The Deputy Speaker

It is my duty to inform the House that the time for 20 minute speeches has come to an end. All speeches remaining on the second reading motion of this bill will be limited to 10 minutes without questions or comments.

Income Tax Amendments Act, 1998Government Orders

11:05 a.m.

Reform

Dale Johnston Reform Wetaskiwin, AB

Mr. Speaker, a bill to implement changes to the Income Tax Act is something we could talk on and on about. One of the first things we should point out to interested parties is that this bill will implement changes to the Income Tax Act for 1998. As we all know, the deadline to file taxes for 1998 is fast drawing to a close, it is 15 days from now, and we had all better have our filing done. This seems to me a rather odd time to be talking about implementing last year's changes to the Income Tax Act. That begs the question: Are are now filing under these implementations or are we not? Are these implementations going to take place in the 1998 tax year or in the 1999 tax year?

Let us look at a little history about income tax. Income tax was brought in as a temporary measure to pay the war debt of the first world war. It was a very cunning operation because it was deemed that only those very wealthy people who earned over $1,000 a year would be subject to this tax. Because that did not include a lot of people, most folks said “What is the problem? We will never be making the princely sum of $1,000 a year, so we will not worry about it. We will let those rich people pay it”. Of course it was only a matter of a very few years before everyone earned enough money to be blessed with income taxes. It is the sort of thing that creeps up on you and bites you right in the pocketbook where you least would like to be bitten.

The need for a flat tax is greater now than it has ever been.

We have heard people talk in this House today about the underground economy and what a scourge that is on Canada. We are assuming, at least Revenue Canada assumes, that the way to combat this would be to bring in several more inspectors, auditors and policemen to harass Canadians into their patriotic duty of paying more taxes. I do not believe that is going to do the job at all.

There is one thing and one thing alone that will encourage people to deal in the underground economy and that is a monetary incentive. If people feel that tax rates are so high that they have nothing to lose by dealing under the table, as my friend from Kamloops has pointed out, then they are going to do that. They are going to take the risk. It is simply a matter of people judging whether or not the risk is worthwhile. The higher the tax rates, the more easily people can decide that the risk is very worthwhile.

I believe that a flat tax rate would do a lot of things. It would more fairly distribute the tax burden in Canada, and we all know we are in favour of fairness as far as taxation is concerned. A flat tax would lower the tax rate for everybody. I firmly believe that if we were to lower the tax rate, the rate of compliance would increase to such a point that the government would suddenly discover it is getting more revenue than it did with the higher tax rate.

If Revenue Canada said it needed fewer people to harass and police to make sure it has compliant taxpayers, that in itself would be a net benefit to the government because it would incur less expense by not having all of these employees on the payroll.

We all recognize that there has to be some general taxation in Canada in order to provide the services that the federal government has undertaken to provide to Canadians. All services have to be paid for. However, I very much object to the method by which the government determines that tax rate.

The tax rate seems to be set by Revenue Canada taking absolutely every penny it can out of the Canadian people and then setting programs to make sure that the money is spent, and then some. By golly, in days gone by the government spent to the tune of $40 billion more than it took in.

We are now in a position where we are paying $40 billion, $45 billion or $50 billion, depending on the interest rate, in interest payments alone for the party which has been going on over the past many years. It is like paying for the pizza that we ate two weeks ago.

The Reform Party thinks the government's plans and priorities should be set and then the tax rate should be set in such a way that revenue can be brought in to pay for the services that are demanded by the Canadian people. That is the way we run our households. We do not say to ourselves that we are going to bring in every penny we can, spend all of it and run up our Mastercard, so that when the Mastercard is full we can take out a Visa to pay off the Mastercard. We do not spend and spend because we love being in debt and paying interest. I do not think we would find very many Canadians who would go along with that kind of philosophy.

At the moment taxes are the biggest single drain on Canadian individuals and families. Their tax obligation is more than their house payments. It is more than their car payments. It is likely more than their bills for food, shelter and clothing combined. When the tax burden gets to that point we have to realize that people are going to rebel.

People are going to rebel in various ways. They may not form picket lines on the street and demonstrate, but they may rebel in the way they comply with the tax laws.

I am in no way condoning non-compliance with the tax laws. I know that the government certainly has the upper hand and the last word in those instances. It certainly is very onerous for one to be in a delinquent position with the taxman. I would not recommend that to anybody, but the incentive is definitely there.

We cannot help but think about the smuggling problem in central Canada. The taxes on cigarettes were such that it was very profitable for certain individuals to bring cigarettes across from the United States duty free and sell them in Canada at a huge profit. The government's answer to that was to reduce the taxes on cigarettes. I would question the methodology in that case.

If the government is willing to pursue or to investigate in that particular instance, why would it not look at the possibility of lowering the income tax rates for all Canadians? Perhaps we would see, as I have suggested, better compliance and more actual revenue. It does not necessarily follow that increased tax rates result in increased revenues. I truly believe we need a system that will emphasize tax fairness. We need a system that people will be willing to comply with. Fairness is certainly the way to go.

I had intended to talk about the unfairness that is involved with the government's plan to attach itself to the public service pension plan. Unfortunately I am going to have to save that for the debate coming up sometime next week when that bill comes before the House.

Suffice it to say that one of the largest and most recurring problems we as members of parliament deal with in our constituencies is the unfairness in the tax system, either with the GST, with income taxes or various other forms of taxation. We have to act as negotiators or advocates on behalf of our constituents to try to get fairness out of the government.

Income Tax Amendments Act, 1998Government Orders

11:15 a.m.

Reform

Howard Hilstrom Reform Selkirk—Interlake, MB

Mr. Speaker, I am pleased to speak today on Bill C-72, an act to amend the Income Tax Act. The parliamentary secretary has asked my hon. colleagues on this side of the House to give praise at times when the government does something good. I can stand here today and say that for things like the registered education savings plan, certainly a little bit of praise has to go to the government.

It has been my experience in life, and I happen to be over the age of 20, that what the government giveth with one hand, it taketh away with the other hand. As a result, the net gain any one of us happens to get out of all these programs ends up being zero, or as we have seen in the past, we are actually worse off.

The budgets in past years have been looked at in that way by Canadians. They look at the taxes they are currently paying, then they look at the program changes in the budget that increase some taxes or decrease others. At times it looks as if the taxpayer is actually winning. That is before it is announced that now there are some user fees.

There are fees that farmers in particular have to pay for government services that are legislated and mandated by government that are for the benefit of all Canadians. Lots of times, as I say, on the one hand the government giveth and on the other hand it taketh away. When it taketh away, it seems it taketh more than it giveth.

I will give an example using gross figures. In 1998-99 I think the federal budget, the revenues in any event, took in about $130 billion. That is a pretty big figure. Now we look one year later, and I have seen estimates that for 1999-2000 the federal government expects to take in in the neighbourhood of $150-some billion, as high as $157 billion I have seen.

Canadians are paying much higher taxes. When I use the example of giving and taking away, we can see that the government continues to take away much larger revenues from Canadians which could be better left in their hands as they would spend it and make jobs.

As has been expressed in the House by many members, a government should set out what its priorities are. It should set out what it intends to do, what is absolutely necessary the government should do that private enterprise cannot. Based on that, it should tax to the level which is required to pay for those essential government services.

We have a tax system that takes away from Canadians tremendous amounts of dollars, billions of dollars, to the tune of $155 billion in the next fiscal year. Then it looks for a place to spend that money. That is what is essentially wrong with this taxation system. We have the cart before the horse in that area.

I would like to speak for just a couple of minutes on what these amendments are doing for low income and poor people. People have low incomes many times due to situations beyond their control.

Farmers and ranchers fall into that low income level. Based on previous historical data, farmers end up paying in quarterly payments under the Income Tax Act. At the end of the year, when they ultimately file their tax returns about 14 months later, they will get that money back.

The government has had the use of that money for the whole fiscal year and the farmer has not had the use of that money. It is the farmer's money in the first place. Finally, he gets to put in a tax return and get some of that money back, probably in many cases all of it back. Certainly people making $12,000 to $16,000 get most of their tax money back, but in the meantime that money has been used by the government. That tax rebate gains no interest while the government has it so the taxpayer does not benefit from that.

Contrast that with a situation where the same low income taxpayer happens to cash in a small RRSP or they get a payment. In the Manitoba flood situation there was an initial $5,000 payment. That all becomes taxable. When the government is owed money by the taxpayer, immediately that is determined to be owed, it is my understanding that 9% per day is put on the outstanding amount.

I have not figured out the actual figures. But certainly the principle of the idea that the government can collect interest from the taxpayer but the taxpayer cannot collect interest from the government flies in the face of equity and reason.

We see another problem. We are looking at amendments that could have gone into the Income Tax Act over the course of time but did not. The amendments that should be going into the act should help the taxpayer and should lower the amount the government takes in from the taxpaying Canadian public. It is always designed so that does not happen.

I will refer to the agriculture income disaster assistance plan. In that plan farmers have to do their accounting on an accrual basis. Many farmers are still operating on a cash basis, which is a form of accounting that is good for farmers who have straightforward incomes.

When the AIDA program was put together, in order to comply with the various complexities of the Income Tax Act, farmers who filed under the cash basis had to convert all their records and accounting systems over to the accrual basis just to try to get in on the agriculture income disaster assistance program. When I say they tried to get into it, it is not that farmers want to get into it, it is that they have had a disaster that requires that they try to find some way to keep their farms or ranches in operation.

There are lots of amendments which could have gone in along with the amendments referred to in Bill C-72. I have already mentioned those other taxes that could be taken right out of the system, such as the user fees for government services that benefit all Canadians.

There is another issue which has been partially dealt with, or there is a capacity for the Income Tax Act to deal with it. The will of the elected members on the government side is what is in question on this particular issue. I am referring to the family trust provisions.

Canadians were outraged a few years ago that a well-known family in Canada, it was reported publicly, had removed approximately $750,000 out of the country without paying any tax whatsoever. I suspect the figure is actually much higher.

I have not seen anything in the newspapers and I have not been advised in any way that the Income Tax Act has been amended to correct that system. I understand that there was already a provision in the act where the government could go back three years and look at those transactions and assess appropriate penalties and taxes.

On behalf of all Canadians, I would certainly like to see the tax paid on that $750 million. It was not $750,000. That is peanuts to a millionaire's family. It was $750 million, almost $1 billion.

I would like to see fairness for the poor in this country as well as the rich. The very rich are still not paying their fair share of taxes when we see these kinds of family trust provisions that only the rich can take advantage of.

I praised the government for the registered education savings plan. Certainly the government deserves credit for that. The problem is that someone making $12,000 to $15,000 a year cannot afford to put the basic money into those plans.

I conclude by asking that the Income Tax Act be simplified overall and made fair for all Canadians.

Income Tax Amendments Act, 1998Government Orders

11:25 a.m.

Reform

Garry Breitkreuz Reform Yorkton—Melville, SK

Mr. Speaker, as we draw to the end of this debate, it is imperative that I speak up on behalf of my constituents who are very concerned about the complexity of the Income Tax Act.

As we listen to the comments that have been made by the Liberals, we as an opposition party feel it is high time that the fundamentals be addressed. The complexity of the Income Tax Act is such that the average person can no longer fill out the forms. When people cannot understand something, they begin to lose confidence in it. That is only common sense.

What has happened with the Income Tax Act is that every year it has become more and more convoluted, more and more complex. When people fail to understand it and cannot do what the government refers to as simple forms, they think it is not fair and they would like to see something done about it. On behalf of my constituents I am pleading with the government to look at an overhaul of the Income Tax Act.

The other evening when we voted I was really torn between voting for tax reduction, that is allowing employers to give their employees bus passes without making it a taxable benefit, which would have been a way to encourage less use of individualized means of transport, or voting for a simpler tax system. That is the choice we had: voting for a tax reduction or voting for a simpler tax system. That is what it has come to and that is why we need an overhaul of it.

We need both. We need tax reduction, and the government knows it. We are losing some of our best young people who are going south of the border or to other countries. If we are to address the fundamentals of our economy, it is high time to look at serious tax reduction.

As I was listening to the questions to us from the members of the government as we were speaking on this matter, it was abundantly obvious that the bureaucracy and the government in Ottawa are not bothered by creating a complex, convoluted tax system. I would like to give a couple of examples with which I have been very familiar in the last several months.

We have had the government develop a farm compensation package for the drop in commodity prices that farmers have experienced because of the subsidies other countries are putting in place for their farmers. The government came out with a program, AIDA, the compensation package. The government said that it would be very simple and bankable. Farmers would be able to fill out the forms in a few moments, send them in, and would know exactly what they would get.

The forms we have pulled off the Internet are 50 pages long. It takes an accountant quite some time to fill it out. Farmers have to go through all kinds of calculations and measurements, and it is not very easy to do. If this is what the bureaucracy and the government regard as a simple form, they had better think twice. It is costing farmers $200, $300, $500 and up to $1,000 to fill out the forms, and then they may not even get anything.

The same is true of income tax forms. It is very costly for people to have somebody fill them out. It ends up being another tax on them that they cannot avoid because they have to hire somebody to fill out the forms.

Another thing the government has done is to go to a gun registry. I suppose the House is wondering how a gun registry fits in with this topic. It is another example of how complex things have become. One has to jump through all kinds of hoops and hurdles now to own property which one has taken for granted for many years. It does not improve public safety. It does not improve our lives in any way. It is another complex form that people have to fill out.

The government defended this registry system and the licensing system that accompanies it by saying that it is no more complex than the Income Tax Act. Let that sink in. It is bringing in more forms, more complex things to fill out, and is defending them by saying they are no more complex than the Income Tax Act. The Income Tax Act is not simple.

The question I have, and I think it is the key question as I have listened to all the debate, is why has our tax system become so complex. I listened to the defence the government has made for this complex system. The Liberals and Liberal minded politicians, which includes the Conservatives previously and the NDP, want to manipulate behaviour. They want to shape society in such a way that it will conform to their way of thinking. They will put a tax break here and cause this kind of behaviour to take place there by adjusting the tax system.

We saw it very clearly when it came to giving benefits to parents. Parents who choose to stay at home and take care of their children do not get the same tax benefits. It makes the tax system more complex, but it is a way for the government to manipulate behaviour. It gets parents to give up their children, send them to day care or whatever, rather than allow them to have equality, allow one of the parents to stay home and to do so without being penalized by the tax system. It is another example of how complex things have become and I think it is because they want to manipulate behaviour.

Look at all the things in the tax system that make it so complex. At some point it can be traced back to somebody who wanted to cause a certain kind of behaviour to take place. I would like somebody on the other side to reply to that because I am sure that is true.

We need to go to a very simple tax system. Some serious study must be done on a flatter tax system. We have to look at the province of Alberta which is doing a study now or thinking of implementing a flat tax. The federal government should do the same. The benefits from that would be enormous. People would again gain control over their lives. They would be able to direct their money.

I know the government put the question forth: “Would you like to have a tax break if you can save for your child's university education and so on”. Why have that? Why not just let parents and taxpayers figure out where they want to put their money and how they want to manage it?

We have the same problem in other areas, for example RRSPs. The government is trying to tell us exactly how to save, who to invest with and so on. All these things are ways to manipulate behaviour. We have to do some serious study on how to reduce taxes.

In my constituency farmers are grossly overtaxed. There is a real concern that many farmers are being driven off the land because they are too highly taxed.

I hope the government will get the message that we need some serious tax reductions and that the tax system needs to be overhauled and simplified. That is the message I get from my constituents for the entire month of April, at least, and throughout the year but it is not as intense as it is right now.

Income Tax Amendments Act, 1998Government Orders

11:35 a.m.

The Acting Speaker (Mr. McClelland)

Is the House ready for the question?

Income Tax Amendments Act, 1998Government Orders

11:35 a.m.

Some hon. members

Question.

Income Tax Amendments Act, 1998Government Orders

11:35 a.m.

The Acting Speaker (Mr. McClelland)

The question is on the amendment. Is it the pleasure of the House to adopt the amendment?