House of Commons Hansard #225 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was taxes.


The House proceeded to the consideration of 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, as reported (with amendment) from the committee.

Income Tax Amendments Act, 1998Government Orders

11:05 a.m.

Ottawa South Ontario


John Manley Liberalfor the Minister of Finance

moved that the bill be concurred in.

(Motion agreed to)

Income Tax Amendments Act, 1998Government Orders

11:05 a.m.

Ottawa South Ontario


John Manley Liberalon behalf of the Minister of Finance

moved that the bill be read the third time and passed.

Income Tax Amendments Act, 1998Government Orders

11:05 a.m.

Stoney Creek Ontario


Tony Valeri LiberalParliamentary Secretary to Minister of Finance

Madam Speaker, in the time allotted to me this morning, I will provide some context for the thinking behind the 1998 budget and then highlight some of the measures that were included in this particular bill which forms the income tax side of the 1998 budget itself.

First, the 1998 budget reconfirmed our balanced approach to building a strong economy and a secure society. The federal books are balanced. We have put an end to credit card government. We indicated in the 1998 budget and have continued to reduce Canada's debt burden through a two-front strategy of stronger economic growth and a concrete debt repayment plan.

As government members, we have always said and we recognize that a healthy bottom line is a means to an end, not an end in itself. In the 1998 budget we have also included the Canadian opportunities strategy, which included the millennium scholarship program, as well as other programs.

The 1998 budget represents the second stage of a three part plan that we put together in 1994. The Minister of Finance said that this plan was not simply a theme for one budget or one year. It has defined our approach from the beginning and will define our approach in the future.

First, as in the previous budgets, we reduced the deficit. With the 1998 budget we balanced the books and have begun the process of debt reduction. In future budgets we will stay the course. The 1999 budget proved these words.

Second, we have invested in the future. Over 80% of the spending in the 1998 budget reflected two of the highest priorities of Canadians: access to knowledge and skills, and support for health and education through increased transfers to the provinces.

Third, we reduced taxes initially in the 1998 budget in a targeted way. As soon as the country's resources permit we will broaden and deepen the process. As we saw in the 1999 budget, that is exactly what the government did. Collectively, the 1998 and 1999 budgets provided $16.5 billion of tax relief to Canadians. This is an approach that is delivering real benefits for Canadians today. It is certainly a robust outlook for Canada as we start the new millennium.

As I go through and highlight some of Bill C-72, I will take a moment and comment on what members will probably hear from the Reform Party, the Bloc and other opposition parties. These parties will say that the government is off track. We will argue that we are not. The true test will be what Canadians think.

As we conclude our prebudget deliberations from year to year, and we are about to start in June and into the fall for the upcoming budget, over and over again Canadians reflect on our approach. We have taken a balanced approach in both the 1998 and 1999 budgets, which is what we will continue to do.

Let me highlight some of what is included in Bill C-72. When the finance minister presented the 1998 budget, he noted that these measures represent the first steps toward general income tax relief. Each of the budgets have provided targeted tax relief where it would be most beneficial. With the deficit behind us, the government is now in a position to introduce broad based tax relief while adhering to the principle that such relief must not jeopardize our regained fiscal health or impinge on the priorities like health care and education.

General tax relief as indicated in the 1999 budget will speak for itself. The measures in the bill reduce taxes for low and middle income Canadians, those least able to pay. Two of the measures in the 1998 budget provide general tax. For low income Canadians, the amount of $6,456 that can be earned tax free is increased by $500 effective July 1, 1998.

Most people will ask, as I am sure the hon. member for Elk Island has asked before, how this can actually work. It was explained to the member in committee. He seems to understand the technical matters of this particular bill so I will leave the member to refer to the report from committee. The spousal and equivalent to spousal maximums of $5,380 were also increased by $500.

What does this mean? It means that single taxpayers with incomes under $20,000 can earn up to an extra $500 tax free; for a family earning under $40,000, the maximum increase would be $1,000 tax free. As a result of this measure, 400,000 low income individuals will be removed from the tax rolls and another 4.6 million taxpayers will pay less income tax.

The 1999 budget was a follow up on the 1998 budget and in fact continued on the same track. The 1999 budget extended this $500 increase to all taxpayers and raised it by a further $175, increasing the basic exemption by $675. Canadians are now able to earn $7,044 tax free in 1999 and $7,131 in the year 2000. In addition, the maximum spousal and equivalent to spousal amounts will increase to $6,055.

These measures will benefit 600,000 low income Canadians, 400,000 will pay no federal tax as a result of Bill C-72 and another 200,000 will disappear from the tax rolls because of the 1999 measures.

The second measure providing tax relief in the 1998 budget is the elimination of the 3% general surtax for people earning under $50,000 and a reduction in the surtax for those with incomes between $50,000 and $65,000. Members may recall, and there may be people in the gallery who will recall, that when the Conservatives were in office they put in place a 3% surtax to pay for the deficit. What we have always said is that once the books were balanced the 3% surtax would be the first tax measure we would deal with, and the 1998 budget did so in a targeted fashion. The surtax has been eliminated for almost 13 million filers and it has been reduced for another one million Canadians.

The 1999 budget is very much intertwined with the 1998 budget. In 1998 we targeted the reduction of the 3% surtax to those earning below $50,000 and in the 1999 budget we will have eliminated the surtax completely for 15.1 million Canadian taxpayers as of July 1, 1999.

In every budget our government has provided targeted tax relief where the need was greatest and the benefits most substantial. The 1998 budget was no different. It introduced the Canadian opportunities strategy which was designed to ensure that all Canadians have an equal opportunity to participate in the changing economy.

Hon. members know that many students have limited access to post-secondary education because of financial barriers. Bill C-72 implements several measures which will financially benefit students.

For example, for some students a federal tax credit of 17% of interest paid on federal and provincial student loans was introduced, which will provide tax relief for about one million students. A student with a $25,000 loan, which is the average, would typically see a federal-provincial tax reduction of $530 in the first year alone. The new credit would mean about $3,200 in tax relief over a 10 year pay down period.

Income Tax Amendments Act, 1998Government Orders

11:15 a.m.

An hon. member

You're keeping me awake.

Income Tax Amendments Act, 1998Government Orders

11:15 a.m.


Tony Valeri Liberal Stoney Creek, ON

The hon. member says that I am keeping him awake. I am thankful, and I am sure his constituents are very thankful, that he is staying awake. It is not often that the member stays awake in this Chamber. I thank him for the compliment.

This tax credit complements other student assistance measures announced in the 1998 budget, such as graduated interest relief and extended loan repayment periods which will assist a further 100,000 students.

To help Canadians upgrade their skills through full time study, often difficult for those in the workplace, Bill C-72 includes measures such as tax free RRSP withdrawals for lifelong learning. It is not uncommon, as I am sure hon. members across the way and certainly members on this side of the House are aware, to find that there are constituents back home who find themselves in a job, in a position, they are employed. They have been able to put away some money in RRSPs, but they need to upgrade their skills and they find themselves unable to access money to do that. Much like the homeowner program which utilizes the registered retirement savings plan, this program would allow Canadians to access tax free RRSP money for lifelong learning in order for them to upgrade their skills and to further their education.

An individual who is enrolled in full time training for at least three months can withdraw a maximum of $10,000 per year from their RRSP up to a limit of $20,000 over four years. The money must be repaid to their RRSP program over a 10 year period.

Another measure in Bill C-72 extends the education credit to many part time students who are trying to balance work, family and other commitments. Students can claim a credit for each month they are enrolled in a qualifying course which is at least three weeks in duration and meets a minimum of 12 hours per month. That also facilitates lifelong learning for about 250,000 part time students.

I am sure members will recall that in the 1998 budget the government made some improvements to what is known as the registered education savings plan. The 1998 budget introduced the Canada education savings grant. I have received a number of calls and a number of constituents have contacted me to find out about the program. I am sure the same is true for hon. members across the way. They include grandparents, parents, aunts and uncles who want to contribute to their niece's or nephew's, grandson's or granddaughter's educational savings program. The government has provided a 20% grant on the first $2,000 put into a registered education savings plan for children under 18. That is a maximum of $400 per year that the federal government will contribute to that program to help young Canadians access post-secondary education.

Bill C-72 also proposes additional changes to RESPs. It is important to note that disabled part time students will now be eligible for educational assistance payments from RESPs for the first time. Families whose children do not pursue higher education would be able to transfer up to $50,000 from their registered education savings plan to their registered retirement savings plan. That is an increase of $10,000. That creates a bit more flexibility in the registered education savings plan which will encourage more Canadians to contribute.

There is also the new caregiver credit which provides Canadians caring for an elderly parent or a disabled family member a tax reduction. This credit will assist about 450,000 caregivers who are not normally eligible for it.

Another important measure which was included in the 1998 budget, and I am hopeful that members opposite will draw attention to it because many of their constituents will benefit from it, will benefit self-employed Canadians. As a result of the 1998 budget self-employed Canadians will now be able to deduct health and dental insurance premiums from their business incomes. We have allowed that particular measure to go forward. I know that the Canadian Federation of Independent Business was a big promoter of that measure, as well as a number of members opposite. Members on this side of the House have consistently fought for self-employed Canadians. This is an example of an initiative that will help that sector of the business community.

Volunteer firefighters, under previous legislation, received $500 tax free for their volunteer efforts. In the 1998 budget we have increased it to $1,000 and will extend it to other emergency service volunteers such as ambulance technicians and search and rescue volunteers. There is also a recognition of volunteerism in the 1998 budget because we know that individuals, like volunteer firefighters, give of their time and contribute to their communities. This is a way for the federal government to provide some tax free moneys to them as reimbursement for expenses they incur in the work they do for their community.

The 1998 budget continued the government's policy of providing targeted tax relief and began the process of ensuring general tax relief, starting with low and middle income Canadians. The 1999 budget builds on these measures and is part of a long term strategy to reduce taxes. Of course members opposite will simply say “Cut taxes at any cost”. They do not understand that the commitment the government has made is to remain in balance. We have provided targeted tax relief in the 1999 budget. We have provided $16.5 billion in tax relief and we have never said that this is the end of our tax strategy. We have always said that this is the beginning of our tax strategy.

Together the 1998 and 1999 budgets set us on the track for tax relief and will continue to provide tax relief to Canadians.

Income Tax Amendments Act, 1998Government Orders

11:20 a.m.

Some hon. member

Oh, oh.

Income Tax Amendments Act, 1998Government Orders

11:20 a.m.


Tony Valeri Liberal Stoney Creek, ON

I see the Conservatives at the other end of the Chamber hollering across the way. I think they are hollering in support of Bill C-72. The hon. member for Kings—Hants is yelling at a number of individuals on the Liberal side. I would assume he is merely saying that he is supportive of Bill C-72 and finds that the tax relief is quite adequate as a starting point. It is certainly something that we on this side of the house agree with and we will continue to provide tax relief.

If, for a moment, the hon. member for Kings—Hants could pay attention to what is going on, then he would understand what tax policy is all about and be able to provide some constructive suggestions in the debate. However, I am not sure if that is possible.

Bill C-72 is essentially in line with the government's principles of tax policy. We feel that its relief measures are fair. The initial focus for broad based tax relief is on personal income taxes, where the burden is the greatest. The government has said continually that personal income taxes are where relief is needed first and that is what the 1998 and 1999 budgets have provided.

Most importantly, especially in the context of a lot of rhetoric that goes on in the House, given that there is an Ontario election campaign on right now and there is a lot of talk about tax relief, the measures for tax relief in the 1998 and 1999 budgets are not financed with borrowed money. It is the first time in decades that a government is providing tax relief to Canadians and is not borrowing to provide that relief. In essence, what we have is a reduction in tax relief. We do not have an increase in the deficit. We do not have an increase in the debt. What we also do not have is what most—

Income Tax Amendments Act, 1998Government Orders

11:25 a.m.


Dick Harris Reform Prince George—Bulkley Valley, BC

Madam Speaker, I rise on a point of order. I was listening to the comments of the parliamentary secretary and I would like to advise members to move away from him because I am sure lightning is going to strike.

Income Tax Amendments Act, 1998Government Orders

11:25 a.m.

The Acting Speaker (Ms. Thibeault)

The hon. parliamentary secretary.

Income Tax Amendments Act, 1998Government Orders

11:25 a.m.


Tony Valeri Liberal Stoney Creek, ON

Madam Speaker, the hon. member probably understands that when one has young children one actually engages in discussion about mystic knights, Thor and all of the other myths. In fact, when lightning strikes it is actually supposed to be a symbol of good luck, so I would thank the hon. member across the way.

I guess he was taking exception to the point that I was making, in essence saying that the government is not borrowing money to finance these tax cuts. Obviously the Reform Party has some difficulty with that. I could point to some previous platform documents in which the Reform Party indicated that we, the government, should first balance our books before engaging in any sort of tax relief. Obviously today that is not much of an issue because it feels the wind is blowing toward tax relief and that is where we should be going. Regardless of whether we put ourselves back into a deficit position or increase the debt, Reformers are just promoting tax relief for Canadians.

I can only reiterate that in every pre-budget consultation I have participated in Canadians have consistently said they are in favour of tax relief, that they want tax relief, that the burden of personal income taxes is too high, but that they are not prepared to pay the price of a reduction by decreasing the quality of health care or education, or by increasing the deficit or the debt. We very clearly and carefully listened to Canadians and that is demonstrated in the 1998 and 1999 budgets.

I would reiterate that both the 1998 and 1999 budgets, and certainly Bill C-72, represent the starting point for the process of ensuring general tax relief. The 1998 budget started with low and middle income Canadians. The 1999 budget broadened that tax relief to include all Canadians. As we move forward in budgets to come we will continue to provide a very balanced approach, one that includes investing in Canadian priorities, continuing to bring down the tax burden for Canadians and ensuring that we stay in balance.

Income Tax Amendments Act, 1998Government Orders

11:25 a.m.


Gerry Ritz Reform Battlefords—Lloydminster, SK

Madam Speaker, ordinary members rise in the House to describe how proud or pleased they are to speak to a particular bill. However, today I can only say that I am disappointed with the thrust of Bill C-72. Actually, it is more of a short stab in the dark.

The parliamentary secretary talked in glowing terms of long term tax relief. The bottom line is long term. Will anybody live long enough to actually see tax relief?

My disappointment arises from what is not in this bill, as much as what is. We do not oppose certain measures such as the reinstatement of the $5,000 credit for investments in labour sponsored venture capital funds. That simply brings it back up to where it was before the government tinkered with it.

We understand the finance minister cut that amount in 1998 because certain funds were not doing what they were supposed to do. Fair enough. But in some regions of the country these funds are performing a valuable service.

We realize that we cannot simply open the floodgates on investments and accept accountability and viable opportunities for every dollar that is offered. That is why the Reform Party has long advocated increased competition in the financial services sector and a removal of foreign asset restrictions on RRSP accounts. This country needs a diverse pool of investment money and the widest possible range of opportunities for that investment.

The truth of the matter is there are clauses in this bill that can be commended in principle. The life learning plan allows Canadian residents to take money out of their RRSPs to pay for full time training for themselves or their spouses which is basically a good idea. I do not know if everyone in that situation can afford full time training—and that is the loophole, the catch—as opposed to something a little more flexible, but it is a noble effort.

We are aware that RRSP contributions have fallen off in the last two years. People just do not have the cash to buy those RRSPs. There is something like $126 billion in unused contribution room outstanding. As I said, it is a noble effort and let us hope there are a few Canadians out there who can actually afford to get retrained and plan on using that training here in Canada rather than being forced to go to other lower tax jurisdictions.

That same analysis applies to another program concerning part time education. Eligible part time students can use education tax credits and child care expense deductions to go back to school. I presume that helps young single mothers in particular. There is a lot of merit in doing that.

We can characterize this as a housekeeping bill. We are a few days late in getting the parliamentary rules in place. Revenue Canada's cutoff was about a week ago, but we still have not made into law the restrictions and so on that are actually in place for last year's Revenue Canada forms. It is a cart before the horse scenario.

Why not fill out the skeletal legislative agenda with bills that show vision, imagination and courage rather than something that is last year's business? I guess we would be treading on the Liberal's electoral secrets for success: say little, do less, keep your head down. This is a major disappointment for Canadians who are poised to grab their share of the future and find themselves regulated to death by their government.

What we do not see in Bill C-72 is any admission by the finance minister, his bureaucrats or any of the Liberal members of the finance committee that their tax system is out of control. We see a clause that reduces the individual surtax by a couple of bucks. Who on the government side would dare stand up and defend putting taxes on taxes in the first place? This goes on year after year and Canadians still wait for the government to wake up and straighten out the mess in the complex tax code it has made.

The 5% surcharge which remains untouched falls on incomes as low as $60,000, not a lot of money in today's economy. There are thousands of workers in high tech industries or specialized manufacturing who easily make that much, and what do they do? They take their skills and their incomes and they maximize them south of the border.

The Liberals maintain their punitive tax structures while Canadian artists, entrepreneurs, doctors and scientists head for friendlier climates. Worst of all, they table bills like this one to announce all over again what Canadians already heard about and paid for in last year's budget. They are so hungry for any positive PR spin that they keep talking about all the good things that really do not add up to any dollars at all.

We have heard the finance minister claim that the country can only afford this style of nickel and dime tax adjustment, that it costs the government to give people their own money back. What a ludicrous premise. We know what it costs because year after year the finance minister announces that his programs will cost the treasury so many billions of dollars, and he goes ahead and subtracts that amount from the nation's books or the taxpayers' pockets, whichever is handier.

There is another reason for my disappointment. This government bill takes the opportunity to fiddle with the tax act, but instead of simplifying it or even simplifying the language, it merely piles more complexity on to the impenetrable pile it started decades ago. Members have risen in this House and read out passages from this bill, or have referred to this and other bills as being as thick as phone books. I have said that if the tax code was piled up it would be taller than any individual. I can also say that the tax code when piled on the back of a taxpayer can drive him to his knees.

Does Bill C-72 address the complexity or incomprehensibility of the tax code? No it does not. It merely carries on the age-old tradition of defining the taxpayers' responsibility to the government and not the government's duty to lighten the burden of taxes and to reveal clearly why they are needed and how they will be spent. Accountability, quite a concept.

In the revised explanatory notes that accompanied this bill and which were published in March, there are several pages of anti-avoidance rules that chase taxpayers into their home offices to make sure they are rendering unto Caesar what Caesar decides is his.

Ironically, they also include exceptions which allow clever tax lawyers to again avoid the taxes that are being chased in the first place. We know from the auditor general's report that billions of dollars in potential taxes continue to elude governments. We are aware that despite promises there are still loopholes for the well to do to cart off family trusts to lower tax regimes around the world. So much for our complex tax codes.

The Liberals have made it clear that they believe the myth that high taxes result in high revenues and that excessive spending leads to better service. We would not have to dig too deep to expose how this logic breaks down in the real world. It is human nature to resist when being pushed where we do not want to go. When the price of a good or service rises, we look for a bargain or reduce our consumption of that article. If taxes become too much of a burden, we seek relief any way we can either by avoidance or by going where a more enlightened tax regime offers a better deal for our tax dollar.

Lower taxes are not the only thing that influences people but it starts a cycle of prosperity that solves many other issues. Increasingly higher taxes reduce economic activity until there is less and less to tax. Governments see decreasing returns and cannot afford the services they claim to uphold. We have seen those cuts to the bone in health care. This is the opposite of what some in the House will say. They are convinced that high taxes alone provide a foundation for services. They follow this logic to its faulty conclusion, a complex tax code, taxes on taxes.

On the other hand lower taxes do not lead to a lack of services for the following reasons. Given a limitless amount of money to spend, it is also human nature to continue to demand limitless services to go along with it. It is human nature for bureaucrats to continuously try to satisfy those demands. What we have seen in the last three decades or so is the explosion of government spending in an effort to micromanage every aspect of our economic and social lives.

Government is everywhere trying to be all things to all people and failing at most. It tries to be charitable but ends up subsidizing self-defeating behaviour. It tries to stimulate a business on one side of the street while putting another one out of business through higher taxation and artificial competition.

The government creates monopolies and then finds itself in an endless process of paying inflated sums to keep the market under control. The old adage is if it moves tax it. If it moves again tax it some more. If it stops moving the government subsidizes it so it can tax it when it starts to move again. That seems to fit in very well with this logic.

In the 1999 budget we saw an increase in the child tax benefit and an admission by the finance minister that the clawback provisions are a disincentive for parents to earn more money. According to the C.D. Howe Institute, even with the tinkering, single earner families with two children with earnings in the $20,000 to $30,000 range, which is right around that poverty line that has been arbitrarily set, would keep less than $35 from an additional $100 earnings. This is true of the worst provinces. I define those as the ones where there are so many overlapping federal and provincial programs that Canadians have no choice but to sit and wait for the government to tell them what their income is going to be.

In Bill C-72 we see the same tinkering at work. The child care expense deduction has been increased to $7,000 but it only applies to parents who hire people to take care of their kids. This has become a fairly common situation in Canadian households. Many people are of the opinion that one of the strongest reasons for this is that the government takes too much money.

Canadian couples should have the decision as to how they are going to raise their children. It has been snatched from their hands and placed in the cold dead grip of a disinterested bureaucracy with its own social agenda.

Taxpayers' money not only goes to finance programs to relieve a situation that governments create, but it also goes to finance lobby groups to perpetuate the myth that Canadian families would be in stress without the government rather than because of it. Even so, tens of thousands of brave parents make the courageous decision to re-order their lifestyle to fit what is best for their young children.

Bill C-72 fails to address another situation that is obvious to everyone except the Prime Minister. On May 3 the Prime Minister got up and said the government wiped out bracket creep by increasing the personal exemption by a whopping $50 a month. He failed to mention several facts of which the government should rightly be embarrassed.

Not only should the basic personal exemption be in excess of $8,000 a year, but the Liberals are only going to phase in their tinkering over the next two years. It will only go to a maximum of $7,131, not nearly enough in today's economy.

They like to brag on the other side that somewhere between 400,000 and 600,000 Canadians have been pushed off the tax rolls with their generosity. They fail to mention that 1.4 million people have been added back on through the back door to these tax rolls because the Liberals have not got around to adjusting the tax brackets for inflation. We call that bracket creep. That is according to the OECD study.

A KPMG study, and we know how much the finance minister likes those when they are in his favour, has shown that the low to middle tax bracket of $29,590 should be almost $37,000, an increase of over $8,000. If anybody in the finance department had bothered to keep up with the times, the higher tax bracket of $59,180 should be over $73,000 just to keep up with inflation. That might convince many of our valuable scientists, engineers and skilled workers to stay here and add that value to our country and our economy.

The Liberals would tell us that they cannot afford real tax cuts, only the nickel and dime stuff they have been feeding Canadians. In Bill C-72 there is another instalment of surtax reduction, although we always hear that it is $500 a year when in fact it was $250 last year and $250 this year. Again, the numbers are better when we add them altogether. I wonder if many Canadians will actually notice that change in April 2000.

There is a tax credit for interest paid on student loans which is a good thing, but it only applies to the federal government student loans, not to the bank student loans. There is a real disparity. The students who are still going to school can write off the federal government part but not the bank loans. As the federal government withdraws from programs such as that, these same students find themselves caught on the horns of a dilemma.

I wonder how much better off we would all be if the finance minister had not wasted time with the millennium scholarship fund and simply had gone to the source. That was really the taxpayers' hard earned surplus in 1998. If he had turned the money back to students who really need it, I think we would have got a lot more bang for our buck.

Eliminating bracket creep for instance would have put a $900 million ding into the finance minister's slush fund but would have put hundreds of dollars back into the hands of low and middle income Canadians, right where they need it.

We also see provisions for people to use their RRSPs for something other than a hedge against government incompetence in mismanagement of the CPP fund. People can withdraw money for education, which is good. But since it is their money anyway, it is a bit of a shell game as to what they should be able to do with it.

I come back to the question of why the government cannot do anything more substantial or imaginative than this tinkering we see in Bill C-72. This government will try to use two excuses. It will say that it will not cut taxes and it will not tax us back into a deficit the same way it taxed us into the high spending it did in the first place. It will also say that it wants to be fair to the poor or maintain services that Canadians are so proud of, part of our Canadian mosaic, or that it apparently represents what we are as a people.

We have seen government spending go up the last three years and projections that it will continue to do so. This is hardly a prudent way to manage the future. Our fundamentals are supposedly right, but in our minds they are not.

We have also seen the insatiable desire of this government to hold control of every aspect of health care and social spending in its grip, even in the face of the Liberals' proven incompetence.

As I said before, we have the cart before the horse with this legislation. We are working with provisions in this bill that were actually implemented last year. The funding was set aside last year.

The parliamentary secretary in his address earlier this morning talked in glowing terms about people below $20,000 being in a tax free zone. I ask what is the big deal? That is still well below the poverty line that is arbitrarily set in Canada, so that is really not a whole lot to crow about.

People in Canada are looking for real tax relief. The industry minister, with supporting statistics from his own department, Industry Canada, has acknowledged the realities of a high tax system in Canada and what it is doing to our economy here, our productivity, as it were.

Again the parliamentary secretary talked about the RESPs. As I said before, if we are talking to finance people, a trust fund is far more manageable in the RRSP portion of it. It gives us lots more flexibility. Students can do different things with that. They do not have to go to the same type of college or facility that the RESPs would direct them to. It is much more easy and much more flexible to put that money into a trust fund.

The caregiver tax credit of $400 that he so eloquently spoke of appears at $11,000 worth of income. It is nickels and dimes again. It does not go anywhere. As a caregiver, $400 a year does not begin to cover a week's cost when one is caring for an invalid or a handicapped person. It is an insult to these people.

The parliamentary secretary talked in glowing terms and his words were that the winds of tax relief were blowing across the country. I would say that the reality is it is not even a gentle breeze.

Income Tax Amendments Act, 1998Government Orders

11:45 a.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, I am pleased to speak this morning for the last time on Bill C-72, which implements certain measures set out in the 1998 budget brought down by the Minister of Finance.

Some hon. members will most certainly recall, and I will take it upon myself to remind the others, that in 1998 when the Minister of Finance released his budget, we in the Bloc Quebecois had some years previously encouraged the government to include certain measures that were included in that budget. Minor as they may have been, they were, in our opinion, a step in the right direction. Our position has not changed fundamentally with respect to those highly specific measures.

Generally speaking, however, given the broad range of possibilities presented to the Minister of Finance in 1998, which were included in the latest budget for 1999-2000, we did not feel the Minister of Finance had gone far enough. He claimed otherwise, however, concealing the real figures on the state of the public purse. With those real figures, we were able to state that the Minister of Finance could have go much further with the broad range of possibilities available to him, if he had any real compassion.

What are the budget measures from 1998 that we find today in Bill C-72, which we had encouraged and applauded at that time, and still do today?

There is the $500 increase in the basic personal credit. We supported this measure, although the Minister of Finance could have gone even further beyond the tiny step he took.

There is the surtax reduction for individuals, to a maximum of $250. This too is positive, but does not go far enough.

There is the home buyers' plan for the disabled. Finally, after several years of battles, the plan is now in place. We worked on this. A number of my Bloc Quebecois colleagues worked very hard representing associations of the disabled from their ridings so that special measures such as the home buyers' plan for persons with a disability could become a reality. We applauded this measure.

There are the tax credits for interest on student loans. Students too deserve support in their efforts to acquire knowledge and to enter the labour market. In this case too, the government has not gone far enough in supporting students in Quebec and Canada.

There is an increase in the child care expense deduction. This is a good thing.

As regards the lifelong learning plan and the matter of tax-free withdrawal of funds invested in a registered retirement savings plan, here again, when the Bloc Quebecois made public a few years ago an analysis of a possible and positive reform of personal taxes, we were the first to ask the Minister of Finance to use the funds invested in RRSPs for purposes other than retirement.

The rate of unemployment, as we have seen, has remained fairly high. We could also see that there were urgent needs, particularly in the case of middle income families, and that we should either think about using the funds invested in a registered retirement savings plan to create self-employment, to allow taxpayers to create their own jobs, or about helping them return to the labour market, through continuing education programs.

We were happy to see that measure included in the 1998 budget. In fact, we supported that initiative when the Minister of Finance made it public.

However, we do not agree with the minister—and he is certainly not deserving of any praise regarding this aspect of his 1998 budget—when he says he could not do more than the few positive measures found in Bill C-72, because this is utterly false.

When the Minister of Finance brought down his 1998 budget, he claimed there would be a zero surplus for each of the following three years. However, we were quick to react and set the record straight regarding the 1998-99 figures and the anticipated results for 1999-2000.

In 1998-99, the surplus will exceed $15 billion. We are talking about a $15 billion surplus for the fiscal year that ended on March 31. In the next fiscal year, the surplus will be $20 billion.

The Minister of Finance is still claiming there is no money available. But he forgets to mention that, under the Financial Administration Act, all the unexpected surpluses in the previous fiscal years were automatically used to pay off part of the debt. Last year, over $20 billion went directly to pay back part of the capital on the debt.

We have nothing against paying off the debt. That is not the point. However, when one has a surplus, one must make a number of decisions as a good manager of the public treasury. Instead of using a portion of the surpluses from last fiscal and a portion of the surpluses from this fiscal to help out middle income families, he could have provided more assistance for unemployed workers and students, given the precarious economic situation in which many families have been living in Quebec and in Canada since 1997-98.

Instead, the Minister of Finance presented an inaccurate picture of the state of the nation's finances. He then used this picture to make his argument that it was impossible for the federal government to provide any more assistance to middle income families, who have been having a hard time for several years now because of him.

What could the Minister of Finance have done during fiscal 1997-98, fiscal 1998-99 and the current fiscal year? He could have done something we have been asking him to do since the 1993 election, which is to devote some of his precious time to federal fiscal reform. Since 1993, the Bloc Quebecois has come up with two possible scenarios for reforming federal taxation, one for individual taxpayers and one for corporations.

When we released our two reports, the Minister of Finance even congratulated us on our good work, but he has done nothing about reforming federal taxation since.

Income Tax Amendments Act, 1998Government Orders

11:50 a.m.

Some hon. members

Oh, oh.

Income Tax Amendments Act, 1998Government Orders

11:50 a.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, would you please ask the members opposite to withdraw if they have matters to discuss? The environment is not conducive to productive exchanges, particularly not during a speech on something as basic as the future of families in Quebec and in Canada. Would you please ask them to continue their conversation elsewhere?

Income Tax Amendments Act, 1998Government Orders

11:50 a.m.

The Acting Speaker (Mr. McClelland)

I do not think the other members were being too noisy. They were merely chatting, but I understand your point.

Income Tax Amendments Act, 1998Government Orders

11:50 a.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, there was nothing petty in what I said. It is rather tiresome to be speaking and hear the whispers of a Liberal MP over there. Out of mere courtesy, perhaps out of respect for this House, if there is a need for private conversations, they should be held in the lobby. Moreover, the Chair has often stopped conversations of that nature in order to ensure that the institution operates as it should. That was all I was asking for. I see that my colleague has finished his discussion, so I can now continue my speech.

I was saying that, in 1998-99, the Minister of Finance could have done great things. He had choices to make. The same thing goes for 1999-2000, but since Bill C-72 is connected with the 1998 budget, I will limit myself to that budget.

He knew he had a surplus of $15 billion. He could count just as we could. If we in the Bloc Quebecois were able to determine that the surplus for fiscal year 1998-99 would range between $12 billion and $15 billion, he could have done the same with the whole gang of public servants, specialists, and the amazing prediction machine at his disposal. But instead he concealed the real figures.

We have been calling for tax reform for years now. The Reform Party did exactly the same recently. The Minister of Finance prefers to focus on economic conditions rather than taking a serious look at the tax system.

This is certainly a major undertaking, because the last tax reform was in 1968, with the Carter report. That report led to the implementation of certain measures which resulted in some marked improvements to the tax system, ones which were of considerable significance.

But it is work. It is true that the time he spent on reforming the tax system he would not spend promoting his candidacy for the leadership of the Liberal Party of Canada.

The Minister of Finance must have the interest of the public more at heart than his own interests, and, until he convinces me otherwise, I think he has worked more for his own interests, and he has displayed a certain laziness not found among his predecessors.

He could have done extraordinary things. When he felt the lid on the pot was beginning to lift, he decided to establish an empty working group that produced an empty report. Some considerations were correct, but most did not relate to the needs for significant change, particularly in the area of personal income tax.

The Mintz working group, which he set up in order to reform taxes, focussed on corporate taxes only. What did the Minister of Finance do with the report Mr. Mintz submitted? He took it and he put it on a shelf. He applied none of its recommendations.

He did not deign to work on reforming personal income taxes, which would be easy to do. As I mentioned earlier, the reports the Bloc Quebecois produced were applauded and welcomed by the Minister of Finance. But there has been no follow up. There really is a lack of interest.

What could the Minister of Finance have done without racking his brains and compromising his race for the leadership of the Liberal Party of Canada? He could have fully indexed the tax tables and all the parameters of federal taxation. He could have done it very simply. I will illustrate my remarks in this respect in a few minutes.

Here is what happens without indexation. Since 1986, the government has not taken inflation lower than 3% into account. When the rate of inflation is such as the one we have been experiencing for several years, the federal government gets tax revenues that increase every year, without having to impose any direct tax increase or specific tax measure. So, by not fully indexing tax tables, the Minister of Finance is quietly getting more money, every year, in the federal treasury.

When inflation is high, taxpayers must pay more for goods and services. They must pay more for food, housing and even in taxes. They pay more indirectly because no adjustment, or only partial adjustment, is made by the federal government to the tax tables and the various federal tax components, to take into account the cost of living increase.

If the government fully took inflation into account, it would lower federal tax rates for certain income categories, or it would allow a tax rate that is currently low and that applies to a specific income category to apply to a higher income category.

Instead of doing that, the government decided it was just too easy to get more money. It was just too easy to fully index tax tables and components. Instead of helping middle income families, the Minister of Finance decided to maintain the unfair system that has been in place since 1986.

What is the result of all this? I tried to illustrate how it affects taxpayers, particularly middle income earners, who account for 70% of all taxpayers. On the first $29,590, the federal tax rate in 17%. If the government had fully taken inflation into account since 1986, and had also fully indexed federal tax brackets, taxpayers would now be paying 17% not on the first $29,590 that they earn, but on the first $36,918.

This makes a difference. Because taxes are not fully indexed, taxpayers are paying 17% on the first $29,590 of earnings instead of on the first $36,918. This has a negative impact on families' disposable income.

We are told that families' disposable income has continued to fall since the late 1970s. This is a measure that reduces disposable income. Disposable income is what is left over after taxpayers have paid all their taxes. It is what they have left to buy goods and services and to make investments.

When tax brackets are not indexed, it starts to add up: 17% on the first $36,000 rather than 17% on the first $29,590 starts to add up to thousands of dollars a year.

The $29,591 to $59,180 federal tax bracket is taxed at 26%. After that, it goes up. Normally, with full indexing, the 26% tax rate would have kicked in between $36,000 and $73,800 instead of between $29,000 and $59,000. This becomes important, because the first $36,000 earned would be taxed at only 26% instead of 29% or 30%, which is quite a difference.

The Minister of Finance preferred instead to continue with this unfair system, to allow the economic situation and inflation to continue unchecked so as to provide him with additional revenue, rather than impose any unpopular measures like raising income and other taxes.

I would remind hon. members that some 72% or 73% of taxpayers fall within the category of the two taxation levels I referred to, of 17% and 26%, for incomes of between $29,000 and $59,000. So not having fully indexed tax tables, tax levels and other tax parameters since 1986 has cost the majority of taxpayers very dearly.

I will give an illustration of what not having full indexation can represent for a resident of Quebec and a resident of Ontario. For example, for a family with one wage-earner and two children, with a 1986 income of $25,800 and a 1996 income of $35,400, the lack of indexation of the tax tables and other tax parameters has meant a loss of between $7,000 and $10,000 since 1986. That is a considerable amount of money.

We are not talking about a family with millions in income, but a family with one wage earner and two children, whose income was $25,800 in 1986 and had risen to $35,400 by 1996, as a result of inflation and promotions. The lack of indexation of the tax tables and other tax parameters has meant a loss of $7,000 since 1986. That is a considerable amount of money.

These people do not have any money to throw away. They are not taking vacations in Acapulco every year. Since 1986 they have seen between $7,000 and $10,000 in net revenue taken out of their pockets. They could have invested it in their children's education. They could have used it to improve their general situation. They also could have perhaps put it toward buying a house.

Maintaining such unjust situations is a serious matter. We have a family with one wage earner, a family of two adults and two children, losing between $7,000 and $10,000, if their present income is $35,000 or $36,000.

That is what lies behind the inaction of the Liberal government and the laziness of the Minister of Finance .

It is not for the fun of it that we have been asking him to reform taxes since 1993 and keep asking him to do so. They could have done something else to improve people's situation. They should have reformed taxes years ago. It needs to be done soon. It needed to be done in 1993, when there were one million poor children in Canada. Today, in 1999, there are 1.6 million poor children.

This man, rising every week with his hand on his heart and speaking of his compassion for poor children, is helping make the parents of these children poorer. This category of middle income earner, representing 70% of taxpayers, makes the greatest contribution to the employment insurance fund. The Minister of Finance is literally stealing the surplus from it, to the tune of $6 billion or $7 billion a year, rather than take this money and give it back to workers in the middle class and employers in SMBs or give a significant part of it back to the unemployed who are excluded from the application of the employment insurance plan.

The Minister of Human Resources Development, who says that he too has great compassion for those worst off, cut the plan and tightened eligibility criteria with the complicity of the Minister of Finance. The Minister of Human Resources Development is a kind of sherpa for the Minister of Finance.

Middle income earners paying because the tax tables and brackets are not fully indexed are also paying in terms of the money they take—and I am being polite—the money they rob from the employment insurance fund. These people pay double, and this is the fault of the Minister of Finance. If we look at the category of the public servants, these are the same middle income earners whose pension plan surplus will be taken by the President of the Treasury Board.

He has just introduced a bill that will establish the pension investment board for the main pension plans. He also announced that he expects he will use the $30 billion surplus accumulated in the plan as he sees fit, without consulting anyone.

This is a curious style of management, in which money is taken from middle income earners, because there is no tax reform. More money is taken from them when the government helps itself to the surplus in the EI fund. And moreover the same thing is happening to federal public servants, as the government is grabbing the surpluses in their pension funds.

I was going to say something unparliamentary, but I will refrain. I am casting about for a word that is parliamentary but conveys my meaning. It begins to look like the federal government is systematically misrepresenting the numbers, using money that does not belong to it, wasting this money on measures designed more for the visibility, such as the millennium scholarships, the Minister of Canadian Heritage's Canadian flag operation, or the Council on Canadian Unity. This is no way to manage taxpayers' money and the public knows it. The public should not be underestimated.

When we travel throughout Quebec, as I often do, people, not necessarily hard-liners, tell us that the federal government's management of taxpayers' money and the type of hypocrisy we see here make absolutely no sense.

Since 1996, the Minister of Finance has been promising legislation to eliminate tax loopholes that mostly benefit Canada's millionaires and billionaires. We have not seen it yet.

People will remember the auditor general's criticism in 1996, following our denunciations that went all the way back to the 1993 election campaign of the family trust system for millionaires—not for middle income earners, but for millionaires—that lets them use tax loopholes for tax planning purposes instead of the purposes for which they were originally intended, such as providing a life annuity for a permanently disabled child.

Here we have a situation that was denounced by the auditor general, a situation where officials from the Department of National Revenue, the Department of Finance and the Department of Justice got together of an evening one December 24 a few years ago and came up with an advance ruling allowing a family of billionaires to transfer two family trusts totalling $2 billion completely tax free to the United States.

This was unprecedented. At least, we were not aware of any other similar situation.

There was a public outcry and the Bloc Quebecois strongly condemned what had taken place. I must say that the public servants who were present when that advance ruling was made and who appeared before the Standing Committee on Finance and the Standing Committee on Public Accounts found it to be most uncomfortable to say the least.

Following that incident, the Minister of Finance announced that he would table a bill to make taxpayers accountable in the case of such transfers by providing a certain amount to pay taxes to Revenue Canada when assets are transferred abroad.

Three years ago, when the minister announced his intention to eliminate that loophole, what did these millionaires and billionaires do? They came up with all sorts of schemes to immediately transfer their trusts to tax havens abroad, by taking advantage of the precedent created by that advance ruling. They took advantage of the situation. In 1999, three years after alerting robbers, the Minister of Finance has yet to table his bill to eliminate the tax loopholes available to these millionaires.

It is hardly surprising. In the last budget, the most significant tax reductions are for those with incomes of $250,000 and up. Based on the proposed tax reductions, these people, who do not have a hard time making ends meet—unlike a family of two adults and two children with an income of $36,000—will benefit from tax savings of $3,800 as early as this year. On the other hand, those earning between $25,000 and $50,000 are not going to benefit from a tax saving of any more than $80 to $350.

The reason is obvious. We see where the friends of the Liberal Party and the friends of the Minister of Finance fit in. They are not families with one wage earner, with two adults and two children, and an income of $36,000. They are millionaires and billionaires. Moreover, what came out yesterday or the day before about the key contributors to the Liberal Party of Canada's campaign fund is most revealing. There are many banks, trust companies and family trusts. No change there. Join the dots between a $35,000 or $45,000 contribution, even $100,000, from major companies to the Liberal Party coffers, and then ask yourself whether the Liberals will end up with their hands tied afterward when it comes to tax reform, to blocking the loopholes for millionaires, for preventing the banks from doing certain things.

It is so ridiculous that I recently cut out an article on this subject, which I found most instructive. In 1993, when I first came to this House, I said we would be fighting to block the gaps in the taxation system, the so-called loopholes. These loopholes enable people who are far from being in need to do tax planning, to do all sorts of tricky tax moves, with the blessing of the Minister of Finance, in order to find themselves tax-exempt in foreign tax havens.

In the newspapers in 1993, there were classified ads that read “Come and plan the retirement of your dreams with us”. They were talking about tax havens. At that point, the Income Tax Act permitted millions and millions of dollars in taxes to be saved through various means.

I was looking at a paper last week again, and it made no sense. There was another classified ad, which read in English and French, “Come and see us, we have ways for you to save hundreds of thousands if not millions in taxes, depending on your income”. No family earning $36,000 a year will be able to take advantage of the advice on how to save money in tax havens. One has to have money to do that.

Six years later, nothing has changed, with tax havens. With permissive federal taxes and the federal Income Tax Act, the situation is similar to that of 1993, in which millionaires and billionaires paid no taxes and 70% of Quebeckers and Canadians pay most of the taxes, that is, the average income earners. Yet the Minister of Finance still has not introduced a bill to put an end to this scandal.

Bill C-72 contains some positive measures. They are the ones we praised in the 1998 budget. The Minister of Finance could have done so much better that it is ironic he is getting off so lightly.

With the options available to him then and now, he could have helped improve the situation of people in this country, of middle income families that have been struggling for years. Some of them have sunk into poverty because of the measures of the Minister of Finance and of the Minister of Human Resources Development in the area of employment insurance. He could have done a lot.

Still, this bill is a small step in the right direction, and we would not want to tell taxpayers “These incomplete measures would save you a few dollars, and we could not oppose the bill simply because it really did not go far enough”.

Therefore, we will support this bill, but we will continue to condemn this rip-off of middle income families and the fact that the Minister of Finance has simply let economic—and political—conditions dictate his course of action for several years, not assuming his responsibilities as he should have.

Who knows, perhaps he will make it and become Prime Minister some day, but I certainly do not wish it on Canada. As for us, we will be gone; we will have left and probably have achieved sovereignty a few years earlier. Canada deserves better than a minister like this one, a minister who did not take his responsibilities when he was in a position to effect social change, but chose not to.

Income Tax Amendments Act, 1998Government Orders

12:15 p.m.


Nelson Riis NDP Kamloops, BC

Mr. Speaker, I am quite delighted to speak to Bill C-72 today in this closing round of debate.

My first question would be to the Parliamentary Secretary to the Minister of Finance. What is it about bracket creep that he likes so much? We hear an awful lot about bracket creep. I know it is something that my friend feels very strongly about because he just refuses to let it up. He wants to hold it close to his chest as though this is his special bracket creep and no one is taking it from him. I will get back to this point in a moment.

In order to give a balanced approach, I have to say that there are a number of things in the legislation that are actually quite helpful; for example, the increase in tax breaks for caregivers. Who can stand in the House and say it is not a good idea for the government to come up with an extra $400 per year for people taking care of people in their homes? This is going to make a tremendous difference. Something like $35 will really be noticed by people who are caregivers. Quite frankly, it is the ultimate in baby steps in terms of tax reform but it is at least a slight lean in the right direction.

There have also been increases in the registered education savings plan, the homebuyers plan, the part time education deductions, the child care expense deductions, and, as I mentioned already, the caregiver tax credit which provides, as it states here, a new refundable tax credit up to $400 per caregiver. This will make a major difference.

There are a number of changes that we would support in principle. However, they are the most infinitesimal changes that one could imagine occurring to the tax act of Canada. If we sat down and asked what the absolute minimalist approach we could take to tax reform and what would be the least we could get away with and still sound like we are doing okay, that would be what Bill C-72 is all about. However, to say that none of this is worthwhile would obviously be silly. There are a number of important gestures. I perhaps would use the term gesture more than anything to indicate that we are moving in the right direction.

Having said that, what on earth am I going to say at report stage and third reading on this particular bill?

I got up early this morning and reread all the weekend papers to look at what they were saying about taxes, tax changes, tax reform and so on. We have all filled out our tax returns in the last few weeks.

We all have a sensitivity about the tax system. I was curious to know what the editorial writers, reporters and others were saying. The general theme was that the tax rate and the tax burden should be reduced.

I think we have seen this movie before. I remember reading in the newspapers a few years ago that the fundamental requirement to achieving economic prosperity in the country was to reduce the levels of inflation. The levels of inflation were simply too high. We had images of Prime Minister Trudeau wrestling this phantom inflation to the ground and pinning it down. Once this was done the economy would turn around. I can say with some pleasure that we did that. We wrestled the old inflation to the ground, pinned it down for three counts and it was down and out. Now, for all intents and purposes, we have no inflation.

Did that significantly change the way the economy was functioning? Did we become more productive? Did employment levels come down substantially? Unfortunately the answer is no. There was no significant shift.

The government then admitted it had made a mistake. It felt that if it could get interest rates down then that would stimulate the economy back into high gear. We went through all sorts of contortions and interest rates finally came down to relatively recent historic lows in the 4%, 5% and 6% range for people borrowing money. However, that did not have the big hit that we had anticipated either.

The government then said that it was not just inflation and interest rates, that it was really the size of government. The President of the Treasury Board then said that 55,000 federal civil servants would have to be laid off. The government laid off 55,000 people across the country, one of the largest layoffs ever in Canadian history. Did that achieve the results? No, that did not have much of an impact in the end either.

The government had laid off 55,000 people and inflation and interest rates had gone down but now the problem was the deficit. It then began cutting programs and the deficit went down. As a matter of fact it was wiped right out. The deficit is history. It went the way of the dodo bird.

Things, however, did not change a whole lot or turn things around. The government then said it had a new problem called tax cuts. It felt that if taxes were cut it would get the economy moving and into high gear. My friend from the Conservative Party agrees with me. It is a mantra for people to get up in the morning and say “Please God, lower tax rates and the economy will get into high gear”.

Who is going to say that we should not do that? I am not going to say we should not lower taxes. It would be almost suicidal to say that. However, I have seen this movie before. Getting inflation down, the deficit down, downsizing the government and cutting taxes does not work. It has not worked in the past. I am not sure this is the answer. Where is this call coming from? Is it widespread across the country?

I know my Conservative friend and the Parliamentary Secretary to the Minister of Finance will recall the questions we asked Canadians when we toured the country during our prebudget consultations. We asked Canadians what they thought should be done, and what their priorities were for the budget in terms of the economy.

I can say without any hesitation that some people said that tax cuts were not a priority. They said that health care, education and training were priorities, but that tax cuts should come after the health care system is back on its feet and after a decent educational system is in place from kindergarten to post-secondary. If some of my colleagues who were on the committee feel differently, then I think we should hear from them.

Sometimes people were pushed and pressed and said they wanted tax cuts, but when the question was asked whether they wanted to see tax cuts or health care left the way it was, the answer was no. The same answer came back when they were asked about education. Most of these people, who were experts in their field, admitted to our committee that they did not want tax cuts as a top priority.

Perhaps we should set that aside because it would appear that tax cuts are not really the top priority. It really is a major issue. When a poll was conducted recently asking Canadians what should be done in terms of the federal budget, 45% of Canadians felt that health care should be a priority and only 7% said that taxes were the most important issue facing Canadians. I wonder who those people are? We have heard some of them speak out. We heard Paul Desmarais say that taxes were too high, particularly for wealthy people. Jimmy Pattison, on the west coast, said that taxes were too high for wealthy people. We have heard others make the case that taxes are too high, resulting in a lot of Canada's best managers, high tech workers and scientists going to the United States.

There is no denying that many people are being attracted to the United States, but I suspect that the tax rate is only one of the attractive features. I suspect the offer of perhaps twice as much money to leave Canada and go to the United States to work in Texas, Michigan, Florida, or wherever is probably as crucial as any in the decision making.

What is perhaps even more important to some of the high tech workers and the scientific community is the fact that they will have decent lab supplies and decent labs to work in. Having the funds available for their research also attracts some of our best researchers to go to the United States. I suspect that taxation is far down on their list of points when they make that decision.

I am not saying that reduced taxes is something we should not be concerned about. We obviously should, but is it a priority?

I suspect that if we were to press the issue we would find that most Canadians are fed up with the taxes that they pay because of two things. I think most Canadians filling out their tax returns and either writing a cheque to the Receiver General of Canada or have been writing cheques over for the last year, depending on the nature of their income, are fed up with the high taxes they are paying because they think they are not getting a good deal for their taxes. They think their taxes are being spent on some questionable priorities of the government.

I do not think Canadians are that far out. I remember a big deal that happened in the House when we found out that $3.3 million was being spent to improve the image of the other place. Is it a national priority for Canadians to improve the image of the other place? Some people think it is, but I suspect that, other than a handful of senators, we would be hard-pressed to find a single Canadian who would say that he or she wants his or her tax money to go toward enhancing the image of the people who inhabit the other place across the hallway.

Does anyone remember the $98,000 spent for a book on dumb blonde jokes? I took that personally being somewhat of a blonde myself. Is it a national priority to give someone $98,000 to write and publish a joke book about blondes? Is this something that taxpayers want to see their hard-earned tax dollars going to pay for? I doubt it.

There is also the $500,000 canoe museum up in the Prime Minister's constituency. I know many of us are very fond of canoes. A lot of us have canoes and we paddle them. A canoe is a great Canadian image-maker, but I do not know if it was a priority to spend $500,000 of our hard-earned tax money on a little canoe museum in the Prime Minister's riding. I will listen to my Liberal friends opposite as they stand up and say that having a dumb blonde joke book funded by the taxpayers was a good way to use taxpayers money, or whatever. Let us face it, the list is endless.

The point I am trying to make is that most Canadians do not begrudge the fact that they have to pay taxes. That is why in the past we have had a very good health care system. That is why we have a whole variety of programs that differentiate us as a country from most other countries of the world. However, there is a feeling that their taxes are not being wisely invested or wisely spent, that there is a lot of frivolous and unnecessary spending going on without a proper accounting. As parliamentarians, I think we all have to admit that there is not a proper accounting.

I remember that when I was first elected the big time of the year was when we went through the estimates. We would sit down in our committees, whether it was the agriculture committee, the foreign affairs committee, the finance committee, or the health committee, and spend days and days going through the estimates so that members of parliament would at least have some inclination as to what the department was spending the money on. The minister and the parliamentary secretary would be grilled. The secretaries of state and the departmental representatives would also be grilled. At the end of the process we had a general feeling that the moneys being invested were at least identified as to where they were going.

Whether we agreed with them or not, we at least knew they were being spent here and being invested there, they were going to build this or they were going to try to get that thing happening in that part of Canada, et cetera.

Now the whole process of dealing with the estimates has essentially been thrown out the window. Committees really do not deal with the estimates in the same vigilant way they did in the past. In many cases they do not go over the estimates at all. They are deemed to have been discussed, deemed to have been passed and that is the end of it.

When taxpayers feel that their elected representatives do not represent them in going through how taxes are being used it is absolutely true. There is a good reason the taxpayers of Canada feel a little uneasy at this time of the year when they are writing their cheques to the Receiver General of Canada.

It is fair to say that most Canadians, may I say all Canadians, feel that some people get a better deal than others because of our tax system. Some people benefit from our tax system where other people pay too much. Let us face it. Some are in a category where they can hire a tax accountant, or they have a good tax adviser or lawyer, and they use the part of the tax act of Canada, the Income Tax Act which is annotated with explanations beside some of the points.

My guess is that if they can afford a tax lawyer, or their affairs are in such a way that they have a good tax accountant or a good tax adviser, they can probably take advantage of provisions in the act that will enable them to either pay very little income tax or in some cases pay absolutely no income tax in spite of the fact that they might have had substantial income during that year.

It is a fact of life that a lot of people pay very little income tax. As a matter of fact I know lots of people in this country who are proud of the fact that they have used this book. They have good advisers and have arranged their financial affairs in certain ways that they do not pay any income tax all. That is the way it is. They are not doing anything wrong. They are not doing anything illegal or unethical. They are simply using the provisions of the tax act that most Canadians are unable to use because their income tax is deducted at source. For Canadians who work in a plant or a factory, or in an office, somebody deducts their income tax and that is it. They do not have any real deductions that other people obviously have.

There is this feeling that the tax act is haywire, unfair, unjust and that it is biased in favour of certain Canadians who tend to be wealthy, and larger corporations, compared to the average small business. That is simply a fact of life.

I am going ask that we pause for a moment or two while I read from the bible of taxation. It has come that time of the day when it behoves us all to set aside a few quiet moments to contemplate what the tax act actually says. I will not read much.

I have chosen for today's reading chapter 127, verse 11, subsection (b)(vi). I think all members of parliament will get quite a thrill when they listen to this part of the bible. It may even be inspiring. Let us put ourselves into a state of meditation for a moment or two while I read from section 127, verse 11 of the tax act. It goes like this:

Application of ss. (9) after November 16, 1978.—In applying subsection (9) in respect of

(a) a qualified property or qualified transportation equipment acquired after November 16, 1978, or qualified construction equipment acquired after April 19, 1983, the references in paragraph (a) and (b) thereof to “5%” shall be read as references to “7%”, the references in paragraphs (a.1) and (b.1) thereof to “5%” shall be read as references to “13%” and the references in paragraphs (a.2) and (b.2) thereof to “2.5%” shall be read as references to “3%”,

(b) a qualified expenditure incurred by a taxpayer after November 16, 1978 and before his taxation year that includes November 1, 1983, or a qualified expenditure incurred by him in that taxation year or a subsequent taxation year if he deducted an amount under section 37.1 in computing his income for the year,

(i) where the expenditure was incurred by a Canadian-controlled private corporation in a taxation year of the corporation in which it is or would, if it had sufficient taxable income for the year, be entitled to a deduction under section 125 in computing its tax payable under this Part for the year, the references in paragraphs (a) and (b) thereof to “5%” shall be read as references to “25%” and the references in paragraphs (a.1), (a.2), (b.1) and (b.2) thereof to “2.5%” or “5%”, as the case may be, shall be read as references to “0%”, and

(ii) in any other case, the references in paragraphs (a), (a.1), (b) and (b.1) thereof to “5%” shall be read as references to “10%” and the references in paragraphs (a.2) and (b.2) thereof to “2.5%” shall be read as references to “0%”; and

(c) a qualified expenditure incurred by a taxpayer in his taxation year that includes November 1, 1983 or a subsequent taxation year, other then a qualified expenditure referred to in paragraph (b), the references in paragraphs (a) and (b) thereof to “5%” shall be read as references to “20%”, the references in paragraphs (a.1) and (b.1) thereof to “5%” shall be read as references to “10%” and the references in paragraphs (a.2) and (b.2) thereof to “2.5%” shall be read as references to “0%”.

That is from the tax act, section 127, verse 11(b)(vi).

I could read some more of the fascinating passages but I think the case is clear. Who in their right mind could understand what the hell that is all about? Nobody. I doubt if there is a tax expert in this country who could honestly say they know what that is all about. They practise the grey area of taxation.

Back in the sixties the Carter commission went from coast to coast and spent a great deal of time analysing the tax act of that period. It made a number of recommendations. Now is the time to have Carter commission two and to re-evaluate our tax act from top to bottom to ensure for the future that it is a fair and just piece of taxation.

Income Tax Amendments Act, 1998Government Orders

12:35 p.m.


Ken Epp Reform Elk Island, AB

Madam Speaker, I have to comment. I was truly warmed at the reading by the minister, and he is not the minister; I was thinking of minister in the ecclesiastical sense. It warmed the cockles of my heart.

The member said something about tax breaks not having an effect on the economy. I want to challenge his thinking about this and I would like him to respond.

Whether one taxes or not does not really destroy any money. All it does is change who gets to spend it. It is my understanding that when we are taxed, our earnings are simply put on a train or now on the electronic highway and they are shipped at a million miles a second to Ottawa. Politicians and bureaucrats spend the money which the people have earned.

It is certainly true that some government spending provides people with jobs. We know that is true for all government workers as it is true for other people as well who contract for government jobs. I do not think we would totally discount that taxes are an active player in the economy.

Most studies I have read or read about imply very strongly that if we leave the money close to the people who earn it, they actually invest it in a better way than most governments spend it. The member indicated some of the waste government is involved in.

I would like the member to comment on why it is in his view that reduction of taxes would not help the economy. It certainly would not hinder it. I think it would help it because the people would spend it more wisely than the politicians and bureaucrats.

Income Tax Amendments Act, 1998Government Orders

12:35 p.m.


Nelson Riis NDP Kamloops, BC

Madam Speaker, as usual I appreciate my friend's intervention. He always has a thoughtful point to make. Once again he has made a thoughtful point. I agree with him in part and I will explain the part.

All of us would agree that government expenditures in health care and education are probably tax dollars well invested. I do not think anyone would deny that. Tax dollars spent on canoe museums or dumb blond joke books and so on are probably moneys not well invested. Let us agree that there are useful public expenditures and unuseful public expenditures.

The point my hon. friend makes is if there is a tax cut, is this not good for the economy. There is a lot of talk about tax cuts these days in the provincial election in Ontario. The so-called winners of the Ontario provincial tax cuts which were introduced previously resulted in someone earning $15,000 will save $160 a year and someone earning $250,000 will save $5,000 a year. In other words someone making a lot of money is going to save a lot more.

We can call our economic system a capitalist system, a market driven system or whatever, but it depends on people buying goods or services. As long as people are buying a lot of goods and services our economy heats up. When those consumer dollars are not being used our economy weakens.

When we give a tax break to low or middle income earners, they will likely spend every nickel of that tax break. They will go out and spend it either on buying a new car, on clothing, on food, on whatever. They will spend all that extra money they have in their hands. An upper income earner will take that money and invest it in the international stock market. They may set money aside for investment at another time and they may even start a business.

The point I want to make is that it is more likely that middle and low income earners will spend their money than will a multimillionaire who gets a tax cut. They may not spend the money. They may, but they may not. They may not even spend it in Canada. They may prefer to buy a condo in Florida, the Cayman Islands or wherever.

If we want to get the maximum bang for our tax reduction, can I suggest to my hon. friend that we give some thought to cutting a tax that would be felt the next morning by every single citizen, from a child to the most elderly taxpayer or consumer, and that is a reduction in the GST. That would be felt from top to bottom. Every single person would benefit, as opposed to having selected tax cuts for the benefit of certain people.

Income Tax Amendments Act, 1998Government Orders

12:40 p.m.


Ken Epp Reform Elk Island, AB

Madam Speaker, I hate to dominate the debate but I did give others the opportunity to stand before I stood for the second time.

I need to get my head around this. There is certainly the view that some Canadians may spend it outside the country. The fact is that if it is earned in Canada, it is taxed in Canada. Surely the member is not going to be in favour of passing laws that say people face some financial penalty if they invest their money outside the country. I am sure he would not be contemplating that.

I want to make a comment and again have a response with respect to how people spend their money. I am quite convinced that a member of the NDP would certainly favour reducing the money that flows from the poor to the rich. What is happening is that not only collectively as taxpayers and as citizens do we owe a lot of money to the big financiers and the large financial corporations, but also as individuals. People are loaded with debt like they have never been before. It could just be that with a tax cut those individuals would be able to reduce their debt and certainly we should reduce it as a country so that we end up transferring less of the earnings of those in the middle to lower income class to the rich class.

I think the hon. member should be in favour of that. I would like his comment.

Income Tax Amendments Act, 1998Government Orders

12:40 p.m.


Nelson Riis NDP Kamloops, BC

Madam Speaker, what I am about to say I say with all the respect possible.

I think that those who are calling for a tax cut as the only element of major tax reform are being a bit narrow in their thinking, to be fair. I would like to use a harsher term than that, but I will just say narrow.

I believe that what we require in this country is tax reform. If we have decent tax reform that is fair and just and honest in approach we would find that most middle income Canadians would get a tax break. The taxes would be lowered for the average middle income earner and those at the higher end would perhaps be paying slightly more.

The reality is that we have to close some of these loopholes. I know the government has closed a few little ones, but if we close more of the large tax loopholes that exist, have a complete tax reform as we saw during the Carter Commission period, then we would have a better tax system and a fairer distribution to those who pay the taxes of Canada.

For decades and decades the system has become so out of whack, so convoluted, so biased, so unfair, so unjust that it has caused most Canadians to enter the underground economy whenever they have an opportunity. I know that what happens underground is illegal, by and large, but we understand why people do it. They do it because they know that their taxes are not being wisely invested. They know that a lot of people are getting tax breaks that they do not get and cannot get. Therefore, they get whatever tax breaks they can by operating in the underground economy.

The auditor general did us a service in his last report by suggesting that it is in the range of about $40 billion worth of transactions. I would guess that is very conservative. He is a conservative individual. His methodology is always conservative. I suspect it is much larger than $40 billion.

We could imagine that if that $40 billion was on top of the table, the amount of debt reduction and program expenditures that exist in our economy that could be financed just from that would be quite substantial.

I think it behoves us to go beyond our rhetoric and our discussion of simple tax cuts to talk more about a decent overhaul of our whole tax system.

Income Tax Amendments Act, 1998Government Orders

12:45 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Madam Speaker, before I begin my comments I would like to commend my colleague from the New Democratic Party on his comments today on tax reform as opposed to tax cuts. I think that is a very important distinction that needs to be made.

The problems we face as a country are perhaps more complicated now than they have ever been. The challenges that we face change more rapidly now than we have ever seen before. We are in a rapidly changing, globally competitive environment. Within that context, Canada now, more than ever, needs significant holistic tax reform.

My colleague referred to the Carter Commission which travelled the country formulating public policy in the 1960s. I believe those tax reforms were implemented in 1971. The next tax reform that was significant was in the late 1980s, I believe 1988, when there was a significant broadening of the bases and decreasing of the number of brackets.

Of course, we will remember the GST in 1993, a significant tax reform which resulted in significant political reform, most of which, politically, was not positive. That being the case, the impact of the GST, I would argue, ultimately has been quite positive. It replaced the manufacturers sales tax, which pummelled Canadian enterprise in a global environment, and replaced it with a consumption based tax.

Increasingly that is what tax experts and productivity experts are calling for, a movement from taxes on capital, from taxes on income, to a more fairly based consumption tax, which could in fact be progressive. It need not sacrifice progressivity as an expense to a tax system that fosters competitiveness. I appreciated his comments.

These are exciting times that we live in today in Canada. It took 14 years, from 1984 to 1998, to eliminate the deficit. In fact, the leader of the Reform Party in this House said that deficit reduction in Canada really began back in 1984. At that time, when the Progressive Conservative government was first elected, the deficit as a percentage of GDP was around 9%. Over the next nine years it was reduced from 9% to around 5%. At the same time program spending growth was reduced from 15% per year to zero growth by the time that government left office rather suddenly in 1993.

Since then efforts to reduce the deficit have continued, largely abetted and aided by the policies implemented by the previous government. Those policies were free trade, the elimination of the manufacturers sales tax, the introduction of the GST, and the deregulation of financial services, transportation and energy. Those structural changes in the Canadian economy made by that government were credited by the Economist magazine in 1998 as being pivotal and important for the reduction and the ultimate elimination of the deficit in Canada.

The reason I mention this very important period of time in Canadian history in terms of fiscal policy and economic policy is because I believe that as we enter the new millennium, as we enter a period where change is going to be more rapid and the challenges facing Canadians are going to be ever more complex, we need a government that is more than a caretaker, more than a stewardship short of government, a government that basically has inherited some strong economic policies but really has not done a whole lot to create new economic policies or made the types of visionary changes that are necessary to lead Canadians proudly and prosperously into the next century.

Right now, when the challenges are so great, we need the type of government that would engage Canadians in the kind of dialogue and the type of visionary public policy creation that would produce in the long term the types of policies that will attach the hands of Canadians to the opportunities of the 21st century. Tax reform is a very important part of that. Arguably, tax reform, particularly in the early 21st century, will be very important as an economic development tool. We are seeing that around the world, whether it is in countries like Ireland which have very aggressive corporate tax strategies, the tax policies that we are seeing in the U.S., for instance, or within our own country. We are seeing provinces jockeying for position to reduce provincial taxes in order to attract industry and create increased levels of job growth and prosperity within the province.

Tax reform is going to become more and more important. In this environment it is going to take more than tinkering around the periphery of taxes. It is going to take a significant, mature and holistic approach to what are systemic problems.

This government's approach to taxation policy is anaemic. The government has refused to deal with some of the root difficulties and some of the distortions we have within the tax system.

There are some individual elements of Bill C-72 and some individual initiatives that are difficult to disagree with in terms of their general direction. For instance, the increase in the personal tax credit of $500 is positive. We agree with the general trend to increase the personal tax credit. The PC party is calling for an increase, not just to $7,000, but to $10,000. It is unconscionable that in Canada we are taxing people who make as little as $7,000 per year. We believe that the personal credit should be raised to $10,000.

The government is saying that by increasing the personal credit by $500 it is taking 400,000 Canadians off the tax rolls. What the government fails to mention is that since 1993, due to bracket creep, this government has actually dragged 1.4 million low income Canadians, kicking and screaming, on to the tax rolls for the first time. It is hardly fair for the government to say that it is taking people off the tax rolls when in fact it is putting more people on the tax rolls, and bracket creep continues to cost Canadians a lot. We are calling for the elimination of bracket creep and the re-indexing of tax brackets, particularly in the post-deficit environment.

We saw the reduction of the 3% surtax, which was a deficit reduction surtax. Seeing that it has played a role in reducing and ultimately eliminating the deficit, we would call for the government to eliminate the 3% surtax, which has been the trend, but also to eliminate the 5% surtax. The government is calling it the high income surtax. That is one of the issues we have from a competitiveness perspective because the government treats people making over $60,000 as though they were rich.

In Canada the highest marginal tax rate is hit at around $60,000. In the U.S. the highest marginal tax rate is not reached until the individual hits a threshold of about $412,000 Canadian.

Last week in Maclean's magazine there was an interesting survey of opportunities for freshly minted graduates in Canada. The average salary for a freshly minted graduate with a bachelor degree in commerce, according to Maclean's , who is entering the financial services sector in investment banking, is $72,000. In the first year out of university these bachelor of commerce graduates, or business administration graduates, are making $72,000. Immediately, in the first year out of school, with student loans and everything else, the government is taxing them at the highest marginal tax rate.

It is little wonder that we are chasing from Canada some of our best and brightest young people who are seeking opportunities, particularly south of the border, in what is frequently referred to as the brain drain.

The government sometimes says that it is not really a personal income tax issue, that that is not the biggest reason; the fact is that U.S. companies are also paying more money. The fact that U.S. companies are paying higher salaries is partially due to the fact that U.S. companies are paying lower percentages in corporate tax rates. The general compensation trends have been toward salaries combined with stock options. In that type of environment our capital gains tax plays a significant role in reducing incentives for Canadians to stay here. This is particularly pervasive within the high tech sector.

If we are to be competitive in the 21st century it is particularly important that we be competitive in the high tech sector and that we be competitive in the service sector as opposed to simply focusing on the traditional manufacturing and resource based sectors.

The challenges and the opportunities we have now are very exciting. In the post-deficit environment tax reform is a very viable and, I would argue, important initiative that the government should be pursuing more aggressively; not just tinkering with, but offering significant broad-based reform.

In a pre-deficit environment, without a fiscal surplus, tax reform is more difficult because whenever there is tax reform the government stands the risk of creating winners and of course losers. It is dealing with a zero sum issue. It is not possible to give more to one group without taking more from another.

However, in a post-deficit environment it is possible to implement significant, important and innovative tax reform without hurting any group within society. Tax relief can play an integral role in tax reform. When one group is provided with more through a simplification of the tax code, it need not mean that another group receives less. The surplus environment provides an opportunity for ameliorative tax relief that would compensate for any detrimental effects of tax reform.

Canadian workers and taxpayers have played a significant role in the elimination of the deficit. As I said earlier, it took 14 years from 1984 to 1998 to accomplish that. Canadian taxpayers have seen an increase from 1993 to 1998 from $112 billion in federal taxes to about $150 billion in federal taxes, a growth in federal taxes that far outstripped the growth in the economy.

According to Douglas Porter, senior economist and vice-president of Nesbitt Burns who was a witness before the finance committee last week, disposable income has fallen significantly in Canada primarily due to the high tax burden, particularly relative to the U.S. The fact is that in the U.S. over the past few years there has been a significant increase in personal disposable income and during the same period there has been a decrease in Canada.

Personal debt rates are at an unprecedented high in Canada. Personal bankruptcy rates are higher than they have ever been. The government may boast of being in the black, but the fact is that because of the government's high tax policies Canadians are in the red at an unprecedented rate.

During the seventies and eighties Canadian disposable income was around 80% of the U.S. level. By the end of 1998 Canadian disposable income had fallen to 50% of the U.S. level. Part of that as well is related to the lower dollar in Canada and that whenever our dollar is weakened it represents to a considerable extent a pay cut for Canadians in the global environment in terms of what we can consume. It is a corporate tax issue. It is a personal tax issue. It is a productivity issue.

Interestingly on the productivity question, which we have been studying in the finance committee, most witnesses indicated that high taxes in Canada had played a role. Some said it was a very significant role. Some said it was a smaller role. Almost all the witnesses attributed, at least in part, our low productivity growth in Canada to our high tax regime and the secular decline in productivity over the past 30 years to taxes which are simply too high and make us uncompetitive.

Another issue that comes up frequently at the finance committee productivity hearings is investment. In jurisdictions where investment is high, typically productivity is higher. The Canadian government tendency to tax capital and income on capital reduces incentives to invest. When one reduces investment one ultimately reduces productivity.

Certainly members on the government side would like to debate the whole notion of productivity and spend a lot of time trying to define productivity in a rather esoteric or arcane intellectual argument. The government does not seem to realize that productivity is one of the greatest challenges facing Canadians in the 21st century in terms of our ability to build wealth in Canada.

There is a huge number of factors. Tax policy is very important. Social policy can play a role in terms of innovative social policy. While the government claims that innovative or forward thinking tax policy or tax reduction cannot coexist with innovative social policy, the fact is that the government is wrong on that.

One witness before the finance committee was Dr. Fraser Mustard who has done an immense amount of work on innovative social policy and on investing in young people and children, particularly in preschool, and what is known as head start programs or early intervention programs aimed at children in high risk situations. Many of these studies have been done in inner city communities where the need was greatest, but they would apply almost anywhere.

One dollar invested in preschool children in high risk situations would provide a societal benefit of about $7 by the time the child reached the age of 25. It is a very innovative social policy aimed at those first three years of early childhood development, the first three years of a child's life during which 90% of the child's cognitive adaptive skills close off.

That is the one area where we do not have any real government policy. We have a post-secondary education policy which is primarily provincial but with some federal co-operation through things like the millennium scholarship program. We have a secondary and primary education system.

We have absolutely not strategy for the area during which we can have the most significant and positive impact on the lives of our young people and on the future competitiveness of our country through augmenting our human capital for those first three years.

The government will argue that we cannot have tax reduction, tax reform and innovative social policy. That is not true. This is a government that cannot walk and chew bubble gum at the same time. The fact is that we can have both.

We spend more on health care in Canada than the U.S. government does on a per capita basis. I would argue that the U.S. health care system is very inefficient due to the lack of a single tier system, the insurance industry and the litigious nature of U.S. society. By the same token, the U.S. spends more on health care than we do in Canada on a per capita basis and has a defence budget that is mammoth on a per capita basis relative to ours.

We can actually have the type of tax reform Canadians need, the type of social policy reform Canadians need, but it will take vision, leadership, courage, a depth of knowledge of global issues which Canadians have not had since the previous government, and innovative policies like free trade, reducing or eliminating the manufacturers sales tax, and deregulation of financial services, transportation and energy.

Unfortunately it seems that Canadians will have to wait until after the government has left office before they get the meaningful broad based tax reform they need to compete and succeed in a global environment.

Income Tax Amendments Act, 1998Government Orders

1:05 p.m.


Deepak Obhrai Reform Calgary East, AB

Madam Speaker, I listened with interest to my colleague from the Conservative Party.

He brought one point forward when he said an investment of $1 in early childhood would give dividends. He used the figure of $7 at age 25 as being the benefit to Canada, which is an extremely positive feature. I would like him to take into account the high tech brain drain we are seeing from the country. We probably will lose the $7 with that brain drain.

Now there is a new proposal coming from the finance minister with reference to giving tax breaks through stock options for high tech industries. What would the member's point of view be on this kind of tax break? Would that be the way to go, or would a comprehensive tax reform for every Canadian be a better way to go?

Income Tax Amendments Act, 1998Government Orders

1:05 p.m.

Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Madam Speaker, the member raised the very important issue of the significant investment in Canada in social infrastructure aimed at producing bright, talented young people who ultimately choose to live in other jurisdictions if we do not reduce our tax burden. That represents a huge loss of potential and a huge loss of investment for Canadians and for Canada. If we take into account the cumulative effect over the person's life of the bright young talent that we lose, it is immense.

I agree with the member. We have to address tax issues if we are to benefit from the type of social investment we spoke of. He referred to the same studies, Dr. Fraser Mustard's studies on early childhood intervention, which is very important and very innovative.

In terms of a tax break which would benefit specifically the high tech sector, I agree with the hon. member that we do not need a more complicated and Pavlovian tax code that encourages one behaviour and discourages another. We need significant broad based tax reform aimed at providing all Canadian industries and individuals with a heightened level of competitiveness.

I guess in Canada all sectors are high tax sectors, but we should be fostering and supporting our high tech sector. I would argue that the tax system should not be used to encourage or discourage one type of behaviour or another. I am in complete compliance and agreement with the hon. member that we need broad based tax reform effort aimed at reducing corporate and personal income taxes, at simplifying both of them, and at moving our tax bases from the taxing of capital and income on capital.

In a global sense and in a competitive sense we have to move toward a consumption tax base. We can have a consumption tax base that is progressive. There are ways to ensure movement toward a consumption tax which need not sacrifice the progressivity that is important to Canadians as part of our tax code.