Mr. Speaker, it is with pleasure that I rise today to speak to Bill C-24, an act to amend the Excise Tax Act, the Budget Implementation Act, 1997, the Budget Implementation Act, 1998, the Budget Implementation Act, 1999 and the Income Tax Act.
Here we are in May 2000 debating amendments to the budget implementation act dating back to the 1997 budget. It should be noted that in reviving parliamentary democracy the Liberal plan for the House of Commons and electoral reform from the 1993 Liberal platform stated:
In addition, the credibility stretching tradition of not passing actual tax measures until many months after a budget, often even after the measures have come into effect, must, within the context of a suitable system of consultation, be ended.
What we have here is another example of a broken Liberal promise. In this case it is one of parliamentary reform to provide a more reasonable time period within which budgets would be implemented, as opposed to talking about these changes three years after an actual budget is presented by the Minister of Finance.
Another area of the specific legislation which magnifies some of the broken Liberal promises is the fact that we are discussing some measures relative to the changes to the GST. Everyone in the House remembers, particularly the Liberal members opposite who ran in the 1993 election, campaigning on a Liberal commitment to get rid of the GST.
The current government promised at various points during the 1993 campaign to eliminate, to scrap, to abolish the GST. The finance minister in 1989 once said in the House of Commons that the GST was a stupid, inept and incompetent tax. As a candidate for the Liberal leadership he was quoted as saying that he was committed to scrapping the GST and replacing it with an alternative. Since then the Prime Minister during foreign travels has not just embraced the GST but has actually told foreign dignitaries that it was his idea in the first place and that it is a great tax.
For the Liberals today to embrace the GST after campaigning vociferously against it qualifies them for the award of the patron saint of hypocrisy in the Canadian parliamentary system. For Liberals to have fought against the GST and now take credit for it and benefit as a government from the proceeds of the GST is one of the reasons Canadians are so skeptical and cynical about politics in general.
The Economist magazine 1998 year preview stated quite clearly that credit for the deficit reduction in Canada belonged largely to structural reforms made by the previous government. The Economist magazine went on to list them. They included free trade, the GST, deregulation of financial services, transportation and energy. If I remember correctly, the Liberals campaigned vociferously against all those policies in previous elections. The current government has utilized those policies to eliminate the deficit.
I am not suggesting that I would have been happier had the government reversed those policies. In fact I am quite pleased that it maintained them. The only thing worse than the Liberals blatantly stealing Conservative policies and taking credit for the results would be if they were to implement Liberal policies which would probably be far more deleterious for the Canadian economy. Instead of trying to creatively develop Liberal policies we are pleased that they had the good sense to embrace and support the sound policies of the previous government.
I could go further and say that this is a government of sound and original ideas. Unfortunately its original ideas are seldom sound and its sound ideas are never original.
Although the GST was an appropriate tax measure and appropriate tax reform at the time, we have not seen any meaningful level of tax reform under the current government. We could look at other countries with which we are competing and the degree to which they are using tax reform and tax reduction as vehicles to create greater levels of economic growth. I suggest that we look at what Izzy Asper, former leader of the Liberal Party in Manitoba, the CEO of CanWest Global Communications Corporation and head of the Global Television Network, said when he spoke recently at the BCNI meetings in Toronto.
He said that the Canadian tax system we were living under was last reformed 32 years ago, that it was obsolete and that the world it was designed to deal with no longer existed. He went on to say that the system was a nightmare of complexity and a sea of uncertainty, and that the tax system was anti-business, anti-private sector and anti-entrepreneurial.
He asked a question of the Minister of Industry who spent some time speaking to corporate leaders. The Minister of Industry responded by saying that there could be no significant level of tax reform in Canada and that tax reform would require a complete consensus.
Obviously we will never have complete consensus on tax reform or on any other major public policy reform or issue. The industry minister and the whole government are so focused on poll driven incrementalism and focus group economics that they cannot really embrace the courageous visionary changes and steps toward the more competitive economy which is necessary now because it would involve political risk.
We have an industry minister who is credited by some as being one of the most commonsensical in terms of his recognition that the private sector plays a role in the economy. He actually believes there cannot be any tax reform unless there is 100% complete consensus on tax reform issues. I think that is a sad state of affairs.
Canada needs a significant level of tax reform. Such reform should be used as a vehicle for tax reduction. It is not just personal taxes. We need a significant level of corporate tax reduction.
The most recent budget reduced corporate taxes somewhat over a period of years. However, prior to this budget we had the second highest corporate taxes in the OECD. After the full implementation of budget measures over a five year period we will still have the fourth highest corporate taxes of 31 OECD countries.
It is not really a very significant step in the right direction, particularly given that 27 of the 31 OECD countries have stated plans to further reduce their corporate taxes. While we are taking baby steps in the right direction on some of these issues, other countries with which we are competing are taking gigantic leaps.
On the hypercompetitive global information highway upon which individual Canadian companies are trying to compete and succeed, we run the risk of becoming road kill unless the government actually embraces some of the realities of the future as opposed to always dealing with reforms around an economy that no longer exists. That is part of the difficulty in discussing and making these types of changes so long after a budget is introduced.
Right now the rate of economic change has never been greater. Now is probably the worst time in Canadian history to have a caretaker, cruise control kind of government that is more focused on next week's polls than on the challenges and opportunities for the next 20 or 30 years. My fear is that Canadians will continue to be held back by this weak leadership that is not focused on the real issues facing the private sector and all Canadians.
We should be moving more significantly toward reducing and ultimately eliminating capital taxes in Canada. The taxation of capital in itself is of dubious benefit. It creates significant disadvantages to accumulating capital in Canada and some significant competitive disadvantages for our Canadian financial services sector and banks. Some 7.5 million Canadians are shareholders of those banks directly or indirectly.
The capital gains tax issue needs to be addressed. The government's recent budget would reduce capital gains inclusion rates from 75% to 66.6%. That is a step in the right direction but it still leaves Canadian entrepreneurs with a 13% disadvantage in terms of effective capital gains tax rates over the U.S. A 13% disadvantage is certainly not something to crow about.
The capital gains tax issue particularly in the new economy is important because of the degree to which stock options are used as compensatory assets. There is no reason to suspect this will not continue to be the case even with the recent volatility. The new economy is going to continue to depend on stock options as a very important compensatory vehicle.
As such, when we maintain a 13% disadvantage over the U.S. in terms of the way we tax capital gains, the resultant gain from exercising a stock option, we are driving entrepreneurial talent from Canada. We are sending the risk takers and the great minds who are capable of building better companies and better opportunities and thus a better country, somewhere else. That better country may not be Canada. It may be the United States of America or somewhere else because of the wrong-headedness of the government and its inability to get with it in terms of embracing the realities of the new economy.
There are several revenue neutral changes in Bill C-24 which relate to the goods and services tax, the GST, and the harmonized sales tax, the HST. These measures were announced on March 20, 1997. Most of them relate directly to Atlantic Canada and Nova Scotia in particular. It is notable that these were introduced on March 20, 1997, just a few short months before the Liberals were turfed from Nova Scotia. I am not suggesting that the unanimous decision in ridings across Nova Scotia to remove the Liberal representatives from their seats was a reflection of this issue specifically, but I think it did play a certain role.
By and large the measures are revenue neutral changes. Some of them are positive. Assistance to charities that employ individuals with disabilities and charities that are involved in bottle recycling, enhancements to visitor rebate programs and changes benefiting small businesses that sell products to direct sellers are positive measures and we in the Progressive Conservative Party can support them.
The general tax direction not just of this legislation but of any Liberal government legislation in recent years has been so flawed by a fundamental lack of vision and initiative that it is very difficult to support almost any tax package brought forward.
There have been some changes on the tobacco tax regime and also the tax regime on split run magazines.
I would like to speak to some of the things that are not addressed in this legislation and which I would like to see more of in Liberal fiscal and economic policies.
It is time to significantly raise the basic personal exemption in Canada. It is absolutely atrocious how much people are being taxed. The most recent budget would have raised the basic personal exemption to $8,200, the amount at which the government feels it is appropriate to start taxing Canadians. In the U.S. the basic personal exemption is not hit until someone earns approximately $11,000 Canadian. Here we are in Canada which supposedly is a less harsh country and we actually tax people at $8,200 per year. That seems fundamentally unfair and needs to be addressed, but the government clearly has not set that as a priority.
Canada needs to redefine its middle class. Currently the top marginal tax rate is hit at $60,000. The most recent budget would increase that to $70,000. The fact is in the U.S. an American does not hit the top marginal tax rate until he or she is making $420,000 Canadian. As a result, we are taxing at $60,000 and the government with the full implementation of the most recent budget would increase that to $70,000.
Using $70,000 as the amount, at $70,000 the government feels it is appropriate to tax Canadian families as if they are rich. That creates immense pressure for those people earning $70,000 to $100,000 to be drawn south of the border to greater opportunities and lower taxes.
For example a software designer or a knowledge based worker in Vancouver making $70,000 per year will pay 52% of his income in combined federal and provincial income taxes. Less than an hour and a half away in Seattle, a software worker or a knowledge based industry worker making the same amount of money, about $70,000 Canadian, will pay 26% of his income in combined state and federal taxes. An hour and a half away in the United States, the same individual in the same industry will pay half the level of taxes that he would pay in Canada.
The argument that is used quite frequently, and to a certain extent there is some validity to it, is that of medicare. That argument has been reduced significantly in recent years as the government particularly since 1993 has cut, slashed and decimated the Canadian health care system which for a long time defined Canadians. The health care system played a large role not just in protecting the health of Canadians but also in defining to a large extent the Canadian psyche.
The government through its draconian cuts since 1993 has created immense havoc in every province in the country. Every province has had to deal with the significant level of cuts for health care funding that the government has perpetrated. As a result of the cuts, the percentage of federal commitment to health care has declined steadily to a point that some estimates are that the federal government is paying around 13% of every dollar spent on health care in Canada. Clearly that is unacceptable and that is part of the problem.
On the tax side, the Canadian advantage with medicare really does not exist any longer. What we have seen develop in Canada is a fairly mediocre system for everybody. While it is egalitarian, it is a poor system. As a result, those who can afford it are increasingly being drawn toward making the choice of seeking health care elsewhere or to actually live elsewhere. Many of the professionals who have been drawn away by the brain drain work for companies that provide health care insurance so it is less of an issue.
We have to consider this from a competitiveness perspective. We have to ensure that we are not allowing economic symbolism to define us. Economic performance is more important than economic symbolism.
We have to get our fundamentals right. We need a sound tax structure which is more reflective of the current realities. We also need a more effective health care system which recognizes the current realities.
The fact is that Canada already has a two tier health care system. Around 30% of our health care costs are in the form of costs covering pharmaceuticals, much of which is already paid for privately.
The changes in health care which have occurred and to a large extent the rising costs of pharmaceuticals, the increased level of sophistication in biotechnology and the pharmaceutical industry have already led to rising costs and an increased level of participation by the private sector. Add to that the fact that many Canadians are drawn to the U.S. for health care treatments in private sector facilities.
We need significant levels of economic reform on the fiscal front. We need sound and firm debt reduction targets. We need lower taxes, better tax reform and a better health care system. That is only going to be accomplished with a more visionary, courageous government. Unfortunately, I have lost faith in the members opposite to provide that type of leadership.