Debates of June 12th, 2000

Sales Tax And Excise Tax Amendments Act, 1999

[Ken Epp, Reform, Elk Island, AB]

That is the truth.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, let me start off with an observation about the Canadian Alliance.

Members of that party said when they came to Ottawa their leader was not going to be driven around in a big fancy limousine because it would send the wrong message. It was to be a grassroots party and being escorted about in a nice big black limousine with a personal driver was not the imagery the then Reform Party wanted. Today is the leader being chauffeured around in a black limousine? The answer is yes.

Then the leader said he would not want to move into Stornoway because that big mansion would send the wrong impression. He said that it should be turned into a bingo hall but lo and behold, the leader of the Reform Party moved in and occupied Stornoway.

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, I rise on a point of order. Where the Leader of the Official Opposition lays his head at night is irrelevant to Bill C-24. I call for relevance in this debate.

[The Acting Speaker (Ms. Thibeault)]

I will ask the hon. member to try to be relevant for the rest of his speech, even though personally I did not think that such a remark was out of order.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, you are absolutely right. My friend is also right.

Perhaps I was trying to make my point in a roundabout way. The leader of the Reform Party said that he would not live in Stornoway. Then he changed his mind and said, “Excuse me. I made a mistake. I actually will move into Stornoway”. That was the point. To be fair, it actually does not have much to do with this legislation.

Then I noticed a number of my friends in the Reform Party—

[John Williams, Reform, St. Albert, AB]

I rise on a point of order, Madam Speaker. It is the Canadian Alliance party.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, a number of my friends in what was then the Reform Party said that one thing they would never ever do was opt into the MP pension plan. Some people here did. I am not going to name the members but a number of MPs said, “We changed our mind. I guess some of us are going to opt in now”.

[An hon. member]

The member from Kamloops did not.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, the member from Kamloops was always in the plan. I was honest about it. I was in the plan and I paid for it. I did not say I would not take it and then slip in.

The point of these comments is to simply say it is no wonder people are cynical about us. When one thing is said and another thing is done—

[Ken Epp, Reform, Elk Island, AB]

Relevance.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, I am getting to the point. My hon. friend is calling for relevance. Let us go to the Liberals.

Bill C-24 is a little bit of fiddling around with the GST. We are anxious and glad that the fiddling took place. We support this fiddling, but let us face it. What the government should have done was phase out the GST, and make a little change here and a little finicky switch there and so on. And we applaud that, but for goodness sake, what did the Liberal members do when they campaigned across the country?

I heard from countless candidates in the election campaign that the minute they were elected they were going to do away with the GST. I do not know if they actually said that, but they said they were going to deal with the GST. The Liberals said the GST was unfair. They said the GST was biased. They said the GST was unjust and if people elected the Liberals, they were going to change all of that. Where people made the mistake was they thought the Liberals meant they were going to abolish it. The Liberals did not. When they got elected they said they would keep this tax.

Once again a certain cynicism builds. Quite frankly I wonder why it is not even greater because again, going back to my friends in the Liberal Party, they even campaigned against the NAFTA. The Liberals said that if they were elected, they were are going to do away with NAFTA. Of course, not only did they not do away with NAFTA, they have become the free trade cheerleaders of the world. They are trying to get us into NAFTA now with almost every country going. We could debate the merits of NAFTA, but the point is they said they were going to abolish NAFTA. The Liberals said they were going to get out of NAFTA but they did exactly the opposite.

No wonder people are cynical. No wonder people ask if anyone can actually believe what the Liberals say.

That same group said if they were elected they would introduce a national child care program. Have we seen a national child care program? Whoops. They forgot about that. The Liberals promised that if they were elected they would introduce a national child care program. They did not say, “If you elect us, we are going to have negotiations with the provinces”. They said, “A child care program is a national priority for us”. We are still waiting.

There is a long list and I could go on but I think I have made my point. No wonder people are a little cynical about this business. If we are going to deal with the GST, as my friend from Regina said, the only way to deal with it is to reform the tax system from top to bottom. A complete overhaul of the tax system is needed. The tax system right now is out of control. It is meaningless. I do not think a single member or Canadians anywhere in the country could say, “I understand our tax system”.

[John Williams, Reform, St. Albert, AB]

Read our proposal.

[Nelson Riis, NDP, Kamloops, BC]

My friend says to read the proposal from the Canadian Alliance party. Its proposal is a flat tax. I know that my friends are going to campaign on the flat tax. The Republican Party in the United States rejected it. The Republicans said there was no way they could go ahead with the flat tax idea because it is a tax that is going to benefit the wealthy people. The Republicans said to forget it, they were going to drop it. George Bush has never used the term flat tax.

Then Mr. Harris and Ernie Eves in Ontario said there was no way they wanted to touch this flat tax business because again, it favours the rich and the wealthy of the country. We can probably guess who the multimillionaires would vote for, because if they were making millions of dollars and only had to pay a 17% flat tax, my goodness, that would be a real windfall.

The NDP does not support a flat tax.

[Charlie Penson, Reform, Peace River, AB]

Like the leader of the NDP.

[Nelson Riis, NDP, Kamloops, BC]

We have nothing against millionaires. I was just saying that millionaires like the flat tax because it means they pay a lot less income tax.

The reality is that the NDP supports the idea of improving the GST. However, the ultimate solution is not to tinker with it, with a little switch here and a little shift there, but to abolish the GST as we were originally promised.

If there was a signal it would be that any political party that said it was going to abolish the GST would be very successful in the next general election. I have been listening carefully and I hear only one party saying that, the New Democratic Party of Canada. It says that this is a regressive tax. The GST is an unfair and biased tax and it should be phased out. That is our fundamental point.

We have some clear differences here. The Liberals like the GST. The Canadian Alliance wants to bring in a flat tax. The New Democratic Party wants to phase out the GST, do away with the GST and have less tax.

I think I have said enough. My friends are nodding in agreement so I think I will sit down.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, it is a pleasure to speak to Bill C-24.

As my colleague in the party formerly known as reform said, it was my party that actually brought in the GST. I am proud to say it was my party which had the foresight to replace a counterproductive tax called the manufacturers' sales tax with one called the GST. In fact, it has been recognized as not only one of the fairer taxes, but as one of the least negative in terms of its impact on the economy.

Members of the party formerly known as reform, the party that dare not speaketh its name, and the Liberal Party seem to have embraced that previously opposed tax because it was and is the right policy.

It took a party that was willing to take a significant amount of risk and which had a high level of vision and focus on the future of Canada, not simply a focus on next week's polls but instead on the challenges and opportunities facing Canadians well into the 21st century. That was the Progressive Conservative government of Brian Mulroney. It is to his credit that that policy has ultimately aged very well.

It is clear that Canada needs a significant level of tax reform. There has not been a significant level of tax reform since the time of the GST going back to I believe 1989 when the tax proposals were first discussed and debated. Ultimately the GST was implemented in the early 1990s. That was a major shift in tax reform in Canada, primarily because it enabled the country to move from a purely income based tax system to a consumption based system. That in itself is recognized by most free market economic theorists around the world as being more sensible in taxing income.

The fact is we have to raise revenue. Oliver Wendell Holmes once said that taxes are the price we pay for a civilized society. The question is how we tax people and the amount to which we tax people. Those questions determine largely the degree to which we have a productive and viable economy capable of producing the level of economic wealth and prosperity to sustain the very social programs, benefits, health care and education that we value as Canadians. It is very important to consider the degree to which tax reform can be a great vehicle in creating economic growth.

Other countries have leapt ahead of Canada in this very critical area. Ireland for example has had a 92% growth in its GDP per capita over the last 10 years, largely based on an aggressive and innovative tax reform strategy. Ireland's tax reform was based largely on creating a corporate tax strategy which attracted a significant amount of investment from around the world.

When the finance committee studied the issue of productivity last year, it was clear from a number of economic minds that there was a significant link between investment and productivity in the new economy. Clearly productivity gains are critical and exceptionally important in creating economic wealth and prosperity in the new economy.

The question is: How do we do that? Clearly there is a strong linkage between capital and productivity. The types of productivity enhancements that are necessary to create economic growth today require significant levels of capital and investment. Tax policy that encourages investment, that attracts capital, will ultimately lead to greater levels of productivity. Greater levels of productivity will ultimately lead to greater levels of economic growth and competitiveness for Canada.

Our productivity growth or lack thereof, or the degree to which our productivity growth has lagged behind our trading competitors, particularly the U.S., threatens the standard of living that we value as Canadians.

We have seen during the 1990s a significant decline in our disposable income relative to the U.S. We have had about an 8% decline during the same period that Americans have enjoyed a 10% increase. Our productivity growth has lagged behind the U.S. while other countries—and I cited Ireland a few minutes ago—have had extraordinary growth, 92% growth of GDP per capita. In the last 10 years the U.S. has had around 15% to 20% growth in GDP per capita. Canada has had about a 5% growth in GDP per capita.

As other countries and individuals and businesses in other countries are getting richer, Canadians in a relative sense are getting poorer. That in part is the reason we have seen our dollar lose almost 10 cents under this government since 1993. A dollar that lost only a penny during the nine years of the Mulroney government has lost under this government almost 10 cents.

The Prime Minister's response was that a low dollar is good for tourism as it reduces the cost for Americans to come to Canada. His theory is that Canada can devalue its way to prosperity. The logical corollary of his illogical argument is that ultimately if we continue on this trend we could reduce our dollar to zero and thus would become the greatest trading nation in the world because we could give all our products away and things would be very productive and beneficial from that perspective. Obviously the Prime Minister's theory on monetary or fiscal policy is as sound as his theory on most policy issues.

This is a government that is a government of sound and original ideas. Unfortunately its sound ideas are seldom original and its original ideas are never sound. The degree to which the government has relied on the sound fiscal policies of the previous government and the structural changes made to the Canadian economy by the previous government to fuel its economic growth has been unprecedented. There has never been a government that has fought as vociferously against the very economic policies it ultimately ended up embracing as this government.

As we discussed, those policies included the GST, free trade, deregulation of financial services, transportation and energy. Liberals members opposite fought every one of those structural reforms tooth and nail until they were elected, at which point they embraced the policies because they were the right ones.

In some ways we should commend Liberal members opposite for swallowing themselves whole upon being elected in 1993, sacrificing their principles at the altar of reality, doing what was right for Canada and embracing the sound policies of the previous government. For that I commend them and thank them because they were willing to put aside principle in the interest of doing what is right for Canada, which is adopting the right policies that they vigorously opposed in opposition.

My colleague from the New Democratic Party spoke at length of the soundness from an economic perspective of eliminating the GST or reducing the GST with a goal of eliminating it. There would be nothing worse in terms of our tax policy reform than eliminating or reducing the GST at this point. The GST raises about $22 billion worth of revenue, which is a greater level of revenue than what we draw from corporate taxation in Canada. Raising that revenue actually has a less negative impact on the economy than any other form of taxation. I did not have the opportunity to ask the member for whom I have a significant amount of respect about it. I disagree vehemently with many of the policies of the New Democratic Party, but I do respect its consistency as opposed to the flip-flop party in the government opposite or the party formerly known as Reform. Its members have adopted one policy of the Liberal Party to change its policies at whim to try to appeal to the populist winds that blow not just across the prairies but anywhere in Canada where they feel they may be able to buy the odd vote.

Even though I vehemently oppose the economic naivete that permeates NDP policy, I do respect its principles that remain fairly consistent in opposing things like the GST. The New Democrats to their credit were opposed to the GST and continue to be opposed to the GST. The New Democrats to their credit were opposed to NAFTA and continue to be opposed to trade.

I am supporting their consistency in maintaining what I believe to be bad policies. However I would prefer a party and individuals in a party that for principled reasons maintain policies that I disagree with than parties that simply embrace the latest political whim or populist leaning out there. Government by populism is an abdication of leadership.

Leadership means not just simply doing what is popular but it means doing what is right. Leadership means not just responding to today's polls but in fact looking ahead of where Canadians are today and trying to determine where the country is going relative to other countries. Leadership means looking at global trends and putting in place a policy framework that responds very strongly to the future opportunities and challenges facing Canadians.

With the abdication of leadership to a large extent that has occurred in political service, there seems to be almost a vacuum of vision, foresight and courageous leadership in today's political environment. On the other hand the Progressive Conservative Party continues to bring forth visionary tax reform policies, including the elimination of the personal capital gains tax. Certainly this is not because the elimination of personal capital gains tax is a populist idea that would resonate across the main streets of Canada necessarily but because it is the right policy.

If we want to create the greatest level of economic growth and prosperity for Canadians sometimes we have to say and do what is right. In terms of its impact on the economy there is no tax that has a more deleterious impact on the new economy, on wealth creation and on capital formation for the new economy than the capital gains tax regime.

We have a 13% disadvantage over the U.S. in areas of capital gains taxation, even after the recent budget which was a step in the right direction but a baby step when other countries are taking gigantic leaps. Elimination of the personal capital gains tax would give us a 20% advantage. For the first time in a long time Canada would actually have an advantage in a very important area of taxation. In the most critical and fundamentally important form of taxation in terms of its impact on the new economy Canada would have an advantage over the U.S. We would become a magnate for investment in the new economy as opposed to the repellent we have become under the listless, rudderless leadership of the government.

In another area of tax reform we need a redefining of the middle class in Canada. Clearly our current tax brackets penalize success in a very unfair way. Americans do not hit the top marginal tax rate until $420,000 Canadian. In Canada we currently hit the top marginal tax rate at about $60,000. After full implementation of the recent budget that figure would be $70,000. At $70,000 Canadian, even after the full implementation of that budget, we would still see Canadians hit the top marginal tax rate.

A family today making $70,000 per year is not rich. It is naive to think that someone making $70,000 per year in Canada, and particularly a family with dependants, would be rich. This creates a huge disadvantage when Americans do not hit that top income threshold until $420,000.

This means that a technology worker, a software engineer for instance in Vancouver who is making $72,000 per year, is paying 52% of his income in federal and provincial taxes. The same individual at the same level of income in the same industry an hour and a half away in Seattle would be paying about 26% of his income in taxes. We need to redefine the middle class in Canada. We need to adjust our tax bracket significantly to recognize that there are many people in that very critical area.

I see my colleagues from Quebec here. Quebec's policies on the new economy have been very successful in creating a greater level of economic growth whether it is in biotech, e-commerce or knowledge based industry. Quebec has done a commendable job in terms of growing the economy in these areas, but it has been without the assistance of the federal government and with a lack of leadership in terms of the types of tax policies that would attract knowledge based industry to Canada in general.

I would hope that my colleagues from Quebec would share with us their vision of the new economy. It is extraordinarily important for all regions of Canada to develop policies that attract the innovators, not just keep the innovators in Canada which is probably the wrong headed place to start. Instead of the notion of trying to keep the people here, why do we not develop policies that actually attract the best and the brightest?

Whenever we shoot for a fairly low goal we end up achieving a lot less. We should be developing the types of policies that attract innovators to Canada. Quebec has been quite successful in developing provincial policies that have been helpful in terms of doing so.

The federal government made a recent announcement of another $400 million for ACOA to invest in a technology fund in Atlantic Canada. There is some discussion about that, as nebulous as it might be. Governments and government agencies have been inconsistent and continue to be notoriously bad at picking winners and losers. There is a no more complicated area of the economy in terms of the difficulty in separating winners and losers than the new economy.

As much as I think ACOA has done some very good work at various times, we would be far better served to see a reduction in corporate and capital gains tax in Atlantic Canada by the amount the government is proposing to increase the ACOA allotment for new economy investments. Reducing taxes in Atlantic Canada, particularly those taxes that have the most negative impact on the new economy, would be far more sound than increasing the budget of an agency for direct lending and grants to the new economy. That is my feeling.

In a general sense we need to reduce and ultimately eliminate the personal capital gains tax in Canada if we want to speak to the new economy entrepreneurs and create a greater level of economic growth in the sectors we need to be competitive in. We need to reduce our corporate tax levels to at least OECD levels. While the government has made a pathetic, anemic, little baby step in the right direction, other countries are leaping ahead of us far more quickly.

We need to redefine our middle class by adjusting our tax bracket significantly, but not to the extent that is being suggested by the party formerly known as Reform in its flat tax proposal. Steve Forbes fought two U.S. elections on the flat tax. He was unsuccessful in both cases because the flat tax was too right wing for U.S. Republicans. The flat tax is too right wing for the government of Mike Harris and Ernie Eves. It has been cited by individuals including Mr. Eves, the finance minister in Ontario, as being unfair overall and not being appropriate. I would argue that for very sound reasons it will be less saleable in Canada than it has been in the U.S and, from a principle perspective, it is not an appropriate policy.

We should be building our tax policies around growth and not greed. We should be focusing on reducing the types of taxes that most negatively impact on our ability to compete in the new economy. We have to recognize that lower taxes in some cases do not necessarily result in lower revenue. In fact, reducing capital gains taxes would create such a significant level of unlocking of capital in Canada that we would ultimately raise significant levels of revenue in other areas.

Alan Greenspan, the federal reserve chairman in the U.S., has recommended the elimination of personal capital gains tax from the perspective that it would unlock a significant level of capital and help entrepreneurialism and economic growth in the U.S. That is the very same priority we should have in Canada.

In closing, the legislation is a collection of tiny little baby steps on tax policies by a government that is incapable of the broad sweeping changes and courageous vision that the previous government had. After the next election, I look forward to, being in position as part of a Progressive Conservative government, making the types of changes Canadians need.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

The question is on the motion for third reading of Bill C-24. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

Nay.