House of Commons Hansard #109 of the 36th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was taxes.

Topics

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

Some hon. members

Agreed.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

Some hon. members

No.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

The Deputy Speaker

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

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

Some hon. members

Yea.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

The Deputy Speaker

All those opposed will please say nay.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

Some hon. members

Nay.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

The Deputy Speaker

In my opinion the yeas have it.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

Some hon. members

On division.

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

The Deputy Speaker

I declare the motion carried, on division.

(Motion agreed to)

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

The Deputy Speaker

When shall the bill be read the third time? At the next sitting of the House?

Income Tax Act Amendments, 1999Government Orders

3:30 p.m.

Some hon. members

Now.

Income Tax Act Amendments, 1999Government Orders

3:35 p.m.

Bloc

Yvan Bernier Bloc Bonaventure—Gaspé—Îles-De-La-Madeleine—Pabok, QC

Mr. Speaker, on a point of order. I agree that summer is knocking at the door and that the government is in a hurry to get things done, but I want to make sure I understand things properly.

When you asked if we were ready for the question, five Bloc Quebecois members rose to express their disagreement. I would like to know your decision on this point or hear it again.

Income Tax Act Amendments, 1999Government Orders

3:35 p.m.

The Deputy Speaker

I regret to inform the hon. member that, when the Chair put the question, I asked the House to answer yea or nay according to its pleasure. I then said “In my opinion, the yeas have it”. Five members had not risen at that point. I am sorry, but I counted the members and there were not five. That is the only reason I asked “When will the bill be read the third time?” And that is how it went. We are now at third reading.

Income Tax Act Amendments, 1999Government Orders

3:35 p.m.

Bloc

Réal Ménard Bloc Hochelaga—Maisonneuve, QC

Mr. Speaker, I rise on a point of order. With all due respect to the Chair, we were five members, and it is the prerogative of the members to call for a vote.

We are in parliament and we would not understand that you impede our ability to vote. We were five members, and I ask you to reconsider your decision so that we may continue our debate calmly as we ought. We were five members and we want to vote on this question. This is the prerogative of the Bloc Quebecois to request it.

Income Tax Act Amendments, 1999Government Orders

3:35 p.m.

The Deputy Speaker

I do not agree with the hon. member that it is the prerogative of just anyone in the House to call for a vote. However, five members of this House must rise, and five had not risen when I put the question. I am sure that, while I was saying “I declare the motion carried”, other members arrived, but it was too late. The decision has been made and that is the end of that.

Income Tax Act Amendments, 1999Government Orders

3:35 p.m.

Bloc

Yvan Bernier Bloc Bonaventure—Gaspé—Îles-De-La-Madeleine—Pabok, QC

Mr. Speaker, I rise on a point of order. To help those who are watching us and the members opposite understand what is going on, I wonder if the Chair or the clerk could clarify under the standing orders whether when a vote is called it is necessary for a member to be in his or her own seat?

It is necessary to be standing and to say that we want to vote. I believe this is what happened earlier when five Bloc Quebecois members stood up asking for one. The hon. member for Hochelaga—Maisonneuve told the Chair that he was present and he was indeed present. I would not want the call of summer to make us proceed too quickly.

Income Tax Act Amendments, 1999Government Orders

3:40 p.m.

Liberal

Bob Kilger Liberal Stormont—Dundas, ON

Mr. Speaker, if you will give me a few seconds, I first want to say that I understand very well and I think you were right in how you interpreted the rules.

I also appreciate the fact that the Bloc Quebecois still continues to co-operate regarding Bill C-25. Even if we did not have the opportunity to ask for a recorded division, under the rules that were properly interpreted by the Chair, I always appreciate their co-operation and that of the other parties because it allows us to go ahead with this bill.

Income Tax Act Amendments, 1999Government Orders

3:40 p.m.

The Deputy Speaker

I appreciate the comments made by all the members on this issue but I would like to find the applicable standing order.

Income Tax Act Amendments, 1999Government Orders

3:40 p.m.

Bloc

Réal Ménard Bloc Hochelaga—Maisonneuve, QC

On a point of order, Mr. Speaker. If you agree, I propose that we carry on with the business of the House and that the Chair gets back to this issue later on. We do not want to delay the House in its proceedings.

Income Tax Act Amendments, 1999Government Orders

3:40 p.m.

The Deputy Speaker

I thank the hon. member. When I issued my ruling, there were not five members who had risen. This is the only reason why I made that ruling. I am aware of course that five members must rise. If five members rise, there is a recorded division.

I posed the question, when shall the bill be read a third time. The question may be put now and I propose to put it to the House because apparently that is the request.

Income Tax Act Amendments, 1999Government Orders

3:40 p.m.

Beaches—East York Ontario

Liberal

Maria Minna Liberalfor the Minister of Finance

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

Income Tax Act Amendments, 1999Government Orders

3:40 p.m.

Etobicoke North Ontario

Liberal

Roy Cullen LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, I am pleased to speak to the House today at third reading of Bill C-25, the 1999 income tax amendments act.

Hon. members are familiar with this legislation so I will not take up valuable House time discussing the bill in any detail. Instead, I will briefly review the highlights of the bill.

This bill brings into force many of the tax measures that were announced in the 1999 budget, together with some non-budget tax measures. For those hon. members wondering about the tax measures in the 2000 budget, they will be contained in separate legislation.

Every one of the government's budgets to date have provided targeted tax relief designed to achieve key social and economic goals. With the deficit eliminated in 1997-98, the door was subsequently opened to the introduction of some broad based tax relief measures.

The tax measures in the 1999 budget build on those that were introduced in previous budgets. Most important, as members of the House know, for the first time since 1965 the 1999 budget provides tax relief for every taxpayer without the government having to borrow money to pay for it and, as with the previous relief measures, low and middle income Canadians benefit the most.

Hon. members will be aware of the government's commitment to provide ongoing tax relief to Canadians as we can afford it. Hon. members will also know that the Minister of Finance followed through on the promise he made in the fall fiscal and economic update and announced a five year tax reduction plan in budget 2000.

This plan will provide real and lasting tax reductions for Canadians and ensure that all taxpayers will see their taxes reduced in a manner consistent with the government's tax-cutting principles. These measures, however, will be introduced under separate legislation.

As we did in eliminating the deficit, the tax reduction plan will be achieved as quickly as possible—and further expanded as resources permit.

It is important that we pass this bill without delay. Let me continue my remarks by outlining the measures in this bill that stem from the 1999 budget.

Bill C-25 includes three general tax relief measures which, subject to this legislation being enacted, all took effect on July 1, 1999. The amount of income Canadians can receive tax free is increased. This amount is increased further in the 2000 budget, a provision that will be contained in separate legislation. The supplement to personal amounts provided for low income taxpayers in the 1998 budget is extended to all taxpayers and increased by a further $175. Bill C-25 eliminates the general 3% surtax for all taxpayers.

Standing to benefit the most from these measures are low income earners. A single filer with an income of $15,000 for example will pay 15% less federal tax, while a similar person earning $30,000 will pay 6% less tax.

Income splitting with minor children is also covered in this bill. Income splitting occurs when high income individuals divert income to low income earners, generally family members, to avoid tax. In most cases only high income individuals with dependants reap any tax benefits from income splitting. Bill C-25 rectifies this situation by introducing a special tax that is specifically directed at structures designed to split income with minors.

Individuals age 17 and under will have to pay this special tax on any taxable dividends or any benefits on unlisted shares of Canadian and foreign companies that they receive from a trust or partnership. In addition, income they receive from a partnership or trust that comes from a business carried on by a relative will also be subject to this special tax.

Bill C-25 also deals with the taxation of retroactive lump-sum payments. These payments are taxed in the year they are received, even though a significant portion may relate to prior years. Because of the progressivity of the tax system, an individual's tax liability on these payments may be higher than if they had been made, and taxed, year by year as the income arose.

There will now be a special relieving mechanism in place to compute the tax on qualifying retroactive lump sum payments where those payments are $3,000 or more in a given year.

Bill C-25 also effects a change on the tax treatment of Hutterite colonies. For tax purposes, Hutterite colonies are viewed as communal organizations and subject to section 143 of the Income Tax Act. The intent is that their income be taxed at roughly the same level as farming income earned outside these organizations by allocating colony income among adult members.

Until now, income in a communal organization was allocated to only one designated spouse in a family. To allow for the tax burden on communal organizations to be reduced and more fairly distributed, Bill C-25 provides for income to be allocated to each spouse in the family. This change will help maintain roughly equivalent taxation on income earned by Hutterite colonies and other groups.

Bill C-25 also contains a number of other tax provisions that were included in the 1999 budget.

Third parties making false statements that could be used for tax purposes will now be subject to two new civil penalties. One deals with tax shelter and other tax-planning arrangements; the second concerns advising or participating in a false tax filing.

There will now be a culpable conduct test—consistent with what the courts have used in the past when applying civil penalties to taxpayers—along with a “reliance in good faith” exception to the test.

There has been some discussion about the culpable conduct test. I would like to briefly describe for the House and for Canadians what it is and what it is not.

Culpable conduct as defined in the act means conduct, whether an act or a failure to act, that (a) is tantamount to intentional conduct, (b) shows an indifference as to whether this act is complied with, or (c) shows a wilful, reckless or wanton disregard of law. I am sure members of the House will agree that conduct such as this is truly not acceptable. Honest errors of omission or commission will not be applicable under the culpable conduct test.

Bill C-25 also addresses the tax situation that arises when an individual dies and the value of their RRSP or RRIF is included in their income for the year of their death. When there is a surviving spouse but RRSPs and RRIFs have been left to dependent children, it is the children, not the deceased's estate, who will now be responsible for any resulting income inclusions. With income tax rates for dependent children usually lower, this provision will help them when a parent dies.

Through the bill the care of people with severe disabilities living in a group home, therapy for those with severe disabilities, and tutoring for the learning disabled will now be covered under the medical expense tax credit. In addition, talking text books for people with perceptual disabilities who are enrolled at educational institutions will be included on the eligible equipment list for persons with disabilities.

Corporations producing electrical energy for sale or steam for use in such production will now be eligible for the manufacturing and processing profits tax credit. This measure will help the electricity generating sector to become more competitive.

The next measure will also help corporations. Faced with multiple taxation years being reassessed at the same time, corporations are often caught in situations where refund interest is taxable while arrears interest is non-deductible. There will now be a relieving mechanism in place so corporations can ask for such amounts to be offset for interest calculation purposes.

Another component in Bill C-25 is designed to help the Canadian investment services industry compete more effectively internationally. A new rule will ensure that, subject to conditions, if a non-resident hires a Canadian firm to provide certain investment services, the non-resident is not, for that reason alone, considered to be carrying on business in Canada.

Canadian firms serving offshore clients will continue to pay tax in Canada on their profits. Non-residents who receive income from Canadian sources will continue to be subject to Canadian tax.

Other measures in the bill will encourage labour sponsored venture capital corporations to focus more on small business investments under the 12% part VI surcharge on large deposit making institutions. The 12% part VI surcharge on large deposit making institutions is being extended further to October 31, 2000.

As I indicated at the beginning of my remarks, this bill also contains some non-budget tax measures. One exempts the income of the trust that has been established by the federal, provincial and territorial governments to provide compensation to hepatitis C victims from income taxation.

Finally, the bill ensures that for tax purposes cash demutualization benefits are treated as dividends and therefore are subject to the low dividend rate. While there is no immediate tax benefit associated with a policyholder receiving a share as a demutualization benefit, a capital gain would be recognized once the share is sold.

In conclusion, I encourage my hon. colleagues to support the bill. Each of these measures improves the operation of the tax system and each adheres to the principle of tax fairness. Together the measures introduced in the 1997, 1998 and 1999 budgets reduce the income tax burden of Canadians by some 10%.

But, as the Minister of Finance said last fall, these are only the first steps. Combined with the actions in those budgets, the measures in the 2000 budget will see personal income taxes reduced by 22% in 2004-05.

Let us pass this bill quickly, colleagues, so we can move on to implementing the five year tax reduction plan.

Income Tax Act Amendments, 1999Government Orders

3:55 p.m.

Reform

Jim Hart Reform Okanagan—Coquihalla, BC

Mr. Speaker, we have heard the smoke and mirrors from the government side on Bill C-25 in all the things those members have been saying.

I come from the area of Okanagan—Coquihalla. The people in my riding of Okanagan—Coquihalla are hard working and diligent. They want to have families and create an environment in their communities that is good for themselves and for their community. They want to prosper.

Mr. Speaker, you probably knew this, but in my riding there are two communities with interesting names. One is Merritt and the other is Hope, British Columbia. I often say that the people of Okanagan—Coquihalla reflect the names of those two communities. They are hard workers. They give meritorious service to their communities. They have hope. They have hope for the future. They have hope that they will prosper. But that hope has been dashed by the Liberal government over the last seven years because it has failed to deliver to Canadians the things that make people prosperous, the things that encourage entrepreneurship and so on.

Bill C-25 is an omnibus bill that contains amendments to the Income Tax Act, the Excise Tax Act and implements certain provisions of the 1999 federal budget. Canadians are not in support of this bill.

I want to touch on a point that preceded this debate. That is the issue of the two amendments that were proposed by the finance critic for the Canadian Alliance. Both of those amendments would have seen increased accountability to the powerful revenue agency. Both of those amendments have been disregarded by the House. The excuse was that they were not accompanied by a Governor General's recommendation. We hear all the time from the government how it has broad based consultations, that it speaks to Canadians and tries to find out what Canadians are really after. Let us look at what these two amendments did.

There was broad consultation. We talked to people in the financial services industry, the accounting industry, the life underwriting industry. These were people in the professional tax field. They came to the finance committee to give testimony. They talked about how the bill is too broadly based, how it does not offer a neutral appeal process. That is pretty serious when we are talking about taxes.

If the revenue agency goes after a Canadian with the allegation of a problem with his tax return, there has to be an appeal process, does there not? We think there would be. The amendments the hon. member for Medicine Hat brought forward did that, but they have been disregarded by the Liberal government. It is outrageous. However I am used to it and I think Canadians are used to it.

We will not sit idly by and watch this continually happen time and time again. In the next campaign the Liberal government is going to feel the wrath of the Canadian people when it comes to taxation. I assure the Liberals that they are plummeting now, but they are going to plummet even further in the polls the day we go to the people of Canada and ask them what they think of the Liberal government's record on taxation over the last seven or eight years.

I would like to look at payroll taxes for a minute. In 1999 the increased payroll taxes taken to fund the Canada pension plan removed any savings Canadians expected to see on their paystubs. Canadians will be faced with increases to the Canada pension plan for the next four years. In fact the increased payroll taxes taken to fund the Canada pension plan is the single biggest tax increase in the country.

Does the Liberal government talk about that? No, it does not, but the fact is that its increases to payroll taxes are the biggest that Canadians have ever seen, the largest tax grabs in the history of the country.

Despite the Liberal claims in the 1999 budget, Canadians are still faced with the highest personal income taxes of all the G-7 states, a major factor in the continuing brain drain of skilled Canadians to lower tax regimes like that of the United States.

The Liberal government claims that the 2000 budget will change the distinction we held in 1999. Budget 2000 proposes a five year tax reduction plan that is supposed to create the most important structural changes to the federal tax system in more than a decade.

We all remember the finance minister in his speech in the House. He said:

Today, we are setting out a five year plan so that individuals, families, small businesses and others will know for certain that their taxes will fall this year, next year and in years to come.

The finance minister stated that Canadians could expect tax relief equalling $58.4 billion over the next five years. He even admitted that tax dollars were not the property of the federal government, which was quite a revelation for the Minister of Finance, but really the property of Canadian taxpayers. He said “It is your money after all”. That is exactly what he said in the House. Can Canadians really expect to receive $58.4 billion in tax relief from the federal Liberal government?

Income Tax Act Amendments, 1999Government Orders

4 p.m.

An hon. member

Hardly.

Income Tax Act Amendments, 1999Government Orders

June 7th, 2000 / 4 p.m.

Reform

Jim Hart Reform Okanagan—Coquihalla, BC

My hon. friend says “Hardly”. Let me explain. The answer is no. He is absolutely right. After all the hoopla died away it became clear that new spending initiatives combined with tax increases from previous budgets like those in Bill C-25 would wipe out the vast majority of the $58.4 billion tax cut.

Over the next five years spending on programs will increase by $7.5 billion. This brings the supposed tax cut down to just over $50 billion, but there is more. It is kind of like buying one of those vegamatics on TV: “But wait, there is more”.

Subtract from this $50 billion the whopping $29.5 billion payroll tax hike caused by the multi-year increase to Canada pension plan premiums. As I mentioned earlier, every January for the next four years Canadians will have to pay more of their hard earned dollars to bankroll a public pension plan that for all intents and purposes is broken.

Now the tax cut is down to about $20 billion, but wait, there is more. Some $13.5 billion of this amount are nothing more than a cancellation of scheduled tax hikes. Is cancelling a scheduled tax hike a tax break? I do not think so, and judging from the response from my constituents they do not think so either.

That leaves a grand total of $7.9 billion for tax relief or, to put it another way, $107.60 per taxpayer per year. We could put it another way, $8.97 per taxpayer per month, or we could take it down even lower to $2.07 per week, enough to buy a medium size Tim Horton's coffee.

Canadian taxpayers are getting no meaningful tax relief from the Liberal government. Each Canadian is still paying over $2,000 more in taxes than they were in 1993 when the Liberals formed the government. That is quite a different story from what we have heard from the Liberals. They keep telling Canadians that there are tax cuts. It is absolute smoke and mirrors.