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House of Commons Hansard #37 of the 37th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was americas.

Topics

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

All those opposed will please say nay.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

Some hon. members

Nay.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

In my opinion the yeas have it.

And more than five members having risen:

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

The recorded division on Motion No. 6 stands deferred.

The next question is on Motion No. 7. Is it the pleasure of the House to adopt the motion?

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

Some hon. members

Agreed.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

Some hon. members

No.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

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

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

Some hon. members

Yea.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

All those opposed will please say nay.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

Some hon. members

Nay.

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

In my opinion the nays have it.

And more than five members having risen:

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

The recorded division on Motion No. 7 stands deferred.

The House will now proceed to the taking of the deferred recorded divisions at the report stage of the bill. Call in the members. And the division bells having rung :

Financial Consumer Agency Of Canada ActGovernment Orders

12:40 p.m.

The Deputy Speaker

The recorded divisions stand deferred until tomorrow, March 28, to the expiry of the time provided for Government Orders.

Income Tax Amendments Act, 2000Government Orders

12:45 p.m.

West Nova Nova Scotia

Liberal

Robert Thibault Liberalfor the Minister of Finance

moved that Bill C-22, an act to amend the Income Tax Act, the Income Tax Application Rules, certain acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another act related to the Excise Tax Act, be read the second time and referred to a committee.

Income Tax Amendments Act, 2000Government Orders

12:45 p.m.

Etobicoke North Ontario

Liberal

Roy Cullen LiberalParliamentary Secretary to Minister of Finance

Mr. Speaker, I welcome the opportunity to present Bill C-22, the Income Tax Amendments Act, 2000 for second reading today.

While the bill amends several sections of the Income Tax Act, more important, it implements key elements of the government's five year tax reduction plan which was introduced last year.

Briefly, this plan will provide $100 billion in tax relief by 2004-05, thereby reducing the federal personal income tax paid by Canadians by 21% on average.

Families with children will receive an even larger tax cut—about 27% on average.

The bill also includes many additional measures, including technical amendments that were introduced in Bill C-43 last fall but which died on the order paper when the election was called.

Many of these amendments are relieving in nature. Some correct technical deficiencies in the act while others lighten the administration of the tax system. Whatever the changes, one thing is certain, each is based on the principles of fairness and equity in the federal tax system to which our government has been committed since coming to office in 1993.

Once we eliminated the deficit in 1997-98, we began to cut taxes for all Canadians. The bill before us today is the biggest step forward in our tax cutting efforts to date and is based on four key principles.

First, our approach to tax reduction must be fair starting with those who need relief most, middle and low income earners, and especially families with children.

Second, we will focus initially on personal income taxes since that is where we are most out of line.

Third, we will ensure that Canada has an internationally competitive business tax system.

Fourth, we will not finance tax relief with borrowed money because that means an inevitable return to higher taxes in the future.

For the government, fiscal responsibility is fundamental and tax cuts are essential. At the same time, it is essential that an effective, fair and technically valid tax system be maintained, which is the thrust of the legislation before us today.

I will now discuss the main measures in the bill beginning with some of the personal income tax changes.

In 1999 the government promised Canadians that it would set out a multi-year plan for further tax reductions. The 2000 budget delivered on that commitment by making the most important structural changes to the Canadian tax system in more than a decade with a special emphasis on the needs of families with children. The bill provides for tax rate reductions at all income levels as of January 1, 2001.

The low and middle income tax rates fall to 16% and 22% respectively. The top 29% rate is reduced to 26% on incomes between about $61,000 and $100,000, which means that the 29% rate applies only to income over $100,000.

While tax burdens will fall for all Canadians, the decline will be felt substantially by middle income earners. In addition, the bill would eliminate the 5% deficit reduction surtax as of January 1, 2001.

One component of the five year tax reduction plan must be in place by July 1 of this year because it benefits Canadian children. I am referring to the increased support for families with children through the Canada child tax benefit.

As hon. members know, the Canada child tax benefit is a key element of federal assistance to families. It is an income based benefit with two components: the Canada child tax benefit base benefit for low and middle income families and the national child benefit supplement for low income families.

The maximum Canada child tax benefit for the first child will rise to $2,372 in July 2001, well on the way to the five year goal of $2,500 by the year 2004.

For the second child, the maximum Canada child tax benefit will increase to $2,308 in July 2004. Together with increases announced in previous budgets, annual Canada child tax benefits will exceed $9 billion a year in the year 2004, of which low income families will receive about $6 billion and middle income families about $3 billion.

The bill contains other personal income tax changes that are specifically designed to help those who need it most.

For example, the amount on which the disability tax credit, the DTC, is based is increasing from $4,293 to $6,000 effective 2001. This tax relief will increase over time, as the DTC is fully indexed to inflation.

The list of relatives to whom the disability tax credit can be transferred has expanded to make it consistent with the medical expense tax credit rules. In addition, speech language pathologists will now be able to certify eligibility for the disability tax credit with respect to speech impairments.

Another measure increases the maximum annual amount that can be deducted for child care expenses to $10,000 from $7,000 for each eligible child for whom the disability tax credit can be claimed.

The amounts on which the caregiver tax credit and the infirm dependant credit are calculated are both going up to $3,500. With full indexation, this tax relief will continue to increase over time.

At present, individuals with certain mobility impairments may qualify under the medical expense tax credit for renovation costs that enable them to gain access to, or be mobile or functional within, their home. Bill C-22 includes reasonable incremental costs relating to the construction of a principal residence to help these individuals.

To provide additional assistance to students, the annual exemption for scholarships, fellowships and bursaries received in conjunction with programs for which the education tax credit may be claimed increases to $3,000, up from $500.

I also want to mention that self-employed individuals will now be able to deduct one-half of their Canada pension plan or Quebec pension plan contributions on self-employment income. The remaining one-half will continue to be eligible for a personal tax credit at the lowest tax rate. Without the bill they would be entitled only to the credit on both the employer and employee contributions, which would put them at a disadvantage vis-à-vis owner-operators who can deduct the employer share.

The technical amendments in this bill are too numerous to mention in the short time allotted to me in this debate. However, I would like to highlight a few of them before moving on to the business tax changes implemented in this bill.

On the personal tax side, some of the changes ensure that the rules under which clergy can claim a deduction for their residence are clarified. They also ensure that Revenue Canada can release information about a former registered charity as long as it relates to when the organization was a registered charity.

They ensure that municipalities do not have to file T4s for volunteers to whom they paid not more than $1,000. They also ensure that the exemption applicable to reasonable travel allowances to part time teachers be extended to teachers who do not have other jobs.

The five year tax reduction plan also goes a long way toward making Canada's business income tax system more internationally competitive. This is important because business tax rates have a significant impact on the level of business investment, employment, productivity, wages and incomes.

With this in mind, Bill C-22 includes significant corporate tax rate reductions. Corporate tax rates will drop to 21% from 28% for businesses in the highest taxed sectors, such as high technology services, to make them more internationally competitive. These reductions begin with a one-point cut effective January 1, 2001.

By 2005 the combined federal provincial tax rate, including both income and capital taxes, will drop from the current average of 47% to 35%. This would put our businesses on a more competitive level with other G-7 countries.

Two measures in the tax reduction plan involve capital gains. The first provides a tax deferred capital gains rollover for investments in shares of certain small and medium sized active business corporations. It includes increasing the $500,000 investment limit, originally announced in the 2000 budget, to $2 million as announced in the economic statement and increasing the size of small businesses eligible for the rollover from $10 million to include corporations with no more than $50 million in assets immediately after the investment.

The second measure reduces the capital gains inclusion rate to one-half. This would reduce the tough federal provincial tax rate on capital gains in Canada from an average of about 31% to about 23%, lower than the typical U.S. combined federal state top rate of about 25%. Both measures would improve access to capital for small businesses with high growth potential. High technology industries would particularly benefit.

Consistent with this change to the capital gains inclusion rate, the deduction for employee stock options would increase from one-third to one-half. As a result, employees in Canada would be taxed more favourably on their stock option benefits than employees in the U.S. The bill defers the taxation for certain stock option benefits and allows an additional deduction for certain stock option shares donated to charity.

Another measure that I want to discuss relates to branches of foreign banks operating in Canada.

These new rules stem from the 1999 amendments to the Bank Act, which allow foreign banks to establish specialized, commercially focused branches here. Previously, foreign banks could operate in Canada only through Canadian incorporated subsidiaries.

The tax system for the new foreign bank branches would now be comparable to that for Canadian banks. These new rules would give foreign banks a time limit window to move their operations from a Canadian subsidiary into a Canadian branch without undue tax consequences.

As with the personal tax measures, the business tax changes are too numerous to discuss individually during today's debate. I would like to summarize a few of them.

The bill, for example, provides a tax deferred rollover for shares received on certain foreign spinoffs. It strengthens thin capitalization rules. It phases out over a three year period the special income tax regime for non-resident owned investment corporations. It treats provincial deductions for scientific research that exceed the amount of the SR & ED expenditures as government assistance. It ensures appropriate treatment of foreign exploration and development expenses in computing foreign tax credits. It introduces a temporary 15% investment tax credit for grassroots mineral exploration and it amends the corporate divisive reorganization rules.

Other technical amendments ensure that Canadian corporations that hold shares of non-resident corporations through partnerships are not subject to double taxation. The additional capital tax on life insurance corporations is extended until the end of 2000. Shares of one foreign corporation can be exchanged on a tax deferred rollover basis for shares of another foreign corporation. The tax treatment of resource expenditures and the rules governing gifts of ecologically sensitive land are clarified. In a chain of corporations, a corporation is controlled by its immediate parent, even where the parent is itself controlled by a third corporation. Replacement property rules do not apply to shares of the capital stock of corporations, and a member of a limited liability partnership under provincial law is not automatically a limited partner under the Income Tax Act.

Those are some of the more technical changes incorporated into the bill. There are three remaining measures that I wish to discuss briefly before closing. The first involves changes to the rules governing the taxation of trusts and their beneficiaries.

Bill C-22 addresses the tax treatment of property distributed from a Canadian trust to a non-resident beneficiary. It also introduces measures dealing with the tax treatment of bare, protective and similar trusts, as well as mutual fund trusts, health and welfare trusts and trusts governed by RRSPs and RRIFs.

For example, the existing rules whereby an individual can roll over property to a trust for the exclusive benefit of a spouse or common law partner would be extended to alter ego trusts and joint spousal or common law partner trusts.

Several new anti-avoidance measures designed to ensure that transfers to trusts cannot be used to inappropriately reduce tax are also included in the bill. For example, there would be limits on the use of rollovers where trusts were used to avoid tax when a beneficiary emigrates. Also, income allocations to beneficiaries could not be used by trusts to circumvent the rules ensuring that spousal or common law partner trusts, alter ego trusts and joint spousal or common law partner trusts would not allocate income to others before the beneficiary, spouse or common law partner dies.

In addition, rollovers to a trust would be denied if the transfer was part of a series of transactions designed to defer capital gains through the use of a trust as an intermediary between a vendor and purchaser of property.

A final anti-avoidance measure would prevent certain pre-1972 trusts from using graduated income tax rates if they received property from a trust not subject to these rates, and the beneficial ownership of the property had not changed.

The second measure I wish to highlight involves the new taxpayer migration rules, which are also part of the government's ongoing commitment to greater fairness in the tax system.

Since 1972 Canada has had special tax rules that apply when people give up Canadian residence. The basic entitlement of those rules is a deemed disposition that treats the immigrant as having disposed of property immediately before leaving.

For many years, questions have persisted as to the exact scope of this deemed disposition on departure from Canada and its interaction with Canada's international tax treaties. Under Bill C-22, Canada retains the right to tax emigrants on gains that accrue during their stay in Canada.

The bill would also clarify the effect of the new rules on various kinds of rights to future income and would allow returning former residents to reverse the tax effects of their departure, regardless of how long they were a non-resident.

In addition, former residents would be able to reduce the Canadian tax payable on their pre-departure and distribution gains by certain foreign taxes paid on the same gains. This is part of Canada's commitment to avoiding international double taxation, a commitment that is reflected in our network of tax treaties as well.

Since 1999, in anticipation of these rules coming into effect, Canada has been negotiating its tax treaties to reinforce protection against double taxation when immigrants' pre-departure gains are taxed.

A final measure, deals with amendments to the Income Tax Act that relate to the June 3rd, 1999 agreement between Canada and the United States concerning foreign periodicals.

Since the 1960s the Income Tax Act has precluded the deduction of advertising expenses unless a newspaper or a periodical is at least 75% Canadian owned and has at least 60% original Canadian content.

As a result of the Canada-U.S. agreement, this rule no longer applies to advertisements and periodicals. Instead, advertising expenses and periodicals with at least 80% original editorial content would be fully deductible and advertising expenses and other periodicals would be 50% deductible regardless of ownership.

In addition, after July 1996, the meaning of Canadian citizen will include Canadian pension funds and other entities that own Canadian newspapers to ensure that they qualify as citizens under the ownership requirements of the Income Tax Act. For periodicals, this amendment applies from July 1996 to May 2000, after which time nationality of ownership is irrelevant.

In conclusion, while the bill is lengthy, very detailed and technical in nature, its components are all very important and deserve to be passed without delay. Most are relieving or clarifying measures and a few are housekeeping measures.

As I indicated earlier, each measure is designed with the principle of tax fairness in mind and there are many taxpayers out there who will benefit from these changes. The measure with the highest profile of course implements the key components of our government's five year tax reduction plan. In summary, that plan reduces the tax burden at the middle income level, increases support for families with children and makes Canada's business income tax system more internationally competitive. As I stated earlier, the five year tax reduction plan will provide $100 billion in cumulative tax relief by 2004-05.

I urge all hon. members of the House to give the bill quick and speedy passage and, most importantly, to keep in mind all the Canadian children who will benefit from the increases to the Canada Child Tax Benefit on July 1.

Income Tax Amendments Act, 2000Government Orders

1:05 p.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, congratulations on your elevation to the Chair. I am pleased to rise to debate Bill C-22 which is, as the hon. Parliamentary Secretary to the Minister of Finance has indicated, a very substantive tax bill which appeared before this place in the form of a ways and means motion several days ago in the session. It seeks to give effect in part to tax changes proposed by the hon. Minister of Finance in his economic political statement here before the dissolution of parliament at the call of the election.

Let me say at the outset that the bill before us is a classic example of what has gone wrong with parliamentary oversight of legislation, particularly with respect to taxation. The bill before us has some 513 pages of technical amendments. I can say with a fair degree certainty that not a single member of this place, let alone the parliamentary secretary who just spoke or the minister he represents, has read or will read. It is a bill that exercises enormous power over the lives of Canadians through the Income Tax Act which in itself has coercive powers delegated to it by this parliament. The some 500 pages of amendments in the bill are amendments to a tax act which runs over 1,300 pages long.

Let me remind my hon. colleagues that in the House in 1917, before it burned down, this same parliament passed what was called the temporary Income War Tax Act. It ran all of seven pages. The government of the day of then Prime Minister Borden said that the bill was only necessary for a short period of time to finance the war effort during the great war and that we would be able to repeal it shortly thereafter. This was an income tax which applied only to very wealthy Canadians at the time, people who were in the top fraction of income earners. The vast majority of Canadians were unaffected by it. The politicians said that it was temporary and that would be repealed.

This does not look like a repeal bill to me. This looks like another 500 pages of amendments on top a 1,300 page statute of which I doubt a single person in this country understands the totality. There might be a tiny handful of tax experts in academia or in the Department of Finance who have even a vague grasp of the myriad complexity of the Income Tax Act which we are seeking to amend today. This is a testament to the enormous complexity of the tax code with which Canadians must grapple every day.

That act in 1917 was passed in good faith by parliamentarians and committed to the Canadians, who they were taking money from to finance the war effort, that it would be repealed. It was not. Not only was it not repealed, it was added to, broadened and expanded to bring more and eventually every single working Canadian into its ambit.

Today we end up with an enormous, complex web of tax laws which inhibit the wealth creating potential of this nation which diminishes our productivity. It drives down our competitiveness and undermines the standard of living of Canadian families who are working harder to get ahead but who are falling behind because of the tax act which the bill seeks to amend.

Let me say as a matter of principle on behalf of the official opposition, the Canadian Alliance, that we stand four-square against this huge complex and destructive system of penalizing work, investment, risk taking and wealth creation. These are the very virtues and habits upon which a prosperous and free nation is built. All of those things are undermined by taxation in general and this extraordinarily complex tax system that we have in this country.

A political philosopher once remarked that the power to tax is in fact the power to destroy. It is the power of government to use its monopoly on coercive force to reach out the hand of the state and to take from individuals, businesses and corporations the fruits of their labours. We can never underestimate just how destructive that power can be. We can never know how many small businesses or how many dreams have been vanquished because people were unable to realize their potential and dreams of starting up and operating a successful business because they were unable to keep enough of the fruits of their labours to keep their heads above water. That is what the bill represents.

I am sure the parliamentary secretary who just spoke perhaps does not reflect often on the first principles of taxation. It is important for us every now and then in this place to remember the enormous power that we wield through this taxing power. We do so somewhat recklessly. As I suggested, I am certain that not a single member of the House has now or will read the entire bill.

I tried to make my way through as much of it as I can. I consulted the experts in the finance department. I received the bill a couple of days ago and I am supposed to stand here on behalf of the official opposition, which has a quasi constitutional obligation to be the watchdog of the government particularly with respect to issues like this, and provide a thorough, detailed, thoughtful analysis and assessment of the bill, when these 500 pages of technical amendments were just delivered to us.

I know for certain that the finance minister not only has not read the bill, he is likely at best vaguely familiar with the impact of the amendments contained herein.

Even though the official opposition will vote against it for a number of reasons, this will undoubtedly go on to the finance committee which, I predict, will have fairly brief hearings because none of the members will be able to penetrate the impenetrable complexity of the Income Tax Act.

Well meaning and very bright officials from the Department of Finance will appear before the committee to explain and analyze, as best they can, the impact of the bill. The committee members, who were elected to represent the best interests of their constituents and to uphold any parliamentary oversight and scrutiny, will have to take the bureaucrats at their word and then the bill will come back to this place and be passed.

Members will not understand what they have passed because of the complexity of the act. That is a very serious concern, but it does not need to be that way. In a more functional democratic institution, the American congress for instance, both the upper and lower houses have ways and means committees with independent legislators and adequate staff resources. The staff of those committees have become experts on the complexities of tax legislation and are able to frame and craft bills of this nature with a real understanding of what they are doing. The U.S. congress has specific committees to deal with taxing power and taxing legislation.

As a result, congress and the people it represents have the benefit of real, serious, substantive democratic oversight and input into tax legislation. We only pretend to have such input in this place because of the dysfunctional nature of parliament and the complexity of the Income Tax Act.

How do I know that is the case? How can I prove that the consideration of tax legislation does not work in this parliament? It is very simple. This bill, and at least three other bills before the House right now, include amendments to tax legislation that seek to undo the drafting mistakes of previous bills passed by parliament. It is unacceptable that we waste the valuable time of parliament time after time by undoing mistakes made in the drafting of legislation. Those mistakes were not identified by members of parliament because they do not have the expertise, the time or the resources. What is the point of digging down into the depths of a bill if it will be passed anyway?

We do not have time to ensure at a meaningful level that the bureaucrats have it right. The minister does not do that. He receives draft legislation from bureaucrats, rubber stamps it and sends it to parliament. We ought not spend time correcting the errors that drafting officials and bureaucrats have made. If we had more serious parliamentary scrutiny, oversight and involvement in the development of tax legislation, and a tax code which made sense to ordinary taxpayers, we would not need to constantly revisit bills such as the one before us.

For those reasons my party stands four square for the reform and simplification of the tax code. I will quote from the Canadian Alliance policy declaration. It was not dreamed up by any one person. It was the result of a grassroots, bottom up democratic process. Our members agreed that:

We will restore public confidence in the fairness of the Canadian tax system by reducing its complexity. We will restore indexation and move towards a simpler tax system, built around—

This is a novel concept for a government which likes to play the politics of envy and class warfare. It continues:

—a single rate of taxation to ensure lower taxes for all Canadians. We believe that all Canadians above a minimum income level should share in the cost of the services provided by government, which benefit us all.

That is what we seek to do.

The hon. parliamentary secretary suggested the bill would give effect to what he called, disingenuously, the largest tax cut in Canadian history. That is absolutely bogus. He argues the bill would give effect to the political statement made by the finance minister in October.

Let me give credit where it is due. After seven years of advocacy in this place by the Reform caucus and then the Canadian Alliance that tax relief be our nation's highest economic priority, and after millions of Canadians demanded to see a little more of what they earn and said they were fed up with Liberal tax increases, the finance minister, days before an election, finally came forward with some modest tax cuts.

However they are not real tax cuts for real people. I challenge people to take the paystub test. People who watch the debate in this place see me and my colleagues stand to demand the finance minister cut taxes and they see him stand to say he has already done so. How are people to know which of us is telling the truth? I have a very simple test.

Income Tax Amendments Act, 2000Government Orders

1:20 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I rise on a point of order. I need some clarification. The member said his party supports a single rate of tax, and yet in the last election it did not even include it in its platform.

Income Tax Amendments Act, 2000Government Orders

1:20 p.m.

The Deputy Speaker

With the greatest of respect, if I looked high and low, nowhere would I find anything in that statement resembling a point of order.

Income Tax Amendments Act, 2000Government Orders

1:20 p.m.

Canadian Alliance

Jason Kenney Canadian Alliance Calgary Southeast, AB

Mr. Speaker, not only was it not a point of order. It was completely inaccurate. Our platform included a policy for a single rate of tax.

I will make clear what I was saying. People are confused by competing claims about whether taxes have been cut. They can be the arbiters. They have very simple documentary evidence to adjudicate the test. It is called their paystub.

I invite everyone listening to or watching the debate to look at their paystubs and compare them to the paystubs for the same week or month last year. They will see that the supposed Liberal tax cut for this year was actually a tax increase. It is bogus.

When we combine the impact of Bill C-2 regarding Canada pension plan payroll taxes, which was passed during this fiscal year by the previous parliament and is the largest tax increase in Canadian history, with the myriad of other tax increases imposed by the government and the snail's pace at which its modest tax cuts will apply, Canadians at most income levels will find they are paying more than they did the year before.

If they are not, it is because of the foresight of provincial governments. Provincial taxes in Ontario and Alberta have gone down, thanks to the leadership of people like Mike Harris and Ralph Klein, but federal taxes have stayed the same or gone up.

The finance minister and his parliamentary secretary claim the bill includes $100 billion of tax relief. A nice round figure like that is like pricing something at $9.99 in a department store. The finance minister was told by campaign officials to get the number up because he needed a nice, big round number to talk about in the election. They decided it would be $100 billion. It is nothing of the sort.

The government claims $100.5 billion of gross tax relief in the bill and $3.2 billion of that is an increase in spending. The government has taken the Canada child tax benefit, which is an entitlement program and a spending program, and booked it as a tax cut. Once again the paragons of clean accounting in the government opposite are misleading Canadians.

Then there is the $29.5 billion by which the government increased the Canada pension plan payroll tax. The government, after enormous pressure from this party, from the Canadian Taxpayers Federation and from the Canadian people, finally decided to stop the insidious back door tax grab on inflation known as deindexation. Under deindexation people were bumped into higher tax brackets and paid more taxes. They did so because they were getting cost of living adjustments and not because of any real increase in income.

The Canadian Alliance objected to deindexation. Finally the government responded to our objection and stole our policy by agreeing to reindex the tax system, but not retroactively to 1986 when the Mulroney government deindexed the system.

Let me say parenthetically that the Liberal Party in the 1988 and 1993 elections ran against the Tory Party, and rightfully so, for having deindexed the tax system in 1986. However when it finally came to setting things right, did the Liberals give back the money that had been stripped out of people's wallets by taxes and inflation since 1986? No, sir. They reindexed. They did not give back the some $9 billion that people had lost to deindexation.

The Liberals say they will adjust tax brackets, exemptions and credits upward to account for the consumer price index so that they no longer impose a tax on inflation. That is good. However they count that as a tax cut. In other words, the government counts a non-increase as a cut. They tell Canadians they will not tax them on inflation and that Canadians should be grateful it will be counted as a tax cut. There are accountants in this place who would find that pretty specious. The government has declared $21 billion worth of specious, non-existent tax cuts which are merely non-increases.

When we add all that up, the real total net tax cut in the government's bill is $47 billion over five years. That is about half the tax relief proposed by the Canadian Alliance over five years based on comparable accounting. It is a fraction of the tax relief proposed by U.S. President Bush of $1.6 trillion to $2.3 trillion, depending on how we count it, over 10 years for a country with taxes that are already lower.

That would not be such a problem if Canada had its tax burden under control. However it does not. Revenues to the federal government last year were at their highest level in history. The government is bigger in terms of the money it hoovers out of people's wallets, purses and small business tills than any government in the history of the dominion. Personal income taxes in Canada consume a higher percentage of gross domestic product than in any other nation in the G-8. At 17.6% of GDP we have the highest personal income taxes.

According to a recent study by Price Waterhouse that was published in The Economist , Canada has the highest corporate income tax rates in the OECD, the Organization for Economic Co-operation and Development, the 23 principal industrialized countries in the world. Of those 23 countries, yes, we are number one when it comes to business tax rates.

When we look down the line, we see that none of this will change under the bill. When the tax cuts here have been fully implemented, and after the Bush tax changes have been implemented in the U.S., Canada will still have income taxes far higher than those of the United States and our other principal competitors. That is having an impact on our competitiveness and our standard of living. We know that.

We know that Canadians are working harder now than they ever have and are falling behind. We know we have an increase in the brain drain: the loss of talent and human capital to the United States and other jurisdictions, in large part because of the tax burden.

We know that Canada has fallen from second to 16th place in the OECD in terms of our standard of living over the past 15 years. We went from the second highest per capita GDP to the 16th, to the middle of the pack. Over the past 10 years, by comparison, Ireland leapfrogged over Canada in terms of its growth in per capita GDP, which is the best measure of increases in the standard of living, in large part because it provided huge tax incentives.

A member opposite said that it was because of something other than tax relief. My brother moved a company with 30 very well paying jobs to Dublin because of the tax cuts offered in Ireland and the huge advantage it offers over Canada.

This is not an agenda that would restore the competitiveness of the nation. It would continue to impose on Canadians an enormous burden of taxation into the future.

The bill would do a number of other things to which we object. First, there are a couple of elements which do step in the right direction. Reducing the inclusion rate on capital gains to 15% is something that should have happened a long time ago. We would like to see that inclusion rate go down to 33 1/3% so that we stop penalizing people who invest their whole lives in a business or in a property. This is a form of a death tax. We work hard our entire life, we invest in a business or property and we look forward to passing that on to the next generation. We, as individuals, may not take any benefit from it, but guess what? The moment we die, the Government of Canada comes in with deemed capital gains, which is really a form of estate tax or death tax, and grabs one-third of our lifetime earnings that were in that investment. That is wrong. We should not penalize people's lifetime investments. We should not diminish their abilities to pass on to the next generation their life's savings as we do through deemed capital gains.

There are a number of technical changes in the bill. One of the technical changes with which we have a great deal of trouble is the fact that the bill would continue the unfairness with which single income families with children are treated under the tax code.

The House will recall that this was a very hot issue at one point in the last parliament. The Secretary of State for International Financial Institutions, in response to a question I put to him about why the government discriminated against single income families with kids and why there was as much as an 80% tax penalty for those families versus their dual income counterparts, stood in his place and said that the government discriminated against single income families because they did not work as hard or have as many expenses as the double income families. That was pitting one kind of family against another.

As we said then and I say now, let me inform the secretary of state that moms and dads who stay home to raise small kids, to care for the elderly and the infirm, and to build families and homes, work just as hard, if not harder, as those of us in the paid workforce. They deserve and demand our respect and fairness in the tax code.

The current tax code's discrimination against those families must be eliminated and fairness must be brought in. The Canadian Alliance has proposed, among other things, equalizing the spousal or equivalent to spouse basic exemption with the basic personal exemption.

Under the bill we would have two classes of citizens: those who are primary income earners and their spouses. They have equal worth and that worth should be reflected in the tax code by a spousal exemption equal to the basic personal exemption. That would not done here. We would continue to penalize the stay at home parents.

We would raise that exemption from $8,000, which it will eventually get to pursuant to this bill after several years, to $10,000. That would lift hundreds of thousands of working families off the tax rolls so that instead of giving money to be misspent by the government they could invest it in their own priorities, their own children and their own homes.

We would bring in a child tax deduction. We would provide a deduction of $3,000 per child so that families with children would be able to keep more of what they earn to reflect the costs of raising kids.

What does the government do? Absolutely nothing of the sort. To the contrary, the bill before us raises the so-called child care expense deduction from $7,000 to $10,000. This is another piece of discrimination because only certain families would get to claim the child care expense deduction. Only those dual income families with receipted child care expenses could make use of it. Only 17% of tax filers could claim this deduction, and even a smaller fraction could claim it to the full amount.

If a mother with three children is the main income earner and the father decides to stay home until the kids are in school, the tax code says that the dad's work at home cannot be deducted. The tax code says that it has no value to society and therefore will not be recognized. However, if a parent decides instead to earn a second income and drops the kids off at a day care on the way to the second job, the federal government will give recognition for the third party costs of child care. The at home costs, the opportunity costs, the forgone income and the real financial costs of raising children at home are recognized nowhere.

It is intolerable that we should be increasing discrimination against single income parents. We will oppose the bill on that ground alone.

The bill includes an element which further erodes parliament's recognition of the unique and important role and status of the institution of marriage in our society and culture. It does so by bringing forward further amendments to change any reference from spouse to common law partner.

This is a change which was begun in a bill amending the Income Tax Act in the previous parliament, but in one of the many drafting errors to which I referred earlier the officials neglected to amend certain sections of the bill, saying that in various sections reference to spouse as part of the institution of marriage has been abolished for all intents and purposes from the Income Tax Act. It is an institution which in this and every other society I know of has been given certain privileges because it is the basis of the family, the basic institution of society.

We have said from time immemorial that the institution of marriage should be given certain preferences and privileges to protect the family. The bill would further erode the distinctiveness of that institution by saying common law partners, not spouses.

We as a parliament or as a country should not be ashamed of declaring that the spousal commitment in the covenant of marriage is a fundamental contractual relationship in the development of strong and healthy families and that they are necessary to having a strong and healthy society.

That is another reason we oppose the bill. It further undermines and weakens marriage as an institution.

There are a number of other provisions in the bill which the Alliance finds objectionable. It does include certain technical changes to which we do not object. Here is an interesting one: the foreign actors' tax credit. Most people may ask what that is all about. It turns out that we currently withhold 15% of the income of Hollywood actors who come to Canada to act in Hollywood movies. We then reserve the right to force them to file a tax return and tax them even more.

The Hollywood movie actors have been shedding crocodile tears about this unfair tax treatment by Canada. The same government which cannot find the fiscal room to help out single income families, has decided to give millionaire Hollywood movie actors a tax break in the bill. Lo and behold, Sylvester Stallone and Bruce Willis will be at the front of the line when it comes to tax relief from the government. Single income moms and dads can stay at home without fairness.

The government would do this by raising the withholding tax from 15% to 23%, a very modest increase, but then it says that the actors would not have to file returns beyond that. These are people making millions of dollars at the highest possible marginal rates.

My office staff called the movie producers, the Hollywood actors, the actors' guilds and so on to hear what they thought of this move by the government. They were in favour of this because it would be a big tax cut for the millionaire Hollywood movie stars. They said that if we did not make this change, they might not keep coming back to work in Canada. I find it very odd when I look at the priorities that the government has for tax relief.

We in the Alliance have talked about raising the basic exemption for individuals and spouses, or equivalent to spouses, to $10,000. We talked about introducing a $3,000 deduction per child. Let us just figure out what that means. If we had a Canadian Alliance government, it would mean that a family with two parents and three kids would pay no taxes on their first $29,000 of income. It would mean that a single mom could give her first child the equivalent to spouse deduction of $10,000, so that a single mom with two kids would have $23,000 tax free.

These measures would lift 1.4 million low income Canadians off the tax roles altogether, giving them a hand up so they could get ahead. It would stop penalizing them for earning that small incremental income to try to get ahead economically. The government does nothing in the bill to lift Canadians off the tax roles.

When our party came out with its bold and powerful proposal to eventually get to a 17% single income tax rate and lift 1.4 million low income people off the tax roles and to restore and create family tax fairness, the government said that it looked popular. It said that it was testing well in the polls so it had better try to outflank the opposition. What did it do? It came up with a new basic rate of 16% in the bill and thought that Canadians would be fooled by that because, after all, 16% is lower than 17%.

Yes, it is. However, for the people, for whom it matters, those at the lowest income levels, there are no increases in the basic exemptions and deductions. Those are far more generous. What the Liberals want is for a single mom working as a waitress to pay 16% of her paltry income. Our plan would say that a low income individual would pay no taxes at all because we want that individual to get ahead through higher deductions and exemptions at the bottom end of the tax system.

In closing, I encourage the government to think about the enormous complexity of the Income Tax Act and the destructive effect it has on our economy and our society. It should think of the tens of thousands of bright, young Canadians, whose educations we subsidize, who leave the country every year to pursue their economic opportunities elsewhere in large part because of diminished opportunities and our tax system.

I want them to think about the low income working families, the single moms and the seniors on fixed incomes who are forced to pay taxes today. I want them to join us in dreaming about creating a tax system which is simple, fair and low, which rewards risk taking, investment and productivity and which rewards the virtues upon which a prosperous society is built.

I want to invite them to join us in the opposition in proposing a tax system that lifts the low income people off the tax rolls, that puts the family first and restores fairness to the tax system and that stops the beggar thy neighbour, class warfare politics of envy approach, which informs the so-called progressive tax system that penalizes people who succeed, work hard and get ahead.

I invite them to do all of those things by opposing Bill C-22, a bill that once more adds yet another destructive layer on to the tax act which was first passed in this place in 1917. I hope they will join us in doing that and working together to create an economic environment of opportunity which rewards risk taking, saving, investment and hard work. That is what Canadians are asking for and that is what we are fighting for by opposing the bill.

Income Tax Amendments Act, 2000Government Orders

1:45 p.m.

Bloc

Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, I am pleased to rise to speak to Bill C-22 implementing certain provisions of the latest budget of the Minister of Finance.

I can say right away that we will oppose this bill, because we have repeatedly criticized, not only during the course of the regular budget of March 2000, but also when the Minister of Finance tabled his mini budget in the fall, the fact that the huge tax resources at his disposal over the next five years were being badly used.

When we speak of huge tax resources, the situation has not changed, even with the prospect of a downturn in the States. We will return to this later. In the next five years, even taking into account a downturn in the economy in fiscal 2001-02 linked to that of the States, the Minister of Finance will have some $135 billion in surplus.

That is a lot of money, $135 billion. It is slightly down from what he anticipated last year in fact because of the American situation. Last year, the talk was of $147 billion or thereabouts. Now the figure cited is $135 billion. However, the possibility of making choices around these huge surpluses remains essentially the same.

The Minister of Finance is faced with a situation in which, through various unfair measures he created, on the backs of just about everyone, annual surpluses that will reach record levels in the next five years.

He has accumulated these surpluses and will continue to do so on the backs of the unemployed. He will take from the employment insurance fund between $5 billion and $6 billion annually to create his budget surplus. Five to six billion dollars a year will be taken from the contributions by employers and employees, contributions which have nothing to do with those of the federal government. The government has not contributed to this fund for a number of years, but still takes $5 billion to $6 billion annually from it. It is shameful.

In recent years, the Minister of Finance has taken $38 billion from the EI fund surplus. This money came from the pockets of employers, workers and mainly the unemployed. What must be kept in mind is that, if the surplus in the EI fund is accumulating as rapidly as it is, it is because of two things: first, employer and employee contributions are too high, and second, the majority of people who are out of work are excluded from the plan.

I remind hon. members that only 43% of people who end up unemployed are in fact eligible for employment insurance. Corrective measures by the government will remedy some of this, but only a tiny portion, not all of it. Despite the improvements made by the bill on employment insurance, most of those who are left out will continue to be.

Year in, year out, the Minister of Finance is going to continue to pocket at least $5 billion of the $6 billion EI fund surplus to add to his budget surplus and to look good, as well as to be able to give tax cuts to the richest members of Canadian society.

As well, we must not lose sight of the fact that the Minister of Finance created this surplus, and will continue to add to it, at the expense of the provinces.

For six years now, the Minister of Finance has cut transfer payments to the provinces for the funding of education, health and income security. This was money that the provinces did not have, year after year, to meet their citizens' needs.

The surplus is in Ottawa, while the needs are in the provinces. The health sector needs money, and the Minister of Finance had plenty. Last year the Minister of Finance did restore some funding, but year after year they are still some $2 billion short of what is required to cope with changing health costs, caused in large part by the aging of the population. Over the next five years, the shortfall in transfers will total $10 billion.

Given the greying of the population, we know there will be a natural increase of 3% in health requirements, in Quebec and elsewhere in Canada. This increase is solely because of the fact that the population is aging. The Minister of Finance has not taken this phenomenon into account and the surplus continues to accumulate in his coffers.

This year again, in spite of the downturn in the U.S. economy, the Minister of Finance will have a surplus of about $18 billion to $20 billion. It is easy to have such surpluses when one does nothing and makes the provinces do the work by cutting transfers, by not indexing in view of the urgent needs in health and education, and by shamelessly dipping into the employment insurance fund. It is easy to accumulate surpluses under these circumstances.

We believe that with the surpluses for this year and the four previous years, the Minister of Finance could do a lot more than what he intends to do under his five year plan. He is in a position to target groups that need help. The Minister of Finance intends to give major tax cut to those who earn $250,000 and up.

From this year on, those, and there are not too many of them, who earn in excess of $250,000 and others such as millionaires and billionaires will enjoy significant tax cuts. They will get about 70% of all the tax cuts planned by the Minister of Finance. If a person is earning $250,000 this year, he is lucky because he will get the largest tax cuts, because of the changes related to the partial inclusion of capital gains, because of tax cuts as such, or because of indexation. These people will get at least $9,000 to $11,000 in tax cuts.

However, a single parent with dependent children is not so lucky, because he or she will only get about $250 in tax cuts this year. Talk about equity and social justice.

Under our proposals, with the same tax resources the Minister of Finance has estimated for the next five years, we in the Bloc Quebecois would have taken measures to ensure that starting this year families earning $35,000 or less would not pay any taxes. Everyone else would have benefited from a 50% tax break. That is what I call being progressive. That is what I call dealing with the needs of the people, the real needs of the people.

The Minister of Finance could have diverted his resources to the majority of taxpayers, as we have done. Nine out of ten taxpayers would have benefited from a tax break under our proposals, not just 1% of all taxpayers, the richest taxpayers in Canada and partisans of the Liberal Party and our millionaire friend, the finance minister, but nine out of ten, that is 90% of taxpayers.

If we can come up with these proposals using the same basic figures as the Minister of Finance did, why has he not redirected his policies?

With the estimated tax resources for the next five years and despite the downturn in the U.S. economy, because we adjusted our estimates accordingly, the Minister of Finance could have used $5 billion of the $6 billion EI surplus every year to improve the system, raise the benefits and expand the system to include the 57% of the unemployed who do not currently qualify.

Seasonal workers, women and especially young workers who are particularly hard hit by the vicious employment insurance system could have benefited this year from decent EI benefits.

Why are we able to come up with a scenario whereby each year $5 billion stays in the EI fund to help young people, women and also families? We are talking about a good parental leave plan in Quebec City, not the useless kind of plan being proposed to us. With our forecasts with regard to surpluses, why are we able to do all these things? It is because we in the Bloc Quebecois believe that our first duty is to serve the most disadvantaged, those who belong to the middle income category, those into whose pockets the federal government has been dipping since it came into office in 1993.

Let is not forget that these nine taxpayers out of ten, to whom we wanted to give tax cuts considering the huge surpluses that will accumulate in the federal government's coffers, are the ones who pay the biggest share of taxes. Indeed, the federal government gets most of its tax revenues from families in the $25,000 to $80,000 a year income range.

With all these surpluses, the federal government is not thinking about those families. It is not thinking about those who have been taxed to death these last few years. It does not want to ensure that they benefit from these surpluses, but it wants to ensure that millionaires do. That is the kind of social justice practised by this government.

Let us not even talk about social housing any more. It is not a priority for this government, as evidenced by the fact that it has not invested a cent in this area since 1993. Yet, the needs are enormous. Since that year, the number of families spending more than 50% of their income on housing has almost doubled. If one spends 50% of one's income on housing, it means that there is only 50% left to buy food and clothing for one's self and one's children.

Income Tax Amendments Act, 2000Government Orders

1:55 p.m.

The Speaker

I am sorry to interrupt the hon. member, but he will have 28 minutes left to conclude his remarks after oral question period.

Points Of OrderGovernment Orders

1:55 p.m.

The Speaker

Before beginning Statements by Members, I have something to say about the point of order the hon. House leader of the Bloc Quebecois raised yesterday concerning the Prime Minister's reply to a question posed by the hon. leader of the Bloc Quebecois on March 21, 2001.

The hon. member for Roberval alleged that the office of the Prime Minister had improperly intervened with the publications process to change the reply given by the Prime Minister as it appeared in the blues so that it read substantively differently when printed in Hansard . Specifically, he said that the phrase “nous n'avions pas d'intérêt financier” was changed to “nous n'avions pas de parts” and that this constitutes a substantive change that is unacceptable under our usual practices.

I have now had an opportunity to review all the pertinent information on this case: the video tape of the exchange, the blues and the official Hansard , and I asked for and received a report from my officials on this matter. This is what have I learned.

The videotape of the exchange shows the Prime Minister's reply, with the phrase “nous n'avions pas de parts” just as indicated in the official Hansard .

However, that portion of the tape is admittedly hard to understand and the reply may have contained some additional words that remain unclear in listening to the tape. It appears that the transcriber preparing the blues, faced with a difficult portion of the tape to decipher, sought, as is often the case, the context of the question in the words of the questioner. So, the words “nous n'avions pas d'intérêt financier” appear in the blues, which, I remind hon. members, are the unedited transcript of the first take on transcribing events in the Chamber.

The change from the phrase in the blues “nous n'avions pas d'intérêt financier” to the phrase in the Debates “nous n'avions pas de parts” was made by the Hansard editors as a result of their listening to the tape and coming to the conclusion, as I invite members themselves to do, that this was the accurate transcription of the phrase used in the Prime Minister's reply.

I am satisfied that there was no impropriety here and no interference with the usual practices concerning the preparation of the official record of House Debates . I thank the hon. member for his intervention.

I therefore conclude that the allegations of the member for Roberval are without foundation and the matter is closed.

Government Of QuebecStatements By Members

2 p.m.

Liberal

Guy St-Julien Liberal Abitibi—Baie-James—Nunavik, QC

Mr. Speaker, the Premier of Quebec, who was appointed by only 203 Pequistes, said that the dollars are in Ottawa, while the needs are in Quebec.

However, Mr. Landry and PQ members made no mention of the studies of Richard Le Hir on sovereignty, which resulted in a major fiasco for the Parti Quebecois, then led by Jacques Parizeau.

Quebec's treasury is full of money. This year an additional $953 million will come from Ottawa under the equalization program and another $500 million next year. Quebec has only allocated $10 million out of the $730 million that it invested in eight non-profit organizations, and it will get an additional $1 billion in federal transfers this year for health, also let us not forget the $840 million treasure still sitting in a trust in Toronto.

What Quebecers really want is not a referendum, but substantial tax cut and the elimination of the indexation of provincial tax tables, just like the federal government did.

HealthStatements By Members

March 27th, 2001 / 2 p.m.

Canadian Alliance

Kevin Sorenson Canadian Alliance Crowfoot, AB

Mr. Speaker, last week I rose in the House reiterating the concerns being expressed by my predominantly rural riding regarding foot and mouth disease. The letters and calls have not stopped and fears have not been abated as British soldiers continue to be deployed to military camps such as Wainwright, Suffield and Cold Lake.

Hopefully there will be some appeasement given news reports indicating that no British soldiers who have assisted civilians in the United Kingdom with the disposal of carcasses are being sent to Canada and that stringent precautions such as submerging shoes and other personal items in disinfectant are being taken.

I am putting the ministers of defence and agriculture on notice. The cattle industry is the lifeblood of many of my constituents. The economic vibrancy of Alberta depends significantly on a healthy cattle industry.

The ministers must therefore do everything possible to stop foot and mouth disease from invading the country. They are responsible for safeguarding the livelihood of my Crowfoot constituents.

AutismStatements By Members

2 p.m.

Liberal

Jean Augustine Liberal Etobicoke—Lakeshore, ON

Mr. Speaker, I wish to support my constituents, Margaret McIntosh and Karen Taylor, in bringing to your attention the situation of families who are caring for autistic children.

Autism is a neuro-developmental disorder affecting communication, socialization and behaviour. Statistics indicate that 1 in 200 children have a form of autism, an increase of over 500% in the past 10 years. Parents are in desperate need of services and support.

Margaret and Karen look to the Geneva Centre for Autism for the necessary support and services. The centre cannot do it alone and therefore has to seek financial assistance from the community. I congratulate the Geneva Centre and encourage support for its very important work with autistic children.