Mr. Speaker, it is with pleasure that I rise today to speak on Bill C-22.
These amendments to the Income Tax Act represent a collection of baby steps, some of which are in the right direction. Some represent a significant further complication of an already far too complicated tax code. Most represent politics and the triumph of politics over public policy.
If we look at the general direction of these tax measures, we will find that there is no general direction to the these measures. In fact, they resulted from a flimsily put together pre-election document, sometimes referred to as a mini budget. It is referred to as a mini budget but I suggest it reflects the government's mini vision of Canada.
The fact is these baby steps, these tinkerings, these policies do not reflect what Canadians need and are particularly not what the tax code needs. We need a significant level of tax reform in Canada. Tax reform can be used as a vehicle for economic growth. Instead of making tax tinkering part of its pre-election policy, Canadians would be better served if the government was to utilize tax reform as a vehicle for long term economic growth. That would benefit all Canadians and improve our competitiveness globally. These tax measures do not do much to provide for greater long term competitiveness for the Canadian economy.
If we look at the government's record since the election in 1993 relative to international confidence in Canada's economy, the most damning reflection or gauge by which to judge the government is our falling dollar and the fact that under this government our dollar has lost over 11 cents of value. That is the dollar reflects the share value of Canada Inc. Under this government we have seen an 11 cent decline in our country's dollar.
Every time there is a loss in the value of the Canadian dollar in comparison to the U.S. that leads to a pay cut for every Canadian. We depend greatly on the goods and services we consume from our neighbours to the south. A loss in the dollar represents a direct loss in our standard of living and ultimately in our quality of life in Canada.
The tax policy and fiscal policy provide a very important key to providing long term strengthening of the dollar. The government refuses to discuss the falling Canadian dollar under the guise of deferring to the Governor of the Bank of Canada and his responsibility over monitoring policy. Fiscal policy levers in the long term are as important as monetary policy levers in providing long term strength to the Canadian dollar. The importance of fiscal policy, that is tax and debt policies and strategic spending policies to the long term strengthening of the Canadian economy, is where the government's record has been a less than impressive one.
Some of the types of tax reform measures that we would like to see and that would make a great deal of sense are those that address some of the most pernicious and uncompetitive natures of our Canadian tax burden. One is our capital gains tax.
Even after there was some tinkering in this economic statement and some reduction of capital gains taxes, we still have a higher tax burden in capital gains than the U.S. For the government to eliminate personal capital gains tax would cost the federal treasury about $4 billion a year. This would put us ahead of the U.S. in a very important area of taxation, particularly in areas of new economy, biotechnology and in some of these other areas that are emerging.
In terms of encouraging new economy venture investments, particularly during a time when market conditions are so turbulent and we need to try to provide whatever incentives we can to maintain early investors' interest in these areas, the elimination of personal capital gains tax would provide a great incentive for Canadians to invest and help continue to grow the economy.
It would be even more important now than it was a few months ago as we see the economic downturn that we are experiencing in Canada, in the U.S. and indeed globally at this point. It becomes even more important in some areas. I have referred in a specific sense to capital gains taxation. It is even more important now that we try, for once, to be ahead of the U.S. as opposed to constantly trying to keep up and in fact always being a couple of steps behind. That is one area where we would have liked to have seen a more dramatic and visionary step as opposed to the tinkering the government has done.
The fact is that most of these tax measures occur over a five year period. If hon. members look at the degree to which these tax reductions will impact Canadians in the short term, it is actually much less than what the government would like Canadians to believe, particularly when combined with the payroll tax hikes that became effective recently with the CPP payroll tax hikes. It is clear that the net tax benefit or the net benefit to Canadians in a take home pay context is minimal or in fact none if members again take into account payroll taxes.
Whatever way the government would like Canadians to view these measures, it will become painfully obvious to Canadian taxpayers when they are receiving their cheques and with their tax deductions that these measures have been half measures and have not really addressed the fundamental issues of high taxes in Canada. Canadians have the highest income taxes in the G-7 and the second highest corporate taxes in the OECD. Even after full implementation of these tax measures over a five year period, we would still end up having about the third highest corporate taxes in the OECD. That is assuming that none of the other countries reduce their tax burdens, and we already are aware that at least seven of them are entertaining and moving toward lower taxes.
Even as we see a slight narrowing of the gap between Canada and the U.S. in terms of tax burden in the short term, we see the U.S. now introducing the largest tax cut in its history. The tax cut is being negotiated currently and is making progress through congress. We are still behind. The mini budget introduced prior to the last election did not do much to get us caught up to the U.S. economy in the current context and yet we are now going to see, under President Bush, a leapfrogging further ahead. Again, Canada will be further behind.
A recent report from the Fraser Institute drew, in a convincing way, a direct linkage between Canada's low dollar and Canada's systemically high levels of taxation on all fronts. We have yet to see a firm commitment from the government, not just on tax reform as a vehicle for long term strengthening of the Canadian economy, but also for debt reduction. Debt reduction, when we have approximately four times the per capita debt of the U.S., should be a much higher priority than the government has made it.
In fact, many of these tax reduction measures are simply spending measures in the form of targeted tax cuts. Rewarding a particular kind of behaviour is nothing more than spending. It is another way to encourage people to do something that they may not do otherwise. People end up making decisions based on tax policy as opposed to what makes sense from a business policy, from an investment policy or from a personal perspective.
The fact is, this mini budget, this pre-election document, was far from what Canadians needed in the most turbulent February we have seen in the last seven years. In the last seven years there has not been a worse February for the government to avoid having a budget in than this last February, when the government ducked the issue and decided arbitrarily not to have a budget.
The fact is, Canadians, particularly with the difference in the economic conditions between the time when the mini budget was introduced and today, need a budget more than ever. Whether it is the decline in the global capital markets or the dramatic declines in the TSE, the NASDAQ and the New York stock exchange, Canadian investors and individual Canadians have seen their retirement savings diminish sharply in recent weeks. At the same time, they are seeing their standard of living decline because of a weakening dollar. There is a significant and reasonable concern among Canadians which should be addressed, not through an economic statement in the spring and not through a state of the union address which the finance minister has talked about providing, but through a full budget.
It is also offensive from a democratic accountability perspective, because this parliament, with its new members in some cases, has not actually been asked to approve a budget introduced after the last election. There are a number of new members of parliament in the House and government spending and government estimates ultimately should be accountable to this place, to parliament. For the government to determine that it is not important to engage parliamentarians in the approval of government spending and tax policy through the support of a ratification of a budget in the House is really and truly offensive.
There are a number of reasons why we have concerns with the government's policies, with its tax policies and general fiscal policies. However, these concerns are not just our concerns. These are concerns shared by many Canadians, particularly by some of Canada's top economists. We are seeing a unified front from Canada's economists relative to the lackadaisical approach of the government on specific tax policies. In the words of Terence Corcoran, a journalist, “If weak currency created growth, Canada would be a world leader”.
The Prime Minister once said that a weak dollar is actually good for tourism. I think this indicates his economic naiveté but also his genuine belief that a country can devalue its way to prosperity. The fact is, a weak dollar is no way to guarantee long term growth and an increase in the standard of living of a people. In fact, it is quite the contrary. If the Prime Minister's argument is correct, that somehow reducing the dollar can improve tourism, let us think about this. The logical corollary of his argument is that if we would reduce the dollar to zero ultimately we could become the largest exporting nation and the most successful exporting nation in the world. Of course we would be giving away our products.
The finance minister said in 1990, I believe at the time when he was running for the Liberal leadership the first time, that he would, if given the opportunity, manage the dollar's decline down to its natural level of about 78 cents to 80 cents. He has done so well that he has managed the dollar's decline down to the 63 cent range.
Canadians are asking a legitimate question. They want to know why the finance minister is not doing more to strengthen the intrinsic value of the Canadian dollar as opposed to accepting its decline. Is it that the Liberal government has accepted that currencies such as Canada's will in the long term be marginalized and that the best way to get rid of the independent Canadian dollar is to simply euthanize it, to let it wither on the vine and let it decline to such a level that Canadians will say, as they have already started to say, they would be better off with a common North American currency?
I do not believe we would be better off with a common North American currency. To give up our monetary policy levers would be a mistake. If we give up our floating currency with the U.S., there needs to be another operative mechanism to reflect things. For instance, the commodity crisis that occurred about two years ago in Asia would have manifested itself not in a reduced Canadian dollar at that point, but in higher levels of unemployment. Without the floating Canadian dollar, I would argue that the operative mechanism that would reflect differing levels of productivity or commodity price valuations would be unemployment rates. I am concerned about the notion of losing that very important tenet of economic sovereignty that is the independent monetary policy and the Canadian dollar.
Why would the government watch over the decline of the Canadian dollar and not defend it? If we in this place do not take steps to strengthen the Canadian dollar in the long term through more aggressive and innovative tax and debt reduction policies and more innovative tax reform packages, and if we do not deal with this in a more forward thinking and visionary way, we and certainly the government will have to accept the blame for the Canadian dollar withering on the vine.
At some point, and I am not sure when it will be, if we continue to see the cyclical decline of the Canadian dollar, Canadians are going to ask why we have an independent currency. I do not want to see us get to that stage and I am concerned that we are precariously close to that position right now.
With a government that has seen the Canadian dollar drop by over 11 cents under its seven year term, it is important to remind the government that under the previous Mulroney government the dollar lost only one cent during the same period of time. If the value of a country's currency reflects global investor confidence in that country, I would suggest that investors do not have a great deal of long term confidence in the government.