Debates of May 11th, 2001

Income Tax Amendments Act, 2000

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, as usual the Finance minister's assistant is talking through his hat.

Any confusion is coming from his side. It will not be easy to fool those who just completed their income tax returns. Canadians know very well that a lone parent family with one dependant and an income of $30,000 a year is still paying a lot of income taxes to the federal government and that the federal income tax impoverishes this family already living below the poverty line. He will not fool those people.

If he thinks that Canadians are all stupid, he should think again, especially since the income tax period only just ended. Canadians just filed their income tax returns. They cannot be fooled because they know what they paid in income tax. That is the first thing.

The second thing is that, talking about these great tax reductions, he said—he was honest enough to say so—“within four years”, not right now. The surplus is there. Does anyone know how much has accumulated in the federal government's coffers in the first 11 months of the last fiscal year? Twenty billion dollars, and the Minister of Finance is committed to put $15 billion into the debt payment. He is forgetting the other priorities.

It is fine to pay off the debt, we are all for that. But to put all the money in there, while there are huge needs in the health sector and in the fight against poverty, I cannot take this.

He is having discussions with the provinces about social housing. Let us look at that. Do people know what the government wants to do? It wants to leave the old stock of social housing to the provinces, with maintenance costs, but not one cent for investing in social housing. It is easy to pass the buck that way.

The forecasting errors—I did not want to raise them, but he did. Do people know for how long the Bloc Quebecois, with a small team of two or three people and a small portable computer, has been doing the estimates, the forecasts for the deficit and the surplus? Since 1995. Do people know what the margin of error in our forecasts has been from year to year? Three per cent, a normal forecasting error.

What kind of error margins did the Minister of Finance and the Liberal representative who just spoke have in their forecasts? Between 130% and 400% recently, a 3% margin of error in our forecasts as opposed to between 130% and 400%. Where is the confusion? Where is the inability to forecast the surplus, or rather, the deliberate way of hiding the truth, the real numbers, from the population?

This does not come from the Bloc Quebecois. It comes from the government. So, before telling us what to do and saying any odd thing to the population, who knows how much taxes it is paying to the federal government, I would urge my colleague to reflect further.

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

Madam Speaker, it is with pleasure that I rise to speak on Bill C-22.

The amendments to the Income Tax Act come as a result of the February 2000 budget and also as a result of the October mini budget, or economic statement or whatever semantics one would utilize to describe that pre-election document of the Liberal Party of Canada.

The amendments to the Income Tax Act represent a collection of baby steps. Some are in the right direction. Some simply represent a further complication of an already far too complicated tax code. Most represent the triumph of politics over public policy.

If we look at the general direction of these tax measures, we will find there is no general direction. In fact most of them have resulted from a flimsily put together pre-election document. The document is referred to as the mini budget and reflects a mini vision of Canada.

These baby steps and tinkerings do not reflect what Canadians truly need in an overall and significant broad based tax reform. Tax reform can be used as a vehicle to create greater levels of economic growth and opportunity. Instead of making tax tinkering part of a pre-election policy, we should seize the tremendous opportunity we have now with the budget surpluses to bring taxes down, but use tax reform and tax reduction in lockstep.

Typically with tax reform we always create winners and losers. However, if we implement tax reform and tax reduction simultaneously in lockstep, we can ensure that there are no losers created by significant tax reform. All Canadians then would be winners as we create a more competitive and less distortionary Canadian economy which is poised and positioned for significant growth and opportunity, particularly in new economic endeavours.

We have seen in recent years our competitiveness with our trading partners suffer. We have seen other countries like Ireland leapfrog over Canada and seize opportunities to grow and prosper while Canada languishes. Ireland had a 92% growth in GDP per capita over a 10 year period. During the same 10 year period Canada had a 5% growth in its GDP per capita. This is pretty anemic when we consider the extraordinary growth in Ireland, a country once referred to as an economic basket case. Now it is referred to as an economic lion. Ireland did that by utilizing significant tax reform, particularly focused on a reduction of capital and corporate income taxes.

One of my hon. colleagues opposite constructively offered her views on this. I appreciate her views, as someone with a profound understanding from her family perspective of Ireland, and I agree with her. Ireland's commitment to education over the last 20 years to 30 years has strongly helped position Ireland. That being the case, Canada has by and large with its provincial and federal governments over time made significant commitments to education, so I would argue that that part of the equation has been done quite well.

We could improve our commitment to education, as could any country. It could be argued that Ireland could improve its commitment. The greatest difference between the two environments at this point is not in their commitment to education, it is their commitment to tax reform as a lever to create greater levels of economic growth and opportunity. That is the part we have to address, and I am certain she would agree with me on that front as well.

If we look at the government's record on economic issues since 1993 and how international confidence has been demonstrated in the government's record since 1993, there is no better gauge by which to judge the government than the performance of the Canadian dollar. We have seen under this government a loss in the Canadian dollar relative to the U.S. dollar of about 11 cents. The dollar reflects the shareholder value of Canada has seen a significant decline under the government. Under the previous government there was a one cent decline over a period of nine years. This government has achieved an 11 cent decline in a period of about eight years.

Every time our dollar goes down it is effectively a pay cut for every Canadian. We depend on the U.S. to such a significant amount as our trading partners. From a consumer perspective, given the degree to which Canadian consumers buy from U.S. companies, it significantly reduces over a period of time their disposable income.

It also has a very negative impact on productivity. Canadian companies in the short term do not necessarily see the need to make productivity enhancement a priority if they can hide under this low dollar policy of the government.

The low dollar also damages productivity in the long term. Companies that purchase productivity enhancing equipment or technological advancement software, et cetera from the U.S. are less inclined to do so if the dollar is low. As a result it becomes a self-perpetuating prophecy that in fact the low dollar creates in the long term lower levels of productivity by actually reducing incentives for companies to do the right thing and build their productive capacity in Canada.

In general, what is particularly disturbing about the state of the Canadian dollar is that the Bank of Canada has in recent years pursued a high dollar policy, yet Canadians are suffering as under this low dollar result. The Bank of Canada under its policies has targeted inflation rates in Canada of about a point lower than those which are considered acceptable by the federal reserve in the U.S. Despite this high dollar policy, we are getting this low dollar result. We have to carefully analyze and respond to the fiscal inadequacies of the fiscal framework in Canada.

The government describes having a balanced approach. The fact is a balanced approach is not the appropriate approach if we have significant inherent imbalances in the economic framework, and we do have some significant imbalances. Some are with taxation, not only in terms of overall levels of taxation but particular types of taxation which in and of themselves have the most negative impact on economic growth. Unfortunately, some of the taxes which are most politically palatable to reduce are ones that will probably have some of the smaller impacts on economic growth and opportunity. Some of the tax reductions which would spur the greatest level of economic growth are those that sometimes are less popular politically.

In the short term, and particularly after an election, the government should take some risks and tackle some of the major issues and addressing tax reform and the reduction of some of Canada's most productivity damaging taxes. I will speak about a couple of them.

One is our dependence on capital taxes in Canada. Capital taxes reduce investments and the incentives for Canadians and people outside of Canada to invest in the country. If we look at any study on productivity, there is a strong correlation between productivity and investment. If we tax capital and investment to the degree we do in Canada, that will have a significant negative impact on productivity enhancement.

The government has made some reduction in capital gains taxes. The government says that the effective rates of capital gains taxes are lower than in the U.S. That is not the case. We are still higher in Canada than in the U.S. However, the most important thing to recognize is the missed opportunity of the government to eliminate personal capital gains taxes. In this one instance we would be ahead of the U.S. in a very critical area of the economy, that of taxing capital gains and encouraging investment as opposed to discouraging investment innovation.

The government is losing this opportunity because of political reasons, the same reasons why the Liberal opposition fought vociferously against the GST. It was a case of politics then and it is a case of politics now. That is why it is not moving more aggressively to address capital taxes in Canada, specifically capital gains taxes.

I am focusing my comments today on tax reform, but we also need to see a greater commitment to debt reduction which in time would strengthen the Canadian dollar through fiscal policy.

In short, we are asking the Bank of Canada with one blunt instrument, the interest rate, to try to strengthen the Canadian dollar. We are ignoring in many cases the fiscal policy issues that could be addressed by the government, but it refuses to talk about the dollar. It also refuses to talk about some of the concrete measures it could take through fiscal policy to address the dollar.

We could also utilize tax reform in lockstep with equalization and other policies as part of our economic development strategy. I mentioned earlier the tremendous success that Ireland has enjoyed over the last 12 years. Some would say that comparing Ireland to Canada is not the best possible comparison because of the degree to which Ireland received EU transfers in order to allow it to invest so significantly in tax reduction. That argument is not necessarily a bad one. However if we want to look at the best possible comparison, we could compare Atlantic Canada today to Ireland 10 years ago.

Today we have a hodgepodge of economic development policies and agencies such as ACOA for Atlantic Canada. We also have our equalization policy which is the only constitutionally enshrined spending program of the government. I would suggest we should develop a tax policy in consideration of some of our economic development strategies.

In Atlantic Canada for example, the total budget for ACOA is a little more than the total amount of federal corporate taxes paid in Atlantic Canada. If we were to try to think in a more imaginative and visionary way about this, we could see the possibility exists with some assistance to eliminate federal corporate taxes in that region of the country to spur economic growth and opportunity. Quite possibly this could have a greater level of impact on economic growth than would result from the activities of ACOA.

I am not saying that ACOA has not had a positive impact in some areas. My personal belief is that in many ways it was probably a more appropriate instrument in the old economy than it is in the new economy. In the new economy tax measures have demonstrated far greater traction in achieving results in targeted areas than have direct investments by agencies such as ACOA.

We need to invest in infrastructure. If the Atlantic innovation fund focused on infrastructure, universities, technology transfer strategies and commercialization, those sort of initiatives could be very beneficial. I have great concerns about government agencies making direct investments in individual companies.

Another potential role for ACOA would be for it to take part, through the Atlantic innovation fund, in syndicated investment. Effectively the participation of ACOA would not be as an individual investor in a company, it would be part of a syndication of investors, the majority of which would be private sector investors.

That could help by reducing overall risk and encouraging private sector investment in particular geographic and sectoral areas, so that is a potential role. However, we need to get far more creative about how we encourage tax reform as a vehicle for economic growth. We must also consider other public policy priorities, such as economic development, and work more creatively in that regard.

On a technical issue, Bill C-22 would allow tax deferred rollover treatment for Canadians who hold shares of foreign corporations that have been subsidiaries to the parent shareholders. Some companies do not qualify because the bill would require distributing corporations to have their shares listed and actively traded on a stock exchange. That is inherently unfair. It is my understanding from the Parliamentary Secretary to the Minister of Finance that the issue will be addressed in future amendments and legislation. I would be supportive of that and would encourage the anomaly to be addressed.

In terms of general tax reform, the government would do well to dust off the Mintz report on corporate taxation and implement its recommendations without significant amendment. That would go a long way to improving competitiveness and reducing the distortionary nature of our tax code.

We must move aggressively not just to reduce taxes in totality but to reduce those which have the most negative impact on economic growth and opportunity. Jack Mintz, in his report to the Minister of Finance, went a long way toward doing that. However the report has collected a lot of dust and has not garnered the respect it deserves. The significant changes that should have followed the report never occurred.

To compare the way the current Liberal government deals with the erudite reports of great Canadians like Jack Mintz to the way the Mulroney government dealt with such reports, we need only look at the great report of Donald MacDonald on free trade.

Donald MacDonald had been a Liberal cabinet minister yet the Mulroney government recognized the inherent benefits of following the recommendations of the MacDonald commission. The Mulroney government pursued a controversial free trade policy, fought an election on it and did what was at the time relatively unpopular. In the 1988 election over half of Canadians voted against free trade yet the Mulroney government had the courage, vision, foresight and wisdom to pursue innovative policies and do what was right.

That is what I hope to see from the current government. I hope it has the courage, vision and foresight to pursue an aggressive policy of innovative tax reform and thereby create greater economic growth and opportunity for all Canadians.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Madam Speaker, I listened with intrigue to the member's speech. He is a fellow member of the finance committee. When members of the finance committee listen to witnesses and debate among themselves a lot of interesting ideas come out.

During his speech the member made a passing reference to ACOA. ACOA has been used by various governments as a means of currying political favour come election time. However its long term economic benefit to Atlantic Canada has been much less than advertised. The member said the same thing and indicated that a good system of tax breaks would be of much greater benefit. I think along those lines as well.

Could the hon. member enlarge a bit on the role of ACOA? What vision might he have for bolstering, or setting free the economy of Atlantic Canada? Would he be kind enough to respond?

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

Madam Speaker, the hon. member for Elk Island keeps us all on our toes periodically, in this place as well as in the finance committee, and I appreciate his question.

ACOA has often played an important role in Atlantic Canada, even into the mid-1990s, by investing where no private sector venture capital players were doing so. Some of the technology companies that have since developed and emerged would not be there today had it not been for government investment.

The environment has since changed. I am aware of four active venture capital firms that are investing directly in Atlantic Canada. Investment banking activity is taking place. Some of Canada's smartest money is finding opportunities in Canada's smartest region and I am pleased to see that development.

Now that private sector money is being invested in Atlantic Canada, ACOA can perhaps act as a partner to such investment without necessarily making the decisions. It could play a transitional role in reducing overall risk without necessarily controlling investment. It could leave some of that control in private sector hands or, as I suggest and with which I believe the member concurred, the ACOA budget or part of it could be used to reduce corporate taxes in Atlantic Canada and thereby create greater economic growth and opportunity.

It is important to recognize that ACOA played an important and positive role for Atlantic Canada before private money began finding its way to these early stage companies. We can now be far more creative and innovative in terms of tax reform and economic development strategies.

[Deepak Obhrai, Canadian Alliance, Calgary East, AB]

Madam Speaker, it is my pleasure to speak to Bill C-22. I take the opportunity to speak to the bill because I have a concern. I will not dwell on the logistics of the bill. I will leave it to my colleagues to talk about its other technical aspects.

I rise to speak to the bill because the government claims it has helped Canadians by reducing taxes and listening to Canadians. I see the former revenue minister sitting there. He created the big super agency and decided how it would work.

I will point out a direct example from my constituency of how the government and the minister's former agency have been picking the pockets of ordinary Canadians. A gentleman in my riding wrote me a letter and gave me permission to talk about it.

Eric is a senior citizen on the Canada pension plan. He is upset because the government is withdrawing money from his account without notifying him. The gentleman lives on CPP and the government is taking more than 10% off his pension. How does the government expect him to live if it takes more than 10% off his CPP?

Eric admits he owes the government money. However the government should have better mechanisms for collecting money from seniors and others who cannot afford to have their meagre benefits taken away by Revenue Canada. How does the government expect the gentleman to live after that?

This morning I rose in the House on an S. O. 31 to talk about a senior citizen who had taken $3,000 out of his retirement savings plan to buy a computer. It triggered penalties and an increase in his income tax. The poor senior citizen ended up losing interest. The gentleman took out $3,000 and ended up paying the government $168.

Is that how we treat senior citizens? Is that how we treat Canadians who work hard and save their money? When they try to reap the fruits of their labour the government, with policies that go from left to right and top to bottom, takes money away from them. It takes only a little here and there but cumulatively the individual loses. The gentleman ended up paying the government. Is that justice? It shows that the left hand of the government does not know what the right hand is doing. All Liberal members care about is how to take money from Canadians.

I have permission from another senior citizen to speak about his income tax return. This gentleman was mad.

[Herb Dhaliwal, Liberal, Vancouver South—Burnaby, BC]

I hope he did it electronically.

[Deepak Obhrai, Canadian Alliance, Calgary East, AB]

Yes, I am sure he did. Let me tell the minister opposite what his government and his former department did.

The gentleman's income was $24,000 a year. I hope members across the way will not tell me that $24,000 is a big sum of money. Because the gentleman took money from his retirement savings plan Revenue Canada charged him instalment interest of $109. The department charged him instalment interest on an income of $24,000.

How does the government expect the gentleman to live? How is a gentleman earning only $24,000 expected to pay tax to Revenue Canada on time? Can Revenue Canada not see that and show some compassion instead of charging him $109? I have examples from all my—

[The Acting Speaker (Ms. Bakopanos)]

I apologize to the hon. member but his time is up. He will have 14 minutes and 22 seconds when we resume debate.

It being 1.30 p.m., the House will now proceed to consideration of Private Members' Business as listed on today's order paper.

The House resumed from April 3 consideration of the motion that Bill C-222, an act to amend the Income Tax Act (deduction of expenses incurred by a mechanic for tools required in employment) be read the second time and referred to a committee.

Income Tax Act

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I am very pleased to rise today to speak to this private member's bill introduced by my very hon. colleague, the member for Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans. He is a bit of a visionary. He showed remarkable intelligence by putting this bill forward.

For too long this category of workers has been neglected. We only have to think back to the quiet revolution of the mid-1960s and Quebec's development in the 1970s. A similar phenomenon occurred in the rest of Canada. A university education was valued to such a point that what we used to call trade schools, today's training schools for specialized technicians, were neglected.

We must re-assert the value of specialized technicians as a trade in various sectors. There is a shortage of specialized technicians these days. In my riding we are experiencing a situation I never thought we would see only a few short years ago. We can no longer fill specialized technician positions, especially in mechanics.

There is going to be, there already is a shortage of specialized technicians. The shortage could very well worsen with time. Recently, in June 1999, if I remember correctly, the Canadian Automotive Repair and Service Council said that the biggest challenge facing the industry at the end of the 20th century was to attract young people. They were talking about mechanics.

When it is possible to improve the situation for automotive mechanic technicians, we must do so with the objective of attracting new recruits. We must make it easier for young people who decide to get training in automotive mechanics to become skilled technicians, because we all need them.

If we do not attract excellent skilled technicians to parliament, we will be prevented from doing our work correctly. Who never wished for a skilled automotive mechanic when his or her car broke down? Automotive mechanics provide an essential service for the smooth operation of the economy.

If, a few years down the road, we face a shortage that is worse than it is today, we would deeply regret our inaction. This is why we must make a particular effort.

Once again, I congratulate my colleague from Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans. It is thanks to this kind of initiative that we often manage to change things.

We are not asking for much. We are only asking for fairness for automotive mechanics, by allowing them to claim a tax deduction for tools of $250 or less in value. For tools that cost $250 or more, we are asking that this be treated as a capital expenditure, which would allow these workers to claim a capital cost allowance on the cost of their tools, which are often highly sophisticated and very expensive.

For example, the cost of the basic tool kit for a young person starting out as an automobile technician is said to be between $3,000 and $4,000. This young technician needs this basic tool kit. When he is looking for a job, the first question he is asked by the prospective employer is “Where is your tool kit?” This young technician who just got out of school must pay $3,000 to buy his tools, after having paid several thousand dollars for his specialized training.

A highly skilled technician, a brake specialist or a radiator specialist, for example, may have a basic tool kit that costs $3,000 to $4,000 and a special tool kit that may cost anywhere from $20,000 to $40,000 depending on the area of specialization. This is a lot of money to spend for tools that are required.

I am pleased to see that, in the last parliament, my colleague introduced a similar bill, which was passed by a vast majority of members in this House. I think only 11 or 12 out of the 301 members of the House of Commons opposed that bill.

It is encouraging to see that it is possible to raise awareness among all members and to get them to set aside any partisan considerations in order to make tax policy decisions that will help the cause of a particular category of workers, namely automotive technicians.

It may seem like a minor tax bill, but its impact is just huge. I say that, because the only reason my colleague—and those who, like me and my colleagues in the Bloc Quebecois, support him—has introduced such a bill is to serve the public interest and improve the general well-being of the population. All bills, private members bills as well as government bills, should aim at serving the public interest.

Such deductions may seem trivial, but they may be the incentive needed to bring a young person, who still does not know what to do in life but who is very gifted in mechanics, to choose this trade.

We need gifted mechanics. I am not a specialist of mechanics and I will never be, this is not my ambition. I hardly know the difference between an engine and a carburetor. However, I do not want to dwell on my shortcomings. My point is that a young person who has such a talent and who does not know yet what trade to choose could decide to become a mechanic if he has some hope that a tax credit or a special capital cost allowance on tools will make things easier for him.

Those who already work as mechanics and who are given the chance to deduct the costs of their tools will also feel relieved. We should not forget that automotive technicians provide an essential service. Without them, we might not be here this morning. Mechanics do not make fortunes. The average salary varies from $29,000 to $40,000 a year. Providing relief to automotive technicians, who must not only buy their equipment but keep it up to date, could contribute to improve their quality of life. That is what we are here for.

The automobile industry goes through changes and incredible technological evolution. My colleague, the member for Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans, told me that every year there are incredible changes occurring in mechanics, namely in terms of hybrid components, that is electrical and fuel injection components. We must take into consideration the fact that technicians need to renew their equipment.

I hope that all members will support this bill introduced by the member for Beauport-Montmorency—Côte-de-Beaupré-Île-d'Orléans.

[Libby Davies, NDP, Vancouver East, BC]

Madam Speaker, I am very pleased to rise in the House today to speak in support of Bill C-222.

I congratulate the member for having brought the bill forward in the last parliament and for having gained such strong support from all sides of the House. The New Democratic Party supported the earlier bill and we will support the new version of the bill. In fact my colleague from Acadie—Bathurst introduced a similar motion in the House.

The basic principle of the bill is about valuing people's work. We should be supportive of the work that mechanics do. They should legitimately be allowed to deduct the tools of their trade as an expense. It is the principle of fairness and of recognizing the importance of this one type of work.

Not everybody can afford an automobile but most of us do rely on automobiles to drive us to different locations. However, we do not really value the work that goes into maintaining those automobiles. Auto mechanics have a thankless task.

We like to complain about auto mechanics and the cost of repairs. Sometimes people do get ripped off but we are talking about an area of work that is highly skilled. Mechanics require an enormous amount of training and initiative in terms of keeping abreast of technological advances in the automobile industry.

My colleague from the Bloc mentioned that many auto mechanics do not make a lot of money. It is not exactly the most highly paid and lucrative job out there. It is very important that we look at this kind of work and recognize that there is a monetary expense involved for auto mechanics. They do not have the advantage, as do some other sectors, of being able to claim the tools of their trade as an expense.

The bill is not only about valuing people's work, it is also about fair taxation. Our tax system is a crazy maze. Most people feel very intimidated by a system that has become incredibly complex but most people understand instinctively, although our system is a progressive tax system, that the less money one earns the worst break one gets.

We have situations where corporate executives can write off all kinds of expenses that are considered to be legitimate expenses of business or employment. Buying hockey tickets, fancy dinners or other kinds of things for entertainment are considered essential costs of a corporate executive of doing business and are recognized by our taxation system. At the other end of the spectrum, when looking at the work of an auto mechanic, no such recognition is provided.

When I was first elected in 1997 I received a number of letters from auto mechanics in east Vancouver. We have a number of successful car dealerships just at the edge of my riding. I received a number of letters from skilled auto mechanics regarding the unfairness in the tax system and the fact that they could not claim their tools which were to them a fair and legitimate expense.

The bill is a very good initiative and an good example of what a positive contribution private member's bills can make in the House. We may not be able to solve the problems of the whole world but we can bring specific concerns forward for debate, seek the support of other members of the House and actually get them approved.

Not only is this a good bill but it is a good example of how we can cut across party lines and actually support a small but very reasonable initiative.

The New Democratic Party most wholeheartedly supports this initiative. We believe it is important to recognize the work that auto mechanics do. The small break they would get as a result of this bill being passed is important to those people. It would not change the total scheme of things. I do not think it would upset any balance. It could be seen as part of a direction to support the idea of fair taxation, which is taxation is based on ability to pay. It is based on the idea that a tax system should be progressive and certainly there are major issues within our tax system that we can hold up as examples of great inequities within the system.

Another constituent of mine brought forward the example of a pensioner or someone with a very low income who is sent a shortened income tax form, even shorter than the regular one. I think it is called a TS1A. If a pensioner or someone on a low income happens to make a political contribution, as many pensioners do, the form itself does not actually contain the appropriate line for the contribution. It has to be put somewhere else. As a result anyone making a $100 contribution would end up getting a credit of only $17 whereas those using the regular tax form would get a full credit of $58.

I bring this forward because to me it is just another example of practices that have gone on within the system. Maybe they go on unnoticed. No one pays attention to them. They are actually discriminatory. They do not recognize that in the case of the pensioner or low income person making a political contribution, the person actually gets ripped off by the tax system relative to those of us who fill out the full length form.

I think the motion is along those lines in terms of wanting to make a small change that will provide some recognition and value regarding the real cost of tools for this work.

I congratulate the member for continuing to press the matter in the House of Commons and for not giving up. It is sometimes through these small advances that working people get a better break. I would hope that all auto mechanics in Quebec, in my province of British Columbia and in other places in Canada would have the benefit of what would come from the approval of this bill.

We would certainly encourage the government to actually translate the bill into the necessary tax system change. I think most people anticipate that the bill would be approved and I thank the member for bringing it forward. All of us in the New Democratic caucus support his initiative in the bill.

[Cheryl Gallant, Canadian Alliance, Renfrew—Nipissing—Pembroke, ON]

Madam Speaker, it gives me great pleasure to speak in support of Bill C-222, an act to amend the Income Tax Act for the deduction of expenses incurred by a mechanic for the tools required for employment.

I first acknowledge the tremendous leadership my Canadian Alliance colleague from Lakeland has shown in providing information on the issue. He introduced Bill C-244, which is identical in subject matter to the bill before us today, and I know that as a newly elected member of parliament it is issues such as this one and the quality and calibre of representation of members like the member for Lakeland that bring credit to this institution.

During the November 22, 2000, election I had the opportunity to speak to a number of mechanics who were very aware of this issue. In fact I spoke to one mechanic from Petawawa, Ontario who told me that he had been working on this issue for 30 years. It was his wish that while it was probably too late for him to see any fairness on the issue, hopefully this issue could be resolved for his son who is looking to follow in his footsteps now.

What has been very disappointing in regard to this issue is how it so clearly demonstrates the dysfunction of parliament. This is a private member's bill. All members should be allowed to look at the proposal and then decide on behalf of their constituents whether this is an issue that they should support. All members should let their conscience be their guide and vote accordingly. In the last election Liberal members said they supported this legislation.

The government does not care about whether or not its members have an informed opinion about a particular piece of legislation. They are now being whipped into line with the silliest of objections. It is a shame that members of the government party are muzzled in the way they are.

I am proud that I am able to do something that no government member is allowed to do, that is, to speak freely and vote freely in the House of Commons. This sad fact was also brought home with the decision by the Liberal Party to force its members, except for one or two brave souls, to vote against its election promise, something it received votes for as part of its election platform, to vote against an independent ethics counsellor. What a sad day for the democratic process in Canada.

I know that there are some conscientious members on the government side. There were enough of them on the House of Commons finance committee before the last election to direct the Minister of Finance in their report, in prebudget consultations, and tell him to do the right thing and change the tax rules so that mechanics would be treated fairly.

Let us take a look at some of the government's objections. These objections were raised by the government in regard to implementing tax fairness for mechanics. Let us be clear. We are not talking about special treatment. We are talking about fairness.

The Liberal government's first excuse is that mechanics make too much money for this write-off. Frankly that is such a foolish assertion that I am astonished the government even made it. This proposal is not about whether mechanics are charity cases and whether the government should throw them a few scraps. This is about being treated fairly under the Income Tax Act and in relation to how others are treated as well. It is a sad commentary that the Liberal Party should feel this way.

The Liberal government also says it is true that mechanics need to spend anywhere from $20,000 to $70,000 on tools, but that is a cost incurred over maybe 40 years. That may be the way the government does equipment procurement for the military, but I have news for the government: tools wear out or get lost.

That is why some employers make it a condition of hiring that mechanics buy their own tools. If mechanics do not own their own tools, some owners have found, the tools disappear. They get left on vehicles or misplaced. It just happens. I am not talking about theft because I do not believe that to be a problem whatsoever. Tools get misplaced around the home as well. The issue is that mechanics must have their own tools as a condition of employment. Others such as shop owners can write off the cost of their tools. The issue here is tax fairness.

The Liberal government knows this but it persists with the myth that somehow this is a special treatment rule. It is not. It is an issue of tax fairness.

[Monique Guay, Bloc, Laurentides, QC]

Madam Speaker, it is with great pleasure that I rise to speak to the bill presented by my colleague from Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans, a bill that is being presented for the second time.

I would like to point out his determination—I would even say his endurance and pride—in coming back once more before the House with a bill that will make things much easier for those who work as mechanics.

Moreover, this is a votable bill. As we all know, my colleague presented the same bill in the last parliament, and 213 members voted in favour of the bill. That says a lot, when you think that there are 301 members in the House.

Again, we hope to have the same kind of support for this bill, which is really forward looking in this field, and I want to insist on that.

The purpose of the bill is to allow mechanics to deduct the cost of providing tools for their employment. In the last 15 years, members from almost all parties have introduced private member's bills to ensure that mechanics could deduct the cost of their tools.

It is very important here to consider that—I am going to speak a little about the past—when we began even a few years ago to encourage all our young people to go to university, as my colleague mentioned earlier in his speech, we neglected the vocational sector to some degree.

I was looking earlier at the statistics in my own riding. I have 1,300 mechanics working in the Laurentides riding. That is not insignificant. A look at the work of mechanics reveals it to be fairly hard work, physically difficult and requiring a lot of energy and good health. It is not the sort of job a person can continue doing to age 70. It is the sort of job people retire early from, at age 50 or 55, because it requires an enormous amount of physical energy.

These people will therefore expend their energy differently and much more physically than we parliamentarians here in the House.

It is an absolutely vital trade. We could never do without mechanics. Madam Speaker, if you had a flat on the highway, or if I did, I can tell you I would be very happy to see a mechanic coming to help. Even changing a spare is not something all the members of the House could do.

This is a very important trade, for which I have very great respect. As I was saying, in another decade, everyone went to university. Now we are realizing we have a shortage, especially in areas such as mechanics. Young people get specialized training in schools and colleges. They pay a lot for that, and when they enter the labour market, most private places they go to work for, either garages or institutions, ask then “Listen, do you have your tool chest?”

But a tool chest costs a lot of money. It does not cost hundreds of thousands of dollars, but it still costs several thousands. To work in a garage or a service station, these young people need a solid background, and the necessary tools right from the start.

Sure enough, if we compare with Bombardier, it will supply tools to its workers. Bombardier is specialized in this area. But if you take an independent worker, who works in a small garage in a village or in a local garage, as much as possible he must provide his own basic tools. It is like a hairdresser; she needs her tools to work and she provides them.

So he is considered to be a sort of self-employed worker. These young people are barely into their twenties when they enter the labour market, and they are penalized, often on top of having to pay back their tuition, costs of special training, because they must go into debt just as they are hitting adulthood in order to pay for tools. I think that this is unacceptable.

When we see that the federal government is racking up surpluses on the backs of unemployed workers—we are talking about a whopping $38 billion—when we see that it has so much money and that it is not able to help young people get a start in life, that is unacceptable.

This bill would correct this situation. It would be an excellent beginning for the government. It could stop resorting to parables and show us once and for all that it truly intends to help young people enter the labour market. It could innovate even further because, in other trades, such as plumbing or electrical, in all these fields, it could eventually do almost the same thing.

There are 1,300 mechanics in my riding of Laurentides. We should be able to encourage these people from the beginning; we are not asking for the moon and the stars. There are 115,000 mechanics in this country who invest an average of between $15,000 and $40,000 each for their tools and equipment. Their average pay is not all that much; according to some, they earn an average of $29,000 annually. With $29,000, if a mechanic has to buy a set of tools worth between $15,000 and $40,000, I can tell the House that it will take a mechanic many years to pay for them; this is a form of mortgage for these people and a mortgage takes 20 years to pay off.

I believe that we have the means, the capacity and the cash to help them get a start in life. We keep hearing in committee that young people are important, that women are important, that everything possible is going to be done to help them, so perhaps it is high time the Liberal government made good on its desire to do good deeds. We are still hearing talk in the human resources development committee about loans and scholarships, but that is not what is needed.

What is needed is something tangible. We need the government to take prompt action in matters such as this. We need a majority vote here in this House. The Minister of Finance has the fiscal capacity to accommodate it. It can be calculated, very rapidly even. We need a gesture of good will from this government.

I repeat that I totally support my colleague for Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans and sincerely hope we can have as good a vote as we did during the last parliament, that our colleagues will be informed on the issue and will also speak on it. They are, of course, welcome to add their comments on Bill C-222.

We would be very pleased to finally see a tax policy that will help trades people, who often have not had the opportunity to attend university but who work very hard at what they do, who do marvellous work and for whom we have enormous respect. These people absolutely deserve to have help getting off to a good start in life.

Today in the House, the government has an opportunity to provide these young people with the support they so greatly need. We cannot ignore them. We need positive, real and tangible policies so that our young people can get off to a real start toward a better life.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Madam Speaker, I am honoured to stand in this place to speak in defence of those who perform the mechanical repairs on our vehicles.

This issue has been ongoing for many years in parliament, certainly all the years I have been here. I am up to the challenge today of persuading 172 Liberals to vote in favour of the private member's bill. I hope I can convince at least half of them. As for the others, I do not care if they vote against it. If I can get half the Liberals to support the bill then finally the injustice would be stopped.

What injustice are we talking about? I am speaking about the fact that a taxation principle is being unfairly applied when it comes to the tools used by mechanics. The general tax principle is that people can deduct from income money that is expended in earning an income. For example, if a farmer requires a tool in order to do the work of earning an income on the farm, the cost of that tool is a deductible expense when it comes to filing income tax. In other words, they can buy a tool that they need without having to pay income tax on the money earned to purchase it.

There are many other professions where this applies. When I walk down the mall in some of my communities I see a doctor's office with a sign that says professional corporation. That designation is so that the doctor can deduct the cost of the expense of the equipment which he or she needs to earn income. Lawyers deduct the cost of all tools they need to do their jobs. Accountants register themselves as professional corporations thereby being able to claim all the expenses of earning an income and avoiding income tax on that portion.

Almost everyone can deduct from income money that is spent to earn income, either instantaneously as an expense or through some form of depreciation. While we are talking about a straight deductibility for mechanics, the government may also want to look at providing a system of capital cost allowances. Costs could be depreciated year by year until the value has been totally written off.

I remember a real estate acquaintance of mine who took an old used door that he had in his basement and put it on top of two milk cartons, set a chair in front of it and called it a desk. He was able to deduct from income tax the proportional cost of his house as he worked as a real estate agent. He was able to deduct a presumed cost that he had in earning his income.

When it is an explicit requirement that a mechanic have tools to do his or her job to earn income, why is it that the government and all governments before have discriminated against mechanics by not allowing them to either deduct from income the cost of their tools or to depreciate them on an ongoing capital cost allowance basis?

That is blatant unfairness and it needs to be corrected. That is why I am so passionately pleading with 172 Liberals and other members of the opposition to vote in favour of the bill. The bill, in one form or another, has been in front of every parliament since I came here and the government has scuttled it every time by letting it go on and on until finally there was a prorogation of the House and the bill was dropped.

I know quite a bit about the use of tools. I used to do all my own mechanical work. The very first car I owned was a 1959 Meteor, a fantastic gift from my parents. It was my primary vehicle for 25 years and I drove it every day. I always said that I would drive it to the moon, and the mileage on it when it finally cratered was just 5,000 miles short of having driven the equivalent distance from the earth to the moon.

The reason I did my own mechanical work was that I was not a very rich kid. My dad's friend gave me a grease gun so I did my own grease jobs. I bought oil in bulk and did my own oil changes. When something needed fixing and I did not have the tool, I went to the store and bought it so I would have it the next time. In one of my vehicles I had the major task of replacing the bearings in the differential. I borrowed a gauge for the very precise measurement of spaces that was required for that job. I bought an expensive Craftsman tool at Sears so I could take it apart. I still have the socket even if I only used it once. I do not claim to have the right to deduct it from my income. However, one thing I did learn was that accumulating tools was a very costly thing and all I had were the basic tools. I could not afford a winch so when I did a motor job on my Honda Civic I took the head off it before I took the motor out. Then I lifted the motor out so I would not need a winch.

Tool costs are extremely high. When most mechanics are hired by garages and service stations a condition to their employment is that they have their own tools. Without their tools they could not touch a thing, just as I could not. If I did not have the right tool I had to buy it. The same thing is true for mechanics. When they do not have the right tool they go out and buy it unless they can persuade a fellow worker to lend it to them. Once they have it, it is in their toolbox.

An empty toolbox without any tools that rolls on the floor costs between $300 to $400. Mechanics must invest between $20,000 and $50,000 in order to do their job. It is high time we recognized both the importance of the work they do and the unfairness that is being perpetrated on them by not allowing them to deduct the tool expenses from their taxable income.

As has been mentioned, those tools also have to be replaced because they wear out and some are lost. I have on numerous occasions picked tools up off the highway because I know the value of them. I also know that if they are left on the road they can be kicked up and cause damage to a vehicle, such as puncturing a tire or even causing injury to another person.

I have picked up a few screwdrivers and other things which I have found on the road. It is pretty well impossible to find out from where these things came. Likely a mechanic left them sitting on some part of the motor when he was working on it and forgot to remove them. The person for whom the work was done drove away and the screwdrivers fell onto the highway. This is another source of loss.

Losses have to be replaced. That is a cost item. I plead with all members to agree that there is no reason in the world why these people should not be treated the same as anyone else who has a cost of employment to that extent in earning their income. I again emphasize my plea to members to please vote in favour of this bill so that finally this inequity will be solved.

[Alex Shepherd, Liberal, Parliamentary Secretary to President of the Treasury Board]

Madam Speaker, I am very pleased to speak on Bill C-222, a very important bill brought forward by the member for Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans.

As a number of other members have mentioned, a concept of this bill has been before the House many times before. In my previous life I was a self-employed chartered accountant. I had many mechanics, both employed and self-employed, as my clients, so I am very familiar with their concern regarding this issue.

I believe a number of interveners have possibly misunderstood the concept. The first issue is self-employment as opposed to employment. In fact the previous speaker gave many examples of people who were able to deduct tools, et cetera, by virtue of the fact that they were deemed to be self-employed. He was also confused about incorporated and unincorporated businesses. Unincorporated self-employed people are allowed to deduct expenses laid out to earn income.

There is a significant difference in the income tax system between people who are employed as opposed to people who are self-employed. We can have a long debate about that in and of itself, but generally speaking it is considered that people who are self-employed have likely more substantial risk in earning an income than do people who receive a weekly paycheque. Some people dispute that in this day and age when people are getting laid off of their jobs and so forth, but that is some of the foundation that underlies why this situation has occurred.

The issue of fairness was mentioned. A number of interveners said that it was only being fair to do this. I understand that plight and the costs involved in acquiring and even maintaining a tool inventory. However many people who are employed have similar costs related to being employed. Even we have a dress code in the House of Commons. I incur costs for suits and other things related to maintaining my job as a condition of employment, but these costs are not tax deductible.

I have two young sons who are engaged in the high tech sector. While it is not a specific condition of their employment, they feel it is part of their jobs to have computers in their homes. They use those computers as an extension of their work, but they are not allowed to deduct those computers for tax purposes.

The fact of the matter is that if we are going to start talking about fairness, we are going to have to talk about a lot of other people. I am sure people in our audience today or sitting at home watching this debate who are employed can think of things that they incur as well to earn employment income.

Uniforms is another issue that has been around for years. People may be required to wear uniforms such as a waitress or whatever the case may be. They are required to buy the uniform from their employers, but are not allowed to deduct them for tax purposes. That is another idiosyncrasy of the income tax system.

I am sure all of us can think of reasons why we should have a tax deduction. The real issue is why should this group of people be treated somewhat differently than all other people who are employed.

To go over the bill itself, the bill proposes to change the Income Tax Act to help mechanics to pay the costs of providing their own tools when this is a condition of their employment. I think that is very important.

We should also ask ourselves a fundamental question. Why is it a condition of employment for mechanics to buy their own tools? There are a lot of reasons for that but it has developed differently from other industries.

Changes would allow mechanics to deduct the cost of buying, renting, insuring or maintaining their tools. Income deductions would be available for tools costing less than $250 and this could be adjusted in accordance with inflation. That is what the bill says. For bigger amounts it would be subject to capital cost allowance and allowed to be deducted over a period of time.

The Government of Canada understands the difficult issue this bill is trying to address. We appreciate that employed mechanics face work related costs that are sometimes significant. This is particularly true, and it has been brought out in the debate today, of young people who have just become mechanics and have to buy that first investment. It is well known that if people enter a career path as a mechanic, they will have to buy their first set of tools. It does not alleviate the fact that it is very expensive and could be cost prohibitive to people becoming mechanics.

There is some merit that the bill is trying to achieve. However the bill overlooks some very important administrative issues, issues that would need to be considered if the bill went forward.

For instance, the bill talks about the word mechanic. Many people have used the words auto mechanic but it does not say that in the bill. Canada's national occupation code lists many kinds of mechanics. There are automotive mechanics, but there are also auto body mechanics, heavy duty mechanics, small engine mechanics, aircraft mechanics and many varieties of industrial mechanics. That has not been defined in the bill. People have used the analogy automotive mechanics but the bill says mechanics of all kinds.

Many other people would call themselves mechanics as defined under Statistics Canada even though they may not fit in any of those particular categories. In reality the bill has brought forward a great deal of confusion.

Another important administrative issue is how the deduction will work under the bill. I am puzzled by the use of the thresholds. The bill talks about those amounts in excess of $200, I believe, which is different from the current capital cost allowance provisions which is $250. In other words, it would appear that the bill anticipates some other form of capital cost allowance regime. This is a mystery to me.

What is even stranger is the bill talks about the proportionality of tools in excess of $250. I have a hard time reading and understanding it myself. I am assuming if a particular tool was $1,000, the first $250 would be deducted as a regular expense and the $750 would somehow be added to a person's capital cost allowance schedule as a depreciation.

There is no system of the Income Tax Act that treats capital acquisitions in that manner. It does not take part of a car and write it off while the other part is depreciated over a long period of time. It does not take part of a tractor, write it off and depreciate the balance over a long period of time.

The bill is inconsistent and does not fit in with the current income tax regime. Therefore, it is not a simple bill. It is a very complex bill that deals with a whole different method of depreciation and providing for capital cost allowances.

One of the problems is the matter of control. We recognize that in some areas there are already mechanisms which apply to employees who have to pay out of their own pocket for work supplies. The cost of chainsaws is allowed to be written off by loggers because it is recognized that they depreciate quicker than other forms of equipment.

We have to sit back from this issue and think about it for a minute. We talk about fairness but there are other employed people who are treated similarly to mechanics. This is not to say that mechanics are not deserving of some kind of treatment, but if we open up that Pandora's box we will have to open it up for a lot of other people, especially some of the people who are listening to us today.

My preference is that at this time the bill not go forward until it is studied further.

[Antoine Dubé, Bloc, Lévis-Et-Chutes-De-La-Chaudière, QC]

Madam Speaker, I am very pleased to speak to Bill C-222 that was introduced by my colleague from Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans. This is the second time that he has introduced this bill. Unfortunately, it died on the Order Paper because the election was called.

I understand his situation, because I remind the House, without going into this too much, that I myself introduced a bill on shipbuilding that also died on the Order Paper when it was on the verge of being passed at third reading. The government preferred not to pass it.

Again today, during Oral Question Period, we talked about this. The same thing applies to mechanics. At the time, at second reading, only 11 members had voted against the bill. Before the election, many Liberal members had voted for the bill. I hope they will continue to do so. It is simply the election that prevented it from being passed.

I listened to my two Liberal colleagues who spoke about this bill. The parliamentary secretary basically maintained the position he took last time. But I am a little surprised to see the position taken by the member for Durham, who has often shown that he can not only express himself in an independent way, but also vote independently from his government when he had the opportunity—

[Alex Shepherd, Liberal, Durham, ON]

Madam Speaker, I rise on a point of order. I would like it known that I voted against the bill the first time round.

[Antoine Dubé, Bloc, Lévis-Et-Chutes-De-La-Chaudière, QC]

Madam Speaker, I was saying that the member for Durham had shown, on a few occasions, that he placed the interest of his constituents before the position of his party.

At any rate, he put forward several arguments which I think should be discussed by the finance committee, which would be called upon to study this bill and bring the necessary amendments, keeping in mind that we must not establish a precedent.

I simply remind those who are listening to us that we are still looking at the principle of the bill. The member talked about tradition. This is something I know about. I have two brothers who work in this field. One is an employee who specializes in automatic transmissions, and his tools are very expensive. The other one owns his own garage and could claim a capital cost allowance on his tools. There is a double standard here. One is self-employed whereas the other one is an employee. So I know what I am talking about today.

For the benefit of my constituents, very often, in the House, I talk about the Lévis shipyard. When that shipyard is in full operation, it employs 1,000 to 1,500 workers. In my riding, this bill also affects 1,200 to 1,500 workers. Therefore it is very important.

[The Acting Speaker (Ms. Bakopanos)]

The hour provided for the consideration of Private Members' Business has now expired. The order is dropped to the bottom of the order of precedence on the order paper.

It being 2.30 p.m. the House stands adjourned until Monday next at 11 a.m. pursuant to Standing Order 24(1).

(The House adjourned at 2.30 p.m.)