Mr. Speaker, I am splitting my time with my colleague, the member for Lethbridge. I am pleased to stand today to take part in this debate because I think it is an important one.
In my view, this is really a story about hypocrisy: the hypocrisy of those in this government who want one set of rules for themselves and another set of rules for ordinary Canadians, the mom and pop corner store operations that have to pay a lot of taxes.
The reality is that Canada is a high tax country. Most Canadians would like to pay lower taxes. I think that is a given. We hear it all the time. But they also recognize that they have a responsibility: if they are going to take advantage of services, they have to pay tax.
What Canadians object to is wasteful spending and spending on priority areas that they do not share. They do not like to give money to huge corporations. If they want to buy shares in some corporation in Canada, they can do that through a public offering or the stock market, but they do not want the Government of Canada doing that for them. They think big government should be curtailed.
There was a little bit of a reprieve in the size of government in the mid-1990s when the Mexican peso crisis and the credit downgrades on Canadian debt forced the Liberals to deal with Canada's fiscal problems, but of course the Liberal government chose to bite the bullet only after it was forced to. How did it do so? Basically it transferred its problem to the provinces by offloading a whole large area of government spending. Health care, I would suggest, has never fully recovered from that offloading. The government chose the easy way. Transfers to provinces were cut very dramatically while cuts to its own departments were very small.
Canadians did get a tax break in the year 2000, after six years of tax increases under this government, but just before the last election. In early 2000, the Canadian Alliance proposed a $100 billion tax reduction plan which the Liberals claimed was not affordable. To ensure electoral success, however, following strong Alliance polling numbers, the Liberals introduced their tax plan to appeal to a growing number of Canadians demanding a tax cut. Although the Liberal plan was smaller than the Alliance plan, it stole several key proposals to augment its policy expediency.
Further spending and tax cuts are required, but since the government's spending has been increasing since that time, the total federal expenditures are up by over $36 billion since 1997. I will not hold my breath that we will see tax cuts any time soon.
That sets the stage for a government that says one thing and puts in special rules for its friends, or in some cases maybe even its own members, but raises taxes time after time in Canada for the mom and pop operations and individual Canadians. I think this is the height of hypocrisy.
I said earlier that Canadians understand the need to pay taxes. Therefore, it is especially galling when those in a position to take advantage and dodge their responsibilities to the taxman do just that. I would suggest that those in authority, those in that position, include the former minister of finance. It is downright infuriating when somebody who is in that position of authority to require Canadians to pay extra taxes, as he has done over a long period of time, ensures that their own tax bill is considerably lighter than otherwise might be the case. How are they doing that?
I thank the Bloc for introducing this motion today, because it just reveals the hypocrisy, with special tax havens and special rules for dividends coming back that avoid taxes. Who could take advantage of that? I want to quote the former auditor general, who talked about those who took advantage of Liberia. It was said that “Liberia wasn't simply a tax haven--foreign affiliates there were also allowed to bring their profits back into Canada, tax-free”.
So it was not good enough that they could register their companies there and stay there themselves, but they were able transfer their profits back to Canada, tax free. There were very, very low taxes or none at all in some cases.
What did the auditor general at that time say? The former auditor general was trying to shut down these kinds of tax havens. Denis Desautels said that they were costing the government hundreds of millions of dollars. To deal with that, in early 1994 the former minister of finance said in his budget speech:
Certain Canadian corporations are not paying an appropriate level of tax. Accordingly, we are taking measures to prevent companies from using foreign affiliates to avoid paying taxes which are otherwise due.
That sounds pretty good, but what was the reality? What did he choose to do? He did choose to close one loophole, that which encouraged Canadian companies to locate in countries that did not have a tax treaty with Canada. That is why the former minister of finance's company, Canada Steamship Lines, used to proudly fly the flag of Liberia. However, when he ended that tax advantage, which he said he was going to do in his budget, he very conveniently had an escape hatch, one that most Canadians did not know about at the time. He quickly relocated his businesses at CSL and his flag to Barbados.
Although Canada does have a tax treaty with Barbados, there is a loophole, one that the Minister of National Revenue conveniently forgot to mention today. It allows companies, and in particular the company belonging to the member for LaSalle--Émard, to transfer CSL dividends back to Canada completely tax free. This was exactly the opposite of what the former auditor general wanted when he said that Canadian companies were avoiding paying hundreds of millions of dollars of tax.
I want to quote from a CBC interview about a year ago on Disclosure , which said that the former minister of finance “didn't shut down all the tax havens. Across the Atlantic, he kept Barbados open, and that's exactly where [Canada Steamship Lines] went next”. Disclosure asked, “Why did you move your shell companies to Barbados in 1995?” That is just a year after he closed down the Liberian one.
Mr. Préfontaine from CSL said, “We moved them to Barbados because of the change to Canadian tax rules”.
There just happened to be a convenient tax loophole escape hatch for the former finance minister's company. Disclosure went on to ask, “Was Paul Martin aware of this--when you moved to Barbados in 1995?”