Debates of Sept. 18th, 2003

Supply

[Rick Casson, Canadian Alliance, Lethbridge, AB]

Mr. Speaker, another rules based system that we support is the rules based trade. We just saw the government at meetings in Cancun, Mexico with the WTO which utterly failed. It was an opportunity that the government had through a rules based system to make some headway and it went nowhere.

We heard about the EU, we heard about the U.S. and we heard about developing countries. Where was Canada? It could have been bridging the gap between some of those countries and doing what it was supposed to do?

I think the diminished position of Canada on the world stage created by the government is causing some of this lack of talk on our behalf.

Last year $1.5 billion was returned to Canada through this double-dipping system tax free. We are not talking about eliminating all of it. We are talking about eliminating the double-dipping that allows this to go on. Two auditor generals have said that something needs to be done. It is ridiculous and it just keeps going on and on.

As we look at this and try to be realistic, it is too bad the Minister of National Revenue avoided a lot of the key issues in what the motion is presenting today and did not address them. It would have been good to hear her do that but she chose not to. I guess that is her choice.

However when will the government get serious about creating an atmosphere in which entrepreneurs, industry and risk takers can flourish? On the one hand we have a tax system that rewards a few at the top of the scale. On the other hand we have a tax system that gets in the way of initiative, productivity and people. They look at their tax returns at the end of the year, whether they are a mom and pop business or a mom and pop home trying to get by, who ask where all their money has gone. They have worked hard all year, done their part but where has their money gone. When they look at it, there are payroll deduction taxes, income taxes, gas taxes and tax and tax. It just gets to a point where it stifles creativity and hard work.

That is the underlying problem. Most people say to us, as politicians, “Just give me a chance”. When they come into our offices, they are not looking for non-repayable grants. They just want a chance to use their initiative, to use the few dollars they have put together to create a business that they know will succeed if just given that small opportunity.

As I indicated, if we could just possibly do that as a country, then we could create this kind of initiative. However it will not happen. It is certainly will not happen over the next seven months until the next election. Hopefully it will happen after that next election with a new government that respects the individual people in the country who work hard, that respects the dollars in their pockets and will not take those dollars away from people when they need the money for themselves.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, to start with, I would like to congratulate the Bloc members, especially the member for Joliette, for putting forward this motion and for this very important initiative.

It is astounding that we as members of Parliament have to debate this matter this year, at this point in our history. It is astounding that we need a motion to ask the government to put an end to our tax convention with Barbados, a tax haven that allows wealthy taxpayers and Canadian corporations to avoid their tax obligations.

It is incredible that we are here today debating a motion calling on the government to close tax havens. How is it possible in this day and age that such havens still exist? How is it possible, given all the rhetoric of this government, all that commitment about accountability, transparency and integrity, that such loopholes still exist in our society today? I want to address that today.

I want to indicate at the outset that I will be splitting my time with the member for Winnipeg Centre. We both have a lot to say about this issue, particularly since coming from Winnipeg we have had very close hand experience with a similar issue, and that is project loophole.

Members of the House may recall in fact that it was a Winnipegger by the name of George Harris with the support of an organization, a social justice coalition called Choices--

[Pat Martin, NDP, Winnipeg Centre, MB]

A Canadian hero.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Yes, as my colleague from Winnipeg Centre said, a Canadian hero who took up the matter of a decision by the government of the day back in the early 1990s to allow a wealthy family in Canada to ship $2 billion out of the country to avoid paying taxes. In fact that family, that corporation avoided paying taxes to the tune of $700 million.

That was $700 million lost to this country that could have been put to good use in terms of restoring important programs in the areas of health, education, social services, agriculture, urban infrastructure, the elimination of poverty and the list goes on and on. Yet this government permitted that loophole. Of course, typical Liberals in Canada today do nothing and organizations have to find the money to take these issues to court, to fight it all the way through, as George Harris did, to the Supreme Court.

I think it is interesting to note that on December 19, 2001, Judge Eleanor Dawson made a ruling and at that time she stated:

It is astonishing that senior officials at Revenue Canada failed to keep minutes of certain meetings where crucial decisions were being made. It is axiomatic that poor practices of this sort has the potential of compromising public accountability.

Here we are today in 2003 dealing with a blatant example of that kind of axiomatic practice, the kind of issue that causes Canadians to question the very purpose of elections and democracy in the country. This touches on a very important issue in terms of not just finances and fiscal policy and revenue, but in terms of confidence in this place, in Parliament, in the democratic process and in electoral procedures. We have to address this.

I hope that although it has taken a heck of a long time to get to the point where we are having a wide open debate on this issue the Liberals will once and for all try to resolve this issue, although it will be very difficult for them to do so because I think one of the reasons we are in this mess today is because the former finance minister, who is soon to become the next leader of the Liberal Party and possibly even the prime minister of this country, is really the mastermind behind this kind of unacceptable behaviour and practice.

[Pat Martin, NDP, Winnipeg Centre, MB]

The architect.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

As my colleague from Winnipeg Centre said, the architect of this absolutely despicable practice in our society today.

We are talking about tax havens. There is something wrong with tax havens, is there not? First, offshore tax havens provide a blank cheque to corporate business to avoid their fiscal and social responsibilities. We know that. It is money that is lost to us which could have been used for important services that we and the government have an obligation to provide the people of Canada. We are talking about a lot of money. The tax rate for corporations in Barbados is 2.5%. That is one-tenth of the Canadian rate.

It is not just New Democrats and other opposition members saying that. The Auditor General said that last fall in her report. She said that Canada loses hundreds of millions of dollars through tax havens. She cited at that time the Barbadian example. She said that the 1995 effort to close tax loopholes was insufficient.

That is one reason why we need to address this loss of revenue and this tendency on the part of some in our society to skirt the law, to find ways around the law, to look for loopholes.

The second reason is that tax havens also harm Canadian workers, not only are jobs shipped out of the country but labour standards and practices are out of line, much less stringent than Canadian standards. Union protection may be denied, workers work under lower safety standards and receive less pay and benefits than they would as Canadian workers. That is important.

Let us go back to the former minister of finance because he at one point recognized the negative aspects of tax havens. He actually stated:

What we've really got to do is go at these tax havens on a global basis.

Others have referenced this but let us remind folks that in his 1994 budget speech the former finance minister actually said:

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 Canadian taxes which are otherwise due.

As New Democrats we certainly supported that initiative and, in fact, there was some tightening of the tax laws in 1994. However, as we know, the former finance minister, the member for LaSalle—Émard, did not shut down all the tax havens, did he? Across the Atlantic he kept Barbados open. Interestingly, that is exactly where CSL went.

I want to read an exchange that happened between representatives of CSL and members of the Disclosure program where many of these series of developments were exposed.

The question: “Why did you move your shell companies to Barbados in 1995?” The answer: “We moved them to Barbados because of the change in the Canadian tax rules”.

The question: “Was [the former finance minister] aware of this--when you moved to Barbados in 1995?” The answer: “[The former finance minister's] assets are in a blind management trust”.

The question: “Was he part of this decision to move to Barbados?” The answer: “This is a question that you should ask Mr. Wilson [Federal Ethics Counsellor]”.

The question: “Was this discussed at any of your meetings?” The answer: “These are all questions that should be put to Mr. Wilson”.

We put those questions to Howard Wilson but, interestingly, he could not reveal details of those meetings without permission from CSL and from, guess who, the former finance minister.

There were more exchanges between Disclosure and Mr. Wilson.

The question: “What was discussed at these meetings?” The answer: “Well I'm, I'm not really in a position to go and tell you. These are matters that are covered by the Privacy Act.”

The question: “We're just asking what went on in those meetings. And what was discussed in those meetings”. The answer: “Well, you've got my answer on that”.

The question: “We're not going to know?” The answer: “No”.

Canada Steamship Lines now has nine shell companies in Barbados, eight of them at a lawyer's office near Bridgetown. They share the same mailbox and the same tax rate, 2.5%.

I rest my case. It is absolutely clear that we have to once and for all deal with this issue of tax havens and send a message to Canadians about the kind of person they are getting in the name of the former finance minister.

If this is what he is like in terms of his business dealings, if this is how he treats pensioners, as we saw out on the front steps of the legislature today with Voyageur bus, what is he like in terms of protecting the interests of Canadians?

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I wish to thank the hon. member for her very eloquent speech. She has introduced fresh facts on the issue concerning the former finance minister and future Prime Minister.

I would like to know if, like the Auditor General, the hon. member is concerned that tax havens are eroding the Canadian tax base, not to mention that of Quebec and all the provinces. Does she think that the companies and individuals who are currently taking advantage of tax havens are setting themselves apart from the people of Quebec and Canada as a whole?

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, I totally agree with the hon. member for Joliette that they are setting themselves apart from all Canadians.

It is absolutely clear that through this kind of practice we have a double standard. On the one hand the government is saying that Canadians should abide by the laws of the land but if they are a little late in paying their taxes we can be sure they will be nailed immediately and forced to pay penalties. Yet big corporations and people with wealth and influence, like the former finance minister, are allowed to break the laws of this country and operate in an area that is clearly unethical if not illegal. This causes all kinds of problems in terms of people's beliefs and faith in a system that should be fair for all.

This issue is important in terms of lost revenue. We know that billions of dollars have been lost in these tax havens. We also know from project loophole that $700 million was lost because of one deal alone. We also know that the last big initiative by the former minister of finance was a $100 billion tax cut which largely benefited the wealthy and big corporations in Canada today.

If we put it all together we have a system that is skewed, a system that is biased and a system that does not restore people's confidence in it as an equitable, fair system. We also have a lot of lost revenue that destroys the government's ability to do its job of meeting the basic needs of Canadians to ensure that we have an equitable society where everyone in this country has access to health care when they need it, housing when they need it, where farmers can get the support they need in the event of a crisis like mad cow disease, and where cities can have the resources they need to provide basic services for Canadians who desperately want to contribute back to society.

The member for Joliette is absolutely right. We have to stand together and resolve this issue once and for all.

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, the member talks as if nothing has occurred since 1994. I would like to refresh her memory.

First, in 1995 the government took steps to deal with the anti-avoidance rules of shifting passive income to foreign jurisdictions.

Second, in 1996 foreign reporting requirements were implemented to provide better law enforcement.

In 1997 the transfer pricing rules were improved to counter the potential for cross-border shifting of income.

In 2002 revised rules relating to foreign investment entities and non-resident trusts were proposed to help protect the Canadian tax base.

As the member knows, there are 1,700 companies in Barbados. We have 79 tax treaties. I assume the NDP wants us to rip up all of those tax treaties. She knows that we believe in a fair taxation system. We make sure there is no avoidance.

However In this case the member is suggesting to the House that somehow the government has stood still. In fact, we continue to have ongoing discussions with Barbados and other countries. I would ask the member to reply as to how she considers this to be standing still.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, it is obvious that we are dealing with a glaring loophole that has not been addressed by the government. Yes, some progress was made in 1994; yes, some of the loopholes were dealt with; and yes, some of the laws were tightened, but the question for us today is: Why does Canada continue to have a treaty with Barbados to permit and encourage such harmful activity? I have not heard an answer from the government to that question. What message does this send to the business community and to Canadians in general?

The Liberal government is opposed to tax havens--

[The Acting Speaker (Ms. Bakopanos)]

Resuming debate, the hon. member for Winnipeg Centre.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I would like to begin by thanking the member for Winnipeg North Centre, the NDP finance critic, for so generously sharing her time with me. I begged for an opportunity to participate in this debate because this particular issue makes my blood boil.

I also would like to take a moment to compliment the member for Joliette, who had the good sense to bring this issue before the House of Commons today, for giving us the opportunity to debate it and to recognize the tireless contribution he has made in his efforts to bring some semblance of reason and fairness to the Canadian taxation system as it pertains to these offshore tax havens.

I agree with the member for Joliette and the member for Winnipeg North Centre that these tax havens undermine Canada's tax system. It is as simple as that. When individuals and corporations can legally and by design avoid paying their fair share of taxation it puts an added burden onto the rest of us.

I will be concentrating mostly on the corporation side and touch briefly on individuals who take advantage of these outrageous tax loopholes. However I accuse both of them of nothing short of economic treason for taking steps to deliberately avoid paying their fair share of taxes in the very country that gave them the opportunity to prosper, to flourish and to achieve certain wealth.

I believe the convention with Barbados should be terminated, as simple as that, for the simple reason that this is not a reciprocity agreement among equals. It is not as though we are dealing with France, Germany, Italy or other G-7 countries where we are trying to avoid double taxation, which would be unfair, we all agree. It is not reciprocity at all when 99.9% of the business is flowing one way in the 1700 Canadian businesses that are seeking to avoid paying taxes in Barbados. How many Barbadian companies are setting up in Canada to participate in our tax regime and benefits? It is completely one-sided. It is completely an arrangement of convenience for those who would seek to avoid paying their fair share of taxes and shortchange the Canadian people and certainly our taxation system.

In 1994 and 1995 the rules were addressed somewhat. They started plugging some of the more egregious, offensive tax loopholes. For instance, one could no longer deduct a bribe. Believe it or not, up until 1994 bribes were tax deductible. Granted, the former minister of finance, our future prime minister, plugged that one, but he specifically left exemptions big enough to drive a truck through, big enough to drive a--

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

A ship.

[Pat Martin, NDP, Winnipeg Centre, MB]

A ship through or a tanker. I thank the member for Kings—Hants for--

[An hon. member]

Or a bus.

[Pat Martin, NDP, Winnipeg Centre, MB]

Or we could drive a bus through. These specific exemptions were left in out of self-interest, out of conflict of interest I accuse.

It makes me furious to think that they can get away with this and then look Canadians in the eye and talk about fair taxation when they, out of self-interest, specifically left in these tax loopholes for which they can take advantage. The man has more gall than Caesar, and he had all gall.

Surely one would think a federal cabinet minister would be patriotic enough to do his business in this country. Surely one would think Canadians would want a future prime minister to fly a Canadian flag on the ships he owns. Would that not be sort of a prerequisite of patriotism for someone who would seek the highest office in the land? It is unbelievable.

This is not just some left wing lobby group that dislikes corporations. This is not the whinging of a frustrated NDPer. Successive auditors general have continuously pointed out that we are being shortchanged, that we are losing opportunity and revenue, by design, deliberately, to shovel these benefits into the hands of corporations.

Let me deal with the banks for a moment because I do not have much time.

Certain Canadian banks are operating in tax havens which are even blacklisted by the OECD. Charter banks means we give them the exclusive right to certain financial activities and privileges, very profitable privileges, for instance, credit card transactions, cheque processing transactions.

Surely those Canadian charter banks that we call our own have an obligation to pay their fair share of taxes and not actively seek out every possible way to avoid paying taxes in this country. It undermines our tax base and our tax system. It undermines the quality of life we enjoy because we do value quality of life. We do seek to elevate the standards of living conditions for all people and that does take a tax regime that is higher than that of Barbados and higher than some of the other tax shelter countries.

It undermines our tax base when it puts Canadian companies at a disadvantage. Those Canadian companies that stay here and pay their fair share find themselves at an economic disadvantage against those who go out and participate in this economic treason. It gives justification for the Canadian Alliance to stand and say that Canadian businesses are at a disadvantage to other global competition because in that sense it is true. Well, we should plug that loophole. It is that simple.

I wish to thank the member for Joliette for giving us this opportunity to remind the government in the twilight days of this Parliament to do the honourable thing, do what is right and put an end to this outrageous rip-off. I cannot say how disappointed and angry I am at this entire stink.

There is another tax loophole that the government has selectively left unplugged, and that is the whole idea that business fines are still tax deductible. In 1994 the government revisited this issue and made it so that bribes were no longer tax deductible, but it did not plug the loophole so that business fines would not be allowed to be tax deductible. Well guess what? The former minister of finance, the future Prime Minister, got the largest single fine in Canadian history for polluting the Halifax harbour with offshore dumping of bilge water or sludge or whatever pollutant into the water.

Happily the laws have not been changed, even though the government was made aware of this in 1994, 1996, 1997, and by my private member's bill in 1998, 1999 and 2000. It has had ample opportunities to change this but it does not want to plug that loophole because it is to the advantage of certain cabinet ministers in the government, specifically the owner of Canada Steamship Lines. It is outrageous.

My colleague from Winnipeg North Centre read some comments from the CBC television show that exposed this outrageous shell company situation that Canada Steamship Lines and other Canadian companies enjoy in Barbados. She pointed out that Canada Steamship Lines has nine shell companies in Barbados. All they are is a post office box. They do not produce anything; they do not generate anything. They do not build widgets in Barbados. It is not as though they are engaged in any activity other than providing a post office mailbox for Canada Steamship Lines so that they can avoid paying their fair share of taxes.

We should not tolerate it. Canadians should be in the streets with pitchforks screaming about this issue. Canadians deserve to be outraged. Unfortunately, I think they are getting jaded. They are getting used to maybe the way Ottawa does business. Well, it is not the way it does business as long as we have anything to say about it and as long as we have breath to expose this kind of issue.

How can the revenue minister, of all people, stand in her place today and defend what amounts to organized tax evasion; systematic, institutionalized, organized tax evasion? It puts these companies in the company of biker gangs and organized crime and other people who use the absolute secrecy of these offshore banks to disclose all kinds of criminal activity. That is who seeks these things out, those who do not want their financial activities known to others. That is who engages in this offshore banking regime that exists internationally. It does not say much for the company that they choose to keep when it is rogues, crooks and certain Canadian corporations that choose to avail themselves of these outrageous tax loopholes.

Talk about ethics and values being the operative buzzwords of Ottawa these days. Where are the ethics? Where are the values demonstrated by a cabinet minister in the Canadian government, exercising rights under these rules as they exist today? Where is the morality of it? We know it is legal, but is it moral? Is it ethical? No, it stinks to high heaven, and I, like most Canadians, am outraged. I, like all Canadians, thank the member for Joliette for allowing us this opportunity to lambaste the government on this issue today.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Madam Speaker, I appreciate the words of my colleague from Winnipeg Centre.

I would ask the hon. member to reflect a bit on a similar situation that we both dealt with in Winnipeg. The situation was the uprising and the uproar from folks in our communities who reacted negatively to the thought of one wealthy family in this country shipping money outside to avoid paying taxes.

I think it is relevant here. We are talking specifically about a tax haven in Barbados. We know there are other issues of concern that must be addressed. It would be important to make the connections with project loophole and to hear from the member for Winnipeg Centre what his impressions were with that struggle and how it fits with the issue we are dealing with today.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I thank my colleague from Winnipeg North Centre for giving me the opportunity to share with the House some of the work done by a man that I consider to be a Canadian hero. Mr. George Harris and a group of concerned citizens in Winnipeg tried to take this issue of tax avoidance to the highest level.

This occurred when a Canadian family moved $2 billion out of the country in family trusts without paying any income tax on that money at all. This was in complete contrast and violation to the existing rules. Somehow that family got an exemption.

George Harris learned that the statute of limitations was running out to appeal this outrageous shift of money by a Canadian wealthy family so that it would not have to pay taxes on it. I believe there was $750 million that the family avoided paying. Imagine the difference that could make in an inner city riding like Winnipeg North Centre or my own or anywhere in the country.

Revenue Canada turned a blind eye to it. The deduction was originally turned down by Revenue Canada because the honest people that process tax and follow the rules said this could not be done. However, the government let the family do it anyway. The government then fought it in the courts every step of the way, so that the statute of limitations would expire so that no one could appeal. That was project loophole.

I nominated George Harris for the Order of Canada for his work in project loophole. Mr. Harris is in Africa today working in AIDS relief to his great credit. He is a Canadian champion who had the guts in a David and Goliath situation to take on the Bronfman family and take on the Mulroney government that gave that money away. Mr. Harris took on the Liberal government that did not have the guts to reverse that ruling by Revenue Canada and tax that money to the same level that every Canadian pays taxes on income and capital gains. Instead, the government turned a blind eye.

It was outrageous and a black stain on the history and legacy of the government that it would not listen to a group of concerned citizens as they fought this through the Federal Court. The Liberal government put up 20 lawyers to every one lawyer that this citizen could bring forward in Federal Court to oppose and defend the actions of the government in foregoing the $750 million of money that was rightfully ours. It was our money and we let it slip away out of the country. The government turned its back on it and it was a disgrace.

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, I wish to thank the hon. member for Winnipeg Centre for his excellent remarks. I think he illustrated well how tax havens, and Barbados in particular, establish tax practices which are extremely prejudicial to our social programs.

I would like to ask him what he thinks of the fact that a brochure entitled, Barbados: A Guide for Canadian Exporters is available through the Department of Foreign Affairs and International Trade website. This brochure encourages Canadian investors to take advantage of Barbadian tax benefits. Is this consistent, in his opinion, with the approach of a responsible government, or is the government not promoting a tax haven at the expense of the interests of all Canadians and Quebeckers?

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I am absolutely shocked and appalled at what I have just learned from the member for Joliette. He shared with the House information to which all Canadians should be alerted this very moment. All Canadians should be made aware of what the member for Joliette has just brought to the attention of the House, that on the Canadian government's own Export Development Bank's website there is advice giving counsel to Canadian companies as to how to shelter themselves to avoid paying Canadian taxes.

Has the Canadian government lost its mind? What is wrong with this country? Has the world gone mad? No, not the world, perhaps, just the ruling party. The Liberals have lost their minds if they want to counsel and advise their buddies on how to avoid paying their fair share of taxes in this country. It is a travesty. It is shocking and appalling. I think this is worthy of a news conference immediately to tell Canadians.

Look what Revenue Canada does if ordinary Canadians fail to pay their taxes on time. It hounds them mercilessly. It garnishees their wages. It takes their homes. It literally hounds them to their graves to collect every $50 in back taxes that some poor slobs failed to remit to Revenue Canada. Yet it advises and counsels--

[The Acting Speaker (Ms. Bakopanos)]

Resuming debate, the hon. member for Kings--Hants.

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

Madam Speaker, it is with pleasure today that I rise to speak to this motion. I think it is a very important issue that the member from the Bloc has raised. I want to point out some aspects of this issue that I do not think have been adequately addressed so far in the discussions today.

Everyone recognizes that tax treaties exist to avoid double taxation. As such, the notion of tax treaties is not the issue here. The importance of us having tax treaties is unarguable.

The tax treaty with Barbados is a special case because of the fact that there is a disproportionate percentage of Canada's foreign direct investment in Barbados that does not make sense given the size of its economy and the nature of the investment.

I would argue that we should be talking about a multilateral effort, working particularly with the OECD, which has done a lot of work in this regard, and with our other trade and economic partners to eliminate this kind of negative use of tax levers to create tax havens which ultimately take from the Canadian economy and other industrialized economies significant wealth and ability to invest in some of the programs that are important to ourselves domestically.

I would argue that it would make more sense to renegotiate the tax treaty with Barbados rather than to unilaterally scrap it. I think we ought to do that with other countries, including the United States. One of the difficulties with simply scrapping the treaty is that companies that have made significant borrowing and investment commitments based on the current tax laws would only have six months' notice. I do not think that termination notice of six months would be adequate.

We also cannot ignore that as a country we do not live in a vacuum. Barbados has tax treaties with other jurisdictions, including the United States, so we need to work with those countries, the other countries with whom Barbados has tax treaties. I think unilateral action in this matter rather than a more multilateral effort could result in Canada losing a lot of its ability to work effectively.

The other thing that could happen as well with unilateral action is that we could see a lot of corporations in Canada that currently have relationships based on the tax treaty with Barbados conceivably moving operations from Canada to the United States, as an example. To pursue this unilaterally without discussion with other countries with whom Barbados has tax treaties I think would be folly. There is a lot of work that needs to be done beyond simply cancelling our tax treaty with Barbados. I think Canada has a very important role we can play, working with our trading partners. Pursuing this under the auspices of OECD and other international organizations, I think we could actually achieve a lot more in really addressing this issue.

I think it is also important when we are talking about tax treaties to consider tax policy in a more macro sense and thus consider the impact that tax policy has today on investment decisions. Twenty years ago, tax policy was not as important as it has become today as a lever to create investment, growth and prosperity. In the old days before more economic integration globally and in a time when there was less competition, high taxes tended to redistribute income. Today, high taxes can redistribute people, talent and capital.

People, particularly talented people, and capital have never been as mobile as they are today. If we look at the economic success stories of the last 10 to 15 years, it is hard to ignore the degree to which tax policy has played a critical role in shaping those successes. Ireland had a 92% growth in GDP per capita largely based on an innovative and aggressive tax strategy. Ireland is a relatively small country on the edge of the second largest market in the world. Canada is a small country, by population and economic perspective, that is on the edge of the largest market in the world.

I believe that as a country we should stop simply talking about northern tiger when our tax policy means that we are likely to remain a northern kitten for a long time. It is time for us to actually become that northern tiger, to earn our stripes by presenting a bold, new, innovative tax strategy focused on making Canada a magnet for capital and talent, as opposed to a repellent, by having a tax system that rewards hard work and investment instead of attacking ambition and initiative.

The kinds of ideas I would like to see incorporated in that tax reform would be to eliminate the capital tax immediately, not phase it out over a period of time, and to eliminate capital gains taxes in Canada, which we did not have before 1971 when they were brought in to replace the inheritance tax. Bringing in the capital gains tax to replace the inheritance tax made Canada a good place to die but not a good place to live. The fact is there is no tax that does more to hurt investment and, as such, hurt productivity. Whenever anything is done to reduce levels of investment, it is an attack on productivity. Whenever we attack productivity, we attack the standard of living and the capacity to develop a better standard of living for Canadians and our capacity to afford the kinds of social programs that Canadians value.

I would also propose a significant overhauling of our corporate tax system. The government boasts that we have a lower corporate tax regime in Canada than many other countries. I have even heard the Minister of Finance claim we have lower corporate taxes than the U.S. That is patently false. The fact is that if we are only comparing statutory rates and ignoring effective rates, we are not actually talking in the real world. Our effective corporate tax rates are still among the highest in the OECD and need to be addressed if we are going to be serious about attracting levels of investment that can improve productivity and the standard of living of Canadians.

The dean of the Rotman School of Business at the University of Toronto, Roger Martin, has proposed, among other things, the idea of radically changing our capital cost allowance structure to in fact allow corporations to write off on a cash basis investments in new equipment and productivity enhancement immediately as opposed to more gradually over a period of time or amortizing the benefit over a period of time. It would be a radical step that would provide a huge advantage for Canadian companies and a tremendous incentive for Canadian companies to invest in productivity enhancement. That is one idea.

I propose that we eliminate corporate welfare in Canada, that we take the money currently going to Canadian companies through HRDC or Industry Canada or regional development programs, and use that money to reduce in a significant and broad based way corporate taxes in Canada. One example would be in Atlantic Canada, where the budget of ACOA, the regional development program, is $447 million per year. The total federal corporate taxes for Atlantic Canada are $380 million per year. The capacity exists without costing the federal treasury any money to actually eliminate federal corporate taxes in the region and at the same time have $70 million left over to invest in important infrastructure.

We can ask ourselves the question, or more important, we can ask Atlantic Canadian business people in small, medium sized and, in some cases, large businesses. Which would be more beneficial in terms of increasing their capacity to create jobs, wealth and prosperity for Atlantic Canada: 500 ACOA bureaucrats telling people how to start small businesses or one of the lowest corporate tax regimes in North America and in fact in the world? If we were to leave just provincial corporate tax rates in Atlantic Canada, we would in fact have corporate tax rates in the 12% range, which would be very close to those of Ireland, just as an example.

It is self-evident that tax levers create greater opportunities for wealth, prosperity, growth and opportunity than direct subsidies, because businesses, business people and entrepreneurs will make the decisions where to put the money. It will not be politicians and bureaucrats. Politicians and bureaucrats do not do a very good job of selecting winners from losers. Actually, that is not completely fair. Usually they do a good job of picking losers. It is just on the winners' side of the ledger that they do not seem to do as well.

As someone who started his first small business in Atlantic Canada at the age of 19 renting compact mini-bar fridges to students and building a business with over 1,000 refrigerators, by the time I graduated from university I could have been called a fridge magnet. Nobody on the other side of the House got that; maybe I should explain it.

The fact is that we can create more growth and opportunity across Canada if we have the courage to reform our tax system. That cannot be done unless we, in lock step with that, address our regional development strategies and our strategy in terms of investments in business through Industry Canada and HRDC.

I would also propose on the personal side that we eliminate RRSP limits in Canada. That would create huge opportunities for tax deferred savings, not tax write-offs but tax deferred savings. It would create a situation whereby a lot of the tax revenue would be deferred to the future when there is a demographic issue, when Canada will need significant tax revenue at a time when there will be less people working, more people retiring and more burden on the health care system. Eliminating RRSP limits would shift a lot of the tax revenue to the future at a time when it is going to be extremely important.

It would also eliminate a lot of the incentive for young Canadians, talented Canadians and educated Canadians to move to other tax jurisdictions, including the United States, again without giving up tax revenue over their life cycle but simply deferring it to the future. I think we would do a lot to address the brain drain issue with that kind of approach. It makes a great deal of sense when we consider the types of people we are losing to the United States. It is not just the numbers; it is the quality of the talent we are losing. Also, we are not just losing them for three or four years. We are losing people at middle and in a lot of cases higher income levels, who are going to the United States, starting off their careers and in many cases planting roots, becoming established and staying there.

I lived in New York between 1991 and 1996, when I returned to Canada. Many of my friends in New York were expatriate Canadians and most of them are still there. Sadly, I will inform the House that I do not believe they are coming back. They are now rooted there. In many cases they have established families and are enjoying a standard of living in the United States superior to that which they could afford here in Canada. Even when we talk in terms of the advantage of our health care system, these people, through their companies, have private health care insurance, so in many cases they have not just lower taxes but also a better health care system in terms of the degree to which the health care system exists for their own families and their own situations.

I think that we as a country have to become very strategic, not just in terms of our tax policy but in terms of our social investment policy. We have to be smarter about how we spend money.

We hear of the levels of waste that exist in the federal government. This week, just as a tip of the iceberg, one ministerial aid has spent something like $30,000 on meals over a period. I am sure if the Canadian Restaurant and Foodservices Association had a political staffer of the year award, it would probably go to this individual. That is just tip of the iceberg stuff.

Anyone in the House who would deny that there is no waste in government is delusional. There is an opportunity for us to reduce waste, to target government activities in areas where there is a real reason for the government to be participating and there is an ability for government to play a constructive role in improving the lives of Canadians and to get out of the rest of those areas, to stop interfering with provincial jurisdictions, as a federal government, to help provide provinces with the fiscal tools they need and the fiscal capacity in taxing power that is required to provide the constitutionally mandated services of health care and education and to stop micromanaging as a federal government.

There are a number of areas where not only on the expense side can we spend more wisely but on the tax side we can tax more wisely. Renegotiating tax treaties is one part of the equation. Again, we should be renegotiating tax treaties and working with our trading partners in a multilateral approach to Barbados and other tax havens. Beyond that I cannot over-emphasize the need, in lockstep with that approach, for Canada to introduce the kinds of tax reform that can truly revolutionize the Canadian economy and create the kind of growth, prosperity and opportunity Canadians deserve. To fail to do that and to simply go in a hyper-competitive billable economy where talent and capital have never been as mobile as they are right now would be folly.

I hope I have been able to bring a different approach to this debate and I hope that in consideration of this motion all members consider the need to reform Canada's antiquated tax system that is currently hurting opportunities for Canadians here. It is holding us back. Let us consider just for a moment the opportunity we have as legislators to make decisions today to reform Canada's tax system in a way that we can look back in 5, or 10 or 20 years at our having played an important role in making Canada truly a northern tiger instead of simply talking about Canada's desire to be a northern tiger.

[John O'Reilly, Liberal, Haliburton—Victoria—Brock, ON]

Madam Speaker, I always enjoy listening to the member for Kings—Hants. He brings a whole different perspective into the fiscal reality of Canada. I know he calls himself a fridge magnet in a different sense of humour. As an entrepreneur in university, he invested in small fridges. Every student took him up on it and he made his first million or two there, and I congratulate him for that.

When he was talking about winners and losers, I hope he was not talking about the recent convention that he just went through. If he was, then he is suggesting that they picked a loser and that he was really the winner. I hope he will clarify that.

On the serious side of it, I hope he would take some time to expand on his theory on the elimination of capital gains because I believe that elimination would generate a lot of money and investment in the country. I wanted to give him an opportunity to expand on that.

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

Madam Speaker, with regard to the first point, the Progressive Conservative Party won because we actually had a leadership race. Canadians won because they were glued to their television sets watching a contest as opposed to a party where the leadership candidates are limping to a finish.

Canadians are concerned because there is a stark realization that Canada is one heart beat away from having the current Minister of Canadian Heritage as prime minister. If the member for LaSalle--Émard were to step in front of one of his Voyageur buses as an example, I would be very afraid as would Canadians.

I was proud to participate in the leadership selection process that resulted in the Progressive Conservative Party selecting a new generation of leadership in my leader, the member for Pictou--Antigonish--Guysborough, under whom I am proud to serve in the House and on the hustings and doorsteps of Canadians.

On the second question, in terms of capital gains, the government has reduced capital gains inclusion rates somewhat but has only gone so far. The problem with tinkering is that in the hyper-competitive global economy and in the investment community, tinkering does not get noticed. What would get noticed and what would create a great deal of interest in Canada is if the government were to take the bold step that our party presented in the last federal election and eliminate federal capital gains tax completely thereby creating a huge unlocking of capital in Canada.

Capital gains tax results in people making decisions based on tax decisions, not on economic decisions, and it locks up capital. Whenever capital is locked up a static situation is created which prevents capital from going where it ought to, to create jobs and opportunities in the most productive place. We presented that in our last platform. In fact I was co-chair of that platform process. I urge the hon. member to read that platform because it was a great platform and well regarded by all four Canadians who read it. Perhaps he could be the fifth. If more Canadians had read it, they would have voted for us in the last election as well. Maybe he will join us in our fight for a more competitive tax system on this side of the House.

[Pauline Picard, Bloc, Drummond, QC]

Madam Speaker, I would like to thank my colleague from the Progressive Conservative Party for his remarks, and I would like to ask him the following question. Does he not find the role played by Canada on the international stage with regard to tax practices somewhat troubling? For example, on the Department of Foreign Affairs and International Trade web site one can read the following:

Canadian banks have long had a successful presence in Barbados, and its important offshore financial sector is led by Canadian banks and insurance companies. Canadians now account for 90% of Barbados' offshore banking.

In view of the fact that that country is a tax haven, does my colleague not find it somewhat shocking to find such propaganda on the DFAIT web site?