Madam Speaker, it is with pleasure that I rise today to speak on Bill C-48. Tax reform is an issue that I am always interested in speaking on. We see continued evidences of tax tinkering from the government, a one-off ad-hockery sort of approach to dealing with taxation, but no overall strategy to improve Canada's competitiveness, to make Canada a northern tiger as opposed to a northern kitten, and to make Canada a magnet for capital and the best minds and the brightest minds in the world.
We support the direction of this legislation. We have some concerns about the increase in the effective tax rates on the mining industry. Any increase in taxes on industry in Canada is a concern for us because all sectors in Canada are overtaxed. In the old days the government could get away with that, but today in a hyper-competitive global environment high taxes no longer just redistribute income: high taxes redistribute people and capital. So we do support reducing the taxation on resource based industries and standardizing the tax treatment of industries in the resource sector. This goes back to the Mintz report on business taxation in Canada.
In fact, I remember that when the Mintz report actually came out it was my recommendation and the recommendation of my party that the government move to implement the recommendations of the Mintz report without a lot of delay. The Mintz report is probably one of the most erudite and intelligent studies of the Canadian business tax system that has ever been conducted. It provided a very important road map on how to build a more competitive tax system in Canada.
The government often speaks of Canada having lower corporate taxes than the United States. That is just patently false. If we were dealing only in statutory rates we are closer, but the United States is far more competitive than Canada in terms of effective tax rates, corporate tax rates and taxes on investment.
If we go beyond that and look at some of the national economic success stories in the last 10 to 15 years, most of them have been based on governments that were willing to embrace significant and broad based tax reform, not just tax relief, which is often done based on politics, not on public policy parameters, but tax reform based on creating greater levels of investment.
Of course, greater levels of investment lead to greater levels of productivity. Greater levels of productivity lead to higher standards of living and to an increase in the government's ability, of course, to afford the social investment that people demand and need.
Ireland is probably one of the best examples of a country that has turned its situation around. I come from Atlantic Canada and I very much understand its situation, based on generations of Atlantic Canadians leaving Atlantic Canada and going to other parts of Canada seeking opportunities. Ireland was a lot like that for a long time, in fact for generations. Now, for the first time in a long time, children of expatriate Irish in other parts of the world, in Canada or the United States as an example, are returning to Ireland. In fact, people are going to Ireland seeking opportunities, largely based on the Irish government's dramatic, significant and innovative tax reform package, which led to one of the most competitive corporate tax regimes anywhere in the world.
There is no better tax reform in terms of its ability to attract investment and improve productivity, prosperity and the standard of living than corporate tax reform, reform of taxes on investment and capital. Ireland had a 92% growth in its GDP per capita over a 10 year period. During the same period of time, Canada had a 5% growth in GDP per capita. The Irish standard of living has grown beyond that of Canada. It is shocking. Twenty years ago Ireland was an economic basket case and today it is truly a Celtic tiger. It has set an example of what can be done if governments take some risk and present some bold public policy, particularly on the tax reform side.
Some of the ideas that I would like to see the government embrace in a tax reform package include eliminating personal capital gains tax in Canada. There was no capital gains tax in Canada prior to 1971 with the Carter commission and the implementation of the capital gains tax. The original capital gains tax was designed to replace the inheritance tax, but eliminating the inheritance tax and replacing it with the capital gains tax made Canada a great place to die but not a great place to live.
We really should take a serious look at eliminating Canada's capital gains tax, not reducing it or tinkering with it but eliminating it. That would unlock an immense amount of capital. Capital gains tax serves to lock up capital, to prevent the flow of capital to the most effective opportunities. It hurts productivity because investors are compelled to make decisions based on tax reasons and to hoard money into static investments that may not make sense from an investment or a business perspective but simply make sense from a tax avoidance perspective.
We would unleash incredible entrepreneurial potential in Canada if we actually went beyond the U.S. instead of always just trying to catch up with the U.S. in key areas. In the capital gains area, if we actually went beyond the U.S. and eliminated the personal capital gains tax in Canada it would have a tremendous impact on Canada's economic growth and prosperity and the environment for entrepreneurs and investors here.
I would also suggest that it is a good time for us to consider what Roger Martin, the dean of the Rotman school of business at University of Toronto, has proposed, and that is allowing a 100% capital cost allowance write-off at the time of the investment. That would create huge incentives for companies to invest in productivity enhancement and provide a huge advantage for Canadian companies over American companies. Currently because of our treatment of capital cost allowance we are compared to the U.S. That is one of the reasons why the United States still has a significantly lower effective corporate tax rate environment: because of our uncompetitive capital cost allowance system in Canada.
I would go further. I would suggest that we eliminate corporate welfare from Industry Canada, HRDC and regional development programs and use that money to reduce corporate taxes nationally, but also in a targeted level in the regions. I will give some examples.
I come from a region where there is a program called ACOA, the Atlantic Canada Opportunities Agency. ACOA has a $447 million per year budget. Total federal corporate taxes in Atlantic Canada are $380 million. We could actually eliminate ACOA and eliminate federal corporate taxes in the region, which would leave us with provincial corporate tax rates in the 12% range, which coincidentally is about the same as Ireland's. When we really ask ourselves the question of which strategy would have the greatest capacity to create economic growth, prosperity and opportunity in Atlantic Canada, 500 ACOA bureaucrats driving around Atlantic Canada trying to tell people how to start small businesses or the most competitive corporate tax environment in North America and one of the most competitive in the world, the answer is self-evident.
We ought to take the same approach with all regional development programs in Canada. Instead of bureaucrats and politicians trying to select between winners and losers, we should allow the market to identify the winners. That kind of approach would unleash the entrepreneurial potential of our regions. It would in this case allow Atlantic Canada to pay into equalization in the not so distant future which would be good for all of Canada. It would create a tremendous level of growth, prosperity and opportunity.
This is an important discussion right now because one of the topics we are talking about in this sessions is the reform of Canada's EI system. We should move toward individual EI accounts. We should allow Canadians to build up capital within their own individual EI account if they do not draw from it frequently or perhaps do not draw from it at all. For instance, if a Canadian were to pay into his or her own individual EI account, after 10 years of paying into it and not drawing out from it, he or she would receive a statement every year of that EI account balance. It would go up incrementally each year. It would grow over time.
People could withdraw from their accounts to upgrade their skills educationally. That would address the very real issue of underemployment. Underemployment is growing in Canada and is as significant an issue as unemployment. The ability to withdraw from an EI account to upgrade skills, to take a course which is needed to go from underemployed to fully employed would be good for Canadian productivity.
Currently, government funding is available for people to upgrade their skills if they are already drawing EI, but not if they are actually working and want to upgrade their skills and need that little bit of help. For example, some people in their 30s, 40s or perhaps 50s are at a stage in their lives where they are stuck in a career rut and they want to improve their lot and that of their families. There is nothing that the government will do for them from a funding perspective to facilitate that unless they are actually unemployed and drawing EI. This would help in that regard.
Alternatively if people did not draw from EI to upgrade their skills or only rarely drew from EI during their careers, they would have a little bit of capital in their EI accounts which upon retirement they could roll into their RRSPs. That would be a reward system in many ways for Canadians who work hard and do not draw from the EI system. It would be an EI system that works for Canadians who work. That kind of incentive and that kind of reward based system would help significantly.
Going further, we should eliminate the capital tax completely. Currently the government is phasing it out over a period of time. We have the budgetary capacity to eliminate the capital tax immediately. All of this can be done without creating a deficit. We are committed, as are Canadians, to running government deficit free, to living within our means. It is going to involve not just tax reform but part of it will also involve considering the size and the effectiveness and the role of government, what the federal government should focus on, what it could do effectively and what it should not be trying to do.
It seems ridiculous to me that we have a federal government that cannot provide a coherent foreign policy. It cannot manage a military effectively or fund a military. It cannot from a trade policy perspective protect Canadians' interests by protecting our trading relationship with the richest market in the world. The same government that cannot handle things such as the military, foreign policy and trade policy which are clearly in the federal domain is trying to run the education policies of the provinces and trying to micromanage the health care systems of the provinces.
The federal government should focus on those areas. This could mean taking a more aggressive approach in dealing with the Americans on the BSE issue, or working toward a Canada-U.S. security and economic partnership which not only addresses perimeter security issues but goes further to harmonize our regulatory burdens between the two countries and also as part of it addressing the ambiguity around resource pricing and subsidies and replacing it with clarity to avoid a lot of those types of trade disputes. If the government really focused on those federal domain areas, it would not have time to focus on trying to micromanage the affairs of the provinces.
The government, through HRDC, must stop the incredible intrusion into the private sector across Canada. An incredible amount of waste exists through small and large scale corporate welfare. The government could target some of that money toward tax reduction and tax reform in lockstep. The government must address some of the waste in government.
The fact that a ministerial assistant spent $28,000 on food over a period of a year is shocking. That individual ought to have been named by the Canadian Restaurant Association as the political staffer of the year which is probably the only award he ought to receive. Canadians have to live within their means and pay taxes. They work hard and are having trouble just maintaining their standard of living and that of their families. It is shocking for them when they see that kind of egregious waste in government.
We need to find ways to not just in an ad hoc manner tinker with our tax system but reform Canada's tax system, reform Canada's regulatory system, address the waste in government and reconsider the role and effectiveness of government in key areas.
Every one of us in the House regardless of our political party ought to be considering ways that we can improve productivity, prosperity and the standard of living of Canadians.
We cannot afford to dilly-dally and dither while other countries are embracing bold innovative approaches to economic growth and economic reform. Canada is a relatively small country on the edge of the largest market in the world. We have the opportunity for Canada to become a true northern tiger. We must make Canada a magnet for capital, make Canada a magnet for some of the best and brightest minds in the world and to allow Canadians to have an unprecedented level of economic growth.
Free trade is a policy to which my party is unequivocally committed. It has created incredible wealth and prosperity for Canadians. We need to go further in a post-NAFTA environment and strengthen our trading relationship with the United States. As a principle we must look toward a true Canada-U.S. security and economic partnership. At the same time we must revolutionize our tax system and regulatory burden so that Canadians not only have access to the richest market in the world but they have a tax system and an economic environment that makes it an advantage to be Canadian as opposed to a disadvantage.
All Canadians want to live here, but we ought to be building a tax system that makes Canada not just a good place to live but the best place to invest and grow companies and businesses. Regardless of where they are in the world, we should allow them to make Canada the location of choice within North America.