Debates of Feb. 2nd, 2005

Federal-Provincial Fiscal Arrangements Act

[Bill Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, it is a pleasure to be able to say a few words today about Bill C-24 at second reading. Hopefully we will be able to dispose of this bill, at least at this stage, later this day, have a vote and get it off to committee, where we can continue this debate about equalization.

Certainly equalization is a very important part of how the country is constituted. It predates the Constitution of 1982. I think it goes back to 1957. In the process of patriating the Constitution in 1980-82, we enshrined the principle of equalization. I was here at that time. I think that was a very important thing to do: to establish at a constitutional level the fact that as a country we want provinces to be able to provide reasonably comparable levels of public services.

In order to do that without so-called have not provinces having to tax at a level that would make them uncompetitive and therefore create an even worse economic situation for them, there is a pooling of resources at the federal level pursuant to a particular formula by which provinces which fall below a certain fiscal standard, shall we say, receive equalization payments.

It is also timely that we are having this debate this afternoon, because we have in recent days witnessed the Atlantic accord between the federal government and Nova Scotia and Newfoundland and Labrador. This bears on the equalization debate, because what was at stake there was a feeling on the part of Newfoundland and Labrador and Nova Scotia, first of all, of course, that a promise the Prime Minister made during the election campaign be kept. That promise had to do with how and when the equalization formula is amended as a result of wealth that accrues to provinces as a result of new revenues, in this case oil and gas revenues. The federal government reached an agreement on January 28, 2005, whereby Nova Scotia and Newfoundland and Labrador can keep 100% of their offshore energy revenues.

This we welcome, but it also at the same time creates questions about how other provinces are being treated. For instance, it creates questions, I know, in the minds of many people from Saskatchewan.

Indeed, my leader, the hon. member for Toronto—Danforth, asked a question today in the House with respect to what the government intended to do in regard to Saskatchewan. Because although Saskatchewan is happy for Nova Scotia and Newfoundland and Labrador, it hopes that this ultimately means good news for Saskatchewan too. It feels that at the moment as a result of the Atlantic accord an argument could be made that revenue from natural resources is being treated differently depending on what jurisdiction that revenue is being raised in.

For instance, looking back over the last 10 years, Saskatchewan makes the argument that a similar deal for Saskatchewan would have realized over $4 billion for the Province of Saskatchewan if the federal government had not taxed back its oil and gas revenues, that is to say, when it was in the have not status. Saskatchewan is no longer in the have not status, but when it was, this is the amount of money that was lost to the Province of Saskatchewan because it did not have the kind of deal that Nova Scotia and Newfoundland and Labrador now have with the federal government with respect to their oil and gas revenues.

It is not surprising that the Government of Saskatchewan, and I believe with the support of the opposition in Saskatchewan and I am certain with the support of the people of Saskatchewan, feels that some similar treatment of the revenue from its energy resources is due to Saskatchewan, if fairness is to be the rule of the land.

I think we will see a growing debate about the ramifications of this welcome agreement between the government and Newfoundland and Labrador and Nova Scotia, a welcome agreement but nevertheless an agreement that has ramifications for other provinces that feel they need to be treated somewhat differently now as a result of that agreement having been reached.

We hope it is not the case that the only difference between Saskatchewan and Newfoundland and Labrador, for instance, is that the Prime Minister did not go there in the dying days of the election and make a promise he had no intention of keeping in order to save Liberal candidates in Saskatchewan. I hope members would not think me cynical to suggest this, but maybe it was because there were no Liberal candidates to save in Saskatchewan, except the Minister of Finance himself, that no such promises were made.

The fact of the matter is that the Prime Minister made this promise in Newfoundland and Labrador. If it is a promise that was rooted in a commitment to fairness and not just rooted in the politics of the moment, a promise which the Prime Minister came to regret and then had to live up to as a result of pressure from those provinces, if it is a promise that was rooted in fairness, then ultimately this Prime Minister is going to have to deal with the legitimate feelings of the Saskatchewan government and the Saskatchewan people that something different is due to them as a result of that promise made and the promise ultimately kept to Newfoundland and Labrador.

The Government of Saskatchewan, for instance, argues that its province loses on average about 90% of all the provincial royalties and taxes collected on oil and gas developments. In fact, it claims that in some years Saskatchewan has lost in excess of 100% of all its provincial energy revenues. This means that the people of Saskatchewan have been realizing very little financial benefit from the depletion of a non-renewable resource. I do not think that is fair, particularly when one considers that now Nova Scotia and Newfoundland and Labrador can retain 100%.

It is only fair, it seems to me, that the case of Saskatchewan be looked at. I understand that Saskatchewan will be making its case to this independent panel that has been set up to advise on the equalization program.

With respect to Bill C-24, we are supporting it at second reading. We want to get it into committee but we certainly do not think that this is by any means a perfect piece of legislation. We feel that we should look at amending Bill C-24 to ensure that, at a minimum, growth in the equalization program keep pace with growth in the nominal gross domestic product. Hopefully this is something the committee can look at.

Under proposed paragraphs 4.1(1)(b) and (c), growth in total equalization payments is being arbitrarily constrained to 3.5% per year. The result of this is that the value of the program will continue to be eroded over the next several years and will increasingly be inadequate to meet the commitment of the federal government to address fiscal disparities under section 36(2) of the Constitution. Thus, we have a formula here that is not sustainable from the point of view of the provinces. Certainly I know that this is how the Government of Manitoba sees this formula that would be enshrined through Bill C-24.

It is widely understood, I think, and accepted, regrettably, that the federal government's financial commitment to equalization has declined over time. Equalization as a percentage of GDP fell from about 1.1% in the mid-1980s to just 0.7% by 2003-04.

This has occurred for the following reasons, the following actions on the part of the federal government. It has happened because the government is now using a five-province standard instead of a more rational all-province standard. It has occurred because, in the same vein, the federal government has made unilateral changes which made coverage under the program less rather than more comprehensive.

I think the provinces welcomed the October 2004 decision by the federal government to boost base funding in 2004-05 and 2005-06 although, as I have already said, they are concerned--and we share that concern--that the escalator being set at just 3.5% will undermine the improvement that this represents over time unless it is changed to reflect economic growth.

It may be that during committee deliberations and perhaps at report stage the bill could be amended. Proposed paragraphs 4.1(1)(b) and (c) could be amended so that rather than 3.5%, total payments under the equalization program could be set at the average rate of growth in Canada and Canada's nominal gross domestic product for the three previous years beginning on April 1, 2006.

It is clear that the federal government is in a position to do this. The provinces are not asking the federal government to do something that is beyond its fiscal capacity to do. When we look at the history of federal surpluses, $61.3 billion between 1997-98 and 2003-04, and the federal government's projections of future surpluses, $61 billion between 2004-05 and 2009-10, the projections made by the Liberals themselves in their own platform, the modest cost associated with the kinds of changes the provinces are looking at is easily affordable. What we are suggesting is easily affordable.

Assuming nominal GDP growth would average about 5.5%, the extra cost of ensuring the value of the transfer is not diminished would be less than a quarter of a billion dollars per year, a drop in the bucket when we think of the overall fiscal surpluses that the federal government is now dealing with. This would go some way but certainly not all the way toward addressing the problem of the équilibre fiscal that my colleagues in the Bloc talked about. It would also go some way toward addressing a concern that we share about the fiscal imbalance that now exists between the federal government and the provinces. Here would be an opportunity, at one level, to address that fiscal imbalance and the government seems unwilling to do the right thing.

I am sure that at some point a Liberal will argue that the government is putting an additional $33 billion into the equalization program with the October 2004 deal. The provinces consider this number to be wildly exaggerated in terms of the actual increase in funding, especially in the medium and long terms, because before that increase in October 2004 funding for the program was at an all time low, both as a per cent of GDP and as a per cent of federal revenue, and would have rebounded in any case over time as the Ontario economy recovered along with the economies of the other provinces.

So the $33 billion improvement that the Minister of Finance likes to talk about is the sum of all additional funds and is based on the naive assumption, or certainly the convenient assumption, that equalization would have remained unchanged at its 2003-04 low point for the entire 10 year period. This is the kind of manipulation of figures and statistics that the federal government is famous for in its dealings with the provinces.

The federal deal actually provides less than what provinces would have received if the federal government had listened to the premiers and moved to the all-province standard with full revenue coverage, something that was also recommended by the Senate standing committee.

These are some of the things that I think need to be put on the record as we move into the closing stages of this second reading debate on Bill C-24.

I hope that the federal government will listen to these arguments and see that it has an opportunity to really live by the spirit of equalization that was enshrined in our Constitution in 1982, and which has been a feature of the Canadian social fabric ever since I was knee-high to a grasshopper.

We look forward to being able to make these arguments along the way and hope that the recent accord reached between the federal government and Newfoundland and Labrador and Nova Scotia will also provide an opportunity for the concerns of Saskatchewan, and perhaps even other provinces to be revisited in a way that leaves no Canadian, no matter where they live, feeling that somehow they have been treated unfairly by the equalization formula or treated unfairly because it just so happened that the Prime Minister did not go to their province and make a last minute promise in the desperate last days of an election campaign that was almost lost by that Prime Minister.

[The Deputy Speaker]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Deputy Speaker]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker]

In my opinion the yeas have it.

And more than five members having risen:

[The Deputy Speaker]

Call in the members.

The recorded division on the motion stands deferred until 5:30 this day.

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows:the hon. member for Kildonan—St. Paul, Justice; the hon. member for British Columbia Southern Interior, Air Transportation Security; the hon. member for Kamloops—Thompson—Cariboo, Canadian Heritage.

The House resumed from December 14, 2004 consideration of the motion that Bill C-33, a second act to implement certain provisions of the budget tabled in Parliament on March 23, 2004, be read the second time and referred to a committee.

Budget Implementation Act, 2004, No. 2

[Leon Benoit, Conservative, Vegreville—Wainwright, AB]

Mr. Speaker, we are at second reading of the Budget Implementation Act, but it is not for this year's budget. It is for last year's budget. The speed with which the government operates sometimes is simply astounding. It really is unbelievable. We have had an election, but with the empty agenda that we have seen in the House, it is amazing that we are still only now on second reading of one of the budget implementation acts for the 2004 budget.

We will be talking about the 2005 budget, which is expected to come down in a couple of weeks from now, probably three weeks from now. However, it is important before we get into the 2005 budget that we look at what was and was not put in to the 2004 budget.

Canadians were clearly looking for tax relief in the 2004 budget. Certainly, they knew that we had huge surpluses in this country. As a result Canadians, I am sure, were expecting some kind of tax relief. They had been overtaxed. That is what a surplus is.

There was more than adequate money to deal with the important issues and services that Canadians expect government to provide. There is ample money for that and some substantial tax reductions.

Yet, what were the tax reductions? The government says that it is doing wonderful things on tax reduction. It is going to reduce the air security tax. It was just a year or two ago when it implemented the air security tax. It was clear from the beginning that it was putting this tax in place to help deal with air security issues.

Over time, the opposition found out that in fact the amount being raised in this huge air tax was way beyond what was needed for security. Therefore, our transport critic, the member from British Columbia, hammered away at the government day after day, month after month to eliminate that tax because clearly it was not needed for security measures.

The government first of all completed resisted. It said that it was going to keep the tax in place. It just refused to lower the tax as our former transport critic encouraged.

However, now in this budget, it is no longer possible for the government to deny that this tax should be removed. Instead of removing the tax, it has reduced it somewhat. It is a step in the right direction, but it is not exactly a wonderful thing the government is doing. All it is doing is reducing partially a tax it put in place, a new tax from a couple years back. It is interesting the way the Liberals spin these things.

The bill makes timid attempts at dealing with measures to assist small business. It is not the time for timid attempts in dealing with the tax involved in small business. It is time for some bold measures.

However, there is one thing we have seen that is undeniable. This government is not a government of bold measures. It is a government that is really trying to do nothing or as little as possible and stay in power. The main reason for it existing is being in power.

The current Prime Minister, as we have seen, is really timid. He is weak. He has no apparent agenda and the business of the House shows that.

We had very little in terms of business in the House in 2004. I encourage Canadians to look at the bills that have been on the agenda and to look at their content. It is very thin gruel indeed. Still we are working on second reading of implementing the 2004 budget. That tells us a lot about the government.

When it comes to really important issues like some tax reduction for business, what has it done? Just very weak and timid measures in this budget. There is so much to be done.

There are a lot of indications that the economy in the United States and Canada will start to weaken. It is exactly at that time that we expect bold measures from government to stimulate business. Regrettably, we simply have not seen that.

We were hoping there would be some serious attacks and measures taken to help families across this country. This is an agenda that our party has taken on for many years, trying to have taxes reduced, especially for low and middle income families. Our party wants some bold measures taken when it comes to making it easier for families to look after their children.

What did the government do in response to the issue of child care? During the last election campaign the government made great announcements of a national child care program. However, that is not what is being asked by Canadians. This was the fourth election that the Liberals promised this national day care program. It has not been delivered yet. In my opinion that is a good thing. We expect the government to break its promises because it does it routinely. However, in this case it is a good thing because it is not what Canadians are looking for.

Canadians do not want a big national day care program, where somehow government believes it can look after children better than parents. Canadians want some measures to be taken to make it easier for parents to look after their children, as they see fit.

If parents choose to look after their children themselves at home, then they should get the same benefit as a family where a parent chooses to put children into the day care system somewhere. That is a reasonable measure to make. Leave the decision in the hands of the individual families and parents.

This is what the Conservative Party feels is an appropriate measure. We do not feel it is appropriate to do as this government is talking about once again for the fourth time and that is to put in place some grandiose national child care program. That is not what we want. This is not what we are looking for at all. It is not what Canadians are looking for.

Sadly again there is nothing in the 2004 budget on day care. I know the finance minister finally after some cajoling has talked to our finance critic. He has been reminded that he is in a minority government, not a majority. The finance minister should listen to the opposition parties. Our critic has sent the message pretty clearly that we expect some serious tax reductions in this budget, including something for families.

Hopefully, in the 2005 budget we will see a little bit of action taken and not the big void that we saw in the 2004 budget.

When we look at the 2004 budget and we go through this implementation bill, we would expect some serious measures that were taken. At the time of the 2004 budget the government knew it was going into an election. The government knew they were going to have an election. The election occurred about four months after the budget.

Most people would expect it would be a strong budget, putting forth the best effort. That is what governments tend to do when they are going into an election campaign. If this is the government's best effort, then it is indeed a sad commentary on the weakness, the lack of direction, the unacceptable focus of the Prime Minister and the government. The focus does not seem to be there.

What are the two issues that the government lays before the Canadian people? The two issues are a national day care program and same sex marriage. In both cases these are not issues that Canadians asked the government to bring to our Parliament as the major focus. The government has lost its focus. These are simply not things that most Canadians wanted the government to bring before the country.

The government and the Prime Minister have totally lost focus. They have totally lost touch with what Canadians want. This is a sad commentary. We see it in the 2004 budget and I am afraid that the 2005 budget will not be any better. My greatest concern is that not only have we not seen the tax reduction in 2004, but that we will not see it in 2005.

If we look at the one thing that Canadians need out of this 2005 budget, it has to be some serious tax relief, especially for low and middle income families. That is what we want. That is what families have told us they want. We will see in the upcoming budget, but I doubt very much that it will be a big part of the government's agenda for the country, and that is a sad thing.

The government has been ripping off taxpayers by an extra $10 billion a year, fudging the numbers on the surplus year after year, hiding the $10 billion so it can blow it on things like the sponsorship program, the billion dollar boondoggle and the gun registry which is now at $1.5 billion or $2 billion, who even knows. That is completely unacceptable.

The surplus should be reported honestly and openly but that has not been done. We have been calling for some independent analysts to examine the books of the government and forecast what the surpluses will be so Canadians will know how much of their tax money is being spent, how much is coming in and how much the surplus is. If we see surpluses of $10 billion, why can that not go to tax relief instead of to some grandiose national day care program or some of the other wasted programs that we have seen from the government? We keep asking those questions but I am afraid we do not get the answers from across the floor.

Not only does the 2004 budget, which we are still talking about a year later, the implementation legislation, weak and show a lack of leadership, but here we are going into the 2005 budget. We have a minority government. The new Conservative Party has 99 members of Parliament in the House. The government, I think, has 133. There is not a lot of difference. We should certainly have some serious say on what is in the budget.

I am actually quite disturbed by the lack of consultation between the government and the official opposition. It is not because we have not tried. I think Liberal members owe it to Canadians to recognize that we have a minority government in place. A minority government means opposition parties should be consulted, in particular the official opposition party which is what the new Conservative Party is.

Why has that meaningful consultation not taken place? Why am I so afraid that once again in the 2005 budget we will see more of this lack of leadership and more of the government trying to hide these surpluses? It is an overtaxation of $10 billion a year. How about returning that to the Canadian taxpayers so that they can spend that hard-earned money the way they see fit? That is the approach that we take to this.

Our approach should be recognized in the budget brought down by the government but here we are, unbelievably, three weeks before the 2005 budget is about to come and what are we talking about in the House? There is very little of substance. We are still talking about the implementation bill for the 2004 budget. Where is the leadership?

We have seen the lack of leadership on so many other issues from the government. The foreign affairs agenda is astounding. Our member from Calgary has done a more important and meaningful job in China than the Prime Minister did on a foreign affairs trip. I think that demonstrates the lack of ability, the lack of will or the lack of understanding on the part of the Prime Minister as to what his job is. His job is to provide some real leadership on issues that really matter to Canadians, issues like health care. Very little has been done on that issue. An agreement was reached with the provinces but nothing meaningful has been done on how we are going to sustain the health care system.

The next issue that comes to mind is taxation, especially when we see families that are having difficulty just getting by.

A recent study, which was reported widely, showed that if families feel like they have not been making progress during these so-called good years, it is because they have not been making progress. The study showed clearly that the disposable income for families actually has not been increasing through what the government calls good times.

These are good times for the government because it is raking in more and more tax money from taxpayers, but does that mean these are good times for Canadian families? No, they are not. Taxpayers have lost ground in the time the Liberal government has been in office. Through all these good economic times, they have actually lost ground. They have not made the gains.

The government's coffers are loaded with money. It has a $10 billion surplus every year but that has not helped Canadian families. All that means is that too much money is being taken from Canadian families. Canadian families are overtaxed. I know I have been repeating myself on this issue but it seems like it will take a lot more repetition for the government to get the message. It is just not listening on this issue.

If the government says that I am wrong, it can prove me wrong. What I hope to see in the upcoming budget are some serious tax reduction measures for low and middle income families. Many Canadian families simply cannot deal with their situations not improving and, in fact, situations that are actually worsening in spite of an economy that is supposed to be so strong.

What did the study I was referring to show in that regard? It showed that the government was taxing too much. It has increased taxes too much. It talks about tax reduction and makes some tax reductions on the one hand, but on the other hand it increases taxes and the take increases every year. Every year the tax take of the government from hard-working Canadian families increases. It has to end. It has to be slowed down and reversed. We can start with a tax reduction to low and middle income families.

We are in the House today looking at the budget implementation bill for the 2004 budget. The government is a year behind with no apparent direction. The Prime Minister seems completely rudderless, with no focus. We have a government that, quite frankly, does not deserve to be in office.

I am trusting that with the very positive proposals we have put forth for Canadian families, we will be on the government side after the next election, that we will provide a lot more meaningful budgets than the Prime Minister and finance minister have provided and that we will make things better for Canadian families. It is long overdue.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, we are dealing with a budget implementation bill. I know the member is always enthusiastic when he is talking about not only the last budget, but what should be in the next budget.

I want to briefly comment on the child care matter he dealt with. In my own view, I do not think Canadians are homogenous and can be pigeonholed into one or the other. People who do not go to work will be on welfare and if they have children they do need to have some support.

The member will well know that I have worked hard to support families that have one parent who stays at home to provide direct parental care to their preschool children. We do have to be balanced and be reflective of the reality of families.

The points that I want to put to the member have to do with taxation. In a 2004 report it was summarized and reported that in the year 2002, 15 million Canadians filed income tax returns and paid taxes. Another 7 million taxpayers who filed returns paid no taxes, but they filed returns for other purposes. We are really talking about 15 million Canadians filing tax returns and paying taxes.

If we were to give $100 to each one of those 15 million people, we would be talking about $1.5 billion. If we were to give $500, all of a sudden we would be up to the level of the last surplus. A $500 tax cut for Canadians would wipe out last year's surplus.

The member is saying that he wants serious tax cuts. How much in tax cuts is he proposing if $500 would cost almost $9 billion? What does the member mean when he says serious tax cuts? Let us get a dollar figure. Let us get the magnitude so that we can understand what commitment his party is trying to make, not only to one year when there is a surplus, but which will be with us as an obligation of reduced revenue each and every year forever?

[Leon Benoit, Conservative, Vegreville—Wainwright, AB]

Mr. Speaker, I do believe the hon. member understands how refundable tax credits work and understands that we can have, through the tax system, a tax credit that would go to individuals who do not pay taxes.

Therefore, rather than ignoring low income families, the system we are talking about, which has been done before, tends to target the low and middle income families. What we are talking about is focusing on low and middle income families, which is not difficult to do. We can do that through the tax system. Even where families do not pay tax up to the amount of the credit, then that money will go to that family.

We are talking about targeting. We are talking about balance. The member is talking about these numbers, $500 per individual and that kind of thing. We are talking about targeted tax reduction. We are talking about amounts a lot larger than the member seems to understand. It can be done very comfortably while still ensuring that we do not go into a deficit position.

We should not forget that our party is the party that came to Ottawa as the Reform Party in 1993. It has since merged with the Progressive Conservative Party. When we came here in 1993, what was our main platform? It was balancing the budget. We had a plan to do it in three years. We called it the zero in three plan. We are the party that has always said that we would have no more deficits, that we will never get into a deficit position again.

In the 1993 election the Liberal Party said that a deficit was not important. However when it got into power it saw that it was quite a different situation. The Liberals were forced, because of our agenda, to balance the budget. The hon. member should have, over the last 11 years, learned a little bit more about what is really possible in this country.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, I would like to thank my colleague from Vegreville—Wainwright.

[Bill Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, on a point of order, I was here when the question and comment period was first brought into being. Although it may not be in the Standing Orders, my understanding is that the Chair is expected to recognize people from other parties who want to question the member. It is only when no one else is rising that people are entitled to softball questions from their own colleagues.

[The Deputy Speaker]

I thank the member for Elmwood—Transcona for that. I was anticipating this other member getting up and perhaps I should not have. I certainly have noticed the member for Elmwood—Transcona and he will be next on questions and comments.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, my colleague from Vegreville—Wainwright delivered a pretty good presentation of the mismanagement by the Liberal government.

The Liberal member opposite does not understand when my colleague is talking about tax relief that there is a direct relationship between a low level tax regime and a buoyant economy. The member asked what it would cost the government. This money will not be put away under the bed. It will be spent. It will spur the economy and bring in additional tax revenue to the government. The member has to get that point clearly in focus in order to understand what the Conservative Party and my colleague were talking about.

I want to ask my colleague about a couple of things that were not mentioned in the budget. The fact is that for about 15 years the disposable income of the average Canadian family has remained stagnant despite raises in pay. While the Liberals crow about tax relief for Canadians, that just is not so. It is false crowing.

Would the member comment on that?

[Leon Benoit, Conservative, Vegreville—Wainwright, AB]

Mr. Speaker, it is an interesting point that the member has made.

We hear a lot of things said by members of the government about the wonderful things they are doing. My question is that If they are doing such a wonderful job through all these good economic times, then why on earth has disposable income not increased? That is the point I made during my speech. The answer is they are taxing our small businesses in particular to death and they are taxing families to death. It is simply that the level of taxation is much too high.

Let us focus on reducing taxes to small businesses, which would generate more revenue, although I would hope that would be left in their pockets. That is a possibility too. It is certainly what I would like to see. Also let us focus the child care measures on the individual parents and individual families.

[Bill Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, the member talked about the fact that over the last 15 years, and I am not sure what studies he is citing, families do not have the same disposable income that they used to have, and I agree. Where I find myself at variance with the hon. member is that I think it is a very limited argument to suggest that this is only because of, or even because of for that matter, the taxation policies that have been in place over that period of time.

I wonder why the hon. member ignores study after study that shows that one of the reasons Canadian families do not have the disposable income they used to have is that we now have a low wage economy compared to what we had 10 or 15 years ago. This was deliberately created with the knowledge and consent of the member's own party, the predecessor party, the Progressive Conservative Party. The free trade agreement was designed to bring down wages in this country.

It does not matter what kind of tax regime we have. If people are making half as much an hour as they used to make because their old manufacturing jobs have disappeared and they are now working for a telemarketing company for seven bucks an hour instead of making something for 16 bucks an hour, we could have as low a tax regime as we liked, but we would still have people with no disposable income because they are not getting paid a decent wage.

Why do we never ever hear that from the Conservative Party, the Reform Party, the Progressive Conservative Party, or whatever that party will morph into next?

The fact is that party never gets the message that Canadians who are poor are poor because they are not being paid enough by their employers because there is too big a surplus going into profit margins. It is not taxes; it is the fact that people are not being paid enough in the first place.

[Leon Benoit, Conservative, Vegreville—Wainwright, AB]

Mr. Speaker, I agree with the member that the type of government provided by the Liberal Party over the past 11 years has pushed wage earners away from the higher earning jobs to the McJobs, as they are called, the really low end jobs. That has happened all too much. The fact is that if taxes were lowered there would be a lot more disposable income automatically. That is the way it works.

I have a lot of respect for the member but I would like to say that he thinks the solutions come from social programs. He is a socialist and he is proud of that. The problem is that socialism has not worked in any country in the world. The kinds of proposals that we are putting forward will make things better for Canadian families, especially low and middle income families. They have been proven to work around the world. That is the difference between the member's philosophy and mine.

[Guy Côté, Bloc, Portneuf, QC]

Mr. Speaker, we in the Bloc Québécois are very conscientious vis-à-vis our role within this Parliament. We always deal with each issue with rigour. As we have indicated on many occasions, we will support any government bill which we feel is good for the citizens of Quebec, but not those which we feel do not respond to the demands and concerns of Quebeckers.

Bill C-33 implements certain provisions of budget 2004. Allow me to mention in passing that, to a new member, it seems rather odd to be addressing this House on a budget tabled a year ago in order for some of its provisions to be implemented.

We will be voting in favour of this bill because, while not perfect, it does contain a number of provisions that meet our approval.

Bill C-33 is comprised of three parts. The first part implements amendments to the Air Travellers Security Charge Act to reduce the amounts charged to airline passengers under this act.

Although the terrible events of September 2001 unfortunately made it necessary to allocate additional funds to ensure traveller safety, the need is obviously not nearly as great at this time. This bill therefore represents a first step, lower security charges.

The second part of the bill implements the amendments to the First Nations Goods and Services Tax to facilitate the establishment of taxation arrangements between the Government of Quebec and interested Indian bands situated in Quebec. Quebec has often played a lead role, been an initiator in its relations with the various aboriginal nations within its territory. We therefore feel that such a measure will be beneficial to the aboriginal nations, among others.

The third part of the bill implements amendments to the Income Tax Act and related acts which are generally fiscal in nature. I will list some of these.

For instance, the bill mentions a new disability supports deduction. This is a good thing.

Part 3 also refers to improving the recognition of medical expenses for caregivers. Once again, since caregivers do have expenses, improving the recognition of these expenses is a good thing.

There is also reference to eliminating the deductibility of fines and penalties. This is, to my mind, totally logical. An individual or business that pays fines, tickets or penalties, regardless of what regulation governs them, ought not to be able to deduct them as a general rule.

Another point is the introduction of tax relief for Canadian Forces personnel and police deployed to international high-risk operational missions.

I very much like this measure, because Base Val-Cartier is located in the riding of Portneuf—Jacques-Cartier. Moreover, one of my good friends, who is in the Canadian Armed Forces, has in recent years been deployed outside Canada regularly and sometimes to some pretty risky places. If he can benefit from tax relief, along with some of his colleagues, that is an excellent measure.

As I have said, although we will be voting in favour of this bill, it is still incomplete in certain aspects. You know the saying about many a slip 'twixt cup and lip.

In 2004, the Prime Minister had the opportunity to change the way his government did things. He was preparing to go to the polls. He knew that there would be an election soon. He could have taken a new tack in order to properly respond to the concerns of Quebeckers. Unfortunately, once again, the Prime Minister missed the boat.

At that time, he was talking about a new era of cooperation with the provinces. We are still waiting for the smallest sign of this era of cooperation. Unfortunately, there is nothing in sight.

Despite reaching an acceptable agreement on funding health care, the federal government has totally ignored another responsibility, that of funding education. Currently, the federal government's share of education funding is around 12%. This is unacceptable. Unfortunately, this was not included in the last budget. We can only hope that the government will rectify this mistake in its next budget.

During the conference on equalization, the Prime Minister imposed his own priorities at the expense of the needs of the provinces and Quebec. He imposed his own choices despite an appearance of consultation, a speech in which he said he was consulting with his provincial counterparts. That is not the reality. The reality is that he imposed his choices; he imposed his calculations on the provinces at the October 26 conference.

The Prime Minister imposed his priorities, his choices and his calculations. He has totally ignored the reality and the needs of Quebec and the provinces. We are talking here about the fact that equalization remained unchanged during the last conference despite his offer in September. There is no talk about any changes to the formula, although this formula penalizes Quebec. It leads to unstable and unpredictable payments that will do nothing to improve the well-being of our fellow citizens.

Above all, there is something else. We regularly talk about this in the House and we will continue to talk about it as long as this government fails to understand the message being sent by the public, by the constituents. The Prime Minister has done absolutely nothing to resolve the fiscal imbalance. Worse still, he refuses to recognize it.

Let us make no mistake; the fiscal imbalance is a reality that Ottawa must recognize. The fiscal imbalance denotes a situation that is quite easy to understand. My son is nine and he understands it. What is this reality? It is that Ottawa has too much revenue for its responsibilities, while the provinces do not have sufficient revenues for theirs.

As we have seen year in and year out since 1997, Ottawa has been running astronomical surpluses. It is swimming in surpluses; it does not know what to do with them. It has run out of ideas on how to spend all that money, that is the $60 billion accumulated since 1997-98. During that time, the vast majority of provinces have had to manage potential deficits and, in some cases, actual deficits. That is completely absurd.

For Quebec, the shortfall caused by the fiscal imbalance totals $31.4 billion over six years. I would not want to be in the shoes of Quebec's finance minister and have to continually come up against this government which is not responsive at all to the needs of Quebeckers.

The most recent evaluation of the shortfall caused by the fiscal imbalance, along with Quebec's latest demands, including dollar figures, is presented in a document entitled “Correcting Fiscal Imbalance”, which was released when Quebec's most recent budget was presented, in March 2004. Reference is indeed made in this document to a total of $31.4 billion over six years.

The demands with respect to equalization and social transfers are essentially the same as those of the Séguin commission.

However, while advocating the transfer of tax fields as a basic solution to the fiscal imbalance, Quebec's finance minister proposed, as an interim measure—since one has to face reality—to significantly increase transfer payments for health and education, as well as equalization payments.

In total, Quebec's finance department proposed a $7.2 billion increase in federal transfers across Canada. In equalization alone, the federal government should invest over $5 billion, as a result of the 10 province rule and a number of other amendments to the formula. This would restore some tax fairness between Quebec and the various provinces.

For Quebec, these proposals amounted to an additional $3.3 billion for 2004-05 alone. This is, in essence, the shortfall caused by the fiscal imbalance in Quebec, as calculated by its government.

Unfortunately, we have to recognize that we are falling way short, in spite of the health accord and the forced agreement on equalization. This government just does not meet the demands of the Government of Quebec.

This year, the Government of Quebec will receive approximately $300 million more in equalization payments, following the conference that was held on October 26, 2004. It will also receive an additional $502 million for health, as a result of the same conference.

Therefore, instead of having a $3.3 billion shortfall in 2004-05, the Quebec government, its premier and its finance minister must deal with a $2.5 billion shortfall, while the federal government has generated surpluses in excess of $9.1 billion. Such is the fiscal imbalance. It is that simple. The provinces have all the trouble in the world to generate the revenues that they need to fulfill their mandate. Meanwhile, the federal government is boasting, despite its very approximate surplus forecasts, despite turning $1.9 billion into $9.1 billion, and it seems very pleased by this situation. It is outrageous.

The global solution to fiscal imbalance is simple. It involves a transfer of tax fields from the federal government to Quebec and the provinces, giving them not only greater budget resources, but also greater fiscal autonomy in the management of their own decisions. As the Séguin Commission pointed out, the solution to the fiscal imbalance is based on an increase in the level of federal transfers and, above all, on a new distribution of the tax fields between the federal government, Quebec and the provinces.

I want to go back briefly and specifically to Bill C-33. Earlier, I mentioned a number of things about which the Bloc Québécois is pleased. However, there is a specific issue to which I want to go back.

Part 3 talks about ensuring that the general anti-avoidance rules in the Income Tax Act apply to transactions effected through a misuse or abuse of the Income Tax Regulations, a tax treaty or other federal legislation. This sounds like a very good idea to us. It is a good measure. The problem is that it misses the target.

The general anti-avoidance rules were adopted in 1988, after tax authorities discovered the limits of the jurisprudence available to fight invasive tax planning. These general anti-avoidance rules can only be used if no other anti-avoidance provision in the Income Tax Act applies.

When the anti-avoidance rules apply, the penalty provided is the rejection by tax authorities of the tax advantage sought through the transaction. These general rules can apply to countless situations, provided the three conditions set in the section on the Income Tax Act are fulfilled.

The first condition is that the taxpayer gains some tax benefit. So far, so good. The second condition is the existence of an avoidance operation, that is an operation that is directly part of a series of operations leading directly or indirectly to a tax benefit.

However, the act provides an exception when the transaction is primarily conducted for genuine purposes other than gaining a tax benefit.

The third condition requires that the transaction result in the misuse of a specific provision of the Income Tax Act or an abuse of these provisions as a whole.

An amendment specifying that the abuse of a provision in a tax treaty or a section of the regulations is covered by the General Anti-Avoidance Rules in section 245 of the Income Tax Act can only be a good thing. The amendment would provide that when the legislation, the treaty or the regulations fail to cover or improperly cover a situation, the General Anti-Avoidance Rules would apply.

The concern is when the problem lies elsewhere. The real problem is not with the cases that are not covered, but with those that are clearly covered by sections drafted specifically to encourage tax evasion. Under such circumstances, the General Anti-Avoidance Rules do not apply. As luck would have it, Barbados is a flagrant example. Almost all Canadian subsidiaries in Barbados are what are called international business companies, incorporated in a way that limits considerably the amount of taxes they pay.

Since the Canada-Barbados tax treaty excludes international business companies, it does not apply to Canadian subsidiaries and they should therefore be subject to Canadian tax. No problem so far.

The government happened to draft the Income Tax Act regulations so that, even if the tax convention does not apply to such companies, even if section 148.1 of the Income Tax Act excludes only the companies clearly covered by the tax convention, Canadian subsidiaries in Barbados are considered to be covered. Obviously, this encourages evasion and investments in Barbados. Since it is clearly specified in the regulations, we cannot say that this type of situation is not covered. So, the General Anti-Avoidance Rules do not apply, even if an amendment has broadened their scope.

In closing, once again, of course, without there being any direct link with any company, especially not a shipping company, we have here a flagrant case of tax evasion in Barbados, oddly enough.

That said, we will vote in favour of Bill C-33, which contains a number of items we find satisfactory.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I am pleased to rise and say hello to the foreign affairs minister who is here to hear this barn burner.

We are talking about the budget implementation bill. When we had this budget a few months ago, some important things were in it. I know one of the members said that the government had done nothing for small business. Therefore, I reviewed what was in the budget as it related to small business.

I want to share with the House some of the things that happened in 2004, which the budget implementation bill is working through the all the details and implementing, in this important sector, the small business sector, a key creator of innovative ideas which creates jobs in Canada.

Here is what happened.

We accelerated by one year the planned increase in the small business deduction limit to $300,000 by 2005. We removed the impediment to small business fully accessing the 35% refundable scientific research and experimental development investment tax credit on expenditures up to $2 million. We extended the non-capital loss carry forward period of all taxpayers to 10 years. We implemented a new government electronic tendering system to provide fair equal access and less expensive access for all businesses in applying to the government for procurement opportunities. Finally, we committed the federal government to work with small business groups to reduce the paper burden.

I have often found that if we do a little homework on the matter before the House, it generally answers the questions that members might rhetorically raise.

There are a number of initiatives in terms of building the economy: research and innovation, commercialization of research, strengthening Canada's business advantage and the list goes on.

Each budget has a theme and each budget has some important contributions to make to the next stage in building on prior budgets. I want to raise that because I have often thought that it is difficult to assess a budget in isolation. What we really have to do is look at a series of budgets in the context of where we have been.

There has been some discussion that we have very little or no growth in the net paycheques of Canadians. The government not only introduced but implemented and extended to Canadians a $100 billion tax reduction program. One of the most expensive elements of that was also the indexation of the income tax system. That means that every year the exemptions, the credits, are indexed. It means every year there is a tax reduction for Canadians, and this is a forever thing.

I wanted to raise this because there is an interesting discussion ongoing. The hypothesis is that if there is a surplus at the end of a fiscal period, that represents an overtaxation of Canadians and that it should go back to the people. I wish it were that easy. I am a chartered accountant by profession and I have dealt with this. As businesses move through a fiscal period, they do not have the opportunity to hit the target right on the button because there are things that are not in their control.

We were fortunate to balance the budget back in 1997, and have continued to balance the budget. We have had surpluses of varying amounts since that time. It is accumulated. It is over $50 billion which has been used to repay debt in Canada.

The debt issue was a very serious issue in Parliament back then. Debt had grown to $576 billion. Thirty-seven cents out of every dollar was going to pay interest to service the debt. Today it is down to 22¢ on the dollar. It means that we have paid down approximately $500 billion of the national debt. The debt to GDP ration is coming down into the areas in which the senior economists across the country have said that these are levels which are more acceptable.

Once Canada was called a third world country because of the size of our debt. We brought it down. It was fiscally responsible to bring it down to a range of reasonableness. It also has caused a permanent savings to the people of Canada. The relief on the debt interest is creating about $3 billion in interest saved. That is $3 billion we can count on being there which otherwise would not have been there. It means we can dedicate the surplus and the interest savings to new programs and services for Canadians.

When the Liberals assumed the government from the Conservative Party in 1993, the deficit was $42 billion. The government was spending $42 billion more than it was taking in and a great proportion of that happened to be debt interest. It is very fortunate that through prudent fiscal management the deficit was eliminated within three years, and in 1997 we had a balanced budget. Yes, there have been some surpluses.

However, when it was projected that the budget would be balanced, there was a great discussion in Canada about the fiscal dividend to Canadians and how would Canadians benefit from that dividend in terms of the savings achieved. Some people would say that to the extent we balanced the budget, we trimmed all those programs and we saved the spending on interest expenses. Now we have the surplus, we should give back to Canadians. However, that is not quite so.

The fiscal dividend is not the surplus that is generated. It is the savings on interest expense when that surplus is applied against the debt. That is the true fiscal dividend when there is a permanent savings. Surpluses and deficits can vary from time to time. In the last budget we had the incidence where in the fourth quarter the performance in the corporate sector was outstanding and way beyond the expectations of all the forecasters. More revenues were coming in because of the more robust economy which meant more revenue for the federal treasury in terms of taxation. That is not a bad thing.

Ironically, all of a sudden the whole discussion shifted from our debt being too high and paying too much interest to we had a surplus and that was a bad thing. The government is being criticized for fiscal prudence, for a balanced approach in budgeting, to creating a surplus, to paying down some debt, to earning interest savings, to investing in new programs, particularly health care, because there are surpluses.

The Conservative member who spoke first in this debate today said that we needed serious tax cuts. I said to the member that there were 15 million Canadians who filed tax returns and paid taxes and another 5 million Canadians who filed tax returns who paid no taxes but they filed to get their GST credit and the other benefits available through filing a return.

Assume we are talking about 15 million Canadians filing a return in which they declare and pay taxes. If we were to give each one of those people $100, that would mean $1.5 billion of spending. It would mean $1.5 billion of revenue reduction for the government, which would mean it would go right to the bottom line. In a year $100 is $2 a week. It is not a meaningful amount to the vast majority of Canadians. To the low income and poorer Canadians $100 is $100, and it is very important. However, $100 to taxpayers costs $1.5 billion. If we were to raise that to $500, all of a sudden it is $6 billion of revenue reduction. If we were to grant that $6 billion of reduced revenue, it would be $6 billion the next year and so on. It is a forever thing.

The Conservatives say if we have a $9 billion dollar surplus, we should give $9 billion worth of tax breaks. It does not work that way because the surplus occurred only one year. There is no guarantee that we will not hit a recession next year or the year after that. We have been very fortunate for the last 10 or 11 years. However, one year of a deep recession can cost Canada about $15 billion in EI benefit payments alone

Let us be very careful not to equate a one year surplus to the ability to grant tax cuts every year. It is a bit ingenuous to suggest we have to return the money. The government cannot give tax cuts this year and then take them back next year. That is not the way the system works. The system could not possibly respond to the uncertainties in the economy.

Yes, the moneys belong to Canadians. Every member should say that the Government of Canada does not have any money of its own. The money belongs to all the citizens of Canada. However, when the government manages fiscal affairs of the nation, it has to be fiscally prudent. It has to ensure that the debt is in a manageable state. It has to ensure that it will to stay out of deficit. Canadians want to stay out of deficit. The government has ensure that important legislative programs are properly supported and funded. These are promises to Canadians that will be kept. They have to do with the fundamentals of the health care system, of pensions for seniors, of help for families, the GST credits and all the other tenet things about which we have spoken.

I asked the Conservative member to tell me what serious tax cuts the Conservatives wanted. If they understood that $100 is $1.5 billion, what would the Conservatives do and what was the number? I was puzzled to hear the answer. The answer was that we had refundable tax credits. Virtually every tax credit in the income tax system is a non-refundable credit. Once people's incomes are reduced to zero, they do not receive a refund. A political donation is a refundable credit.

I do not think I have heard the answer yet. Meaningful tax cuts are important. However, they have to be done in a prudent way to ensure that we balance the budget, pay down debt, sustain our mandated and legislated programs and keep our priorities straight and in line with those of Canadians.