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.