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House of Commons Hansard #133 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was budget.

Topics

Budget Implementation Act, 2007Government Orders

4:25 p.m.

Liberal

Paul Zed Liberal Saint John, NB

Mr. Speaker, the reality is they will be unable to deliver programs. We will end up with a checkerboard. We will end up with region against region, rich provinces and poor provinces. We will end up with Quebec and Ontario doing very well and Atlantic provinces, Saskatchewan and even parts of northern British Columbia in a situation where, I am afraid to say, they would be unable to deliver any national program that looks vaguely like Canada has looked in the past.

Budget Implementation Act, 2007Government Orders

4:25 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

Order, please. 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 Acadie—Bathurst, The Budget; the hon. member for Thunder Bay—Rainy River, The Budget.

Budget Implementation Act, 2007Government Orders

4:30 p.m.

NDP

Bill Siksay NDP Burnaby—Douglas, BC

Mr. Speaker, it is a pleasure to participate in the debate on Bill C-52, the budget implementation act. I want to share my time with the hon. member for Parkdale—High Park.

In this corner of the House, NDP members did not support the budget that was presented by the government at the end of March. The main reason we did not support the budget is that we do not believe that it addresses the growing prosperity gap in Canada. We do not believe that it helps ordinary and working class families meet their expectations, see the advancement they had hoped to find. It does not help immigrant and refugee families find their place in Canada and find that new life in Canada they had hoped for when they came to this country.

We do not see the budget as doing anything to end the growing prosperity gap that Canadians face. We could have made some progress on that. The government has a strong surplus at its disposal which it could have used to bring in the kinds of programs that would reduce the growing prosperity gap in Canada.

The government could have chosen to end some of the huge corporate tax giveaways that it has made since coming to power, $9 billion worth of corporate tax cuts that could have been used in other ways that would have been of benefit to Canadians from coast to coast to coast.

This is pointed out very clearly by some of the work the Canadian Centre for Policy Alternatives has been doing on the prosperity gap in Canada. A recent study it put forward demonstrated that most Canadians are not better off in recent years and that in fact most Canadian families are putting in more work time and 80% of them are getting a smaller share of Canada's growing economy. The Canadian Centre for Policy Alternatives has shown that over the last 20 years Canadians are working longer hours and for fewer benefits. The gap between the rich and the poor is growing largely because, as it points out, the lion's share of benefits of Canada's economic growth are going to the richest 10% of families. It is not going to the majority, the 80% of families whose income is under $100,000, and that is a huge number of people and a very high threshold.

The income gap is growing. In 2004 the richest 10% of families earned 82 times more than the poorest 10%. That is almost triple the ratio in 1976 when the richest earned only 31 times more; it was significant but it was only 31 times more in 1976. That gap is at a 30 year high.

It is also not just a question of incomes, but people are working longer for those questionable incomes. All but the richest 10% of families are working more weeks and hours in the paid workforce, 200 hours more on average since 1996, and yet only the richest 10% saw any significant increase in their earnings, a 30% increase. Everybody else either stayed the same or actually lost ground. In fact, the poorest Canadians saw their real incomes drop in that period.

We do not see that the budget has done anything to alleviate that situation. That is a pretty hard statistical overview of the situation. It does not look at the real hardships that are caused to families, families who cannot afford the drugs they need when they are ill, families who cannot afford the child care they need, families who cannot afford the education they know will help them realize some of their hopes for life in Canada.

The budget was a huge missed opportunity to address the growing prosperity gap in Canada.

I want to talk specifically about the post-secondary education situation in Canada. There are two major post-secondary institutions in my riding, Simon Fraser University and the British Columbia Institute of Technology, one of Canada's leading polytechnic institutions.

We know in my riding that affordability in education is a huge crisis for most families and for students. Students are graduating with huge debts. Families are struggling to ensure that their children can have a decent post-secondary education and build for their own futures.

Working and middle class families and immigrant and refugee families particularly know the importance of a good education. Many of them are struggling to ensure that their children have a good education here in Canada.

In this budget the Conservatives put students last. The measures that are introduced in the budget do not go any way to help reduce the cost of post-secondary education. The budget directly affects only 1,000 students by the graduate student scholarship. That is one-tenth of 1% of all students in Canada. There are one million students in Canada and the Conservatives have chosen to only look out for about 1,000 of them.

In fact, the Conservatives have given more money in the budget to attract students from other countries to Canada, $1 million, than to increase access for prospective Canadians to college, undergraduate, medical or law students. They have tweaked the RESP system, but the benefits disproportionately go to wealthier families. That is something that is completely unfair in this country at a time when ordinary middle class families are struggling to ensure that their children get a decent post-secondary education. With a $9 billion surplus and $8 billion in corporate tax cuts, the investment in post-secondary education is less than $1 billion in the coming years.

There are some marginal increases in core transfers, but the rate is so small that it is going to take years to accomplish anything significant. It is going to take years to even get back to where we were in the 1980s and early 1990s.

In 1983-84 the percentage of GDP for post-secondary education transfers was .56%. That dropped to .41% in 1992-93 and went way down to .19% in 2004-05. It dropped again to .17% in 2007-08 and has come up only very slightly in the projections for 2008-09 to .22%. We are still dramatically behind where things started out before the Liberals made their huge cuts to transfer payments for post-secondary education in Canada. There is nothing that will get us back to the point where there is some real assistance for students to ensure their education in this budget.

Students were explicitly excluded from the working income tax benefit even though hundreds of thousands of students have to work full time to afford their tuition fees and lower their eventual student debt. There is no plan to address student debt in the budget. There is no plan to address the expiry of the Canada Millennium Scholarship Foundation.

That is not where the problems end with this bill for young people. Last week in my riding I attended a conference called Toward Effective Community Practice for High Risk Youth. Youth workers from Burnaby and New Westminster attended. There were many concerns raised about the lack of a coordinated approach to high risk youth and the problems they face in our society. There is no national strategy on youth, no coordinated effort to deal with the problems of high risk youth. There is no attempt to deal with the various boundaries and jurisdictional problems that face young people in difficulty in our country.

Programs for 8 to 12 year olds are particularly important, but they are the ones most dramatically lacking. Teens and those reaching the high end of the age limits of these programs are left without any kind of support whatsoever at a huge cost to Canadian society later on. The question of how we support youth in our society is also something that is very significant.

I hope to talk a bit about the situation of new immigrants and refugees in Canada and what this budget has not done for them. Maybe I will get a chance to do that later, but I want to mention three specific things in Burnaby.

There are three important projects for which the city of Burnaby was looking for support from the federal government and which did not appear in this budget. One is for the establishment of an immigration and refugee services hub in the centre of Burnaby. We need money for infrastructure in Burnaby to deal with the growing population of immigrants and refugees in the community. It is a good thing for our community, but the infrastructure is not there. We need a facility to do that. The city has put aside the land for it, but needs help from the other levels of government.

The city of Burnaby and other communities in the Lower Mainland also need support from the federal government for the World Police & Fire Games in 2009. We need to show support for our police and firefighters by supporting them in this project. The games were recently completed in Adelaide, Australia and the premier of the state of South Australia has indicated what a huge boon they were to the economy of that state and how important they were to its communities.

There is also the question of Burnaby Lake. There was money in this budget to help Lake Winnipeg and Lake Simcoe but there was nothing for Burnaby Lake which is quickly deteriorating from an open water lake into a swamp and marshland. We need to preserve this important habitat for all kinds of wildlife to ensure that Burnaby Lake remains an open water lake.

The city of Burnaby has been seeking a commitment from the federal government for years. It was not forthcoming from the previous government even though the Leader of the Opposition when he was minister of the environment visited and promised to look into it. Nothing was forthcoming and there is still nothing forthcoming from the current government even though the city and the province have committed to this important project.

There are many things missing from this budget, many things that do not address the prosperity gap, many things that do not address the particular needs of the community that I represent. The government could have done a better job.

Budget Implementation Act, 2007Government Orders

4:40 p.m.

Conservative

Michael Chong Conservative Wellington—Halton Hills, ON

Mr. Speaker, I have to disagree with my colleague from the New Democratic Party on one issue, what he calls corporate tax giveaways. I want to bring to his attention two parts of this budget that fly in the face of that assertion.

The first is that the government in this budget has called for the elimination of the accelerated capital cost allowance for the oil sands, something which the leader of the New Democrats has long called for and something which this budget delivers on. Many economists in Canada have long argued that capital cost allowances should reflect real life usage and not provide a subsidy to businesses that are economically viable and successful. This is a case of an industry that will make close to $100 billion in new capital investments in the oil sands in the coming years and the reason we as a government decided to eliminate the accelerated capital cost allowance for this sector. That is one item in the budget that counters the member's arguments that it is full of corporate tax giveaways.

The second element in the budget that flies in the face of the member's assertion is our decision to eliminate the tax deductibility of interest on loans that are borrowed by Canadian corporations to invest in operations abroad, a tax loophole that many Canadian corporations use to shelter domestically produced income from domestic corporate taxes in tax havens abroad. Our government in this budget, under the leadership of the Minister of Finance and the Prime Minister, has decided to eliminate the tax deductibility of interest on loans taken to invest in those operations and those tax loopholes abroad.

Those are two things that the budget does that completely contradict the member's assertion that the budget is full of “corporate tax giveaways”.

Budget Implementation Act, 2007Government Orders

4:40 p.m.

NDP

Bill Siksay NDP Burnaby—Douglas, BC

Mr. Speaker, if the accelerated capital cost allowance for the oil sands were truly eliminated, it would be done now and not by 2015. This is something that has gone on for years. It is something that is inappropriate when Canadians need the kind of programs that that money could go toward. If the government were truly committed to doing this, why is there such a long timeline for dealing with that particular issue?

There are Canadians who need the kinds of programs that help them flourish, that help their children get an education, that help their children get cared for, that help everyone get the kind of health care they need. That is not happening in many cases. We need those resources to go to those kinds of programs that were so severely cut by the previous Liberal government and which the Conservative government seems to have no intention of addressing in its work.

Budget Implementation Act, 2007Government Orders

4:40 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, the member talked about the issue of the prosperity gap.

I am pretty sure he has some seniors in his riding and I am pretty sure he had some feedback from his constituents with regard to the announced taxation of income trusts. Some 70% of Canadian seniors do not have defined benefit plans. It meant that a lot of them were relying on income trusts. It meant that the 31.5% proposed tax cost them probably anywhere from 12% to 20% of their nest egg. It created the kind of prosperity gap the member is talking about. I know why the member did not talk about it in his speech, because his party, particularly his party's finance critic, supported the taxation of income trusts at finance committee.

I wonder if the member would comment on whether or not we should look for a more fair and equitable way to address the issues of income trusts, rather than putting the burden on seniors and making them part of the prosperity gap problem.

Budget Implementation Act, 2007Government Orders

4:45 p.m.

NDP

Bill Siksay NDP Burnaby—Douglas, BC

Mr. Speaker, I have not been able to listen to the entire debate but I know the member likes to get up and ask that question of people in this corner.

The reality is that if people in his corner of the House had addressed the problems with income trusts when they were first pointed out to them, we would not have had the mess that exists now for so many Canadians.

We in this corner of the House will not take any responsibility for doing something wrong when the responsibility clearly lies in the corner of the House where the member who asked the question sits. Those problems with income trusts should have been addressed years ago. It is too bad it got to the condition that it was in. Something had to be done. Unfortunately, the Liberals had the ability to deal with it long ago and chose not to.

Budget Implementation Act, 2007Government Orders

4:45 p.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

Mr. Speaker, it is a pleasure to speak to the implementation of the budget but it is not a pleasure to examine this budget. I and my party view it as an incredible missed opportunity for Canadians.

After years of sustained surpluses and the economy doing very well, we are seeing, however, that more and more Canadians are not doing well. The budget had a chance to amend the damage of deep cuts implemented by previous governments to social and physical infrastructures in our country.

It was a chance to bring Canada into the 21st century by investing in children's early education, post-secondary education in a meaningful way and in adult lifelong learning. It was a chance to ensure that no Canadian lives without shelter or goes to bed hungry. It was a chance to ensure that the most vulnerable Canadians, those with mental and physical disabilities, those suffering from addictions, seniors, those facing the barriers of racism, poverty and abuse get a helping hand and firm support. Frankly, the budget failed them.

It is a budget that has failed to close the growing inequality gap in our country. In addition, it has failed to adequately tackle the challenge of climate change.

I will first speak to the growing prosperity gap. With ongoing billions in corporate tax cuts, the budget will further widen, not shrink, the gap between those families at the top end and the rest of us, the middle and working class families.

After years of sustained surpluses, we now see the benefits primarily going to the top 10% of families as opposed to those in the bottom 10%, and this is at a 30 year high.

The budget fails to reinstate a federal minimum wage cancelled by the previous government and set it at $10 an hour, which would be the poverty level which should at least be the minimum in this country. We need to provide a living wage for people and it is time that our federal government took the lead with this important initiative.

There was nothing in the budget for affordable housing despite a growing crisis of homelessness on the streets of Toronto where I represent the riding of Parkdale—High Park. Parents and their children in my community continue to need a national child care program, although with the government and with the budget we have seen an ABC approach, which is anything but child care.

There is the money to sustain current spaces but this is not a child care system. It is not a system of early education and development. Parents in my riding tell me repeatedly that this is creating a crisis in their families. Parents are spending up to $1,500 a month per child for child care. Even at these exorbitant rates, hundreds of children are on waiting lists to get adequate care. It is simply disgraceful in a country with our wealth and where we pretend to be a modern society and a modern economy that we are behind the rest of the developed world in this regard.

I see on the streets of Toronto and in my community the growing signs of poverty. I see people homeless on the streets. I see the distress of families with young children who line up for breakfast programs and free meals on a Sunday evening. More than one million workers in the Toronto area earn less than $29,800 a year, many of them new Canadians who have been here for generations. Many workers of colour are women but they all share one thing in common: the work they do is often undervalued and under-paid.

In Toronto, over 200,000 children live below the poverty level, which is almost 20%, and this rate is growing.

I must recognize the passing of June Callwood, a journalist and social activist who, increasingly in her later years, became so distressed that as a society we could not marshal the political will to resolve the crisis of child poverty in a country so wealthy and especially with surplus budgets year after year and a growing economy. I am saddened that June Callwood passed without seeing a government that would take the initiative to come up with a plan to tackle this blight on our society today and for the future. We are still waiting for a government to do that but clearly in this budget the government has not.

Immigrants and newcomers make up about half of Toronto's population but 57% of them live in poverty. The child poverty rate among recent immigrants has been growing in every decade since the 1980s. I know an issue that newcomers tell me about repeatedly that is so tragic is that skilled workers, such as engineers, doctors, specialists and professionals of all kinds, who come to Canada cannot work in their field because they cannot get proper accreditation of their credentials.

I know the government said that it would study the situation but for the families that are living in poverty because the parents are driving taxis or working in bagel stops instead of practising in their profession as an engineer, a psychologist or a dentist, a study does not cut it. People want action and results and they want their credentials recognized. They want a system that welcomes them and recognizes their credentials now, not in several years to come.

The government did initiate the tax credit for low income people. Tax credits can be beneficial and protect the net incomes of earnings from living wages through compensating workers for income tax assessments and social insurance charges. The tax credits can address fluctuations and deficiencies in labour market hours which we know to be a big problem.

However, the adoption of living wage standards, that is a $10 an hour minimum wage, and the introduction of work tax credits must take place together. If not, then work tax credits become subsidies to employers for paying poverty wages. These subsidies would then provide unfair market advantages to less responsible employers over employers who pay living wages. The two must go together.

I also want to comment on the issue of infrastructure which is a huge issue in the city of Toronto. The budget has failed to deliver for large urban centres such as Toronto. In fact, I would argue that it is a step back for Toronto. My constituents in Parkdale—High Park tell me that they work hard, they pay their taxes and they want to see more of those taxes invested into our city in the critical social and physical infrastructure that we need.

So much of what we need in Toronto right now is borne by our property taxes. Property taxes are going through the roof. Seniors, especially in their twilight years, who are in their own homes are squeezed because they have fixed incomes and their property taxes keep going up. Property taxes are regressive and disproportionately affect working and middle income people and seniors are especially hard hit. Property taxes also make it hard on small businesses across the city.

Toronto is Canada's largest city and it has the sixth largest government in Canada. It is home to a diverse population of about 2.6 million people. It is the economic engine of Canada and one of the greenest and most creative cities in North America. We need a national transit strategy like the one I have been calling for and the one outlined by the big city mayors. The economy and the environment of Toronto depend on better transit, more buses, streetcars and subways.

I know the government has announced funding to extend the subway to York University and Vaughan, which is a positive step, but we need ongoing, sustained, multi-year funding and a plan to grow transit in the city of Toronto as the city is growing.

Another huge disappointment is that culture has received such short shrift in the budget. It is only a part of a page in the budget. There is nothing for the big six projects in the city of Toronto and there is no new money for CBC which will affect not only the people who work in this sector, but will affect us as a nation because this is so important to our voice and to who we are as a country.

In summary I would like to say that with no urban strategy, with no help for the working poor and with very little in environmental protection, this is a budget that is a step back for Toronto and for Canadians in general.

Budget Implementation Act, 2007Government Orders

4:55 p.m.

Conservative

Michael Chong Conservative Wellington—Halton Hills, ON

Mr. Speaker, once again I take umbrage with the member for Parkdale—High Park in her criticism of the budget, particularly when she focuses on the area of early childhood learning and child care and argues that our government is not doing anything in this area.

I have two broad points to make to suggest that is not the case. The first is that this is an area of provincial jurisdiction. Our government has indicated that in certain areas of provincial jurisdiction we will continue to play a leadership role: things like health care through the Canada Health Act, where the Minister of Health recently announced some very good initiatives with respect to patient wait time guarantees; things like national infrastructure projects in which the government will be investing a record $33 billion over the coming years; and things like post-secondary education and training in which the government is making record investments. In certain areas we will be playing a role but early childhood learning and child care is not one of those areas.

Much in the same way that the Government of Canada, as with most members of Parliament here, would never choose to tell a province how to run its public school system or tell a province that we will set up a federal department of education to run the provincial public school system, similarly, early childhood learning and child care is really an extension of the public school system, an extension of an area of provincial responsibility. To that end, our government has respected provincial jurisdiction in this area because what works in downtown Montreal, in Westmount or in Outremont may not work in the rural wilds of Saskatchewan. What may work in downtown Toronto may not work in rural Ontario. What may work in High Park may not work out in Fergus, Ontario.

We have chosen to allow the provinces to deliver the service. Many provinces are already doing so. Quebec has a system that has been in place for years. Ontario has the early years centres.

We have increased the transfers to the province so that they can better deliver the service. We are increasing it by $39 billion over the next seven years and this will assist parents and children throughout the country.

Budget Implementation Act, 2007Government Orders

4:55 p.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

Mr. Speaker, I do not know how the member can stand in the House with a straight face and turn his back on the children of Canada. I think that is a disgrace.

This country has an obligation to the children of Canada to create a national child care program. To put the falsehood to the member's argument that this is only provincial jurisdiction, why did the government offer tax cuts to corporations to create child care spaces? We told the government that those tax cuts would not create a single child care space and, guess what? We were right.

Our federal government has an obligation to act in the best interests of Canadian children. We need a national child care program and all the fudging by the government will not get it out of that responsibility.

Budget Implementation Act, 2007Government Orders

5 p.m.

Liberal

Larry Bagnell Liberal Yukon, YT

Mr. Speaker, I would like to say that this is the largest spending budget in history. The government has quite upset Conservative people by breaking its promise that it is being more efficient in government, cutting government spending and all of a sudden it has this huge spending spree.

Does the member think that the government should have broken its promise or its philosophy and upset so many Conservatives in the country by spending so much money, the largest spending in history?

Budget Implementation Act, 2007Government Orders

5 p.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

Mr. Speaker, the government has an obligation to respond to the needs of all Canadians. We are in a period of budget surpluses and the economy is doing well. As I said earlier, it is the people who in many cases are not doing well.

We have an opportunity, that does not come along very often, to take the initiative and make up for the cuts that have happened in past years by investing in housing, children, and investing in a meaningful way in post-secondary education and the arts. We have an opportunity to really invest in nation building. From that perspective, I believe the government has failed.

Budget Implementation Act, 2007Government Orders

5 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, we are debating Bill C-52, the budget implementation bill. I did not take the opportunity to participate in the debate on the budget itself. As members know, the implementation bill is a bill which takes the specific provisions of the budget and puts them into the legal language necessary to amend various statutes, and to create new statutes to give effect to them, and that is what the House is dealing with.

One of the things that I thought I would do is rather than try to blanket the budget and the budget implementation bill and give my own personal commentary, I wanted to carve out at least two issues which I think are very important to Canadians. Those two issues happen to be issues for which I believe that the government has broken its promise.

This is a very serious issue, to suggest that the government has broken a promise. In fact, the Prime Minister himself in circulating a document prior to the last election put out this document which said on the cover that there was no greater fraud than a promise not kept.

Let us talk about income trusts because I think this has to be the most significant broken promise in the history of Canadian politics. I am pleased to see that the finance minister is here. He is already upset that I am raising this.

Budget Implementation Act, 2007Government Orders

5 p.m.

Conservative

Jim Flaherty Conservative Whitby—Oshawa, ON

This is hyperbole. Who is going to defeat him?

Budget Implementation Act, 2007Government Orders

5 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

He is already losing it because he knows that he is going to hear all of the details.

Income trust is kind of an interesting one because in the last Parliament the then government had a consultation process. It was a three month consultation process which looked at the taxation of dividend paid corporations as opposed to looking at those that are structured as income trusts in which the income trust organization itself does not pay the tax but rather the recipient.

It is very significant to know that there are only about 30% of Canadians who actually have defined benefit plans. That means that 70% of seniors do not have a defined pension benefit. They have to find another way to get an instrument which is going to give them the same kind of cash flow on a regular basis, on a monthly basis, to pay their bills. That instrument is an income trust. An awful lot of Canadian seniors invested in income trusts and--

Budget Implementation Act, 2007Government Orders

5 p.m.

Conservative

Jim Flaherty Conservative Whitby—Oshawa, ON

Are you going to defend income trusts? Oh, my God, you don't believe a word you are saying.

Budget Implementation Act, 2007Government Orders

5 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, the finance minister continues to be agitated and he is continuing to heckle here, but I am going to continue with the facts.

Maybe I should at this point add that on the minister's own website there is a question that people can answer which asks, “Did you receive a benefit from budget 2007?”. What was the answer? These are people who responded to the finance minister's own website. Some 93% of Canadians who responded to his own survey said they did not benefit from the 2007 budget. That is the truth.

Do members know what is even more truthful? The minister had it yanked off his site yesterday. He had it yanked off his site because he did not want anybody else to see it.

Budget Implementation Act, 2007Government Orders

5 p.m.

An hon. member

The truth hurts.

Budget Implementation Act, 2007Government Orders

5 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

It really is an issue of truth.

So, let us get back to income trusts because the minister is going to want to hear this.

The last government, after consultation, decided not to tax income trusts. In fact, there were adjustments made to the taxation of corporate dividends that narrowed the gap. Then, during the last election campaign, what happened? The Conservative Party said it would never tax income trusts.

That was a fatal promise to make because in the first place it was interfering with the capital markets. It was interfering with the financial markets because it gave a confidence level to investors to say that the Liberals did not tax income trusts and the Conservatives said they were not going to tax income trusts. Canadians were saying that now they could invest in income trusts safely because they were not going to be taxed at a usurious level. What happened is that more and more Canadians, particularly seniors, invested in income trusts.

What happened on Halloween? The Halloween massacre occurred. That is what it was. The biggest broken promise in the history of Canada was the announcement for the taxation of income trusts. How much? Canadians--

Budget Implementation Act, 2007Government Orders

5:05 p.m.

Conservative

Mike Wallace Conservative Burlington, ON

Remember the GST.

Budget Implementation Act, 2007Government Orders

5:05 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, listen to members of the Conservative Party trying to shout me down because they do not like to hear the truth. Let me carry on with the truth.

How much is the tax on income trusts? There is 31.5% tax on income trusts. Yes, it was not going to kick in until 2011, but because the market value of an investment today has to reflect the long term yields that the--

Budget Implementation Act, 2007Government Orders

5:05 p.m.

Conservative

Jim Flaherty Conservative Whitby—Oshawa, ON

What about tax fairness? What do you have against everybody paying their fair share?

Budget Implementation Act, 2007Government Orders

5:05 p.m.

Conservative

Gord Brown Conservative Leeds—Grenville, ON

What about the GST broken promise?

Budget Implementation Act, 2007Government Orders

5:05 p.m.

Conservative

Jim Flaherty Conservative Whitby—Oshawa, ON

Why do people have to pay more taxes? Why do you favour corporations? You don't care about people.

Budget Implementation Act, 2007Government Orders

5:05 p.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

When the finance minister gets so rabid on these issues, it tells me that I am on the right track. The yelling by the finance minister tells me I am on the right track. With a 31.5% tax on seniors, I am on the right track.

I can say that when one gets the market valuation of an investment instrument discounting the future, the long term yields, and it shows there is going to be a 31% tax starting four or five years from now, the present value of that investment is going down.

How far did it go down? Canadians understand how far those investments went down. They went down immediately, the very next day. They went down by $35 billion of investment value, mostly seniors' investments. Their retirement nest eggs were wiped out. The minister will say that is nonsense.

I have the information and I can tell the House exactly how many seniors were involved in this. About 1.5 million seniors were damaged by this. There is nobody in the House of Commons who did not get more feedback from people on this income trust debacle, this broken promise than any other issue. This was the issue of this Parliament. This is a promise broken that destroyed the retirement nest eggs of a significantly large number of Canadian investors, most of them seniors.

Obviously parliamentarians were concerned. In fact, it was the Liberal caucus that went to the finance committee and made a proposal to look into this. It is not enough to just have rhetoric and yelling and screaming. The Conservative members want to yell and scream. Let us have some debate on this. Let us bring it to committee. Let us get some expert witnesses. Let us find out what the true facts are.

The finance minister came before the finance committee and said it was going to cost $500 million a year for six years, that $3 billion was going to be lost in tax revenue to the government and that we could not afford it. What happened? Experts came before the committee and the committee tore the finance minister's arguments to shreds. He said there was $3 billion of tax leakage. There was not $3 billion worth of tax leakage.

Don Francis, for example, an economist, said there was no tax leakage. Cameron Renkas said that studies done by BMO capital markets have shown there was not any tax leakage. Yves Fortin, an economist who the minister knows, said the allegation of the existence of tax leakage was unfounded and the tax leakage argument was incorrect and unsubstantiated.

There were others who characterized the methodology used by the Department of Finance in its 2005 consultation paper, which the committee was told has not changed, as faulty.

Gordon Tait suggested that in his view some of the assumptions used by the Department of Finance were flawed.

These were expert witnesses coming before the finance committee.

The Canadian Association of Income Trust Investors described the tax leakage estimate as grossly exaggerated and not supported by fact and indicated that there was no clear, credible data.

I have talked about conclusions that some people reached. How about some facts? I was there and I participated in those debates and hearings. I was there because it was important to my constituents.

The best testimony came from HDR/HLB Decision Economics Inc., which laid out different assumptions with respect to four key factors that might explain the difference in the analysis that it did compared to that of the finance department. They were identical in all respects except for a couple.

Here is one that will blow your socks off, Mr. Speaker. The first one is that the finance minister's calculations over the six years, the $3 billion calculation, failed to take into account legislative tax changes that this Parliament already had passed. He just left them out and assumed that they were not going to happen even though they were law.

The government made a mistake, but the minister did not agree. He did not defend his position. He did not acknowledge that he made a mistake. Why not?

There was another item. HDR/HLB came back and said it was assumed that persons as income trust investors through an RRSP did not pay taxes because RRSPs do not pay taxes and that the tax would be paid only when money came out of the RRSP. But this analysis assumed that anybody who bought income trusts through registered retirement savings plans would never pay tax, never ever, nobody in Canada, for all time.

Obviously that is not a tax leakage: it comes out. In fact, we can look at the public accounts and see how much tax revenue people pay on deregistering of RRSPs or conversion to RIFFs and taking the money out in the prescribed fashion. That was an error in the computation of the tax leakage by the finance minister and the finance department.

There is also the effective corporate tax rate for energy trusts. History shows what it is. The big charts that the finance minister trundled in before the finance committee were totally wrong. They did not tie in with the actual historical corporate tax rate for the energy trusts.

There were problems with the proportion of income trust units held as tax exempt units. As well, the value of deferred taxes was handled wrong.

I could go on, but the bottom line of the HDR/HLB Decision Economics Inc. analysis, which was applauded by all, was that instead of having an estimated $500 million tax leakage for 2006 it in fact was $164 million, and in 2010, instead of being another $500 million, it was actually only $32 million. We see quite a difference just by correcting the errors that the finance minister made before the finance committee.

Did he or any of his officials in the subsequent hearing days ever challenge any of the testimony of the expert witnesses? The answer is no. There was no rebuttal. There was no explanation of the criticisms of the computation of the tax leakage. That tax leakage calculation was the only reason that they moved forward. They made a mistake. They are not prepared to admit it, but the impact on Canadians is unbelievable.

What did the finance committee do in its 14th report to the House of Commons? It made three recommendations. The first is that the government has to be “as transparent as possible”. It recommended that the government “release the data and methodology it used” in estimating the amount of the federal tax leakage.

The committee was satisfied that it did not receive the information and the methodology. In fact, in a response given to an access to information request, all of the rows and columns of the analysis were blacked out. All that was delivered were the titles across the top and down the side. It was effectively a blank piece of paper.

That was the response by the finance minister to a legitimate access to information request. The Standing Committee on Finance of the Parliament of Canada wanted it. Did it get the information it asked for? The answer is no. The finance minister refused.

The second recommendation made by the committee was that rather than dealing with these income trusts together with a few other items in a ways and means motion, maybe the House of Commons ought to handle as a separate item income trusts and this terrible broken promise that destroyed the pension nest eggs of so many seniors across Canada, rather than burying it in a whole bunch of other things. Parliament would have been given an opportunity to express itself in a clear vote on what it thought about the income trust decision.

The third recommendation stated:

Overwhelming evidence indicates that superior and far less damaging alternatives were available to the federal government. The Committee urges the government to consider implementing one of two such alternative strategies....

What were those strategies? I know what one of them was. It was a Bloc Québécois proposal basically saying that instead of deferring the implementation of this 31.5% tax by four years, it should be delayed by 10 years. Certain death would be delayed. I do not agree with that one.

However, there was another one. It was proposed by Liberal members of committee in consultation with the Liberal caucus. That proposal was to change or wipe out the 31.5% tax on income trusts and replace it with a 10% tax, but that 10% tax would apply only to those who were not Canadian residents.

In other words, there would be a rebate to Canadians so that Canadian investors in income trusts would not be hit. That means Canadian seniors would not have lost their nest eggs. Experts have indicated that up to about two-thirds of the lost market value of their investments in income trusts would be recovered by going at it in a less draconian fashion.

Members who have talked on the budget have talked about it being divisive, about it pitting some Canadians against others. This is an example of where the government has put a lot of seniors at a disadvantage.

There were better ways to do this. If the finance department is not prepared to provide the Standing Committee on Finance with the detailed calculations on which it based its decision, it shows there is something wrong.

In fact, the expert witnesses showed that it was wrong. The government is not prepared to open up to that. It is not prepared to admit it. It is not prepared to defend its position. It is not prepared to show where the analysis of the expert witnesses was wrong. Why? Because it cannot. That is the issue. The government cannot defend the indefensible. It was a bad decision, from the way it was handled right back to the promise not to tax income trusts. Why interfere with the markets?

Now I must tell members that the government decided to offer pension income splitting because it thought that might help to appease Canadians. The fact is that when we look at the numbers one of the things we are going to find on pension income splitting is that after adjusting for the number of people who have no one to split with, and after adjusting for those who are already at the lowest possible rate or who have a partner who is at the lowest rate and bracket, after all those factors, according to Yves Fortin, an economist who appeared before the finance committee, only 12% to 14% of all seniors will benefit at all from pension income splitting.

It is not enough. This is smoke and mirrors, as has been suggested. Even in some of the documents the government has, the government refers to it as income splitting, not pension income splitting. Why? Because again it is part of the strategy of the rhetoric of the government to suggest that something exists which in fact does not. There is somehow this belief that if it is said often enough people will start to believe it and it must be so because it has been heard so many times.

Let them understand one thing. The Prime Minister was right when he put in the document that I referred to earlier that “there is no greater fraud than a promise not kept”. The income trust decision was a fraud and a broken promise.