Debates of May 10th, 2007

Opposition Motion--Finance

[Colin Carrie, Conservative, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, I thank the member for Peterborough for his excellent speech and his excellent responses to questions.

I am pleased to have the opportunity to debate the importance of international investment to Canadians and to their continued prosperity.

Canada's and the world's economy has fundamentally changed over the past two decades. The dramatic reduction in communications and transportation costs, combined with successive rounds of trade liberalizations and countries' efforts to liberalize their investment regimes, have encouraged greater international competition for capital, technology and markets.

The growth in international flows of capital or foreign direct investment has significantly outpaced the growth of trade in GDP over the past two decades.

World inward investment more than doubled during the 1980s, more than tripled during the 1990s and may well quadruple by the end of this decade. This is a trend that Canadian firms and consumers benefit from, and I will explain how.

The benefits of foreign investment are well-established. First and foremost, foreign investment creates jobs for Canadians. Foreign investment fosters a more competitive domestic economy. Foreign companies investing in Canada create healthy competition for domestic firms, resulting in more efficient production that benefits consumers through lower prices and more innovative products and services. There is significant evidence that increased competition leads to greater use of new technologies among domestic manufacturing plants and that productivity spills over from foreign controlled plants to domestically controlled plants.

Foreign investment also provides Canadian companies linkages to markets. Foreign investment enables Canadian firms to be integrated into global value chains. More must be done to encourage the two way flow of foreign direct investment that helps to galvanize the global value chain. Canadian companies have increased their involvement in China and other overseas countries through contracts with foreign companies and by setting up facilities. Why? It is to tap into these fast growing economies, to secure these markets and to capitalize on Canadian and international advantages.

The vast majority of multinational enterprises driving the global investment trends are our historical trade and investment partners: the United States, Europe and Japan. Combined, they are the source of over 80% of global investments and the destination for two-thirds of global investments.

In addition to our traditional trade and investment partners, new competitors are entering the global stage, namely, China, India, Russia, Mexico and Brazil. With this rise, is the expansion of FDI from emerging economy multinationals. As a result, developing country investments abroad now account for one-tenth of global FDI.

My constituents of Oshawa know firsthand the benefits of FDI and international trade. In 1875, Colonel R.S. McLaughlin relocated his Canadian-owned McLaughlin Carriage Company to Oshawa. After developing a stable and profitable Canadian company, McLaughlin Carriage was sold to the U.S.-based automotive manufacturer General Motors, in 1918.

Since that time, General Motors has invested hundreds of millions of dollars into our region, creating hundreds of thousands of good paying jobs and investing millions into our community. Oshawa now boasts of hosting General Motors of Canada's national headquarters, Canadian Regional Engineering Centre, and North America's largest manufacturing facility. The results have been the development of a strong economy in the region, hundreds of millions of dollars in spinoffs and economic benefits, and a better community.

Granted, over our history there have been some tough times and job losses due to economic slowdowns and pressures from the vast global economy but my constituents and I know, wholeheartedly, the benefits that foreign direct investment by General Motors has brought to Oshawa.

As I have just explained, as an open economy, Canada benefits from international trade and investment. While we are witnessing that companies from around the world are increasingly becoming global in order to remain competitive and enhance their prospects for growth in output and employment, Canadian firms are doing the same and more so.

Over the years, increases in merger and acquisition activity have led to concerns about the hollowing out of Canada's corporate sector. A recent study by the Institute for Competitiveness and Prosperity looked at the number of Canadian globally competitive companies present in Canada in 1985 and the number we had in 2006. The study showed that we had 33 global leaders in 1985. The list included firms like Hiram Walker, Northern Telecom, Canada Malting and Bombardier, to name a few. If Canada is being hollowed out, one would expect that the number of such firms would have declined but the number of Canadian-owned globally competitive firms had grown to 72 by 2006, more than twice as many as we had in 1985. Firms added to the list include Research in Motion, Magna and MacDonald Dettwiler, firms that are recognized as world leaders today.

In fact, the report shows that Canada is growing globally competitive firms at a rate that exceeds the rate of foreign acquisitions. Based on this analysis, the institute has concluded that Canada is clearly not being hollowed out.

The findings of the institute's study are consistent with an earlier study by Statistics Canada. Statistics Canada analyzed trends in the number of head offices and head office employment in Canada between 1999 and 2005. It also finds little evidence that Canada is being hollowed out. In fact the report shows that the number of head offices in Canada and the amount of head office employment actually grew and that foreign controlled firms were the dominant force are driving this growth.

The report concludes that the effect of foreign ownership has not been to reduce the number of head offices in Canada, nor head office employment. As a result of foreign investment, more new head offices were created than lost and employment in head offices was as high after the merger or acquisition than had occurred before. In view of these facts, it is difficult to argue that foreign ownership of Canadian firms is associated with a falling number of head offices and declining employment opportunities.

Recognizing the importance of international investment flows into the country, Canada has a broad framework in place to ensure the efficient flow of investment, while at the same time protecting Canadian interests.

The Investment Canada Act is a key part of that framework. The act provides a mechanism to review significant acquisitions of Canadian businesses by non-Canadians and to determine if it will be of net benefit to Canada. I will take this opportunity to describe how the Investment Canada Act works.

The administration of the act is shared between two ministers and their respective departments. The Minister of Canadian Heritage is responsible for the review of investments involving cultural businesses and the Minister of Industry is responsible for the review of all other investments. Acquisitions are allowed only, when on balance, the transaction is likely to be of net benefit to Canada.

In making his determination, the act requires that the Minister of Industry consider the following factors: first, the effect of the investment on the level and nature of economic activity in Canada; second, the degree and significance of participation by Canadians in the Canadian business or new Canadian business; third, the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada; fourth, the effect of the investment on competition within any industry or industries in Canada; fifth, the compatibility of the investment with national industrial economic and cultural policies, including those enunciated by a province; and sixth, the contribution of the investment to Canada's ability to compete in world markets.

As part of the review process, we consult with the federal government department with policy responsibility for the industy sector involved in the proposed acquisition, with the Competition Bureau and with all the provinces in which the Canadian business has substantial activities or assets. I can assure members that any investment reviews conducted under the act are done with such rigour and a view to ensuring that the interests of Canadians are promoted.

I will leave members with four main points today.

First, the Government of Canada recognizes the importance of foreign direct investment to the continued growth and prosperity of the Canadian economy and to Canadians' standard of living.

Second, while there may be a large number of high profile Canadian firms being acquired, the act allows us to ensure that these investments are beneficial to Canadians.

Third, detailed studies suggest that head office employment, particularly in foreign controlled firms rose between 1999 and 2005. FDI into Canada has been and continues to be beneficial.

Fourth, the Government of Canada is committed to ensuring that Canada continues to attract foreign investment in order to sustain economic growth and productivity.

[Shawn Murphy, Liberal, Charlottetown, PE]

Mr. Speaker, regarding the whole issue of interest deductibility, what we have going on in Canada is total confusion. In the budget document the Minister of Finance stated that interest would not be deducted in foreign operations. Every day since then he has issued a new statement. It would be interpreted narrowly, he would talk about two years, three years, 10 years. He is now talking about double-dipping, and now they are introducing this concept of tax fairness.

It is crazy. I just came from a meeting of the finance committee. There are five experts who are shaking their heads. We need some sanity in the system.

When will the minister bring some sanity to the system? Right now all we have is uncertainty?

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Speaker, I will state, unequivocally, that the minister is bringing some sanity to the tax system. He is trying to change what the debate is about today. The debate today is about tax fairness. We are looking at the Liberals' idea of tax fairness versus the Conservative view of tax fairness.

What we are looking at is closing loopholes. The Liberals may want to change the channel a little, but they cannot hide from their record. Let us look at their record. Perhaps the Liberal member may know of a Liberal finance minister in the past who may have closed tax loopholes for ordinary Canadians, but perhaps he knows of a Liberal finance minister who did not close loopholes for his own company.

Maybe he knows of a former Liberal finance minister who perhaps had a Canadian company and fired all those employees. Then moved his company offshore. Why? Perhaps it might have been to partake in some loopholes that were left open by the Liberal government of the time.

This government is committed to fairness. We are committed to ensuring that everyone pays their fair share, unlike the previous Liberal government, which for its friends it had loopholes, but made average Canadians pay more because of that.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, fairness sounds like a fairly good term to use. The Prime Minister is on the record as saying that the greatest fraud is a promise not kept. He promised in the last election that he would not tax income trusts, never.

Then, on October 31 last year, that promise was broken and a 31.5% punitive tax was imposed on income trust investors. It wiped out $25 billion of wealth of 2 million Canadians, many of them seniors and those providing for their retirement nest egg.

Fairness means ensuring that things are happening equitably. Why do seniors have to be the target of a draconian tax measure? That is not fairness.

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Speaker, it is all about fairness. He talks about seniors. Under the previous Liberal government, seniors suffered under its taxation policy.

Our Minister of Finance has taken a leadership role. He has introduced, for the first time, pension splitting. Right now in Oshawa we have thousands of pensioners. They were struggling under the backward Liberal plan. They had choices to make such as whether they would lose their houses because of the taxation of the Liberal Party. The minister has listened to pensioners. He knows that by raising the deductibility of seniors, it will be better for most seniors, especially the seniors in Oshawa who are benefiting so much from pension splitting.

[Gary Schellenberger, Conservative, Perth—Wellington, ON]

Mr. Speaker, I know the hon. member represents Oshawa. How does he feel the foreign direct investment affects the auto industry?

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Speaker, we had an opportunity last year to visit manufacturers of motor vehicles, and I thank the member for his participation.

When we were in opposition, the Conservative Party took the lead on manufacturing. We did a study for the first time ever. Our auto caucus went across southern Ontario. We visited every manufacturer of motor vehicles in Canada. We had the opportunity to visit General Motors, DaimlerChrysler, Ford, Honda and Toyota.

One of the things that became obvious was none of those were Canadian companies. They are all foreign owned. Our manufacturing sector across Ontario has benefited so much from foreign direct investment through the top-quality jobs. We have unbelievable economic spinoffs because Canada welcomes these companies.

The Conservative government is going to prove to the world that we are still welcoming those countries in a fair and profitable way. We want Canada to be leaders in the world.

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, I will be splitting my time with the hon. member for Scarborough—Guildwood.

This is an issue that all of us have heard from our constituents at length. There is a big push across the country to get the Conservative government to mend its ways and reverse the devastating policy initiatives it has made since it has come into office. The Conservatives have not only affected individuals by raising taxes, particularly on the poor, but they have also negatively affected the private sector, the small to medium sized businesses. These businesses are the heart and backbone of our country. They provide the jobs that generate the tax revenues that allow any government to have the resources to deal with everything from health to education.

Let us take the first big blunder by the government, and we are dealing with that today. It is the issue of income trusts. I remember, as do all members of the House, what the Prime Minister said when he was in opposition before the last election. He put his hand on his heart and said, “Whether it is death taxes, or taxing income trusts, a new Conservative government will never let this happen”. He said that to all Canadians. What did he do when he came into power? He took his hand off his heart and announced to all Canadians that he would tax income trusts.

We all knew there were problems with income trusts. In fact, the former finance minister, who currently sits in the Liberal caucus, had put out solutions and said that we should look at this. The government today, the then opposition, castigated the Liberals for even thinking about it, saying that they would never do it.

As a consequence of the hand on heart promise by the Conservative Prime Minister, millions of Canadians from coast to coast put their faith in him. They thought they could trust that individual and put their hard-earned moneys into income trusts.

Who are these people? Many of them are grandmothers and grandfathers. They are individuals who have limited resources and require a standard and ongoing reliable source of income in order to provide for themselves in their elderly years. People with limited funds and had very little to spend put their money into income trusts based on the promise of our current Prime Minister.

When the Prime Minister taxed income trusts, he ripped off and destroyed $25 billion of Canadians' assets, ordinary Canadians, many of whom are poor, or have limited resources or are retired. He robbed $25 billion of their hard-earned moneys, moneys in capital that they can never ever hope to recover.

Imagine, if these individuals were our grandmothers, grandfathers, fathers or mothers who had their moneys robbed at one of the most sensitive times of their lives. That is what has happened.

It has also caused companies to be open for takeover. As a result of the government's gross and irresponsible mismanagement, we have seen, through this income trust blunder, 15 takeover attempts in the last five months and another 15 strategic takeovers in critical sectors. That is a direct result of what has happened.

We have also seen a number of other takeovers as a result of income trusts plunging in value, others coming in from outside of the country and taking these assets from Canadians. In other words, what the government has done by lying to the public is it has allowed others from outside the country to rob Canadians of their assets. That is unthinkable. Frankly, I do not know why the government does not say that it made a mistake and that it will change this, but I know it will not. I will get to that a little later.

On the income deductibility issue, for Canadians who are watching, it will not allow Canadian companies to be on a level playing field. Countries such as Japan and many others allow their companies to deduct interest on moneys that they borrow in order to acquire companies abroad. When our companies are deprived of doing that, we are hamstringing them and preventing them from competing with other countries globally.

By doing that we not only prevent our ability to expand, because we are a trading nation, but we also prevent our country from growing economically and as a result prevent the creation of jobs and the tax base that I thought the Conservative government would understand. But it does not.

Frankly, I do not understand why, other than to talk about how decisions are made in that caucus and how decisions are made in government today, which is vastly different from the way things were made before. In other words, we have a very small number of people in the Prime Minister's Office, including the Prime Minister, and a tiny number of people around him, who make all the decisions, who tell cabinet ministers what to say and what to do, and tell them what not to do and what not to say. That deprives cabinet ministers and backbench government members from being able to do their jobs and represent their constituents.

It prevents the bureaucracy from being able to provide the intelligent, informed, and knowledgeable opinions that they have and advice that they could give to any government regardless of stripe. The reason why this happens is that the Prime Minister is a follower of the political philosopher Leo Strauss from the U.S. who believes that a small number of people are predestined and predetermined to rule a country.

Because we have a small number of individuals doing this within the Prime Minister's Office, including the Prime Minister, and because this is made with a very small number of individuals without adequate checks and balances, that is why we are seeing the blunders that the government is committing today.

The normal checks and balances that have been there forever are now gone. Frankly, I have never seen it before, where a Prime Minister erodes the power of the media in asking questions that are required and erodes the power of the public sector to engage not only government members but also opposition members.

We as opposition members regardless of stripe are deprived and prevented from being able to access the knowledge, abilities and information from government workers in the public service. We cannot even get the briefings that we need when we need them because it is shut down by the Prime Minister's Office.

What does that do to democracy? It erodes the fundamental pillars that we have in our country. That hurts everybody. It hurts the government, the Prime Minister, opposition members, it hurts democracy and worst of all, it hurts the public, the people who rely on us to do our job for them.

A symptom of this is the ridiculous situation that took place with Shane Doan. Why do we have issues like this coming to the forefront when we should be dealing with health care, which never comes to the forefront in the House, and yet the average wait in an emergency department now is 8 to 12 hours? The 8 to 12 hours, when one is sick in emergency, is a crisis and it should be something that the House should be dealing with, with the provinces. But do we hear about it? No, we do not hear about it.

Do we hear about the poor? No. Why? It is because the government raised taxes on the poor. It lowered the basic personal exemption and it raised the lowest tax rate on the poor. How unthinkable is that at a time of surpluses? Why are we not dealing with issues like poverty reduction? Why are we not dealing with issues, pragmatic solutions to deal with the environmental crisis? Why are we not dealing with the aging workforce that we have? Why are we not talking about the demographic time bomb that is coming through our country like a tsunami, that is not even being addressed in the House? Why?

These are the solutions that members across party lines can put their competent minds to, to deal within the interests of the public service and in the interest of the public. We have great people in our country and in the House. We have wonderful ideas in the House, outside of the House, in the public service, across our country and around the world. We could be a place in the House where we could adopt those solutions and apply those solutions in the interest of the public. Why are we not doing that?

It is in part, as I said, because we have a Prime Minister and a new government that is focused on trying to win elections and not serving the public. The public service has been subsumed to private interests in the case of the government and in doing this, it has weakened everything that we wish to do, from trying to deal with proper economic solutions that it is failing at, and we have two today on income trusts and income deductibility, to social program renewal, the environment, defence and foreign policy where it is missing in action frequently. These are the issues Canadians care about.

These are the issues that Canadians pay our salaries to do for them. These are the issues the House should be consumed with and yet it is not. I hope that the public gets mad enough to demand from the government and the Prime Minister the responsible actions that they demand of a competent Canadian government and a competent Canadian institution. I hope they do it and they do it soon, and we will be there to help them.

[Dean Del Mastro, Conservative, Peterborough, ON]

I think the public will get angry, Mr. Speaker. I think they are going to get angrier with an official opposition that does not believe Canadians should have any say in who represents them in the Senate or that there should be mandatory minimum sentences for gun crimes, or how about taking the effects of big money out of politics. I think they will be angry all right, but I think they are going to be angry at the official opposition.

The member spoke at length about the markets and so forth. I would hazard a guess he probably has not looked at the markets. Does the member know that the TSX is up over 17% since October 31, 2006? Does he know that? I doubt it. Additionally, does the member know that the TSX income trusts index is up over 5% since October 1, 2006? Does the member know that? I doubt it.

Let me tell the House something else the member does not know anything about. It is about a government with the guts to make a decision that has to be made because we know when the Liberals were in government they did not do it. The Auditor General pointed out problems to them in 2003. They did nothing. They did not care about tax fairness at all.

I will tell the House something else. They also did not care that the gap between rich and poor was getting so wide under its government that it was absolutely despicable. I ask the member this. Why does he not support tax fairness?

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, perhaps I could educate the member on a couple of facts. Number one, he is right that the TSX is up, but does the member not acknowledge that income trusts are lagging away behind the TSX? Why is that happening?

I will tell the member the reason why income trusts are lagging behind the TSX. If the member would put aside the rhetoric, put aside the propaganda that has been given to him by his people, he might be able to open his eyes and ears and listen for a moment to the fact that income trusts have actually lagged behind the TSX. That is part of the proof demonstrating what a horrible mistake that the government made.

If the Canadian public was so happy about income trusts, why are we seeing this coast of coast furor on the part of those people who have been severely penalized? If this is such a happy moment and that the government made such a wise decision, why are we finding this massive anger across the country among individuals from coast to coast who are so angry about this that they have engaged in a national campaign to try to convince the government to change it. These are ordinary folks.

I hope that the hon. member would inquire about this with his own Minister of Finance and also ask a couple questions. Why did the government raise the taxes on the poor? Why did it lower the basic personal exemption? These are the questions that he should ask.

[Denise Savoie, NDP, Victoria, BC]

Mr. Speaker, like many members in the House, I have received many letters from seniors who have been caught in the problem of income trusts and who have been misled either by bad financial advice and by the promise of the current Prime Minister to not tax the income trusts, and thus have found themselves in this situation.

Throughout this issue, the NDP's principal focus has been to find a fair solution that best serves the interests of ordinary Canadians. We have consistently fought to close the corporate tax loopholes.

Last year the NDP called for a moratorium on new income trusts in order to give adequate time to resolve the problems in a way that would help and would do the least damage to ordinary Canadians. I wonder where the Liberals were when the NDP called for a moratorium and a transition strategy on this issue?

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, I want to say to my hon. colleague from the NDP that we offered quite a few solutions to the government when it put this catastrophic policy in place.

I will talk about a few of the principles that we have articulated in the interest of the public. The first is that we minimize the loss of savings for Canadians, we preserve the strength of the income trusts sector, we create tax fairness by eliminating any tax leakage caused by the income trusts sector, and we create tax neutrality by eliminating any incentive to convert from a corporation to an income trust purely for tax purposes. Those are the principles that underline a whole series of solutions that we put forward and the leader of the Liberal Party has articulated very clearly.

I encourage members of the public to please take a look at the series of solutions that we have offered to the government. We want to work with Canadians from coast to coast to offer those solutions that are relevant to their concerns with respect to income trusts, to fix this problem so that Canadians at least in some part will be able to recover a little of their assets. Also, we will avoid, we will not avoid it because the devastation and destruction has been done; however, we will somehow be able to mitigate to some small degree the devastation that the government has wrought upon our private and public sector.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, thank you for the opportunity to speak to this motion and about the astonishing level of incompetence in the government, mixed with equal measures of deceit and dishonesty.

We should have known better when the Conservatives introduced the GST decision. There is hardly an economist on the planet who thinks this was a good idea except the third rate economist who sits over there in the Prime Minister's chair. How in heaven's name was it a good, sound, economic, and competent public policy to raise income taxes and lower consumption taxes?

I have in my hand last year's income tax return and this year's income tax return. I was amused by how the members opposite started howling when we actually read on the T-1 that the base rate in 2005 was 15%. When we go to this year, T-1 for 2006 is up to 15.25%. Raise the income tax, lower the consumption tax, but surely that is exactly reflective of the economic incompetence of this particular government.

It gets worse, though. After that we had the income trust decision. After campaigning and saying, “We will not touch income trusts”, the Conservatives did a complete about-face and taxed income trusts.

This is really quite extraordinary because we have a dishonest decision. On its face and in its facts it is a fundamentally dishonest decision to campaign on one thing and do the opposite when one is in government. The Conservatives say that they had to do it because there was tax leakage. We asked to be shown the tax leakage and what do we get? Eighteen pages of blacked out documents. That is really very helpful. We can do an analysis on 18 pages of blacked out documents.

Then they get into the idiotic notion that they have put out 18 pages of blacked out documents and they ask Mr. Gordon Tait, a respected economist with BMO, if they could have their 18 pages back. How hilarious. Four months after they put the documents out, they want them back, but of course by that time, they are on billboards across the nation. In fact, the document is posted on Bank Street right at Wellington in the bus shelter. Talk about a hilarious keystone cops type of comedy over this income trust fiasco. If it was not so tragic and if it was not so costly to so many people, it would be hilarious.

Then we have the budget bill. Popped into the budget bill is this thing about interest deductibility. It says the Conservatives are against tax havens and for tax fairness, and they want to make sure that everybody pays their fair share, et cetera.

I just came from the finance committee. My hon. colleague was there with me. We had five witnesses, some of the most respected economists and tax experts in the country. They said that the last time the Income Tax was amended, it took 14 years of consultation by the various affected parties to amend the Income Tax Act, because there are all kinds of competing interests.

The Conservatives said we have 81 bilateral tax treaties with other nations. We do not just drop a nuclear bomb in the middle of all of those negotiations and of that act without expecting consequences to occur. Of course, consequences have occurred.

We see income trusts leaving the country in droves, and how much tax revenue will we get from them? I do not expect we will see too much if those income trusts are now sited in other jurisdictions. We lost all that tax revenue. So much for tax leakage. This is not tax leakage, it is a tax hemorrhage.

Now we have basically open season on Canadian companies, which now have to compete in the marketplace. They cannot deduct their interest, but everybody else can. That just simply raised the cost of acquisition to Canadian companies. For the love of Pete, does that make any sense at all? Could we possibly think of anything more incompetent?

It only gets worse. We have the idiocy of the GST thing. We have the incompetence and the dishonesty of the income trusts. We have the deceit and incompetence of the interest deductibility decision.

I just want to read for members what people have said about this last decision. Allan Lanthier, retired senior partner at Ernst & Young, and past president of the Canadian Tax Foundation, called the government's decision on interest deductibility “the single most misguided policy I've seen out of Ottawa in 35 years”.

Claude Lamoureux, chief executive officer of the Ontario Teachers' Pension Plan, incredulously said:

This is unbelievable. I don't know who in [the Department of] Finance looked at this. I can't believe any sensible person would do this.

These folks are not friends of the Liberal Party of Canada. These folks are speaking because they know something. As all of the expert witnesses were saying, where is the consultation? If in fact there is consultation, we can address whatever issues are thought to be important.

Why would the Conservatives disadvantage Canadian companies? Why would they kneecap them in the marketplace? What is going on here? Why would they encourage companies to just go south or go anywhere other than Canada?

Any time the government starts talking about tax fairness, Canadians immediately have an instinctive reaction to reach for their wallets, because they know something bad is about to happen.

Like many people in this chamber, I believe in the marketplace. I am not a big fan of over-regulation, but I really think it is crazy and idiotic to go and tilt the marketplace in favour of foreigners.

Why in heaven's name would the government take away the opportunity from Canadian companies to deduct interest but not be able to take the same deductibility issue away from foreign companies? Why would the Conservatives put a huge for sale sign on the income trust sector? Why would they pass a withholding tax that benefits foreign people acquiring Canadian companies? Why would they pass that and then combine them all together so that they hugely disadvantage Canadian companies competing in the marketplace?

This is incompetent, this is deceitful, and it is dishonest.

I will quote the CEO of Manulife, who said at a shareholders' meeting, “I sometimes worry that we may wake up one day and find that, as a nation, we have lost control of our affairs”.

Let me close with this. After a review of the useful qualifications of the cabinet and the Prime Minister, Diane Francis wrote in the National Post, the in-house organ of the Conservative Party, an article entitled “Canada Inc. needs better governance...”. She stated:

I dread to imagine what the discussion around the federal cabinet table was last fall concerning measures such as income trusts or interest deductibility restrictions. Did anyone bring up the potential, unintended consequences?

Was a huge menu and range of varied options the topic of lively, heated and lengthy discussion?

Not in this caucus. Not in this government. This is a one-man show. The article continued:

Were the nuances of capital market reactions, or taxation matters, debated?

What is $35 billion among friends, right? So they wiped out a whole bunch of peoples' savings plans. So what if Canadian companies cannot acquire abroad? Does that really matter? The article continued:

Was the obvious alternative of cutting taxes on dividends instead of trashing income trust promises a subject of great discussion?

I suspect not. The article continued:

Were the studies, commissioned by the previous government, and its many other solutions, reviewed carefully over days and nights by all cabinet members so they could deliberate in an authoritative fashion?

Or was talk just about how to finesse the treachery to seniors and Alberta about a promise broken?

Or did it zero in on how this would affect voting results in Quebec?

I could not have said it better. And that is what the government's friends are saying.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, I listened intently to the hon. member's comments. Many members in the House may well remember that when the hon. member was serving as parliamentary secretary to the minister of finance in the former government he actually was out in front of his government. I believe that he believed in tax fairness, because he was on the record on several occasions as saying that the government of the day needed to move toward taxing trusts.

Then he was kneecapped by the then minister of finance from Wascana, who decided no, the Liberals would tax dividends instead. It did not work. They did not understand that a lot of it was foreign-held investment.

What I would like to ask the member, since he does sit on the finance committee with me, is whether he remembers the words of the governor of the Bank of Canada, who said, “Clearly, there has been a very significant tax incentive to use the income trust form of organization in cases where this would not have been the appropriate form of organization...”.

Further, the Bank of Canada governor went on to say that “the tax system was actually creating inefficiencies in capital markets--inefficiencies that, over time, would lead to lower levels of investment, output and productivity”.

Is that what the Liberal Party is arguing for here today? Lower levels of investment, opportunity and productivity? Is that what the member is standing up for? Less tax fairness and more breaks for buddies? Why does he not believe in tax fairness?

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, we have just had a major contribution to the biomass in this country.

The governor actually was quite reasoned about this. I do not think the governor was endorsing $35 billion worth of destruction of people's capital assets. I think the governor actually would have endorsed this comment by Diane Francis:

Were the studies, commissioned by the previous government, and its many other solutions, reviewed carefully over days and nights by all cabinet ministers so they could deliberate in an authoritative fashion?

Nothing was done. The Conservatives do not have the studies. The documents that were presented by the finance minister were all blacked out. The Conservatives do not have the basis for making the decision they made, and then, to add insult to injury, the finance committee offered a solution based upon the Liberal solution and the Conservatives ignored it.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Speaker, I would like to put to my colleague, who gave a very good speech, a couple of other facts and get his reaction in terms of how he thinks past behaviour affects future behaviour in terms of economic competence.

Here we have three members of the government's cabinet, the Minister of Health, the Minister of the Environment and the Minister of Finance, who left their previous incarnation in the province of Ontario and left behind a $5.6 billion deficit, a $20 billion increase in the provincial debt through money borrowed on international markets, and a $30 billion infrastructure deficit. As well, they announced the budget in a car parts factory.

Finally, we see, as the member has pointed out, GST cuts that make no sense and a tax deductible transit pass that is ridiculous, and 250,000 child care spaces never materialized.

My question for my colleague is this: how can we believe anything this Minister of Finance says given his past record and the legacy of misery he left the province of Ontario?

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Speaker, I share the hon. member's concern. I think it is a well-founded concern. We saw what the Conservative government did in Ontario, which was a disaster. It has been left to the successor Liberal government to dig out from underneath the mess, the same way that Bill Clinton in the United States had to dig out from the previous mess of the Bush administration and now is watching as the Bush administration trashes all of the good work that the Clinton administration did over the course of eight years.

We had Mr. Chrétien and Mr. Martin digging out from the mess left behind by the previous Mulroney government. Is there a pattern here or does economic competence only reside on this side of the aisle? It is certainly not over there.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Mr. Speaker, I am pleased to rise here today to speak to this motion presented by the Liberal Party. We are talking about two issues here: interest deductibility on loans to finance foreign investments and the income trust issue. The Liberal motion addresses these two subjects, but it does not deal with tax havens, on the whole, which is unfortunate. I would point out that this is not all that surprising, considering the appalling Liberal record when it comes to tax havens. For years, they allowed companies—such as Canada Steamship Lines—to transfer back to Canada, exempt from taxation, profits earned in tax havens or quasi-tax havens such as Barbados.

As for interest deductibility on foreign investments, we in the Bloc Québécois believe it is a little early to condemn the government. Indeed, we have not yet seen the details of the measure in the form of a notice of ways and means, and we have not yet seen the minister's exact position on this. The government's attitude could be criticized, however, because, once again, it has taken an amateurish and poorly thought out approach. It has unleashed what was obviously a poorly thought out decision on the markets, without having analyzed the repercussions of that decision. This is not the first time this has happened. We have seen it in the past, and it is a shame to see how sloppy this government is. We see this in other files that do not necessarily all fall under the Minister of Finance. This is true of the summer career placement program, which is in a complete shambles. The organizations still do not know how much funding they will be receiving in the coming weeks, despite their urgent needs.

Just because the government acted quickly on this matter does not mean the opposition should do the same. We do not think it is wise to condemn this initiative before we know what is to come. The issue of interest deductibility concerns us. We feel it is important for Quebec and Canadian companies to be able to remain competitive and expand abroad. However, we are also extremely concerned about any issue involving possible tax evasion.

We know, just as well as the government and all officials do, that this provision on interest deductibility for foreign investments is used by companies to avoid paying taxes. This is commonly known as double-dipping, in other words, a company deducts the same interest in two, and sometimes more, different jurisdictions. It pays taxes on interest income in jurisdictions with extremely low or non-existent tax rates and deducts interest income in jurisdictions where tax rates are very high, or at least higher, which is the case in Canada, for example.

In the Standing Committee on Finance, we are currently discussing and analyzing this issue. We believe it would be appropriate to await these results, to have the bill, the government's notice of ways and means before making a definitive statement on this.

As for the second part of the Liberal Party motion on income trusts, I think the Liberal Party's record, as well as the Conservative Party's, is pathetic. Unfortunately, I understand that I will not have enough time to address this second matter immediately. I am sure I will have a chance to continue after question period.

[The Acting Speaker, Andrew Scheer]

The hon. member for Jeanne-Le Ber will have five minutes after question period to finish his presentation.

Democratic Reform

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

Mr. Speaker, after just 14 months in Parliament, the Conservative government has already implemented many of the democratic reforms advocated by my constituents for the past 15 years.

For example, we have instituted fixed election dates, banned corporate and union contributions to political parties, implemented a five year ban on lobbying for ministers and others, protected whistleblowers, and enhanced the ability of the Auditor General to follow the money to more effectively scrutinize spending.

However, when it comes to making the Liberal dominated Senate more accountable, things are not going quite as well. In fact, Liberal MPs have stalled on allowing elections for senators to replace those who are forced to leave the Senate because they have reached the age of 75. Unbelievably, the Liberal dominated Senate has held up for almost a year a two paragraph bill which would replace lifetime appointments with eight year terms.

While the Liberals continue to stand in the way of democratic reform, this Conservative government is taking action to restore accountability through democratic reforms.

Human Rights

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, Father Thaddeus Nguyen Van Ly is a Roman Catholic priest and prominent Vietnamese citizen involved in many pro-democracy movements and activities in support of greater religious freedom in Vietnam.

Father Ly was arrested early on the morning of the 17th of May, 2001 in his church as he prepared to celebrate mass. Father Ly's peaceful activities in support of his religious and political views date back many years. For his ongoing imprisonment and continuous non-violent protests, Amnesty International has adopted Father Ly as a prisoner of conscience.

At a trial on March 30, 2007 where no lawyers were present and Father Ly was forcibly not allowed to speak, his support for a pro-democracy movement has led to him being sentenced to an additional eight years in prison.

Let me be very clear. I am calling on the Prime Minister and the Minister of Foreign Affairs to demand and secure Father Ly's immediate and unconditional release.

Gilles Villeneuve

[Guy André, Bloc, Berthier—Maskinongé, QC]

Mr. Speaker, this week we are marking the 25th anniversary of the passing of the famous Quebec Formula 1 driver, Gilles Villeneuve, who lost his life in a tragic accident during the Belgian Grand Prix trials.

From a young age, Gilles Villeneuve had a real passion for automobile racing. With his great determination and immense talent, he quickly made a name for himself and climbed up the ranks of automobile racing before finally being hired by the most prestigious of the Formula 1 teams: Ferrari. His spectacular driving, daring and memorable passing manoeuvres made him a formidable competitor who was widely admired.

I would like to thank all the organizers and volunteers associated with the Gilles Villeneuve museum in Berthierville who, on the occasion of the 25th anniversary of his death, have staged an outstanding exhibition recalling the talent and achievements of this great Quebec race car driver.

Child Care

[Olivia Chow, NDP, Trinity—Spadina, ON]

Mr. Speaker, today we will conclude our study of the NDP's early learning and child care act. I thank my colleagues for their support.

Strong child care legislation is the step the Liberals did not take and the Conservatives refuse to take.

A recent letter I received from a constituent in Toronto said:

The issue for our family isn't so much the money, but the availability of safe, flexible, stimulating daycare. What's money if there's nothing to buy?

There is nothing to buy. There are no spaces for everyday families to feel secure knowing their children are being cared for in high quality, affordable early learning and child care centres. Our country is failing its children.

A recent international Save the Children report indicates that Canada has fallen from fifth to 25th on its indicator. Poor early learning and child care services are to blame for our abysmal showing.

This Mother's Day, I urge the Prime Minister to turn the landmark bill into law so Canada will finally achieve a national child care program.

Commonwealth Air Training Plan Museum

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, members of Brandon's Commonwealth Air Training Plan Museum welcomed American Ambassador Mr. David Wilkins, who unveiled a plaque in honour of the American airmen who trained, fought and died with the Royal Canadian Air Force during the second world war.

At the beginning of the war, Canada had 4,000 people in the RCAF. At the peak of the war, Canada had the fourth largest air force in the world with 253,000 members.

Brandon's Commonwealth Air Training Plan Museum, which is located at the Brandon airport, contains the best collection of artifacts, and captures and highlights much of this period of our history. There are also a number of World War II airplanes displayed that are still in working condition and are used on special occasions.

I could not end my comments without mentioning veterans like Archie Londry and Reg Forbes who, along with many others, continue to provide leadership in what is becoming a world-class museum.

I invite all my colleagues to visit this impressive museum the next time they are in western Manitoba.

Mental Health

[Carolyn Bennett, Liberal, St. Paul's, ON]

Mr. Speaker, this week marks mental health awareness week, a week to open the eyes of Canadians to the reality of mental illness.

Mental illness affects more than six million, or one in five Canadians. Of the 10 leading causes of disabilities worldwide, five are mental disorders. Close to 4,000 Canadians commit suicide each year and it is the most common cause of death for people 15 to 24 years of age.

For too long, Canadians who suffer from mental illness have lived in the shadows. Too few Canadians realize what a heavy burden mental illness imposes on society and too few people who suffer from it seek our help in times of need.

We call upon the government to get the mental health commission running as soon as possible. There is important work to do to reduce the negative stigma about mental illness among the general population and health care professionals, and to promote the positive effects of best practice in prevention, diagnosis and medical treatment.