Mr. Speaker, I welcome the opportunity to help Canadians understand what all this rhetoric is about income trusts, interest deductibility and head offices in Canada. Stripped of all its rhetoric and nasty remarks about people in the government, what the Liberals are essentially saying is they want to have some businesses in Canada paying either no tax or significantly less tax than other businesses. They want to subsidize some businesses as opposed to others. They also want to have businesses to have two tax deductions for only one expense. Then they say, if this does not happen, that somehow dire consequences will flow to Canada.
I know this makes kind of an interesting political argument and gets people worked up, but we have to look at the facts, and that is what I intend to do today.
Let us first of all talk about income trusts. At the present time income trusts pay no tax at all. We think that is a problem. We began to see this as a problem when huge sectors of our economy started to either move toward the no tax model, such as our telecommunications industry. Then we heard that leaders of the energy and banking sectors were moving in this direction to pay no tax, and we became quite alarmed, I have to admit that.
If our corporate sector is not paying taxes, then we lose significant support for the social programs about which all Canadians are very concerned. We need tax dollars from corporations to help pay for health care, education, to ensure the security of our country is strong, and the list goes on.
If corporations start moving to pay no tax or significantly less tax even, then what happens to these programs? The money would then have to come from ordinary individual Canadians. If corporate tax is not coming in, then that deficit has to be made up by ordinary Canadians. A lot of ordinary Canadians are on fixed incomes because they are pensioners, or they are no longer in the workforce. Even those in the workforce are already taxed to death.
We have made a move to ensure that businesses in the country continue to contribute to the social fabric of the country through their tax dollars. Shoot us for doing such a terrible thing, but the fact is that it had to be done. We cannot have the business and corporate sectors in the country not contributing to the social programs of which we are all so proud and which define the country. This move had huge support.
Some of the analysts in the media said, “When the Liberals were in power, they did not grapple with income trusts”. They say now that the Conservative finance minister has tackled a difficult issue that the Liberals could not muster the gumption to resolve.
The National Post said, “The income trust issue is settled....in other words. It's time to move on. Everyone else has gotten the message. Why haven't Liberals”.
The Toronto Star said that what the Liberal leader should do was rethink his stand on income trusts and make the tough choice the Conservative government did and that the member for Wascana was afraid to make. It said, “ Defending tax unfairness will not win him the next election”.
However, the Liberals are unable to realize that we cannot have the corporate sector in the country moving to pay no taxes, or even significantly less tax. It will not work. We have to have a level playing field with tax fairness to support the social fabric of our country.
I do not know why the Liberals cannot get that. The business sector gets that. Mr. D'Alessandro from Manulife Financial said, “I think it's the right thing. I agree with the minister's justification. Continuing on the path of income trusts would not be in the long-term interests of the country”.
The CEO of CI Financial Income Fund said, “It was inevitable this was going to happen. It had begun to pervert the whole of corporate Canada”.
I could quote so many. I do not have time.
Even the Liberals themselves supported what we did on income trusts. Sheila Copps said, “Reversing the income trust decision”, as we heard today the Liberals now want to do, “would also run afoul of espoused Liberal principles, by promoting a tax loophole for a select few, financed by the rest of us”.
Former Liberal finance minister John Manley said, “it was the right thing to do”. He said, “any day that good public policy triumphs is a good day”. The Liberal finance critic himself, when this policy was announced, said that it was absolutely the right thing to ensure tax fairness and to work for Canada's productivity.
I do not understand why the Liberals cannot see the logic. The only conclusion I have to reach is that they are mischievously and, I hate to say it, disingenuously pushing this rhetoric for purely political purposes, to try to paint the Conservative government, which had the courage to do what they did not, as somehow the bad guys. They are saying that they will not be as bad as that, that they will be friends of Canadians. That is not going to fool anybody, I hate to say in case the Liberals are under any illusions about it, because nobody buys it. People who know this area know that what we did was the right thing.
Jim Pattison, who lost a lot of money after the income trust decision, said, “I think it was the right thing to do. Fundamentally, it was the right thing for the country”. I could quote many more business people who believe that.
How about the seniors who were affected, those who the Liberals say were somehow harmed by this? The National Pensioners and Senior Citizens Federation, the United Senior Citizens of Ontario and the Small Investor Protection Association have requested criminal investigations into the “deceptive cash yields used in the marketing of income trusts”. They were supported by an opinion letter sent by forensic accountant Al Rosen, who says Canadians were repeatedly lied to by marketers of the so-called income yields that many trusts were supposedly generating.
The fact is there were problems with the whole scheme, the way some businesses organized their affairs, and we dealt with it. It was hard for us politically. Everyone knows that. We did not do this to win political points when we desperately needed them as a minority government. We did it because it was the right thing for Canada, for investors and for seniors. Because of that, we brought in income splitting for seniors. We also doubled the amount of the age credit so seniors could protect more of their pension incomes. We have done this in a way that is right for Canada, that gives a win to people on pensions and that is right for our whole system.
Let us talk about income interest deductibility. What the government wants to do is plug what we perceive to be a tax loophole where corporations are allowed two deductions for one interest expense. They can deduct it in Canada and in another country. We want to plug that loophole. We do not think corporations, even Canadian corporations, should be allowed two deductions for the same expense.
Why do we think that? Because somebody has to pay for that deduction. It is a subsidy and assistance to businesses. We are happy to assist business. As everyone knows, we have done a lot to assist business, and I hope to have time to talk about that. However, we do not think there should be two deductions for the same expense. We are moving to fix that.
In the budget we made it clear that we were going to address tax loopholes and tax havens that distorted the level playing field on which we all paid taxes. The government wants to decrease taxes for everybody. In fact, we have done that. This year and in the next two years our government will decrease taxes to individual Canadians by $37.8 billion. That is a lot of tax relief.
We have also reduced taxes to the corporate sector. However, we can only do that for everybody if we plug the loopholes and the unfair distortions that are in the system. We made that clear. We made it clear in the budget that we would set up a panel to study this situation. I quote from page 240 of the budget where it says:
The Minister of Finance will set up an advisory panel to examine the system over the next year to identify further improvements for consideration in Budget 2008
Now somehow the Liberals make this leap from trying to make our tax system fair to dire consequences for the Canadian economy. I have no doubt that they know better. The finance critic for the opposition knows better; he is an economist. Somehow, for political purposes, this doom and gloom is ringing through the halls of Parliament, simply and solely for partisan purposes.
I am a partisan too. I understand partisanship, but surely there has to be an element, a scintilla of responsibility in the way these arguments are put forward. Therefore, I want to reassure Canadians, in spite of the overblown, overheated partisan rhetoric they will hear from the Liberals today, that there is not the cause for worry that the Liberals would like to drum up.
I quote from the Institute for Competitiveness and Prosperity report. It says that from 1985 to 2006, Canadian global leaders have more than doubled from 33 to 72. It says:
—we are growing globally competitive Canadian firms at a rate that wildly exceeds the rate of foreign acquisition. Net, we simply are not being hollowed out. We are thickening up”.
I quote from the “Financial Post Crosbie: Mergers & Acquisitions in Canada” report. It says:
Canadian companies continued to exhibit a strong appetite for foreign companies, making 456 purchases valued at $70 billion, nearly quadruple the number of foreign acquisitions of domestic companies.
Don Drummond, the TD Bank Chief Economist, says, “the facts don't warrant the hysteria that the Canadian economy is being sold out”. Liberal hysteria simply is that and it is not warranted and Canadians should pay it no mind.
Statistics Canada released a report yesterday. It said,“The holdings of Canadian direct investment abroad amounted to $523.3 billion at the end of 2006, or 13.8% higher than at the end of 2005. Holdings of foreign direct investment in Canada hit $448.9 billion at the end of 2006, up 10.1% from the end of 2005”. It goes on to say, “At the end of last year, Canadians' foreign corporate holdings were worth $74 billion more than foreign corporate holdings here”
Yesterday, the KPMG analysis was released. It says, “there have been more Canadian acquisitions of foreign firms than foreign acquisitions of Canadian firms over each of the past two years”.
How does plugging a tax loophole that allows two deductions for one expense going to have any impact on this? The Liberals are trying to scaremonger and very irresponsibly.
The KPMG corporate finance partner says, “I don't know what all the fuss is about. Everybody is worrying about the hollowing out of corporate Canada”. Not everybody because Liberals are trying to raise it. He says, “there is still significant deal flow going both ways”.
Today, the Montreal Gazette says:
As for Canada's economy being "gutted," this notion is so foolish that it's hard to know where to begin ridiculing it....Just for convenience, let's start with some new facts that throw a bucket of cold water on the overheated rhetoric.
Statistics Canada yesterday updated the official data on foreign investment in Canada and Canadian investment in other countries. Guess what: Canadian investment abroad is worth well over half a trillion dollars, outweighing foreign investment in Canada by a cool $74 billion.
That is even after some huge foreign takeovers in Canadian firms last year. The Montreal Gazette continues to say:
What's more, the value of Canadian investment abroad has grown faster than foreign investment in Canada every single year for the past decade.
It is nonsense to suggest that any Canadian government would want to tamper with that or is tampering with that. We are not tampering with that. We are simply doing what the Liberals should have done, and were urged to do for many years, to plug the loopholes and tax havens that were distorting the Canadian tax system.
In fact, preventing the use of tax havens and double dipping is an issue that has been around for a long time. The Auditor General, the 1997 Mintz committee on business taxation, the House of Commons public accounts committee and the finance committee, all these bodies have raised these concerns about the use of tax havens and double-dipping. In fact, the Mintz committee recommended that the deduction we are dealing with in budget 2007 which the Liberals over there are hollering, screaming, ranting and raving and making dire croakings about, all of these bodies have said it needs to be dealt with.
Just because the Liberals do not have the courage to address these issues and make Canada's tax system fair is no reason for them to criticize a government with enough courage and vision to do it. We are going to continue to do it.
The Toronto Star said:
Although it makes no sense to allow companies to claim tax breaks against income on which they pay no tax...[the Liberal leader]...is turning his back on sound tax policy.
Did the Liberal leader listen? No. Here he is today again turning his back and sticking out his tongue at sound tax policies for cheap political partisanship. It is a shame because we are here to serve our country, not to engage in overblown political manoeuvring.
David Dodge, the Bank of Canada governor, said:
We should deal with the abuses....it's certainly something that the [finance] minister...ought to try to do.
Terence Corcoran of the Financial Post said:
--Canadian taxpayers are subsidizing borrowing to finance foreign operations that other countries can tax.
He asked, “Why would we do that?” That is a good question. Maybe the Liberals opposite could answer that. He said:
--why should Canada give up tax revenue of $2.8-million so that [a particular company] can pay $3.5-million to a government in Europe? Canada is subsidizing job creation in a European country and boosting its tax base.
We do not want to do that.
The Liberals need to be more responsible in this whole area. It is not going to help our system and our economy for that kind of cheap political posturing that is not rooted in facts or common sense.
Canada's new government has taken significant action since coming into office to improve the international competitiveness of Canadian businesses. I have a list of things that we have done. I do not have time to read it but I will tell Canadians that we are committed to making Canada absolutely shine, a world leader in competitiveness and productivity, in being a significant, huge, strong, vigorous player in the global economy. That is our goal. All the moves we have made are intended to further that goal.
We have taken some political criticism for it. We have taken some unjustified criticism in a partisan way from the Liberals. I will say that Canada's interest, Canada's future, Canada's wealth, Canada's place in the global marketplace is our goal, is in our hearts and is where we are going to be moving to make sure that Canada shines. Canadians can take that to the bank.