Mr. Speaker, first I would like to congratulate my colleague, the member for Jeanne-Le Ber, for his speech. Like him, I rise today to speak to the motion tabled by the Liberal Party with regard to income trusts.
As pointed out by my Bloc Québécois colleagues, we supported both the ways and means motion and the 2007-08 federal budget. The latter changes the taxation of existing income trusts, which will receive the same tax treatment as corporations at the end of a four-year transition period. Furthermore, it will no longer be possible to establish new income trusts.
There are reasons for our support. First, we must realize why corporations register as income trusts. In the March 2007-08 federal budget, the Minister of Finance indicated that, year in and year out, the different levels of government lost $400 million in revenue because of income trusts. And this was before companies such as Bell and Telus announced that they would convert to income trusts which, in and of itself, would have inflated tax losses to about $1 billion annually. This measure, which has allowed corporations to avoid paying significant amounts of tax, had to be eliminated.
Furthermore, the income trust structure practically forces a company to pay 100% of its profits to its shareholders at the end of the year. Although the shareholders are the main beneficiaries of this measure, it has a negative impact on the economy. If the company retains part of the profits for an investment project, for instance, it must pay the maximum amount of taxes on that non-distributed revenue. This is why, in addition to the tax losses associated with the conversion of a growing number of income trusts for reasons that are strictly tax motivated, we must also look at the potential loss of productivity in our businesses, in the context of a serious productivity crisis in the manufacturing sector of Quebec and Canada. Between 2005 and 2006, Canada dropped from seventh place to tenth place in the world, according to the World Competitiveness Yearbook 2007.
Over the past few months, thousands of investors have been pressuring members of Parliament to reverse this decision. I am sure we have all met citizens who have come to us to tell their stories. In my riding, some of my constituents told me that the drop in the stock market cost them thousands of dollars. During the last election campaign, the Conservative Party promised not to touch income trusts. Investors trusted that party, trusted the government, and either kept such investments or acquired more, which meant that those investments became even more attractive and we saw an artificial inflation of the price. The Conservative government is therefore partially responsible, because it deceived thousands of investors during the last election campaign.
The Bloc Québécois supports this decision, but deplores the Conservatives' lack of honesty during the last election.
It goes without saying that steps had to be taken to eliminate the corporate practice of converting to income trusts in order to avoid paying taxes. Until now, only shareholders were taxed on dividends, not the trust itself.
I also want to mention the importance of keeping campaign promises to voters. A promise made to the people is sacred and must be respected. During the election campaign, the Conservatives had two options. They could easily have said that they would make changes once in power, or they could have avoided creating false hope by saying nothing about it. In other words, they should have stuck to what was in place and made a decision at the right time.
In 2006, companies that decided to convert to income trusts accounted for $70 billion worth of market capitalization, and that is not including telecommunications giants BCE and Telus, which also planned to convert.
Canada has about 250 income trusts worth about $200 billion in sectors ranging from real estate, oil and gas and telecommunications to food processing and manufacturing. The income trust craze was getting so big that it was endangering the national economy.
Again yesterday, the Bloc Québécois issued a news release demanding the elimination of tax havens. My colleague talked briefly about tax havens earlier. It would have been nice to see some steps taken against these tax havens, which are causing Canada to lose billions of dollars.
Given that some companies are taking advantage of interest deductibility to deduct interest charges in a number of jurisdictions, which is a form of tax evasion, and given that the Bloc Québécois is strongly opposed to tax evasion and the use of tax havens, we cannot support this motion. We will vote against the Liberal Party's motion.
Let us not forget that the bill concerning interest deductibility will be studied in committee, and that the Standing Committee on Finance will have an opportunity to submit its recommendations. Everyone will have the opportunity to suggest solutions to this problem during committee meetings.
The Bloc Québécois is very concerned about the increase in tax evasion in Canada. Canadian investments in tax havens between 1990 and 2003 soared, reached unprecedented levels, increased considerably. Canadian corporations invested large and growing amounts in countries recognized as offshore financial centres, particularly in the Caribbean. Assets held by the financial sector have practically increased tenfold, rising from $8 billion in 1990 to $72 billion in 2003. Barbados, where Canadian corporations operate 1,700 subsidiaries, is ranked the third most popular destination for Canadian capital abroad, after the United States and Great Britain.
Bill C-52 which is presently being studied by the House, amends the tax treatment of income trusts in order to eliminate the advantage of this entity over a corporation.
The Bloc Québécois has been giving thought to the issue of income trusts for a few years. We do not want income trusts to be abolished. One solution might be to introduce a minimum tax on income trust profits rather than preventing corporations from establishing themselves as income trusts.
With this bill, the government will impose a 21% tax for 2007 and will add 13% in subsequent years.
In closing, we will vote against the Liberal Party motion.