Mr. Speaker, I will be splitting my time with the member for Kings—Hants.
I rise in the House today to speak to the Liberal motion, which reads:
That...the government's mistaken policies with respect to interest non-deductibility and income trusts are making it increasingly difficult for Canadian businesses to succeed internationally, while making Canadian businesses increasingly vulnerable to foreign takeovers, thus putting Canadian jobs, head offices and investment at risk....
Budget 2007, the second Conservative budget, contains what the former chairman of the Canadian Tax Foundation, Allan Lanthier, called “the single most misguided policy to come out of Ottawa in 35 years”.
I am not referring to the disaster caused by the Conservatives in the income trusts sector last October. I will return to that issue later. Rather, I refer to the tax measure tucked away on page 242 of budget 2007 regarding interest deductibility and foreign affiliates. It would easily throw a major hurdle in front of Canadian firms who want to make foreign acquisitions by removing the interest deductibility from money borrowed to carry out those transactions.
As I was listening to the member for Winnipeg North, I was flabbergasted by her lack of knowledge to the fact that it is the small and medium size enterprises that create jobs, that are in an expansion mode and in a growth mode. Those are the businesses that create jobs. Why would she be against those corporations trying to expand? Where would her constituents find jobs? Who creates those jobs?
While the Conservatives may fancy themselves as a party of free enterprise, the fact is that the Minister of Finance has no credibility. I would refer to the article by their biggest supporter, Diane Francis, talking about the total incompetence on the cabinet benches of the Conservative government.
As we move forward and we look at who the real job creators are, the engine of competitiveness, we destroy them by removing that interest deductibility. The Canadian Council of Chief Executives, Tom d'Aquino, has said that the decision to remove this deductibility may seriously undermine the competitiveness of Canada's homegrown champions, the companies that are most active and most successful in building global businesses from head offices in Canada.
I would hardly call that faint praise for a budget that is ironically entitled “Aspire”. What does it aspire? Does it aspire to remove the economic security of Canada? Does it aspire to destroy Canadian companies? That is what interest deductibility does.
We live in a global competitive world. We need to be smart and let our companies, the small and medium size enterprises, which are in expansion mode, expand.
I am afraid that what the Minister of Finance calls a tax loophole is actually a competitive edge for Canadian firms to compete globally on an even playing field with firms enjoying similar tax measures in the United States, Japan and Europe. It is beyond me why the minister is so determined to hobble the Canadian economy.
According to tax specialist, Neal Armstrong:
it is typical for a Canadian parent company to arrange most of its borrowing in Canada, then use the funds to invest in foreign acquisitions.
However, the Conservatives want to take this tool away from business. It makes no sense whatsoever.
As Mr. Armstrong points out, the result is that Canadian banks will lose income from those loans and in turn the government will lose the tax benefit from that income.
Mr. Armstrong goes on to say:
And that doesn't do us any good, because the bank in the foreign country isn't paying any [Canadian] tax.
What should businesses in Canada expect from the proposal of the Minister of Finance?
Tax specialist, Karen Atkinson, predicts that many companies will have to “jump through hoops” to create financing structures, calling the finance minister's proposal a “make-work project for lawyers and accountants”. Is that what we want to do? We must remove red tape in order to make our companies competitive. We do not need to hobble these companies.
Len Farber, a former senior official at the Department of Finance, is equally baffled by the proposal. According to Mr. Farber, what the minister calls double dipping is what gives Canadian corporations the competitive edge internationally. He suggests that the minister could have the measure apply to only foreign multinationals operating in Canada but exclude Canadian companies. That is why the Liberal motion today calls on the Minister of Finance to rethink his strategy and enter into meaningful consultation.
At this stage, I would like to congratulate my hon. colleague, the member for Markham—Unionville, who has done a splendid job in bringing this issue to the attention of all Canadians. The hon. member is a well-recognized economist and former minister who eloquently points out that:
[It] is not that we should oppose foreign ownership, but that we should oppose tax measures that tilt the playing field in favour of foreign companies and at the cost of homegrown Canadian companies.
This is not the first major misstep by the Minister of Finance. I am still receiving desperate letters and phone calls from constituents in Don Valley East who took the Conservatives at their word when they made an election promise to not tax income trusts.
Thousands of investors, many of them seniors, lost the bulk of their retirement savings because of this finance minister, when he broke his promise in October last year. What are my constituents going to aspire to when half of their savings have been wiped out by the Conservatives' incompetence?
Sadly, it is a fact that many of the Prime Minister's cabinet just do not have any experience in the business world. The result is simply bad policy and bad business environment.
Instead of tapping into this country's entrepreneurship, the Conservatives are hobbling Canadian businesses. Instead of being proud Canadians, being economically independent and competing in the global market, we are hobbling our Canadian companies, our pride, our enterprise, and our ability to create and maintain jobs.
Instead, we are now becoming economically dependent on other countries and foreign takeovers. In the past few weeks we have seen foreign takeovers by China, the United States and India. Where are the high-paying jobs going? They will go south, or anywhere, except stay in Canada.
The policy of non-deductibility is not a very intelligent policy and I would like to urge the government to rethink it.