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House of Commons Hansard #153 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was measures.

Topics

Budget Implementation Act, 2007Government Orders

12:30 p.m.

NDP

Peter Julian NDP Burnaby—New Westminster, BC

Now it does not have members of Parliament.

Budget Implementation Act, 2007Government Orders

12:30 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Now it does not have members of Parliament. I have often questioned what the actual role of the Bloc is in the House. That question is now put front and centre for all the world to see. It is a bit embarrassing and unfortunate. I think the people of Quebec will make different decisions in the next election than ones made in the past. However, that is not why I am speaking today.

It is important to finally recognize that Quebeckers do not share the Bloc's point of view. That is clear, particularly when it comes to the budget. This budget contains an extreme measure that will affect the economy, as well as the future of our country and the provinces.

The Bloc supported the Conservatives' budget, but it is impossible to understand why unless we look at it from the Bloc's perspective on the next election. That is why the Bloc supported the budget: to try to get a few more seats here supporting its point of view in the next election.

I need to talk about the northwest for a moment. I need to talk about the people of Skeena—Bulkley Valley and in general the rural residents and the people who live in the true country of Canada.

There is much talk in this House and discussion in the general media in this country about the urbanization of Canada. Yet the foundation of our country, the foundation certainly of our economy rests still in the rural sector. This budget steps away from support of rural communities in a most desperate way.

We have seen programs cut for young people seeking employment. This disproportionately affects those young people looking to stay and maintain a vibrant community, looking to eventually raise their own children and contribute to the community. Often times these summer employment programs were a stepping stone allowing young people to stay in their communities and form those communities and bring something strong for our future.

We talk about our future. My colleague from Burnaby mentioned how we watched the devastation of the pine beetle grow in my region of the northwest and the central interior of British Columbia. We watched the previous government attempt to put its head in the sand and ignore it. The previous government did not allow any funding whatsoever to come through for what is now being seen as the greatest ecological disaster our country has ever faced.

We have seen this new government come forward and make promises of money. Then we do not find in 478 pages of this budget document a single line or space to talk about the pine beetle devastation.

How is it that this government, that claims to be letting the west in and all that triumphalism of the last election that finally there was some interest coming from the west, has butted up against the Rockies and stopped there. The interests and views of the people of British Columbia have been taken somehow for granted.

People in British Columbia know that in the previous two elections time and time again Conservative incumbents put themselves forward in B.C. and it was New Democrats that were removing them from office because they were not reflecting the views and the grassroots of what people are most interested in.

The west can lose an entire sector of our economy, namely the forestry sector, and watch it decline in a rapid rate and yet there is not even a whisper of interest. The government spent $11 million on an airport. That is hardly going to turn around one of the greatest sectors of our economy that has held British Columbia and the entire country together for many decades and centuries.

Let me turn now to first nations. Thirty percent of my region in Skeena is made up of first nations people. I think Chief Phil Fontaine came out almost immediately and cited that this budget was almost in a sense a declaration of war. He said it was a declaration of conflict, looking to conflict directly with the first nations people of our country. Why this has happened is simply beyond me.

It is not as if first nations people are enjoying a quality of life superior to any other sector. It is far worse. I would take any member of Parliament in this place through Skeena. I would show them both the pride and the deep conviction of community that is in those reserves and villages. I would also show people the desperate living conditions that people continue to live in.

It has been said too many times in this place that it is a national disgrace to have a budget come forward, the single most important document that a government produces on a yearly basis, and absolutely wipe out any slight progress that had been made by previous governments. It is a shame. It continues the shame, as does the lack of reform for our employment insurance program.

The government has this kitty or free bank that is directly off the back of employers and employees across this country. There has been committee report after committee report that has come forward and said that the EI reforms need to be front and centre, particularly for transitional economies like Prince Rupert, British Columbia, and for my colleague from Acadie—Bathurst, where we know there are times when communities need support. It is basic Keynesian economics that there are ups and downs.

We know that when things are good they are good and we put a little money aside for when things are bad. That is what the employment insurance program, being insurance, is meant to do. This is an insurance program that just does not pay out. It simply collects money and moves it into a slush fund and the government spends it on its little pet projects rather than helping out communities and families.

Child care has been growing in concern across my region. There are families that are desperate for basic, simple, ordinary child care services and they cannot find it. There are single mothers looking to enter back into the workforce and they cannot find child care spaces. People simply cannot find a way back to the workforce to contribute to the economy for lack of child care funding.

The provincial government in British Columbia has had a few enormous embarrassments. There has not been any type of opposition to the government stripping out hundreds of millions of dollars for child care which has been an incredible shame.

There was not a whimper out of Victoria from the B.C. Liberals as these Conservatives, and they are both of the same ideological brush, simply removed the funding from child care spaces in B.C. and not a single space has been created as a result. That is true in Skeena. It is true in Vancouver, Victoria and right across British Columbia.

The people of Skeena are hard-working people. They are settlers. They are people who have made the land possible. They are first nations that have lived there for thousands of years.

Last year, I asked for a study to be done by the Library of Parliament to describe the tax balance; how much tax money the people in my riding are paying out to the federal government and how much is coming back in terms of services over the last 10 years, as an example.

Year on year, the devastating number that came back to us was 10 to 1. For every $10 that was sent out of Skeena in tax dollars, in revenue for the federal government to spend across this country, there was $1.00 coming back.

People talk about fiscal imbalance from the provincial level. I have fiscal imbalance coming out of every which way in Skeena. When we look for some sort of level of basic fairness, from the forestry sector that contributes hundreds of millions of dollars, the mining sector, the fishing industry that has done so over decades, and we ask for a simple balancing of the equation, we do not receive even 1 to 1. When we ask for something a little more reasonable, we are told to go away. However, the oil sands is able to pull out a little over $1 billion a year in tax subsidies every year for an industry that is making more money than it knows what to do with right now.

Canadians are looking for a little fairness. People of Skeena are looking for a little fairness. This budget simply did not deliver.

It was with great conviction and some certain sense of sorrow that we chose to vote against this budget because we are looking for some sort of decency and balance, particularly in a minority Parliament because this is the House that Canadians constructed for us.

On the environment, we have regression after regression. We thought things were bad with the Liberals when it came to climate change. We had no idea how bad it could get. The deniers moved to delayers, and now to outright spin doctors. The Conservatives paid a little too close attention to the Liberals' ability to spin rather than hold up on substance.

The budget is unsupportable. We will continue to resist efforts of this government to bring it to fruition.

Budget Implementation Act, 2007Government Orders

12:40 p.m.

NDP

Peter Stoffer NDP Sackville—Eastern Shore, NS

Mr. Speaker, my hon. colleague is absolutely correct. There is great disappointment in this budget because in many ways it divides Canadians but does not unite them.

I would also like to give the member the opportunity to explain to Canadians, especially people in his riding, what democracy means. Democracy means when the Prime Minister, who was then in opposition, said that when a motion passes the House this is what government should adhere to.

A motion did pass this House last November. It was called the veterans first motion. In that motion, we asked that the SISIP program be redone. Two DND ombudsmen also said the same thing. It is unfair to disabled soldiers when their insurance money gets clawed back. It is a sin. We have the fiscal capacity to fix it. We waited for the budget; it was not there.

Then there is the VIP extension for widows and widowers. That was in the motion passed by the House. It was a promise by the Prime Minister, but it was not in the budget.

Then there was the elimination of the gold-digger clause when soldiers and RCMP officers married after the age of 60. That was in the motion passed by the House. Two Conservatives had private members' bill on it. Yet the Conservatives voted against it.

There are many other things that we would like to see done. In the brevity of time, those are the three main elements.

Why does this member think the government so callously in opposition supported these endeavours but once in government voted against them even when it has the fiscal capacity to help the widows, and our injured soldiers and veterans?

Budget Implementation Act, 2007Government Orders

12:40 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Mr. Speaker, I thank my colleague from Sackville—Eastern Shore for his lengthy and tireless work on behalf of veterans. Year after year the member has stood in the House with great passion and conviction. I recall that even a few weeks ago in question period all members congratulated him for his support for veterans.

It seems there is a certain democratic deficit being displayed by the current regime and the Prime Minister. While in opposition the Prime Minister often spoke of the need to have the will of the House expressed and then supported by the government of the day. Yet suddenly and quickly, as quickly as a member can cross the floor or someone can be appointed to the Senate, those convictions and principles, if we can call them that, changed.

A principle is not a principle when it is tested and found wanting. That is political opportunism. It is unfortunate that the Prime Minister did this, because my colleague from Sackville—Eastern Shore is talking about our veterans. It seems to me the government seems more excited and fixated by votes on the Afghan mission, declaring triumphalism and supporting the George Bush style of tactics, than by actually supporting our veterans when they return home.

The veterans first charter that passed through the House is the most glaring example of this. That charter was supported by the House, including the Conservatives, but then the basic elements in the veterans first charter were ignored by the government. There was the program for the widows, the VIP, and there were others that my colleague from Sackville—Eastern Shore mentioned.

When the fixation and focus seem to go in that direction, with chest thumping, getting all excited and slamming their desks, the Conservatives are there, but they are not there when it is time to support our veterans, to put money on the table, to make sure that when they come back money is not stripped away from their disability programs and the other options we give them. It is a contract, such that when the Government of Canada asks soldiers to serve, they will be supported, both in the field of operations and upon their return home.

We have seen this in living conditions in regard to the lack of support when veterans return to their communities. The government has failed them and their families. It is truly a tragedy that the government continues to pretend to be a supporter of the military yet when the time comes for true support, when the mission is finished and our veterans' term of duty has been served, and when the member for Sackville—Eastern Shore brings this motion forward and is supported by all members of the House, the government still ignores the will of Parliament, to the detriment of not only our democracy but in particular our veterans.

Budget Implementation Act, 2007Government Orders

12:40 p.m.

An hon. member

It's a shame.

Budget Implementation Act, 2007Government Orders

12:40 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

That is a true shame.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

Is the House ready for the question?

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Some hon. members

Question.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

The question is on the motion. Is it the pleasure of the House to adopt the motion?

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Some hon. members

Agreed.

No.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

All those in favour of the motion will please say yea.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Some hon. members

Yea.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

All those opposed will please say nay.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Some hon. members

Nay.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

In my opinion the nays have it.

And five or more members having risen:

Call in the members.

And the bells having rung:

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Liberal

Karen Redman Liberal Kitchener Centre, ON

Mr. Speaker, I would ask that this vote be deferred to the end of government orders tomorrow.

Budget Implementation Act, 2007Government Orders

12:45 p.m.

Conservative

The Acting Speaker Conservative Royal Galipeau

Pursuant to the request by the chief opposition whip, the vote on Bill C-52 will be held at the expiry of the time provided for government orders tomorrow.

Income Tax Amendments Act, 2006Government Orders

12:45 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, I rise to continue my remarks.

This is a technical bill. It is designed is to prevent a circumvention of tax rules and to prevent tax evasion, particularly through the use of tax havens. This bill results from a consultation process initiated in 1999 by the previous Liberal government. We saw its fruition in 2005. Bill C-33 is basically the photocopy of the Liberal initiative commenced over those years. As a consequence, the Liberal members of Parliament will be supporting the bill, as I hope all members of the House will.

I will start with a little background. As we know, Canada has a fairly complicated tax system. It has been negotiated over 14 years of consultation. It is fairly complex in that many considerations have to go into in writing an income tax act. We also have something in the order of 81 bilateral treaties with other countries, so any amendments on one side have to be balanced with amendments on the other.

The essential goal is to make sure that Canadian companies are not taxed twice, once in the jurisdiction in which the money is earned, and then once again in the jurisdiction of residence. Generally this system works quite well.

Occasionally, however, some residents go to zero tax jurisdictions and the result is that there is no tax at all, which I think all members will agree is an unfair proposition. Bill C-33 will help to ensure that when this happens all that income will be taxed in Canada.

We as legislators need to ensure that the Canada Revenue Agency has the proper tools in order to be able to make sure that everyone pays his or her fair share. In the previous Liberal government, we worked very hard to ensure that all Canadians paid their fair share.

In the 2005 budget, we provided the Canada Revenue Agency with an additional $30 million annually to strengthen its capacity to administer the tax system in areas where aggressive tax planning and compliance risks have the potential to erode the tax base.

Our government used that money to create 11 aggressive international tax planning centres of expertise whose main focus is to develop new ways to track and combat aggressive tax planning and the use of international tax shelters. These are centres in which we gather together the best and the brightest Revenue Canada has to offer in order to be able to deal with a series of complicated schemes to see whether they are designed merely to avoid income tax in this country. Specifically, the centres were designed to deal with tax havens and any illegal activities that were going on in those tax havens.

In order to effectively combat this problem, we must work with international partners, because there is no sense in being the boy scouts of the world. Thus, part of our responsibility is to work with the OECD, the Pacific Association of Tax Administrators and the Joint International Tax Shelter Information Centre.

All of these centres of excellence were created by the previous Liberal government.

We want to weed out the good taxpayers from the bad taxpayers. That is not always an easy job.

It is regrettable that the government seems to be engaged in some exercise in overkill. Let us take, for instance, the minister's latest blunder in a whole series of blunders coming out of the budget and in what looks like an endless series of fiscal missteps. He said at page 241 of the budget that he wants to “eliminate the deductibility of interest incurred to invest in business operations abroad”.

In short, the budget proposed to put an end to all interest deductibility for loans used to invest abroad. This would have ended a longstanding principle that when we invest money abroad the interest is considered a cost of earning it and is therefore deductible.

Since just about every other major developed country continues to allow these homegrown operations to do this, eliminating Canada's advantage in this respect would put our companies at a serious disadvantage in the competitive global marketplace.

The policy received virtually universal scorn from pretty well everyone from the Chamber of Commerce to any other business entity. Allan Lanthier, former chairman of the Canadian Tax Foundation, had this to say:

This measure would put Canadian companies at a significant competitive disadvantage and I think the economic fallout to the Canadian economy is potentially disastrous...I don't think the finance minister understands that, I don't think he was properly advised by his Finance officials.

I've been practising [tax] law for 35 years--this is the single most misguided proposal I've seen out of Ottawa in 35 years.

Let me quote Len Farber, formerly a senior official with the Department of Finance, who said:

This goes beyond tax havens, this impacts good, complying, taxpaying corporations in many ways. The Canadian economy is a fairly small economy and if a company has reached its capacity here, if it doesn't continue expanding, it becomes a target for a takeover.

We have certainly seen that. Mr. Farber continued, saying:

Now they're making the cost of borrowing higher, so it's a pretty hard blow.

The budget did not distinguish if a company wants to borrow money to invest in the Cayman Islands or the United States or Germany. In one broad stroke, the finance minister lumped every single country in the world together and in the same breath told us that this measure was to fight the abuse of tax havens.

Shortly after the budget, the minister went to Toronto but had to beat a hasty retreat. He had to admit that he had made a colossal blunder. He now says that he will only go after Canadian companies that abuse the system by using tax havens for their investments.

The minister then got into a series of clarifications. Beware of clarifications, I say to everyone, because that is political-speak. What it means is: “I really goofed and what I am trying to do is redeem myself”. When questions got raised after the budget, he was quoted as saying:

We are satisfied with what we proposed in the budget, but I will certainly listen [to stakeholders]...

It would have been nice if he had listened before he put it in the budget. He continued, saying:

We have to have budget confidentiality before we bring issues forward.

However, one can have consultations. I know that idea is novel for his government, but it can be done. The minister continued:

But I will listen and we will design [the measure] in the most advantageous way possible.

People then legitimately asked, “So what does that mean?” Finance official and director of communications Dan Miles said:

No, he's not backing down. The policy is the policy.

Really, though, it is the policy but not necessarily the policy.

On May 8, the minister went to Toronto again to issue another clarification. Today, he was in Toronto again, to issue another clarification, so we are clarifying on the clarifications on the previous clarifications.

First of all, he said he was against all interest deductibility. Then he was only against interest deductibility through tax havens. Then it was only for two years, which meant, okay, I have tax deductibility for two years, so I will not really be upset for two years. Then he said no, it would now be 10 years, so I will be upset in 10 years. He then clarified again to say that it was not all interest deductibility and it was not two years and it was not 10 years and it was not just against tax havens: it was against double-dipping.

What the minister knows about double-dipping could probably be learned at a Dairy Queen, but now today he is against towering, which is a sort of subset of double-dipping. It is sort of like sprinkles on the double-dip. Now he is against the sprinkles on the double-dip.

He had changed this from two years to 10 years but now he is against it for five years. In five years he will be upset about it, but maybe not even then, at least until the tax experts and the panel get back to him. If we then read the rest of his press release, it is all blah-blah and Conservative propaganda.

If would be really interesting to find out, at one point or another, what it is the minister actually means as distinct from what he actually said in the budget. Also, as I and others have asked, if he is going to change the budget, could he at least table a precise ways and means motion so that we know exactly what it is he is upset about?

I do not know much about towering, but from what I do understand, it is a series of corporations and tax-flowing entities, that is, entities through which people can flow their profits, the objective of which is to eliminate withholding tax. It is not clear to me at this stage whether we are merely closing a loophole for a foreign jurisdiction, which will benefit the foreign treasury of another country but will have no impact on ours.

We may have gone through this whole entire exercise of corporation, non-corporate entity, another corporation, another non-corporate entity, through to the operating company and back up and down that whole tower, as they describe it, and all we will have achieved is a tax point for a foreign jurisdiction.

I hope that is not what he means, because then he certainly has a lot of people upset about absolutely nothing. If that is the case, then he will reduce the after-tax revenue to Canadian companies. That makes a lot of sense, does it not? Thus, we put money into somebody else's treasury, take money out of Canadian companies, and do nothing for our own treasury.

It will not benefit our treasury at all, so I do not know what the fuss is all about. Hopefully, we will find out if the minister actually tables something that has some precision and some meaning. As I said, the press release is just a glorified bunch of propaganda and rhetoric, but is very short on specifics.

What is obvious today is the minister has backed down from his position of all interest deductibility all the time to a microdot of interest deductibility. In two months from the budget, he has gone from two years, to ten years, to five years. He is so enamoured with this spinning exercise that he has spun himself into the ground. He is so excited about tax havens and so-called tax fairness that now he appears to be in favour of tax havens and is not fussed about tax unfairness.

I sincerely hope the minister is choosing not to throw the baby out with the bathwater and that he will arrive at some level of precision to which we are all entitled.

Income Tax Amendments Act, 2006Government Orders

12:55 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Mr. Speaker, on occasion the hon. member and I agree on a number of things. There may well be something we can agree on, which is a specific example that we saw in finance committee the other day when we were looking into the specific case. The finance minister has rightfully indicated that he would like to put an end to it. It was where a corporation borrowed money from a tax haven, lent it back to another tax haven, to lend it to a subsidiary of itself in the United States. This was tried by the CRA and it lost. The CRA could prove that the same company had claimed the same $20 million interest expense twice, taking a tax credit for it twice, incurring the cost only once, but the CRA lost, indicating that the courts felt this was perfectly legal.

This is a big problem. The point was made that if I could claim deductions on my taxes for interest expenses that I had not actually incurred, I would be more competitive. Indeed, I would be able to purchase more. I would be better off. Some of these corporations are doing that, and it is wrong. This is double-dipping.

Speaking about that specific example where the same corporation claimed the same tax deduction twice, but incurring it only once, does the hon. member believe that is wrong, or does he thinks it is fair? I do not think it is fair. It is not fair to Canadian taxpayers. I would love to hear what the hon. member has to say about it.

Income Tax Amendments Act, 2006Government Orders

1 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, the hon. member will recollect that the testimony of the witnesses said that 10 cases had been dealt with on this particular point, or themes and variations on this point. Five had gone in favour of the taxpayer and five had gone against the taxpayer in favour of the Crown. It is a point of contention.

There is no issue here about double deductions which are illegal. That is not the issue. The way in which the minister has phrased the budget is that all interest will apply. In other words, he has taken a cannon to the entire concept, which I think even the hon. member will realize this. If we cannot deduct interest for acquisition costs, then we are at a severe disadvantage to anyone else with whom we are competing.

At this point, it is five and five. Then there are the files that are resolved outside of the court. The tax officials indicated that they had been having a lot of success in resolving this issue under the general anti-avoidance rule. The general anti-avoidance rule is essentially a large omnibus rule which says if the scheme is only for the purposes of reducing or eliminating tax liability, it is avoidance and the person or corporation will be taxed anyway.

I still would like to see the hon. minister put on the table what precisely he is upset about, give us a break from all this tax unfairness and tax havens nonsense and just say what he means.

Income Tax Amendments Act, 2006Government Orders

1 p.m.

NDP

Peter Stoffer NDP Sackville—Eastern Shore, NS

Mr. Speaker, admittedly many people watching this probably may not have a full grasp on this. They probably assume that corporations are getting away without paying their fair share of taxes. However, would the hon. member to break it down?

Some people in my riding owe about $1,600 or $1,700 in back taxes. They are being charged interest and penalties on that to the point where the interest and penalties are even more than the principal amount they owe. The CRA is going after them very hard, yet we hear consistently of companies that are getting away with tax avoidance altogether.

Would the member to break it down when he talks about tax fairness? The member is right in that the minister should table in the House specifically through a ways and means motion what he is upset about. However, an awful lot of Canadians are upset as well. If the minister can screw up so badly on this file, what do average, ordinary Canadians think about what is happening to them with their taxes?

Income Tax Amendments Act, 2006Government Orders

1 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, it is more than just mildly disturbing to see a minister so badly, as the member put it, screw up in this file, particularly in such an area of acute sensitivity, not only sensitivity for the companies that might be involved in this, but also for all taxpayers generally.

As a general proposition, all of us want tax fairness for everyone. There is not anybody, not a member in the House, who does not want tax fairness for everyone. That is not the issue. The real issue is we want tax certainty when we do tax planning. I will take a simple example like a deduction in our RRSP. Everybody knows we can deduct up to $18,000 against our current income and put it into our RRSP.

What happens if the Minister of Finance says that he is against that deduction? A lot of people would pretty upset if he made a blanket statement in his major budget document saying that he was against that deduction. Then over the next two months, he spent all kinds of time backing down and backing down, saying that he was not really against the deduction and that he would phase it in over two years. Then he would say, no, that he would phase it in over 10, then he would go back to five years and say that it was only tax deductions for a certain class of people, like people owing over $1 million, or it was only tax deductions for people who were earning over $1 million, but earning it somewhere other than Canada.

We are back down from the universe of everyone who deducts for RRSPs to a very small group of people who may or may not, under certain circumstances, be possibly abusing the system.

The minister should table it. He should let us know and then we can debate the actual merits of it. This is a bizarre way to be the chief person in Canada responsible for the nation's finances. I wake up in the morning wondering what his next blunder will be.

The GST was idiocy from the standpoint of intelligent management of the nation's finances. We do not up income tax to down consumption taxes. Everybody knows that. We do not say one thing in an election about income trusts and eight months later slam the folks into the ground. Now with this thing the entire business community, and that affects everyone, is very upset. They have lost a competitive advantage in the marketplace. Now the minister is backing right down.

I do not know what he means. I read the material issued this morning by the minister. Maybe there are clairvoyants who can read this better than I can, but I certainly do not know what he is talking about.

Income Tax Amendments Act, 2006Government Orders

1:05 p.m.

Bloc

Claude Bachand Bloc Saint-Jean, QC

Mr. Speaker, I am pleased to speak today on this bill. I will begin by saying that the Bloc Québécois will support this bill because we feel it is a step in the right direction.

Allow me to explain what I mean by that. I believe that many members of this House went into politics to try to make our society fairer. Fairness can apply to many things, such as upholding rights or justice, but it should also apply to all tax measures. There is much criticism of our taxation system, and many people wonder why they should work so hard when others can use tax avoidance strategies to hold onto nearly everything they earn.

This bill really comes down to fairness, and it is important to us. We are not saying that the bill is perfect and should stop there. On the contrary, we even think the government should keep going in this direction and ensure that the middle class and the disadvantaged are treated fairly compared to the wealthy.

Often, the disadvantaged and the middle class feel that the wealthy have access to an unfair number of tax avoidance measures. Tax fairness is crucial to the continued health of a society. People see it as unfair that they are doing a good job but are not being paid enough or that governments are deducting too much money for the services they provide.

Once they sense this unfairness, many people will engage in illicit behaviour, such as working under the table or moonlighting, in order to make ends meet at the end of the month. This is because these people realize that the very wealthy can avoid paying what they should ordinarily pay.

Offshore trusts are commonplace today, and they are not currently illegal. I believe that people object to such measures not because they are illegal, but because they are improper. People say that the very wealthy should not be able to get away with depriving the government of revenues and thereby depriving the middle class and the disadvantaged of additional services.

To achieve a balanced budget, revenues are either increased through supplementary taxes, in other words, taxing a little more, or by cutting expenses, or both. However, in society, when exorbitant amounts of money escape the tax authorities, someone else must pay, either by paying more taxes or by giving up various services.

As we speak, places like Quebec are experiencing problems in health care and education. I think people realize that we cannot place full responsibility for these problems on the provincial level of government. People realize there are a number of levels of government: federal, provincial, municipal and even boards of education. People know they have to contribute to all these levels.

Like the fiscal imbalance, when there is imbalance people start to wonder why things are that way and why balance is not restored. That is the whole issue with the fiscal imbalance between Ottawa and the provinces. I think we are not alone in Quebec in complaining about this injustice and imbalance.

Many other provinces are having a hard time making ends meet when it comes to health care and education. Ottawa has been amassing surpluses, year after year, for many years now.

I will not get into employment insurance, even though there is injustice there as well. People know that they do not get out of it what they pay into it and that some of this money ends up in the consolidated revenue fund. People question these measures and start to wonder. They wonder why Ottawa has so much money while the public is dealing with extremely costly health care and education services. Ottawa does not really have extremely costly budgetary items, with the exception perhaps of the Department of National Defence. The government is investing a lot of money in defence right now.

People are wondering how we can regain balance in all this. The bill we are debating today will help to that end, or at least it is a start. For far too long now, in my opinion, the government has not moved on these matters. This has caused people to ask questions and express misgivings about all governments.

I would venture to say that this is the type of injustice people are criticizing, regardless of where the member or public official stands in the polls.

Unfortunately, people often lump all politicians together, even though they are certainly not all the same. There are certainly some good MPs. When a minister of finance or a prime minister does something that seems unjust to the public, they react. Often, the whole party or group of public officials end up paying for it.

So we think that this is a positive step. Non-resident trusts make income splitting possible, which is also completely absurd. This means that someone who has a large fortune and many children could split his income in a non-resident trust. This lets people who have no means and who have 18- or 19-year-old children who do not work or are still in school, split their income in order to pay less tax. It is very important to change this as soon as possible, because it is not right that someone who earns a lot of money and who has a big income at the end of the year is able to use this out, to split their income among three, four or ten people, and to pay less tax. In such situations, progressive taxes apply. What does that mean? Usually, the more income a person makes, the more taxes they pay. If someone earns $1 million per year, they must pay more than 50% tax. If they can split it among 10 people in the family, this would mean each person earns $100,000, and will pay less tax. This must be fixed. A number of other injustices must be fixed.

Consider tax treaties, for instance. On that topic, the former finance minister for the Liberal Party thought he was doing a good deed when he said he wanted to eliminate tax havens. He wanted to put an end to tax treaties because they were robbing the government of revenue. Furthermore, it was not fair that very wealthy people were going elsewhere, such as to the Bahamas, to shelter all of their income from Canadian taxation.

I would remind the House that the hon. member for LaSalle—Émard, the former federal finance minister for the Liberals, eliminated nearly all tax havens, except for Barbados. A few months before the elimination of all the other tax havens, that individual—the one I just mentioned—transferred his funds from various tax havens to Barbados. Barbados was the only tax haven that remained active. He patted himself on the back for eliminating 80% of the tax havens. However, he transferred his own fortunes from other tax havens to the only one left, Barbados.

Thus, a tax loophole still exists for wealthy families. We must continue to work to correct this.

The Bloc Québécois analyzed the bill in detail. I would now like to briefly address the importance of ensuring not only of the appearance of tax equity, but also that the government has enough revenues to deliver all the necessary services.

In that regard, if we decide to amend legislation—as we are discussing here today—and say that it will be increasingly difficult for non-resident trusts to avoid taxation, this will mean that people are going to have to pay more taxes. If they pay more income tax, the government will have greater revenues. If the government has greater revenues—because everyone is treated equally—there will be a number of possibilities. For instance, we can lower taxes for middle-income Canadians, who very much need that. We can create additional social programs, and we can also ensure, with appropriate fiscal balance in Canada, that all Canadians are treated equally from province to province.

I referred earlier to problems in the areas of health and education in Quebec as well as in other provinces. There are, however, provinces where there are no problems in these areas. Alberta comes to mind, with the huge amounts of money oil companies are making. This points to some unfairness. We have to correct not only inequities between individuals, but also inequities between regions and jurisdictions. Additional federal income could help resolve once and for all the fiscal imbalance in Quebec. That is not what the government has done in its latest budget.

As we said before, we voted for the budget because the government took a step in the right direction by addressing part of the problem. But transferring money from Ottawa to Quebec is not the whole answer. A tax transfer is also required. The government has to recognize that there is a problem. The way to solve it is through a tax transfer, because the great benefit of a tax transfer is that it makes it possible to plan over a much longer term.

At present, Quebec is practically choked by its health and education services. It takes what Ottawa is giving, but this government's philosophy and policies could change next year, and Quebec and the other provinces in need could be getting much less. That has a direct impact on health and education services.

This government does not want to hear about a tax transfer from Ottawa to Quebec—which would allow the Quebec government to make long term plans—because tax transfers are hard to take back. A cash transfer of $700 million, $800 million or $900 million, however, does not bind the government to keep transfers coming year after year. Should things get rough at the federal level one year, it could simply decide not to make transfer payments that year.

It is therefore important that the bill before us today not only restores tax equity between individuals, but also between the various Canadian provinces. When a state has increased revenues, it can do as it pleases with its surpluses.

Middle-income people and workers will finally be able to see that a particular individual or family that makes a lot of money will also have to pay a lot in income tax. They know that, with the help of a good accountant, people can use tax instruments and invest their money elsewhere or invest it in a tax haven, because the bill before us did not resolve this aspect. Instead, it resolves the issue of non-resident trusts, but we also need to resolve the tax haven problem. We are not the only ones to denounce them. The Bloc Québécois has always denounced tax havens. We must not be taken in by the ploy used by the former Liberal finance minister, who said he eliminated 80% of tax havens, as I mentioned to the House a moment ago.

This bill is therefore important to us. The Bloc Québécois intends to examine it carefully and in detail. At first glance, we are pleased with this bill. Generally speaking, the Bloc Québécois is pleased with everything that comes from the Auditor General, which is also why we like the bill.

For a number of years, the Auditor General has been criticizing the unfair treatment of citizens and the fact that certain very wealthy families are able to find loopholes. Thus, we always pay close attention when the Auditor General has something to say. She also instigated a number of changes, including policy changes. Although she normally acts as more of a watch dog, the sponsorship scandal had serious political ramifications for certain parties in this House.

Because our federal government spends more than $250 billion a year, we need someone, an Auditor General and his or her team, to thoroughly examine various issues in order to be able to eliminate unfounded tax loopholes or denounce certain realities.

The federal government has a number of important departments. I sit on the Standing Committee on National Defence, and I often listen to the Auditor General's criticism of defence. There is currently a lot to criticize. Some scandals have been reported by the Auditor General and some changes have been made not just to the Canadian electoral map, but also to Canadian law. That is what we are dealing with today.

We are pleased with what the Auditor General said in 2005, and we are pleased that the government is taking action today and making changes through this bill. It will put an end to what we want to see an end to and that is offshore trusts. No longer will these wealthy families be able to take this route. However, the issue still has not been resolved. If people withdraw money from their offshore trusts and deposit all of it in Barbados, we are back at square one. We would simply be plugging one loophole and allowing these wealthy families to benefit even more elsewhere and still not pay taxes. The government, which is depriving itself of revenue, will continue to do so.

Once again, as far as fairness is concerned, people are taking notice. Unfortunately, they often blame the government for these loopholes and these ways of doing things. They also say that the government is never on their side and is always siding with major corporations. This is currently the case with the Kyoto protocol. We know what side the government is on. It is not a green plan they keep proposing, but a brown one the colour of oil. People know it. They even see a certain association between the government and major companies.

On the political spectrum, the Bloc Québécois is much closer to the centre; maybe slightly left of centre. We agree that everyone should pay their fair share of taxes.

There are indeed legal tools. For example, the middle class can use RRSPs. You would never see the Bloc Québécois ever agree to axing the retirement savings programs. With much greater longevity and limited government resources, we are going to run into problems.

The bill before us is important. The government has to recover revenue and they know how to do that. Gone are the days of trying to get this money from the middle class by raising taxes or cutting services. Wealthy families now have to do their part. We feel this bill is the first step and that is why the Bloc Québécois is pleased to support it.

Income Tax Amendments Act, 2006Government Orders

1:25 p.m.

Conservative

Dean Del Mastro Conservative Peterborough, ON

Mr. Speaker, I enjoyed listening to the comments from the hon. member. I commend the Bloc for supporting what is a great budget for Canada. This budget moved from fiscal imbalance to fiscal balance and provided significant resources to the provinces in areas like education and infrastructure.

I also want to commend the Bloc Québécois for its stand on tax havens. I would love to hear some insight on this from the hon. member since he has been in this House for quite some time and has taken a stand against tax havens. Several reports from the Auditor General spoke about tax havens. In fact, the Auditor General highlighted this issue for the former government.

I would love to hear from the hon. member why he thinks the former government did nothing to protect taxpayers and ensure tax fairness while tax havens continued to grow. I would love to hear from the member why he thinks that was the case.