Debates of May 14th, 2007

Income Tax Amendments Act, 2006

[Claude Bachand, Bloc, Saint-Jean, QC]

Mr. Speaker, I thank my colleague for the opportunity to reopen the debate on tax havens. I would again like to talk about the Bloc Québécois experience with this issue under the former Liberal government. It was understandable that the former Liberal finance minister, who subsequently became prime minister, would object to eliminating tax havens. According to some reports in the electronic media, several did not even fit the definition of a tax haven. For example, the one in question was supposed to have a corporate office and employees working there.

I remember very well that the tax haven where the company of the prime minister and finance minister—he served in both positions—was domiciled was the subject of a television report. The journalist went down there and found only one or two individuals and virtually no signage. When the journalist arrived, the individual telephoned the head office here in Canada and asked what they should do. It was obvious that they wanted to shelter from tax the wealth of the then prime minister, the former minister of finance. The Bloc Québécois denounced this state of affairs. What happened was wrong because in order to save himself he said he was going to eliminate tax havens. He eliminated them all, except for Barbados. A few months before shutting them down he transferred all his money to Barbados. He then said he was a great man because he had shut down 80% of tax havens, except for Barbados. We later learned that he had transferred his money to Barbados. He kept Barbados and shut down the others. Citizens are not fools and find such action unacceptable.

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

Mr. Speaker, I wonder whether the hon. member would comment upon Quebec as a tax jurisdiction. Would he agree that Quebec is among the highest, if not the highest, tax jurisdiction in North America?

Would he agree that government spending on a per capita basis is something in the order of $1,500 per person greater in Quebec than in other provinces, particularly the province of Ontario?

Would he agree that the province of Quebec is struggling to retain business to grow its economy, that in fact the province's GDP has not been expanding in the last number of years?

Would he recognize that corporations, and persons for that matter, seek lower tax jurisdictions in order to be competitive? If they do that in Canada and they do that internationally, would he then agree that some corporations in order to be viable end up siting themselves offshore, because if they do not, they will simply cease to exist?

If he agrees with all of that, would he therefore agree that the only issues we should be addressing in this chamber are those abuses which are abuses designed effectively to evade taxes rather than to avoid taxes?

[Claude Bachand, Bloc, Saint-Jean, QC]

Mr. Speaker, I will try to answer my colleague's five or six questions briefly.

I am somewhat opposed to his approach. I have never been the sort of person who believes in the law of the jungle, which says that might makes right. Nor am I the sort of person who bows down to big corporations and tells them that they can come and do business here for free. We have seen that happen. Hyundai received a $300 million subsidy, then closed its doors.

Anyone who takes a close look at the competitive system—with which I am familiar because I go to the United States often—and compares Quebec to its neighbouring states will find that Quebec is very competitive. For example, we have a very clean and non-polluting energy source that makes Quebec attractive to companies. Quebec's tax system also appeals to them. That does not mean we should tell companies that they do not have to pay their fair share. That does not mean we should tell company owners that we do not mind if they send their money to Barbados. That is taking things too far.

Quebec is forced to tax Quebeckers heavily because of the fiscal imbalance. When the federal government realizes that it has too much money for the services it provides and when it transfers money to the provinces that need it, such as Quebec, then it will be in a better position to understand. In the meantime, I would reiterate that my party's preference is for us to keep all of our income and sales taxes and make our own decisions about service delivery. We think that is the best solution at this time.

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

Mr. Speaker, it is difficult, but let us deal with the facts. Quebec is a high tax jurisdiction. Quebec spends more on a per capita basis. Quebec's GDP has flatlined. It has been flatlined for quite a number of years. Quebec is facing a demographic crisis. To nobody's great surprise, business is not going to Quebec; it is in fact leaving Quebec.

As a consequence, it ends up with policies which say that if Quebec gets all the money, somehow or another it will decide how it gets distributed. The problem is that there will be no money unless there is a competitive tax regime.

How does the member expect that Quebec will continue to carry on in the fashion that it is without a competitive tax regime? Why does he continue to think that it will spend in GDP per person way more than everyone else spends and continue to carry on without massive subsidies from the rest of the country, which is effectively what the transfers are?

I ask the hon. member again, does he think the first step in Quebec's recovery to being a contributing member of Confederation, regardless of whether or not it wants to separate, is to try to find a competitive tax rate and regime which competes effectively with Ontario, New Brunswick and the northern states in the U.S.?

[Claude Bachand, Bloc, Saint-Jean, QC]

Mr. Speaker, I repeat that Quebec is a competitive environment. Of course we make choices. For example, a portion of the payroll tax that employers must pay goes to health care.

Some people will say that in order to remain competitive, we should eliminate the payroll tax. However, in the northeastern United States, even though a sum of money may not be deducted from the payroll, employers and employees have to take out insurance. And we have proof that this costs much more than what is done in Quebec.

There is a basic issue. As long as we are in a federal system, a societal choice is made in the House of Commons. Quebec does not always share that choice, which comes at a cost. That is my answer to my colleague's question.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, I am pleased to speak to this bill. While I support in principle many of these amendments, out of the principle of tax fairness there is one major issue addressed here that goes against what is truly fair for all Canadians. That issue is income trusts.

Last week I had an opportunity to stand in the House and speak on how the government's reversal, or betrayal, of its promise on income trusts had affected some of my constituents. The response I received from people like the Bouchards, who have had to rethink their retirement plans and plans to buy a home, strikes to the heart of how badly the government has bungled.

My constituents were very grateful and gracious in their praise that someone here in Ottawa was finally speaking for their interests. The silence, the lack of consideration and responsiveness from the government has left them feeling shut out from the decisions that dramatically affect their finances.

It brings to mind the last time the Minister of Finance visited my riding of Newton—North Delta to speak to the local Chamber of Commerce. He would not take any questions. He finished his speech and simply ran away from having a real dialogue with my constituents.

These constituents are local businesspeople who pay their taxes and contribute to their community. These are the people who need and want answers from the government. These are the people who should have been truly consulted on major changes to the nature of investment in this country.

Now we know in real numbers the cost of not consulting: an estimated $35 billion, which is an average of $25,000 for each Canadian. The income trust tax has resulted in at least 15 takeover attempts of Canadian companies in the last five months. How is that encouraging enterprise in this country?

The investment business is no different from my local business community in one respect. It will look for the best competitive advantage for its customers. It will try to get the maximum return for those who invest with it.

The taxation on trusts, as my colleague the hon. member for Markham—Unionville said in his speech, did not have to force these takeover attempts. There are better ways of handling this than the nuclear bomb solution the government chose to put in place. As the Angus Reid numbers confirm, 91% of ordinary Canadians did not want this to happen.

We have to ask ourselves who benefits from taking this valuable investment vehicle out of the hands of some of our most vulnerable Canadians. They are Canadians who are beyond their peak earning years. They are Canadians who are just starting out and who are investing for simple goals, like owning a small home to have a roof over their heads. They are not making more than $30,000 a year. In fact that is the only tax bracket for which the government raised the income tax in the previous budget.

The government would have us believe that only big companies were benefiting from income trust investments. The truth is that all Canadians will have to make up the deficit in revenues. The $16 billion distributed in revenues through trusts to hard-working Canadians brought in $6 billion in tax revenues for the government. That money is gone now. As the Canadian Association of Income Trust Investors suggests, we could make up the money by increasing the GST from 6% to 7.5%, or we could add $463 in taxes to each ordinary working Canadian.

It will be interesting to see what the government tries to do to find that money. Perhaps the Finance Minister is hoping that the amendments to close tax havens will provide us with a lot of the lost revenues, but the real losses are not felt here in Ottawa. They are felt in communities like mine, in Surrey and Delta.

Canadians are not feeling the economic benefit of a budget surplus. Many are just doing what they can to stay in the black and not the red. Many are wondering what happened to the sound, fiscal management of the 13 years of Liberal government that saw their after tax income grow by 11%. That sound fiscal management amounted to year after year of balanced budgets and surplus budgets, the best economic performance and turnaround of any G-8 country.

We do not get those numbers by making the kind of decisions the government is making. We do not get them by stealing money from seniors or hard-working average Canadians or by denying investment options to the most vulnerable people who do not have the benefit of pension plans and big salaries. Approximately 70% of hard-working Canadians, like my constituents, cannot depend on these options.

As the Prime Minister himself said, there is no greater fraud than a promise broken. We can do what we can to make up for these losses like closing tax havens. As I said, for the principle of fairness, I support such measures, but the Conservatives will never make up for this fraud and this betrayal of Canadians. Canadians expect and deserve more from their government.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, I listened to what the member had to say and quite frankly, I am disappointed with his comments.

It would seem to me that the hon. member would be a little bit more impartial in how he looks at things. He might consider expert testimony from individuals like Kevin Dancey with the Canadian Institute of Chartered Accountants or perhaps Finn Poschmann from the Rotman School of Management. How about David Dodge, the Governor of the Bank of Canada who said that these measures taken by the government demonstrated leadership. Because let us face it, it was not an easy decision. It was not something we wanted to do. It was something we had to do to protect the tax base and protect the future for Canadians.

The Governor of the Bank of Canada, David Dodge, said specifically, without these measures, what was facing the country was lower investment, lower productivity, less employment and less wealth. That is why the government had to act. That is why the Prime Minister demonstrated leadership, something I know the Liberals know very little about, given the state of the Leader of the Opposition and his performance in the House.

I will say one thing to the hon. member. He should stand up for the taxpayers in his jurisdiction and support tax fairness in general as a principle because the people on this side of the House certainly do. We will make the difficult decisions when we need to. I think the hon. member should support difficult decisions when they are made for the right reason, like the one that he spoke of. I would love to know why he does not.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, the hon. member is talking about the Governor of Canada, Mr. Dodge. He did not advocate for this.

The member was talking about fairness. I will read from a pamphlet of the Canadian Association of Income Trust Investors. It states:

91% of Canadians think the tax fairness plan is not remotely fair, here's why: Promise Made--Promise Broken. False Premise for Broken Promise. Fraudulent Analysis. Promotes Foreign Takeovers. Exacerbates Canada's Two-Tiered Pension System. Double Taxation of RRSPs. Panders to Life Companies and CEOs. Eliminates an Essential Investment Choice. $35 Billion Windfall for Private Equity. Energy Subservience--Deep North American Integration. Bad for all Canadians.

This is not what I say as a partisan politician. This is stated by the Canadian Association of Income Trust Investors.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, today we are debating a bill that discusses trusts among other things. There was also the statement by the Minister of Finance this morning concerning tax havens, although he seems interested in only one aspect. And any impact is going to get buried in the work of an advisory panel.

Does my colleague not think that now the government should not only pass this bill, but also conduct a real investigation and take concrete action to eliminate tax havens? For example, the treaty with Barbados allows approximately $4 billion in profits into Canada every year tax free. But if this money were taxed—as is usually the case with tax treaties—there would be $800 million in taxes that would not have to come out of the pockets of the middle class and all taxpayers.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, I agree with the hon. member from the Bloc. In fact, I would like to remind the hon. member that this is the bill that the previous federal Liberal government brought forward in 1999. We, as Liberal members, are supporting this to make sure that all those technical amendments are made to make this fair for all Canadians and that is why I am supporting it as well.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I had the opportunity to participate in the finance committee hearings in which the finance minister presented his calculation of the so-called tax leakage. Unfortunately, many of the people, including the Governor of the Bank of Canada, had prepared their speeches prior to hearing the evidence of expert witnesses who demonstrated clearly that there was flawed methodology and incorrect assumptions in the finance minister's presentation.

The facts are that tax revenues on an annual basis will be reduced some $6 billion a year as a result of the private sector, private equity takeovers of income trusts to date.

Since the tax leakage that the finance minister was talking about was only $5 billion, and that was over six years, maybe the member could help to answer how can Canadians determine that in fact losing $6 billion a year is a better scenario than simply losing $5 billion over six years?

It seems to me that tax fairness means that we make sure that everybody is paying their fair share, but certainly that we do not give away all of the tax revenue with respect to income trusts that have been taken over because of this broken promise.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, before I address the hon. member's question, over the last two weeks I have received letters from students in grades 5 and 6 asking for members of Parliament to restore decency in the House. I would request the hon. member for Peterborough and other Conservative members who have been heckling to listen to me. They can ask their questions when the opportunity arises. I would like to remind all members of Parliament of that.

As the hon. member mentioned, tax revenues are gone because these companies are being taken by overseas companies.

[Dean Del Mastro, Conservative, Peterborough, ON]

That is not what the statistics are saying.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, I do not know why the member for Peterborough is not listening. I remind him of the letters I received from grade 5 and grade 6 students about restoring decency in this House.

Companies will be paying their taxes overseas and we will not be able to collect from them. The loss to Canadians will be even bigger than what the hon. member thinks.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, the hon. member points out that I had a number of things to say. I certainly want to get back in on this debate. I have a hard time listening to comments that are being said because there is such a distortion of the actual truth.

[Paul Szabo, Liberal, Mississauga South, ON]

CAITI and the Liberal Party. Step outside and say it.

[Dean Del Mastro, Conservative, Peterborough, ON]

The hon. member wants to quote from CAITI, Mr. Speaker. Absolutely. Let me tell the member what journalists are saying about CAITI. They are saying that CAITI is a bunch of thugs that are beating up on the media and will not allow the media to tell the truth on this story. Journalists are afraid. We can see what CAITI has done to the hon. member for Winnipeg North, the NDP finance critic, who has been under attack from CAITI. I commend her for not backing down from a bunch of thugs.

I would like to know why the member is siding with CAITI in light of all the evidence that has been brought forward by experts from coast to coast who have said that what was happening with trusts was bad for Canada long-term, bad for investment, bad for productivity and bad for employment. This government made a tough decision to do the right thing and the member should support it. He should not support the thugs.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, if the member had been listening to me he would know that I am in fact standing here in support of the bill.

This government blacks out things and bypasses things. I am on the access to information committee and last week we had to deal with the report on Afghanistan. Does the member know which government blacked out things? It was the present Conservative government. The figures speak for themselves. When we inherited the economic disaster from the Conservatives in 1993 and this country was--

[The Deputy Speaker, Bill Blaikie]

Order, please. It breaks my heart to bring this lively exchange to an end.

Resuming debate. The hon. member for Montmagny--L'Islet--Kamouraska--Rivière-du-Loup.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, it is my pleasure to rise to speak on this bill. I know that my remarks will be interrupted because there is only five minutes left before members' statements and oral question period after. In the first part of my remarks and from the outset, I want to say that the Bloc Québécois will be supporting this bill with respect to changing the rules for foreign investment entities and non-resident trusts. It was high time that this kind of action be taken to bring about changes in the major areas in this bill, on which I will elaborate a little later.

On this day when the Minister of Finance announced what he called a tax fairness debate, we can see that the government has overlooked two things. This bill should also have included something about the whole issue of the tax treaty with Barbados. If there is a loophole for tax avoidance in Canada right now, that is the one. In addition, on the face of the government's proposal this morning, it would seem that it simply voids what the budget said. Very rarely is a decision that is not to be implemented for another five years, and that will be submitted to an advisory panel in the meantime, announced in a statement by the finance minister.

The government realized somehow that what was announced in the budget was not specific enough. It was having a major negative impact on the economy while at the same time not addressing all potential abuse in that area. It is therefore right to vote for Bill C-33 to ensure that this legislation can come into force. Indeed, tax fairness issues had been identified by the Auditor General, and even by predecessors of hers, but had not yet been addressed.

However, today, we would have liked—particularly the Bloc Québécois—the government to take advantage of the great opportunity provided by this bill to correct a problem, to address a major flaw in Canada's whole international tax structure, namely the infamous tax treaty with Barbados. We expected the minister to deal with this issue. Unfortunately, he merely dealt with the deductibility of interest costs, by coming up with a solution that looks like an attempt to muddy the waters. Moreover, there is no indication at all that the issue of the tax treaty with Barbados will be settled.

When we talk to people about this issue, they find it a bit complicated. It is simply a matter of understanding that, under the existing system—which is the result of the government's action, not something that happened by accident—each and every year, we lose $800 million in taxes that should be paid by businesses on the profits that come back from Barbados without being taxed. Indeed, we would have expected the government to do something about this situation in today's legislation, but it did not.

The bill amends the rules that apply to non-resident trusts and to foreign investment entities. These changes were necessary in order to amend the Income Tax Act, which sets the tax rules for these non-resident trusts. Normally, a trust falls under Canada's Income Tax Act if it has received a transfer or the proceeds of property from a partnership, joint venture, trust, fund, organization, etc. The trust is required to pay taxes on its revenues to the Government of Canada. If it does not do so, beneficiaries are held responsible and they must pay those taxes themselves. However, the amounts imposed on beneficiaries will reflect their contribution to the trust. An additional relief will be provided to those beneficiaries whose contribution is minimal, compared to the other contributions made to the trust.

So, this bill includes various measures and amendments that change the rules that apply when this money is brought back to Canada. More specifically, these measures define the additional criteria used to determine the fair market value of the assets held by a non-resident trust. In addition to correcting this situation, we would have liked the government to also deal with the issue created by the tax treaty with Barbados.

I will let the House reflect on this issue that is not dealt with in the bill, on this major lack of fairness that has a huge impact on Canada's tax system.

[The Deputy Speaker, Bill Blaikie]

Order, please. The hon. member will have 15 minutes left to continue his remarks.

We will now proceed to statements by members. The hon. member for Dufferin—Caledon.

Orangeville Blues and Jazz Festival

[David Tilson, Conservative, Dufferin—Caledon, ON]

Mr. Speaker, on Friday, June 1, the town of Orangeville will once again be the proud host of the Orangeville Blues and Jazz Festival.

The annual festival had its beginnings in 2003. A small group of five volunteers organized and operated a full-blown festival over three days. Today, this annual event is the largest musical festival of its kind northwest of Toronto, which draws extraordinary talent and some of the most acclaimed blues and jazz performers in Canada.

The festival has been immensely successful due to the outstanding talent but also because of the tremendous efforts performed by the festival's organizers, such as Larry Kurtz, artistic director for the festival. I commend the efforts of Mr. Kurtz, as well as the other festival organizers, and thank them for drawing such positive attention to the town of Orangeville and to the local businesses and organizations in our community.

On behalf of the residents of Dufferin—Caledon, I wish the Orangeville Blues and Jazz Festival great success in its fifth season.

Victorian Order of Nurses

[Lloyd St. Amand, Liberal, Brant, ON]

Mr. Speaker, a historical and venerable organization in Canada is celebrating 110 years this year.

Established in 1897 by the wife of Governor General Aberdeen, VON Canada has been delivering health care and support services to Canadians in need and helping to build the Canadian health care system.

Since 1897, VON has been evolving to identify the health and social needs of Canadians and working with partners to develop programs to meet those needs. Decade after decade, VON has been called upon to respond to the changing health and social needs of Canadians and it has continued to deliver on its strong commitment to all Canadians.

VON continues to be a provider of high quality care through 51 branches in more than 1,300 communities across Canada affecting millions of Canadians each year.

I want to wish the VON a happy anniversary and I wish it 110 more years of dedicated service to Canadians.

Member for Lotbinière—Chutes-de-la-Chaudière

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

Mr. Speaker, Quebec members from the Conservative Party have repeatedly stated in this House that the Bloc is useless in Ottawa. Well, not only is the Bloc Québécois useful, but you will never hear one of us speak as crudely as the member for Lotbinière—Chutes-de-la-Chaudière did at the May 7 meeting of the Standing Committee on Natural Resources.

The member said:

Often, a father will give his son advice on how to select a heating system. That is not usually something a mother discusses with her daughter; a mother is more likely to advise her daughter on what curtains to pick. That is the reality. It may be sexist, but that is the reality.

Yes, Mr. Speaker, it is sexist. After all, your remarks simply reflect the opinion this government has of women, as evidenced by the cuts to Status of Women, the new criteria for the women's program, and the elimination of the court challenges program.

I dream of a day when the very few women in the Conservative caucus will stand up to condemn such remarks.

Life-Work Balance

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Mr. Speaker, yesterday, many of us took time to celebrate mothers but mothers in this country need more than flowers.

What mothers and fathers deserve is better work-life balance. They deserve not to be penalized for taking time off to care for children or sick and aging relatives.

New mothers deserve real maternity benefits. Currently, two-thirds of women who pay into EI cannot access maternity benefits.

Parents need affordable, not for profit child care so that working families can make ends meet. In order to make jobs work for women, we need to ensure flexible and family friendly workplaces.

This is the reason I introduced a motion that calls on the government to implement a multi-stakeholder task force to produce recommendations for better life-work balance choices. Women and men in this country should not need to choose either family or work. Canadians deserve the opportunity to do both.

Today the National Association of Women and the Law are here to discuss with parliamentarians many of these equality issues. I would like to take this opportunity to thank the organization for its work.