Debates of May 16th, 2007

Olympic and Paralympic Marks Act

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

Mr. Speaker, I am a proud British Columbian and proud to be part of the 2010 Olympics as the hon. member was a proud Quebecker in 1976 when Montreal hosted the Olympics that year.

When it comes to the government working on anything, the Conservatives delay each and every thing. They inspect bills, whether they are their own justice bills, whether it is the counterfeiting legislation, child care, or access to information. I was on that committee when the Conservative member filibustered for four consecutive meetings.

The government must learn to act on things faster and in a more efficient manner, so it can serve Canadians and Quebeckers.

[Mario Silva, Liberal, Davenport, ON]

Mr. Speaker, I want to take this opportunity to congratulate my hon. colleague for his excellent speech and the work he has done on this file. Obviously, it shows a great interest and enthusiasm on his part for the Olympics coming in 2010 to Vancouver.

Vancouver has a very soft spot in my heart because I went to grade school there for a number of years before moving to Toronto. Certainly, we are very pleased with Vancouver's bid. We are looking forward to the Olympics. When I was on city council in Toronto, I worked on the 2008 Olympics bid. Unfortunately, we did not win, it went to China, but we are very proud and very pleased that Vancouver was chosen to host the world and bring the world together. We are very delighted and look forward to that very day.

Branding is a very important issue and I understand the issue that my hon. colleague raised in his remarks in relation to Bill C-47. However, there are those who have issued concerns that this might be some form of censorship. I would like my hon. colleague to comment on that and elaborate further why this legislation is needed.

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

Mr. Speaker, the member for Davenport shows commitment. I went the other way around. I was in Alberta to begin with and moved to British Columbia. I would love to have him back there. He would be welcome.

I also congratulate him as a city councillor for his efforts and the work that he has done on the 2008 Olympics bid. This is the type of work that has to be done for causes like this from day one. I can say that the right hon. Jean Chrétien and members of the Liberal Party were there from day one and are there today.

The member asked me about protection and its effect. As I said earlier, brand protection is revenue protection and $700 million, which is almost 100% of the money that is going to be spent on the Olympics, is coming from private corporate big sponsors and we cannot turn our backs on them.

If we do not raise that kind of money, it is going to be a burden on Canadians. Someone has to pay. The British Columbia government has made a commitment to the Olympics committee that it will contribute to any shortfall. When I stand here as a responsible member of Parliament for British Columbians, I have to take that into consideration. That is why I am a big supporter of brand protection, which is revenue protection.

At the same time, because it has a grandfathering clause, it is not going to affect small businesses that use the word “Olympics” or “olympia pizza”, for example, in the riding of Vancouver East. Those people will be protected in the grandfathering clause, but at the same time the Internet and the media, which was a question asked earlier, will not be part of this protection. They will be free to express their opinions. They are free to use the logo and the name in whichever sense they want. I hope I answered that question.

[Keith Martin, Liberal, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, when the era of the modern Olympics began with Baron Pierre de Coubertin in 1896 and he coined the term “citius, altius, fortius”, he could not have imagined how far the Olympics have come today. What a grand spectacle it is and what an advantage it is to communities that host them.

I want to thank my colleague from Newton—North Delta for all of his hard work and all of our colleagues in Vancouver who have worked hard to make this happen with our provincial counterparts and the private sector.

I want to ask my colleague this. Does he not think that a small part of the moneys generated from the Olympics could be used to reinvest in athletic facilities in British Columbia and other parts of Canada, and particularly to work with children to make sure they have the facilities that will enable them to participate in sports?

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

Mr. Speaker, I would like to congratulate my hon. colleague from Esquimalt—Juan de Fuca for all his work because he was there even before I was on this Olympics file. He has done good work.

When it comes to children, I see where the member is coming from. He has a commitment to youth and our future generations. The money that we are raising and the infrastructure that we are putting together will be used by other generations to come.

[The Acting Speaker, Royal Galipeau]

It being 5:30 p.m., the House will now proceed to the consideration of private members' business as listed on today's order paper.

Income Trusts

[John Cannis, Liberal, Scarborough Centre, ON]

moved:

That, in the opinion of the House, in relation to the proposed tax on distributions from publicly traded income trusts or publicly traded partnerships, other than those that only hold passive real estate investments, the government should repeal its planned 31.5 per cent tax regime and replace it with an immediate 10 per cent tax to be paid by such entities with the revenue to be shared equitably with provincial governments provided that the tax would be refundable to investors who are Canadian residents in order to: (a) minimize the loss of savings to Canadians who invested in income trusts; (b) preserve the strengths of the income trust sector; (c) create tax fairness by eliminating any tax leakage caused by the income trust sector; and (d) create neutrality by eliminating any incentive to convert from a corporation to an income trust purely for tax purposes.

Mr. Speaker, as each one of us in this hon. chamber stands to debate this motion, I hope that we do not try to distort what the motion is really saying.

As the leader of the Liberal Party, the member for Saint-Laurent—Cartierville, indicated in his presentation last week, there are two segments to this initiative on behalf of the Liberal Party. When the idiotic and not thought out initiative was suggested by the Minister of Finance, the member for Markham—Unionville immediately commented. As has been said by many people who are not politicians, the member for Markham--Unionville is a recognized economist, a person who in his private life worked in the financial sector, and he could best understand this issue.

All of us have made every effort to understand it. As it is unravelling, not only we as parliamentarians recognize the faults in the finance minister's initiative and the new Conservative government, but average Canadians from coast to coast to coast have picked up on it. I thank the media, because the media have done an admirable job in bringing the facts forward.

People within the industry, representatives of various organizations that I will refer to in a moment, not just within Canada but outside Canada as well, are saying that we are often described as a member of the global community. We are international partners in our responsibility to create a safe society for people to live in both here and abroad. One example is the important mission in Afghanistan which our men and women in the Canadian Forces are undertaking. We have to ensure that the finances of nations are stabilized in order to create the level playing field that we have been encouraging.

Just last week when the Minister of Finance was asked a question he replied that the government wants to create fairness and a level playing field. On the interest deductibility issue, it seemed really odd to us how he was going to create a level playing field when other countries had the same provision for their corporate sectors, and yet it was being taken away from Canadians thus creating an unbalanced playing field for us to work on.

It is not just in this Parliament that this issue has come before us. There was a discussion and an inquiry on this issue in the last Parliament when there was also a minority government. There was talk about looking at what we could do, whether we should change it or leave it alone, et cetera. The member for Scarborough—Guildwood, who formerly was the parliamentary secretary to the minister of finance, provided his input. I also applaud the member for Halton who has been on top of this issue right from day one. He has been very forthcoming with respect to his comments and his information gathering.

I will talk about the last Parliament for a moment. In all fairness, Canadians who are watching us today should be reminded of what happened so they can appreciate what is happening here today.

When this initiative was undertaken in the last Parliament, the Liberal government of the day was looking at it, there is no question. Inevitably it was decided that we would not do anything with the income trust file. That was publicly known. Canadians were concerned at that time, and I do not blame them. They said, “They said they were going to do it and now they are saying they are not going to do it”. Canadians felt a bit uncomfortable and rightfully so.

The leader of the opposition at that time, the right hon. Prime Minister today, made a commitment that should the Conservatives be successful in securing government, they would not do anything. They would leave it as it is. In the Prime Minister's own words which I quoted last week, he said, “We guarantee you we will not touch this file”, to the seniors especially, whom I talked about last week, and to corporate Canada, which I do not like to refer to as such because it is not what I believe it is; I would refer to it as working Canada, to employed Canada, because it affects people's jobs as well. Based on that commitment during the campaign, Canadians felt comfortable that they had a firm commitment. That is campaigning.

We fast forward a little and the Conservatives assume the role of the new Conservative minority government and lo and behold, to our surprise the Minister of Finance, the former minister of finance for Ontario, and we all know the devastation of Ontario under the finance minister, came up with this bright idea out of the blue. The important thing for me, on behalf of my constituents and the seniors with whom I have been speaking, that the Conservatives in essence reneged on a firm campaign commitment.

I am pleased today, after the initiatives of the Liberal Party, that the interest deductibility issue has been addressed, bringing us back again to a level playing field. Finally the finance minister, the Prime Minister, the new Conservative Party as a whole saw the light that it was indeed wrong, that it would hurt Canadian companies and that it would not permit them to compete fairly as other countries and their organizations would have been able to do. I am pleased that they saw the light. It just goes to show that the will of the people and their message does get through in this Parliament.

I would like to quote some distinguished people on how they felt about the government's initiatives on income trusts. Allan Lanthier, a retired senior partner of Ernst and Young and the immediate past chairman of the Canadian Tax Foundation said it is “the single most misguided proposal I have out of Ottawa in 35 years”.

We have stood in the House many times applauding and congratulating various organizations, our firefighters, our military, our police and the teaching profession as well. Today, as young as we get, we always remember our teachers. I recently had the opportunity to celebrate the 100th anniversary of the high school I attended, Riverdale Collegiate Institute in Toronto. The first thing I did was to thank all those teachers for the years they taught us well.

Claude Lamoureux of the Ontario Teachers' Pension Plan board, said the following:

This is unbelievable. I do not know who in finance looked at this. I cannot believe any sensible person would do this.

Another individual who always comments post-budget is Mr. Thomas d'Aquino, president and chief executive of the Canadian Council of Chief Executives. Somebody like him is getting input from corporate Canada, or business Canada, whatever one calls it. This is what he had to say:

--we are worried that the change announced in the budget 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 Canadian communities. It may also damage Canada's standing as an international centre for financial services.

We can imagine the kind of effects that this policy would have had not just on Canada's competitiveness but right down to the families, to the households, to people's inability to educate their children, to pay their mortgages, to seniors.

[Dean Del Mastro, Conservative, Peterborough, ON]

Shameful.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Speaker, the member is right. It is shameful. Even members of the Conservative Party are saying it is shameful. It just goes to show that they finally saw the light.

Nancy Hughes Anthony, the president of the Canadian Chamber of Commerce, whom that party supports and we support as well, had this to say:

The proposal appears to be driven by revenue enhancement rather than a desire to build a competitive advantage.

Let me explain that. When she says revenue enhancement, the Conservatives promised they were going to give a one per cent reduction in the GST. They knew right away almost $6 billion would be eliminated from the revenue.

I have said before and I will say again there is a price for civility and it is called tax. A friend of mine said, “I do not want to pay taxes anymore. I am tired of it”. I said, “Great, do not pay taxes, but do not ask for the services that the nation provides. Do not ask for military support. Do not ask for security. Do not ask for moneys toward health. Do not ask for money for infrastructure”.

Last week the member for Peterborough, he too finally saw the light. He read from page 23 of our red book and finally he completed the sentence about our promise to eliminate the GST. He was right, but what those members failed to say was that in the last 13 years we had promised to eliminate the GST and replace it with an equally revenue generating tax. The member was not there at that time. I was, when we offered to the provinces to harmonize it. The Maritimes did. If Mr. Harris and Mr. Klein at that time had wished, it would have been a done deal.

There is so much to say on this file and it just goes on and on.

I was just asked how to build Canada's economy. Let me answer the member from the Conservative Party. When we inherited the mess they left, the Conservatives' blunders, a $43 billion deficit and a debt that was going out of whack, our country was being described as a third world, bankrupt banana republic. We did not complain. We just went to work. We did not raise taxes. We lowered taxes. We created the longest uninterrupted period of growth in the history of our country. More employment was created under the Liberal government than at any other time in the history of our country.

The Conservative Party has finally heard that 91% of the people do not wish to see these types of policies implemented. I would just remind those members that two out of three Canadians did not vote for that party.

I am glad they are changing their minds. I am glad they did on the interest deductibility and hopefully, they will see that our proposal is the right way to go.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, once again we see debate in this House brought down to levels to which it should never go. The member quite frankly brought up so many points that were false, I do not know where to begin, but let me begin by making a few points of fact on the motion that the member brought to the House.

First of all, the member is probably aware that every single provincial finance treasurer came forward and said there was tax leakage, that it was substantial, that we could not afford to have it and we could not afford to let it keep on going. The governor of the Bank of Canada came forward and said there was tax leakage, and what is more, that corporations switching to income trusts was a bad structure.

I see the member for Mississauga South is counselling the member. That is good. The member for Mississauga South also knows nothing about this topic, but I will tell members something else.

Finn Poschmann from the C.D. Howe Institute said something had to be done, and better now than later. Kevin Dancey from the Canadian Institute of Chartered Accountants said that there was leakage and there was also severe reporting problems with income trusts.

That member stands in this House and says he stands for families. He should stand for them now. He should stand for tax fairness while he has a chance. The member for Markham—Unionville has no idea. His friends on Bay Street are the ones who influence him. The thugs with CAITI are the ones who influence him.

Regular Canadians, people who pay taxes and rely on the people in this House to do their jobs and stand up for them, are the ones who need tax fairness. The member should stand up for them. I would like to know why he does not.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Speaker, as for all the huffing and puffing that was going on over there, if the member had read the motion he would have seen how we are asking this initiative to indeed become revenue neutral so that nobody is penalized. Those members are just used to taxing. For example, we are just saying to move it from the 31.5% that they are proposing to 10%. Who is being fair here?

Second, I want to remind the member that we are trying to protect the country first of all. He will have to answer to the seniors in his riding.

I also want to point out for the hon. member that 15 income trusts were taken over just recently, costing a tax base for our country of $6 billion.

Let me close with this. The Gartner Letter, a United Kingdom daily commentary on the markets, described it this way: the Canadian finance minister's “idiotic 'trust' taxation decision rendered last October 31st, which we still believe ranks as one of the worst decisions ever rendered by a person in a position of monetary authority”.

That says it all.

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

Mr. Speaker, I will speak quickly, since we do not have much time. Does the hon. member admit that, on the essence of the issue, that was the right decision to make? Unfortunately, the Conservatives changed their mind after they had promised they would not modify the rules. Many small investors were swindled by that decision. However, on the essence of the issue, the situation could no longer continue.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Speaker, I thank the hon. member because he is adding a human element to this. I very much appreciate that.

When the potential leader of a nation, as he becomes the leader of the nation, sends a signal, people take certain steps. They may invest savings and they may invest for their future, et cetera. Today, a year and a half later, these people have been misled. Their lives have been affected negatively. That is what this is all about.

I am simply telling them to let us add a human element to this. They have betrayed seniors and it has to stop.

[The Acting Speaker, Royal Galipeau]

The hon. member for Simcoe North for a very short question.

[Bruce Stanton, Conservative, Simcoe North, ON]

Mr. Speaker, as I listened to this hon. member I wondered what he would have to say about prominent members from his own party like, for example, Sheila Copps, who said that reversing the income trust decision “would...run afoul of espoused Liberal principles, by promoting a tax loophole for a select few financed by the rest of us”.

What does he have to say about these prominent Liberals like Ms. Copps?

[The Acting Speaker, Royal Galipeau]

Equal time for the hon. member for Scarborough Centre, but no more.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you kindly, Mr. Speaker. Every member, after they have moved on and are outside this House, has every right to say something. The members who may have more information on this are the committee members, who participate on a daily basis, or experts such as the people I have just outlined, including the former finance minister, the president of the teachers' pension fund, the president of the Canadian Council of Chief Executives, the president of the Canadian Council of the--

[An hon. member]

Oh, oh!

[The Acting Speaker, Royal Galipeau]

Resuming debate.

The hon. member for St. Catharines.

[Rick Dykstra, Conservative, St. Catharines, ON]

Mr. Speaker, I appreciate the opportunity to speak to the bill.

I am a little surprised to see the member here. He and I had a good debate on Thursday of last week and he indicated that if I showed him where in the Liberal red book it said that the GST was going to be cancelled, scrapped and changed, he would resign, but he is here today to speak to his private member's motion. I took him up on his challenge, mano-a-mano, and, like the Liberal Party, he did not keep his commitment.

I take this opportunity to contribute to the debate on Motion No. 321, a proposal that represents another sorry chapter in the tale of Liberal mismanagement on the issue of income trusts. It is a book that is never going to become a best seller, and I would like to think, as probably all Canadians would, that the conclusion of the Liberal Party is actually being written as we speak.

The Liberal Party now has had at least three policies on income trusts: one with the tax, one without a tax, and now we are back with a tax in another Liberal plan.

The proposal in this motion fails in every respect. First, there is no tax neutrality between trusts and corporations. Second, it does not address significant federal and provincial revenue losses if existing trusts continue to grow. Third, there is no level playing field. It maintains a tax advantage for income trusts over corporations, which we have seen is bad for this country.

It would open the door for corporate taxpayers like Hibernia and EnCana to convert to trusts. No wonder, as the member for Peterborough so aptly put it, that Finn Poschmann of the C.D. Howe Institute called it “a politically funky stew”. I have seen Finn at our finance committee meetings and I am not saying that he always agrees with us, but I will say that he and the government are 100% on side in terms of what we needed to do with income trusts.

Our government is committed to tax fairness, as we announced on October 31, 2006. Prior to that, Canadian companies were announcing intentions to convert to the income trusts and it was happening at a frenetic pace. Such decisions offered short term tax benefits but created significant economic distortions. It threatened Canada's long term economic growth and it shifted future tax burdens onto taxpaying Canadians, both families and individuals.

It would have meant unchecked growth that would have resulted in billions in lost revenue, which would not have been invested in the priorities of Canadians. This has been confirmed by a number of experts. Economist Andrew Teasdale noted that “exploitation was set to expand to a level which could have significantly impacted the ability of the government's right to make tax policy”.

Bank of Canada Governor David Dodge said:

By giving incentives that led to the inappropriate use of the income trust form of organization, the tax system was actually creating inefficiencies in capital markets, inefficiencies that, over time, would lead to lower levels of investment, output and productivity.

The introduction of the tax fairness plan restores balance and fairness to the federal tax system.

The decision was not an easy one. It was a tough one, but it was the right one. The provision of doing the right thing and addressing tax relief means that we could reduce the general corporate income tax rate; we could increase the age credit amount for seniors; and in regard to a recommendation, after 40 years we actually could introduce pension income splitting for seniors.

This is the right plan. It will not indefinitely maintain a tax imbalance between income trusts and corporations, and it will not maintain the economic distortions which that imbalance entailed, an imbalance that over the next number of years would have forced personal income tax rate increases that would have shocked Canadians.

Dominic D'Alessandro of Manulife Financial said it was “the right thing” and that “continuing on this path [of income trusts] would not be in the long-term interest of this country”.

In April 2007 the Financial Post had a poll that showed that a majority of Canada's business leaders supported our action and saw income trusts “as an increasing threat to economic growth because income trusts, unlike normal companies, were obliged to distribute their earnings and couldn't readily reinvest”.

They couldn't talk about the reinvestment of capital equipment, of machinery. That is something we put right in the budget with the accelerated capital cost allowance that allows companies and corporations across this country to accelerate the investment they make into their companies. Instead of doing it over 10 or 15 years, they can now do it in two years. We are starting to see companies and corporations move in that direction.

Even the Liberal member for Halton said that “reforming the [income] trust business and stemming the tide of conversions is necessary for the long-term health of the economy”.

Motion No. 321 offers dangerous false hope to Canadians who suffered losses, regrettably, and it suggests that going back to an imbalance is actually the right thing to do. It would reintroduce unnecessary uncertainty into financial markets. We have seen, as I outlined, that the movement of the Liberal Party on income trusts has shown that the financial markets were imbalanced when they tried to and did not move on this.

I am not the only one saying that. Jack Mintz of the Rotman School of Management said that the Liberals are “creating market uncertainty by extending false hope to investors”. The National Post said, “The issue is settled”. It said, “In other words, it's time to move on“.

Everyone in the House got the message except the Liberals. Why not? Why are the Liberals proposing a plan that will exacerbate revenue loss? Let us imagine the revenue loss if Hibernia or EnCana and other large energy companies were to convert to income trusts. The Liberal plan would create a burden on Canadian taxpayers and would cost the federal and provincial treasuries billions.

Every single province supported our tax fairness plan. From across this country finance ministers from every province and territory wrote letters to every member of the finance committee to tell them that this was the right thing to do.

P.E.I. finance minister Mitch Murphy said that without our plan the province could find itself “facing a severe tax base decline...[that] would be very damaging to [Prince Edward Island's] efforts to build a strong, self reliant corporate tax base...as well as in the Atlantic region in general”.

Canada's Conservative government has said it repeatedly: Canadians pay far too much tax.

Budgets 2006 and 2007 introduced a total of over $40 billion of tax relief benefiting Canadian individuals and businesses.

Ignoring the issue of income trusts would have resulted in ordinary Canadians paying more tax today and for years to come.

Corporate tax avoidance left us with us with a choice. We either balance our budget on the backs of ordinary Canadians or we take firm action to implement tax fairness. It was not an easy decision. When leadership is required and when tough decisions are made, leadership is never easy and those decisions are never easy, but those decisions have to be made.

The tax fairness plan provides certainty and security. Proceeding with the plan means acting in the national interest and enhancing incentives to save and invest for family retirement and security.

Unlike previous governments, we did not base our decisions on political calculation but on principles of tax fairness, balancing the needs of the individual investors versus the interests of taxpayers.

Decisions are all about fairness: fairness for Canadian taxpayers and their families who would otherwise be asked to pay more and more; fairness for the corporate sector, by removing the tax distortion in favour of income trusts relative to corporations; and fairness for all Canadian governments, federal, provincial and territorial, by preventing a significant loss of tax revenue, by setting right a significant wrong.

Where once there was speculation, today there is certainty. Where once there was posturing, today there are principled decisions. Where once there was dithering, today we have decisiveness. Where once we had confusion, today we have confidence.

Businesses are making their own choices and they are moving on. It is time we all moved on. The result of our decision is clear: a tax system that is fairer for Canadians and that will help our economy to become more productive, efficient and dynamic today and for years to come.

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

Mr. Speaker, our debate on this motion must take two different angles into account. This is an example of a terrible decision made by the federal government, which, systematically, year after year, sends conflicting messages to the business community and investors.

For example, in September 2005, the Liberal finance minister declared a moratorium on the creation of income trusts, under the pretext that the government wanted to limit the loss of tax revenues stemming from the conversion of corporations. In his economic and fiscal update in November 2005, the minister flip-flopped and lifted the moratorium that he had just declared in September 2005.

When the Conservatives said during the election campaign that they would not touch the financial vehicles known as income trusts, many investors found them to be a worthwhile investment. Big businesses and small investors all went ahead with them. The Conservatives must accept their considerable responsibility. Their actions caused the stock market activity that we saw in relation to income trusts.

But this tax avoidance had to be eliminated. When he was running for office, the current Minister of Finance should have been careful and said that he would look at the figures and announce appropriate measures once he was in power. Instead, he said that he would not make any change, but he reversed his position in the fall of 2006. Using a ways and means motion, he announced the introduction of a tax on the income distributed by trusts to companies, thereby going back on what he had said during the election campaign. This caused serious problems. However, if we take a close look at this issue, we see that the Conservative government practically had no choice. The finance department estimated that year in and year out, the different levels of government lost $400 million in revenue because of income trusts.

For example, 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 was allowing corporations to avoid paying significant amounts of tax, had to be eliminated.

The measure offered tax benefits, but no constructive benefit to the economy. The income trust structure practically forces a company to pay 100% of its profits to its shareholders at the end of the year, which is highly counter-productive in terms of economic investments. If the company keeps part of its profits for an investment project, for instance, it must pay the maximum amount of taxes on that non-distributed revenue. This structure did not promote investment. This is why, in addition to the tax leakage associated with the conversion of a growing number of income trusts for reasons that are strictly tax motivated, the potential loss of productivity in our businesses is a real danger when the manufacturing sector in Quebec and Canada is going through a serious productivity crisis.

For example, according to the World Competitiveness Yearbook, 2007, Canada was ranked seventh in 2005, but fell to 18th in 2006. Had the government not stepped in, a company such as Bell, for example, would have been forced to distribute all profits to its shareholders or be subject to substantial financial penalties. It makes no sense for this structure to be applied to a company such as Bell. Thus, Bell would have been forced to cancel its investments in order to ensure its growth and would have been condemned to die a slow death. Entire industrial sectors could have been forced, by shareholders wishing to maximize their short-term profits, to convert to income trusts merely for tax reasons. At the same time, they would have had to sacrifice long-term growth in our industrial sector. Action had to be taken to correct this situation. That is what the government did.

It was the way in which they did it that had a significant negative impact on the stock exchange and on the portfolios of small and large investors. First, it backtracked on its election promise made to citizens and investors that it would not change the tax treatment. After it came into power, it suddenly changed its mind.

The Bloc would have liked the Minister of Finance to have taken more care in making his decision. He could have arrived at a conclusion that would have avoided using this solution. The Bloc Québécois did make constructive suggestions in this regard.

Nevertheless, in the end, we have to come to terms with the government's position as expressed in the budget and the bill to implement the budget, which is currently before the Standing Committee on Finance. The Bloc Québécois does not believe that this budget corrects the fiscal imbalance. It merely corrects the financial imbalance without dealing with the underlying fiscal imbalance. All the same, we think that the budget deserves our support, and the people of Quebec agree with us on that. As part of its budget, the government will be transferring adequate funds to Quebec. In light of our current financial situation and the fact that often, the needs are provincial while the money is federal, that will give the province a chance to breathe.

They are correcting the situation for this year and the next few years, but they are not making any structural improvements. The federal government has yet to take that step. The Bloc Québécois has been fighting this battle for the past four years in the House of Commons and in every other forum imaginable. It has based its arguments on the Séguin report and the consensus in Quebec. Four years ago, nobody in this House was talking about fiscal imbalance. Now we have at least one budget that will allocate major funds to Quebec. As such, the budget deserves our support.

The income trust situation should have been fixed with a similar measure despite the fact that it clearly had a negative impact on a lot of investors. In terms of the underlying issue, the decision the government made was necessary, yet the government should have found other ways to ensure that the measure had as few negative effects as possible. Proposals to address this were submitted to the committee. The Bloc Québécois has been recognized for its efforts in that regard. The government did not agree to the Bloc's proposals. Instead, it implemented its own crude solution, which is fine, but our solution would have been better.

If the government had kept its original position and not made any changes, we would be faced today with huge flights of capital, which would add significantly to the challenges and problems facing the manufacturing industry in Quebec and Canada. We know how important it is in today's competitive global economy for capital to be available and used to improve productivity and not just make tax gains.

I believe that, on the face of it, the proposal my colleague is making today is not acceptable. This House must reject this motion. Moreover, if it were adopted, it would run counter to the budget that has been adopted and the implementation bill that is currently under study.

I invite my colleague and anyone who has questions about this issue that should be studied to continue making representations during the pre-budget consultations to come. This will not resolve the issue for this year, but if any additional information and solutions are out there, it would be interesting to know what they are. The Bloc Québécois began looking at income trusts in 2005, after the Liberal finance minister announced that the moratorium had been lifted. We did not want to abolish income trusts at that time. Instead of preventing corporations from becoming income trusts, we were in favour of introducing a minimum tax on profits from income trusts. We felt that this was worth considering, as it would rebalance the tax treatment of income trusts and corporations.

Following the minister's decision, in October 2006, the member for Joliette, who was then our party's finance critic, brought forward a motion before the Standing Committee on Finance that read as follows:

That, as soon as the report on prebudget consultations has been completed, the Standing Committee on Finance study the economic and fiscal consequences of the transformation of a growing number of taxable corporations into income trusts.

A few days later, we learned where the finance minister stood on this issue. Today, we have to choose between voting for this motion—which would recreate a very difficult situation that is not good for the economy and especially the manufacturing industry—and rejecting this motion. The Bloc Québécois chooses to reject the motion. We believe that that is better overall for Quebec's economy. We must move in that direction.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, there is a good reason why the United States, Great Britain, Japan, Australia, or any country in the European Union, such as Germany or France, do not allow income trusts. The United States does not allow them because they are disastrous economic policy, and I do not use the word “disastrous” lightly.

Income trusts are corporate greed gone wild. They are a corporate wet dream. No business likes to pay taxes, so these guys have discovered a way to pay none, not just lower taxes but no taxes. The guy who developed this got a promotion. Some young Turk somewhere on Bay Street or Wall Street got a bonus that year after inventing this. I cannot get over how we have allowed this disastrous policy to percolate and incubate until it has reached the magnitude that it has.

The NDP spoke out as soon as it noticed it. I took note when the Yellow Pages converted to an income trust. It was a good number of years ago. I met one of the lawyers who orchestrated the Yellow Pages conversion. He said to me, “You are a socialist”. He asked why we were not screaming bloody murder, that somebody should call the cops, that there was robbery going on. That was essentially his point of view. He asked how we could stay silent on it, did we not read the financial pages? In actual fact, sometimes I think we do not read the financial pages enough because stuff like goes on that deserves to be denounced in the strongest possible way.

Businesses do not like paying taxes, so they argue with government all the time that they should pay less and less. We balk sometimes at that, but they have managed to shift the tax burden successfully over the years. It used to be that roughly 50% of government's tax revenue came from individuals and the other 50% came from business. That has shifted dramatically to 80:20, to 85:15, to where individuals are assuming the overwhelming majority. With income trusts, businesses found a way to pay no taxes and shift all the burden on to the unit holder who would get the revenue.

A lot of people do not understand how simple the income trust concept is. Businesses are putting together a corporate structure where there are nothing more than shells, flow through entities. That is what is disastrous.

This was why our American colleagues, who know capitalism better than anyone in the world perhaps, balked at it. They recognized how devastating this would be for a business if the earnings simply flowed through to unit holders with no commitment to hang on to any of that money for research and development or to grow the business and hire more people.

The obligation is to meet this insatiable demand for increased revenue to the unit holders. They suck the life out of a corporation. They stuck it dry. It is corporate greed at its ugliest, at its worst embodiment. It is the manifestation of greed run wild for short term gain and long term pain. That is why no country in the world would allow it. That is what was wrong—

[An hon. member]

Except the Liberals.

[Pat Martin, NDP, Winnipeg Centre, MB]

Except for the Liberals, who lapped it up like lap dogs to corporate Canada. When this was presented to the Liberals, they allowed it to go on for years and years.

I have the figures here for what started out as simply a bad idea by some corporate zealot.

[Charlie Angus, NDP, Timmins—James Bay, ON]

An article of faith for the Liberal Party of Canada.