Mr. Speaker, in the life of a Parliament, especially a minority Parliament, private members, those members who are not ministers of the Crown or parliamentary secretaries, typically have only one opportunity to bring forward an issue, either through a bill or a motion, for debate. They have only one opportunity potentially to present a piece of legislation or motion that could change or suggest a change for the betterment of their constituents and indeed all Canadians.
That is why I am surprised with the selection of this motion by the member for Scarborough Centre. While I would not suggest that the income trust issue does not merit discussion, I believe we have had ample opportunity to discuss and vote on the issue through the budget implementation bill, previous ways and means motions, and at the finance committee.
Moreover, not only do I believe this extensive and exhaustive debate has run its course both inside and outside the House, I believe the conclusion is clear and indisputable. Canada's Conservative government made the right decision when it levelled the playing field between income trusts and corporations and ended the growing drain of tax leakage on both federal and provincial coffers.
As a National Post editorial from early January stated so forcefully:
The NDP and the Bloc Quebecois have said they will support the government's income-trust plan. Civil servants have implemented the necessary regulatory changes....
The issue is settled, in other words. It's time to move on. Everyone else has gotten the message. Why haven't...the Liberals?
Why indeed. Another interesting question that voters in Scarborough Centre should ask themselves is why their member of Parliament used this one direct opportunity to effect change in this Parliament to parade out the Liberal finance critic's ill-advised proposal on this largely settled issue of income trusts. The member is ignoring the issues that really matter in his riding, like safer communities, improved public transit, a cleaner environment, and the list goes on.
We, along with the overwhelming majority of the House, will defeat the Liberal income trust proposal. The proposal fails to level the playing field between income trusts and corporations, nor does it even try to address tax revenue losses experienced by the federal and provincial governments. It is a proposal that independent expert Finn Poschmann, director of research at the C.D. Howe Institute, has lambasted as politically funky stew.
We instead will support our government's tax fairness plan which, unlike the Liberal plan, will restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations.
If the member does not agree with that principle, then perhaps he should talk to his Liberal colleague Senator Jerry Grafstein, the chair of the Senate banking, trade and commerce committee, who had publicly noted even prior to our plan “a pressing need to fix the gap between corporations and income trusts”. Noting that, he said:
The most important thing is the tax system should be neutral between two firms in the same business.
Or maybe the member should talk to Ontario's Liberal provincial government which has heralded our plan. In the words of Ontario's Liberal finance minister, Greg Sobara:
--the Government of Ontario supports the federal government's efforts to ensure fair taxation through changes to the tax treatment of income trusts. We believe that these changes will protect federal and provincial revenue from significant tax leakage.
Moreover, our tax fairness plan will also deliver over a billion dollars in new tax relief annually through a corporate income tax rate reduction, an age credit amount increase, and of course, something that I had a lot of support for, the introduction of pension income splitting. I note for the member for Scarborough Centre, who has repeatedly voted against pension income splitting, that this measure will directly benefit countless pensioners and seniors in his riding.
Canada's Conservative government is committed to tax fairness, committed to ensuring businesses and individuals each pay their fair share. Had we not acted, the tax burden would have been unfairly shifted to hard-working Canadian individuals and families. We could not stand by and watch that happen.
We could also not stand by and watch the negative ramifications that the rapidly growing rate of conversions of corporations to income trusts was having on Canada's long term productivity and economic growth. This is a concern that was shared, as revealed in an April 2007 Financial Post poll, by a strong majority of Canadian business leaders who saw the rising trust conversions as:
--an increasing threat to economic growth because income trusts, unlike normal companies, were obliged to distribute their earnings and couldn't readily reinvest.
As we have heard before, Jim Pattison, the head of one of the largest private companies in Canada noted that ours was the right decision. As he put it, fundamentally it was the right thing for the country. Why? It is simple, Pattison, like all smart entrepreneurs, knows that a successful company is created for the long term by continually reinvesting profits.
However, an income trust CEO has no such opportunity. In his own words:
In my opinion, it's important to manage for the long term...
And when the pressure is on management for distributions all the time, there's a tendency by some to not put the money into R&D or spending capital...because the pressure is on the distribution.
Jeffrey Olin, investment banking head at Desjardins Securities, echoed those sentiments when he observed that prior to our government's action, many business models were not adaptable to the income trust structure were drawn to it solely on the promise of easy tax savings. In his analysis he notes:
As a result, trusts may have less internal capital available to pursue growth initiatives or reinvestment in capital expenditures. This could be quite detrimental to the long-term interests of the entity or the economy in general
Before I conclude, I will address a charge that has made by the Liberal members and their friends and a certain well funded lobby group that our tax fairness plan has killed businesses involved in the income trust sector.
To illustrate my point, I will read verbatim what Rudy Luukko, Investment funds editor of Morningstar Canada, had to say on the matter just a few short weeks ago on May 25:
From...the harsh reaction from the trust industry and trust investors, you might have thought that Finance Minister...had driven a stake through the heart of Canadian income trusts on Halloween night.
Six months after the Oct. 31 fright night, however, a much more benign picture emerges. To paraphrase Mark Twain, reports of the death of income trusts have been greatly exaggerated.
There's no question that the trust universe took a hit, and that there are some awful individual trusts whose prices have collapsed because of their lack of business merits. But in the context of equity investing—where double-digit short-term losses are not at all unusual in the pursuit of higher long-term returns—the damage has on the whole been relatively light
In the six months ended April 30—whose Nov. 1 start date coincides with the first trading day after [Minister of Finance]'s surprise announcement—the S&P/TSX Capped Income Trust Index is down 3.6%.
Nevertheless, it was clear that income trusts had a special tax advantage that regular businesses and corporations did not and in the interests of fairness we were compelled to act.
As a respected Canadian commentator Andrew Coyne cleverly observed:
To listen to these trust-fund patriots, you’d think they were the only businesses in the country that were being taxed. Quite the opposite: before the change of policy, they were the only ones that weren’t...
So all of this squawking...is over the loss of, in effect, a subsidy.
Clearly, a policy that levels the playing field between income trusts and corporations that makes them equal, not worse, was the right thing to do. Although the decision to act was not easy, it was absolutely necessary. It was a decision for the country for future generations of Canadians, our children and our grandchildren.