Mr. Speaker, it gives me great pleasure today to speak to the member for Scarborough Centre's motion M-321. I will not read the motion because it is nearly half a page long, which is extremely long.
At the outset, I must say that for at least three reasons, the Bloc Québécois will vote against the motion. First, I think that bringing back income trusts would endanger the productivity of our economy. Second, income trusts cause a great deal of lost revenue for the federal government and all other levels of government. Third, I think that passing this motion would have the same effect as the government's decision to eliminate income trusts. It would send another shock wave through the financial markets.
From the very beginning, the Bloc Québécois has supported the notice of ways and means and the federal budget, which modified the tax regime so that after a four-year transition period, existing income trusts would be taxed like corporations. It also cancelled the creation of any new income trusts. I think that is an important part of it. Existing income trusts will be given a four-year transition period, and no new income trusts will be allowed.
Not long ago, the Department of Finance estimated that the income trust structure was responsible for annual losses to all levels of government averaging $400 million. Before the Minister of Finance intervened, two big corporations, Bell and Telus, had announced their intention to convert to income trusts. These two corporations alone would have increased governments' loss of revenue significantly to $1 million per year. We felt that we had to put a stop to this measure, which would have enabled companies to keep huge sums of money out of government coffers.
Of course, government revenue losses are a very serious matter. Regarding income trusts, what was even more worrisome and objectionable, however, was that the income trust structure meant that companies were practically forced to pay 100% of their profits to shareholders at the end of the year. Indeed, if the company retained part of the profits for an investment project, for instance, it had to pay the maximum amount of taxes on that non-distributed revenue. As a result, most companies that converted to income trusts were investing less and less, especially in the development of new technologies and so on. This structure did not allow companies to invest where and when they needed to invest.
In addition to the tax losses associated with the conversion of a growing number of income trusts for strictly tax-motivated reasons, we must also look at the potential loss of productivity in our businesses, in the context of a serious productivity crisis in the manufacturing sector of Quebec and Canada. It is important to remember that, in order to remain productive, more money must be invested in research and development, especially in the manufacturing sector. In recent years, that sector has suffered considerable losses: job losses, company closures and plant relocations.
To remain competitive, businesses in this sector must continue to invest in research and development. The creation of income trusts no longer allowed businesses to invest more in R and D. I would remind the House that, according to a report published earlier this year, in terms of global competitiveness, Canada ranked seventh in the world in 2005—since the analysis was retroactive. Only a year later, in 2006, Canada dropped to tenth place. Our businesses are increasingly less competitive and increasingly less productive, and that means they must invest more in productivity, especially in research and development.
Had the government not stepped in—this is one of the reasons the Bloc Québécois was in favour of government measures, even if we did not completely agree with the way things were done and with the four-year transition period provided by the government—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.
This means that the company would have had to turn over almost all of its profits to its shareholders, leaving little leeway to invest in research and development.
It makes no sense for this structure to be applied to a company such as Bell. 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. We will remember that Bell and Telus are very large companies that must be constantly investing. They are in a sector—telecommunications and communications—where research, development and the application of new technologies are extremely important. So these companies must continue to invest in order to remain competitive globally.
Shareholders' desire to maximize profits in the short term could have forced segments of our industrial sector to convert to income trusts strictly for tax reasons, thereby sacrificing the long-term growth of the entire sector.
It is also important to remember that, when the Liberals are calling on the government to reverse its surprise decision to raise the tax rate on income trusts, arguing that this measure has cost taxpayers huge sums of money and that returning to the old structure will restore the value of investments to previous levels, they are forgetting an extremely important point.
Since the Conservatives had promised during the most recent election campaign that they would not touch income trusts, investors put their faith in the government. We agree with the Liberals on this: because the Conservatives had promised that they would not touch income trusts, taxpayers kept on investing in income trusts. Unfortunately, the government did not keep its promise. It is therefore true that many investors were duped by the government, which suddenly announced a change in the tax treatment of income trusts.
In promising what they did during the election campaign, the Conservatives eliminated a risk factor associated with these investments, making them more attractive and artificially inflating their price.
As soon as the government—I am referring to the “government” but the Conservatives had not yet formed the government—announced its intention during the election campaign, income trust prices became artificially inflated. When the government announced that it had changed its mind, the stock market dropped dramatically.
I see that I have only a minute left, so in closing, I want to say that if we adopted the measure the Liberals are proposing, the result would be largely the same. There would be another dramatic drop in the stock market. And what might be the impact of the government's proposed transition period, which I believe is too short? We would likely find ourselves in the same situation, with the same problem.
There is one main reason why we are obviously opposed to this measure: maintaining income trusts is making our economy less and less competitive.