House of Commons Hansard #168 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was finance.


The House resumed from May 16 consideration of the motion.

Income TrustsPrivate Members' Business

11 a.m.


Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, it is a pleasure to speak to this motion, a motion relating to a matter that would be a significant issue in the next election. The motion basically reads that the government should repeal its 31.5% tax regime on income trusts and replace it with a 10% tax to be paid only by foreigners. It proposes a refundable tax credit to Canadian residents.

The reason for changing the tax on income trusts from 31.5% to 10% is that it would result in about two-thirds recovery of the $25 billion that were wiped out in the investment value of those saving for their retirement, particularly retired seniors. Its consequences would be to minimize the loss to Canadians who did invest in trusts, to preserve the strengths of the income trust sector, to create tax fairness by eliminating any tax leakage caused by the income trust sector and, finally, to create a neutrality by eliminating any incentive to convert from a corporation to an income trust purely for tax purposes. Tax avoidance is the issue.

Are income trusts bad? If we look at the proposal of the government we see that real estate investment trusts are exempt from this 31.5% tax. The reason being is that they are mature businesses and passive businesses in the sense that they are not subject to the ebbs and flows of the marketplace. Companies that purchase strip malls and lease them out would be an example of a REIT.

Therefore, income trusts as an instrument are not a bad thing, notwithstanding what some members in the House have suggested. The issue has to do with tax leakage. It has to do with the differential between the taxes collected from both the corporation and an individual where someone had invested in a dividend paying corporation, compared to those who invest in income trusts. Income trusts themselves do not pay the tax directly. The amounts are fully taxable in the hands of the investor.

There is probably a big question mark here with regard to tax leakage. I had an opportunity to participate in the finance committee hearings where the finance minister appeared to present his calculations of how much this leakage was and how it was calculated. That did not exactly happen. The finance minister basically said that there was a $500 million leakage in 2006 and that the government was deferring the implementation of this tax until 2011. He said that if we were to multiply that by six years we would get $3 billion. All of a sudden the government will be out $3 billion.

That was not very much detail. However, the finance minister was the first to speak. We then had testimony from experts who came forward. HDR|HLB Decision Economics, Inc. probably raised the most questions which did not get answers. HDR had worked with the finance department to go over the elements of the so-called tax leakage. There was no disagreement in the vast majority of the elements that would be included in the computation of such a leakage.

However, there are at least four that are significant and substantial. First, in determining the $500 million a year loss of tax revenue to the government because of the existence of an income trust, the finance minister failed to take into account legislated tax changes passed by Parliament and coming into force in the year 2007. If there are changes in the tax code coming in 2007, we simply cannot take the estimated leakage of 2006 and multiply it by six. It is just absolutely wrong. The finance minister made a mistake.

The second item had to do with income trusts that were purchased through a pension plan, an RRSP or sitting in a registered retirement income fund. The finance minister and the Department of Finance decided to assume that the Government of Canada received absolutely no taxation revenue from pension plans, RRSPs and RRIFs who invested in income trusts.

What a foolish assumption. If every investment in income trusts were made through pension plans, RRSPs or RRIFs, that means the assumption of the finance minister of Canada is that income trusts generate no taxation revenue at all; it is totally zero this year, next year and for all time. The assumption is that there is no tax revenue. Obviously that is ludicrous.

HDR went on to describe how the estimate of the taxation burden by energy companies was much greater than it actually was. In fact, it was substantially lower.

There are a couple of other items that I will not go into because a 10 minute speech is not long enough to do the subject justice. The bottom line is that HDR concluded, based on the work it had done, that the actual tax leakage was only about 5% of what the finance minister had told Canadians in the finance committee. The annual leakage estimated by the finance minister was $500 million. Five per cent of that is a token amount, relatively speaking, and certainly not enough to have the consequences that the minister knew, or ought to have known, would occur should he move forward with this 31.5% tax.

As we know, within two days after the initial blip and everything had settled down, $25 billion of the investment value of investors was wiped out totally. As of today, instead of it being 11% of the loss of the value, it has recovered a little to 10% because the business continues to work and the value of the stock or the income trusts will go up. However, for all intents and purposes, the loss as a result of the proposed 31.5% tax is a permanent loss, a permanent impairment in the value of the investment.

When the finance minister made that announcement on Halloween, the Halloween massacre as it is referred to, of last year, he also announced pension income splitting for pensioners. When a government makes a major decision on the taxation of investments, why would it also bring another change in the taxation of Canadians at the same time which are actually unrelated? I will demonstrate how.

Only 30% of seniors actually have pension plans, RRSPs or RRIFs, which means that 70% do not. Of the 30% of the seniors who receive a pension, about one-quarter are widows and single persons, which reduces the 30% down to 22.5%, and of those, because the other spouse may already be at the lowest possible rate, there is no benefit in transferring or splitting income. According to Yves Fortier, a former senior official with the Department of Finance, he said that would bring it down to only 16.7% of seniors receiving a pension who will benefit from pension income splitting. On top of that, if many of the remaining seniors receiving a pension were in low paying jobs they are at the lowest brackets, and those kinds of things bring it down.

Mr. Fortier's analysis, a reputable individual, not a political person, concludes that only 12% to 14% of all seniors would benefit.

It gets worse than that. Does anyone know why? It gets worse because the people who are investing in income trusts are people who have no pensions. Income trusts is an investment vehicle that provides a regular cash flow for seniors to pay their bills.

In a low interest rate scenario economy, people needed an instrument like income trusts to provide them with a cash flow that was not just equivalent to a dividend but a full distribution of the earnings of the entity, in this case being income trusts. Income trusts play a very important role in terms of retirement planning and operations of Canadians.

The bottom line is that pension income splitting really only benefits those who have pensions, not the ones who have income trusts. It is a non sequitur. The finance minister has made a grave mistake and he will pay for it in the election.

Income TrustsPrivate Members' Business

11:10 a.m.


Ed Fast Conservative Abbotsford, BC

Mr. Speaker, I am pleased to participate in the debate, which is an important one. The Liberal member for Scarborough Centre has proposed a motion regarding income trusts. The motion essentially demands that our government's decision on income trusts be reversed and replaced with a 10% tax.

Sadly, the motion is a misguided attempt by the Liberal Party to rewrite its own sorry history on this issue. In fact, the motion would be a huge step backward for Canada. It would make us the laughingstock of other nations that long ago eliminated tax free treatment of income trusts or in fact banned them outright.

Indeed, the Liberal motion contains recommendations that if adopted would again create an unlevel playing field between income trusts and corporations. It would again cause federal and provincial governments to lose significant tax revenues to highly profitable Canadian corporations. It would again reintroduce unfairness into the Canadian tax system.

Who would be left holding the bag again? Ordinary hard-working Canadian taxpayers and families.

Let me refresh my colleague's memory. On March 19, 2007, Canada's new Conservative government presented its second budget. The budget was aimed at helping hard-working Canadian families, families that for far too many years have borne the burden of excessive Liberal taxes.

Our budget also took significant steps forward in helping our country achieve its full potential so that the world will see an aggressive, competitive and re-energized Canadian economy.

In the budget, our new government proposed bold new measures to preserve our environment. We also committed to delivering on what is important to Canadians, things like the quality of our health care system, making our communities safer and more secure, and supporting the men and women of our armed forces, including our veterans.

Budget 2007 also will implement major elements of Canada's long term economic plan, entitled Advantage Canada. Our plan creates greater opportunities for Canadians to fulfill their dreams of a good job, a world class education for their children, a home of their own, and a retirement they can count on.

In Advantage Canada, our government committed to reducing taxes to give Canada the lowest overall tax rate among the G-7 countries on new business investment. Our new government recognizes that in a global economy we need to establish a tax advantage to attract and retain business investment in our country. That is why Advantage Canada also includes a plan to create an entrepreneurial advantage by reducing the unnecessary regulation and red tape and lowering corporate taxes to unlock business investment.

By the building of a more competitive business environment, consumers will have access to goods at lower prices and Canadian businesses will compete more effectively in the global market. Advantage Canada will build a strong economy that not only competes in the 21st century but is equipped to lead the world in the 21st century.

Most importantly, our budget promised to proceed with the tax fairness plan that we announced on October 31 of last year. Unlike the motion by the Liberal member for Scarborough Centre, our plan will restore balance and fairness to the federal tax system by creating a level playing field between income trusts and corporations. There will be no more tax free treatment for wealthy corporations that earn millions and indeed billions of dollars in profits each year.

Under the old Liberal plan, more and more Canadian corporations were planning on converting to income trusts to avoid corporate tax. Let us consider this. At the time of our income trust announcement, Canada's well respected oil and gas company, EnCana, was considering a plan to convert to an income trust. We cannot blame it. Last year EnCana earned almost $7 billion in profits. As an income trust it could legally earn these profits without paying a penny of corporate tax on the portion paid out as distributions to unitholders.

I am not one who considers profit a dirty word. Quite to the contrary, we want to see our Canadian companies being profitable, but it is difficult to find any Canadians who would agree that such wealthy companies should be able to avoid paying taxes, especially on millions and billions of dollars in profits.

Our Conservative government went even further to ensure tax fairness. We shut down certain offshore trusts, eliminated double-dipping investment writeoffs and closed other tax loopholes that have been used to shift the tax burden from wealthy corporations and individuals. Who was the burden being shifted to? We can guess: the Canadian moms and dads who work so hard to provide for their families, moms and dads who cannot take advantage of tax loopholes that are used by the wealthy corporations.

Those days of Liberal inaction and unfairness are over. From now on, all Canadian corporations again will pay their fair share of taxes.

Our tax fairness plan was the result of months of careful consideration and evaluation, and we came to the conclusion that the measures brought forth by our government are essential to ensure that our economy continues to grow and prosper. They bring Canada into line with other jurisdictions that have banned the tax free treatment of income trusts. Our Conservative government does not and will not support tax avoidance.

In short, our plan levels the playing field between corporations that pay their fair share of tax and those that do not.

Some members of the House, most notably the Liberals, cannot stand the thought of tax fairness. They cannot stand the thought of changing the rules so that Canadians are treated fairly and equally. In fact, the Liberal opposition has become vicious in its attack on our fairness plan.

I decided to look at what other people have to say about our plan. I looked at the words of the finance minister of British Columbia, Carole Taylor, who is very supportive of our plan. Then I looked to a person whom I admire very much, one of Canada's most successful business people, Jimmy Pattison, who has built a billion dollar empire, and did it the right way.

Apparently Mr. Pattison did have investments in income trusts. We would expect that he would be quite upset about our decision to again tax income trusts but we would be wrong. Here is what he said: “I think it was the right thing to do...fundamentally, it was the right thing for the country”.

The article I am quoting from continued:

How could he say such a thing? Easy. Over time, he created a $6-billion company by continually reinvesting its profits...But an income trust CEO [president] has no such option. “In my opinion, it's important to manage for the long term,” Mr. Pattison said.

“And when the pressure is on management for distributions all the time, there's a tendency by some to not put the money into [research and development] or spending capital...because the pressure is the distribution.”

The pressure is on distributing these tax free profits.

I have 10 pages of quotes from economists, business people, bankers and even Liberal politicians, and all of them support our tax fairness plan. I know time is short, Mr. Speaker, and I will have to forgo giving you some more quotes.

The motion before us does not in any way address the federal and provincial revenue losses caused by income trusts. We have estimated that the revenue loss to the federal government was about half a billion dollars in 2006 alone, and that was a conservative estimate. The same thing applies to the provinces across Canada. Some of the largest corporations in Canada were lining up to get similar tax free treatment. Failure to implement the tax fairness plan would harm our country's finances.

Sadly, the proposals in the Liberal motion before us would do nothing for those investors who have already sold their trust units. What the Liberals are doing is raising false hopes. Our government, on the other hand, is committed to levelling the playing field between corporations and income trusts. Our decision to tax income trusts is all about fairness, fairness for Canadian taxpayers and families, fairness within the corporate sector, and fairness for all Canadian governments, which includes the provinces.

As always, the proof is in the pudding. We, as a new Conservative government, are delivering for our taxpayers. We are delivering for Canadians.

In closing, I will say that the Liberals' position on income trusts, as reflected in the motion before us, has changed so many times that it is hard to keep up with it. First they wanted to shut down the tax free treatment. Then there was an RCMP investigation. Then they changed their minds and did not support taxation. Today the motion says they will support it but they only want a 10% tax.

This is all pure political posturing on the part of the Liberals. I would ask members of the House to do what is right for all Canadians and vote against this ill-advised motion.

Income TrustsPrivate Members' Business

11:20 a.m.


Jean-Yves Roy Bloc Haute-Gaspésie—La Mitis—Matane—Matapédia, QC

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.

Income TrustsPrivate Members' Business

11:30 a.m.


Judy Wasylycia-Leis NDP Winnipeg North, MB

Mr. Speaker, it is my pleasure to join others in this debate on the private member's motion introduced by the member for Scarborough Centre. However, I regret that we are using more time in the House to have yet another debate on an issue that the Liberals will not let go. This is another attempt by Liberals to save face on a matter that has been thoroughly debated by the House and has reached a conclusion that the Liberals will not accept.

We all acknowledge the fact that the Conservatives made an election promise and broke it. As was acknowledged in all the hearings on this issue from beginning to end, that was a stupid election promise. It was a promise made out of political expediency in the same way that the Liberals are now tied up with this issue from which they cannot break loose.

This issue is about political expediency that goes back to the fall of 2005 when in fact Liberals decided that this issue of income trusts had to be studied. It was seen as a problem in terms of an investment vehicle in Canada that had to be addressed and they proceeded to put in place a task force to study the issue. They learned from that study that income trusts have no place in our investment field today. Yet, they refuse to let go because the political mileage they think they can gain from this still runs supreme.

Let us be clear about this motion. It is from the member for Scarborough Centre who wants very clearly to turn back the clock, just as the Liberals proposed on numerous occasions at the finance committee and in the House. It is a wrong headed initiative. It does not make sense and it is time for the member for Scarborough Centre and all of his Liberal colleagues to let go and say yes, it is time for us to clear the deck on this issue to allow for a level playing field in terms of income trusts and to ensure that taxpayers are protected from future tax leakage.

The members on that side of the House want to dismiss the notion of tax leakage. They refused to accept the fact that there was every possibility of more and more corporations joining the bandwagon in order to be able to use the income trust vehicle as a tax avoidance measure.

Some in the House may think it is okay to have tax avoidance measures and like to differentiate time and time again between tax avoidance and tax evasion. We in the New Democratic Party in this corner of the House believe that we should be doing everything possible to close tax loopholes, end tax havens, eliminate tax avoidance schemes and certainly to make illegal any tax evasion initiatives.

It is time to end this debate. We have already spent numerous days, hours, money and resources revisiting this issue time and time again. The problem is that back in the fall of 2005 the Liberals were headed on this path to try to phase out income trusts. They were inclined to look very seriously at the use of an income trust tax. In fact, when this issue first emerged on the front page of every media outlet across this country, because of the potential for a breach in security and the huge spike in the income trust investment field, the member for Scarborough—Guildwood actually suggested in a press conference that the announcement made by the then finance minister was about introducing a tax on income trusts. The Liberals were on that course.

In the last election the Conservatives foolishly promised not to move any such motion. They recognized the error of their ways and have returned to the House determined to actually level the playing field, which is the right thing to do. They made a mistake in making the promise, but it is the right thing to do in terms of Canadian public policy.

The motion of the member for Scarborough Centre is an attempt to turn back the clock. It is just not possible and it does not make any sense. Time and time again we have heard from witnesses at our committee. They have clearly indicated to us the problems with trying to turn back the clock on the income trust file.

On of our most respected and credible witnesses before our committee has been Dianne Urquhart, who is an independent consulting analyst. She reminds us time and time again that such a motion, if implemented, would revitalize the income trust market by fully restoring the tax advantage for income trusts over corporations. Maybe the Liberals have had a change of heart and they want that. She said it would provide an irresponsible combined federal and provincial tax incentive for seniors and other unsophisticated retail investors to purchase more income trusts.

It would provide a particularly irresponsible significant combined federal and provincial tax incentive within the tax deferred plan, and that is a point that is shared by many Canadians, except for Liberals, who are prepared to condone or allow for continued tax leakage.

The Liberals in this debate and the Bloc as well today have tried to suggest that we have to do this because the sky is falling. It is true that some investors lost considerable money by investing much more than they ought to have in the income trust deals, probably because of very bad advice from investors who had a lot of money to make by convincing seniors to go in this direction.

Some people lost money. For that, all of us in the House are deeply sorry. We regret that had to happen. We wish the Conservatives had not played this game of political expediency and during the election period of 2005-06 had actually said, “Look, we will review this area, and if we need to introduce a tax on income trusts, we will”. Unfortunately, they chose to go the other way, and as a result, some people were hurt very badly.

However, it is not correct to say that the sky is falling when in fact we have numerous reports showing how the value of income trusts has returned almost to where it was at the beginning.

I want to return to the report from Dianne Urquhart who told us at the finance committee that the income trust tax damage was relatively small. Upon announcement, the average capital loss in the 14 day post-announcement was 14%, or $24 billion. The capital loss as of last night, and the date she was using was just a week or two ago, the average capital loss as at that time was a negative 3% or $5 billion. She said that while income trusts have rallied from their worst prices they have, as she indicated earlier that morning, underperformed the common stock market, which has rallied 15% since October 31.

Those are the facts. Also, we have headlines from numerous newspapers saying “Trusts back from the Halloween Scare” and another, “Fury Over Tax Leakage Clouds Real Trust Issue”. The editorial in the Toronto Star condemns the position by the leader of the Liberals and the Liberal Party. An editorial in the Toronto Sun said that the Conservatives had clearly embarked upon a dangerous course of promising one thing during an election and doing something else, however, they were right to do what they did, in the end.

Finally, I want to say on behalf of seniors everywhere, there is a mandate on our part to ensure that we stand up for those millions of seniors who do not stand to benefit from income trusts and who have actually been taken advantage of by players in this field.

I want to refer to the National Pensioners and Senior Citizens Federation, which has 450 clubs and chapters with a million members, who has stood from the very beginning saying that the government was right, even though some people took losses, to bring in the income trust tax. The Small Investors Protection Association has joined with that federation in referencing this whole area and also calling for a national inquiry on the malfunctioning of Canada's securities and accounting regulations and white collar crime enforcement team.

As well, the United Senior Citizens of Ontario organization has joined in calling for an investigation into what it considers the largest alleged fraud in Canadian history, based on the deceptive yields in income trusts. This alleged fraud is anticipated to reach $40 billion, according to our volunteer consultants. This is an issue that must be dealt with. Income trusts must be phased out. The income trust tax issue must not be revisited.

Income TrustsPrivate Members' Business

11:40 a.m.


Anthony Rota Liberal Nipissing—Timiskaming, ON

Mr. Speaker, the NDP member said something that really disturbed me. She said to just let it go and let us get on with things.

I have seniors in my riding who invested money in income trusts, their savings, their retirement money. They were putting that money aside thinking they had the word of a party that was honourable and would keep its promise. They put their money into income trusts in good faith. The money is gone. They lost a big part of their retirement income.

It is hard for me to just say forget about it and get on with things. I find it very difficult to look a senior in the eye and say that the money is gone, it is over, that the Conservatives did not tell people what they were going to do that they said one thing and did another. It would be very difficult for me to say to a senior that it is time to get on with life. It is very difficult for me to just forget about it.

Seniors are a large part of our community. They contribute a lot. They saved for their retirement. They had banked on that income and they were hoping it would continue. That is the main issue I look at. I look at those seniors who were left out in the cold without the income they had planned on, especially after having been given a promise. The promise was broken and they did not have that money anymore. They had banked on sincerity.

What comes to mind is the credibility not only of the Government of Canada which says one thing and does another, but also of our financial sector. It has to be kept in mind that the financial system in any country is based on stability and a government keeping its word. When we look at what happened here, the government gave its word about what was going to happen, that it was not going to tax income trusts or change anything, but it suddenly changed. That really hurts the markets. How can we have a financial system that is very solid and sure when things keep changing all the time? It is very difficult.

When we look at what has been lost, $25 billion went out of people's savings overnight. When we look at the sector itself, what really worries me is Canadian ownership. We pride ourselves on being Canadians and owning our own resources. Suddenly we look at a market that fell down. The value fell out. It is more advantageous for international companies to come in and take over those companies. What was owned by Canadians is gone. It is now owned by foreign multinational companies. There was the concern of about $500 million in tax revenue being lost. That is a serious concern and it is something that had to be looked at. FIve hundred million dollars is a sizeable amount of money.

When we look at what happened in the income trust sector, there has been a takeover of 12 companies. Twelve income trusts are now held by foreign owners. They are no longer held by Canadians, no longer held by the Canadian people who owned income trust shares. Instead the companies were taken up by foreign companies and that $500 million meant about a $6 billion loss in tax revenue altogether.

We were worried about $500 million, half a billion dollars. That is a lot of money, no question, and we had to be concerned about it. What ended up happening is we are losing $6 billion in tax revenue because the companies that bought out the income trusts are foreign owned. They are paying taxes in their home countries. They are taking that from Canada and paying it in another jurisdiction. That is a nice gift to give to other countries, but I do not think it is really right and I do not think it is fair. Certainly not a lot of thought was put into the income trust ban.

We heard about Bell Canada. We heard about the banks. We heard about other companies wanting to become income trusts. I could not agree more that was not something we should allow as Canadians. When we look at these companies, they have to reinvest in the future, especially when we look at IT companies like Bell Canada. Those companies have to put money into research and development so that down the road they can have a better product and do more.

There should have been consultations, but that is unheard of with the Conservative government. The Conservatives just tell us what they think is right and what they want to do. There should have been consultations with the sector to find out what had to be done, where it had to go, what it needed and what we needed as a country. By doing that, we would have had a better idea rather than to ban income trusts outright.

There are some sectors where an income trust would not be a bad thing, for example, a mine or an oil well. When a resource is depleted, there is no need to invest a large amount of money in it. It is just a matter of getting the resource out and flowing it through to the individual investors. That is very important.

I come from northern Ontario. I know what flow through shares have done for mines and for the economy of northern Ontario. Obviously the government does not look at rural Canada with the same affection I do. There is something there, but it has to be realized there is some use to it.

When money starts flowing through to individuals, the money is not lost completely. The rate of return is higher for the end user, but the rate of income tax is higher at the lower end as well. The individual paying the tax will likely be paying more tax than the company itself.

When I look at this, I look at what has happened through the deception that has gone on and the broken promises. I look at what has happened within the income trust sector in Canada and I see a real flushing out of an industry that was truly Canadian. An industry that belonged to Canadian people is being completely destroyed. Why? The government broke a promise. A promise was just thrown away.

Today I think of our seniors, I think of investors who had banked on this based on a promise. Maybe we could make a change and make it worthwhile so that they could regain confidence and faith in the Canadian financial system, in the Canadian government, and in Canada itself.

Income TrustsPrivate Members' Business

11:50 a.m.


Gord Brown Conservative Leeds—Grenville, ON

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 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.

Income TrustsPrivate Members' Business

11:55 a.m.


Derek Lee Liberal Scarborough—Rouge River, ON

Mr. Speaker, I am pleased to wrap up the debate on a private member's bill that attempts to redress the impact of the government's budget measure, essentially penalizing income trust owners in a way that had not been envisaged before the budget.

The reason why the member for Scarborough Centre has introduced this bill is to propose implementation of measures, which had been generated within the Liberal opposition caucus, to redress these punitive tax measures introduced by the government in its budget.

The issue for many Canadians, who hold income trusts, is not only that there was a tax measure introduced, but the tax measure introduced reneged on a promise. It was not like the government was backed into a corner and did not do anything in relation to one of its promises. It actually promised these income trust holders that it would not tax them and then turned around and equivalent to a sucker punch proposed to tax these people in this tax measure. It was not only a broken promise, it was an obvious betrayal.

Arguably income trust owners are not the majority of Canadians, but they are a very identifiable segment of Canadians. The ones we are concerned about, and the reason for the bill, is the seniors group who have always paid taxes. They have done their savings and now they chose a tax measure that they thought would suit. The government has now changed the rules and punitively taxed them. This measure is intended to redress that.

Income TrustsPrivate Members' Business



The Acting Speaker Conservative Royal Galipeau

It being 12:02 p.m., the time provided for debate has expired.

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

Income TrustsPrivate Members' Business


Some hon. members



Income TrustsPrivate Members' Business



The Acting Speaker Conservative Royal Galipeau

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

Income TrustsPrivate Members' Business


Some hon. members


Income TrustsPrivate Members' Business



The Acting Speaker Conservative Royal Galipeau

All those opposed will please say nay.

Income TrustsPrivate Members' Business


Some hon. members


Income TrustsPrivate Members' Business



The Acting Speaker Conservative Royal Galipeau

In my opinion the nays have it.

And five or more members having risen:

Pursuant to Standing Order 93 the division stands deferred until Wednesday, June 13, immediately before the time provided for private members' business.

The House resumed from June 8 consideration of the motion that Bill C-52, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007, be read the third time and passed, and of the motion that this question be now put.

Budget Implementation Act, 2007Government Orders



Peter Julian NDP Burnaby—New Westminster, BC

Mr. Speaker, I rise to speak to Bill C-52, the Conservative government's budget. I am unfortunately the first person to rise after the tawdry, cheap events of last Friday in the House, the unparalleled, unprecedented, tawdry events of a government that is so desperate now to get its budget through it had to go down into the bowels of the House of Commons to look through dusty books, looking back to the 1960s and the 1970s, to find some sort of procedural trick that would allow it to pass the budget when it knew that most Canadians are opposing it. In the last few days we have seen the budget self-destruct, as many of the Atlantic provinces, Saskatchewan and many Canadians from coast to coast to coast have said very clearly that the budget is manifestly not in the interests of Canada.

Last Friday, with two minutes to go in private members' business, the House leader stood to try to conjure a trick out of his pocket and try to force through, what he called “a national emergency”, the budget, without a vote, not complete the debate only to force it through.

As members well know, the House refused that. However, the fact that the Conservatives would use such a cheap and tawdry trick to try to get their budget through I think belies the reality. The Conservatives acknowledge now that their budget does not have the popular support of Canadians. As a result of that, they had to resort to this trick.

What they used was a procedural trick to try to declare this a national emergency. The only emergency is the rapid and constant fall of the Conservatives in public opinion polls. We have seen in places like British Columbia, Saskatchewan and Nova Scotia that the Conservative vote continues to erode. Why does it continue to erode? Not only because of tricks like that, the trick of last Friday, a trick that manifestly failed, but also because their budget simply does not have credibility.

I will talk a bit about the situation that Canadians are really living through while the Conservatives are playing their little political games here in Ottawa. From there, I will talk about how the budget does not address what are very clear concerns, crises that are occurring in main streets across the country.

Instead, very clearly what we have is a Conservative budget, a Bay Street budget, the same as the Liberal budgets were, oriented toward corporate tax cuts and huge handouts, shovelling money off the back of a truck through the oil and gas sector. That seems to be the Conservative priorities. Canadians are living a much different reality.

Let us talk about the reality of most Canadians. Let us talk about average family incomes. Since 1989, Statistics Canada tells us, since the signing of the Canada-U.S. free trade agreement, most Canadian families have seen their income fall. They are earning less money now than they were then.

What we have seen under now more than 15 years of Conservative and Liberal economic policies is the wealthy are fabulously so. They are able to buy their 15th or 16th Lamborghini without any problem. However, most Canadian families are earning less. It is not just that they are working harder and longer weeks, and I will come back to those statistics, the bottom line is Conservative and Liberal economic policies have manifestly failed.

Let us look at the figures. The poorest of Canadians, the family with an income of less than $20,000 a year, those below the poverty line, have seen over this 15 year period the loss of about a month's income. What they used to earn in 12 months, they are living on 11 months' worth of income. We have seen a 10% fall in real income for the poorest of Canadian families.

The Conservative budget does absolutely nothing to address that catastrophic fall in Canadian income levels for the poorest of Canadian families. It is no secret, 300,000 Canadians will be sleeping in the parks and main streets of our country tonight, 300,000 Canadians who no longer even have the resources to have a roof over their heads. The Conservative budget does absolutely nothing to address the crisis in homelessness and the catastrophic fall in the incomes of the poorest of Canadians.

Let us go to the next group. Another 20% of Canadians, and let us call them the working class, are families earning less than $36,000 a year. They are now earning two weeks' less income than they were in 1989.

In other words, after 15 years of Liberal and Conservative economic policies, they have seen their incomes fall so that they are now living on 50 weeks of income, whereas they used to live on 52 weeks of income. They have actually lost two weeks of income and are trying to make ends meet with far fewer financial resources.

Let us continue on to the middle class. It is the same thing for families earning less than $56,000 year. They are now earning two weeks' less income than they were in 1989.

We now are talking about 60% of Canadian families who are struggling to get by on fewer and fewer financial resources. The Liberals did absolutely nothing to address this. They simply shovelled money at the wealthiest of Canadians. The Conservatives now are doing exactly the same thing.

Even higher income earners, the upper middle class, have actually seen no income improvement since 1989.

That is 80% of Canadian families who see stagnation or who have seen increasing impoverishment under the watch of those parties over the last more than 15 years.

Who has profited from the Canada-U.S. free trade agreement and NAFTA and from the Conservative and Liberal economic policies shovelling money at the corporate sector? There are unbelievable amounts of resources to give to the oil and gas industry and the banks, and to give in corporate tax cuts, but who has profited? Only one sector has: the wealthiest of Canadians. In fact, Statistics Canada tells us that it is the wealthiest 5% of Canadians who have seen their incomes skyrocket over this period.

What the people who are listening to us today or who read these remarks in Hansard say, what the people say certainly as we knock on doors in my neighbourhoods, is that they cannot understand why Ottawa does not get it. Why it is harder and harder to make ends meet, they say, and yet the government seems to want to favour the wealthiest of Canadians with corporate tax cuts? They say that the government does not seem concerned about ordinary, hard-working Canadian families. They ask that question.

We have seen the Conservative response. The Conservatives' response was a cheap conjuring trick to try to get their budget through before Canadians wake up to what an appallingly negative impact it will have on them.

The Conservative government erodes resources in health care. It does not do anything to open up doors to post-secondary education and training. It throws a few dollars here and there but does not address the underlying systemic problems in this Confederation, which has led to the fact that most Canadian families are falling further behind and most Conservative and Liberal economic policies are favouring that small proportion of Canadians who have everything they could possibly want.

What is wrong with this picture when the top 5% of Canadian income earners receive most of the attention of Conservative and Liberal governments? Those governments simply shovel money at them. What is wrong with this picture when ordinary working families are forgotten?

I have talked about the fact that income levels are actually falling while the Conservatives have this delusion that everything is just peachy-keen. They say that because they look at the job figures. The job figures from Statistics Canada actually prove the point: the jobs that are created today are not sustainable manufacturing jobs or family-sustaining jobs. They are part time and temporary jobs. They are jobs paying the minimum wage.

Every time the finance minister stands up and says that we have full employment, what he is actually saying is that we have full employment like most third world countries have full employment. Canadians are scraping to get by on minimum wage, part time jobs and whatever temporary contracts they can get. They are struggling to keep a roof over their heads. The finance minister does not recognize that the economic policy of the past 15 years has actually led to a steady impoverishment.

It is not because Canadians are not working harder and harder. The Community Social Planning Council of Toronto produced a study just a few weeks ago which indicates that for the average family raising children the annual number of hours worked went up by 200 hours, that is, the average family worked 200 hours more in 2004 than in 1996.

What this means is that the average Canadian working family is working five weeks more. Those families are trying to jam another five weeks of work into a working year. They are struggling. They are putting in an unprecedented number of overtime hours, yet their revenue levels are lower than they were in 1989. What a destruction of our quality of life. What a failure on the bottom line.

Canadian families have seen their incomes tank, yet they are putting in five weeks more of labour in a 52 week year. It is an annual average of 200 hours more worked in 2004 than in 1996. It would be even higher today. Overtime hours have gone up by over 30% and yet most Canadian families are earning less now than in 1989.

That is what is fundamentally wrong with how the Liberals and Conservatives have addressed economic policy for the past more than 15 and nearly 20 years. They simply do not understand the impact of their policies. They are economic illiterates. They cannot check the bottom line to see if the economic policies have actually made sense. They are shovelling money at the corporate sector with more and more corporate tax cuts when we already subsidize the corporate sector to an unparalleled extent through the subsidies we provide to medicare.

Our medical system now in place offers a competitive advantage that no American corporation can match, yet the corporate sector is continuing to request lower and lower tax rates when our subsidies already give them a very clear competitive advantage. What is wrong with this picture when the corporate sector fails to acknowledge that the hard work of Canadians from coast to coast to coast gives the sector a competitive advantage but that corporations have to pay their fair share of taxes in order for that competitive advantage to be sustained?

They cannot have their cake and eat it too. Corporate leaders need to be told that. They need to be told that they have to be responsible, and that since we are already subsidizing them to an unparalleled extent, with study after study showing that medicare is a huge competitive advantage when Canadian companies compete with American ones, they cannot at the same time have lower corporate tax levels than they have in the United States. They cannot have both. They have to make clear and responsible choices.

We have not seen those responsible choices from the Liberals. We certainly have not seen them from the Conservatives, and last Friday in particular attests to that, but things have to change and that is certainly why more and more Canadians are looking to park their votes with another political entity. We certainly are seeing a greater interest in new ideas. The NDP, of course, since its inception, has always been the birthplace of new and responsible ideas, whether they are economic or financial in nature or in terms of social policies.

Before I move on to the next portion of my presentation, I do want to say one thing. The ministry of finance actually charted NDP, Liberal, Conservative and even the Parti Québécois governments over a 20 year period. It charted and compared the actual year-end fiscal returns to the budgetary promises of each of those governments.

This was done by the federal ministry of finance, which we certainly could not say is an NDP ally in any way, but that long term study, the only long term study that has ever been undertaken on this phenomenon of what the actual fiscal period returns show, clearly proved that the NDP as a party and NDP elected officials as individuals are the best fiscal managers. The worst were the Liberals. No matter what their promises are, 86% of the time the Liberals actually run a deficit. The Conservatives were a little better, actually running deficits 66% of the time over that 20 year period.

The NDP projected surplus or balanced budgets most of the time, and most of the time we actually achieved that. There is no difference between the spin and the results, between the rhetoric and the reality. We actually perform better in terms of fiscal management than Conservatives or Liberals. No wonder Canadians are looking around now and taking a hard look at what political parties promise and what they actually deliver.

The NDP is the only party that actually addresses the economic reality of most Canadian working families and we are the best financial managers. Those are two reasons why we are seeing increasing interest in our party.

Before I move on to B.C. issues, I want to mention the catastrophic collapse of our manufacturing sector. We have trade policies from the government, like we did from the previous government, which do not address the fact that value added and manufacturing production is collapsing across this country. A quarter of a million family-sustaining jobs have been lost in the last few years under the Liberal watch and under the Conservative watch.

Let us look at some of the impacts of that manufacturing loss. In Nova Scotia, 20% of manufacturing jobs have been lost. In Quebec, 18% of manufacturing jobs have been lost. In Windsor, and we have had very eloquent testimony to this effect from the member for Windsor—Tecumseh and the member for Windsor West, we have actually seen 35% of manufacturing jobs lost.

Windsor is in crisis. Southern Ontario is in crisis. The minimum wage, part time jobs that the finance minister is offering do not in any way compensate for this hemorrhaging of manufacturing jobs.

In Toronto, over 100,000 manufacturing jobs have been lost. That is 21% of manufacturing jobs in Toronto. In Oshawa, it is 21%. In Thunder Bay, it is over 20%. We are seeing a hemorrhaging of manufacturing jobs across this country and there is nothing in the budget that addresses this crisis.

We have a variety of crises that have developed over the past 15 years under the Liberal watch. The Conservatives said they would take a completely new approach. Instead, they have taken exactly the same do nothing approach, a shovel money at the corporate sector approach, which has not addressed the catastrophic fall in manufacturing jobs. It has not addressed the very real erosion of family income since 1989 and the signing of the Canada-U.S. free trade agreement.

This approach does not address the homelessness crisis. It does not address the inability of most families to have their kids or adults move on to post-secondary education, apprenticeship and training. It does not address that crisis. It does not address the health care crisis. Instead of dealing with the underfunding of our public health care system, we have seen the Conservatives take exactly the same road as the Liberals and look to more privatization.

We know that in the United States more privatization means more costs and fewer benefits. The United States health care system costs twice the amount per capita that the Canadian system does and yet 60 million Americans at any point in one year will have absolutely no health care coverage whatsoever. It is a failed American model that the Conservatives are pushing, as the Liberals did before them.

As I come from British Columbia, I would like to move on now to the budget and what it does not do for British Columbia. The finance minister rose in this House and said that his Canada went from the Alberta Rockies to Newfoundland and Labrador. He completely excluded British Columbia.

I admire his honesty, because there is nothing in the budget that addresses clear Conservative promises to B.C. The Conservatives said they would deal with the leaky condo crisis. The Conservatives promised they would take action on that. Instead, they have left 60,000 British Columbia families with absolutely no support in the leaky condo crisis.

With softwood lumber, we have seen the complete disregard for softwood communities in British Columbia and elsewhere.

Regarding the pine beetle issue, the Conservatives promised and spun but they did not provide the funding. The Kamloops Daily News said the following just last Friday on the pine beetle, “When will [the government] come to the table and be a part of the solution?” For whatever reason, the feds just do not get it on the pine beetle. We have seen devastation throughout the interior of British Columbia. The government has done absolutely nothing to address that.

I could go on, with the World Police & Fire Games and a whole host of other issues such as the flooding in the Fraser River and the Skeena district of British Columbia. We have seen only $16 million offered up for the flooding even though we know that $22 million is required just to protect the city of Chilliwack alone.

I could go on and on but the reality is that the Conservative government just does not get it, which is why it tried to force this budget through by a conjuring trick last Friday.

Budget Implementation Act, 2007Government Orders

12:20 p.m.


The Acting Speaker Conservative Royal Galipeau

It is with regret that I must interrupt the hon. member but he cannot go on and on because his time is up.

Questions and comments, the hon. member for Yukon.

Budget Implementation Act, 2007Government Orders

12:20 p.m.


Larry Bagnell Liberal Yukon, YT

Mr. Speaker, I would like the member to finish his last thought.

Does the member know why the government conjured up that trick last Friday? Why would it do those types of tricks? There are two weeks left in the session. Speakers like my colleague and others had not had a chance to speak to the budget. Does the government not want honesty and transparency? Does the government not want people to speak and provide their opinions on the budget? Why would the government do that on a Friday when most MPs are working with their constituents in their ridings except those on House duty? Does the government not want members working with their constituents?

Did the government do that because the budget is falling apart with respect to income trusts and interest deductibility? Was it because the budget is falling apart as far as the provinces are concerned with respect to the Atlantic accord? In fact, the Canadian Press reported this morning that the Prime Minister told Saskatchewan and Nova Scotia to sue him.

Did the Conservative government not say that it was elected on accountability? Does doing something like this not fly in the face of that philosophy?

Budget Implementation Act, 2007Government Orders

12:25 p.m.


Peter Julian NDP Burnaby—New Westminster, BC

Mr. Speaker, the reality is that the government is now facing a perfect storm on its budget. A member of its caucus has already been kicked out. Other members of the Conservative government are under pressure from their constituents to leave the party.

With the collapse of the Atlantic accord, the government is facing a storm because the premiers across Atlantic Canada are now coming out against the budget. The premier of Saskatchewan, who has a tremendous reputation and a great deal of credibility, has also been speaking against this appalling budget. We have not heard a peep from any of the Conservative members from Saskatchewan in support of their province. Not a single member of the Conservative Party from Saskatchewan is actually willing to stand up for the province of Saskatchewan.

In British Columbia we have a proud tradition of standing up for our constituents. There used to be Saskatchewan members in this House who would stand up proudly for Saskatchewan. Now we have a troop of sheep, none of whom, not a single Conservative member, will stand up for their province or their constituents. It is unbelievable. Not a single Conservative member from Saskatchewan has dared say anything about the farm crisis or the destruction of the Canadian Wheat Board. Not a single Conservative member from Saskatchewan has dared say anything against the talking points they are getting from the Prime Minister's Office.

With that crisis in confidence from Saskatchewan and Atlantic Canada, the Conservative government is clearly in trouble. It knows its budget is in trouble. However, rather than consenting to honest debate so each of the issues, which it has failed to address, would be out in the public domain, which is our responsibility as parliamentarians, it tried to get the budget adopted by using a cheap and tawdry trick. However, it did not work because members of the New Democratic Party and other parties were here and we simply stopped the government in its tracks from what was a conjuring trick to try to get a budget passed that no longer has any legitimacy whatsoever.

Budget Implementation Act, 2007Government Orders

12:25 p.m.


Chris Charlton NDP Hamilton Mountain, ON

Mr. Speaker, I was really impressed by the breadth of my colleague's knowledge about the impact of this budget on his home province of British Columbia and on his own riding.

My home riding is Hamilton Mountain in Ontario. Our province has been absolutely decimated by the loss of manufacturing sector jobs. In my home town alone, 11,000 of those jobs have been lost.

When people look to this budget and to the government, they want real help. What they had hoped for, at a minimum, was some real investment in employment insurance and some real access to retraining so they could get jobs in new fields because the manufacturing sector is being decimated in part because of the trade policies that were started under former Conservative prime minister, Brian Mulroney, but the same environment exists now for trade and for the economy in this country today.

I know the member does not have the same manufacturing base that I have in my riding but I would think that issues like EI and retraining would be equally important to the forestry sector. He has been an eloquent spokesperson against the softwood sellout that was so readily supported by other parties in the House but which has devastated many workers and their families in my colleague's province.

I just wonder whether my colleague could comment on whether he is getting the same groundswell of outcry because the government failed to do anything for working families in this country.

Budget Implementation Act, 2007Government Orders

12:30 p.m.


Peter Julian NDP Burnaby—New Westminster, BC

Mr. Speaker, the member for Hamilton Mountain has been a passionate advocate of advancing through Parliament the quality of life of ordinary working families and, as has all the NDP caucus, has been pushing forward an end to this economic disillusion that somehow just continuing to give to the wealthiest in the country will somehow, through some magical, mystical trickle down theory, bring prosperity for all Canadians. Clearly, that has not worked.

We also have the failure of the budget to deal with employment insurance, retraining, access to apprenticeship programs and post-secondary education programs. What we have seen instead is an incredibly short-sighted, misguided trade policy that continues down the same road that the Liberals took. The definition of insanity is doing the same thing over and over again and expecting a different result.

We see the Canada-U.S. Free Trade Agreement and NAFTA, because we capitulated on all points, are leading to an actual fall in the income of most Canadian working families. They certainly understand it. When we ask families whether they are doing better now than they were 15 years ago, most say that they are not. Most families say that they are struggling to make ends meet. They said that they are working harder and longer hours and yet they have fewer and fewer financial resources.

After the government capitulated on NAFTA, it moved forward with the softwood lumber capitulation. Now we are seeing the trade minister, as a renegade because the Prime Minister has no understanding of trade policy whatsoever, moving forward to sign free trade agreements that will lead to more catastrophic job losses. The FTA will gut our shipbuilding industry. The trade minister, who has betrayed his constituents and who is now betraying the whole country, which makes him consistent, is now trying to sign a trade agreement with South Korea which will devastate our auto sector. What is next?

Time and time again we have seen the government capitulate and give away everything. The results for most working families from coast to coast to coast are lower incomes and part time, temporary minimum wage jobs, such as burger flipping because that is all that is left when the auto sector is gutted, the shipbuilding sector is gutted, the textile industry is gutted and the softwood lumber industry is gutted. When, in every sector, our value added manufacturing is simply tossed away so that some banker in Toronto can make another million dollars then we can understand why we are seeing greater and greater frustration arising across the country.

The government is off the rails. It said that it would be different than the previous Liberal government and yet we now see the exact same inability to grasp economic fundamentals. It does not understand that when most working families are earning less it must change the policies in order to address the fundamental income crisis. It is same old, same old.

The NDP will continue to push and say that the emperor has no clothes and that the government needs to start taking action on these issues. We will continue to press because we are the only voice for ordinary working families who have seen their incomes erode, their manufacturing jobs taken away, the doors to post-secondary education and apprenticeship training closed and access to health care when they need it no longer there. Alberta and Saskatchewan are experiencing an agricultural crisis but the Alberta and Saskatchewan Conservative MPs will not say a whit about that. We are here to stand up for Canadians and we will continue to do so. We know there will be a lot more of us in the House after the next election.

Budget Implementation Act, 2007Government Orders

12:30 p.m.


Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Mr. Speaker, I am pleased to speak today to Bill C-52, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007.

As vice-chairman of the Standing Committee on Finance, the committee and I had the opportunity to study the bill in detail and we heard from numerous witnesses on some of the bill's more contentious issues.

For the past 16 months, one of my major grievances with the government has been its lack of vision. Since my time on Parliament Hill, I have never seen a government anger and disappoint all sides of the political spectrum the way this Conservative government has. It has not only managed to alienate its former supporters but it has also failed to endear itself to its adversaries.

At several points during its mandate, the Conservative government enacted piecemeal legislation that had not been well researched, developed or consulted upon. It has botched several files, most recently the Canada summer jobs program where hundreds of community organizations were left without funding. Even worse was the fact that these groups had no contacts and could not receive straight answers from the ministry because of government mismanagement.

First the Conservatives cut the program and then they reintroduced it but with less money. They received thousands of complaints and put more money into the program. At this point we still do not know which group is getting funding and how much. This is just another example of how far removed Conservative values are from the values of most Canadians. It took intense pressure from this side of the House, as well as protests from groups across the country, to get the government to backtrack on its ill-conceived plan and to reinstate funding to non-profit community groups across Canada.

I have spoken to the budget on several occasions and have highlighted all my preoccupations with the Conservatives, mainly that they lack any vision whatsoever and look only to immediate, political gain instead of long term goals for Canada. A perfect example of this are the green levy and the auto eco-rebate. Those are the only green initiatives contained in the budget and they were developed without any consultation with the automotive industry.

Encouraging Canadians to purchase fuel efficient vehicles is a step in the right direction, but an additional tax on certain vehicles is not the answer. In fact, it is a simplistic solution to a complex situation that instead requires a multi-pronged and careful approach.

According to testimony the committee heard from both industry and environmental groups, the proposed green levy and auto eco-rebate will fail to produce any meaningful change in reducing carbon emissions. These programs damage domestic automakers by placing $67 million worth of levies on domestic vehicles, which is about 80% of all the levies that will be collected. The transfer of $47 million in benefits to one company, which is 75%, for one vehicle that is produced offshore.

We should remember that when Canada imports foreign cars, greenhouse gases are produced by ships that cross the ocean to get them here. The more cars Canada imports, the more emissions the ships produce. Therefore, when the government offers a feebate benefit to only one foreign produced car, not only is it discouraging people from buying cars made in Canada, it is also encouraging increased emissions from a greater volume of imports which essentially cancels out the emissions difference the rebated cars produce.

Only three of the twenty-one eligible cars under the feebate program are made in Canada. While I do not want to give cars that are not fuel efficient an easy pass, I do think the government should not be punishing Canadian automakers at a time when our industry has suffered so many job losses in the last decade.

2006 marked the first time in 18 years that Canada had an automotive trade deficit. This was down from a $15 billion trade surplus only seven years earlier. In those seven years, Canada has gone from being ranked number four in auto assembly worldwide to being ranked number nine in 2006.

Companies such as Ford, Chrysler and GM account for eight out of every ten auto workers in Canada. However, with these measures in the budget, Canadian workers are being punished. These measures also damage the Canadian economy segment in vehicles. The $1,000 rebate for one vehicle, which makes up half of all rebates, undermines the ability of other dealers and manufacturers to sell equally beneficial subcompacts competitively on the same basis. Perhaps the biggest failure of these measures is that they fail to help get older cars off the road.

The majority of greenhouse gas emissions produced by Canada's on road fleet of cars are produced by older vehicles. There are significant differences between the amounts of emissions a 1990 model creates as compared to its 2007 counterpart. The Conservatives were better off putting more money and more energy into getting older cars off the road than they were by punishing new cars.

Recently, the finance minister has been quoted on committing another flip-flop by announcing that he would reconsider the way that the green levy and the auto ecorebate would function. This is a good sign, but it is too vague to have much meaning.

During the clause by clause of this bill in committee I put forward a motion to remove the clause dealing with these measures in order that the government would be able to rethink its policy on this issue, but without success. I only hope that the minister will stay true to his word and look at alternative measures to deal with the auto industry. These measures should not punish Canadian automakers which is currently the case, and should emphasize getting older cars off the road.

As I mentioned earlier, these vehicle feebates were some of the only green initiatives contained in the budget. The Conservative government is failing to protect the environment and Canadians are getting fed up.

The environment minister has attempted to douse the fires by putting together more piecemeal legislation but, guess what? That has also failed. By not consulting environmental groups the government demonstrated its arrogance and its ignorance on the issues of climate change and the environment.

One specific example that was raised during the finance committee study of this bill was in the crucial area of ocean conservation. The government has reduced the budget of the Department of Fisheries and Oceans by $105 million and has only allocated $18 million over two years to the conservation of oceans in our economic zones.

It is a sad statement when experts agree that it will take over $100 million per year to get Canada on track to meeting its international commitments in ocean conservation.

In 2005 the Liberal government announced the Canada's oceans action plan and had begun allocating money when a premature election was called. Since coming into power the Conservatives have mismanaged all environmental files, but perhaps they have done the most horrendous job of protecting Canada's oceans.

Canada has only protected less than 1% of our economic zone and with the Conservatives in power that figure will surely not improve. I cannot understand how the Conservatives can spend millions of dollars buying military equipment to protect Canada's Arctic region, but allocate practically nothing to protect the Arctic Ocean.

They can spend millions on patrol boats, but refuse to allocate money into protecting our oceans, which directly employ approximately 98,000 Canadians. Seafood exports account for about $5.5 billion of our economy, yet the government does not deem the oceans important enough to properly fund their conservation.

These measures contained in the budget have not endeared the government to environmentalists and we can forgive climate change experts for doubting the Prime Minister's new found devotion to the environment. We can also forgive these same experts for going one step further and calling the government's environmental plan a fraud and sellout.

As I was saying, the Conservatives have not only raised the ire of the left, but they have turned their backs on their allies on the right. I am talking of course about the energy sector in Alberta and its dissatisfaction with the government's decision to tax income trusts. I suppose that when he came into power in 2006, the Prime Minister never imagined that the Liberal Party would come to the defence of so many energy corporations in Alberta and the way in which they want to structure themselves.

The Prime Minister and the Minister of Finance delivered a low blow to investors and corporations when they blindsided them on Hallowe'en with a 31.5% tax rate on income trusts.

Several months ago, the Standing Committee on Finance tried to understand how the government calculated the so-called tax leakage in the income trust sector. After the committee was repeatedly denied access to these documents, it came to the conclusion that the government's decision to tax income trusts was based on imprecise data and was another case of mismanagement. Unfortunately, the Conservatives' mismanagement of the income trust matter cost Canadian workers $25 billion. These working people had found a high performance investment mechanism for their retirement. From one day to the next, the Minister of Finance destroyed years of savings. And the government has the audacity to claim that this measure is part of its tax fairness plan. I do not see what is so fair about liquidating Canadians' savings or the consequences of this decision to the energy sector in Alberta.

Small oil companies are having trouble because of reduced access to capital. These companies are using all of their resources just to stay afloat. That means that they have less to invest in reducing greenhouse gas emissions and making their production systems more environmentally friendly. Moreover, the income trust decision is threatening our energy corporations. They are at risk of being taken over by foreign interests. Recently, we have seen a number of takeovers and takeover attempts by foreign companies, which will weaken the Canadian economy and reduce the government's tax revenues. Rather than help Canadian companies, the government has hurt our industry and has made an unprecedented number of foreign takeovers possible.

The Liberal Party proposed a fair solution to income trust taxation. It was a solution that experts, businesses and investors agreed on. Unfortunately, the government ignored our proposal, which was rejected by the Standing Committee on Finance. Then the Liberal members proposed adopting the Bloc Québécois' income trust amendment. The amendment would have extended the grace period from four years to 10. Thanks to Liberal support, that amendment would have been passed had the Bloc members not changed their minds and voted against their own proposal. This proves that the Bloc Québécois has no useful solutions to offer to Quebeckers and that it is not protecting Quebec's interests.

During a meeting of the Standing Committee on Finance, a Bloc member said:

Let's not forget that when we examined the report, the bill had not been submitted to us. We wanted to find the best possible solution. However, in the present context, what we really hope for is speedy passage of the bill so that the budget can be implemented as soon as possible.

In other words, the Bloc members are here for the sole purpose of protecting their own interests. An amendment could easily have been adopted to allow Quebeckers and all Canadians to benefit from a four- to 10-year grace period. After speaking out so vigorously against taxing income trusts, the Bloc members changed their minds. Moreover, they lack courage when real changes have to be made.

I doubt that the many people who have invested in income trusts in Quebec and Canada are pleased with the Bloc's about-face.

Another area where Canadians will be feeling the crunch from Conservative mismanagement is set to begin as the summer gets underway. With Canada's tourist season in full swing, a thriving section of our economy must deal with the elimination of one of its greatest selling tools, the visitor rebate program.

The program gave Canada's tourism industry a valuable tool to help it compete for global tourists. Once again, without any consultation with the tourism industry, the government eliminated the program. Only a small handful of developed nations do not have a federal sales tax rebate program for tourists. Thanks to the Conservatives Canada can count itself among these few. It is difficult to understand why the government wants to weaken Canada's tourism industry since so many Canadians are dependent on this industry.

After the special finance committee's hearing requested by Liberal MPs to study the visitors rebate program, and along with the help of industry stakeholders, the continued pounding of the government on its ill-developed decision finally convinced the finance minister to announce a federal foreign convention and tourist incentive program in Bill C-52. That measure in the budget partially corrects the mistake made by the government when it first eliminated the GST rebate program, but it does not go far enough.

Why was the government determined to destroy a program that worked as it did with the Canada summers job program? The argument surrounding the GST rebate could not be timelier as summer is now upon us. I am glad to see some reversal by the government on this matter, but there is another set of seasonal problems for which the government must account.

As we know, summertime is also a season of festivals in Canada. My hometown of Montreal is host to an endless number of world renowned festivals which draw millions of visitors each year. Anyone who has seen the international jazz festival and the just for laughs festival understands how important festivals are to Montreal's economy. I wonder if the current Minister of Canadian Heritage and Status of Women has been to Montreal during festival season because her actions have led us to believe otherwise.

Just a few weeks ago, the presidents of Montreal's two largest festivals spoke out against the minister's lack of action to secure funding in time for the summer. Festivals are a huge economic boost to local economies across the country and the minister's inability to assure funding for these festivals is a complete failure on her part and on the part of the government. I cannot understand how the Conservatives can mismanage such an obvious and crucial file such as this one.

Art groups across the country have been criticizing the government for months about the disastrous underfunding of the arts. Cultural groups in the country have felt insulted and ignored by the government and it has caused well-known authors and artists to speak out. We cannot allow Canada's vibrant arts community to suffer under the Conservatives' ideological program cuts and mismanagement.

We have already seen them mismanage countless files by closing Liberal programs and then reopening them only a few months later under a new or different name, whether they wanted to take credit for these supposedly new programs or whether they just thought that no one would notice that they were gone remains unclear.

This began in September 2006 when the Conservatives cut a number of effective Liberal programs. The Liberal Party protested these ideological cuts, as did the public. Since then we have seen the government re-announce these programs under new names and pretend as if the Liberal initiated programs never existed.

Canadians deserve better than what the government has given them, ill-conceived, piecemeal programs that will not help Canada advance into the 21st century. The government is much better at photo ops and slander than it is at governing and our country is not any better for it.

Budget Implementation Act, 2007Government Orders

12:50 p.m.


Lloyd St. Amand Liberal Brant, ON

Mr. Speaker, my colleague's very thoughtful speech reflected a depth of knowledge and understanding of financial issues that I know he certainly possesses.

Members of the Conservative government were arguably the last group of Canadians to understand the issue of climate change and to understand the necessity for the federal government to actually do something about climate change or global warming.

It was not, for instance, one of its much vaunted five priorities. There was nary a mention made by anybody on the Conservative benches in 2006 about climate change or global warming, but it is funny that a couple of public opinion polls published in December 2006 sort of coached, cajoled or finally led the government into doing something about climate change.

A couple of years ago a budget was introduced by the then Liberal government. It talked about project green. I would ask my hon. colleague how the measures contained in project green in 2005, and the half measures contained in the most recent budget from the Conservative government, stack up?

Budget Implementation Act, 2007Government Orders

12:50 p.m.


Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Mr. Speaker, I did not get a chance to talk much about environmental issues, nor am I an expert on those matters. There are hon. members in my party who are much better at it than I am, but I could provide a couple of numbers and some information on what the Liberals did in 2005.

Some of the facts have changed because we have lost two years in advancing on project green which the Liberal government announced in 2005. The federal government's action to implement the Kyoto protocol peaked with the release in 2005 of a climate change plan which set up a series of funds and initiatives designed to assist with the costs of achieving them. It also set sector by sector targets and a mix of voluntary and regulatory measures.

In budget 2005 the Liberal government had committed $10 billion by 2012 to meet all those targets. That spending included a climate change fund of $1 billion over five years which was booked to create a permanent institution for the purchase of emissions reduction and removal credits on behalf of the Government of Canada. The focus of this program was by and large to encourage and fund domestic projects that would qualify under the Kyoto protocol.

We also introduced a partnership fund that was created to work with provincial governments on the reduction of greenhouse gases and a role in combating global warming. Budget 2005 also booked $250 million for large projects to be undertaken in conjunction with the provincial governments toward national objectives. Funding was scheduled to increase to $1 billion and would have provided $538 million to support closing coal fired electricity production in Ontario and a further $328 million to support Quebec's Kyoto plan.

We also introduced a one tonne challenge and the EnerGuide retrofit program, which I mentioned in passing in my speech. The Conservative government decided to cancel that and reintroduce it with less money. This program had been assigned $120 million to reduce emissions. The EnerGuide retrofit program included EnerGuide for low income housing. It was designed to help Canadians save energy and money by making their homes and buildings more energy efficient.

There was also a wind power production incentive and renewable power production incentive. The Liberal government set aside $1.8 billion in funding over 15 years for that initiative. There were some other initiatives for sustainable energy and science and technology strategies in budget 2005. Some $200 million was dedicated for that.

When we hear that there was no plan and no moneys put aside, I am not sure what members of the Conservative government are thinking about when they make those statements.