Madam Speaker, I have been listening to the debate since this morning and I am pleased to rise in the House today to speak to the NDP's motion. However, I must warn my colleagues that we have already decided to vote against this motion for various reasons that I will try to explain. I would like to thank my colleague from New Westminster—Burnaby for moving this motion since it gives us an opportunity to debate issues that are important to Canadians and to discuss our response to and our concerns about this.
At first glance, the motion is a bit misleading because it combines two very separate issues. First, it deals with the taxation of stock options for business executives. Second, it deals with the matter of tax evasion, which we already know is a serious problem in Canada.
The first issue is stock options, which are a completely legal means of compensation under the Income Tax Act, a law that was passed by various former governments since it has been amended a number of times in the past. The purpose of this law is to allow the government to collect enough money to keep the government and the country running properly and to promote an entrpreneurial climate that will enhance the economic vitality of the country and by extension the quality of life of Canadians. That is very important.
The second issue is tax evasion, which is a major problem. All parties in the House recognize that this is an illegal practice. I think everyone agrees on that. Tax evasion flouts the obligation that all Canadians have to declare all of their earnings. If they do not, they may be subject to fines and even face criminal charges. That is what is happening in a number of cases across the country. The government has high ambitions in that regard. I will talk more about that a little later.
Before speaking to both topics, I must protest against the NDP trying to force a vote by creating a false dichotomy: either you are with them, or you are with the bad guys. This is not a black and white issue; there are grey areas. Unfortunately, in this motion, it is either one or the other. As such, we will not be able to support it.
On the issue of tax credits for stock options, I must point out that this is an essential tool for start-ups, since not all of them can afford to pay big salaries to their employees. Offering shares is a way of rewarding all the owners to some degree by compensating for the income that they will not be earning, since they will need to regularly invest in the business. It is a type of compensation that depends entirely on the company’s success.
I know of what I speak, even if my business is not listed on a stock exchange and I do not own any stocks. I have already played that game, but not anymore. As an entrepreneur, I know first-hand that starting a business can have very negative consequences on the family and on the business itself. There are ups and downs. I have owned a business for 25 years and I can say that it is not always easy to create and keep jobs, and what is even more challenging is to grow a business, which means taking risks. Business owners are the ones to bear those risks.
I am pleased to say that the top entrepreneurial city for 2017 was Rivière-du-Loup, in my riding. My region has a strong business climate, but it is not because small businesses are publicly traded or because these people are being paid in dividends through stock options, quite the contrary. Small businesses make up 90% of Canada’s economy and not all small businesses are like those listed on an exchange and able to afford to provide stock options. Despite that, entrepreneurs like me are personally working hard to develop the local economy.
A lot of people are included in the middle class. Entrepreneurs starting up a business often find themselves in precarious situations, risking their own money and not having a stable income or a pension fund or employment insurance. It is a reality that I face and have faced in the past.
I can assure my colleagues that I have taken family risks for the good of my business, which is doing very well today. However, when I was starting out, that was not necessarily the case. Things were extremely challenging. Success is really not guaranteed.
According to Industry Canada, only 50% of small businesses make it through the first five years. Some will certainly be quite successful, but others will fail. The NDP takes issue with the fact that the sale of shares obtained through stock options is taxed at only 50% of the amount, but they also disregard the fact that many, if not half, of entrepreneurs will end up with stock that has no value.
The reality of the stock market is that it is always fluctuating. Just a few minutes ago I saw on the Internet that the stock market lost 1,000 points today, following a 2,000-point loss last week. Over the course of four days, the stock market lost about 4% of its value, which also has an impact on stock options. It seems, then, that New Democrats are being misleading by trying to stir up resentment against the wealthy, who they claim are not doing their part.
Here are the facts. Anyone in Canada earning an average income of up to $46,000 per year pays 15% in federal tax. That is actually closer to 11% because of the basic exemption on the first $12,000. A member of the 1% who earns over $230,000 annually pays 33% in federal tax on any amount over $205,000. Even taking into account the current stock options credit, one percenters who risked everything to grow their business and then sell the shares they got instead of paycheques still have to pay a 16.5% federal tax when they sell those shares. That is in addition to corporate tax, which is 11% to 15% and would already have been paid. That is another tax the NDP would like to raise. Those people are already paying as much tax as Canadians earning an average income, if not more.
If the NDP were to eliminate the stock option credit, companies would no longer have this tool, which is essential in helping companies start up in Canada. This fact makes his motion completely unacceptable to us. What is worse, the tax increases that the NDP would enforce would make businesses flee to other countries, which brings us to the topic of tax evasion.
We think that the best way to combat tax evasion is to foster a competitive business climate in Canada, eliminating any temptation to look elsewhere. Yes, it is true that there are some unscrupulous people who are looking for ways to avoid their legal responsibility to declare all of their assets and foreign income. The parties in this House all agree that this in unacceptable. We expect that, no matter which government is in power, the Canada Revenue Agency will use its investigative and judicial powers to deter people from breaking the law. I encourage Canadians to speak out against all forms of tax evasion.
The CRA, under the leadership of the Minister of National Revenue, has proven itself to be absolutely incompetent in recent years in going after the bad people. The minister is constantly repeating the same answer, regardless of the question. She tells us that the government has invested $1 billion in fighting tax evasion, and that it has recouped nearly $25 billion. We know the story, but the fact remains that before Christmas, the minister was forced to apologize for having misled the House. She admitted that much-touted figure of $25 billion was not based on the facts, and that she had quite obviously made it up.
The media is reporting that not one Canadian named in the paradise papers has been prosecuted so far, but we see that a troubling number of ordinary Canadians are falling victim to the CRA's excessively dogged determination. I am talking about single mothers who are being asked to pay back $8,000 they received through the Canada child benefit either because the CRA did not believe that their children truly existed or because they thought that the mothers were no longer with their spouses. In an interview with Radio-Canada the taxpayers' ombudsman described the situation as problematic and criticized, as we have, the CRA for attacking the vulnerable.
In my riding, a company wanted to switch banks and an employee in charge of the company's finances made a transpositional error in the date and the company was penalized financially for that. The company has been around for 40 years and has always paid its taxes, but now it is being slapped with a $3,000 bill, which is totally unacceptable. The CRA should target the right people. Unfortunately, that is currently not the case.