Yvan Loubier

[Bill C-28, February 5th, 1998]

Mr. Speaker, yesterday, when we asked questions about Bill C-28, which seeks to amend, among others, the Income Tax Act provisions on international shipping companies, the Minister of Finance and the Prime Minister got all worked up, but provided no answers.

My question is for the Minister of Finance. Instead of getting upset, would it not be better for him, and for everyone else, to reply to these questions: who asked for this amendment to the Income Tax Act, and who could derive benefit from these changes?

[Ice Storm 1998, February 4th, 1998]

Mr. Speaker, I was in the heart of what was called and will be remembered as the “triangle of darkness”. I witnessed from close up the plight of those affected by the storm in my riding. These people faced adversity with courage and determination. Some of them actually continue to do so, since power has not yet been restored everywhere in the vast riding of Saint-Hyacinthe—Bagot.

It is in difficult times that real leaders emerge. Let me name a few who did so in this particular case. There are many, but time does not allow us to name them all. One of these leaders is unquestionably the premier of Quebec, Lucien Bouchard, who displayed a real ability for crisis management, and who acted like a true state leader by gaining people's trust and promoting solidarity among all Quebeckers in the face of a catastrophe.

Then there is André Caillé, who took measures to ensure that Hydro-Québec's network, which could no longer serve 20% of Quebec's population, would be rebuilt efficiently and in record time.

There is also Claude Bernier, the mayor of Saint-Hyacinthe and reeve of the Mascoutins regional county municipality, who behaved like a field general and a true crisis manager. I humbly salute him now, after putting myself at his service from the very beginning of the crisis. He acted with remarkable effectiveness and efficiency throughout this most difficult period.

I congratulate all the volunteers, the police forces, the fire departments, the Royal 22e Régiment, with whom I had an opportunity to work. I also want to thank the hundreds of volunteers who worked without respite in shelters, in local community service centres, and for the Red Cross. I must not forget all elected municipal officials, that is the mayors and the councillors. Without their input, without their contribution, we would never had made it through this unprecedented emergency situation.

The crisis is far from over. Yesterday, the meeting I held in my riding of Saint-Hyacinthe—Bagot with some 600 people from business and industry reminded me of the harsh realities being faced by the people of my riding. These 600 people from business and industry told us that, in less than one month, they had lost about $215 million worth of commercial and industrial sales.

Representatives of their workers came to tell us that, in less than one month, from January 6 to February 2, they had lost in excess of $42 million in earnings. The director of the Saint-Hyacinthe industrial and economic corporation—whom I commend in passing for his very great efficiency—indicated to us that the unemployment rate in the greater Saint-Hyacinthe—Bagot region at the present time was in excess of 30%. These few figures alone indicate the extent of the catastrophe and the work that remains to be done to rebuild the industrial base and to ensure that the work force reabsorbs this instant unemployment.

Yesterday these people were extremely vocal in expressing their suffering, and they asked me to pass on their wishes to the Canadian government. The first of these is for the Government of Canadato reach a prompt agreement with the Government of Quebec to put into place a true program for reconstruction of the industrial base, one that would provide compensation for ice damage to equipment and facilities not covered by insurance.

With respect to stocks of perishables that were lost, we have been asked if the federal government and the Quebec government could help pay compensation for these lost stocks of perishables.

We have also been asked to help pay the difference between running generators, which can cost anything from $200 to $2,000 to run depending on the size of the business, and using regular electrical power. Indeed, that is how it was done last year in the Saguenay region and Manitoba, where a program was established for industrial reconstruction.

Labour representatives asked that we speak out and continue to speak very loud and clear, to ensure that something comes of the fine words the Minister of Human Resources Development had in the early days of the crisis, that they actually translate into greater compassion. When the Minister of Human Resources Development spoke of humanism and flexibility, we all figured this meant he would not task every last HRD employee to collect overpayments from the ice storm victims. These people have already gone two weeks without pay or income of any sort and lived on half the money they should normally have been bringing in for three, four and even five weeks in some cases. Plus they have had to face extraordinary expenses.

There is still some hope, however, because we just learned moments ago—which explains my departure from the House—that the Minister of Human Resources Development has agreed to meet tomorrow with the MPs for Montérégie and mid-Quebec, the Bloc members and the two from the Conservative Party. We hope that at that time what the minister was saying at the beginning of the emergency will be translated into facts and that he will give up chasing after over-payments and harassing people who have already been sorely tried by a disaster without precedent.

I wish to assure the people of Saint-Hyacinthe—Bagot, on behalf of my colleagues in Montérégie and mid-Quebec, that all Bloc Quebecois MPs are at their service. All of our offices are open every day to respond to their needs, to help them take the necessary steps, to support them as well in the trials they are undergoing. Please do not hesitate to call us, and please do not hesitate to contact us. We have been there from the start, and we will continue to be there right up until the end.

[Bill C-28, February 4th, 1998]

Mr. Speaker, I simply asked a question. I did not tarnish anyone's reputation. And I expect a reply to my supplementary.

Can the Minister of Finance tell us if the few businesses that will benefit from this generous tax measure include Canada Steamship Lines, which is fully owned by the minister and which has a number of subsidiaries in Liberia and Bermuda?

[Bill C-28, February 4th, 1998]

Mr. Speaker, Bill C-28 amends certain provisions of the Income Tax Act and proposes, among other measures, to ease the tax requirements for Canadian businesses that have subsidiaries involved in international shipping, in tax havens such as Liberia and Bermuda. Oddly enough, this tax saving measure would be retroactive to the 1995 fiscal year.

My question is for the Minister of Finance. Who asked him to make such an amendment to the Income Tax Act, and how many Canadian businesses will benefit from this measure?

[Ice Storm, February 2nd, 1998]

Mr. Speaker, on January 15, the minister said “when people are forced to live without heat and power, the one thing we want to make sure is that they do not have to worry about their income”. As things stand, these people are not paid for the first two weeks, while they are getting 55% for the other weeks, because the minister set up a new employment insurance program which is devoid of compassion toward the unemployed.

Where is the difference? Why such a contrast between the minister's words about being compassionate and flexible, and the drastic and heartless measures he is now imposing?

[Ice Storm, February 2nd, 1998]

Mr. Speaker, during the ice storm the Minister of Human Resources Development publicly encouraged the unemployed to apply in advance for employment insurance benefits, adding that he would show a great deal of compassion toward them.

Everyone understood that, given the plight of thousands of families, the government would show flexibility and, more specifically, would waive the two-week penalty that applies.

Can the minister tell us whether or not the unemployed affected by the ice storm will have to pay back the extra money paid to them, given the two-week penalty?

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Thank you for your comment, Madam Speaker.

As I was saying, a great Quebec legislator always said that, when a government introduced an omnibus bill in the House, you had better watch out. You had better read between the lines, and watch out for the tiniest, apparently minor provisions, because they might be what we call “fast ones”.

So it is with Bill C-28 before us. Setting aside the fact that it provides for cumulative cuts of $42 billion up until 2003 in provincial transfer payments for social assistance, post-secondary education and health—my colleagues, the hon. members for Drummond and Lotbinière will be speaking about this a bit later on—setting aside these outrageous provisions introduced by the Minister of Finance a few years back, which were made somewhat more palatable by the $6 billion reduction in cuts already announced, a careful look at this 464 page omnibus bill reveals a little surprise.

What is this provision we find troublesome? It can be found in paragraphs 241(1) and (2). Clause 241 proposes amendments to the tax treatment of profits generated by offshore subsidiaries involved in international shipping, and these tax changes, retroactive to 1995, could mean that a certain number of individuals among the richest taxpayers in Canada could benefit from tax deductions that would be possible only if Bill C-28 were passed.

We suspect that clause 241 very clearly represents an apparent conflict of interest, and we will show why over the next few minutes. It is an apparent conflict of interest that could be very, very serious.

To go right back to the beginning of the story, prior to 1972, the federal government had become aware that the richest taxpayers in Canada were taking advantage of their position to hire specialists, including taxation specialists who were earning a pretty penny providing this type of advice, and dummy corporations were being set up outside the country, dormant corporations as they are called, holding corporate shares, particularly in the area of international shipping.

Prior to 1972, the government looked into the situation thoroughly, and found that these offshore companies were being set up in what are considered tax havens, countries such as Liberia, Bermuda and Barbados. Tax havens are places where corporate taxes are very low, or in the case of Liberia, non-existent.

So they became aware that some rich Canadian taxpayers were setting up these dummy companies in countries considered tax havens, investing in them shares of foreign companies directly involved in maritime shipping. In 1972, therefore, the federal government decided to reform the corporate taxation system to some extent. This was in response to the Carter report and part of the overall movement to make the Canadian taxation system more equitable. In 1972, the federal government reformed the provisions concerning investment or stock administration companies handling shares of foreign corporations located abroad.

It stated that, in future, Canadian owners of foreign corporations, with no production activity and merely administering the shares of other foreign corporations involved in maritime shipping, ought to pay annual taxes, the present level of which is around 38%. This tax was to be paid annually to Revenue Canada. So all dividends on shares held by foreign investment companies and owned by Canadians, were to be taxed by Revenue Canada, in other words any interest or dividends paid, and so on.

This sort of income has been called foreign accrual property income, or FAPI, as the tax people know it.

So, as of today, any interest income drawn from this sort of bogus company must be included in the income of the Canadian resident and taxed at the current rate of approximately 38%. This applied from 1972 to date. Right up to today these businesses have been paying tax annually. They are obliged to do so.

Let us take a 1998 example. A Canadian business opens a subsidiary abroad in a country considered a tax haven, such as Liberia or Barbados. In Liberia, the business is set up to manage the stock portfolio of a foreign resident and the stocks are those of a marine transportation business located in another foreign country, also a tax haven.

When the shipping company pays dividends to the second company, which simply manages the shares it owns in the first company, the dividends are taxed by Revenue Canada.

Bill C-28 changes the rules for international marine transportation. Now, even though the business is nothing more than a bogus company abroad which holds the stocks of businesses involved in international marine transportation in foreign countries, the dividends paid to it will no longer be taxed annually by Revenue Canada so long as they are not returned to Canada by the mother company in Canada, and I am quoting the explanatory notes in C-28 for clause 241. Paragraph 250(6)—of the current legislation—is amended to ensure that holding shares in marine shipping subsidiary is considered as equivalent to operating a shipping business. The corporation itself must meet the principal business criteria or hold throughout the year shares of one or more subsidiary wholly-owned corporations.

In other words, at present and until Bill C-28 is passed, any bogus corporation owned by a Canadian citizen abroad, in a country considered to be a tax haven, is required to pay taxes to the Government of Canada on an annual basis. With the new provision in Bill C-28 amending section 250 of the Income Tax Act, this corporation would not be required to pay taxes to Revenue Canada as long as the Canadian corporation's dividends have not been repatriated to Canada. This is a way for shipping corporations involved in international traffic to save tens of millions of dollars in taxes owed to the Canadian government.

I must point out that the bill provides for this provision to be retroactive to 1995. Taxpayers seldom benefit from retroactive measures. The government usually proposes retroactive measures when it stands to gain, but this measure, retroactive to 1995, where international shipping corporations will not be required to pay taxes on an annual basis, benefits about 10 or 11 corporations right now.

Let us take one of these 10 or 11 Canadian corporations that most Quebec and Canadian taxpayers are familiar with for having seen its ships, which are registered in Liberia, on the St. Lawrence River and near the Gulf of St. Lawrence. Let us take Canada Steamship Lines Inc. as an example.

Canada Steamship Lines Inc. deals in international shipping. It is a Canadian corporation owned by the CSL group. This Canadian corporation owns abroad, namely in Bermuda, another corporation which manages equity holdings known as CSL Self Unloader Investment Limited.

What this corporation does is hold shares in approximately eight corporations in Liberia, Bermuda and Barbados, which operate ships and are involved in shipping.

The first company, CSL Self Unloader Investment, which is based in Bermuda, collects the dividends paid by these eight companies through transportation activities. The dividends collected by Bermuda's CSL Self Unloader Investment are currently taxed on an annual basis by the Canadian government, because the business is deemed to be Canadian and must thus pay taxes to the Canadian government.

What would happen under Bill C-28? Under clause 241 of Bill C-28, Canada Steamship Lines, in Bermuda, which manages the investments, including the portfolios of companies that are truly in the transportation business, would no longer have to pay taxes to the Canadian government. The change would be retroactive to 1995, which means that if CSL Self Unloader Investment, in Bermuda, has already paid taxes to the Canadian government, it would get a tax refund. The company is currently taxed at about 38% on the dividends and other securities in its portfolio, which it manages for the Canada Steamship Lines group based in Canada.

Clause 241 of Bill C-28 proposes a major change to a tax system that has been in place since 1972. It is a change that applies specifically to Canadian shipping companies. As you know, this means only about ten Canadian companies, which are all members of the Canadian Ship Owners Association. Out of these ten companies, there may be two or three that can benefit from the new provisions and save millions in taxes, retroactively to 1995. One of them is Canada Steamship Lines.

Need I tell you who owns Canada Steamship Lines? It is the finance minister, the man behind Bill C-28 and its sponsor. Given what I have just said, one has to wonder.

First, and this is a question to the government: who asked for such a specific change, a change that would affect at the most ten Canadian shipping companies? The possibilities are tremendous for two or three of them, Canada Steamship Lines in particular. Who called for these amendments? Not the Canadian Lake Carriers Association, because we were speaking with its vice-president, Mr. Lanteigne, only this morning, and he told us it was the first he had heard of it. They were not the ones calling for these amendments.

So who asked for a specific amendment, which is so advantageous for international shipping and potentially very advantageous for the Minister of Finance?

The second question is how much of a tax saving would this new provision in clause 241 of Bill C-28 represent for the few shipping corporations involved in international shipping? Of these corporations, how much would Canada Steamship Lines, owned 100% by the present Minister of Finance, pocket in tax savings if Bill C-28 were passed? We know that the Minister of Finance has been the sole owner of the Canadian arm of Canada Steamship Lines since 1988. How much would this corporation pocket with Bill C-28 and the provisions in clause 241?

Then there is the next question, which we are entitled to ask as taxpayers, as citizens of this country, as the government, as lawmakers. If the Minister of Finance is the man behind a bill in which he also has a stake and stands to benefit from substantial tax savings through a corporation in which he holds shares, is that not a conflict of interest, or an apparent conflict of interest, which is questionable from a public and ethical point of view?

Those are the five questions that really concern the opposition, the Bloc Quebecois, and that appear on half a page of the 464 pages introduced by the Minister of Finance at the very end in what is called “certain Acts related to the Income Tax Act”. Buried in this 464-page bill is a two-paragraph provision that makes us suspect an actual or apparent conflict of interest involving the legislator—the Minister of Finance—and the principal shareholder of Canada Steamship Lines—who is also the Minister of Finance.

Until we get answers to these five questions, clear and unambiguous answers from the government and the Minister of Finance, we in the Bloc Quebecois will fight with our last drop of energy what appears to be a conflict of interest, what appears to be an unfair advantage to a very small portion of Canada's population, the richest Canadians, with the Minister of Finance as one of their prime representatives.

Rest assured that, because of this provision—and many others as well, but we will await the answers to the five questions—we will vigorously oppose the passage of Bill C-28 and strive to obtain answers to our questions, which are fundamental and related to a short provision that benefits certain people who are in conflict of interest.

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Madam Speaker, could you ask my Liberal colleague to show a little respect, please?

[Income Tax Amendments Act, 1997, February 2nd, 1998]

I would ask my Liberal colleague for a little more respect, because we have important things to say to his government and especially to the Minister of Finance.

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Madam Speaker, before I begin to speak to Bill C-28, I would ask your permission to pay special tribute to the people of my riding of Saint-Hyacinthe—Bagot who, with courage and determination and always a smile, endured—and some of them are still enduring— the hardships of the ice storm in the past month.

I would say to them that I and my colleagues in the Bloc Quebecois—I see the member for Drummond is here—will support them to the end. We will support them in their difficulties, as we have since the start of this disaster, and we will continue to ensure that they are treated properly. I refer, among other things, to the promise made by the Minister of Human Resources Development to eliminate the qualifying period and to not collect overpayments from the victims of the storm. I am talking as well about the various programs for small and medium size businesses, the very small businesses and the self-employed.

I can assure you that my colleagues in the Bloc Quebecois and I will work tirelessly to ensure that these people and companies obtain satisfaction when they need the full support and all the efforts of the members of the Bloc Quebecois.

A famous Quebec legislator has always said that, when an omnibus bill is presented in Parliament—