Mr. Speaker, I would like to congratulate the Parliamentary Secretary to the Minister of Finance on his excellent speech. If only it reflected reality, it would be fantastic, but it does not. Coming back to the Liberal majority interim report on prebudget consultations, I would like to read to you a few lines of this whole report, which are quite telling and which distort the premises of this debate.
The last paragraph of the interim report on prebudget consultations, the Liberal majority report, reads as follows: "The Committee recommends that this House support the real and sustained progress being made on deficit reduction, while maintaining a balanced approach".
These few words seem to indicate that the government is taking the people of Quebec and Canada for fools, and that they are not; this is an insult to their intelligence.
The fact of the matter is that, in light of the actions it has taken over the past two years and the direction it is taking for the next three years, the government does not score well in terms of financial administration. Why not? Because the Minister of Finance will be meeting his targets in 1995-96 and in the following years at the expense of the unemployed, welfare recipients, students and those who are sick.
When the Minister of Finance tells us that, in 1995-96, his deficit will reach $32.7 billion, we have to add to this $32.7 billion the $5 billion he snatched from the UI fund surplus.
When he talks about having largely exceeded the deficit reduction target for 1996-97 set in his last budget, when he talks about the deficit being brought back down to $24.3 billion in 1996-97, once again, we have to add another $5 billion in funds snatched
from the UI fund surplus. I remind the House that, since 1990, the federal government has not paid a dime into the UI fund, which is fed by employees and employers through their premiums. The Minister of Finance makes himself right at home, snatching from the UI fund surplus an amount of $5 billion that must be added to his 1996-97 deficit figure. Beside the $5 billion drawn from the UI fund, federal transfer cuts must also be taken into consideration. In 1996-97, these cuts will total approximately $2.5 billion.
Therefore, if we figure out the total for next year, that is if we add to the $24.3 billion deficit mentioned by the Minister of Finance in his economic statement the cuts in transfers to the provinces, as well as the surplus in the UI account, we arrive at an actual deficit of $31.8 billion for 1996-97.
The same is true for 1997-98. The Minister of Finance paid a visit, with great pomp, to the committee last week and showed us, with his usual imposing presence, all kinds of nice and colourful diagrams and graphs. He told us that not only will he meet his budget goals but that, in 1997-98, he will be able to bring the federal deficit down, to 2 per cent of the GDP, or $17 billion. Again, the Minister of Finance does not tell the whole truth.
The government is hiding some facts. Indeed, to this $17 billion deficit we must add $4.5 billion in cuts, which is a way for the federal government to offload its problems onto the provinces. Mr. Speaker, we are talking about $4.5 billion. The federal government dumps its deficit reduction responsibilities on the provinces, to the tune of $4.5 billion in 1997-98. Then, we must also add to that amount a $5 billion surplus in the UI account, which the Minister of Finance and his government will take from the UI fund.
Therefore, far from standing at $17 billion as claimed by the finance minister and his secretary of state, the actual deficit in 1997-98 will total $26.5 billion.
When you look at all this you wonder what the Minister of Finance has done in the last two years to really provide leadership and sound management regarding Canada's public finances? What has he done? Nothing. The minister was content with taking, if not stealing, the UI surpluses. He was content with offloading his responsibilities onto the provinces, and, regrettably, he was content to solve his deficit problems on the back of the unemployed, the welfare recipients, the sick and, soon, the elderly.
These are the corrections I wanted to make following the finance minister's snow job, which was added to this morning by his secretary of state.
How does the Minister of Finance manage to get these surpluses in the UI account, which will be $5 billion this year, $5 billion next year and $5 billion the following year?
He uses an approach which is twofold. First, as we saw with the reform introduced by the Minister of Human Resources Development, which I consider to be a human tragedy, the minister came up with a plan to tighten UI eligibility criteria. In so doing, not only was a surplus created, but also the responsibility ends up dumped into the backyard of the provinces, as literally whole families, thousands of families eligible in the past for unemployment insurance, end up on welfare year after year.
For Quebec alone, the Quebec department of income security calculates that no fewer than 10,500 additional households will end up on the welfare rolls in 1996-97 as a result of the tightened UI eligibility criteria which have been decreed by the Minister of Human Resources Development, lauded by the Minister of Finance, and backed by this government, one which has not shown a once of compassion in the two years it has been in power.
In 1997-98, the tightening up of UI will force an additional 26,500 households, 26,500 Quebec families, onto welfare. A further 27,500 Quebec households we be added in 1998-99. A sad thing to contemplate.
The second equally heartless approach this government is using to create a surplus in a fund into which the government has not put a red cent for the past five years is to maintain high contribution levels for employees and employers.
I think the public is entitled to know that contributions at this time represent $2.95 for each $100 of insurable earnings. The Minister of Finance could have reduced that figure, this very year, from $2.95 to $2.93, thus creating no fewer than 12,000 new jobs and meeting his deficit objectives for the coming year and the year after that, but he preferred to sacrifice 12,000 jobs by maintaining contribution levels at $2.95 per $100 of insurable earnings, instead of dropping them to $2.93. That is how they claim to have achieved the goal of sound and balanced administration of public finances that we all are seeking to achieve.
As I have already said, the main victims of the two years of Liberal reign have been the jobless, the welfare recipients and the students. Before long, as the Minister of Finance disclosed during his appearance before the finance committee, it will be seniors whose necks are on the chopping block.
Among the Minister of Finance's objectives, as revealed in his last budget, is a review of the Canada Pension Plan. Now, having tightened up UI eligibility criteria, he is focussing the same attention on the pension plan.
But why make such a mess of things? Why reduce the federal government's deficit by creating a very substantial social deficit? There are other options. The Minister of Finance has other options
than skimming the surplus off unemployment insurance. He has other options than offloading the deficit on the provinces and, in the process, on students, welfare recipients and those who are ill. He has other options than preventing the creation of thousands of jobs by keeping unemployment insurance premiums unduly high. He has other options than attacking senior citizens.
And one of those options, one we have kept repeating for more than two years, is a thorough reform of corporate taxation. We keep telling him but it was not until others started saying the same thing that the minister realized that perhaps something could be done in that area, but there is still a lack of political will to do so. The people of Quebec and the people of Canada are not being told the whole truth, once again.
Until 1987, the Department of Finance published statistics on Canadian businesses that made a profit without paying taxes. In 1987, the last year for which figures were available, 93,405 businesses had made profits totalling $27 billion without paying taxes. After that, do you know what they did? The Department of Finance and the Minister of Finance at the time and today, the current finance minister, were so ashamed of these figures and how they multiplied, because they tripled over a period of seven years, that they stopped publishing these statistics.
According to a report from the Department of Finance published last year in December, if I am not mistaken, 288 tax measures were available to Canadian businesses, 288 measures they could use to avoid losing part of their profits to federal taxes.
Let me tell you about two of these measures which the Minister of Finance, if he had the political will to do so, if he were not himself directly involved in the wonderful world of big business, could set in motion immediately and plug the holes in the tax system with little effort.
First there is the income tax return, and then there are tax havens and the lack of fiscal measures to prevent Canadian businesses from using countries considered as tax havens as part of their tax planning.
With respect to the tax return, allow me to quote from an excellent study done last September by Professors Bernard, Lauzon and Poirier, three researchers for the department of accounting sciences at the Université du Québec in Montreal.
In connection with a study of 438 businesses, they say, and I quote: "Of the 438 businesses included and analyzed in our study, we found that 200, or 46 per cent, actually paid less than 20 per cent of their profits in income tax in 1992. Two hundred businesses managed to pay less than 20 per cent tax, because of the tax return. Of these 200 businesses, 30, or 6.8 per cent of the sample, received tax refunds totalling $126 million, despite profits of $200 million".
These 30 businesses received a tax refund of $126 million, despite profits of $200 million. Does this make sense?
My quote continues: "It is also noted that 51 businesses paid no income tax-0 per cent income tax-despite $282 million in profits before taxes. Of those 200 companies, 72, or 16.4 per cent, paid less than 10 per cent tax. Thus before tax profits of $2.2 billion gave rise to actual tax payments of $130 million, or approximately 6 per cent income tax."
This is not considered unusual. The government considers this usual. The Reform Party is mum on the subject, their nest having been made long ago. They do not find it unusual that such businesses make huge profits and do not pay a cent of income tax, or almost none. It is acceptable for these business to use 288 measures to get around having to pay and for the government to make drastic cuts in unemployment insurance and in transfers to the provinces for welfare, post-secondary education and health care. For the Liberals and the Reform Party this is fine, just as it is to continue with a tax system that no longer makes any sense.
It makes no sense when we look not only at these facts but also at the market emerging for the exchange, the sale of tax losses. These classified ads can be seen every day in the newspapers, as I have said repeatedly over the past two years. The Globe and Mail , the Financial Post , The Economist , all financial and business magazines carry ads like this one: ``Tax losses for sale''.
Just imagine, they are no longer selling goods and services but tax deductions. The ad goes on to say: "Our client, a cosmetics distributor with large tax losses and undervalued assets seeks a buyer who can use his tax deductions. Discretion assured". I should hope so, discretion assured. They should be ashamed of themselves. "Please contact-"I will not identify the company but not because I am not tempted to do so.
I find it simply outrageous that, faced with this evidence, the government, the Minister of Finance, the Reform Party can hide the reality of tax evasion from the population and not have done anything in the last two years to close the loopholes. Another way for large corporations and high income people to avoid paying their fair share to the federal government is to use so-called tax havens.
An article in last June's CA Magazine , the magazine for Canadian chartered accountants, urged large corporations and very high income individuals to create companies in countries regarded as tax havens. It urged Canadian chartered accountants to create these phoney companies in tax havens such as Bermuda and some Caribbean countries so that they can shelter their millions of dollars in profits and avoid paying taxes to the Canadian government, or pay very little.
That is a lot of money. In 1992, the auditor general talked about $16 billion in revenue lost to those countries regarded as tax havens; $16 billion is a lot of money. Although all individuals are required by tax laws to report all the money they make outside Canada, corporations and businesses are not. They are not required to report their income outside Canada.
The hundreds of millions, even billions of dollars in profits, as the auditor general said in 1992, that go through the phoney companies set up in these tax havens are not taxed. The profits are sent back to Canada without being taxed so that thousands of Canadian businesses, most of them large corporations, do not pay one penny of tax while making billions of dollars in profits.
I do not understand why the Minister of Finance has not yet initiated a corporate tax reform, as we have been asking him to do for the past two years. He should do it, if only to be fair to businesses that do pay their taxes, to the majority of businesses-we all know entrepreneurs-with a sense of corporate citizenship.
He should also do it to be fair to those businesses that see other businesses, like the ones I just mentioned, get away with not paying a cent in taxes when they, on the other hand, are bled dry, especially since 1990, to be good corporate citizens, and when individual taxpayers are even worse off than businesses, paying taxes year in year out but being affected by all the cutbacks, like the ones announced by the Minister of Finance, that were made since 1984 to the UI fund and to federal transfer payments. At the end of the day, it is always the same people, the taxpayers, who foot the bill for these inhuman measures, which border on incompetence in improving the state of public finance as planned.
We are always accused of getting on the case of banks. Well, they will come under scrutiny because, when we look at tax havens and at what the six major Canadian banks are doing, it is outrageous. Is there nothing wrong with these banks being allowed to use such tax havens to avoid paying taxes to the federal government?
There are quite telling figures in this regard. Just the other day, officials of major banks were close to tears, saying: "We have to pay taxes. That is terrible. They are strangling us". Banks will make $4 billion in profits this year, and they are complaining about being strangled.
Is it normal that the Scotia Bank, for example, has more branches in the Caribbean alone that around the world? Scotia has 33 branches in the Caribbean, in small countries that are generally viewed as tax havens. Thirty three branches. It has one branch in America outside the Caribbean, five in Europe, seven in Asia-I would say there are quite are few more people, potential customers, in Asia than in the Caribbean-but 33 in the Caribbean.
It is the same thing with CIBC: seven branches in the Caribbean. Same for the Royal Bank: ten branches in the Caribbean. There are even countries with a population of barely 60,000 where Canadian banks have four branches.
Is it normal to put up with that? Is it normal to let these banks take advantage of tax loopholes to transfer hundreds of millions in these countries, take the profits back home, not pay any federal taxes, and then announce with great pump, as they did one after the other last week, record profits for 1995? This no longer makes any sense.
In view of this situation, it is not surprising that, since 1950, the fiscal contribution of Canadian companies, unlike that of individual taxpayers, has been shrinking and is now next to nothing.
Let us take a brief look at history. In 1950, companies paid 23 per cent of all taxes collected by the state, compared to 24 per cent for individual taxpayers. In other words, the contribution of companies and individual taxpayers was essentially the same.
And what were these contributions in 1993? The federal government collected 52.7 per cent of its taxes from individuals, compared to only 6.5 per cent from companies. That change alone should make us wonder. It should make the Minister of Finance, as we have been asking him to for two years, undertake, with our assistance, a comprehensive and in-depth review of the corporate tax system.
But this is not all. On December 8, it was mentioned in the daily La Presse that companies should pay more taxes. The article read, in part: Corporate tax represents a smaller proportion of the GDP in Canada''-a comparison was being made with the United States-and this gives us reason to believe that it might be possible to reduce some of the tax benefits granted to Canadian companies''.
Who expressed that view? It is not leftist groups, nor the Bloc Quebecois, the unions or some progressive organizations. Do you know who said that? It is the International Monetary Fund, which is a group of very conservative analysts, conservative not in the political but in the philosophical sense of the word. These people usually ask the Minister of Finance to cut twice as deeply as he actually does in federal programs and expenditures. But this time, the IMF is asking the minister to review the corporate tax legislation and perhaps impose higher taxes on companies, at least those that do not pay their fair share, and there are a quite a few of them.
There is a gap between what goes on and what we have been asking for two years from the Minister of Finance. If the minister really wanted to show some leadership in putting our fiscal house
in order, he would not target the poor. He should take a comprehensive approach regarding this issue. When we speak of fiscal consolidation, this means not only expenditures but also tax receipts, revenue.
Is it possible, from what I have just demonstrated, that the Canadian tax system may want some cleaning up? That it may be time to do some tidying of corporate taxation, after 30 years of adding on and taking off new measures, top-loading as it is termed? If only out of a need for fairness, as I have said, for those who pay their taxes as opposed to those who do not, as well as to simplify the system.
Two years ago, I asked the library for some reference books so that I could know all there was to know about taxation. I do not think my office could have held all of the documentation I would have had to read to be an expert like those folks who get half a million dollars a year to advise businesses to open up branches in tax havens, or those who write in CA Magazine.
For all of these reasons, the Bloc categorically rejects what the Liberal majority report states concerning pre-budget consultations. I would like to indicate four approaches the Minister of Finance might use in preparing his next budget.
The first is absolutely vital: the Minister of Finance must reform the corporate taxation system.
Second, as the Quebec Finance Minister asked this week, the federal government must forget about the Canada social transfer for Quebec and give it tax points, in order to eliminate duplication and overlap in the management of this reality, thus enabling Quebec to assume the responsibilities the federal government has abdicated with respect to the most disadvantaged in society. Quebec can take over and do it much better.
Our third suggested measure: further defence cuts. Another $1.5 or 2 billion could well be cut as early as next year. This is something he can and must do.
As for the fourth measure, we are asking the Minister of Finance to stop dumping on the jobless, welfare recipients, students and the sick-as well as the seniors who are about to be added to their ranks.
These are the four points the Minister of Finance and his government ought to be guided by, after two years of showing absolutely no compassion toward the most unfortunate of our society, while boasting of how well they are handling public funds, this is nothing but smoke and mirrors.
